<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. 333-81079
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LABRANCHE & CO INC.
(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:
<TABLE>
<S> <C>
JEFFREY M. MARKS, ESQ. ALAN L. BELLER, ESQ.
WARREN J. NIMETZ, ESQ. WILLIAM F. GORIN, ESQ.
FULBRIGHT & JAWORSKI L.L.P. CLEARY, GOTTLIEB, STEEN & HAMILTON
666 FIFTH AVENUE ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10103 NEW YORK, NEW YORK 10006
(212) 318-3000 (212) 225-2000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), 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, please 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 462(c) 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 30, 1999
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 IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
11,500,000 SHARES
[LOGO]
COMMON STOCK
---------------
We are selling 11,500,000 shares of our common stock. The underwriters named
in this prospectus may purchase up to 1,725,000 additional shares of common
stock from us under certain circumstances.
This is an initial public offering of common stock. We currently expect the
initial public offering price to be between $15.00 and $17.00 per share. The
common stock has been approved for listing on the New York Stock Exchange under
the symbol "LAB."
------------------------
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------- --------------
<S> <C> <C>
Public Offering Price.................................................. $ $
Underwriting Discount.................................................. $ $
Proceeds to LaBranche & Co Inc. (before expenses)...................... $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 1999.
------------------------
SALOMON SMITH BARNEY
DONALDSON, LUFKIN & JENRETTE
ABN AMRO ROTHSCHILD
A DIVISION OF ABN AMRO
INCORPORATED
<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>
Prospectus Summary........................................................................................ 1
Risk Factors.............................................................................................. 8
Use of Proceeds........................................................................................... 19
Dividend Policy........................................................................................... 19
Capitalization............................................................................................ 20
Dilution.................................................................................................. 21
Selected Historical Consolidated Financial Data........................................................... 22
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................................... 24
Business.................................................................................................. 35
Management................................................................................................ 50
Employment Agreements and Noncompetition Agreements....................................................... 52
Incentive Awards to Our Employees......................................................................... 54
Principal Stockholders.................................................................................... 57
Certain Transactions...................................................................................... 58
Description of Capital Stock.............................................................................. 60
Shares Eligible for Future Sale........................................................................... 62
Underwriting.............................................................................................. 64
Legal Matters............................................................................................. 65
Experts................................................................................................... 66
Where You Can Find Additional Information................................................................. 66
Index to Financial Statements............................................................................. F-1
</TABLE>
------------------------
Until 1999, all dealers that buy, sell or trade the common
stock, 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.
<PAGE>
PROSPECTUS SUMMARY
THE INFORMATION BELOW IS ONLY A SUMMARY OF MORE DETAILED INFORMATION
INCLUDED IN OTHER SECTIONS OF THIS PROSPECTUS. THE OTHER INFORMATION IS
IMPORTANT, SO PLEASE READ THIS ENTIRE PROSPECTUS CAREFULLY. UNLESS STATED
OTHERWISE, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION TO PURCHASE 1,725,000 SHARES OF OUR COMMON
STOCK HAS NOT BEEN EXERCISED AND THAT WE HAVE COMPLETED THE REORGANIZATION OF
OUR FIRM FROM PARTNERSHIP TO CORPORATE FORM.
LABRANCHE & CO INC.
Founded in 1924, we are 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 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 42 new common
stock listings to our firm. In addition, we have acquired three specialist
operations since 1997, adding 128 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.
1
<PAGE>
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;
- actively participate in the consolidation of the specialist industry by
making selective acquisitions; and
- increase our capital base and our access to capital.
Our revenues in 1998 were $126.4 million on an actual basis and $137.9
million on a pro forma basis, while our net income for the same period was $2.7
million on an actual basis and $31.9 million on a pro forma basis. Our revenues
for the first six months of 1999 were $103.5 million on both an actual and pro
forma basis, while our net income for the same period was $6.3 million on an
actual basis and $27.7 million on a pro forma basis. Pro forma revenues and net
income give effect to (1) our July 1998 acquisition of substantially all the
assets of Fowler, Rosenau and Geary, LLC and (2) the reorganization of our firm
from partnership to corporate form and related transactions.
2
<PAGE>
REORGANIZATION AND RELATED TRANSACTIONS
LaBranche & Co Inc. is a newly formed holding corporation, and after giving
effect to a number of transactions to be effected concurrently with this
offering and a concurrent note offering, our assets will 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, will be effected
through the transactions summarized below:
[GRAPHIC]
- The members of LaB Investing Co. L.L.C. have agreed, subject to the
completion of this offering, to exchange their membership interests in LaB
Investing Co. L.L.C. for an aggregate of 34,750,000 shares of our common
stock. In addition, three members of LaB Investing Co. L.L.C. will receive
an aggregate of $10.0 million in cash as part of the exchange. We thus
will become the sole member of LaB Investing Co. L.L.C., and LaB Investing
Co. L.L.C. will continue to be the general partner of LaBranche & Co.
- The limited partners of LaBranche & Co., other than Mill Bridge, Inc.,
have agreed, subject to the completion of this offering, to exchange their
limited partnership interests in LaBranche & Co. for an aggregate of $68.1
million in cash, 625,000 shares of our common stock and subordinated
indebtedness of $350,000.
- Mill Bridge, Inc., a subsidiary of Van der Moolen Holding NV, will receive
$90.0 million from us in exchange for its limited partnership interest in
LaBranche & Co., including $74.0 million in cash after this offering and
our note offering and a subordinated note for $16.0 million. In addition,
we will repay $5.0 million of subordinated debt to an affiliate of Van der
Moolen upon the closing of this offering and our note offering.
- As a result of the above transactions, we will become the sole limited
partner of LaBranche & Co., which will continue to operate as a
broker-dealer and a NYSE specialist firm.
- We will grant (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 common stock to employees who are not managing
directors, in each case under the Equity Incentive Plan.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered........................ 11,500,000 shares
Common stock to be outstanding after the
offering.................................. 46,875,000 shares
Use of proceeds............................. The estimated net proceeds from this offering
will be approximately $169.5 million. We intend
to use the majority of the net proceeds for
general corporate purposes to support the growth
of our business, including working capital and
future acquisitions. In addition, we will use
approximately $60.1 million to redeem some of
the limited partnership interests of our
subsidiary, LaBranche & Co., as part of the
reorganization of our firm from partnership to
corporate form. There is no specific allocation
for a substantial portion of the net proceeds,
and there can be no assurance that management
will be able to use the unallocated proceeds
effectively to continue to grow our business.
See the risk factor entitled "We may not
effectively use the unallocated proceeds of this
offering to continue to grow our business."
Proposed New York Stock Exchange symbol..... LAB
</TABLE>
At approximately the same time as this offering, we will incur indebtedness
of approximately $116.4 million. This indebtedness will consist of (1) an
offering of an aggregate principal amount of $100.0 million of senior notes due
2004 under Rule 144A of the Securities Act, which we refer to as our note
offering, and (2) the issuance of an aggregate principal amount of $16.4 million
of subordinated indebtedness. Of this indebtedness:
- $98.4 million will be used to redeem limited partnership interests in
LaBranche & Co.;
- $10.0 million will be used to redeem membership interests in LaB Investing
Co. L.L.C.; and
- $5.0 million will be used to repay subordinated indebtedness as part of
our reorganization.
- ------------------------
The above information excludes (1) 1,200,000 shares of common stock subject
to options with an exercise price equal to the initial public offering price
and (2) restricted stock units for 1,059,000 shares of common stock.
4
<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,
------------------------------------------------------ ------------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT OTHER DATA)
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
</TABLE>
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. Concurrently with this offering and our note
offering, we will reorganize our firm from partnership to corporate form and in
connection with the reorganization, will redeem limited partnership and
membership interests. As a corporation, we will 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 this offering and our note offering. See "--Reorganization
and Related Transactions" and "--Summary Pro Forma Consolidated Financial Data."
As a partnership, we generally have 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 will be subject to U.S. federal,
state and local income taxes.
5
<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 gives
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 as adjusted consolidated
balance sheet data as of June 30, 1999 give effect to (1) the reorganization and
related transactions as if they occurred on June 30, 1999, (2) our note
offering, (3) the application of the net proceeds of our note offering, (4) the
sale by us of 11,500,000 shares of common stock in this offering at an assumed
initial offering price of $16.00 per share, after deducting the underwriting
discount and estimated offering expenses payable by us, and (5) the application
of the net proceeds from this offering.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE 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 40,538(A) 11,299 33,047(A)
Lease of exchange memberships...................... 6,568 7,064 4,165 4,165
Interest........................................... 3,577 13,955(B) 2,195 7,179(B)
Exchange, clearing and brokerage fees.............. 2,898 3,233 1,997 1,997
Amortization of intangibles........................ 2,526 7,132( (D) 1,693 3,566(D)
Other operating expenses........................... 5,286 6,281 2,795 2,795
----------- ----------- ----------- -----------
Total operating expenses......................... 34,776 78,203 24,144 52,749
----------- ----------- ----------- -----------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary and provision for income taxes.......... 91,635 59,647 79,349 50,744
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 59,647 31,135 50,744
Limited partners' interest in earnings of
subsidiary......................................... 26,292 -- (F) 21,054 -- (F)
----------- ----------- ----------- -----------
Income before provision for income taxes............. 6,560 59,647 10,081 50,744
Provision for income taxes........................... 3,900 27,735(G) 3,789 23,072(G)
----------- ----------- ----------- -----------
Net income........................................... $ 2,660 $ 31,912 $ 6,292 $ 27,672
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted net income per share............... $ 0.68(H) $ 0.59(H)
----------- -----------
----------- -----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and short-term investments.................................................. $ 38,063 $ 147,513(J)(K)
Working capital.................................................................. 123,698 233,148(J)(K)
Total assets..................................................................... 346,101 589,857(J)(K)
Total long-term indebtedness (I)................................................. 51,158 162,508(B)
Limited partners' interest in subsidiary......................................... 37,094 -- (J)
Members' capital/stockholders' equity............................................ 95,569 265,069(J)(K)
</TABLE>
- ------------------------
(A) Employee compensation and benefits was adjusted to reflect managing
directors' compensation based on authorized revised compensation policies
which will be 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 note offering of $100.0 million and the issuance of a $16.0
million subordinated note and the incurrence of $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) Based on 46,875,000 weighted average shares outstanding. 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.
(I) Excludes subordinated liabilities related to contributed exchange
memberships.
(J) Reflects the redemption of limited partnership interests for $168.4 million,
comprised of $142.1 million in cash, a $16.0 million subordinated note, the
incurrence of $350,000 of subordinated indebtedness and $10.0 million in
common stock. Reflects redemption of membership interests for $10.0 million.
(K) Reflects net proceeds of $169.5 million to be received upon completion of
this offering.
7
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. 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. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND OPERATING
RESULTS COULD BE ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID
TO PURCHASE OUR COMMON STOCK.
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.
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 REVENUES.
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."
8
<PAGE>
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.
OUR QUARTERLY RESULTS MAY FLUCTUATE SIGNIFICANTLY AND THE MARKET PRICE OF OUR
COMMON STOCK COULD DECREASE.
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.
If our operating results fall below the expectations of securities analysts
and investors, the market price of our common stock could decrease.
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.
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<PAGE>
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
information regarding the rules which govern our activities as a specialist, see
"Business--Operations-- NYSE Rules Governing Our Specialist Activities."
WE WILL INCUR A SUBSTANTIAL AMOUNT OF INDEBTEDNESS SIMULTANEOUSLY WITH THIS
OFFERING, THE AMOUNT AND TERMS OF WHICH MAY ADVERSELY AFFECT OUR ABILITY TO
GROW, COMPETE AND RESPOND TO CHANGING MARKETS.
We will have a substantial amount of indebtedness after the consummation of
our note offering. Our indebtedness and the related covenant restrictions could
have important consequences to you, including the following:
- our ability to obtain additional financing and to fund our operations and
our growth strategy may be impaired;
- our ability to use operating cash flow in other areas of our business will
be limited because we will have to make principal and interest payments;
- we may not be able to compete with others firms that are not as leveraged;
and
- our substantial degree of leverage and our covenant restrictions may limit
our ability to adjust to changing market conditions, changes in our
industry and economic downturns.
We may also need to incur additional debt in the future for working capital
or to complete acquisitions, even though covenants in our existing debt
agreements and the indenture governing our notes may limit our ability to do so.
In addition, if we breach any of these covenants, we may default under our
indebtedness.
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 our notes.
See "Business--Regulatory Matters" for a discussion of our net capital
requirements.
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<PAGE>
WE MAY HAVE INSUFFICENT 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 this offering and our 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.
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."
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 communications 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.
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<PAGE>
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 other technological developments and advances, it could
have an adverse affect 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 and
chief executive officer. 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 this offering and the reorganization of our firm from
partnership to corporate form, our managing directors will receive substantial
amounts of our common stock in exchange for their current interests in LaB
Investing Co. L.L.C. Because the shares of common stock will be received in
exchange for membership interests, ownership of these shares will not be
dependent upon the continued employment of those managing directors. In
addition, employees who are not managing directors will receive grants of stock
options and restricted stock units. The steps we have taken to encourage the
continued service of these individuals after this offering, who include key
senior personnel in our specialist activities, may not be effective. For a
description of the compensation plan for our employees to be implemented after
this offering, see "Management--Executive Compensation" and "Incentive Awards to
Our Employees."
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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 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 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
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<PAGE>
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
DATA 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 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, 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
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<PAGE>
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.
WE CANNOT PREDICT THE EFFECT A PROPOSED PUBLIC OFFERING BY THE NYSE WOULD HAVE
ON OUR BUSINESS.
The NYSE has recently 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.
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<PAGE>
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 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.
Immediately following this offering, our managing directors will own
approximately 72.5% 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 and chief executive officer, James G. Gallagher and Alfred O. Hayward,
Jr., each an executive officer and director. Accordingly, these individuals will
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 will be 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 that might otherwise give you the
opportunity to realize a premium over the then-prevailing market price for your
shares of our common stock.
THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE BECAUSE AN ACTIVE AND
SUSTAINED TRADING MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP.
Prior to this offering, there has been no public market for our common
stock. Although we will make application for listing our common stock on the
NYSE, there can be no assurance that an active trading market will be created or
sustained. Due to the absence of any prior public market for the shares of our
common stock, there can be no assurance that the initial public offering price
will correspond to the price at which the shares of common stock will trade in
the public market subsequent to the offering. The initial public offering price
will be determined by negotiations among ourselves and representatives of the
underwriters based on several factors and will not necessarily reflect the
market price of our common stock following the offering.
FUTURE SALES BY EXISTING STOCKHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR
COMMON STOCK.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate. After
this offering, we will have outstanding 46,875,000 shares of common stock. In
connection with the
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reorganization of our firm from partnership to corporate form, our managing
directors and limited partners who are exchanging their interests for 35,375,000
restricted shares of our common stock have contractually agreed that they will
not sell their common stock for various time periods after this offering. Under
these contractual restrictions, these restricted shares are eligible for sale in
the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
312,500............................................... One year after the closing of this offering.
625,000............................................... Two years after the closing of this offering.
12,208,333.............................................. Three years after the closing of this offering.
23,791,667.............................................. Four years after the closing of this offering.
35,375,000.............................................. Five years after the closing of this offering.
</TABLE>
Under SEC rules, the shares eligible for sale in the public market are as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
11,500,000 shares sold in this offering................. After the closing of this offering.
35,375,000 restricted shares............................ After one year from the closing of this offering
(subject to volume limitations which expire after the
second year other than in the case of affiliates).
</TABLE>
In addition:
- each of our managing directors must retain 25% of his or her common stock,
currently totaling 8,501,318 shares in the aggregate, for the duration of
his or her employment; and
- an employee may not sell shares of our common stock that are subject to a
pledge agreement, unless the requirements of the pledge agreement are
waived by us.
Our directors, officers and stockholders have agreed that they will not
sell, directly or indirectly, any common stock without the prior written consent
of Salomon Smith Barney Inc. for a period of 180 days from the date of this
prospectus.
We intend to file a Form S-8 registration statement under the Securities Act
to register shares of common stock issuable under our Equity Incentive
Plan. The registration statement will become effective immediately on filing.
Shares covered by that registration statement are eligible for resale in the
public markets, subject to Rule 144 limitations applicable to affiliates.
WE MAY NOT EFFECTIVELY USE THE UNALLOCATED PROCEEDS OF THIS OFFERING TO CONTINUE
TO GROW OUR BUSINESS.
The principal purpose of this offering is to provide more permanent capital
to support the growth of our specialist business. There is no specific
allocation for a substantial portion of the net proceeds, and our management
retains the right to utilize the net proceeds as it determines, including to
pursue selective acquisitions of other specialist firms. There can be no
assurance that management will be able to use the proceeds to effectively
continue the growth of our business.
THE TANGIBLE BOOK VALUE OF THE COMMON STOCK WILL BE SUBSTANTIALLY LOWER THAN THE
OFFERING PRICE.
The initial public offering price will be substantially higher than the pro
forma tangible book value per share of our outstanding common stock. If you
purchase our common stock in this offering, the shares you buy will experience
an immediate and substantial dilution in tangible book value per share. The
shares of common stock owned by existing stockholders will receive a material
increase in the
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tangible book value per share. The dilution to investors in this offering will
be approximately $14.12 per share. As a result, if we were to distribute our
tangible assets to our stockholders immediately following this offering,
purchasers of shares of common stock in this offering would receive less than
the amount they will have paid for such shares. See "Dilution."
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD ENABLE OUR BOARD OF DIRECTORS TO
PREVENT OR DELAY A CHANGE OF CONTROL OF OUR COMPANY.
Some of the provisions of our certificate of incorporation, our bylaws and
Delaware law could, together or separately:
- discourage potential acquisition proposals;
- delay or prevent a change in control; and
- limit the price that investors might be willing to pay in the future for
shares of our common stock.
In particular, our board of directors may issue up to 10,000,000 shares of
preferred stock with rights and privileges that might be senior to our common
stock, without the consent of the holders of the common stock. Our certificate
of incorporation and bylaws will provide, among other things, that our board of
directors will be divided into three classes which will serve staggered three
year terms, that stockholders may not take actions by written consent and that
special meetings of stockholders may only be called by our board of directors or
our chairman. We are also subject to Section 203 of the Delaware General
Corporation Law which generally prohibits a Delaware corporation from engaging
in any of a broad range of business combinations with any interested stockholder
for a period of three years following the date on which the stockholder became
an interested stockholder.
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USE OF PROCEEDS
The principal purpose of this offering and our note offering is to provide
more permanent capital to support the growth of our business. The estimated net
proceeds from this offering, our note offering and our issuance of $16.4 million
of subordinated indebtedness, and the uses of those proceeds are set forth in
the tables below.
<TABLE>
<S> <C>
THIS OFFERING:
Net proceeds (1).......................... $169.5 million ($195.2 million if the
underwriters' over-allotment option is
exercised in full)
Uses...................................... $60.1 million to redeem some limited
partnership interests in LaBranche & Co. as
part of the reorganization of our firm from
partnership to corporate form
Remaining Proceeds........................ $109.4 million
</TABLE>
- ------------------------
(1) Assumes we sell 11,500,000 shares of common stock at an assumed offering
price of $16.00 per share and deducts underwriting discounts and commissions
and other estimated offering expenses.
We will use the remaining $109.4 million of net proceeds of this offering
for general corporate purposes which may include selective acquisitions of other
specialist firms. We do not have any commitments or agreements with respect to
any acquisitions. Our management will retain broad discretion in the allocation
of the remaining net proceeds of this offering. Pending such uses, we intend to
invest these proceeds in short-term, investment grade, interest-bearing
securities.
<TABLE>
<S> <C>
NOTE OFFERING AND ISSUANCE OF $16.4 MILLION
OF SUBORDINATED INDEBTEDNESS:
Net proceeds (1).......................... $113.4 million
Uses of proceeds.......................... $98.4 million to redeem some limited
partnership interests in LaBranche & Co.
$10.0 million to redeem membership interests
in LaB Investing Co. L.L.C.
$5.0 million to repay subordinated
indebtedness
Remaining proceeds........................ $0
</TABLE>
- ------------------------
(1) Assumes net proceeds from our note offering of $97.0 million after deducting
the discount to the initial purchasers, commissions and other estimated
offering expenses.
DIVIDEND POLICY
We currently anticipate that we will retain any future earnings for the
development and operations of our specialist business. Accordingly, we do not
anticipate paying cash dividends on our capital stock in the foreseeable future.
19
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
(1) on an actual basis;
(2) on a pro forma basis to give effect to:
- the reorganization of our firm from partnership to corporate form and
the related transactions described under "Certain
Transactions--Reorganization and Related Transactions," as if they had
occurred on June 30, 1999; and
- our note offering; and
(3) on a pro forma as adjusted basis to give further effect to:
- the sale by us of 11,500,000 shares of common stock in this offering at
an assumed initial offering price of $16.00 per share, after deducting
the underwriting discount and estimated offering expenses payable by
us; and
- the application of the proceeds from this offering.
The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical and pro forma financial statements and notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------------------
<S> <C> <C> <C>
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Senior notes............................................................. $ -- $ 100,000 $ 100,000
Subordinated indebtedness(1)............................................. 51,158 62,508 62,508
---------- ----------- -----------
Total long-term indebtedness, including current portion.................. 51,158 162,508 162,508
---------- ----------- -----------
Limited partners' interest in subsidiary................................. 37,094 -- --
Members' capital for LaB Investing Co. L.L.C............................. 95,569 -- --
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none
issued and outstanding historical, pro forma and pro forma as
adjusted............................................................. -- -- --
Common stock, $.01 par value, 200,000,000 shares authorized; 35,375,000
shares issued and outstanding, pro forma; 46,875,000 shares issued
and outstanding, pro forma as adjusted(2)............................ -- 354 469
Additional paid-in-capital............................................. -- 95,215 264,600
Retained earnings...................................................... -- -- --
---------- ----------- -----------
Total stockholders' equity............................................... -- 95,569 265,069
---------- ----------- -----------
Total capitalization..................................................... $ 183,821 $ 258,077 $ 427,577
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(1) Excludes subordinated liabilities related to contributed exchange
memberships of $20.0 million.
(2) The above information excludes (1) 1,200,000 shares of common stock subject
to options with an exercise price equal to the initial public offering price
and (2) restricted stock units for 1,059,000 shares of common stock, in each
case under the Equity Incentive Plan.
20
<PAGE>
DILUTION
The pro forma net tangible book value of LaBranche & Co Inc. as of June 30,
1999, was approximately $(81,575,000), or $(2.31) per share of common stock. Pro
forma net tangible book value per share is equal to the amount of tangible net
assets of LaBranche & Co Inc., less total liabilities, divided by the pro forma
number of shares of common stock outstanding as of June 30, 1999. Assuming the
sale by LaBranche & Co Inc. of the shares of common stock offered hereby
(assuming an initial public offering price of $16.00 per share) and the
application of the net proceeds from this offering, the pro forma net tangible
adjusted book value of LaBranche & Co Inc. at June 30, 1999 would have been
approximately $87,925,000 or $1.88 per share of common stock. This amount
represents an immediate increase in pro forma net tangible book value of $4.19
per share to existing stockholders and an immediate dilution in net tangible
book value of $14.12 per share to new investors in the common stock in this
offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $ 16.00
Pro forma net tangible book value per share at June 30, 1999........... $ (2.31)
Increase per share attributable to new investors....................... $ 4.19
---------
Pro forma net tangible book value per share after the offering......... 1.88
---------
Dilution per share to new investors.................................... $ 14.12
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999,
the total number of shares of common stock purchased from LaBranche & Co Inc.,
the total consideration paid to LaBranche & Co Inc., and the average price per
share paid by existing stockholders of LaBranche & Co Inc. and by new investors
purchasing shares from LaBranche & Co Inc. in this offering, at an assumed
initial public offering price of $16.00 per share, before deducting underwriting
discounts and commissions and the estimated offering expenses payable by
LaBranche & Co Inc.:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------------- --------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 35,375,000 75.5% $ 95,569,000 36.0% $ 2.70
New investors....................................... 11,500,000 24.5 169,500,000 64.0 14.74
------------- ----- -------------- -----
Total............................................... 46,875,000 100.0% $ 265,069,000 100.0%
------------- ----- -------------- -----
------------- ----- -------------- -----
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by existing stockholders will be reduced to 72.8%
of the total number of shares of common stock to be outstanding after this
offering, and will increase the number of shares of common stock held by the new
investors to 27.2% of the total number of shares of common stock to be
outstanding immediately after this offering.
21
<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.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- ---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- ---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
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
--------- --------- --------- ---------- ---------- ----------- ----------
--------- --------- --------- ---------- ---------- ----------- ----------
<CAPTION>
DECEMBER 31,
------------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
--------- --------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
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.
23
<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, we are 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 among our managing directors based on their respective percentage
interests in the profits of LaB
24
<PAGE>
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 this offering.
REORGANIZATION
Simultaneously with this offering, we will incur indebtedness of
approximately $116.4 million 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 this offering will be higher than historical levels.
The redemption of the limited partners' interests is accounted for as a step
acquisition under the purchase method of accounting. The excess of purchase
price over the limited partners' capital accounts of $131.3 million is allocated
to intangible assets. Accordingly, amortization of intangible assets is expected
to increase in the future.
INCOME TAXES
As a partnership, we have generally not been 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 will be 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.
25
<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
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
<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 21.2 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 due primarily to the Fowler, Rosenau
acquisition, by which we became the specialist for 76 additional common stock
listings, and was due also to increased share volume as principal in our
existing specialist stocks traded on the NYSE. Our share volume as principal
increased
26
<PAGE>
97.0% 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 55.0% to
1.8 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 106 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
31 to 43, 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 to $51.2
million at June 30, 1999, from $48.1 million at 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 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.
27
<PAGE>
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 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
listings 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 special
stocks increased 70.3% to 916.9 million shares for 1998, from 538.5 million
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.
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.
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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 31 to 43, 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 from $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 for 1997.
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.
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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 52 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 an increase 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 60.7% to 538.5 million shares for 1997, from 335.1 million 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 64 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 was $300,000 in 1997 and $5.4 million in 1996 as a result
of 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 31, 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.
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.
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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 increase profitability of
the firm.
LIQUIDITY
We have 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. 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 $200,000.
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 extend the
maturities for an additional year, unless the lender provides notice at least
seven months prior to maturity. Concurrently with this offering, we will repay
$5.0 million of the junior subordinated debt as part of the reorganization of
our firm from partnership to corporate form.
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Concurrently with this offering, we will pay $152.1 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. Additionally, the proceeds of our note offering
and the issuance of $16.4 million of subordinated indebtedness will be used to
acquire some limited partnership interests in LaBranche & Co.
Under our note offering, we will issue $100.0 million aggregate principal
amount of senior notes. The notes will bear interest at a rate of % annually
and mature in , 2004. The indenture covering the notes will include
certain covenants that, among other things, limit our ability to:
- borrow money;
- pay dividends on our stock or purchase our stock;
- make investments;
- engage in transactions with stockholders and affiliates;
- create liens on our assets; and
- sell assets or engage in mergers and consolidations.
We will issue a subordinated note in an aggregate principal amount of $16.0
million 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 will bear interest at the annual rate
of %. We will also enter into a $350,000 cash subordinated loan agreement,
bearing interest at an annual rate of %, as payment for the acquisition of a
limited partnership interest. In addition, we will repay $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
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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 this offering, our note
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.
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, 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 21(st) century
dates and 20(th) 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
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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.
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
- 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, we are 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 42 new listed companies, resulting from 66 listing interviews.
In addition we have acquired three specialist operations since 1997, adding 128
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
- 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 78 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.
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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:
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>
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.
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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.
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
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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;
- 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 84.2% 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
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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 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 82.1% to 84.2% 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. Founded in
1924, 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.
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- 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
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 66 selection pools for listed
companies and were chosen by management of the listed companies in 42 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
this offering and our note offering, we will 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
this offering and our note offering, our working capital will increase
from $123.7 million to $233.1 million. In selecting a specialist firm,
listed companies often focus on the capital resources of the specialist,
especially more recently as trading volumes have increased. We
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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. L.L.C, 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 33 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 $7.5 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 chief executive officer.
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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 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>
<C> <S>
Lucent Technologies
Exxon
AT&T
Merck
SBC Communications
Glaxo Wellcome
Tyco International
SmithKline Beecham
Chevron
ING Groep
Medtronic
MediaOne Group
The Gap
Taiwan Semiconductor
Manufacturing
Compaq
TOTAL Fina
Minnesota Mining & Manufacturing
Schlumberger
Koninklijke Philips Electronics
ABN AMRO Holding
The News Corporation
Viacom
US West
Atlantic Richfield
National Australia Bank
Royal PTT Nederland
Kroger
Household International
Suntrust Banks
Lowes Companies
CVS
Istituto Bancario San Paolo di Torino Istituto Mobiliare Italiano
Equant
Firstar
Fox Entertainment Group
Bestfoods
Australia & New Zealand Banking Group
TNT Post Group
Computer Sciences Corporation
Capital One Financial
Tribune Company
PPG Industries
Conseco
Circuit City Stores
Comerica
Archer-Daniels Midland
Bank of Ireland Group
Public Service Enterprise Group
Entergy
Dollar General
</TABLE>
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For a complete listing of our listed companies, please see the inside back
cover of this prospectus.
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.
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 the
SEC, 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
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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.
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.
48
<PAGE>
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.
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 this offering and our
note offering, three of our managing directors will retire 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.
49
<PAGE>
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> <C>
Michael LaBranche..................... 44 Chairman and Chief Executive Officer
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 operating committee since our inception in June 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 operating 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 operating 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 following the closing of this offering and our note offering 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
50
<PAGE>
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.
The compensation committee of our board of directors will be established as
soon as practicable after the closing of this offering and our note offering 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 after
the completion of this offering and our note offering. It is anticipated that
non-employee directors will receive an annual retainer, attendance fees for
board and/or 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 this
offering and our note offering, we will 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 this offering and our
note offering.
The following table sets forth the annual salary we intend to pay during
fiscal 1999 to 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>
NAME AND PRINCIPAL POSITION YEAR ANNUAL SALARY(1)
- ---------------------------------------------------------------------------------------- --------- ----------------
<S> <C> <C>
Michael LaBranche....................................................................... 1999 $ 250,000
Chairman and Chief Executive Officer
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.
51
<PAGE>
The following table sets forth the number of shares issuable upon the
exercise of options to be granted to our executive officers under our Equity
Incentive Plan upon completion of this offering. These options have an exercise
price equal to 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., will exchange their membership interests in LaB Investing Co. L.L.C. for
shares of our common stock. We have entered into employment agreements with each
member who will continue as a managing director after this offering and pledge
agreements and agreements regarding noncompetition and other covenants with all
members, whether or not they continue to be employed with us following this
offering, including, in both cases, 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 reasonably 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 this
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.
52
<PAGE>
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 sercurities 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 this
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 this 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 this 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.
53
<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 will become effective prior to the closing of
this offering. You should, however, refer to the exhibits that are a part of the
registration statement for a copy of the Equity Incentive Plan. See "Available
Information."
Immediately prior to the closing of this offering, we will grant (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 some of our employees who are not
managing directors. Subject to continuing service with us and 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 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
our 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 will be administered by the
compensation committee of our board of directors. 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.
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
54
<PAGE>
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.
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
55
<PAGE>
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 a 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 will adopt, effective upon the closing of this
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 this 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 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.
56
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents information about the beneficial ownership of
our common stock following this offering 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 July 23, 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>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
SHARES ------------------------
NAME AND ADDRESS BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
- -------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Michael LaBranche............................................................... 3,399,213 9.6% 7.3%
James G. Gallagher.............................................................. 2,271,103 6.4 4.8
Alfred O. Hayward, Jr........................................................... 1,838,743 5.2 3.9
S. Lawrence Prendergast......................................................... -0- 0.0 0.0
Vincent J. Flaherty............................................................. 2,072,768 5.9 4.4
Michael J. Naughton............................................................. 1,884,995 5.3 4.0
All executive officers and directors as a group................................. 11,466,822 32.4 24.4
</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." As a result of the stockholders'
agreement, Messrs. LaBranche, Gallagher and Hayward may be deemed to share
the beneficial ownership of the shares of our common stock subject to the
stockholders' agreement. Each of Messrs. LaBranche, Gallagher and Hayward in
his individual capacity disclaims such beneficial ownership in respect of
the shares not directly owned by him.
57
<PAGE>
CERTAIN TRANSACTIONS
REORGANIZATION AND RELATED TRANSACTIONS
REORGANIZATION
Concurrently with this offering and our note offering, we will complete 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. have agreed, subject to the
completion of this offering, to exchange 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 34,750,000 shares of our common stock.
In addition, three members of LaB Investing Co. L.L.C. will receive an
aggregate of $10.0 million in cash as part of their exchange. All the
members of LaB Investing Co. L.L.C. are managing directors, and all
members who will remain employed by us following this offering are only
receiving shares of our common stock, and no cash, in the reorganization.
We thus will become the sole member of LaB Investing Co. L.L.C., and LaB
Investing Co. L.L.C. will continue to be the general partner of LaBranche
& Co. Our common stock to be received by the members of LaB Investing Co.
L.L.C. will be 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 will receive upon the closing of this
offering:
<TABLE>
<CAPTION>
PERCENTAGE INTEREST IN NUMBER OF SHARES OF
PROFITS OF OUR COMMON STOCK
NAMED EXECUTIVE OFFICER LABRANCHE & CO. TO BE RECEIVED
- ------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
Michael LaBranche.......................... 5.3% 3,399,213
James G. Gallagher......................... 3.6 2,271,103
Alfred O. Hayward, Jr...................... 3.6 1,838,743
Vincent J. Flaherty........................ 5.0 2,072,768
Michael J. Naughton........................ 3.6 1,884,995
</TABLE>
- The 19 limited partners of LaBranche & Co., other than Mill Bridge, Inc.,
have agreed, subject to the completion of this offering and our note
offering, to exchange their limited partnership interests in LaBranche &
Co. which represented a 16.4% interest in the profits of LaBranche & Co.
to us in exchange for an aggregate of $68.1 million in cash, 625,000
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 will be subject to lock-up restrictions which
will prohibit the transfer of 50% of those shares for a period of one year
and the remaining 50% for a period of two years following this offering.
- Mill Bridge, Inc., a subsidiary of Van der Moolen Holding NV, will receive
$90.0 million from us, including $74.0 million in cash upon the closing of
this offering and our note offering and a subordinated 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.
- As a result of the above transactions, we will become 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 this offering, we will grant options
under the Equity Incentive Plan to purchase an aggregate of 1,200,000
shares of our common stock to our executive officers. These options have
an exercise price equal to the initial offering price and are not
currently exercisable.
- Immediately prior to the closing of this offering, we will grant
restricted stock units under the Equity Incentive Plan for 1,059,000
shares of our common stock to employees who are not managing directors.
These restricted stock units are not vested.
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<PAGE>
- Prior to the closing of this offering, we will completely discharge 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 will be 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 intend to enter into a stockholders' agreement with all 36 members of LaB
Investing Co. L.L.C. who will be receiving our common stock in the
reorganization, 33 of whom will remain managing directors following this
offering, and with the employees who will receive options and restricted stock
or restricted stock unit awards in connection with the reorganization. This
stockholders' agreement will contain various restrictions on the transfer of our
stock by the parties to such agreement and a voting agreement.
TRANSFER RESTRICTIONS. The stockholders' agreement will prohibit the
transfer of our shares by the former members of LaB Investing Co. L.L.C. and our
employees who receive our common stock in the reorganization for a period of
three years following this offering. Beginning on the third anniversary of this
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. 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 Officers listed below earned
interest income on their capital contributions in the amounts set forth opposite
their names:
<TABLE>
<CAPTION>
CAPITAL INTEREST
NAMED EXECUTIVE OFFICER 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
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<PAGE>
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, 1999, and Mr. LaBranche's spouse holds $1.3 million of
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.
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering and the filing of the amendment to our
certificate of incorporation referred to below, our authorized capital stock
will consist of 200,000,000 shares of common stock, $.01 par value, and
10,000,000 shares of preferred stock, $.01 par value. Upon the closing of this
offering, and after giving effect to the issuance of 11,500,000 shares of common
stock offered by us hereby, there will be 46,875,000 shares of common stock and
no shares of preferred stock issued and outstanding. See "--Preferred Stock."
COMMON STOCK
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the board of directors from time to time may
determine. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders. Cumulative voting for the
election of directors is not authorized by our certificate of incorporation,
which means that the holders of a majority of the shares voted can elect all of
the directors then standing for election. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon our
liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders shall be distributed ratably among the holders of
our common stock after payment of liquidation preferences, if any, on any
outstanding shares of preferred stock and payment of other claims of creditors.
Each outstanding share of common stock is, to be outstanding upon completion of
this offering will be upon payment therefor, duly and validly issued, fully paid
and nonassessable.
There is currently no active trading market for our common stock.
Application will be made to have our common stock approved for listing on the
NYSE under the symbol "LAB."
PREFERRED STOCK
The 10,000,000 authorized shares of preferred stock may by issued in one or
more series without further stockholder authorization, and the board of
directors is authorized to fix and determine the terms, limitations and relative
rights and preferences of the preferred stock, to establish series of preferred
stock and to fix and determine the variations as among series. If we issue
preferred stock, it would have priority over our common stock with respect to
dividends and to other distributions, including the distribution of assets upon
liquidation, and we may be obligated to repurchase or redeem it. The board of
directors can issue preferred stock without the approval of our common
stockholders. Preferred stock may have voting and conversion rights (including
multiple voting rights) which could adversely affect the rights of holders of
common stock. In addition to having a preference with respect
60
<PAGE>
to dividends or liquidation proceeds, if preferred stock is issued, it may be
entitled to the allocation of capital gains from the sale of our assets. We do
not have any present plans to issue any shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless
- the corporation has elected in its certificate of incorporation or bylaws
not to be governed by the Delaware anti-takeover law (we have not made
such an election);
- the business combination was approved by the board of directors of the
corporation before the other party to the business combination became an
interested stockholder;
- upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also
officers or held in employee stock plans in which the employees do not
have a right to determine confidentially whether to tender or vote stock
held by the plan); or
- the business combination was approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the
interested stockholder did not own. The three-year prohibition does not
apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had
not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested
stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as a stockholder who becomes beneficial
owner of 15% or more of a Delaware corporation's voting stock. Section 203
could have the effect of delaying, deferring or preventing a change in
control of LaBranche & Co Inc.
In addition, provisions of our certificate of incorporation and bylaws which
will take effect upon the closing of the offering and which are summarized in
the following paragraphs, may have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by our stockholders.
CLASSIFIED BOARD OF DIRECTORS
Following this offering, our board of directors will be divided into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the board of directors will be elected each year.
These provisions, when coupled with the provision of our certificate of
incorporation authorizing the board of directors to fill vacant directorships or
increase the size of the board of directors, may deter a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by such removal with its own
nominees.
61
<PAGE>
STOCKHOLDER ACTION; SPECIAL MEETINGS OF STOCKHOLDERS
Our bylaws provide that our stockholders may not take action by written
consent, but only at an annual or special meeting of stockholders. Our by-laws
further provide that special meetings of our stockholders may be called only by
the chairman of the board of directors or a majority of the board of directors.
SUPERMAJORITY VOTING PROVISIONS
Our certificate of incorporation provides that the affirmative vote of at
least two-thirds of our stockholders is required to amend the provisions of our
certificate and by-laws relating to the classification of the board of
directors, stockholder action by written consent and the calling of special
meetings.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized by unissued common stock and
preferred stock could render more difficult or discourage an attempt to obtain
control of LaBranche & Co Inc. by means of a proxy contest, tender offer, merger
or otherwise.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
We will enter into indemnification agreements with our current directors and
executive officers. These provisions and agreements may have the practical
effect in some cases of eliminating our stockholders' ability to collect
monetary damages from our directors. We believe that these contractual
agreements and the provisions in our certificate of incorporation and by-laws
are necessary to attract and retain qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is Firstar Bank, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and we cannot predict the effect, if any, that market sales of shares or
the availability of any shares for sale will have on the market price of the
common stock prevailing from time to time. Sales of substantial amounts of
common stock, or the perception that such sales could occur, could adversely
affect the market price of our common stock and our ability to raise capital
through a sale of our securities.
Upon completion of this offering, we will have 46,875,000 shares of common
stock outstanding (or 48,600,000 shares if the underwriters over-allotment
option is exercised in full).
In connection with the reorganization of our firm from partnership to
corporate form, our managing directors and limited partners who are exchanging
their interests for 35,375,000 restricted shares of our common stock have
contractually agreed that they will not sell their common stock for various time
periods after this offering. Under these contractual restrictions, these
restricted shares are eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF SHARES DATE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
312,500............................................... One year after the closing of this offering.
625,000............................................... Two years after the closing of this offering.
12,208,333.............................................. Three years after the closing of this offering.
23,791,667.............................................. Four years after the closing of this offering.
35,375,000.............................................. Five years after the closing of this offering.
</TABLE>
62
<PAGE>
Under SEC rules, the shares eligible for sale in the public market are as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
11,500,000 shares sold in this offering................. After the closing of this offering.
35,375,000 restricted shares............................ After one year from the closing of this offering
(subject to volume limitations which expire after the
second year other than in the case of affiliates).
</TABLE>
In addition:
- each of our managing directors must retain 25% of his or her common stock,
currently totaling 8,501,318 shares in the aggregate, for the duration of
his or her employment; and
- an employee may not sell shares of our common stock that are subject to a
pledge agreement, unless the requirements of the pledge agreement are
waived by us.
The 11,500,000 shares (or up to 13,225,000 shares if the underwriters'
over-allotment option is exercised in full) of common stock sold in this
offering will be freely tradable without further restriction or further
registration under the Securities Act, except for shares purchased by any of our
affiliates (as this term is defined in the Securities Act), which will be
subject to the limitations of Rule 144 under the Securities Act. Subject to
certain contractual limitations, holders of restricted shares generally will be
entitled to sell these shares in the public securities market without
registration either pursuant to Rule 144 or any other applicable exemption under
the Securities Act.
In general, under Rule 144 under the Securities Act, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
within the meaning of Rule 144 for at least one year, and including the holding
period of any prior owner except an affiliate, would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of
one percent of the then outstanding shares of common stock or the average weekly
trading volume of the common stock on the NYSE during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about LaBranche & Co Inc. Any person (or persons whose shares are
aggregated) who is not deemed to have been our affiliate at any time during the
three months preceding a sale, and who has beneficially owned shares for at
least two years (including any period of ownership of preceding non-affiliated
holders), would be entitled to sell such shares under Rule 144(k) without regard
to the volume limitations, manner of sale provisions, public information
requirements or notice requirements. An "affiliate" is a person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or under common control with, such issuer.
We intend to file one or more registration statements under the Securities
Act to register 4,687,500 shares of common stock subject to outstanding stock
options or reserved for issuance under our equity compensation plans. Upon
completion of this offering, options to purchase approximately 1,200,000 shares
and 1,059,000 restricted stock units will be outstanding under our equity
compensation plans.
Our directors and officers and our stockholders who hold 35,375,000 shares
in the aggregate have entered into lock-up agreements. Pursuant to these
agreements, they have agreed not to sell, directly or indirectly, any shares of
common stock without the prior written consent of Salomon Smith Barney Inc. for
a period of 180 days from the date of this prospectus. However, they may gift or
transfer shares so long as the donee or transferee agrees to be bound by the
terms of the lock-up agreement.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the number of shares
set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------------------------- -------------
<S> <C>
Salomon Smith Barney Inc.......................................................
Donaldson, Lufkin & Jenrette Securities Corporation............................
ABN AMRO Incorporated..........................................................
-------------
Total...................................................................... 11,500,000
-------------
-------------
</TABLE>
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and ABN AMRO Incorporated are acting as
representatives, propose to offer some of the shares directly to the public at
the public offering price set forth on the cover page of this prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share on
sales to certain other dealers. If all of the shares are not sold at the initial
offering price, the representatives may change the public offering price and the
other selling terms. The representatives have advised us that the underwriters
do not intend to confirm any sales to any accounts over which they exercise
discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 1,725,000 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.
We and our officers, directors and stockholders have agreed that, for a
period of 180 days from the date of this prospectus, they will not, without the
prior written consent of Salomon Smith Barney Inc., dispose of or hedge any
shares of our common stock or any securities convertible into or exchangeable
for our common stock. Salomon Smith Barney Inc. in its sole discretion may
release any of the securities subject to these lock-up agreements at any time
without notice.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations between us and the representatives for the
underwriters. Among the factors considered in determining the initial public
offering price were our record of operations, our current financial condition,
our future prospects, our markets, the economic conditions in and future
prospects for the industry in which we compete, our management, and currently
prevailing general conditions in the equity securities markets, including
current market valuations of publicly traded companies considered comparable to
us. There can be no assurance, however, that the prices at which the shares will
sell in the public market after this offering will not be lower than the price
at which they are sold by the underwriters or that an active trading market in
the common stock will develop and continue after this offering.
The common stock has been approved for listing on the NYSE under the symbol
"LAB."
The following table shows the underwriting fees to be paid to the
underwriters by us, in connection with this offering. The underwriting fee is
equal to the public offering price per share of common stock
64
<PAGE>
less the amount paid by the underwriters to us per share of common stock. The
underwriting fees are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of our common stock. The
underwriters will not receive any additional compensation in connection with
this offering.
<TABLE>
<CAPTION>
PAID BY LABRANCHE & CO
INC.
----------------------
NO FULL
EXERCISE EXERCISE
---------- ----------
<S> <C> <C>
Per share.............................................................. $ $
Total..................................................................
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price of
the common stock while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.
Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. These transactions may be effected on the NYSE or in the
over-the-counter market, or otherwise and, if commenced, may be discontinued at
any time.
We estimate that our total offering expenses will be approximately $1.6
million. Offering expenses are expenses incurred by us in connection with this
offering and include filing fees, NYSE listing fees, printing expenses and legal
and accounting expenses. We will pay all these offering expenses.
The representatives may, from time to time, engage in transactions with and
perform services for us in the ordinary course of their business. Certain of the
underwriters are acting as the initial purchasers in our note offering. In
addition, we act as specialist for ABN AMRO Holding N.V. ADRs listed on the
NYSE. Therefore, we may be obligated at times to buy or sell these ADRs to
counter short-term imbalances in the prevailing market. At other times we may
trade these ADRs at our own election.
We have agreed to indemnify the underwriters against civil liabilities,
including liabilities under the Securities Act of 1933 for any losses arising
out of any material misstatements or omissions by us in this prospectus or any
misrepresentation by us in the underwriting ageement. In addition, we have
agreed to contribute to payments the underwriters may be required to make in
respect of any of those liabilities.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for LaBranche & Co Inc. by Fulbright & Jaworski L.L.P., New York, New York,
and for the underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New
York.
65
<PAGE>
EXPERTS
The financials statements and schedule of LaB Investing Co. L.L.C. and
Subsidiary and the financial statements of LaBranche & Co. included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
The financials statements of Fowler, Rosenau & Geary, LLC included in this
prospectus and elsewhere in the registration statement have been auditied by
Sugarman & Thrope, P.C., independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement, of which this
prospectus constitutes a part, on Form S-1 under the Securities Act (herein,
together with all amendments and exhibits referred to herein as the
"Registration Statement") with respect to the common stock being sold in this
offering. This prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules to the Registration
Statement, because some parts have been omitted in accordance with rules and
regulations of the SEC. For further information with respect to LaBranche & Co
Inc. and the common stock being sold in this offering, 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 or 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.
We intend to furnish our stockholders annual reports containing financial
statements audited by our independent auditors and quarterly reports containing
unaudited financial information.
66
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
LAB INVESTING CO. L.L.C. AND SUBSIDIARY
<TABLE>
<CAPTION>
PAGE
---------
<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
---------
<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
<PAGE>
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 as adjusted
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. Following
the Reorganization Transactions, LaBranche & Co Inc., on a consolidated basis,
will be subject to federal, state and local income taxes. Concurrently with the
closing of the offering, the Partnership will complete the following
Reorganization Transactions:
- The limited partners of LaBranche & Co. will redeem their interests for
$142.1 million in cash, a $16.0 million subordinated note, $350,000 of
subordinated indebtedness and 625,000 shares of our common stock assumed
to have a value of $10.0 million, for a total purchase price of $168.4
million.
- The members of LaB Investing Co. L.L.C. will exchange their membership
interests in LaB Investing Co. L.L.C. for $10.0 million in cash and
34,750,000 shares of common stock of LaBranche & Co Inc.
- $5.0 million of subordinated debt at an interest rate of 10.0% is assumed
to be repaid.
In addition, simultaneously with the initial public offering, LaBranche & Co
Inc. will incur indebtedness of approximately $100.0 million. The proceeds of
the indebtedness, net of estimated issuance costs of approximately $3.0 million,
are assumed to be 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.................................................................. 11.1 million 15 years
----------------
$ 131.3 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 will become employees of the corporation. The Board of
Directors of LaBranche & Co Inc. will approve the LaBranche & Co Inc. Annual
Incentive Plan (the "Plan") upon completion of the offering. 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 this 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 OFFERING PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS............................... $ 2,763 $ 97,000(A) $ 169,500(H) $ 112,213
(142,050)(B)
(10,000)(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 subordinated indebtedness....................... 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....................................... 45,838 131,306(E) -- 177,144
OTHER ASSETS............................................ 6,516 3,000(A) -- 9,516
----------- ----------- ----------- -----------
Total assets........................................ $ 346,101 $ 74,256 $ 169,500 $ 589,857
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES AND MEMBERS' CAPITAL
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
----------- ----------- ----------- -----------
COMMITMENTS............................................. -- -- -- --
SUBORDINATED LIABILITIES:
Exchange memberships, at market value................. 20,000 -- -- 20,000
16,350(G) --
Other subordinated indebtedness....................... 51,158 (5,000)(D) -- 62,508
----------- ----------- ----------- -----------
71,158 11,350 -- 82,508
----------- ----------- ----------- -----------
LIMITED PARTNERS' INTEREST IN SUBSIDIARY................ 37,094 (37,094)(B) -- --
----------- ----------- ----------- -----------
10,000(B)
MEMBERS' CAPITAL/STOCKHOLDERS' EQUITY................... 95,569 (10,000)(C) 169,500 265,069
----------- ----------- ----------- -----------
Total liabilities and members' capital/stockholders'
equity............................................ $ 346,101 $ 74,256 $ 169,500 $ 589,857
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</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 21,748(I) 33,047
Lease of exchange memberships.................................. 4,165 -- 4,165
Interest....................................................... 2,195 4,984(D)(F)(G) 7,179
Exchange, clearing and brokerage fees.......................... 1,997 -- 1,997
Amortization of intangibles.................................... 1,693 1,873(J) 3,566
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 28,605 52,749
---------- ----------- -----------
Income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and provision
for income taxes............................................. 79,349 (28,605) 50,744
MANAGING DIRECTORS' COMPENSATION................................. 48,214 (48,214)(K) --
---------- ----------- -----------
Income before limited partners' interest in earnings of
subsidiary and provision for income taxes.................... 31,135 19,609 50,744
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY............. 21,054 (21,054)(L) --
---------- ----------- -----------
Income before provision for income taxes....................... 10,081 40,663 50,744
PROVISION FOR INCOME TAXES....................................... 3,789 19,283(M) 23,072
---------- ----------- -----------
Net income..................................................... 6,292 21,380 27,672
---------- ----------- -----------
---------- ----------- -----------
Pro forma weighted average shares outstanding.................... 46,875,000(N)
-----------
-----------
Pro forma basic and diluted net income per share................. $ 0.59(N)
-----------
-----------
</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(O) 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 25,562(I) 40,538
Lease of exchange memberships........................ 6,568 496 -- 7,064
Interest............................................. 3,577 410 9,968(D)(F)(G) 13,955
Exchange, clearing and brokerage fees................ 2,898 335 -- 3,233
Amortization of intangibles.......................... 2,526 860(P) 3,746(J) 7,132
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 39,276 78,203
---------- ------- -------------- -----------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary and provision for income taxes.......... 91,635 7,288 (39,276) 59,647
MANAGING DIRECTORS' COMPENSATION....................... 58,783 1,387 (60,170)(K) --
---------- ------- -------------- -----------
Income before limited partners' interest in earnings
of subsidiary and provision for income taxes....... 32,852 5,901 20,894 59,647
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY... 26,292 -- (26,292)(L) --
---------- ------- -------------- -----------
Income before provision for income taxes............. 6,560 5,901 47,186 59,647
PROVISION FOR INCOME TAXES............................. 3,900 200 23,635(M) 27,735
---------- ------- -------------- -----------
Net income........................................... $ 2,660 $ 5,701 $ 23,551 $ 31,912
---------- ------- -------------- -----------
---------- ------- -------------- -----------
Pro forma weighted average shares outstanding.......... 46,875,000(N)
-----------
-----------
Pro forma basic and diluted net income per share....... $ 0.68(N)
-----------
-----------
</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 long-term indebtedness. Debt
issuance costs are estimated to approximate $3.0 million.
(B) Reflects the redemption of limited partnership interests in exchange for
$168.4 million, comprised of $142.1 million in cash, a $16.0 million
subordinated note and $350,000 of subordinated indebtedness (see note (G))
and $10.0 million in common stock.
(C) Reflects redemption of members' interest for $10.0 million.
(D) Reflects pro forma repayment of $5.0 million of subordinated liabilities
owed to a limited partner and reverses the related interest expense.
(E) Reflects $131.3 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 assumed to
be used for redemption of limited partners' and members' interest and the
related interest expense.
(G) Reflects the issuance of a $16.0 million subordinated note and $350,000 of
subordinated indebtedness assumed to be used for redemption of limited
partners' interest and the related interest expense.
(H) Reflects net proceeds of $169.5 million to be received upon completion of
the initial public offering.
(I) 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), 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.
(J) Reflects pro forma amortization of intangibles related to redemption of
limited partners' interests.
(K) Managing directors' compensation was adjusted to reverse the actual amounts
previously recorded.
(L) Reflects reversal of limited partners' interest in earnings of subsidiary.
(M) Reflects federal, state and local income taxes at an estimated effective tax
rate of approximately 44%.
(N) Based on 46,875,000 weighted average shares outstanding. 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.
(O) Reflects the pro forma pre-acquisition results of operations of Fowler,
Rosenau for the six months ended June 30, 1998.
(P) 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) at June 30,
1999................................................................... 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 .42 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 provisions as long as 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,
------------------------
ASSETS 1998 1997
- -------------------------------------------------------------------------- JUNE 30, ------------ ----------
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
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 at June 30,
1999)................................................................... 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 partners...................................................... 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, limited partners' interest in
earnings of subsidiary and unincorporated business
taxes............................................. 24,142 14,420 34,773 19,907 17,149
----------- --------- --------- --------- ---------
Income before managing directors' compensation,
limited partners' interest in earnings of
subsidiary 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 limited partners' interest in earnings
of subsidiary and unincorporated business taxes... 31,137 13,994 32,855 17,715 9,526
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY.... 21,054 10,848 -- -- --
Income before unincorporated business taxes......... 10,083 3,146 -- -- --
UNINCORPORATED BUSINESS TAXES........................... 3,789 1,900 3,900 1,881 1,592
----------- --------- --------- --------- ---------
Net income.......................................... $ 6,294 $ 1,246 $ 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 PARTNER 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 2,355 6,294
Contributions to capital..................................................... 17,395 1,028 18,423
Distributions of capital..................................................... (2,861) (3,863) (6,724)
--------- ---------- ----------
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................................................ $ 6,294 $ 1,246 $ 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 2,758 1,648 206
--------- --------- --------- --------- ---------
Net cash (used in) provided by operating activities... (15,371) (20,763) (8,690) (26,436) 21,863
--------- --------- --------- --------- ---------
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 16,750 28,004 1,769
Proceeds from contributions to capital.................... 18,423 8,029 28,840 12,147 5,013
Payments for distributions of capital..................... (6,724) (2,994) (33,618) (20,397) (19,857)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities... 13,483 21,335 11,972 19,754 (13,075)
--------- --------- --------- --------- ---------
(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 .42 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 as long as 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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11,500,000 SHARES
[LOGO]
COMMON STOCK
---------
PROSPECTUS
, 1999
---------
SALOMON SMITH BARNEY
DONALDSON, LUFKIN & JENRETTE
ABN AMRO ROTHSCHILD
A DIVISION OF ABN AMRO
INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by LaBranche & Co Inc. in
connection with the sale of the common stock being registered hereby. All the
amounts shown are estimated, except the SEC registration fee, the NASD filing
fee and the New York Stock Exchange listing fee.
<TABLE>
<S> <C>
SEC Registration Fee.......................... $ 62,505.00
NASD Filing Fee............................... 22,982.50
New York Stock Exchange Listing Fee........... 256,100.00
Printing Expenses............................. 200,000.00
Legal Fees and Expenses....................... 600,000.00
Accounting Fees and Expenses.................. 300,000.00
Blue Sky Expenses and Counsel Fees............ 5,000.00
Transfer Agent and Registrar Fees............. 5,000.00
Miscellaneous................................. 168,412.50
------------
Total....................................... $1,620,000.00
------------
------------
</TABLE>
ITEM 14. 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
II-1
<PAGE>
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.
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 intends to enter into indemnification agreements with its
current directors and executive officers. The Company intends 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 Section of 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 form of
underwriting agreement filed as Exhibit 1.1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
As part of the Reorganization and Related Transactions, LaBranche & Co Inc.
will issue: (i) an aggregate of 35,375,000 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), to certain limited partners of
LaBranche & Co. and all of the members of LaB Investing Co. L.L.C. and (ii) a
$16.4 million of subordinated indebtedness (collectively, the "Reorganization
Securities"). Also immediately prior to this offering, the Company will make
awards of stock options and restricted stock units to certain of its employees.
Since 1996, the Company sold (i) $20.0 million aggregate principal amount of
8.17% subordinated notes; (ii) $15.0 million aggregate principal amount of 7.69%
subordinated notes; and (iii) $15.3 million aggregate principal amount of 10.0%
subordinated notes (collectively, the "Notes"). The offering and sale of the
Reorganization Securities will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), because they will have been offered and
sold in transactions exempt form registration under the Securities Act pursuant
to Section 4(2). The offering and sale of the Notes were not registered under
the Securities Act because they were offered and sold in transactions exempt
from registration under the Securities Act pursuant to Section 4(2). The
employee awards will not be registered under the Securities Act because the
awards will not involve an offer or sale for purposes of Section 2(a)(3) of the
Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.
2.1 Form of Plan of Incorporation of LaBranche & Co.
2.2 Form of 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 Form of Amended and Restated Certificate of Incorporation of the Company.
3.2 Form of Amended and Restated Bylaws of the Company.
4.1 Specimen Stock Certificate.
5.1 Opinion of Fulbright & Jaworski L.L.P. re: legality.*
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 dated as of , 1999, 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 Form of Subordinated Note.*
10.12 Credit Agreement, dated as of June 26, 1998, by and among LaBranche & Co., and
The Bank of New York, as amended.
10.13 Form of Indemnification Agreement.
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 & Thrope, P.C.
24.1 Power of attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment
II-3
<PAGE>
ITEM 17. 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 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 provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to the 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 July 30, 1999.
LABRANCHE & CO INC.
BY: /S/ GEORGE M.L. LABRANCHE, IV
-----------------------------------------
George M.L. LaBranche, IV
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN 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 substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ GEORGE M.L. LABRANCHE, Chief Executive Officer and
IV Chairman of the Board
- ------------------------------ (Principal Executive July 30, 1999
George M.L. LaBranche, IV Officer)
/s/ TODD GRABER Controller (Principal
- ------------------------------ Accounting Officer) July 30, 1999
Todd Graber
* Director
- ------------------------------ July 30, 1999
James Gallagher
* Director
- ------------------------------ July 30, 1999
Alfred O. Hayward, Jr.
/s/ S. LAWRENCE PRENDERGAST Executive Vice President,
- ------------------------------ Finance and Director July 30, 1999
S. Lawrence Prendergast
/s/ GEORGE M. L. LABRANCHE, IV
----------------------------------------
George M. L. LaBranche, IV
*By: AS ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
2.1 Form of Plan of Incorporation of LaBranche & Co.
2.2 Form of 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 Form of Amended and Restated Certificate of Incorporation of the Company.
3.2 Form of Amended and Restated Bylaws of the Company.
4.1 Specimen Stock Certificate.
5.1 Opinion of Fulbright & Jaworski L.L.P. re: legality.*
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 dated as of , 1999, 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 Form of Subordinated Note.*
10.12 Credit Agreement, dated as of June 26, 1998, by and among LaBranche & Co., and The Bank of New York,
as amended.
10.13 Form of Indemnification Agreement.
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 & Thrope, P.C.
24.1 Power of attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
Exhibit 1.1
Draft of July 28, 1999
LaBranche & Co Inc.
_______________ Shares (1)
Common Stock
($0.01 par value)
Underwriting Agreement
New York, New York
__________, 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, shares of Common Stock, $ 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 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
- --------
(1) Plus an option to purchase from the Company, up to additional
Securities to cover over-allotments.
<PAGE>
partnership ("LABCO."), and after consummation of the Reorganization
Transactions, references to the "Company" shall be deemed to be references to
LaBInc.
It is understood and agreed to by all parties that in connection with
the conversion 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" and the issuance and sale of $100 million in aggregate principal
amount of senior notes by the Company pursuant to a Note Purchase Agreement
dated _____________, 1999 are hereinafter referred to as the "RELATED
TRANSACTIONS."
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 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
2
<PAGE>
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 qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction which requires such
qualification; 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) 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 have been duly and validly authorized and issued, are fully paid
and, are non-assessable and 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 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, the Stockholders' Agreement, each
Employment Agreement, each Noncompetition Agreement and each Pledge
Agreement (each such capitalized term not defined herein having the
meaning ascribed to it in the Prospectus) has been duly authorized,
executed and delivered by the Company and constitutes a valid
3
<PAGE>
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; and the Company has obtained the signature
of each other party to the Stockholders' Agreement, each Employment
Agreement, each Noncompetition Agreement, each Pledge Agreement and the
Stockholders' Agreement; 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; and the statements set forth in the
Prospectus under the headings "Description of Capital Stock,"
"Business--Regulatory Matters and --Legal Proceedings," "Certain
Transactions," "Employment and Noncompetition Agreements" 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 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) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its Subsidiaries
pursuant to, (i) the charter or by-laws of the Company or any of its
Subsidiaries, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company or any of its Subsidiaries is a party or bound or to which its
or their property is subject, or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any
of its Subsidiaries of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its Subsidiaries or any of its
or their properties;
(k) 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;
4
<PAGE>
(l) The consolidated historical financial statements and
schedules of the Company and its consolidated Subsidiaries 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 (except as otherwise noted therein).
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 include 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;
(m) There are no pending actions, suits or proceedings by or
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its Subsidiaries is a party
or its or their property is subject of a character required to be
disclosed in the Registration Statement which is not adequately
disclosed in the Prospectus; and, to the best of the Company's
knowledge, no such actions, suits or proceedings are threatened or
contemplated by any court or governmental agency, authority or body or
threatened by others;
(n) Each of the Company and each of its Subsidiaries owns or
leases all such properties as are 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;
(o) Neither the Company nor any Subsidiary is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its
property is subject, or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or such Subsidiary or any of its
properties, as applicable;
5
<PAGE>
(p) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its consolidated Subsidiaries and
delivered their report with respect to the audited consolidated
financial statements and schedules 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;
(q) Sugarman & Thrope, P.C., who have certified certain
financial statements of Fowler, Rosenau & Geary LLC ("FOWLER")delivered
their report with respect to the audited consolidated financial
statements and schedules 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;
(r) 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;
(s) 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 on the
condition (financial or otherwise), prospects, 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);
(t) 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;
(u) The Company and its Subsidiaries have such concessions,
permits, licenses, consents, exemptions, franchises, authorizations,
orders, registrations, qualifications and other approvals (each, an
"AUTHORIZATION") of, and have made all filings with and notices to, all
Federal state and foreign governments, governmental or regulatory
authorities and
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self-regulatory organizations and all courts and other tribunals, as
are necessary to consummate the Reorganization Transactions and the
Related Transactions. Each such Authorization is valid and in full
force and effect and the Company and each of its Subsidiaries is in
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 impairment of the
rights of the holder of any such Authorization; and other than as
disclosed in the Prospectus, such Authorizations contain no
restrictions that are materially more burdensome than those imposed on
LaBCo. and LaBLLC immediately prior to the consummation of the
Reorganization Transactions;
(v) The Company and its Subsidiaries possess all
Authorizations issued by the appropriate Federal, state and foreign
governments, governmental or regulatory authorities, self-regulatory
organizations and all courts or other tribunals, and 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 necessary to conduct their respective businesses as
described in the Prospectus;
(w) 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;
(x) 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;
(y) Each of the Company and its Subsidiaries 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 the regulations and published interpretations thereunder
with respect to each "plan" (as defined in Section 3(3) of ERISA and
such regulations and published interpretations) in which employees of
the Company and its Subsidiaries are eligible to participate and each
such plan is in compliance in all material respects with the presently
applicable provisions of ERISA and such regulations and published
interpretations. The Company and its Subsidiaries have not 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;
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(z) 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. The consummation
of the Reorganization Transactions and the Related Transactions will
not (i) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, (A) the organizational documents of
the Company, (B) any of the organizational documents of either of the
Subsidiaries, or (C) any indenture, loan agreement, mortgage, lease or
other 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 or any of their respective properties is bound, or (ii)
violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any government or court or any
governmental body or agency having jurisdiction over the Company or any
of its Subsidiaries or any of their respective properties;
(aa) The statements set forth under the headings "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000" and "Risk Factors--We face risks associated with
the Year 2000" 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;
(bb) 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;
(cc) LaBCo. is registered as a broker-dealer with the SEC
under the Exchange Act and with state securities authorities in each
state where LaBCo. is required to be so registered. LaBCo. is a member
organization in good standing with the NYSE;
(dd) LaBCo. is a broker-dealer subject to the provisions of
Regulation T (12 C.F.R. ss.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; and
(ee) 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
8
<PAGE>
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 as set forth in the Prospectus, (a)
to the Company's knowledge, there are no rights of third parties to any
such Intellectual Property; (b) there is no material infringement by
third parties of any such Intellectual Property; (c) there is no
pending or, to the Company's best knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's rights in or to
any such Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; (d) there is no
pending or, to the Company's best knowledge, threatened action, suit,
proceeding or claim by others challenging the validity or scope of any
such Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; (e) there is no
pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other
proprietary rights of others, and the Company is unaware of any other
fact which would form a reasonable basis for any such claim; (f) to the
Company's knowledge, there is no U.S. patent or published U.S. patent
application which contains claims that dominate or may dominate any
Intellectual Property described in the Prospectus as being owned by or
licensed to the Company or that interferes with the issued or pending
claims of any such Intellectual Property; and (g) there is no prior art
of which the Company is aware that may render any U.S. patent held by
the Company invalid or any U.S. patent application held by the Company
unpatentable which has not been disclosed to the U.S. Patent and
Trademark Office.
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
$ 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 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
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<PAGE>
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
, 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 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
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<PAGE>
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, (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
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<PAGE>
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 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
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.
(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. (including filing fees and the reasonable fees
and expenses of counsel for the Underwriters relating to such filings);
(viii) the transportation and other
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<PAGE>
expenses incurred by or on behalf of Company representatives 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; and (x) all other costs and expenses incident to the
performance by the Company of its obligations hereunder.
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 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 qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction which
requires such qualification;
(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
general partnership interests in LaBCo. and the membership
interests in LaBLLC have been duly and validly created and are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
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<PAGE>
(iii) all of the membership interests of LaBLLC and
all of the partnership interests of LaBCo. have been duly and
validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the
Prospectus, all membership interests of LaBLLC and all
partnership interests of LaBCo. are owned by the Company,
either directly or through wholly owned Subsidiaries, free and
clear of any perfected security interest and, to the knowledge
of such counsel, after due inquiry, any other security
interest, claim, lien or encumbrance;
(iv) 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; 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 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; the holders of outstanding shares of capital
stock of the Company are not entitled to preemptive or other
rights to subscribe for the Securities; and, except as set
forth in the Prospectus, 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;
(v) 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 --Legal Proceedings,"
"Certain Transactions," "Employment and Noncompetition
Agreements" and "Shares Eligible for Future Sale" fairly
summarize the matters therein described;
(vi) the Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has 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; and such counsel has no reason to believe that on
the Effective
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<PAGE>
Date or at the Execution Time the Registration Statement
contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus as of its date and on the Closing Date
included or includes any untrue statement of a material fact
or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances
under which they were made, not misleading (in each case,
other than the financial statements and other financial
information contained therein, as to which such counsel need
express no opinion);
(vii) this Agreement 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) each of the Stockholders' Agreement, each
Employment Agreement, each Noncompetition Agreement and each
Pledge Agreement 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;
(ix) 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;
(x) the Company and its Subsidiaries 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, 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 or results or, after
notice or lapse of time or both, would reasonably be expected
to result in any other material impairment of the rights of
the holder of any such Authorization; and other than as
disclosed in the Prospectus, such Authorizations contain no
restrictions that are materially more burdensome than those
imposed on LaBCo. or LaBLLC immediately prior to the
consummation of the Reorganization Transactions;
(xi) all stockholder, partnership and limited
liability company member approvals necessary for LaBInc.,
LaBCo. and LaBLLC to consummate the
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Reorganization Transactions and the Related Transactions have
been obtained and are in full force and effect. The
consummation of the Reorganization Transactions and the
Related Transactions will not (i) conflict with or constitute
a breach of any of the terms or provisions of, or a default
under, (A) the organizational documents of LaBInc., (B) the
organizational documents of LaBCo. or LaBLLC, or (C) any
material indenture, mortgage, deed of trust, loan agreement,
or other agreement or instrument known to such counsel to
which any of LaBInc., LaBCo. or LaBLLC is a party or by which
any of LaBInc., LaBCo. or LaBLLC is bound or to which any of
the property or assets of any of LaBInc., LaBCo. or LaBLLC is
subject, or (ii) violate or conflict with any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over any of
LaBInc., LaBCo. or LaBLLC or any of their properties;
provided, HOWEVER, that, for the purposes of this paragraph
(xi), such counsel need not express any opinion with respect
to Federal or state securities laws, other antifraud laws, and
fraudulent transfer laws, and, insofar as the consummation of
the Reorganization Transactions and Related Transactions are
concerned, such counsel need not express any opinion 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 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) neither the issue and sale of the Securities,
nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation of or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or pursuant to, (i) the
charter or by-laws of the Company or the organizational
documents of its Subsidiaries, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or its
Subsidiaries is a party or bound or to which its or their
property is subject, or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the
Company or its Subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or its
Subsidiaries or any of its or their properties;
(xiv) neither the Company nor any Subsidiary is in
violation or default of (i) any provision of its charter or
bylaws, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument
to which it is a party or bound or to which its property is
subject, or (iii) any statute, law, rule, regulation,
16
<PAGE>
judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or such
Subsidiary or any of its properties, as applicable;
(xv) 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;
(xvi) 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;
(xvii) the Company and its Subsidiaries have such
Authorizations of, and have made all 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, as are necessary to consummate
the Reorganization Transactions and the Related Transactions.
Each such Authorization is valid and in full force and effect
and the Company and each of its Subsidiaries is in 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 impairment of the rights of
the holder of any such Authorization; and other than as
disclosed in the Prospectus, such Authorizations contain no
restrictions that are materially more burdensome than those
imposed on LaBCo. and LaBLLC immediately prior to the
consummation of the Reorganization Transactions;
(xviii) the Company and its Subsidiaries possess all
Authorizations issued by the appropriate Federal, state and
foreign governments, governmental or regulatory authorities,
self-regulatory organizations and all courts or other
tribunals, and 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
necessary to conduct their respective businesses as described
in the Prospectus;
(xix) 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. The consummation of the
Reorganization Transactions and the Related Transactions will
not (i) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, (A) the
17
<PAGE>
organizational documents of the Company, (B) any of the
organizational documents of either of the Subsidiaries, or (C)
any indenture, loan agreement, mortgage, lease or other
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 or any of their respective properties is bound,
or (ii) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any government
or court or any governmental body or agency having
jurisdiction over the Company or any of its Subsidiaries or
any of their respective properties;
(xx) 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, to register any such securities under the Act,
or to qualify any indenture under the Trust Indenture Act of
1939, as amended;
(xxi) LaBCo. is registered as a broker-dealer with
the SEC under the Exchange Act and with state securities
authorities in each state where LaBCo. is required to be so
registered. LaBCo. is a member organization in good standing
with the NYSE;
(xxii) the consummation of the transactions
contemplated by the Reorganization Transactions and the
Related Transactions will not violate Regulation T, U or X of
the Board of Governors of the Federal Reserve system; and
(xxiii) 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.
