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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 1996
J. Michaels, Inc.
(Exact name of registrant as specified in charter)
New York 0-5703 11-1796714
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
182 Smith Street, Brooklyn, New York 11201
(Address of principal executive offices)
Registrant's telephone number, including area code: (718-852-6100)
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On April 24, 1996, J. Michaels Inc. (the "Company") and Muriel Siebert
Capital Markets Group Inc. ("Siebert"), the sole shareholder of Muriel Siebert &
Co., Inc. signed a definitive Plan and Agreement of Merger providing for the
merger of Siebert into the Company (the "Merger"). As was contemplated by the
letter of intent previously signed (reported in the Form 8-K dated February 2,
1996), the Plan and Agreement of Merger provides that the Company will liquidate
all of its existing assets, and at the effectiveness of the Merger, the existing
shareholders of the Company will receive out of the liquidation proceeds a cash
payment and the right to share pro rata the remaining net after tax proceeds
(after payment of expenses and liabilities) realized from the sale of the
existing assets of the Company. After the Merger, the shareholders of the
Company as of the effectiveness of the Merger will retain 2.5% of the shares of
the surviving company, and the shareholders of Siebert will own 97.5% of the
shares of the surviving company. The surviving company will continue the
existing brokerage business conducted by Muriel Siebert & Co., Inc.
Consummation of the merger is subject to certain conditions, including
the approval of the shareholders of the Company and Siebert.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
J. MICHAELS, INC.
(Registrant)
By: /s/JAMES H. MICHAELS
James H. Michaels, Pres.
Dated: April 25, 1996
EXHIBITS
Exhibit 10 Plan and Agreement of Merger dated April 24, 1996, and
exhibits and schedules thereto
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PLAN AND AGREEMENT OF MERGER
between
J. MICHAELS, INC.,
a New York corporation,
and
MURIEL SIEBERT CAPITAL MARKETS GROUP INC.,
a Delaware corporation
Dated as of April 24, 1996
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TABLE OF CONTENTS
(This Table of Contents is for convenience of reference
only and is not intended to define, limit or describe the
scope or intent of any provision of this Merger Agreement.)
Page
RECITALS ...........................................................1
ARTICLE I MERGER OF THE COMPANY INTO MSCMG........................ 1
Section 1.1. Merger.............................................. 1
Section 1.2. Further Assurances...............................2
ARTICLE II CERTIFICATE OF INCORPORATION, BY-LAWS,
DIRECTORS AND OFFICERS, AND STOCK OPTIONS........ 2
Section 2.1. Charter Amendment........................................... 2
Section 2.2. Certificate of Incorporation.............................. 2
Section 2.3. By-Laws................................................2
Section 2.4. Directors and Officers................................ 3
Section 2.5. Stock Options............................................ 3
ARTICLE III CONVERSION AND EXCHANGE OF SHARES
AND LIQUIDATION OF THE COMPANY.............3
Section 3.1. Conversion of Shares...........................................3
Section 3.2. Liquidation of the Company Assets.............................. 4
Section 3.3. Option to Leave Assets in Company............................ 5
Section 3.4. Exchange of Certificates..................................... 6
Section 3.5. Company Common Stock........................................ 6
Section 3.6. No Further Transfers......................................... 6
Section 3.7. Legended Certificates........................................ 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE COMPANY................................ 7
Section 4.1. Organization; Authority...................................... 7
Section 4.2. Subsidiaries................................................ 7
Section 4.3. Capitalization of the Company......................... 8
Section 4.4. Charter Documents.............................................. 9
Section 4.5. Subsidiary Capitalization...................................... 9
Section 4.6. Binding Obligation; Consents; Litigation...................... 9
Section 4.7. Financial Statements........................................ 10
Section 4.8. Real Property.............................................. 11
Section 4.9. Banking Facilities...........................................11
Section 4.10. Powers of Attorney and Suretyships.......................11
Section 4.11. Employee Benefits..................................11
Section 4.12. Compliance With Law; Permits..............................15
Section 4.13. Litigation..............................................15
Section 4.14. Material Contracts and Agreements............................ 16
Section 4.15. Labor Matters................................................17
Section 4.16. Tax Matters.................................................17
Section 4.17. Absence of Undisclosed Liabilities...........................18
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Section 4.18. Insurance...................................................18
Section 4.19. No Material Adverse Change 19
Section 4.20. Required Consents 19
Section 4.21. Proxy Statement 19
Section 4.22. Commission Filings 20
Section 4.23. Transfer of Assets and Liabilities
to Liquidating Trust 20
Section 4.24. Disclosure; Representations and Warranties 21
Section 4.25. Finders or Brokers 21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MSCMG 21
Section 5.1. Organization 21
Section 5.2. Authority; Consents 21
Section 5.3. Subsidiaries 22
Section 5.4. Capitalization of MSCMG 22
Section 5.5. Binding Obligation; Consents; Litigation 22
Section 5.6. Financial Statements 23
Section 5.7. Compliance With Law; Permits 23
Section 5.8. Litigation 24
Section 5.9. Litigation 24
Section 5.10. Consents 24
Section 5.11. No Material Adverse Change 24
Section 5.12. Proxy Statement 25
Section 5.13. Disclosure; Representations and Warranties 25
Section 5.14. Finders or Brokers 25
ARTICLE VI TRANSACTIONS PRIOR TO THE EFFECTIVE
TIME OF THE MERGER 26
Section 6.1. Stockholders' Meeting 26
Section 6.2. Approvals; Consents 27
Section 6.3. Conduct and Liquidation of Business
Prior To Effective Time of the Merger 27
Section 6.4. Access to Information and Documents 28
Section 6.5. Periodic Information 29
Section 6.6. Representations 29
Section 6.7. Mailing Date 30
Section 6.8. Information 35
Section 6.9. Notice of Breach 36
Section 6.10. Negotiations with Third Parties 36
Section 6.11. Tax Matters 38
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE PARTIES 41
Section 7.1. Stockholder Approvals 41
Section 7.2. Filing of Charter Amendment 41
Section 7.3. Listing 41
Section 7.4. Mailing Date Documents 41
Section 7.5. Regulatory Approvals 41
Section 7.6. Escrow Agreement 42
Section 7.7. Trust Agreement 42
ARTICLE VIII CONDITIONS TO MSCMG'S OBLIGATIONS 42
Section 8.1. Representations and Warranties 42
Section 8.2. The Company's Performance 43
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Section 8.3. Authority 43
Section 8.4. Opinion of the Company's Counsel 43
Section 8.5. Legal Matters Satisfactory 43
ARTICLE IX CONDITIONS TO THE COMPANY'S OBLIGATIONS
Section 9.1. Representations and Warranties 43
Section 9.2. MSCMG's Performance 44
Section 9.3. Authority 44
Section 9.4. Opinion of MSCMG's Counsel 44
Section 9.5. Legal Matters Satisfactory 44
ARTICLE X TERMINATION 44
Section 10.1. Termination 44
Article XI INDEMNIFICATION 45
Section 11.1. Indemnification by the Company 45
Section 11.2. Indemnification by the Company 49
Section 11.3. Legal Proceedings 51
ARTICLE XII MISCELLANEOUS 52
Section 12.1. Expenses 52
Section 12.2. Survival of Representations and Warranties 52
Section 12.3. Governing Law 53
Section 12.4. Notices 53
Section 12.5. Jurisdiction; Agent For Service 54
Section 12.6. Press Releases 56
Section 12.7. Assignment; Amendments, Waivers 56
Section 12.8. Entire Agreement 56
Section 12.9. Severability 56
Section 12.10. Headings 57
Section 12.11. Counterparts 57
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b
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER (this "Merger Agreement") is made as of
April 24, 1996 between J. MICHAELS, INC., a New York corporation (the
"Company"), and MURIEL SIEBERT CAPITAL MARKETS GROUP INC., a Delaware
corporation wholly-owned by Muriel Siebert ("MSCMG"). The Company and MSCMG are
sometimes referred to herein as the "Constituent Corporations", and the Company
is sometimes referred to herein as the "Surviving Corporation."
RECITALS
A. The Company was incorporated in the State of New York on April 9, 1934.
Its principal executive offices are located at 182 Smith Street, Brooklyn, New
York 11201. The authorized capital stock of the Company consists of 1,500,000
shares of common stock, par value $1.00 per share (the "Company Common Stock"),
of which 891,282 shares were outstanding and entitled to vote as of April 24,
1996. The number of such outstanding shares of the Company Common Stock is
subject to change prior to the effective time of the merger herein provided for
pursuant to the exercise of current outstanding employee stock options.
B. MSCMG was incorporated in the State of Delaware on November 29, 1993.
Its principal executive offices are located at 885 Third Avenue, Suite 1720, New
York, New York 10022. The authorized capital stock of MSCMG consists of 1,500
shares of common stock, no par value (the "MSCMG Common Stock"), all of which
are outstanding and entitled to vote as of the date hereof.
C. The Boards of Directors of the Company and MSCMG have approved this Merger
Agreement and deem it advis- able and for the benefit of their respective
corporations and their stockholders that MSCMG merge with and into the
Company on the terms and conditions herein set forth (the "Merger").
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
MERGER OF THE COMPANY INTO MSCMG
Section 1.1. Merger. Upon the approval and adop- tion of this Merger
Agreement by the stockholders of each of the Constituent Corporations in
accordance with the laws of
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the States of New York and Delaware, as appropriate, and the satisfaction or
waiver of the conditions set forth herein to the obligations of the parties
hereto, a certificate of merger shall, subject to the rights of termination and
abandonment hereinafter set forth, be filed with the Department of State of the
State of New York in accordance with the law of the State of New York and the
Secretary of State of the State of Delaware in accordance with the law of the
State of Delaware. Effective as of the close of business on the date on which
the filing of such certificate of merger is made, MSCMG shall merge with and
into the Company, which as the Surviving Corporation shall continue its
corporate existence under the laws of the State of New York under the name of
Siebert Financial Corp. The date and time of such filing is herein referred to
as the "Effective Time of the Merger".
Section 1.2. Further Assurances. From time to time as and when requested by
the Surviving Corporation, or by its successors or assigns, the officers and
directors of MSCMG last in office shall execute and deliver such deeds and other
instruments of transfer and shall take or cause to be taken such further or
other act as shall be necessary or advisable in order to vest or perfect in the
Surviving Corporation, or to confirm of record or otherwise to the Surviving
Corporation, title to and possession of all the property, interests, assets,
rights, privileges, immunities, powers and purposes of each of the Constituent
Corporations.
ARTICLE II
CERTIFICATE OF INCORPORATION, BY-LAWS,
DIRECTORS AND OFFICERS, AND STOCK OPTIONS
Section 2.1. Charter Amendment. At or immediately prior to the Effective
Time of the Merger, the Company shall amend its Certificate of Incorporation to
increase the number of authorized shares of Company Common Stock from 1,500,000
to 49,000,000 (the "Charter Amendment").
Section 2.2. Certificate of Incorporation. Except for the change of name of
the Company as provided herein, the Certificate of Incorporation of the Company
in effect at the Effective Time of the Merger (as amended by the Charter
Amendment) shall be the Certificate of Incorpo- ration of the Surviving
Corporation until amended as provided by law.
Section 2.3. By-Laws. The by-laws of the Company in effect at the Effective
Time of the Merger shall be the
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by-laws of the Surviving Corporation until amended or repealed as provided by
law.
Section 2.4. Directors and Officers. The direc- tors of MSCMG at the
Effective Time of the Merger shall be the directors of the Surviving Corporation
and shall hold office as provided in the by-laws of the Surviving Corpora- tion.
The officers of MSCMG at the Effective Time of the Merger shall be the officers
of the Surviving Corporation and shall hold office as provided in the by-laws of
the Surviving Corporation.
Section 2.5. Stock Options. The Company's Incentive Stock Option Plan and
the 1987 Stock Option Plan shall be terminated on the date of the Effective Time
of the Merger and any options issued pursuant to such plans not exercised prior
to the Effective Time of the Merger shall be canceled.
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
AND LIQUIDATION OF THE COMPANY
Section 3.1. Conversion of Shares. The manner and basis of converting the
shares of each Constituent Corporation shall be as follows:
(a) Subject to the provisions of paragraph (b), each share of MSCMG Common
Stock outstanding immediately prior to the Effective Time of the Merger (other
than shares of MSCMG Common Stock held in the treasury of MSCMG) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be entitled to receive as of the Effective Time of the Merger 23,823.33 shares
of Company Common Stock for each share of MSCMG Common Stock owned as of the
Effective Time of the Merger, such number of shares of Company Common Stock to
be fixed so that the stockholders of MSCMG as of the Effective Time of the
Merger receive an aggregate of 97.5% of the issued and outstanding shares of
Company Common Stock as of the Effective Time of the Merger.
(b) No certificates for fractions of shares of Company Common Stock and no
scrip or other certificates evi- dencing fractional interests in such shares
shall be issu- able and any such fractional share which would otherwise be
issued shall be canceled without the payment of any amount therefore. No such
stockholder shall be entitled to any voting, dividend or other rights as a
stockholder of the Company with respect to any fractional share.
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(c) The holders of Company Common Stock immediately prior to the Effective
Time of the Merger other than the Dissenting Holders (as defined below) (such
holders other than the Dissenting Holders, the "Existing Holders") shall at the
Effective Time of the Merger receive a cash payment equal to the Effective Date
Payment (as hereinafter defined), and the right to receive distributions from
the liquidating trust to be established by the Company pursuant to Section 3.2
for the benefit of the Existing Holders (the "Liquidating Trust"). The Effective
Date Payment shall be an amount equal to the available cash proceeds from the
liquidation referred to in Section 3.2 below (including in such proceeds the net
after-tax proceeds of any assets sold, after payment of all expenses and
liabilities of the Company (including tax liabilities relating to the
liquidation), and the cash and cash equivalents of the Company in hand
immediately prior to the Effective Time of the Merger), less (i) $500,000 to be
placed in escrow pursuant to Section 3.2 below, (ii) $500,000 to be held by the
Liquidating Trust to pay liabilities, if any, pursuant to the proviso in Section
3.2 below, and (iii) such amount as the trustees of the Liquidating Trust (the
"Trustees") determine in good faith to retain in the Liquidating Trust to enable
the Liquidating Trust to (x) liquidate the assets in the Liquidating Trust in an
orderly fashion and (y) maintain an adequate reserve for liabilities assumed by
the Liquidating Trust.
(d) Each share of MSCMG Common Stock issued and held in the treasury of
MSCMG immediately prior to the Effective Time of the Merger shall be canceled
and retired, and no shares or other securities of the Company shall be issuable,
and no cash shall be exchangeable, with respect thereto.
(e) The Merger shall effect no change in any of the shares of Company
Common Stock outstanding at the Effective Time of the Merger and no such shares
shall be converted as a result of the Merger.
Section 3.2. Liquidation of the Company Assets. Prior to the date hereof,
the Company commenced to liquidate the assets relating to the existing business
of the Company. At the Effective Time of the Merger, (i) the Existing Holders
(other than those who have elected to enforce their right to receive payment for
their shares pursuant to Section 623 of the New York Business Corporation Law)
(such electing holders, the "Dissenting Holders") shall receive the Effective
Date Payment, (ii) $500,000 shall be placed in escrow pursuant to an escrow
agreement substantially in the form of Exhibit A hereto (the "Escrow Agreement")
for one year from the Effective Time of the Merger and (iii) the Surviving
Corporation shall receive the Effective Date Payment for the Dissenting Holders.
Subject to Section 3.3
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below, any and all assets of the Company immediately prior to the Effective Time
of the Merger not so disbursed to the Existing Holders or placed in escrow
pursuant to this Section 3.2 or disbursed to the Surviving Corporation pursuant
to clause (iii) above, including without limitation any and all cash or cash
equivalents not placed in escrow or included in the Effective Date Payment or
the payment to the Surviving Corporation, shall be transferred to the
Liquidating Trust for the exclusive benefit of the Existing Holders; provided,
however, that on or immediately after the liquidation of the last of the
material assets of the Company transferred to the Liquidating Trust (other than
accounts receivable), an additional $500,000 shall be reserved by the
Liquidating Trust for a period of one year from the date thereof to be used to
pay all amounts due to MSCMG (or the Surviving Corporation as the successor in
interest thereto) pursuant to Section 11.1 hereto or to pay liabilities other
than liabilities set forth in Schedule 4.17. Without limiting the generality of
the foregoing, the assets of the Company immediately prior to the Effective Time
of the Merger which are to be transferred to the Liquidating Trust shall include
all cash and cash equivalents, all real and personal property, all rights to tax
or other refunds and all rights of any kind or nature whatsoever, whether choate
or inchoate.
Section 3.3. Option to Leave Assets in Company. At the option of the
Trustees and with the consent of the Surviving Corporation which shall not be
unreasonably withheld, assets of the Company immediately prior to the Effective
Time of the Merger which would otherwise have been transferred to the
Liquidating Trust and which constitute an active business shall, instead, be
held by the Company pending their sale or other disposition. During the period
in which any such assets are held by the Company, the Company irrevocably
designates the Trustees as its agents to manage any such assets pending their
sale or other disposition and to arrange in all respects for their sale or other
disposition, provided that the Company shall have no liability with respect to
such assets or in connection with such disposition, and any liability in
connection with such assets or such disposition shall be a liability to be
assumed by the Liquidating Trust. Such assets, and any after-tax revenues
generated by such assets (including without limitation any revenues generated
from the operation of such assets or their sale or other disposition) and after
payment of all expenses incurred as a result directly, or in any way indirectly,
of the operation or retention of such assets, shall be held in trust by the
Company for the benefit of the Liquidating Trust, and any such after-tax
revenues upon sale or disposition shall immediately be transferred to the
Liquidating Trust. The determination of after-tax revenues for purposes of this
Section 3.3 shall be
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made in accordance with the procedures contained in Section 6.11(d) hereof.
Section 3.4. Exchange of Certificates.
(a) Each holder of record at the Effective Time of the Merger of shares of
MSCMG Common Stock shall be en- titled, upon the surrender to the Company or its
transfer agent of the certificate for its shares of MSCMG Common Stock for
cancellation, to receive a certificate or certificates representing the number
of shares of Company Common Stock into which the holder's shares of MSCMG Common
Stock shall have been converted in the Merger under Section 3.1(a).
(b) Until so presented and surrendered in exchange for a certificate or
certificates representing shares of Company Common Stock, each certificate which
represented issued and outstanding shares of MSCMG Common Stock which were
converted at the Effective Time of the Merger into the right to receive shares
of Company Common Stock shall be deemed for all corporate purposes, except as
set forth below, to evidence the ownership of the number of shares of Company
Common Stock into which the holder's shares shall have been converted in the
Merger. Unless and until any such certificates shall be so surrendered, the
holder of such certificate shall not be entitled to receive any dividend or
other distribution payable to holders of shares of Company Common Stock.
Following such surrender, there shall be paid to the record holder of the
certificate representing shares of Company Common Stock issued upon such
surrender the amount of dividends (without interest thereon) which shall have
become payable with respect to the number of shares of Company Common Stock
represented by the certificate issued in exchange upon such surrender; provided
that such record holder shall not be entitled to receive the Effective Date
Payment, or any other distributions from or in respect of the Liquidating Trust,
after the Effective Time of the Merger or any other proceeds of the liquidation
referred to in Section 3.2 above.
Section 3.5. Company Common Stock. Except for the issuance of
shares of Company Common Stock upon conversion of shares of MSCMG Common Stock
pursuant to Section 3.1, the Merger shall effect no change in the shares of the
Company's capital stock and none of its shares shall be converted as a result of
the Merger.
Section 3.6. No Further Transfers. After the Effective Time of
the Merger, there shall be no registration of transfers on the stock transfer
books of MSCMG of the shares which were outstanding immediately prior to the
Effective Time of the Merger.
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Section 3.7. Legended Certificates. Certificates
representing shares of Company Common Stock issued to each
holder of securities of MSCMG, shall bear a legend substan-
tially as follows:
"The shares represented by this certificate have not been
registered, under the Securities Act of 1933. The shares may not be
sold or transferred in the absence of a current prospectus or an
exemption therefrom under the Securities Act of 1933."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as
follows:
Section 4.1. Organization; Authority. The Company is a
corporation organized and existing in good standing under the laws of the State
of New York. The Company is not required to be qualified or licensed to do
business as a foreign corporation in any jurisdiction by reason of the ownership
or leasing of real property, the maintenance of offices, the warehousing of
goods, the conduct of its business activities, the nature of its business or
otherwise, except where the failure to be so qualified or licensed would be
curable by subsequent qualification without such failure having a material
adverse effect on the Company or would not have a material adverse effect on the
Company. The Company would not be subject to material penalties, taxes or other
burdens based on its past conduct if it chose to qualify in any jurisdiction in
which it is not now qualified. No jurisdiction in the United States in which the
Company is not now qualified has asserted to the Company that the Company is
required to be qualified to do business therein.
The Company has all necessary power and authority to own or to
lease, and to operate, its properties and assets and to carry on its business as
it is now being conducted.
Section 4.2. Subsidiaries. Set forth on Schedule 4.2 are the
only corporations (the "Company Subsidiaries") with respect to which the Company
beneficially owns, directly or indirectly, in excess of 50% of the outstanding
stock or other equity interests, the holders of which are entitled to vote for
election of a majority of the board of directors or other governing body
thereof, except for corporations, if any, which have no material assets or
liabilities and have
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not conducted any operations for the past three years ("Inactive Subsidiaries").
The Company is not aware of any Inactive Subsidiaries. The other entities listed
on Schedule 4.2 are the only entities with respect to which (i) the Company
beneficially owns directly or indirectly in excess of 5% but not in excess of
50% of the outstanding stock or other interests, the holders of which are
entitled to vote for election of a majority of the board of directors or other
governing body thereof, (ii) the Company may be deemed to be in control because
of factors or relationships other than the quantity of stock or other interests
owned, or (iii) the Company's investment in which is accounted for by the equity
method. Each Company Subsidiary is organized and existing and in good standing
under the laws of its jurisdiction of incorporation, which jurisdiction is set
forth on Schedule 4.2. Each Company Subsidiary has all necessary power and
authority to own or to lease, and to operate, its properties and assets and to
carry on its business as it is now being conducted. Each Subsidiary is duly
licensed or qualified to do business as a foreign corporation and in good
standing in every jurisdiction in which (i) the ownership or leasing of real
property, the maintenance of offices, the warehousing of goods, the conduct of
its business activities or the nature of its business makes such qualification
necessary and (ii) failure so to qualify or to become licensed would, if not
remedied, impair title to its properties or its rights to enforce contracts
against others or expose it to material liability in such jurisdictions.
