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): March 31, 1998
DAIN RAUSCHER CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-8186 41-1228350
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(State or other jurisdiction (Commission file) (IRS employer
of incorporation) identification No.)
Dain Rauscher Plaza, 60 South Sixth Street,
Minneapolis, Minnesota
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612)371-7750
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
(a) On March 31, 1998, pursuant to an Agreement and Plan of
Merger, dated as of February 8, 1998 (the "Merger
Agreement") among Dain Rauscher Corporation ("DRC"), Dain
Rauscher Incorporated, a wholly owned subsidiary of DRC
("DRI"), DRI Buyer Sub, LLC, a wholly owned subsidiary of
DRI ("Buyer Sub"), Wessels, Arnold & Henderson Group, L.L.C.
("WAH Group") and Wessels, Arnold & Henderson, L.L.C.
("WAH"), Buyer Sub and WAH Group were merged with and into
WAH (the "Merger") and WAH became a wholly owned subsidiary
of DRI. On April 6, 1998 WAH was merged with and into DRI
and ceased to exist as a separate entity. The description
of the Merger Agreement contained herein is qualified in its
entirety by reference to the Merger Agreement, which is
attached hereto as Exhibit 2.1 and is incorporated herein
by reference. The Merger Consideration was negotiated at
arms' length by the parties to the Merger Agreement. Prior
the to Merger, the holders of limited liability company
interests in WAH Group and WAH were not affiliated with
DRC, DRI or Buyer Sub . The Merger will be accounted for
as a purchase. The total consideration payable to the
holders of outstanding limited liability company interests
of WAH Group and WAH (except for interests of WAH held by
WAH Group, which were canceled) consisted of $120 million
in cash and $30 million aggregate principal amount in five-
year zero coupon subordinated debentures of DRC
(collectively, the "Merger Consideration"). The cash used
in the transaction came from the following sources: $80
million from a subordinated loan by and between DRI, as
borrower, and U.S. Bank National Association, Norwest Bank
Minnesota, N.A., The Chase Manhattan Bank and The Bank of
New York, as lenders; and $40 million from internally
generated sources.
(b) The assets of WAH Group and WAH consist primarily of cash,
accounts receivable, securities inventory, prepaid expenses
and other current assets, property and equipment and
investments in affiliates. WAH utilized its assets to
provide a comprehensive range of investment banking and
institutional equity sales, trading and research services.
DRI intends to use the assets of WAH's business
substantially as previously used.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
The required combined financial statements of WAH Group
and WAH are not included in this Current Report on Form
8-K. These combined financial statements will be
provided in an amendment to this Current Report on Form
8-K as soon as practicable, but not later than June 14,
1998.
(b) Pro Forma Financial Information
The required pro forma combined financial information
relative to the acquisition of WAH Group and WAH is not
included in this Current Report on Form 8-K. The pro
forma combined financial information will be provided in
an amendment to this Current Report on Form 8-K as soon
as practicable, but not later than June 14, 1998.
(c) Exhibits
Exhibit No. Description
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2.1 Agreement and Plan of Merger, dated
February 8, 1998 among Dain Rauscher
Corporation, Dain Rauscher Incorporated
and Wessels, Arnold & Henderson Group,
L.L.C. and Wessels, Arnold & Henderson, LLC.
4.1 Form of Dain Rauscher Corporation
Subordinated Debenture
4.2 Form of Dain Rauscher Corporation Stock
Option Agreement
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.
Date: April 15, 1998 DAIN RAUSCHER CORPORATION
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By: John C. Appel
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John C. Appel
Vice Chairman and Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
Number Item
- ------ ----
2.1 Agreement and Plan of Merger, dated February 8,
1998 among Dain Rauscher Corporation, Dain Rauscher
Incorporated and Wessels, Arnold & Henderson Group,
L.L.C. and Wessels, Arnold & Henderson, L.L.C.
4.1 Form of Dain Rauscher Corporation Subordinated
Debenture
4.2 Form of Dain Rauscher Corporation Stock Option
Agreement
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
DAIN RAUSCHER CORPORATION
DAIN RAUSCHER INCORPORATED
AND
WESSELS, ARNOLD & HENDERSON GROUP, L.L.C.
WESSELS, ARNOLD & HENDERSON, L.L.C.
February 8, 1998
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 Buyer Sub
1.2 The Merger
1.3 Effect of the Merger
1.4 Effective Time
1.5 Certificate of Formation; Limited Liability Company Agreement
1.6 Taking of Necessary Action; Further Action
1.7 The Closing
1.8 Reservation of Right to Revise Structure
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Securities
2.2 Delivery of Merger Consideration
2.3 Allocation of Purchase Price
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
3.1 Organization and Qualification
3.2 Subsidiaries
3.3 Authority
3.4 Authority; Vote Required
3.5 Regulatory Filings and Consents
3.6 Registrations
3.7 Capitalization
3.8 Reports; Financial Statements
3.9 Undisclosed Liabilities
3.10 No Material Adverse Effect
3.11 Securities
3.12 Litigation
3.13 Tax Matters
3.14 Contracts and Commitments
3.15 Title to Property
3.16 Intellectual Property Rights
3.17 Employees
3.18 Employee Benefit Plans
3.19 Compliance with Laws
3.20 Environmental Matters
3.21 No Pending Transactions
3.22 Risk Management Instruments
3.23 Brokerage
3.24 Accounting Controls
3.25 Contracts with Clients
3.26 Special Members
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
4.1 Organization and Qualification
4.2 Authority
4.3 Brokerage
4.4 Consents
4.5 SEC Reports
4.6 No Material Adverse Effect
4.7 Debentures; Options
4.8 Subsidiaries
4.9 Parent Stock
4.10 Buyer Sub
4.11 Litigation
4.12 Compliance with Laws
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of the Business
5.2 INTENTIONALLY OMITTED
5.3 Regulatory Filings
5.4 Conditions
5.5 No Solicitation
5.6 Notice of Certain Matters
5.7 Buyer Consents
5.8 Transaction Expenses
ARTICLE VI
COVENANTS OF BUYER
6.1 Regulatory Filings
6.2 Equity Capital Markets Group
6.3 Conditions
6.4 Governance
6.5 Closing Distribution
6.6 Severance Pool
6.7 Retention Pool
6.8 Stock Options
6.9 Notice of Certain Matters
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
7.1 Representations and Warranties
7.2 Covenants
7.3 Pre-Merger Notification
7.4 Required Consents and Regulatory Approvals
7.5 Absence of Certain Litigation
7.6 Member's Agreements
7.7 Employment Agreement
7.8 Capital Contribution
7.9 Delivery of Closing Documents
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANIES' OBLIGATIONS
8.1 Representations and Warranties True at Effective Time
8.2 Covenants
8.3 Pre-Merger Notification
8.4 Required Consents and Regulatory Approvals
8.5 Absence of Certain Litigation
8.6 Employment Agreement
8.7 Delivery of Closing Documents
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 Pre-Closing Business
9.2 Benefit Plans
9.3 Agreement to Defend
9.4 Access to Books and Records
9.5 Satisfaction of Conditions
ARTICLE X
TERMINATION
10.1 Reasons for Termination
10.2 Effects of Termination
10.3 Fees and Expenses
10.4 Prompt Notice
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival of Representations and Warranties
11.2 Indemnification
11.3 Method of Asserting Claims
11.4 Certain Tax Matters
ARTICLE XII
OTHER PROVISIONS
12.1 Law Governin
12.2 Assignment
12.3 Amendment and Waiver
12.4 Notices
12.5 Counterparts
12.6 Headings
12.7 Entire Agreement
12.8 Public Announcements
12.9 No Third Party Beneficiary
EXHIBITS
Exhibit 1.1 Buyer Sub Joinder Agreement
Exhibit 2.1 Subordinated Debenture
Exhibit 6.8 Non-Qualified Stock Option Agreement
Exhibit 7.6 Member's Agreement
Exhibit 7.7 Employment Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated
February 8, 1998, is by and among Dain Rauscher Corporation, a
Delaware corporation ("Parent"), Dain Rauscher Incorporated, a
Delaware corporation ("Buyer"), Wessels, Arnold & Henderson
Group, L.L.C., a Delaware limited liability company ("Seller 1"),
and Wessels, Arnold & Henderson, L.L.C., a Delaware limited
liability company and ("Seller 2" and together with Seller 1,
the "Companies" and each a "Company").
WHEREAS, the Boards of Directors of Parent and Buyer, the
Executive Committee of Seller 1 and Seller 2 as Managing Member
of Seller 2 have each determined that it is in the best interests
of their respective corporation or limited liability company and
their respective stockholders or members that each of the
Companies be merged with a wholly owned subsidiary of Buyer which
will be formed for the purpose of acquiring the Companies ("Buyer
Sub"), with Seller 2 surviving the Merger as a wholly owned
subsidiary of Buyer, pursuant to this Agreement and in accordance
with the Limited Liability Company Act of the State of Delaware
(the "Delaware Act").
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 (as defined below),
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 Buyer Sub. Prior to the Effective Time, Buyer shall take
any and all action necessary (i) duly to organize Buyer Sub for
the purpose of consummating the Merger (as defined in Section 1.2
hereof); (ii) to cause Buyer Sub to become a party to this
Agreement, to be evidenced by the execution by Buyer Sub of a
supplement to this Agreement in substantially the form of Exhibit
1.1 hereto, and delivery thereof to each of the Companies; and
(iii) to cause Buyer Sub to take all actions necessary or proper
to comply with the obligations of Parent, Buyer and such Buyer
Sub to consummate the transactions contemplated hereby.
1.2 The Merger. At the "Effective Time" (as defined in
Section 1.4 hereof), in accordance with this Agreement and the
Delaware Acts, Seller 1 and Buyer Sub shall each be merged with
and into Seller 2, the separate existence of each of Seller1 and
Buyer Sub shall cease, and Seller 2 shall continue as the
surviving limited liability company under the name "Wessels,
Arnold & Henderson, L.L.C." (the "Merger"). Seller 2, in its
capacity as the limited liability company surviving the Merger
and wholly owned subsidiary of Buyer, is sometimes referred to
herein as the "Surviving Company."
1.3 Effect of the Merger. At the Effective Time, the
Surviving Company shall succeed to and possess all of the
properties, interests, rights, privileges, powers, franchises,
immunities and purposes, and be subject to all the debts,
liabilities, obligations, restrictions, disabilities, penalties
and duties, of the Companies and Buyer Sub (collectively, the
"Constituent Companies"), all without further act or deed and
with the effects set forth in Section 18-209(g) of the Delaware
Act. Neither Parent nor Buyer shall become subject to any debts,
liabilities, obligations, restrictions, disabilities, penalties
or duties of Seller1, Seller2, Buyer Sub or the Surviving
Company.
1.4 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 Articles VII and VIII, and
the parties hereto will cause a certificate of merger relating to
the Merger to be executed, delivered, filed and recorded with the
Secretary of State of the State of Delaware in accordance with
the Delaware Act. The Merger shall become effective immediately
upon the filing of such certificate of merger with the Secretary
of State of the State of Delaware. The date and time on which
the Merger shall become effective is referred to herein as the
"Effective Time."
1.5 Certificate of Formation; Limited Liability Company
Agreement. At the Effective Time, the Certificate of Formation
of Seller 2 as in effect immediately prior to the Effective Time
shall become the Certificate of Formation of the Surviving
Company until further amended in accordance with law. The
limited liability company agreement of Buyer Sub as in effect
immediately prior to the Effective Time shall be the limited
liability company agreement of the Surviving Company from and
after the Effective Time until further amended as provided
therein and in accordance with the law.
1.6 Taking of Necessary Action; Further Action. Parent,
Buyer and the Companies, respectively, shall each use its best
efforts to take all such action as may be necessary or
appropriate to effectuate the Merger under the Delaware Act at
the time specified in Section 1.4. If, at any time after the
Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the
Surviving Company with full right, title and possession in and to
all the properties, interests, rights, privileges, powers,
franchises, immunities and purposes of either of the Constituent
Companies, the officers of the Surviving Company are fully
authorized in the name of each Constituent Companies or otherwise
to take, and shall take, all such lawful and necessary action.
1.7 The Closing. The closing of the transactions
contemplated by the Agreement (the "Closing") will take place at
the offices of Dorsey & Whitney LLP, 220 South Sixth 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."
