Edgar Filing: LABRANCHE & CO INC

FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO: 333-55862

[LOGO]

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The respective boards of directors of ROBB PECK McCOOEY Financial
Services, Inc., or RPM, and LaBranche & Co Inc., or LaBranche, have approved a
merger of RPM with and into LaBranche. On January 18, 2001, RPM entered into an
Agreement and Plan of Merger with LaBranche, as amended on February 15, 2001,
the terms of which are incorporated by reference into this proxy
statement/prospectus. The merger agreement provides that, upon the closing of
the merger, each outstanding share of RPM common stock will be converted into
98.778 shares of LaBranche common stock and shares of LaBranche Series A
preferred stock having an aggregate liquidation preference of $1,426.53. The
merger consideration is subject to the indemnification and escrow provisions
described in this proxy statement/prospectus under "The Merger
Agreement--Indemnification by RPM Stockholders and Option Holders" and "The
Merger Agreement--Escrow of Series A Preferred Stock." The RPM stockholders
could be required to return to LaBranche a portion of such shares, or LaBranche
may be required to deliver to the RPM stockholders additional shares, of
LaBranche Series A preferred stock based on RPM's final adjusted net book value,
as defined in the merger agreement, as of the closing date of the merger.

In addition, in connection with the merger, each option to purchase RPM
common stock outstanding and unexercised immediately prior to the merger will be
converted into a fully vested option to purchase 98.778 shares of LaBranche
common stock. RPM has adopted a deferred compensation plan for the benefit of
its option holders, and RPM has adopted a $9.0 million retention bonus pool for
the benefit of as many as 31 of its current employees. The obligations under the
RPM Deferred Compensation Plan and the retention bonus pool will be assumed by
LaBranche upon the consummation of the merger. Prior to the merger, RPM will
dispose of its subsidiary, Robb Peck McCooey Real Estate Management Corp., or
Remco, which engages in management activities and, through its subsidiaries,
owns real estate, to George E. Robb, Jr., RPM's President and controlling
stockholder. The disposition of this real estate business to Mr. Robb, Jr. is in
consideration of the relinquishment by Mr. Robb, Jr. of his controlling interest
in RPM.

The merger cannot be completed unless RPM stockholders holding a majority of
the outstanding shares of RPM common stock vote to approve the merger and the
merger agreement.

Because the price of LaBranche's common stock fluctuates, the value of the
LaBranche common stock you will receive in the merger will fluctuate on a daily
basis.

LaBranche common stock is traded on the New York Stock Exchange under the
symbol "LAB." It is expected that 6,924,337 shares of LaBranche common stock
will be issued in connection with the merger. On February 28, 2001, the closing
price on the New York Stock Exchange of LaBranche common stock was $43.40 per
share. There is no public market for RPM common stock.

PLEASE READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 19 OF THIS PROXY
STATEMENT/ PROSPECTUS.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE LABRANCHE COMMON STOCK OR
LABRANCHE SERIES A PREFERRED STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF
THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

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As used in this proxy statement/prospectus, unless the context otherwise
requires, "we," "us," "our" or "LaBranche" refers to LaBranche & Co Inc. and its
subsidiaries, and "RPM" refers to ROBB PECK McCOOEY Financial Services, Inc. and
its subsidiaries, and "you" or "your" refers to RPM stockholders.

The date of this proxy statement/prospectus is March 1, 2001, and it is
being distributed to RPM stockholders on or about March 2, 2001.

TABLE OF CONTENTS

Questions and Answers About the Merger...................... iii
Who Can Help Answer Your Questions.......................... v
Summary..................................................... 1
Risk Factors................................................ 19
Forward-Looking Statements.................................. 33
The RPM Stockholders' Special Meeting....................... 34
The Merger.................................................. 36
The Merger Agreement........................................ 47
Selected Historical Consolidated Financial Data of
LaBranche................................................. 61
Selected Historical Consolidated Financial Data of RPM...... 62
Management's Discussion and Analysis of Financial Condition
and Results of Operations of LaBranche.................... 63
Management's Discussion and Analysis of Financial Condition
and Results of Operations of RPM.......................... 73
Description of LaBranche's Business......................... 80
Management of LaBranche..................................... 95
Employment Agreements and Noncompetition Agreements......... 98
Incentive Awards to LaBranche's Employees................... 100
Principal Stockholders of LaBranche......................... 104
LaBranche's Related Party Transactions...................... 105
Description of RPM's Business............................... 106
Management of RPM........................................... 118
RPM's Executive Compensation................................ 119
Principal Stockholders of RPM............................... 119
RPM's Related Party Transactions............................ 120
Description of LaBranche's Capital Stock.................... 121
Description of RPM's Capital Stock.......................... 125
Material Differences in Rights of LaBranche and RPM
Stockholders.............................................. 127
Market Price Information.................................... 132
Cash Dividend Policy........................................ 133
Legal Matters............................................... 134
Experts..................................................... 134
Where You Can Find Additional Information................... 134
Index to Financial Statements............................... F-1

LIST OF ANNEXES

ANNEX A Agreement and Plan of Merger
ANNEX B Section 262 of the Delaware General Corporation Law
ANNEX C Tax Opinion of Kelley Drye & Warren LLP

All information in this proxy statement/prospectus relating to LaBranche has
been supplied by LaBranche and all information relating to RPM has been supplied
by RPM. The unaudited pro forma financial information contained herein regarding
LaBranche has been prepared by LaBranche. RPM does not have independent
knowledge of the matters set forth herein regarding LaBranche and takes no
responsibility for any such information contained herein, and LaBranche does not
have independent knowledge of the matters set forth herein regarding RPM and
takes no responsibility for any such information contained herein.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY LABRANCHE
OR RPM (OR THEIR SUCCESSORS). THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF LABRANCHE OR RPM
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.

QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: WHAT WILL HAPPEN IN THE MERGER?

A: Upon completion of the merger, you will receive 98.778 shares of LaBranche
common stock and shares of LaBranche Series A preferred stock having an
aggregate liquidation preference equal to $1,426.53 for each share of RPM
common stock you own. The merger consideration is subject to the
indemnification and escrow provisions described below, and you may be
required to return to LaBranche, or you may receive from LaBranche, a
portion of shares of LaBranche Series A preferred stock based on the
calculation of RPM's adjusted net book value (as defined in the merger
agreement) as of the closing date of the merger. Only whole shares of
LaBranche common stock will be issued. You will receive cash instead of
fractional interests in shares of LaBranche common stock. Because the market
price of LaBranche common stock may change from day to day, you cannot be
sure of the market value of the LaBranche common stock you will receive in
the merger at the time you vote your shares. Immediately after the merger,
former RPM stockholders will own about 12.4% of the outstanding shares of
LaBranche common stock.
After the merger, LaBranche stockholders will continue to hold their shares
in LaBranche. Immediately after the merger, LaBranche stockholders will own
about 87.6% of the outstanding shares of LaBranche common stock.
In connection with the merger, RPM and each of its option holders will amend
their option agreements to provide for the immediate vesting and conversion
of their options into options to purchase LaBranche common stock upon
consummation of the merger. In addition, RPM has adopted an RPM Deferred
Compensation Plan, in which each RPM option holder is entitled to
participate, and adopted a retention bonus pool in the amount of
$9.0 million for the benefit of as many as 31 of RPM's employees and payable
three years after the closing of the merger. Any of these 31 employees who
is terminated for "cause" or who voluntarily terminates his employment for
any reason other than "good reason" will not be entitled to receive payment
under the retention bonus pool. LaBranche will assume the obligations under
the RPM Deferred Compensation Plan and retention bonus pool upon
consummation of the merger. Prior to the merger, RPM will repurchase all
outstanding shares of its preferred stock, repay certain portions of its
indebtedness and dispose of its real estate management subsidiary to George
E. Robb, Jr., RPM's President and controlling stockholder.

Q: WILL ALL THE MERGER CONSIDERATION BE PAID AT THE TIME OF THE MERGER?

A: A portion of the Series A preferred stock issuable to you will be held in
escrow to satisfy any indemnification payment obligations incurred as the
result of a breach of any of RPM's or your representations and warranties
contained in the merger agreement and the stockholder agreement that you
will be required to execute in connection with the merger. Generally, you
will be liable for such indemnification only if and to the extent that the
total amount of damages suffered by LaBranche on account of such breaches
exceeds a threshold of $1.0 million. An additional portion of the Series A
preferred stock will be held in escrow pending a final calculation of RPM's
adjusted net book value as of the closing date of the merger. To the extent
that RPM's adjusted net book value as of the closing date of the merger is
less than the aggregate liquidation preference of the shares of LaBranche
Series A preferred stock issuable at the closing of the merger, escrowed
shares of LaBranche Series A preferred stock with a liquidation preference
equal to the amount of such deficiency will be returned to LaBranche. On the
other hand, if the adjusted net book value of RPM as of the closing date of
the merger is greater than the aggregate liquidation preference of the
shares of LaBranche Series A preferred stock issuable at the closing of the
merger, LaBranche will be obligated to deliver additional shares of
LaBranche Series A preferred stock with an aggregate liquidation preference
equal to the amount of such excess. The calculation of RPM's "adjusted net
book value" is described in "The Merger Agreement--Escrow of Series A
Preferred Stock" on page 53 of this proxy statement/prospectus.

iii

Q: WHAT ARE THE RPM STOCKHOLDERS BEING ASKED TO VOTE ON AT THE MEETING?

A: The RPM stockholders are being asked to vote on the proposal to approve the
merger of RPM with and into LaBranche upon the terms and conditions set
forth in the merger agreement. The approval of the merger and the merger
agreement requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of RPM common stock entitled to vote.
The LaBranche stockholders are not required to vote to approve the merger or
the other transactions related to the merger.

Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?

A: We are working toward completing the merger as quickly as possible. We
anticipate completing the merger shortly after the RPM stockholders' special
meeting, assuming that the requisite number of stockholders of RPM approve
the merger and the conditions to the merger set forth herein are satisfied
or waived.

Q: WHAT RIGHTS WILL I HAVE AS A HOLDER OF LABRANCHE SERIES A PREFERRED STOCK?

A: Each holder of shares of LaBranche Series A preferred stock will be entitled
to receive cumulative preferential cash dividends at an annual rate of 8% of
the liquidation preference of such shares until the fourth anniversary of
the closing of the merger, 10% from the fourth until the fifth anniversary
of the closing of the merger, and 10.8% thereafter. The holders of LaBranche
Series A preferred stock will also have the opportunity to vote on certain
matters that would affect the rights of the LaBranche Series A preferred
stockholders, any issuances of LaBranche stock with rights greater than or
equal to theirs, and any proposal for the merger or consolidation of
LaBranche, the sale of more than 50% of LaBranche's consolidated assets, or
any similar transaction. As a holder of LaBranche Series A preferred stock,
you will be entitled to a preference in payment upon a liquidation of
LaBranche.

Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?

A: The merger generally will not be taxable to LaBranche, RPM or the RPM
stockholders, except for any cash the RPM stockholders receive in lieu of
fractional shares of LaBranche common stock. YOU SHOULD CONSULT YOUR OWN TAX
ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER.

Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?

A: Under Delaware law, you are entitled to dissenters' rights. If you do not
vote in favor of the merger and you properly elect to exercise your
dissenters' rights as described under "The Merger--Dissenters' Appraisal
Rights" and in ANNEX B, you may be entitled to receive in cash an amount
equal to the "fair value" of your RPM common stock as determined by a court.
The fair value could be equal to, less than or more than the value of the
shares you would receive in the merger. Pursuant to the stockholder
agreement you are being asked to sign as a condition to the closing of the
merger, a copy of the form of which has been filed as an exhibit to the
registration statement of which this proxy statement/prospectus forms a
part, you will be asked to waive the dissenters' rights described above.

Q: WHAT DO I NEED TO DO NOW?

A: After carefully reading and considering the information contained in this
proxy statement/ prospectus, please fill out, sign and return your proxy
card to RPM as soon as possible so that your shares will be represented at
the RPM stockholders' special meeting. To ensure that we obtain your vote,
please return your proxy card even if you currently plan to attend the RPM
stockholders' special meeting in person. The proxy card will not be used if
you attend and vote at the RPM stockholders' special meeting in person.

Q: WHERE AND WHEN IS THE RPM STOCKHOLDERS' SPECIAL MEETING?

A: The RPM stockholders' special meeting will be held at the offices of RPM, 20
Broad Street, 6th Floor, New York, New York 10005 on March 12, 2001, at
10:00 a.m. local time, unless adjourned to a later date.

Q: WHO CAN VOTE?

A: All record holders of RPM common stock at the close of business on
February 20, 2001 can vote at the RPM stockholders' special meeting.

WHO CAN HELP ANSWER YOUR QUESTIONS

If you would like additional copies of this document, or if you would like
to ask any additional questions about the merger, you should contact:

Nathan J. Mistretta
Executive Vice President--Finance and Administration,
Secretary and Treasurer
ROBB PECK McCOOEY Financial Services, Inc.
20 Broad Street, 6th Floor
New York, New York 10005
(212) 422-7622

SUMMARY

THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL THE INFORMATION THAT IS
IMPORTANT TO YOU. THIS PROXY STATEMENT/PROSPECTUS INCLUDES SPECIFIC TERMS OF THE
MERGER, AS WELL AS INFORMATION REGARDING LABRANCHE'S AND RPM'S RESPECTIVE
BUSINESSES AND DETAILED FINANCIAL DATA. TO UNDERSTAND THE MERGER FULLY AND FOR A
MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ THIS
DOCUMENT, AS WELL AS THE DOCUMENTS TO WHICH WE REFER YOU, CAREFULLY. WE
ENCOURAGE YOU TO READ THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY. WE HAVE
INDICATED PAGE NUMBERS PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE
DESCRIPTION OF SOME OF THE TOPICS IN THIS SUMMARY.

THE COMPANIES

LABRANCHE & CO INC. (Page 80)

Organized in 1999 as a holding company in connection with the reorganization
of LaBranche & Co. from partnership to corporate form and the related initial
public offering of its common stock, LaBranche & Co Inc. is the parent of
LaBranche & Co. LLC, one of the oldest and largest specialist firms on the New
York Stock Exchange, or the NYSE. As a NYSE specialist, LaBranche's role is to
maintain, as far as practicable, a fair and orderly market in its specialist
stocks. In doing so, LaBranche provides a service to its listed companies and to
the brokers, traders and their respective customers who trade in its specialist
stocks. As a result of its commitment to providing high quality specialist
services, LaBranche has developed a strong reputation among its constituencies,
including investors, members of the Wall Street community and listed companies.

LaBranche's business has grown considerably during the past five years. Its
revenues have increased from about $37.2 million in 1995 to $344.8 million in
2000, representing a compound annual growth rate of 56.1%. It has accomplished
this growth both internally and through selective acquisitions. Since the NYSE
implemented its new specialist allocation process in March 1997, LaBranche has
been selected by 67 new listed companies, resulting from 117 listing interviews.
In addition LaBranche has acquired five NYSE specialist operations since 1997,
adding 281 new NYSE common stocks to the list of stocks for which it acts as
specialist. During the past five years, LaBranche has also increased the scope
of its business, as illustrated by the following data obtained from the NYSE:

- the annual dollar volume on the NYSE of stocks for which LaBranche has
acted as specialist increased to $2.2 trillion in 2000, as compared to
$133.3 billion in 1995. Based on these dollar volumes, LaBranche was the
largest specialist firm in 2000 as compared to the eighth largest in 1995;

- the annual share volume on the NYSE of stocks for which LaBranche has
acted as specialist increased to 52.7 billion in 2000, as compared to
4.0 billion in 1995. Based on these share volumes, LaBranche was the
largest specialist firm in 2000 as compared to the sixth largest in 1995;

- the total number of LaBranche's common stock listings increased to 386 as
of December 31, 2000, as compared to 125 as of December 31, 1995. Based on
the number of its common stock listings, LaBranche was the third largest
specialist firm as of December 31, 2000 as compared to the fifth largest
as of December 31, 1995. In addition, LaBranche acts as specialist for 134
other listed securities.

LaBranche is a Delaware corporation that was incorporated in June 1999. Its
principal executive offices are located at One Exchange Plaza, 25th Floor, New
York, New York 10006, and its telephone number is (212) 425-1144.

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. (Page 106)

During 2000, RPM was the sixth largest specialist firm on the NYSE based on
its share of NYSE common stock trading volume and total number of common stock
listings. RPM began its specialist operations in 1925, and as of December 31,
2000 acted as specialist for 203 NYSE listed stocks, including 129 NYSE listed
common stocks. These listed stocks included 15 of the 250 most actively traded
common stocks, 21 of the stocks comprising the S&P 500 and three of the 30 Dow
Jones Industrial Average stocks. Selected stocks handled by RPM as specialist
include Bristol-Myers Squibb Company, Cigna Corporation, CSX Corporation, Delta
Air Lines, E.I. duPont de Nemours, Eastman Kodak Company, H.J. Heinz Company,
Philip Morris Companies, Inc., United Parcel Service, Wells Fargo & Company and
Whirlpool Corporation. RPM's strong portfolio of U.S. companies is enhanced by a
diverse portfolio of foreign companies including Telecom Brasileiras S.A.
(Telebras) of Brazil, Nippon Telegraph & Telephone Corporation of Japan,
ScottishPower, Jefferson Smurfit Group PLC of Ireland, Tele Danmark A/S,
Compania De Telecomunicaciones De Chile S.A. (Chilean Telephone), Telecom
Argentina Stet-France Telecom S.A., Grupo Televisa, S.A. and Cemex, S.A. de C.V.
of Mexico.

RPM owns a 25% interest in Freedom Specialist Inc.--R. Adrian & Co.,
LLC--ROBB PECK McCOOEY Specialist Corporation Joint Account, an entity that
serves as specialist for 34 NYSE listed stocks as of December 31, 2000,
including 28 NYSE common stock listings. These listed stocks include two of the
250 most actively traded common stocks and four S&P 500 stocks. Freedom
Specialist Inc. also owns 25% of the joint account and R. Adrian & Co., LLC owns
50% of the joint account. RPM acts as manager of this joint account.

For the past 25 years, RPM also has provided clearing, execution and other
services to a variety of customers, including NYSE specialist firms,
broker-dealers, financial institutions, traders and professional investors.
These services are provided utilizing RPM's in-house data processing system,
which enables tailor-made reports to be provided to RPM's clients. RPM clears
for its specialist operations, and these clearing activities for the specialist
operations accounted for about 5.6% of RPM's clearing revenues for the year
ended April 28, 2000 and about 5.3% of RPM's clearing revenues for the six
months ended October 27, 2000.

RPM is a Delaware corporation that was incorporated in August 1985. Its
principal executive offices are located at 20 Broad Street, 6th Floor, New York,
New York 10005 and its telephone number is (212) 422-7622.

THE RPM STOCKHOLDERS' SPECIAL MEETING (Page 34)

DATE, TIME AND PLACE

The special meeting will be held at the offices of RPM, 20 Broad Street, 6th
Floor, New York, New York 10005 on March 12, 2001, beginning at 10:00 a.m.,
local time, unless adjourned to a later date.

PURPOSE OF THE RPM STOCKHOLDERS' SPECIAL MEETING (Page 34)

At the special meeting, RPM stockholders will be asked to vote on a proposal
to approve the Agreement and Plan of Merger, dated as of January 18, 2001, as
amended on February 15, 2001, attached to this proxy statement/prospectus as
ANNEX A. That document provides for the merger of RPM with and into LaBranche,
with LaBranche being the surviving corporation. At the effective time of the
merger, RPM will cease to exist. The merger agreement is the principal legal
document that governs the terms and conditions of the merger and we encourage
you to read it along with this proxy statement/prospectus.

RECOMMENDATION OF THE BOARD OF DIRECTORS OF RPM (Page 40)

The board of directors of RPM recommends that RPM stockholders vote FOR the
approval of the merger and the merger agreement. See "The Merger--Interests of
RPM Directors and Executive

Officers in the Merger" for a discussion of conflicts of interest that certain
directors and executive officers of RPM may have in connection with the merger
and the other transactions contemplated in the merger agreement.

THE MERGER (Page 36)

TERMS OF THE MERGER (Page 36)

The merger agreement provides for the merger of RPM with and into LaBranche.
For each share of RPM common stock they own, RPM stockholders will receive
98.778 shares of LaBranche common stock and shares of LaBranche Series A
preferred stock with an aggregate liquidation preference of $1,426.53. The
shares of LaBranche Series A preferred stock to be issued in the merger are
subject to the RPM stockholders' indemnification obligations. In addition, RPM
stockholders could be required to return to LaBranche a portion of the shares of
LaBranche Series A preferred stock, or may receive from LaBranche additional
shares of LaBranche Series A preferred stock, based on the final calculation of
RPM's adjusted net book value (as defined in the merger agreement) as of the
closing date of the merger. Each share of LaBranche Series A preferred stock to
be received in the merger will entitle the holder thereof to:

- cumulative preferred cash dividends at an annual rate of 8% of the
liquidation preference per share until the fourth anniversary of the
closing of the merger, 10% until the fifth anniversary of the closing, and
10.8% thereafter;

- certain voting rights; and

- preferred distributions if LaBranche is liquidated.

Only whole shares of LaBranche common stock will be issued. RPM stockholders
will receive cash instead of any fractional interest in a share of LaBranche
common stock.

In addition, RPM and each of its option holders will amend their option
agreements to provide for immediate vesting and conversion upon consummation of
the merger of each RPM option into an option to purchase 98.778 shares of
LaBranche common stock.

As a result of the merger, RPM stockholders will own about 12.4% and
LaBranche stockholders immediately before the merger will own about 87.6% of the
outstanding shares of LaBranche common stock following the merger. These
percentages are based on the number of shares of LaBranche common stock and RPM
common stock outstanding on January 31, 2001.

EFFECTIVE TIME OF THE MERGER (Page 36)

As soon as practicable after the conditions to consummation of the merger
described below have been satisfied or waived, and unless the merger agreement
has been terminated as provided below, a certificate of merger will be filed
with the Secretary of State of the State of Delaware, at which time the merger
will become effective. It is presently contemplated that the effective time will
be as soon as practicable after approval of the merger at the special meeting of
RPM's stockholders or any adjournment thereof and after the registration
statement containing this proxy statement/prospectus is

declared effective by the SEC. If the RPM stockholders do not approve the merger
agreement and the merger, the merger agreement will terminate and the merger
will not become effective.

RPM'S REASONS FOR THE MERGER (Page 40)

RPM believes that LaBranche and RPM have complementary assets, resources and
expertise that should enable the merged companies to compete more effectively
together than they could separately. RPM also believes that the merger will
afford RPM stockholders an opportunity to participate in the potential for
diversified and enhanced growth after the merger and that the RPM stockholders
will gain liquidity by receiving publicly traded common stock of LaBranche for
their RPM common stock, which is not publicly traded.

LABRANCHE'S REASONS FOR THE MERGER (Page 41)

LaBranche believes that the acquisition of RPM will strengthen its position
in the specialist market and will enhance its presence in the clearing broker
business and offer a broader platform to expand both businesses. LaBranche also
believes that because the two companies' businesses are substantially similar,
their combination offers the opportunity to enhance their combined revenues
without a corresponding increase in expenses.

DISSENTERS' APPRAISAL RIGHTS (Page 41)

The RPM stockholders have the right to dissent from the merger and to demand
and obtain a cash payment equal to the appraised value of the shares of RPM
common stock held by them under the circumstances described in this proxy
statement/prospectus. The appraised value that a dissenting RPM stockholder
obtains for his shares of RPM common stock by dissenting will be determined by a
court and may be less than, equal to or greater than the value of the merger
consideration provided for in the merger agreement. If an RPM stockholder fails
to comply precisely with the procedural requirements of Section 262 of the
Delaware General Corporation Law, a copy of which is annexed to this proxy
statement/prospectus as ANNEX B, the stockholder will lose his right to dissent
and seek payment for the appraised value of his shares of RPM common stock. By
signing the RPM stockholder agreement you are being asked to sign as a condition
to the closing of the merger, you will waive these dissenters' rights.

TAX CONSEQUENCES (Page 42)

The merger is structured so that the RPM stockholders will not recognize
gain or loss for federal income tax purposes for the shares of LaBranche common
stock and Series A preferred stock they receive in the merger. Kelley Drye &
Warren LLP, legal counsel for RPM, has issued an opinion to this effect, a copy
of which is annexed to this proxy statement/prospectus as ANNEX C. RPM
stockholders will be taxed only on cash they receive in lieu of fractional
shares of LaBranche common stock. Tax matters are complicated, and tax results
may vary among stockholders. We urge you to contact your own tax advisor to
understand fully how the merger will affect you.

ACCOUNTING TREATMENT (Page 44)

The merger will be accounted for by LaBranche under the purchase method of
accounting. Accordingly, the merger consideration will be allocated among the
assets of RPM based on their respective estimated fair market values at the
effective time of the merger, and any excess of the value of the merger
consideration over such fair market values will be accounted for as goodwill.
The financial statements of LaBranche will reflect the combined operations of
LaBranche and RPM from the effective time of the merger.

NO SOLICITATION (Page 44)

Pending the closing of the merger, RPM has agreed that it will not, directly
or indirectly:

- solicit, initiate or encourage the submission of any competing acquisition
proposal;

- participate in or encourage, including by way of furnishing any non-public
information, any discussions or negotiations regarding any competing
acquisition proposal; or

- enter into any definitive agreement relating to any competing acquisition
proposal.

INTERESTS OF RPM DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (Page 45)

Certain directors and executive officers of RPM have interests in the merger
that are different from, or in addition to, your interests. These interests
relate to, among other things, directorships and officer positions with
LaBranche or its subsidiaries after the merger, receipt of accelerated payments
under supplemental executive retirement plans, receipt of registration rights,
participation in RPM's Deferred Compensation Plan, participation in RPM's
retention bonus pool, and rights under the RPM option amendments. In addition,
at or prior to the closing, RPM will dispose of its real estate management
subsidiary, which manages and owns, through its subsidiaries, real estate, to
George E. Robb, Jr., RPM's President and controlling stockholder.

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF LABRANCHE AFTER THE MERGER
(Page 46)

There currently are eight members of the LaBranche board of directors. Upon
completion of the merger, the number of directors on the board will be increased
to ten. Following the merger:

- Michael LaBranche, currently Chairman, President and Chief Executive
Officer of LaBranche, will continue to serve as Chairman, President and
Chief Executive Officer of LaBranche;

- Robert M. Murphy, currently the Executive Vice President of RPM, will
become a Class I director of LaBranche and the Chief Executive Officer of
LaBranche & Co. LLC;

- George E. Robb, Jr., currently the President of RPM, will become a
Class II director of LaBranche; and

- the remainder of the directors and executive officers of LaBranche prior
to the merger will continue to hold their respective directorships and
executive officer positions with LaBranche.

THE MERGER AGREEMENT (Page 47)

REPRESENTATIONS AND WARRANTIES (Page 48)

Both RPM and LaBranche have made customary representations and warranties to
each other in the merger agreement. All such representations and warranties,
except those relating to taxes and ERISA matters, will survive the closing of
the merger and for a period of 18 months thereafter. The representations and
warranties relating to taxes and ERISA matters will survive until the expiration
of the statute of limitation periods applicable to those claims.

REPRESENTATIONS AND WARRANTIES OF THE RPM STOCKHOLDERS AND OPTION HOLDERS
(Page 49)

In addition, each of the RPM stockholders will make certain representations
and warranties in a separate stockholder agreement with LaBranche, and each of
the RPM option holders will make certain representations and warranties in a
separate indemnification agreement with LaBranche.

REGULATORY APPROVALS (Page 50)

It is a condition to the merger that LaBranche and RPM obtain any and all
authorizations, permits, approvals and consents of any governmental entity and
regulatory authority, including the

NYSE, the SEC, the NASD, the CBOE and the AMEX and that the merger be in
compliance with all applicable state and federal securities laws. As of
February 28, 2001, LaBranche and RPM were in the process of obtaining the
necessary authorizations, permits, approvals and consents from these entities.
It is also a condition to the merger that the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired. LaBranche
and RPM were granted early termination of the waiting period for the merger
under the Hart-Scott-Rodino Act by the Federal Trade Commission and the
Department of Justice on December 8, 2000. If any other approval or action is
required, LaBranche and RPM will seek that approval or action. There can be no
assurance that any approval or action, if required, will be obtained on a timely
basis, if at all.

CERTAIN COVENANTS (Page 50)

Until the closing of the merger, each of RPM and LaBranche has agreed to
carry on its and its subsidiaries' respective businesses in the ordinary course
and consistent with past practice. Each of RPM and LaBranche also has agreed not
to take, or agree to take, any actions that would adversely affect its business
or financial condition. Until the closing of the merger, each of RPM and
LaBranche has agreed to use all reasonable efforts consistent with past practice
and policies to maintain its and its subsidiaries' respective registrations and
good standing with the SEC, NASD, NYSE, AMEX, any regional market on which it
conducts business, and states where such registration is required under the
securities laws of such states.

RPM has agreed to cause a meeting of the RPM stockholders to be held as soon
as reasonably practicable after the signing of the merger agreement. The RPM
board of directors has agreed to recommend approval of the merger agreement by
its stockholders and to take all reasonable and lawful action to solicit and
obtain such approval.

The merger agreement also contains other mutual covenants of the parties,
including covenants relating to preparation and filing of all required documents
with the proper governmental agencies, maintaining the confidentiality of all
information disclosed to each other in connection with the merger, using all
reasonable efforts to obtain all necessary consents, approvals or waivers, as
applicable, of third parties or governmental agencies to the merger, providing
access to information of the other party in connection with its businesses and
advising the other party as to material changes in its businesses.

INDEMNIFICATION BY RPM STOCKHOLDERS AND OPTION HOLDERS (Page 52)

Under the merger agreement, the RPM stockholders and option holders are
required to indemnify LaBranche for breaches by RPM of its representations,
warranties and covenants contained in the merger agreement. The RPM stockholders
are required to indemnify LaBranche for breaches of their own representations
and warranties contained in their stockholder agreements, and the RPM option
holders are required to indemnify LaBranche for breaches of their own
representations and warranties contained in the indemnification agreement. The
RPM stockholders and option holders generally will be liable for such
indemnification only if and to the extent that the total amount of damages
suffered by LaBranche on account of such breaches exceeds a threshold of
$1.0 million. The total indemnification liability of the RPM stockholders will
be limited to:

- 10% of the closing value (as defined in the merger agreement) of the
LaBranche common stock to be distributed to them in the merger
($31.4 million if the closing had occurred on February 15, 2001), plus

- 10% of the liquidation value of the LaBranche Series A preferred stock to
be distributed to them in the merger (expected to be about
$10.0 million), plus

- an amount expected to be about $14.4 million (assuming no further
exercises of RPM stock options prior to the closing of the merger).

The total indemnification liability of the RPM option holders will be
limited to:

- 10% of the closing value (as defined in the merger agreement) of the
LaBranche common stock issuable to them upon exercise of their amended RPM
stock options ($12.6 million if the closing had occurred on February 15,
2001), plus

- 10% of the amount of the benefits payable, excluding interest, under the
RPM Deferred Compensation Plan, (about $3.0 million), plus

- an amount expected to be about $5.6 million (assuming no further exercises
of RPM stock options prior to the closing of the merger).

The RPM option holders' indemnification obligations to LaBranche may be
satisfied only by a reduction in the benefits otherwise payable to them under
the RPM Deferred Compensation Plan. LaBranche also will indemnify the RPM
stockholders and option holders against breaches of its representations,
warranties and covenants contained in the merger agreement, subject to a minimum
threshold amount of $1.0 million and a maximum liability equal to the aggregate
of the maximum liability of the RPM stockholders and option holders.

ESCROW OF SERIES A PREFERRED STOCK (Page 53)

At the effective time of the merger, LaBranche will deposit with an escrow
agent a portion of the shares of Series A preferred stock to be issued to the
RPM stockholders in the merger. The shares deposited will have a total
liquidation value equal to the maximum indemnification liability of the RPM
stockholders to LaBranche as described above and will be held in escrow to
satisfy these indemnification obligations, if there are any, of the RPM
stockholders. The escrow arrangement will terminate 18 months after the closing
of the merger, except that if there are unresolved pending claims for
indemnification on that date, shares will be retained in escrow to cover those
claims until they are resolved. LaBranche's remedies for satisfaction of
indemnification claims against the RPM stockholders, if any, will be limited to
recovery of the shares held in the escrow, except that, after termination of the
escrow, LaBranche will still have recourse to shares distributed from the escrow
to the RPM stockholders, or to the cash proceeds of any sale of those shares,
with respect to claims for tax and ERISA matters.

