CREDIT AGREEMENT
dated as of March 16, 1999
among
INVESTMENT TECHNOLOGY GROUP, INC.,
as Borrower
and
THE BANK OF NEW YORK,
as Lender
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.......................................................1
Section 1.01 Defined Terms.............................................1
Section 1.02 Terms Generally..........................................12
Section 1.03 Accounting Terms; GAAP...................................12
ARTICLE 2. THE CREDITS......................................................13
Section 2.01 Commitment...............................................13
Section 2.02 Requests for Loans.......................................13
Section 2.03 Funding of Loans.........................................13
Section 2.04 Termination and Reduction of Commitment..................13
Section 2.05 Repayment of Loans; Evidence of Debt.....................14
Section 2.06 Prepayment of Loans......................................14
Section 2.07 Payments Generally; Pro Rata Treatment; Sharing of
Setoffs..................................................15
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC............................15
Section 3.01 Interest.................................................15
Section 3.02 Fees.....................................................16
Section 3.03 Capital Adequacy.........................................17
Section 3.04 Taxes....................................................17
Section 3.05 Mitigation Obligations...................................18
ARTICLE 4. REPRESENTATIONS AND WARRANTIES...................................18
Section 4.01 Organization; Powers.....................................18
Section 4.02 Authorization; Enforceability............................18
Section 4.03 Governmental Approvals; No Conflicts.....................19
Section 4.04 Financial Condition; No Material Adverse Change..........19
Section 4.05 Properties...............................................19
Section 4.06 Litigation and Environmental Matters.....................20
Section 4.07 Compliance with Laws and Agreements......................20
Section 4.08 Investment and Holding Company Status....................20
Section 4.09 Taxes....................................................20
Section 4.10 ERISA....................................................21
Section 4.11 Disclosure...............................................21
Section 4.12 Subsidiaries.............................................21
Section 4.13 Labor Matters............................................21
Section 4.14 Solvency.................................................22
Section 4.15 Security Documents.......................................22
Section 4.16 Federal Reserve Regulations..............................22
Section 4.17 Membership...............................................23
Section 4.18 Assessments by the SIPC..................................23
Section 4.19 Year 2000................................................23
ARTICLE 5. CONDITIONS.......................................................23
Section 5.01 Effective Date...........................................23
Section 5.02 Conditions to First Loans................................25
Section 5.03 Each Credit Event........................................26
ARTICLE 6. AFFIRMATIVE COVENANTS............................................27
Section 6.01 Financial Statements and Other Information...............27
Section 6.02 Notices of Material Events...............................28
Section 6.03 Existence; Conduct of Business...........................29
Section 6.04 Payment of Obligations...................................29
Section 6.05 Maintenance of Properties................................29
Section 6.06 Books and Records; Inspection Rights.....................29
Section 6.07 Compliance with Laws.....................................29
Section 6.08 Use of Proceeds..........................................30
Section 6.09 Information Regarding Collateral.........................30
Section 6.10 Insurance................................................30
Section 6.11 Additional Domestic Subsidiaries.........................31
Section 6.12 Further Assurances.......................................31
Section 6.13 Environmental Compliance.................................31
Section 6.14 Membership...............................................31
ARTICLE 7. NEGATIVE COVENANTS...............................................32
Section 7.01 Indebtedness.............................................32
Section 7.02 Liens....................................................33
Section 7.03 Fundamental Changes......................................34
Section 7.04 Investments, Loans, Advances, Guarantees and
Acquisitions.............................................35
Section 7.05 Asset Sales..............................................36
Section 7.06 Sale and Lease-Back Transactions.........................36
Section 7.07 Hedging Agreements.......................................36
Section 7.08 Restricted Payments......................................36
Section 7.09 Transactions with Affiliates.............................37
Section 7.10 Restrictive Agreements...................................37
Section 7.11 Concerning the POSIT License Agreement...................38
Section 7.12 Leverage Ratio...........................................38
Section 7.13 Net Capital..............................................38
Section 7.14 Consolidated Shareholders' Equity........................38
Section 7.15 Capital Expenditures.....................................38
Section 7.16 Initial Transactions.....................................38
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ARTICLE 8. EVENTS OF DEFAULT................................................38
ARTICLE 9. MISCELLANEOUS....................................................41
Section 9.01 Notices..................................................41
Section 9.02 Waivers; Amendments......................................41
Section 9.03 Expenses; Indemnity; Damage Waiver.......................42
Section 9.04 Successors and Assigns...................................43
Section 9.05 Survival.................................................44
Section 9.06 Counterparts; Integration................................45
Section 9.07 Severability.............................................45
Section 9.08 Right of Setoff..........................................45
Section 9.09 Governing Law; Jurisdiction; Consent to Service of
Process..................................................45
Section 9.10 WAIVER OF JURY TRIAL.....................................46
Section 9.11 Headings.................................................46
Section 9.12 Interest Rate Limitation.................................46
SCHEDULES:
Schedule 4.06 Disclosed Matters
Schedule 4.10 Exceptions to Section 4.10 (ERISA)
Schedule 4.12 Subsidiaries
Schedule 7.01 Existing Indebtedness
Schedule 7.02 Existing Liens
Schedule 7.04 Existing Investments
Schedule 7.04(f) Certain Entities
Schedule 7.11 Existing Restrictions
EXHIBITS:
Exhibit A Form of Note
Exhibit B Form of Opinion of Borrower's Counsel (Section 5.01)
Exhibit B-1 Form of Opinion of Borrower's Counsel (Section 5.02)
Exhibit C Form of Security Agreement
Exhibit D Form of Assumption Agreement
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CREDIT AGREEMENT, dated as of March 16, 1999, between INVESTMENT
TECHNOLOGY GROUP, INC. and THE BANK OF NEW YORK.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.01 Defined Terms
As used in this Agreement, the following terms have the meanings
specified below:
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Rate, respectively.
"Assumption Agreement" means the Assumption Agreement, substantially
in the form of Exhibit D.
"Available Amount" means, on any date of determination, an amount
equal to the lesser of (i) the Commitment and (ii) the sum of (x) 16.666667% of
the fair market value of equity securities owned by ITG and (y) the fair market
value of money market instruments, including cash and cash equivalents, owned by
the Borrower and the Subsidiaries.
"Availability Period" means the period from and including the date
on which the conditions set forth in Sections 5.01 and 5.02 shall have been
satisfied (or waived pursuant to Section 9.02) to but excluding the Commitment
Termination Date.
"Board" means the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrower" means (i) prior to the consummation of the merger
referred to in paragraph (d) of the definition of "Initial Transactions",
Investment Technology Group, Inc., a Delaware corporation and (ii) thereafter
Jefferies Group, Inc., a Delaware corporation to be renamed Investment
Technology Group, Inc. as described in paragraph (e) of the definition of
"Initial Transactions".
"Borrowing Request" means a request by the Borrower for a Loan in
accordance with Section 2.02.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed.
"Capital Expenditures" of any Person means expenditures (whether
paid in cash or other consideration or accrued as a liability) for fixed or
capital assets (excluding any capitalized software and any capitalized interest
and any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations and excluding any
replacement assets acquired with the proceeds of insurance) made by such Person.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) upon the consummation of the Initial
Transactions or at any time thereafter, the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) of shares
representing 50% or more of the aggregate ordinary voting power or economic
interests represented by the issued and outstanding equity securities of the
Borrower on a fully diluted basis, (b) the failure of the Borrower to own
directly, beneficially and of record, 100% of the aggregate ordinary voting
power represented by the issued and outstanding equity securities of ITG on a
fully diluted basis or (c) the occupation of a majority of the seats (other than
vacant seats) on the board of directors of the Borrower by Persons who were
neither (i) nominated by the board of directors of the Borrower in connection
with the 1999 annual stockholders' meeting, nor (ii) appointed by directors so
nominated.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by the Lender (or,
for purposes of Section 3.03(a), by any lending office of the Lender or by the
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means any and all "Collateral", as defined in any
applicable Security Document.
"Commitment" means the commitment of the Lender to make Loans
hereunder, expressed as an amount representing the maximum aggregate amount of
the Credit Exposure hereunder, as such commitment may be reduced from time to
time pursuant to Section 2.04. The initial amount of the Lender's Commitment is
$20,000,000.
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"Commitment Termination Date" means March 14, 2000.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period minus the sum of (a) pay-in-kind
or accreted Consolidated Interest Expense not involving any payment of cash, (b)
to the extent included in Consolidated Interest Expense, the amortization of
fees paid by the Borrower or any Subsidiary in connection with the incurrence of
any Indebtedness and (c) the amortization of debt discounts, if any, or fees in
respect of any interest rate cap agreement or other agreement or arrangement
entered into by the Borrower or any Subsidiary designed to protect the Borrower
or such Subsidiary against fluctuations in interest rates.
"Consolidated EBIT" means, for any period, net income for such
period of the Borrower and the Subsidiaries, determined on a consolidated basis
in accordance with GAAP, plus, without duplication and to the extent deducted in
determining such net income, the sum of (a) Consolidated Cash Interest Expense
for such period and (b) the aggregate amount of cash taxes paid for such period.
