<PAGE>
NOTICE
------
June 11, 1996
TO THE STOCKHOLDERS OF JACK CARL/312-FUTURES, INC.:
Notice is hereby given that in accordance with the provisions of Section
228 of the Delaware General Corporation Law ("DGCL"), the holders of the issued
and outstanding common stock and preferred stock of Jack Carl/312-Futures, Inc.,
a Delaware corporation (the "Company"), having not less than the minimum number
of votes that would be necessary to authorize or take such action, as described
below shall, by written consent without a meeting and without a vote, on June
30, 1996 (the "Written Consent"), in lieu of any meeting, take the following
action:
Consummation of a material business sale to E.D. & F. Man
International Inc., a Delaware corporation, an unaffiliated third party, of
substantially all of the business of the Company's principal wholly owned
subsidiary, Index Futures Group, Inc.
Only holders of record of the Company's stock at the close of business on
June 10, 1996, are entitled to receive notice of the informal action by the
shareholders in accordance with Section 228 of the DGCL. This Information
Statement is being sent to such holders of record on or about June 10, 1996. NO
RESPONSE IS BEING REQUESTED FROM YOU AND YOU ARE NOT REQUESTED TO RESPOND TO
THIS INFORMATION STATEMENT. IN ACCORDANCE WITH SECTION 228 OF THE DGCL, PROMPT
NOTICE OF THE TAKING OF THE CORPORATE ACTION WITHOUT A MEETING BY LESS THAN
UNANIMOUS WRITTEN CONSENT WILL BE GIVEN IN WRITING TO THOSE SHAREHOLDERS WHO
HAVE NOT CONSENTED IN WRITING.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE NOT REQUESTED TO SEND US A PROXY.
By order of the Board of Directors of
Jack Carl/312-Futures, Inc.
200 West Adams Street
Chicago, Illinois 60606
(312) 407-5700
/s/ Bruce Mathias
- -----------------
Bruce Mathias,
Secretary
<PAGE>
INFORMATION STATEMENT DATED JUNE 11, 1996
-----------------------------------------
THE TRANSACTION
General
- -------
In consideration of the payments described below, Index Futures Group, Inc.
("Index"), the principal wholly owned subsidiary of Jack Carl/312 Futures, Inc.
(the "Company"), has agreed to sell, transfer and assign to E. D. & F. Man
International Inc. ("MINC"), a unit of E. D. & F. Man Group plc, the business of
Index consisting of substantially all the brokerage accounts maintained by
Index, together with all positions, securities and other assets held in or for
such accounts and other agreed assets used in the conduct of the business and
any new business generated by former employees of Index who are employed by MINC
as part of this transaction ("Business").
After consummation of the transaction, Index will no longer do business
with the public as a Futures Commission Merchant. The Company believes that this
transaction will enable it to reduce its consolidated costs and expenses
associated with operating a clearing futures commission business, will make
capital available for expansion or establishment of other activities and will
provide a material stream of income over approximately the next five and a half
years, as described below.
Index and MINC have entered into a definitive Asset Purchase and Sale
Agreement providing for such transfer on the terms generally described herein.
Reference is made to the definitive Asset Purchase and Sale Agreement, a copy of
which is an exhibit to this Information Statement and to the Company's Form 8-K
being filed with the Commission, for a more complete description of the terms
and conditions of the transaction.
Price
- -----
The purchase price ("Price") payable by MINC in connection with the
transaction is based on a percentage of the Net Income (as defined) from the
Business during the sixty-six month period following the sale. Generally, Net
Income from the Business means an amount equal to the futures brokerage
commissions, fees and other income derived, and the net interest income derived,
from the Business less (i) direct costs, (ii) transaction specific production
expenses and overheads allocable to the Business, and (iii) an operational
general and administrative charge as defined. Index will have the right to
receive periodic reports and to audit MINC's records relevant to each pricing
determination.
Based on historic levels of revenues as well as estimates of reductions in
the Company's expenses as a result of this transaction, the parties estimate
that the total purchase price over time will be between 10 and 20 million
dollars, but there can be no assurance that the aggregate purchase price will be
in that range.
2
<PAGE>
The following percentages of Net Income from the Business are to be paid to
Index:
First 30 months after closing 40%
Next 12 months 30%
Next 24 months 20%
Not later than 30 days after the end of each calendar quarter, 75% of the
payment attributable to the preceding quarter shall be made, and the balance for
the year shall be paid to Index by MINC not later than the following February
28th. The Agreement provides for certain penalties in the event of nonpayment
and also provides for certain dispute resolutions terms.
Effect of the Transaction
- -------------------------
There will be no material differences in the rights of security holders of
the Company as a result of this transaction.
Following the closing of the transaction, the Company intends to cause
Index to withdraw from clearing membership at various futures exchanges after
the transition period described below is completed. (See "Transition Period").
Furthermore, Index will reduce its personnel (in compliance with any applicable
federal or state "plant closing laws"). MINC, as part of the transfer, has
indicated it intends to offer employment to a significant number of Index
employees who will be terminated by Index. See "Employees and Offices."
The transaction is intended to reduce costs substantially and make capital
available for other business purposes, without being subject to the strict
regulatory requirements imposed upon futures commission merchants doing business
with the public which are registered with the Commodity Futures Trading
Commission ("CFTC"). There is no assurance that the Company will successfully
accomplish any of the foregoing. The Company's wholly owned London based foreign
exchange trading and brokering subsidiary, Index FX Ltd., will continue to
operate.
As a result of the transaction, the Company and its subsidiaries will cease
using the names "Jack Carl" and "Index" and certain other names currently used
by the Business no later than approximately six months after consummation.
Due Diligence
- -------------
Both the Company and MINC have made investigations of one another's
business, properties, financial condition and affairs. The closing date of this
transaction is scheduled for June 30, 1996.
Accounting Treatment and Income Tax Consequences
- ------------------------------------------------
Index intends to account for the transaction as a contingent payment sale
of its business over the 66 month term of the payments to be received.
Accordingly, payments it receives will be taxed in the year of receipt. The
parties have undertaken to agree to take consistent positions with respect to
allocation of the contingent sale price among the elements of the business being
3
<PAGE>
sold by Index to MINC. The company has neither sought nor received any advance
ruling from the Internal Revenue Service or an opinion of tax counsel concerning
the tax treatment to be afforded the transaction.
Additional Payments
- -------------------
MINC has agreed not to dispose of or close down the Jack Carl Futures
discount brokerage portion of the Business ("Jack Carl Discount Division") for a
period of eighteen months following the Closing Date. If, during the eighteen
month period, MINC disposes of or shuts down the Jack Carl Discount Division,
upon such disposition Index shall be entitled to immediate payment of an amount
equal to the contribution of Net Income from the Jack Carl Discount Division
during the greater of the preceding 12 calendar months the period from the
Closing Date to the shut down or disposition date. Furthermore, if after the
eighteen month period ends and prior to the Final Payment Date (as defined),
MINC determines to dispose of, close down, sell, transfer or convey the Jack
Carl Discount Division, MINC must give notice of the terms of such disposition.
Within 30 days from such notice, at Index's election, it will receive from MINC
either (i) an amount equal to 30.9% of the payments received from MINC arising
from the disposition of the Jack Carl Discount Division; or (ii) an amount equal
to the contribution to Net Income from the Jack Carl Discount Division during
the 12 months preceding the date of such disposition applied pro rata to the
period remaining until the Final Payment Date; or (iii) within 60 days of
Index's election, Index may repurchase the Jack Carl Discount Division for an
amount equal to the amount MINC would receive on a disposition less the amount
payable to Index pursuant to (ii) above.
Notwithstanding the preceding paragraph, before the Final Payment Date,
should the Jack Carl Discount Division result in a negative Net Income of
$50,000 or more for each of the three preceding months, and MINC elects to close
down the Jack Carl Discount Division, Index's sole right shall be an option for
a 60 day period to take back the Jack Carl Discount Division from MINC at no
further cost.
Index is also entitled to reimbursement from MINC for 69.1% of any
severance payments due employees of Index employed solely in the Business who
are terminated by Index during this period and who do not become employed by
MINC.
Transition Period
- -----------------
Index has agreed to provide transition services to MINC in operating the
Business for a period of up to six months following the Closing Date. This will
include making its office space at 200 West Adams Street, Chicago, Illinois,
available to MINC, at the latter's cost, as well as providing the service of
Index employees to MINC as may be required in connection with the transfer of
the Business.
Furthermore, during this period, MINC will have use of such systems
including telephones, telephone systems, computer systems and general ledger
systems as MINC may require in connection with the transfer of the Business. In
connection with these systems, Index has agreed to sell to MINC at the Closing,
at fair market value, such other assets agreed by Index
4
<PAGE>
and MINC and which are used in the conduct of the Business. Payment for
transition services costs shall be charged to MINC on a cost pass through basis
and shall be payable monthly.
Filings
- -------
The parties have complied or are complying with applicable regulatory and
"self regulatory" filings required, and have agreed to vigorously defend using
their best efforts, any litigation or administrative proceeding brought prior to
the Closing Date to challenge the transactions contemplated in the Agreement.
Employees and Offices
- ---------------------
Index has provided MINC with information regarding its current employees
sufficient to allow MINC to offer employment to those employees which MINC may
seek to employ in the Business and Index will use its best efforts to cause such
employees to work for MINC. MINC has sole discretion and has no obligation to
offer employment to any person. Burton J. Meyer, President of the Company, has
agreed to be employed by MINC from and after the Closing Date under an
employment agreement substantially similar to the terms of his current agreement
with the Company, which agreement expires June 30, 1996. As such, effective as
of the Closing, Mr. Meyer will resign his positions at the Company and its
subsidiaries. MINC has advised that Mr. Meyer will be an Executive Vice
President of MINC, the President of the Jack Carl Futures discount brokerage
division of MINC and will have responsibility over the remainder of the business
being transferred.
Covenant Not to Compete
- -----------------------
The Company and Index have agreed that subsequent to the Closing, except as
otherwise expressly provided, neither the Company nor any of its affiliates will
compete with MINC, solicit any employees, customers, accounts or business of
MINC, nor do any act intended to have or having any material adverse effect on
the businesses or the operations of MINC. In addition, Mr. Lee S. Casty has
personally agreed not to compete with MINC nor do any act intended to have or
having any material adverse effect on the businesses or the operations of MINC.
See "Certain Transactions." This covenant will continue in effect for the period
during which Index is entitled to payment of the Price as described above.
Foreign Exchange Business Excluded
- ----------------------------------
Subject to offering it first to MINC at competitive rates, Index FX Ltd.'s
futures business incidental to its current foreign exchange business is not
limited by this transaction, and the Company and Index maintain the right to
introduce but not clear such futures business as they determine. Any such
futures business introduced to MINC shall be part of the Business transferred.
Information Concerning MINC
- ---------------------------
The following information as well as the Financial Statements attached as
Exhibit B to this Information Statement, have been provided by E. D. & F. Man,
International Inc. ("MINC").
5
<PAGE>
MINC, a Delaware corporation, is a wholly owned subsidiary of E. D. & F. Man
Inc. an indirect wholly owned subsidiary of E. D. & F. Man Group plc ("Group"),
an English corporation. Group is an international trading and financial services
concern owning a group of companies operating in 56 countries. Group sources,
supplies and processes a range of agricultural products, manages specialized
investment funds, as well as acts as brokers of futures and options on exchanges
around the world.
MINC is a Futures Commission Merchant ("FCM") registered with the CFTC.
MINC provides execution and clearing services on all major U.S. futures and
futures options exchanges. It is also registered with the Securities and
Exchange Commission as a broker-dealer.
Representations, Warranties, Indemnities and Covenants
- ------------------------------------------------------
Each party has provided the other with appropriate covenants,
representations and warranties appropriate to the transaction including, without
limitation, representations and warranties regarding each party's corporate
authority, compliance with laws, maintenance of assets, conduct of business,
litigation and financial statements.
Each party agrees to indemnify the other for any breach of any covenant,
representation or warranty made by it relating to the transaction or to such
party, and other appropriate matters.
From the date of the Agreement through the Closing Date, Index has agreed
to use its best efforts to maintain the Business as a going concern by causing
the Business to continue to operate only in the usual, regular and ordinary
manner, including but not limited to, maintaining in full force and effect all
currently existing contracts, leases and insurance coverage contracts, paying
all obligations of the Business, preserving goodwill, etc. In addition, prior to
the Closing Date, Index has given MINC access to all of its information and
records concerning Index's employees and customers in order to provide for an
orderly transfer of the Business to MINC on the Closing Date.
CERTAIN TRANSACTIONS
--------------------
Following the Closing and Index's withdrawal from clearing status, it
intends to prepay to the Company $5,000,000 principal amount in subordinated
loans the Company has made to Index for use as part of its regulatory capital,
plus accrued interest. Index also intends to prepay $4,000,000 principal amount
of subordinated loans, plus accrued interest to the Harris Trust and Savings
Bank. The Company, in turn, intends to prepay Mr. Lee S. Casty, its principal
shareholder, French American Securities, Inc., a corporation wholly owned by Mr.
Casty, and Mr. Burton J. Meyer, its President, the $940,000 principal amount,
$4,550,000 principal amount and $900,000 principal amount, respectively, plus
accrued interest, they have loaned to the Company.
Mr. Lee S. Casty, the principal stockholder of the Company has acted as a
finder in connection with this transaction. As such, Mr. Casty will receive from
Index a finder's fee consisting of a percentage from the gross proceeds of the
transaction received by Index, ranging from 6% of the first one million dollars
down to 2% for each one million dollars after the first four million dollars of
gross proceeds, not to exceed twenty million dollars of gross proceeds of this
transaction. In addition, a portion of the Price for the Business may be
allocated to Mr. Casty in
6
<PAGE>
consideration of his personal covenant not to compete. While the amount of such
allocation has not yet been determined it will not exceed 10% of the Price
payable by MINC. See "The Transaction - Covenant Not to Compete."
As noted above, Burton J. Meyer, President of the Company, following the
Closing will become an executive of MINC, in charge of the Business being sold.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Financial Information Provided
- ------------------------------
The Company is not providing pro forma financial information as it believes
that such information is not material to an understanding of this transaction.
The consolidated financial statements of the Company, for the fiscal year
ended June 30, 1995, attached to this Information Statement have been audited by
Arthur Andersen & Co., Inc., independent auditors, as set forth in their reports
thereon appearing elsewhere in this Information Statement, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing. Reference is also hereby made to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995 for additional
historical financial information concerning the Company.
The financial statements of MINC for the fiscal year ended March 31, 1996
attached to this Information Statement have been provided by MINC and have been
audited by Price Waterhouse LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere in this Information Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
Reference is also hereby made to the Company's Form 10-Q for the three
months ended March 31, 1996 containing its unaudited consolidated financial
statements for the quarter then ended. Copies of the Form 10-Q are available
from the Company upon request.
NO SOLICITATION OF VOTES
Inasmuch as substantially all of the business operations of the Company are
conducted by and through Index, the Company has determined that the proposed
sale and transfer of Index's customer business requires the affirmative vote of
a majority of the Company's stockholders. In accordance with the requirements of
the Delaware General Corporation Law, as amended ("DGCL"), such action may be
taken by consent, in lieu of a meeting, of a sufficient number of shares
necessary to take the action. Mr. Lee S. Casty, the beneficial owner of 48.07%
of the outstanding common stock of the Company, and four others including Burton
J. Meyer, President of the Company, beneficially owning an aggregate of 9.75% of
the outstanding shares of common stock, have indicated that they intend to
consent in writing to the transaction, in accordance with the requirements of
the DGCL. Accordingly, the Company need not solicit and is not soliciting votes
or consents from the other shareholders. Nevertheless, in accordance with SEC
Rules, the Company intends that its stockholders be provided with this
definitive Information Statement describing the transaction.
7
<PAGE>
Notice of completion of the transaction will be made after consummation.
By order of the Board of Directors of
Jack Carl/312-Futures, Inc.
200 West Adams Street
Chicago, Illinois 60606
(312) 407-5700
/s/ Bruce Mathias
- -----------------
Bruce Mathias,
Secretary
8
<PAGE>
EXHIBITS
A. Financial Statements - Jack Carl/312 Futures, Inc.
B. Financial Statements - E.D. & F. Man International, Inc.
C. Asset Purchase and Sale Agreement
9
<PAGE>
HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
Year Ended June 30,
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Operating Data:
Revenues $41,658,300 $37,565,300 $36,670,400 $39,227,300 $38,545,300
=========== =========== =========== =========== ===========
Income before income taxes
and extraordinary item $ 3,947,800 $ 992,300 $ 308,900 $ 1,210,100 $ 2,281,400
Income tax expense 1,536,200 406,200 149,600 361,600 1,212,500
----------- ----------- ----------- ----------- -----------
Income before extraordinary item 2,411,600 586,100 159,300 848,500 1,068,900
Extraordinary item (1) - - - 3,000 1,059,800
----------- ----------- ----------- ----------- -----------
Net income 2,411,600 586,000 159,300 851,500 2,128,700
Assumed cumulative dividend on Class A
preferred stock (40,000) (40,000) (40,000) (40,000) (40,000)
----------- ----------- ----------- ----------- -----------
Net income applicable to common
stock $ 2,371,600 $ 546,100 $ 119,300 $ 811,500 $ 2,088,700
=========== =========== =========== =========== ===========
Primary earnings per share as
restated for the one-for-four
reverse split of common stock (2):
Income before extraordinary item $ .08 $ .03 $ .01 $ .04 $ .06
=========== =========== =========== =========== ===========
Net income $ .08 $ .03 $ .01 $ .04 $ .11
=========== =========== =========== =========== ===========
Weighted average number of shares
outstanding, as restated for the
one-for-four reverse split of
common stock 30,680,524 20,175,612 20,178,239 20,178,239 20,178,239
=========== =========== =========== =========== ===========
Fully diluted earnings per share
as restated for the one-for-four
reverse split of common stock (2):
Income (loss) before extraordinary item $ .08 $ .03 $ .01 $ .04 $ .06
=========== =========== =========== =========== ===========
Net income (loss) $ .08 $ .03 $ .01 $ .04 $ .11
=========== =========== =========== =========== ===========
Weighted average number of shares
outstanding, as restated for the
one-for-four reverse split of
common stock 30,680,524 20,175,612 20,178,239 20,178,239 20,178,239
=========== =========== =========== =========== ===========
Balance Sheet Data:
As of June 30,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total assets $190,932,400 $202,806,200 $151,817,500 $143,654,300 $121,140,400
Notes payable 6,390,000 7,690,000 9,615,600 10,140,600 550,000
Subordinated debt 1,690,000 2,000,000 - 225,000 9,828,100
Stockholders' equity 7,364,100 3,876,500 3,295,200 3,135,900 2,284,400
</TABLE>
- ------------------------
(1) Represents tax benefits resulting from utilization of net operating loss
carryforward.
Earnings per share are computed on the basis of the weighted average number
of shares of common stock outstanding during each year, adjusted for the
effect of common stock equivalents arising from the assumed exercise of
stock options and warrants if dilutive.
