Exhibit 2.1
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT is dated as of June 6, 2002 (this
"Agreement") between SWS Group, Inc., a Delaware corporation ("SWS"), and
Westwood Holdings Group, Inc., a Delaware corporation ("Westwood").
W I T N E S S E T H
WHEREAS, SWS currently conducts a number of businesses, including asset
management services;
WHEREAS, SWS contributed to Westwood all of the capital stock of
Westwood Management Corporation and Westwood Trust, and in exchange therefor
Westwood has issued to SWS 5,374 shares of Westwood common stock, $0.01 par
value per share ("Westwood Common Stock");
WHEREAS, the SWS Board of Directors has authorized the distribution of
all of the issued and outstanding shares of Westwood Common Stock that continue
to be owned by SWS to the holders of its issued and outstanding shares of common
stock, par value $0.10 per share (the "SWS Common Stock"), as of the record
date, on the basis of one share of Westwood Common Stock for every four shares
of SWS Common Stock (the "Distribution");
WHEREAS, the parties intend that the Distribution qualify as a tax-free
transaction under Section 355(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, the parties hereto have determined to set forth the principal
corporate and other transactions required to effect the Distribution and to set
forth other agreements that will govern certain other matters prior to and
following the Distribution.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Action" means any demand, claim, suit, action, arbitration, inquiry,
investigation or other proceeding by or before or any Governmental Authority or
any arbitration or mediation tribunal.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person; provided, however, that for purposes of this Agreement, any Person who
was a member of both Groups prior to the Distribution shall be deemed to be an
Affiliate only of the Group of which such Person is a
member following the Distribution. For the purposes of this definition,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
Any contrary provision of this Agreement notwithstanding, neither SWS nor any of
its Subsidiaries shall be deemed to be an Affiliate of Westwood.
"Agreement" has the meaning set forth in the preamble hereto, as such
agreement may be amended and supplemented from time to time in accordance with
its terms.
"Ancillary Agreement" means each of the Tax Separation Agreement; the
Transition Services Agreement; that certain Investment Agreement, dated June 2,
1999, relating to the Southwest Special Reserve Account for the Benefit of PAIB,
between Westwood Management Corporation and SWS; that certain Investment
Agreement, dated October 3, 1993, relating to the Special Reserve Account for
Exclusive Benefit of Customers between Westwood Management Corporation and SWS;
that certain Agency Account without Investment Advice Letter of Instruction,
dated March 31, 1998, relating to the Southwest Special Reserve Account between
Westwood Trust and SWS; and that certain Agency Account without Investment
Advice Letter of Instruction, dated as of March 31, 1998, relating to the
Special Reserve Account for the Exclusive Benefit of PAIB between Westwood Trust
and SWS; as any of such agreements may be amended or superseded from time to
time.
"Boykin Trust" means the Richard A. Boykin, Jr. Family Trust.
"Commission" means the Securities and Exchange Commission.
"Distribution" has the meaning set forth in the recitals to this
Agreement.
"Distribution Agent" means Computershare Trust Company, Inc.
"Distribution Date" means the day as of which the Distribution shall be
effected.
"Distribution Documents" means all of the agreements and other
documents entered into in connection with the Distribution as contemplated
hereby, including, without limitation, this Agreement and the Ancillary
Agreements.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Finally Determined" means, with respect to any Action or other matter,
that the outcome or resolution of such Action or matter has been judicially
determined by judgment or order not subject to further appeal or discretionary
review.
"Form 10" means the registration statement on Form 10 initially filed
by Westwood with the Commission on February 8, 2002 to effect the registration
of Westwood Common Stock
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pursuant to the Exchange Act in connection with the Distribution, as such
registration statement may be amended or supplemented from time to time.
"Group" means, as the context requires, the Westwood Group or the SWS
Group.
"Indemnified Party" has the meaning set forth in Section 3.4.
"Indemnifying Party" has the meaning set forth in Section 3.4.
"Information Statement" means the final Information Statement to be
sent to each holder of SWS Common Stock in connection with the Distribution.
"Insurance Proceeds" means those monies (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
"Insured Claims" means those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the SWS
Policies, whether or not subject to deductibles, co-insurance, uncollectability
or retrospectively rated premium adjustments, but only to the extent that such
Liabilities are within applicable policy limits, including aggregates.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, any action, order, injunction or consent
decree of any governmental agency or entity, or any award of any arbitrator of
any kind, and those arising under any agreement, commitment or undertaking.
"Losses" means, with respect to any Person, any and all damage, loss,
liability and expense incurred or suffered by such Person (including, without
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any and all Actions or threatened Actions).
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or an agency or instrumentality thereof.
"Record Date" means the date determined by the SWS Board of Directors
(or determined by a committee of such Board of Directors pursuant to authority
delegated to such committee by the SWS Board of Directors) as the record date
for determining the holders of SWS Common Stock entitled to receive the
Distribution.
"Return" has the meaning set forth in the Tax Separation Agreement.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"SWS" has the meaning set forth in the preamble.
"SWS Common Stock" has the meaning set forth in the recitals to this
Agreement.
"SWS Group" means SWS and its Subsidiaries (other than any Subsidiary
or member of, or other entity in, the Westwood Group).
"SWS Liabilities" means all (i) Liabilities of the SWS Group resulting
from breaches by the SWS Group under this Agreement, (ii) Liabilities accrued as
of the Distribution Date, except as otherwise specifically provided herein, and
other Liabilities, whether arising before, on or after the Distribution Date, of
or relating to the SWS Group or arising from or in connection with the conduct
of the business of the SWS Group (other than the Westwood Business) or the
ownership or use of assets in connection therewith and (iii) any Liabilities or
expenses of the Westwood Group in excess of $500,000 that arise out of or
directly or indirectly relate to the Boykin Trust (such expenses to include
unpaid trustee fees owing to Westwood at the time of the Distribution but not
thereafter). Notwithstanding the foregoing, "SWS Liabilities" shall exclude (y)
any Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Separation Agreement) and (z) any Liabilities specifically retained or assumed
by Westwood pursuant to this Agreement.
