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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 17, 1999
KINNARD INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 0-9377 41-0972952
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
920 Second Avenue South
Minneapolis, Minnesota 55402
(Address of principal executive offices)
(612) 370-2700
(Registrant's telephone number, including area code)
<PAGE>
Items 1-4. Not Applicable.
Item 5. OTHER EVENTS.
On May 17, 1999, Kinnard Investments, Inc., a Minnesota corporation (the
"Company"), and MI Acquisition Corporation, a Minnesota corporation ("MIAC"),
issued a joint press release (the "Press Release") announcing that they had
entered into an Agreement and Plan of Merger, dated as of May 16, 1999 (the
"Merger Agreement"), by and among the Company, MIAC and a wholly owned
subsidiary of the Company ("Merger Subsidiary"). Upon the terms and subject
to the conditions set forth in the Merger Agreement, MIAC will merge with and
into the Merger Subsidiary (the "Merger") and each share of common stock of
MIAC, par value $.01 per share (the "Shares"), excluding shares held by MIAC,
the Company or their respective subsidiaries and Dissenting Shares (as such
term is defined in the Merger Agreement) will be converted on the Effective
Date of the Merger into, at the election of the holder thereof, the right to
receive either $19.25 in cash, without interest, or 3.5 shares of the
Company's common stock, $.01 par value per share or, under certain
circumstances, a combination of cash and common stock of the Company. Copies
of the Merger Agreement and the Press Release are attached as Exhibits 2 and
99 hereto. The foregoing description of the Merger Agreement is qualified in
its entirety by reference to the specific terms and conditions of the Merger
Agreement which are incorporated by reference to Exhibit 2 hereto, including
that the Merger Agreement is conditioned upon being duly adopted by the
requisite vote of the holders of outstanding shares of the Company's common
stock and of MIAC's common stock entitled to vote thereon.
FORWARD LOOKING INFORMATION
Exhibit 99 hereto contains certain forward-looking statements that
involve risks and uncertainties. Such statements relate to the financial
condition, results of operations, plans, objectives, future performance and
business of the Company on a pro forma combined basis following the
consummation of the Merger and include forward-looking statements with
respect to expected benefits to be achieved by the pro forma combined entity
as well as other statements modified by the words "believes," "expects,"
"anticipates," or similar expressions. Factors that may cause actual results
to differ materially from those contemplated by such forward-looking
statements include, among other things (i) a delay in the expected time frame
for the consummation of the Merger (ii) the future performance of the
combined company or the integration of the businesses of the Company and
MIAC, (iii) statutory or regulatory changes affecting the businesses in which
the combined entity will operate, (iv) risks associated with mergers,
acquisitions and significant transactions generally, for example, integration
costs or business disruption following the Merger or the failure to retain
key employees, and (v) changes in overall economic conditions.
Item 6. Not Applicable.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a)-(b) Not Applicable.
2
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(c) Exhibits
2 Agreement and Plan of Merger, dated May 16, 1999, among the
Company, MIAC and Merger Subsidiary.
99 Joint Press Release, dated May 17, 1999, of the Company
and MIAC announcing the execution of the Merger Agreement.
Items 8-9. Not Applicable
3
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KINNARD INVESTMENTS, INC.
Date: June 4, 1999 By: /s/ William F. Farley
----------------------------------
William F. Farley
Chairman and
Chief Executive Officer
4
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<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
2 Agreement and Plan of Merger, dated May 16, Electronic Transmission
1999, among the Company, MIAC and Merger
Subsidiary
99 Joint Press Release dated May 17, 1999, of the Electronic Transmission
Company and MIAC announcing the execution of the
Merger Agreement.
</TABLE>
5
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MI ACQUISITION CORPORATION,
KINNARD INVESTMENTS, INC.
AND
PEACHTREE ACQUISITION, INC.
May 16, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Taking of Necessary Action; Further Action. . . . . . . . . . . . . . . . 2
1.9 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Reservation of Right to Revise Structure. . . . . . . . . . . . . . . . . 3
ARTICLE II MERGER CONSIDERATION; EXCHANGE . . . . . . . . . . . . . . . . . . . . 3
2.1 Conversion of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Elections by Holders of Company Common Stock. . . . . . . . . . . . . . . 3
2.3 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Procedure for Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 No Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Distributions with Respect to Unexchanged Shares. . . . . . . . . . . . . 9
2.8 No Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Closing of Stock Transfer Books; Rights as Shareholders . . . . . . . . . 9
2.11 Anti-Dilution Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . 11
3.1 Corporation Organization and Authority. . . . . . . . . . . . . . . . . . 11
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Corporate Authority; Vote Required. . . . . . . . . . . . . . . . . . . . 14
3.6 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Regulatory Filings and Consents . . . . . . . . . . . . . . . . . . . . . 15
3.8 Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Absence of Undisclosed Material Liabilities . . . . . . . . . . . . . . . 17
3.11 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
i
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3.15 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . 20
3.16 Participation Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 22
3.17 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.18 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . . 23
3.19 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21 Compliance with Laws, Permits and Licenses. . . . . . . . . . . . . . . . 25
3.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.23 No Pending Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.24 Risk Management Instruments . . . . . . . . . . . . . . . . . . . . . . . 28
3.25 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.26 Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.27 Contracts with Clients. . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.28 Investment Advisory Activities. . . . . . . . . . . . . . . . . . . . . . 29
3.29 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.30 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.31 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . 30
4.1 Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . 30
4.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5 Corporate Authority; Vote Required. . . . . . . . . . . . . . . . . . . . 32
4.6 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.7 Regulatory Filings and Consents . . . . . . . . . . . . . . . . . . . . . 32
4.8 Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.9 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.10 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . 34
4.11 Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.14 Parent Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . 37
4.15 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . . 37
4.16 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.17 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.18 Compliance with Laws, Permits and Licenses. . . . . . . . . . . . . . . . 39
4.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.20 Risk Management Instruments . . . . . . . . . . . . . . . . . . . . . . . 41
4.21 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.22 Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.23 Investment Advisory Activities. . . . . . . . . . . . . . . . . . . . . . 41
4.24 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ii
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4.25 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.26 No Pending Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.27 Contracts with Clients. . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE V COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 42
5.1 Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.2 Regulatory Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3 Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.5 Notice of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . 46
5.6 Affiliates; Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 47
5.7 Delivery of Shareholder List. . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Satisfaction of Related Party Agreements. . . . . . . . . . . . . . . . . 47
ARTICLE VI COVENANTS OF PARENT. . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.2 Regulatory Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.4 Notice of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . 49
6.5 Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 49
7.1 Joint Proxy Statement/Prospectus; Registration Statement;
Listing on Nasdaq; Shareholder Meetings . . . . . . . . . . . . . . . . . 49
7.2 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . 51
7.5 Satisfaction of Conditions. . . . . . . . . . . . . . . . . . . . . . . . 52
7.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.7 Certain Director Positions. . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII CONDITIONS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . 52
8.1 Conditions to Obligation of Each Party to Effect the Merger . . . . . . . 52
8.2 Additional Conditions to Obligations of Parent. . . . . . . . . . . . . . 53
8.3 Additional Conditions to Obligations of the Company . . . . . . . . . . . 55
ARTICLE IX TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.1 Reasons for Termination . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.2 Effects of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.3 Prompt Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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ARTICLE X OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.3 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.4 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.8 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.9 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.10 No Third Party Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated May 16,
1999, is by and among MI Acquisition Corporation (the "Company"), Kinnard
Investments, Inc. (the "Parent") and Peachtree Acquisition, Inc. ("Merger
Subsidiary").
RECITALS
A. The Company is a Minnesota corporation, having its principal
place of business in Minneapolis, Minnesota.
B. Parent is a Minnesota corporation, having its principal place
of business in Minneapolis, Minnesota.
C. The Merger Subsidiary is a Minnesota corporation, having its
principal place of business in Minneapolis, Minnesota. The Merger Subsidiary
is a wholly-owned subsidiary of Parent that has been organized for the
purpose of effecting the Merger in accordance with this Agreement.
D. Subject to the terms and conditions contained in this
Agreement, the parties to this Agreement intend to effect the Merger of the
Company with and into the Merger Subsidiary, with the Merger Subsidiary being
the corporation surviving the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and subject to the conditions
contained herein, and in order to set forth the terms and conditions of the
Merger, the manner of effecting the Merger, and certain other provisions
relating thereto, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3),
the Company shall merge with and into the Merger Subsidiary, and the separate
corporate existence of the Company shall thereupon cease (the "Merger"). The
Merger Subsidiary shall be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in the Minnesota Business Corporation Act ("MBCA"). Without limiting
the generality of the foregoing, the Surviving Corporation shall succeed to
and possess all of the properties, interests, rights, privileges, powers,
franchises, immunities and purposes, and become subject to all the debts,
liabilities, obligations, restrictions, disabilities, penalties and duties,
of the Company.
1.3 EFFECTIVE TIME. The consummation of the Merger shall be effected
as promptly as practicable after the satisfaction or waiver of the conditions
set forth in Article VIII, and the
<PAGE>
parties hereto will cause articles of merger relating to the Merger (the
"Articles of Merger") to be executed, delivered, filed and recorded with the
Secretary of State of the State of Minnesota in accordance with the MBCA.
The Merger shall become effective immediately upon the date and time of the
filing of such Articles of Merger with the Secretary of State of the State of
Minnesota or on such later date or time as specified in the Articles of
Merger (the "Effective Time").
1.4 ARTICLES OF INCORPORATION. The articles of incorporation of
the Surviving Corporation (the "Articles of Incorporation") shall be the
articles of incorporation of the Merger Subsidiary as in effect immediately
prior to the Effective Time, until duly amended in accordance with the terms
thereof and the MBCA.
1.5 BYLAWS. The Bylaws of the Surviving Corporation shall be the
bylaws of the Merger Subsidiary as in effect immediately prior to the
Effective Time, until duly amended in accordance with the terms thereof and
the aforementioned Articles of Incorporation.
1.6 DIRECTORS. The directors of the Surviving Corporation shall be
the directors of the Merger Subsidiary immediately prior to the Effective
Time, and such directors, together with any additional directors as may
thereafter be elected, shall hold such office until such time as their
successors shall be duly elected and qualified.
1.7 OFFICERS. The officers of the Surviving Corporation shall be
the officers of the Merger Subsidiary immediately prior to the Effective
Time, together with any additional officers as may be agreed upon prior to
the Effective Time by Parent and the Company or as may be appointed
thereafter.
1.8 TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time
after the Effective Time the Surviving Corporation shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its rights, title or interest in, to or under any of
the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger,
or (ii) otherwise carry out the purposes of this Agreement, the Company and
its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement; and the proper officers and
directors of the Surviving Corporation are fully authorized in the name of
the Company or otherwise to take any and all such action.
1.9 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Kaplan, Strangis
and Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street, Minneapolis,
Minnesota, or at such other location as the parties shall mutually agree, and
will be effective at the Effective Time. The date on which the Closing
occurs shall be referred to herein as the "Closing Date."
2
<PAGE>
1.10 RESERVATION OF RIGHT TO REVISE STRUCTURE. At Parent's
election, the acquisition of the Company as contemplated by this Agreement
may be alternatively structured in any form of reorganization as Parent may
direct; provided, that (i) there is no adverse change in the federal income
tax consequences to Parent, the Merger Subsidiary, the Company, the Surviving
Corporation or any other relevant entities or to the shareholders of the
Company, the Merger Subsidiary or the Surviving Corporation as a result of
such modification, (ii) the consideration to be received by the shareholders
of the Company is not changed or altered, and (iii) such modification will
not delay or impede the consummation of the transactions contemplated by this
Agreement. In the event of such an election, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect such election.
ARTICLE II
MERGER CONSIDERATION; EXCHANGE
2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any further action on the part of any shareholder:
(a) each share, if any, of the common stock, $.01 par value
of the Company (the "Company Common Stock") that is owned by the
Company, any subsidiary of the Company, the Parent or any subsidiary
of the Parent or Dissenting Shares (as defined in Section 2.5) shall
automatically be cancelled and retired and shall cease to exist, and,
except as set forth in Section 2.5 with respect to Dissenting Shares,
no exchange or payment shall be made with respect thereto; and
(b) each share of the Company Common Stock (other than shares
of the Company Common Stock cancelled as set forth in Section 2.1(a))
issued and outstanding immediately prior to the Effective Time shall be
converted into, at the election of the holder thereof, one of the
following (as adjusted pursuant to this Article II) (the "Merger
Consideration"):
(i) the right to receive $19.25 in cash, without
interest (the "Cash Consideration"), or
(ii) the right to receive 3.5 shares (the "Exchange
Ratio") of the common stock, $.02 par value of Parent (the
"Parent Common Stock") (such shares of Parent Common Stock are
hereinafter referred to as the "Stock Consideration").
2.2 ELECTIONS BY HOLDERS OF COMPANY COMMON STOCK.
(a) ELECTIONS. Each person who, at the Effective Time, is a
record holder of shares of Company Common Stock (other than holders of
shares of MI Acquisition Common Stock cancelled as set forth in
Section 2.1(a)) shall be entitled, with respect to the Merger
Consideration to be received for each share of Company Common Stock
held by such holder, to (i) elect to receive the Stock Consideration
(a "Stock Election") with respect to such holder's Company Common
Stock ("Stock Election Shares"), (ii) elect to
3
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receive the Cash Consideration (a "Cash Election") with respect to
such holder's Company Common Stock ("Cash Election Shares"), or (iii)
make no election (a "No Election") with respect to such holder's
Company Common Stock ("No-Election Shares").
(b) METHOD OF ELECTION. Prior to the mailing of the Joint
Proxy Statement/Prospectus (as defined in Section 7.1) Parent shall
appoint a bank or trust company designated by Parent and reasonably
acceptable to the Company to act as the exchange agent (the "Exchange
Agent") for the payment of the Merger Consideration. Parent shall
mail, with the Joint Proxy Statement/Prospectus, the following to each
holder of record of shares of Company Common Stock as of the record
date for the Company Meeting (excluding any shares of Company Common
Stock (other than Dissenting Shares) cancelled pursuant to Section
2.1(a)):
(i) a letter of transmittal (the "Letter of
Transmittal") which shall specify that delivery shall be
effected and risk of loss and title shall pass with respect to
certificates formerly representing Company Common Stock (the
"Company Certificates") only upon delivery of such Company
Certificates to the Exchange Agent and shall be in such form as
and have such other provisions as Parent shall specify,
(ii) instructions for use in effecting the surrender of
Company Certificates (the "Surrender Instructions"), and
(iii) an election form (the "Election Form") permitting
holders to make a Cash Election, a Stock Election or No Election
with respect to such shares.
(c) ELECTION CHANGES OR REVOCATIONS. Any Cash Election,
Stock Election or No Election shall have been validly made only if the
Exchange Agent shall have actually received a properly completed and
executed Election Form (with the signature or signatures thereof
guaranteed to the extent required therein) together with Company
Certificates covered by the Election Form by the Election Deadline
described in Section 2.2(d). A Dissenting Shareholder (as defined in
Section 2.5(d)) may not make a valid election. An Election Form will
be properly completed only if accompanied by all Company Certificates
representing the shares of Company Common Stock covered thereby or in
the event of a lost Company Certificate, the holder has complied with
the lost certificate procedure specified in the Letter of Transmittal.
Any holder of Company Common Stock that has made an election by
submitting an Election Form to the Exchange Agent may at any time
prior to the Election Deadline change such holder's election by
submitting a revised Election Form properly completed and signed that
is received by the Exchange Agent prior to the Election Deadline. Any
holder of Company Common Stock may at any time prior to the Election
Deadline revoke such holder's election by written notice to the
Exchange Agent received by the close of business on the day prior to
the Election Deadline. Any shares of Company Common Stock with
respect to which the holder shall not, as of the Election Deadline,
have made such an election by submission to and receipt by the
Exchange Agent of an effective, properly completed
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Election Form or with respect to which the holder shall have revoked
an election shall be deemed to be No-Election Shares.
(d) ELECTION DEADLINE. The Election Deadline shall be 5:00
p.m., local Minneapolis, Minnesota time on the last business day prior
to the date of the Company Meeting.
(e) RULES GOVERNING ELECTIONS, PRORATIONS AND ALLOCATIONS.
Parent shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing the validity of the Election Forms,
the manner and extent to which Cash Elections, Stock Elections and No
Elections are to be taken into account for the determinations
prescribed in this Article II, the issuance and delivery of Parent
Certificates (as defined in Section 2.4(b)) in payment of the Stock
Consideration, and the payment of Cash Consideration for shares of
Company Common Stock converted into the right to receive cash as a
result of the Merger. Subject to the terms of this Agreement and the
Election Form, the Exchange Agent shall have reasonable discretion to
determine whether any election, revocation or change has been timely
and properly made and to disregard immaterial defects in an Election
Form, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive.
2.3 PRORATION.
(a) The Merger Consideration shall include cash of not less
than $5,000,000 and not more than (i) $8,000,000 minus (ii) cash paid
to extinguish certain stock options and on account of the Dissenting
Shares. As more fully set forth below, the aggregate amount of cash to
be paid to holders of shares of Company Common Stock (other than
shares of Company Common Stock cancelled as set forth in Section
2.1(a)) (i) shall not be less than $5,000,000 (the "Minimum Aggregate
Cash Merger Consideration") and (ii) shall not exceed $8,000,000,
minus the sum of (A) the aggregate amount payable with respect to
Director Stock Options (as defined in Section 2.10) outstanding at the
Effective Time, and (B) the product of the number of Dissenting Shares
multiplied by $19.25 (the "Maximum Aggregate Cash Merger
Consideration").
(b) In the event that the product of the total number of
Cash Election Shares multiplied by $19.25 (such product shall be
referred to hereinafter as the "Cash Election Amount") is less than
the Minimum Aggregate Cash Merger Consideration, then:
(i) all Cash Election Shares shall be converted into
the right to receive Cash Consideration,
(ii) the Exchange Agent will select, on a pro rata
basis, first from among the No-Election Shares and then, if
necessary, from among the Stock Election Shares, a sufficient
number of such shares ("Cash Designee Shares") such that the
product of (A) the sum of the number of Cash Election Shares
plus the number of Cash Designee Shares, multiplied by (B)
$19.25 equals as closely as practicable the Minimum Aggregate
Cash Merger Consideration and the Cash
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Designee Shares shall be converted into the right to receive
Cash Consideration, and
(iii) the No-Election Shares and the Stock Election
Shares not so selected as Cash Designee Shares shall be
converted into the right to receive Stock Consideration.
