Appendix A
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "AGREEMENT"), dated as of the 17th day of
March, 1999, by and between JEFFERIES GROUP, INC., a Delaware corporation
("JEFG"), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation ("ITGI",
and, together with JEFG, the "CONSTITUENT CORPORATIONS").
WHEREAS, the Board of Directors of JEFG has approved the business
transactions pursuant to which all the assets, businesses and Liabilities (as
defined below) of ITGI and its subsidiaries will be separated from all other
assets, businesses and Liabilities of JEFG;
WHEREAS, JEFG and JEF Holding Company, Inc., a Delaware corporation and
wholly-owned subsidiary of JEFG ("HOLDING"), concurrently herewith are entering
into a Distribution Agreement (the "DISTRIBUTION AGREEMENT"), which provides
that (x) JEFG will transfer to Jefferies & Company, Inc., a Delaware corporation
and wholly-owned subsidiary of JEFG ("JEFCO"), prior to the time that JEFCO
becomes a subsidiary of Holding in connection with the Contribution (defined
below), and to Holding, and JEFCO and Holding will accept from JEFG, all of
JEFG's assets other than JEFG's capital stock in ITGI (collectively, the
"CONTRIBUTION"), and JEFG will assign to Holding (or to JEFCO, as appropriate),
and Holding and JEFCO (as appropriate) will assume from JEFG, all JEFG
liabilities excluding all liabilities of, or related to, ITGI (the "ASSUMPTION")
(such transfer and acceptance pursuant to the Contribution and such assignment
and assumption pursuant to the Assumption being collectively referred to herein
as the "TRANSFERS"), and (y) all of the outstanding common stock of Holding (the
"Holding Common Stock") will be distributed in a pro rata dividend (the
"DISTRIBUTION") to JEFG's stockholders;
WHEREAS, as of March 16, 1999, ITGI declared a dividend in an amount equal
to $4.00 per share in cash payable on the business day immediately succeeding
the consummation of the pre-closing to the Merger referred to in Sections 2, 8,
9 and 10 hereof (the "PRE-CLOSING") to all its stockholders of record as of
April 20, 1999, including JEFG (the "SPECIAL ITGI CASH DIVIDEND");
WHEREAS, following the Special ITGI Cash Dividend, the Transfers, and the
Distribution, (x) ITGI will merge (the "MERGER," and together with the Transfers
and the Distribution, collectively the "JEFG TRANSACTIONS") with and into JEFG
and (y) outstanding shares of Common Stock, par value $0.01 per share (the "ITGI
COMMON STOCK"), of ITGI will be canceled or converted into the right to receive
shares of Common Stock, par value $0.01 per share (the "JEFG COMMON STOCK"), of
JEFG in the manner set forth herein;
WHEREAS, JEFG, Holding and ITGI concurrently herewith are entering into a
Tax Sharing and Indemnification Agreement (the "TAX AGREEMENT"), which sets
forth the rights and obligations of JEFG and Holding following the Merger with
respect to certain tax matters, and JEFG and Holding concurrently herewith are
entering into a Benefits Agreement (the "BENEFITS AGREEMENT," and together with
the Distribution Agreement and the Tax Agreement, the "ANCILLARY AGREEMENTS"),
which sets forth the rights and obligations of JEFG and Holding following the
Merger with respect to certain employee benefit matters;
WHEREAS, the Boards of Directors of JEFG and ITGI have each determined that
the combination of JEFG and ITGI into one publicly traded corporation after the
Transfers and the Distribution is in the best interest of JEFG and ITGI and have
each approved this Merger Agreement and the Merger upon the terms and conditions
set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a tax-free liquidation of ITGI into JEFG under Section 332 of the
Internal Revenue Code of 1986, as amended
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(the "CODE"), and a reorganization for ITGI's stockholders, excluding JEFG (the
"ITGI PUBLIC STOCKHOLDERS") under Section 368(a)(1)(A) of the Code;
NOW THEREFORE, in consideration of the agreements and conditions set forth
below, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. THE MERGER
Subject to the terms and conditions hereof and in accordance with the
General Corporation Law of the State of Delaware, as amended (the "DGCL"), at
the Effective Time (as hereinafter defined): (a) ITGI shall be merged with and
into JEFG and the separate existence of ITGI shall cease; (b) JEFG, as the
surviving corporation in the Merger (the "SURVIVING CORPORATION"), (i) shall
continue its corporate existence under the laws of the State of Delaware, (ii)
shall change its name to "INVESTMENT TECHNOLOGY GROUP, INC.", and (iii) shall
succeed to all rights, assets, liabilities and obligations of ITGI in accordance
with the DGCL; (c) the Certificate of Incorporation of JEFG, as in effect
immediately prior to the Effective Time, shall continue as the Certificate of
Incorporation of the Surviving Corporation, as amended and restated as set forth
on Appendix A hereto (with the amendments referred to therein being referred to
herein as the "CHARTER AMENDMENT"); (d) the By-laws of JEFG, as in effect
immediately prior to the Effective Time, shall continue as the By-laws of the
Surviving Corporation, as amended and restated as set forth on Appendix B
hereto; (e) the directors of ITGI immediately prior to the Effective Time shall
be the directors of the Surviving Corporation; and (f) the officers of ITGI
immediately prior to the Effective Time shall continue as the officers of the
Surviving Corporation. From and after the Effective Time, the Merger will have
all the effects provided by applicable law.
2. STOCKHOLDERS' MEETINGS; PRE-CLOSING, CLOSING AND EFFECTIVE TIME OF THE
MERGER; SEC FILINGS
(a) Prior to the date hereof, JEFG and Holding have jointly prepared and
filed with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended and the rules and regulations
thereunder (the "EXCHANGE ACT"), a proxy statement/information statement (as
amended from time to time, the "PROXY/INFORMATION STATEMENT") and JEFG and ITGI
have jointly prepared and filed with the SEC a proxy statement/prospectus (as
amended from time to time, the "PROXY/PROSPECTUS"). The Proxy/Information
Statement comprises and will comprise (i) proxy material of JEFG with respect to
the approval and adoption of this Agreement (including the Charter Amendment)
and the issuance of JEFG Common Stock pursuant to this Agreement and the
approval of certain employee benefit plans of Holding (the "PLAN PROPOSALS") and
(ii) an information statement with respect to the Distribution and Holding,
which will be filed with the SEC as part of a Form 10 registration statement of
Holding under the Exchange Act. The Proxy/Prospectus comprises and will comprise
proxy material of ITGI with respect to the approval and adoption of this
Agreement, the election of ITGI directors and the ratification of ITGI's auditor
appointment and a registration statement (as amended from time to time, the
"REGISTRATION STATEMENT"), including a prospectus, of JEFG under the Securities
Act of 1933, as amended and the rules and regulations thereunder (the
"SECURITIES ACT"), with respect to JEFG Common Stock to be issued to the ITGI
Public Stockholders pursuant to this Agreement in connection with the Merger.
JEFG will use its best efforts to respond to any comments of the SEC and take
such other actions as may be necessary or appropriate with respect to the
Proxy/Information Statement to enable the Proxy/Information Statement in
definitive form to be mailed to JEFG's stockholders as promptly as practicable.
Each of JEFG and ITGI will use their respective best efforts to respond to any
comments of the SEC and take such other actions as may be necessary or
appropriate to enable the SEC to declare the Registration Statement effective
under the Securities Act and to cause a Proxy/Prospectus in definitive form to
be mailed to ITGI's stockholders as promptly as practicable.
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(b) JEFG shall submit this Agreement and the issuance of JEFG Common Stock
pursuant to this Agreement and the Plan Proposals to the holders of JEFG Common
Stock and ITGI shall submit this Agreement, the election of ITGI directors and
the ratification of ITGI's auditor appointment and to the holders of ITGI Common
Stock, respectively, for approval and adoption at stockholders' meetings to be
held April 20, 1999 (the "STOCKHOLDERS' MEETINGS").
(c) Subject to the satisfaction of the conditions contained in Sections 8,
9 and 10 hereof, the Pre-Closing shall occur on the day of the Stockholders'
Meetings, unless extended in writing by JEFG and ITGI (the "PRE-CLOSING DATE").
Immediately following completion of the Pre-Closing, JEFG, ITGI, Holding and The
Bank of New York, as escrow agent (the "ESCROW AGENT"), shall enter into a
pre-closing and escrow agreement dated as of the Pre-Closing Date, substantially
in the form of Appendix C hereto (the "ESCROW AGREEMENT"), pursuant to which:
(1) ITGI shall deposit into escrow, cash in an amount equal to the
aggregate Special ITGI Cash Dividend, to be released without
condition or limitation by the Escrow Agent on the business day
following the completion of the Pre-Closing to all of ITGI's
stockholders of record as of the close of business on the date of the
Stockholders' Meetings;
(2) Documents shall be executed and placed into escrow to effectuate, in
accordance with the Distribution Agreement, any remaining Transfers
immediately following the Escrow Agent's payment to JEFCO of $60
million, consistent with the direction of JEFG delivered on the
Pre-Closing Date instructing the Escrow Agent to make such payment to
JEFCO in respect of JEFG's pro rata share of the Special ITGI Cash
Dividend, which remaining Transfers will be effected through the
Escrow Agent in accordance with the Escrow Agreement immediately
following payment of the Special ITGI Cash Dividend;
(3) JEFG shall deposit into escrow an agreement between JEFG and
EquiServe, as distribution agent for the Holding Common Stock (the
"DISTRIBUTION AGENT"), pursuant to which JEFG shall irrevocably
direct the Distribution Agent to, and the Distribution Agent shall
agree to, distribute all Holding Common Stock to JEFG's stockholders
immediately after being instructed to do so by the Escrow Agent, who
shall issue such instructions unless the Escrow Agent receives a
certificate from ITGI or JEFG on or prior to 9:00 a.m. E.T. on the
Closing Date that either or both of the conditions referred to in
Section 11(b) or (c) shall not have been satisfied; and
(4) ITGI and JEFG shall deposit into escrow the executed Certificate of
Merger (as defined below), to be filed without condition or
limitation by the Escrow Agent with the Secretary of State of the
State of Delaware after the Escrow Agent's (i) issuance of the
instructions to the Distribution Agent described in clause (3) above
and (ii) receipt of confirmation from the Distribution Agent
confirming in writing its book-entry distribution of all Holding
Common Stock to JEFG's stockholders.
Subject to completion of the Pre-Closing and upon the satisfaction of the
conditions contained in Section 11(b) and (c) herein, the Constituent
Corporations shall hold a closing (the "CLOSING") at the offices of Morgan,
Lewis & Bockius LLP, New York, New York on the fifth business day following the
date of the Stockholders' Meetings unless extended in writing by JEFG and ITGI
(the "CLOSING DATE"). On the Closing Date, the Escrow Agent, on behalf of the
Constituent Corporations, shall cause the Merger to be consummated by filing a
certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State
of the State of Delaware in accordance with clause (4) above and the provisions
of the Escrow Agreement (the date and time of such filing, or such later date or
time agreed upon by JEFG and ITGI in accordance with the DGCL and set forth
therein, the "EFFECTIVE TIME").