Notwithstanding anything to the contrary in this definition, for purposes
hereof, the term "Consolidated EBIT" shall be computed, on a consistent basis,
to reflect purchases, acquisitions, sales, transfers and dispositions made by
the Borrower and the Subsidiaries (other than in the ordinary course of
business) during the relevant period as if they occurred at the beginning of
such period.
"Consolidated Interest Expense" means, for any period, interest and
fees accrued, accreted or paid by the Borrower and the Subsidiaries during such
period in respect of the Indebtedness of the Borrower and the Subsidiaries,
determined on a consolidated basis in accordance with GAAP, including (a) the
amortization of debt discounts to the extent included in interest expense in
accordance with GAAP, (b) the amortization of all fees (including fees with
respect to interest rate cap agreements or other agreements or arrangements
entered into by the Borrower or any Subsidiary designed to protect the Borrower
or such Subsidiary, as applicable, against fluctuations in interest rates)
payable in connection with the incurrence of Indebtedness to the extent included
in interest expense in accordance with GAAP and (c) the portion of any rents
payable under capital leases allocable to interest expense in accordance with
GAAP.
"Consolidated Shareholders' Equity" means at any date of
determination, shareholders' equity of the Borrower and the Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt" means, as of any date, the aggregate
principal amount of all Indebtedness of the Borrower and the Subsidiaries that
would be reflected as liabilities on a consolidated balance sheet of the
Borrower and the Subsidiaries as of such date prepared in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
The terms "Controlling" and "Controlled" have meanings correlative thereto.
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"Credit Exposure" means, at any time, the sum of the aggregate
outstanding principal amount of the Loans at such time.
"Default" means any event or condition which constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 4.06.
"dollars" or "$" refers to lawful money of the United States of
America.
"Domestic Subsidiary" means any Subsidiary that is organized under
the laws of the United States of America or any State or political subdivision
thereof.
"Effective Date" means the date on which the conditions specified in
Section 5.01 are satisfied (or waived in accordance with Section 9.02).
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower or any Subsidiary, is treated as
a single employer under Section 414(b) or (c) of the Code or, solely for
purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section
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303(d) of ERISA of an application for a waiver of the minimum funding standard
with respect to any Plan; (d) the incurrence by the Borrower or any ERISA
Affiliate of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any ERISA Affiliate of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice,
or the receipt by any Multiemployer Plan from the Borrower or any ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to such term in Article
8.
"Excluded Taxes" means, with respect to the Lender or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower under any Loan Document, (a) net income taxes and franchise taxes in
lieu of net income taxes imposed by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or in which its applicable lending office is located
and (b) any branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Borrower is located.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded, if necessary, to the next greater 1/100 of 1%) equal to the rate per
annum at which the Lender is offered overnight Federal funds by a Federal funds
broker selected by the Lender at or about 2:00 p.m., New York City time, on such
day, provided that if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate at which the Lender is offered overnight Federal
funds by such Federal funds broker at or about 2:00 p.m., New York City time, on
the next preceding Business Day.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"FOCUS Report" means a Financial and Operational Combined Uniform
Single Report which is or may be required to be filed on a monthly or quarterly
basis, as the case may be, with the Securities and Exchange Commission, the NASD
or other Governmental Authority or self-regulatory organization or any report
which is required by the Securities and Exchange Commission, the NASD or other
Governmental Authority or self-regulatory organization in lieu of such report.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity (including
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the NASD or other applicable examining authority) exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor as to enable the primary obligor
to pay such Indebtedness or other obligation or (d) as an account party in
respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guaranteed" has a meaning correlative thereto.
"Hazardous Materials" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such
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Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to such term in Section
9.03(b).
"Initial Restricted Payment" means the payment of a dividend by ITG
to the Borrower and the Borrower to its shareholders in an amount not to exceed
$75,000,000.
"Initial Transaction Date" means the date on which the Initial
Transactions are consummated.
"Initial Transaction Documents" means the Agreement and Plan of
Merger, Distribution Agreement, Benefits Agreement, Amended and Restated Tax
Sharing Agreement and Tax Sharing and Indemnification Agreement, each dated as
of March 17, 1999, executed or delivered in connection with the Initial
Transactions.
"Initial Transactions" means the following transactions consummated
on or before the Effective Date:
(a) the making of the Initial Restricted Payment;
(b) the contribution by Jefferies Group of all of its assets
(other than its capital stock in the Borrower) and all of its liabilities
(other than liabilities related to the Borrower) to JEFCO and its
subsidiaries;
(c) the distribution by Jefferies Group to its shareholders of
all of its capital stock in JEFCO;
(d) the merger of the Borrower with and into Jefferies Group,
with Jefferies Group as the survivor and the assumption by Jefferies Group
of the obligations of the Borrower under the Loan Documents pursuant to
the Assumption Agreement; and
(e) the change of Jefferies Group's name to "Investment
Technology Group, Inc.".
"ITG" means ITG Inc., a Delaware corporation and a wholly owned
Subsidiary.
"JEFCO" means JEF Holding Company, Inc., a Delaware corporation.
"Jefferies & Co." means Jefferies & Company, Inc., a Delaware
corporation.
"Jefferies Group" means Jefferies Group, Inc., a Delaware
corporation.
"Lender" means The Bank of New York and its successors and assigns.
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"Leverage Ratio" means, as of any date, the quotient of (a)
Consolidated Total Debt as of such date divided by (b) Consolidated EBIT for the
period of the most recent four consecutive fiscal quarters ending before such
date for which financial statements are available.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan Documents" means this Agreement, the Note, the Assumption
Agreement and the Security Documents.
"Loan" means a Loan referred to in Section 2.01 and made pursuant to
Section 2.02.
"Margin Stock" has the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under any Loan Document or (c) the
rights of or benefits available to the Lender under any Loan Document.
"Material Indebtedness" means Indebtedness (other than Indebtedness
under the Loan Documents) or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and the Subsidiaries in an
aggregate principal amount exceeding $1,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary, as applicable, would be required to pay if such
Hedging Agreement were terminated at such time.
"Maturity Date" means March 15, 2001.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Capital" means "net capital" as defined in Rule 15c3-1 or any
successor rule as in effect at the time of determination.
"Note" means a promissory note evidencing the Loans payable to the
order of the Lender substantially in the form of Exhibit A.
"Obligations" has the meaning assigned to such term in the Security
Agreement.
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"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, the Loan Documents.
"Participant" has the meaning assigned to such term in Section
9.04(c).
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex 1
to the Security Agreement or any other form approved by the Lender.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 6.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 30 days or are being contested in compliance with Section 6.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance
and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in
the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article 8; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent that such obligations are
backed by the full faith and credit of the United States of America), in
each case measuring within one year from the date of acquisition thereof;
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(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, or any
successor thereto, or from Moody's Investors Service, Inc. or any
successor thereto;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any domestic office of any
commercial bank organized under the laws of the United States of America
or any State thereof that has a combined capital and surplus and undivided
profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) of this
definition and entered into with a financial institution satisfying the
criteria described in clause (c) of this definition; and
(e) investments made by the Borrower and the Subsidiaries in
the ordinary course of business.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower,
any Subsidiary or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"POSIT Joint Venture" means the joint venture between ITG (as
successor in interest to Jefferies & Co.) and BARRA Inc. formed in 1987.
"POSIT License Agreement" means the License Agreement, dated as of
October 1, 1987, as amended, between the POSIT Joint Venture and between ITG (as
successor in interest to Jefferies & Co.).
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by the Lender as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective. The
Prime Rate is not intended to be the lowest rate of interest charged by the
Lender in connection with extensions of credit to borrowers.
"Regulation T" means Regulation T of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
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"Regulation U" means Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Related Parties" means the Lender's Affiliates, directors,
officers, employees, agents and advisors.
"Restricted Payment" means, as to any Person, any dividend or other
distribution by such Person (whether in cash, securities or other property) with
respect to any shares of any class of equity securities of such Person, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares or any option,
warrant or other right to acquire any such shares except upon the exercise of
any options, warrants or other rights to acquire such shares.
"Rule 15c3-1" means Rule 15c3-1 of the General Rules and Regulations
as promulgated by the Securities and Exchange Commission under the Securities
and Exchange Act of 1934, as amended (17 CFR 240.15c3-1), as such Rule may be
amended from time to time, or any rule or regulation of the Securities and
Exchange Commission which replaces Rule 15c3-1.
"Security Agreement" means the Security Agreement, substantially in
the form of Exhibit C, between the Borrower and the Lender.
"Security Documents" means the Security Agreement and each other
security agreement, instrument or other document executed or delivered pursuant
to Section 6.12 or 6.13 to secure any of the Obligations.
"SIPC" means The Securities Investor Protection Corporation and any
successor organization discharging the functions of The Securities Investor
Protection Corporation.