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 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 of the Board and the
principal financial officer of the
18
<PAGE>
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 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
on the condition (financial or otherwise), prospects,
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).
(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 period ended
[June 30], 1999, 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
financial statement schedules and pro forma financial
statements 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;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and its Subsidiaries; their limited review, in accordance with
standards established under Statement on Auditing Standards
No. 71, of the unaudited interim financial information for the
six-month period ended June 30, 1999, and as at June 30, 1999,
as indicated in their report dated , 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 of the meetings of the stockholders,
19
<PAGE>
directors and Managing Committee LaB LLC; 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 were any changes, at a
specified date not more than five days prior to the
date of the letter, in the long-term indebtedness of
the Company and its Subsidiaries or capital stock of
the Company or decreases in the members'
capital/stockholders' equity 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 fiscal year in
income before limited partners' interest in earnings
of subsidiary and provision for income taxes or per
share amounts of net income of the Company and its
Subsidiaries, 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 information included in the
Registration Statement and Prospectus in response to
Regulation S-K, Item 301 (Selected Financial Data),
Item 302 (Supplementary Financial Information), Item
402 (Executive Compensation) and Item 503(d) (Ratio
of Earnings to Fixed Charges) is not in conformity
with the applicable disclosure requirements of
Regulation S-K; and
(iii) they have performed certain other specified
procedures 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
20
<PAGE>
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 report with respect to a review of
unaudited interim financial information of the Company for the eight
quarters ending December 31, 1998, in accordance with Statement on
Auditing Standards No. 71.
The Company shall have received from Arthur Andersen LLP (and
furnished to the Representatives) an examination 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 a review report 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 examination report
shall be included in the Registration Statement.
(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:
(i) 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;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by Fowler; their
limited review in accordance with standards established by the
American Institute of Certified Public Accountants of the
unaudited interim financial information for the seven-month
period ended June 30, 1998 and as at June 30, 1998, as
indicated in their report dated January 20, 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; and
inquiries of certain officials of Fowler, who have
responsibility for financial and accounting matters of Fowler,
as to transactions and events
21
<PAGE>
subsequent to November 30, 1997, nothing came to their
attention which caused them to believe that:
(A) any unaudited financial statements of
Fowler, included in the Registration Statement and
the Prospectus do not comply in form in all material
respects with applicable accounting requirements of
the Act and with the published rules and regulations
of the Commission with respect to registration
statements on Form S-1; and said unaudited financial
statements are not in conformity with generally
accepted accounting principals applied on a basis
substantially consistent with that of the audited
financial statements included in the Registration
Statement and the Prospectus; or
(B) with respect to the period subsequent to
June 30, 1998, there were any changes, at a specified
date not more than five business days prior to the
date of the letter, in the total liabilities of
Fowler, or decreases in inventory of specialist
stocks or members' capital of Fowler as compared with
the amounts shown on the June 30, 1998 consolidated
balance sheet included in the Registration Statement
and the Prospectus, or for the period from July 1,
1998 to such specified date there were any decreases,
as compared with the corresponding period in the
preceding fiscal year, in net income of Fowler 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; and
(iii) they have performed certain other specified
procedures 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 agrees with the accounting
records of Fowler excluding any questions of legal
interpretation.
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 (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
22
<PAGE>
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 cancelation 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 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
23
<PAGE>
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. 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 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 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
24
<PAGE>
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
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.
(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
25
<PAGE>
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).
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 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
cancelation of this Agreement.
26
<PAGE>
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 Inc. General Counsel
(fax no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith
Barney Inc., 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.
"EXECUTION TIME" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
27
<PAGE>
"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]
28
<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:
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
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:
--------------------------
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF UNDERWRITTEN
UNDERWRITERS SECURITIES TO BE PURCHASED
- ------------ --------------------------
<S> <C>
Salomon Smith Barney Inc..................................................... $
Donaldson, Lufkin & Jenrette Securities Corporation..........................
ABN AMRO Incorporated........................................................
--------------
Total...................................................... $
==============
</TABLE>
30
<PAGE>
SCHEDULE II
[Stockholders to be Subject to Lock-up Agreement]
<PAGE>
[FORM OF LOCK-UP AGREEMENT] EXHIBIT A
[LETTERHEAD OF OFFICER, DIRECTOR OR MAJOR SHAREHOLDER OF
CORPORATION]
LaBranche & Co. Inc.
Public Offering of Common Stock
-------------------------------
, 1999
Salomon Smith Barney Inc.
Donaldson, Lufkin & Jenrette
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:
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.
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 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
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...........................6
Section 6. Stockholders' Agreement...........................................7
Section 7. Amendments to this Plan...........................................8
Section 8. Tax Consequences..................................................8
Section 9. Management of the Company.........................................9
Section 10. Other............................................................10
Section 11. Documents That Exchanging Parties Are Being Asked to Sign........13
Section 12. Copies of Documents and List of Contact Persons..................14
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
-i-
<PAGE>
INTRODUCTION
GENERAL
This is the Plan of Incorporation, dated as of June 10, 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
<PAGE>
delivering 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
-2-
<PAGE>
Incorporation 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 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
-7-
<PAGE>
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.
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.
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<PAGE>
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.
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
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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 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
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<PAGE>
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
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.
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<PAGE>
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
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
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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.
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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<PAGE>
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:
------------------------------
Name:
Title:
LaB INVESTING CO. L.L.C
By:
-----------------------------------
Name:
Title:
LaBRANCHE & CO INC.
By:
-----------------------------------
Name:
Title:
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<PAGE>
Exhibit 2.2
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "AGREEMENT") is dated as of June ___,
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 ___, 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.
<PAGE>
(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 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.
2
<PAGE>
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").
3
<PAGE>
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 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.
4
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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;
5
<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.
6
<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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(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.
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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, 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
9
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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.
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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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:
-------------------------------------
Name:
Title:
LAB INVESTING CO. L.L.C.
-----------------------------------------
Name:
Title:
-----------------------------------------
George M.L. LaBranche, IV
-----------------------------------------
Vincent J. Flaherty
-----------------------------------------
James G. Gallagher
-----------------------------------------
Alfred O. Hayward, Jr.
-----------------------------------------
Michael J. Naughton
-----------------------------------------
John McGraner
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-----------------------------------------
Vincent Papandrea
-----------------------------------------
Anthony M. Corso
-----------------------------------------
Eugene C. McCarthy
-----------------------------------------
John O. Pickett, III
-----------------------------------------
Michael C. Ziebarth
-----------------------------------------
Anthony Giardina
-----------------------------------------
Sean M. McCooey
-----------------------------------------
Mark Soltz
-----------------------------------------
Christopher M. Smith
-----------------------------------------
Joseph Corso, Jr.
-----------------------------------------
Robert A. Conte
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-----------------------------------------
Paul A. Redmond
-----------------------------------------
Thomas G. McLaughlin
-----------------------------------------
Nicholas Caputo
-----------------------------------------
Joseph R. Dewhurst, II
-----------------------------------------
Steven C. Berger
-----------------------------------------
John L. McWilliams
-----------------------------------------
Thomas J. Shanley
-----------------------------------------
Kevin R. McMahon
-----------------------------------------
Fred DeBoer
-----------------------------------------
Robert W. Keelips, III
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-----------------------------------------
Karin Gill
-----------------------------------------
John M. Dempsey, III
-----------------------------------------
John N. Durante
-----------------------------------------
Gerard A. Competello
-----------------------------------------
William J. Burke, III
-----------------------------------------
Christopher Connors
-----------------------------------------
Christopher Keelips
-----------------------------------------
Vincent G. Quigley
-----------------------------------------
Anthony Picerni
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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
<PAGE>
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 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
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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) 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. The Board of Directors
shall consist of five (5) directors; provided that the number of directors may
be increased from time to time by resolution adopted by the affirmative vote of
a majority of the Continuing 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
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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 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 any directorships 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
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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.
(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,
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(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 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.
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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
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 ___ day of _____, 1999.
LaBRANCHE & CO INC.
By:
-----------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
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Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
LABRANCHE & CO INC.
Adopted on July___, 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
seventy (70).
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
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<PAGE>
any action, suit, or proceeding referred to in Sections 10.01 and 10.02, or in
defense of 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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<PAGE>
(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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<PAGE>
[Letterhead] [Letterhead]
Exhibit 4.1
TEMPORARY CERTIFICATE-EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE
WHEN READY FOR DELIVERY
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
LOGO TO COME
LaBranche & Co Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE
COMMON STOCK OF
LaBranche & Co Inc.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
FirStar
TRANSFER AGENT
AND REGISTRAR,
BY
AUTHORIZED OFFICER
<PAGE>
The Corporation will furnish without charge to each stockholder who so
requests a statement of the number of shares constituting each class or series
of stock and the designation thereof, and a copy of the powers, 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/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ................... Custodian ..........................
(Cust) (Minor)
under Uniform Gifts to Minors
Act ....................................................
(State)
Additional abbreviations may also be used though not in the above list.
For value received,____________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------
- ----------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint_____________________________________________
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-------------------
NOTICE:
--------------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) 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.
[Letterhead] [Letterhead]
<PAGE>
Exhibit 10.1
AGREEMENT OF LEASE
between
Aetna Life Insurance Company, Landlord
and
La Branche & Co., Tenant
Dated: January 6th, 1984
PREMISES:
Easterly portion of 26th floor
1 Exchange Plaza
New York, New York
OFFICE LEASE
<PAGE>
TABLE OF CONTENTS
Page
Article 1 Rent .................................................... 1
Article 2 Commencement of Term .................................... 3
Article 3 Adjustments of Rent ..................................... 5
Article 4 Electricity ............................................. 12
Article 5 Use ..................................................... 15
Article 6 Alterations and Installations ........................... 15
Article 7 Repairs ................................................. 21
Article 8 Requirements of Law ..................................... 23
Article 9 Insurance, Loss, Reimbursement, Liability ............... 24
Article 10 Damage by Fire or other Cause ........................... 27
Article 11 Assignment, Mortgaging, Subletting, Etc.................. 29
Article 12 Certificate of Occupancy ................................ 35
Article 13 Adjacent Excavation - Shoring ........................... 36
Article 14 Condemnation ............................................ 36
Article 15 Access to Demised Premises; Changes...................... 38
Article 16 Conditions of Limitation ................................ 39
Article 17 Re-entry by Landlord, Injunction ........................ 41
Article 18 Damages ................................................. 42
Article 19 Landlord's Right to Perform Tenant's Obligations ........ 44
Article 20 Quiet Enjoyment ......................................... 45
Article 21 Services and Equipment .................................. 45
Article 22 Definitions ............................................. 48
Article 23 Invalidity of any Provision ............................. 49
Article 24 Brokerage ............................................... 49
Article 25 Subordination ........................................... 50
Article 26 Certificate of Tenant ................................... 52
Article 27 Legal Proceedings, Waiver of Jury Trial ................. 53
Article 28 Surrender of Premises ................................... 53
Article 29 Rules and Regulations ................................... 54
Article 30 Consents and Approvals .................................. 54
Article 31 Notices ................................................. 55
Article 32 No Waiver ............................................... 56
Article 33 Captions ................................................ 57
Article 34 Inability to Perform .................................... 57
Article 35 No Representations by Landlord .......................... 57
Article 36 Name of Building ........................................ 58
Article 37 Arbitration ............................................. 58
Article 38 Indemnity ............................................... 58
Article 39 Memorandum of Lease ..................................... 59
Article 40 Approval of Permanent Mortgagee ......................... 59
Article 41 Security Deposit ........................................ 60
Article 42 Fair Market Rent Review/Renewal Option .................. 61
Article 43 Miscellaneous ........................................... 66
Article 44 Intentionally Omitted ................................... 68
Article 45 Partnership ............................................. 68
<PAGE>
SCHEDULES
A - Floor Plan
B - Description of Land
C - Work Agreement
D - Form of Estoppel Letter
E - Rules and Regulations
F - Cleaning and Janitorial Services
G - Letter of Credit
<PAGE>
AGREEMENT OF LEASE made as of this 6th day of January, 1984, between
AETNA LIFE INSURANCE COMPANY, a Connecticut corporation having an address at One
Civic Center Plaza, P.O. Box 1414, Hartford, Connecticut 06143 (hereinafter
referred to as "Landlord") and LA BRANCHE & CO., a New York partnership having
an address at 30 Broad Street, New York, New York 10004 (hereinafter referred to
as "Tenant").
W I T N E S S E T H:
Landlord hereby leases and Tenant hereby rents from Landlord the
easterly portion of the 26th floor shown hatched on the plan annexed hereto as
Schedule A (the "demised premises") in the building (the "Building") constructed
by Landlord on the land (the "Land") described in Schedule B annexed hereto (the
Land and the Building being hereinafter referred to as the "Property"), for a
term (the "Term") of ten (10) years commencing on the "Commencement Date" and
ending on the "Expiration Date" (as said terms are defined in Article 2 hereof)
unless the Term shall sooner cease and terminate as hereinafter provided. It is
understood and agreed that the Building has no 13th floor.
The parties hereby covenant and agree as follows:
ARTICLE 1
RENT
1.01. Tenant agrees to pay to Landlord a fixed annual rent (the
"fixed annual rent") at the annual rate of ONE HUNDRED FORTY-SEVEN THOUSAND
EIGHT HUNDRED EIGHTY-NINE & 00/100 ($147,889.00) DOLLARS in equal monthly
installments of TWELVE THOUSAND THREE HUNDRED TWENTY-FOUR & 08/100) ($12,324.08)
DOLLARS each in advance on the first day of each calendar month during the Term,
at the office of Landlord or such other place as Landlord may designate, without
any setoff or deduction whatsoever, except such deductions as are specifically
referred to in Articles 10 and 14 hereof. The first full month's installment of
fixed annual rent and the Security Deposit described in Article 41 hereof shall
be paid by Tenant to Landlord upon the execution of this Lease. Should the
Commencement Date fall on any day other than the first day of a month, then the
1
<PAGE>
fixed annual rent for such month shall be prorated on a per diem basis, and
Tenant agrees to pay the amount thereof for such partial month on the
Commencement Date.
1.02. Tenant shall pay the fixed annual rent and all additional rent
payable hereunder in lawful money of the United States by check (subject to
collection) drawn to the order of Jones Lang Wootton - One Exchange, or such
other party as Landlord may from time to time designate, on a bank which is a
member of the New York Clearinghouse Association or a successor thereto. All
sums, other than fixed annual rent, payable by Tenant hereunder shall be deemed
additional rent and shall be payable on demand unless other payment dates are
hereinafter provided. Landlord shall have the same right and remedies
(including, without limitation, the right to commence a summary proceeding) for
a default in the payment of additional rent as for a default in the payment of
fixed annual rent notwithstanding the fact that Tenant may not then also be in
default in the payment of fixed annual rent.
1.03. If Tenant shall fail to pay when due any installment of fixed
annual rent or any payment of additional rent for a period of 7 days after such
installment or payment shall have become due, Tenant shall pay interest thereon
at the Interest Rate (as such term is defined in Article 22 hereof), from the
date when such installment or payment shall have become due to the date of the
payment thereof, and such interest shall be deemed additional rent. The
provisions of this Section 1.03 are in addition to all other remedies available
to Landlord for nonpayment of fixed annual rent or additional rent.
1.04. If any of the fixed annual rent or additional rent payable
under this Lease shall be or become uncollectible, reduced or required to be
refunded because of any Legal Requirement (as such term is defined in Article 22
hereof), Tenant shall enter into such agreement(s) and take such other legally
permissible steps as Landlord may request to permit Landlord to collect the
maximum rents which from time to time during the continuance of such Legal
Requirement may be legally permissible and not in excess of the amounts reserved
therefor under this Lease. Upon the termination of such Legal Requirement, (a)
the rents hereunder shall be payable in the amounts reserved herein for the
periods following such termination and (b) Tenant shall pay to Landlord, to the
maximum extent legally permissible, an amount equal to (i) the rents which would
have been paid pursuant to this Lease but for such Legal Requirements less (ii)
the rents paid by Tenant during the period such Legal Requirement was in effect.
2
<PAGE>
ARTICLE 2
COMMENCEMENT OF TERM
2.01. (a) The "Commencement Date" of the Term shall be the earlier
of (i) the date on which the demised premises are substantially ready for
occupancy (as defined below), or (ii) the date Tenant or anyone claiming under
or through Tenant first occupies the demised premises for the conduct of its
business.
(b) The "Expiration Date" of the Term shall be the last day of
the month in which the tenth anniversary of the Commencement Date occurs or such
later date as shall be specified by Landlord pursuant to Section 2.06 below.
2.02. The demised premises shall be completed and prepared for
Tenant's occupancy as provided in Schedule C annexed hereto. The facilities,
materials and work so to be furnished, installed and performed in the demised
premises by Landlord at its expense are hereinafter and in Schedule C referred
to as the "Building Standard Work." All other installations, materials and work
which may be undertaken by Landlord for the account of Tenant to prepare, equip,
decorate and furnish the demised premises for Tenant's occupancy shall be at
Tenant's expense and are hereinafter and in Schedule C called "Tenant's Extra
Work". Building Standard Work and Tenant's Extra Work are herein and in Schedule
C collectively called "Landlord's Work." Any installations, materials and work
undertaken by Tenant (in the circumstances herein permitted) to prepare, equip,
decorate and furnish the demised premises for Tenant's occupancy shall be at
Tenant's expense and are hereinafter and in Schedule C called "Tenant's Special
Work".
2.03. The demised premises shall be deemed substantially ready for
occupancy when the Building Standard Work (or so much thereof as Tenant shall
require) shall have been substantially completed and a Certificate of Occupancy
(temporary or final) shall have been issued by the Department of Buildings of
the City of New York permitting use of the demised premises for the purposes
permitted by Article 5 hereof. The Building Standard Work (or so much thereof as
Tenant shall require) shall be deemed to have been substantially completed
notwithstanding that (i) minor or insubstantial details of construction,
decoration or mechanical adjustment remain to be performed, provided the demised
premises are accessible and reasonably useable and (ii) portions thereof are
incomplete which under good
3
<PAGE>
construction scheduling practice should be done after still incomplete Tenant's
Extra Work or Tenant's Special Work. Landlord shall diligently complete all such
portions of Building Standard Work as soon as reasonably practicable.
2.04. Notwithstanding anything to the contrary contained in this
Lease, the Commencement Date shall be deemed to have occurred on the date when
the demised premises would have been, in Landlord good faith judgment,
substantially ready for occupancy except for (i) Tenant's delay in complying
with, or failure to comply with, the provisions of Schedule C hereof or (ii) any
Tenant's Delay as defined in Schedule C hereof including, without limitation,
any request by Tenant for Tenant's Extra Work, even though no Certificate of
Occupancy (temporary or final) has been issued or the Building Standard Work
being done for Tenant has not been commenced or completed.
2.05. Landlord shall, in accordance with the foregoing, fix the
Commencement Date and shall notify Tenant of the date so fixed. When the
Commencement Date has so been determined, the parties shall within fifteen (15)
days thereafter, at Landlord's request, execute a written agreement confirming
such date as the Commencement Date. Any failure of the parties to execute such
written agreement shall not affect the validity of the Commencement Date as
fixed and determined by Landlord as aforesaid.
2.06. Notwithstanding anything contained to the contrary in this
Lease, Landlord at its option, upon written notice from Landlord to Tenant given
within nine (9) months after the Commencement Date is fixed, may extend the Term
as follows: (i) to a date occurring no later than one year beyond the date the
Term would have expired absent the right to extend the Term pursuant to this
Section 2.06 and/or (ii) in the event of any Tenant's Delay for the number of
days equal to the number of days of Tenant's Delay.
2.07. Notwithstanding anything to the contrary in this Lease,
Landlord shall not be entitled to collect nor shall Tenant be required to pay
fixed annual rent for the period commencing on the Commencement Date and
continuing for 59 days thereafter. All of the other terms, provisions and
conditions contained in this Lease shall apply with full force and effect during
said two-month period.
4
<PAGE>
ARTICLE 3
ADJUSTMENTS OF RENT
3.01. A. For purposes hereof, the following definitions shall apply:
(a) The term "Base Tax" shall mean the sum of $1,179,200.00.
(b) The term "Tax Year" shall mean each period of twelve
months which includes any part of the Term which now or hereafter is or may be
duly adopted as the fiscal year for real estate tax purposes of the City of New
York.
(c) The term "Taxes" shall mean (i) all real estate taxes,
assessments, governmental levies, municipal taxes, county taxes or any other
governmental charge, general or special, ordinary or extraordinary, unforeseen
as well as foreseen, of any kind or nature whatsoever, which are or may be
assessed, levied or imposed upon all or any part of the Property and the
sidewalks, plazas or streets adjacent thereto, including any tax, excise or fee
measured by or payable with respect to any rent (other than any occupancy or
rent tax payable by Tenant pursuant to Section 3.03), and levied against
Landlord and/or the Property under the laws of the United States, the City or
State of New York, or any political subdivision thereof, and (ii) any expenses
incurred by Landlord, including payments to attorneys and appraisers, in
contesting any of the items set forth in clause (i) of this sentence, or the
assessed valuations of all or any part of the Property. If due to a future
change in the method of taxation or in the taxing authority, a new or additional
real estate tax, or a franchise, income, transit, profit or other tax or
governmental imposition, however designated, shall be levied against Landlord,
and/or the Property, in addition to, or in substitution in whole or in part for
any tax which would constitute "Taxes", or in lieu of additional Taxes, such tax
or imposition shall be deemed for the purposes hereof to be included within the
term "Taxes."
(d) The term "Tenant's Tax Share" shall mean 1.36%.
(e) The term "Escalation Statement" shall mean a statement
setting forth the amount payable by Tenant for a specified Tax Year or Operating
Year (as defined in
5
<PAGE>
Section 3.02 hereof), as the case may be, or for some portion thereof pursuant
to this Article 3.
B. Tenant shall pay to Landlord as additional rent for each
Tax Year a sum equal to Tenant's Tax Share of the amount by which the Taxes for
such Tax Year exceed the Base Tax (hereinafter referred to as "Tenant's Tax
Payment"). Landlord shall furnish the Tenant an annual Escalation Statement
(subject to revision as hereinafter provided) for each Tax Year setting forth
Tenant's Tax Payment for such Tax Year. Tenant's Tax Payment shall be due and
payable as follows: two semi-annual installments, in advance, on the first day
of each June and December of each calendar year. If an annual Escalation
Statement is furnished to the Tenant after the commencement of the Tax Year to
which it relates, then (a) until such Escalation Statement is rendered, Tenant
shall pay Tenant's Tax Payment for such Tax Year in installments based upon the
last Escalation Statement rendered to Tenant with respect to Taxes and (b)
Tenant shall, within 20 days after such annual Escalation Statement is furnished
to Tenant, pay to Landlord an amount equal to any underpayment of the
installments of Tenant's Tax Payment theretofore paid by Tenant for such Tax
Year and, in the event of an overpayment by Tenant, Landlord shall permit Tenant
to credit against subsequent payments under this Section 3.01 the amount of such
overpayment. If there shall he any increase in Taxes for any Tax Year, whether
during or after such Tax Year, Landlord shall furnish a revised Escalation
Statement for such Tax Year to Tenant, and Tenant's Tax Payment for such Tax
Year shall be adjusted and paid or credited, as appropriate, in the same manner
as provided in the preceding sentence. If during the Term, Taxes are required to
be paid (either to the appropriate taxing authorities or as tax escrow payments
to a superior mortgagee or ground lessor) in full or in monthly, quarterly, or
other installments, on any other date or dates than as presently required, then
at Landlord's option, Tenant's Tax Payments shall be correspondingly accelerated
or revised so that said Tenant's Tax Payments are due at least 30 days prior to
the date payments are due to the taxing authorities or the superior mortgagee or
ground lessor. The benefit of any discount for any early payment or prepayment
of Taxes shall accrue solely to the benefit of Landlord and such discount shall
not be subtracted from Taxes.
C. If Landlord shall receive a refund of Taxes for any Tax
Year, Landlord shall permit Tenant to credit against subsequent payments under
this Section 3.01, Tenant's Tax Share of the refund, but not in excess of,
Tenant's Tax Payment paid for such Tax Year.
6
<PAGE>
3.02. A. For purposes hereof the following definitions shall apply:
(a) The term "Expense Base Factor" shall mean $1,136,200.00.
(b) The term "Operating Year" shall mean each calendar year
which includes any part of the Term.
(c) The terms "Tenant's Expense Share" shall mean 1.41%.
(d) The term "Expenses" shall mean the total of all the costs
and expenses (and taxes thereon, if any) incurred by Landlord with respect to
the operation and maintenance of the Property and the services provided to the
tenants of the Building computed on an accrual basis including, without
limitation, the costs and expenses with respect to: steam, gas and any other
fuel or utilities; water rates and sewer rents; air conditioning for areas other
than those leased to individual Tenants; ventilation and heating; electricity
for areas other than those leased to individual Tenants as indicated by meter,
or if there be no meter, as determined by Landlord's electrical consultant (as
defined in Section 3.08 hereof); elevators and escalators; metal, elevator cab,
lobby, plaza, sidewalk, curb and other public area maintenance and cleaning;
interior and exterior landscaping and decoration; painting of non-tenant areas;
window cleaning; building standard cleaning service supplied to tenants by
Landlord; the purchase price or rental cost, as applicable, of all building and
cleaning supplies, tools, materials, machinery and equipment; depreciation of
hand tools and other movable equipment used in the operation or maintenance of
the Property; fire, extended coverage, boiler and machinery, sprinkler
apparatus, public liability and property damage, loss of rental, fidelity and
plate glass insurance and any other insurance required by the holder of any
mortgage or ground lease covering the Property or customarily carried with
respect to buildings similar to the Building; wages, salaries, bonuses,
disability benefits, hospitalization, medical, surgical, union and general
welfare benefits (including group life insurance), any pension, retirement or
life insurance plan and other benefit or similar expense respecting employees of
the Landlord up to and including the building manager; uniforms and working
clothes for such employees and the cleaning and replacement thereof; expenses
imposed on the Landlord pursuant to law or to any collective bargaining
agreement with respect to such employees; workmen's compensation insurance,
payroll, social security, unemployment and other similar taxes with respect to
such
7
<PAGE>
employees; salaries of bookkeepers and accountants; professional and consulting
fees, including legal and accounting fees; charges for independent contractors
performing work included within the definition of Expenses; association fees or
dues; telephone and stationery; guards, watchmen, and other security personnel
services and/or systems; directory; building telephone; repairs, replacements
and improvements which are necessary or appropriate for the continued operation
of the Building as a first-class office building; and management fees for the
management of the Building, or if no managing agent is employed by Landlord
(i.e. Landlord performs such management services itself), a sum in lieu thereof
which is not in excess of the then prevailing rates for management fees in the
Borough of Manhattan for first-class office buildings similar to the building.
The following costs and expenses shall be excluded or deducted, as
appropriate, from the foregoing costs and expenses:
(i) the cost of electricity furnished to the demised
premises and other space leased to tenants as measured by meters, or if there be
no meters, as determined by Landlord's electrical consultant;
(ii) leasing commissions;
(iii) salaries for Landlord's executives above the grade
of building manager;
(iv) amounts received by Landlord through proceeds of
insurance to the extent the proceeds are compensation for expenses which were
previously included in Expenses hereunder;
(v) cost of repairs or replacements incurred by reason
of fire or other casualty or condemnation to the extent to which Landlord is
compensated therefor through proceeds of insurance or condemnation award;
(vi) advertising and promotional expenditures other than
for prospective employees of the Landlord (which expenditures shall be included
within the definition of Expenses);
(vii) Taxes;
(viii) costs for performing Landlord's Work for any
individual Tenant or for performing work or
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furnishing services to or for individual tenants at such tenant's expense; and
(ix) expenditures for capital improvements except those
which under generally applied real estate practice are expensed or regarded as
deferred expenses and except for capital expenditures required by law, in either
of which cases the cost thereof shall be included in Expenses for the Operating
Year in which the costs are incurred and subsequent Operating Years, on a
straight line basis, to the extent that such items are amortized over an
appropriate period, but not more than ten years, with interest at the Interest
Rate.
If Landlord shall purchase any item of capital equipment or make any
capital expenditures designed to result in savings or reductions in Expenses,
then the costs for same shall be included in Expenses. The costs of capital
equipment or capital expenditures are so to be included in Expenses for the
Operating Year in which the costs are incurred and subsequent Operating Years,
on a straight line basis, to the extent that such items are amortized over such
period of time as reasonably can be estimated as the time in which such savings
or reductions in Expenses are expected to equal Landlord's costs for such
capital equipment or capital expenditure, with interest at the Interest Rate. If
Landlord shall lease any such item of capital equipment designed to result in
savings or reductions in Expenses, then the rentals and other costs paid
pursuant to such leasing shall be included in Expenses for the Operating Year in
which they were incurred.
If during all or part of any Operating Year, Landlord shall not
furnish any particular item(s) of work or service (which would constitute an
Expense hereunder) to portions of the Building, due to the fact that
construction of the Building is not completed, or such portions are not occupied
or leased, or because such item of work or service is not required or desired by
the tenant of such portion, or such tenant is itself obtaining and providing
such item of work or service, or for other reasons, then, for the purpose of
computing the additional rent payable hereunder, the amount of the Expenses for
such item for such period shall be increased by an amount equal to the
additional operating and maintenance expenses which would reasonably have been
incurred during such period by Landlord if it had at its own expense furnished
such item of work or services to such portion of the Building.
B. If the Expenses for any Operating Year exceed the Expense
Base Factor, Tenant shall pay to Landlord
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as additional rent for such Operating Year an amount equal to Tenant's Expense
Share of the excess of the Expenses for such Operating Year over the Expense
Base Factor (hereinafter referred to as "Tenant's Expense Payment").
C. Landlord shall furnish to Tenant for each Operating Year an
Escalation Statement (subject to revision as hereinafter provided) setting forth
Landlord's estimate of Tenant's Expense Payment for such Operating Year. Tenant
shall pay to Landlord on the first day of each month during such Operating Year
an amount equal to one-twelfth (1/12) of Landlord's estimate of Tenant's Expense
Payment for such Operating Year. If Landlord shall furnish such estimate for an
Operating Year after the commencement thereof, then (a) until the first day of
the month following the month in which such estimate is furnished to Tenant,
Tenant shall pay to Landlord on the first day of each month an amount equal to
the monthly sum payable by Tenant to Landlord under this Paragraph C for the
last month of the preceding Operating Year; (b) Landlord shall notify Tenant in
the Escalation Statement containing such estimate whether the installments of
Tenant's Expense Payment previously paid for such Operating Year were more or
less than the installments which should have been paid for such Operating Year
pursuant to such estimate and (i) if there shall be an underpayment, Tenant
shall pay the amount thereof within ten days after being furnished with such
Escalation Statement or (ii) if there shall be an overpayment, Tenant shall be
entitled to a credit in the amount thereof against subsequent payments under
this Section 3.02; and (c) on the first day of the month following the month in
which such estimate is furnished to Tenant and monthly thereafter for the
balance of such Operating Year, Tenant shall pay to Landlord an amount equal to
one-twelfth (1/12) of Tenant's Expense Payment as shown on such estimate.
Landlord may at any time and from time to time (but not more often than three
times in any Operating Year) furnish to Tenant an Escalation Statement setting
forth Landlord's revised estimate of Tenant's Expense Payment for a particular
Operating Year and Tenant's Expense Payment for such Operating Year shall be
adjusted and paid or credited, as applicable, in the same manner as provided in
the preceding sentence.
D. After the end of each Operating Year Landlord shall submit
to Tenant an annual Escalation Statement prepared by Landlord setting forth the
Expenses for the preceding Operating Year and the balance of Tenant's Expense
Payment, if any, due to Landlord from Tenant for such Operating Year. If such
annual Escalation Statement shall show that the sums paid by Tenant under
subparagraph 3.02(C) above exceeded Tenant's Expense Payment for such
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Operating Year, Tenant shall be entitled to a credit in the amount of such
excess against subsequent payments under this Section 3.02. If such annual
Escalation Statement shall show that the sums so paid by Tenant were less than
Tenant's Expense Payment for such Operating Year, Tenant shall pay the amount of
such deficiency to the Landlord within ten days after being furnished with such
annual Escalation Statement.
E. The annual Escalation Statements with respect to Expenses
to be furnished by Landlord as provided above shall be in reasonable detail and
shall be certified by Landlord or by an independent firm of certified public
accountants. Landlord may use operating cost allocations and estimates if such
allocations or estimates are required for this Section 3.02.
3.03. Tenant shall pay to Landlord upon demand, as additional rent,
any occupancy tax or rent tax now in effect or hereafter enacted, which Landlord
is now or hereafter is required to pay with respect to the demised premises or
this Lease.
3.04. If the Commencement Date shall be other than the first day of
a Tax Year or an Operating Year or if the date of the expiration or other
termination of this Lease shall be a day other than the last day of a Tax Year
or an Operating Year, then Tenant's Tax Payment and/or Tenant's Expense Payment
for such partial year shall be equitably adjusted taking into consideration the
portion of such Tax Year or Operating Year falling within the Term. Landlord
shall, as soon as reasonably practicable, cause an Escalation Statement with
respect to Taxes for the Tax Year and/or Expenses for the Operating Year in
which the Term expires to be prepared and furnished to Tenant. Such Escalation
Statement shall be prepared as of the expiration date of the Term if such date
is December 31, and if not, as of the first to occur of June 30 or December 31
after the expiration date of the Term. Landlord and Tenant shall thereupon make
appropriate adjustments of amounts then owing and notwithstanding anything to
the contrary contained herein in the event any amount shall be due and owing
from Landlord to Tenant upon the expiration of or termination of the Term (other
than by reason of Tenant's default), such amount shall be refunded rather than
credited against any further rent obligations hereunder simultaneously with the
rendering of the final Escalation Statement.
3.05. In no event shall the fixed annual rent ever be reduced by
operation of this Article 3. The rights and obligations of Landlord and Tenant
under the provisions
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of this Article 3 shall survive the termination of this Lease, and payments
shall be made pursuant to this Article 3 notwithstanding the fact that an
Escalation Statement is furnished to Tenant after the expiration or other
termination of the Term.
3.06. Landlord's failure to render an Escalation Statement with
respect to any Tax Year or Operating Year shall not prejudice Landlord's right
to thereafter render an Escalation Statement with respect thereto or with
respect to any subsequent Tax Year or Operating Year.
3.07. Each Escalation Statement shall be conclusive and binding upon
Tenant unless within 10 days after receipt of such Escalation Statement Tenant
shall notify Landlord that it disputes the correctness of such Escalation
Statement, specifying the particular respects in which such Escalation Statement
is claimed to be incorrect. Any dispute relating to any Escalation Statement,
not resolved within 30 days after the giving of such notice by Tenant, may be
submitted to arbitration by either party pursuant to Article 37 hereof. Pending
the determination of such dispute, Tenant shall pay additional rent in
accordance with the Escalation Statement that Tenant is disputing, without
prejudice to Tenant's position.
3.08. Any determinations with respect to charges for electricity on
floors occupied by more than one tenant or otherwise which must be made pursuant
to the terms of this Lease shall be made by a reputable, independent electrical
consultant selected by Landlord (Landlord's "electrical consultant"). Any
determination made by Landlord's electrical consultant pursuant to or in
connection with this Lease shall be binding and conclusive on Landlord and on
Tenant.
ARTICLE 4
ELECTRICITY
4.01. Landlord agrees that prior to the Commencement Date risers,
feeders and wiring will be installed in the Building by Landlord to furnish
electrical service to the demised premises in accordance with the provisions of
the Work Agreement annexed hereto as Schedule C. After the Commencement Date any
additional risers, feeders or other equipment or service proper or necessary to
supply Tenant's electrical requirements, upon written
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request of Tenant, will be installed by Landlord at the sole cost and expense of
Tenant, if in Landlord's sole judgment the same are necessary and will not cause
permanent damage or injury to the Building or the demised premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants or
occupants.
4.02. Tenant covenants and agrees to pay directly to the utility
company supplying electricity to the demised premises the amounts due for
electric current consumed by Tenant as indicated by meters measuring Tenant's
consumption thereof.
4.03. If one meter measures the consumption of electric current by
Tenant and another lessee of space in the Building (i.e., more than one tenant
on a floor), or if there is no meter measuring Tenant's consumption of electric
current for any purpose, including without limitation, air conditioning,
ventilating and heating, Tenant agrees to pay to Landlord or Landlord's
designated agent charges for electric current consumed by Tenant as determined
by Landlord's electric consultant in accordance with Section 3.08 above. Bills
therefor, at the rate charged to Landlord for such electric current, plus the
amount of sales tax imposed thereon by any Governmental Authority, plus 5% of
the total amount thereof for administration and processing, shall be rendered at
such times as Landlord may elect based upon estimates of Landlord's electric
consultant which may be made from time to time as Landlord deems necessary. In
the event that such bills are not paid within five (5) days after the same are
rendered, Landlord may, without further notice, discontinue the service of
electric current to the demised premises without releasing Tenant from any
liability under this Lease and without Landlord or Landlord's agent incurring
any liability for any damage or loss sustained by Tenant by such discontinuance
of service. Tenant shall permit Landlord's electrical consultant to make surveys
in the demised premises from time to time during normal business hours regarding
the electrical equipment and fixtures and the use of electric current therein.
With respect to the electric current used to run the air conditioning on
Tenant's floor during normal business hours, Landlord shall charge Tenant its
proportionate share of such charge plus sales tax and the administrative fees
referred to above based upon the proportion which the demised premises bears to
the rentable square footage on the entire floor (i.e. 3,997/9,000).
4.04. Tenant's use of electric current in the demised premises shall
not at any time exceed the capacity
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of any of the electrical conductors and equipment in or otherwise serving the
demised premises. Tenant shall not make or perform or permit the making or
performing of, any alterations to wiring, installations or other electrical
facilities in or serving the demised premises without the prior consent of
Landlord in each instance. Should Landlord grant any such consent, all
additional risers or other equipment required therefor shall be installed by
Landlord and the cost thereof shall be paid by Tenant upon Landlord's demand.
4.05. Landlord shall not be liable in any way to Tenant for any
failure or defect in the supply or character of electric energy furnished to the
demised premises by reason of any requirement, act or omission of the public
utility providing the Building with electricity or for any other reason
whatsoever.
4.06. If Tenant pays for electric current consumed pursuant to
Section 4.03, Landlord reserves the rights to discontinue furnishing electric
energy to Tenant at any time upon sixty (60) days' written notice to Tenant, and
from and after the effective date of such termination, Landlord shall no longer
be obligated to furnish Tenant with electric energy, provided, however that such
termination date may be extended for a time reasonably necessary for Tenant to
make arrangements to obtain electric service directly from the public utility
company servicing the Building. If Landlord exercises such right of termination,
this Lease shall remain unaffected thereby and shall continue in full force and
effect; and thereafter Tenant shall diligently arrange to obtain electric
service directly from the public utility company servicing the Building, and may
utilize the then existing electric feeders, risers and wiring serving the
demised premises to the extent available and safely capable of being used for
such purpose and only to the extent of Tenant's then authorized connected load.
Landlord shall not be obligated to pay any part of the cost incurred in Tenant
obtaining direct electric service.
4.07. Tenant covenants and agrees that at no time will the connected
electrical load in the demised premises exceed 4 1/2 watts per square foot.
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ARTICLE 5
USE
5.01. The demised premises shall be used solely as and for executive
and general offices, and for no other purpose.
5.02. Tenant shall not use or permit the use of the demised premises
or any part thereof in any way which would violate any of the covenants,
agreements, terms, provisions and conditions of this Lease or for any unlawful
purposes or in any unlawful manner or in violation of the Certificate of
Occupancy for the demised premises or the Building, and Tenant shall not permit
the demised premises or any part thereof to be used in any manner or anything to
be done, brought into or kept therein which, in Landlord's judgment shall, or
tend to, impair or interfere with (i) the character, reputation or appearance of
the Building as a high quality office building, (ii) any of the Building
services or the proper and economic heating, cleaning, air conditioning or other
servicing of the Building or the demised premises, or (iii) the use of any of
the other areas of the Building by, or occasional discomfort, inconvenience or
annoyance to, any of the other tenants or occupants of the Building. Tenant
shall not install any electrical or other equipment of any kind which, in the
judgment of Landlord, might cause any such impairment, interference, discomfort,
inconvenience or annoyance or which might overload the risers or feeders
servicing the demised premises or other portions of the Building.
ARTICLE 6
ALTERATIONS AND INSTALLATIONS
6.01. Tenant shall make no alterations, installations, additions or
improvements in or to the demised premises without Landlord's prior written
consent and then only by contractors or mechanics first selected by Tenant and
approved by Landlord; such approval not to be unreasonably withheld or delayed;
provided, however, that with respect to any work affecting the electrical,
plumbing, mechanical or HVAC systems in the Building, Tenant will use only those
contractors designated by Landlord. All such work, alterations, installations,
additions and improvements
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shall be done at Tenant's sole expense and at such times and in such manner as
Landlord may from time to time designate.
Tenant's Extra Work and future work in the demised premises shall be
done solely in accordance with plans and specifications first approved in
writing by Landlord. Tenant shall reimburse Landlord promptly upon demand for
any costs and expenses incurred by Landlord in connection with Landlord's review
of such Tenant's plans and specifications. Landlord will not unreasonably
withhold or delay its consent to requests for nonstructural alterations,
additions and improvements (provided they will not interfere with Landlord's
Work or the operation of the Building nor affect the outside of the Building nor
adversely affect its structure, or its electrical, HVAC, plumbing or mechanical
systems).
Any such approved alterations and improvements shall be performed in
accordance with the foregoing and the following provisions of this Article 6:
1. All work shall be done in a good and workmanlike manner.
2. (a) Any contractor employed by Tenant to perform any work
permitted by this Lease, and all of its subcontractors shall agree
to employ only such labor as will not result in jurisdictional
disputes or strikes or cause disharmony with other workers employed
at the Building. Tenant will inform Landlord in writing of the names
of any contractor or subcontractors Tenant proposes to use in the
demised premises at least ten (10) days prior to the beginning of
work by such contractor or subcontractors.
(b) Tenant covenants and agrees to pay to the
contractor, as the work progresses, the entire cost of supplying the
materials and performing the work shown on Tenant's approved plans
and specifications.
3. All such alterations shall be performed in compliance with
all Legal Requirements (as defined in Article 22 hereof) including,
without limitation, those imposed by the New York City Building
Department, the New York City Fire Department and O.S.H.A.
4. Tenant shall keep the Building and the demised premises
free and clear of all liens for
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any work or material claimed to have been furnished to Tenant or to
the demised premises on Tenant's behalf, and all work to be
performed by Tenant shall be done in a manner which will not
unreasonably interfere with or disturb other tenants or occupants of
the Building.
5. During the progress of the work to be done by Tenant, said
work shall be subject to inspection by representatives of Landlord
who shall be permitted access and the opportunity to inspect, at all
reasonable times, but this provision shall not in any way whatsoever
create any obligation on Landlord to conduct such an inspection.
6. With respect to alteration or improvement work costing more
than $25,000 (other than Tenant's Extra Work), Tenant agrees to pay
to Landlord's managing agent, as additional rent, promptly upon
being billed therefor, a sum equal to five (5%) percent of the cost
of such work or alteration, for Landlord's indirect costs, field
inspection and coordination in connection with such work. However,
such payment shall not be required of Tenant with respect to Tenant
Finish Work.
7. Prior to commencement of any work, Tenant shall furnish to
Landlord certificates evidencing the existence of:
(a) workmen's compensation insurance covering all
persons employed for such work with statutorily required
limits; and
(b) Employer's liability coverage including bodily
injury caused by disease with limits of not less than $100,000
per employee;
(c) Comprehensive general liability insurance including
but not limited to completed operations coverage, products
liability coverage, contractural coverage, broad form property
damage, independent contractor's coverage and personal injury
coverage naming (i) Landlord as well as such representatives
and consultants of Landlord as Landlord shall reasonably
specify (collectively "Landlord's Consultants"),
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including, but not limited to, as of the date hereof Jones
Lang Wootton, Baro Partners, Exchange Plaza Partners and
George A. Fuller Company, as well as Tenant, as additional
insureds, with coverage of not less than $3,000,000 combined
single limit coverage (or such higher limits as Landlord may
from time to time impose in its reasonable judgment);
(d) Tenant shall require all contractors engaged or
employed by the Tenant to indemnify and hold Tenant, Landlord,
and Landlord's Consultants, including but not limited to, as
of the date hereof Jones Lang Wootton, Baro Partners, Exchange
Plaza Partners and George A. Fuller Company, harmless in
accordance with the following clauses (with such modifications
therein as may be required from time to time by reason of a
change in the parties constituting Landlord's Consultants):
"The contractor hereby agrees to the fullest extent permitted
by law to assume the entire responsibility and liability for
and defense of and to pay and indemnify the Landlord, Tenant,
Jones Lang Wootton, Baro Partners, Exchange Plaza Partners and
George A. Fuller Company against any loss, cost, expense,
liability or damage and will hold each of them harmless from
and pay any loss, cost, expense, liability or damage
(including, without limitation, judgments, attorney's fees,
court costs, and the cost of appellate proceedings), which the
Landlord and/or Tenant and/or Jones Lang Wootton and/or Baro
Partners and/or Exchange Plaza Partners and/or George A.
Fuller Company incurs because of injury to or death of any
person or on account of damage to property, including loss of
use thereof, or any other claim arising out of, in connection
with, or as a consequence of the performance of the work by
the contractor and/or any acts or omissions of the contractor
or any of its officers, directors, employees, agents
sub-contractors or anyone directly or indirectly employed by
the contractor or anyone for whose acts the contractor may be
liable as it relates to the scope of this Contract, whether
such injuries to person or
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damage to property are due or claimed to be due to any
negligence of the Landlord and/or Tenant and/or Jones Lang
Wootton and/or George A. Fuller Company and/or Baro Partners
and/or Exchange Plaza Partners, its or their employees or
agents or any other person."
The contractor's insurance shall specifically insure the
foregoing hold harmless provision verbatim.
(e) Such insurance shall be placed with solvent and
responsible companies reasonably satisfactory to the Landlord
and licensed or authorized to do business in the State of New
York, and the policies shall provide that they may not be
cancelled without 30 days' prior notice in writing to the
Landlord.
8. Movement of all men and materials shall only be done at the
direction, the times and in the manner designated by Landlord.
6.02. Notice is hereby given that Landlord shall not be liable for
any labor or materials furnished or to be furnished to Tenant upon credit, and
that no mechanic's or other lien for any such labor or materials shall attach to
or affect the reversion or other estate or interest of Landlord in and to the
demised premises. Any mechanic's lien, filed against the demised premises or the
Building for work claimed to have been done for or materials claimed to have
been furnished to Tenant shall be discharged by Tenant at its expense within
fifteen (15) days after notice of such filing, by payment, filing of the bond
required by law or otherwise. Failure to comply with the provisions of this
Section 6.02 shall constitute a material default by Tenant under this Lease
entitling Landlord to exercise any or all of the remedies provided in this Lease
in the event of Tenant's default.
6.03. All alterations, installations, additions and improvements
made and installed by Landlord, at its expense, including without limitation all
work referred to in Article 2 hereof and in Exhibit C hereto, other than
Tenant's Extra Work, shall be the property of Landlord and shall remain upon and
be surrendered with the demised premises as a part thereof at the end of the
Term.
6.04. All alterations, installations, additions and improvements
made and installed by Tenant, or at Tenant's expense, upon or in the demised
premises which are
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of a permanent nature and which cannot be removed without damage to the demised
premises or Building including, without limitation, Tenant's Extra Work, shall
become the property of Landlord, and shall remain upon and be surrendered with
the demised premises as a part thereof at the end of the Term (and shall not be
removed prior thereto without Landlord's written consent), except that Landlord
shall have the right at any time up to six months prior to the expiration of the
Term to serve notice upon Tenant that any of such alterations, installations,
additions and improvements shall be removed and, in the event of service of such
notice, Tenant will, at Tenant's own cost and expense, remove the same in
accordance with such request, and restore the demised premises to its original
condition, ordinary wear and tear and casualty excepted. Notwithstanding the
foregoing, if upon submitting any plans relating to alterations, installations,
additions and improvements, Tenant shall indicate thereon that, in accordance
with this paragraph 6.04, Landlord must designate in writing such portions of
the alterations, installations, additions and improvements as Landlord may
desire to have Tenant remove at the expiration of the Term as above provided,
then unless Landlord shall, on or before the date that such plans are approved
by Landlord, specify those items which it may desire to have Tenant remove,
Landlord shall have no right to cause Tenant to remove same.
6.05. Where furnished by or at the expense of Tenant all furniture,
furnishings and trade fixtures, including without limitation, murals, business
machines and equipment, counters, screens, grille work, special panelled doors,
cages, partitions, metal railings, closets, panelling, free standing lighting
fixtures and equipment, drinking fountains, refrigeration and air handling
equipment, and any other moveable property shall remain the property of Tenant
which may at its option remove all or any part thereof at any time prior to the
expiration of the Term. In case Tenant shall decide not to remove any part of
such property, Tenant shall notify Landlord in writing not less than three (3)
months prior to the expiration of the Term, specifying the items of property
which it has decided not to remove. If, within thirty (30) days after the
service of such notice, Landlord shall request Tenant to remove any of the said
property, Tenant shall at its expense remove the same. As to such property which
Landlord does not request Tenant to remove, the same shall be, if left by
Tenant, deemed abandoned by Tenant and thereupon the same shall become the
property of Landlord.
6.06. If any alterations, installations, additions, improvements or
other property which Tenant shall
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have the right to remove or be requested by Landlord to remove as provided in
Sections 6.04 and 6.05 hereof (herein in this Section 6.06 called the
"property") are not removed on or prior to the expiration of the Term, Landlord
shall have the right to remove the property and to dispose of the same without
accountability to Tenant and at the sole cost and expense of Tenant. In case of
any damage to the demised premises or the Building resulting from the removal of
the property Tenant shall repair such damage or, in default thereof, shall
reimburse Landlord for Landlord's cost in repairing such damage. This obligation
shall survive any termination of this Lease.
6.07. Tenant shall keep records of Tenant's alterations,
installations, additions and improvements costing in excess of $25,000, and of
the cost thereof. Tenant shall, within 45 days after demand by Landlord, furnish
to Landlord copies of such records if Landlord shall require same in connection
with any proceeding to reduce the assessed valuation of the Building, or in
connection with any proceeding instituted pursuant to Article 14 hereof.
ARTICLE 7
REPAIRS
7.01. Tenant shall, at its sole cost and expense, make such repairs
to the demised premises and the fixtures and appurtenances therein as are
necessitated by the act, omission, occupancy or negligence of Tenant or by the
use of the demised premises in a manner contrary to the purposes for which same
are leased to Tenant, as and when needed to preserve them in good working order
and condition. Except as otherwise provided in Section 9.05 hereof, all damage
or injury to the demised premises and to its fixtures, appurtenances and
equipment caused by Tenant moving property in or out of the Building or by
installation or removal of furniture, fixtures or other property, shall be
repaired, restored or replaced promptly by Tenant at its sole cost and expense,
which repairs, restorations and replacements shall be in quality and class equal
to the original work or installations. If Tenant fails to make such repairs,
restoration or replacements, same may be made by Landlord at the expense of
Tenant and such expense shall be collectible as additional rent and shall be
paid by Tenant within 10 days after rendition of a bill therefor.
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The exterior walls of the Building, the portions of any window sills
outside the windows and the windows are not part of the premises demised by this
Lease and Landlord reserves all rights to such parts of the Building.
7.02. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which such floor was
designed to carry and which is allowed by law. The floor of the demised premises
will carry 50 pounds live load per square foot of floor space and 12 pounds for
partitions per square foot of floor space.
7.03. Business machines and mechanical equipment used by Tenant
which cause vibration, noise, cold or heat that may be transmitted to the
Building structure or to any leased space to such a degree as to be
objectionable to Landlord or to any other tenant in the Building shall be placed
and maintained by Tenant at its expense in settings of cork, rubber or spring
type vibration eliminators sufficient to absorb and prevent such vibration or
noise, or prevent transmission of such cold or heat. The parties hereto
recognize that the operation of elevators, air conditioning and heating
equipment will cause some vibration, noise, heat or cold which may be
transmitted to other parts of the Building and demised premises. Landlord shall
be under no obligation to endeavor to reduce such vibration, noise, heat or cold
beyond what is customary in current good building practice for buildings of the
same type as the Building.
7.04. Except as otherwise specifically provided in this Lease, there
shall be no allowance to Tenant for a diminution of rental value and no
liability on the part of Landlord by reason of inconvenience, annoyance or
injury to business arising from the making of any repairs, alterations,
additions or improvements in or to any portion of the Building or the demised
premises or in or to fixtures, appurtenances or equipment thereof. Landlord
shall exercise reasonable diligence so as to minimize any interference with
Tenant's business operations, but shall not be required to perform the same on
an overtime or premium pay basis.
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ARTICLE 8
REQUIREMENTS OF LAW
8.01. Tenant shall comply with all Legal Requirements which shall
impose any violation, order or duty upon Landlord or Tenant with respect to the
demised premises, or the use or occupation thereof.
8.02. Notwithstanding the provisions of Section 8.01 hereof, Tenant,
at its own cost and expense, in its name and/or (whenever necessary) Landlord's
name, may contest, in any manner permitted by law (including appeals to a court,
or governmental department or authority having jurisdiction in the matter), the
validity or the enforcement of any Legal Requirements with which Tenant is
required to comply pursuant to this Lease, and may defer compliance therewith
provided that:
(a) such non-compliance shall not subject Landlord to
criminal prosecution or subject the Property to lien or sale;
(b) such non-compliance shall not be in violation of any
mortgage, or of any ground or underlying lease or any mortgage thereon;
(c) Tenant shall first deliver to Landlord a surety bond
issued by a surety company of recognized responsibility, or other security
satisfactory to Landlord, indemnifying and protecting Landlord against any loss
or injury by reason of such non-compliance; and
(d) Tenant shall promptly, diligently and continuously
prosecute such contest.
Landlord, without expense or liability to it, shall cooperate with
Tenant and execute any documents or pleadings required for such purpose,
provided that Landlord shall reasonably be satisfied that the facts set forth in
any such documents or pleadings are accurate.
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ARTICLE 9
INSURANCE, LOSS, REIMBURSEMENT, LIABILITY
9.01. Tenant shall not do or permit to be done any act or thing upon
or about the demised premises, which will invalidate or be in conflict with New
York standard fire insurance policies covering the Building, and fixtures and
property therein, or which would increase the rate of fire insurance applicable
to the Building to an amount higher than it otherwise would be; and Tenant shall
neither do nor permit to be done any act or thing upon the demised premises
which shall or might subject Landlord to any liability or responsibility for
injury to any person or persons or to property by reason of any business or
operation being carried on within the demised premises; but nothing in this
Section 9.01 shall prevent Tenant's use of the demised premises for the purposes
stated in Article 5 hereof.
9.02. If, as a result of any act or omission by Tenant or violation
of this Lease, the rate of fire insurance applicable to the Building shall be
increased to an amount higher than it otherwise would be, Tenant shall reimburse
Landlord for all increases of Landlord's fire insurance premiums so caused; such
reimbursement to be additional rent payable within 5 days after demand therefor
by Landlord. In any action or proceeding wherein Landlord and Tenant are
parties, a schedule or "make-up" of rates for the Building or demised premises
issued by the body making fire insurance rates for the demised premises, shall
be presumptive evidence of the facts stated therein including the items and
charges taken into consideration in fixing the fire insurance rate then
applicable to the demised premises.
9.03. Landlord or its agents shall not be liable for any injury or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, rain or snow or leaks from any part of the
Building, or from the pipes, appliances or plumbing works or from the roof,
street or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature, unless any of the foregoing shall be caused by or
due to the negligence of Landlord, its agents, servants or employees.
9.04. Landlord or its agents shall not be liable for any damage
which Tenant may sustain, if at any time any window of the demised premises is
broken, or temporarily or permanently closed, darkened or bricked upon for any
reason
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whatsoever, except only Landlord's arbitrary acts if the result is permanent,
and Tenant shall not be entitled to any compensation therefor or abatement of
rent or to any release from any of Tenant's obligations under this Lease, nor
shall the same constitute an eviction or constructive eviction.
9.05. Tenant shall reimburse Landlord for all expenses, damages or
fines incurred or suffered by Landlord, by reason of any breach, violation or
non-performance by Tenant, or its agents, servants or employees, of any covenant
or provision of this Lease, or by reason of damage to persons or property caused
by moving property of or for Tenant in or out of the Building, or by the
installation or removal of furniture or other property of or for Tenant, or by
reason of or arising out of the carelessness, negligence or improper conduct of
Tenant, or its agents, servants or employees, in the use or occupancy of the
demised premises. Subject to compliance with the provisions of Section 8.02
hereof, where applicable, Tenant shall have the right, at Tenant's own cost and
expense, to participate in the defense of any action or proceeding brought
against Landlord, and in negotiations for settlement thereof if, pursuant to
this Section 9.05, Tenant would be obligated to reimburse Landlord for expenses,
damages or fines incurred or suffered by Landlord.
9.06. Tenant shall give Landlord notice in case of fire or accidents
in the demised premises promptly after Tenant is aware of such event.
9.07. Tenant agrees to look solely to Landlord's interest in the
Property, or the lease of the Building or of the Property, and the demised
premises, for the satisfaction of any right or remedy of Tenant for the
collection of a judgment (or other judicial process) requiring the payment of
money by Landlord, in the event of any liability by Landlord, and no other
property or assets of Landlord shall be subject to levy, execution, attachment,
or other enforcement procedure for the satisfaction of Tenant's remedies under
or with respect to this Lease, the relationship of Landlord and Tenant
hereunder, or Tenant's use and occupancy of the demised premises, or any other
liability of Landlord to Tenant.
9.08. (a) Landlord agrees that it will, at its sole cost and
expense, include in its fire insurance policies appropriate clauses pursuant to
which the insurance companies (i) waive all right of subrogation against Tenant
with respect to losses payable under such policies and (ii) agree that such
policies shall not be invalidated should the insured waive in writing prior to a
loss any or all right of
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recovery against any party for losses covered by such policies.
(b) Notwithstanding anything to the contrary contained
in this Lease, Tenant agrees that it will, at its sole cost and expense, include
in its property insurance policies appropriate clauses pursuant to which the
insurance companies (i) waive all right of subrogation against Landlord and any
tenant of space in the Building with respect to losses payable under such
policies and (ii) agree that such policies shall not be invalidated should the
insured waive in writing prior to a loss any or all right of recovery against
any party for losses covered by such policies. Tenant shall furnish Landlord
upon demand evidence satisfactory to Landlord evidencing the inclusion of said
clauses in Tenant's property insurance policies.
(c) Landlord hereby waives any and all right of recovery
which it might otherwise have against Tenant, its servants, agents and
employees, for loss or damage occurring to the Building and the fixtures,
appurtenances and equipment therein, to the extent the same is covered by
Landlord's insurance, notwithstanding that such loss or damage may result from
the negligence or fault of Tenant, its servants, agents or employees. Tenant
hereby waives any and all right of recovery which it might otherwise have
against Landlord, its servants, and employees, and against every other tenant in
the Building who shall have executed a similar waiver as set forth in this
Section 9.08(b) for loss or damage to, Tenant's furniture, furnishings, fixtures
and other property removable by Tenant under the provisions hereof to the extent
that same is covered by Tenant's insurance, notwithstanding that such loss or
damage may result from the negligence or fault of Landlord, its servants, agents
or employees, or such other tenant and the servants, agents or employees
thereof.
9.09. Tenant covenants and agrees to provide at its expense on or
before the Commencement Date and to keep in force during the Term naming
Landlord and Tenant as insured parties a comprehensive general liability
insurance policy including, without limitation, blanket contractual liability
coverage, broad form property damage, independent contractor's coverage and
personal injury coverage protecting Landlord and Tenant against any liability
whatsoever, occasioned by any occurrence on or about the demised premises or any
appurtenances thereto. Such policy is to be written by good and solvent
insurance companies licensed to do business in the State of New York
satisfactory to Landlord, and shall be in such limits as
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Landlord may reasonably require. As of the date of this Lease Landlord
reasonably requires limits of liability thereunder of not less than $3,000,000
per occurrence for bodily or personal injury (including death) and in the amount
of $1,000,000 per occurrence in respect of property damage. Such insurance may
be carried under a blanket policy covering the demised premises and other
locations of Tenant, if any, provided that each such policy shall in all
respects, comply with this Article and shall specify that the portion of the
total coverage of such policy that is allocated to the demised premises is in
the amounts required pursuant to this Section 9.09. Prior to the time such
insurance is first required to be carried by Tenant and thereafter, at least 15
days prior to the effective date of any such policy, Tenant agrees to deliver to
Landlord a duplicate original of the aforesaid policy and a certificate
evidencing such insurance. Said certificate shall contain an endorsement that
such insurance may not be cancelled except upon 30 days' prior notice to
Landlord. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder entitling Landlord
to exercise any or all of the remedies provided in this Lease in the event of
Tenant's default. Notwithstanding anything to the contrary contained in this
Lease, the carrying of insurance by Tenant in compliance with this Section shall
not modify, reduce, limit or impair Tenant's obligations and liability under
Article 38 hereof.
ARTICLE 10
DAMAGE BY FIRE OR OTHER CAUSE
10.01. If the Building or the demised premises shall be partially or
totally damaged or destroyed by fire or other cause (and if this Lease shall not
have been terminated as in this Article 10 hereinafter provided), Landlord shall
repair the damage and restore and rebuild the Building and/or the demised
premises, at its expense with reasonable dispatch after notice to it of the
damage or destruction.
10.02. If the Building or the demised premises shall be damaged or
destroyed by fire or other cause, then unless such fire or damage shall have
resulted from the negligence of Tenant or its officers, contractors, licensees,
agents, employees, guests, invitees or visitors, the rents payable hereunder
shall be abated to the extent that the demised premises shall have been rendered
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untenantable for the period from the date of such damage or destruction to the
date the damage shall be repaired or restored; provided, however, that should
Tenant reoccupy a portion of the demised premises during the period the
restoration work is taking place and prior to the date that the whole of said
demised premises are made tenantable, fixed annual rent and additional rents
allocable to such portion shall be payable by Tenant from the date of such
occupancy.
10.03. If the Building shall be so damaged or destroyed by fire or
other cause (whether or not the demised premises are damaged or destroyed) as to
require a reasonably estimated expenditure made by Landlord or a reputable
contractor designated by Landlord of more than 30% of the full insurable value
of the Building immediately prior to the casualty, then Landlord may terminate
this Lease by giving Tenant notice to such effect within 120 days after the date
of the casualty. In case of any damage or destruction mentioned in this Article
10 which Landlord is required to repair and restore, Tenant may terminate this
Lease by notice to Landlord if Landlord has not completed the making of the
required repairs and restorations within 12 months after the date of such damage
or destruction, or within such period after such date (not exceeding 6 months)
as shall equal the aggregate period Landlord may have been delayed in doing so
by Force Majeure Causes (as defined in Article 34 hereof).
10.04. No damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the demised premises or of the Building
pursuant to this Article 10.
10.05. Notwithstanding any of the foregoing provisions of this
Article 10, if Landlord or the lessor of any superior lease or the holder of any
superior mortgage shall be unable to collect all of the insurance proceeds
(including rent insurance proceeds) applicable to damage or destruction of the
demised premises or the Building by fire or other cause, by reason of some
action or inaction on the part of Tenant or any of its employees, agents or
contractors, then, without prejudice to any other remedies which may be
available against Tenant, there shall be no abatement of Tenant's rents, but the
total amount of such rents not abated (which would otherwise have been abated)
shall not exceed the amount of uncollected insurance proceeds.
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10.06. Landlord will not carry separate insurance of any kind on
Tenant's property (including, without limitation, any property of the Tenant
which shall become the property of Landlord as provided in Article 6 hereof),
and, except as provided by law, Landlord shall not be obligated to repair any
damage thereto or replace or clean the same, or any other decorations,
installations, equipment or fixtures installed by or for Tenant at Tenant's
expense. Tenant shall maintain such fire and casualty insurance as it deems
advisable.
10.07. The provisions of this Article 10 shall be considered an
express agreement governing any case of damage or destruction of the demised
premises by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York, providing for such a contingency in the absence of an
express agreement, and any other law of like import, now or hereafter in force,
shall have no application in such case.
ARTICLE 11
ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
11.01. Except as otherwise expressly provided in this Article 11,
Tenant shall not without, in each instance, obtaining the prior consent of
Landlord, (a) assign or otherwise transfer this Lease or the term and estate
hereby granted, (b) sublet all or part of the demised premises or allow the same
to be used or occupied by others or in violation of Article 5, (c) mortgage,
pledge or encumber this Lease or all or part of the demised premises in any
manner by reason of any act or omission on the part of Tenant, or (d) advertise,
or authorize a broker to advertise, for a subtenant for all or part of the
demised premises or for an assignee of this Lease. For purposes of this Article
11, (i) the transfer of a majority of the issued and outstanding capital stock
of any corporate tenant or subtenant, or the transfer of a majority of the total
interest in any other entity (partnership or otherwise) which is a tenant or
subtenant, however accomplished, whether in a single transaction or in a series
of related or unrelated transactions, shall be deemed an assignment of this
Lease, or of such sublease, as the case may be, (ii) a takeover agreement shall
be deemed a transfer of this Lease, (iii) any person or legal representative of
Tenant, to whom Tenant's interest under this Lease passes by operation of law,
or otherwise, shall be bound by the provisions of this
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Article 11, and (iv) a modification, amendment or extension without Landlord's
prior written consent of a sublease previously consented to by Landlord shall be
deemed a new sublease. Tenant agrees to furnish to Landlord upon demand at any
time and from time to time such information and assurances as Landlord may
reasonably request that neither Tenant, nor any subtenant, shall have violated
the provisions of this Section 11.01.
11.02. The provisions of clauses (a) and (b) of Section 11.01 hereof
shall not apply to transactions entered into by Tenant with a corporation into
or with which Tenant is merged or consolidated or with an entity to which
substantially all of Tenant's assets are transferred, provided (a) such merger,
consolidation or transfer of assets is for a good business purpose and not
principally for the purpose of transferring the leasehold estate created hereby,
and (b) the assignee or successor entity has a net worth at least equal to or in
excess of the net worth of Tenant either (i) immediately prior to such merger,
consolidation or transfer or (ii) as of the date hereof, whichever is greater.
11.03. Any assignment or transfer, whether made with Landlord's
consent as required by Section 11.01 or without Landlord's consent pursuant to
Section 11.02, shall not be effective unless and until (a) the assignee shall
execute, acknowledge and deliver to Landlord a recordable agreement, in form and
substance reasonably satisfactory to Landlord, whereby the assignee shall (i)
assume the obligations and performance of this Lease and agree to be personally
bound by all of the covenants, agreements, terms, provisions and conditions
hereof on the part of Tenant to be performed or observed on and after the
effective date of any such assignment and (ii) agree that the provisions of this
Article 11 shall, notwithstanding such assignment or transfer, continue to be
binding upon it in the future, and (b) in the case of an assignment or transfer
pursuant to Section 11.02 Tenant or its successor shall have delivered to
Landlord financial statements certified by a reputable firm of certified public
accountants evidencing satisfaction of the net worth requirements referred to in
Section 11.02. Tenant covenants that, notwithstanding any assignment or
transfer, whether or not in violation of the provisions of this Lease, and
notwithstanding the acceptance of fixed annual rent by Landlord from an assignee
or transferee or any other party, Tenant shall remain fully and primarily and
jointly and severally liable for the payment of the fixed annual rent and all
additional rent due and to become due under this Lease and for the performance
and observance of all of the covenants, agreements, terms, provisions and
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conditions of this Lease on the part of Tenant to be performed or observed.
11.04. The liability of Tenant, and the due performance by Tenant of
the obligations on its part to be performed under this Lease, shall not be
discharged, released or impaired in any respect by an agreement or stipulation
made by Landlord or any grantee or assignee of Landlord, by way of mortgage, or
otherwise, extending the time of, or modifying any of the obligations contained
in this Lease, or by any waiver or failure of Landlord to enforce any of the
obligations on Tenant's part to be performed under this Lease, and Tenant shall
continue liable hereunder. If any such agreement or modification operates to
increase the obligations of a tenant under this Lease, the liability under this
Section 11.04 of the tenant named in the Lease or any of its successors in
interest (unless such party shall have expressly consented in writing to such
agreement or modification) shall continue to be no greater than if such
agreement or modification had not been made.
11.05. Landlord shall not unreasonably withhold or delay its consent
to an assignment of this Lease or a subletting of the whole or a part of the
demised premises for substantially the remainder of the term of this Lease,
provided:
(a) Tenant shall furnish Landlord with the name and
business address of the proposed subtenant or assignee, information with respect
to the nature and character of the proposed subtenant's or assignee's business,
or activities, such references and current financial information with respect to
net worth, credit and financial responsibility as are reasonably satisfactory to
Landlord, and an executed counterpart of the Letter of Intent (as defined in
Section 11.06 below);
(b) The proposed subtenant or assignee is a reputable
party whose financial net worth, credit and financial responsibility is,
considering the responsibilities involved, reasonably satisfactory to Landlord;
(c) The nature and character of the proposed subtenant
or assignee, its business or activities and intended use of the demised premises
are, in Landlord's reasonable judgment, in keeping with the standards of the
Building and the floor or floors on which the demised premises are located;
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(d) The proposed subtenant or assignee is not then an
occupant of any part of the Building or a party who dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building during the 12 months immediately preceding Tenant's request for
Landlord's consent;
(e) All costs incurred with respect to providing
reasonably appropriate means of ingress and egress from the sublet space or to
separate the sublet space from the remainder of the demised premises shall,
subject to the provisions of Article 6 with respect to alterations,
installations, additions or improvements, be borne by Tenant;
(f) Each assignment or sublease shall specifically state
that (i) it is subject to all of the terms, covenants, agreements, provisions,
and conditions of this Lease, (ii) the subtenant or assignee, as the case may
be, will not have the right to further assign or sublet all or part of the
demised premises or to allow same to be used by others, without the consent of
Landlord in each instance, (iii) a consent by Landlord thereto shall not be
deemed or construed to modify, amend or affect the terms and provisions of this
Lease, or Tenant's obligations hereunder, which shall continue to apply to the
premises involved, and the occupants thereof, as if the sublease or assignment
had not been made, (iv) if Tenant defaults in the payment of any rent, Landlord
is authorized to collect any rents due or accruing from any assignee, subtenant
or other occupant of the demised premises and to apply the net amounts collected
to the fixed annual rent and additional rent due hereunder, (v) the receipt by
Landlord of any amounts from an assignee or subtenant, or other occupant of any
part of the demised premises shall not be deemed or construed as releasing
Tenant from Tenant's obligations hereunder or the acceptance of that party as a
direct tenant, and (vi) the subtenant shall be required to pay its proportionate
share of Tenant's Tax Payment and Tenant's Expense Payment;
(g) Tenant shall together with requesting Landlord's
consent hereunder, have paid Landlord any costs incurred by Landlord to review
the requested consent including any attorney's fees incurred by Landlord;
(h) The proposed subtenant or assignee is not (i) a bank
or trust company, safe deposit business, savings and loan association or loan
company; (ii) employment or recruitment agency; (iii) school, college,
university or educational institution whether or not for
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profit; or (iv) a government or any subdivision or agency thereof;
(i) In the case of a subletting of a portion of the
demised premises, the portion so sublet shall be regular in shape and suitable
for normal renting purposes;
(j) Intentionally omitted.
(k) The subletting or assignment shall not be at a lower
rental rate than that being obtained by Landlord at the time for similar space
then available in the Building; and
(l) Tenant shall have complied with the provisions of
said Section 11.06 and Landlord shall not have made any of the elections
provided for therein.