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3. CONVERSION AND CANCELLATION OF SECURITIES
(a) At the Effective Time, each share of ITGI Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of ITGI
Common Stock described in Section (b) of this Section) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive such number of shares of JEFG Common Stock equal to
the result obtained by dividing (x) the total number of shares of JEFG Common
Stock outstanding immediately prior to the Effective Time by (y) the total
number of shares of ITGI Common Stock held by JEFG immediately prior to the
Effective Time (the "EXCHANGE RATIO"); provided that no fractional shares of
JEFG Common Stock shall be issued and, in lieu thereof, a cash payment shall be
made as provided in Section 4(i) herein.
(b) At the Effective Time, each share of ITGI Common Stock held in the
treasury of ITGI or held by JEFG immediately prior to the Effective Time, shall
by virtue of the Merger and without any action on the part of the holder
thereof, be automatically canceled and retired and cease to exist, and no cash,
securities or other property shall be payable in respect thereof.
(c) The holders of shares of ITGI Common Stock or JEFG Common Stock shall
not be entitled to appraisal rights as a result of either of the Transfers or
the Merger.
4. EXCHANGE OF CERTIFICATES
(a) Prior to the Pre-Closing Date, JEFG shall select a bank or trust
company to act as exchange agent (the "EXCHANGE AGENT") in connection with the
surrender of certificates evidencing shares of ITGI Common Stock converted into
shares of JEFG Common Stock pursuant to the Merger. On the Pre-Closing Date,
JEFG shall deposit with the Escrow Agent one or more certificates representing
the shares of JEFG Common Stock issuable pursuant to Section 3(a) (the "MERGER
STOCK"), which shares of Merger Stock shall be issued in accordance with this
Agreement at the Effective Time. At and following the Effective Time, JEFG shall
deliver to the Exchange Agent such cash as may be required from time to time to
make payment of cash in lieu of fractional shares in accordance with Section
4(i) hereof.
(b) As soon as practicable after the Effective Time, JEFG shall cause the
Exchange Agent to mail to each person who was, at the Effective Time, a holder
of record of a certificate or certificates that immediately prior to the
Effective Time evidenced outstanding shares of ITGI Common Stock (the
"CERTIFICATES") (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall be in a form and
contain any other provisions as JEFG and the Surviving Corporation may
reasonably agree and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the Merger Stock. Upon
the proper surrender of Certificates to the Exchange Agent, together with a
properly completed and duly executed letter of transmittal and such other
documents as may be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor certificates
representing the shares of Merger Stock that such holder has the right to
receive pursuant to the terms hereof (together with any dividend or distribution
with respect thereto made after the Effective Time and any cash paid in lieu of
fractional shares pursuant to Section 4(i)), and the Certificate so surrendered
shall be canceled. In the event of a transfer of ownership of ITGI Common Stock
that is not registered in the transfer records of ITGI, a certificate
representing the proper number of shares of Merger Stock may be issued to a
transferee if the Certificate representing such ITGI Common Stock is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence reasonably satisfactory to JEFG that any
applicable stock transfer tax has been paid.
(c) After the Effective Time, each outstanding Certificate which
theretofore represented shares of ITGI Common Stock shall, until surrendered for
exchange in accordance with this Section 4, be
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deemed for all purposes to evidence ownership of full shares of JEFG Common
Stock into which the shares of ITGI Common Stock (which, prior to the Effective
Time, were represented thereby) shall have been so converted.
(d) Any Merger Stock deposited with the Exchange Agent pursuant to Section
4(a) hereof, and not exchanged pursuant to Section 4(b) hereof for ITGI Common
Stock within six months after the Effective Time, and any cash deposited with
the Exchange Agent pursuant to Section 4(a) hereof, and not exchanged for
fractional interests pursuant to Section 4(i) hereof within six months after the
Effective Time, shall be returned by the Exchange Agent to the Surviving
Corporation which shall thereafter act as exchange agent subject to the rights
of holders of ITGI Common Stock hereunder.
(e) At the Effective Time, the stock transfer books of ITGI shall be closed
and no transfer of shares of ITGI Common Stock shall thereafter be made.
(f) None of JEFG, ITGI, the Surviving Corporation or the Exchange Agent
will be liable to any holder of shares of ITGI Common Stock for any shares of
Merger Stock, dividends or distributions with respect thereto or cash payable in
lieu of fractional shares pursuant to Section 4(i) hereof delivered to a state
abandoned property administrator or other public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) If any Certificates shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificates to
be lost, stolen or destroyed, the Exchange Agent will deliver in exchange for
such lost, stolen or destroyed Certificates the Merger Stock for the shares
represented thereby, deliverable in respect thereof, as determined in accordance
with the terms hereof. When authorizing such payment in exchange for any lost,
stolen or destroyed Certificates, the person to whom the Merger Stock is to be
issued, as a condition precedent to such delivery, shall give JEFG a bond
satisfactory to JEFG against any claim that may be made against JEFG with
respect to the Certificates alleged to have been lost, stolen or destroyed.
(h) No dividend or other distribution declared or made after the Effective
Time with respect to common stock of the Surviving Corporation with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Merger Stock issuable upon surrender
thereof until the holder of such Certificate shall surrender such Certificate in
accordance with Section 4(b). Subject to the effect of applicable law, following
surrender of any such Certificate there shall be paid, without interest, to the
record holder of certificates representing whole shares of Merger Stock issued
in exchange therefor: (i) at the time of such surrender, the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to common stock of the Surviving Corporation; and (ii) the
amount of dividends or other distributions with respect to common stock of the
Surviving Corporation that are properly payable with respect to such Merger
Stock arising out of the fact that the Surviving Corporation shall have
established for a dividend or distribution concerning common stock of the
Surviving Corporation with (A) a record date subsequent to the Effective Time
but prior to surrender of such Certificate for such Merger Stock and (B) a
payment date subsequent to the surrender of such Certificate.
(i) No certificates or scrip evidencing fractional shares of Merger Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests shall not entitle the owner thereof to any rights of
a stockholder of JEFG or the Surviving Corporation. In lieu of any such
fractional shares, each holder of a Certificate previously evidencing ITGI
Common Stock, upon surrender of such Certificate for exchange pursuant to this
Section 4, shall be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (a) the closing regular way price for a
share of the Surviving Corporation's common stock on the NYSE Composite
Transaction Tape on the first business day immediately following the Effective
Time, by (b) the fractional interest to which such holder would otherwise be
entitled; PROVIDED, HOWEVER, no holder of ITGI Common Stock will receive cash
for any fractional share interest in an amount equal to or greater than such
closing
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regular way price of one full share of the Surviving Corporation's common stock.
The Surviving Corporation shall be obligated to fund all amounts required to be
paid in accordance with the preceding sentence. The fractional share interests
of each holder of a Certificate previously evidencing ITGI Common Stock will be
aggregated.
5. OPTIONS
(a) Prior to the Effective Time, each outstanding option to purchase or
acquire ITGI Common Stock shall have been adjusted for the effects of the
Special ITGI Cash Dividend in the following fashion: the exercise price of each
such ITGI option will be reduced so that (1) the ratio of the unadjusted
exercise price over the volume weighted average regular way market price of the
ITGI Common Stock on the trading day that the Special ITGI Cash Dividend is paid
(the "PRE-DIVIDEND PRICE") is equal to (2) the ratio of the adjusted exercise
price over the greater of (x) the volume weighted average regular way market
price of the ITGI Common Stock on the trading day following the trading day that
the Special ITGI Cash Dividend is paid or (y) the Pre-Dividend Price minus the
per share amount of the Special ITGI Cash Dividend (with the greater of (x) or
(y) constituting the "POST-DIVIDEND PRICE"); PROVIDED, HOWEVER, that the
adjusted exercise price shall not be higher than the unadjusted exercise price.
In the event, and only in the event, there is an adjustment to the exercise
price pursuant to the preceding sentence, to compensate for the loss in the
intrinsic value of each option (the spread of the market price above the
exercise price), the number of shares issuable upon exercise of the options of
each holder will be adjusted to such greater number that is equal to the
aggregate number of shares issuable pursuant to the unadjusted options
multiplied by the ratio of the Pre-Dividend Price divided by the Post-Dividend
Price.
(b) Following the adjustments set forth in paragraph (a) of this Section 5,
at the Effective Time, each option granted by ITGI to purchase shares of ITGI
Common Stock, which is outstanding and unexercised immediately prior thereto,
shall be assumed by the Surviving Corporation and converted into an option to
purchase such number of shares of the Surviving Corporation's Common Stock and
at such exercise price as are determined as provided below (and otherwise having
the same vesting, duration and other terms as the original option):
(i) the number of shares of the Surviving Corporation's Common Stock to
be subject to the new option shall be equal to the product of (1)
the number of shares of ITGI Common Stock subject to the original
option and (2) the Exchange Ratio, the product being rounded, if
necessary, up or down, to the nearest whole share; and
(ii) the exercise price per share of the Surviving Corporation's Common
Stock under the new option shall be equal to (1) the exercise price
per share of the ITGI Common Stock under the original option
divided by (2) the Exchange Ratio, rounded, if necessary, up or
down, to the nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code. Prior to the Effective Time,
the Board of Directors of ITGI shall take such action as may be required under
the governing option plans and agreements to effectuate the foregoing.
At the Effective Time, the Surviving Corporation will assume the ITGI 1994 Stock
Option and Long-Term Incentive Plan (as amended and restated January 29, 1997),
the ITGI Employee Stock Purchase Plan and the ITGI Non-Employee Directors' Stock
Option Plan as the successor to ITGI under such plans. Awards authorized under
such plans may be made to employees of the Surviving Corporation and its
subsidiaries following the Effective Time.
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6. REPRESENTATIONS AND WARRANTIES
6A. REPRESENTATIONS AND WARRANTIES OF JEFG. JEFG represents and warrants
to, and agrees with, ITGI as follows:
(a) Organization, Etc. JEFG is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as is now being conducted as described in the JEFG SEC
Reports (defined below). Except as set forth on Section 6A(a) of the disclosure
schedule attached to this Agreement (the "DISCLOSURE SCHEDULE"), JEFG is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where such
failure to so qualify would not have any material adverse effect on JEFG and its
subsidiaries taken as a whole (a "JEFG MATERIAL ADVERSE EFFECT"). JEFG has
provided to ITGI complete and correct copies of its certificate of incorporation
and bylaws (the "ORGANIZATIONAL DOCUMENTS"), as currently in effect.
(b) Authority of JEFG. JEFG has full corporate power and authority to (i)
execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements and (ii) to consummate the JEFG Transactions. The
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation of the JEFG Transactions have been duly and
validly authorized by the Board of Directors of JEFG, and no other corporate
proceedings on the part of JEFG are necessary to authorize this Agreement or any
of the Ancillary Agreements or to consummate the JEFG Transactions, other than
the approval of the adoption by the JEFG stockholders of this Agreement and the
issuance of JEFG Common Stock pursuant to this Agreement. Each of this Agreement
and the Ancillary Agreements has been duly and validly executed and delivered by
JEFG and constitutes valid and binding agreements of JEFG, enforceable against
JEFG in accordance with their respective terms.