(c) In the event that the Cash Election Amount is greater
than the Maximum Aggregate Cash Merger Consideration, then:
(i) all Stock Election Shares and all No-Election
Shares shall be converted into the right to receive Stock
Consideration,
(ii) the Exchange Agent will select, on a pro rata
basis, from among the Cash Election Shares, a sufficient number
of such shares ("Stock Designee Shares") such that the product
of (A) the number of Cash Election Shares minus the number of
Stock Designee Shares, multiplied by (B) $19.25 equals as
closely as practicable the Maximum Aggregate Cash Merger
Consideration and the Stock Designee Shares shall be converted
into the right to receive Stock Consideration, and
(iii) any Cash Election Shares not so selected as Stock
Designee Shares shall be converted into the right to receive
Cash Consideration.
(d) In the event that the Cash Election Amount is greater
than the Minimum Aggregate Cash Merger Consideration but less than the
Maximum Aggregate Cash Merger Consideration, then:
(i) all Cash Election Shares shall be converted into
the right to receive Cash Consideration,
(ii) the Exchange Agent will select, on a pro rata
basis, from among the No-Election Shares, a sufficient number of
Cash Designee Shares such that the product of (A) the sum of the
number of Cash Election Shares plus the number of Cash Designee
Shares, multiplied by (B) $19.25 equals as closely as
practicable the Maximum Aggregate Cash Merger Consideration and
the Cash Designee Shares shall be converted into the right to
receive Cash Consideration, and
(iii) any No-Election Shares not so selected as Cash
Designee Shares and all Stock Election Shares shall be converted
into the right to receive Stock Consideration.
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2.4 PROCEDURE FOR EXCHANGE.
(a) ALLOCATION DETERMINATION. As soon as practicable after
the Election Deadline (but in no event later than five business days
after the Election Deadline) the Exchange Agent shall determine the
allocation of the cash portion and the stock portion of the Merger
Consideration in accordance with Section 2.3 above and shall notify
Parent of its determined allocation (the "Allocation Determination").
(b) DEPOSIT OF EXCHANGE FUND. Promptly after the Allocation
Determination, Parent shall deposit (or cause to be deposited) with
the Exchange Agent, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II,
(i) cash in an amount sufficient to pay the aggregate Cash
Consideration in accordance with this Article II (other than in
respect of Dissenting Shares) and (ii) certificates representing
shares of Parent Common Stock (the "Parent Certificates") for exchange
in accordance with this Article II) (the cash and certificates
deposited pursuant to clauses (i) and (ii) being hereinafter referred
to as the "Exchange Fund"). To the extent not immediately required
for payment on surrendered shares of Company Common Stock, cash in the
Exchange Fund shall be invested by the Exchange Agent, as directed by
Parent (as long as such directions do not impair the rights of holders
of Company Common Stock) in direct obligations of the United States of
America, obligations for which the faith and credit of the United
States of America is pledged to provide for the payment of principal
and interest, commercial paper rated of the highest investment quality
by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group,
or certificates of deposit issued by a commercial bank having at least
$5 billion in assets, and any net earnings with respect thereto shall
be paid to Parent as and when requested by Parent.
(c) SURRENDER OF CERTIFICATES; EXCHANGE. As soon as
practicable after the Effective Time, the Exchange Agent will mail a
Letter of Transmittal and Surrender Instructions to each holder of
record of shares of Company Common Stock immediately prior to the
Effective Time (excluding any shares of Company Common Stock cancelled
pursuant to Section 2.1(a)) that did not previously submit the Company
Certificates representing such shares to the Exchange Agent with a
properly completed Letter of Transmittal. From and after the
Effective Time, each holder of a Company Certificate shall, upon
surrender of such certificate for cancellation to the Exchange Agent,
together with the Letter of Transmittal, duly executed, and such other
documents as Parent or the Exchange Agent shall reasonably request, be
entitled to receive promptly after the Allocation Determination has
been made in exchange therefor (A) a check in the amount equal to the
cash, if any, which such holder has the right to receive pursuant to
the provisions of this Article II (including any cash in lieu of
fractional shares of Parent Common Stock), and (B) a Parent
Certificate representing that number of shares of Parent Common Stock,
if any, which such holder has the right to receive pursuant to this
Article II (in each case less the amount of any required withholding
taxes), and Company Certificate so surrendered shall forthwith be
canceled. Until surrendered as contemplated by this Section 2.2(c),
each Company Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger
Consideration with
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respect to the shares of Company Common Stock formerly represented
thereby in accordance with this Article II. If any Parent Certificate
is to be issued in a name other than that in which Company Certificate
surrendered in exchange therefor is registered, it shall be a
condition of such issuance that the person requesting such issuance
shall pay any transfer or other tax required by reason of the issuance
of a Parent Certificate in a name other than that ofthe registered
holder of Company Certificate surrendered, or shall establish to the
satisfaction of Parent or its agent that such tax has been paid or is
not applicable.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund (including the proceeds of any investments thereof and
any shares of Parent Common Stock) that remains unclaimed by the
former shareholders of the Company for six months after the Effective
Time shall be delivered to Parent. Any former shareholder of the
Company who has not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation and Parent for
payment of the applicable Merger Consideration, cash in lieu of
fractional shares and unpaid dividends and distributions on Parent
Common Stock deliverable in respect of each share of Company Common
Stock such shareholder holds as determined pursuant to this Agreement,
in each case without any interest thereon.
2.5 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, holders of Company Common Stock that have, prior to any vote
on the Merger, delivered a written demand for the fair value of their shares
of Company Common Stock in the manner provided in Section 302A.473 of the
MBCA, shall have such rights, if any, as they may have pursuant to Section
302A.471 of the MBCA and such shares of Company Common Stock shall not be
converted or exchangeable as provided in Section 2.2 (all such shares of
Company Common Stock are hereinafter called "Dissenting Shares"). The
Company shall give Parent prompt notice upon receipt by the Company of any
written notice from any shareholder of the Company asserting dissenters'
rights (each a "Dissenting Shareholder"). The Company agrees that prior to
the Effective Time, it will not, except with the prior written consent of
Parent, voluntarily make any payment with respect to, or settle or offer to
settle , any demand for fair value under Section 302A.473 of the MBCA. Each
Dissenting Shareholder who becomes entitled, pursuant to the provisions of
applicable law, to payment for his or her shares of Company Common Stock
pursuant to Sections 302A.471 and 302A.473 of the MBCA shall receive payment
therefor from Parent (but only after the amount thereof shall be agreed upon
or finally determined pursuant to the provisions of applicable law). If any
Dissenting Shareholder shall fail to perfect or shall effectively withdraw or
lose his or her right to appraisal and payment of his or her shares of
Company Common Stock, such Dissenting Shareholder shall forfeit the right to
appraisal of such shares and, at the Effective Time, such shares shall
thereupon be deemed converted into No-Election Shares.
2.6 NO FRACTIONAL SHARES. No fractional shares of Parent Common
Stock, and no certificates representing such fractional shares, shall be
issued pursuant to the Merger. In lieu of the issuance of any fractional
share of Parent Common Stock pursuant to the Merger, cash adjustments shall
be paid to holders in respect of any fractional share of Parent Common Stock
that would otherwise be issuable, and the amount of such cash adjustment,
without interest, shall
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be equal to the product obtained by multiplying such fractional share
interest of such holder (after taking into account all fractional share
interests then held by such holder) by $19.25.
2.7 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered certificate with respect to the
shares of Company Common Stock represented thereby, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to this
Agreement, until the holder of such certificate shall surrender such
certificate in accordance with this Agreement. Subject to the effect of
applicable laws, following surrender of any such certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to this Agreement and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Parent Common Stock.
2.8 NO LIABILITY. None of the Parent, the Company, the Surviving
Corporation, the Exchange Agent or any other person shall be liable to any
former holder of shares of Company Common Stock for any amount properly
delivered to a public official pursuant to any abandoned or unclaimed
property, escheat or similar laws.
2.9 LOST CERTIFICATES. In the event any Company Certificate shall
have been lost, stolen or destroyed upon the making of an affidavit of that
fact by the person to the Exchange Agent claiming such Company Stock
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such reasonable amount as Parent may
direct as indemnity against any claim that may be made against it with
respect to such Company Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Company Certificate the
applicable Merger Consideration, cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Parent Common Stock, as
provided in this Article II, deliverable in respect thereof pursuant to this
Agreement.
2.10 CLOSING OF STOCK TRANSFER BOOKS; RIGHTS AS SHAREHOLDERS. At
the Effective Time, the stock transfer books of the Company shall be closed
and there shall be no further registration of transfers of shares of Company
Common Stock thereafter on the records for the Company. From and after the
Effective Time, the holders of certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares except as
otherwise provided herein or by law. On or after the Effective Time, any
Company Certificates presented to the Exchange Agent or Parent for any reason
shall be converted in accordance with this Article II.
2.11 ANTI-DILUTION PROVISIONS. In the event that Parent changes (or
establishes a record date for changing) the number of shares of Parent Common
Stock issued and outstanding prior to
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the Effective Time as a result of a stock split, stock dividend,
recapitalization or similar transaction with respect to the outstanding
Parent Common Stock and the record date therefore shall be prior to the
Effective Time, the Exchange Ratio for the Stock Consideration shall be
proportionately adjusted.
2.12 STOCK OPTIONS.
(a) At the Effective Time, all employee stock options (the
"Employee Options") to purchase shares of Company Common Stock under
the Company's 1997 Stock Option Plan (the "Employee Option Plan"),
which are then outstanding and unexercised, shall cease to represent a
right to acquire shares of Company Common Stock and shall be converted
automatically into options to purchase shares of Parent Common Stock,
and Parent shall assume each such Employee Option subject to the terms
thereof, including but not limited to the accelerated vesting of such
options which shall occur in connection with or by virtue of the
Merger as and to the extent required by the Employee Option Plan and
agreements governing such Employee Options; provided, however, that
from and after the Effective Time, (i) the number of shares of Parent
Common Stock purchasable upon exercise of such Employee Option shall
be equal to the number of shares of Company Common Stock that were
purchasable under such Employee Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, and rounding to the
nearest whole share, and (ii) the per share exercise price under each
such Employee Option shall be adjusted by dividing the per share
exercise price of each such Employee Option by the Exchange Ratio, and
rounding down to the nearest cent. The terms of each Employee Option
shall, in accordance with its terms, be subject to further adjustment
as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction with respect to Parent
Common Stock on or subsequent to the Effective Time. Notwithstanding
the foregoing, each Employee Option which is intended to be an
"incentive stock option" (as defined in Section 422 of the Internal
Revenue Code, as amended (the "Code")) shall be adjusted in accordance
with the requirements of Section 424 of the Code. Accordingly, with
respect to any incentive stock options, fractional shares shall be
rounded down to the nearest whole number of shares and where necessary
the per share exercise price shall be rounded down to the nearest cent.
(b) At the Effective Time, all director stock options (the
"Director Options") to purchase shares of Company Common Stock under
the Company's 1998 Director Stock Option Plan (the "Director Option
Plan"), which are then outstanding and unexercised, whether vested or
unvested, shall automatically become immediately vested and each
holder of a Director Option shall receive within five business days
after the Closing Date from the Surviving Corporation a cash payment
(less applicable withholding taxes) in an aggregate amount equal to
the difference between $19.25 less the applicable exercise price per
share with respect to such Director Option as expressly stated in the
applicable stock option agreement or agreements (the "Option
Consideration"). The Company shall take such other actions
(including, without limitation, giving requisite notices to holders of
Director Options advising them of such accelerated vesting and rights
pursuant to this Section 2.12(b) and obtaining any requisite
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consents from the holders of such Director Options) as are necessary
to fully advise holders of Directors Options of the rights under this
Agreement and the Director Options, to facilitate their timely
exercise of such rights and to effectuate the provisions of this
Section 2.12(b). From and after the Effective Time, other than as
expressly set forth in this Section 2.12(b), no holder of a Director
Option shall have any other rights in respect thereof other than to
receive payment for his or her Director Options equal to the Option
Consideration, and the Company shall take all necessary actions to
terminate effective as of the Effective Time the Director Option Plan
and any agreements or similar arrangements with respect thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary
that, except as set forth in the Disclosure Schedule delivered by the Company
to Parent and Merger Subsidiary on or prior to the execution of this
Agreement, which identifies exceptions by specific section references (the
"Company Disclosure Schedule"):
3.1 CORPORATION ORGANIZATION AND AUTHORITY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota.
(b) (i) The Company has all requisite governmental
authorizations, certificates, licenses, consents and approvals
required to carry on its business as presently conducted, except
where the failure to possess such authorizations, certificates,
licenses, consents and approvals does not or would not
reasonably be expected to have a Material Adverse Effect (as
defined in Section 3.1(b)(ii)) on the Company. The Company is
licensed or qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned
or leased by it or the nature of the business transacted by it
requires it to be so licensed or qualified except where the
failure to be so licensed or qualified does not or would not
reasonably be expected to have a Material Adverse Effect on the
Company. The copies of the Articles of Incorporation and Bylaws
of the Company, as amended to date, previously furnished by the
Company to the Parent, are complete and correct and such
instruments, as so amended, are in full force and effect as of
the date hereof.
(ii) For purposes of this Agreement, "Material Adverse
Effect" means any change, effect or event that individually or
in the aggregate when taken together with all related changes,
effects or events (A) is, with respect to Parent or the Company
(or, in the case of the Company, the Surviving Corporation after
the Merger), as the case may be, materially adverse to the
business, financial condition, assets, properties, operations or
results of operations, of such entity and its Subsidiaries (as
defined in Section 3.3(f)) in each case taken as a whole, (B)
does or is reasonably likely to impair materially the ability of
the Company,
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Parent or the Merger Subsidiary, respectively, to timely
perform its obligations under this Agreement or otherwise to
threaten materially or to impede materially the consummation of
the Merger and the transactions contemplated by this Agreement, or
(C) in the case of the Company, is materially adverse to the
ability of the Surviving Corporation to conduct the business of
the Company or the Company Subsidiaries to conduct their
respective businesses, in each case as presently conducted, after
the Closing Date; provided, however, that "Material Adverse
Effect" shall not be deemed to include any effects of (i) changes
in laws, regulations or interpretations thereof by any court,
administrative agency or commission or other federal, state or
local governmental authority or instrumentality ("Governmental
Authority"), (ii) changes in generally accepted accounting
principles, (iii) events or conditions generally affecting the
securities industry or rising from changes in general business or
economic conditions that do not have a disproportionate effect on
such entity, (iv) the resignation or other termination of
employment, after the date of this Agreement, of any employees of
(A) the Company or Company Subsidiaries responsible for the
production of, individually or in the aggregate, less than $3.5
million of gross revenues of the Company and its Subsidiaries for
fiscal year 1998 on a consolidated basis or (B) the Parent or
Parent Subsidiaries responsible for the production of,
individually or in the aggregate, less than $3.5 million of gross
revenues of the Parent and its Subsidiaries for fiscal year 1998
on a consolidated basis, and (v) actions or omissions to act
required by this Agreement or having the prior written consent of
the other parties hereto.
(iii) For purposes of this Agreement, "Material" means,
with respect to any fact, circumstance, event or thing relating to
Parent, the Company or the Surviving Corporation, as the case may
be, that such fact, circumstance, event or thing is material to
(A) the business, financial condition, assets, properties,
operations or results of operations of such entity and its
Subsidiaries, in each case taken as a whole, (B) the ability of
the Company, Parent, or the Merger Subsidiary to timely perform
its obligations under this Agreement or otherwise to consummate
the transactions contemplated under this Agreement, or (C) the
ability of the Surviving Corporation to conduct the business of
the Company or the Company Subsidiaries to conduct their
respective businesses, in each case as presently conducted, after
the Closing Date.
3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 3,000,000 shares of Company Common Stock, and (ii) 100,000
shares of preferred stock, par value $.01 per share (the "Company Preferred
Stock"). As of the date of this Agreement, (a) 938,950 shares of Company
Common Stock were issued and outstanding, (b) no shares of Company Preferred
Stock were issued and outstanding, (c) 300,000 shares of Company Common Stock
were reserved for issuance pursuant to outstanding Employee Options
heretofore granted under the Employee Option Plan, and (d) 50,000 shares of
Company Common Stock were reserved for issuance pursuant to outstanding
Director Options heretofore granted under the Directors Option Plan. Section
3.2 of the Company Disclosure Schedule sets forth a schedule showing (i) each
outstanding Employee Option and Director Option and the date it was granted,
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(ii) the number of shares of Company Common Stock subject thereto, and (iii)
the exercise price thereof. All of the outstanding shares of Company Common
Stock are, and all shares of Company Common Stock which may be issued
pursuant to the exercise of outstanding Employee Options or outstanding
Director Options will be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and nonassessable,
issued in material compliance with all applicable federal and state
securities laws and not issued in violation of any preemptive or similar
rights. Except as provided in this Section 3.2, no shares of the capital
stock of the Company are reserved for issuance for any purpose. There are no
bonds, debentures, notes or other indebtedness having general voting rights
(or convertible and the securities having such rights)("Voting Debt") of the
Company issued and outstanding. There are no other shares of capital stock
or other equity securities, instruments or other rights of the Company
authorized, issued or outstanding and no other options, warrants, rights to
subscribe (including any preemptive rights), calls, agreements, arrangements
or commitments of any character whatsoever to which the Company is a party or
may be bound requiring the issuance, transfer or sale of any shares of
capital stock, Voting Debt or other equity interests of the Company or any
securities or rights convertible into or exchangeable or exercisable for any
such shares or equity interests, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock, options, warrants or rights or
to purchase, redeem or acquire any shares of its capital stock or securities
convertible into or exchangeable or exercisable for any such shares or other
securities.
3.3 SUBSIDIARIES.
(a) The Company has fully and accurately disclosed in
Schedule 3.3 of the Company Disclosure Schedule all the Company's
Subsidiaries and the states in which such Subsidiaries are organized.
