UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number 1-9143
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RODMAN & RENSHAW CAPITAL GROUP, INC.
- - - - - -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3111956
- - - - - ----------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
120 S. LaSalle Street, Chicago, Illinois 60603
- - - - - -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 312/977-7800
--------------
N/A
- - - - - -------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. YES X No
------- ------
Shares of common stock outstanding at May 5, 1995: 6,645,802
par value $.09.<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
INDEX
PAGE
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements -
Condensed Consolidated Statements of Financial Condition
as of March 31, 1995 (unaudited) and December 31, 1994.
Condensed Consolidated Statements of Operations (unaudited)
for the three months ended March 31, 1995 and
March 25, 1994.
Condensed Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 1995 and
March 25, 1994.
Notes to Condensed Consolidated Financial Statements
(unaudited) - March 31, 1995.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
March 31
1995 December 31
(Unaudited) 1994
------------ -----------
ASSETS
Cash and cash equivalents $ 372 $ 7,011
Securities purchased under
agreements to resell 77,533 35,054
Cash and short-term investments
required to be segregated under
federal regulations (including
resale agreements:
03/31/95 - $45,950; 12/31/94 -
$35,200) 84,053 39,215
Receivables:
Customers 51,240 47,036
Brokers, dealers and clearing
organizations 88,346 155,408
Miscellaneous 9,819 10,607
Securities owned, at market 67,380 144,500
Memberships in security and
commodity exchanges at cost
(market value 03/31/95 - $5,473;
12/31/94 - $6,227) 3,330 3,850
Furniture, fixtures and leasehold
improvements, at cost, less
accumulated depreciation and
amortization (03/31/95 - $8,024;
12/31/94 - $7,844) 2,727 2,298
Prepaid expenses and other assets 6,355 5,213
Recoverable income taxes 93 1,379
Deferred income taxes - Net of
valuation allowance:
03/31/95 - $5,246;
12/31/94 - $5,246) 3,779 2,760
------------ -----------
$ 395,027 $ 454,331
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings from
banks $ 30,377 $ 54,331
Short-term note payable
to affiliate 10,000 10,000
Payables:
Customers 118,421 89,878
Brokers, dealers and clearing
organizations 81,161 158,151
Miscellaneous 421 661
Securities sold but not yet
purchased, at market 108,959 97,844
Accrued commissions 3,077 2,066
Accounts payable and accrued
expenses 15,892 11,101
------------ -----------
368,308 424,032
Liabilities subordinated to the
claims of general creditors 2,500 3,874
Stockholders' equity:
Convertible non-voting preferred
stock, 5,000,000 shares authorized;
none issued at 03/31/95 and 150 shares
Series A, $.01 par value issued at
at 12/31/94 - -
Common stock, $.09 par value:
20,000,000 shares authorized;
6,646,000 issued at 03/31/95
and 4,577,000 issued at 12/31/94 598 412
Additional paid-in capital 30,749 30,935
Accumulated deficit (7,128) (4,922)
------------ ------------
24,219 26,425
------------ ------------
$ 395,027 $ 454,331
============ ============
See Notes to Condensed Consolidated Financial Statements
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands, except per share)
THREE MONTHS ENDED
March 31, March 25,
1995 1994
------------ ------------
REVENUES: $ $
Commissions 6,458 6,985
Principal 5,567 4,862
Interest 3,604 1,802
Fee Income 1,132 514
Other 718 430
------------ ------------
TOTAL REVENUES 17,479 14,593
EXPENSES:
Employee compensation and benefits 11,524 8,958
Commissions, floor brokerage
and clearing 1,208 1,719
Interest 2,960 1,186
Occupancy and equipment 1,382 1,397
Communications 1,819 1,561
Professional fees 923 839
Other operating expenses 888 2,047
------------ ------------
TOTAL EXPENSES 20,702 17,707
------------ ------------
Loss before taxes (3,223) (3,114)
Tax benefit (1,019) (1,026)
------------ ------------
NET LOSS $ (2,206) $ (2,088)
============ ============
Loss per Share Data:
Net loss per share
and common equivalent
Primary and Fully Diluted ($0.37) ($0.46)
Weighted Average Shares
and Common Share Equivalent 5,933 4,570
See Notes to Condensed Consolidated Financial Statements
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
March 31, March 25,
1995 1994
------------- ------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (2,206) $ (2,088)
Adjustments to reconcile net
loss to net cash flows
provided by (used in)
operating activities:
Gain on sale of exchange
membership (190)
Depreciation and amortization 180 107
Deferred income taxes (1,019) 112
Net changes in operating assets
and liabilities:
Securities purchased under
agreements to resell (42,479) 26,841
Cash and short-term investments
required to be segregated under
federal regulations (44,838) (3,185)
Receivables from and payables
to customers, brokers, dealers
and clearing organizations 14,411 (17,931)
Miscellaneous receivables 788 11,423
Recoverable income taxes and
income taxes payable 1,286 (1,208)
Securities owned 77,120 13,075
Prepaid expenses and other
assets (1,142) 287
Miscellaneous payables (240) (620)
Accounts payable and accrued
expenses 4,791 (992)
Accrued commissions 1,011 (245)
Securities sold but not
yet purchased 11,115 (7,822)
------------ -------------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 18,588 17,754
<PAGE>
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
(Purchase) sale of furniture,
fixtures and leasehold
improvements (609) 102
Sale of exchange membership 710
------------ -------------
NET CASH FLOWS PROVIDED BY
INVESTING ACTIVITIES 101 102
CASH FLOWS USED IN FINANCING
ACTIVITIES
Net decrease in short-term
borrowings from banks (23,954) (19,793)
Payment of liabilities
subordinated to claims of
general creditors (1,374) -
Proceeds from issuance of
common stock in connection
with stock option plan - 1,139
------------ -------------
NET CASH FLOWS USED IN
FINANCING ACTIVITIES (25,328) (18,654)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (6,639) (798)
Cash and cash equivalents at
beginning of period 7,011 1,996
------------ -------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 372 $ 1,198
============ =============
See Notes to Condensed Consolidated Financial Statements
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
- - - - - ------------------------------
The unaudited condensed consolidated financial statements of Rodman
& Renshaw Capital Group, Inc. and subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management of the
Company, all adjustments considered necessary for a fair
presentation of the financial condition and results of operations of
the Company for the periods presented have been included. Certain
reclassifications have been made to prior period's amounts to
conform with current period presentations. Although the Company has
stock options outstanding they do not have a dilutive effect on
earnings per share, accordingly the primary and fully diluted loss
per share calculations are not different. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Transition Report on Form 10-K for the
period from June 25, 1994 through December 31, 1994.
NOTE B - ASSETS SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS
- - - - - --------------------------------------------------------------
The Company is holding in safekeeping $62,019,000 and $83,370,000 of
securities owned by customers as of March 31, 1995, and December 31,
1994, respectively. In accordance with applicable regulations,
these securities are not included in the Condensed Consolidated
Statement of Financial Condition.
NOTE C - NET CAPITAL REQUIREMENT AND DIVIDEND RESTRICTIONS
- - - - - ----------------------------------------------------------
The Company's primary subsidiary, Rodman & Renshaw, Inc.("Rodman"),
a registered broker-dealer and futures commission merchant, is
subject to the minimum net capital rules of the Securities and
Exchange Commission (the "SEC") (Rodman has elected to use the
alternative net capital method permitted by the SEC rule), Commodity
Futures Trading Commission (the "CFTC"), and the capital rules of
the New York Stock Exchange, Inc. (the "NYSE"), of which Rodman is a
member. These rules require that Rodman maintain minimum net
capital, as defined in such rules, equal to the greater of 2% of
aggregate debits arising from customer transactions or $1,000,000,
or 4% of the funds required to be segregated for customers pursuant
to the Commodity Exchange Act. The NYSE may require a member firm
to reduce its business if its net capital is less than the greater
of $125,000 or 6% of the funds required to be segregated and may
prohibit a member firm from expanding its business or paying cash
dividends if resulting net capital would be less than the greater of
$150,000 or 7% of the funds required to be segregated. At March 31,
1995, and December 31, 1994, Rodman had net capital of $9.43 million
and $16.64 million, respectively, or $5.50 million and $11.04
million, respectively, in excess of required net capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The results of operations should be read in conjunction with the
Company's condensed consolidated statements of income. The
Company's principal activities -- securities and commodities
brokerage, principal trading for servicing its customers, and
investment banking services -- are highly competitive and extremely
volatile. The earnings of the Company are subject to wide
fluctuations since many factors over which the Company has little or
no control -- such as the overall volume of activity in the
securities, futures and options markets and the volatility and
general level of market prices and interest rates -- may affect its
operations. In addition, results of operations for any particular
interim period may not be indicative of results to be expected for
the year ending December 31, 1995.
Revenues for the quarter ended March 31, 1995, totalled $17.48
million, up 20% from $14.59 million for the previous year's first
calendar quarter. The Company previously had a last Friday in June
fiscal year, which was changed to a calendar year effective
December 31, 1994. This and all other analysis presents a
comparison to the three month period ended March 25, 1994,
previously the Company's third fiscal quarter. For the most recent
quarter, the Company recorded a net loss of $2.21 million, or $0.37
per share. For the quarter ended March 25, 1994, the Company
reported a net loss of $2.09 million, or $0.46 per common share and
common share equivalent. The per share loss declined for the first
quarter of 1995 because 150 shares of the Company's preferred stock
were converted into 2,068,965 shares of common stock on January 31,
1995, pursuant to the terms of the preferred stock following
stockholder approval of the conversion.
REVENUES
Commission revenue fell 8% to $6.46 million for the quarter ended
March 31, 1995, from $6.99 million in the corresponding 1994
calendar quarter. Revenues from principal transactions include
mark-ups and realized and unrealized gains and losses on securities
held for resale. Principal transaction revenues increased 15% to
$5.58 million for the quarter ended March 31, 1995, from the
corresponding 1994 calendar quarter.
Interest revenue is derived primarily from financing customer
security purchases and from investments which are maintained
pursuant to the rules and regulations of the SEC and the CFTC
pertaining to segregation of customer funds. Interest revenues
increased by $1.8 million or 100% for the quarter ended March 31,
1995, as compared to the quarter ended March 25, 1994, due
principally to increases in security inventory positions and retail
customer margin receivables and higher prevailing interest rates.
EXPENSES
Employee compensation and benefit expense increased by 29% for the
quarter ended March 31, 1995, from the year earlier quarter. This
increase is attributable to the variable nature of certain
compensation related to increases in commissions, principal revenues
and fee income.
Interest expense increased $1.77 million to $3.0 million for the
three-month period ended March 31, 1995, from the year earlier
quarter. This increase is due to interest paid on the short-term
note payable to an affiliate, increased balances of short term notes
payable to banks to finance larger security inventory positions for
comparable inventory balances as of March 1994, and higher
prevailing interest rates at March 31, 1995.
Clearance and floor brokerage expense, which is variable in nature,
decreased 30% for the quarter, in line with the lower revenues.
Other operating expenses decreased 57% to $888,000 for the quarter
ended March 31, 1995. The comparable previous year's quarter
reflected losses resulting from discretionary trading activities in
customer accounts.
LIQUIDITY AND CAPITAL RESOURCES
The Company's assets are substantially comprised of customer-related
receivables and securities inventory, both of which are highly
liquid. The principal sources of financing are stockholders'
equity, customer payables, proceeds from securities lending, short-
term loans from banks and affiliates and other payables.
Additionally, the Company maintains lines of credit with large
financial institutions which include daily demand loans, letters of
credit and reverse repurchase agreements to meet financing needs.
All of these lines of credit require collateral to be pledged, and
the borrowings may not exceed the value of the collateral. The
Company believes that such lines will be available as long as
collateral is available.
As a registered broker-dealer and futures commission merchant,
Rodman is required by the SEC and CFTC to maintain specific amounts
of net capital to meet its customers' obligations. As of March 31,
1995, Rodman's net capital, as defined, was $9.43 million, which was
$5.50 million in excess of required net capital.
On June 22, 1994, the Company borrowed $10,000,000 from Confia,
S.A., Institucion de Banca Multiple, Abaco Grupo Financiero
("Confia, S.A."), an affiliated company of the Company's majority
stockholder, Abaco Casa de Bolsa, S.A. de C.V., Abaco Grupo
Financiero ("Abaco"). The loan was renewed on December 19, 1994 for
a six month term. Management of the Company believes that Confia,
S.A. will continue to renew the loan for additional periods.
However, the interest rate on the loan, if it is renewed, will be
established at the time of the renewal, and such rate is expected to
increase substantially because of rising interest rates in Mexico.
Management of the Company is engaged in discussions with Confia,
S.A. concerning a change in the nature of the short-term borrowing.
It has also initiated discussions with third parties concerning
replacement financing.