1.8 Reservation of Right to Revise Structure. Upon the
mutual agreement of the parties, the Merger may alternatively be
structured so that (a) the Companies are merged with a wholly
owned subsidiary or subsidiaries of Buyer other than Buyer Sub or
(b) a wholly owned subsidiary or subsidiaries of Buyer is merged
with and into one or more of the Companies; provided, however,
that no such change shall alter or change the amount or kind of
the Merger Consideration (as defined in Section 2.1 hereof). 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
CONVERSION OF SECURITIES
2.1 Conversion of Securities. The total consideration to be
paid by Parent and Buyer in the Merger shall consist of
$120,000,000 in cash (the "Cash Consideration") and $30,000,000
aggregate principal amount (the "Debenture Consideration" and,
together with the Cash Consideration, the "Merger Consideration")
in five-year zero coupon debentures of Parent in substantially
the form attached as Exhibit 2.1 (the "Debentures"). On or
before the Effective Time, the Buyer and Companies shall allocate
the Merger Consideration between (i) the assets of Seller 1 (such
allocated amount, the "Seller 1 Consideration") and (ii) the
limited liability company interests (each such interest, an "LLC
Interest") in Seller 2 (such allocated amount, the "Seller 2
Consideration"). By virtue of the Merger and without any action
on the part of the holder thereof, at the Effective Time,
pursuant to this Agreement and in accordance with the Delaware
Act:
(a) All of the Members (as defined below) holding limited
liability company interests (each such interest, a "LLC
Interest") of Seller 1 immediately prior to the Effective Time
shall be entitled to receive from Parent and Buyer an amount of
the Seller 1 Consideration proportionate to such Member_s LLC
Interest in Seller 1 immediately prior to the Effective Time (as
a distribution in respect of the sales of the assets of Seller
1), and all such Members' LLC Interests in Seller 1 shall be
canceled and extinguished;
(b) Except for Seller 1, all of the Members holding LLC
Interests of Seller 2 immediately prior to the Effective Time
shall be entitled to receive from Parent and Buyer an amount of
the Seller 2 Consideration proportionate to such Member's LLC
Interest in Seller 2 immediately prior to the Effective Time (in
respect of the sale of the Member's LLC Interest in Seller 2),
and all such Members' LLC Interests in Seller 2 shall be canceled
and extinguished;
(c) The LLC Interests of Seller 2 held by Seller 1
immediately prior to the Effective Time shall be canceled and
extinguished; and
(d) Each LLC Interest of Buyer Sub which shall be outstanding
immediately prior to the Effective Time shall be converted into
and become an LLC Interest of Seller 2, as the Surviving Company.
Holders of LLC Interests in Seller 1 and/or Seller 2 are
referred to herein as the "Members".
2.2 Delivery of Merger Consideration. Immediately after the
Effective Time, Buyer shall deliver to each Member: (a) a check,
or at such Member's request, a wire transfer in immediately
available funds to the account at a bank designated by such
Member, in an amount equal to the aggregate amount of the Cash
Consideration to which such Member is entitled pursuant to
Section 2.1 hereof, and (b) a Debenture having a principal amount
equal to the aggregate amount of the Debenture Consideration to
which such Member is entitled pursuant to Section 2.1 hereof.
2.3 Allocation of Purchase Price. Prior to the Closing Date,
Buyer and the Companies shall mutually allocate the Merger
Consideration among each of the Companies and the assets of each
of the Companies in accordance with applicable income tax
regulations of the United States Treasury, after taking into
account the fair market value of the assets of each of the
Companies and the results of any appraisals Buyer may obtain.
Each party shall prepare for filing all tax returns that may be
required with respect to the transaction provided for herein
pursuant to Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), any Treasury Regulations promulgated
thereunder, any other similar provision of the Code and any other
similar, applicable foreign, state or local tax law or
regulation, and shall file such tax returns and all other returns
and tax information on a basis that is consistent with such
allocations. At Buyer's request, the Companies shall make a
timely election under Section 754 of the Code. Parent, Buyer and
the Companies agree, for all federal, state and local income tax
purposes, to treat the Merger as the purchase by Buyer of (i) the
assets of Seller 1 and (ii) the LLC Interests of the Members in
Seller 2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
The Companies represent and warrant to Parent and Buyer that,
except as (i) set forth in the Disclosure Schedule delivered by
the Companies to Parent and Buyer prior to the execution of this
Agreement, which identifies exceptions by specific section
references (the "Disclosure Schedule") or (ii) would not
constitute a Material Adverse Effect (as hereinafter defined)
with respect to the Companies. "Material Adverse Effect" means,
with respect to the Companies (and their respective subsidiaries,
taken as a whole), or to Parent and Buyer (and their respective
subsidiaries, taken as a whole), any effect that is material and
adverse on the assets, business, operations, financial condition,
results of operations or Members' or stockholders' equity, as the
case may be; provided, however, that "Material Adverse Effect"
shall not be deemed to include any effects of (i) changes in
laws, regulations or interpretations thereof by Governmental
Authorities (as defined in Section 3.5(b)), (ii) changes in
generally accepted accounting principles, (iii) events or
conditions generally affecting the securities industry or arising
from changes in general business or economic conditions,
including general changes in market prices or interest rates and
(iv) actions or omissions to act required by this Agreement or
having the prior written consent of the other party.
3.1 Organization and Qualification. Each of the Companies is
a duly organized and validly existing limited liability company
in good standing under the laws of the state in which it is
organized and, except as specifically disclosed on Schedule 3.1
of the Disclosure Schedule, is duly qualified to do business as a
foreign limited liability company 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 makes
such qualification necessary except where the failure to be so
qualified or registered would not have a Material Adverse Effect
with respect to the Companies. The copies of the Companies_
Certificates of Formation and Limited Liability Company
Agreements, as amended to date (each an "LLC Agreement"),
previously furnished by the Company to Buyer are complete and
correct and such instruments, as so amended, are in full force
and effect as of the date hereof.
3.2 Subsidiaries. The Companies have fully and accurately
disclosed in Schedule 3.2 of the Disclosure Schedule any
corporation, partnership or other legal entity of which any of
the Companies, directly or indirectly, owns an amount of the
outstanding voting securities or other ownership interests
entitling such Company, directly or indirectly, to elect a
majority of the board of directors (or other governing body) of
such entity (the "Subsidiaries"). No equity securities of such
Subsidiaries are or may become required to be issued by reason of
any warrants, rights, options, calls, commitments or other
agreements. The copies of the organizational documents, as
amended to date, of all Subsidiaries previously furnished to
Buyer are complete and correct and such instruments, as so
amended, are in full force and effect as of the date hereof. Each
of the Subsidiaries has been duly organized and is validly
existing in good standing under the laws of the state in which it
is organized.
3.3 Authority. Each of the Companies and its Subsidiaries
has all requisite power and authority to own, lease and operate
its properties and conduct its business as presently conducted.
3.4 Authority; Vote Required.
(a) The Members of each Company have by requisite vote under
the Delaware Act and the LLC Agreements approved this Agreement
and no other approval of the Members of any Company is required
in connection with the Merger and the other transactions
contemplated by this Agreement. Each of the Companies has the
requisite power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated on
its part hereby. The execution, delivery and performance of this
Agreement by the Companies and the consummation of the
transactions contemplated on their part hereby have been duly and
validly authorized by all necessary action under such Company's
LLC Agreement and the LLC Act, and no other proceedings on the
part of any Company or its Members are necessary to authorize the
execution, delivery and performance of this Agreement or the
consummation by each Company of the transactions contemplated on
its part hereby. This Agreement has been duly and validly
executed and delivered by each Company and constitutes a valid
and binding obligation of such Company, enforceable in accordance
with its terms.
(b) The execution and delivery of this Agreement by each
Company does not, and the performance of this Agreement by each
Company will not conflict with or violate the Certificate of
Formation or LLC Agreement or equivalent organizational documents
of the Companies or any of their Subsidiaries.
3.5 Regulatory Filings and Consents.
(a) No consents or approvals of, notifications to, or
filings or registrations with, any court, administrative agency
or commission or any other federal, state or local authority or
instrumentality, domestic or foreign (collectively "Governmental
Authority") or the National Association of Securities Dealers
("NASD"), New York Stock Exchange ("NYSE"), the American Stock
Exchange ("AMEX"), Chicago Board of Trade ("CBOT"), the
Securities Investor Protection Corporation ("SIPC"), or other
commission, board, bureau, agency, or body that is not a
Governmental Authority but is charged with supervision or
regulation of brokers, dealers, securities underwriting or
trading, stock exchanges, commodities exchanges, insurance
companies or agents, investment companies or investment advisers,
or to the jurisdiction of which any of the Companies or the
Subsidiaries is otherwise subject (collectively "Self Regulatory
Organization") are required to be made or obtained or obtained by
the Companies or the Subsidiaries in connection with the
execution, delivery or performance by the Companies of this
Agreement or to consummate the Merger except for (i)the filing
with the Securities and Exchange Commission ("the SEC") of an
amendment of Forms BD and ADV of the applicable Companies and
similar filings with, or consents of, various state and foreign
Governmental Authorities; (ii)approvals and consents of the NYSE
and NASD prior to the consummation of the Merger; (iii)approval
of NYSE and other exchanges to the transfer of ownership of seats
or memberships; (iv)any filings required by the Hart-Scott-Rodino
Antitrust Improvements Act, as amended (the "HSR Act"); and (v)-
the expiration of the applicable waiting periods; and (iv)
filings of applications, notice and obtaining consents and
approvals as disclosed in Schedule 3.5 of the Disclosure
Schedule.
(b) Subject to the making of the filings, the receipt of the
regulatory approvals and the expiration of the waiting periods
referred to in Section 3.5(a), the delivery and performance of
this Agreement and the consummation of the Merger do not and will
not constitute a material breach of or a material default under,
or give rise to rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the material properties or assets of any of
the Companies or any of their Subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other material instrument or
obligation to which the any of the Companies or any of their
Subsidiaries is a party or by which any of the Companies or any
of their Subsidiaries or any of their respective properties is
bound or affected.
3.6 Registrations.
(a) Each of the Companies and their Subsidiaries required to
be registered as a broker dealer, investment adviser or insurance
agency, with the SEC, the 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) All of the Companies' and their Subsidiaries' respective
officers and employees who are required to be licensed or
registered to conduct the business of such Company or such
Subsidiary as presently conducted are duly licensed or registered
in each state in which such licensing or regulation is so
required (collectively, the "Registered Representatives"). To
the knowledge of the Companies, none of the Registered
Representatives is or has been subject to any disciplinary or
other regulatory compliance proceeding that would, or would be
reasonably likely to, prevent, restrict, unduly delay or
otherwise limit the transfer from the Companies to Buyer, or the
re-licensing or re-registration by Buyer, of the licenses or
registrations of such Registered Representatives in any state in
which such Registered Representatives are licensed or registered.
3.7 Capitalization. Schedule 3.7 of the Disclosure Schedule
sets forth, by Company, the name of each Member and the
percentage of LLC Interests held by such Member therein as of the
date hereof. All of the outstanding LLC Interests have been duly
and validly authorized and issued. As of the date hereof,
neither of the Companies has made any commitment or otherwise has
any obligation to issue, transfer or sell any LLC Interests.
3.8 Reports; Financial Statements.
(a) Since January 1, 1995: (i)each of the Companies has
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
(collectively, the "Company SEC Reports"), (ii) each of the
Companies and each of their Subsidiaries have 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, (iii)
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 3.8(a) being collectively referred
to as the "Company Reports"). The Company Reportsdid not at the
time they were filed (after giving effect to any amendments filed
before the date hereof) contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
or will be made, not misleading.
(b) Each of the Companies and its Subsidiaries has
delivered to Buyer (i) copies of the audited consolidated balance
sheets and the related consolidated statements of income,
consolidated statements of changes in Members' capital and
consolidated statements of cash flows (including the related
notes and schedules thereto and reports of independent auditors)
(the "Audited Reports") as of and for the fiscal years ended
December 31, 1996 and December 31, 1995 and (ii) to the extent
applicable, copies of the reports of any of the Companies 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
December 31, 1996 and December 31, 1995 and quarters ended March
31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997
(collectively and with all future Audited Reports and Company SEC
Reports, the "Company Financial Statements"). The Company
Financial Statements (as of the dates thereof and for the periods
covered thereby) are in accordance with the books and records of
such 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 it relates as of the date and for the periods presented, in
each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, as
to the Audited 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.
(c) As of the Closing Date, the Companies' minimum aggregate
Members' equity shall be $26,500,000.
3.9 Undisclosed Liabilities. Each of the Companies and its
Subsidiaries has not incurred or become subject to any
liabilities, obligations, 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) except: (a)as disclosed
in the Disclosure Schedule, (b)as disclosed on the Company
Financial Statements, (c)liabilities, obligations, claims and
expenses which have arisen after December 31, 1997, in the normal
and ordinary course of business consistent with past practices
(none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, or other claim or lawsuit);
or (d) liabilities, obligations, claims and expenses which would
result in a loss of less than $150,000.