"SWS Policies" means the following insurance policies, together with
the rights, benefits and privileges thereunder, which are owned or maintained by
or on behalf of SWS or any of its predecessors and which relate to both the
business of SWS and the Westwood Business:
Coverage Insurer Policy Number
- -------- ------- -------------
Property Fidelity & Deposit Co. FSA0004730-06
Commercial General Liability Fidelity & Deposit Co. FSA0004730-06
Business Auto Fidelity & Deposit Co. CAP0008823-07
Umbrella Liability Fidelity & Deposit Co. CCL0004936-07
Fiduciary Liability Fidelity & Deposit Co. FRP0002987-02
Directors & Officer National Union Fire 858-18-49
D&O - Excess Federal Insurance Co. 70426732
Kidnap & Ransom Chubb Group 8113-81-83C
Financial Institution Bond National Union Fire 280-68-84
"Tax" has the meaning set forth in the Tax Separation Agreement.
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"Tax Separation Agreement" means the Tax Separation Agreement dated as
of the date hereof between SWS and Westwood.
"Third-Party Claim" has the meaning set forth in Section 3.5.
"Transition Services Agreement" means the Transition Services Agreement
dated as of the date hereof between SWS and Westwood.
"Westwood" has the meaning set forth in the preamble.
"Westwood Business" means the business of Westwood and its Subsidiaries
as conducted as of the date hereof.
"Westwood Common Stock" has the meaning set forth in the recitals to
this Agreement.
"Westwood Group" means Westwood Holdings Group, Inc. and its
Subsidiaries as of and after the Distribution Date (including all predecessors
to such Persons).
"Westwood Liabilities" means all (i) Liabilities of the Westwood Group
resulting from breaches by the Westwood Group under this Agreement, (ii)
Liabilities expressly assumed by Westwood pursuant to Section 4.5 herein and
(iii) except as otherwise specifically provided herein, other Liabilities,
whether arising before, on or after the Distribution Date, of or relating to the
Westwood Group or arising from or in connection with the conduct of the Westwood
Business or the ownership or use of assets in connection therewith.
Notwithstanding the foregoing, "Westwood Liabilities" shall exclude: (x) any
Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Separation Agreement), (y) any Liabilities or expenses of the Westwood Group in
excess of $500,000 that arise out of or directly or indirectly relate to the
Boykin Trust (such expenses to include unpaid trustee fees owing to Westwood at
the time of the Distribution but not thereafter) and (z) any Liabilities
specifically retained or assumed by SWS pursuant to this Agreement.
ARTICLE 2
THE DISTRIBUTION
Section 2.1 Cooperation Prior to the Distribution
(a) SWS and Westwood shall prepare, and Westwood shall file with the
Commission, the Form 10, which shall include the Information Statement, and
which shall set forth appropriate disclosure concerning Westwood and the
Distribution. SWS and Westwood shall use reasonable efforts to cause the Form 10
to become effective under the Exchange Act as soon as practicable. After the
Form 10 has become effective, SWS shall mail the Information Statement to the
holders of SWS Common Stock as of the Record Date.
(b) SWS and Westwood shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereto that are
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appropriate to reflect the establishment of or amendments to any employee
benefit and other plans contemplated by this Agreement and the Ancillary
Agreements.
(c) SWS and Westwood shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.
(d) Westwood shall prepare, file and pursue an application to permit
listing of the Westwood Common Stock on the New York Stock Exchange.
Section 2.2 SWS Board Action; Conditions Precedent to the Distribution
SWS's Board of Directors shall, in its discretion, establish (or
delegate authority to establish) the Record Date and the Distribution Date and
any appropriate procedures in connection with the Distribution. In no event
shall the Distribution occur unless the following conditions shall have been
waived by SWS or shall have been satisfied:
(a) the Commission must have declared the Form 10 effective under the
Exchange Act;
(b) the New York Stock Exchange must have approved the listing of the
Westwood Common Stock, subject to official notice of issuance;
(c) the SWS Board of Directors must be satisfied that the Distribution
will be made out of surplus within the meaning of Section 170 of the General
Corporation Law of the State of Delaware;
(d) the SWS Board of Directors must have approved the Distribution and
must not have abandoned, deferred or modified the Distribution at any time
before the completion of the Distribution;
(e) Westwood's Certificate of Incorporation and Bylaws, in
substantially the forms filed as exhibits to the Form 10, must be in effect;
(f) Westwood must have received approval of the change of control of
Westwood Trust from the Texas Banking Commissioner or confirmation that a change
of control of Westwood Trust has not occurred as a result of the Distribution;
and
(g) each of the Ancillary Agreements shall have been duly executed and
delivered by the parties thereto.
Section 2.3 The Distribution
Subject to the terms and conditions set forth in this Agreement, (i)
prior to the Distribution Date, SWS shall deliver to the Distribution Agent for
the benefit of holders of
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record of SWS Common Stock on the Record Date, a stock certificate or
certificates, endorsed by SWS in blank, representing all of the outstanding
shares of Westwood Common Stock held by SWS, (ii) the Distribution shall be
effective on the Distribution Date and (iii) SWS shall instruct the Distribution
Agent to distribute, on or as soon as practicable after the Distribution Date,
to each holder of record (other than SWS as the holder of treasury shares) of
SWS Common Stock as of the close of business on the Record Date one share of
Westwood Common Stock for every four shares of SWS Common Stock so held.
Westwood agrees to provide all certificates for shares of Westwood Common Stock
that SWS shall require (after giving effect to Sections 2.4 and 2.5) in order to
effect the Distribution.
Section 2.4 Split of Westwood Common Stock to Accomplish the
Distribution
Following the filing of Westwood's Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware and prior to
the Distribution Date, Westwood shall effect a stock split in the form of a
stock dividend which will result in the ownership by SWS of a number of shares
of Westwood Common Stock, rounded to the next higher share, if necessary, equal
to one-fourth of the number of shares of SWS Common Stock outstanding (excluding
treasury shares) on the Record Date.