Section 4.3. Capitalization of the Company. The
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authorized capital stock of the Company consists of
1,500,000 shares of common stock, par value $1.00 per share,
of which 891,282 shares are outstanding and have been duly
authorized and validly issued and are fully paid and
nonassessable. No shares of the Company's capital stock are
held by the Company or any of the Company Subsidiaries.
There are no options, warrants, rights, calls, commitments
or agreements of any character obligating the Company or any
of the Company Subsidiaries to issue any shares of capital
stock or any security representing the right to purchase or
otherwise receive any such shares, except for options to
purchase 25,000 shares of the Company Common Stock pursuant
to employee stock options granted under the Company Incen-
tive Stock Option Plan. Schedule 4.3 contains a complete
---
and accurate list of the following with respect to each
employee stock option outstanding under the Company
Incentive Stock Option Plan and the 1987 Stock Option Plan:
the name of the holder of such option, the date such option
was granted, became or will become exercisable and will
expire, the number of shares of Company Common Stock covered
by such option and the exercise price of such option.
Except for restrictions on transfer arising under applicable
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Federal and state securities laws, there are no existing restrictions imposed by
the Company or by its affiliates on the transfer of any outstanding shares of
capital stock of the Company and there are no registration covenants with
respect thereto. None of the outstanding shares of the Company or any of the
Company Subsidiaries was issued in violation of the preemptive rights of any
present or former stockholder.
Section 4.4. Charter Documents. The copies of
the certificates of incorporation and by-laws of the Company
and each of the Company Subsidiaries which have previously
been delivered to MSCMG are complete and correct.
Section 4.5. Subsidiary Capitalization. Except as set forth on
Schedule 4.5, (i) the authorized capital stock of the Company Subsidiaries
consists solely of shares of common stock; (ii) there are no options, warrants,
rights, calls, commitments or agreements of any kind obligating the Company or
any of the Company Subsidiaries to issue any shares of the capital stock of such
Company Subsidiary or any security representing the right to purchase or
otherwise receive any such capital stock or to transfer any issued shares of
such capital stock; and (iii) the Company is the record and beneficial owner of
all the outstanding shares of capital stock of the Company Subsidiaries, free
and clear of all mortgages, security interests, liens, claims and encumbrances.
All such shares of common stock which are outstanding have been validly issued
and are fully paid and nonassessable.
Section 4.6. Binding Obligation; Consents; Litigation. The
execution and delivery of this Merger Agreement by the Company do not, and the
consummation of the transactions contemplated hereby will not, violate (i) any
provision of the certificate of incorporation or by-laws of the Company or any
of the Company Subsidiaries or (ii) any provision of, or result in a breach of
any of the terms or provisions of, or result in the acceleration of any
obligation under, or constitute a default under, any mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree to which the
Company or any of the Company Subsidiaries is a party, or to which the Company
or any of the Company Subsidiaries is, or the assets, properties or business of
the Company or any of the Company Subsidiaries are, subject, which would have a
material adverse effect on the Company or any of its assets (provided that
neither a material adverse change in the operations of the Company, nor the
liquidation of the Company's assets, shall be deemed to have a material adverse
effect on the Company or its assets) (any such included material adverse effect,
a "Material Adverse Effect"). The Board of Directors of the Company has approved
this Merger Agreement,
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has authorized the execution and delivery hereof and has directed that this
Merger Agreement be submitted to the stockholders of the Company for adoption at
a special meeting of such stockholders. The Company has full power, authority
and legal right to enter into this Merger Agreement and, upon appropriate vote
of its stockholders in accordance with the law, to consummate the transactions
contemplated hereby. Except for the approval of its stockholders, the Company
has taken all action required by law, its certificate of incorporation, its
by-laws or otherwise to authorize and to approve the execution and delivery of
this Merger Agreement and the documents, agreements and certificates executed
and delivered by the Company in connection herewith and the consummation by the
Company of the transactions contemplated hereby. This Merger Agreement has been
duly executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms. No consent, action, approval or authorization of, or
registration, declaration or filing with, any governmental authority arising
from the Company's obligations prior to the Merger is required to be obtained by
the Company in order to authorize the execution and delivery by the Company of
this Merger Agreement or the consummation by the Company of the Merger.
Section 4.7. Financial Statements. The Company has furnished
MSCMG with complete copies of the financial statements of the Company for each
of the three fiscal years ended March 31, 1995 (as restated in the case of the
fiscal years ended March 31, 1994 and 1993), including in each case a balance
sheet, the related statements of income and of changes in financial position for
the period then ended, the accompanying notes, and the report thereon of Richard
A. Eisner & Company, LLP, independent (of the Company) certified public
accountants with respect to the fiscal year ended March 31, 1995 ("Eisner &
Co.") and the report thereon of Ernst & Young LLP, independent (of the Company)
certified public accountants with respect to the two fiscal years ended March
31, 1994 and the unaudited financial statements of the Company for the
nine-month period from March 31, 1995 to December 31, 1995, including a balance
sheet and the related statements of income and of changes in financial position
for the nine-month period then ended (the consolidated balance sheet therein and
the notes thereto as at December 31, 1995 being called the "Company Balance
Sheet"). All such financial statements (i) reflect and provide adequate reserves
in respect of all known liabilities of the Company and the Company Subsidiaries
in accordance with GAAP, including all known contingent liabilities as of their
respective dates, and (ii) present fairly the financial condition of the Company
and the Company Subsidiaries at such dates except that a diminution
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in the value of the Company's assets from that reflected on the Company Balance
Sheet shall not be a breach of the representation so long as such diminution
shall not result in the Company's being rendered insolvent at any time from the
date hereof through the Effective Time of the Merger.
Section 4.8. Real Property. Except as set forth on Schedule
4.8, neither the Company nor the Company Subsidiaries owns, has legal or
equitable title in, or has a leasehold interest in, any real property (the "Real
Property").
Section 4.9. Banking Facilities. Schedule 4.9 sets forth the
name of each bank with which the Company has an account or safe deposit box, the
identifying numbers or symbols thereof and the name of each person authorized to
draw thereon or to have access thereto.
Section 4.10. Powers of Attorney and Suretyships. The Company
has set forth on Schedule 4.10 the name of each person, if any, holding any
power of attorney from the Company and the Company Subsidiaries and a summary
statement of the terms thereof. The Company and the Company Subsidiaries have no
material obligation or material liability, either actual, accrued, accruing or
contingent, as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity.
Section 4.11. Employee Benefits.
(a) Set forth on Schedule 4.11 is a correct and complete list
of all funded or unfunded, written or oral, employee benefit plans, contracts,
agreements, incentives, salary, wages or other compensation plans or
arrangements, including but not limited to all pension and profit sharing plans,
savings plans, bonus, deferred compensation, incentive compensation, stock
purchase, supplemental retirement, severance or termination pay, stock option,
hospitalization, medical, life insurance, dental, disability, salary
continuation, vacation, or supplemental unemployment benefit programs, policies,
plans, or arrangements, union contracts, employment contracts, consulting
agreements, retiree benefits and agreements, severance agreements and each other
employee benefit program, plan, policy or arrangement, at any time maintained
since January 1, 1990, contributed to, or required to be contributed to by the
Company or an ERISA Affiliate for the benefit of present or former employees,
directors, agents or consultants, or for which the Company may be responsible or
with respect to which it may have any liability, whether or not subject to ERISA
and whether legally binding or not
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(each a "Plan"); provided, however, Schedule 4.11 shall set forth only those
hospitalization, medical, life insurance, dental, disability, salary
continuation and vacation programs, policies, plans or arrangements and only
those union contracts to which the Company or an ERISA Affiliate is currently
contributing. "ERISA Affiliate" means any trade or business, whether or not
incorporated, that together with the Company would be deemed a single employer
under Section 414(b), (c), (m), (n) or (o) of the Code or Section 4001 of ERISA.
Each Plan intended to be qualified under Section 401(a) of the Code (a
"Tax-Qualified Plan", which term shall exclude any multiemployer plan (as
defined in Section 3(37) of ERISA to which the Company or any of its
subsidiaries contribute and which is the subject of a collective bargaining
agreement ("Multiemployer Plans")) is identified as a Tax-Qualified Plan in such
Schedule 4.11 and is so qualified.
(b) The Company has heretofore delivered to MSCMG
true and complete copies of the following:
(i) each Plan listed on Schedule 4.11 and all
amendments thereto to the date hereof;
(ii) each trust agreement and annuity contract (or any other
funding instruments) pertaining to any Plan, including all amendments
to such documents to the date hereof;
(iii) the most recent determination letter
issued by the Internal Revenue Service with
respect to each of the Tax-Qualified Plans;
(iv) the most recent actuarial valuation
report for each Plan for which an actuarial
valuation report is required to be prepared; and
(v) the most recent Annual Report (IRS Forms 5500 series),
including Schedules A and B and plan audits, if applicable, required to
be filed with respect to each Plan.
(c) The status as of the date hereof of each Plan and
Multiemployer Plan is set forth in Schedule 4.11, including (i) the amount of
the Company's or the ERISA Affiliates contribution to such Plan for each of the
past three fiscal years and the plan year in which the Effective Time of the
Merger occurs, (ii) the amount of any liability of the Company and the ERISA
Affiliates for payments or contributions past due with respect to such Plan as
of the last day of its most recent plan year and as of the end of any subsequent
month ending prior to the Effective Time of the Merger, and the date any such
amounts were paid,
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(iii) any contribution to such Plan in a form other than in cash and (iv)
whether such Plan has been terminated. Except as set forth on Schedule 4.11,
neither the Company nor the ERISA Affiliates has obligations or liabilities with
respect to any Plan or liabilities relating to any Plan under any collective
bargaining agreement to which they are a party or by which they are bound.
(d) To the knowledge of the Company or any officer of the
Company, each Tax-Qualified Plan and any related trust agreements or annuity
contracts (and any other funding instruments) currently comply, and have
complied in the past, both as to form and operation, including compliance with
all reporting and disclosure requirements, with the provisions of ERISA and the
Code, as well as the provisions of any applicable collective bargaining
agreement. The IRS has issued a favorable determination letter with respect to
the qualification under Sections 401(a) and 501(a) of the Code including
compliance with the requirements of the Tax Reform Act of 1986, of each Tax-
Qualified Plan and related trust, if any, and has not taken any action to revoke
such letters. In addition, all necessary governmental approvals for the
Tax-Qualified Plans have been obtained.
(e) With respect to each Tax-Qualified Plan that is subject to
Title I, Subtitle B, Part 3 of ERISA (a "Pension Plan") the present value, on a
termination basis of all accrued benefits (vested and nonvested) of each such
Plan as of the Effective Time of the Merger, determined on the basis of the
actuarial assumptions set forth on Schedule 4.11(e), will not exceed the fair
market value of the assets of each such Plan as of the Effective Time of the
Merger.
(f) With respect to all Pension Plans, except as set forth on
Schedule 4.11, (i) the Company and ERISA Affiliates have paid all premiums (and
interest charges and penalties for late payment, if applicable) due the PBGC
with respect to each plan year thereof for which such premiums are required;
(ii) on and after September 2, 1974, there has been no "reportable event" (as
defined in Section 4043(b) of ERISA and the regulations of the PBGC under that
Section) subject to Title IV of ERISA; (iii) no liability to the PBGC has been
incurred by the Company ERISA Affiliates on account of any termination subject
to Title IV of ERISA; (iv) on and after September 2, 1974, no filing has been
made by the Company ERISA Affiliates with the PBGC, and no proceeding has been
commenced by the PBGC, to terminate any Pension Plan subject to Title IV of
ERISA maintained, or wholly or partially funded, by the Company and ERISA
Affiliates (v) neither the Company and the ERISA Affiliates have (A) ceased
operations at a facility so as to become subject to the provisions of Section
4062(f) of ERISA, (B) withdrawn
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as a substantial employer so as to become subject to the provisions of Section
4063 of ERISA, (C) ceased making contributions so as to become subject to
Section 4064(a) of ERISA to a Pension Plan to which the Company or any ERISA
Affiliates made contributions during the five years prior to the Closing Date,
or (D) made a complete or partial withdrawal from a Multiemployer Plan.
(g) In addition, with respect to all Plans, except as set
forth on Schedule 4.11, (i) other than routine claims for benefits, there are no
material actions, suits or claims pending or threatened against any Plan or the
fiduciaries thereof, or against the assets of any Plan and (ii) on and after
January 1, 1975, neither the Company nor any ERISA Affiliate, any plan fiduciary
of any Plan has engaged in any prohibited transaction within the meaning of
Title I of ERISA or Section 4975 of the Code and no imposition of excise tax
penalties has occurred with respect thereto.
(h) At the Effective Time of the Merger, the Company will have
no employees except to the extent that a portion of the business is left in the
Company as contemplated by Section 3.3.
(i) To the knowledge of the Company or any officer of the
Company, each "group health plan" (within the meaning of Section 4980B of the
Code) maintained by the Company has been administered in compliance with the
coverage continuation requirements contained in the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and any regulations promulgated or proposed
under the Code.
(j) The Company shall terminate or cause to be terminated, on
or prior to the Effective Time of the Merger, and without any liability to the
Surviving Corporation or MSCMG, all Plans described in Schedule 4.11, so that to
the extent permitted by applicable law the Company no longer maintains,
contributes to or participates in such plans after the Effective Time of the
Merger, all in accordance with the applicable requirements of ERISA, the Code,
and the terms of such plans or related instruments; provided, however, that any
plan required to be maintained by applicable law shall be terminated as soon as
permitted by applicable law. The Company shall promptly provide MSCMG with
copies of all documents filed with any governmental agencies and any other
documents relating to the amendment of such plans.
(k) Without limiting the generality of Section
3.2 of this Agreement, the parties hereto hereby further
agree that the Liquidating Trust, on or prior to the
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Effective Time, expressly assumes all obligations and responsibilities under the
Plans currently maintained or contributed to by the Company on behalf of the
employees or former employees, including, without limitation, all obligations
and liabilities with respect to the termination of and withdrawal from the
Plans, all obligations and responsibilities to provide retiree health coverage
and continuation coverage and appropriate notices under COBRA, and all
obligations and responsibilities under all severance and termination pay plans
and programs, and shall indemnify MSCMG and the Surviving Corporation for and
hold them harmless from and against all liabilities, costs, and expenses arising
in connection with such Plans, continuation coverage requirements and
termination obligations. The Surviving Corporation shall cooperate fully with
the Liquidating Trust by making available records, books of account or other
materials, or taking such other reasonable actions, as may be necessary or
helpful for the Liquidating Trust to fulfill its obligations under this Section
4.11(k).
(l) The Corporation does not maintain, sponsor or
contribute to any plan or program providing retiree medical
or life insurance benefits.
Section 4.12. Compliance With Law; Permits. Except as set
forth in Schedule 4.12, and except in all cases for non-compliance which would
not have a Material Adverse Effect, the Company and each Company Subsidiary have
complied with all applicable federal, state, local or foreign laws, regulations,
ordinances, orders, injunction, or decrees, or administrative decisions or
directives (the "Requirements of Law"), relating to its securities, property,
employees, former employees or applicants for employment ("Employees") or
business, including, without limitation, Title VII of the Civil Rights Act of
1964, as amended ("Title VII"), OSHA, the Age Discrimination in Employment Act
of 1967, as amended ("ADEA"), the Equal Pay Act of 1963, as amended ("EPA"), the
NLRA, the Foreign Corrupt Practices Act of 1977, as amended, the Foreign Agents
Registration Act of 1938, as amended, the Federal Regulation of Lobbying Act, as
amended, and the Ethics in Government Act of 1978, as amended, and all
applicable statutes, regulations, orders and restrictions relating to
environmental standards or controls.
Section 4.13. Litigation. (a) Except as set forth in Schedule
4.13, there is no (i) action, suit, claim, proceeding or investigation pending
or, to the knowledge of the Company or any officer of the Company, threatened
against or affecting the Company or any of the Company Subsidiaries or their
assets, Employees or properties, at law or in equity, or before or by any court
or governmental authority, (ii) arbitration proceeding relating to the
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Company or any of the Company's Subsidiaries or their assets, Employees or
properties or (iii) governmental inquiry pending or, to the knowledge of the
Company or any officer of the Company, threatened relating to or involving the
Company, any of the Company Subsidiaries, their assets or properties or the
businesses of the Company or any of the Company Subsidiaries or the transactions
contemplated by this Merger Agreement (including inquiries as to the
qualification of the Company or any of the Company Subsidiaries to hold or
receive any permit) and the Company does not know of any basis for any of the
foregoing. Except for actions brought to collect accounts receivable in the
ordinary course of the Company's business, there are no pending actions, suits,
claims or proceedings brought by the Company or any of the Company Subsidiaries
against others.
(b) Except as set forth in Schedule 4.13, neither the Company
nor any of the Company Subsidiaries has received any written opinion,
memorandum, legal advice or notice from legal counsel to the effect that they
are exposed, from a legal standpoint, to any liability or disadvantage which may
be material to their respective businesses and which would continue past the
Effective Time of the Merger. Neither the Company nor any of the Company
Subsidiaries is in default with respect to any order, writ, injunction or decree
known to or served upon the Company or any of the Company Subsidiaries of any
court or of any governmental authority.
Section 4.14. Material Contracts and Agreements. The Company
has described all material contracts of the Company now in effect to which the
Company or any of the Company Subsidiaries is a party or by which it or its
properties or assets may be bound or affected, under which the total obligation
of the Company or any of the Company Subsidiaries is in excess of $100,000 or
which is otherwise material to the Company on Schedule 4.14 (the "Material
Contracts"). No default, alleged default or anticipatory breach exists on the
part of the Company or any of the Company Subsidiaries or, to the best knowledge
of the Company or any of its officers, on the part of any other party, under any
Material Contract, and there are no material agreements of the parties relating
to any Material Contract that have not been disclosed to MSCMG. All Material
Contracts will be either (i) terminated as of the Effective Time of the Merger
and evidence of such termination shall be given to MSCMG or (ii) assumed by the
Liquidating Trust. As of the Effective Time of the Merger, neither the Company
nor any of the Company Subsidiaries will be a party to any transaction with any
officer or director of the Company or any of the Company Subsidiaries, any
member of the family of any such officer or director or any corporation,
partnership, trust (except the Liquidating Trust) or other entity in which any
such officer or director
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has a substantial interest or is an officer, director,
trustee or partner.
Section 4.15. Labor Matters. Except as set forth on Schedule
4.15, neither the Company nor any of the Company Subsidiaries is a party to any
collective bargaining agreement with any labor organization. All such collective
bargaining agreements shall be terminated as of the Effective Time of the
Merger. There is not pending, or to the knowledge of the Company threatened, any
labor dispute, strike or work stoppage involving the employees of the Company or
any Company Subsidiaries.
Section 4.16. Tax Matters.
(a) Each of the Company and each of the Company Subsidiaries
has filed all tax returns required to be filed by it under the laws of the
United States of America, the jurisdiction of its incorporation, and each state
or other jurisdiction in which it conducts business activities and is required
to file. The Company has paid or set up an adequate reserve in respect of all
taxes for the periods covered by such returns. Neither the Company nor any of
the Company Subsidiaries has any tax liability for which no tax reserve has been
made in respect of any jurisdiction in which the Company has business activities
and is required to file. The Company has set up as provisions for taxes on the
Company Balance Sheet amounts sufficient for all accrued and unpaid federal,
state, county and local taxes of the Company and the Company Subsidiaries,
whether or not disputed, including any interest and penalties in connection
therewith, for all fiscal periods ending on or before the date of the Company
Balance Sheet.
(b) The Company's federal income tax returns have been
examined by the United States Internal Revenue Service (or closed by applicable
statutes) for all years to and including the fiscal year ended March 31, 1992
and no such examinations are in progress. Any deficiencies proposed as a result
of said audits have been paid or finally settled and no issue has been raised in
any such examinations which, by application of similar principles, reasonably
can be expected to result in the assertion of a deficiency for any other year
not so examined. The results of any settlements and any necessary adjustments in
state income tax resulting therefrom are properly reflected in the Company's
financial statements referred to in Section 4.7. The Company is not aware of any
fact which would constitute grounds for any further tax liability with respect
to the years which have not been examined. No agreements or waivers have been
made by or on behalf of the Company for the extension of time for the assessment
of any tax or for any applicable statute of limitations.
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(c) Except for taxes for the payment of which an adequate
reserve has been established on the Company Balance Sheet, there are no tax
liens, whether imposed by any federal, state or local taxing authority,
outstanding against any of the assets, properties or business of the Company.
(d) All taxes and assessments that the Company is required to
withhold or to collect have been duly withheld or collected and all withholdings
and collections have either been duly and timely paid over to the appropriate
governmental authority or are, together with the payments due or to become due
in connection therewith, duly reflected on the Company Balance Sheet in
accordance with GAAP.
For purposes of this Section 4.16, the term "the Company"
includes each other corporation with which the Company files consolidated or
combined income tax returns or reports.
Section 4.17. Absence of Undisclosed Liabilities. Neither the
Company nor any Company Subsidiary has any material indebtedness, liability or
obligation of any character whatsoever, whether or not accrued and whether or
not fixed or contingent, other than (i) liabilities reflected in the Company
Balance Sheet, (ii) liabilities incurred in the ordinary course of business (or
pursuant to the liquidation) of the Company and the Company Subsidiaries since
the date of the Company Balance Sheet, (iii) indebtedness, liabilities and
obligations listed on Schedule 4.17 hereto, and (iv) liabilities incurred in
connection with the performance of this Merger Agreement. The Company has
described all material indebtedness, liabilities or obligations of the Company
and the Company Subsidiaries known to it on Schedule 4.17 (the "Scheduled
Liabilities").