Rodman's subordinated borrowings have maturities at dates within the
next twelve months as follows:
June 19, 1995 $10,000,000
September 30, 1995 $ 2,500,000
On January 3, 1995, Rodman obtained regulatory approval to repay and
repaid $1,374,000 of a subordinated note to an unrelated party
pursuant to a termination agreement. The subordinated borrowing due
September 30, 1995, which also is from an unrelated party, will
either be renewed or repaid, depending on Rodman's capital needs,
renewal terms and other factors. If the borrowing is repaid, the
repayment will be funded from cash reserves. The $10,000,000
subordinated borrowing is part of a senior subordinated revolving
credit facility between Rodman and the Company terminating on
June 15, 1997, which facility currently is funded by the Company's
borrowing from Confia, S.A. discussed above. It is the intention of
management of the Company and Rodman to extend this subordinated
borrowing through June 1998 unless the nature of the short-term
borrowing between the Company and Confia, S.A. is changed, as
discussed above. To the extent that such subordinated borrowing is
required for Rodman's continued compliance with minimum net capital
requirements, it may not be repaid. In the event that the borrowing
between the Company and Confia, S.A. is not renewed and Rodman is
not permitted to repay the subordinated debt to the Company, the
Company will have to seek third party sources of funds as discussed
above. If the Company is unable to obtain such third party funds,
it will be required to curtail substantially the business activities
of Rodman in order to reduce Rodman's minimum capital requirements
and, in turn, allow Rodman to repay its subordinated debt to the
Company. The Board of Directors of the Company already has
authorized management of the Company to solicit interest in and
negotiate a sale of part or all of Rodman's commodities business,
which requires intensive use of regulatory capital.
Rodman also is initiating discussions with several unrelated parties
to increase its subordinated borrowings and regulatory net capital.
If Rodman is unable to obtain such capital, it may be unable to
expand its businesses but should be able to maintain its current
level of activities provided that it does not sustain substantial
additional losses (and provided that it renews the Confia, S.A. loan
or obtains replacement financing as discussed in the above two
paragraphs). In the event that Rodman is unable to obtain
additional capital and wishes to expand in certain areas, or in the
event that it sustains substantial losses, it may reduce its
activities in areas it identifies as insufficiently profitable to
justify the regulatory capital required to conduct them.
On March 28, 1995, Rodman acquired certain of the assets and hired
substantially all of the professional employees of the institutional
equities, research and investment banking departments of Mabon
Securities Corp. In the transaction, Rodman also assumed certain
liabilities associated with individuals to whom it extended offers
of employment. These liabilities are expected to be approximately
$600,000, will offset working capital over time as they are
dependent on the individual employees' employment by Rodman.
Although the Company will have two office relocations during the
second quarter of 1995, the Company has negotiated tenant build-out
concessions and intends to utilize other traditional means of
financing to minimize the impact of such relocations on the
Company's liquidity. The Company estimates that it will spend
approximately $1,000,000 out of cash reserves related to these
moves. The Company is presently analyzing the effect of the Mabon
transaction on its office space and equipment requirements and
believes that the impact on liquidity and capital will not be
material. The Company does not anticipate any other material
capital expenditures or investments during the next year. Future
expenditures, if any, are expected to be funded by cash generated
from operations and other traditional means of financing.
In the quarter ended March 31, 1995, the Company generated cash and
cash equivalents of $61.07 million exclusive of the increase in
securities purchased under agreements to resell of $42,479,000 from
operating activities primarily related to the decrease in security
inventory positions. In the quarter ended March 25, 1994, the
Company's operations generated $17.7 million.
In the quarter ended March 31, 1995, the Company's financing
activities used $25.3 million. In the quarter ended March 25, 1994,
the Company's financing activities used $18.7 million.
In the quarter ended March 31, 1995, the Company provided $101,000
from investing activities, as compared to the quarter ended
March 25, 1994, when the Company provided $102,000 from investing
activities.
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the stockholders was held on January 31, 1995
to vote on:
Proposal 1: Authorization of the conversion of each of
the Company's 150 outstanding shares of Series A Non-Voting
Convertible Preferred Stock into 13,793.103 shares of common stock;
and
Proposal 2: Ratification of the appointment of Coopers
& Lybrand L.L.P. as independent auditors for the transition period
ended December 31, 1994.
The results of the voting were as follows:
For Against Abstain Non-Vote
Proposal 1: 2,820,027 35,622 20,612 1,402,794
Proposal 2: 4,256,564 18,684 3,807 0
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The following exhibits are included
herein or are incorporated by reference
(2.1) Asset Purchase Agreement dated as of
March 21, 1995 between the Company and
Mabon Securities Corp.
(10.1) Employment Agreement dated as of March
16, 1995 between Rodman & Renshaw,
Inc. and Peter Boneparth.
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the
quarter ended March 31, 1995.
<PAGE>
SIGNATURES
----------
Pursuant to the requirement of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
RODMAN & RENSHAW CAPITAL GROUP, INC.
(Registrant)
Date: May 12, 1995 By: /s/ John T. Hague
---------------------------------
John T. Hague
Chief Financial Officer
Date: May 12, 1995 By: /s/ Charles W. Daggs, III
----------------------------------
Charles W. Daggs, III
President and Chief Executive
Officer
C:\WP51\FILINGS\10Q-5-95.7
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of March 21, 1995, is
entered into by and between Mabon Securities Corp. ("Seller"), a
Delaware corporation, and Rodman & Renshaw, Inc. ("Purchaser"), a
Delaware corporation.
WHEREAS, Purchaser desires to acquire, and Seller desires to
transfer to Purchaser, certain assets and liabilities of the investment
banking, direct access and equity businesses of Seller (the
"Businesses") on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Acquired Assets" shall have the meaning set forth in Section
4.2(a).
"Actual Knowledge," with respect to Seller, means the actual
knowledge of the General Counsel of Seller, without regard to any
attorney-client privilege, it being understood that such person is
under no duty or obligation to make any investigation or inquiry.
"Affiliate" means, with respect to any person, any person
controlling, controlled by or under common control with such person.
"Applicable Law" means all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including the common law),
rules, regulations, ordinances, codes or orders of any Governmental
Authority, and (b) orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any Governmental Authority.
"Assigned Contracts" shall have the meaning set forth in Section
4.2(a).
"Assumed Liabilities" shall have the meaning set forth in Section
4.2(c).
"Boston Lease" means the lease pursuant to which Seller leases
the Boston Office.
"Boston Office" means the office of Seller located at 225
Franklin Street, Boston, Massachusetts.
"Businesses" shall have the meaning set forth in the Preamble.
"Clearing Agreement" shall have the meaning set forth in Section
4.2(g).
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Date" shall have the meaning set forth in Section 4.1.
"Closing Date Payment" shall have the meaning set forth in
Section 4.2(h).
"Closing Transactions" shall have the meaning set forth in
Section 4.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Continuation Coverage" shall have the meaning set forth in
Section 7.6(c).
"Continuing Employee" shall have the meaning set forth in Section
7.6(a).
"Conveyancing Documents" shall have the meaning set forth in
Section 4.3.
"Delayed Asset" shall have the meaning set forth in Section 4.5.
"Delayed Liability" shall have the meaning set forth in Section
4.5.
"Disclosure Letter" means the separate disclosure letter
delivered by Seller to Purchaser contemporaneously with the execution
and delivery of this Agreement.
"Effective Date" shall mean the date of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"Excluded Liabilities" shall have the meaning set forth in
Section 4.2(d).
"Final Purchase Price" shall have the meaning set forth in
Section 7.11(b).
"Governmental Authority" means any (i) government, or any
commission, authority, board, agency, division, subdivision or any
court or tribunal, of the government of the United States or of any
state, territory, city, municipality, county or town thereof or of the
District of Columbia, or of any foreign jurisdiction, or (ii) any
regulatory body or self-regulatory organization to which Seller or
Purchaser, as the case may be, is subject including, in clauses (i) and
(ii), the employees or agents thereof.
"Licenses and Permits" means the governmental permits,
franchises, authorizations, licenses and other rights granted to Seller
by any Governmental Authority and applicable to or used primarily in
the conduct of the Businesses and all certificates of convenience or
necessity, immunities, privileges, easements, consents, grants,
ordinances and other rights of any character used primarily in the
conduct of, or required or necessary for the lawful ownership or
operation of, the Businesses.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien (statutory or other) or conditional sale agreement.
"Loss" shall have the meaning set forth in Section 6.1.
"Material Adverse Effect" means a material adverse effect on the
business, assets, properties, condition (financial or otherwise),
operations or results of operations of the Businesses taken as a whole.
"Move Date" shall mean the date upon which Purchaser shall
relocate substantially all of the Acquired Assets and Continuing
Employees from the Subject Space.
"NASD" shall mean the National Association of Securities Dealers.
"1934 Act" means the Securities Exchange Act of 1934.
"NYSE" shall mean the New York Stock Exchange.
"Preamble" means that part of this Agreement preceding Article
I.
"Purchase Price" means the sum of the amount of the Assumed
Liabilities and the amount of Closing Date Payment.
"Purchaser" shall have the meaning set forth in the Preamble.
"Required Consent" means the consent of any person necessary for
the sale, conveyance, transfer or assignment of any Acquired Asset or
the assumption of any Assumed Liability.
"Required Move Date" means (i) with respect to that portion of
the Subject Space located on the 32nd floor of One Liberty Plaza, May
31, 1995 and (ii) with respect to that portion of the Subject Space
located on the 31st floor of One Liberty Plaza, July 31, 1995.
"Seller" shall have the meaning set forth in the Preamble.
"Service Agreement" shall have the meaning set forth in Section
4.2(f).
"Space Sharing Agreement" shall have the meaning set forth in
Section 4.2(f).
"Subject Space" shall have the meaning set forth in Section
7.4(a).
"Tax" or "Taxes" shall mean all Federal, state, local, foreign
and other governmental taxes, assessments, duties, fees, levies or
similar charges of any kind, including all income taxes, excise taxes,
franchise taxes, gross receipts taxes, real and personal property
taxes, stamp taxes, transfer taxes, sales and use, payroll, employment
and other withholding taxes, and including all obligations under any
tax sharing agreement, tax indemnity obligation or similar written or
unwritten agreement, arrangement or practice, and including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Returns" shall mean all returns, filings and reports
(including information reports) with respect to any Tax or Taxes.
"Third Party Claim" shall have the meaning set forth in Section
6.4(a).
"Transition Period" means the period from and after the Closing
Date to and including the Move Date.
"USOP Transfer Date" shall have the meaning set forth in Section
4.8.
"WARN" means the Worker Adjustment and Retraining Notification
Act.
"Welfare Plans" shall have the meaning set forth in Section
7.6(c).
1.2 Terms Generally. The definitions in Section 1.1 shall
apply equally to both the singular and plural forms of the terms
defined. "Include", "includes" and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. "Writing", "written"
and comparable terms refer to printing, typing, lithography or other
means of reproducing words in a visible form. Any agreement or
instrument or any law, rule or regulation of any Governmental Authority
defined or referred to in Section 1.1 means such agreement or
instrument or such law, rule or regulation as from time to time
amended, modified or supplemented in accordance with the terms thereof,
including (in the case of agreements or instruments) by waiver or
consent and (in the case of such law, rule or regulation) by succession
of any comparable successor law, rule or regulation and includes (in
the case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns. Any term defined
below by reference to any agreement or instrument or any law, rule or
regulation of any Governmental Authority has such meaning whether or
not such agreement, instrument or law, rule or regulation is in effect.
"Agreement", "hereof", "herein", "hereunder" and comparable terms refer
to this Agreement (including all exhibits and schedules hereto) and not
to any particular article, section, clause or other subdivision hereof
or attachment hereto. References to any gender include, unless the
context otherwise requires, references to all genders, and references
to the singular include, unless the context otherwise requires,
references to the plural and vice versa. References in this Agreement
to "Article", "Section", "Clause" or another subdivision or to an
attachment are, unless the context otherwise requires, to an article,
section, clause or subdivision of or attachment to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser, as of the
Effective Date and as of the Closing Date, as follows:
2.1 Corporate Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware, and has all requisite corporate power and authority to own
its properties and assets (including the Acquired Assets) and to
conduct its businesses (including the Businesses) as now conducted.
2.2 Authorization and Validity of This Agreement. Seller has
full corporate power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution
and delivery by Seller of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary
corporate action by its Board of Directors and stockholder, and no
other corporate proceedings on its part are necessary to authorize such
execution, delivery and performance. This Agreement has been duly
executed and delivered by Seller and constitutes its valid and binding
obligation, enforceable against it in accordance with its terms.
2.3 No Conflict or Violation; Consents. The execution,
delivery and performance by Seller of this Agreement (i) do not and
will not violate or conflict with any provision of the Certificate of
Incorporation or By-laws of Seller and (ii) do not and will not
conflict with, or result in any violation of or default (with or
without notice or lapse of time or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person under,
or result in the creation of any Lien upon any of the Acquired Assets
under, any provision of (A) any contract, agreement or other instrument
to which Seller is a party or by which it is bound or to which any of
its properties or assets is subject assuming receipt of all Required
Consents, and except as set forth in the Disclosure Letter, or (B) any
provision of Applicable Law applicable to Seller or its properties or
assets, other than, in the case of clauses (A) and (B) above, any such
items that, individually or in the aggregate, would not have a Material
Adverse Effect and would not prevent or materially delay the
consummation of the Closing Transactions. The execution, delivery and
performance by Seller of this Agreement and the consummation by it of
the Closing Transactions do not require the consent or approval of, or
filing by Seller with, any Governmental Authority except (I) approvals
and authorizations of the NYSE and other self-regulatory organizations
in the securities and commodities field; (II) compliance with and
filings under the 1934 Act and applicable state securities laws; and
(III) such consents, approvals and filings, as to which the failure to
obtain or make would not, individually or in the aggregate, materially
impair the ability of Seller to perform its obligations hereunder.
2.4 Brokers or Finders. Except for Morgan Stanley & Co.
Incorporated, whose fees and expenses shall be paid by Seller, no
agent, broker, investment banker or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the Closing Transactions based
on arrangements made by or on behalf of Seller.