Each of the Company's Subsidiaries has been duly organized and is
validly existing and in good standing under the laws of the state in
which it is organized, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the
business transacted by it or the conduct of its business requires it
to be so licensed or qualified except where the failure to be so
licensed or qualified has not had and would not reasonably be expected
to have a Material Adverse Effect on the Company.
(b) No capital stock of any of the Company Subsidiaries are
or may become required to be issued (other than to the Company or a
wholly owned Subsidiary of the Company) by reason of any options,
warrants, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible
into or exchangeable or exercisable for, shares of capital stock of
any of such Subsidiaries and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may be bound to issue, redeem, purchase or sell
shares of any Subsidiary capital stock or securities convertible into
or exchangeable or exercisable for any such shares or interests.
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(c) The copies of the organizational documents, as amended
to date, of all Subsidiaries of the Company previously furnished to
Parent are complete and correct and such instruments, as so amended,
are in full force and effect as of the date hereof.
(d) All of the outstanding shares of capital stock of each
of the Company's Subsidiaries have been duly authorized and validly
issued, were not issued in violation of any subscription or preemptive
right, are fully paid and nonassessable and subject to no preemptive
or other similar rights, and are owned by the Company or a Subsidiary
of the Company free and clear of any lien, charge, mortgage, pledge,
security interest, restriction, claim or encumbrance of any nature
whatsoever ("Liens"), other than any restriction on transfer under any
applicable securities laws.
(e) Except for the stock of the Company Subsidiaries
directly or indirectly owned by the Company, warrants received in the
ordinary course of business as an underwriter or as otherwise
disclosed in Schedule 3.3 of the Company Disclosure Schedule, neither
the Company nor any Company Subsidiary owns any stock, partnership
interest, joint venture interest or any other security issued by any
other corporation, organization or entity, except readily marketable
securities owned by the Company or a Company Subsidiary in the
ordinary course of business.
(f) As used in this Agreement, the word "Subsidiary," with
respect to any party to this Agreement, means any corporation,
partnership, joint venture or other organization, whether incorporated
or unincorporated, of which: (i) such party or any other Subsidiary
of such party is a general partner; (ii) voting power to elect a
majority of the Board of Directors or others performing similar
functions with respect to such corporation, partnership, joint venture
or other organization is held by such party or by any one or more of
its Subsidiaries, or by such party and any one or more of its
Subsidiaries.
3.4 CORPORATE POWER. The Company and each of its Subsidiaries has
all requisite corporate power and authority to carry on their respective
business as it is now being conducted and to own, lease and operate their
respective properties and assets.
3.5 CORPORATE AUTHORITY; VOTE REQUIRED.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery and
performance of this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority
of the voting power of all the outstanding shares of Company Common
Stock (the "Requisite Company Shareholder Vote") in accordance with
the MBCA and the Company's Articles of Incorporation and
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Bylaws and the filing of the appropriate merger documents required by
the MBCA). This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms.
(b) The Company has taken all action necessary, if any, in
order to exempt this Agreement and the transactions contemplated
hereby from, and this Agreement and the transactions contemplated
hereby are exempt from, the requirements of any "moratorium," "control
share," "fair price" or other anti-takeover laws and regulations
(collective, "Takeover Laws") of the State of Minnesota.
3.6 NONCONTRAVENTION.
(a) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company
will not conflict with or violate the Articles of Incorporation,
Bylaws or equivalent organizational documents of the Company or any of
its Subsidiaries.
(b) Subject to the approval by the shareholders of the
outstanding Company Common Stock, receipt of the required regulatory
approvals, the required filings under federal and state securities and
insurance laws and approvals of NYSE and any other applicable exchange
of the Merger and the other transactions contemplated hereby and
except as do not or would not reasonably be expected to have a
Material Adverse Effect on the Company, the execution, delivery and
performance of this Agreement and the consummation of the Merger do
not and will not constitute a breach of or a default under, or give
rise to rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation 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 affected.
3.7 REGULATORY FILINGS AND CONSENTS. Except for the consents,
approvals, notifications, filings and registration set forth in Section 3.7
of the Company Disclosure Schedule or where the failure to obtain such
consents and approvals or make such filings or registration does not or would
not reasonably be expected to have a Material Adverse Effect on the Company,
no consents or approvals of, notifications to, or filings or registrations
with, (i) any court, administrative agency or commission or any other
federal, state or local authority or instrumentality, domestic or foreign
(collectively, "Governmental Authority"), (ii)(A) the National Association of
Securities Dealers, Inc. ("NASD"), New York Stock Exchange ("NYSE"), the
American Stock Exchange ("AMEX"), Chicago Board of Trade ("CBOT"), the
Securities Investor Protection Corporation ("SIPC"), the Municipal Securities
Rulemaking Board (the "MSRB") or (B) other commission, board, bureau, agency,
or body that is not a Governmental Authority but is charged with the
regulation and supervision or regulation of brokers, dealers, investment
advisors, securities underwriting or trading, stock exchanges, commodities
exchanges, insurance companies or agents, investment companies, investment
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advisors or lending or gaming activities and to the jurisdiction of which the
Company or any of its Subsidiaries are subject (collectively,
"Self-Regulatory Agencies") or (iii) pursuant to any applicable laws,
regulation or orders are required to be made or obtained by the Company or
any of its Subsidiaries in connection with the execution, delivery or
performance by the Company of this Agreement or to consummate the Merger.
3.8 REGISTRATIONS.
(a) Except as does not or would not reasonably be expected
to have a Material Adverse Effect on the Company, the Company and any
Company Subsidiary required to be registered as a broker dealer,
investment adviser or insurance agency, with the Securities and
Exchange Commission (the "SEC"), any securities commission or similar
authority or insurance authority of any state or foreign jurisdiction
or any Self Regulatory Organization are duly registered as such and
such registrations are in full force and effect. All such
registrations as currently filed, and all periodic reports required to
be filed with respect thereto, are accurate and complete in all
material respects.
(b) Except as does not or would not reasonably be expected
to have a Material Adverse Effect on the Company, all of the Company
and the Company's Subsidiaries' respective officers and employees who
are required to be licensed or registered to conduct the business of
the Company or such Subsidiary as presently conducted are duly
licensed or registered in each state or foreign jurisdiction in which
such licensing or regulation is so required (collectively, the
"Company Registered Representatives"). To the knowledge of the
Company, none of the Company Registered Representatives is or has
been, since August 1, 1997, subject to any disciplinary or other
regulatory compliance proceeding.
3.9 REPORTS; FINANCIAL STATEMENTS.
(a) Since August 1, 1997 the Company and each Company
Subsidiary has (i) filed all forms, reports, statements and other
documents required to be filed with the SEC including, without
limitation, all FOCUS reports and all amendments and supplements to
all such reports (the "Company SEC Reports"), (ii) filed all forms,
reports, statements and other documents required to be filed with any
Governmental Authorities including, without limitation, state
authorities regulating the purchase and sale of securities, and (iii)
filed all trade reports, filings, amendments to forms and other
documents required by any Self Regulatory Organization (all such
forms, reports, statements and other documents in clauses (i), (ii)
and (iii) of this Section 3.9(a) being collectively referred to as the
"Company Reports") except where the failure to file such Company
Reports has not had or would not reasonably be expected to have a
Material Adverse Effect on the Company. The Company has made
available to Parent copies of each of the Company Reports and will
promptly provide copies of each Company Report filed after the date of
this Agreement. The Company Reports previously filed did not at the
time they were filed (after giving effect to any amendments filed
before the date hereof) and the Company Reports filed in the future
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the
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statements therein, in the light of the circumstances under which they
were or will be made, not misleading.
(b) The Company has delivered to Parent (i) copies of its
audited consolidated balance sheets as at October 31, 1998 and 1997
and the related consolidated statements of operations, cash flows and
shareholders' equity for the fiscal year ended October 31, 1998 and
the period from August 1, 1997 to October 31, 1997 (including the
related notes and schedules thereto and reports of independent
auditors) (the "Audited Reports"), (ii) an unaudited consolidated
balance sheet of the Company as at March 31, 1999 (the "Latest Balance
Sheet") and the related consolidated statements of operations, cash
flows and shareholder equity for the five months then ended (the
"Interim Financial Reports"), and (iii) copies of the reports of the
Company and its Subsidiaries filed with the SEC (the "SEC Reports")
pursuant to Section 17 of the Exchange Act and Rule 17a-5 thereunder
for the fiscal years ended October 31, 1998 and October 31, 1997 and
the quarter ended January 31, 1999 (collectively and with all future
Audited Reports, Interim Financial Reports and SEC Reports, the
"Company Financial Statements"). The Company will promptly provide
Parent with copies of the Company Financial Statements with respect to
periods after the dates set forth above when available. The Company
Financial Statements (as of the dates thereof and for the periods
covered thereby) are or, if delivered in the future, will be in
accordance with the books and records of the Company, which books and
records are complete and accurate in all material respects and fairly
present in all material respects the financial position of the entity
or entities to which they relate as of the date and for the periods
presented, in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved, as to the Audited Reports and the Interim Financial Reports,
and in accordance with regulatory accounting principles, as to the SEC
Reports and subject to normal and recurring year-end audit adjustments
in the case of unaudited statements.
3.10 ABSENCE OF UNDISCLOSED MATERIAL LIABILITIES. All of the
obligations or liabilities, claims or expenses of any nature (whether
absolute, accrued, contingent, unliquidated or otherwise, whether due or to
become due, whether known or unknown, and regardless of when asserted)
arising out of transactions or events heretofore entered into, or any action
or inaction, including Taxes (as defined in Section 3.14) with respect to or
based upon transactions or events heretofore occurring that are required to
be reflected, disclosed or reserved against in audited consolidated financial
statements in accordance with GAAP ("Liabilities") have, in the case of the
Company and its Subsidiaries, been so reflected, disclosed or reserved
against in the Latest Balance Sheet, and the Company and its Subsidiaries
have no other Liabilities except: (a) Liabilities incurred since the date of
the Latest Balance Sheet (the "Latest Balance Sheet Date") in the normal and
ordinary course of business consistent with past practices (none of which is
an uninsured Liability for breach of contract, breach of warranty, tort, or
other claim or lawsuit), (b) as otherwise disclosed in the Company Disclosure
Schedule, or (c) Liabilities incurred pursuant to this Agreement or in
connection with the transactions contemplated under this Agreement.
3.11 NO MATERIAL ADVERSE EFFECT. Since October 31, 1998, the
business of the Company and its Subsidiaries has been conducted in the
ordinary and usual course, consistent with past practice, and there has been
no event, occurrence, development or state of
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circumstances or facts which has had or would reasonably be expected to have
a Material Adverse Effect on the Company.
3.12 SECURITIES. Each of the Company and its Subsidiaries has good
and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity),
free and clear of any Lien , except to the extent such securities are pledged
in the ordinary course of business consistent with prudent business practices
to secure the obligations of each of the Company or its Subsidiaries.
3.13 LITIGATION.
(a) No action, suit, proceeding, order, investigation, claim
or arbitration proceeding is pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, or
their respective properties, businesses, employees or agents, at law
or in equity, or before or by any court, arbitrator, mediator or Self
Regulatory Organization or Governmental Authority except for those
that would not have or would not reasonably be expected to have a
Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries or their
respective properties, businesses, employees or agents is a party to
or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement restriction with, or a commitment
letter or similar submission to, any Self Regulatory Organization or
Governmental Authority except for those that do not or would not
reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has been
advised by any such Self Regulatory Organization or Governmental
Authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum or understanding, commitment
letter or similar submission.
(c) Section 3.13 of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, a true and complete list of
all claims, actions, suits or proceedings by private parties against
the Company or the Company Subsidiaries (i) arising out of any state
of facts relating to the origination or sale of investment products or
services by the Company, its Subsidiaries or any employees thereof
(including, without limitation, equity or debt securities, mutual
funds, insurance contracts, annuities, partnership and limited
partnership interests, interests in real estate, debt origination,
loan participations, investment banking services, securities
underwritings, or investment advisory services in which the Company or
any of its Subsidiaries participated in any manner), or (ii) that
could reasonably be expected to involve individually an amount in
excess of $50,000 or collectively an aggregate amount in excess of
$100,000.
3.14 TAX MATTERS.
(a) Each of the Company and any Subsidiary and any affiliated,
combined or unitary group of which the Company or any Subsidiary is or
was a member, and any Company Employee Plans (as defined in Section 3.20
hereof), as the case may be (each, a
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"Company Tax Affiliate" and, collectively, the "Company Tax
Affiliates"), has: (i) timely filed (or has had timely filed on its
behalf) all returns, declarations, reports, estimates, information
returns, and statements ("Tax Returns") required to be filed or sent
by it in respect of any "Taxes" (as defined in subsection (f) below)
or required to be filed or sent by it by any taxing authority having
jurisdiction and such Tax Returns are true, correct and complete in
all material respects; (ii) timely and properly paid (or has had paid
on its behalf) all Taxes shown to be due and payable on such Tax
Returns; (iii) paid or arranged for payment by or on behalf of it or
reflected on its books as an accrued Tax liability, either current or
deferred all Material Taxes of the Company or any Subsidiary which
will be due and payable, whether now or hereafter, for any period
ending on, ending on and including, or ending prior to the Closing
Date; (iv) complied in all material respects with all applicable laws,
rules, and regulations relating to the withholding of Taxes and the
payment thereof (including, without limitation, withholding of Taxes
under Sections 1441 and 1442 of the Code or similar provisions under
any foreign laws), and timely and properly withheld from individual
employee wages or payments to any independent contractor, creditor,
shareholder or other third party and paid over to the proper
governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(b) There are no Liens for Taxes upon any assets of the
Company, any Company Subsidiary or of any Company Tax Affiliate,
except Liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted
or assessed against the Company, its Subsidiaries or the Company Tax
Affiliates that has not been resolved and paid in full. No waiver,
extension or comparable consent given by the Company, the Subsidiaries
or the Company Tax Affiliates regarding the application of the statute
of limitations with respect to any Taxes or Tax Returns is
outstanding, nor is any request for any such waiver or consent
pending. There has been no tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Company Tax
Returns for the Company's 1995, 1996 or 1997 tax years, nor is the
Company or any Subsidiary under Tax audit or other proceeding, nor has
there been any notice to the Company or any Subsidiary by any taxing
authority regarding any such Tax, audit or other such proceeding, or,
to the knowledge of the Company or any Company Subsidiary, is any such
Tax audit or other proceeding threatened with regard to any Taxes or
Company Tax Returns. Neither the Company nor any Subsidiary has any
knowledge of any unresolved questions, claims or disputes concerning
the liability for Taxes of the Company, the Subsidiaries or the
Company Tax Affiliates which would exceed the estimated reserves
established on its books and records. The Company Tax Returns for all
taxable years of the Company or any Company Subsidiary are closed by
the applicable statute of limitations for all taxable years prior to
the Company's 1995 tax year.
(d) Neither the Company, any Subsidiary nor any Company Tax
Affiliate is a party to any agreement, contract or arrangement that
would result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the
Code and the consummation of the transactions contemplated by this
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Agreement will not be a factor causing payments to be made by the
Company, any Company Subsidiary, any Company Tax Affiliate or the
Surviving Corporation that are not deductible (in whole or in part)
under Section 280G of the Code.
(e) Except as disclosed in Schedule 3.14 of the Disclosure
Schedule, neither the Company nor any Company Subsidiary (i) is a
party to any agreement providing for the allocation or sharing of
taxes or (ii) is required to include in income any adjustment by
reason of a voluntary change in accounting method initiated by the
Company or any Company Subsidiary (nor does the Company or any Company
Subsidiary have any knowledge that any taxing authority has proposed
any such adjustment or change of accounting method).
(f) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies, or other assessments, however
denominated and whether imposed by a taxing authority within or
without the United States, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated,
severance, stamp, occupation, property, or other taxes, customs
duties, fees, assessments, or charges of any kind whatsoever,
including, together with all interest and penalties thereon, and
additions to tax or additional amounts imposed by any taxing authority
whether arising before, on or after the Effective Date.
3.15 CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in Section 3.15, Section 3.16,
Section 3.17 or Section 3.20 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is a party to any of
the following contracts, agreements or arrangements, whether written
or oral (the "Company Material Agreements"):
(i) pension, profit-sharing, retirement,
hospitalization, group insurance, medical expense reimbursement,
death benefit, disability, deferred compensation, fringe
benefit, stock option, stock purchase, stock bonus, incentive
compensation, bonus, or any other employee benefit plan;
(ii) collective bargaining agreement or other contract
with any labor union, or any contract, whether written or oral
(excluding any oral contract that is terminable-at-will under
the laws of the relevant jurisdiction), for the employment of
any officer, individual employee, or other person or entity on a
full-time, part-time, consulting or other basis, or any
agreement relating to loans to officers, directors or
affiliates;
(iii) contract or agreement related to the voting of the
shares of the Company or any of its Subsidiaries or the election
of directors of the Company or any Company Subsidiary;
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(iv) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing a lien
on any asset or group of assets of the Company or any Company
Subsidiary other than in the ordinary course of business and
consistent with past practice;
(v) guarantee of any obligation, except for guarantees
of the obligations of wholly owned Subsidiaries, other than in the
ordinary course of business and consistent with past practice;
(vi) contract or agreement (A) prohibiting it from freely
engaging or competing in any business anywhere in the world, or
(B) entered into, other than in the ordinary course of business
and consistent with past practice, restricting the right of the
Company or any Company Subsidiary to use or disclose any
information in its possession;
(vii) partnership, joint venture, or other similar
contract arrangement;
(viii) underwriting, agency, dealer, sales representative
or other similar agreements relating to public offerings or
private placements of partnership interests or insurance products,
in each case, other than in the ordinary course of business;
(ix) any contract relating to the acquisition or
disposition of any business of the Company or a Company Subsidiary
(whether by merger, sale of stock, sale of assets or otherwise)
entered into after August 1, 1997;
(x) any other contract which creates future payment
obligations in excess of $100,000 in the aggregate and which by
its terms does not terminate or is not terminable without penalty
upon notice of 90 days or less other than loan commitments made in
the ordinary course of business which the Company reasonably
anticipates will be funded through loan participations under which
third parties other than the Company or any Company Subsidiary
would fulfill such future payment obligations; or
(xi) any other contract not entered into in the ordinary
course of business that is Material to the Company.