Section 2.5 Fractional Shares
No certificates representing fractional shares of Westwood Common Stock
will be distributed in the Distribution. The Distribution Agent will be directed
to determine the number of whole shares and fractional shares of Westwood Common
Stock allocable to each holder of SWS Common Stock as of the Record Date. Upon
the determination by the Distribution Agent of the aggregate number of
fractional shares, as soon as practicable after the Distribution Date, the
Distribution Agent, acting on behalf of the holders thereof, shall sell such
fractional shares for cash on the open market and shall disburse to each holder
entitled thereto the appropriate portion of the resulting cash proceeds
(calculated by multiplying the average gross selling price per share times the
number of fractional shares allocable to such holder), less a pro rata portion
of the aggregate brokerage commission payable in connection with the sale.
Section 2.6 Intercompany and Third Party Accounts
All accounts between the SWS Group and the Westwood Group, including
receivables, payables and loans, or any other account that may arise (other than
receivables, payables and loans otherwise specifically provided for hereunder or
under any Ancillary Agreement), as well as all accounts between the SWS Group or
the Westwood Group on the one hand, and third parties on the other hand,
including, without limitation, in respect of any cash balances, any cash
balances representing deposited checks or drafts for which only a provisional
credit has been allowed or any cash held in any centralized cash management
system between the SWS Group and the Westwood Group which exist and have not
been settled by the Distribution Date, shall be paid or settled in the ordinary
course of business in a manner consistent with the payment or settlement of
similar accounts arising from transactions with third parties no later than 30
days after the Distribution Date.
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ARTICLE 3
INDEMNIFICATION
Section 3.1 Westwood Indemnification of the SWS Group
(a) Subject to Section 3.3, on and after the Distribution Date,
Westwood shall indemnify, defend and hold harmless the SWS Group and the
respective directors, officers, employees and Affiliates of each Person in the
SWS Group (the "SWS Indemnitees") from and against any and all Losses incurred
or suffered by any of the SWS Indemnitees arising out of, or due to the failure
of any Person in the Westwood Group to pay, perform or otherwise discharge, any
of the Westwood Liabilities.
(b) Subject to Section 3.3, Westwood shall indemnify, defend and hold
harmless each of the SWS Indemnitees and each Person, if any, who controls any
SWS Indemnitee within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all Losses caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Form 10 or any amendment thereof or the Information Statement (as amended or
supplemented if Westwood shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if, and only to the
extent that, such Losses are caused by any untrue statement or omission or
alleged untrue statement or alleged omission arising out of information provided
by Westwood for inclusion in the Form 10 or Information Statement.
Section 3.2 SWS Indemnification of Westwood Group
(a) Subject to Section 3.3, on and after the Distribution Date, SWS
shall indemnify, defend and hold harmless the Westwood Group and the respective
directors, officers, employees and Affiliates of each Person in the Westwood
Group (the "Westwood Indemnitees") from and against any and all Losses incurred
or suffered by any of the Westwood Indemnitees and arising out of, or due to the
failure of any Person in the SWS Group to pay, perform or otherwise discharge,
any of the SWS Liabilities.
(b) Subject to Section 3.3, SWS shall indemnify, defend and hold
harmless each of the Westwood Indemnitees and each Person, if any, who controls
any Westwood Indemnitee within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
Losses caused by any untrue statement or alleged untrue statement of a material
fact contained in the Form 10 or any amendment thereof or the Information
Statement (as amended or supplemented if SWS shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, if, and only to
the extent that, such Losses are caused by any untrue statement or omission or
alleged untrue statement or alleged omission arising out of information provided
by SWS for inclusion in the Form 10 or Information Statement.
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Section 3.3 Insurance; Third Party Obligations; Tax Benefits; Payments
Received
Any indemnification pursuant to Sections 3.1 or 3.2 shall be paid net
of the amount of any insurance or other amounts that would be payable by any
third party (other than expenses owed to Westwood by the Boykin Trust, including
unpaid trustee fees owed to Westwood at or prior to the Distribution) to the
Indemnified Party (as defined below) in the absence of this Agreement
(irrespective of time of receipt of such insurance or other amounts) and net of
any tax benefit to the Indemnified Party attributable to the relevant payment or
Liability. Such indemnification shall be increased to reflect any tax liability
of the indemnified party so that the indemnified party receives 100% of the
after-tax amount of any payment or liability. It is expressly agreed that no
insurer or any other third party shall be (i) entitled to a benefit it would not
be entitled to receive in the absence of the foregoing indemnification
provisions, (ii) relieved of the responsibility to pay any claims to which it is
obligated or (iii) entitled to any subrogation rights with respect to any
obligation hereunder.
In the event that Westwood receives payment at any time or from time to
time from the Boykin Trust for its expenses (including unpaid trustee fees owed
to Westwood at or prior to the Distribution) and SWS has made one or more
indemnification payments for any Liabilities or expenses that arise out of or
directly or indirectly relate to the Boykin Trust, Westwood shall immediately
reimburse SWS up to the amount of any such non-reimbursed indemnification
payments. To the extent that any payments received by Westwood from the Boykin
Trust are in excess of the amount of indemnification payments made by SWS, the
difference shall be credited against the $500,000 threshold calculation under
(iii) of "SWS Liabilities" in Article I.