2.5 Litigation. Except as described in the Disclosure Letter,
to Seller's Actual Knowledge: (a) there is no suit, action, arbitration
or legal, administrative, governmental or other proceeding or
investigation pending or threatened in writing against or related to
Seller (i) in respect of the Businesses, the Acquired Assets or the
Assumed Liabilities, except such suits, actions, arbitrations,
proceedings or investigations which do not have a Material Adverse
Effect, or (ii) which is reasonably expected to materially adversely
affect or restrict the ability of Seller to consummate the transactions
contemplated by this Agreement or to perform its obligations hereunder;
and (b) there is no judgment, order, injunction or decree of any court
or Governmental Authority to which Seller is subject which is
reasonably expected to materially adversely affect or restrict the
ability of Seller to consummate the transactions contemplated by this
Agreement or to perform its obligations hereunder.
2.6 Title to Acquired Assets. At the Closing (or (A) at the
USOP Transfer Date with respect to shares of common stock of U.S.
Office Products Company or (B) at such later time as is provided for
in Section 4.6 with respect to the assets described therein) Seller
will have and will convey to Purchaser good title to (i) the fixed
assets to be transferred to Purchaser pursuant to Section 4.2(a)(iv),
free and clear of all Liens except for those Liens set forth in the
Disclosure Letter, and (ii) the securities to be transferred to
Purchaser pursuant to Section 4.2(a)(iii), free and clear of all Liens
and without actual knowledge by Purchaser of any adverse claim or any
events or circumstances which could reasonably be expected to result
in any adverse claim.
2.7 Compliance with Laws. Except as set forth in the
Disclosure Letter, to Seller's Actual Knowledge, Seller: (i) has
complied with each and is not in violation of any federal, state or
local laws, statutes, rules, regulations, orders, ordinances, judgments
or decrees of any Governmental Authority to which the Businesses, the
Acquired Assets or the Assumed Liabilities are subject; and (ii) has
not failed to obtain any license, permit, certificate or other
governmental authorization necessary to the conduct of the Businesses,
which, in the event of any noncompliance, violation or failure to
obtain, as the case may be, pursuant to Clause (i) or (ii) above, would
have a Material Adverse Effect.
2.8 Benefit Plans. Seller does not have any "pension plan,"
as such term is defined in Section 3(2) of ERISA, with respect to which
payments must be made to the Pension Benefit Guaranty Corporation.
2.9 No Representation as to Value or Prospects. Other than the
representations and warranties set forth in this Article II, Seller
makes no representations or warranties to Purchaser. Purchaser agrees
that Seller has not authorized, and shall not be responsible or liable
for, any statements or representations made to Purchaser or its
employees, officers or agents by Continuing Employees or former
employees of Seller. Notwithstanding any other provision of this
Agreement, it is expressly agreed that Seller makes no representation
or warranty as to the value or prospects of the Businesses or the
Acquired Assets. Seller has expressly stated to Purchaser that the
investment banking, direct access and equity businesses as heretofore
conducted by Seller, of which the Businesses form a part, have in the
aggregate been unprofitable, have been deteriorating and may continue
to deteriorate, and that Seller has decided to close the Businesses as
of March 31 and has already taken steps to downsize the Businesses and
curtail their operations substantially.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller, as of the
date hereof and as of the Closing Date, as follows:
3.1 Corporate Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to own its
properties and assets and the Acquired Assets and to conduct its
businesses as now conducted and as to be conducted following the
Closing.
3.2 Authorization and Validity of This Agreement. Purchaser
has full corporate power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. As of the
Closing Date, the execution and delivery of this Agreement and the
performance of its obligations hereunder will have been duly authorized
by all necessary corporate action by the Board of Directors of
Purchaser, and no other corporate proceedings on the part of Purchaser
will be necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by
Purchaser and constitutes its valid and binding obligation, enforceable
against it in accordance with its terms.
3.3 No Conflict or Violation; Consents. The execution,
delivery and performance by Purchaser of this Agreement (i) do not and
will not violate or conflict with any provision of the Certificate of
Incorporation or By-laws of Purchaser and (ii) do not and will not
conflict with, or result in any violation of or default (with or
without notice or lapse of time or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person under,
or result in the creation of any Lien upon any of the properties or
assets of Purchaser under, provision of (A) any contract, agreement or
other instrument to which Purchaser is a party or by which it is bound
or to which any of its properties or assets is subject or (B) any
provision of Applicable Law applicable to Purchaser or its properties
or assets, other than, in the case of clauses (A) and (B) above, any
such items that, individually or in the aggregate, would not have a
material adverse effect on the business, assets, properties, condition
(financial or otherwise), operations, results of operations or
prospects or Purchaser and would not prevent or materially delay the
consummation of the Closing Transactions. The execution, delivery and
performance by Purchaser of this Agreement and the consummation by it
of the Closing Transactions do not require the consent or approval of,
or filing by Purchaser with, any Governmental Authority except (I) as
may be required to transfer any Licenses and Permits; (II) approvals
and authorizations of the NYSE and other self-regulatory organizations
in the securities and commodities field; (III) compliance with and
filings under the 1934 Act and applicable state securities laws; and
(IV) such consents, approvals and filings, as to which the failure to
obtain or make would not, individually or in the aggregate, materially
impair the ability of Purchaser to perform its obligations hereunder.
3.4 Brokers or Finders. Except for Hadley Lockwood & Co.,
Inc., Peter Boneparth, Edwin McGuinn, Jr., and Mark Clein, whose fees
and expenses shall be paid by Rodman & Renshaw Capital Group, Inc., no
agent, broker, investment banker or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the Closing Transactions based
on arrangements made by or on behalf of Purchaser.
ARTICLE IV
THE TRANSACTIONS
4.1 The Closing.
Subject to the satisfaction or waiver by the appropriate party
of all the conditions set forth in this Agreement, the transactions
contemplated by Section 4.2 (the "Closing Transactions") shall be
consummated at a closing (the "Closing") to be held at the offices of
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New
York 10006 at 10:00 a.m. as promptly as possible after, but no later
than the second business day following, satisfaction or waiver of all
of the conditions set forth in Section 5.1 or such later or earlier
date as the parties may agree (the "Closing Date").
4.2 Transfer of the Acquired Assets.
(a) On the terms and subject to the conditions set forth
in this Agreement and except as set forth in Section 4.2(b) and 4.5,
at the Closing, Seller shall convey, transfer, assign and deliver to
Purchaser, and Purchaser shall accept from Seller, all right, title and
interest of Seller in and to all of the assets, properties and rights
owned by Seller and used primarily in the operation of the Businesses,
of every type and description (the "Acquired Assets"). The Acquired
Assets include, without limitation, all of the right, title and
interest of Seller in or to the following to the extent utilized in the
operation of the Businesses and existing on the Closing Date (and
whether or not in existence on the date hereof):
(i) all of the records, customer lists, files,
computer records, books of account, customer
account agreements and all other similar items
heretofore used primarily in the Businesses;
provided, that Seller shall be entitled to
retain copies of all records, including
without limitation customer account records,
to the extent and for so long as may be
required by any Applicable Law; and provided,
further, that for a period of five years
following the Closing Date, Purchaser shall
promptly upon Seller's request and at Seller's
reasonable expense provide Seller with access
to and copies of any agreements used
heretofore in the Businesses;
(ii) all of the contracts of Seller utilized
primarily in the conduct of the Businesses,
including without limitation the contracts
listed in Schedule 4.2(a)(ii) (which Schedule
Purchaser acknowledges has been prepared based
solely on information provided by Peter
Boneparth) (the "Assigned Contracts");
(iii) subject to Section 4.8, all of the
trading positions of the Businesses
remaining at midnight on the day before
the Closing Date;
(iv) all of the fixed assets and, to the extent
transferable, any equipment of Seller utilized
primarily in the conduct of the Businesses and
located in the Boston Office, including
without limitation the fixed assets and
equipment that shall be listed in Schedule
4.2(a)(iv), which Schedule shall be reasonably
agreed upon by the parties prior to the
Closing and amended to reflect actual
transfers occurring after the Closing Date;
(v) all customer and other deposits, if any,
relating primarily to or generated as a result
of the prior operation of the Businesses;
(vi) all materials relating to work in progress of
the Businesses, including transaction
documents, engagement letters and drafts
involved in investment banking transactions;
(vii) to the extent assignable, all
intellectual property rights, if any, of
Seller (other than the names "Mabon" and
"Nugent" or any derivatives thereof)
used primarily in the conduct of the
Businesses (including Seller's goodwill
therein), including but not limited to
research reports, business and marketing
plans and computer software and all
related documentation, copyrights and
applications therefor; provided, that
Seller shall have no obligation to
maintain or otherwise provide service
with respect to any such computer
software on or after the Closing Date,
except as provided in the Service
Agreement;
(viii) to the extent assignable, all licenses,
certificates, permits, franchises,
approvals and authorizations, if any, of
the Businesses and applications for any
of the foregoing;
(ix) any prepaid expenses relating primarily to the
Businesses;
(x) any security deposits deposited by or on
behalf of Seller with respect to the
Businesses;
(xi) to the extent assignable, the Boston Lease;
(xii) to the extent transferable, any
leasehold improvements primarily related
to office space occupied by the
Businesses in the Boston Office; and
(xiii) to the extent transferable at no cost to
Seller, all telephone, telex and fax
numbers used primarily in the
Businesses.
(b) Any provision of this Agreement to the contrary
notwithstanding, Purchaser shall not acquire and there shall be
excluded from the Acquired Assets the following (the "Excluded
Assets"):
(i) all assets of Seller which are primarily used
by Seller other than in the operation of the
Businesses;
(ii) the names "Mabon," "Nugent" or any derivatives
thereof;
(iii) Seller's employee benefit plans,
programs or arrangements, whether or not
subject to ERISA, and the assets
thereof; and
(iv) Seller's leases of office space at One Liberty
Plaza and in Washington, D.C. and San
Francisco, California, and any fixed assets,
equipment and leasehold improvements related
thereto, except as otherwise provided by this
Agreement.
(c) From and after the Closing Date, Purchaser shall
assume and agree to pay, perform and discharge when due the following
liabilities (whether absolute or contingent, known or unknown) (the
"Assumed Liabilities"):
(i) liabilities of Seller outstanding on the
Closing Date (or, with respect to shares of
common stock of U.S. Office Products Company,
on the USOP Transfer Date) that finance
securities forming part of the Acquired
Assets;
(ii) liabilities incurred on or after the Closing
Date that are directly related to the Acquired
Assets;
(iii) liabilities and obligations under
Assigned Contracts (including the Boston
Lease) to the extent transferable or
usable, but only to the extent arising
and to be performed on or after the
Closing Date;
(iv) liabilities, if any, to pay severance and
amounts due in lieu of notice under WARN to
Continuing Employees and liabilities under
Seller's employment agreements with Continuing
Employees; and
(v) liabilities to pay Taxes allocated to
Purchaser pursuant to Section 4.9 or
Apportioned Taxes allocated to Purchaser
pursuant to Section 7.9.
For purposes of this Section 4.2(c), any liability arising from a
transaction of the Businesses consummated or terminated after the
Closing Date shall be deemed to arise or to be incurred after the
Closing Date even if such transaction was initiated prior to the
Closing Date.
(d) Any provision of this Agreement to the contrary
notwithstanding, the following liabilities (the "Excluded Liabilities")
of Seller are excluded and shall not be assumed or discharged by
Purchaser:
(i) any Tax liability of Seller arising out of or
in connection with the consummation and
performance of the transactions contemplated
by this Agreement, other than Taxes allocated
to Purchaser pursuant to Section 4.9;
(ii) any liability or obligation (other than
Apportioned Taxes allocated to Purchaser
pursuant to Section 7.9) of Seller or any
consolidated group of which Seller was or is a
member, for Taxes arising prior to the Closing
Date and, to the extent such Taxes do not
relate to the Businesses or Acquired Assets,
Taxes arising after the Closing Date,
including, without limitation, those arising
from Treasury Regulation 1.1502-6(a);
(iii) any liabilities arising prior to the
Closing Date for injury to or death of
persons or damage to or destruction of
property (including, without limitation,
any worker's compensation claim),
regardless of when said claim or
liability is asserted;
(iv) any liabilities arising prior to the Closing
Date arising out of violations of any law,
statute, rule, regulation, ordinance, writ,
judgment, decree or order of any Governmental
Authority;
(v) any liabilities in respect of any action,
suit, proceeding or arbitration by any person
or Governmental Authority to the extent such
action, suit, proceeding or arbitration is
brought with respect to matters occurring
prior to the Closing Date;
(vi) any liability arising under any Assigned
Contract to the extent that such liability
relates to any alleged breach by Seller of
such Assigned Contract prior to the Closing
Date;
(vii) any liabilities to the extent arising
out of, relating to or otherwise in
respect of the Excluded Assets; and
(viii) without limitation by the specific
enumeration of the foregoing, any
liabilities not expressly assumed by
Purchaser pursuant to the terms hereof.
For purposes of this Section 4.2(d), any liability arising from a
transaction of the Businesses consummated or terminated after the
Closing Date shall be deemed to arise or to be incurred after the
Closing Date even if such transaction was initiated prior to the
Closing Date.
(e) Whenever such amounts are due and payable, Seller
shall (i) pay to the Continuing Employees, net of any required
withholding Taxes, all compensation due to the Continuing Employees for
all periods prior to the Closing Date, including the accrued vacation
pay of the Continuing Employees and any bonuses payable to the
Continuing Employees for the period ending on the Closing Date.
(f) At the Closing, Seller and Purchaser shall enter into
a Transition Service Agreement satisfactory to the NYSE and
substantially in the form attached hereto as Annex A (the "Service
Agreement"), with such changes as the parties shall negotiate in good
faith prior to the Closing, and a Space Sharing Agreement substantially
in the form of attached hereto as Annex B (the "Space Sharing
Agreement"), with such changes as the parties shall negotiate in good
faith prior to the Closing.