3.10 No Material Adverse Effect. Except as disclosed in
Schedule 3.10 of the Disclosure Schedule, since December 31,
1997, no Material Adverse Effect has occurred with respect to the
Companies, whether or not arising from transactions in the
ordinary course of business; provided that, clause (ii) of the
first sentence of this Article III shall not apply to this
Section 3.10.
3.11 Securities. Each of the Companies and its Subsidiaries
to their knowledge 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 or encumbrance, 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 Companies or its Subsidiaries in
accordance with generally accepted accounting principles and
except where the failure to have such good and marketable title
would not result in a Material Adverse Effect with respect to the
Companies.
3.12 Litigation. No action, suit, proceeding, order,
investigation, claim or arbitration proceeding is pending or, to
the knowledge of any of the Companies, threatened against any
Company or any of its Subsidiaries, or their respective
properties or businesses, 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 a
Material Adverse Effect with respect to the Companies. None of
the Companies nor any of the Subsidiaries or properties is a
party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, any Self Regulatory
Organization or Governmental Authority except for those that
would not have a Material Adverse Effect on the Companies. None
of the Companies 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. Attached to Schedule 3.12 of the
Disclosure Schedule is a true and complete list, as of the date
hereof, of all Litigation pending or threatened arising out of
any state of facts relating to the sale of investment products or
services by the Companies, the 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, investment banking services, securities underwritings, or
investment advisory services in which any Company or its
Subsidiary participated in any manner except for those that would
not have a Material Adverse Effect with respect to the Companies.
3.13 Tax Matters.
(a) Each of the Companies and any Subsidiary, any affiliated,
combined or unitary group of which the Company or any Subsidiary
is or was a member, and any "Employees Plans" (as defined in
Section 3.18 hereof), as the case may be (each, a "Tax Affiliate"
and, collectively, the "Tax Affiliates"), has: (i) timely filed
(or has had timely filed on its behalf) all returns,
declarations, reports, estimates, information returns, and
statements ("Returns") required to be filed or sent by it in
respect of any "Taxes" (as defined in subsection (j) below) or
required to be filed or sent by it by any taxing authority having
jurisdiction and such Returns are true, correct and complete;
(ii) timely and properly paid (or has had paid on its behalf) all
Taxes shown to be due and payable on such Returns; (iii) All
Taxes of the Companies 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, shall have been paid by or
on behalf of the Companies or shall be reflected on the
Companies' books as an accrued Tax liability, either current or
deferred; (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 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 or of any Tax Affiliate, except liens for Taxes not yet
due.
(c) No deficiency for any Taxes has been proposed, asserted
or assessed against any of the Companies or the Tax Affiliates
that has not been resolved and paid in full. No waiver,
extension or comparable consent given by any Company or the Tax
Affiliates regarding the application of the statute of
limitations with respect to any Taxes or 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 Returns, nor is any such
Tax audit or other proceeding pending, nor has there been any
notice to any Company by any Taxing authority regarding any such
Tax, audit or other proceeding, or, to the knowledge of the
Companies, is any such Tax audit or other proceeding threatened
with regard to any Taxes or Returns. None of the Companies has
any knowledge of any unresolved questions, claims or disputes
concerning the liability for Taxes of such Company or the Tax
Affiliates which would exceed the estimated reserves established
on its books and records.
(d) None of the Companies nor any 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 Company or any Tax Affiliate that are not deductible (in
whole or in part) under Section 280G of the Code.
(e) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies, or other assessments,
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,
without limitation, all interest and penalties thereon, and
additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign, upon the Companies or any Tax
Affiliate.
3.14 Contracts and Commitments.
(a) Except as disclosed in Schedule 3.14 (or Schedule 3.18)
of the Disclosure Schedule, neither the Company nor any
Subsidiary is a party to any:
(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 relating to the voting of LLC
Interests of any Company or the election of managers of any
Company;
(iv) other than in the ordinary course of business and
consistent with past practice, 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 any
Company or any Subsidiary;
(v) other than in the ordinary course of business and
consistent with past practice, guarantee of any obligation,
except for guarantees of the obligations of wholly owned
Subsidiaries;
(vi) contract or agreement prohibiting it from freely
engaging or competing in any business anywhere in the world, or
other than in the ordinary course of business and consistent with
past practice, restricting the right of any Company or any
Subsidiary to use or disclose any information in its possession;
(vii) partnership, joint venture, or other similar
contract arrangement or agreement other than the LLC Agreements;
(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 cause of
business;
(ix) any contract relating to the acquisition or
disposition of any business (whether by merger, sale of stock,
sale of assets or otherwise);
(x) any other contract which creates future payment
obligations in excess of $2,000,000 in the aggregate and which by
its terms does not terminate or is not terminable without penalty
upon notice of 180 days or less; or
(xi) any other contract not entered into in the
ordinary course of business that is material to the Companies
taken as a whole.
(b) Except as disclosed on Schedule 3.14 of the Disclosure
Schedule:
(i) the Companies and each Subsidiary 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 agreement to
which either is a party or is bound thereby;
(ii) to the knowledge of the Companies and each
Subsidiary, 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 such agreement.
3.15 Title to Property.
(a) The Companies do not own any real property. The real
property demised by the leases described under the caption
"Leases" in such Schedule 3.15 together constitute all of the
real property owned, used or occupied by the Company
(collectively, the "Real Property").
(b) The Leases are in full force and effect, and the Lessee
therein has a valid and existing leasehold interest under each
such Lease for the term set forth therein. The Companies have
delivered to Buyer 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 Buyer. None of the Companies is in default
which would, and no circumstances exist which, if not remedied,
would either with or without notice of the passage of time or
both, result in a termination, under any of such Leases.
3.16 Intellectual Property Rights. Except as disclosed in
Schedule 3.16 of the Disclosure Schedule, there are no
trademarks, service marks, trade names, corporate names,
copyrights, trade secrets or other intellectual property rights
owned by the Companies or necessary to the conduct of the
Companies_ businesses as now conducted. The Companies own and
possess all right, title and interest, or a valid license, in and
to the intellectual property rights set forth in such Schedule
3.16.
3.17 Employees. The Companies and each Subsidiary are in
compliance in all material respects with all laws relating to the
employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, and is current in the
payment of employee-related obligations. There are no workers'
compensation claims pending against any Company or any
Subsidiary.
3.18 Employee Benefit Plans.
(a) Schedule 3.18 of the Disclosure Schedule discloses each
"employee benefit plan", as defined in Section 3(3) of the
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 any Company
or any ERISA Affiliate and covers any employee or former employee
of any Company or any ERISA Affiliate or under which any Company
or any ERISA Affiliate has any liability. Such plans are
hereinafter referred to collectively as the "Employee Plans."
For purposes of this Section 3.20, "ERISA Affiliate" means any
person which is treated as a single employer with any Company
under Section 414 of the Code. The only Employee Plans which
individually or collectively would constitute an "employee
pension benefit plan" as defined in Section 3(2) of ERISA (the
"Pension Plans") are identified as such in Schedule 3.18 of the
Disclosure Schedule.
(b) No Employee Plan constitutes a "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA (a "Multiemployer Plan"),
and no Employee Plan is maintained in connection with any trust
described in Section 501(c)(9) of the Code. No Employee Plan is
a defined benefit plan or a money purchase pension plan and no
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 Employee Plan has or would
reasonably subject any Company or Subsidiary, or any officer or
director of any Company or Subsidiary, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section
4972 or Sections 4974 through 4980B, inclusive, of the Code.
(c) Each 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 Companies have furnished to
Buyer copies of the most recent Internal Revenue Service
determination letters with respect to any such Plans. Except as
disclosed in Schedule 3.18 of the Disclosure Schedule, each
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) Schedule 3.18 of the 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 an Employee Plan, (ii) is entered into,
maintained or contributed to, as the case may be, by any Company
or any of its ERISA Affiliates and (iii) covers any employee or
former employee of any Company or any of its 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 Buyer, are hereinafter referred to
collectively as the "Benefit Arrangements." Each 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 Benefit Arrangement. Except as set forth in Schedule 3.18
of the Disclosure Schedule and except as provided by law, the
employment of all persons presently employed or retained by any
Company or any Subsidiary is terminable at will.
(e) The Companies and its ERISA Affiliates have no post-
retirement health and medical benefits for retired employees. No
condition exists that would prevent Buyer or any affiliate of
Buyer from amending or terminating any Employee Plan or Benefit
Arrangement, other than any limitations imposed under ERISA or
the Code.
3.19 Compliance with Laws. Except as set forth in Schedule
3.19 of the Disclosure Schedule, each of the Companies and its
Subsidiaries and their respective officers and employees:
(a) in the conduct of its business (including without
limitation, its municipal securities and NASDAQ market-making
activities), is in material 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;
(b) has all material permits, licenses, authorizations,
orders and approvals of, and have 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 such Company, taken as a
whole; 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 January 31, 1997, has received no notification or
communication from any Governmental Authorities and Self
Regulatory Organizations (i) asserting that any of them is not in
compliance with any of the statutes, rules, regulations or
ordinances which such Governmental Authorities or Self Regulatory
Organizations 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 Companies or their Subsidiary's 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 any 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
Authorities or Self Regulatory Organizations against any Company,
its Subsidiary or any officer, director or employee thereof;
(e) to the knowledge of the Companies, each of Monterey Bay
Partners fund and WAH Investments, L.L.C. has operated and is
currently operating (including, but not limited to, disclosure
documents and periodic reports to shareholders) in compliance in
all material respects with all laws, rules, regulations and
orders applicable to it or its business, including, but not
limited to, appropriate exemptions or exclusions within the
Securities Act, the Exchange Act, the Investment Company Act, and
applicable Self-Regulatory Organizations;
(f) neither the Company, nor, to the knowledge of the
Companies any "affiliated person" (as defined in the Investment
Company Act) thereof, is 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. Neither the Company, 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.
3.20 Environmental Matters. All of the Real Property used
by any of the Companies or any Subsidiary has been maintained in
material compliance with all federal, state and local
environmental protection, occupational, health and safety or
similar laws, ordinances, restrictions, licenses and regulations,
including but not limited to the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 et seq.), Resource Conservation &
Recovery Act (42 U.S.C. Section 6901 et seq.), Safe Drinking
Water Act (42 U.S.C. Section 3000(f) et seq.), Toxic Substances
Control Act (15 U.S.C. Section 261 et seq.), Clean Air Act (42
U.S.C. Section 6901 et seq.), Comprehensive Environmental
Response of Compensation and Liability Act (42 U.S.C. Section
6901 et seq.) ("CERCLA"), and similar laws, ordinances,
restrictions, licenses and regulations of the States of Minnesota
and California.
3.21 No Pending Transactions. Except for this Agreement,
none of the Companies 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.
3.22 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 any of the Companies' own accounts, of
for the account of one or more of the Companies' Subsidiaries or
their customers were entered into in the ordinary course of
business (a) in accordance with prudent business practices and
all applicable laws, rules, regulations and regulatory policies
and (b) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid
and legally binding obligation of one of the Companies or one of
their Subsidiaries, enforceable in accordance with its terms and
are in full force and effect. None of the Companies nor their
Subsidiaries, nor to the Companies' knowledge, any other party
thereto, is in breach of any of its obligations under any such
agreement or arrangement. The Companies 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, 1997 there has not been a
change in such value that, individually or in the aggregate,
resulted in a Material Adverse Effect on any Company.
3.23 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 any
of the Companies or any Subsidiary.
3.24 Accounting Controls. Each of the Companies and their
Subsidiaries has devised and maintained systems of internal
accounting controls sufficient to provide reasonable assurances,
in the judgment of the Operating Committees of the respective
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 Companies 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.
3.25 Contracts with Clients. Each of the Companies and
their Subsidiaries is in material compliance with the terms of
each contract with any customer to whom such Company or
Subsidiary provides services under any contract (a "Client"), and
each such contract is in full force and effect with respect to
the applicable Client. To the knowledge of the Companies, each
extension of credit by any of the Companies or their Subsidiaries
to any Client (a) is in full compliance with Regulation T of the
Federal Reserve Board or any similar regulation of any Self
Regulatory Organization, (b) is secured by an equity amount no
less than the amounts permitted pursuant to the rules and
regulations of any Self Regulatory Organization.