Section 4.18. Insurance. All significant policies of
insurance, together with the premiums currently paid thereon, providing for
business interruption, personal, Employee, product or public liability coverage
with respect to the business of the Company and the Company Subsidiaries are
described on Schedule 4.18. The copies of such policies which have previously
been delivered to MSCMG are complete and correct. All such policies will be
outstanding and in full force and effect at the Effective Time of the Merger and
thereafter, as applicable, until the complete liquidation of the Company's
business; provided, that as of the Effective Time of the Merger, some or all of
such policies will be terminated and the balance (if any) of such policies will
be assigned to, and be for the benefit of, the Liquidating Trust (and the
Surviving Corporation to the extent that the Company is named as a party in any
suit
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covered by such policies). Except as set forth on Schedule 4.18, there are no
claims, actions, suits or proceedings arising out of or based upon any of such
policies of insurance, and, so far as is known to the Company or any of its
officers, no basis for any such claim, action, suit or proceeding exists. There
are no notices of any pending or threatened terminations with respect to any of
such policies and each of the Company and the Company Subsidiaries is in
compliance with all conditions contained therein.
Section 4.19. No Material Adverse Change. Since the date of
the Company Balance Sheet, the Company has not experienced any damage,
destruction or loss (whether or not covered by insurance) or adverse change in
the value of the Company such that the Company has been or would be rendered
insolvent.
Section 4.20. Required Consents. There have been or will be
timely filed, given obtained or taken all applications, notices, consents,
approvals, orders, registrations, qualifications, waivers or other actions of
any kind required by virtue of the execution and delivery of this Merger
Agreement by the Company or the consummation by the Company of any of the
transactions contemplated hereby.
Section 4.21. Proxy Statement. When the Proxy Statement (the
"Proxy Statement") to be distributed to stockholders in connection with the
Merger shall first be mailed or distributed to such stockholders (the "Mailing
Date"), the information with respect to the Company and the Company Subsidiaries
set forth in the Proxy Statement (a) will comply in all material respects with
the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the General Rules and Regulations of the Securities and Exchange
Commission (the "Commission") thereunder and (b) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, except that no representation is hereby made as to any statements or
omissions as described in this clause (b) with respect to which, prior to the
Mailing Date, the Company shall have requested in writing any addition or
modification to the Proxy Statement which shall be necessary in order to make
the Proxy Statement not untrue or misleading in any material respect, unless
such addition or modification shall have been made by the Company prior to the
Mailing Date. At all times subsequent to the Mailing Date up to and including
the Effective Time of the Merger, the information with respect to the Company
and the Company Subsidiaries set forth in the Proxy Statement and all amendments
and supplements thereto (i) will comply in all material respects with the
provisions of the Exchange Act and the General Rules and Regulations of
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the Commission thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, except that
no representation is hereby made as to any statements or omissions as described
in this clause (ii) with respect to which, after the Mailing Date and prior to
the Effective Time of the Merger, the Company shall have requested in writing
any supplement to or amendment of the Proxy Statement, which shall be necessary
in order to make the Proxy Statement not untrue or misleading in any material
respect, unless such supplement or amendment shall have been made by the Company
prior to the Effective Time of the Merger.
Section 4.22. Commission Filings. The Company has previously
delivered to MSCMG a copy of the Company's Annual Reports on Form 10-K for the
fiscal years ended March 31, 1994 and 1995, the Company's annual reports to
stockholders for the fiscal years ended March 31, 1994 and 1995, the Company's
proxy statements in connection with its annual meetings of stockholders held on
September 1, 1994 and September 15, 1995 and its Quarterly Reports on Form 10- Q
for the fiscal quarters ended June 30, 1995, September 30, 1995 and December 31,
1995. The Company has heretofore made public disclosure of such additional
material information since the date of the Company's report on Form 10-K for the
fiscal year ended March 31, 1995 as it was required to disclose pursuant to the
requirements of applicable federal and state securities and other laws and has
furnished copies of such disclosures to MSCMG. Such Annual Reports on Form 10-K,
annual reports to stockholders, proxy statements, Quarterly Reports on Form
10-Q, and other public disclosures of the dates thereof or the dates made, and
such other documents or information with respect to the Company and the Company
Subsidiaries required to be supplied to MSCMG pursuant to this Merger Agreement
or supplied to MSCMG at its request by the Company or on its behalf, taken as a
whole, were or are true, correct and complete and did not or do not contain any
statement which is false or misleading with respect to a material fact, and did
not or do not omit to state a material fact necessary in order to make the
statements therein not false or misleading.
Section 4.23. Transfer of Assets and Liabilities to
Liquidating Trust. Except for those assets and liabilities referred to in
Section 3.3 or listed on Schedule 4.23, the Company will have transferred to the
Liquidating Trust immediately prior to the Effective Time of the Merger each and
every one of its assets and the Liquidating Trust will have assumed all of the
Company's liabilities and obligations now existing or hereafter arising out of
the business and operations of the Company through the period
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ending immediately prior to the Effective Time of the
Merger.
Section 4.24. Disclosure; Representations and Warranties. The
Company has made true and complete responses to all MSCMG's requests for
information, documents, contracts, agreements and records of the Company and the
Company Subsidiaries relating to the business of the Company and the Company
Subsidiaries. Neither this Merger Agreement nor any statement, certificate,
writing or document furnished to MSCMG by the Company in connection with this
Merger Agreement contains, as of the dates of such documents, any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein not misleading.
Section 4.25. Finders or Brokers. The Company has not utilized
the services of any investment banker, broker, finder or intermediary in
connection with the transactions contemplated hereby who might be entitled to a
fee or commission in connection with this Merger Agreement or upon consummation
of the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MSCMG
MSCMG represents and warrants that:
Section 5.1. Organization. MSCMG is a
corporation organized and existing in good standing under
the laws of the State of Delaware.
Section 5.2. Authority; Consents. MSCMG has the corporate
power and authority to execute, deliver and perform its obligations under this
Merger Agreement and the other documents, agreements and certificates executed
and delivered by MSCMG in connection herewith. The execution and delivery of
this Merger Agreement do not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the certificate of
incorporation or by-laws of MSCMG, or any provision of, or result in a breach of
any of the terms or provisions of, or result in the acceleration of any
obligation under, or constitute a default under, any mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree, to which
MSCMG is a party, or to which MSCMG is, or the assets, properties or business of
MSCMG are, subject. MSCMG has taken all action required by law, its certificate
of incorporation, its by-laws or otherwise, to authorize and to approve the
execution and delivery of this Merger Agreement
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and the documents, agreements and certificates executed and delivered by MSCMG
in connection herewith by MSCMG and the consummation by MSCMG of the
transactions contemplated hereby. This Merger Agreement has been duly executed
and delivered by MSCMG and constitutes a valid and legally binding obligation of
MSCMG, enforceable against MSCMG in accordance with its terms.
Section 5.3. Subsidiaries. Immediately prior to the Effective
Time of the Merger, Muriel Siebert & Co., Inc., a New York corporation
("MS&Co."), will be the only corporation with respect to which MSCMG
beneficially owns, directly or indirectly, in excess of 50% of the outstanding
stock or other equity interests, the holders of which are entitled to vote for
election of a majority of the board of directors or other governing body
thereof. The authorized capital stock of MS&Co. will consist solely of shares of
common stock; (ii) there will be no options, warrants, rights, calls,
commitments or agreements of any kind obligating MSCMG or MS&Co. to issue any
shares of the capital stock of MS&Co. or any security representing the right to
purchase or otherwise receive any such capital stock or to transfer any issued
shares of such capital stock; and (iii) MSCMG will be the record and beneficial
owner of all the outstanding shares of capital stock of MS&Co., free and clear
of all mortgages, security interests, liens, claims and encumbrances. All such
shares of common stock which are outstanding have been validly issued and are
fully paid and nonassessable.
Section 5.4. Capitalization of MSCMG. The authorized capital
stock of MSCMG consists of 1,500 shares of common stock, no par value, all of
which shares are issued and outstanding and owned by Muriel Siebert. There are
no options, warrants, rights, calls, commitments or agreements of any character
obligating the Company or any of the Company Subsidiaries to issue any shares of
capital stock or any security representing the right to purchase or otherwise
receive any such shares.
Section 5.5. Binding Obligation; Consents; Litigation. The
execution and delivery of this Merger Agreement by MSCMG do not, and the
consummation of the transactions contemplated hereby will not, violate (i) any
provision of the certificate of incorporation or by-laws of MSCMG or MS&Co. or
(ii) any provision of, or result in a breach of any of the terms or provisions
of, or result in the acceleration of any obligation under, or constitute a
default under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which MSCMG or MS&Co. is a party, or to
which MSCMG or MS&Co. is, or the assets, properties or business of MSCMG or
MS&Co. are, subject, which would have a Material Adverse Effect on
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MSCMG or any of its assets. The Board of Directors and the sole stockholder of
MSCMG have approved this Merger Agreement and authorized the execution and
delivery hereof. MSCMG has full power, authority and legal right to enter into
this Merger Agreement and to consummate the transactions contemplated hereby.
MSCMG has taken all action required by law, its certificate of incorporation,
its by-laws or otherwise to authorize and to approve the execution and delivery
of this Merger Agreement and the documents, agreements and certificates executed
and delivered by MSCMG in connection herewith and the consummation by MSCMG of
the transactions contemplated hereby. This Merger Agreement has been duly
executed and delivered by MSCMG and constitutes a valid and legally binding
obligation of MSCMG, enforceable against MSCMG in accordance with its terms. No
consent, action, approval or authorization of, or registration, declaration or
filing with, any governmental authority arising from MSCMG's obligations prior
to the Merger is required to be obtained by MSCMG in order to authorize the
execution and delivery by MSCMG of this Merger Agreement or the consummation by
MSCMG of the Merger.
Section 5.6. Financial Statements. MSCMG has furnished the
Company with complete copies of the financial statements of MS&Co. for each of
the three fiscal years ended December 31, 1995, including in each case a balance
sheet (the consolidated balance sheet therein and the notes thereto as at
December 31, 1995 being called the "MS&Co. Balance Sheet"), the related
statements of income and of changes in financial position for the period then
ended, the accompanying notes, and the report thereon of Eisner & Co.,
independent (of MS&Co. certified public accountants with respect to the two
fiscal years ended December 31, 1995 and the report thereon of Shulman, Jacobson
& Co., independent (of MS&Co.) certified public accountants with respect to the
fiscal year ended December 31, 1993. All such financial statements (i) reflect
and provide adequate reserves in respect of all known liabilities of MS&Co. in
accordance with GAAP, including all known contingent liabilities as of their
respective dates, and (ii) present fairly the financial condition of MS&Co. at
such dates.
Section 5.7. Compliance With Law; Permits. Except in all cases
for non-compliance which would not have a Material Adverse Effect, MSCMG and
MS&Co. have complied with all Requirements of Law relating to its securities,
property, Employees or business, including, without limitation, Title VII, OSHA,
the ADEA, the EPA, the NLRA, the Foreign Corrupt Practices Act of 1977, as
amended, the Foreign Agents Registration Act of 1938, as amended, the Federal
Regulation of Lobbying Act, as amended, and the Ethics in Government Act of
1978, as amended, and all
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applicable statutes, regulations, orders and restrictions
relating to environmental standards or controls.
Section 5.8. Litigation. (a) There is no (i) action, suit,
claim, proceeding or investigation pending or, to the knowledge of MSCMG or any
officer of MSCMG threatened against or affecting MSCMG or MS&Co. or their
assets, Employees or properties, at law or in equity, or before or by any court
or governmental authority, (ii) arbitration proceeding relating to MSCMG or
MS&Co. or their assets, Employees or properties or (iii) governmental inquiry
pending or, to the knowledge of MSCMG or any officer of MSCMG, threatened
relating to or involving MSCMG, MS&Co., their assets or properties or the
businesses of MSCMG or MS&Co. or the transactions contemplated by this Merger
Agreement (including inquiries as to the qualification of MSCMG or MS&Co. to
hold or receive any permit) and MSCMG does not know of any basis for any of the
foregoing. There are no pending actions, suits, claims or proceedings brought by
MSCMG or MS&Co. against others.
(b) Neither MSCMG nor MS&Co. has received any written opinion,
memorandum, legal advice or notice from legal counsel to the effect that they
are exposed, from a legal standpoint, to any liability or disadvantage which may
be material to their respective businesses and which would continue past the
Effective Time of the Merger. Neither MSCMG nor MS&Co. is in default with
respect to any order, writ, injunction or decree known to or served upon MSCMG
or MS&Co. of any court or of any governmental authority.
Section 5.9. Litigation. MSCMG knows of no pending or
threatened action, suit, proceeding, investigation, order or injunction before
or by any court or governmental body that seeks to restrain or to prevent the
consummation of the transactions contemplated by this Merger Agreement.
Section 5.10. Consents. Except as otherwise
referred to herein, no consent, action, approval or
authorization of, or registration, declaration or filing with, any governmental
authority having jurisdiction over MSCMG is required to be obtained by MSCMG in
order to authorize the execution and delivery by MSCMG of this Merger Agreement
or the performance by MSCMG of its terms (except for filings and consents
required pursuant to New York Stock Exchange requirements).
Section 5.11. No Material Adverse Change. Since
the date of the MS&Co. Balance Sheet, MS&Co. has not
experienced any material damage, destruction or loss
(whether or not covered by insurance) to its assets or
material adverse change in the value of MS&Co.
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Section 5.12. Proxy Statement. On the Mailing Date, the
information with respect to MSCMG and MS&Co. set forth in the Proxy Statement
(a) will comply in all material respects with the provisions of the Exchange
Act, and the General Rules and Regulations of the Commission thereunder and (b)
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, except that no representation is hereby made
as to any statements or omissions as described in this clause (b) with respect
to which, prior to the Mailing Date, MSCMG shall have requested in writing any
addition or modification to the Proxy Statement which shall be necessary in
order to make the Proxy Statement not untrue or misleading in any material
respect, unless such addition or modification shall have been made by the
Company prior to the Mailing Date. At all times subsequent to the Mailing Date
up to and including the Effective Time of the Merger, the information with
respect to MSCMG and MS&Co. set forth in the Proxy Statement and all amendments
and supplements thereto (i) will comply in all material respects with the
provisions of the Exchange Act and the General Rules and Regulations of the
Commission thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, except that
no representation is hereby made as to any statements or omissions as described
in this clause (ii) with respect to which, after the Mailing Date and prior to
the Effective Time of the Merger, MSCMG shall have requested in writing any
supplement to or amendment of the Proxy Statement which shall be necessary in
order to make the Proxy Statement not untrue or misleading in any material
respect, unless such supplement or amendment shall have been made by the Company
prior to the Effective Time of the Merger.
Section 5.13. Disclosure; Representations and Warranties.
MSCMG has made true and complete responses to all the Company's requests for
information, documents, contracts, agreements and records of MSCMG and MS&Co.
relating to the business of MSCMG and MS&Co. Neither this Merger Agreement nor
any statement, certificate, writing or document furnished to the Company by
MSCMG in connection with this Merger Agreement contains, as of the dates of such
documents, any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading.
Section 5.14. Finders or Brokers. MSCMG has not
utilized the services of any investment banker, broker,
finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or
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commission in connection with this Merger Agreement or upon consummation of the
transactions contemplated hereby.
ARTICLE VI
TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE MERGER
Section 6.1. Stockholders' Meeting. (a) Subject to its
fiduciary responsibilities, the Board of Directors of the Company will submit
(i) this Merger Agreement, (ii) the Charter Amendment, and (iii) the proposal to
transfer substantially all of its assets to the Liquidating Trust as required by
Section 909 of the New York Business Corporation Law (the "Plan of Liquidation")
to its stockholders for their adoption and will solicit proxies in favor of and
recommend to its stockholders such adoption at a meeting thereof to be duly
called and held as soon as practicable. In connection therewith, the Company
shall prepare and file with the Commission, as soon as practicable, the required
proxy material and shall use its best efforts promptly to obtain clearance by
the staff of the Commission of the mailing of such material to its stockholders.
Subject to its fiduciary responsibilities, the Company will use its best efforts
to obtain the necessary approval of this Merger Agreement, the Charter Amendment
and the Plan of Liquidation by its stockholders and will take as soon as
practicable such other and further actions as may be required by this Merger
Agreement and as may be required by law to effectuate the Merger, the Charter
Amendment and the Plan of Liquidation. In obtaining the authorization and
approval of its stockholders, the Company shall comply with all applicable
Federal and state securities and other laws in connection with the transactions
to be effected hereunder. Without limiting the generality of the foregoing, the
Company agrees that the information contained in its proxy statement (other than
information as to MSCMG furnished to the Company in writing by MSCMG) (i) will
comply in all respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder, and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case when first mailed to the Company's stockholders and at all times
thereafter through the Effective Date of the Merger. The Company shall not
distribute any material to its stockholders in connection with this Merger
Agreement, the Charter Amendment, the Plan of Liquidation and the transactions
contemplated hereby other than materials contained in its proxy statement
cleared by the staff of the Commission, except such additional material cleared
by the staff of the Commission.
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(b) Without limiting the generality of the foregoing, MSCMG
agrees that the information as to MSCMG furnished to the Company in writing by
MSCMG for use in the Proxy Statement (i) will comply in all respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder, and (ii) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case on the Mailing Date and at
all times thereafter through the Effective Date of the Merger.
Section 6.2. Approvals; Consents. The Company will obtain or
cause to be obtained all consents, approvals and authorizations required by any
applicable requirement of law or by any contract or agreement to be obtained by
the Company in connection with the consummation of the Merger and the Plan of
Liquidation. MSCMG will obtain or cause to be obtained all consents, approvals
and authorizations required by any applicable requirement of law or by any
contract or agreement to be obtained by MSCMG in connection with the
consummation of the Merger.
Section 6.3. Conduct and Liquidation of Business Prior To
Effective Time of the Merger. (a) The Company agrees that from and after the
date hereof, the Company will continue to use its best efforts to liquidate the
assets relating to the businesses of the Company and the Company Subsidiaries
and to satisfy and fully discharge the Scheduled Liabilities.
(b) The Company agrees that from the date hereof to the
Effective Time of the Merger, and except as otherwise consented to or approved
by an officer of MSCMG in writing or required by this Merger Agreement:
(i) No change shall be made in the number of shares of
authorized or issued capital stock of the Company or any of the Company
Subsidiaries, except pursuant to the exercise of the employee stock
options referred to in the third sentence of Section 4.3; nor shall any
option, warrant, call, commitment, right or agreement of any character
be granted or made by the Company or any of the Company Subsidiaries
relating to their respective authorized or issued capital stock.
(ii) No dividend shall be declared or paid or other
distribution or payment declared, made or paid in respect of the
Company Common Stock.
(iii) No powers of attorney shall be granted by
the Company or any of the Company Subsidiaries except
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as may be necessary for the conduct of meetings of
stockholders or directors of the Company Subsidiaries.
(iv) The Company shall use all reasonable efforts to terminate
all contracts, agreements, commitments, understandings or instruments
of the Company or any of the Company Subsidiaries, including the
Material Contracts, except for those to be assumed by the Liquidating
Trust, and to deliver evidence of such termination to MSCMG prior to
the Effective Time of the Merger.
(v) Except as agreed pursuant to Section 3.3, prior to the
Effective Time of the Merger, the Company will terminate the employment
of all of its employees, and shall give any notices required to be
given, and provide any benefit required to be paid or continued,
pursuant to the Worker Adjustment and Retraining Notification Act
("WARN"), COBRA or any other applicable federal, state or local laws,
regulations, ordinances, orders, injunction, or decrees, or
administrative decisions or directives, with respect to such
termination of employment.
Section 6.4. Access to Information and Documents. (a) From the
date hereof to the Effective Time of the Merger, the Company shall give to, or
cause to be made available for, MSCMG and MSCMG shall give to, or cause to be
made available for, the Company and their respective counsels, accountants and
other representatives full access during normal business hours to all
properties, documents, contracts, employees and records of the Company and the
Company Subsidiaries or MSCMG and furnish the other party with copies of such
documents and with such information as such party from time to time reasonably
may request; provided, however, that nothing herein shall be deemed to obligate
the Company or MSCMG to provide the other party access to information or
operations the access to which is restricted for statutory or other governmental
security purposes. The Company will make available to MSCMG for examination
correct and complete copies of all Federal, state, local and foreign tax returns
filed by the Company and the Company Subsidiaries, together with all available
revenue agents' reports, all other reports, notices and correspondence
concerning tax audits or examinations and analyses of all provisions for
reserves or accruals of taxes including deferred taxes.
(b) Until the Effective Time of the Merger (and, if this
Merger Agreement is terminated prior to the Effective Time of the Merger, at all
times after such termination), the Company and MSCMG will not disclose or use
any confidential information obtained in the course of their
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respective investigations, except to the extent that any such confidential
information subsequently becomes public knowledge.
(c) If the Merger is not consummated and this Merger Agreement
is terminated, then MSCMG promptly shall return all documents, contracts,
records or properties of the Company furnished by the Company to MSCMG, and all
copies thereof, and the Company promptly shall return all documents, contracts,
records or properties of MSCMG furnished by MSCMG to the Company, and all copies
thereof.
Section 6.5. Periodic Information. (a) From the date hereof to
the Effective Date of the Merger, the Company shall furnish MSCMG with such
additional financial and operating data and other information regarding its or
the Company Subsidiaries' business, reasonably available to the Company, as
MSCMG shall from time to time reasonably request.
(b) From the date hereof to the Effective Date of the Merger,
the Company shall, promptly and in a timely manner, notify MSCMG of any of the
occurrence of any event, or the failure of any event to occur, that results in a
misrepresentation by the Company or the breach of any warranty by the Company,
or any failure by the Company to comply with any covenant, condition or
agreement contained herein.
(c) From the date hereof to the Effective Date of the Merger,
MSCMG shall furnish the Company with such additional financial and operating
data and other information regarding its business, reasonably available to
MSCMG, as the Company shall from time to time reasonably request.
(d) From the date hereof to the Effective Date of the Merger,
MSCMG shall, promptly and in a timely manner, notify the Company of the
occurrence of any event, or the failure of any event to occur, that results in a
misrepresentation by MSCMG or the breach of any warranty by MSCMG, or any
failure by MSCMG to comply with any covenant, condition or agreement contained
herein.