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders of
Jack Carl/312-Futures, Inc.
and Subsidiaries:
We have audited the accompanying consolidated statements of financial condition
of JACK CARL/312-FUTURES, INC. (a Delaware corporation) AND SUBSIDIARIES as of
June 30, 1995 and 1994, and the related consolidated statements of operations,
changes in stockholders' equity, changes in liabilities subordinated to claims
of general creditors and cash flows for the years ended June 30, 1995, 1994 and
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jack Carl/312-Futures, Inc. and
Subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for the years ended June 30, 1995, 1994 and 1993, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states, in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois,
September 22, 1995
-36-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
---- ----
<S> <C> <C> <C> <C>
Cash $ 1,034,900 $ 1,862,300
Cash segregated or secured under Comodity Exchange Act 1,181,700 3,279,800
U.S. Government obligations 82,885,600 123,783,900
Deposits with clearing organizations 78,030,700 52,882,800
Warehouse receipts 1,537,200 963,700
Receivables:
Brokers and dealers 9,253,400 5,313,200
Clearing organizations 12,627,900 10,906,400
1995 1994
---- ----
Customers $1,152,200 $ 915,800
Affiliates 7,300 13,800
Other 379,100 366,200
Less - Allowance for doubtful accounts (191,900) (506,600) 1,346,700 789,200
--------- ---------
Investments in and advances to affiliated partnerships 39,100 44,400
Notes receivable 633,700 641,300
Exchange memberships, at cost (market value of
$1,228,100 in 1995 and $955,500 in 1994) 781,300 652,300
Furniture, equipment, and leasehold improvements, net
of accumulated depreciation and amortization of
$1,602,800 in 1995 and $1,379,000 in 1994 682,900 608,900
Goodwill, net of accumulated amortization of $4,054,500
in 1995 and $4,000,900 in 1994 541,900 595,500
Other assets 355,400 482,500
------------ ------------
Total $190,932,400 $202,806,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables:
Clearing organizations $ 185,900 $ 6,000
Customers 168,500,000 181,590,900
Officers and employees 2,221,500 3,888,400
Accounts payable and accrued expenses 4,580,900 3,754,400
Notes payable 6,390,000 7,690,000
------------ ------------
Total 181,878,300 196,929,700
------------ ------------
Liabilities subordinated to claims of general creditors 1,690,000 2,000,000
------------ ------------
Stockholders' equity:
Class A preferred stock, $1 par value; 10%
cumulative, redeemable, 400,000 shares authorized
and outstanding 400,000 400,000
Common stock, restated for reverse split, $.004 par
value; 150,000,000 shares authorized, 33,624,532
and 20,174,739 shares issued and outstanding in
1995 and 1994, respectively 134,500 80,700
Paid-in capital 8,395,300 7,373,100
Retained deficit (1,565,700) (3,977,300)
------------ ------------
Total stockholders' equity 7,364,100 3,876,500
------------ ------------
Total $190,932,400 $202,806,200
============ ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-37-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Commissions $33,665,000 $33,529,100 $32,739,100
Interest 7,365,000 3,389,700 3,403,000
Trading gains (losses), net 164,900 330,300 223,400
Other 463,300 316,200 304,900
----------- ----------- -----------
Total revenues 41,658,300 37,565,300 36,670,400
----------- ----------- -----------
Expenses:
Commissions, floor brokerage and
clearing costs 18,381,900 19,580,400 20,939,400
Compensation and related benefits 8,948,100 7,605,400 7,401,600
Interest 3,323,000 1,807,700 1,374,200
Communications 1,672,000 1,973,500 1,781,300
Business promotion 1,680,000 1,222,300 1,064,800
Rent and other occupancy costs 1,465,900 1,382,600 1,255,000
Professional and consulting fees 451,100 897,200 532,300
Depreciation 234,800 254,900 325,300
Amortization of goodwill 53,600 53,600 53,600
Doubtful accounts expense (benefit) (586,000) 49,100 (155,700)
Other 2,086,100 1,746,300 1,789,700
----------- ----------- -----------
Total expenses 37,710,500 36,573,000 36,361,500
----------- ----------- -----------
Income before income taxes 3,947,800 992,300 308,900
Income tax expense 1,536,200 406,200 149,600
----------- ----------- -----------
Net income 2,411,600 586,100 159,300
Assumed cumulative dividend on Class A
preferred stock (40,000) (40,000) (40,000)
----------- ----------- -----------
Net income applicable to common stock $ 2,371,600 $ 546,100 $ 119,300
=========== =========== ===========
Primary earnings per share, restated
for reverse split:
Net income $ .08 $ .03 $ .01
=========== =========== ===========
Weighted average number of shares
outstanding 30,680,524 20,175,612 20,178,239
=========== =========== ===========
Fully diluted earnings per share,
restated for reverse split:
Net income $ .08 $ .03 $ .01
=========== =========== ===========
Weighted average number of shares
outstanding 30,680,524 20,175,612 20,178,239
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-38-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(AS RESTATED FOR THE ONE-FOR-FOUR REVERSE SPLIT OF COMMON STOCK)
<TABLE>
<CAPTION>
Class A Common Stock
Preferred --------------------- Paid-In Retained
Stock Shares Amount Capital Deficit Total
--------- ---------- -------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1992 $400,000 20,178,239 $ 80,700 $7,377,900 $(4,722,700) $3,135,900
Net income -- -- -- -- 159,300 159,300
--------- ---------- -------- ---------- ------------ ----------
Balance, June 30, 1993 $400,000 20,178,239 $ 80,700 $7,377,900 $(4,563,400) $3,295,200
Conversion of redeemable
convertible preferred stock -- (3,500) -- (4,800) -- (4,800)
Net income -- -- -- -- 586,100 586,100
--------- ---------- -------- ---------- ------------ ----------
Balance, June 30, 1994 $400,000 20,174,739 $ 80,700 $7,373,100 $(3,977,300) $3,876,500
Issuance of common stock
pursuant to rights offering -- 13,449,826 53,800 1,022,200 -- 1,076,000
Repurchase of common stock
pursuant to reverse split -- (33) -- -- -- --
Net income -- -- -- -- 2,411,600 2,411,600
--------- ---------- -------- ---------- ------------ ----------
Balance, June 30, 1995 $400,000 33,624,532 $134,500 $8,395,300 $(1,565,700) $7,364,100
========= ========== ======== ========== ============ ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-39-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN LIABILITIES
SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<S> <C>
Balance, June 30, 1992 $ 225,000
Maturities (225,000)
----------
Balance, June 30, 1993 -
New borrowings 2,000,000
----------
Balance, June 30, 1994 2,000,000
New borrowings 1,190,000
Reissuance 2,000,000
Reductions:
Repayments (1,500,000)
Maturities (2,000,000)
----------
Balance, June 30, 1995 $1,690,000
==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-40-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,411,600 $ 586,100 $ 159,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 288,400 308,500 378,900
Deferred taxes 315,600 175,000 286,100
Doubtful accounts expense (benefit) (586,000) 49,100 (155,700)
Gain on sale of assets -- (8,500) (200)
Equity in net loss of affiliated partnerships 18,700 7,900 17,100
Changes in:
Cash segregated or secured under
Commodity Exchange Act 2,098,100 (1,726,700) (746,200)
U.S. Government obligations 40,898,300 (19,094,900) (1,686,400)
Deposits with clearing organizations (25,147,900) (23,442,900) (3,019,500)
Warehouse receipts (573,500) (234,400) 91,600
Receivables (5,633,200) (6,503,900) (2,290,800)
Other assets (188,500) 34,900 (150,200)
Payables (14,577,900) 49,007,500 10,442,400
Accounts payable and accrued expenses 826,500 1,325,500 1,306,200
------------ ------------ ------------
Cash provided by operating activities 150,200 483,200 2,020,200
------------ ------------ ------------
Cash Flows From Investing Activities:
(Increase) decrease in investments in and advances
to affiliated partnerships (13,400) 98,000 406,100
Decrease in notes receivable 7,600 30,000 18,900
Purchase of exchange membership (130,000) -- (6,600)
Purchase of furniture, equipment and
leasehold improvements (357,800) (227,900) (124,500)
Rebate from purchase of equipment 50,000 -- --
Proceeds from sale of assets -- 8,500 3,200
------------ ------------ ------------
Cash provided by (used in) investing activities (443,600) (91,400) 297,100
------------ ------------ ------------
Cash Flows From Financing Activities:
Increase in liabilities subordinated to claims
of general creditors 1,190,000 2,000,000 --
Repayment of liabilities subordinated to claims
of general creditors (1,500,000) -- --
Repayments of notes payable (1,300,000) (1,925,600) (750,000)
Conversion of redeemable convertible preferred stock -- (4,800) --
Issuance of common stock pursuant to rights offering 1,076,000 -- --
------------ ------------ ------------
Cash provided by (used in) financing activities (534,000) 69,600 (750,000)
------------ ------------ ------------
Increase (decrease) in cash (827,400) 461,400 1,567,300
Cash (bank overdrafts), beginning of period 1,862,300 1,400,900 (166,400)
------------ ------------ ------------
Cash, end of period $ 1,034,900 $ 1,862,300 $ 1,400,900
============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-41-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
Supplemental Schedule of Non Cash Investing
and Financing Activities
1995
Notes payable aggregating $7,590,000, due January 31, 1995 were extended to
January 31, 1996, of which $1,200,000 was subsequently repaid.
In March, 1995 a subordinated loan in the amount of $2,000,000 was extended
to February 28, 1996.
1994
Notes payable aggregating $3,700,600, due July 31, 1993 were extended to
July 31, 1994. A $540,000 note payable due July 31, 1993 was extended to
January 1, 1994 and subsequently extended to January 31, 1994.
A $250,000 note payable due November 1, 1993 was extended to November 1,
1994. Notes payable aggregating $5,000,000 due December 31, 1993 were extended
to January 31, 1994.
In February, 1994, all notes payable due at various dates, were extended to
January 1995.
1993
Notes payable in the amount of $3,140,600 due July 31, 1992 were extended
to July 31, 1993 and $250,000 of a $1,000,000 note payable due July 31, 1992 was
extended to July 31, 1993. A $250,000 note payable due November 1, 1992 was
extended to November 1, 1993. Notes payable in the amounts of $2,000,000 and
$3,000,000 due December 31, 1992 and January 31, 1993, respectively, were
extended to December 31, 1993.
Subordinated loans in the amount of $100,000 and $125,000 which matured on
July 31, 1992 were replaced by notes payable due to the same parties. The new
notes mature July 31, 1993.
-42-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1 - ORGANIZATION OF JACK CARL/312-FUTURES, INC.
Jack Carl/312-Futures, Inc. ("JC/312") and Subsidiaries, (the "Company"),
engages principally in the business of effecting transactions in futures and
options on futures contracts for the accounts of customers and the operation of
commodity pools. Index Futures Group, Inc. ("Index"), the principal operating
subsidiary of JC/312, is a registered futures commission merchant with the
Commodity Futures Trading Commission ("CFTC"). Another subsidiary of JC/312 is
a registered broker-dealer.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of JC/312
and its wholly-owned subsidiaries, Index, Index Securities, Inc., Brokers
Resource Corp. and Jack Carl Management and Trading, Inc. as well as those of
its majority-owned subsidiary, Stark Research, Inc. All material intercompany
accounts and transactions are eliminated in consolidation.
Revenue Recognition
Commission revenues on commodity futures and options transactions and
related commission expenses are recorded on a half-turn basis.
U.S. Government Obligations
U.S. Government obligations are valued at market. The change in unrealized
appreciation on house and customer funds invested in U.S. Government obligations
is reflected in interest income.
Investments in Partnerships
The investments in partnerships are accounted for on the equity
method.
Furniture, Equipment and Leasehold Improvements
Furniture and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets. Leasehold improvements are
amortized using the straight-line method over the lesser of their useful lives
or the remaining terms of the leases.
-43-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONS0LIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
The excess of cost over estimated fair value of net assets acquired is
reflected as goodwill and is being amortized over twenty years. Goodwill arose
as a result of business combinations which occurred in 1985 and 1986.
CUSTOMER-OWNED SECURITIES
Customer-owned securities are reflected at market value in the consolidated
statements of financial condition. This presentation has no effect on
stockholders' equity. At June 30, 1995 and 1994, the total market value of
customer-owned securities included in the consolidated statements of financial
condition as both assets and liabilities was S45,768,800 and $48,059,300,
respectively.
INCOME TAXES
Deferred income taxes are provided to reflect the tax effects of timing
differences between financial and tax reporting. The nature of the timing
differences are discussed in footnote 11.
EARNINGS PER SHARE
Earnings per share are computed on the basis of the weighted average number
of shares of common stock outstanding during each year, adjusted for the effect
of common stock equivalents arising from the assumed exercise of stock options,
if dilutive. The earnings per share data has been restated for the November,
1994 one-for-four reverse split of common stock.
RECLASSIFICATION
Certain amounts previously reported have been reclassified to conform to
the current method of presentation.
-44-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 3 - ASSETS SEGREGATED AND SECURED UNDER COMMODITY EXCHANGE
ACT
Under the Commodity Exchange Act, Index is required to segregate all
balances due to customers in connection with transactions in regulated
commodities. In addition, in accordance with CFTC Regulation 30.7, Index is
required to secure all balances due to U.S. customers for activities in foreign
futures or options. Segregated and secured assets included in the consolidated
statements of financial condition at June 30, are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash $ 1,181,700 $ 3,279,800
U.S. Government obligations 81,482,000 123,105,300
Deposits with clearing
organizations 69,531,900 47,651,800
Receivables from clearing
organizations, net 12,043,300 10,517,600
Receivables from brokers and dealers 8,436,200 4,821,100
Warehouse receipts 1,537,200 963,700
----------- -----------
Total segregated and
secured assets $174,212,300 $190,339,300
=========== ===========
Amount required to be
segregated and secured $167,730,300 $181,115,700
=========== ===========
</TABLE>
NOTE 4 - DEPOSITS WITH CLEARING ORGANIZATIONS
Deposits with clearing organizations, including house and customer funds,
at June 30, are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
U.S. Government obligations $75,964,600 $51,509,300
Guarantee deposits 1,163,700 960,400
Stock in exchange clearing organization
at cost (market value of $960,000)
in 1995 and $896,000 in 1994 360,000 360,000
Cash margins 542,400 53,100
---------- ----------
Total $78,030,700 $52,882,800
========== ==========
</TABLE>
-45-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 5 - INVESTMENTS IN AND ADVANCES TO AFFILIATED PARTNERSHIPS
Index Management Services, Inc. ("IMSI"), a subsidiary of Index, as a
general partner, has invested in commodity pools and was a Co-general partner of
Index Asset Management Partners ("IAMP"), which was a general partner of a
commodity pool. In addition, IMSI is also the sponsor of an exempted Cayman
Islands limited liability company which is in the process of liquidation. At
June 30, the investment in and advances to such entities consist of the
following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Investment $28,000 $31,700
Advances 11,100 12,700
------- -------
Total $39,100 $44,400
======= =======
</TABLE>
IMSI is required to maintain minimum net worth and investments in the
commodity pools as defined in the commodity pool partnership agreements. At June
30, 1995, IMSI is in compliance with those requirements. The commodity pool of
which IAMP was the General Partner liquidated during the year ended June 30,
1994. Index provides commodity brokerage services to the remaining active pool
at agreed upon rates and IMSI currently receives administrative fees from that
pool.
NOTE 6 - NOTES PAYABLE
Notes payable at June 30, consist of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Principal stockholder,
interest at prime plus 4%, due:
January 31, 1996 and January 31, 1995 $ 540,000 $ 540,000
January 31, 1996 and January 31, 1995 400,000 400,000
Affiliates and other related parties,
interest at prime plus 4%, due:
January 31, 1996 and January 31, 1995 750,000 750,000
January 31, 1996 and January 31, 1995 150,000 250,000
January 31, 1996 and January 31, 1995 2,000,000 2,000,000
January 31, 1996 and January 31, 1995 1,800,000 3,000,000
January 31, 1996 and January 31, 1995 750,000 750,000
---------- ----------
Total $6,390,000 $7,690,000
========== ==========
</TABLE>
-46-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 6 - NOTES PAYABLE (continued)
Interest paid on notes payable during the years ended June 30, 1995, 1994
and 1993 was $894,100, $764,000 and $703,600, respectively, substantially all
of which was paid to related parties.
The weighted average interest rates on short-term borrowings outstanding at
June 30, 1995 and 1994 are 12.9% and 10.8%, respectively. Short-term borrowings
include notes payable and liabilities subordinated to claims of general
creditors. The weighted average interest rate was calculated by dividing
interest expense by the related average amount outstanding in June.
At June 30, 1995, all notes payable mature during the year ended June 30,
1996.
NOTE 7 - LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
Liabilities subordinated to claims of general creditors at June 30, consist
of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Bank, interest at prime plus 3% and
prime plus 2% due February 28, 1996
and March 9, 1995 $1,690,000 $2,000,000
========== ==========
</TABLE>
These liabilities are borrowed in accordance with the terms of a revolving
subordinated debt line totalling $4,000,000. Had any of the remaining funds
been borrowed, Index's regulatory capital would have increased on a dollar for
dollar basis.
Interest expense on liabilities subordinated to claims of general creditors
during the years ended June 30, 1995, 1994, and 1993 was $234,100, $54,400 and
$1,600, respectively.
NOTE 8 - STOCKHOLDERS' EQUITY
Rights Offering
In July, 1994, the Company offered to its common stockholders the non-
transferable right to purchase, at a subscription price of $.02 per share, two-
thirds of a share of common stock for each one share of common stock owned of
record on July 15, 1994. 53,799,304 shares of common stock were available and
purchased in the Rights Offering. The gross proceeds of the Rights Offering
were $1,076,000.
-47-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONS0LIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE 8 - STOCKHOLDERS' EQUITY (continued)
Class A Preferred Stock
The Company has issued 400,000 shares of Class A preferred stock, 10%
cumulative, to its principal stockholder. The shares are redeemable at par,
with accumulated dividends, at the option of the Company. At June 30, 1995,
cumulative dividends in arrears amounted to $373,300 or $.93 per share. No
liability for these dividends has been recorded as dividends are not payable
until declared.
Common Stock
Effective at the close of business November 4, 1994, the Company effected a
one-for-four reverse split of its common stock, par value $.001. Each four
shares of such common stock were reclassified and changed into one share of
common stock having a par value of $.004. Pursuant to the reverse split, the
Company is obligated to pay any holder of fractional shares resulting from the
reverse split $.05 per share of common stock up to a maximum of $.15 for three
shares. At the close of business on November 4, 1994, the outstanding shares of
common stock were reduced to approximately 33,624,565 shares from 134,498,260
shares before the reverse split. As a result of the repurchase of fractional
shares, there are outstanding as of June 30, 1995, 33,624,532 shares of common
stock.
All outstanding shares, earnings per share and weighted average information
has been restated to reflect the one-for-four reverse split of common stock.
Stock Option Plan
In March, 1986, the Company adopted an incentive stock option plan
reserving 500,000 shares of common stock. In December, 1990, the Company
granted options for 410,000 shares at the then market price exercisable through
December, 2000. The Company also has granted options other than in accordance
with the March 1986 incentive stock option plan.
In January, 1995, the Company granted to two officers options totalling
250,000 shares of common stock exercisable from January 3, 1995 until the
termination of their respective agreements. On June 30, 1995, options granted
in May, 1994 expired and options for 500,000 shares of common stock were
-48-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONS0LIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 8 - STOCKHOLDERS' EQUITY (continued)
forfeited. The following summarizes, after restatement for the November 4, 1994
one-for-four reverse stock split, all outstanding options at June 30, 1995.
<TABLE>
<CAPTION>
Shares Shares Shares Shares Shares
Granted Price Exercisable Forfeited Cancelled Remaining
--------- ----- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dec.
l990 410,000 $.60 340,000 50,469 19,531 340,000
Feb.
1992 125,000 $.25 125,000 - - 125,000
May
1992 75,000 $.60 50,000 25,000 - 50,000
Sept.
1992 125,000 $.375 125,000 - - 125,000
Feb.
1994 1,250,000 $.24 1,250,000 - - 1,250,000
May
1994 500,000 $.24 - 500,000 - -
Jan.
1995 250,000 $.125 250,000 - - 250,000
--------- --------- ------- ------ ---------
Total 2,735,000 2,140,000 575,469 19,531 2,140,000
========= ========= ======= ====== =========
</TABLE>
NOTE 9 - RELATED PARTY TRANSACTIONS
A note receivable in the amount of $633,700 arose in connection with
advances made by the Company to an affiliated entity. These demand receivables
were converted into a demand note bearing interest at 8% and was subsequently
changed to the prime rate of interest. This note was fully collateralized by
deposits at Index as of June 30, 1995. The Company earned $52,400, $39,000 and
$33,100 of interest income on this note during the years ended June 30, 1995,
1994 and 1993, respectively.
The Company rents from an officer and director, an exchange membership
having a market value at June 30, 1995 of approximately $760,000. The Company,
for six months during the
-49-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 9 - RELATED PARTY TRANSACTIONS (CONTINUED)
year ended June 30, 1993, also rented an exchange membership from another
officer. Rent expense for the years ended June 30, 1995, 1994 and 1993 was
$64,000, $49,200 and $73,400, respectively.