11.06. (a) Should Tenant be willing to agree to assign this Lease or
to sublet all or any portion of the demised premises (other than by an
assignment or sublease permitted by Section 11.02 hereof), Tenant shall, deliver
to Landlord executed counterparts of a letter of intent (the "Letter of Intent")
between Tenant and the proposed assignee or sublessee (who shall be a bona fide
third-party), as applicable, setting forth the material terms of the proposed
assignment or subletting, including, without limitation, (i) the price per
square foot, (ii) any work being performed by Tenant for such proposed subtenant
or assignee, (iii) any contribution to the cost of any work being performed by
such subtenant or assignee being made by Tenant, (iv) any rent concessions, and
(v) any lease takeover obligations. Simultaneously with delivering of the Letter
of Intent, Tenant will deliver to Landlord the information required by Section
11.05 hereof, and Landlord shall then have the right to elect by notice to
Tenant given within 30 days after such delivery (x) to consent or refuse to
consent to such proposed assignment or sublease in accordance with the terms of
this Lease or (y) to elect to:
A. With respect to a proposed assignment of this Lease,
terminate this Lease by giving written notice of such
termination to Tenant as of the Effective Date (as hereinafter
defined) specified in such notice as if it were the Expiration
Date set forth herein;
B. With respect to a proposed subletting of the entire demised
premises, terminate this Lease by giving written notice of
such
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termination to Tenant as of the Effective Date specified in
such notice as if it were the Expiration Date set forth
herein; and
C. With respect to a proposed subletting of less than the
entire demised premises, terminate this Lease by giving
written notice of such termination to Tenant with respect to
such portion of the demised premises as of the Effective Date
specified in such notice as if it were the Expiration Date set
forth herein in which case Tenant shall promptly execute and
deliver to Landlord an appropriate modification of this Lease
in form reasonably satisfactory to Landlord.
For purposes hereof, the "Effective Date" shall mean the date set forth in
Landlord's notice of termination as the date upon which such termination shall
become effective, which date shall not be less than sixty (60) days nor more
than one hundred and fifty (150) days after such notice is given. If Landlord
does not exercise its option to terminate this Lease as to all or a portion of
the demised premises as above provided in this Section 11.06, Tenant shall have
the right to negotiate and enter into an assignment or sublease subject to all
of the other terms, provisions and conditions of this Lease (other than
Landlord's termination right under this Section 11.06) for a period of one
hundred and eighty (180) days after the expiration of said 30-day period on the
terms and conditions set forth in the Letter of Intent. If no such assignment or
sublease is executed and exchanged within such 180-day period, or if the terms
and conditions set forth in the Letter of Intent are changed in any material
respect, Tenant must once again comply with the provisions of Section 11.06 with
respect to such proposed assignment or subletting.
(b) If pursuant to the exercise of any of Landlord's
options under this Section 11.06, this Lease is terminated as to only a portion
of the demised premises, then the fixed annual rent payable hereunder and the
additional rent payable pursuant to Article 3 hereof shall be adjusted in
proportion to the portion of the demised premises affected by such termination.
(c) If the Landlord shall give its consent to any
assignment of this Lease or to any sublease, Tenant shall in consideration
therefor, pay to Landlord, as additional rent 50% of the following amounts:
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(i) in the case of an assignment, an amount equal to all
sums and other considerations paid to Tenant by the assignee for or by reason of
such assignment (including, but not limited to, sums paid for the sale of
Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or
other personal property, less, in the case of a sale thereof, the then net
unamortized or undepreciated cost thereof determined on the basis of Tenant's
federal income tax returns); and
(ii) in the case of a sublease, any rents, additional
charges or other consideration payable under the sublease to Tenant by the
subtenant which is in excess of the fixed annual rent and additional rent
accruing during the term of the sublease in respect of the subleased space (at
the rate per square foot payable by Tenant hereunder) pursuant to the terms
hereof (including, but not limited to, sums paid for the sale or rental of
Tenant's fixtures, leasehold improvements, equipment, furniture or furnishings
other personal property, less, in the case of the sale thereof, the then net
unamortized or undepreciated cost thereof determined on the basis of Tenant's
federal income tax returns). The sums payable under this Section 11.06(c) shall
be paid to Landlord as and when paid by the assignee or subtenant to Tenant.
(d) If Landlord exercises any of its options under this
Section 11.06, Landlord shall be free to, and shall have no liability to Tenant
if Landlord shall, lease the demised premises or any portion thereof with
respect to which one of such options exercised, to Tenant's proposed assignee or
subtenant, as the case may be.
ARTICLE 12
CERTIFICATE OF OCCUPANCY
12.01. Landlord represents that the Certificate of Occupancy for the
Building will permit the use of the demised premises for the purposes specified
in this Lease. Landlord will make no changes in the Building which would result
in a change in the Certificate of Occupancy so as to prevent Tenant from using
the demised premises for the purposes specified in this Lease.
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ARTICLE 13
ADJACENT EXCAVATION - SHORING
13.01. If an excavation or other substructure work shall be made
upon land adjacent to the demised premises, or shall be authorized to be made,
Tenant shall afford to the person causing or authorized to cause such
excavation, license to enter upon the demised premises for the purpose of doing
such work as shall be necessary to preserve the wall of or the Building of which
the demised premises form a part from injury or damage and to support the same
by proper foundations without any claim for damages or indemnity against
Landlord, or diminution or abatement of rent.
ARTICLE 14
CONDEMNATION
14.01. In the event that the whole of the demised premises shall be
lawfully condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. In the event that only a part of
the demised premises shall be so condemned or taken, then, effective as of the
date of vesting of title, the fixed annual rent under Article 1 hereof and
additional rents under Article 3 hereof shall be abated proportionately
according to the reduction in the rentable area of the demised premises
resulting from such condemnation or taking. In the event that only a part of the
Building shall be so condemned or taken, then (a) Landlord (whether or not the
demised premises be affected) may, at Landlord's option, terminate this Lease
and the term and estate hereby granted as of the date of such vesting of title
by notifying Tenant in writing of such termination within 60 days following the
date on which Landlord shall have received notice of vesting of title, or (b) if
such condemnation or taking shall be of a substantial part of the demised
premises (25% or more) or of a substantial part of the means of access thereto,
Tenant may, at Tenant's option, by delivery of notice in writing to Landlord
within 30 days following the date on which Tenant shall have received notice of
vesting of title, terminate this Lease and the term and estate hereby granted as
of the date of vesting of title, or (c) if neither Landlord nor Tenant elects to
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terminate this Lease, as aforesaid, this Lease shall be and remain unaffected by
such condemnation or taking, except that the fixed annual rent payable under
Article 1 and additional rents payable under Article 3 shall be abated to the
extent hereinbefore provided in this Article 14.
14.02. In the event of termination of this Lease in any of the cases
hereinbefore provided, this Lease and the term and estate hereby granted shall
expire as of the date of such termination with the same effect as if that were
the Expiration Date, and the fixed annual rent and additional rents payable
hereunder shall be apportioned as of such date.
14.03. In the event of any condemnation or taking of all or a part
of the Building, Landlord shall be entitled to receive the entire award in the
condemnation proceeding, including any award made for the value of the estate
vested by this Lease in Tenant. Tenant hereby expressly assigns to Landlord any
and all right, title and interest of Tenant now or hereafter arising in or to
any such award or any part thereof, and agrees that it shall not be entitled to
receive any part of such award.
14.04. In the event of any taking of less than the whole of the
Building which does not result in a termination of this Lease, Landlord, at its
expense, shall proceed with reasonable diligence to repair, alter and restore
the remaining parts of the Building and the demised premises to substantially
their former condition to the extent that the same may be feasible and so as to
constitute a complete and tenantable Building and demised premises.
14.05. In the event any part of the demised premises be taken to
effect compliance with any law or requirement of public authority other than in
the manner hereinabove provided in this Article 14, then, (i) if such compliance
is the obligation of Tenant under this Lease, Tenant shall not be entitled to
any diminution or abatement of rent or other compensation from Landlord
therefor, but (ii) if such compliance is the obligation of Landlord under this
Lease, the fixed annual rent hereunder shall be reduced and additional rents
under Article 3 shall be adjusted in the same manner as is provided in Section
14.01 according to the reduction in rentable area of the demised premises
resulting from such taking.
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ARTICLE 15
ACCESS TO DEMISED PREMISES; CHANGES
15.01. Tenant shall permit Landlord to erect, use and maintain
pipes, ducts and conduits in and through the demised premises, provided the same
are installed adjacent to or concealed behind walls and ceilings of the demised
premises. Landlord shall to the extent practicable install such pipes, ducts and
conduits by such methods and at such locations as will not materially interfere
with or impair Tenant's layout or use of the demised premises. Landlord or its
agents or designees shall have the right, but only upon notice to Tenant or any
authorized employee of Tenant at the demised premises, to enter the demised
premises, during business hours, (a) for the making of such repairs or
alterations as Landlord may deem necessary for the Building or which Landlord
shall be required to or shall have the right to make by the provisions of this
Lease or any other lease in the Building and (b) for the purpose of inspecting
them or exhibiting them to existing or prospective purchasers, mortgagees or
lessees of all or part of the Land, Building or Property or to prospective
assignees, agents or designees of any such parties. Landlord shall be allowed to
take all material into and upon the demised premises that may be required for
the repairs or alterations above mentioned without the same constituting an
actual or constructive eviction of Tenant in whole or in part, and the rent
reserved hereunder shall not abate while said repairs or alterations are being
made by reason of loss or interruption of the business of Tenant because of the
prosecution of any such work. Landlord shall exercise reasonable diligence so as
to minimize the disturbance to Tenant but nothing contained herein shall be
deemed to require Landlord to perform the same on an overtime or premium pay
basis.
15.02. Landlord reserves the right, without the same constituting an
actual or constructive eviction and without incurring liability to Tenant
therefor, to change the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairways, toilets and other
public parts of the Building; provided, however, that access to the Building
shall not be cut off and that there shall be no unreasonable obstruction of
access to the demised premises or unreasonable interference with the use or
enjoyment thereof.
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15.03. Landlord reserves the right to light from time to time all or
any portion of the demised premises at night for display purposes without paying
Tenant therefor.
15.04. Landlord may, during the twelve (12) months prior to
expiration of the Term exhibit the demised premises to prospective tenants.
15.05. If Tenant shall not be personally present to open and permit
an entry into the demised premises at any time when for any reason an entry
therein shall be urgently necessary by reason of fire or emergency, Landlord or
Landlord's agents may forceably enter the same without rendering Landlord or
such agents liable therefor (if during such entry Landlord or Landlord's agents
shall accord reasonable care to Tenant's property) and without in any manner
affecting the obligations and covenants of this Lease.
ARTICLE 16
CONDITIONS OF LIMITATION
16.01. This Lease and the term and estate hereby granted are subject
to the limitation that whenever Tenant shall make an assignment of the property
of Tenant for the benefit of creditors, or if a petition shall be filed by or
against Tenant under any provisions of the United States Bankruptcy Act or under
the provisions of any other bankruptcy or insolvency law or any law of like
import, or whenever a permanent receiver of Tenant or of or for the property of
Tenant shall be appointed, then, Landlord may, (a) at any time after receipt of
notice of the occurrence of any such event, or (b) if such event occurs without
the acquiescence of Tenant, at any time after the event continues for thirty
(30) days, give Tenant a notice of intention to end the Term of this Lease at
the expiration of 5 days from the date of service of such notice of intention,
and upon the expiration of said 5 day period this Lease and the Term and estate
hereby granted, whether or not the Term shall theretofore have commenced, shall
terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 18.
16.02. This Lease and the Term and estate hereby granted are subject
to further limitation as follows:
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(a) whenever Tenant shall fail to pay any installment of
fixed annual rent or any additional rent or any other charge payable by Tenant
to Landlord, on the day the same is due and payable pursuant to the terms
hereof, and such default shall continue for 5 days after Landlord shall have
given Tenant a notice specifying such default, or
(b) whenever Tenant shall do or permit anything to be
done, whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Tenant within 15 days after Landlord shall have given to Tenant a notice
specifying the same, or, in the case of a happening or default which cannot with
due diligence be cured within a period of 15 days and the continuation of the
period required for cure will not subject Landlord to the risk of criminal
liability (as more particularly described in Article 8 hereof) or termination of
any superior lease or foreclosure of any superior mortgage, if Tenant shall not,
(i) within said 15 day period advise Landlord of Tenant's intention to duly
institute all steps necessary to remedy such situation, (ii) duly institute
within said 15 day period, and thereafter diligently and continuously prosecute
to completion all steps necessary to remedy the same and (iii) complete such
remedy within such time after the date of the giving of said notice of Landlord
as shall reasonably be necessary, or
(c) whenever any event shall occur or any contingency
shall arise whereby this Lease or the estate hereby granted or the unexpired
balance of the Term hereof would, by operation of law or otherwise, devolve upon
or pass to any person, firm or corporation other than Tenant, except as
expressly permitted by Article 11, or
(d) whenever Tenant shall abandon the demised premises
(unless as a result of a casualty), or
(e) whenever in case any other lease held by Tenant from
Landlord shall expire and terminate (whether or not the term thereof shall then
have commenced) as a result of the default of Tenant thereunder, or
(f) whenever Tenant shall fail to do, observe or perform
any act or thing to be done, observed or performed by Tenant pursuant to the
Work Agreement annexed hereto as Schedule C, or
(g) whenever Tenant shall default in the due keeping,
observing or performance of any covenant, agreement, provision or condition of
Article 5 hereof on the
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part of Tenant to be kept, observed or performed and if such default shall
continue and shall not be remedied by Tenant within 24 hours after Landlord
shall have given to Tenant a notice specifying the same,
then in any of said cases set forth in the foregoing Subsections (a), (b), (c),
(d), (e), (f) and (g) Landlord may give to Tenant a notice of intention to end
the Term at the expiration of 3 days from the date of the service of such notice
of intention, and upon the expiration of said 3 days this Lease and the Term and
estate hereby granted, whether or not the Term shall theretofore have commenced,
shall terminate with the same effect as if that day were the Expiration Date,
but Tenant shall remain liable for damages as provided in Article 18.
ARTICLE 17
RE-ENTRY BY LANDLORD, INJUNCTION
17.01. If Tenant shall fail to pay any installment of fixed annual
rent, or of any additional rent, or any other charge payable by Tenant to
Landlord on the date the same is due and payable, and if such default shall
continue for 5 days after Landlord shall have given to Tenant a notice
specifying such default, or if this Lease shall terminate as in Article 16
provided, Landlord or Landlord's agents and employees may immediately or at any
time thereafter re-enter the demised premises, or any part thereof, either by
summary dispossess proceedings or by any suitable action or proceeding at law,
or by force or otherwise, without being liable to indictment, prosecution or
damages therefrom. The word re-enter, as herein used, is not restricted to its
technical legal meaning.
17.02. In the event of a breach or threatened breach by Tenant of
any of its obligations under this Lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies or means
of redress to which Landlord may lawfully be entitled at any time and Landlord
may invoke any remedy allowed at law or in equity as if specific remedies were
not provided for herein.
17.03. If this Lease shall terminate under the provisions of Article
16, or if Landlord shall re-enter the demised premises under the provisions of
this Article 17, or
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in the event of the termination of this Lease, or of re-entry by or under any
summary dispossess or other proceeding or action or any provision of law by
reason of default hereunder on the part of Tenant, then (a) Tenant shall
thereupon pay to Landlord the fixed annual rent and additional rent payable by
Tenant to Landlord up to the time of such termination of this Lease, or of such
recovery of possession of the demised premises by Landlord, as the case may be,
and shall also pay to Landlord damages as provided in Article 18, and (b)
Landlord shall be entitled to retain all moneys, if any, paid by Tenant to
Landlord, whether as advance rent, security or otherwise, but such moneys shall
be credited by Landlord against any fixed annual rent or additional rent due
from Tenant at the time of such termination or re-entry or, at Landlord's option
against any damages payable by Tenant under Articles 16 and 18 or pursuant to
law.
17.04. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Landlord
obtaining possession of the demised premises, by reason of the violation by
Tenant of any of the covenants and conditions of this Lease or otherwise.
ARTICLE 18
DAMAGES
18.01. If this Lease is terminated under the provisions of Article
16, or if Landlord shall re-enter the demised premises under the provisions of
Article 17, or in the event of the termination of this lease, or of re-entry by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Tenant shall pay to
Landlord as damages, at the election of Landlord, either
(a) a sum which at the time of such termination of this
Lease or at the time of any such re-entry by Landlord, as the case may be,
represents the then value of the excess, if any, of
(1) the aggregate of the fixed annual rent and the additional
rent payable hereunder which would have been payable by Tenant
(conclusively presuming the additional rent to be the same as
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was payable for the year immediately preceding such termination
except that additional rent on account of increases in Real Estate
Taxes and Expenses shall be presumed to increase at the average of
the rates of increase thereof previously experienced by Landlord
during the period (not to exceed 3 years) prior to such termination)
for the period commencing with such earlier termination of this
Lease or the date of any such re-entry, as the case may be, and
ending with the Expiration Date, had this Lease not so terminated or
had Landlord not so re-entered the demised premises, over
(2) the aggregate rental value of the demised premises for the
same period, or
(b) sums equal to the fixed annual rent and the
additional rent payable hereunder which would have been payable by Tenant had
this Lease not so terminated, or had Landlord not so re-entered the demised
premises, payable upon the due dates therefor specified herein following such
termination or such re-entry and until the Expiration Date, provided, however,
that if Landlord shall re-let the demised premises during said period, Landlord
shall credit Tenant with the net rents received by Landlord from such
re-letting, such net rents to be determined by first deducting from the gross
rents as and when received by Landlord from such re-letting, the expenses
incurred or paid by Landlord in terminating this Lease or in re-entering the
demised premises and in securing possession thereof, as well as the expenses of
re-letting, including altering and preparing the demised premises for new
tenants, brokers' commissions, legal fees, and all other expenses properly
chargeable against the demised premises and the rental thereof; it being
understood that any such re-letting may be for a period shorter or longer than
the remaining term of this Lease. In no event shall Tenant be entitled to
receive any excess of such net rents over the sums payable by Tenant to Landlord
hereunder for the period of such re-letting, or shall Tenant be entitled in any
suit for the collection of damages pursuant to this subsection to a credit in
respect of any net rents from a re-letting, except to the extent that such net
rents are actually received by Landlord. If the demised premises or any part
thereof should be re-let in combination with other space, then proper
apportionment on a square foot basis shall be made of the rent received from
such re-letting and of the expenses of re-letting. If the demised premises or
any part thereof be re-let by Landlord for the unexpired portion of the term of
this Lease, or any part thereof, before presentation of proof of such damages
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to any court, commission or tribunal, the amount of rent payable pursuant to
such re-letting shall, prima facie, be the fair and reasonable rental value for
the demised premises, or part thereof, so re-let during the term of the
re-letting.
18.02. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under the provisions of Article 16, or under any provision of law,
or had Landlord not re-entered the demised premises. Nothing herein contained
shall be construed to limit or preclude recovery by Landlord against Tenant of
any sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder on
the part of Tenant. Nothing herein contained shall be construed to limit or
prejudice the right of Landlord to prove for and obtain as liquidated damages by
reason of the termination of this Lease or re-entry of the demised premises for
the default of Tenant under this Lease, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved whether or not such amount
be greater, equal to, or less than any of the sums referred to in Section 18.01.
ARTICLE 19
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
19.01. If Tenant shall default in the observance or performance of
any term or covenant on Tenant's part to be observed or performed under any of
the terms or provisions of this Lease, (a) Landlord may remedy such default for
the account of Tenant, immediately and without notice in case of emergency, or
in any other case if Tenant shall fail to remedy such default with all
reasonable dispatch after Landlord shall have notified Tenant in writing of such
default and the applicable grace period for curing such default shall have
expired; and (b) if Landlord makes any expenditures or incurs any obligations
for the payment of money in connection with such default including, but not
limited to, reasonable attorneys' fees in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations incurred, with
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interest at the Interest Rate, shall be deemed to be additional rent hereunder
and shall be paid by Tenant to Landlord upon rendition of a bill to Tenant
therefor. The provisions of this Article 19 shall survive the expiration or
other termination of this Lease.
ARTICLE 20
QUIET ENJOYMENT
20.01. Landlord covenants and agrees that subject to the terms and
provisions of this Lease, if, and so long as, Tenant keeps and performs each and
every covenant, agreement, term, provision and condition herein contained on the
part or on behalf of Tenant to be kept or performed, then Tenant's rights under
this Lease shall not be cut off or ended before the expiration of the term of
this Lease, subject however, to: (i) the obligations of this Lease, and (ii) the
provisions of Article 25 hereof with respect to Superior Instruments which
affect this Lease.
ARTICLE 21
SERVICES AND EQUIPMENT
21.01. So long as Tenant is not in default under any of the
covenants of this Lease, Landlord shall:
(a) Provide necessary elevator facilities on business
days from 8:00 A.M. to 6:00 P.M. and shall have at least one elevator subject to
call at all other times. At Landlord's option, the elevators shall be operated
by automatic control or by manual control, or by a combination of both of such
methods.
(b) Maintain and keep in good order and repair the air
conditioning, heating and ventilating systems installed by Landlord. The heating
and ventilation systems will function when seasonably required on business days
from 8:00 A.M. to 6:00 P.M. as more fully described in Schedule C annexed hereto
and made a part hereof. The air conditioning system (as it relates to the
demised premises) shall have separate controls in the demised premises and may
be operated by Tenant as required if the demised premises constitute an entire
floor; with respect to partial floors
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said controls shall be operated by the concierge of the Building. Landlord has
informed Tenant that the windows of the demised premises and the Building are
sealed, and that the demised premises may become uninhabitable and the air
therein may become unbreathable during the hours or days when Landlord is not
required pursuant to this paragraph to furnish heat or ventilation or when
Tenant does not operate the air-conditioning systems. Any use or occupancy of
the demised premises during such hours shall be at the sole risk, responsibility
and hazard of Tenant, and Landlord shall have no responsibility or liability
therefor. Such condition of the demised premises shall not constitute nor be
deemed to be a breach or a violation of this Lease or of any provision thereof,
nor shall it be deemed an actual or constructive eviction nor shall Tenant claim
or be entitled to claim any abatement of rent nor make any claim for any damages
or compensation by reason of such condition of the demised premises. Tenant
shall cause and keep entirely unobstructed all the vents, intakes, outlets and
grilles, at all times and shall comply with and observe all regulations and
requirements prescribed by Landlord for the proper functioning of the heating,
ventilating and air-conditioning systems. Nothing contained herein shall be
deemed to require Landlord to furnish at Landlord's expense such electric energy
as is required to operate the air conditioning system serving the demised
premises. Subject to the provisions of Article 4 hereof all such electric energy
shall be furnished to Tenant at Tenant's cost and expense. In the event that
Tenant shall require heating or ventilation (or air conditioning if Tenant
occupies a partial floor) at such times as same are not furnished by Landlord,
Tenant shall advise the concierge of the Building of such requirement and, the
same shall be furnished by Landlord. Tenant agrees to pay the Landlord's charges
therefor as additional rent. The temperature controls for the air conditioning
shall be in the demised premises as provided for in Schedule C but the controls
for turning on said air conditioning shall be with the concierge.
(c) Provide the cleaning and janitorial services
described on Schedule F annexed hereto on business days.
(d) Furnish water for lavatory and drinking and office
cleaning purposes. If Tenant requires, uses or consumes water for any other
purposes, Tenant agrees that Landlord may install a meter or meters or other
means to measure Tenant's water consumption, and Tenant further agrees to
reimburse Landlord for the cost of the meter or meters and the installation
thereof, and to pay for the
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maintenance of said meter equipment and/or to pay Landlord's cost of other means
of measuring such water consumption by Tenant. Tenant shall reimburse Landlord
for the cost of all water consumed, as measured by said meter or meters or as
otherwise measured, including sewer rents.
21.02. Landlord reserves the right without any liability whatsoever,
or abatement of fixed annual rent, or additional rent, to stop the heating, air
conditioning, elevator, plumbing, electric and other systems when necessary by
reason of accident or emergency or for repairs, alterations, replacements or
improvements, provided that except in case of emergency, Landlord will notify
Tenant in advance, if possible, of any such stoppage and, if ascertainable, its
estimated duration, and will proceed diligently with the work necessary to
resume such service as promptly as possible and in a manner so as to minimize
interference with the Tenant's use and enjoyment of the demised premises, but
Landlord shall not be obligated to employ overtime or premium labor therefor.
21.03. Tenant shall reimburse Landlord for the cost to Landlord of
removal from the demised premises and the Building of so much of any refuse and
rubbish of Tenant as shall exceed that ordinarily accumulated daily in the
routine of general business office occupancy.
21.04. It is expressly agreed that any firm or corporation
furnishing laundry, linen towels, drinking water, ice, food or beverages, cable
television and other similar supplies and services to tenants and licensees in
the Building is subject to being excluded from the Building if Landlord, in its
reasonable judgment, determines that such firm or corporation interferes with
the operation of the Building. Landlord may fix, in its own absolute discretion,
at any time and from time to time, the hours during which and the regulations
under which such supplies and services are to be furnished. It is understood,
however, that Tenant or regular office employees of Tenant who are not employed
by any supplier of such food or beverages or by any person, firm or corporation
engaged in the business of purveying such food or beverages, may personally
bring food or beverages into the Building for consumption within the demised
premises by employees of Tenant, but not for resale to or for consumption by any
other tenant. Landlord may fix in its absolute discretion, at any time and from
time to time, the hours during which, and the regulations under which, foods and
beverages may be brought into the Building by regular employees of Tenant.
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21.05. Tenant agrees to employ such office maintenance contractor as
Landlord may from time to time designate, for all waxing, polishing, cleaning
(other than those cleaning services Landlord is obligated to furnish) and
maintenance work in the demised premises, provided that the quality thereof and
the charges therefor are reasonably comparable to that of other contractors.
Tenant shall not employ any other contractor without Landlord's prior written
consent.
21.06. Landlord will not be required to furnish any other services,
except as otherwise provided in this Lease.
ARTICLE 22
DEFINITIONS
22.01. The term "Landlord" as used in this Lease means only the
owner, or the mortgagee in possession, for the time being of the Land and
Building (or the owner of a lease of the Building or of the Land and Building),
so that in the event of any transfer of title to said Land and Building or said
lease, or in the event of a lease of the Building, or of the Land and Building,
upon notification to Tenant of such transfer or lease the said transferor
Landlord shall be and hereby is entirely freed and relieved of all existing or
future covenants, obligations and liabilities of Landlord hereunder, and it
shall be deemed and construed as a covenant running with the land without
further agreement between the parties or their successors in interest, or
between the parties and the transferee of title to said Land and Building or
said lease, or the said lessee of the Building or of the Land and Building, that
the transferee or the lessee, as applicable, has assumed and agreed to carry out
any and all such covenants, obligations and liabilities of Landlord hereunder.
22.02. The term "Business Days" as used in this Lease shall exclude
Saturdays, Sundays and all days observed as legal holidays and defined as Public
Holidays in the Official Directory of the City of New York as well as all other
days recognized as holidays under applicable union contracts; provided, however,
that the Building shall be open on all days that the New York Stock Exchange is
open for business.
22.03. "Interest Rate" shall mean a rate per annum equal to the
lesser of (a) 2% above the so-called
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"prime rate" of Republic National Bank, as publicly announced from time to time
or if Republic National Bank shall cease to exist or cease to announce such
rate, any similar rate designated by Landlord which is publicly announced from
time to time by any other bank (a "Substitute Bank") in the City of New York
having combined capital and surplus in excess of $100,000,000 or (b) the maximum
rate of interest, if any, which Tenant may legally contract to pay.
22.04. "Legal Requirements" shall mean laws, statutes and ordinances
including building codes and zoning regulations and ordinances and the orders,
rules, regulations, directives and requirements of all federal, state, county,
city and borough departments, bureaus, boards, agencies, offices, commissions
and other subdivisions thereof, or of any official thereof, or of any other
governmental, public or quasi-public authority, whether now or hereafter in
force, which may be applicable to the Land or Building or the demised premises
or any part thereof, or the sidewalks, curbs or areas adjacent thereto and all
requirements, obligations and conditions of all instruments of record on the
date of this Lease.
ARTICLE 23
INVALIDITY OF ANY PROVISION
23.01. If any term, covenant, condition or provision of this Lease
or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease shall not be affected
thereby and each remaining term, covenant, condition and provision of this Lease
shall be valid and shall be enforceable to the fullest extent permitted by law.
ARTICLE 24
BROKERAGE
24.01. Tenant covenants, represents and warrants that Tenant has had
no dealings or negotiations with any broker or agent other than Jones Lang
Wootton (which is representing Landlord) and Edward S. Gordon & Company in
connection with the consummation of this Lease, and Tenant covenants and agrees
to pay, hold harmless and indemnify
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Landlord from and against any and all cost, expense (including reasonable
attorneys' fees and court costs), loss and liability for any compensation,
commissions or charges claimed by any broker or agent, other than the brokers
set forth in this Section 24.01, with respect to this Lease or the negotiation
thereof if such claim or claims by any such broker or agent are based in whole
or in part on dealing with Tenant or its representatives. Landlord agrees to pay
to the brokers specified in this Section 24.01 such compensation, commissions or
charges to which they are entitled pursuant to the separate agreements between
said brokers and Landlord.
ARTICLE 25
SUBORDINATION
25.01. This Lease is and shall be subject and subordinate to all
ground or underlying leases which may now or hereafter affect the Land or the
Building and to all mortgages which may now or hereafter affect such leases, the
Land or the Building, and to all renewals, refinancings, modifications,
replacements and extensions thereof (hereinafter called "Superior Instruments").
The provisions of this Section 25.01 shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver at its own cost and
expense any instrument, in recordable form if required, that Landlord, the
holder of any Superior Instrument or any of their respective successors in
interest may request to evidence such subordination, and Tenant hereby
constitutes and appoints Landlord or its successors in interest to be Tenant's
attorney-in-fact, irrevocably and coupled with an interest, to execute and
deliver any such instrument for and on behalf Tenant.
25.02. In the event of a termination of any ground or underlying
lease, or if the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any mortgage, or if the holder of any mortgage acquires a lease
in substitution therefor, then Tenant under this Lease will, at the option to be
exercised in writing by the holder of any such Superior Instrument or any
purchaser, assignee or lessee, as the case may be, either (i) attorn to it and
will perform for its benefit all the terms, covenants and conditions of this
Lease on Tenant's part to be performed
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with the same force and effect as if it were the landlord originally named in
this Lease, or (ii) enter into a new lease with it for the remaining term of
this Lease and otherwise on the same terms and conditions and with the same
options, if any, then remaining. The foregoing provisions of clause (i) of this
Section 25.02 shall enure to the benefit of such holder of a Superior
Instrument, purchaser, assignee or lessee, shall be self-operative upon the
exercise of such option, and no further instrument shall be required to give
effect to such option, and no further instrument shall be required to give
effect to said provisions. Tenant, however, upon demand of any such holder of a
Superior Instrument, purchaser, assignee or lessee agrees to execute, from time
to time, instruments in confirmation of the foregoing provisions of this Section
25.02, satisfactory to any such holder of a Superior Instrument, purchaser,
assignee or lessee, acknowledging such attornment and setting forth the terms
and conditions of its tenancy. Tenant hereby constitutes and appoints Landlord
or its successors in interest to be the Tenant's attorney-in-fact, irrevocably
and coupled with an interest, to execute and deliver such instrument of
attornment, or such new lease, if the Tenant refuses or fails to do so promptly
upon request.
25.03. Anything herein contained to the contrary notwithstanding,
under no circumstances shall any such holder of a Superior Instrument,
purchaser, assignee or lessee, as the case may be, whether or not it shall have
succeeded to the interests of the landlord under this Lease, be
(a) liable for any act, omission or default of any prior
landlord; or
(b) subject to any offsets, claims or defenses which the
Tenant might have against any prior landlord; or
(c) bound by any rent or additional rent which Tenant might
have paid to any prior landlord for more than one month in advance or for more
than three months in advance where such rent payments are payable at intervals
of more than one month; or
(d) bound by any modification, amendment or abridgment of the
Lease, or any cancellation or surrender of the same, made without its prior
written approval.
25.04. If, in connection with the financing of the Building, the
holder of any mortgage shall request
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reasonable modifications in this Lease as a condition of approval thereof,
Tenant will not unreasonably withhold, delay or defer making such modifications
provided the same do not (i) increase the fixed annual rent or additional rents
payable by Tenant, (ii) reduce the term hereof or (iii) extend the term hereof
except as otherwise provided in Section 2.06.
25.05. If Landlord shall turn over to the holder of a Superior
Instrument the Security Deposit deposited by Tenant with Landlord pursuant to
Article 41 hereof, then notwithstanding anything to the contrary contained
herein, such holder shall hold same subject to and in accordance with all Legal
Requirements.
ARTICLE 26
CERTIFICATE OF TENANT
26.01. Tenant shall, without charge, at any time and from time to
time, within ten (10) days after request by Landlord, execute, acknowledge and
deliver to Landlord, the holder of a Superior Instrument or any other person,
firm or corporation specified by Landlord, a written instrument (an "Estoppel
Certificate") in the form attached hereto as Schedule D or such other form as
may be required by the holder of any Superior Instrument. Prior to taking
occupancy of the demised premises, and as a condition precedent thereto, Tenant
shall execute, acknowledge and deliver such an estoppel certificate to Landlord.
26.02. Tenant agrees that, except for the first month's rent
hereunder, it will pay no rent under this Lease more than thirty (30) days in
advance of its due date, if so restricted by any existing or future Superior
Instrument or by an assignment of this Lease to the holder of such Superior
Instrument, and, in the event of any act or omission by Landlord which would
give Tenant the right to terminate this Lease, Tenant will not exercise such
right until Tenant shall have first given written notice of such act or omission
to the holder of any Superior Instrument who shall have furnished such holder's
last address to Tenant, and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notices, during which
time such holder shall have the right, but shall not be obligated, to remedy or
cause to be remedied such act or omission. Tenant further agrees not to exercise
any such right if the holder of any such Superior
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Instrument commences to cure such act or omission within a reasonable time after
having received notice thereof and diligently prosecutes such cure thereafter.
ARTICLE 27
LEGAL PROCEEDINGS, WAIVER OF JURY TRIAL
27.01. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other on any matters whatsoever arising out of or in any way in connection with
this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy
of the demised premises, and/or any other claims (except claims for personal
injury or property damage), and any emergency statutory or any other statutory
remedy. It is further mutually agreed that in the event Landlord commences any
summary proceeding for non-payment of rent, Tenant will not interpose and does
hereby waive the right to interpose any counterclaim of whatever nature or
description in any such proceeding. Tenant shall reimburse Landlord upon demand
for all costs and expenses (including attorney's fees and disbursements and
court costs) incurred by Landlord in connection with enforcing Tenant's
obligations hereunder or in protecting Landlord's rights hereunder whether
incurred in connection with an action or proceeding commenced by Landlord, by
Tenant, by a third party or otherwise. All such amounts shall be deemed to be
additional rent and shall be collectible in the same manner as provided in
Section 1.02 hereof.
ARTICLE 28
SURRENDER OF PREMISES
28.01. Upon the expiration or other termination of the Term, Tenant
shall quit and surrender to Landlord the demised premises, broom clean, in good
order and condition, ordinary wear and tear and damage by fire, the elements or
other casualty excepted, and Tenant shall remove all of its property as herein
provided. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of the Term.
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28.02. If Tenant shall, without the written consent of Landlord,
hold over after the expiration of the Term such tenancy shall be deemed a
month-to-month tenancy, which tenancy may be terminated as provided by
applicable law. During such tenancy, Tenant agrees to (a) pay to Landlord, each
month, the greater of the fair market rental value for the Premises or one
hundred twenty (120) percent of the fixed annual rent and all additional rent
payable by Tenant for the last month of the Term and (b) be bound by all of the
terms, covenants and conditions herein specified.
ARTICLE 29
RULES AND REGULATIONS
29.01. Tenant and Tenant's servants, employees and agents shall
observe faithfully and comply strictly with the Rules and Regulations set forth
in Schedule E attached hereto and made part hereof entitled "Rules and
Regulations" and such other and further reasonable Rules and Regulations as
Landlord or Landlord's agents may from time to time adopt provided, however,
that in case of any conflict or inconsistency between the provisions of this
Lease and of any of the Rules and Regulations as originally or as hereafter
adopted, the provisions of this Lease shall control. Reasonable written notice
of any additional Rules and Regulations shall be given to Tenant.
Nothing in this Lease contained shall be construed to impose upon
Landlord any duty or obligation to enforce the Rules and Regulations or the
terms, covenants or conditions in any other lease, against any other tenant of
the Building, and Landlord shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees.
ARTICLE 30
CONSENTS AND APPROVALS
30.01. Wherever in this Lease Landlord's consent or approval is
required, if Landlord shall delay or refuse such consent or approval, Tenant in
no event shall be entitled to make, nor shall Tenant make, any claim, and Tenant
hereby waives any claim, for money damages (nor shall
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Tenant claim any money damages by way of set-off, counterclaim or defense) based
upon any claim or assertion by Tenant that Landlord unreasonably withheld or
unreasonably delayed its consent or approval. Tenant's sole remedy shall be an
action or proceeding to enforce any such provision, for specific performance,
injunction or declaratory judgment.
ARTICLE 31
NOTICES
31.01. Any notice or demand, consent, approval or disapproval, or
statement (collectively called "Notices") required or permitted to be given by
the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing and unless otherwise required by such law or regulation, shall be sent
by United States mail postage prepaid as registered or certified mail, return
receipt requested. Any Notice shall be addressed to Landlord or Tenant, as
applicable, at its address set forth on page 1 of this Lease as said address may
be changed form time to time as hereinafter provided. After Tenant shall occupy
the demised premises, the address of Tenant for Notices shall be the Building.
By giving the other party at least ten days prior written notice, either party
may, by Notice given as above provided, designate a different address or
addresses for Notices.
31.02. Any Notice shall be deemed given as of the date of delivery
as indicated on the return receipt; and in the case of failure to deliver by
reason of changed address of which no Notice was given or refusal to accept
delivery, as of the date of such failure as indicated on the return receipt or
by notice of the postal department.
31.03. In addition to the foregoing, either Landlord or Tenant may,
from time to time, request in writing that the other party serve a copy of any
Notice on one other person or entity designated in such request, such service to
be effected as provided in Section 31.01 hereof.
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ARTICLE 32
NO WAIVER
32.01. No agreement to accept a surrender of this Lease shall be
valid unless in writing signed by Landlord. No employee of Landlord or of
Landlord's agents shall have any power to accept the keys of the demised
premises prior to the termination of this Lease. The delivery of keys to any
employee of Landlord or of Landlord's agent shall not operate as a termination
of this Lease or a surrender of the demised premises. In the event of Tenant at
any time desiring to have Landlord sublet the premises for Tenant's account,
Landlord or Landlord's agents are authorized to receive said keys for such
purpose without releasing Tenant from any of the obligations under this Lease.
The failure of Landlord to seek redress for violation of, or to insist upon the
strict performance of, any covenant or condition of this Lease or any of the
Rules and Regulations set forth herein, or hereafter adopted by Landlord, shall
not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of this
Lease shall not be deemed a waiver of such breach. The failure of Landlord to
enforce any of the Rules and Regulations set forth herein, or hereafter adopted,
against Tenant and/or any other tenant in the Building shall not be deemed a
waiver of any such Rules and Regulations. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver be in writing signed
by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly rent herein stipulated shall be deemed to be other than on the
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment of rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease provided.
32.02. This Lease contains the entire agreement between the parties,
and any executory agreement hereafter made shall be ineffective to change,
modify, discharge or effect an abandonment of it in whole or in part unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
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ARTICLE 33
CAPTIONS
33.01. The captions are inserted only as a matter of convenience and
for reference, and in no way define, limit or describe the scope of this Lease
nor the intent of any provision thereof.
ARTICLE 34
INABILITY TO PERFORM
34.01. If, by reason of (1) strike, (2) labor troubles, (3)
governmental pre-emption in connection with a national emergency, (4) any rule,
order or regulation of any governmental agency, (5) conditions of supply or
demand which are affected by war or other national, state or municipal
emergency, or any other cause or (6) fire or other casualty, (7) adjustment of
insurance claims, (8) acts of God, or (9) any other cause beyond Landlord's
reasonable control (collectively "Force Majeure Causes"), Landlord shall be
unable to fulfill its obligations under this Lease or shall be unable to supply
any service which Landlord is obligated to supply, this Lease and Tenant's
obligation to pay rent hereunder shall in no wise be affected, impaired or
excused.
ARTICLE 35
NO REPRESENTATIONS BY LANDLORD
35.01. Landlord or Landlord's agents have made no representations or
promises with respect to the Building or demised premises except as herein
expressly set forth.
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ARTICLE 36
NAME OF BUILDING
36.01. The name of the Building shall be One Exchange Plaza.
Landlord shall have the full right at any time to name and change the name of
the Building and to change the designated address of the Building. The Building
may be named after any person, firm, or otherwise, whether or not such name is,
or resembles, the name of a tenant of the Building.
ARTICLE 37
ARBITRATION
37.01. In each case specified in this Lease in which resort to
arbitration shall be required, such arbitration (unless otherwise specifically
provided in other Sections of this Lease) shall be in New York City in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and the provisions of this Lease. The decision and award of the
arbitrators shall be in writing, shall be final and conclusive on the parties,
and counterpart copies thereof shall be delivered to each of the parties. In
rendering such decision and awards, the arbitrators shall not add to, subtract
from or otherwise modify the provisions of this Lease. Judgment may be had on
the decision and award of the arbitrators so rendered in any court of competent
jurisdiction.
ARTICLE 38
INDEMNITY
38.01. Tenant shall indemnify Landlord and save it harmless from and
against any and all liability, damages, costs or expenses, including attorneys'
fees, arising from any act, omission, or negligence of Tenant or its officers,
contractors, licensees, agents, employees, guests, invitees, or visitors in or
about the Building or arising from any breach or default under this Lease by
Tenant, or arising from any accident, injury, or damage, howsoever and by
whomsoever caused, to any person or property, occurring in
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or about the Building or Premises. This provision shall not be construed to make
Tenant responsible for loss, damage, liability or expense resulting from
injuries to third parties caused by the negligence of Landlord, or its officers,
contractors, licensees, agents, employees, or invitees.
ARTICLE 39
MEMORANDUM OF LEASE
39.01. Tenant shall, at the request of Landlord execute and deliver
a statutory form of memorandum of this Lease for the purpose of recording, but
said memorandum of this Lease shall not in any circumstances be deemed to modify
or to change any of the provisions of this Lease.
ARTICLE 40
APPROVAL OF PERMANENT MORTGAGEE
40.01. This Lease is conditioned on Landlord obtaining the approval
of this Lease (hereinafter referred to as "Approval") by the holder of the
construction and/or permanent first mortgage on the Land and Building or a
commitment therefor (the "Mortgagee"). Landlord represents that it will use
reasonable efforts to obtain the Approval.
40.02. In the event Landlord has not obtained the Approval within 15
days after the date hereof, Landlord shall have the obligation to terminate this
Lease upon 7 days' notice to Tenant and this Lease shall terminate upon the
expiration of 7 days after the date of such notice.
40.03. In the event a Mortgagee notifies Landlord that it will not
give the Approval, then Landlord shall have the right to terminate this Lease by
written notice to Tenant, and upon the giving of such notice, this Lease shall
terminate.
40.04. In the event of the termination of this Lease pursuant to
Sections 40.02 or 40.03 hereof, and upon such termination, all further
obligations of the parties hereunder shall end and neither Landlord or Tenant
shall
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have any liability to the other, except Landlord shall refund any pre-paid rent
and/or security deposit to Tenant.
40.05. In the event that the Approval is not obtained, Landlord will
reimburse Tenant for any of its reasonable out-of-pocket architectural fees
incurred in connection with the demised premises.
ARTICLE 41
SECURITY DEPOSIT
41.01. Tenant has deposited with Landlord an unconditional,
irrevocable letter of credit substantially in the form attached hereto as
Schedule G in an amount equal to two monthly installments of fixed annual rent,
as security for the full and punctual performance by Tenant of all of the terms
of this Lease. In the event Tenant defaults in the performance of any of the
terms of this Lease, Landlord may draw upon the letter of credit in full and any
amounts not applied as hereinafter provided shall be held by Landlord subject to
and in accordance with the provisions of this Article. Landlord may then apply
the whole or any part of the security so drawn upon to the extent required for
the payment of (i) any rent or (ii) any sum which Landlord may expend or may be
required to expend by reason of Tenant's default including, without limitation,
any damages or deficiency in the re-letting of the demised premises, whether
accruing before or after summary proceedings or other re-entry by Landlord. Upon
each such application, Tenant shall, on demand, pay to Landlord the sum so
applied in cash which shall be added to the remaining proceeds from the letter
of credit so that the security held by Landlord shall be restored to the amount
first set forth above. If Tenant shall fully and punctually comply with all of
the terms of this Lease, the letter of credit or the amount of the security
deposit, as the case may be, shall be returned to Tenant after the termination
of this Lease, delivery of exclusive possession of the Premises to Landlord and
the payment to Landlord of the balance of Tenant's Expense Payment and Tax
Payment for the final Operating Year and Tax Year. In the event of a sale or
lease of the Building, Landlord shall have the right to transfer the letter of
credit or the security deposit to the vendee or lessee and Landlord shall ipso
facto be released by Tenant from all liability for the return of such security;
and Tenant agrees to look solely to the new landlord for the return of said
security and it is agreed that the provisions hereof shall
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apply to every transfer or assignment made of the letter of credit or security
to a new landlord. If 30 days prior to the date of such sale, Landlord shall be
holding a letter of credit as Tenant's security, Tenant will upon 5 days' prior
written notice, deliver a substitute letter of credit naming the new landlord as
the new beneficiary thereof. In the event Tenant shall default on such
obligation, Landlord may draw upon the letter of credit and transfer the
proceeds thereof to the new landlord. Tenant shall not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, or attempted assignment or encumbrance. In the event
the letter of credit referred to above or any substitute letter of credit is not
renewed so that at all times the letter of credit held by Landlord hereunder is
valid for a period in excess of 30 days, Landlord may draw upon said letter of
credit and hold the proceeds thereof subject to and in accordance with the terms
of this Section. Anything to the contrary contained herein notwithstanding, if
Tenant shall fully and punctually comply with all the terms of this Lease for
two years following the Commencement Date, Landlord shall within 30 days
thereafter return the letter of credit to Tenant upon receiving (a) a substitute
letter of credit with an expiration date no earlier than one year from the date
of such letter of credit and in substantially the same form as the letter of
credit initially deposited with Landlord hereunder but in an amount equal to one
monthly installment of fixed annual rent, and (b) a receipt for the original
letter of credit from Tenant. The substitute letter of credit shall be held and
applied subject to and in accordance with the terms of this Article 41.
ARTICLE 42
FAIR MARKET RENT REVIEW/RENEWAL OPTION
42.01. On the fifth anniversary of the Commencement Date (the
"Review Date"), the fixed annual rent payable pursuant to Article 1 shall be
increased so as to equal the lesser of (i) the fair market rent for the demised
premises as determined in the manner hereinafter provided, or (ii) 125% of the
fixed annual rent payable under Article 1 hereof immediately prior to such
Review Date; provided, however, that in no event may the fixed annual rent
payable under Article 1 hereof be reduced by the operation of this Article 42.
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42.02. If in Landlord's opinion an increase in the fixed annual rent
is warranted because the fair market rent for the demised premises has
increased, Landlord shall give Tenant notice thereof (hereinafter called the
"Review Notice") which Review Notice shall specify the new increased fixed
annual rent that Tenant shall be obligated to pay. The increased fixed annual
rent set forth in the Review Notice shall be effective as of the Review Date to
which such Review Notice relates.
42.03. (a) If Landlord gives a Review Notice, then at any time
within 15 days after the giving of such Review Notice, Tenant may dispute the
fair market rent for the demised premises as determined by Landlord by giving
notice to Landlord that it is initiating the appraisal process provided for
herein and specifying in such Notice the name and address of the arbitrator
designated by Tenant to act on its behalf. Within 15 days after the designation
of Tenant's arbitrator, Landlord shall give notice to Tenant specifying the name
and address of Landlord's arbitrator. The two arbitrators so chosen shall meet
within 10 days after the second arbitrator is appointed and if, within 20 days
after the second arbitrator is appointed, the two arbitrators shall not agree
upon a determination in accordance with Paragraph (c) of this Section 42.03 they
shall together appoint a third arbitrator. If said two arbitrators cannot
agree upon the appointment of a third arbitrator within 10 days after the
expiration of such 20 day period, then either party, on behalf of both, and on
notice to the other may request such appointment by the American Arbitration
Association (or any successor organization) in accordance with its then
prevailing rules. If the American Arbitration Association shall fail to appoint
said third arbitrator within 10 days after such request is made, then either
party may apply, on notice to the other, to the Supreme Court, New York County,
New York (or any other court having jurisdiction and exercising functions
similar to those now exercised by the foregoing court) for the appointment of
such third arbitrator.
(b) Each of the arbitrators selected as herein provided shall
have at least five years experience in the leasing or management of office space
in the "Downtown" office market in the Borough of Manhattan. Each party shall
pay the fees and expenses of the arbitrator selected by it. The fees and
expenses of the third arbitrator and all other expenses (not including the
attorney's fees, witness fees and similar expenses of the parties which shall be
borne separately by each of the parties) of the arbitration shall be borne
equally by the parties hereto.
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(c) The majority of the arbitrators shall determine the fair
market rent of the demised premises as of the later of the Review Date or the
date a Review notice is given and render a decision and award as to their
determination to both Landlord and Tenant within 20 days after the appointment
of the third arbitrator. In rendering such decision and award, the arbitrators
shall assume or take into consideration as appropriate all of the following: (i)
the Landlord and prospective tenant are typically motivated; (ii) the Landlord
and prospective tenant are well informed and well advised and each is acting in
what it considers its own best interest; (iii) a reasonable time under
then-existing market conditions is allowed for exposure of the demised premises
on the open market; (iv) the rent is unaffected by concessions, special
financing amounts and/or terms, or unusual services, fees, costs or credits in
connection with the leasing transaction; (v) the demised premises are fit for
immediate occupancy and use "as is" and require no additional work by Landlord
and that no work has been carried out thereon by the Tenant, its subtenant, or
their predecessors in interest during the Term which was diminished the rental
value of the demised premises; (vi) in the event the demised premises have been
destroyed or damaged by fire or other casualty, they have been fully restored;
(vii) that the demised premises are to be let with vacant possession and subject
to the provisions of this Lease (assuming, however, that the Base Tax and
Expense Base Factor are the same as those specified in Article 3 hereof) for a
five-year term; and (viii) market rents then being charged for comparable space
in other similar office buildings in the same area. For example, if (i) the fair
market rent for the demised premises were $50 per square foot on the Review Date
if one assumed a Base Tax and Expense Base Factor which would be used in leases
generally entered into at the time such fair market rent is being determined,
(ii) escalations for Taxes and Expenses from the Base Tax and Expense Base
Factor contained in the Lease at the time when fair market rent is being
determined are $5 per square foot and (iii) the initial fixed annual rent
payable hereunder were $40 per square foot, then (a) the fair market rent for
the demised premises on the assumptions set forth above (including assumption
vii) would be $45 per square foot (i.e. the $50 per square foot less the $5 of
escalations) and the increase to bring Tenant's fixed annual rent to fair market
rent would be $5 per square foot. In rendering such decision and award, the
arbitrators shall not modify the provisions of this Lease. The decision and
award of the arbitrators shall be in writing and be final and conclusive on all
parties and counterpart copies thereof shall be delivered to each of said
parties. Judgment may be had on the decision and award of the
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arbitrators so rendered in any court of competent jurisdiction.
(d) Prior to the determination of the arbitrators, Tenant
shall pay as the fixed annual rent it is obligated to pay under this Lease the
amount set forth in the Review Notice and in the event the arbitrators determine
that the fixed annual rent payable pursuant to this Article 42 is greater than
that set forth in the Review Notice, then Tenant shall promptly pay to Landlord
the amount of its underpayment of fixed annual rent for the period commencing on
the Review Date, or if the arbitrators determine that the fixed annual rent
payable pursuant to this Article 42 is less than that set forth in the Review
Notice, then Tenant shall be entitled to a credit in the amount of its
overpayment for the period commencing on the Review Date against subsequent
payments of fixed annual rent due hereunder. In the event the arbitrators
determine that the rent set forth in Landlord's Review Notice is more than 110%
of the rent which should be payable to Landlord pursuant to the provisions of
this Article 42, Tenant shall be entitled to receive an additional credit
against fixed annual rent by reason of any overpayment of fixed annual rent paid
by Tenant under this paragraph (d) equal to interest on the amount of any such
overpayment to the extent paid by Tenant at the rate being paid by Republic
National Bank or, if Republic National Bank shall cease to exist, a Substitute
Bank (as defined in Article 22) on 30-Day Certificates of Deposit at the time
such overpayment is made from the date paid by Tenant to the date credit for
such overpayment is taken. In no event shall the fixed annual rent (as the same
may have been increased from time to time in accordance with this Article 42) be
reduced pursuant to this Article 42.
(e) Nothing contained in this Article 42 shall be deemed in
any way to alter or modify the provisions or Article 3 hereof.
42.04. (a) Tenant shall have an option (the "Option") to extend the
term of the Lease for one (1) additional term of five (5) years (the "Renewal
Term") commencing on the first day next succeeding the Expiration Date upon the
same terms, conditions and provisions as are provided for in the Lease
(including, without limitation, the same Base Tax and Expense Base Factor but
excluding this Section 42.04 and Section 2.07 hereof) except that the fixed
annual rent payable pursuant to Article 1 hereof for the Renewal Term shall be
the greater of (i) the fixed annual rent payable thereunder immediately prior to
the Expiration Date, or (ii) the fair market rent for the demised premises
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as of such Expiration Date determined in the manner provided in paragraph (c)
below.
(b) The Option may be exercised only by Tenant giving written
notice to Landlord of Tenant's exercise of said Option by Certified Mail, return
receipt requested, not more than fourteen (14) nor less than nine (9) months
prior to the Expiration Date of the Term (the "Exercise Notice"). Upon Tenant's
giving of the Exercise Notice, the term of this Lease shall be extended
automatically upon the terms and conditions herein specified without the
execution of an extension agreement or other instrument. It is expressly agreed
that Tenant shall have only one opportunity to exercise the Option. If Tenant
shall not give Landlord the Exercise Notice at the time and in the manner set
forth above, the Option shall terminate and be deemed waived by Tenant. Time is
of the essence as to the date for the giving of the Exercise Notice.
(c) After Landlord receives the Exercise Notice, and if in
Landlord's opinion an increase in the fixed annual rent for the Renewal Term is
warranted because the fair market rent for the demised premises has increased,
Landlord shall send Tenant a Review Notice stating the amount which, in
Landlord's opinion, shall constitute the fair market rent for the demised
premises as of the Expiration Date. The increased fixed annual rent set forth in
the Revised Rent Notice shall be effective as of the first date of the Renewal
Term. The provisions of Section 42.03 shall apply to any disputes as to the fair
market rent specified by Landlord in the Review Notice with respect to the
Renewal Term with all references to the Review Date being deemed to refer to the
first day of the Renewal Term.
42.05. Notwithstanding the foregoing provisions of this Article 42,
if on the date that Tenant exercises the Option, or if on any subsequent date up
to and including the Expiration Date, Tenant is in default in the performance of
any of the terms, conditions or provisions of this Lease and such default has
continued beyond the applicable grace period herein provided, than Tenant's
exercise of the Option and the extension of the Term of this Lease contemplated
thereby shall, at the option of Landlord exercised by written notice to Tenant,
be rendered null and void and shall be of no further force and effect and Tenant
shall have no further or additional right to exercise the Option, all of which
shall be deemed waived by Tenant.
42.06. If Tenant exercises the Option, or if the fixed annual rent
payable under Article 1 hereof is increased pursuant to the operation of
Sections 42.01 --
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42.03 hereof, then, at Landlord's request, Tenant agrees within ten (10) days
after such request is made to execute, acknowledge and deliver to Landlord an
instrument in form and substance reasonably satisfactory to Landlord, confirming
(i) the extension of the Term, (ii) the increased fixed annual rent payable
under this Lease pursuant to this Article 42, and (iii) the other modifications
provided for in this Article 42, but no such instrument shall be required in
order to make the provisions hereof effective.
ARTICLE 43
MISCELLANEOUS
43.01. Irrespective of the place of execution or performance, this
Lease shall be governed by and construed in accordance with the laws of the
State of New York.
43.02. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted.
43.03. Except as otherwise expressly provided in this Lease, each
covenant, agreement, obligation or other provision of this Lease on Tenant's
part to be performed shall be deemed and construed as a separate and independent
covenant of Tenant, not dependent on any other provision of this Lease.
43.04. All terms and words used in this Lease, regardless of the
number or gender in which they are used, shall be deemed to include any other
number and any other gender as the context may require.
43.05. Time shall be of the essence with respect to the exercise of
any option on the part of Tenant to extend the term of this Lease.
43.06. Except as otherwise provided herein whenever payment of
interest is required by the terms hereof it shall be at the Interest Rate.
43.07. If the demised premises or any additional space to be
included within the demised premises shall not be available for occupancy by
Tenant on the specific date hereinbefore designated for the commencement of the
term of this Lease or for the inclusion of such space for any reason
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whatsoever, then this Lease shall not be affected thereby but, in such case,
said specific date shall be deemed to be postponed until the date when the
demised premises or such additional space shall be available for occupancy by
Tenant, and Tenant shall not be entitled to possession of the demised premises
or such additional space until the same are available for occupancy by Tenant;
provided, however, Tenant shall have no claim against Landlord, and Landlord
shall have no liability to Tenant by reason of any such postponement of said
specific date, and the parties hereto further agree that any failure to have the
demised premises or such additional space available for occupancy by Tenant on
said specific date or on the Commencement Date shall in no way affect the
obligations of Tenant hereunder nor shall the same be construed in any way to
extend the Term. This Section 42.07 shall be deemed to be an express provision
to the contrary of Section 223-a of the Real Property Law of the State of New
York and any other law of like import now or hereafter in force.
43.08 In the event that Tenant is in arrears in payment of fixed
annual rent or additional rent hereunder, Tenant waives Tenant's right, if any,
to designate the items against which any payments made by Tenant are to be
credited, and Tenant agrees that Landlord may apply any payments made by Tenant
to any items it sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items against which any such payments shall be
credited.
43.09. All Exhibits referred to in this Lease are hereby
incorporated in this Lease by reference.
43.10. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns.
43.11. No remedy or election hereunder shall be deemed exclusive but
shall, whenever possible, be cumulative with all other remedies at law or in
equity.
43.12. Under no circumstances shall Tenant record a copy of this
Lease without Landlord's prior written consent.
67
<PAGE>
ARTICLE 44
INTENTIONALLY OMITTED
ARTICLE 45
PARTNERSHIP
45.01. The liability of each of the general partners of the
partnership Tenant shall be joint and several. The technical dissolution of
Tenant (or of any of the partnerships constituting Tenant) by reason of the
death, retirement, resignation, bankruptcy or adjudication of incompetency of
one or more partners, shall not affect this Lease or the liability thereunder of
the general partners, and Tenant agrees that the partnership shall nevertheless
continue as Tenant with respect to the remaining general partner(s).
45.02. Simultaneously with execution of this Lease by Landlord and
Tenant, Tenant has delivered to Landlord a list of the names and addresses of
all existing general partners of the partnership Tenant. In the event Tenant
admits any new general partner(s) (a "New General Partner"), Tenant agrees,
within thirty (30) days thereafter, to give notice to Landlord of that fact and
of the name and address (residence address, if an individual) of each New
General Partner(s), together with such reasonable proof as Landlord shall
require that all of such New General Partner(s) have in writing assumed
performance of Tenant's obligations under this Lease. The admission of any new
partner or withdrawal of any partners pursuant to paragraph 45.04 below shall
constitute a permitted assignment under Article 11 hereof.
45.03. In the event of a merger or consolidation with another firm,
Tenant agrees, within thirty (30) days thereafter, to give notice to Landlord of
that fact and all of the names and addresses (residence address, if individuals)
of the New General Partners of the merged or consolidated firm, together with
such reasonable proof as Landlord shall require that all of such New General
Partners
68
<PAGE>
have in writing assumed performance of Tenant's obligations under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed
this Lease as of the day and year first above written.
AETNA LIFE INSURANCE COMPANY,
Landlord
By:
------------------------------------
Vice-President
LA BRANCHE & CO., Tenant
By: /s/ [ILLEGIBLE]
------------------------------------
A Partner
69
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
AGREEMENT made as of the 1st day of May, 1993, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having an
office at 10 Rockefeller Plaza, New York, New York 10022 ("Landlord") and LA
BRANCHE & CO., a New York partnership, having an office at One Exchange Plaza,
New York, New York ("Tenant").
W I T N E S S E T H
WHEREAS:
(A) Landlord is the owner of premises located at One Exchange Plaza,
New York, New York ("Building").
(B) Tenant is the tenant of a portion of the twenty-sixth floor of
the Building ("Demised Premises") pursuant to that certain Agreement of Lease
("Lease"), dated as of January 6, 1984, between Aetna Life Insurance Company and
Tenant.
(C) Tenant has requested that Landlord extend the term of the Lease
and modify certain other provisions thereof and Landlord has agreed to do so
subject to and in accordance with the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained, the parties hereto hereby agree as follows:
<PAGE>
1. The term of the Lease, as modified hereby, is hereby extended to
April 30, 2003 upon all the terms, covenants and conditions of the Lease, except
as herein expressly set forth. Accordingly, all references in the Lease to the
"Expiration Date" shall be deemed to refer to April 30, 2003.
2. Effective from and after May 1, 1993,
(a) the fixed annual rent payable under the Lease, as modified
hereby, shall be in the amount of $103,922.00 which shall be payable in equal
monthly installments of $8,660.17;
(b) the Base Tax shall be the Taxes for the tax fiscal year
commencing on July 1, 1993 and ending on June 30, 1994; and
(c) the Expense Base Factor shall be the Expenses for the
calendar year commencing on January 1, 1993 and ending on December 31, 1993.
3. Effective from and after May 1, 1998, the fixed annual rent
payable under the Lease, as modified hereby, shall be increased to $119,910.00
which shall be payable in equal monthly installments of $9,992.50.
4. Promptly after the execution hereof by Landlord and Tenant,
Landlord shall perform the following work ("Landlord's Work") in the Demised
Premises, all of which shall be of a material, design, finish and color, if
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applicable, of the standard adopted by Landlord for the Building ("Building
Standard"):
(i) install new carpeting;
(ii) paint all walls and trim;
(iii) furnish and install new energy saving Con Edison
lighting fixtures and replace ceiling titles, where necessary;
(iv) clean existing curtains throughout and replace liners,
where necessary; and
(v) install a chair rail molding on all walls.
Tenant shall inform Landlord of its paint color and carpet
selection, chosen from the Building Standard selections, not later than ten (10)
days from the date of the execution of this Agreement by Landlord and Tenant.
5. Article 31 of the Lease is hereby modified to provide that all
notices to Landlord shall be addressed to Landlord as follows:
The Prudential Insurance Company of America
c/o Premisys Real Estate Service, Inc.
55 Broadway
New York, NY 10006
with copies to:
The Prudential Insurance Company of America
10 Rockefeller Plaza, 15th Floor
New York, New York 10020-1903
Attn: Jay Weiser,
Associate Regional Counsel
and
The Prudential Insurance Company of America
Three Gateway Center
100 Mulberry Street, 13th Floor
Newark, New Jersey 07102-4077
Attn: John Gorham, Director, Equity Investments
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<PAGE>
6. Articles 40 and 42 of the Lease are hereby deleted.
7. Tenant represents and warrants to Landlord that it has not dealt
with any broker in connection with this Agreement other than Edward S. Gordon
Company, Inc. and Sylvan Lawrence Company ("Brokers") and Landlord shall pay any
commission payable to the Brokers in connection with this Agreement pursuant to
separate agreements with the Brokers. Tenant shall indemnify Landlord and hold
Landlord harmless against all liability and expense (including, without
limitation, reasonable attorneys' fees) for any other brokerage commission or
finder's fee relating to this Agreement based on the alleged actions of Tenant
or its agents or representatives. Tenant's liabilities under such
indemnification shall survive any expiration or termination of the Lease, as
modified hereby.
8. Unless otherwise defined herein, the terms contained in this
Agreement shall have the respective meanings ascribed to them in the Lease.
9. The submission of this Agreement to Tenant shall not constitute
Landlord's agreement to execute and exchange this Agreement and is made subject
to Landlord's acceptance, execution and delivery thereof.
10. Except as expressly modified hereby, the Lease shall remain in
full force and effect in accordance with its terms and is hereby ratified and
confirmed.
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<PAGE>
11. This Agreement may not be modified or terminated orally and
shall be binding upon and inure to the benefit of the successors and, subject to
the provisions of Article 11 of the Lease, assigns of Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement
as of the day and year first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:_____________________________________
LA BRANCHE & CO.
By:_____________________________________
, General Partner
<PAGE>
Exhibit 10.2
SECOND AMENDMENT TO LEASE AGREEMENT
AGREEMENT made as of the ____ day of July, 1995 by and between Bank of
Communications a banking corporation organized and doing business pursuant to
the laws of the People's Republic of China, having an office at 55 Broadway, New
York, New York ("Landlord") and La Branche & Co., a New York general
partnership, having an office at 55 Broadway, New York, New York ("Tenant").
This Second Amendment is hereinafter referred to as the "Agreement".
W I T N E S S E T H:
WHEREAS, Landlord acquired fee title to the property located at 55
Broadway, New York, New York ("Property") from The Prudential Insurance Company
of America ("Prudential") on September 20, 1994 subject to an existing office
lease with Tenant;
WHEREAS, Tenant and Aetna Life Insurance Company, Prudential's predecessor
in interest, entered into that certain office lease agreement dated January 6,
1984, pursuant to which Tenant leased from Aetna a portion of the 26th floor in
the Property;
WHEREAS, on or about May 1, 1993 Tenant and Prudential entered into that
certain First Amendment to Lease Agreement ("First Amendment") which, among
other things, (i) extended the term of the lease to April 30, 2003, (ii)
modified the fixed annual rental amount, (iii) modified the Base Tax year for
calculating the real estate tax escalation chargeable to Tenant, (iv) modified
the Expense Base Factor for calculating the operating expense escalation
chargeable to Tenant, (v) required Prudential to perform certain specified work,
(vi) deleted certain lease provisions and (vii) otherwise ratified the subject
lease, as amended. The original lease agreement together with the First
Amendment are hereinafter referred to as the "Lease";
WHEREAS, Tenant has requested that Landlord extend the term of the Lease
and permit Tenant to relocate to a larger space, and to modify certain other
provisions of the Lease, and Landlord has agreed to do so subject to and in
accordance with the terms, provisions and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, promises,
conditions and provisions herein contained, the value and adequacy of which is
hereby acknowledged by both parties hereto, the parties hereto hereby agree as
follows:
1. The term "Demised Premises" contained in the "Witnesseth" paragraph of
the Lease is deleted and substituted with "the entire twenty-fifth (25th) floor
in the Property", which shall from the date of this Agreement forward constitute
the Demised Premises.
2. The fixed annual rent shall be paid by Tenant to Landlord pursuant to,
and in the amounts set forth on Schedule A of this Agreement, commencing upon
the Commencement Date, as hereinafter defined.
<PAGE>
3. The Lease shall be extended for a period of twelve (12) years,
commencing on the "Commencement Date" (as hereinafter defined) and expiring on
the twelfth anniversary of the Commencement Date (the "Expiration Date"). All
references to Commencement Date and to Expiration Date in the Lease shall be to
the Commencement Date and the Expiration Date as provided in this Agreement.
Notwithstanding anything to the contrary contained herein, Tenant agrees to
submit complete construction drawings, plans and specifications to the Landlord
within thirty (30) days from the date of execution of this Agreement. Landlord
shall have such drawings, plans and specifications reviewed and either approved
or have suggested revisions thereto within ten (10) days after receipt of the
drawings, plans and specifications. The "Commencement Date" shall be deemed to
be the date which is one hundred and twenty (120) days from the date on which
the Landlord approves the drawings, plans and specifications.
4. With respect to Article 3, paragraph 3.01 of the Lease:
(i) the term "Base Tax" shall mean the amount of Taxes due and payable in
tax year 1995/96;
(ii) the term "Tenant's Tax Share" shall mean 3.05%; and
(iii) the term "Taxes" shall be supplemented by adding to the definition
"any charge, fee or imposition which is assessed or payable as a result of the
Property being located within a Business Improvement District, as defined by the
Zoning Resolution of the City of New York".
5. With respect to Article 3, paragraph 3.02 of the Lease:
(i) the term "Expense Base Factor" shall mean the Expenses in calendar
year 1995; and
(ii) the term "Tenant's Expense Share" shall mean 3.05%.
6. With respect to Article 4, in those sections regarding multi-tenant
floors (i.e. ss.4.03) all references to proportionate payments or usage are
deemed deleted inasmuch as the Demised Premises shall, pursuant to this
Agreement, be comprised of an entire floor.
7. With respect to Article 6, after the references to Jones Lang Wootton,
Baco Partners, Exchange Plaza Partners and George A. Fuller Company, at each
location shall be deemed to be, effective the date of execution hereof, the
"Bank of Communications" and "Premisys Real Estate Services".
8. With respect to Article 24 of the original Lease and paragraph 7 of the
First Amendment, "Cushman & Wakefield, Inc." is added thereto as of the date of
this Agreement.
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<PAGE>
9. The following Articles, Exhibits and Schedules of the Lease are hereby
deleted in their entirety: 39, Schedule C, Schedule F, Exhibit 1 and Exhibit 2.
10. With respect to Article 41 of the Lease, the amount of the security
deposit referred to therein shall be changed from $24,648.00 to $76,500 and the
references to the posting of a Letter of Credit shall be modified to conform to
the terms of this Agreement, including, but not limited to, a requirement that
Tenant deliver to Landlord, simultaneously with the delivery of a signed
Agreement, an original and satisfactory clean and irrevocable stand-by Letter of
Credit as required hereunder and pursuant to Article 41 of the Lease, except as
amended herein.
11. A. Tenant, at Tenant's expense, subject to paragraph 1(3) below, shall
prepare a preliminary plan or set of plans and preliminary specifications (which
said preliminary plan or set of plans, as the case may be, and specifications
are hereinafter called the "Plans") which shall contain complete information
(including engineering required) and dimensions necessary and sufficient for the
construction and finishing of the Demised Premises. The Plans shall be submitted
by Tenant to Landlord upon execution and delivery of this Agreement. Any
revisions to the Plans reasonably required by Landlord shall be performed by
Tenant within five (5) business days after demand by Landlord.
In accordance with the Plans, Tenant, at Landlord's expense, subject to
the Cap (as hereinafter defined in Paragraph 1 of this Article) and except as
otherwise expressly specified in this Agreement, will cause its designated
contractor to make and complete in and to the Demised Premises the work and
installations (herein called "Tenant's Work") specified in Schedule B annexed
hereto (which unless otherwise specifically provided herein, shall include such
removal as may be required of existing installations).
Notwithstanding any provision of the Lease or this Agreement to the
contrary, any requests for revisions to the Plans or other notices to be given
to Tenant by Landlord pursuant to this Article may be given to Tenant's
designated representative, Steven C. Berger either (i) delivered personally or
(ii) sent by telecopy to (212) 344-1469 or (iii) sent by certified mail, return
receipt requested, or overnight courier, with receipt acknowledged, to: 55
Broadway, 26th Floor, New York, New York 10006.
B. The term "Work Cost" as used in this Article shall mean the
actual cost (including the cost of applicable insurance premiums and the cost of
engineering if any) to Landlord of Tenant's Work.
C. In all instances where Tenant is required to supply information
or authorizations with regard to Landlord's Work, tenant shall supply the same
within three (3) business days after written request therefor by Landlord.
D. Except as provided in this Article, Landlord shall not be
required to spend any money or to do any work to prepare the Demised Premises
for Tenant's
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<PAGE>
occupancy. The specification of Tenant's Work in Schedule B represents the limit
of Landlord's responsibilities in connection with the preparation of the Demised
Premises and except as so provided, Tenant shall take the Demised Premises
"AS-IS". Any other improvements, alterations or additions shall be performed by
Tenant at Tenant's sole cost and expense, but subject to all of the terms,
conditions and covenants of this Agreement.