(b) The Company has furnished to Parent true and complete
copies of each of the Company Material Agreements (or, if oral, a written
summary of such Company Material Agreements).
(c) Except as disclosed in Section 3.15 of the Company
Disclosure Schedule:
(i) The Company and each of its Subsidiaries have
performed all material obligations required to be performed by
them and are not in material default under or in material breach
of nor in receipt of any claim of material
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default or breach under any Company Material Agreement to which
either is a party or is bound thereby;
(ii) to the knowledge of the Company, no event has
occurred which with the passage of time or the giving of notice or
both would result in such a material default or breach under any
Company Material Agreement.
(d) To the knowledge of the Company, no employee of the Company
or any Company Subsidiary is a party to a contract other than with the
Company or a Company Subsidiary (A) prohibiting him or her from freely
engaging or competing in any business anywhere in the world, or (B)
entered into other than in the ordinary course of business and consistent
with past practice, restricting his or her right to use or disclose any
information in his or her possession.
3.16 PARTICIPATION AGREEMENTS.
(a) All issued and outstanding participation agreements, loan
participation notes or similar arrangements to which the Company or any
Company Subsidiary is a party or under which the Company or any Company
Subsidiary has any liability (the "Participation Agreements") were
entered into in the ordinary course of business of the Company or the
Company Subsidiary which is a party to or liable under such Participation
Agreements.
(b) The Company and the Company Subsidiaries have performed all
material obligations required to be performed by them and are not in
material default under or material breach of nor in receipt of any claim
of any material breach or default under any Participation Agreements.
(c) The Company has no knowledge of any breach by any third
party of any material obligation to be required to be performed by it or
any material default under any Participation Agreement.
(d) Each agreement evidencing a Participation Agreement
provides that neither the Company nor any Company Subsidiary has made any
guaranty of payment of the debt that is the subject of the Participation
Agreement and that the participant shall not have recourse to the Company
or any Company Subsidiary for repayment of such debt. Neither the
Company nor any Company Subsidiary has waived any material provision
thereof in a manner that would increase the liability of the Company or
any Company Subsidiary thereunder.
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3.17 TITLE TO PROPERTY.
(a) The Company does not own any real property. The real
property demised by the leases (the "Leases") described under the caption
"Leases" in Section 3.17 of the Company Disclosure Schedule together
constitute all of the real property used or occupied by the Company
(collectively, the "Real Property").
(b) The Leases are in full force and effect, and the lessee
therein has valid and existing leasehold interests under each such Lease
for the term set forth therein. The Company has delivered to Parent
complete and accurate copies of each of the Leases and none of such
Leases has been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Parent. The
lessee under each of the Leases is not in default which would, and no
circumstances exist which, if not remedied, would either with or without
notice or the passage of time or both, result in a termination, under any
of such Leases.
3.18 INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in Section 3.18
of the Company Disclosure Schedule, there are no Material trademarks, service
marks, trade names, corporate names, copyrights, trade secrets or other
intellectual property rights owned or licensed by the Company or any of its
Subsidiaries or necessary to the conduct of the businesses of the Company or its
Subsidiaries as now conducted. The Company or one of its Subsidiaries owns and
possesses all right, title and interest, or a valid license, in and to the
intellectual property rights set forth in such Section 3.18.
3.19 EMPLOYEES. The Company and each of its Subsidiaries are in
compliance in all material respects with all Material laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity and collective bargaining, and is current in the payment of
employee-related obligations. There are no Material workers' compensation claims
pending against the Company or any of its Subsidiaries.
3.20 EMPLOYEE BENEFIT PLANS.
(a) Section 3.20 of the Company Disclosure Schedule discloses
each "employee benefit plan", as defined in Section 3(3) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which (i)
is subject to any provision of ERISA, and (ii) is maintained,
administered or contributed to by the Company or any Company ERISA
Affiliate (as defined below) and covers any employee or former employee
of the Company or any ERISA Affiliate or under which the Company or any
ERISA Affiliate has any liability. Such plans are hereinafter referred to
collectively as the "Company Employee Plans." For purposes of this
Section 3.20, "Company ERISA Affiliate" means any person which is treated
as a single employer with the Company under Section 414 of the Code. The
only Company Employee Plans which individually or collectively would
constitute an "employee pension benefit plan" as defined in Section 3(2)
of ERISA (the "Company Pension Plans") are identified as such in Section
3.20 of the Company Disclosure Schedule.
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(b) No Company Employee Plan constitutes a "multiemployer
plan", as defined in Section 4001(a)(3) of ERISA (a "Multiemployer
Plan"), and no Company Employee Plan is maintained in connection with any
trust described in Section 501(c)(9) of the Code. No Company Employee
Plan is a defined benefit plan or a money purchase pension plan and no
Company Employee Plan is subject to Title IV of ERISA. Nothing done or
omitted to be done and no transaction or holding of any asset under or in
connection with any Company Employee Plan has or would reasonably subject
the Company or any Company Subsidiary, or any officer or director of the
Company or any Company Subsidiary, to any Material liability under Title
I of ERISA or liable for any Material amount of tax pursuant to Section
4972 or Sections 4974 through 4980B, inclusive, of the Code.
(c) Each Company Pension Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of
the Code. The Company has furnished to Parent copies of the most recent
Internal Revenue Service determination letters with respect to the
Company Pension Plans. Except as disclosed in Section 3.20 of the
Company Disclosure Schedule, each Company Employee Plan has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Plans.
(d) Section 3.20 of the Company Disclosure Schedule lists each
employment, severance or other similar contract, arrangement or policy
and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or
benefits which (i) is not a Company Employee Plan, (ii) is entered into,
maintained or contributed to, as the case may be, by the Company or any
Company ERISA Affiliates and (iii) covers any employee or former employee
of the Company or any Company ERISA Affiliates. Such contracts, plans
and arrangements as are described above, copies and descriptions
(including descriptions of the number and level of employees covered
thereby) of all of which have been furnished previously to Parent, are
hereinafter referred to collectively as the "Company Benefit
Arrangements." Each Company Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which
are applicable to such Company Benefit Arrangement. Except as set forth
in Section 3.20 of the Company Disclosure Schedule and except as provided
by law, the employment of all persons presently employed or retained by
the Company or any of its Subsidiary is terminable at will.
(e) The Company and the Company ERISA Affiliates have no
post-retirement health and medical benefits for retired employees. No
condition exists that would
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prevent Parent or any affiliate of Parent from amending or terminating
any Company Employee Plan or Company Benefit Arrangement, other than any
limitations imposed under ERISA or the Code.
(f) With respect to all Company Employee Plans, all
contributions which are due have either been made or properly accrued.
(g) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result
in any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or any employee of the Company or any of its Subsidiaries under any
Company Benefit Arrangement or otherwise from the Company or any of its
Subsidiaries, (ii) increase any benefits otherwise payable under any
Company Benefit Arrangement or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
3.21 COMPLIANCE WITH LAWS, PERMITS AND LICENSES. Except as set forth
in Section 3.21 of the Company Disclosure Schedule, each of the Company and its
Subsidiaries, and their respective officers and employees:
(a) in the conduct of its business (including without
limitation, its municipal securities and lending activities), is in
compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such
businesses, and the rules of all Self Regulatory Organizations applicable
thereto except where the failure to be in compliance does not have or
would not reasonably be expected to have a Material Adverse Effect;
(b) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities and Self Regulatory Organizations that
are required in order to permit them to own and operate their businesses
as presently conducted and that are Material to the business of the
Company; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to its knowledge, no
suspension or cancellation of any of them is threatened or reasonably
likely; and all such filings, applications and registrations are current;
(c) Since August 1, 1997, has received no notification or
communication from any Governmental Authority or Self Regulatory
Organization (i) asserting that any of them is not in compliance with any
of the statutes, rules, regulations or ordinances which such Governmental
Authority or Self Regulatory Organization enforces, or has otherwise
engaged in any unlawful business practice, (ii) threatening to revoke any
license, franchise, permit, seat on any stock or commodities exchange, or
governmental authorization, (iii) requiring any of them (including any of
the Company's or its Subsidiaries' directors or controlling persons) to
enter into a cease and desist order, agreement, or memorandum of
understanding (or requiring the board of directors thereof
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to adopt any resolution or policy) or (iv) restricting or disqualifying
the activities of the Company or any of its Subsidiaries (except for
restrictions generally imposed by rule, regulation, or administrative
policy on broker-dealers generally);
(d) is not aware of any pending or threatened investigation,
review or disciplinary proceedings by any Governmental Authority or Self
Regulatory Organization against the Company, any of its Subsidiaries or
any officer, director or employee thereof;
(e) other than Miller & Schroeder Asset Management and Miller &
Schroeder Small Business Capital Corporation, is not required to be
registered as an investment company, investment advisor, commodity
trading advisor, commodity pool operator, futures commission merchant,
introducing broker, insurance agent, or transfer agent under any United
States federal, state, local or foreign statutes, laws, rules or
regulations. No broker-dealer Subsidiary acts as the "sponsor" of a
"broker-dealer trading program", as such terms are defined in Rule 17a-23
under the Exchange Act.
(f) is not, nor, to the knowledge of the Company is, any
"affiliated person" (as defined in the Investment Company Act of 1940, as
amended and the rules and regulations promulgated thereunder (the
"Investment Company Act")) thereof, ineligible pursuant to Section 9(a)
or 9(b) of the Investment Company Act to serve as an investment advisor
(or in any other capacity contemplated by the Investment Company Act) to
an Investment Company (as defined in the Investment Company Act).
Neither the Company, nor any "associated person" (as defined in the
Investment Advisors Act of 1940, as amended and the rules and regulations
promulgated thereunder (the "Investment Advisors Act")) thereof, is
ineligible pursuant to Section 203 of the Investment Advisors Act to
serve as an investment advisor or as an associated person to a registered
investment advisor; and
(g) is not, nor is any affiliate of any of them, subject to a
"statutory disqualification" as defined in Section 3(a)(39) of the
Securities Exchange Act of 1934, as amended and the rules and regulations
promulgated thereunder (the "Exchange Act").
3.22 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement:
(i) "Environmental Laws" means any federal, state or
local law, regulation, order, decree, permit, authorization,
common law or agency requirement with force of law relating to:
(a) the protection or restoration of the environment, health or
safety as enacted or amended prior to the date hereof (in each
case as relating to the environment) or natural resources; or (b)
the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance.
(ii) "Hazardous Substance" means any hazardous or toxic
substance, material or waste, including those substances,
materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR
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Section 172.101), or by the United States Environmental Protection
Agency as hazardous substances (40 CFR Par 302) and amendments
thereto, petroleum products or other such substances, materials
and wastes that are or become regulated under any applicable
local, state or federal law, including petroleum compounds, lead,
asbestos and polychlorinated biphenyls.
(b) Except as set forth in Section 3.22 of the Company Disclosure
Schedule:
(i) The Company and its Subsidiaries have complied in
all material respects at all times with applicable Environmental
Laws.
(ii) No property (including buildings and any other
structures) currently or formerly owned, used or operated (or
which the Company or any of its Subsidiaries would be deemed to
have owned, used or operated under any Environmental Law) by the
Company or any of its Subsidiaries or in which the Company or any
of its Subsidiaries (whether as fiduciary or otherwise) has a
Lien, has been contaminated with, or has had any release of, any
Hazardous Substance in such form or substance so as to create any
liability for the Company or its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries is
subject to liability for any Hazardous Substance disposal or
contamination on any other third-party property.
(iv) Since August 1, 1997, the Company and its
Subsidiaries have not received any notice, demand letter, claim or
request for information alleging any violation of, or liability of
the Company under, any Environmental Law.
(v) The Company and its Subsidiaries are not subject to
any order, decree, injunction or other agreement with any
Governmental Authority or any third party relating to any
Environmental Law.
(c) The Company has made available to Parent copies of all
environmental reports, studies, sampling data, correspondence, filings
and other environmental information in its possession or reasonably
available to it relating to the Company or one of its Subsidiaries or any
currently or formerly owned, used or operated property or any property in
which the Company or one of its Subsidiaries (whether as fiduciary or
otherwise) has held a Lien.
3.23 NO PENDING TRANSACTIONS. Except for this Agreement, as of the date
of this Agreement, neither the Company nor any of its Subsidiaries is a party to
or bound by any agreement, undertaking or commitment (i) to merge or consolidate
with, or acquire all or substantially all of the property and assets of, any
other corporation or person or (ii) to sell, lease or exchange all or
substantially all of its property and assets to any other corporation or person.
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3.24 RISK MANAGEMENT INSTRUMENTS. All interest rate swaps, caps,
floors, collars, option agreements, futures and forward contracts, and other
similar risk management arrangements, whether entered into for the Company's own
accounts, or for the account of one or more of its Subsidiaries or their
customers, were entered into in the ordinary course of business (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies in all material respects, and (ii) with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of the Company or one
of its Subsidiaries, enforceable in accordance with its terms and are in full
force and effect. Neither the Company nor its Subsidiaries, nor to the
Company's knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement. The Company Financial
Statements disclose the value of such agreements and arrangements on a mark-to-
market basis in accordance with generally accepted accounting principles and
since October 31, 1998 there has not been a change in such value that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company.
3.25 BROKERAGE. No third party shall be entitled to receive any
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company or any of its Subsidiaries.
3.26 ACCOUNTING CONTROLS. Each of the Company and its Subsidiaries has
devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances, in the judgment of the Board of Directors of the
Company, that (a) all material transactions are executed in accordance with
management's general or specific authorization, (b) all material transactions
are recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles consistently applied
with respect to broker-dealers or any other criteria applicable to such
statements, (c) access to the material property and assets of each of the
Company and its Subsidiaries is permitted only in accordance with management's
general or specific authorization, and (d) the recorded accountability for items
is compared with the actual levels at reasonable intervals and appropriate
action is taken with respect to any differences.
3.27 CONTRACTS WITH CLIENTS. The Company and its Subsidiaries are in
material compliance with the terms of each contract with any customer to whom
the Company or such Subsidiary provides services under any contract ("Company
Client"), and each such contract is in full force and effect with respect to the
applicable Company Client. Except as disclosed in Section 3.27 of the Company
Disclosure Schedule, there are no Material disputes pending or threatened with
respect to any former Company Client. The Company has made available to Parent
true and complete copies of all advisory, sub-advisory and similar agreements
with any Company Client. Except to the extent that it does not or would not
reasonably be expected to have a Material Adverse Effect on the Company, each
extension of credit by the Company or any of its Subsidiaries to any Company
Client (i) is in full compliance with Federal Reserve Board Regulation T or any
substantially similar regulation of any Governmental Authority and, (ii) is
fully secured, and the Company or such Subsidiary has a first priority perfected
security interest in the collateral securing such extension of credit.
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3.28 INVESTMENT ADVISORY ACTIVITIES. Except for Miller & Schroeder
Small Business Capital Corporation and Miller and Schroeder Asset Management,
Inc., none of the Company or its Subsidiaries is or has been during the past
five years an "investment adviser" within the meaning of the Investment Advisers
Act required to be registered, licensed or qualified as an investment advisor
under the Investment Advisers Act or subject to any liability or disability by
reason of any failure to be so registered, licensed or qualified.
3.29 INSURANCE POLICIES. All of the Company's and its Subsidiaries'
insurance and umbrella policies insuring the Company and its Subsidiaries and
their directors, officers, agents, properties and businesses, are valid and in
full force and effect and without any premium past due, and there are not
claims, singly or in the aggregate, under such policies which are in excess of
the limitations of coverage set forth in such policies. Except as set forth on
Section 3.29 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary has received notice of default under, or intended
cancellation or non-renewal of, any Material policies of insurance which insure
the properties, business or liability of the Company or any Company Subsidiary.
3.30 REGISTRATION STATEMENT. None of the information supplied or to be
supplied by the Company for inclusion in (a) the Registration Statement (as
defined in Section 7.1), (b) the Joint Proxy Statement/Prospectus (as defined
in Section 7.1), or (c) any other document to be filed with the SEC or other
Governmental Authority or Self Regulatory Organization in connection with the
transactions contemplated hereby, at the respective times such documents are
filed and, in the case of the Registration Statement, when it becomes effective
and at the Effective Time, and with respect to the Prospectus, when mailed and
at the time of the Company Meeting (as provided in Section 7.1(b)), shall be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading.
3.31 AFFILIATE TRANSACTIONS. Except as set forth on Section 3.31 of
the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries, nor any directors, officers or employees of the Company or of any
Company Subsidiary or any of their spouses or any entity controlled by any one
or more of them is presently or has been since October 31, 1998 (i) a party to
any transaction or agreement with the Company or any Company Subsidiary
(including but not limited to, any contract, agreement, commitment or other
arrangement providing for the furnishing of services, or the rental of real or
personal property, or any loan agreement, note or borrowing arrangement or other
arrangement); (ii) entitled to receive any fee or other payment of consideration
in connection with this Agreement or the consummation of the transactions
contemplated hereby; or (iii) the direct or indirect owner of any interest
(other than an investment in a publicly-held corporation, not exceeding 1% of
the outstanding capital stock of such corporation) in any corporation, firm,
association or business organization which is a present or potential competitor
of, customer of or supplier of products or services to the Company or any
Company Subsidiary, nor does any such person receive income from any source
other than the Company or any Company Subsidiary which relates to the business
of, or should properly accrue to, the Company or any Company Subsidiary.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that, except as set forth
in the Disclosure Schedule delivered by Parent to the Company on or prior to the
execution of this Agreement, which identifies exceptions by specific section
reference (the "Parent Disclosure Schedule"):
4.1 ORGANIZATION AND QUALIFICATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. Parent has all requisite governmental authorizations, certificates,
licenses, consents and approvals required to carry on its business as presently
conducted, except where the failure to possess such authorizations,
certificates, licenses, consents and approvals does not or would not reasonably
be expected to have a Material Adverse Effect on Parent. Parent is licensed or
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned or leased by it or the nature of the
business transacted by it requires it to be licensed or qualified except where
the failure to be so licensed or qualified has not had or would not reasonably
be expected to have a Material Adverse Effect on Parent.