Certain exchange memberships owned by officers and others, having an
aggregate market value of $5,310,000 have been pledged to various exchange
clearinghouses or corporations on behalf of the Company and may be used by them
under certain circumstances to fulfill the Company's obligations to those
clearinghouses or corporations. These exchange memberships are not included in
the Company's consolidated statements of financial condition. The Company in the
ordinary course of business, guarantees certain loans which are secured by
exchange memberships owned by an individual who is an officer and director, and
by the principal shareholder.
The Company receives funds, in the form of loans, from its principal
shareholder, an affiliated company and an officer and director of the Company.
See Note 6 for the terms and balances at June 30, 1995 and 1994.
Pursuant to the Rights Offering, the principal shareholder, the president
of the Company and the president of Index, immediately following the expiration
of the Rights Offering, purchased, in addition to their allocable number of
shares in the Rights Offering, 9,768,516, 4,884,259 and 4,884,259 shares,
respectively, of the Registrant's common stock at the subscription price of
$.02 per share. Such shares were the shares not purchased by other shareholders
during the Rights Offering.
NOTE 10 - SALE OF ASSETS
In January, 1993, Brokers Resource Corp. ("BRC"), at the time a wholly-
owned subsidiary of Index and currently a wholly-owned subsidiary of the
Company, sold the majority of its guaranteed introducing broker business to an
unrelated entity in return for a portion of future earnings on such business
through January 15, 1995. No gain was recognized at the date of the sale due to
the uncertainty of future earnings. During the years ended June 30, 1995, 1994
and 1993, the Company earned $481,900, $982,000 and $525,500, respectively, from
the transaction, which is included in commission income. The revenue stream from
this transaction ended effective January 15, 1995.
-50-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE 11 -- INCOME TAXES
The provision for Federal income taxes for each of the years ended June 30, is
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ----------
<S> <C> <C> <C>
Current $1,220,600 $ 581,200 $(136,500)
Deferred 315,600 (175,000) 286,100
---------- --------- ----------
Total provision $1,536,200 $ 406,200 $ 149,600
========== ========= ==========
State tax expense is immaterial for the years ended June 30, 1995, 1994 and
1993.
Reconciliation of the total provision for income taxes to the Federal
statutory rate for the years ended June 30, is as follows:
1995 1994 1993
Amount % Amount % Amount %
----------------- ----------------- -----------------
<S> <C> <C> <C>
At Federal statutory rate $1,342,300 34.0 $337,400 34.0 $105,000 34.0
Amortization of goodwill 18,200 .5 18,200 1.8 18,200 5.9
Additional tax due IRS
for 1987-1989 settlement 49,500 1.2 -- -- -- --
Non-deductible loss
of majority-owned
subsidiary 41,200 1.0 40,500 4.1 -- --
Additional provision
for current and
deferred taxes 8,800 .9 -- -- 25,000 8.1
Penalties 45,100 .5 -- -- -- --
Other, net 31,100 .8 10,100 1.0 1,400 .4
---------- ---- -------- ---- -------- -----
Net amounts $1,536,200 38.9 $406,200 40.9 $149,600 48.4
========== ==== ======== ==== ======== =====
</TABLE>
Effective July 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes. Under this standard, deferred
tax is recognized using the liability method, whereby tax rates are applied to
cumulative temporary differences based on when and how they are expected to
affect the tax return. Deferred tax assets and liabilities are adjusted for tax
rate changes. The primary components of the Company's deferred tax assets and
liabilities are as follows:
-51-
<PAGE>
JACK CARL/3l2-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
<TABLE>
<CAPTION>
NOTE 11 - INCOME TAXES (CONTINUED)
June 30, June 30,
1995 1994
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Bad debt reserve $ 66,100 $ 175,300
Book and tax depreciation
difference 67,500 65,300
Insurance reserve - 56,800
Unrealized loss on U.S.
Government obligations - 30,600
Contingent liability reserve - 28,200
Bonus accrual 65,400 89,700
Accrued legal expense 40,800 -
--------- ---------
Total deferred tax assets $ 239,800 $ 445,900
--------- ---------
Deferred income tax liabilities:
Unrealized gain on U.S.
Government obligations $(135,900) $ -
Common area maintenance reserve - -
Partnership income (26,200) (21,400)
Prepaid rent (18,100) (49,300)
1987-1989 audit adjustment (61,300) (61,100)
Other (l,400) (1,600)
---------- ----------
Total deferred tax liabilities $(242.900) $(133,400)
--------- ---------
Net deferred tax assets
(liabilities) $ (3,100) $ 312,500
========= =========
</TABLE>
No valuation allowance has been provided as management believes deferred tax
assets are realizable.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company has noncancellable leases for office space which expire at varying
dates through the year 2000. Minimum annual rentals, excluding escalations and
increases in operating expenses and taxes, are as follows:
<TABLE>
<CAPTION>
Year Ending June 30, Amount
-------------------- --------
<S> <C>
1996 $183,700
1997 164,600
1998 102,500
1999 102,500
2000 and thereafter 119,600
--------
Total $672,900
========
</TABLE>
-52-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company has entered into employment agreements which expire at varying
dates through fiscal 1997 with certain of its officers, providing for aggregate
minimum annual payments for the years ending June 30, 1996 and 1997 of
approximately $788,500 and $240,000, respectively. Additional compensation is
payable under certain circumstances as defined in the agreements.
The Company has guaranteed performance under the Commodity Exchange Act of
certain introducing brokers with respect to their customer accounts.
Index and BRC issued a limited indemnification agreement to the purchaser of
the BRC business (see Note 10). This agreement covers potential customer claims
arising from activity prior to the sale. No such claims are currently
outstanding.
NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK AND CONCENTRATION
OF CREDIT RISK
The Company, through Index, is in the business of clearing and executing
futures contracts and options on futures contracts for the accounts of its
customers. As such, Index guarantees to the respective clearinghouses its
customers' performance under these contracts. To reduce its risk, Index requires
its customers to meet, at a minimum, the margin requirement established by each
of the exchanges at which the contract is traded. This margin is a good faith
deposit from the customer which reduces the risk to Index of failure on behalf
of the customer to fulfill any obligation under the contract. To minimize its
exposure to risk of loss due to market variation, Index adjusts these margin
requirements, as needed, due to daily fluctuations in the values of the
underlying positions. If necessary, certain positions may be liquidated to
satisfy resulting changes in margin requirements. Management believes that the
margin deposits held at June 30, 1995, were adequate to minimize the risk of
material loss which could be created by the positions held at that time. At June
30, 1995, Index held proprietary long financial futures positions and foreign
currency forward contracts with an aggregate notional value of $223,616,200 and
proprietary short financial futures positions and foreign currency forward
contracts with an aggregate notional value of $243,566,100. At June 30, 1994,
Index held proprietary long financial futures positions and foreign currency
forward contracts with an aggregate notional value of $153,761,600 and
proprietary short financial futures positions and foreign currency forward
contracts with an aggregate notional value of $153,761,600.
-53-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK AND
CONCENTRATION OF CREDIT RISK (CONTINUED)
The exchange upon which financial futures and options on futures contracts
are traded acts as the counterparty and, accordingly, bears the risk of
performance. At June 30, 1995 Index's open financial contracts were transacted
at the Chicago Mercantile Exchange, Chicago Board of Trade, Commodity Exchange,
Inc. and MidAmerican Commodity Exchange. At June 30, 1995 foreign currency
forward contracts were transacted at DAIWA Securities America, Inc. and Refco,
Inc. At June 30, 1994, Index's open financial contracts were transacted at the
Chicago Mercantile Exchange, Chicago Board of Trade, Commodity Exchange, Inc.
and MidAmerican Commodity Exchange. At June 30, 1994, foreign currency forward
contracts were transacted at First National Bank of Chicago and DAIWA Securities
America, Inc.
NOTE 14 - LITIGATION
The Company is a defendant in, and may be threatened with, various legal
proceedings arising from its regular business activities. Management, after
consultation with legal counsel, is of the opinion that the ultimate liability,
if any, resulting from any pending or threatened action or proceedings will not
have a material effect on the financial position or results of operations of the
Company.
The Company, in October, 1994 settled an Internal Revenue Service assessment
which resulted from the review of its calendar year 1990 customer income tax
withholding filings. The settlement did not materially affect the financial
position or the operations of the Company.
The Company was defending against a complaint filed against Index and BRC,
for alleged negligence and breach of fiduciary duty in conjunction with the
alleged operation of an unregistered commodity pool by a customer of an
introducing broker guaranteed by BRC. Index and BRC filed a motion for summary
judgment. A U.S. District Court entered an order granting Index and BRC's motion
for summary judgment, dismissing the plaintiff's claims in their entirety and
directing that judgment be entered in favor of Index and BRC.
The Company is currently defending against a demand for arbitration filed by
a former client to recover damages of $1,000,000 for misrepresentation of risk
and unauthorized trading. Although the client's actual losses were approximately
$850,000, the Company believes the claims are without merit and plans to
vigorously contest the action. In management's opinion, the ultimate liability,
if any, will not materially affect the financial position or operations of the
Company.
-54-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 14 - LITIGATION (CONTINUED)
The Company is currently defending a complaint filed by former partners of a
general partnership which cleared its trades at the Company. The plaintiffs
allege that the general partner, a co-defendant, defrauded them by failing to
disclose risks and misrepresenting account performance. The Company is alleged
to have aided and abetted the general partner by permitting him to act as a
Commodity Pool Operator without proper registration and by furnishing account
statements and other account data to the general partner which were then altered
by the general partner and used to defraud plaintiffs. Plaintiffs' actual losses
were approximately $157,000. The Company believes the allegations are without
merit and will vigorously defend this action.
In April, 1994, Index without admitting or denying the allegations, paid
$100,000 to the CFTC, settling the administrative action filed on September 29,
1992. The equity receiver of an alleged commodity pool operator brought a
related action which is still pending to recover losses of approximately
$600,000, alleging various theories such as constructive trust, negligence,
breach of fiduciary duty and conversion. Index denies the allegations, believes
they are without merit and intends to defend this action vigorously.
NOTE 15 - CAPITAL REQUIREMENTS
Index is subject to the minimum capital requirements adopted and
administered by the Commodity Futures Trading Commission ("CFTC") and by certain
exchanges of which Index is a member. As of June 30, 1995, adjusted net capital,
as defined, of $12,811,600 is $6,803,600 in excess of the minimum required under
the regulations of the CFTC and exchanges. The net capital requirements may
effectively restrict the payment of cash dividends and the repayment of
subordinated borrowings.
A subsidiary of JC/312 is subject to the Uniform Net Capital Rule adopted
and administered by the Securities and Exchange Commission. At June 30, 1995,
the subsidiary is in compliance with those requirements.
NOTE 16 - NASDAQ LISTING
On August 17, 1994, the Company was advised by NASDAQ that the securities of
the Company were delisted from the NASDAQ SmallCap Market effective August 18,
1994. The Company appealed NASDAQ's decision and secured additional market
makers. On December 7, 1994, the Company's common stock resumed trading on the
NASDAQ SmallCap Market.
-55-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 17 - CASH FLOWS
For purposes of reporting cash flows, cash does not include segregated or
secured cash, as defined in the Commodity Exchange Act. Interest paid during the
years ended June 30, 1995, 1994 and 1993 amounted to $3,194,300, $1,706,300 and
$1,367,400, respectively. The Company made income tax payments in the amount of
$444,600 and $185,000 during the years ended June 30, 1995 and 1994,
respectively, and made no income tax payments during the year ended June 30,
1993.
-56-
<PAGE>
SCHEDULE II
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
-------------------------
Charged to
(Benefits Charged
Balance at Against) to Other Balance
Beginning Costs and Accounts Deductions at End of
Description of Period Expenses (Describe) (Describe) Period
- ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful
accounts
For the year
ended June 30,
1995: $ 506,600 $(586,000) $323,900(b) $ (52,600)(a) $191,900
For the year
ended June 30,
1994: $ 613,200 $ 49,100 $ - $(155,700)(a) $506,600
For the year
ended June 30,
1993: $1,380,000 $(155,700) $ - $(611,100)(a) $613,200
</TABLE>
(a) Uncollected receivables written off.
(b) Collection of receivables previously written off.
-57-
<PAGE>
Exhibit Index
-------------
Certain exhibits to this report on Form 10-K have been incorporated by
reference. For a list of these exhibits, see Item 14 hereof.
<TABLE>
<CAPTION>
Page In
Sequentially
Numbered System
Exhibit No. Description Where Found
- ---------- ----------- ---------------
<S> <C> <C>
The following exhibits are filed herewith:
10.38 Employment agreement, dated September
14, 1994, between Jack Carl/312-Futures,
Inc. and Allyson D. Laackman 62
10.39 Employment agreement, dated July 1, 1995,
between Jack Carl/312-Futures, Inc. and
Allyson D. Laackman 75
10.40 Letter containing terms of employment,
dated January 27, 1995, between Index
Futures Group (UK) Limited and
Charles Romilly 88
10.41 Letter of understanding, dated July 1,
1995, between Index Futures Group, Inc.
and Michael Moss 91
11.1 Computation of Earnings
Per Common Share 59
21.1 Subsidiaries of the Registrant 61
24.1 Power of Attorney 35
</TABLE>
-58-
<PAGE>
Exhibit 11.1
JACK CARL/312-FUTURES, INC. & SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
AS RESTATED FOR THE ONE-FOR-FOUR REVERSE SPLIT OF COMMON STOCK
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
<S> <C> <C> <C>
1995 1994 1993
------ ------ ------
Primary
- -------
Earnings
Income before
extraordinary item $ 2,411,600 $586,100 $159,300
Deduct assumed dividends on
Class A preferred stock (40,000) (40,000) (40,000)
--------- ------- -------
Net income applicable
to common stock $ 2,371,600 $546,100 $ll9,300
========= ======= =======
Shares
Weighted average number of
common shares outstanding 30,680,524 20,175,612 20,178,239
========== ========== ==========
Primary earnings per
common share:
Net income $ .08 $ .03 $ .01
====== ======= =======
</TABLE>
<PAGE>
JACK CARL/312-FUTURES, INC. & SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
as Restated for the One-for-Four Reverse Split of Common Stock
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Assuming Full Dilution
Earnings
Net income $ 2,411,600 $ 586,100 $ 159,300
=========== =========== ===========
Shares
Weighted average number of
common shares outstanding 30,680,524 20,175,612 20,178,239
=========== =========== ===========
Earnings per common share
assuming full dilution:
Net income $ .08 $ .03 $ .01
=========== =========== ===========
</TABLE>
-60-
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1996 AND JUNE 30, 1995
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
------------ ------------
(Unaudited) (Audited)
<S> <C> <C> <C> <C>
Cash $ 2,436,300 $ 1,034,900
Cash segregated or secured under Commodity Exchange
Act 4,521,900 1,181,700
U.S. Government obligations 129,381,900 82,885,600
Other short term investments 28,646,700 --
Deposits with clearing organizations 55,133,700 78,030,700
Warehouse receipts 1,001,500 1,537,200
Receivables:
Brokers and dealers 2,344,300 9,253,400
Clearing organizations 15,992,800 12,627,900
March 31, June 30,
1996 1995
---------- -----------
Customers $ 851,800 $1,152,200
Affiliates -- 7,300
Other 386,500 379,100
Less--Allowance for doubtful accounts (284,100) (191,900) 954,200 1,346,700
---------- -----------
Investments in and advances to affiliated
partnerships 9,400 39,100
Notes receivable 629,300 633,700
Exchange memberships, at cost (market value
of $995,600 and $1,228,100 at March 31, 1996
and June 30, 1995, respectively) 781,300 781,300
Furniture, equipment, and leasehold improvements,
net of accumulated depreciation and amortization
of $1,835,300 and $1,602,800 at March 31, 1996
and June 30, 1995, respectively 703,800 682,900
Goodwill, net of accumulated amortization of
$4,094,700 and $4,054,500 at March 31, 1996
and June 30, 1995, respectively 501,700 541,900
Other assets 520,500 355,400
------------ ------------
Total $243,559,300 $190,932,400
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables:
Clearing organizations $ 144,100 $ 185,900
Customers 221,725,400 168,500,000
Officers and employees 1,867,300 2,221,500
Affiliates 18,300 --
Accounts payable and accrued expenses 3,404,100 4,580,900
Notes payable 6,390,000 6,390,000
------------ ------------
Total 233,549,200 181,878,300
------------ ------------
Liabilities subordinated to claims of general
creditors 2,750,000 1,690,000
------------ ------------
Stockholders' equity:
Class A preferred stock, $1 par value; 10%
cumulative, redeemable, 400,000 shares
authorized and outstanding 400,000 400,000
Common stock, $.004 par value; 150,000,000 shares
authorized, 33,624,530 and 33,624,532 shares
issued and outstanding at March 31, 1996 and
June 30, 1995, respectively 134,500 134,500
Paid-in capital 8,395,300 8,395,300
Retained deficit (1,655,200) (1,565,700)
Cumulative translation adjustment (14,500) --
------------ ------------
Total stockhlders' equity 7,260,100 $ 7,364,100
------------ ------------
Total $243,559,300 $190,932,400
============ ============
</TABLE>
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues
Commissions $23,030,500 $24,579,100
Interest 5,648,600 4,980,700
Trading gains, net 1,196,200 96,900
Other 150,300 557,000
----------- -----------
Total revenues 30,025,600 30,213,700
----------- -----------
Expenses:
Commission, floor brokerage and clearing costs 12,462,300 13,744,200
Compensation and related benefits 7,775,500 6,649,600
Communications 1,454,100 1,214,500
Interest 2,981,300 2,335,200
Rent and other occupancy costs 1,163,600 1,020,700
Business promotion 1,551,200 1,197,400
Professional and consulting fees 526,500 399,200
Depreciation 235,500 169,600
Amortization of goodwill 40,200 40,200
Other 1,775,100 901,000
----------- -----------
Total expenses 29,965,300 27,671,600
----------- -----------
Income before income taxes 60,300 2,542,100
Income tax expense 149,800 919,700
----------- -----------
Net income (loss) (89,500) 1,622,400
Assumed cumulative dividend on Class A preferred stock (30,000) (30,000)
----------- -----------
Net income (loss) applicable to common stock $ (119,500) $ 1,592,400
=========== ===========
Primary earnings (loss) per common share, restated for reverse split:
Net income (loss) $ (.00) $ .05
=========== ===========
Weighted average number of common shares outstanding 33,717,323 29,648,509
=========== ===========
Fully diluted earnings (loss) per common share, restated for reverse split:
Net income (loss) $ (.00) $ .05
=========== ===========
Weighted average number of common shares outstanding 33,717,323 29,648,509
=========== ===========
</TABLE>
<PAGE>
JACK CARL/312-FUTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN LIABILITIES
SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
<S> <C> <C>
1996 1995
----------- ----------
Liabilities subordinated to claims of general
creditors, at beginning of period $ 1,690,000 $2,000,000
New borrowings 2,750,000 -
Maturities (1,690,000) -
----------- ----------
Liabilities subordinated to claims of general
creditors, at end of period $ 2,750,000 $2,000,000
=========== ==========
</TABLE>
<PAGE>
[LETTERHEAD OF PRICE WATERHOUSE LLP]
- --------------------------------------------------------------------------------
Price Waterhouse LLP [LOGO]
Report of Independent Accountants
May 30, 1996
Board of Directors
E. D. & F. Man International Inc.
(a wholly owned subsidiary of E. D. & F. Man Inc.)
In our opinion, the accompanying consolidated statement of financial condition
presents fairly, in all material respects, the financial position of E. D. & F.