(c) No Consent. No filing or registration with, or permit, authorization,
consent or approval of, or notification or disclosure (collectively,
"GOVERNMENTAL CONSENTS") to, any United States (federal, state or local) or
foreign government, or governmental, regulatory or administrative authority,
agency or commission, court or other body or any arbitral tribunal (each, a
"GOVERNMENTAL AUTHORITY") or any other third party (collectively, "CONSENTS") is
required in connection with the execution, delivery and performance by JEFG of
this Agreement or any of the Ancillary Agreements or the consummation by JEFG of
the JEFG Transactions, except (i) the filing and effectiveness of the
Proxy/Information Statement under the Exchange Act, the filing of the
Proxy/Prospectus under the Exchange Act and the Securities Act and the
effectiveness of the Proxy/Prospectus under the Securities Act, (ii) the
applicable approval of this Agreement (including the Charter Amendment) and the
issuance of JEFG Common Stock pursuant to this Agreement by the holders of JEFG
Common Stock, (iii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, (iv) such consents, approvals, orders,
permits, authorizations, registrations, declarations and filings as may be
required under the Blue Sky laws of various states, (v) the listing on the New
York Stock Exchange of the common stock of the Surviving Corporation, in
connection with the Merger, and of Holding, in connection with the Distribution,
and (vi) as set forth in Section 6A(c) of the Disclosure Schedule.
(d) No Violation. Assuming that all Consents have been duly made or
obtained as contemplated by Section 6A(c), the execution, delivery and
performance by JEFG of this Agreement and the Ancillary Agreements and the
consummation by JEFG of the JEFG Transactions will not (i) violate any provision
of the Organizational Documents of JEFG, (ii) to the best of JEFG's knowledge,
violate any statute, rule, regulation, order or decree of any Governmental
Authority by which JEFG or any of its subsidiaries other than ITGI and its
subsidiaries (the "NON-ITGI SUBSIDIARIES"), or their respective assets, may be
bound or affected or (iii) result in a material violation or breach of, or
constitute a material default (or give rise to any right of termination,
cancellation, acceleration, redemption or repurchase) under, any of the terms,
conditions or provisions of (x) any note, bond, mortgage,
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indenture or deed of trust relating to indebtedness for borrowed money or (y)
any material license, lease or other agreement, instrument or obligation to
which JEFG or any of the Non-ITGI Subsidiaries is a party or by which any of
their respective assets may be bound or affected.
(e) Capitalization of JEFG. The authorized capital stock of JEFG consists
of 100,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock,
$.01 par value per share ("JEFG PREFERRED STOCK"). As of December 31, 1998,
there were 21,230,030 JEFG Common Stock and no shares of JEFG Preferred Stock
outstanding. All issued and outstanding shares of capital stock of JEFG are duly
authorized and validly issued, fully paid, nonassessable and free of preemptive
rights with respect thereto. As of the date hereof, 695,499 shares of JEFG
Common Stock are issuable upon exercise of outstanding options or other rights
to purchase or acquire JEFG Common Stock ("JEFG COMMON STOCK EQUIVALENTS") and
301,682 shares of JEFG Common Stock are reserved under employee stock ownership,
stock purchase, equity compensation and incentive plans of JEFG and the Non-ITGI
Subsidiaries. Prior to the Effective Time, JEFG will use its best efforts to
cause all JEFG Common Stock that is the subject of JEFG Common Stock Equivalents
to be issued and all JEFG Common Stock Equivalents to be exercised or canceled
or exchanged for options, shares, awards or common stock equivalents of Holding.
Except for the JEFG Common Stock Equivalents, there are no options, warrants,
calls, subscriptions, or other rights, agreements or commitments obligating JEFG
to issue, transfer or sell any shares of capital stock of JEFG or any other
securities convertible into or evidencing the right to subscribe for any such
shares.
(f) SEC Filings.
(i) JEFG has timely filed with the SEC all required forms, reports,
registration statements and documents required to be filed by it with the
SEC since January 1, 1999 (collectively, the "JEFG SEC REPORTS"), all of
which complied as to form in all material respects with the applicable
provisions of the Securities Act or the Exchange Act, as the case may be.
The JEFG SEC Reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not, as of their
respective dates, and do not contain any untrue statement of a material
fact concerning JEFG and the Non-ITGI Subsidiaries or omit to state a
material fact required to be stated therein concerning JEFG and the
Non-ITGI Subsidiaries or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
concerning JEFG and the Non-ITGI Subsidiaries.
(ii) JEFG will deliver to ITGI as soon as they become available true
and complete copies of any report or other document mailed by JEFG to its
securityholders generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time (the
"SUBSEQUENT JEFG REPORTS"). As of their respective dates, the Subsequent
JEFG Reports will not contain any untrue statement of a material fact
concerning JEFG and the Non-ITGI Subsidiaries or omit to state a material
fact required to be stated therein concerning JEFG and the Non-ITGI
Subsidiaries or necessary to make the statements therein, in the light of
the circumstances under which they are made, not misleading concerning
JEFG and the Non-ITGI Subsidiaries and will comply in all material
respects with all applicable requirements of law. The audited
consolidated financial statements and unaudited consolidated interim
financial statements of JEFG and the Non-ITGI Subsidiaries included or
incorporated by reference in the JEFG SEC Reports or to be included or
incorporated by reference in the Subsequent JEFG Reports have been
prepared or will be prepared, as the case may be, in accordance with GAAP
and fairly present or will fairly present the consolidated financial
position of JEFG and the Non-ITGI Subsidiaries, as of the dates thereof
and the consolidated results of operations and consolidated cash flow for
the periods to which they relate (subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments and to the
extent they may not include footnotes or may be condensed or summary
statements).
A-8
(g) Liabilities. To the best knowledge of JEFG, JEFG has no Liabilities
(as defined herein) other than (i) those arising under this Agreement or
described in Section 6A(g)(i) of the Disclosure Schedule, and (ii) any
Liabilities of or related to ITGI and its subsidiaries. For purposes hereof,
the term "LIABILITIES" means any and all known claims, debts, commitments,
liabilities and obligations, absolute or contingent, matured or not matured,
liquidated or unliquidated, accrued or unaccrued, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, commitments, liabilities and obligations arising
under this Agreement, any law, rule, regulation, action, order or consent
decree of any governmental entity or any award of any arbitrator of any
kind, and those arising under any contract, commitment or undertaking.
Immediately following the Transfers, JEFG will have no Liabilities other
than those described in clause (ii) above and those set forth in Section
6A(g)(ii) of the Disclosure Schedule.
(h) No JEFG Assets Used in ITGI Business. No "ASSETS" (as defined
below) of JEFG or any of its subsidiaries (other than ITGI and its
subsidiaries) are used by ITGI or any of its subsidiaries or reflected on
the consolidated balance sheet of ITGI. For purposes hereof, the term
"ASSETS" means properties, rights, contracts, leases and claims, of every
kind and description, wherever located, whether tangible or intangible, and
whether real, personal or mixed.
(i) Absence of Changes or Events. Since December 31, 1998, JEFG has
not, directly or indirectly, except as described in Section 6A(i) of the
Disclosure Schedule:
(i) except in the ordinary course of business, purchased or otherwise
acquired, or agreed to purchase or otherwise acquire, any share of
capital stock of JEFG, or any options, warrants or other equity security,
debt security or other indebtedness of JEFG or declared, set aside or
paid any dividend or otherwise made a distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital
stock;
(ii) except in the ordinary course of business (A) created or
incurred any indebtedness for borrowed money; (B) assumed, guaranteed,
endorsed or otherwise become responsible for the obligations of any other
individual, firm or corporation, or made any loans or advances to any
other individual, firm or corporation; or (C) entered into any commitment
or incurred any Liabilities;
(iii) except in the ordinary course of business, suffered any damage,
destruction or loss that is material to JEFG, whether covered by
insurance or not; or
(iv) agreed to do any of the things described in the preceding
clauses (i) through (iii).
(j) Litigation. Except as described in Section 6A(j) of the Disclosure
Schedule, there is no (1) claim, action, suit or proceeding pending or, to
the best of JEFG's knowledge, threatened against JEFG or any of the Non-ITGI
Subsidiaries by or before any Governmental Authority or (2) outstanding
judgment, order, writ, injunction or decree of any court, governmental
agency or arbitration tribunal in a proceeding to which JEFG was or is a
party or by which any of them or any of their respective assets may be bound
or affected.
(k) Compliance with Laws.
(i) Except as described in Section 6A(k)(i) of the Disclosure
Schedule, neither JEFG nor any of the Non-ITGI Subsidiaries has violated
or failed to comply with any statute, law, ordinance, regulation, rule or
order of any Governmental Authority, or any judgment, decree or order of
any court, applicable to its business or operations, except where such
violation or failure to comply would not give rise to a JEFG Material
Adverse Effect.
(ii) Except as described in Section 6A(k)(ii) of the Disclosure
Schedule, (1) JEFG has such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from
appropriate governmental agencies and bodies as are necessary to own,
lease
A-9
or operate the properties and to conduct the business of Non-ITGI
Subsidiaries in the manner described in the JEFG SEC Reports ("JEFG
LICENSES"), except where the failure to have such will not give rise to a
JEFG Material Adverse Effect; (2) JEFG is, and within the period of all
applicable statutes of limitation has been, in compliance with its
obligations under such JEFG Licenses and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or
termination of such JEFG Licenses and (3) JEFG has no knowledge of any
facts or circumstances that could reasonably be expected to result in an
inability of JEFG to renew any JEFG License. Neither the execution and
delivery by JEFG of this Agreement nor the Ancillary Agreements nor the
consummation of the JEFG Transactions will result in any revocation or
termination of any JEFG License. Set forth in Section 6A(k)(ii) of the
Disclosure Schedule is a true and complete list of all JEFG Licenses
which are necessary for the conduct of the business described in clause
(1) above.
(l) Labor and Employment Matters. Except as described in Section 6A(l)
of the Disclosure Schedule:
(i) Neither JEFG nor any of the Non-ITGI Subsidiaries is party to any
union contract or other collective bargaining agreement. JEFG and the
Non-ITGI Subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, safety, wages and hours, except where the failure to comply
will not give rise to a JEFG Material Adverse Effect, and are not engaged
in any unfair labor practice. There is no labor strike, slowdown or
stoppage pending (or any labor strike or stoppage threatened) against or
affecting JEFG or any of the Non-ITGI Subsidiaries, and no union
organizing activities with respect to any of its employees are occurring
or threatened.
(ii) Neither JEFG nor any of the Non-ITGI Subsidiaries is a party to
any employment, management services, consultation or other contract or
agreement with any past or present officer, director or employee or any
entity affiliated with any past or present officer, director or employee,
other than the agreements executed by employees generally, the forms of
which have been provided to ITGI.
(m) No Puts. Except as set forth in Section 6(A)(m) of the Disclosure
Schedule, neither the execution and delivery by JEFG of this Agreement or
the Ancillary Agreements nor the consummation of the JEFG Transactions gives
rise to any obligation of JEFG or any of the Non-ITGI Subsidiaries, or any
right of any holder of any security of JEFG or any of the Non-ITGI
Subsidiaries to require JEFG to purchase, offer to purchase, redeem or
otherwise prepay or repay any such security, or deposit any funds to effect
the same.
(n) Leases. There have been made available to ITGI true and complete
copies of each lease pursuant to which real property is held under lease by
JEFG, or, to JEFG's knowledge, under a lease to which JEFG is guarantor, and
true and complete copies of each lease pursuant to which JEFG leases real
property to others. Section 6A(n) of the Disclosure Schedule sets forth a
true and complete list of all such leases. Such leased real properties are
in good operating order and condition.