Section 6.6. Representations. The Company and MSCMG (a) will
take and, in the case of the Company, cause the Company Subsidiaries to take all
action necessary to render accurate as of the Effective Time of the Merger their
respective representations and warranties contained herein, (b) will refrain
from taking any action which would render any such representation or warranty
inaccurate in any material respect as of such time, and (c) will perform or
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cause to be satisfied each covenant or condition to be performed or satisfied by
them under this Merger Agreement.
Section 6.7. Mailing Date. (a) On or prior to
the Mailing Date, MSCMG shall have received the following:
(i) A letter from Eisner & Co., dated the Mailing Date and
addressed to MSCMG and the Company, in form and substance satisfactory
to MSCMG, to the effect that:
(A) they are independent certified public accountants
with respect to the Company and the Company Subsidiaries
within the meaning of the Exchange Act and the applicable
published rules and regulations thereunder;
(B) in their opinion the consolidated financial
statements of the Company and the Company Subsidiaries
examined by them and included in the Proxy Statement comply as
to form in all material respects with the accounting
requirements of the Exchange Act, and of the published rules
and regulations issued by the Commission thereunder;
(C) at the request of MSCMG they have carried out
procedures to a specified date not more than five business
days prior to the Mailing Date, which do not constitute an
examination in accordance with generally accepted auditing
standards of the consolidated financial statements of the
Company and the Company Subsidiaries, as follows: (1) read the
unaudited consolidated financial statements, if any, of the
Company and the Company Subsidiaries included in the Proxy
Statement, (2) read the unaudited consolidated financial
statements of the Company and the Company Subsidiaries for the
period from the date of the most recent financial statements
included in the Proxy Statement through the date of the most
recent interim financial statements available in the ordinary
course of business, (3) read the minutes of the meetings of
stockholders and boards of directors of the Company and the
Company Subsidiaries from March 31, 1994 to said date not more
than five business days prior to the Mailing Date, and (4)
made inquiries of certain officers and employees of the
Company who have responsibility for financial and accounting
matters as to (i) whether the unaudited financial statements,
if any, of the Company and the Company Subsidiaries included
in the Proxy Statement comply as to form in all material
respects with the applicable
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accounting requirements of the Exchange Act, and the published
rules and regulations issued by the Commission thereunder;
(ii) whether said financial statements are fairly presented in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements; and (iii) whether there has been
any change in capital stock or long term debt or any decrease
in consolidated net current assets, stockholders' equity,
revenues, income before income taxes or in the total or per
share amounts of consolidated net income of the Company and
the Company Subsidiaries; and, based on such procedures,
nothing has come to their attention which would cause them to
believe that (1) the unaudited financial statements, if any,
of the Company and the Company Subsidiaries included in the
Proxy Statement do not comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act, and the published rules and regulations issued
by the Commission thereunder; (2) said financial statements
are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements; (3)
as of said date not more than five business days prior to the
Mailing Date there was, except as set forth in the Proxy
Statement, any (x) material change in capital stock or long
term debt of the Company and the Company Subsidiaries or (y)
material decrease in consolidated net current assets or
stockholders' equity of the Company and the Company
Subsidiaries in each case as compared with the amounts shown
in the consolidated balance sheet of the Company and the
Company Subsidiaries at the date of the most recent financial
statements included in the Proxy Statement; or (4) for the
period from the date of the most recent financial statements
included in the Proxy Statement to said date not more than
five business days prior to the Mailing Date, there were,
except as set forth in the Proxy Statement, any decreases as
compared with the corresponding portion of the preceding
12-month period in consolidated revenues; and
(D) at the request of MSCMG they have carried out
described procedures acceptable to MSCMG to a specified date
not more than five business days prior to the Mailing Date
(which procedures do not constitute an examination in
accordance with generally accepted auditing stan-
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dards of the consolidated financial statements of the Company
and the Company Subsidiaries) with respect to such tabular,
percentage, statistical and financial information relating to
the Company set forth in the Proxy Statement as MSCMG shall
have reasonably requested.
(ii) An opinion dated the Mailing Date, of Moses & Singer LLP,
counsel to the Company to the effect that, while such counsel assumes
no responsibility for any events, occurrences or statements of fact
relating to the Company or the Company Subsidiaries, or for the
accuracy, completeness or fairness of any statements contained in the
Proxy Statement, and while such counsel expresses no opinion as to the
financial statements or other financial or statistical data contained
therein, with respect to the information in the Proxy Statement
relating to the Company and the Company Subsidiaries, such counsel has
no reason to believe that the Proxy Statement, as amended or
supplemented to the date of such opinion, contains any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(iii) A certificate of the Company's President and its chief
financial officer, dated the Mailing Date, in form and substance
satisfactory to MSCMG, stating that (A) the Company has complied in all
material respects with the agreements contained herein on its part to
be performed on or prior to such date, and (B) the representations and
warranties of the Company contained herein are true and correct in all
material respects at and as of the date of such certificate, except to
the extent affected by the transactions contemplated hereby and by the
liquidation of the Company as permitted by the provisions of Section
6.3 prior to the Mailing Date, with the same effect as though such
representations and warranties had been made at and as of such date.
(iv) A certificate of the Company's President and its chief
financial officer, dated the Mailing Date, in form and substance
satisfactory to MSCMG, stating that all approvals, consents and waivers
required by Section 4.6 have been obtained, specifically identifying
such consents, waivers and attaching copies thereof to such
certificate.
(v) A voting agreement having the terms and provisions set
forth in Exhibit B attached hereto (the "Voting Agreement") dated the
Mailing Date shall have
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been signed by James H. Michaels (both individually and as the trustee
for the trust for the benefit of Richard H. Michaels and as a
co-trustee for the trust under the will of Jules Michaels) agreeing to
vote all of his shares of Company Common Stock in favor of the Merger
Agreement, the Charter Amendment and the Plan of Liquidation subject to
the conditions set forth therein.
(vi) A complete set of Schedules to this Agreement shall have
been delivered by the Company to MSCMG and the form and content of such
Schedules shall be satisfactory to MSCMG in its sole and complete
discretion.
(b) On or prior to the Mailing Date, the Company
shall have received the following:
(i) A letter from Eisner & Co., dated the Mailing Date and
addressed to the Company and MSCMG, in form and substance satisfactory
to the Company, to the effect that:
(A) they are independent certified public accountants
with respect to MSCMG and MS&Co. within the meaning of the
Exchange Act and the applicable published rules and
regulations thereunder;
(B) in their opinion the financial statements of
MS&Co. examined by them and included in the Proxy Statement
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act, and of the
published rules and regulations issued by the Commission
thereunder;
(C) at the request of the Company they have carried
out procedures to a specified date not more than five business
days prior to the Mailing Date, which do not constitute an
examination in accordance with generally accepted auditing
standards of the financial statements of MS&Co., as follows:
(1) read the unaudited consolidated financial statements, if
any, of MS&Co. included in the Proxy Statement, (2) read the
unaudited consolidated financial statements of MS&Co. for the
period from the date of the most recent financial statements
included in the Proxy Statement through the date of the most
recent interim financial statements available in the ordinary
course of business, (3) read the minutes of the meetings of
stockholders and boards of
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directors of MS&Co. from December 31, 1995 to said date not
more than five business days prior to the Mailing Date, and
(4) made inquiries of certain officers and employees of MS&Co.
who have responsibility for financial and accounting matters
as to (i) whether the unaudited financial statements, if any,
of MS&Co. included in the Proxy Statement comply as to form in
all material respects with the applicable accounting
requirements of the Exchange Act, and the published rules and
regulations issued by the Commission thereunder; (ii) whether
said financial statements are fairly presented in conformity
with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited
financial statements; and (iii) whether there has been any
change in capital stock or long term debt or any decrease in
net current assets, stockholders' equity, revenues, income
before taxes or in the total or per share amounts of net
income of MS&Co.; and, based on such procedures, nothing has
come to their attention which would cause them to believe that
(1) the unaudited financial statements, if any, of MS&Co.
included in the Proxy Statement do not comply as to form in
all material respects with the applicable accounting
requirements of the Exchange Act, and the published rules and
regulations issued by the Commission thereunder; (2) said
financial statements are not fairly presented in conformity
with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited
financial statements; (3) as of said date not more than five
business days prior to the Mailing Date there was, except as
set forth in the Proxy Statement, any (x) change in capital
stock or long term debt of MS&Co. or (y) decrease in net
current assets or stockholders' equity of MS&Co. in each case
as compared with the amounts shown in the balance sheet of
MS&Co. at the date of the most recent financial statements
included in the Proxy Statement; or (4) for the period from
the date of the most recent financial statements included in
the Proxy Statement to said date not more than five business
days prior to the Mailing Date, there were, except as set
forth in the Proxy Statement, any decreases as compared with
the corresponding portion of the preceding 12-month period in
revenues or income before taxes or in the total or per share
amounts of net income; and
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(D) at the request of the Company they have carried
out described procedures acceptable to the Company to a
specified date not more than five business days prior to the
Mailing Date (which procedures do not constitute an
examination in accordance with generally accepted auditing
standards of the financial statements of MS&Co.) with respect
to such tabular, percentage, statistical and financial
information relating to MS&Co. set forth in the Proxy
Statement as the Company shall have reasonably requested.
(ii) An opinion dated the Mailing Date, of Whitman Breed
Abbott & Morgan, counsel to MSCMG to the effect that, while such
counsel assumes no responsibility for any events, occurrences or
statements of fact relating to MSCMG or MS&Co., or for the accuracy,
completeness or fairness of any statements contained in the Proxy
Statement, and while such counsel expresses no opinion as to the
financial statements or other financial or statistical data contained
therein, with respect to the information in the Proxy Statement
relating to MSCMG and MS&Co., such counsel has no reason to believe
that the Proxy Statement, as amended or supplemented to the date of
such opinion, contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading.
(iii) A certificate of the President of MSCMG, dated the
Mailing Date, in form and substance satisfactory to the Company,
stating that (A) MSCMG has complied in all material respects with the
agreements contained herein on its part to be performed on or prior to
such date, and (B) the representations and warranties of MSCMG
contained herein are true and correct in all material respects at and
as of the date of such certificate, except to the extent affected by
the transactions contemplated hereby, with the same effect as though
such representations and warranties had been made at and as of such
date.
(iv) A certificate of MSCMG's President and its chief
financial officer, dated the Mailing Date, in form and substance
satisfactory to the Company, stating that all approvals, consents and
waivers required by Section 5.10 have been obtained, specifically
identifying such consents, waivers and attaching copies thereof to such
certificate.
Section 6.8. Information. (a) The Company will
furnish MSCMG with all information concerning the Company
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reasonably required for inclusion in any application made by MSCMG to any stock
exchange or any governmental or regulatory body in connection with the
transactions contemplated by this Merger Agreement.
(b) MSCMG will furnish the Company with all information
concerning MSCMG and MS&Co. reasonably required for inclusion in the Proxy
Statement or any application made by the Company to the Commission, any stock
exchange or any governmental or regulatory body in connection with the
transactions contemplated by this Merger Agreement.
Section 6.9. Notice of Breach. (a) MSCMG will immediately give
notice to the Company of the occurrence of any event or the failure of any event
to occur that results in a breach of any representation or warranty by MSCMG or
a failure by MSCMG to comply with any covenant, condition or agreement contained
herein.
(b) The Company will immediately give notice to MSCMG of the
occurrence of any event or the failure of any event to occur that results in a
breach of any representation or warranty by the Company or a failure by the
Company to comply with any covenant, condition or agreement contained herein.
Section 6.10. Negotiations with Third Parties. The Company
will not, without the prior written approval of MSCMG, initiate, solicit or
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal
relating to, or that may reasonably be expected to lead to, any Competing
Transaction (as defined below), or enter into discussions or negotiate with any
person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any of the officers, directors or employees of the Company or any of the
Company Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of the Company
Subsidiaries to take any such action, and the Company shall promptly notify
MSCMG of all relevant terms of any such inquiries and proposals received by the
Company or any of the Company Subsidiaries or by any such officer, director,
investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and if such inquiry or proposal
is in writing, the Company shall promptly deliver or cause to be delivered to
MSCMG a copy of such inquiry or proposal; provided, however, that nothing
contained in this Section 6.10 shall prohibit the Board of Directors of the
Company from (i) furnishing information to, or entering into discussions or
negotiations with, any person or entity in
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connection with an unsolicited bona fide written proposal, which proposal is at
a materially higher value, by such person or entity to acquire the Company
pursuant to a merger, consolidation, share exchange, business combination or
other similar transaction or to acquire a substantial portion of the assets of
the Company if the Board of Directors of the Company, after consultation with
and based upon the advice of independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith that such
action is appropriate for such Board of Directors to comply with its fiduciary
duties to stockholders under applicable law; (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction; or
(iii) failing to make or withdrawing or modifying its recommendation referred to
in Section 6.1 if the Board of Directors of the Company, after consultation with
and based upon the advice of independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith that such
action is necessary for such Board of Directors to comply with its fiduciary
duties to stockholders under applicable law; provided, further, however, that in
consideration of MSCMG's willingness to incur the expenses and devote the time
and resources necessary to seek to consummate the transactions contemplated
hereby, if the transactions contemplated hereby fail to be consummated because
the Company has taken any of the actions contemplated in clauses (i) through
(iii) above and the Competing Transaction is consummated, the Company shall pay
to MSCMG, by bank check or wire transfer of immediately available funds, an
amount equal to $750,000. For purposes of this Merger Agreement, "Competing
Transaction" shall mean any of the following (other than the transactions
contemplated by this Merger Agreement, including the Liquidation) involving the
Company or any of the Company Subsidiaries: (I) any merger, consolidation, share
exchange, business combination or similar transaction; (II) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets of the Company and the Company Subsidiaries, taken as a whole; (III) any
tender offer or exchange offer for 20% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith; (iv) any person having acquired
beneficial ownership of, or any group (as such term is used in Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder) having
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the outstanding shares of capital stock of the
Company; or (v) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
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Section 6.11. Tax Matters. (a) (i) Subject to the limitations of Section
11.1(c), the Liquidating Trust shall be responsible for the payment of all taxes
of the Company and each Company Subsidiary attributable to taxable periods
ending on or before the date of the Effective Time of the Merger (the "Pre-ETM
Period") to the extent that payment of such taxes (through payment of estimated
taxes, withholding or in any other manner) has not been made prior to the
Effective Time of the Merger including any taxes resulting from the transfer of
assets by the Company to the Liquidating Trust. The term "Taxes" shall mean all
taxes, charges, fees, interest, penalties, additions to tax or other
assessments, including but not limited to income (whether net or gross), excise,
property, sales, transfer, use, value added, franchise taxes, payroll, wage,
unemployment, worker's compensation, social security, capital, occupation,
estimated, and customs duties imposed by any Tax Authority. The term "Tax
Authority" as used in this Section 6.11 shall mean any domestic or foreign
national, state or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising any
regulatory or taxing authority.
(ii) In the case of any taxable period that
includes (but does not end on) the date of the Effective Time of the Merger, the
Taxes of the Company and each of the Company Subsidiaries which shall be
considered attributable to the pre-ETM Period shall be computed as if such
taxable period had in fact ended at the Effective Time of the Merger and such
Taxes as so computed shall be the responsibility of the Liquidating Trust to the
extent that payment of such Taxes has not been made prior to the Effective Time
of the Merger.
(b) If the amount of Taxes paid by the Company and any of the
Company Subsidiaries or by the Liquidating Trust with respect to a Pre-ETM
Period exceeds the amount of Taxes for which the Company, any of the Company
Subsidiaries or the Liquidating Trust are responsible under this Agreement, the
Surviving Corporation shall pay to the Liquidating Trust the amount of such
excess after the final liability for such Taxes has been determined; provided,
however, that the Surviving Corporation shall in any event immediately pay such
excess to the Liquidating Trust in the event that such excess is used by any
Company Subsidiary or by the Surviving Corporation to reduce or eliminate taxes
that would otherwise be payable with respect to any taxable period subsequent to
a Pre-ETM Period.
(c) The amount of any Taxes attributable to any taxable period
that includes (but does not end on) the date of the Effective Time of the Merger
shall be determined on
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the basis of the permanent books and records (including workpapers) of the
Company and the Company Subsidiaries by assuming that the Company and each
Subsidiary had a taxable year which ended at the Effective Time of the Merger,
except that exemptions, allowances or deductions that are calculated on an
annual basis shall be apportioned on a time basis.
(d) The Surviving Corporation shall compute or cause (i)
Eisner & Co. or (ii) such national accounting firm as shall be approved by the
Liquidating Trust (which approval shall not be unreasonably withheld) to compute
the Taxes for all Pre-ETM Periods for which the Liquidating Trust is responsible
for Taxes under subsection (a) of this Section 6.11 including any taxes
determined under subsection (c) above (each a "Pre-ETM Return Calculation"). The
Surviving Corporation shall pay the fees of Eisner & Co. or the national
accounting firm for computing taxes under this Section 6.11(d). The Surviving
Corporation shall submit the Pre-ETM Return Calculation to the Liquidating Trust
at least 60 days prior to the due date, including extensions actually obtained
(the "Due Date"), of any tax return on which such Taxes are returnable. The
Pre-ETM Return Calculation shall include a statement of any Taxes paid by the
Company prior to the Effective Time of the Merger and the Liquidating Trust
shall have 25 days in which to object to the Pre-ETM Return Calculation. In the
event of a dispute as to any Pre-ETM Return Calculation, the dispute shall be
referred to such firm of independent certified public accountants mutually
agreed to by the Company and the Liquidating Trust (the "Independent
Accountants"). Such Independent Accountants shall finally determine the Pre-ETM
Return Calculation at least ten (10) business days prior to the Due Date of any
such return. The Company and the Liquidating Trust shall each pay one-half of
the fees of such Independent Accountants relating to such determination. The
Liquidating Trust shall pay the Pre-ETM Return Calculation as finally determined
(less any Taxes paid prior to the Effective Time of the Merger as set forth in
the Pre-ETM Return Calculation).
(e) The Company shall prepare and timely file or shall cause
the preparation and timely filing of all tax returns required to be filed prior
to the Effective Time of the Merger. The Surviving Corporation shall have the
sole responsibility for the preparation and filing of all other tax returns of
the Company and any Company Subsidiary; provided that any returns with respect
to which the Liquidating Trust shall have liability under Section 6.11(a) shall
be prepared by (i) Eisner & Co. or (ii) such national accounting firm as shall
be approved by the Liquidating Trust (which approval shall not be unreasonably
withheld).
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(f) (i) The Surviving Corporation and the Company Subsidiaries
shall elect, where permitted by law, to carry forward any net operating loss,
net capital loss, charitable contribution or other item arising on or after the
date of the Effective Time of the Merger that could, absent such election, be
carried back to a Pre-ETM Period. Neither any Company Subsidiary nor the
Surviving Corporation shall amend, without the prior written consent of the
Liquidating Trust, any tax returns relating to a Pre-ETM Period.
(ii) If the Company and the Company Subsidiaries shall have a
net operating loss for any Pre-ETM Period, the Surviving Corporation shall
carryback such net operating loss to the extent permitted under Section 172 of
the Internal Revenue Code (the "Code") and shall apply, for the benefit of the
Liquidating Trust, for a tentative carryback adjustment of the tax pursuant to
Section 6411 of the Code for any prior taxable year affected by such net
operating loss carryback and, upon receipt of such Section 6411 refund or any
other refund of tax with respect to a Pre-ETM Period, shall promptly remit any
such refund to the Liquidating Trust.
(g) The Liquidating Trust and its duly appointed
representatives shall have the sole right, at its sole expense, to supervise or
otherwise coordinate any examination process and to negotiate, resolve, settle
or contest any asserted tax deficiencies or to assert any claim for a tax refund
(collectively a "Tax Claim") with respect to any Pre-ETM Period and neither the
Surviving Corporation nor any Company Subsidiary shall negotiate, resolve,
settle or contest any such Tax Claim without the prior written consent of the
Liquidating Trust.
(h) The Surviving Corporation agrees to give prompt notice to
the Liquidating Trust of the assertion of any claim, or the commencement of any
suit, action, proceeding, investigation or audit with respect to any tax for a
Pre-ETM Period, which notice shall describe in reasonable detail the facts
pertaining thereto and the amount or an estimate of the amount of the liability
arising therefrom. The Company shall cooperate fully in any such action by
furnishing or making available records, books of account or other materials or
taking such other actions (including the granting of a power of attorney to the
Liquidating Trust) as may be necessary or helpful for the defense against the
assertions of any taxing authority as to any return for such periods to the
extent that the Liquidating Trust has responsibility therefore pursuant to
Section 6.11(a).
(i) The Company and each Company Subsidiary shall
retain its records relating to all tax periods which remain
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subject to audit by action or statute or waiver for all Pre- ETM Periods. To the
extent that such records are currently maintained in both a hard copy and an
electronic media format, both such types of records that pertain to the income
or operations of the Company and each Company Subsidiary prior to the close of
business on the date of the Effective Time of the Merger will be retained by the
Company and will not be destroyed without the prior written approval of the
Liquidating Trust prior to the expiration of the applicable statute of
limitations.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Merger Agreement are
subject to the fulfillment and satisfaction of each of the following conditions,
any one or more of which may be waived by MSCMG and the Company.
Section 7.1. Stockholder Approvals. On or before the Effective
Time of the Merger, the stockholders of the Company and the stockholders of
MSCMG shall have adopted this Merger Agreement by the affirmative vote of at
least two-thirds of the outstanding shares of stock and the stockholders of the
Company shall have approved the Charter Amendment and the Plan of Liquidation.
Stockholders owning no more than 45,814 shares shall have elected to enforce
their right to receive payment for their shares of Company Common Stock pursuant
to Section 623 of the New York Business Corporation Law.
Section 7.2. Filing of Charter Amendment. Before the Effective
Time of the Merger the Company shall have filed the Charter Amendment with the
New York Department of State.