(g) At the Closing, Seller and Purchaser shall enter into
a Clearing Agreement satisfactory to the NYSE and substantially in the
form attached hereto as Annex C (the "Clearing Agreement"), with such
changes as the parties shall negotiate in good faith prior to the
Closing.
(h) At the Closing, in addition to assuming the Assumed
Liabilities, Purchaser shall make the Closing Date Payment. The
"Closing Date Payment" shall be a cash payment to Seller, by wire
transfer of same-day funds, in an amount equal to the sum of:
(i) the mark-to-market value of the securities
transferred to Purchaser pursuant to Section
4.2(a)(iii),
(ii) the amount shown on Schedule 4.2(a)(iv) as of
the Closing Date as payment for the fixed
assets and equipment listed therein,
(iii) $57,453 in repayment of the
unrecoverable prepaid expenses of Seller
relating to the Businesses listed in
Schedule 4.2(h)(iii),
(iv) $35,000 as advance reimbursement of severance
and amounts due in lieu of notice under WARN
pursuant to Section 7.5(a),
(v) $50,000 in prepayment of amounts due under
NYSE seat leases described in Section
5.1(b)(vi), and
(vi) $200,000 as payment for all other Acquired
Assets and Delayed Assets not specifically
described above and not transferred pursuant
to Section 4.6, and
(vii) $250,000 as prepayment of amounts due
from Purchaser to Seller pursuant to
Section 7.3(c).
4.3 Transfer of Assets. The conveyance, transfer, assignment
and delivery by Seller of the Acquired Assets to Purchaser shall be
effected on the Closing Date by deeds, bills of sale, endorsements,
stock powers, assignments and other instruments of transfer and
conveyance reasonably satisfactory in form and substance to counsel for
Purchaser (the "Conveyancing Documents").
4.4 Subsequent Documentation. Seller shall, at any time and
from time to time after the Closing Date, upon the reasonable request
and at the expense of Purchaser, do, execute, acknowledge and deliver
all such further deeds, assignments, transfers and other instruments
of transfer and conveyance as may be required for the better assigning,
transferring, granting, conveying and confirming to Purchaser or its
successors and assigns, or for aiding and assisting in collecting and
reducing to possession, any or all of the Acquired Assets (any such
document, upon its execution and delivery, becoming a Conveyancing
Document).
4.5 Asset Transfers Requiring Consent.
(a) The parties recognize that the transfer of certain
Acquired Assets to Purchaser as contemplated hereby cannot be effected
without Required Consents. To the extent that any Required Consent
with respect to any Acquired Asset has not been obtained on or prior
to the Closing Date, such Acquired Asset (a "Delayed Asset") shall not
be transferred as an Acquired Asset hereunder, and any related
liability that would, but for the absence of such Required Consent,
constitute an Assumed Liability (a "Delayed Liability") shall not be
assumed by Purchaser as an Assumed Liability hereunder, unless and
until such Required Consent has been obtained. Notwithstanding the
foregoing, if any Required Consent is not obtained with respect to the
Boston Lease or any leased equipment to be transferred to Purchaser,
Seller shall at no expense to Seller sub-lease to Purchaser the Boston
Office (at the annual rate of $26 per square foot) or such equipment
(at the rate paid by Seller), as the case may be, and if the Required
Consent is not obtained with respect to such sub-lease or the transfer
of any other Acquired Asset, Seller shall, at the reasonable request
of Purchaser and at the expense of Purchaser, implement any lawful
arrangement designed to provide to Purchaser the benefits under or of
the applicable Acquired Asset; provided, however, that Purchaser
assumes and agrees to pay and perform all liabilities relating to such
Acquired Asset that would otherwise constitute Assumed Liabilities.
(b) At such time and on each occasion after the Closing
Date that a Required Consent shall be obtained with respect to any
Delayed Asset, such Delayed Asset shall forthwith be transferred and
assigned to Purchaser hereunder, and all related Delayed Liabilities
shall be simultaneously assumed by Purchaser hereunder, whereupon (i)
such Delayed Asset shall constitute an Acquired Asset for all purposes
hereunder and (ii) such Delayed Liabilities shall constitute Assumed
Liabilities for all purposes hereunder.
4.6 Payments for Additional Fixed Assets, Equipment and
Computer Software. If following the Closing Purchaser desires to
acquire additional fixed assets, equipment or software of Seller used
prior to the Closing Date in the conduct of the Businesses and not
transferred to Purchaser as an Acquired Asset at the Closing or as a
Delayed Asset thereafter, Seller shall transfer such assets to
Purchaser for cash in an amount to be agreed to by Purchaser and
Seller. It is the intention of Purchaser and Seller that the amount
paid for such assets should represent as nearly as possible the
adjusted book value of such assets on Seller's books and records,
without giving effect to any write-offs occurring after December 1,
1994.
4.7 Allocation of Purchase Price. Solely for Tax purposes,
Purchaser and Seller agree (i) to allocate the Purchase Price and the
Final Purchase Price among the Acquired Assets in accordance with the
rules under Section 1060 of the Code and the Treasury Regulations
promulgated thereunder and (ii) to act in accordance with the
computations and allocations contained in Schedule 4.7 (which Schedule
shall be agreed upon by Purchaser and Seller in good faith prior to the
Closing; provided, that the failure to agree upon such Schedule shall
not be construed as cause for either party to terminate this Agreement
pursuant to Section 5.1) (including any modifications thereto
reflecting any post-closing adjustments) with regard to all Taxes and
all relevant Tax Returns (including all forms and reports required to
be filed pursuant to Section 1060 of the Code). Seller and Purchaser
agree to take no action inconsistent with such Tax allocation
including, without limitation, during the course of any examination,
administrative appeal and/or litigation relating to Taxes.
4.8 Transfer of Position in U.S. Office Products. The "USOP
Transfer Date" shall be the later of the Closing Date and the seventh
day after the exercise by Seller of its option to acquire overallotment
shares of common stock of U.S. Office Products Company.
Notwithstanding anything to the contrary herein, Seller shall not
transfer to Purchaser any shares of common stock of U.S. Office
Products Company until the USOP Transfer Date. Upon transfer of such
shares to Purchaser, Purchaser shall pay to Seller in cash, by wire
transfer of same-day funds, an amount equal to the mark-to-market value
of such shares.
4.9 Transfer Taxes. The parties hereto agree that all
applicable excise, sales, use, transfer, value-added, documentary,
stamp, filing, recordation and other similar taxes, levies, fees and
charges, if any (including all real estate transfer taxes and
conveyance and recording fees, if any), that may be imposed upon, or
payable or collectible or incurred in connection with, this Agreement
and the transactions contemplated hereby shall be borne equally by
Seller and Purchaser. Purchaser or Seller, as the case may be, shall
pay to the party legally obligated to remit such Taxes to the relevant
taxing authority under applicable law its share of such Taxes within
10 days of receipt of a written request therefor.
4.10 Waiver of Right to Certain Fees. Seller hereby waives its
rights to any investment banking, advisory, broker's or finder's fees
or commissions or similar fees to be paid by Purchaser to Peter
Boneparth and Mark Clein in connection with any of the Closing
Transactions.
ARTICLE V
CONDITIONS TO CLOSING; TERMINATION
5.1 Conditions to Closing.
(a) The obligations of Seller to consummate the Closing
Transactions shall be subject to the fulfillment, on or before the
Closing Date, of the following conditions:
(i) to the reasonable satisfaction of Seller, all
necessary regulatory consents and approvals
(including consents and/or approvals of the
NYSE or the NASD) shall have been received;
(ii) Purchaser shall have complied in all material
respects with all of its covenants and
obligations hereunder;
(iii) all representations and warranties of
Purchaser contained in Article III shall
be true and correct in all material
respects as of the Closing Date;
(iv) no preliminary or permanent injunction or
other order issued by any Governmental
Authority nor any statute, rule, or
regulation, promulgated or enacted by any
Governmental Authority that prevents the
consummation of the Closing Transactions,
shall be in effect;
(v) Each individual listed on Part I of Schedule
5.1(b)(v), at least four of the individuals
listed on Part II of Schedule 5.1(b)(v), at
least three of the individuals listed on Part
III of Schedule 5.1(b)(v), and at least 90% of
the individuals listed on Part IV of Schedule
5.1(b)(v) shall have accepted the offer of
employment made by Purchaser; and
(vi) Purchaser shall have entered (or offered to
enter into) into the Clearing Agreement, the
Service Agreement and the Space Sharing
Agreement with Seller.
(b) The obligations of Purchaser to consummate the
Closing Transactions shall be subject to the fulfillment, on or before
the Closing Date, of the following conditions:
(i) to the reasonable satisfaction of Purchaser,
all necessary regulatory consents and
approvals (including consents and/or approvals
of the NYSE or the NASD) shall have been
received;
(ii) Seller shall have complied in all material
respects with all of its covenants and
obligations hereunder;
(iii) all representations and warranties of
Seller contained in Article II shall be
true and correct in all material
respects as of the Closing Date;
(iv) no preliminary or permanent injunction or
other order issued by any Governmental
Authority nor any statute, rule, or
regulation, promulgated or enacted by any
Governmental Authority that prevents the
consummation of the Closing Transactions,
shall be in effect;
(v) Each individual listed on Part I of Schedule
5.1(b)(v), at least four of the individuals
listed on Part II of Schedule 5.1(b)(v), at
least three of the individuals listed on Part
III of Schedule 5.1(b)(v), and at least 90% of
the individuals listed on Part IV of Schedule
5.1(b)(v) shall have accepted the offer of
employment made by Purchaser;
(vi) With respect to a total of three seats on the
floor of the NYSE, Seller shall have (A)
subject to Section 7.3(e), entered into leases
with Purchaser pursuant to which Purchaser
shall lease from Seller NYSE seats for a term
of one year at prevailing market rates or (B)
substituted Purchaser as lessee under one or
more of Seller's existing leases of NYSE
seats;
(vii) Seller shall have entered into (or
offered to enter into) the Clearing
Agreement, the Service Agreement and the
Space Sharing Agreement with Purchaser;
and
(viii) No change with respect to the Acquired
Assets or the Assumed Liabilities shall
have occurred or have become reasonably
likely to occur which would result in a
Material Adverse Effect.
5.2 Termination by Seller.
Seller may terminate this Agreement at any time if (a) any
Governmental Authority has indicated in writing that it will not grant
any material consent or approval required for the consummation of the
Closing Transactions; (b) Seller has provided written notice to
Purchaser that Purchaser has materially breached any of its obligations
hereunder and Purchaser has not remedied such breach within twenty days
after receipt of such notice; or (c) through no fault of Seller, the
Closing has not occurred by March 31, 1995.
5.3 Termination by Purchaser.
Purchaser may terminate this Agreement at any time if (a)
any Governmental Authority has indicated in writing that it will not
grant any material consent or approval required for the consummation
of the Closing Transactions; (b) Purchaser has provided written notice
to Seller that Seller has materially breached any of its obligations
hereunder and Seller has not remedied such breach within twenty days
after receipt of such notice; or (c) through no fault of Purchaser, the
Closing has not occurred by March 31, 1995.
5.4 Consequences of Termination.
(a) In the event of any termination of this Agreement,
(i) Seller shall be entitled to operate, sell, close or otherwise
dispose of the Businesses in such manner as Seller, in its sole
discretion, deems appropriate and (ii) Seller shall not have any
liability to Purchaser, and Purchaser shall not have any liability to
Seller, except by reason of any material misrepresentation or a breach
of any material obligation or covenant contained in this Agreement.
(b) Notwithstanding anything to the contrary in this
Agreement, the obligations of Seller and Purchaser under Section 7.5
shall survive termination of this Agreement.
5.5 Tax Matters.
Seller shall provide Purchaser with (i) all forms,
certificates and/or other instruments required to pay the transfer and
recording taxes and charges arising from the transactions contemplated
by this Agreement, together with evidence that such transfer taxes and
charges have been paid (it being understood that such payment by Seller
may give rise to a claim for reimbursement pursuant to Section 4.9),
(ii) an affidavit, stating, under penalty of perjury, Seller's taxpayer
identification number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code (or any similar provision
of state or other tax law) and (iii) any clearance certificate or
similar document(s) which may be required by any state taxing authority
to relieve Purchaser of an obligation to withhold any portion of the
payments to Seller pursuant to this Agreement. From and after the
Closing Date, Seller shall cooperate with Purchaser with regard to
performing all reporting duties for wages and compensation paid to
Continuing Employees.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller. From and after the Closing,
Seller shall indemnify and fully defend, save and hold Purchaser
harmless from any losses, damages, liabilities, claims, costs,
expenses, fines, penalties, amounts paid in settlement and reasonable
attorneys' fees and expenses (collectively, "Losses") suffered by
Purchaser, as incurred (payable quarterly (except as provided in
Sections 6.4(b), (c) and (e)) upon written request), for or on account
of or arising from or in connection with or otherwise with respect to:
(a) any breach of any representation or warranty of
Seller made in this Agreement;
(b) any failure of Seller duly to perform or observe any
of its covenants or agreements contained in this Agreement;
(c) any Excluded Asset;
(d) any Excluded Liability;
(e) to the extent not included in paragraph (d), any
liability of the Businesses, whether contingent or matured, arising
from the operation of the Businesses prior to the Closing Date (it
being understood that any liability arising from a transaction of the
Businesses consummated or terminated after the Closing Date shall be
deemed to arise or to be incurred after the Closing Date even if such
transaction was initiated prior to the Closing Date);
(f) any failure by Seller to comply with the continuation
health care coverage requirements of Section 4980B of the Code and
Sections 601 through 608 of ERISA, which failure occurred on or prior
to the Closing Date with respect to any current or former employee of
Seller or any qualified beneficiary of such employee (as defined in
Section 4980B(g)(1) of the Code); or
(g) any information contained in or omitted from any
filing made by Seller with any Governmental Authority (except
information contained therein that is consistent with information
provided by Purchaser in writing in connection with such filing).