(o) Contracts and Commitments. Section 6A(o) of the Disclosure Schedule
sets forth each existing contract, obligation, commitment, agreement or
understanding of any type in any of the following categories:
(i) contracts that provide for payments by JEFG in any year
aggregating in excess of $100,000;
(ii) any contract under which JEFG has become absolutely or
contingently or otherwise liable for (1) the performance under a contract
of any other person, firm or corporation or
A-10
(2) the whole or any part of the indebtedness or liabilities of any other
person, firm or corporation;
(iii) any contract under which any amount payable by JEFG is
dependent upon the revenues or profits of JEFG or its subsidiaries;
(iv) any contract with any director, officer or five percent or
greater stockholder of JEFG or any contract with any entity in which, to
the best of JEFG's knowledge, any director, officer or stockholder or any
family member of any director, officer or stockholder has a material
economic interest; and
(v) any contract that limits or restricts where JEFG may conduct its
business or the type or line of business that JEFG may engage in.
JEFG is not in breach of or default under any such contract, obligation,
commitment, agreement or understanding.
(p) Environmental Matters. To the best knowledge of JEFG, without any
special inquiry, (i) JEFG and the Non-ITGI Subsidiaries are, and within
applicable statutes of limitation, have been, in material compliance with
all applicable Environmental Laws (as defined below), (ii) JEFG and the
Non-ITGI Subsidiaries have all material permits, authorizations and
approvals required under any applicable Environmental Laws and are in
compliance with their requirements, and the consummation by JEFG of the
transactions contemplated hereby will not require any notification,
disclosure, registration, reporting, filing, investigation, or remediation
under any Environmental Law, (iii) there are no pending or threatened
Environmental Claims (as defined below) against JEFG or any of the Non-ITGI
Subsidiaries, (iv) JEFG has no knowledge of any circumstances that could
reasonably be anticipated to form the basis of an Environmental Claim
against JEFG or any of the Non-ITGI Subsidiaries or any of their respective
properties or operations and the business operations relating thereto and
(v) there has been no disposal, spill, discharge or release of any hazardous
or toxic substance or material, as defined or regulated by any Environmental
Law, on, at or under any property that could reasonably be expected to
result in material liability of, or material costs to, JEFG under any
Environmental Law. For purposes of this Agreement, the following terms shall
have the following meanings: "ENVIRONMENTAL LAW" means any foreign, federal,
state, local or municipal statute, law, rule, regulation, ordinance, code
and any published judicial or administrative interpretation thereof
including, without limitation, any judicial or administrative order,
consent, decree or judgment relating to, regulating or imposing liability or
standards of conduct concerning the environment, health, pollution or any
pollutant, contaminant or hazardous or toxic substance or waste, and any
other chemical or material exposure to which is prohibited or limited or
which is otherwise regulated by any governmental authority. "ENVIRONMENTAL
CLAIMS" means any and all civil or criminal administrative, regulatory or
judicial actions, suits, demands, notice or demand letters, potentially
responsible party letters, claims, liens, notices of noncompliance or
violation, investigations or proceedings relating in any way to any
Environmental Law.
(q) Finders or Brokers. Other than J.P. Morgan & Co. Incorporated,
neither JEFG nor any of the Non-ITGI Subsidiaries has employed any
investment banker broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to any fee, discount
or commission.
(r) Fairness Opinion. JEFG has received the opinion of J.P. Morgan
Securities Inc. attached as Appendix E hereto.
(s) Board Recommendation. The Board of Directors of JEFG has, by a
unanimous vote at a meeting of such Board duly held on March 17, 1999,
approved and adopted, and declared advisable, this Agreement (including the
issuance of JEFG Common Stock pursuant to this
A-11
Agreement and the Charter Amendment), the Ancillary Agreements, the JEFG
Transactions and the Plan Proposals and determined that the JEFG
Transactions are in the best interest of the stockholders of JEFG, and prior
to the date hereof has resolved to recommend that the holders of JEFG Common
Stock approve and adopt this Agreement (including the issuance of JEFG
Common Stock pursuant to this Agreement and the Charter Amendment) and the
Plan Proposals.
(t) Holding Debt Assumption. Supplemental indentures have been duly
executed in respect of JEFG's 7 1/2% Senior Notes Due 2007 (the "7 1/2%
NOTES") which (i) amend in certain respects the indenture relating to the
7 1/2% Notes and (ii) effective as of the date the Transfers are completed,
provide that Holding shall assume, and JEFG shall be released from, JEFG's
obligations under the 7 1/2% Notes and the related indenture. Complete
copies of such supplemental indentures, along with the officers'
certificates, opinions of JEFG's counsel and consents of holders of the
7 1/2% Notes provided to the trustee for the 7 1/2% Notes in connection
therewith have been provided to ITGI and its counsel.
6B. REPRESENTATIONS AND WARRANTIES OF ITGI. ITGI represents and warrants
to, and agrees with, JEFG as follows:
(a) Organization, Etc. ITGI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite power and authority to own, lease and operate is
properties and to carry on its business as it is now being conducted as
described in the ITGI SEC Reports (defined below). Except as set forth on
Section 6B(a) of the Disclosure Schedule, ITGI is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where
such failure to so qualify would not have any material adverse effect on
ITGI and its subsidiaries taken as a whole (an "ITGI MATERIAL ADVERSE
EFFECT"). ITGI has provided to JEFG complete and correct copies of the
Organizational Documents, as currently in effect, of ITGI.
(b) Authority of ITGI. ITGI has full corporate power and authority to
(i) execute, deliver and perform its obligations under this Agreement and
(ii) to declare and pay the Special ITGI Cash Dividend and to consummate the
Merger. The execution, delivery and performance of this Agreement, the
payment of the Special ITGI Cash Dividend (subject to approval and adoption
of this Agreement and the Merger by the JEFG and ITGI stockholders and the
satisfaction or waiver of all other conditions to the Merger) and the
consummation of the Merger have been duly and validly authorized by the
Board of Directors of ITGI, and no other corporate proceedings on the part
of ITGI are necessary to authorize this Agreement or to consummate the
Merger, other than the approval and adoption of this Agreement by ITGI
stockholders as required by the DGCL. This Agreement has been duly and
validly executed and delivered by ITGI and constitutes a valid and binding
agreement of ITGI, enforceable against ITGI in accordance with its terms.
(c) No Governmental Consent. No Governmental Consent or other Consent
is required in connection with the execution, delivery and performance by
ITGI of this Agreement, the declaration and payment of the Special ITGI Cash
Dividend or the consummation by ITGI of the Merger, except (i) the filing of
the Proxy/Prospectus under the Exchange Act and the Securities Act and the
effectiveness thereof under the Securities Act, (ii) the applicable approval
of this Agreement and the Merger by the holders of ITGI Common Stock as
required by the DGCL, (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (iv) such consents, approvals,
orders, permits, authorizations, registrations, declarations and filings as
may be required under the Blue Sky laws of various states, (v) the listing
on the New York Stock Exchange of the common stock of the Surviving
Corporation and (vi) as set forth in Section 6B(c) of the Disclosure
Schedule.
A-12
(d) No Violation. Assuming that all Consents have been duly made or
obtained as contemplated by Section 6B(c), the execution, delivery and
performance by ITGI of this Agreement and the consummation by ITGI of the
Merger and the declaration and payment of the Special ITGI Cash Dividend
will not (i) violate any provision of the Organizational Documents of ITGI,
(ii) to the best of ITGI's knowledge, violate the DGCL or any other statute,
rule, regulation, order or decree of any Governmental Authority by which
ITGI or its subsidiaries, or their properties, may be bound or affected or
(iii) result in a material violation or breach of, or constitute any
material default (or give rise to any right of termination, cancellation,
acceleration, redemption or repurchase) under, any of the terms, conditions
or provisions of (x) any note, bond, mortgage, indenture or deed of trust
relating to indebtedness for borrowed money or (y) any material license,
lease or other agreement, instrument or obligation to which ITGI or its
subsidiaries is a party.
(e) Capitalization of ITGI.
(i) The authorized capital stock of ITGI consists of 30,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock, $.01 par
value per share ("ITGI PREFERRED STOCK"). As of December 31, 1998, there
were 18,590,360 shares of ITGI Common Stock and no shares of ITGI
Preferred Stock outstanding. All issued and outstanding shares of capital
stock of ITGI are duly authorized and validly issued, fully paid,
nonassessable and free of preemptive rights with respect thereto.
(ii) At no time prior to the date hereof did ITGI have more than
18,750,000 shares of ITGI Common Stock issued and outstanding.
(iii) As of the date hereof, 2,869,967 shares of ITGI Common Stock
are issuable upon exercise of outstanding options or other rights to
purchase or acquire ITGI Common Stock ("ITGI COMMON STOCK EQUIVALENTS")
and zero shares of ITGI Common Stock are reserved for issuance prior to
the Effective Time under employee stock ownership, stock purchase, equity
compensation and incentive plans of ITGI and its subsidiaries. Except for
the ITGI Common Stock Equivalents, there are no options, warrants, calls,
subscriptions, or other rights, agreements or commitments obligating ITGI
to issue, transfer or sell any shares of capital stock of ITGI or any
other securities convertible into or evidencing the right to subscribe
for any such shares. Section 6B(e)(i) of the Disclosure Schedule
accurately reflects the total outstanding ITGI Common Stock Equivalents
that, at the date hereof or any time prior to or through the Effective
Time, could be exercised for ITGI Common Stock by contract, arrangement
or otherwise (the "EXERCISABLE ITGI RIGHTS") and Section 6B(e)(ii) of the
Disclosure Schedule accurately reflects the total outstanding ITGI Common
Stock Equivalents that are the subject to any agreement that prevents the
exercise of Exercisable ITGI Rights and the purchase or acquisition of
ITGI Common Stock pursuant to Exercisable ITGI Rights until after the
earlier of the Effective Time or April 29, 1999 (the "LOCK-UP
AGREEMENTS"). Section 6B(e)(ii) of the Disclosure Schedule sets forth the
aggregate number of shares subject to each form of Lock-Up Agreement, and
Section 6B(e)(iii) of the Disclosure Schedule contains each form of
Lock-Up Agreement.
(iv) ITGI agrees to promptly advise JEFG (and provide executed copies
of any agreement) concerning any Lock-Up Agreement executed after the
date of this Agreement, including any amendment to any Lock-Up Agreement.
ITGI will, prior to the earlier of the Effective Date or April 30, 1999,
only permit the exercise of such Exercisable ITGI Rights that are not
subject to Lock-Up Agreements (regardless of whether such Agreements have
been executed on or prior to the date hereof or after the date hereof and
prior to the Effective Time).
A-13
(f) SEC Filings.
(i) ITGI has timely filed with the SEC all required forms, reports,
registration statements and documents required to be filed by it with the
SEC since January 1, 1999 (collectively, the "ITGI SEC REPORTS"), all of
which complied as to form in all material respects with the applicable
provisions of the Securities Act or the Exchange Act, as the case may be.
As of their respective dates, the ITGI SEC Reports (including all
exhibits and schedules thereto and documents incorporated by reference
therein) did not, as of their respective dates, and do not contain any
untrue statement of a material fact concerning ITGI and its subsidiaries
or omit to state a material fact required to be stated therein concerning
ITGI and its subsidiaries or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
concerning ITGI and its subsidiaries.