Section 3.4 Notice and Payment of Claims
If any SWS Indemnitee or Westwood Indemnitee (the "Indemnified Party")
determines that it is or may be entitled to indemnification by any party (the
"Indemnifying Party") under Article 3 (other than in connection with any Action
subject to Section 3.5), the Indemnified Party shall deliver to the Indemnifying
Party a written notice specifying, to the extent reasonably practicable, the
basis for its claim for indemnification and the amount for which the Indemnified
Party reasonably believes it is entitled to be indemnified. Within 30 days after
receipt of such notice, the Indemnifying Party shall pay the Indemnified Party
such amount in cash or other immediately available funds unless the Indemnifying
Party objects to the claim for indemnification or the amount thereof. If the
Indemnifying Party does not give the Indemnified Party written notice objecting
to such indemnity claim and setting forth the grounds therefor within such
30-day period, the Indemnified Party shall give the Indemnifying Party an
additional notice of its claims for indemnification and if the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
claims within 10 days after receipt of such additional notice, the Indemnifying
Party shall be deemed to have acknowledged its liability for such claim and the
Indemnified Party may exercise any and all of its rights under applicable law to
collect such amount. In the event of such a timely objection by the Indemnifying
Party, the amount, if any, that is Finally Determined to be required to be paid
by the Indemnifying Party in respect of such indemnity claim shall be paid by
the Indemnifying Party to the Indemnified Party in cash within 15 days after
such indemnity claim has been so Finally Determined. Notice and
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payment of all claims shall be in accordance with the provisions of this
Agreement and with a copy of the notice to:
SWS Group, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
Telecopy: (214) 859-6020
Attention: General Counsel
Section 3.5 Notice and Defense of Third-Party Claims
Promptly following the earlier of (i) receipt of notice of the
commencement by a third party of any Action against or otherwise involving any
Indemnified Party or (ii) receipt of information from a third party alleging the
existence of a claim against an Indemnified Party, in either case, with respect
to which indemnification may be sought pursuant to this Agreement (a
"Third-Party Claim"), the Indemnified Party shall give the Indemnifying Party
written notice thereof. The failure of the Indemnified Party to give notice as
provided in this Section 3.5 shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the Indemnifying
Party is materially prejudiced by such failure to give notice. Within 15 days
after receipt of such notice, the Indemnifying Party may (i) by giving written
notice thereof to the Indemnified Party, acknowledge liability for such
indemnification claim and at its option elect to assume the defense of such
Third-Party Claim at its sole cost and expense or (ii) object to the claim for
indemnification set forth in the notice delivered by the Indemnified Party
pursuant to the first sentence of this Section 3.5; provided that if the
Indemnifying Party does not within such 15-day period give the Indemnified Party
written notice objecting to such indemnification claim and setting forth the
grounds therefor, the Indemnified Party shall give the Indemnifying Party an
additional notice of its claims for indemnification and if the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
claims within 10 days after receipt of such additional notice, the Indemnifying
Party shall be deemed to have acknowledged its liability for such
indemnification claim. If the Indemnifying Party has elected to assume the
defense of a Third-Party Claim, (x) the defense shall be conducted by counsel
retained by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party, provided that the Indemnified Party shall have the right to
employ counsel to represent such Indemnified Party if, in such Indemnified
Party's reasonable judgment, a conflict of interest between such Indemnified
Party and such Indemnifying Party exists in respect of such claim that would
make representation of both such parties by one counsel inappropriate, and in
such event the fees and expenses of such separate counsel shall be paid by such
Indemnifying Party (if the Indemnifying Party elects to assume such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, subject to the foregoing proviso, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense); and (y) the
Indemnifying Party may settle or compromise the Third Party Claim without the
prior written consent of the Indemnified Party so long as such settlement
includes an unconditional release of the Indemnified Party from all claims that
are the subject of such Third Party Claim, provided that the Indemnifying Party
may not agree to any such settlement pursuant to which any remedy or relief,
other than monetary damages for which the Indemnifying Party shall be
responsible hereunder, shall be applied to or
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against the Indemnified Party, without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not assume the defense of a Third-Party Claim for which
it has acknowledged liability for indemnification hereunder, the Indemnified
Party may require the Indemnifying Party to reimburse it on a current basis for
its reasonable expenses of investigation, reasonable attorneys' fees and
reasonable out-of-pocket expenses incurred in defending against such Third-Party
Claim and the Indemnifying Party shall be bound by the result obtained with
respect thereto by the Indemnified Party; provided that the Indemnifying Party
shall not be liable for any settlement effected without its consent, which
consent shall not be unreasonably withheld. The Indemnifying Party shall pay to
the Indemnified Party in cash the amount, if any, for which the Indemnified
Party is entitled to be indemnified hereunder within 15 days after such Third
Party Claim has been Finally Determined, in the case of an indemnity claim as to
which the Indemnifying Party has acknowledged liability or, in the case of any
indemnity claim as to which the Indemnifying Party has not acknowledged
liability, within 15 days after such Indemnifying Party's objection to liability
hereunder has been Finally Determined.
Section 3.6 Contribution
If for any reason the indemnification provided for in Section 3.1 or
3.2 is unavailable to any Indemnified Party, or insufficient to hold it
harmless, then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such proportion
as is appropriate to reflect all relevant equitable considerations.
Section 3.7 Non-Exclusivity of Remedies
The remedies provided for in this Article 3 are not exclusive and shall
not limit any rights or remedies that may otherwise be available to any
Indemnified Party at law or in equity.
Section 3.8 Termination of Indemnification Obligations
The obligations of the parties under this Article 3 shall terminate two
years after the Distribution Date; provided, however, such obligations shall not
terminate with respect to any claim for indemnification or contribution or with
respect to which notice is delivered to the Indemnifying Party in accordance
with Section 3.4 prior to the date of termination.
ARTICLE 4
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
Section 4.1 Employees Generally
As of the Distribution Date, SWS will retain responsibility for all of
its current employees (other than employees of Westwood Group), and Westwood
will retain responsibility for all employees of Westwood Group (including
persons absent from active service by reason of disability or otherwise). As of
the Distribution Date, employees of Westwood Group will no longer be deemed
employees of SWS Group.
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Section 4.2 Employee Benefit Plans Generally
As of the Distribution Date, all SWS medical, dental, disability, life
insurance and similar plans provided by SWS Group to its employees shall
terminate as to employees of Westwood Group. Westwood will adopt employee
benefit plans that will be substantially similar to plans provided by SWS to be
effective as of the Distribution Date.
Section 4.3 SWS Stock Options Held by Westwood Group Employees
As of the Distribution Date, SWS shall provide for 100% vesting of
options to purchase SWS Common Stock held by employees of the Westwood Group.
Each option to purchase SWS Common Stock held by an employee of Westwood Group
will be amended to substitute Westwood or one of its Subsidiaries for SWS as the
employer of such employee. In addition, to the extent that SWS makes any
adjustments to its outstanding options as a result of the Distribution, similar
adjustments will be made to the SWS options held by Westwood employees.
Section 4.4 SWS 401(k) Profit Sharing Plan Accounts Held by Westwood
Group Employees
As of the Distribution Date, SWS shall provide for 100% vesting for
accounts in the SWS 401(k) Profit Sharing Plan for employees of the Westwood
Group. As soon as practicable following the Distribution, the trustees of the
SWS 401(k) Profit Sharing Plan will transfer such accounts to the trustees of
the Westwood Group 401(k) Profit Sharing Plan.
