SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8186
DAIN RAUSCHER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1228350
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
Dain Rauscher Plaza, 60 South Sixth Street
Minneapolis, Minnesota 55402-4422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 371-2711
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
As of April 30, 1998, the Company had 12,383,313 shares
of common stock outstanding.
DAIN RAUSCHER CORPORATION
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
Page
----
I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index of Exhibits
Exhibits
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAIN RAUSCHER CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
March 31, December 31,
1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 51,815 $ 35,909
Receivable from customers 1,124,283 1,170,160
Receivable from brokers and dealers 274,901 229,421
Securities purchased under agreements to resell 327,822 135,777
Trading securities owned, at market 436,554 541,511
Equipment, leasehold improvements and
buildings, at cost, net 45,161 42,376
Other receivables 76,353 80,867
Deferred income taxes 44,922 44,868
Other assets 146,531 23,512
---------- ----------
$2,528,342 $2,304,401
========== ==========
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings $ 142,415 $ 179,000
Drafts payable 98,173 83,499
Payable to customers 597,128 601,949
Payable to brokers and dealers 557,887 580,970
Securities sold under repurchase agreements 158,756 170,906
Trading securities sold, but not yet
purchased, at market 344,738 127,364
Accrued compensation 71,732 128,463
Other accrued expenses and accounts payable 129,312 97,500
Subordinated and other debt 108,316 15,659
---------- ----------
2,208,457 1,985,310
---------- ----------
Shareholders' equity:
Common stock 1,556 1,546
Additional paid-in capital 94,859 89,321
Retained earnings 228,665 233,419
Treasury stock, at cost (5,195) (5,195)
---------- ----------
319,885 319,091
---------- ----------
$2,528,342 $2,304,401
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
DAIN RAUSCHER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per-share amounts)
<TABLE>
Three Months Ended March 31,
1998 1997
----------------------------
<S> <C> <C>
Revenues:
Commissions $ 72,924 $ 63,627
Principal transactions 36,795 42,024
Investment banking and underwriting 22,229 25,868
Interest 31,797 28,734
Asset management 13,330 10,500
Correspondent clearing 4,466 4,428
Other 6,473 4,891
-------- --------
Total revenues 188,014 180,072
Interest expense (15,567) (14,110)
-------- --------
Net revenues 172,447 165,962
-------- --------
Expenses excluding interest:
Compensation and benefits 110,960 101,484
Communications 12,187 11,309
Occupancy and equipment 11,519 9,763
Travel and promotional 7,213 6,577
Floor brokerage and clearing fees 2,827 2,927
Other 10,904 9,513
Merger-related charge 20,000 -
-------- --------
Total expenses excluding interest 175,610 141,573
-------- --------
Earnings:
Earnings (loss) before income taxes (3,163) 24,389
Income tax benefit (expense) 1,139 (8,634)
-------- --------
Net earnings (loss) $ (2,024) $ 15,755
======== ========
Earnings (loss) per share:
Basic $ (.16) $ 1.29
======== ========
Diluted $ (.16) $ 1.22
======== ========
Dividends per share $ .22 $ .18
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
DAIN RAUSCHER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
Three Months Ended March 31,
1998 1997
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (2,024) $ 15,755
Adjustments to reconcile earnings to cash provided
(used) by operating activities, net of effect
of acquisition:
Depreciation and amortization 3,453 2,639
Deferred income taxes (54) (1,060)
Other non-cash items 2,106 1,872
Cash and short-term investments segregated
for regulatory purposes - (51,000)
Net payable to brokers and dealers (58,247) 46,162
Securities purchased under agreements to
resell (192,044) (189,956)
Net trading securities owned and trading
securities sold, but not yet purchased 328,404 36,782
Short-term borrowings and drafts payable
of securities companies 28,090 176,276
Net receivable from customers 41,055 (6,643)
Securities sold under repurchase agreements (12,150) 10,594
Accrued compensation (56,908) (50,987)
Other 12,653 24,332
--------- ---------
Cash provided by operating activities 94,334 14,766
--------- ---------
Cash flows from financing activities:
Proceeds from:
Issuance of common stock 1,215 1,037
Subordinated and other debt 80,000 -
Payments for:
Revolving credit agreement, net (50,000) -
Subordinated and other debt (9,000) (3,435)
Dividends on common stock (2,713) (2,203)
--------- ---------
Cash provided (used) by financing activities 19,502 (4,601)
--------- ---------
Cash flows from investing activities:
Proceeds from investment dividends and sales 1,532 -
Payments for :
Equipment, leasehold improvements and other (3,874) (3,509)
Acquisition, net of cash acquired (95,588) -
--------- ---------
Cash used by financing activities (97,930) (3,509)
--------- ---------
Increase in cash and cash equivalents 15,906 6,656
Cash and cash equivalents:
At beginning of period 35,909 34,387
--------- ---------
At end of period $51,815 $ 41,043
========= =========
Income tax payments totaled $2,651,000 and $6,453,000 and interest
payments totaled $11,489,000 and $12,430,000 during the three months
ended March 31, 1998 and 1997, respectively.
During the three months ended March 31, 1998, the Company had non-cash
financing activity of $21,657,000 representing subordinated debentures
issued as a portion of the consideration paid for an acquisition. Also
for the three months ended March 31, 1998 and 1997, respectively, the
Company had non-cash financing activity of $4,149,000 and $2,323,000
associated with the crediting of common stock to deferred compensation
plan participants.
See accompanying notes to consolidated financial statements.
</TABLE>
DAIN RAUSCHER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Condensed Consolidated Financial Statements
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with the instructions for
Form 10-Q and do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1997. In the opinion of management, all adjustments necessary for a
fair presentation of such interim consolidated financial statements
have been included. All such adjustments are of a normal recurring
nature. The results of operations for the three-month period ended
March 31, 1998, are not necessarily indicative of results for
subsequent periods.
Certain prior year amounts in the financial statements have been
reclassified to conform to the 1998 presentation.
B. Acquisition
On March 31, 1998, the Company acquired Wessels, Arnold &
Henderson, LLC ("WAH"), a privately held investment banking,
institutional equity sales and trading firm based in Minneapolis. The
transaction was accounted for as a purchase and, accordingly, the
revenues and operating results of WAH are not included in the
consolidated statements of operations for the three months ended March
31, 1998.