E. Tenant has made and makes no representation of the date on which
it will substantially complete Tenant's Work and, Tenant acknowledges and agrees
that Landlord shall be under no penalty or liability to Tenant whatsoever by
reason of any delay in such performance and the Lease shall not be affected
thereby. The term of the Lease shall commence on the Commencement Date. Tenant
shall, at no cost to Landlord, execute a confirmatory letter establishing the
actual commencement date, promptly after Landlord's request for same.
F. Tenant shall be permitted to enter into the Demised Premises for
installation of its machinery, equipment and fixtures and performance of its
work, all as permitted by the Lease, prior to the Commencement Date at its sole
risk.
G. All work performed by Tenant, including the building air
conditioning installation, shall, upon installation, become Landlord's property
and shall be surrendered at the expiration or sooner termination of the term of
the Lease, in good condition, reasonable wear and tear excepted; provided,
however, that Tenant shall have the right to remove trade fixtures, equipment
and personal property. Tenant shall repair all damage occasioned by such
removal.
H. For the purposes of this Article, Tenant's Work shall be deemed
to be substantially completed when all major construction is completed as
determined by Tenant's architect (as hereinafter defined), life safety systems
operable, the Demised Premises is locked and secured, and there is beneficial
occupancy although minor items of construction or improvements which do not
unreasonably interfere with Tenant's ability to carry on its business in the
Demised Premises have not been completed. Landlord's construction representative
shall periodically inspect Tenant's Work to determine that (i) Tenant's Work is
being done in accordance with the Plans or (ii) any changes do not adversely
affect the structural components of the building or the building systems. If
Landlord's construction representative reasonably determines that Tenant's Work
does not comply with clauses (i) or (ii) above, Landlord's construction
representative may object to such work by notice to Tenant, which notice shall
specify the nature of such objection. Tenant agrees to promptly comply with and
remedy all objections raised by Landlord's construction representative,
I. 1. Notwithstanding anything contained to the contrary in this
Lease, the total cost of Tenant's Work which Landlord shall provide Tenant
without charge and for building installations performed prior to the
Commencement Date shall be FOUR HUNDRED FOUR THOUSAND DOLLARS ($404,000.00) (the
"Cap"). If the Work Cost shall exceed the Cap, Tenant expressly acknowledges and
agrees that it shall be solely responsible
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<PAGE>
for payment of all costs above the Cap. Tenant hereby expressly acknowledges
that, if the Work Cost is less than the Cap, the Landlord shall retain the
difference, it being understood that there shall be no rent concessions or
abatements in Tenant's favor.
2. In addition to the Cap, Landlord shall contribute an
additional $10,000 toward any renovations in the Demised Premises required by
the Americans with Disabilities Act ("ADA") or any other law or governmental
regulation. Tenant acknowledges and agrees that the common area bathrooms shall
comply with the ADA.
3. Landlord shall contribute an amount not to exceed $36,000
in addition to the Cap toward preparation of construction drawings, filing fees,
expediters fees and similar "soft" costs. All costs incurred by Tenant for
tenant changes shall be at Tenant's sole cost and expense.
J. Tenant hereby advises Landlord that the estimated total "hard"
cost of performing Tenant's Work is $600,000.00 (the "Total Cost"). Tenant also
advises Landlord that it is Tenant's intention to engage LCG Architects as its
architect. Landlord hereby acknowledges that LCG Architects is acceptable to
Landlord. Tenant covenants and agrees that if, for whatever reason, or for no
reason, it either does not engage LCG Architects as its architect or if LCG
Architects ceases to function as the Tenant's architect, any other architect
which Tenant may desire to engage, may only be engaged with the prior written
consent of the Landlord, which such consent shall not be unreasonably withheld
or delayed (as such, LCG Architects or such other architect selected by Tenant
and approved by Landlord, shall be hereinafter referred to as "Tenant's
Architect."). The sum(s) to be paid by the Landlord, pursuant to Article 1
hereof, shall be paid as follows:
1. Tenant's Architect shall periodically (but not more often
than once each month) certify in writing to both Tenant and to Landlord, (i) the
cost of Tenant's Work completed to the date of such certification less the cost
of Tenant's Work previously certified by Tenant's Architect as being completed
(the "Payment Amount"), (ii) an estimate as the amount of the Total Cost
remaining and (iii) that the Tenant's Work has been performed in accordance with
the Plans. Within five (5) business days from receipt of each such
certification, Landlord shall pay to Tenant the Payment Amount. In addition, in
the event that the cost of compliance of the Tenant's Work with the requirements
of the ADA is less than $10,000, then, upon certification that such compliance
has been completed, the Tenant's Architect shall also indicate the cost of such
compliance, and the Landlord shall pay such sum to the Tenant. If such
compliance cost exceeds the said $10,000, then Landlord shall pay the sum of
$10,000 to the Tenant.
2. Within five (5) business days after receipt by the Landlord
of a written statement (certified as true, complete and accurate by the
president or the Chief Executive Officer of the Tenant) from the Tenant
specifying the amount of the "soft" costs (for example, preparation of Plans,
filing fees, expediter fees and similar costs and fees) required for the
performance of Tenant's Work, Landlord shall deliver to Tenant its check
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<PAGE>
in such amount up to a maximum or $36,000. To the extent that the amount of
Tenant's soft costs is less than $36,000, the difference will be added to the
Cap.
3. Each time the Landlord advances monies to the Tenant
pursuant to paragraph J1., above, Tenant shall, in exchange for such monies,
deliver to the Landlord fully executed and acknowledged lien waivers from such
contractor, subcontractor, materialmen and suppliers (each a "Contractor") to be
paid, each lien waiver to indicate the amount which each such Contractor has
received to the date or such payment. Upon final completion of Tenant's Work,
Tenant shall promptly deliver final lien waivers from each Contractor.
K. Landlord shall provide Tenant with a list of four (4) approved
contractors from which such list, Tenant agrees to select one such contractor to
perform Tenant's Work. In the event Tenant is dissatisfied with the bids that
are submitted by the contractors on such list, then, Tenant shall promptly try
to obtain a contractor to perform Tenant's Work and shall submit the name,
address and such other information as may be reasonably required by Landlord
concerning such new general contractor. Landlord agrees that it will not
unreasonably withhold its consent to the utilization by Tenant of such general
contractor not on the aforementioned list of four (4) general contractors.
Tenant specifically acknowledges and agrees that the Tenant and the general
contractor shall not permit any mechanics liens or contractor/materialmen's
liens to be placed against the Building. Moreover, Tenant acknowledges and
agrees that any general contractor selected by Tenant to perform Tenant's Work
must provide the requisite property, public liability, workmen's compensation
and any and all other insurance required by law which such insurance shall be in
an amount at least equal to three (3) times the total amount of the cost of
Tenant's Work, which such insurance shall also name Landlord as an additional
insured.
12. Tenant presently occupies part of the 26th floor of the Building. If
and only if this Agreement is executed and unconditionally delivered by Landlord
and Tenant, then the original Expiration Date (as such term is defined in the
Lease) of the Lease shall be deemed to be that date (the "Lease Amended
Expiration Date") which is the day immediately preceding the Commencement Date
of this Agreement, unless sooner terminated pursuant to any of the terms,
covenants and conditions of the Lease or pursuant to law, upon all of the
executory terms, covenants and conditions contained in the Lease (including the
payment of fixed rent and additional rent at the rates set forth therein). In
the event that Tenant shall fail to vacate the 26th floor premises and surrender
same unto Landlord, in accordance with the applicable terms and provisions of
the Lease, on or before the Lease Amended Expiration Date, such failure shall be
deemed a default by Tenant in the performance of a material covenant hereunder,
upon which Landlord shall have the right to exercise any and all rights and
remedies afforded Landlord under the Lease, including, but not limited to, the
recovery of damages incurred by Landlord by reason of claims of any new or
prospective tenant of the aforesaid 26th floor premises arising from Tenant's
holding-over, or the termination of any new Lease with respect to said premises
by reason of Landlord's inability to timely deliver possession of said premises
to any new tenant. The foregoing
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<PAGE>
extension of the term of the Lease shall be of no force or effect in the event
that this Agreement is not executed and unconditionally delivered by Landlord
and Tenant for any reason whatsoever, including Landlord's willful refusal to
execute this Agreement.
13. Schedule F of the Lease is deemed deleted and replaced with Schedule C
annexed hereto and made a part hereof.
14. Except as expressly modified herein, all terms, conditions,
provisions, rights and obligations set forth in the Lease, as amended, shall
continue in full force and effect, and Tenant hereby ratifies said Lease, as
amended, and agrees and acknowledges that there are no defaults, defenses,
claims, counterclaims, set-offs or actions available against the Landlord or
Landlord's predecessors in interest arising out of said Lease, as amended. All
defined terms used herein, unless defined herein, shall have the same meaning
ascribed to them in the Lease.
15. The covenants, agreements, terms and conditions contained in this
Agreement shall bind and inure to the benefit of the parties hereto and except
as otherwise specifically provided in the Lease, as amended, their respective
legal successors and assigns.
16. Any and all notices, demands or other communications between Tenant,
Landlord and Landlord's construction representative shall be deemed effective
only if in writing, forwarded to the parties hereto at their respective
addresses set forth above, or hereinafter provided in writing to Landlord or to
Tenant, as the case may be. Such notices may be by telecopier or fax, personal
delivery, or certified mail return receipt requested and the effective date of
any such notice shall be the date on which such notice was received by the party
to whom it was addressed. Copies of any and all such notices, demands or other
written communication shall be forwarded to Tenant's counsel, Fulbright &
Jaworski, L.L.P., Attention: Thomas E. McHugh, Jr., Esq., 666 Fifth Avenue, New
York, New York 10103-3198 (Facsimile #(212) 752-5958) and copies of any and all
such notices demands or other written requests shall be forwarded to Landlord's
counsel, Parker Duryee Rosoff & Haft, P.C., Attention: Daniel B. Zanini, Esq.,
529 Fifth Avenue, New York, New York 10017 (Telecopier #(212) 972-9487).
17. Landlord and Tenant agree that, based solely on the Plans, Tenant's
Work does not include any sufficiently unique or unusual construction or
installation, such that Tenant would be obliged to remove any or all of Tenant's
Work at the termination of the Lease as modified by this Agreement. However, in
the event that the final plans and specifications, or any change orders thereto,
add any unique or unusual construction or installation, as reasonably determined
by the Landlord, Tenant hereby agrees that at the termination of the Lease as
modified by this Agreement, that it will, at its sole cost and expense, remove
such unique or unusual construction or installation(s).
18. This Agreement may not be changed orally but only in writing signed by
the party against whom enforcement is sought.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Second Amendment to Lease Agreement as of the day and year first above written.
BANK OF COMMUNICATIONS
/s/ [ILLEGIBLE]
----------------------------------------
By:
LA BRANCHE & CO.
/s/ [ILLEGIBLE]
----------------------------------------
By:
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THIRD AMENDMENT TO LEASE AGREEMENT
AGREEMENT made as of the 5th day of August, 1997 by and between Bank of
Communications a banking corporation organized and doing business pursuant to
the laws of the People's Republic of China, having an office at 55 Broadway, New
York, New York ("Landlord") and La Branche & Co., a New York general
partnership, having an office at 55 Broadway, New York, New York ("Tenant").
This Third Amendment is hereinafter referred to as the "Agreement".
W I T N E S S E T H:
WHEREAS, Landlord acquired fee title to the property located at 55
Broadway, New York, New York ("Property") from The Prudential Insurance Company
of America ("Prudential") on September 20, 1994 subject to an existing office
lease with Tenant;
WHEREAS, Tenant and Aetna Life Insurance Company, Prudential's predecessor
in interest, entered into that certain office lease agreement dated January 6,
1984, pursuant to which Tenant originally leased from Aetna a portion of the
26th floor in the Property;
WHEREAS, on or about May 1, 1993 Tenant and Prudential entered into that
certain First Amendment to Lease Agreement ("First Amendment") which, among
other things, (i) extended the term of the lease to April 30, 2003, (ii)
modified the fixed annual rental amount, (iii) modified the Base Tax year for
calculating the real estate tax escalation chargeable to Tenant, (iv) modified
the Expense Base Factor for calculating the operating expense escalation
chargeable to Tenant, (v) required Prudential to perform certain specified work,
(vi) deleted certain lease provisions and (vii) otherwise ratified the subject
lease, as amended;
WHEREAS, in July, 1995, Landlord and Tenant entered into that certain
Second Amendment to Lease Agreement ("Second Amendment") which, among other
things, (i) substituted the "Demised Premises" under the original 1984 lease
agreement (a portion of the twenty-sixth (26th) floor in the Property) with the
entire twenty-fifth (25th) floor in the Property, which 25th floor comprises the
Demised Premises at this time; (ii) modified the annual rent payable by Tenant
to Landlord; (iii) extended the term of the Lease for a period of twelve (12)
years from the Commencement Date, as defined; (iv) modified the base years and
Tenant's proportionate share amounts with respect to real estate tax and
operating expense escalations; (v) increased the amount of the security deposit
from $24,648.00 to $76,500; (vi) provided for the build-out of the twenty-fifth
(25th) floor, pursuant to Tenants' plans and specifications, as well as the
respective contributions of the parties toward the costs of the work; (vii)
deleted certain Lease provisions and (viii) otherwise ratified the subject
Lease, as amended. The original lease agreement together with the First
Amendment thereto and the Second Amendment thereto are hereinafter referred to
as the "Lease";
<PAGE>
WHEREAS, Tenant has requested that Landlord extend the Demised Premises
under the Lease to include the entire twenty-fourth (24th) floor in the Property
and to modify certain other provisions of the Lease, and Landlord has agreed to
do so subject to and in accordance with the terms, provisions and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, promises,
conditions and provisions herein contained, the value and adequacy of which are
hereby acknowledged by both parties hereto, the parties hereto hereby agree as
follows:
1. The term "Demised Premises" originally defined in the "Witnesseth"
paragraph of the original 1984 lease agreement, as modified by paragraph one of
the Second Amendment, referred to above, is now hereby further modified to
include, in addition to the twenty-fifth (25th) floor in the Property (but not
in substitution therefor) the entire twenty-fourth (24th) floor in the Property,
which together shall from the Possession Date, as hereinafter defined, forward
constitute the Demised Premises. The entire twenty-fourth (24th) floor in the
Property is hereinafter referred to as the "Additional Premises".
2. With respect to the Additional Premises only, the fixed annual rental
which shall be paid by the Tenant to the Landlord shall be as set forth in
Schedule A of this Agreement, commencing upon the Commencement Date, as
hereinafter defined. The total fixed annual rental which shall be paid by Tenant
to Landlord for the entire Demised Premises (twenty-fifth (25th) and
twenty-fourth (24th) floors combined) shall be as set forth in Schedule B of
this Agreement.
3. (a) Landlord and Tenant agree that the Expiration Date, as defined in
the Lease and confirmed in this Agreement, is January 6, 2008 for the entire
Demised Premises. With respect to the Additional Premises only, the Commencement
Date shall be deemed to be the date which is one-hundred eighty (180) days from
the date the Landlord delivers possession of the Additional Premises to Tenant
(the "Possession Date"). Landlord shall give Tenant three (3) days prior written
notice of the actual Possession Date. Tenant agrees to submit complete
construction drawings, plans and specifications pertaining to the build-out of
the twenty-fourth (24th) floor to the Landlord within sixty (60) days from the
date of execution of this Agreement. Landlord shall have such drawings, plans
and specifications reviewed and either approved or have suggested revisions
thereto within twenty (20) days after receipt of such drawings, plans and
specifications.
(b) If the Possession Date does not occur on or before September 15,
1997, as to which date time is of the essence, Tenant may, at its option,
terminate this Agreement and neither party shall have any right or obligation
arising herefrom other than those set forth in paragraph 8(b) below.
4. With respect to Article 3, paragraph 3.01 of the Lease, and paragraph 4
of the
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<PAGE>
Second Amendment and pertaining solely to the Additional Premises:
(i) the term "Base Tax" shall mean the amount of Taxes due and payable in
tax year 1997/98;
(ii) the term "Tenant's Tax Share" shall mean 3.05%; and
(iii) the term "Taxes" shall be supplemented by adding to the definition
"any charge, fee or imposition which is assessed or payable as a result of the
Property being located within a Business Improvement District, as defined by the
Zoning Resolution of the City of New York".
5. With respect to Article 3, paragraph 3.02 of the Lease and paragraph 5
of the Second Amendment and pertaining solely to the Additional Premises:
(i) the term "Expense Base Factor" shall mean the Expenses in calendar
year 1997; and
(ii) the term "Tenant's Expense Share" shall mean 3.05%.
6. With respect to Article 41 of the Lease and paragraph 10 of the Second
Amendment, the amount of the security deposit referred to therein shall be
changed from $76,500.00 to $153,000 and the references to the posting of a
Letter of Credit shall be modified to conform to the terms of this Agreement,
including, but not limited to, a requirement that Tenant deliver to Landlord,
simultaneously with the delivery of a signed Agreement, an original and
satisfactory clean and irrevocable stand-by Letter of Credit as required
hereunder and pursuant to Article 41 of the Lease, and paragraph 10 of the
Second Amendment, except as amended herein.
7. A. Tenant, at Tenant's expense, subject to paragraph 1 below, shall
prepare preliminary construction drawings, plans and preliminary specifications
(which said preliminary of drawings, plans, as the case may be, and
specifications are hereinafter called the "Plans") which shall contain complete
information (including engineering required) and dimensions necessary and
sufficient for the construction and finishing of the Additional Premises. The
Plans shall be submitted by Tenant to Landlord within sixty (60) days of the
execution and delivery of this Agreement. Any revisions to the Plans reasonably
required by Landlord shall be performed by Tenant within five (5) business days
after demand by Landlord.
In accordance with the Plans, Tenant, at Landlord's expense, subject to
the Cap (as hereinafter defined in Paragraph 1 of this Article) and except as
otherwise expressly specified in this Agreement, will cause its designated
contractor to make and complete in and to the Additional Premises the work and
installations (herein called "Tenant's Work") specified in the
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<PAGE>
Plans (which shall include the installation of an inter-connecting interior
staircase between the 25th floor and the Additional Premises). Notwithstanding
the foregoing, Landlord, at its sole expense, shall arrange for the interior
demolition within the Additional Premises prior to the Possession Date.
Notwithstanding any provision of the Lease or this Agreement to the
contrary, any requests for revisions to the Plans or other notices to be given
to Tenant by Landlord pursuant to this Article may be given to Tenant's
designated representative, Steven C. Berger either (i) delivered personally or
(ii) sent by telecopy to (212) 344-1469 or (iii) sent by certified mail, return
receipt requested, or overnight courier, with receipt acknowledged, to: 55
Broadway, 25th Floor, New York, New York 10006.
B. Intentionally omitted.
C. In all instances where Tenant is required to supply information
or authorizations with regard to Landlord's Work, Tenant shall supply the same
within three (3) business days after written request therefor by Landlord.
D. Except as provided in this Article, Landlord shall not be
required to spend any money or to do any work to prepare the Additional Premises
or the Demised Premises for Tenant's occupancy. Tenant shall take the Additional
Premises "AS-IS". Any other improvements, alterations or additions shall be
performed by Tenant at Tenant's sole cost and expense, but subject to all of the
terms, conditions and covenants of this Agreement.
E. Tenant has made and makes no representation of the date on which
it will substantially complete Tenant's Work and, Tenant acknowledges and agrees
that Landlord shall be under no penalty or liability to Tenant whatsoever by
reason of any delay in such performance and the Lease shall not be affected
thereby. The term of the Lease shall commence on the Commencement Date. Tenant
shall, at no cost to Landlord, execute a confirmatory letter establishing the
actual commencement date, promptly after Landlord's request for same.
F. Tenant shall be permitted to enter into the Additional Premises
for installation of its machinery, equipment and fixtures and performance of its
work, all as permitted by the Lease, on the Possession Date at its sole risk,
and provided all other provisions of the Lease, including without limitation,
insurance requirements, are satisfied.
G. All work performed by Tenant, including the building air
conditioning installation, shall, upon installation, become Landlord's property
and shall be surrendered at the expiration or sooner termination of the term of
the Lease, in good condition, reasonable wear and tear excepted; provided,
however, that Tenant shall have the right to remove trade fixtures, equipment
and personal property. Tenant shall repair all damage occasioned by such
removal.
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<PAGE>
H. Landlord's construction representative shall periodically inspect
Tenant's Work to determine that (i) Tenant's Work is being done in accordance
with the Plans or (ii) any changes do not adversely affect the structural
components of the building or the building systems. If Landlord's construction
representative reasonably determines that Tenant's Work does not comply with
clauses (i) or (ii) above, Landlord's construction representative may object to
such work by notice to Tenant, which notice shall specify the nature of such
objection. Tenant agrees to promptly comply with and remedy all objections
raised by Landlord's construction representative.
I. Notwithstanding anything contained to the contrary in the Lease,
or in this Agreement, the total cost of Tenant's Work which Landlord shall
provide Tenant without charge and for building installations performed prior to
the Commencement Date shall be THREE HUNDRED SIXTY THOUSAND DOLLARS
($360,000.00) (the "Cap"). If the total cost of Tenant's Work shall exceed the
Cap, Tenant expressly acknowledges and agrees that it shall be solely
responsible for payment of all costs above the Cap. Tenant hereby expressly
acknowledges that, if the Work Cost is less than the Cap, the Landlord shall
retain the difference, it being understood that there shall be no rent
concessions or abatements in Tenant's favor.
J. Tenant hereby advises Landlord that the estimated total "hard"
cost of performing Tenant's Work is $600,000.00 (the "Total Cost"). Tenant also
advises Landlord that it is Tenant's intention to engage LCG Architects as its
architect. Landlord hereby acknowledges that LCG Architects is acceptable to
Landlord. Tenant covenants and agrees that if, for whatever reason, or for no
reason, it either does not engage LCG Architects as its architect or if LCG
Architects ceases to function as the Tenant's architect, any other architect
which Tenant may desire to engage, may only be engaged with the prior written
consent of the Landlord, which such consent shall not be unreasonably withheld
or delayed (as such, LCG Architects or such other architect selected by Tenant
and approved by Landlord, shall be hereinafter referred to as "Tenant's
Architect"). The sum(s) to be paid by the Landlord, pursuant to Article 1
hereof, shall be paid as follows:
1. Tenant's Architect shall periodically (but not more often
than once each month) certify in writing to both Tenant and to Landlord, (i) the
cost of Tenant's Work completed to the date of such certification less the cost
of Tenant's Work previously certified by Tenant's Architect as being completed
(the "Payment Amount"), (ii) an estimate as the amount of the Total Cost
remaining and (iii) that the Tenant's Work has been performed in accordance with
the Plans. Within five (5) business days from receipt of each such
certification, Landlord shall pay to Tenant the Payment Amount.
2. Each time the Landlord advances monies to the Tenant
pursuant to paragraph J1., above, Tenant shall, in exchange for such monies,
deliver to the Landlord fully executed and acknowledged lien waivers from such
contractor, subcontractor, materialmen and suppliers (each a "Contractor") to be
paid, each lien waiver to indicate the
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<PAGE>
amount which each such Contractor has received to the date of such payment. Upon
final completion of Tenant's Work, Tenant shall promptly deliver final lien
waivers from each Contractor.
K. Landlord shall provide Tenant with a list of four (4) approved
contractors from which such list, Tenant agrees to select one such contractor to
perform Tenant's Work. In the event Tenant is dissatisfied with the bids that
are submitted by the contractors on such list, then, Tenant shall promptly try
to obtain a contractor to perform Tenant's Work and shall submit the name,
address and such other information as may be reasonably required by Landlord
concerning such new general contractor. Landlord agrees that it will not
unreasonably withhold its consent to the utilization by Tenant of such general
contractor not on the aforementioned list of four (4) general contractors.
Tenant specifically acknowledges and agrees that the Tenant and the general
contractor shall not permit any mechanics liens or subcontractor/materialmen's
liens to be placed against the Property. Moreover, Tenant acknowledges and
agrees that any general contractor selected by Tenant to perform Tenant's Work
must provide the requisite property, public liability, workmen's compensation
and any and all other insurance required by law which such insurance shall be in
an amount at least equal to three (3) times the total amount of the cost of
Tenant's Work, which such insurance shall also name Landlord as an additional
insured.
8. (a) Tenant specifically acknowledges that the Additional Premises are
presently the subject of a lease agreement with another tenant. Landlord desires
to terminate that agreement in order to make this Agreement effective. However,
the effectiveness of this Agreement is specifically and expressly conditioned on
the termination of the existing lease covering the Additional Premises. In the
event the existing lease agreement is not terminated, for any reason, then
Landlord shall so notify Tenant in writing, which notice shall be given within
thirty (30) days of the execution and delivery of this Agreement, in which case
this Agreement shall be deemed void ab initio and neither party shall have any
further right or obligation arising here from.
(b) If this Agreement is rendered a nullity because Tenant has
terminated the Agreement because Landlord failed to deliver possession of the
Additional Premises to Tenant on or before September 15, 1997 or if Landlord
fails to obtain a surrender of the existing lease pursuant to paragraph 8(a)
above, Landlord shall reimburse Tenant for any and all reasonable out-of-pocket
costs and expenses incurred by Tenant in connection with this Agreement and the
Additional Premises, including but not limited to attorney fees, architect's
fees and engineering fees.
9. Except as expressly modified herein, all terms, conditions, provisions,
rights and obligations set forth in the Lease, as amended, shall continue in
full force and effect, and Tenant hereby ratifies said Lease, as amended, and
agrees and acknowledges that there are no
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<PAGE>
defaults, defenses, claims, counterclaims, set-offs or actions available against
the Landlord or Landlord's predecessors in interest arising out of said Lease,
as amended. All defined terms used herein, unless defined herein, shall have the
same meaning ascribed to them in the Lease.
10. The covenants, agreements, terms and conditions contained in this
Agreement shall bind and inure to the benefit of the parties hereto and except
as otherwise specifically provided in the Lease, as amended, their respective
legal successors and assigns.
With respect to paragraph 16 of the Second Amendment pertaining to
Notices, copies of any notices, demands or communications to Tenant shall be
sent to Tenant's counsel, Fulbright & Jaworski LLP, Attention: Douglas Danzig,
Esq.
11. This Agreement may not be changed orally but only in writing signed by
the party against whom enforcement is sought.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Third Amendment to Lease Agreement as of the day and year first above written.
BANK OF COMMUNICATIONS
/s/ [ILLEGIBLE]
----------------------------------------
By:
LA BRANCHE & CO.
/s/ Steven C. Berger
----------------------------------------
By: Steven C. Berger
Managing Director
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<PAGE>
Exhibit 10.3
LABRANCHE & CO INC.
EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of the LaBranche & Co Inc. Equity Incentive
Plan (the "Plan") is to establish a flexible vehicle through which LaBranche &
Co Inc., a Delaware corporation (the "Company"), can offer equity-based
compensation incentives to eligible personnel of the Company and its
subsidiaries and affiliates (collectively, the "Firm") in order to attract,
retain and motivate such personnel and to further align the interests of such
personnel with those of the stockholders of the Company.
2. TYPES OF AWARDS. Awards under the Plan may be in the form of (a)
options to purchase shares of the Company's common stock, $0.01 par value
("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 (the "Code") and options which do not qualify as ISOs
("NQSOs"), (b) restricted shares of Common Stock, (c) restricted stock units
tied to shares of Common Stock, and (d) other equity-based awards related to
shares of Common Stock, including stock appreciation rights and dividend
equivalents, which the Committee determines to be consistent with the purposes
of the Plan.
3. ADMINISTRATION.
(a) COMMITTEE. The Plan shall be administered by the Board of
Directors of the Company (the "Board") or a committee or subcommittee thereof
(the "Committee") appointed by the Board. If a Committee is appointed, then,
unless the Board determines otherwise, its members shall consist solely of
individuals who qualify as "non-employee directors" under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as "outside directors" under Section 162(m) of the Code. If
for any reason the Committee does not satisfy the "non-employee director"
requirements of Rule 16b-3 or the "outside director" requirements of Section
162(m) of the Code, such non-compliance shall not affect the validity of the
awards, interpretations or other actions of the Committee. Notwithstanding
anything herein to the contrary, the Plan shall be administered solely by the
Board with respect to grants made to non-employee directors of the Company. To
the extent that the Plan is administered by the Board, the Board shall have all
the authority and responsibility granted to the Committee herein.
(b) AUTHORITY OF COMMITTEE. Subject to the limitations of the
Plan, the Committee, acting in its sole and absolute discretion, shall have full
power and authority to (i) select the persons to whom awards shall be made under
the Plan, (ii) make awards to such persons and prescribe the terms and
conditions of such awards, (iii) construe, interpret and apply the provisions of
the Plan and of any agreement or other document evidencing an award made under
the Plan, (iv) prescribe, amend and rescind rules and regulations relating to
the Plan, including rules governing its own operations, (v) correct any defect,
supply any omission and reconcile any inconsistency in the Plan, (vi) amend any
outstanding award in any respect, including, without limitation, to accelerate
the time or times at which the award becomes
<PAGE>
vested, unrestricted or may be exercised, (vii) carry out any responsibility or
duty specifically reserved to the Committee under the Plan, and (viii) make any
and all determinations and interpretations and take such other actions as may be
necessary or desirable in order to carry out the provisions, intent and purposes
of the Plan. A majority of the members of the Committee shall constitute a
quorum. The Committee may act by the vote of a majority of its members present
at a meeting at which there is a quorum or by unanimous written consent.
(c) INDEMNIFICATION. The Company shall indemnify and hold
harmless each member of the Committee and any employee or director of the Firm
to whom any duty or power relating to the administration or interpretation of
the Plan is delegated from and against any loss, cost, liability (including any
sum paid in settlement of a claim with the approval of the Board), damage and
expense (including legal and other expenses incident thereto) arising out of or
incurred in connection with the Plan, unless and except to the extent
attributable to such person's fraud or wilful misconduct.
4. SHARE LIMITATIONS. Subject to adjustment pursuant to Section 13
below, the maximum number of shares of Common Stock that may be issued under the
Plan is 4,687,500. For this purpose, the following shares shall be deemed not to
have been issued and shall be deemed to remain available for issuance: (a)
shares covered by the unexercised portion of an option or stock appreciation
right that terminates, expires or is canceled, (b) shares of restricted stock
that are forfeited or repurchased in accordance with the terms of the award, (c)
shares represented by restricted stock units or other-equity based awards that
are forfeited, canceled or otherwise terminated, and (d) shares that are
withheld in order to pay the purchase price for shares covered by any award or
to satisfy the tax withholding obligations associated with any award under the
Plan. Shares of Common Stock available for issuance under the Plan may be
authorized and unissued, held by the Company in its treasury or otherwise
acquired for purposes of the Plan. No fractional shares of Common Stock shall be
issued under the Plan. The maximum number of shares of Common Stock with respect
to which awards (including options and stock appreciation rights) may be granted
under the Plan to any employee in any calendar year shall be 500,000 shares.
5. ELIGIBILITY. Awards under the Plan may be made to such officers,
directors, employees (including prospective employees), consultants and other
individuals who may perform services for the Firm, as the Committee may select.
In making awards under the Plan, the Committee shall give consideration to the
functions and responsibilities of a potential recipient, the potential
recipient's previous and/or expected future contributions to the business of the
Firm and such other factors as the Committee deems relevant under the
circumstances.
6. STOCK OPTIONS. Subject to the provisions of the Plan, the Committee
may grant options to eligible personnel upon such terms and conditions as the
Committee deems appropriate. The terms and conditions of any option shall be
evidenced by a written option agreement or other instrument approved for this
purpose by the Committee.
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<PAGE>
(a) EXERCISE PRICE. The exercise price per share of Common
Stock covered by an option granted under the Plan may not be less than the fair
market value per share on the date of grant (or, in the case of an ISO granted
to an optionee who, at the time the option is granted, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or a "subsidiary" of the Company within the meaning of Section 424 of
the Code, 110% of fair market value).
(b) OPTION TERM. No option granted under the Plan may be
exercisable (if at all) more than ten years after the date the option is granted
(or, in the case of an ISO granted to a ten percent stockholder described in
Section 422 of the Code, five years).
(c) VESTING AND EXERCISE OF OPTIONS. The Committee may
establish such vesting and other conditions and restrictions on the exercise of
an option and/or upon the issuance of Common Stock in connection with the
exercise of an option as it deems appropriate. Subject to satisfaction of
applicable withholding requirements, once vested and exercisable, an option may
be exercised by transmitting to the Company (i) a notice specifying the number
of shares to be purchased and (ii) payment of the exercise price. The exercise
price of an option may be paid in cash and/or such other form of payment as the
Company may permit.
(d) RIGHTS AS A STOCKHOLDER. No shares of Common Stock shall
be issued in respect of the exercise of an option until full payment of the
exercise price and the applicable tax withholding obligation with respect to
such exercise has been made or provided for. The holder of an option shall have
no rights as a stockholder with respect to any shares covered by an option until
the date such shares are issued. Except as otherwise provided herein, no
adjustments shall be made for dividend distributions or other rights for which
the record date is prior to the date such shares are issued.
(e) BUY OUT AND SETTLEMENT. The Committee, on behalf of the
Company, may at any time offer to buy out any outstanding option on such terms
and conditions as the Committee shall establish.
7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS. Subject to the
provisions of the Plan, the Committee may award restricted shares of Common
Stock and/or restricted stock units tied to shares of Common Stock to eligible
personnel upon such terms and subject to such conditions and restrictions as the
Committee deems appropriate. The terms and conditions of any restricted stock or
restricted stock unit award shall be evidenced by a written agreement or other
instrument approved for this purpose by the Committee.
(a) PURCHASE PRICE. The purchase price payable for shares of
restricted stock and for shares issued pursuant to the settlement of a
restricted stock unit may be as low as zero, provided, however, that to the
extent required by applicable law, the purchase price per share shall be no less
than the par value of a share of Common Stock.
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<PAGE>
(b) RESTRICTIONS AND VESTING. The Committee may establish such
conditions and restrictions on the vesting of restricted stock and restricted
stock units and on the issuance of shares of restricted stock as it deems
appropriate, including, without limitation, conditions and restrictions based
upon continued service, the attainment of specified performance goals and/or
other factors and criteria deemed relevant for this purpose.
(c) RIGHTS AS A STOCKHOLDER. The holder of restricted stock
units awarded under the Plan shall have only the rights of a general unsecured
creditor of the Company and shall have no rights as a stockholder with respect
to the shares of Common Stock referenced by such units until such shares are
issued in the name of the holder following the satisfaction or expiration of the
vesting and other conditions and restrictions applicable to such units. The
recipient of restricted stock shall have the rights of a stockholder with
respect to the restricted stock, subject to any restrictions and conditions as
the Committee may impose.
(d) STOCK CERTIFICATES FOR RESTRICTED STOCK. Unless the
Committee elects otherwise, shares of restricted stock shall be evidenced by
book entries on the Company's stock transfer records pending the expiration of
restrictions thereon. If a stock certificate for shares of restricted stock is
issued, it shall bear an appropriate legend to reflect the nature of the
restrictions applicable to the shares represented by the certificate, and the
Committee may require that any or all such stock certificates be held in custody
by the Company until the applicable restrictions have lapsed. The Committee may
establish such other conditions as it deems appropriate in connection with the
issuance of certificates for shares of restricted stock, including, without
limitation, a requirement that the grantee deliver a duly signed stock power,
endorsed in blank, for the shares covered by the award.
(e) LAPSE OF RESTRICTIONS. If and when the vesting conditions
and other restrictions applicable to a restricted stock or restricted stock unit
award are satisfied or expire, a certificate for the shares covered or
referenced by the award, to the extent vested and free of restrictions, shall be
delivered to the holder. All legends shall be removed from said certificates at
the time of delivery except as otherwise required by applicable law.
8. OTHER EQUITY-BASED AWARDS. The Committee may grant other types of
equity-based awards, including, without limitation, the grant or offer for sale
of unrestricted shares of Common Stock and/or the grant of stock appreciation
rights or dividend equivalents, in such amounts and subject to such terms and
conditions as the Committee shall determine. Such awards may entail the transfer
of actual shares of Common Stock to Plan participants, or payment in cash or
otherwise of amounts based on the value of shares of Common Stock and may
include, without limitation, awards designed to comply with or take advantage of
the applicable local laws or jurisdictions other than the United States.
9. TERMINATION OF EMPLOYMENT OR SERVICE. Unless otherwise determined by
the Committee at grant or, if no rights of the recipient are thereby reduced,
thereafter, and subject to earlier termination
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<PAGE>
in accordance with the provisions hereof, the following rules apply with regard
to awards held by a recipient at the time of his or her termination of
employment or other service with the Firm:
(a) STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(i) TERMINATION BY REASON OF DEATH. If a
participant's employment or service terminates by reason of his or her death,
then any option or stock appreciation right held by the deceased participant
shall thereupon become fully vested and may be exercised by the deceased
participant's beneficiary at any time within one year from the date of death but
in no event after expiration of the stated term and, to the extent not exercised
within such time period, will be canceled.
(ii) TERMINATION BY REASON OF DISABILITY. If a
participant's employment or service is terminated by the Firm due to his or her
Disability (as hereinafter defined), then any option or stock appreciation right
held by the participant, to the extent exercisable on the date his or her
employment or service terminates, may be exercised by the participant at any
time within one year from the date his or her employment or service terminates
but in no event after expiration of the stated term, and, to the extent not
exercised within such time period, will be canceled. If the participant dies
during such one-year period, then the deceased participant's beneficiary may
exercise the option or stock appreciation right, to the extent exercisable by
the deceased participant immediately prior to his or her death, for a period of
one year following the date of death but in no event after expiration of the
stated term. "Disability" means a participant's absence from employment for at
least 180 days in any twelve month period as a result of his or her incapacity
due to physical or mental illness, as determined by the Committee.
(iii) TERMINATION FOR CAUSE. If a participant's
employment or service is terminated by the Firm for Cause (as hereinafter
defined) or if, at the time of a participant's termination, a ground for
termination for Cause exists, then, notwithstanding anything to the contrary
contained herein, any option or stock appreciation right held by the participant
(whether or not otherwise vested) shall immediately terminate and cease to be
exercisable. "Cause" means (A) in the case where there is no employment or
consulting agreement between the participant and the Firm or where such an
agreement exists but does not define "Cause" (or words of like import), a
termination classified by the Firm as a termination due to the participant's
dishonesty, fraud, insubordination, willful misconduct, refusal to perform
services or materially unsatisfactory performance of his or her duties, or (B)
in the case where there is an employment or consulting agreement between the
participant and the Firm, a termination that is or would be deemed for "cause"
(or words of like import) under such agreement.
(iv) OTHER TERMINATION. If a participant's employment
or service terminates for any reason (other than death, Disability or Cause or
at a time when Cause exists) or no reason, then any option or stock appreciation
right held by the participant, to the extent not then exercisable, shall
thereupon terminate. Any option or stock appreciation right held by the
participant which is exercisable at the time of such termination of employment
or service shall remain exercisable during the thirty-day period following
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<PAGE>
such termination of employment or service or, if sooner, until the expiration of
the stated term of the option or stock appreciation right and, to the extent not
exercised within such period, shall thereupon terminate.
(b) RESTRICTED STOCK, RESTRICTED STOCK UNITS AND OTHER-EQUITY
BASED AWARDS. Unless otherwise determined by the Committee, upon the termination
of a recipient's employment or service for any reason (including, without
limitation, death or Disability) or no reason, any shares of restricted stock,
restricted stock units or other equity-based awards (other than stock options
and stock appreciation rights covered by Section 9(a) hereof) which have not yet
become fully vested shall be forfeited, and any certificate therefor or book
entry with respect thereto or other evidence thereof shall be canceled.
10. FAIR MARKET VALUE. For purposes of the Plan, the fair market value
of a share of Common Stock, as of any date, shall be determined in good faith by
the Board in a uniform and consistent manner.
11. NON-TRANSFERABILITY. No stock option or stock appreciation right
granted under the Plan shall be transferable by the recipient other than upon
the recipient's death to a beneficiary designated by the recipient in a manner
acceptable to the Committee, or, if no designated beneficiary shall survive the
recipient, pursuant to the recipient's will or by the laws of descent and
distribution. All stock options and stock appreciation rights shall be
exercisable during the recipient's lifetime only by the recipient. Shares of
restricted stock and restricted stock units may not be transferred prior to the
date on which shares are issued or, if later, the date on which such shares have
vested and are free of any applicable restriction imposed hereunder. Except as
otherwise specifically provided by law or the provisions hereof or the
applicable award agreement or instrument, no award received under the Plan may
be transferred in any manner, and any attempt to transfer any such award shall
be void, and no such award shall in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person who shall be
entitled to such award, nor shall it be subject to attachment or legal process
for or against such person. Notwithstanding the foregoing, the Committee may
determine at the time of grant or thereafter that an NQSO is transferable in
whole or part to such persons, under such circumstances, and subject to such
conditions as the Committee may prescribe.
12. OTHER CONDITIONS. The Committee may impose such other conditions
with respect to the grant of awards or the issuance of shares of Common Stock
pursuant to the Plan, including, without limitation, conditions relating to the
application of federal or state securities laws or exchange requirements as it
deems necessary or advisable.
13. CAPITAL CHANGES; CHANGE IN CONTROL; MERGER.
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares for which awards may be granted under the Plan, the
maximum number of shares that may be covered by individual awards in any year,
the number and class of shares covered by each outstanding award and, if
applicable, the exercise price per share shall all be adjusted proportionately
or as otherwise
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<PAGE>
appropriate to reflect any increase or decrease in the number of issued shares
of Common Stock resulting from a split-up or consolidation of shares or any like
capital adjustment, or the payment of any stock dividend, and/or to reflect a
change in the character or class of shares covered by the Plan arising from a
readjustment or recapitalization of the Company's capital stock.
(b) CHANGE IN CONTROL. The Committee may provide in any award
agreement for the effect on the award of a "change in control" of the Company or
any of its subsidiaries or affiliates (as such term is defined by the Committee
in any such award agreement), including, without limitation, the acceleration of
the exercisability of, or the lapse of restrictions or deemed satisfaction of
goals with respect to, any outstanding awards.
(c) MERGER; CONSOLIDATION. Unless otherwise provided in the
applicable award agreement, in the event of a merger, consolidation, mandatory
share exchange or other similar business combination of the Company with or into
any other entity ("Successor Entity") or any transaction in which another person
or entity acquires all the issued and outstanding Common Stock, or all or
substantially all the assets of the Company, outstanding awards may be assumed
or an equivalent award may be substituted by the Successor Entity or a parent or
subsidiary of the Successor Entity.
(d) FRACTIONAL SHARES. In the event of any adjustment in the
number of shares covered by any option pursuant to the provisions hereof, any
fractional shares resulting from such adjustment shall be disregarded, and each
such option shall cover only the number of full shares resulting from the
adjustment.
(e) DETERMINATIONS FINAL. All adjustments under this Section
13 shall be made by the Committee, and its determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.
14. TAX WITHHOLDING. As a condition to the exercise of any award or the
delivery of any shares of Common Stock pursuant to any award or the lapse of
restrictions on any award, or in connection with any other event that gives rise
to a federal or other governmental tax withholding obligation on the part of the
Firm relating to an award, (a) the Firm may deduct or withhold (or cause to be
deducted or withheld) from any payment or distribution to a grantee whether or
not pursuant to the Plan or (b) the Firm shall be entitled to require that the
grantee remit cash to the Firm (through payroll deduction or otherwise), in each
case in an amount sufficient in the opinion of the Company to satisfy such
withholding obligation. If the event giving rise to the withholding obligation
involves a transfer of shares of Common Stock, then, unless the applicable award
agreement provides otherwise, at the discretion of the Committee, the grantee
may satisfy the withholding obligation described under this Section 14 by
electing to have the Company withhold shares of Common Stock (which withholding
will be at a rate not in excess of the statutory minimum rate) or by tendering
previously owned shares of Common Stock, in each case having a fair market value
equal
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<PAGE>
to the amount of tax to be withheld (or by any other mechanism as may be
required or appropriate to conform with local tax and other rules).
15. AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan, provided, however, that no such action may affect adversely the accrued
rights of the holder of any outstanding award without the consent of the holder.
Except as otherwise provided in Section 13, any amendment which would increase
the number of shares of Common Stock for which awards may be granted under the
Plan (in the aggregate or on an individual basis) or modify the class of
individuals eligible to receive awards under the Plan shall be subject to the
approval of the Company's stockholders. The Committee may amend the terms of any
agreement or certificate made or issued hereunder at any time and from time to
time, provided, however, that any amendment which would adversely affect the
accrued rights of the holder may not be made without his or her consent.
16. NO RIGHTS CONFERRED. Nothing contained herein shall be deemed to
give any individual any right to receive an award under the Plan or to be
retained in the employ or service of the Firm.
17. DECISIONS AND DETERMINATIONS TO BE FINAL. All decisions and
determinations made by the Board pursuant to the provisions hereof and, except
to the extent rights or powers under the Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee shall
be final, binding and conclusive.
18. GOVERNING LAW. All rights and obligations under the Plan and each
award agreement or instrument shall be governed by and construed in accordance
with the laws of the State of New York, without regard to its principles of
conflict of laws.
19. TERM OF THE PLAN. The Plan shall become effective on the date of
its adoption by the Board. Unless sooner terminated by the Board, the Plan shall
terminate on the tenth anniversary of the date of its adoption by the Board. The
rights of any person with respect to an award made under the Plan that is
outstanding at the time of the termination of the Plan shall not be affected
solely by reason of the termination of the Plan and shall continue in accordance
with the terms of the award (as then in effect or thereafter amended) and the
Plan.
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<PAGE>
Exhibit 10.4
LABRANCHE & CO INC.
ANNUAL INCENTIVE PLAN
1. PURPOSE. The purpose of the LaBranche & Co Inc. Annual Incentive Plan
(the "Plan") is to enable LaBranche & Co Inc. (the "Company") and its
subsidiaries and affiliates (collectively with the Company, the "Firm") to
attract, motivate and retain employees by allowing them to participate in an
annual profit-based compensation pool.
2. ADMINISTRATION.
(a) COMMITTEE. The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
whose members shall serve at the pleasure of the Board. Notwithstanding the
foregoing, the Board may, in its sole discretion, at any time and from time to
time, resolve to administer the Plan. In such event, the Board shall have all
the authority and responsibility granted to the Committee herein.
(b) AUTHORITY OF COMMITTEE. Subject to the limitations of the Plan,
the Committee, acting in its sole and absolute discretion, shall have full power
and authority to (i) select those employees (in addition to the managing
directors of the Firm) who shall participate in the Plan for any fiscal year of
the Company, (ii) prescribe the terms and conditions of bonus awards under the
Plan, (iii) construe, interpret and apply the provisions of the Plan, (iv)
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (v) correct any defect, supply any
omission and reconcile any inconsistency in the Plan, (vi) carry out any
responsibility or duty specifically reserved to the Committee under the Plan,
and (vii) make any and all determinations and interpretations and take such
other actions as may be necessary or desirable in order to carry out the
provisions, intent and purposes of the Plan. The determination of the Committee
on all matters relating to the Plan shall be final, binding and conclusive. The
Committee may allocate among its members and delegate to any person who is not a
member of the Committee any of its administrative responsibilities.
(c) INDEMNIFICATION. The Company shall indemnify and hold harmless
each member of the Committee and any employee or director of the Firm to whom
any duty or power relating to the administration or interpretation of the Plan
is delegated from and against any loss, cost, liability (including any sum paid
in settlement of a claim with the approval of the Board), damage and expense
(including legal and other expenses incident thereto) arising out of or incurred
in connection with the Plan, unless and except to the extent attributable to
such person's fraud or wilful misconduct.
3. PARTICIPATION. Participation in the Plan is limited to (a) managing
directors of the Firm and (b) such other employees of the Firm as the Committee,
acting in its sole discretion, may select.
<PAGE>
4. COMPENSATION POOL.
(a) ESTABLISHMENT AND ALLOCATION. The Firm will set aside thirty
percent (30%) of its Pre-Tax Income (as defined below), or such lower
percentage as the Committee may determine, for each fiscal year for the
payment of incentive bonuses to Plan participants. The amount set aside for
any fiscal year (the "Compensation Pool") shall be reduced by the amount of
compensation expense charged to the Company for such fiscal year attributable
to the Company's award to its employees of restricted stock units with
respect to shares of its common stock in connection with the initial offering
of its shares to the public. The Compensation Pool will be allocated among
the Plan participants in such amounts or percentages as the Committee, acting
in its sole discretion, shall determine, provided that not more than
twenty-five percent (25%) of the Compensation Pool may be allocated to any
participant for any fiscal year. In allocating the Compensation Pool for any
fiscal year, the Committee may take into account such factors and
considerations as it deems appropriate in any individual case. "Pre-Tax
Income" for any fiscal year shall mean the Company's "income before provision
for income taxes" for such fiscal year, as reported on the Company's audited
financial statements.
(b) TERMINATION OF EMPLOYMENT. If a participant's employment with
the Firm terminates for any reason before the end of a fiscal year of the
Company, the Committee shall have the discretion to determine whether (i)
such participant's share of the Compensation Pool shall be forfeited, (ii)
such participant's share of the Compensation Pool shall be reduced on a
pro-rata basis to reflect the portion of such fiscal year during which the
participant was employed by the Firm or (iii) to make such other arrangements
as the Committee deems appropriate in connection with the termination of such
participant's employment. The Committee, acting in its sole discretion, shall
determine whether and the manner in which the percentage of the Compensation
Pool for any fiscal year which is forfeited or otherwise not applied will be
allocated to participants and/or otherwise utilized for the benefit of the
Firm.
5. PAYMENT OF BONUS AMOUNT; DEFERRAL. A participant's share of the
Compensation Pool for any year will be payable by the Firm as soon as
practicable following the end of the fiscal year, in such manner and upon
such terms and conditions as the Committee may determine. Subject to such
terms and conditions as may be imposed by the Committee, each participant may
be permitted or required to defer receipt of part or all of any payments
otherwise due under the Plan.
6. GENERAL PROVISIONS.
(a) AMENDMENT; TERMINATION. The Board reserves the right at any time
and from time to time to modify, alter, amend, suspend, discontinue or terminate
the Plan in any respect whatsoever, provided that no such action may reduce the
amount or jeopardize the payment of any previously declared bonus that is then
owed by the Firm to a participant without such participant's consent.
(b) NONASSIGNABILITY; DESIGNATION OF BENEFICIARIES. Except as
otherwise specifically provided in this Section 6(a) with respect to the
disposition of a deceased participant's interest in the Plan (if any), no rights
of any participant or beneficiary under the Plan may be transferred, assigned or
otherwise disposed of, and any attempted transfer, assignment or other
disposition shall be void. A participant may designate a beneficiary who will be
entitled to receive
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<PAGE>
the amount, if any, that may be payable under the Plan as a result of the
participant's death by filing a written beneficiary designation with the Company
in a manner that is acceptable to the Committee. A beneficiary designation may
be replaced or revoked by filing a new beneficiary designation form in the same
manner. If a deceased participant is not survived by a designated beneficiary,
then any amount payable under the Plan on account of the deceased participant's
death will be paid to his or her estate for disposition in accordance with his
or her will or, if applicable, the laws of descent and distribution.
(c) PLAN CREATES NO EMPLOYMENT RIGHTS. Nothing in the Plan shall
confer upon any participant the right to continue in the employ or other service
of the Firm or affect the right of the Firm to terminate such employment or
other service at any time.
(d) ARBITRATION. Any dispute, controversy or claim between the Firm
and any participant arising out of or relating to or concerning the provisions
of the Plan shall be finally settled by arbitration in New York City before, and
in accordance with the rules then obtaining of, the New York Stock Exchange,
Inc. ("NYSE") or, if the NYSE declines to arbitrate the matter, the American
Arbitration Association (the "AAA") in accordance with the commercial
arbitration rules of the AAA. Prior to arbitration, all claims asserted by any
participant must first be submitted to the Committee.
(e) GOVERNING LAW. All rights and obligations under the Plan shall be
governed by and construed in accordance with the laws of the state of New York,
without regard to principles of conflict of laws.
(f) TAX WITHHOLDING. All bonus payments under the Plan will be subject
to applicable tax withholding requirements.
(g) RIGHT OF OFFSET. The Firm shall have the right to offset, against
the obligation to pay amounts to any participant under the Plan, any outstanding
amounts such participant then owes to the Firm and any amounts the Firm
otherwise deems appropriate pursuant to any tax equalization policy or
agreement.
3
<PAGE>
Exhibit 10.5
LaBRANCHE & CO.
, 1999
[Name]
[Address]
Dear _______:
We are pleased to offer you continued employment as a Managing Director
of LaBranche & Co., a New York limited partnership (the "Company"), or one or
more of its subsidiaries or affiliates (individually and collectively, the
"Firm") upon the terms and conditions set forth herein.
1. You shall be employed by the Firm, subject to the terms and
conditions of this Agreement, for the period commencing on the consummation of
the initial public offering of the equity securities of LaBranche & Co Inc. (the
"Commencement Date ") and, unless terminated earlier in accordance herewith,
ending on __________, 200 _ (the "Initial Employment Period") [3/5 years?].
After the Initial Employment Period (unless otherwise agreed by you and the Firm
in writing), there shall be no set term of employment. For purposes of this
Agreement, the term "Employment Period" means the period commencing on the
Commencement Date and ending on the date on which your employment by the Firm
terminates, and includes the Initial Employment Period.
2. During the Employment Period, you shall: (i) have such duties and
responsibilities as are assigned by the Firm from time to time; (ii) devote your
entire business time exclusively to the faithful, diligent and competent
performance of your duties and responsibilities; and (iii) be subject to the
direction, supervision and control of the Firm, including, but not limited to,
in connection with its securities business. You shall refrain from engaging in
any aspect of the securities business except on behalf of the Firm without the
prior approval of the New York Stock Exchange, Inc. (the "NYSE"). You shall be
subject to all terms and conditions of employment generally applicable to
comparable employees of the Firm, as established by the Firm from time to time.
3. [The Firm shall pay you an initial base salary that is not less than
your base salary in effect on the date hereof.] Such salary shall be paid in
accordance with the Firm's normal payroll practices and shall be subject to
review by the Firm from time to time. During the
<PAGE>
Employment Period, you shall be entitled to receive an annual bonus under the
Firm's Annual Incentive Plan in accordance with the terms thereof.
4. Subject to your satisfaction of any applicable eligibility
requirements, you shall be entitled to participate, in accordance with the terms
thereof, in all employee benefit plans and programs generally provided by the
Firm to its senior executives, including any health, disability, insurance or
other benefit plans or programs now existing or hereafter adopted.
5. You shall be reimbursed by the Firm for all reasonable business
expenses incurred by you in the performance of your duties hereunder for which
you submit expense statements or vouchers and such other supporting information
and substantiation as the Firm customarily requires of its employees.
6. You or the Firm may terminate your employment at any time for any
reason, or for no reason, by giving not less than ninety (90) days' prior
written notice of termination; provided, however, that the Firm may elect to
place you on paid leave for all or any part of such 90-day period; and provided
further that no advance notice need be given by the Firm to you in connection
with a termination of your employment for Cause or on account of Disability.
"Cause" means: (i) your breach of this Agreement, the Agreement Relating to
Noncompetition and Other Covenants dated as of the date hereof between you and
the Company (the "Noncompetition Agreement"), the Pledge Agreement dated as of
the date hereof between you and the Company, the Stockholders' Agreement dated
as of the date hereof among LaBranche & Co, Inc. and the individuals listed on
Schedules I and II thereto or any other written agreement between you and the
Firm; (ii) your violation of any Firm policy (including in respect of hedging or
confidential information) as in effect from time to time; (iii) your conviction
of, or pleading NOLO CONTENDERE to, a crime involving moral turpitude or a
felony; or (iv) your becoming subject to any "statutory disqualification" within
the meaning of Section 3(a)(39) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act "). "Disability" means your absence from employment
for at least 180 days in any 12-month period as a result of your incapacity due
to mental or physical illness, as determined by the Firm.
7. You shall comply with all laws applicable to the securities business
of the Firm and with all rules and regulations of the Securities and Exchange
Commission, the NYSE (and any other securities exchange of which the Firm is a
member), and any regulatory authority of a state in which the Firm is registered
as a broker-dealer. You shall provide the Firm with such written information as
may be necessary for the Firm to complete accurately all forms required by the
rules and regulations of the NYSE, the Securities and Exchange Commission or any
other regulatory organization to which the Firm is subject. You shall duly and
accurately file all required income tax returns and agree to retain Arthur
Andersen LLP (or such other nationally recognized firm of independent certified
public accountants as the Firm shall designate from time to time) to prepare
your federal, state and local personal income tax returns for all taxable
periods during the Employment Period. You shall acknowledge that you are an
agent and/or representative of the Firm in registration applications filed with
appropriate regulatory authorities, and you shall be subject to the applicable
approved person rules of the NYSE. You acknowledge that you are not subject to
any "statutory disqualification" within the meaning of Section 3(a)(39) of the
Exchange Act.
2
<PAGE>
8. The Firm may withhold from any and all amounts payable hereunder
such federal, state and local taxes as may be required to be withheld pursuant
to any applicable law or regulation.
9. Any dispute, controversy or claim between you and the Firm arising
out of or relating to or concerning the provisions of this Agreement, your
employment with the Firm or otherwise concerning any rights, obligations or
other aspects of your employment relationship in respect of the Firm, shall be
finally resolved in accordance with the provisions of Sections 9, 10 and 11 of
the Noncompetition Agreement. Without limiting the foregoing, you acknowledge
that a violation on your part of this Agreement would cause irreparable damage
to the Firm. Accordingly, you agree that the Firm shall be entitled to
injunctive relief for any actual or threatened violation of this Agreement in
addition to any other remedies it may have.
10. This agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of laws.
11. This Agreement shall supersede any and all prior understandings and
agreements between you and the Firm, whether written or oral, relating to the
subject matter hereof. Notices hereunder shall be delivered to the Firm at its
principal executive office directed to the attention of the Company's Chief
Executive Officer, and to you at your last address appearing in the Firm's
employment records.
12. You may not, directly or indirectly (including by operation of
law), assign your rights or obligations hereunder. The Company may at any time
and from time to time assign its rights and obligations hereunder, including,
without limitation, to any of its subsidiaries or affiliates (and have such
rights and obligations reassigned to it or to any other subsidiary or
affiliate). This Agreement shall inure to the benefit of and be binding upon the
Firm and its assigns. This Agreement may not be amended or modified other than
by a written agreement executed by you and the Company or its successors, nor
may any provision hereof be waived other than by a writing executed by you or
the Company or its successors.
13. If any provision of this Agreement is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining provisions shall not be
affected thereby. Except as expressly provided herein, this Agreement shall not
confer on any person other than you and the Firm any rights or remedies
hereunder.
3
<PAGE>
Please confirm your acceptance and agreement to the terms and
conditions hereof by signing and returning the enclosed duplicate of this letter
which shall thereupon constitute an agreement between you and the Company, on
its behalf and on behalf of its subsidiaries and affiliates.
Very truly yours,
LaBRANCHE & CO.
(on its behalf, and on behalf of its
subsidiaries and affiliates)
By: _____________________________________
Agreed & accepted
as of the date hereof:
By:________________________
4
<PAGE>
Exhibit 10.6
AGREEMENT RELATING TO
NONCOMPETITION AND OTHER COVENANTS
This AGREEMENT, dated as of June ___, 1999 (this "AGREEMENT"), is by
and between LaBranche & Co Inc., a Delaware corporation (the "COMPANY"), and the
individual whose name appears at the end of this Agreement ("COVENANTOR").
WHEREAS, in connection with Covenantor's participation in the Exchange
Agreement, dated as of June __, 1999, by and among the Company, LaB Investing
Co. L.L.C., a New York limited liability company ("INVESTING"), and the members
of Investing listed on Schedule A thereto (the "EXCHANGE AGREEMENT"), Covenantor
has agreed to certain obligations, inter alia, to keep information concerning
the Company, LaBranche & Co., a New York limited partnership ("LABRANCHE LP"),
and Investing (the Company, LaBranche LP and Investing being hereinafter
referred to collectively or individually, as applicable, as the "COMPANY
GROUP"), confidential, not to engage in competitive activities, not to solicit
listed companies (as defined below) or the Company Group's employees and to
cooperate with the Company Group in maintaining certain relationships following
the termination of Covenantor's employment with the Company Group.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Covenantor and the Company agree as follows:
1. CONFIDENTIAL INFORMATION. In the course of involvement in the
Company Group's activities or otherwise, Covenantor has obtained or may obtain
confidential information concerning the Company Group's businesses, strategies,
operations, financial affairs, organizational and personnel matters (including
information regarding any aspect of Covenantor's tenure as an officer, managing
director, partner, consultant or employee of the Company Group or of the
termination of such office, position, partnership, arrangement or employment),
policies, procedures and other non-public matters, or concerning those of third
parties. Such information ("CONFIDENTIAL INFORMATION") may have been or be
provided in written or electronic form or orally. In consideration of, and as a
condition to, continued access to Confidential Information, and without
prejudice to or limitation of any other confidentiality obligations imposed by
agreement or by law, Covenantor hereby undertakes to use and protect
Confidential Information in accordance with any restrictions placed on its use
or disclosure. Without limiting the foregoing, except as authorized by the
Company Group or as required by law, Covenantor may not disclose or allow
disclosure of any Confidential Information, or of any information derived
therefrom, in whatever form, to any person unless such person is a director,
officer, partner, employee, attorney or agent of the Company Group and, in
Covenantor's reasonable good faith judgment, has a need to know the Confidential
Information or information derived therefrom in furtherance of the business of
the Company Group. The foregoing obligations will survive, and remain binding
and enforceable notwithstanding any
<PAGE>
termination of Covenantor's employment with the Company Group and any settlement
of the financial rights and obligations arising from Covenantor's employment
with the Company Group. Without limiting the foregoing, the existence of, and
any information concerning, any dispute between Covenantor and the Company Group
shall constitute Confidential Information except that Covenantor may disclose
information concerning such dispute to the arbitrator or court that is
considering such dispute, or to Covenantor's legal counsel (provided that such
counsel agrees not to disclose any such information other than as necessary to
the prosecution or defense of the dispute).
2. NONCOMPETITION. (a) In view of Covenantor's importance to the
Company Group, Covenantor hereby agrees that the Company Group would likely
suffer significant harm from Covenantor's competing with the Company Group
during the Restricted Period. Accordingly, Covenantor hereby agrees that
Covenantor will not, without the written consent of the Company Group, during
the Restricted Period:
(1) form, or acquire a 5% or greater equity ownership, voting
or profit participation interest in, any Competitive Enterprise; or
(2) associate (including, but not limited to, association as
an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise and in connection with such association
engage in, or directly or indirectly manage or supervise personnel
engaged in, any activity
(i) which is similar or substantially related to any
activity in which Covenantor was engaged, in whole or in part,
at the Company Group, or
(ii) which calls for the application of the same or
similar specialized knowledge or skills as those utilized by
Covenantor in Covenantor's activities with the Company Group,
at any time during the one-year period immediately prior to
the Date of Termination (or, in the case of an action taken
during the Covenantor's period of employment with the Company
Group, during the one-year period immediately prior to such
action), and, in any such case, irrespective of the purpose of
the activity or whether the activity is or was in furtherance
of advisory, agency, proprietary or fiduciary business of
either the Company Group or the Competitive Enterprise.
(b) For purposes of this Agreement, "RESTRICTED PERIOD" means the
period commencing on the date hereof and ending on the later of (1) the fifth
anniversary of the date of consummation of the initial public offering of the
common stock of the Company (the "IPO DATE") or (2) the first anniversary of
Covenantor's Date of Termination.
(c) For purposes of this Agreement, a "COMPETITIVE ENTERPRISE" is a
business enterprise that (1) engages in any activity, or (2) owns or controls a
significant interest in any entity that engages in any activity, that, in either
case, competes anywhere with any business activity in
2
<PAGE>
which the Company Group is engaged. The activities covered by the previous
sentence include, without limitation, specialist services and/or securities
brokerage, sales, lending, custody, clearance, settlement or trading.
(d) For purposes of this Agreement, if Covenantor and the Company Group
are parties to a written agreement relating to Covenantor's employment with the
Company Group on or after the date hereof (the "EMPLOYMENT AGREEMENT"), "DATE OF
TERMINATION" means (i) if Covenantor's employment is terminated by the Company
Group for Cause or on account of Disability, as those terms are defined in the
Employment Agreement, the date of the Company Group's delivery of written notice
of termination to Covenantor, (ii) if Covenantor's employment is terminated by
the Company Group other than for Cause or on account of Disability, the date
that is ninety (90) days after the Company Group's delivery of written notice of
termination to Covenantor, or (iii) if Covenantor's employment is terminated by
Covenantor, the date that is ninety (90) days after Covenantor's delivery of
written notice of termination to the Company Group. If Covenantor and the
Company Group are not parties to an Employment Agreement, "DATE OF TERMINATION"
means the date Covenantor's employment with the Company Group is terminated, for
whatever reason.
3. NONSOLICITATION OF LISTED COMPANIES (a) Covenantor hereby agrees
that during the Restricted Period, Covenantor will not, in any manner, directly
or indirectly, (1) Solicit a listed company to transact business with a
Competitive Enterprise or to reduce or refrain from doing any business with the
Company Group, or (2) interfere with or damage (or attempt to interfere with or
damage) any relationship between the Company Group and a listed company.
(b) For purposes of this Agreement, the term "SOLICIT" means any direct
or indirect communication of any kind whatsoever, regardless of by whom
initiated, inviting, advising, encouraging or requesting any person or entity,
in any manner, to take or refrain from taking any action.
(c) For purposes of this Agreement, the term "LISTED COMPANIES" means
any company (1) for whom the Company Group acts as a specialist, (2) which is
seeking a listing of its stock on the New York Stock Exchange, Inc. (the
"NYSE"), or (3) which is identified by the Company Group as a potential listed
company (whether by new listing, transfer or other means) during the period of
Covenantor's employment by the Company Group.
4. NONSOLICITATION OF EMPLOYEES. Covenantor hereby agrees that during
the Restricted Period, Covenantor will not, in any manner, directly or
indirectly, Solicit any person who is an employee of the Company Group to resign
from the Company Group or to apply for or accept employment with any Competitive
Enterprise.
5. TRANSFER OF RELATIONSHIPS WITH LISTED COMPANIES. (a) During the
Coverage Period, Covenantor hereby agrees to take all actions and do all such
things as may be reasonably requested by the Company Group from time to time to
maintain for the Company Group the
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business, goodwill, and business relationships with any listed company with whom
Covenantor worked during the term of Covenantor's employment with the Company
Group.
(b) For purposes of this Agreement, the term "COVERAGE PERIOD" means,
(1) if Covenantor and the Company Group are parties to an Employment Agreement,
the 90-day period beginning on the date on which notice of Covenantor's
termination of employment is delivered to or by the Company Group by or to
Covenantor, or in the case of termination for Cause or on account of Disability,
the 90-day period beginning on the Date of Termination or (2) if Covenantor is
not a party to an Employment Agreement, the 90-day period beginning on the date
Covenantor's employment with the Company Group is terminated, for whatever
reason.
6. PRIOR NOTICE REQUIRED. Covenantor hereby agrees that prior to
accepting employment with any other person or entity during the Restricted
Period, Covenantor will provide such prospective employer with written notice of
the provisions of this Agreement, with a copy of such notice delivered
simultaneously to the Company Group.
7. COVENANTS GENERALLY. (a) Covenantor's covenants as set forth in the
preceding paragraphs of this Agreement are from time to time referred to herein
as the "COVENANTS." If any of the Covenants is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such Covenant shall be
deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining such Covenants shall not be
affected thereby; provided, however, that if any of such Covenants is finally
held to be invalid, illegal or unenforceable because it exceeds the maximum
scope determined to be acceptable to permit such provision to be enforceable,
such Covenant will be deemed to be modified to the minimum extent necessary to
modify such scope in order to make such provision enforceable hereunder.
(b) Covenantor understands that the provisions of the Covenants may
limit Covenantor's ability to earn a livelihood in a business similar to the
business of the Company Group.
(c) Covenantor acknowledges that a violation on Covenantor's part of
any of the Covenants would cause irreparable damage to the Company Group.
Accordingly, Covenantor agrees that the Company Group will be entitled to
injunctive relief for any actual or threatened violation of any of the Covenants
in addition to any other remedies it may have.
8. DAMAGES. (a) Covenantor acknowledges that Covenantor's compliance
with the Covenants is an important factor to the continued success of the
Company Group's operations and its future prospects. Covenantor and the Company
agree that if at any time during the Restricted Period, Covenantor were to
breach any of the Covenants set forth in this Agreement, the damages to the
Company Group would be material, but that the amount of such damages would be
uncertain and not readily ascertainable. Accordingly, Covenantor and the Company
agree that if, prior to the fifth anniversary of the IPO Date, Covenantor
breaches any of such Covenants, as determined by the Board of Directors of the
Company (the "BOARD") in its good faith judgment, the Company Group will be
entitled to receive immediately following such determination and written demand
therefor,
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and Covenantor will make, a cash payment as and for liquidated damages (the
"LIQUIDATED DAMAGES") in an amount equal to 75% of the aggregate value of the
common stock of the Company (based on the initial offering price of the common
stock of the Company) and any cash received by Covenantor in the LLC Exchange
(as defined in the Exchange Agreement).
The payment of any amount as Liquidated Damages will not be construed as a
release or waiver by the Company of the right to prevent the continuation of any
such violation of such Covenants in equity or otherwise. In addition, Covenantor
and the Company agree that it would be too speculative to attempt to determine
any amount of liquidated damages that would be applicable following the fifth
anniversary of the IPO Date, and that any damages payable as a result of any
breach following such date shall be determined without regard to this Section 8.
(b) Covenantor and the Company agree that the Liquidated Damages are
reasonable in proportion to the probable damages likely to be sustained by the
Company Group if Covenantor breaches at any time prior to the fifth anniversary
of the IPO Date any of the Covenants set forth in Sections 2, 3 and 4 hereof,
that the amount of actual damages to be sustained by the Company Group in the
event of such breach is incapable of precise estimation and that such cash
payments are not intended to constitute a penalty or punitive damages for any
purpose.
(c) Covenantor acknowledges and agrees that Covenantor's payment
obligations in respect of Liquidated Damages under this Agreement will be full
recourse obligations and will be secured pursuant to a Pledge Agreement in
substantially the form set forth as Exhibit A hereto (the "PLEDGE AGREEMENT").
Covenantor further acknowledges and agrees that upon expiration of the Pledge
Agreement, the Company Group will continue to be entitled to all available
remedies for any breach of this Agreement.
(d) Covenantor acknowledges and agrees that any cash payment of
Liquidated Damages pursuant to this Section 8 shall be in addition to, and not
in lieu of, any forfeitures of awards (required pursuant to the terms of any
such awards) that may be granted to Covenantor in the future under one or more
of the Company Group's compensation and benefit plans.
9. ARBITRATION. Subject to the provisions of Sections 10 and 11 hereof,
any dispute, controversy or claim between Covenantor and the Company Group
arising out of or relating to or concerning the provisions of this Agreement,
the Pledge Agreement, any agreement between Covenantor and the Company Group
relating to or arising out of Covenantor's employment with the Company Group or
otherwise concerning any rights, obligations or other aspects of Covenantor's
employment relationship in respect of the Company Group ("EMPLOYMENT RELATED
MATTERS"), 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 (the
"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 Group 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
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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 participant in
this Agreement 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 the Secretary of the Company as the
participant'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.
10. INJUNCTIVE RELIEF; SUBMISSION TO JURISDICTION. Notwithstanding the
provisions of Section 9, and in addition to its right to submit any dispute or
controversy to arbitration, the Company Group may bring an action or special
proceeding in a state or federal court of competent jurisdiction sitting in the
City of New York, 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 the Covenants, the Employment Agreement
(if applicable) or the Pledge Agreement, or to enforce an arbitration award,
and, for the purposes of this Section 10, Covenantor (i) expressly consents to
the application of Section 11 to any such action or proceeding, (ii) agrees that
proof will not be required that monetary damages for breach of the provisions of
the Covenants, the Employment Agreement (if applicable) or the Pledge Agreement
would be difficult to calculate and that remedies at law would be inadequate and
(iii) irrevocably appoints the Secretary of the Company as Covenantor's agent
for service of process in connection with any such action or proceeding, who
shall promptly advise Covenantor of any such service of process.