"Street Loans" means short term borrowings, whether or not
collateralized, borrowed for the purpose of facilitating settlement or financing
of securities or commodities transactions in the ordinary course of business.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or, in the case
of a partnership, more than 50% of the general partnership interests are, as of
such date, owned, controlled or held by the parent or one or more subsidiaries
of the parent.
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"Subsidiary" means any subsidiary of the Borrower.
"Taxes" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means (a) the execution, delivery and performance by
the Borrower of each Loan Document, (b) the borrowing of the Loans, (c) the use
of the proceeds of the Loans and (d) the Initial Transactions.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02 Terms Generally
The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation". The word "will" shall be construed to have
the same meaning and effect as the word "shall". Unless the context requires
otherwise, (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
Section 1.03 Accounting Terms; GAAP
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time, provided that, if the Borrower notifies the Lender
that the Borrower requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Lender
notifies the Borrower that it requests an amendment to any provision hereof for
such purpose), regardless of whether any such notice is given before or after
such change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith. Unless the context
otherwise requires, any reference to a fiscal period shall refer to the relevant
fiscal period of the Borrower.
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ARTICLE 2. THE CREDITS
Section 2.01 Commitment
Subject to the terms and conditions set forth herein, the Lender
agrees to make Loans to the Borrower from time to time during the Availability
Period in an aggregate principal amount that will not result in the Credit
Exposure exceeding the Available Amount. Within the foregoing limits and subject
to the terms and conditions set forth herein, the Borrower may borrow, prepay
and reborrow Loans. At the time that each Loan is made, such Loan shall be in an
aggregate amount that is an integral multiple of $100,000 and not less than
$1,000,000, provided that a Loan may be in an aggregate amount that is equal to
the entire unused balance of the Commitment.
Section 2.02 Requests for Loans
To request a Loan, the Borrower shall notify the Lender of such
request by telephone not later than 11:00 a.m., New York City time, on the date
of the proposed Loan. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Lender of a written Borrowing Request in a form approved by the Lender and
signed by the Borrower. Each such telephonic and written Borrowing Request shall
specify the following information:
(i) the aggregate amount of the requested Loan;
(ii) the date of such Loan, which shall be a Business
Day;
(iii) the location and number of the Borrower's account
to which funds are to be disbursed, which shall comply with the
requirements of Section 2.03; and
(iv) a reasonably detailed calculation of the Leverage
Ratio on a pro forma basis immediately after giving effect to such
Loan and the use of the proceeds thereof.
Section 2.03 Funding of Loans
Subject to Sections 5.02 and 5.03, the Lender shall make each Loan
on the proposed date thereof by 2:00 p.m., New York City time, by crediting or
otherwise transferring the proceeds of the requested Loan to an account of the
Borrower maintained with the Lender and designated by the Borrower in the
applicable Borrowing Request.
Section 2.04 Termination and Reduction of Commitment
(a) Unless previously terminated, the Commitment shall terminate on
the Commitment Termination Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitment, provided that (i) the Borrower shall not terminate or
reduce the Commitment if,
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after giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.06, the Credit Exposure would exceed the Commitment, and (ii) each
such reduction (other than a termination) shall be in an amount that is an
integral multiple of $100,000 and not less than $1,000,000.
(c) The Borrower shall notify the Lender of any election to
terminate or reduce the Commitment under paragraph (b) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Each notice
delivered by the Borrower pursuant to this Section shall be irrevocable,
provided that a notice of termination of the Commitment delivered by the
Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Lender on or prior to the specified effective date)
if such condition is not satisfied. Any termination or reduction of the
Commitment hereunder shall be permanent.
Section 2.05 Repayment of Loans; Evidence of Debt
(a) The Borrower hereby unconditionally promises to pay to the
Lender the then unpaid principal amount of each Loan on the Maturity Date.
(b) If on any day the Credit Exposure exceeds the Available Amount,
the Borrower shall, no later than the following Business Day, prepay the Loans
in an amount equal to such excess.
(c) The Lender shall maintain accounts in which it shall record (i)
the amount of each Loan made hereunder, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to the
Lender hereunder and (iii) the amount of any sum received by the Lender
hereunder. The entries made in such accounts shall, to the extent not
inconsistent with any entries made in any Note, be prima facie evidence of the
existence and amounts of the obligations recorded therein, provided that the
failure of the Lender to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
(d) The Loans evidenced by the Note and interest thereon shall at
all times (including after assignment pursuant to Section 9.04) be represented
by one or more Notes in like form payable to the order of the payee named
therein and its registered assigns.
Section 2.06 Prepayment of Loans
(a) The Borrower shall have the right at any time and from time to
time to prepay any Loan in whole or in part, subject to the requirements of this
Section.
(b) In the event of any partial reduction or termination of the
Commitment, then (i) at or prior to the date of such reduction or termination,
the Lender shall notify the Borrower of the Credit Exposure after giving effect
thereto and (ii) if such sum would exceed the Commitment after giving effect to
such reduction or termination, then the Borrower shall, on the
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date of such reduction or termination, prepay Loans in an amount sufficient to
eliminate such excess.
(c) The Borrower shall notify the Lender by telephone (confirmed by
telecopy) of any prepayment not later than 11:00 a.m., New York City time, on
the date of prepayment. Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of each Loan or portion thereof to
be prepaid, provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of the Commitment as contemplated by Section
2.04, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.04. Each partial prepayment
of any Loan under Sections 2.04(b) and 2.06(a) shall, when added to the amount
of each concurrent reduction of the Commitment and prepayment of Loans under
such Sections, be in an integral multiple $100,000 and not less than $1,000,000.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 3.01.
Section 2.07 Payments Generally; Pro Rata Treatment; Sharing of Setoffs
(a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal of Loans,
interest or fees, or of amounts payable under Section 3.03, 3.04 or 9.03, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without setoff or counterclaim. Any amounts
received after such time on any date may, in the discretion of the Lender, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the Lender by
wire transfer to Account No. GLA 111231, ABA 021000018, or to such other account
as to which the Lender may notify the Borrower in writing from time to time. If
any payment hereunder shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available
to the Lender to pay fully all amounts of principal of Loans, interest, fees and
commissions then due hereunder, such funds shall be applied (i) first, towards
payment of interest, fees and commissions then due hereunder, and (ii) second,
towards payment of principal of Loans then due hereunder.
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC.
Section 3.01 Interest
(a) Each Loan shall bear interest at the Alternate Base Rate for the
period from the date such Loan is made until the date which is two weeks
thereafter and thereafter, if applicable, at the Alternate Base Rate plus 2%.
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(b) Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, then, so long as such Event of Default is
continuing, all principal of and interest on each Loan and each fee and other
amount payable by the Borrower hereunder shall bear interest, after as well as
before judgment, at a rate per annum equal to (i) in the case of principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraph of this Section or (ii) in the case of any other amount, 2%
plus the Alternate Base Rate.
(c) Accrued interest on each Loan shall be payable in arrears on the
last day of each March, June, September and December, provided that (i) interest
accrued pursuant to paragraph (b) of this Section shall be payable on demand and
(ii) in the event of any repayment or prepayment of any Loan, accrued interest
on the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment.
(d) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed at times when the Alternate Base Rate
is based on the Prime Rate shall be computed on the basis of a year of 365 days
(or 366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate shall be determined by the Lender, and such
determination shall be conclusive absent clearly demonstrable error.
Section 3.02 Fees
(a) The Borrower agrees to pay to the Lender for its own account, a
commitment fee, which shall accrue at a rate per annum equal to 0.35% on the
daily amount of the unused Commitment during the period from and including the
Effective Date to but excluding the Commitment Termination Date. Accrued
commitment fees shall be payable in arrears on the last day of March, June,
September and December of each year, each date on which the Commitment is
permanently reduced and on the date on which the Commitment terminates,
commencing on the first such date to occur after the date hereof. All commitment
fees shall be computed on the basis of a year of 365 days (or 366 days in a leap
year) and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
(b) The Borrower agrees to pay to the Lender for its own account, an
upfront fee equal to 1.50% of the Commitment, of which one-half shall be payable
on the Effective Date and the balance on the Initial Transaction Date.
(c) Unless on or before July 31, 1999, (i) the Net Capital of ITG
(calculated without regard to loans made by the Borrower to ITG with the
proceeds of the Loans) is greater than or equal to the sum of the Commitment on
such date plus $5,000,000, and (ii) Consolidated Shareholders' Equity is greater
than or equal to $80,000,000, the Borrower agrees to pay to the Lender for its
own account, an additional fee equal to $500,000, payable on such date.
(d) The Borrower agrees to pay to the Lender, for its own account,
fees and other amounts payable in the amounts and at the times separately agreed
upon between the Borrower and the Lender.
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(e) All fees and other amounts payable hereunder shall be paid on
the dates due, in immediately available funds, to the Lender. Fees and other
amounts paid shall not be refundable under any circumstances.