An additional portion of the Series A preferred stock will be held in escrow
to provide for the RPM stockholders' possible obligation to return a portion of
the shares of LaBranche Series A preferred stock to LaBranche based on the final
calculation of RPM's adjusted net book value (as defined in the merger
agreement) as of the closing date of the merger. The escrowed shares will be
distributed to the RPM stockholders after the final calculation of RPM's
adjusted net book value as of the closing date of the merger, except to the
extent required to be returned to LaBranche as a result of that calculation.

CONDITIONS TO THE MERGER (Page 54)

Various conditions must be satisfied before LaBranche and RPM complete the
merger. Some of these conditions apply to both LaBranche and RPM, which means
that if the conditions are not met, neither LaBranche nor RPM will have an
obligation to complete the merger. Some conditions apply only to LaBranche,
which means that if the conditions are not met, RPM will have an obligation to
complete the merger but LaBranche will not. The remainder of the conditions
apply only to RPM, which means that if the conditions are not met, LaBranche
will be obligated to complete the merger but RPM will not. If these conditions
are not met or waived, even if the RPM stockholders approve the merger, the
closing will not occur.

TERMINATION OF THE MERGER AGREEMENT (Page 56)

The merger agreement may be terminated at any time prior to the effective
time, whether before or after the approval of the RPM stockholders:

- by mutual consent of LaBranche and RPM;

- by LaBranche, if:

- it has not breached any of its material obligations under the merger
agreement and either (1) RPM has materially breached and failed to cure
within 15 days any of its representations, warranties and covenants
under the merger agreement, or (2) the closing of the merger has not
occurred by June 30, 2001 by reason of the failure of any conditions
precedent to LaBranche's obligation to complete the merger;

- the RPM stockholders' special meeting has not occurred within 25
calendar days, subject to possible extension, after the registration
statement containing this proxy statement/ prospectus has been declared
effective by the SEC;

- at the RPM stockholders' special meeting, the requisite vote of the RPM
stockholders to approve the merger is not obtained; or

- the volume-weighted average sales price of LaBranche's common stock for
any 20 consecutive trading days before the closing of the merger is
more than $38.00 per share; or

- by RPM, if:

- it has not breached any of its material obligations under the merger
agreement and either (1) LaBranche has materially breached and failed
to cure within 15 days any of its representations, warranties and
covenants under the merger agreement, or (2) the closing of the merger
has not occurred by June 30, 2001 by reason of the failure of any
conditions precedent to RPM's obligation to complete the merger; or

- the volume-weighted average sales price of LaBranche's common stock for
any five consecutive trading days before the closing of the Merger is
less than $15.00 per share.

TERMINATION FEE (Page 57)

If the merger agreement is terminated by LaBranche because the RPM
stockholders' special meeting has not occurred within 25 calendar days after the
registration statement containing this proxy statement/prospectus has been
declared effective by the SEC and copies of the final prospectus have been
delivered to RPM to allow it to provide for distribution to its stockholders
(subject to extension to 25 business days to allow for compliance with
applicable law) or if the RPM stockholders do not approve the merger at the RPM
stockholders' special meeting, RPM will be required to pay to LaBranche a fee of
$10.0 million.

DEFERRED COMPENSATION PLAN (Page 57)

At the effective time of the merger, LaBranche will succeed to RPM's
liabilities and obligations under the RPM Deferred Compensation Plan. The RPM
Deferred Compensation Plan provides for the payment, on or before the date that
is 81 months after the closing of the merger, of about $30.2 million, plus
interest at 8% per year, to the RPM option holders. While the payment of
benefits under the RPM Deferred Compensation Plan may be accelerated in certain
circumstances, no more than $6.0 million in deferred compensation benefits
(including interest) may be paid in any 12 consecutive month period. If the plan
is terminated, the deferred compensation benefits (including interest) of all
participants, to the extent not previously paid, must be distributed to the
participants in a lump sum. The amounts payable under the RPM Deferred
Compensation Plan may be reduced to satisfy indemnification obligations of the
RPM option holders to LaBranche, if there are any.

RETENTION BONUS POOL (Page 58)

At the effective time of the merger, LaBranche will succeed to RPM's
liabilities and obligations under RPM's retention bonus pool. The RPM retention
bonus pool requires $9.0 million to be payable as bonus compensation on the
third anniversary of the closing date of the merger to as many as 31 employees
of RPM. The portion of this retention bonus pool payable to each of these
persons will be determined by the majority vote of a committee consisting of
Robert M. Murphy, George E. Robb, Jr. and Michael LaBranche or their respective
successors. If any of these persons' employment with LaBranche or any of its
subsidiaries terminates for certain reasons prior to the third anniversary of
the closing of the merger, the employee will no longer be eligible to
participate in this retention bonus pool. No payments out of the retention bonus
pool may be made if LaBranche is not current in its payment of dividends on the
outstanding shares of LaBranche Series A preferred stock.

REGISTRATION RIGHTS AGREEMENT (Page 58)

As a condition to the closing of the merger, LaBranche will enter into a
registration rights agreement with George E. Robb, Jr., RPM's President, and
Robert M. Murphy, RPM's Executive Vice President. Pursuant to the registration
rights agreement. Messrs. Robb, Jr. and Murphy will have the right to request
that LaBranche register all or a portion of the shares of LaBranche common stock
that they hold for public resale. The registration rights agreement also
provides that, if LaBranche determines to conduct a public offering of its
stock, either for its own account or for the account of any of its other
stockholders, LaBranche will offer Messrs. Robb, Jr. and Murphy the opportunity
to include all or a portion of their shares of LaBranche common stock in that
registration statement. Under the registration rights agreement, LaBranche will
be required to pay all registration expenses of Messrs. Robb, Jr. and Murphy in
any registration effected under the agreement.

STOCK OPTIONS (Page 58)

Each outstanding agreement governing options to purchase shares of RPM
common stock will be amended to provide that such options become immediately
vested and converted into options to acquire shares of LaBranche common stock at
the effective time of the merger. At that time, an option to purchase shares of
RPM common stock will become exercisable for the number of shares of LaBranche
common stock equal to the product of:

- the number of shares of RPM common stock subject to the original RPM stock
option; and

- 98.778.

The exercise price per share of LaBranche common stock underlying each
amended option will be equal to the price obtained by dividing:

- the exercise price per share of RPM common stock subject to the original
RPM stock option; by

- 98.778.

LaBranche has agreed to use its reasonable best efforts to file a
registration statement with respect to the shares of LaBranche common stock
underlying the amended stock options not later than ten business days following
the closing of the merger.

DISPOSITION OF REAL ESTATE MANAGEMENT OPERATIONS (Page 59)

requiring that RPM dispose of Remco prior to the consummation of the merger.
RPM's interest in Remco will be transferred to Mr. Robb, Jr. as consideration
for Mr. Robb, Jr.'s relinquishment of his controlling interest in RPM. It is
currently contemplated that this disposition and transfer to Mr. Robb, Jr. will
be effected through a series of mergers of Remco and Remco's subsidiaries into a
newly created limited liability company controlled by Mr. Robb, Jr. in which
Mitchell Low, President of Remco, will have a limited participation interest. As
of December 31, 2000, Remco and its subsidiaries had a recorded net book value
of about $7.3 million.

STOCK TRANSFER RESTRICTION AGREEMENTS WITH RESPECT TO LABRANCHE SERIES A
PREFERRED STOCK (Page 59)

In connection with, and as a condition to LaBranche's obligation to complete
the merger, the RPM stockholders must enter into stockholder agreements with
LaBranche pursuant to which they will agree not to sell or otherwise dispose of
the shares of LaBranche Series A preferred stock they will receive in the merger
without the prior written consent of LaBranche, except in certain limited
circumstances.

BASE COMPENSATION AND OTHER BENEFITS TO FORMER RPM EMPLOYEES (Page 60)

LaBranche has agreed in the merger agreement to provide to the employees of
RPM who become employees of LaBranche or any of its subsidiaries after the
merger base compensation and employee benefits, including health and welfare
benefits, life insurance and vacation, on terms and conditions that are no less
favorable than the base compensation and employee benefits provided to similarly
situated employees of LaBranche or such subsidiary.

MATERIAL DIFFERENCES IN RIGHTS OF LABRANCHE AND RPM STOCKHOLDERS (Page 127)

Upon consummation of the merger, RPM stockholders will become stockholders
of LaBranche, and their rights as stockholders will be governed by the
certificate of incorporation and bylaws of LaBranche. There are a number of
significant differences between the certificates of incorporation and bylaws of
LaBranche and RPM. However, since LaBranche and RPM are both Delaware
corporations, the rights of RPM stockholders will continue to be governed by
Delaware law after the merger.

MARKET PRICE INFORMATION (Page 132)

LaBranche's initial public offering was completed on August 24, 1999 and its
common stock is traded on the New York Stock Exchange under the symbol "LAB."
RPM is a privately held company and its stock is not traded or quoted in any
public market. The following table shows, for the calendar quarters indicated,
based on published financial sources, the high and low closing sale prices of
shares of LaBranche common stock on the NYSE:

PRICE PER SHARE
CALENDAR -------------------
PERIOD HIGH LOW
-------- -------- --------

1999
Third Quarter (from August 24)..................... $14.25 $11.19
Fourth Quarter..................................... 13.38 9.38
2000
First Quarter...................................... 15.38 11.31
Second Quarter..................................... 17.63 11.13
Third Quarter...................................... 36.25 15.44
Fourth Quarter..................................... 39.63 22.19
2001
First Quarter (through February 28)................ 51.03 27.69

On February 28, 2001, the closing price per share of LaBranche common stock
on the NYSE was $43.40. As of February 28, 2001, LaBranche had about 117
stockholders of record. Since many of LaBranche's outstanding shares are held by
brokers or other nominees, the number of record holders is not representative of
the number of beneficial holders. LaBranche has never declared or paid cash
dividends on its capital stock. Other than the dividends payable on the
Series A preferred stock in the future, LaBranche currently anticipates that it
will retain earnings to support its operations and to finance the growth and
development of its business, and it does not anticipate paying any cash
dividends on its common stock in the future.

The table below presents:

- the last reported sale price of one share of LaBranche common stock on
each of the dates indicated, as reported by the NYSE; and

- the market value of one share of RPM common stock on an equivalent per
share basis.

In each case below, it is assumed that the merger had been completed on each
of January 18, 2001, the last full trading day before the public announcement of
the execution of the merger agreement, and on February 28, 2001, the last day
for which this information could be calculated before the date of this proxy
statement/prospectus. The equivalent price per share data for the RPM common
stock has been determined by multiplying the last reported sale price of one
share of LaBranche common stock on each of the indicated dates by 98.778 and
then adding $1,426.53, the liquidation value of LaBranche Series A preferred
stock to be issued at closing for each share of RPM common stock held by them:

EQUIVALENT PRICE
LABRANCHE PER SHARE OF RPM
DATE COMMON STOCK COMMON STOCK
---- ------------ ----------------

January 18, 2001............................... $36.88 $5,069.46
February 28, 2001.............................. $43.40 $5,713.50

There are 13 holders of record of RPM common stock. No established trading
market for the RPM common stock exists. All shares of RPM preferred stock will
be redeemed by RPM before the closing of the merger.

CASH DIVIDEND POLICY (Page 133)

Neither LaBranche nor RPM has ever paid dividends on its common stock.

RISK FACTORS (Page 19)

For a discussion of some risk factors that should be considered by
prospective investors in connection with an investment in LaBranche common
stock, see "Risk Factors."

RECENT OPERATING RESULTS OF LABRANCHE

LaBranche's unaudited revenues increased to $345.0 million in the year ended
December 31, 2000, from $201.0 million in the year ended December 31, 1999.
LaBranche's unaudited net income increased to $82.0 million in the year ended
December 31, 2000, compared to $29.0 million in the year ended December 31,
1999.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF LABRANCHE

The summary historical consolidated financial data of LaBranche set forth
below for the years ended December 31, 1997, 1998 and 1999 have been derived
from our consolidated financial statements, which have been audited by Arthur
Andersen LLP, independent public accountants, and are included elsewhere in this
proxy statement/prospectus. The summary historical consolidated financial data
of LaBranche set forth below for the years ended December 31, 1995 and 1996 have
been derived from our consolidated financial statements, audited by Arthur
Andersen LLP, independent public accountants, but are not included elsewhere in
this proxy statement/prospectus. The summary historical consolidated financial
data for the nine months ended September 30, 1999 and 2000 were derived from the
unaudited financial statements included in this proxy statement/prospectus.
LaBranche's management believes that the unaudited historical financial
statements contain all adjustments needed to present fairly the information
contained in those statements, and the adjustments made consist only of normal
recurring adjustments. The summary historical consolidated financial data of
LaBranche set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations of LaBranche,"
which are included elsewhere in this proxy statement/prospectus.

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ------------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT OTHER DATA)

STATEMENT OF OPERATIONS DATA:
Revenues:
Net gain on principal transactions......... $26,290 $37,113 $47,817 $ 95,048 $150,971 $109,528 $203,174
Commissions................................ 7,736 10,180 15,186 26,576 37,222 26,662 32,367
Other...................................... 3,147 2,643 4,637 4,787 12,844 8,945 11,995
------- ------- ------- -------- -------- -------- --------
Total revenues........................... $37,173 $49,936 $67,640 $126,411 $201,037 $145,135 $247,536
======= ======= ======= ======== ======== ======== ========
Income before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and provision for
income taxes............................... 26,254 32,783 47,732 91,635 134,468 104,911 120,393
Net Income................................... $ 1,134 $(1,692) $ 1,489 $ 2,660 $ 29,034 $ 13,463 $ 59,629
======= ======= ======= ======== ======== ======== ========
Diluted earnings per share................... $ 0.14 $ 0.11 $ 0.72 $ 0.35 $ 1.24
======= ======== ======== ======== ========
Other Data:
Number of our common stock listings.......... 125 132 202 284 271 278 395
Total share volume on the NYSE of our
specialist stocks (in billions)............ 4.0 5.6 10.9 20.0 25.7 18.6 39.6
Total dollar volume on the NYSE of our
specialist stocks (in billions)............ 133.3 201.4 476.7 950.4 1,209.3 929.5 1,742.2
NYSE average daily trading share volume (in
millions).................................. 346.1 412.0 526.9 673.6 809.2 781.9 1,013.9
Ratio of earnings to fixed charges(1)........ 32.8x 20.0x 10.7x 9.0x 10.0x 6.0x 5.0x

AS OF DECEMBER 31, AS OF
---------------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999 2000
------- ------- -------- -------- -------- --------------
(UNAUDITED)
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and short term
investments................. $ 8,971 $16,479 $ 17,989 $ 25,822 $109,196 $227,173
Working capital............... 32,855 27,694 62,562 104,250 229,119 282,730
Total assets.................. 65,177 78,918 157,754 272,201 505,125 932,213
Total long-term
indebtedness(2)............. 1,150 2,919 31,423 48,073 162,330 402,283
Members' capital/stockholders'
equity...................... 18,270 13,735 37,658 77,093 251,972 346,238

------------------------------

(1) For purposes of this ratio, earnings represent pre-tax income for 1995 to
1998 plus limited partners' interest in earnings of subsidiary and fixed
charges. Fixed charges represent interest expensed as well as amortized
premiums, discounts and capitalized expenses related to indebtedness.

(2) Excludes subordinated liabilities related to contributed exchange
memberships.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF RPM

The summary historical consolidated financial data (other than Other Data)
of RPM set forth below for the years ended April 24, 1998, April 30, 1999 and
April 28, 2000 have been derived from RPM's consolidated financial statements,
which have been audited by PricewaterhouseCoopers LLP, independent accountants,
and are included elsewhere (other than the balance sheet data as of April 24,
1998) in this proxy statement/prospectus. The summary historical consolidated
financial data set forth below for the years ended April 26, 1996 and April 25,
1997 and the balance sheet data as of April 24, 1998 have been derived from
RPM's consolidated financial statements, audited by PricewaterhouseCoopers LLP,
independent accountants, but are not included elsewhere in this proxy
statement/prospectus. The summary historical consolidated financial data for the
six months ended October 29, 1999 and October 27, 2000 were derived from the
unaudited financial statements included in this proxy statement/prospectus.
RPM's management believes that the unaudited historical financial statements
contain all adjustments needed to present fairly the information contained in
those statements, and the adjustments made consist only of normal recurring
adjustments. The summary historical consolidated financial data of RPM set forth
below should be read in conjunction with the consolidated financial statements
and related notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations of RPM," which are included
elsewhere in this proxy statement/prospectus. RPM's fiscal year ends on the last
Friday of each April, and its first, second and third fiscal quarters end on the
last Friday of each July, October and January, respectively.

SIX MONTHS ENDED
YEAR ENDED APRIL, OCTOBER,
---------------------------------------------------- -------------------
1996 1997 1998 1999 2000 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT OTHER DATA)

INCOME STATEMENT DATA:
Revenues:
Trading and investment gains,
net........................ $ 31,394 $ 38,020 $ 75,155 $ 76,344 $ 44,124 $ 26,431 $ 37,834
Floor brokerage.............. 16,332 18,126 22,662 25,067 24,786 11,958 8,956
Clearance fees and
commissions................ 16,173 17,433 17,281 15,456 18,873 7,948 9,569
Other........................ 5,522 5,730 8,614 8,928 13,952 6,026 8,178
-------- -------- -------- -------- -------- -------- --------
Total revenues............. $ 69,421 $ 79,309 $123,712 $125,795 $101,735 $ 52,363 $ 64,537
======== ======== ======== ======== ======== ======== ========
Income before provision for
income taxes................. $ 16,273 $ 18,589 $ 46,697 $ 37,859 $ 27,753 $ 15,191 $ 15,603
Net income..................... 8,591 9,877 24,983 20,259 14,726 7,971 8,230
======== ======== ======== ======== ======== ======== ========

BALANCE SHEET DATA:
Total assets................... $153,464 $150,634 $249,517 $283,236 $293,785 $321,983 $315,444
Long-term borrowings........... 11,563 10,455 5,750 27,634 37,534 25,006 34,538
Redeemable preferred stock..... 2,844 2,844 2,844 2,664 2,664 2,664 2,664

OTHER DATA:
Number of RPM's common stock
listings..................... 73 84 100 117 125 121 128

SUMMARY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

Set forth below are condensed consolidated statements of operations for the
year ended December 31, 1999 and for the nine months ended September 30, 2000:

(1) on a historical basis;

(2) on a pro forma basis to give effect to the reorganization of LaBranche & Co.
from partnership to corporate form and the related initial public offering
(the "Reorganization Transactions") as if they had occurred on January 1,
1999;

(3) on a pro forma basis to give effect to the following transactions as if they
had occurred on January 1, 1999 and January 1, 2000, respectively:

- the acquisition of Henderson and Webco; and

- our pending acquisition of RPM, including (i) the issuance of an aggregate
of 6.9 million shares of common stock, (ii) the issuance of nonconvertible
preferred stock having an aggregate face value of $100.0 million and an
estimated fair value of approximately $89.1 million, (iii) the assumption
of all obligations under RPM's outstanding option agreements with
employees, whereby each option to purchase RPM common stock will be
converted into an option to purchase 98.778 shares of our common stock and
(iv) the reversal of the historical results of operations for RPM Real
Estate, RPM Asset Management and RPM Investment Division as these business
lines will not be acquired by LaBranche (these acquisitions and related
transactions are referred to as the "Acquisition Transactions").

The pro forma consolidated statement of financial condition data as of
September 30, 2000 gives effect to the Acquisition Transactions as if they had
occurred on September 30, 2000.

The pro forma consolidated financial information has been prepared by our
management and is not necessarily indicative of the results that would have been
achieved had the above described transactions occurred on the dates indicated or
that may be achieved in the future.

FOR THE YEAR ENDED DECEMBER 31, 1999
---------------------------------------------------------------------------------
(K)
PRO FORMA
FOR THE REORGANIZATION
PRO FORMA TRANSACTIONS, THE
PRO FORMA FOR THE REORGANIZATION HENDERSON
FOR THE TRANSACTIONS AND AND WEBCO ACQUISITIONS AND
REORGANIZATION THE HENDERSON AND THE ACQUISITION
HISTORICAL TRANSACTIONS WEBCO ACQUISITIONS TRANSACTIONS
---------- -------------- ---------------------- --------------------------

Statement of Operations Data
Revenues:
Net gain on principal transactions.... $150,971 $150,971 $210,915 $246,676
Commissions........................... 37,222 37,222 66,599 92,131
Other................................. 12,844 12,844 19,355 43,637
-------- -------- -------- --------
Total revenues...................... 201,037 201,037 296,869 382,444
-------- -------- -------- --------
Expenses:
Employee compensation and related
benefits............................ 34,268 63,448(a) 90,910(a)(g) 122,706(a)(g)(l)(m)(n)
Lease of exchange memberships......... 8,416 8,416 8,808 12,507
Interest.............................. 8,286 15,091(b) 46,613(b)(h)(i) 50,315(b)(h)(i)(o)
Exchange, clearing and brokerage
fees................................ 3,709 3,709 6,083 11,290
Amortization of intangibles........... 4,623 6,808(c) 18,351(c)(j) 42,025(c)(j)(p)
Other................................. 7,267 7,267 16,138 27,528
-------- -------- -------- --------
Total expenses before managing
directors' compensation, limited
partners' interest in earnings of
subsidiary and provision for
income taxes...................... 66,569 104,739 186,903 266,371

FOR THE YEAR ENDED DECEMBER 31, 1999 (CONTINUED)
---------------------------------------------------------------------------------
(K)
PRO FORMA
FOR THE REORGANIZATION
PRO FORMA TRANSACTIONS, THE
PRO FORMA FOR THE REORGANIZATION HENDERSON
FOR THE TRANSACTIONS AND AND WEBCO ACQUISITIONS AND
REORGANIZATION THE HENDERSON AND FOR THE ACQUISITION
HISTORICAL TRANSACTIONS WEBCO ACQUISITIONS TRANSACTIONS
---------- -------------- ---------------------- --------------------------

Income before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... $134,468 $ 96,298 $109,966 $116,073
MANAGING DIRECTORS' COMPENSATION............ 56,191 --(d) --(d) --(d)
Income before limited partners' interest in
earnings of subsidiary and provision for
income taxes.............................. 78,277 96,298 109,966 116,073
LIMITED PARTNERS' INTEREST IN EARNINGS OF
SUBSIDIARY................................ 25,344 --(e) --(e) --(e)
-------- -------- -------- --------
Income before provision for income taxes.... 52,933 96,298 109,966 116,073
Provision for income taxes.................. 23,899 47,350(f) 58,166(f) 69,570(f)
-------- -------- -------- --------
Net Income.................................. $ 29,034 $ 48,948 $ 51,800 $ 46,503
======== ======== ======== ========
Diluted earnings per share.................. $ 0.72 $ 0.65
======== ========

FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
-----------------------------------------------
PRO FORMA
FOR THE (K)
HENDERSON PRO FORMA
AND WEBCO FOR THE ACQUISITION
HISTORICAL ACQUISITIONS TRANSACTIONS
---------- ------------ -------------------

Statement of Operations Data
Revenues:
Net gain on principal transactions............ $203,174 $212,324 $280,201
Commissions................................... 32,367 35,989 51,892
Other......................................... 11,995 11,865 37,071
-------- -------- --------
Total revenues.............................. 247,536 260,178 369,164
-------- -------- --------
Expenses:
Employee compensation and related benefits.... 64,435 79,839(g) 125,249(g)(l)(m)(n)
Lease of exchange memberships................. 8,127 8,127 11,335
Interest...................................... 29,910 35,057(h)(i) 39,590(h)(i)(o)
Exchange, clearing and brokerage fees......... 3,631 4,076 9,760
Depreciation and amortization of
intangibles................................... 12,404 14,400(j) 31,972(j)(p)
Other......................................... 8,636 10,219 18,638
-------- -------- --------
Total expenses before provisions for income
taxes....................................... 127,143 151,718 236,544
-------- -------- --------

Income before provision for income taxes........ 120,393 108,460 132,620
Provision for income taxes...................... 60,764 55,967(f) 73,819(f)
-------- -------- --------
Net Income...................................... $ 59,629 $ 52,493 $ 58,801
======== ======== ========
Diluted earnings per share...................... $ 1.24 $ 0.90
======== ========

AS OF SEPTEMBER 30, 2000
--------------------------------------------
PRO FORMA
FOR THE ACQUISITION
HISTORICAL TRANSACTIONS
---------- -------------------

Balance Sheet Data:
Cash and short-term investments................. $227,173 $ 254,554(q)(r)
Working capital................................. 282,730 237,342(q)(r)(t)
Total assets.................................... 932,213 1,678,642(q)(s)(r)
Total long-term indebtedness.................... 402,283 426,626(q)(r)
Stockholders' equity............................ 346,238 777,447(q)(u)(v)

a. Employee compensation and benefits was adjusted to reflect managing
directors' compensation based on the revised compensation policies which
were implemented at the time of the Reorganization Transaction.

b. Reflects the repayment of $5.0 million of subordinated liabilities owed
to a former limited partner and reverses the related interest expense.
Reflects the issuance of senior notes of $100.0 million, the issuance of
a $16.0 million note and $350,000 of subordinated indebtedness and the
related interest expense.

c. Reflects the amortization of intangibles, on a straight-line basis,
related to the redemption of limited partners' interest.

d. Managing directors' compensation was adjusted to reverse the actual
amounts previously recorded.

e. Reflects reversal of actual limited partners' interest in earnings of
subsidiary previously recorded.

f. Reflects federal, state and local income taxes at an estimated tax rate
of approximately 47.5%.

g. Employee compensation and related benefits was adjusted to reflect the
new compensation arrangements made with Henderson and Webco employees to
which these employees have been subject since becoming employees of
LaBranche.

h. Reflects the interest expense for the $250.0 million of senior
subordinated notes net of a discount of approximately $4.3 million,
$2.5 million aggregate principal amount of senior promissory notes issued
to Webco stockholders.

i. Reflects the reversal of the interest expense related to the repayment
of Henderson subordinated notes prior to the acquisition.

j. Reflects the amortization of intangibles related to the acquisitions of
Henderson and Webco.

k. Reflects the reversal of the historical results of operations of RPM
Real Estate, RPM Asset Management and RPM Investment Division, as
LaBranche will not acquire these business lines.

l. Employee compensation and related benefits was adjusted to reflect the
new compensation arrangements made with nine RPM employees to which those
employees will be subject upon becoming employees of LaBranche, which
will be effective upon completion of the acquisition.

m. Reflects the reversal of actual compensation expense related to RPM's
stock option agreements with employees.

n. Reflects the pro rata compensation expense for the $9.0 million
retention bonus pool payable to certain RPM employees and the accrual of
interest with respect to the benefits payable under the RPM Deferred
Compensation Plan.

o. Reflects the reversal of the actual interest expense incurred prior to
the repayment of $21.2 million of RPM's subordinated debt.

p. Reflects the amortization of intangibles related to the RPM Acquisition.

q. Reflects the reversal of the historical statement of financial condition
of RPM Real Estate and RPM Asset Management as of September 30, 2000, as
LaBranche will not acquire these business lines.

r. Reflects the repayment of approximately $21.2 million of subordinated
debt of RPM and the estimated payments for professional services provided
in connection with the RPM Acquisition.

s. Reflects a total of $448.5 million of purchase price allocated to
intangibles for the RPM acquisition, the related deferred tax
liabilities, and the reversal of $7.3 million of intangible assets
remaining from RPM's previous acquisitions.

t. Reflects the recognition of the benefits payable under the RPM Deferred
Compensation Plan to certain employees of RPM 81 months after the
completion of the RPM Acquisition.

u. Reflects the RPM acquisition for an aggregate of approximately
6.9 million shares of common stock, shares of nonconvertible preferred
stock having an aggregate face value of $100.0 million and an estimated
fair value of approximately $89.1 million and the assumption of all
obligations under RPM's outstanding option agreements with employees,
whereby each option to purchase RPM common stock will be converted into a
vested option to purchase 98.778 shares of LaBranche's common stock.

v. Reflects the elimination of the redeemable stocks and other equity of
RPM.

COMPARATIVE PER-SHARE DATA

The following table sets forth historical net income and book value per
share of LaBranche and the unaudited pro forma combined net income and book
value per share data after giving effect to the merger. The exchange ratio for
the merger is 98.778 shares of LaBranche common stock for each share of RPM
common stock, as set forth in the merger agreement. Neither LaBranche nor RPM
has declared or paid any cash dividends on its common stock, and LaBranche does
not anticipate doing so in the foreseeable future.

The historical book value per share of LaBranche common stock is computed by
dividing redeemable common stock and other equity at the end of each period by
the total number of shares of common stock outstanding at the end of each
period. In determining the book value per share, the tax benefits associated
with the exercise of any options were not considered.

The pro forma per share data has been calculated assuming that the
6.9 million shares of LaBranche common stock and the converted RPM options were
issued as of January 1, 1999 and January 1, 2000, respectively. The diluted pro
forma book value per share data assumes exercise of all options granted under
LaBranche's Equity Incentive Plan as well as the replacement options granted to
RPM.

The unaudited pro forma combined data below is for illustrative purposes
only, and is not necessarily indicative of the results that would have been
achieved had the merger occurred on the dates indicated or the results that may
be achieved in the future. The information below should be read

in conjunction with the audited historical financial statements of LaBranche and
RPM included elsewhere in this proxy statement/prospectus.

NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1999 SEPTEMBER 30, 2000
----------------- ------------------

LABRANCHE HISTORICAL:
Net income per share--basic and diluted..................... $0.72 $ 1.24
Book value per share--basic................................. $5.49 $ 7.07
Book value per share--diluted............................... $5.71 $ 7.24

LABRANCHE UNAUDITED PRO FORMA COMBINED:
Net income per share--basic and diluted..................... $0.65 $ 0.90
Book value per share--basic................................. $13.98
Book value per share--diluted............................... $13.73

The following table sets forth historical net income and book value per
share of RPM and the unaudited pro forma combined net income and book value per
RPM equivalent share data after giving effect to the merger. The exchange ratio
for the merger is 98.778 shares of LaBranche common stock for each share of RPM
common stock, as set forth in the merger agreement. Neither LaBranche nor RPM
has declared or paid any cash dividends on its common stock, and LaBranche does
not anticipate doing so in the foreseeable future.

The historical book value per share of RPM redeemable common stock is
computed by dividing redeemable common stock and other equity at the end of each
period by the total number of shares of RPM common stock outstanding at the end
of each period. In determining the book value per share the tax benefits
associated with the exercise of any options were not considered.

The pro forma comparative per share data has been calculated assuming that
each share of RPM common stock will be exchanged for 98.778 shares of LaBranche
common stock.

YEAR ENDED SIX MONTHS ENDED
APRIL 28, 2000 OCTOBER 27, 2000
-------------- ----------------

RPM UNAUDITED HISTORICAL:
Net income per share--basic..................... $ 204.71 $ 121.45
Net income per share--diluted................... $ 185.44 $ 109.96
Book value per share--basic..................... $1,325.00 $1,446.72
Book value per share--diluted................... $1,135.23 $1,243.21

RPM UNAUDITED PRO FORMA PER RPM
EQUIVALENT SHARE:
Net income per share--basic..................... $ 2.07 $ 1.23
Net income per share--diluted................... $ 1.88 $ 1.11
Book value per share--basic..................... $ 13.41 $ 14.65
Book value per share--diluted................... $ 11.49 $ 12.59

RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU VOTE ON THE
MERGER OR OTHER PROPOSALS OR DECIDE TO MAKE AN INVESTMENT IN THE COMMON STOCK
AND PREFERRED STOCK OF LABRANCHE. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
ARE SOME OF THE MATERIAL RISKS THAT WE FACE.

RISKS RELATED TO THE MERGER

THE MARKET VALUE OF THE LABRANCHE SHARES RECEIVED IN THE MERGER WILL FLUCTUATE.

