AMENDMENT NO. 1
TO ACQUISITION AGREEMENT
This AMENDMENT NO. 1 to ACQUISITION AGREEMENT (this "
Amendment ") is entered into as of this 30th day of
November, 2005, by and between STIFEL FINANCIAL CORP., a Delaware
corporation (" Buyer "), and CITIGROUP INC., a Delaware
corporation (" Seller ").
RECITALS
WHEREAS , the Seller and Buyer are parties to an
Acquisition Agreement, dated as of September 12, 2005 (the "
Acquisition Agreement "), pursuant to which, inter
alia, Buyer has agreed to acquire from Seller the
Business;
WHEREAS , the Seller and Buyer desire to amend the
Acquisition Agreement in certain respects, as set forth in this
Amendment; and
WHEREAS , capitalized terms used but not defined herein
have the meanings ascribed to them in the Acquisition
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound, the Parties agree as follows:
ARTICLE I
CERTAIN AMENDMENTS
Section 1.1 Article I .
(a)
Section 1.12 . The definition of "Business" set forth in
Section 1.12 of the Acquisition Agreement is hereby amended and
restated in its entirety as follows:
"" Business " means the capital
markets business of Legg Mason, as described in subsection (b) of
the definition of PC/CM Business in Annex A of the Transaction
Agreement, but only to the extent conducted by LMUK and LMWW and
their respective Subsidiaries, and in any event excluding Howard
Weil, Incorporated and Howard Weil Financial Corporation and each
of their respective Subsidiaries and the assets and liabilities
thereof; provided, that, the Business shall not include that
portion of the capital markets business of Legg Mason to the extent
conducted by Orchard or LMMCC and any of their respective
Subsidiaries; provided further, that Business shall not include the
municipal finance and institutional municipal sales and trading
segments or the retail fixed income and equity segments of the
capital markets business of Legg Mason and its Subsidiaries."
(b)
Section 1.39 . The cross reference in the definition of
"Direct Sale Agreement" contained in Section 1.39 of the
Acquisition Agreement is hereby amended to read "Section 1.99."
(c)
Section 1.50 . The definition of "Escrow Agreement"
contained in Section 1.50 of the Acquisition Agreement is hereby
deleted in its entirety and the words "[INTENTIONALLY DELETED]" are
inserted in place of the deleted text.
(d)
Section 1.51 . The definition of "Escrow Deposit" contained
in Section 1.51 of the Acquisition Agreement is hereby deleted in
its entirety and the words "[INTENTIONALLY DELETED]" are inserted
in place of the deleted test.
(e)
Section 1.89 . The definition of "Net Book Value" contained
in Section 1.89 of the Acquisition Agreement is hereby amended by
inserting the following at the end thereof:
"; provided, that, in determining Net
Book Value there shall be (i) excluded any asset related to the
rights of Buyer to receive proceeds under the Warrant Agreement,
and (ii) excluded any accrual for liabilities related to the
Assumed Liabilities referred to in paragraph 2 of Schedule
1.11(d) ."
(f)
Section 1.99 .
(i) The following is hereby added at
the end of Section 1.99 : "The Purchased Assets shall
include a one-half ownership interest in and to the Cripps Model
(as defined in Section 5.20(c) ), subject to Sections
5.20(b) and 5.20(d) . For the avoidance of doubt, the
Parties also hereby acknowledge and agree that the Purchased Assets
shall also include all municipal bond positions held in LMWW
accounts numbered 140019,140020, 140032, 140440 and 140441 (the "
Muni Securities "). The Parties hereby acknowledge and agree
that, notwithstanding anything to the contrary contained in the
Acquisition Agreement, any assets of LMWW arising under the Direct
Sale Agreement, dated as of November 30,2005 (the " Direct Sale
Agreement "), among Buyer, Legg Mason and Citi, shall not be
included the Purchased Assets and shall be considered Excluded
Assets.
(g)
Section 1.102 . The definition of "Related Agreements"
contained in Section 1.102 of the Acquisition Agreement is hereby
amended by deleting the text "the Escrow Agreement," therefrom.
