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Exhibit 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
dated as of September 10, 2000
among
The Goldman Sachs Group, Inc.,
SLK LLC, and
SLK Acquisition L.L.C.
as Amended and Restated as of
October 31, 2000
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TABLE OF CONTENTS
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RECITALS......................................................................................................... 1
ARTICLE I
Certain Definitions; Interpretation
1.01 Certain Definitions..................................................................................... 3
1.02 General Rules of Interpretation......................................................................... 10
ARTICLE II
The Merger
2.01 The Merger.............................................................................................. 10
2.02 Closing................................................................................................. 11
2.03 Tax Treatment of the Merger............................................................................. 11
ARTICLE III
Consideration; Exchange; Employee Incentives
3.01 Merger Consideration.................................................................................... 11
3.02 Exchange Procedures..................................................................................... 12
3.03 Withdrawn Member Interest and Managing Director Subordinated Debt Election.............................. 13
3.04 Withdrawn Member Interest and Managing Director Subordinated Note Documents............................. 14
3.05 Restricted Stock Units Awards........................................................................... 14
3.06 Incremental Liquidity Gain.............................................................................. 15
3.07 Adjustments to Prevent Dilution......................................................................... 15
ARTICLE IV
Actions Pending the Effective Time
4.01 Forbearances of the Company............................................................................. 16
4.02 Forbearances of Acquiror................................................................................ 19
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ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules.................................................................................... 19
5.02 Standard................................................................................................ 19
5.03 Representations and Warranties with Respect to the Company.............................................. 20
5.04 Representations and Warranties with Respect to the Partnership.......................................... 36
5.05 Representations and Warranties of Acquiror.............................................................. 36
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts................................................................................. 39
6.02 Access; Information..................................................................................... 40
6.03 No Rights Triggered..................................................................................... 40
6.04 Regulatory Applications................................................................................. 40
6.05 Regulatory Compliance................................................................................... 41
6.06 Performance Ranking..................................................................................... 41
6.07 Notification of Certain Matters......................................................................... 41
6.08 Public Announcements.................................................................................... 42
6.09 Fee Agreements.......................................................................................... 42
6.10 Private Placement....................................................................................... 42
6.11 Employee Benefits....................................................................................... 42
6.12 Indemnification of Members and Employees................................................................ 43
6.13 Restructuring Transactions. ............................................................................ 43
6.14 SLK 2000. .............................................................................................. 43
ARTICLE VII
Tax Matters
7.01 Tax Representations..................................................................................... 44
7.02 Covenants............................................................................................... 46
7.03 Termination of Tax Sharing Agreements................................................................... 48
7.04 Seller Tax Indemnification.............................................................................. 48
7.05 Exclusivity............................................................................................. 50
7.06 Survival of Obligations................................................................................. 50
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7.07 Agreed Tax Treatment.................................................................................... 50
ARTICLE VIII
Conditions to Consummation of the Merger
8.01 Conditions to Each Party's Obligation to Effect the Merger.............................................. 50
8.02 Conditions to Obligations of the Company................................................................ 51
8.03 Conditions to Obligations of Acquiror and NewCo......................................................... 51
ARTICLE IX
Indemnification
9.01 Indemnification......................................................................................... 53
9.02 Notice and Defense of Claims............................................................................ 56
9.03 Survival of Representations and Warranties.............................................................. 57
ARTICLE X
Termination
10.01 Termination............................................................................................. 57
10.02 Effect of Termination and Abandonment................................................................... 58
ARTICLE XI
Miscellaneous
11.01 Entire Understanding; No Third-Party Beneficiaries...................................................... 58
11.02 Waiver; Amendment....................................................................................... 58
11.03 Expenses................................................................................................ 59
11.04 Notices................................................................................................. 59
11.05 Additional Provisions................................................................................... 60
11.06 Counterparts............................................................................................ 60
11.07 Governing Law; Enforcement; Waiver of Jury Trial........................................................ 60
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Annex 1 Members
Annex 1A Supplement to the List of Members
Annex 2 Partners
Annex 3 Form of Amended and Restated Member Agreement
Annex 4 Form of Custody Agreement
Annex 5 Intentionally Omitted
Annex 6 Retention RSUs
Annex 7 SLK RSUs
Annex 8 Form of Acquiror Subordinated Note
Annex 9 Members who will Become Class B Members in the Merger
Annex 10 Form of Operating Agreement
Annex 11 Payments to Withdrawn Members
Annex 12 Form of Withdrawn Member Agreement
Annex 13 Agreement of Merger, dated as of October 30, 2000, of SLK
Investing Co. and SLK LLC.
Annex 14 Member Merger Consideration
Annex 15 Indemnification Percentages of Members
Annex 16 Form of Assignment and Assumption Agreement
Annex 17 Nonconforming Managing Director Subordinated Notes
Note: Certain of these annexes have been omitted from this Exhibit 2.1 pursuant
to Item 601(b)(2) of Regulation S-K. The Registrant hereby agrees to furnish
supplementally a copy of any omitted annex to the SEC upon request.
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER,
dated as of September 10, 2000, as amended and restated as of October 31, 2000,
among The Goldman Sachs Group, Inc. ("Acquiror"), SLK LLC (the "Company"), and
SLK Acquisition L.L.C. ("NewCo").
RECITALS
A. The Company. The Company is a New York limited liability
company having its principal place of business in New York, New York. Annex 1
(which, for purposes of this Agreement, shall include the supplement thereto
delivered on the date hereof and that is attached hereto as Annex 1A) lists the
names and profit and loss allocations of all the members of the Company (each, a
"Member", and collectively, the "Members") after giving effect to the
Restructuring Transactions.
B. The Partnership. Spear, Leeds & Kellogg, L.P. (the
"Partnership") is a New York limited partnership having its principal place of
business in New York, New York. The Company is the sole general partner of the
Partnership. Annex 2 lists the names and profit and loss allocations of all
partners of the Partnership (each, a "Partner" and collectively, the
"Partners").
C . Acquiror. Acquiror is a Delaware corporation, having its
principal place of business in New York, New York.
D. NewCo. NewCo is a New York limited liability company formed
solely for the purpose of effecting the Merger (as defined below). NewCo is
owned 99% by Acquiror and 1% by SLK Acquisition Holdings, Inc., a Delaware
corporation and a wholly owned subsidiary of Acquiror.
E. The Merger. Subject to the terms and conditions contained
in this Agreement, the Company and Acquiror intend to effect the merger (the
"Merger") of NewCo with and into the Company, with the Company being the limited
liability company surviving such merger. In connection with the Merger, the Cash
Consideration (as defined below) being paid to Members in respect of their
Company Membership Interests (as defined below) is approximately $2.1 billion
and the aggregate number of shares of Acquiror Common Stock (as defined below)
being issued to Members in respect of their Company Membership Interests is
approximately 34.4 million, having a value of $4.4 billion as of the date of the
Original Agreement (in each case, before adjustments for pre-closing
distributions to Members, the Restructuring Transactions and consideration paid
or issued under 3.03).
F. Amendment and Restatement. Acquiror and the Company entered
into an Agreement and Plan of Merger, dated as of September 10, 2000 (the
"Original Agreement"); Section 11.02 of the Original Agreement provides that the
Original Agreement may be amended by an agreement in writing between the parties
approved or authorized by their respective Boards of Directors or similar
governing body and executed in the same manner as the Original Agreement as
originally executed and delivered by the parties. Acquiror and the Company
desire to amend and
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restate the provisions of the Original Agreement in accordance with Section
11.02 in order to add NewCo and SLK 2000, LLC as parties hereto and to make
certain other changes agreed to by Acquiror and the Company. The parties hereby
agree that the Original Agreement shall constitute the agreement of the parties
until such time as the Members representing a majority in interest of the
Members shall have executed and delivered a Member Agreement (as defined below),
at which time this Agreement, as so amended and restated hereby, shall hereafter
(subject to Section 11.01) constitute the entire agreement of the parties hereto
with respect to the matters set forth herein.
G. Supplemental Agreements. Each of the Members identified as
such in Annex 1 (other than AC Trust, which will enter into a Member Agreement
prior to the Closing) has previously entered into an instrument in which he or
she adopted and consented to the Original Agreement and the transactions
contemplated thereby (each, an "Original Member Agreement"). In addition, each
of the Members identified as such in Annex 1 executed a Supplemental Members
Agreement which is attached as an Annex to the Original Member Agreement (the
"Supplemental Members Agreement"). Further, one individual has entered into an
agreement with Acquiror similar to the Member Agreement (as defined below) and
each Member identified as such in Annex 1 and Annex 1A has, as of the date
hereof, executed an amendment and restatement of the Original Member Agreement
(the Original Member Agreement, as amended and restated (and as it may be
further amended from time to time), the "Member Agreement" (which term shall
also refer to that similar agreement executed and delivered by such other
individual and referred to in this sentence) substantially in the form of Annex
3, in which such Member has, among other things, (i) agreed to an amendment and
restatement of the Member Agreement which adopts and consents to the Original
Agreement, this Amended and Restated Agreement and Plan of Merger and the
Supplemental Members Agreement and (ii) adopted the SLK Investing Merger
Agreement (as defined below) and the transactions contemplated thereby. (The
Original Member Agreements and the Member Agreements, together with the Custody
Agreements and the counterparts to the Acquiror Shareholders Agreement to be
executed by the Members pursuant to Section 2(e) of the Member Agreement, are
referred to collectively as the "Supplemental Agreements".)
H. SLK Investing Co. Certain of the Members, who directly or
indirectly hold all of the partnership interests in SLK Investing Co. L.P., a
New York limited partnership ("SLK Investing"), have caused SLK Investing Co. to
merge with and into the Company (the "SLK Investing Merger") so that the Company
currently owns all of the Class A limited partnership interests in the
Partnership.
NOW, THEREFORE, in consideration of the premises, and of the
mutual covenants, representations, warranties and agreements contained herein
and in the Supplemental Agreements, the parties agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS; INTERPRETATION
1.01 Certain Definitions. The following terms are used in this
Agreement and the Supplemental Agreements with the meanings set forth below:
"Acquiror" has the meaning assigned in the preamble to this
Agreement.
"Acquiror Common Stock" means the Common Stock, par value
$0.01 per share, of Acquiror.
"Acquiror Financial Statements" shall have the meaning
assigned in Section 5.05(d).
"Acquiror Party" means each of Acquiror, its respective
directors, officers, employees, agents and controlling persons, and
each of the heirs, executors, successors and assigns of any of the
foregoing and, without duplication, the Surviving LLC (effective at the
Effective Time).
"Acquiror Shareholders Agreement" means the Shareholders'
Agreement, dated May 7, 1999, among Acquiror and the other parties
named therein.
"Acquiror Subordinated Notes" has the meaning assigned in
Section 3.03.
"Affiliate" means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified person. For
the purposes of this definition, (a) "control" when used with respect
to any specified person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and (b) the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this agreement, as amended or modified from
time to time in accordance with Section 11.02.
"business day" means any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by
law or executive order to close.
"Cash Consideration" has the meaning assigned in Section
3.01(a).
"CBOE" means the Chicago Board Options Exchange, Incorporated.
"CFTC" means the United States Commodity Futures Trading
Commission.
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"Chosen Courts" has the meaning set forth in Section 11.07(a).
"Clearing Agreement" has the meaning assigned in Section
5.03(h).
"Closing" and "Closing Date" have the meanings assigned in
Section 2.02.
"Closing Stock Price" has the meaning assigned in Section
3.06.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
"Company" has the meaning assigned in the preamble to this
Agreement.
"Company Membership Interests" means the membership interests
in the Company.
"Compensation Plans" has the meaning assigned in Section
5.03(o).
"Confidentiality Agreement" means the letter agreement, dated
March 6, 2000, between the Partnership and the Acquiror.
"Constitutive Documents" means, with respect to any person,
such person's articles or certificate of incorporation and by-laws,
limited liability company agreement or operating agreement, partnership
agreement or other constitutive documents.
"Contract" means, with respect to any person, any agreement,
indenture, undertaking, debt instrument, contract, lease,
understanding, arrangement, or commitment to which such person or any
of its Subsidiaries is a party or by which any of them may be bound or
to which any of their properties may be subject.
"Custodian" has the meaning assigned in the form of Custody
Agreement.
"Custody Agreements" means, collectively, a Custody Agreement
to be entered into by each of the Members and each other person who
will receive Acquiror Common Stock in the Merger or by election
pursuant to Section 3.03, in substantially the form of Annex 4.
"Disclosure Schedule" has the meaning assigned in Section
5.01.
"Effective Time" has the meaning assigned in Section 2.01(e).
"Election Deadline" has the meaning assigned in Section 3.04.
"Employees" has the meaning set forth in Section 5.03(o).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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"ERISA Affiliate" has, with respect to any person, the meaning
assigned in Section 5.03(o).
"ERISA Plans" has the meaning assigned in Section 5.03(k).
"Excess Shares" shall mean , initially, that number of shares
of Acquiror Common Stock equal to the quotient derived by dividing
(I)the product of (A) the amount by which the Closing Stock Price
exceeds $128.025, times (B) the aggregate number of shares of Acquiror
Common Stock to be issued to Members in respect of their Company
Membership Interests, as set forth in Annex 14, times (C) 0.27 by (II)
the Closing Stock Price, provided, that, if the sale price of shares of
Acquiror Common Stock sold pursuant to Section 3.05 is different from
the Closing Stock Price, such number shall be adjusted so as to enable
the Members to receive net proceeds (without regard to income taxes
payable in respect of such sales) not less than the product described
in clause (I) above (it being understood that if, at the time of any
sales of shares of Acquiror Common Stock during the same tax year as
the Closing, the sale price(s) of the shares is less than the Closing
Stock Price, then the number of Excess Shares shall be adjusted
appropriately to reflect the reduction in the capital gains tax payable
as a result of the Merger after taking into account any capital loss on
any sale of shares of Acquiror Common Stock (whether usable or not) at
a price below the Closing Stock Price, in each case assuming a 27%
effective tax rate.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Financial Statements" has the meaning assigned in Section
5.03(g).
"Focus Report" has the meaning assigned in Section 5.03(g).
"Foreign Plans" has the meaning assigned in Section 5.03(o).
"Governmental Authority" means any court, administrative
agency or commission or other federal, state, local or foreign
governmental authority or instrumentality.
"Indemnification Percentage" means, with respect to any
Member, that percentage set forth on Annex 15.
"Indemnified Party" has the meaning assigned in Section
9.02(a).
"Indemnifying Party" has the meaning assigned in Section
9.02(a).
"Intellectual Property" has the meaning assigned in Section
5.03(h).
"Investment Advisers Act" means the Investment Advisers Act of
1940, as amended, and the rules and regulations thereunder.
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"Investment Company Act" means the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
"IRS" means the United States Internal Revenue Service.
"Lien" means a charge, mortgage, pledge, security interest,
restriction (other than a restriction on transfer arising under
Securities Laws), claim, lien, or encumbrance of any nature whatsoever,
except for liens incurred in the ordinary course of business in respect
of Taxes for which adequate reserves have been established.
"Limited Partnership Interest" means an ownership interest in
the Partnership held by the limited partners of the Partnership.
"Litigation" has the meaning assigned in Section 5.03(j).
"Losses" has the meaning assigned in Section 9.01(a).
"Managing Director Subordinated Note" means the cash
subordination agreements and secured demand notes substantially all of
which are held by current/retired Managing Directors (as such term is
used in the Offering Memorandum), or persons or entities related to
such person (including, without limitation, familial relatives and
trusts) and are included within the caption "Junior Subordinated Debt"
set forth in the Capitalization section of the Offering Memorandum,
having a principal amount not in excess of $210 million as of the date
of the Original Agreement.
"Material Adverse Effect" means, with respect to Acquiror, the
Company or the Surviving LLC, respectively, an effect or change that,
individually or in the aggregate with other such effects or changes, is
both material and adverse with respect to the respective financial
condition, results of operations, assets, business or management of
Acquiror and its Subsidiaries, the Company and its Subsidiaries, or the
Surviving LLC and its Subsidiaries, as applicable, and in each case
taken as a whole.
"Material Contract" has the meaning assigned in Section
5.03(h).
"Member" and "Members" have the meaning assigned in the
Recitals.
"Member Agreement" has the meaning assigned in the Recitals.
"Merger" has the meaning assigned in the Recitals.
"Merger Certificate" has the meaning assigned in Section
2.01(e).
"Merger Consideration" has the meaning assigned in Section
3.01(a).
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"NewCo" has the meaning assigned in the Recitals.
"NYSE" means the New York Stock Exchange, Inc.
"Offering Memorandum" has the meaning assigned in Section
5.03(y).
"Operating Agreement" means the Amended and Restated Operating
Agreement of SLK LLC, dated as of August 1, 2000, as amended from time
to time.
"Order" has the meaning assigned in Section 8.01(b).
"Original Agreement" has the meaning assigned in the Recitals.
"Owner" means a Member or Partner, as applicable, and "Owners"
means the Members and Partners collectively.
"Partner" and "Partners" have the meaning assigned in the
Recitals.
"Partnership" has the meaning assigned in the Recitals.
"Partnership Interest" means an ownership interest in the
Partnership.
"Pension Plan" has, with respect to any person, the meaning
assigned in Section 5.03(o).
"person" means any individual, bank, corporation, limited
liability company, partnership, joint venture, association, joint-stock
company, business trust, governmental entity, or unincorporated
organization.
"Plans" has the meaning assigned in Section 5.03(o).
"Pre-Closing Period" has the meaning assigned in Section
7.02(b).
"Pre-Closing Taxes" has the meaning assigned in Section
7.02(b).
"Previously Disclosed" has the meaning assigned in Section
5.01.
"Regulatory Orders" has the meaning assigned in Section
5.03(j).
"Reports" has the meaning assigned in Section 5.03(f).
"Restructuring Transactions" means the transactions set forth
in Schedule 6.13 hereto.
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"Retention RSUs" has the meaning assigned in Section 3.05.
"Rights" means, with respect to any person, any Contracts,
securities or obligations convertible into or exercisable or
exchangeable for, or giving any person any right to subscribe for or
acquire, or any options, calls or commitments relating to, or any
equity interest in or equity appreciation right or other instrument the
value of which is determined in whole or in part by reference to the
market price or value of, shares of capital stock or other equity
interest in such person.
"SEC" means the United States Securities and Exchange
Commission.
"SEC Documents" has the meaning assigned in Section 5.05(d).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Securities Laws" means, collectively, the Securities Act, the
Exchange Act, the Investment Advisers Act, the Investment Company Act,
the Commodity Exchange Act, as amended, and any other federal, state,
local or foreign securities, derivatives or commodity laws.
"Self-Regulatory Organization" means the National Association
of Securities Dealers, Inc., the American Stock Exchange, the National
Futures Association, the CBOE, the Chicago Board of Trade, the NYSE,
any Self-Regulatory Organization Previously Disclosed with respect to
Section 5.03(f) and any other similar federal, state or foreign self-
regulatory body or organization having jurisdiction over the Company or
Acquiror (as the case may be), any of their respective Subsidiaries or
Affiliates or any of their respective business operations.
"SLK 2000" has the meaning assigned in Section 6.14.
"SLK Investing" has the meaning assigned in the Recitals.
"SLK Investing Agreement" means the Restated Articles of
Partnership, dated as of January 1, 1999, of SLK Investing.
"SLK Investing Merger" has the meaning assigned in the
Recitals.
"SLK Investing Merger Agreement" has the meaning assigned in
Section 5.03(z).
"SLK Representative" means SLK Management Inc. or its designee
identified in writing to Acquiror (it being understood that the
appointment of any such designee must be approved in writing by
Acquiror (which approval will not be unreasonably withheld)).
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"SLK Partnership Agreement" means the Amended and Restated
Articles of Partnership of Spear, Leeds and Kellogg, L.P., dated as of
January 1, 2000.
"SLK RSUs" has the meaning assigned in Section 3.05.
"Stock Consideration" has the meaning assigned in Section
3.01(a).
"Subsidiary" has the meaning assigned in Rule 1-02 of
Regulation S-X of the SEC, including, with respect to the Company,
without limitation, SLK Investing.
"Supplemental Members Agreement" has the meaning assigned in
the Recitals.
"Supplemental Agreements" has the meaning assigned in the
Recitals.
"Surviving LLC" has the meaning assigned in Section 2.01(a).
"Tax Returns" means any return (including, without limitation,
information returns, annual reports or other returns in respect of any
Compensation Plan), declaration, report, claim for refund, information
return or statement relating to any Tax, together with all schedules or
attachments thereto, and including any amendments of any of the
foregoing.
"Tax" or "Taxes" means all taxes, charges, fees, levies or
other assessments, however denominated and whether imposed by a taxing
authority within or without the United States, including, without
limitation, all net income, gross income, gross receipts, sales, use,
ad valorem, goods and services, capital, transfer, franchise, profits,
license, withholding, payroll, employment, employer health, excise,
estimated, severance, stamp, occupation, property or other taxes,
custom duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority.
"Third Party Claim" has the meaning assigned in Section
9.02(a).
"Third-Party Intellectual Property Rights" has the meaning
assigned in Section 5.03(s).
"Withdrawn Member" shall mean any person who is a "Withdrawn
Member" (as such term is defined in the Operating Agreement), a
"Withdrawn Partner" (as such term is defined in the SLK Partnership
Agreement), and/or a "Withdrawn Partner" (as such term is defined in
the SLK Investing Agreement) or any predecessor agreement, as
applicable.
"Withdrawn Member Amount" means the sum of the Withdrawn
Member Interests of all Withdrawn Members determined in accordance with
the Operating Agreement, the SLK Partnership Agreement and/or the SLK
Investing Agreement, as applicable, and all respective predecessor
agreements, which shall not exceed $165,000,000.
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"Withdrawn Member Interest" means a Share (as such term is
defined in the Operating Agreement, the SLK Partnership Agreement
and/or the SLK Investing Agreement, as applicable) of a Withdrawn
Member.
1.02 General Rules of Interpretation. When a reference is made
in this Agreement to "Recitals", "Sections", "Annexes" or "Schedules", such
reference shall be to a Recital of, or Annex or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed followed by the words "without limitation".
References herein to "transactions contemplated by this Agreement" shall be
deemed to include a reference to each transaction contemplated by or provided
for in this Agreement and any documents or agreements, including the
Supplemental Agreements, entered into in connection herewith. No rule of
construction against the draftsperson shall be applied in connection with the
interpretation or enforcement of this Agreement. Whenever this Agreement shall
require a party to take an action, such requirement shall be deemed to include
an undertaking by such party to cause its Subsidiaries, and to use its
reasonable best efforts to cause its other Affiliates, to take all necessary and
appropriate action in connection therewith.
ARTICLE II
THE MERGER
2.01 The Merger. At the Effective Time, the Merger shall occur
and in furtherance thereof:
(a) Structure and Effects of the Merger. NewCo shall merge
with and into the Company, and the separate legal existence of NewCo
shall thereupon cease. The Company shall be the surviving limited
liability company in the Merger (sometimes hereinafter referred to as
the "Surviving LLC") and shall continue to be governed by the laws of
the State of New York, and the separate legal existence of the Company
with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. The Merger shall have the
effects specified in Section 1004 of the New York Limited Liability
Company Law.
(b) Certificate of Limited Liability Company. The Certificate
of Limited Liability Company of the Surviving LLC shall be the
Certificate of Limited Liability Company of the Company as in effect
immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and applicable law.