The share exchange ratio in the merger is fixed. This means that the
exchange ratio will not be adjusted to reflect changes in the market value of
the LaBranche common stock and Series A preferred stock. The market value of
LaBranche common stock at the effective time of the merger may vary
significantly from the price as of the date the merger agreement was executed,
the date of this proxy statement/prospectus or the date on which RPM
stockholders vote on the merger. For example, during the period beginning on
February 1, 2000 and ending on February 28, 2001, the most recent practicable
date prior to the mailing of this proxy statement/prospectus, the closing price
of LaBranche common stock on the NYSE ranged from a low of $44.82 to a high of
$51.03 and ended that period at $50.55. Past stock performance is not an
indication of future market performance.

The merger may not be completed immediately following the RPM stockholders'
special meeting, as is currently planned. Regulatory or other factors could lead
to delays in completing the merger. At the time of the RPM stockholders' special
meeting, RPM stockholders will not know the exact value of the LaBranche common
stock that will be issued in connection with the merger. LaBranche and RPM urge
you to obtain current market quotations of LaBranche common stock. Neither
LaBranche nor RPM can assure you as to the market price of LaBranche common
stock at any time.

WE MAY ENCOUNTER PROBLEMS EFFECTIVELY INTEGRATING RPM IF THE MERGER IS
COMPLETED.

Integrating the operations and personnel of RPM into LaBranche will be a
complex process, and we are uncertain that the integration will be completed in
a timely manner or that we will achieve the anticipated benefits of the merger.
The acquisition of RPM is larger than any of our prior acquisitions. In addition
to the risks described below in connection with acquisitions generally, the
ultimate success of the merger is dependent on the following factors:

- our ability to maintain a relationship with the listed companies in whose
stocks RPM currently makes a market, as well as our ability to maintain
the base of stocks for which we make a market;

- our ability to integrate RPM's and our clearing operations;

- our ability to successfully integrate RPM's specialist activities and
operating systems into ours; and

- our ability to retain and incentivize RPM's employees.

IF WE DO NOT SUCCESSFULLY INTEGRATE RPM, OR IF THE MERGER'S BENEFITS DO NOT MEET
THE EXPECTATIONS OF INVESTORS OR FINANCIAL OR INDUSTRY ANALYSTS, THE MARKET
PRICE OF OUR COMMON STOCK THAT YOU RECEIVE IN THE MERGER MAY DECLINE.

We cannot assure you that we will be able to successfully integrate the
business of RPM with our existing business operations. The RPM acquisition may
result in unforeseen operating difficulties and expenditures. It may also
require significant management attention that would otherwise be available for
ongoing development of our business. Moreover, we cannot assure you that the
anticipated benefits of the RPM acquisition will be realized. As a result of the
RPM acquisition, we will incur amortization

expenses related to goodwill and other intangible assets, and we may incur
contingent liabilities of which we are not aware.

As part of our acquisition of RPM, we will acquire its clearing operations.
We have limited experience operating a clearing business and may not be familiar
with all of the risks associated with the clearing business. We cannot assure
you that we will successfully operate and manage RPM's clearing business.

The market price of our common stock may decline as a result of the merger
if:

- we do not achieve the benefits of the merger as rapidly as, or to the
extent, anticipated by financial or industry analysts;

- our assumptions about RPM's business model and operations prove incorrect,
and the effect of the merger on our financial results is not consistent
with the expectations of financial or industry analysts; or

- our significant stockholders following the merger determine to dispose of
their shares of LaBranche common stock because the results of the merger
are not consistent with their expectations.

FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT US.

If the merger is not completed for any reason, we will be subject to a
number of material risks, including:

- the risk of payment of the costs related to the merger, such as legal and
accounting fees, which must be paid whether or not the merger is
completed;

- the risk that the benefits we expect to realize from the merger, such as
the potentially enhanced financial and competitive position of the
combined company, may not be realized;

- the risk of adverse publicity and negative perceptions by analysts and
investors; and

- the risk of adverse effects on our financial and market position created
by the diversion of management attention from day-to-day business and the
disruption of our employees' work activities.

UNCERTAINTIES ASSOCIATED WITH THE MERGER MAY CAUSE US TO LOSE KEY PERSONNEL.

Our current and prospective employees may experience uncertainty about their
future roles with us. This uncertainty may adversely affect our ability to
attract and retain key personnel. In addition, our ability to successfully
integrate RPM's business operations into our own may be adversely affected if a
significant number of our or their key personnel depart prior to or after the
closing of the merger, which would adversely affect our business and results of
operations.

THE COMBINED COMPANY WILL INCUR SIGNIFICANT MERGER-RELATED CHARGES AND
INTEGRATION COSTS.

The combined company will incur merger-related costs such as financial
advisory, legal and accounting fees and financial printing and other related
charges. Additional unanticipated costs may be incurred in the integration of
LaBranche and RPM.

RPM STOCKHOLDERS COULD LOSE A PORTION OF THE LABRANCHE STOCK TO BE DISTRIBUTED
TO THEM.

Under the merger agreement, 5% of the shares of LaBranche Series A preferred
stock issuable in the merger must be placed in an escrow account at the closing
of the merger instead of being distributed to the RPM stockholders. If the
aggregate liquidation preference of the shares of

LaBranche Series A preferred stock delivered to the RPM stockholders at the
closing exceeds the adjusted net book value (as defined in the merger agreement)
of RPM as of the closing date of the merger, the escrow agent will be required
to deliver to LaBranche shares of LaBranche Series A preferred stock with an
aggregate liquidation preference equal to the sum of that excess and the RPM
stockholders' share of any expenses of the escrow.

Under the merger agreement, additional shares of LaBranche Series A
preferred stock having an aggregate liquidation preference equal to the sum of
(a) 10% of the value of the aggregate merger consideration and (b) about
$14.4 million, must also be placed in the escrow account at the closing of the
merger instead of being distributed to the RPM stockholders. LaBranche is
entitled to be indemnified against breaches of the representations, warranties,
agreements and covenants of RPM contained in the merger agreement. This
indemnification obligation will be applicable to the extent that LaBranche's
losses suffered or sustained exceed $1.0 million and written notice of such
losses is delivered prior to the date that is 18 months following the closing of
the merger or, with respect to tax and ERISA losses, prior to the expiration of
the statute of limitations applicable thereto.

Under the terms of these escrow arrangements, George E. Robb, Jr., RPM's
President, and Robert M. Murphy, RPM's Executive Vice President, will be
authorized to defend and to settle, on behalf of all of the former RPM
stockholders, any claims asserted by LaBranche. As a result, the former RPM
stockholders could lose all or a portion of the LaBranche Series A preferred
stock to be placed into escrow.

THE MERGER MAY NOT BE TREATED AS A TAX FREE REORGANIZATION.

The merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, which would make the transaction
generally tax-free to LaBranche, RPM and the RPM stockholders to the extent they
receive LaBranche common stock and Series A preferred stock. It is a condition
to the obligation of RPM to consummate the merger that it receives an opinion
from its counsel that the merger will be treated as a tax-free reorganization.
In rendering its opinion, counsel to RPM will rely upon certain representations
of RPM and LaBranche, made as of the closing date of the merger. If such
representations are untrue, incorrect or incomplete, the merger may not be
treated as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, and the receipt of the merger consideration by RPM stockholders,
as well as the merger, may be taxable.

OFFICERS AND DIRECTORS OF RPM MAY HAVE POTENTIAL CONFLICTS OF INTEREST.

You should be aware that some directors and executive officers of RPM may
have interests in the merger that are different from, or in addition to, your
interests. At the close of business on the record date, directors and executive
officers of RPM owned and were entitled to vote 64,000 shares of RPM common
stock, which represented about 91.3% of the shares of RPM common stock
outstanding on that date. Many of these persons are entitled to participate in
benefit plans that were previously adopted. Messrs. Robb and Murphy, RPM's
President and Executive Vice President, respectively, are stockholders of RPM
and also will become directors of LaBranche. Mr. Murphy also will become Chief
Executive Officer of LaBranche & Co. LLC following the merger. Cornelius F.
Bodtmann, RPM's Executive Vice President and a director, Nathan J. Mistretta,
RPM's Executive Vice President, Finance and Administration, Secretary and
Treasurer, and Mr. Murphy will be entitled to lump sum payments under
supplemental executive retirement plans with RPM at the closing of the merger,
and Messrs. Robb, Jr. and Murphy will receive registration rights with respect
to the shares of common stock they receive in connection with this transaction.
In addition, at or prior to the closing of the merger and as a condition to the
merger, RPM must dispose of its real estate management subsidiary, which manages
and, through its subsidiaries, owns real estate, to George E. Robb, Jr., RPM's
President and controlling stockholder. RPM's stockholders should consider
whether these interests may have influenced RPM's

directors or executive officers to support or recommend the merger and the other
proposals contained herein.

SOME OF THE RPM STOCKHOLDERS MAY BE SUBJECT TO RULE 145 RESTRICTIONS ON THE
TRANSFER OF THEIR LABRANCHE STOCK, AS WELL AS OTHER TRANSFER RESTRICTIONS.

The shares of LaBranche common stock that will be issued to RPM stockholders
pursuant to the merger will be freely transferable, except that shares that are
delivered to persons who are "affiliates" (as such term is defined in Rule 144
under the Securities Act of 1933) of RPM at the time of the RPM stockholders'
special meeting may only be resold by them pursuant to an effective registration
statement covering such securities, in transactions permitted by the resale
provisions of Rule 145 (or Rule 144 in the case of persons who become affiliates
of LaBranche after the merger) or as otherwise permitted under the Securities
Act. People who may be deemed to be affiliates of RPM or LaBranche generally
include entities that control, are controlled by, or are under common control
with, RPM or LaBranche, as the case may be, and may include certain officers and
directors of RPM or LaBranche as well as principal stockholders of RPM or
LaBranche. The merger agreement requires RPM to cause each of its affiliates to
deliver to LaBranche, prior to the closing date of the merger, a letter to the
effect that such person will not sell or otherwise dispose of any of the shares
of LaBranche common stock or Series A preferred stock except pursuant to an
effective registration statement under the Securities Act or pursuant to a
transaction that, in the opinion of LaBranche's counsel, is not required to be
registered under the Securities Act and is permissible under Rule 145.

THE HOLDERS OF LABRANCHE SERIES A PREFERRED STOCK FOLLOWING THE MERGER WILL HAVE
CERTAIN VOTING RIGHTS THAT COULD HINDER A CHANGE IN CONTROL.

Upon completion of the merger, the former holders of RPM common stock will
hold all of the outstanding shares of LaBranche Series A preferred stock. Each
holder of LaBranche Series A preferred stock will have the opportunity to vote
on certain matters that would affect the rights of the LaBranche Series A
preferred stockholders, any issuances of LaBranche stock with rights greater
than or equal to theirs and on any proposals that relate to the merger or
consolidation of LaBranche, the sale of 50% or more of LaBranche's consolidated
assets or similar transactions. Following the consummation of the merger, George
E. Robb, Jr., RPM's President, and Robert M. Murphy, RPM's Executive Vice
President, will own about 71.3% of the outstanding shares of LaBranche Series A
preferred stock. Therefore, Messrs. Robb and Murphy will have the ability to
control the outcome of any of the actions described above and could hinder
LaBranche's ability to take such actions.

THE LABRANCHE SERIES A PREFERRED STOCK WILL BE VERY DIFFICULT TO DISPOSE OF OR
OTHERWISE TRANSFER.

The shares of LaBranche Series A preferred stock are subject to restrictions
on transfer pursuant to the stockholder agreements required to be signed by each
of the RPM stockholders as a condition to the merger. There will be no market
for the shares of LaBranche Series A preferred stock and you will be prohibited
from selling or transferring them without LaBranche's consent.

RISKS RELATED TO OUR BUSINESS FOLLOWING THE MERGER

WE WILL HAVE SIGNIFICANT INDEBTEDNESS AND INTEREST PAYMENT OBLIGATIONS.

As of December 31, 2000, we had outstanding consolidated debt in the
principal amount of about $397.8 million, excluding subordinated liabilities
related to contributed exchange memberships. LaBranche & Co. LLC also has the
ability to borrow $200.0 million under a one-year revolving credit facility with
The Bank of New York which we originally established in June 1998, increased and
extended in both June 1999 and February 2000, and extended again in
January 2001. We also may need to incur additional debt in the future for
working capital or to complete acquisitions, even though our

existing debt obligations impose certain limits on our ability to do so. Our
high level of indebtedness could have important consequences, including the
following:

- our ability to obtain additional financing to fund our growth strategy,
working capital, capital expenditures, debt service requirements or other
purposes may be impaired;

- our ability to use operating cash flow in other areas of our business will
be limited because we must dedicate a substantial portion of these funds
to make principal and interest payments;

- we may not be able to compete with others who have less debt than we do;
and

- our indebtedness may limit our flexibility to adjust to changing market
conditions, changes in our industry and economic downturns.

Our ability to satisfy our debt obligations will depend upon our future
operating performance and our ability to obtain additional debt or equity
financing. Prevailing economic conditions and financial, business and other
factors, many of which are beyond our control, will affect our ability to make
these payments. If in the future we cannot generate sufficient cash from
operations to meet our debt obligations, we will need to refinance our debt
obligations, obtain additional financing or sell assets. We cannot be sure that
our business will generate cash flow or that we will be able to obtain funding
sufficient to satisfy our debt service requirements.

Further, LaBranche & Co. LLC is a broker-dealer and a specialist regulated
by the SEC and the NYSE. Such regulations include strict capital requirements
and complex approval procedures for withdrawals of capital from, and in some
cases, other distributions by, a broker-dealer. These regulations could prevent
us from obtaining funds necessary to satisfy our obligations to pay interest on
or repay our indebtedness.

OUR ABILITY TO TAKE ACTIONS MAY BE RESTRICTED BY THE TERMS OF OUR INDEBTEDNESS.

The covenants in our existing debt agreements, including our credit
agreement with The Bank of New York, the note purchase agreements relating to
LaBranche & Co. LLC's existing senior subordinated indebtedness and the
indentures governing our senior notes and senior subordinated notes, and in any
future financing agreements may adversely affect our ability to finance future
operations or capital needs or to engage in other business activities. These
covenants limit or restrict our ability and the ability of our subsidiaries to:

- incur additional debt;

- pay dividends and make distributions to the extent that those payments
adversely affect our net capital requirements;

- repurchase our securities;

- make certain investments;

- create liens on our assets;

- transfer or sell assets;

- enter into transactions with affiliates;

- issue or sell stock of subsidiaries; or

- merge or consolidate.

In addition, the credit agreement and the note purchase agreements require
LaBranche & Co. LLC to comply with certain financial ratios. LaBranche & Co.
LLC's ability to comply with these ratios may be affected by events beyond our
or its control. If any of the covenants in our credit agreement,

the note purchase agreements or the indentures relating to our senior notes and
senior subordinated notes is breached, or if LaBranche & Co. LLC is unable to
comply with the financial ratios to which it is subject, it may be in default
under the credit agreement or the note purchase agreements and we may be in
default under the indentures relating to our senior notes and senior
subordinated notes. A significant portion of our indebtedness then may become
immediately due and payable. We are not certain whether we would have, or be
able to obtain, sufficient funds to make these accelerated payments. Compliance
with the covenants is also a condition to borrowings under the credit agreement.

WE WILL BE REQUIRED TO TAKE ACTIONS UPON THE OCCURRENCE OF A CHANGE OF CONTROL.

Upon the occurrence of a change of control, we are required to offer to
repurchase all of our outstanding senior notes and senior subordinated notes at
a price equal to 101% of their principal amount, together with accrued and
unpaid interest, if any, to the date of repurchase. Certain important corporate
events, such as leveraged recapitalizations that would increase our level of
indebtedness, would not constitute a change of control. If a change of control
were to occur, it is possible that we would not have sufficient funds to
repurchase our outstanding senior notes and senior subordinated notes or that
restrictions in the credit agreement, the note purchase agreements relating to
LaBranche & Co. LLC's existing senior subordinated indebtedness and, the
indentures governing our senior notes and senior subordinated notes will not
allow such repurchases. Furthermore, a change of control will most likely
trigger a default under the credit agreement, the note purchase agreements
relating to LaBranche & Co. LLC's existing senior subordinated indebtedness and
the indentures governing our senior notes and senior subordinated notes. To the
extent we do not have sufficient funds to meet our repurchase obligations and
any other obligations in respect of the credit agreement, the note purchase
agreements and the indentures relating to our senior notes and senior
subordinated notes, we would necessarily seek third-party financing. However, it
is possible that we would not be able to obtain such financing.

WE MAY HAVE INSUFFICIENT CAPITAL IN THE FUTURE AND MAY BE UNABLE TO SECURE
ADDITIONAL FINANCING WHEN WE NEED IT.

Our business depends on the availability of adequate capital. We cannot be
sure that we will have sufficient capital in the future or that additional
financing will be available on a timely basis, or on terms favorable to us.
Historically, we have satisfied these needs with internally generated funds, our
bank credit facilities and the issuance of subordinated debt by our operating
subsidiaries and the issuance by us of our senior notes, our senior subordinated
notes and our common stock. We currently anticipate that our available cash
resources and credit facilities will be sufficient to meet our anticipated
working capital, regulatory capital and capital expenditure requirements through
the end of 2001.

We may, however, need to raise additional funds to:

- increase the capital available to us for our inventory positions;

- support more rapid expansion;

- acquire similar or complementary businesses; or

- respond to unanticipated capital requirements.

We may be required to obtain this additional financing on short notice as a
result of rapid, unanticipated developments, such as a steep market decline.

OUR REVENUES MAY DECREASE DUE TO CHANGES AFFECTING THE ECONOMY, SUCH AS
INCREASES IN INTEREST RATES OR INFLATION, OR CHANGES AFFECTING THE SECURITIES
MARKETS, SUCH AS DECREASED VOLUME OR LIQUIDITY.

An adverse change affecting the economy or the securities markets could
result in a decline in market volume or liquidity. This would result in lower
revenues from our specialist activities. Recent

increases in our revenues have been caused primarily by significant increases in
the volume of trading on the NYSE and favorable conditions in the securities
markets. The favorable business environment of the recent past has begun to slow
and may continue to slow in the future.

SUSTAINED DECLINES IN PRICE LEVELS OF SECURITIES COULD CAUSE US TO INCUR LOSSES.

Adverse changes in the economy and the securities markets could lead to
lower price levels of securities. Sustained declines in these price levels may
result in:

- losses from declines in the market value of securities held in our
accounts;

- the failure of buyers and sellers of securities to fulfill their
settlement obligations; or

- increases in claims and litigation.

WE MAY HAVE DIFFICULTY SUCCESSFULLY MANAGING OUR GROWTH.

Since 1994, we have experienced significant growth in our business
activities and the number of our employees. We cannot assure you that the
combined company will be able to manage its growth successfully. Our inability
to do so could have an adverse effect on our business, financial condition
and/or operating results. The growth of our business has increased the demands
upon our management and operations and we expect it to continue to do so in the
future. This growth has required, and will continue to require, us to increase
our investment in management personnel, financial and management systems and
controls, and facilities. The scope of procedures for assuring compliance with
applicable rules and regulations has changed as the size and complexity of our
business has increased. In response, we have implemented formal compliance
procedures, which are regularly updated. Our future operating results will
depend on our ability to continue:

- to improve our systems for operations, financial control and communication
and information management;

- to refine our compliance procedures and enhance our compliance oversight;
and

- to recruit, train, manage and retain our employees.

TRADING THROUGH NYSE SPECIALISTS COULD BE REPLACED BY ALTERNATIVE TRADING
SYSTEMS WHICH COULD REDUCE OUR REVENUE.

Alternative trading systems could reduce the levels of trading of
NYSE-listed stocks executed through specialists. This, in turn, could have an
adverse effect on our revenues. Over the past few years, a number of alternative
trading systems have developed or emerged which may compete with specialists by
increasing trading in NYSE-listed stocks off the NYSE trading floor and in
over-the-counter markets. In the future, similar new systems may continue to be
developed and placed in operation.

NEW AND PROPOSED NYSE INITIATIVES MAY LOWER THE REVENUES WE EARN ON TRADES
EXECUTED IN SHARES OF OUR COMMON STOCK LISTINGS.

The NYSE recently approved the repeal of Rule 390, which generally
prohibited member firms from trading stocks listed before April 26, 1979 other
than on a national exchange. Any stocks listed before April 26, 1979 for which
we act as specialist are now freely tradeable in over-the-counter markets. We do
not receive commissions on trades executed in over-the-counter markets and do
not participate in those trades as principal. Additionally, on December 28,
1999, the NYSE implemented a new initiative, which increased from two minutes to
five minutes the window for providing commission-free transactions on orders.
Therefore, any order we execute as agent within five minutes of placement of the
order does not generate any commission revenue for us. This new initiative has
adversely affected our commission revenue per trade, when we act as agent.

COMPETITION FROM NASDAQ FOR NEW LISTINGS COULD ADVERSELY AFFECT NYSE TRADING
VOLUME AND, IN TURN, REDUCE OUR REVENUES.

Nasdaq continues to grow and gain in popularity, attracting companies that
might otherwise list on the NYSE. If more companies decide to be quoted on
Nasdaq as opposed to listing their stocks on the NYSE, or if companies choose to
delist using recently relaxed delisting procedures, trading volume on the NYSE
could be adversely affected. This, in turn, could adversely affect our trading
revenue. In recent years, many high technology companies have opted to be quoted
on Nasdaq, even though many of them would have qualified for NYSE listing. In
addition, the SEC recently approved a revision to NYSE Rule 500 which makes it
easier for a company to delist its shares from the NYSE. The original rule
required supermajority stockholder approval before a listed company could delist
from the NYSE. Under the recently approved amendment of Rule 500, a company can
delist from the NYSE if it obtains the approval of a majority of the company's
board of directors and its audit committee and then provides its 35 largest
stockholders with written notice of the proposed delisting and allows a
20-40 day waiting period to elapse.

OUR QUARTERLY RESULTS MAY FLUCTUATE SIGNIFICANTLY.

Our revenues may fluctuate significantly based on factors relating to the
securities markets. These factors include:

- a decrease in trading volume on the NYSE;

- volatility in the equity securities markets; and

- changes in the value of our securities positions.

Many elements of our cost structure do not decline if we experience
quarterly reductions in our revenues. As a result, if market conditions cause
our revenues to decline, we may be unable to adjust our cost structure on a
timely basis and we could suffer losses.

RISKS ASSOCIATED WITH OUR TRADING TRANSACTIONS COULD RESULT IN TRADING LOSSES.

A majority of our specialist-related revenues may be derived from trading by
us as principal. We may incur trading losses relating to the purchase, sale or
short sale of securities for our own account. In any period, we also may incur
trading losses in our specialist stocks for reasons such as price declines in
our specialist stocks, lack of trading volume in our specialist stocks and the
required performance of our specialist obligations. From time to time, we may
have large position concentrations in securities of a single issuer or issuers
engaged in a specific industry. In general, because our inventory of securities
is marked to market on a daily basis, any downward price movement in these
securities will result in a reduction of our revenues and operating profits. We
also operate a proprietary trading desk separately from our NYSE specialist
operations, which represented 0.5% of our total revenues in 2000. We may incur
trading losses as a result of these trading activities.

Although we have adopted risk management policies, we cannot be sure that
these policies have been formulated properly to identify or limit our risks.
Even if these policies are formulated properly, we cannot be sure that we will
successfully implement these policies. As a result, we may not be able to manage
our risks successfully or avoid trading losses.

NYSE SPECIALIST RULES MAY REQUIRE US TO MAKE UNPROFITABLE TRADES OR TO REFRAIN
FROM MAKING PROFITABLE TRADES.

When we trade as principal, we attempt to derive a profit from the
difference between the price at which we buy and the price at which we sell
securities. Our role as a specialist, at times, requires us to make trades that
adversely affect our profitability. In addition, as a specialist, we are at
times required to refrain from trading for our own account in circumstances in
which it may be to our advantage to trade. For example, we may be obligated to
act as a principal when buyers or sellers outnumber each

other. In those instances, we may take a position counter to the market, buying
or selling shares to support an orderly market in the affected stocks. In order
to perform these obligations, we hold varying amounts of securities in
inventory. In addition, specialists generally may not trade for their own
account when public buyers are meeting public sellers in an orderly fashion and
may not compete with public orders at the same price. By having to support an
orderly market, maintain inventory positions and refrain from trading under some
favorable conditions, we are subjected to a high degree of risk. Additionally,
the NYSE periodically amends its rules and may make the rules governing our
activities as a specialist more stringent or may implement changes, which could
adversely affect our trading revenues.

IF WE LOSE THE SERVICES OF OUR KEY PERSONNEL OR CANNOT HIRE ADDITIONAL QUALIFIED
PERSONNEL, OUR BUSINESS WILL BE HARMED.

Our future success depends on the continued service of key employees,
particularly Michael LaBranche, our Chairman, Chief Executive Officer and
President, and after the merger, Robert M. Murphy, who will become a director of
LaBranche and the Chief Executive Officer of LaBranche & Co. LLC. The loss of
the services of any of our key personnel or the inability to identify, hire,
train and retain other qualified personnel in the future could have an adverse
effect on our business, financial condition and/or operating results. We have
employment agreements with Mr. LaBranche and other key employees and expect to
enter into an employment agreement with Mr. Murphy after the closing of the
merger. We also maintain "key person" life insurance policies on Mr. LaBranche
and other key employees. Competition for key personnel and other highly
qualified management, trading, compliance and technical personnel is intense. We
cannot assure you that we will be able to attract new or retain currently
employed highly qualified personnel in the future.

In connection with the reorganization transactions undertaken in
anticipation of the initial public offering of our common stock, our managing
directors received substantial amounts of our common stock in exchange for their
interests in LaB Investing Co. L.L.C. Because the shares of common stock were
received in exchange for membership interests, ownership of the shares is not
dependent upon the continued employment of those managing directors. In
addition, a number of our employees have received grants of stock options and
restricted stock units. The steps we have taken to encourage the continued
service of these individuals, who include key senior personnel in our specialist
activities, may not be effective.

OUR SUCCESS WILL DEPEND ON OUR ABILITY TO ACCURATELY PROCESS AND RECORD OUR
TRANSACTIONS, AND ANY FAILURE TO DO SO COULD SUBJECT US TO LOSSES.

Our specialist activities require us to accurately record and process a very
large number of transactions on a daily basis. Any failure or delay in recording
or processing transactions could cause substantial losses for brokers, their
customers and/or us and could subject us to claims for losses. We rely on our
staff to operate and maintain our information and communications systems
properly, and we depend on the integrity and performance of those systems. Our
recording and processing of trades is subject to human and processing errors.
Moreover, extraordinary trading volume or other events could cause our
information and communications systems to operate at an unacceptably low speed
or even fail. Any significant degradation or failure of our information systems
or any other systems in the trading process could cause us to fail to complete
transactions or could cause brokers who place trades through us to suffer delays
in trading.

OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO UPGRADE OUR INFORMATION AND
COMMUNICATIONS SYSTEMS, AND ANY FAILURE TO DO SO COULD HARM OUR BUSINESS AND
PROFITABILITY.

The development of complex communications and new technologies, including
Internet-based technologies, may render our existing information and
communications systems outdated. In addition, our information and communications
systems must be compatible with those of the NYSE. As a result,

if the NYSE upgrades its systems, we will need to make corresponding upgrades.
Our future success will depend on our ability to respond to changing
technologies on a timely and cost-effective basis. We cannot be sure that we
will be successful in upgrading our information and communications systems on a
timely or cost-effective basis. Our failure to do so could have an adverse
effect on our business, financial condition and/or operating results.

The NYSE's ability to develop information and communications systems and
complex computer and other technology systems has been instrumental in its
recent growth and success. We are dependent on the continuing development of
technological advances by the NYSE, a process over which we have no control. If
the NYSE for any reason is unable to continue its recent history of
computer-related and other technological developments and advances, it could
have an adverse effect on the success of the NYSE, including its ability to
grow, to manage its trading volumes or to attract new listings. Any such
developments can be expected to adversely affect our operations, financial
condition and operating results.

OUR MANAGEMENT INFORMATION SYSTEMS MAY FAIL AND INTERRUPT OUR BUSINESS, AND ANY
SLOWDOWN OR FAILURE OF OUR COMPUTER SYSTEMS COULD SUBJECT US TO LIABILITY FOR
LOSSES SUFFERED BY OUR CUSTOMERS.

Any information or communication systems failure or decrease in information
or communications systems performance that causes interruptions in our
operations could have an adverse effect on our business, financial condition
and/or operating results. Our systems may fail as a result of:

- hardware or software failure; or

- power or telecommunications failure.

Although we have established a back-up disaster recovery center in Hoboken,
New Jersey, it may not be effective in preventing an interruption of our
business.

In addition, our clearing services will depend on our ability to store,
retrieve, process and manage significant databases, and to receive and process
trade orders through a variety of electronic media. Our principal computer
equipment and software systems relating to our clearing operations will be
maintained at our offices in New York, New York. Our systems or any other
systems in the trading process could slow down significantly or fail for a
variety of reasons. There can be no assurance that we will be able to accurately
predict future volume increases or volatility or that our systems will be able
to accommodate these volume increases or volatility without failure or
degradation. Any significant degradation or failure of our computer systems or
any other systems in the clearing or trading processes could cause delays in the
execution of our customers' trades. These delays could subject us to claims for
losses, including litigation claiming fraud or negligence.

WE WILL DEPEND ON THE NYSE AND CLEARING AND DEPOSITORY INSTITUTIONS TO EFFECT
TRADES, AND THEIR FAILURE TO PERFORM COULD SUBJECT US TO LOSSES.

We are dependent on the proper and timely function of complex information
and communications systems maintained and operated by or for the NYSE and
clearing and depository institutions. Failures or inadequate or slow performance
of any of those systems could adversely affect our ability to operate and
complete trades. The failure to complete trades on a timely basis could subject
us to losses and claims for losses of brokers and their customers.

WE DEPEND SIGNIFICANTLY ON REVENUES FROM OUR SPECIALIST ACTIVITIES FOR A SMALL
GROUP OF LISTED COMPANIES, AND THE LOSS OF ANY OF THEM COULD REDUCE OUR
REVENUES.

Historically, a small number of listed companies have accounted for a
significant portion of our revenues from our specialist trading activities. The
loss of any of these listed companies could have an adverse effect on our
revenues. For the years ended December 31, 1999 and 2000, transactions in our
ten most profitable specialist stocks accounted for about 44.2% and 38.7% of our
total revenues,

respectively. We cannot assure you that we will be able to retain these or other
listed companies. We could lose these listed companies if they cease to be
traded on the NYSE as a result of being acquired or otherwise delisted. In
addition, if the NYSE were to determine that we have failed to fulfill our
obligations as specialist for a listed company, our registration as a specialist
for that listed company could be canceled or suspended.

WE DEPEND HEAVILY ON OUR SPECIALIST ACTIVITIES, AND IF THEY FAIL TO GROW AS
ANTICIPATED, IT WOULD HARM THE GROWTH OF OUR REVENUES.

We currently derive substantially all of our revenues from specialist
activities. If demand for our specialist services fails to grow, grows more
slowly than we currently anticipate or declines, our revenues would be adversely
affected. We expect our specialist activities to continue to account for the
majority of our revenues for the foreseeable future. Our future success will
depend on:

- continued growth in the volume of trading and the number of listings on
the NYSE;

- our ability to be chosen as specialist for additional listing companies;

- our ability to respond to regulatory and technological changes; and

- our ability to respond to changing demands in the marketplace.

WE ARE SUBJECT TO INTENSE COMPETITION FOR NEW LISTINGS AND IN OUR CLEARING
ACTIVITIES, AND OUR PROFITABILITY WILL SUFFER IF WE DO NOT COMPETE EFFECTIVELY.

We cannot be sure that we will be able to compete effectively with current
or future competitors. Our failure to compete effectively would have an adverse
effect on our profitability. We obtain all our new listings on the NYSE by going
through an allocation process. Under this process, either a committee of the
NYSE or the listing company chooses the specialist. The competition for
obtaining new listing companies is intense. We expect competition to continue to
intensify in the future. Some of our competitors may have significantly greater
financial and other resources than we have and may have greater name
recognition. These competitors may be able to respond more quickly to new or
evolving opportunities and listing company requirements. They may also be able
to undertake more extensive promotional activities to attract new listing
companies. In addition, the specialist industry has recently been consolidating
and has intensified the competition in our industry. Although the combined
companies resulting from this merger may have a stronger capital base, we cannot
assure you that further consolidation in the industry will not weaken the
benefits of this merger in terms of our competitive position. This trend has
intensified the competition in our industry. Finally, the NYSE retains the
ability to name new specialist firms.