4.2 CAPITALIZATION. The authorized capital stock of Parent consists
of (i) 7,500,000 shares of Parent Common Stock, (ii) 1,000,000 shares of
preferred stock (the "Parent Preferred Stock"), and (iii) 16,500,000 shares of
undesignated stock (the "Parent Undesignated Stock"). As of April 23, 1999, (a)
5,127,915 shares of Parent Common Stock were issued and outstanding, (b) no
shares of Parent Preferred Stock were issued and outstanding, (c) no shares of
Parent Undesignated Stock were issued and outstanding and (d) 689,351 shares of
Parent Common Stock were reserved for issuance under Parent's Employee Stock
Purchase Plan, (e) 1,205,583 shares of Parent Common Stock were reserved for
issuance under Parent's 1990 and 1997 Stock Option Plan and (f) 364,104 shares
of Parent Common Stock were reserved for issuance under outstanding warrants to
purchase shares of Parent Common Stock. All of the outstanding shares of Parent
Common Stock are duly authorized, validly issued, fully paid and nonassessable,
issued in material compliance with all applicable federal and state securities
laws and not issued in violation of any preemptive or similar rights. Except as
provided in this Section 4.2, no shares of the capital stock of Parent are
reserved for issuance for any purpose. Parent has no Voting Debt issued and
outstanding. There are no other shares of capital stock or other equity
securities, instruments or other rights of Parent authorized, issued or
outstanding and no other options, warrants, rights to subscribe (including any
preemptive rights), calls, agreements, arrangements or commitments of any
character whatsoever to which Parent is a party or may be bound requiring the
issuance, transfer or sale of any shares of capital stock, Voting Debt or other
equity interests of Parent or any securities or rights convertible into or
exchangeable or exercisable for any such shares or equity interests, and there
are no contracts, commitments, understandings or arrangements by which Parent is
or may become bound to issue additional shares of its capital stock, options,
warrants or rights or to purchase, redeem or acquire any shares of its capital
stock or securities convertible into or exchangeable or exercisable for any such
shares or other securities. The shares of Parent Common Stock to be issued in
exchange for Company Common Stock in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable.
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4.3 SUBSIDIARIES.
(a) Parent has fully and accurately disclosed in Schedule 4.3
of the Parent Disclosure Schedule all Parent's Subsidiaries and the
states in which such Subsidiaries are organized. Each of Parent's
Subsidiaries has been duly organized and is validly existing and in good
standing under the laws of the state in which it is organized, and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or licensed
by it or the nature of the business transacted by it or the conduct of
its business requires it to be so licensed or qualified except where the
failure to be so licensed or qualified has not had or would not
reasonably be expected to have a Material Adverse Effect on Parent.
(b) No capital stock of any of Parent's Subsidiaries are or may
become required to be issued (other than to Parent or a wholly owned
Subsidiary of Parent) by reason of any options, warrants, rights to
subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable or
exercisable for, shares of capital stock of any of such Subsidiaries and
there are no contracts, commitments, understandings or arrangements by
which Parent or any of its Subsidiaries is or may be bound to issue,
redeem, purchase or sell shares of any Subsidiary capital stock or
securities convertible into or exchangeable or exercisable for any such
shares or interests.
(c) The copies of the organizational documents, as amended to
date, of all Subsidiaries of Parent previously furnished to Parent are
complete and correct and such instruments, as so amended, are in full
force and effect as of the date hereof.
(d) All of the outstanding shares of capital stock of each of
Parent's Subsidiaries have been duly authorized and validly issued, were
not issued in violation of any subscription or preemptive right, are
fully paid and nonassessable and subject to no preemptive or other
similar rights, and are owned by Parent or a Subsidiary of the Company
free and clear of any Lien, other than any restriction on transfer under
any applicable securities laws.
(e) Except for the stock of the Parent's Subsidiaries directly
or indirectly owned by the Parent, warrants received in the ordinary
course of business as an underwriter or as otherwise disclosed in
Schedule 4.3 of the Parent Disclosure Schedule, neither the Parent nor
any Parent Subsidiary owns any stock, partnership interest, joint venture
interest or any other security issued by any other corporation,
organization or entity, except readily marketable securities owned by the
Parent or a Parent Subsidiary in the ordinary course of business.
4.4 CORPORATE POWER. Parent and each of its Subsidiaries has all
requisite corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate its properties and assets.
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4.5 CORPORATE AUTHORITY; VOTE REQUIRED.
(a) Each of Parent and Merger Subsidiary has the requisite
corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by Parent and Merger Subsidiary and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the
part of Parent or Merger Subsidiary are necessary to authorize the
execution, delivery and performance of this Agreement or to consummate
the transactions contemplated hereby (other than the approval of the
issuance of Parent Common Stock as Stock Consideration by the holders of
a majority of the voting power of all the outstanding shares of Parent
Common Stock (the "Requisite Parent Shareholder Vote") and the filing of
the appropriate merger documents required by the MBCA). This Agreement
has been duly and validly executed and delivered by each of Parent and
Merger Subsidiary and constitutes a legal, valid and binding obligation
of each of them, enforceable in accordance with its terms.
4.6 NONCONTRAVENTION.
(a) The execution and delivery of this Agreement by the Parent
does not, and the performance of this Agreement by the Parent will not
conflict with or violate the Articles of Incorporation, Bylaws or
equivalent organizational documents of the Parent or any of its
Subsidiaries.
(b) Subject to the approval by the shareholders of the
outstanding Parent Common Stock, receipt of the required regulatory
approvals, the required filings under federal and state securities and
insurance laws and approvals of NYSE and any other applicable exchange of
the Merger and the other transactions contemplated hereby and except as
do not or would not reasonably be expected to have a Material Adverse
Effect on the Parent, the delivery and performance of this Agreement and
the consummation of the Merger do not and will not constitute a breach of
or a default under, or give rise to rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on
any of the properties or assets of the Parent or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Parent or any of its Subsidiaries is a party or by which the
Parent or any of its Subsidiaries or any of their respective properties
is bound or affected.
4.7 REGULATORY FILINGS AND CONSENTS. Except for the consents,
approvals, notifications, filings and registration set forth in Section 4.7 of
the Parent Disclosure Schedule or where the failure to obtain such consents and
approvals or make such filings or registration does not or would not reasonably
be expected to have a Material Adverse Effect on Parent, no consents or
approvals of, notifications to, or filings or registrations with, (i) any
Governmental Authority, (ii)(A) the NASD, the NYSE, the AMEX, the CBOT, the SIPC
or the MSRB, or (B) any Self Regulatory Agency, or (iii) pursuant to any
applicable laws, regulation or orders are
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required to be made or obtained by Parent or any of its Subsidiaries in
connection with the execution, delivery or performance by Parent of this
Agreement or to consummate the Merger.
4.8 REGISTRATIONS.
(a) Except as does not or would not reasonably be expected to
have a Material Adverse Effect on the Parent, the Parent and any Parent
Subsidiary required to be registered as a broker dealer, investment
adviser or insurance agency, with the SEC, any securities commission or
similar authority or insurance authority of any state or foreign
jurisdiction or any Self Regulatory Organization are duly registered as
such and such registrations are in full force and effect. All such
registrations as currently filed, and all periodic reports required to be
filed with respect thereto, are accurate and complete in all material
respects.
(b) Except as does not or would not reasonably be expected to
have a Material Adverse Effect on the Parent, all of the Parent and the
Parent's Subsidiaries' respective officers and employees who are required
to be licensed or registered to conduct the business of the Parent or
such Subsidiary as presently conducted are duly licensed or registered in
each state or foreign jurisdiction in which such licensing or regulation
is so required (collectively, the "Parent Registered Representatives").
To the knowledge of the Parent, none of the Parent Registered
Representatives is or has been, since August 1, 1997, subject to any
disciplinary or other regulatory compliance proceeding.
4.9 SEC REPORTS.
(a) Since August 1, 1997, Parent and each Parent Subsidiary has
(i) filed all forms, reports, statements and documents with the SEC
required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder along with all amendments and
supplements to all such documents, all of which have complied as of their
respective filing dates, or in the case of registration statements, their
respective effective dates, in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder (collectively, the "Parent SEC
Reports"), (ii) filed all forms, reports, statements and other documents
required to be filed with any Governmental Authorities, including,
without limitation, state authorities regulating the purchase and sale of
securities, and (iii) filed all trade reports, filings, amendments to
forms and other documents required by any Self Regulatory Organization
(all such forms, reports, statements and other documents in clauses (i),
(ii) and (iii) of this Section 4.9(a) being collectively referred to as
the "Parent Reports") except where the failure to file such Parent
Reports has not had or would not reasonably be expected to have a
Material Adverse Effect on the Parent. Parent has made available to the
Company copies of each of the Parent Reports and will promptly provide
copies of each Parent Report filed after the date of this Agreement.
None of such Parent Reports previously filed, at the time filed, or in
the case of registration statements, their respective effective dates
(after giving effect to any amendments filed before the date hereof),
contained and the Parent Reports filed in the future will not contain any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein
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or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and related consolidated
statements of income, stockholders' equity and cash flows (including the
related notes and schedules thereto) of Parent included in Parent SEC
Reports complied (or if included in Parent SEC Reports filed after the
date of this Agreement, will comply) as to form, at the time filed, in
all material respects with the published rules and regulations of the SEC
with respect thereto at the time filed (the "Parent Financial
Statements"), were prepared (or if included in Parent SEC Reports filed
after the date of this Agreement, will be prepared) in accordance with
GAAP applied on a consistent basis during the periods involved and
include all adjustments consisting of normal recurring accruals necessary
(in the case of unaudited interim financial statements) are in accordance
with the books and records of Parent, which books and records are
complete and accurate in all material respects and present fairly the
consolidated financial position of Parent as of their respective dates,
and the consolidated income and cash flows for the periods presented
therein, all in conformity with GAAP applied on a consistent basis,
except as otherwise noted therein or as permitted under the Exchange Act.
(c) Neither Parent nor any of its Subsidiaries is a party to or
bound by any contract, arrangement, commitment or understanding which is
a material contract (as defined in Item 601(b)(10) of Regulation S-K of
the SEC) to be performed after the date of this Agreement that has not
been filed or incorporated by reference in Parent SEC Reports filed prior
to the date of this Agreement. Such material contracts are hereinafter
referred to as the "Parent Material Contracts."
(d) Except as and to the extent set forth in the Consolidated
Statement of Financial Condition of Parent and its Subsidiaries as of
March 31, 1999 (the "Parent Balance Sheet"), neither Parent nor its
Subsidiaries have any Liabilities except: (a) liabilities incurred since
the date of Parent Balance Sheet in the normal and ordinary course of
business consistent with past practices (none of which is an uninsured
liability for breach of contract, breach of warranty, tort, or other
claim or lawsuit) or (b) as otherwise disclosed in Section 4.9 of the
Parent Disclosure Schedule, or (c) Liabilities incurred pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement.
4.10 NO MATERIAL ADVERSE EFFECT. Since December 31, 1998, and except
as disclosed in the Parent SEC Reports, the business of the Parent and its
Subsidiaries has been conducted in the ordinary and usual course, consistent
with past practice, and there has been no event, occurrence, development or
state of circumstances or facts which has had or would reasonably be expected to
have a Material Adverse Effect on the Parent.
4.11 SECURITIES. Each of the Parent and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are
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pledged in the ordinary course of business consistent with prudent business
practices to secure the obligations of each of the Parent or its Subsidiaries.
4.12 LITIGATION.
(a) No action, suit, proceeding, order, investigation, claim or
arbitration proceeding is pending or, to the knowledge of the Parent,
threatened against the Parent or any of its Subsidiaries, or their
respective properties, businesses, employees or agents, at law or in
equity, or before or by any court, arbitrator, mediator or Self
Regulatory Organization or Governmental Authority except for those that
would not have or would not reasonably be expected to have a Material
Adverse Effect on the Parent.
(b) Neither the Parent nor any of its Subsidiaries or their
respective properties, businesses, employees or agents is a party to or
is subject to any order, decree, agreement, memorandum of understanding
or similar arrangement restriction with, or a commitment letter or
similar submission to, any Self Regulatory Organization or Governmental
Authority except for those that do not or would not reasonably be
expected to have a Material Adverse Effect on the Parent. Neither the
Parent nor any of its Subsidiaries has been advised by any such Self
Regulatory Organization or Governmental Authority that it is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum or understanding, commitment letter or similar
submission.
(c) Section 4.12 of the Parent Disclosure Schedule sets forth,
as of the date of this Agreement, a true and complete list of all claims,
actions, suits or proceedings by private parties against the Parent or
the Parent Subsidiaries (i) arising out of any state of facts relating to
the origination or sale of investment products or services by the Parent,
its Subsidiaries or any employees thereof (including, without limitation,
equity or debt securities, mutual funds, insurance contracts, annuities,
partnership and limited partnership interests, interests in real estate,
debt origination, loan participations, investment banking services,
securities underwritings, or investment advisory services in which the
Parent or any of its Subsidiaries participated in any manner), or (ii)
that could reasonably be expected to involve individually an amount in
excess of $50,000 or collectively an aggregate amount in excess of
$100,000.
4.13 TAX MATTERS.
(a) Each of the Parent and any Subsidiary and any affiliated,
combined or unitary group of which the Parent or any Subsidiary is or was
a member, and any Parent Employee Plans (as defined in Section 4.17
hereof), as the case may be (each, a "Parent Tax Affiliate" and,
collectively, the "Parent Tax Affiliates"), has: (i) timely filed (or has
had timely filed on its behalf) all Tax Returns, required to be filed or
sent by it in respect of any Taxes or required to be filed or sent by it
by any taxing authority having jurisdiction (the "Parent Tax Returns")
and such Tax Returns are true, correct and complete in all material
respects; (ii) timely and properly paid (or has had paid on its behalf)
all Taxes shown to be due and payable on such Tax Returns; (iii) paid or
arranged
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for payment by or on behalf of it or reflected on its books as an accrued
Tax liability, either current or deferred all Material Taxes of the
Parent or any Subsidiary which will be due and payable, whether now or
hereafter, for any period ending on, ending on and including, or ending
prior to the Closing Date; (iv) complied in all material respects with
all applicable laws, rules, and regulations relating to the withholding
of Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Sections 1441 and 1442 of the Code or similar
provisions under any foreign laws), and timely and properly withheld from
individual employee wages or payments to any independent contractor,
creditor, shareholder or other third party and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.
(b) There are no Liens for Taxes upon any assets of the Parent,
any Parent Subsidiary or of any Parent Tax Affiliate, except Liens for
Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed against the Parent, its Subsidiaries or the Parent Tax
Affiliates that has not been resolved and paid in full. No waiver,
extension or comparable consent given by the Parent, the Subsidiaries or
the Parent Tax Affiliates regarding the application of the statute of
limitations with respect to any Taxes or Parent Tax Returns is
outstanding, nor is any request for any such waiver or consent pending.
There has been no tax audit or other administrative proceeding or court
proceeding with regard to any Taxes or Parent Tax Returns for the
Parent's 1996, 1997 or 1998 tax years, nor is the Parent or any
Subsidiary under Tax audit or other proceeding, nor has there been any
notice to the Parent or any Subsidiary by any taxing authority regarding
any such Tax, audit or other such proceeding, or, to the knowledge of the
Parent or any Parent Subsidiary, is any such Tax audit or other
proceeding threatened with regard to any Taxes or Parent Tax Returns.
Neither the Parent nor any Subsidiary has any knowledge of any unresolved
questions, claims or disputes concerning the liability for Taxes of the
Parent, the Subsidiaries or the Tax Affiliates which would exceed the
estimated reserves established on its books and records. The Tax Returns
for all taxable years of the Parent or any Parent Subsidiary are closed
by the applicable statute of limitations for all taxable years prior to
the Parent's 1996 tax year.
(d) Neither the Parent, any Subsidiary nor any Parent Tax
Affiliate is a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code and
the consummation of the transactions contemplated by this Agreement will
not be a factor causing payments to be made by the Parent, any Parent
Subsidiary, any Parent Tax Affiliate or the Surviving Corporation that
are not deductible (in whole or in part) under Section 280G of the Code.
(e) Except as disclosed in Schedule 4.13 of the Parent
Disclosure Schedule, neither the Parent nor any Parent Subsidiary (i) is
a party to any agreement providing for the allocation or sharing of taxes
or (ii) is required to include in income any adjustment by reason of a
voluntary change in accounting method initiated by the Parent or any
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Parent Subsidiary (nor does the Parent or any Parent Subsidiary have any
knowledge that any taxing authority has proposed any such adjustment or
change of accounting method).
4.14 PARENT MATERIAL CONTRACTS. Except as disclosed in Section 4.14 of
the Parent Disclosure Schedule:
(a) the Parent and each of its Subsidiaries have performed all
material obligations required to be performed by them and are not in
material default under or in material breach of nor in receipt of any
claim of material default or breach under any Parent Material Contract to
which either is a party or is bound thereby; and
(b) to the knowledge of the Parent, no event has occurred which
with the passage of time or the giving of notice or both would result in
such a material default or breach under any Parent Material Contract.
4.15 INTELLECTUAL PROPERTY RIGHTS. The Parent or one of its
Subsidiaries owns and possesses all right, title and interest, or a valid
license, in and to the intellectual property rights necessary to the conduct of
the business of the Parent or its Subsidiaries as now conducted.
4.16 EMPLOYEES. The Parent and each of its Subsidiaries are in
compliance in all material respects with all Material laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity and collective bargaining, and is current in the payment of
employee-related obligations. There are no Material workers' compensation claims
pending against the Parent or any of its Subsidiaries.
4.17 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Section 4.17, each "employee benefit
plan", as defined in Section 3(3) of Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which (i) is subject to any provision
of ERISA, and (ii) is maintained, administered or contributed to by the
Parent or any Parent ERISA Affiliate (as defined below) and covers any
employee or former employee of the Parent or any Parent ERISA Affiliate
or under which the Parent or any Parent ERISA Affiliate has any liability
is hereinafter referred to collectively as the "Parent Employee Plans."
For purposes of this Section 4.17, "Parent ERISA Affiliate" means any
person which is treated as a single employer with the Parent under
Section 414 of the Code and any Parent Employee Plans which individually
or collectively would constitute an "employee pension benefit plan" as
defined in Section 3(2) of ERISA are referred to herein as the "Parent
Pension Plans".