6.2 Indemnification by Purchaser. From and after the Closing,
Purchaser shall indemnify and fully defend, save and hold Seller
harmless from any Loss suffered by Seller, as incurred (payable
quarterly (except as provided in Sections 6.4(b), (c) and (e)) upon
written request), for or on account of or arising from or in connection
with or otherwise with respect to:
(a) any breach of any representation or warranty of
Purchaser made in this Agreement;
(b) any failure of Purchaser duly to perform or observe
any of Purchaser's covenants or agreements contained in this Agreement;
(c) any Acquired Asset;
(d) any Assumed Liability; and
(e) to the extent not included in paragraph (d), any
liability of the Businesses, whether contingent or matured, arising
from the operation of the Businesses from and after the Closing Date
(it being understood that any liability arising from a transaction of
the Businesses consummated or terminated after the Closing Date shall
be deemed to arise or to be incurred after the Closing Date even if
such transaction was initiated prior to the Closing Date); and
filing made by Purchaser with any Governmental Authority (except
information contained therein that is consistent with information
provided by Seller in writing in connection with such filing).
6.3 Limitations to Seller's Indemnification Obligation.
(a) Purchaser shall not be entitled to make any claim for
indemnification under Section 6.1(a) unless and until the aggregate of
all amounts of said claims exceed $50,000, in which event Purchaser may
claim indemnification for all Losses described by such Section 6.1(a)
theretofore incurred; provided, however, that such limitation shall not
apply to any claim for indemnification under Section 6.1(a) to the
extent that such claim relates to a breach of Seller's representations
and warranties set forth in Sections 2.1, 2.2, 2.3(i), 2.4 and 2.8.
(b) Seller shall not be obligated to make any payment
pursuant to Section 6.1(a) to the extent that making such payment would
cause the cumulative amount actually paid by Seller pursuant to such
Section 6.1(a) to exceed $250,000; provided, however, that any amounts
payable as a result of the breach of any of Seller's representations
and warranties set forth in Sections 2.1, 2.2, 2.3(i), 2.4 and 2.8
shall be payable without regard to the cumulative amount paid by Seller
pursuant to Section 6.1(a), and any amounts paid by Seller as a result
of the breach of any of Seller's representations and warranties set
forth in Sections 2.1, 2.2, 2.3(i), 2.4 and 2.8 shall not be counted
in determining whether such cumulative amount exceeds $250,000.
6.4 Procedures for Indemnification.
(a) In order for a party to be entitled to any
indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by any person
against the indemnified party (a "Third Party Claim"), such indemnified
party must notify the indemnifying party of the Third Party Claim
reasonably promptly after receipt by such indemnified party of written
notice of the Third Party Claim; provided, however, that failure to
give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been
actually prejudiced as result of such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, reasonably
promptly after the indemnified party's receipt thereof, copies of all
notices and documents (including court papers) received by the
indemnified party relating to the Third Party claim, other than those
notices and documents (including court papers) separately addressed to
the indemnifying party; provided, however, that failure to deliver any
such notice or document shall not affect the indemnification provided
hereunder, except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the
defense thereof and, if it so chooses at its sole cost and upon written
notice to the indemnified party acknowledging its obligation to
indemnify the indemnified party therefor in accordance with the terms
of this Agreement, to assume the defense thereof with counsel selected
by the indemnifying party; provided, however, that such counsel is
reasonably satisfactory to the indemnified party. Should the
indemnifying party so elect to assume the defense of a Third Party
Claim, the indemnifying party shall not be liable to the indemnified
party for legal expenses subsequently incurred by the indemnified party
in connection with the defense thereof; provided, however, that (i) if
the indemnifying party assumes such defense, the indemnified party
shall have the right to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed
by the indemnifying party, it being understood that the indemnifying
party shall control such defense and (ii) the indemnified party shall
be entitled to employ separate counsel, at the expense of the
indemnifying party, and to participate in the defense of such Third
Party Claim if in the opinion of counsel to such indemnified party a
conflict or potential conflict exists between such indemnified party
and the indemnifying party that would make such separate representation
advisable. The indemnifying party shall be liable for the reasonable
fees and expenses of counsel employed by the indemnified party for any
period during which the indemnifying party has failed to assume the
defense thereof and shall pay such fees and expenses as incurred by the
indemnified party.
(c) Subject to the terms and conditions of Section 6.3,
with respect to any Third Party Claim, the indemnifying party shall
forthwith, upon notice from the indemnified party (which notice shall
be given concurrently with or after the later of (i) the date of the
payment with respect to such Third Party Claim and (ii) the date that
a court of competent jurisdiction shall enter a final judgment, order
or decree not subject to appeal establishing such liability), pay to
the indemnified party the amount of the indemnity payable under this
Article VI. If the indemnifying party so elects to assume the defense
of any Third Party Claim, the indemnified party shall cooperate with
the indemnifying party in the defense thereof. Such cooperation shall
include the retention and (upon the indemnifying party's reasonable
request) the provision to the indemnifying party of records and
information that are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. If the indemnifying party shall have assumed the defense
of a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in
connection with such Third Party Claim, which releases the indemnified
party completely in connection with such Third Party Claim and which
would not otherwise significantly adversely affect the indemnified
party. The indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, any Third Party Claim
the defense of which shall have been assumed by the indemnifying party
in accordance with the terms hereof. The indemnified party shall have
the right to admit any liability with respect to, or settle, compromise
or discharge, any Third Party Claim the defense of which shall not have
been assumed by the indemnifying party.
(d) Notwithstanding the foregoing, the indemnifying party
shall be liable for the reasonable fees and expenses of counsel
incurred by the indemnified party in defending any Third Party Claim
if such Third Party Claim, if successful, is likely to result in a
judgment, decree or order of injunction or other equitable relief or
relief for other than money damages against the indemnified party.
(e) In the event any indemnified party should have a
claim for indemnity against any indemnifying party that does not
involve a Third Party Claim being asserted against or sought to be
collected from such indemnified party, the indemnified party shall
deliver notice of such claim with reasonable promptness to the
indemnifying party. The failure by any indemnified party so to notify
the indemnifying party shall not relieve the indemnifying party from
any liability which it may have to such indemnified party under this
Article, except to the extent that the indemnifying party shall have
been actually prejudiced as a result of such failure. If the
indemnifying party does not notify the indemnified party within 20
calendar days following its receipt of such notice that the
indemnifying party disputes its liability to the indemnified party
under this Article, such claim specified by the indemnified party in
such notice shall be conclusively deemed a liability of the
indemnifying party under this Article, and the indemnifying party
shall, subject to Section 6.3, pay the amount of such liability to the
indemnified party on demand or, in the case of any notice in which the
amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof)
becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as provided above,
the indemnifying party and the indemnified party shall proceed in good
faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in
an appropriate court of competent jurisdiction.
6.5 Losses Net of Insurance, etc.
(a) The amount of any Loss for which indemnification is
provided under this Article shall be net of any amounts recovered by
the indemnified party under insurance policies with respect to such
Loss and shall be (i) increased to take account of any net Tax cost
incurred by the indemnified party hereunder and (ii) reduced to take
account of any net Tax benefit realized by the indemnified party
arising from the incurrence or payment of any such Loss. In computing
the amount of any such Tax cost or Tax benefit, the indemnified party
shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the
receipt of any indemnity payment hereunder or the incurrence or payment
of any indemnified Loss. Any indemnification payment hereunder shall
initially be made without regard to this Section and shall be increased
or reduced to reflect any such net Tax cost (including gross-up) or net
Tax benefit only after the indemnified party has actually realized such
cost or benefit. For purposes of this Agreement, an indemnified party
shall be deemed to have "actually realized" a net Tax cost or a net Tax
benefit to the extent that, and at such time as, the amount of Taxes
payable by such indemnified party is increased above or reduced below,
as the case may be, the amount of Taxes that such indemnified party
would be required to pay but for the receipt of the indemnity payment
and the incurrence or payment of such Loss. The amount of any increase
or reduction hereunder shall be adjusted to reflect any final
determination (including the execution of Form 870-AD or successor
form) with respect to the indemnified party's liability for Taxes and
payments between Seller and Purchaser to reflect such adjustment shall
be made if necessary.
6.6 Survival of Representations and Warranties. The
representations and warranties in this Agreement shall survive for a
period of one year following the Closing and shall then expire for all
purposes (including for purposes of Sections 6.1 and 6.2).
ARTICLE VII
POST-CLOSING COVENANTS
7.1 Temporary Use of Subject Space and Equipment. Purchaser
represents that it has executed a binding lease for office space
located at the World Financial Center, New York, New York that will be
sufficient to accommodate the Businesses. Seller understands that such
office space is undergoing necessary modifications and is not yet ready
to accommodate the Businesses. Accordingly, to accommodate Purchaser's
temporary need for office space and equipment used in the conduct of
the Businesses, Seller agrees that until such time as Purchaser's
office space at the World Financial Center is ready, Purchaser may
continue to occupy the Subject Space and to use the equipment used by
the Businesses as of the Closing Date, as more fully set forth in
Sections 7.3 and 7.4.
7.2 Agreement Not to Compete. For a period of one year
commencing on the Closing Date, neither Seller nor any of its
Affiliates using the "Mabon" name shall engage, directly or through one
or more subsidiaries, in the trading, dealing, underwriting or placing
or brokerage of equity securities, other than (i) underwriting or
placing equity securities issued by an Affiliate of Seller, (ii)
transactions with any counterparty in convertible bonds, preferred
stocks and global depositary receipts, (iii) execution of transactions
in any equity security for the account of Seller or any of its
Affiliates and (iv) the execution of floor brokerage transactions;
provided, however, that Cedar Street Securities Corp. and Cedar Street,
Ltd. may engage in the trading, dealing or brokerage of equity
securities of all types.
7.3 Use of Equipment and Software; Market Data Services; NYSE
Seats.
(a) From the Closing until the Move Date, Seller shall
permit Purchaser to use all equipment and software listed on Schedule
7.3(a). If Purchaser has not vacated the Subject Space by May 31,
1995, then from June 1, 1995 to the Move Date, Purchaser shall pay
Seller for such equipment on the first day of each month at the rates
set forth on Schedule 7.3(a). Notwithstanding the two immediately
preceding sentences, the obligations of Seller and Purchaser thereunder
with respect to equipment located (or software used exclusively) on the
portion of the Subject Space located on the 31st floor or 32nd floor,
as the case may be, of One Liberty Plaza shall terminate from and after
the respective Move Date with respect to such portion of the Subject
Space, in which event the monthly payment due hereunder shall be
adjusted proportionately. If subsequent to the Closing Purchaser
requires additional equipment or desires to change the existing
configuration of any such equipment, Seller shall be under no
obligation to provide any such additional equipment or to make any such
change unless Purchaser pays all additional costs related thereto. On
the Move Date, Purchaser shall return the equipment subject to this
Section 7.3(a) to Seller in the same configuration and state (normal
wear and tear excepted) as on the Closing Date.
(b) Purchaser and Seller may each at its option and at
its own expense seek to negotiate with the relevant vendors for an
assignment to Purchaser of those portions of Seller's equipment leases
relating to equipment used by Purchaser under Section 7.3(a).
(c) From and after the Closing until the Move Date,
Seller shall permit Purchaser to use the Bloomberg and other market
data services and the voice telephone and telecommunications services
(including direct lines, ringdown circuits and lease lines) utilized
as of the Closing Date in the conduct of the Businesses and the other
items listed in Schedule 7.3(c). In consideration of such use,
Purchaser shall pay Seller each month for such services and such other
itmes as set forth in the two immediately following sentences. On or
prior to the fifteenth day of each month, commencing May 1995, Seller
shall send to Purchaser a written statement, in reasonable detail,
showing amounts due from Purchaser pursuant to this Section 7.3(c).
Promptly upon receipt of such statement, and subect to Section 7.11(d),
Purchaser shall prepay to Seller an amount equal to the amount shown
on such statement, reduced by the amount by which (i) the aggregate
prepayments pursuant to Section 4.2(h)(vii) and this Section 7.3(c)
exceed (ii) the aggregate amount appearing on statements sent pursuant
to this Section 7.3(c); provided, that if as of the date of any such
statement the amount in clause (ii) exceeds the amount in clause (i),
Purchaser shall, in addition to prepaying the full amount appearing on
such statement, also pay the amount of the excess described in this
proviso. Schedule 7.3(c) sets forth Seller's estimate of the amounts
due each month under this Section 7.3(c). If subsequent to the Closing
Purchaser requires additional market data, voice telephone or
telecommunications services or desires to change any aspect of any such
service, Seller shall be under no obligation to provide any such
additional services or to make any such change unless Purchaser pays
all additional costs related thereto.
(d) If at any time after the Closing, (i) Purchaser shall
utilize any equipment or fixed assets of Seller (other than equipment
or fixed assets described elsewhere in this Section 7.3), or (ii)
Purchaser shall utilize any other supplies, items or services not
otherwise provided pursuant to Sections 7.3, 7.4, the Clearing
Agreement or the Service Agreement, then upon Seller's request and the
provision by Seller of reasonable supporting documentation, Purchaser
shall promptly reimburse Seller for the reasonable costs or expenses
relating to Purchaser's use of such equipment or fixed assets or other
supplies, itmes or services.