Section 1.2 Section 2.2 . Subsection (a) of Section 2.2
of the Acquisition Agreement is hereby amended and restated in its
entirety as follows:
"(a) cash in an amount equal to the sum
(such sum, the " Closing Payment ") of (i) the Net Book
Value plus (ii) Seven Million Dollars ($7,000,000) (the "
Premium "); at Closing, Buyer shall pay the Closing Payment
in cash, by wire transfer of immediately available funds, to an
account designated by Seller in writing not less than two (2)
Business Days prior to Closing; and"
Section 1.3 Section 2.3 . The last sentence of Section
2.3 is hereby amended and restated in its entirety as follows:
"The Parties hereby acknowledge and
agree that the transactions contemplated under this Agreement shall
be consummated at 12:02 AM EST on the same date as the closing of
the transactions under the Transaction Agreement, which time is
immediately subsequent to the closing of the transactions under the
Transaction Agreement."
Section 1.4 Section 2.5 . Clause (i) of subsection (b) of
Section 2.5 of the Acquisition Agreement is hereby amended to
delete the text:
"Within 25 days following the receipt
of the Final Closing Date Balance Sheet"
and inserting the following text in
place thereof:
"Within 23 days following the receipt
of the Final Closing Date Balance Sheet"
Section 1.5 Section 2.10. Section 2.10 of the Acquisition
Agreement is hereby amended and restated in its entirety as
follows:
"The assets and liabilities included in
the Purchased Assets and Assumed Liabilities that are of the type
reflected in the line items designated in the Illustrative Balance
Sheet as "Broker to Broker Trade" or "B to B Trade," other than any
equity securities but including the Muni Securities (the " Non-
Equities Securities Portfolio Assets and Liabilities "), shall
be acquired by Buyer from LMWW pursuant to the Direct Sale
Agreement in broker to broker trades that are effected prior to the
close of trading on the Business Day immediately preceding the
Closing Date (such Business Day prior to the Closing Date is
currently expected to be November 30,2005) in trades that are
settled on a T+l or T+3 basis (but in no event prior to the
Closing). If for any reason any of the securities included in the
Non-Equities Securities Portfolio Assets and Liabilities are not so
acquired by Buyer from LMWW, then (i) they shall be acquired at the
respective values for such securities as are reflected on the books
and records of LMWW as of the close of business on the Business Day
immediately preceding the Closing Date in trades that are effected
at or prior to the open of trading on the Closing Date (currently
expected to be December 1,2005) and that are settled on a T+l or
T+3 basis and (ii) the aggregate price paid by Buyer for the
securities in such trades shall be increased to the extent that the
aggregate value of such securities as reflected on the Final
Closing Date Balance (which shall be the same values as reflected
on the PC/CM Final Closing Date Balance Sheet (as defined in the
Transaction Agreement)) is greater than the aggregate price at
which such trades were effected on the Closing Date and decreased
to the extent that the aggregate value of such securities as
reflected on the Final Closing Date Balance Sheet (which shall be
the same values as reflected on the PC/CM Final Closing Date
Balance Sheet) is less than the aggregate price at which such
trades were effected on the Closing Date, with any such increase or
decrease to be paid by Buyer (in the case of an increase) or LMWW
(in the case of a decrease) on the second Business Day after the
Final Closing Date Balance Sheet is finalized in accordance with
Section 2.5 , together with interest accrued from the
applicable original settlement date at the rate specified in
Section 2.5 . The Non-Equities Securities Portfolio Assets
and Liabilities acquired by Buyer as described in this Section
2.10 shall be excluded from the computation of Estimated Net
Book Value and Net Book Value. In furtherance of the foregoing,
Buyer shall assume all of LMWW's short positions included in the
Non-Equities Securities Portfolio Assets and Liabilities (or
related to any equity securities included in the Purchased Assets)
and shall satisfy such obligations by selling (on the same trading
date that it acquire's LMWW's long positions in the Non-Equities
Securities Portfolio Assets and Liabilities) securities sufficient
to permit LMWW to close out and flatten such short positions. The
provisions of Section 2.4(a )( ii) and 2.4(c)
shall have no further force and effect."