Section 7.3. Listing. On or before the Effective Time of the
Merger, The Nasdaq Stock Market shall have approved the listing, upon official
notice of issuance, of the shares of Company Common Stock to be issued pursuant
to the Merger as contemplated by Article Three.
Section 7.4. Mailing Date Documents. MSCMG and
the Company shall each have received on the Mailing Date the
documents which they are to receive under Section 6.4.
Section 7.5. Regulatory Approvals. On or before the Effective
Time of the Merger, all applicable approvals of governmental regulatory
authorities of the United States of America or of any state or political
subdivision thereof required to consummate the Merger shall have been obtained.
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Section 7.6. Escrow Agreement. The Company and a person or
entity acceptable to the Company and MSCMG, as escrow agent, shall have executed
and delivered to MSCMG the Escrow Agreement and placed $500,000 in escrow in
accordance with the terms thereof.
Section 7.7. Trust Agreement. (a) The Company and the Trustees
shall have executed and delivered a trust agreement substantially in the form of
Exhibit E hereto creating the Liquidating Trust and the Company shall have
transferred all of its business and assets (other than the escrow amount) to the
Liquidating Trust (except as otherwise provided in Section 3.3) and the
Liquidating Trust shall have assumed all the Company's obligations and
liabilities (including the Scheduled Liabilities and all tax liabilities
resulting from the transfer of the owned Real Property to the Liquidating Trust)
by executing an assignment and assumption agreement substantially in the form of
Exhibit F hereto.
(b) In furtherance of the Company's transfer of its business
and asset to the Liquidating Trust, prior to the Effective Time of the Merger,
the Company shall execute a deed whereby it transfers title to all owned Real
Property to the Liquidating Trust, and a bill of sale and assignment whereby it
transfers title to all of its personal property, inventory, accounts receivable,
bank accounts and all other assets of the Company to the Liquidating Trust.
Further, the Company and the Liquidating Trustee shall enter into the assignment
and assumption agreement described above.
ARTICLE VIII
CONDITIONS TO MSCMG'S OBLIGATIONS
The obligations of MSCMG hereunder are subject to the
satisfaction, at or before the Effective Time of the Merger, of the following
conditions (any of which may be waived, in whole or in part, by MSCMG):
Section 8.1. Representations and Warranties. The
------------------------------
representations and warranties of the Company contained in
this Merger Agreement (including the Schedules and Exhibits
hereto), or in any certificate or document delivered to
MSCMG in connection herewith, shall be true in all material
respects at the Effective Time of the Merger as if made
again on and as of the Effective Time of the Merger. The
Company shall have duly performed and complied with all
agreements and conditions required by this Merger Agreement
to be performed or complied with by the Company at or before
the Effective Time of the Merger. MSCMG shall have been
furnished with certificates of appropriate officers of the
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Company, dated the Effective Time of the Merger, certifying in such detail as
MSCMG may reasonably request to the fulfillment of the foregoing conditions.
Section 8.2. The Company's Performance. Each of the
obligations of the Company to be performed by it on or before the Effective Time
of the Merger pursuant to the terms of this Merger Agreement shall have been
duly performed in all material respects at the Effective Time of the Merger, and
at the Effective Time of the Merger the Company shall have delivered to MSCMG a
certificate to such effect signed by the President of the Company.
Section 8.3. Authority. All action required to be taken by, or
on the part of, the Company to authorize the execution, delivery and performance
of this Merger Agreement by the Company and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors and stockholders of the Company.
Section 8.4. Opinion of the Company's Counsel. Moses & Singer
LLP, special counsel to the Company, shall have delivered to MSCMG an opinion,
dated the Effective Time of the Merger and addressed to MSCMG, in form and
substance satisfactory to MSCMG.
Section 8.5. Legal Matters Satisfactory. All legal matters,
and the form and substance of all documents to be delivered by the Company to
MSCMG at the Effective Time of the Merger, shall have been approved by, and
shall be satisfactory to, MSCMG. The Trust shall have become a party to this
Agreement by executing an amendment hereto.
ARTICLE IX
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company hereunder are subject to the
satisfaction, at or before the Effective Time of the Merger, of the following
conditions (any of which may be waived, in whole or in part, by the Company):
Section 9.1. Representations and Warranties. The
------------------------------
representations and warranties of MSCMG contained in this
Merger Agreement, or in any certificate or document
delivered to the Company in connection herewith, shall be
true in all material respects at the Effective Time of the
Merger as if made again on and as of the Effective Time of
the Merger. MSCMG shall have duly performed and complied
with all agreements and conditions required by this Merger
Agreement to be performed or complied with by MSCMG at or
before the Effective Time of the Merger. The Company shall
have been furnished with certificates of appropriate
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officers of MSCMG, dated the Effective Time of the Merger, certifying in such
detail as the Company may reasonably request to the fulfillment of the foregoing
conditions.
Section 9.2. MSCMG's Performance. Each of the obligations of
MSCMG to be performed by it on or before the Effective Time of the Merger
pursuant to the terms of this Merger Agreement shall have been duly performed in
all material respects at the Effective Time of the Merger, and at the Effective
Time of the Merger MSCMG shall have delivered to the Company a certificate to
such effect signed by the President of MSCMG.
Section 9.3. Authority. All action required to be taken by, or
on the part of, MSCMG to authorize the execution, delivery and performance of
this Merger Agreement and the consummation of the transactions contemplated
hereby shall have been duly and validly taken by the Board of Directors and the
sole stockholder of MSCMG.
Section 9.4. Opinion of MSCMG's Counsel. Whitman Breed Abbott
& Morgan, special counsel to MSCMG, shall have delivered to the Company an
opinion, dated the Closing Date and addressed to the Company, substantially in
the form of Exhibit D.
Section 9.5. Legal Matters Satisfactory. All legal matters,
and the form and substance of all documents to be delivered by MSCMG to the
Company at the Closing, shall have been approved by, and shall be satisfactory
to, the Company.
ARTICLE X
TERMINATION
Section 10.1. Termination.
This Merger Agreement may be terminated and the Merger abandoned at any time
before the Effective Time of the Merger:
(a) by the written consent of the Company and MSCMG;
(b) by MSCMG, if there has been a material misrepresentation in this Merger
Agreement by the Company, or a material breach by the Company of any of its
warranties or covenants set forth herein, or a failure of any condition to
which the obligations of MSCMG hereunder are subject;
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(c) by the Company, if there has been a material misrepresentation in this
Merger Agreement by MSCMG, or a material breach by MSCMG of any of the
warranties or covenants of MSCMG set forth herein, or a failure of any condition
to which the obligations of the Company hereunder are subject;
(d) by either the Company or MSCMG if the Effective Time of the Merger
shall not have occurred before July 30, 1996, for any reason other than the
failure of the party seeking to terminate this Merger Agreement to perform its
obligations hereunder or a misrepresentation or breach of warranty by such party
herein;
(e) by the Company or MSCMG if the Company shall not have received at the
stockholder meeting called to approve the Merger the favorable vote of at least
two-thirds of its stockholders to approve the Merger; or
(f) by the Company or MSCMG if the Board of Directors of the
Company (i) fails to make or withdraws or modifies its recommendation
to the stockholders of the Company to vote in favor of the Merger, or
(ii) recommends to the Company's stockholders approval or acceptance of
a Competing Transaction, in each case only if the Board of Directors of
the Company, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), determines in good faith that such action
is appropriate for such Board of Directors to comply with its fiduciary
duties to shareholders under applicable law.
Article XI
INDEMNIFICATION
Section 11.1. Indemnification by the Company.
(a) The Company (through the Liquidating Trust) shall be
liable for, shall indemnify MSCMG (or the Surviving Corporation as the
successor in interest thereto) for, shall hold harmless, protect and
defend MSCMG (or the Surviving Corporation as the successor in interest
thereto) from and against, and shall reimburse MSCMG (or the Surviving
Corporation as the successor in interest thereto) for, any and all
MSCMG Damages (as
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defined in Section 11.1(b)) in the manner and to the extent set forth
in this Section 11.1, and subject in all cases to the limitation on the
scope of the Company's obligation to indemnify set forth in Section
11.1(c).
(b) The term "MSCMG Damages" means any and all damages,
losses, liabilities, obligations, penalties, excise taxes, income
taxes, fines, actions, claims, litigation, demands, defenses,
judgments, suits, proceedings, equitable relief, costs, sums paid in
settlement of the foregoing, disbursements or expenses (including,
without limitation, attorneys' and experts' fees and disbursements) of
any kind or of any nature whatsoever (whether based in common law,
statute or contract; fixed or contingent; known or unknown) suffered or
incurred by MSCMG, its officers, directors, employees, affiliates,
successors or assigns (including the Surviving Corporation) resulting
from or arising in connection with:
(i) any misrepresentation by the Company contained in
or made pursuant to this Merger Agreement or in any
certificate, instrument or agreement delivered to MSCMG
pursuant to or in connection with this Merger Agreement;
(ii) any breach of warranty or any default in the
performance of any covenant or obligation of the Company under
or in connection with this Merger Agreement;
(iii) any obligations and liabilities of the Company to be
assumed by the Liquidating Trust pursuant to Section 6,
including, without limitation, the Scheduled Liabilities;
(iv) any Taxes for which the Liquidating
Trust is liable under Section 6.11(a);
(v) any pension, severance, health and other employee
benefit, including severance or vacation pay, supplemental
unemployment benefits or any similar benefit, that became
payable to any employees of the Company in connection with a
Shutdown (as hereinbelow defined) and any other costs,
expenses or payments paid or payable by the Company in
connection with the transactions contemplated by this Merger
Agreement that would not otherwise have been paid or become
payable
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but for the liquidation of the Company, the Merger or the
transactions contemplated by this Merger Agreement. The term
"Shutdown" means the closure or deemed closure of any plant or
the discontinuance or deemed discontinuance of any department
or business, in any case related to the Company or the Company
Subsidiaries or their respective businesses or operations; and
(vi) the employment, termination of employment or
application for employment of any Employee of the Company
prior to the Effective Time of the Merger or at any time in
connection with Section 6.3(b)(viii); and
(vii) all obligations and liabilities with respect to
the termination of and withdrawal from the Plans, all
obligations and responsibilities to provide retiree health
coverage and continuation coverage and appropriate notices
under COBRA, and all obligations and responsibilities under
all severance and termination pay plans and programs.
(c) MSCMG Damages shall only include actual liability or cost
incurred and paid by MSCMG (or the Surviving Corporation as the
successor in interest thereto) to a third party, and shall not include
any claim for any diminution in the value of any assets of the Company
or MSCMG or the Surviving Corporation, or any other damages, direct or
indirect, other than in an actual cost or expense paid by MSCMG (or the
Surviving Corporation as the successor in interest thereto) to a third
party. Notwithstanding anything in this Agreement, under law or
otherwise, the maximum liability of the Company (through the
Liquidating Trust) to MSCMG (or the Surviving Corporation as the
successor in interest thereto) for MSCMG Damages shall be limited as
follows:
(i) the Company shall not be liable for more than an
amount equal to $1,000,000 in the aggregate for all claims for
such MSCMG Damages (excluding, however, liabilities with
respect to the non-payment of the Scheduled Liabilities which
shall be satisfied by the Liquidating Trust and excluding any
Taxes resulting from the sale or transfer to the Liquidating
Trust of assets in connection with the liquidation of assets
relating to the existing businesses of the Company) which
liability shall be satisfied in full from
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funds deposited in escrow pursuant to the
Escrow Agreement; and
(ii) the obligation of the Company (through the
Liquidating Trust) to indemnify MSCMG for, and to hold MSCMG
harmless from, MSCMG Damages shall survive the Effective Time
of the Merger until the first anniversary date of the
Effective Time of the Merger, and no claim with respect to
such MSCMG Damages under this Section 11.1 shall be valid
unless asserted in writing prior to the expiration of such
period, specifying in reasonable detail the basis for such
MSCMG Damages, as provided in the Escrow Agreement.
The right of MSCMG (or the Surviving Corporation as the successor in interest
thereto) to be indemnified pursuant to this Section 11.1 up to the maximum
amount of $1,000,000 in the aggregate (consisting of $500,000 held pursuant to
the Escrow Agreement and $500,000 reserved by the Liquidating Trust in
accordance with the provisions of Section 3.2) is the sole and exclusive right
of MSCMG for any breach of this Agreement or any of the documents executed in
connection herewith, or otherwise in connection with any of the transactions
contemplated hereby, including without limitation the Merger, and neither MSCMG
nor any of its affiliates shall have the right to assert any claim against the
Company, any controlling person of the Company or any of the Company's
affiliates, directors, officers, employees or stockholders, whether such claim
is based on tort (including fraud), contract or otherwise, and whether arising
under statute, common law or otherwise, arising out of this Agreement, the
Merger or any of the transactions contemplated hereby or thereby, except for
claims relating to the non-payment of the Scheduled Liabilities.
In addition, no claim, whether such claim is based on tort
(including fraud), contract or otherwise, and whether arising under statute,
common law or otherwise, shall be asserted by the Company, MSCMG or any of their
affiliates against the Trustees or the beneficiaries of the Liquidating Trust.
No claim shall be asserted by the Company, MSCMG or any of their affiliates
against the Liquidating Trust after the first anniversary date of the Effective
Time of the Merger, or in excess of an aggregate of $1,000,000 (consisting of
$500,000 held pursuant to the Escrow Agreement and $500,000 reserved by the
Liquidating Trust in accordance with the provisions of Section 3.2), except for
claims relating to the non-payment of the Scheduled Liabilities.
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Section 11.2. Indemnification by the Company.
(a) MSCMG (through the Surviving Corporation) shall be liable
for, shall indemnify the Company (or the Liquidating Trust as the
successor in interest thereto) for, shall hold harmless, protect and
defend the Company (or the Liquidating Trust as the successor in
interest thereto) from and against, and shall reimburse the Company (or
the Liquidating Trust as the successor in interest thereto) for, any
and all Company Damages (as defined in Section 11.2(b)) in the manner
and to the extent set forth in this Section 11.2, and subject in all
cases to the limitation on the scope of MSCMG's obligation to indemnify
set forth in Section 11.2(c).
(b) The term "Company Damages" means any and all damages,
losses, liabilities, obligations, penalties, excise taxes, income
taxes, fines, actions, claims, litigation, demands, defenses,
judgments, suits, proceedings, equitable relief, costs, sums paid in
settlement of the foregoing, disbursements or expenses (including,
without limitation, attorneys' and experts' fees and disbursements) of
any kind or of any nature whatsoever (whether based in common law,
statute or contract; fixed or contingent; known or unknown) suffered or
incurred by the Company, its officers, directors, employees,
affiliates, successors or assigns (including the Liquidating Trust)
resulting from or arising in connection with:
(i) any misrepresentation by MSCMG contained in or
made pursuant to this Merger Agreement or in any certificate,
instrument or agreement delivered to the Company pursuant to
or in connection with this Merger Agreement;
(ii) any breach of warranty or any default in the
performance of any covenant or obligation of MSCMG under or in
connection with this Merger Agreement; and
(iii) any Taxes for which the Surviving
Corporation is liable under Section 6.11(e);
(c) Company Damages shall only include actual liability or
cost incurred and paid by the Company (or the Liquidating Trust as the
successor in interest thereto) to a third party, and shall not include
any claim for any diminution in the value of any assets of the Company
or the Liquidating Trust, or any other damages, direct or indirect,
other than in an actual
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cost or expense paid by the Company (or the Liquidating Trust as the
successor in interest thereto) to a third party. Notwithstanding
anything in this Agreement, under law or otherwise, the maximum
liability of MSCMG (through the Surviving Corporation) to the Company
(or the Liquidating Trust as the successor in interest thereto) for
Company Damages shall be limited as follows:
(i) MSCMG shall not be liable for more
than an amount equal to $1,000,000 in the
aggregate for all claims for such Company
Damages; and
(ii) the obligation of MSCMG (through the Surviving
Corporation) to indemnify the Company for, and to hold the
Company harmless from, Company Damages shall survive the
Effective Time of the Merger until the first anniversary date
of the Effective Time of the Merger, and no claim with respect
to such Company Damages under this Section 11.2 shall be valid
unless asserted in writing prior to the expiration of such
period, specifying in reasonable detail the basis for such
Company Damages.
The right of the Company (or the Liquidating Trust as the successor in interest
thereto) to be indemnified up to the maximum amount of $1,000,000 pursuant to
this Section 11.2 is the sole and exclusive right of the Company for any breach
of this Agreement or any of the documents executed in connection herewith, or
otherwise in connection with any of the transactions contemplated hereby,
including without limitation the Merger, and neither the Company nor any of its
affiliates shall have the right to assert any claim against MSCMG, any
controlling person of MSCMG or any of MSCMG's affiliates, directors, officers,
employees or stockholders, whether such claim is based on tort (including
fraud), contract or otherwise, and whether arising under statute, common law or
otherwise, arising out of this Agreement, the Merger or any of the transactions
contemplated hereby or thereby. In addition, (i) no claim, whether such claim is
based on tort (including fraud), contract or otherwise, and whether arising
under statute, common law or otherwise, shall be asserted by the Company, the
Liquidating Trust or any of their affiliates against MSCMG or the Surviving
Corporation and (ii) no claim shall be asserted by the Company, the Liquidating
Trust or any of their affiliates against MSCMG or the Surviving Corporation
after the first anniversary date of the Effective Time of the Merger, in excess
of the $1,000,000.
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Section 11.3. Legal Proceedings.
(a) If any legal proceeding shall be instituted, or any claim
or demand made, against an indemnified party or a party which proposes
to assert that the provisions of this Article XI apply (the
"Indemnified Party") such Indemnified Party shall give prompt notice of
the claim to the party obliged or alleged to be so obliged so to
indemnify such Indemnified Party (the "Indemnitor"). The omission so to
notify such Indemnitor, however, shall not relieve such Indemnitor from
any duty to indemnify which otherwise might exist with regard to such
claim unless (and only to the extent that) the omission to notify
materially prejudices the ability of the Indemnitor to assume the
defense of such claim. After any Indemnitor has received notice from an
Indemnified Party that a claim has been asserted against such
Indemnified Party, the Indemnitor shall have the right, upon giving
written notice to the Indemnified Party, to participate in the defense
of such claim and to elect to assume the defense against the claim, at
its own expense, through the Indemnified Party's attorney or an
attorney selected by the Indemnitor and approved by the Indemnified
Party, which approval shall not be unreasonably withheld. If the
Indemnitor fails to give prompt notice of such election, then the
Indemnitor shall be deemed to have elected not to assume the defense of
such claim and the Indemnified Party may defend against the claim with
its own attorney.
(b) If the Indemnitor so elects to participate in the defense
of such claim or to assume the defense against a claim, then the
Indemnified Party will cooperate and make available to the Indemnitor
(and its representatives) all employees, information, books and records
in its possession or under its control which are reasonably necessary
or useful in connection with such defense; and if the Indemnitor shall
have elected to assume the defense of a claim, then the Indemnitor
shall have the sole right to compromise and settle in good faith any
such claim. If the Indemnitor shall elect to defend or to agree in
writing to compromise or to settle any such claim, then it shall be
bound by any ultimate judgment or settlement as to the existence and
amount of the claim, and the amount of said judgment or settlement
shall be conclusively deemed for all purposes of this Merger Agreement
to be a liability on account of which the Indemnified Party is entitled
to be indemnified hereunder.
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(c) If the Indemnitor does not elect to assume, or is deemed
to have elected not to assume, the defense of a claim then:
(i) the Indemnified Party alone shall
have the right to conduct such defense;
(ii) the Indemnified Party shall have the right to
compromise and to settle, in good faith, the claim without the
prior consent of the Indemnitor; and
(iii) if it is ultimately determined that the claim of
loss which shall form the basis of such judgment or settlement
is one that is validly an obligation of the Indemnitor that
elected not to assume the defense, then such Indemnitor shall
be bound by any ultimate judgment or settlement as to the
existence and the amount of the claim and the amount of said
judgment or settlement shall be conclusively deemed for all
purposes of this Merger Agreement to be a liability on account
of which the Indemnified Party is entitled to be indemnified
hereunder.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Expenses. Except as otherwise provided herein,
MSCMG shall pay all of the expenses of the Company and MSCMG, in connection with
the preparation and performance of the terms of this Merger Agreement and the
transactions contemplated hereby (other than those incurred in association with
the liquidation of the Company, which expenses shall be paid solely by the
Company), including all fees and expenses of each party's investment bankers,
counsel, accountants and actuaries. MSCMG shall pay up to $25,000 of the fees
and expenses of the Company for investment bankers, counsel, accountants and
actuaries in connection with the negotiation and preparation of any letters of
intent between the parties related to the transactions contemplated hereby.
Section 12.2. Survival of Representations and Warranties. (a)
Except as provided below, the representations and warranties of the Company
contained in Article 4 and the representations and warranties of MSCMG contained
in Article 5 shall terminate upon (i) the first anniversary date of the
Effective Time of the Merger, or (ii) the termination of this Merger Agreement
and abandonment of the
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Merger pursuant to the provisions of Section 10.1(a) or 10.1(d) (except for the
agreements as to confidentiality contained in Section 6.4 and as to expenses
contained in Section 12.1), and the parties hereto shall have no continuing
obligations or liabilities with respect thereto.
(b) If either MSCMG or the Company shall have the right to
terminate this Merger Agreement and abandon the Merger pursuant to the
provisions of Section 10.1(b) or Section 10.1(c), then the party which does not
have the right so to terminate this Merger Agreement will use its reasonable
efforts to cure the condition giving rise to such right. If such party is unable
to cure the condition giving rise to such right, the other may exercise its
right under Section 10.1(b) or Section 10.1(c) to terminate the Merger Agreement
and abandon the Merger, or may waive such right and proceed to consummate the
Merger. In any such event, the representations, warranties, covenants and
agreements (except for the agreements as to confidentiality contained in Section
6.4 and as to expenses contained in Section 12.1) of the parties shall
terminate, and the parties hereto shall have no continuing obligations or
liabilities with respect thereto, except as set forth in this Section 12.2(b).
Section 12.3. Governing Law. THIS MERGER AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WITHIN SUCH
STATE.