(ii) ITGI will deliver to JEFG as soon as they become available true
and complete copies of any report or other document mailed by ITGI to its
securityholders generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time (the
"SUBSEQUENT ITGI REPORTS"). As of their respective dates, the Subsequent
ITGI Reports will not contain any untrue statement of a material fact or
omit to state a material fact concerning ITGI and its subsidiaries or
omit to state a material fact required to be stated therein concerning
ITGI and its subsidiaries or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading
concerning ITGI and its subsidiaries and will comply in all material
respects with all applicable requirements of law. The audited
consolidated financial statements and unaudited consolidated interim
financial statements of ITGI and its subsidiaries included or
incorporated by reference in the ITGI SEC Reports or to be included or
incorporated by reference in the Subsequent ITGI Reports have been
prepared or will be prepared in accordance with GAAP and fairly present
or will fairly present the consolidated financial position of ITGI and
its subsidiaries, as of the dates thereof and the consolidated results of
operations and consolidated cash flow for the periods to which they
relate (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments and to the extent they may not
include footnotes or may be condensed or summary statements).
(g) Liabilities. Except for the Liabilities arising under this
Agreement or set forth or referred to in ITGI SEC Reports or the
Proxy/Prospectus, ITGI and its subsidiaries have no material Liabilities,
other than those described in Section 6B(g) of the Disclosure Schedule.
(h) Absence of Changes or Events. Since December 31, 1998, ITGI has
not, directly or indirectly, except as described in Section 6B(h) of the
Disclosure Schedule:
(i) except in the ordinary course of business, purchased or otherwise
acquired, or agreed to purchase or otherwise acquire, any share of
capital stock of ITGI, or any options, warrants or other equity security,
debt security or other indebtedness of ITGI or declared, set aside or
paid any dividend or otherwise made a distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital
stock;
(ii) except in the ordinary course of business (A) created or
incurred any indebtedness for borrowed money; (B) assumed, guaranteed,
endorsed or otherwise become responsible for the obligations of any other
individual, firm or corporation, or made any loans or advances to any
other individual, firm or corporation; or (C) entered into any commitment
or incurred any liabilities;
(iii) except in the ordinary course of business, suffered any damage,
destruction or loss that is material to ITGI, whether covered by
insurance or not; or
(iv) agreed to do any of the things described in the preceding
clauses (i) through (iii).
A-14
(i) Compliance with Laws.
(i) Except as described in Section 6B(i)(i) of the Disclosure
Schedule, neither ITGI nor any of its subsidiaries has violated or failed
to comply with any statute, law, ordinance, regulation, rule or order of
any Governmental Authority, or any judgment, decree or order of any
court, applicable to their respective business or operations, except
where such violation or failure to comply would not give rise to an ITGI
Material Adverse Effect.
(ii) Except as described in Section 6B(i)(ii) of the Disclosure
Schedule, (1) ITGI has such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from
appropriate governmental agencies and bodies as are necessary to own,
lease or operate the properties and to conduct the business in the manner
described in the ITGI SEC Reports ("ITGI LICENSES"), except where the
failure to have such will not give rise to an ITGI Material Adverse
Effect; (2) ITGI is, and within the period of all applicable statutes of
limitation has been, in compliance with its obligations under such ITGI
Licenses and no event has occurred that allows, or after notice or lapse
of time would allow, revocation or termination of such ITGI Licenses and
(3) ITGI has no knowledge of any facts or circumstances that could
reasonably be expected to result in an inability of ITGI to renew any
ITGI License. Neither the execution and delivery by ITGI of this
Agreement or any Ancillary Agreement or the payment of the Special ITGI
Cash Dividend or the consummation of the Merger will result in any
revocation or termination of any ITGI License. Set forth in Section
6B(i)(ii) of the Disclosure Schedule is a true and complete list of all
ITGI Licenses which are necessary for the conduct of the business
described in clause (1) above.
(j) Labor and Employment Matters. Except as described in Section 6B(j)
of the Disclosure Schedule:
(i) Neither ITGI nor any of its subsidiaries is a party to any union
contract or other collective bargaining agreement. ITGI and its
subsidiaries are in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment,
safety, wages and hours, except where the failure to comply will not give
rise to a ITGI Material Adverse Effect, and are not engaged in any unfair
labor practice. There is no labor strike, slowdown or stoppage pending
(or any labor strike or stoppage threatened) against or affecting ITGI or
any of its subsidiaries, and no union organizing activities with respect
to any of its employees are occurring or threatened.
(ii) Neither ITGI nor any of its subsidiaries is a party to any
employment, management services, consultation or other contract or
agreement with any past or present officer, director or employee or any
entity affiliated with any past or present officer, director or employee,
other than the agreements executed by employees generally, the forms of
which have been provided to JEFG.
(k) No Puts. Except as set forth in Section 6B(k) of the Disclosure
Schedule, neither the execution and delivery by ITGI of this Agreement or
any Ancillary Agreement nor payment of the Special ITGI Cash Dividend or the
consummation of the Merger gives rise to any obligation of ITGI or any of
its subsidiaries, or any right of any holder of any security of ITGI or any
of its subsidiaries to require ITGI to purchase, offer to purchase, redeem
or otherwise prepay or repay any such security, or deposit any funds to
effect the same.
(l) Leases. There have been made available to JEFG true and complete
copies of each lease pursuant to which real property is held under lease by
ITGI and under which JEFG is a guarantor, and true and complete copies of
each lease pursuant to which ITGI leases real property to others. Section
6B(l) of the Disclosure Schedule sets forth a true and complete list of all
such leases. The leased real properties are in good operating order and
condition.
A-15
(m) Contracts and Commitments. Section 6B(m) of the Disclosure Schedule
sets forth each existing contract, obligation, commitment, agreement or
understanding of any type in any of the following categories:
(i) contracts that provide for payments by ITGI in any year
aggregating in excess of $100,000;
(ii) any contract under which ITGI has become absolutely or
contingently or otherwise liable for (1) the performance under a contract
of any other person, firm or corporation or (2) the whole or any part of
the indebtedness or liabilities of any other person, firm or corporation;
(iii) any contract under which any amount payable by ITGI is
dependent upon the revenues or profits of ITGI or its subsidiaries;
(iv) any contract with any director, officer or five percent or
greater stockholder of ITGI or any contract with any entity in which, to
the best of ITGI's knowledge, any director, officer or stockholder or any
family member of any director, officer or stockholder has a material
economic interest; and
(v) any contract that limits or restricts where ITGI may conduct its
business or the type or line of business that ITGI may engage in.
ITGI is not in breach of or default under any such contract, obligation,
commitment, agreement or understanding.
(n) Litigation. Except as described in Section 6B(n) of the Disclosure
Schedule, there is no (1) claim, action, suit or proceeding pending or, to
the best of ITGI's knowledge, threatened against ITGI or any of its
subsidiaries by or before any Governmental Authority or (2) outstanding
judgment, order, writ, injunction or decree of any court, governmental
agency or arbitration tribunal in a proceeding to which ITGI or any of its
subsidiaries was or is a party or by which any of them or any of their
respective assets may be bound or affected.
(o) Environmental Matters. To the best knowledge of ITGI, without any
special inquiry, (i) ITGI and its subsidiaries are, and within applicable
statutes of limitation, have been, in material compliance with all
applicable Environmental Laws, (ii) ITGI and its subsidiaries have all
material permits, authorizations and approvals required under any applicable
Environmental Laws and are in compliance with their requirements, and the
consummation by ITGI of the transactions contemplated hereby will not
require any notification, disclosure, registration, reporting, filing,
investigation, or remediation under any Environmental Law, (iii) there are
no pending or threatened Environmental Claims against ITGI or any of its
subsidiaries, (iv) ITGI has no knowledge of any circumstances that could
reasonably be anticipated to form the basis of an Environmental Claim
against ITGI or any of its subsidiaries or any of their respective
properties or operations and the business operations relating thereto and
(v) there has been no disposal, spill, discharge or release of any hazardous
or toxic substance or material, as defined or regulated by any Environmental
Law, on, at or under any property that could reasonably be expected to
result in material liability of, or material costs to, ITGI under any
Environmental Law.
(p) Ownership of JEFG Common Stock. Except as set forth in Section
6B(p) of the Disclosure Schedule, ITGI and its subsidiaries own no JEFG
Common Stock and are party to no contracts or options which would allow or
obligate ITGI or any of its subsidiaries to purchase JEFG Common Stock.
(q) Finders or Brokers. Other than Donaldson, Lufkin & Jenrette
Securities Corporation, neither ITGI nor any of its subsidiaries has
employed any investment banker broker, finder or
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intermediary in connection with the transactions contemplated hereby who
might be entitled to any fee, discount or commission.
(r) Fairness Opinion. ITGI has received the opinion of Donaldson,
Lufkin & Jenrette Securities Corporation attached as Appendix E hereto.
(s) Board and Special Committee Recommendations. The Board of Directors
of ITGI has, by a unanimous vote at a meeting of such Board duly held on
March 16, 1999, approved and adopted, and declared advisable, this Agreement
and authorized the declaration and payment of the Special ITGI Cash Dividend
and determined that this Agreement and the Merger are in the best interest
of the stockholders of ITGI, and prior to the date hereof has resolved to
recommend that the holders of ITGI Common Stock approve and adopt this
Agreement. In addition, a Special Committee of the Board of Directors of
ITGI consisting exclusively of independent directors (the "ITGI SPECIAL
COMMITTEE") has, by a unanimous vote at a meeting of such committee held on
March 15, 1999, unanimously approved, and declared advisable, this Agreement
and determined that this Agreement and the Merger are fair to and in the
best interests of ITGI's stockholders other than JEFG.
7. COVENANTS OF JEFG AND ITGI
(a) Certain Changes. Except as contemplated by this Agreement and the
Ancillary Agreements, ITGI agrees that, without the prior written consent of
JEFG, between the date hereof and the Closing Date, ITGI will, and ITGI will
cause each of its subsidiaries to (i) conduct its affairs in the ordinary
course of business consistent with past and then current practice, (ii) not
adopt, amend or modify any employment or personnel contract or plan, or
increase the level of compensation payable to any officer or employee other
than in accordance with past practice or as otherwise required by law or the
terms of any such contract or plan; (iii) refrain from (A) issuing any
capital stock or security convertible into capital stock of ITGI, except
pursuant to Exercisable ITGI Rights that are not subject to Lock-Up
Agreements, (B) granting any option to purchase or acquire ITGI Common
Stock, which option is granted outside of the ordinary course or
inconsistent with past practice or is exercisable at any time prior to April
30, 1999, and (C) taking any other action that would otherwise alter its
capital structure, (iv) refrain from paying any dividend (other than the
Special ITGI Cash Dividend) or making any distribution (including, any stock
split or stock dividend) with respect to its securities, (v) refrain from
entering into any contract or arrangement other than in the ordinary course
of business and (vi) refrain from amending its Certificate of Incorporation
or By-laws. ITGI agrees to promptly advise JEFG if it has more than
18,750,000 shares of ITGI Common Stock outstanding at any time prior to the
Effective Time, or any person holding, or exercising rights under, ITGI
Common Stock Equivalents shall have validly tendered any exercise form
related thereto and demanded the issuance and delivery of ITGI Common Stock
in respect of any such ITGI Common Stock Equivalent prior to the Effective
Time. ITGI agrees not to amend, by written instrument, document, waiver or
other act or practice, any Lock-Up Agreement without JEFG's prior written
consent.