3.26 Special Members. Other than William Henderson and
Kenneth J. Wessels, no Special Members (as such term is defined
in the LLC Agreement of each of the Companies) and no former
Members of either of the Companies shall be entitled to any
distribution or any other payments of any kind as a result of the
consummation of the Merger pursuant to the terms of the LLC
Agreements of either Company, including without limitation
Section 8.06 or Article 11(c) of each LLC Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer represent and warrant to the Companies that,
except as would not constitute a Material Adverse Effect with
respect to Parent and Buyer:
4.1 Organization and Qualification. Each of Parent and
Buyer is a duly incorporated and validly existing corporation in
good standing under the laws of the state of Delaware and is duly
qualified to do business as a foreign corporation 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 makes such qualification necessary except where
the failure to be so qualified or registered would not have a
Material Adverse Effect. Each of Parent and Buyer has all
requisite corporate power and authority to own, lease and operate
its properties and conduct its business as presently conducted.
4.2 Authority. Each of Parent and Buyer has full corporate
power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated on its
part hereby. The execution, delivery and performance of this
Agreement by each of Parent and Buyer and the consummation of the
transactions contemplated on its part hereby have been duly and
validly authorized by its Board of Directors and no other
corporate proceedings on its part are necessary to authorize the
execution, delivery and performance of this Agreement or the
consummation by them of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered
by each of Parent and Buyer and constitutes a valid and binding
obligation of Parent and Buyer, enforceable in accordance with
its terms.
4.3 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
Parent or Buyer.
4.4 Consents. (a) Other than in connection with or in
compliance with the provisions of the Delaware Act, the HSR Act,
the NASD rules, the NYSE, and the state commissions regulating
the business of securities broker-dealers in the states in which
Parent or Buyer is licensed to do business, no authorization,
consent or approval of, or filing with, any public body, court or
authority is necessary on the part of Parent or Buyer for the
consummation by Parent and Buyer of the transactions contemplated
on its part by this Agreement.
(b) The delivery and performance of this Agreement and the
consummation of the Merger do not and will not constitute a
material breach of or a material default under, or give rise to
rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of
the material properties or assets of any of Parent or Buyer or
any of their Subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other material instrument or obligation to which any
of Parent or Buyer is a party or by which any of Parent or Buyer
or any of their respective properties is bound or affected.
4.5 SEC Reports. (a) Since January 1, 1995, Parent has
filed all forms, reports and documents with the SEC required to
be filed by it pursuant to the federal securities laws and the
SEC rules and regulations thereunder, 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").
None of such Parent SEC Reports, including, without limitation,
any exhibits, financial statements or schedules included therein,
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 any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein 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 the Parent SEC Reports complied 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,
were 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 such Company, 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.
4.6 No Material Adverse Effect. Except as disclosed in the
Parent SEC Reports as filed and amended before the date hereof,
since September 30, 1997, no Material Adverse Effect has occurred
with respect to Parent and Buyer, whether or not arising in the
ordinary course of business; provided that, clause(ii) of the
first sentence of this Article IV shall not apply to this Section
4.6
4.7 Debentures; Options. The issuance, execution and
delivery of the Debentures and the nonqualified stock options
referred to in Section 6.8 (collectively, the "Options") have
been duly and validly authorized by the Board of Directors of
Parent and no other corporate proceedings on its part are
necessary to authorize the issuance, execution and delivery of
the Debentures or the Options. When issued and delivered by
Parent in accordance with the terms of Article II or Section 6.8,
respectively, the Debentures and the Options will constitute
valid and binding obligations of Parent, enforceable in
accordance with their terms.
4.8 Subsidiaries. Each of Parent's Subsidiaries has been
duly organized and is validly existing in good standing under the
laws of the jurisdiction of its organization, and is duly
qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified.
4.9 Parent Stock.
(a) As of the date hereof, the authorized common stock of
Parent consists of 30,000,000 shares of common stock, par value
$.125 per share ("Parent Common Stock"), of which 12,364,472
shares were outstanding as of October 31, 1997.
(b) The shares of Parent Common Stock which will be issued
upon conversion of the Options, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable.
4.10 Buyer Sub. Buyer will organize Buyer Sub for the sole
purpose of consummating the Merger. When organized, Buyer Sub
will be a limited liability company, duly formed and validly
existing in good standing under the laws of the jurisdiction of
its organization. Buyer will cause Buyer Sub to execute a
supplement to this Agreement in the form attached as Exhibit 1.1
hereto, and, when so executed, this Agreement will be a valid and
legally binding agreement of Buyer Sub, enforceable in accordance
with its terms.
4.11 Litigation. No action suit, proceeding, order,
investigations, claim or arbitration proceeding is pending or, to
the knowledge of Parent or Buyer, threatened against either of
them or their respective properties or business, 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 a Material Adverse Effect on Parent and
Buyer. Neither Parent nor Buyer is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, any Self
Regulatory Organization or Governmental Authority except for
those that would not have a Material Adverse Effect on Parent and
Buyer. Neither Parent nor Buyer 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.
4.12 Compliance with Laws. Parent and Buyer, (i) in the
conduct of their respective businesses, is in material 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, (ii) has all material permits, licenses,
authorizations, orders and approvals of, and have 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
Parent and Buyer, taken as a whole; 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; and (iii)
since January 31, 1997, has receive no notification or
communication from any Governmental Authorities and Self
Regulatory Organizations asserting that either of them is not in
compliance with any of the statutes, rules, regulations or
ordinances which such Governmental Authorities or Self Regulatory
Organizations enforces, or has otherwise engaged in any unlawful
business practice.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of the Business. Except as set forth on Schedule
5.1, hereof, each of the Companies shall 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 Buyer
(which consent shall not be unreasonably withheld or delayed) in
writing:
(a) The businesses of the Companies shall be conducted only
in, and the Companies shall not take any action except in, the
ordinary course of the Companies' business and in accordance in
all material respects with all applicable laws, rules and
regulations and the Companies' past custom and practice;
(b) Each of the Companies shall not, directly or indirectly,
do or permit to occur any of the following: (i)issue or sell any
additional LLC Interests of, or any options, warrants, conversion
privileges or rights of any kind to acquire any of LLC Interests,
(ii)sell, pledge, dispose of or encumber any of its material
assets, except in the ordinary course of business; (iii)amend or
propose to amend its Certificate of Formation or LLC Agreement;
(iv)split, combine or reclassify any outstanding LLC Interests,
or declare, set aside or pay any dividend or other distribution
payable in cash, stock, property or otherwise with respect to LLC
Interests other than the regular year-end and quarterly
distributions to Members and the distribution contemplated by
Section 6.5 hereof; (v)redeem, purchase or acquire or offer to
acquire any LLC Interests; (vi)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; (vii)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; (viii)or enter into
or propose to enter into, or modify or propose to modify, any
agreement, arrangement or understanding with respect to any of
the matters set forth in this Section5.1(b);
(c) None of the Companies shall, directly or indirectly,enter
into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any employees of any of the
Companies or any Subsidiary other than with respect to employees
who earn less than $50,000 per year;
(d) Except as required by law, the Companies shall not adopt
or amend any bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or arrangement for
the benefit or welfare of any employee, officer or director of
any of the Companies or any Subsidiary;
(e) The Companies shall not 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 Companies shall (i)use their best efforts to preserve
intact the Companies' business organization and goodwill, keep
available the services of the Companies' officers and employees
as a group and maintain satisfactory relationships with
suppliers, distributors, customers and others having business
relationships with the Companies; (ii)confer on a regular and
frequent basis with representatives of Buyer 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 Buyer in finalizing and communicating to
the Companies' employees severance, retention and transition
arrangements ;
(g) None of the Companies shall (i)implement or adopt any
change in its accounting principles, practices or methods, other
than as may be required by generally accepted accounting
principles, (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 Companies
for the taxable years ending December31, 1996 and 1995, 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, none
of the Companies shall (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 INTENTIONALLY OMITTED
5.3 Regulatory Filings. The Companies 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 the Companies for the
consummation of the transactions contemplated on its part herein.
The Companies will coordinate and cooperate with Buyer in
exchanging such information, will not make any such filing
without providing to Buyer 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
Buyer may request in connection with all of the foregoing.
5.4 Conditions. The Companies shall take all commercially
reasonable actions necessary or desirable to cause the conditions
set forth in Article VII 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).
5.5 No Solicitation. Unless and until this Agreement shall
have been terminated pursuant to Section 10.1 hereof, the
Companies shall not, and shall cause each of its officers,
directors, agents or affiliates not to:
(a) directly or indirectly, solicit, initiate or encourage
submission of any proposal or offer from, or discussions or
negotiations with any corporation, partnership, person, group or
other entity (including any of its or their officers or
employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or
purchase of all or a material portion of the assets of, or any
equity interest in, any of the Companies or other similar
transaction or business combination involving any of the
Companies or any of their Subsidiaries or divisions (a "Takeover
Proposal"); or
(b) except as is reasonably determined by the Executive
Committee of Seller 1 after due consideration of the factual
basis and the advice of counsel experienced in such matters that
such action is required by law, participate in negotiations
regarding any Takeover Proposal, or disclose, directly or
indirectly, any information not customarily disclosed to any
person (other than Buyer and its representatives) concerning the
business and properties of any of the Companies, afford to any
other person access to the properties, books or records of the
Company or otherwise cooperate in any way with, assist,
facilitate or encourage any person (other than Buyer and its
representatives) in connection with a Takeover Proposal.
In the event any of the Companies shall receive any Takeover
Proposal, such Companies shall promptly inform Buyer of such
Takeover Proposal and shall promptly provide Buyer with such
information regarding such Takeover Proposal as Buyer may
request.
5.6 Notice of Certain Matters. The Companies shall promptly
notify Buyer of: (a)of any governmental, administrative or self-
regulatory organization complaints, investigations or hearings
(or communications indicating that the same may be contemplated);
(b)promptly notify Buyer in writing if any of the Companies 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)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 Companies or any of their Subsidiaries subsequent
to the date of this Agreement and prior to the Effective Time,
under any material agreement, indenture or instrument to which
any of the Companies or any of their Subsidiaries is a party or
is subject, (d)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)any Material Adverse Effect of the Companies
and their Subsidiaries as an entirety or the occurrence of an
event which, so far as reasonably can be foreseen at the time of
its occurrence, would result in any such Material Adverse Effect.
5.7 Buyer Consents. The Companies understand, agree and
acknowledge that all consents, recommendations and advice which
may be given by Buyer to the Companies regarding the conduct of
the Companies' business pending the Effective Time shall not
constitute an undertaking, commitment or representation by Buyer
nor give rise to any obligation or liability of Buyer with
respect thereto.
5.8 Transaction Expenses. Prior to making any distributions
to Members with respect to earnings for the quarter ended March
31, 1998, the Companies shall allocate among themselves and
either pay or accrue on their respective balance sheets each
Companies' portion of the Companies' and their Members' expenses
incurred in connection with the negotiation, execution and
delivery of this Agreement and all related documents and the
consummation of the transactions contemplated hereby.
5.9 Filing of Tax Returns. The Representative shall file (or
cause to be filed), on or prior to the due date thereof, all Tax
returns required to be filed for all Tax periods ending on or
before the Closing Date; provided, however, that the
Representative shall not file any such Tax returns without
providing Buyer with final copies of each such Tax returns, at
least ten days before filing such return or election and the
Representative shall reasonably cooperate with any request by
Buyer in connection therewith.
ARTICLE VI
COVENANTS OF BUYER
6.1 Regulatory Filings. Buyer 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 Buyer for the
consummation of the transactions contemplated on its part herein.
Buyer will coordinate and cooperate with the Companies in
exchanging such information, will not make any such filing
without providing to the Companies 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 Companies may request in connection with all of the
foregoing.
6.2 Equity Capital Markets Group. After the Effective Time,
and for the term of Kenneth J. Wessels's Employment Agreement
with Buyer, the equity capital markets business of Buyer and of
Seller 2 shall be combined and operated under the name, "Dain
Rauscher Wessels Equity Capital Markets Group, a division of Dain
Rauscher Incorporated." Pursuant to the terms of his Employment
Agreement, Kenneth J. Wessels shall be the senior officer
responsible for managing such division. Through December31,
1998, Buyer shall dedicate significant resources to inform
clients and the general public of the transition of the Companies
into Buyer.
6.3 Conditions. Buyer 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
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 Governance. After the Effective Time and subject to the
review of the Chief Executive Officer of Buyer, the senior
officer managing the Equity Capital Markets Group of Buyer shall
have the authority to allocate discretionary compensation to the
employees in the Equity Capital Markets Group in a manner
consistent with the ordinary practices of Seller 2.