Section 12.4. Notices. All notices, consents, requests,
instructions, approvals and other communications provided for herein shall be
deemed validly given, made or served if in writing and delivered personally (as
of such delivery) or sent by certified mail (as of two days after deposit in a
United States post office), or sent by overnight courier service (as of two days
after delivery to an internationally recognized courier service), or by telex,
facsimile or telegraph (upon receipt), in any case, postage and charges prepaid,
(a) if to MSCMG, addressed to:
Muriel Siebert Capital Markets Group Inc.
885 Third Avenue, Suite 1720
New York, New York 10022
Telephone: (212) 644-2418
Facsimile: (212) 486-2784
Attention: Muriel Siebert
with a copy to:
Whitman Breed Abbott & Morgan
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200 Park Avenue
New York, New York 10166
Telephone: (212) 351-3000
Facsimile: (212) 351-3131
Attention: Monte E. Wetzler, Esq.
(b) if to the Company, addressed to:
J. Michaels, Inc.
182 Smith Street
Brooklyn, New York 11201
Telephone: (718) 852-6100
Facsimile: (718) 858-0396
Attention: James H. Michaels
with a copy to:
Moses & Singer LLP
1301 Avenue of the Americas
New York, NY 10019-6076
Telephone: (212) 554-7800
Facsimile: (212) 554-7700
Attention: Irving Sitnick, Esq.
or such other address as shall be furnished in writing by
either party to the other.
Section 12.5. Jurisdiction; Agent For Service.
(a) Legal proceedings commenced by the Company or MSCMG
arising out of any of the transactions or obligations contemplated by this
Merger Agreement shall be brought exclusively in the Federal courts or, in the
absence of Federal jurisdiction, state courts, in either case in New York, New
York. The Company and MSCMG irrevocably and unconditionally submit to the
jurisdiction of such courts and agree to take any and all future action
necessary to submit to the jurisdiction of such courts. Each of MSCMG and the
Company irrevocably waives any objection that it may now or hereafter have to
the laying of venue of any suit, action or proceeding brought in any Federal or
state court in New York, New York and further irrevocably waives any claims that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum. Final judgment against the Company or MSCMG, as the
case may be, in any such suit shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and of the amount of any indebtedness or
liability of the Company or MSCMG, as the case may be, therein described, or by
appropriate proceedings under any applicable treaty or otherwise.
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(b) The Company consents to service of process in any suit,
action or other proceeding arising out of this Merger Agreement or the subject
matter hereof or any of the transactions contemplated hereby in such Federal or
state courts by registered mail addressed to the Company at the address provided
in Section 12.4 or to the Company's Agent (defined below). The Company hereby
irrevocably designates and appoints Moses & Singer LLP, with offices on the date
hereof at 1301 Avenue of the Americas, New York, New York 10019-6076 (herein
referred to as the "Company's Agent"), as its attorney-in-fact to receive
service of process in such action, suit or proceeding, it being agree that
service upon such attorney-in-fact shall constitute valid service upon the
Company and its successors and assigns. The Company's submission to jurisdiction
is made for the express benefit of MSCMG and its successors, subrogees and
assigns. Nothing in this Section shall affect the right of MSCMG, or its
successors, subrogees or assigns to serve legal process in any other manner
permitted by law or shall affect the right of MSCMG or its successors, subrogees
or assigns to bring any action or proceeding against the Company or its property
in the courts of other jurisdictions. So long as this Merger Agreement shall be
in effect, the Company shall maintain a duly appointed agent for the service of
summonses give MSCMG written notice prior to any change of the identity of or of
the address for such agent.
(c) MSCMG consents to service of process in any suit, action
or other proceeding arising out of this Merger Agreement or the subject matter
hereof or any of the transactions contemplated hereby in such Federal or state
courts by registered mail addressed to MSCMG at the address provided in Section
12.4 or to MSCMG's Agent (defined below). MSCMG hereby irrevocably designates
and appoints Whitman Breed Abbott & Morgan, with offices on the date hereof at
200 Park Avenue, New York, New York 10166 (herein referred to as "MSCMG's
Agent"), as its attorney-in-fact to receive service of process in such action,
suit or proceeding, it being agree that service upon such attorney-in-fact shall
constitute valid service upon MSCMG and its successors and assigns. MSCMG's
submission to jurisdiction is made for the express benefit of the Company and
its successors, subrogees and assigns. Nothing in this Section shall affect the
right of the Company, or its successors, subrogees or assigns to serve legal
process in any other manner permitted by law or shall affect the right of the
Company or its successors, subrogees or assigns to bring any action or
proceeding against MSCMG or its property in the courts of other jurisdictions.
So long as this Merger Agreement shall be in effect, MSCMG shall maintain a duly
appointed agent for the service of summonses and other legal processes in New
York, New York and shall give the Company
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written notice prior to any change of the identity of or of
the address for such agent.
Section 12.6. Press Releases. MSCMG and the Company will
consult and cooperate in the issuance, form, content and timing of any press
releases issued in connection with the transactions contemplated by this Merger
Agreement.
Section 12.7. Assignment; Amendments, Waivers.
(a) Neither MSCMG nor the Company shall assign any of its
rights or obligations under this Merger Agreement without the prior written
consent of the other, except that the Company shall have the right to assign all
of its rights together with but not separate from all of its obligations under
this Agreement and the Escrow Agreement to the Liquidating Trust; provided that
the Liquidating Trust shall have no right to further assign such rights or
obligations which shall terminate upon the termination of the Liquidating Trust
except as otherwise provided in this Agreement.
(b) This Merger Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and
permitted assigns, and no other person shall acquire or have any right under or
by virtue of this Merger Agreement.
(c) No provision of this Merger Agreement may be amended,
modified or waived except by written agreement duly executed by each of the
parties. No waiver by either party of any breach of any provision hereof shall
be deemed to be a continuing waiver thereof in the future or a waiver of any
other provision hereof; nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 12.8. Entire Agreement. This Merger Agreement
represents the entire agreement between the parties and supersedes and cancels
any prior oral or written agreement, letter of intent or understanding related
to the subject matter hereof.
Section 12.9. Severability. If any term, provision, covenant
or restriction of this Merger Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder of the
terms, provisions, covenants and restrictions of this Merger Agreement shall
remain in full force and effect, unless such action would substantially impair
the benefits to either party of the remaining provisions of this Merger
Agreement.
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Section 12.10. Headings. The headings herein are
for convenience only, do not constitute a part of this
Merger Agreement, and shall not be deemed to limit or affect
any of the provisions hereof.
Section 12.11. Counterparts. This Merger Agreement may be
executed in one or more counterparts which, taken together, shall constitute one
and the same instrument, and this Merger Agreement shall become effective when
one or more counterparts have been signed by each of the parties.
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IN WITNESS WHEREOF, this Merger Agreement has been duly
executed by the parties hereto on the day and year first above written.
J. MICHAELS, INC. MURIEL SIEBERT CAPITAL
MARKETS GROUP INC.
By_______________________ By_______________________
Name:____________________ Name:____________________
Title:___________________ Title:___________________
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Schedules
Section 4.2 Names and Addresses of Subsidiaries;
Jurisdictions of Incorporation and
Qualification
Section 4.3 Incentive Stock Options
Section 4.5 Subsidiary Capitalization
Section 4.8 Real Property
Section 4.10 Powers of Attorney
Section 4.11 Employee Benefits
Section 4.12 Compliance with Applicable Law
Section 4.13 Litigation
Section 4.14 Material Contracts
Section 4.15 Labor Matters
Section 4.17 Scheduled Liabilities
Section 4.18 Insurance
Section 4.23 Retained Assets
Exhibit A Form of Escrow Agreement
Exhibit B Form of Voting Agreement
Exhibit C Intentionally Omitted
Exhibit D Form of Opinion of Counsel to MSCMG
Exhibit E Form of Trust Agreement
Exhibit F Form of Assignment and Assumption Agreement
-iv-
<PAGE>
ESCROW AGREEMENT
This ESCROW AGREEMENT, dated as of ______ __, 1996 (this
"Agreement"), by and among J. MICHAELS, INC., a New York corporation (the
"Company"), MURIEL SIEBERT CAPITAL MARKETS GROUP INC., a Delaware corporation
(together with its successors, "MSCMG"), J. MICHAELS, INC. TRUST, a New York
trust (the "Trust"), and ________________________, solely in the capacity as
escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, MSCMG and the Company have executed and delivered a
Plan and Agreement of Merger, dated as of April 24, 1996 (the "Merger
Agreement"), pursuant to which, subject to the terms and conditions thereof,
MSCMG shall merge with and into the Company;
WHEREAS, pursuant to the Merger Agreement the Company has
agreed to transfer substantially all its assets and liabilities to the Trust
prior to the effective time of the merger in order to liquidate such assets in
an orderly manner for the benefit of the stockholders of the Company prior to
the effective time of the merger; and
WHEREAS, MSCMG and the Company have agreed that on or about
the date hereof the Company shall cause to be deposited with the Escrow Agent
$500,000 in cash to be held in escrow by the Escrow Agent in accordance with the
terms of this Agreement at the request of and as an accommodation to MSCMG, the
Company and the Trust;
NOW, THEREFORE, in consideration of the promises, the mutual
covenants contained herein and in the Merger Agreement and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows (capitalized terms used herein without
definition shall have the meanings attributed thereto in the Merger Agreement):
1. Escrow Funds. (a) On the date hereof, the Company shall
deliver to the Escrow Agent the sum of $500,000 (together with all interest or
other income on such amount from time to time, the "Escrow Funds") by delivery
of a check in the amount of the Escrow Funds for prompt deposit into the [name
of Account] at [name of bank] (Account No.
___ ______) (the "Escrow Account").
<PAGE>
(b) The Escrow Funds shall be held, invested and applied by
the Escrow Agent pursuant to the terms of this Agreement.
2. Investment of Funds. As soon as practicable after the
receipt thereof, the Escrow Agent shall, so long as no Default Notice (as
defined in Section 3) has been received by the Escrow Agent, invest the Escrow
Funds in [a money market account or such other investment available to the
Escrow Agent] at [name of bank] as the Trust may request. The Trust (as
successor in interest to the Company) shall bear and retain the sole
responsibility for the selection of the investment hereunder and all risk of
loss from such investment.
3. Disbursement of Escrow Funds.
(a) Unless the Escrow Agent receives a default notice
substantially in the form of Annex I hereto (a "Default Notice") from MSCMG at
least two business days prior to __________ __, 1997 (the "Escrow Payment
Date"), the Escrow Agent shall, and is hereby directed to, withdraw and pay to
the Trust the Escrow Funds in the Escrow Account on the Escrow Payment Date.
(b) All payments of Escrow Funds made by the Escrow Agent
under Section 3(a) or Section 5 shall be payable in accordance with the
directions specified by notice to the Escrow Agent by the party to be paid
thereunder.
(c) If the Escrow Agent receives a Default Notice from MSCMG
at least two business days prior to the Escrow Payment Date, the Escrow Agent
shall not make any payments with respect to the Escrow Payment Date for the
amounts claimed in the Default Notice (the "Default Amount") and shall hold the
Default Amount on deposit in the Escrow Account and shall apply such funds in
accordance with the directions received by the Escrow Agent (i) jointly from
MSCMG and the Trust by notice executed by each of MSCMG and the Trust pursuant
to Section 5(a), or (ii) by the Arbitrators pursuant to Section 5(b), as the
case may be. The Escrow Agent shall, and is hereby directed to, withdraw and pay
to the Trust the balance of the Escrow Funds remaining in the Escrow Account
after the retention of the Default Amount on the Escrow Payment Date.
4. Events of Default. If any of the events
specified in Section 11.1(b)(i)-(vii) of the Merger
Agreement (an "Event of Default") shall occur or have
occurred then, in any such event, MSCMG shall (i) deliver a
Default Notice to the Escrow Agent in accordance with
Section 3(a) and (ii) give notice to the Trust of the claim
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by MSCMG for MSCMG Damages (as such term is defined in Section 11.1(b) of the
Merger Agreement), specifying in reasonable detail the nature of MSCMG Damages
for which payment is claimed, the Section or Sections of the Merger Agreement
and this Agreement upon which such claim is based, compliance with the
indemnification provisions of the Merger Agreement and the estimated amount
payable in respect thereof.
5. Determination of MSCMG Damages.
(a) MSCMG and the Trust shall from time to time consult
together and use their best efforts to cooperate in resolving questions as to
MSCMG Damages payable to MSCMG hereunder. If the parties shall resolve such
questions, the parties shall jointly notify the Escrow Agent of such resolution
by notice executed by MSCMG and the Trust and directing the Escrow Agent to make
such payments from the Escrow Funds as the parties shall have agreed.
(b) If MSCMG and the Trust are unable, after a period of 30
days from the date of the Default Notice delivered pursuant to Section 4(a), to
determine the amount, if any, of MSCMG Damages payable to MSCMG in respect of an
Event of Default, then the parties shall submit such dispute to arbitration in
New York, New York in accordance with the rules and regulations of the American
Arbitration Association (the "Arbitrators") for a determination of the amount of
MSCMG Damages, if any, payable to MSCMG. Upon resolution of MSCMG claim for
MSCMG Damages, the Arbitrators shall notify the Escrow Agent of the amount, if
any, of Escrow Funds payable to MSCMG with respect to such claim and the Escrow
Agent shall pay such amount to MSCMG. The Arbitrators shall also determine
whether MSCMG or the Trust (or both) shall bear the fees and expenses of such
Arbitrators.
(c) Any resolution as to the amount of MSCMG Damages payable
to MSCMG hereunder determined by the Arbitrators may be enforced by MSCMG in
accordance with Section 5(d).
(d) Legal proceedings commenced by the Trust or MSCMG against
the other to enforce determinations made by the Arbitrators shall be brought
exclusively in the federal courts or, in the absence of federal jurisdiction,
state courts, in either case in New York, New York. Each of the Trust and MSCMG
irrevocably and unconditionally submits to the jurisdiction of such courts and
agrees to take all future actions necessary to submit to the jurisdiction
thereof. Each of the Trust and MSCMG irrevocably waives any objection which it
may have to the laying of venue of any suit, action or proceeding brought in
such courts in New
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York and further irrevocably waives any claim that any such suit, action or
proceeding brought in such courts has been brought in an inconvenient forum.
Final judgment in any such suit shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any indebtedness or
liability of any party therein described.
6. Escrow Agent's Duties and Fees. (a) The
------------------------------
Escrow Agent shall be obligated to perform only such duties
as are expressly set forth in this Agreement. The Escrow
Agent may rely upon, and shall be protected in acting or
refraining from acting upon, any written notice, instruction
or request furnished to it under this Agreement and believed
by it to be genuine and to have been signed or presented by
the proper party or parties, provided that, as set forth
below, any modification of this Agreement shall be required
to be signed by each of the parties to this Agreement. The
Escrow Agent acts under this Agreement as a depositary only
and is not a party to or bound by any agreement or
undertaking which may be evidenced by or arise out of any
items deposited with or delivered to it pursuant to this
Agreement and is not responsible or liable in any manner for
the sufficiency, correctness, genuineness or validity of any
such items and undertakes no responsibility or liability for
the form of execution of such items or the identity,
authority, title or rights of any person executing or
depositing same. The Escrow Agent shall not be liable to
MSCMG or the Trust or their respective successors and
assigns for any action taken or omitted to be taken here-
under in good faith; provided, however, that the Escrow
--------
Agent shall be and remain liable for any damages arising as
a result of its wilful misconduct or gross negligence.
(b) MSCMG shall indemnify the Escrow Agent for and hold the
Escrow Agent harmless against, any loss, damage, liability or expense incurred
by the Escrow Agent not caused by its gross negligence or wilful misconduct,
arising out of or in connection with its entering into this Agreement and the
performance of its duties under this Agreement, including the costs and expenses
of defending itself against any claim or liability in any legal proceeding in
connection with this Agreement (including reasonable attorneys' fees). The
Escrow Agent may consult with counsel of its choice and shall have full and
complete authorization and protection for any action taken or suffered by it
under this Agreement in good faith and in accordance with the opinion of such
counsel.
(c) MSCMG shall pay the reasonable compensation
of the Escrow Agent for the services to the rendered by the
Escrow Agent hereunder and shall pay to or reimburse the
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Escrow Agent for all expenses, disbursements and advances, including reasonable
attorneys' fees, incurred or made by the Escrow Agent in connection with the
performance of its duties hereunder.
(d) MSCMG, the Company and the Trust warrant to the Escrow
Agent that, except as provided in Section 6(e), there are no Federal, state or
local tax liability or filing requirements concerning the Escrow Agent's actions
contemplated hereunder and warrant and represent to the Escrow Agent that the
Escrow Agent has no duty to withhold or file any report or any tax liability
under any Federal or state income tax, local or state property tax, local or
state sales or use taxes, or any other tax by any taxing authority. MSCMG agrees
to indemnify the Escrow Agent fully for any tax liability, penalties or interest
incurred by the Escrow Agent arising hereunder and agrees to pay in full any
such tax liability together with penalty and interest if any is ultimately
assessed against the Escrow Agent for any reason as a result of its action
hereunder (except for the Escrow Agent's individual income tax liability).
(e) Due to the requirement that all trust accounts have
Taxpayer Identification Numbers documented by appropriate W-8 and W-9 forms, the
Escrow Agent shall promptly provide such forms to MSCMG, the Company and the
Trust, and MSCMG, the Company and the Trust shall return such forms to the
Escrow Agent, duly completed and signed, within five days of receipt thereof.
MSCMG, the Company and the Trust acknowledge that failure to provide such forms
may prevent or delay disbursement of Escrow Funds hereunder.
7. Notices. All notices, consents, requests,
instruction, approvals and other communications provided for
in this Agreement shall be in writing and shall become
effective when delivered at the following addresses:
(a) if to MSCMG:
Muriel Siebert Capital
Markets Group, Inc.
885 Third Avenue, Suite 1720
New York, New York 10022
Fax: (212) 486-2784
Attention: Muriel Siebert
(b) if to the Company:
J. Michaels, Inc.
182 Smith Street
Brooklyn, New York 11201
Fax: (718) 858-0396
Attention: James H. Michaels
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<PAGE>
(c) if to the Trust:
J. Michaels, Inc. Trust
c/o J. Michaels, Inc.
182 Smith Street
Brooklyn, New York 11201
Fax: (718) 858-0396
Attention: James H. Michaels
(d) if to the Escrow Agent:
[name]
[address]
Fax: (212)
Attention:
8. Miscellaneous Provisions. (a) This
Agreement shall be governed by and construed in accordance
with the internal, substantive laws of the State of New York
without giving effect to the conflict of law rules thereof.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) This Agreement may not be assigned by MSCMG,
the Company or the Trust in any manner whatsoever.
(d) MSCMG, the Company and the Trust shall cooperate with the
Escrow Agent and deliver to the Escrow Agent such additional information and
documents as the Escrow Agent shall reasonably request in the performance of its
obligations under this Agreement, including such documents as it shall
reasonably request to evidence termination of this Agreement and to evidence
consent to the final payment of the Escrow Funds and interest on the Escrow
Funds in accordance with the terms of the Agreement.
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IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be duly executed as of the day and year first above written.
MURIEL SIEBERT CAPITAL
MARKETS GROUP INC.
By:______________________________
Name:
Title:
J. MICHAELS, INC.
By:______________________________
Name:
Title:
J. MICHAELS, INC. TRUST
By:______________________________
Name:
Title: Trustee
- -------------------
, as Escrow Agent
By:______________________________
Name:
Title:
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Annex I
to
Escrow Agreement
FORM OF DEFAULT NOTICE
[MSCMG's LETTERHEAD]
[Escrow Agent
Address
Attention: ]
Re: Escrow Account No. [ ]
Dear Sir or Madam:
Pursuant to Section 4(a) of the Escrow Agreement, dated as of
__________ ___, 1996 (the "Escrow Agreement"), among Muriel Siebert Capital
Markets Group Inc., a Delaware corporation (together with its successors,
MSCMG"), J. Michaels, Inc., a New York corporation (the "Company"), J. Michaels,
Inc. Trust, a New York trust (the "Trust"), and you, as escrow agent, you are
hereby notified that an Event of Default has occurred.
Accordingly you are hereby directed to hold $_____ of the
Escrow Funds on deposit in the Escrow Account pursuant to Section 3(a) of the
Escrow Agreement and not to make any payments of such amount to the Trust under
the Escrow Agreement.
[Specify in reasonable detail the nature of MSCMG Damages for
which payment is claimed, the Section or Sections of the Merger Agreement and
the Escrow Agreement upon which such claim is based, compliance with the
indemnification provisions of the Merger Agreement and the estimated amount
payable in respect thereof]
Capitalized terms used herein without definition have the
meanings attributed thereto in the Escrow Agreement.
IN WITNESS WHEREOF, MSCMG has duly caused this Default Notice
to be delivered to you in accordance with the terms of the Escrow Agreement.
MURIEL SIEBERT CAPITAL
MARKETS GROUP INC.
By:________________________
Name:
Title:
<PAGE>
Exhibit B
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of April 24, 1996 (this
"Agreement"), between MURIEL SIEBERT CAPITAL MARKETS GROUP INC., a Delaware
corporation ("MSCMG"), and JAMES H. MICHAELS, a resident of the State of New
York (both individually and in his capacity as the trustee for a trust for the
benefit of Richard H. Michaels and his capacity as a co-trustee for a trust
under the will of Jules Michaels) ("Mr. Michaels").
R E C I T A L S:
A. Mr. Michaels is the current Chairman of the Board,
President and Principal Executive Officer of J. Michaels, Inc., a New York
corporation (the "Company"), and is, as of the date hereof, the record owner of
74,862 shares of common stock, par value $1.00 per share (the "Common Stock"),
of the Company and has the right to acquire 20,000 shares of Common Stock
pursuant to currently exercisable stock options (collectively, the "J. Michaels
Shares"). The J. Michaels Shares constitute approximately 10.4% of the issued
and outstanding shares of Common Stock as of the date hereof.
B. Mr. Michaels is the trustee for a trust for
the benefit of Richard H. Michaels which is, as of the date
hereof, the record owner of 101,532 shares of Common Stock
(the "R. Michaels Trust Shares" and together with the J.
Michaels Shares, the "Shares"). In such capacity, Mr.