In addition, the market for securities clearing services is rapidly evolving
and highly competitive. We will compete with many firms that provide clearing
services to the securities industry. A number of our competitors have
significantly greater financial, technical, marketing and other resources than
we will possess. Some of our competitors will also offer a wider range of
services and financial products than we do and have greater name recognition and
more extensive client bases. They may be able to respond more quickly to new or
changing opportunities, technologies and client requirements. These competitors
may be able to undertake more extensive promotional activities, offer more
attractive terms to clients or adopt more aggressive pricing policies. We cannot
assure you that we will be able to compete effectively with current or future
competitors in our clearing activities. Despite our efforts to remain
competitive, our customers may decide to discontinue using our clearing
services.

THE FAILURE BY US OR OUR EMPLOYEES TO COMPLY WITH APPLICABLE LAWS AND
REGULATIONS COULD RESULT IN SUBSTANTIAL FINES AND OTHER PENALTIES.

The securities industry is subject to extensive regulation under both
federal and state laws. In addition, the SEC, the NASD, the NYSE, other
self-regulatory organizations, commonly referred to as SROs, and state
securities commissions require strict compliance with their respective rules and

regulations. Failure to comply with any of these laws, rules or regulations
could result in serious adverse consequences. We and our officers and employees
may be subject in the future to claims arising from acts in contravention of
these laws, rules and regulations. An adverse ruling against us and/or our
officers and other employees as a result of any of these claims could result in
us and/or our officers and other employees being required to pay a substantial
fine or settlement. It could also result in the suspension or revocation of our
registration with the SEC as a broker-dealer or our suspension or expulsion as a
member of the NYSE. If this occurred, we would be unable to operate our
business. In addition, if the NASD initiates disciplinary action against us or
our employees, we could be subject to penalties or revocation of our NASD
membership, which would affect our ability to perform our clearing business.

THE REGULATORY ENVIRONMENT IN WHICH WE OPERATE MAY CHANGE, MAKING IT DIFFICULT
FOR US TO REMAIN IN COMPLIANCE.

The regulatory environment in which we operate is subject to change which we
cannot predict. It may be difficult for us to comply with new or revised
legislation or regulations imposed by the SEC, the NASD, other U.S. or foreign
governmental regulatory authorities and SROs, including the NYSE. Failure to
comply would have an adverse effect on our business, financial condition and/or
operating results. Changes in the interpretation or enforcement of existing laws
and rules by the SEC, these governmental authorities, the NASD, SROs and the
NYSE could also have an adverse effect on our business, financial condition
and/or operating results.

WE CANNOT PREDICT THE EFFECT A PROPOSED PUBLIC OFFERING BY THE NYSE WOULD HAVE
ON OUR BUSINESS.

The NYSE has announced that it intends to offer shares of its capital stock
to the public. We are unable to predict what effect, if any, such an offering
would have on our business and the specialist industry.

FAILURE TO COMPLY WITH NET CAPITAL OR NET LIQUID ASSET REQUIREMENTS MAY RESULT
IN THE REVOCATION OF OUR REGISTRATION WITH THE SEC OR OUR EXPULSION FROM THE
NYSE.

The SEC, the NYSE and various other regulatory agencies have stringent rules
with respect to the maintenance of minimum levels of capital and net liquid
assets by securities brokers-dealers as well as specialist firms. The NYSE
recently increased its minimum net liquid asset requirements. As of
December 31, 2000, we were required to maintain minimum net liquid assets of
$284.3 million, and after our acquisition of RPM, we estimate that we will be
required to maintain minimum net liquid assets of $405.0 million. Failure to
maintain compliance with the minimum capital requirements and net liquid asset
levels may subject us to suspension or revocation of registration by the SEC and
suspension or expulsion as a member of the NYSE and other regulatory bodies. If
this occurred, we would be unable to operate our business. In addition, a change
in these rules, the imposition of new rules or any unusually large requirement
or charge against our regulatory capital could limit any of our operations that
require the intensive use of capital. These rules could also restrict our
ability to withdraw capital from LaBranche & Co. LLC. Any limitation on our
ability to withdraw capital from LaBranche & Co. LLC could limit our ability to
pay cash dividends, repay debt and repurchase shares of our outstanding stock. A
substantial market decline, a significant operating loss or any unusually large
requirement or charge against regulatory capital could adversely affect our
ability to expand or even maintain our present levels of business, which could
have an adverse effect on our business, financial condition and/or operating
results.

EMPLOYEE AND OTHER MISCONDUCT IS DIFFICULT TO DETECT AND DETER AND COULD RESULT
IN LOSSES.

There have been a number of highly publicized cases involving fraud, stock
manipulation or other misconduct by employees in the financial services industry
in recent years, and we run the risk that employee misconduct could occur.
Misconduct by employees could include binding us to transactions that exceed
authorized limits or present unacceptable risks, or hiding from us unauthorized
or unsuccessful activities, which, in either case, may result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use or disclosure of confidential information, which could result in regulatory
sanctions and serious reputational or financial harm. It is not always possible
to deter employee misconduct and the precautions we take to prevent and detect
this activity may not be effective in all cases. As a result of our recent
acquisitions and the proposed acquisition of RPM, the number of our employees
has increased, and will continue to increase significantly, and our lack of
experience working with these employees increases the risk that we will not
detect or deter employee misconduct.

In addition, we rely on encryption and authentication technology to effect
secure transmissions of confidential information over computer systems. If third
parties were able to penetrate our network security or otherwise misappropriate
customers' personal or account information, we could be subject to liability
arising from claims related to impersonation or similar fraud claims or other
misuse of personal information, as well as suffer harm to our reputation. There
can be no assurance that advances in computer capabilities, new discoveries in
the field of cryptography or other events or developments will not result in a
compromise or breach of the technology we use to protect customers' transactions
and account data. We may incur significant costs to protect against the threat
of network security breaches or to alleviate problems caused by such breaches.

WE ARE SUBJECT TO RISK RELATING TO LITIGATION AND POTENTIAL SECURITIES LAWS
LIABILITY.

Many aspects of our business involve substantial risks of liability. A
specialist is exposed to substantial risks of liability under federal and state
securities laws, other federal and state laws and court decisions, as well as
rules and regulations promulgated by the SEC and the NYSE. We are also subject
to the risk of litigation and claims that may be without merit. We could incur
significant legal expenses in defending ourselves against such lawsuits or
claims. An adverse resolution of any future lawsuits or claims against us could
have an adverse effect on our business, financial condition and/or operating
results.

COUNTERPARTIES MAY FAIL TO PAY US.

As a specialist in listed stocks, the majority of our securities
transactions are conducted as principal with broker-dealer counterparties
located in the United States. The NYSE and the clearing houses monitor the
credit standing of the counterparties with which we conduct business. However,
we cannot assure you that any of these counterparties will not default on their
obligations. If any do, our business, financial condition and/or operating
results could be adversely affected.

SOME OF OUR EXECUTIVE OFFICERS WILL BE IN A POSITION TO CONTROL MATTERS
REQUIRING A STOCKHOLDER VOTE.

Certain of our managing directors who currently own about 70.6% of our
outstanding common stock have entered into a stockholders' agreement under which
they have agreed, among other things, that their shares of our common stock will
be voted, for as long as they own their shares, as directed by a majority vote
of Michael LaBranche, our Chairman, Chief Executive Officer and President, James
G. Gallagher and Alfred O. Hayward, Jr., each an executive officer and director.
Accordingly, these individuals currently have the ability to control all matters
requiring approval by our stockholders. These matters include the election and
removal of directors and the approval of any merger, consolidation or sale of
all or substantially all of our assets. In addition, they currently are able to

dictate the management of our business and affairs. This concentration of
ownership could have the effect of delaying, deferring or preventing a change in
control, a merger or consolidation, a takeover or another business combination.

OUR CLEARING REVENUES MAY BE AFFECTED DUE TO DECLINES IN TRADING VOLUME OR
LIQUIDITY OF SECURITIES MARKETS, WHICH COULD RESULT IN DECREASED PROFITABILITY
OF OUR CLEARING OPERATIONS.

Recently, there has been significant transaction volume and volatility in
U.S. securities markets. Sudden changes in the market could result in:

- reduced trading activity;

- the failure of buyers and sellers of securities to fulfill their
settlement obligations; and

- increases in claims and litigation.

The occurrence of any of these events would likely result in reduced
revenues and decreased profitability from our clearing operations.

IF WE ARE UNABLE TO RESPOND TO THE DEMANDS OF CORPORATE CLEARING CLIENTS, OUR
ABILITY TO REACH CLEARING REVENUE GOALS OR MAINTAIN THE PROFITABILITY OF OUR
CLEARING OPERATIONS COULD BE DIMINISHED.

Corporate clearing clients' demand for our services will be influenced by:

- rapid technological change;

- changing demands of the clients' customers; and

- evolving industry standards.

Our future success in clearing operations will depend, in part, on our
ability to respond to our clients' demands for new services, products and
technologies on a timely and cost-effective basis, to adapt to technological
advancements and changing standards and to address the increasingly
sophisticated requirements of clearing customers.

"ANTI-TAKEOVER" PROVISIONS MAY MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO
ACQUIRE CONTROL OF THE COMBINED COMPANY, EVEN IF THE CHANGE IN CONTROL WOULD BE
BENEFICIAL TO STOCKHOLDERS.

We are a Delaware corporation. Anti-takeover provisions in Delaware law and
our charter and bylaws could make it more difficult for a third party to acquire
control of us. These provisions could adversely affect the market price of our
common stock and could reduce the amount that stockholders might receive if we
are sold. For example, our charter provides that our board of directors may
issue preferred stock without stockholder approval. In addition, our certificate
of incorporation provides for a classified board, with each board member serving
a staggered three-year term. These "anti-takeover" provisions may make it more
difficult for a third party to acquire control of us, even if the change in
control would be beneficial to stockholders.

FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements based on
our current expectations, assumptions, estimates and projections about our
companies and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors described in
"Risk Factors" and elsewhere in this proxy statement/prospectus. We will not
update these forward-looking statements, even if new information becomes
available or other events occur in the future. Whether actual results will
conform to our expectations and predictions is subject to a number of risks and
uncertainties including but not limited to:

- the significant considerations discussed in this proxy
statement/prospectus;

- risks associated with the effect of economic conditions;

- future capital needs;

- restrictions imposed by the terms of our indebtedness;

- our ability to identify, complete and integrate this and other
acquisitions successfully;

- risks associated with retaining our significant specialist stocks;

- the impact of competition and potential consolidations in our industry;
and

- the impact of legislation and regulation.

You should rely only on the information contained in this proxy
statement/prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information provided by this proxy statement/prospectus is accurate as of any
date other than the date on the front of this proxy statement/prospectus.

THE RPM STOCKHOLDERS' SPECIAL MEETING

LaBranche and RPM are sending this proxy statement/prospectus to the
stockholders of RPM in connection with a special meeting of RPM stockholders.
This proxy statement/prospectus is being distributed to RPM stockholders on or
about March 2, 2001.

DATE, TIME AND PLACE

The RPM special meeting will be held on March 12, 2001, at 10:00 a.m. local
time, at the offices of RPM, 20 Broad Street, 6th Floor, New York, New York
10005, unless adjourned to another date and time.

PURPOSE OF THE RPM STOCKHOLDERS' SPECIAL MEETING

At the RPM stockholders' special meeting, you will be asked to consider and
vote upon a proposal to approve the Agreement and Plan of Merger dated as of
January 18, 2001, as amended on February 15, 2001, attached to this proxy
statement/prospectus as ANNEX A, which provides for the merger of RPM with and
into LaBranche, with LaBranche being the surviving corporation. A vote for this
proposal also effectively constitutes approval of the disposition of RPM's real
estate management subsidiary to George E. Robb, Jr., RPM's President and
controlling stockholder, as described elsewhere in this proxy
statement/prospectus.

The RPM board has determined that the merger is advisable and fair to, and
in the best interests of, RPM stockholders. The RPM board has unanimously
approved the merger agreement and unanimously recommends that you vote FOR
approval of the merger.

The board of directors of LaBranche has unanimously approved the merger and
the issuance of shares of LaBranche common stock and Series A preferred stock in
the merger. Delaware law and the rules of the NYSE do not require that LaBranche
stockholders approve the merger.

See "The Merger--Interests of RPM Directors and Executive Officers in the
Merger" for a discussion of conflicts of interest that certain directors and
executive officers of RPM may have in connection with these recommendations.

RPM stockholders may also be asked to vote upon a proposal to adjourn or
postpone the special meeting, in order to (among other things) allow additional
time for RPM to solicit additional votes to approve the merger.

RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM

Only holders of record of RPM common stock at the close of business on
February 20, 2001, the record date, are entitled to notice of and to vote at the
RPM stockholders' special meeting or at any adjournment or postponement of the
special meeting. On the record date, 70,100 shares of RPM common stock were
issued and outstanding and were held by 13 holders of record. A majority of the
shares of RPM common stock issued and outstanding and entitled to vote on the
record date must be represented in person or by proxy at the RPM stockholders'
special meeting for a quorum to be present to vote upon the merger proposal.
Abstentions count as present for establishing a quorum, but will have the same
effect as a vote against approval of the merger. Holders of record of RPM common
stock on the record date are entitled to one vote per share at the special
meeting.

VOTE REQUIRED

Each holder of RPM common stock outstanding on the record date is entitled
to one vote for each share held. The holders of a majority of the outstanding
shares of RPM common stock entitled to vote must be present at the RPM
stockholders' special meeting in person to constitute a quorum to

transact business. Approval of the merger and the merger agreement requires the
affirmative vote of the holders of a majority of the shares of RPM common stock
issued and outstanding and entitled to vote.

VOTING BY RPM DIRECTORS AND EXECUTIVE OFFICERS

At the close of business on the record date, directors and executive
officers of RPM owned and were entitled to vote 64,000 shares of RPM common
stock, which represented about 91.3% of the shares of RPM common stock
outstanding on that date. See "The Merger--Interests of RPM Directors and
Executive Officers in the Merger" for a discussion of conflicts of interest that
certain RPM directors and executive officers of RPM may have in connection with
these matters.

VOTING OF PROXIES

All shares of RPM common stock represented by properly executed proxies
received in time for the RPM stockholders' special meeting will be voted at the
RPM stockholders' special meeting in the manner specified in the proxies.
Properly executed proxies that do not contain voting instructions will be voted:

- FOR approval of the merger and the merger agreement, as amended, which
effectively constitutes approval of the disposition of RPM's real estate
management subsidiary to George E Robb, Jr., and

- FOR giving discretion to the proxies to vote upon such other business as
may properly come before the meeting, including any adjournment or
postponement thereof.

It is not expected that any matter, other than the proposed merger described
above, will be raised at the RPM stockholders' special meeting. If, however, the
RPM board properly presents other matters, the persons named as proxies will
vote in accordance with their judgment.

Adjournments may be made for the purpose of soliciting additional proxies.
Any adjournment may be made by approval of the holders of shares representing a
majority of the votes present in person or by proxy at the meeting. A quorum is
not needed for an adjournment. No announcement is needed for an adjournment
other than the announcement made at the meeting. RPM does not currently intend
to seek an adjournment of the meeting.

HOW TO VOTE BY PROXY

Complete, sign, date and return the enclosed proxy card to RPM. Proxies must
be received by RPM prior to the date of the special meeting.

REVOCABILITY OF PROXIES

You may revoke a proxy at any time before the special meeting. To revoke
your proxy, you must file a duly executed revocation of proxy with the Secretary
of RPM. Then you must submit a new duly executed proxy by mail or by appearing
at the special meeting and voting in person. Attendance at the RPM special
meeting will not constitute revocation of a proxy, but voting at the RPM special
meeting will revoke your prior proxy.

SOLICITATION OF PROXIES

RPM will bear the cost of the solicitation of proxies from its stockholders.
Proxies will be solicited on behalf of the board of directors. Directors,
officers and employees may solicit proxies. No additional compensation will be
paid for the solicitations made by directors, officers or employees.

THE MERGER

TERMS OF THE MERGER

The merger agreement provides for the merger of RPM with and into LaBranche.
For each share of RPM common stock they own, the RPM stockholders will receive
98.778 shares of LaBranche common stock and shares of LaBranche Series A
preferred stock having an aggregate liquidation preference of $1,426.53. In
addition, RPM and each RPM option holder will amend that option holder's option
agreement to convert, as of the effective time of the merger, each of his RPM
options into an immediately exercisable option to purchase 98.778 shares of
LaBranche common stock.

A portion of the shares of Series A preferred stock issuable to the RPM
stockholders in the merger will be held in escrow for a period of 18 months to
satisfy any indemnification payment obligations of the RPM stockholders to
LaBranche under the merger agreement. An additional portion of the LaBranche
Series A preferred stock will be held in escrow pending a final calculation of
RPM's adjusted net book value (as defined in the merger agreement) as of the
closing date of the merger to provide for the RPM stockholders' obligation to
return shares of LaBranche Series A preferred stock to LaBranche to the extent
that the aggregate liquidation preference of the shares issued to the RPM
stockholders at the closing exceeds the adjusted net book value of RPM as of the
closing date of the merger. See "Risk Factors--RPM stockholders could lose a
portion of the LaBranche stock to be distributed to them."

On January 18, 2001, the last trading day before we publicly announced the
execution of the merger agreement, the closing price of LaBranche common stock
on the NYSE was $36.88 per share. Had the merger then taken place, each share of
RPM common stock would have been converted into 98.778 shares of LaBranche
common stock with a value of about $3,642.44 and shares of LaBranche Series A
preferred stock with an aggregate liquidation preference of $1,426.53. When we
complete the merger, the value you receive for your RPM common stock may be more
or less than this amount depending on the market value of LaBranche common stock
at that time.

As a result of the merger, former RPM stockholders will own about 12.4%, and
LaBranche stockholders immediately before the merger will own about 87.6%, of
the outstanding shares of LaBranche common stock. These percentages are based on
the number of shares of LaBranche common stock and RPM common stock outstanding
on January 31, 2001.

The discussion in this proxy statement/prospectus of the merger and the
description of the principal terms of the merger agreement and the merger are
summaries only. You should refer to the merger agreement for the details of the
merger and the terms of the merger agreement. We have attached a copy of the
merger agreement to this proxy statement/prospectus as ANNEX A.

EFFECTIVE TIME OF THE MERGER

As soon as practicable after the conditions to consummation of the merger
described below have been satisfied or waived, unless the merger agreement has
been terminated under the circumstances described below, a certificate of merger
will be filed with the Secretary of State of the State of Delaware, at which
time the merger will become effective. It is presently contemplated that the
effective time will be as soon as practicable after the registration statement
of which this proxy statement/prospectus forms a part is declared effective by
the SEC and after approval of the merger at the RPM stockholders' special
meeting. The waiting period under the Hart-Scott-Rodino Act has already
terminated and the necessary authorizations, approvals and consents of the NYSE,
the NASD, the CBOE and the AMEX are in the process of being obtained. If the RPM
stockholders do not approve the merger agreement and the merger, or if the other
conditions to the merger have not been satisfied or waived, the merger agreement
will terminate and the merger will not become effective.

BACKGROUND OF THE MERGER

As evidenced by its acquisition of a number of other NYSE specialist
businesses since 1997, LaBranche has been committed to taking advantage of the
consolidation trend in the specialist industry by selectively pursuing
acquisitions of other NYSE specialist operations. Toward that end, Michael
LaBranche and Robert M. Murphy, Executive Vice President and a director of RPM
and the President and Chief Executive Officer of RPM's specialist corporation,
initiated informal discussions in 2000 regarding a possible combination of
LaBranche and RPM. RPM had previously discussed with several other firms a
possible combination of their operations with RPM's or an infusion of capital
into RPM, but these discussions had not resulted in a completed transaction of
the kind sought by the management of RPM. Shortly thereafter, George E. Robb,
Jr., the President and a director of RPM and the Chairman of the Board of
Directors of RPM's specialist corporation, was invited to participate in the
discussions between Messrs. LaBranche and Murphy.

Mr. LaBranche initially reported such discussions to the board of directors
of LaBranche at a meeting held on September 11, 2000. At that meeting,
Mr. LaBranche distributed to LaBranche's board of directors a draft letter of
intent relating to a proposed acquisition of RPM by means of a merger, presented
a preliminary and general outline of RPM's operations and a financial profile of
RPM and indicated that Donaldson Lufkin & Jenrette Securities Corporation had
been retained to advise LaBranche in connection with the proposed combination
transaction with RPM. During the course of the meeting, the members of
LaBranche's board were briefed on their fiduciary obligations in considering the
proposed acquisition of RPM and the status of the negotiations with RPM. The
members of LaBranche's board of directors discussed the proposed combination
with RPM at length and questioned Mr. LaBranche on such matters as valuation,
the potential consideration and comparable recent transactions involving NYSE
specialist firms. After this discussion, LaBranche's board of directors
authorized Mr. LaBranche and other appropriate officers of LaBranche to continue
to negotiate, execute and deliver on behalf of LaBranche a non-binding letter of
intent relating to the proposed acquisition of RPM on substantially the same
terms and conditions as those discussed at the meeting and contained in the
draft letter of intent reviewed by the members of LaBranche's board of directors
at the meeting. The LaBranche board also authorized Mr. LaBranche and those
officers to proceed to negotiate the terms and conditions of a definitive
agreement relating to the proposed acquisition of RPM for the purpose of
subsequently presenting such agreement to LaBranche's board of directors for its
review and approval.

On October 5, 2000, LaBranche and RPM entered into reciprocal
confidentiality agreements in order to afford their respective representatives
access to more detailed information concerning the other party for the purpose
of refining the terms of their understanding regarding LaBranche's proposed
acquisition of RPM. Thereafter, on October 10, 2000, LaBranche and RPM entered
into a non-binding letter of intent setting forth the proposed terms of
LaBranche's acquisition of RPM. This letter of intent expressed LaBranche's and
RPM's mutual intention to negotiate a definitive agreement relating to a
tax-free merger of RPM with and into LaBranche involving (1) the issuance by
LaBranche to the stockholders of RPM of approximately 6,670,000 shares of
LaBranche common stock and shares of a new LaBranche Series A preferred stock
having an aggregate liquidation preference based on a percentage of the net book
value of RPM as of the date of the closing of the transaction, and
(2) LaBranche's assumption of RPM's outstanding employee stock options, which
options would be immediately exercisable for about 3,030,000 shares of
LaBranche's common stock and other consideration.

Upon the execution of the letter of intent, each of LaBranche and RPM
commenced a due diligence investigation of the other party and began work on the
negotiation and preparation of a definitive agreement relating to LaBranche's
proposed acquisition of RPM.

At a meeting of LaBranche's board of directors held on October 20, 2000,
Mr. LaBranche updated the members of LaBranche's board on the status of the
negotiations with RPM's representatives and

discussed the anticipated effects of the RPM acquisition on LaBranche's balance
sheet, the expected increase in LaBranche's market share as a result of the
transaction, how the transaction compared with other recent acquisitions within
the industry (particularly the acquisition of Spear, Leeds & Kellogg, L.P. by
The Goldman Sachs Group, Inc.) and the consistency of the RPM acquisition with
LaBranche's overall corporate strategy.

At a meeting held on October 26, 2000 at the offices of RPM's counsel,
LaBranche's and RPM's respective legal, accounting and financial advisors
discussed the amount of LaBranche preferred stock to be delivered to RPM's
stockholders in connection with the proposed merger and to the RPM option
holders upon the exercise of their amended stock options and the formula for
defining RPM's net book value for purposes of determining that amount. In the
course of these discussions, LaBranche's and RPM's advisors identified a number
of issues relating to the definition of RPM's net book value for purposes of the
proposed transaction which the advisors subsequently addressed with LaBranche's
and RPM's respective management teams. As a result of these discussions,
Messrs. LaBranche and Murphy met again on October 30, 2000 and tentatively
agreed on a formula for determining RPM's net book value for purposes of
calculating the amount of LaBranche preferred stock to be delivered to RPM's
stockholders upon the closing of the merger and into which the amended RPM stock
options would be exerciseable.

On October 31, 2000, LaBranche's counsel circulated initial drafts of the
merger agreement and several of the related agreements and other documents
contemplated by the proposed transaction. In the days that followed, LaBranche's
counsel provided initial drafts of the other agreements and documents required
in connection with LaBranche's proposed acquisition of RPM.

At a meeting of LaBranche's board of directors held on November 16, 2000,
Mr. LaBranche again described the fundamental terms and conditions of, and
business reasons for, the proposed acquisition of RPM and updated the members of
LaBranche's board on the status of the negotiations regarding a definitive
merger agreement with respect to the RPM acquisition. Prior to this meeting, the
members of LaBranche's board had been furnished with a copy of the then-current
draft of the merger agreement for their review and consideration.
Representatives of Donaldson Lufkin & Jenrette Securities Corporation were
present at the meeting to advise LaBranche's board on the negotiations and the
financial aspects of the proposed acquisition of RPM. LaBranche's board of
directors then engaged in a discussion of the transaction with its legal and
financial advisors. Following this discussion, the board unanimously approved of
the proposed acquisition of RPM on the terms and conditions contained in the
draft of the merger agreement distributed to the members of LaBranche's board
before the meeting. The LaBranche board authorized the appropriate officers of
LaBranche to proceed to negotiate the terms and conditions of the proposed
acquisition and the other transactions contemplated thereby, and to execute the
merger agreement and such other documents as they determine to be necessary or
advisable in connection therewith.

On November 21, 2000, LaBranche's and RPM's respective counsel filed
required Notification and Report Forms with the Federal Trade Commission and the
Antitrust Division of the U.S. Department of Justice pursuant to the
Hart-Scott-Rodino Act in connection with the proposed transaction.

LaBranche's and RPM's representatives held a meeting at RPM's offices on
November 28, 2000. Issues discussed at this meeting included the registration
rights to be granted to RPM's stockholders with respect to the LaBranche common
stock to be issued to them in connection with the proposed transaction, the
survival period of RPM's representations and warranties contained in the merger
agreement, LaBranche's rights to indemnification for any breach of RPM's
representations, warranties and covenants contained in the merger agreement, the
terms and conditions of the escrow arrangements for satisfying the RPM
stockholders' indemnification obligations to LaBranche, the voting, dividend and
liquidation rights associated with the LaBranche preferred stock to be issued to
the RPM stockholders in connection with the proposed transaction and the terms
upon which RPM's outstanding employee stock options would be assumed by
LaBranche in the merger.

On November 30, 2000, the RPM board of directors, acting by unanimous
written consent, approved all actions which had been taken prior to that date by
the officers of RPM in connection with the proposed merger, determined that the
proposed merger was advisable and directed the officers of RPM to negotiate the
terms and conditions of the proposed merger and the proposed merger agreement.

On December 8, 2000, LaBranche's counsel was notified by the Federal Trade
Commission and the U.S. Department of Justice that its request for early
termination of the required waiting period after filing of Hart-Scott-Rodino
pre-merger Notification and Report Forms had been granted.

At a meeting held on December 14, 2000 at the offices of LaBranche's counsel
among Messrs. LaBranche, Robb, Murphy and LaBranche's, RPM's and Mr. Robb's
respective counsel, the parties discussed, negotiated and reached agreements in
principle on open issues. With respect to registration rights, the meeting
participants agreed in principle that the LaBranche stock to be issued to RPM's
stockholders in connection with the proposed merger would be registered pursuant
to a Form S-4 registration statement to be filed by LaBranche and that the
closing of the transaction would be deferred until the SEC had declared the
registration statement effective, the stockholders of RPM had approved of the
merger in a duly called special meeting held for that purpose and the other
conditions to the merger had been satisfied or waived. At this meeting, the
participants also tentatively agreed to the conversion of each of RPM's
outstanding employee stock options into an option to acquire 98.778 shares of
LaBranche common stock. In addition, the RPM option holders would become
participants in the RPM Deferred Compensation Plan to be adopted by RPM, subject
to RPM stockholder approval in accordance with Section 280G of the Internal
Revenue Code.

At a meeting of LaBranche's board of directors held on December 15, 2000,
Mr. LaBranche updated the members of LaBranche's board on the status of the
negotiations regarding a definitive merger agreement with respect to the RPM
acquisition and advised the members of LaBranche's Board of the decision by
management to file a registration statement on Form S-4 with respect to the
shares of LaBranche stock to be issued to RPM's stockholders in connection with
LaBranche's proposed acquisition of RPM.

On January 10, 2001 the board of directors of RPM met with its legal
counsel, independent accountants and tax advisors to discuss the proposed merger
and the related transactions. The members of the RPM board reviewed and
discussed with their advisors the terms and conditions of the draft merger
agreement and the related documents. Among other things, the Board discussed the
structure of the transaction, the consideration to be received by RPM
stockholders and option holders in the transaction and the tax consequences of
the transaction. By written consent, the board resolved to enter into the merger
agreement, to repurchase RPM's Third and Fourth Preferred Stock, to accelerate
payments under RPM's supplemental executive retirement plans, to repay certain
outstanding debt, to amend its stock option agreements with the RPM option
holders, to adopt a deferred compensation plan and to transfer its interest in
its real estate subsidiary to George E. Robb, Jr. The board also resolved to
call a special meeting of the RPM stockholders to approve the merger agreement
and the other transactions described therein. The written consent was signed by
all of the directors of RPM.

Thereafter until January 18, 2001, representatives and counsel of LaBranche
and RPM, including representatives and counsel of George E. Robb, Jr., continued
to negotiate the terms of the merger agreement and related transaction
documents. After the close of business on that day, representatives of LaBranche
and RPM executed the merger agreement, and LaBranche issued a press release the
following morning announcing the execution of the merger agreement.

During early February 2001, representatives of LaBranche and RPM discussed
the possibility of RPM adopting the retention bonus pool initially expected to
be adopted by LaBranche. On February 16, 2001, RPM's board of directors
unanimously approved the adoption by RPM of the retention bonus plan. LaBranche
and RPM's representatives met to discuss and negotiate an

amendment to the merger agreement to reflect this change, and this amendment was
executed as of February 15, 2001.

RPM'S REASONS FOR THE MERGER; RECOMMENDATION OF THE RPM BOARD OF DIRECTORS

The specialist and clearing industries are highly competitive. RPM currently
provides specialist and clearing services and LaBranche also provides specialist
services and limited clearing services. It is expected that the combined company
will provide its customers with better specialist services and have the added
benefit of enhanced clearing services of the combined company. By merging with
LaBranche, RPM expects to be able to provide better and more uniform services to
its customers. RPM believes that, over time, the merger will lead to reduction
in operating costs and capital expenditures and enable it to efficiently achieve
its strategic objectives.

In reaching its decision to approve the merger agreement and the merger, and
to recommend that the RPM stockholders approve the merger agreement and the
merger, the RPM board consulted with senior management and advisors. The board
also independently considered a number of factors, including the following:

- the complementary nature of the two companies' operations;

- the fact that the RPM stockholders would have the opportunity to
participate in the potential for diversified and enhanced growth after the
merger;

- the fact that the RPM stockholders would gain liquidity by receiving
publicly traded common stock of LaBranche in place of their RPM common
stock, which is not publicly traded;

- the fact that the RPM stockholders would receive dividends on the
LaBranche Series A preferred stock to be issued to them;

- the operational and administrative cost savings that would result from the
merger with LaBranche;

- the fact that the merger will bring together the complementary assets,
resources and expertise of the two companies, which should enable the
combined company to effectively compete in the rapidly changing
marketplace;

- the potential of RPM to enhance LaBranche's public market perception and
result in an increased valuation of the combined company; and

- the qualification of the merger as a tax-free transaction for U.S. federal
income tax purposes.

The RPM board also reviewed with senior management and legal and financial
advisors a number of additional factors relevant to the merger, including:

- historical information concerning LaBranche's and RPM's respective
businesses, financial performance and condition, operations, technology,
management and competitive position; and

- current financial market conditions and historical market prices and
trading information with regard to LaBranche's common stock.

The RPM board also identified and considered the following potentially
negative factors in its deliberations concerning the merger:

- the risk that the integration of the two companies' respective operations
and employees might not occur in a timely manner and that the operations
of the two companies might not be successfully integrated;

- the risk that, despite the efforts of the combined company, key technical
and management personnel might not remain employed by the combined
company;

- the substantial expenses to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
arising from the merger;

- the risk that potential benefits sought in the merger might not be fully
realized; and

- the other risks described under the caption "Risk Factors" presented
earlier in this proxy statement/prospectus.