Except as contemplated by this Agreement and the Ancillary Agreements,
JEFG agrees that, without the prior written consent of ITGI, between the
date hereof and the Closing Date, JEFG will, and JEFG will cause each of the
Non-ITGI Subsidiaries to (1) conduct its affairs in the ordinary course of
business consistent with past and then current practice, (2) not adopt,
amend or modify any employment or personnel contract or plan, or increase
the level of compensation payable to any officer or employee other than in
accordance with past practice or as otherwise required by law or the terms
of any such contract or plan; (3) refrain from issuing any capital stock or
security convertible into capital stock, except pursuant to outstanding
stock options and equity compensation awards, or granting any option or
equity compensation awards except any such option or award that by its terms
becomes, upon consummation of the Transfers, an option to
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purchase or acquire Holding Common Stock or an award in equity of Holding,
or taking any other action that would be specified in Section 6A(e) of the
Disclosure Schedule, or taking any other action that would otherwise alter
its capital structure, (4) refrain from paying any dividend (other than the
Distribution) or making any distribution (including, any stock split or
stock dividend) with respect to its securities, (5) refrain from entering
into any contract or arrangement other than in the ordinary course of
business and (6) refrain from amending its Certificate of Incorporation or
By-laws.
(b) Proxy/Prospectus and Proxy/Information Statement. JEFG agrees that
the Proxy/ Prospectus and any amendment or supplement thereto and the
Proxy/Information Statement and any amendment or supplement thereto, at the
time of mailing thereof and at the time of the Stockholders' Meetings, will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, HOWEVER, that the foregoing
shall not apply to any information relating solely to ITGI and any of its
subsidiaries (including financial and statistical information), the Special
ITGI Cash Dividend or the ITGI-provided information concerning the Merger,
as set forth in detail in Schedule B to the Distribution Agreement (the
"ITGI MERGER INFORMATION"). If at any time prior to the Stockholders'
Meetings, either the Proxy/Prospectus or the Proxy/Information Statement
shall, as it relates solely to JEFG or any of the Non-ITGI Subsidiaries, the
Transfers, the Ancillary Agreements, the Distribution or the JEFG Merger
Information (defined below), contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, JEFG shall promptly notify
ITGI and such parties shall use their best efforts to promptly cause to be
filed with the SEC and, as required by law, disseminated to the stockholders
of JEFG and ITGI an amendment or supplement that will result in the
Proxy/Prospectus and/or the Proxy/Information Statement (as the case may
be), as so amended or supplemented, not containing an untrue statement of a
material fact and not omitting to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that the foregoing shall not apply to any information
relating solely to ITGI, any of its subsidiaries, the Special ITGI Cash
Dividend and the ITGI Merger Information. JEFG will not file any amendment
or supplement to the Proxy/ Prospectus or Proxy/Information Statement, or
submit any information to the SEC in connection therewith, without prior
consultation with ITGI.
ITGI agrees that the Proxy/Prospectus and any amendment or supplement
thereto and the Proxy/Information Statement and any amendment or supplement
thereto, at the time of mailing thereof and at the time of the Stockholders'
Meetings, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, HOWEVER, that the foregoing
shall not apply to any information relating solely to JEFG and the Non-ITGI
Subsidiaries (including financial and statistical information), the
Transfers, the Ancillary Agreements, the Distribution or the JEFG-provided
information concerning the Merger, as set forth in detail in Schedule A to
the Distribution Agreement (the "JEFG MERGER INFORMATION"). If at any time
prior to the Stockholders' Meetings, either the Proxy/Prospectus or the
Proxy/Information Statement, as it relates solely to ITGI or any of its
subsidiaries, the Special ITGI Cash Dividend or the ITGI Merger Information,
shall contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, ITGI shall promptly notify JEFG and such
parties shall use their best efforts to promptly cause to be filed with the
SEC and, as required by law, disseminated to the stockholders of JEFG and
ITGI an amendment or supplement that will result in the Proxy/Prospectus
and/or the Proxy/Information Statement (as the case may be), as so amended
or supplemented, not containing an untrue statement of a material fact and
not omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED, HOWEVER,
that the foregoing shall not apply to
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any information relating solely to JEFG and the Non-ITGI Subsidiaries, the
Transfers, the Ancillary Agreements, the Distribution or the JEFG Merger
Information. ITGI will not file any amendment or supplement to the
Proxy/Prospectus or Proxy/Information Statement, or submit any information
to the SEC in connection therewith, without prior consultation with JEFG.
(c) Further Assurances. In addition to the actions specifically
provided for elsewhere in this Agreement, each of the parties hereto will
use its commercially reasonable efforts to (i) execute and deliver such
further instruments and documents and take such other actions as the other
party may reasonably request in order to effectuate the purposes of this
Agreement and to carry out the terms hereof and (ii) take, or cause to be
taken, all actions, and to do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable laws, regulations and
agreements or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable efforts to obtain any consents and approvals and to make any
filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement.
(d) Expenses. Each of JEFG and ITGI shall be responsible for the
Transaction Expenses (as defined below), as set forth in this paragraph (d).
To the extent JEFG, Holding or ITGI incurs expenses in connection with the
Transactions (as defined below) which do not constitute Transaction
Expenses, the party incurring such expense shall be solely responsible for
such expenses. "TRANSACTION EXPENSES" shall be limited to reasonable
"OUT-OF-POCKET" expenses (i.e., expenses paid to a third party, excluding
internal costs or allocations) of JEFG, Holding or ITGI that have been
incurred because of or in order to effect the JEFG Transactions and the
Special ITGI Cash Dividend (collectively, the "TRANSACTIONS"), including:
(i) fees paid to investment bankers and their counsels,
(ii) fees paid to outside counsel, including those who are giving
legal opinions,
(iii) fees paid to effect all of the Transfers, including (A) consent
payments and fees and expenses in respect of the transfer of JEFG's
8 7/8% Senior Notes due 2004 (the "8 7/8% NOTES") and the 7 1/2% Notes to
Holding pursuant to the Assumption, not to exceed the aggregate amount
set forth in Section 7(d)(iii) of the Disclosure Schedule, and (B)
payments to landlords, third parties or others to whom JEFG has given
guarantees in order to obtain their consents to the release of JEFG from
the related obligations,
(iv) professional and closing fees (but excluding financing costs)
paid in order to replace financing arrangements that have been affected
by the Transactions or new financing arrangements of ITGI or the
Surviving Corporation,
(v) fees paid to compensation and benefit plan consultants,
actuaries, and the like to the extent services are rendered (a) for
changes to existing plans which are necessary in order to effect or
because of the Transactions or (b) to implement new plans which will
replace plans which had been in place at JEFG or ITGI prior to the
Transactions, excluding fees for services rendered to implement new plans
which are not substantially similar in purpose and effect to existing
JEFG plans and costs related to enhanced pension benefits and any
underfunding liability of existing plans,
(vi) payments to the ITGI Special Committee and their counsel,
(vii) costs of acquiring and installing (and licensing fees limited
to first year licensing fees for) software by ITGI, but only to the
extent that such systems provide reasonably similar information and
functionality as that currently used or provided by JEFG or ITGI,
(viii)tax, accounting and auditing services provided by KPMG LLP and
Ernst & Young LLP in connection with the Transactions, and
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(ix) costs of securityholder matters (exclusive of matters addressed
in clause (iii)(A) above) and agency matters related to the Transactions,
including solicitation, printing, mailing, registrar and transfer agent
fees, exchange agent, distribution agent, trustee and escrow agent fees
and expenses, filing fees, listing fees and other regulatory fees and
licenses.
Expenses of JEFG and Holding which may constitute Transaction Expenses relevant
for the allocation in the second succeeding sentence shall be counted on a
dollar-for-dollar basis for Transaction Expenses incurred which are not tax
deductible and on the basis of $0.565 for each dollar of Transaction Expenses
incurred which are tax deductible and, based upon such procedure, shall not
exceed $11.5 million in the aggregate. Expenses of ITGI which may constitute
Transaction Expenses relevant for the allocation in the following sentence shall
be counted on a dollar-for-dollar basis for Transaction Expenses incurred which
are not tax deductible and on the basis of $0.565 for each dollar of Transaction
Expenses incurred which are tax deductible and, based upon such procedure, shall
not exceed $6.0 million. The allocation of responsibility for Transaction
Expenses between JEFG and ITGI shall be determined by dividing (A) the sum of
(i) the lesser of $11.5 million or the dollar amount of Transaction Expenses
actually incurred by JEFG and Holding (with such lesser amount constituting the
"REIMBURSABLE JEFG EXPENSE CAP") plus (ii) the lesser of $6.0 million or the
dollar amount of Transaction Expenses actually incurred by ITGI (with such
lesser amount constituting the "REIMBURSABLE ITGI EXPENSE CAP"), by (B) two
(with the resulting amount constituting the "RATABLE TRANSACTION EXPENSE
RESPONSIBILITY"). Following determination of the Ratable Transaction Expense
Responsibility, (y) ITGI (or the Surviving Corporation, in the event such
determination occurs after the Effective Time) shall reimburse JEFG (or Holding
or its subsidiaries, in the event such determination occurs after the Effective
Time) for any positive difference resulting after subtracting the Ratable
Transaction Expense Responsibility from the Reimbursable JEFG Expense Cap or (z)
JEFG (or Holding, in the event such determination occurs after the Effective
Time) shall reimburse ITGI (or the Surviving Corporation, in the event such
determination occurs after the Effective Time) for any positive difference
resulting after subtracting the Ratable Transaction Expense Responsibility from
the Reimbursable ITGI Expense Cap.
Notwithstanding the foregoing, (A) expenses that would otherwise be incurred in
the ordinary course of business or are the result of changes being implemented
coincident with the JEFG Transactions at management's discretion do not qualify
as Transaction Expenses, (B) when there is a range of options that may be taken
with respect to an expense that fits within the matters described in clauses (i)
through (ix) above, only the least expensive alternative qualifies as a
Transaction Expense (and any amount in excess of the least expensive alternative
shall be for the account of, and shall be the sole responsibility of, the party
that incurred such expense), and (C) no services rendered or expenses incurred
subsequent to the Effective Time (other than any such expenses incurred to
comply with Section 3.01 of the Distribution Agreement) will qualify as
Transaction Expenses.
Notwithstanding any other provision set forth in this Paragraph (d), (A) JEFG
shall be responsible for all Transaction Expenses in the event that JEFG, as a
stockholder of ITGI, fails to vote in favor of the Merger Agreement and thereby
causes the failure of the Merger Agreement to be approved and adopted at the
ITGI Stockholders' Meeting, (B) ITGI shall be responsible for all Transaction
Expenses in the event that ITGI breaches, or any of its subsidiaries breaches
its representations, warranties or covenants contained in Section 6B(e)(ii),
Section 6B(e)(iii), the second sentence of Section 6B(e)(iv), Section 7(a) (iii)
or the second sentence of Section 7(j) hereof and such action causes an
inability to satisfy any of the conditions set forth in Section 8(h) or 11(b)
hereof, (C) any party that breaches Section 7(m) hereof shall be responsible for
all Transaction Expenses, (D) any party that causes the condition set forth in
Section 8(h) or 11(b) not to be fulfilled shall be responsible for all
Transaction Expenses, and (E) JEFG shall be responsible for all Transaction
Expenses in the event it participates, but does not afford the benefit to the
ITGI Public Stockholders of their full participation, in a transaction described
in Section 7(l) hereof.