(b) No Parent Employee Plan constitutes a Multiemployer Plan,
and no Parent Employee Plan is maintained in connection with any trust
described in Section 501(c)(9) of the Code. No Parent Employee Plan is a
defined benefit plan or a money purchase pension plan and no Parent
Employee Plan is subject to Title IV of ERISA. Nothing done or omitted to
be done and no transaction or holding of any asset under or in connection
with any Parent Employee Plan has or would reasonably subject the Parent
or any Parent
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Subsidiary, or any officer or director of the Parent or any Parent
Subsidiary, to any Material liability under Title I of ERISA or liable
for any Material amount of tax pursuant to Section 4972 or Sections 4974
through 4980B, inclusive, of the Code.
(c) Each Parent Pension Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of
the Code. The Parent has furnished or made available to the Company
copies of the most recent Internal Revenue Service determination letters
with respect to the Parent Pension Plans. Except as disclosed in Section
4.17 of the Parent Disclosure Schedule, each Parent Employee Plan has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Plans.
(d) Each employment, severance or other similar contract,
arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an Parent Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may
be, by the Parent or any Parent ERISA Affiliates and (iii) covers any
employee or former employee of the Parent or any Parent ERISA Affiliates
are hereinafter referred to collectively as the "Parent Benefit
Arrangements." Each Parent Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which
are applicable to such Parent Benefit Arrangement.
(e) Parent and the Parent ERISA Affiliates have no post-
retirement health and medical benefits for retired employees. No
condition exists that would prevent the Company or any affiliate of the
Company from amending or terminating any Parent Employee Plan or Parent
Benefit Arrangement, other than any limitations imposed under ERISA or
the Code.
(f) With respect to all Parent Employee Plans, all
contributions which are due have either been made or properly accrued.
(g) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result
in any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or any employee of the Parent or any of its Subsidiaries under any Parent
Benefit Arrangement or otherwise from the Parent or any of its
Subsidiaries, (ii) increase any benefits otherwise payable under any
Parent Benefit Arrangement or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
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4.18 COMPLIANCE WITH LAWS, PERMITS AND LICENSES. Except as set forth
in Section 4.18 of the Parent Disclosure Schedule, each of the Parent and its
Subsidiaries, and their respective officers and employees:
(a) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, and the rules of all Self
Regulatory Organizations applicable thereto except where the failure to
be in compliance does not have or would not reasonably be expected to
have a Material Adverse Effect;
(b) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities and Self Regulatory Organizations that
are required in order to permit them to own and operate their businesses
as presently conducted and that are Material to the business of the
Parent; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to its knowledge, no
suspension or cancellation of any of them is threatened or reasonably
likely; and all such filings, applications and registrations are current;
(c) Since August 1, 1997, has received no notification or
communication from any Governmental Authority or Self Regulatory
Organization (i) asserting that any of them is not in compliance with any
of the statutes, rules, regulations or ordinances which such Governmental
Authority or Self Regulatory Organization enforces, or has otherwise
engaged in any unlawful business practice, (ii) threatening to revoke any
license, franchise, permit, seat on any stock or commodities exchange, or
governmental authorization, (iii) requiring any of them (including any of
the Parent's or its Subsidiaries' directors or controlling persons) to
enter into a cease and desist order, agreement, or memorandum of
understanding (or requiring the board of directors thereof to adopt any
resolution or policy) or (iv) restricting or disqualifying the activities
of the Parent or any of its Subsidiaries (except for restrictions
generally imposed by rule, regulation, or administrative policy on
broker-dealers generally);
(d) is not aware of any pending or threatened investigation,
review or disciplinary proceedings by any Governmental Authority or Self
Regulatory Organization against the Parent, any of its Subsidiaries or
any officer, director or employee thereof;
(e) other than John G. Kinnard and Company, Incorporated
("JGK"), is not required to be registered as an investment company,
investment advisor, commodity trading advisor, commodity pool operator,
futures commission merchant, introducing broker, insurance agent, or
transfer agent under any United States federal, state, local or foreign
statutes, laws, rules or regulations. No broker-dealer Subsidiary acts
as the "sponsor" of a "broker-dealer trading program", as such terms are
defined in Rule 17a-23 under the Exchange Act.
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(f) is not, nor, to the knowledge of the Parent is, any
"affiliated person" (as defined in the Investment Company Act) thereof,
ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act
to serve as an investment advisor (or in any other capacity contemplated
by the Investment Company Act) to an Investment Company (as defined in
the Investment Company Act). Neither the Parent, nor any "associated
person" (as defined in the Investment Advisors Act) thereof, is
ineligible pursuant to Section 203 of the Investment Advisors Act to
serve as an investment advisor or as an associated person to a registered
investment advisor; and
(g) is not, nor is any affiliate of any of them, subject to a
"statutory disqualification" as defined in Section 3(a)(39) of the
Exchange Act.
4.19 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 4.19 of the Parent Disclosure
Schedule:
(i) The Parent and its Subsidiaries have complied in all
material respects at all times with applicable Environmental Laws.
(ii) No property (including buildings and any other
structures) currently or formerly owned, used or operated (or
which the Parent or any of its Subsidiaries would be deemed to
have owned, used or operated under any Environmental Law) by the
Parent or any of its Subsidiaries or in which the Parent or any of
its Subsidiaries (whether as fiduciary or otherwise) has a Lien,
has been contaminated with, or has had any release of, any
Hazardous Substance in such form or substance so as to create any
liability for the Parent or its Subsidiaries.
(iii) Neither the Parent nor any of its Subsidiaries is
subject to liability for any Hazardous Substance disposal or
contamination on any other third-party property.
(iv) Since August 1, 1997, the Parent and its
Subsidiaries have not received any notice, demand letter, claim or
request for information alleging any violation of, or liability of
the Parent under, any Environmental Law.
(v) The Parent and its Subsidiaries are not subject to
any order, decree, injunction or other agreement with any
Governmental Authority or any third party relating to any
Environmental Law.
(c) The Parent has made available to the Company copies of all
environmental reports, studies, sampling data, correspondence, filings
and other environmental information in its possession or reasonably
available to it relating to the Parent or one of its Subsidiaries or any
currently or formerly owned, used or operated property or any property in
which the Parent or one of its Subsidiaries (whether as fiduciary or
otherwise) has held a Lien.
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4.20 RISK MANAGEMENT INSTRUMENTS. All interest rate swaps, caps,
floors, collars, option agreements, futures and forward contracts, and other
similar risk management arrangements, whether entered into for the Parent's own
accounts, or for the account of one or more of its Subsidiaries or their
customers, were entered into in the ordinary course of business (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies in all material respects, and (ii) with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of the Parent or one
of its Subsidiaries, enforceable in accordance with its terms and are in full
force and effect. Neither the Parent nor its Subsidiaries, nor to the Parent's
knowledge, any other party thereto, is in breach of any of its obligations under
any such agreement or arrangement. The Parent Financial Statements disclose the
value of such agreements and arrangements on a mark- to-market basis in
accordance with generally accepted accounting principles and since December 31,
1998 there has not been a change in such value that, individually or in the
aggregate, resulted in or would reasonably be expected to result in a Material
Adverse Effect on the Parent.
4.21 BROKERAGE. No third party shall be entitled to receive any
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Parent or any of its Subsidiaries.
4.22 ACCOUNTING CONTROLS. Each of the Parent and its Subsidiaries has
devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances, in the judgment of the Board of Directors of the
Parent, that (a) all material transactions are executed in accordance with
management's general or specific authorization, (b) all material transactions
are recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles consistently applied
with respect to broker-dealers or any other criteria applicable to such
statements, (c) access to the material property and assets of each of the Parent
and its Subsidiaries is permitted only in accordance with management's general
or specific authorization, and (d) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
4.23 INVESTMENT ADVISORY ACTIVITIES. Except for JGK, none of the
Parent or its Subsidiaries is or has been during the past five years an
"investment adviser" within the meaning of the Investment Advisers Act required
to be registered, licensed or qualified as an investment advisor under the
Investment Advisers Act or subject to any liability or disability by reason of
any failure to be so registered, licensed or qualified.
4.24 INSURANCE POLICIES. All of the Parent's and its Subsidiaries'
insurance and umbrella policies insuring the Parent and its Subsidiaries and
their directors, officers, agents, properties and businesses, are valid and in
full force and effect and without any premium past due, and there are not
claims, singly or in the aggregate, under such policies which are in excess of
the limitations of coverage set forth in such policies. Neither the Parent nor
any Parent Subsidiary has received notice of default under, or intended
cancellation or non-renewal of, any
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Material policies of insurance which insure the properties, business or
liability of the Parent or any Parent Subsidiary.
4.25 REGISTRATION STATEMENT. None of the information supplied or to be
supplied by the Parent for inclusion in (a) the Registration Statement (as
defined in Section 7.1), (b) the Joint Proxy Statement/Prospectus (as defined in
Section 7.1), or (c) any other document to be filed with the SEC or other
Governmental Authority or Self Regulatory Organization in connection with the
transactions contemplated hereby, at the respective times such documents are
filed and, in the case of the Registration Statement, when it becomes effective
and at the Effective Time, and with respect to the Prospectus, when mailed and
at the time of the Parent Meeting (as provided in Section 7.1(c)), shall be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading.
4.26 NO PENDING TRANSACTIONS. Except for this Agreement, as of the date
of this Agreement, neither Parent nor any of its Subsidiaries is a party to or
bound by any agreement, undertaking or commitment (i) to merge or consolidate
with, or acquire all or substantially all of the property and assets of, any
other corporation or person or (ii) to sell, lease or exchange all or
substantially all of its property and assets to any other corporation or person.
4.27 CONTRACTS WITH CLIENTS. Parent and its Subsidiaries are in
material compliance with the terms of each contract with any customer to whom
Parent or such Subsidiary provides services under any contract ("Parent
Client"), and each such contract is in full force and effect with respect to the
applicable Parent Client. There are no Material disputes pending or threatened
with respect to any former Parent Client. Except to the extent that it does not
or would not reasonably be expected to have a Material Adverse Effect on Parent,
each extension of credit by Parent or any of its Subsidiaries to any Parent
Client (i) is in full compliance with Federal Reserve Board Regulation T or any
substantially similar regulation of any Governmental Authority and, (ii) is
fully secured, and Parent or such Subsidiary has a first priority perfected
security interest in the collateral securing such extension of credit.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 CONDUCT OF THE BUSINESS. Except as set forth on Schedule 5.1,
hereof, the Company will, and will cause each of its Subsidiaries to, observe
each term set forth in this Section 5.1 and agrees that, from the date hereof
until the Effective Time, unless otherwise consented to by Parent (which consent
shall not be unreasonably withheld or delayed) in writing signed by either
William Farley or George Stroebel:
(a) The business of the Company and its Subsidiaries shall be
conducted only in, and the Company and its Subsidiaries shall not take
any action except in, the ordinary course of their respective businesses
and in accordance in all material respects with all applicable laws,
rules and regulations and their past custom and practice;
(b) The Company and its Subsidiaries shall not, directly or
indirectly, do any of the following:
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(i) issue, sell or otherwise permit to become
outstanding or authorize the creation of, any additional share of
capital stock of the Company or any of its Subsidiaries (other
than the issuance of Company Common Stock pursuant to the Employee
Options and the Director Options disclosed on Section 3.2 of the
Company Disclosure Schedule) or any options, warrants, conversion
privileges or rights of any kind to acquire any additional shares
of such capital stock;
(ii) permit any additional shares of capital stock of the
Company or any of its Subsidiaries to become subject to new grants
of employee or director stock options, other rights or similar
stock-based employee rights.
(iii) sell, pledge, dispose of or encumber any of its
Material assets, except in the ordinary course of business;
(iv) amend or propose to amend its Articles of
Incorporation or Bylaws;
(v) directly or indirectly adjust, split, combine,
redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property or otherwise
with respect to any shares of capital stock of the Company or any
of its Subsidiaries;
(vi) redeem, purchase or acquire or offer to acquire any
shares of its capital stock;
(vii) acquire (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or
division or material assets thereof;
(viii) incur any indebtedness for borrowed money or
issue any debt securities, except the borrowing of working capital
in the ordinary course of business and consistent with past
practice;
(ix) declare or make any distributions or pay any
dividends with respect to its capital stock;
(x) enter into, amend or terminate any agreements,
commitments or contracts that, individually or in the aggregate
with related agreements, commitments or contracts, are Material to
the Company (except in the ordinary course of business consistent
with past practice); or
(xi) authorize any of, or commit or agree to take any of,
the foregoing actions.
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(c) Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, (i) enter into, modify or renew any employment,
consulting, severance or similar agreements or arrangements with any
director, officer or employee other than employment or consulting
agreements with respect to employees or consultants who earn less than
$100,000 per year, (ii) grant any salary increases, severance or
termination pay to, any employees of the Company or any the Company
Subsidiary other than with respect to employees who earn less than
$100,000 per year, or (iii) grant bonuses except pursuant to existing
employment agreements, compensation plans or otherwise in the ordinary
course of business consistent with past practice.
(d) Except as required by law, neither the Company nor any
Subsidiary shall adopt or amend any bonus, profit-sharing, compensation,
stock option, pension, retirement, deferred compensation, severance,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee, officer or
director of the Company or any Subsidiary;
(e) Neither the Company nor any Subsidiary shall cancel or
terminate their current insurance policies or cause any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to
or greater than the coverage under the canceled, terminated or lapsed
policies for substantially similar premiums are in full force and effect;
(f) The Company will, and will cause each of its Subsidiaries
to:
(i) use all commercially reasonable efforts to preserve
intact the business organization and goodwill of the Company and
its Subsidiaries, keep available the services of their respective
officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others
having business relationships with the Company;
(ii) confer on a regular and frequent basis with
representatives of Parent to report operational matters and the
general status of ongoing operations;
(iii) not intentionally take any action which would
render, or which reasonably may be expected to render, any
representation or warranty made by them in this Agreement untrue
at the Closing; and
(iv) cooperate with Parent in finalizing and
communicating to the Company's employees severance, retention and
transition arrangements;
(g) The Company shall not and shall not permit a Company
Subsidiary to:
(i) implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles;
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(ii) change its methods of reporting income and
deductions for federal income tax purposes from those employed in
the preparation of federal income tax returns of the Company for
the taxable years ending October 31, 1998 and 1997, except as
required by changes in law or regulation;
(iii) make or rescind any express or deemed election
relating to Taxes; or
(iv) settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes.
(h) Except as required by applicable law or regulation, the
Company shall not and shall not permit any Company Subsidiary to:
(i) implement or adopt any change in its risk management
policies, procedures or practices, which, individually or in the
aggregate with all such other changes, would be material;
(ii) fail to use commercially reasonable means to avoid
any material increase in its aggregate exposure to risk from the
general United States securities markets; or
(iii) materially restructure or materially change its
investment securities portfolio, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or
reported.
5.2 REGULATORY FILINGS. The Company shall, as promptly as practicable
after the execution of this Agreement, make or cause to be made all filings and
submissions under the Hart-Scott-Rodino Antitrust Improvements, as amended (the
"HSR Act") and any other laws or regulations applicable to the Company whether
to a Governmental Authority, Self Regulatory Agency or otherwise for the
consummation of the transactions contemplated on its part herein. The Company
will coordinate and cooperate with Parent in exchanging such information, will
not make any such filing without providing to Parent a final copy thereof for
its review and consent at least two full business days in advance of the
proposed filing, and will provide such reasonable assistance as Parent may
request in connection with all of the foregoing.
5.3 CONDITIONS. The Company shall take, and shall cause the Company
Subsidiaries to take, all commercially reasonable actions necessary or desirable
to cause the conditions set forth in Article VIII hereof to be satisfied and to
consummate the transactions contemplated herein as soon as reasonably possible
after the satisfaction thereof (but in any event within three business days of
such date).
5.4 NO SOLICITATION. Unless and until this Agreement shall have been
terminated pursuant to Section 9.1 hereof, the Company shall not and shall not
permit any Subsidiary to initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may
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reasonably be expected to lead to, any Competing Transaction (as such term is
defined below), or negotiate with any person in furtherance of such inquiries or
to obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any Subsidiary to take any such action;
provided, however, that the Company's Board of Directors may provide (or
authorize the provision of) information to, and may engage in (or authorize)
such negotiations or discussions with, any person, directly or through
representatives, if (i) the Board of Directors, after having consulted with
independent counsel, has determined in good faith that providing such
information or engaging in such negotiations or discussions is reasonably
required in order to properly discharge the directors' fiduciary duties in
accordance with the applicable laws of the State of Minnesota, (ii) prior to
furnishing such information to such person or engaging in such negotiations or
discussions, the Company provides Parent with at least seven days' notice to the
effect that it is furnishing information to, or entering into negotiations or
discussions with, such person, and (iii) prior to furnishing such information to
such person, the Company has received from such person an executed
confidentiality agreement in customary form. For purposes of this Agreement,
"Competing Transaction" shall means any of the following involving the Company
or its Subsidiaries: (i) any merger, consolidation, share exchange or other
similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of ten percent or more of assets in a single transaction or
series of transactions, excluding from the calculation of the percentage
hereunder any such transactions undertaken in the ordinary course of business
and consistent with past practice; (iii) any sale of ten percent or more of
shares of capital stock (or securities convertible or exchangeable into or
otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock); (iv) any tender offer or exchange offer for ten percent
or more of outstanding shares of capital stock; (v) any solicitation of proxies
in opposition to approval by the Company's shareholders of the Merger; (vi) any
person shall have acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 10% or more of the then outstanding capital stock of
the Company; or (vii) any public announcement of a proposal, plan or intention
to do any of the foregoing.
5.5 NOTICE OF CERTAIN MATTERS. The Company shall promptly notify
Parent in writing:
(a) of any Material governmental, administrative or Self
Regulatory Organization complaints, investigations or hearings (or
communications indicating that the same may be contemplated);
(b) if the Company shall discover that any representation or
warranty made by it in this Agreement was when made, or has subsequently
become, untrue in any respect;
(c) of any notice or other communication from any third party
relating to, a material default or event which, with notice or lapse of
time or both, would become a material default, received by the Company or
any of its Subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, under any Material agreement,
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indenture or instrument to which the Company or any of its Subsidiaries
is a party or is subject;
(d) of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; and
(e) of any Material Adverse Effect of the Company or the
occurrence of an event which, so far as reasonably can be foreseen at the
time of its occurrence, does or would reasonably be expected to have any
such Material Adverse Effect.