The consideration paid for the acquisition was $120 million of
cash and five-year subordinated debentures with a discounted value of
$21.7 million ($30 million face amount). Goodwill of approximately
$115 million was recorded and will be amortized over an estimated life
of 25 years.
The Company recorded a $20.0 million pretax charge ($12.8 million
after tax) during the 1998 first quarter for costs related to the
merger. Substantially all of the $20.0 million charge will result in
cash outflows, primarily during the second quarter of 1998. As a
result of the merger, approximately 150 jobs were eliminated. These
non-recurring costs include the following: $16.0 million for
severance; $2.5 million for space consolidation; and the remaining
$1.5 million for other integration costs. As of March 31, 1998,
approximately $2.8 million in expenditures, primarily severance, had
been incurred.
The following unaudited pro forma information has been prepared
assuming that the acquisition of WAH had occurred at the beginning of
the periods presented after including the impact of certain
adjustments including amortization of goodwill, increased interest
expense on acquisition debt and the related income tax effects. The
pro forma financial information below does not include the effect of
the $20.0 million charge recorded by the Company in the quarter ended
March 31, 1998 that was directly related to the acquisition of WAH.
<TABLE>
Three Months Ended
March 31,
1998 1997
--------------------------
<S> <C> <C>
Statement of Operations Data:
Revenues $ 205,487 $ 194,843
Interest expense (17,895) (16,194)
--------- ---------
Net revenues 187,592 178,649
Expenses excluding interest 170,815 152,726
--------- ---------
Earnings before income taxes 16,777 25,923
Income tax expense (5,916) (9,186)
--------- ---------
Net earnings $ 10,861 $ 16,737
========= =========
Basic earnings per share $ .88 $ 1.37
========= =========
Diluted earnings per share $ .82 $ 1.29
========= =========
</TABLE>
The pro forma financial information above is presented for
informational purposes only and is not necessarily indicative of the
actual results that would have been achieved had the merger been
consummated prior to the dates or periods indicated, nor are they
necessarily indicative of future operating results.
C. Short-Term Borrowings
On March 20, 1998, the Company entered into a $50 million
committed, revolving credit agreement to replace a similar facility
dated June 27, 1997. The facility expires March 19, 1999 and contains
a one-year renewal option. Loans under the facility are unsecured and
bear interest at a floating rate of the London Interbank Offering Rate
(LIBOR) plus 61 basis points. No amounts were outstanding under the
facility at March 31, 1998. The Company must comply with provisions
in the agreement regarding net worth, regulatory net capital and
indebtedness.
D. Subordinated and Other Debt
On March 31, 1998, the Company's broker-dealer subsidiary entered
into an $80 million subordinated term loan agreement with a group of
banks in connection with the acquisition of WAH. Proceeds from the
loan qualify as regulatory capital. Term loans under this agreement
are unsecured, and consist of advances bearing interest at either the
current Eurodollar Interbank Rate plus 160 basis points, or the
lead bank's published Reference Rate, at the discretion of the
Company. Principal payments under the agreement consist of $5.0
million per quarter beginning April 1, 1999 with the final
payment due on December 31, 2002. The Company must comply with
provisions in the agreement regarding net worth and regulatory net
capital.
On March 31, 1998, the Company also issued $30 million (face
amount) in 5-year zero coupon subordinated debentures in connection
with the acquisition of WAH. The debentures were recorded at a
discounted present value of $21.7 million.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion should be read in conjunction with Item 7
(Management's Discussion and Analysis) of the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.
Summary
The following is a consolidated summary of the Company's results
of operations for the three months ended March 31, 1998 and 1997:
<TABLE>
Three Months Ended March 31,
1998 1997
----------------------------
<S> <C> <C>
Revenues.............................. $188,014 $180,072
Interest expense...................... (15,567) (14,110)
-------- --------
Net revenues.......................... 172,447 165,962
Expenses excluding interest and
merger-related expenses.............. 155,610 141,573
-------- --------
Operating earnings before income
taxes................................ 16,837 24,389
Income tax expense from operations.... (6,061) (8,634)
-------- --------
Net operating earnings................ 10,776 15,755
Merger-related expenses (net of tax).. (12,800) -
-------- --------
Net earnings (loss)................... $ (2,024) $ 15,755
======== ========
Earnings (loss) per share:
From net operating earnings:
Basic................................ $ 0.87 $ 1.29
Diluted.............................. $ 0.82 $ 1.22
Net:
Basic................................ $ (0.16) $ 1.29
Diluted.............................. $ (0.16) $ 1.22
</TABLE>
Consolidated net operating earnings were $10.8 million, or $.82
per share diluted, during the first quarter of 1998 compared with
$15.8 million, or $1.22 per share, for the first quarter of 1997.
During the quarter , the Company's Private Client Group posted a 26-
percent increase in pretax profitability, primarily due to strong
sales of investment products to individual investors, and the Fixed
Income Capital Markets Group posted a 17-percent increase in pretax
profitability, principally the result of higher fees earned
underwriting securities for municipal and governmental clients. These
increases, however, were more than offset by a decline in the
profitability of the Equity Capital Markets Group ("ECM") from the
first quarter of 1997. A significant portion of this decline resulted
from uncertainty surrounding the Company's February 9, 1998
announcement that it would purchase Wessels, Arnold & Henderson, LLC,
("WAH") a privately held investment banking, institutional equity
sales and trading firm based in Minneapolis. This announcement,
coupled with the disruption brought about by the October 1997
announcement of the merger of the Company's former broker-dealer
subsidiaries into a single company, effectively was the second
reorganization of the ECM group within a four-month period that
included, among other things, job eliminations, managerial changes and
changes in assignments of customer accounts, research coverage and
trading coverage.