11. CHOICE OF FORUM. (a) COVENANTOR AND THE COMPANY HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO OR CONCERNING THIS AGREEMENT, THE EMPLOYMENT AGREEMENT (IF
APPLICABLE), THE PLEDGE AGREEMENT, OR ANY EMPLOYMENT RELATED MATTER THAT IS NOT
OTHERWISE ARBITRATED OR RESOLVED ACCORDING TO THE PROVISIONS OF SECTION 9
HEREOF. This includes any suit, action or proceeding to compel arbitration or to
enforce an arbitration award. This also includes any suit, action, or proceeding
arising out of or relating to any post-employment Employment Related Matters.
Covenantor and the Company acknowledge that the forum designated by this Section
11 has a reasonable relation to this Agreement, and to Covenantor's relationship
to the Company Group. Notwithstanding the foregoing, nothing herein shall
preclude the Company Group from bringing any action or proceeding in any other
court for the purpose of enforcing the provisions of Sections 9, 10 or 11.
(b) The agreement of Covenantor and the Company as to forum is
independent of the law that may be applied in the action, and Covenantor and the
Company agree to such forum even if the forum may under applicable law choose to
apply non-forum law. Covenantor and the
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Company hereby waive, to the fullest extent permitted by applicable law, any
objection which Covenantor or the Company now or hereafter may have to personal
jurisdiction or to the laying of venue of any such suit, action or proceeding in
any court referred to in Section 11(a). Covenantor and the Company undertake not
to commence any action arising out of or relating to or concerning this
Agreement in any forum other than a forum described in this Section 11.
Covenantor and the Company agree that, to the fullest extent permitted by
applicable law, a final and non-appealable judgment in any such suit, action or
proceeding in any such court shall be conclusive and binding upon Covenantor and
the Company Group.
12. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.
13. MISCELLANEOUS. (a) This Agreement shall not supersede any other
agreement, written or oral, pertaining to the matters covered herein, except to
the extent of any inconsistency between this Agreement and any prior agreement,
in which case this Agreement shall prevail.
(b) Notices hereunder shall be delivered to the Company Group at its
principal office directed to the attention of the Secretary of the Company, and
to Covenantor at Covenantor's last address appearing in the Company Group's
employment records.
(c) This Agreement may not be amended or modified, other than by a
written agreement executed by Covenantor and the Company or its successor, nor
may any provision hereof be waived other than by a writing executed by
Covenantor or the Company or its successor; provided, that any waiver, consent,
amendment or modification of any of the provisions of this Agreement will not be
effective against the Company Group without the written consent of the Chief
Executive Officer of the Company or its successor, or such individual's
designee. Covenantor may not, directly or indirectly (including by operation of
law), assign Covenantor's rights or obligations hereunder without the prior
written consent of the Chief Executive Officer of the Company or its successor,
or such individual's designee, and any such assignment by Covenantor in
violation of this Agreement shall be void. This Agreement shall be binding upon
Covenantor's permitted successors and assigns. Without impairing Covenantor's
obligations hereunder, the Company may at any time and from time to time assign
its rights and obligations hereunder to Investing or LaBranche LP (and have such
rights and obligations reassigned to it or to any other subsidiary or
affiliate). This Agreement shall be binding upon and inure to the benefit of the
Company Group and its assigns.
(d) Without limiting the provisions of Section 7(a) hereof, if any
provision of this Agreement is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability and the remaining provisions shall not be affected thereby.
(e) Except as expressly provided herein, this Agreement shall not
confer on any person other than the Company Group and Covenantor any rights or
remedies hereunder.
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(f) The captions in this Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
IN WITNESS WHEREOF, Covenantor, and the Company hereto have caused this
Agreement to be executed and delivered on the date first above written.
LaBRANCHE & CO INC.
By:
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
-----------------------------------------------
Name:
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Exhibit 10.7
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of June ___, 1999 (the "AGREEMENT"), is
by and between LaBranche & Co Inc., a Delaware corporation (the "COMPANY"), and
the individual whose name appears at the end of this Agreement ("PLEDGOR").
RECITALS
A. COVENANTS. Pledgor and the Company have entered into an Agreement
Relating to Noncompetition and Other Covenants (the "NONCOMPETITION AGREEMENT"),
dated as of the date hereof, in respect of, inter alia, Pledgor's obligations
(the "OBLIGATIONS") to keep information concerning the Company, LaBranche & Co.,
a New York limited partnership ("LABRANCHE LP"), and LaB Investing Co. L.L.C., a
New York limited liability company ("INVESTING") (the Company, LaBranche LP and
Investing being collectively or individually, as applicable, referred to herein
as the "COMPANY GROUP"), confidential, not to engage in competitive activities,
not to solicit listed companies or the Company Group's employees, and to
cooperate with the Company Group in maintaining certain relationships following
the termination of Pledgor's employment with the Company Group. In addition,
Pledgor has agreed to certain provisions regarding arbitration, choice of law
and choice of forum, injunctive relief and submission to jurisdiction with
respect to the enforcement of the Obligations.
B. THE PLEDGE. Pursuant to the Noncompetition Agreement, Pledgor has
agreed to pay a certain amount of liquidated damages (the "LIQUIDATED DAMAGES")
to the Company in respect of any breach by Pledgor of any of the Obligations. As
security for the timely payment of Liquidated Damages, Pledgor has agreed to
pledge to the Company Group shares (the "PLEDGED SHARES") of common stock of the
Company (the "COMMON STOCK"), or other collateral described below, all as set
forth herein.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. PLEDGE.
(a) Unless otherwise requested by Pledgor pursuant to the last
sentence of Section 1(b), as collateral security for the full and timely payment
of Liquidated Damages, Pledgor hereby delivers, deposits, pledges, transfers and
assigns to the Company, in form transferable by delivery, and creates for the
benefit of the Company a perfected first priority security interest in, Pledged
Shares with a Fair Market Value (as defined in Section l(d)) on the date hereof
equal to the amount of Liquidated Damages (and all certificates or other
instruments or documents evidencing the Pledged Shares) and, except as set forth
in Section 2(a), all proceeds thereof (together with any securities or property
to be delivered to the Company pursuant to Section 2(b) and, upon substitution
or delivery in accordance with Section l(b), any Substitute Collateral (as
defined in
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Section l(b)), "PLEDGED SECURITIES"). Pledgor herewith delivers to the Company
appropriate undated security transfer powers duly executed in blank (or other
documents deemed necessary or appropriate by the Company to give the Company
control (as defined in the Uniform Commercial Code of the State of New York (the
"UCC"))) (such transfer powers and other appropriate documents, the "CONTROL
DOCUMENTS") in respect of Pledged Securities, and will deliver Control Documents
for all Pledged Securities to be pledged hereunder from time to time.
(b) During the term of this Agreement, Pledgor may, upon the prior
written approval of the Board of Directors of the Company, substitute for
Pledged Securities readily marketable direct obligations of the United States,
any agency thereof, or any triple-A rated sovereign, shares of Common Stock, or
other collateral acceptable to the Board of Directors of the Company in its sole
and absolute discretion (collateral other than Pledged Shares, the "SUBSTITUTE
COLLATERAL") with a Fair Market Value on the date of substitution equal to or
greater than the Fair Market Value on such date of the Pledged Securities to be
released in exchange therefor. Upon such substitution, the Pledged Securities
replaced by such Substitute Collateral shall be released from the pledge
hereunder.
(c) If Pledgor is not prohibited from doing so by the terms of the
Exchange Agreement dated as of the date hereof among the Company Group and the
individuals listed on Schedule A thereto (the "EXCHANGE AGREEMENT"), the
Stockholders' Agreement dated as of the date hereof among the Company and the
individuals listed on Schedules I and II thereto (the "STOCKHOLDERS'
AGREEMENT"), any other written agreement with the Company, or any law or
regulation or Company policy (collectively, the "RESTRICTIONS"), this Agreement
shall not prohibit Pledgor from disposing of Pledged Shares, provided that such
disposition shall be made expressly subject to all of the Company's rights
hereunder, that the provisions of this Agreement shall (as described in Section
l(a)) apply to all proceeds of such disposition, and that such disposition shall
be permitted only if the Company shall have determined that such disposition
will not result in the loss for any period by the Company of the perfection of
its first priority security interest in such proceeds, and provided further,
that the proceeds of such disposition are cash, Tender or Exchange Offer
Consideration or a combination thereof, with an aggregate Fair Market Value on
the date of such disposition equal to or greater than the Fair Market Value on
such date of the Pledged Shares so disposed. Pledgor shall give the Company
prior written notice of any proposed transaction under this Section 1(c). For
purposes of this Agreement, "TENDER OR EXCHANGE OFFER CONSIDERATION" means the
consideration issuable for Pledged Shares pursuant to any tender or exchange
offer in which the Pledgor is not prohibited from participating by the
Restrictions.
(d) For purposes of this Agreement, the "Fair Market Value" of any
Pledged Security means, as of any date (1) in the case of a Pledged Security
that is a share of Common Stock, the average of the daily closing prices for a
share of Common Stock on the principal securities exchange or market on which
the Common Stock is traded for the 20 consecutive business days before the date
in question (the "AVERAGE CLOSING PRICE"), provided, however, that the Fair
Market Value of a share of Common Stock for purposes of determining the initial
amount to be pledged as of the date of this Agreement shall be deemed to be the
initial public offering price in the initial public offering by the Company of
its Common Stock; and provided, further, that in
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connection with any taking of ownership by the Company of Pledged Securities
under Section 3 hereof, the Average Closing Price shall be determined as the
average of the daily closing prices for a share of Common Stock on the principal
securities exchange or market on which the Common Stock is traded for the 20
consecutive business days before the date the Enforcement Notice (as hereafter
defined) was given, and (2) otherwise, the fair market value thereof as
determined in good faith by the Company. Any good faith determination by the
Company of the Fair Market Value of any Pledged Security will be binding on
Pledgor.
2. ADMINISTRATION OF SECURITY. The following provisions shall govern
the administration of Pledged Securities:
(a) So long as no Payment Event (as defined below) has
occurred and is continuing, Pledgor shall (subject to any restrictions imposed
under the Stockholders' Agreement) be entitled to vote Pledged Securities and to
exercise all of Pledgor's right under the Stockholders' Agreement in respect of
the Pledged Shares, and to receive and retain all regular quarterly cash
dividends and distributions and, except as set forth in Section 2(b) below,
other distributions thereon and to give consents, waivers and ratifications in
respect thereof. As used herein, a "PAYMENT EVENT" shall mean the failure by
Pledgor to make any payment of Liquidated Damages upon demand by the Company
therefor as provided in the Noncompetition Agreement.
(b) If Pledgor becomes entitled to receive, or receives, any
certificate representing Pledged Securities (or other security that may succeed
Pledged Securities or any security issued as a dividend or distribution in
respect of Pledged Securities) in respect of any stock split, reverse stock
split, stock dividend, spinoff, split up, merger or other combination, exchange
or distribution in connection with any reclassification, increase or reduction
of capital, in each case, with respect to Pledged Securities, Pledgor agrees to
accept the same as the Company's agent and to hold the same in trust on behalf
of and for the benefit of the Company and to deliver the same forthwith to the
Company in the exact form received, with the endorsement of Pledgor when deemed
necessary or appropriate by the Company of undated security transfer powers duly
executed in blank, to be held by the Company, subject to the terms of this
Agreement, as additional collateral security for Liquidated Damages.
(c) Pledgor hereby agrees that the Company is authorized to
hold Pledged Securities through one or more custodians. The Company and its
agents (and its and their assigns) shall have no obligation in respect of
Pledged Securities, except to hold and dispose of the same in accordance with
the terms of this Agreement. In the event that Pledgor substitutes cash for
Pledged Securities as provided in Section l(b) or 1(c), the Company shall
determine in its sole discretion the manner in which such cash shall be invested
during the term of this Agreement.
(d) Pledgor agrees with the Company that: (1) Pledgor will
not, and will not purport to, grant or suffer liens or encumbrances against
(excluding for such purpose the Stockholders' Agreement), or except as provided
in Section 1(c), sell, transfer or dispose of, any Pledged Securities other than
to or in favor of the Company; (2) the Company is authorized, at any time and
from time to time, to file financing statements and give notice to third parties
regarding
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Pledged Securities without Pledgor's signature to the extent permitted by
applicable law, to transfer all or any part of Pledged Securities to the
Company's name or that of its nominee, and, subject to the provisions of Section
2(a), to exercise all rights as if the absolute owner thereof; and (3) Pledgor
has provided the Company with Pledgor's true legal name and principal residence,
and Pledgor will not change Pledgor's name without 30 days' prior written notice
to the Company
(e) Subject to the earlier disposition and application of
Pledged Securities pursuant to this Agreement following a Payment Event, Pledged
Securities shall be released from the pledge hereunder, and the lien hereby
created in such Pledged Securities shall simultaneously be released, upon the
earliest to occur of (1) Pledgor's death, (2) payment in cash or other
satisfaction by Pledgor of all Liquidated Damages, or (3) the fifth anniversary
of the IPO Date (as defined in the Noncompetition Agreement), and all remaining
Pledged Securities shall be thereupon released from the pledge hereunder and
this Agreement shall terminate. Notwithstanding the foregoing, no Pledged
Securities shall be released from the pledge hereunder pursuant to this Section
2(e), if there are one or more pending disputes between Pledgor and the Company
as to the occurrence of a Payment Event or as to the right of the Company or the
Company Group to exercise its remedies under this Agreement or the
Noncompetition Agreement, including realization against Pledged Securities in
accordance with Section 3 hereof, and this Agreement shall not terminate until
the resolution of all such disputes.
(f) The Company shall immediately upon request by Pledgor
execute and deliver to Pledgor such instruments, deeds, transfers, assurances
and agreements, in form and substance as Pledgor shall reasonably request,
including the withdrawal or termination of any financing statements and
amendments thereto, or the filing, withdrawal, termination or amendment of any
other document required under applicable law to evidence the termination of the
security interest created hereunder with respect to any securities that are
released from the pledge hereunder in accordance with the provisions of this
Agreement.
3. REMEDIES IN CASE OF A PAYMENT EVENT. If a Payment Event has occurred
and is continuing, the Company shall have the rights and remedies of a secured
party under Article 9 of the UCC. To the extent required and permitted by
applicable law, the Company will give Pledgor notice of the time and place of
any public sale or of the time after which any private sale or other disposition
of Pledged Securities is to be made, by sending notice at least three days
before the time of sale or disposition, which Pledgor hereby agrees is
reasonable. The Company need not give such notice if not required by the UCC.
Pledgor acknowledges the possibility that the public sale of some or all Pledged
Securities by the Company may not be made without a then existing and effective
registration statement under the Securities Act of 1933, as amended. Pledgor
acknowledges and agrees with the Company that the Company has no affirmative
obligation to prepare or keep effective any such registration statement and
agrees that at any private sale of Pledged Securities may be sold at a price
that is less than the price which might have been obtained at a public sale or
that is less than the aggregate outstanding amount of Liquidated Damages. For so
long as Pledged Securities consist of securities of a type customarily sold in a
recognized market or which are the subject of widely distributed standard price
quotations, the Company may, as its remedy hereunder, take ownership of such
number of Pledged Securities as are necessary (based upon the Fair Market
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Value thereof) to satisfy the then unpaid portion of Liquidated Damages (without
payment of any cash consideration) by giving written notice to Pledgor (the
"ENFORCEMENT NOTICE"). Effective upon the giving of the Enforcement Notice, and
without further action on the part of the parties to this Agreement, the Company
shall be deemed to have (1) taken ownership and disposed of the lesser of (A)
all Pledged Securities or (B) such whole number of Pledged Securities as has a
Fair Market Value at least equal to the then unpaid Liquidated Damages; and (2)
received proceeds in the amount of the Fair Market Value of such Pledged
Securities and applied such proceeds to the payment of any then unpaid
Liquidated Damages. Any excess net proceeds from the deemed sale of such Pledged
Securities will continue to be held as Pledged Securities under this Agreement
until returned in accordance with Section 2(e). Nothing in this Agreement,
however, shall require the Company to take ownership of Pledged Securities in
accordance with this Section 3 in order to satisfy Pledgor's obligation to pay
Liquidated Damages.
4. PLEDGOR'S OBLIGATIONS NOT AFFECTED. Except as provided in Section
9(b), the obligations of Pledgor under this Agreement shall remain in full force
and effect without regard to, and shall not be impaired or affected by (a) any
subordination, amendment or modification of or addition or supplement to this
Agreement, the Noncompetition Agreement, the Exchange Agreement or any
assignment or transfer thereof; (b) any exercise or non-exercise by the Company
of any right, remedy, power under or in respect of this Agreement, the
Noncompetition Agreement, the Exchange Agreement or any waiver of any such
right, remedy, power or privilege; (c) any waiver, consent, extension,
indulgence or other action or inaction in respect of this Agreement, the
Noncompetition Agreement, the Exchange Agreement or any assignment or transfer
of any thereof; (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like, of the Company, LaBranche LP
or Investing whether or not Pledgor shall have notice or knowledge of any of the
foregoing; (e) any substitution of collateral pursuant to Sections l(b) or 1(c);
or (f) any other act or omission to act or delay of any kind by Pledgor, the
Company or any other person or any other circumstance whatsoever which might,
but for the provisions of this clause (f), constitute a legal and equitable
discharge of Pledgor's obligations hereunder.
5. ATTORNEYS-IN-FACT. Each of the Company, George M.L. LaBranche, IV
and James G. Gallagher, from time to time, acting separately, are hereby
appointed the attorneys-in-fact of Pledgor for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
that the Company, George M.L. LaBranche, IV or James G. Gallagher reasonably may
deem necessary or advisable to accomplish the purposes hereof, which
appointments as attorneys-in-fact are irrevocable as ones coupled with an
interest.
6. TERMINATION. Upon the earliest to occur of the events set forth in
Section 2(e) hereof, this Agreement shall terminate and the Company shall return
to Pledgor the remaining Pledged Securities, except as otherwise provided in
such Section.
7. NOTICES. All notices or other communications required or permitted
to be given hereunder shall be delivered as provided in the Noncompetition
Agreement.
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<PAGE>
8. NO THIRD PARTY BENEFICIARIES. Except as expressly provided herein,
this Agreement shall not confer on any person other than the Company and Pledgor
any rights or remedies hereunder.
9. MISCELLANEOUS.
(a) This Agreement and Section 8 of the Noncompetition
Agreement contain the entire understanding and agreement between Pledgor and the
Company with respect to the matters expressly covered therein and supersede any
other agreement, written or oral, pertaining to such matters.
(b) This Agreement may not be amended or modified other than
by a written agreement executed by Pledgor and the Company or its successors,
nor may any provision hereof be waived other than by a writing executed by
Pledgor or the Company or its successors; provided, that any waiver, amendment
or modification of any of the provisions of this Agreement will not be effective
against the Company without the written consent of the Chief Executive Officer
of the Company or its successors, or such individual's designee. Pledgor may
not, directly or indirectly (including by operation of law), assign Pledgor's
rights or obligations hereunder without the prior written consent of the Chief
Executive Officer of the Company or its successors, or such individual's
designee, and any such assignment by Pledgor in violation of this Agreement
shall be void. This Agreement shall be binding upon Pledgor's permitted
successors and assigns. Without impairing Pledgor's obligations hereunder, the
Company may at any time and from time to time assign its rights and obligations
hereunder to any of its subsidiaries or affiliates (and have such rights and
obligations reassigned to it or to any other subsidiary or affiliate). This
Agreement shall be binding upon and inure to the benefit of the Company Group
and its assigns.
(c) If any provision of this Agreement is finally held to be
invalid, illegal or unenforceable (whether in whole or in part), such provision
shall be deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability and the remaining provisions shall
not be affected thereby.
(d) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS, AND SHALL BE SUBJECT TO THE PROVISIONS OF SECTIONS 9, 10
AND 11 OF THE NONCOMPETITION AGREEMENT.
(e) The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
LaBRANCHE & CO INC.
By:
---------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
-------------------------------------------
Name:
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<PAGE>
Exhibit 10.8
LABRANCHE & CO INC.
STOCKHOLDERS' AGREEMENT
DATED AS OF AUGUST __, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I LIMITATIONS ON TRANSFER OF SECURITIES....................................3
Section 1.1. General.........................................................3
Section 1.2. General Transfer Restrictions...................................3
Section 1.3. Compliance with Certain Restrictions............................3
Section 1.4. Transfers Following Death or Disability.........................4
Section 1.5. Transfers with the Consent of Board of Directors................4
Section 1.6. Transfers to Permitted Transferees..............................4
Section 1.7. Compliance with Law and Regulations.............................4
Section 1.8. Legend on Certificates; Entry of Stop Transfer Orders...........4
Section 1.9. Certificates to be Held by Company..............................5
Section 1.10. Transfers in Violation of Agreement Void........................6
ARTICLE II VOTING AGREEMENT.........................................................6
Section 2.1. Voting by Stockholders..........................................6
Section 2.2. Designation of Successors.......................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES...........................................7
Section 3.1. Representations and Warranties of the Stockholders..............7
ARTICLE IV DEFINITIONS..............................................................8
ARTICLE V MISCELLANEOUS...........................................................10
Section 5.1. Standstill Provisions..........................................10
Section 5.2. Expenses.......................................................11
Section 5.3. Filing of Schedule 13D or 13G..................................11
Section 5.4. Notices........................................................12
Section 5.5. Term of the Agreement..........................................12
Section 5.6. Amendments; Waivers............................................13
Section 5.7. Adjustment upon Changes in Capitalization; Adjustments upon
Changes of Control; Representatives, Successors and Assigns....13
Section 5.8. Disinterested Board Members to Make Determinations.............14
Section 5.9. Severability...................................................14
Section 5.10. Representatives, Successors and Assigns........................14
Section 5.11. Governing Law..................................................14
Section 5.12. Specific Performance...........................................14
Section 5.13. Arbitration....................................................15
Section 5.14. Submission to Jurisdiction.....................................15
Section 5.15. Further Assurances.............................................15
Section 5.16. Execution in Counterparts......................................16
Section 5.17. Entire Agreement...............................................16
</TABLE>
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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) the Employee Stockholders (as defined below) listed on
Schedules I and II hereto. The Exchanging Members and Employee Stockholders 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 Exchanging Members have entered into an
Exchange Agreement, dated as of the date hereof (the "EXCHANGE AGREEMENT"),
pursuant to which 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 (or, in
the case of Steven C. Berger, Paul Redmond and Robert W. Keelips, III, 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, the Exchanging Members and the Employee
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"); and
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. 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: (a) the terms
<PAGE>
of this Agreement, (b) the restrictions on the transfer of the Company's
securities contemplated by the Plan of Incorporation of LaBranche LP, dated as
of June 10, 1999, (c) in the case of employees of the Company Group, any trading
restrictions generally applicable to employees of the Company Group, (d) the
terms of any "lock-up" agreement required by the underwriters of the IPO and (e)
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.
Section 1.2. GENERAL TRANSFER RESTRICTIONS.
(a) Each Stockholder 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.
(b) Notwithstanding the provisions set forth in Section 1.2(a)
above, each Stockholder agrees that for so long as such Stockholder remains in
the employ of any member of the Company Group, such Stockholder 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 (1) beneficially owned
by such Stockholder immediately after the consummation of the IPO and (2)
beneficial ownership of which is acquired by such Stockholder thereafter, with
no reduction in such aggregate number for Covered Securities disposed of by such
Stockholder.
Section 1.3. 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.
(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.
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(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 1.4. 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 1.5. 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 1.6. 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 1.7. 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 1.8. 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 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
3
<PAGE>
persons listed on Schedules I and II 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 1.9. CERTIFICATES TO BE HELD BY COMPANY. (a) Each Stockholder
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 Stockholder or the estate of any Stockholder, 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 Stockholder 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 Stockholder's Covered Securities
which are then intended and permitted to be Transferred under the provisions of
this Agreement.
(b) Subject to the Stockholders 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 Stockholders
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 Stockholder 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 Stockholders.
Section 1.10. 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
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<PAGE>
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:
(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
5
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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 6.3 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.
"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.
6
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"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 received by such
Stockholder as a result of the LLC Exchange, any securities of the Company
received by such Stockholder pursuant to any agreement, arrangement or stock
option, incentive or similar plan of the Company and any shares of Common Stock
issuable upon the exercise of such securities, or, in the case of any
Stockholder that becomes a party to this Agreement by an amendment to Schedule I
or II hereof, the shares of Common Stock designated on such Schedule. Prior to
or after the IPO, securities of the Company 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.
"EMPLOYEE STOCKHOLDER" means any Stockholder employed by the Company
Group listed on Schedules I and II hereto.
"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.
"NASD" means the National Association of Securities Dealers, Inc.
7
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"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.
"PROXIES" has the meaning set forth in Section 2.1(a).
"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.
"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 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,
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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.
9
<PAGE>
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.
(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,
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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) 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.
11
<PAGE>
(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.
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
12
<PAGE>
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 1.2 (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.
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).
13
<PAGE>
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 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.
14
<PAGE>
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.]
15
<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.
By:
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
- ------------------------------- -------------------------------
George M.L. LaBranche, IV Vincent J. Flaherty
- ------------------------------- -------------------------------
James G. Gallagher Alfred O. Hayward, Jr.
- ------------------------------- -------------------------------
Michael J. Naughton John McGraner
- ------------------------------- -------------------------------
Vincent Papandrea Anthony M. Corso
- ------------------------------- -------------------------------
Eugene C. McCarthy John O. Pickett, III
- ------------------------------- -------------------------------
Michael C. Ziebarth Anthony Giardina
16
<PAGE>
- ------------------------------- -------------------------------
Sean M. McCooey Mark Soltz
- ------------------------------- -------------------------------
Christopher M. Smith Joseph Corso, Jr.
- ------------------------------- -------------------------------
Robert A. Conte Paul A. Redmond
- ------------------------------- -------------------------------
Thomas G. McLaughlin Nicholas Caputo
- ------------------------------- -------------------------------
Joseph R. Dewhurst, II Steven C. Berger
- ------------------------------- -------------------------------
John L. McWilliams Thomas J. Shanley
- ------------------------------- -------------------------------
Kevin R. McMahon Fred DeBoer
- ------------------------------- -------------------------------
Robert W. Keelips, III Karin Gill
- ------------------------------- -------------------------------
John M. Dempsey, III John N. Durante
17
<PAGE>
- ------------------------------- -------------------------------
Gerard A. Competello William J. Burke, III
- ------------------------------- -------------------------------
Christopher Connors Christopher Keelips
- ------------------------------- -------------------------------
Vincent G. Quigley Anthony Picerni
18
<PAGE>
SCHEDULE I
EXCHANGING MEMBERS
George M.L. LaBranche, IV*
Vincent J. Flaherty*
James G. Gallagher*
Alfred O. Hayward, Jr.*
Michael J. Naughton*
John McGraner*
Vincent Papandrea*
Anthony M. Corso*
Eugene C. McCarthy*
John O. Pickett, III*
Michael C. Ziebarth*
Anthony Giardina*
Sean M. McCooey*
Mark Soltz*
Christopher M. Smith*
Joseph Corso, Jr.*
Robert A. Conte*
Paul A. Redmond
Thomas G. McLaughlin*
Nicholas Caputo*
Joseph R. Dewhurst, II*
Steven C. Berger
John L. McWilliams*
Thomas J. Shanley*
Kevin R. McMahon*
Fred DeBoer*
Robert W. Keelips, III
Karin Gill*
John M. Dempsey, III*
John N. Durante*
Gerard A. Competello*
William J. Burke, III*
Christopher Connors*
Christopher Keelips*
Vincent G. Quigley*
Anthony Picerni*
- --------
*/Also an Employee Stockholder
I-1
<PAGE>
SCHEDULE II
EMPLOYEE STOCKHOLDERS
II-1
<PAGE>
Exhibit 10.9
================================================================================
[COMPOSITE CONFORMED COPY WITH
SUBSTANTIALLY ALL EXHIBITS
CONFORMED AS EXECUTED]
LABRANCHE & CO.
------------------------
Note Purchase Agreement
------------------------
DATED SEPTEMBER 15, 1997
$20,000,000 8.17% SUBORDINATED NOTES DUE SEPTEMBER 15, 2002
================================================================================
<PAGE>
TABLE OF CONTENTS PAGE
1. AUTHORIZATION OF NOTES .............................................. 1
2. SALE AND PURCHASE OF NOTES .......................................... 1
3. CLOSING ............................................................. 1
4. CONDITIONS TO CLOSING................................................ 2
4.1 Representations and Warranties ................................. 2
4.2 Performance; No Default ........................................ 2
4.3 Compliance Certificate ......................................... 2
4.4 Opinions of Counsel ............................................ 2
4.5 Purchase Permitted By Applicable Law, etc ...................... 3
4.6 Net Capital .................................................... 3
4.7 Sale of Other Notes ............................................ 3
4.8 Payment of Special Counsel Fees ................................ 3
4.9 Private Placement Number ....................................... 3
4.10 Changes in Organizational Structure ............................ 3
4.11 Intercreditor Agreements ....................................... 4
4.12 Proceedings and Documents ...................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................... 4
5.1 Organization; Power and Authority .............................. 4
5.2 Authorization, etc ............................................. 4
5.3 Disclosure ..................................................... 5
5.4 Subsidiaries ................................................... 5
5.5 Financial Statements ........................................... 5
5.6 Compliance with Laws, Other Instruments, etc ................... 6
5.7 Governmental Authorizations, etc ............................... 6
5.8 Litigation; Observance of Agreements, Statutes and Orders ...... 6
5.9 Taxes .......................................................... 7
5.10 Title to Property; Leases ...................................... 7
5.11 Licenses, Permits, etc ......................................... 7
5.12 Compliance with ERISA........................................... 7
5.13 Private Offering by the Company ................................ 8
5.14 Use of Proceeds; Margin Regulations ............................ 8
5.15 Existing Debt................................................... 9
5.16 Foreign Assets Control Regulations, etc......................... 9
5.17 Status under Certain Statutes .................................. 9
5.18 Membership in NYSE, Etc ........................................ 9
5.19 Priority of Notes .............................................. 10
6. REPRESENTATIONS OF THE PURCHASER .................................... 10
6.1 Purchase for Investment ........................................ 10
6.2 Source of Funds ................................................ 11
7. INFORMATION AS TO COMPANY ........................................... 12
7.1 Financial and Business Information ............................. 12
LaBranche & CO. NOTE PURCHASE AGREEMENT
i
<PAGE>
TABLE OF CONTENTS (Cont.) PAGE
7.2 Officer's Certificate .......................................... 15
7.3 Inspection ..................................................... 15
8. PREPAYMENT OF THE NOTES ............................................. 16
8.1 Required Prepayments ........................................... 16
8.2 Optional Prepayments with Make-Whole Amount .................... 16
8.3 Allocation of Partial Prepayments .............................. 16
8.4 Maturity; Surrender, etc ....................................... 16
8.5 Purchase of Notes .............................................. 16
8.6 Offer to Pay upon Change in Control ............................ 17
8.7 Make-Whole Amount .............................................. 19
9. AFFIRMATIVE COVENANTS ............................................... 21
9.1 Compliance with Law ............................................ 21
9.2 Insurance ...................................................... 21
9.3 Maintenance of Properties ...................................... 21
9.4 Payment of Taxes and Claims .................................... 22
9.5 Legal Existence, etc ........................................... 22
9.6 Ranking of Notes ............................................... 22
9.7 Line of Business ............................................... 22
9.8 Compliance with Margin Regulations ............................. 22
9.9 Subsidiaries ................................................... 23
10. NEGATIVE COVENANTS .................................................. 23
10.1 Minimum Partners' Capital ...................................... 23
10.2 Permitted Debt ................................................. 23
10.3 Restricted Payments ............................................ 23
10.4 Transactions with Affiliates ................................... 24
10.5 Merger, Consolidation, etc ..................................... 24
10.6 Liens .......................................................... 25
10.7 Limitation on Loans ............................................ 25
11. EVENTS OF ACCELERATION; EVENTS OF DEFAULT; REMEDIES ................. 26
11.1 Events of Acceleration ......................................... 26
11.2 Remedies Upon an Event of Acceleration ......................... 27
11.3 Events of Default .............................................. 29
11.4 Remedies Upon an Event of Default .............................. 30
11.5 Other Remedies ................................................. 30
11.6 Annulment of Acceleration of Notes ............................. 30
12. SUSPENSION OF REPAYMENT; SUBORDINATION, STATUS AND OTHER MATTERS .... 31
12.1 Suspension of Required Payments ................................ 31
12.2 Suspension of Optional Payments ................................ 33
12.3 Recapture Interest ............................................. 34
12.4 Subordination of Obligations ................................... 35
12.5 Insolvency Event ............................................... 35
12.6 Obligations Not Impaired ....................................... 36
12.7 Non-liability of NYSE .......................................... 36
LaBranche & CO. NOTE PURCHASE AGREEMENT
ii
<PAGE>
TABLE OF CONTENTS (Cont.) PAGE
12.8 Status of Proceeds of Notes .................................... 36
12.9 Notices to NYSE ................................................ 36
12.10 Futures Commission Merchants .................................. 37
12.11 Set-off ....................................................... 37
12.12 Amendment ..................................................... 37
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ....................... 38
13.1 Registration of Notes .......................................... 38
13.2 Transfer and Exchange of Notes ................................. 38
13.3 Limitation on Transfer of Notes ................................ 38
13.4 Replacement of Notes ........................................... 38
14. PAYMENTS ON NOTES ................................................... 39
14.1 Place of Payment ............................................... 39
14.2 Home Office Payment ............................................ 39
15. EXPENSES, ETC ....................................................... 39
15.1 Transaction Expenses ........................................... 39
15.2 Survival ....................................................... 40
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT ........ 40
17. AMENDMENT AND WAIVER ................................................ 40
17.1 Requirements ................................................... 40
17.2 Solicitation of Holders of Notes ............................... 41
17.3 Binding Effect, etc ............................................ 41
17.4 Notes held by Company, etc ..................................... 41
18. NOTICES ............................................................. 42
19. REPRODUCTION OF DOCUMENTS ........................................... 42
20. CONFIDENTIAL INFORMATION ............................................ 43
21. SUBSTITUTION OF PURCHASER ........................................... 44
22. MISCELLANEOUS ....................................................... 44
22.1 Successors and Assigns ......................................... 44
22.2 Payments Due on Non-Business Days .............................. 44
22.3 Severability ................................................... 45
22.4 Construction ................................................... 45
22.5 Counterparts ................................................... 45
22.6 Governing Law .................................................. 45
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 4.2 -- Pre-Closing Transactions
LaBranche & CO. NOTE PURCHASE AGREEMENT
iii
<PAGE>
TABLE OF CONTENTS (Cont.)
SCHEDULE 4.10 -- Changes in Organizational Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.12 -- ERISA
SCHEDULE 5.15 -- Existing Debt
SCHEDULE 9.2 -- Insurance
EXHIBIT 1 -- Form of 8.17% Subordinated Note due September 15, 2002
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 4.11 -- Form of Intercreditor Agreement
LaBranche & CO. NOTE PURCHASE AGREEMENT
iv
<PAGE>
LABRANCHE & CO.
One Exchange Plaza
New York, NY 10006
8.17% Subordinated Notes Due September 15, 2002
Dated September 15, 1997
To Each of the Purchasers Listed in
the Attached Schedule A:
Ladies and Gentlemen:
LaBranche & Co., a New York limited partnership (the "Company"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES
The Company will authorize the issue and sale of $20,000,000 aggregate
principal amount of its 8.17% Subordinated Notes due September 15, 2002 (the
"Notes", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement and the Other Agreements). The Notes
shall be substantially in the form of Exhibit 1, with such changes therefrom, if
any, as may be approved by you and the Company. Certain capitalized terms used
in this Agreement are, defined in Schedule B; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement; and references to Sections are, unless otherwise specified,
references to Sections of this Agreement.
2. SALE AND PURCHASE OF NOTES
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified below your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "Other Agreements")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "Other Purchasers"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified below
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
3. CLOSING
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Hebb & Gitlin, One State Street,
Hartford, Connecticut at 10:00 a.m., local Hartford time, at a closing (the
"Closing") on September 15, 1997 or on such other Business Day thereafter on or
prior to September 30, 1997 as may be agreed upon by the Company and you and the
Other Purchasers. At the Closing the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $100,000 as you may request) dated the date of the
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
by wire transfer of immediately available funds for the account of the Company
to account number at The Bank of New York, One Wall Street, New York, NY 10015,
ABA# 021-000-018 FBO LaBranche & Co., A/C # 8540904708 Attn. Rick Rivera
212-635-6739. If at the Closing the Company shall fail to tender such Notes to
you as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company in this Agreement shall
be correct as of the date hereof and at the time of the Closing.
4.2 Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Section 5.14) no Default, Event of Default or Event of Acceleration shall have
occurred and be continuing. Except as set forth on Schedule 4.2, the Company
shall not have entered into any transaction since June 1, 1997 that would have
been prohibited by Section 10.4, had such Section applied since such date.
4.3 Compliance Certificate.
The Company shall have delivered to you an Officers' Certificate dated the
date of the Closing, certifying that the conditions specified in Section 4.1,
Section 4.2 and Section 4.10 have been fulfilled, and certifying as to the
resolutions attached thereto and other proceedings relating to the
authorization, execution and delivery of the Notes and the Agreements.
4.4 Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing
(a) from Fulbright & Jaworski L.L.P., counsel for the Company,
covering the matters set forth in Exhibit 4.4(a) and covering such other
matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company hereby instructs its
counsel to deliver such opinion to you), and
(b) from Hebb & Gitlin, your special counsel in connection with such
transactions, substantially in the form of Exhibit 4.4(b) and covering
such other matters incident to such transactions as you may reasonably
request.
LaBranche & CO. NOTE PURCHASE AGREEMENT
2
<PAGE>
4.5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall
(a) be permitted by the laws and regulations of each jurisdiction to
which you are subject, without recourse to provisions (such as section
1405(a)(8) of the New York Insurance Law) permitting limited investments
by insurance companies without restriction as to the character of the
particular investment,
(b) not violate any applicable law or regulation (including, without
limitation, Regulation G, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System), and
(c) not subject you to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or regulation was
not in effect on the date hereof.
If requested by you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
4.6 Net Capital.
The Company shall provide such evidence as is reasonably satisfactory to
you evidencing that the Company has obtained the approval of the NYSE to
classify the Notes as a component of the Net Capital of the Company.
4.7 Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
4.8 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.9 Private Placement Number.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.10 Changes in Organizational Structure.
Except as specified in Schedule 4.10, the Company shall not have changed
its jurisdiction of organization or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
LaBranche & CO. NOTE PURCHASE AGREEMENT
3
<PAGE>
4.11 Intercreditor Agreements.
Each partner and Affiliate of the Company which are the holders of
subordinated liabilities of the Company shall have executed and delivered an
Intercreditor Agreement.
4.12 Proceedings and Documents.
All proceedings in connection with the transactions contemplated by this
Agreement and all documents and instruments incident to such transactions shall
be satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as you or they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to you, as of the date of the Closing,
that:
5.1 Organization; Power and Authority.
(a) The Company. The Company
(i) is a limited partnership duly organized and, to the extent
applicable, validly existing and in good standing under the laws of
its jurisdiction of organization,
(ii) is duly qualified as a foreign limited partnership and is
in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and
(iii) has the legal power and authority to own or hold under
lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Other Agreements and the
Notes and to perform the provisions hereof and thereof.
(b) The General Partner. The General Partner
(i) is a limited liability company, duly organized and, to the
extent applicable, validly existing and in good standing under the
laws of its jurisdiction of organization, and
(ii) has all legal power and authority necessary to be, act
as, and carry out its responsibilities as, the general partner of
the Company.
5.2 Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary action on the part of the Company and the General
Partner, and this Agreement constitutes, and upon execution and delivery thereof
each Note will constitute, a legal, valid and
LaBranche & CO. NOTE PURCHASE AGREEMENT
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binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally, and
(b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Disclosure.
The Company, through its agent, ING Barings, has delivered to you and each
Other Purchaser a copy of a Private Placement Memorandum, dated June 26, 1997
(the "Memorandum"), relating to the transactions contemplated hereby. The
Memorandum fairly describes, in all material respects, the general nature of the
business and principal properties of the Company. Except as disclosed in
Schedule 5.3, this Agreement, the Memorandum, the documents, certificates and
other writings delivered to you by or on behalf of the Company in connection
with the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
December 31, 1996, there has been no change in the financial condition,
operations, business, properties or prospects of the Company except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that is peculiar
to the Company (excluding facts of a general, publicly known, economic or
political nature) that has had or, so far as the Company can now reasonably
foresee, could reasonably be expected to have a Material Adverse Effect and that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
5.4 Subsidiaries.
The Company has no Subsidiaries.
5.5 Financial Statements.
The Company has delivered to each Purchaser copies of the financial
statements of the Company listed on Schedule 5.5. All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the financial position of the Company as of the
respective dates specified in such Schedule 5.5 and the results of its
operations and cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved except as set forth in the notes thereto (subject, in the case of any
interim financial statements, to normal year-end adjustments).
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5.6 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the General Partner on behalf
of the Company of this Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of
the General Partner or the Company under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter,
organizational document or by-laws, or any other agreement or instrument
to which the General Partner or the Company is bound or by which the
Company, the General Partner or any of their respective properties may be
bound or affected,
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the General
Partner or the Company, or
(c) violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to the General Partner or the
Company.
5.7 Governmental Authorizations, etc.
Neither the nature of the General Partner or the Company or of any of
their respective businesses or properties, nor any relationship between the
Company and any other Person, nor any circumstance in connection with the offer,
issuance, sale or delivery of the Notes and the execution and delivery of this
Agreement, or the performance of the obligations hereunder and thereunder, is
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority on the part of
the Company as a condition to the execution and delivery of this Agreement, the
offer, issuance, sale or delivery of the Notes, or the performance of the
obligations hereunder or thereunder, except for consents, approvals and
authorizations, and filings, registrations and qualifications, that have been
obtained or made.
5.8 Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any property of the Company or
challenging the validity or enforceability of this Agreement or the Notes,
in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) The Company is not in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental
Authority and is not in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
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5.9 Taxes.
The Company has filed all tax returns that are required to have been filed
in any jurisdiction, and has paid all taxes shown to be due and payable on such
returns and all other taxes and assessments levied upon it or its properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments,
(a) the amount of which is not individually or in the aggregate
Material, or
(b) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect
to which the Company has established adequate reserves in accordance with
GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect.
5.10 Title to Property; Leases.
The Company has good and sufficient title to its properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company after said date (except as sold
or otherwise disposed of in the ordinary course of business), in each case free
and clear of Liens prohibited by this Agreement. All leases that individually or
in the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.11 Licenses, Permits, etc.
Except as disclosed in Schedule 5.11:
(a) the Company owns or possesses all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and trade
names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company with respect to any
patent, copyright, service mark, trademark, trade name or other right
owned or used by the Company.
5.12 Compliance with ERISA.
(a) Disclosure. Schedule 5.12 sets forth all "employee pension
benefit plans" with respect to which the Company or any "affiliate" of the
Company is a "plan sponsor" or a "substantial employer" or in respect of
which the Notes could constitute an "employer security." To the best
knowledge of the Company, no part of the assets of any of the
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employee pension benefit plans listed on Schedule 5.12 are managed,
controlled or invested by, or are on deposit with, any Purchaser or any
affiliate thereof. The terms "employee pension benefit plan" and "plan
sponsor" have the meanings specified in section 3 of ERISA, "substantial
employer" has the meaning specified in section 4062 of ERISA and
"affiliate" and "employer security" have the meanings specified in section
407(d) of ERISA).
(b) Investment Advice. Neither the Company nor any of its Affiliates
has offered or delivered any evaluation or other investment advice on any
basis in respect of the advisability of the purchase of the Notes to any
Purchaser in any manner that would cause the Company or Affiliates to
become a "party in interest" (as defined in section 3 of ERISA) or a
"disqualified person" (as defined in section 4975 of the IRC) with respect
to any "employee benefit plan" (as defined in section 3 of ERISA) the
assets of which are being used to acquire the Notes.
(c) Prohibited Transactions. The execution and delivery of this
Agreement and the issuance and sale of the Notes hereunder will not
involve any transaction that is subject to the prohibitions of section 406
of ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A) through section 4975(D), inclusive, of the IRC.
(d) Defined Benefit Plan. The Company has never at any time had any
liability or obligation in respect of any "defined benefit plan" (as
defined in section 3 of ERISA).
(e) Compliance with ERISA. The Company and the ERISA Affiliates and
each Pension Plan are in compliance with ERISA, except for such failures
to comply that in the aggregate for all such failures could not reasonably
be expected to have a Material Adverse Effect.
(f) Multiemployer Plans. Neither the Company nor any ERISA Affiliate
contributes to, maintains, or has any liability or obligation in respect
of, a Multiemployer Plan.
5.13 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than 50 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of section 5 of the Securities Act.
5.14 Use of Proceeds; Margin Regulations.
(a) Use of Proceeds. The proceeds of the Notes shall be dealt with
in all respects as capital of the Company, shall be subject to the risks
of its business, and may be deposited in an account or accounts in the
Company's name in any bank or trust company.
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(b) Regulation G, Etc. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for the purpose of
buying or carrying any margin stock within the meaning of Regulation G of
the Board of Governors of the Federal Reserve System (12 CFR 207), or for
the purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of
said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). As used in this Section, the
terms "margin stock" and "purpose of buying or carrying" shall have the
meanings assigned to them in said Regulation G.
5.15 Existing Debt.
(a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Company as of August 31, 1997 (and specifying, as
to each such Debt, the collateral, if any, securing such Debt), since
which date there has been no Material change in the amounts, interest
rates, sinking funds, installment payments, collateral or maturities of
the Debt of the Company. The Company is not in default and no waiver of
default is currently in effect, in the payment of any principal or
interest on any Debt of the Company and no event or condition exists with
respect to any Debt of the Company that would permit (or that with notice
or the lapse of time, or both, would permit) one or more Persons to cause
such Debt to become due and payable before its stated maturity or before
its regularly scheduled dates of payment. No notice has been issued in
respect of non-renewal of the maturity of the "scheduled maturity date" of
any Debt listed on Schedule 5.15 that constitutes Permitted Subordinated
Debt.
(b) Except as disclosed in Schedule 5.15, the Company has not agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to a Lien not permitted by Section 10.6.
5.16 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17 Status under Certain Statutes.
The Company is not subject to regulation under the Investment Company Act
of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended,
the Transportation Acts (49 U.S.C), as amended, or the Federal Power Act, as
amended.
5.18 Membership in NYSE, Etc.
(a) Broker-Dealer Status. The Company is registered as a
broker-dealer with the SEC under the Exchange Act and with state
securities authorities in each state where the Company is required to be
so registered. The Company is a member organization in good standing of
the NYSE and the NASD.
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(b) Regulation T. The Company's operations, as currently conducted,
are not subject to the provisions of Regulation T (12 C.F.R. ss. 220) of
the Board of Governors of the Federal Reserve System.
(c) SIPC Assessments. The Company is not in arrears with respect to
any assessment made by the SIPC.
(d) Notes as Net Capital. The Company has obtained the approval of
the NYSE to classify the Notes as subordinated loan agreements and Net
Capital. No other approval or consent of the NYSE, the SEC or any other
Governmental Authority is necessary to permit such classification.
5.19 Priority of Notes.
There is no Debt of the Company that is in any manner subordinated to any
other Debt of the Company and that is not junior in right of payment and
performance to the right of payment and performance of the Notes. To the best
knowledge of the Company, all Intercreditor Agreements executed and delivered
pursuant to Section 4.11 are duly authorized, executed and delivered by the
holders of subordinated liabilities of the Company subject to such agreements,
and such agreements are enforceable in accordance with their terms against such
Persons, except as such enforceability is limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally, and
(b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6. REPRESENTATIONS OF THE PURCHASER
6.1 Purchase for Investment.
You represent that you are
(a) an "accredited investor" as defined in Rule 501 (a) under the
Securities Act, and
(b) purchasing the Notes for your own account or for one or more
separate accounts maintained by you or for the account of one or more
pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times
be within your or their control.
You understand that the Notes have not been registered under the Securities Act
and may be resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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6.2 Source of Funds.
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) General Account -- the Source is an "insurance company general
account" as defined in Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and in respect thereof you
represent that there is no "employee benefit plan" (as defined in section
3(3) of ERISA and section 4975(e)(1) of the IRC, treating as a single plan
all plans maintained by the same employer or employee organization or
affiliate thereof) with respect to which the amount of the general account
reserves and liabilities of all contracts held by or on behalf of such
plan exceed 10% of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as set
forth in the NAIC Annual Statement filed with your state of domicile and
that the acquisition of the Notes by such account is eligible for and
satisfies the other requirements of such exemption;
(b) Separate Account -- the Source is either
(i) an insurance company pooled separate account, within the
meaning of PTE 90-1 (issued January 29, 1990) and the Purchaser has
no knowledge of any fact or circumstance that would make reliance by
it on PTE 90-1 unreasonable, or
(ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as you have
disclosed to the Company in writing pursuant to this Section 6.2(b)
(ii), no employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or
collective investment fund;
(c) QPAM --
(i) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the PTE 84-14) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of
section V(c)(1) of PTE 84-14) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part
I(c) and Part I(g) of PTE 84-14 are satisfied, neither the QPAM nor
a Person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of PTE 84-14) owns a 5% or
more interest in the Company,
(ii) (A) the identity of such QPAM, and
(B) the names of all employee benefit plans whose assets
are included in such investment fund
LaBranche & CO. NOTE PURCHASE AGREEMENT
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have been disclosed to the Company in writing pursuant to this
Section 6.2(c), and
(iii) the Purchaser has no knowledge of any fact or
circumstance that would make reliance by it on PTE 84-14
unreasonable;
(d) Government Plan -- the Source is a governmental plan;
(e) Identified Plans -- the Source is one or more employee benefit
plans, or a separate account or trust fund comprised of one or more
employee benefit plans, each of which has been identified to the Company
in writing pursuant to this Section 6.2(e); or
(f) Exempt Plans -- the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of ERISA
and the prohibited transaction provisions of the IRC.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information.
The Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a) FOCUS Report -- as soon as practicable after the end of each
fiscal quarter of the Company, and in any event within 5 days after filing
with the NYSE, the Company's FOCUS Report for such period as filed;
(b) Quarterly Statements -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of,
(i) a statement of financial condition of the Company as at
the end of such quarter, and
(ii) statements of income, changes in partners' capital and
cash flows of the Company, for such quarter and (in the case of the
second and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Responsible Official as fairly
presenting, in all material respects, the financial position of the
Company and its results of operations and cash flows, subject to changes
resulting from year-end adjustments, provided that delivery within the
time period specified above of copies of the Company's Quarterly Report on
Form 10-Q prepared in compliance with the requirements therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(b);
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(c) Annual Statements -- within 90 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a statement of financial condition of the Company, as at
the end of such year, and
(ii) statements of income, changes in partners' equity and
cash flows of the Company, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of a Big Six Accounting Firm, which
opinion shall state that such financial statements present fairly,
in all material respects, the financial position of the Company and
its results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default, an Event of Default or an Event of
Acceleration, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the existence
thereof (it being understood that such accountants shall not be
liable, directly or indirectly, for any failure to obtain knowledge
of any Default, Event of Default or Event of Acceleration unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or
did not make such an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in
Section 7.1(c)(ii)(B), shall be deemed to satisfy the requirements of this
Section 7.1(c);
(d) SEC and Other Reports -- promptly upon their becoming available,
one copy of
(i) each financial statement, report, notice or proxy
statement sent by the Company to public securities holders
generally, and
(ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such
holder), and each prospectus and all amendments thereto filed by the
Company with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the
Company to the public concerning developments that are Material;
LaBranche & CO. NOTE PURCHASE AGREEMENT
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(e) Notice of Default, Event of Default or Event of Acceleration --
promptly, and in any event within five days after a Responsible Official
becoming aware of the existence of any Default, Event of Default or Event
of Acceleration, or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has
given any notice or taken any action with respect to a claimed default of
the type referred to in Section 11.1(g), a written notice specifying the
nature and period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within 15 days after
a Responsible Official becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Pension Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations thereunder,
for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof;
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Pension Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or Title IV of ERISA or the penalty or
excise tax provisions of the IRC relating to employee benefit plans,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or
Title IV of ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such liabilities or
Liens then existing, could reasonably be expected to have a Material
Adverse Effect;
(g) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company from any Federal or state Governmental Authority (including the
Examining Authority) relating to any action or proceeding, order, ruling,
statute or other law or regulation that could reasonably be expected to
have a Material Adverse Effect;
(h) Requested In formation -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or relating to
the ability of the Company to perform its obligations hereunder and under
the Notes as from time to time may be reasonably requested by any such
holder of Notes.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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7.2 Officer's Certificate.
Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1 (b) or Section 7.1 (c) shall be accompanied by a certificate of a
Responsible Official setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 and Section 10.3, during
the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as
the case may be, permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the
Company from the beginning of the quarterly or annual period covered by
the statements then being furnished to the date of the certificate and
that such review shall not have disclosed the existence during such period
of any condition or event that constitutes a Default, an Event of Default
or an Event of Acceleration or, if any such condition or event existed or
exists (including, without limitation, any such event or condition
resulting from the failure of the Company to comply with any Environmental
Law), specifying the nature and period of existence thereof and what
action the Company shall have taken or proposes to take with respect
thereto.
7.3 Inspection.
The Company shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default, Event of Default or Event of
Acceleration then exists, at the expense of such holder and upon
reasonable prior notice to the Company, to visit the principal executive
office of the Company, to discuss the affairs, finances and accounts of
the Company with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company, all at such reasonable times and as often as
may be reasonably requested in writing; and
(b) Default -- if a Default, Event of Default or Event of
Acceleration then exists, at the expense of the Company, to visit and
inspect any of the offices or properties of the Company, to examine all
their respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company), all at such times and as often as may be requested.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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8. PREPAYMENT OF THE NOTES
8.1 Required Prepayments.
Subject to Section 12.1, the principal of the Notes shall become due and
payable in full, together with all amounts owing in respect thereof (including
all accrued interest) on September 15, 2002 (the "Scheduled Maturity Date").
8.2 Optional Prepayments with Make-Whole Amount.
Subject to Section 12.2, the Company may, at its option, upon notice as
provided below, prepay at any time all, or from time to time any part, of the
Notes, in an amount not less than 5% of the aggregate principal amount of the
Notes then outstanding in the case of a partial prepayment, at 100% of the
principal amount so prepaid, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid, and shall be accompanied by
a certificate of a Responsible Official as to the estimated Make-Whole Amount
due in connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of such computation.
Two Business Days prior to such prepayment, the Company shall deliver to each
holder of Notes a certificate of a Responsible Official specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
8.3 Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
8.4 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5 Purchase of Notes.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except
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(a) upon the payment or prepayment of the Notes in accordance with
the terms of this Agreement and the Notes, or
(b) pursuant to an offer to purchase made by the Company or an
Affiliate pro rata to the holders of all Notes at the time outstanding
upon the same terms and conditions.
Any such offer shall provide each holder with sufficient information to enable
it to make an informed decision with respect to such offer, and shall remain
open for at least 15 Business Days. If the holders of more than 50% of the
principal amount of the Notes then outstanding accept such offer, the Company
shall promptly notify the remaining holders of such fact and the expiration date
for the acceptance by holders of Notes of such offer shall be extended by the
number of days necessary to give each such remaining holder at least 10 Business
Days from its receipt of such notice to accept such offer. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.6 Offer to Pay upon Change in Control.
(a) Notice of Change in Control Notice Event. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any
Responsible Official (including, without limitation, via the receipt of
notice of a Change in Control Notice Event from any holder of Notes), the
Company will, within five (5) Business Days after such obtaining of
knowledge, give notice of such Change in Control Notice Event to each
holder of Notes. Such notice will
(i) refer to this Section 8.6(a),
(ii) be dated the date of the sending of such notice,
(iii) specify, in reasonable detail, the nature and date of
the Change in Control Notice Event, and
(iv) be executed by a Responsible Official.
(b) Offer in Respect of a Change in Control.
(i) In General. Subject to Section 12.2, in connection with a
Change in Control, the Company may, but shall not be required to,
make one irrevocable separate offer to each holder of Notes to pay
the principal of all of such holder's Notes (together with any
interest accrued and unpaid thereon and any Make-Whole Amount due in
respect thereof), on a date (the "Change in Control Payment Date")
specified in such offer, which will be the Change in Control Date.
(ii) Subject to Approval of Examining Authority. As provided
in Section 12.2(a), no Optional Note Payment may be made during the
365 day period following the Closing Date and no Optional Note
Payment may be made without the prior written permission of the
Examining Authority.
(iii) Timing of Offers. Such offer
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(A) will be made no later than 20 Business Days prior to
the Change in Control Date in respect thereof,
(B) will be made no earlier than the earlier of the
occurrence of the first Change in Control Notice Event related
to such Change in Control or 45 days prior to such Change in
Control Date, and
(C) will remain open for at least 20 Business Days.
(iv) Content of Offer. Each such offer will
(A) refer to this Section 8.6(b),
(B) be dated the date of the sending of such offer,
(C) describe in reasonable detail the nature and
material terms of the Change in Control,
(D) specify the Change in Control Payment Date,
(E) specify the last date upon which the offer can be
accepted or rejected, and the consequences of failing to
provide an acceptance or rejection as provided in Section
8.6(c),
(F) specify the principal amount of each Note
outstanding, and the interest that would be due on each Note
offered to be paid if such offer was accepted, accrued to the
Change in Control Payment Date,
(G) provide the calculation (with details) of an
estimated Make-Whole Amount, if any, (calculated as if the
date of such notice was the date of payment) due in connection
with such payment, and
(H) be executed by a Responsible Official.
(c) Acceptance, Rejection. To accept or reject such offered payment,
a holder of Notes shall send a notice of acceptance or rejection to the
Company prior to the expiration of the specified offer period. A failure
to respond to any such written offer of payment as provided in this
Section 8.6(c) shall be deemed to constitute an acceptance of such offer.
(d) Deferral of Obligation to Pay. The obligation of the Company to
pay the principal of the Notes pursuant to the offers required by Section
8.6(b) and accepted in accordance with Section 8.6(c) is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances have been made. In the event that such Change in Control does
not occur on or prior to the specified Change in Control Payment Date in
respect thereof, such payment shall be deferred until and shall be made on
the Change in Control Date (as deferred). The Company shall keep each
holder of Notes reasonably and timely informed of
(i) any deferral in, and the expected dates of, the Change in
Control Payment Date, and
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(ii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned (in which case
the offers and acceptances made pursuant to this Section 8.6 in
respect of such Change in Control shall be deemed rescinded,
provided that if such abandoned Change in Control is revived, it
shall be deemed to be a new Change in Control hereunder).
If the Change in Control Payment Date is deferred by more than 5 Business
Days, the Company will promptly deliver to the holders of the Notes the
information required by Section 8.6(b)(iv), updated accordingly.
(e) Material Alteration in Transaction. If, prior to the Change in
Control Payment Date, the terms of the transaction constituting the
related Change in Control are altered in any material respect, the Company
will immediately notify each holder of Notes of the details of such
alteration. Each holder of Notes will have the right to reverse its
acceptance or rejection of such offer (if already accepted or rejected)
until the end of the 5th Business Day following the day on which such
holder is notified by the Company of such alteration. Each holder of Notes
which reverses its acceptance or rejection of such offer shall notify the
Company thereof during such 5 Business Day period. If any holder of Notes
fails to notify the Company of a reversal of its acceptance or rejection
of such offer during such 5 Business Day period, such holder of Notes
shall be deemed to have confirmed such acceptance or rejection. The Change
in Control Payment Date will be deferred, to the extent necessary, to
accommodate such 5 Business Day period, and the Company will promptly
deliver to the holders of the Notes the information required by Section
8.6(b)(iv), updated accordingly as necessary.
(f) Payment. The offered payment shall be made at 100% of the
principal amount of the Notes to be prepaid (together with any interest
accrued and unpaid thereon, determined as of the Change in Control Payment
Date). Two Business Days prior to the making of such payment, the Company
shall deliver to each holder of Notes by facsimile transmission a
certificate of a Responsible Official specifying the details of the
calculation of such Make-Whole Amount as of the specified payment date,
including a copy of the source of interest rate information used in such
calculation.
(g) Waiver of Event of Acceleration. Each holder which shall have
rejected an offer of payment made in accordance with this Section 8.6
shall be deemed to have
(i) waived the right to accelerate the maturity of such
holder's Notes in connection with such Change in Control and the
Event of Acceleration caused by such Change in Control, and
(ii) agreed that no Event of Acceleration shall have occurred
as a result of such Change in Control.
Such waiver shall not affect the rights of the holders of the Notes in
respect of any other Change in Control.
8.7 Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the
LaBranche & CO. NOTE PURCHASE AGREEMENT
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Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 11.2 or
Section 11.4, as the context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.75% per annum plus the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York City time)
on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as "Page
678" on the Telerate Access Service (or such other display as may
replace Page 678 on Telerate Access Service) for actively traded
U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, or
(ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date.
Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial
practice, and
(b) interpolating linearly between
(1) the actively traded U.S. Treasury security with the
duration closest to and greater than the Remaining Average
Life, and
(2) the actively traded U.S. Treasury security with the
duration closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) remaining until the Scheduled Maturity Date.
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"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, the payment on the Scheduled Maturity Date of such
Called Principal and all interest thereon that would be due after the
Settlement Date with respect to such Called Principal if no payment of
such Called Principal were made prior to the Scheduled Maturity Date,
provided that if such Settlement Date is not a date on which interest
payments are due to be made under the terms of the Notes, then the amount
of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8 or has become or is declared to be immediately due and payable
pursuant to Section 12, as the context requires.
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
9.1 Compliance with Law.
The Company will comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws and all laws, rules and regulations of the SEC, the NYSE and
the NASD, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of their respective
businesses (including, without limitation, those required by the SEC, the NYSE
and the NASD), in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect provided that the failure of the Company to be registered as a
broker-dealer in good standing with the SEC under the Exchange Act, to be a
member organization in good standing of the NYSE, or to maintain its status as a
specialist broker in good standing with the NYSE, shall be a breach of this
Section 9.1.
9.2 Insurance.
The Company will maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated. Schedule 9.2 contains a summary of insurance coverages
of the Company in existence on the Closing Date.
9.3 Maintenance of Properties.
The Company will maintain and keep, or cause to be maintained and kept,
their respective properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided that this Section
shall not prevent the Company from discontinuing the operation and
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the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.4 Payment of Taxes and Claims.
The Company will file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes, assessments, charges and levies have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company, provided that the Company need not pay any such tax or assessment or
claims if
(a) the amount, applicability or validity thereof is contested by
the Company on a timely basis in good faith and in appropriate
proceedings, and the Company has established adequate reserves therefor in
accordance with GAAP on the books of the Company, or
(b) the nonpayment of all such taxes, assessments, charges and
levies in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
9.5 Legal Existence, etc.
Subject to Section 10.5, the Company will at all times preserve and keep
in full force and effect its legal existence.
9.6 Ranking of Notes.
The Notes shall at all times rank as direct, unsecured, subordinated
obligations of the Company and shall rank at senior to all other subordinated
Debt of the Company present and future.
9.7 Line of Business.
The Company will not engage in any businesses other than the businesses in
which the Company is engaged on the date of this Agreement, securities
brokerage, clearing, and securities trading businesses, and financial and
investment services related thereto.
9.8 Compliance with Margin Regulations.
No provision of this Agreement is intended by the Company or the holders
of the Notes, and no provision of this Agreement shall be construed by any other
Person to provide "indirect security" in any "margin stock" owned by the
Company, and no provision of this Agreement is intended to restrict the right or
ability of the Company to sell, pledge, or otherwise dispose of margin stock
owned by it to the extent that such a restriction would be in violation of
Regulation G, Regulation T or Regulation U of the Board of Governors of the
Federal Reserve System, and any provision of this Agreement that may be
construed to impose a restriction that is inconsistent with such Regulations is
intended to be, and shall be, construed as being subject to and limited by said
Regulations. The terms "indirect security" and "margin stock" have the meanings
assigned to them by such Regulation G.
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9.9 Subsidiaries.
The Company will not suffer to exist at any time any Subsidiaries of the
Company.
10. NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
10.1 Minimum Partners' Capital.
(a) Regulatory Capital. The Company will not permit, at any time,
(i) NYSE Net Capital to be less than 150% of NYSE Required Net
Capital, and
(ii) SEC Net Capital to be less than 150% of SEC Required Net
Capital, in each case determined at such time.
(b) Partners' Capital. The Company will not permit, at any time,
Adjusted Partners' Capital to be less than $40,000,000.
10.2 Permitted Debt.
The Company will not suffer to exist at any time any Debt other than
Permitted Secured Debt, Permitted Subordinated Debt and Pension Plan Notes.
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,
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(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 of Default or Event of Acceleration then exists
or would exist after giving effect thereto,
provided that during any period when a Default, Event of Default or Event of
Acceleration then exists, the Company will be permitted to declare, make and pay
Permitted Tax Dividends if, after giving effect to such declaration, making or
payment, the aggregate amount of all Permitted Tax Dividends paid during the 365
day period ending on the date of such declaration, making or payment does not
exceed an amount equal to the Maximum Tax Rate multiplied by Operating Income
determined in respect of the then most recently ended period of 4 Fiscal
Quarters.
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 properties of any kind or
the rendering of any service) with any Affiliate (other than the Company),
except in the ordinary course and pursuant to the reasonable requirements of the
Company's business and upon fair and reasonable terms.
10.5 Merger, Consolidation, etc.
The Company will not consolidate with or merge with any other Person or
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case
may be, shall be a solvent business organization organized and existing
under the laws of the United States or any State thereof or Canada or any
province thereof (including the District of Columbia), and, if the Company
is not such business organization;
(i) such business organization shall have executed and
delivered to each holder of any Notes its assumption of the due and
punctual performance and observance of each covenant and condition
of this Agreement, the Other Agreements and the Notes, and
(ii) shall have caused to be delivered to each holder of any
Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof,
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(b) all necessary approvals of, and filings with, the NYSE, the SEC
and the NASD shall have been obtained, and reasonable evidence thereof
shall have been provided to the holders of the Notes; and
(c) immediately after giving effect to such transaction, no Default,
Event of Default or Event of Acceleration shall have occurred and be
continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor business
organization that shall theretofore have become such in the manner prescribed in
this Section 10.5 from its liability under this Agreement or the Notes.
10.6 Liens.
The Company will not cause or permit to exist, or agree or consent to
cause or permit to exist in the future (upon the happening of a contingency or
otherwise), any of its property, whether now owned or hereafter acquired, to be
subject to a Lien except:
(a) Liens securing Permitted Secured Debt;
(b) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, so long as the payment
obligation secured thereby is not delinquent;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance,
social security and other like laws; and
(d) Liens in the nature of reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and
other similar title exceptions or encumbrances affecting real property,
provided that such exceptions and encumbrances do not in the aggregate
materially detract from the value of said properties or materially
interfere with the use of such property in the ordinary conduct of the
business of the Company.
Notwithstanding any other provision of this Agreement, the Company will not
cause or permit to exist, or agree or consent to cause or permit to exist in the
future (upon the happening of a contingency or otherwise), any Lien on any NYSE
Exchange Memberships owned by the Company.
10.7 Limitation on Loans.
The Company will not make or suffer to exist loans or advances, or assets
in the nature of loans or advances, to any Person or group of related Persons in
excess of $1 000,000 in the aggregate for all such loans or advances to each
such Person or group outstanding at any time, other than loans made in the
ordinary course of business of the Company, provided that loans to Affiliates
of, employees of, partners of or holders of equity in, the Company shall not be
deemed to have been made in such ordinary course.
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11. EVENTS OF ACCELERATION; EVENTS OF DEFAULT; REMEDIES
11.1 Events of Acceleration.
An "Event of Acceleration" shall exist if any of the following occurs and
is continuing:
(a) Principal or Make-Whole Amount Payments -- the Company shall
fail to make any payment of principal or Make-Whole Amount on any Note on
or before the date such payment is due (without giving effect to Section
12.1 or Section 12.2 in determining when such payment is due);
(b) Interest Payments -- the Company shall fail to make any payment
of interest on any Note on or before 5 Business Days after the date such
payment is due (without giving effect to Section 12.1 or Section 12.2 in
determining when such payment is due)
(c) Particular Covenant Defaults -- the Company shall fail to
perform or observe any covenant contained in Section 10 or in Section
7.1(e);
(d) Other Defaults--the Company shall fail to comply with any other
provision hereof, and such failure continues for more than 30 days after
such failure shall first become known to any Responsible Official;
(e) Warranties or Representations -- any warranty, representation or
other statement by or on behalf of the Company contained herein or
contained in any instrument furnished in compliance herewith or in
reference hereto shall have been false or misleading in any material
respect when made;
(f) Specialist Status -- the Company is not a specialist broker in
good standing with the NYSE;
(g) Default on Debt or Other Security --
(i) the Company shall fail to make any payment on any Debt
when due; or
(ii) any event shall occur or any condition shall exist in
respect of Debt of the Company or under any agreement securing or
relating to such Debt, that immediately or with any one or more of
the passage of time, the giving of notice or the expiration of
waivers granted in respect of such event or condition:
(A) causes, or permits any one or more of the holders
thereof or a trustee therefor to cause such Debt or a portion
thereof, to become due prior to its stated maturity or prior
to its regularly scheduled date or dates of payment;
(B) causes or permits any one or more of the holders
thereof or a trustee therefor to elect any member of the board
of directors (or its equivalent) of such Person; or
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(C) causes or permits any one or more of the holders
thereof or a trustee therefor to require the Company to
repurchase such Debt from such holder;
provided that the aggregate amount of all obligations in respect of such
Debt exceeds at such time $1,000,000;
(h) Involuntary Bankruptcy Proceedings --
(i) a receiver, liquidator, custodian or trustee of the
Company, the General Partner or of all or any of the Property of the
Company or the General Partner 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 or the General
Partner or the Company or the General Partner shall be adjudicated a
bankrupt or insolvent;
(ii) any of the Property of the Company or the General Partner
shall be sequestered by court order and such order remains in effect
for more than 60 days; or
(iii) a petition shall be filed against the Company or the
General Partner 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 or the General Partner 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 or the
General Partner shall make an assignment for the benefit of its creditors,
or the Company or the General Partner shall admit in writing its
inability, or the Company or the General Partner shall fail, to pay its
debts generally as they become due, or the Company or the General Partner
shall consent to the appointment of a receiver, liquidator or trustee of
all or any part of the Property of the Company or the General Partner; or
(k) Change in Control -- a Change in Control shall have occurred.
11.2 Remedies Upon an Event of Acceleration.
(a) Acceleration upon Event of Acceleration. During any period in
which an Event of Acceleration shall exist, the Required Holders may
exercise any right, power or remedy permitted to such holder or holders by
law, and shall have, in particular, without limiting the generality of the
foregoing, the right to declare, by notice in writing, delivered by
certified or registered mail to the Company and the Examining Authority,
the entire principal of, and all interest accrued on, and any Make-Whole
Amount with respect to, all the Notes then outstanding to be, and such
Notes shall thereupon become, due and payable on the Accelerated Maturity
Date determined in respect of such notice, without any presentment,
demand, protest or other notice of any other kind, all of which are
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<PAGE>
hereby expressly waived, and the Company shall forthwith pay to the holder
or holders of all the Notes then outstanding the entire principal of, and
interest accrued on, and any Make-Whole Amount with respect to, the Notes,
on the Accelerated Maturity Date, provided that such notice shall not be
given until at least 6 months after the Closing Date, and, provided
further, that the right of the holders of Notes to receive payment of
principal of, interest on, or Make-Whole Amount with respect to, the
Notes, shall remain subordinate as set forth in Section 12.4.