Man International Inc. and its subsidiaries at March 31, 1996 in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Company's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this statement in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
E. D. & F. MAN INTERNATIONAL INC.
---------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
---------------------------------------------
MARCH 31, 1996
--------------
(in thousands)
<TABLE>
<S> <C>
Assets
- ------
Cash $ 7,142
Cash segregated under federal regulation 2,371
Due from brokers, dealers and clearing organizations 131,745
Due from customers and noncustomers 28,614
Due from affiliates 3,353
Securities purchased under agreements to resell 715,742
Securities owned
U.S. Govemment securities 31,098
Other marketable securities 6,132
Not readily marketable, at estimated fair value 421
Memberships in exchanges, at cost (market value of $14,724) 10,040
Furniture, equipment, and leasehold improvements, net of
accumulated depreciation of $2,929 2,893
Other assets 4,038
--------
Total assets $943,589
========
Liabilities and stockholder's equity
- ------------------------------------
Liabilities:
Due to brokers, dealers and clearing organizations $ 17,003
Due to customers and noncustomers 758,922
Due to affiliates 8,224
Accounts payable and accrued liabilities 29,932
--------
814,081
Subordinated debt 123,000
--------
Total liabilities 937,081
--------
Stockholder's equity:
Common stock 350
Additional paid-in capital 4,900
Retained earnings 1,258
--------
Total stockholder's equity 6,508
--------
Total liabilities and stockholder's equity $943,589
========
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
E. D. & F. MAN INTERNATIONAL INC.
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
MARCH 31. 1996
NOTE 1 - ORGANIZATION:
E. D. & F. Man International Inc, ("MINC") is a wholly owned subsidiary of E. D.
& F. Man Inc., a United States corporation, whose ultimate parent is E. D. & F.
Man Group plc, a United Kingdom corporation.
MINC is registered with the Commodity Futures Trading Commission ("CFTC") AS A
FUTURES commission merchant and is a member of the National Futures Association,
an industry self regulatory agency. MINC is also registered with the Securities
and Exchange Commission ("SEC") and the National Association of Securities
Dealers ("NASD") as a broker-dealer. e provides brokerage services to
customers and affiliates on United States securities and commodities exchanges
and on overseas exchanges through affiliates.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
Consolidation Policy
The consolidated financial statements include the accounts of MINC and
Geldermann, Inc. ("Geldermann"), a wholly owned subsidiary (collectively, the
"Company"). All material intercompany balances and transactions have been
eliminated.
Revenue Recognition
Commission income and the associated direct costs related to customer futures
transactions are recognized on a half-turn basis. Customers' securities
transactions, and the related revenues and expenses thereon, are recorded on a
settlement date basis which does not differ from that which would have been
recorded on a trade date basis.
U. S. Government Securities
U. S. Government securities are carried at cost plus accrued interest, which
approximates market value. Approximately S7,293,900 of these securities
represent guarantee deposits maintained at clearing organizations.
-3-
<PAGE>
Securities Purchased Under Agreements to Resell
Securities purchased under agreements to resell are carried at the amounts at
which the securities will be subsequently resold plus accrued interest, which
approximates market value. The securities purchased under agreements to resell
are restricted due to segregation requirements of the CFI C. Such reverse
repurchase agreements are with several U.S. banking institutions and are
collateralized by U. S. Government securities. It is the Company's policy to
obtain possession or control of the underlying collateral. The Company monitors
the fair value of the securities purchased under these agreements on a daily
basis and obtains additional collateral from counterparties as necessary.
Property, Plant and Equipment
Fixed assets consist of furniture, equipment and leasehold improvements.
Furniture ant equipment is depreciated over their estimated useful lives using
the straight-line method. Leasehold improvements are amortized over the lease
term using the straight-line method.
Benefit Plans
Eligible employees of MINC are covered by E. D. & F. Man Inc.'s non-contributory
defined benefit pension plan.
Income Taxes
The Company is included in the consolidated federal income tax return of E. D. &
F. Man Inc. Federal income taxes are determined on a separate return basis
pursuant to a tax sharing agreement with its parent. The Company accounts for
income taxes under the liability method. Under this method, deferred taxes are
provided for differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates that will be in effect
when these differences are expected to reverse.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets ant liabilities at the date of the financial statements ant
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Goodwill
is amortized over 15 years on a straight line basis. Included within
goodwill is the excess of the fixed consideration paid or accrued over the
estimated fair value of the net assets acquired of Geldermann as well as the
capitalization of direct costs associated with the purchase,
-4-
<PAGE>
including severance and lease termination payments and accruals for rental
costs related to redundant space and equipment.
Fair Value of Financial Instruments
The carrying value of financial instruments approximates fair value except for
subordinated debt. Based on the related party nature of the subordinated debt,
the fair value of such debt is not considered to be readily determinable.
NOTE 3 - COMMON STOCK
At March 31, 1996, the Company's capital shares consist of the following
classes:
Class A (Voting), $10 par value; 25,000 shares authorized;
20,000 shares issued and outstanding $200,000
Class B (Non-Voting), $10 par value; 25,000 shares
authorized; 15,000 shares issued and outstanding $150,000
NOTE 4 - CAPITAL REQUIREMENTS:
MINC is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which
requires a broker-dealer that is also registered as a futures commission
merchant to maintain adjusted net capital equal to or above the greater of its
requirement under paragraph (a)(1)(ii) of Rule 15c3-1, or 4 percent of the
funds required to be segregated pursuant to the Commodity Exchange Act and the
regulations thereunder. At March 31, 1996, MINC had adjusted net capital, as
defined, of approximately $66,191,900, which was approximately $34,933,000 in
excess of the minimum required to be maintained.
Geldermann, Inc. is subject to the net capital requirements of the CFTC. At
March 31, 1996 Geldermann, Inc.'s regulatory net capital of approximately
$17,603,100 exceeded the minimum net capital requirement by approximately
$17,271,500.
MINC and its regulated subsidiaries are subject to certain notification and
other provisions of the net capital rules of the SEC and CFTC regarding
advances to affiliates, repayments of subordinated liabilities, dividend
payments and other equity withdrawals.
NOTE 5 - SEGREGATION OF FUNDS
The Company is required under the Commodity Exchange Act and the Securities
Exchange Act of 1934 to segregate assets at least equivalent to balances due to
customers trading in regulated futures and options on futures contracts and U.S.
domiciliaries trading on foreign futures markets and trading in securities and
options on securities markets, respectively. At March 31, 1996, the
-5-
<PAGE>
Company maintained segregated assets and foreign secured assets, including
customer owned securities, as follows:
Pursuant to Commodity Exchange Act:
Cash $ 2,229,200
Firm owned securities 5,375,300
Customer owned securities 226,296,000
Securities purchased under agreements to resell 574,800,200
Receivables from exchanges and clearing organizations 49,091,700
Net equities with other futures commission merchants 4,184,000
------------
Total $861,976,400
============
Foreign Secured Assets Relating to Foreign Futures Activities:
Cash $ 49,706,600
Firm owned securities 1,075,900
Customer owned securities 14,155,400
Securities purchased under agreements to resell 70,032,400
Receivables from exchanges and clearing organizations 19,300
Net equities with other futures commission merchants (2,660,000)
------------
Total $132,329,600
============
Pursuant to Securities Exchange Act Requirements:
Securities purchased under agreements to resell $ 23,406,800
============
At March 31, 1996, the Company was in compliance with these segregation
requirements.
NOTE 6 - INCOME TAXES:
The Company files consolidated Federal, and New York state and City income tax
returns with its parent, E. D. & F. Man Inc. The Company also files income tax
returns in Illinois and certain other states.
NOTE 7 - RELATED PARTY TRANSACTIONS:
E. D. & F. Man Inc. provides certain administrative services to the Company.
These services include payment of the Company's payroll costs, occupancy costs,
equipment rentals, communication costs as well as various other operating
expenses. The Company reimburses E. D. & F. Man Inc. for these expenditures.
The Company provided various execution and brokerage services to affiliates on
bases determined by management.
Certain of the Company's bank and credit facilities have been guaranteed or
supported by an affiliate.
-6-
<PAGE>
At March 31, 1996, subordinated borrowings from E. D. & F. Man Group plc total
$37,500,000 expiring January 31, 1997, and from E. D. & F. Man Inc. total
$85,500,000 expiring as follows: $5,000,000 on May 31, 1996, $57,000,000 on June
15, 1997, and $23,500,000 on June 2, 1996. Such borrowings are subordinated to
the claims of all present and future creditors and bear interest at prime plus
1%.
The Company has an agreement with the E. D. & F. Man International Ltd. ("MIL")
to introduce customers to MIL who desire to purchase or sell London Metals
Exchange futures and options contracts. For such contracts, the counterparties
are customers of MIL with no obligation of performance by the Company. The
Company is reimbursed by MIL for its expenses related to such transactions. The
Company also receives a service fee equal to a share of the N Profits, as
defined in the agreement, from such transactions.
NOTE 8 - LEASES:
The Company leases certain office premises, equipment and computer hardware for
its own use. At March 31, 1996, the minimum annual rental commitment under non-
cancelable leases was:
1997 $ 927,500
1998 713,900
1999 733,400
----------
Total $2,374,800
==========
NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK:
Off-balance sheet market risk of futures and options positions undertaken by the
Company's customers and affiliates is borne by such entities. The Company's
operational credit risk is primarily limited to amounts due from brokers,
dealers, exchanges, clearing organizations, customers and affiliates.
Transactions in futures contracts are conducted through regulated exchanges for
which the Company, its customers and other counterparties are subject to margin
requirements and are settled in cash on a daily basis, thereby minimizing credit
risk. Credit losses could arise should counterparties fail to perform and the
value of any collateral proves inadequate. The Company manages credit risk by
monitoring net exposure to individual counterparties on a daily basis,
monitoring credit limits and requiring additional collateral where appropriate.
Securities trades are recorded on a settlement date basis. Should either the
customer or broker fail to perform, the Company may be required to complete the
transaction at prevailing market prices resulting in a credit risk. Trades
pending at March 31, 1996 were settled without adverse effect on the Company's
consolidated statement of financial condition.
In the normal course of business, the Company invests in U.S. government
obligations and other short-term instruments with U.S. financial institutions or
U.S. branches of major foreign banks.
-7-
<PAGE>
Management does not anticipate that losses, if any, as a result of credit risk
would materially affect the Company's financial position.
NOTE 10 - COMMITMENTS AND CONTINGENCES
Various legal actions are pending against the Company. Any legal actions
involving significant damage claims relate to activities of Geldermann prior to
acquisition by MINC. As part of the acquisition agreement, the seller has agreed
to indemnify the Company and its officers against any liabilities up to
$63,000,000 in respect to known or unknown claims, as of the acquisition date,
including any pending or threatened litigation against Geldermann.
As of March 31, 1996, a non-guaranteed subsidiary (which has been liquidated) of
Geldermann had an outstanding judgment against it of approximately $2,000,000,
which has been accrued in the consolidated statement of financial condition.
Additional amounts, which have not been accrued, for interest and attorneys
costs may also become payable. In addition to the seller's indemnification, any
liability related to this litigation matter has also been indemnified by the
previous corporate owner of such subsidiary. The accrued liability of $2,000,000
has therefore been fully offset by recording a corresponding receivable due from
the parties issuing the indemnifications. The accrued liability and
corresponding receivable are reflected in the consolidated statement of
financial condition in accounts payable and accrued liabilities and other
assets, respectively.
At March 31, 1996, outstanding letters of credit aggregated approximately
$41,000,000. Such letters of credit were used principally in lieu of original
margin deposits with various clearing associations and in lieu of capital
deposits with various exchanges.
The Company guarantees certain third party loans on a collateralized basis.
Guarantees at March 31, 1996, amounted to approximately $1,948,500 and the
market value of the collateral, consisting of exchange memberships, was
approximately $6,162,000.
In the opinion of management, these matters will be resolved with no material
adverse effect on the Company's consolidated statement of financial position.
NOTE 11 - DISPOSITIONS OF SUBSIDIARIES
On March 29, 1996, the Company sold its interest in Greystone International
Limited, a wholly owned subsidiary of Gotham Asset Management, Inc. ("GAMI").
The Company also sold its interest in Greystone Partners, a partnership interest
of GAMI. GAMI is a wholly owned subsidiary of Heinhold Asset Management, Inc.
("HAMI"), formerly a wholly owned subsidiary of Geldermann.
Subsequent to the above sales, the Company dividended its remaining interest in
HAMI on March 31, 1996, for its net book value of $2,018,200 to E. D. & F. Man
Inc.
-8-
<PAGE>
E.D. & F. Man International Inc.
Statement of Financial Condition
For the Quarter Ended March 31, 1996
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Assets
Cash $ 7,048
Cash segregated under federal regulation 2,054
Due from brokers, dealers and clearing organizations 88,196
Due from customers 25,596
Investment in and due from affiliates 26,207
Securities purchased under agreements to resell 663,119
Securities and investments owned
U.S. and Canadian Government securities 20,524
Other securities and investments 5,259
Not readily marketable, at estimated fair value 1,537
Memberships in exchanges, at cost 8,615
Furniture, equipment and leasehold improvements,
net of accumulated depreciation and amortization 2,029
Other assets 4,691
--------
Total Assets $854,875
--------
========
Liabilities and stockholder's equity
Due to brokers, dealers and clearing organizations $ 8,977
Due to customers 663,170
Due to affiliates 29,652
Bank Loans payable 8892
Accounts payable and accrued liabilities 29,154
--------
$739,845
Subordinated debt 110,000
Common stock 350
Additional paid-in capital 4,900
Retained earnings (220)
--------
5,030
--------
Total liabilities and stockholder's equity $854.875
--------
========
</TABLE>
<PAGE>
--------------------------------
ASSET PURCHASE
AND
SALE AGREEMENT
DATED MAY 31, 1996
BETWEEN
INDEX FUTURES GROUP, INC.
AND
E.D. & F. MAN INTERNATIONAL INC.
--------------------------------
<PAGE>
Table of Contents
Section
1. DEFINITIONS
2. PURCHASE AND SALE OF THE ASSETS
2.1 Property to be Acquired from Seller
2.2 Liabilities
2.3 Liabilities Expressly Not Assumed
2.4 Payments
2.5 Other Payments
3. CLOSING TRANSACTIONS
3.1 Sale and Purchase of the Business
3.2 The Purchase Price
3.3 Payment of Purchase Price
3.4 Employment of New Employees
3.5 Payments for Certain Terminated Customer Accounts
3.6 Payments for Disposition or Cessation of the Jack Carl Division
3.7 Payments for Terminated Employees
4. TRANSITION PERIOD
4.1 Transition Period
4.2 200 West Adams Street
4.3 Services by Seller Employees
4.4 Use of Systems
4.5 Payment for Transition Services Costs
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF SELLER
5.1 Organization of Seller
5.2 Authority
5.3 Absence of Violation
5.4 Assets
5.5 Customer Accounts
5.6 Compliance with Laws
ii
<PAGE>
5.7 Litigation
5.8 Contracts
5.9 Financial Statements
5.10 Accuracy of Information
5.11 Employee Plans, Contracts and Employees
5.12 No Material Adverse Change
5.13 Disclosure
5.14 No Finder
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF PURCHASER
6.1 Organization of Purchaser
6.2 Authority
6.3 Absence of Violation
6.4 Litigation
6.5 Financial Statements
6.6 Accuracy of Information
6.7 No Material Adverse Change
6.8 No Finder
7. ACTION PRIOR TO THE CLOSING DATE
7.1 Regulatory Filings
7.2 Cooperation
7.3 Maintain Business as Going Concern
7.4 Purchaser's Access to Information and Records Before Closing
7.5 Other Business
8. COOPERATION AFTER THE CLOSING
8.1 Access to Records After Closing
8.2 Conduct of Business
8.3 Non-Competition with Respect to the Business
8.4 Enforcement; Interpretation
9. CLOSING
9.1 The Closing
9.2 Contractual Consents
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
12. DEFAULT; INDEMNIFICATION
iii
<PAGE>
12.1(a) Indemnification by Seller
12.1(b) Indemnification by Purchaser
12.2 Tax Indemnification
12.3 Conditions of Indemnification
12.4 Default of Purchase Price Payment
13. TRANSFER AND SALES TAX
14. ACTIONS TO BE TAKEN AT OR SUBSEQUENT TO THE
CLOSING DATE
14.1 Further Assurances
14.2 Cooperation in Litigation
14.3 Monthly Statements
14.4 Seller's Net Worth
14.5 Seller's Accounting
14.6 Certain Actions
15. TAX MATTERS
15.1 Filings, Etc.
15.2 Allocation of Taxes
15.3 Cooperation
16. OTHER PROVISIONS
16.1 Complete Agreement
16.2 Waiver, Discharge, etc.
16.3 Notices
16.4 Public Announcements; Other Disclosures
16.5 Expenses
16.6 Governing Law
16.7 Jurisdiction; Arbitration
16.8 Successors and Assigns
16.9 Execution in Counterparts;
Facsimile Signatures
16.10 Titles and Headings
16.11 Schedules
16.12 No Third Party Beneficiaries
iv
<PAGE>
LIST OF
SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1.12 G and A Charge
Schedule 1.23 Index Division
Schedule 2.1(a)(i) Customer Accounts
Schedule 2.1(a)(iii) Introducer Agreements
Schedule 2.1(a)(v) Intellectual Property
Schedule 2.1(a)(vi) Other Assets
Schedule 3.7 Severance
Schedule 5.5(b) Location of Property
Schedule 5.5(c) Discretionary Customer Accounts
Schedule 5.7 Litigation
Schedule 5.8(b)(i) Assigned Contracts
Schedule 5.8(b)(ii) Standard Form of Seller's Customer Agreements
Schedule 5.11(a) Employment Agreements
Schedule 5.11(b) Employee Handbook
<PAGE>
EXHIBITS
Exhibit 10(h) Form of Agreement of Seller's Parent
Exhibit 10(i) Form of Principal Shareholder Non-Compete
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement is made and entered into on this
31st day of May, 1996 (the "Agreement"), by and between Index Futures Group,
Inc., a Delaware corporation ("Seller"), and E.D. & F. Man International Inc., a
Delaware corporation ("Purchaser" and together with Seller, the "Parties").
WITNESSETH:
WHEREAS, Seller owns and operates a futures commission merchant business
and owns the assets related thereto;
WHEREAS, Purchaser wishes to purchase from Seller and Seller wishes to sell
to Purchaser the "Purchased Assets" as hereinafter defined, for the purchase
price, and upon the terms and conditions, more fully set forth in this
Agreement.
NOW, THEREFORE, Seller and Purchaser in consideration of the premises, and
agreements and covenants contained herein and subject to the satisfaction of the
conditions set forth herein, hereby agree as follows:
SECTION 1. DEFINITIONS.
For purposes of this Agreement all technical terms and phrases used in this
Agreement are intended to be construed and applied in accordance with their
customary usage in the commodity futures trading industry and all capitalized
terms not otherwise defined herein shall have the respective meanings ascribed
to them as follows:
1.1 Affiliate. With respect to any Person, "Affiliate" means a Person,
other than a natural person, controlled by, controlling or under common control
with such Person, and includes, in the case of Purchaser, any direct or indirect
subsidiary of E.D. & F. Man International Inc. and, in the case of Seller, any
direct or indirect subsidiary of Seller's parent.
1.2 Business. "Business" means the futures commission merchant business
engaged in by Seller prior to the Closing Date in providing broker services with
respect to commodity futures contracts and commodity options and transactions
incidental to the foregoing which business consists of a Jack Carl Division and
an Index Division.
1.3 Business Day. "Business Day" means any day other than a Saturday,
Sunday or day on which banks are authorized or required to be closed under the
laws of the State of New York. Any reference in this Agreement to a day other
than a "Business Day" means a calendar day.
1.4 CE Act. "CE ACT" means the Commodity Exchange Act, as amended.
<PAGE>
1.5 CFTC. "CFTC" means the Commodity Futures Trading Commission.
1.6 CFTC Regulations. "CFTC Regulations" means the rules and regulations
promulgated by the CFTC under the CE Act.
1.7 Closing. "Closing" means the Closing referred to in Section 3.
1.8 Closing Date. "Closing Date" means the Closing Date specified in
Section 3.
1.9 Employee Plans. "Employee Plans" means all employee benefit plans (as
such term is defined in Section 3 of ERISA).
1.10 ERISA. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.11 Final Payment Date. "Final Payment Date" means the anniversary date of
the Closing Date of the 66th month following the Closing Date.