(e) With respect to any leases of NYSE seats owned by
Seller and leased to Purchaser pursuant to Section 5.1(b)(vi), Seller
shall at all times have the right to transfer, sell or otherwise
dispose of such NYSE seat; provided, that Purchaser shall be afforded
a reasonable time to obtain a replacement NYSE seat at prevailing
market terms.
7.4 Office Space and Support and Other Services.
(a) Commencing on the Closing Date and continuing through
the relevant Required Move Date, Seller shall permit Purchaser to
occupy the Subject Space. The "Subject Space" shall consist of (i)
approximately 6,200 square feet of office space on the 31st floor and
(ii) approximately 12,000 square feet of office space on the 32nd floor
of One Liberty Plaza currently used by the Business, as indicated on
the diagram attached hereto as Schedule 7.4(a); provided, that from the
date that Purchaser vacates the office space described under clause (i)
or (ii) above, such vacated space shall no longer constitute a part of
the Subject Space. Purchaser shall use commercially reasonable efforts
to vacate the Subject Space as soon as practicable and covenants to
vacate the Subject Space by the relevant Required Move Date. If
Purchaser has not vacated the Subject Space by May 31, 1995, then from
June 1, 1995 to the Move Date, Purchaser shall pay to Seller each month
(i) rent at a rate equal to one-half of Seller's fixed rent per square
foot for the Subject Space; provided, that if Purchaser has not vacated
the Subject Space by the relevant Required Move Date, Seller shall be
entitled, in addition to all other remedies available to it, to collect
holdover rent from Purchaser for the period from the relevant Required
Move Date to and including the Move Date at a rate per square foot
equal to 100% of Seller's fixed rent per square foot for the Subject
Space, and (ii) all "Additional Charges" (as such term is defined in
the lease relating to Seller's office space at One Liberty Plaza),
relating to the Subject Space with respect to such period. Seller and
Purchaser shall share equally the cost of such temporary, non-
structural modifications as may be necessary in accordance with any
Applicable Law or any requirement of the NYSE to separate the Subject
Space from space occupied by Seller. Purchaser acknowledges that due
to the timing of the transactions contemplated by this Agreement and
the short duration of the arrangements contemplated by this Section
7.4(a), which arrangements Seller is providing as an accommodation to
Purchaser, Purchaser and Seller have agreed that if the consent of
Seller's landlord to such arrangements was required, it would not be
practicable to seek and obtain such consent. Accordingly, if such
landlord takes the position that its consent to such arrangements is
required, and such landlord takes action based on such position that
is materially adverse to Seller, Seller shall immediately notify
Purchaser of such action, and Seller and Purchaser shall use
commercially reasonable efforts to develop and employ, at no expense
to Seller, a joint strategy intended to allow Purchaser to remain in
the Subject Space until the relevant Required Move Date. If Purchaser
is nevertheless required to vacate the Subject Space despite such
strategy, Purchaser shall vacate the Subject Space immediately. Seller
shall not be responsible for any Losses incurred by Purchaser as a
result of or arising out of any actions taken by such landlord or in
the event that Purchaser is required pursuant to the immediately
preceding sentence to vacate the Subject Space prior to the relevant
Required Move Date.
(b) From and after the Closing, Seller shall provide such
other services to Purchaser as Seller agrees from time to time to
provide, it being understood that in no event will Seller provide any
services relating to the 401(k) and health care plans of employees of
Purchaser (other than administrative services necessary to enable
transferred employees to roll over or close out their 401(k) accounts).
7.5 Anti-Raid.
For a period of nine months after the Closing or, if this
Agreement is terminated, for a period of nine months after the date of
such termination:
(a) Purchaser will not, and will cause its Affiliates not
to, employ or hire any person who was an employee of Seller or its
Affiliates as of March 3, 1995 (other than Continuing Employees);
provided, that Purchaser may employ or hire a person who was an
employee of the Businesses as of March 3, 1995 upon Purchaser's
reimbursement, to the extent not reimbursed in advance pursuant to
Section 4.2(h)(ii)(C), of Seller for any amounts (or, with respect to
persons listed on Schedule 7.5(a), one-half of any amounts) that Seller
has paid or is obligated to pay to such person as severance or in lieu
of notice under WARN; and
(b) Without the prior approval of Purchaser, neither
Seller nor its Affiliates will employ or hire any Continuing Employee.
7.6 Employees.
(a) Seller acknowledges that it has heretofore permitted
Purchaser to solicit and make offers of employment to those persons
listed on Schedule 7.6(a)(i). Purchaser represents that the persons
listed on Schedule 7.6(a)(ii) have executed acceptances of such offers.
Purchaser has no knowledge that, with respect to compensation, any
offer of employment made by Purchaser to any person on Schedule
7.6(a)(i) is not comparable to such employee's existing arrangements
with Seller. In connection with such offers, Purchaser shall use
reasonable efforts to cause those persons who accept such offers of
employment to execute a waiver of severance compensation and amounts
due in lieu of notice under WARN and a release of Seller and its
Affiliates from liability, substantially in the form attached hereto
as Annex D. Those employees of the Businesses who have accepted offers
of employment with Purchaser and those persons who are later employed
or hired by Purchaser in accordance with the proviso to Section 7.5(a)
shall be referred to as the "Continuing Employees."
(b) With respect to such activities of Continuing
Employees as are within the scope of their employment with Purchaser,
Seller agrees that it will not enforce any confidentiality or non-
competition covenants contained in existing employment or other
agreements between Seller and such Continuing Employees to the extent
that such covenants relate to the Businesses.
(c) Effective as of the Closing Date, all Continuing
Employees shall cease to be covered by Seller's employee welfare
benefit plans, including plans, programs, policies and arrangements
which provide medical and dental coverage, life and accident insurance,
disability coverage, and vacation and severance pay (collectively,
"Welfare Plans"), and shall become covered by Purchaser's Welfare
Plans, if any, except to the extent provided otherwise by the
applicable Welfare Plan; provided, however, that Continuing Employees
will be considered eligible for Purchaser's Group Benefit Plan as of
the date they begin employment with Purchaser. Seller shall retain
responsibility for, and sole liability in respect of, providing group
health coverage, at the employee's expense, required by Section 4980B
of the Code or Section 601 of ERISA ("Continuation Coverage") under the
terms of the health plan maintained by Seller to (i) employees of
Seller who were employed in connection with the Businesses, who
terminated employment prior to the Closing Date and who elected such
Continuation Coverage or (ii) employees of Seller who are employed in
connection with the Businesses and who are entitled to such
Continuation Coverage, whether from Seller or Purchaser, as a result
of the transactions contemplated by this Agreement.
(d) Purchaser shall be responsible for the payment of any
amounts due as post-Closing compensation, severance compensation or
payments in lieu of notice under WARN to Continuing Employees who are
terminated by Purchaser.
(e) For purposes of any employee benefit plans, programs
or perquisites of Purchaser, Purchaser shall take into account the
service of Continuing Employees with Seller to the same extent as if
such service had been rendered to Purchaser, except that Purchaser
shall not be required to credit such service for purposes of benefit
accrual under any defined benefit plans of Purchaser.
(f) Purchaser agrees not to impose any pre-existing
condition or similar exclusion for claims under Purchaser's medical or
dental insurance plan to the extent such claims would have been covered
by the applicable plan of Seller had Continuing Employees continued as
employees of Seller.
(g) Schedule 7.6(g)(i) sets forth Seller's severance pay
policy as it may apply to Continuing Employees. Schedule 7.6(g)(ii)
sets forth, with respect to each person who is or will be a Continuing
Employee as of the Closing Date, (1) the date on which such person was
hired by Seller (2) the length of service credited to such employee by
Seller for purposes of Seller's employee benefit plans, programs and
perquisites, including for purposes of severance pay calculations and
(3) such person's annual salary as of the most recent date of his or
her employment with Seller.
(h) Purchaser shall procure the consent of each
Continuing Employee covered by an employment agreement listed in
Schedule 7.6(h) to the assumption by Purchaser of Seller's obligations
thereunder with respect to the period commencing on the Closing Date.
7.7 Use of Name. Purchaser shall not have the right to use,
and shall refrain from using, the name "Mabon," "Nugent" or any
derivatives thereof in the conduct of Purchaser's business, including
the Businesses.
7.8 Right to First Call. Seller shall use its commercially
reasonable efforts to transfer to Purchaser, at no expense to Seller,
all of its rights and interest to the research and software services
provided by First Call.
7.9 Apportioned Taxes. The parties hereto agree that all real
property taxes, personal property taxes and similar ad valorem
obligations that are levied with respect to the Acquired Assets or the
Businesses for a tax or assessment period which includes but does not
end on the Closing Date (collectively, the "Apportioned Taxes") shall
be apportioned between Seller and Purchaser as of the Closing Date
based on the number of days in any such period falling on or before the
Closing Date, on the one hand, and after the Closing Date, on the other
hand (it being understood that Purchaser is responsible for the portion
of each such Apportioned Tax attributable to the number of days after
the Closing Date in the relevant assessment period).
7.10 Notification of Certain Claims. If Purchaser receives
written notice of a Third Party Claim involving any predecessor of
Seller, Purchaser shall immediately notify Seller of such Third Party
Claim.
7.11 Refunds of Certain Excess Payments; Billing for Services;
Disputed Amounts.
(a) As promptly as practicable after the Move Date,
Seller and Purchaser shall agree in good faith on a final amount as
payment for the items described in Sections 4.2(h)(ii) and (iii), and
Seller shall pay to Purchaser or Purchaser shall pay to Seller, as the
case may be, the amount by which such final amount is less than or
exceeds, respectively, the sum of amounts set forth in such Sections.
It is the intention of Purchaser and Seller that such final amount
should represent as nearly as possible the adjusted book value of such
assets on Seller's books and records, without giving effect to any
write-down occurring since December 1, 1994. In addition, as promptly
as practicable after the Move Date, Seller shall refund to Purchaser
the amount, if any, by which the aggregate amount prepaid by Purchaser
pursuant to Section 4.2(h)(vii) and paid or prepaid by Purchaser
pursuant to Sections 7.3(a), 7.3(c), 7.3(d) and 7.4(a), the Clearing
Agreement and the Service Agreement exceeds the aggregate amount due
from Purchaser to Seller under Section 7.3(a), 7.3(c), 7.3(d) and
7.4(a), the Clearing Agreement and the Service Agreement.
(b) As promptly as practicable after the expiration of the
restrictions set forth in Section 7.5, Seller shall refund to Purchaser
the amount, if any, by which the amount prepaid by Purchaser pursuant
to Section 4.2(h)(iv) exceeds the aggregate amount required to be
reimbursed by Purchaser pursuant to Section 7.5(a). The "Final
Purchase Price" shall be the Purchase Price as adjusted to reflect any
payment made pursuant to the preceding sentence and Section 7.11(a).
(c) On or prior to the fifteenth day of each month,
Seller shall send to Purchaser a written statement, in reasonable
detail, showing amounts due from Purchaser to Seller pursuant to
Sections 7.3(a), 7.3(d) and 7.4 or under the Service Agreement or the
Clearing Agreement for the previous calendar month. Subject to Section
7.11(d), Purchaser shall, within seven days of receipt of such
statement, pay to Seller the amount shown as due thereon.
(d) In the event that Purchaser disagrees with Seller
with respect to (i) the final amount as payment for the items described
in Sections 4.2(h)(ii) and (iii) or (ii) any amount due from Purchaser
pursuant to the Service Agreement, the Clearing Agreement, Sections
7.3(a), 7.3(c), 7.3(d), 7.4(a) or 7.5 or any sublease of the Boston
Office pursuant to Section 4.5(a), Seller and Purchaser shall attempt
to resolve their disagreement. If the parties have failed to reach
agreement within 15 days after Purchaser has delivered written notice
of such a disagreement to Seller, then the matter shall be submitted
to arbitration by an Arbitrator, who shall be Ernst & Young LLP;
provided, if within the three years preceding such submission either
party hereto has retained the services of Ernst & Young LLP at any
time, or has had discussions with Ernst & Young with respect to
retaining such firm in the future, the Arbitrator shall be another
major accounting firm mutually agreeable to the accounting firms
retained by the parties. Within ten days after any such matter is
submitted to the Arbitrator, Purchaser and Seller shall each submit to
the Arbitrator all documentation and other material necessary to
support their respective positions. Within thirty days after the
submission of any matter to the Arbitrator, the Arbitrator shall render
a decision based on the documentation and other material submitted by
the parties within such ten-day period. The decision of the Arbitrator
shall be final and binding on the parties.
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances.
(a) At any time and from time to time after the Closing
Date, Seller shall forthwith execute and deliver, or cause to be
executed and delivered, such further instruments and take such further
actions as Purchaser or its counsel may reasonably request to
effectuate the purposes of this Agreement, including executing and
delivering appropriate instruments of transfer (which shall also
constitute "Conveyancing Documents") for the transfer of any Acquired
Asset not transferred to Purchaser at the Closing.
(b) Each of Purchaser and Seller shall use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause
to be done, all things necessary, proper or advisable consistent with
Applicable Law to consummate the transactions contemplated hereby in
accordance with the terms hereof.
(c) Each of Purchaser and Seller agrees not to disclose
any non-public information concerning the other (including any
information learned during the course of Purchaser's investigation of
the Businesses or disclosed in the Disclosure Letter), except as
required by law.