(c) Operating Agreement. The operating agreement of the
Surviving LLC shall be the operating agreement of the Company as in
effect immediately prior to the Effective
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Time as such shall be amended, effective as of the Effective Time, to
be in the form set forth in Annex 10 hereto.
(d) Manager. The initial manager of the Surviving LLC shall be
Acquiror.
(e) Effective Time. The Merger shall become effective upon the
filing, by the offices of the Secretary of State of the State of New
York, of a certificate of merger (the "Merger Certificate") in
accordance with applicable law, or at such later date and time as may
be set forth in such Merger Certificate (the "Effective Time"). The
parties shall use their reasonable best efforts to cause the Merger to
become effective as soon as is reasonably practicable, but in any event
on a date that is not later than three business days after the last of
the conditions set forth in Article VIII shall have been satisfied or
waived in accordance with the terms of this Agreement (other than those
conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions).
2.02 Closing. The closing of the Merger (the "Closing") shall
take place at 9:00 a.m. at the offices of Sullivan & Cromwell, 125 Broad Street,
New York, New York, or at such other place as the parties shall agree, on the
date on which the Effective Time shall occur (the "Closing Date").
2.03 Tax Treatment of the Merger. The parties intend that for
U.S. federal income tax purposes the Merger be treated as a taxable purchase by
Acquiror of the Company Membership Interests owned by the Members including
Withdrawn Member Interests (and subordinated debt owned by former Managing
Directors of the Company) in exchange for cash and Acquiror Common Stock. For
these purposes, and all other U.S. federal income tax purposes, the parties
agree that the Acquiror Common Stock subject to the Transfer Restrictions (as
defined in the Member Agreements) and received by the Members in the Merger
shall be valued for all U.S. federal income tax purposes at 100% of the mean of
the high and low of the trading price of the Acquiror Common Stock on the
Closing Date.
ARTICLE III
CONSIDERATION; EXCHANGE; EMPLOYEE INCENTIVES
3.01 Merger Consideration. At the Effective Time,
automatically and without any action on the part of any party, Member or other
person:
(a) Outstanding Company Membership Interests. Subject to the
terms and conditions set forth in this Agreement, (x) the Company
Membership Interests that are outstanding and owned by a Member, other
than those Members set forth on Annex 9, immediately prior to the
Effective Time shall become and be converted into the right to receive
an amount in cash and a number of shares of Acquiror Common Stock, in
each case, as set forth next to such Member's name in Annex 14 (the
aggregate amount of cash being
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received by all Members in respect of their Company Membership
Interests being the "Cash Consideration", the aggregate number of
shares of Acquiror Common Stock being received by all Members in
respect of their Company Membership Interests being the "Stock
Consideration", and the aggregate amount of the Cash Consideration and
the Stock Consideration being the "Merger Consideration") and (y) the
Company Membership Interests that are outstanding and owned by a Member
set forth on Annex 9 immediately prior to the Effective Time shall
become and be converted into Class B membership interests in the
Surviving LLC, which membership interests shall have the rights
ascribed to such interests as set forth in the operating agreement of
the Surviving LLC, the form of which is attached hereto as Annex 10.
(b) Outstanding NewCo Membership Interests. The membership
interests of NewCo outstanding immediately prior to the Effective Time
shall be converted into an identical number of Class A membership
interests in the Surviving LLC.
(c) Fractional Shares. Notwithstanding any other provision in
this Agreement, no fractional shares of Acquiror Common Stock and no
certificates or scrip therefor, or other evidence of ownership thereof,
will be issued in the Merger or otherwise hereunder; instead, Acquiror
shall pay to each holder of Company Membership Interests who otherwise
would be entitled to a fractional share of Acquiror Common Stock an
amount in cash (without interest) determined by multiplying such
fraction by $128.025.
(d) Rights as Members. At the Effective Time, (i) holders of
Company Membership Interests other than those Members set forth on
Annex 9 shall have no rights as members of the Company or otherwise
with respect to their ownership therein other than the right to receive
their allocated share of the Merger Consideration as set forth in Annex
14 and (ii) those Members set forth on Annex 9 who hold Company
Membership Interests shall have only those rights as a member of the
Surviving LLC holding Class B membership interest therein.
(e) Merger Consideration Payment. The Stock Consideration
shall be paid to the Members as provided for herein and held in custody
pursuant to the Custody Agreements. It is a condition to any Member
receiving the Member's allocated share of the Merger Consideration that
the Member execute and deliver a Member Agreement and a Custody
Agreement.
3.02 Exchange Procedures.
(a) Delivery of Merger Consideration. Acquiror will:
(1) prior to the Effective Time, cause to be delivered to each
Member (other than any Member set forth on Annex 9) any necessary or
appropriate transmittal materials for use in paying such Member's
allocated share of the Merger Consideration to such Member on the
Closing Date.
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(2) promptly thereafter cause to be delivered to the Custodian
on behalf of each Member (other than any Member set forth on Annex 9)
certificates representing such Member's allocated share of the Stock
Consideration and shall on the Closing Date deliver by wire transfer to
each Member (other than any Member set forth on Annex 9) the cash that
such Member is entitled to receive pursuant to the provisions of this
Article III in respect of the Cash Consideration, fractional shares and
dividends or distributions; provided that certificates representing
Acquiror Common Stock will not be issued to or on behalf of, and such
wire transfer will not be made to, any Member until the Member has
properly completed and returned any transmittal materials delivered by
Acquiror pursuant to Section 3.02(a)(1) and has executed and delivered
to Acquiror a Custody Agreement.
(b) Registration of Acquiror Stock. All Acquiror Common Stock
to be delivered on behalf of a Member will be registered in the name of
the Custodian or its nominee and all checks to be issued to a Member
will be made out in the name of such Member.
(c) No Interest. No interest will be paid on any consideration
provided for in this Article III, including the Merger Consideration,
cash in lieu of fractional shares or dividends or distributions on any
of the preceding.
(d) No Rights Until Surrender. No dividends or other
distributions on Acquiror Common Stock will be paid in respect of any
Acquiror Common Stock deliverable on behalf of a Member as a result of
the Merger until the Custodian is properly entitled to receive
certificates representing such Acquiror Common Stock in accordance with
this Section 3.02, and no Member will be eligible to vote such Acquiror
Common Stock until the Custodian becomes so entitled. After the
Custodian becomes entitled to receive certificates in accordance with
this Section 3.02, the Member will also be entitled to receive
dividends or distributions with a record date after the Effective Time
that have become payable on the Acquiror Common Stock represented
thereby, without interest.
(e) Delivery of Class B Membership Interests. Acquiror shall
cause the Surviving LLC to take all action necessary to record on the
books and records of the Surviving LLC the ownership, after the
Effective Time, of the Class B membership interests in the Surviving
LLC owned by those Members set forth on Annex 9 hereto.
3.03 Withdrawn Member Interest and Managing Director
Subordinated Debt Election. At the Effective Time, (i) each Withdrawn Member,
including any entity and/or person related to such Withdrawn Member (including,
without limitation, familial relatives and trusts) shall receive a payment with
respect to such person's Withdrawn Member Interest, such payment to be that
amount of cash, shares of Acquiror Common Stock and/or a subordinated note of
Acquiror substantially in the form set forth in Annex 8 hereto (an "Acquiror
Subordinated Note"), and (ii) each Withdrawn Member, including any entity and/or
person related to such Withdrawn Member (including, without limitation, familial
relatives and trusts), that holds a Managing Director Subordinated Note shall
sell such person's Managing Director Subordinated Note to Acquiror for that
amount of cash, shares of Acquiror Common Stock and/or an Acquiror Subordinated
Note, in each case, as set forth next to such person's name in Annex 11 hereto.
At the Effective Time, each
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Withdrawn Member (including any entity and/or person related to such Withdrawn
Member (including, without limitation, familial relatives and trusts)) that
holds a Managing Director Subordinated Note shall transfer such Managing
Director Subordinated Note to Acquiror pursuant to an Assignment and Assumption
Agreement among such person, Acquiror and the Partnership (or, if applicable,
any Affiliate of the Partnership) in the form set forth in Annex 16.
3.04 Withdrawn Member Interest and Managing Director
Subordinated Note Documents. Each Withdrawn Member and each person who holds a
Managing Director Subordinated Note shall, prior to the Closing, execute and
deliver to Acquiror a Withdrawn Member Agreement (unless such person is
otherwise executing a Member Agreement) which shall be in the form of Annex 12
hereto. Further, each Withdrawn Member and each person who holds a Managing
Director Subordinated Note and who shall receive shares of Acquiror Common Stock
in respect of for such person's Withdrawn Member Interest and/or Managing
Director Subordinated Note shall, prior to the Closing, execute and deliver to
the Acquiror (i) a Custody Agreement and (ii) other than those that are estates,
a questionnaire, in a form satisfactory to Parent, confirming that such
Withdrawn Member or person is an "accredited investor" as such term is defined
in Regulation D under the Securities Act. In the event that either a Withdrawn
Member or a holder of a Managing Director Subordinated Note fails to take all
necessary action to implement the transactions contemplated by Sections 3.03 and
3.04, the Company agrees to take, or cause to be taken, all necessary steps to
redeem, as of the Effective Time, all outstanding Withdrawn Member Interests or
Managing Director Subordinated Notes (it being understood that Sections 3.03 and
3.04 will not result in a duplication of amounts owed to Withdrawn Members or
holders of Managing Director Subordinated Notes), including (i) in the case of a
Withdrawn Member Interest, redeeming such amount in accordance with the terms of
the Operating Agreement or the SLK Partnership Agreement, as applicable, and
(ii) in the case of a Managing Director Subordinated Note, having such note
redeemed by the Company or the Partnership, in each case, effective as of the
Effective Time. Shares of Acquiror Common Stock and Acquiror Subordinated Notes
issued pursuant to this Article III shall be issued at or promptly after the
Effective Time consistent with the payment of the Merger Consideration pursuant
to Section 3.02.
3.05 Restricted Stock Units Awards. Effective as of the
Effective Time, Acquiror shall grant to certain employees (which may include
Members who may or may not be employees) of the Company or its Subsidiaries who
remain employed by the Company or its Subsidiaries through the Effective Time in
substantially the same capacity as on the date of this Agreement and become
employees of Acquiror or one of its Subsidiaries an aggregate of 4,973,382
Acquiror restricted stock units, as such may be equitably adjusted pursuant to
the terms of Section 3.07, based upon an award agreement substantially in the
form of Annex 6A and 6B (the "Retention RSUs"). In addition, effective as of the
Effective Time, Acquiror shall grant to employees of the Company or any of its
Subsidiaries who remain employed by the Company or such Subsidiary through the
Effective Time and become employees of Acquiror or one of its Subsidiaries an
aggregate of 2,056,495 Acquiror restricted stock units, as such may be equitably
adjusted pursuant to the terms of Section 3.07, based upon an award agreement
substantially in the form of Annex 7A and 7B (the "SLK RSUs"). Acquiror and the
Company shall mutually agree prior to the Effective Time on which employees
shall be granted SLK RSUs and the number of SLK RSUs to be granted to each such
employee. The Company shall consult with Acquiror regarding which employees
should be granted Retention RSUs
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and the number of Retention RSUs that should be granted to each such employee,
and after such consultation the Company shall determine, with Acquiror's written
consent (which shall not be unreasonably withheld), which employees shall
receive the Retention RSUs and how many Retention RSUs are allocated to each
such employee. The issuance and delivery of Retention RSUs and SLK RSUs shall be
conditioned upon the recipient's executing and delivering to Acquiror a custody
agreement in the form customarily used by Acquiror for recipients of restricted
stock units. All Retention RSUs and SLK RSUs shall be granted pursuant to the
Acquiror 1999 Stock Incentive Plan. All material communications by the Company
in respect of the grant of Retention RSUs and SLK RSUs shall be approved in
advance by Acquiror. With respect to the 28 non-exempt employees of the Company
identified to Acquiror who are non-exempt employees on the Closing Date, any
Retention RSUs to be granted to such employees (but in no event to exceed 3,095
RSUs) will be in the form of SLK RSUs.
3.06 Incremental Liquidity Gain. In the event that the closing
per share price of Acquiror Common Stock on the trading day immediately
preceding the Closing Date (the "Closing Stock Price") exceeds $128.025,
Acquiror shall as promptly as reasonably practicable following the Closing Date,
file a registration statement on an appropriate form under the Securities Act of
1933 to register the resale of the Excess Shares. Acquiror will use reasonable
best efforts to cause such registration statement to become effective as soon as
reasonably practicable. The Excess Shares shall be sold through Goldman, Sachs &
Co. in such manner as Goldman, Sachs & Co. shall determine in its sole
discretion. The Members whose Excess Shares are included in the registration
statement shall pay all of their and Acquiror's out-of-pocket expenses incurred
in connection with the preparation and filing of the registration statement and
the resale of the Excess Shares. Acquiror may delay any such filing,
effectiveness or offering if Acquiror in good faith believes that such filing,
effectiveness or offering would interfere with a proposed corporate transaction
(including an acquisition or disposition) or offering of securities by Acquiror
or any stockholder or require Acquiror to disclose material, nonpublic
information and will use reasonable best efforts to effect such filing,
effectiveness or offering once such transaction or offering is completed or
abandoned or such information is disclosed.
3.07 Adjustments to Prevent Dilution. In the event that
Acquiror changes the number of shares of Acquiror Common Stock, or securities
convertible or exchangeable into or exercisable for shares of Acquiror Common
Stock, issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
extraordinary distribution or other similar transaction, the Stock
Consideration, the number of Retention RSUs, the number of SLK RSUs, and
references to $128.025 where used as a calculation element or reference price
shall be equitably adjusted so as to give effect to the intended purpose of this
Agreement.
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ARTICLE IV
ACTIONS PENDING THE EFFECTIVE TIME
4.01 Forbearances of the Company. Until the Effective Time,
except as Previously Disclosed or as expressly contemplated by this Agreement
(including, without limitation, as expressly contemplated on Schedule 6.13
hereto) or any Supplemental Agreement, without the prior written consent of
Acquiror, the Company will, and the Company will cause its Subsidiaries to,
conduct the business of the Company and its Subsidiaries in the ordinary and
usual course and, to the extent consistent therewith, shall use reasonable best
efforts to preserve intact their business organizations and assets and maintain
their rights, franchises and existing relations with clients, customers,
suppliers, employees and business associates. In addition, without Acquiror's
written consent (which shall not be unreasonably withheld) the Company will not,
and will cause its Subsidiaries and its Subsidiaries' employees, members,
partners, agents and other representatives not to:
(a) Ordinary Course. Engage in any new activities or lines of
business or take any action reasonably likely to have an adverse effect
upon the ability of the Company to perform any of its obligations under
this Agreement.
(b) Equity Interests. Issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional equity
interests of the Company or any of its Subsidiaries or any Rights in
respect thereof or permit any transfers or dispositions of any equity
interests in the Company, or any of its Subsidiaries from and after the
date of this Agreement; provided, that (i) the Partnership shall be
permitted to issue additional Class C limited partnership interests and
(ii) First Options of Chicago Inc. shall be permitted to issue
additional shares of Class A Preferred Stock, in each case, in the
ordinary and usual course of business consistent with past practice.
(c) Distributions, Etc. Make, declare, pay or set aside for
payment any dividend on or in respect of, or declare or make any
distribution on, any shares of capital stock or equity interests of the
Company or any of its Subsidiaries, other than distributions from
Subsidiaries to the Company or a wholly owned Subsidiary of the
Company, or directly or indirectly adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital
stock or equity interests; provided, that the Company shall be
permitted to make distributions to its Members (i) in an amount not to
exceed $116,503,000 (including $50 million reserved for such purposes)
in respect of Taxes accrued as of June 30, 2000, (ii) in an amount not
to exceed $35,134,000 in respect of distributions available as of
January 1, 2000, (iii) in an amount not to exceed $26,689,000 in
respect of distributions for the period January 1, 2000 through June
30, 2000 and available as of June 30, 2000, (iv) in amounts necessary
to permit Members to pay the aggregate net U.S. federal, state and
local income taxes imposed on them with respect to the net earnings of
the Company during the period commencing on July 1, 2000 and ending
immediately prior to the Effective Time (after taking into account Tax
credits and other available Tax assets and any prior distributions to
fund such Taxes and not including any Taxes payable as the result of
sales or
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other dispositions requiring the recognition of unrealized gains
reflected on the June 30, 2000 Financial Statements (including the
"short-against the box" positions)), (v) in an amount with respect to
each Member and taking into account any amounts previously paid to such
Member (other than the distributions described in clauses (i) through
(iv) and (vi) through (ix) of this subsection (c)) since June 30, 2000,
not to exceed 4% of a Member's average capital account balance (as such
amount is calculated on a monthly basis in the ordinary and usual
course of the Company's business, but excluding any net income earned
after June 30, 2000) for the period from July 1, 2000 and ending
immediately prior to the Effective Time, (vi) of customary bi-weekly
draws, in amounts per Member consistent with past practice and in the
ordinary and usual course of business, (vii) for purposes of making
charitable contributions not in excess of $100,000,000, that the
Members may cause the Company or the Partnership to make after the date
of the Original Agreement, (viii) of two percent (2%) charitable giving
draws of not more than $68,000 in the aggregate for all Members and
(ix) as previously disclosed on Schedule 5.03(g) or Schedule 5.03(aa);
provided, however, that the Tax rates and taxable income used for
purposes of these computations are not inconsistent with any Tax
Returns filed by the Partnership or the Company, the Financial
Statements and any other available financial information, and provided,
further, that the manner in which the effective Tax rate is computed is
subject to Acquiror's reasonable approval and is based upon the highest
applicable U.S. federal, state and local rates applicable to
individuals.
(d) Compensation; Employment Agreements; Etc. Enter into,
amend, modify or renew any employment, consulting, severance or similar
contracts with any director, officer, employee or Member, or grant any
salary, wage or other compensation increase or increase any employee
payment or benefit (including incentive or bonus payments), except (1)
for normal individual increases in compensation to persons other than
Directors or Managing Directors in the ordinary course of business
consistent with past practice, (2) for other changes that are required
by applicable law, (3) to satisfy contractual obligations existing as
of the date of the Original Agreement that have been previously made
available to Acquiror, and (4) for employment arrangements for, or
grants of awards (other than any ownership interest in the Company or
any of its Subsidiaries, or Rights with respect thereto) to, newly
hired employees of the Company (other than officers or directors) or
any of its Subsidiaries in the ordinary course of business consistent
with past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend or
communicate in writing or orally any intention to take such action, or
grant any waiver with respect to, any pension, retirement, equity
option, equity purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect
of any current of former director, officer, employee or Owner, except
(1) for non-material items in the ordinary and usual course of business
or by the transactions to be effected by this Agreement or (2) as may
be required (i) by applicable law or (ii) to satisfy contractual
obligations existing on the date of the Original Agreement that have
been Previously Disclosed and accrued on the Financial Statements, or
take any action to
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accelerate the funding, vesting or exercisability of options,
restricted membership interest awards or other compensation or benefits
payable thereunder.
(f) Dispositions. Initiate, solicit or otherwise encourage,
directly or indirectly, any (i) enquiries or the making of any proposal
or offer with respect to a merger, consolidation or similar transaction
involving the Company or any of its Subsidiaries, or any purchase of
membership interests or securities of the Company or any of its
Subsidiaries, or otherwise participate in or facilitate any effort or
attempt to make or effectuate such an offer or proposal including,
without limitation, by engaging in any discussions or negotiations or
providing any confidential information or data to, any person making
such other offer or proposal; and (ii) except for sales, transfers,
mortgages, encumbrances or other dispositions of securities or other
investments or assets in the ordinary course of business consistent
with past practice, sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue (1) any material amount of assets or
properties or (2) any material business or operations.
(g) Acquisitions. Except for the purchase of securities or
other investments or assets in the ordinary course of business
consistent with past practice, acquire any assets, business, or
properties of any other entity.
(h) Governing Documents. Amend the Constitutive Documents of
the Company or any of its Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required by generally accepted accounting principles or applicable law
or regulation.
(j) Contracts. Without limiting the applicability of Section
4.01(d) or (e), enter into or terminate any material contract (other
than a material contract which expires by its terms) or amend, modify
or waive in any respect any of its existing material contracts or its
rights thereunder other than in the ordinary course of business
consistent with past practice.
(k) Claims. Settle any claim, action or proceeding, except for
any claim, action or proceeding involving solely money damages in an
amount, individually and in the aggregate for all such settlements, not
more than $1,000,000 and which is not reasonably likely to establish an
adverse precedent or basis for subsequent claims, actions, proceedings
or settlements.
(l) Adverse Actions. Knowingly take any action that is
reasonably likely to result in (1) any of its representations or
warranties set forth in this Agreement being or becoming untrue at any
time at or prior to the Effective Time (after giving effect to Section
5.02) or (2) any of the conditions set forth in Article VIII not being
satisfied, except, in either case, as may be required by applicable law
or regulation.
(m) Indebtedness. Incur any indebtedness for borrowed money
(other than any indebtedness with a final maturity less than 12 months
from the date of its issuance incurred
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in the ordinary course of business consistent with past practice) or
issue any debt obligations that would be considered Managing Director
Subordinated Notes.
(n) Commitments. Agree, commit to or enter into any agreement
to take any of the actions referred to in Section 4.01(a) through (m).
4.02 Forbearances of Acquiror. Until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of the Company, Acquiror will not, and will cause each of its
Subsidiaries not to, knowingly take any action reasonably likely to result in
(1) any of its representations and warranties set forth in this Agreement being
or becoming untrue at any time at or prior to the Effective Time (after giving
effect to Section 5.02) or (2) any of the conditions set forth in Article VIII
not being satisfied except, in either case, as may be required by applicable law
or regulation. In addition, Acquiror shall not declare, make or pay any
extraordinary dividend or other extraordinary distribution on Acquiror Common
Stock, whether in cash or otherwise (which shall not include any quarterly cash
dividends in the ordinary and usual course of business) unless an equitable
adjustment is made to the Stock Consideration and the calculation element or
reference price of $128.025.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. The Company has delivered to
Acquiror, and Acquiror has delivered to the Company, a schedule (respectively,
its "Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate either (a) in response to an
express informational requirement contained in or requested by a provision
hereof or (b) as an exception to one or more representations or warranties
contained in Section 5.03, 5.04, 5.05 and 7.01. Information set forth in a
party's Disclosure Schedule, whether in response to an express informational
requirement or as an exception to one or more representations, warranties or
covenants, as applicable, in each case that is contained (or incorporated by
reference) in a correspondingly enumerated portion of such Disclosure Schedule
or as disclosed in the Offering Memorandum, is described herein as "Previously
Disclosed".
5.02 Standard. No representation or warranty contained in
Section 5.03, 5.04, 5.05 and 7.01 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event, or circumstance that should
have been disclosed as an exception to one or more representations or
warranties, unless such fact, event or circumstance, whether individually or
taken together with all other facts, events or circumstances that should have
been so disclosed (whether or not as exceptions) with respect to such
representation or warranty contained in Section 5.03, 5.04, 5.05 or 7.01, has
had or is reasonably likely to have a Material Adverse Effect with respect to
the Company (in the case of Section 5.03 and Section 7.01), the Partnership (in
the case of Section 5.04 and Section 7.01), Acquiror (in the case of Section
5.05); provided, that this Section 5.02 will not apply to, and will not limit
breaches of, the first sentence of Section 5.03(a), Section 5.03(b), the last
two
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sentences of the first paragraph of Section 5.03(c), Section 5.03(d), the last
two sentences of Section 5.03(g)(1), Section 5.03(g)(3)(B), Section 5.03(z),
Section 5.03(aa), the first sentence of Section 5.04(a), Section 5.04(b), the
first sentence of Section 5.05(a), Section 5.05(b), the last sentence of
5.05(d)(1), 5.05(d)(2)(B), 5.05(d)(3) and the last sentence of Section 5.05(e);
and provided, further, that this Section 5.02 will not apply in determining
whether indemnification is available under Article VII or Article IX hereof.