The above list of information and factors considered by the RPM board is not
intended to be exhaustive but includes all material factors considered by the
RPM board. In view of the variety of factors considered in connection with its
evaluation of the merger, the RPM board did not find it practicable to, and did
not, quantify or otherwise assign relative weight to the specific factors
considered in reaching its determination. In addition, individual members of the
RPM board may have given different weight to different factors.

After careful consideration, the RPM board determined that the terms of the
merger agreement are fair to and in the best interests of RPM and its
stockholders. As a result, the board approved the merger agreement and the
merger. The RPM board recommends that you vote FOR approval of the merger
agreement and the merger.

LABRANCHE'S REASONS FOR THE MERGER

LaBranche believes that the acquisition of RPM will strengthen its market
position in the specialist market and will enhance its presence in the clearing
broker business and offer a broader platform to expand both businesses.
LaBranche also believes that because the two companies' businesses are
substantially similar, their combination offers the opportunity to enhance their
combined revenues without a corresponding increase in expenses.

DISSENTERS' APPRAISAL RIGHTS

Each RPM stockholder has the right to dissent from the merger and to demand
and obtain a cash payment equal to the appraised value of the shares of RPM
common stock held by him under the circumstances described below, but is being
asked to waive this right by signing a stockholder agreement. If any RPM
stockholder does not execute the form of stockholder agreement, LaBranche could
abandon the merger. The appraised value that a dissenting RPM stockholder
obtains for his shares of RPM common stock by dissenting will be determined by a
court and may be less than, equal to or greater than the value of the merger
consideration provided for in the merger agreement. If an RPM stockholder fails
to comply precisely with the procedural requirements of Section 262 of the
Delaware General Corporation Law, the stockholder will lose his right to dissent
and seek payment for the appraised value of his shares of RPM common stock.

The following is a summary of Section 262, which specifies the procedures
applicable to dissenting stockholders. This summary is not a complete statement
of the law regarding an RPM stockholder's right to dissent under Delaware law,
and if an RPM stockholder is considering dissenting, we urge the stockholder to
review the provisions of Section 262 carefully and to consult an attorney. The
text of Section 262 is attached to this proxy statement/prospectus as ANNEX B,
and we incorporate that text into this proxy statement/prospectus by reference.
Among other matters, each RPM stockholder should be aware of the following:

- to be entitled to dissent and seek appraisal, he must:

- hold shares of RPM common stock on the date he makes the demand
required under Delaware law;

- continuously hold those shares until the merger has been completed;

- not vote in favor of the merger; and

- otherwise comply with the requirements of Section 262;

- before the RPM stockholders' special meeting, he must deliver a written
notice that states his identity and intent to demand appraisal to RPM,
20 Broad Street, 6th Floor, New York, New York 10005, Attention:
Secretary (RPM stockholders should be aware that simply voting against
the merger or not voting is not a demand for appraisal rights);

- within ten days after the effective time of the merger, the surviving
corporation will notify all the dissenting RPM stockholders who have
complied with Section 262 and who have not voted in favor of the merger of
the date the merger became effective;

- within 120 days after the effective time of the merger, an RPM stockholder
who has complied with the requirements of Section 262, may file a petition
in the Delaware Court of Chancery demanding a determination of the value
of his RPM stock, but if a petition is not filed by the stockholder or
another dissenting RPM stockholder within this time period, the
stockholder will lose his right to an appraisal and will be entitled to
receive only the merger consideration provided for in the merger
agreement;

- the Court of Chancery will determine which dissenting stockholders
complied with the requirements of Section 262 and are entitled to
appraisal rights;

- the Court of Chancery will then appraise the shares, determining their
fair value exclusive of any value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any,
to be paid on the appraised fair value, based on its consideration of all
relevant factors;

- the Court of Chancery will then direct the surviving corporation to pay
the fair value of the dissenting shares, together with any interest, to
the stockholder entitled to payment when he surrenders the certificates to
the surviving corporation;

- the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to bear the
costs in a manner that it deems equitable;

- the court may require, upon the dissenting stockholder's request, that all
or a portion of the expenses incurred by any stockholder in connection
with the appraisal, including attorney's and expert's fees, be charged pro
rata against the value of all shares entitled to appraisal;

- if the RPM stockholder dissents from the merger, he will not be entitled
to vote his shares of RPM common stock for any purpose or to receive
dividends or other distributions (other than dividends or other
distributions payable to stockholders of record at a date prior to the
effective time of the merger) after the effective time of the merger; and

- the RPM stockholder may withdraw his demand for appraisal and accept the
merger consideration provided for in the merger agreement at any time
within 60 days after the effective date of the merger or after that date
with the surviving corporation's consent.

U.S. FEDERAL INCOME TAX CONSEQUENCES

The following summary discusses the material U.S. federal income tax
consequences of the merger to the RPM stockholders. This discussion is based
upon the Internal Revenue Code, Treasury regulations, administrative rulings and
judicial decisions currently in effect, all of which are subject to change,
possibly with retroactive effect. The discussion assumes that RPM stockholders
hold their RPM common stock as a capital asset within the meaning of Section
1221 of the Internal Revenue Code. Further, the discussion does not address all
aspects of U.S. federal income taxation that may be relevant to a particular
stockholder in light of his, her or its circumstances or to stockholders subject
to special treatment under the U.S. federal income tax laws, including:

- insurance companies;

- tax-exempt organizations;

- broker-dealers;

- financial institutions;

- persons that hold their RPM common stock as part of a straddle, a hedge
against currency risk or a constructive sale or conversion transaction;

- persons who are neither U.S. citizens nor residents;

- foreign corporations, foreign partnerships or foreign estates or trusts as
to the U.S.;

- stockholders who acquired their RPM common stock through the exercise of
options or otherwise as compensation or through a tax-qualified retirement
plan; or

- RPM option holders.

This summary does not address the tax consequences of the repurchase of RPM
preferred stock prior to the closing. Furthermore, this discussion does not
consider the potential effects of any state, local or foreign tax laws.

Neither LaBranche nor RPM has requested or intends to request a ruling from
the U.S. Internal Revenue Service with respect to any of the U.S. federal income
tax consequences of the merger and, as a result, there can be no assurance that
the IRS will not disagree with or challenge any of the conclusions described
below.

RPM has received a tax opinion from its counsel, Kelley Drye & Warren LLP,
dated February 16, 2001, that the merger will qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. A copy of this
opinion is annexed to this proxy statement/prospectus as ANNEX C. It is a
condition to the closing of the merger that tax counsel confirm its opinion, as
of the closing date.

As a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, the material U.S. federal income tax consequences of the merger to
RPM stockholders are as follows:

- no gain or loss will be recognized by RPM stockholders on the exchange of
their RPM common stock for LaBranche common stock and Series A preferred
stock, except for cash received instead of fractional shares of LaBranche
common stock, as discussed below;

- the aggregate adjusted tax basis of the LaBranche common stock and
Series A preferred stock received in the merger by an RPM stockholder
(including any fractional share of LaBranche common stock with respect to
which the RPM stockholder receives cash) will be equal to the aggregate
adjusted tax basis of the RPM stockholder's RPM common stock exchanged
therefor, and will be allocated between the LaBranche common stock and
Series A preferred stock (including any fractional shares) received in
proportion to the relative fair market value of the LaBranche common stock
and Series A preferred stock as of the closing date of the merger; and

- the holding period of the LaBranche common stock and Series A preferred
stock received in the merger by an RPM stockholder will include the
holding period of the RPM stockholder's RPM common stock exchanged
therefor.

CASH INSTEAD OF FRACTIONAL SHARE. The receipt of cash instead of a
fractional share of LaBranche common stock will be treated as a taxable
disposition of that fractional share interest and the RPM stockholder will
recognize taxable gain or loss for U.S. federal income tax purposes equal to the
difference between the amount of cash received and the RPM stockholder's
adjusted tax basis in the fractional share. The gain or loss will constitute
capital gain or loss and will constitute long-term capital gain or loss if the
RPM stockholder's holding period for the RPM common stock surrendered in the
merger is greater than 12 months as of the date of the merger. For non-corporate
RPM stockholders, this long-term capital gain generally will be subject to tax
at a maximum U.S. federal income tax rate of 20%. The deductibility of capital
losses is subject to limitations.

ESCROW. While the matter is not free from doubt, RPM stockholders likely
will be treated as having received the escrowed shares of LaBranche Series A
preferred stock upon the closing of the merger. Accordingly, until the escrowed
shares are released, the interim adjusted tax basis of the

LaBranche common stock and Series A preferred stock received by RPM stockholders
likely will be determined as though the maximum number of shares of LaBranche
common stock and Series A preferred stock had been received by RPM stockholders
at the closing of the merger, and RPM stockholders likely will not recognize any
gain or loss upon the release of Series A preferred stock from the escrow. The
adjusted tax basis of any forfeited escrowed shares of Series A preferred stock
of an RPM stockholder would be added to the adjusted tax basis of the remaining
LaBranche common stock and Series A preferred stock received in the merger by
that RPM stockholder.

APPRAISAL RIGHTS. An RPM stockholder who receives cash for his RPM common
stock as a result of exercising his appraisal rights will recognize capital gain
or loss equal to the difference between the amount of cash he receives and the
adjusted tax basis of his RPM common stock.

SECTION 306 STOCK. The IRS could take the position that the LaBranche
Series A preferred stock received by RPM stockholders in the merger is "Section
306 stock" if the IRS asserts that the receipt of the Series A preferred stock
by RPM stockholders is "substantially the same as the receipt of a stock
dividend." If the Series A preferred stock were determined to be "Section 306
stock," an RPM stockholder could be required to recognize ordinary income on the
subsequent sale or exchange of such stock or dividend income on the redemption
of such stock without regard to such RPM stockholder's tax basis in the
Series A preferred stock, and would not be permitted to recognize any loss. RPM
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF THE RECEIPT OF LABRANCHE SERIES A PREFERRED STOCK.

BACKUP WITHHOLDING. Some non-corporate RPM stockholders may be subject to
backup withholding at a 31% rate on cash payments received instead of fractional
shares of LaBranche common stock in the merger or as a result of the exercise of
appraisal rights, unless they:

- furnish a correct taxpayer identification number and certify that they are
not subject to backup withholding on the substitute Form W-9 or successor
form included in the letter of transmittal to be delivered to RPM
stockholders following the date of completion of the merger; or

- are otherwise exempt from backup withholding.

REPORTING REQUIREMENTS. An RPM stockholder who receives LaBranche common
stock and Series A preferred stock in the merger may be required to retain
records related to his RPM common stock, and file with his U.S. federal income
tax return a statement setting forth facts relating to the merger.

THIS SUMMARY DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE
CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, THE SUMMARY DOES NOT ADDRESS
ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE
MERGER. THE SUMMARY DOES NOT ADDRESS THE TAX CONSEQUENCES OF ANY TRANSACTION
OTHER THAN THE MERGER. ACCORDINGLY, WE STRONGLY URGE YOU TO CONSULT WITH A TAX
ADVISOR TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR
OTHER TAX CONSEQUENCES TO YOU OF THE MERGER.

ACCOUNTING TREATMENT

The merger will be accounted for by LaBranche under the purchase method of
accounting. Accordingly, the merger consideration will be allocated among the
assets of RPM based on their respective fair market values at the date of
acquisition, and any excess of the merger consideration over such fair market
values will be accounted for as goodwill. The financial statements of LaBranche
will reflect the combined operations of LaBranche and RPM from the effective
date of the merger.

NO SOLICITATION

Pending the closing of the merger, RPM has agreed that it will not, directly
or indirectly,

- entertain, encourage, solicit or initiate the submission of any competing
acquisition proposal;

- participate in or encourage, including by way of furnishing any non-public
information, any discussions or negotiations regarding any competing
acquisition proposal; or

- enter into any definitive agreement relating to any competing acquisition
proposal.

INTERESTS OF RPM DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

In considering the recommendation of RPM's board of directors with respect
to the adoption and approval of the merger, RPM's stockholders should be aware
that some members of the management of RPM and RPM's board of directors have
interests in the merger that are different from, or in addition to, the
interests of RPM's stockholders generally. These items relate to, among other
things, directorships and officer positions with LaBranche or its subsidiaries
after the merger, receipt of accelerated payments under supplemental executive
retirement plans, receipt of registration rights, participation in the RPM
Deferred Compensation Plan and retention bonus pool, and the conversion of their
existing RPM stock options into fully-vested options to purchase shares of
LaBranche common stock. RPM's board of directors was aware of these potential
interests and considered the following matters, among others, in approving the
merger agreement and the merger.

At the close of business on the record date, directors and executive
officers of RPM owned and were entitled to vote 64,000 shares of RPM common
stock, which represented about 91.3% of the shares of RPM common stock
outstanding on that date. Upon completion of the merger, it is anticipated that
the current directors and executive officers of RPM collectively will own an
aggregate of about 6,321,792 shares of LaBranche common stock, or 9.5% of the
then outstanding shares of LaBranche common stock.

At the close of business on the record date, three directors and executive
officers of RPM collectively held options to purchase an aggregate of 7,900
shares of RPM common stock. Upon completion of the merger, the outstanding RPM
employee stock options will be converted into options to purchase shares of
LaBranche common stock, using the same 98.778 per share exchange ratio as that
for RPM's common stock. See "The Merger Agreement--Stock Options" for a further
description of the participation of RPM optionholders in the merger. Upon
completion of the merger, it is anticipated that the current directors and
executive officers of RPM and their affiliates collectively will beneficially
own options to purchase an aggregate of 780,346 shares of LaBranche common
stock.

Messrs. Robb and Murphy, RPM's President and Executive Vice President,
respectively, are stockholders of RPM and also will become directors of
LaBranche following the merger. Mr. Murphy also will become the Chief Executive
Officer of LaBranche & Co. LLC, LaBranche's specialist subsidiary after the
merger. In addition, the following RPM directors and executive officers also are
stockholders and option holders of RPM and will receive consideration in the
merger:

- Cornelius F. Bodtmann, RPM's Executive Vice President and a director;

- Nathan J. Mistretta, RPM's Executive Vice President--Finance and
Administration, Secretary and Treasurer and a director;

- Frederick F. Tramutola, Jr., RPM's Executive Vice President and a
director; and

- James B. Robb, RPM's Senior Vice President and a director.

A condition to LaBranche's obligation to complete the merger is the
disposition by RPM of its subsidiary, ROBB PECK McCOOEY Real Estate Management
Corp., or Remco, to George E. Robb, Jr. Mr. Robb, Jr. is the President and
controlling stockholder of RPM. Remco engages in real estate management
activities and, through its subsidiaries, owns real property. The real estate
held through Remco and the associated real estate management activities are
unrelated to the principal business and operations of RPM. LaBranche does not
desire to assume the business conducted by Remco and is requiring that RPM
dispose of Remco prior to the consummation of the merger. RPM's interest in
Remco will be transferred to Mr. Robb, Jr. in consideration for Mr. Robb, Jr.'s
relinquishment of his controlling interest in RPM. It is currently contemplated
that this disposition and transfer to Mr. Robb,

Jr. will be effected through a series of mergers of Remco and Remco's
subsidiaries into a newly created limited liability company controlled by
Mr. Robb, Jr. in which Mitchell Low, President of Remco, will have a limited
participation interest. As of December 31, 2000, Remco and its subsidiaries had
a recorded net book value of about $7.3 million.

The merger also will constitute a change of control under RPM's supplemental
executive retirement plan, or SERP, agreements with Messrs. Murphy, Bodtmann and
Mistretta. As a result, commencing on the date of closing of the merger:

- Mr. Murphy will immediately be entitled to a lump sum payment of his
entire SERP benefit, totaling $5.0 million;

- Mr. Bodtmann will immediately be entitled to a lump sum payment of his
entire SERP benefit, totaling $4.5 million; and

- Mr. Mistretta will immediately be entitled to a lump sum payment of his
entire SERP benefit, totaling $4.0 million.

RPM's stockholders should consider whether these interests may have
influenced RPM's directors and officers to support or recommend the merger.

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF LABRANCHE AFTER THE MERGER

There currently are eight members of the LaBranche board of directors. Upon
completion of the merger, the number of directors on the board will be increased
to ten. LaBranche has agreed to appoint George E. Robb, Jr. and Robert M.
Murphy, President and Executive Vice President, respectively, of RPM prior to
the merger, as Class II and Class I directors, respectively, of LaBranche.

LaBranche's board of directors has been classified pursuant to its
certificate of incorporation. In accordance with the provisions of its
certificate of incorporation, LaBranche has divided its directors into three
classes, designated Class I, Class II and Class III. Each class consists, as
nearly as possible, of one-third of the total number of directors constituting
LaBranche's entire board of directors. Class I directors will serve until
LaBranche's 2003 annual meeting of stockholders, Class II directors will serve
until LaBranche's 2001 annual meeting and Class III directors will serve until
LaBranche's 2002 annual meeting. At each annual meeting of LaBranche
stockholders, successors to the directors whose terms expire at that annual
meeting are elected for a three-year term.

Following the merger:

- Michael LaBranche, currently Chairman, President and Chief Executive
Officer of LaBranche, will continue to serve as Chairman, President and
Chief Executive Officer of LaBranche;

- George E. Robb, Jr., currently the President of RPM, will become a
director of LaBranche;

- Robert M. Murphy, currently an Executive Vice President of RPM, will
become a director of LaBranche and Chief Executive Officer of LaBranche &
Co. LLC, LaBranche's specialist subsidiary; and

- the remainder of the directors and executive officers of LaBranche prior
to the merger will continue to hold their respective directorships and
executive officer positions with LaBranche.

EXPENSES

The merger agreement provides that each of LaBranche and RPM will pay its
own expenses in connection with the merger and related transactions, including,
the fees and expenses of its own investment advisors, brokers, legal counsel,
accountants and other outside experts.

NEW YORK STOCK EXCHANGE LISTING

LaBranche common stock is listed on the New York Stock Exchange under the
symbol "LAB." The LaBranche common stock to be issued to the RPM stockholders in
the merger will be listed on the NYSE. The LaBranche Series A preferred stock to
be issued to the RPM stockholders in the merger will not be listed.

THE MERGER AGREEMENT

GENERAL

The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, as amended, which is incorporated by
reference and attached as ANNEX A to this proxy statement/prospectus. We
encourage you to read the merger agreement in its entirety.

STRUCTURE OF THE MERGER

Under the merger agreement, RPM will merge directly with and into LaBranche.
LaBranche will be the surviving corporation in the merger.

CLOSING; EFFECTIVE TIME

The merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware or at such later time as
LaBranche and RPM may agree and specify in the certificate of merger. The filing
of the certificate of merger is expected to occur shortly after the RPM
stockholders' special meeting assuming that the RPM stockholders approve the
transaction at the meeting or an adjournment thereof and that the other
conditions in the merger agreement are satisfied or waived. Please see "The
Merger Agreement--Conditions to the Merger" for a discussion of these
conditions.

WHAT RPM STOCKHOLDERS WILL RECEIVE IN THE MERGER

For each share of RPM common stock they own, the RPM stockholders will
receive 98.778 shares of LaBranche common stock and shares of LaBranche
Series A preferred stock having an aggregate liquidation preference of
$1,426.53. The shares of LaBranche Series A preferred stock issuable to the RPM
stockholders are subject to the RPM stockholders' indemnification obligations to
LaBranche, and the RPM stockholders may be obligated to return to LaBranche a
portion of shares of LaBranche Series A preferred stock deliverable to them at
the closing of the merger based on the final calculation of the adjusted net
book value of RPM as of the closing date of the merger, as described below. In
addition, RPM and each RPM option holder will amend that option holder's option
agreement to provide for the conversion of each of his RPM options into an
immediately exercisable option to purchase 98.778 shares of LaBranche common
stock.

A portion of the shares of LaBranche Series A preferred stock issuable to
the RPM stockholders in the merger will be held in escrow for a period of
18 months to satisfy any indemnification payment obligations of the RPM
stockholders to LaBranche under the merger agreement. An additional portion of
the LaBranche Series A preferred stock will be held in escrow pending a final
calculation of the adjusted net book value (as defined in the merger agreement)
of RPM as of the closing date of the merger. To the extent the adjusted net book
value of RPM as of the closing date of the merger is less than the amount of the
aggregate liquidation preference of the shares of LaBranche Series A preferred
stock issuable to the RPM stockholders at the closing of the merger, escrowed
shares of LaBranche Series A preferred stock with a liquidation preference equal
to the amount of such deficiency will be returned to LaBranche. On the other
hand, if the adjusted net book value of RPM as of the closing date of the merger
is greater than the aggregate liquidation preference of the shares of LaBranche
Series A preferred stock issuable to the RPM stockholders at the closing of the
merger, LaBranche will be obligated to deliver to the RPM stockholders
additional shares of LaBranche Series A preferred stock with an aggregate
liquidation preference equal to the amount of such excess.

PROCEDURES FOR SURRENDER OF RPM STOCK CERTIFICATES; FRACTIONAL SHARES

Commencing immediately after the effective time of the merger, upon
surrender by RPM stockholders of their stock certificates representing shares of
RPM common stock, RPM stockholders

will receive stock certificates representing shares of LaBranche common stock
and LaBranche Series A preferred stock together with a cash payment in lieu of
any fractional shares of LaBranche common stock to which they are otherwise
entitled. No fractional shares of LaBranche common stock will be issued for RPM
shares. Instead, LaBranche will pay an amount in cash determined by multiplying
(x) the fractional share interest to which the RPM stockholder would otherwise
be entitled by (y) the volume-weighted average sales price per share of
LaBranche common stock during the 20 consecutive trading days ending on and
including the second trading day immediately preceding the closing as reported
by Bloomberg Information Systems, Inc.

REPRESENTATIONS AND WARRANTIES

RPM has made certain customary representations and warranties to LaBranche
in the merger agreement relating to, among other things:

- its organization, the organization of its subsidiaries and similar
corporate matters;

- its capital structure;

- its authorization, execution and delivery and performance of the merger
agreement and the other agreements contemplated thereby;

- the absence of conflicts, violations or defaults under its organizational
documents or conflicts with or violations of any laws as a result of
executing the merger agreement or completing the merger;

- the governmental consents and filings required to complete the merger;

- its compliance with governmental regulations concerning employee benefit
plans and labor matters;

- the completeness of its financial statements;

- the absence of conflicts with other documents, agreements and instruments
to which it or any of its subsidiaries is a party;

- its compliance with regulatory requirements and licenses in the conduct of
its business;

- its right to own or license intellectual property rights such as
copyrights, patents and trademarks that it uses in the conduct of its
business;

- the absence of undisclosed liabilities and material adverse events;

- transactions with affiliates and related parties;

- the filing of its tax returns and payment of taxes;

- the absence of employment-related proceedings;

- the identification and effectiveness of its material agreements and
commitments;

- the absence of legal proceedings against it, except as specifically
identified in a schedule to the merger agreement;

- its insurance policies; and

- its bank accounts.

LaBranche has made customary representations and warranties to RPM in the
merger agreement relating to, among other things:

- its organization, the organization of its subsidiaries and similar
corporate matters;

- its capital structure;

- its authorization, execution and delivery and performance of the merger
agreement and the other agreements contemplated thereby;

- the absence of conflicts with other documents, agreements and instruments
to which it or any of its subsidiaries is a party;

- its filing of tax returns and payment of taxes;

- the retention and effectiveness of all regulatory approvals required in
connection with the conduct of its business;

- the timeliness and completeness of all its required SEC filings;

- the accuracy and completeness of its financial statements;

- the absence of legal proceedings against it;

- its compliance with applicable laws;

- the identification of potential restrictions on its payment of dividends;

- the governmental consents and filings required to complete the merger; and

- its compliance with governmental regulations concerning employee benefit
plans and labor matters.

All representations of RPM and LaBranche made in the merger agreement will
survive the closing of the merger and for a period of 18 months thereafter,
except that all representations and warranties as to taxes and employee benefits
matters under ERISA will survive until the expiration of the statute of
limitations applicable to such claims.

REPRESENTATIONS AND WARRANTIES OF THE RPM STOCKHOLDERS AND OPTION HOLDERS

Each of the RPM stockholders who surrenders his RPM stock in connection with
the merger must make certain representations and warranties in a separate
stockholder agreement with LaBranche, and each of the RPM option holders must
make certain representations and warranties in an indemnification agreement with
LaBranche. The representations and warranties of each RPM stockholder include
representations and warranties relating to:

- the RPM stockholder's ownership of his RPM stock;

- the RPM stockholder's power to execute, deliver and perform the
stockholder agreement;

- the absence of conflicts, violations or defaults under any other agreement
to which the RPM stockholder is a party or violations of any laws as a
result of the RPM stockholder's execution of the stockholder agreement;

- the absence of the need for governmental consents and approvals in
connection with the RPM stockholder's execution of the stockholder
agreement;

- the absence of a broker or finder used by that RPM stockholder in
connection with the merger;

- the absence of litigation impairing the RPM stockholder's ability to
perform his obligations under the stockholder agreement or which might
prevent the consummation of the merger;

- waiver of the RPM stockholder's right to have his RPM common stock
redeemed in connection with the repurchase by RPM of any shares of RPM
preferred stock which he may own prior to the closing of the merger; and

- an agreement not to transfer the Series A preferred stock being acquired
by the RPM stockholder in the merger in violation of the transfer
restrictions contained in the stockholder agreement.

Pursuant to the RPM stockholder agreements, each RPM stockholder also will
waive his dissenter's rights in connection with the merger.

Each of the RPM option holders who executes the indemnification agreement
among LaBranche and the option holders will make certain representations and
warranties. These include representations and warranties relating to:

- the RPM option holder's ownership of his RPM options;

- the RPM option holder's power to execute, deliver and perform the
indemnification agreement; and

- the absence of conflicts, violations or defaults under any other agreement
to which the RPM option holder is a party or violations of any laws as a
result of the RPM option holder's execution of the indemnification
agreement.

REGULATORY APPROVALS

It is a condition to the consummation of the merger that LaBranche and RPM
obtain any and all authorizations, permits, approvals and consents of any
governmental entity and regulatory authority, including the NYSE, the SEC, the
NASD, the CBOE and the AMEX and that the merger be in compliance with all
applicable state and federal securities laws. As of February 28, 2001, LaBranche
and RPM were in the process of obtaining the necessary authorizations, permits,
approvals and consents from these entities. It is also a condition to the merger
that the applicable waiting period under the Hart-Scott-Rodino Act has expired.
LaBranche and RPM were granted termination of the waiting period for the merger
under the Hart-Scott-Rodino Act by the Federal Trade Commission and the
Department of Justice on December 8, 2000. If any other approval or action is
required, LaBranche and RPM will seek that approval or action. There can be no
assurance that any approval or action, if required, will be obtained on a timely
basis, if at all.

CERTAIN COVENANTS

INTERIM OPERATIONS OF RPM

Until the closing of the merger, RPM and its subsidiaries have agreed to
carry on their business in the ordinary course and consistent with past
practice. RPM also has agreed not to do any of the following without the consent
of LaBranche:

- make any amendments or changes to its charter or bylaws or those of its
subsidiaries;

- except as expressly permitted in the merger agreement, make any payments
or accelerate the vesting of any other benefit or right of any director,
officer or employee contingent upon the merger or the possible termination
of his employment after the merger, amend any employment agreements or
benefits of any officer, director, consultant or employee or make any
loans or advances to any officer, director, employee, stockholder or
consultant of RPM;

- issue or enter into negotiations to issue any shares of its capital stock
or shares convertible into capital stock other than the issuance of shares
under RPM's existing option agreements;

- change the number of shares of its authorized capital stock or grant any
option, warrant, call, commitment or agreement of any character relating
to its authorized capital stock or the stock of its subsidiaries;

- declare or pay any dividends on, or make any distributions with respect
to, its capital stock, split, combine or reclassify any of its capital
stock or repurchase, redeem or otherwise acquire any shares of its capital
stock, other than the redemption of the RPM preferred stock prior to the
closing of the merger;

- incur any new debt in excess of $150,000 (other than debt incurred in the
ordinary course of business);

- sell, lease or otherwise dispose of any of its assets having a book or
market value in excess of $150,000 in the aggregate or that are otherwise
material to its business or enter into an agreement to do any of the
foregoing, other than in the ordinary course of business consistent with
past practice;

- incur or commit to any capital expenditures, obligations or liabilities in
excess of $50,000 individually or $150,000 in the aggregate, acquire or
agree to acquire by merging or consolidating with, or acquire or agree to
acquire by purchasing a substantial portion of the assets of, any
business, acquire or agree to acquire any assets for aggregate
consideration in excess of $150,000 other than the acquisition of
materials and supplies, services and activities during the ordinary course
of business consistent with past practice, make any investment in any
business, except in the ordinary course of business consistent with past
practice, or enter into any license, technology development or technology
transfer agreement;

- enter into any new line of business;

- with certain exceptions, adopt or amend any benefit plan in a manner that
results in a material increase in the benefits available under such plan
or its compensation expense;

- terminate any of its existing insurance policies;

- settle or compromise any material litigation or arbitration proceeding; or

- agree or commit to do any of the above.

During the period before the closing, RPM also has agreed to:

- perform and cause its subsidiaries to perform all their respective
obligations and conduct their business in the ordinary course; and

- use commercially reasonable efforts to maintain registrations and good
standing with the SEC, the NASD, the NYSE, the AMEX, the CBOE, any
regional market on which it conducts business and any states where such
registration is required.

From the date of the merger agreement until the closing, LaBranche has
agreed to carry on its business in the ordinary course and consistent with past
practice. LaBranche also has agreed not to do any of the following without the
consent of RPM:

- pay any dividend or make any other distribution to holders of its capital
stock or repurchase, redeem or otherwise acquire any shares of its capital
stock other than in the ordinary course of business pursuant to any
preexisting agreements or arrangements with its employees or consultants;

- with certain exceptions, directly or indirectly merge or consolidate with
another entity or enter into any transaction resulting in LaBranche
holding less than a 50% interest in the assets which it held prior to the
transaction;

- authorize, create or issue any new class or series of capital stock that
ranks senior to or equal to the LaBranche Series A preferred stock to be
issued in the merger to the RPM stockholders; or

- agree or commit to do any of the above.

During the period before the closing, LaBranche also has agreed to:

- perform and cause its subsidiaries to perform all their respective
obligations and conduct their respective businesses in the ordinary
course; and

- use commercially reasonable efforts to maintain its registrations and good
standing with the SEC, the NASD, the NYSE, the AMEX, the CBOE, any
regional market on which it conducts business, and with any states where
such registration is required.

INDEMNIFICATION BY RPM STOCKHOLDERS AND OPTION HOLDERS

Under the merger agreement, the RPM stockholders and the RPM option holders
are required to indemnify LaBranche for breaches by RPM of its representations,
warranties and covenants contained in the merger agreement. The RPM stockholders
are also required to indemnify LaBranche for breaches of their representations
and warranties contained in their respective separate stockholder agreements.
The RPM option holders are required to indemnify LaBranche for breaches of their
representations and warranties contained in the indemnification agreement. The
RPM stockholders and option holders generally will be liable for such
indemnification only if and to the extent that the total amount of damages
suffered by LaBranche on account of such breaches exceeds a threshold of
$1.0 million.

The total indemnification liability of the RPM stockholders will be limited
to:

- 10% of the liquidation value of the LaBranche Series A preferred stock to
be distributed to them in the merger (expected to be about
$10.0 million), plus

- an amount expected to be about $14.4 million (assuming no further
exercises of RPM options prior to the closing of the Merger).

The total indemnification liability of the RPM option holders will be
limited to:

- 10% of the amount of the benefits payable, excluding interest, under the
RPM Deferred Compensation Plan, (about $3.0 million), plus

- an amount expected to be about $5.6 million (assuming no further exercises
of RPM options prior to the closing of the merger).

The RPM option holders' indemnification obligation to LaBranche may be
satisfied only by a reduction of the benefits payable to them under the RPM
Deferred Compensation Plan.

LaBranche also will indemnify the RPM stockholders and option holders
against breaches of its representations, warranties and covenants contained in
the merger agreement, subject to a minimum threshold amount of $1.0 million and
a maximum liability equal to the aggregate of the maximum liability of the RPM
stockholders and option holders as described above.