(b) Acceleration upon Payment Default. During any period in which an
Event of Acceleration described in Section 11.1(a) or Section 11.1(b)
shall exist, and irrespective of whether the Notes then outstanding shall
have been declared to be due and payable pursuant to Section 11.2(a), any
holder of Notes who or which shall have not consented to any waiver with
respect to such Event of Acceleration may, at its option, exercise any
right, power or remedy permitted to such holder or holders by law, and
shall have, in particular, without limiting the generality of the
foregoing, the right to declare, by notice in writing, delivered by
certified or registered mail to the Company and the Examining Authority,
the entire principal of, and all interest accrued on, and any Make-Whole
Amount with respect to, all the Notes then held by such holder to be, and
such Notes shall thereupon become, due and payable on the Accelerated
Maturity Date determined in respect of such notice, without any
presentment, demand, protest or other notice of any other kind, all of
which are hereby expressly waived, and the Company shall forthwith pay to
such holder the entire principal of, and interest accrued on, and any
Make-Whole Amount with respect to, such Notes on the Accelerated Maturity
Date, provided that such notice shall not be given until at least 6 months
after the Closing Date, and, provided further, that the right of such
holder of Notes to receive payment of principal of, interest on, or
Make-Whole Amount with respect to, the Notes, shall remain subordinate as
set forth in Section 12.4.
(c) Accelerated Maturity Date. If, upon the Accelerated Maturity
Date, the obligation of the Company to pay the principal of, interest
accrued on, and any Make-Whole Amount due with respect to, the Notes, is
suspended as required by Section 12.1 or Section 12.2, and a receivership,
insolvency, liquidation pursuant to the SIPA or otherwise, bankruptcy,
assignment for the benefit of creditors, reorganization whether or not
pursuant to bankruptcy laws, or any other marshalling of the assets and
liabilities of the Company has not commenced on or prior to such
Accelerated Maturity Date, then the unpaid principal amount of the Notes,
accrued interest thereon and any Make-Whole Amount due with respect
thereto, shall be due and payable on the day immediately following such
Accelerated Maturity Date notwithstanding Section 12.1 and Section 12.2,
provided, that the right of the holders of Notes to receive any payment of
principal thereof, together with accrued interest thereon, shall remain
subordinate as set forth in Section 12.4.
(d) Significant Events. The Company and you agree that the
occurrence of each of the events specified in Section 11.1 is a
significant indication that the financial position of the Company has
changed materially and adversely from agreed upon norms, represent events
that could materially and adversely affect the ability of the Company to
conduct its business as conducted on the Closing Date, or represent
significant changes in the business conducted by the Company from that in
effect on the Closing Date.
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11.3 Events of Default.
The occurrence of any of the following events shall constitute an "Event
of Default:"
(a) SIPC Decree -- 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 days;
(b) Net Capital --
(i) if the Company is not operating pursuant to paragraph
(a)(1)(ii) of Rule 15c3-1, the Aggregate Debt of the Company shall
exceed 1,500% of the Net Capital of the Company, or
(ii) (A) if the Company is operating pursuant to paragraph
(a)(1)(ii) of Rule 15c3-1, the Net Capital of the Company
shall be less than 2% of Aggregate Debit Items of the Company,
or
(B) if the Company is registered as a futures commission
merchant, the Net Capital of the Company shall be less than
four percent 4% of the funds required to be segregated by the
Company pursuant to the CEA and the regulations thereunder
(less the market value of commodity options purchased by
option customers on or subject to the rules of a contract
market, each such deduction not to exceed the amount of funds
in the option customer's account), if greater than the amount
required in the immediately preceding clause (A);
in each case for a period of 15 consecutive Business Days commencing
on the date the Company first determines and notifies the Examining
Authority, or the Examining Authority or the SEC first determines
and notifies the Company, of such fact;
(c) Revocation of Broker-Dealer Status -- the SEC shall revoke the
registration of the Company as a broker-dealer;
(d) Suspension of Membership Status -- the Examining Authority shall
suspend (and not reinstate within 10 days) or revoke the Company's status
as a member organization thereof; or
(e) Insolvency Event -- any receivership, insolvency, liquidation
pursuant to the SIPA or otherwise, bankruptcy, assignment for the benefit
of creditors, reorganization whether or not pursuant to bankruptcy laws,
or any other marshalling of the assets and liabilities of the Company.
If the occurrence of any event or the existence of any condition shall be both
an Event of Default and an Event of Acceleration under the provisions of this
Agreement, such event or condition shall be deemed to be an Event of Default for
all purposes of this Agreement and the Notes.
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<PAGE>
11.4 Remedies Upon an Event of Default.
Upon the occurrence of an Event of Default, the unpaid principal amount of
the Notes, together with accrued interest thereon and any Make-Whole Amount in
respect thereof, shall mature and become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company, provided that the right of the holders of Notes to
receive any payment of principal thereof, together with accrued interest thereon
and any Make-Whole Amount due with respect thereto, shall remain subordinate as
set forth in Section 12.4.
11.5 Other Remedies.
(a) Other Remedies. During the existence of an Event of Default or
an Event of Acceleration, irrespective of whether the Notes then
outstanding shall have been declared to be due and payable and
irrespective of whether any holder of Notes then outstanding shall
otherwise have pursued or be pursuing any other rights or remedies, any
holder of Notes may proceed to protect and enforce its rights hereunder
and under the Notes by exercising such remedies as are available to such
holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any
agreement contained herein or in aid of the exercise of any power granted
herein, provided that the maturity of such holder's Notes may be
accelerated only in accordance with Section 11.2 and Section 11.4, and
provided further, that the right of the holders of Notes to receive any
payment of principal thereof, together with accrued interest thereon and
any Make-Whole Amount due with respect thereto, shall remain subordinate
as set forth in Section 12.4.
(b) Nonwaiver and Expenses. No course of dealing on the part of any
holder of Notes nor any delay or failure on the part of any holder of
Notes to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. If the
Company shall fail to pay when due any principal of, Make-Whole Amount due
with respect to, or interest on, any Note, or shall fail to comply with
any other material provision hereof, the Company shall pay to each holder
of Notes, to the extent permitted by law, such further amounts as shall be
sufficient to cover the costs and expenses, including but not limited to
reasonable attorneys' fees incurred by such holder in collecting any sums
due on such Notes or in otherwise assessing, analyzing or enforcing any
rights or remedies that are or may be available to it.
11.6 Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 11.2(a), then and in every
such case, the Required Holders may, by written instrument filed with the
Company, rescind and annul such declaration, and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all the Notes and all other sums
payable hereunder and under the Notes (except any principal of, or
interest or Make-Whole Amount on, the Notes which shall have become due
and payable by reason of such declaration under Section 11.2(a)) shall
have been duly paid; and
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<PAGE>
(c) each and every other Default, Event of Default and Event of
Acceleration shall have been waived pursuant to Section 17 or otherwise
made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default, Event of Default or Event of Acceleration or
impair any right consequent thereon.
12. SUSPENSION OF REPAYMENT; SUBORDINATION, STATUS AND OTHER MATTERS
12.1 Suspension of Required Payments.
(a) Suspension. The Company's obligation to pay all or a portion of
the principal amount of the Notes (and Make-Whole Amount, if any, due with
respect thereto) on the Scheduled Maturity Date or any Accelerated
Maturity Date (any such payment of principal, Make-Whole Amount and any
payment of interest due in connection therewith, referred to as a
"Required Note Payment") shall be suspended and such obligation shall not
mature for any period of time during which any of the following conditions
shall exist, after giving effect to such Required Note Payment (and giving
effect to the payment of all other Payment Obligations of the Company
payable on or prior to the due date of such Required Note Payment
determined without giving effect to this Section 12.1(a)):
(i) Aggregate Debt -- in the event that the Company is not
operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Aggregate
Debt of the Company would exceed 1,200% of Net Capital of the
Company (or such other percentum as may be made applicable to the
Company at the time of such Required Note Payment by the Examining
Authority or the SEC); or
(ii) Aggregate Debit Items -- in the event that the Company is
operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Net Capital
of the Company would be less than 5% (or such other percentum as may
be made applicable to the Company at the time of such Required Note
Payment by the Examining Authority or the SEC) of Aggregate Debit
Items of the Company; or
(iii) Futures Commission Merchant -- in the event that the
Company is registered as a futures commission merchant under the
CEA, the net capital of the Company (as defined in the CEA and the
regulations thereunder as in effect at the time of such Required
Note Payment) would be less than 6% (or such other percentum as may
be made applicable to the Company at the time of such Required Note
Payment by the CFTC) of the funds required to be segregated pursuant
to the CEA and the regulations thereunder and the foreign futures or
foreign options secured amount less the market value of commodity
options purchased by customers on or subject to the rules of a
contract market or a foreign board of trade, provided that the
deduction for each customer shall be limited to the amount of
customer funds in such customer's account and foreign futures and
foreign options secured amounts; or
(iv) Net Capital -- in the event that the Net Capital of the
Company would be less than 120% (or such other percentum as may be
made applicable to the Company at the time of such Required Note
Payment by the Examining
LaBranche & CO. 31 NOTE PURCHASE AGREEMENT
<PAGE>
Authority or the SEC) of the minimum dollar amount required by Rule
15c3-1 (or such other dollar amount as may be made applicable to the
Company at the time of such Required Note Payment by the Examining
Authority or the SEC); or
(v) Net Capital - Futures Commission Merchant -- in the event
that the Company is registered as a futures commission merchant
under the CEA, its net capital (as defined in the CEA and the
regulations thereunder as in effect at the time of such Required
Note Payment) would be less than 120% (or such other percentum as
may be made applicable to the Company at the time of such Required
Note Payment by the CFTC) of the minimum dollar amount required by
the CEA and the regulations thereunder as in effect at the time of
such Required Note Payment (or such other dollar amount as may be
made applicable to the Company at the time of such Required Note
Payment by the CFTC); or
(vi) Other -- in the event that the Company is subject to the
provisions of paragraph (a)(6)(v) or paragraph (c)(2)(x)(B)(1) of
Rule 15c3-1, the Net Capital of the Company would be less than the
amount required to satisfy the 1,000% test (or such other percentum
test as may be made applicable to the Company at the time of such
Required Note Payment by the Examining Authority or the SEC) stated
in such applicable paragraph;
(the Net Capital necessary to enable the Company to avoid such suspension
of its obligation to pay a Required Note Payment being referred to as the
"Required Payment Minimum Capital").
(b) Actions Taken with Respect to Suspension. During any such period
when the obligation to make a Required Note Payment is suspended in
accordance with Section 12.1(a), the Company shall, as promptly as is
consistent with the protection of its customers, reduce its business to a
condition whereby such Required Note Payment with accrued interest thereon
could be paid (together with the payment of any other Payment Obligation
of the Company payable at or prior to the date of such Required Note
Payment) without the Company's Net Capital being below the Required
Payment Minimum Capital. The Company shall provide the holders of the
Notes and the NYSE immediate notice of the termination of such suspension,
and no later than the 5th day after delivery of such notice, make such
Required Note Payment.
(c) Recapture of Note Required Payments. If a Required Note Payment
is made and immediately after such Required Note Payment, the Net Capital
of the Company is less than the Required Payment Minimum Capital with
respect thereto, each holder of Notes receiving all or a portion of such
Required Note Payment shall (whether or not such holder had any knowledge
or notice that such Required Note Payment was made in violation of Section
12.1(a)) repay to the Company, its successors or assigns, on a pro rata
basis among the holders of the Notes receiving such payment, such portion
of the sum so paid (without interest) as necessary to cause the Company to
be in compliance under Section 12.1(a) with respect to the portion of such
Required Note Payment not so repaid (such compliance to be determined
based on facts and circumstances in effect on the date the Company first
made such Required Note Payment); provided that any suit by or on behalf
of the Company for the recovery of any such Required Note Payment must be
commenced within 2 years of the date such Required Note Payment was first
paid by the Company. Such repaid portion of such
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<PAGE>
Required Note Payment shall be held by the Company as if such repaid
portion of such Required Note Payment had never been made.
12.2 Suspension of Optional Payments.
(a) Suspension. The Company may offer to make a payment of principal
of the Notes pursuant to Section 8.2 and Section 8.6 only with the prior
written permission of the Examining Authority (such payment being
hereinafter referred to as an "Optional Note Payment"). No Optional Note
Payment may be made during the 365 day period following the Closing Date.
No Optional Note Payment shall be made if after giving effect thereto (and
to all other payments of principal of outstanding subordination agreements
of the Company including the return of any Secured Demand Note (and any
collateral held therefor) the maturity or accelerated maturity of which
are scheduled to occur on or before the earlier of 6 months after the date
such Optional Note Payment is to occur or the Scheduled Maturity Date) and
without reference to any projected profit or loss of the Company, any of
the following conditions exist:
(i) Aggregate Debt -- in the event that the Company is not
operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Aggregate
Debt of the Company would exceed 1,000% of the Net Capital of the
Company (or such other percentum as may be made applicable to the
Company at the time of such Optional Note Payment by the Examining
Authority or the SEC); or
(ii) Aggregate Debit Items -- in the event that the Company is
operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Net
Capital of the Company would be less than 5% (or such other
percentum as may be made applicable to the Company at the time of
such Optional Note Payment by the Examining Authority or the SEC) of
Aggregate Debit Items of the Company; or
(iii) Futures Commission Merchant -- in the event that the
Company is registered as a futures commission merchant under the
CEA, the net capital of the Company (as defined in the CEA and the
regulations thereunder as in effect at the time of such Optional
Note Payment) would be less than 7% (or such other percentum as may
be made applicable to the Company at the time of such Optional Note
Payment by the CFTC) of the funds required to be segregated pursuant
to the CEA and the regulations thereunder and the foreign futures or
foreign options secured amount less the market value of commodity
options purchased by customers on or subject to the rules of a
contract market or a foreign board of trade, provided that the
deduction for each customer shall be limited to the amount of
customer funds in such customer's account and foreign futures and
foreign options secured amounts; or
(iv) Net Capital -- in the event that the Net Capital of the
Company would be less than 120% (or such other percentum as may be
made applicable to the Company at the time of such Optional Note
Payment by the Examining Authority or the SEC) of the minimum dollar
amount required by Rule 15c3-1 (or such other dollar amount as may
be made applicable to the Company at the time of such Optional Note
Payment by the Examining Authority or the SEC); or
LaBranche & CO. 33 NOTE PURCHASE AGREEMENT
<PAGE>
(v) Net Capital - Futures Commission Merchant -- in the event
that the Company is registered as a futures commission merchant
under the CEA and if its net capital (as defined in the CEA and the
regulations thereunder as in effect at the time of such Optional
Note Payment) would be less than 120% (or such other percentum as
may be made applicable to the Company at the time of such Optional
Note Payment by the CFTC) of the minimum dollar amount required by
the CEA and the regulations thereunder as in effect at the time of
such Optional Note Payment (or such other dollar amount as may be
made applicable to the Company at the time of such Optional Note
Payment by the CFTC); or
(vi) Other -- in the event that the Company is subject to the
provisions of paragraph (a)(6)(v) or paragraph (c)(2)(x)(B)(1) of
Rule 15c3-1, the Net Capital of the Company would be less than the
amount required to satisfy the 1,000% test (or such other percentum
test as may be made applicable to the Company at the time of such
Optional Note Payment by the Examining Authority or the SEC) stated
in such applicable paragraph;
(the Net Capital necessary to enable the Company to avoid such suspension
of its obligation to pay an Optional Note Payment being referred to as the
"Optional Payment Minimum Capital").
(b) Recapture of Optional Note Payments. If an Optional Note Payment
is made and immediately after such Optional Note Payment, the Net Capital
of the Company is less than the Optional Payment Minimum Capital with
respect thereto, each holder of Notes receiving all or a portion of such
Optional Note Payment shall (whether or not such holder had any knowledge
or notice that such Optional Note Payment was subject to suspension
pursuant to Section 12.2(a)) repay to the Company, its successors or
assigns, on a pro rata basis among the holders of the Notes receiving such
payment, such portion of the sum so paid (without interest) as necessary
to cause the Company to be in compliance under Section 12.2(a) with
respect to the portion of such Optional Note Payment not so repaid (such
compliance to be determined based on facts and circumstances in effect on
the date the Company first made such Optional Note Payment); provided that
any suit by or on behalf of the Company for the recovery of any such
Optional Note Payment must be commenced within 2 years of the date such
Optional Note Payment was first paid by the Company. Such repaid portion
of such Optional Note Payment shall be held by the Company as if such
repaid portion of such Optional Note Payment had never been made.
12.3 Recapture Interest.
Interest shall accrue at the interest rate provided in the Notes for
overdue payments of principal on each payment or prepayment of principal of the
Notes (and on all interest and Make-Whole Amount paid together with such
payment) that is repaid by any holder of Notes as provided in Section 12.1(c) or
Section 12.2(b) (such repaid amount referred to herein as the "Recaptured
Amount") from the date such payment was first paid by the Company to such holder
until the date when such Recaptured Amount, and the default interest thereon, is
finally, fully and indefeasibly paid by the Company to each such holder. Upon
such full, final and indefeasible payment, such holder shall pay to the Company
interest on such Recaptured Amount in respect of any period when both the
Default Rate applied to (and was indefeasibly paid to and collected by such
holder) such Recaptured Amount as provided in this Section 12.3
LaBranche & CO. 34 NOTE PURCHASE AGREEMENT
<PAGE>
and such Recaptured Amount was in the possession of such holder, at the federal
funds overnight rate in effect from time to time during such period.
12.4 Subordination of Obligations.
The obligation of the Company under the Notes and this Agreement with
respect to the payment of outstanding principal of, interest on, and Make-Whole
Amount, if any, due with respect thereto, at any time when an Insolvency Event
has occurred and is continuing, is and shall be fully and irrevocably
subordinate in right of payment and subject to the prior payment or provision
for payment in full of all claims of all other present and future creditors of
the Company arising out of any matter occurring prior to the date on which the
Company's obligation to make any such payment in respect of the Notes matures
consistent with the provisions hereof, except for
(a) claims which are the subject of subordination provisions which
rank on the same priority as the Notes or the class of claims of which the
Notes are a member (claims hereunder shall rank pari passu with such
claims), and
(b) claims which are the subject of subordination provisions which
rank junior to the Notes or the class of claims of which the Notes are a
member (claims hereunder shall be senior to such claims),
provided that the rights of the holders of the Notes shall rank, now and in the
future, prior and superior to any claims represented by capital, equity or other
ownership interests of the Company, including, without limitation, claims of
general partners, limited partners, stockholders, and members, and claims
derived from such interests, including, without limitation, declared
distributions or dividends in respect of such interests, regardless of the
priority such claims would otherwise have under statute or law. Claims made
senior to the Notes pursuant to this Section 12.4 are referred to herein as
"Senior Claims".
12.5 Insolvency Event.
In the event of the appointment of a receiver or trustee of the Company or
in the event of its insolvency, liquidation pursuant to the SIPA or otherwise,
bankruptcy, assignment for the benefit of creditors, reorganization (whether or
not pursuant to bankruptcy laws) or any other marshalling of the assets and
liabilities of the Company (such events referred to collectively as an
"Insolvency Event"), the obligation of the Company to pay the principal of the
Notes, together with interest accrued thereon and the Make-Whole Amount, if any,
due with respect thereto, shall become due and payable in full (notwithstanding
any contrary provision of this Agreement or the Notes) but the holders of the
Notes shall not be entitled to participate or share, ratably or otherwise, in
the distribution of assets of the Company in satisfaction of such obligation to
pay the principal of the Notes, together with the interest accrued thereon and
the Make-Whole Amount, if any, due with respect thereto, until all Senior Claims
have been fully satisfied (or provision made for payment if assets of the
Company available to pay the same shall be adequate in amount to satisfy all
such claims fully). Subject to the payment in full of all Senior Claims, the
holders of Notes shall be, to the extent of distributions of Property of the
Company to the holders of Senior Claims to which the holders of Notes would be
entitled but for this Section 12, subrogated to the rights of the holders of
such Senior Claims.
LaBranche & CO. 35 NOTE PURCHASE AGREEMENT
<PAGE>
12.6 Obligations Not Impaired.
Nothing contained in this Section 12 shall impair, as between the Company
and any holder of Notes, the obligation of the Company to pay to such holder the
principal of the Notes, interest thereon and Make-Whole Amount, if any, due with
respect thereto, as and when the same shall become due and payable in accordance
with the terms hereof to the extent that such payments are made in compliance
with Section 12.1 or Section 12.2, or require the holders of the Notes to turn
over any such payment to the Company except as provided in Section 12.1(c) and
Section 12.2(b), or subordinate the claims against the Company of the holders of
the Notes to any other Person except the holder of a Senior Claim, and then only
in connection with an Insolvency Event. Nothing contained in this Section 12
shall prevent any holder of any Notes from exercising all rights, powers and
remedies otherwise permitted by applicable law, this Agreement and the Notes.
12.7 Non-liability of NYSE.
You warrant and represent that the Notes are not being purchased in
reliance upon the standing of the Company as a member organization of the NYSE
or upon the NYSE's surveillance of the Company's financial position or its
compliance with the Constitution, Rules and practices of the NYSE. You have made
such investigation of the Company and its members, partners, officers and
directors as you deem necessary and appropriate under the circumstances. You are
not relying upon the NYSE to provide any information concerning or relating to
the Company and you agree that the NYSE has no responsibility to disclose to the
holders of the Notes any information concerning or relating to the Company which
it may now, or at any future time, have. Neither the NYSE, its Special Trust
Fund, nor any director, officer, trustee or employee of the NYSE or said Trust
Fund shall be liable to the holders of the Notes with respect to this Agreement
or the repayment the Notes or of any interest thereon or other amounts due with
respect thereto.
12.8 Status of Proceeds of Notes.
The proceeds of the loan evidenced hereby shall be dealt with in all
respects as capital of the Company, shall be subject to the risks of its
business, and may be deposited in an account or accounts in the Company's name
in any bank or trust company.
12.9 Notices to NYSE.
Whenever prior written notice to the NYSE is required pursuant to the
provisions of this Agreement, such written notice shall be given by the Company
to
The New York Stock Exchange, Inc.
20 Broad Street
New York, NY 10005
Attn: Surveillance Director,
or as otherwise directed by the NYSE.
LaBranche & CO. 36 NOTE PURCHASE AGREEMENT
<PAGE>
12.10 Futures Commission Merchants.
If the Company is a futures commission merchant, as that term is defined
in the CEA, the Company agrees, consistent with the requirements of section
1.17(h) of the regulations of the CFTC (17 C.F.R. ss.1.17(h)), that:
(a) whenever prior written notice by the Company to the NYSE is
required pursuant to the provisions of this Agreement, the same prior
written notice shall be given by the Company to
(i) the CFTC at its principal office in Washington, D.C.,
Attention Chief Accountant of Division of Trading and Markets,
and/or
(ii) the commodity exchange of which the Company is a member
and which is then designated by the CFTC as the Company's DSRO;
(b) whenever prior written consent, permission or approval of the
NYSE is required pursuant to the provisions of this Agreement, the Company
shall also obtain the prior written consent, permission or approval of the
CFTC and/or of the DSRO; and
(c) whenever the Company receives written notice of acceleration of
maturity pursuant to the provisions of this Agreement, the Company shall
promptly give written notice thereof to the CFTC at the address above
stated and to the DSRO, as required.
12.11 Set-off.
The holders of the Notes agree that they are not taking and will not take
or assert as security for the payment of the Notes any security interest in or
Lien upon, whether created by contract, statute or otherwise, any Property of
the Company or any Property in which the Company may have an interest, which is
or at any time may be in the possession or subject to the control of any holder
of Notes. The holders of the Notes hereby waive, and further agree that they
will not seek to obtain payment of the Notes in whole or in any part by
exercising, any right of set-off they may assert or possess in connection with,
and related to, the Notes, whether created by contract, statute or otherwise.
Any agreement between the Company and the holders of the Notes (whether in the
nature of a general loan and collateral agreement, a security or pledge
agreement or otherwise) shall be deemed amended hereby to the extent necessary
so as not to be inconsistent with the provisions of this Section 12.11.
12.12 Amendment.
Notwithstanding any other provision of this Agreement, this Agreement and
the Notes shall not be modified or amended without the prior written approval of
the NYSE. This instrument embodies the entire agreement between the Company and
the holders of the Notes and no other evidence of such agreement has been or
will be executed without the prior written consent of the NYSE.
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<PAGE>
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
13.1 Registration of Notes.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.
13.3 Limitation on Transfer of Notes.
No holder of Notes may, without the prior written consent of the Company,
transfer its Notes to a Competitor or an affiliate of a Competitor. The Company
will notify the Examining Authority of such transfer, to the extent required by
law or regulation.
13.4 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, a Purchaser or
LaBranche & CO. 38 NOTE PURCHASE AGREEMENT
<PAGE>
another holder of a Note with a minimum net worth of at least $50,000,000,
such Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES
14.1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in New York,
New York at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
14.2 Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel) incurred
by you and each Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement or the Notes (whether or not such amendment, waiver
or consent becomes effective), including, without limitation:
LaBranche & CO. 39 NOTE PURCHASE AGREEMENT
<PAGE>
(a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder of any Note; and
(b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or
in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes.
The Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER
17.1 Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that
(a) no amendment or waiver of any of the provisions of any one or
more of Section 1 through Section 6 and Section 21, or any defined term
(as it is used therein), will be effective as to you unless consented to
by you in writing, and
(b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby,
(i) subject to the provisions of Section 11 relating to
acceleration or rescission, change the amount or time of any
prepayment or payment of principal
LaBranche & CO. 40 NOTE PURCHASE AGREEMENT
<PAGE>
of, or reduce the rate or change the time of payment or method of
computation of interest or of the Make-Whole Amount on, the Notes,
(ii) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any such
amendment or waiver, or
(iii) amend any of Section 8, Section 11.1(a), Section
11.1(b), Section 11.2 through Section 11.6, inclusive, or Section
20.
17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof or of the Notes. The Company will
deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the entering
into by any holder of Notes of any waiver or amendment of any of the terms
and provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did not consent to
such waiver or amendment.
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default,
Event of Default or Event of Acceleration not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
LaBranche & CO. 41 NOTE PURCHASE AGREEMENT
<PAGE>
18. NOTICES
All notices and communications provided for hereunder shall be in writing
and sent
(a) by telecopy if the sender on the same day sends a confirming
copy of such notice by a recognized overnight delivery service (charges
prepaid),
(b) by registered or certified mail with return receipt requested
(postage prepaid), or
(c) by a recognized overnight delivery service (with charges
prepaid).
Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of George M.L. LaBranche, IV, or at
such other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation,
(a) consents, waivers and modifications that may hereafter be
executed,
(b) documents received by you at the Closing (except the Notes
themselves), and
(c) financial statements, certificates and other information
previously or hereafter furnished to you,
may be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
LaBranche & CO. 42 NOTE PURCHASE AGREEMENT
<PAGE>
20. CONFIDENTIAL INFORMATION
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company in connection with
the transactions contemplated by or otherwise pursuant to this Agreement that is
proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by you as being confidential information of
the Company, provided that such term does not include information that
(a) was publicly known or otherwise known to you prior to the time
of such disclosure,
(b) subsequently becomes publicly known through no act or omission
by you or any Person acting on your behalf,
(c) otherwise becomes known to you other than through disclosure by
the Company, or
(d) constitutes financial statements delivered to you under Section
7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to
(i) your directors, officers, trustees, employees, agents, attorneys
and affiliates, (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes),
(ii) your financial advisors and other professional advisors who
agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to sell
such Note or any part thereof or any participation therein (if such Person
has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section
20),
(vi) any federal or state regulatory authority having jurisdiction
over you,
(vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio, or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate
LaBranche & CO. 43 NOTE PURCHASE AGREEMENT
<PAGE>
(A) to effect compliance with any law, rule, regulation or
order applicable to you,
(B) in response to any subpoena or other legal process,
(C) in connection with any litigation to which you are a party
or
(D) if an Event of Default or an Event of Acceleration has
occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS
22.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2 Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
LaBranche & CO. 44 NOTE PURCHASE AGREEMENT
<PAGE>
22.3 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank; next page is signature page.]
LaBranche & CO. 45 NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
---------------------------------
Name: George M.L. LaBranche IV
Title: Sr. Managing Director
The foregoing is hereby agreed to as
of the date thereof.
[Separately executed by each
of the following Purchasers]
COLUMBINE LIFE INSURANCE COMPANY
By ING Investment Management, Inc., as agent
By: /s/ Fred C. Smith
---------------------------------
Name: Fred C. Smith
Title: Senior Vice President
and Managing Director
PEERLESS INSURANCE COMPANY
By ING Investment Management, Inc., as agent
By: /s/ Fred C. Smith
---------------------------------
Name: Fred C. Smith
Title: Senior Vice President
and Managing Director
LaBranche & CO. 46 NOTE PURCHASE AGREEMENT
<PAGE>
INDIANA INSURANCE COMPANY
By ING Investment Management, Inc., as agent
By: /s/ Fred C. Smith
---------------------------------
Name: Fred C. Smith
Title: Senior Vice President
and Managing Director
SOUTHLAND LIFE INSURANCE COMPANY
By ING Investment Management, Inc., as agent
By: /s/ Fred C. Smith
---------------------------------
Name: Fred C. Smith
Title: Senior Vice President
and Managing Director
SECURITY LIFE OF DENVER INSURANCE COMPANY
By ING Investment Management, Inc., as agent
By: /s/ Fred C. Smith
---------------------------------
Name: Fred C. Smith
Title: Senior Vice President
and Managing Director
LaBranche & CO. 47 NOTE PURCHASE AGREEMENT
<PAGE>
NN LIFE INSURANCE COMPANY OF CANADA
By: /s/ Michel Tremblay
---------------------------------
Name: Michel Tremblay
Title: Vice President - Investments
By: /s/ E. Charlene Valiquette
---------------------------------
Name: E. Charlene Valiquette
Title: V.P. & Chief Financial Officer
WESTERN UNION INSURANCE COMPANY
By: /s/ Michel Tremblay
---------------------------------
Name: Michel Tremblay
Title: Senior Vice President - Investments
LaBranche & CO. 48 NOTE PURCHASE AGREEMENT
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Accelerated Maturity Date" means with respect to a notice of acceleration
given pursuant to Section 11.2(a) or Section 11.2(b), the last Business Day of
the calendar month that is 6 months (including the month within which such
notice shall have been given) after the day such notice shall have been given.
"Adjusted Partners' Capital" means, at any time, an amount equal to the
sum of
(a) partners' capital as shown on a statement of financial position
of the Company,
(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,
determined at such time, in accordance with GAAP, to the extent applicable.
"Affiliate" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is
under common Control with, such first Person, and
(b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any corporation or other business organization of which the
Company beneficially owns or holds, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity interests.
As used in this definition, "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. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"Aggregate Debit Items" means "aggregate debit items" as computed in
accordance with Exhibit A to 17 C.F.R. ss.240.15c3-3 as amended from time to
time, and any successor rule or regulation of the SEC regulating the same
subject matter.
"Aggregate Debt" means "aggregate indebtedness" as defined by Rule 15c3-1.
"Big Six Accounting Firm" means any of Price Waterhouse & Co., Arthur
Andersen & Co., Ernst & Young, KPMG Peat Marwick, Deloitte & Touche and Coopers
& Lybrand and their respective successors.
LaBranche & CO. Schedule B-1 NOTE PURCHASE AGREEMENT
<PAGE>
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City, New York are required or authorized to
be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CEA" means the Commodity Exchange Act, together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.
"CFTC" means the Commodity Futures Trading Commission and any successor
organization discharging the regulatory functions of the Commodity Futures
Trading Commission.
"Change in Control" means the occurrence of any of the following events:
(a) if the Company is organized as a limited partnership,
(i) more than 50% of the limited and general partnership
interest of the Company is legally and beneficially owned by
Persons other than Acceptable Persons, or
(ii) more than 50% of the general partnership interest of the
Company is legally and beneficially owned by Persons other than
Acceptable Persons;
(b) if the Company is not organized as a limited partnership, more
than 50% of the equity interest of the Company is legally and beneficially
owned by Persons other than Acceptable Persons;
(c) more than 50% of the equity interest of the General Partner is
legally and beneficially owned by Persons other than Acceptable Persons;
or
(d) fifty percent or more of the general partnership interest of
the Company (for so long as the Company is organized as a limited
partnership) is beneficially owned by any Person other than LaB Investing
Co. L.L.C., a New York limited liability company,
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, at any time, a natural person who,
(i) in respect of the Company, on the Closing Date, 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 natural person, or
(ii) in respect of the General Partner, on the Closing Date,
owned, directly or indirectly, membership interests in the General
Partner.
LaBranche & CO. Schedule B-2 NOTE PURCHASE AGREEMENT
<PAGE>
"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.
"Change in Control Date" means, at any time in respect of a Change in
Control, if prior to such Change in Control, the date upon which the Company
reasonably believes such Change in Control will occur, and if such Change in
Control has occurred, the date on which such Change in Control occurred.
"Change in Control Notice Event" means the execution of any definitive
written agreement which, when fully performed by the parties thereto, would
result in a Change in Control, provided that the existence of customary closing
conditions shall not render an otherwise definitive written agreement
non-definitive.
"Change in Control Payment Date" is defined in Section 8.6(b)(i).
"Closing" is defined in Section 3.
"Company" means LaBranche & Co., a New York limited partnership, and its
successors and assigns.
"Competitor" means at any time any Person which is a specialist broker
member of the NYSE at such time.
"Confidential Information" is defined in Section 20.
"Debt" with respect to any Person means, at any time, without duplication:
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money); or
LaBranche & CO. Schedule B-3 NOTE PURCHASE AGREEMENT
<PAGE>
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clause (a) through clause (f) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clause (a) through clause (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default or an Event of Acceleration.
"Default Rate" means that rate of interest that is the greater of
(i) 2% per annum above the rate of interest stated in clause (a) of
the first paragraph of the Notes or
(ii) 2% over the rate of interest publicly announced by The Bank of
New York (or its successors and assigns) in New York, New York as its
"base" or "prime" rate.
"DSRO" means the designated self-regulatory organization of the Company
pursuant to a plan filed with the CFTC pursuant to section 1 .52 of the
regulations of the CFTC (17 C.F.R. ss.1.52).
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the IRC.
"Event of Acceleration" is defined in Section 11 .1.
"Event of Default" is defined in Section 11 .3.
"Examining Authority" has the meaning assigned to it by Rule 15c3-1,in
relation to the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fiscal Quarter" means any of the quarters beginning on January 1, April
1, July 1 and October 1 and ending on March 31, June 30, September 30 and
December 31, respectively.
LaBranche & CO. Schedule B-4 NOTE PURCHASE AGREEMENT
<PAGE>
"FOCUS Report" means a Financial and Operational Combined Uniform Single
Report required to be filed on a monthly or quarterly basis, as the case may be,
with the SEC or the NYSE, or any report that is required in lieu of such report.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"General Partner" means LaB Investing Co. L.L.C., a New York limited
liability company, for so long as it is the general partner of the Company, and
any successor to its capacity as such general partner.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company conducts all or any
part of its business, or which asserts jurisdiction over any
properties of the Company, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government, including, without limitation, the NYSE, the NASD and the
Examining Authority of the Company.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such indebtedness or
obligation, or
(ii) to maintain any working capital or other balance sheet
condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
LaBranche & CO. Schedule B-5 NOTE PURCHASE AGREEMENT
<PAGE>
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Insolvency Event" is defined in Section 12.5.
"Institutional Investor" means
(a) any original purchaser of a Note,
(b) any holder of a Note holding more than 2.5% of the aggregate
principal amount of the Notes then outstanding, and
(c) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any
insurance company, any broker or dealer, or any other similar financial
institution or entity, regardless of legal form.
"Intercreditor Agreement" means an agreement in the form of Exhibit 4.11.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Make-Whole Amount" is defined in Section 8.7.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets,
properties or prospects of the Company, or
(b) the ability of the Company to perform its obligations under this
Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"Maximum Tax Rate" means, with respect to any period, a percentage
(expressed as a decimal) equal to the maximum annual income tax rate on ordinary
income of a natural person subject at such time to Federal, New York State, and
New York City income taxes, determined in respect of the last day of such
period.
LaBranche & CO. Schedule B-6 NOTE PURCHASE AGREEMENT
<PAGE>
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001 (a)(3) of ERISA).
"NASD" means the National Association of Securities Dealers, Inc., and any
successor organization discharging the regulatory functions of the National
Association of Securities Dealers, Inc.
"Net Capital" means "net capital," as defined by Rule 15c3-1.
"NYSE" means the New York Stock Exchange, Inc., or if the Company is
terminated as a member of the NYSE, then "NYSE" shall mean the Examining
Authority at such time.
"NYSE Exchange Memberships" means, at any time, NYSE exchange memberships
carried as assets on the books of the Company.
"NYSE Net Capital" means, at any time, the "net capital" of the Company at
such time, computed in accordance with Rule 325 of the NYSE, or any later
enacted rule of the NYSE that supersedes such Rule 325.
"NYSE Required Net Capital" means, at any time, the minimum amount of NYSE
Net Capital necessary at such time in order to permit the Company to "expand its
business" as defined by and pursuant to Rule 326(a) of the NYSE, or any later
enacted rule of the NYSE that supersedes such Rule 326(a).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Responsible Official or
of any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.
"Operating Income" means, in respect of any period, the net income (or
deficit) of the Company before
(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) consultants' fees, and
(c) taxes,
(but only to the extent included in the determination of such net income)
determined for such period in accordance with GAAP.
"Optional Note Payment" is defined in Section 12.2(a).
"Optional Payment Minimum Capital" is defined in Section 12.2(a)(vi).
"Other Agreements" is defined in Section 2.
LaBranche & CO. Schedule B-7 NOTE PURCHASE AGREEMENT
<PAGE>
"Other Purchasers" is defined in Section 2.
"Payment Obligation" has the meaning specified in Appendix D to Rule
15c3-1.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Pension Plan" means, at any time, any "employee pension benefit plan" (as
such term is defined in section 3 of ERISA) maintained at such time by the
Company or any ERISA Affiliate for employees of the Company or such ERISA
Affiliate, excluding any Multiemployer Plan.
"Pension Plan Note" means notes or loans made by a Pension Plan of the
Company to the Company, so long as the aggregate principal amount of all Pension
Plan Notes outstanding does not at any time exceed $1,300,000.
"Permitted Secured Debt" means, at any time, Debt
(a) that was incurred in the normal course of the Company's
business for the purpose of selling, trading, settling or otherwise
managing the actively traded stock held by the Company,
(b) that is secured only by stocks actively traded by the Company
at such time, and
(c) the principal amount of which does not exceed an amount equal
to 70% of the market value of such stock at such time, after deducting
from such value the amount of all other obligations secured by Liens on
such stock.
"Permitted Subordinated Debt" means, at any time, any obligation for money
borrowed by the Company that at such time
(a) is subordinated to the claims of creditors of the Company
pursuant to a subordination agreement (as defined in Appendix D of Rule
15c3-1),
(b) is properly accounted for as Net Capital on the FOCUS Report of
the Company,
(c) is subject to a duly authorized, executed and delivered, and
enforceable agreement in the form of the Intercreditor Agreement, and
(d) ranks junior to the Notes in priority as to payment and
performance.
"Permitted Tax Dividends" means distributions made during any period when
the Company is organized as a limited partnership to the partners (general and
limited) of the Company for the purpose of funding, and in the amount of, the
federal, state and local income tax liabilities of its partners attributable to
the taxable income of the Company.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
LaBranche & CO. Schedule B-8 NOTE PURCHASE AGREEMENT
<PAGE>
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation that
is preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"property" or "properties" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"PTE" is defined in Section 6.2(a).
"Recaptured Amount" is defined in Section 12.3.
"Required Holders" means, at any time, the holder or holders of more than
50% in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"Required Note Payment" is defined in Section 12.1(a).
"Required Payment Minimum Capital" is defined in Section 12.1(a)(vi).
"Responsible Official" means any senior managing director (or its
equivalent) of the Company and any official of the Company with responsibility
for the administration of the relevant portion of this Agreement.
"Restricted Payment" means
(a) any distribution in respect of the Company's partnership
capital (including distributions characterized as interest thereon), other
than dividends and distributions payable solely in additional partnership
capital interests or Permitted Subordinated Debt,
(b) redemptions, purchases or other acquisitions (direct or
indirect) or partnership interests,
(c) payments of interest, principal or other amounts in respect of
Permitted Subordinated Debt, and
(d) Managing Directors' Compensation and Consultants' Fees.
As used in this definition,
"Managing Directors' Compensation and Consultants' Fees" has the
meaning attributed to it in the Company's Financial Statements for the
Years Ended December 31, 1996, 1995, 1994, 1993, and 1992, audited by
Arthur Andersen LLP and included in the Memorandum.
LaBranche & CO. Schedule B-9 NOTE PURCHASE AGREEMENT
<PAGE>
"Rule 15c3-1" means 17 C.F.R. ss.240.15c3-1 as amended from time to time,
and any successor rule or regulation of the SEC regulating the same subject
matter.
"Scheduled Maturity Date" is defined in Section 8.1.
"SEC" means the Securities and Exchange Commission and any successor
organization discharging the regulatory functions of the Securities and Exchange
Commission.
"SEC Net Capital" means, at any time, the "net capital" of the Company at
such time, computed in accordance with Rule 15c3-1.
SEC Required Net Capital" means, at any time, the minimum amount to which
SEC Net Capital must be equal at such time pursuant to Rule 15c3-1 to remain in
compliance with all provisions thereof applicable to the Company, including the
provisions thereof imposing restrictions on the Company's obligation to pay the
principal of, and interest and Make-Whole Amount on, the Notes.
"Secured Demand Note" means a note issued pursuant to a "secured demand
note agreement" as defined by Appendix D to Rule 15c3-1.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Claims" is defined in Section 12.4(b).
"SIPA" means Securities Investor Protection Act of 1970, together with all
rules and regulations promulgated pursuant thereto, as amended from time to
time.
"SIPC" means the Securities Investor Protection Corporation and any
successor organization discharging the functions of the Securities Investor
Protection Corporation.
"Source" is defined in Section 6.2.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the
LaBranche & CO. Schedule B-10 NOTE PURCHASE AGREEMENT
<PAGE>
simultaneous payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so determined.
LaBranche & CO. Schedule B-11 NOTE PURCHASE AGREEMENT
<PAGE>
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment") dated as of June 3, 1998, by and among
LaBranche & Co. (the "Company"), a New York limited partnership, and EACH OF THE
INSTITUTIONS IDENTIFIED AS A HOLDER OF NOTES ON THE SIGNATURE PAGES HEREOF
(collectively, the "Noteholders").
1. PRELIMINARY STATEMENT
1.1 The Company entered into those separate Note Purchase Agreements,
dated as of September 15, 1997 (as in effect immediately prior to the Effective
Date, collectively, the "Existing Note Purchase Agreement" and as amended
hereby, the "Note Purchase Agreement"), with, respectively, each of the
Noteholders, pursuant to which the Company issued and sold to the holders of the
Notes $20,000,000 in principal amount of the Company's 8.17% Subordinated Notes
(the "Notes") due September 15, 2002.
1.2 Each of the Company and the Noteholders agrees to amend the Existing
Note Purchase Agreement as more particularly set forth in this Amendment.
2. DEFINED TERMS
The terms used herein have the meanings specified in the Existing Note
Purchase Agreement.
3. AMENDMENTS TO TERMS OF EXISTING NOTE PURCHASE AGREEMENT
3.1 Section 5.18.
Section 5.18(a) and Section 5.18(b) is amended to read in full as follows:
(a) Broker-Dealer Status. The Company is registered as a
broker-dealer with the SEC under the Exchange Act and with state
securities authorities in each state where the Company is required to be
so registered. The Company is a member organization in good standing of
the NYSE.
(b) Regulation T. The Company is a broker-dealer subject to the
provisions of Regulation T (12 C.F.R. ss.220) of the Board of Governors of
the Federal Reserve System. The Company maintains procedures and internal
controls designed to ensure that neither the Company nor any Subsidiary
extends or maintains 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 the Company and the
Subsidiaries, and the activities of employees of each thereof, to ensure
that neither the Company nor any Subsidiary extends or maintains credit to
or for its customers other than in accordance with the provisions of said
Regulation T.
3.2 Section 9.1.
Section 9.1 is amended to read in full as follows:
<PAGE>
The Company will comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws and all laws, rules and regulations of the SEC and the NYSE,
and will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses
(including, without limitation, those required by the SEC and the NYSE), in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect provided that the
failure of the Company to be registered as a broker-dealer in good standing with
the SEC under the Exchange Act, to be a member organization in good standing of
the NYSE, or to maintain its status as a specialist broker in good standing with
the NYSE, shall be a breach of this Section 9.1.
3.3 Section 10.5.
Section 10.5 is amended to read in full as follows:
The Company will not consolidate with or merge with any other Person or
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case
may be, shall be a solvent business organization organized and existing
under the laws of the United States or any State thereof or Canada or any
province thereof (including the District of Columbia), and, if the Company
is not such business organization;
(i) such business organization shall have executed and
delivered to each holder of any Notes its assumption of the due and
punctual performance and observance of each covenant and condition
of this Agreement, the Other Agreements and the Notes, and
(ii) shall have caused to be delivered to each holder of any
Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof,
(b) all necessary approvals of, and filings with, the NYSE and the
SEC shall have been obtained, and reasonable evidence thereof shall have
been provided to the holders of the Notes; and
(c) immediately after giving effect to such transaction, no Default,
Event of Default or Event of Acceleration shall have occurred and be
continuing.
2
<PAGE>
No such conveyance, transfer or lease of substantially all of the assets
of the Company shall have the effect of releasing the Company or any
successor business organization that shall theretofore have become such in
the manner prescribed in this Section 10.5 from its liability under this
Agreement or the Notes.
3.4 Schedule B.
Each of the definitions of "Intercreditor Agreement" and "Permitted
Subordinated Debt" in Schedule B to the Existing Note Purchase Agreement is
hereby amended to read in full as follows:
"Intercreditor Agreement means an agreement in the form of Exhibit
4.11 attached to the Note Purchase Agreement dated as of June 3, 1998 in
respect of the Company's 7.69% Subordinated Notes due June 3, 2008, as in
effect on June 3, 1998.
"Permitted Subordinated Debt" means, at any time, any obligation for
money borrowed by the Company that
(a) at such time
(i) is subordinated to the claims of creditors of the Company
pursuant to a subordination agreement (as defined in Appendix D of
Rule 15c3-1),
(ii) is properly accounted for as Net Capital on the FOCUS
Report of the Company,
(iii) is subject to a duly authorized, executed and delivered,
and enforceable agreement in the form of the Intercreditor
Agreement, and
(iv) ranks junior to the Notes in priority as to payment and
performance, or
(b) is evidenced by the Company's 7.69% Subordinated Notes due June
3, 2008.
4. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
The Company hereby represents and warrants to the holders of the Notes as
of the Effective Date:
(a) the Company, is duly organized, validly existing and in good
standing in its jurisdiction of organization;
(b) the Company has the power to enter into this Amendment and to
perform its obligations hereunder;
3
<PAGE>
(c) this Amendment has been duly authorized by all necessary action
on the part of the Company and its general partner, and this Amendment
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 nor delivery by the Company of this
Amendment nor the performance by it of its obligations hereunder or under
the Note Purchase Agreement or the Notes:
(i) will adversely affect the enforceability against the
Company of the Note Purchase Agreement or the Notes;
(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 Authority or other person (including,
without limitation, the NYSE) 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 its general partner, or any provision of
any law, rule, regulation, order or decree of any Governmental
Authority applicable to the Company or its general partner; or
(iv) will violate or constitute a default under any material
agreement to which any of 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) neither this Amendment nor 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; there is no fact known to the Company that is
peculiar to the Company (excluding facts of a general, publicly known,
economic or political nature) that has had, or so far as the Company can
now reasonably foresee, could reasonably be expected to have, a Material
Adverse Effect and that has not been set forth herein or in the other
documents, certificates and other writings delivered to you by or on
behalf of the Company specifically for use in connection with the
transactions contemplated hereby; and
(f) there exists no Default, Event of Acceleration or Event of
Default under the Note Purchase Agreement.
4
<PAGE>
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, the Note Purchase
Agreement, any agreement related thereto, or under applicable law. Except as
expressly provided herein,
(a) no other terms and 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
shall continue in full force and effect.
The Company hereby acknowledges, confirms, reaffirms and ratifies all of its
obligations and duties under the Note Purchase Agreement and all agreements
related thereto. This Amendment is not a limitation on the ability of any holder
of Notes to exercise any of its rights and remedies due to any Default, Event of
Acceleration or Event of Default in the Note Purchase Agreement, nor does this
Amendment constitute an agreement or obligation of any holder of Notes to give
its consent to any future amendment of the Note Purchase Agreement or to any
future transaction that would, absent consent of the holders of the Notes,
constitute a Default, an Event of Acceleration 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 the Note Purchase
Agreement. Upon the effectiveness of this Amendment, each reference in the Note
Purchase Agreement to any Note Purchase Agreement and each agreement or document
referring thereto 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 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.
5
<PAGE>
6.4 Effectiveness.
This Amendment may be executed in one or more counterparts and shall be
effective, as of the date hereof (the "Effective Date"), when at least one
counterpart shall have been executed by the Company and holders of Notes
constituting the Required Holders, and upon the approval by the Examining
Authority. Each set of counterparts which, collectively, show execution by each
party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
6
<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.
LABRANCHE & CO. BY LAB INVESTING
CO. LLC., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
----------------------------------
Name: GEORGE M.L. LABRANCHE IV
Title: SR. MANAGING DIRECTOR
<PAGE>
Holders of Notes
COLUMBINE LIFE INSURANCE COMPANY
PEERLESS INSURANCE COMPANY
INDIANA INSURANCE COMPANY
SOUTHLAND LIFE INSURANCE COMPANY
SECURITY LIFE OF DENVER INSURANCE COMPANY
By: ING Investment Management LLC, as Agent
By: /s/ Fred C. Smith
----------------------------------------
Name: Fred C. Smith
Title: SVP and Managing Director
NN LIFE INSURANCE COMPANY OF CANADA
By: /s/ Fred C. Smith
----------------------------------------
Name: Fred C. Smith
Title: Authorized Signatory
By: /s/ Michael B. Stevens
----------------------------------------
Name: Michael B. Stevens
Title: Authorized Signatory
WESTERN UNION INSURANCE COMPANY
By: /s/ Fred C. Smith
----------------------------------------
Name: Fred C. Smith
Title: Authorized Signatory
WESTERN UNION INSURANCE COMPANY
By: /s/ Michael B. Stevens
----------------------------------------
Name: Michael B. Stevens
Title: Authorized Signatory
<PAGE>
Exhibit 10.10
================================================================================
[COMPOSITE CONFORMED COPY WITH SUBSTANTIALLY ALL EXHIBITS
CONFORMED AS EXECUTED]
LABRANCHE & Co.
-----------------------
Note Purchase Agreement
-----------------------
DATED JUNE 3, 1998
$15,000,000 7.69% SUBORDINATED NOTES DUE JUNE 3, 2008
================================================================================
<PAGE>
TABLE OF CONTENTS PAGE
1. AUTHORIZATION OF NOTES .............................................. 1
2. SALE AND PURCHASE OF NOTES .......................................... 1
3. CLOSING ............................................................. 1
4. CONDITIONS TO CLOSING ............................................... 2
4.1 Representations and Warranties ................................. 2
4.2 Performance; No Default ........................................ 2
4.3 Compliance Certificate ......................................... 2
4.4 Opinions of Counsel ............................................ 2
4.5 Purchase Permitted By Applicable Law, etc ...................... 3
4.6 Net Capital .................................................... 3
4.7 Sale of Other Notes ............................................ 3
4.8 Payment of Special Counsel Fees ................................ 3
4.9 Private Placement Number ....................................... 3
4.10 Changes in Organizational Structure ............................ 3
4.11 Intercreditor Agreements ....................................... 4
4.12 Amendment to Existing Notes .................................... 4
4.13 Proceedings and Documents ...................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................... 4
5.1 Organization; Power and Authority .............................. 4
5.2 Authorization, etc ............................................. 5
5.3 Disclosure ..................................................... 5
5.4 Subsidiaries ................................................... 5
5.5 Compliance with Laws, Other Instruments, etc ................... 5
5.6 Governmental Authorizations, etc ............................... 6
5.7 Litigation; Observance of Agreements, Statutes and Orders ...... 6
5.8 Taxes .......................................................... 6
5.9 Title to Property; Leases ...................................... 7
5.10 Licenses, Permits, etc ......................................... 7
5.11 Compliance with ERISA .......................................... 7
5.12 Private Offering by the Company ................................ 8
5.13 Use of Proceeds; Margin Regulations ............................ 8
5.14 Existing Debt .................................................. 8
5.15 Foreign Assets Control Regulations, etc ........................ 9
5.16 Status under Certain Statutes .................................. 9
5.17 Membership in NYSE, Etc ........................................ 9
5.18 Priority of Notes .............................................. 9
5.19 Amendment to Existing Notes .................................... 10
6. REPRESENTATIONS OF THE PURCHASER .................................... 10
6.1 Purchase for Investment ........................................ 10
6.2 Source of Funds ................................................ 10
7. INFORMATION AS TO COMPANY ........................................... 12
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TABLE OF CONTENTS (Cont.) PAGE
7.1 Financial and Business Information ............................. 12
7.2 Officer's Certificate .......................................... 14
7.3 Inspection ..................................................... 15
8. REPAYMENT OF THE NOTES .............................................. 15
8.1 Required Repayments ............................................ 15
8.2 Optional Prepayments with Make-Whole Amount .................... 15
8.3 Allocation of Partial Prepayments .............................. 16
5.4 Maturity; Surrender, etc ....................................... 16
8.5 Purchase of Notes .............................................. 16
8.6 Offer to Pay upon Change in Control ............................ 17
8.7 Make-Whole Amount .............................................. 19
9. AFFIRMATIVE COVENANTS ............................................... 21
9.1 Compliance with Law ............................................ 21
9.2 Insurance ...................................................... 21
9.3 Maintenance of Properties ...................................... 22
9.4 Payment of Taxes and Claims .................................... 22
9.5 Legal Existence, etc ........................................... 22
9.6 Ranking of Notes ............................................... 22
9.7 Line of Business ............................................... 22
9.8 Compliance with Margin Regulations ............................. 22
9.9 Subsidiaries ................................................... 23
10. NEGATIVE COVENANTS .................................................. 23
10.1 Minimum Partners' Capital ...................................... 23
10.2 Permitted Debt ................................................. 23
10.3 Restricted Payments ............................................ 23
10.4 Transactions with Affiliates ................................... 24
10.5 Merger, Consolidation, etc ..................................... 24
10.6 Liens .......................................................... 25
10.7 Limitation on Loans ............................................ 25
11. EVENTS OF ACCELERATION; EVENTS OF DEFAULT; REMEDIES ................. 26
11.1 Events of Acceleration ......................................... 26
11.2 Remedies Upon an Event of Acceleration ......................... 27
11.3 Events of Default .............................................. 29
11.4 Remedies Upon an Event of Default .............................. 30
11.5 Other Remedies ................................................. 30
11.6 Annulment of Acceleration of Notes ............................. 31
12. SUSPENSION OF REPAYMENT; SUBORDINATION, STATUS AND OTHER MATTERS .... 31
12.1 Suspension of Required Payments ................................ 31
12.2 Suspension of Optional Payments ................................ 33
12.3 Recapture Interest ............................................. 35
12.4 Subordination of Obligations ................................... 35
12.5 Certain Events ................................................. 36
12.6 Obligations Not Impaired ....................................... 36
LaBranche & CO. NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS (Cont.) PAGE
12.7 Non-liability of NYSE ......................................... 36
12.8 Status of Proceeds of Notes ................................... 37
12.9 Notices to NYSE ............................................... 37
12.10 Futures Commission Merchants .................................. 37
12.11 Set-off ....................................................... 38
12.12 Amendment ..................................................... 38
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ....................... 38
13.1 Registration of Notes ......................................... 38
13.2 Transfer and Exchange of Notes ................................ 38
13.3 Limitation on Transfer of Notes ............................... 39
13.4 Replacement of Notes .......................................... 39
14. PAYMENTS ON NOTES ................................................... 39
14.1 Place of Payment .............................................. 39
14.2 Home Office Payment ........................................... 39
15. EXPENSES ETC. ....................................................... 40
15.1 Transaction Expenses .......................................... 40
15.2 Survival ...................................................... 40
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT ........ 40
17. AMENDMENT AND WAIVER ................................................ 41
17.1 Requirements .................................................. 41
17.2 Solicitation of Holders of Notes .............................. 41
17.3 Binding Effect, etc ........................................... 42
17.4 Notes held by Company, etc .................................... 42
18. NOTICES ............................................................ 42
19. REPRODUCTION OF DOCUMENTS ........................................... 43
20. CONFIDENTIAL INFORMATION ............................................ 43
21. SUBSTITUTION OF PURCHASER ........................................... 44
22. MISCELLANEOUS ....................................................... 45
22.1 Successors and Assigns ........................................ 45
22.2 Payments Due on Non-Business Days ............................. 45
22.3 Severability .................................................. 45
22.4 Construction .................................................. 45
22.5 Counterparts .................................................. 45
22.6 Governing Law ................................................. 46
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
LaBranche & CO. NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS (Cont.)
SCHEDULE 4.2 -- Pre-Closing Transactions
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.7 -- Certain Litigation
SCHEDULE 5.10 -- Patents, etc.
SCHEDULE 5.11 -- ERISA
SCHEDULE 5.14 -- Existing Debt
SCHEDULE 9.2 -- Insurance
EXHIBIT 1 -- Form of 7.69% Subordinated Note due June 3, 2008
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 4.11 -- Form of Intercreditor Agreement
EXHIBIT 4.12 -- Form of Amendment
LaBranche & CO. NOTE PURCHASE AGREEMENT
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LABRANCHE & Co.
One Exchange Plaza
New York, NY 10006
7.69% Subordinated Notes Due June 3, 2008
Dated June 3, 1998
To Each of the Purchasers Listed in
the Attached Schedule A:
Ladies and Gentlemen:
LaBranche & Co., a New York limited partnership (the "Company"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES
The Company will authorize the issue and sale of $15,000,000 aggregate
principal amount of its 7.69% Subordinated Notes due June 3, 2008 (the "Notes",
such term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement and the Other Agreements). The Notes shall be
substantially in the form of Exhibit 1, with such changes therefrom, if any, as
may be approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement; and references to Sections are, unless otherwise specified,
references to Sections of this Agreement.
2. SALE AND PURCHASE OF NOTES
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified below your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "Other Agreements")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "Other Purchasers"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified below
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
3. CLOSING
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Fulbright & Jaworski L.L.P., 666 5th
Avenue, New York, NY at 10:00 a.m., local New York City time, at a closing (the
"Closing") on June 3, 1998 or on such other Business Day thereafter on or prior
to July 1, 1998 as may be agreed upon by the Company and you and the Other
Purchasers. At the Closing the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $100,000 as you may request) dated the date of the
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
by wire transfer of immediately available funds for the account of the Company
to account number at The Bank of New York, One Wall Street, New York, NY 10015,
ABA# 021-000-018 FBO LaBranche & Co., A/C # 8540904708 Attn. Rick Rivera
212-635-6739. If at the Closing the Company shall fail to tender such Notes to
you as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, at the Closing, of
the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company in this Agreement shall
be correct as of the date hereof and at the time of the Closing.
4.2 Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Section 5.13) no Default, Event of Default or Event of Acceleration shall have
occurred and be continuing. Except as set forth on Schedule 4.2, the Company
shall not have entered into any transaction since June 1, 1997 that would have
been prohibited by Section 10.4, had such Section applied since such date.
4.3 Compliance Certificate.
The Company shall have delivered to you an Officers' Certificate dated the
date of the Closing, certifying that the conditions specified in Section 4.1,
Section 4.2 and Section 4.10 have been fulfilled, and certifying as to the
resolutions attached thereto and other proceedings relating to the
authorization, execution and delivery of the Notes and the Agreements.
4.4 Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing
(a) from Fulbright & Jaworski L.L.P., counsel for the Company,
covering the matters set forth in Exhibit 4.4(a) and covering such other
matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company hereby instructs its
counsel to deliver such opinion to you), and
(b) from Hebb & Gitlin, your special counsel in connection with such
transactions, substantially in the form of Exhibit 4.4(b) and covering
such other matters incident to such transactions as you may reasonably
request.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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4.5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall
(a) be permitted by the laws and regulations of each jurisdiction to
which you are subject, without recourse to provisions (such as section
1405(a)(8) of the New York Insurance Law) permitting limited investments
by insurance companies without restriction as to the character of the
particular investment,
(b) not violate any applicable law or regulation (including, without
limitation, regulations of the Board of Governors of the Federal Reserve
System in respect of margin lending), and
(c) not subject you to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or regulation was
not in effect on the date hereof.
If requested by you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
4.6 Net Capital.
The Company shall provide such evidence as is reasonably satisfactory to
you evidencing that the Company has obtained the approval of the NYSE to
classify the Notes as a component of the Net Capital of the Company.
4.7 Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
4.8 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.9 Private Placement Number.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.10 Changes in Organizational Structure.
The Company shall not have changed its jurisdiction of organization or
been a party to any merger or consolidation and shall not have succeeded to all
or any substantial part of the liabilities of any other entity, at any time
following December 31, 1997.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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4.11 Intercreditor Agreements.
Each partner and Affiliate of the Company which are the holders of
subordinated liabilities of the Company shall have executed and delivered an
Intercreditor Agreement.
4.12 Amendment to Existing Notes.
The amendment (the "Amendment") (the form of which is attached hereto as
Exhibit 4.12) of the Note Purchase Agreement dated September 15, 1997 between
the Company and the purchasers listed in Schedule A thereto relating to the
Company's issuance of the 8.17% Subordinated Notes due September 15, 2002 in the
aggregate principal amount $20,000,000 shall have been executed and delivered by
the Company.
4.13 Proceedings and Documents.
All proceedings in connection with the transactions contemplated by this
Agreement and all documents and instruments incident to such transactions shall
be satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as you or they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to you, as of the date of the Closing,
that:
5.1 Organization; Power and Authority.
(a) The Company. The Company
(i) is a limited partnership duly organized and, to the extent
applicable, validly existing and in good standing under the laws of
its jurisdiction of organization,
(ii) is duly qualified as a foreign limited partnership and is
in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and
(iii) has the legal power and authority to own or hold under
lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Other Agreements and the
Notes and to perform the provisions hereof and thereof.
(b) The General Partner. The General Partner
(i) is a limited liability company, duly organized and, to the
extent applicable, validly existing and in good standing under the
laws of its jurisdiction of organization, and
LaBranche & CO. NOTE PURCHASE AGREEMENT
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(ii) has all legal power and authority necessary to be, act
as, and carry out its responsibilities as, the general partner of
the Company.
5.2 Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary action on the part of the Company and the General
Partner, and this Agreement constitutes, and upon execution and delivery thereof
each Note will constitute, 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
(a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally, and
(b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Disclosure.
Except as disclosed in Schedule 5.3, this Agreement, the documents,
certificates and other writings delivered to you by or on behalf of the Company
in connection with the transactions contemplated hereby, taken as a whole, do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made. Except as expressly described
in Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, since December 31, 1997, there has been no change in the
financial condition, operations, business, properties or prospects of the
Company except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. There is no fact known
to the Company that is peculiar to the Company (excluding facts of a general,
publicly known, economic or political nature) that has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have a
Material Adverse Effect and that has not been set forth herein or in the other
documents, certificates and other writings delivered to you by or on behalf of
the Company specifically for use in connection with the transactions
contemplated hereby.
5.4 Subsidiaries.
The Company has no Subsidiaries.
5.5 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the General Partner on behalf
of the Company of this Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of
the General Partner or the Company under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter,
organizational document or by-laws, or any other agreement or instrument
to which the General Partner or the Company is bound or by which the
Company, the General Partner or any of their respective properties may be
bound or affected,
LaBranche & CO. NOTE PURCHASE AGREEMENT
5
<PAGE>
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the General
Partner or the Company, or
(c) violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to the General Partner or the
Company.
5.6 Governmental Authorizations, etc.
Neither the nature of the General Partner or the Company or of any of
their respective businesses or properties, nor any relationship between the
Company and any other Person, nor any circumstance in connection with the offer,
issuance, sale or delivery of the Notes and the execution and delivery of this
Agreement, or the performance of the obligations hereunder and thereunder, is
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority on the part of
the Company as a condition to the execution and delivery of this Agreement, the
offer, issuance, sale or delivery of the Notes, or the performance of the
obligations hereunder or thereunder, except for consents, approvals and
authorizations, and filings, registrations and qualifications, that have been
obtained or made.
5.7 Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.7, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any property of the Company or
challenging the validity or enforceability of this Agreement or the Notes,
in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) The Company is not in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental
Authority and is not in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.8 Taxes.
The Company has filed all tax returns that are required to have been filed
in any jurisdiction, and has paid all taxes shown to be due and payable on such
returns and all other taxes and assessments levied upon it or its properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments,
(a) the amount of which is not individually or in the aggregate
Material, or
(b) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect
to which the Company has established adequate reserves in accordance with
GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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5.9 Title to Property; Leases.
The Company has good and sufficient title to its properties that
individually or in the aggregate are Material. All leases that individually or
in the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.10 Licenses, Permits, etc.
Except as disclosed in Schedule 5.10:
(a) the Company owns or possesses all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and trade
names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company with respect to any
patent, copyright, service mark, trademark, trade name or other right
owned or used by the Company.
5.11 Compliance with ERISA.
(a) Disclosure. Schedule 5.11 sets forth all "employee pension
benefit plans" with respect to which the Company or any "affiliate" of the
Company is a "plan sponsor" or a "substantial employer" or in respect of
which the Notes could constitute an "employer security." To the best
knowledge of the Company, no part of the assets of any of the employee
pension benefit plans listed on Schedule 5.12 are managed, controlled or
invested by, or are on deposit with, any Purchaser or any affiliate
thereof. The terms "employee pension benefit plan" and "plan sponsor" have
the meanings specified in section 3 of ERISA, "substantial employer" has
the meaning specified in section 4062 of ERISA and "affiliate" and
"employer security" have the meanings specified in section 407(d) of
ERISA).
(b) Investment Advice. Neither the Company nor any of its Affiliates
has offered or delivered any evaluation or other investment advice on any
basis in respect of the advisability of the purchase of the Notes to any
Purchaser in any manner that would cause the Company or Affiliates to
become a "party in interest" (as defined in section 3 of ERISA) or a
"disqualified person" (as defined in section 4975 of the IRC) with respect
to any "employee benefit plan" (as defined in section 3 of ERISA) the
assets of which are being used to acquire the Notes.
(c) Prohibited Transactions. The execution and delivery of this
Agreement and the issuance and sale of the Notes hereunder will not
involve any transaction that is subject to the prohibitions of section 406
of ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A) through section 4975(D), inclusive, of the IRC.
LaBranche & CO. NOTE PURCHASE AGREEMENT
7
<PAGE>
(d) Defined Benefit Plan. The Company has never at any time had any
liability or obligation in respect of any "defined benefit plan" (as
defined in section 3 of ERISA).
(e) Compliance with ERISA. The Company and the ERISA Affiliates and
each Pension Plan are in compliance with ERISA, except for such failures
to comply that in the aggregate for all such failures could not reasonably
be expected to have a Material Adverse Effect.
(f) Multiemployer Plans. Neither the Company nor any ERISA Affiliate
contributes to, maintains, or has any liability or obligation in respect
of, a Multiemployer Plan.
5.12 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than 50 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of section 5 of the Securities Act.
5.13 Use of Proceeds; Margin Regulations.
(a) Use of Proceeds. The proceeds of the Notes shall be dealt with
in all respects as capital of the Company, shall be subject to the risks
of its business, and may be deposited in an account or accounts in the
Company's name in any bank or trust company.
(b) Margin Regulations. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for any purpose that
would violate any regulation of the Board of Governors of the Federal
Reserve System in respect of margin lending.
5.14 Existing Debt.
(a) Schedule 5.14 sets forth a complete and correct list of all
outstanding Debt of the Company as of April 30, 1998 (and specifying, as
to each such Debt, the collateral, if any, securing such Debt), since
which date there has been no Material change in the amounts, interest
rates, sinking funds, instalment payments, collateral or maturities of the
Debt of the Company. The Company is not in default and no waiver of
default is currently in effect, in the payment of any principal or
interest on any Debt of the Company and no event or condition exists with
respect to any Debt of the Company that would permit (or that with notice
or the lapse of time, or both, would permit) one or more Persons to cause
such Debt to become due and payable before its stated maturity or before
its regularly scheduled dates of payment. No notice has been issued in
respect of non-renewal of the maturity of the "scheduled maturity date" of
any Debt listed on Schedule 5.14 that constitutes Permitted Subordinated
Debt.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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(b) Except as disclosed in Schedule 5.14, the Company has not agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to a Lien not permitted by Section 10.6.
5.15 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.16 Status under Certain Statutes.
The Company is not subject to regulation under the Investment Company Act
of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended,
the Transportation Acts (49 U.S.C), as amended, or the Federal Power Act, as
amended.
5.17 Membership in NYSE, Etc.
(a) Broker-Dealer Status. The Company is registered as a
broker-dealer with the SEC under the Exchange Act and with state
securities authorities in each state where the Company is required to be
so registered. The Company is a member organization in good standing of
the NYSE.
(b) Regulation T. The Company is a broker-dealer subject to the
provisions of Regulation T (12 C.F.R. ss. 220) of the Board of Governors
of the Federal Reserve System. The Company maintains procedures and
internal controls designed to ensure that neither the Company nor any
Subsidiary extends or maintains 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 the Company
and the Subsidiaries, and the activities of employees of each thereof, to
ensure that neither the Company nor any Subsidiary extends or maintains
credit to or for its customers other than in accordance with the
provisions of said Regulation T.
(c) SIPC Assessments. The Company is not in arrears with respect to
any assessment made by the SIPC.
(d) Notes as Net Capital. The Company has obtained the approval of
the NYSE to classify the Notes as subordinated loan agreements and Net
Capital. No other approval or consent of the NYSE, the SEC or any other
Governmental Authority is necessary to permit such classification.
5.18 Priority of Notes.
There is no Debt of the Company that is in any manner subordinated to any
other Debt of the Company and that is not junior in right of payment and
performance to the right of payment and performance of the Notes. To the best
knowledge of the Company, all Intercreditor Agreements executed and delivered
pursuant to Section 4.11 are duly authorized, executed and delivered by the
holders of subordinated liabilities of the Company subject to such agreements,
LaBranche & CO. NOTE PURCHASE AGREEMENT
9
<PAGE>
and such agreements are enforceable in accordance with their terms against such
Persons, except as such enforceability is limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally, and
(b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.19 Amendment to Existing Notes.
The Amendment has been duly authorized, executed and delivered by the
Company and is in full force and effect.
6. REPRESENTATIONS OF THE PURCHASER
6.1 Purchase for Investment.
You represent that you are
(a) an "accredited investor" as defined in Rule 501(a) under the
Securities Act, and
(b) purchasing the Notes for your own account or for one or more
separate accounts maintained by you or for the account of one or more
pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times
be within your or their control.
You understand that the Notes have not been registered under the Securities Act
and may be resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
6.2 Source of Funds.
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) General Account -- the Source is an "insurance company general
account" as defined in Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and in respect thereof you
represent that there is no "employee benefit plan" (as defined in section
3(3) of ERISA and section 4975(e)(1) of the IRC, treating as a single plan
all plans maintained by the same employer or employee organization or
affiliate thereof) with respect to which the amount of the general account
reserves and liabilities of all contracts held by or on behalf of such
plan exceed 10% of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as set
forth in the NAIC Annual Statement filed with your state of domicile and
that the acquisition of the Notes by such account is eligible for and
satisfies the other requirements of such exemption;
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(b) Separate Account -- the Source is either
(i) an insurance company pooled separate account, within the
meaning of PTE 90-1 (issued January 29, 1990) and the Purchaser has
no knowledge of any fact or circumstance that would make reliance by
it on PTE 90-1 unreasonable, or
(ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as you have
disclosed to the Company in writing pursuant to this Section
6.2(b)(ii), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or
collective investment fund;
(c) QPAM --
(i) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the PTE 84-14) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of
section V(c)(1) of PTE 84-14) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part
1(c) and Part 1(g) of PTE 84-14 are satisfied, neither the QPAM nor
a Person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of PTE 84-14) owns a 5% or
more interest in the Company,
(ii) (A) the identity of such QPAM, and
(B) the names of all employee benefit plans whose assets
are included in such investment fund
have been disclosed to the Company in writing pursuant to this
Section 6.2(c), and
(iii) the Purchaser has no knowledge of any fact or
circumstance that would make reliance by it on PTE 84-14
unreasonable;
(d) Government Plan -- the Source is a governmental plan;
(e) Identified Plans -- the Source is one or more employee benefit
plans, or a separate account or trust fund comprised of one or more
employee benefit plans, each of which has been identified to the Company
in writing pursuant to this Section 6.2(e); or
(f) Exempt Plans -- the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of ERISA
and the prohibited transaction provisions of the IRC.