5.03 Representations and Warranties with Respect to the
Company. Except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, the Company hereby
represents and warrants to, and agrees with, Acquiror as follows:
(a) Organization, Standing and Authority. The Company has been
duly organized and is validly existing as a limited liability company
in good standing under the laws of the State of New York. The Company
is duly qualified to do business and is in good standing in the States
of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified. The Company and each of its Subsidiaries has the requisite
power and authority and has in effect all federal, state, local, and
foreign governmental authorizations necessary for it to own or lease
its properties and assets and to carry on its business as it is now
conducted. The Company has delivered to Acquiror a true and complete
copy of its articles of organization and operating agreement, which are
the only Constitutive Documents of the Company.
(b) Membership Interests. (i) Annex 1 is an accurate and
complete list of the Members of the Company and is an accurate and
complete list of their respective ownership interests in all material
respects. As of the date of this Agreement, the Company has no Company
Membership Interests reserved for issuance and no obligation to admit
any other person as a Member. All the outstanding Company Membership
Interests are duly authorized and validly issued and were not issued in
violation of any subscriptive or preemptive rights. There are no other
Company Membership Interests authorized, issued or outstanding and
there are no preemptive rights or any outstanding Rights of the Company
or any of its Subsidiaries of any character relating to the issued or
unissued securities of the Company (including those relating to the
issuance, sale, purchase, redemption, conversion, exchange, redemption,
voting or transfer thereof). Since June 30, 2000 and until the date
hereof, no dividend or other distribution has been paid on or in
respect of the Company Membership Interests other than (x) as would
have been permitted under Section 4.01(c)(iv), (v) and (vi) had this
Agreement been in effect at such time or (y) as Previously Disclosed on
Schedule 5.03(b).
(ii) Immediately after Effective Time, Acquiror shall own all
of the Membership Interests of the Company.
(iii) Each Member and Withdrawn Member (other than those that
are estates) that will receive Acquiror Common Stock or an Acquiror
Subordinated Note in connection with the Merger is an "accredited
investor" as defined in Regulation D under the Securities Act.
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(c) Subsidiaries. The Company has Previously Disclosed a list
of all its Subsidiaries, including the states or foreign jurisdictions
in which such Subsidiaries are organized and, if any of such
Subsidiaries is not wholly owned by the Company or one or more of its
Subsidiaries, the percentage owned by the Company or each such
Subsidiary and the names, addresses and type and percentage ownership
by any other person; provided, that the Company is also the general
partner of SLK Funding Co. and SLK Successor Partners, but will, in
consummating the Restructuring Transactions, resign as such and each of
SLK Funding Co. and SLK Successor Partners will be liquidated; and
provided, further, that the Company is the managing general partner of
SLK 1986, but such interest will be sold pursuant to the Restructuring
Transactions. No equity interests in any of the Company's Subsidiaries
are or may become required to be issued (other than to the Company or a
wholly owned Subsidiary of the Company) by reason of any Rights with
respect thereto. There are no Contracts or outstanding claims assessed
against the Company by which any of the Company's Subsidiaries is or
may be bound to sell or otherwise issue any equity interests, and there
are no Contracts relating to the rights of the Company to vote or to
dispose of such equity interests. All of the equity interests in each
of the Company's Subsidiaries have been duly authorized and validly
issued and, to the extent applicable, are fully paid and nonassessable
and are subject to no subscriptive or preemptive rights or Rights and
are owned by the Company or one of its Subsidiaries free and clear of
any Liens other than those Liens created by the existence of the
Constitutive Documents. Each of the Company's Subsidiaries is in good
standing under the laws of the jurisdiction in which it is organized,
and is duly qualified to do business and in good standing in each
jurisdiction where its ownership or leasing of property or the conduct
of its business requires it to be so qualified. The Company is the sole
general partner of the Partnership and (including the Float (as such
term is defined in the SLK Partnership Agreement)), has the right to
98.942% of the Partnership's profits, free and clear of all Liens other
than those Liens created by the existence of the Constitutive
Documents, and is responsible for 100% of the Partnership's losses, and
no other person has any interest, legal, beneficial or otherwise in
such Partnership Interest. At the Closing Date, the Company shall have
the right to 100% of the Partnership's profits. Upon the consummation
of the Merger, the Surviving LLC will continue to own, beneficially and
of record, such Partnership Interest, free and clear of all Liens other
than those Liens created by the existence of the Constitutive Documents
or liens created by Acquiror.
The Company has Previously Disclosed a true and complete list
of all equity securities (other than those issued by a Subsidiary) it
or a Subsidiary of the Company holds or controls as of the date of this
Agreement involving, in the aggregate, ownership or control of 5% or
more of any class of the issuer's voting securities or 25% or more of
the issuer's equity. The Company has Previously Disclosed a list of all
corporations (and any other entities or joint undertakings treated as a
partnership for any Tax purpose), limited liability companies, joint
ventures or similar entities, in which it owns or controls a 5% or more
interest, directly or indirectly, and the nature and amount of each
such interest.
(d) LLC Action. The Company has the requisite power and
authority, and has taken all limited liability company action
necessary, (1) to authorize the execution and
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<PAGE> 27
delivery of and performance of its obligations under this Agreement and
(2) to approve and adopt the Merger and in accordance herewith, to
consummate the Merger and the transactions contemplated by this
Agreement. Without limiting the foregoing, any action of the Members of
the Company required to approve or adopt this Agreement and the
transactions contemplated by this Agreement has been duly taken in
accordance with the requirements of the New York State Limited
Liability Company Law and the Operating Agreement. No further action of
the Members or Managers of the Company is required in order to
consummate the Merger and, except for the execution and delivery of
documents referred to herein that are contemplated to be entered into
at or prior to Closing, the transactions contemplated by this
Agreement. As of the Closing, no Member will have any dissenter's or
similar rights with respect to the Merger. This Agreement has been duly
executed and delivered on behalf of the Company and constitutes the
valid and legally binding agreement of the Company, enforceable in
accordance with its terms except as the enforceability hereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of
equity.
(e) No Defaults. Subject to (A) the receipt of Previously
Disclosed required approvals, (B) the receipt of waivers in connection
with certain requirements of (i) the 7.45% Series A Senior Subordinated
Notes due September 17, 2004, the 7.59% Series B Senior Subordinated
Notes due September 17, 2006, the 7.67% Series C Senior Subordinated
Notes due September 17, 2009, each issued by the Partnership, (ii) the
8.16% Series A Senior Secured Notes due December 1, 2002 and the 8.37%
Series B Senior Secured Notes due December 1, 2004, each issued by SLK
Holdings, Inc. and (iii) the 8.16% Series A Senior Subordinated
Regulatory Capital Notes due December 1, 2002 and the 8.37% Series B
Senior Subordinated Regulatory Capital Notes due December 1, 2004, each
issued by First Options of Chicago, Inc., and (C) the filing of the
Merger Certificate, the execution, delivery and performance of this
Agreement and the consummation by the Company of the transactions
contemplated by this Agreement, do not and will not (1) conflict with
or constitute a breach or violation of, or a default under, or cause or
allow the acceleration or creation of any right, obligation or Lien
(with or without the giving of notice, passage of time or both)
pursuant to any law, rule or regulation or any judgment, decree, order,
or any governmental or non-governmental permit, license, franchise or
privilege or any Contract of it or any of its Affiliates or to which it
or any of its Affiliates or its or their properties is subject or
bound, (2) constitute a breach or violation of, or a default under, the
Constitutive Documents of the Company or any of its Subsidiaries, or
(3) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental or non-governmental
permit, license, franchise or privilege or the consent or approval of
any other party to any such Contract.
(f) Reports. The Company and its Subsidiaries have timely
filed all reports, registrations, statements and other filings (other
than those relating to Taxes or Tax Returns), together with any
amendments required to be made with respect thereto, that were required
to be filed by the Company or any of its Subsidiaries since December
31, 1998 with (1) the SEC or the CFTC, (2) any other applicable
Governmental Authorities (other than taxing
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<PAGE> 28
authorities) or (3) any Self-Regulatory Organization (all such reports
and statements, including the financial statements, exhibits and
schedules thereto, being collectively referred to herein as the
"Reports"), including without limitation, all reports, registrations,
statements and filings required under the Securities Laws. Each of the
Reports, when filed, complied (or, if filed after the date of the
Original Agreement, will comply) as to form with all applicable
statutes, rules, regulations and orders (whether or not enforced or
promulgated by the Governmental Authority with which they were filed)
and did not (or will not) contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) Financial Statements.
(1) The Company has delivered to Acquiror copies of each of
the audited consolidated statements of financial condition of the
Partnership (including all related notes and schedules thereto) as of
September 30, 1998 and 1999, and the audited consolidated statements of
income, changes in partner's capital and cash flows of the Partnership
(including any related notes and schedules thereto) for the fiscal
years ended September 30, 1997, 1998 and 1999, and the unaudited
consolidated financial statements of the Partnership as of, and for the
fiscal quarters ended, June 30, 1999 and 2000 and the unaudited
unconsolidated financial statements of each of the Subsidiaries of the
Partnership that are registered as broker-dealers under Section 15 of
the Exchange Act contained in the Financial and Operational Combined
Uniform Single Reports (each, a "Focus Report") for the fiscal quarters
ended June 30, 1999 and 2000 (collectively, the "Financial
Statements"). Each of the statements of financial condition included in
the Financial Statements fairly presents in all material respects the
consolidated financial position of the Partnership (or, in the case of
the Focus Reports, of the relevant Subsidiary on an unconsolidated
basis) as of its date, and each of the statements of income and changes
in owners' capital and cash flows or equivalent statements included in
the Financial Statements fairly presents in all material respects the
consolidated results of operations, changes in owners' capital and
changes in cash flows, as the case may be, of the Partnership (or, in
the case of the Focus Reports, of the relevant Subsidiary on an
unconsolidated basis) for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end adjustments and
footnote disclosure), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved (except as may be noted therein and except that unaudited
statements may not include notes). As of the Closing Date, the only
asset of the Company will be its general partnership interest and Class
A limited partnership interest in the Partnership, and the Company will
not, except as Previously Disclosed, engage (and will not, except as
Previously Disclosed (including the transactions expressly set forth on
Schedule 6.13), have engaged since the date of the Original Agreement)
in any business other than owning such general partnership interest and
Class A limited partnership interest, and the Company shall have no
liabilities whether accrued, contingent, absolute, determined,
determinable or otherwise, other than those directly arising from the
Company's ownership of such general partnership interest and the
Company shall not have transferred any liabilities to the Partnership
or any other Subsidiary.
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<PAGE> 29
(2) There are no liabilities as of the date of the Original
Agreement of the Partnership or any of its Subsidiaries of any kind
whatsoever that are required to be disclosed on the balance sheet,
whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances known to the Company or any of its Subsidiaries which
could reasonably be expected to result in such a liability, other than:
(A) liabilities reflected or reserved
against in the Financial Statements; and
(B) liabilities arising, in the ordinary
course of business consistent with past practice,
after the date of the most recent statement of
financial condition included in the Financial
Statements that are not and could not reasonably be
expected to be materially adverse to the Company or
its Subsidiaries.
(3) Since September 30, 1999, (A) the Company and its
Subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice (except as expressly set forth on Schedule 6.13)
and (B) there has not occurred any change, occurrence or event, and no change,
occurrence or event has become reasonably likely, which has had, or is
reasonably likely to have, a Material Adverse Effect with respect to the
Company.
(4) The pricing of securities and loans held in the Company's
and its Subsidiaries' trading accounts or securities portfolios and reflected in
the financial statements contained in the Focus Report for the quarter ended
June 30, 2000 is consistent with past practices.
(h) Contracts.
(1) The Company has Previously Disclosed, and
delivered true and complete copies of, each of the following
Contracts to which it or any of its Subsidiaries is a party,
by which it or any of its Subsidiaries is bound, or to which
its or any of its Subsidiaries' properties are subject (other
than trading commitments with customers or counterparties to
purchase or sell securities in the ordinary course of business
and consistent with past practice):
(A) the real property leases relating to its
(i) 220,000 square feet lease for 120 Broadway, New
York, New York and (ii) 90,000 square feet lease for
its Jersey City, New Jersey location;
(B) any joint venture, shareholder or other
similar agreement or arrangement or any options,
rights or obligations to acquire from any person any
capital stock, voting securities or equity interests
or Rights or securities convertible into or
exchangeable for capital stock, voting securities or
equity interests of such person;
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<PAGE> 30
(C) other than the purchase and sale
contract set forth in clause (i) of Schedule 6.13,
any Contract entered into within the last three (3)
years relating to the acquisition or disposition of
any material business or operations (whether by
merger, sale of stock, sale of assets or otherwise);
(D) any Contract providing for existing or
future borrowing of money or payment of the deferred
purchase price of property in excess of $10,000,000
(in either case, whether incurred, assumed,
guaranteed or secured by any asset) (other than
borrowings with a maturity of less than one (1)
year);
(E) any application, license, franchise or
other Contract relating to any trademark and
trademark rights, tradename and tradename rights,
service mark and service mark rights, service name
and service name rights, copyright and copyright
rights or patent and patent rights (collectively, the
"Intellectual Property");
(F) any Contract providing for exclusive
dealing or that limits the freedom of the Company or
any of its Affiliates to compete in any line of
business or with any person or in any area;
(G) any Contract, other than this Agreement
and the Supplemental Agreements, between the Company
or any of its Subsidiaries and (i) an Owner or any
"associates" or members of the "immediate family" (as
such terms are respectively defined in Rule 12b-2 and
Rule 16a-1 of the Exchange Act) of an Owner, (ii) any
other Affiliate of the Company or of an Owner, (iii)
any person 5% or more of whose outstanding voting
securities are directly or indirectly owned,
controlled or held with power to vote by the Company
or any Affiliate of the Company or of an Owner or
(iv) any officer of the Company or any Affiliate of
the Company or of an Owner or any "associates" or
members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of
the Exchange Act) of any such Owner (it being
understood that the contract referred to in clause
(i) of Schedule 6.13, the SLK Investing Merger
Agreement and the secured demand notes and cash
subordination agreements constituting Managing
Director Subordinated Notes referred to in clause
(vii) of Schedule 6.13 shall each be deemed, for
purposes of this Section 3.03(h)(1)(G) only, to have
been "Previously Disclosed"); or
(H) other than the Supplemental Agreements,
any Member agreement, voting agreement, voting trust
agreement or similar Contract involving the interests
of the Company or any of its Subsidiaries.
The Company has made available its forms of
agreements relating to the clearing of futures or securities
transactions, the custody of assets or the extension of
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<PAGE> 31
credit (a "Clearing Agreement"). Each Clearing Agreement
entered into by the Company or any of its Subsidiaries is not
modified in any material respect from such form of Clearing
Agreement that has been made available.
Each contract required to be disclosed or made available in
respect of this Section 5.03(h) is referred to as a "Material
Contract".
(2) Each Material Contract is a valid and binding
agreement of the Company (and/or its Subsidiaries party
thereto (and/or its Affiliates in the case of clause (F)
above)) and, with respect to any such of the Company and its
Subsidiaries (and/or its Affiliates in the case of clause (F)
above), is in full force and effect, and none of the Company,
any of its Subsidiaries (and/or its Affiliates in the case of
clause (F) above) or, as of the date of the Original
Agreement, to the knowledge of the Company or any of its
Subsidiaries (and/or its Affiliates in the case of clause (F)
above), any other party thereto is in default under any such
Contract and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would
constitute such a default (to the knowledge of the Company or
any of its Subsidiaries with respect to any event relating to
a party other than the Company or its Subsidiaries).
(i) Properties; Securities.
(1) Except as reflected or reserved against in the
Financial Statements, each of the Company and its Subsidiaries
has good and marketable title to, or in the case of leased
property, has valid leasehold interests in all property and
assets purported to be owned or leased by it (whether real or
personal, tangible or intangible, and including investment
securities and other investments) reflected in the Financial
Statements or acquired after the date thereof, except for
property and assets sold or transferred since such date in the
ordinary course of business consistent with past practices.
None of such property or assets (except property or assets
sold or transferred since such date in the ordinary course of
business consistent with past practices) is subject to any
Liens (including Tax-related Liens), except:
(A) Liens incurred in the ordinary course of
business consistent with past practice;
(B) Liens securing liabilities which, in
each case, are disclosed or reserved against in the
Financial Statements;
(C) Liens for Taxes not yet due or payable
or being contested in good faith (and, in either
case, for which adequate accruals or reserves have
been established in the Financial Statements);
(D) Mechanics or materialmen liens and
similar liens arising by operation of law; or
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<PAGE> 32
(E) Liens which do not materially detract
from the value or materially interfere with any
current use of such property or assets.
(2) To the knowledge of the Company and its
Subsidiaries, all buildings and all fixtures, equipment, and
other property and assets used but not owned by the Company or
any of its Subsidiaries are held under valid leases or
subleases enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and by general
equity principles.
(3) Each of the Company and its Subsidiaries has a
"security entitlement" (as defined in the Uniform Commercial
Code) in all securities or investments held or purported to be
held by it (except securities sold under repurchase agreements
or held in any fiduciary or agency capacity), free and clear
of any Lien, except to the extent such securities are pledged
in the ordinary course of business consistent with past
practices to secure obligations of each of the Company or any
of its Subsidiaries. Such securities are valued on the books
of the Company and its Subsidiaries in accordance with
generally accepted accounting principles.
(4) All Managing Director Subordinated Notes, by
their terms, are redeemable by the Company at a price equal to
the principal amount thereof, plus accrued interest, if any,
through the date of such redemption without penalty.
(j) Litigation; Regulatory Action. Except as Previously
Disclosed, no litigation, proceeding or investigation ("Litigation")
before or by any court, arbitrator, mediator or Governmental Authority
is pending against the Company or any of its Subsidiaries, and, to the
knowledge of the Company or any of its Subsidiaries, no such Litigation
has been threatened, and there is no existing condition, situation or
set of circumstances known to the Company or any of its Subsidiaries
which could reasonably be expected to result in such litigation;
neither the Company nor any of its Subsidiaries, or any of their
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, any Self-Regulatory
Organization or any Governmental Authority (including the SEC, the CFTC
and the Federal Trade Commission) charged with the supervision or
regulation of broker-dealers, securities underwriting or trading, stock
exchanges, commodities exchanges, alternative trading systems or the
supervision or regulation of the Company or any of its Subsidiaries
(collectively, "Regulatory Orders"). There is no Litigation involving
the Company, and to the Company's knowledge there are no claims,
disputes or Litigation involving any Member or former Member, related,
in each case, to the ownership of the membership interests of the
Company.
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<PAGE> 33
(k) Compliance with Laws. Each of the Company and its
Subsidiaries, and their respective Owners, managers, directors,
officers and employees:
(1) in the conduct of its businesses has been and is
in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, and with the applicable
rules of all Self-Regulatory Organizations including without
limitation, (w) all applicable regulatory net capital
requirements, including SEC Rule 15c3-1 and, as applicable,
the "early warning" and "expansion-contraction" capital
requirements in NYSE Rules 325 and 326, the liquid net assets
requirements of NYSE Rule 104.20 and the capital requirements
of any futures exchanges; (x) all rules and regulations
relating to the maintenance and preservation of books and
records; and (y) the provisions of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and
regulations promulgated thereunder;
(2) has and has had all permits, licenses,
authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental
Authorities and Self-Regulatory Organizations that are
required in order to permit them to own and operate their
businesses as presently conducted; all such permits, licenses,
authorizations, orders, franchises and approvals are in full
force and effect and, to the Company's and its Subsidiaries'
knowledge, no suspension or cancellation of any of them is
threatened or reasonably likely; and all such filings,
applications and registrations are current and do not need to
be amended in any material respect;
(3) since January 1, 1997, except as disclosed on the
Partnership's or its Affiliates' most recent Form BD filed
with the SEC, the Partnership has received no written
notification or communication (or, to the Company's and its
Subsidiaries' knowledge, any other communication) from any
Governmental Authority or Self-Regulatory Organization (A)
asserting that any of them is not in compliance with any of
the statutes, rules, regulations, or ordinances which such
Governmental Authority or Self-Regulatory Organization
enforces, or has otherwise engaged in any unlawful business
practice except such assertions that were resolved to the
satisfaction of such Governmental Authority or Self-Regulatory
Organization and did not result in a material change to the
operations or practices of the Company or such Subsidiary, (B)
threatening to revoke any license, franchise, permit, seat on
any stock or commodities exchange, or governmental
authorization, (C) requiring any of them (including any of the
Company's or its Subsidiaries' Owners, managers, directors,
officers or controlling persons) to enter into a cease and
desist order, agreement, or memorandum of understanding (or
requiring the board of directors (or similar body) thereof to
adopt any resolution or policy) or (D) restricting or
disqualifying the activities of the Company or any of its
Subsidiaries (except for restrictions generally imposed by
rule, regulation or administrative policy on brokers or
dealers generally); and the Company has delivered true and
complete copies of each such written notification or
communication to Acquiror;
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<PAGE> 34
(4) is not the subject of any pending or aware of any
threatened investigation, review, disciplinary proceedings or
unresolved issues raised by any Governmental Authority or
Self-Regulatory Organization against or with respect to the
Company, any of its Subsidiaries or any Owner, manager,
officer, director or employee thereof;
(5) in the conduct of its business with respect to
employee benefit plans subject to Title I of ERISA or Section
4975 of the Code ("ERISA Plans"), has not (A) engaged in any
conduct which would subject it or them to liability under
Sections 405, 406, 409, 502(i) or 502(l) of ERISA or Section
4975 of the Code or (B) engaged in any conduct that could
constitute a crime or violation listed in Section 411 of ERISA
which could preclude such person from providing services to
any ERISA Plan;
(6) is not, nor is any Affiliate of any of them,
subject to a "statutory disqualification" as defined in
Section 3(a)(39) of the Exchange Act; is not subject to a
disqualification that would be a basis for censure,
limitations on the activities, functions or operations of, or
suspension or revocation of, the registration of any
broker-dealer Subsidiary as broker-dealer under Section 15, or
municipal securities dealer, government securities broker or
government securities dealer under Section 15, Section 15B or
Section 15C of the Exchange Act; is not, nor are any of their
"principals" (as defined in Section 8a(2) of the Commodity
Exchange Act), subject to any of the provisions of Section 8a
that would permit the CFTC, subject to the terms of such
section, to refuse to register or to suspend or revoke the
registration of any of them or their respective principals;
and, to the Company's knowledge, there is no current
investigation, whether formal or informal, or whether
preliminary or otherwise, that is reasonably likely to result
in, any such censure, limitations, suspension or revocation;
and
(7) has not acted as an underwriter of any
securities.
(l) Registrations.