ESCROW OF SERIES A PREFERRED STOCK

At the effective time of the merger, LaBranche will deposit with an escrow
agent a portion of the shares of Series A preferred stock to be issued to the
RPM stockholders in the merger. These shares will have a total liquidation value
equal to the maximum indemnification liability of the RPM stockholders to
LaBranche as described above and will be held in escrow to satisfy these
indemnification obligations, if there are any, of the RPM stockholders. The
escrow arrangement will terminate 18 months after the closing of the merger,
except that if there are unresolved pending claims for indemnification on that
date, shares will be retained in escrow to cover those claims until they are
resolved. LaBranche's remedies for satisfaction of indemnification claims
against the RPM stockholders, if any, will be limited to recovery of the shares
held in the escrow, except that, after termination of the escrow, LaBranche will
still have recourse to shares distributed from the escrow to the RPM
stockholders, or to the cash proceeds of any sale of those shares, with respect
to claims for tax and ERISA matters.

An additional portion of the Series A preferred stock will be held in escrow
to provide for the RPM stockholders' obligation to return a portion of the
shares of LaBranche Series A preferred stock to LaBranche, or LaBranche's
obligation to issue additional shares of Series A preferred stock to the RPM
stockholders, based on the final calculation of RPM's adjusted net book value
(as described in the merger agreement) as of the closing date of the merger.
These escrowed shares will be distributed to the RPM stockholders after the
final calculation of RPM's adjusted net book value as of the closing date of the
merger, except to the extent, if any, required to be returned to LaBranche as a
result of that calculation. To the extent the adjusted net book value of RPM as
of the closing date of the merger is different from the aggregate liquidation
preference of the shares of LaBranche Series A preferred stock issued on the
closing date of the merger, the number of shares will be adjusted accordingly.

The "adjusted net book value" of RPM is defined in the merger agreement as
the stockholders equity of RPM adjusted by subtracting the following amounts:

(1) the aggregate liquidation value of any then outstanding shares of RPM's
preferred stock;

(2) 53% of the additional expense of accelerating the full vesting of any
then unvested options to purchase RPM common stock;

(3) 53% of the additional expense of RPM's accelerated payment of all
amounts (including those attributable to retiree medical and long-term
care insurance benefits) payable under RPM's supplemental executive
retirement plans;

(4) the unamortized portion of the goodwill associated with RPM's exchange
memberships;

(5) the unamortized portion of the goodwill associated with RPM's franchise
rights;

(6) the unamortized portion of the goodwill associated with RPM's specialist
stocks, including those held by the joint account with Freedom
Specialist Inc. and R. Adrian & Co., LLC;

(7) 53% of the "amount of unfunded liabilities" with respect to RPM's
pension plan, actuarially determined on a termination basis (with such
liabilities taking into account any benefits projected to accrue for
service during the 15-day period following the closing date of the
merger) by RPM's actuary and agreed to by LaBranche's actuary using the
assumptions and methods specified in a schedule to the merger agreement;

(8) the stockholders equity of Remco, assuming the capitalization of any
intercompany payables owed by Remco to RPM or to any of RPM's other
subsidiaries; and

(9) 53% of the aggregate amount of benefits payable under the RPM Deferred
Compensation Plan (not including interest) and the retention bonus pool;

and by adding to such amount the following amounts (in the case of clauses
(10) and (11), determined as of the closing date of the merger):

(10) the amount of any stock option compensation payable included in RPM's
accrued liabilities (assuming for this purpose the acceleration of the
full vesting of any then unvested options to purchase RPM common stock);

(11) the amount of any surplus with respect to RPM's pension plan,
actuarially determined on a termination basis in accordance with
clause (7) above, and after taking into account applicable income taxes
(computed at a tax rate of 47%), excise tax under Section 4980 of the
Internal Revenue Code, and any use by LaBranche of such surplus to fund
any plan of LaBranche;

(12) 53% of the aggregate amount of the benefits payable under the RPM
Deferred Compensation Plan (not including interest) and the retention
bonus pool; and

(13) $7,600,000 (subject to equitable adjustment in the event any RPM options
are exercised prior to the closing of the merger).

To avoid duplication with respect to clauses (1) through (9) above, the
items in such clauses will not be deducted to the extent that stockholders
equity of RPM already reflects the deduction of the amounts of the items in such
clauses (and the creation of related deferred tax assets, in the case of any
item for which only 53% would be deducted), and that with respect to clauses
(10) through (12) above, the items in such clauses will not be added to the
extent that stockholders equity of RPM already reflects the addition of the
amounts of the items in such clauses (and the creation of related deferred tax
liabilities, in the case of any item for which only 53% would be added).

OTHER AGREEMENTS

RPM has agreed to cause the RPM stockholders' special meeting to be held as
soon as reasonably practicable after the signing of the merger agreement. RPM's
board of directors also has agreed to recommend approval of the merger agreement
by its stockholders and to take all reasonable and lawful action to solicit and
obtain such approval.

The merger agreement contains mutual covenants of the parties, including
covenants relating to:

- preparation and filing of all required documents with the proper
governmental agencies;

- maintenance of the confidentiality of all information disclosed to each
other in connection with the merger;

- use of all reasonable efforts to obtain all necessary consents, approvals
or waivers, as applicable, of third parties or governmental agencies to
the merger;

- provision of access to information of each party in connection with their
respective businesses; and

- advice to each other as to material changes in their respective
businesses.

APPOINTMENTS TO LABRANCHE BOARD OF DIRECTORS

LaBranche has agreed to appoint George E. Robb, Jr. and Robert M. Murphy,
the current President and Executive Vice President, respectively, of RPM to
serve as Class II and Class I directors, respectively, of LaBranche immediately
after the merger.

CONDITIONS TO THE MERGER

CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. Various
conditions must be satisfied before LaBranche and RPM complete the merger. Some
of these conditions apply to both LaBranche

and RPM, which means that if the conditions are not met, neither LaBranche nor
RPM will be obligated to complete the merger. Some conditions apply only to
LaBranche, which means that if the conditions are not met, RPM will be obligated
to complete the merger, but LaBranche will not. The remainder of the conditions
apply only to RPM, which means that if the conditions are not met, LaBranche
will be obligated to complete the merger, but RPM will not.

CONDITIONS THAT APPLY TO BOTH LABRANCHE AND RPM. Neither LaBranche nor RPM
will have an obligation to complete the merger unless the following conditions
are satisfied:

- accuracy of the representations and warranties of the other party and the
other party's performance of all its obligations under the merger
agreement;

- approval of the merger agreement and the merger by RPM's stockholders;

- effectiveness of this proxy statement/prospectus;

- entry into a Registration Rights Agreement by each of LaBranche, George E.
Robb, Jr. and Robert M. Murphy;

- the grant of all necessary governmental approvals;

- absence of any judgment, injunction, order or decree or provision of any
law or regulation prohibiting the completion of the merger;

- entry into an escrow agreement by each of LaBranche, the escrow agent and
George E. Robb, Jr. and Robert M. Murphy, as representatives of the RPM
stockholders; and

- delivery of all additional required closing documents.

CONDITIONS THAT APPLY ONLY TO LABRANCHE. LaBranche will not have an
obligation to complete the merger unless additional conditions are also
satisfied, including the following:

- absence of any material adverse change in the financial condition,
business or results of operations of RPM;

- receipt by LaBranche of a closing opinion of RPM's counsel reasonably
satisfactory to LaBranche;

- entry by each of the RPM stockholders into a stockholder agreement with
LaBranche;

- entry by each existing holder of RPM options into an amendment of his
option agreement with RPM;

- approval of the adoption of the RPM Deferred Compensation Plan by the RPM
stockholders in the manner required by Section 280G of the Internal
Revenue Code.

- repayment by RPM of certain of its outstanding indebtedness;

- RPM's specialist corporation having net liquid assets of at least
$65 million as of the closing date;

- RPM's adjusted net book value being at least $85 million as of the closing
date;

- ownership as of the closing date by RPM and its subsidiaries of at least
11 NYSE memberships and entry by LaBranche into amended NYSE A-B-C
agreements with respect to each of those memberships and amended and
restated lease agreements and use and proceeds agreements with respect to
the other NYSE memberships used by RPM employees;

- delivery by RPM to LaBranche of an affidavit that it is not a "United
States real property holding corporation" under the Internal Revenue Code;

- surrender of RPM stock certificates by each of the RPM stockholders;

- receipt by LaBranche of a certificate of the Chief Executive Officer of
RPM as to the termination of RPM's supplemental executive retirement plans
and the adoption of an amendment to cease benefit accruals under its
pension plan;

- receipt by RPM or waiver by LaBranche as a condition to closing, of all
consents of the other parties to material contracts;

- redemption by RPM of all its outstanding shares of preferred stock prior
to the closing date;

- RPM's disposal of its entire interest in Remco prior to the closing date;

- entry by each of the existing holders of RPM options into the
indemnification agreement with LaBranche;

- waiver by each of the RPM stockholders of his dissenter's rights in
connection with the merger; and

- receipt by LaBranche of a letter from certain affiliates of RPM agreeing
to certain transfer restrictions on the shares of LaBranche stock to be
received by them in the merger.

CONDITIONS THAT APPLY ONLY TO RPM. RPM will not have an obligation to
complete the merger unless additional conditions are also satisfied, including
the following:

- receipt by RPM of a closing opinion of LaBranche's counsel reasonably
satisfactory to RPM;

- appointment of Robert M. Murphy as Chief Executive Officer of LaBranche's
specialist subsidiary, LaBranche & Co. LLC;

- appointment of George E. Robb, Jr. and Robert M. Murphy as Class II and
Class I directors of LaBranche, respectively;

- LaBranche's filing with the Secretary of State of Delaware of a
certificate of designations for the Series A preferred stock to be
distributed to RPM stockholders as part of the merger consideration; and

- receipt by RPM of an opinion from its tax counsel that the merger will be
treated as a "reorganization" for U.S. federal income tax purposes.

Because of these conditions, even if the RPM stockholders approve the
merger, the merger may not occur.

AMENDMENTS AND WAIVERS

The merger agreement may be amended by a written amendment executed by RPM
and LaBranche. After the RPM stockholders have approved the merger, however, no
party to the merger agreement may amend the merger agreement in a way that would
require stockholder approval without getting such approval.

TERMINATION OF THE MERGER AGREEMENT

The merger agreement may be terminated at any time prior to the effective
time, whether before or after the approval by the RPM stockholders:

- by mutual written consent of RPM and LaBranche;

- by LaBranche, if it has not breached any of its material obligations under
the merger agreement and either (1) RPM has materially breached and failed
to cure within 15 days any of its representations, warranties and
covenants under the merger agreement, or (2) the closing of the

merger has not occurred by June 30, 2001 by reason of the failure of any
conditions precedent to LaBranche's obligation to complete the merger;

- by RPM, if it has not breached any of its material obligations under the
merger agreement and either (1) LaBranche has materially breached and
failed to cure within 15 days any of its representations, warranties and
covenants under the merger agreement, or (2) the closing of the merger has
not occurred by June 30, 2001 by reason of the failure of any conditions
precedent to RPM's obligation to complete the merger;

- by LaBranche, if

- the RPM stockholders' special meeting has not occurred within 25
calendar days after this proxy statement/prospectus has been declared
effective by the SEC and copies of the final proxy statement/prospectus
have been delivered to RPM to allow it to provide for its distribution
to its stockholders (which 25 calendar day period may be extended to 25
business days to allow for compliance with applicable law); or

- at the RPM stockholders' special meeting, the requisite vote of the RPM
stockholders to approve the merger is not obtained;

- by RPM, if the volume-weighted average sales price of LaBranche's common
stock for any five consecutive trading days before the closing is less
than $15.00 per share; or

- by LaBranche, if the volume-weighted average sales price of LaBranche's
common stock for any 20 consecutive trading days before the closing is
more than $38.00 per share.

TERMINATION FEE

If the merger agreement is terminated by LaBranche because the RPM
stockholders' special meeting has not occurred within 25 calendar days, subject
to extension to 25 business days to allow for compliance with applicable law,
after the registration statement containing this proxy statement/ prospectus has
become effective and copies of the final prospectus have been delivered to RPM
to allow it to provide for distribution to its stockholders, or if the RPM
stockholders do not approve the merger at the RPM stockholders' special meeting,
RPM will be required to pay to LaBranche a fee of $10.0 million.

DEFERRED COMPENSATION PLAN

At the effective time of the merger, LaBranche will succeed to RPM's
liabilities and obligations under the RPM Deferred Compensation Plan. The RPM
Deferred Compensation Plan has been approved by the required number of RPM
stockholders who are "disinterested" persons within the meaning of Section 280G
of the Internal Revenue Code. The RPM Deferred Compensation Plan provides for
the payment, on or before the date that is 81 months after the closing of the
merger, of about $30.2 million, plus interest at 8% per year, to the RPM option
holders. While the payment of benefits under the RPM Deferred Compensation Plan
may be accelerated in certain circumstances, no more than $6.0 million in
deferred compensation benefits (including interest) may be paid in any 12
consecutive month period. The circumstances under which payment of benefits
under the RPM deferred compensation plan may be accelerated are:

- Upon direction of the RPM Deferred Compensation Plan committee to
accelerate payment to any or all participants;

- If a participant's employment is terminated for any reason other than
death, payment of that participant's deferred compensation may, in the
sole discretion of the RPM Deferred Compensation Plan committee, be
accelerated; and

- If a participant dies before receiving the total amount of his benefits,
his beneficiary will be paid in a lump sum within 30 days after his death.

If the RPM Deferred Compensation Plan is terminated, the deferred
compensation benefits (including interest) of all participants, to the extent
not previously paid, must be distributed to the participants in a lump sum. The
benefits payable to the participants in the RPM Deferred Compensation Plan may
be used to satisfy the RPM option holders' indemnification obligations to
LaBranche the merger agreement and their indemnification agreement with
LaBranche.

RETENTION BONUS POOL

At the effective time of the merger, LaBranche will succeed to RPM's
liabilities and obligations under RPM's retention bonus pool. The retention
bonus pool has been approved by the required number of RPM stockholders who are
"disinterested" persons within the meaning of Section 280G of the Internal
Revenue Code. The RPM retention bonus pool requires $9.0 million to be payable
as bonus compensation on the third anniversary of the closing date of the merger
to as many as 31 employees of RPM who become employees of LaBranche. The portion
of this retention bonus pool payable to each of these employees will be
determined by majority vote of a committee consisting of Robert M. Murphy,
George E. Robb, Jr. and Michael LaBranche or their respective successors. If any
of these employees' employment with LaBranche or any of its subsidiaries
terminates for "cause" or by reason of the employee's voluntary termination of
his employment for reasons other than "good reason," as these terms are defined
in the merger agreement, such employee will no longer be eligible to participate
in the retention bonus pool. No payment out of the retention bonus pool may be
made if LaBranche is not current in its payment of dividends on the outstanding
shares of LaBranche Series A preferred stock.

REGISTRATION RIGHTS AGREEMENTS

As a condition to the closing of the merger, LaBranche will enter into a
registration rights agreement with George E. Robb, Jr., RPM's President, and
Robert M. Murphy, RPM's Executive Vice President. Pursuant to the registration
rights agreement, Messrs. Robb, Jr. and Murphy will have the right to request
that LaBranche register all or a portion of the shares of LaBranche common stock
that they hold for public resale. The registration rights agreement also
provides that, if LaBranche determines to conduct a public offering of its
stock, either for its own account or for the account of any of its other
stockholders, LaBranche will offer Messrs. Robb, Jr. and Murphy the opportunity
to include all or a portion of their shares of LaBranche common stock in that
registration statement. Under the registration rights agreement, LaBranche will
be required to pay all registration expenses of Messrs. Robb, Jr. and Murphy in
any registration effected under the agreement.

LaBranche will be entitled to suspend trading under any registration
statement effected under the registration rights agreement until the
registration statement is corrected if, in the reasonable judgment of LaBranche,
any event has occurred that would make the information contained in that
registration statement materially misleading. This suspension right, however,
cannot be exercised by LaBranche for more than a total of 180 days during any
twelve-month period.

STOCK OPTIONS

Each outstanding option to purchase shares of RPM common stock will be
amended to provide that such option become immediately vested and converted into
an option to acquire shares of LaBranche common stock at the effective time of
the merger. The option amendments have been approved by the required number of
RPM stockholders who are "disinterested" persons within the meaning of
Section 280G of the Internal Revenue Code. As so amended, an option to purchase
shares

of RPM common stock will become exercisable for the number of shares of
LaBranche common stock equal to the product of:

- the number of shares of RPM common stock subject to the original RPM stock
option; and

- 98.778.

The exercise price per share of LaBranche common stock underlying each
amended option will be equal to the price obtained by dividing:

- the exercise price per share of RPM common stock subject to the original
RPM stock option; by

- 98.778.

LaBranche has agreed to file a registration statement on Form S-8 with
respect to the shares underlying the assumed stock options not later than ten
business days following the closing of the merger.

DISPOSITION OF REAL ESTATE MANAGEMENT OPERATIONS

A condition to LaBranche's obligation to complete the merger is the
disposition by RPM of its subsidiary, ROBB PECK McCOOEY Real Estate Management
Corp., or "Remco," to George E. Robb, Jr. Mr. Robb, Jr. is the President and
controlling stockholder of RPM. Remco engages in real estate management
activities and, through its subsidiaries, owns real property. The real estate
held through Remco and the associated real estate management activities are
unrelated to the principal business and operations of RPM. LaBranche does not
desire to assume the business conducted by Remco and is requiring that RPM
dispose of Remco prior to the consummation of the merger. RPM's interest in
Remco will be transferred to Mr. Robb, Jr. as consideration for Mr. Robb, Jr.'s
relinquishment of his controlling interest in RPM. It is currently contemplated
that this disposition and transfer to Mr. Robb, Jr. will be effected through a
series of mergers of Remco and Remco's subsidiaries into a newly created limited
liability company controlled by Mr. Robb, Jr. in which Mitchell Low, President
of Remco, will have a limited participation interest. As of December 31, 2000,
Remco and its subsidiaries had a recorded net book value of about $7.3 million.

STOCK TRANSFER RESTRICTION AGREEMENTS WITH RESPECT TO LABRANCHE SERIES A
PREFERRED STOCK

In connection with the merger and as a condition to LaBranche's obligations
under the merger agreement, each of the RPM stockholders must enter into a
stockholder agreement with LaBranche pursuant to which he will agree not to sell
or otherwise dispose of the shares of LaBranche Series A preferred stock he will
receive in the merger without the prior written consent of LaBranche, except in
certain limited circumstances. The following transfers do not require prior
written consent:

- a transfer upon death to the RPM stockholder's heirs, executors or
administrators or to an inter vivos trust for the benefit of a spouse or
lineal descendant;

- a transfer to any organization to which contributions by the RPM
stockholder are deductible for federal income, estate or gift tax
purposes, provided that the RPM stockholder is a trustee or member of the
board of directors or other governing body having the ultimate authority
to vote, dispose, or direct the voting or disposition of, the shares of
LaBranche Series A preferred stock;

- a transfer to a corporation of which a majority of the outstanding shares
of capital stock entitled to vote for the election of directors is
beneficially owned by the RPM stockholder; or

- a pledge or encumbrance in favor of institutional lenders or other
financial institutions other than to a business enterprise that operates
or engages in specialist activities or owns, manages or controls any
entity that operates or engages in specialist activities.

If any of the first three types of these transactions occur, the transferee
must agree to the same transfer restrictions set forth above. If the fourth
transaction above occurs, the pledgee must agree to the placement on his
securities of a restrictive legend on its certificate stating that the shares
represented by the certificate cannot be sold or otherwise transferred without
first being offered to LaBranche.

AMENDMENT OF RPM PENSION PLAN

Pursuant to the merger agreement, RPM has agreed to amend the RPM pension
plan, and to take such actions as are reasonably necessary under Section 204(h)
of ERISA or other applicable law to terminate any and all future benefit
accruals under the RPM pension plan. It is expected that LaBranche will
terminate the RPM pension plan after the consummation of the merger.

BASE COMPENSATION AND OTHER BENEFITS TO FORMER RPM EMPLOYEES

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF LABRANCHE

The selected historical consolidated financial data of LaBranche set forth
below for the years ended December 31, 1997, 1998 and 1999 have been derived
from LaBranche's consolidated financial statements, which have been audited by
Arthur Andersen LLP, independent public accountants, and are included elsewhere
in this proxy statement/prospectus. The selected historical consolidated
financial data set forth below for the years ended December 31, 1995 and 1996
have been derived from LaBranche's consolidated financial statements, which have
been audited by Arthur Andersen LLP, independent public accountants, but are not
included elsewhere in this proxy statement/prospectus. The selected historical
consolidated financial data for the nine months ended September 30, 1999 and
2000 were derived from LaBranche's unaudited financial statements included in
this proxy statement/ prospectus. LaBranche's management believes that the
unaudited historical financial statements contain all adjustments needed to
present fairly the information contained in those statements, and the
adjustments made consist only of normal recurring adjustments. The selected
historical consolidated financial data of LaBranche set forth below should be
read in conjunction with the consolidated financial statements and related notes
thereto and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of LaBranche," which are included elsewhere in this
proxy statement/prospectus.

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT OTHER DATA)

STATEMENT OF OPERATIONS DATA:
Revenues:
Net gain on principal transactions............. $26,290 $37,113 $47,817 $ 95,048 $150,971 $109,528 $203,174
Commissions.................................... 7,736 10,180 15,186 26,576 37,222 26,662 32,367
Other.......................................... 3,147 2,643 4,637 4,787 12,844 8,945 11,995
------- ------- ------- -------- -------- -------- --------
Total revenues............................... $37,173 $49,936 $67,640 $126,411 $201,037 $145,135 $247,536
======= ======= ======= ======== ======== ======== ========
Income before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and provision for
income taxes............................... 26,254 32,783 47,732 91,635 134,468 104,911 120,393
Net Income....................................... $ 1,134 $(1,692) $ 1,489 $ 2,660 $ 29,034 $ 13,463 $ 59,629
======= ======= ======= ======== ======== ======== ========
Diluted earnings per share..................... $ 0.14 $ 0.11 $ 0.72 $ 0.35 $ 1.24
======= ======== ======== ======== ========
OTHER DATA:
Number of our common stock listings.............. 125 132 202 284 271 278 395
Total share volume on the NYSE of our specialist
stocks (in billions)........................... 4.0 5.6 10.9 20.0 25.7 18.6 39.6
Total dollar volume on the NYSE of our specialist
stocks (in billions)........................... 133.3 201.4 476.7 950.4 1,209.3 929.5 1,742.2
NYSE average daily trading share volume (in
millions)...................................... 346.1 412.0 526.9 673.6 809.2 781.9 1,013.9
Ratio of earnings to fixed charges(1)............ 32.8x 20.0x 10.7x 9.0 10.0x 6.0x 5.0x

AS OF DECEMBER 31, AS OF
---------------------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- -------------
(UNAUDITED)
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and short term investments................... $ 8,971 $ 16,479 $ 17,989 $ 25,822 $109,196 $227,173
Working capital................................... 32,855 27,694 62,562 104,250 229,119 282,730
Total assets...................................... 65,177 78,918 157,754 272,201 505,125 932,213
Total long-term indebtedness(2)................... 1,150 2,919 31,423 48,073 162,330 402,283
Members' capital/stockholders' equity............. 18,270 13,735 37,658 77,093 251,972 346,238

------------------------------

(1) For purposes of this ratio, earnings represent pre-tax income from 1995 to
1998 plus limited partners' interest in earnings of subsidiary and fixed
charges. Fixed charges represent interest expensed as well as amortized
premiums, discounts and capitalized expenses related to indebtedness.

(2) Excludes subordinated liabilities related to contributed exchange
memberships.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RPM

The selected historical consolidated financial data (other than Other Data)
of RPM set forth below for the years ended April 24, 1998, April 30, 1999 and
April 28, 2000 have been derived from RPM's consolidated financial statements,
which have been audited by PricewaterhouseCoopers LLP, independent accountants,
and are included elsewhere (other than the balance sheet data as of April 24,
1998) in this proxy statement/prospectus. The selected historical consolidated
financial data set forth below for the years ended April 26, 1996 and April 25,
1997 and the balance sheet data as of April 24, 1998 have been derived from
RPM's consolidated financial statements, audited by PricewaterhouseCoopers LLP,
independent accountants, but are not included elsewhere in this proxy
statement/prospectus. The selected historical consolidated financial data for
the six months ended October 29, 1999 and October 27, 2000 were derived from the
unaudited financial statements included in this proxy statement/prospectus.
RPM's management believes that the unaudited historical financial statements
contain all adjustments needed to present fairly the information contained in
those statements, and the adjustments made consist only of normal recurring
adjustments. The selected historical consolidated financial data of RPM set
forth below should be read in conjunction with the consolidated financial
statements and related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations of RPM," which are
included elsewhere in this proxy statement/prospectus. RPM's fiscal year ends on
the last Friday of each April, and RPM's first, second and third fiscal quarters
end on the last Friday of each July, October and January, respectively.

INCOME STATEMENT DATA:
Revenues:
Trading and investment gains,
net........................ $ 31,394 $ 38,020 $ 75,155 $ 76,344 $ 44,124 $ 26,431 $ 37,834
Floor brokerage.............. 16,332 18,126 22,662 25,067 24,786 11,958 8,956
Clearance fees and
commissions................ 16,173 17,433 17,281 15,456 18,873 7,948 9,569
Other........................ 5,522 5,730 8,614 8,928 13,952 6,026 8,178
-------- -------- -------- -------- -------- -------- --------
Total revenues........... $ 69,421 $ 79,309 $123,712 $125,795 $101,735 $ 52,363 $ 64,537
======== ======== ======== ======== ======== ======== ========
Income before provision
for income taxes....... $ 16,273 $ 18,589 $ 46,697 $ 37,859 $ 27,753 $ 15,191 $ 15,603
Net income..................... 8,591 9,877 24,983 20,259 14,726 7,971 8,230
======== ======== ======== ======== ======== ======== ========

OTHER DATA:
Number of RPM's common stock
listings..................... 73 84 100 117 125 121 128

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF LABRANCHE

YOU SHOULD READ THE FOLLOWING DISCUSSION OF LABRANCHE'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS TOGETHER WITH THE FINANCIAL STATEMENTS AND THE NOTES
TO SUCH STATEMENTS INCLUDED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS BASED ON LABRANCHE'S CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT LABRANCHE AND
LABRANCHE'S INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES. LABRANCHE'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
AS MORE FULLY DESCRIBED IN THE "RISK FACTORS" SECTION AND ELSEWHERE IN THIS
PROXY STATEMENT/PROSPECTUS. LABRANCHE UNDERTAKES NO OBLIGATION TO UPDATE
PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION
BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.

OVERVIEW

Organized in 1999 in connection with the reorganization of LaBranche & Co.
from partnership to corporate form and the related initial public offering of
our common stock, we are the sole member of LaBranche & Co. LLC and the sole
stockholder of Henderson Brothers, Inc. Our subsidiary LaBranche & Co. LLC, is
one of the oldest and largest specialist firms on the New York Stock
Exchange, Inc. Our Henderson Brothers subsidiary acts as a clearing broker for
customers of several introducing brokers and provides direct access floor
brokerage services to institutional customers. Our business has grown
considerably during the past five years. We have accomplished this growth both
internally and through selective acquisitions. Our revenues increased from
$37.2 million in 1995 to $344.8 million in 2000, representing a compound annual
growth rate of 56.1%. During the same period, we increased the number of our
common stock listings from 125 to 386.

REVENUES

Our revenues consist primarily of net gains earned from principal
transactions in securities for which we act as specialist, and commissions
revenue earned from specialist activities. Net gain on principal transactions
represents trading gains net of trading losses and transaction fees, and is
earned by us when we act as principal buying and selling our specialist stocks.
These revenues are primarily affected by changes in share volume and
fluctuations in the prices of our specialist stocks. Share volume for our
specialist stocks has historically been driven by general trends in NYSE trading
volume, as well as factors particularly affecting our listed companies,
including increased merger and acquisition activity, stock splits, greater
frequency of company news releases (i.e., earnings guidance and reports),
heightened research analyst coverage and investor sentiment. Commissions revenue
consists of commissions we earn when acting as agent to match buyers and sellers
for limit orders executed by us on behalf of brokers after a specified period of
time; we do not earn commissions when we match market orders. Commission revenue
is primarily affected by share volume of the trades executed by us as agent.
Other revenue consists of proprietary trading revenue, income from an investment
in a hedge fund and interest income earned on short-term investments. For the
nine months ended September 30, 2000, net gain on principal transactions
represented 82.1% of our total revenues, commission revenue represented 13.1% of
our total revenues, and other revenues represented 4.8% of our total revenues.

EXPENSES

Our largest operating expense is compensation and benefits. Employee
compensation and benefits primarily consist of salaries and wages and
profitability-based compensation. Profitability-based compensation includes
compensation and benefits paid to managing directors, trading professionals and
other employees based on our profitability and the employee's overall
performance.

ACQUISITIONS COMPLETED DURING 2000

On March 2, 2000, we completed the acquisition of all of the outstanding
stock of Henderson Brothers, Inc. for about $228.4 million in cash. In addition,
on March 9, 2000, we acquired Webco Securities, Inc. through a merger for
2.8 million shares of our common stock, $11.0 million in cash and senior
promissory notes in the aggregate principal amount of $3.0 million, each bearing
an interest rate of 10% per annum. These acquisitions were accounted for under
the purchase method of accounting and the excess of cost over estimated fair
value of the net assets acquired of $204.9 million for Henderson Brothers and
$28.8 million for Webco was allocated to intangible assets. The results of
specialist operations of each of these acquired companies are included in our
consolidated financial statements beginning on the date of completion of its
acquisition.

PENDING ACQUISITION

We have entered into a merger agreement to acquire RPM for an aggregate of
approximately 6.9 million shares of our common stock and shares of
nonconvertible preferred stock having an aggregate face value of approximately
$100.0 million and an estimated fair value of approximately $89.1 million. In
addition, all obligations under RPM's outstanding option agreements with
employees will be assumed, whereby each option to purchase RPM common stock will
be replaced with an immediately exercisable option to purchase 98.778 shares of
our common stock. The purchase price is estimated to approximate
$439.3 million, the majority of which will be allocated to intangible assets.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

REVENUES

Total revenues increased 70.6% to $247.5 million for the nine months ended
September 30, 2000, from $145.1 million for the same period in 1999, principally
due to the increase in revenue from net gain on principal transactions. Net gain
on principal transactions increased 85.6% to $203.2 million for the nine months
ended September 30, 2000, from $109.5 million for the same period in 1999. This
increase was primarily due to the Henderson Brothers and Webco acquisitions in
March 2000, as a result of which we became the specialist for 147 additional
common stock listings, as well as increased share volume in principal trading in
our specialist stocks traded on the NYSE. Our share volume as principal
increased 103.1% to 13.2 billion shares for the nine months ended September 30,
2000, from 6.5 billion shares for the same period in 1999.

Commission revenue increased 21.3% to $32.4 million for the nine months
ended September 30, 2000, from $26.7 million for the same period in 1999. This
increase was primarily due to the increase in the number of our common stock
listings as a result of the Henderson Brothers and Webco acquisitions and to
increased share volume in our specialist stocks traded on the NYSE in which we
acted as agent. The share volume executed by us as agent in our specialist
stocks increased 41.4% to 4.1 billion shares for the nine months ended
September 30, 2000, from 2.9 billion shares for the same period in 1999.

Other revenue increased 34.8% to $12.0 million for the nine months ended
September 30, 2000, from $8.9 million for the same period in 1999. This increase
was primarily due to an increase in our interest income and the additional
income generated by Henderson Brothers, which was also offset by a decrease in
our proprietary trading revenues and other investments.

EXPENSES

Total expenses before managing directors' compensation and limited partners'
interest in earnings of subsidiary and provision for income taxes increased
216.2% to $127.1 million for the nine months ended September 30, 2000 from
$40.2 million for the same period in 1999.

Employee compensation and related benefits increased 238.9% to
$64.4 million for the nine months ended September 30, 2000, from $19.0 million
for the same period in 1999. This increase was primarily due to the inclusion of
managing directors' salary, incentive-based compensation and related benefits in
employee compensation subsequent to our reorganization, and due to the Henderson
Brothers and Webco acquisitions that resulted in our employment of 97 additional
individuals as of the respective acquisition dates. As a percentage of total
revenues, employee compensation increased to 26.0% of total revenues for the
nine months ended September 30, 2000, from 13.1% of total revenues for the same
period in 1999.