Section 4.5 SWS Deferred Compensation Plan Accounts Held by Westwood
Group Employees
As soon as practicable following the Distribution, the trustee of the
SWS rabbi trust, which holds the assets of the SWS Deferred Compensation Plan,
will transfer the accounts held for the benefit of Westwood Group employees to
the trustee of the Westwood Group rabbi trust, which holds the assets of the
Westwood Group Deferred Compensation Plan. Contemporaneous with the transfer of
the assets to the Westwood Group rabbi trust, SWS will transfer to Westwood, and
Westwood will assume, the related liability and unrealized holding gain
accounts.
Section 4.6 Restriction on Solicitation or Employment of Employees
For a period of one year following the Distribution Date, each of the
SWS Group and the Westwood Group agrees that (without the prior written consent
of the other) it will not, directly or indirectly, (i) solicit or otherwise
attempt to induce or influence any employee of the other Group to terminate
employment with his or her then-current employer or (ii) employ any employee of
the other Group; provided, that the foregoing shall not apply to the
solicitation or hiring of any Person whose employment with a Group terminated at
least 90 days prior to the date of such solicitation or hiring for a bona fide
reason not intended to circumvent the provisions of this Section 4.6.
12
ARTICLE 5
ACCESS TO INFORMATION
Section 5.1 Provision of Corporate Records
Immediately prior to or as soon as practicable following the
Distribution Date, each Group shall provide to the other Group all documents,
contracts, books, records, Tax Returns (and any information related thereto) and
data (including but not limited to minute books, stock registers, stock
certificates and documents of title) in its possession relating to such other
Group or such other Group's business and affairs; provided that if any such
documents, contracts, books, records, Tax Returns (and any information related
thereto) or data relate to both Groups or the business and operations of both
Groups, each such Group shall provide to the other Group true and complete
copies of such documents, contracts, books, records, Tax Returns (and any
information related thereto) or data. Data stored in electronic form shall be
provided in the format in which it existed at the Distribution Date and, if
requested, in hard copy (at the expense of the requesting party), except as
otherwise specifically set forth in this Agreement or any Ancillary Agreement.
Section 5.2 Access to Information
From and after the Distribution Date, each Group shall, during the time
specified in Section 5.5, afford promptly to the other Group and its
accountants, counsel and other designated representatives reasonable access
during normal business hours to all documents, contracts, books, records,
computer data, Tax Returns (and any information related thereto) and other data
in such Group's possession relating to such other Group or the business and
affairs of such other Group (other than data and information subject to an
attorney/client or other privilege), insofar as such access is reasonably
required by such other Group, including, without limitation, for audit,
accounting, litigation, disclosure reporting and regulatory compliance purposes.
Section 5.3 Litigation Cooperation
Each Group shall use reasonable efforts to make available to the other
Group and its accountants, counsel, and other designated representatives, upon
written request, its directors, officers, employees and representatives as
witnesses, and shall otherwise cooperate with the other Group, to the extent
reasonably required in connection with any Action arising out of either Group's
business and operations prior to the Distribution Date in which the requesting
party may from time to time be involved.
Section 5.4 Reimbursement
Each Group providing information or witnesses to the other Group, or
otherwise incurring any expense in connection with cooperating, under Sections
5.1, 5.2 or 5.3 shall be entitled to receive from the recipient thereof, upon
the presentation of invoices therefor, payment for all out-of-pocket costs and
expenses as may be reasonably incurred in providing such information, witnesses
or cooperation.
13
Section 5.5 Retention of Records
Except as otherwise required by law or agreed to in writing, each party
shall, and shall cause the members of its respective Group to, retain all
information relating to the other Group's business and operations in accordance
with past practice of such party (provided that all Tax Returns and information
related thereto will be retained for a period of six years). Notwithstanding the
foregoing, any party may destroy or otherwise dispose of any such information at
any time, provided that, prior to such destruction or disposal, (i) such party
shall provide not less than 90 days' prior written notice to the other party,
specifying the information proposed to be destroyed or disposed of and the
scheduled date for such destruction or disposal and (ii) if the recipient of
such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the information proposed to be destroyed or
disposed of be delivered to such requesting party, the party proposing the
destruction or disposal shall promptly arrange for the delivery of such of the
information as was requested at the expense of the requesting party.
Section 5.6 Confidentiality
Each party shall hold and shall cause its directors, officers,
employees, agents, consultants and advisors ("Representatives") to hold in
strict confidence all information (other than any such information relating
solely to the business or affairs of such party) concerning the other party
unless (i) such party is compelled to disclose such information by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law or (ii) such information can be shown to have been (A) in the public
domain through no fault of such party or (B) lawfully acquired after the
Distribution Date on a non-confidential basis from other sources.
Notwithstanding the foregoing, such party may disclose such information to its
Representatives so long as such Persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially. If such party or any of its Representatives
becomes legally compelled to disclose any documents or information subject to
this Section, such party will promptly notify the other party so that the other
party may seek a protective order or other remedy or waive such party's
compliance with this Section. If no such protective order or other remedy is
obtained or waiver granted, such party will furnish only that portion of the
information which it is advised by counsel is legally required and will exercise
its reasonable efforts to obtain reliable assurance that confidential treatment
will be accorded such information. Such party agrees to be responsible for any
breach of this Section by it and its Representatives.
Section 5.7 Privileged Matters
The parties hereto recognize that legal and other professional services
that have been and will be provided prior to the Distribution Date have been and
will be rendered for the benefit of each of the members of the SWS Group and
each of the members of the Westwood Group, and that each of the members of the
SWS Group and each of the members of the Westwood Group should be deemed to be
the client for the purposes of asserting all privileges which may be asserted
under applicable law. Except as otherwise specifically provided in the Tax
Separation
14
Agreement with respect to tax matters, to allocate the interests of each party
in the information as to which any party is entitled to assert a privilege, the
parties agree as follows:
(a) SWS shall be entitled, in perpetuity, to control the assertion or
waiver of all privileges in connection with privileged information that relates
solely to the business of SWS (exclusive of the Westwood Business), whether or
not the privileged information is in the possession of or under the control of
SWS or Westwood. SWS shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
that relates solely to the subject matter of any claims constituting SWS
Liabilities, now pending or which may be asserted in the future, in any Action
initiated against or by SWS, whether or not the privileged information is in the
possession of or under the control of SWS or Westwood.