In conjunction with the acquisition of WAH, the Company recorded a
$20.0 million merger-related charge in the 1998 first quarter to cover
severance, space consolidation, systems/operations expenses and other
costs of integration. As a result of the charge, the Company incurred
a net loss of $2.0 million, or $.16 cents per share diluted, for the
quarter ended March 31, 1998. The $20.0 million charge exceeded
management's previous estimate of up to $15.0 million due to strategic
decisions to focus on certain industry sectors within the ECM
business. As a result, approximately 150 jobs were eliminated, more
than originally anticipated. Excluding the merger-related charge, the
Company expects the acquisition to have minimal impact on earnings in
1998, and to be accretive to earnings in the first full year of
operations.
Results of Operations
Commission revenues increased $9.3 million or 15 percent during
the 1998 first quarter over the first quarter of 1997 as a result of
higher sales of listed securities, mutual funds and insurance and
annuity products. Contributing also to the increase were higher
securities prices, particularly during February and March of 1998, and
higher volumes of securities trades including an 11-percent rise in
the New York Stock Exchange's average daily trading volume in the 1998
first quarter.
Revenues from principal transactions declined $5.2 million or 12
percent primarily due to lower trading revenues in over-the-counter
equity securities. The decline was primarily related to lower spreads
earned trading OTC equity securities resulting from management's
decision to provide increased liquidity in order to facilitate
institutional trading as well as smaller fractions used in share price
posting. Also contributing was the impact of the merger of the
Company's broker-dealer subsidiaries and the WAH acquisition (see
"Summary" above), as well as lower sales and trading of tax-exempt
fixed income securities. These declines were partially offset by
increases in sales and trading of taxable fixed income securities.
Similarly, investment banking and underwriting revenues declined
$3.6 million or 14 percent during the first quarter from the same
quarter of 1997 due primarily to lower underwriting transaction levels
in the ECM group. Management believes the lower revenue production was
due largely to the restructuring changes made as a result of the
merger of Dain Bosworth and Rauscher Pierce Refsnes, effective on
January 2, 1998, and the acquisition of WAH (see "Summary" above).
Offsetting some of this decline, however, were increases in fees
earned from underwriting securities for municipal and governmental
clients.
Net interest income increased $1.6 million or 11 percent during
the quarter, primarily due to a 17-percent increase in average margin
loan balances. The margin loan increase can be attributed to
favorable market conditions coupled with comparatively low interest
rates. The resulting increase in net interest income was partially
offset by the effects of a 50-percent decline in customer credit
balances in the 1998 first quarter versus the 1997 first quarter, due
primarily to transfers of certain customers' credit balances to
Company-sponsored money market funds.
Asset management revenues increased $2.8 million or 27 percent in
the first quarter over the prior year due to increased levels of
assets in fee-based, managed account programs at Dain Rauscher
Incorporated and, to a lesser degree, a 33-percent increase in assets
under management at the Company's money management subsidiary, Insight
Investment Management Inc.
Other revenues increased $1.6 million or 32 percent over the 1997
quarter primarily due to gains related to the sale of securities
previously obtained in connection with corporate underwriting
activities.
During the 1998 first quarter, compensation and benefits increased
$9.5 million or 9 percent due principally to increased commissions
associated with higher levels of operating revenues and higher
incentive compensation. Also contributing to the increase were higher
salary levels and a 3-percent rise in the average number of employees.
Expenses other than compensation and benefits increased $4.5
million or 11 percent over the 1997 first quarter principally due to :
(1) increased occupancy costs associated with office expansions and
office operating costs, including real estate taxes; (2) volume-driven
increases in communications market-data and clearing services; (3)
travel and promotional costs associated with the generation of new
business; (4) increased information system contractor and development
costs; and (5) increased litigation related expenses.
Liquidity and Capital Resources
On March 31, 1998, the Company's broker-dealer subsidiary entered
into an $80 million subordinated term loan agreement with a group of
banks in connection with the acquisition of WAH. Proceeds from the
loan qualify as regulatory capital. Term loans under this agreement
are unsecured, and consist of advances bearing interest at either the
current Eurodollar Interbank Rate plus 160 basis points, or the lead
bank's published Reference Rate, at the discretion of the Company.
Principal payments under the agreement consist of $5.0 million per
quarter beginning April 1, 1999 with the final payment due on December
31, 2002. The Company must comply with provisions in the agreement
regarding net worth and regulatory net capital.
On March 20, 1998, the Company entered into a $50 million
committed, revolving credit agreement to replace a similar facility
dated June 27, 1997. The facility expires March 19, 1999 and contains
a one-year renewal option. Loans under the facility are unsecured and
bear interest at a floating rate of the London Interbank Offering Rate
(LIBOR) plus 61 basis points. No amounts were outstanding under the
facility at March 31, 1998. The Company must comply with provisions
in the agreement regarding net worth, regulatory net capital and
indebtedness.
On March 31, 1998, the Company also issued $30 million (face
amount) in 5-year zero coupon subordinated debentures related to the
acquisition of WAH. The debentures were recorded at a discounted
present value of $21.7 million.
As described in Note K of the Consolidated Financial Statements of
the Company's 1997 Annual Report on Form 10-K, Dain Rauscher
Incorporated must comply with certain regulations of the Securities
and Exchange Commission and New York Stock Exchange, Inc. measuring
capitalization and liquidity. The broker-dealer continues to operate
above minimum net capital standards of 5 percent of aggregate debit
items. At March 31, 1998, net capital was $114.8 million, 9.5
percent of aggregate debit balances and $54.5 million in excess of the
5-percent requirement.
During the 1998 first quarter, the Company declared and paid a
regular quarterly dividend on its common stock of $.22 per share, an
increase of $.04 per share over the previous rate of $.18 per share.
The determination of the amount of future cash dividends, if any, to
be declared and paid will depend on the Company's future financial
condition, earnings and available funds.
Private Securities Litigation Reform Act of 1995 "Safe Harbor"
The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and
is filing this cautionary statement in connection with such safe
harbor legislation. This Form 10-Q, the Company's Annual Report to
Shareholders, any Form 10-K, Form 10-Q or Form 8-K of the Company or
any other written or oral statements made by or on behalf of the
Company may include forward-looking statements which reflect the
Company's current views with respect to future events and financial
performance. The words "believe," "expect," "anticipate," "intends,"
"estimate," "forecast," "project," "should" and similar expressions
are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution investors that any forward-looking
statements made by or on behalf of the Company are subject to
uncertainties and other factors that could cause actual results to
differ materially from such statements. These uncertainties and other
factors include, but are not limited to, the "Risk Factors" listed
below. Though the Company has attempted to list comprehensively these
important factors, the Company wishes to caution investors that other
factors may in the future prove to be important in affecting the
Company's results of operations. New factors emerge from time to time
and it is not possible for management to predict all such factors, nor
can it assess the impact of each such factor on the business or the
extent to which any factor, or a combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements.