(1) The Company has previously made available each
registration of the Company and any of its Affiliates as a
broker-dealer, a registered representative or a sales person
(or in a similar capacity) with the SEC, the securities or
commodities commission or similar authority of any state or
foreign jurisdiction or any Self-Regulatory Organization;
each such registration is in good standing (to the extent such
concept is applicable) and in full force and effect; and no
other such registrations are required in order to permit them
to own and operate their businesses as presently conducted.
(2) Other than as previously made available, none of
the Company or its Affiliates, nor any of their respective
Owners, directors, managers, officers and employees, is
required to be registered as an investment adviser, investment
company, commodity trading advisor, commodity pool operator,
futures commission
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<PAGE> 35
merchant, insurance agent, or transfer agent under any United
States federal, state, local or foreign statutes, laws, rules
or regulations (including any of the Securities Laws).
(m) Specialist Securities. On the date of the Original
Agreement, the Partnership and certain of its Subsidiaries act as the
Self-Regulatory Organization specialist unit for each security
Previously Disclosed. Except as Previously Disclosed, the Company has
no reason to believe and has not been advised that it may be required
to cease acting as the Self-Regulatory Organization specialist unit for
any of such securities, nor has it agreed to act as the Self-Regulatory
Organization specialist unit for any other security, nor will it so
agree without the prior written approval of Acquiror. The Company will
use its best efforts to retain its status as the Self-Regulatory
specialist unit for each security Previously Disclosed.
(n) No Brokers. None of the Company or its Subsidiaries, or
any of their respective Affiliates, has employed any broker or finder,
or incurred any brokers or finders commissions or fees, in connection
with the transactions contemplated hereby.
(o) Compensation Plans; ERISA Matters.
(1) The Company has Previously Disclosed a list of
all significant employment, consulting, benefit and
compensation plans, contracts, policies or arrangements and
descriptions of any unwritten plans, policies or arrangements
covering current or former Members or employees or consultants
of the Company or any of its Subsidiaries (the "Employees")
and current or former Partners of the Partnership or as to
which the Company or any of its Subsidiaries could have,
directly or indirectly, any liability, including, but not
limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred compensation, stock
option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans and any applicable "change in
control" or similar provisions in any plan, contract or
arrangement (the "Compensation Plans"). True and complete
copies of all Compensation Plans, including, but not limited
to, any trust instruments and insurance contracts forming a
part of any Compensation Plans, and all amendments thereto
have been provided or made available to Acquiror. No
Compensation Plan provides for any benefit based in whole or
in part on the value of any Membership Interest or equity
interest owned by the Company or any of its Subsidiaries. For
purposes of this paragraph (1), a Compensation Plan is deemed
significant if (i) it covers fifty (50) or more individuals or
(ii) it requires annual contributions or payments by the
Company or any of its Subsidiaries or provides annual benefits
aggregating an amount equal to or in excess of $1,000,000.
(2) All employee benefit plans covering Employees
(the "Plans"), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan which is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code, has received a
favorable determination letter from the Internal Revenue
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<PAGE> 36
Service with respect to "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), and the Company is not aware of any
circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending
or, to the knowledge of the Company threatened, litigation
relating to the Plans, and there is no existing condition,
situation or set of circumstances known to the Company or any
of its Subsidiaries which could reasonably be expected to
result in such litigation. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any
Plan that, assuming the taxable period of such transaction
expired as of the date of the Original Agreement, could
subject the Company or any Subsidiary to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i)
of ERISA in an amount which would be material.
(3) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or
any of its Subsidiaries with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained
by any of them, or the single-employer plan of any entity
which is considered one employer with the Company under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither the Company, any of its Subsidiaries nor
an ERISA Affiliate has contributed to a Pension Plan that is a
"multiemployer plan", within the meaning of Section 3(37) of
ERISA, at any time on or after September 26, 1980 or could
have liability in respect of any such plan. No notice of a
"reportable event", within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or
by any ERISA Affiliate within the 12-month period ending on
the date of the Original Agreement or will be required to be
filed in connection with the transactions contemplated by this
Agreement.
(4) All contributions required to be made under the
terms of any Compensation Plan have been timely made or have
been reflected on the Financial Statements. Neither any
Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA and no ERISA Affiliate has an outstanding
funding waiver. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security
to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(5) Under each Pension Plan which is a
single-employer plan, as of the last day of the most recent
plan year ended prior to the date of the Original Agreement,
the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions
contained in the Plan's most recent actuarial valuation), did
not exceed the then current value of the assets of such Plan,
and there has been no
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<PAGE> 37
adverse change in the financial condition of such Plan since
the last day of the most recent plan year.
(6) Neither the Company nor any of its Subsidiaries
has any obligations for retiree health, life or other benefits
under any Compensation Plan.
(7) The consummation of the transactions contemplated
by this Agreement, either alone or in conjunction with any
other event, will not (x) entitle any Employees to severance
pay, (y) accelerate the time of payment or vesting or trigger
any payment or funding (through a grantor trust or otherwise)
of compensation or benefits under, increase the amount payable
or trigger any other material obligation pursuant to, any of
the Compensation Plans or (z) result in any payments under,
any of the Compensation Plans which would constitute a
"parachute payment" to any "disqualified individual" as those
terms are defined in Section 280G of the Code; provided, that
the representations of this paragraph (7) shall not apply with
respect to any awards, payments, compensation and benefits to
be paid or made pursuant to this Agreement or other agreements
related to the transactions to be effected hereby.
(8) All Compensation Plans covering current or former
non-U.S. employees or otherwise maintained outside the U.S.
for U.S. employees are in substantial compliance with
applicable local law ("Foreign Plans"). The Company and its
Subsidiaries have no unfunded liabilities with respect to any
Foreign Plan that are not properly reflected on the Financial
Statements;
(9) There has been no amendment to, written
interpretation, communication or announcement by the Company
or any of its affiliates relating to, or change in employee
participation or coverage under, any Compensation Plan, which
would significantly increase the expense of maintaining such
Compensation Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year; and
(p) Labor Relations. Each of the Company and its Subsidiaries
is in compliance with all currently applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours, including, without limitation, the Immigration
Reform and Control Act, the Worker Adjustment and Retraining
Notification Act, any such laws respecting employment discrimination,
disability rights or benefits, equal opportunity, plant closure issues,
affirmative action, workers' compensation, employee benefits, severance
payments, labor relations, employee leave issues, wage and hour
standards, occupational safety and health requirements and unemployment
insurance and related matters. None of the Company or its Subsidiaries
is engaged in any unfair labor practice (within the meaning of the
National Labor Relations Act). As of the date of the Original
Agreement, there is no unfair labor practice complaint pending or, to
the knowledge of the Company, threatened against any of the Company or
its Subsidiaries before the National Labor Relations Board. Neither the
Company nor any of its Subsidiaries is a party to, or is bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is the
Company or any of its
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Subsidiaries the subject of a proceeding as of the date of the Original
Agreement asserting that the Company or any such Subsidiary has
committed an unfair labor practice (within the meaning of the National
Labor Relations Act) or seeking to compel it or such Subsidiary to
bargain with any labor organization as to wages and conditions of
employment, nor is there any strike or other labor dispute involving
the Company or any of its Subsidiaries, pending or, to the best of the
Company's knowledge, threatened, nor is it aware of any activity
involving the Company's or any of its Subsidiaries' employees seeking
to certify a collective bargaining unit or engaging in any other
organization activity.
(q) Insurance. The Company and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts as is in
accordance with industry practices. Copies of all insurance policies
and related documents have been made available to Acquiror.
(r) Accounting Controls. Each Subsidiary of the Company that
is registered as a broker-dealer has adopted recordkeeping systems that
comply with the requirements of Section 17 of the Exchange Act and the
rules and regulations promulgated thereunder and the rules of all
Self-Regulatory Organizations having jurisdiction, and maintains its
records in accordance therewith. Each of the Company and its
Subsidiaries has devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances that (1) all
transactions are executed in accordance with management's general or
specific authorization; (2) all transactions are recorded as necessary
to permit the preparation of financial statements in conformity with
generally accepted accounting principles consistently applied with
respect to broker-dealers, if applicable, or any other criteria
applicable to such statements; (3) access to the property and assets of
the Company and its Subsidiaries is permitted only in accordance with
management's general or specific authorization; and (4) the recorded
amounts for items is compared with the actual levels at reasonable
intervals and appropriate action is taken with respect to any
differences.
(s) Proprietary Rights. The Company and its Subsidiaries
exclusively own or have the perpetual and exclusive right to use
Intellectual Property material to the conduct of their business, and
all of these have been Previously Disclosed; and such ownership or
right to use such Intellectual Property is free and clear of any Liens,
and no other person has the right to use such Intellectual Property.
Except as Previously Disclosed: (A) neither the Company nor any of its
Subsidiaries is, or will be as a result of the execution and delivery
of this Agreement or the performance of its obligations under this
Agreement, in violation of any licenses, sublicenses and other
agreements as to which the Company or any such Subsidiary is a party
and pursuant to which the Company or any such Subsidiary is authorized
to use any third-party patents, trademarks, service marks, copyrights,
trade secrets, computer software or other proprietary rights
(collectively, "Third-Party Intellectual Property Rights") nor shall
such agreements be subject to termination or material modification by
reason thereof; (B) no claims with respect to (I) the Intellectual
Property or (II) Third-Party Intellectual Property Rights are currently
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened by any person; (C) neither the Company nor any of its
Subsidiaries knows of any valid grounds for any bona fide claims (I) to
the effect
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that the Company or its Subsidiaries is infringing, or has infringed,
any Third-Party Intellectual Property Rights; (II) against the use of
the Intellectual Property or Third-Party Intellectual Property Rights
by the Company or any of its Subsidiaries as currently conducted; (III)
challenging the ownership, validity or enforceability of any
Intellectual Property; or (IV) challenging the license or legally
enforceable right to the use of the Third-Party Intellectual Rights by
the Company or any of its Subsidiaries; and (D) to the knowledge of the
Company or any of its Subsidiaries, there is no unauthorized use,
infringement or misappropriation of any of the Intellectual Property by
any third party, including any employee or former employee of the
Company or any of its Subsidiaries.
(t) Affiliate Transactions. There is no indebtedness between
the Company or any of its Subsidiaries, on the one hand, and any Owner,
officer, manager, director or Affiliate (other than the Company or any
of its Subsidiaries) of the Company or the Partnership, on the other,
other than (i) usual and customary advances made in the ordinary course
of business, (ii) Managing Director Subordinated Notes and (iii)
indebtedness of the Company to SLK Reinsurance Ltd., which is a wholly
owned subsidiary of SLK 1986 (a partnership whose general and limited
partners are wholly owned S corporations of Members of the Company),
all of which indebtedness (other than that in clause (i) above) will be
repaid in full pursuant to the Restructuring Transactions; no such
Owner, officer, manager, director or Affiliate provides or causes to be
provided any assets, services (other than services as an officer,
director or employee) or facilities to the Company or any of its
Subsidiaries; neither the Company nor any of its Subsidiaries provides
or causes to be provided any assets, services or facilities to any such
Owner, officer, manager, director or Affiliate (other than as
reasonably necessary for them to perform their duties as officers,
directors or employees); neither the Company nor any of its
Subsidiaries beneficially owns, directly or indirectly, any investment
in or issued by any such officer, manager, director or Affiliate; and
no such Owner, officer, manager, director or Affiliate has any direct
or indirect ownership interest in any person with which the Company or
any of its Subsidiaries competes or has a business relationship other
than an ownership interest that represents less than five percent of
the outstanding equity interests in a publicly traded company.
(u) Clearing Activities. Each of the Company and its
Subsidiaries have taken reasonable steps to manage risk in its clearing
business including performing due diligence with respect to the
character and integrity of customers in the opening of its customer
accounts. Since January 1, 1997, no person or Self-Regulatory
Organization has made a written claim that the Company or any of its
Subsidiaries is responsible or liable for the trading activities of its
clearing customers which the Company reasonably believes is likely to
give rise to a liability.
(v) Disclosure. The copies of all documents furnished to
Acquiror in connection with this Agreement were accurate and complete
copies of the originals thereof, including all amendments and
supplements thereto.
(w) Anti-takeover Statutes. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation enacted under state or federal
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laws in the United States applicable to the Company or any of its
Subsidiaries is applicable to the Merger or the transactions
contemplated thereby.
(x) Derivatives. All swap, forward, future, option, or any
other similar agreement or arrangement executed or arranged by the
Company or any of its Subsidiaries, whether entered into for the
Company's account, or for the account of one or more of the Company's
Subsidiaries or their customers were, to the Company's knowledge,
entered into (i) in accordance with all applicable laws, rules,
regulations and regulatory policies and (ii) with counterparties
believed at the time to be financially responsible; and each of them
constitutes the valid and legally binding obligation of the Company or
any of its Subsidiaries, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity, and are in full force and effect.
Neither the Company nor any of its Subsidiaries nor, to the Company's
knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(y) Offering Memorandum. The Company has delivered to Acquiror
a copy of the Partnership's confidential offering memorandum, dated
August 16, 2000, for the Partnership's 8.25% Senior Notes due 2005 (the
"Offering Memorandum"). As of the date thereof, the Offering Memorandum
did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in
which they were made, not misleading.
(z) As of the effective time of the SLK Investing Merger
contemplated by the SLK Investing Merger Agreement attached hereto as
Annex 13, SLK Investing will be the sole record and beneficial owner of
all of the issued and outstanding Class A limited partnership interests
in the Partnership. As a result of the SLK Investing Merger, the
Company will own all issued and outstanding Class A limited partnership
interests in the Partnership free and clear of all Liens. As of the
effective time of the SLK Investing Merger, SLK Investing will not have
any liabilities (whether accrued, contingent, absolute, determined,
determinable, known, unknown or otherwise) or assets, other than the
Class A limited partnership interests in the Partnership, and the
Company will not incur, or become obligated for, any liabilities
(whether accrued, contingent, absolute, determined, determinable,
known, unknown or otherwise) as a result of the SLK Investing Merger.
As of the Effective Time, all of the Restructuring Transactions shall
have been completed in accordance with the terms set forth on Schedule
6.13.
(aa) Schedule 5.03(aa) contains a true, accurate and complete
list of (i) all distributions made on any shares of capital stock or
equity interests of the Company or any of its Subsidiaries (other than
distributions from Subsidiaries to the Company or a wholly owned
Subsidiary of the Company), (ii) all withdrawals made by the Members or
any equity holder of the Partnership and (iii) other than payments
pursuant to Article III, any payments made to any Affiliate, owner,
officer, manager or director out of the
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ordinary course of business, in each case, between September 10, 2000
and the Closing Date pursuant to Section 4.01(c) or otherwise.
5.04 Representations and Warranties with Respect to the
Partnership. Subject to Section 5.02, except as Previously Disclosed in a
paragraph of its Disclosure Schedule corresponding to the relevant paragraph
below, the Company hereby represents and warrants to, and agrees with, Acquiror
as follows:
(a) Organization, Standing and Authority. The Partnership has
been duly organized and is validly existing as a limited partnership in
good standing under the laws of the State of New York. The Partnership
is duly qualified to do business and is in good standing in the States
of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified. Each of the Partnership and its Subsidiaries has in effect
all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry
on its business as it is now conducted. The Partnership has delivered
to the Acquiror a true and complete copy of its Certificate of Limited
Partnership and its Amended and Restated Articles of Partnership, which
are the only Constitutive Documents of the Partnership.
(b) Partnership Interests. Subject to such changes in the
Class C limited partners of the Partnership permitted by Section
4.01(b) of which the Company shall promptly give notice to Acquiror and
after giving effect to the transfer of the Class A limited partnership
interest from SLK Investing to the Company pursuant to the SLK
Investing Merger, Annex 2 lists all of the Partners of the Partnership
and the amount of their Partnership Interests, and the Partnership has
no Partnership Interests reserved for issuance and no obligation to
admit any other person as a general or limited partner. All of the
outstanding Partnership Interests have been duly authorized, validly
issued, fully paid and, except for the general partnership interest,
non-assessable, and were not issued in violation of any subscriptive or
preemptive rights. There are no other Partnership Interests outstanding
(or claims made against the Partnership or the Company in respect
thereof) and there are no preemptive rights or any outstanding rights
of any character relating to issued or unissued Partnership Interests
(including those relating to the issuance, sale, purchase, redemption,
conversion, exchange, redemption, voting or transfer thereof). Since
September 30, 1999, no dividend or other distribution has been declared
or paid on or in respect of the Partnership Interests or any other
interest in the Partnership.
5.05 Representations and Warranties of Acquiror. Subject to
Section 5.02, except as Previously Disclosed by Acquiror in a paragraph of its
Disclosure Schedule corresponding to the relevant paragraph below, Acquiror
hereby represents and warrants to the Company as follows:
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(a) Organization, Standing and Authority. Acquiror has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware. Each of Acquiror and
NewCo is or will be duly qualified to do business and is or will be in
good standing in the States of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified. Each of Acquiror and
its Subsidiaries has in effect all federal, state, local and foreign
governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now
conducted.
(b) Authority. Each of Acquiror and NewCo has the requisite
corporate or other power and authority, and has taken all action
necessary, in order (1) to authorize the execution and delivery of, and
performance of its obligations under, this Agreement and (2) to approve
and adopt the Merger and, in accordance therewith, to consummate the
Merger and the other transactions contemplated by this Agreement.
Without limiting the foregoing, any action of the stockholders of
Acquiror and the members of NewCo required to approve or adopt this
Agreement and the transactions contemplated by this Agreement has been
duly taken in accordance with the requirements of the Delaware General
Corporation Law or the New York Limited Liability Company Law, as the
case may be. No further action of the stockholders or board of
directors of Acquiror or the members of NewCo is required in order to
consummate the Mergers and the other transactions contemplated by this
Agreement. This Agreement constitutes the valid and binding agreement
of each of Acquiror and NewCo enforceable in accordance with its terms
except, in each case, as the enforceability hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to the enforcement of
creditor's rights generally and by general principles of equity.
(c) No Defaults. Except as Previously Disclosed, the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated by this Agreement by
Acquiror and NewCo does not and will not (1) conflict with or
constitute a breach or violation of, or a default under, or cause or
allow the acceleration or creation of any right, obligation or Lien
(with or without the giving of notice, passage of time or both)
pursuant to, any law, rule or regulation or any judgment, decree, order
or governmental or non-governmental permit, license, franchise or
privilege or any Contract of Acquiror or of any of its Subsidiaries or
to which Acquiror or any of its Subsidiaries or its or their properties
is subject or bound, (2) constitute a breach or violation of, or a
default under, the Constitutive Documents of Acquiror or any of its
Subsidiaries, or (3) require any consent or approval under any such
law, rule, regulation, judgment, decree, order or governmental or
non-governmental permit, license, franchise or privilege or the consent
or approval of any other party to any such Contract.
(d) SEC Documents and Financial Statements. (1) Acquiror has
made available to the Company copies of its Annual Report on Form 10-K
for the fiscal year ended November 26, 1999, and its Quarterly Reports
on Form 10-Q for the fiscal quarters ended February 25, 2000 and May
26, 2000, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, including any such reports
filed
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subsequent to the date of the Original Agreement, the "SEC Documents").
As of their respective dates, each of the SEC Documents (including the
financial statements, exhibits and schedules thereto), filed, used or
circulated prior to the date of the Original Agreement complied, and
any such SEC Documents filed, used or circulated subsequent to the date
of the Original Agreement will comply, as to form with the Exchange Act
and did not, and will not, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made therein, in the light of the circumstances under which they were
made, not misleading. Each of Acquiror's consolidated statements of
financial condition included in the SEC Documents, including the
related notes and schedules thereto, fairly presents, or with respect
to such statements included in SEC Documents filed after the date of
the Original Agreement will fairly present, in all material respects,
the consolidated financial position of Acquiror and its Subsidiaries as
of the date of such statement of financial condition and each of the
consolidated statements of income, cash flows and owners' equity
included in the SEC Documents, including any related notes and
schedules thereto, fairly presents, or with respect to such statements
included in SEC Documents filed after the date of the Original
Agreement will fairly present, in all material respects, the
consolidated results of operations, cash flows and stockholders' equity
of Acquiror and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and footnote disclosure), in each case in accordance with
generally accepted accounting principles consistently applied during
the periods involved (except as may be noted therein and except that
unaudited statements may not include notes) (the "Acquiror Financial
Statements").
(2) There are no liabilities as of the date of the
Original Agreement of Acquiror or any of its Subsidiaries of
any kind whatsoever that are required to be disclosed on its
balance sheet, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances known to
Acquiror or any of its Subsidiaries which could reasonably be
expected to result in such a liability, other than:
(A) liabilities reflected or reserved
against in the Acquiror Financial Statements; and
(B) liabilities arising in the ordinary
course of business consistent with past practice,
after the date of the most recent balance sheet
included in the Acquiror Financial Statements that
are not and could not reasonably be expected to have
a Material Adverse Effect on Acquiror or any of its
Subsidiaries.
(3) Since November 26, 1999, there has not occurred
any change, occurrence or event, and no change, occurrence or
event has become reasonably likely, which has had, or is
reasonably likely to have, a Material Adverse Effect with
respect to Acquiror.
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(e) Capital Stock. The Acquiror has (1) 4,000,000,000
authorized shares of Acquiror Common Stock, of which 440,901,874 were
outstanding as of May 26, 2000, (2) 200,000,000 authorized shares of
nonvoting common stock, of which 7,440,362 were outstanding as of May
26, 2000 and (2) 150,000,000 authorized shares of Preferred Stock, of
which none are outstanding. All of the outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any
subscriptive or preemptive rights. When issued in the Merger in
accordance with the terms of this Agreement, the shares of Acquiror
Common Stock constituting Merger Consideration will be duly authorized,
validly issued, fully paid and nonassessable, shall not have been
issued in violation of any subscriptive or preemptive rights and shall
have been approved for listing on the NYSE, upon official notice of
issuance.
(f) Compliance with Laws. Except as set forth in the SEC
Documents filed prior to the date of the Original Agreement, the
businesses of each of Acquiror and its Subsidiaries have not been, and
are not being, conducted in violation of any applicable laws, except as
is not reasonably likely to have a Material Adverse Effect on Acquiror.
Except as set forth in the SEC Documents filed prior to the date of the
Original Agreement, no investigation or review by any Governmental
Authority with respect to Acquiror or any of its Subsidiaries is
pending or, to the knowledge of Acquiror, threatened, except as is not
reasonably likely to have a Material Adverse Effect on Acquiror. To the
knowledge of Acquiror, no material change is required in Acquiror's or
any of its Subsidiaries' processes, properties or procedures in
connection with any such laws, and Acquiror has not received any notice
or communication or any material noncompliance with any such laws that
has not been cured as of the date of the Original Agreement, except as
is not reasonably likely to have a Material Adverse Effect on Acquiror.
(g) NewCo. NewCo is a New York limited liability company
organized solely for the purpose of consummating the transactions
contemplated hereby and has no material assets and liabilities and is
treated, for federal income tax purposes, as a disregarded entity or
partnership.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each of the Company and Acquiror agrees to use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the transactions contemplated hereby as promptly as practicable and otherwise to
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other parties hereto to that end, including cooperating in
seeking to obtain any contractual consents required from third parties;
provided, however, that nothing in this Section 6.01 shall require, or be
construed to require, Acquiror to proffer to, or agree to, sell or hold separate
and agree to sell, before or after the Effective
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Time, any assets, businesses, or interest in any assets or businesses of
Acquiror, the Company or any of their respective Affiliates (or to consent to
any sale, or agreement to sell, by the Company of any of its assets or
businesses) or to agree to any material changes or restriction in the operations
of any such assets or businesses.