(b) Westwood shall be entitled, in perpetuity, to control the assertion
or waiver of all privileges in connection with privileged information that
relates solely to the Westwood Business, whether or not the privileged
information is in the possession of or under the control of SWS or Westwood.
Westwood shall also be entitled, in perpetuity, to control the assertion or
waiver of all privileges in connection with privileged information which relates
solely to the subject matter of any claims constituting Westwood Liabilities,
now pending or which may be asserted in the future, in any Action initiated
against or by Westwood, whether or not the privileged information is in the
possession of Westwood or under the control of SWS or Westwood.
(c) The parties hereto agree that they shall have a shared privilege,
with equal right to assert or waive, subject to the restrictions in this Section
5.7, with respect to all privileges not allocated pursuant to the terms of
Sections 5.7(a) and (b). All privileges relating to any Action, disputes or
other matters that involve SWS and Westwood in respect of which such parties
retain any responsibility or liability under this Agreement shall be subject to
a shared privilege among them.
(d) No party hereto may waive any privilege which could be asserted
under any applicable law, and in which any other party hereto has a shared
privilege, without the consent of the other party, which consent shall not be
unreasonably withheld or delayed, except to the extent reasonably required in
connection with any Third-Party Claim or as provided in subsection (e) below.
Consent shall be in writing, or shall be deemed to be granted unless written
objection is made within 20 days after notice upon the other party requesting
such consent.
(e) In the event of any Action or dispute between any of the parties
hereto, any party and a Subsidiary of another party hereto, or a Subsidiary of
one party hereto and a Subsidiary of another party hereto, either such party, to
the extent necessary in connection with such Action or dispute, may waive a
privilege in which the other party has a shared privilege, without obtaining the
consent of the other party, provided that such waiver of a shared privilege
shall be effective only as to the use of information with respect to such Action
or dispute between the relevant parties and/or their Subsidiaries, and shall not
operate as a waiver of the shared privilege with respect to third parties.
15
(f) If a dispute arises between or among the parties hereto or their
respective Subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto specifically agrees that it will
not withhold consent to waiver for any purpose except to protect its own
legitimate interests.
(g) Upon receipt by any party hereto or by any Subsidiary thereof of
any subpoena, discovery or other request which arguably calls for the production
or disclosure of information subject to a shared privilege or as to which
another party has the sole right hereunder to assert a privilege, or if any
party obtains knowledge that any of its or any of its Subsidiaries' current or
former officers or directors has received any subpoena, discovery or other
requests which arguably calls for the production or disclosure of such
privileged information, such party shall promptly notify the other party of the
existence of the request and shall provide the other party a reasonable
opportunity to review the information (to the extent such information is
available to such party) and to assert any rights it or they may have under this
Section 5.7 or otherwise to prevent the production or disclosure of such
privileged information.
(h) The transfer of all records and other information pursuant to this
Agreement is made in reliance on the agreement of SWS and Westwood, as set forth
in Sections 5.6 and 5.7, to maintain the confidentiality of privileged
information and to assert and maintain all applicable privileges. The access to
information being granted pursuant to Sections 5.1 and 5.2 hereof, the agreement
to cooperate with respect to litigation pursuant to Section 5.3, the furnishing
of notices and documents and other cooperative efforts contemplated by Section
3.5 hereof, and the transfer of privileged information between and among the
parties and their respective Subsidiaries pursuant to this Agreement shall not
be deemed a waiver of any privilege that has been or may be asserted under this
Agreement or otherwise.
(i) Any waiver of privilege granted pursuant to this Section 5.7 shall
only be valid if given in writing and signed by the Chief Executive Officer,
General Counsel or Board of Directors of the party granting such waiver.
ARTICLE 6
FURTHER ASSURANCES AND CONSENTS
In addition to the actions specifically provided for elsewhere in this
Agreement, each of the parties hereto shall use its reasonable efforts to 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 but not limited to 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; provided that no party hereto shall be obligated
to pay any consideration therefor (except for filing fees and other similar
charges) to any third party from whom such consents or approvals are
16
requested or to take any action or omit to take any action if the taking of or
the omission to take such action would be unreasonably burdensome to the party,
its Group or its Group's business.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Notices
All notices and other communications to any party hereunder shall be in
writing (including telecopy or similar writing) and, except as noted, shall be
deemed given when received addressed as follows:
If to SWS, to:
SWS Group, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
Telecopy: (214) 859-6020
Attention: General Counsel
With a copy to:
Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Telecopy: (214) 999-4667
Attention: David G. McLane
If to Westwood, to:
Westwood Holdings Group, Inc.
300 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 756-6920
Attention: Brian O. Casey, President
With a copy to:
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy: (214) 740-8800
Attention: John B. McKnight
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall thereafter be made.
17
Section 7.2 Amendments; No Waivers
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by SWS and Westwood, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 7.3 Expenses
Except as specifically provided otherwise in this Agreement or any Ancillary
Agreement, all costs and expenses incurred by the SWS Group in connection with
the Distribution and related transactions shall be paid by SWS, and all costs
and expenses incurred by the Westwood Group in connection with the Distribution
and related transactions shall be paid by Westwood.
Section 7.4 Insurance Matters
(a) Continuation of Westwood Rights under SWS Policies. SWS and
--------------------------------------------------
Westwood agree that, following the Distribution Date, Westwood shall retain all
rights of an insured party under each of the SWS Policies with respect to any
injury, loss, liability, damage or expense incurred or claimed to have been
incurred prior to the Distribution Date by any party in or in connection with
the conduct of the Westwood Business or against Westwood or any Westwood
Subsidiary, to the extent that such injury, loss, liability, damage or expense
may arise out of insured or insurable occurrences or events under one or more of
the SWS Policies. If, subsequent to the Distribution Date, any Person shall
assert such a claim whose occurrence is prior to the Distribution Date against
Westwood or any Westwood Subsidiary, SWS shall at the time such claim is
asserted be deemed to assign, without need of further documentation, to Westwood
any and all rights of an insured party under the applicable SWS Policy with
respect to such asserted claim, specifically including rights of indemnity, if
any, and the right, if any, to be defended by or at the expense of the insurer;
provided, however, that nothing in this paragraph shall be deemed to constitute
(or to reflect) the assignment of the SWS Policies, or any of them, to Westwood.