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As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information.
The Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a) FOCUS Report -- as soon as practicable after the end of each
fiscal quarter of the Company, and in any event within 5 days after filing
with the NYSE, the Company's FOCUS Report for such period as filed;
(b) Quarterly Statements -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of,
(i) a statement of financial condition of the Company as at
the end of such quarter, and
(ii) statements of income, changes in partners' capital and
cash flows of the Company, for such quarter and (in the case of the
second and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Responsible Official as fairly
presenting, in all material respects, the financial position of the
Company and its results of operations and cash flows, subject to changes
resulting from year-end adjustments, provided that delivery within the
time period specified above of copies of the Company's Quarterly Report on
Form 10-Q prepared in compliance with the requirements therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) Annual Statements -- within 90 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a statement of financial condition of the Company, as at
the end of such year, and
(ii) statements of income, changes in partners' equity and
cash flows of the Company, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of a Big Six Accounting Firm, which
opinion shall state that such financial statements present fairly,
in all material respects, the financial position of the Company and
its results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such
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accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default, an Event of Default or an Event of
Acceleration, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the existence
thereof (it being understood that such accountants shall not be
liable, directly or indirectly, for any failure to obtain knowledge
of any Default, Event of Default or Event of Acceleration unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or
did not make such an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in
Section 7.1(c)(ii)(B), shall be deemed to satisfy the requirements of this
Section 7.1(c);
(d) SEC and Other Reports -- promptly upon their becoming available,
one copy of
(i) each financial statement, report, notice or proxy
statement sent by the Company to public securities holders
generally, and
(ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such
holder), and each prospectus and all amendments thereto filed by the
Company with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the
Company to the public concerning developments that are Material;
(e) Notice of Default, Event of Default or Event of Acceleration --
promptly, and in any event within five days after a Responsible Official
becoming aware of the existence of any Default, Event of Default or Event
of Acceleration, or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has
given any notice or taken any action with respect to a claimed default of
the type referred to in Section 11.1(g), a written notice specifying the
nature and period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within 15 days after
a Responsible Official becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Pension Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations thereunder,
for which notice
LaBranche & CO. NOTE PURCHASE AGREEMENT
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thereof has not been waived pursuant to such regulations as in
effect on the date hereof;
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Pension Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or Title IV of ERISA or the penalty or
excise tax provisions of the IRC relating to employee benefit plans,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or
Title IV of ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such liabilities or
Liens then existing, could reasonably be expected to have a Material
Adverse Effect;
(g) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company from any Federal or state Governmental Authority (including the
Examining Authority) relating to any action or proceeding, order, ruling,
statute or other law or regulation that could reasonably be expected to
have a Material Adverse Effect;
(h) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or relating to
the ability of the Company to perform its obligations hereunder and under
the Notes as from time to time may be reasonably requested by any such
holder of Notes.
7.2 Officer's Certificate.
Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1(b) or Section 7.1(c) shall be accompanied by a certificate of a
Responsible Official setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 and Section 10.3, during
the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as
the case may be, permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the
Company from the beginning of the quarterly or annual period covered by
the statements then being furnished to the date of the certificate and
that such review shall not have disclosed the existence during such period
of any condition or event that constitutes a Default, an Event of Default
or an Event of Acceleration or, if any such condition or event existed or
exists (including, without
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limitation, any such event or condition resulting from the failure of the
Company to comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Company shall have taken
or proposes to take with respect thereto.
7.3 Inspection.
The Company shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default, Event of Default or Event of
Acceleration then exists, at the expense of such holder and upon
reasonable prior notice to the Company, to visit the principal executive
office of the Company, to discuss the affairs, finances and accounts of
the Company with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company, all at such reasonable times and as often as
may be reasonably requested in writing; and
(b) Default -- if a Default, Event of Default or Event of
Acceleration then exists, at the expense of the Company, to visit and
inspect any of the offices or properties of the Company, to examine all
their respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company), all at such times and as often as may be requested.
8. REPAYMENT OF THE NOTES
8.1 Required Repayments.
Subject to Section 12.1, the Company shall repay, and there shall become
due and payable, $3,000,000 (or such lesser amount as may be due in accordance
with Section 8.2(b)) in principal amount of the Notes on June 3 in each year
beginning on June 3, 2004 and ending on June 3, 2008, inclusive (each such
payment date a "Mandatory Repayment Date" and each such repayment a "Mandatory
Repayment'). Each such repayment shall be at one hundred percent (100%) of the
principal amount repaid, together with interest accrued thereon to the date of
repayment. Subject to Section 12.1, the principal of the Notes shall become due
and payable in full, together with all amounts owing in respect thereof
(including all accrued interest) on June 3, 2008 (the "Scheduled Maturity
Date").
8.2 Optional Prepayments with Make-Whole Amount.
(a) Optional Prepayments. Subject to Section 12.2, the Company may,
at its option, upon notice as provided below, prepay at any time all, or
from time to time any part, of the Notes, in an amount not less than 5% of
the aggregate principal amount of the Notes then outstanding in the case
of a partial prepayment, at 100% of the principal amount so prepaid, plus
the Make-Whole Amount determined for the prepayment date with respect to
such principal amount. The Company will give each holder of Notes written
notice of each optional prepayment under this Section 8.2 not less than 30
days and not more than 60 days prior to the date fixed for such
prepayment. Each such notice
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shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal
amount being prepaid, and shall be accompanied by a certificate of a
Responsible Official as to the estimated Make-Whole Amount due in
connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Responsible Official
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.
(b) Effect of Prepayments and Repurchases. Each prepayment of the
Notes pursuant to this Section 8.2, and each repurchase of Notes by the
Company, shall reduce each of the then remaining Mandatory Repayments by a
percentage equal to the aggregate principal amount of the Notes so paid or
purchased divided by the aggregate principal amount of the Notes
outstanding immediately prior to such payment or purchase.
8.3 Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
8.4 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5 Purchase of Notes.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except
(a) upon the payment or prepayment of the Notes in accordance with
the terms of this Agreement and the Notes, or
(b) pursuant to an offer to purchase made by the Company or an
Affiliate pro rata to the holders of all Notes at the time outstanding
upon the same terms and conditions.
Any such offer shall provide each holder with sufficient information to enable
it to make an informed decision with respect to such offer, and shall remain
open for at least 15 Business Days. If the holders of more than 50% of the
principal amount of the Notes then outstanding
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accept such offer, the Company shall promptly notify the remaining holders of
such fact and the expiration date for the acceptance by holders of Notes of such
offer shall be extended by the number of days necessary to give each such
remaining holder at least 10 Business Days from its receipt of such notice to
accept such offer. The Company will promptly cancel all Notes acquired by it or
any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant
to any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
8.6 Offer to Pay upon Change in Control.
(a) Notice of Change in Control Notice Event. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any
Responsible Official (including, without limitation, via the receipt of
notice of a Change in Control Notice Event from any holder of Notes), the
Company will, within five (5) Business Days after such obtaining of
knowledge, give notice of such Change in Control Notice Event to each
holder of Notes. Such notice will
(i) refer to this Section 8.6(a),
(ii) be dated the date of the sending of such notice,
(iii) specify, in reasonable detail, the nature and date of
the Change in Control Notice Event, and
(iv) be executed by a Responsible Official.
(b) Offer in Respect of a Change in Control.
(i) In General. Subject to Section 12.2, in connection with a
Change in Control, the Company may, but shall not be required to,
make one irrevocable separate offer to each holder of Notes to pay
the principal of all of such holder's Notes (together with any
interest accrued and unpaid thereon and any Make-Whole Amount due in
respect thereof), on a date (the "Change in Control Payment Date")
specified in such offer, which will be the Change in Control Date.
(ii) Subject to Approval of Examining Authority. As provided
in Section 12.2(a), no Optional Note Payment may be made during the
365 day period following the date of Closing and no Optional Note
Payment may be made without the prior written permission of the
Examining Authority, provided that the failure to obtain such
permission shall not waive or otherwise limit the operation of
Section 11.1(k).
(iii) Timing of Offers. Such offer
(A) will be made no later than 20 Business Days prior to
the Change in Control Date in respect thereof,
(B) will be made no earlier than the earlier of the
occurrence of the first Change in Control Notice Event related
to such Change in Control or 45 days prior to such Change in
Control Date, and
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(C) will remain open for at least 20 Business Days.
(iv) Content of Offer. Each such offer will
(A) refer to this Section 8.6(b),
(B) be dated the date of the sending of such offer,
(C) describe in reasonable detail the nature and
material terms of the Change in Control,
(D) specify the Change in Control Payment Date,
(E) specify the last date upon which the offer can be
accepted or rejected, and the consequences of failing to
provide an acceptance or rejection as provided in Section
8.6(c),
(F) specify the principal amount of each Note
outstanding, and the interest that would be due on each Note
offered to be paid if such offer was accepted, accrued to the
Change in Control Payment Date,
(G) provide the calculation (with details) of an
estimated Make-Whole Amount, if any, (calculated as if the
date of such notice was the date of payment) due in connection
with such payment, and
(H) be executed by a Responsible Official.
(c) Acceptance, Rejection. To accept or reject such offered payment,
a holder of Notes shall send a notice of acceptance or rejection to the
Company prior to the expiration of the specified offer period. A failure
to respond to any such written offer of payment as provided in this
Section 8.6(c) shall be deemed to constitute an acceptance of such offer.
(d) Deferral of Payments. Payment of principal of the Notes in
respect of offers accepted in accordance with Section 8.6(c) is subject to
the occurrence of the Change in Control in respect of which such
acceptances have been made. In the event that such Change in Control does
not occur on or prior to the specified Change in Control Payment Date in
respect thereof, such payment shall be deferred until and shall be made on
the Change in Control Date (as deferred). The Company shall keep each
holder of Notes reasonably and timely informed of
(i) any deferral in, and the expected dates of, the Change in
Control Payment Date, and
(ii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned (in which case
the offers and acceptances made pursuant to this Section 8.6 in
respect of such Change in Control shall be deemed rescinded,
provided that if such abandoned Change in Control is revived, it
shall be deemed to be a new Change in Control hereunder).
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If the Change in Control Payment Date is deferred by more than 5 Business
Days, the Company will promptly deliver to the holders of the Notes the
information required by Section 8.6(b)(iv), updated accordingly.
(e) Material Alteration in Transaction. If, prior to the Change in
Control Payment Date, the terms of the transaction constituting the
related Change in Control are altered in any material respect, the Company
will immediately notify each holder of Notes of the details of such
alteration. Each holder of Notes will have the right to reverse its
acceptance or rejection of such offer (if already accepted or rejected)
until the end of the 5th Business Day following the day on which such
holder is notified by the Company of such alteration. Each holder of Notes
which reverses its acceptance or rejection of such offer shall notify the
Company thereof during such 5 Business Day period. If any holder of Notes
fails to notify the Company of a reversal of its acceptance or rejection
of such offer during such 5 Business Day period, such holder of Notes
shall be deemed to have confirmed such acceptance or rejection. The Change
in Control Payment Date will be deferred, to the extent necessary, to
accommodate such 5 Business Day period, and the Company will promptly
deliver to the holders of the Notes the information required by Section
8.6(b)(iv), updated accordingly as necessary.
(f) Payment. The offered payment shall be made at 100% of the
principal amount of the Notes to be prepaid (together with any interest
accrued and unpaid thereon, determined as of the Change in Control Payment
Date). Two Business Days prior to the making of such payment, the Company
shall deliver to each holder of Notes by facsimile transmission a
certificate of a Responsible Official specifying the details of the
calculation of such Make-Whole Amount as of the specified payment date,
including a copy of the source of interest rate information used in such
calculation.
(g) Waiver of Event of Acceleration. Each holder which shall have
rejected an offer of payment made in accordance with this Section 8.6
shall be deemed to have
(i) waived the right to accelerate the maturity of such
holder's Notes in connection with such Change in Control and the
Event of Acceleration caused by such Change in Control, and
(ii) agreed that no Event of Acceleration shall have occurred
as a result of such Change in Control.
Such waiver shall not affect the rights of the holders of the Notes in
respect of any other Change in Control.
8.7 Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 11.2 or
Section 11.4, as the context requires.
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"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.75% per annum plus the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York City time)
on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as "Page
678" on the Telerate Access Service (or such other display as may
replace Page 678 on Telerate Access Service) for actively traded
U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, or
(ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date.
Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial
practice, and
(b) interpolating linearly between
(1) the actively traded U.S. Treasury security with the
duration closest to and greater than the Remaining Average
Life, and
(2) the actively traded U.S. Treasury security with the
duration closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing
(a) such Called Principal into
(b) the sum of the products obtained by multiplying
(i) the principal component of each Remaining Scheduled
Payment with respect to such Called Principal by
(ii) the number of years (calculated to the nearest
one-twelfth year) that will elapse between the Settlement Date
with respect to such
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Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a
date on which interest payments are due to be made under the terms of the
Notes, then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such Settlement Date
and required to be paid on such Settlement Date.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8 or has become or is declared to be immediately due and payable
pursuant to Section 12, as the context requires.
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
9.1 Compliance with Law.
The Company will comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws and all laws, rules and regulations of the SEC and the NYSE,
and will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses
(including, without limitation, those required by the SEC and the NYSE), in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect provided that the
failure of the Company to be registered as a broker-dealer in good standing with
the SEC under the Exchange Act, to be a member organization in good standing of
the NYSE, or to maintain its status as a specialist broker in good standing with
the NYSE, shall be a breach of this Section 9.1.
9.2 Insurance.
The Company will maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated. Schedule 9.2 contains a summary of insurance coverages
of the Company in existence on the date of Closing.
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9.3 Maintenance of Properties.
The Company will maintain and keep, or cause to be maintained and kept,
their respective properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided that this Section
shall not prevent the Company from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
9.4 Payment of Taxes and Claims.
The Company will file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes, assessments, charges and levies have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company, provided that the Company need not pay any such tax or assessment or
claims if
(a) the amount, applicability or validity thereof is contested by
the Company on a timely basis in good faith and in appropriate
proceedings, and the Company has established adequate reserves therefor in
accordance with GAAP on the books of the Company, or
(b) the nonpayment of all such taxes, assessments, charges and
levies in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
9.5 Legal Existence, etc.
Subject to Section 10.5, the Company will at all times preserve and keep
in full force and effect its legal existence.
9.6 Ranking of Notes.
The Notes shall at all times rank as direct, unsecured, subordinated
obligations of the Company and shall rank at senior to all other subordinated
Debt of the Company present and future.
9.7 Line of Business.
The Company will not engage in any businesses other than the businesses in
which the Company is engaged on the date of this Agreement, securities
brokerage, clearing, and securities trading businesses, and financial and
investment services related thereto.
9.8 Compliance with Margin Regulations.
No provision of this Agreement is intended by the Company or the holders
of the Notes to violate any regulation of the Board of Governors of the Federal
Reserve System in respect of margin lending.
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9.9 Subsidiaries.
The Company will not suffer to exist at any time any Subsidiaries of the
Company.
10. NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
10.1 Minimum Partners' Capital.
(a) Regulatory Capital. The Company will not permit, at any time,
(i) NYSE Net Capital to be less than 150% of NYSE Required Net
Capital, and
(ii) SEC Net Capital to be less than 150% of SEC Required Net
Capital, in each case determined at such time.
(b) Partners' Capital. The Company will not permit, at any time,
Adjusted Partners' Capital to be less than $40,000,000.
10.2 Permitted Debt.
The Company will not suffer to exist at any time any Debt other than
Permitted Secured Debt, Permitted Subordinated Debt and Pension Plan Notes.
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,
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(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 of Default or Event of Acceleration then exists
or would exist after giving effect thereto,
provided that during any period when a Default, Event of Default or Event of
Acceleration then exists, the Company will be permitted to declare, make and pay
Permitted Tax Dividends if, after giving effect to such declaration, making or
payment, the aggregate amount of all Permitted Tax Dividends paid during the 365
day period ending on the date of such declaration, making or payment does not
exceed an amount equal to the Maximum Tax Rate multiplied by Operating Income
determined in respect of the then most recently ended period of 4 Fiscal
Quarters.
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 properties of any kind or
the rendering of any service) with any Affiliate (other than the Company),
except in the ordinary course and pursuant to the reasonable requirements of the
Company's business and upon fair and reasonable terms.
10.5 Merger, Consolidation, etc.
The Company will not consolidate with or merge with any other Person or
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case
may be, shall be a solvent business organization organized and existing
under the laws of the United States or any State thereof or Canada or any
province thereof (including the District of Columbia), and, if the Company
is not such business organization;
(i) such business organization shall have executed and
delivered to each holder of any Notes its assumption of the due and
punctual performance and observance of each covenant and condition
of this Agreement, the Other Agreements and the Notes, and
(ii) shall have caused to be delivered to each holder of any
Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof,
LaBranche & CO. NOTE PURCHASE AGREEMENT
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(b) all necessary approvals of, and filings with, the NYSE and the
SEC shall have been obtained, and reasonable evidence thereof shall have
been provided to the holders of the Notes; and
(c) immediately after giving effect to such transaction, no Default,
Event of Default or Event of Acceleration shall have occurred and be
continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor business
organization that shall theretofore have become such in the manner prescribed in
this Section 10.5 from its liability under this Agreement or the Notes.
10.6 Liens.
The Company will not cause or permit to exist, or agree or consent to
cause or permit to exist in the future (upon the happening of a contingency or
otherwise), any of its property, whether now owned or hereafter acquired, to be
subject to a Lien except:
(a) Liens securing Permitted Secured Debt;
(b) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, so long as the payment
obligation secured thereby is not delinquent;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance,
social security and other like laws; and
(d) Liens in the nature of reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and
other similar title exceptions or encumbrances affecting real property,
provided that such exceptions and encumbrances do not in the aggregate
materially detract from the value of said properties or materially
interfere with the use of such property in the ordinary conduct of the
business of the Company.
Notwithstanding any other provision of this Agreement, the Company will not
cause or permit to exist, or agree or consent to cause or permit to exist in the
future (upon the happening of a contingency or otherwise), any Lien on any NYSE
Exchange Memberships owned by the Company.
10.7 Limitation on Loans.
The Company will not make or suffer to exist loans or advances, or assets
in the nature of loans or advances, to any Person or group of related Persons in
excess of $1,000,000 in the aggregate for all such loans or advances to each
such Person or group outstanding at any time, other than loans made in the
ordinary course of business of the Company, provided that loans to Affiliates
of, employees of, partners of or holders of equity in, the Company shall not be
deemed to have been made in such ordinary course.
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11. EVENTS OF ACCELERATION; EVENTS OF DEFAULT; REMEDIES
11.1 Events of Acceleration.
An "Event of Acceleration" shall exist if any of the following occurs and
is continuing:
(a) Principal or Make-Whole Amount Payments -- the Company shall
fail to make any payment of principal or Make-Whole Amount on any Note on
or before the date such payment is due (without giving effect to Section
12.1 or Section 12.2 in determining when such payment is due);
(b) Interest Payments -- the Company shall fail to make any payment
of interest on any Note on or before 5 Business Days after the date such
payment is due (without giving effect to Section 12.1 or Section 12.2 in
determining when such payment is due);
(c) Particular Covenant Defaults -- the Company shall fail to
perform or observe any covenant contained in Section 10 or in Section
7.1(e);
(d) Other Defaults -- the Company shall fail to comply with any
other provision hereof, and such failure continues for more than 30 days
after such failure shall first become known to any Responsible Official;
(e) Warranties or Representations -- any warranty, representation or
other statement by or on behalf of the Company contained herein or
contained in any instrument furnished in compliance herewith or in
reference hereto shall have been false or misleading in any material
respect when made;
(f) Specialist Status -- the Company is not a specialist broker in
good standing with the NYSE;
(g) Default on Debt or Other Security --
(i) the Company shall fail to make any payment on any Debt
when due; or
(ii) any event shall occur or any condition shall exist in
respect of Debt of the Company or under any agreement securing or
relating to such Debt, that immediately or with any one or more of
the passage of time, the giving of notice or the expiration of
waivers granted in respect of such event or condition:
(A) causes, or permits any one or more of the holders
thereof or a trustee therefor to cause such Debt or a portion
thereof, to become due prior to its stated maturity or prior
to its regularly scheduled date or dates of payment;
(B) causes or permits any one or more of the holders
thereof or a trustee therefor to elect any member of the board
of directors (or its equivalent) of such Person; or
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(C) causes or permits any one or more of the holders
thereof or a trustee therefor to require the Company to
repurchase such Debt from such holder;
provided that the aggregate amount of all obligations in respect of such
Debt exceeds at such time $1,000,000;
(h) Involuntary Bankruptcy Proceedings --
(i) a receiver, liquidator, custodian or trustee of the
Company, the General Partner or of all or any of the property of the
Company or the General Partner 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 or the General
Partner or the Company or the General Partner shall be adjudicated a
bankrupt or insolvent;
(ii) any of the property of the Company or the General Partner
shall be sequestered by court order and such order remains in effect
for more than 60 days; or
(iii) a petition shall be filed against the Company or the
General Partner 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 or the General Partner 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 or the
General Partner shall make an assignment for the benefit of its creditors,
or the Company or the General Partner shall fail, to pay its debts
generally as they become due, or the Company or the General Partner shall
consent to the appointment of a receiver, liquidator or trustee of all or
any part of the property of the Company or the General Partner; or
(k) Change in Control -- a Change in Control shall have occurred.
11.2 Remedies Upon an Event of Acceleration.
(a) Acceleration upon Event of Acceleration. If
(i) an Event of Acceleration shall exist, and
(ii) written notice thereof shall have been provided by any
holder or holders of more than 50% in principal amount of the Notes
at the time outstanding (exclusive of Notes held by the Company or
any Subsidiary or Affiliate thereof) to the Company and the
Examining Authority,
LaBranche & CO. NOTE PURCHASE AGREEMENT
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then, on the Accelerated Maturity Date determined with respect to such
notice, all Notes shall become due and payable on such Accelerated
Maturity Date, without any presentment, demand, protest or other notice of
any other kind, all of which are hereby expressly waived, and the Company
shall forthwith pay to the holder or holders of all the Notes then
outstanding the entire principal of, and interest accrued on, and any
Make-Whole Amount with respect to, the Notes on the Accelerated Maturity
Date, provided that
(A) no such notice may be delivered until at least 6 months
after the date of Closing, and,
(B) the right of the holders of Notes to receive payment of
principal of, interest accrued on, or Make-Whole Amount with respect
to, the Notes, shall remain subordinate as set forth in Section
12.4.
(b) Acceleration upon Payment Default. If
(i) an Event of Acceleration described in Section 11.1(a) or
Section 11.1(b) shall exist, and
(ii) written notice thereof shall have been provided by any
holder of Notes to the Company and the Examining Authority,
then, on the Accelerated Maturity Date determined with respect to such
notice and irrespective of whether any notice shall have been delivered in
accordance with Section 11.2(a), the Notes held by such holder shall
become due and payable on such Accelerated Maturity Date, without any
presentment, demand, protest or other notice of any other kind, all of
which are hereby expressly waived, and the Company shall forthwith pay to
such holder the entire principal of, and interest accrued on, and any
Make-Whole Amount with respect to, the Notes held by such holder on the
Accelerated Maturity Date, provided that
(A) such notice shall not be given until at least 6 months
after the date of Closing, and,
(B) the right of such holder of Notes to receive payment of
principal of, interest accrued on, or Make-Whole Amount with respect
to, such Notes, shall remain subordinate as set forth in Section
12.4.
(c) Accelerated Maturity Date. If, upon any Accelerated Maturity
Date,
(i) the obligation of the Company to pay the principal of,
interest accrued on, and any Make-Whole Amount due with respect to,
the Notes, is suspended as required by Section 12.1 or Section 12.2,
and
(ii) a receivership, insolvency, liquidation pursuant to the
SIPA or otherwise, bankruptcy, assignment for the benefit of
creditors, reorganization whether or not pursuant to bankruptcy
laws, or any other marshalling of the assets and liabilities of the
Company has not commenced on or prior to such Accelerated Maturity
Date,
LaBranche & CO. NOTE PURCHASE AGREEMENT
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then the unpaid principal amount of the Notes, accrued interest thereon
and any Make-Whole Amount due with respect thereto, shall be due and
payable on the day immediately following such Accelerated Maturity Date
notwithstanding Section 12.1 and Section 12.2, provided, that the right of
the holders of Notes to receive any payment of principal thereof, together
with accrued interest thereon, and any Make-Whole Amount due with respect
thereto, shall remain subordinate as set forth in Section 12.4.
(d) Significant Events. The Company and you agree that the
occurrence of each of the events specified in Section 11.1 is a
significant indication that the financial position of the Company has
changed materially and adversely from agreed upon norms, represent events
that could materially and adversely affect the ability of the Company to
conduct its business as conducted on the date of Closing, or represent
significant changes in the business conducted by the Company from that in
effect on the date of Closing.
11.3 Events of Default.
The occurrence of any of the following events shall constitute an "Event
of Default:"
(a) SIPC Decree -- 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 days;
(b) Net Capital --
(i) if the Company is not operating pursuant to paragraph
(a)(1)(ii) of Rule 15c3-1, the Aggregate Indebtedness of the Company
shall exceed 1,500% of the Net Capital of the Company, or
(ii) (A) if the Company is operating pursuant to paragraph
(a)(1)(ii) of Rule 15c3-1, the Net Capital of the Company
shall be less than 2% of Aggregate Debit Items of the Company,
or
(B) if the Company is registered as a futures commission
merchant, the Net Capital of the Company shall be less than 4%
of the funds required to be segregated by the Company pursuant
to the CEA and the regulations thereunder (less the market
value of commodity options purchased by option customers on or
subject to the rules of a contract market, each such deduction
not to exceed the amount of funds in the option customer's
account), if greater than the amount required in the
immediately preceding clause (A);
in each case for a period of 15 consecutive Business Days commencing
on the date the Company first determines and notifies the Examining
Authority, or the Examining Authority or the SEC first determines
and notifies the Company, of such fact;
(c) Revocation of Broker-Dealer Status -- the SEC shall revoke the
registration of the Company as a broker-dealer;
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(d) Suspension of Membership Status -- the Examining Authority shall
suspend (and not reinstate within 10 days) or revoke the Company's status
as a member organization thereof; or
(e) Insolvency Event -- any receivership, insolvency, liquidation
pursuant to the SIPA or otherwise, bankruptcy, assignment for the benefit
of creditors, reorganization whether or not pursuant to bankruptcy laws,
or any other marshalling of the assets and liabilities of the Company.
If the occurrence of any event or the existence of any condition shall be both
an Event of Default and an Event of Acceleration under the provisions of this
Agreement, such event or condition shall be deemed to be an Event of Default for
all purposes of this Agreement and the Notes.
11.4 Remedies Upon an Event of Default.
Upon the occurrence of an Event of Default, the unpaid principal amount of
the Notes, together with accrued interest thereon and any Make-Whole Amount in
respect thereof, shall mature and become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company, provided that the right of the holders of Notes to
receive any payment of principal thereof, together with accrued -interest
thereon and any Make-Whole Amount due with respect thereto, shall remain
subordinate as set forth in Section 12.4.
11.5 Other Remedies.
(a) Other Remedies. If
(i) an Event of Acceleration shall exist, and
(ii) written notice thereof shall have been provided by any
holder of Notes to the Company and the Examining Authority,
then, on and after the Accelerated Maturity Date determined with respect
thereto, and irrespective of whether any holder of Notes then outstanding
shall otherwise have pursued or be pursuing any other rights or remedies,
any holder of Notes may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation
of any of the terms hereof or thereof, or in aid of the exercise of any
power granted hereby or thereby, provided that
(A) such notice shall not be given until at least 6 months
after the date of Closing,
(B) the maturity of such holder's Notes may be accelerated
only in accordance with Section 11.2 and Section 11.4, and
(C) the right of the holders of Notes to receive any payment
of principal thereof, together with accrued interest thereon and any
Make-Whole Amount due with respect thereto, shall remain subordinate
as set forth in Section 12.4.
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(b) Nonwaiver and Expenses. No course of dealing on the part of any
holder of Notes nor any delay or failure on the part of any holder of
Notes to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. If the
Company shall fail to pay when due any principal of, Make-Whole Amount due
with respect to, or interest on, any Note, or shall fail to comply with
any other material provision hereof, the Company shall pay to each holder
of Notes, to the extent permitted by law, such further amounts as shall be
sufficient to cover the costs and expenses, including but not limited to
reasonable attorneys' fees incurred by such holder in collecting any sums
due on such Notes or in otherwise assessing, analyzing or enforcing any
rights or remedies that are or may be available to it.
11.6 Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 11.2(a), then and in every
such case, the Required Holders may, by written instrument filed with the
Company, rescind and annul such declaration, and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all the Notes and all other sums
payable hereunder and under the Notes (except any principal of, or
interest or Make-Whole Amount on, the Notes which shall have become due
and payable by reason of such declaration under Section 11.2(a)) shall
have been duly paid; and
(c) each and every other Default, Event of Default and Event of
Acceleration shall have been waived pursuant to Section 17 or otherwise
made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default, Event of Default or Event of Acceleration or
impair any right consequent thereon.
12. SUSPENSION OF REPAYMENT; SUBORDINATION, STATUS AND OTHER MATTERS
12.1 Suspension of Required Payments.
(a) Suspension. The Company's obligation to pay the principal amount
of the Notes (and Make-Whole Amount, if any, due with respect thereto) on
any Mandatory Repayment Date, the Scheduled Maturity Date or any
Accelerated Maturity Date (any such payment of principal, and Make-Whole
Amount, referred to as a "Required Note Payment") shall be suspended and
such obligation shall not mature for any period of time during which any
of the following conditions shall exist, after giving effect to such
Required Note Payment (together with the payment of any other obligation
of the Company payable at or prior to the payment of such Required Note
Payment and the return of any Secured Demand Note and the collateral
therefor held by the Company and returnable at or prior to the payment of
such Required Note Payment):
(i) Aggregate Indebtedness -- in the event that the Company is
not operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Aggregate
Indebtedness of the Company
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would exceed 1,200% of the Net Capital of the Company (or such other
percentum as may be made applicable to the Company at the time of
such Required Note Payment by the Examining Authority or the SEC);
or
(ii) Aggregate Debit Items -- in the event that the Company is
operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Net Capital
of the Company would be less than 5% (or such other percentum as may
be made applicable to the Company at the time of such Required Note
Payment by the Examining Authority or the SEC) of Aggregate Debit
Items of the Company; or
(iii) Futures Commission Merchant -- in the event that the
Company is registered as a futures commission merchant under the
CEA, the net capital of the Company (as defined in the CEA and the
regulations thereunder as in effect at the time of such Required
Note Payment) would be less than 6% (or such other percentum as may
be made applicable to the Company at the time of such Required Note
Payment by the CFTC) of the funds required to be segregated pursuant
to the CEA and the regulations thereunder and the foreign futures or
foreign options secured amount less the market value of commodity
options purchased by customers on or subject to the rules of a
contract market or a foreign board of trade, provided that the
deduction for each customer shall be limited to the amount of
customer funds in such customer's account and foreign futures and
foreign options secured amounts, or such net capital would be less
than the minimum capital requirement as defined by the Company's
DSRO; or
(iv) Net Capital -- in the event that the Net Capital of the
Company would be less than 120% (or such other percentum as may be
made applicable to the Company at the time of such Required Note
Payment by the Examining Authority or the SEC) of the minimum dollar
amount required by Rule 15c3-1 (or such other dollar amount as may
be made applicable to the Company at the time of such Required Note
Payment by the Examining Authority or the SEC); or
(v) Net Capital - Futures Commission Merchant -- in the event
that the Company is registered as a futures commission merchant
under the CEA, its net capital (as defined in the CEA and the
regulations thereunder as in effect at the time of such Required
Note Payment) would be less than 120% (or such other percentum as
may be made applicable to the Company at the time of such Required
Note Payment by the CFTC) of the minimum dollar amount required by
the CEA and the regulations thereunder as in effect at the time of
such Required Note Payment (or such other dollar amount as may be
made applicable to the Company at the time of such Required Note
Payment by the CFTC); or
(vi) Other -- in the event that the Company is subject to the
provisions of paragraph (a)(6)(v) or paragraph (c)(2)(x)(C) of Rule
15c3-1, the Net Capital of the Company would be less than the amount
required to satisfy the 1,000% test (or such other percentum test as
may be made applicable to the Company at the time of such Required
Note Payment by the Examining Authority or the SEC) stated in such
applicable paragraph;
LaBranche & CO. NOTE PURCHASE AGREEMENT
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(the Net Capital necessary to enable the Company to avoid such suspension
of its obligation to pay a Required Note Payment being referred to as the
"Required Payment Minimum Capital").
(b) Actions Taken with Respect to Suspension. During any such period
when the obligation to make a Required Note Payment is suspended in
accordance with Section 12.1(a), the Company shall, as promptly as is
consistent with the protection of its customers, reduce its business to a
condition whereby such Required Note Payment with accrued interest thereon
could be paid (together with the payment of any other obligation of the
Company payable at or prior to the payment of such Required Note Payment
and the return of any Secured Demand Note and the collateral therefor held
by the Company and returnable at or prior to the payment of such Required
Note Payment) without the Company's Net Capital being below the Required
Payment Minimum Capital. The Company shall provide the holders of the
Notes and the Examining Authority immediate notice of the termination of
such suspension, and no later than the 5th day after delivery of such
notice, make such Required Note Payment.
(c) Recapture of Required Note Payments. If a Required Note Payment
is made and immediately after such Required Note Payment, the Net Capital
of the Company is less than the Required Payment Minimum Capital with
respect thereto, each holder of Notes receiving all or a portion of such
Required Note Payment shall (whether or not such holder had any knowledge
or notice that such Required Note Payment was made in violation of Section
12.1(a)) repay to the Company, its successors or assigns, on a pro rata
basis among the holders of the Notes receiving such payment, such portion
of the sum so paid (without interest) as necessary to cause the Company to
be in compliance under Section 12.1(a) with respect to the portion of such
Required Note Payment not so repaid (such compliance to be determined
based on facts and circumstances in effect on the date the Company first
made such Required Note Payment); provided that any suit by or on behalf
of the Company for the recovery of any such Required Note Payment must be
commenced within 2 years of the date such Required Note Payment was first
paid by the Company. Such repaid portion of such Required Note Payment
shall be held by the Company as if such repaid portion of such Required
Note Payment had never been made.
12.2 Suspension of Optional Payments.
(a) Suspension. The Company may offer to make a payment of principal
of the Notes pursuant to Section 8.2 and Section 8.6 only with the prior
written permission of the Examining Authority (such payment being
hereinafter referred to as an "Optional Note Payment"). No Optional Note
Payment may be made during the 365 day period following the date of
Closing. No Optional Note Payment shall be made if after giving effect
thereto (and to all other payments of principal of outstanding
subordination agreements of the Company including the return of any
Secured Demand Note (and any collateral held therefor) the maturity or
accelerated maturity of which are scheduled to occur on or before the
earlier of 6 months after the date such Optional Note Payment is to occur
or the Scheduled Maturity Date) and without reference to any projected
profit or loss of the Company, any of the following conditions exist:
(i) Aggregate Indebtedness -- in the event that the Company is
not operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Aggregate
Indebtedness of the Company
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would exceed 1,000% of the Net Capital of the Company (or such other
percentum as may be made applicable to the Company at the time of
such Optional Note Payment by the Examining Authority or the SEC);
or
(ii) Aggregate Debit Items -- in the event that the Company is
operating pursuant to the alternative net capital requirement
provided for in paragraph (a)(1)(ii) of Rule 15c3-1, the Net Capital
of the Company would be less than 5% (or such other percentum as may
be made applicable to the Company at the time of such Optional Note
Payment by the Examining Authority or the SEC) of Aggregate Debit
Items of the Company; or
(iii) Futures Commission Merchant -- in the event that the
Company is registered as a futures commission merchant under the
CEA, the net capital of the Company (as defined in the CEA and the
regulations thereunder as in effect at the time of such Optional
Note Payment) would be less than 7% (or such other percentum as may
be made applicable to the Company at the time of such Optional Note
Payment by the CFTC) of the funds required to be segregated pursuant
to the CEA and the regulations thereunder and the foreign futures or
foreign options secured amount less the market value of commodity
options purchased by customers of the Company on or subject to the
rules of a contract market or a foreign board of trade, provided
that the deduction for each customer shall be limited to the amount
of customer funds in such customer's account and foreign futures and
foreign options secured amounts or such net capital would be less
than the minimum capital requirement as defined by the Company's
DSRO; or
(iv) Net Capital -- in the event that the Net Capital of the
Company would be less than 120% (or such other percentum as may be
made applicable to the Company at the time of such Optional Note
Payment by the Examining Authority or the SEC) of the minimum dollar
amount required by Rule 15c3-1 (or such other dollar amount as may
be made applicable to the Company at the time of such Optional Note
Payment by the Examining Authority or the SEC); or
(v) Net Capital - Futures Commission Merchant -- in the event
that the Company is registered as a futures commission merchant
under the CEA and if its net capital (as defined in the CEA and the
regulations thereunder as in effect at the time of such Optional
Note Payment) would be less than 120% (or such other percentum as
may be made applicable to the Company at the time of such Optional
Note Payment by the CFTC) of the minimum dollar amount required by
the CEA and the regulations thereunder as in effect at the time of
such Optional Note Payment (or such other dollar amount as may be
made applicable to the Company at the time of such Optional Note
Payment by the CFTC); or
(vi) Other -- in the event that the Company is subject to the
provisions of paragraph (a)(6)(v) or paragraph (c)(2)(x)(C) of Rule
15c3-1, the Net Capital of the Company would be less than the amount
required to satisfy the 1,000% test (or such other percentum test as
may be made applicable to the Company at the time of such Optional
Note Payment by the Examining Authority or the SEC) stated in such
applicable paragraph;
LaBranche & CO. NOTE PURCHASE AGREEMENT
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(the Net Capital necessary to enable the Company to avoid such suspension
of its obligation to pay an Optional Note Payment being referred to as the
"Optional Payment Minimum Capital").
(b) Recapture of Optional Note Payments. If an Optional Note Payment
is made and immediately after such Optional Note Payment, the Net Capital
of the Company is less than the Optional Payment Minimum Capital with
respect thereto, each holder of Notes receiving all or a portion of such
Optional Note Payment shall (whether or not such holder had any knowledge
or notice that such Optional Note Payment was subject to suspension
pursuant to Section 12.2(a)) repay to the Company, its successors or
assigns, on a pro rata basis among the holders of the Notes receiving such
payment, such portion of the sum so paid (without interest) as necessary
to cause the Company to be in compliance under Section 12.2(a) with
respect to the portion of such Optional Note Payment not so repaid (such
compliance to be determined based on facts and circumstances in effect on
the date the Company first made such Optional Note Payment); provided that
any suit by or on behalf of the Company for the recovery of any such
Optional Note Payment must be commenced within 2 years of the date such
Optional Note Payment was first paid by the Company. Such repaid portion
of such Optional Note Payment shall be held by the Company as if such
repaid portion of such Optional Note Payment had never been made.
12.3 Recapture Interest.
Interest shall accrue at the interest rate provided in the Notes for
overdue payments of principal on each payment or prepayment of principal of the
Notes (and on all interest and Make-Whole Amount paid together with such
payment) that is repaid by any holder of Notes as provided in Section 12.1(c) or
Section 12.2(b) (such repaid amount referred to herein as the "Recaptured
Amount") from the date such payment was first paid by the Company to such holder
until the date when such Recaptured Amount, and the interest accrued at the
Default Rate, is finally, fully and indefeasibly paid by the Company to each
such holder. Upon such full, final and indefeasible payment, such holder shall
pay to the Company interest on such Recaptured Amount in respect of any period
when both the Default Rate applied to (and was indefeasibly paid to and
collected by such holder) such Recaptured Amount as provided in this Section
12.3 and such Recaptured Amount was in the possession of such holder, at the
federal funds overnight rate in effect from time to time during such period.
12.4 Subordination of Obligations.
The obligation of the Company under the Notes and this Agreement with
respect to the payment of outstanding principal of, interest on, and Make-Whole
Amount, if any, due with respect thereto, is and shall be fully and irrevocably
subordinate in right of payment and subject to the prior payment or provision
for payment in full of all claims of all other present and future creditors of
the Company arising out of any matter occurring prior to the date on which the
Company's obligation to make any such payment in respect of the Notes matures
consistent with the provisions hereof, except for
(a) claims which are the subject of subordination provisions which
rank on the same priority as the Notes or the class of claims of which the
Notes are a member (claims hereunder shall rank pari passu with such
claims), and
LaBranche & CO. NOTE PURCHASE AGREEMENT
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<PAGE>
(b) claims which are the subject of subordination provisions which
rank junior to the Notes or the class of claims of which the Notes are a
member (claims hereunder shall be senior to such claims),
provided that the rights of the holders of the Notes shall rank, now and in the
future, prior and superior to any claims represented by capital, equity or other
ownership interests of the Company, including, without limitation, claims of
general partners, limited partners, stockholders, and members, and claims
derived from such interests, including, without limitation, declared
distributions or dividends in respect of such interests, regardless of the
priority such claims would otherwise have under statute or law. Claims made
senior to the Notes pursuant to this Section 12.4 are referred to herein as
"Senior Claims".
12.5 Certain Events.
In the event of the appointment of a receiver or trustee of the Company or
in the event of its insolvency, liquidation pursuant to the SIPA or otherwise,
bankruptcy, assignment for the benefit of creditors, reorganization (whether or
not pursuant to bankruptcy laws) or any other marshalling of the assets and
liabilities of the Company, the obligation of the Company to pay the principal
of the Notes, together with interest accrued thereon and the Make-Whole Amount,
if any, due with respect thereto, shall become immediately due and payable- in
full (notwithstanding any contrary provision of this Agreement or the Notes) but
the holders of the Notes shall not be entitled to participate or share, ratably
or otherwise, in the distribution of assets of the Company in satisfaction of
such obligation to pay the principal of the Notes, together with the interest
accrued thereon and the Make-Whole Amount, if any, due with respect thereto,
until all Senior Claims have been fully satisfied (or provision made for payment
if assets of the Company available to pay the same shall be adequate in amount
to satisfy all such claims fully). Subject to the payment in full of all Senior
Claims, the holders of Notes shall be, to the extent of distributions of
property of the Company to the holders of Senior Claims to which the holders of
Notes would be entitled but for this Section 12, subrogated to the rights of the
holders of such Senior Claims.
12.6 Obligations Not Impaired.
Nothing contained in this Section 12 shall impair, as between the Company
and any holder of Notes, the obligation of the Company to pay to such holder the
principal of the Notes, interest thereon, Make-Whole Amount and any other
amounts, if any, due with respect thereto, as and when the same shall become due
and payable in accordance with the terms hereof to the extent that such payments
are made in compliance with Section 12.1 or Section 12.2, or require the holders
of the Notes to turn over any such payment to the Company except as provided in
Section 12.1(c) and Section 12.2(b), or subordinate the claims against the
Company of the holders of the Notes to any other Person except the holder of a
Senior Claim, and then only in connection with an Insolvency Event.
12.7 Non-liability of NYSE.
You warrant and represent that the Notes are not being purchased in
reliance upon the standing of the Company as a member organization of the NYSE
or upon the NYSE's surveillance of the Company's financial position or its
compliance with the Constitution, Rules and practices of the NYSE. You have made
such investigation of the Company and its members, partners, officers and
directors as you deem necessary and appropriate under the circumstances. You are
not relying upon the NYSE to provide any information concerning or relating to
the
LaBranche & CO. NOTE PURCHASE AGREEMENT
36
<PAGE>
Company and you agree that the NYSE has no responsibility to disclose to the
holders of the Notes any information concerning or relating to the Company which
it may now, or at any future time, have. Neither the NYSE, its Special Trust
Fund, nor any director, officer, trustee or employee of the NYSE or said Trust
Fund shall be liable to the holders of the Notes with respect to this Agreement
or the repayment the Notes or of any interest thereon or other amounts due with
respect thereto.
12.8 Status of Proceeds of Notes.
The proceeds of the Notes shall be dealt with in all respects as capital
of the Company, shall be subject to the risks of its business, and may be
deposited in an account or accounts in the Company's name in any bank or trust
company.
12.9 Notices to NYSE.
Whenever prior written notice to the NYSE is required pursuant to the
provisions of this Agreement, such written notice shall be given by the Company
to
The New York Stock Exchange, Inc.
20 Broad Street
New York, NY 10005
Attn: Surveillance Director,
or as otherwise directed by the NYSE.
12.10 Futures Commission Merchants.
If the Company is a futures commission merchant, as that term is defined
in the CEA, the Company agrees, consistent with the requirements of section
1.17(h) of the regulations of the CFTC (17 C.F.R. ss. 1.17(h)), that:
(a) whenever prior written notice by the Company to the NYSE is
required pursuant to the provisions of this Agreement, the same prior
written notice shall be given by the Company to
(i) the CFTC at its principal office in Washington, D.C.,
Attention Chief Accountant of Division of Trading and Markets (or as
otherwise directed by the CFTC), and/or
(ii) the commodity exchange of which the Company is a member
and which is then designated by the CFTC as the Company's DSRO;
(b) whenever prior written consent, permission or approval of the
NYSE is required pursuant to the provisions of this Agreement, the Company
shall also obtain the prior written consent, permission or approval of the
CFTC and/or of the DSRO; and
(c) whenever the Company receives written notice of acceleration of
maturity pursuant to the provisions of this Agreement, the Company shall
promptly give written notice thereof to the CFTC at the address above
stated and to the DSRO, as required.
LaBranche & CO. NOTE PURCHASE AGREEMENT
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<PAGE>
12.11 Set-off.
The holders of the Notes agree that they are not taking and will not take
or assert as security for the payment of the Notes any security interest in or
Lien upon, whether created by contract, statute or otherwise, any property of
the Company or any property in which the Company may have an interest, which is
or at any time may be in the possession or subject to the control of any holder
of Notes. The holders of the Notes hereby waive, and further agree that they
will not seek to obtain payment of the Notes in whole or in any part by
exercising, any right of set-off they may assert or possess in connection with,
and related to, the Notes, whether created by contract, statute or otherwise.
Any agreement between the Company and the holders of the Notes (whether in the
nature of a general loan and collateral agreement, a security or pledge
agreement or otherwise) shall be deemed amended hereby to the extent necessary
so as not to be inconsistent with the provisions of this Section 12.11.
12.12 Amendment.
Notwithstanding any other provision of this Agreement, this Agreement and
the Notes shall not be modified or amended without the prior written approval of
the NYSE. This instrument embodies the entire agreement between the Company and
the holders of the Notes and no other evidence of such agreement has been or
will be executed without the prior written consent of the NYSE.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
13.1 Registration of Notes.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall
LaBranche & CO. NOTE PURCHASE AGREEMENT
38
<PAGE>
not be transferred in denominations of less than $100,000, provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $100,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.
13.3 Limitation on Transfer of Notes.
No holder of Notes may, without the prior written consent of the Company,
transfer its Notes to a Competitor or an affiliate of a Competitor. The Company
will notify the Examining Authority of such transfer, to the extent required by
law or regulation.
13.4 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, a Purchaser or another holder of a Note with a
minimum net worth of at least $50,000,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES
14.1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in New York,
New York at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
14.2 Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made
LaBranche & CO. NOTE PURCHASE AGREEMENT
39
<PAGE>
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company pursuant to Section
14.1. Prior to any sale or other disposition of any Note held by you or your
nominee you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note or Notes
pursuant to Section 13.2. The Company will afford the benefits of this Section
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel) incurred
by you and each Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement or the Notes (whether or not such amendment,
waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder of any Note; and
(b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or
in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes.
The Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the
LaBranche & CO. NOTE PURCHASE AGREEMENT
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<PAGE>
preceding sentence, this Agreement and the Notes embody the entire agreement and
understanding between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER
17.1 Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that
(a) no amendment or waiver of any of the provisions of any one or
more of Section 1 through Section 6 and Section 21, or any defined term
(as it is used therein), will be effective as to you unless consented to
by you in writing, and
(b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby,
(i) subject to the provisions of Section 11 relating to
acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change
the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes,
(ii) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any such
amendment or waiver, or
(iii) amend any of Section 8, Section 11.1(a), Section
11.1(b), Section 11.2 through Section 11.6, inclusive, or Section
20.
17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof or of the Notes. The Company will
deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the entering
into by any holder of Notes of any waiver or amendment of any of the terms
and provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did not consent to
such waiver or amendment.
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<PAGE>
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default,
Event of Default or Event of Acceleration not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES
All notices and communications provided for hereunder shall be in writing
and sent
(a) by telecopy if the sender on the same day sends a confirming
copy of such notice by a recognized overnight delivery service (charges
prepaid),
(b) by registered or certified mail with return receipt requested
(postage prepaid), or
(c) by a recognized overnight delivery service (with charges
prepaid).
Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of George M.L. LaBranche, IV, or at
such other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
LaBranche & CO. 42 NOTE PURCHASE AGREEMENT
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19. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation,
(a) consents, waivers and modifications that may hereafter be
executed,
(b) documents received by you at the Closing (except the Notes
themselves), and
(c) financial statements, certificates and other information
previously or hereafter furnished to you,
may be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company in connection with
the transactions contemplated by or otherwise pursuant to this Agreement that is
proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by you as being confidential information of
the Company, provided that such term does not include information that
(a) was publicly known or otherwise known to you prior to the time
of such disclosure,
(b) subsequently becomes publicly known through no act or omission
by you or any Person acting on your behalf,
(c) otherwise becomes known to you other than through disclosure by
the Company, or
(d) constitutes financial statements delivered to you under Section
7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to
(i) your directors, officers, trustees, employees, agents, attorneys
and affiliates, (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes),
LaBranche & CO. 43 NOTE PURCHASE AGREEMENT
<PAGE>
(ii) your financial advisors and other professional advisors who
agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to sell
such Note or any part thereof or any participation therein (if such Person
has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section
20),
(vi) any federal or state regulatory authority having jurisdiction
over you,
(vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio, or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(A) to effect compliance with any law, rule, regulation or
order applicable to you,
(B) in response to any subpoena or other legal process,
(C) in connection with any litigation to which you are a party
or
(D) if an Event of Default or an Event of Acceleration has
occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall
LaBranche & CO. 44 NOTE PURCHASE AGREEMENT
<PAGE>
be deemed to refer to such Affiliate in lieu of you. In the event that such
Affiliate is so substituted as a purchaser hereunder and such Affiliate
thereafter transfers to you all of the Notes then held by such Affiliate, upon
receipt by the Company of notice of such transfer, wherever the word "you" is
used in this Agreement (other than in this Section 21), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and you
shall have all the rights of an original holder of the Notes under this
Agreement.
22. MISCELLANEOUS
22.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2 Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
22.3 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
LaBranche & CO. 45 NOTE PURCHASE AGREEMENT
<PAGE>
22.6 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank; next page is signature page.]
LaBranche & CO. 46 NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
----------------------------------
Name: George M.L. LaBranche IV
Title: Sr. Managing Director
The foregoing is hereby agreed to as of the
date thereof.
SECURITY LIFE OF DENVER INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By:
------------------------------------
Name:
Title:
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By:
----------------------------------
Name:
Title:
The foregoing is hereby agreed to as of the
date thereof.
SECURITY LIFE OF DENVER INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By: /s/ Fred C. Smith
------------------------------------
Name: Fred C. Smith
Title: SVP and Managing Director
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
----------------------------------
Name: George M.L. LaBranche IV
Title: Sr. Managing Director
The foregoing is hereby agreed to as of the
date thereof.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By:
------------------------------------
Name:
Title:
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By:
----------------------------------
Name:
Title:
The foregoing is hereby agreed to as of the
date thereof.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By: /s/ Fred C. Smith
------------------------------------
Name: Fred C. Smith
Title: SVP and Managing Director
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
----------------------------------
Name: George M.L. LaBranche IV
Title: Sr. Managing Director
The foregoing is hereby agreed to as of the
date thereof.
SOUTHLAND LIFE INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By:
------------------------------------
Name:
Title:
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By:
----------------------------------
Name:
Title:
The foregoing is hereby agreed to as of the
date thereof.
SOUTHLAND LIFE INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By: /s/ Fred C. Smith
------------------------------------
Name: Fred C. Smith
Title: SVP and Managing Director
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
----------------------------------
Name: George M.L. LaBranche IV
Title: Sr. Managing Director
The foregoing is hereby agreed to as of the
date thereof.
EQUITABLE AMERICAN INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By:
------------------------------------
Name:
Title:
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By:
----------------------------------
Name:
Title:
The foregoing is hereby agreed to as of the
date thereof.
EQUITABLE AMERICAN INSURANCE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By: /s/ Fred C. Smith
------------------------------------
Name: Fred C. Smith
Title: SVP and Managing Director
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By: /s/ George M.L. LaBranche IV
----------------------------------
Name: George M.L. LaBranche IV
Title: Sr. Managing Director
The foregoing is hereby agreed to as of the
date thereof.
USG ANNUITY & LIFE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By:
------------------------------------
Name:
Title:
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
LABRANCHE & CO. BY LAB INVESTING
CO. L.L.C., ITS GENERAL PARTNER
By:
----------------------------------
Name:
Title:
The foregoing is hereby agreed to as of the
date thereof.
USG ANNUITY & LIFE COMPANY
By ING INVESTMENT MANAGEMENT LLC, as Agent
By: /s/ Fred C. Smith
------------------------------------
Name: Fred C. Smith
Title: SVP and Managing Director
LaBranche & CO. NOTE PURCHASE AGREEMENT
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Accelerated Maturity Date" means with respect to a notice of acceleration
given pursuant to Section 11.2(a) or Section 11.2(b), the last Business Day of
the calendar month that is 6 months after the day such notice shall have been
given.
"Adjusted Partners' Capital" means, at any time, an amount equal to the
sum of
(a) partners' capital as shown on a statement of financial position
of the Company,
(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,
determined at such time, in accordance with GAAP, to the extent
applicable.
"Affiliate" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is
under common Control with, such first Person, and
(b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any corporation or other business organization of which the
Company beneficially owns or holds, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity interests.
As used in this definition, "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. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"Aggregate Debit Items" means "aggregate debit items" as computed in
accordance with Exhibit A to 17 C.F.R. ss.240.15c3-3 as amended from time to
time, and any successor rule or regulation of the SEC regulating the same
subject matter.
"Aggregate Indebtedness" means "aggregate indebtedness" as defined by Rule
15c3-1.
"Amendment" is defined in Section 4.12.
"Big Six Accounting Firm" means any of PriceWaterhouse & Co., Arthur
Andersen & Co., Ernst & Young, KPMG Peat Marwick, Deloitte & Touche and Coopers
& Lybrand and their respective successors.
LaBranche & CO. Schedule B-1 NOTE PURCHASE AGREEMENT
<PAGE>
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City, New York are required or authorized to
be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CEA" means the Commodity Exchange Act, together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.
"CFTC" means the Commodity Futures Trading Commission and any successor
organization discharging the regulatory functions of the Commodity Futures
Trading Commission.
"Change in Control" means the occurrence of any of the following events:
(a) if the Company is organized as a limited partnership,
(i) more than 50% of the limited and general partnership
interest of the Company is legally and beneficially owned by Persons
other than Acceptable Persons, or
(ii) more than 50% of the general partnership interest of the
Company is legally and beneficially owned by Persons other than
Acceptable Persons;
(b) if the Company is not organized as a limited partnership, more
than 50% of the equity interest of the Company is legally and beneficially
owned by Persons other than Acceptable Persons;
(c) more than 50% of the equity interest of the General Partner is
legally and beneficially owned by Persons other than Acceptable Persons;
or
(d) fifty percent or more of the general partnership interest of the
Company (for so long as the Company is organized as a limited partnership)
is beneficially owned by any Person other than LaB Investing Co. L.L.C., a
New York limited liability company,
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, at any time, a natural person who,
(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 natural person, or
(ii) in respect of the General Partner, 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.
LaBranche & CO. Schedule B-2 NOTE PURCHASE AGREEMENT
<PAGE>
"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.
"Change in Control Date" means, at any time in respect of a Change in
Control, if prior to such Change in Control, the date upon which the Company
reasonably believes such Change in Control will occur, and if such Change in
Control has occurred, the date on which such Change in Control occurred.
"Change in Control Notice Event" means the execution of any definitive
written agreement which, when fully performed by the parties thereto, would
result in a Change in Control, provided that the existence of customary closing
conditions shall not render an otherwise definitive written agreement
non-definitive.
"Change in Control Payment Date" is defined in Section 8.6(b)(i).
"Closing" is defined in Section 3.
"Company" means LaBranche & Co., a New York limited partnership, and its
successors and assigns.
"Competitor" means at any time any Person which is a specialist broker
member of the NYSE at such time.
"Confidential Information" is defined in Section 20.
"Debt" with respect to any Person means, at any time, without duplication:
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money); or
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clause (a) through clause (f) hereof.
LaBranche & CO. Schedule B-3 NOTE PURCHASE AGREEMENT
<PAGE>
Debt of any Person shall include all obligations of such Person of the character
described in clause (a) through clause (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default or an Event of Acceleration.
"Default Rate" means that rate of interest that is the greater of
(i) 2% per annum above the rate of interest stated in clause (a) of
the first paragraph of the Notes or
(ii) 2% over the rate of interest publicly announced by The Bank of
New York (or its successors and assigns) in New York, New York as its
"base" or "prime" rate.
"DSRO" means the designated self-regulatory organization of the Company
pursuant to a plan filed with the CFTC pursuant to section 1.52 of the
regulations of the CFTC (17 C.F.R. ss.1.52).
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the IRC.
"Event of Acceleration" is defined in Section 11.1.
"Event of Default' is defined in Section 11.3.
"Examining Authority" has the meaning assigned to it by Rule 15c3-1, in
relation to the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the Company's 8.17% Senior Subordinated Notes due
2002, as amended from time to time.
"Fiscal Quarter" means any of the quarters beginning on January 1, April
1, July 1 and October 1 and ending on March 31, June 30, September 30 and
December 31, respectively.
"FOCUS Report" means a Financial and Operational Combined Uniform Single
Report required to be filed on a monthly or quarterly basis, as the case may be,
with the SEC or the NYSE, or any report that is required in lieu of such report.
LaBranche & CO. Schedule B-4 NOTE PURCHASE AGREEMENT
<PAGE>
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"General Partner" means LaB Investing Co. L.L.C., a New York limited
liability company, for so long as it is the general partner of the Company, and
any successor to its capacity as such general partner.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company conducts all or any
part of its business, or which asserts jurisdiction over any
properties of the Company, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government, including, without limitation, the NYSE and the Examining
Authority of the Company.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such indebtedness or
obligation, or
(ii) to maintain any working capital or other balance sheet
condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
LaBranche & CO. Schedule B-5 NOTE PURCHASE AGREEMENT
<PAGE>
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Institutional Investor" means
(a) any original purchaser of a Note,
(b) any holder of a Note holding more than 2.5% of the aggregate
principal amount of the Notes then outstanding, and
(c) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any
insurance company, any broker or dealer, or any other similar financial
institution or entity, regardless of legal form.
"Intercreditor Agreement" means an agreement in the form of Exhibit 4.11.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Make-Whole Amount" is defined in Section 8.7.
"Mandatory Repayment" is defined in Section 8.1.
"Mandatory Repayment Date" is defined in Section 8.1.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets,
properties or prospects of the Company, or
(b) the ability of the Company to perform its obligations under this
Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"Maximum Tax Rate" means, with respect to any period, a percentage
(expressed as a decimal) equal to the maximum annual income tax rate on ordinary
income of a natural person subject at such time to Federal, New York State, and
New York City income taxes, determined in respect of the last day of such
period.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
LaBranche & CO. Schedule B-6 NOTE PURCHASE AGREEMENT
<PAGE>
"Net Capital" means "net capital," as defined by Rule 15c3-1.
"NYSE" means the New York Stock Exchange, Inc., or if the Company is
terminated as a member of the NYSE, then "NYSE" shall mean the Examining
Authority at such time.
"NYSE Exchange Memberships" means, at any time, NYSE exchange memberships
carried as assets on the books of the Company.
"NYSE Net Capital" means, at any time, the "net capital" of the Company at
such time, computed in accordance with Rule 325 of the NYSE, or any later
enacted rule of the NYSE that supersedes such Rule 325.
"NYSE Required Net Capital" means, at any time, the minimum amount of NYSE
Net Capital necessary at such time in order to permit the Company to "expand its
business" as defined by and pursuant to Rule 326(a) of the NYSE, or any later
enacted rule of the NYSE that supersedes such Rule 326(a).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Responsible Official or
of any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.
"Operating Income" means, in respect of any period, the net income (or
deficit) of the Company before
(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) consultants' fees, and
(c) taxes,
(but only to the extent included in the determination of such net income)
determined for such period in accordance with GAAP.
"Optional Note Payment" is defined in Section 12.2(a).
"Optional Payment Minimum Capital" is defined in Section 12.2(a)(vi).
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"Payment Obligation" has the meaning specified in Appendix D to Rule
15c3-1.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
LaBranche & CO. Schedule B-7 NOTE PURCHASE AGREEMENT
<PAGE>
"Pension Plan" means, at any time, any "employee pension benefit plan" (as
such term is defined in section 3 of ERISA) maintained at such time by the
Company or any ERISA Affiliate for employees of the Company or such ERISA
Affiliate, excluding any Multiemployer Plan.
"Pension Plan Note" means notes or loans made by a Pension Plan of the
Company to the Company, so long as the aggregate principal amount of all Pension
Plan Notes outstanding does not at any time exceed $1,300,000.
"Permitted Secured Debt" means, at any time, Debt
(a) that was incurred in the normal course of the Company's business
for the purpose of selling, trading, settling or otherwise managing the
actively traded stock held by the Company,
(b) that is secured only by stocks actively traded by the Company at
such time, and
(c) the principal amount of which does not exceed an amount equal to
70% of the market value of such stock at such time, after deducting from
such value the amount of all other obligations secured by Liens on such
stock.
"Permitted Subordinated Debt" means, at any time, any obligation for money
borrowed by the Company that
(a) at such time
(i) is subordinated to the claims of creditors of the Company
pursuant to a subordination agreement (as defined in Appendix D of
Rule 15c3-1),
(ii) is properly accounted for as Net Capital on the FOCUS
Report of the Company,
(iii) is subject to a duly authorized, executed and delivered,
and enforceable agreement in the form of the Intercreditor
Agreement, and
(iv) ranks junior to the Notes in priority as to payment and
performance, or
(b) is evidenced by the Existing Notes.
"Permitted Tax Dividends" means distributions made during any period when
the Company is organized as a limited partnership to the partners (general and
limited) of the Company for the purpose of funding, and in the amount of, the
federal, state and local income tax liabilities of its partners attributable to
the taxable income of the Company.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions
LaBranche & CO. Schedule B-8 NOTE PURCHASE AGREEMENT
<PAGE>
are or, within the preceding five years, have been made or required to be made,
by the Company or any ERISA Affiliate or with respect to which the Company or
any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation that
is preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"property" or "properties" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"PTE" is defined in Section 6.2(a).
"Recaptured Amount" is defined in Section 12.3.
"Required Holders" means, at any time, the holder or holders of more than
50% in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"Required Note Payment" is defined in Section 12.1(a).
"Required Payment Minimum Capital" is defined in Section 12.1 (a)(vi).
"Responsible Official" means any senior managing director (or its
equivalent) of the Company and any official of the Company with responsibility
for the administration of the relevant portion of this Agreement.
"Restricted Payment" means
(a) any distribution in respect of the Company's partnership capital
(including distributions characterized as interest thereon), other than
dividends and distributions payable solely in additional partnership
capital interests or Permitted Subordinated Debt,
(b) redemptions, purchases or other acquisitions (direct or
indirect) or partnership interests,
(c) payments of interest, principal or other amounts in respect of
Permitted Subordinated Debt, and
(d) Managing Directors' Compensation and Consultants' Fees.
As used in this definition,
"Managing Directors' Compensation and Consultants' Fees" has the
meaning attributed to it in the Company's Financial Statements for the
Years Ended December 31, 1996, 1995, 1994, 1993, and 1992, audited by
Arthur Andersen LLP.
"Rule 15c3-1" means 17 C.F.R. ss.240.15c3-1 as amended from time to time,
and any successor rule or regulation of the SEC regulating the same subject
matter.
"Scheduled Maturity Date" is defined in Section 8.1.
LaBranche & CO. Schedule B-9 NOTE PURCHASE AGREEMENT
<PAGE>
"SEC" means the Securities and Exchange Commission and any successor
organization discharging the regulatory functions of the Securities and Exchange
Commission.
"SEC Net Capital" means, at any time, the "net capital" of the Company at
such time, computed in accordance with Rule 15c3-1.
SEC Required Net Capital" means, at any time, the minimum amount to which
SEC Net Capital must be equal at such time pursuant to Rule 15c3-1 to remain in
compliance with all provisions thereof applicable to the Company, including the
provisions thereof imposing restrictions on the Company's obligation to pay the
principal of, and interest and Make-Whole Amount on, the Notes.
"Secured Demand Note" means a note issued pursuant to a "secured demand
note agreement" as defined by Appendix D to Rule 15c3-1.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Claims" is defined in Section 12.4(b).
"SIPA" means Securities Investor Protection Act of 1970, together with all
rules and regulations promulgated pursuant thereto, as amended from time to
time.
"SIPC" means the Securities Investor Protection Corporation and any
successor organization discharging the functions of the Securities Investor
Protection Corporation.
"Source" is defined in Section 6.2.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
LaBranche & CO. Schedule B-10 NOTE PURCHASE AGREEMENT
<PAGE>
Exhibit 10.12
================================================================================
CREDIT AGREEMENT
by and between
LaBRANCHE & CO.
AND
THE BANK OF NEW YORK
Dated as of June 26, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. ACCOUNTING TERMS, DETERMINATION OF MARKED TO MARKET VALUE,
DEFINITIONS ...................................................... 1
Section 1.1. Accounting Terms .......................................... 1
Section 1.2. Determination of Marked to Market Value ................... 1
Section 1.3. Definitions ............................................... 1
Section 1.4. Interpretation ............................................ 6
ARTICLE 2. LOANS ............................................................ 6
Section 2.1. Amounts ................................................... 6
Section 2.2. Notice of Borrowing; Note ................................. 6
Section 2.3. Termination or Reduction of Commitment .................... 7
Section 2.4. Increase of Commitment .................................... 7
Section 2.5. Use of Proceeds ........................................... 8
Section 2.6. Commitment Fee ............................................ 8
Section 2.7. Interest .................................................. 8
Section 2.8. Repayments; Rollovers ..................................... 8
Section 2.9. Payments .................................................. 9
Section 2.10. Capital Adequacy .......................................... 10
ARTICLE 3. REPRESENTATIONS AND WARRANTIES ................................... 10
Section 3. 1. Representations and Warranties ............................ 10
ARTICLE 4. CONDITIONS OF LENDING ............................................ 13
Section 4.1. Conditions to Effectiveness and the Initial Loan .......... 13
Section 4.2. Conditions to Each Loan ................................... 14
ARTICLE 5. COVENANTS ........................................................ 15
Section 5.1. Affirmative Covenants ..................................... 15
Section 5.2. Negative Covenants ........................................ 19
ARTICLE 6. EVENTS OF DEFAULT ................................................ 20
Section 6.1. Events of Default ......................................... 20
ARTICLE 7. OTHER PROVISIONS ................................................. 22
Section 7.1. Release of Collateral ..................................... 22
Section 7.2. Expenses and Indemnification .............................. 23
Section 7.3. Covenants to Survive ...................................... 23
Section 7.4. Binding Agreement ......................................... 23
Section 7.5. Amendments and Waivers .................................... 24
Section 7.6. No Waiver ................................................. 24
Section 7.7. Notices ................................................... 24
Section 7.8. Section Headings .......................................... 25
Section 7.9. Severability .............................................. 25
Section 7.10. Entire Agreement .......................................... 25
<PAGE>
Section 7.11. Consent to Jurisdiction; Service of Process; Waiver
of Trial by Jury .......................................... 25
Section 7.12. Governing Law ............................................. 26
EXHIBITS
Exhibit A - Promissory Note
Exhibit B - Security Agreement
Exhibit C - Opinion of Counsel
Exhibit D - Compliance Certificate
Exhibit E - LaB Certificate
Schedule 3.1(f)
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<PAGE>
CREDIT AGREEMENT
Credit Agreement, dated as of June 26, 1998 by and between LaBRANCHE &
CO., a New York limited partnership (the "Borrower") and THE BANK OF NEW YORK
(the "Bank").
ARTICLE 1. ACCOUNTING TERMS, DETERMINATION OF MARKED TO MARKET VALUE,
DEFINITIONS
Section 1.1. Accounting Terms.
Unless otherwise defined, all accounting terms shall be construed,
and all computations or classifications of assets or liabilities and of income
and expenses shall be made or determined, in accordance with generally accepted
accounting principles consistently applied.
Section 1.2. Determination of Marked to Market Value.
The "marked to market value" of all or any portion of the Collateral
(as defined in Section 1.3 hereof) shall be based upon such price thereof as is
provided by Interactive Data Service (or such other nationally accepted pricing
service as the Bank may select); provided, however, that if trading is suspended
in any Specialist Security (as defined in Section 1.3 hereof) which comprises
all or part of the Collateral:
(a) on the first day of such suspension in trading, the marked to
market value of such Specialist Security shall be the last price thereof
provided by Interactive Data Service (or such other nationally accepted
pricing service as the Bank may select) immediately prior to such
suspension in trading;
(b) on the second day of such suspension in trading, the marked to
market value of such Specialist Security shall be (i) an amount equal to
50% of the last price thereof provided by Interactive Data Service (or
such other nationally accepted pricing service as the Bank may select)
immediately prior to such suspension in trading, or (ii) if the Bank shall
have received information which indicates that trading in such Specialist
Security will continue to be suspended for more than two (2) days, such
lesser value as the Bank may determine; and
(c) on the third and each subsequent day of such suspension in
trading, the marked to market value of such Specialist Security shall,
unless the Bank and the Borrower otherwise agree, be zero.
Section 1.3. Definitions.
As used herein, in the Note (as defined in this Section 103) and,
except as otherwise defined, in any certificate, document or report delivered
pursuant hereto or thereto, the following terms shall have the following
meanings:
<PAGE>
"Affiliate" shall mean any partner in the Borrower, any LaB Member
or any Person directly or indirectly controlling, controlled by or under common
control with the Borrower, any partner in the Borrower and/or any LaB Member.
"Agreement" shall mean this Credit Agreement as the same may from
time to time be amended, supplemented or otherwise modified.
"Bank" shall mean The Bank of New York.
"Borrower" shall mean LaBranche & Co., a New York limited
partnership.
"Borrowing Base" shall mean, at any time, an amount equal to the sum
of the Specialist Borrowing Base at such time plus the Non-Specialist Borrowing
Base at such time.
"Borrowing Date" shall mean the date on which the Bank makes any
Loan.
"Broker Rate" shall mean the rate established from time to time by
the Bank in its sole discretion as its broker loan rate.
"Business Day" shall mean any day other than a day on which
commercial banks in New York, New York are required or permitted by law to
close.
"CFTC" shall mean the Commodity Futures Trading Commission, or any
regulatory body which succeeds to the functions thereof.
"Close of Business" shall mean 5PM on any Business Day.
"Collateral" shall mean all Specialist Securities and/or
Non-Specialist Securities in which the Bank has a security interest and upon
which the Bank has a lien pursuant to the Security Agreement as collateral
security for the payment and performance of all obligations and liabilities of
the Borrower hereunder and under the other Loan Documents.
"Collateral Value" shall mean, at any time, the aggregate marked to
market value at such time of all Collateral at such time.
"Combination" shall mean the combination of the assets and business
operations of Fowler, Rosenau & Geary, LLC, a New York limited liability company
("FRG") with those of the Borrower, which combination is scheduled to occur as
of July 1, 1998 and, in connection therewith, the admission of certain members
of FRG as limited partners of the Borrower and the admission of certain other
members of FRG as members of LaB.