Investors are further cautioned not to place undue reliance on
such forward-looking statements as they speak only to the Company's
views as of the date the statement is made. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
The Company herein incorporates by reference Exhibit 99 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Item No. Item Method of Filing
- ----------------------------------------------------------------------
10 Employment Agreement dated March 31, Filed herewith.
1998 between the Company and Kenneth
J. Wessels.
11 Computation of Net Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
Three reports on Form 8-K were filed during the quarter ended March
31, 1998.
(1) Items reported:
Item 5 - Other events (Name change of registrant; NYSE trading
symbol change of registrant; merger of registrant's wholly-owned
broker-dealers)
Date of earliest event reported - January 2, 1998
Financial Statements Filed - None
(2) Items reported:
Item 5 - Other Events (Press releases regarding: (1) an increase
in the registrant's regular quarterly cash dividend from $.18
to $.22 per share; (2) announcement regarding acquisition of
Wessels, Arnold & Henderson, LLC).
Item 7 - Financial Statements and Exhibits
Exhibit 99.1 - Press release announcing increase in registrant's
regular quarterly cash dividend from $.18 to $.22 per share.
Exhibit 99.2 - Press release announcing acquistion of Wessels,
Arnold & Henderson, LLC.
Date of earliest event reported - February 5, 1998
Financial Statements Filed - None
(3) Items reported:
Item 2 - Acquisition of Wessels, Arnold & Henderson, LLC
Item 7 - Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements of Business Acquired
The following financial statements of WAH are incorporated by
reference to Exhibit 99.1 filed herewith:
Independent Auditors' Report
Combined Balance Sheet as of December 31, 1997
Combined Statement of Income for the Year Ended December 31, 1997
Combined Statement of Changes in Members' Equity for the Year
Ended December 31, 1997
Combined Statement of Cash Flows for the Year Ended December 31,
1997
Notes to Combined Financial Statements
(b) Pro Forma Financial Information
The following pro forma financial information is incorporated
by reference to Exhibit 99.2 filed herewith:
Pro Forma Combined Balance Sheet as of December 31, 1997
(unaudited)
Pro Forma Combined Statement of Operations for the Year Ended
December 31, 1997 (unaudited)
Notes to Pro Forma Combined Balance Sheet and Statement of
Operations
(c) Other Exhibits
Exhibit 2.1 - Agreement and Plan of Merger, dated February 8,
1998 among Dain Rauscher Corporation, Dain Rauscher Incorporated
and Wessels, Arnold & Henderson Group, LLC and Wessels, Arnold &
Henderson, LLC
Exhibit 4.1 - Form of Dain Rauscher Corporation Subordinated
Debenture
Exhibit 4.2 - Form of Dain Rauscher Corporation Stock Option
Agreement
Date of earliest event reported - March 31, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DAIN RAUSCHER CORPORATION
Registrant
Date: May 15, 1998 By David J. Parrin
---------------------- ---------------------------
David J. Parrin
Senior Vice President
and Controller
(Principal Accounting Officer)
DAIN RAUSCHER CORPORATION
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1998
(a) Exhibits
Item No. Item Method of Filing
- ----------------------------------------------------------------------
10 Employment Agreement dated March 31, Filed herewith.
1998 between the Company and Kenneth
J. Wessels.
11 Computation of Net Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
Three reports on Form 8-K were filed during the quarter ended March
31, 1998.
(1) Items reported:
Item 5 - Other events (Name change of registrant; NYSE trading
symbol change of registrant; merger of registrant's wholly-owned
broker-dealers)
Date of earliest event reported - January 2, 1998
Financial Statements Filed - None
(2) Items reported:
Item 5 - Other Events (Press releases regarding: (1) an increase
in the registrant's regular quarterly cash dividend from $.18
to $.22 per share; (2) announcement regarding acquisition of
Wessels, Arnold & Henderson, LLC).
Item 7 - Financial Statements and Exhibits
Exhibit 99.1 - Press release announcing increase in registrant's
regular quarterly cash dividend from $.18 to $.22 per share.
Exhibit 99.2 - Press release announcing acquistion of Wessels,
Arnold & Henderson, LLC.