6.02 Access; Information.
(a) The Company agrees that upon reasonable prior notice and
subject to applicable laws relating to the exchange of information, and
in a manner so as to not interfere with the normal business operations
of the Company and its Subsidiaries, it shall afford Acquiror and its
officers, employees, counsel, accountants and other authorized
representatives, such access during normal business hours throughout
the period from the date of the Original Agreement to the Closing to
the books, records (including Tax Returns and work papers, whether
prepared by employees, consultants, or independent auditors),
properties, personnel and such other information of the Company, and
its Subsidiaries as Acquiror (or any such representative) may
reasonably request and, during such period, the Company shall furnish
to Acquiror (or such other representative) (1) a copy of each material
report, schedule and other document filed by the Company or any of its
Subsidiaries pursuant to the requirements of Securities Laws, promptly
after the filing thereof, (2) monthly Focus Reports not later than the
25th day after the end of each month, commencing with the first Focus
Report filed after the date of the Agreement, and (3) all other
information concerning the business, properties and personnel of the
Company and its Subsidiaries as Acquiror (or any such other
representative) may reasonably request, reasonably promptly after such
request.
(b) No investigation by Acquiror of the business and affairs
of the Company or its Affiliates shall affect or be deemed to modify or
waive any representation, warranty, covenant or agreement in this
Agreement, or any conditions to any party's obligation to consummate
the transactions contemplated by this Agreement.
6.03 No Rights Triggered. The Company shall take all
reasonable steps necessary to ensure that the entry into this Agreement and the
consummation of the transactions contemplated by this Agreement and any other
action or combination of actions, or any other transactions contemplated by this
Agreement, do not and will not result in the grant of any Rights to any person
(a) under the Constitutive Documents of the Company or any of its Affiliates or
(b) under any agreement to which the Company or any of its Affiliates is a party
or by which they are bound or to which any of their respective properties are
subject.
6.04 Regulatory Applications.
(a) Subject to the proviso contained in Section 6.01, each of
Acquiror and the Company shall use its respective reasonable best efforts to
prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties, Self-Regulatory
Organizations and Governmental Authorities necessary to consummate the
transactions contemplated by this Agreement. Each party will consult with the
other party, subject to
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applicable law, and rules or regulations of any Governmental Authority, with
respect to the obtaining of all material permits, consents, approvals and
authorizations of all third parties, Self-Regulatory Organizations and
Governmental Authorities necessary or reasonably advisable to consummate the
transactions contemplated by this Agreement and each will keep the other parties
apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Unless precluded by applicable law, rule or regulation of
any Governmental Authority, each of Acquiror and the Company agrees, upon
request, to furnish the other party with all information concerning itself, its
Subsidiaries, Owners, directors, officers, employees and such other matters as
may be necessary or reasonably advisable in connection with any filing, notice
or application made by or on behalf of such other party to any third party,
Self-Regulatory Organization or Governmental Authority.
6.05 Regulatory Compliance.
(a) The Company will use its reasonable best efforts to
maintain all of the Company's existing material permits, licenses,
authorizations, orders and regulatory approvals and the minimum net capital
necessary to conduct its businesses as currently conducted by the Company and
comply in all material respects with all regulatory requirements applicable to
the business of the Company.
(b) The Company shall provide to Acquiror, promptly after the
filing thereof, a copy of each report filed by the Company with any
Self-Regulatory Organization.
6.06 Performance Ranking. The Company will use its best
efforts to operate the specialist business in such a manner that the Company
will maintain, at all times prior to the Closing Date, an overall tier
classification of not lower than Tier 3 in the quarterly Specialist Performance
Evaluation Questionnaire results prepared by the NYSE.
6.07 Notification of Certain Matters.
(a) Each of Acquiror and the Company shall give prompt notice
to the other of any fact, event or circumstance known to it or any of its
Subsidiaries that is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in a breach of any
of its representations and warranties, after giving effect to Section 5.02, or
covenants or agreements contained herein.
(b) Prior to the Closing, the Company shall promptly notify
Acquiror, and Acquiror shall promptly notify the Company, of:
(1) any notice or other communication from any person
making any offer or proposal referred to in Section 4.01(f) or
alleging that the consent of such person is or may be required
as a condition to the Closing;
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(2) any notice or other written communications from
any client (A) terminating or threatening to terminate any
Contract relating to the rendering of services to such client
by the Company or any of its Subsidiaries or (B) relating to
any dispute with such client by the Company or any of its
Subsidiaries, in each case which, individually or in the
aggregate, are or are reasonably likely to be material; or
(3) any notice or other communication from any
Governmental Authority or Self-Regulatory Organization in
connection with the transactions contemplated by this
Agreement.
(c) Promptly after the date of this Agreement, the Company
shall provide to each Member that has not, as of the date of this
Agreement, executed and delivered a Member Agreement a written notice
that satisfies the requirements of Section 407(c) of the New York
Limited Liability Company Law informing such Members that the Members
that have executed and delivered a Member Agreement (i) hold in the
aggregate voting interests having a majority in interest of the Members
and (ii) have adopted and consented to the Merger.
6.08 Public Announcements. The parties agree that they will
not, without the prior approval of the other parties, issue any press release or
written statement for general circulation relating to the transactions
contemplated by this Agreement, except as otherwise required by applicable law
or regulation or the rules of any applicable Self-Regulatory Organization and,
if so required, such party will endeavor to give the other party a reasonable
opportunity to review and comment on the statement prior to its release.
6.09 Fee Agreements. The Company shall provide to Acquiror,
promptly after executing the same, a copy of any written fee agreement or any
material contract, agreement or other instrument relating specifically to the
operation of the specialist business into which the Company enters after the
date of the Original Agreement.
6.10 Private Placement. The parties understand and agree that
the sale of shares of Acquiror Common Stock to the Members in the Merger and to
Withdrawn Members or holders of Managing Director Subordinated Notes pursuant to
Article III is intended to be a "private placement" exempt from registration
under the Securities Act by virtue of Regulation D thereof. Each party
represents and warrants to the others that, as of the Closing Date, assuming the
truth of the representations and warranties made herein and in the Supplemental
Agreements by each of the parties thereto, such party has taken no action
without the prior written consent of the other parties that would cause (i) the
sale of Acquiror Common Stock in the Merger or (ii) the sale of Acquiror
Subordinated Notes pursuant to Section 3.03 to become subject to the
registration requirements of the Securities Act.
6.11 Employee Benefits. Acquiror agrees that during the period
commencing at the Effective Time and ending on the first anniversary thereof,
the employees of the Company and its Subsidiaries will continue to be provided
with benefits under employee benefit plans (other than stock options or other
plans involving the issuance of securities of the Company or Acquiror) which in
the aggregate are substantially comparable to those currently provided by the
Company to such
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employees or that are comparable to those provided to similarly situated
employees of Acquiror or its Subsidiaries; provided, however, that employees
covered by collective bargaining agreements need not be provided with such
benefits. Acquiror will cause each employee benefit plan of Acquiror or any of
its Subsidiaries in which employees of the Company or any of its Subsidiaries
are eligible to participate to take into account for purposes of eligibility and
vesting thereunder the service of such employees with the Company or any of its
Subsidiaries as if such service were with Acquiror or any of its Subsidiaries,
to the same extent that such past service was credited under a comparable plan
of the Company or any of its Subsidiaries or is provided generally to employees
of Acquiror (and similar treatment shall apply to past employee compensation).
Within twenty days of the date of the Original Agreement, the Company shall
furnish a list to Acquiror of all Compensation Plans that are not significant
Compensation Plans that were not Previously Disclosed pursuant to Section
5.03(o)(1).
6.12 Indemnification of Members and Employees. For the
six-year period immediately following the Effective Time, Acquiror agrees that
it will indemnify and hold harmless each Member (in its capacity as an officer
or a Managing Director acting in an executive capacity of the Company, SLK
Management Inc. or the Partnership) against any Losses incurred in connection
with any third party claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under the New York Limited Liability Company
Law to indemnify such person but only if such Member acted in good faith, for a
purpose which such Member reasonably believed to be in the best interests of the
Company, SLK Management Inc. or the Partnership, as applicable, and, in criminal
actions or proceedings, had no reasonable cause to believe that his conduct was
unlawful; provided, further, that Acquiror shall have the right to assume and
control the defense of such claim and any litigation resulting therefrom) it
being understood that such Member shall have the right to participate in such
defense and that Acquiror shall not consent to entry of any judgment or entry
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the Member of a release from all
liability in respect to such claim or litigation.
6.13 Restructuring Transactions. Prior to the Effective Time,
the Company shall complete the Restructuring Transactions in accordance with the
terms set forth in Schedule 6.13.
6.14 SLK 2000. The Company agrees that prior to the Closing it
shall deposit with SLK 2000, LLC, a New York limited liability company (or
another entity designated by the Company (SLK 2000, LLC or such other entity,
collectively "SLK 2000")) an amount in cash equal to at least $15 million in
order to secure performance by the Members with the terms of Section 14(d) of
the Member Agreements and the indemnification obligations under Article VII. Any
amount (but not more than $15 million pursuant to this Section) held by SLK 2000
may be used to satisfy (x) amounts payable for indemnification obligations under
Article VII hereunder (subject to any limitation as may be imposed by such
Member's Indemnification Percentage) and (y) the amount of any Overpayment with
respect to any Member as contemplated by Section 14(d) of such Member's Member
Agreement. SLK 2000 hereby agrees to pay to Acquiror (x) any amounts owed to
Acquiror in respect of such indemnification obligations under Article VII and
(y) the amount of
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any Overpayment with respect to any Member as contemplated by Section 14(d) of
such Member's Member Agreement; provided, that in no event shall SLK 2000 be
required to pay to Acquiror an aggregate amount in excess of $15 million in
respect of all such obligations pursuant to this Section. SLK 2000's obligations
under this Section 6.14 shall terminate after the amount of the Underpayments
(as defined in the Member Agreements), if any, or the Overpayments (as defined
in the Member Agreements), if any, with respect to all Members shall have been
finally determined (as mutually agreed by SLK 2000 and Acquiror) and the amounts
of any Overpayments, if any, shall have been remitted to Acquiror. SLK 2000
hereby agrees that until such time as its obligations under this Section shall
have terminated, it shall ensure that it shall have net assets of at least $15
million.
ARTICLE VII
TAX MATTERS
7.01 Tax Representations. Except as Previously Disclosed in a
paragraph of its Disclosure Schedule corresponding to the relevant paragraph
below, the Company, the Partnership and each of their Subsidiaries hereby
represent and warrant to Acquiror as follows:
(a) All Tax Returns required to be filed or furnished to any
person (including its owners) on or before the Closing Date (taking
into account applicable extensions) by or with respect to the Company,
the Partnership and each of their Subsidiaries or any of their income,
properties or operations have been, or will be, duly and timely filed
or furnished, the information reflected on those Tax Returns was, or
when filed or furnished will be, accurate and complete, and the
Company, the Partnership and each of their Subsidiaries have, or will
have, timely paid all Taxes other than Taxes resulting from
transactions or actions occurring on the Closing Date, but after the
Closing, or after the Closing Date for which they are responsible that
are due on or before the Closing Date or have provided for such Taxes
in a reserve which is adequate for the payment of such Taxes and is
identified in the Financial Statements, and through the Closing Date
will have maintained adequate provisions on their books for all Taxes
other than Taxes resulting from transactions or actions occurring on
the Closing Date, but after the Closing, or after the Closing Date
payable by them that have accrued but are not yet due;
(b) There are no outstanding assessments, claims or
deficiencies for any Taxes of the Company, the Partnership or any of
their Subsidiaries that have been proposed, asserted or assessed in
writing;
(c) No Tax audit or examination is currently being conducted
or proposed in writing by any taxing authority with respect to the
Company, the Partnership or any of their Subsidiaries;
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(d) There are no outstanding waivers or agreements extending
the applicable statute of limitations for any period with respect to
any Taxes of the Company, the Partnership or any of their Subsidiaries;
(e) None of the Company, the Partnership or any of their
Subsidiaries will be required, as a result of (A) a change in
accounting method for a Tax period beginning on or before the Closing,
to include any adjustment under Section 481(c) of the Code (or any
similar provision of state, local or foreign law) in taxable income for
any Tax period beginning on or after the Closing Date, or (B) any
"closing agreement" as described in Section 7121 of the Code (or any
similar provision of state, local or foreign law), to include any item
of income in or exclude any item of deduction from any Tax period
beginning on or after the Closing Date;
(f) There is no outstanding written claim by a taxing
authority that the Company, the Partnership or any of their
Subsidiaries may be subject to taxation or required to file a Tax
Return in a jurisdiction where it does not file Tax Returns and none of
the Company, the Partnership or any of their Subsidiaries is aware of
any jurisdiction that could properly make such a claim;
(g) There are no Tax allocation or sharing agreements to which
the Company, the Partnership or any of their Subsidiaries is a party;
(h) None of the Company's Subsidiaries is or has been a member
of an affiliated group (within the meaning of Section 1504 of the Code
or similar provisions of state, local or foreign law) with respect to
which it is liable for Taxes of another person under Treasury
Regulations Section 1.1502-6 or any similar provision under state,
local or foreign law;
(i) Each of the Company's Subsidiaries that is required to be
is registered for the purposes of sales tax, transfer taxes, value
added taxes or any similar Tax has been so registered at all times that
it has been required to be so registered, and it has complied in all
material respects with all statutory requirements, orders, provisions,
directions or conditions relating to such Taxes;
(j) There are no Material Liens or encumbrances for Taxes on
any of the assets of the Company, the Partnership or any of their
Subsidiaries;
(k) Each of the Company, the Partnership and each of their
Subsidiaries has paid all Taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third
parties and has complied with all requirements (including record
retention) applicable to information reporting or other reporting
requirements;
(l) None of the Company, the Partnership or any of their
Subsidiaries or any predecessor to the Company, the Partnership or
their Subsidiaries has made any consent under Section 341 of the Code;
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(m) No Tax is required to be withheld pursuant to Section 1445
of the Code as a result of the Merger or the acquisition of any
Partnership Interest by Acquiror;
(n) For U.S. federal income tax purposes, each of the Company,
the Partnership and each of their Subsidiaries is, and through the
Closing Date will be, treated as a partnership or disregarded entity,
and none of the Company, the Partnership, any of their Subsidiaries or,
to the best knowledge of the Company, any Owner or other owner of any
interest in the Company or any of its Subsidiaries has, or through the
Closing Date will have, made any election, taken any action or filed
any Tax Return on a basis that is inconsistent with the foregoing; and
(o) All Tax Returns (including attachments thereto) of the
Company, the Partnership and each of their Subsidiaries and all closing
agreements, private letter rulings, technical advice memoranda or
similar agreements or rulings (if any) entered into with or issued by
any taxing authority, by or with respect to the Company, the
Partnership or any of their Subsidiaries that were delivered by the
Company pursuant to Acquiror's due diligence request are true copies of
such documents.
7.02 Covenants.
(a) Elections. Until the Effective Time, except as Previously
Disclosed or as expressly contemplated by this Agreement or any
Supplemental Agreement, the Company will not, and the Company will
cause any of its Subsidiaries and the Partnership not to, make any Tax
elections, amend any Tax elections currently in effect, change or
consent to any change in any method of accounting for any Tax purpose
or file any Tax Return (including any amended return) on a basis that
is not consistent with past practice, in each case without the prior
written consent of the Acquiror, which consent shall not be
unreasonably withheld, provided, however, that such consent shall not
be considered unreasonably withheld if the election, amendment or
change, as the case may be, would adversely affect the Acquiror.
(b) Tax Returns. Any Tax Returns with respect to the
operations of the Company, the Partnership and their Subsidiaries for
all periods ending on or before the Closing Date (the "Pre-Closing
Period"), including for those jurisdictions and tax authorities that
permit or require a short period Tax Return, shall be or caused to be
prepared and filed on a timely basis after the Closing by the Acquiror.
Whenever it is necessary to determine the liability for Taxes of the
Company, the Partnership or any of their Subsidiaries for a portion of
a taxable year or period that begins before and ends after the Closing
Date, the determination of the Taxes of the Company, the Partnership or
any of their Subsidiaries for the portion of the taxable year or period
ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined and shall equal: (i) in the case of
any real or personal property Tax or any other Tax imposed on a
periodic basis, an amount equal to the Tax for the entire taxable
period beginning before and ending after the Closing Date, multiplied
by a fraction the numerator of which is the number of days in such
portion of the period ending on the Closing Date and the denominator of
which is the number of days in such entire taxable period; and (ii) in
the case of any other Tax, the amount that would be
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payable by the Company, the Partnership or any of their Subsidiaries if
its taxable year that began prior to the Closing Date ended on the
Closing Date. Any Taxes due in respect of Tax Returns filed pursuant to
the first sentence of this paragraph and any Taxes allocable to
Pre-Closing Periods under the immediately preceding sentence (including
any interest or penalties assessed with respect to such Taxes) shall be
considered "Pre-Closing Taxes". At least 10 business days prior to the
filing of any such Tax Return that includes Pre-Closing Taxes, Acquiror
shall make available to the SLK Representative copies of such proposed
Tax Return, and the filing of such Tax Return shall be subject to the
approval of the SLK Representative, which approval shall not be
unreasonably withheld; provided, that, in the event the SLK
Representative does not provide such approval or disapproval to
Acquiror within 5 business days after receipt of such proposed Tax
Return copies, the SLK Representative shall be deemed to have provided
an irrevocable approval with respect to such Tax Return.
(c) Cooperation. The currently designated Tax Matters Partner
(as defined in Section 6231(a)(7) of the Code) of the Company, the
Partnership and each of their Subsidiaries (including SLK investing)
that is treated as a partnership for U.S. federal income tax purposes,
shall continue as Tax Matters Partner. If such Tax Matters Partner
shall desire to resign such position (or is to be liquidated or
otherwise becomes ineligible) or the Acquiror shall request the Tax
Matters Partner's resignation, the current Tax Matters Partner shall,
subject to the Acquiror's consent which shall not be unreasonably
withheld, designate his or her replacement (and in the case of a
liquidation of the Tax Matters Partner, such designation shall occur
prior to liquidation) (and complete and execute any forms as may be
required to evidence or effect such designation). The Acquiror and the
Surviving LLC shall cooperate with the Tax Matters Partner in any Tax
audit, examination or other proceeding involving the Company, the
Partnership or any of their Subsidiaries that is treated as a
partnership for U.S. federal income tax purposes for any taxable period
that relates to periods prior to the Closing. The Tax Matters Partner
shall not enter into any compromise or agree to settle any claim
pursuant to any Tax audit, examination or other proceeding which would
adversely affect the Acquiror for any taxable year without the written
consent of the Acquiror, which consent may not be unreasonably
withheld.
(d) Section 754 Election. To the extent permitted by law and
contract, the Company, the Partnership and each of their respective
Subsidiaries that is treated as a partnership for U.S. federal income
tax purposes, shall make an election, or continue in effect any
election previously made, under Section 754 of the Code and any
comparable provision of any other tax law for the taxable year in which
the Closing occurs, provided, that the Company and the Partnership
shall be required to exercise any right (or, to the extent the Company
or the Partnership can do so, the Company and the Partnership shall
cause any of their Subsidiaries to exercise any right) they have to
amend any contract to permit such election to be made.
(e) Transfer Taxes. Fifty percent (50%) of all transfer,
documentary, sales, use, stamp, registration, value added and other
such Taxes and fees (including any penalties and interest) incurred in
connection with the transactions contemplated by the Merger (including
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any real property transfer tax and any similar Tax) shall be paid by
each of Acquiror on the one hand, and the Members, on the other.
Notwithstanding the immediately preceding sentence, one hundred percent
(100%) of all transfer, documentary, sales, use, stamp, registration,
value added and other such taxes and fees incurred in connection with
the Restructuring Transactions shall be paid solely by the Members.
Each party will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such Taxes and fees, and to the
extent required by applicable law, each party will join, and cause its
Subsidiaries and Affiliates to join, in the execution of any such Tax
Returns and other documentation.
(f) Allocation of Purchase Price. Acquiror shall determine the
allocation of any adjustments to the basis of the assets of the
Company, the Partnership and each of their respective Subsidiaries
resulting from the Merger; provided, that any such allocation to assets
covered under Section 751 of the Code, if any, shall be subject to
approval of the Company, or, if after the Effective Time, the SLK
Representative, which consent shall not be unreasonably withheld.
7.03 Termination of Tax Sharing Agreements. Any Tax allocation
or sharing agreement or arrangement, whether or not written, that may have been
entered into by any of the Company's Subsidiaries or any member of its
affiliated groups (as defined in Section 1504(a) of the Code) shall be
terminated as of the Closing Date unless a continuation of such agreement is
required by law or contract, or consented to by the Acquiror. After the Closing
Date, none of the Surviving LLC or any of its Subsidiaries shall have any
further rights or liabilities thereunder.
7.04 Seller Tax Indemnification.
(a) Each Acquiror Party shall, pursuant to this Section
7.04(a) and the Supplemental Agreements, be entitled to indemnification
from the Members, severally and not jointly (in proportion to their
respective Indemnification Percentages), against, and shall be held
harmless (subject to the limitations set forth herein) by the Members,
severally and not jointly (in proportion to their respective
Indemnification Percentages), from:
(i) Pre-Closing Taxes in excess of Taxes for which reserves
have been established prior to the date of the Original
Agreement or will be established prior to the Closing Date,
consistent with past practice;
(ii) Pre-Closing Taxes imposed on any Acquiror Party as
members of an "affiliated group" (within the meaning of
Section 1504(a) of the Code or any comparable provision of
foreign, state or local law) that arises under Treasury
Regulations Section 1.1502-6(a) or any comparable provision of
foreign, state or local law; and
(iii) a breach of the representations set forth in Section
7.01;
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provided, however, that the Members shall not be liable for and shall
not indemnify any Acquiror Party for any Taxes resulting from
transactions or actions taken on the Closing Date (but after the
Closing) or after the Closing Date; provided, further, that
notwithstanding the foregoing, no Acquiror Party shall be entitled to
payment of indemnification pursuant to this Section 7.04 (a) with
respect to any individual Loss unless the aggregate of all such Losses
(after reduction for any tax benefits realized as a result of the
payment or accrual of such Losses) shall exceed $5 million (and then
only for the amount of such excess).
(b) The amount of any indemnification payment payable in
accordance with this Section 7.04 and Article IX shall be reduced by
the amount of any reduction in Taxes actually realized (or to be
realized in such year) as a result of the event giving rise to the
indemnification payment. The Indemnified Party shall pay the
Indemnifying Party the amount of any reduction in Taxes actually
realized in a future year as a result of the event giving rise to such
indemnification payment within ten (10) business days of receiving such
payment with respect to such reduction to the extent such payment with
respect to such reduction is received after the Indemnified Party
receives such indemnification payment, provided, that, the amount paid
shall not exceed the payments previously made by such Members under
this Section 7.04 or Article IX, as the case may be. Each Member shall
be severally and not jointly liable for such indemnification
obligations in proportion to their respective Indemnification
Percentages. Unless settled in a reasonable period of time in cash by a
Member or by delivery of Acquiror Common Stock (valued at market price
at the time of delivery), all amounts payable for indemnification of
Acquiror by any Member pursuant to this Section 7.04 may, in Acquiror's
sole discretion, be offset against shares of Acquiror Common Stock
owned by such Member or against other amounts payable by Acquiror or
any Affiliates of Acquiror to such Member. It is understood that an
Member's Acquiror Common Stock may be used to satisfy amounts payable
for indemnification even if such shares are not then transferable under
the transfer restrictions in the Member's Member Agreement.