Interest expense increased 564.4% to $29.9 million for the nine months ended
September 30, 2000, from $4.5 million for the same period in 1999. This increase
was primarily due to the issuance, in connection with the Henderson Brothers and
Webco acquisitions, of $250.0 million of indebtedness that began accruing
interest on March 2, 2000. In addition, the increase was due to the issuance of
$116.4 million of indebtedness, in connection with our reorganization, that
began accruing interest from August 24, 1999. As a percentage of total revenues,
interest increased to 12.1% of total revenues for the nine months ended
September 30, 2000, from 3.1% of total revenues for the same period in 1999.

Depreciation and amortization of intangibles expense increased 327.6% to
$12.4 million for the nine months ended September 30, 2000, from $2.9 million
for the same period in 1999.

Amortization of intangibles increased as a result of the $233.7 million of
intangible assets recorded as a result of our acquisition of Henderson Brothers
and Webco. In addition, the increase was due to the $127.4 of intangible assets
recorded as a result of our acquisition of all the limited partner interests in
LaBranche & Co. in connection with our reorganization transactions. As a
percentage of total revenues, depreciation and amortization of intangibles
increased to 5.0% of total revenues for the nine months ended September 30,
2000, from 2.0% of total revenues for the same period in 1999.

Lease of exchange memberships expense increased 28.6% to $8.1 million for
the nine months ended September 30, 2000, from $6.3 million for the same period
in 1999. This increase was due to the increase in the number of leased
memberships from 44 to 48, and was also due to an increase in the average annual
leasing cost of a membership from about $192,000 to $276,000.

Exchange, clearing and brokerage fees consist primarily of fees paid by us
as a specialist to the NYSE and to clearing houses. Fees paid by us to the NYSE
primarily include fees based on the volume of transactions executed as principal
and as agent, as well as a flat annual fee. Exchange, clearing and brokerage
fees expense increased 24.1% to $3.6 million for the nine months ended
September 30, 2000, from $2.9 million during the same period in 1999. This
increase was primarily due to the increased trading volumes as a result of the
Henderson Brothers and Webco acquisitions.

Other expenses increased 87.0% to $8.6 million for the nine months ended
September 30, 2000, from $4.6 million for the same period in 1999. This increase
was primarily the result of increased legal and filing fees associated with
various filings and acquisitions, additional fees incurred in connection with
the increase and extension of our line-of-credit with a U.S. commercial bank,
increased charitable contributions, as well as an increase in advertising and
promotional costs.

INCOME BEFORE MANAGING DIRECTORS' COMPENSATION, LIMITED PARTNERS' EARNINGS IN
INTEREST OF SUBSIDIARY AND PROVISION FOR INCOME TAXES

Income before managing directors' compensation and limited partners'
interest in earnings of subsidiary and before provision for income taxes
increased 14.8% to $120.4 million for the nine months ended September 30, 2000,
from $104.9 million for the same period in 1999. This increase was primarily due
to the additional revenues generated by the Henderson Brothers and Webco
acquisitions which was offset by the inclusion of managing directors' salary and
incentive based compensation in

employee compensation and related benefits and the additional interest and
amortization of intangibles expense as a result of the reorganization and
acquisitions.

INCOME TAXES

Provision for income taxes increased 514.1% to $60.8 million for the nine
months ended September 30, 2000, from $9.9 million for the same period in 1999,
as a result of the federal, state and local income taxes to which we are subject
as a result of our reorganization from partnership to corporate form, a
significant increase in nondeductible amortization of intangibles and our
increased profitability.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

REVENUES

Total revenues increased 59.0% to $201.0 million for 1999, from
$126.4 million for 1998, principally due to the increase in revenue from net
gain on principal transactions. Net gain on principal transactions increased
58.9% to $151.0 million for 1999, from $95.0 million for 1998. This increase was
primarily due to an increase in share volume for our specialist stocks traded on
the NYSE. This increase, in turn, was primarily due to the Fowler, Rosenau
acquisition on July 1, 1998 under which we became the specialist for 76
additional common stock listings, and to increased share volume as principal in
our existing specialist stocks traded on the NYSE. Our share volume as principal
increased 62.7% to 9.6 billion shares for 1999, from 5.9 billion shares for
1998.

Commission revenue increased 39.8% to $37.2 million for 1999 from
$26.6 million for 1998. This increase was due to an increase in share volume in
which we acted as agent. This increase, in turn, was primarily due to the
increase in the number of our common stock listings as a result of the Fowler,
Rosenau acquisition on July 1, 1998 and to increased share volume in our
existing specialist stocks traded on the NYSE. The share volume executed by us
as agent in our specialist stocks increased 41.4% to 4.1 billion shares for
1999, from 2.9 billion shares for 1998.

Other revenue increased 166.7% to $12.8 million for 1999, from $4.8 million
for 1998. This increase was primarily due to net gains in proprietary trading of
non-specialist securities and realized gains from a limited partnership
investment in a hedge fund.

EXPENSES

Total expenses before managing directors' compensation and limited partners'
interest in earnings of subsidiary and provision for income taxes increased
91.4% to $66.6 million for 1999, from $34.8 million for 1998.

Employee compensation and related benefits increased 146.8% to
$34.3 million for 1999, from $13.9 million for 1998. This increase was due to
the Fowler, Rosenau acquisition on July 1, 1998, which resulted in our
employment of 36 additional individuals, and to the inclusion of managing
director salary, incentive-based bonus and related benefits in employee
compensation from the date of our reorganization in August 1999. As a percentage
of total revenues, employee compensation increased to 17.1% of total revenues
for 1999, from 11.0% of total revenues for 1998.

Lease of exchange memberships expense increased 27.3% to $8.4 million for
1999, from $6.6 million for 1998. This increase was due to the increase in the
number of leased memberships from 44 to 48, primarily as a result of the hiring
of additional specialists and to an increase in the average annual leasing cost
of the memberships from about $180,000 to $192,000 per membership. As a
percentage of total revenues, lease of exchange membership expense decreased to
4.2% for 1999, from 5.2% for 1998.

Interest expense increased 130.6% to $8.3 million for 1999, from
$3.6 million for 1998. This increase was primarily due to the issuance of
$116.4 million of indebtedness that began accruing interest from August 24,
1999.

Amortization of intangibles increased 84.0% to $4.6 million for 1999, from
$2.5 million for 1998. Amortization of intangibles increased as a result of the
Fowler, Rosenau acquisition, as well as the $127.4 million of intangible assets
recorded as a result of our acquisition of all of the limited partnership
interests in LaBranche & Co. in connection with our reorganization transactions.

Exchange, clearing and brokerage fees consist primarily of fees paid by us
as a specialist to the NYSE and to clearing houses. Fees paid by us to the NYSE
include primarily fees based on the volume of transactions executed as principal
and as agent, as well as a flat annual fee. Exchange, clearing and brokerage
fees expense increased 27.6% to $3.7 million for 1999, from $2.9 million for
1998. This increase was primarily attributable to an increase in share volume.

Legal and professional fees increased 74.7% to $1.6 million for 1999, from
$916,000 for 1998. This increase was primarily the result of increased legal and
accounting fees due to our reorganization transactions.

Occupancy expense increased 27.3% to $1.4 million for 1999, from
$1.1 million for 1998. This increase was primarily the result of the leasing of
additional office space.

Communications expense increased 20.0% to $1.2 million for 1999, from
$1.0 million for 1998. This increase was primarily the result of additional
telephone, data retrieval and informational services utilized due to the growth
of our business.

Other expenses increased 30.4% to $3.0 million for 1999, from $2.3 million
for 1998. The increase was primarily due to an increase in advertising and
promotional expenses.

Income before managing directors' compensation and limited partners'
interest in earnings of subsidiary and provision for income taxes increased
46.8% to $134.5 million for 1999, from $91.6 million for 1998.

Managing directors' compensation decreased 4.4% to $56.2 million for 1999,
from $58.8 million for 1998 as a result of the inclusion of managing director
salary, incentive-based bonus and related benefits in employee compensation from
the date of our reorganization transactions.

Limited partners' interest in earnings of subsidiary decreased 3.8% to
$25.3 million for 1999, from $26.3 million for 1998 as a result of our
reorganization, at which time we acquired all of the limited partnership
interests in LaBranche & Co.

Provision for income taxes increased 512.8% to $23.9 million for 1999, from
$3.9 million for 1998 as a result of an increase in our profitability and the
federal, state and local income taxes to which we are subject as a result of our
reorganization from partnership to corporate form.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

REVENUES

Total revenues increased 87.0% to $126.4 million for 1998 from
$67.6 million for 1997, due primarily to the increase in revenue from net gain
on principal transactions. Net gain on principal transactions increased 98.8% to
$95.0 million for 1998, from $47.8 million for 1997. This increase was primarily
due to an increase in share volume. This increase in share volume, in turn, was
primarily due to increased share volume as principal in our existing specialist
stocks traded on the NYSE, and was also due to the increase in the number of our
common stock listing due to the Fowler, Rosenau acquisition. Our share volume as
principal increased 136.0% to 5.9 billion shares for 1998, from 2.5 billion
shares for 1997.

Commission revenue increased 75.0% to $26.6 million for 1998 from
$15.2 million for 1997. This increase was due to an increase in share volume in
which we acted as agent. This increase, in turn, was primarily due to increased
share volume in our existing specialist stocks traded on the NYSE, and was also
due to the increase in the number of our common stock listings due to the
Fowler, Rosenau acquisition. The share volume executed by us as agent in our
specialist stocks increased 70.6% to 2.9 billion shares for 1998, from
1.7 billion shares for 1997.

Other revenue increased 4.2% to $4.8 million for the twelve months ended
December 31, 1998, from $4.6 million for the same period in 1997. This increase
was primarily due to net gains in proprietary trading of non-specialist
securities.

EXPENSES

Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
74.9% to $34.8 million for 1998, from $19.9 million for 1997.

Employee compensation and related expenses increased 71.6% to $13.9 million
for 1998, from $8.1 million for 1997. Our number of employees increased to 152
as of December 31, 1998, from 95 as of December 31, 1997, primarily due to the
Fowler, Rosenau acquisition. As a percentage of total revenues, employee
compensation decreased to 11.0% of total revenues for 1998, from 12.0% of total
revenues for 1997. Severence expense was $0 in 1998 and $300,000 in 1997. We
incurred severence expense during 1997 as a result of a subsequent change in the
retirement package of one of our senior managing directors who retired in 1996.

Lease of exchange membership expense increased 78.4% to $6.6 million for
1998, from $3.7 million for 1997. This increase was due to the increase in the
number of leased memberships from 32 to 44, resulting from the Fowler, Rosenau
acquisition, and due to an increase in the average annual leasing cost of the
memberships from about $150,000 to $180,000 per membership. As a percentage of
total revenues, lease of exchange memberships expense decreased to 5.2% for
1998, from 5.5% for 1997.

Interest expense increased 125.0% to $3.6 million for 1998, from
$1.6 million for 1997. This increase was primarily due to an increase in
outstanding subordinated indebtedness to $48.1 million at December 31, 1998 from
$31.4 million at December 31, 1997.

Exchange, clearing and brokerage fees expense increased 45.0% to
$2.9 million for 1998, from $2.0 million for 1997. This increase was primarily
attributable to an increase in share volume.

Amortization of intangibles increased 239.2% to $2.5 million for 1998, from
$737,000 for 1997. Amortization of intangibles increased due to the Fowler,
Rosenau acquisition. In addition, amortization of intangibles arising from the
Ernst and Stern acquisitions was incurred for the full year of 1998 and was only
incurred during the second half of 1997.

Occupancy expense increased 136.6% to $1.1 million for 1998, from $465,000
for 1997. This increase was primarily the result of the leasing of additional
office space.

Communications expense increased 36.0% to $964,000 for 1998, from $709,000
for 1997. This increase was the result of additional telephone, data retrieval
and informational services utilized due to the growth of our business.

Legal and professional fees increased 47.7% to $916,000 for 1998, from
$620,000 for 1997. This increase was primarily the result of increased legal and
accounting fees due to the Fowler, Rosenau acquisition and consulting services
we obtained to comply with data processing testing required by the NYSE in
anticipation of the acquisition.

Other expenses increased 43.8% to $2.3 million for 1998, from $1.6 million
for 1997. This was the result of payments made to Fowler, Rosenau in 1998 under
a profit sharing arrangement for trading in a specialist stock. This contractual
arrangement was terminated when we acquired Fowler, Rosenau in July 1998.

Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated business taxes increased 92.0% to
$91.6 million for 1998, from $47.7 million for 1997.

Managing directors' compensation increased 96.0% to $58.8 million for 1998,
from $30.0 million for 1997 as a result of the increased profitability of the
firm.

Unincorporated business tax expense increased 105.3% to $3.9 million in
1998, from $1.9 million for 1997 as a result of the increased profitability of
the firm.

LIQUIDITY

Prior to our initial public offering of common stock and the concurrent
offering of our 9 1/2% senior notes, we had financed our business primarily
through members' capital and the issuance of subordinated indebtedness. As of
September 30, 2000, we had $932.2 million in assets, of which $224.6 million
consisted of cash and short-term investments which primarily consist of
commercial paper maturing within thirty days and overnight repurchase
agreements. As of December 31, 1999, we had $505.1 million in assets,
$109.2 million of which consisted of cash and short-term investments, which
primarily consist of commercial paper maturing within seven days. As of
December 31, 1998, we had $272.2 million in assets, $25.8 million of which
consisted of cash and short-term investments.

In February 2000, we increased and extended our line-of-credit with a U.S.
commercial bank to $200.0 million from $100.0 million and extended it again in
January 2001 until February 1, 2002. Amounts outstanding under the U.S.
commercial bank credit facility are secured by our inventory of specialist
stocks and bear interest at the U.S. commercial bank's broker loan rate. To
date, we have not utilized this facility.

As of each of September 30, 2000 and December 31, 1999, the subordinated
debt of LaBranche & Co. LLC totaled $46.5 million (excluding subordinated
liabilities related to contributed exchange memberships). Of this amount,
$35.0 million represented senior subordinated debt privately placed pursuant to
several note purchase agreements. Of this $35.0 million, $20.0 million matures
on September 15, 2002 and bears interest at an annual rate of 8.17%, payable on
a quarterly basis, and $15.0 million matures on June 3, 2008 and bears interest
at an annual rate of 7.69%, payable on a quarterly basis. These notes are senior
to all other subordinated notes of LaBranche & Co. LLC. Subordinated debt
totaling $11.5 million represents junior subordinated debt of LaBranche & Co.
LLC placed with former limited partners, their family members and our employees
of which approximately $4.6 million was repaid as of December 31, 2000. This
debt has maturities ranging from the second half of 2000 through the first half
of 2002, and bears interest at an annual rate between 8.0% and 10.0%, payable on
a quarterly basis. The agreements relating to the junior subordinated debt
generally have automatic rollover provisions, which extend the maturities for an
additional year, unless the lender provides notice at least seven months prior
to maturity.

Concurrently with the initial public offering of our common stock and the
offering of our 9 1/2% senior notes and as part of the reorganization of our
firm from partnership to corporate form, we acquired all the limited partnership
interests in LaBranche & Co. and the entire membership interest in LaB Investing
Co. L.L.C. for shares of our common stock, cash in the aggregate amount of
$149.2 million and subordinated debt. As of June 30, 2000, LaB Investing Co.
L.L.C. was merged with and into LaBranche & Co. and on the same date, LaBranche
& Co. converted into a limited liability company.

On August 24, 1999 we issued $100.0 million aggregate principal amount of
senior notes. The senior notes bear interest at a rate of 9 1/2% annually and
mature in August 2004. The indenture covering these senior notes includes
certain covenants that, among other things, limit our ability to borrow money,
pay dividends on our stock or purchase our stock, make investments, engage in
transactions with stockholders and affiliates, create liens on our assets, and
sell assets or engage in mergers and consolidations.

At about the same time as our 9 1/2% senior note offering and the initial
public offering of our common stock, we issued a $16.0 million senior note as
partial payment for the acquisition of a certain limited partnership interest in
LaBranche & Co. The note is payable in three installments with $6.0 million of
the aggregate principal amount already having been paid on the first anniversary
of issuance. The remaining principal amount is payable in $5.0 million
installments on each of the second and third anniversaries of issuance and bears
interest at the annual rate of 9 1/2%. LaBranche & Co. also entered into a
$350,000 cash subordinated loan agreement, bearing interest at an annual rate of
8.0%, in connection with the acquisition of a certain limited partner interest.

On March 2, 2000, we issued $250.0 million aggregate principal amount of
senior subordinated notes. These senior subordinated notes bear interest at a
rate of 12% annually and mature in March 2007. The indenture covering these
senior subordinated notes includes certain covenants that, among other things,
limit our ability to borrow money, pay dividends on our stock or purchase our
stock which would take our net capital below a certain amount, make investments,
engage in transactions with stockholders and affiliates, create liens on our
assets, and sell assets or engage in mergers and consolidations.

The senior subordinated notes also require us, within 150 days after the end
of each fiscal year, to offer to redeem from all holders of the senior
subordinated notes a principal amount equal to our "excess cash flow" at a price
equal to 103% of the principal amount being offered for purchase plus accrued
and unpaid interest, if any, to the date of redemption. Each holder is entitled
to be offered his pro rata share based on his ownership percentage of the
outstanding senior subordinated notes. "Excess cash flow" is defined for this
purpose as 40% of the amount by which our consolidated EBITDA exceeds the sum of
our interest expense, tax expense, increase in net capital or net liquid asset
requirements, capital expenditures, any cash amounts related to acquisitions of
NYSE specialists or any cash payments related to our payment at maturity of the
principal amount of our existing or certain other indebtedness.

In connection with the Webco acquisition, we issued $3.0 million in
aggregate principal amount of unsecured senior promissory notes to former
stockholders of Webco. The senior promissory notes bear interest at an annual
rate of 10%. Of the aggregate principal amount, $500,000 has already been
repaid. The remaining $2.5 million will be due September 9, 2001, and is subject
to set-off for any amounts for which the former stockholders of Webco may be
obligated to indemnify us for any breaches of their or Webco's representations,
warranties and covenants under the Webco acquisition agreement.

As a broker-dealer, LaBranche & Co. LLC is subject to regulatory
requirements intended to ensure the general financial soundness and liquidity of
broker-dealers and requiring the maintenance of minimum levels of net capital,
as defined in SEC Rule 15c3-1. LaBranche & Co. LLC is required to maintain
minimum net capital, as defined, equivalent to the greater of $100,000 or 1/15
of aggregate indebtedness, as defined. NYSE Rule 326(c) also prohibits a
broker-dealer from repaying subordinated borrowings, paying cash dividends,
making loans to any parent, affiliates or employees, or otherwise entering into
transactions which would result in a reduction of its total net capital to less
than 150% of its required minimum capital. Moreover, broker-dealers are required
to notify the SEC prior to repaying subordinated borrowings, paying dividends
and making loans to any parent, affiliates or employees, or otherwise entering
into transactions which, if executed, would result in a reduction of

30% or more of their excess net capital (net capital less minimum requirement).
The SEC has the ability to prohibit or restrict such transactions if the result
is detrimental to the financial integrity of the broker-dealer.

At September 30, 2000, LaBranche & Co. LLC had net capital of
$313.4 million, which was $310.9 million in excess of its required net capital
of $2.5 million. At December 31, 1999, LaBranche & Co. LLC had net capital of
$161.4 million, which was $159.9 million in excess of its required net capital
of $1.5 million.

The NYSE generally requires members registered as specialists to maintain a
minimum dollar regulatory capital amount in order to establish that they can
meet, with their own net liquid assets, their position requirement. Effective
October 31, 2000, the NYSE changed Rule 104, its minimum net liquid asset
requirements. Specialist units that exceed five percent in any of the NYSE's
four concentration measures now are required to maintain minimum net liquid
assets based upon the securities for which they act as the specialist. The net
liquid assets must be equivalent to $4.0 million for each stock in the Dow Jones
Industrial Average, $2.0 million for each stock in the S&P 100 Stock Price
Index, excluding stocks included in the previous classification, $1.0 million
for each stock in the S&P 500 Stock Price Index, excluding stock included in the
previous classifications, $500,000 for each common stock, excluding bond funds
and stocks included in the previous classifications, and $100,000 for each stock
not included in any of the above classifications. In addition, the NYSE requires
any new specialist entities that result from a merger, acquisition,
consolidation or other combination of specialist entities to maintain net liquid
assets equivalent to the greater of either: (1) the aggregate net liquid assets
of the specialist entities prior to their combination or (2) the new capital
requirements prescribed under Rule 104. "Net liquid assets" for a specialist who
also engages in transactions other than specialist activities is based upon its
excess net capital as determined in accordance with SEC Rule 15c3-1. Currently,
LaBranche & Co. LLC's net liquid asset requirement is $284.3 million. As of
September 30, 2000, LaBranche & Co. LLC's actual net liquid assets were
$326.0 million compared to a requirement of $284.3 million. As of December 31,
1999, LaBranche & Co. LLC's NYSE minimum required net liquid assets was
$93.6 million compared to actual net liquid assets of $175.9 million.

Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.

During the nine months ended September 30, 2000, we contributed additional
capital to LaBranche & Co. LLC in a net aggregate amount of about
$270.2 million. Of this amount, $266.0 million represented net assets of
Henderson Brothers and Webco, which we contributed to LaBranche & Co. LLC
immediately upon our acquisitions of those firms. During the fourth quarter of
1999, we contributed additional capital to LaBranche & Co. LLC in a net
aggregate amount of 30.1 million.

We currently anticipate that our available cash resources and credit
facilities will be sufficient to meet our anticipated working capital,
regulatory capital and capital expenditure requirements through the end of 2001.

As a clearing broker, our Henderson Brothers subsidiary is required to
maintain minimum net capital of $250,000 pursuant to SEC Rule 15c3-1. As of
September 30, 2000, Henderson Brothers had net capital of $10.7 million, which
was $10.5 million in excess of its required minimum net capital.

MARKET RISK

A majority of our specialist related revenues are derived from trading by us
as principal. We also operate a proprietary trading desk separately from our
NYSE specialist operations, which generated 0.5% of our total revenues in the
nine months ended September 30, 2000 and 3.8% of our total revenues in the same
period in 1999 and which generated 3.3% of our total revenues for the year

ended December 31, 1999. We may incur trading losses as a result of these
trading activities. These activities involve primarily the purchase, sale or
short sale of securities for our own account. These activities are subject to a
number of risks, including risks of price fluctuations and rapid changes in the
liquidity of markets. In any period, we may incur trading losses in our
specialist stocks for a variety of reasons, including price declines of our
specialist stocks, lack of trading volume in our specialist stocks and the
performance of our specialist obligations. From time to time, we have large
position concentrations in securities of a single issuer or issuers engaged in a
specific industry. In general, because our inventory of securities is marked to
market on a daily basis, any downward price movement in these securities will
result in a reduction of our revenues and operating profits.

We have developed a risk management process, which is intended to balance
our ability to profit from our specialist activities with our exposure to
potential losses. In addition, we have trading limits relating to our
proprietary trading desk. For a full description of our risk management
procedures and the limits placed on our proprietary trading desk, please see
"Description of LaBranche's Business--Risk Management" and "--Our Proprietary
Trading."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF RPM

YOU SHOULD READ THE FOLLOWING DISCUSSION OF RPM'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH THE FINANCIAL STATEMENTS AND THE NOTES TO
SUCH STATEMENTS INCLUDED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS BASED ON RPM'S CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT RPM AND ITS INDUSTRY.
THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. RPM'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY DESCRIBED IN THE "RISK
FACTORS" SECTION AND ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. RPM
UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR
ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN
THE FUTURE.

OVERVIEW

During 2000, RPM was the sixth largest specialist firm on the New York Stock
Exchange based on its share of NYSE common stock trading volume and total number
of common stock listings. RPM began its specialist operations in 1925, and as of
December 31, 2000 acted as specialist for 203 NYSE listed stocks, including 129
NYSE listed common stocks. These listed stocks included 15 of the 250 most
actively traded common stocks, 21 of the stocks comprising the S&P 500 and three
of the 30 Dow Jones Industrial Average stocks. Selected stocks handled by RPM as
specialist include Bristol-Myers Squibb Company, Cigna Corporation, CSX
Corporation, Delta Air Lines, E.I. duPont de Nemours, Eastman Kodak Company,
H.J. Heinz Company, Philip Morris Companies, Inc., United Parcel Service, Wells
Fargo & Company and Whirlpool Corporation. RPM's strong portfolio of U.S.
companies is enhanced by a diverse portfolio of foreign companies including
Telecom Brasileiras S.A. (Telebras) of Brazil, Nippon Telegraph & Telephone
Corporation of Japan, ScottishPower, Jefferson Smurfit Group PLC of Ireland,
Tele Danmark A/S, Compania De Telecomunicaciones De Chile S.A. (Chilean
Telephone), Telecom Argentina Stet-France Telecom S.A., Grupo Televisa, S.A. and
Cemex, S.A. de C.V. of Mexico.

RPM owns a 25% interest in Freedom Specialist Inc.--R. Adrian & Co.,
LLC--ROBB PECK McCOOEY Specialist Corporation Joint Account, an entity that
served as specialist for 34 NYSE listed stocks as of December 31, 2000,
including 28 NYSE common stock listings. These listed stocks included two of the
250 most actively traded common stocks and four S&P 500 stocks. Freedom
Specialist Inc. also owns 25% of the joint account and R. Adrian & Co., LLC owns
50% of the joint account. RPM acts as manager of this joint account.

RPM also has provided clearing, execution and other services to a variety of
customers including NYSE specialist firms, broker-dealers, financial
institutions, traders and professional investors for the past 25 years. These
services are provided utilizing RPM'S in-house data processing system, which
enables tailor-made reports to be provided to RPM's clients. RPM clears for its
specialist operations, and these clearing activities for the specialist
operations accounted for about 5.6% of RPM's clearing revenues for its fiscal
year ended April 28, 2000 and about 5.3% of RPM's clearing revenues for the six
months ended October 27, 2000.

RPM is a holding company that owns all the capital stock of ROBB PECK
McCOOEY Specialist Corporation, ROBB PECK McCOOEY Clearing Corporation, RPM
Asset Management Corp. and ROBB PECK McCOOEY Real Estate Management Corporation
and subsidiaries.

RPM's business has grown considerably during the past five years. RPM's
revenues increased from $69.4 million for the fiscal year ended April 26, 1996
to $101.7 million for the fiscal year ended April 28, 2000, representing a
compound annual growth rate of 10%.

REVENUES

RPM's revenues consist primarily of net trading gains earned from principal
transactions in securities for which RPM acts as specialist, floor brokerage
revenue earned from specialist activities, and commissions and clearance fees
earned on customer transactions. Trading and investment gains, net represents
gains net of losses and transaction fees, and are earned by RPM when it acts as
principal buying and selling specialist and other stocks. These revenues are
primarily affected by changes in share volume and fluctuations in price of its
specialist stocks. Share volume for its specialist stocks has historically been
driven by general trends in NYSE trading volume, as well as factors particularly
affecting its listed companies, including increased merger and acquisition
activity, stock splits, greater frequency of company news releases (earnings
guidance and reports), heightened research analyst coverage and investor
sentiment. Floor brokerage revenue consists primarily of commissions RPM earns
when acting as agent to match buyers and sellers for limit orders executed by
RPM on behalf of brokers after a specified period of time. RPM does not earn
commissions when it matches market orders. Floor brokerage revenue is primarily
affected by share volume of the trades executed by RPM as agent. Commissions and
clearance fee revenues consist of fees RPM earns on executing and clearing
customer transactions. Commissions and clearance fee revenue is primarily
affected by the volume of transactions executed and/or cleared by RPM as agent.
For its fiscal year ended April 28, 2000, trading and investment gains, net
represented 43.4% of RPM's total revenues, floor brokerage revenue represented
24.4% of RPM's total revenues and clearance fees and commissions revenue
represented 18.6% of RPM's total revenues.

EXPENSES

RPM's largest operating expense is compensation and benefits. Employee
compensation and benefits primarily consist of salaries, commissions, bonuses
and stock option compensation. Bonuses and commissions are based primarily on
profitability and the employee's overall performance. Stock option compensation
is the increased value of stock options granted to certain directors and
officers of RPM as measured by the increase in RPM's book value from the date of
grant.

SIX MONTHS ENDED OCTOBER 27, 2000 COMPARED TO SIX MONTHS ENDED OCTOBER 29, 1999

REVENUES

Total revenues increased 23.3% to $64.5 million for the six months ended
October 27, 2000, from $52.4 million for the comparable period in 1999,
principally due to the increase in revenue from net trading and investment gains
on principal transactions. Trading and investment gains, net increased 43.1% to
$37.8 million for the six months ended October 27, 2000, from $26.4 million for
the comparable period in 1999. This increase was primarily due to increased
share volume in principal trading in RPM's specialist stocks traded on the NYSE.

Floor brokerage revenue decreased 25.1% to $9.0 million for the six months
ended October 27, 2000, from $12.0 million for the comparable period in 1999.
This decrease was primarily due to a new initiative implemented by the NYSE on
December 28, 1999 which increased from two minutes to five minutes the window
for providing commission-free transactions on orders. Therefore, any order RPM
executes as agent within five minutes of placement of the order does not
generate any floor brokerage revenue for us.

Clearance fees and commission revenue increased by 20.4% to $9.6 million for
the six months ended October 27, 2000, from $7.9 million for the comparable
period of 1999. This increase is primarily due to an increase in direct access
customer activity.

Interest revenue increased 68.6% to $7.2 million for the six months ended
October 27, 2000 from $4.3 million for the comparable period in 1999. The
increase was primarily due to interest received related to the increase in stock
borrow and treasury bill balances.

Other revenue increased 86.1% to $642,900 for the six months ended
October 27, 2000, from $345,300 for the comparable period in 1999. This increase
was primarily due to increased profitability in RPM's interest in the Freedom
Specialist Inc.--R. Adrian & Co., LLC--ROBB PECK McCOOEY Specialist Corporation
Joint Account income.

EXPENSES

Total expenses before provision for income taxes increased 31.6% to
$48.9 million for the six months ended October 27, 2000 from $37.2 million for
the comparable period in 1999. This increase was primarily due to a decrease in
compensation and benefits expense.

Compensation and benefits increased 37.2% to $31.1 million for the six
months ended October 27, 2000, from $22.6 million for the comparable period in
1999. As a percentage of total revenues, employee compensation increased to
48.1% of total revenues for the six months ended October 27, 2000, from 43.2% of
total revenues for the comparable period in 1999.

Floor brokerage and clearance fees increased 71.8% to $3.4 million for the
six months ended October 27, 2000, from $2.0 million for the same period in
1999. This increase was primarily due to an increase in direct access customer
activity.

Interest expense increased 51.5% to $4.3 million for the six months ended
October 27, 2000, from $2.9 million for the comparable period in 1999. This
increase was primarily due to an increase in interest paid related to the
increase of borrowings and interest paid to customers on their free credit
balances.

Leased exchange seats expense increased 19.1% to $2.1 million for the six
months ended October 27, 2000, from $1.8 million for the comparable period in
1999. This increase was due to an increase in the average annual leasing cost of
a membership from approximately $197,000 to $251,000.

INCOME BEFORE PROVISION FOR INCOME TAXES

Income before provision for income taxes increased 2.7% to $15.6 million for
the six months ended October 27, 2000, from $15.2 million for the comparable
period in 1999.

INCOME TAXES

Provision for income taxes increased 2.1% to $7.4 million for the six months
ended October 27, 2000, from $7.2 million for the comparable period in 1999, as
a result of increased profitability of the firm.

FISCAL YEAR ENDED APRIL 28, 2000 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1999

REVENUES

Total revenues decreased 19.1% to $101.7 million for fiscal 2000, from
$125.8 million for 1999, principally due to the decrease in revenue from trading
and investment gains, net, on principal transactions. Trading and investment
gains, net decreased 42.2% to $44.1 million for fiscal 2000, from $76.3 million
for fiscal 1999. This decrease was due to a substantial loss incurred due to
specialist trading on a new issue in November 1999.

Clearance fees and commission revenue increased by 22.1% to $18.9 million
for fiscal 2000 from $15.5 million for fiscal 1999. This increase is primarily
due to an increase in direct access, professional trader and retail customer
activity.

Interest revenues increased by 39.1% to $9.8 million for fiscal 2000 from
$7.1 million for fiscal 1999. This increase was primarily due to an increase of
stock borrow balances and customer margin debit balances.

Underwriting income increased 100.0% to $1.6 million for fiscal 2000. This
income was for fees earned on private placements.