1.12 G and A Charge. "G and A Charge" means the actual charge to the Jack
Carl Division and Index Division equal to the incremental general and
administrative expenses incurred by Purchaser determined in accordance with
Schedule 1.12. This G and A charge will be allocated between the Jack Carl
Division and the Index Division based on the round-turns done by each division.
This charge is computed by dividing total G and A by the total number of
round-turns done by the Business, then multiplied by the numbers of round-turns
applicable to each division. The G and A Charge shall be capped at $5.45 per
round-turn through the third full calendar month following the Closing Date,
$4.34 per round-turn for the succeeding full six (6) calendar month period and
$3.78 per round-turn thereafter until the Final Payment Date for each trade
cleared by the respective division (other than floor brokerage, locals business,
changer, transfer, exchange of futures for physical transactions and execution
only trades).
1.13 GAAP. "GAAP" means generally accepted accounting principles in the
United States.
1.14 Liability. "Liability" means any debt, liability, understanding,
arrangement, undertaking and obligation, whether primary or secondary, direct or
indirect, fixed, absolute or contingent, including that arising under any law,
rule, regulation or order of any governmental department, commission, board,
bureau, agency, exchange, board of trade, contract market or other market
regulatory organization, self-regulatory organization or instrumentality, any
award of any arbitrator and any judgment or decree of any court or tribunal in
each case domestic or foreign (collectively "Laws"), and any contract,
agreement, arrangement, understanding, lease, commitment or undertaking.
1.15 Lien. "Lien" means any lien, claim, encroachment, easement,
encumbrance, mortgage, pledge, deed of trust, hypothecation, equity, charge,
restriction, possibility of reversion or other similar conflicting ownership or
security interest.
2
<PAGE>
1.16 Net Commissions. "Net Commissions" means an amount equal to the gross
brokerage commissions on commodity futures and futures options contracts paid to
Purchaser by Jack Carl Accounts and Index Accounts plus any fees, trail
commissions and other income derived from such accounts, net of (a) the sum of
any direct costs which consist solely of applicable NFA, exchange, clearing,
floor brokerage fees and other fees assessed by Law, and (b) any rebates paid
for introducing services pursuant to the Introducer Agreements (as hereinafter
defined).
1.17 Net Income. "Net Income" means the sum of (a) Net Commissions plus
(b) Net Interest Income less the sum of (c) Production Expenses plus (d) the G
and A Charges. For purposes of computing Net Income, trade errors, debits,
deficits, lawsuits and related costs which are attributable solely to an event
which occurs following the Closing Date shall be excluded for purposes of
computing Net Income, provided that trade errors attributable to an employee of
a production unit of the Index Division or the Jack Carl Division which occur
during the six months following the Closing Date up to an aggregate maximum of
net $1,250,000 for all trade errors of all employees (after giving effect to the
actual contribution of the employee of the production unit to each error) shall
be considered an expense of the Business and included under clause (c) for
purposes of computing Net Income. For purposes of computing Net Income,
commission rebates offered to customers for error settlements shall be excluded.
1.18 Net Interest Income. "Net Interest Income" means the amount of
interest income retained by Purchaser after deduction for Purchaser's net cost
of capital to fund credit balances of the Business sufficient to maintain
Purchaser's "early warning" capital regulatory requirements for the Business
under applicable Law plus 1% ("Required Capital") and payment of interest to
customers of the Business and rebates under any Introducer Agreements. For
purposes of the calculation of interest income, interest on customer funds and
on the amount of Required Capital, will accrue on a daily basis at the
Purchaser's actual, daily, average rate of return on Purchaser's total
investments. For purposes of calculating the cost of capital, the cost will be
calculated by applying the Purchaser's internal borrowing rate, which is
currently the daily equivalent of the Chase Manhattan Bank 30 Day LIBOR plus 3/8
percent to the daily Required Capital amount.
1.19 New Employees. "New Employees" means those Seller Employees who are
offered employment by Purchaser pursuant to Section 3.4 and commence such
employment with Purchaser.
1.20 NFA. "NFA" means the National Futures Association.
1.21 NFA Rules. "NFA Rules" means the rules and regulations promulgated by
the NFA.
1.22 Index Accounts. "Index Accounts" means those Customer Accounts of the
Index Division and any futures and futures options accounts opened after the
Closing Date by New Employees of the Index Division or by employees recruited by
New Employees and forming part of a production unit of the Index Division or
such accounts introduced by Seller or its Affiliates.
3
<PAGE>
1.23 Index Division. "Index Division" means each of those individual
production units and non-salesmen introduced business of the Business and house
business described in Schedule 1.23.
1.24 Permitted Liens. "Permitted Liens" means (a) Liens for taxes not
yet due or for which there is a reserve on Seller's most recent audited
financial statements, (b) imperfections of title or encumbrances that do not
interfere with the ability of the Seller to conduct its business as currently
conducted or materially interfere with its ability to transfer the Purchased
Assets, (c) mechanics', carriers', workmen's, repairmen's and similar Liens, (d)
pledges and deposits and other Liens made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other such
social security laws or regulations, and (e) any other immaterial Liens.
1.25 Person. "Person" means any natural person, corporation, partnership,
trust, joint venture, association or other legal or business entity.
1.26 Purchase Price. "Purchase Price" means the Purchase Price set forth
in Section 3.2.
1.27 Production Expenses. "Production Expenses" means all expenses and
overhead incurred specifically for the benefit of the Index Division or to the
Jack Carl Division, excluding G and A Charge, trading errors (except as set
forth in section 1.17), debits, deficits, lawsuits and related costs, automation
charges and rent, except that rent for the La Jolla, California space is
considered a Production Expense. Additionally, rent as may be required in the
future, should the Business expand and related space requirements increase,
would be included as a Production Expense at the Purchaser's actual square foot
rate specifically allocable to that space. During the Transition Period,
Production Expenses will also include salary, benefits and commissions paid to
employees of the Seller providing support services, allocable rent at 200 West
Adams Street, Chicago, Illinois, termination costs and such other costs incurred
pursuant to Section 4 during the Transition Period excluding automation, upgrade
and moving costs.
1.28 Jack Carl Accounts. "Jack Carl Accounts" means those Customer
Accounts of the Jack Carl Division and any futures and futures options accounts
opened after the Closing Date by any employee of the Jack Carl Division.
1.29 Jack Carl Division. "Jack Carl Division" means the retail discount
brokerage operations and the La Jolla, California operations (which in addition
to retail discount brokerage offers and sells managed futures programs and
investment products) portions of the Business conducted under the name "Jack
Carl Futures Discount Division".
1.30 Seller Employees. "Seller Employees" means all current and former
employees of Seller as of the Closing Date.
1.31 Transition Period. "Transition Period" means a period of up to six
months from the month-end in which the Closing occurs.
4
<PAGE>
SECTION 2. PURCHASE AND SALE OF THE ASSETS
2.1 (a) Property to be Acquired from Seller. At the Closing, subject to
Section 2.1(b) and the other terms and conditions set forth in this Agreement
and on the basis of and in reliance upon the representations, warranties,
covenants, obligations and agreements set forth in this Agreement, Seller shall
sell, convey, transfer, assign and deliver to Purchaser, and Purchaser shall
purchase from Seller, the following items (collectively, the "Purchaser
Assets"):
(i) Customer Accounts. Those certain customer accounts carried on the
books of Seller which are set forth or identified on Schedule 2.1(a)(i) and
all rights in such list of customers plus those certain customer accounts
opened on the books of Seller from the date hereof until the close of
business on the Closing Date ("Customer Accounts");
(ii) Customer Agreements. Those certain agreements, arrangements,
understandings and commitments entered into by Seller with respect to
Customer Accounts, including those for which Seller provides execution only
services, together with all ancillary agreements, notices, risk disclosure
statements, account opening forms and powers-of-attorney ("Customer
Agreements");
(iii) Introducer Agreements. Those certain agreements, arrangements,
understandings and commitments of Seller and those Affiliates described in
Schedule 2.1(a)(iii) (the "Introducer Agreements");
(iv) Real Property Leases. Those real property leases of Seller for
office space at 1020 Prospect Street, La Jolla, California, 30 South Wacker
Drive, Chicago, Illinois and 14 Wall Street, New York, New York in the
forms previously delivered by Seller to Purchaser (the "Leases");
(v) Intellectual Property. The intellectual property of Seller and
those Affiliates described in Schedule 2.1(a)(v) (the "Intellectual
Property");
(vi) Other Assets. Those other assets of Seller and those Affiliates
described in Schedule 2.1(a)(vi), or otherwise identified by the Parties at
or prior to the Closing ("Other Assets"). Seller and Purchaser shall use
their best efforts to identify such additional assets as may be necessary
for the Business. Seller shall transfer such assets at Closing for payment
at an agreed price.
Notwithstanding the foregoing, Seller shall only retain such rights in the
Customer Agreements, Introducer Agreements, the Leases and Other Assets
identified as contracts (collectively, the "Assigned Contracts") as are
necessary to enable Seller to enforce the terms and provisions of such Assigned
Contracts with respect to transactions and events occurring on or prior to the
Closing Date, including, without limitation, claims by and against any Customer
Account or the
5
<PAGE>
collection of any debit balance in any Customer Account prior to the Closing
Date (the "Retained Rights").
(b) Notwithstanding any other provision of this Agreement but subject to
Section 3.5, Seller shall not be obligated to convey, transfer, assign or
deliver to Purchaser and Purchaser shall not be obligated to purchase from
Seller, any Customer Account (each, a "Retained Customer Account") (or any
Customer Agreement with respect to such Retained Customer Account, each a
"Retained Customer Agreement") which Purchaser identifies as such by notice to
Seller pursuant to the following sentence. At or prior to the Transfer Time,
Purchaser shall have the right to designate any Customer Account as a Retained
Customer Account by providing Seller with written notice specifying (by account
number or other specification sufficient to reasonably identify such Customer
Account) that such Customer Account is a Retained Customer Account. In
connection with designating any account as a Retained Customer Account,
Purchaser undertakes to consider such account consistent with industry standards
for comparable customers and Purchaser's customary policies, practices and
procedures (including with respect to creditworthiness and financial expertise).
2.2 Liabilities. Except as specifically and expressly set forth in this
Agreement, Purchaser neither assumes nor agrees to pay any debt, obligation or
other Liability of Seller or any Affiliate of Seller whether or not related to
the Purchased Assets. Purchaser shall assume the obligations of Seller to
perform Seller's obligations pursuant to the Assigned Contracts (excluding
any obligations arising from or relating to any default under any Assigned
Contract by Seller or any Affiliate of Seller or arising out of any state of
facts with respect to such Assigned Contract existing on or prior to the Closing
Date) to the extent, but only to the extent, that by the terms of such Assigned
Contracts, such performance is required after the Closing Date; provided
however, that (i) Purchaser shall have no liability or obligation to perform
under an Assigned Contract unless all of Seller's rights thereunder shall have
been fully and effectively assigned to Purchaser (subject to Retained Rights)
and (ii) Purchaser shall not be deemed to have assumed or undertaken to perform,
any Liability under any Assigned Contract which is terminated or expires prior
to the Closing Date; provided, that Purchaser shall not have any Liability under
any Assigned Contract which is terminated, superseded or replaced, except for
Liabilities arising out of events occurring during the period from the Closing
Date until the effectiveness of such termination, suppression or replacement
and, provided further, that if Purchaser and another party to an Assigned
Contract modify the terms of such Assigned Contract, Purchaser's Liability under
this Agreement with respect to such Assigned Contract shall be deemed to be
modified accordingly. Prior to the Closing Date, Seller shall provide notice of
the transfer of Customer Accounts as contemplated by Section 3.1(b)(i); and in
the event that any owner of a Customer Account shall object to the transfer of
such Customer Account and/or cause such Customer Account to be transferred to a
Person other than Purchaser, neither such Customer Account nor the related
Customer Agreements shall be deemed to be assigned to or assumed by Purchaser
and Purchaser shall have no Liability with respect thereto. Any unsecured debit
balance or deficit in any Customer Account transferred to Purchaser on the
Closing Date (including any such debit balance or deficit arising from trading
conducted on the Closing Date) shall be the responsibility of Seller and shall
be paid by Seller to Purchaser within five Business Days of the Closing Date
6
<PAGE>
unless satisfied by the Customer prior thereto or unless such debit balance or
deficit can be offset against a credit balance in an account maintained at
Purchaser.
2.3 Liabilities Expressly Not Assumed. Without limiting the generality of
Section 2.2, Purchaser shall not assume or be obligated for any Liability,
including without limitation, in respect of:
(a) any Liability of Seller, any Affiliate of Seller or the Business for
taxes, including federal, state, local and foreign income, franchise, payroll,
unemployment, social security, sales, property and gross receipt taxes whether
resulting from carrying on the Business in the usual and ordinary course, the
consummation of the transactions contemplated by this Agreement or otherwise;
(b) any Liability of Seller or its Affiliates for any interest, fines,
penalties or refunds required to be made as a result of any failure of Seller to
comply with Law;
(c) any Liability of Seller or its Affiliates under any contract,
agreement, arrangement, understanding, lease, commitment or undertaking, except
as expressly set forth in Section 2.2;
(d) any Liability of Seller or its Affiliates for accounts payable or
accrued expenses;
(e) any Liability of Seller or its Affiliates to any employee of Seller or
its Affiliates or under any Employee Plan of Seller or its Affiliates or to
which Seller or its Affiliates are subject; or
(f) any Liability of Seller or its Affiliates for any services performed or
sold by Seller or its Affiliates, or any Liability for any acts or omissions of
Seller or its Affiliates, whether accrued, contingent, absolute, existing or
disclosed to Purchaser, irrespective of whether any such Liability may have been
incurred with respect to the Purchased Assets or any part thereof, or may exist
independently of the Purchased Assets.
2.4 Payments. All payments to be made hereunder by any Party shall be
made in United States dollars by means of wire transfer into an account as and
where designated by the Party to whom such payment is to be made.
2.5 Other Payments. Seller shall use its best efforts to cause itself and
its Affiliates to effect a transfer as soon as practicable following the Closing
of all trailing commissions and any other continuing income streams relating to
the Business.
7
<PAGE>
SECTION 3. CLOSING TRANSACTIONS.
3.1 Sale and Purchase of the Business.
(a) The Closing shall occur at 2:00 p.m. (the "Transfer Time") on the
Closing Date which shall be June 30, 1996. In the event the Parties shall be
unable, or unwilling due to market conditions, to close on June 30, 1996, the
Parties shall cooperate and use their best efforts to close as soon as
practicable thereafter. For all purposes of this Agreement, the Transfer Time on
the Closing Date shall be deemed to be the effective time of the transactions
and transfers contemplated by this Section 3 even though such transactions and
transfers may not be fully consummated and effected until a date or dates
following the Closing Date.
(b) In connection with the Closing and on the Closing Date, Purchaser and
Seller shall take the following actions and effect the following transfers:
(i) Promptly following the execution and delivery of this Agreement,
Seller shall deliver notice required under CFTC Regulation Section 1.65 to
each owner of a Customer Account and each Person possessing discretionary
authority over a Customer Account in a form satisfactory to the Parties.
Any Customer Account opened by Seller at or following the posting of this
notice shall also be sent this notice.
(ii) At or prior to the Transfer Time, each Party shall deliver to the
other Party the documents contemplated by Sections 10 and 11 of this
Agreement.
(iii) At the Transfer Time, Seller shall transfer the Customer
Accounts to the Purchaser and Seller shall transfer to Purchaser by means
of transfer trades all positions in the Customer Accounts which are open on
the Closing Date and all cash, securities and other property and collateral
which is on deposit with Seller in or with respect to such Customer
Accounts on such date of transfer (collectively "Property"); provided,
however, that the Parties acknowledge that the process of transferring all
Customer Accounts is not anticipated to be completed until after the close
of business on the Closing Date and that transfers of certain Property may
be delayed. Purchaser shall not reject to clear any transaction in any
Customer Account transferred by Seller at the Transfer Time, except with
respect to transactions in Retained Customer Accounts. In the event that
any Property cannot be transferred on the Closing Date, such Property shall
be transferred as promptly as practicable thereafter. In the event Seller
receives transfers of any additional Property relating to such Customer
Accounts, Seller shall use its best efforts to transfer, upon receipt, such
Property to Purchaser for deposit in the applicable Customer Accounts by a
mutually acceptable procedure. In the event Seller transfers more Property
than should have been transferred, Purchaser shall return the same as soon
as practicable after receipt from Seller of a calculation demonstrating to
Purchaser's reasonable satisfaction the reason for and amount of such
excess. Each Customer Account that is an account maintained and serviced by
the United Kingdom production unit of the Index Division shall be
transferred to E.D. & F. Man International Limited in accordance with the
terms of this Section 3.1(b)(iii) and applicable Law.
8
<PAGE>
(iv) At the Transfer Time, Seller shall transfer the applicable
governmental registrations and self-regulatory memberships of the New Employees
from Seller to Purchaser, either by means of a bulk transfer or otherwise, and
Purchaser shall effectuate and assume such transfers, and provided, that in the
event that any such registrations and memberships cannot be transferred at the
Transfer Time on the Closing Date, Seller shall transfer such registrations and
memberships as promptly as practicable thereafter.
(v) At the Transfer Time, Seller shall effect an assignment to Purchaser of
all of Seller's rights (other than Retained Rights) and interests under and in
the Assigned Contracts. In connection with effectuating said assignment of the
Assigned Contracts Purchaser and Seller agree to execute and deliver one or more
assignments in mutually satisfactory form. To the extent any Assigned Contract
requires the consent of a third party, at the Transfer Time, Seller shall
deliver to Purchaser evidence of consent to such assignment. At the Transfer
Time, Seller shall deliver to Purchaser a bill of sale in mutually satisfactory
form for Purchased Assets sold to Purchaser.
(vi) At the Transfer Time, Seller shall deliver to Purchaser the originals
of the Customer Agreements, (the originals of which will remain in Chicago) the
Introducer Agreements, the Intellectual Property, the Leases, employee
registration files, lead lists and all other books and records required in the
operation of the Business and, upon request, such other material relating to the
Business.
(vii) At the Transfer Time and at the opening of business the next Business
Day, Seller shall deliver to Purchaser a list of those Customer Accounts opened
by Seller which are not listed as part of Schedule 2.1(a)(i).
(viii) At the Transfer Time or as soon as practicable thereafter, Seller
shall use its best efforts to transfer any booth leases on any exchange
identified by Purchaser and Seller.
(ix) On the Closing Date or as soon as practicable thereafter, Seller shall
deliver to Purchaser a true and complete equity run for all Customer Accounts
transferred to Purchaser, which shall include all trading through the close of
business on the Closing Date and shall identify any undermargined account
(determined by reference to all cash, securities and other equity and positions
held in or for such account). Seller shall be liable to Purchaser for the amount
due on such undermargined accounts to the extent not paid when due by customer
provided that any liability of Seller on an undermargined account shall be
reduced by the amount which Seller would have realized upon an orderly
liquidation of such account at the opening on the next trading day; provided,
however, if Seller notifies Purchaser to liquidate any account prior to such
opening, Purchaser shall use its best efforts to liquidate such account in the
first available market prior to the opening on the next trading day.
3.2 The Purchase Price. The Purchase Price for the Business shall be an
amount equal to a percentage of the Net Income earned by the Jack Carl Division
and the Index Division (the "Applicable Percentage") as follows:
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Time Period Applicable Percentage
First 30 Months 40%
Next 12 Months 30%
Next 24 Months 20%
Any partial month in the time period will be prorated accordingly. The Purchase
Price will be subject to an aggregate cap of $50,000,000. Purchaser acknowledges
that a portion of the Purchase Price will be paid by Seller to Lee S. Casty as
payment for providing a non-compete agreement.