Section 1.6 Section 5.5.
(a)
Section 5.5 of the Acquisition Agreement is hereby amended by
adding the following at the end of Section 5.5(a):
"Notwithstanding anything to the
contrary herein, Buyer shall not be deemed in breach of Section
5.5(a) to the extent it has not made employment offers to any
individuals who have been added to Schedule 1.29(a) pursuant to
this Amendment. Promptly following Closing, Buyer shall make an
offer of employment to such new CM Business Employee who has not
otherwise received an employment offer and otherwise in accordance
with Section 5.5(a), in each individual case subject to Buyer's
reasonable review and concurrence that the employment terms and
base pay of each such CM Business Employee is substantially
consistent with other similarly situated CM Business
Employees."
(b)
Section 5.5 of the Acquisition Agreement is hereby amended by
adding the following as new Section 5.5(i):
"(i) Not less than ten (10) Business
Days prior to the proposed payment date of the Annual Bonuses and
the Flip Bonuses (each as described in a summary provided to the
Buyer on the date hereof (the " Bonus Summary ")), which
proposed payment date shall not be later than January 15,2006 (the
" Bonus Payment Date "), Buyer will provide to Seller for
its review and approval a schedule which contains (i) the proposed
Bonus Payment Date, (ii) the amount of the Annual Bonuses and Flip
Bonuses proposed by Buyer to be paid to each Buyer Employee to whom
Buyer proposes paying an Annual Bonus and/or a Flip Bonus, together
with a calculation of the FICA and Medicare Tax payments relating
thereto, and (iii) the amount of each such Buyer Employee's pro
rated annual bonus for the portion of the fiscal year ended March
31,2005 equal to the portion of the current fiscal year through the
Closing Date. Buyer's determination of the amount of such Annual
Bonuses and Flip Bonuses will be made in accordance with the
parameters described in the Bonus Summary. If the Seller disagrees
with the Buyer's determination of the aggregate amount of the
Annual Bonuses and Flip Bonuses or the amount of any individual
Annual Bonus or Flip Bonus proposed by Buyer to be paid by Buyer to
any Buyer Employee, then the Seller shall notify the Buyer of the
aggregate amount of the Annual Bonuses and Flip Bonuses and the
amount of the Annual Bonus and Flip Bonus to be paid to each Buyer
Employee, and the amount of such bonuses to be paid shall be as
specified by Seller. On the Business Day immediately prior to the
Bonus Payment Date, Seller will transfer to Buyer to an account
previously designated to Seller by Buyer an amount in cash equal to
the sum of (i) the aggregate amount of the Annual Bonuses, plus
(ii) the aggregate amount of the Flip Bonuses; provided ,
that Seller will not be obligated to transfer to the Buyer the
amount of the Annual Bonus or Flip Bonus with respect to any Buyer
Employee who has not prior to such time executed and delivered to
Seller a release in a form acceptable to the Seller in its sole
discretion (a " Release "), which Seller may waive or modify
as it determines; provided, further that Buyer shall have no
liability to Seller if Buyer pays any Annual or Flip Bonus to any
Buyer Employee if Seller has transferred to Buyer such amount,
whether in error or otherwise prior to receiving a Release
satisfactory to Seller. On the Bonus Payment Date, the Buyer shall
pay to the Buyer Employees who have so executed and delivered to
Seller a Release each such Buyer Employee's Annual Bonus and Flip
Bonus as determined in accordance with this Section 5.5(i).
Simultaneously with the transfer of funds described in the
preceding sentence, Seller shall transfer an amount to Buyer equal
to the sum of (I) the lesser of (i) 50% of the employer's portion
of the FICA attributable to the payment of the Annual Bonuses and
the Flip Bonuses funded by Seller and (ii) $650,000 plus
(II) Medicare Tax attributable to the payment of the Flip Bonuses
and the Annual Bonuses funded by Seller. Notwithstanding the
foregoing, if the Seller has not on or prior to December 3, 2005
received a copy of the letter agreement attached hereto as
Schedule 5.5(i) that has been execute