Date of earliest event reported - February 5, 1998
Financial Statements Filed - None
(3) Items reported:
Item 2 - Acquisition of Wessels, Arnold & Henderson, LLC
Item 7 - Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements of Business Acquired
The following financial statements of WAH are incorporated by
reference to Exhibit 99.1 filed herewith:
Independent Auditors' Report
Combined Balance Sheet as of December 31, 1997
Combined Statement of Income for the Year Ended December 31, 1997
Combined Statement of Changes in Members' Equity for the Year
Ended December 31, 1997
Combined Statement of Cash Flows for the Year Ended December 31,
1997
Notes to Combined Financial Statements
(b) Pro Forma Financial Information
The following pro forma financial information is incorporated
by reference to Exhibit 99.2 filed herewith:
Pro Forma Combined Balance Sheet as of December 31, 1997
(unaudited)
Pro Forma Combined Statement of Operations for the Year Ended
December 31, 1997 (unaudited)
Notes to Pro Forma Combined Balance Sheet and Statement of
Operations
(c) Other Exhibits
Exhibit 2.1 - Agreement and Plan of Merger, dated February 8,
1998 among Dain Rauscher Corporation, Dain Rauscher Incorporated
and Wessels, Arnold & Henderson Group, LLC and Wessels, Arnold &
Henderson, LLC
Exhibit 4.1 - Form of Dain Rauscher Corporation Subordinated
Debenture
Exhibit 4.2 - Form of Dain Rauscher Corporation Stock Option
Agreement
Date of earliest event reported - March 31, 1998
EXHIBIT 11
DAIN RAUSCHER CORPORATION
COMPUTATION OF NET EARNINGS PER SHARE
(Amounts in thousands, except per share data)
<TABLE>
Three months ended March 31,
___________________________
1998 1997
_________ _________
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net earnings (loss) $ (2,024) $ 15,755
========= =========
Weighted average common shares outstanding 12,316 12,213
========= =========
Basic earnings (loss) per share $ (.16) $ 1.29
========= =========
EARNINGS PER SHARE ASSUMING DILUTION:
Net earnings (loss) $ (2,024) $ 15,755
========= =========
Weighted average number of common and dilutive
potential common shares outstanding:
Weighted average common shares outstanding 12,316 12,213
Dilutive effect of stock options
(net of tax benefits) - 567
Shares credited to deferred compensation
plan participants - 172
--------- ---------
Weighted average number of common and dilutive
potential common shares outstanding 12,316 12,952
========= =========
Diluted earnings (loss) per share $ (.16) $ 1.22
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DAIN
RAUSCHER CORPORATION'S MARCH 31, 1998 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 51815
<RECEIVABLES> 1475537
<SECURITIES-RESALE> 327822
<SECURITIES-BORROWED> 0<F1>
<INSTRUMENTS-OWNED> 436554
<PP&E> 45161
<TOTAL-ASSETS> 2528342
<SHORT-TERM> 142415
<PAYABLES> 1382500
<REPOS-SOLD> 158756
<SECURITIES-LOANED> 0<F2>
<INSTRUMENTS-SOLD> 344738
<LONG-TERM> 108316
0
0
<COMMON> 1556
<OTHER-SE> 318329
<TOTAL-LIABILITY-AND-EQUITY> 2528342
<TRADING-REVENUE> 36795
<INTEREST-DIVIDENDS> 31797
<COMMISSIONS> 72924
<INVESTMENT-BANKING-REVENUES> 22229
<FEE-REVENUE> 13330<F3>
<INTEREST-EXPENSE> 15567
<COMPENSATION> 110960
<INCOME-PRETAX> (3163)
<INCOME-PRE-EXTRAORDINARY> (2024)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2024)
<EPS-PRIMARY> (.16)<F4>
<EPS-DILUTED> (.16)<F4>
<FN>
<F1>INCLUDED IN RECEIVABLES
<F2>INCLUDED IN PAYABLES
<F3>INCLUDES FEES FROM ASSET MANAGEMENT ONLY
<F4>EARNINGS (LOSS) PER SHARE AMOUNTS REPRESENT BASIC AND DILUTED AS PRESCRIBED
UNDER SFAS 128
</FN>
</TABLE>
EXHIBIT 10
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated March 31, 1998, is by and between
Dain Rauscher Incorporated, a Minnesota corporation (the
"Company"), and Kenneth J. Wessels, an individual resident of the
State of Minnesota ("Executive").
WHEREAS, Executive has heretofore been employed as a
senior executive officer of Wessels, Arnold & Henderson Group,
L.L.C., a Delaware limited liability company ("WAHG"), and
Wessels, Arnold & Henderson, L.L.C., a Delaware limited liability
company ("WAH" and, together with "WAHG", the "Wessels Group"),
has been a managing director of WAHG and WAH and is knowledgeable
about and experienced in the management and affairs of the
Wessels Group;
WHEREAS, the Company has agreed to acquire the Wessels
Group pursuant to an Agreement and Plan of Merger dated February
8, 1998 (the "Merger Agreement"), by and among the Wessels Group,
the Company and Dain Rauscher Corporation, a Delaware corporation
and sole stockholder of the Company ("Parent"), which provides
for the merger of the Wessels Group with an acquisition
subsidiary of the Company (the "Merger");
WHEREAS, Executive is also an owner of the Wessels
Group who intends to sell his interests in the Wessels Group in
the Merger;
WHEREAS, Parent and the Company have conditioned the
consummation of the Merger on, among other things, the
effectiveness of this Agreement; and
WHEREAS, the Company desires to retain the services of
Executive subsequent to the consummation of the Merger, and
Executive desires to be employed by the Company, on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the respective
covenants and commitments of the Company and Executive set forth
below, and as an inducement to Parent and the Company to
consummate the Merger, Executive hereby agrees as follows:
1. Employment. The Company hereby agrees to employ
Executive, and Executive hereby accepts such employment and
agrees to perform services for the Company on and after the
Effective Date of the Merger, upon the other terms and conditions
set forth in this Agreement.
2. Term. Unless otherwise determined in accordance with
the provisions of this Agreement, the term of Executive's
employment hereunder shall commence on the date of the occurrence
of, and as of the time immediately after, the consummation of the
Merger (the "Effective Date"), and shall extend for a continuous
period ending on December 31, 1999. Such period shall be
extended automatically for one additional year unless either
party delivers written notice to the other party on or before
October 31, 1999 of such notifying party's determination not to
continue Executive's employment hereunder. The term of
Executive's employment hereunder is referred to herein as the
"Term."
3. Position and Duties.
3.01 Service with the Company. During the term,
Executive shall have the title of Senior Executive Vice President
of the Company, or an equivalent title to that held by the most
senior officers responsible for managing the Private Client Group
and the Fixed Income Group of the Company. In such capacity,
Executive shall manage the Company's Equity Capital Markets
Group. During the Term, Executive shall report directly to the
Chairman and Chief Executive Officer of the Company or, if one is
named, the President and Chief Operating Officer of the Company.
In addition, during the Term, Executive shall also have
the title of Senior Executive Vice President of Parent.
3.02 Performance of Duties. Executive agrees to serve
the Company faithfully and to the best of his ability and to
devote his full time, attention and efforts to the business and
affairs of the Company during the Term. Executive hereby
confirms that he is under no contractual commitments inconsistent
with his obligations set forth in this Agreement and that, during
the Term, he will not render or perform any services for any
other corporation, firm, entity or person which are inconsistent
with the provisions of this Agreement or which would otherwise
impair his ability to perform his duties hereunder.