Section 3.03 Capital Adequacy
(a) If the Lender determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on the Lender's capital or on the capital of the Lender's holding company as a
consequence of this Agreement or the Loans made by the Lender to a level below
that which the Lender or the Lender's holding company could have achieved but
for such Change in Law (taking into consideration the Lender's policies and the
policies of the Lender's holding company with respect to capital adequacy), then
from time to time the Borrower will pay to the Lender such additional amount or
amounts as will compensate the Lender or the Lender's holding company for any
such reduction suffered.
(b) A certificate of the Lender setting forth the amount or amounts
necessary to compensate the Lender or its holding company, as applicable, as
specified in paragraph (a) of this Section shall be delivered to the Borrower
and shall be conclusive absent manifest error. The Borrower shall pay the Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof. Failure or delay on the part of the Lender to demand compensation
pursuant to this Section shall not constitute a waiver of the Lender's right to
demand such compensation.
Section 3.04 Taxes
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder and under any other Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes,
provided that, if the Borrower shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section), the Lender receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Lender, within ten days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Lender on or with respect to any payment by or on account of
any obligation of the Borrower under the Loan Documents (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by the Lender shall be conclusive absent
manifest error.
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(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority that were deducted under
Section 3.04(a), the Borrower shall deliver to the Lender the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Lender.
Section 3.05 Mitigation Obligations
If the Lender requests compensation under Section 3.03, or if the
Borrower is required to pay any additional amount to the Lender or any
Governmental Authority for the account of the Lender pursuant to Section 3.04,
then the Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans (or any participation therein) hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of the Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
3.03 or 3.04, as applicable, in the future and (ii) would not subject the Lender
to any unreimbursed cost or expense and would not otherwise be disadvantageous
to the Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by the Lender in connection with any such designation or
assignment.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
Section 4.01 Organization; Powers
Each of the Borrower and the Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
Section 4.02 Authorization; Enforceability
The Transactions are within the corporate, partnership or other
analogous powers of each of the Borrower and the Subsidiaries to the extent it
is a party thereto and have been duly authorized by all necessary corporate,
partnership or other analogous and, if required, equityholder action. Each Loan
Document has been duly executed and delivered by each of the Borrower and the
Subsidiaries to the extent it is a party thereto and constitutes a legal, valid
and binding obligation thereof, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally.
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Section 4.03 Governmental Approvals; No Conflicts
The Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect, (b)
will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any of the Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon the Borrower or
any of the Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by the Borrower or any of the Subsidiaries, and
(d) will not result in the creation or imposition of any Lien on any asset of
the Borrower or any of the Subsidiaries other than Liens expressly permitted by
Section 7.02.
Section 4.04 Financial Condition; No Material Adverse Change
(a) The Borrower has heretofore furnished to the Lender its Form
10-K for the fiscal year ended December 31, 1998 containing the consolidated
statement of financial condition and statements of income, changes in
stockholders' equity and cash flows of the Borrower and the Subsidiaries as of
and for the fiscal year ended December 31, 1998 and 1997, reported on by KPMG
LLP, independent public accountants. The consolidated financial statements
referred to in the preceding sentence present fairly, in all material respects,
the financial condition and results of operations of the Borrower and
consolidated Subsidiaries as of such dates and for the indicated periods in
accordance with GAAP and are consistent with the books and records of the
Borrower (which books and records are correct and complete).
(b) The contents of the FOCUS Report of ITG as of December 31, 1998,
a copy of which has been furnished to the Lender, are correct in all material
respects.
(c) Since December 31, 1998, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole.
Section 4.05 Properties
(a) Each of the Borrower and the Subsidiaries has good title to, or
valid leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Borrower and the Subsidiaries owns, or is entitled
to use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and the
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
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Section 4.06 Litigation and Environmental Matters
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any of the
Subsidiaries (i) that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve any Loan Document or the
Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower nor any of
its Subsidiaries (i) have failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) have become subject to any Environmental
Liability, (iii) have received notice of any claim with respect to any
Environmental Liability or (iv) know of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
Section 4.07 Compliance with Laws and Agreements
Each of the Borrower and the Subsidiaries is in compliance with all
laws, regulations and orders of any Governmental Authority applicable to it or
its property and all indentures, agreements and other instruments binding upon
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
Section 4.08 Investment and Holding Company Status
Neither the Borrower nor any of the Subsidiaries are (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
Section 4.09 Taxes
Except as set forth on Schedule 4.06, each of the Borrower and the
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed by it and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings and for which the Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves or (b)
to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
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Section 4.10 ERISA
No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other such ERISA Events for which liability is
reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. Except as provided in Schedule 4.10, the present value
of all accumulated benefit obligations under each Plan (based on the assumptions
used for purposes of Statement of Financial Accounting Standards No. 87) did
not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $1,600,000 the fair market value of the assets of
such Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than
$1,600,000 the fair market value of the assets of all such underfunded Plans.
Section 4.11 Disclosure
The Borrower has disclosed to the Lender or made public all
agreements, instruments and corporate or other restrictions to which it or any
of the Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower or any Subsidiary
to the Lender in connection with the negotiation of the Loan Documents or
delivered thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.
Section 4.12 Subsidiaries
Schedule 4.12 sets forth the name and jurisdiction of incorporation
of, and the ownership interest of the Borrower in, each Subsidiary as of the
Effective Date.
Section 4.13 Labor Matters
As of the Effective Date, there are no strikes, lockouts or
slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of
the Borrower, threatened. The hours worked by and payments made to employees of
the Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, except where any such violations, individually and in
the aggregate, would not be reasonably likely to result in a Material Adverse
Effect. All material payments due from the Borrower or any Subsidiary, or for
which any claim may be made against the Borrower or any Subsidiary, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of the Borrower or such Subsidiary.
The consummation of the Transactions will not give rise to any right of
termination
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or right of renegotiation on the part of any union under any collective
bargaining agreement to which the Borrower or any Subsidiary is bound.
Section 4.14 Solvency
Immediately after the consummation of each Transaction and
immediately following the making of each Loan, if any, made on the date thereof
and after giving effect to the application of the proceeds of such Loan, (a) the
fair value of the assets of the Borrower and the Subsidiaries, taken as a whole,
at a fair valuation, will exceed their debts and liabilities, subordinated,
contingent or otherwise; (b) the present fair saleable value of the property of
the Borrower and the Subsidiaries, taken as a whole, will be greater than the
amount that will be required to pay the probable liability of their debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) the Borrower will be able to
pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the Borrower will not
have unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be conducted
following such date.
Section 4.15 Security Documents
(a) The Security Agreement is effective to create in favor of the
Lender a legal, valid and enforceable security interest in the Collateral (as
defined in the Security Agreement) and, when (i) the pledged property
constituting such Collateral is delivered to the Lender, (ii) the financing
statements in appropriate form are filed in the offices specified on Schedule 5
to the Perfection Certificate and (iii) all other applicable filings under the
Uniform Commercial Code or otherwise that are required under the Loan Documents
are made, the Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Borrower thereunder
in such Collateral, in each case prior and superior in right to any other
Person, other than with respect to Liens expressly permitted by Section 7.02.
Section 4.16 Federal Reserve Regulations
(a) Neither the Borrower nor any of the Subsidiaries (other than
ITG) are engaged principally, or as one of their important activities, in the
business of extending credit for the purpose of buying or carrying Margin Stock.
ITG is a broker and dealer subject to the provisions of Regulation T. ITG
maintains procedures and internal controls reasonably adapted to insure that ITG
does not extend or maintain credit to or for its customers other than in
accordance with the provisions of Regulation T, and officers of ITG regularly
supervise its activities and the activities of employees of ITG to insure that
ITG does not extend or maintain credit to or for its customers other than in
accordance with the provisions of Regulation T, except for occasional
inadvertent failures to comply with Regulation T in connection with transactions
which are not material either in number or amount.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase, acquire or carry any
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Margin Stock or for any purpose that entails a violation of, or that is
inconsistent with, the provisions of the regulations of the Board, including
Regulation T, U or X.
Section 4.17 Membership
ITG is a member organization in good standing of the NASD and is
duly registered as a broker-dealer with the Securities and Exchange Commission.
Section 4.18 Assessments by the SIPC
ITG is not in arrears with respect to any assessment which the
Borrower has received from the SIPC and which is currently due or past due.
Section 4.19 Year 2000
Any reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) the Borrower's and the Subsidiaries' computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others) and the testing of all such systems and equipment,
as so reprogrammed, will be completed by September 30, 1999. The cost to the
Borrower and the Subsidiaries of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Borrower and the
Subsidiaries (including reprogramming errors and the failure of others' systems
or equipment) would not reasonably be expected to result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Borrower and the Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrower and the Subsidiaries to conduct their
business, except for those failures that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
ARTICLE 5. CONDITIONS
Section 5.01 Effective Date
This Agreement shall not become effective until the date on which
each of the following conditions is satisfied (or waived in accordance with
Section 9.02):
(a) The Lender (or its counsel) shall have received from the
Borrower either (i) a counterpart of this Agreement signed on behalf of the
Borrower or (ii) written evidence satisfactory to the Lender (which may include
telecopy transmission of a signed signature page of this Agreement) that the
Borrower has signed a counterpart of this Agreement.