(b) Administration. From and after the Distribution Date, SWS shall be
--------------
responsible for accounting for premiums, indemnity payments, deductibles and
retentions, as appropriate under the terms and conditions of each of the SWS
Policies; distributing Insurance Proceeds as contemplated by this Agreement;
reporting to insurers its own Insured Claims and those Insured Claims which
Westwood has reported to it; and processing and managing Insured Claims made
under the SWS Policies based on supporting information and documentation
provided by the party submitting such Insured Claim; provided that SWS's
retention of the administrative responsibilities for the SWS Policies listed in
this paragraph (b) will not relieve the party
18
submitting any Insured Claim of the primary responsibility for reporting such
Insured Claim accurately, completely and in a timely manner. Subject to Section
3 hereof, each of SWS and Westwood shall administer and pay any costs related to
defending its respective Insured Claims under the SWS Policies to the extent
such defense costs are not covered under such policies, and will be responsible
for obtaining or reviewing the appropriateness of releases upon settlement of
its respective Insured Claims under the SWS Policies. The retention of the SWS
Policies by SWS is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under the SWS
Policies, including, but no limited to, Westwood and any of its operations, and
any Westwood Subsidiary or Affiliate.
(c) Allocation of Policy Limits. SWS and Westwood agree that where
---------------------------
Westwood Liabilities are specifically covered under SWS Policies in effect for
periods prior to the Distribution Date, then from and after the Distribution
Date Westwood may claim for Insured Claims under each such SWS Policy as and to
the extent that such insurance is available up to the full extent of the
applicable fixed dollar coverage limits of the policy, subject to the terms of
this Section 7.4(c). In the event that the aggregate of Insured Claims by SWS
and Westwood have exhausted the fixed dollar coverage limits under a particular
SWS Policy, taking into account defense costs to the extent such costs are
applied against such limits of such policy, then the party that has utilized
more than its "allocable portion" (as defined below) of the fixed dollar
coverage limits under such Policy (the "benefited party") shall indemnify the
party which utilized less than its allocable portion of such fixed dollar
coverage limits (the "non-exceeding party") for any subsequent claim by the
non-exceeding party (including, without limitation, defense costs related to
such claim) arising out of an insured or insurable occurrence or event under
such SWS Policy which would have been an Insured Claim but for the fact that the
limits of such SWS Policy were exceeded, up to the difference between such
parties allocable portion of the fixed dollar coverage limits under such SWS
Policy and the amount of such fixed dollar coverage limits (excluding defense
costs to the extent such costs are not applied against the fixed dollar coverage
limits) actually utilized by the non-exceeding party (the "maximum reimbursement
amount"). The non-exceeding party shall submit to the benefited party the same
information and documentation that it would have been required to submit to the
insurance carrier under the applicable SWS Policy within the same time frames
provided for in such SWS Policy, and the benefited party shall, within 30 days
of receipt of documentation supporting such claim, either pay such claim or give
written notice denying the claim to the non-exceeding party. Westwood's
"allocable portion" is the percentage of consolidated SWS sales attributable to
the Westwood Business for the SWS fiscal year during which the event giving rise
to the claim occurred (or, with respect to SWS's 2002 fiscal year, for the
portion of the 2002 fiscal year prior to the Distribution), and SWS's "allocable
portion" is the percentage of consolidated SWS sales attributable to the
business of SWS (exclusive of the Westwood Business) for the same period.
In the event the benefited party denies any claim, then the parties
shall select an independent insurance coverage expert within 30 days of the
notice of denial. If the parties are unable to agree on an independent insurance
coverage expert within 45 days of the notice of denial, and a third independent
insurance coverage expert shall be selected by mutual agreement of the first two
independent insurance coverage experts within 60 days of the notice of denial.
If the parties agree on the selection of an independent insurance coverage
expert, such expert so selected, or if the parties do not so agree, the third
independent insurance coverage expert so
19
selected, shall interpret the terms, provisions and conditions of the applicable
SWS Policy and shall determine, within 45 days of being selected, whether the
claim would have been an Insured Claim under such SWS Policy and the amount of
reimbursement that the non-exceeding party will receive in settlement of such
claims; provided, however, that the aggregate amount of claims paid by a
benefited party under this paragraph (c) shall not exceed the maximum
reimbursement amount.
The decision of the independent insurance coverage expert will be final
and binding on the parties, and no appeal may be taken from that decision. Fees
and costs for attorneys, experts and all independent insurance coverage experts
will be borne equally by the parties. This agreement of the parties to submit
disputes between them to the procedures set forth in this paragraph (c) will not
be deemed a waiver of legal defenses, including, but not limited to, statutes of
limitations, that either party may have.
Except as set forth in this paragraph (c) or in paragraph (d) of this
Section 7.4, SWS and Westwood will not be liable to one another for claims by
the other not reimbursed by insurers for any other reason whatsoever not within
the control of SWS or Westwood, as the case may be, including, but not limited
to, coinsurance provisions, deductibles, quota share deductibles, self-insured
retentions, bankruptcy or insolvency of an insurance carrier, SWS Policy
limitations or restrictions, any coverage disputes, any failure to timely claim
by Westwood or SWS or any defect in such claim or its processing.
(d) Allocation of Insurance Deductibles. Insured Claims by both SWS and
-----------------------------------
Westwood shall be subject to, and shall apply toward the satisfaction of, the
full amount of applicable deductibles or self-insured retentions under the SWS
Policies; provided that, if the aggregate deductibles or self-insured retentions
under any SWS Policy (other than an SWS Policy providing for directors and
officers liability coverage) are exceeded and one company benefits from the
deductibles or retentions paid by the other, then the benefited company shall
reimburse the other company to the extent of such benefit up to its allocable
portion of such aggregate deductible or retention within 30 days of receipt of
such benefit.