8.2 Successors and Assigns. Except as otherwise provided in
this Agreement, no party hereto shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of
the other parties hereto, and any rights or obligations hereunder
without the prior written consent of the other parties hereto, and any
such attempted assignment without such prior written consent shall be
void and of no force and effect; provided, however, that no such
assignment shall reduce or otherwise vitiate any of the obligations of
any other party hereunder. This Agreement shall incur to the benefit
of and shall be binding upon the successors and permitted assigns of
the parties hereto.
8.3 Governing Law; Jurisdiction.
(a) This Agreement shall be construed, performed and
enforced in accordance with, and governed by, the laws of the State of
New York, without giving effect to the principles of conflicts of laws
thereof.
(b) Each party irrevocably submits to the exclusive
jurisdiction of (i) the Supreme Court of the State of New York, New
York County, and (ii) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby. Each party agrees to commence any action, suit
or proceeding relating hereto either in the United States District
Court for the Southern District of New York or if such suit, action or
other proceeding may not be brought in such court for reasons of
subject matter jurisdiction, in the Supreme Court of the State of New
York, New York County. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions
contemplated hereby in (A) the Supreme Court of the State of New York,
New York County, or (B) the United States District Court for the
Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
8.4 Expenses. Except as otherwise provided in this Agreement,
each of the parties hereto shall pay its own expenses in connection
with this Agreement and the transactions contemplated hereby, including
any legal and accounting fees, whether or not the transactions
contemplated hereby are consummated.
8.5 Severability. In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the
extent it is not so declared, and all of the other provisions of this
Agreement shall remain in full force and effect and the parties shall
negotiate in good faith to replace the part hereof declared null, void
or unenforceable with an alternative provision that preserves for the
parties the benefits of this Agreement.
8.6 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be
deemed to have been duly given: (i) on the date of service if served
personally on the party to whom notice is to be given; (ii) on the day
of transmission if sent via facsimile transmission to the facsimile
number given below; or (iii) on the business day after delivery to
Federal Express or a similar overnight courier or the Express Mail
service maintained by the United States Postal Service, as follows:
If to Seller:
Mabon Securities Corp.
One Liberty Plaza, 32nd floor
New York, New York 10006
Attn: Frances DiSavino
Telecopy: (212) 346-5885
Copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Victor I. Lewkow
Telecopy: (212) 225-3999
If to Purchaser:
Rodman & Renshaw, Inc.
120 South LaSalle St.
Chicago, Illinois 60603
Attn: James D. Van De Graaff
Telecopy: (312) 977-7941
Copy to: Squadron, Ellenoff, Plesent, Sheinfeld &
Sorkin, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Joel I. Papernik
Telecopy: (212) 697-6686
Any party may change its address for the purpose of this Section
by giving the other parties written notice of its new address in the
manner set forth above.
8.7 Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties
or conditions hereof may be waived, only by a written instrument
executed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. Any waiver by any party of any condition,
or of the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, in any one or more instances,
shall not be deemed to be nor construed as a further or continuing
waiver of any such condition, or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
8.8 Public Announcements. Purchaser and Seller shall, on or
after the date hereof, send to customers of the Businesses a letter in
the form attached hereto as Annex E and issue a joint press release in
the form attached hereto as Annex F. Until the Closing, no party shall
make any press release or public announcement concerning the
transactions contemplated by this Agreement without prior consent of
the other party hereto. Promptly upon Closing, Seller and Purchaser
shall issue a joint press release and shall send a joint letter to
clients of Seller, each in form and substance mutually agreed to and
approved in advance.
8.9 Books and Records. Seller and Purchaser agree that each
will cooperate with and make available to each other, at the expense
of the requesting party, all books and records, information and
employees retained and remaining in existence after the Closing Date
that are necessary in connection with any (a) filing with the
Securities and Exchange Commission or any regulatory body or any audit
in connection therewith or (b) tax inquiry, audit, investigation or
dispute.
8.10 Entire Agreement. This Agreement, the Disclosure Letter
and the Schedules and Annexes hereto contain the entire understanding
between the parties hereto with respect to the transactions
contemplated hereby and thereby and supersede and replace all prior
agreements and understandings, oral or written, with regard to such
transactions.
8.11 Headings. The table of contents and section and paragraph
headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
8.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which shall constitute the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or
caused to be executed this Agreement as of the date first above
written.
MABON SECURITIES CORP.
by /s/ Salvatore Trani
Name: Salvatore Trani
Title: Chairman
RODMAN & RENSHAW, INC.
by /s/ Charles W. Daggs III
Name: Charles W. Daggs III
Title: President
EHXIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 16th day of March, 1995, by and
between RODMAN & RENSHAW, INC., a Delaware corporation with its
principal place of business at 120 South Lasalle Street, Chicago,
Illinois 60603 (the "Company"), and PETER BONEPARTH, an individual
residing at 250 Briarwood Crossing, Lawrence, N.Y. 11559 (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to secure the employment of
the Executive with the Company on the terms and conditions set
forth in this Agreement; and
WHEREAS, the Executive desires to be so employed;
NOW, THEREFORE, in consideration of the promises and the
mutual agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Employment, Term.
1.1 Employment. The Company agrees to employ the
Executive, and the Executive agrees to serve in the employ of the
Company, for the term set forth in Section 1.2, in the positions
and with the responsibilities, duties and authority set forth in
Section 2 and on the other terms and conditions set forth in this
Agreement.
1.2 Term. The period of the Executive's employment
under this Agreement (herein referred to as the "term of this
Agreement") shall commence on March 15, 1995 (the "Commencement
Date") and shall terminate on the third anniversary of the
Commencement Date, unless sooner terminated in accordance with this
Agreement. This Agreement shall be automatically renewed for
successive one-year terms unless either party provides written
notice to the other party of its or his desire not to renew within
30 days prior to the expiration of the initial term or any renewal
term, as the case may be.
1.3 Place of Employment. The Executive's principal
place of employment shall be at the Company's principal office in
the State of New York, which office shall at all times during the
term hereof be located within a 25 mile radius of New York City;
the Executive shall travel as the rendering of the services
hereunder may require.
2. Positions, Duties. The Executive shall serve in the
position of Head of Investment Banking of the Company. The
Executive shall have authority and responsibilities appropriate and
customary to such position (including the ability to hire and fire
employees in consultation with the General Counsel, the Human
Resources Department and other appropriate senior management
personnel) and shall perform, faithfully and diligently, such
duties as are consistent with such authority and responsibilities.
The Executive shall report directly to the Chief Executive Officer
of the Company, unless the Chief Executive Officer is unavailable,
in which event the Executive shall report to the Chief Operating
Officer. The Executive shall devote his complete and undivided
attention to the performance of his duties and responsibilities
hereunder during the normal working hours of executive employees of
the Company.
3. Salary, Bonus.
3.1 Salary. During the term of this Agreement, in
consideration of the performance by the Executive of the services
set forth in Section 2 and his observance of the other covenants
set forth herein, the Company shall pay the Executive, and the
Executive shall accept, a guaranteed base salary at the rate of
$200,000 per annum. Executive's guaranteed base salary shall be
payable in accordance with the standard payroll practices of the
Company.
3.2 Bonus.
(a) Minimum Guaranteed Bonus; Pre-Tax Profit Bonus. For
each full or partial fiscal year of the Company during the term of
this Agreement, the Company shall pay to the Executive the greater
of (i) the finder's fee referred to in that certain letter
agreement dated March 13, 1995 between Executive and Capital Group
(as hereinafter defined) for the first fiscal year of the Company
during the term hereof, and in subsequent years during the term
hereof an amount equal to $650,000 ("Minimum Guaranteed Bonus") or
(ii) a bonus in an amount equal to Fourteen percent (14%) of the
total Pre-tax Profit (as hereinafter defined) of the Company's
Investment Banking Group in such fiscal year, calculated in
accordance with Section 3.3 below (the "Pre-Tax Profit Bonus") and
25% of all revenues (as defined in 3.2(c)(1) below) generated by
the Executive and allocated to the Investment Banking Group. In
addition, the Company shall pay such bonuses in respect of periods
subsequent to the termination of the Executive's employment as
provided in Sections 7.1, 7.2, 7.4 and 7.5 hereof. Within twenty
(20) days of demand therefore, the Executive and his
representatives shall have the right to inspect the Company's books
and records for the purpose of verifying the calculation of the
Pre-Tax Profit Bonus.
(b) Calculation of Bonuses. Each bonus to which the
Executive (or his estate or other legal representative) shall be
entitled in respect of any partial fiscal year shall be in an
amount equal to the product of (i) the total bonus which would have
been payable to the Executive for the whole of such fiscal year,
multiplied by (ii) a fraction, the numerator of which is the number
of days in such partial fiscal year, and the denominator of which
is 365. In the event of the termination of the employment of the
Executive pursuant to Section 7.3 of this Agreement, the Executive
shall not be entitled to any bonus except for the Minimum
Guaranteed Bonus in respect of the part of the fiscal year of the
Company during which the Executive was employed by the Company.
Each bonus payable to the Executive (or his estate or other legal
representative) for any full or partial fiscal year of the Company
pursuant to this Section 3.2 shall be paid by the Company within 45
days following the end of such fiscal year. Notwithstanding the
foregoing, the bonuses for January 1, 1998 through March 31, 1998
shall be paid within 45 days of March 31, 1998.
(c) Pre-Tax Profit. For each fiscal year, the company
shall arrive at the Pre-Tax Profit, which shall be "Revenues", as
hereinafter defined, minus all "direct expenses", as hereinafter
defined, and "certain allocated expenses", as hereinafter defined.
(1) Revenues. "Revenues" shall mean:
(a) 100% of all fees received for mergers and
acquisition work;
(b) 100% of all financial advisory fees
received;
(c) 100% of the management fees received in
connection with any public underwriting
of securities;
(d) 35% of all sales credits received by
December 31, 1995 in connection with any
public offerings;
(e) 30% of all sales credits received from
January 1, 1996 through December 31, 1996
in connection with any public offerings;
(f) 25% of all sales credits received from
January 1, 1997 through December 31, 1997
in connection with any public offerings;
(g) 25% of all sales credits received during
the term remaining in connection with any
public offerings; and
(h) 100% of all private placement revenues
(subject to any reasonable adjustment by
the Chief Executive Officer as it relates
to the apportionment of private placement
fees between department).
(2) Direct Expenses. "Direct expenses" shall mean:
(a) Salary, benefits and bonuses of all
Investment Banking personnel;
(b) All Direct expenses as set forth in the
Rodman & Renshaw Profit and Loss
Statement, which is annexed hereto as
Exhibit A.
(3) Certain Allocated Expenses. From March 15,
1995 until December 31, 1995, an amount equal to
25% of the fixed compensation of the research
department's personnel, i.e. salaries, benefits and
guaranteed bonuses, if any, shall be considered a
"certain allocated expense." From January 1, 1996
through December 31, 1996, an amount equal to 30%
of the fixed compensation of the research
department's personnel, as hereinabove defined,
shall be considered a "certain allocable expense."
From January 1, 1997 through December 31, 1997, an
amount equal to 35% of the fixed compensation, as
hereinabove defined, of the research department's
personnel shall be considered a "certain allocated
expense." For the remaining term of the agreement,
35% of the fixed compensation of the research
department shall be considered a "certain allocated
expense."
(4) Non-Cash Compensation. Non-cash compensation
received by the Investment Banking Group (e.g.
stocks, warrants, options, etc.) shall not be
included in the calculation of Pre-Tax Profit. 50%
of such non-cash compensation will be distributed
to the Investment Banking Group to be allocated by
the Executive in his sole discretion. Said non-
cash compensation will be available for
distribution within 90 days of receipt.
(5) Minimum Payments. Notwithstanding the
foregoing, the Executive shall receive, at the
least, his guaranteed base salary, benefits and
minimum guaranteed bonus for each year of this
agreement.
(d) In the event of any change in the fiscal year of the
Company, appropriate adjustments shall be made to the provisions of
Sections 3.2 and 3.3 in order to carry out the essential intent and
principles of such Sections and in the event of the assumption of
this Agreement by any successor to the Company pursuant to a "sale
of the Company" (as defined in Section 6.4 of this Agreement),
appropriate adjustments shall be made to the definition of "Pre-tax
Profit" in order to carry out the essential intent and principles
of Sections 3.2 and 3.3.
4. Expense Reimbursement. During the term of this
Agreement, the Company shall reimburse the Executive for all
reasonable out-of-pocket expenses incurred by him in connection
with the performance of his duties hereunder, upon the presentation
of proper invoices therefor in accordance with the Company's
policies.
5. Investment Banking Group Compensation. The Executive
shall recommend to the Company's Chief Executive Officer the
compensation paid each individual in the Investment Banking Group
for each fiscal or partial fiscal year during the term of this
Agreement. Such recommendation is subject to the approval of the
Compensation Committee of Rodman & Renshaw Capital Group, Inc.
("Capital Group"). The Company agrees that the total compensation
(all benefits, salaries and bonuses, except the minimum guaranteed
bonus of the Executive or the investment banking fee, as defined
above) paid all Investment Banking Group personnel shall be between
40% and 55% of the revenues generated by the Investment Banking
Group in each fiscal or partial fiscal year during the term of this
agreement; for purposes of determining whether the compensation of
the personnel in the Investment Banking Group is between 40% and
55% of revenues, the bonus attributable to the Executive shall be
an amount equal to 25% of the revenues generated by the Executive.