(b) The Lender shall have received a Note signed on behalf of the
Borrower.
(c) The Lender shall have received a favorable written opinion
(addressed to the Lender and dated the Effective Date) from Cahill Gordon &
Reindel, counsel to the
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Borrower, substantially in the form of Exhibit B. The Borrower hereby requests
such counsel to deliver such opinion.
(d) The Lender shall have received such documents and certificates
as the Lender or its counsel may reasonably request relating to the
organization, existence and good standing of the Borrower, the authorization of
the Loan Documents and any other legal matters relating to the Borrower, the
Loan Documents or the transactions contemplated thereby, all in form and
substance reasonably satisfactory to the Lender and its counsel.
(e) The Lender shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer, confirming compliance with the conditions set forth in paragraphs (a)
and (b) of Section 5.03.
(f) The Lender shall have received all fees and other amounts due it
from the Borrower and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all reasonable fees and
disbursements of Lender's counsel and other out-of-pocket expenses required to
be reimbursed or paid by the Borrower hereunder.
(g) The Lender shall have received a Federal Reserve Form U-1 duly
executed by the Borrower and satisfactory to the Lender.
(h) The Lender shall have received (i) a true and complete copy of
the POSIT License Agreement and (ii) a letter from the POSIT Joint Venture with
respect to the timely payment by ITG of all royalties thereunder (subject to
audit), such letter to be in all respects satisfactory to the Lender.
(i) After giving effect to the Transactions to be consummated on the
Effective Date, none of the Borrower or any of the Subsidiaries shall have
outstanding any shares of preferred equity securities or any Indebtedness, other
than (i) Indebtedness incurred under the Loan Documents and (ii) Indebtedness
permitted under Section 7.01.
(j) The Lender shall have received a true, complete and correct copy
of each Initial Transaction Document, which shall be in form and substance
reasonably satisfactory to the Lender.
(k) The Lender shall have received a copy of a private letter ruling
of the Internal Revenue Service which states that the Initial Transactions shall
be tax-free to the Borrower.
The Lender shall notify the Borrower of the Effective Date, and such notice
shall be conclusive and binding. Notwithstanding the foregoing, the obligations
of the Lender to make Loans hereunder shall not become effective unless each of
the foregoing conditions and each of the conditions set forth in Section 5.02 is
satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New
York City time, on May 15, 1999 (and, in the event such conditions are not so
satisfied or waived, the Commitment shall terminate at such time).
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Section 5.02 Conditions to First Loans
The obligations of the Lender to make the initial Loans shall be
subject to the prior or contemporaneous satisfaction of the conditions set forth
in Section 5.01 and the satisfaction (or waiver in accordance with Section 9.02)
of the following additional conditions:
(a) The Lender shall have received counterparts of the Assumption
Agreement signed on behalf of Jefferies Group.
(b) The Lender shall have received such documents and certificates
as the Lender or its counsel may reasonably request relating to the
organization, existence and good standing of Jefferies Group, the authorization
by Jefferies Group of the Transactions and any other legal matters relating to
Jefferies Group, the Loan Documents or the Transactions, all in form and
substance reasonably satisfactory to the Lender and its counsel.
(c) The Lender shall have received such documents and certificates
as the Lender or its counsel may reasonably request relating to the absence of
changes to the documentation delivered by the Borrower pursuant to Section
5.01(d) and the continued effectiveness thereof, and attaching resolutions of
its board of directors authorizing the Initial Transactions and the Initial
Transaction Documents, all in form and substance reasonably satisfactory to the
Lender and its counsel.
(d) The Lender shall have received counterparts of the Security
Agreement signed on behalf of the Borrower, together with the following:
(i) all stock certificates representing shares of capital
stock of all Domestic Subsidiaries owned by or on behalf of the Borrower
as of the Effective Date after giving effect to the Transactions;
(ii) stock powers and instruments of transfer, endorsed in
blank, with respect to such stock certificates, promissory notes and other
instruments;
(iii) all instruments and other documents, including Uniform
Commercial Code financing statements, required by law or reasonably
requested by the Lender to be filed, registered or recorded to create or
perfect the Liens intended to be created under the Security Agreement; and
(iv) a completed Perfection Certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer
and the chief legal officer of the Borrower, together with all attachments
contemplated thereby, including the results of a search of the Uniform
Commercial Code (or equivalent) filings made with respect to the Borrower
in the jurisdictions contemplated by the Perfection Certificate and copies
of the financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Lender that the Liens
indicated by such financing statements (or similar documents) are
permitted by Section 7.02 or have been released.
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(e) After giving effect to the Initial Transactions, the (i) Net
Capital of ITG shall be greater than or equal to the Commitment and (ii)
Consolidated Shareholders' Equity shall be greater than or equal to $70,000,000,
and the Lender shall have received a certificate of a Financial Officer, in form
and substance reasonably satisfactory to the Lender, to the foregoing effects.
(f) The Lender shall have received a certificate, dated the Initial
Transaction Date and signed by the President, a Vice President or a Financial
Officer, (i) confirming that each Initial Transaction has been consummated in
accordance with the terms and conditions of the applicable Initial Transaction
Documents (with no waiver or amendment of any provision thereof without the
prior written consent of the Lender), (ii) confirming that there has been no
change to the Initial Transaction Documents as delivered to the Lender pursuant
to Section 5.01 and (iii) attaching a copy of a certificate of merger issued by
the Secretary of State of the State of Delaware with respect to the merger of
the Borrower with and into Jefferies Group.
(g) The Lender shall have received a certificate, signed by a
Financial Officer, setting forth reasonably detailed calculations demonstrating
compliance with Sections 7.12, 7.13, 7.14 and 7.15, on a pro forma basis
immediately after giving effect to the Transactions.
(h) The Lender shall have received a favorable written opinion
(addressed to the Lender and dated the Initial Transaction Date) from Cahill
Gordon & Reindel, counsel to the Borrower, substantially in the form of Exhibit
B-1. The Borrower hereby requests such counsel to deliver such opinion.
(i) The Lender shall have received all reasonable fees and other
amounts due it from the Borrower and payable on or prior to the Initial
Transaction Date, including, to the extent invoiced and not theretofore paid,
reimbursement or payment of all reasonable fees and disbursements of Lender's
counsel and other out-of-pocket expenses required to be reimbursed or paid by
the Borrower hereunder.
(j) In the event that the Borrower shall have delivered any of the
certificates required by Section 5.02(b), (e) or (g) prior to the Initial
Transaction Date, the Lender shall have received a certificate, dated the date
of the consummation of the Initial Transactions and signed by the President, a
Vice President or a Financial Officer, certifying that the information contained
in any such certificate is true and correct as of the Initial Transaction Date.
(k) After giving effect to the Transactions to be consummated on the
Initial Transaction Date, none of the Borrower or any of the Subsidiaries shall
have outstanding any shares of preferred equity securities or any Indebtedness,
other than (i) Indebtedness incurred under the Loan Documents and (ii)
Indebtedness permitted under Section 7.01.
Section 5.03 Each Credit Event
The obligation of the Lender to make a Loan is subject to the
satisfaction of the following conditions:
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(a) The representations and warranties of the Borrower set forth in
each Loan Document shall be true and correct on and as of the date of such Loan.
(b) At the time of and immediately after giving effect to such Loan
no Default shall have occurred and be continuing.
Each Loan shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE 6. AFFIRMATIVE COVENANTS
Until the Commitment have expired or been terminated and the principal of
and interest on each Loan and all fees and other amounts payable under the Loan
Documents shall have been paid in full, the Borrower covenants and agrees with
the Lender that:
Section 6.01 Financial Statements and Other Information
The Borrower will furnish to the Lender:
(a) within 90 days after the end of each fiscal year, (i) its Form
10-K containing its audited consolidated statement of financial condition and
related statements of income, changes in stockholders' equity and cash flows as
of the end of and for such year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on by KPMG LLP or other
independent public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, its Form 10-Q containing its consolidated
statement of financial condition and related statements of income, changes in
stockholders' equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Borrower and
the consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) and (b) above, a certificate of a Financial Officer (i) certifying as
to whether a Default has occurred and, if a Default has occurred, specifying the
details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Sections 7.12, 7.13, 7.14 and 7.15, and (iii) stating whether
any change in
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GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 4.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on such
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
(e) As soon as available and in any event within 30 days after
filing thereof, copies of all quarterly FOCUS reports and notices of all
material violations of rules and regulations of the Securities and Exchange
Commission or any material securities exchange which the Borrower or any
Subsidiary shall file with the Securities and Exchange Commission or any
material securities exchange;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; and
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of the Loan Documents,
as the Lender may reasonably request.