3.03 Board Seat. During the Term, the Company shall
appoint Executive to be a member of the Company's Board of
Directors. During the Term, Parent agrees to vote its shares of
the Company's common stock in favor of Executive's election to
the Board of Directors of the Company, and to nominate or cause
the appointment of Executive for election to the Board of
Directors of Parent and use its best efforts to solicit and
obtain such election or appointment.
4. Compensation.
4.01 Base Salary. Subject to the terms and conditions
of this Agreement, as base compensation for all services to be
rendered by Executive under this Agreement during the Term, the
Company shall pay Executive an annualized base salary of no less
than $300,000 (the "Base Salary"), payable in accordance with the
Company payroll policy as in effect from time to time (currently
on a twice-per-month installment basis).
4.02 Incentive Compensation. In addition to the
Guarantee (as defined in Section 4.03 hereof), and also subject
to the terms and conditions of this Agreement, the Company shall
pay Executive an annual incentive bonus during the Term in
accordance with the terms set forth in Exhibit A hereto (the
"Formula Bonus").
4.03 Guaranteed Cash Compensation; Mandatory Deferral.
During each full calendar year of the Term (and for the 9-month
period ending December 31, 1998), Executive's total cash
compensation, exclusive of the Formula Bonus, shall not be less
than $1,500,000 on an annualized basis (the "Guarantee").
Executive shall annually defer 30% of such compensation,
exclusive of the Formula Bonus, into Parent's Executive Deferred
Compensation Plan.
4.04 Stock Options. Upon commencement of the Term,
Parent shall issue to Executive, pursuant to a Stock Option
Agreement in the form attached as Exhibit B hereto, non-qualified
options to acquire 24,000 shares of Parent's Common Stock under
Parent's 1996 Stock Incentive Plan. The exercise price for the
options shall be equal to $58.875 per share. The vesting
schedule for such options shall be: 20% on the second
anniversary of the Effective Date, an additional 30% on the third
anniversary and the remaining 50% on the fourth anniversary, but
shall accelerate upon: (a)a "Change-in-Control" of Parent, as
defined in the Stock Option Agreement, (b)termination of
Executive's employment by the Company other than For Cause or (c)
termination of Executive's employment by Executive for Good
Reason.
4.05 Savings and Retirement Plans. During the Term,
Executive shall be eligible to participate in all savings and
retirement plans of Parent or the Company, to the extent
applicable generally to other senior executives of the Company.
For purposes of all such plans, the Company shall credit
Executive with full credit for all service credited under the
Wessels Group's 401(k) plan for purposes of eligibility to
participate and receive benefits and vesting but not for benefit
accruals in any Company retirement plan.
4.06 Welfare and Other Benefit Plans. During the Term,
Executive and/or Executive's family, as the case may be, shall be
eligible to participate in and shall receive all benefits under
welfare, fringe, vacation and other similar benefit plans and
programs provided by Parent or the Company (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs and perquisites) to the extent applicable
generally to other senior executives of Parent or the Company;
provided that the Company shall waive all pre-existing condition
limitations under any health plans to be waived with respect to
Executive and/or Executive's family. For purposes of all such
plans, Parent shall credit Executive with full credit for all
service credited under the corresponding benefit plans of WAH for
purposes of eligibility to participate and receive benefits and
for vesting but not for purposes of benefit accruals.
4.07 Expenses. During the Term, Executive shall be
entitled to receive prompt reimbursement for all reasonable
business expenses incurred by Executive in the performance of his
duties hereunder, in accordance with the policies of the Company.
5. Confidential Information. Except as expressly
permitted or directed by the Company, during the term of this
Agreement or at any time thereafter, Executive shall not divulge,
furnish or make accessible to anyone or use in any way (other
than for the benefit of and in the course of conducting the
business of the Company) any confidential or proprietary
knowledge or information of the Company or of any affiliate of
the Company, including the Wessels Group and the Company's other
subsidiaries and Parent, and its other direct and indirect
subsidiaries (collectively, the "Company Affiliates"), which
Executive has acquired or become acquainted with prior to the
term of this Agreement while working for the Wessels Group or
will acquire or become acquainted with during the term of this
Agreement, whether or not during regular working hours, in each
case, whether developed by himself or by others ("Confidential
Information"). Executive acknowledges that the Confidential
Information constitutes a unique and valuable asset of the
Company and of the respective Company Affiliates and represents a
substantial investment of time and expense by the Wessels Group,
the Company (through its acquisition of the Wessels Group in the
Merger and otherwise) and by the respective Company Affiliates
and that any disclosure or other use of Confidential Information
other than for the sole benefit of the Company or of any Company
Affiliate would be wrongful and would cause irreparable harm to
the Company or such Company Affiliate. The foregoing obligations
of confidentiality shall not apply to any Confidential
Information which (x) is at the time acquired by Executive, or
thereafter becomes, a part of the public domain other than
through the act or omission of Executive, (y) is lawfully
provided to a third party without any obligation of
confidentiality by the Company or any Company Affiliate or any
employee of the Company or any Company Affiliate in the ordinary
course of conducting the business of the Company or such Company
Affiliate or (z) is required by law or by the order of any court,
governmental agency or self-regulatory organization having
jurisdiction over the matter to be disclosed.
6. Noncompetition and Nonsolicitation Covenants. As a
significant inducement to the Company to enter into this
Agreement and provide the benefits to Executive hereunder, and as
a significant inducement to the Company to cause the Merger to
occur, both of which, Executive acknowledges, provide
considerable benefits to Executive, Executive agrees to the terms
of this Article 6, which terms Executive acknowledges and agrees
are reasonable and appropriate under the circumstances.
6.01 Noncompetition. During the period of Executive's
employment with the Company hereunder and for a period of two
years thereafter, Executive shall not, 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,
trading, financial advisory or merger and acquisitions advisory
businesses engaged in by the Company or any Company Affiliate
during the term of this Agreement (the "Covered Business"),
except as an employee of the Company, within the United States.
This Section 6.01 shall no longer apply after the Executive is
terminated for Cause or terminates for Good Reason.