6.5 Closing Distribution. Buyer acknowledges that, prior to
the Closing, and except as is otherwise set forth in Section 9.1
hereof, the Companies shall be entitled to make a closing
distribution to their Members of the net income earned by the
Companies during the period commencing on January 1, 1998 and
ending on the Effective Time (to the extent not previously
distributed in accordance with the terms of this Agreement).
6.6 Severance Pool. After the Effective Time, Buyer shall
establish a severance pool in an amount not to exceed $2,000,000,
which amount shall be available to pay severance costs with
respect to employees of the Companies as shall be mutually
administered by the Vice Chairman of Buyer and Kenneth J.
Wessels.
6.7 Retention Pool. After the Effective Time, Buyer shall
establish a retention pool in an amount not to exceed $6,000,000,
which amount shall be available to pay retention bonuses with
respect to employees of the Companies. The retention pool shall
be mutually administered by the Vice Chairman of Buyer and
Kenneth J. Wessels.
6.8 Stock Options. Effective immediately after the Closing,
Parent shall issue to the Members in the amounts set forth on
Schedule 6.8 hereto nonqualified stock options pursuant to
Parent's 1996 Stock Incentive Plan and a Non-Qualified Stock
Option Agreement substantially in the form of Exhibit 6.8 hereto.
The exercise price for each share of Parent Common Stock which
may be acquired thereunder shall be $58.875. The parties hereto
acknowledge that Schedule 6.8 may be amended after the date
hereof and prior to the Effective Time to reflect any change in
the identity of the Members or in their proportionate percentages
set forth therein, which changes will affect the allocation of
the stock options set forth therein (but not the total amount of
stock options shown therein).
6.9 Notice of Certain Matters. The Buyer shall promptly
notify the Companies: (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 Buyer 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 or Buyer subsequent to the date of this Agreement and
prior to the Effective Time, under any material agreement,
indenture or instrument to which Parent or Buyer 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 and Buyer as an entirety or the occurrence of an event
which, so far as reasonably can be foreseen at the time of its
occurrence, would result in any such Material Adverse Effect.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of
the following conditions, any of which may be waived, in whole or
in part, to the extent permitted by applicable law:
7.1 Representations and Warranties. The representations and
warranties made by the Companies in or pursuant to this Agreement
shall be true and correct in all material 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 Companies 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.
7.2 Covenants. The Companies 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.
7.3 Pre-Merger Notification. The Companies and Buyer shall
each have filed (or cause to be filed) all reports and satisfied
all requests for additional information pursuant to the HSR Act
and the rules promulgated thereunder, and the applicable waiting
periods shall have expired.
7.4 Required Consents and Regulatory Approvals. All consents
of Governmental Entities and Self-Regulatory Organizations, and
all filings with and notifications of Governmental Entities or
Self-Regulating Organizations which regulate the business of the
Companies, or in which any Company is a member, necessary on the
part of such Company, 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 businesses of the Companies and their
Subsidiaries without a Material Adverse Effect with respect to
the Companies shall have been obtained or effected.
7.5 Absence of Certain Litigation. At the Effective Time:
(a) 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 Buyer to dispose of or discontinue a
significant portion of the business conducted by Buyer and its
Subsidiaries or of the business conducted by the Companies and
their Subsidiaries as a result of the Merger or consummation of
the transactions contemplated hereby; and
(b) 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.
7.6 Member's Agreements. At least 85% of the Members shall
have entered into a Member's Agreement with Buyer in
substantially the form of Exhibit 7.6 hereto (collectively, the
"Members' Agreements").
7.7 Employment Agreement. Kenneth J. Wessels shall have
entered into an employment agreement with Buyer substantially in
the form of Exhibit 7.7 hereto with any changes thereto agreed by
Messrs. Wessel and Weiser (the "Employment Agreement"), which
agreement shall not have terminated.
7.8 Capital Contribution. Each Member in each Company shall
have made its customary capital contribution to such Company for
the year-ended December 31, 1997.
7.9 Delivery of Closing Documents. At or prior to the
Effective Time, the Companies shall have delivered to Buyer all
of the following:
(a) a certificate of the President and the Chief Financial
Officer of each Company, dated as of the Closing Date, stating
that the conditions precedent set forth in Sections 7.1 and 7.2
hereof have been satisfied;
(b) copies of the Governmental Entity and Self-Regulatory
Organization consents and approvals and of the authorizations
referred to in Sections 7.3 and 7.4 hereof; and
(c) a copy, dated as of a date not more than five business
days in advance of the Closing Date, of (i) the Certificate of
Formation of each Company, certified by the Secretary of State of
the State of Delaware and, (ii) a Certificate of Good Standing
from the Secretaries of State of the States of Delaware,
Minnesota and California evidencing the good standing of each
Company in each such jurisdiction.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANIES' OBLIGATIONS
The obligation of the Companies to consummate the
transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions, any of which may be
waived, in whole or in part, to the extent permitted by
applicable law:
8.1 Representations and Warranties True at Effective Time.
The representations and warranties made by Parent and Buyer in or
pursuant to this Agreement shall be true and correct in all
material 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 or Buyer 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.
8.2 Covenants. Parent and Buyer shall have performed and
complied in all material respects with all of their obligations
under this Agreement which are to be performed or complied with
by them prior to or at the Effective Time.
8.3 Pre-Merger Notification. Parent and the Companies shall
each have filed (or cause to be filed) all reports and satisfied
all requests for additional information pursuant to the HSR Act
and the rules promulgated thereunder, and the applicable waiting
periods shall have expired.
8.4 Required Consents and Regulatory Approvals. All consents
of third parties, including, without limitation, Governmental
Entities and Self-Regulatory Organizations, and all filings with
and notifications of Governmental Entities or Self-Regulating
Organizations which regulate the business of Parent or Buyer, or
in which any Parent or Buyer is a member, necessary on the part
of Parent or Buyer, or their respective 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 businesses of Parent and
Buyer without a Material Adverse Effect with respect to the
Companies shall have been obtained or effected.
8.5 Absence of Certain Litigation. At the Effective Time:
(a) 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
(b) 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.
8.6 Employment Agreement. Buyer shall have entered into the
Employment Agreement with Kenneth J. Wessels, which Agreement
shall not have terminated.
8.7 Delivery of Closing Documents. At or prior to the
Effective Time, Buyer shall have delivered to the Companies all
of the following:
(a) a certificate of the Chief Executive Officer or a Vice
Chairman and the Chief Financial Officer or Controller of each of
Parent and of Buyer, dated as of the date of the Effective Time,
stating that the conditions precedent set forth in Sections 8.1
and 8.2 hereof have been satisfied; and
(b) copies of the Governmental Entity and Self-Regulatory
Organization consents and approvals and of the authorizations
referred to in Sections 8.3 and 8.4 hereof; and
(c) a copy, dated as of a date not more than five business
days in advance of the Closing Date, of the Certificates of Good
Standing of each of Parent and Buyer certified by the Secretaries
of States of the States of Delaware and Minnesota.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 Pre-Closing Business. If the Companies generate any fee
which is attributable for services rendered or work substantially
completed by the Companies prior to the Closing Date and such fee
is not paid until after the Closing, the Members, as determined
by Kenneth J. Wessels, shall be entitled to the amount of such
fee; provided, however, that such fee shall not be payable to the
Members until it has been received by the Surviving Company.
Any amounts paid to the Members pursuant to the preceding
sentence shall not be considered to be compensation paid to the
Members by Buyer or any affiliate of Buyer for purposes of
determining any benefit or bonus payable under any Buyer or
affiliate of Buyer benefit, retirement or compensation plan.
9.2 Benefit Plans. As of the Effective Time, Buyer will
cause the Surviving Company and its subsidiaries to maintain for
employees of the Companies and their Subsidiaries who as of the
Effective Time become employed by the Surviving Company, Parent
or any of their 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 enjoyed by
similarly situated employees of Parent and its subsidiaries. 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 Companies and their 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. Following the Effective Time, Parent shall, or shall
cause the Surviving Company 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 Companies
and their subsidiaries) and eligibility waiting periods under any
health plans to be waived with respect to Covered Employees, to
the extent permitted by the applicable plans of the Parent or its
subsidiaries, who, immediately prior to the Effective Time,
participated in a health plan maintained by the Companies and its
subsidiaries, and their eligible dependents and to recognize and
credit any amounts incurred towards any deductible or co-payments
under such health plans. Without in any way affecting Parent's
or Buyer's right to be indemnified for a Loss (as defined in
Section 11.02 hereof) with respect to a misrepresentation or
breach of any representation or warranty in Article III hereof,
Buyer 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 Companies and its
subsidiaries under such plans and arrangements.
9.3 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. It is understood and agreed that the
Companies shall (as and to the extent permitted by applicable law
and their respective Certificate of Formation and Bylaws, as in
effect on the date hereof) indemnify and hold harmless and, after
the Effective Time, the Surviving Company shall (to the same
extent) indemnify and hold harmless, each current officer and
employee of each of the Companies (the "Indemnified Parties")
against any losses, claims, damages, liabilities, costs,
expenses, judgments and amounts paid in settlement in connection
with any such claim, action, suit or proceeding, and in the event
of any such claim, action, suit or proceeding (whether arising
before or after the Effective Time), the Indemnified Parties may
retain counsel satisfactory to them and to Buyer, and the
Companies or the Surviving Company shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties promptly
as accurate and complete statements therefor are received;
provided, that none of the Companies nor the Surviving Company
shall be liable for any settlement effected without its prior
written consent; provided further, that none of the Companies nor
the Surviving Company shall have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited
by applicable law or by the Certificate of Formation or Limited
Liability Company Agreement or the Certificate of Incorporation
or Bylaws of any of the Companies or the Surviving Company, as
applicable; and provided further, that, prior to receiving
(either directly or indirectly) any advancement of its counsel's
fees and expenses hereunder, each Indemnified Party shall execute
and deliver to Buyer (on behalf of itself, the Companies and the
Surviving Company) a written undertaking, in form and substance
satisfactory to Buyer, promptly to repay all such amounts if the
ultimate determination described in the preceding proviso shall
have been made with respect to such Indemnified Party. Any
Indemnified Party wishing to claim indemnification under this
Section 9.3 shall, upon learning of any such claim, action, suit
or proceeding, promptly notify the Company and the Surviving
Company thereof hereunder; provided, that failure to so notify
the Companies or the Surviving Company shall not cause loss of
the Indemnified Party's rights hereunder except to the extent
that the Companies or the Surviving Company shall have been
materially prejudiced thereby. Any obligations of the Companies
or the Surviving Company to advance litigation expenses shall
extend only to the reasonable fees and expenses of one law firm
retained to represent the Indemnified Parties as a group with
respect to any such matters unless there is, under applicable
standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified
Parties or counsel retained by the Indemnified Parties advises
that the retention of separate counsel by one or more of the
Indemnified Parties is advisable and counsel for the Companies
and the Surviving Company concurs in such advice. The provisions
of this Section 9.3 shall survive the Effective Time for a period
of five years thereafter and are intended to benefit the
Companies and each of the Indemnified Parties and to be binding
upon Buyer and its successors and assigns.
The provisions of this Section 9.3 are not intended to limit
or diminish in any way the rights and benefits of any persons,
including the Indemnified Parties, which are contained in any of
the Companies' Certificates of Formation or LLC Agreements or
which are provided to such persons pursuant to the Delaware Act.
9.4 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 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 February 6, 1998 between Buyer and Seller 2, with respect
to the "Evaluation Material" (as defined therein) of either party
obtained by the other party thereunder.
9.5 Satisfaction of Conditions. Each of the parties hereto
will use its best efforts to satisfy those conditions set forth
in Articles VII and VIII hereof which are to be satisfied by it.
ARTICLE X
TERMINATION
10.1 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 the Companies and the stockholder of Buyer Sub, with
the effects set forth in Section 10.2 hereof:
(a) By the mutual consent of the Boards of Directors of
Parent and Buyer and the Operating Committees of the Companies;
or
(b) By Parent or Buyer at any time after June 30, 1998 (or
such later date as shall have been agreed to in writing by the
parties) if any of the conditions provided for in Article VII of
this Agreement have not been met and have not been waived in
writing by Buyer; or
(c) By Parent or Buyer, on the one hand, or the Companies, on
the other hand, at any time after discovery of (i) a Material
Adverse Effect with respect to the Companies, or Parent and
Buyer, respectively, 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 Companies at any time after June 30, 1998 (or such
later date as shall have been agreed to in writing by the
parties) if any of the conditions provided for in Article VIII of
this Agreement have not been met and have not been waived in
writing by the Company; or
(e) At any time prior to the Effective Date, by Parent or
Buyer, on the one hand, or the Companies, on the other hand, in
the event of a 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.