5.6 AFFILIATES; TAX TREATMENT. Within thirty (30) days after the date
of this Agreement, (a) the Company shall deliver to Parent a letter identifying
all persons who are then "affiliates" of the Company, including, without
limitation, all directors and executive officers of the Company for purposes of
Rule 145 promulgated under the Securities Act and (b) the Company shall advise
the persons identified in such letter of the resale restrictions imposed by
applicable securities laws, and shall use reasonable efforts to obtain from each
person identified in such letter a written agreement, substantially in the form
attached hereto as Exhibit 5.6. The Company shall use reasonable efforts to
obtain from any person who becomes an affiliate of the Company after the
Company's delivery of the letter referred to above, and on or prior to the
Effective Time, a written agreement substantially in the form attached hereto as
Exhibit 5.6 as soon as practicable after attaining such status. The Company
will use its reasonable best efforts to cause the Merger to qualify for a
reorganization under Section 368(c) of the Code.
5.7 DELIVERY OF SHAREHOLDER LIST. The Company shall deliver to Parent
or its designee, from time to time prior to the Effective Time, a true and
complete list setting forth the names and addresses of the shareholders of the
Company, their holdings of stock as of the latest practicable date, and such
other shareholder information as Parent may reasonably request.
5.8 SATISFACTION OF RELATED PARTY AGREEMENTS. The Company will have
terminated or otherwise obtained the release of the Company and the Company
Subsidiaries from, without any payment by the Company or a Company Subsidiary,
those items listed on Exhibit 5.8.
ARTICLE VI
COVENANTS OF PARENT
6.1 CONDUCT OF THE BUSINESS. Except as set forth on Schedule 6.1,
hereof, the Parent will, and will cause each of its Subsidiaries to, observe
each term set forth in this Section 6.1 and agrees that, from the date hereof
until the Effective Time, unless otherwise consented to by the Company (which
consent shall not be unreasonably withheld or delayed):
(a) The business of the Parent and its Subsidiaries shall be
conducted only in, and the Parent and its Subsidiaries shall not take any
action except in, the ordinary course of their respective businesses and
in accordance in all material respects with all applicable laws, rules
and regulations and their past custom and practice;
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(b) The Parent and its Subsidiaries shall not, directly or
indirectly, do any of the following:
(i) sell, pledge, dispose of or encumber any of its
Material assets, except in the ordinary course of business;
(ii) declare or make any distributions or pay any
dividends with respect to its capital stock; or
(iii) authorize any of, or commit or agree to take any of,
the foregoing actions.
(c) The Parent will, and will cause each of its Subsidiaries
to:
(i) use all commercially reasonable efforts to preserve
intact the business organization and goodwill of the Parent and
its Subsidiaries, keep available the services of their respective
officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others
having business relationships with the Parent;
(ii) confer on a regular and frequent basis with
representatives of the Company to report operational matters and
the general status of ongoing operations;
(iii) not intentionally take any action which would
render, or which reasonably may be expected to render, any
representation or warranty made by them in this Agreement untrue
at the Closing;
(iv) cooperate with the Company in finalizing and
communicating to the Parent's employees severance, retention and
transition arrangements; and
(v) use its reasonable best efforts to cause the Merger
to qualify for a reorganization under Section 368(c) of the Code.
6.2 REGULATORY FILINGS. Parent shall, as promptly as practicable
after the execution of this Agreement, make or cause to be made all filings and
submissions under the HSR Act and any other laws or regulations applicable to
Parent whether to a Governmental Authority, Self-Regulatory Agency or otherwise
for the consummation of the transactions contemplated on its part herein.
Parent will coordinate and cooperate with the Company in exchanging such
information, will not make any such filing without providing to the Company a
final copy thereof for its review and consent at least two full business days in
advance of the proposed filing, and will provide such reasonable assistance as
the Company may request in connection with all of the foregoing.
6.3 CONDITIONS. Parent shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Article VIII to be
satisfied and to consummate the
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transactions contemplated herein as soon as reasonably possible after the
satisfaction thereof (but in any event within three business days of such date).
6.4 NOTICE OF CERTAIN MATTERS. Parent shall promptly notify the
Company:
(a) of any Material governmental, administrative or Self
Regulatory Organization complaints, investigations or hearings (or
communications indicating that the same may be contemplated);
(b) if Parent shall discover that any representation or
warranty made by it in this Agreement was when made, or has subsequently
become, untrue in any respect;
(c) of any notice or other communication from any third party
relating to, a material default or event which, with notice or lapse of
time or both, would become a material default, received by Parent
subsequent to the date of this Agreement and prior to the Effective Time,
under any material agreement, indenture or instrument to which Parent is
a party or is subject,
(d) of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, and
(e) of any Material Adverse Effect with respect to Parent as an
entirety or the occurrence of an event which, so far as reasonably can be
foreseen at the time of its occurrence, does or would reasonably be
expected to have in any such Material Adverse Effect.
6.5 FUNDS. At the Effective Time, the Parent will have the funds
necessary to consummate the Merger and to pay the aggregate Cash Consideration
in accordance with the terms of this Agreement.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT; LISTING
ON NASDAQ; SHAREHOLDER MEETINGS.
(a) Parent and the Company will make all commercially
reasonable efforts to jointly prepare and file, as soon as practicable,
with the Securities and Exchange Commission (the "SEC") under the
Exchange Act, a joint proxy statement with respect to the shareholder
meetings of Parent and the Company referred to in Sections 7.1(b) and (c)
(the "Joint Proxy Statement/Prospectus"). In connection therewith, as
soon as practicable after the date hereof, Parent shall file with the
SEC, and shall use its best efforts to have declared effective by the
SEC, a Registration Statement on Form S-4 (the "Registration Statement")
to register under the Securities Act of 1933, as amended (the "Securities
Act"), the shares of Parent Common Stock to be issued in the Merger,
which
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Registration Statement shall incorporate the Joint Proxy
Statement/Prospectus. Parent does not undertake to file post-effective
amendments to Registration Statement or to file a separate registration
statement to register the sale of Parent Common Stock by affiliates of
the Company pursuant to Rule 145 promulgated under the Securities Act.
The Company will furnish to Parent all information concerning the Company
and its Subsidiaries required to be set forth in the Registration
Statement and Parent will provide the Company and its counsel the
opportunity to review and approve such information as set forth in the
Registration Statement. Parent and the Company will each render to the
other its full cooperation in preparing, filing, prosecuting the filing
of, and amending the Registration Statement such that it comports at all
times with the requirements of the Securities Act and the Exchange Act.
Specifically, but without limitation, each will promptly advise the other
if at any time before the Effective Time any information provided by it
for inclusion in the Registration Statement appears to have been, or
shall have become, incorrect or incomplete and will furnish the
information necessary to correct such misstatements or omissions. As
promptly as practicable after the effective date of the Registration
Statement, the Company will mail to its shareholders (i) a notice of the
Company's shareholders meeting described in Section 7.1(b) below and the
Joint Proxy Statement/Prospectus, and (ii) as promptly as practicable
after approval thereof by the Company, such other supplementary proxy
materials as may be necessary to make the Joint Proxy
Statement/Prospectus comply with the requirements of the Securities Act
and the Exchange Act. Except as provided above and except with the prior
written consent of Parent, the Company will not mail or otherwise furnish
or publish to shareholders of the Company any proxy solicitation material
or other material relating to the Merger that constitute a "prospectus"
within the meaning of the Securities Act. As promptly as practicable
after the effective date of the Registration Statement, Parent will mail
to its shareholders (i) a notice of the Company's shareholders meeting
described in Section 7.1(c) below and the Joint Proxy
Statement/Prospectus, and (ii) as promptly as practicable such other
supplementary proxy materials as may be necessary to make the Joint Proxy
Statement/Prospectus comply with the requirements of the Securities Act
and the Exchange Act. Parent shall comply, prior to the Effective Time,
with all applicable requirements of "Blue Sky" and federal and state
securities laws in connection with the Merger and the issuance of Parent
Common Stock in connection therewith. In addition, Parent shall promptly
file all appropriate applications with the Nasdaq National Market to have
Parent Common Stock to be issued in the Merger approved for listing on
the Nasdaq Stock Market's National Market upon notice of issuance.
(b) The Company and its directors in their capacity as
directors shall: (a) cause the Company's shareholders meeting (the
"Company Meeting") to be duly called and held as soon as practicable to
consider and vote upon the Merger and any related matters in accordance
with the applicable provisions of applicable law, (b) submit this
Agreement to the Company's shareholders together with a recommendation
for approval by the Board of Directors of the Company, and (c) use their
best efforts to obtain the approval and adoption of the Merger by the
requisite percentage of the Company's shareholders; provided, however,
the Company's Board of Directors may fail to make the recommendation or
to seek to obtain the requisite shareholder approval or to withdraw,
modify or change any such recommendation, if such Board of Directors
determines in
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good faith, after consultation with independent counsel, that such
actions are required in order to discharge properly the director's
fiduciary duty under the MBCA.
(c) Parent and its officers and directors shall: (a) cause
Parent's shareholders meeting (the "Parent Meeting") to be duly called
and held as soon as practicable to consider and vote upon the issuance of
the shares of Parent Common Stock to be issued as Stock Consideration in
accordance with the Merger Agreement and any related matters in
accordance with the applicable provisions of applicable law with the
recommendation for approval by the Board of Directors of Parent, and (b)
use their best efforts to obtain the approval and adoption of the
issuance of such shares by the requisite percentage of Parent's
shareholders.
7.2 BENEFIT PLANS. As of the Effective Time and until the transition
to the Parent's benefit plans, Parent will cause the Surviving Corporation and
its subsidiaries to maintain for employees of the Company and its Subsidiaries
who as of the Effective Time become employed by the Surviving Corporation,
Parent or any of its subsidiaries (the "Covered Employees"), for so long as they
are so employed employee pension and welfare plans, programs and arrangements,
including severance plans (collectively, "Designated Benefits"), that are no
less favorable in the aggregate than the Designated Benefits currently enjoyed
by such Covered Employees prior to the Effective Time. In addition, to the
extent an employee benefit plan, program or arrangement maintained or
contributed to by Parent and its subsidiaries is made available to Covered
Employees, the prior service with the Company and the Company Subsidiaries of
each such Covered Employee will be treated as if it were service rendered to
Parent or its subsidiaries, as the case may be, solely for purposes of
eligibility to participate and for vesting thereunder, but not for the purpose
of benefit accrual. Following the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, cause any and all pre-existing condition
limitations (to the extent such limitations did not apply to a pre-existing
condition under a plan of the Company and its subsidiaries) and eligibility
waiting periods under any health plans to be waived with respect to Covered
Employees who, immediately prior to the Effective Time, participated in a health
plan maintained by the Company and its subsidiaries, and their eligible
dependents and to recognize and credit any amounts incurred towards any
deductible, maximum out-of-pocket expenditures or co-payments under such health
plans. Parent shall honor, pursuant to the terms of the Employee Plans and
Benefit Arrangements, and to the extent consistent with applicable law and the
Merger Agreement, all employee benefit obligations to current employees of the
Company and its subsidiaries under such plans and arrangements. As soon as
reasonably practicable after the Effective Time, Parent shall cause the
Company's 401(k) Plan to be merged with Parent's 401(k) Plan.
7.3 AGREEMENT TO DEFEND. In the event any claim, action, suit or
proceeding arising out of the Merger is commenced, whether before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto.
7.4 ACCESS TO BOOKS AND RECORDS.
(a) Between the date hereof and the Closing Date, each party
shall afford to the other party hereto and its authorized representatives
full access at all reasonable times
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and upon reasonable notice to the offices, properties, books, records,
officers, employees and other items of such first party, and otherwise
provide such assistance as is reasonably requested by the other party
hereto.
(b) In the event that the transactions contemplated by this
Agreement are not consummated for any reason, both parties agree to abide
by the terms of that certain Confidentiality Agreement, dated March 31,
1999 between Parent and Miller & Schroeder, Inc., with respect to the
"Information" (as defined therein) of either party obtained by the other
party thereunder.
7.5 SATISFACTION OF CONDITIONS. Each of the parties hereto will use
all commercially reasonable efforts to satisfy those conditions set forth in
Article VIII hereof which are to be satisfied by it.
7.6 EXPENSES.
(a) Except as provided in Section 9.2 below, all Expenses (as
defined below) incurred by Parent and the Company shall be borne solely
and entirely by the party which has incurred the same.
(b) "Expenses" as used in this Agreement shall include all
out-of-pocket expenses (including without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to the party and its affiliates) incurred by a party or on
its behalf in connection with or related to the authorization,
preparation and execution of this Agreement, the solicitation of
shareholder approvals and all other matters related to the closing of
the transactions contemplated hereby.
7.7 CERTAIN DIRECTOR POSITIONS. Parent agrees to cause James Dlugosch
to be elected or appointed as a director of Parent at the Effective Time. It is
the intention of the parties that the size of the Board of Directors of Parent
following the Effective Time to be increased by three directors and that, in
connection with such increase, and thereafter until the first annual meeting of
Shareholders of Parent following the Effective Time that Mr. Dlugosch and two
additional persons proposed by Mr. Dlugosch and approved by Parent's Board of
Directors who are or become shareholders of Parent on account of the Merger and
who are not employed by the Company Subsidiary shall serve as directors of
Parent.
ARTICLE VIII
CONDITIONS OF MERGER
8.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The
Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of
the Registration Statement shall have been issued by the
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SEC and no proceedings for that purpose shall, on or prior to the
Effective Time, have been initiated or, to the knowledge of Parent or
the Company, threatened by the SEC. Parent shall have received all
other federal or state securities permits and other authorizations
necessary to issue Parent Common Stock in exchange for the Company
Common Stock and to consummate the Merger.
(b) SHAREHOLDER APPROVALS. This Agreement and the Merger shall
have been approved and adopted by the Requisite Company Shareholder Vote
and the issuance of the shares of Parent Common Stock to be issued as
Stock Consideration shall have been approved by the Requisite Parent
Shareholder Vote.
(c) ARTICLES OF MERGER. Each of Parent and the Company shall
have executed and delivered the Articles of Merger in accordance with
Section 1.3 hereof.
(d) NASDAQ LISTING. The shares of Parent Common Stock that are
to be issued to the shareholders of the Company upon consummation of the
Merger shall have been authorized for listing on the Nasdaq Stock
Market's National Market, subject to notice of issuance.
(e) NO ORDER. No federal or state governmental or regulatory
authority or other agency or commission, or federal or state court of
competent jurisdiction, shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect restricting, preventing or prohibiting consummation of
the transactions contemplated by this Agreement.
8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The obligations
of Parent to effect the Merger are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company in or pursuant to this Agreement shall be
true and correct in all material respects (except that where any
statement in a representation or warranty expressly includes a statement
of materiality, such statement shall be true and correct in all respects)
at and as of the Effective Time with the same effect as though such
representations and warranties had been made or given at and as of the
Effective Time (without taking into account any disclosures by the
Company of discoveries, events or occurrences arising on or after the
date hereof), except that any such representation or warranty made as of
a specified date (other than the date hereof) shall only need to have
been true on such date.
(b) COVENANTS. The Company shall have performed and complied
in all material respects with all of their obligations under this
Agreement which were to be performed or complied with by it prior to or
at the Effective Time.
(c) REQUIRED CONSENTS AND REGULATORY APPROVALS. All consents
of Governmental Authorities and Self Regulatory Organizations, and all
filings with and
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notifications of Governmental Authorities or Self-Regulatory
Organizations which regulate the business of the Company or its
Subsidiaries, or in which the Company or a Subsidiary is a member,
necessary on the part of the Company, or its Subsidiaries or
affiliates, to the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and, with the
exception of licenses necessary to continue the Company's gaming
business, to permit the continued operation of the business of the
Company and its Subsidiaries without a Material Adverse Effect with
respect to the Company and its Subsidiaries shall have been obtained
or effected.
(d) ABSENCE OF CERTAIN LITIGATION. At the Effective Time:
(i) there shall be no injunction, restraining order or
order of any nature issued by any court of competent jurisdiction
which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided or
compels or would compel Parent to dispose of or discontinue a
significant portion of the business conducted by Parent and its
Subsidiaries or of the business conducted by the Company and its
Subsidiaries as a result of the Merger or consummation of the
transactions contemplated hereby; and
(ii) there shall be no suit, action or other proceeding
by the United States (or any agency thereof) or by any State (or
any agency thereof) pending before any court or governmental
agency wherein such complainant seeks the prohibition of the
consummation of the Merger or asserts the illegality of the
Merger.
(e) DELIVERY OF CLOSING DOCUMENTS. At or prior to the
Effective Time, the Company shall have delivered to Parent all of the
following:
(i) a certificate of the President and the Chief
Financial Officer of the Company, dated as of the Closing Date,
stating that the conditions precedent set forth in Sections 8.2(a)
and 8.2(b) hereof have been satisfied;
(ii) copies of the Governmental Authority and Self
Regulatory Organization consents and approvals and of the
authorizations referred to in Section 8.2(c) hereof; and
(iii) a copy, dated as of a date not more than five
business days in advance of the Closing Date, of
(x) the Articles of Incorporation of the Company,
certified by the Secretary of State of the State of
Minnesota,
(y) a Certificate of Good Standing from the
Secretary of State of the State of Minnesota evidencing the
good standing of the Company in such jurisdiction, and
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(z) Executed resignations from such directors and
officers in their capacities as directors or officers, and
not as employees, of the Company or the Company
Subsidiaries as Parent shall request with no resulting
liability or expense to the Company, its Subsidiaries,
Parent or Merger Subsidiary.
(f) OPINION OF COUNSEL. Parent shall have received from Briggs
and Morgan, Professional Association or other independent counsel for the
Company reasonably satisfactory to Parent, an opinion dated the Effective
Time, in form and substance reasonably satisfactory to Parent, covering
the matters set forth in Exhibit 8.2(f) hereto, which opinion shall be
based on such assumptions and containing such qualifications and
limitations as are appropriate and reasonably satisfactory to Parent.