(c) Contests.
(i) The Acquiror shall notify the SLK Representative if the
Internal Revenue Service (or other taxing authority) shall
propose an adjustment, which, if upheld, would result in the
Members making a payment under Section 7.04(a). If the SLK
Representative shall request, the Acquiror shall (x) consult
with the SLK Representative regarding the contest of such
proposed adjustment, (y) use good faith efforts to permit the
SLK Representative to attend scheduled meetings with the
Internal Revenue Service (or other taxing authority) regarding
such contest and (z) if feasible, provide the SLK
Representative with copies of written materials prior to
submission. Notwithstanding the foregoing, the Acquiror shall
have absolute and complete control of any contest provided,
that the Acquiror shall not settle any contest without the
consent of the SLK Representative, which consent shall not be
unreasonably withheld.
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(ii) The SLK Representative shall control any contest
involving proposed adjustments to Tax returns filed by the
Company, the Partnership or any of their respective
Subsidiaries for which the liability for additional Taxes, if
the adjustments were to be upheld, would be borne directly by
the Members. The SLK Representative shall consult in good
faith with the Acquiror during the course of such contest,
provided, that without the consent of the Acquiror, which
consent shall not be unreasonably withheld, the SLK
Representative shall not consent to any adjustment that would
adversely affect Acquiror after the Closing.
(iii) To the extent consistent with the foregoing, the Company
and the SLK Representative shall cooperate with each other in
pursuing any contest under this section.
7.05 Exclusivity. The indemnification and other provisions of
this Article VII shall be the sole provisions governing tax indemnification
matters (other than for taxes relating to, or arising in connection with, the
Restructuring Transactions).
7.06 Survival of Obligations. The obligations of the parties
set forth in this Article VII shall remain in effect until 60 days after the
expiration of the applicable statute of limitations.
7.07 Agreed Tax Treatment. Any Payment made to an Acquiror
Party pursuant to Section 7.04 and any Payment pursuant to Article IX shall
constitute an adjustment of the Merger Consideration for tax purposes, and shall
be treated as such by the Acquiror Parties, the Company and any Member on their
respective Tax Returns to the extent permitted by law. The parties intend that
the Merger Consideration shall, for U.S. federal income tax purposes, be treated
as a payment for the Members' Company Membership Interest.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each of Acquiror, NewCo and the Company to
consummate the Merger is subject to the fulfillment or written waiver by the
other parties prior to the Closing of each of the following conditions:
(a) Governmental and Regulatory Consents. The waiting period
applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall
have expired or been terminated. All approvals and authorizations of,
filings and registrations with, and notifications to, all Governmental
Authorities and Self- Regulatory Organizations required for the
consummation of the Merger and the other transactions contemplated by
this Agreement and for the prevention of any termination of any
material right, privilege, license or franchise of either (1) Acquiror
or its Subsidiaries or
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(2) the Company or its Subsidiaries (and, in each case, granted by any
Governmental Authority or Self-Regulatory Organization) shall have been
obtained or made and shall be in full force and effect and all waiting
periods required by law or by rule or regulation of any Governmental
Authority shall have expired. Notwithstanding the foregoing, none of
the preceding in the previous two sentences shall be deemed obtained or
made if it shall be subject to any condition or restriction the effect
of which is that such condition or restriction could reasonably be
expected to have a Material Adverse Effect on the Company or Acquiror.
(b) No Injunction. No Governmental Authority of competent
jurisdiction shall have, after the date of this Agreement, enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits or
materially restricts or materially adversely affects the consummation
of the transactions contemplated by this Agreement (an "Order").
8.02 Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger are also subject to the fulfillment or
written waiver by the Company prior to the Closing of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Acquiror set forth in this Agreement shall be true and
correct (after giving effect to Section 5.02) as of the date of the
Original Agreement and as of the Closing Date as though made on and as
of the Closing Date, except that representations and warranties that by
their terms speak only as of the date of the Original Agreement or some
other date need be true and correct only as of such date; and the
Company shall have received a certificate, dated the Closing Date,
signed on behalf of Acquiror by a senior executive officer to such
effect.
(b) Performance of Obligations of Acquiror. Acquiror and NewCo
shall have performed and complied with in all material respects all
agreements, covenants and obligations required to be performed by them
under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate, dated the Closing Date, signed on
behalf of Acquiror by a senior executive officer to such effect.
8.03 Conditions to Obligations of Acquiror and NewCo. The
obligations of each of Acquiror and NewCo to consummate the Merger are also
subject to the fulfillment or written waiver by Acquiror prior to the Closing of
each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (after giving
effect to Section 5.02 in the case of the representations and
warranties of the Company) and of the Members in the Member Agreements
(other than violations of the representations and warranties of the
Members that will not adversely affect Acquiror's ownership of, or
rights with respect to, any Partnership Interest or Membership
Interest) shall be true and correct as of the date of the Original
Agreement and as of the Closing Date as though made on and as of the
Closing Date, except
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that representations and warranties that by their terms speak only as
of the date of the Original Agreement or some other date need be true
and correct only as of such date; and Acquiror shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by
a senior executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed and complied in all material respects with all
agreements, covenants and obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Acquiror
shall have received a certificate, dated the Closing Date, signed on
behalf of the Company by a senior executive officer of the Company to
such effect.
(c) Third Party Consents. All consents or approvals of all
persons, other than Governmental Authorities and those Previously
Disclosed in Items 1 through 4 in Section 5.03(e) of the Disclosure
Schedule, (i) required for or in connection with the execution,
delivery and performance of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect, unless the
failure to obtain any such consent or approval is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Acquiror or the Surviving LLC and (ii) required so that Acquiror or any
of its Affiliates are not restricted from engaging in any material
business or activity in, or relating to, the financial services
industry.
(d) Member Agreement. A Member Agreement and Supplemental
Member Agreement for each person who is a Member as of the date of the
Original Agreement or is a Member as of the Closing Date shall have
been executed and delivered.
(e) Acquiror Shareholders Agreement. Each Member of the
Company shall have executed and delivered to the Acquiror a counterpart
of the Acquiror Shareholders Agreement.
(f) Agreements with Exchanges. Acquiror shall have established
procedures that shall have been approved by the NYSE pursuant to NYSE
Rule 98, and procedures that shall have been approved by the American
Stock Exchange pursuant to its Rule 193 (as well as procedures approved
by the Philadelphia Stock Exchange, the Chicago Board Options Exchange
and the Pacific Stock Exchange pursuant to analogous rules), each in a
form, and with terms and conditions, reasonably satisfactory to
Acquiror.
(g) SLK Investing Co. The SLK Investing Merger shall have been
consummated in accordance with the terms of the SLK Investing Merger
Agreement.
(h) Pledge Agreement. Each Member of the Company shall have
executed and delivered to the Acquiror a counterpart of the Pledge
Agreement (as defined in the Member Agreement).
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(i) Company Condition. As of the Effective Time, the Company
shall have no assets, liabilities (whether accrued, contingent,
absolute, determined, determinable or otherwise) or other obligations
other than its Partnership Interest and shall not have transferred to
the Partnership or any other Subsidiary any liability (other than
actions Previously Disclosed on Section 5.03(g) of the Disclosure
Schedule).
(j) Manager. At the Effective Time, SLK Management Inc. shall
have resigned as manager of the Company in accordance with Section 415
of the New York Limited Liability Company Law.
(k) Restructuring Transactions. The Company shall have
effected the Restructuring Transactions in accordance with the terms
set forth in Schedule 6.13 and shall have delivered to Acquiror
evidence of the consummation of such transactions in a form reasonably
acceptable to Acquiror.
ARTICLE IX
INDEMNIFICATION
9.01 Indemnification.
(a) After the Effective Time, each Acquiror Party shall,
pursuant to this Section 9.01(a) and the Supplemental Agreements, be
entitled to indemnification from the Members against, and shall be held
harmless (subject to the limitations set forth herein) by the Members
from, any and all damage, loss, liability and expense (including
without limitation reasonable expenses of investigation and attorneys'
fees and expenses in connection with any action, suit or proceeding)
("Losses") incurred or suffered by such person arising out of, related
to, or in connection with (i) any breaches of the Company's
representations and warranties set forth in this Agreement (determined
without regard to Section 5.02) (other than breaches of those
representations and warranties (ww) set forth in Article VII for which
indemnification is provided in Section 7.04, (xx) contained in
5.03(b)(iii), the last sentence of Section 5.03(g)(i), 5.03(z) and
5.03(aa), (yy) set forth in the last two sentences of the first
paragraph of Section 5.03(c) and (zz) for which indemnification is
provided in Section 9.01(b)); (ii) the failure by the Company to
perform in any material respect any of its covenants or agreements
contained in this Agreement; (iii) any claim of any current or former
Partner or Partners (other than a current or former holder of a Class C
limited partnership interest) or other person alleging rights
equivalent to those of a Partner against Acquiror (excluding any
unrelated business or other transaction), the Company (or the Surviving
LLC as successor to the Company) or any of its Affiliates for any
event, occurrence, act or omission occurring at or prior to the
Effective Time; (iv) any claim of any current or former Member or
Members (or other person alleging rights equivalent to those of a
Member) against Acquiror (excluding any unrelated business or other
transaction), the Company (or the Surviving LLC as successor to the
Company) or any of its Affiliates for any event, occurrence, act or
omission occurring at or prior to the Effective Time (other than any
claim of a current Member contemplated by clause (v)); (v) any claim of
any person,
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including, without limitation, any current or former Member or Partner
of the Company, the Partnership or any of their respective
predecessors, successors or affiliates or any Withdrawn Member in
respect of any issue arising out of or relating to Section 3.01 or
Section 3.03(i) (including, without limitation, (a) any claim that such
person is entitled to payment whether pursuant to an oral or written
agreement or otherwise as a Member of the Company under Section 3.01 or
as a Withdrawn Member under Section 3.03(i) or (b) with respect to any
person set forth on Annex 1, 9 or 11 hereof or Annex 2 to the limited
liability agreement of the Surviving LLC, any claim that such person is
entitled to any additional consideration under Section 3.01 or Section
3.03(i)); (vi) any claim of any person that it is entitled to payment
of any monies with respect to the Managing Director Subordinated Notes
set forth on Annex 17 (other than with respect to each note listed on
Annex 17, the person whose name is listed opposite such note); (vii)
any breaches of the Company's representations and warranties in Section
5.03(b)(iii), the last two sentences of the first paragraph of Section
5.03(c), the last sentence of Section 5.03(g)(1), Section 5.03(z) or
Section 5.03(aa); (viii) the Restructuring Transactions; (ix) the
Company's activities as general partner or managing general partner of
SLK Funding Co., SLK Successor Partners or SLK 1986 or any other entity
(other than the Partnership); and (x) the matters referred to in that
certain letter agreement between Acquiror and the Company dated the
date hereof; provided, however, that notwithstanding the foregoing each
Member shall be severally and not jointly liable for such
indemnification obligations in proportion to their respective
Indemnification Percentages; and provided, further, that notice of any
claim under this Section 9.01(a) in respect of or relating to a breach
of the representations and warranties or the Company shall have been
received by the Members on or prior to the date until which the
relevant representation or warranty shall survive pursuant to Section
9.03; and provided, further, that notwithstanding the foregoing, no
Acquiror Party shall be entitled to payment of indemnification pursuant
to this Section 9.01(a)(i), (iii) or (iv) with respect to any
individual item of Loss, (A) unless, with respect to this Section
9.01(a)(i), such item exceeds $1,000,000 (after reduction for any tax
benefits realized by any Acquiror Party as a result of such Loss) and,
with respect to this Section 9.01(a)(iii) and (iv), such item exceeds
$100,000 (after reduction for any tax benefits realized by any Acquiror
Party as a result of such Loss) and (B) unless, with respect to this
Section 9.01(a)(i), the aggregate of all such Losses of all Acquiror
Parties shall exceed $10 million (after reduction for any tax benefits
realized by any Acquiror Party as a result of such Loss and then only
for the amount of such excess); and provided, further, that no Acquiror
Party shall be entitled to payment of indemnification pursuant to the
provisions of this Section 9.01(a)(i), (iii) or (iv) to the extent that
the amount of all Losses against which the Acquiror Parties shall have
been previously indemnified under such provisions of this Section
9.01(a)(i), (iii) or (iv) exceeds $300 million in the aggregate. Unless
settled in a reasonable period of time in cash by a Member or by
delivery of Acquiror Common Stock (valued at market price at the time
of delivery), all amounts payable for indemnification of Acquiror by
any Member pursuant to this Section 9.01(a) may, in Acquiror's sole
discretion, be offset against shares of Acquiror Common Stock owned by
such Member or against other amounts payable by Acquiror or any
Affiliates of Acquiror to such Member and held pursuant to the terms of
the Custody Agreement. It is understood that a Member's Acquiror Common
Stock may be used to satisfy amounts
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payable for indemnification even if such shares are not then
transferable under the transfer restrictions in the Member's Member
Agreement.
(b) After the Effective Time, each Acquiror Party shall,
pursuant to this Section 9.01(b) and the Supplemental Agreements, be
entitled to indemnification from the Members against, and shall be held
harmless by the Members from, any and all Losses incurred or suffered
by such person arising out of, related to or in connection with the
pending or threatened Litigation involving the Company or any of its
Affiliates as of the date of the Original Agreement and Previously
Disclosed; provided, however, that (i) the first proviso contained in
Section 9.01(a) and the last two sentences contained in Section 9.01(a)
shall apply mutatis mutandis to the indemnification provided in this
Section 9.01(b), (ii) no Acquiror Party shall be entitled to payment of
indemnification pursuant to this Section 9.01(b) unless the aggregate
of all such Losses of all Acquiror Parties (after reduction for any
benefits realized by any Acquiror Party as a result of such Loss) shall
exceed $4 million (and then only for the amount of such excess) and
(iii) no Acquiror Party shall be entitled to payment of indemnification
pursuant to the provisions of this Section 9.01(b) to the extent that
the amount of all Losses against which the Acquiror Parties shall have
been previously indemnified under this Section 9.01(b) exceed $29
million in the aggregate.
(c) After the Effective Time, the Members shall, pursuant to
this Section 9.01(c), be entitled to indemnification from Acquiror
against, and shall be held harmless (subject to the limitations set
forth herein) by Acquiror from, any and all Losses incurred or suffered
by them arising out of, related to, or in connection with, any breaches
of, (i) Acquiror's representations and warranties set forth in this
Agreement (determined without regard to Section 5.02); or (ii) the
failure by Acquiror to perform in any material respect any of its
covenants or agreements contained in this Agreement; provided, that
notice of any claim under this Section 9.01(c)(i) shall have been
received by Acquiror on or prior to the date until which the relevant
representation or warranty shall survive pursuant to Section 9.03; and
provided, further, that notwithstanding the foregoing, no Member shall
be entitled to payment of indemnification pursuant to this Section
9.01(c)(i) with respect to any individual item of Loss, (A) unless,
with respect to this Section 9.01(c)(i), such item exceeds $1,000,000
(after reduction for any tax benefits realized by any Member as a
result of such Loss) and (B) unless the aggregate of all such Losses of
all such parties with respect to this Section 9.01(c)(i) shall exceed
$10 million (after reduction for any tax benefits realized by any
Member as a result of such Loss and then only for the amount of such
excess); and provided, further, that notwithstanding the foregoing, no
Member will be entitled to payment of indemnification pursuant to this
Section 9.01(c)(i) to the extent that the amount of all Losses for
which Acquiror has previously provided indemnification under Section
9.01(c)(i) exceeds $300 million in the aggregate.
(d) For the purposes of this Section 9.01, in computing such
individual or aggregate amounts of claims, the amount of each claim
shall be deemed to be an amount net of any insurance proceeds and any
indemnity, contribution or other similar payment recoverable by the
indemnified party from any third party with respect thereto.
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(e) Unless Acquiror otherwise consents in writing, the SLK
Representative shall serve as the sole and exclusive representative of
each Member with respect to any claim for indemnification brought by
any Acquiror Party under this Article IX and with respect to any issue
that arises in respect of this Article IX. The Company hereby agrees
that the SLK Representative shall have the power to take any action in
order to contest, defend and settle each such claim for indemnification
on behalf of each Member and any action by the SLK Representative shall
be final and binding on the Company and the Members.
9.02 Notice and Defense of Claims.
(a) Each party entitled to indemnification under this Article
IX (the "Indemnified Party") shall give notice to the party or parties
required to provide indemnification (the "Indemnifying Party")
promptly, but not later than 45 days, after such Indemnified Party
receives written notice of any claim, event or matter as to which
indemnity may be sought; provided, that the failure of the Indemnified
Party to give notice as provided in this Section 9.02 shall not relieve
any Indemnifying Party of its obligations under Section 9.01 or Section
7.04, except to the extent that such failure actually and materially
prejudices the rights of any such Indemnifying Party and then only to
the extent of such prejudice. In the event of any claim, action, suit,
proceeding or demand asserted by any person who is not a party (or a
successor to a party) to this Agreement (a "Third-Party Claim") which
is or gives rise to an indemnification claim, the Indemnifying Party
may elect to assume and control the defense of any such claim and any
litigation resulting therefrom, provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld or delayed),
and the Indemnified Party may participate in such defense at the
Indemnified Party's expense, which shall include counsel of its choice,
provided, further, that the Indemnified Party shall have the right to
employ, at the Indemnifying Party's expense, one counsel of its choice
in each applicable jurisdiction (if more than one jurisdiction is
involved) to represent the Indemnified Party if, in the Indemnified
Party's reasonable judgment, there exists an actual or potential
conflict of interest between the Indemnified Party and the Indemnifying
Party or if the Indemnifying Party elects not to defend, compromise or
settle a Third-Party Claim, provided, further, that if the Indemnifying
Party elects to assume and control the defense but fails to retain
counsel to prosecute the action within thirty days of such election,
then the Indemnified Party shall have the right to defend such
Third-Party Claim on behalf of and for the account and risk of the
Indemnifying Party. The Indemnifying Party, in the defense of any such
claim or litigation, shall not, except with the prior written consent
of the Indemnified Party, consent to entry of any judgment or entry
into any settlement (i) which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnified
Party of a release from all liability in respect to such claim or
litigation or (ii) which could reasonably be expected to restrict
materially the conduct of business of Acquiror or any of its
Subsidiaries. In the event the Indemnifying Party is prepared to settle
an action and the Indemnified Party reasonably believes that such
settlement could have such an impact on it then the Indemnified Party
may choose to continue to defend such action in which case the
Indemnified Party shall be responsible for the incremental costs of
continuing such matter
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(including, the additional legal costs and additional costs or losses
with respect to such matter) in excess of the amount offered to be
settled by the Indemnifying Party (and the legal costs incurred to
date) which costs shall be borne by the Indemnifying Party. The
Indemnified Party shall not settle or compromise any such claim without
the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. The Indemnified Party shall make
its employees available and furnish such information regarding itself
or the claim in question as the Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
9.03 Survival of Representations and Warranties. The
representations and warranties shall survive the Closing, until February 28,
2002 and, thereafter, to the extent a claim is made prior to such date with
respect to any breach of any such representation or warranty until such claim is
finally determined or settled, provided, that the representations and warranties
contained in Sections 5.03(o) and Article VII shall survive the Closing until
the expiration of all applicable statutes of limitation. Notwithstanding any
other provision of this Agreement, Section 5.03(b)(iii), the last two sentences
of the first paragraph of Section 5.03(c) and the last sentence of the
representation and warranty set forth in Section 5.03(g)(i), 5.03(z) and
5.03(aa), and the indemnity obligation contained in Section 9.01(b) shall
survive forever.
ARTICLE X
TERMINATION
10.01 Termination. This Agreement may be terminated, and the
Merger may be abandoned:
(a) Consent. At any time prior to the Effective Time, by the
mutual consent of each of Acquiror and the Company.
(b) Breach. At any time prior to the Effective Time, by
Acquiror on the one hand, or the Company, on the other hand, in the
event of either: (1) a breach by the other of any representation or
warranty contained herein, which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
party of such breach; or (2) a breach by the other of any of the
covenants or agreements contained herein, which breach cannot be or has
not been cured within 10 days after the giving of written notice to the
breaching party of such breach and which breach in the case of either
of (1) and (2) above, would cause any condition set forth in Article
VIII not to be satisfied.
(c) Delay. At any time prior to the Effective Time, by
Acquiror, on the one hand, or the Company on the other hand, in the
event that the Effective Time shall have failed to occur on or before
May 31, 2001 except to the extent that such failure arises out of or
results from any breach of this Agreement by or knowing action or
inaction of the party seeking to terminate pursuant to this Section
10.01(c).
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(d) No Approval. By Acquiror, on the one hand, or the Company,
on the other hand, if the approval of any Governmental Authority
required for consummation of the Merger and the other transactions
contemplated by this Agreement shall have been denied by final
nonappealable action of such Governmental Authority, or such
Governmental Authority shall have requested the permanent withdrawal of
any application therefor, or any such approval shall be made subject to
any condition or restriction described in the proviso to Section
8.01(b).
(e) Order. At any time prior to the Effective Time, by
Acquiror, on the one hand, or the Company on the other hand, if any
Order permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable or any
Law is in effect or is adopted or issued, which has the effect of
prohibiting the Merger.
10.02 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article X, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (a) as set forth in Section 11.03
and (b) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.01 Entire Understanding; No Third-Party Beneficiaries. This
Agreement and the Supplemental Agreements represent the entire understanding of
the parties hereto with reference to the transactions contemplated hereby and
this Agreement and the Supplemental Agreements supersede any and all other oral
or written agreements heretofore made other than the Confidentiality Agreement.
Except for Section 3.05 (with respect to the Members or employees of the Company
as it relates to Acquiror's obligation to award the Retention RSUs and SLK RSUs
and as it relates to the rights described in paragraph B of the first page of
Annexes 6A, 6B, 6C, 7A and 7B), for Section 3.03 (with respect to Withdrawn
Members and holders of the Managing Director Subordinated Notes), for Section
6.12 (with respect to Members), for Article VII (with respect to Members and the
SLK Representative), and for Article IX, in each case only, on and after the
Effective Time, nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
11.02 Waiver; Amendment. Prior to the Effective Time, any
provision of this Agreement may be (a) waived by the party benefitted by the
provision or (b) amended or modified at any time, by an agreement in writing
between the parties hereto approved or authorized by their respective Boards of
Directors or similar governing body and executed in the same manner as this
Agreement.
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11.03 Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
11.04 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given (a) on the
date of delivery, if personally delivered or telecopied (with confirmation), (b)
on the first business day following the date of dispatch, if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing, if mailed by registered or certified mail (return receipt
requested), in each case to such party at its address or telecopy number set
forth below or such other address or numbers as such party may specify by notice
to the parties hereto.
If to the Company to:
SLK LLC
120 Broadway
New York, New York 10271
Facsimile: (212) 433-7294
Attention: Carl H. Hewitt
General Counsel and Managing Director
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 757-3990
Attention: Robert B. Schumer, Esq.
If to Acquiror or NewCo to:
The Goldman Sachs Group, Inc.