"Commitment" shall mean $75,000,000, as the same may be (a) reduced
from time to time pursuant to Section 2.3(a)(ii) hereof and/or (b) increased
pursuant to Section 2.4 hereof.
"Concentration Base" shall mean, at any time, an amount equal to 25%
of the Collateral Value at such time, provided that in the case of Collateral
consisting of any stock being a component of the Standard & Poor's 500 Index,
such percentage shall be 30%.
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<PAGE>
"Default" shall mean an event or condition which would constitute an
Event of Default with the giving of notice or the lapse of time, or both.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"DSRO" shall mean the self-regulatory organization designated as the
designated self-regulatory organization of the Borrower pursuant to a plan filed
with the CFTC pursuant to Regulation 1.52 under the Commodity Exchange Act, as
amended.
"DTC" shall mean Depository Trust Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated pursuant thereto, as the same may
from time to time be supplemented or amended.
"Event of Default" and "Events of Default" shall have the meanings
assigned thereto in Section 6.1 hereof.
"Financial Statements" shall mean, collectively, (a) the audited
statement of financial condition of the Borrower as of December 31, 1997, (b)
the audited statement of income of the Borrower for the fiscal year of the
Borrower ended December 31, 1997, (c) the audited statement of changes in
partners' capital for the fiscal year of the Borrower ended December 31, 1997
and (d) the audited statement of cash flows of the Borrower for the fiscal year
of the Borrower ended December 31, 1997, in each case together with the notes
thereto.
"FOCUS Report" shall mean a Financial and Operational Combined
Uniform Single Report required to be filed on a monthly or quarterly basis, as
the case may be, with the SEC or the NYSE, or, if the Borrower is registered as
a futures commission merchant with the CFTC, the DSRO or the NFA, any report
which is required in lieu of such report.
"Governmental Authority" means any foreign, federal, state,
municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof, or any court or arbitrator.
"Indebtedness" of any Person shall mean (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property, (b)
all obligations of such Person for the payment of rent or hire of property of
any kind whatsoever under leases or lease arrangements which under generally
accepted accounting principles are required to be capitalized, (c) all
obligations of such Person under conditional sales or other title retention
agreements, and (d) all indebtedness for borrowed money secured by any lien upon
property owned by such Person (whether or not the holder of such indebtedness
has any recourse against such Person).
"LaB" shall mean LaB Investing Co. L.L.C., a New York limited
liability company and the sole general partner in the Borrower.
"LaB Agreement" shall mean the Amended and Restated Operating
Agreement of LaB, dated as of January 1, 1998.
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<PAGE>
"LaB Member" shall mean any of the LaB Members.
"LaB Members" shall mean the members in LaB as set forth on Schedule
II attached hereto.
"Loan" and "Loans" shall have the meanings assigned thereto in
Section 2.1 hereof.
"Loan Document" shall mean any one of the Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the Note,
the Security Agreement and all other agreements, documents, instruments and/or
certificates executed and/or delivered pursuant hereto or thereto or in
connection herewith or therewith.
"Managing Directors" shall mean George M.L. LaBranche, IV, Alfred 0.
Hayward, Jr., Michael J. Naughton and Vincent J. Flaherty.
"Maturity Date" shall mean with respect to a Loan the Business Day
immediately succeeding the Borrowing Date of such Loan, as such Maturity Date
may be extended as provided in Section 2.8(a).
"NFA" shall mean the National Futures Association or any other
registered futures association which succeeds to the functions of the National
Futures Association.
"Non-Specialist Borrowing Base" shall mean, at any time, an amount
equal to 50% of the aggregate marked to market value at such time of all
Non-Specialist Securities which comprise all or part of the Collateral at such
time.
"Non-Specialist Loans" shall mean Loans, the proceeds of which are
or are to be used for the purpose described in Section 2.5(b) hereof.
"Non-Specialist Securities" shall mean all securities, investment
property and other financial assets (a) for which the Borrower is not acting as
a specialist on the NYSE pursuant to the rules and regulations of the NYSE and
(b) which (i) are acceptable to the Bank, (ii) are listed on the NYSE and (iii)
were in the account of the Borrower with DTC immediately prior to the grant by
the Borrower to the Bank of a security interest therein and a lien thereupon
pursuant to the Security Agreement.
"Note" shall mean a promissory note substantially in the form of
Exhibit A attached hereto as the same may from time to time be replaced,
amended, supplemented or otherwise modified.
"Note Purchase Agreements" shall mean 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.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Obligations" shall have the meaning assigned thereto in the
Security Agreement.
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<PAGE>
"Option" shall have the meaning assigned thereto in Section 2.4
hereof.
"Partnership Agreement" shall mean the Amended and Restated Articles
of Partnership of the Borrower dated as of January 1, 1998.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and each successor
thereto.
"Person" shall mean any individual, firm, partnership, limited
liability company, joint venture, corporation, association, business enterprise,
joint stock company, unincorporated association, trust, Governmental Authority
or any other entity, whether acting in an individual, fiduciary, or other
capacity.
"Plan" shall mean any employee benefit plan or other plan maintained
for employees of the Borrower or any Subsidiary of the Borrower covered by Title
I of ERISA.
"SEC" shall mean the Securities and Exchange Commission and each
successor thereto.
"Security Agreement" shall mean the Security Agreement substantially
in the form of Exhibit B attached hereto as the same may from time to time be
amended, supplemented or otherwise modified.
"Special Counsel" shall mean Emmet, Marvin & Martin, LLP.
"Specialist Borrowing Base" shall mean, at any time, an amount equal
to 70% of the aggregate marked to market value at such time of all Specialist
Securities which comprise all or part of the Collateral at such time.
"Specialist Loans" shall mean Loans, the proceeds of which are or
are to be used for the purpose described in Section 2.5(a) hereof.
"Specialist Securities" shall mean all securities, investment
property and other financial assets (a) for which the Borrower is acting as a
specialist on the NYSE pursuant to the rules and regulations of the NYSE and (b)
which (i) are listed on the NYSE and (ii) were in the account of the Borrower
with DTC immediately prior to the grant by the Borrower to the Bank of a
security interest therein and a lien thereupon pursuant to the Security
Agreement.
"Specialist Security" shall mean any one of the Specialist
Securities.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership, joint venture, firm or other Person or entity of which
more than 50% of the outstanding shares of stock of each class having ordinary
voting power or other equity interests is at the time owned by such Person
and/or by one or more Subsidiaries of such Person; provided, however, that (a) a
partnership (general or limited) shall also be a "Subsidiary" if such Person
and/or one or more of such Person's Subsidiaries own more than 50% of the equity
interests owned by all managing partners or managing general partners, if any,
thereof, and (b) a limited partnership shall also be a "Subsidiary" if such
Person and/or
-5-
<PAGE>
one or more of such Person's Subsidiaries own more than 50% of the equity
interests owned by all general partners thereof.
"Termination Date" shall mean the earlier of (a) [364 days after
closing]__, 1999 or (b) the date on which the Commitment is terminated pursuant
to Section 2.3(a)(i), 2.3(b) or 6.1 hereof.
Section 1.4. Interpretation.
Terms defined in the singular shall have a comparable meaning when
used in the plural, unless otherwise defined in the plural. The words "hereof",
"herein", "hereto", "hereunder" and similar expressions mean and refer to this
Agreement and not to any portion or provision of this Agreement.
ARTICLE 2. LOANS
Section 2.1. Amounts.
Subject to the terms and conditions contained in this Agreement, the
Bank agrees to make loans (each, a "Loan" and, collectively, "Loans") to the
Borrower from time to time prior to the Termination Date in an aggregate
principal amount not exceeding at any one time outstanding the lesser of the
Commitment or the Borrowing Base; provided, however, that (a) the aggregate
outstanding principal amount of all Specialist Loans shall not exceed the
Specialist Borrowing Base and (b) the aggregate outstanding principal amount of
all Non-Specialist Loans shall not exceed the Non-Specialist Borrowing Base.
Prior to the Termination Date, the Borrower may use the Commitment by borrowing,
repaying and reborrowing all in accordance with the terms and conditions of this
Agreement.
Section 2.2. Notice of Borrowing; Note.
When the Borrower desires to borrow a Loan, it shall give the Bank
irrevocable written or fax notice of its intention to borrow under this Article
II not later than one hour before the Close of Business on the date of a
proposed borrowing, specifying (a) the date of the proposed borrowing (which
shall be a Business Day), (b) the amount to be borrowed (which shall be an
integral multiple of $1,000,000), and (c) whether such borrowing is to be a
Specialist Loan or a Non-Specialist Loan. The Loans shall be evidenced by the
Note. The Note shall be dated the date of the first borrowing hereunder and
shall be payable to the order of the Bank in the principal amount of the
Commitment or the aggregate unpaid principal amount of all Loans made to the
Borrower by the Bank, whichever is less. The date of each borrowing, the
principal amount thereof and the aggregate principal amount of Loans outstanding
thereunder may be recorded by the Bank on the schedule attached to the Note, but
the failure of the Bank so to record shall not affect any of the Borrower's
obligations and liabilities hereunder or under any other Loan Document. The
aggregate unpaid principal amount of Loans set forth on such schedule shall,
absent manifest error, be conclusive evidence of the principal amount owing and
unpaid thereon.
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<PAGE>
Section 2.3. Termination or Reduction of Commitment.
(a) Borrower's Option.
At the Borrower's option, and upon prior written or fax notice to
the Bank at least five (5) Business Days prior to the end of any calendar
quarter, the Borrower, without premium or penalty, may permanently, as of the
first day of the immediately succeeding calendar quarter:
(i) terminate the Commitment upon payment in full of the Note,
together with accrued interest thereon to the date of such payment and all
fees and other amounts due the Bank hereunder and under the other Loan
Documents; or
(ii) reduce the Commitment in integral multiples of
$10,000,000 upon payment of an amount equal to the sum of:
(A) the excess, if any, of the then outstanding
principal amount of the Note over the reduced Commitment; plus
(B) all accrued interest on such excess to the date of
such payment.
Any notice of termination or reduction of the Commitment under this Section
2.3(a) shall specify that the Commitment is being terminated in full or reduced
in part, the date of such termination or reduction (which shall be a Business
Day) and, in the case of a reduction, (x) the amount of the reduction and (y)
the amount of the payment pursuant to Section 2.3(a)(ii)(A) hereof which is to
be applied to Specialist Loans and/or Non-Specialist Loans (provided that if the
Borrower does not make the specification required by this clause (y), such
payment shall be applied first to the then aggregate outstanding principal
amount of all Specialist Loans and, thereafter, to the then aggregate
outstanding [ILLEGIBLE] of all Non-Specialist Loans).
(b) Bank's Option.
In the event that, in any period of ninety (90) [ILLEGIBLE] the
Managing Directors shall cease to be Managing Directors, the [ILLEGIBLE] upon
five (5) Business Days' prior written or fax notice to the [ILLEGIBLE] thirty
(30) days after the Bank has actual knowledge thereof, may [ILLEGIBLE] whereupon
the Borrower shall pay to the Bank, on or prior to the [ILLEGIBLE] Commitment,
the unpaid principal amount of the Note in full, [ILLEGIBLE] thereon to the date
of such payment and all fees and other amounts [ILLEGIBLE] and under the other
Loan Documents.
Section 2.4. Increase of Commitment.
If, after the date hereof, the NYSE allocates to the Borrower the
right to make a market as a specialist (pursuant to the rules and regulations of
the NYSE) in any additional security listed on the NYSE, the Borrower shall have
the option (the "Option"), exercisable once during the term of this Agreement,
to increase the Commitment by an amount which is equal to or less than 10% of
the Commitment immediately prior to the Borrower's exercise
-7-
<PAGE>
of the Option. If the Borrower desires to exercise the Option, it shall give the
Bank at least three (3) Business Days' prior irrevocable written or fax notice
of its intention to exercise the Option, which notice (a) shall specify the date
(which shall be a Business Day on or after the day on which such allocation
becomes effective) on which the Commitment is to be increased and the amount of
the increase in the Commitment, and (b) shall be accompanied by (i) evidence
satisfactory to the Bank and its counsel of such allocation by the NYSE (which
evidence shall indicate the date of effectiveness of such allocation) and (ii)
if the Borrower has theretofore executed and delivered to the Bank a Note, a new
Note, duly executed by the Borrower, in the amount of the increased Commitment.
Section 2.5. Use of Proceeds.
The proceeds of the Loans shall be used by the Borrower (a) to
finance the specialist security positions of the Borrower, (b) to finance the
"purchasing" or "carrying" by the Borrower of "margin stock" other than
specialist security positions (the terms "purchasing", "carrying" and "margin
stock" being as defined in Regulation U promulgated by the Board of Governors of
the Federal Reserve System) or (c) to reduce or retire a Loan outstanding
hereunder.
Section 2.6. Commitment Fee.
The Borrower shall pay to the Bank on the last Business Day of each
calendar quarter, commencing on the first such day following the date hereof, a
commitment fee at the rate of .28125% per annum (calculated on the basis of a
360 day year for the actual number of days involved) on the average daily unused
amount of the Commitment during the quarter (or portion thereof) ending on the
date such payment is due. Any such fee payable with respect to the quarter in
which the Commitment is terminated pursuant to Section 2.3(a)(i), 2.3(b) or 6.1
hereof shall be paid on the date of such termination.
Section 2.7. Interest.
Each Loan shall bear interest at a rate per annum equal to the
Broker Rate, but in no event in excess of the maximum rate permitted by law.
Interest shall be payable (a) monthly on the last Business Day of each month,
commencing on the last Business Day of the month in which the initial Loan is
made, and (b) at maturity. Notwithstanding the foregoing, all principal payments
due on Loans which are in default shall bear interest, payable on demand, from
the date of default until paid (whether before or after judgment) at a rate per
annum equal to the Broker Rate plus two percent (2%). Interest shall be
calculated on the basis of a 360 day year for the actual number of days
involved. The interest rate shall change on the effective date of any change in
the Broker Rate; provided, however, that the Bank shall have no obligation to
notify the Borrower of such change in the Broker Rate.
Section 2.8. Repayments; Rollovers.
(a) Except as otherwise provided herein, each Loan shall be repaid
by the Borrower before the Close of Business on such Loan's Maturity Date.
Notwithstanding the foregoing sentence, and provided that no Default or Event of
Default exists or would exist after giving effect thereto, the Borrower may
request that a Loan be rolled over until not later than the Close of Business on
the Business Day immediately succeeding the Maturity Date of such Loan by giving
the Bank an irrevocable request therefor not later than one hour prior to
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<PAGE>
the Close of Business on such Maturity Date. As promptly as practicable after
the Bank decides, in its sole and absolute discretion, to roll over such Loan,
the Bank shall give telephonic notice to such effect to the Borrower and the
Maturity Date of such Loan shall be extended to the Close of Business on the
immediately succeeding Business Day. Under no circumstance, however, will the
Bank be obligated to roll over a Loan, even if the Collateral Value therefor is
or is made sufficient pursuant to Section 2.8 (b) or (c), and the fact that a
Loan has been rolled over shall not obligate the Bank to do so again and if for
any reason or no reason a Loan is not rolled over, such Loan shall be due and
payable by the Close of Business on its Maturity Date. As used in this Section,
the term "rolled over" shall mean the making of a Loan the proceeds of which
shall be used to repay the Loan made to the Borrower on the immediately
preceding Business Day.
(b) If, at any time, whether on or after a Borrowing Date, the
outstanding principal balance of all Specialist Loans shall exceed the
Specialist Borrowing Base, the Borrower shall repay the Specialist Loans
in a sufficient amount (together with accrued interest on the amount
repaid to the date of repayment) such that, after giving effect to such
repayment, the outstanding principal balance of all Specialist Loans does
not exceed the Specialist Borrowing Base; provided, however, that in lieu
of making all or part of such repayment, the Borrower may, pursuant to the
Security Agreement, grant to the Bank a security interest in and lien upon
a sufficient number of Specialist Securities which are not, immediately
prior to such grant, part of the Collateral such that, after giving effect
to such grant and any simultaneous repayment of the Specialist Loans, the
aggregate outstanding principal balance of the Specialist Loans does not
exceed the Specialist Borrowing Base.
(c) If, at any time, whether on or after a Borrowing Date, the
outstanding principal balance of all Non-Specialist Loans shall exceed the
Non-Specialist Borrowing Base, the Borrower shall repay the Non-Specialist
Loans in a sufficient amount (together with accrued interest on the amount
repaid to the date of repayment) such that, after giving effect to such
repayment, the outstanding principal balance of all Non-Specialist Loans
does not exceed the Non-Specialist Borrowing Base; provided, however, that
in lieu of making all or part of such repayment, the Borrower may,
pursuant to the Security Agreement, grant to the Bank a security interest
in and lien upon a sufficient number of Non-Specialist Securities which
are not, immediately prior to such grant, part of the Collateral such
that, after giving effect to such grant and any simultaneous repayment of
the Non-Specialist Loans, the aggregate outstanding principal amount of
the Non-Specialist Loans does not exceed the NonSpecialist Borrowing Base.
(d) Each determination by the Bank of the Non-Specialist Borrowing
Base, the Specialist Borrowing Base and the Collateral Value shall be
conclusive absent manifest error.
Section 2.9. Payments.
All payments hereunder, under the Note and under the other Loan
Documents shall be made in federal or other immediately available funds. The
Bank is hereby authorized to charge the Borrower's deposit account maintained at
the Bank for each payment of interest and fees due hereunder and under the Note.
If any payment under this Agreement or any other Loan Document becomes due and
payable on a day other than a Business Day,
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the date of such payment shall be extended to the next succeeding Business Day,
and interest thereon (to the extent permitted by law) shall be payable for the
extended time.
Section 2.10. Capital Adequacy.
(a) In the event that the Bank shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank (or any
lending office of the Bank) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on the Bank's capital as a consequence of its obligations hereunder to a
level below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy) by an amount reasonably deemed by the Bank to be material,
then, from time to time, the Borrower shall pay upon demand to the Bank such
additional amount or amounts as will compensate the Bank for such reduction. In
determining such amount or amounts, the Bank may use any reasonable averaging
and attribution methods. The protection of this Section 2.10 shall be available
to the Bank regardless of any possible contention of invalidity or
inapplicability of the law, regulation or condition which shall have been
imposed.
(b) A certificate of the Bank setting forth such amount or amounts
as shall be necessary to compensate the Bank as specified in Section 2.10(a)
hereof shall be delivered to the Borrower and shall be conclusive absent
manifest error.
(c) The obligations of the Borrower under Section 2.10(a) hereof
shall survive termination of the Commitment, this Agreement and the other Loan
Documents and payment of the Note and all Loans.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties.
The Borrower represents and warrants to the Bank as follows:
(a) NYSE Member and Specialist. The Borrower is a member of the NYSE
and is registered and acting as a specialist on the NYSE pursuant to the rules
and regulations of the NYSE.
(b) Subsidiaries. The Borrower has no Subsidiaries.
(c) Good Standing and Qualification. The Borrower (i) is a limited
partnership, duly organized, validly existing and in good standing under the
laws of the State of New York, (ii) has all requisite power and authority to own
and operate its properties and to carry on its business as presently conducted,
and (iii) is duly qualified to do business in, and is in good standing under the
laws of, each jurisdiction where the character of the properties owned or leased
by it or the transaction of its business makes such qualification necessary.
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(d) Partners in Borrower. Set forth on Schedule I attached hereto is
a true and complete list of all partners (general and limited) in the Borrower.
(e) Authority. The Borrower has all requisite power and authority
(i) to enter into this Agreement, (ii) to make the borrowings contemplated
hereby, (iii) to grant to the Bank, pursuant to the Security Agreement, a
security interest in and lien upon the Collateral, (iv) to execute and/or
deliver this Agreement and each other Loan Document, and (v) to incur and
perform the obligations provided for herein and therein, all of which have been
duly authorized by all necessary and proper action.
(f) No Consent. Except as set forth on Schedule 3.1(f), no consent
or approval or the taking of any other action (including, without limitation, of
or by partners of the Borrower or of or by the SEC, the NYSE or any other
Governmental Authority) is required as a condition to (i) any borrowing
hereunder, (ii) the grant to the Bank, pursuant to the Security Agreement, of a
security interest in and lien upon any of the Collateral, (iii) the execution,
delivery or performance of this Agreement or any other Loan Document, or (iv)
the validity or enforceability of this Agreement or any other Loan Document.
(g) Due Execution; Binding Agreements. This Agreement has been duly
executed and delivered, and this Agreement constitutes, and each other Loan
Document, when executed and delivered for value received, shall constitute, the
valid and legally binding obligations of the Borrower, enforceable against the
Borrower and each general partner in the Borrower in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity.
(h) Litigation. There are no actions, suits, investigations or
administrative proceedings of or before any Governmental Authority, pending or,
to the knowledge of the Borrower, threatened against the Borrower or any of its
properties or assets, which (i) either in any case or in the aggregate, if
adversely determined, could materially adversely affect the business, prospects,
operations, properties, assets or condition (financial or otherwise) of the
Borrower, (ii) question the validity or enforceability of this Agreement, any
other Loan Document, or any action to be taken in connection with the
transactions contemplated hereby and thereby, or (iii) seek (or are reasonably
expected) to rescind, terminate, revoke, cancel, withdraw, suspend, modify or
withhold any of the franchises, certificates, licenses, permits and other
authorizations referred to in Section 3.1(o) hereof.
(i) No Conflicting Law or Agreements. Neither any borrowing
hereunder nor the grant to the Bank, pursuant to the Security Agreement, of a
security interest in and lien upon any of the Collateral nor the execution,
delivery or performance by the Borrower of this Agreement or any other Loan
Document (i) violates any provision of the Partnership Agreement, (ii) violates
any order, decree or judgment, or any provision of any statute, rule or
regulation, (iii) violates or conflicts with, results in a breach of or
constitutes (with notice or lapse of time or both) a default under, any
agreement, mortgage, indenture or contract to which the Borrower is a party, or
by which it or any of its properties or assets is bound, or (iv) results in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any property or asset of the Borrower other than pursuant to the
Security Agreement. The obligations of the Borrower hereunder constitute
"Permitted Secured Debt" and "Senior Claims", as such terms are defined in the
Note Purchase Agreements.
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(j) Taxes. The Borrower has timely filed all tax returns required to
have been filed by it, and all federal, state, municipal, franchise and other
taxes shown to be due and payable on such filed returns have been paid or have
been reserved against, as required by generally accepted accounting principles,
and the Borrower knows of no unpaid assessment against the Borrower.
(k) Financial Statements. There has heretofore been delivered to the
Bank the Financial Statements. Each of the Financial Statements fairly presents
the financial condition, results of operations and/or changes in financial
position of the Borrower as of the date and for the period referred to therein
and has been prepared in accordance with generally accepted accounting
principles consistently applied throughout the period involved.
(1) Adverse Developments. Since December 31, 1997, there has been no
material adverse change in the business, prospects, operations, properties,
assets or condition (financial or otherwise) of the Borrower.
(m) Existence of Assets and Title Thereto. The Borrower has good
and marketable title to its properties and assets, including the properties and
assets reflected in the Financial Statements (including, without limitation, the
Collateral). Such properties and assets are not subject to any mortgage, pledge,
lien, lease, encumbrance or charge except pursuant to the Security Agreement or
as expressly permitted under the terms of this Agreement.
(n) Regulations U and X. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock", and the proceeds of
the borrowings hereunder are not to be used and will not be used, directly or
indirectly, for the purpose of "purchasing" or "carrying" any "margin stock" in
contravention of Regulation U or X promulgated by the Board of Governors of the
Federal Reserve System; the terms "purchasing", "carrying" and "margin stock"
being as defined in Regulation U promulgated by the Board of Governors of the
Federal Reserve System.
(o) Licenses, Etc. The Borrower possesses all franchises,
certificates, licenses, permits and other authorizations from the SEC, the NYSE
and other Governmental Authorities, free from burdensome restrictions, (i) that
are necessary in any material respect for the ownership, maintenance and
operation of its properties and assets or the conduct of its business, and (ii)
the loss of possession of which would have a material adverse effect on the
business, prospects, operations, properties, assets or condition (financial or
otherwise) of the Borrower. The Borrower is not in violation of any of such
franchises, certificates, licenses, permits and other authorizations in any
material respect.
(p) Compliance. The Borrower is not in default with respect to any
order, writ, injunction or decree of any court or of any Governmental Authority
or official or, to the knowledge of the Borrower, in violation of any law,
statute, rule or regulation to which it or any of its properties or assets is
subject. The Borrower is not in default in the payment or performance of any of
its obligations or in the performance of any material mortgage, indenture,
lease, contract or other agreement to which it is a party or by which it or any
of its properties or assets is bound.
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(q) Leases. The Borrower enjoys quiet and undisturbed possession
under all leases under which it is operating, and all such leases are valid and
subsisting and not in default.
(r) Pension Plans. The PBGC has not made a determination that, with
respect to any Plan of the Borrower, an event or condition has occurred which
constitutes grounds under Section 4042 of ERISA for the termination of, or for
the appointment of a trustee to administer, any such Plan.
(s) Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended, and neither the
entering into of this Agreement or any of the other Loan Documents nor the
issuance of the Note nor the performance hereof or thereof nor any borrowing
hereunder violates or will violate any provision of the Investment Company Act
of 1940, as amended.
(t) Security Interest. The Security Agreement grants and will grant
to or for the benefit of the Bank a continuing security interest in and lien
upon the Collateral. Such security interest and lien (i) constitutes and will
constitute a valid and enforceable security interest and lien under the laws of
the State of New York, (ii) is and will be entitled to all of the rights,
benefits and priorities provided by applicable law, and (iii) is and will be
superior and prior to the rights, now existing or hereafter arising, of all
third persons, whether such rights result by way of mortgage, pledge, lien,
security interest, encumbrance or otherwise. All such action as is necessary in
law has been taken to establish and perfect the security interest of the Bank
in, and its lien upon, the Collateral and to entitle the Bank to exercise all
rights and remedies provided in the Security Agreement and under applicable law,
and no filing, recording, registration or giving of notice or other action is
required in connection therewith except such as have been made or given.
ARTICLE 4. CONDITIONS OF LENDING
Section 4.1. Conditions to Effectiveness and the Initial Loan.
This Agreement shall not be effective and the Bank shall have no
obligation to make the initial Loan until the following conditions precedent
have been fulfilled:
(a) Note. The Bank shall have received the Note, duly executed by
the Borrower.
(b) Security Agreement. The Bank shall have received the Security
Agreement, duly executed by the Borrower.
(c) Evidence of Action and Formation. The Bank shall have received
the following:
(i) Certified copies of all action (in form and substance
satisfactory to the Bank) taken by the Managing Committee of LaB, as the
general partner of the Borrower, to authorize the execution, delivery
and/or performance of this Agreement and all other Loan Documents, the
borrowings to be made hereunder, and the grant to
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the Bank, pursuant to the Security Agreement, of a security interest in
and lien upon the Collateral and certifying that such actions have not
been modified, rescinded or amended, and continue in full force and
effect, setting forth the incumbency of the member or members of the
Managing Committee of LaB who may sign the Loan Documents, including
therein a signature specimen of such member or members, together with such
other documents as the Bank shall reasonably require; and
(ii) True copies of the following:
(A) The Partnership Agreement;
(B) The certificate of limited partnership of the Borrower (and all
amendments thereto) which was filed pursuant to Section 91 of the
New York Partnership Law as in effect prior to July 1, 1991;
(C) Evidence as to the compliance by the Borrower with the publication
requirement in Section 91(1)(b) of the New York Partnership Law as
in effect prior to July 1, 1991;
(D) The certificates and statements filed by the Borrower pursuant to
Section 121-202(a) of the New York Partnership Law as in effect on
and after July 1, 1991;
(E) The LaB Agreement; and
(F) The articles of organization (and all amendments thereto) which was
filed by or with respect to LaB pursuant to Section 203 of the New
York Limited Liability Company Law.
(d) Opinion of Counsel. The Bank shall have received a favorable
written opinion of Fulbright & Jaworski, counsel to the Borrower, dated not more
than five (5) days prior to the date of this Agreement, satisfactory in form and
substance to the Bank and Special Counsel and substantially in the form of
Exhibit C attached hereto.
(e) Daily Filing. The Bank shall have received a copy of the latest
daily capital computation filing made by the Borrower with the NYSE.
(f) Combination. The Bank shall have received a copy (certified by a
member of the Managing Committee of LaB to be true and correct) of documents
evidencing the consummation of the Combination which documents shall be
substantially in the form of the drafts thereof previously submitted to the
Bank.
Section 4.2. Conditions to Each Loan.
The obligation of the Bank to make any Loan (including the initial
Loan) is subject to the fulfillment of the following conditions:
(a) Notice. The Bank shall have received the notice of borrowing
specified in Section 2.2 hereof.
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(b) Perfected Security Interest. The Bank shall have received
evidence reasonably satisfactory to the Bank and its counsel that (i) DTC has,
by book entry, indicated that the Collateral has been credited to the Bank's
account with DTC, (ii) the Bank has control (within the meaning of the Uniform
Commercial Code as then in effect in the State of New York) in respect of all of
the Collateral and (iii) the Bank has a perfected first priority security
interest in and lien upon all of the Collateral.
(c) Approval of Bank's Counsel. All legal matters incident to such
Loan shall be satisfactory to counsel to the Bank.
(d) Borrowing Base; Concentration Base. On the date of making of
such Loan and after giving effect thereto, (i) the aggregate outstanding
principal amount of all Specialist Loans shall not exceed the Specialist
Borrowing Base, (ii) the aggregate outstanding principal amount of all
Non-Specialist Loans shall not exceed the Non-Specialist Borrowing Base, (iii)
the aggregate outstanding principal amount of all Loans shall not exceed the
Borrowing Base, and (iv) the marked to market value of the Specialist Securities
and/or Non-Specialist Securities of any one issuer which comprise part of the
Collateral shall not exceed the Concentration Base.
(e) Purpose Statement. The Bank shall have received a Federal
Reserve Form U-1, duly executed by the Borrower prior to making the first
Specialist Loan and prior to making each Non-Specialist Loan.
(f) Compliance Certificate. (i) On the date of making of such Loan
and after giving effect thereto, (A) the Borrower shall have complied, and shall
then be in compliance, with all the terms, covenants and conditions of this
Agreement and the other Loan Documents which are binding upon it, (B) there
shall exist no Default or Event of Default, and (C) the representations and
warranties contained herein and in the other Loan Documents shall be true and
correct with the same effect as though such representations and warranties had
been made at the time of making of such Loan, and (ii) the Borrower shall have
delivered to the Bank a certificate substantially in the form of Exhibit D
attached hereto executed by the Borrower with respect to all of the foregoing.
(g) LaB Certificate. The Bank shall have received a certificate
substantially in the form of Exhibit E attached hereto, executed by LaB and
dated the date of making of such Loan.
ARTICLE 5. COVENANTS
Section 5.1. Affirmative Covenants.
So long as the Borrower may borrow under this Agreement, and until
payment in full of the Note and all amounts payable hereunder and under all
other Loan Documents and performance of all other obligations of the Borrower
hereunder and under all other Loan Documents, the Borrower will, unless the Bank
shall otherwise consent in writing:
(a) Net Capital. Maintain at all times a net capital (as defined in
Rule 15c3-1(c)(2) promulgated by the SEC) of not less than $30,000,000.
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(b) Net Worth. Maintain at all times a net worth (computed as
required for reporting on line 5 on page 5 of a FOCUS Report of the Borrower) of
not less than $60,000,000.
(c) Financial Statements. Furnish to the Bank the following:
(i) As soon as available but in no event more than ninety (90)
days after the close of each fiscal year of the Borrower, the following
financial statements of the Borrower, all in reasonable detail and in form
satisfactory to the Bank:
(A) a balance sheet as of the close of such fiscal year;
(B) a statement of income and retained earnings to the
close of such fiscal year;
(C) a statement of changes in capital accounts to the
close of such fiscal year;
(D) a statement of cash flows for such fiscal year; and
(E) a copy of the detailed reports, if any, submitted by
the Borrower's independent certified public accountants in connection with
such financial statements.
Each of the foregoing financial statements (I) shall set forth in each case in
comparative form the corresponding figures for the respective date or period for
the preceding fiscal year, (II) shall be audited by Arthur Andersen LLP or such
other firm of certified public accountants as shall be selected by the Borrower
and shall be reasonably satisfactory to the Bank, (III) shall be certified by
such accountants without qualification or limitation because of the restricted
or limited nature of the examination made by such accountants, and (IV) shall be
prepared in accordance with generally accepted accounting principles
consistently applied.
(ii) As soon as available but in no event more than thirty
(30) days after the end of each fiscal quarter of each fiscal year of the
Borrower, the Borrower's FOCUS Report for such fiscal quarter, all in reasonable
detail and with the opinion thereon of the chief financial officer of the
Borrower stating that such FOCUS Report presents fairly, in accordance with
generally accepted accounting principles consistently applied, the financial
condition and results of operations of the Borrower as at the end of and for
such fiscal quarter (subject to year-end adjustments).
(iii) Not later than 10:30 A.M. (New York City time) on each
day after the date of making of the initial Loan, a copy of the daily capital
computation filing made by the Borrower with the NYSE on such day.
(d) Certificates. Furnish to the Bank, (i) concurrently with each
delivery of financial statements or reports under Section 5.1(c) hereof, a
certificate of the chief financial officer of the Borrower stating whether a
Default or an Event of Default has occurred, and, if so, stating the facts with
respect thereto and whether the same has been cured prior to the date of such
certificate, and (ii) concurrently with each delivery of financial statements or
reports under Section 5.1(c)(i) hereof, a certificate of the certified public
accountants who audited such
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financial statements stating whether in the course of the examination necessary
for certifying such financial statements they obtained knowledge of any event
which constitutes a Default or an Event of Default, and, if so, stating the
facts with respect thereto and whether the same has been cured prior to the date
of such certificate. In the event that any certificate furnished pursuant to
this Section 5.1(d) shall state that a Default or an Event of Default has
occurred and is continuing, such certificate shall be accompanied by a statement
executed by the chief financial officer of the Borrower as to the action taken,
being taken and proposed to be taken with respect to such Default or Event of
Default.
(e) Notice of Default or Event of Default. Furnish to the Bank
promptly after the occurrence of each Default or Event of Default which is
continuing, a written statement executed by the chief financial officer of the
Borrower setting forth the details of such Default or Event of Default and the
action which has been taken, is being taken and is proposed to be taken with
respect thereto.
(f) Notice of Litigation. Notify the Bank as soon as possible and in
any event within ten (10) days after the commencement or threat of commencement
of, and all developments with respect to, any action, suit, investigation or
administrative proceeding against the Borrower or any of its properties which
(i) either alone or together with any other such action(s), suit(s),
investigation(s) or administrative proceeding(s), if adversely determined, could
materially adversely affect the business, prospects, operations, properties,
assets or condition (financial or otherwise) of the Borrower, (ii) questions the
validity or enforceability of this Agreement, any other Loan Document or any
action to be taken in connection with the transactions contemplated hereby and
thereby, or (iii) seeks (or may reasonably be expected) to rescind, terminate,
revoke, cancel, withdraw, suspend, modify or withhold any of the franchises,
certificates, licenses, permits and other authorizations referred to in Section
3.1(o) hereof. Each notice pursuant to this Section 5.1(f) shall specify in
detail the nature of the action, suit, investigation or administrative
proceeding and the damages or other relief sought, and shall be accompanied by a
copy of the summons, complaint or other documentation served on the Borrower in
connection with such action, suit, investigation or administrative proceeding.
(g) Offices; Books and Records. (i) Keep and maintain at its own
expense satisfactory and complete books of account and financial records, (ii)
permit officers of the Bank (A) to visit and inspect any of the offices of the
Borrower, (B) to examine its books, and (C) to discuss the affairs and accounts
of the Borrower with the Borrower's employees and with the LaB Members, in each
case at reasonable times, at reasonable intervals and upon reasonable advance
notice, and (iii) furnish to the Bank such other information as it may
reasonably request.
(h) Taxes. Pay and discharge all taxes, assessments, governmental
charges and levies upon the Borrower as and when they become due and payable,
unless, and only to the extent that, such taxes, assessments, governmental
charges and levies shall be contested in good faith and shall have been reserved
against (as required by generally accepted accounting principles) by the
Borrower.
(i) Insurance. Maintain insurance with responsible insurance
companies on such of its properties and assets in such amounts and against such
risks as is customarily maintained by similar businesses.
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(j) Compliance With Laws. Comply or cause compliance in all material
respects with all applicable laws, rules, regulations and ordinances affecting
the Borrower or any of its properties or assets.
(k) Licenses. Obtain and maintain any and all licenses, permits,
franchises and other governmental authorizations (including, without limitation,
from the SEC and the NYSE) that are necessary in any material respect for the
ownership of its properties and assets and the conduct of its business and the
loss of possession of which would have a material adverse effect on the
business, prospects, operations, properties, assets or condition (financial or
otherwise) of the Borrower.
(1) Existence. Maintain its existence as a New York limited
partnership, and qualify and remain qualified to do business in each
jurisdiction where the character of the properties owned or leased by it or the
transaction of its business makes such qualification necessary.
(m) Material Changes. Notify the Bank:
(i) Change in Structure. At least two (2) Business Days prior
to the effective date of any change in the legal structure of the Borrower from
a New York limited partnership to a corporation, joint venture, general
partnership, limited liability company of other form of entity;
(ii) Loss of Specialist Position. Promptly (and in any event
within ten (10) days after the Borrower knows or should have known thereof) if,
for any reason whatsoever, the Borrower ceases to act as specialist (pursuant to
the rules and regulations of the NYSE) with respect to any security theretofore
allocated to the Borrower by the NYSE; and
(iii) Managing Directors. Promptly (and in any event within
two (2) days after the Borrower knows or should have known thereof) if any
Managing Director shall cease to be a Managing Director.
(n) Organizational and Operative Documents of the Borrower. Notify
the Bank promptly of any material modification, amendment or cancellation of the
Partnership Agreement.
(o) Additional and/or Substitute Collateral. If, at any time, the
marked to market value of the Specialist Securities and/or Non-Specialist
Securities of any one issuer which comprise part of the Collateral exceeds the
Concentration Base, grant to the Bank, pursuant to the Security Agreement, a
security interest in and lien upon, in addition to and/or in substitution for
all or part of such Specialist Securities and/or Non-Specialist Securities,
Specialist Securities and/or Non-Specialist Securities which are not,
immediately prior to such grant, part of the Collateral such that, after giving
effect to such grant, the marked to market value of the Specialist Securities
and/or Non-Specialist Securities of any one issuer which comprise part of the
Collateral does not exceed the Concentration Base.
(p) Supplementary Documentation. Promptly upon the request of the
Bank, execute and deliver or cause to be executed and delivered such further
instruments and do or cause to be done such further acts as may be necessary or
as may be reasonably requested by the
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Bank to carry out more effectively the purposes of this Agreement and the other
Loan Documents.
Section 5.2. Negative Covenants.
So long as the Borrower may borrow under this Agreement, and until
payment in full of the Note and all other amounts payable hereunder and under
all other Loan Documents and performance of all other obligations of the
Borrower hereunder and under all other Loan Documents, the Borrower will not,
unless the Bank shall otherwise consent in writing:
(a) Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except for (i) Indebtedness to the Bank pursuant to this Agreement
or any other Loan Document, (ii) Indebtedness secured by the liens specifically
permitted by clauses (iii) and (iv) of Section 5.2(b) hereof, (iii)
Indebtedness, the payment of which is subordinated to the Borrower's
Indebtedness to the Bank under this Agreement on terms approved by the NYSE,
(iv) additional Indebtedness not in excess of $5,000,000 in the aggregate, and
(v) accounts payable and other liabilities created in the ordinary course of
business, but not including any Indebtedness incurred in connection with the
borrowing of money or the acquisition of any asset (except as permitted under
clause (iv) of this Section 5.2(a)).
(b) Mortgages and Pledges. Create, incur, assume or suffer to exist
any mortgage, pledge, lien, charge or other encumbrance of any kind (including
the charge on property purchased under conditional sales or other title
retention agreements) upon, or any security interest in, the Collateral or any
of the other properties or assets, whether now owned or hereafter acquired, of
the Borrower, except for (i) liens under the Security Agreement, (ii) liens
incidental to the conduct of the business of the Borrower or the ownership of
its properties or assets not incurred in connection with the borrowing of money
or the acquisition of any asset, and which in the aggregate do not materially
detract from the business, prospects, operations, properties, assets or
condition (financial or otherwise) of the Borrower, (iii) liens constituting
purchase money mortgages, so long as each such lien secures only the
Indebtedness incurred to purchase the property subject to such lien (provided
that the total amount of Indebtedness secured by all such liens shall not exceed
$250,000 outstanding at any one time), and (iv) liens in existence on December
31, 1997 as set forth in the Financial Statements (provided that the
Indebtedness secured thereby shall not be extended, renewed or increased).
(c) Merger, Consolidation and Acquisition of Assets. Enter into any
merger or consolidation with, or acquire all or substantially all of the assets
of, any Person.
(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, and partnership interest in the Borrower conveying an
interest of more than 10% in the profits of the Borrower.
(e) Contingent Liabilities. Except for the indorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business and repurchase agreements pertaining to U.S. Government
securities entered into in the ordinary course of business with member banks of
the Federal Reserve System or primary dealers in such securities (i) assume,
guarantee, indorse, sell with recourse, contingently agree to purchase,
discount, or otherwise become or remain liable with respect to any Indebtedness,
obligation or other liability of any Person, or (ii) enter into any agreement
for the purchase or other
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acquisition of any product, materials or supplies, or for transportation or for
the payment for services, if in any such case payment therefor is to be made
regardless of the non-delivery of the product, materials or supplies or the
non-furnishing of the transportation or services, if, after giving effect to any
of the transactions specified in clauses (i) and (ii) of this Section 5.2(e),
[ILLEGIBLE] aggregate liability of the Borrower for all transactions specified
in clauses (i) and (ii) of this Section 5.2(e) exceeds $5,000,000 during the
term of this Agreement.
(f) Transactions with Affiliates. Enter into any transactions
([ILLEGIBLE] without limitation, the purchase, sale or exchange of property or
the rendering of any [ILLEGIBLE] with any Affiliate, except in the ordinary
course of and pursuant to the reasonable [ILLEGIBLE] of its business and upon
fair and reasonable terms no less favorable to the Borrower as [ILLEGIBLE]
obtain in any arm's-length transaction with a Person not an Affiliate.
(g) Formation of Subsidiaries. Form, acquire, or acquire an interest
in any Subsidiary.
ARTICLE 6. EVENTS OF DEFAULT
Section 6.1. Events of Default.
If any one or more of the following events (each, an "Event of
Default" and, collectively, "Events of Default") shall occur:
(a) The principal amount due on a Loan is not paid on the Maturity
Date of such Loan (unless such Loan is rolled over pursuant to Section 2.8); or
(b) Any interest on a Loan, any facility fee, or any other amount
(other than the principal amount of a Loan) payable hereunder or under any other
Loan Document is not paid within five (5) days of the due date thereof; or
(c) Default is made in the due observance or performance of any
term, covenant or agreement contained in Section 2.8(a), 2.8(b), 2.8(c), 5.1(a),
5.1(b), 5.1(o) or 5.2 of this Agreement; or
(d) Default is made in the due observance or performance of any
other term, covenant or agreement contained in this Agreement or any other Loan
Document, and such default continues unremedied for a period of thirty (30) days
after the Bank shall have notified the Borrower thereof; or
(e) Any representation, warranty or statement made herein, in any
other Loan Document, in any certificate delivered pursuant to Section 4.2(f) or
4.2(g) hereof or in any financial statement, certificate, report or opinion
delivered pursuant hereto or thereto proves to have been incorrect in any
material respect when made; or
(f) The Borrower makes an assignment for the benefit of creditors,
admits in writing its inability to pay its debts as they become due, generally
fails to pay its debts as they become due, files a voluntary petition under the
Federal Bankruptcy Code (as now or hereafter in effect), is adjudicated bankrupt
or insolvent, files any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation or similar
relief under any
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present or future statute, law or regulation of any jurisdiction, petitions or
applies to any tribunal for any custodian, trustee, receiver, liquidator or
fiscal agent for all or a substantial part of its properties or assets, or there
is commenced against the Borrower any such case or proceeding, or the Borrower
files any answer admitting or not contesting the material allegations of a
petition filed against the Borrower in any such case or proceeding, or the
Borrower seeks, approves, consents to or acquiesces in any such case or
proceeding or in the appointment of any custodian, trustee, receiver, liquidator
or fiscal agent of the Borrower for all or a substantial part of the property of
the Borrower, or any of its partners shall take any action looking to the
dissolution or liquidation of the Borrower; or
(g) Any judgment against the Borrower, or any attachment, execution,
levy or restraining notice against its property, for any amount in excess of
$250,000 remains unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of thirty (30) days; or
(h) Any proceeds of any of the Loans are used for a purpose which is
not in accordance with the terms of this Agreement; or
(i) The Borrower fails to obtain, renew, maintain or comply with any
license, permit, franchise or other governmental authorization (including,
without limitation, from the SEC or the NYSE) necessary for the ownership by the
Borrower of any of its properties or assets or the conduct by the Borrower of
its business as a specialist on the NYSE, the loss of possession of which could
have a material adverse effect on the business, prospects, operations,
properties, assets or condition (financial or otherwise) of the Borrower, or any
such license, permit, franchise or other governmental authorization is
rescinded, terminated, revoked, cancelled, withdrawn, suspended, modified or
withheld or ceases to be in full force and effect; or
(j) Obligations of the Borrower (other than its obligations
hereunder) for the payment of borrowed money in an aggregate amount in excess of
$250,000 (i) become or are declared to be due and payable prior to the stated
maturity thereof or such maturity is accelerated, or (ii) is not paid when due
or within any grace period for the payment thereof; or
(k) There shall occur any default in the performance or observance
of any other term, condition or agreement contained in any obligation referred
to in Section 6.1(j) hereof or in any agreement relating thereto, or any other
event or condition shall occur, if the effect of such default, event or
condition is to cause, or permit the holder or holders of such obligation to
cause, such obligation to become due prior to its stated maturity; or
(l) The PBGC makes a determination that there has occurred an event
or condition which constitutes grounds under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any Plan of
the Borrower; or
(m) Any of the Collateral is subjected to any security interest,
lien, charge or other encumbrance (other than pursuant to the Security Agreement
or as permitted by this Agreement or any other Loan Document) or to attachment,
levy or execution or to any other judicial process, which is not removed, stayed
or bonded within thirty (30) days of such an occurrence; or
(n) Any Person (other than the Bank) exercises or attempts to
exercise any judgment, lien, mortgage, pledge, hypothecation, security interest,
charge or other encumbrance
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or any right or interest in or to any of the Collateral, unless any such
exercise or attempted exercise is contested in good faith and the Borrower shall
have set aside adequate reserves to the extent required by generally accepted
accounting principles; or
(o) The Security Agreement shall for any reason, except to the
extent permitted thereby, cease to create, or the Bank (for any reason other
than termination or release by the Bank) shall cease to have, a valid,
enforceable and perfected first priority security interest in the Collateral or
any portion thereof; or
(p) Without the prior written consent of the Bank, either (i) the
LaB Agreement is modified, amended or cancelled or (ii) any membership interest
in LaB is sold, transferred, assigned, converted or otherwise disposed of if, in
either case, after giving effect thereto, (x) the membership interest in LaB of
any LaB Member increases or decreases by five percentage points or more, (y) any
Person acquires ten percent (10%) or more of the membership interests in LaB, or
(z) the ability, power or authority of the Borrower to borrow hereunder, to
grant to the Bank, pursuant to the Security Agreement, a security interest in
and lien upon any of the Collateral or to pay or perform any of its obligations
and liabilities hereunder or under any other Loan Document would be materially
adversely affected;
then, upon the happening of any of the foregoing Events of Default which shall
be continuing, all obligations of the Bank to make further Loans shall terminate
and the Loans and the Note and all amounts payable pursuant to each Loan
Document shall become immediately due and payable upon written or fax
declaration to that effect given by the Bank to the Borrower; provided, however,
that upon the occurrence of any Event of Default specified in Section 6.1(f)
hereof, all obligations of the Bank to make further Loans shall automatically
terminate, and the Loans and the Note and all amounts payable pursuant to each
Loan Document shall automatically become immediately due and payable. The
Borrower expressly waives any presentment, demand, protest, notice of protest or
other notice of any kind. The Bank may proceed to enforce its rights, whether by
suit in equity or by action at law, whether for specific performance of any
covenant or agreement contained in this Agreement, the Note or any other Loan
Document, or in aid of the exercise of any power granted in this Agreement, the
Note or any other Loan Document, or proceed to obtain judgment or any other
relief whatsoever appropriate to the enforcement of its rights, or proceed to
enforce any other legal or equitable right which the Bank may have by reason of
the occurrence of any Event of Default.
ARTICLE 7. OTHER PROVISIONS
Section 7.1. Release of Collateral.
If requested by the Borrower, the Bank shall, at the Borrower's
expense, release from the Bank's security interest and lien pursuant to the
Security Agreement such of the Collateral as the Borrower may request the Bank
to so release, provided that (a) the Borrower makes such request in writing to
the Bank not less than one (1) Business Day prior to the requested date of
release, specifying the requested date of release (which shall be a Business
Day) and the Collateral to be released, and (b) at the time of, and after giving
effect to, such release, (i) the aggregate outstanding principal amount of all
Specialist Loans shall not exceed the Specialist Borrowing Base, (ii) the
aggregate outstanding principal amount of all Non-Specialist Loans shall not
exceed the Non-Specialist Borrowing Base, (iii) the aggregate outstanding
principal amount of all Loans shall not exceed the Borrowing Base, and (iv) the
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marked to market value of the Specialist Securities and/or Non-Specialist
Securities of any one issuer which comprise part of the Collateral shall not
exceed the Concentration Base.
Section 7.2. Expenses and Indemnification.
(a) The Borrower agrees to pay (i) all out-of-pocket expenses of the
Bank (including reasonable fees and expenses of Special Counsel) incurred in
connection with the development, preparation and execution of the Loan Documents
and any amendments of or supplements thereto, and (ii) all expenses (including
reasonable fees and expenses of the Bank's counsel) incidental to the
enforcement of the rights of the Bank under any provisions of this Agreement,
the Note and the other Loan Documents.
(b) The Borrower shall indemnify and hold harmless the Bank and its
officers, directors, employees, affiliates, agents and controlling Persons
(each, an "Indemnified Party") from and against (i) all documentary, stamp and
other similar taxes, levies, imposts and other charges of any nature imposed by
any taxing authority by reason of the execution and delivery of this Agreement,
the Note or any other Loan Document, and (ii) any and all losses, claims,
damages and liabilities to which any such Indemnified Party may become subject
arising out of or in connection with any claim, litigation, investigation or
proceeding relating to this Agreement, the Note, any other Loan Document, the
credit facility (including the use and intended use of the proceeds thereof)
contemplated hereby, the performance by the Borrower of its obligations under
this Agreement, the Note or any other Loan Document, the consummation of the
transactions contemplated hereby and thereby, or any related transaction,
whether or not any Indemnified Party is a party thereto, and to reimburse each
Indemnified Party upon demand for all legal and other expenses incurred in
connection with investigating or defending any of the foregoing; provided,
however, that the foregoing indemnity will not, as to any Indemnified Party,
apply to losses, claims, damages, liabilities or related expenses to the extent
arising from the willful misconduct or gross negligence of such Indemnified
Party.
(c) The obligations of the Borrower under this Section 7.2 shall
survive termination of the Commitment, this Agreement and the other Loan
Documents and payment of the Note and all Loans.
Section 7.3. Covenants to Survive.
All covenants, agreements, warranties and representations made
herein, in the Note, in all other Loan Documents and in all certificates or
other documents delivered in connection herewith or therewith shall survive the
advances of money made by the Bank to the Borrower hereunder and the delivery of
the Note.
Section 7.4. Binding Agreement.
All covenants, agreements, warranties and representations made
herein, in the Note, in all other Loan Documents and in all certificates or
other documents delivered in connection herewith or therewith shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and permitted assigns, whether or not so expressed, except that the
Borrower may not assign or transfer any of its rights or delegate any of its
duties under this Agreement or any other Loan Document without the prior written
consent of the Bank, and any attempted assignment, transfer or delegation
without such consent shall be null and void.
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<PAGE>
Section 7.5. Amendments and Waivers.
Neither this Agreement nor the Note nor any other Loan Document nor
any term, covenant or condition hereof or thereof may be changed, waived,
discharged, modified or terminated except by a writing executed by the parties
hereto or thereto.
Section 7.6. No Waiver.
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder or under any other Loan
Document shall preclude any other or future exercise thereof, or the exercise of
any other right, remedy or power.
Section 7.7. Notices.
Except as otherwise provided herein, all notices, requests,
consents, demands and other communications hereunder shall be in writing and
shall be mailed by first class registered or certified mail or delivered
personally to the respective parties to this Agreement as follows:
The Borrower:
LaBRANCHE & CO.
One Exchange Plaza
New York, New York 10006
Attention: Steven C. Berger
with a copy to
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Jeffrey M. Marks, Esq.
The Bank:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Attention: Enrique A. Rivera
Vice President
All such notices, requests, consents, demands and other communications shall be
effective upon receipt (in the case of personal delivery) or, if mailed, 3
Business Days after the day of deposit in the mails, except that the notices to
the Bank under Article II hereof shall not be effective until received by the
Bank. The Bank may, without the necessity of independent investigation, rely on
any notice which the Bank believes to be genuine and to have been given or
signed by a Person authorized to do so.
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<PAGE>
Section 7.8. Section Headings.
Section and subsection headings have been inserted herein for
convenience of reference only and shall not be construed as part of this
Agreement.
Section 7.9. Severability.
Every provision of this Agreement and the other Loan Documents is
intended to be severable, and if any term or provision of this Agreement, any
other Loan Document, or any other document delivered in connection herewith or
therewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof and
thereof shall not in any way be affected or impaired thereby.
Section 7.10. Entire Agreement.
All Exhibits and Schedules to this Agreement shall be annexed hereto
and shall be deemed to be part of this Agreement. This Agreement and the
Exhibits and Schedules attached hereto embody the entire agreement and
understanding between the Borrower and the Bank and supersede all prior
agreements and understandings relating to the subject matter hereof.
Section 7.11. Consent to Jurisdiction; Service of Process; Waiver of Trial
by Jury.
(a) The Borrower hereby (i) agrees that any suit, action or
proceeding with respect to this Agreement and/or any other Loan Document, or the
subject matter hereof or thereof, may be brought in the state courts of the
State of New York or in the United States District Court for the Southern
District of New York, in each case sitting in New York County, (ii) irrevocably
submits to the nonexclusive jurisdiction of the aforesaid courts with respect to
any such suit, action or proceeding, and (iii) waives, to the extent permitted
by applicable law, and agrees not to assert, in any such suit, action or
proceeding, by way of motion, as a defense or otherwise, any claim that (A) it
is not personally subject to the jurisdiction of the aforesaid courts, (B)
except as required by applicable law, its property is exempt or immune from
attachment or execution, (C) any such suit, action or proceeding brought in one
of the aforesaid courts is brought in an inconvenient forum, (D) the venue of
any such suit, action or proceeding brought in one of the aforesaid courts is
improper, or (E) this Agreement or any other Loan Document, or the subject
matter hereof or thereof, may not be enforced in or by any such court.
(b) The Borrower hereby irrevocably consents to the service of
process of any of the courts specified in Section 7.11(a) hereof in any suit,
action or proceeding with respect to this Agreement or any other Loan Document,
or the subject matter hereof or thereof, by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Borrower at its address
specified in Section 7.7 hereof.
(c) Nothing contained in this Section 7.11 shall affect the right of
the Bank to serve process in any other manner permitted by law, or to commence
proceedings or otherwise proceed against the Borrower in any other jurisdiction.
(d) THE BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY CONNECTED TO,
THIS AGREEMENT AND/OR ANY OTHER LOAN DOCUMENT OR THE SUBJECT MATTER HEREOF OR
THEREOF.
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<PAGE>
Section 7.12. Governing Law.
This Agreement and the other Loan Documents are being delivered, and
are intended to be performed, in the State of New York and shall be construed
and enforceable in accordance with, and governed by, the laws of the State of
New York other than those relating to conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
LaBRANCHE & CO.
By: LaB Investing Co. L.L.C.
General Partner
By: /s/ Steven C. Berger
----------------------------------
Name: STEVEN C. BERGER
--------------------------------
Title: MANAGING DIRECTOR
-------------------------------
THE BANK OF NEW YORK
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE>
Section 7.12. Governing Law.
This Agreement and the other Loan Documents are being delivered, and
are intended to be performed, in the State of New York and shall be construed
and enforceable in accordance with, and governed by, the laws of the State of
New York other than those relating to conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
LaBRANCHE & CO.
By: LaB Investing Co. L.L.C.
General Partner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE BANK OF NEW YORK
By: /s/ Enrique A. Rivera
----------------------------------
Name: ENRIQUE A. RIVERA
--------------------------------
Title: VICE PRESIDENT
-------------------------------
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<PAGE>
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
entirety 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
thereof:
(u) Year 2000. Any reprograniming 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 reasonably foreseeable consequences of year
2000 to the Borrower (including
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<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 in 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
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<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 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.
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<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/ LaBranche
------------------------------
Name: GML LaBranche IV
----------------------------
Title: Sr. Managing Dir.
---------------------------
<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 10.13
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "AGREEMENT") is made and entered
into as of the ___ day of ______ 1999, by and between LaBranche & Co Inc., a
Delaware corporation (the "COMPANY") and each of the Indemnitees listed on the
signature pages to this agreement (each, an "INDEMNITEE", and collectively, the
"INDEMNITEES") as such signature pages may be amended and supplemented from time
to time.
W I T N E S S E T H
WHEREAS, the Company has become party to (i) a Plan of Incorporation
dated as of June ___, 1999, (the "PLAN OF INCORPORATION") and (ii) an Exchange
Agreement, dated as of June ___, 1999 (the "EXCHANGE AGREEMENT") (such Plan of
Incorporation, together with all exhibits thereto, and such Exchange Agreement,
together with all exhibits thereto, as each may be amended from time to time,
the "TRANSACTION DOCUMENTS");
WHEREAS, as part of the Transaction Documents, the Company has filed a
registration statement (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission for the public offering and sale of shares of its common
stock (including shares issuable in connection with employee benefit plans);
WHEREAS, the Company has requested and will request certain of the
Indemnitees to execute the Registration Statement in the capacity or capacities
listed and to be listed in such Registration Statement; and
WHEREAS, each Indemnitee is one or more of the following: (i) an
officer or director of the Company or (ii) a person requested or authorized by
the board of directors of the Company or the Managing Committee of LaB Investing
Co. L.L.C., a New York limited liability company ("INVESTING") to take actions
on behalf of the Company, Investing or LaBranche & Co., a New York limited
partnership, in connection with the Registration Statement or any of the
Transaction Documents.
NOW, THEREFORE, in consideration of each Indemnitee's acting and
agreeing to act in the capacities referred to above, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
Section 1. GENERAL. The Company (A) will indemnify and hold harmless
each Indemnitee against any Losses (as hereinafter defined), joint or several,
to which such Indemnitee may become subject, under the Securities Act of 1933,
as amended (the "ACT") or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Registration
<PAGE>
Statement or any related Rule 462(b) Registration Statement or any preliminary
prospectus or prospectus comprising a part thereof, or any amendment 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; provided, however, that
the Company shall not be liable in any such case to the extent that any such
Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission relating to such Indemnitee made in
any preliminary prospectus, any registration statement or any prospectus or any
amendment or supplement in reliance upon and in conformity with written
information relating to such Indemnitee furnished to the Company by such
Indemnitee expressly for use therein; and (B) will indemnify and hold harmless
each Indemnitee against any Losses (or actions in respect thereof) which
otherwise arise out of or are based upon or asserted against such Indemnitee in
connection with such Indemnitee's acting in the capacities referred to above in
connection with the transactions contemplated by the Transaction Documents,
except to the extent any such Losses referred to in this clause (B) arise out of
or are based upon the type of conduct for which (x) a director would not be
exempt from liability or (y) the indemnification of a director would be limited
in respect of such Losses, in the case of (x) and (y), within the meaning of
Article Tenth of the Amended and Restated Certificate of Incorporation of the
Company or Section 102(b)(7) of the Delaware General Corporation Law (whether or
not such Indemnitee is a director).
Notwithstanding the foregoing provisions of this Section 1, the
Company and each Indemnitee agree that insofar as indemnification for
liabilities arising under the Act may be permitted under this Agreement to an
Indemnitee who is a director, officer or controlling person of the Company, in
the event that a claim for indemnification against such liabilities is made by
such an Indemnitee (other than the payment by the Company of expenses incurred
or paid by such Indemnitee in the successful defense of any action, suit or
proceeding) in connection with a Registration Statement, the Company 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 whether
such indemnification by it is against public policy as expressed in the Act, and
the Company and such Indemnitee will be governed by the final adjudication of
such question.
Section 2. LOSSES. As used in this Agreement, the term "LOSSES" shall
include, without limitation, damages, losses, claims, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigation costs, defense preparation costs, costs of preparing for and
presenting evidence or testimony, and any expenses of establishing a right to
indemnification under this Agreement. The term "Losses" shall not include taxes,
except to the extent taxes are imposed in respect of payments otherwise made
pursuant to this Agreement, in which case such Indemnitee's Losses shall include
an amount not greater than the net taxes payable (taking into account any
deductions or other tax benefits available to such Indemnitee as a result of the
Losses in respect of which such payment is made).
Section 3. ENFORCEMENT. Subject to the provisions of the second
paragraph of Section 1 hereof, if a claim or request by an Indemnitee under this
Agreement is not paid by the
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<PAGE>
Company, or on its behalf, within thirty days after a written claim of request
has been received by the Company and, if applicable, the affirmation in Section
6 hereof has been received by the Company, such Indemnitee may at any time
thereafter commence an arbitration proceeding in accordance with Section 9
hereof against the Company to recover the unpaid amount of the claim or request
and, if successful in whole or in part, such Indemnitee shall also be entitled
to be paid the expenses of prosecuting such proceeding. It shall be a defense to
any such proceeding (other than a proceeding commenced to enforce a claim for
expenses incurred in defending any actual or threatened proceeding in advance of
its final disposition where the required affirmation and undertaking, if any is
required, have been tendered to the Company) that such Indemnitee has not met
the standards of conduct for the Company to indemnify such Indemnitee herein for
the amount claimed, but the burden of proving such defense shall be on the
Company. Neither the failure of the Company (including its board of directors,
legal counsel or shareholders) to have made a determination prior to the
commencement of such proceeding that indemnification of such Indemnitee is
proper in the circumstances because such Indemnitee has met the applicable
standard of conduct set forth herein, nor an actual determination by the Company
(including its board of directors, legal counsel or shareholders) that such
Indemnitee has not met such applicable standard of conduct, shall be a defense
to the proceeding or create a presumption that such Indemnitee has not met the
applicable standard of conduct.
Section 4. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of any Losses, but not for the total amount thereof, the Company shall
nevertheless indemnify such Indemnitee for the portion of such losses to which
such Indemnitee is entitled.
Section 5. EXPENSES. Expenses incurred by an Indemnitee in connection
with any proceeding shall be paid by the Company upon request of such Indemnitee
that the Company pay such expenses, but only upon receipt by the Company of (i)
a written affirmation of such Indemnitee's good faith belief that the applicable
standard of conduct necessary for indemnification by the Company has been met,
(ii) a written undertaking by or on behalf of such Indemnitee to reimburse the
Company for expenses if and to the extent that it is ultimately determined that
the applicable standard of conduct has not been met and (iii) satisfactory
evidence of the amount of such expenses.
Section 6. NOTICE OF CLAIM. Each Indemnitee shall promptly notify the
Company in writing of any claim against such Indemnitee for which
indemnification will or could be sought under this Agreement. In addition, each
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within such Indemnitee's power and at such
times and places as are not unduly burdensome for such Indemnitee.
Section 7. DEFENSE OF CLAIM. With respect to any proceeding as to
which an Indemnitee notifies the Company of the commencement thereof:
(a) the Company will be entitled to participate at its own expense;
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<PAGE>
(b) subject to Section 7(c) hereof, the Company shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction against any Indemnitee and any other Indemnitees, be liable to
such Indemnitee and such other Indemnitees for the fees and expenses of
more than one separate law firm (in addition to a single firm of local
counsel);
(c) except as otherwise provided below, to the extent that it may
wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to such Indemnitee, which in the Company's
sole discretion may be regular counsel to the Company and may be counsel to
other Indemnitees. The Indemnitees also shall have the right to employ one
separate counsel for such Indemnitees in such action, suit or proceeding if
such Indemnitees reasonably conclude that if they did not there would be a
conflict of interest between the Company and such Indemnitees, and under
such circumstances the fees and expenses of such counsel shall be paid by
the Company; and
(d) the Company shall not be liable to indemnify an Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without the Company's written consent. The Company shall not
settle any action or claim in any manner which would impose any cost or
limitation on an Indemnitee without such Indemnitee's written consent.
Neither the Company nor an Indemnitee will unreasonably withhold or delay
its consent to any proposed settlement.
Section 8. NON-EXCLUSIVITY. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Agreement shall not be exclusive of or affected in
any way by any other right which an Indemnitee may have or hereafter may acquire
under any statute, certificate of incorporation, bylaws, agreement, arrangement,
resolution or instrument providing indemnification or expense payment, except
that any payments otherwise required to be made by the Company hereunder shall
be offset by any and all amounts received by an Indemnitee from any other
indemnitor or under one or more liability insurance policies maintained by an
indemnitor or otherwise and shall not be duplicative of any other payments
received by an Indemnitee from the Company in respect of the matter giving rise
to the indemnity hereunder. When an Indemnitee is entitled to indemnification,
expense advancement or reimbursement under this Agreement and any other
agreement, arrangement, resolution or instrument of the Company, the Indemnitee
may choose to pursue its rights under one or more, but less than all, of such
applicable agreements, arrangements, resolutions or instruments, in which case
such Indemnitee need only comply with the standards and procedures of the
agreements, arrangements, resolutions or instruments under which it chooses to
pursue its rights.
Section 9. ARBITRATION. (a) Subject to the provisions of the second
paragraph of Section 1 and Section 9(b) hereof, any dispute, controversy or
claim between an Indemnitee and the Company arising out of or relating to or
concerning the provisions of this Agreement shall be finally settled by
arbitration in New York City before, and in accordance with
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<PAGE>
the rules then obtaining of, the New York Stock Exchange, Inc. ("NYSE") or, if
the NYSE declines to arbitrate the matter, the American Arbitration Association
(the "AAA") in accordance with the commercial arbitration rules of the AAA.
(b) Notwithstanding the provisions of Section 9(a) and in addition to
its right to submit any dispute or controversy to arbitration, the Company may
bring an action or special proceeding in a state or federal court of competent
jurisdiction sitting in the State of New York, 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
Section 9(b), each Indemnitee (i) expressly consents to the application of
Section 9(c) hereof to any such action or proceeding, (ii) 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 (iii) irrevocably appoints the Secretary of the Company, One
Exchange Plaza, New York, New York 10006 as such Indemnitee's agent for service
of process in connection with any such action or proceeding, who shall promptly
advise such Indemnitee of any such service of process.
(c) (i) EACH INDEMNITEE HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OVER
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO OR CONCERNING THIS
AGREEMENT THAT IS NOT OTHERWISE ARBITRATED ACCORDING TO THE PROVISIONS OF
SECTION 9(a) HEREOF. This includes any suit, action or proceeding to compel
arbitration or to enforce an arbitration award. The parties acknowledge that the
forum designated by this Section 9(c) has a reasonable relation to this
Agreement, and to the parties' relationship with one another. Notwithstanding
the foregoing, nothing herein shall preclude the Company from bringing any
action or proceeding in any other court for the purpose of enforcing the
provisions of this Section 9.
(ii) The agreement of an Indemnitee as to forum is independent of
the law that may be applied in the action, and each Indemnitee agrees to this
forum even if the forum may under applicable law choose to apply non-forum law.
Each Indemnitee hereby waives, to the fullest extent permitted by applicable
law, any objection which such Indemnitee now or hereafter may have to personal
jurisdiction or to the laying of venue of any such suit, action or proceeding in
any court referred to in section 9(c)(i). The parties undertake not to commence
any action arising out of or relating to this Agreement in any forum other than
the forum described in this Section 9(c). The parties agree that, to the fullest
extent permitted by applicable law, a final and non-appealable judgment in any
such suit, action or proceeding in any such court shall be conclusive and
binding upon the parties.
Section 10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
merger or consolidation), heirs, executors and administrators.
-5-
<PAGE>
Section 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 PRINCIPLES OF CONFLICTS OF LAWS.
Section 12. AMENDMENT. Each party understands that from time to time
certain other persons may become Indemnitees and certain Indemnitees will cease
to be Indemnitees to the extent provided in this Section 12. Accordingly, this
Agreement may be amended by action of the Company from time to time to add
additional Indemnitees, without the approval of any other person other than such
proposed Indemnitees, each of whom shall execute a counterpart of the signature
page of this Agreement. This Agreement may also be amended by action of the
Company and without the approval of any other person to remove an Indemnitee;
provided that such amendment shall not be effective unless the Company has
provided 30 days prior written notice to the Indemnitee and, in any event, such
amendment shall not affect any rights of such Indemnitee to be indemnified in
respect of Losses associated with the acts, omissions or status of such
Indemnitee through the effective date of such amendment (including the right to
subsequent indemnification and expense advancement and reimbursement relating to
such acts, omissions or status).
Section 13. WAIVER OF BREACH. The failure or delay of a party at any
time to require performance by any other party of any provision of this
Agreement, even if known, shall not affect the right of such party to require
performance of that provision or to exercise any right, power, or remedy
hereunder, and any waiver by any party of any breach of any provision of this
Agreement shall not be construed as a waiver of any continuing or succeeding
breach of such provision, a waiver of the provision itself, or a waiver of any
right, power, or remedy under this Agreement. No notice to or demand on any
party in any case shall, of itself, entitle such party to other or further
notice or demand in similar or other circumstances.
Section 14. SEVERABILITY. The Company and each Indemnitee agree that
the agreements and provisions contained in this Agreement are severable and
divisible, that each such agreement and provision does not depend upon any other
provision or agreement for its enforceability, and that each such agreement and
provision set forth herein constitutes an enforceable obligation between the
Company and such Indemnitee. Consequently, the Company and each Indemnitee
agrees that neither the invalidity nor the unenforceability of any provision of
this Agreement shall affect the other provisions hereof, and this Agreement
shall remain in full force and effect and be construed in all respects as if
such invalid or unenforceable provision were omitted.
Section 15. NO PRESUMPTION. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that an
Indemnitee did not meet the applicable standard of conduct for indemnification
under this Agreement.
Section 16. NOTICES. Any communication, demand or notice to be given
hereunder will be duly given when delivered in writing by hand or first class
mail to the Company at its principal executive office or to an Indemnitee at its
last address appearing in the business
-6-
<PAGE>
records of the Company (or to such other addresses as a party may
designate by written notice to the Company).
Section 17. NO ASSIGNMENTS. No Indemnitee may assign its rights or
obligations under this Agreement without the prior written consent of the
Company
Section 18. NO THIRD PARTY RIGHTS. Nothing expressed or referred to in
this Agreement will be construed to give any person other than the parties to
this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions are for the sole and exclusive benefit of the parties to
this Agreement and their successors and permitted assigns.
Section 19. 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.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first written above.
LaBRANCHE & CO INC.
By:
-------------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman and Chief Executive Officer
-7-
<PAGE>
INDEMNITEES
Name: Signature:
----- ----------
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- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
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- ---------------------------------- ----------------------------------
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<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
New York, New York
July 30, 1999
<PAGE>
EXHIBIT 23.3
[Letterhead]
July 30, 1999
RE: LA BRANCHE & CO, INC.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made part of this registration
statement.
/s/ SUGARMAN & THROPE, P.C.
New York, New York
July 30, 1999
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<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 DEC-31-1998
<CASH> 2,763 4,722
<RECEIVABLES> 115,467 54,808
<SECURITIES-RESALE> 35,300 21,100
<SECURITIES-BORROWED> 0 0
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<TOTAL-ASSETS> 346,101 272,201
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0 0
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