6.02 Nonsolicitation of Employees. During the period
of Executive's employment with the Company hereunder and for a
period of two years thereafter, Executive shall not, directly or
indirectly, (a) induce or attempt to induce any employee of the
Company or of any Company Affiliate to leave the employ of the
Company or such Company Affiliate, respectively, or in any way
interfere adversely with the relationship between any such
employee and the Company or such Company Affiliate, or (b) induce
or attempt to induce any employee of the Company or of any
Company Affiliate to work for, render services or provide advice
to or supply confidential business information or trade secrets
of the Company or of any Company Affiliate to any third person,
firm or corporation.
6.03 Nonsolicitation of Customers. During the period
of Executive's employment with the Company hereunder and for a
period of two years thereafter, Executive shall not, directly or
indirectly, induce or attempt to induce any customer of the
Equity Capital Markets Group to reduce or cease doing business
with the Company.
6.04 Indirect Competition and Solicitation. During the
term of this Agreement and the period covered by Sections 6.01,
6.02 and 6.03 hereof, Executive shall not, directly or
indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by
the provisions of Sections 6.01, 6.02 and/or 6.03 if such
activity were carried out by Executive, either directly or
indirectly.
6.05 Limitation on Covenant. Notwithstanding the
foregoing Sections 6.01 and 6.04 hereof, ownership by Executive,
as a passive investment, of less than 5% of the outstanding
shares of capital stock of any corporation listed on a national
securities exchange or publicly traded on any nationally
recognized over-the-counter market shall not constitute a breach
of this Article 6.
7. Termination of Employment.
7.01 Death/Disability. Executive's employment
shall terminate automatically upon Executive's death during the
Term. If the Company determines in good faith that Executive has
become Disabled (which term shall have the meaning given to it in
Parent's Long-Term Disability Plan), the Company may give written
notice to Executive in accordance with Section 8.02 hereof of its
intention to terminate Executive's employment. In such event,
Executive's employment with the Company shall terminate effective
on the 30th day after delivery of such notice by Executive;
provided that, if Executive shall have returned to full-time
performance of Executive's duties within such 30-day period,
Executive's employment shall not be so terminated.
7.02 For Cause. The Company may terminate
Executive's employment for Cause. For purposes of this
Agreement, "Cause" shall mean: (i) gross dereliction of his
duties hereunder, or (ii) engaging in any other willful
misconduct (including dishonesty or disloyalty to the Company)
that is materially injurious to the business, reputation,
regulatory status or customer or employee relations of the
Company, the Company's Equity Capital Markets Group or any
Company Affiliate, or (iii) material breach by Executive of this
Agreement which breach has not been cured within 30 days after
written notice of such breach has been delivered by the Company,
or (iv) conviction of any felony or gross misdemeanor involving
moral turpitude or fraud. No act or omission will be deemed
willful if it was taken in good faith or after consultation with
or at the direction of an officer to whom Executive reports.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the Board of Directors of the Company
at a meeting of the Board of Directors of the Company called and
held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive to be heard before the Board
of Directors of the Company), finding that in the good faith
opinion of the Board of Directors of the Company, the Executive
had engaged in the conduct set forth in clause (i), (ii), (iii)
or (iv) of this Section 7.02 and specifying the particulars
thereof.
7.03 For Good Reason. Executive may voluntarily
terminate his employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean (i) a material breach by
Parent or the Company of this Agreement, which breach has not
been cured within 30 days after written notice of the breach has
been delivered by Executive or (ii) requiring Executive to work
in a location more than 50 miles from downtown Minneapolis.
7.04 Effects of Employment Termination.
(a) Death or Disability. The Company shall pay
(within 30 days of death or disability) to Executive or his duly
appointed and acting personal representative, executor or
administrator, as the case may be, as the sole and exclusive
obligation to Executive: (i) all of Executive's accrued but
unpaid Base Salary, plus (ii) an amount such that Executive would
receive, in total, a percentage of the Guarantee equal to the
proportion of the calendar year covered by his employment prior
to the termination date and (iii) the value of any accrued,
vested benefits under applicable benefit plans in which he then
participates.
(b) For Cause; Voluntary Termination Without Good
Reason. The Company shall pay to Executive, as the sole and
exclusive obligation to Executive, all of Executive's accrued but
unpaid Base Salary and the value of any accrued, vested benefits
under applicable benefit plans in which he then participates.
(c) For Good Reason. The Company shall pay to
Executive, as the sole and exclusive obligation to Executive, the
Guarantee applicable to each year, or portion thereof, between
the termination date and December 31, 2000.
(d) Termination Without Cause. The Company shall pay
to Executive the Guarantee applicable to each year, or portion
thereof, between the termination date and December 31, 2000.
7.05 Notice of Termination. Any termination by the
Company for Cause, or by Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 8.02 of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii)
if the date of termination is other than the date of receipt of
such notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice). The
failure by Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of
Executive or the Company, respectively, hereunder or preclude
Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing Executive's or the Company's rights
hereunder.
7.06 Surrender of Records and Property. Upon
termination of his employment with the Company, Executive shall
deliver promptly to the Company, all records, manuals, books,
blank forms, documents, letters, memoranda, notes, notebooks,
computer software, reports, data, tables or calculations or
copies thereof, which are the property of the Company or any
Company Affiliate or which relate in any way to the business,
products, practices or techniques of the Company or any Company
Affiliate, and all other property, trade secrets and other
Confidential Information of the Company or any Company Affiliate,
including, but not limited to, all Confidential Documents, which
in any of these cases are in his possession or under his control.
8. Miscellaneous.
8.01 Governing Law. This Agreement is made under and
shall be governed by and construed in accordance with the laws of
the State of Minnesota, without regard to conflicts of laws
principles thereof.
8.02 Notices. All notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this Agreement will be in writing and will be
deemed to have been given when personally delivered or three days
after being mailed by first class mail, return receipt requested,
or when receipt is acknowledged, if sent by facsimile, telecopy
or other electronic transmission device. Notices, demands and
communications to the Company will, unless another address is
specified in writing, be sent to the address indicated below:
If to Executive:
c/o The Wessels Group
601 Second Avenue South
Minneapolis, MN 55402-4314
Facsimile: 612/373-6159
If to the Company:
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402-4422
Facsimile: 612/371-7755
Attention: Chief Executive Officer
and
Attention: General Counsel
8.03 Negotiated Agreement. The parties agree that this
Agreement is the result of negotiations between the parties, with
the benefit of counsel, and that the language of this Agreement
shall not be construed for or against any particular party.