Section 6.02 Notices of Material Events
The Borrower will furnish to the Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the determination by the Borrower that any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof, whether newly commenced or
ongoing could, if adversely determined, in the good faith opinion of the
Borrower reasonably be expected to result in a Material Adverse Effect;
(c) immediately upon becoming aware of the occurrence thereof,
notice of the suspension or expulsion of ITG from membership in the NASD;
(d) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and the Subsidiaries in an aggregate amount
exceeding $1,000,000, and
(e) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
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Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
Section 6.03 Existence; Conduct of Business
The Borrower will, and will cause each of the Subsidiaries to, do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business, provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under Section 7.03.
Section 6.04 Payment of Obligations
The Borrower will, and will cause each of the Subsidiaries to, pay
its obligations, including Tax liabilities, that, if not paid, would reasonably
be expected to result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.
Section 6.05 Maintenance of Properties
The Borrower will, and will cause each of the Subsidiaries to, keep
and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
Section 6.06 Books and Records; Inspection Rights
The Borrower will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of the Subsidiaries to,
permit any representatives designated by the Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.
Section 6.07 Compliance with Laws
The Borrower will, and will cause each of the Subsidiaries to,
comply with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
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Section 6.08 Use of Proceeds
The proceeds of the Loans will be used only (a) to consummate the
Initial Transactions and (b) to repay intercompany loans from ITG to the
Borrower or make subordinated loans to ITG in order to enable ITG to satisfy its
Net Capital requirements. No part of the proceeds of any Loan will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase, acquire or carry any Margin Stock or for any purpose
that entails a violation of any of the regulations of the Board, including
Regulations T, U and X.
Section 6.09 Information Regarding Collateral
(a) The Borrower will furnish to the Lender prompt written notice of
any change in (i) the legal name of the Borrower or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) the location of the chief executive office of the Borrower, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned or held by it or on its behalf (including the
establishment of any such new office or facility), (iii) the identity or
organizational structure of the Borrower such that a filed financing statement
becomes misleading or (iv) the Federal Taxpayer Identification Number of the
Borrower. The Borrower agrees not to effect or permit any change referred to in
the preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Lender to
continue at all times following such change to have a valid, legal and perfected
security interest in all the Collateral. The Borrower also agrees promptly to
notify the Lender if any material portion of the Collateral is damaged or
destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 6.01, the Borrower shall deliver to the Lender a certificate of a
Financial Officer and the chief legal officer of the Borrower, (i) setting forth
the information required pursuant to Sections 1, 2 and 7 of the Perfection
Certificate or confirming that there has been no change in such information
since the date of the Perfection Certificate or the date of the most recent
certificate delivered pursuant to this Section and (ii) certifying that all
Uniform Commercial Code financing statements or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (i) above, and all other actions have
been taken, to the extent necessary to protect and perfect the security
interests under the Security Agreement for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period).
Section 6.10 Insurance
The Borrower will, and will cause each of the Subsidiaries to,
maintain, with financially sound and reputable insurance companies, (a) adequate
insurance for its insurable properties, all to such extent and against such
risks, including fire, casualty, business interruption
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and other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or similar
locations and (b) such other insurance as is required pursuant to the terms of
any Security Document.
Section 6.11 Additional Domestic Subsidiaries
If any Domestic Subsidiary is formed or acquired after the Effective
Date, the Borrower will notify the Lender in writing thereof within five
Business Days after the date on which such Domestic Subsidiary is formed or
acquired and will cause such equity securities to be pledged pursuant to the
Security Agreement within five Business Days after the date on which such
Domestic Subsidiary is formed or acquired.
Section 6.12 Further Assurances
The Borrower will execute any and all further documents, financing
statements, agreements and instruments, and take all such further actions
(including the filing and recording of financing statements and other
documents), that may be required under any applicable law, or which the Lender
may reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien, all at the expense of the Borrower. The Borrower also agrees to
provide to the Lender, from time to time upon request, evidence reasonably
satisfactory to the Lender as to the perfection and priority of the Liens
created or intended to be created by the Security Documents.
Section 6.13 Environmental Compliance
The Borrower shall, and shall cause each of its Subsidiaries to, use
and operate all of its facilities and property in compliance with all
Environmental Laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in effect
and remain in compliance therewith, and handle all Hazardous Materials in
compliance with all applicable Environmental Laws, except where noncompliance
with any of the foregoing could not reasonably be expected to have a Material
Adverse Effect.
Section 6.14 Membership
The Borrower shall cause ITG and each other Subsidiary which is a
registered broker-dealer with the Securities and Exchange Commission or other
applicable Governmental Authority to maintain such registration in full force
and effect and maintain its membership in good standing in such organizations as
are necessary to enable it to engage in the securities business and take all
action necessary to comply in all material respects with the rules and
regulations in effect from time to time of such organizations and each other
Person or Governmental Authority to which it is subject, except in any case to
the extent that the failure to do so is not reasonably expected to result in a
Material Adverse Effect.
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ARTICLE 7. NEGATIVE COVENANTS
Until the Commitment have expired or been terminated and the principal of
and interest on each Loan and all fees and other amounts payable under the Loan
Documents shall have been paid in full, the Borrower covenants and agrees with
the Lender that:
Section 7.01 Indebtedness
(a) The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness existing on the date hereof and set forth in
Schedule 7.01, but not any extensions, renewals or replacements of any
such Indebtedness;
(iii) Indebtedness of the Borrower or any Subsidiary incurred
to finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured
by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof, provided that (A) such
Indebtedness is incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement and (B) the
aggregate principal amount of Indebtedness permitted by this clause (iii)
shall not exceed $1,000,000 at any time outstanding;
(iv) Indebtedness of any Person that becomes a Subsidiary
(other than a subsidiary of ITG) after the date hereof, provided that (A)
such Indebtedness exists at the time such Person becomes a Subsidiary and
is not created in contemplation of or in connection with such Person
becoming a Subsidiary and (B) the aggregate principal amount of
Indebtedness permitted by this clause (iv) shall not exceed $1,000,000 at
any time outstanding;
(v) Indebtedness of the Borrower or any of its Subsidiaries in
respect of Street Loans, repurchase agreements, reverse repurchase
agreements, securities loan agreements and other similar obligations
incurred in the ordinary course of business;
(vi) other unsecured Indebtedness of the Borrower in an
aggregate principal amount not to exceed $1,000,000 at any time
outstanding; and
(vii) Indebtedness of Jefferies Group to be assumed by JEFCO
pursuant to the Initial Transaction Documents with respect to which the
consent of a third party is necessary for such assumption, which consent
has not been received, provided that such Indebtedness shall not exceed
(x) $5,000,000 from and after the effective date of the merger referred to
in the definition of Initial Transactions until the first anniversary
thereof, (y) $3,330,000 from and after such first anniversary until the
second anniversary thereof and (z) $1,670,000 from and after such second
anniversary until the third anniversary thereof, provided
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that the Borrower's liabilities in respect of such Indebtedness may exceed
the foregoing amounts to the extent that the Borrower shall have received
a letter of credit issued for the benefit of the Borrower by one or more
nationally recognized financial institutions in an aggregate undrawn face
amount not less than the amount of such excess.
(b) The Borrower will not, and it will not permit any Subsidiary to,
(i) issue any preferred equity securities or (ii) be or become liable in respect
of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire
or make any other payment in respect of any shares of equity securities of the
Borrower or any Subsidiary or any option, warrant or other right to acquire any
such shares of equity securities, except as permitted under Section 7.08.
Section 7.02 Liens
The Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof, except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 7.02, provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and any extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary, provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition or
such Person becoming a Subsidiary, as applicable, (ii) such Lien shall not apply
to any other property or assets of the Borrower or any Subsidiary and (iii) such
Lien shall secure only those obligations that it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as applicable, and any
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary, provided that (i) such security
interests secure Indebtedness permitted by clause (iii) of Section 7.01, (ii)
such security interests and the Indebtedness secured thereby are incurred prior
to or within 90 days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets and (iv) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary;
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(f) Liens in respect of obligations to repurchase securities,
repurchase agreements, reverse repurchase agreements, securities loan
agreements, Liens securing Street Loans and other Liens securing short-term
obligations, in each case incurred in the ordinary course of business of the
ITG;
(g) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution;
(h) leases with respect to the assets or properties of the Borrower
or any Subsidiary;
(i) Liens evidenced by Uniform Commercial Code financing statements
regarding operating and equipment leases permitted by this Agreement;
(j) Liens solely in favor of the Borrower or any Subsidiary;
(k) Liens securing obligations under Hedge Agreements with the
Lender; and
(l) Liens in respect of purchase options, calls and similar rights
of third parties granted by ITG in the ordinary course of business where ITG
owns or has purchased for future settlement the underlying securities.