(e) Allocation of Insurance Proceeds. SWS shall direct the insurance
--------------------------------
carriers to pay Insurance Proceeds with respect to claims, costs and expenses
under the SWS Policies directly to or on behalf of Westwood with respect to
Westwood Insured Claims and directly to or on behalf of SWS with respect to
SWS's Insured Claims. The parties agree to use their best efforts to cooperate
with respect to insurance matters.
(f) In the event that Insured Claims of both Westwood and SWS exist
relating to the same occurrence, Westwood and SWS agree to jointly defend such
Insured Claim; provided, that, if, in the reasonable judgment of one party, a
conflict of interest between SWS and Westwood exists in respect of such Insured
Claim or if the other party assumes responsibility for such Insured Claim with
any reservations or exceptions, the party which concludes that a conflict exists
or that has not assumed responsibility for such Insured Claim will have the
right to employ separate counsel reasonably satisfactory to the other party. In
that event, the fees and expenses of such separate counsel will be paid by the
party retaining such counsel unless the other party shall have indemnified such
party against such fees and expenses pursuant to this Agreement or
20
otherwise. Nothing in this Section 7.4 shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement, by
operation of law or otherwise.
Section 7.5 Successors and Assigns
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that neither party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement without the consent of the other
parties hereto. If any party or any of its successors or assigns (i) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provisions shall be made to the satisfaction
of the other party so that the successors and assigns of such party shall assume
all of the obligations of such party under the Distribution Documents.
Section 7.6 Governing Law
This Agreement shall be construed in accordance with and governed by
the law of the State of Texas, without regard to the conflicts of laws rules
thereof.
Section 7.7 Counterparts; Effectiveness
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other parties hereto.
Section 7.8 Entire Agreement
This Agreement and the other Distribution Documents constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof and thereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein or in the other
Distribution Documents has been made or relied upon by any party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder. To the extent
that the provisions of this Agreement are inconsistent with the provisions of
any other Distribution Document, the provisions of such other Distribution
Document shall prevail.
Section 7.9 Tax Matters
(a) Except as otherwise provided herein and not inconsistent with the
Tax Separation Agreement, this Agreement shall not govern the preparation and
filing of any Tax Returns, the payment of, and liability for, any Tax, and the
management of any proceedings or contests
21
relating to any Tax, each of which shall be exclusively governed by the Tax
Separation Agreement.
(b) On or before the Distribution Date, SWS shall have received an
opinion from Gardere Wynne Sewell LLP, counsel to SWS, in form and substance
reasonably satisfactory to SWS, substantially to the effect that, on the basis
of the facts, representations and assumptions set forth in such opinion which
are consistent with the state of facts existing on the Distribution Date, the
Distribution will constitute a tax-free transaction under Section 355(a) of the
Code. In rendering its opinion, SWS's counsel may require and rely upon the
truth and accuracy of various representations and covenants, including those
contained in the Form 10, the Ancillary Agreements, certificates of officers of
SWS, Westwood and others, and other documents, certificates and records they
deem necessary or appropriate as a basis for their opinion.
(c) SWS and Westwood shall comply with all reporting and document
retention requirements of the Code, and the regulations promulgated thereunder,
applicable to the Distribution.
Section 7.10 Jurisdiction
Any Action seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in the United States District Court for the
Northern District of Texas or any other Texas state court sitting in Dallas
County, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 7.1 shall be deemed
effective service of process on such party.
Section 7.11 Existing Arrangements
Except as otherwise contemplated hereby or by the other Distribution
Documents, all prior agreements and arrangements, including those relating to
goods, rights or services provided or licensed, between the Westwood Group and
the SWS Group shall be terminated effective as of the Distribution Date, if not
theretofore terminated. No such agreements or arrangements shall be in effect
after the Distribution Date unless embodied in the Distribution Documents.
Section 7.12 Termination Prior to the Distribution
The SWS Board of Directors may at any time prior to the Distribution
abandon the Distribution and, by notice to Westwood, terminate this Agreement
(whether or not the SWS Board of Directors has theretofore approved this
Agreement and/or the Distribution).
22
Section 7.13 Severability
If any one or more of the provisions contained in this Agreement should
be declared invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained in this
Agreement shall not in any way be affected or impaired thereby so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a declaration,
the parties shall modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner so that the
transactions contemplated hereby are consummated as originally contemplated to
the fullest extent possible.
Section 7.14 Survival
All covenants and agreements of the parties contained in this Agreement
shall survive the Distribution Date indefinitely, unless a specific survival or
other applicable period is expressly set forth herein.
Section 7.15 Captions
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
Section 7.16 Specific Performance
Each party to this Agreement acknowledges and agrees that damages for a
breach or threatened breach of any of the provisions of this Agreement would be
inadequate and irreparable harm would occur. In recognition of this fact, each
party agrees that, if there is a breach or threatened breach, in addition to any
damages, the other nonbreaching party to this Agreement, without posting any
bond, shall be entitled to seek and obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction, attachment, or any other equitable remedy which may then be
available to obligate the breaching party (i) to perform its obligations under
this Agreement or (ii) if the breaching party is unable, for whatever reason, to
perform those obligations, to take any other actions as are necessary, advisable
or appropriate to give the other party to this Agreement the economic effect
which comes as close as possible to the performance of those obligations
(including, but not limited to, transferring, or granting liens on, the assets
of the breaching party to secure the performance by the breaching party of those
obligations).
Section 7.17 Release
Effective upon the Distribution and except as otherwise specifically
set forth in this Agreement, each of SWS and Westwood releases and forever
discharges the other and its respective directors, officers and Affiliates of
and from all Liabilities against such other party, and its respective directors,
officers and Affiliates or any of its successors or assigns, which the releasing
party has or ever had, which arise out of or relate to events, circumstances or
actions taken by such other party prior to the Distribution; provided, however,
that the foregoing general
23
release shall not apply to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby and shall not affect either party's
right to enforce this Agreement or any of the Ancillary Agreements in accordance
with their terms.
IN WITNESS WHEREOF the parties hereto have caused this Distribution
Agreement to be duly executed by their respective authorized officers as of the
date first above written.
SWS GROUP, INC.
By: /s/ Kenneth R. Hanks
__________________________________________________
Executive Vice President
WESTWOOD HOLDINGS GROUP, INC.
By: /s/ Bryan O. Casey
__________________________________________________
Brian O. Casey, President
24