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(e) Access to Information. From the date of this Agreement to the Effective
Time, JEFG and ITGI shall afford the other and its accountants, counsel and
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to all records, books, contacts,
instruments, computer data and other data and information in its possession
relating to the business and affairs of the other (other than data and
information subject to an attorney-client or other privilege), insofar as such
access is reasonably required by the other including, without limitation, for
audit, accounting and litigation purposes.
(f) Affiliates. Sections 7A(f)(i) and (ii) of the Disclosure Schedules list
all persons who may currently be deemed to be "AFFILIATES" of JEFG and ITGI,
respectively, for purposes of Rule 145 under the Securities Act ("AFFILIATES"),
and each such party shall advise the other in writing of any person who becomes
an Affiliate after the date hereof and prior to the Effective Time, and shall
use its commercially reasonable efforts to cause each such person to deliver to
the other party, at or prior to the Effective Time, a written agreement
substantially in the form of Exhibit 7A(f) hereto.
(g) Press Releases. Neither ITGI nor JEFG shall make or issue any press
release or other public statement with respect to any of the transactions
contemplated hereby without obtaining the prior written approval of the other,
which consent shall not be unreasonably withheld.
(h) Consents. JEFG agrees to use its reasonable best efforts to obtain all
Governmental Consents referenced in Section 6A(c) hereof and the Consents listed
on Section 6A(c) of the Disclosure Schedule. ITGI agrees to use its reasonable
best efforts to obtain all Governmental Consents and other consents referenced
in Section 6B(c) hereof.
(i) Amendment of Distribution Agreement. JEFG shall not modify, amend or
waive any provision of the Distribution Agreement, unless JEFG shall have
obtained the consent of ITGI, which consent shall not be unreasonably withheld.
(j) ITGI Lock-Up Covenants. ITGI agrees to refrain, and to cause its
subsidiaries to refrain, from purchasing, or entering into options or contracts
which would allow or obligate ITGI or any of its subsidiaries to purchase, JEFG
Common Stock prior to the Effective Time. ITGI agrees to use its commercially
reasonable efforts to obtain agreements from the holders of ITGI Common Stock
Equivalents not to exercise such options prior to the earlier of (x) the
Effective Time and (y) April 30, 1999.
(k) Termination of Certain Intercompany Agreements. JEFG and ITGI agree
that the Development Rights Agreement and the Intercompany Borrowing Agreement,
each dated March 14, 1994, between JEFG and ITGI, shall be terminated effective
as of the Pre-Closing without liability to any party thereunder, and each party
will execute and deliver prior to the Pre-Closing such instruments as the other
party reasonably may request to give effect to the foregoing.
(l) Other JEFG Covenants Prior to Pre-Closing. In the event that at any
time prior to the Pre-Closing, JEFG receives a third party offer to purchase its
entire equity interest in ITGI, JEFG agrees to use its commercially reasonable
best efforts to endeavor to obtain, but shall not be obligated to obtain, the
same economic terms and benefits of such offer for the benefit of the ITGI
Public Stockholders.
(m) Standstill After Pre-Closing. Each of JEFG and ITGI agrees that it will
not, at any time from and after the Pre-Closing and prior to the Effective Time,
knowingly take any action that would result in ITGI's ceasing to be a member of
the affiliated group (within the meaning of Section 1504(a) of the Code) of
which JEFG is the parent.
(n) JEFG Transfers of Liabilities. JEFG shall take all necessary action
prior to the Pre-Closing Date in order to effect the transfer to Holding (or to
JEFCO, as appropriate), after the Pre-Closing
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Date and prior to the Effective Time, of all JEFG Liabilities that are not
related to ITGI or ITGI's subsidiaries. If, due to the inability of JEFG to
transfer certain of such JEFG Liabilities to Holding or obtain for itself any
required third party releases from such Liabilities or any required consent in
connection with any transfer set forth in the preceding sentence, and therefore
JEFG shall have Liabilities immediately prior to the Effective Time (excluding
Liabilities related to ITGI or ITGI's subsidiaries, Liabilities of ITGI or the
Surviving Corporation arising pursuant to this Agreement or the Ancillary
Agreements, contingent Liabilities arising by operation of law and Liabilities
related to asserted or unasserted litigation, the responsibility for which
cannot be reasonably quantified or ascertained) (with such JEFG Liabilities,
excluding the Liabilities in the preceding parenthetical, constituting the
"RESIDUAL LIABILITIES"), JEFG shall take such action prior to the Pre-Closing
Date, in form and substance reasonably satisfactory to ITGI, to discharge,
offset, reserve against or otherwise mitigate the Residual Liabilities (through
prepayments, reserves, insurance, defeasance, trust arrangements, replacement
guarantees or the provision to third party creditors, landlords, ITGI or the
Surviving Corporation of one or more letters of credit) for all Residual
Liabilities in excess of the Applicable Amount (defined below). The "APPLICABLE
AMOUNT" of unmitigated Residual Liabilities, as used in the preceding sentence,
shall be $5.0 million from and after the Effective Time until the first
anniversary thereof; $3.33 million from and after the first anniversary until
the second anniversary of the Effective Time; $1.67 million from and after the
second anniversary until the third anniversary of the Effective Time; and $0
from and after the third anniversary of the Effective Time. JEFG agrees to
obtain, for the benefit of ITGI (or the Surviving Corporation after the
Effective Time), one or more letters of credit in an aggregate undrawn face
amount not less than the amount by which the aggregate unmitigated Residual
Liabilities exceeds the Applicable Amount. Such letters of credit shall be
issued by one or more nationally recognized financial institutions reasonably
satisfactory to ITGI, be in form and substance reasonably satisfactory to ITGI
and expire not earlier than 135 days after the date on which the related
unmitigated Residual Liabilities terminate.
8. CONDITIONS TO THE OBLIGATIONS OF JEFG AND ITGI TO CONSUMMATE THE PRE-CLOSING
The respective obligations of ITGI, on the one hand, and JEFG, on the other
hand, to consummate the Pre-Closing are subject to the fulfillment (or waiver in
writing by a duly authorized officer of the party which did not fail to satisfy
such condition or requirement) of the following requirements and conditions:
(a) Stockholder Approvals. This Agreement (including the Charter Amendment)
and the issuance of JEFG Common Stock pursuant to this Agreement shall have been
approved and adopted by the requisite votes of JEFG's stockholders in accordance
with the DGCL, New York Stock Exchange requirements and the Organizational
Documents of JEFG. This Agreement shall have been approved and adopted by the
requisite votes of ITGI's stockholders in accordance with the DGCL and the
Organizational Documents of ITGI.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction, sanction or other order issued by
any court of competent jurisdiction, self-regulatory organization or body, stock
exchange or other legal or regulatory restraint or prohibition shall have been
issued and be in effect (i) restraining or prohibiting the consummation of the
Merger, the Contribution, the Assumption, the Special ITGI Cash Dividend, the
Distribution or the other transactions contemplated by the Ancillary Agreements
or this Agreement or (ii) prohibiting or limiting the ownership, operation or
control by the Surviving Corporation or JEFG or any of their respective
subsidiaries of any portion of the business or assets of ITGI or its
subsidiaries as of the Effective Time, or compelling the Surviving Corporation
or JEFG or ITGI or any of their respective subsidiaries to dispose of, grant
rights in respect of, or hold separate any portion of the business or assets of
JEFG, ITGI or any of their respective subsidiaries as of the Effective Time; nor
shall any action have been taken by a governmental regulatory authority, agency
or instrumentality, self-regulatory organization or
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body, stock exchange or any federal, state or foreign statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any governmental regulatory authority, agency or
instrumentality, self-regulatory organization or body, stock exchange or
arbitrator, which is in effect and has the effect of making the Contribution,
the Assumption, the Special ITGI Cash Dividend, the Distribution or the Merger,
illegal or otherwise prohibiting the consummation of the Contribution, the
Assumption, the Special ITGI Cash Dividend, the Distribution or the Merger.
(c) Proxy/Prospectus and Proxy/Information Statement. The registration
statement with respect to the Proxy/Prospectus shall have been declared
effective under the Securities Act and no stop orders with respect thereto shall
have been issued and the Proxy/Prospectus shall have been furnished to the
stockholders of ITGI. JEFG shall have received all requisite authorizations
under all applicable state securities or blue sky laws necessary to consummate
the issuance of JEFG Common Stock pursuant to this Agreement. The
Proxy/Information Statement shall have been furnished to the stockholders of
JEFG.
(d) NYSE Listing. Approval for listing by the New York Stock Exchange, Inc.
upon official notice of issuance of JEFG Common Stock to be issued in the Merger
shall have been received by JEFG.
(e) Supplemental Indentures. Supplemental indenture(s) in form and
substance satisfactory to JEFG and ITGI shall have been duly executed in respect
of the 8 7/8% Notes, pursuant to which, effective as of the date the Transfers
are completed, Holding shall assume, and JEFG shall be released from, JEFG's
obligations under the 8 7/8% Notes and the related indenture. ITGI and its
counsel shall have been provided complete copies of such supplemental
indenture(s) and the officers' certificate(s) and opinion(s) of JEFG's counsel
(which expressly permit(s) ITGI to rely thereon) provided to the trustee for the
8 7/8% Notes in connection therewith, and such officer's certificate(s) and
opinion(s) shall be satisfactory in form and substance to ITGI.
(f) Accounting Advisory Letter. ITGI and JEFG shall have received a letter
from KPMG LLP, dated as of the Pre-Closing Date, substantially in the form set
forth in Section 8(f) of the Disclosure Schedule.
(g) Escrow. The Escrow Agreement shall have been executed and delivered by
JEFG, ITGI and the Escrow Agent, and all items required to be delivered into
escrow thereunder shall have been delivered, to be released by the Escrow Agent
in accordance with the terms and conditions thereof.
(h) JEFG's Maintenance of Minimum Ownership Levels of ITGI Common Stock.
JEFG and ITGI shall be reasonably satisfied that, at all relevant times prior to
the Pre-Closing Date, JEFG owns at least 80% of the outstanding ITGI Common
Stock and that no capital stock of ITGI (other than ITGI Common Stock) shall
have been issued or outstanding.
(i) Satisfaction of Distribution Agreement Conditions. All conditions to
the Distribution set forth in Section 2.02 of the Distribution Agreement shall
have been satisfied and if any condition shall not have been satisfied as of the
Pre-Closing Date such condition shall have been waived by JEFG, in its sole
discretion.
(j) Absence of Withdrawal or Amendment of Tax Ruling. The tax ruling from
the Internal Revenue Service relating to the Transfers, the Distribution and
certain aspects of the Merger obtained prior to the date hereof (the "TAX
RULING") shall not have been, prior to the Pre-Closing, withdrawn by the IRS or
modified by the IRS in any material adverse respect.
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9. CONDITIONS TO THE OBLIGATIONS OF JEFG TO CONSUMMATE THE PRE-CLOSING
The obligations of JEFG under this Agreement to effect the Pre-Closing are
subject to the fulfillment (or waiver in writing by a duly authorized officer of
JEFG), prior to or at the Pre-Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants of ITGI. The representations
and warranties of ITGI herein contained shall be true and correct as of the
Pre-Closing Date in all material respects with the same effect as though made at
such time, except to the extent waived hereunder or affected by the transactions
contemplated herein; ITGI shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement and the
Ancillary Agreements to be performed or complied with by it at or prior to the
Pre-Closing Date; and ITGI shall have delivered to JEFG a certificate in form
and substance satisfactory to JEFG dated the date of the Pre-Closing Date and
signed by the chief executive officer and the chief financial officer of ITGI to
such effect.