Section 7.03 Fundamental Changes
(a) The Borrower will not, and will not permit any Subsidiary to,
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or substantially all
of its assets, or all or substantially all of the equity securities of any of
the Subsidiaries (in each case, whether now owned or hereafter acquired), or
liquidate or dissolve, except that, if at the time thereof and immediately after
giving effect thereto, no Default shall have occurred and be continuing:
(i) any Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving entity
(ii) any Subsidiary may merge into any other Subsidiary
provided that if any such Subsidiary is a direct wholly-owned Domestic
Subsidiary, such direct wholly-owned Domestic Subsidiary shall be the
survivor;
(iii) any Subsidiary (other than ITG or any subsidiary of ITG)
may merge with any Person in a transaction that is not permitted by clause
(i) or (ii) of this Section 7.03(a), provided that such merger is
permitted by Section 7.04 or 7.05, as applicable;
(iv) any Subsidiary may sell, transfer, lease or otherwise
dispose of its assets to (A) the Borrower or (B) any other Subsidiary
provided that if any such
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Subsidiary is a direct wholly-owned Domestic Subsidiary, such direct
wholly-owned Domestic Subsidiary shall be the buyer, transferee or lessee,
as applicable;
(v) the Borrower or any Subsidiary (other than ITG or any
subsidiary of ITG) may sell, transfer, lease or otherwise dispose of its
assets in a transaction that is not permitted by clause (iv) of this
Section 7.03(a), provided that such sale, transfer, lease or other
disposition is also permitted by Section 7.05; and
(vi) any Subsidiary (other than ITG) may liquidate or dissolve
if the Borrower determines in good faith that such liquidation or
dissolution is in the best interest of the Borrower and is not materially
disadvantageous to the Lender.
(b) The Borrower will not, and will not permit any of the
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and the Subsidiaries on the
date of execution of this Agreement and businesses directly related thereto.
Section 7.04 Investments, Loans, Advances, Guarantees and Acquisitions
The Borrower will not, and will not permit any of the Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger) any capital
stock, evidences of indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or permit to
exist any loans or advances to, Guarantee any obligations of, or make or permit
to exist any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions (including
pursuant to any merger)) any assets of any other Person constituting a business
unit, except:
(a) Permitted Investments;
(b) investments and Guarantees (other than Permitted Investments)
existing on the date hereof and set forth in Schedule 7.04;
(c) investments made by the Borrower in the equity securities of any
Subsidiary and made by any Subsidiary in the equity securities of any other
Subsidiary, provided that any such equity securities owned by the Borrower shall
be pledged pursuant to the Security Agreement;
(d) loans or advances made by the Borrower or any Subsidiary to any
Domestic Subsidiary;
(e) acquisitions made by the Borrower from any Subsidiary and made
by any Subsidiary from the Borrower or any other Subsidiary;
(f) investments in the entities set forth on Schedule 7.04(f) in an
amount not to exceed $10,000,000 in any fiscal year;
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(g) loans made by the Borrower to Affiliates and employees to enable
such Affiliates and employees to pay the exercise price, and pay related income
tax withholding obligations in respect of, stock options in the Borrower that
expire April 30, 1999; and
(h) Guarantees constituting Indebtedness permitted by Section
7.01(a)(vii).
Section 7.05 Asset Sales
The Borrower will not, and will not permit any of the Subsidiaries
to, sell, transfer, lease or otherwise dispose (including pursuant to a merger)
of any asset, including any equity securities, nor will the Borrower permit any
of the Subsidiaries to issue any additional shares of its equity securities,
except:
(a) sales, transfers, leases and other dispositions of inventory,
used or surplus equipment, in each case in the ordinary course of business;
(b) sales, transfers, leases and other dispositions made by the
Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any
other Subsidiary;
(c) transactions permitted by Section 7.04; and
(d) if at the time thereof and immediately after giving effect
thereto no Default shall have occurred and be continuing, other sales,
transfers, leases and other dispositions of assets, provided that all sales,
transfers, leases and other dispositions permitted by this clause (c) shall be
made for fair value and solely for cash consideration.
Section 7.06 Sale and Lease-Back Transactions
The Borrower will not, and will not permit any of the Subsidiaries
to, enter into any arrangement, directly or indirectly, with any Person whereby
it shall sell or transfer any property, real or personal, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property that it intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
Section 7.07 Hedging Agreements
The Borrower will not, and will not permit any of the Subsidiaries
to, enter into any Hedging Agreement, other than Hedging Agreements entered into
in the ordinary course of business to hedge or mitigate risks to which the
Borrower or any Subsidiary is exposed in the conduct of its business or the
management of its liabilities.
Section 7.08 Restricted Payments
The Borrower will not, and will not permit any of the Subsidiaries
to, declare or make, or agree to pay for or make, directly or indirectly, any
Restricted Payment, except that (a) the Borrower may declare and pay dividends
with respect to its equity securities payable solely in additional shares of its
equity securities, (b) any Subsidiary may declare and pay dividends
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with respect to its equity securities to the Borrower or any Subsidiary, (c) the
Borrower and ITG may make the Initial Restricted Payment and (d) so long as
immediately before after giving effect thereto (i) no Default would exist and be
continuing and (ii) Consolidated Shareholders' Equity is greater than or equal
to $80,000,000, the Borrower may declare and pay dividends in an amount not in
excess of 25% of the net income of the Borrower and the Subsidiaries determined
on a consolidated basis in accordance with GAAP for the immediately preceding
four fiscal quarters.
Section 7.09 Transactions with Affiliates
The Borrower will not, and will not permit any of the Subsidiaries
to, sell, transfer, lease or otherwise dispose (including pursuant to a merger)
any property or assets to, or purchase, lease or otherwise acquire (including
pursuant to a merger) any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except in the ordinary course of
business at prices and on terms and conditions not less favorable to the
Borrower or such Subsidiary than could be obtained on an arms-length basis from
unrelated third parties; provided, however, that the foregoing limitations shall
not apply to (i) the Initial Transactions, (ii) any transaction permitted by
Section 7.08, and (iii) loans made by the Borrower to Affiliates or employees to
enable such Affiliates or employees to pay the exercise price, and pay related
income tax withholding obligations in respect of, stock options in the Borrower
that expire April 30, 1999.
Section 7.10 Restrictive Agreements
The Borrower will not, and will not permit any of the Subsidiaries
to, directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that prohibits, restricts or imposes any condition upon (a)
the ability of the Borrower or any Subsidiary to create, incur or permit to
exist any Lien upon any of its property or assets or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its equity securities or to make or repay loans or advances to the Borrower or
any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other
Subsidiary, provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions and conditions existing on the date hereof identified on
Schedule 7.10 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary pending such sale,
provided that such restrictions and conditions apply only to the Subsidiary that
is to be sold and such sale is permitted hereunder, (iv) clause (a) of this
Section shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (v) clause (a) of this Section shall not apply to customary
provisions in leases restricting the assignment thereof.
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Section 7.11 Concerning the POSIT License Agreement
The Borrower will not, and will not permit any Subsidiary to, amend,
modify or waive any of its rights under the POSIT License Agreement other than
amendments, modifications or waivers that would not reasonably be expected to
adversely affect the Lender.
Section 7.12 Leverage Ratio
The Borrower will not permit the Leverage Ratio to be greater than
2.50:1.00.
Section 7.13 Net Capital
The Borrower shall not at any time permit the Net Capital before
total haircuts of ITG (calculated in accordance with Rule 15c3-1) to be less
than the sum of $7,500,000 plus the Credit Exposure at such time.
Section 7.14 Consolidated Shareholders' Equity
The Borrower will not permit Consolidated Shareholders' Equity to be
less than the sum of $60,000,000 plus 50% of the net income (if positive) of the
Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP
for each fiscal quarter ending after the date hereof, measured on the date
thereafter on which financial statements for such fiscal quarter are delivered
to the Lender.
Section 7.15 Capital Expenditures
The Borrower will not permit Capital Expenditures made or obligated
to be made by the Borrower and the Subsidiaries on a consolidated basis to be
greater than $10,000,000 in any fiscal year.
Section 7.16 Initial Transactions
Notwithstanding anything to the contrary in any Loan Document,
nothing contained in this Article shall prevent the consummation of any of the
Initial Transactions.
ARTICLE 8. EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee, commission or any other amount (other than an amount referred to in clause
(a) of this Article)
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payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any other Subsidiary in or in connection with any Loan
Document or any amendment or modification hereof or waiver thereunder, or in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with any Loan Document or any amendment or modification hereof
or waiver thereunder, shall prove to have been incorrect in any material respect
when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 6.03 (with respect to the Borrower's
or ITG's existence) or in Article 7, or the Borrower shall fail to observe or
perform any covenant, condition or agreement contained in Section 5(i) of the
Security Agreement.