(f) Either Parent or Buyer, on the one hand, or by the
Companies, 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.
10.2 Effects of Termination. In the event that this
Agreement is terminated prior to the Effective Time pursuant to
Section 10.1 hereof, this Agreement shall become void and there
shall be no liability or further obligation hereunder on the part
of Parent, Buyer or the Companies, except as set forth in Section
5.2(b), Section 9.4(b) or Section 10.3 hereof, and except for
liability arising from a willful breach of this Agreement that is
intended to cause the transactions contemplated hereby not to
occur.
10.3 Fees and Expenses. Except as otherwise set forth in
Section 5.8 hereof, all fees and expenses, including the fees and
expenses of accountants, attorneys and other advisers, incurred
by a party hereto in connection with or related to the
authorization, preparation, negotiation, execution and
performance of this Agreement and all matters contemplated hereby
shall be borne by the party incurring such expense.
10.4 Prompt Notice. In the event of termination of this
Agreement by any party as above provided in Paragraph 10.1,
prompt written notice shall be given to the other parties hereto.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival of Representations and Warranties.
Notwithstanding any investigation made by or on behalf of any of
the parties hereto or the results of any such investigation and
notwithstanding the participation of such party in the Closing,
the representations and warranties contained in ArticleIII hereof
shall survive the Closing for the greater of the following
periods: (i) 18 months from the Closing Date, or (ii) with
respect to any specific representation or warranty under which
Buyer shall have made a claim for indemnification hereunder
within 18 months after the Closing Date and as to which such
claim has not been completely and finally resolved within 18
months after the Closing Date, such representation or warranty
shall survive for the period of time beyond 18 months after the
Closing Date sufficient to resolve, completely and finally, the
claim relating to such representation or warranty.
11.2 Indemnification.
(a) Subject to the limitations of Section 11.2(b), each
holder of a Debenture ("Holders") shall, pursuant to the terms of
such Holder's Debenture and Member's Agreement, severally (based
on such Holder's proportionate entitlement to the original
aggregate principal amount of the Debentures as of the Effective
Time) and not jointly, agree to indemnify Buyer, Buyer Sub and
their respective directors, officers, employees, agents and
controlling persons, and each of the heirs, executors, successors
and assigns of any of the foregoing (each an "Indemnified Party")
and hold them harmless against any loss, liability, deficiency,
damage, expense or cost (including reasonable legal expenses),
whether or not actually realized on or paid prior to the 18-month
anniversary of the Closing Date, which Indemnified Parties may
suffer, sustain or become subject to, prior to the 18-month
anniversary of the Closing Date, as a result of (i)any
misrepresentation in any of the representations and warranties of
the Companies contained in this Agreement or in any exhibits,
schedules, certificates or other documents delivered or to be
delivered by or on behalf of the Companies pursuant to the terms
of this Agreement (collectively, the "Related Documents");
provided that, for purposes of determining whether a Loss has
occurred, the parties agree that no effect shall be given to
clause (ii) of the first sentence of Article III hereof; (ii) any
breach of, or failure to perform, any agreement of the Companies
contained in this Agreement or any of the Related Documents,
(iii) any amounts payable to William Henderson as a result of the
consummation of the Merger to the extent such amounts are not
otherwise satisfied by the Members or (iv) any _Claims" (as
defined in Section 11.3(a) hereof) or threatened Claims against
Buyer or the Surviving Company arising out of the actions or
inactions of any of the Companies with respect to the Companies'
businesses prior to the Closing Date (except for items disclosed
to Buyer pursuant to the Disclosure Schedule) (collectively,
"Losses"). The indemnification provided by this Article shall be
satisfied solely from, and in accordance with the terms of
Section 11 of the Debentures and is consented to in Section 3 of
the Member's Agreement.
(b) The Holders will be liable to the Indemnified Parties for
any Loss (i) only if Buyer delivers to Kenneth J. Wessels, as the
representative of the Holders (including any successor to Kenneth
J. Wessels, as previously identified by notice to Buyer, the
"Representative") a written notice on or before the 18 month
anniversary of the Closing Date, setting forth in reasonable
detail the identity, nature and amount of Losses related to such
claim or claims and (ii) only if the aggregate amount of all
Losses exceeds $1,500,000 (the "Basket Amount") and no payment
shall be required to be paid for the first $1,500,000 of Losses,
except for any Losses arising under Section 11.2(a)(iii) hereof
or a breach of the representations in Sections 3.8(c) and 3.26
hereof, none of which shall be subject to any Basket Amount. In
addition, the Holders shall not be liable for an aggregate amount
of Losses in excess of $10,000,000 except for any Losses arising
under either Section 3.26 or Section 11.2(a)(iii) hereof.
Buyer's failure to provide the detail required by clause (i) in
the preceding sentence shall not constitute either a breach of
this Agreement by Buyer or any basis for the Holders to assert
that Buyer did not comply with the terms of this Section 11.2
sufficient to cause Buyer to have waived its rights under this
Section 11.2 unless the Holders' rights have been materially
prejudiced thereby.
11.3 Method of Asserting Claims.
(a) In the event that any of the Indemnified Parties is made
a defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability
or the costs or expenses of which are Losses (any such third
party action or proceeding being referred to as a "Claim"), Buyer
shall give the Representative prompt notice thereof. The
failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has
materially and adversely affected the Holders' ability to defend
successfully a Claim. The Holders shall be entitled to contest
and defend such Claim; provided, that the Holders (i) have a
reasonable basis for concluding that such defense may be
successful and (ii) diligently contest and defend such Claim.
Notice of the intention so to contest and defend shall be given
by the Holders to Buyer within 20 business days after Buyer's
notice of such Claim (but, in all events, at least five business
days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable
attorneys retained by the Holders. Buyer shall be entitled at
any time, at its own cost and expense (which expense shall not
constitute a Loss unless Buyer reasonably determines that the
Holders are not adequately representing or, because of a conflict
of interest, may not adequately represent, any interests of the
Indemnified Parties, and only to the extent that such expenses
are reasonable), to participate in such contest and defense and
to be represented by attorneys of its or their own choosing. If
Buyer elects to participate in such defense, Buyer will cooperate
with the Holders in the conduct of such defense. Neither Buyer
nor the Holders may concede, settle or compromise any Claim
without the consent of the other party, which consents will not
be unreasonably withheld. Notwithstanding the foregoing, (i) if
a Claim seeks equitable relief or (ii) if the subject matter of a
Claim relates to the ongoing business of any of the Indemnified
Parties, which Claim, if decided against any of the Indemnified
Parties, would materially adversely affect the ongoing business
or reputation of any of the Indemnified Parties, then, in each
such case, the Indemnified Parties alone shall be entitled to
contest, defend and settle such Claim in the first instance and,
if the Indemnified Parties do not contest, defend or settle such
Claim, the Holders shall then have the right to contest and
defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim
against the Holders that does not involve a Claim, Buyer shall
deliver a notice of such claim with reasonable promptness to the
Representative. If the Holders notify Buyer that they do not
dispute the claim described in such notice or fail to notify
Buyer within 20 days after delivery of such notice by Buyer
whether the Holders dispute the claim described in such notice,
the Loss in the amount specified in Buyer's notice will be
conclusively deemed a liability of the Holders and Buyer shall be
able to withhold such amount from the Convertible Debentures. If
the Holders have timely disputed their liability with respect to
such claim, the Representative and the Chief Financial Officer,
or his duly authorized designee, of Buyer will proceed in good
faith to negotiate a resolution of such dispute, and if not
resolved through the negotiations of such individuals within 20
days after the delivery of Buyer's notice of such claim, such
dispute shall be resolved, fully and finally, in Minnesota by an
arbitrator selected pursuant to, and an arbitration governed by,
the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall resolve the dispute within 30
days after selection and judgment upon the award rendered by such
arbitrator may be entered in any court of competent jurisdiction.
The party whose determination of the payment amount in dispute is
furthest from the amount determined by the arbitrator shall bear
its own costs and expenses of such arbitration, the fees and
expenses of the arbitrator and the out-of-pocket costs and
expenses (including legal fees) of the other party thereto.
(c) After the Closing, the rights set forth in this Article
XI shall be the sole and exclusive remedies for
misrepresentations or breaches of covenants or conditions
contained in this Agreement and the Related Documents.
11.4 Certain Tax Matters. Any Loss payable to an
Indemnified Party shall be adjusted by the Tax benefit or Tax
detriment, if any, received or incurred by such Indemnified Party
in connection with the recognition of such Loss. Any payments
made pursuant to this Article XI shall be treated as an
adjustment to purchase price.
ARTICLE XII
OTHER PROVISIONS
12.1 Law Governing. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware
applicable to contracts made and to be performed entirely within
such state.
12.2 Assignment. Neither this Agreement nor any right
hereunder may be assigned by any party hereto.
12.3 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, (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 the
Members, no amendment may be made which reduces the Merger
Consideration or effects any change which would materially
adversely affect the Members, without the further approval of the
Members.
12.4 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 or to Buyer:
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402-4422
Attention: Chief Financial Officer
and
Attention: General Counsel
Facsimile: (612) 371-7755
with a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Robert A. Rosenbaum, Esq.
Facsimile: (612) 340-8738
(b) If to the Companies:
601 Second Avenue South, Suite 3100
Minneapolis, Minnesota 55402-4314
Attention: Chief Executive Officer
and
Attention: Chief Financial Officer
Facsimile: (612) 373-6159
with copies to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Mitchell S. Eitel, Esq.
Facsimile: (212) 558-3588
12.5 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.
12.6 Headings. The headings in the Articles and Sections of
this Agreement are inserted for convenience only and shall not
constitute a part hereof.
12.7 Entire Agreement. This Agreement, including the
Disclosure Schedule and Exhibits referred to herein and any
documents executed by the parties simultaneously herewith,
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.
12.8 Public Announcements. The Companies shall not make any
public announcement or statement with respect to the Merger, this
Agreement or any related transaction without the approval of
Buyer, which approval will not be unreasonably withheld. In the
event Buyer determines to make any public announcements
concerning the proposed Merger, Buyer agrees to notify the
Companies of Buyer_s intention to make such announcement and
provide the Companies with the text of the announcement in
advance of its release to the public.
12.9 No Third Party Beneficiary. This Agreement is made and
entered into solely for the benefit of the parties hereto and,
except for the Members with respect to the payment of the Merger
Consideration pursuant to Article II hereto and except for the
persons described in each of Sections 6.8, 9.2 and 9.3 hereof who
are not parties to this Agreement with respect to the terms of
each of those Sections, 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 Company. Nothing contained in this Agreement shall
create or continue any right of employment of any employee of
Buyer or the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
DAIN RAUSCHER CORPORATION
By Irving Weiser
----------------------
Irving Weiser
Chairman and Chief Executive Officer
DAIN RAUSCHER INCORPORATED
By Irving Weiser
---------------------
Irving Weiser
Chairman and Chief Executive Officer
WESSELS, ARNOLD & HENDERSON GROUP, L.L.C.
By Kenneth J. Wessels
----------------------
Kenneth J. Wessels
Chief Executive Officer
WESSELS, ARNOLD & HENDERSON, L.L.C.
By Kenneth J. Wessels
----------------------
Kenneth J. Wessels
Chief Executive Officer
EXHIBIT 4.1
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING
LAWS. ACCORDINGLY, THIS DEBENTURE MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF WITHOUT (A) AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER HEREOF THAT SUCH SALE, TRANSFER OR
OTHER DISPOSITION MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS (B)
AVAILABILITY OF AN EXEMPTION UNDER RULE 144A UNDER THE SECURITIES
ACT, OR (C)SUCH REGISTRATION.
THIS DEBENTURE SHALL NOT BE TRANSFERABLE DURING THE LIFE OF THE
ORIGINAL HOLDER HEREOF AND ANY ATTEMPTED TRANSFER OF THIS
DEBENTURE DURING SUCH HOLDER'S LIFE SHALL BE INEFFECTIVE TO VEST
IN ANY PURPORTED TRANSFEREE ANY INTEREST IN THIS DEBENTURE.
DAIN RAUSCHER CORPORATION
SUBORDINATED DEBENTURE
No. __ $_________
Dain Rauscher Corporation, a Delaware corporation
(hereinafter referred to as the "Company"), for value received,
hereby promises to pay to ______________________________ at the
address designated below, or registered assigns (hereinafter
referred to as "Holder"), the principal sum of _________Dollars
($________) in lawful money of the United States of America,
subject to adjustment pursuant to Section 11 hereof. The
principal amount of this debenture shall be payable in full on
March 31, 2003.