Michaels has sole voting power with respect to the R.
Michaels Trust Shares. The R. Michaels Trust Shares
constitute approximately 11.4% of the issued and outstanding
shares of Common Stock as of the date hereof.
C. Mr. Michaels is a co-trustee for a trust under the will of
Jules Michaels which is, as of the date hereof, the record owner of 139,449
shares of Common Stock (the "Jules Michaels Trust Shares"). In such capacity,
Mr. Michaels has shared voting power with respect to the Jules Michaels Trust
Shares. The Jules Michaels Trust Shares constitute approximately 15.6% of the
issued and outstanding shares of Common Stock as of the date hereof.
D. The Company and MSCMG have agreed that MSCMG will merge
with and into the Company pursuant to a Plan and Agreement of Merger, dated as
of the date hereof (the "Merger Agreement"), between the Company and MSCMG.
<PAGE>
E. The Company has agreed to convene a special meeting of its
stockholders (the "Special Meeting") as promptly as practicable to consider and
vote on (i) the Merger Agreement, (ii) an amendment to the Company's Certificate
of Incorporation to increase the number of authorized shares of Common Stock,
and (iii) a proposal to transfer substantially all of the Company's assets to a
liquidating trust as required by Section 909 of the New York Business
Corporation Law (collectively, the "Special Meeting Matters").
F. MSCMG wishes to obtain certain assurances from Mr. Michaels
that he will vote the Shares for each of the Special Meeting Matters at the
Special Meeting and will vote the Jules Michaels Trust Shares for each of the
Special Meeting Matters at the Special Meeting if his co-trustee is willing to
so vote and Mr. Michaels is willing to provide such assurances.
THE PARTIES AGREE AS FOLLOWS:
1. Representations and Warranties. Mr. Michaels
represents and warrants that:
(a) He owns, or is otherwise able to direct the voting of, the
Shares described in the Recitals above to the extent issued and
outstanding, free and clear of any restriction on voting, and has the
right to vote the same free of any such encumbrance (other than any
general fiduciary obligation imposed by law).
(b) The execution, delivery and performance of this Agreement
by him do not (i) conflict with or violate any trust or other agreement
or instrument to which or by which he or the Shares is a party or is
bound, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to him or by which the Shares or the
Jules Michaels Trust Shares are bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Shares
or the Jules Michaels Trust Shares pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, to which he is a party or
by which he or the Shares or the Jules Michaels Trust Shares is bound
or affected.
(c) The execution, delivery and performance of
this Agreement by him do not require any consent,
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<PAGE>
approval, authorization or permit of any federal,
state, local or foreign regulatory body.
(d) This Agreement is a valid and binding agreement of his
with respect to the Shares, enforceable against him in accordance with
its terms, except that such enforceability may be limited by
bankruptcy, insolvency, reorganization and other similar laws now or
hereafter in effect that relate to or affect creditors' rights
generally and general equitable principles, whether considered in an
action at law or in equity.
2. Voting Agreement. Mr. Michaels agrees during
the term of this Agreement to vote the Shares and any other
shares of Common Stock to which he at the time of such vote
is able to direct the voting thereof and any other voting
securities of the Company issued or exchanged with respect
to such Shares upon any reclassification, recapitalization,
reorganization, stock split, stock dividend or any other
change in the Company's capital structure in favor of the
Special Meeting Matters at the Special Meeting or any
adjournments thereof. Mr. Michaels further agrees during
the term of this Agreement to vote the Jules Michaels Trust
Shares in favor of the Special Meeting Matters at the
Special Meeting or any adjournments thereof if his co-
trustee is willing to so vote.
3. No Voting Trusts. Mr. Michaels hereby
revokes any and all proxies and voting instructions with
respect to the Shares and the Jules Michaels Trust Shares
previously given by him, and agrees that he will not, nor
will he permit any entity under his control to, grant a
proxy with respect to any of the Shares which permits the
voting of the Shares in a manner inconsistent with this
Agreement, deposit any of the Shares in a voting trust or
subject any of the Shares to any arrangement with respect to
the voting of such Shares inconsistent with this Agreement.
4. Limitation on Sales. During the term of this Agreement, Mr.
Michaels agrees not to sell, assign, transfer, lend, tender, pledge,
hypothecate, exchange, encumber or otherwise dispose of or impair the Shares
unless, in connection therewith, he retains voting rights with respect to such
Shares sufficient to permit him to fulfill his obligations hereunder.
5. Specific Performances. Mr. Michaels
acknowledges that it will be impossible to measure in money
the damage to MSCMG if Mr. Michaels fails to comply with the
obligations imposed by this Agreement and that, in the event
of any such failure, MSCMG will be irreparably harmed and
will not have any adequate remedy at law or in damages.
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<PAGE>
Accordingly, Mr. Michaels agrees that injunctive relief or another equitable
remedy, in addition to remedies at law or damages, is the appropriate remedy for
any such failure, will not oppose the granting of any such remedy on the basis
that MSCMG has an adequate remedy at law or that MSCMG has not been irreparably
harmed and hereby consents to the imposition of any such remedy. Mr. Michaels
agrees not to seek, and hereby waives any requirement for, the securing or
posting of a bond in connection with MSCMG's seeking or obtaining such equitable
relief.
6. Term of Agreement; Termination. The term of this Agreement
shall commence on the date hereof and terminate upon the earlier of (a) the
holding of the Special Meeting at which Company stockholders consider and vote
on the Special Meeting Matters or (b) the date on which the Merger Agreement is
terminated in accordance with its terms. Upon such termination, no party shall
have any further obligations or liabilities hereunder; provided, however, that
such termination shall not relieve any party from liability for any breach of
this Agreement prior to such termination.
7. Miscellaneous.
(a) Governing Law. This Agreement and all rights arising
hereunder shall be construed and determined in accordance with the laws of the
State of New York and the performance hereof shall be governed and enforced in
accordance with such laws.
(b) Notices. All communications hereunder shall be
sufficiently given if delivered personally or sent by telecopy or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows or to such other address which any party may give by written notice to
the other parties hereto:
In the case of MSCMG, to:
Muriel Siebert Capital Markets Group Inc.
885 Third Avenue, Suite 1720
New York, New York 10022
Telephone: (212) 644-2418
Facsimile: (212) 486-2784
Attention: Muriel Siebert
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<PAGE>
with a copy to:
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
Telephone: (212) 351-3000
Facsimile: (212) 351-3131
Attention: Monte E. Wetzler, Esq.
In the case of Mr. Michaels, to:
James H. Michaels
c/o J. Michaels, Inc.
182 Smith Street
Brooklyn, New York 11201
Facsimile: (718) 858-0396
with a copy to:
Moses & Singer LLP
1301 Avenue of the Americas
New York, NY 10019-6076
Telephone: (212) 554-7800
Facsimile: (212) 554-7700
Attention: Irving Sitnick, Esq.
(c) Amendments and Waivers. This Agreement may be amended and
Mr. Michaels may take any action herein prohibited, or omit to perform any act
herein required to be performed, only if Mr. Michaels shall have obtained the
written consent to such amendment, action or omission to act, of MSCMG.
(d) Descriptive Headings. The headings in this
Agreement are for convenience of reference only and shall
not limit or otherwise effect the meaning of terms contained
herein.
(e) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
(f) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their legal
successors-in-interest, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
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<PAGE>
(g) Severability. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of such provision, paragraph, word, clause, phrase or sentence in
every other respect and of the remaining provisions, paragraphs, words, clauses,
phrases or sentences hereof shall not be in any way impaired, it being intended
that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
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<PAGE>
IN WITNESS WHEREOF, this Voting Agreement has been executed as of
the date first above written.
MURIEL SIEBERT CAPITAL MARKETS
GROUP INC.
By:________________________________
Name: Muriel Siebert
Title: President
-----------------------------------
James H. Michaels
-----------------------------------
James H. Michaels, as trustee of
a trust f/b/o Richard H. Michaels
-----------------------------------
James H. Michaels, as co-trustee of
a trust under the will of Jules
Michaels
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<PAGE>
Exhibit D
[letterhead of Whitman Breed Abbott & Morgan]
[Closing Date]
J. Michaels, Inc.
182 Smith Street
Brooklyn, New York 11201
Re: Merger of Muriel Siebert Capital
Markets Group Inc. with and into
J. Michaels, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Muriel Siebert Capital
Markets Group Inc., a Delaware corporation (the "Company"), in connection with
the preparation of the following agreements (referred to herein collectively as
the "Transaction Documents"):
I. Plan and Agreement of Merger, dated as of April
24, 1996 (the "Merger Agreement"), between the
Company and J. Michaels, Inc. ("J. Michaels");
and
II. Escrow Agreement, dated as of ________ __, 1996
(the "Escrow Agreement"), between the Company,
J. Michaels, J. Michaels Trust and [the Escrow
Agent].
This opinion is delivered to you pursuant to Section 9.4 of
the Merger Agreement. Capitalized terms used but not defined herein have the
meanings attributed to them in the Merger Agreement.
We have examined the Transaction Documents and the originals
or certified, photostatic or facsimile copies of such records and other
documents as we have deemed relevant and necessary as the basis for the opinions
set forth below. In such examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, photostatic or facsimile copies and
the authenticity of the originals of such copies.
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<PAGE>
As to various questions of fact material to the opinions
rendered herein, we have relied upon the representations in the documents
examined by us and upon certificates of public officers and an officer of the
Company. We have assumed the due execution and delivery, pursuant to due
authorization, of the documents that we have examined by each party thereto
other than the Company, that each such other party has the full power, authority
and legal right to enter into and perform its obligations under each such
document to which it is a party, that each such document constitutes the valid
and legally binding obligation of each such other party, enforceable against
such party in accordance with its terms, and that all necessary consents,
approvals, authorizations, registrations, declarations and filings (governmental
or otherwise) and all other conditions precedent with respect to the legal and
valid execution and delivery of, and performance under, the documents that we
have examined by each party thereto other than the Company have been made or
satisfied or have occurred and are in full force and effect.
Based upon our examination, as described above, and subject to
the assumptions and qualifications stated, we are of the opinion that:
1. The Company is a corporation duly incorporated and in good
standing and has a legal corporate existence under the laws of the State of
Delaware. The Company has the corporate power and authority to enter into and to
perform its obligations under the Transaction Documents and to consummate the
transactions contemplated thereby.
2. The execution and delivery by the Company of the
Transaction Documents to which it is a party and the performance by the Company
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company.
3. Each of the Transaction Documents to which the Company is a
party has been duly executed and delivered by the Company and constitutes the
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms.
4. Neither the execution or delivery by the Company of the
Transaction Documents nor the performance of its obligations thereunder nor the
consummation by the Company of the transactions contemplated thereby will (a)
violate any provision of the Company's certificate of incorporation or bylaws or
(b) violate, result in a breach of or a default
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<PAGE>
under, or result in the creation of any lien under, any agreement identified in
a certificate of the Company, dated today and delivered to you).
5. Neither the execution or delivery by the Company of the
Transaction Documents nor the consummation by the Company of the transactions
contemplated thereby will (a) except for filings with the Secretary of State of
the states of New York and Delaware, require any consent, approval or
authorization of, or any registration, declaration or filing with, the State of
New York or the United States of America, or any of their respective agencies or
(b) materially violate any statute or regulation of the State of New York or the
United States of America applicable to the Company or any court or
administrative order, writ, judgment or decree which names the Company and is
specifically directed to it or its property and of which we have knowledge
(which is based solely on a review of our litigation docket and a certificate of
the Company, dated today and delivered to you).
6. To our knowledge, which is based solely on a review of our
litigation docket and a certificate of the Company, dated today and delivered to
you, except as disclosed in [insert reference to appropriate agreement, schedule
or certificate], there is no suit, proceeding or investigation pending or
overtly threatened in any court or by or before any regulatory commission, board
or other administrative or governmental agency or arbitration body against the
Company which questions the validity of the Transaction Documents or which, if
adversely determined, would materially adversely affect the ability of the
Company to perform its obligations thereunder.
In giving the opinions expressed above, we express no opinion
as to:
A. the enforceability of any provision in the Transaction
Documents releasing, exculpating or exempting a party from, or
requiring indemnification of a party for, liability for its own action
or in- action, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct;
B. the enforceability of any purported waiver
by any person of any right granted pursuant to any
Federal or state constitution or statute, which may
not legally be waived;
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<PAGE>
C. the effectiveness of any power of attorney
given under the Transaction Documents to the extent
it is intended to be binding on transferees;
D. the waiver of a claim based on the inconvenience
of a forum set forth in Section 12.5(a) of the Merger
Agreement; and
E. Section 12.5(a) of the Merger Agreement, relating to the
submission to jurisdiction, insofar as it purports to confer subject
matter jurisdiction on a United States District Court to adjudicate any
controversy relating to the Transaction Documents in any circumstance
in which such court would not have subject matter jurisdiction.
Our opinions in paragraphs 3 and 5(b) are subject to (a)
applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance and similar laws which relate to or affect creditors' rights
generally, (b) general principles of equity, including (1) the possible
unavailability of specific performance, injunctive relief or any other equitable
remedy and (2) concepts of materiality, reasonableness, conscionability, good
faith and fair dealing, and (c) judicial action giving effect to foreign
governmental actions or foreign laws, in either case, affecting creditors'
rights.
Our opinion in paragraph 1 as to good standing and legal
existence of the Company in the State of Delaware is based solely on a
certificate of the Secretary of State of Delaware.
The foregoing opinions are limited to the Federal laws of the
United States of America and the laws of the State of New York and the General
Corporation Law of the State of Delaware.
The opinions set forth above are solely for your benefit in
connection with the transactions contemplated by the Transaction Documents and
may not be relied upon by any other person for any purpose.
Very truly yours,
<PAGE>
Exhibit E
J. MICHAELS, INC. TRUST AGREEMENT
THIS J. MICHAELS, INC. TRUST AGREEMENT (as the same may be amended,
supplemented or otherwise modified from time to time, this "Agreement"), made
and entered into as of _____________, 1996, by and among J. Michaels, Inc. ("J.
Michaels") and _____________ [and_________________], as designated trustee[s]
(together with any successors to them as trustees, the "Trustees"), for the
benefit of the Settlors (as hereinafter defined).
W I T N E S S E T H
WHEREAS, J. Michaels is planning to liquidate its assets and distribute to
the Settlors the proceeds thereof along with any assets that cannot be timely
liquidated and thereafter MSCMG will merge with and into J. Michaels pursuant to
the Merger Agreement;
WHEREAS, J. Michaels has agreed to transfer to the trust created hereby, in
partial satisfaction of the equity interests of the Settlors, each of their
respective right, title and interest in and to the Trust Assets (as defined
below) on the terms and subject to the conditions set forth herein (the
"Property");
WHEREAS, it is not practicable to distribute the Property in kind among the
Settlors in proportion to their respective equity interests in J. Michaels, and
it does not appear that sale or other distribution of the
<PAGE>
Property and distribution of the proceeds thereof to the Settlors is currently
feasible;
WHEREAS, it is therefore in the best interests of the Settlors
that the Property be acquired by the Trustees, as trustees of the Trust (as
defined below), and that the Trustees have and hold full and complete legal
title to the Property for the specific uses, benefits and purposes hereinafter
set forth;
WHEREAS, it is desired that the powers of the Trustees in
regard to the Trust Estate (as defined below) and the purposes of the Trust be
limited so that the Trust qualifies as a liquidating trust for federal income
tax purposes and is not treated as an association taxable as a corporation;
WHEREAS, the purposes of the Trust shall therefore be limited
to the purposes stated in Section 2.2; and
WHEREAS, it is also desired that the Trust be treated as an
express trust within the meaning of New York trust law or its successor statute;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
2
<PAGE>
SECTION 1. DEFINITIONS
1.1. Defined Terms. As used herein, terms defined in the
Preamble and Premises hereof shall have their respective assigned meanings,
and the following capitalized terms shall have the following meanings:
"Beneficial Interest" shall mean, as to any Settlor, its
beneficial interest in the Trust Estate, which interest bears the same
relationship to the entire Trust Estate as the number of shares of common stock
of J. Michaels owned by the Settlor as of the Effective Time bears to the total
number of shares of common stock of J. Michaels outstanding as of the Effective
Time. When used in relation to Beneficial Interests, the term "pro rata" shall
mean the proportion that a particular Beneficial Interest bears to all
Beneficial Interests.
"Effective Time" shall mean immediately prior to the
effectiveness of the merger of MSCMG with and into J. Michaels pursuant to the
Merger Agreement.
"Escrow Agreement" shall mean the escrow agreement referred to
in the Merger Agreement pursuant to which J. Michaels is to place $500,000 in
escrow for the ultimate benefit of the Trust.
"Escrow Funds" shall mean any moneys paid to the Trust
pursuant to the Escrow Agreement.
"MSCMG" shall mean Muriel Siebert Capital Markets Group Inc.
3
<PAGE>
"Merger Agreement" shall mean a certain Plan and Agreement of
Merger dated as of April _____, 1996 between J. Michaels and MSCMG as it may be
amended from time to time.
"Settlors" shall mean the shareholders of the Common Stock of
J. Michaels of record as of the Effective Time.
"Trust" shall have the meaning assigned to such term in
Section 2.1.
"Trust Assets" and "Trust Estate" shall mean all assets of J.
Michaels as of the Effective Time including the Escrow Funds, but excluding the
Effective Date Payment (as defined in the Merger Agreement).
1.2. Other Definitional Provisions.
The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
exhibit references are to this Agreement unless otherwise specified.
SECTION 2. DECLARATION OF TRUST
2.1. Declaration of Trust. J. Michaels, on behalf of the
Settlors, hereby creates the J. Michaels, Inc. Trust (the "Trust"), for the
benefit of each Settlor as its interest may appear, to which J. Michaels shall
contribute its right, title and interest in the Property on behalf of the
Settlors.
4
<PAGE>
2.2. Purposes and Intent. The Trust is organized for the sole
purpose of liquidating the Trust Estate with no objective to continue or engage
in the conduct of a trade or a business. The Trustees shall treat the Trust for
federal income tax purposes as a liquidating trust in accordance with Treasury
Regulation Section 301.7701-4(d) and as a "grantor trust" subject to the
provisions of Subchapter J, Subpart E of the Internal Revenue Code of 1986, as
amended (or any successor regulation or statute), unless otherwise required.
Pursuant to this express purpose, and in addition to the powers, duties, rights
and responsibilities of the Trustees pursuant to Section 6 hereof, the Trustees
are hereby authorized and directed to take all reasonable and necessary action
to sell or otherwise dispose of the Property, in a single sale or in several
sales, as expeditiously as possible at a reasonable price and on reasonable
terms consistent with an orderly liquidation of the Trust Estate and to
distribute the net proceeds of such disposition to the Settlors in as prompt,
efficient and orderly manner as possible; and until such sale can be made, to
conserve and protect the Trust Estate.
2.3. Title to Property. The Trustees shall hold legal title to
the Property and to such additional contributions at any time constituting a
part of the Trust Estate and shall hold the Property and such other property in
trust pursuant to the terms of this Agreement for the benefit of the Settlors.
The Trustees are further authorized to make disbursements and payments from the
Trust Estate in accordance with the provisions of section 4.
5
<PAGE>
2.4. Documents to be Executed by Trustees. The Trustees are
hereby authorized and directed to execute and deliver on behalf of the Trust any
and all documents necessary to enable the Property, or any interest in and
rights under any and all sales contracts, lease agreements or other instruments
with respect to the Property, to be held in the name of the Trustees on behalf
of the Trust.
2.5. Trustee Selection. The Trustees have been selected by
J. Michaels.
SECTION 3. DELIVERY AND ACCEPTANCE OF TRUST ESTATE
3.1. Conveyance by J. Michaels. At the Effective Time the
interests of J. Michaels in the Property shall be transferred to the Trust on
behalf of the Settlors pursuant to such agreements and documents as may be
deemed reasonably necessary by J. Michaels or the Trustees. The Trust shall
assume and agree to perform those obligations of J. Michaels as provided in the
Assignment and Assumption Agreement annexed as an exhibit to the Merger
Agreement. At any time and from time to time after the date hereof, at the
Trustees' reasonable request, J. Michaels shall execute and deliver such
instruments of sale, transfer, conveyance, assignment and confirmation and take
such other action as the Trustees may deem necessary or desirable in order to
more effectively transfer, convey, assign to the Trust or the Trustees on behalf
of the Trust and to confirm the title of the Trust or the Trustees on behalf of
the Trust to the Property.
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<PAGE>
3.2. Acceptance of Conveyance; Conditions Precedent to
Conveyance. The Trustees are hereby directed to, and the Trustees agree that
they will (i) to the extent not previously done, authorize a representative of
the Trustees to accept delivery of the Property on behalf of the Trust, (ii)
accept all deeds of trust and all other instruments of transfer to be delivered
with respect to the Property and (iii) take such other action as may reasonably
be required of the Trustees or the Trust hereunder for the benefit of the
Settlors.
3.3. Prohibited Transfers. The Trust shall not receive
transfers of any listed stocks or securities, any readily-marketable assets or
any operating assets of a going business. The Trust shall not receive or retain
cash in excess of a reasonable amount to meet claims and contingent liabilities.
The Trust shall not receive transfers of any unlisted stock of a single issuer
that represents 80 percent or more of the stock of such issuer and shall not
receive transfers of any general or limited partnership interests.
SECTION 4. BENEFICIARIES AND DISTRIBUTIONS
4.1. Beneficiaries. The income and principal of the Trust shall be held for the
benefit of the Settlors.
4.2. Source of Payments; Distributions to Settlors. The Trust is required to
distribute at least annually to the Settlors any proceeds from the sale of
assets or income from investments. The Trust may retain a
7
<PAGE>
reasonable amount of proceeds or income to meet claims and contingent
liabilities.