6. Vacation, Benefits, Life Insurance.
6.1 Vacation. During the term of this Agreement, the
Executive will be entitled to vacation consistent with the policy
the company maintains for its most senior executives.
6.2 Benefits/Life Insurance. During the term of this
Agreement, the Executive will be eligible to participate in any
stock option or purchase plan, any profit-sharing or pension plan,
any group medical, dental, and life or disability insurance and all
other employee benefit plans and programs offered by the Company
from time to time to its senior executive employees, subject to the
provisions of such plans and programs as in effect from time to
time. Upon termination of the employment of the Executive with the
Company for any reason, the Executive shall be entitled to purchase
from the Company any life insurance policy then owned by the
Company on the life of the Executive, for a purchase price equal to
the cash surrender value of such policy.
6.3 Stock Options. Following the execution of this
Agreement, the Company shall cause to be granted to the Executive
such stock options as are (i) commensurate with his position as a
senior executive of the Company and (ii) comparable in number to
those granted to other similarly situated senior executives of the
Company.
7. Termination of Employment.
7.1 Death. In the event of the death of the Executive
during the term of this Agreement, the Company shall continue to
pay to his estate or other legal representative of the Executive
the guaranteed base salary provided for in Section 3 (at the annual
rate then in effect) until the first to occur of (i) the expiration
of a period of one (1) year from the date of the Executive's death
or (ii) the third anniversary of the Commencement Date. During
such period, the Company shall also pay to the Executive the
Minimum Guaranteed Bonus in accordance with Section 3.2 hereof.
Rights and benefits of the estate or other legal representative of
the Executive under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans
and programs.
7.2 Disability. If the Executive shall become
incapacitated by reason of physical or mental disability and shall
be unable to perform his normal duties hereunder for a period of
more than three (3) consecutive months, the employment of the
Executive hereunder may be terminated by the Company or the
Executive upon 30 days' notice to the other. In the event of such
termination, the Company shall continue to pay to the Executive the
guaranteed base salary provided for in Section 3 (at the annual
rate then in effect) until the earlier of (a) the expiration of a
period of one (1) year from the date of such termination, or (b)
the third anniversary of the Commencement Date. During such
period, the Company shall also pay to the Executive the Minimum
Guaranteed Bonus in accordance with Section 3.2 hereof. The
Company shall continue to provide the Executive, at the expense of
the Company, with the medical insurance then provided generally to
employees of the Company, for a period of one (1) year following
the termination of the employment of the Executive. Rights and
benefits of the Executive under the benefit plans and programs of
the Company shall be determined in accordance with the provisions
of such plans and programs.
7.3 Due Cause. The employment of the Executive
hereunder may be terminated by the Company at any time for Due
Cause (as hereinafter defined), as provided herein. In the event
of such termination, the Company shall pay to the Executive the
guaranteed base salary provided for in Section 3 (at the annual
rate then in effect) and the Minimum Guaranteed Bonus accrued to
the date of such termination and not theretofore paid to the
Executive. Rights and benefits of the Executive under the benefit
plans and programs of the Company shall be determined in accordance
with the provisions of such plans and programs. For purposes
hereof, "Due Cause" shall mean (a) the Executive's refusal to
comply with the Company's reasonable directions, such directions
being consistent with the Executive's duties under Section 2,
(b) the Executive's conviction of a felony, or (c) the Executive's
suspension or expulsion from the securities industry; provided,
however, that the Executive shall be given written notice by the
Company that it intends to terminate the Executive's employment for
Due Cause, which notice shall specify the act or acts upon the
basis of which the Company intends so to terminate the Executive's
employment, and the Executive shall then be given the opportunity,
within seventy-two (72) hours (or such longer period as the Company
shall specify in such notice) of his receipt of such notice, to
have a meeting with the Board of Directors of the Company to
discuss such act or acts. If the basis of such written notice is
an act or acts described in clause (a) of the preceding sentence,
the Executive shall be given thirty (30) days after such meeting
within which to cease or correct, to the reasonable satisfaction of
the Board of Directors of the Company, and, upon failure of the
Executive within such thirty (30) days to cease or correct such
problem as herein provided, the Executive's employment by the
Company shall automatically be terminated hereunder for Due Cause.
Notwithstanding the foregoing, if there is an identical repetition
of the act or acts described in clause (a) above following the
cessation or correction of said acts to the reasonable satisfaction
of the Board, the Company shall have the right to terminate,
without regard to the thirty (30) day "cease or correct" provision,
upon written notice. In no event shall the amount of revenue
generated by the Executive or the amount of revenue generated by
the Investment Banking Group be relevant to a determination of "due
cause" hereunder.
7.4 Sale of the Company. The employment of the
Executive hereunder shall terminate, at the option of the Company,
upon a sale of the Company (as hereinafter defined). In the event
of such termination, the Company shall continue to pay to the
Executive, until the first to occur of (i) the third anniversary of
the Commencement Date or (ii) the expiration of a period of one (1)
year from the date of death of the Executive, the guaranteed base
salary provided for in Section 3 (at the annual rate then in
effect). During such period, the Company shall also pay the
Minimum Guaranteed Bonus in accordance with Section 3.2 hereof. In
addition, the Company shall pay to the Executive the Profit Bonus
in respect of the portion of the fiscal year completed prior to the
sale of the Company in accordance with Section 3.2(b) hereof.
Rights and benefits of the Executive under the benefit plans and
programs of the Company shall be determined in accordance with the
provisions of such plans and programs. As used herein, the term
"sale of the Company" shall mean any sale or other transfer
(including by means of a merger or consolidation) which results in
a change of control of the majority of the issued and outstanding
shares of voting capital stock of the Company.
7.5 Other Termination by the Company. The Company may
terminate the Executive's employment at any time for whatever
reason it deems appropriate with or without reason on 15 days'
notice to the Executive; provided, however, that in the event that
such termination is not pursuant to Section 7.1, 7.2, 7.3 or 7.4,
the Company shall pay to the Executive on the date of such
termination (a) the guaranteed base salary and Guaranteed Minimum
Bonus provided for in Section 3 which would have been payable from
the date of such termination to the third anniversary of the
Commencement Date (without discount for present value). In
addition, the Company shall pay to the Executive the Profit Bonus
in respect of the fiscal year in which such termination occurs in
accordance with Section 3.2(b) hereof. The Executive shall be
under no obligation to seek subsequent employment and upon
obtaining subsequent employment shall be under no obligation to
offset any amounts earned from such subsequent employment (whether
as an employee, a consultant or otherwise) against such payment.
The Company shall continue to provide the Executive, at the expense
of the Company, with the medical insurance then provided generally
to employees of the Company, for a period of one (1) year following
the termination of the employment of the Executive. Rights and
benefits of the Executive under the benefit plans and programs of
the Company shall be determined in accordance with the provisions
of such plans and programs.
7.6 Defacto Termination. For purposes hereof, the
following acts and circumstances shall be treated as if the
Executive is terminated under Section 7.5:
(i) Defacto or de jure diminution of the Execu-
tive's title, position, responsibilities, or authority;
(ii) Location or relocation of the New York office
of the Company other than within a 25 mile radius of New York, New
York;
(iii) Location of the Executive other than at the
Company's New York office; and
(iv) Breach by the Company of any of its material
obligations hereunder that is not cured within thirty (30) days
after written notice thereof is given by the Executive to the
Company.
8. Board Representation; Management Committee.
For the term of the Executive's employment by the
Company, the Executive shall be nominated to serve as a member of
each of Capital Group's Board of Directors and its Management
Committee or any other committee established to serve a
substantially similar management function within Capital Group or
the Company.
9. Successors and Assigns.
9.1 Assignment by the Company. Subject to the
provisions of Section 7.4, the Company shall require any successors
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. As used
in this Section 9.1, the "Company" shall mean the Company as
herein-before defined and any successor to its business and/or
assets as aforesaid which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law and this
Agreement shall be binding upon, and inure to the benefit of, the
Company, as so defined.
9.2 Assignment by the Executive. The Executive may not
assign his obligations hereunder; provided, however, that nothing
herein shall preclude one or more beneficiaries of the Executive
from receiving any amount that may be payable following the
occurrence of his legal incompetency or his death and shall not
preclude the legal representative of his estate from receiving such
amount or from assigning any right hereunder to the person or
persons entitled thereto under his will or, in the case of
intestacy, to the person or persons entitled thereto under the laws
of intestacy applicable to his estate. The term "beneficiaries",
as used in this Agreement, shall mean a beneficiary or
beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the
Executive (in the event of his incompetency) of the Executive's
estate.
9.3 Other Boards. Subject to written notice to and
approval by the Company, the Company hereby agrees that the
Executive retains the right, absent a clearly delineated conflict
of interest, to serve as a member of the Board of Directors of
another company. Any fees or other compensation as a result of
such service shall be assigned by the Executive to the Company and
considered revenues, defined in 3.2(c)(1) above, of the Investment
Banking Group, other than fees or options granted to the Executive
prior to the date hereof.
10. Governing Law. This Agreement shall be deemed a contract
made under, and for all purposes shall be construed in accordance
with, the laws of the State of New York applicable to contracts to
be performed entirely within such State.
11. Entire Agreement. This Agreement contains all the
understandings and representations between the parties hereto
pertaining to the subject matter hereof. Effective as of the
Commencement Date, this Agreement supersedes all understandings and
agreements, whether oral or in writing, if any, previously entered
into by the Company with the Executive in any way relating to the
employment of the Executive by the Company.
12. Hold Harmless. The Company shall indemnify and hold the
Executive harmless for any costs, damages or expenses, including
reasonable attorney's fees, of any kind in connection with any
claim or legal proceeding brought during, or arising out of, or
relating to the Executive's tenure with the Company. Moreover, the
Company shall hold the Executive harmless from all costs, damages
and expenses, including reasonable attorney's fees, for any claim
or legal proceeding arising out of or relating to the asset
purchase agreement, dated March 15, 1995 between the Company and
Mabon Securities Corp.
13. Amendment, Modification, Waiver. No provision of this
Agreement may be amended or modified unless such amendment or
modification is agreed to in writing and signed by the Executive
and by duly authorized representatives of the Company (other than
the Executive). Except as otherwise specifically provided in this
Agreement, no waiver by either party hereto of any breach by the
other party hereto of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of a
similar or dissimilar provision or condition at the same or any
prior or subsequent time, nor shall the failure of or delay by
either party hereto in exercising any right, power or privilege
hereunder operate as a waiver thereof to preclude any other or
further exercise thereof or the exercise of any other such right,
power or privilege.
14. Legal Fees. The Company shall indemnify and hold the
Executive harmless from any and all costs and expenses (including
reasonable fees and expenses of counsel) incurred by the Executive
in connection with any proceeding brought to enforce this Agreement
which results in an award of damages in the Executive's favor.
15. Arbitration. All disputes or controversies hereunder
shall be settled by arbitration pursuant to the rules of commercial
arbitration of the American Arbitration Association in New York
City, New York. The costs of the arbitration shall be paid by the
Company in the event the arbitration results in an award of damages
in the Executive's favor, with the attorneys fees paid by the
Company pursuant to paragraph 14 above. The determination of the
arbitrator shall be final and binding on the parties hereto and
judgement on it may be entered in any court of competent
jurisdiction.
16. Notices. Any notice to be given hereunder shall be in
writing and delivered personally or sent by certified mail, postage
prepaid, return receipt requested, addressed to the party concerned
at the address indicated below or at such other address as such
party may subsequently designate by like notice:
If to the Company:
Rodman & Renshaw, Inc.
120 S. La Salle St.
Chicago, IL 60603
Attention: James D. Van De Graaff, Esq.
If to the Executive:
Haftel and Silverman, P.C.
26 Broadway - 19th Floor
New York, New York 10004
Attention: Richard E. Haftel, Esq.
17. Severability. Should any provision of this
agreement be held by a court or arbitration panel of competent
jurisdiction to be enforceable only if modified, such holding shall
not affect the validity of the remainder of this Agreement, the
balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and
treated as though originally set forth in this Agreement. The
parties further agree that any such court or arbitration panel is
expressly authorized to modify any such unenforceable provision of
this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by
making such other modifications as it deems warranted to carry out
the intent and agreement of the parties as embodied herein to the
maximum extent permitted by law. The parties expressly agree that
this Agreement as so modified by the court or arbitration panel
shall be binding upon and enforceable against each of them. In any
event, should one or more of the provisions of this Agreement be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and if such provision or provisions are
not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never
been set forth herein.
18. Withholding. Anything to the contrary notwithstanding,
all payments required to be made by the Company hereunder to the
Executive or his beneficiaries, including his estate, shall be
subject to withholding of such amounts relating to taxes as the
Company may reasonably determine it should withhold pursuant to any
applicable law or regulation. In lieu of withholding such amounts,
in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law,
provided it is satisfied in its sole discretion that all
requirements of law affecting its responsibilities to withhold such
taxes have been satisfied.
19. Authority. The Company hereby represents and warrants
that all corporate actions necessary to authorize the execution,
delivery and performance of this Agreement by the Company have been
duly taken and are in full force and effect as of the date hereof.
The Company has delivered to the Executive a certified copy of the
corporate resolutions with respect to such approval.
20. Survivorship. The respective rights and obligations of
the Executive and the Company hereunder shall survive any
termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
21. Titles. Titles of the sections of this Agreement are
intended solely for convenience and no provision of this Agreement
is to be construed by reference to the title of any section.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
RODMAN & RENSHAW, INC.
By: /s/ James D. Van De Graaff
------------------------------
Title: General Counsel
& Secretary
/s/ Peter Boneparth
------------------------------
PETER BONEPARTH
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0
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