Other than as contemplated by Section 4(c) or Section 10(a),
this debenture shall not bear interest. In the event that this
debenture shall bear interest in accordance with either such
Section, all accrued interest on the principal amount of this
debenture shall be payable in full on March 31, 2003.
This debenture is one of a series of debentures having an
aggregate principal amount of Thirty Million Dollars
($30,000,000) that have been concurrently executed and delivered
by the Company pursuant to and in accordance with the terms and
conditions of that Agreement and Plan of Merger dated February 8,
1998 by and among the Company, Dain Rauscher Incorporated,
Wessels, Arnold & Henderson Group, L.L.C. and Wessels, Arnold &
Henderson, L.L.C. (the "Merger Agreement"), and is subject to the
terms and conditions of the Agreement, which are incorporated
herein and made a part hereof by reference. Capitalized terms
used in this debenture and not otherwise defined herein shall
have the respective meanings set forth in the Merger Agreement.
This debenture is subject to the following terms and
conditions:
1. Payment. All payments of principal and interest, if
any, on this debenture shall be made by check at
_______________________, ___________________, __________________
or at such other place in the United States of America as Holder
shall designate to the Company in writing. If any payment of
principal or interest, if any, on this debenture is due on a day
which is not a Business Day, such payment shall be due on the
next succeeding Business Day, and such extension of time shall be
taken into account in calculating the amount of interest, if any,
payable under this debenture. "Business Day" shall mean any day
other than a Saturday, Sunday or legal holiday in the State of
Minnesota.
2. Events of Defaults. The following shall constitute
Events of Default for purposes of this debenture:
(a) Failure to pay the principal of or interest,
if any, on this debenture when due, which failure continue
for thirty (30) days after Holder has notified the Company
of such failure in writing, provided, however, that the
Company's exercise in good faith of its right to withhold
payment pursuant to Section 11(a) hereof, whether or not
ultimately determined to be justified, shall not constitute
an Event of Default.
(b) If, pursuant to or within the meaning of the
United States Bankruptcy Code or any other federal or state
law relating to insolvency or relief of debtors (each a
"Bankruptcy Law"), the Company or any Subsidiary thereof
(i)commences a voluntary case or proceeding; (ii) consents
to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a
trustee, receiver, assignee, liquidator or similar official;
(iv) makes an assignment for the benefit of its creditors;
or (v) admits in writing its inability to pay its debts as
they become due.
(c) If a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that (i) is for
relief against the Company or any Subsidiary thereof in an
involuntary case; (ii) appoints a trustee, receiver,
assignee, liquidator or similar official for the Company or
substantially all of the Company's properties; or (iii)
orders the liquidation of the Company or any Subsidiary
thereof, and in each case the order or decree is not
dismissed within one hundred and twenty (120) days.
(d) If any person commences an involuntary
preceding under any Bankruptcy Law against this Company or
any Subsidiary of the Company that remains undismissed for
more than 60 days.
(e) Any representation or warranty of the Company
in this debenture is untrue or incorrect.
3. Notice of Event of Default. The Company shall notify
Holder in writing within five (5) Business Days after the
occurrence of any Event of Default of which the Company acquires
knowledge.
4. Remedies Following Event of Default.
(a) Upon the occurrence of an Event of Default
(unless all Events of Default have been cured by the Company
or waived by Holder), Holder may, at its option: (i) by
written notice to the Company, declare the entire unpaid
principal balance of this debenture, together with all
accrued interest thereon, if any, immediately due and
payable regardless of any prior forbearance; and (ii)
exercise any and all rights and remedies available to it
under applicable law, including, without limitation, the
right to collect from the Company all sums due under this
debenture.
(b) The Company agrees to pay all reasonable
costs and expenses, including reasonable attorneys' fees, in
connection with Holder's exercise of any of its rights under
this Section 4.
(c) In the event that any principal amount of
this debenture, together with accrued interest thereon, if
any, is not paid when declaration of maturity is made
pursuant to this Section 4, such amount shall bear simple
interest at a rate per annum equal to the rate of interest
applicable immediately prior to such declaration plus two
percent (2%) from the date of such declaration until this
debenture has been paid in full. Such interest shall be
calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days
elapsed.
5. Subordination. The indebtedness evidenced by this
debenture is and shall remain subordinate and subject in right of
payment to the prior payment in full in cash or cash equivalents
of all Senior Debt to the extent and in the manner set forth in
this Section 5:
(a) Upon (i)any acceleration of the principal
amount due on this debenture or (ii)any distribution of
assets of the Company, upon dissolution, winding up,
liquidation or reorganization of the Company, whether in
bankruptcy, insolvency or receivership proceedings, or upon
an assignment for the benefit of creditors, or any other
marshalling of the assets and liabilities of the Company, or
otherwise, Senior Debt shall first be paid in full, or
provision made for such payment, before any payment is made
on account of the principal of and interest, if any, on this
debenture. In such event, upon payment in full of all
Senior Debt, Holder shall be subrogated ratably to all
rights of the holder of such Senior Debt to receive payments
or distributions of the assets of the Company applicable to
such Senior Debt until the principal of and interest, if
any, on this debenture shall be paid in full.
(b) No payment of principal of, interest, if any,
on or redemption or repurchase of, this debenture shall be
made if (i)the Company is in default, or such payment would
result in a default, with respect to the payment of
principal, premium,if any, sinking funds, if any, or
interest with respect to any Senior Debt or (ii)there shall
have occurred any event of default (other than a default in
the payment of principal, premium, if any, sinking funds, if
any, or interest) with respect to any Senior Debt permitting
the holders thereof to accelerate the maturity thereof and
written notice of such occurrence shall have been given to
the Company by any holder or holders of such Senior Debt and
such event of default shall not have been cured or waived or
shall not have ceased to exist. For purposes of this
paragraph, default with respect to payment of any Senior
Debt shall refer to failure of the Company to pay in full
when due the principal of, premium, if any, sinking funds,
if any, or interest (including any purchase or redemption
obligations) with respect to any such Senior Debt, or any
portion thereof, according to its terms. Notwithstanding
the foregoing, payment of principal and interest on this
debenture shall not be subordinated to the prior payment of
such Senior Debt as to all amounts which actually are paid
by the Company under this debenture if the Company was not
in default, and such payment did not result in a default,
with respect to the payment of any Senior Debt at the time
or times such payment or payments were made.
(c) For purposes of this Section 5, "Senior Debt"
shall mean the principal, premium, if any, sinking funds,
if any, or interest with respect to indebtedness of the
Company (i)to financial institutions for borrowed money,
(ii) for purchase money loans secured by real estate or
personal property used in connection with the business of
the Company, or (iii) evidenced by securities, debentures,
notes, bond or other similar instruments, provide such
instruments are sold pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144A
under the Securities Act, whether such indebtedness is
created, incurred or assumed before or after the date
hereof, except such indebtedness as by its terms is
expressly not superior in right of payment to this
debenture, and any renewals, extensions and refundings of
any such indebtedness.
(d) No right of any present or future holder of
any Senior Debt to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company or by
any act or failure to act by any such holder, or by any
noncompliance by the Company with terms, provisions and
covenants of this debenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged
with. Without in any way limiting the generality of the
foregoing, the holders of Senior Debt may, at any time and
from time to time without the consent of or notice to the
Holder of this debenture, without incurring responsibility
to the Holder of this debenture and without impairing or
releasing the subordination provided in this Section 5 or
the obligations hereunder of the Holder of this debenture to
the holders of Senior Debt, do any one or more of the
following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior
Debt, or otherwise amend or supplement in any manner Senior
Debt or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding; (ii)permit the
Company to borrow, repay and then reborrow any or all of the
Senior Debt; (iii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing
Senior Debt; (iv)release any person or entity liable in any
manner for the collection of Senior Debt; (v) exercise or
refrain from exercising any rights against the Company and
any other person or entity; and (vi)apply any sums received
by them to Senior Debt.
(e) The subordination provisions contained in
this Section 5 are expressly and only for the benefit of
third party creditors of the Company and shall in no way
limit the rights or remedies of Holder against the Company,
including without limitation the time at which or the method
by which Holder may proceed against the Company following
any Event of Default.
6. Option Exercise. Subject to Section 11 hereof, at any
time prior to the date on which the principal balance of this
debenture is paid in full, this debenture at the option of
Holder, in whole or in part, may be delivered for cancellation to
the Company in payment, in whole of in part, of any exercise
price under an Employee Non-Qualified Stock Option Agreement,
dated March 31, 1998, between the Company and the original Holder
(the "Option"), in accordance with the terms and conditions of
the Option. To deliver this debenture in payment of any exercise
price, Holder shall (i) give written notice to the Company of
exercise in the form set forth in the Option and (ii)surrender
this debenture, at the principal office of the Company, duly
endorsed in blank. Thereupon, this debenture, or the portion
hereof so delivered for cancellation in payment of any exercise
price, shall be deemed to have been satisfied and discharged. In
the event the principal amount of this debenture has not been
cancelled in full, the Company shall issue and deliver to Holder
a new debenture identical to the one surrendered, except that it
shall be in the correct principal amount after the exercise.
7. Transferability.
(a) This debenture shall not be transferable
during the life of the original Holder and any attempted
transfer during such Holder's life shall be ineffective to
vest in any purported transferee any interest in this
Debenture.
(b) In the event that the original Holder of this
debenture shall die prior to the payment in full of this
debenture, then this debenture shall be transferable to the
executor or personal representative of such Holder.
8. Rights on Death of Original Holder. In the event that
this debenture is transferred to the executor or personal
representative of the original Holder in accordance with Section
7(b), then at any time after March 31, 2000 and prior to the date
on which the principal balance of this debenture is paid in full,
such executor or personal representative, subject to Section 11
hereof, shall have the right to request the payment in full of
the principal of this debenture (and, if applicable, any interest
accrued and unpaid thereon). To request payment pursuant to this
Section 8(a), the executor or personal representative shall (i)
give written notice to the Company that such executor or personal
representative elects to request payment pursuant to this Section
8(a) and (ii)surrender this debenture, at the principal office of
the Company, duly endorsed in blank. As promptly as possible
thereafter, the Company shall make payment in the manner provided
in Section 1 to the executor or personal representative.
9. Forfeiture of Debenture. Holder shall immediately
forfeit all rights to payment of principal of or interest, if
any, on this debenture and any other rights represented by this
debenture in the event that, from the Effective Date and for a
period of two years following the Effective Date, Holder shall,
directly or indirectly, compete with the Company in any manner or
capacity (e.g., as an advisor, principal, agent, partner,
officer, director, stockholder, employee, member of any
association or otherwise) in any phase of the equity capital
markets underwriting, sales, financial advisory, mergers and
acquisitions advisory or trading businesses currently engaged in
by the Company or any Company Affiliate except as an employee of
the Company or any of its Affiliates, within the United States.
10. Certain Terminations of Employment. In the event that
the Company shall terminate Holder's employment with the Company
prior to the 181st day after the date of this debenture, then:
(a) From and after the date of such termination,
this debenture shall bear simple interest at the rate of
five percent (5%) per annum, calculated on the basis of a
year of 365 or 366 days, as applicable, and paid for the
actual number of days elapsed.
(b) From and after the date of such termination,
Section 9 hereof shall be null and void.
11. Certain Rights with Respect to Claims for
Indemnification.
(a) From and after the date of any written notice
from the Company with respect to a claim for indemnification
of Losses under Sections 11.2 and 11.3 of the Merger
Agreement and until all Claims are determined by a final
judgement of a court in accordance with Section 11.3(a) of
the Merger Agreement or all liability for other Losses are
finally determined in accordance with Section 11.3(b) of the
Merger Agreement, (i) any payment of principal of or
interest, if any, on this debenture shall be first reduced
by the proportionate amount of such claimed Losses (the
"Claimed Liability Amount") for which the original Holder of
this debenture may be liable to the Company pursuant to
Sections 11.2 and 11.3 of the Merger Agreement and such
original Holder's Member Agreement, or (ii) the principal
amount of this debenture that may be delivered for
cancellation in payment of any exercise price under the
Option shall be reduced by the Claimed Liability Amount;
and, in each case, no part of the Claimed Liability Amount
shall be paid to the Holder, either in cash or payment of
exercise price until final determination of the amount of
the subject Loss.