(g) TAX OPINION. Parent shall have received from KPMG Peat
Marwick LLP ("KPMG"), an opinion to the effect that:
(i) the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code;
(ii) the Company and Parent will each be party to a
reorganization within the meaning of Section 368(b) of the Code;
(iii) no gain or loss will be recognized by any
shareholder of the Company upon consummation of the Merger (except
with respect to cash received in lieu of a fractional share
interest in Parent Common Stock, on account of Dissenter Shares or
on account of Cash Election Shares);
(iv) the aggregate income tax basis of Parent Common
Stock received by the shareholders of the Company pursuant to the
Merger will be the same as the aggregate tax basis of Company
Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest, Dissenting Shares
or Cash Election Shares for which cash is received); and
(v) No income, gain or loss to holders of Employee
Options upon conversion of such options to acquire Company Common
Stock into options to acquire Parent Common Stock pursuant to
Section 2.12(b) of this Agreement.
(i) AFFILIATES AGREEMENTS. Parent shall have received from
each person who is identified as an "affiliate" of the Company a signed
affiliate letter in the form attached as Exhibit 5.6.
8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY . The
obligations of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT EFFECTIVE TIME. The
representations and warranties made by Parent in or pursuant to this
Agreement shall be
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true and correct in all material respects (except that where any
statement in a representation or warranty expressly includes a
statement of materiality, such statement shall be true and correct in
all respects) on and as of the Effective Time with the same effect as
though such representations and warranties had been made or given on
and as of the Effective Time (without taking into account any
disclosures by Parent of discoveries, events or occurrences arising on
or after the date hereof), except that any such representation or
warranty made as of a specified date (other than the date hereof)
shall only need to have been true on such date.
(b) COVENANTS. Parent shall have performed and complied in all
material respects with all of its obligations under this Agreement which
are to be performed or complied with by it prior to or at the Effective
Time.
(c) REQUIRED CONSENTS AND REGULATORY APPROVALS. All consents
of Governmental Authorities and Self Regulatory Organizations, and all
filings with and notifications of Governmental Authorities or Self
Regulatory Organizations which regulate the business of the Parent or its
Subsidiaries, or in which the Parent or a Subsidiary is a member,
necessary on the part of the Parent, or its Subsidiaries or affiliates,
to the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and to permit the continued
operation of the business of the Parent and its Subsidiaries without a
Material Adverse Effect with respect to the Parent and its Subsidiaries
shall have been obtained or effected.
(d) ABSENCE OF CERTAIN LITIGATION. At the Effective Time:
(i) there shall be no injunction, restraining order or
order of any nature issued by any court of competent jurisdiction
which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided;
and
(ii) there shall be no suit, action or other proceeding
by the United States (or any agency thereof) or by any State (or
any agency thereof) pending before any court or governmental
agency wherein such complainant seeks the prohibition of the
consummation of the Merger or asserts the illegality of the
Merger.
(e) DELIVERY OF CLOSING DOCUMENTS. At or prior to the
Effective Time, Parent shall have delivered to the Company all of the
following:
(i) a certificate of the Chief Executive Officer and the
Secretary of Parent, dated as of the date of the Effective Time,
stating that the conditions precedent set forth in Sections 8.3(a)
and 8.3(b) hereof have been satisfied; and
(ii) copies of the Governmental Authority and Self
Regulatory Organization consents and approvals and of the
authorizations referred to in Section 8.3(c) hereof; and
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(iii) a copy, dated as of a date not more than five
business days in advance of the Closing Date, of a Certificate of
Good Standing of Parent certified by the Secretary of State of the
State of Minnesota.
(f) OPINION OF COUNSEL. The Company shall have received from
Kaplan, Strangis and Kaplan, P.A. or other independent counsel for Parent
reasonably satisfactory to the Company, an opinion dated the Effective
Time, in form and substance reasonably satisfactory to the Company,
covering the matters set forth in Exhibit 8.3(f), which opinions shall be
based on such assumptions and contain such qualifications and limitations
as are appropriate and reasonably satisfactory to the Company.
(g) TAX OPINION. The Company shall have received from KPMG an
opinion to the effect that:
(i) the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code;
(ii) the Company and Parent will each be party to a
reorganization within the meaning of Section 368(b) of the Code;
(iii) no gain or loss will be recognized by any
shareholder of the Company upon consummation of the Merger (except
with respect to cash received in lieu of a fractional share
interest in Parent Common Stock, on account of Dissenters Shares
or on account of Cash Election Shares);
(iv) the aggregate income tax basis of Parent Common
Stock received by the shareholders of the Company pursuant to the
Merger will be the same as the aggregate tax basis of Company
Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest, Dissenting Shares
or Cash Election Shares for which cash is received); and
(v) No income, gain or loss to holders of Employee
Options upon conversion of such options to acquire Company Common
Stock into options to acquire Parent Common Stock pursuant to
Section 2.12(b) of this Agreement.
(h) James Dlugosch, William Sexton and Kenneth Dawkins shall
have received from Norwest Bank Minnesota, N.A. ("Norwest") full and
complete releases of their obligations or liability as guarantors or
pledgors with respect to the Company's credit facility with Norwest
effective no later than the Effective Time.
ARTICLE IX
TERMINATION
9.1 REASONS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, notwithstanding the adoption of this Agreement
by the security holders of
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the Company or the approval of the issuance of Parent Common Stock as Stock
Consideration by the security holders of Parent, with the effects set forth in
Section 9.2 hereof:
(a) By the mutual consent of the Boards of Directors of Parent
and the Company; or
(b) By Parent at any time after January 31, 2000 (or such later
date as shall have been agreed to in writing by the parties) if any of
the conditions provided for in Sections 8.1 or 8.2 of this Agreement have
not been met and have not been waived in writing by Parent except to the
extent that such failure arises or results from the knowing action or
inaction of Parent or Parent Subsidiaries; or
(c) By Parent, on the one hand, or the Company, on the other
hand, at any time after discovery of
(i) a Material Adverse Effect with respect to the
Company, or Parent, respectively, the effects of which event
cannot be or has not been cured within 30 days of giving written
notice to the other party; or
(ii) of the occurrence of an event which would be
reasonably likely to result in such a Material Adverse Effect, in
either case, the effects of which event cannot be or has not been
cured within 30 days of giving written notice to the other party;
or
(d) By the Company at any time after January 31, 2000 (or such
later date as shall have been agreed to in writing by the parties) if any
of the conditions provided for in Sections 8.1 or 8.3 of this Agreement
have not been met and have not been waived in writing by the Company
except to the extent that such failure arises or results from the knowing
action or inaction of Company or Company Subsidiaries; or
(e) At any time prior to the Effective Date, by Parent, on the
one hand, or the Company, on the other hand, in the event of a material
breach by the other party of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within 30 days of
giving written notice to the breaching party of such breach; or
(f) Either Parent, on the one hand, or by the Company, on the
other hand, in the event the approval of any Governmental Authority
required for consummation of the Merger or the transactions contemplated
by this Agreement shall have been denied by final nonappealable action of
such Governmental Authority; or
(g) by Parent, if at any time prior to the Company Meeting, the
Company's Board of Directors shall have failed to make its recommendation
referred to in Section 7.1(b), or withdrawn such recommendation or
modified or changed such recommendation in a manner adverse to the
interests of Parent; or
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(h) by the Company, if the Company shall immediately thereafter
enter into a definitive agreement with a third party providing for an
Acquisition Transaction (as such term is defined below) on terms
determined, in good faith, by the Board of Directors of the Company,
after consultation with independent counsel and financial advisors to the
Board, to be such that termination of this Agreement and entry into such
third-party agreement is required in order to discharge properly the
directors' duties in accordance with Minnesota Law; or
(i) by the Company, within ten business days of receipt of
written notice from Parent that a Change of Control (as described below)
has occurred.
"Acquisition Transaction" means a transaction or series of transactions
that, directly or indirectly, in substance constitutes a disposition of all or
substantially all of the assets or business of the Company or its Subsidiaries,
taken as a whole, whether by means of (i) a merger or consolidation, share
exchange or any similar transaction, (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition, or (iii) a purchase or other acquisition
(including by way of a merger or consolidation, share exchange or otherwise) of
securities representing 50% or more of the voting power of the Company or 50% or
more of any of its Subsidiaries; provided, however, in each of the situations
described in clauses (i), (ii) or (iii), that the Acquisition Transaction shall
represent consideration having an aggregate value (reasonably determined) to the
Company or its shareholders in excess of the consideration to be received in the
Merger.
A "Change of Control" shall be deemed to have occurred upon the
occurrence of the following: (i) Parent shall have entered into a definitive
agreement for a share exchange, reorganization, merger or consolidation of
Parent, other than a share exchange, reorganization, merger or consolidation of
Parent in which the holders of Parent Common Stock outstanding immediately prior
to the share exchange, reorganization, merger or consolidation hold, directly or
indirectly, at least 75% of the voting securities of the surviving corporation
immediately after such share exchange, reorganization, merger or consolidation;
or (ii) there has been an acquisition in one or more transactions by an
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 25% of the then outstanding
shares of Parent Common Stock; (iii) individuals who at the date of this
Agreement constituted the Board of Directors of Parent (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Parent has been approved by a majority of
the directors that are still in office who either were directors at the date of
this Agreement or whose election or recommendation for election was previously
so approved) cease to constitute a majority of the Board of Directors of the
Parent; or (iv) Parent shall have entered into a definitive agreement for the
sale, exchange, transfer or disposition of all or substantially all of the
assets of the Parent or JGK.
9.2 EFFECTS OF TERMINATION.
(a) If the Merger is not consummated as the result of
termination of this Agreement caused otherwise than by breach of a party
hereto, the Company and Parent each shall pay its own Expenses and this
Agreement shall immediately terminate and
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neither the Company nor Parent shall have any liability under this
Agreement for damages or otherwise.
(b) If termination of this Agreement shall have been caused by
breach of this Agreement by any party hereto, then, in addition to other
remedies at law or equity for breach of this Agreement, the party so
found to have breached this Agreement shall indemnify and reimburse the
other party for its expenses.
(c) Anything to the contrary notwithstanding, if this Agreement
(a) is terminated by Parent pursuant to Section 9.1(g) or by the Company
pursuant to Section 9.1(h) or by Parent solely due to the failure of the
Company's shareholders to approve the Merger at the Company Meeting, and
(b) prior thereto or within twelve months after such termination the
Company shall have entered into an agreement to engage in an Acquisition
Transaction, then the Company shall pay Parent a fee equal to $1,500,000.
Such fee shall be paid to Parent within two business days after the date
of entering into such agreement for an Acquisition Transaction.
(d) Anything to the contrary notwithstanding, if this Agreement
is terminated by the Company pursuant to Section 9.1(i), then Parent
shall pay to the Company, within two business days of receiving notice of
such termination, a fee equal to $1,500,000.
9.3 PROMPT NOTICE. In the event of termination of this Agreement by
any party as above provided in Paragraph 9.1, prompt written notice shall be
given to the other parties hereto.
ARTICLE X
OTHER PROVISIONS
10.1 SURVIVAL. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time or
termination of this Agreement, except that (a) the agreements of the parties
contained in Article II, Article IX and this Article X shall survive the
Effective Time and (b) if this Agreement is terminated prior to the Effective
Time, the agreements of the parties contained in Sections 7.4(b) and 9.2 and in
this Article X shall survive such termination.
10.2 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the laws of the State of Minnesota applicable to contracts made and
to be performed entirely within such state.
10.3 ASSIGNMENT. Neither this Agreement nor any right hereunder may be
assigned by any party hereto.
10.4 AMENDMENT AND WAIVER. The parties may, by written agreement:
(a) extend the time for the performance of any of the
obligations or other acts of the parties hereto,
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(b) waive any inaccuracies in the representations or warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement, and
(c) waive compliance with or modify, amend or supplement any of
the covenants, agreements, representations or warranties contained in
this Agreement or waive or modify performance of any of the obligations
of any of the parties hereto; provided that, after adoption of this
Agreement by shareholders of the Company, no amendment may be made which
reduces the Merger Consideration or effects any change which would
materially adversely affect such shareholders, without further approval.
10.5 NOTICES. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, or when sent by facsimile, telecopier or other means of
electronic transmission (with receipt confirmed), or the fourth business day
after having been deposited in the U.S. mails, if sent by registered, first-
class mail, return receipt requested, addressed as follows (or to such other
address as a party may designate by notice to the others):
(a) If to Parent:
Kinnard Investments, Inc.
920 Second Avenue South
Minneapolis, Minnesota 55402
Attention: George F. Stroebel
Facsimile: (612) 370-2557
with a copy to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: James C. Melville, Esq.
Facsimile: (612) 375-1143
(b) If to the Company:
MI Acquisition Corporation
220 South Sixth Street
Suite 300
Minneapolis, Minnesota 55402
Attention: Chief Executive Officer
and
Attention: Chief Financial Officer
Facsimile: (612) 376-1410
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with copies to:
Briggs and Morgan, Professional Association
2400 IDS Center
80 South Eighth Street
Minneapolis Minnesota 55402
Attention: Brian D. Wenger, Esq.
Facsimile: (612) 334-8650
10.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 HEADINGS. The headings in the Articles and Sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
10.8 ENTIRE AGREEMENT. This Agreement, including the Disclosure
Schedule and Exhibits referred to herein and any documents executed by the
parties simultaneously herewith and the Confidentiality Agreement dated March
31, 1999 between Parent and Miller & Schroeder, Inc., constitutes the entire
understanding and agreement of the parties hereto and supersedes all other prior
agreements and understandings, written or oral, between the parties with respect
to the subject matter hereof.
10.9 PUBLIC ANNOUNCEMENTS. The Company shall not make any public
announcement or statement with respect to the Merger, this Agreement or any
related transaction without the approval of Parent, which approval will not be
unreasonably withheld. In the event Parent determines to make any public
announcements concerning the proposed Merger, Parent agrees to notify the
Company of Parent's intention to make such announcement and provide the Company
with the text of the announcement in advance of its release to the public.
10.10 NO THIRD PARTY BENEFICIARY. This Agreement is made and entered
into solely for the benefit of the parties hereto and, except for the right to
receive the Merger Consideration payable pursuant to Article II and the right to
indemnification under Section 8.2, no individual or entity not a signatory
hereto shall have any rights under or with respect to any term of this Agreement
or against any party hereto or, after the Merger, the Surviving Corporation.
Nothing contained in this Agreement shall create or continue any right of
employment of any employee of Parent or the Company.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
KINNARD INVESTMENTS, INC.
By: /s/ William F. Farley
------------------------------------
Its: Chief Executive Officer
-----------------------------------
MI ACQUISITION CORPORATION
By: /s/ James F. Dlugosch
------------------------------------
Its: Chief Executive Officer
-----------------------------------
PEACHTREE ACQUISITION, INC.
By: /s/ William F. Farley
------------------------------------
Its: Chief Executive Officer
-----------------------------------
<PAGE>
EXHIBIT 99
FOR IMMEDIATE RELEASE CONTACT: William F. Farley
Kinnard Investments, Inc.
(612) 370-2956
James Dlugosch
Miller & Schroeder Financial, Inc.
(612) 376-1364
KINNARD TO ACQUIRE MILLER & SCHROEDER
MINNEAPOLIS, May 17, 1999 -- Minneapolis-based financial services firm
Kinnard Investments, Inc. (Nasdaq: KINN), and Miller & Schroeder Financial,
Inc., a closely held Minneapolis fixed-income investment banker, today announced
that they have reached a definitive agreement to combine their businesses. The
agreement is subject to legal and regulatory approvals and approval by
shareholders of both companies.
Under the terms of the agreement, each share of Miller & Schroeder common
stock will be converted, at the holder's election, to either $19.25, without
interest, or 3.5 shares of Kinnard common stock. The transaction is structured
so that Miller & Schroeder investors will receive between $5 million and $8
million in cash. Kinnard expects to issue approximately 2.0 million shares in
connection with the merger. Based on Kinnard's closing share price of $5.00
per share on May 14, the transaction is valued at approximately $17 million.
"This proposed merger will create the dominant mid-market investment
banking and brokerage operation in the Upper Midwest by joining Miller &
Schroeder's highly regarded fixed income underwriting and sales operation with
Kinnard's equity capital markets business and retail sales capabilities," said
William F. Farley, chairman and chief executive officer of Kinnard.
"This is another growth step for our business, which has devoted the last
two years to adding significant corporate finance and research talent, upgrading
systems and expanding the selection of investment products we offer to
institutional and retail clients," Farley said.
"We expect the combined firm to be stronger than either organization alone
because of the balanced revenue stream from fixed income investment banking
and the growing revenue stream on the equity side," said Jim Dlugosch,
chairman and chief executive officer of Miller & Schroeder.
More
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The combined organization had revenues of about $75 million in 1998,
nearly equally split between equity and fixed-income investment banking, with a
capital base of approximately $40 million. Kinnard has a growing fixed income
business that will be integrated with the Miller & Schroeder business. The
combined firm will have over 450 employees, including over 150 sales
representatives.
Management of the successor organization will be headed by Farley as
chairman and chief executive officer, and Dlugosch, who will upon consummation
of the merger become president and chief operating officer of the combined
broker-dealer operation, which will be called Kinnard, Miller & Schroeder.
Subject to necessary approvals, the merger is expected to close in fall 1999.
Kinnard is a full-service investment-banking firm with 13 branch offices in
three states, and 286 employees. The company is a member of the Securities
Investor Protection Corporation (SIPC) and the Chicago Stock Exchange.
Miller & Schroeder Financial, Inc. specializes primarily in fixed income
investment banking, including public finance, mortgage banking and construction
lending, gaming finance and corporate debt securities. It employs 193 people in
nine offices in seven states.
Except for historical information contained herein, the matter set forth in
this news release, including expectations regarding the number of shares of
Kinnard Common Stock to be issued in connection with the merger, the transaction
value, the estimated date of closing of the transaction and the future
performance of the combined company are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
significantly from those indicated in the forward-looking statements. Such
risks and uncertainties include factors that are out of the control of either
Kinnard or Miller & Schroeder including, but not limited to, the actions of
various regulatory agencies, the risks associated with mergers, acquisitions and
significant transactions generally and overall economic conditions.
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