One New York Plaza
New York, New York 10004
Facsimile: (212) 902-3000
Attention: Gregory Palm
General Counsel and Managing Director
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: (212) 558-3588
Attention: James C. Morphy, Esq.
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11.05 Additional Provisions. (a) [Intentionally Omitted]
(b) Any Member who withdraws from the Company after September
10, 2000 and prior to the Closing shall not be deemed a "Withdrawn Member" for
purposes of this Agreement and shall continue to be deemed a Member for purposes
of this Agreement.
11.06 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original.
11.07 Governing Law; Enforcement; Waiver of Jury Trial. (a)
This Agreement shall be governed by, and interpreted in accordance with, the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement in any court of the State of
New York or the Federal courts of the United States of America located in the
State of New York, in each case in the borough of Manhattan (the "Chosen
Courts"). The parties hereby irrevocably submit to the exclusive jurisdiction of
the Chosen Courts in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in the Chosen Courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in the Chosen
Courts. The parties hereby consent to and grant the Chosen Courts exclusive
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 11.04 or in such
other manner as may be permitted by law shall be valid and sufficient service
thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS
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BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.07.
* * *
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<PAGE> 67
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in counterparts by their duly authorized officers, all
as of the day and year first above written.
THE GOLDMAN SACHS GROUP, INC.
By: /s/ DAN H. JESTER
---------------------------------------------
Name: Dan H. Jester
Title: Vice President and Treasurer
SLK LLC
By SLK Management Inc., its Managing Member
By: /s/ GARY F. GOLDRING
---------------------------------------------
Name: Gary F. Goldring
Title: Managing Director
SLK ACQUISITION L.L.C.
By: /s/ DAN H. JESTER
---------------------------------------------
Name: Dan H. Jester
Title: Manager
SLK 2000, LLC
(Solely for the purposes of its obligations under
Section 6.14)
By: /s/ CARL H. HEWITT
---------------------------------------------
Name: Carl H. Hewitt
Title: Manager
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<PAGE> 68
Annex 3
Amended and Restated Member Agreement
AMENDED AND RESTATED MEMBER AGREEMENT, dated as of September
10, 2000, as amended and restated as of October 26, 2000 (this "Agreement"),
between The Goldman Sachs Group, Inc., a Delaware corporation ("Acquiror"), the
signatory hereto, who is the owner of that membership interest ("Membership
Interest") of SLK LLC, a New York limited liability company (the "Company") set
forth next to such signatory's name in Exhibit A (the "Member") and, for
purposes of Section 1(b) hereof only, SLK LLC.
RECITALS
A. Acquiror and the Company entered into an Agreement and Plan
of Merger, dated as of September 10, 2000 (the "Original Merger Agreement").
Acquiror and the Company are in the process of amending and restating the
Original Merger Agreement and a draft of the proposed amendment is attached as
Exhibit G hereto (the "Draft Amended and Restated Merger Agreement") (the
Original Merger Agreement, as it may be amended from time to time, the "Merger
Agreement"); and, subject to the terms and conditions contained in the Merger
Agreement, intend to effect the merger (the "Merger") of NewCo with and into the
Company. In addition, in contemplation of, and prior to, the Merger, the Company
will effect the merger of SLK Investing Co. with and into the Company (the "SLK
Investing Co. Merger") pursuant to the terms of that certain Agreement of Merger
by and between the Company and SLK Investing Co. (the "SLK Investing Co. Merger
Agreement"). Capitalized terms used but not defined herein shall have the
meaning set forth in the Merger Agreement.
B. Upon the consummation of the Merger, the Merger Agreement
provides for the conversion of the Member's Membership Interests into such
amount of cash and shares of common stock, par value $0.01 per share ("Acquiror
Common Stock"), of Acquiror (the "Shares"), as provided in the Merger Agreement.
Member will derive substantial value from Acquiror's execution, delivery and
performance of the Merger Agreement.
C. As an inducement to, and a condition of, Acquiror's
willingness to enter into the Merger Agreement, and having reviewed the Merger
Agreement and the terms of the proposed Merger, Member is executing this
Agreement for the benefit of Acquiror, the Firm (as hereinafter defined), and
each Acquiror Party.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained in the Merger Agreement, and intending to be
legally bound hereby, Member agrees as follows:
<PAGE> 69
1. Adoption of Merger Agreement; Irrevocable Proxy;
Termination. (a) Member hereby (i) adopts and approves the resolutions attached
hereto as Exhibit B and adopts and consents to each of the Merger Agreement and
the SLK Investing Co. Merger Agreement and the transactions contemplated thereby
including, without limitation, each of the Merger and the SLK Investing Co.
Merger, in each case, in accordance with the provisions of Section 407 of the
New York Limited Liability Company Law, (ii) upon request by Acquiror, agrees to
vote to adopt and approve such matters described in clause (i) of this Section
1(a), (iii) agrees to vote against, and to withhold consent from, any action or
proposal that would compete with or would serve to materially interfere with,
delay, discourage, adversely affect or inhibit the timely consummation of the
transactions contemplated by the Merger Agreement, including, without
limitation, the Merger, (iv) consents to the replacement of SLK Management Inc.
by Acquiror or an Affiliate designated thereby, as the managing member of the
Company, such replacement to be effective as of the Effective Time, and (v)
elects to cause the payment and distribution by the Company of the Shares (as
such term is defined in the Operating Agreement) of the Withdrawn Members (as
such term is defined in the Operating Agreement) to such Withdrawn Members prior
to the close of any applicable Additional Holding Periods (as such term is
defined in the Operating Agreement) in the manner set forth in Section 3.04 of
the Draft Amended and Restated Merger Agreement. For the avoidance of doubt, and
without limiting in any respect the effect of clause (a)(i) of this Section 1,
Member hereby approves and consents to the form, terms and provisions of, and
the transactions contemplated by the Merger Agreement, including all exhibits
and annexes thereto, substantially in the form of Exhibit G hereto, with such
changes as the Authorized Agents (as such term is defined in the resolutions
attached hereto as Exhibit B) may approve. To the extent necessary and as
permitted by applicable law, Member hereby also irrevocably (i) waives any
notice, or requirement thereof, with respect to any meeting of Members or other
proceeding for the purpose of adopting and approving the Merger Agreement, the
SLK Investing Co. Merger Agreement, the Merger, the SLK Investing Co. Merger or
any related matters and (ii) acknowledges that Member will not have any
dissenters' or similar rights in connection with either the Merger or the SLK
Investing Co. Merger and the consummation of the other transactions contemplated
by the Merger Agreement and the SLK Investing Co. Merger Agreement. If the
Merger Agreement is properly terminated for any reason in accordance with its
terms and the Merger is not consummated, this Agreement shall terminate
concurrently with such termination of the Merger Agreement.
(b) The Company hereby acknowledges receipt and delivery at
its principal place of business of an executed copy of this Agreement sufficient
to comply with Section 407(b) of the New York Limited Liability Company Law.
2. Cooperation and Support; HSR; No Transfer of Membership
Interest. (a) Member will timely execute and deliver all Supplemental
Agreements, if any, to which it is to be a party as provided in the Merger
Agreement.
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(b) Each Member who will be considered an "acquiring person"
under the rules and regulations promulgated under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") in connection with the
consummation of the transactions contemplated by the Merger Agreement agrees to
use its reasonable best efforts to file a Notification and Report Form under the
HSR Act with respect to the transactions contemplated by the Merger Agreement as
soon as practicable after September 10, 2000.
(c) From and after September 10, 2000, and until the earlier
of the Effective Time or the termination of this Agreement in accordance with
its terms, Member shall not Transfer (as hereinafter defined), directly or
indirectly, all or any portion of its Membership Interest without Acquiror's
prior written consent; provided, however, that in the event of such Member's
death during the term of this Agreement, Member's Membership Interest may be
transferred in accordance with the Operating Agreement.
(d) Member hereby agrees that from and after September 10,
2000, until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Member will not, in any manner, directly
or indirectly (including through advisors, agents or other intermediaries), take
any action to seek, encourage, support or discuss any offer from any
corporation, partnership, person or other entity or group (other than Acquiror)
to acquire any direct or indirect Company Membership Interests, Partnership
Interests or equity securities of any Subsidiary of the Company (other than the
issuance by the Partnership of Class C Limited Partnership Interests and the
issuance by First Options of Chicago Inc. of shares of Class A Preferred Stock
in connection with joint back office arrangements in the ordinary course of
business and consistent with past practices), to merge the Company or any
Subsidiary or Affiliate of the Company with any such person, or to otherwise
acquire any significant portion of the assets of the Company or any Subsidiary
of the Company.
(e) Member hereby agrees to execute and deliver to Acquiror at
the Closing, a counterpart of the Acquiror Shareholders Agreement, which
agreement shall be in full force and effect.
(f) At any time after the original date hereof, Member shall
promptly execute, acknowledge and deliver any other assurances or documents
reasonably requested by Acquiror and necessary for Member to satisfy its
obligations hereunder.
3. Representations, Warranties and Agreements. Member
represents and warrants to, and agrees with, Acquiror as follows:
(a) Member has all requisite power and authority to execute
and deliver this Agreement and to perform all of the obligations imposed upon
Member hereunder. Member is the lawful record and beneficial owner of Member's
Membership Interest set forth next to Member's name in Exhibit A hereto, free
and clear of all Liens other than Liens created by the Constitutive Documents;
no other person (other than any wholly-owned affiliate
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controlled by Member) has an interest, legal, beneficial or otherwise, in
Member's Membership Interest and no consent of any other person is required for
the execution and delivery by Member of, and performance by Member of its
obligations under, this Agreement and the Merger Agreement. Without limiting the
foregoing, no person has any rights with respect to Member's Membership Interest
or the cash or Shares to be issued to Member pursuant to the Merger Agreement
under any community property or similar legal provision or concept. The
representations and warranties contained in the second and third sentences of
this Section 3(a) shall not apply to any Membership Interest to the extent that
such representations and warranties would be deemed breached by virtue of any
existing pledge of such Membership Interest or by an existing contractual
restriction or because spousal consent is required as of September 10, 2000 (so
long as such representations and warranties shall be true and correct, and any
required spousal consent under any community property law shall have been
obtained, at the Closing); provided, however, that this sentence shall not
affect any representation and warranty relating to the right, power or authority
of Member to vote or give a proxy or consent with respect to Member's Membership
Interest. There are no actions, suits or proceedings pending or, to Member's
knowledge, threatened against or affecting Member or the assets of Member in any
court or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality which is
reasonably likely to materially impair, restrict or delay the ability of Member
to perform Member's obligations under this Agreement and the Merger Agreement or
would make this paragraph untrue in any material respect. This Agreement
constitutes the valid and legally binding agreement of Member, enforceable in
accordance with its terms except as the enforceability hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
(b) The execution, delivery and performance of this Agreement
do not and will not (1) constitute a breach or violation of, or a default under,
or cause or allow the acceleration or creation of a Lien (with or without the
giving of notice, passage of time or both) pursuant to any law, rule or
regulation or any judgment, decree, order, governmental or non-governmental
permit or license, or any Contract to which Member is a party or to which Member
or any of Member's assets are subject or bound or (2) require any consent or
approval of any other person under any such law, rule, regulation, judgment,
decree, order, governmental or non-governmental permit, license or Contract, in
each case, which would materially impair, restrict or delay the ability of
Member to perform Member's obligations under this Agreement.
(c) Member will acquire the Shares for Member's own account
and not with a view to, or for resale in connection with, the distribution
thereof and Member has no present intention of selling, Transferring, granting
any participation in, or otherwise distributing the Shares except in conformity
with the Securities Act and other applicable federal and state securities laws
(the "Securities Laws").
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(d) Member has read and fully understands this Agreement, the
Original Merger Agreement, the Draft Amended and Restated Merger Agreement and
the terms of the proposed Merger. The SEC Documents related to Acquiror have
been made available to Member, and Member understands and has evaluated the
risks of an investment in the Shares. Member has been given the opportunity to
ask questions of, and receive answers from, Acquiror and its representatives
concerning the matters pertaining to Member's investment in the Shares and has
been given the opportunity to review such additional information as was
necessary to evaluate the merits and risks of an investment in the Shares.
Member can bear the economic risk of an investment in the Shares.
(e) Member is an "accredited investor" as defined in
Regulation D, which has been adopted by the Securities and Exchange Commission
(the "SEC") under the Securities Act.
(f) Member understands that all the Shares will be
characterized as "restricted securities" under the Securities Laws inasmuch as
they are being acquired from Acquiror in a transaction not involving a public
offering and that, consequently, the Shares may not be resold without first
being registered under the Securities Laws except in certain limited
circumstances. Specifically, Member is familiar with SEC Rules 144 and 145 and
understands, and agrees to comply with, the resale limitations imposed thereby,
by the legends described in paragraph (g) below and by the Securities Laws
generally or cause any other person who has an interest in such Shares to so
comply.
(g) Member understands and agrees that the certificates issued
to Member representing the Shares will bear the following legends and such other
legends as Acquiror may reasonably deem necessary or desirable:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A MEMBER'S AGREEMENT WITH THE GOLDMAN SACHS GROUP, INC. (THE
"MEMBER'S AGREEMENT"), AND A SHAREHOLDERS' AGREEMENT AMONG THE
GOLDMAN SACHS GROUP, INC. AND THE PERSONS NAMED THEREIN,
COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE
OF THE GOLDMAN SACHS GROUP, INC., AND WHICH, AMONG OTHER
MATTERS, PLACE RESTRICTIONS ON THE VOTING AND DISPOSITION OF
SUCH SECURITIES. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE INDIRECTLY OR DIRECTLY SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF, INCLUDING ANY DISPOSITION OF
THE ECONOMIC OR OTHER RISKS OF OWNERSHIP THROUGH HEDGING
TRANSACTIONS OR DERIVATIVES INVOLVING SUCH SECURITIES, ONLY IN
ACCORDANCE WITH THE PROVISIONS OF THE MEMBER'S AGREEMENT."
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR OTHER SECURITIES LAWS AND MAY NOT
BE OFFERED, SOLD, EXCHANGED, TRANSFERRED, ASSIGNED, PLEDGED,
PARTICIPATED, HYPOTHECATED OR OTHERWISE DISPOSED OF (EACH A
"TRANSFER") EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT AND, IF APPLICABLE, SUCH OTHER
SECURITIES LAWS AND FOLLOWING RECEIPT BY THE GOLDMAN SACHS
GROUP, INC. OF A LEGAL OPINION IN FORM AND SUBSTANCE
SATISFACTORY TO IT THAT SUCH TRANSFER IS PERMITTED."
The foregoing legends will be removed from a Share certificate at the request of
Member or another holder thereof in connection with the proposed transfer
thereof only upon satisfaction of Acquiror that such legend is no longer
required or appropriate, including, in the case of the Securities Laws legend,
receipt by Acquiror of an opinion of counsel, in form and substance satisfactory
to Acquiror, to the effect that registration under the Securities Act is
unnecessary in respect of such proposed transfer, in reliance upon SEC Rule 144
or 145 under the Securities Act, and that such legend is not required by law to
appear on such certificate.
Member agrees and consents to the entry of stop transfer
orders against the transfer of Shares subject to transfer restrictions.
(h) Member meets any suitability standards imposed by the
state of Member's residence or imposed by any other applicable laws.
(i) From and after September 10, 2000, and until the earlier
of the Effective Time or the termination of this Agreement in accordance with
its terms, Member agrees to comply as soon as reasonably practicable with the
restrictions on hedging contained in Exhibit D hereto; it being understood that
Member shall in no event on or after September 10, 2000, commence any activities
that involve the disposition of the economic or other risks of ownership through
hedging transactions or derivatives involving Acquiror securities or Member's
Membership Interest.
(j) Member has not, and through the Closing Date will not
have, made any election, taken any action or filed any Tax Return or any other
document filed or provided to any taxing authority that is inconsistent with the
Tax Returns filed and furnished by the Company and the Company's Subsidiaries or
the treatment of the Company as a partnership and of each of the Company's
Subsidiaries as a partnership or disregarded entity (except as set forth in
Section 7.01(n) of the Disclosure Schedule to the Merger Agreement) for U.S.
federal, state and local Tax purposes and Member agrees that the foregoing
representations
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shall be subject to the same indemnification provisions as contemplated by
Section 13 herein.
(k) Member will not make any election, take any action or take
any position on any Tax Return or any other document filed or provided to any
Taxing Authority that is inconsistent with any Tax Return filed with any taxing
authority, or furnished to such Member, by or on behalf of the Company, the
Company's Subsidiaries or the Surviving LLC.
(l) Member agrees to provide, and to use its reasonable best
efforts to cause its respective relatives and affiliates to provide, any
document or take any other action reasonably requested by Acquiror in connection
with any Tax matters relating to the Company, the Company's Subsidiaries and the
Surviving LLC so long as such action does not adversely affect the Member (or
any of its respective relatives or affiliates).
(m) Member has received, separately considered and executed
the Supplemental Members Agreement attached as Exhibit E.
4. Restrictions on Transfer. (a) Member agrees that the Shares
may be Transferred only as follows:
(i) 33 1/3% of the Shares may be Transferred at any time
after May 8, 2002;
(ii) An additional 33 1/3% of the Shares may be
Transferred at any time after May 8, 2003; and
(iii) All of the Shares may be Transferred at any time
after May 8, 2004.
Notwithstanding the foregoing, if Acquiror generally waives the restrictions on
transfer imposed upon the former Schedule II limited partners (the "LPs") of The
Goldman Sachs Group, L.P. ("Group") in connection with Group's 1999 Plan of
Incorporation in order to permit the LPs generally to engage in a registered
secondary offering or estate planning transactions, Acquiror will waive the
transfer restrictions in this Section 4 with respect to the Shares on (i) the
same percentage basis as the waiver granted to LPs in connection with such
registered secondary offering and to permit Member to sell such shares in the
registered secondary offering and (ii) the same basis as the waiver granted to
LPs in connection with such estate planning transactions. (For example, if each
LP is permitted to sell 5% of his Acquiror Common Stock in a registered
secondary offering, Member shall be permitted to sell 5% of Member's Shares; and
if each LP is permitted to engage in estate planning transactions, Member shall
be permitted to do so to a similar extent.)
For purposes of this Agreement, the term "Transfer" means any
direct or indirect sale, transfer, pledge or other disposition of securities of
Acquiror or Member's Membership Interests, as the case may be, including any
disposition of the economic or other risks of ownership through hedging
transactions or derivatives involving Acquiror securities
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or Member's Membership Interests; provided, however, that in the event of such
Member's death during the term of this Agreement, Member's Shares may be
transferred in the same manner and to the same extent as the LPs may transfer
their shares of Acquiror Common Stock pursuant to the Acquiror Shareholders
Agreement.
(c) Member agrees that, at any time Member is employed by the
Firm, it will:
(i) comply with respect to all Shares with Transfer
restrictions related to future primary or secondary
offerings of Shares if requested to do so by Acquiror
to the extent that such restrictions are generally
applicable to similarly titled employees of Acquiror;
(ii) comply with restrictions that may be imposed by
Acquiror from time to time to enable Acquiror or
another party to account for a business combination
using the pooling-of-interests method of accounting
to the extent that such restrictions are generally
applicable to similarly titled employees of Acquiror;
(iii) be subject to the same internal compliance and
trading policies as are in effect from time to time
for similarly titled employees of Acquiror; and
(iv) comply with the hedging restrictions of Acquiror
relating to securities of Acquiror and financial
services companies as are in effect from time to time
for managing directors of Acquiror.
References in this Section 4 to "Shares" shall be deemed to
also refer to securities received in exchange for Shares on the same basis as
provided in Section 6.4 of the Acquiror Shareholders Agreement.
5. Confidential Information. (a) In the course of involvement
in the Firm's activities or otherwise, Member has obtained or may obtain
confidential information concerning the Firm's businesses, strategies,
operations, financial affairs, organizational and personnel matters (including
information regarding any aspect of Member's tenure as a member in, or officer
or employee of, the Firm or of the termination of such membership, officership
or employment), policies, procedures and other non-public matters, or concerning
those of third parties. Such information ("Confidential Information") may have
been or be provided in written or electronic form or orally. In consideration
of, and as a condition to, continued access to Confidential Information, and
without prejudice to or limitation on any other confidentiality obligations
imposed by agreement or by law, Member hereby undertakes to use and protect
Confidential Information in accordance with any reasonable restrictions placed
on its use or disclosure. Without limiting the foregoing, except as authorized
by the Firm or as required by law, Member may not disclose, directly or
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indirectly, any Confidential Information, or any information derived therefrom,
in whatever form, to any person unless such person is a director, officer,
partner, employee, attorney or agent of the Firm and, in Member's reasonable
good faith judgment, has a need to know the Confidential Information or
information derived therefrom in furtherance of the business of the Firm. The
foregoing obligations will survive, and remain binding and enforceable
notwithstanding any termination of Member's employment with the Firm and any
settlement of the financial rights and obligations arising from Member's
employment with the Firm. Without limiting the foregoing, the existence of, and
any information concerning, any dispute between Member and the Firm shall
constitute Confidential Information except that Member may disclose information
concerning such dispute to the arbitrator or court that is considering such
dispute, or to Member's legal counsel (provided that such counsel agrees not to
disclose any such information other than as necessary to the prosecution or
defense of the dispute).
(b) For purposes of this Agreement, "Firm" means (i) prior to
the consummation of the Merger, the Company and its Subsidiaries and Affiliates,
and (ii) from and after the consummation of the Merger, Acquiror and its
Subsidiaries and Affiliates (including the Company and its Subsidiaries).
6. Noncompetition. (a) In view of Member's importance to the
Firm, Member hereby agrees that the Firm would likely suffer significant harm
from Member's competing with the Firm for some period of time following the
consummation of the Merger, and at any time prior to the date of termination
specified in the notice of termination pursuant to Section 10 hereof (the
"Employment Period") and for some time thereafter, and Member understands that
Acquiror would not have agreed to acquire the Company and its business unless
Member entered into this Agreement. Moreover, Member recognizes and agrees that
the business activities of the Firm are worldwide and that the restrictions on
competition included herein are commensurate in geographic scope with those
activities. Accordingly, Member hereby agrees that commencing at the time of
consummation of the Merger, Member will not, without the written consent of
Acquiror, until the later of (x) three years following the Effective Time and
(y) two years following the date of termination of the Employment Period (such
later date is referred to as the "Expiration Date"):
(1) form, or acquire a 5% or greater equity ownership, voting
or profit participation interest in, any Competitive Enterprise (as
defined below); or
(2) associate (including, but not limited to, association as
an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise and in connection with such association
engage in, or directly or indirectly manage or supervise personnel
engaged in, any activity
(i) which is similar or substantially related to any
activity in which Member was engaged, in whole or in part, at
the Firm,
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(ii) for which Member had direct or indirect
managerial or supervisory responsibility at the Firm, or
(iii) which calls for the application of the same or
similar specialized knowledge or skills as those utilized by
Member in Member's activities with the Firm,
at any time during the one-year period immediately prior to the
Expiration Date (or, in the case of an action taken during the
Employment Period, during the one-year period immediately prior to such
action), and, in any such case, irrespective of the purpose of the
activity or whether the activity is or was in furtherance of advisory,
agency, proprietary or fiduciary business of either the Firm or the
Competitive Enterprise.
(By way of example only, this provision precludes an information
systems professional from joining a management or other consulting firm
and providing information technology consulting services or advice to
any Competitive Enterprise.)