(b) Following final determination of the amount
of any Losses for which indemnification is available to the
Company under Sections 11.2 and 11.3 of the Merger
Agreement, the principal amount of this debenture shall be
automatically reduced by the proportionate amount of such
Losses (the "Liability Amount") for which the original
Holder of this debenture is liable to the Company pursuant
to Sections 11.2 and 11.3 of the Merger Agreement and such
original Holder's Member Agreement. In the event the
Liability Amount is at any time determined to be less than
the Claimed Liability Amount or the Holder elects to pay the
Liability Amount in cash, the Holder shall be entitled
receive promptly from the Company any payments with respect
to this debenture due but not paid pursuant to clause (i) of
Section 11(a).
12. Miscellaneous.
(a) Any notice required or permitted to be given
hereunder shall be given in accordance with Section 12.4 of
the Merger Agreement.
(b) The rights and remedies of Holder under this
debenture shall be cumulative and not alternative. No
provision of this debenture may be modified, amended, waived
or terminated except by an instrument in writing signed by
the Holder and the Company. No course of dealing between
the parties will modify, amend, waive or terminate any
provision of this debenture or any rights or obligations of
any party under or by reason of this debenture. The Company
hereby waives presentment, demand, protest and notice of
dishonor and protest.
(c) Whenever possible, each provision of this
debenture shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any
provision of this debenture is held by any court of
competent jurisdiction to be invalid, illegal or
unenforceable under any applicable law or rule, the
validity, legality and enforceability of the other
provisions of this debenture will not be affected or
impaired thereby. Any provision of this debenture held
invalid or unenforceable only in part or degree will remain
in full force and effect to the extent not held invalid or
unenforceable.
(d) ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS DEBENTURE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
PROVISIONS THEREOF.
(e) The headings of Sections in this debenture
are provided for convenience only and will not affect its
construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections
of this debenture unless otherwise specified.
(f) All words used in this debenture will be
construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided,
the words "hereof" and "hereunder" and similar references
refer to this debenture in its entirety and not to any
specific section or subsection hereof.
(g) Nothing in this debenture or the Member's
Agreement executed by the original Holder hereof in
connection with the acquisition of this Agreement shall
confer or be deemed to confer on Holder any right to
continue in the employ of or in any other relationship with
(as consultant, etc.) the Company or any subsidiary of the
Company or affect, in any way, the right of the Company or
any subsidiary of the Company to terminate Holder's
employment or other such relationship at any time.
(h) The Company represents and warrants that this
debenture has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding
obligation of the Company enforceable in accordance with its
terms.
IN WITNESS WHEREOF, the Company has caused this debenture to
be executed and delivered by a duly authorized officer.
Dated: March 31, 1998
DAIN RAUSCHER CORPORATION
By John C. Appel
-------------------------
John C. Appel
Vice Chairman and Chief Financial Officer
[Name and Address of Holder]
EXHIBIT 4.2
APPENDIX C
DAIN RAUSCHER CORPORATION
EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, is made this 31 day of March, 1998, by
and between Dain Rauscher Corporation, a Delaware corporation
(the "Company"), and _____________________ ("Employee").
WITNESSETH, THAT:
WHEREAS, the Company wishes to grant this stock option
to Employee pursuant to its 1996 Stock Incentive Plan (the
"Plan").
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein contained, the parties hereto hereby
agree as follows:
1. Grant of Option.
The Company hereby grants to Employee, on the date set
forth above, the right and option (hereinafter called "this
option") to purchase all or any part of an aggregate of
shares of Common Stock, par value $0.125 per share, at the price
of $58.875 per share on the terms and conditions set forth
herein. This option is not intended to be an incentive stock
option within the meaning of Section422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Duration and Exercisability.
(a) This option may not be exercised by Employee until
the expiration of twelve (12) months from the date of grant, and
this option shall in all events terminate ten (10) years after
the date of grant. Subject to the other terms and conditions set
forth herein, this option may be exercised by Employee in
cumulative installment as follows:
<TABLE>
<CAPTION>
Cumulative percentage
On or after each of of shares as to which
the following dates Option is exercisable
------------------- ---------------------
<C> <C>
March 31, 1999 20%
March 31, 2000 50%
March 31, 2001 100%
</TABLE>
(b) During the lifetime of Employee, this option shall
be exercisable only by Employee. This option shall not be
assignable or transferable by Employee, other than by will or the
laws of descent and distribution.
3. Effect of Termination of Employment.
(a) In the event that Employee shall cease to be
employed by the Company or its subsidiaries for any reason other
than Employee's gross and willful misconduct, Employee's death or
disability, or Employee's retirement (as provided in paragraphs
(b), (c) and (d) of this Section3, respectively), Employee shall
have the right to exercise this option at any time within three
months after such termination of employment to the extent of the
full number of shares Employee was entitled to purchase under
this option on the date of termination, subject to the condition
that this option shall not be exercisable after the expiration of
its term.
(b) In the event that Employee shall cease to be
employed by the Company or its subsidiaries by reason of
Employee's gross and willful misconduct during the course of
employment, including but not limited to, the wrongful
appropriation of funds, or the commission of a gross misdemeanor
or felony, this option shall be terminated as of the date of the
misconduct.
(c) If Employee shall die while in the employ of the
Company or its subsidiaries or if Employee shall become disabled
within the meaning of Code Section 22(e)(3) while in the employ
of the Company or its subsidiaries and Employee shall not have
fully exercised this option, this option may be exercised at any
time within twelve months after Employee's death or disability by
the personal representative(s), administrator(s), or, if
applicable, guardian(s) of Employee or by any person or person to
whom this option is transferred by will or the applicable laws of
descent and distribution, to the extent of the full number of
shares Employee was entitled to purchase under this option on the
date of death (or termination of employment, if earlier) or
disability and subject to the condition that this option shall
not be exercisable after the expiration of its term.
(d) If Employee shall cease to be employed by the
Company or its subsidiaries (i) for any reason other than
Employee's gross and willful misconduct or Employee's death or
disability (as provided in paragraphs (b) and (c) of this Section
3, respectively), (ii) at a time when Employee shall not have
fully exercised this option and (iii) at a time when Employee has
been employed by the Company or its subsidiaries for a period of
at least ten (10) years, this option may be exercised by Employee
at any time on or prior to the earlier of the third anniversary
of the date Employee ceased to be employed by the Company or its
subsidiaries or the expiration of the term of this option (the
period ending as of the earlier of such dates being referred to
hereinafter as the "post-retirement extended exercise period") to
the extent of the full number of shares Employee was entitled to
purchase under this option on the date Employee ceased to be so
employed, subject, however, to the condition that during such
post-retirement extended exercise period Employee shall not (x)
perform any services for or otherwise participate, directly or
indirectly, in the business of any broker/dealer or other entity
engaged in any business in which the Company or any of its
subsidiaries or affiliates is engaged or (y) act in any manner
determined by the committee of the Company's Board of Directors
administering the Plan to be adverse to the interests of the
Company or its subsidiaries. If at any time during such post-
retirement extended exercise period Employee shall cease to
satisfy this condition, Employee's right to exercise this option
pursuant to this paragraph (d) shall terminate immediately and
Employee shall thereafter only be entitled to exercise this
option in accordance with paragraph (a) of this Section 3.
4. Manner of Exercise.
(a) This option can be exercised only by Employee or
other proper party by delivering within the option period written
notice to the Company at its principal office. The notice shall
state the number of shares as to which this option is being
exercised and be accompanied by payment in full of the option
price for all shares designated in the notice.
(b) Employee may pay the option price (i) by check
(bank check, certified check or personal check), (ii) with the
approval of the Company, by delivering to the Company for
cancellation shares of the Company's Common Stock having a fair
market value equal to the option price; provided, however, that
Employee shall not be entitled to tender shares of the Company's
Common Stock pursuant to successive, substantially simultaneous
exercises of this option or any other stock option of the
Company, or (iii) by delivering to the Company for cancellation,
in whole or in part, the Company's Subordinated Debenture dated
March 31, 1998 held by Employee in an aggregate face amount equal
to the option price.
5. Acceleration of Exercisability.
Notwithstanding any installment or delayed exercise
provision contained in this Agreement, this option may be
exercised in full on or after the sixteenth business day
following the date of a "Change in Control" (as hereinafter
defined). For purposes hereof, the following terms shall have
the definitions set forth below:
(a) "Change in Control" shall mean:
(i) the public announcement (which, for purposes of
this definition, shall include, without limitation, a
report filed pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") that any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, other than the Company or its
subsidiaries, or the Company Stock Bonus Plan, or any
other employee benefit plan of the Company or any of
its subsidiaries, or any entity holding shares of the
Company Common Stock organized, appointed or
established for, or pursuant to the terms of, any such
plan, has become the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) of 35% or more of the combined voting power of the
Company's then outstanding voting securities in a
transaction or series of transactions;
(ii) the Continuing Directors (as hereinafter defined)
cease to constitute a majority of the Company's Board
of Directors;
(iii) the shareholders of the Company approve (1) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or pursuant to which shares of the Company's stock
would be converted into cash, securities or other
property, other than a merger of the Company in which
shareholders immediately prior to the merger have the
same proportionate ownership of stock of the surviving
corporation immediately after the merger; (2) any sale,
lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or
substantially all of the assets of the Company; or (3)
any plan of liquidation or dissolution of the Company;
or
(iv) the majority of the Continuing Directors determine
in their sole and absolute discretion that there has
been a change in control of the Company.
(b) "Continuing Director" shall mean any person who is
a member of the Board of Directors of the Company while such
a person is a member of the Board of Directors, who is not
an Acquiring Person (as hereinafter defined) or an Affiliate
or Associate (as hereinafter defined) of an Acquiring
Person, or a representative of an Acquiring Person or of any
such Affiliate or Associate, and who (i) was a member of the
Board of Directors on the date of this Agreement or (ii)
subsequently becomes a member of the Board of Directors, if
such person's initial nomination for election or initial
election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors. For
purposes of this paragraph (b), "Acquiring Person" shall
mean any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) who or which, together with
all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the
combined voting power of the Company's then outstanding
securities, but shall not include the Company, any
subsidiary of the Company or any employee benefit plan of
the Company or of any subsidiary of the Company or any
entity holding shares of the Company's Common Stock
organized, appointed or established for, or pursuant to the
terms of, any such plan; and "Affiliate" and "Associate"
shall have the respective meanings ascribed to such terms in
Rule 12b-2 promulgated under the Exchange Act.
6. Miscellaneous.
(a) This option is issued pursuant to the Plan and is
subject to its terms. The terms of the Plan are available for
inspection during business hours at the principal offices of the
Company.
(b) This agreement shall not confer on Employee any
right with respect to continuance of employment by the Company or
any of its subsidiaries, nor will it interfere in any way with
the right of the Company to terminate such employment at any
time. Employee shall have none of the rights of a shareholder
with respect to shares subject to this option until such shares
shall have been issued to Employee upon exercise of this option.
(c) The exercise of all or any parts of this option
shall only be effective at such time that the sale of Common
Stock pursuant to such exercise will not violate any state or
federal securities or other laws.
(d) If Employee exercises all or any portion of this
option subsequent to any change in the number or character of the
outstanding shares of the Company's Common Stock (through merger,
consolidation, reorganization, recapitalization, stock dividend
or otherwise), Employee shall then receive for the aggregate
price paid by Employee on such exercise of this option, the
number and type of securities or other consideration which
Employee would have received if such option had been exercised
prior to the event changing the number or character of
outstanding shares.
(e) The Company shall at all times during the term of
this option reserve and keep available such number of shares as
will be sufficient to satisfy the requirements of this agreement.
(g) In order to provide the Company with the
opportunity to claim the benefit of any income tax deduction
which may be available to it upon the exercise of this option,
and in order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action
as it deems appropriate to insure that, if necessary, all
applicable federal or state payroll, withholding, income or other
taxes are withheld or collected from Employee. Employee may
elect to satisfy his federal and state income tax withholding
obligations upon exercise of this option by (i)having the Company
withhold a portion of the shares of Common Stock otherwise to be
delivered upon exercise of such option having a fair market value
equal to the amount of federal and state income tax required to
be withheld upon such exercise, in accordance with the rules of
the committee of the Company's Board of Directors that
administers the Plan (the "Committee"), or (ii)delivering to the
Company shares of its Common Stock other than the shares issuable
upon exercise of such option with a fair market value equal to
such taxes, in accordance with the rules of the Committee.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed on the day and year first above written.
Dain Rauscher Corporation
By John C. Appel
-----------------------
John C. Appel
Vice Chairman & CFO
Dain Rauscher Corporation
__________________________
["Employee"]