3.3 Payment of Purchase Price. The payments due from Purchaser to Seller under
Section 3.2 shall be computed each calendar quarter with 75% of the amount
realized by Purchaser payable to Seller no later than 30 days after the end of
each calendar quarter to which the payment relates. The balance owed Seller for
the calendar year shall be paid no later than February 28 of the following year
(the "Year-end Payment"). Each payment hereunder shall be accompanied by a
written report prepared by Purchaser setting forth the computation and
supporting documentation in sufficient detail to permit Seller to verify the
accuracy of the payment. Such supporting documentation shall include, but not be
limited to a system-generated report of commission income generated by each
customer, copies of salesmen rebate calculations, daily balances and rates for
interest income and expense and detail of all G and A Charges and Production
Expenses by category and production unit. Seller shall have 30 days from the
delivery of the Year-end Payment and associated written report to object to the
amount of any payment for the prior year at which time it will become final and
binding on the Parties provided, that during such 30 day period Seller shall
have the right to audit and verify the Year-end Payment and any quarterly
payment computation. Discrepancies identified during such 30 day period shall
remain open until resolved to the satisfaction of both Parties.
3.4 Employment of New Employees. From and after the date of this Agreement,
Purchaser in its sole discretion may offer to employ effective on the Closing
Date those of Seller Employees which it deems necessary or desirable pursuant to
Purchaser's normal employment practices, policies and procedures. The parties
acknowledge that Purchaser's benefit programs may not be comparable to Seller's
benefit programs.
3.5 Payments for Certain Terminated Customer Accounts. Seller has provided
Purchaser with a listing of its ten largest (by gross commission revenue over
the four full calendar months ending April 30, 1996) non-local, Index Division
customers which customers have been accepted by Purchaser as part of this
transaction and the current and future customers of the La Jolla, California
office currently included in the Jack Carl Division (each an "Accepted
Customer"). In the event Purchaser determines to terminate its relationship with
any Accepted Customer for any reason other than a materially adverse change in
the financial condition or credit risk of the Accepted Customer, substantial
compliance problems or breach by the Accepted Customer of its customer agreement
with Purchaser, Purchaser shall notify Seller of such termination and Purchaser
shall include as part of the calculation of Net Income at each payment date
under Section 3.3 an amount equal to the average quarterly Net Income
attributable to such Accepted Customer during the last full calendar quarter
preceding such termination except that
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the G and A Charge shall be $2.00 per round-turn if such termination occurs
during the nine month period following the Closing Date and Net Commissions and
Production Expenses shall be based on Seller's results during the quarter ended
June 30, 1996, if termination occurs during the first quarter following the
Closing Date. In the event Seller establishes that Purchaser through its actions
intentionally (other than actions taken with respect to customers generally or
taken in the ordinary course of business) caused an Accepted Customer to
terminate its relationship with the Business, Purchaser shall pay a liquidated
settlement of an additional $1.00 per round-turn.
3.6 Payments for Disposition or Cessation of the Jack Carl Division. (a)
Purchaser agrees not to dispose of or shut down the Jack Carl Division for a
period of 18 months following the Closing Date (the "Restricted Period"). If
Purchaser disposes of or shuts down the Jack Carl Division during the Restricted
Period, Seller shall be entitled to immediate payment upon such disposition or
shut down of an amount equal to the contribution to Net Income from the Jack
Carl Division during the greater of the preceding 12 full calendar months or the
period from the Closing Date to the shut down or disposition date, applied pro
rata in accordance with the then applicable Applicable Percentage to the period
remaining until the Final Payment Date, except that for purposes of this
calculation of the contribution to Net Income the G and A Charge shall be $2.00
per round-turn trade. If after the Restricted Period and prior to the Final
Payment Date, Purchaser elects to sell, convey or transfer the Jack Carl
Division, Seller shall be notified of the terms thereof and may elect to receive
from Purchaser within 30 days of such notice one of the following: (i) an amount
equal to 30.9% of the payments received from Purchaser arising from the
disposition of the Jack Carl Division; or (ii) an amount equal to the
contribution to Net Income from the Jack Carl Division turing the 12 full months
preceding the date of such disposition applied pro rata in accordance with the
then Applicable Percentage to the period remaining until the Final Payment Date;
or (iii) within 60 days of Seller's election, the Jack Carl Division and the
Jack Carl Accounts for a purchase price equal to the amount Purchaser will
receive on disposition less the amount payable to Seller pursuant to subsection
(ii) above.
(b) If after the Restricted Period and prior to the Final Payment Date,
Purchaser determines to close down the Jack Carl Division, Seller shall receive
payments for such period based on the contribution to Net Income from the Jack
Carl Division during the 12 full months preceding such date applied pro rata in
accordance with the then applicable Applicable Percentage to the period
remaining until the Final Payment Date, together with an assignment to Seller or
its designee reasonably acceptable to Purchaser of Purchaser's rights to the
Jack Carl Division and the Jack Carl Accounts.
(c) Notwithstanding Sections 3.6(a) or 3.6(b), until the Final Payment Date,
if any change in Law causes the Jack Carl Division to result in negative Net
Income of $50,000 or more for each of the three preceding months, or if at any
time following thc Restricted Period there is a negative Net Income of $50,000
or more for each of the three preceding months, and Purchaser elects to close
down the Jack Carl Division, then Seller's sole right under Section 3.6(a) and
(b) shall be an option for a 60 day period to take back the Jack Carl Division
without further Liability (excluding indemnification obligations arising prior
to the transfer back to Seller) from Purchaser ant at no further cost or charge
levied by Purchaser on Seller.
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(d) From the Closing Date until the Final Payment Date, neither Purchaser nor
any Affiliate of Purchaser shall engage, directly or indirectly as owner,
partner or controlling shareholder as defined by GAAP, or otherwise, within or
without the United States, in a business which directly competes with the Jack
Carl Division by soliciting individual retail customers for non-advisory futures
execution and clearing primarily through mass market media such as newspaper and
television advertising and operated similarly to the Jack Carl Division
("Competing Business"); provided that nothing contained herein shall otherwise
restrict or prohibit Purchaser or its Affiliates from conducting any business
presently conducted by any of them. Purchaser represents and warrants that it
does not currently operate a Competing Business. In the event that Purchaser
violates this Section 3.6(d), Seller's sole remedy for any violation shall be
the right to have the net income from such individual retail customers of such
business (calculated in a comparable manner as Net Income) included in Net
Income of the Jack Carl Division. Purchaser agrees that it will not utilize
leads maintained by the Jack Carl Division without providing mutually agreeable
compensation to the Jack Carl Division.
3.7 Payments for Terminated Employees. For a period commencing on the Closing
Date through the end of the Transition Period, Purchaser shall pay Seller
monthly an amount equal to 69.1% of the severance requirements as set forth in
Schedule 3.7 paid to Seller Employees employed solely in the Business on the
Closing Date and thereafter terminated by Seller during the Transition Period
and which do not become New Employees. Any termination costs associated with the
termination of an employee of Purchaser whose termination was based on
Purchaser's determination to fill the terminated employee's position with a
Seller Employee as well as those New Employees terminated by the Purchaser
during the Transition Period shall be as set forth in Schedule 3.7 and charged
30.9% to Seller.
SECTION 4. TRANSITION PERIOD.
4.1 Transition Period. During the Transition Period, Seller shall provide the
transition services set forth in this Section 4 and otherwise required or
necessary by Purchaser for use in operating the Business and Seller shall not
terminate any such services without confirming that Purchaser can replace such
services without interruption or adverse economic effect to the Business.
4.2 200 West Adams Street. During the Transition Period, Seller shall make
available to Purchaser office space at the offices of Seller at 200 West Adams
Street, Chicago, Illinois (the "Premises") as Purchaser may reasonably require
in connection with the transer of the Business during this period. Seller shall
obtain such authorizations and consents as may be required from the landlord of
the Premises to permit Purchaser's access to and use thereof. During the
Transition Period and thereafter, Seller shall remain fully responsible for the
Premises including with respect to any Liability under the Premises lease except
for any Liability caused by any act or any omission to act by Purchaser. During
the Transition Period and any period thereafter in which Purchaser occupies the
Premises, Purchaser shall reimburse Seller for that portion of the ordinary
costs of the Premises except for that portion of the costs allocable to French-
American Securities, Inc. After the transition period, if Seller does not have
a tenant willing to sublet the
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Premises at a total rent of $250,000 or more for a period of not less than one
year ("Suitable Tenant"), Purchaser may continue to so occupy the Premises after
the Transition Period on a month-by-month basis and shall vacate within 30 days
from the date of the notice if the Seller has a Suitable Tenant. If Seller
notifies Purchaser that it has a Suitable Tenant to occupy the Premises at the
end of the Transition Period, Purchaser shall vacate the premises within one
Business Day following the end of the Transition Period. If Purchaser fails to
vacate as provided in either of the preceding sentences for any reason other
than Seller's failure to cooperate, Purchaser shall pay Seller $250,000 as
liquidated damages in addition to all costs of the Premises. If Purchaser
occupies the Premises for six months beyond the Transition Period, Purchaser
shall thereafter become fully liable under the lease for the Premises.
4.3 Services by Seller Employees. During the Transition Period, Seller
shall make available to Purchaser the services of such Seller Employees as
Purchaser may reasonably require in connection with the transfer of the Business
during this period. Purchaser shall have the right but not the obligation to
offer employment to any Seller Employee during the Transition Period upon
consultation with Seller. During the Transition Period, Seller agrees to use its
best effort to maintain a sufficient number of appropriately skilled Seller
Employees for use by Purchaser in order to effect a smooth transition of the
Business from Seller to Purchaser.
4.4 Use of Systems. During the Transition Period, Seller shall use its
best efforts to make available to Purchaser such systems including telephone
lines, telephone systems, computer systems and general ledger systems as
Purchaser may reasonably require in connection with the transfer of the
Business. Seller shall use its best efforts to obtain such authorization and
consents as may be required by the owner or licensor of any such system to
permit Purchaser's use thereof.
4.5 Payment for Transition Services Costs. Seller shall charge Purchaser
for the transition period costs under this Section 4 on a cost pass through
basis and the Premises costs as described in Section 4.2. Seller shall invoice
Purchaser monthly for its costs under this Section 4 and provide appropriate
backup documentation in order that Purchaser may verify such invoice. Purchaser
has right to audit/verify costs.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF SELLER.
Seller hereby represents and warrants to Purchaser and agrees as follows:
5.1 Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power and authority to own its properties and to conduct
the business presently being conducted by it (including the Business), to enter
into and perform its obligations under this Agreement and to transfer the
Purchased Assets to be transferred by Seller as contemplated hereby. Seller is
duly qualified or licensed to do business as a foreign corporation in every
jurisdiction in which it conducts its business and is required to be so
qualified or licensed.
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5.2 Authority. The execution and delivery of this Agreement by Seller and
the consummation by Seller of the transactions contemplated hereby have been
duly authorized by all necessary corporate actions. This Agreement has been duly
executed and delivered on behalf of Seller and constitutes a valid and binding
obligation of Seller, enforceable in accordance with its terms. Seller has, all
licenses, registrations, permits, approvals, consents, and has met all capital
requirements, necessary for the consummation of the transactions herein.
5.3 Absence of Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation of, or a default under, or conflict with, any term or
provision of the certificate of incorporation or by-laws of Seller, or, any
contract, commitment, indenture, lease or other agreement to which Seller is a
party or by which Seller or any of the Purchased Assets is bound, or any order,
writ, injunction, decree or judgment of any court or governmental agency or
entity to which Seller is a party or by which Seller or any of the Purchased
Assets is bound or any statute, rule or regulation to which Seller or any of the
Purchased Assets is subject.
5.4 Assets. (a) Seller currently owns, has legal right to use or the
benefit of, and as of the Closing will own, have legal right to use or the
benefit of, all of the Purchased Assets then being sold, transferred, assigned
or delivered by Seller and the sale, transfer, assignment or delivery thereof to
Purchaser will convey to Purchaser good and marketable title thereto, free and
clear of all restrictions or conditions to transfer or assignment and free and
clear of all Liens, except for Permitted Liens. Except for any consent delivered
at or prior to Closing, no consent of any Person is required in order to effect
the sale, transfer, assignment or delivery of the Purchased Assets (including
any of the Assigned Contracts) by Seller to Purchaser as herein provided, and
the transactions contemplated hereby will not result in the termination, breach
or default of any of the terms or provisions of, or imposition of any Lien upon
any of the Purchased Assets pursuant to the terms of any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which Seller
is a party or by which Seller or any of the Purchased Assets is bound or to
which any of the property or assets of Seller or any of the Purchased Assets is
subject.
(b) Seller enjoys quiet possession under all Leases, and all of such
Leases are valid, subsisting and in full force and effect.
(c) Seller will convey its rights in the Intellectual Property at Closing.
Except as set forth in Schedule 5.7, to the best of Seller's knowledge, the use
of the Intellectual Property by Seller does not infringe on the intellectual
property rights of any other Person. To the best of Seller's knowledge, there
are no limitations or prohibitions on the current use by Seller of the
Intellectual Property that interfere with the ability of Seller using such
Intellectual Property to conduct the Business as presently conducted. No claims
are pending or to the best of Seller's knowledge threatened against Seller or
any of its Affiliates for infringement of the intellectual property rights of
any other Person. Except as set forth in Schedule 5.7, to the best of Seller's
knowledge, no Person is challenging or infringing upon Seller's right to use the
Intellectual Property as presently being used. Except as set forth in Schedule
5.7, Seller has not granted any Person any rights or licenses to use the
Intellectual Property. Seller agrees to pursue any pending
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action listed in Schedule 5.7 relating to the protection and enforcement of The
Stark Report up to a cap of $10,000 of legal fees and expenses subsequent to
Closing.
(d) The Seller owns or has the right to use all hardware, software and
databases used in the Business which constitute Purchased Assets. Seller either
(i) owns free and clear of all Liens other than Permitted Liens the Intellectual
Property interests in such hardware, software and databases or (ii) has such
rights in those interests as are adequate and necessary to conduct the Business
and will at Closing convey such rights.
(e) Seller has performed maintenance in the ordinary course on the
machinery, computer equipment, other equipment and other tangible physical
assets included in the Purchased Assets and such machinery, equipment and assets
are being used or are useful in the Business at its present level of activity
and are in good operating condition sufficient to conduct the business as now
being conducted.
5.5 Customer Accounts. (a) The Customer Accounts transferred to Purchaser
by Seller on and after the Closing Date shall be fully segregated and properly
margined or, if undermargined, subject to a margin call as of the Transfer Time
and as of the actual time of any such transfer. Seller has received and has in
its files an acknowledgment of receipt of the standard risk disclosure
statements executed by the customer for each Customer Account for which such
risk disclosure statements are required by applicable Law together with properly
completed and executed Customer Agreements and related new account
documentation.
(b) Schedule 5.5(b) hereto contains a complete and accurate list showing
the banks at which Property with respect to Customer Accounts is maintained
and the account and account numbers at such banks.
(c) Schedule 5.5(c) hereto contains a complete and accurate list of all
Customer Accounts as to which a Person other than the customer possesses
discretionary authority.
5.6 Compliance with Laws. To the best of Seller's knowledge, there exists
no noncompliance or alleged noncompliance with applicable Law (including, but
not limited to, the CE Act, CFTC Regulations and NFA Rules), relating to the
Purchased Assets which will have a material adverse effect on the continued
operation of the Business and Seller has not received notice written or
otherwise of any alleged violation of or noncompliance with any Law.
5.7 Litigation. Except as set forth in Schedule 5.7, there is no action,
lawsuit, claim, proceeding, or investigation pending or, to the knowledge of
Seller, threatened against or, affecting Seller or the Purchased Assets or any
part thereof or against or affecting the transactions contemplated by this
Agreement in any court, or before any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, exchange, board of trade, contract market or other
regulatory organization, self-regulatory organization or before any arbitrator
of any kind, nor has Seller received any notice written or otherwise of threat
of any such action, lawsuit, claim, proceeding or investigation which would have
a material adverse effect on Seller or the Business. Neither Seller nor any of
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the Purchased Assets is subject to or bound by any judgment, order, writ,
injunction or decree of any Federal, state, local or foreign court, department,
commission, bureau, agency, instrumentality, board of trade, exchange or
contract market affecting this Agreement or the transactions contemplated
hereunder.
5.8 Contracts. (a) Except for leases for office facilities and equipment
which are not included in the Purchased Assets and arrangements for compensating
salesmen and commitments to media vendors, there are no contracts, agreements,
arrangements, understandings, leases, commitments, undertakings or instruments
relating to the Purchased Assets or requiring the performance of any obligations
after the date hereof with respect to the Purchased Assets, other than the
Assigned Contracts as defined in Section 2.1(a).
(b) Except for the Introducer Agreements (which are set forth on Schedule
2.1(a)(iii)), Leases and Other Assets identified as contracts (which are set
forth in Schedule 2.1(a)(vi)) and except as set forth and described in Schedule
5.8(b)(i), (i) each of the Assigned Contracts is in Seller's standard forms as
in effect from time to time (as set forth in Schedule 5.8(b)(ii)) and has not
been modified; (ii) with respect to those Assigned Contracts which are not
in Seller's standard forms or which have been modified from such standard form,
each such Assigned Contract will, by its terms, after the Closing, be terminable
by Purchaser without prior notice, cause or penalty; (iii) each Assigned
Contract has been entered into in the ordinary course of the Business; (iv) no
event of default or event which, with the passage of time or the giving of
notice or both, would constitute a material event of default has occurred and is
continuing under any Assigned Contract; (v) no Accepted Customer has notified
Seller of its intent to discontinue or materially decrease its activities
pursuant to its Customer Agreement or otherwise with Seller; and (vi) to the
best of Seller's knowledge, Seller has conducted all business and transactions
with each of its customers in accordance with applicable Law, the violation of
which would result in a material adverse affect on the Seller or the Business.
(c) Any Assigned Contracts assigned pursuant to Section 2.1 will, when
assigned as contemplated in such Section 2.1, convey to Purchaser all of
Seller's rights in relation thereto, except Retained Rights. To the best of
Seller's knowledge, Seller has complied with all Laws relating to the Assigned
Contracts, the violation of which would result in a material adverse affect on
the Seller or the Business.
(d) Seller has performed to the best of its knowledge, all of its material
obligations under each Assigned Contract required to have been performed by it
on or prior to the date hereof. Seller has not received any notice of default,
nor is Seller in default, nor does Seller believe or have reason to believe
that any condition exists which with notice or lapse of time, or both, would
render Seller in default under any such Assigned Contracts. To the best of
Seller's knowledge, the other parties to such Assigned Contracts are in
compliance with the terms and conditions thereof, the violation of which would
result in a material adverse affect on the Seller or the Business.
(e) To the best of Seller's knowledge, no introducer with which Seller does
business has failed to conduct its business in accordance with applicable Law.
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5.9 Financial Statements. (a) Seller has provided to Purchaser with its
parent's financial statements on Form 10-K and Form 1-FR of Seller for the
period ended June 30, 1994 and June 30, 1995, all Forms 10-Q of Seller's parent
produced thereafter along with the financial statements included therein and
consolidating financial statements of Seller for the same period (the "Financial
Statements"). Except for such adjustments as may be required to be made at year-
end as part of the audit of the Financial Statements, each Financial Statement
presents fairly the consolidated financial position of Seller and its parent and
the consolidating position of Seller as at the last date of the period to which
such Financial Statement relates and the consolidated results of operations,
cash flows and changes in financial position for such period and was prepared in
accordance with GAAP consistently applied and include appropriate disclosure
with regard to commitments and contingent liabilities in accordance with GAAP,
and is in accordance with the books and records maintained by Seller.
5.10 Accuracy of Information. The Financial Statements and such other
material delivered to Purchaser in connection with its evaluation of the
Business has been derived from Seller's books and records and are true and
complete in all material respects. Seller has no knowledge of any material
inaccuracy or omission of a material fact in the Financial Statements or such
other material delivered to Purchaser in connection with its evaluation of the
Business.
5.11 Employee Plans, Contracts and Employees. There are no collective
bargaining or other labor union contracts applicable to the Business. The only
Employee Plan related to the Business under which Seller Employees or other
Persons employed by Seller in connection with the Business may be covered or
entitled to receive benefits is Seller's 401(k) Plan. To the best of Seller's
knowledge, such Plan has been administered in all material respects in
accordance with its provisions and with applicable Law, including ERISA. Except
as set forth on Schedule 5.11(a), no Seller Employee is a party to any
employment agreement with Seller. All Seller Employees who are subject to
registration requirements are properly registered with the NFA and, to the best
of Seller's knowledge, have not engaged in conduct or committed acts which would
constitute a statutory disqualification from registration within the meaning of
Section 8a of the CE Act. Except as provided in Schedule 5.11(b), Seller has not
issued or used any employee handbook, policies or procedures. Schedule 5.11(b)
contains the complete description of severance policies of Seller with respect
to Seller Employees and no other severance agreements or understandings with any
Seller Employee exist.
5.12 No Material Adverse Change. Since January 1, 1996 to the date
hereof, there has not been any material adverse change in the businesses of
Seller, or the Business or the financial condition, the results of operations or
otherwise of any of the foregoing.
5.13 Disclosure. (a) To the best of Seller's knowledge after due inquiry,
no representation or warranty of Seller in this Agreement including the
schedules and exhibits to this Agreement, the Financial Statements or such other
material referenced in Section 5.10 contains any untrue statement of material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements made
herein or therein not misleading.
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(b) Seller has furnished or caused to be furnished to Purchaser complete
and correct copies of all agreements, instruments and documents referred to on
each of the Schedules hereto or otherwise required to be provided to Purchaser
pursuant to the terms of this Agreement. Each of the schedules hereto is
complete and correct in all material respects, to the best of Seller's
knowledge.
5.14 No Finder. Other than with respect to Lee S. Casty, Seller has not,
directly or indirectly, become obligated to pay any fee or commission to, or
dealt with or through, any advisor, broker, finder or intermediary for or on
account of the transactions provided for in this Agreement.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER
Purchaser hereby represents and warrants to Seller and agrees as follows:
6.1 Organization of Purchaser. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to own its properties and conduct the business
presently being conducted by it.
6.2 Authority. The execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the transactions contemplated hereby have
been duly authorized by all necessary corporate actions. This Agreement has been
duly executed and delivered on behalf of Purchaser ant constitutes a valid and
binding obligation of Purchaser, enforceable in accordance with its terms.
Purchaser has all licenses, registrations, permits, approvals, consents, and has
met all capital requirements, necessary for the consummation of the transactions
herein.
6.3 Absence of Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation of, or a default under, or conflict with, any term or
provision of the certificate of incorporation or by-laws of Purchaser, or any
contract, commitment, indenture, lease or other agreement to which Purchaser is
a party or by which Purchaser is bound, or any order, writ, injunction, decree
or judgment of any court or governmental agency or entity, to which Purchaser is
a party or by which it is bound or, any statute, rule or regulation to which
Purchaser is subject.
6.4 Litigation. There is no action, lawsuit, claim, proceeding, or
investigation pending or, to the knowledge of Purchaser, threatened against or,
affecting Purchaser or affecting the transactions contemplated by this Agreement
in any court, or before any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, exchange, board of trade, contract market or other regulatory
organization, self-regulatory organization or before any arbitrator of any kind,
nor has Purchaser received any notice written or otherwise of threat of any such
action, lawsuit, claim, proceeding or investigation which would have a material
adverse effect on Purchaser. Purchaser is not subject
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to or bound by any judgment, order, writ, injunction or decree of any Federal,
state, local or foreign court, department, commission, bureau, agency,
instrumentality, board of trade, exchange or contract market affecting this
Agreement or the transaction contemplated hereunder.
6.5 Financial Statements. Purchaser has provided to Seller Purchaser's
audited financial statements for the periods ended March 31, 1995 and March 31,
1994 and the most recent FOCUS Report of Purchaser (the "Financial Statements").
Except for such adjustments as may be required to be made at year-end as part of
the audit of the Financial Statements, each Financial Statement presents fairly
the financial position of the Purchaser as at the last date of the period to
which such Financial Statement relates and the results of operations, cash flow
and changes in financial position for such period and was prepared in accordance
with GAAP consistently applied and include appropriate disclosure with regard to
commitments and contingent liabilities in accordance with GAAP, and is in
accordance with the books and records maintained by Purchaser.
6.6 Accuracy of Information. The Financial Statements and such other
material delivered to Seller in connection with its evaluation of Purchaser has
been derived from Purchaser's books and records and are true and complete in all
material respects. Purchaser has no knowledge of any material inaccuracy or
omission of material fact in the Financial Statements or such other material
delivered to Purchaser in connection with its evaluation of Purchaser.
6.7 No Material Adverse Change. Since January 1, 1996, to the date
hereof, there has not been any material adverse change in the businesses of
Purchaser, or the financial condition, the results of operations or otherwise of
Purchaser.
6.8 No Finder. Other than with respect to Brown Brothers Harriman & Co.,
Purchaser has not, directly or indirectly, become obligated to pay any fee or
commission to, or dealt with or through, any advisor, broker, finder or
intermediary for or on account of the transactions provided for in this
Agreement.
SECTION 7. ACTION PRIOR TO THE CLOSING DATE.
7.1 Regulatory Filings. As promptly as practicable after the date hereof,
each Party required to obtain any approval or make any filing, notification or
registration in connection with the consummation of the transactions
contemplated by this Agreement, shall make such filing, notification or
registration or seek such approval and the Parties shall use their best efforts
to furnish to the filing party as promptly as practicable any information
required in connection therewith. If any litigation or administrative proceeding
challenging the transactions contemplated by this Agreement shall have been
commenced prior to the Closing Date, all Parties shall vigorously defend such
litigation or proceeding and shall use their best efforts to dispose of the same
in a manner which will eliminate the challenge to such transactions consistent
with Section 3.1.
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7.2 Cooperation. Each of the Parties hereto shall refrain and cause its
respective Affiliates to refrain from voluntarily taking any action which would
(a) render any representation and/or warranty contained in Sections 5 or 6 of
this Agreement inaccurate as of the Closing Date, or (b) be inconsistent with
satisfaction of the requirements applicable to it as set forth in this
Agreement, and each shall promptly do and cause its respective Affiliates to do
all such acts and take all such measures as may be appropriate to enable it to
perform as early as practicable the obligations herein provided to be performed
by it. Seller will promptly notify Purchaser, and Purchaser will promptly notify
Seller, of all lawsuits, claims, proceedings and investigations that may be
threatened, brought, asserted or commenced involving the transactions
contemplated by this Agreement or which might have a material adverse impact on
the Business or the Purchased Assets.
7.3 Maintain Business as Going Concern. During the period from the date
hereof through the Closing Date, Seller shall use its best efforts to cause the
Business to continue to operate only in the usual, regular and ordinary manner
consistent with past practices, maintain in full force and effect all currently
existing contracts, leases and insurance coverage contracts, leases ant relating
to the Business, pay all obligations of the Business as they mature in the
ordinary course of business and use its best efforts to preserve the
organization and good will of the Business and relations with employees,
suppliers, customers and others who have business relations with Seller. Seller
shall not without Purchaser's prior written consent (a) dispose of any of the
Purchased Assets or incur any liabilities which will be Liabilities assumed by
Purchased following the Closing except as expressly provided in this Section 7.3
and in the ordinary course of business; (b) open any new accounts or enter into
any contract, agreement or transaction except in the ordinary course of
business, provided that Seller shall not open any Index Account during the two
Business Days preceding the Closing Date unless Purchaser shall have approved
such opening; (c) pay or provide for any bonus, stock option, stock purchase,
profit-sharing, deferred compensation, pension, retirement or other similar
payment or arrangement to or in respect of any officer, Seller Employee or agent
of Seller except pursuant to contractual arrangements existing on the date
hereof, or increase the compensation payable or to become payable to any of
Seller Employees or agents of Seller; (d) mortgage, pledge or subject to any
Lien, other than Permitted Liens, any of Seller's assets or properties (whether
tangible or intangible) which constitute Purchased Assets; (e) sell, assign,
transfer, convey, surrender, lease otherwise dispose of, or agree to sell,
assign, transfer, convey, lease or otherwise dispose of, any of the Purchased
Assets, other than for fair consideration in the ordinary course of business
consistent with the past practices of Seller and the Business; (f) make or
permit to be made any material amendment or termination of any Purchased Assets;
(g) enter into any collective bargaining agreement or, through negotiation (the
status of which will be regularly communicated to Purchaser) or otherwise, make
any commitment or incur any liability to any labor organization relating to
Seller Employees; (h) introduce any material change with respect to Seller's
operations; or (i) hire any new employees or terminate any Seller Employees
without Purchaser's consent.
7.4 Purchaser's Access to Information and Records Before Closing. Seller
shall give Purchaser, its employees, accountants and other representatives full
access throughout the period prior to the Closing Date, during normal business
hours and upon reasonable notice, to all of the
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Business assets, properties, books, contracts, commitments, customers and
records and furnish to Purchaser during such period all such information
concerning the Business as it may reasonably request. Representatives of
Purchaser shall be allowed, through and coordinated by Seller, to have
reasonable contact with Seller Employees and with past and present customers of
the Business, for the purpose of accomplishing an orderly transfer of the
Business to Purchaser on the Closing Date.
7.5 Other Business. Seller agrees to transfer all of its foreign exchange
business to an Affiliate of Purchaser designated by Purchaser which conducts
foreign exchange business. Revenues generated by such foreign exchange business
shall be included in the Net Income of the Index Division, net of salesmen
rebates and incremental expenses comparable to G and A Charges and Production
Expenses. Seller agrees to introduce all securities and other broker-dealer
related business to Purchaser pursuant to a mutually agreeable introducing
agreement to be executed prior to Closing Date by Seller and Purchaser.
SECTION 8 COOPERATION AFTER THE CLOSING.
8.1 Access to Records after Closing. Seller acknowledges that all
customer lists and records and other information included in the Purchased
Assets are proprietary and confidential information and that, on and after the
Closing Date, all such lists, records and information shall be the sole and
exclusive property of Purchaser. Seller and Purchaser shall preserve all records
relating to any of the Purchased Assets or to the transactions contemplated by
this Agreement for a period of at least five years from the Closing Date.
Subsequent to the Closing Date, if there is a legitimate purpose (including, but
not limited to, the preparation of tax reports and returns and Seller's or
Purchaser's need for information for the operation of their respective Employee
Plans) and not related to prospective competition by such Party with the other
Party or if there is an audit by the Internal Revenue Service, other
governmental inquiry, or litigation or prospective litigation to which Seller or
Purchaser is, or may become, a Party, making necessary Seller's access to the
records of Purchaser related to the Business or making necessary Purchaser's
access to records of Seller or its Affiliates related to the Purchased Assets,
each Party shall allow representatives of the other Party reasonable access to
such records during regular business hours at such Party's place of business for
the sole purpose of obtaining information for use as described herein and shall
permit such other Party to make copies of such reports as necessary subject to
reasonable assurances of confidentiality as such Party may reasonably deem
appropriate.
8.2 Conduct of Business. From and after the Closing Date, Seller will use
its best efforts to cause its employees and those of its Affiliates to cooperate
with and assist Purchaser in the orderly transfer of the Purchased Assets, and
Purchaser will use its best efforts to cause New Employees to cooperate with and
assist Seller in such transfer. Such assistance shall be required only in a
manner which does not unreasonably interfere with the performance by the
affected person of his or her then duties to his or her employer. Except as
otherwise provided in Section 4, there shall be no payment required of the
Person receiving such assistance except reimbursement of any out-of-pocket
travel expenses authorized in advance by Party required to make such
reimbursement incurred by the particular employee subject to receipt of itemized
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receipts and invoices evidencing such expenses. Purchaser agrees to provide the
Business with levels of service consistent with industry standards provided by
clearing firms servicing comparable customers of that division. Consistent with
industry standards for comparable customers and Purchaser's customary policies,
practices and procedures (including with respect to creditworthiness and
financial expertise), Purchaser shall have the right to terminate any Assigned
Contract at any time and, except as provided in Section 3.5, without notice or
obligation to Seller.
8.3 Non-Competition with Respect to the Business. (a) From the Closing
Date until the Final Payment Date, neither Seller nor any Affiliate of Seller
shall engage directly or indirectly as an owner, partner, shareholder or
otherwise, in the Business, or any business currently conducted by the
Business, within or without the United States, nor shall Seller nor any
Affiliate of Seller solicit any employees, customers, accounts of the Business
or business currently conducted by the Business, nor shall Seller nor any
Affiliate of Seller do any act intended to have or having any material adverse
effect on the Business or the businesses currently conducted by the Business.
In addition, Seller will not solicit any employees of Purchaser or its
Affiliates employed in a futures business. However, subject to this Section
8.3, Seller and its Affiliates may continue all non-futures commission merchant
business including cash commodities and exchange of futures for physicals
transactions, and, until the end of the Transition Period, Seller may continue
to service those Customer Accounts on its books immediately prior to the
Closing which accounts were not Purchased Assets. Seller may continue business
as a futures commission merchant which is restricted to proprietary trading and
does not clear, execute or introduce any customer business other than to
Purchaser.
(b) Notwithstanding the provisions of Section 8.3(a), Index FX Ltd. may
continue to conduct a foreign exchange business and incidental futures relating
thereto with its current and future customers provided that it shall offer any
futures related business to Purchaser prior to offering such business to any
other Person. Purchaser agrees that it will offer to service such business at
competitive rates and in the event that such client elects to do such business
with any other Person, Seller shall cause Index FX Ltd. to notify Purchaser of
such election and the terms at which such business is being offered to the
client. Net income (calculated in a comparable manner as Net Income) generated
by futures activities contemplated by Index FX Ltd. with any other Person shall
be included in Net Income of the Index Division, and paid to Purchaser at
Purchase Price Payment date. For purposes of this calculation, the amount of
salesmen rebates will be determined with reference to then current industry
standards. Seller shall provide Purchaser with supporting documentation in
sufficient detail to verify the accuracy of payment pursuant to the method
established in Section 3.3 for Seller's verification and objection to Purchase
Price Payments. Index FX Ltd. may solicit any former customers of the Business
upon their ceasing to be customers of the Business.
(c) By the end of the Transition Period Seller and its Affiliates shall
take all actions necessary to change their corporate and trade names following
the Closing Date and shall not use any name similar to that conveyed to
Purchaser hereunder.
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8.4 Enforcement; Interpretation. (a) Each of the Parties acknowledges and
agrees that breach of the provisions of Section 8.3 of this Agreement would
cause substantial and irreparable harm without readily measurable damages and
accordingly agrees that injunctive relief and/or specific performance of the
obligations or Seller and its Affiliates under such Section would be
appropriate in any such event. Such remedies shall be cumulative and in
addition to all other remedies which Purchaser may have under this Agreement.
(b) The covenants made pursuant to Section 8.3 shall be deemed to be
separate covenants in each of the jurisdictions in which such covenants are to
be enforced and in the event that any provision of such covenants shall be
deemed to be unenforceable under the Laws of any such jurisdiction, such
covenants shall, with respect to such jurisdiction, be deemed modified to the
extent necessary to cause such covenants to be enforceable.
SECTION 9. CLOSING.
9.1 The Closing. Subject to the fulfillment of the conditions precedent
specified in Sections 10 and 11 of this Agreement, the transactions
contemplated by this Agreement shall be consummated at the offices of Fishman &
Merrick, P.C. Chicago, Illinois on the Closing Date described herein or such
other place or places as the parties shall agree in writing.
9.2 Contractual Consents. (a) Without limiting Seller's representations
ant warranties pursuant to Section 5 to the extent that any Purchased Asset is
not capable of being sold, assigned, transferred or delivered without the
consent or waiver of any third Person (including a government or governmental
unit), or if such sale, assignment, transfer or delivery would constitute a
breach thereof or a violation of any Law, this Agreement shall not constitute a
sale, assignment, transfer or delivery thereof, or an attempted sale,
assignment, transfer or deliver thereof until such consent has been obtained or
such breach or violation waived or cured. As soon as practicable after
execution of this Agreement, the Parties shall use all reasonable efforts, and
each Party shall cooperate with the other, to obtain the consents and waivers
and to resolve any impediments to the sale, assignment, transfer or delivery
referred to above and to obtain any other consents and waivers necessary to
consummate the transactions contemplated by this Agreement; provided, however,
that (i) neither Party shall be obligated to make additional expenditures
(except for incidental administrative costs, legal fees and related expenses 1n
connection with its performance of its obligations hereunder) nor (ii) shall
Seller be obligated to incur any obligation as a secondary obligor or surety
with respect to any contract, agreement, lease or arrangement in order to
obtain any consent or waiver without Purchaser providing Seller with
indemnification for such obligation satisfactory to seller.
(b) To the extent that the consents and waivers referred to in Section
9.2(a) are not obtained by Seller and Purchaser, or until the impediments to
the sale, assignments, transfer or delivery referred to therein are resolved,
Seller shall, from and after the Closing Date, use all reasonable efforts, with
the costs of Seller dated thereto to be promptly reimbursed by Purchaser, to
(1) provide, at the request of Purchaser, to Purchaser the benefits of any
Purchased Asset referred to in Section 9.2(a), (ii) cooperate in any reasonable
and lawful arrangement
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requested by Purchaser and designed to provide such benefits to Purchaser,
without incurring any financial obligation to Purchaser and (iii) enforce, at
the request of Purchaser, for the account of Purchaser, any rights of Seller
arising from any Purchased Asset referred to in Section 9.2(a) against any third
Person (including a government or governmental unit) (including the right to
elect to terminate in accordance with the terms thereof upon the advice of
Purchaser).
SECTION 10. CONDITIONS PRECEDENT TO OBLIGATIONS OF
PURCHASER
The obligations of Purchaser under this Agreement with respect to the
transactions to be consummated at the Closing shall, at its option, be subject
to the satisfaction, on or prior to the Closing Date, of all of the following
additional conditions:
(a) Representations and Warranties Accurate. All representations and
warranties of Seller contained in this Agreement shall have been true when made
and, except with respect to Section 5.12, shall be true at the Closing Date as
if such representations and warranties were made at the Closing Date. Seller
shall furnish Purchaser an appropriate certificate, dated the Closing Date and
signed by the Chief Executive Officer and Chief Financial Officer of Seller to
such effect.
(b) Performance by Seller. Seller shall have performed and complied with
all agreements and conditions required by this Agreement to be performed and
complied with by it prior to or on the Closing Date and there shall have been
delivered to Purchaser an appropriate certificate to such effect, dated the
Closing Date and signed by the Chief Executive Officer and Chief Financial
Officer of Seller to such effect.
(c) Litigation. No Law shall have been enacted, entered or deemed
applicable by any domestic or foreign government or governmental or
administrative agency or court which would make any transaction contemplated by
this Agreement illegal. No complaint shall have been filed by any Person (other
than Purchaser or an Affiliate of Purchaser) and be pending which seeks to
enjoin the transactions contemplated by this Agreement, or to impose conditions
or restrictions upon the ability of Purchaser to utilize the Purchased Assets on
substantially the same basis as presently operated or to integrate such
Purchaser Assets into its own operations, or to require divestiture of all or
any part of the Purchased Assets, unless such complaint is dismissed,
withdrawn, set-aside or otherwise eliminated. No injunction, restraining order,
or other order of a court of competent jurisdiction shall be in effect which
restrains, prohibits, or invalidates the transactions contemplated by this
Agreement.
(d) Corporate Action. Certified copies of all resolutions duly adopted by
the directors of Seller and of Seller's parent in connection with the
transactions contemplated hereby shall have been furnished to purchaser prior to
the Closing Date and such resolutions shall be in full force and effect.
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(e) Corporate Documents. Purchaser shall have received a certificate of the
Secretary of Seller certifying the incumbency of officers and genuineness of
signatures of all officers of the Seller executing any document delivered by
Seller at the Closing and copies of the Certificate of Incorporation and By-Laws
of Seller certified to by the Secretary of Seller.
(f) Opinion of Counsel for Seller. Purchaser shall have received from
Fishman & Merrick, P.C. a written opinion dated the Closing Date in the form and
substance satisfactory to Purchaser.
(g) Delivery. Purchaser shall have received from Seller those items
specified in Section 3.1(b).
(h) Agreement of Seller's Parent. Purchaser shall have received the
agreement from Seller's parent in the form of Exhibit 10(h) hereto.
(i) Principal Shareholder Non-Compete. Purchaser shall have received the
non-compete agreement from Seller's parent's principal shareholder in the form
of Exhibit 10(i) hereto.
SECTION 11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller under this Agreement with respect to the
transactions to be consummated at the Closing shall, at its option, be subject
to the fulfillment on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties Accurate. All representations and
warranties of Purchaser contained in this Agreement shall have been true when
made and, except with respect to Section 6.7, shall be true at the Closing Date
as if such representations and warranties were made at the Closing Date.
Purchaser shall furnish Seller an appropriate certificate, dated the Closing
Date and signed by the President or a Vice President of Purchaser, as to such
effect.
(b) Performance by Purchaser. Purchaser shall have performed and complied
with all agreements and conditions required by this Agreement to be performed
and complied with by it prior to or on the Closing Date and there shall be
delivered to Seller an appropriate certificate to such effect, dated the Closing
Date and signed by the President or a Vice President of Purchaser.
(c) Opinion of Counsel for Purchaser. Seller shall have received from Gary
M. Rindner, general counsel for Purchaser, a written opinion, dated the Closing
Date, in the form and substance satisfactory to Seller.
(d) Corporate Action. Certified copies of all resolutions duly adopted by
the Board of Directors (or the Executive Committee thereof) of Purchaser in
connection with the transactions contemplated hereby shall have been furnished
to Seller prior to the Closing Date and such resolutions shall be in full force
and effect.
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(e) Corporate Documents. Seller shall have received a certificate of the
Secretary of Purchaser certifying the incumbency of officers and genuineness of
signatures of all officers of the Purchaser executing any document delivered by
Purchaser at the Closing and copies of the Certificate of Incorporation and
By-Laws of Purchaser certified to by the Secretary of Purchaser.
(f) Litigation. No Law shall have been enacted, entered or deemed
applicable by any domestic or foreign governmental or administrative agency or
court which would make any transaction contemplated by this Agreement illegal.
No complaint shall have been filed by any Person (other than Seller or an
Affiliate of Seller) and be pending which seeks to enjoy the transactions
contemplated by this Agreement, or to impose conditions or restrictions upon
the ability of Purchaser to utilize the purchased Assets on substantially the
same basis as presently operated or to integrate the Purchased Assets into
Purchaser's own operations, or to require divestiture of all or any part of the
Purchased Assets, unless such complaint is dismissed, withdrawn, set-aside or
otherwise eliminated. No injunction, restraining order, or other order of a
court of competent jurisdiction shall be in effect which restrains, prohibits,
or invalidates the transactions contemplated by this Agreement.
(g) Guaranty. Seller shall have received a guaranty from Purchaser's
ultimate parent of its payment obligation under this Agreement.
SECTION 12. DEFAULT; INDEMNIFICATION.
12.1 (a) Indemnification by Seller. Subject to Section 12.3, Seller hereby
agrees to indemnify, defend and hold harmless Purchaser and each officer,
director, stockholder or Affiliate of Purchaser (collectively, the "Purchaser
Group") from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including, but
not limited to, interest, penalties and reasonable attorneys' fees and
disbursements (collectively, "Losses"), asserted against, resulting to, imposed
upon or incurred by the Purchaser Group, by reason of or resulting from (i) any
breach of Seller's representations and warranties contained in this Agreement,
(ii) any breach of any covenants or agreements of Seller contained in or made
pursuant to this Agreement, (iii) any Liability of Seller, its Affiliates or the
Business not assumed by Purchaser pursuant to Section 2.2 of this Agreement,
(iv) any failure by Seller to comply with any so-called bulk transfer laws or
similar laws of any jurisdiction in connection with the transactions
contemplated by this Agreement; (v) any failure by Seller to comply with the
Worker Adjustment and Retraining Notification Act or any similar applicable
state law (collectively, "Plant Closing Laws"), or any Liability arising under
any such Plant Closing Laws in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Purchaser. Subject to section 12.3, purchaser hereby
agrees to indemnify, defend and hold harmless Seller and each officer, director,
stockholder or Affiliate of Seller (collectively, the "Seller Group") from and
against all Losses asserted against, resulting to, imposed upon or incurred by
the Seller Group, by reason of or resulting from (i) any breach of Purchaser's
representations and warranties contained in this Agreement; (ii) any breach of
any
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covenants or agreements of Purchaser contained in or made pursuant to this
Agreement; (iii) any Liability of Seller, its Affiliates or the Business
assumed by Purchaser pursuant to Section 2.2; and (iv) any failure by Purchaser
to comply with Plant Closing Laws as it relates to New Employees.
12.2 Tax Indemnification. Subject to Section 12.3, each Party agrees to
indemnify, defend (with counsel reasonably acceptable to the indemnified party)
and hold harmless the other from and against any and all tax deficiencies or
claims, including any interest or penalties thereon, with respect to any tax
period or matter described herein for which such Party has agreed herein to be
responsible and pay for its own account.
12.3 Conditions of Indemnification. (a) Except as otherwise specifically
provided in this Agreement, any claim for indemnification shall be subject to
the provisions of this Section 12.3:
(i) The Person entitled to receive payment pursuant to such
indemnification obligation (the "Indemnified Person") will give the Party
required to make such payment (the "Indemnifying Party") prompt notice of any
such Claim and shall cooperate in all reasonable respects with the Indemnifying
Party and its counsel in defending such Claim, and the Indemnifying Party shall
(subject to the other provisions of this Section 12.3) have the right to
undertake the defense thereof by representatives chosen by it;
(ii) If the Indemnifying Party, within a reasonable time after such
notice of any such Claim, fails to defend the Indemnified Person against whom
such Claim has been asserted, the Indemnified Person shall (upon further notice
to the Indemnifying Party) have the right to undertake the defense, compromise
or settlement of such Claim on behalf of and for the account and risk of the
Indemnifying Party, subject of the right of the Indemnifying Party to assume the
defense of such Claim at any time prior to settlement, compromise or final
determination thereof; and
(iii) Anything in this Section 12.3 to the contrary notwithstanding,
if there is a reasonable probability that a Claim may materially and adversely
affect an Indemnified Person other than as a result of money damages or other
money payments, the Indemnified Person shall, after reasonable prior notice to
the Indemnifying Party, have the right, at its own cost and expense, to jointly
defend, compromise or settle such Claim.
(b) Payments to any Indemnified Person shall be net of any insurance
payment or other payment received from any Person (other than such Indemnified
Person's Affiliates) in compensation for the same Losses for which
indemnification is sought (such payments from such Person to be net, in the case
of insurance, of any increased premiums payable as the it of receipt of such
payment). An Indemnifying Party shall, to the extent of its payment of
indemnification with respect thereto, be subrogated to any rights of an
indemnified person to recover payments from insurers or other persons.
(c) If any member of the Purchaser Group or the Seller Group is entitled to
receive indemnification from an Indemnifying Party with respect to any claim and
the person on whose
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behalf such Claim is made or the named parties to any litigation or other
proceeding with respect to such Claim include both such Indemnified Person and
such Indemnifying Party or an Affiliate of such Indemnifying Party, and such
Indemnified Person shall have been advised by counsel that counsel employed by
such Indemnifying Party would, under applicable professional standards, have a
conflict in representing both such Indemnifying Party (or such Affiliated) and
such Indemnified Person, if such Indemnified Person notifics the Indemnifying
Party in writing that it elects to employ separate counsel reasonably
satisfactory to the Indemnifying Party at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of such
Claim on behalf of such Indemnified Person, it being understood, however, that
the Indemnifying Party shall not in connection with any one such proceeding or
separate but substantially similar or related proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys at
anytime for all such Indemnified Persons. With the PRIOR written CONSENT OF THE
Indemnifying Party (it being signed that such consent shall not be unreasonably
withheld), any Indemnified Person may agree to any settlement of any Claim
involving a payment or expenditure for which such Indemnified Person intends to
claim indemnification hereunder. Nothing herein shall be deemed to authorize any
Indemnified Person to agree without the prior written consent of the
Indemnifying Party to any such settlement. The Indemnifying Party may not,
without the prior written consent of the Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or threatened
proceeding in respect of which indemnification may be sought under this
Agreement (whether or not any Indemnified Person is an actual or potential party
to such proceeding) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Person from all Liability arising out
of such Proceeding.
(d) The Parties agree that the representations, warranties, covenants and
agreements of the parties contained in this Agreement shall survive the Closing
ant shall not be limited by any investigation made by any Party prior to the
Closing.
12.4 Default of Purchase Price Payment. If any payment due Seller under
Section 3.3 is underpaid at the date due in an amount greater than S50,000, then
Seller shall be entitled to receive full payment of any shortage proved by
Seller PLUS interest on the amount of underpayment greater than $50,000 at an
annual rate of prime (as published in the Wall Street Journal from time to time)
plus 4 3/4% for the period from the due date OF SUCH payment TO the date the
corrective payment is made. Seller agrees to notify Purchaser promptly of any
discrepancies noted which may have resulted in an underpayment.
SECTION 13. TRANSFER AND SALES TAX
Seller shall bear all transfer, purchase, use or similar taxes or documentary
stamp costs under the laws of any nation, state or any COUNTRY, CITY OR
POLITICAL SUB division thereof ARISING OUT of the transactions contemplated by
this Agreement, and any filing or recording fees payable in connection with the
instruments of transfer provided for herein.
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SECTION 14. ACTIONS TO BE TAKEN AT OR SUBSEQUENT TO THE
CLOSING DATE.
14.1 Further Assurances. (a) Seller and its Affiliates shall on and after
the Closing Date, upon request by Purchaser, to, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged ant delivered, all
such further acts, deeds, assignments, transfers, conveyances and assurances
that may be reasonably required for the conveyance, transfer, assignment,
deliver, assurance ant confirmation to Purchaser, or to its successors and
assigns, or for aiding and assisting in collecting or reducing to possession,
any or all of the Purchased Assets.
(b) Seller authorizes Purchaser to apply for and obtain recordation of
the evidences of transfer to Purchaser of the Purchased Assets transferred
pursuant to this Agreement. Seller and its Affiliates shall promptly perform
such lawful acts and execute such documents as Purchaser may reasonably
request to obtain the full benefits of the transfer of ownership of such
Purchased Assets at Seller's expense and to permit Purchaser to be duly
recorded in each appropriate office, bureau and tribunal in each jurisdiction
as the registered owner or proprietor of each of the rights to be transferred
hereunder.
14.2 Cooperation in Litigation. In the event that, after the Closing Date,
Seller or Purchaser shall require the participation of officers and employees
employed by any Party to aid in the defense or settlement of litigation or
claims by third parties, and so long as there exists no conflict of interest
between the Parties, each party shall use its best efforts to make such
officers and employees available to participate in such defense, provided that
the Party requiring the participation of such officers or employees shall pay
all reasonable out-of-pocket costs, charges and expenses arising from such
participation. Seller shall pay 25% of the compensation cost for Philip Tanzar
for a period of one year following the Closing in exchange for 25% of his time
for assistance in resolving pending legal matters of Seller and its wind down.
14.3 Monthly Statements. The Parties shall cooperate to ensure that the
final monthly account statement sent to the owner of each Customer Account by
Seller subsequent to the Closing Date shall identify the positions and
Property transferred to Purchaser by Seller with respect to such account.
At Purchaser's request, Seller shall provide Purchaser with a copy of the
most recent monthly statement sent to the owner of a particular Customer
Account with copies of all purchase and sale transaction reports sent to such
owner of such Customer Account from the date of such most recent monthly
statement to the Transfer Time within two Business Days of such request.
14.4 Seller's Net Worth. Following the Closing, Seller agrees to maintain
a net worth sufficient to discharge its obligations, including with respect to
liabilities and losses at Closing required to be accrued for under GAAP.
14.5 Seller's Accounting. From and after the Closing, Seller agrees to
account to Purchaser at each month-end for any payments received by Seller
which would be included in the
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calculation of Net Income along with a written report and accompanying back-
up documentation and the payments received shall be settled promptly by the
Parties.
14.6 Certain Actions. In the event that during the thirty six month period
following the Closing Date, Purchaser by any act or omission to act within its
control shall terminate the employment of Burton J. Meyer in violation of the
terms of his employment agreement with Purchaser and Mr. Meyer is awarded
damages as a result of such violation, and/or a ruling that the non-competition
provisions of his employment agreement do not apply as a result of such
violation, by an arbitration panel or court of competent jurisdiction and Mr.
Meyer shall thereafter devote significant efforts to a business comparable to
the Business, then Purchaser shall pay Seller as liquidated damages the amount
calculated pursuant to the second sentence of Section 3.6(a) for the period
through the Final Payment Date in lieu of any future payments to Seller
hereunder in respect of the Jack Carl Division.
SECTION 15. TAX MATTERS
15.1 Filings, etc. Seller has duly filed all reports and returns that are
required to be filed with all taxing authorities, all such reports and returns
are in all material respects true and accurate to the best of Seller's
knowledge, and they have paid or accrued all taxes (including, but not limited
to, taxes on properties, income, franchises, licenses, sales, withholding and
payrolls), interest, penalties, assessments or deficiencies as reported due on
such reports and returns. There are no tax liens upon any of the properties or
assets of Seller. No proposed additional taxes, interest or penalties have been
asserted except those that have been paid in full or are accrued on the books
and records of Seller. There are no agreements, waivers or other arrangements
providing for extensions of time with respect to the assessment or collection of
any unpaid tax nor are there any actions, suits, proceedings, investigations or
claims now pending with respect to any unpaid tax. There are no matters under
discussion by Seller with any taxing authority relating to any amount of unpaid
taxes except as accrued for nor are there any pending audits by any taxing
authority. Seller and its Affiliates will file all returns and reports required
to be filed by them with respect to taxes and fees imposed as a result of the
sale of the Purchased Assets.
15.2 Allocation of Taxes. Both Parties shall endeavor to take consistent
positions with respect to their respective 1996 Federal income tax returns,
state or city returns or in any other documents filed pursuant to Section
1060(b) of the Internal Revenue Code of 1986, as amended, (the "Code") regarding
the allocation of the purchase price to the Purchased Assets and any non-
competition payment (including, but not limited to, any filing on Form 8594).
Each Party hereto agrees to cooperate with the other Party in the preparation of
Form 8594 and to furnish the other Party with a copy of such Form prepared in
draft form within a reasonable period before the filing due date of such form.
15.3 Cooperation. Purchaser and Seller mutually agree to cooperate with
each other with respect to the preparation of the returns, the filing and
prosecution of any tax refund claims, and the furnishing of any document, record
or other relevant information relating to any tax liability or refund, and to
keep the other advised as to any issue relating to taxes which could have
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a bearing on such Party's responsibilities hereunder. In the event that any tax
issue arises, by audit or otherwise, which could require one Party to make a
payment under this Section 15 then prompt written notice shall be provided to
the other Party as to the nature of the issue and a reasonable opportunity to
defend against any claim for taxes shall be given to such other Party (such
defense to be at such other Party's sole expense).
SECTION 16. OTHER PROVISIONS.
16.1 Complete Agreement. This Agreement, including the Schedules and
Exhibits attached hereto and the documents referred to herein, shall constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
16.2 Waiver, Discharge, etc. This Agreement may not be released, discharged,
abandoned, changed or modified in any manner, except by an instrument in
writing signed on behalf of each of the Parties by their duly authorized
representatives. The failure of any Party hereto to enforce at any time any of
the provisions of this Agreement shall in no way be construed to be a waiver of
any such provision, nor in any way to affect the validity of this Agreement or
any part thereof or the right of any Party thereafter to enforce such and every
such provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
16.3 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be given by certified mail addressed and
delivered or sent by telex or facsimile, if to Seller to:
Index Futures Group, Inc.
200 West Adams Street, Suite 1500
Chicago, Illinois 60606
Attention: Allyson Laackman, CFO
FAX: (312) 419-5868
with a copy to Fishman & Merrick, P.C.
30 North LaSalle Street, Suite 3500
Chicago, Illinois 60602
Attention: Gerald Fishman
FAX: (312) 726-2649
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or to such other person or at such other place as Seller shall furnish to
Purchaser in writing, and if to Purchaser to:
E.D. & F. Man International Inc.
Two World Financial Center
New York, New York 10281-2700
Attention: General Counsel
FAX: (212)566-9418
or to such other Person or at such other place as Purchaser shall furnish to
Seller in writing.
16.4 Public Announcements; Other Disclosures. Until the Closing Date, no
party shall issue any press release or public announcement or otherwise
divulge the terms of this Agreement without the prior approval of the other
Party hereto except as and to the extent that such Party shall be obligated
by Law.
16.5 Expenses. Each Party shall pay its own expenses incident to the
preparation of this Agreement and the consummation of the transactions
contemplated herein.
16.6 GOVERNING LAW. THIS AGREEMENT, THE 0BLIGATIONS OF THE PARTIES HERETO,
AND ANY CLAIMS OR DISPUTES RELATING THERETO, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF ILLINOIS
EXCLUDING THE CHOICE OR CONFLICTS OF LAW RULES THEREOF WHICH MIGHT OTHERWISE
BE APPLICABLE.
16.7 Jurisdiction; Arbitration. (a) Each party hereto expressly and
irrevocably agrees that it waives any objection, and specifically consents,
to the exclusive jurisdiction and venue of any arbitration located in the
State of Illinois, City of Chicago.
(b) The Parties agree that all controversies which may arise in
connection with any transaction contemplated by this Agreement or the
construction, performance or breach of this Agreement shall be determined by
arbitration, to be held in the City of Chicago, State of Illinois unless
otherwise agreed to by the Parties hereto, and in accordance with the rules
then obtaining of the American Arbitration Association by a panel of three
arbitrators; provided, however, that (i) the arbitrators shall be
knowledgeable in industry standards and practices and the matters giving rise
to the dispute, (ii) the arbitrators shall not have the power and authority to
award punitive damages, (iii) the authority of the arbitrators shall be limited
to construing ant enforcing the terms and conditions of this Agreement as
expressly set forth herein, (iv) the arbitrators, if allowed by the rules,
shall state the reasons for their award and their legal and factual
conclusions underlying the award in a written opinion and (v) the arbitrators
shall award attorneys fees and related costs in favor of the prevailing party.
The award of the arbitrators, or a majority of them, shall be final, and
judgment upon the award may be confirmed and entered in any court, state or
federal, having jurisdiction.
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16.8 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties and the respective successors or assigns of the
Parties, provided that the rights and obligations of Seller herein may not be
assigned, ant the rights of Purchaser may only be assigned in whole or in part,
to an Affiliate or Affiliates of Purchaser, or to such other business
organization which shall succeed to substantially all the assets and business
of Purchaser or its permitted successors or assigns.
16.9 Execution in Counterparts; Facsimile Signatures. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become a binding agreement when one or more
counterparts have been signed by each Party and delivered to the other Party. A
signature to this Agreement delivered by facsimile or other artificial means
shall be deemed valid if a manually signed copy of such signature is delivered
within three (3) Business Days after such facsimile or other signature is
delivered.
16.10 Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
16.11 Schedules. The Schedules and Exhibits to this Agreement shall be
concurred with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
16.12 No Third Party Beneficiaries. It is hereby agreed that the named
Parties, and with respect to indemnification hereunder, the Indemnified Persons
and their respective permitted successors and assigns shall have the sole
right to enforce the performance of the provisions of this Agreement and the
sole right to receive any and all amounts payable by the Parties pursuant to
this Agreement, and that no other Person including, without limitation, any
Seller Employee or New Employee, shall be entitled to, or shall have any claim,
right, title or interest to or in any such amounts by virtue of this Agreement.
This Agreement is personal to the named Parties, and is not intended for the
benefit of, and is not intended to be relied upon by, any other Person
including, without limitation, any obligee under any Assigned Contract or any
Seller Employee or New Employee, except the Indemnified Persons and no such
Person (or any other PERSON ACTING ON IS behalf) shall be entitled to the
benefit of or to enforce this Agreement.
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IN WITNESS WHEREOF, the Parties have executed these presents on the day and
year first above written.
INDEX FUTURES GROUP, INC.
/s/ Burton J. Meyer
--------------------------------
By: Burton J. Meyer
Title: Chief Executive Officer
E.D. & F. MAN INTERNATIONAL INC.
/s/ Gary M. Rudner
--------------------------------
By: Gary M. Rudner
----------------------------
Title: General Counsel & Secretary
---------------------------
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