4.3. Withholding of Taxes and Other Charges. The Trustees may, but shall not be
required to, withhold from the amount distributed at any time to any
Settlor such amount as may be sufficient to pay any tax or other charge
which has been or may be imposed upon such Settlor under the income tax
laws of the United States or of any state or political subdivision or
entity, whenever such withholding is required by any law, regulation, rule,
ruling, directive or other governmental requirement. The Trustees, in the
exercise of their discretion and judgment, may enter into agreements with
taxing or other authorities for the payment of such amounts as may be
withheld in accordance with the provisions of this Section 4.3. The
Trustees agree to notify each Settlor promptly after they become aware that
any distribution to such Settlor hereunder may be subject to withholding
under this Section 4.3. Notwithstanding the foregoing but without prejudice
to the Trustees' rights hereunder, a Settlor shall have the right with
respect to the United States or any state or political subdivision or
entity to contest the imposition of any tax or other charge by reason of
any distribution hereunder.
SECTION 5. TERMINATION
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<PAGE>
5.1. Termination. The Trust shall terminate upon the earliest to occur (the
"Termination Date") of (i) the fulfillment of the Trust's purpose, (ii)
three (3) years after the effective date of this Agreement or (iii) when,
in the reasonable judgment of the Trustees, there are insufficient liquid
assets to pay all of the expenses, liabilities and obligations of the Trust
and the Trustees have been unable to borrow amounts sufficient to provide
for such expenses, liabilities and obligations. If the Trust contains
installment obligations, such as those described in section 453 (h) of the
Internal Revenue Code, that are payable over a period that ends more than
three years after the date of creation of the Trust, the Trust term, with
respect to those obligations only, may extend for a period that is
reasonably necessary to collect and distribute installments on the
obligations. The Trustees shall annually compile and disseminate to the
Settlors all available tax return information with respect to interest
(stated or unstated) and otherwise necessary or useful in reporting under
the installment method. Prior to or contemporaneously with the termination
or expiration of the Trust, the Trustees shall satisfy or provide for
payment of all expenses, liabilities and obligations of the Trust known to
it and distribute the Trust Estate to the Settlors as provided in Section
5.2. The Trustees shall have a reasonable period of time after the
occurrence of the termination or expiration of the Trust in which to wind
up the administration of the Trust and to make a distribution of its
assets. During this period of time, the
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Trustees shall continue to have and shall exercise all powers granted to the
Trustees until the assets of the Trust can be distributed.
5.2. Distribution on Termination. Upon the termination of the
Trust, the Trustees shall deliver and distribute to the Settlors, pro rata in
accordance with their respective Beneficial Interests, all of the assets and
property comprising the Trust (including, without limitation any cash and any
portion of the Property remaining in the Trust) after payment of all expenses,
liabilities and obligations of the Trust, less a reasonable reserve for the
payment of contingent liabilities of the Trust. Such reserve shall be held by
the Trustee for not more than three years after the date of termination of the
trust; provided, however, that in the sole and absolute discretion of the
Trustee all or any part of such reserve may at any time be distributed pro rata
to the Settlors.
SECTION 6. POWERS AND DUTIES OF THE TRUSTEES
6.1. Powers of Trustees. Except as expressly provided
otherwise herein, the Trustees shall have all powers granted to trustees under
New York trust law (or its successor statute), including, without limitation,
all powers which the Trustees deem necessary or desirable to achieve the
purposes of the Trust as set forth in this Agreement. The powers of the Trustees
with respect to the Property shall, however, be limited to receiving the
Property; managing and maintaining the Property prior to the sale or other
disposition of the Property, or entering into
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contracts with others for such management and maintenance; paying expenses
reasonably incurred in connection with the administration of the Trust;
contracting to sell and selling or otherwise disposing of the Property in a
single sale or in a series of separate sales for portions of the Property at
private or public sale, for cash or for credit or for part cash and part credit,
with or without security; and collecting the proceeds of sale. The Trustees are
authorized to sue for and defend the Trust Estate, or any part thereof as at any
time constituted, and to sue for and defend the Trust; and the Trustees are
authorized to compromise, settle and adjust claims in favor of and against the
Trust Estate, or any part thereof, or against the Trust. The Trustees are
authorized to abandon property and release claims, with or without consideration
therefor, which the Trustees deems worthless or when the Trustees deem such
action to be in the best interests of the Settlors. In addition, the Trustees
shall have the power to discharge, compromise and settle any unascertained,
unliquidated or contingent debts, liabilities or obligations of the Trust, and
any other powers which the Trustees deems necessary or desirable to carry out
the purposes of the Trust. The Trustees shall carry out the purposes of the
Trust and the directions contained herein and shall not at any time enter into
or engage in any business, including, without limitation, the purchase or
acceptance of any assets or property (other than such assets or property as are
necessary to carry out the purposes of this Agreement) on behalf of the Trust or
of the Settlors.
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6.2. Establishment of Trust Accounts. Promptly after the
Effective Date there shall be established and, at all times thereafter until the
trust created by this Agreement shall have been terminated, there shall be
maintained by the Trustee trust accounts (the "Trust Accounts"). All right,
title and interest in and to the Trust Accounts shall vest in the Trustees for
the benefit of the Settlors, and funds on deposit in the Trust Accounts shall
constitute part of the Trust Estate. The Trust Accounts shall be subject to the
exclusive dominion and control of the Trustees.
6.3. Investment of Funds Deposited in Trust Accounts. The
Trustees shall invest and reinvest monies on deposit from time to time in the
Trust Accounts in demand and time deposits in banks or savings institutions, or
temporary investments such as short-term certificates of deposit or Treasury
bills or shares in open end mutual funds which invest exclusively in securities
issued or unconditionally guaranteed or insured by the United States government
or any agency or state thereof and backed by the full faith and credit of the
United States or such state having average maturities of not more than one (1)
year from the date of acquisition of such security.
6.4. Payment of Expenses and Other Liabilities. The Trustees
shall pay from the Trust Estate all expenses, charges, liabilities and
obligations of the Trust, including, without limiting the generality of the
foregoing, such debts, liabilities or obligations as may be payable from the
Trust Estate (including, without limitation, the interest and principal of any
outstanding loan), interest, insurance premiums, taxes, assessments and
w
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public charges of every kind and nature, the costs, charges, expenses and
Trustees' fees connected with or arising out of the execution or administration
of the Trust and the Trust Estate, and such payments and disbursements as are
provided for in this Agreement or which may be determined by the Trustees to be
a proper charge against the Trust and the Trust Estate. The Trustees in their
discretion and judgment may from time to time make provisions by reserve or
otherwise out of the Trust Estate for such reasonable amount or amounts as the
Trustees in their discretion and judgment may determine to be necessary or
advisable to meet unascer- tained, unliquidated or contingent liabilities of the
Trust. The Trustees may pay from the Trust Estate any taxes, penalties and
interest that may be due to the Internal Revenue Service or any other taxing
authorities, and the Trustees shall have no liability for any such taxes,
penalties and interest.
6.5. Powers Cumulative. The powers conferred by this
Section 6 in no way limit any power conferred on the Trustees by any other
Section hereof but shall be in addition thereto.
6.6. Self-Dealing. The Trustees are authorized to enter into
any transaction authorized by this Agreement, even though the other party to
that transaction is a Settlor, or a successor or assign of any Settlor, or a
trustee of any trust, including any Trustee under this instrument acting
individually, except to the extent that the New York trust law, or any successor
statute, may expressly prohibit a Settlor from authorizing a trustee to engage
in any such transaction; provided, however, that the terms and
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conditions of any such transaction shall be no more favorable to the foregoing
persons than a transaction that would have been negotiated and entered into with
an unaffiliated party on an arm's-length basis.
6.7. Reporting Requirements of Trustees. No later than 75 days
from the end of each calendar year, the Trustees shall deliver to the Settlors
financial statements prepared by an independent public accounting firm selected
by the Trustees. The Trustees shall cause to be prepared and filed all returns
necessary for federal, state and local income tax purposes.
6.8. Liability of Trustees. The Trustees shall have no
liability hereunder so long as they perform their duties in good faith. The
Trustees shall not be liable for any action taken or omitted in good faith and
believed by them to be authorized within the discretion or rights or powers
conferred upon them by this Agreement. The Trustees shall be indemnified by the
Trust for any claims or causes of action arising from or related to the good
faith exercise of their duties on behalf of the Trust. In performing their
duties hereunder, the Trustees may consult with counsel and shall have no
liability for any action taken upon the advice of such counsel. None of the
provisions of this Agreement shall require the Trustees to expend or risk their
funds or otherwise incur personal financial liability in the performance of any
of their duties hereunder or in the exercise of any of their respective rights
and powers. The Trustees may rely without inquiry upon any writing delivered to
them hereunder which they believe in good faith to be genuine and to have been
given by a proper person.
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6.9. Liability of Third Party. No purchaser at any sale made
by the Trustees or persons dealing with the Trustees hereunder shall be obliged
to see to the application of any money or property paid or delivered to the
Trustees. No person dealing with the Trustees shall be obliged to inquire into
the expediency or propriety of any transaction or the authority of the Trustees
to enter into and consummate the same upon such terms as the Trustees may deem
advisable.
6.10. No Bond. The Trustees need not post any bond for so
acting.
6.11. No Court Supervision. The Trustees shall not be required
to qualify before, be appointed by, or in the absence of breach of trust,
account to any court or obtain the order or approval of any court in the
exercise of any power or discretion granted in this instrument. Any suit or
legal action against the Trustees or the Trust shall be maintained in the
Supreme Court of the County of Kings, State of New York.
6.12.Trustees' Fee. (a) For its services as trustees hereunder, the Trustees
shall be entitled to receive compensation ([________________________] in
addition to reimbursement of their reasonable cost and expenses).
(b) All such fees, costs and expenses shall be payable from the Trust Estate.
6.13. Resignation of or Removal of Trustee and Appointment of
Successor. Each of the Trustees may at any time resign upon giving to the
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then acting co-Trustee thirty (30) days' written notice of such resignation,
subject in either case to the appointment of a successor as provided below. In
the case of resignation, if possible, such Trustee shall continue to serve as
Trustee until such appointment. In addition, the majority in interest of the
Settlors by written notice may at any time remove any of the Trustees, with or
without cause. In the event that a Trustee serving hereunder shall resign, be
removed, cease or fail for any reason to serve as Trustee, such Trustee shall be
succeeded by such person or entity as shall be designated by a majority in
interest of the Settlors which designation may be made by a written instrument.
If a successor Trustee is not appointed as hereinabove provided then, upon
application by the Trustee or the co-Trustee, a successor Trustee which meets
the qualification described above shall, at the expense of the Trust Estate, be
named by the Supreme Court, Kings County, New York. The successor Trustee shall
succeed to the right, title and interest of the Trust without the necessity of
any conveyance or assignment of the Trustee Estate, although conveyances and
assignments shall be made if desired and requested by the successor Trustee.
6.14. Reorganization of Trustee. If any corporate Trustee
should, before or after qualification, change its name, be reorganized, merged
or consolidated with another corporation or entity, or assign its trust
functions to another corporation or entity, the resulting corporation or entity
which succeeds to its fiduciary business (provided such corporation or entity is
organized under the laws of the United States or any State, territory or
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possession thereof and has authority to exercise trust powers in New York) shall
become the Trustee hereunder or be eligible for appointment as Trustee, as the
case may be.
6.15. Liability for Predecessor Fiduciary. No Trustee
hereunder shall be liable for the default of any predecessor Trustee, or for
failure to contest the accounting (if any) rendered by such predecessor Trustee.
Similarly, any Trustee hereunder may accept the Trust Assets delivered to it by
any predecessor Trustee and shall be responsible only for such assets. Nothing
in this Section 6.15 shall limit the power of any Trustee hereunder from
conditioning its acceptance of the Trust or any Trust Assets upon a proper
accounting or from requiring such an accounting from, or the rectifying of a
prior default by, a predecessor fiduciary.
6.16. Ancillary Trustee. If the Trustees are or become unable
or unwilling to act in the jurisdiction in which any of the Trust Estate is
located, the Trustees may appoint an ancillary trustee and may confer upon the
ancillary trustee such powers and discretions, exercisable without court order,
to act with respect to the Trust Estate as the Trustees deem proper. The
ancillary trustee may be either a corporate trustee or an individual trustee.
The ancillary trustee shall be responsible to the Trustees for all property it
administers. The Trustees may pay the ancillary trustee reasonable compensation
for its services and may absolve it from any requirement to furnish a bond or
other security.
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6.17. Release of Power. If the Trustees deem it to be in the
best interest of the Trust and its beneficiaries, the Trustees, by written
instrument signed by the Trustees, shall have the power and authority to
release, disclaim or restrict the scope of any power or discretion granted in
this instrument or implied by law.
6.18. Conflicting Claims or Demands on Trustees. If any
conflicting claims or demands are made or asserted to any portion of the Trust
Estate, or to any interest of any Settlor herein, or if there should be any
disagreement between the transferees, assignees, heirs, representatives, or
legatees succeeding to all or a part of the interest of any Settlor resulting in
adverse claims or demands being made in connection with such interest, then, in
any of such events, the Trustees shall be entitled, at their sole selection, to
refuse to comply with any such conflicting claims or demands. In so refusing,
the Trustees may elect to make no payment or distribution of the Settlor's
interest involved, or any part thereof, and in so doing the Trustees shall not
be or become liable to any of such parties for their failure or refusal to
comply with any of such conflicting claims or demands, provided that the
Trustees shall be liable for interest on any funds which they may so withhold
calculated at the rate of interest received by the Trustees on funds in a like
amount invested by them overnight. The Trustees shall be entitled to refrain and
refuse to act until (i) the rights of the adverse claimants have been
adjudicated by a final judgment of a court of competent jurisdiction, or (ii)
all differences have been adjusted by a valid
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written agreement between all of such parties, and the Trustees shall have been
furnished with an executed counterpart of such agreement, and (iii) the Trustees
may, in their sole discretion, require that there be furnished a surety bond or
other security satisfactory to the Trustees, as they shall deem appropriate to
fully indemnify them as between all conflicting claims or demands.
SECTION 7. SUPPLEMENTS AND AMENDMENTS TO THIS
AGREEMENT
7.1. Supplements and Amendments Without Consent of Settlors.
Without the consent of the Settlors, the Trustees and J. Michaels may execute a
supplement or amendment hereto or enter into one or more agreements supplemental
hereto in a form satisfactory to the Trustees, to cure any ambiguity, to correct
or supplement any provision herein, which may be defective or inconsistent with
any other provision herein, or to make any other provision with respect to
matters or questions arising hereunder which shall not be inconsistent with any
provision hereof; provided, however, that any such action contemplated by this
Section 7.1 shall not result in any material changes to this Agreement or
adversely affect the interests of the Settlors.
7.2. Supplements and Amendments With Consent of Settlors.
With the consent of a majority in interest of the Settlors, the Trustees may
execute a supplement or amendment hereto or enter into one or more
agreements supplemental hereto in a form satisfactory to the Trustees and a
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majority in interest of the Settlors, to cure any ambiguity, to correct or
supplement any provision herein, which may be defective or inconsistent with the
purposes hereof, or to amend any provision, or make any other provision, which
shall not be inconsistent with the purposes hereof.
7.3. Notice and Effect of Executed Amendment. Promptly after
the execution by the Trustees of any supplement or amendment pursuant to Section
7.1 or 7.2 hereof, the Trustees shall give notice of the substance of such
amendment to all of the Settlors or, in lieu thereof, shall send a copy of such
amendment to each such Settlor. Upon the execution of any declaration of
amendment or supplement, this Agreement shall be deemed to be modified and
amended in accordance therewith and the respective rights, limitations of
rights, obligations, duties, and immunities under this Agreement of the Trustees
and the Settlors shall thereafter be determined, exercised, and enforced
hereunder subject in all respects to such modification and amendment, and all
the terms and conditions of any such amendment or supplement shall be thereby
deemed to be part of the terms and conditions of this Agreement for any and all
purposes.
7.4. Irrevocability. This Agreement may only be revoked,
amended or modified pursuant to the provisions of this Section 7; otherwise,
this Agreement shall be irrevocable.
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SECTION 8. MISCELLANEOUS
8.1. Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and may be delivered personally or by
mail, telex or telecopy. Any notice required or permitted to be delivered shall
be deemed to be delivered and received, whether actually received or not, on the
date five calendar days after it is deposited in the United States mail, postage
prepaid, registered or certified, addressed to the person which is to receive it
at the address specified for such person in the records of the Trustees or at
such address which may be specified as provided herein. Any person entitled to
receive notice hereunder may change, at any time or from time to time by written
notice to the Trustees, the address which had theretofore been specified for
receiving notices.
8.2. Governing Law. This Agreement is to be construed, enforced and
governed in accordance with the laws of the State of New York for contracts made
and wholly performed within that state.
8.3. Headings. The captions and headings used in this Agree- ment are for
convenience only and do not in any way limit or amplify the terms and provisions
hereof.
8.4. Severability. If any provision of this Agreement is held to be invalid
or unenforceable, the validity and enforceability of the remaining provisions of
this Agreement shall not be affected thereby.
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8.5. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
8.6. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which taken together shall
be deemed but one instrument.
8.7. Title to Trust Estate. No Settlor nor J. Michaels shall have title to
any part of the Trust Estate. No transfer, by operation of law or otherwise, of
the right and interest of any Settlor in and to the Trust Estate or hereunder
shall operate to terminate this Agreement or the Trust or to entitle any
successor or transferee of such Settlor to an accounting with respect to the
Trust Estate or to the transfer to it of title to any part of the Trust Estate.
8.8. Acceptance by Trustees. The Trustees, by joining in the execution of
this Agreement, accept the Trust herein created and provided for and accepts all
of the rights, powers, privileges, duties and responsibilities of the Trustees
hereunder and agree to exercise and perform the same in accordance with the
terms and provisions contained herein. The Trustees expressly represent that
they will make continuing efforts to dispose of the Property in accordance with
the terms of this Agreement, make timely distributions to the Settlors in
accordance with the provisions of this Agreement and not unduly prolong the
duration of the Trust.
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8.9. Interests of Settlors Not a Security; No Transfers of Interest. A
Settlor's interest in the Trust and/or the Trust Estate is not a security and
shall not be evidenced by any formal certificate or other instrument, but such
Settlor shall be apprised of its interest by the Trustees. The Trustees shall
maintain appropriate records with respect to the interest of each Settlor. No
interest in the Trust and/or the Trust Estate shall be transferable and any
purported transfer shall be null and void ab initio.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
J. MICHAELS, INC.
By:_____________________________
Title:
- -----------------------------
,as Trustee
- ------------------------------------
,as Trustee
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Exhibit F
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Assignment Agreement"), dated as of _____ __, 1996, between J.
Michaels, Inc., a New York corporation (the "Assignor"), and J.
Michaels, Inc. Trust, a New York trust ("Assignee"):
W I T N E S S E T H :
WHEREAS, Assignor has entered into a Plan and Agreement of
Merger with Muriel Siebert Capital Markets Group Inc., a Delaware corporation
(together with its successors in interest, "MSCMG"), dated as of April 24, 1996
(the "Merger Agreement"), wherein MSCMG has agreed to merge with and into
Assignor;
WHEREAS, pursuant to the Merger Agreement and as a condition
to the consummation of the Merger, Assignor has agreed to enter into an
agreement with Assignee wherein Assignor shall assign to Assignee all of
Assignor's liabilities and obligations or every character whatsoever immediately
prior to the Effective Time of the Merger (as such term is defined in the Merger
Agreement), whether or not accrued, whether or not fixed or contingent, and
whether or not known or unknown, including without limitation (i) the
liabilities listed on Schedule 4.17 hereto and all tax liabilities resulting
from the transfer of the real property owned by the Assignor to the Assignee and
(ii) all obligations and responsibilities under the Plans (as such term is
defined in the Merger Agreement) currently maintained or contributed to by the
Company on behalf of the employees or former employees, including, without
limitation, all obligations and liabilities with respect to the termination of
and withdrawal from the Plans, all obligations and responsibilities to provide
retiree health coverage and continuation coverage and appropriate notices under
the Consolidated Omnibus Budget Reconciliation Act of 1985, and all obligations
and responsibilities under all severance and termination pay plans and programs
(the "Assumed Liabilities"); and
WHEREAS, Assignor desires to assign to Assignee, and
Assignee desires to assume, all of the Assumed Liabilities;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the parties
hereto agree as follows:
1. Assignment. Effective as of immediately prior to
the Effective Time of the Merger, Assignor does hereby
<PAGE>
unconditionally and irrevocably assign, transfer and set over unto Assignee all
of Assignor's right, title and interest in, to and under the Assumed
Liabilities.
2. Acceptance of Assignment; Assumption of Obligations.
Effective as of immediately prior to the Effective Time of the Merger, Assignee
does hereby accept from Assignor the assignment contained in paragraph 1 hereof
and does hereby expressly assume all of Assignor's right, title and interest in,
to and under the Assumed Liabilities.
3. Further Assurances. Assignor agrees that at any time and
from time to time Assignor will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as
Assignee may reasonably request in writing in order to obtain the full benefits
of this Assignment Agreement and of the rights and powers herein granted;
provided, however, that this paragraph is not intended to impose on Assignor any
additional duties or liabilities not otherwise contemplated in this Assignment
Agreement.
4. Binding Effect. This Assignment Agreement shall
be binding upon and shall inure to the benefit of Assignor and
Assignee and their respective successors and assigns.
5. Governing Law. THIS ASSIGNMENT AGREEMENT SHALL BE
GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
6. Headings. The headings of the various paragraphs
herein have been inserted for convenience of reference only and
shall not to any extent have the effect of interpreting, modifying or amending
the terms and provisions of this Assignment Agreement.
7. Definitions. Capitalized terms used herein and
not defined herein shall have the meanings set forth for such
terms in the Merger Agreement.
8. Third Party Beneficiaries. Nothing in this
Assignment Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this
Assignment Agreement on any other persons other than the parties
hereto and their respective successors and assigns, nor is
anything in this Assignment Agreement intended to relieve or
discharge the obligations or liability of any third persons to
any party to this Assignment Agreement, nor shall any provision
give any third parties any right of subrogation or action over or
against any party to this Assignment Agreement. MSCMG's sole
-2-
<PAGE>
remedies for any breach of this Assignment Agreement shall be as
set forth in the Merger Agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment Agreement to be duly executed as of the day and year first above
written.
J. MICHAELS, INC.
By:
Name:
Title:
J. MICHAELS, INC. TRUST
By:
Name:
Title:
-4-