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document to which it is a party
(other than those specified in clause (a), (b) or (d) of this Article), and such
failure shall continue unremedied for a period of 30 days after the Borrower
shall have obtained knowledge thereof;
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable (after
giving effect to any applicable grace period);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity (in each case after giving effect to any applicable grace period),
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due solely as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for 45
days or an order or decree approving or ordering any of the foregoing shall be
entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any
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proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount (to the extent not paid or fully covered by insurance) in excess of
$5,000,000 shall be rendered against the Borrower or any Subsidiary or any
combination thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed or
bonded, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Subsidiary to enforce any such
judgment;
(l) an ERISA Event shall have occurred that, when taken together
with all other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect;
(m) any Loan Document shall cease, for any reason, to be in full
force and effect, or the Borrower shall so assert in writing or shall disavow
any of its obligations thereunder;
(n) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by the Borrower not to be, a valid and
perfected Lien on any Collateral, with the priority required by the applicable
Security Document, except (i) as a result of the sale or other disposition of
the applicable Collateral in a transaction permitted under the Loan Documents or
(ii) as a result of the Lender's failure to maintain possession of any stock
certificates delivered to it under the Security Agreement; or
(o) the POSIT License Agreement shall have been terminated or any
event shall have occurred (after any applicable grace period), the result of
which gives the POSIT Joint Venture the right to do so as the result of a
breach; or
(p) a Change in Control shall occur;
then, and in every such event (other than an event described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of such
event, the Lender may and by notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate the Commitment,
and thereupon the Commitment shall terminate immediately and (ii) declare the
Loans then outstanding to be due and payable in whole (or in part, in which case
any principal not so declared to be due and payable may thereafter be declared
to be due and payable), and thereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued under the
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Loan Documents, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event described in clause (h) or (i) of this
Article, the Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued under the Loan Documents, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE 9. MISCELLANEOUS
Section 9.01 Notices
Except in the case of notices and other communications expressly permitted
to be given by telephone, all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 380 Madison Avenue, New York, NY
10017, Attention of John R. MacDonald, Senior Vice President and Chief Financial
Officer (Telephone No. (212) 444-6252; Telecopy No. (212) 444-6490);
(b) if to the Lender to it at One Wall Street, New York, New York
10286, Attention of Mark T. Rogers, Vice President (Telephone No. (212)
635-6827; Telecopy No. (212) 809-9566).
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
Section 9.02 Waivers; Amendments
(a) No failure or delay by the Lender in exercising any right or
power under any Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Lender under the Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of any Loan Document or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any Default, regardless of whether the Lender may
have had notice or knowledge of such Default at the time.
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(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Lender.
Section 9.03 Expenses; Indemnity; Damage Waiver
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Lender and its Affiliates, including the reasonable fees,
charges and disbursements of counsel for the Lender, in connection with the
preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions of any Loan Document (whether or not
the transactions contemplated thereby shall be consummated) and (ii) all
reasonable out-of-pocket expenses incurred by the Lender, including the
reasonable fees, charges and disbursements of any counsel for the Lender, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loans made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans.
(b) The Borrower shall indemnify the Lender and each Related Party
(each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees, charges and disbursements of
any counsel for any. Indemnitee incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of any Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties to the Loan Documents of their
respective obligations thereunder or the consummation of the Transactions or any
other transactions contemplated thereby, (ii) any Loan or the use of the
proceeds thereof, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
the Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of the Subsidiaries or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, the Borrower shall
not assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, any Loan Document or any agreement, instrument or other document
contemplated thereby, the Transactions or any Loan or the use of the proceeds
thereof.
(d) All amounts due under this Section shall be payable promptly but
in no event later than 30 days after written demand therefor, provided that the
Borrower shall have received a breakdown of such amounts in reasonable detail if
it so requests.
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Section 9.04 Successors and Assigns
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Lender (and any attempted assignment or transfer by the Borrower without
such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, the Related Parties) any legal or
equitable right, remedy or claim under or by reason of any Loan Document.
(b) The Lender may, with the consent of the Borrower (such consent
not to be unreasonably withheld or delayed or to be required during the
continuance of an Event of Default), assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of the Commitment and the Loans at the time owing to it); provided that
(i) any such assignment is an aggregate amount of not less than $3,000,000, and
(ii) The Bank of New York continues to hold at all times not less than 51% of
the Credit Exposure. The Lender shall, to the extent of the interest assigned,
be released from its obligations under the Loan Documents (and, in the case of
an assignment covering all of the Lender's rights and obligations under the Loan
Documents, the Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 3.03, 3.04 and 9.03). The Lender agrees
that it will not assign any such rights or obligations to a Plan.
(c) The Lender may, without the consent of the Borrower or the
Lender, sell participations to one or more banks or other entities (other than a
Plan) (each such bank or other entity being called a "Participant") in all or a
portion of the Lender's rights and obligations under the Loan Documents
(including all or a portion of the Commitment and the Loans owing to it),
provided that (i) the Lender's obligations under the Loan Documents shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower and the
Lender shall continue to deal solely and directly with the Lender in connection
with the Lender's rights and obligations under the Loan Documents. Any agreement
or instrument pursuant to which the Lender sells such a participation shall
provide that the Lender shall retain the sole right to enforce the Loan
Documents and to approve any amendment, modification or waiver of any provision
of any Loan Documents, provided that such agreement or instrument may provide
that the Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver that affects such Participant and which would
reduce the principal amount of any Loan, or reduce the rate of interest thereon,
or reduce any fees or other amounts payable under the Loan Documents. Subject to
paragraph (d) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 3.03 and 3.04 to the same extent as if
it were the Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 9.08 as though it were the
Lender, provided that such Participant agrees that if by exercising any right of
setoff or counterclaim or otherwise, it obtains payment in respect of its
participation resulting in it receiving payment of a
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greater proportion of the aggregate amount of its participation than the
proportion it is entitled to receive, then such Participant shall purchase (for
cash at face value) an additional participation in the Loans of the Lender to
the extent necessary so that the benefit of all such payments shall be shared by
the Lender and such Participant in accordance with the terms of the agreement
pursuant to which it purchased its participations provided further that (i) if
any such participations are purchased pursuant to this sentence and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this sentence shall not
be construed to apply to any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
the Lender as consideration for the assignment of or sale of a participation in
any of its Loans. The Borrower consents to the foregoing and agrees, to the
extent it may effectively do so under applicable law, that in acquiring a
participation pursuant to the foregoing arrangements, the Participant may
exercise against the Borrower rights of setoff and counterclaim with respect to
such participation as fully as if the Participant were a direct creditor of the
Borrower in the amount of such participation. A Participant shall not be
entitled to receive any greater payment under Section 3.03 or 3.04 than the
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower's prior written consent. A Participant
that is organized under the laws of a jurisdiction other than United States of
America, any State thereof or the District of Columbia shall not be entitled to
the benefits of Section 3.04 unless the Borrower is notified of the
participation sold to such Participant and, if such Participant is entitled to
an exemption from or reduction of withholding tax under the law of the United
States of America, such Participant agrees to deliver to the Borrower (with a
copy to the Lender), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.
(d) The Lender may at any time pledge or assign a security interest
in all or any portion of its rights under the Loan Documents to secure
obligations of the Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest, provided that no such pledge
or assignment of a security interest shall release the Lender from any of its
obligations under the Loan Documents or substitute any such pledgee or assignee
for the Lender as a party hereto.
Section 9.05 Survival
All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of any Loan Document and the
making of any Loan, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on
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any Loan or any fee or any other amount payable under the Loan Documents is
outstanding and unpaid and so long as the Commitment have not expired or
terminated. The provisions of Sections 3.03, 3.04 and 9.03 shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans and the termination
of the Commitment or the termination of this Agreement or any provision hereof.
Section 9.06 Counterparts; Integration
This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
contract. This Agreement constitutes the entire contract among the parties
relating to the subject matter hereof and supersedes any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
Section 9.07 Severability
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
Section 9.08 Right of Setoff
If an Event of Default shall have occurred and be continuing, the
Lender and its Affiliates are hereby authorized at any time and from time to
time, to the fullest extent permitted by applicable law, to setoff and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other obligations at any time owing by it to or for the credit
or the account of the Borrower against any of and all the obligations of the
Borrower now or hereafter existing under this Agreement held by it, irrespective
of whether or not it shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of the Lender and its
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that it may have.
Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan
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Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that, to the extent
permitted by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by applicable law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Lender may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against the Borrower, or
any of its property, in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 9.10 WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT 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 AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
Section 9.11 Headings
Article and Section headings and the Table of Contents used herein
are for convenience of reference only, are not part of this Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Agreement.
Section 9.12 Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges and other
amounts that are treated as
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interest on such Loan under applicable law (collectively the "charges"), shall
exceed the maximum lawful rate (the "maximum rate") that may be contracted for,
charged, taken, received or reserved by the Lender in accordance with applicable
law, the rate of interest payable in respect of such Loan hereunder, together
with all of the charges payable in respect thereof, shall be limited to the
maximum rate and, to the extent lawful, the interest and the charges that would
have been payable in respect of such Loan but were not payable as a result of
the operation of this Section shall be cumulated, and the interest and the
charges payable to the Lender in respect of other Loans or periods shall be
increased (but not above the maximum rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Rate to the date of
repayment, shall have been received by the Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
INVESTMENT TECHNOLOGY GROUP, INC.
By: /s/ John R. MacDonald
-----------------------------
Name: John R. MacDonald
Title: Chief Financial Officer
THE BANK OF NEW YORK
By: /s/ Mark T. Rogers
-----------------------------
Name: Mark T. Rogers
Title: Vice President