(b) For purposes of this Agreement, a "Competitive Enterprise"
is a business enterprise that (1) engages in any activity, or (2) owns or
controls a significant interest in any entity that engages in any activity,
that, in either case, competes anywhere with any activity in which the Firm is
engaged. The activities covered by the previous sentence include, without
limitation, financial services such as investment banking, public or private
finance, lending, financial advisory services, private investing (for anyone
other than Member and members of Member's family), merchant banking, asset or
hedge fund management, insurance or reinsurance underwriting or brokerage,
property management, or securities, futures, commodities, energy, derivatives or
currency brokerage, sales, market making, lending, custody, clearance,
settlement or trading. It is the intent that the provisions of this Section 6
shall include, for the entire period through the Expiration Date, the activities
described in subparagraphs 1 through 4 of Article 14.E of the Operating
Agreement as in effect as of September 10, 2000.
If Member is employed by the Firm immediately following the
Effective Time and the Firm terminates Member's employment with the Firm without
Cause, the Firm may only enforce the provisions of this Section 6 for so long as
the Firm continues to pay Member the same base salary (i.e., excluding any
incentive, bonus or similar compensation) Member was receiving immediately prior
to such termination. In determining whether the Firm has paid Member's base
salary for any period, the Firm shall receive credit for any payments under any
severance, salary continuation or similar plan or arrangement.
For the purposes of this Section 6 and Section 10 only,
"Cause" means (i) Member's conviction, whether following trial or by plea of
guilty or nolo contendere (or similar plea), in a criminal proceeding (A) on a
misdemeanor charge involving fraud, false statements or misleading omissions,
wrongful taking, embezzlement, bribery, forgery,
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counterfeiting or extortion, or (B) on a felony charge or (C) on an equivalent
charge to those in clauses (A) and (B) in jurisdictions which do not use those
designations; (ii) Member's engaging in any conduct which constitutes an
employment disqualification under applicable law (including statutory
disqualification as defined under the Exchange Act); (iii) Member's willful or
grossly negligent failure to perform Member's duties to the Firm; (iv) Member's
violation of any securities or commodities laws, any rules or regulations issued
pursuant to such laws, or the rules and regulations of any securities or
commodities exchange or association of which Acquiror or any of its subsidiaries
or affiliates is a member; (v) Member's violation of any Firm policy concerning
hedging or confidential or proprietary information, or Member's material
violation of any other Firm policy as in effect from time to time; (vi) Member's
engaging in any act or making any statement which impairs, impugns, denigrates,
disparages or negatively reflects upon the name, reputation or business
interests of the Firm; or (vii) Member's engaging in any willful or grossly
negligent conduct detrimental to the Firm. The determination as to whether
"Cause" has occurred shall be made by the Board of Directors of Acquiror in its
good faith judgment.
7. Nonsolicitation of Clients. (a) Member hereby agrees that
during the Employment Period and thereafter until the Expiration Date, Member
will not, in any manner, directly or indirectly, (1) Solicit a Client to
transact business with a Competitive Enterprise or to reduce or refrain from
doing any business with the Firm, or (2) interfere with or damage (or attempt to
interfere with or damage) any relationship between the Firm and a Client.
(b) For purposes of this Agreement, the term "Solicit" means
any direct or indirect communication of any kind whatsoever, regardless of by
whom initiated, inviting, advising, encouraging or requesting any person or
entity, in any manner, to take or refrain from taking any action. It is the
intent that the provisions of this Section 7 shall include, for the entire
period through the Expiration Date, the activities described in subparagraph 5
of Article 14.E of the Operating Agreement as in effect as of September 10,
2000.
(c) For purposes of this Agreement, the term "Client" means
any client or prospective client of the Firm to whom Member provided services,
or for whom Member transacted business, or whose identity became known to Member
in connection with Member's relationship with or employment by the Firm.
8. Nonsolicitation of Employees; Expiration. Member hereby
agrees that during the Employment Period and thereafter until the Expiration
Date, Member will not, in any manner, directly or indirectly, Solicit any person
who is a Member or former Member of the Company or a key employee of the Firm to
resign from the Firm or to apply for or accept employment with any Competitive
Enterprise.
9. Damages. (a) Member acknowledges that Acquiror would not
have entered into this Agreement or the Merger Agreement in the absence of the
Member's agreement to the provisions of this Section 9 and the Covenants and
Member further
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acknowledges that such compliance with such Covenants is an important factor to
the continued success of the Firm's operations and its future prospects. Member
and Acquiror agree that upon the occurrence of any of the following events, the
damages to the Firm would be material, but that the amount of such damages would
be uncertain and not readily ascertainable. Accordingly, Member and Acquiror
agree that, if, prior to the fifth anniversary of the date of this Agreement,
Member breaches any of the Covenants set forth in Section 6, 7 or 8, as
determined by the Board of Directors of Acquiror (the "Board") in its good faith
judgment, Acquiror will be entitled to receive immediately following such
determination and written demand therefor, and Member will make, within ten
business days after written demand has been received, a payment in cash or
Acquiror Common Stock (valued at the average closing per share price of Acquiror
Common Stock for the five trading days immediately preceding the date of payment
under this Section 9(a)) in such combination of cash and/or Acquiror Common
Stock as the Member shall determine as and for liquidated damages (the
"Liquidated Damages") in the amount set forth next to such Member's name in
Exhibit C (under the heading "Liquidated Damages") attached hereto, which amount
shall be the aggregate amount of liquidated damages due for all such breaches
prior to the fifth anniversary of this Agreement.
The payment of any amount as liquidated damages will not be
construed as a release or waiver by Acquiror of the right to prevent the
continuation of any such violation of such Covenants in equity or otherwise. In
addition, Member and Acquiror agree that it would be too speculative to attempt
to determine any amount of liquidated damages that would be applicable following
the fifth anniversary of the date of this Agreement, and that any damages
payable as a result of any breach following such date shall be determined
without regard to this Section 9.
(b) Member and Acquiror agree that the Liquidated Damages are
reasonable in proportion to the probable damages likely to be sustained by the
Firm if Member breaches at any time prior to the fifth anniversary of this
Agreement any of the Covenants set forth in Sections 6, 7 and 8 hereof, that the
amount of actual damages to be sustained by the Firm in the event of such breach
is incapable of precise estimation and that such cash payments are not intended
to constitute a penalty or punitive damages for any purposes.
(c) Member acknowledges and agrees that Member's payment
obligations under this Section 9 will be full recourse obligations and will be
secured pursuant to a Pledge Agreement, in substantially the form set forth as
Exhibit F hereto (the "Pledge Agreement"). Member agrees to execute and deliver
to Acquiror a Pledge Agreement prior to the Closing.
(d) Member acknowledges and agrees that any cash payment of
Liquidated Damages pursuant to this Section 9 shall be in addition to, and not
in lieu of, any forfeitures of awards (required pursuant to the terms of any
such awards) that may be granted to Member in the future under one or more of
the Firm's compensation and benefit plans.
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10. Employment with the Firm. (a) Member acknowledges that
Acquiror would not have entered into this Agreement or the Merger Agreement in
the absence of Member's agreement to the provisions of this Section 10, and
Member further acknowledges that such Member's continued employment with the
Firm through the second anniversary of the Effective Time is essential to assure
the proper integration of the business operations of the Company into the Firm
and is an important factor to the continued success of the Firm's operations and
its future prospects. Accordingly, Member hereby agrees to remain employed with
the Firm for the period commencing on the Effective Time through the second
anniversary of the Effective Time (the "Initial Employment Period"). After the
Initial Employment Period (unless otherwise agreed by Member and the Firm in
writing), there will be no set term of employment. The Firm may terminate
Member's employment at any time during or after the Initial Employment Period
for any reason, or for no reason, and Member may terminate employment for any
reason or no reason after the Initial Employment Period. Such termination shall
be effected only by giving not less than ninety (90) days' prior written notice
of termination; provided, however, that (i) the Firm may elect to place Member
on paid leave for all or any part of such 90-day period; (ii) no advance notice
need be given by the Firm to Member in connection with a termination of Member's
employment for Cause or on account of Disability; and (iii) provided that the 90
days prior written notice is given, Member may terminate his employment during
the Initial Employment Period on account of Good Reason, Disability or with
Acquiror's written consent. For purposes of this Section 10, "Good Reason"
means, without the consent of Member, a materially adverse alteration in
Member's position or in the nature or status of Member's responsibilities from
those in effect immediately after the Effective Time, or (ii) the Firm's
requiring Member's principal place of employment to be located more than
seventy-five (75) miles from the location at which Member is principally
employed immediately after the Effective Time (except for required travel on the
Firm's business to an extent substantially consistent with Member's customary
business travel obligations in the ordinary course of business prior to the
Effective Time). For purposes of this Section 10, "Disability" means Member's
absence from employment for at least 180 days in any 12-month period as a result
of Member's incapacity due to mental or physical illness or incapacity, as
reasonably determined by the Firm.
(b) At the outset of the Employment Period, Member's duties
and responsibilities will not be, without Member's written consent, materially
diminished from Member's duties and responsibilities immediately prior to the
Effective Time (it being understood that any diminishment in duties or
responsibilities as a result of the Company and its Affiliates being
Subsidiaries of Acquiror shall be disregarded). During the Employment Period:
(i) Member will have such duties and responsibilities as the Firm may from time
to time determine; (ii) Member will devote his entire working time, labor, skill
and energies to the business and affairs of the Firm, provided, however, that
Member shall not be prohibited from making passive personal investments or
conducting private affairs if those activities do not interfere with the
services required under this Agreement; and (iii) Member will be paid such base
salary and other compensation as shall be separately communicated to him.
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(c) It is understood and agreed that the provisions of this
Section 10 shall not apply to: Pumpkin Trust; Michael Appleby; Patrick C. Boyle;
Michael H. Davis; Robert W. Luckow; William G. Peskoff; Norman R. Schlanger;
Alfred Thomas; Frank Weinberg III; and Gerard Dreyer (collectively, the
"Retiring Members").
11. Transfer of Client Relationships. (a) During the Coverage
Period, Member hereby agrees to take all actions and do all such things as may
be reasonably requested by the Firm from time to time to maintain for the Firm
the business, goodwill, and business relationships with any of the Firm's
Clients with whom Member worked during the term of Member's employment with the
Firm.
(b) For purposes of this Agreement, the term "Coverage Period"
means, the 90-day period beginning on the date on which notice of Member's
termination of employment is delivered to or by the Firm pursuant to Section 10,
or in the case of termination of Member's employment by the Firm for Cause or on
account of Extended Absence, the 90-day period beginning on the date of
termination.
12. Prior Notice Required. Member hereby agrees that prior to
accepting employment with any other person or entity prior to the date of
termination, Member will provide such prospective employer with written notice
of the provisions of this Agreement, with a copy of such notice delivered
simultaneously to the General Counsel of Acquiror.
13. Indemnification. Member hereby agrees that it shall
indemnify each Acquiror Party as an Indemnifying Party as set forth in Articles
7 and 9 of the Merger Agreement. If an indemnification claim (an
"Indemnification Claim") is made pursuant to the Merger Agreement, Member agrees
that, unless Acquiror delivers consent in writing, the SLK Representative (as
defined in the Merger Agreement) shall have the sole and exclusive power and
authority to contest, defend and settle each Indemnification Claim on behalf of
Member. In addition, for purposes of Article 7 of the Merger Agreement, Member
agrees that, unless Acquiror delivers consent in writing, the SLK Representative
shall have sole and exclusive power and authority over tax matters reserved to
the SLK Representative under the Merger Agreement. In furtherance thereof,
Member agrees that (i) any action by the SLK Representative shall be
conclusively binding on Member and (ii) SLK Management, Inc. shall be the
initial SLK Representative and agrees to take all action necessary to cause the
Company to designate SLK Management, Inc. as the SLK Representative under the
terms of the Merger Agreement.
14. Taxes.
(a) Tax Returns. Member hereby agrees to prepare and file (or
cause to be prepared and filed) when due (taking into account any applicable
extensions) all of his, her or its Tax Returns related to periods during which
the Merger occurs, and Member will timely pay all Taxes reflected on such Tax
Returns (or which are due with respect to such Tax Returns after adjustment by
any taxing authority). Member further agrees to cooperate with
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Acquiror and to provide Acquiror with any documentation as reasonably requested
in establishing the timely filing of such Tax Returns and timely payment of such
Taxes.
(b) Tax Treatment of the Common Stock. Member agrees that the
Acquiror Common Stock subject to the restrictions on Transfer (as described in
Section 4 herein) and received by the Members in the Merger will be valued for
all U.S. federal income tax purposes at 100% of the mean of the high and low of
the trading price of the Acquiror Common Stock on the Effective Date.
(c) Cooperation. Member agrees to cooperate with the Tax
Matters Partner (as defined in Section 6231(a)(7) of the Code) (or its designee)
to the extent reasonably requested in any Tax audit, examination or other
proceeding involving the Company, the Partnership or any Subsidiary that is
treated as a partnership for U.S. federal income tax purposes for any taxable
period that relates to periods prior to the Closing. Member further agrees that
the existing Tax Matters Partner (or if the existing Tax Matters Partners does
not so act, the Acquiror (or its designee)) shall have the right to designate or
appoint any individual or entity in the name and on behalf of such Member, as
the Tax Matters Partner, with respect to any taxable year of the Company, the
Partnership or any of their Subsidiaries.
(d) Overpayments and Underpayments. The parties hereby agree
that in the event the Company makes distributions to Member pursuant to the
terms of 4.01(c)(i) or (iv) of the Merger Agreement, the parties shall as
promptly as practicable after the Closing determine whether the actual amount of
Taxes owed by Member in respect of the net earnings of the Company during the
period from July 1, 2000 to the Closing Date (after taking into account Tax
credits and other available Tax assets and not including any Taxes payable as
the result of sales or other dispositions requiring the recognition of
unrealized gains reflected on the June 30, 2000 Financial Statements (including
the "short against the box" positions)) is greater than (an "Underpayment") or
less than (an "Overpayment") the amounts distributed to such Member with respect
to the period from July 1, 2000 to the Closing Date in respect to such Taxes,
and, in the event of an Overpayment, Member shall promptly pay to Acquiror and,
in the event of an Underpayment, Acquiror shall promptly pay to Member, the
amount of such difference. Member hereby understands, acknowledges and agrees
that a portion of the Cash Consideration to be paid to the Members under the
Merger Agreement or a portion of a tax distribution to be made to Members with
respect to pre-closing taxable periods will be distributed to SLK Management,
Inc. or another entity designated by the Company (the "SLK Tax Entity") prior to
Closing in order to further secure performance by the Members with the terms of
this Section 14(d). The amount of the portion of the Cash Consideration or of
the tax distribution to be distributed to the SLK Tax Entity shall be mutually
agreed by the Company and Acquiror. Member hereby agrees that the SLK Tax Entity
shall have the power to take any action with respect to any payments to be made
in respect of Overpayments and Underpayments and, without limitation, hereby
agrees that (i) the SLK Tax Entity shall be permitted to remit to Acquiror the
amount of any Overpayment with respect Member, if applicable, and (ii)
authorizes the SLK Tax Entity to receive, on behalf of Member, the amount of any
Underpayment in respect of Member (it
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being understood that the SLK Tax Entity shall promptly remit to Member any such
amount received from Acquiror).
15. Intentionally Omitted.
16. Covenants Generally. (a) Member's covenants as set forth
in Sections 5 through 14 of this Agreement are from time to time referred to
herein as the "Covenants." If any of the Covenants is finally held to be
invalid, illegal or unenforceable (whether in whole or in part), such Covenant
shall be deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability and the remaining such Covenants (or
part of such Covenants, as the case may be) shall not be affected thereby;
provided, however, that if any of such Covenants is finally held to be invalid,
illegal or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such Covenant will be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder.
(b) Member understands that the provisions of the Covenants
may limit Member's ability to earn a livelihood in a business similar to the
business of the Firm.
(c) Member acknowledges that a violation on Member's part of
any of the Covenants would cause irreparable damage to the Firm. Accordingly,
Member agrees that the Firm will be entitled to injunctive relief for any actual
or threatened violation of any of the Covenants in addition to any other
remedies it may have.
(d) Acquiror will at all times maintain an effective S-8 or
other registration statement covering shares of Acquiror Common Stock to be
delivered pursuant to the restricted stock unit awards specified in Section 3.05
of the Merger Agreement and in connection with the administration of such awards
shall treat the Member in the same manner as similarly titled employees of
Acquiror and its subsidiaries.
17. Waiver and Release. (a) Member hereby irrevocably waives
any right to contest the terms of the Merger Agreement and the transactions
contemplated thereby, whether on the grounds of unequal or disparate treatment,
inconsistency or conflict with the terms and provisions of the Operating
Agreement.
(b) Member hereby irrevocably releases Acquiror, each and
every affiliate, shareholder, subsidiary, partner, officer, member, director and
employee of Acquiror and its affiliates in their capacities as such
("Releasees") from any claims, liabilities, costs, expenses, actions, suits or
demands however arising, whether at law or in equity, contingent, known or
unknown, which Member or his heirs, successors or assigns may have or assert, in
respect of any interest in the Company and its affiliates or arising out of any
Membership Interest, Partnership Interest, or Member, partnership or employment
relationship with the Company or its affiliates (including claims for breach of
any contract relating to employment, partnership status or compensation, or for
discrimination based upon race,
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<PAGE> 84
color, ethnicity, sex, age, national origin, religion, disability, sexual
orientation, or any other unlawful criterion or circumstance) which Member or
Member's heirs, successors or assigns may have or have had; provided that this
release shall not extend to (i) agreements entered into hereunder or in
connection with the transactions contemplated by the Merger Agreement and (ii)
any conduct that resulted from a Releasee's bad faith, fraud or criminal act or
omission.
18. Arbitration. Subject to the provisions of Sections 19 and
20 hereof, any dispute, controversy or claim between Member and the Firm arising
at or after the Effective Time out of or relating to or concerning the
provisions of this Agreement, relating to or arising out of Member's employment
with the Firm or otherwise concerning any rights, obligations or other aspects
of Member's employment relationship in respect of the Firm ("Employment Related
Matters"), shall be finally settled by arbitration in New York City before, and
in accordance with the rules then obtaining of, the New York Stock Exchange,
Inc. (the "NYSE") or, if the NYSE declines to arbitrate the matter, the American
Arbitration Association (the "AAA") in accordance with the commercial
arbitration rules of the AAA.
19. Injunctive Relief; Submission to Jurisdiction; Specific
Performance. (a) Notwithstanding the provisions of Section 18, and in addition
to its right to submit any dispute or controversy to arbitration, the Firm may
bring an action or special proceeding in a state or federal court of competent
jurisdiction sitting in the City of New York, whether or not an arbitration
proceeding has theretofore been or is ever initiated, for the purpose of
temporarily, preliminarily, or permanently enforcing the provisions of the
Covenants, or to enforce an arbitration award, and, for the purposes of this
Section 19, Member (i) expressly consents to the application of Section 20 to
any such action or proceeding, (ii) agrees that proof will not be required that
monetary damages for breach of the provisions of the Covenants would be
difficult to calculate and that remedies at law would be inadequate and (iii)
irrevocably appoints the General Counsel of Acquiror as Member's agent for
service of process in connection with any such action or proceeding, who shall
promptly advise Member of any such service of process.
(b) Each party hereto severally acknowledges that it will be
impossible to measure in money the damage to the other party if the party hereto
fails to comply with any of the obligations imposed by this Agreement and that
every such obligation is material. Accordingly, each party hereto severally
agrees that injunctive relief or other equitable remedy, in addition to remedies
at law or damages, is the appropriate remedy for any such failure and will not
oppose the granting of such relief on the basis that the other party has an
adequate remedy at law.
20. Choice of Forum. (a) MEMBER AND THE FIRM HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT OR ANY
EMPLOYMENT RELATED MATTER THAT IS NOT OTHERWISE ARBITRATED ACCORDING TO
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<PAGE> 85
THE PROVISIONS OF SECTION 18 HEREOF. This includes any suit, action or
proceeding to compel arbitration or to enforce an arbitration award. This also
includes any suit, action, or proceeding arising out of or relating to any
post-employment Employment Related Matters. Member and the Firm acknowledge that
the forum designated by this Section 20 has a reasonable relation to this
Agreement, and to Member's relationship to the Firm. Notwithstanding the
foregoing, nothing herein shall preclude the Firm from bringing any action or
proceeding in any other court for the purpose of enforcing the provisions of
Sections 18, 19 or 20.
(b) The agreement of Member and the Firm as to forum is
independent of the law that may be applied in the action, and Member and the
Firm agree to such forum even if the forum may under applicable law choose to
apply non-forum law. Member and the Firm hereby waive, to the fullest extent
permitted by applicable law, any objection which Member or the Firm now or
hereafter may have to personal jurisdiction or to the laying of venue of any
such suit, action or proceeding in any court referred to in Section 20(a).
Member and the Firm undertake not to commence any action arising out of or
relating to or concerning this Agreement in any forum other than a forum
described in this Section 20. Member and the Firm agree that, to the fullest
extent permitted by applicable law, a final and non-appealable judgment in any
such suit, action or proceeding in any such court shall be conclusive and
binding upon Member and the Firm.
21. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS.
22. No Right to Employment. Nothing in this Agreement or the
Merger Agreement shall confer upon Member the right to employment or continued
employment by the Firm or affect the Firm's right to terminate such employment
at will.
23. Miscellaneous. (a) This Agreement and the Merger Agreement
shall supersede any other agreement, written or oral, pertaining to the matters
covered herein.
(b) Notices hereunder shall be delivered to Acquiror at its
principal executive office directed to the attention of its General Counsel, and
to Member at Member's last address appearing in the Firm's employment records.
(c) This Agreement may not be amended or modified, other than
by a written agreement executed by Member and Acquiror or its successors, nor
may any provision hereof be waived other than by a writing executed by Member or
Acquiror or its successors; provided, that any waiver, consent, amendment or
modification of any of the provisions of this Agreement will not be effective
against the Firm without the written consent of Acquiror or its successors.
Member may not, directly or indirectly (including by operation of law), assign
Member's rights or obligations hereunder without the prior written consent of
Acquiror or its successors, and any such assignment by Member in violation of
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this Agreement shall be void. This Agreement shall be binding upon Member's
permitted successors and assigns. Without impairing Member's obligations
hereunder, Acquiror may at any time and from time to time assign its rights and
obligations hereunder to any of its subsidiaries or affiliates (and have such
rights and obligations reassigned to it or to any other subsidiary or
affiliate). This Agreement shall be binding upon and inure to the benefit of the
Firm and its assigns.
(d) Without limiting the provisions of Section 16(a) hereof,
if any provision of this Agreement is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability and the remaining provisions shall not be affected thereby.
(e) Except as expressly provided herein, this Agreement shall
not confer on any person other than Acquiror, the Firm and each Member any
rights or remedies hereunder.
(f) The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
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IN WITNESS WHEREOF, each signatory hereto has caused this
Agreement, including the written consent evidenced hereby, to be executed and
delivered this 10th day of September, 2000.
THE GOLDMAN SACHS GROUP, INC.
(on its behalf, and on behalf of its
subsidiaries and affiliates)
By:
---------------------------------
Name:
SLK LLC
(with respect to Section 1(b) only)
By SLK Management Inc., its
Managing Member
By:
---------------------------------
Name:
(As received by SLK LLC at its principal office)
MEMBER
---------------------------------
Name:
