SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 24, 1997
HOME HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19347 13-3584978
(State of Incorporation) (Commission file number) (I.R.S. Employer
Identification No.)
59 Maiden Lane, New York, New York 10038-4548
(Address or principal executive office) (Zip Code)
Registrant's telephone number including area code (212) 530-6600
Item 5. Other Events.
On February 24, 1997, Gruntal Financial Corp. ("GFC") and
The 1880 Group LLC entered into a Reorganization Agreement, under which GFC
will be restructured (the "Reorganization") as a limited liability company,
Gruntal Financial, L.L.C. ("Gruntal Financial"), and sold to a management
group led by Robert P. Rittereiser, GFC's chairman and chief executive
officer. GFC's business includes securities underwriting, sales and
trading, discount brokerage, merchant banking, financial advisory services,
investment research, correspondent brokerage services, asset management and
life insurance agency.
GFC is a direct subsidiary of The Home Insurance Company
("Home Insurance"), subject to ownership of a minority interest of Class B
common stock of GFC by certain of its current and former employees. Home
Insurance is a direct, wholly-owned subsidiary of the Registrant. The 1880
Group LLC ("The 1880 Group") is a limited liability company organized under
the laws of the State of Delaware, the members of which include Mr.
Rittereiser and several other GFC officers including, but not limited to,
Lee Fensterstock, President and Chief Operating Officer, Joanne T. Marren,
Executive Vice President and General Counsel, and Henry Gottman, Executive
Vice President (collectively, "Management").
The Reorganization involves the issuance of several classes
of securities to GFC and The 1880 Group, including preferred securities,
with a face amount of approximately $235 million. As a result of the
Reorganization, GFC will own 40% of the common interest in Gruntal
Financial and The 1880 Group will own 60% of the common interest in Gruntal
Financial. In connection with the issuance of certain preferred securities
to GFC, Home Insurance and Centre Reinsurance Dublin, an affiliate of the
Zurich Insurance Company, will enter into a swap agreement intended to
ensure that Home Insurance's investment in Gruntal Financial yields at
least $155.5 million plus a 7.5% per annum rate of return thereon, subject
to certain modifications with respect to certain distributions and sales
proceeds of the common and preferred interests of Gruntal Financial.
In connection with the Reorganization, Management will enter
into management services agreements with The 1880 Group which, in turn,
will provide such services to Gruntal Financial.
The consummation of the reorganization is subject to certain
conditions, including, but not limited to, the approval of the Department
of Insurance of Home Insurance's domiciliary state, New Hampshire.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following financial statements, pro forma financial
information and exhibits are filed as part of this Form 8-K:
(a) Financial Statements or Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
(2.1) Reorganization Agreement, dated
February 24, 1997, between GFC and
The 1880 Group;
(99.1) Form of Gruntal Financial, L.L.C.
Agreement, to be dated as of the
date of the consummation of the
Reorganization, between GFC and The
1880 Group (attached to the Reorganization
Agreement as Exhibit 3.1C);
(99.2) Form of Swap and Investment Management
Amendment, to be dated as of the date of the
consummation of the Reorganization, by and
among Home Insurance and Centre Reinsurance
Dublin (attached to the Reorganization
Agreement as Exhibit 3.1E); and
(99.3) Press release issued on February 25,
1997.
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
HOME HOLDINGS INC.
Dated: February 25, 1997 By: /s/ Richard H. Hershman
-------------------------
Richard H. Hershman
Treasurer
REORGANIZATION AGREEMENT
DATED FEBRUARY 24, 1997
BETWEEN
GRUNTAL FINANCIAL CORP.
AND
THE 1880 GROUP LLC
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................1
ARTICLE II THE TRANSACTIONS...............................5
Section 2.1 GFC Actions....................................5
Section 2.2 Holdings.......................................5
ARTICLE III THE CLOSING....................................6
Section 3.1 Transactions to Occur at the Closing...........6
Section 3.2 Closing........................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................7
Section 4.1 Mutual.........................................7
Section 4.2 Management.....................................9
Section 4.3 GFC............................................9
ARTICLE V COVENANTS............................................9
Section 5.1 Alternative Proposal...........................9
Section 5.2 Reasonable Efforts............................10
Section 5.3 Consents......................................10
Section 5.4 Public Announcements..........................11
Section 5.5 Tangible Book Value...........................11
Section 5.6 Miscellaneous.................................12
ARTICLE VI CONDITIONS TO CLOSING...............................13
Section 6.1 Conditions to Each Party's Obligation
to Effect the Transactions....................13
Section 6.2 Conditions to the Obligation of GFC...........14
Section 6.3 Conditions to the Obligations of
Management....................................15
ARTICLE VII TERMINATION; AMENDMENT; WAIVER......................16
Section 7.1 Termination...................................16
Section 7.2 Effect of Termination.........................17
Section 7.3 Amendments and Waivers........................17
ARTICLE VIII MISCELLANEOUS.......................................18
Section 8.1 Survival......................................18
Section 8.2 Entire Agreement..............................18
Section 8.3 Governing Law.................................18
Section 8.4 Notices.......................................18
Section 8.5 Successors and Assigns; No Third
Party Beneficiaries...........................19
Section 8.6 Counterparts..................................20
Section 8.7 Interpretation................................20
Section 8.8 Legal Enforceability..........................20
Section 8.9 Brokerage Fees and Commissions................20
Section 8.10 Expenses......................................20
EXHIBITS
2.1A Term Sheet with respect to the repurchase of
interest in GFC
3.1A Form of Operating LLC Agreement
3.1B Form of Merger Agreement
3.1C Form of Holdings LLC Agreement
3.1D Term Sheet with respect to the Services
Agreements
3.1E Form of Swap and Investment
Management Amendment
3.1F Form of Subordinated Loan Amendment
3.1G Form of the Annual Incentive Compensation
Plan of Management
3.1H Form of Registration Rights Agreement
3.1I Form of Guaranty Agreement
6.1G Form of Mutual Release
6.1GY Certain Agreements that will not be terminated
at Closing
6.2C Form of DLJ Fairness Opinion
6.2D Form of the Legal Opinion of Paul, Weiss,
Rifkind, Wharton & Garrison to the Company
6.2E Items to be addressed in the Legal Opinion
of Management's Counsel to GFC
6.3C Items to be addressed in the Legal Opinion
of Paul, Weiss, Rifkind, Wharton & Garrison
to Management
REORGANIZATION AGREEMENT dated February 24, 1997, between GRUNTAL
FINANCIAL CORP., a Delaware corporation ("GFC"), and THE 1880 GROUP LLC, a
Delaware limited liability company ("Management").
The parties desire to enter into this Agreement for the purpose
of setting forth the agreements of the parties with respect to certain
transactions to be entered into by the parties as herein described. The
parties intend that this Agreement be treated as a plan of liquidation
within the meaning of section 332 of the Code (as defined below).
Accordingly, the parties agree as follows:
I
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings:
"Affiliate" means, with respect to any person, any other person
that directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under direct or indirect common control with,
such person. The term "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities,
by contract or otherwise.
"Alternative Proposal" means any bona fide proposal by a third
party to enter into a transaction (whether involving the issuance of
securities or otherwise) involving the recapitalization, reorganization or
other restructuring of GFC or any of its Significant Subsidiaries, the sale
of a substantial interest in GFC or any of its Significant Subsidiaries, or
the sale or other disposition, by way of merger, sale of stock or assets,
joint venture, or otherwise, of a substantial portion of the business of
GFC or any of its Significant Subsidiaries, in each case, other than
pursuant to the Transactions.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day that banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests (however designated) in capital stock of a corporation and any
other equivalent ownership interest in a person other than a corporation.
"Closing" has the meaning set forth in Section 3.2.
"Closing Date" means March 24, 1997 or such other date, after the
parties have confirmed to each other in writing that the conditions set
forth in Article VI have been satisfied or waived, as the parties may
mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Home Holdings Inc., a Delaware corporation.
"CRD" means Centre Reinsurance Dublin, a corporation organized
and existing under the laws of Ireland.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GFC" has the meaning set forth in the introductory statement
hereof.
"GFC Subsidiaries" means, collectively, Gruntal & Co, Gruntal
Management Inc., a Delaware corporation, and The GMS Group, Inc., a New
York corporation.
"Gruntal & Co" means Gruntal & Co. Incorporated, a Delaware
corporation.
"Gruntal & Co LLC" has the meaning set forth in Section 3.1(a).
"Gruntal & Co LLC Agreement" has the meaning set forth in Section
3.1(a).
"Gruntal & Co Subsidiaries" means, collectively, Gruntal Life
Agency, Inc., a New York corporation, and Gruntal Insurance Agency, Inc., a
Massachusetts corporation.
"Gruntal & Co Subsidiary LLC" has the meaning set forth in
Section 3.1(a).
"Gruntal & Co Subsidiary LLC Agreement" has the meaning set forth
in Section 3.1(a).
"Guaranty Agreement" has the meaning set forth in Section 3.1(i).
"HI" means The Home Insurance Company, a New Hampshire domiciled
property and casualty stock insurance company.
"Holdings" has the meaning set forth in Section 3.1(c).
"Holdings LLC Agreement" has the meaning set forth in Section
3.1(c).
"Initial Senior Officers" has the meaning set forth in Section
5.6(a).
"Insurance Regulators" has the meaning set forth in Section
5.3(b).
"Insurance Regulatory Approvals" means the approvals of the
Insurance Regulators necessary in order to consummate the Transactions, as
set forth in Section 5.3(b).
"Interim Dividend" has the meaning set forth in Section 6.2(f).
"Investment Management Agreement" means the Investment Management
Agreement dated June 12, 1995, among Centre Investment Services Limited,
Zurich Centre Investments Limited, the Company, HI, U.S. International
Reinsurance Company, The Home Insurance Company of Illinois and The Home
Insurance Company of Wisconsin.
"Lien" means any mortgage, pledge, security interest, lease,
easement, servitude or similar encumbrance.
"Lost Deferred Tax Assets" means the deferred tax assets,
calculated in accordance with generally accepted accounting principles
consistently applied with past practice, on the books of GFC immediately
prior to the Closing.
"Management" has the meaning set forth in the introductory
statement hereof.
"Management/GMS LLC" has the meaning set forth in Section 3.1(a).
"Management/GMS LLC Agreement" has the meaning set forth in
Section 3.1(a).
"Material Adverse Effect" means, with respect to any person, a
material adverse effect on its financial condition or assets, taken as a
whole.
"Merger Agreement" has the meaning set forth in Section 3.1(b).
"Non-Regulatory Consents" has the meaning set forth in Section
5.3(b).
"NYSE" means the New York Stock Exchange, Inc.
"Operating LLCs" means, collectively, Gruntal & Co LLC, the
Management/GMS LLCs and the Gruntal & Co Subsidiary LLCs.
"Operating LLC Agreements" means, collectively, the Gruntal & Co
LLC Agreement, Management/GMS LLC Agreements, and Gruntal & Co Subsidiary
LLC Agreements.
"Other Regulatory Approvals" means the approvals of the
Securities and Commodities Regulators necessary in order to consummate the
Transactions, as set forth in Section 5.3(b).
"person" means an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization or a government or any department or agency thereof.
"Portfolio Value Swap Agreement" means the Portfolio Value Swap
Agreement dated as of June 12, 1995, as amended, between CRD, HI and
certain Subsidiaries of HI.
"Registration Rights Agreement" has the meaning set forth in
Section 3.1(h).
"Repurchase" means the repurchase or conversion into debt
securities of all of the issued and outstanding shares of Class B common
stock of GFC as contemplated in Section 2.1(i) and (v).
"SEC" means the United States Securities and Exchange Commission
and any governmental body or agency succeeding to the functions thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities and Commodities Regulators" has the meaning set forth
in Section 5.3(b).
"Services Agreements" has the meaning set forth in Section
3.1(d).
"Significant Subsidiary" means, a Subsidiary (including its
Subsidiaries) of a person the net worth (calculated in accordance with
generally accepted accounting principles consistently applied) of which
Subsidiary equals or exceeds 25% of the consolidated net worth (calculated
in accordance with generally accepted accounting principles consistently
applied) of such person, as such consolidated net worth is set forth in the
most recent available quarterly or annual financial statements of such
person.
"Subordinated Loan Amendment" has the meaning set forth in
Section 3.1(f).
"Subsidiary" means, with respect to any person, any other person
of which, at the time as of which any determination is being made, such
first mentioned person or one or more of its Subsidiaries has, directly or
indirectly, Voting Control.
"Swap and Investment Management Amendment" has the meaning set
forth in Section 3.1(e).
"Transaction Documents" has the meaning set forth in Section 3.1.
"Transaction Expenses" means, as of any date, the aggregate sum
of all of the cost, fees and expenses paid or to be paid by Holdings
pursuant to Section 8.10(a).
"Transactions" has the meaning set forth in Section 3.1.
"Value" has the meaning set forth in Section 5.5(a).
"Voting Control" means, at any time, the ownership or control,
whether direct or indirect, of outstanding shares of Capital Stock of a
person that, at such time, have by the terms thereof ordinary voting power
to elect a majority of the members of the board of directors (or persons
performing similar functions) of such person (excluding voting power of the
holders of preferred stock arising upon the occurrence of a contingency).
II
THE TRANSACTIONS
2.1 GFC Actions. At or prior to the Closing GFC shall: (i) offer
to repurchase certain issued and outstanding shares of Class B common stock
of GFC not beneficially owned by HI in accordance with the procedures and
on the terms set forth in Exhibit 2.1A; (ii) form the Operating LLCs in
accordance with the provisions of the Operating LLC Agreements and make the
contributions required to be made therein; (iii) effect the merger of each
GFC Subsidiary and Gruntal & Co Subsidiary with and into an Operating LLC
in accordance with the provisions of the Merger Agreement; (iv) form
Holdings; and (v) convert any remaining outstanding shares of Class B
common stock of GFC into debt securities through a merger as set forth in
Exhibit 2.1A.
2.2 Holdings. At the Closing, the parties shall enter into the
Holdings LLC Agreement and make the contributions required to be made
therein.
III
THE CLOSING
3.1 Transactions to Occur at the Closing. Subject to the terms
and conditions of this Agreement, including, without limitation, Article VI
hereof and the Transaction Documents, on the Closing Date the parties will
execute and deliver, or cause their respective Affiliates to execute and
deliver, the following:
(a) (x) the Limited Liability Company Agreement (the
"Gruntal & Co LLC Agreement") with respect to the formation of a Delaware
limited liability company ("Gruntal & Co LLC"), (y) the Limited Liability
Company Agreements (the "Management/GMS LLC Agreements") with respect to
the formation of two Delaware limited liability companies (the
"Management/GMS LLCs") and (z) the Limited Liability Company Agreements
(the "Gruntal & Co Subsidiary LLC Agreements"), with respect to the
formation of one Delaware limited liability company and one Massachusetts
limited liability company (together, the "Gruntal & Co Subsidiary LLCs"),
each substantially in the form of Exhibit 3.1A hereto;
(b) the Merger Agreements (the "Merger Agreements"), between
(w) Gruntal & Co and the Gruntal & Co LLC, (x) each GFC Subsidiary (other
than Gruntal & Co), or its successor by merger, and a Management/GMS LLC,
and (y) each Gruntal & Co Subsidiary, or its successor by merger, and a
Gruntal & Co Subsidiary LLC, each substantially in the form of Exhibit 3.1B
hereto;
(c) the Limited Liability Company Agreement (the "Holdings
LLC Agreement") between GFC and Management with respect to the formation of
Gruntal Financial, L.L.C. ("Holdings"), substantially in the form of
Exhibit 3.1C hereto;
(d) the services agreements (the "Services Agreements")
between Management and each of the Initial Senior Officers, each reflecting
substantially the terms set forth in Exhibit 3.1D;
(e) the amendment (the "Swap and Investment Management
Amendment") to the Portfolio Value Swap Agreement and the Investment
Management Agreement, substantially in the form of Exhibit 3.1E hereto;
(f) the amendment (the "Subordinated Loan Amendment") to the
subordinated loan arrangements between HI and each of GFC and Gruntal & Co,
substantially in the form of Exhibit 3.1F hereto;
(g) the Annual Incentive Compensation Plan of Management,
substantially in the form of Exhibit 3.1G hereto;
(h) the Registration Rights Agreement (the "Registration
Rights Agreement") between Holdings and GFC, substantially in the form of
Exhibit 3.1H hereto;
(i) the Guaranty Agreement from Gruntal & Co LLC (the
"Guaranty Agreement"), substantially in the form of Exhibit 3.1I hereto;
and
(j) the mutual release referred to in Section 6.1(g).
The foregoing agreements listed in this Section 3.1 are referred to,
together with this Agreement, collectively as the "Transaction Documents"
and the transactions contemplated by any such Transaction Documents, the
"Transactions."
The parties will also enter into, execute and deliver, or cause
their respective Affiliates to enter into, execute, deliver and file, such
other instruments, opinions, certificates and other documents as are
provided for under the terms of this Agreement and the Transaction
Documents to be entered into, executed, delivered and filed at the Closing,
including the certificates of formation with respect to Holdings and the
Operating LLCs, and the certificates of merger with respect to the mergers
contemplated by the Merger Agreements.
3.2 Closing. The closing of the Transactions to occur on the
Closing Date (the "Closing") shall take place at 10:00 a.m., New York City
time, at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285
Avenue of the Americas, New York, New York 10019-6064, or at such other
time and place as the parties hereto may mutually agree. All the
Transactions to occur under this Agreement and the Transaction Documents on
the Closing Date shall be deemed to occur simultaneously on the Closing
Date.
IV
REPRESENTATIONS AND WARRANTIES
4.1 Mutual. Each party represents and warrants to the other:
(a) It is an organization duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization
and has all requisite organizational power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so existing and in good standing or to have
such power and authority would not have a Material Adverse Effect.
(b) Each of it and each of its Subsidiaries that is or shall
be a party to any of the Transaction Documents has all requisite
organizational capacity, power and authority to execute and deliver such
Transaction Documents and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement and the other
Transaction Documents by it or such Subsidiary and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary organizational proceedings (including
stockholders' or members' approval where required) and no other
organizational proceedings on its or such Subsidiary's part are necessary
to authorize this Agreement or such other Transaction Documents or to
consummate the transactions contemplated hereby or thereby. This Agreement
has been, and each of the other Transaction Documents, when executed by it
or such Subsidiary, will be, duly and validly executed and delivered by
it or such Subsidiary and this Agreement is, and such other Transaction
Documents will be, its or such Subsidiary's valid and binding obligations,
enforceable against it or such Subsidiary in accordance with the terms
hereof or thereof, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(c) Except for the Insurance Regulatory Approvals, the Other
Regulatory Approvals, the Non-Regulatory Consents, any applicable
requirements of the Exchange Act, and as contemplated by this Agreement and
the Transaction Documents, neither the execution and delivery of this
Agreement or the Transaction Documents (to the extent it or one of its
Subsidiaries is a party thereto) nor the consummation by it or such
Subsidiary of the transactions contemplated hereby or thereby will (i)
conflict with or result in any breach of any provision of its or such
Subsidiary's charter document, (ii) require on its or such Subsidiary's
part any filing with, or the obtaining of any permit, authorization,
consent or approval of, any governmental or regulatory authority or any
third party, (iii) result in a violation or breach of, or constitute (with
or without notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration of payment,
or to the creation of a Lien) under any of the terms, conditions or
provisions of any note, mortgage, indenture, other evidence of
indebtedness, guarantee, license, agreement or other contract, instrument
or obligation to which it or such Subsidiary is a party or by which it or
such Subsidiary or any of its or such Subsidiary's properties or assets may
be bound or (iv) violate any award of any arbitrator or any order, writ,
injunction, decree, statute, rule or regulation applicable to it or such
Subsidiary or any of its or such Subsidiary's properties or assets, except
for such filings, permits, authorizations, consents, approvals, defaults,
rights or violations under clauses (ii), (iii) and (iv) above which, or the
failure to obtain which, (A) would not in the aggregate have a Material
Adverse Effect and (B) would not materially and adversely affect its or
such Subsidiary's ability to consummate the transactions contemplated
hereby or by the other Transaction Documents to which it or such Subsidiary
is a party.
(d) Any securities being acquired by it in connection with
the transactions contemplated hereby are being acquired by it for
investment purposes only and not with a view to the distribution thereof.
4.2 Management. Management represents and warrants that it is
entering into the transactions contemplated hereby based upon its own
knowledge and investigation of the GFC's business and is not relying upon
any representation or warranty of GFC (except as set forth in this Article
IV), or any of GFC's officers, directors, employees, agents or advisors,
nor upon the accuracy of any record, projection or statement made available
or given to Management in the performance of such investigation or
otherwise. Without limiting the generality of the foregoing, Management
acknowledges that neither GFC nor any of its Affiliates has made any
representation or warranty to Management with respect to: (i) any
projections, estimates or budgets heretofore delivered or made available to
Management regarding future revenues, expenses, results of operations,
transactions or the financial condition of GFC or (ii) any other
information or documents made available to Management or its counsel,
accountants or advisors.
4.3 GFC. GFC represents and warrants to Management that HI owns,
beneficially and of record, all of the Class A Common Stock of GFC, free
and clear of any Liens and GFC owns, beneficially and of record, directly
or indirectly, all of the outstanding capital stock of each of the GFC
Subsidiaries and the Gruntal & Co Subsidiaries, free and clear of any
Liens.
V
COVENANTS
5.1 Alternative Proposal. Neither GFC nor any of its Affiliates
shall, nor shall GFC or such Affiliate authorize any of their respective
representatives or agents directly or indirectly to, (i) solicit, or enter
into, commence or participate in any discussions or negotiations with any
person (other than Management) that indicates an interest in effecting, an
Alternative Proposal or execute a letter of intent, agreement in principle
or definitive agreement with respect to an Alternative Proposal or (ii) in
connection with any Alternative Proposal, furnish, or cause to be
furnished, to any such person any information concerning the business,
financial condition, results of operations, operations, properties or
assets of GFC or any of its Subsidiaries. If GFC, its Affiliates, and their
respective representatives and agents shall have acted as contemplated by
the immediately preceding sentence and any person shall submit an
unsolicited Alternative Proposal to GFC, the Company or HI, GFC shall
promptly notify Management of the terms and conditions of such Alternative
Proposal, including the identity of such person. After such notification
GFC may (A) upon the execution and delivery by such person of a
confidentiality agreement containing such restrictions as are customary in
such type of transactions, furnish, or cause to be furnished, to such
person any information reasonably requested concerning the business,
financial condition, results of operations, operations, properties or
assets of GFC or any of its Subsidiaries, (B) enter into, commence or
participate in any discussions or negotiations with such person, or execute
a letter of intent, agreement in principle or definitive agreement with
such person, and (C) at any time by notice to Management terminate this
Agreement if the Board of Directors of GFC determines in its good faith
judgment, based on the advice of its financial and legal advisors, that (x)
the Board of Directors of GFC, the Company or HI has a fiduciary duty under
applicable law to take such action, (y) the Alternative Proposal represents
a higher value for GFC than the Transactions or (z) the Insurance
Regulators have informed GFC, the Company or HI that such Insurance
Regulators have determined that it is in the interest of HI and its
policyholders for GFC to effect the Alternative Proposal rather than to
consummate the Transactions.
5.2 Reasonable Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement and the other Transaction Documents
(including, without limitation, executing any additional instruments
necessary to consummate the transactions contemplated hereby or thereby).
In case at any time after the Closing Date any further action is necessary
to carry out the purposes of this Agreement, each of the parties hereto
will cause its proper officers and directors to use all reasonable efforts
to take all such necessary action.
5.3 Consents.
(a) Each of the parties shall cooperate, and use all
reasonable efforts, in as timely a manner as is reasonably practicable, to
make all filings and applications, and obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, necessary to consummate
the transactions contemplated by this Agreement and the other Transaction
Documents. Each of the parties hereto will furnish to the other party such
necessary information and reasonable assistance as such other persons may
reasonably request in connection with the foregoing and will provide the
other party with copies of all filings made by such party with any
governmental or regulatory entity or any other information supplied by such
party to a governmental or regulatory entity in connection with this
Agreement or the other Transaction Documents and the transactions
contemplated hereby and thereby.
(b) The parties shall cooperate (i) to obtain all approvals
(the "Insurance Regulatory Approvals") of any insurance regulatory
authority required in connection with the consummation of the Transactions
("Insurance Regulators"); (ii) to obtain all approvals (the "Other
Regulatory Approvals") of any securities or commodities regulatory
authority (including the SEC, the NYSE, the National Futures Association
and the National Association of Securities Dealers, Inc.) required in
connection with the consummation of the Transactions, including the
transactions contemplated by the Subordinated Loan Amendment (the
"Securities and Commodities Regulators"); (iii) to obtain all consents,
waivers or approvals (the "Non-Regulatory Consents") of any person required
in connection with the consummation of the Transactions; and (iv) to make
all filings and applications necessary to consummate the Transactions.
(c) The parties will keep each other advised of any material
communications with or requests received (in writing or orally) from any
Insurance Regulator or Securities and Commodities Regulator concerning the
Insurance Regulatory Approvals or the Other Regulatory Approvals,
respectively.
5.4 Public Announcements. The parties will keep all non-public
information regarding the Transactions confidential and will consult with
each other before issuing any press release or making any public filing
with respect to the Transactions and shall not issue any such press release
or make any such public filing prior to such consultation, except as may be
required by law.
5.5 Tangible Book Value.
(a) Management shall prepare (i) an unaudited consolidated
statement of financial condition of GFC as of the Closing Date, (ii) an
unaudited consolidated income statement of GFC for the period from January
1, 1997 to the Closing Date, (iii) a schedule calculating tangible book
value (the "Value") of GFC as of the Closing Date, which Value shall be
based on, and shall be brought forward to the Closing Date from, the
tangible book value of GFC as calculated from the audited financial
statements for GFC for the period ending December 31, 1996, without giving
effect to the Transactions consummated on the Closing Date, and shall set
forth the calculation of the Value in reasonable detail. For the avoidance
of doubt, Value shall not reflect or give effect to the Interim Dividend or
Transaction Expenses, but shall include the Lost Deferred Tax Assets.
(b) As soon as reasonably practicable, but no later than the
date five Business Days prior to the proposed Closing Date, Management
shall deliver to GFC an interim set of the statements and schedule referred
to in Section 5.5(a). In preparing such interim set of statements and
schedule, Management shall be entitled to rely on and use such estimates
and projections as Management considers reasonably necessary to prepare
the statements and the schedule and to calculate the Value as of the
Closing Date.
(c) Within ten Business Days after the Closing Date,
Management shall deliver to GFC a final set of the statements and schedule
referred to in Section 5.5(a).
(d) The Value, as set forth on the schedule delivered
pursuant to Section 5.5(c), shall become final and binding on the parties
hereto on the date which is 20 calendar days after Management has delivered
such schedule to GFC, unless GFC objects by notification in writing to
Management prior to the end of such 20 calendar day period, which objection
shall set forth in reasonable detail the basis of such objection.
(e) The parties shall use their best efforts to reach an
agreement on the amount of the Value after the delivery of such objection.
If such agreement cannot be reached within 10 calendar days after the
delivery of such objection, GFC and Management shall appoint Coopers &
Lybrand, or another nationally recognized accounting firm, to determine the
Value. The Value so determined by such Person shall be final and binding on
the parties hereto. The parties shall cause the fees and expenses of such
Person to be borne by Holdings.
(f) Within three Business Days after the determination of
the Value has become final and binding on the parties hereto: (A) if the
sum of (i) $160 million, (ii) the Interim Dividend and (iii) the aggregate
Transaction Expenses paid or to be paid by Holdings pursuant to Section
8.10(a) is less than such Value, then Management shall cause Holdings to
pay HI an amount equal to the difference between such Value and such sum;
and (B) if such sum is greater than such Value, then GFC shall pay to
Holdings an amount equal to the lower of (i) the Interim Dividend and (ii)
the difference between such sum and such Value.
5.6 Miscellaneous.
(a) On or prior to the date five Business Days prior to the
proposed Closing Date, Management shall deliver to GFC the list of names of
a group of individuals (the "Initial Senior Officers") not more than seven,
who are proposed to be the initial senior officers of Holdings, together
with their proposed titles or positions in Holdings.
(b) Management shall use its reasonable best efforts to
cause Gruntal & Co (or Gruntal & Co LLC, as the case may be) to enter into
a brokerage clearing agreement with Kennedy Cabot as soon as reasonably
practicable, and shall at all times keep GFC apprised of the status and
progress of the negotiation and execution of such agreement, including
furnishing GFC with the initial draft of such agreements and related
documents and any subsequent draft substantially different from a draft
previously delivered.
(c) The parties agree that, after the Closing, the Lost
Deferred Tax Assets shall not be reflected in the financial statements or
reports, or otherwise be carried on the books and records, of Holdings.
VI
CONDITIONS TO CLOSING
6.1 Conditions to Each Party's Obligation to Effect the
Transactions. The respective obligation of each party to effect the
transactions comprising the Transactions is subject to the satisfaction at
or prior to the Closing Date of the following conditions:
(a) No statute, rule or regulation (but not including any
statute, rule or regulation that is an Insurance Regulatory Approval or an
Other Regulatory Approval), or order, decree, or injunction enacted,
entered, promulgated or enforced by any court or governmental authority
shall be in effect which prohibits or restricts the consummation in any
material respect of the Transactions to be consummated on the Closing Date;
(b) The Insurance Regulatory Approvals and the Other
Regulatory Approvals shall have been obtained on terms reasonably
satisfactory to each of the parties hereto;
(c) The Value set forth in the interim schedule delivered to
the parties pursuant to Section 5.5(b), minus Transaction Expenses
estimated pursuant to Section 6.2(f)(y), shall have been not less than $160
million;
(d) The Lost Deferred Tax Assets set forth in the interim
statements and schedule delivered to the parties pursuant to Section 5.5(b)
shall not have been greater than $11 million;
(e) All intercompany indebtedness from GFC and its
Subsidiaries, on the one hand, to the Company and HI, on the other hand, in
excess of the principal amount set forth in the Subordinated Loan Amendment
shall have been extinguished, canceled, terminated or otherwise paid in
full, and all tax sharing or other similar agreements between the Company
and HI, on the one hand, and GFC and its Subsidiaries, on the other, shall
have been terminated;
(f) The Services Agreements, Swap and Investment Management
Amendment and the Subordinated Loan Amendment shall each have been executed
and delivered and become effective;
(g) Holdings, Management, Gruntal & Co LLC, each Gruntal &
Co Subsidiary LLC and each Management/GMS LLC, on the one hand, and the
Company, HI and GFC and their respective Subsidiaries, on the other, shall
have entered into a mutual release, substantially in the form of Exhibit
6.1G hereto, irrevocably releasing the other from any and all obligations
or liabilities owed to it, other than the obligations and liabilities under
(x) this Agreement and the other Transaction Documents and (y) the
agreements or instruments set forth in Exhibit 6.1GY; and
(h) The conditions to closing under each of the Transaction
Documents to be satisfied as of the Closing Date shall have been satisfied
or waived by the parties thereto.
6.2 Conditions to the Obligation of GFC. The obligation of GFC to
effect the Transactions is further subject to the satisfaction or waiver at
or prior to the Closing Date of the following conditions:
(a) The representations and warranties made to GFC in this
Agreement and the other Transaction Documents to which it is party shall be
true and correct in all material respects as of the date when made, and at
and as of the Closing Date as if made at and as of such time;
(b) Management shall have performed in all material respects
its obligations under this Agreement and the other Transaction Documents to
which it is a party required to be performed by it at or prior to the
Closing Date pursuant to the terms hereof and thereof;
(c) GFC shall have received a copy of a fairness opinion,
addressed to it, the Company and HI, substantially in the form of Exhibit
6.2C hereto, from Donaldson, Lufkin & Jenrette Securities Corp., to the
effect that the consideration to be received by HI is fair from a financial
point of view; and the Board of Directors of the Company shall have
determined, based on a report from Donaldson, Lufkin & Jenrette Securities
Corp. of the terms on which unaffiliated third parties have offered to
Donaldson, Lufkin & Jenrette Securities Corp. to enter into transactions
comparable to the Swap and Investment Management Amendment, that the terms
of the transactions contemplated by the Swap and Investment Management
Amendment are no less favorable to GFC and HI than would be obtainable at
the time for a comparable transaction on an arm's-length basis from an
unrelated third party;
(d) GFC shall have received a copy of a legal opinion,
addressed to the Board of Directors of the Company, substantially in the
form of Exhibit 6.2D hereto, from Paul, Weiss, Rifkind, Wharton & Garrison;
(e) GFC shall have received copies of the legal opinion,
from Debevoise & Plimpton and the general counsel of Gruntal & Co,
addressing the items set forth in Exhibit 6.2E hereto;
(f) HI shall have received a cash dividend (the "Interim
Dividend") from GFC in an amount equal to the excess, if any, of (x) the
Value set forth in the schedule delivered by Management pursuant to Section
5.5(b) over (y) the sum of $160 million and the Transaction Expenses
reasonably estimated to be paid or borne by Holdings pursuant to Section
8.10(a);
(g) The Registration Rights Agreement shall have been
executed and delivered by Holdings;
(h) The Non-Regulatory Consents (other than those the
failure to obtain would not have a Material Adverse Effect) applicable to
the Transactions contemplated by the Transaction Documents to which GFC or
any of its Affiliates is a party shall have been obtained on terms
reasonably satisfactory to GFC;
(i) The employment arrangements between the Initial Senior
Officers and GFC or its Affiliates, and related documents, including the
letter of credit from The Bank of New York dated February 14, 1996 with
respect to the employment agreement of Lee Fensterstock, and the guaranty
dated November 16, 1995 by HI, the Company and Zurich Centre Investments
Limited, a Bermuda corporation, with respect to the employment agreement of
Robert Rittereiser, shall each have been terminated;
(j) HI shall have received a funding commitment from Zurich
Centre Investments Limited with respect to the Swap and Investment
Management Amendment, similar to the funding commitment HI received with
respect to the Portfolio Value Swap Agreement;
(k) The Annual Incentive Compensation Plan shall have been
adopted by Management;
(l) Such directors and officers of GFC as GFC may request
shall have resigned and such resignation shall have become effective;
Management shall have delivered the corporate books and records of GFC to
GFC; and
(m) Management shall have furnished GFC with such
certificates and other documents evidencing the fulfillment of the
conditions set forth in this Section 6.2 as GFC may reasonably request.
6.3 Conditions to the Obligations of Management. The obligations
of Management to effect the Transactions are further subject to the
satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(a) The representations and warranties of GFC contained in
this Agreement and the Transaction Documents shall be true and correct in
all material respects as of the date when made, and at and as of the
Closing Date as if made at and as of such time;
(b) GFC shall have performed in all material respects its
obligations under this Agreement and the Transaction Documents required to
be performed by it at or prior to the Closing Date pursuant to the terms
hereof or thereof;
(c) Management shall have received copies of the legal
opinion from Paul, Weiss, Rifkind, Wharton & Garrison, addressing the items
set forth in Exhibit 6.3C;
(d) Management shall have received a certificate from HI,
representing and warranting that, to HI's knowledge, without any
investigation or verification thereof, upon the consummation of the
Transactions at the Closing as provided for in this Agreement, (i) each of
the Gruntal & Co Subsidiary LLCs will acquire good and valid title to all
of the assets of the respective Gruntal & Co Subsidiary, (ii) each of the
Management/GMS LLCs will acquire good and valid title to all of the assets
of the respective GFC Subsidiary, (iii) Gruntal & Co LLC will acquire good
and valid title to all of the assets of Gruntal & Co and (iv) Holdings will
acquire good and valid title to GFC's membership interests in Gruntal & Co
LLC and each of the Management/GMC LLCs, in each case, free and clear of
any Lien other than any liabilities arising in the ordinary course of
business of GFC or the relevant Subsidiary;
(e) The Guaranty Agreement shall have been executed and
delivered by Gruntal & Co LLC; and
(f) GFC shall have furnished Management with such
certificates and other documents evidencing the fulfillment of the
conditions set forth in this Section 6.3 as Management may reasonably
request.
VII
TERMINATION; AMENDMENT; WAIVER
7.1 Termination.
(a) This Agreement may be terminated and abandoned at any
time prior to the Closing Date:
(i) by mutual written consent of the parties hereto;
(ii) by either party hereto upon notice to the other,
if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting any of the transactions intended to occur on the Closing
Date and such order, decree, ruling or other action shall have become
final and non-appealable;
(iii) by either party hereto upon notice to the other,
if the Closing Date shall not have occurred by August 24, 1997 and the
failure of the Closing to occur is not due to the material breach of
any material covenant or agreement on the part of such party set forth
in this Agreement or any of the Transaction Documents; and
(iv) by GFC pursuant to Section 5.1.
7.2 Effect of Termination.
(a) In the event of the termination and abandonment of this
Agreement pursuant to Section 7.1 hereof, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders, other than the provisions
of Sections 5.4, 7.2, 8.3, 8.4, 8.9 and 8.10(b).
(b) Without limiting the effects of Section 7.1(a), upon any
termination or abandonment of this Agreement prior to the consummation of
the Transactions, pursuant to Section 7.1(a) or otherwise, or any complete
setting aside or unwinding of the Transactions at any time, nothing herein
or in any other Transaction Documents shall terminate or otherwise affect,
or be deemed to terminate or otherwise affect, any of the rights and
obligations of the parties hereto or their Affiliates existing prior to the
execution or delivery of this Agreement, or prior to the consummation of
the Transactions, including the rights and obligations of the Initial
Senior Officers under their existing employment agreements and related
documents with GFC or its Affiliates. It is the intention of the parties
hereto that if, following consummation, the Transactions are partially set
aside or unwound, the Initial Senior Officers shall be restored to a
position neither worse nor better than their current position with respect
to GFC and its Affiliates, including their rights and obligations under
their existing employment agreements and related documents with GFC or its
Affiliates.
(c) Nothing contained in this Section 7.2 shall relieve any
party from liability for any breach of this Agreement.
7.3 Amendments and Waivers. The provisions of this Agreement may
not be changed or modified, except by an agreement in writing signed by the
parties hereto. The provisions of this Agreement may not be waived or
discharged, except by an agreement in writing signed by the party against
whom enforcement of any waiver or discharge is sought.
VIII
MISCELLANEOUS
8.1 Survival. The representations and warranties made in
Article IV hereof shall not survive the Closing.
8.2 Entire Agreement. This Agreement (including the exhibits and
the agreements and other documents referred to herein, including, without
limitation, the other Transaction Documents) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior negotiations, commitments, agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof.
8.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (regardless
of the laws that might otherwise govern under applicable principles of
conflicts law) as to all matters, including, without limitation, matters of
validity, construction, effect, performance and remedies.
8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed effective or given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed
delivery by a recognized courier service or an affidavit of the messenger
when delivered by hand or (c) the expiration of seven calendar days after
the day when mailed by certified or registered mail, postage prepaid,
addressed at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to GFC, to:
Gruntal Financial Corp.
c/o The Home Insurance Company
59 Maiden Lane
New York, New York 10038
Telephone: (212) 530-6600
Telecopy: (212) 530-6143
Attention: General Counsel
With copies to:
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Bertil Lundqvist, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telephone: (212) 373-3000
Telecopy: (212) 757-3990
Attention: Albert P. Hand, Esq.
(b) If to Management, to:
Robert P. Rittereiser
Chairman of the Board and CEO
Gruntal & Co., Incorporated
Fourteen Wall Street
New York, New York 10005-2176
With copies to:
Joanne T. Marren, Esq.
Executive Vice President
and General Counsel
Gruntal & Co., Incorporated
Fourteen Wall Street
New York, New York 10005-2176
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Telephone: (212) 909-6775
Telecopy: (212) 909-6836
Attention: Michael W. Blair, Esq.
8.5 Successors and Assigns; No Third Party Beneficiaries. This
Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party (whether by operation
of law or otherwise) without the prior written consent of the other party,
except that (i) any party may assign its rights (but not its obligations)
hereunder and under the Transaction Documents to one or more of its wholly
owned Subsidiaries and (ii) GFC may at any time assign its rights and
obligations hereunder and under the other Transaction Documents to HI or
any other wholly owned Subsidiary of HI. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
8.7 Interpretation. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
8.8 Legal Enforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
8.9 Brokerage Fees and Commissions.
(a) GFC represents and warrants to Management that no person
(other than Donaldson, Lufkin & Jenrette Securities Corp.) is entitled to
receive from it or its Affiliates any investment banking, brokerage or
finder's fee or fees for financial consulting or advisory services in
connection with this Agreement or any of the transactions contemplated
hereby.
(b) Management represents and warrants to GFC that no person
is entitled to receive from it any investment banking, brokerage or
finder's fee or fees for financial consulting or advisory services in
connection with this Agreement or any of the transactions contemplated
hereby.
8.10 Expenses.
(a) The parties shall cause Holdings to bear all expenses in
connection with the negotiation and consummation of the Transactions,
including $4,361,537 incurred or made in connection with the Repurchase,
and the fees and expenses of the legal and financial advisers incurred,
paid or reimbursed by the parties participating in the negotiation and
consummation of the Transactions and their Affiliates (including the fees
and expenses of (i) Chadbourne & Parke LLP, Debevoise & Plimpton, Skadden,
Arps, Slate, Meagher & Flom, LLP and Paul, Weiss, Rifkind, Wharton &
Garrison and (ii) Lazard Freres & Co., Donaldson, Lufkin and Jenrette
Securities Corp. and Merrill Lynch & Co.).
(b) If this Agreement is terminated and the Transactions are
not consummated, GFC shall bear all fees and expenses (including those of
the advisers named in Section 8.10(a)) incurred, paid or reimbursed by the
parties and their Affiliates in connection with the negotiation of this
Agreement and the attempted consummation of the Transactions.
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
GRUNTAL FINANCIAL CORP.
By /s/ Robert P. Rittereiser
--------------------------
Name:
Title:
THE 1880 GROUP LLC
By /s/ Robert P. Rittereiser
--------------------------
Name:
Title:
LIMITED LIABILITY COMPANY AGREEMENT
OF
GRUNTAL FINANCIAL, L.L.C.
Dated: March __, 1997
TABLE OF CONTENTS
Page
ARTICLE I NAME; TERM..........................................1
1.1 The Company.........................................1
1.2 Company Name........................................1
1.3 Effective Date......................................1
1.4 Term................................................1
1.5 Purposes............................................1
1.6 Offices.............................................2
1.7 Filings.............................................2
1.8 Certain Definitions.................................2
1.9 Glossary............................................9
ARTICLE II CAPITAL CONTRIBUTIONS; CAPITALACCOUNTS; ALLOCA-
TIONS; DISTRIBUTION................................13
2.1 Initial Capital Contribution.......................13
2.2 Additional Contributions...........................13
2.3 Capital Accounts...................................13
2.4 Allocations; Guaranteed Payments...................15
2.5 Allocations for Tax Purposes.......................17
2.6 Distributions......................................17
2.7 No Return..........................................19
2.8 Withholding........................................19
ARTICLE III ACCOUNTING; FINANCIAL AND TAX MATTERS..............20
3.1 Books and Records; Reports.........................20
3.2 Fiscal Year........................................21
3.3 Compensation.......................................21
3.4 Bank and Investment Accounts.......................22
3.5 Tax Matters Person.................................22
3.6 Tax Elections and Accounting Decisions.............22
3.7 Classification as a Partnership....................22
3.8 Valuation..........................................23
ARTICLE IV MEETINGS OF MEMBERS AND MANAGEMENT OF THE
COMPANY............................................23
4.1 Meeting of Members.................................23
4.2 Quorum of Members; Adjournment.....................23
4.3 Management of the Company..........................24
4.4 Appointment and Removal of Directors...............24
4.5 Committees.........................................25
4.6 Meetings of the Executive Committee................26
4.7 Quorum and Voting..................................26
4.8 Procedural Matters of the Executive Committee......27
4.9 Officers...........................................27
4.10 Chairman...........................................28
4.11 Certain Actions....................................29
4.12 Rights and Obligations of Members..................32
4.13 Increase in the Size of Executive Committee........32
ARTICLE V INDEMNIFICATIONS AND OTHER PROCEDURES..............33
5.1 Limitation of Liabilities..........................33
5.2 Indemnification of Directors and other Persons.....34
5.3 Indemnification of GFC.............................35
5.4 Procedure for Indemnification......................35
5.5 Certain Procedures.................................36
ARTICLE VI TERMINATION; DISSOLUTION; LIQUIDATION AND WIND-
ING-UP; LIQUIDITY EVENTS...........................37
6.1 Termination of the Company.........................37
6.2 Dissolution Events.................................37
6.3 Liquidation and Winding-Up.........................37
6.4 Calculation of Gain or Loss........................38
6.5 Survival of Rights, Duties and Obligations.........38
6.6 Distributions Following a Liquidity Event..........39
6.7 Certain Provisions in Liquidity Events.............39
6.8 Claims of Members..................................39
ARTICLE VII TRANSFER OF LLC INTERESTS..........................40
7.1 Transfers of Interests.............................40
7.2 Tag-Along Rights...................................41
7.3 Transfer after the Fourth Anniversary..............42
7.4 Other Transfer Restrictions........................44
7.5 Admission of Additional Members by the Company.....45
7.6 Additional or Substituted Members..................46
7.7 Withdrawal of Members..............................46
7.8 Election to Adjust Tax Basis.......................46
7.9 No Removal.........................................47
ARTICLE VIII GENERAL PROVISIONS.................................47
8.1 Notices............................................47
8.2 Third Party Beneficiary............................47
8.3 Non-Waiver.........................................47
8.4 Amendments.........................................47
8.5 Further Assurances.................................47
8.6 Applicable Law.....................................48
8.7 Severability.......................................48
8.8 Counterparts.......................................48
8.9 Usage..............................................48
8.10 Table of Contents and Headings.....................48
8.11 Investment Representation..........................48
Schedules
1.8 Calculation of Initial Preferred C Nominal Amount; Example
2.1 Initial Capital Contributions; Addresses of the Members
4.4 Initial Directors
4.9 Initial Senior Officers
LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") of
GRUNTAL FINANCIAL, L.L.C., a Delaware limited liability company (the
"Company"), dated March __, 1997, entered into by GRUNTAL FINANCIAL CORP.
("GFC") and THE 1880 GROUP LLC (the "Management Group").
The Company was previously formed by GFC in accordance
with the Limited Liability Company Act of the State of Delaware, as
amended from time to time (the "Act"). GFC desires to cause the Company
to admit the Management Group as, and the Management Group desires to
become, a second member of the Company (GFC and the Management Group
being referred to herein as "Members," which term shall also include such
other persons who shall become members of the Company in accordance with
the terms of this Agreement and the Act). The Members desire to set forth
the terms and conditions for the operation of the Company after such
admission.
A glossary of the defined terms used herein appears in
Section 1.9.
Accordingly, the Members agree as follows:
ARTICLE I
NAME; TERM
1.1 The Company. The Company shall be governed by the
terms and conditions of this Agreement.
1.2 Company Name. The name of the Company shall be
"GRUNTAL FINANCIAL, L.L.C." The Company may change its name at any time
in accordance with the provisions of the Act.
1.3 Effective Date. This Agreement shall become effective
upon the consummation of the Transactions and the execution and delivery
of this Agreement by the parties hereto.
1.4 Term. The Company shall have perpetual existence and
shall dissolve and its affairs shall be wound up in accordance with the
Act and this Agreement upon the termination or dissolution of the Company
in accordance with the terms of this Agreement.
1.5 Purposes. The Company is organized to conduct the
business heretofore conducted by GFC and such other businesses for which
limited liability companies may be organized under the Act.
1.6 Offices. The principal office of the Company shall be
established and maintained at New York, New York, or at such other or
additional place or places as the Executive Committee shall from time to
time determine. The resident agent of the Company in the State of
Delaware shall be the [The Corporation Service Company, currently at 1013
Centre Road, Wilmington, New Castle County, Delaware 19805]. The Company
may have other offices, either within or outside of the State of
Delaware, at such place or places as the Executive Committee may from
time to time designate or the business of the Company may require.
1.7 Filings. The Members promptly shall execute and
deliver such documents and perform such acts consistent with the terms of
this Agreement as may be necessary to comply with the requirements of law
for the qualification and operation of a limited liability company under
the laws of each jurisdiction in which the Company shall conduct
business.
1.8 Certain Definitions. As used in this Agreement, terms
not defined herein have the meanings ascribed thereto by the Act, and the
following terms have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls, or is controlled by, or is
under common control with, such Person. For this purpose, "control" means
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
the exercise of Voting Control, by contract, or otherwise.
"Book Basis" means, with respect to any asset, such
asset's Tax Basis, except as follows: (i) the initial Book Basis of any
asset contributed by a Member shall be the fair market value of such
asset at the time of contribution (as determined pursuant to Section
3.8), and in the case of an asset which is part of the Initial Capital
Contribution, the fair market value of such asset shall be as set forth
on Schedule 2.1 annexed hereto; (ii) the Book Basis of all assets shall,
if the Executive Committee so determines, be adjusted to equal their fair
market values (as determined pursuant to Section 3.8), and to the extent
set forth in section 1.704-1(b)(2)(iv)(f) under the Regulations, in
connection with a contribution of money or other property to the Company
by a new or existing Member as consideration for an interest in the
Company, a liquidation of the Company, or a distribution of money or
other property by the Company to a withdrawing or continuing Member as
consideration for an interest in the Company; (iii) the Book Basis of any
asset distributed by the Company shall be its fair market value on the
date of distribution (as determined pursuant to Section 3.8); and (iv) if
the Book Basis of any asset is determined under clause (i), (ii) or
(iii), it shall thereafter be adjusted to take into account any Book
Depreciation taken into account with respect to such asset for purposes
of determining Net Income or Net Loss.
"Book Depreciation" means the amount of any depreciation
or other cost recovery deductions with respect to any asset for any year
determined in accordance with the methods used for Federal income tax
purposes.
"CDL" shall mean Zurich's right to receive distributions
pursuant to Sections 2.6(a)(i)(H), 2.6(a)(i)(I) (with respect to Tax
Distributions pursuant to Section 2.6(a)(i)(H) only), 2.6(a)(iv)(y)(3)
and 6.6(e) of this Agreement.
"CDL Accrual" for any period means the sum of (i)
two-fifteenths (2/15) of the Preferred A Return for such period, plus
(ii) an amount equal to the interest that would accrue for such period at
a rate equal to seven and one-half (7.5%) per annum, compounded annually,
on the Unpaid CDL Amount.
"Closing Date" shall have the meaning set forth in the
Reorganization Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Final Determination" means (i) a decision, judgement,
decree or other order by any court of competent jurisdiction which
decision, judgement, decree or other order has become final (i.e., when
all allowable appeals thereof have been exhausted by either party to the
action, or the time for filing such appeal has expired), (ii) a closing
agreement entered into under section 7121 of the Code or any other
settlement agreement entered into in connection with an administrative or
judicial proceeding or (iii) the expiration of the time for instituting a
claim for refund or, if such a claim was filed, the expiration of the
time for instituting suit with respect thereto.
"Home" means The Home Insurance Company, a New Hampshire
domiciled property and casualty stock insurance company.
"Home NOL Event" means, with respect to a taxable period,
that Home, for any reason, is not able to offset income from the Company
with current losses, or existing or future net operating loss
carryforwards for Federal income tax purposes (determined without taking
into account the effect of section 56(d)(1)(A) of the Code). In the event
of a Final Determination that disallows Home's use of net operating loss
carryforwards for a past taxable period, a Home NOL Event will have
occurred in such past taxable period, and to the extent such net
operating loss carryforwards are disallowed, Home will receive Tax
Distributions for such periods pursuant to, and in the priority of,
Section 2.6(a)(i)(I). A Home NOL Event will be deemed not to have
occurred with respect to any taxes that Home has no current duty to pay
because its tax liability is subordinate to policy holders, unless the
Insurance Commissioner of the State of New Hampshire directs Home to
pay such taxes. A Home NOL Event shall not be effective for purposes of
this Agreement for a taxable period unless the Company has received a
certificate for such taxable period signed by the Chief Financial Officer
of Home to the effect that a Home NOL Event has occurred and the date on
which such event occurred.
"Initial Preferred A Nominal Amount" means $160 million
minus the product of (i) 50% and (ii) the Lost Deferred Tax Assets.
"Initial Preferred B Nominal Amount" means $70 million.
"Initial Preferred C Nominal Amount" means the value on
the Closing Date of the LTIP, calculated as set forth in Schedule 1.8.
"Lien" has the meaning set forth in the Reorganization
Agreement.
"Liquidity Event" means:
(i) any merger, consolidation, amalgamation or other
business combination transaction of the Company or any of its material
Subsidiaries with another Person;
(ii) any conveyance, sale, lease, transfer or other
disposition of, in a single transaction or in a related series of
transactions, a material portion of the business or assets of the Company
or any of its material Subsidiaries;
(iii) any recapitalization, reorganization or similar
restructuring transaction involving the Company or any of its material
Subsidiaries; any reclassification of or with respect to any class of
membership interest of the Company or any of its material Subsidiaries;
(iv) any liquidation, winding up or dissolution of the
Company or any of its material Subsidiaries; the commencement by the
Company or any of its material Subsidiaries of a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or the consent by it to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or the
making by it of a general assignment for the benefit of creditors, or the
failure by it generally to pay its debts as they become due, or the
taking by it of any organizational action to authorize any of the
foregoing;
(v) if an involuntary case or other proceeding shall be
commenced against the Company or any of its material Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, the failure by the Company or such Subsidiary to
take any action to dismiss or stay such involuntary case or other
proceeding, or the failure by the Company or such Subsidiary to take any
action to contest any order for relief entered against the Company or any
of its material Subsidiaries under any such laws as now or hereafter in
effect;
(vi) any issuance and sale, pursuant to a public offering
or private placement, of any profit share or interest (including any LLC
Interests) of the Company or any of its material Subsidiaries or any
securities or rights of any kind convertible into or exchangeable for
such profit share or interest, or any option, warrant, put, call or other
arrangement of any kind to purchase or otherwise receive from the Company
or such Subsidiary any such profit share or interest; or
(vii) any other extraordinary transaction involving the
Company or any of its material Subsidiaries.
References in the foregoing definition to a material Subsidiary of the
Company shall include Gruntal & Co., L.L.C. and any other Significant
Subsidiary of the Company, and references to the Company or Gruntal &
Co., L.L.C. shall include references to their respective successors.
"Lost Deferred Tax Assets" has the meaning set forth in
the Reorganization Agreement.
"Net Income or Net Loss" means, for each taxable year, an
amount equal to the Company's taxable income or loss, respectively, for
such taxable year determined in accordance with section 703(a) of the
Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to section 703(a)(1) of the
Code shall be included in taxable income or loss) and treating as an
expense the guaranteed payments accrued pursuant to section 2.4(c), with
the following adjustments: (i) any income of the Company that is exempt
from Federal income tax and not otherwise taken into account in computing
Net Income and Net Loss pursuant to this definition shall be added to
such taxable income or loss; (ii) any expenditures of the Company
described in section 705(a)(2)(B) of the Code or treated as such pursuant
to section 1.704-1(b)(2)(iv)(i) under the Regulations and not otherwise
taken into account in computing Net Income or Net Loss pursuant to this
definition shall be subtracted from such taxable income or loss; (iii)
items of income, gain, deductions or losses specially allocated
pursuant to Sections 2.3(e) and 2.4(f) in any year shall be excluded from
the calculation of taxable income or loss for such year; and (iv) with
respect to items relating to any asset the Book Basis of which differs
from its Tax Basis, as described in the following sentence. For purposes
of computing Net Income or Net Loss, (A) the amount of gain or loss with
respect to the disposition of any such asset shall be determined by the
difference between the amount realized with respect to such disposition
and such asset's Book Basis, (B) if the Book Basis of any such asset is
adjusted pursuant to clause (ii) or (iii) in the definition of Book
Basis, the amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset, and (C) the amount of Book
Depreciation for any year shall equal the amount that bears the same
ratio to the Book Basis of such asset as the depreciation or other cost
recovery deduction computed for Federal tax income tax purposes bears to
the Tax Basis of such asset.
"Person" means individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company,
trust, estate, unincorporated organization, governmental authority or
other entity.
"Preferred A Nominal Amount" as of any date means the sum
as of such date of (i) the Unpaid Initial Preferred A Nominal Amount,
plus (ii) the Unpaid Preferred A Return as of the end of the prior fiscal
year.
"Preferred A Return" means seven and one half percent
(7.5%) per annum, compounded annually, on the Preferred A Nominal Amount.
"Preferred B Nominal Amount" as of any date means the sum
as of such date of (i) the Unpaid Initial Preferred B Nominal Amount, and
(ii) the Unpaid Preferred B Return as of the end of the prior fiscal
year.
"Preferred B Return" means ten percent (10%) per annum,
compounded annually, on the Preferred B Nominal Amount.
"Preferred C Nominal Amount" as of any date means the sum
as of such date of (i) the Unpaid Initial Preferred C Nominal Amount,
plus (ii) the Unpaid Preferred C Return as of the end of the prior fiscal
year.
"Preferred C Return" means ten percent (10%) per annum,
compounded annually, on the Preferred C Nominal Amount.
"Registration Rights Agreement" means the Registration
Rights Agreement dated the date hereof between GFC and the Company.
"Regulations" means the regulations promulgated under the
Code.
"Reorganization Agreement" means the Reorganization
Agreement dated February 24, 1997 between GFC and the Management Group.
"Significant Subsidiary" means, a Subsidiary (including
its Subsidiaries) of a Person the net worth (calculated in accordance
with generally accepted accounting principles consistently applied) of
which Subsidiary equals or exceeds 25% of the consolidated net worth
(calculated in accordance with generally accepted accounting principles
consistently applied) of such Person, as such consolidated net worth is
set forth in the most recent available quarterly or annual financial
statements of such Person.
"Subsidiary" means, with respect to any Person, any other
Person of which, at the time as of which any determination is being made,
such first mentioned Person or one or more of its Subsidiaries has,
directly or indirectly, Voting Control.
"Tax Basis" means, with respect to any asset, such asset's
adjusted basis for Federal income tax purposes.
"Tax Distribution Amount" means, (i) with respect to a
class of LLC Interest of a Member, for a taxable year, the product of (A)
the taxable income allocable to such LLC Interest pursuant to this
Agreement for such taxable year, excluding taxable income allocated
pursuant to section 2.4(a)(i), but including, in the case of the
Preferred A Interest, taxable income accrued to GFC with respect to the
Preferred A Return, and (B) the Tax Rate for such taxable year, provided
that the Tax Distribution Amount with respect to income allocated to GFC
pursuant to Sections 2.4(a)(iii) and (iv) shall be zero with respect to
periods prior to the occurrence of a Home NOL Event, and (ii) with
respect to the CDL, the product of (A) taxable income accrued to Zurich
with respect to the CDL under U.S. Federal tax principles, and (B) the
Tax Rate for such year.
"Tax Matters Person" has the same meaning as the term "tax
matters partner" as such term is defined in section 6231(a)(7) of the
Code.
"Tax Rate" for a taxable year means the maximum overall
rate of Federal, state and local personal income tax (taking into account
the deductibility of state and local taxes for federal income tax
purposes and the differential, if any, in tax rates applicable to capital
gains and ordinary income) payable by an individual resident of New York
City with respect to income of the Company, as determined by the
Company's auditors.
"Transactions" has the meaning set forth in the
Reorganization Agreement.
"Unallocated Preferred B Nominal Amount" means, as of any
date, the excess, if any, of (a) the Initial Preferred B Nominal Amount
over (b) the amount of Net Income allocated as of such date pursuant to
Section 2.4(a)(iii)(A).
"Unallocated Preferred B Return" means, as of any date,
the excess, if any, of (a) accrued Preferred B Return through such date
over (b) the amount of Net Income allocated as of such date pursuant to
Section 2.4(a)(ii)(A).
"Unallocated Preferred C Nominal Amount" means, as of any
date, the excess, if any, of (a) the Initial Preferred C Nominal Amount
over (b) the amount of Net Income allocated as of such date pursuant to
Section 2.4(a)(iii)(B).
"Unallocated Preferred C Return" means, as of any date,
the excess, if any, of (a) accrued Preferred C Return through such date
over (b) the amount of Net Income allocated as of such date pursuant to
Section 2.4(a)(ii)(B).
"Unpaid CDL Amount" means, as of any date, the excess, if
any, of (a) the aggregate CDL Accrual through and including such date
over (b) the sum of all distributions made as of such date pursuant to
Sections 2.6(a)(i)(H), 2.6(a)(i)(I) (with respect to Tax Distributions
pursuant to Section 2.6(a)(i)(H) only), 2.6(a)(iv)(y)(3) and 6.6(e).
"Unpaid Initial Preferred A Nominal Amount" means, as of
any date, the excess, if any, of (a) the Initial Preferred A Nominal
Amount over (b) distributions made as of such date pursuant to Sections
2.6(a)(iv)(x), 2.6(a)(v) and 6.6(a).
"Unpaid Initial Preferred B Nominal Amount" means, as of
any date, the excess, if any, of (a) the Initial Preferred B Nominal
Amount over (b) distributions made as of such date pursuant to Sections
2.6(a)(i)(F), 2.6(a)(i)(I) (with respect to Tax Distributions pursuant to
Section 2.6(a)(i)(F) only), 2.6(a)(iv)(y)(1) and 6.6(c)(A).
"Unpaid Initial Preferred C Nominal Amount" means, as of
any date, the excess, if any, of (a) the Initial Preferred C Nominal
Amount over (b) distributions made as of such date pursuant to Sections
2.6(a)(i)(B), 2.6(a)(i)(I) (with respect to Tax Distributions pursuant to
Section 2.6(a)(i)(B) only), 2.6(a)(iv)(y)(2) and 6.6(c)(B).
"Unpaid Preferred A Return" means, as of any date, the
excess, if any, of (a) accrued Preferred A Return over (b) the sum of all
distributions made as of such date pursuant to Sections 2.6(a)(i)(D),
2.6(a)(i)(I) (with respect to Tax Distributions pursuant to Section
2.6(a)(i)(D) only), 2.6 (a)(ii) and 6.6(b).
"Unpaid Preferred B Return" means, as of any date, the
excess, if any, of (a) accrued Preferred B Return over (b) the sum of all
distributions made as of such date pursuant to Sections 2.6(a)(i)(E),
2.6(a)(i)(I) (with respect to Tax Distributions pursuant to Section
2.6(a)(i)(E) only), 2.6(a)(iii)(A) and 6.6(d)(A).
"Unpaid Preferred C Return" means, as of any date, the
excess, if any, of (a) accrued Preferred C Return over (b) the sum of all
distributions made as of such date pursuant to Sections 2.6(a)(i)(A),
2.6(a)(i)(I) (with respect to Tax Distributions pursuant to Section
2.6(a)(i)(A) only), 2.6(a)(iii)(B) and 6.6(d)(B).
"Voting Control" means, at any time, the ownership or
control, whether direct or indirect, of outstanding securities,
interests, participations, membership interests or other equivalent
ownership interest (however designated) of a Person that, at such time,
have by the terms thereof ordinary voting power to elect a majority of
the members of the board of directors (or executive committee, or
persons performing similar functions) of such Person.
"Zurich" means _________________.
1.9 Glossary. The following capitalized terms are defined
in the following Sections of this Agreement:
Term Section
Act introductory statement
Affiliate 1.8
Adjustment Amount Schedule 1.8
Agreement introductory statement
Book Basis 1.8
Book Depreciation 1.8
Capital Account 2.3
CDL 1.8
CDL Accrual 1.8
Claim 5.4(a)
Closing Date 1.8
Code 1.8
Common Allocation 2.4(a)
Common Interest 2.1
Company introductory statement
Directors 4.4(a)
Dissolution Event 6.2
Dividends Schedule 1.8
Executive Committee 4.3
Final Determination 1.8
GFC introductory statement
GFC Directors 4.4(a)
GFC Notice 7.3(d)
Home 1.8
Home NOL Event 1.8
Hypothetical Proceeds Schedule 1.8
Indemnified Party 5.4(a)
Indemnitee 5.2(a)
Initial Capital Contribution 2.1
Initial Preferred A Nominal Amount 1.8
Initial Preferred B Nominal Amount 1.8
Initial Preferred C Nominal Amount 1.8
Interests 7.3(e)
Interim Dividend Schedule 1.8
Joined Party 5.5(a)
Lien 1.8
Liquidity Event 1.8
LLC Interests 2.1
Lost Deferred Tax Assets 1.8
LTIP Schedule 1.8
Management Directors 4.4(a)
Management Group introductory statement
Members introductory statement
Net Income or Net Loss 1.8
Offer Notice 7.3(a)
Offer Price 7.3(a)
Person 1.8
Preferred A Interest 2.1
Preferred A Nominal Amount 1.8
Preferred A Return 1.8
Preferred B Interest 2.1
Preferred B Nominal Amount 1.8
Preferred B Return 1.8
Preferred C Interest 2.1
Preferred C Nominal Amount 1.8
Preferred C Return 1.8
Registration Rights Agreement 1.8
Regulations 1.8
Reorganization Agreement 1.8
Representative 4.6(a)
Senior Officers 4.9(d)
Services Agreement 3.3
Significant Subsidiary 1.8
Subsidiary 1.8
Target Schedule 1.8
Tax Basis 1.8
Tax Distribution Amount 1.8
Tax Distributions 2.6(a)(i)
Tax Matters Person 1.8
Tax Rate 1.8
TB Schedule 1.8
TBV 4.13(b)
Threshold 7.3(e)
Transactions 1.8
Transfer 7.1(a)
Unallocated Preferred B Nominal Amount 1.8
Unallocated Preferred B Return 1.8
Unallocated Preferred C Nominal Amount 1.8
Unallocated Preferred C Return 1.8
Unpaid CDL Amount 1.8
Unpaid Initial Preferred A Nominal Amount 1.8
Unpaid Initial Preferred B Nominal Amount 1.8
Unpaid Initial Preferred C Nominal Amount 1.8
Unpaid Preferred A Return 1.8
Unpaid Preferred B Return 1.8
Unpaid Preferred C Return 1.8
Voting Control 1.8
X 4.13(b)
Y 4.13(b)
Zurich 1.8
ARTICLE II
CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS; ALLOCATIONS; DISTRIBUTION
2.1 Initial Capital Contribution. Upon execution of this
Agreement, the Management Group shall contribute to the capital of the
Company the property set forth on Schedule 2.1 hereto opposite its name.
The assets contributed to the Company by GFC and set forth on Schedule
2.1 hereto opposite its name shall be considered contributions of GFC to
the capital of the Company. The respective contributions of each of the
Members set forth on Schedule 2.1 hereto shall be the "Initial Capital
Contribution" of each of the respective Members. The respective interests
(each, an "LLC Interest") of the Members in the Company, shall be as set
forth below, unless and until such percentages shall be changed (i) upon
the admission or withdrawal of any Member or (ii) in connection with
additional contributions to or withdrawal from the capital of the
Company. GFC's interest in the Company shall be (1) 100% of the
"Preferred A Interest,"(2) 100% of the "Preferred B Interest," and (3)
40% of the "Common Interest." The Management Group's interest in the
Company shall be (1) 100% of the "Preferred C Interest," and (2) 60% of
the Common Interest.
2.2 Additional Contributions. No Member shall be required
or obligated to make additional contributions to the capital of the
Company; provided that any Member may make additional contributions to
the capital of the Company in such amounts as the Executive Committee may
approve in exchange for additional LLC Interests with such preferences,
rights and designations and such other terms and conditions as the
Executive Committee may determine, which terms and conditions shall be
set forth in an amendment to this Agreement and adopted pursuant to
Section 8.4.
2.3 Capital Accounts.
(a) A capital account shall be maintained on the books of
the Company for each LLC Interest of each Member (a "Capital Account") in
accordance with the terms of this Section 2.3. The provisions of this
Agreement are intended to comply the capital account maintenance rules of
section 1.704-1(b)(2)(iv) under the Regulations, and shall be interpreted
consistently therewith. Each Member's "capital account" for purposes of
the Regulations promulgated pursuant to section 704 of the Code shall
equal the sum of the Capital Accounts of each LLC Interest of that
Member.
(b) The Capital Account of each LLC Interest shall be
increased by:
(i) the amount of any cash contributed to the capital of
the Company by a Member which is allocated to such LLC Interest,
(ii) the fair market value (net of liabilities that the
Company is considered to assume or take subject to under section 752 of
the Code) of any property (other than cash) contributed to the capital of
the Company by a Member which is allocated to such LLC Interest,
(iii) allocations to such LLC Interest of Net Income
pursuant to Section 2.4(a),
(iv) allocations to such LLC Interest of income pursuant
to Section 2.3(e), and
(v) contributions deemed made pursuant to Section
2.4(f)(i).
For the purposes of this Agreement, GFC's Initial Capital Contribution
shall be allocated to its Preferred A Interest. The initial Capital
Accounts of the Preferred B Interest and the Preferred C Interest shall
be zero.
(c) The Capital Account of each LLC Interest shall be
decreased by:
(i) the amount of any cash distributed to such LLC
Interest, except for cash payments of accrued guaranteed payment (within
the meaning of section 707(c) of the Code) made pursuant to Sections
2.6(a)(i)(D), 2.6(a)(ii) and 6.6(b),
(ii) the fair market value (net of liabilities that such
Member is considered to assume or take subject to under section 752 of
the Code) of any property (other than cash) distributed to such LLC
Interest, except for property payments of accrued guaranteed payment
(within the meaning of section 707(c) of the Code) made pursuant to
Sections 2.6(a)(i)(D), 2.6(a)(ii) and 6.6(b),
(iii) allocations to such LLC Interest of Net Loss
pursuant to Section 2.4(b),
(iv) allocations to such LLC Interest of loss pursuant to
Section 2.3(e), and
(v) allocations pursuant to Section 2.4(f)(ii).
(d) For purposes of determining the amount an LLC
Interest's Capital Account is increased or decreased pursuant to Sections
2.3(b) and (c), respectively, and Section 6.4, assets contributed or
distributed, as the case may be, in kind shall be valued at their fair
market value as determined pursuant to Section 3.8.
(e) Section 704 of the Code and the Regulations issued
thereunder including but not limited to the provisions of such
Regulations addressing qualified income offset provisions, minimum gain
chargeback requirements and allocations of deductions attributable to
nonrecourse debt and partner nonrecourse debt, are hereby incorporated by
reference. If, as a result of the provisions of section 704 of the Code
and the Regulations thereunder, items of income or loss are allocated to
the Members in a manner that is inconsistent with the manner in which the
Members intend to divide Company distributions as reflected in Section
2.6 and 6.6, to the extent permitted under the Regulations items of
future income and loss shall be allocated among the Members so as to
prevent such allocations from distorting the manner in which Company
distributions will be divided among the Members pursuant to this
Agreement.
2.4 Allocations; Guaranteed Payments.
(a) Net Income for each fiscal year shall be allocated
among the LLC Interests, taking into account distributions previously
made, as follows, and in the following order of priority:
(i) first, to reverse allocations of Net Loss previously
made in the following order of priority:
(A) first, 40% to the Common Interest of GFC and 60% to
the Common Interest of Management Group to the extent of cumulative
allocations previously made pursuant to Section 2.4(b)(v) less cumulative
allocations previously made pursuant to this Section 2.4(a)(i)(A);
(B) next, to the Preferred A Interest to the extent of
cumulative allocations previously made pursuant to Section 2.4(b)(iv)
less cumulative allocations previously made pursuant to this Section
2.4(a)(i)(B);
(C) next, to the Preferred B Interest and the Preferred C
Interest in proportion and to the extent of cumulative allocations
previously made pursuant to Section 2.4(b)(iii) less cumulative
allocations previously made pursuant to this Section 2.4(a)(i)(C) to each
such LLC Interest;
(D) next, to the Common Interest of GFC to the extent of
cumulative allocations previously made pursuant to Section 2.4(b)(ii)
less cumulative allocations previously made pursuant to this Section
2.4(a)(i)(D); and
(E) next, 40% to the Common Interest of GFC and 60% to the
Common Interest of Management Group to the extent of cumulative
allocations previously made pursuant to Section 2.4(b)(i) less cumulative
allocations previously made pursuant to this Section 2.4(a)(i)(E); and
(ii) next, to (A) the Preferred B Interest, and (B) the
Preferred C Interest, in proportion and to the extent of the Unallocated
Preferred B Return and the Unallocated Preferred C Return, respectively;
(iii) next, to (A) the Preferred B Interest, and (B) the
Preferred C Interest, in proportion and to the extent of the Unallocated
Preferred B Nominal Amount and the Unallocated Preferred C Nominal
Amount, respectively; and
(iv) thereafter, 40% to the Common Interest of GFC and 60%
to the Common Interest of Management Group (the "Common Allocation").
(b) Net Loss for each fiscal year shall be allocated to
the Members as follows, and in the following order or priority:
(i) first, 40% to the Common Interest of GFC and 60% to
the Common Interest of Management Group, until the Capital Account of the
Common Interest of the Management Group is reduced to zero;
(ii) next, to the Common Interest of GFC to the extent of
the Capital Account balance of such Interest;
(iii) next, to the Preferred B Interest and the Preferred
C Interest, in proportion and to the extent of their Capital Account
balances;
(iv) next, to the Preferred A Interest to the extent of
its Capital Account Balance; and
(v) thereafter, 40% to the Common Interest of GFC and 60%
to the Common Interest of Management Group.
(c) For each fiscal year, the Company shall accrue a
guaranteed payment (within the meaning of section 707(c) of the Code) (i)
to GFC equal to the Preferred A Return for such fiscal year, and (ii) to
the Management Group pursuant to Section 3.3.
(d) Upon any change in the relative LLC Interests of the
Members, whether by reason of the admission or withdrawal of a Member,
the sale or exchange by any Member of all or any part of its LLC
Interest, or otherwise, the Members' shares of all Company items shall be
determined, except as otherwise required by law, by an interim closing of
the Company's books.
(e) For Federal income tax purposes, income, gain, loss
and deduction with respect to property contributed to the Company by any
Member shall be allocated in accordance with section 704(c) of the Code
and the Regulations promulgated thereunder so as to take account of any
difference between the tax basis of such property to the Company and its
value upon contribution. In furtherance of the foregoing, the Executive
Committee shall determine which of the methods prescribed in such
Regulations the Company shall employ.
(f) Notwithstanding any provision in this Agreement to the
contrary, all payments made by the Management Group, in cash, notes or
otherwise, with respect to incentive awards under the Management Group's
Equity Incentive Program for Senior Management shall be treated as (i) a
contribution to the capital of the Company by the Management Group with
respect to its Common Interest and a payment of such amount by the
Company, and (ii) an expense of the Company that is specially allocated
and charged to the Capital Account of the Common Interest of the
Management Group.
2.5 Allocations for Tax Purposes. For each taxable year of
the Company, the income, recognized gains and losses, credits and
deductions of the Company shall be allocated, for federal, state and
local income tax purposes, among the Members in the same manner as
similar items are allocated among the Members for such taxable year of
the Company as provided in this Article II, except as otherwise required
by law. Except as may otherwise be provided herein, whenever a
proportionate part of Net Income or Net Loss of the Company is credited
or charged to a Member's Capital Account for any fiscal year, every item
of income, gain, loss, or deduction entering into the computation thereof
shall be considered either credited or charged, as the case may be, and
every item of credit or tax preference related thereto and applicable to
such fiscal year shall be allocated, to such Capital Account in the same
proportion.
2.6 Distributions.
(a) The Company shall make Tax Distributions within 90
days after the end of each fiscal year in the order of priority set forth
in Section 2.6(a)(i); thereafter, subject to Section 2.6(c), the Company
may make such distributions in such amounts and at such times as may be
determined by the Executive Committee; and, if the Executive Committee
determines to make such a distribution, such distribution shall be paid
in the order of priority set forth in Section 2.6(a)(ii) through (vi):
(i) "Tax Distributions" for a fiscal year shall be made in
the following order of priority:
(A) first, to the Management Group the Tax Distribution
Amount for such fiscal year with respect to the Preferred C Interest
pursuant to Section 2.4(a)(ii)(B);
(B) next, to the Management Group the Tax Distribution
Amount for such fiscal year with respect to the Preferred C Interest
pursuant to Section 2.4(a)(iii)(B);
(C) next, to the Management Group the Tax Distribution
Amount for such fiscal year with respect to its Common Interest;
(D) next, to GFC the Tax Distribution Amount for such
fiscal year with respect to its Preferred A Interest;
(E) next, to GFC, the Tax Distribution Amount for such
fiscal year with respect to its Preferred B Interest pursuant to Section
2.4(a)(ii)(A) for such fiscal year;
(F) next, if (and only if) a Home NOL Event has occurred,
to GFC the Tax Distribution Amount for such fiscal year with respect to
its Preferred B Interest pursuant to Section 2.4(a)(iii)(A) with respect
to the portion of the fiscal year after the occurrence of the Home NOL
Event;
(G) next, if (and only if) a Home NOL Event has occurred,
to GFC the Tax Distribution Amount for such fiscal year with respect to
its Common Allocation with respect to the portion of the fiscal year
after the occurrence of the Home NOL Event;
(H) next, to Zurich the Tax Distribution Amount for such
fiscal year with respect to the CDL; and
(I) next, to the Members and Zurich in proportion to and
to the extent of any Tax Distributions for prior fiscal years that have
not been paid;
(ii) next, to the Preferred A Interest to the extent of
the Unpaid Preferred A Return;
(iii) next, to (A) the Preferred B Interest, and (B) the
Preferred C Interest, in proportion and to the extent of the Unpaid
Preferred B Return and the Unpaid Preferred C Return;
(iv) next, (x) 50% to the Preferred A Interest, and (y)
50% to (1) the Preferred B Interest, (2) the Preferred C Interest, and
(3) Zurich, in proportion and to the extent of the Unpaid Initial
Preferred B Nominal Amount, the Unpaid Initial Preferred C Nominal
Amount, and the Unpaid CDL Amount;
(v) next, to the Preferred A Interest to the extent of the
Unpaid Initial Preferred A Nominal Amount; and
(vi) thereafter to the Common Interests in proportion and
to the extent of their respective Capital Account balances.
(b) The Company shall advance funds to all the Members and
Zurich out of amounts expected to be distributed pursuant to Section
2.6(a)(i), at such times and in such amounts as individual Members of the
Company and Zurich would require funds to pay estimated taxes. Such
distributions shall be treated as advances recoverable from future
distributions from the Company and, to the extent not previously
recovered, shall be repaid by such Member and Zurich to the Company
within 90 days of the end of the fiscal year.
(c) The provisions of this Section 2.6 shall not apply to
the proceeds to be distributed upon the occurrence of a Liquidity Event,
which shall be governed by Section 6.6. No distributions, other than
pursuant to Sections 2.6(a)(i) and (ii), shall be made pursuant to this
Section 2.6 that reduces the tangible book value of the Company below the
Preferred A Nominal Amount without the consent of Zurich, which may be
granted or withheld by Zurich in its sole discretion. In the event of
operating losses causing the tangible book value of the Company to be
less than the Preferred A Nominal Amount, no distributions, other than
pursuant to Sections 2.6(a)(i) and (ii), shall be made pursuant to this
Section 2.6 without the consent of Zurich, which may be granted or
withheld by Zurich in its sole discretion, until the tangible book value
is restored to the level of the Preferred A Nominal Amount.
(d) Any distribution by the Company pursuant to this
Section 2.6 to the Person shown on the Company's records as a Member or
to its legal representatives, or to the assignee of the right to receive
such distributions as provided herein, shall acquit the Company of all
liability to any other Person who may be interested in such distribution
by reason of any other assignment or transfer of such Member's LLC
Interests for any reason (including an assignment or transfer thereof by
reason of death, incompetence, bankruptcy or liquidation of such Member).
2.7 No Return. Except as provided herein or by law, no
Member shall have any right to withdraw any part of such Member's Capital
Account or to demand or receive the return of any of such Member's
capital contributions from the Company.
2.8 Withholding. Any payments required to be made by the
Company to any Member or to Zurich hereunder shall be net of any and all
amounts required to be deducted and withheld from such payments under
applicable law. Each of Zurich and each Member hereby consents to the
deduction and withholding of any such amounts, agrees to cooperate fully
with the Company in determining the amount of any required withholdings,
and agrees promptly to return to the Company upon request any amounts
that the Company erroneously fails to deduct and withhold from any
payment hereunder.
ARTICLE III
ACCOUNTING; FINANCIAL AND TAX MATTERS
3.1 Books and Records; Reports.
(a) The financial officers of the Company shall maintain a
system of accounting established and administered in accordance with the
principles applicable and accounting method used by the Company for
Federal income tax purposes and otherwise in accordance with generally
accepted accounting principles consistent with GFC's systems and
practices as of the date hereof, and shall set aside on the books of the
Company or otherwise record all such proper reserves as shall be required
by generally accepted accounting principles consistent with GFC's systems
and practices as of the date hereof.
(b) As soon as reasonably practicable but no later than 30
days after the end of each of the first three quarters of each fiscal
year of the Company, the financial officers of the Company shall prepare
and distribute to each Member quarterly financial statements of the
Company including a balance sheet, capital account balances and profit
and loss statement.
(c) As soon as reasonably practicable but no later than 30
days after the close of each fiscal year of the Company, there shall be
prepared and distributed to each Member the following financial
statements: (i) a balance sheet of the Company as at the end of such
fiscal year; (ii) a statement of profit and loss for such fiscal year;
(iii) a statement of the Members' Capital Accounts and changes therein
for such fiscal year; and (iv) a statement of cash flows of the Company
for such fiscal year.
(d) As soon as reasonably practicable but no later than 50
days after the close of each fiscal year of the Company, there shall be
prepared and distributed to each Member the financial statements referred
to in Section 3.1(c), accompanied by the audited report thereon of the
independent accountants for the Company.
(e) The Executive Committee shall keep or cause to be kept
complete and accurate records and books of account in which shall be
entered all such transactions and other matters relative to the Company's
business as are usually entered into records and books of account
maintained by persons engaged in businesses of like character. All such
books and records shall at all times be made available at the principal
office of the Company and shall be open to the reasonable inspection and
examination of the Members or their duly authorized representatives under
reasonable conditions during normal business hours.
3.2 Fiscal Year. The fiscal year of the Company shall be
the calendar year.
3.3 Compensation. Each of the Senior Officers shall
perform the services for or on behalf of the Company and its Subsidiaries
specified in the services agreement between such Senior Officer and the
Management Group (each, a "Services Agreement"), subject to the terms and
conditions of such Services Agreement, and the Company shall provide to
the Management Group from time to time in advance funds sufficient to
satisfy all liabilities, costs and expenses incurred by the Management
Group pursuant to the terms of each such Services Agreement and for any
liability incurred by the Management Group pursuant to any claim for
indemnification made by any officer or director of the Management Group
arising out of the provision of services for the Company or any of its
Subsidiaries by any Senior Officer under any Services Agreement. Each
Services Agreement will provide that the services of the Senior Officer
party to such Services Agreement for or on behalf of the Company and its
Subsidiaries will terminate at the request of the Executive Committee
with or without "cause," or due to the "retirement," death or "permanent
disability" of such Senior Officer and may be terminated by such Senior
Officer with or without "good reason" (as each such term is defined in
such Services Agreement) and, depending upon the circumstances of such
termination, such Senior Officer will be entitled to the payments and
other benefits provided under such Services Agreement, the liabilities,
costs and expenses of the Management Group in respect of such payments
and benefits to be subject to reimbursement by the Company in accordance
with the preceding sentence. All payments to the Management Group under
this Section 3.3 will be treated for Federal income tax purposes as
payments described in section 707(c) of the Code. The Management Group
shall indemnify and hold harmless the Company for any Federal, state and
local income tax withholding obligations of the Company applicable to
payments under this Section 3.3, and hereby authorizes the Company to
offset the amount of any such obligations against any distributions
payable to the Management Group to the extent necessary to satisfy such
obligations. The Company shall be named as a third party beneficiary of
each Services Agreement with respect to the enforcement of the
obligations of the member of the Management Group party to such Services
Agreement and each such member of the Management Group shall be a third
party beneficiary of the provisions of this Section 3.3 regarding funds
provided to the Management Group.
3.4 Bank and Investment Accounts. All funds of the Company
shall be deposited in its name, or in such name as may be designated by
the Executive Committee, in such checking, savings or other accounts, or
held in its name in the form of such other investments as shall be
designated by the Executive Committee. All withdrawals of such deposits
or liquidations of such investments by the Company shall be made
exclusively upon the signature or signatures of such employee or
employees of the Company as the Executive Committee may designate.
3.5 Tax Matters Person. The Tax Matters Person of the
Company shall be the Management Group, who shall be subject to the
control of the Executive Committee. Each Member, by its execution of this
Agreement, consents to such designation of the Tax Matters Person, and
agrees to execute, certify, acknowledge, deliver, swear to, file and
record at the appropriate public offices such documents as may be
necessary or appropriate to evidence such consent.
3.6 Tax Elections and Accounting Decisions. All
determinations as to tax elections shall be made by the Tax Matters
Person. By executing this Agreement, each of the Members consents to the
authority of the Tax Matters Person to make any such elections and shall
cooperate in the making of such elections (including providing consents
and other authorizations that may be required). All determinations as to
accounting principles shall be made by the Executive Committee, in a
manner consistent with Section 3.1(a).
3.7 Classification as a Partnership.
(a) The Members intend that the Company be classified as a
partnership for Federal tax purposes effective as of the date of this
Agreement. The Tax Matters Person shall not file an election for the
Company to be taxable as an association, shall take all steps as may be
required to maintain the Company's classification as a partnership for
Federal tax purposes, and shall take all steps that are not unduly
burdensome, as determined by the Executive Committee, as may be required
to maintain the Company's classification as a partnership for state tax
purposes.
(b) The Executive Committee shall (i) at no time take any
action or cause the Company to take any action that would result in the
Company being treated as a publicly traded partnership taxable as
provided in section 7704 of the Code or being classified as an
association for Federal income tax purposes, rather than as a
partnership, and (ii) make reasonable, good faith and diligent efforts to
exercise its discretion in the performance of its duties and
responsibilities hereunder in such a manner as to cause the Company to
remain classified as a partnership for Federal income tax purposes,
rather than as an association, and to prevent the Company from being
treated as a publicly traded partnership taxable as provided in section
7704 of the Code.
3.8 Valuation. If any provision in this Agreement provides
that the fair market value of an asset or security shall be determined
pursuant to this Section 3.8, the fair market value of such asset or
security shall be determined as follows:
(i) if such asset or security is a publicly-traded
security, it shall be valued at the average of the closing price per unit
of such security on the principal exchange or market in which such
security trades, for the ten consecutive trading days ending on and
including the date as of which such determination is required; and
(ii) if such asset or security is not a publicly-traded
security, or is a publicly-traded security for which the closing prices
referred to in Section 3.8(i) are for whatever reason not available,
then, unless all Directors of the Executive Committee shall have reached
a unanimous decision as to its valuation, and subject to Section 4.11,
the Executive Committee shall appoint a nationally recognized investment
banking or appraisal firm to value such asset or security and to deliver
a report as promptly as possible setting forth its valuation thereof and
the basis of such valuation. Such firm shall be required to determine its
valuation based on the fair selling price of such asset or security on
the open market as between a willing seller and a willing purchaser, and
to take into account, if such asset is a security that is not
publicly-traded or is otherwise a restricted security, if such security
represents a majority or minority interests in the issuer of such
security and if there are any restrictions on the transferability or
liquidity of such security.
ARTICLE IV
MEETINGS OF MEMBERS AND MANAGEMENT OF THE COMPANY
4.1 Meeting of Members. A regular or annual meeting of
Members shall be held each calendar year at such date, time and place as
may be determined by the Executive Committee and designated in a notice
of meeting given to each Member no less than five business days prior to
the meeting. The Executive Committee shall hold a special meeting of the
Members upon the request of holders of one-third of all Common Interests,
which request shall indicate in reasonable detail the purpose of the
meeting requested. At any meeting of Members, only such business may be
transacted as is related to the purpose or purposes of such meeting set
forth in the notice thereof or in any waiver of notice thereof, and any
action or decision taken in such a meeting requires the affirmative votes
of Members holding a majority of the Common Interests (or such other LLC
Interests entitled to vote as a separate class with respect thereto).
4.2 Quorum of Members; Adjournment. Except as otherwise
provided by the Act, the holders of a majority of all Common Interests,
present in person or represented by proxy, shall constitute a quorum for
the transaction of any business at such meeting, provided that when a
specified item of business is required to be voted on by a class or
series (if the Company shall then have Members of more than one class or
series) voting as a class, the holders of a majority of the LLC Interests
of such class or series shall constitute a quorum (as to such class or
series) for the transaction of such item of business. When a quorum is
once present to organize a meeting of Members, it is not broken by the
subsequent withdrawal of any Members. The holders of a majority of the
Common Interests (or such other LLC Interests entitled to vote as a
separate class with respect thereto) present in person or represented by
proxy at any meeting of Members, including an adjourned meeting, whether
or not a quorum is present, may adjourn such meeting to another time and
place.
4.3 Management of the Company. Except as otherwise
expressly provided for in Section 4.11, the business and affairs of the
Company shall be managed by and under the direction of a committee
established pursuant to, and with the powers and authority set forth in,
this Article IV (the "Executive Committee"). The Executive Committee
shall have the sole and exclusive responsibility and authority for the
management, conduct and operation of the Company's business in all
respects and in all matters, except to the extent that the Executive
Committee delegates any such responsibility or authority to any officer,
Member, employee or agent of the Company or to any other committee. The
Executive Committee may delegate such general or specific authority to
officers, Members, employees or agents of the Company or to any other
committee as the Executive Committee considers desirable from time to
time, and such officers, Members, employees or agents of the Company or
such other committee may, subject to any restraints or limitations
imposed by the Executive Committee, exercise the authority granted to
them.
4.4 Appointment and Removal of Directors.
(a) The Executive Committee shall be comprised of seven
individuals (the "Directors"). The Directors shall be selected in the
manner set forth in this Section 4.4. GFC shall have the right to
designate three Directors (the "GFC Directors") and the Management Group
shall have the right to designate four Directors (the "Management
Directors"), including the Chair man. A Director must be an officer,
employee, director (or equivalent) or other representative of the Member
designating such Director. The individuals whose names are set forth on
Schedule 4.4 hereto shall constitute the initial Directors. The size of
the Executive Committee shall not be changed, except (i) by the
affirmative vote of all of the Members or (ii) as contemplated by Section
4.4(d), 4.13 or 7.1(d).
(b) Any Director may resign at any time by giving written
notice of his resignation to the Executive Committee. A resignation shall
take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its
receipt, and, unless otherwise specified therein, the acceptance of a
resignation shall not be necessary to make it effective. Any Director may
be removed at any time with or without cause by the person who designated
his or her initial selection to the Executive Committee.
(c) Any Director who dies, becomes incapacitated, resigns
or is removed from office shall be replaced, by notice to the Executive
Committee: (i) in the case of a GFC Director, by a person designated by
GFC, and (ii) in the case of a Management Director, by a person
designated by the Management Group.
(d) Upon the resignation or withdrawal of a Member, each
Director appointed by such Member shall be deemed to have resigned at the
same time. The Executive Committee positions vacated by such resignation
shall not be filled and the number of positions in the Executive
Committee shall thereafter be reduced by such number of vacated
positions.
(e) Except as otherwise may be determined by the Executive
Committee, no payment of expenses incurred by the Directors incident to
the performance of their duties and responsibilities as such under this
Agreement shall be paid by or charged to the Company.
(f) Directors shall also have the right to attend (but not
to vote at) meetings of the board of directors or executive committee (or
persons performing similar functions) of Gruntal & Co., L.L.C. and any
other Subsidiar ies of the Company as a Member may request at any time
and to receive, upon the request of a Member, agendas, minutes and all
other materials distributed to participants of such meetings. Upon the
request of GFC at any time, the Company shall cause the business and
affairs of Gruntal & Co., L.L.C. to be managed by and under the direction
of an executive committee, and shall appoint one GFC Director to such
executive committee. The Company shall exercise its Voting Control with
respect to its Subsidiaries so as to facilitate the exercise of the
rights under this Section 4.4(f) by its Members or Directors.
4.5 Committees.
(a) The Executive Committee may, by resolutions duly
adopted from time to time, delegate authority to committees. Each
committee shall be composed of such Persons, and shall have such
authority, as the Executive Committee may by resolution determine. All
of the provisions of Sections 4.6, 4.7 and 4.8 shall apply to
committees except that special meetings of a committee may be called by
any member of such committee.
(b) The Company shall have an Audit Committee, whose
authority and composition shall be determined by the Executive Commit-
tee; provided that GFC Directors and other Persons not affiliated with
any Member of the Company shall at all times constitute a majority of the
members of the Audit Committee. The Company's auditors shall initially be
KPMG Peat Marwick LLP, and any change of the auditors of the Company
shall require the unanimous approval of all members of the Audit
Committee.
4.6 Meetings of the Executive Committee.
(a) Zurich shall have the right to designate a representa-
tive (the "Representative") to attend (but not to vote at) meetings of
the Executive Committee and to receive notices, agendas, minutes and all
other materials distributed to participants of such meetings as well as
other materials distributed to the Directors pursuant to Section 4.4(f).
(b) The Executive Committee shall hold regular meetings
at such time and place as shall be determined by the Executive Committee.
Except as otherwise determined by the Executive Committee, all special
and regular meetings of the Executive Committee shall be held at the
principal office of the Company. Unless waived by all of the Directors
and the Representative in writing (before or after a meeting), or by the
attendance of such Director or Representative at such meeting as provided
below, prior notice of any meeting, whether regular, special, or
otherwise, shall be given to each Director and the Representative in the
manner specified in Section 8.1 at least five business days before the
date of such meeting. A special meeting of the Executive Committee may be
called by any Director by giving such notice. Notice of any meeting need
not be given to any Director or the Representative who shall submit,
either before or after the meeting, a signed waiver of notice. Attendance
of a Director or the Representative at a meeting shall constitute a
waiver of notice of such meeting, except when the Director or the
Representative attends the meeting for the express purpose of objecting
at the beginning thereof to the transaction of any business because the
meeting is not lawfully called or convened. Notice of any adjourned
meeting, including the place, date and time of the new meeting, shall be
given to all Directors or the Representative not present at the time of
the adjournment, as well as to the other Directors and the Representative
unless the place, date and time of the new meeting is announced at the
adjourned meeting.
4.7 Quorum and Voting. The Executive Committee shall be
entitled to vote on all matters relating to the affairs of the Company. A
quorum for any meeting of the Executive Committee shall be constituted
only upon (i) notice of such meeting having been given to (or waiver
having been received from) all Directors and the Representative pursuant
to Section 4.6 and (ii) attendance of such meeting by at least a majority
of the Directors. No action may be taken by the Executive Committee
unless a quorum is constituted and, subject to Section 4.11, the
affirmative vote of a majority of the Directors present shall be required
for any act or decision thereof. In the event of a tied vote, neither the
Chairman nor any other Person shall have a casting or second vote. No
Director shall be disqualified from acting on any matter because such
Director or one or more of the Members that appointed such Director is or
are interested in the matter to be acted upon by the Executive Committee
so long as such interest has been disclosed to the Executive Committee
prior to the action relating thereto.
4.8 Procedural Matters of the Executive Committee.
(a) Each Director shall have one vote on all matters
presented to the Executive Committee for decision or approval.
(b) Any action required or permitted to be taken by the
Executive Committee may be taken without a meeting if (i) all of the
Directors consent in writing to such action and (ii) notice with respect
to such request for written consent has been given to all Directors and
the Representative pursuant to Section 4.6. Such consent shall have the
same effect as a unanimous vote of the Executive Committee.
(c) The Executive Committee shall cause to be kept a book
of minutes of all of its actions by written consent and its meetings in
which there shall be recorded the time and place of such meeting, whether
regular or special (and if special, how called), the notice thereof
given, the names of those present and the proceedings thereof.
(d) The Chairman shall appoint a secretary of the meeting
who shall produce the written minutes of the meeting. The secretary of
the meeting may be a person who is not a Director.
(e) Directors and the Representative may participate in a
meeting of the Executive Committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear one another, and such participation
shall constitute presence in person at such meeting.
4.9 Officers.
(a) The Executive Committee shall elect officers of the
Company, including a Chairman, a President, a Secretary and a Treasurer
of the Company, and may elect or appoint one or more Managing Directors,
Vice Presidents and such other officers of the Company as the Executive
Committee may determine, subject, in the case of the election of a
Chairman, to Section 4.10, and in the case of the election of all other
officers, to the approval of the Chairman, and, in all such cases,
subject to the terms of the Services Agreement of the Senior Officers.
The Executive Committee may use descriptive words or phrases to designate
the standing, seniority or area of special competence of the officers
elected or appointed. Any two or more offices may be held by the same
person, and persons other than employees of the Company may serve as
officers, Managing Directors or Vice Presidents of the Company. All
officers as between themselves and the Company shall have such authority
and perform such duties in the management of the Company as may be
provided in this Article IV or as the Executive Committee may from time
to time determine, and may act on behalf of the Company in the manner and
regarding such matters as is provided for in this Article IV or as may be
authorized by the Executive Committee. Subject to the terms of the
Services Agreements of the Senior Officers, the Executive Committee may
establish, increase, reduce or otherwise modify responsibilities of the
officers of the Company or may create or eliminate offices as the Company
may consider appropriate.
(b) Each officer elected by the Executive Committee shall
serve until his or her successor is duly elected as provided herein or,
if earlier, until his or her death, resignation or removal. A vacancy in
any office because of death, resignation, removal, or any other cause
shall be filled for the unexpired portion of the term by the Executive
Committee in the manner prescribed in this Agreement for the regular
election to such office.
(c) Any officer may resign at any time by so notifying the
Executive Committee and the Secretary in writing. Such resignation shall
take effect upon receipt of such notice or at such later time as is
therein specified, and unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective. Any officer
elected by the Executive Committee may be removed by the Executive
Committee with or without cause, upon the recommendation of the Chairman
or, in the case of the removal of the Chairman, in accordance with
Section 4.10. The election of an individual as an officer shall not of
itself create a right to continued employment with the Company or a right
to continue to provide services to the Company as an independent
contractor.
(d) The names of certain initial officers of the Company
are set forth in Schedule 4.9 hereto (such officers, together with their
successors and any other persons exercising similar authority, the
"Senior Officers").
4.10 Chairman.
(a) The Chairman shall be the chief executive officer of
the Company and shall have responsibility for the general management of
the Company, subject to the control of the Executive Committee and shall
also have the powers and duties that are specified as applicable to the
Chairman in this Agreement and such other powers and duties as are
assigned to the Chairman by the Executive Committee. Without limiting the
foregoing, (i) the Chairman shall have specific authority to develop and
present to the Executive Committee for approval promptly following the
date hereof a short and long term disability program covering Senior
Officers, providing short and long term disability benefits described in
the Services Agreements of the Senior Officers, and, as long as the cost
to the Company pursuant to Section 3.3 of such program is reasonable in
relation to the benefits provided, the Executive Committee shall approve
the adoption and implementation of such program, (ii) in the event of the
retention of a new Senior Officer after the date hereof, the Chairman
shall have specific authority to cause the Management Group to enter into
a services agreement with such new Senior Officer containing terms and
provisions that are substantially comparable to the terms and provisions
of the Services Agreements of the initial Senior Officers and under which
such new Senior Officer is guaranteed a minimum annual bonus for the
first three years of his or her services to the Company and (iii) the
Chairman shall otherwise have authority to make all determinations
concerning the retention, provision of services by or termination of the
Senior Officers, the retention or employment and the termination of all
other employees of the Company and, subject to Section 4.11(a)(v), the
establishment of the terms and conditions of each such Senior Officer's
retention or provision of services or of each such employee's retention
or employment.
(b) The initial Chairman of the Company shall be Robert
Rittereiser. Notwithstanding any other provisions of this Agreement,
except with the approval of at least five Directors, which five Directors
must include, unless GFC has designated two GFC Directors pursuant to
Section 4.13, at least two Management Directors, the Executive Committee
shall not approve, and the Company shall not take any action with respect
to (i) the removal of the Chairman, (ii) the appointment of any person to
serve as Chairman or (iii) any amendment to or modification of this
Section 4.10 or any other provisions of the Agreement relating to the
powers and duties of the Chairman.
(c) In the event the offices of Chairman of the Company
and CEO of the Management Group are not held by the same person,
determinations under the Annual Incentive Compensation Plan for members
of the Management Group shall be made by the Chairman of the Company
and recommended to the CEO of the Management Group, which recommendations
shall be binding so long as such recommendations are consistent with such
Plan and the Services Agreements of the respective members of the
Management Group.
4.11 Certain Actions.
(a) Notwithstanding any other provisions in this Agree-
ment, as long as any Preferred A Interest or Preferred B Interest remains
issued and outstanding, the Executive Committee shall not approve, and
the Company shall not take, any of the following actions except with the
approval of (x) unless GFC has designated two GFC Directors pursuant to
Section 4.13, the Chairman (or, if such office is vacant, at least one
Management Director) and (y) at least one GFC Director:
(i) any issuance or agreement to issue any profit share or
interest (including any LLC Interests) of the Company or any of its
Significant Subsidiaries or any securities or rights of any kind
convertible into or exchangeable for such profit share or interest, or to
issue any option, warrant, put, call or other arrangement of any kind to
purchase or otherwise receive from the Company any such profit share or
interest;
(ii) any repurchase by the Company of any profit share or
interest (including any LLC Interests);
(iii) subject to clause (i) in the proviso in Section
8.4, any approval or disapproval of any Transfer of any profit share or
interest (including any LLC Interests) of the Company or any of its
Significant Subsidiaries;
(iv) any incurrence of indebtedness for borrowed money or
other commitment or liability, issuance of guarantees, or granting of
liens over assets of the Company or any of its Significant Subsidiaries
(whether or not in connection with such incurrence or issuance), in each
case, in excess of, whether in a single transaction or a series of
related transactions, $15 million, including without limitation any
acquisition of any asset, securities or business from any Person in
excess of, whether in a single transaction or a series of related
transactions, $15 million, other than of the type currently incurred or
granted by GFC and its Subsidiaries, as the case may be, in the ordinary
course of business;
(v) (x) any amendment to or modification of the
Certificate of Formation of the Company, this Agreement (subject to
clause (i) in the proviso in Section 8.4), the Annual Incentive
Compensation Plan of the Management Group, or any Services Agreement or
employment agreement with any Senior Officer (including the Services
Agreements dated the date hereof between the Management Group and each of
the initial Senior Officers), (y) the entry by the Company into any
employment agreement or Services Agreement with any Senior Officer on
terms and conditions (other than those relating to any interests in the
Management Group and the Annual Incentive Compensation Plan) that are not
substantially similar to those set forth in such Services Agreements with
the initial Senior Officers, or (z) adoption of any disability plan for
Senior Officers;
(vi) any filing by the Company of a registration statement
under the Securities Act of 1933, as amended;
(vii) any action in connection with any Liquidity Event
involving the Company or any of its Significant Subsidiaries;
(viii) any loans or other advances to, or other
transactions with, any Member, Director or officer of the Company or any
Subsidiary of the Company;
(ix) any action in connection with (A) the Audit
Committee; (B) the appointment of the investment banking or appraisal
firm referred to in Section 3.8; or (C) subject to clause (i) in the
proviso in Section 8.4, the admission of any Person as a Member, or
other participant in the profit or interest, of the Company, irrespective
of whether any profit share or interest (including any LLC Interests) of
the Company or any of its Significant Subsidiaries is issued in
connection therewith; or
(x) any material change in the Company's or any of its
Significant Subsidiaries' business. For purposes of this Section
4.11(a)(x), the Company's or such a Significant Subsidiary's "business"
shall mean securities underwriting, sales and trading, discount
brokerage, merchant banking, financial advisory services, investment
research, correspondent brokerage services, asset management and life
insurance agency.
(b) Without obtaining the prior written consent of the New
Hampshire Insurance Department, the Company shall not, and shall not
permit any of its Subsidiaries (including Gruntal & Co., L.L.C.) to,
enter into any agreement (including any guaranty) or otherwise conduct
any transaction, with GFC, Home, Trygg-Hansa AB or Zurich Insurance
Company or any of their respective Affiliates, (i) not in the ordinary
course of business or (ii) providing for the making or receipt of
revenues, commissions or other payments that, individually or in the
aggregate, exceeds $50,000; provided that nothing in this Section 4.11(b)
shall apply to or otherwise affect any agreements existing on the date
hereof between the Company or any such Subsidiary and GFC, Home,
Trygg-Hansa AB, Zurich Insurance Company or such Affiliate, or any
transactions pursuant to such agreements. 24
(c) Without obtaining the prior written consent of Zurich,
the Company shall not, and shall not permit any of its Subsidiaries
(including Gruntal & Co., L.L.C.) to, enter into any agreement (including
any guaranty) or otherwise conduct any transaction, with Home or any of
its Affiliates, (i) not in the ordinary course of business or (ii)
providing for the making or receipt of revenues, commissions or other
payments that, individually or in the aggregate, exceeds $50,000;
provided that nothing in this Section 4.11(c) shall apply to or otherwise
affect any agreements existing on the date hereof between the Company or
any such Subsidiary and Home or such Affiliate of Home, or any
transactions pursuant to such agreements.
(d) References in this Section 4.11 to the Company or
Gruntal & Co., L.L.C. shall include references to their respective
successors.
4.12 Rights and Obligations of Members. The Members shall
have no liability, under this Agreement or otherwise, with respect to the
debts, liabilities and obligations of the Company because of their status
as Members, except to the extent provided in the Act.
4.13 Increase in the Size of Executive Committee.
(a) The number of Directors constituting the Executive
Committee shall be increased by two GFC Directors to be designated by GFC
if either of the events set forth in Section 4.13(a)(i) or (ii) shall
have occurred and is continuing at the end of any fiscal quarter:
(i) if TBV for such fiscal quarter shall be less than the
greater of X and Y; or
(ii) if the aggregate distributions paid by the Company
with respect to all of its issued and outstanding LLC Interests (for the
avoidance of doubt, not including CDL), since the date of this Agreement
shall be less than the product of $2 million multiplied by (N - 7), where
N, which shall not be less than zero, is the number of quarters that has
elapsed since the date of this Agreement, counting the first complete
quarter after the date of this Agreement as the first quarter.
(b) For purposes of this Section 4.13:
TBV for any fiscal quarter = QV for such fiscal quarter + I, where
QV for such fiscal quarter = tangible book value of the
Company as at the end of such fiscal quarter, calculated in accordance
with generally accepted accounting principles applied consistently with
past practice, and
I = all indemnification or other payments made by the
Company with respect to, arising out of or in connection with the
business, assets, operation or conditions of, or any business transacted
or activities carried out by, GFC or any of its Subsidiaries (including
Gruntal & Co., Incorporated), in each case, at any time or for any period
prior to (and excluding) January 1, 1996, pursuant to Section 5.3 or
otherwise, since the date of this Agreement to the extent any such
payment has not been accrued or otherwise provided for in V, and
V = "Value", as defined in and determined to be final and
binding pursuant to Section 5.5 of the Reorganization Agreement;
X = V - TE - D - $25 million, where
TE = Transaction Expenses borne by the Company pursuant to
Section 8.10(a) of the Reorganization Agreement, except to the extent
such Transaction Expenses have already been accrued or otherwise provided
for in V, and
D = the aggregate amount of dividends paid by GFC to Home
in connection with the Transactions, as adjusted pursuant to Section
5.5 of the Reorganization Agreement; and
Y = .85 x CV, where
CV = TBV of the Company as at the end of the corresponding
fiscal quarter in the immediately preceding fiscal year.
(c) At no time shall the Executive Committee be increased
by more than two Directors under this Section 4.13. If the number of
Directors has been increased under this Section 4.13 and at the end of
any subsequent fiscal quarter neither of the events set forth in Section
4.13(a)(i) and (ii) shall be continuing, then the number of Directors
constituting the Executive Committee shall be reduced by two and the two
GFC Directors previously designated by GFC under this Section 4.13 shall
be deemed to have resigned immediately.
ARTICLE V
INDEMNIFICATIONS AND OTHER PROCEDURES
5.1 Limitation of Liabilities.
(a) A Person exercising management powers or respon-
sibilities for or on behalf of the Company, including any officer or
Director, shall not have personal liability to the Company for damages
for any breach of duty in such capacity; provided that nothing in this
Section 5.1(a) shall eliminate or limit the liability of any such Person
if (i) its actions were committed in bad faith or were the result of its
active and deliberate dishonesty and were material to such action, suit
or proceeding, (ii) it did not reasonably believe that its actions were
in good faith and in or not opposed to the best interests of the Company,
or (iii) it personally gained in fact a financial profit or other
advantage to which it was not legally entitled.
(b) None of the Members shall have the power to bind any
other Member except as specifically provided in this Agreement. None of
the Members or the Company shall be responsible or liable for any
indebtedness, liability or obligation of any other Member incurred either
before or after the execution of this Agreement, except that the Company
shall be responsible and liable for indebtedness, liabilities or
obligations incurred in connection with activities within the proper
business purposes of the Company and pursuant to direct authorization of
the Executive Committee or a duly authorized officer of the Company.
5.2 Indemnification of Directors and other Persons.
(a) The Company shall indemnify any person (an
"Indemnitee") who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding
brought by or against the Company or otherwise, whether civil, criminal,
administrative or investigative, including an action by or in the right
of the Company to procure a judgment in its favor, by reason of the fact
that (x) such Indemnitee is or was a Director, member of the Executive
Committee or officer, (y) at the relevant time, being or having been such
a Director, member of the Executive Committee or officer, such Indemnitee
is or was serving at the request of the Company as a partner, director,
officer or trustee of another corporation, partnership, joint venture,
trust or other enterprise, or (z) such Indemnitee otherwise is providing
or has provided services to or for the benefit of the Company under a
written agreement with the Management Group relating to the management of
the Company, against all expenses, including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement actually
and reasonably incurred by such Indemnitee in connection with such
action, suit or proceeding. Notwithstanding the foregoing, no
indemnification shall be provided to or on behalf of any Indemnitee if a
judgment or other final adjudication adverse to such Indemnitee
establishes that (i) its actions were committed in bad faith or were the
result of its active and deliberate dishonesty and were material to such
action, suit or proceeding, (ii) it did not reasonably believe that its
actions were in good faith and in or not opposed to the best interests of
the Company, or (iii) it personally gained in fact a financial profit or
other advantage to which it was not legally entitled.
(b) Any indemnification under Section 5.2(a) (unless
ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that the indemnification of the
Indemnitee is proper under the circumstances because it has met the
applicable standard of conduct set forth in Section 5.2(a). Such
determination shall be made by the Executive Committee or, if the
Executive Committee so directs, by independent legal counsel in a written
opinion.
(c) The Company may, in the discretion of the Executive
Committee, pay expenses incurred in defending any action, suit or
proceeding described in Section 5.2(a) in advance of the final
disposition of such action, suit or proceeding, subject to receipt by the
Company of an undertaking, in form and substance satisfactory to the
Executive Committee, to repay any amounts so advanced if the final
disposition of such action, suit or proceeding is such that the recipient
of such advances is not entitled to indemnification for the expenses
covered thereby.
(d) The Company may, in the discretion of the Executive
Committee, purchase and maintain insurance on behalf of any Indemnitee
against any liability asserted against it, whether or not the Company
would have the power by law to indemnify it against such liability.
(e) The indemnification provided by this Section 5.2 shall
not be deemed exclusive of any other rights to indemnification to which
those seeking indemnification may be entitled under any agreement,
determination of Members or otherwise. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant
to, this Section 5.2 shall continue as to an Indemnitee who has ceased to
be a Member or officer (or other person indemnified hereunder) and shall
inure to the benefit of the executors, administrators, legatees and
distributes of such person.
(f) The provisions of this Section 5.2 shall be a contract
between the Company, on the one hand, and each Indemnitee who served in
such capacity at any time while this Section 5.2 is in effect, on the
other hand, pursuant to which the Company and each such Indemnitee intend
to be legally bound. No repeal or modification of this Section 5.2 shall
affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any proceeding
theretofore or thereafter brought or threatened based in whole or in
part upon such state of facts.
5.3 Indemnification of GFC. The Company shall indemnify
GFC and any and all Affiliates of GFC (including Home) and any of their
respective directors, officers, stockholders, employees, agents and
representatives against any loss, liability, claim, damage or expense
incurred by any such person with respect to, arising out of or in
connection with (i) the Repurchase (as defined in the Reorganization
Agreement) and (ii) the business, assets, operation or conditions of, or
any business transacted or activities carried out by, GFC or any of its
Subsidiaries (including Gruntal & Co., Incorporated) at any time or for
any period prior to (and excluding) January 1, 1996.
5.4 Procedure for Indemnification.
(a) If any person entitled to indemnification under
Section 5.2 or 5.3 (an "Indemnified Party") shall receive notice of the
assertion by a person of any claim or of the commencement by any such
person of any action (a "Claim") with respect to which the Company is
obligated to provide indemnification, the Indemnified Party shall give
the Company prompt notice thereof; provided that the failure of any
Indemnified Party to give such notice shall not relieve the Company of
its obligations under this Article V, except to the extent that the
Company is actually prejudiced by such failure. Such notice shall
describe the Claim in reasonable detail, and, if available, shall
indicate the estimated amount of the Claim asserted.
(b) The Company may elect to defend, compromise or settle,
at the Company's expense and by the Company's counsel reasonably
satisfactory to the Indemnified Party, any Claim. If the Company elects
to defend a Claim, it shall, within 30 days of its receipt of notice of
such Claim (or sooner, if the nature of such Claim so requires), notify
the related Indemnified Party of its election and such Indemnified Party
shall cooperate in the defense of such Claim to the extent reasonably
requested in writing by the Company. If the Company elects not to defend
against a Claim, or fails to notify an Indemnified Party of its election,
such Indemnified Party may defend, compromise or settle such Claim.
However, neither the Company nor an Indemnified Party, as the party
controlling the defense of a Claim, may compromise or settle any claim or
consent to the entry of any judgment without the prior written consent of
the other (which consent shall not be unreasonably withheld or delayed),
other than a compromise, settlement or consent that includes as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party of a full and final release from all liability in
respect to such Claim.
5.5 Certain Procedures
(a) If the Company or any of its Affiliates, Members or
Senior Officers, or officers or employees of such Affiliate, Member or
Senior Officer (each, a "Joined Party"), is made or becomes a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in connection with, arising out of or as a result of the
Transactions (as defined in the Reorganization Agreement), the formation
of the Company or the issuance of the LLC Interests to the Management
Group or GFC by the Company, the Company shall promptly notify GFC, and
GFC may elect to defend, compromise or settle, at GFC's expense and by
GFC's counsel, such action, suit or proceeding, unless (i) in the
reasonable determination of counsel to GFC, there is a conflict between
the interests of GFC and those of the Company or such Joined Party, or
(ii) the Company or such Joined Party elects to defend, settle or
compromise such action, suit or proceeding, in each of which case, the
Company or such Joined Party shall defend, compromise or settle such
action, suit or proceeding at its own expense and by its own counsel.
(b) Nothing in this Section 5.5 shall affect any rights of
indemnification, contractual, statutory, or otherwise, that any Joined
Party may have.
ARTICLE VI
TERMINATION; DISSOLUTION; LIQUIDATION AND WINDING-UP;
LIQUIDITY EVENTS
6.1 Termination of the Company. The Company shall be
terminated upon the occurrence of a Dissolution Event.
6.2 Dissolution Events. The Company shall be dissolved and
its affairs wound up upon any of the following (each a "Dissolution
Event"):
(a) the written consent of all the Members; or
(b) the entry of a decree of judicial dissolution under
the Act.
Upon the dissolution of the Company, the Executive Committee shall
promptly notify the Members of such dissolution. Without limiting the
generality of the foregoing, any of the following actions undertaken by
or occurring to a Member shall not dissolve the Company: (i) its becoming
the subject of a bankruptcy or reorganization case under Title 11 of the
United States Bankruptcy Code; (ii) its being generally unable to pay its
debts as they come due; (iii) its making an assignment for the benefit of
creditors; (iv) its being adjudged insolvent, or the entering against the
Member of an order for relief in any insolvency proceeding; (v) the
filing of a petition or answer by or against it seeking any
reorganization, arrangement, composition, readjustment, rehabilitation,
liquidation, dissolution or similar relief under any statute, law or
regulation; (vi) its filing of an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against
it in any proceeding of this nature; (vii) its seeking, contesting or
acquiescence in the appointment of a trustee, receiver or liquidator of
it or of all or any substantial part of its properties; or (viii) its
death, retirement, resignation, expulsion or dissolution.
6.3 Liquidation and Winding-Up. If the Company is
dissolved pursuant to Section 6.2, the Company shall be liquidated and
wound up in accordance with the Act and the following provisions:
(a) The financial officers of the Company shall be
directed to prepare a balance sheet of the Company in accordance with
generally accepted accounting principles as of the date of dissolution,
which balance sheet shall be reported upon by the Company's independent
public accountants.
(b) The assets, properties and business of the Company
shall be liquidated by the Executive Committee as promptly as possible,
but in an orderly and businesslike manner so as not to involve undue
sacrifice. Notwithstanding the foregoing, if it is determined by the
Executive Committee not to sell all or any portion of the properties and
assets of the Company, such properties and assets shall be distributed in
kind in the order of priority set forth in Section 6.3(d); provided that
the fair market value (as determined pursuant to Section 3.8) of such
properties and assets shall be used in determining the extent and amount
of a distribution in kind of such properties and assets in lieu of actual
cash proceeds of any sale or other disposition thereof.
(c) Net Income or Net Loss of the Company for the year of
liquidation shall be credited or charged to the Capital Accounts of the
Members in accordance with the allocation provisions set forth in Section
2.4.
(d) The proceeds of sale of all or substantially all of
the properties and assets of the Company and all other properties and
assets of the Company not sold, as provided in Section 6.3(b), and valued
at the fair market value thereof as provided in Section 6.3(b), shall be
applied and distributed as follows, and in the following order or
priority:
(i) first, to the payment of all debts and liabilities
of the Company and the expenses of liquidation not otherwise adequately
provided for;
(ii) next, to the setting up of any reserves that are
reasonably necessary for any contingent unforeseen liabilities or
obligations of the Company or of the Members arising out of, or in
connection with, the Company; and
(iii) next, according to the provisions of Section 6.6.
(e) A certificate of cancellation of the Company, as
required by law, shall be filed.
6.4 Calculation of Gain or Loss. The amount by which the
fair market value (as determined pursuant to Section 3.8) of any property
to be distributed in kind to the Members exceeds or is less than the Book
Basis of such property, determined immediately prior to such
distribution, shall, to the extent not otherwise recognized to the
Company, be taken into account in computing Net Income or Net Loss of the
Company for purposes of crediting or charging the Capital Accounts of,
and distributing proceeds to, the Members pursuant to Sections 2.3, 2.6,
6.3 and 6.6.
6.5 Survival of Rights, Duties and Obligations. The
termination, dissolution, liquidation or winding up of the Company for
any reason shall not release any party from liability which at the time
of such termination, dissolution, liquidation or winding up already had
accrued to any other party or which thereafter may accrue in respect to
any act or omission prior to such termination, dissolution, liquidation
or winding up.
6.6 Distributions Following a Liquidity Event. Except as
otherwise provided in Section 6.7, the Company shall distribute the net
proceeds of a Liquidity Event following the occurrence of such Liquidity
Event in the following order of priority:
(a) first, to the Preferred A Interest to the extent of
the Unpaid Initial Preferred A Nominal Amount;
(b) next, to the Preferred A Interest, to the extent of
the Unpaid Preferred A Return;
(c) next, to (A) the Preferred B Interest, and (B) the
Preferred C Interest, in proportion and to the extent of the Unpaid
Initial Preferred B Nominal Amount and the Unpaid Initial Preferred C
Nominal Amount;
(d) next, to (A) the Preferred B Interest, and (B) the
Preferred C Interest, in proportion and to the extent of the Unpaid
Preferred B Return and the Unpaid Preferred C Return;
(e) next, to Zurich to the extent of the Unpaid CDL
Amount;
(f) next, the remaining proceeds to the Common Interests
in proportion and to the extent of the positive balances of their respec-
tive Capital Accounts; provided that to the extent that any Member has a
negative balance in such Member's Capital Account, such Member shall not
be obligated to restore such Capital Account to zero; and
(g) thereafter 40% to GFC and 60% to Management Group.
6.7 Certain Provisions in Liquidity Events. The Company
shall not be required to distribute the proceeds of a Liquidity Event
(other than (x) a Liquidity Event having the effect of selling,
transferring or otherwise disposing of all or substantially all of the
assets or business of the Company and its Subsidiaries, taken as a
whole or (y) a Liquidity Event as set forth in paragraph (iv) or (v) of
the definition of Liquidity Event in Section 1.8) if, within 90 days
after receipt by the Company of any proceeds of such Liquidity Event, the
Executive Committee has determined that such proceeds are to be used in
the operation of the Company and has adopted a plan setting forth in
reasonable detail how such proceeds are to be so used within a reasonable
period of time after such adoption.
6.8 Claims of Members. The Members and former Members
shall look solely to the Company's assets for the payment of any claims
under this Agreement, and shall have no recourse against any individual
Member for such claims.
ARTICLE VII
TRANSFER OF LLC INTERESTS
7.1 Transfers of Interests.
(a) No Member may sell, give, pledge, assign, hypothe-
cate, encumber, grant a security interest in or otherwise dispose of all
or any portion of such Member's LLC Interests (including any beneficial
interest therein), or withdraw as a Member (together, "Transfer"), except
pursuant to this Article VII. No Member may make a Transfer in violation
of this Article VII, and any such Transfer shall be null, void and
without effect.
(b) Management Group may not Transfer any or all of its
LLC Interests without the prior written consent of GFC.
(c) GFC may:
(i) at any time Transfer any or all of its LLC Interests
(together with any or all of its rights under this Agreement) to (x) an
Affiliate (for purposes of this Section 7.1(c)(i)(x), Zurich or any of
its Affiliates shall be considered not to be an Affiliate of GFC) or (y)
Centre Reinsurance Dublin, or an Affiliate thereof, pursuant to Section
8.6 of the Portfolio Value Swap Agreement dated June 12, 1995, as amended
by Amendment Nos. 1 and 2 thereto, between Home and Centre Reinsurance
Dublin;
(ii) at any time Transfer to any Person any or all of its
LLC Interest (together with any or all of its rights under this
Agreement, other than the rights of GFC's LLC Interests with respect to
the designation of GFC Directors set forth in Article IV (other than
Section 4.13));
(iii) at any time after the fourth anniversary of the date
of this Agreement, (x) subject to Section 7.3(a), (b) and (c), Transfer
to any Person all (but not less than all) of its LLC Interests (together
with any or all of its rights under this Agreement) and (y) subject to
Section 7.3(d), Transfer to any Person some (but not all) of its LLC
Interests (together with any or all of its rights under this Agreement);
and
(iv) at any time for purposes of exercising its rights
under this Article VII, furnish, or request the Company to furnish, to
any third party proposed transferee any information reasonably requested
concerning the business, financial condition, results of operations,
operations, properties or assets of the Company or any of its
Subsidiaries. Upon receipt of a confidentiality agreement duly executed
and delivered by such third party containing restrictions customary in
such type of transactions, the Company shall promptly comply with such
request and furnish such information to such third party.
(d) If GFC transfers to any Person all of its LLC
Interests pursuant to Section 7.1(c)(ii), upon the effectiveness of such
Transfer:
(i) all of the GFC Directors (other than the ones, if any,
designated pursuant to Section 4.13) on the Executive Committee or, if
applicable, on the executive committee of Gruntal & Co., L.L.C. shall be
deemed to have resigned immediately; the Executive Committee (or such
executive committee) positions vacated by such resignations shall not
be filled and the number of positions in the Executive Committee (or such
executive committee) shall thereafter be reduced by such number of
vacated positions;
(ii) Section 4.11 shall cease to be effective under this
Agreement; and
(iii) the transferee Member shall not be entitled to
designate any Director, except pursuant to Section 4.13, and each such
Director shall exercise all the rights and authority of a Director
provided in this Agreement, shall be designated and removed by such
transferee Member, and shall be subject to Section 4.13.
(e) If a Member has received an offer, or a solicitation,
an expression of interest or any other invitation to enter into, commence
or participate in any discussion or negotiation, from or with any person
that indicates an interest in effecting a Transfer of any or all of
such Member's LLC Interests, such Member shall promptly notify the other
Member of such offer, solicitation, expression of interest or invitation.
Thereafter, to the extent such proposed Transfer is permissible under
this Article VII, such Member may participate in the discussion or
negotiation with respect to such proposed Transfer, and such Member
shall keep the other Member apprised of the progress of such discussion
or negotiation; provided that nothing in this Section 7.1(e) shall
require a Member to share with the other Members any communication,
whether written or otherwise, with such other person, or entitle such
other Member to participate in such discussion or negotiation.
7.2 Tag-Along Rights. If the Company shall at any time
propose to effect any issuance or sale of any profit share or interest
(including any LLC Interests) of the Company or any of its Significant
Subsidiaries (including Gruntal & Co., L.L.C.), or any securities or
right of any kind convertible into or exchangeable for such profit share
or interest, or any option, warrant, put, call or other arrangement of
any kind to purchase or otherwise receive from the Company or such
Subsidiary any such profit share or interest, then, unless such issuance
or sale is (i) subject to Section 3 of the Registration Rights Agreement
or (ii) in connection with the formation of any Person that, upon its
formation, would not be a Significant Subsidiary of the Company, the
Company shall by notice to GFC offer GFC the opportunity to participate
in such sale by including any or all of GFC's LLC Interests in such sale,
upon the same terms and conditions of such sale or, with respect to
GFC's LLC Interests that are not identical to the profit share or
interest proposed to be issued, such substantially similar terms and
conditions of sale as GFC may agree. Within 30 calendar days after the
effectiveness of such notice, GFC shall by notice notify the Company of
its election whether to participate in such sale and the terms and
conditions of its participation. The failure of GFC to respond within
such 30 calendar day period shall be regarded as its rejection of the
offer to participate in such sale and the Company shall be entitled to
consummate such sale or issuance on the terms and conditions set forth in
its notice within 120 calendar days after the expiration of such 30
calendar day period. If such sale is not consummated within such 120
calendar day period, the Company may not effect such sale or issuance
unless it shall have complied with and issued the notice required in this
Section 7.2 again.
7.3 Transfer after the Fourth Anniversary.
(a) At any time after the fourth anniversary of the date
of this Agreement, if GFC receives a bona fide offer from a third party
(other than pursuant to Section 7.1(c)(i)) to purchase (including a
purchase by merger or a purchase of assets) all (but not less than all)
of its LLC Interests, GFC shall promptly by notice (the "Offer Notice")
to the Company and the Management Group notify them of such offer,
setting forth the terms thereof in reasonable detail, including the
consideration (the "Offer Price") offered by such third party and if
applicable a copy of the written offer from such third party offeror.
(b) If such bona fide offer applies to all of the LLC
Interests held by GFC and by the Management Group, and if the Offer Price
exceeds or is equal to the Threshold for the immediately preceding
quarter, then, if so requested by GFC, the Management Group shall be
required to sell all (but not less than all) of the Management Group's
LLC Interests in such sale. Upon the effectiveness of the Offer Notice,
the Management Group shall (i) sell all of its LLC Interests on the same
terms and conditions as GFC sells all of its LLC Interests, (ii) take all
necessary action to consummate such transaction, including voting its LLC
Interests in favor of such transaction and not exercising any appraisal
rights, if applicable, in connection therewith and (iii) take all actions
(including executing documents) in connection with the consummation of
such transaction as may reasonably be requested of it by GFC.
(c) If the Offer Price is less than the Threshold for the
immediately preceding quarter, the Management Group may, within 30
calendar days after the effectiveness of the Offer Notice, notify GFC of
the Management Group's intention to purchase all (but not less than all)
of GFC's LLC Interests included in such third party offer from the third
party offeror on the same terms and conditions as set forth in such third
party offer within 120 calendar days of the date of the Management
Group's notice of its intention to purchase GFC's LLC Interests. If the
Management Group does so respond, GFC shall sell, and the Management
Group shall purchase, all of GFC's LLC Interests on such terms and
conditions. If the Management Group does not respond within such 30
calendar day period, responds to decline such purchase, or fails to
consummate such purchase within such 120 calendar day period, it shall be
deemed to have waived its rights under this Section 7.3(c). By notice to
the Management Group within ten calendar days after the effectiveness of
such waiver, GFC may (A) sell all of its LLC Interests to the third party
on the same terms and conditions set forth in the Offer Notice within 120
calendar days after the expiration of such ten calendar day period and if
such sale is not consummated within such 120 calendar day period, GFC may
not sell its LLC Interests unless it shall have complied with this
Section 7.3 and issued a new Offer Notice, or (B) require the Management
Group to sell all (but not less than all) of the Management Group's LLC
Interests in such sale together with all of GFC's LLC Interests, and the
Management Group shall then (i) sell all of its LLC Interests on the same
terms and conditions as GFC, (ii) take all necessary action to consummate
such transaction, including voting its LLC Interests in favor of such
transaction and not exercising any appraisal rights, if applicable, in
connection therewith and (iii) take all actions (including executing
documents) in connection with the consummation of such transaction as may
reasonably be requested of it by GFC.
(d) At any time after the fourth anniversary of the date
of this Agreement, if GFC intends to effect a Transfer of some (but not
all) of its LLC Interests pursuant to Section 7.1(c)(iii)(y), GFC shall
notify ("GFC Notice") the Management Group of such intention, specifying
the terms and conditions on which GFC is willing to effect such a
Transfer. The Management Group may, within 30 calendar days after the
effectiveness of the GFC Notice, notify GFC of the Management Group's
intention to purchase all (but not less than all) of GFC's LLC Interests
included in the GFC Notice, on the same terms and conditions as set forth
therein. If the Management Group does so respond, GFC shall sell, and the
Management Group shall purchase, all of GFC's LLC Interests included in
the GFC Notice, on the terms and conditions set forth therein within 120
calendar days after the expiration of such 30 calendar day period. If the
Management Group does not respond within such 30 calendar day period,
responds to decline such purchase, or fails to consummate such purchase
within such 120 calendar day period, GFC may sell all of its LLC
Interests included in the GFC Notice, within 120 calendar days after the
expiration of such 30 calendar day period or (in the case of a failure to
consummate) 120 calendar day period, on terms and conditions no less
favorable to GFC than those included in the GFC Notice, and, if such sale
is not consummated within such 120 calendar day period, GFC may not sell
such LLC Interests unless it shall have complied with this Section 7.3(d)
and issued a new GFC Notice.
(e) For purposes of this Section 7.3:
(i) "Threshold" means, with respect to all of the LLC
Interests and the CDL (together, "Interests"), an amount that is equal to
the higher of (i) 10 x NI and (ii) 1.3 x PV, where:
NI means the quotient obtained by dividing (x) the sum of
after tax net income of the Company for the immediately preceding eight
consecutive complete fiscal quarters by (y) two; for this purpose, after
tax net income means the net income of the Company, calculated in
accordance with generally accepted accounting principles, consistently
applied with past practice, and assuming a corporate tax rate of 40%; and
PV means the tangible book value of the Company as at the end of the
immediately preceding fiscal quarter, calculated in accordance with
generally accepted accounting principles, applied consistently with past
practice.
(ii) If an Offer Price is expressed with respect to some
but not all of the Interests (for example, an Offer Price for all of the
LLC Interests held by GFC), the amount of the Threshold calculated under
Section 7.3(e)(i) shall be appropriately adjusted and reduced so that
only such portions of the Threshold as representing those portions of the
Interests corresponding to the Interests offered to be purchased by the
Offer Price shall be compared to the Offered Price. For purposes of so
adjusting the Threshold, the LLC Interests will be valued on a deemed
liquidation basis, assuming that the Company is liquidated as of the date
of such valuation pursuant to the procedures and priority of distribution
set forth in Section 6.3.
(iii) If an Offer Price includes any non-cash
consideration: (x) the fair market value of such non-cash consideration
shall be determined pursuant to Section 3.8 and (y) the Offer Notice
shall be deemed not to have become effective until after the fair market
value of any such non-cash consideration has been so determined.
7.4 Other Transfer Restrictions.
(a) Notwithstanding any other provisions of this Agree-
ment, no Transfer of a Member's LLC Interests may be made unless, in the
opinion of counsel to the Company, satisfactory in form and substance to
the Executive Committee (which opinion may be waived, in whole or in
part, at the discretion of the Executive Committee):
(i) such Transfer would not violate the Securities Act of
1933, as amended, or any state securities or "blue sky" laws applicable
to the Company or the LLC Interests to be Transferred;
(ii) such Transfer would not cause the Company to lose its
status as a partnership for federal income tax purposes; and
(iii) such Transfer shall not impose liability or
reporting obligations on the Company or any Member thereof in any
jurisdiction, whether domestic or foreign, or result in the Company
becoming subject to the jurisdiction of any court or governmental entity
anywhere other than Delaware.
(b) Any Person that acquires an LLC Interest pursuant to
this Article VII shall assume (i) the pro rata portion of Capital Account
of the transferring Member that related to the portion of the LLC
Interests being transferred to such Person and (ii) all obligations of
the transferring Member arising under Section 2.2. To the extent
permitted by law, a transferring Member shall have no liability for
amounts required to be paid with respect to such Member's LLC Interests
after the transferee of such LLC Interests, as the case may be, is
admitted as a substituted Member.
(c) If any Transfer of a Member's LLC Interests in the
Company shall occur at any time other than the end of the Company's
fiscal year, the distributive income, gain, loss and expense as computed
for tax purposes and the related cash distributions shall be allocated
between the transferor and the transferee on such proper basis as the
transferor and transferee shall agree to consistent with applicable
requirements under section 706 of the Code; provided that no such
allocation shall be effective unless (i) the transferor and transferee
shall have given the Company written notice, prior to the date of such
transferee becoming a Member hereunder, stating their agreement that such
allocation shall be made on such proper basis, (ii) the Executive
Committee, in its discretion, shall have consented to such allocation and
(iii) the transferor and transferee shall have agreed to reimburse the
Company for any incremental accounting fees and other expenses incurred
by the Company in making such allocation.
7.5 Admission of Additional Members by the Company. The
Company may, from time to time, upon the approval of the Executive
Committee and subject to Section 4.11, issue LLC Interests or other
profit shares or interests in the Company to any Person, with such
preferences, rights and designations and such other terms and conditions
as the Executive Committee may define (which terms and conditions shall
be set forth in an amendment to this Agreement and adopted pursuant to
Section 8.4), and such Person shall, upon such issuance and fulfillment
of the conditions set forth in Section 7.6, be admitted to the Company as
a Member.
7.6 Additional or Substituted Members. No Transfer of any
LLC Interests or portion thereof shall be effective unless and until the
transferee is admitted as a Member of the Company pursuant to this
Section 7.6. As a condition to the admission of any Person as an
additional or substituted Member, this Agreement shall be amended,
pursuant to Section 8.4, to admit such Person as such additional or
substituted Member, and such Person shall execute and acknowledge such
amendment to confirm that such Person has agreed to be bound by all of
the covenants, terms and conditions of this Agreement, as amended. Such
Persons shall become Members on the last to occur of (a) if applicable,
their making contributions to the capital of the Company; (b) their
execution of the amendment described in the second sentence of this
Section 7.6; (c) the approval of or filing with any other Person which
approval or filing is required; and (d) the making of all other necessary
amendments, modifications and restatements of this Agreement as required
to reflect a change or modification of the Company or of the respective
rights of the Members hereunder (including such adjustment in LLC
Interests and in Capital Accounts as may be required to admit a new
Member and to reflect the issuance of a LLC Interest to a new Member);
and thereupon such Persons shall be included in the definition of
Members, and as parties to this Agreement, for all purposes of this
Agreement. Anything herein to the contrary notwithstanding, the Company
and the Executive Committee shall be entitled to treat the transferor of
a LLC Interest as the absolute owner thereof in all respects, and shall
incur no liability for distributions made in good faith to the
transferor, until such time as a Transfer meeting all of the requirements
of this Article VII has been made.
7.7 Withdrawal of Members.
(a) Any Member may withdraw as a Member at any time upon
60 days prior written notice to the Company.
(b) Upon a Person's withdrawal as a Member pursuant to
Section 7.7(a), such Person shall no longer be considered a Member for
purposes of this Agreement and, shall not be entitled to receive (i) any
allocations or distributions from the Company in accordance with the
terms of this Agreement, or (ii) the balance of such Member's Capital
Account.
7.8 Election to Adjust Tax Basis. The Tax Matters Person
may, but need not, cause the Company to make an election or, with the
consent of the Commissioner of Internal Revenue, to revoke any election
made under section 754 of the Code to adjust the basis of Company
property under sections 734 and 743 of the Code, and each Member agrees
to furnish the Company with all information necessary to give effect to
any such election. The Tax Matters Person may elect to make any other
election permitted under any provision of the Code if, in the opinion of
the Tax Matters Person, such election would be advantageous to the
Members as a group or to any Member without being disadvantageous to any
other Member.
7.9 No Removal. Notwithstanding any other provisions
herein, no Member may be removed or expelled from the Company as a Member
without the consent of such Member.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed effective or given upon
(a) transmitter's confirmation of a receipt of a facsimile transmission,
(b) confirmed delivery by a recognized courier service or an affidavit of
the messenger when delivered by hand or (c) the expiration of seven
calendar days after the day when mailed by certified or registered mail,
postage prepaid, addressed to the address that a Member or other person
has notified the Secretary of the Company from time to time for the
purpose of receiving notice hereunder.
8.2 Third Party Beneficiary. Zurich shall be considered a
third party beneficiary under this Agreement and be entitled to enforce
its rights hereunder directly.
8.3 Non-Waiver. No delay on the part of any party in
exercising any right hereunder shall operate as a waiver thereof, nor
shall any waiver, express or implied, by any party of any right hereunder
or of any failure to perform or breach hereof by any other party
constitute or be deemed a waiver of any other right hereunder or of any
other failure to perform or breach hereof by the same or any other
Member, whether of a similar or dissimilar nature thereof.
8.4 Amendments. This Agreement may be amended from time to
time only upon the approval of the Executive Committee and Members
holding two-thirds of all the Common Interests; provided that (i) such
approval shall not be required in connection with any Transfer by GFC of
its LLC Interests pursuant to Section 7.1 (c)(i), (ii) or (iii); and
(ii) no amendment affecting the rights or interests of any Interests in
the Company shall be effective unless such amendment has also been
approved by Persons holding two-thirds of such Interests voting as a
separate class. Any proposal to amend this Agreement shall be accompanied
by a summary of the proposed amendment and shall be delivered to all of
the Members. The date of adoption of an amendment shall be the date on
which the Company shall have received the requisite approvals.
8.5 Further Assurances. Each of the Members hereby agrees
to execute and deliver all such other and additional instruments and
documents and to do such other acts and things as may be reasonably
necessary or appropriate to carry out the intent and purposes of this
Agreement.
8.6 Applicable Law. This Agreement, the relations, rights
and duties of the Members among themselves, and all matters pertaining to
the Members and the Company, shall be governed by and construed under and
in accordance with the laws of the State of Delaware applicable to
agreements entered into and to be performed wholly within such State.
8.7 Severability. In the event that any provision of this
Agreement shall be declared to be invalid, illegal or unenforceable,
such provision shall survive to the extent it is not so declared, and the
validity, legality and enforceability of the other provisions hereof
shall not in any way be affected or impaired thereby, unless such action
would substantially impair the benefits to either party of the remaining
provisions of this Agreement.
8.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8.9 Usage. Any word or term used in this Agreement in any
form shall be masculine, feminine, neuter, singular or plural, as proper
reading requires.
8.10 Table of Contents and Headings. The table of contents
and headings in this Agreement are solely for convenience of reference
and shall not affect the interpretation or construction of any of the
provisions hereof.
8.11 Investment Representation. Each Member, by execution
of this Agreement, (a) represents to the other Member and to the Company
that such Member is acquiring an interest in the Company for the purpose
of investment for such Member's own account, with the intent of holding
such interest for investment and without the intent of participating
directly or indirectly in any sale or distribution thereof, and (b)
acknowledges that such Member must bear the economic risk of loss of such
Member's capital contributions to the Company because the Agreement
contains substantial restrictions on transfer and because such interest
has not been registered under applicable Federal and state securities
laws and cannot be sold unless subsequently registered under such
securities laws or an exemption therefrom is available. Furthermore, each
Member and its assigns and transferees agree to provide such
certification as may from time to time be required by the Executive
Committee to ensure that the Company is in compliance with all applicable
laws.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or caused this Agreement to be executed, by their respective
duly authorized officers, on the date first above written.
THE 1880 GROUP LLC
By:__________________________________
Name:
Title:
GRUNTAL FINANCIAL CORP.
By:___________________________________
Name:
Title:
Schedule 1.8
CALCULATION OF INITIAL PREFERRED C NOMINAL AMOUNT
The Initial Preferred C Nominal Amount is equal to the
hypothetical value of the Management LTIP (the "LTIP") on the
Closing Date, assuming an amount of proceeds of a hypothetical
sale of GFC that is based on the transactions contemplated by the
Reorganization Agreement (the "Hypothetical Proceeds").
Hypothetical Proceeds is equal to the Initial Preferred
A Nominal Amount, plus the Initial Preferred B Nominal Amount,
plus the Initial Preferred C Nominal Amount. The Initial Pre-
ferred A Nominal Amount is equal to $160 million minus 50% of the
Lost Deferred Tax Assets, and the Initial Preferred B Nominal
Amount is fixed at $70 million. Note that while the Initial
Preferred C Nominal Amount is a function of Hypothetical Pro-
ceeds, Hypothetical Proceeds is simultaneously a function of the
Initial Preferred C Nominal Amount.
Hypothetical Proceeds is then compared to a target
("Target") that equals the tangible book value ("TB") of GFC as
of 12/31/95, plus any capital thereafter contributed by the
stockholders of GFC, less any dividends paid by GFC ("Divi-
dends"), all accreted to the Closing Date at the one-year Trea-
sury rate as of January 1 of such year. A pre-Closing estimated
Dividend (the "Interim Dividend") will be paid pursuant to
Section 6.2(f) of the Reorganization Agreement. An adjustment
payment will be made post-closing (an "Adjustment Amount"),
pursuant to Section 5.5 of the Reorganization Agreement. If the
Adjustment Amount is paid to Home, it shall be added to Divi-
dends. If the Adjustment Amount is paid to the Company, it shall
be subtracted from Dividends.
To the extent that the Hypothetical Proceeds exceeds
Target, the value of the LTIP will be calcu lated as follows: (a) 10% of
the first 30% by which the Hypothetical Proceeds exceed Ta rget, (b)
thereafter, 20% of the next 30% by which the Hypothetical Proceeds exceed
Ta rget, (c) thereafter, 30% of the next 30% by which the Hypothetical
Proceeds exceed Ta rget, (d) thereafter, 40% of the next 30% by which the
Hypothetical Proceeds exceed Ta rget, and (e) thereafter, 50% of any
additional Hypothetical Proceeds that exceed Target.
Example of Calculation of Initial Preferred C Nominal Amount
Assumptions:
1. TB of GFC as of 12/31/95, plus any capital thereafter contributed by
the stockholders of GFC, less any Dividends, all accreted at the one-year
Treasury rate to the Closing Date, not including the Interim Dividend and
the Adjustment Amount, equals $171.5 million.
2. The Lost Deferred Tax Assets equal $9.257 million.
3. The Interim Dividend plus the Adjustment Amount equals $7.338 million.
Variables:
A = Initial Preferred A Nominal Amount = 160 - .5(Lost
Deferred Tax Assets) = = 160 - .5(9.257) = 160 - 4.6285 = 155.3715
B = Initial Preferred B Nominal Amount = 70
C = Initial Preferred C Nominal Amount = LTIP value at Closing
P = Hypothetical Proceeds = A + B + C = 155.3715 + 70 + C = 225.3715 + C
T = Target = 1995 TB accreted to Closing - Interim Dividend - Adjustment
Amount = = 171.5 - Interim Dividend - Adjustment Amount
Under these assumptions, (P - T) will be in the range of
30% to 60% of T, and the value of the LTIP will be equal to 10% of 30% of
T, plus 20% of the excess of (P - T) over 30% of T, or:
C = .1(.3)T + .2[(P - T) - .3T].
If we simplify:
C = .03T + .2[P - 1.3T]
C = .03T + .2P - .26T
C = .2P - .23T
Because P is a function of C, we need to remove P from the equation. If
we substitute for P and T, from above, and simplify:
C = .2(225.3715 + C) - .23(171.5 - Interim Dividend -
Adjustment Amount)
C = 45.0743 + .2C - 39.445 + .23(Interim Dividend +
Adjustment Amount)
.8C = 5.6293 +.23(Interim Dividend + Adjustment Amount)
C = 7.036625 + 0.2875(Interim Dividend + Adjustment Amount)
Accordingly, for Interim Dividend + Adjustment Amount = 7.338, the value
of the LTIP and the Initial C Nominal Amount equals $9,146,300;
Hypothetical Proceeds equals $234,517,800; and Target equals
$164,162,000.
Schedule 2.1
Name and Address of Member Initial Capital Contribution
Gruntal Financial Corp. 100% of all of the issued and outstanding
c/o The Home Insurance Company membership interests in each of the
59 Maiden Lane Gruntal & Co., L.L.C., Gruntal Man-
New York, NY 10038 agement, L.L.C. and The GMS Group,
L.L.C., and all other assets and
liabilities of GFC (other than
those under the Reorganization
Agreement, the other Transaction
Documents (as defined in the
Reorganization Agreement), and
certificates, agreements and
instruments related thereto),
the net fair market value of all
of which is $160 million minus
the product of (i) 50% and (ii)
the Lost Deferred Tax Assets
The 1880 Group LLC Provision of services by The 1880 Group
c/o Gruntal & Co., Incorporation LLC and its members.
Fourteen Wall Street
New York, NY 10005-2176
Schedule 4.4
Schedule 4.9
Exhibit 3.1E
AMENDMENT NO. 2 TO PORTFOLIO VALUE SWAP AGREEMENT (this
"Amendment"), dated as of March __, 1997 by CENTRE REINSURANCE DUBLIN, a
corporation organized under the laws of the Republic of Ireland
("Centre"), THE HOME INSURANCE COMPANY, a stock insurance company
domiciled in New Hampshire ("Home"), and certain other subsidiaries of
Home listed on the signature page hereof.
The parties hereto are parties to a Portfolio Value Swap
Agreement dated as of June 12, 1995, as amended (the "Swap Agreement").
Home and certain other parties are parties to an
Investment Management Agreement dated as of June 12, 1995 (the
"Investment Management Agreement").
Gruntal Financial Corp. ("GFC"), a subsidiary of Home, and
The 1880 Group LLC ("Management") are parties to the Reorganization
Agreement dated February 24, 1997 (the "Reorganization Agreement").
GFC and Management have on the date hereof entered into a
Limited Liability Company Agreement (the "Holdings Agreement") in
connection with Gruntal Financial, L.L.C. (the "Company").
In connection with the consummation on the date hereof of
the transactions contemplated by the Reorganization Agreement and the
Holdings Agreement, Home has become directly or indirectly the owner of
certain interests in the Company which interests, pursuant to terms of
the Swap Agreement and the Investment Management Agreement, could be
considered as part of the "Portfolio," as defined in the Swap Agreement
and the Investment Management Agreement and be subject to the Swap
Agreement and the Investment Management Agreement. The parties hereto
intend to effect a different arrangement with respect to such interests,
as set forth herein.
The parties hereby agree as follows:
Section 1. Amendment. The Swap Agreement is hereby
amended, effective upon the effectiveness of this Amendment, by adding
thereto an Article VIII, as follows:
ARTICLE VIII
CERTAIN LLC INTERESTS
8.1 Definitions. Capitalized terms used but not defined in
this Article VIII shall have the meanings given to them in the Limited
Liability Company Agreement dated March __, 1997 entered into by Gruntal
Financial Corp. ("GFC") and The 1880 Group LLC (the "Holdings
Agreement"). As used in this Article VIII, the following terms have the
following meanings:
"Business Day" has the meaning set forth in the Swap
Agreement.
"Calculation Amount" means the Initial Preferred A
Nominal Amount.
"Calculation Period" means, as of any date, the period
from and including the effective date of this Article VIII to and
including such date.
"Company" means Gruntal Financial, L.L.C., a Delaware
limited liability company.
"Investment Management Agreement" means the Investment
Management Agreement dated June 12, 1995 among Home and certain other
parties.
"Lien" means any mortgage, pledge, security interest,
lease, easement, servitude or similar encumbrance.
"Payment Amount" means, as of the Termination Date, the
excess, if any, of Target Value over Portfolio Value.
"Payment Date" means the thirteenth Business Day next
following the Termination Date.
"Portfolio Value" means the sum of the future values as of
the last day of a Calculation Period (calculated at 7.5% per annum, on
the basis of a 365/366 day year, actual number of days elapsed,
compounded annually) of (i) all distributions paid or made by the Company
during the Calculation Period (a) to GFC pursuant to Sections
2.6(a)(i)(D), 2.6(a)(i)(I) (with respect to Tax Distributions pursuant to
Section 2.6(a)(i)(D) only), 2.6(a)(ii), 2.6(a)(iv)(x), 2.6(a)(v), 6.6(a)
and 6.6(b) of the Holdings Agreement,1 (b) to any Person pursuant to
Sections 2.6(a)(i)(F) and 2.6(a)(i)(I) (with respect to Tax Distributions
pursuant to Section 2.6(a)(i)(F) only) of the Holdings Agreement,2 (c) to
any Person pursuant to Sections 2.6(a)(i)(A), 2.6(a)(i)(B), 2.6(a)(i)(I)
(with respect to Tax Distributions pursuant to Sections 2.6(a)(i)(A) and
2.6(a)(i)(B) only), 2.6(a)(iii)(B), 2.6(a)(iv)(y)(2), 6.6(c)(B), and
6.6(d)(B) of the Holdings Agreement,3 and (d) to GFC pursuant to
Sections 2.6(a)(vi) and 6.6(f) of the Holdings Agreement,4 and (ii) all
proceeds (a) paid to GFC as a result of or in connection with a Transfer
or other disposition of its Preferred A Interest or Common Interest, and
(b) paid to any Person as a result of or in connection with a Transfer
or other disposition of its Preferred C Interest. Such distributions and
proceeds shall be included in the computation of Portfolio Value when so
paid, whether or not received by GFC, such Person or any of their
respective successors or transferees (for the avoidance of doubt any
amounts paid to or on behalf of creditors or Lien-holders of any of the
foregoing shall be included in the computation of Portfolio Value and, if
any such distributions, proceeds or LLC Interests are Transferred,
attached or foreclosed, the amount of such Transfer, attachment or
foreclosure shall be included in the computation of Portfolio Value).
For purposes of computation of Portfolio Value, (i) any distributions
paid or made to or proceeds received by GFC or any other direct or indi-
rect subsidiaries of Home shall be considered paid or made to or received
by Home, and (ii) all proceeds paid to Home as a result of or in
connection with a Transfer or other disposition of the equity interest of
GFC or any other subsidiary of Home that is the record or beneficial
owner of Home's LLC Interests shall be included in the computation of
Portfolio Value. If distributions or proceeds consist of any publicly
traded security, such security shall be valued at the average of the
closing price per unit of such security on the principal exchange or
market in which such security trades, for the ten consecutive trading
days ending on and including the date of such distribution or payment of
such proceeds, as the case may be. If distributions or proceeds consist
of any non-publicly traded security, such security shall be valued as
determined by Centre on the basis of the average of price quotes
obtained from at least two different brokers or dealers that Centre
selects.5
"Target Value" means, as of any date, the Calculation
Amount, plus an assumed Total Return on the Calculation Amount for the
Calculation Period of 7.5% per annum, calculated on the basis of a
365/366 day year, actual number of days elapsed, compounded annually.
"Termination Date" means the date on which the termination
of this Article VIII pursuant to Section 8.5(b) (but not Section 8.5(c))
becomes effective.
"Total Return" means a total or all-in return during any
specified period. Total Return shall be measured in "gross" and shall not
be adjusted upwards or downwards to give effect to any tax, accounting or
other special treatment of the return for purposes of measurement under
this Article VIII.
"Transfer" means, with respect to any securities or
interests (including any beneficial interest therein), including any LLC
Interests, any sale, giving, pledge, assignment, hypothecation,
encumbrance, granting of a security interest, or any other disposition
thereof and, with respect to the LLC Interests, includes the withdrawal
by a Member from the Company.
8.2 Portfolio. Notwithstanding any other provisions in
this Agreement or the Investment Management Agreement to the contrary,
the LLC Interests of the Company held directly or indirectly by Home, and
any returns or other distributions thereon (including for this purpose
any dividend distribution of such returns or distributions from direct or
indirect subsidiaries of Home to Home) shall not be considered part of
the "Portfolio" as defined in, or be subject to, this Agreement (other
than this Article VIII) and the Investment Management Agreement, and no
fees shall be payable under the Investment Management Agreement with
respect to such LLC Interests.
8.3 Calculations and Payments.
(a) Home shall promptly notify Centre upon the making or
declaring by the Company of any retur ns or distributions on the LLC
Interests, or Home's receipt of any returns, distributions or proceeds
with respect to its LLC Interests. Upon the receipt of such notification,
Centre shall calculate the Portfolio Value as of the date of such
distribution or receipt, and Home shall render such assistance as Centre
may reasonably request in connection with such calculation. If the
Portfolio Value exceeds the Target Value as of such date, Centre shall
notify Home to terminate this Article VIII pursuant to Section
8.5(b)(iii).
(b) On or before the Payment Date, Centre shall provide to
Home a notice in which Centre sets forth the Payment Amount payable on
the Payment Date, setting forth in reasonable detail the calculation of
the Payment Amount.
(c) On the Payment Date Centre shall pay Home the Payment
Amount in immediately available funds to such account as shall be
specified in a notice to Centre by Home.
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1 Distributions with respect to Home's Preferred A Interest.
2 Tax Distributions with respect to Home's Preferred B Nominal Amount.
3 Distributions with respect to Management's Preferred C Interest.
4 Distributions with respect to Home's Common Interest, other than Tax
Distributions paid to Home with respect to its Common Interest.
5 Similar language is used to define market value of non-traded
securities in Schedule 3 to the Investment Management Agreement.
(d) Payments under this Article VIII shall not be subject
to any set-off, counterclaim or other combination of accounts of or with
respect to any payment or other rights that a party hereunder may be
entitled, whether by operation of law, contract (including but not
limited to this Agreement (other than this Article VIII), the Portfolio
Value Swap Agreement (the "Holdings Swap Agreement") between Centre and
Home Holdings Inc. dated June 12, 1995, as amended, and the Aggregate
Excess of Loss Reinsurance Agreement dated June 12, 1995, as amended (as
so amended, the "Reinsurance Agreement") between Centre and Home), or
otherwise.
8.4 Amendment. No amendment, modification, supplement or
waiver in respect of this Article VIII will be effective unless (x) in
writing and signed by Home and Centre and (y) consented to in writing by
the New Hampshire Insurance Department.
8.5 Termination.
(a) This Article VIII shall not be terminated upon or
otherwise affected by the termination of the other provisions of this
Agreement.
(b) This Article VIII shall terminate upon (i) Transfer or
other disposition, with the prior written consent of Centre under Section
8.6(a) (including any consent deemed to be given pursuant to Section
8.6(b) or 8.6(c)(ii)), by Home of all of its LLC Interests (other than
the Preferred B Interests) in the Company, or if Home, with the prior
written consent of Centre under Section 8.6(a) (including any consent
deemed to be given pursuant to Section 8.6(b) or 8.6(c)(ii)), otherwise
ceases to be the record or beneficial owner (other than through GFC) of
all such LLC Interests (other than the Preferred B Interests), (ii) if
the Company is terminated and dissolved pursuant to the Holdings
Agreement and the Act, completion of the final distribution of the assets
of the Company in the liquidation and winding up of the Company, or (iii)
notice to Home by Centre under Section 8.3(a) that, as of any date, the
Portfolio Value equals or exceeds the Target Value.
(c) This Article VIII may be terminated by Centre, without
being liable to make any payments under this Article VIII, by notice to
Home (i) upon a termination of the other provisions of this Agreement
effected or caused by the New Hampshire Insurance Department and
delivery by Centre of a credit enhancement instrument or other
arrangement in form and substance reasonably satisfactory to Home and the
New Hampshire Insurance Department that continues to provide to Home
substantially all the benefit intended to be provided to Home under this
Article VIII, or (ii) if a default or violation by Home of Section 8.6(a)
shall have occurred and be continuing, Centre shall have notified Home of
such default or violation and, if such default or violation is curable
within 30 calendar days, Home has not cured such default or violation
within 30 calendar days after such notice. For the avoidance of doubt the
date on which this Article VIII is terminated pursuant to this Section
8.5(c) shall not be considered a "Termination Date".
8.6 Home's LLC Interests.
(a) Home agrees with Centre that, without the prior
written consent of Centre, which consent may be withheld by Centre at
Centre's absolute discretion:
(i) Home shall not amend, modify, supplement, waive any of
its rights under or terminate the Holdings Agreement;
(ii) Home shall not Transfer or otherwise dispose of any
or all of its Preferred A Interests or Common Interests in the Company,
or otherwise cease to be the record or beneficial owner (other than
through GFC) thereof;
(iii) Home shall not Transfer or otherwise dispose of any
or all its equity interests in GFC or any other direct or indirect
subsidiary that is the record or beneficial owner of Home's Preferred A
Interests or Common Interests in the Company, or otherwise cease to be
the record or beneficial owner (other than through a wholly-owned
subsidiary) of such equity interests;
(iv) Home shall not create, incur, assume or permit to
exist any Lien on Home's LLC Interests (other than the Preferred B
Interests); or
(v) Home shall not take any action relating to the
termination or dissolution of the Company.
(b) Centre shall be deemed to have consented to a Transfer
requested by Home pursuant to Section 8.6(a)(ii) upon execution and
delivery by Home of an instrument in form and substance satisfactory to
Centre (i) terminating this Article VIII and releasing Centre of all
obligations and liabilities under this Article VIII or (ii) confirming
that the proceeds of such proposed Transfer will cause the Portfolio
Value to exceed or equal the Target Value as of the date of such Transfer
and that the Payment Amount as of the Termination Date will be zero.
(c) (i) This Section 8.6(c) shall apply if: (1) pursuant
to the Reinsurance Agreement, Centre shall have paid (including by way of
offset pursuant to Article X of the Reinsurance Agreement) to Home an
amount up to the Aggregate Limit (as defined in the Reinsurance
Agreement), (2) Home shall not have any Cash Available (as defined in the
Reinsurance Agreement), and (3) Home proposes to Transfer to a third
party all of Home's LLC Interests (including its Preferred B Interests to
the extent not previously Transferred by Home), free and clear of any
Liens thereon, without delivering an instrument confirming that the
proceeds of such proposed Transfer will cause the Portfolio Value to
exceed or equal the Target Value, as contemplated by Section 8.6(b)(ii),
and has requested Centre's consent with respect to such proposed Transfer
of the Preferred A Interests and Common Interests included therein.
(ii) If Centre declines to consent to the proposed
Transfer referred to in Section 8.6(c)(i), then, within 30 calendar days
after such decline, Centre shall notify Home whether Centre intends to
purchase all of such LLC Interests of Home included in such proposal. If
Centre does so notify, Home shall sell, and Centre (or an Affiliate
thereof) shall purchase, all such LLC Interests on the same terms and
conditions as proposed by such proposed third party transferee, subject
to and together with the terms and conditions set forth in the next two
sentences. Home shall deliver, upon the consummation of such sale and
purchase, (1) good, valid and marketable title to such LLC Interests,
free and clear of any Liens, (2) evidence in form and substance
reasonably satisfactory to Centre (or such Affiliate) that such good,
valid and marketable title is being delivered, free and clear of any
Liens and (3) evidence in form and substance reasonably satisfactory to
Centre (or such Affiliate), including opinion from counsel reasonably
satisfactory to Centre (or such Affiliate) and certificates from senior
officers or other authorized representatives of Home or its successor,
including without limitation a duly appointed liquidator, rehabilitator,
receiver, conservator or trustee or other Person of similar capacity,
that Home has the capacity and authority to enter into and consummate
such transactions and to deliver such title, free and clear of any Liens.
The consummation of such sale and purchase shall take place at a place to
be designated by Centre (or such Affiliate), and on a date that is the
later of (x) 120 calendar days after Centre's notification of intent to
purchase and (y) the date, if any, set forth in the terms and conditions
of such proposed third party transferee. Upon the consummation of such
sale and purchase, Centre shall also be deemed to have consented to a
Transfer (to itself or such Affiliate) pursuant to Section 8.6(a). If
Centre does not so notify within such 30 calendar day period, or notifies
to decline such purchase, it shall be deemed to have consented to such
proposed Transfer under Section 8.6(a). Home may then Transfer all such
LLC Interests to the third party on the terms and conditions proposed by
such third party within 120 calendar days after the expiration of such 30
calendar day period. If such sale is not consummated within such 120
calendar day period, Home may not Transfer such LLC Interests unless it
shall have requested Centre's consent under Section 8.6(a) again.
Section 2. Status of Swap Agreement.
(a) This Amendment is limited solely for the purposes and
to the extent expressly set forth herein and nothing herein contained or
implied shall constitute an amendment or waiver of any other term,
provision or condition of the Swap Agreement.
(b) For the avoidance of doubt Centre hereby confirms that
none of the transactions contemplated by the Reorganization Agreement or
the Holdings Agreement constitutes a "Merger Without Assumption" within
the meaning of the Swap Agreement or the Portfolio Value Swap Agreement
between Centre and Home Holdings Inc. dated June 12, 1995, as amended.
Section 3. Counterparts. This Amendment may be executed in
any number of counterparts, all of which taken together shall constitute
one Amendment and any of the parties hereto may execute this Amendment by
signing such a counterpart.
Section 4. Effectiveness. This Amendment shall become
effective (i) upon the execution and delivery by each party hereto of a
counterpart hereof and (ii) if, upon such execution and delivery, the
conditions set forth in Section 6.1(c) and (d) of the Reorganization
Agreement shall have been satisfied.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first above written.
CENTRE REINSURANCE DUBLIN
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
THE HOME INSURANCE COMPANY
By:__________________________________
Name:
Title:
THE HOME INSURANCE COMPANY
OF ILLINOIS
By:_________________________________
Name:
Title:
THE HOME INSURANCE COMPANY
OF WISCONSIN
By:__________________________________
Name:
Title:
U.S. INTERNATIONAL REINSURANCE
COMPANY
By:__________________________________
Name:
Title:
Agreed to with respect to Section 8.2
in Section 1 of the Amendment only
CENTRE INVESTMENT SERVICES LIMITED
By:__________________________________
Name:
Title:
ZURICH CENTRE INVESTMENT LIMITED
By:__________________________________
Name:
Title:
Accepted and Agreed for the
NEW HAMPSHIRE INSURANCE
DEPARTMENT
By:__________________________
Name:
Title:
FOR IMMEDIATE RELEASE
Contact: Randy Bradley
Gruntal Financial Corp.
(212) 225-4886
MANAGEMENT GROUP TO BUY GRUNTAL
RESTRUCTURING WILL PROVIDE STRATEGIC INDEPENDENCE FOR
INVESTMENT FIRM
NEW YORK (February 25, 1997) -- Gruntal Financial Corp.,
the parent company of Gruntal & Co. Incorporated,
announced today that the company will be restructured as
a limited liability company and sold to a management
group led by Robert P. Rittereiser, chairman and chief
executive officer. The transaction involves the issuance
of several classes of securities, including preferred
securities, with a face amount of approximately $235
million.
The Home Insurance Company, Gruntal Financial
Corp.'s parent company, will remain a member of the new
company, to be called Gruntal Financial LLC.
"The transaction will allow the management group to
develop its business and strategic relationships
independent of The Home Insurance Company," said
Rittereiser." In addition, the structure will provide
equity incentives for both management and a broad group
of employees to develop longer term plans that build the
company's franchise value and strengthen its ability to
service individual and institutional clients over the
years ahead," he said.
Gruntal Financial LLC will be a holding company that
will acquire the assets and liabilities of Gruntal
Financial Corp. which include Gruntal & Co.,
Incorporated, a full-service securities firm serving
individual and institutional clients, and GMS, a broker-
dealer specializing in the sale of tax exempt securities
to individual and instititutional investors.
Day-to-day operating control over Gruntal Financial LLC
and its subsidiaries will be the responsibility of
management. Gruntal Financial LLC will have a seven-
member executive committee.
Gruntal Financial, with approximately $195 million
in capital and $2.9 billion in assets (at closing), is a
national full-service investment securities firm with 29
branch offices employing more than 2000 people.
The transaction is subject to receipt of regulatory
approvals, expected to be received by late March.
####