(b) Consents. ITGI shall have obtained all Governmental Consents and shall
have obtained all other Consents referenced in Section 6B(c) and designated to
be required to have been obtained on or prior to the Pre-Closing.
(c) Opinions of Counsel.
(i) ITGI shall have delivered to JEFG opinions, dated the Pre-Closing
Date, satisfactory to counsel for JEFG, of Cahill Gordon & Reindel, counsel
to ITGI, to the effect that:
(1) ITGI is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power to enter into and perform its
obligations under this Agreement.
(2) The execution, delivery and performance of this Agreement and the
consummation of the Merger as provided herein by ITGI have been duly
authorized and approved by all requisite corporate action; this
Agreement has been duly executed and delivered by ITGI and
constitutes a valid and binding obligation of ITGI, enforceable in
accordance with its terms, subject to any bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors'
rights and by general principles of equity.
(3) Upon the filing of the appropriate certificate of merger with the
Secretary of State of the State of Delaware, the Merger shall be
effective in accordance with the terms of this Agreement and the
DGCL.
(4) All such approvals, consents, authorizations or modifications as may,
to the knowledge of such counsel, be required to permit the
performance by ITGI of its respective obligations under this
Agreement and consummation of the transactions herein contemplated
have been obtained (whether from Governmental Authorities or other
persons).
In rendering its opinion letter, Cahill Gordon & Reindel may rely on
certificates of officers of ITGI or its subsidiaries or government officials,
opinions of other counsel and such other evidence as such counsel for ITGI may
deem necessary or desirable.
(ii) JEFG shall have received an opinion of Morgan, Lewis & Bockius
LLP, in form and substance reasonably satisfactory to JEFG and substantially
in the form of Appendix F (following Morgan, Lewis & Bockius LLP's receipt
of representations of officers of ITGI and JEFG substantially in the form of
Appendices G-1 and G-2), on the basis of certain facts, representations and
assumptions set forth in such opinion, dated the Pre-Closing Date, to the
effect that, with respect to the ITGI Public Stockholders, the Merger will
be treated for federal income tax purposes as a reorganization qualifying
under the provisions of Section 368(a) of the Code, and
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that each of JEFG and ITGI will be a party to the reorganization within the
meaning of Section 368(b) of the Code.
10. CONDITIONS TO THE OBLIGATIONS OF ITGI TO CONSUMMATE THE PRE-CLOSING
The obligations of ITGI under this Agreement to effect the Pre-Closing are
subject to the fulfillment (or waiver in writing by a duly authorized officer of
ITGI), prior to or at the Pre-Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants of JEFG. The representations
and warranties of JEFG herein contained shall be true and correct as of the
Pre-Closing Date in all material respects with the same effect as though made at
such time, except to the extent waived hereunder or affected by the transactions
contemplated herein; JEFG shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement and the
Ancillary Agreements to be performed or complied with by it at or prior to the
Pre-Closing Date; and JEFG shall have delivered to ITGI a certificate in form
and substance satisfactory to ITGI dated the Pre-Closing Date and signed by the
chief executive officer and the chief financial officer of JEFG to such effect.
(b) [Intentionally Omitted].
(c) [Intentionally Omitted].
(d) Options. JEFG shall have delivered to ITGI a copy (certified by the
Secretary of JEFG) of duly adopted resolutions of the Board of Directors of JEFG
accelerating the vesting and exercisability of all options to purchase or
acquire JEFG Common Stock, which acceleration shall be effective on or before
the release of the Special ITGI Cash Dividend pursuant to the Escrow Agreement.
JEFG shall have caused all outstanding JEFG Common Stock Equivalents to have
been exercised or canceled, or exchanged (conditioned upon completion of the
Distribution) for options, shares, or common stock equivalents of Holding as of,
or within two business days following the Pre-Closing Date, or reserved against
without the Surviving Corporation's responsibility after the Effective Time.
(e) Transfer and Releases. JEFG shall have taken all necessary action to
effect the transfer (after the Pre-Closing Date before the Effective Time) of
all JEFG Liabilities, excluding the Residual Liabilities, to Holding and to
provide that the unmitigated Residual Liabilities shall not be in excess of the
Applicable Amount.
(f) Consents. JEFG shall have obtained all Governmental Consents referenced
in Section 6A(c) hereof and shall have obtained all Consents listed in Section
10(f) of the Disclosure Schedule.
(g) Opinion of Counsel.
(i) JEFG shall have delivered to ITGI an opinion, dated the Pre-Closing
Date, satisfactory to counsel for ITGI, of Morgan, Lewis & Bockius LLP,
counsel for JEFG, to the effect that:
(1) JEFG is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation, and has the requisite corporate power to enter
into and perform its obligations under this Agreement.
(2) The execution, delivery and performance of this Agreement by JEFG
and the Ancillary Agreements by JEFG and Holding and the issuance
of JEFG Common Stock pursuant to this Agreement have been duly
authorized and approved by all requisite corporate action; this
Agreement has been duly executed and delivered by JEFG and
constitutes a valid and binding obligation of JEFG enforceable
against JEFG in accordance with its terms, subject to any
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights and general
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principles of equity; the Ancillary Agreements have been duly
executed and delivered by JEFG and Holding, and constitute a
valid and binding obligation of JEFG and Holding and are
enforceable in accordance with their terms, subject to any
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights and general principles of
equity.
(3) Upon the filing of the appropriate certificate of merger with the
Secretary of State of the State of Delaware, the Merger shall be
effective in accordance with the terms of this Agreement and the
DGCL.
(4) All such approvals, consents, authorizations or modifications as
may, to the knowledge of such counsel, be required to permit the
performance by JEFG of its respective obligations under this
Agreement and consummation of the transactions herein
contemplated have been obtained (whether from Governmental
Authorities or other persons).
(5) The JEFG Common Stock to be issued by JEFG as contemplated by
this Agreement has been duly authorized and upon delivery to the
ITGI Public Stockholders, will be duly and validly issued, fully
paid and non-assessable, and will not have been issued in
violation of any statutory preemptive rights of stockholders.
In rendering its opinion letter, Morgan, Lewis & Bockius LLP may rely on
certificates of officers of JEFG, opinions of other counsel and such other
evidence as such counsel for JEFG may deem necessary or desirable.
(ii) ITGI shall have received an opinion of Cahill Gordon & Reindel, in
form and substance reasonably satisfactory to ITGI and substantially in the
form of Appendix H (following Cahill Gordon & Reindel's receipt of
representations of officers of ITGI and JEFG substantially in the form of
Appendices I-1 and I-2), on the basis of certain facts, representations and
assumptions set forth in such opinion, dated the Pre-Closing Date, to the
effect that the Merger will be treated for federal income tax purposes from
the perspective of the ITGI Public Stockholders as a reorganization
qualifying under the provisions of Section 368(a) of the Code, and that each
of JEFG and ITGI will be a party to the reorganization within the meaning of
Section 368(b) of the Code.
(h) Amendment of Distribution Agreement. No provision of the Distribution
Agreement shall have been modified, amended or waived without the prior written
consent of ITGI, which consent shall not be unreasonably withheld.
(i) Other. All certificates, consents and opinions, including any provision
therein permitting ITGI to rely thereon, delivered in connection with the
supplemental indentures referred to in Section 6(A)(t) shall not have been
withdrawn.
(j) Procurement of Any Necessary Letters of Credit. JEFG shall have
procured and delivered to ITGI all necessary letters of credit concerning
unmitigated Residual Liabilities in excess of the Applicable Amount as may be
required by Section 7(n) hereof.
11. CONDITIONS TO THE OBLIGATIONS OF JEFG AND ITGI TO CONSUMMATE THE MERGER
The obligations of each of JEFG and ITGI under this Agreement to effect the
Merger are subject to the fulfillment (or waiver in writing by a duly authorized
officer of JEFG and ITGI), prior to or at the Effective Time, of each of the
following conditions:
(a) Pre-Closing Consummated. The Pre-Closing shall have been consummated in
accordance with this Agreement and the Escrow Agreement shall have been fully
complied with.
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(b) JEFG's Maintenance of Minimum Ownership Levels of ITGI Common Stock.
JEFG and ITGI shall be reasonably satisfied that, at all relevant times prior to
the Effective Time, JEFG owns at least 80% of the outstanding ITGI Common Stock
and that no capital stock of ITGI (other than ITGI Common Stock) shall have been
issued or outstanding.
(c) Absence of Withdrawal or Amendment of Tax Ruling. The Tax Ruling shall
not have been, prior to the Effective Time, withdrawn by the IRS or modified by
the IRS in any material adverse respect.
12. NO SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties, covenants and other obligations of JEFG and
ITGI hereunder shall not survive the Merger; PROVIDED, HOWEVER, that Section
7(d) hereof shall survive (i) the Merger in accordance with Section 12.01 of the
Distribution Agreement and (ii) any termination of this Agreement prior to the
Effective Time pursuant to Section 13 hereof.
13. TERMINATION
(a) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the completion of the Pre-Closing
(i) by mutual written consent of JEFG and ITGI or (ii) by either party upon (x)
the failure of the other party to satisfy any covenant or agreement set forth in
this Agreement or the Ancillary Agreements or (y) upon the discovery of any
representation of the other party which is false in any material respect or for
which there is a material omission to disclose information which makes any
representation of the other party materially misleading or (z) the failure to
satisfy any condition set forth in Section 8 hereof or the failure of the other
party to satisfy a condition to such party's obligation to consummate the
Pre-Closing set forth in Section 9 or 10 hereof, as applicable.
(b) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time after completion of the Pre-Closing and
prior to the Closing (i) by mutual written consent of JEFG and ITGI or (ii) by
either party upon the failure of the condition set forth in Section 11(b) or
11(c) hereof to be satisfied unless and to the extent such failure occurred as a
result of such party's breach of any representation, warranty or covenant set
forth in this Agreement.
14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
15. NOTICES
All notices and communications under this Agreement shall be in writing and
any communication or delivery hereunder shall be deemed to have been duly given
when received addressed as follows:
If to ITGI to:
Investment Technology Group, Inc.
380 Madison Avenue, 4th Floor
New York, New York 10017
Attention: Chief Financial Officer
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With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Immanuel Kohn, Esq.
If to JEFG to:
Jefferies Group, Inc.
11100 Santa Monica Boulevard, 11th Floor
Los Angeles, California 90025
Attention: Chief Financial Officer
With a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Attention: Brian J. Lynch, Esq.
Such notices shall be deemed received (i) as of the date of delivery by hand
delivery, (ii) one business day after such notice is given to a national
overnight delivery service or (iii) five business days after placed in the
United States mail, provided such mail is sent by certified mail with return
receipt requested. Either party may, by written notice so delivered to the other
party, change the address to which delivery of any notice shall thereafter be
made.
16. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware regardless of the laws that might otherwise govern
under principles of conflicts of laws applicable thereto.
17. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
JEFFERIES GROUP, INC.
By: /s/ CLARENCE T. SCHMITZ
--------------------------------------
Name: Clarence T. Schmitz
Title: Executive Vice President and
Chief Financial Officer
INVESTMENT TECHNOLOGY GROUP, INC.
By: /s/ RAYMOND L. KILLIAN, JR.
--------------------------------------
Name: Raymond L. Killian, Jr.
Title: Chairman, Chief Executive
Officer and President
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