8.04 Prior Agreements. This Agreement (including
others specifically mentioned herein) contains the entire
agreement of the parties relating to the employment of Executive
by the Company and the other matters discussed herein and
supersedes all prior promises, contracts, agreements and
understandings of any kind, whether express or implied, oral or
written, with respect to such subject matter, and the parties
hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not
set forth herein.
8.05 Withholding Taxes. The Company may take such
action as it deems appropriate to insure that all applicable
federal, state, city and other payroll, withholding, income or
other taxes arising from any payments made pursuant to this
Agreement or otherwise as a result of Executive's employment with
the Company, and in order to comply with all applicable federal,
state, city and other tax laws or regulations, are withheld or
collected from Executive.
8.06 Termination, Amendment or Modification of
Agreement. This Agreement may be terminated, extended amended or
otherwise modified only by written agreement duly executed by
each of the Company and Executive.
8.07 No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any
estoppel to enforce any provisions of this Agreement, except by a
statement in writing signed by the party against whom enforcement
of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated,
shall operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for
the future or as to any act other than that specifically waived.
8.08 Assignment. This Agreement shall not be
assignable, in whole or in part, by either party without the
written consent of the other party, except that the Company may,
without the consent of Executive, assign its rights and
obligations under this Agreement to any corporation, firm or
other business entity with or into which the Company may merge or
consolidate, or to which the Company may sell or transfer all or
substantially all of its assets; provided that such corporation,
firm or other business entity shall assume in writing the
Company's obligations hereunder (any failure to do so
constituting a material breach by the Company of the terms
hereof). After any such assignment by the Company, the Company
shall be discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the
purposes of all provisions of this Agreement including this
Section 8.08. This Agreement shall be binding upon Executive's
heirs and representatives.
8.09 Arbitration. Executive and the Company agree
that, except with respect to any action for injunctive relief
pursuant to the provisions of Section 8.10 hereof, all other
disputes relating to, or arising out of, this Agreement, the
termination of this Agreement, Executive's employment with the
Company or the termination of Executive's employment shall be
submitted to arbitration before the New York Stock Exchange, Inc.
("NYSE") in accordance with the applicable provisions of the
Constitution and the rules of the Board of Directors of the NYSE,
as the sole and exclusive remedy for resolving such
controversies. Executive and the Company agree that the decision
of the arbitrator shall be final and binding and that a judgment
may be entered on such arbitration award in any court of
competent jurisdiction.
8.10 Injunctive Relief. Executive agrees that any
breach of the provisions of this Agreement, including without
limitation the provisions of Articles 5 and 6, would cause
irreparable harm to the Company for which the Company could not
be fully compensated by money damages. Accordingly, Executive
specifically agrees that the Company shall be entitled to
temporary and permanent injunctive relief to enforce the
provisions of this Agreement and that such relief may be granted
without the necessity of proving actual damages and without the
necessity of posting any bond in connection therewith. This
provision with respect to injunctive relief shall not, however,
diminish the right of the Company to claim and recover damages in
addition to injunctive relief.
8.11 Severability. To the extent that any provision of
this Agreement shall be determined to be invalid or
unenforceable, the invalid or unenforceable portion of such
provision shall be deleted from this Agreement, and the validity
and enforceability of the remainder of such provision and of this
Agreement shall be unaffected. If any time period or geographic
area referred to in Article 6 of this Agreement shall be
determined by any court or arbitration panel having jurisdiction
over any dispute between the Company and Executive arising
hereunder or otherwise in connection with Executive's employment
by the Company (including any termination of such employment by
either the Company or Executive) to be unreasonable, such time
period or geographic region shall be changed to the maximum
amount of time or largest geographic area that such court or
arbitration panel determines is reasonable under all of the facts
and circumstances.
8.12 Attorneys' Fees. If either party to this
Agreement seeks arbitration or brings an action (under either
Section 8.08 or 8.09 hereof) based upon this Agreement, the
Company shall pay all costs and expenses in connection with such
proceeding, including its reasonable attorneys' fees and the
costs of arbitration of the Executive, unless the Executive has
commenced a frivolous action.
IN WITNESS WHEREOF, Executive and the Company have
executed this Agreement as of the date set forth in the first
paragraph.
"EXECUTIVE"
Kenneth J. Wessels
------------------
Kenneth J. Wessels
DAIN RAUSCHER INCORPORATED
Irving Weiser
By -----------------------
Irving Weiser
Chairman and Chief Executive Officer
Accepted and agreed this day
of March, 1998, for purposes only
of Sections 3.03 and 4.04 hereof:
DAIN RAUSCHER CORPORATION
Irving Weiser
By ----------------------
Irving Wesier
Chairman and Chief Executive Officer
EXHIBIT A
Formula Bonus Opportunity
1. Executive will be eligible to earn a bonus tied to the
performance of the Company's post-Merger Equity Capital
Markets Group (using a compound annual growth rate revenue
target of 18%, and a fully allocated profit margin target of
18%), as described in the following example:
<TABLE>
Total Net Percentage
Percentage Points in Excess Bonus Amount Formula
CAGR Margin Points of 36% X 10 Base Bonus Paid
---- ------ ---------- ---------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
18% 18% 36% -0- $1,500,000 -0-
30% 16% 46% 100% $1,500,000 $1,500,000
23% 23% 46% 100% $1,500,000 $1,500,000
28% 23% 51% 150% $1,500,000 $2,250,000
</TABLE>
2. "CAGR" means compound annual growth rate.
3. "Margin" means fully allocated operating margins before the
Merger transaction costs, cost of capital and goodwill
amortization.
4. The Margin must equal or exceed 12% for a given period in
order for the formula to apply. If the Margin is less than
12%, Executive's bonus will be at the discretion of the
Company's Board of Directors.
5. The performance bonus amount determined by the above formula
may be increased or decreased by 20% based upon previously
agreed objectives.
6. 1998 base revenue: $148 million.
7. 1998 bonus amount base: $1.125 million.