EXPENSES

Total expenses before provision for income taxes decreased 15.9% to
$74.0 million for fiscal 2000, from $87.9 million for fiscal 1999. This decrease
was primarily due to a decrease in compensation and benefits expense.

Compensation and benefits expense decreased 27.4% to $41.7 million for
fiscal 2000, from $57.4 million for fiscal 1999. This decrease was primarily due
to lower compensation paid as a result of reduced trading revenues. As a
percentage of total revenues, employee compensation decreased to 41.0% of total
revenues for fiscal 2000, from 45.7% of total revenues for fiscal 1999.

Floor brokerage and clearance fees increased 44.5% to $5.3 million for
fiscal 2000, from $3.7 million for fiscal 1999. This increase was primarily due
to an increase in direct access customer activity.

Interest expense increased 9.8% to $6.1 million for fiscal 2000, from
$5.6 million for fiscal 1999. This increase was primarily due to an increase in
interest paid to customers on their free credit balances.

Leased exchange seats expense increased 18.7% to $3.9 million for fiscal
2000, from $3.3 million for fiscal 1999. This increase was due to an increase in
the average annual leasing cost of the memberships from approximately $174,000
to $218,000 per membership.

Other expenses decreased 9.1% to $10.2 million for fiscal 2000, from
$11.3 million for fiscal 1999. The decrease was primarily due to a decrease in
consulting fees that were incurred in fiscal 1999 when substantial consulting
fees relating to a computer system conversion were incurred.

Income before provision for income taxes decreased 26.7% to $27.8 million
for fiscal 2000, from $37.9 million for fiscal 1999.

Provision for income taxes decreased 26.0% to $13.0 million for fiscal 2000,
from $17.6 million for fiscal 1999 as a result of a decrease in the
profitability of the firm.

FISCAL YEAR ENDED APRIL 30, 1999 COMPARED TO FISCAL YEAR ENDED APRIL 24, 1998

REVENUES

Total revenues increased 1.7% to $125.8 million for 1999 from
$123.7 million for fiscal 1998, due primarily to the increase in revenue from
floor brokerage. Trading and investment gains, net increased 1.6% to
$76.3 million for fiscal 1999, from $75.2 million for fiscal 1998. This increase
was primarily due to an increase in share volume. This increase in share volume,
in turn, was primarily due to increased share volume as principal in our
existing specialist stocks traded on the NYSE.

Floor brokerage revenue increased 10.6% to $25.1 million for fiscal 1999
from $22.7 million for fiscal 1998. This increase was due to an increase in
share volume in which RPM acted as agent. This increase, in turn, was primarily
due to increased share volume in RPM's existing specialist stocks traded

on the NYSE. The share volume executed by RPM as agent in its specialist stocks
increased 16.7% to 2.8 billion shares for fiscal 1999, from 2.4 billion shares
for fiscal 1998.

Clearance fees and commission revenue decreased 10.6% to $15.5 million for
fiscal 1999 from $17.3 million for fiscal 1998. This decrease was primarily due
to reduced volume of execution activity.

Interest revenue increased 10.5% to $7.1 million for fiscal 1999 from
$6.4 million for fiscal 1998. This increase was primarily due to interest
received related to an increase in treasury bills.

Other revenue decreased 40.2% to $1.0 million for fiscal 1999, from
$1.6 million for the comparable period in fiscal 1998. This decrease was
primarily due to a decrease in underwriting income.

EXPENSES

Total expenses before provision for income taxes increased 14.2% to
$87.9 million for 1999, from $77.0 million for fiscal 1998, primarily due to
compensation and benefits expense.

Compensation and benefits increased 11.9% to $57.4 million for fiscal 1999,
from $51.3 million for fiscal 1998. As a percentage of total revenues,
compensation and benefits expense increased to 45.7% of total revenues for
fiscal 1999, from 41.5% of total revenues for fiscal 1998.

Floor brokerage and clearance fees decreased 26.5% to $3.7 million for
fiscal 1999, from $5.0 million for fiscal 1998. This decrease was primarily due
to reduced retail activity and give-up execution fees.

Interest expense increased 53.7% to $5.6 million for 1999, from
$3.6 million for fiscal 1998. This increase was primarily due to an increase in
the average outstanding borrowings to $37.8 million for fiscal 1999 as compared
to $16.0 million in fiscal 1998.

Leased exchange seats expense increased 30.6% to $3.3 million for fiscal
1999, from $2.5 million for fiscal 1998. This increase was due to the increase
in the number of leased memberships from 17 to 19, as well as an increase in the
average annual leasing cost of the memberships from approximately $149,000 to
$174,000 per membership.

Depreciation and amortization expense increased 45.2% to $1.6 million in
fiscal 1999 from $1.1 million in fiscal 1998. This increase was primarily due to
new computer software and equipment.

Other expenses increased 29.2% to $11.3 million for 1999, from $8.7 million
for fiscal 1998. This increase was primarily the result of consulting fees
relating to a computer system conversion incurred in fiscal 1999.

Income before provision for income taxes decreased 18.9% to $37.9 million
for fiscal 1999, from $46.7 million for fiscal 1998.

Provision for income taxes decreased 18.9% to $17.6 million in fiscal 1999,
from $21.7 million for fiscal 1998 as a result of a decrease in the
profitability of the firm.

LIQUIDITY

Prior to the issuance of RPM's senior notes, RPM had financed its business
primarily through stockholder's equity and debt issued upon the redemption of
stock. As of October 27, 2000, RPM had $315.4 million in assets, of which
$10.7 million consisted of non-segregated cash and short-term investments,
primarily in commercial paper maturing within three days. As of April 28, 2000,
RPM had $293.8 million in assets, $40.5 million of which consisted of
non-segregated cash and short-term investments, which primarily consist of U.S.
Treasury bills and commercial paper maturing within two months. As of April 30,
1999, RPM had $283.2 million in assets, $44.1 million of which consisted of

non-segregated cash and short-term investments, which primarily consisted of
treasury bills and commercial paper maturing within nine months.

As of October 27, 2000 and April 28, 2000, the subordinated debt of RPM
totaled $33.7 million and $25.7 million, respectively (excluding subordinated
liabilities related to contributed exchange memberships). Of this amount,
$20.0 million represented senior subordinated debt privately placed pursuant to
several note purchase agreements, bearing interest at an annual rate of 7.95%,
payable on a quarterly basis, and maturing on June 1, 2005. These notes are
senior to all other subordinated notes of RPM. The agreement covering the senior
notes includes certain covenants that, among other things, limit RPM's ability
to borrow money, pay dividends on its stock or purchase its stock, make
investments, engage in transactions with stockholders and affiliates, create
liens on its assets, and sell assets or engage in mergers and consolidations.
Subordinated debt totaling $10.2 million as of October 27, 2000 and
$2.2 million as of April 28, 2000 represents secured demand notes issued by
RPM's specialist corporation and clearing corporation to family members of
stockholders. These notes have maturities in 2001 and bear interest at an annual
rate from 9% to 11%, payable monthly. The agreements relating to these notes
generally have automatic rollover provisions, which extend the maturities for an
additional year, unless the lender provides notice at least seven months prior
to maturity.

Subordinated debt totaling $3.6 million represents junior subordinated debt
of RPM placed primarily with former stockholders and their family members. This
debt has maturities ranging from the second half of 2000 through 2004, and bears
interest at an annual rate between 9.0% and 12.5%, payable on a quarterly basis.

As broker-dealers, RPM's specialist corporation and RPM's clearing
corporation are subject to regulatory requirements intended to ensure the
general financial soundness and liquidity of broker-dealers and requiring the
maintenance of minimum levels of net capital, as defined in SEC Rule 15c3-1.
RPM's specialist corporation and RPM's clearing corporation are required to
maintain minimum net capital, as defined, equivalent to the greater of $250,000
or 2% of aggregate debits, as defined. NYSE Rule 326(c) also prohibits a
broker-dealer from repaying subordinated borrowings, paying cash dividends,
making loans to any parent, affiliates or employees, or otherwise entering into
transactions which would result in a reduction of its total net capital to less
than 150% of its required minimum capital. Moreover, broker-dealers are required
to notify the SEC prior to repaying subordinated borrowings, paying dividends
and making loans to any parent, affiliates or employees, or otherwise entering
into transactions which, if executed, would result in a reduction of 30% or more
of their excess net capital (net capital less minimum requirement). The SEC has
the ability to prohibit or restrict such transactions if the result is
detrimental to the financial integrity of the broker-dealer.

At October 27, 2000, RPM's specialist corporation had net capital of
$110.0 million, which was $109.7 million in excess of its required net capital
of $250,000. At April 28, 2000, RPM's specialist corporation had net capital of
$94.5 million, which was $94.2 million in excess of its required net capital of
$250,000. At October 27, 2000, RPM's clearing corporation had net capital of
$15.8 million, which was $14.8 million in excess of its required net capital of
$1.0 million. At April 28, 2000, RPM's clearing corporation had net capital of
$14.8 million, which was $13.7 million in excess of its required net capital of
$1.1 million.

$2.0 million for each stock in the S&P 100 Stock Price Index, excluding stocks
included in the previous classification, $1.0 million for each stock in the S&P
500 Stock Price Index, excluding stock included in the previous classifications,
$500,000 for each common stock, excluding bond funds and stocks included in the
previous classifications, and $100,000 for each stock not included in any of the
above classifications. In addition, the NYSE has proposed to require any new
specialist entities that result from a merger, acquisition, consolidation or
other combination of specialist entities, to maintain net liquid assets
equivalent to the greater of either: (1) the aggregate net liquid assets of the
specialist entities prior to their combination or (2) the new capital
requirements prescribed under Rule 104.

As of October 27, 2000, RPM's specialist corporation's net liquid assets
were approximately $111.1 million, $94.6 million in excess of its requirement of
$16.5 million on that date. As of April 28, 2000, RPM's specialist corporation's
net liquid assets were approximately $97.7 million, $78.6 million in excess of
its requirement of $19.1 million on that date. As of October 30, 2000, due to
the NYSE's changes to Rule 104, the net liquid assets required for RPM's
specialist corporation was $106.6 million. On that date, RPM's specialist
corporation had net liquid assets of approximately $111.1 million, which was
$4.5 million more than the new NYSE requirement.

Failure to maintain the required net capital and net liquid assets may
subject RPM to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.

RPM currently anticipates that its available cash resources and credit
facilities will be sufficient to meet its anticipated working capital,
regulatory capital and capital expenditure requirements through the end of 2001.

MARKET RISK

A majority of RPM's specialist related revenues are derived from trading by
RPM as principal. RPM also operates a proprietary trading desk separately from
its NYSE specialist operations, which generated 0.5% of its total revenues in
the six months ended October 27, 2000 and 0.3% of its total revenues for the
same period in 1999, and which generated 1.6% of its total revenues for the year
ended April 28, 2000. RPM may incur trading losses as a result of these trading
activities. These activities involve primarily the purchase, sale or short sale
of securities for RPM's own account. These activities are subject to a number of
risks, including risks of price fluctuations and rapid changes in the liquidity
of markets. In any period, RPM may incur trading losses in its specialist stocks
for a variety of reasons, including price declines of its specialist stocks,
lack of trading volume in its specialist stocks and the performance of its
specialist obligations. From time to time, RPM has large position concentrations
in securities of a single issuer or issuers engaged in a specific industry. In
general, because its inventory of securities is marked to market on a daily
basis, any downward price movement in these securities will result in a
reduction of its revenues and operating profits.

RPM has developed a risk management process, which is intended to balance
its ability to profit from its specialist activities with its exposure to
potential losses. In addition, RPM has trading limits relating to its
proprietary trading desk. Although RPM has adopted risk management policies, it
cannot be sure that these policies have been formulated properly to identify or
limit its risks. Even if these policies are formulated properly, RPM cannot be
sure that it will successfully implement these policies. As a result, RPM may
not be able to manage its risks successfully or avoid trading losses.

DESCRIPTION OF LABRANCHE'S BUSINESS

THE FOLLOWING DESCRIPTION OF LABRANCHE'S BUSINESS CONTAINS FORWARD-LOOKING
STATEMENTS, WHICH INVOLVE RISKS AND UNCERTAINTIES. LABRANCHE'S RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS
A RESULT OF SOME FACTORS. SEE "RISK FACTORS."

OVERVIEW

We are a holding company that is the sole member of LaBranche & Co. LLC and
owns all the outstanding stock of Henderson Brothers, Inc. Founded in 1924
LaBranche & Co. LLC is one of the oldest and largest specialist firms on the
NYSE. Our Henderson Brothers subsidiary is a clearing broker for customers of
several introducing brokers and provides direct access floor brokerage services
to institutional customers.

As a NYSE specialist, our role is to maintain, as far as practicable, a fair
and orderly market in our specialist stocks. In doing so, we provide a service
to our listed companies, and to the brokers, traders and their respective
customers who trade in our specialist stocks. We believe that, as a result of
our commitment to providing high quality specialist services, we have developed
a strong reputation among our constituencies, including investors, members of
the Wall Street community and our listed companies.

Our business has grown considerably during the past five years. Our revenues
have increased from about $37.2 million in 1995 to $344.8 million in 2000,
representing a compound annual growth rate of 56.1%. We have accomplished our
growth both internally and through selective acquisitions. For example, since
the NYSE implemented its new specialist allocation process in March 1997, we
have been selected by 67 new listed companies, resulting from 117 listing
interviews. In addition, we have acquired five specialist operations since 1997,
adding 281 new common stock listings to our firm. During the past five years, we
have also increased the scope of our business, as illustrated by the following
data:

- the annual dollar volume on the NYSE of stocks for which we acted as
specialist increased to $2.2 trillion in 2000, as compared to
$133.3 billion in 1995. Based on these dollar volumes, we were the largest
specialist firm in 2000 as compared to the eighth largest in 1995;

- the annual share volume on the NYSE of stocks for which we act as
specialist increased to 52.7 billion in 2000, as compared to 4.0 billion
in 1995. Based on these share volumes, we were the largest specialist firm
in 2000 as compared to the sixth largest in 1995; and

- the total number of our common stock listings increased to 386 as of
December 31, 2000, as compared to 125 as of December 31, 1995. Based on
the number of our common stock listings, we were the third largest
specialist firm as of December 31, 2000 as compared to the fifth largest
as of December 31, 1995. In addition, we acted as the specialist for 134
other NYSE-listed securities and for the AMEX-listed options with respect
to the common stock of 21 companies, including Electronic Data Systems,
Global Crossing and Exodus Communications.

As of December 31, 2000, our listed companies included:

- 68 of the S&P 500 companies; and

- seven of the 30 companies comprising the Dow Jones Industrial Average. Our
Dow stocks are American Express, AT&T, Exxon Mobil, JP Morgan Chase,
Merck, Minnesota Mining & Manufacturing and SBC Communications.

INDUSTRY BACKGROUND

THE NYSE

The NYSE is currently the largest securities market in the world. The market
capitalization of all U.S. shares listed on the NYSE increased from about $6.0
trillion at December 31, 1995 to about $11.5 trillion at December 31, 2000,
representing a compound annual growth rate of 13.9%. The number of companies
listed on the NYSE increased from 2,675 at the end of 1995 to 2,862 at the end
of 2000.

The NYSE's average daily trading volume increased from 91.2 million shares
in 1984 to 1.04 billion shares in 2000, as illustrated by the following graph:

NYSE AVERAGE DAILY TRADING VOLUME FROM 1984 TO 2000
(SHARE VOLUME IN MILLIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

NYSE AVERAGE DAILY TRADING VOLUME FROM 1984 TO 1999

1984 91.2
1985 109.2
1986 141.0
1987 188.9
1988 161.5
1989 165.5
1990 156.8
1991 178.9
1992 202.3
1993 264.5
1994 291.4
1995 346.1
1996 412.0
1997 526.9
1998 673.6
1999 809.2
2000 1041.6

Trading on the NYSE takes place through open bids to buy and open offers to
sell made by NYSE members, acting as principal or as agent for institutions or
individual investors. Buy and sell orders meet directly on the trading floor
through an auction process, and prices are determined by the interplay of supply
and demand in that auction. In order to buy and sell securities on the NYSE, a
person must first be accepted for membership in the NYSE. The number of
memberships, or seats, is presently limited to 1,366, and the price of a
membership depends on supply and demand. Based on recent transfers of
memberships, the market price of a membership on the NYSE is about
$2.0 million. To become a member, each prospective applicant must also pass an
examination covering NYSE rules and regulations.

NYSE members are generally categorized based upon the activities in which
they engage on the trading floor, such as specialists or brokers. The largest
single membership group is floor brokers, which consists of both commission
brokers and independent brokers. Commission brokers are employed by
broker-dealer firms that are members of the NYSE and earn salaries and
commissions. Independent

floor brokers are brokers who independently handle orders for other
broker-dealers and financial institutions.

THE SPECIALIST

All trading of securities on the NYSE is conducted through an auction
process. The auction process for each security is managed by the specialist for
that security. The specialist is a broker-dealer who applies for and, if
accepted, is assigned the role to maintain a fair and orderly market in its
specialist stocks. The number of specialist units on the NYSE has decreased from
36 at December 31, 1995 to 18 at December 31, 2000. Of these, the three largest
specialist units as ranked by their number of specialist stocks were responsible
for about 56.0% of the average daily trading volume in 2000, as measured by
dollar volume.

A specialist firm is granted the franchise by the NYSE in a particular stock
to conduct the auction in that security. Specialist firms conduct their auctions
at specific trading posts located on the floor of the NYSE. Because the
specialist firm runs the auction in its specialist stocks, it knows of all bids
and offers in those stocks and gathers orders to price its stocks appropriately.

Specialist firms compete for the original listing of stocks through an
allocation process organized by the NYSE. As part of this allocation process,
companies seeking a listing may select a specialist firm in one of two ways.
Under the first method, the NYSE's allocation committee selects the specialist
firm based on specific criteria. Under the second method, available since
March 1997, the listing company requests that the allocation committee select
three to five potential specialist firms suitable for the stock, based on
criteria specified by the listing company. The listing company then has the
opportunity to meet with each specialist firm identified by the allocation
committee. Within one week after meeting the competing specialist firms, the
listing company must select a specialist firm. Currently, substantially all of
the companies seeking a listing on the NYSE opt to make the final choice of
their own specialist firm under the second allocation method.

When assigned a particular stock, the specialist firm agrees to specific
obligations. The specialist firm's role is to maintain, as far as practicable,
trading in the stock that will be fair and orderly. This implies that the
trading will have reasonable depth and price continuity, so that, under normal
circumstances, a customer may buy or sell stock in a manner consistent with
market conditions. A specialist firm helps market participants achieve price
improvement in their trades because the best bids and offers are discovered
through the auction process. In performing its obligations, the specialist firm
is exposed to all transactions that occur in each of its specialist stocks on
the NYSE floor. In any given transaction, the specialist firm may act as:

- an auctioneer by setting opening prices for its specialist stocks and by
matching the highest bids with the lowest offers, permitting buyers and
sellers to trade directly;

- a facilitator bringing together buyers and sellers who do not know of each
other in order to execute a trade which would not otherwise occur;

- an agent for broker-dealers who wish to execute transactions as instructed
by their customers. Typically, these orders are limit orders entrusted to
the specialist at prices above or below the current market price; or

- a principal using its own capital to buy or sell stocks for its own
account.

The specialist firm's decision to buy or sell shares of its specialist
stocks as principal for its own account may be based on obligation or
inclination. For example, the specialist firm may be obligated to buy or sell
its specialist stock to counter short-term imbalances in the prevailing market,
thus helping to maintain a fair and orderly market in that stock. At other
times, the specialist firm may be inclined to buy or sell the stock as principal
based on attractive opportunities. The specialist firm may trade at its

election so long as the trade will contribute to a fair and orderly market. In
actively-traded stocks, the specialist firm continually buys and sells its
specialist stocks at varying prices throughout each trading day. The specialist
firm's goal and expectation is to profit from differences between the prices at
which it buys and sells these stocks. In fulfilling its specialist obligations,
however, the specialist firm may, at times, be obligated to trade against the
market, adversely impacting the profitability of the trade. In addition, the
specialist firm's trading practices are subject to a number of restrictions, as
described in "Operations--NYSE Rules Governing our Specialist Activities."

RECENT TRENDS IN NYSE TRADING AND THE SPECIALIST'S ROLE

Specialist firms generate revenues by executing trades, either as agent or
principal, in their specialist stocks. Accordingly, the specialist firms'
revenues are primarily driven by the volume of trading on the NYSE. This volume
has increased significantly in recent years. The increase in trading volume has
resulted from a number of factors, including:

- an increase in the number of households investing in stocks;

- an increase in the amount of assets managed through retirement plans,
mutual funds, annuity and insurance products, index funds and other
institutional investment vehicles;

- the increased popularity and use of computerized trading, hedging and
other derivative strategies;

- an increase in NYSE-listed stocks due to:

- initial public offerings and spin-offs;

- transfers from Nasdaq and the American Stock Exchange; and

- an increase in listings of foreign companies;

- higher equity portfolio turnover by individuals and institutional
investors as a result of lower commission rates and other transaction
costs;

- an increase in on-line trading;

- trading in smaller price increments;

- an increase in the market capitalization of growth stocks; and

- an increase in the amount of shares traded due to stock splits and stock
dividends.

These factors have, in turn, been influenced by a strong U.S. economy, low
interest rates and low levels of inflation.

The NYSE has commenced trading in decimals and has increased the window for
providing commission-free execution of a trade to five minutes from the previous
two minutes. The NYSE is also considering the following additional changes:

- longer trading days; and

- trading of foreign stocks in ordinary form side by side with their
American depositary receipts.

We believe that trading in decimals and, if instituted, these additional
changes will likely contribute to additional growth in NYSE trading volume.

The majority of trades in NYSE-listed stocks take place through NYSE
specialist firms. In 2000, specialist firms handled about 83.1% of trades in
NYSE-listed stocks. Trades in NYSE-listed stocks also are generally effected as
follows:

- some stocks are listed on multiple exchanges, such as regional exchanges,
and trades take place on those exchanges;

- NYSE members may trade NYSE-listed stocks off the NYSE in the
over-the-counter market; and

- non-NYSE members may trade NYSE-listed stocks off the NYSE in
over-the-counter markets.

Technological advances have contributed to the increased trading through
alternative trading systems, ATSs, such as electronic communications networks,
ECNs, and crossing systems. While the first ECN was created in 1969, most of the
others currently in operation were started in the past few years. These systems
electronically facilitate the matching of buy and sell orders that are entered
by their network members. If a match does not occur, some ATSs will forward
unfilled orders to other ATSs or to exchanges such as the NYSE. Some of these
networks also allow limited negotiation between members to facilitate a match.
These ATSs generally limit trades over their systems to their members, who are
typically large financial institutions, well-capitalized traders or brokerage
firms. Additionally, some ATSs are being developed to facilitate trading by
retail investors. In April 1999, the SEC ruled that these networks are allowed,
and in specified cases are required, to register and become subject to
regulation as stock exchanges.

The percentage of annual trading of NYSE listed stocks on the NYSE has
ranged from 82.8% to 84.1% for the past five years. It is unclear, however, how
the alternative trading methods and new technologies just described or that may
be developed will affect the percentage of trading in listed stocks conducted on
the NYSE. The NYSE has indicated that it is studying the possibility of
embracing electronic communications network technology to expand trading. ATSs
may be developed, organized and operated by large brokerage houses and
investment banks with more substantial capital, better access to technology and
direct access to investors. As a result, these parties may be well positioned to
direct trading to these networks. These alternative trading methods may account
for a growing percentage of the trading volume of NYSE-listed stocks.

The accelerating growth of trading volume and the increase in stock prices
on the NYSE in the 1990s has increased the demands upon specialists. In order to
fulfill their obligations, specialists are required to execute a greater number
of trades in a shorter period of time with greater price volatility. In
addition, specialists are called upon to take larger positions in their
specialist stocks. These factors have led to a consolidation of specialist units
in the past five years. We believe that the specialist market is becoming
increasingly dominated by a number of large, better-capitalized specialist firms
that are able to provide an enhanced level of service.

LABRANCHE'S COMPETITIVE POSITION

We are committed to providing the highest quality service to our various
constituencies. We believe our success is based on the following factors:

- LEADING POSITION IN THE SPECIALIST MARKET. We have a long-standing
reputation as one of the leading specialist firms on the NYSE. We have
successfully grown our business and improved our services through widely
varying market conditions. Trading in the stocks for which we acted as
specialist during 2000 accounted for 21.8% of the dollar volume on the
NYSE and 21.7% of the share volume. Based on these percentages, we were
the largest specialist firm on the NYSE. We are continuing to develop our
relationships with ATSs and to embrace new technologies in trading
platforms.

- DIVERSE AND HIGH QUALITY SPECIALIST STOCKS. Our listed companies operate
in a variety of industries including financial services, media, oil and
gas, retail, technology and telecommunications. Many of our listed
companies are leaders in their respective fields. We believe that acting
as specialist in the stocks of industry leaders will benefit us as these
leading companies continue to expand their businesses through internal
growth and acquisitions.

- STRONG MARKET-MAKING SKILLS. We utilize our strong market-making skills to
actively trade as principal in our specialist stocks. We believe that we
significantly improve liquidity in our specialist stocks, particularly
during periods of market volatility. In 2000, about 31.6% of our trades
were as principal as compared to an average of about 27.4% for all NYSE
specialists.

- INNOVATIVE CUSTOMER-ORIENTED SERVICES. We are committed to providing our
listed companies with a high level of service, in addition to our
specialist functions on the trading floor. We provide our listed companies
with detailed reports on the trading activity of their stocks. We also
maintain frequent contact with a majority of our listed companies to
discuss the trading in their stock. In addition, we were the first
specialist firm to:

- host an annual listed company conference;

- publish a company newsletter; and

- commission customer satisfaction surveys from our listed companies.

- COMPLETED ACQUISITIONS. Since 1997, we have acquired the following six
specialist operations, solidifying our position as one of the leading NYSE
specialist firms:

- a portion of the specialist operations of Stern Bros., LLC
(July 1997);

- Ernst, Homans, Ware & Keelips (August 1997);

- Fowler, Rosenau & Geary, LLC (July 1998);

- Henderson Brothers, Inc. (March 2000);

- Webco Securities, Inc. (March 2000); and

- the assets and operations of an AMEX options specialist unit that acted
as the specialist in the options of 21 common stocks (December 2000).

Through 2000, we effectively employed our capital resources and skilled
personnel to maximize the synergies created through consolidation. We believe
this experience will assist us in integrating the business operations of RPM.

Our objective is to continue the growth in our revenues and profits by
pursuing the following strategies:

- AGGRESSIVELY PURSUE NEW LISTINGS. We have been and will continue to be
aggressive in positioning ourselves in the NYSE allocation process.
Between March 1997, when the NYSE adopted the new allocation procedure,
and December 31, 2000, we participated in 117 selection pools for listed
companies and were chosen by management of the listed companies in 67 of
them.

- CAPITALIZE ON PENDING AND FUTURE ACQUISITIONS. In connection with the
acquisitions of Henderson Brothers and Webco, we added 150 additional NYSE
common stock listings, including 28 S&P 500 stocks and two included in the
Dow Jones Industrial Average. The acquisition of RPM would add 129 NYSE
common stock listings to our specialist portfolio, including three
components of the Dow Jones Industrial Average and 21 S&P 500 stocks,
based on the number of RPM's specialist stocks as of December 31, 2000.
The RPM acquisition also will include RPM's 25% interest in a joint
account with R. Adrian & Co., LLC and Freedom Specialist Inc., which acted
as the specialist for 28 NYSE-listed companies, including four S&P 500
stocks, at

December 31, 2000. With the RPM acquisition, we expect to be the largest
specialist on the NYSE based on a number of common stock listings and
annual dollar and share volume traded. As of December 31, 2000, we were
the specialist for 386 listed companies, including 68 of the S&P 500 and
six of the companies included in the Dow Jones Industrial Average. We
intend to continue to take advantage of the consolidation trend in the
specialist industry by selectively pursuing acquisitions of other
specialist operations.

OPERATIONS

NYSE RULES GOVERNING OUR SPECIALIST ACTIVITIES

Under the NYSE rules, a specialist has a duty to maintain, as far as
practicable, a fair and orderly market in its specialist stocks. In order to
fulfill its obligations, the specialist must at times trade for its own account,
even when it may adversely affect the specialist's profitability. In addition,
under some circumstances, the specialist is prohibited from making trades as
principal in its specialist stocks. The specialist's obligations are briefly
described below.

REQUIREMENT TO TRADE AS PRINCIPAL. A specialist must buy and sell
securities as principal when necessary to minimize an actual or reasonably
anticipated short-term imbalance between supply and demand in the auction
market. The specialist must effect these transactions when their absence could
result in an unreasonable lack of continuity and/or depth in their specialist
stocks. The specialist is not expected to act as a barrier in a rising market or
a support in a falling market, but must use its own judgment to try to keep such
price increases and declines equitable and consistent with market conditions.

A specialist must make firm and continuous two-sided quotations that are
timely and that accurately reflect market conditions. In making these
quotations, the specialist's transactions are calculated to contribute to the
maintenance of price continuity with reasonable depth. Following is an
illustration of how a specialist acts as principal to maintain price continuity:

The most recent sale in a listed stock was $50, the best public bid (to buy)
on the specialist's book is $49 3/4, and the best public offer (to sell) on the
book is $50 1/4. A broker who wants to buy 100 shares at the market in this
instance without a specialist would purchase at $50 1/4, the offer price.
Similarly, a broker seeking to sell 100 shares without a specialist would
receive $49 3/4, the bid price. The specialist, who is expected to provide
reasonable price continuity, in this case might narrow the quote spread by
offering or bidding for stock for its own account. In this instance, the broker
who wants to buy 100 shares might buy at $50 1/16 from the specialist, as
opposed to buying the same amount of shares from the best offer of $50 1/4,
thereby offering price improvement to the customer. In the next trade, a broker
willing to sell 100 shares might sell to the specialist at $50, as opposed to
selling to the best available bid of $49 3/4, again achieving price improvement
for the customer.

TRADING RESTRICTIONS. In trading for its own account, the specialist must
avoid initiating a market-destabilizing transaction. All purchases and sales
must be reasonably necessary to permit the specialist to maintain, as far as
practicable, a fair and orderly market in its specialist stocks. In addition,
the specialist must comply with the following trading requirements:

- A specialist must first satisfy a customer's market buy order (an order to
buy at the prevailing market price) before buying any stock for its own
account. Similarly, a specialist must first satisfy a customer's market
sell order (an order to sell at the prevailing market price) before
selling any stock for its own account.

- A specialist must first satisfy a customer's limit order held by it before
buying or selling at the same price for its own account. A limit order is
an order either to buy only at or below a specified price, or to sell only
at or above a specified price. A specialist may not have priority

over any customer's limit order. A specialist, however, may buy or sell at
the same price as a customer limit order as long as that limit order is
executed first.

- If a public buyer wants to buy at a particular price and a seller wants to
sell at the same price, the buyer and seller trade directly with each
other, and the specialist should not interfere in the transaction.

- The specialist does not charge commissions for trades in which it acts as
a principal.

- Except in some circumstances in less active markets, the specialist may
not, without permission from an NYSE official, initiate destabilizing
trades for its own account which cause the stock price to rise or fall.

- Any transactions by the specialist for its own account must be effected in
a reasonable and orderly manner in relation to the condition of the
general market, the market in the particular stock and the adequacy of the
specialist's position to the immediate and reasonably anticipated needs of
the market.

In addition, the specialist cannot be in a control relationship with any of
its listed companies. This means a specialist may not acquire more than 5% of
any common or preferred issue of its specialist stocks and may not own 10% or
more of any common or preferred stock. A specialist may not hold any position as
an officer or director or receive payments or loans or engage in business
transactions with any of its listed companies.

RISK MANAGEMENT

Because our specialist activities expose our capital to significant risks,
managing these risks is a constant priority for us. Our central role in the
auction process helps us to reduce risks by enabling us to incorporate
up-to-date market information in the management of our inventory, subject to our
specialist obligations. In addition, we have developed a risk management
process, which is designed to balance our ability to profit from our specialist
activities with our exposure to potential losses. Our risk management process
includes as participants our executive operating committee, our floor management
committee, our floor team captains and our specialists. These parties' roles are
described as follows:

EXECUTIVE OPERATING COMMITTEE. Our executive operating committee is
composed of Michael LaBranche, Anthony M. Corso, Alfred O. Hayward, Jr., Michael
J. Naughton and James G. Gallagher. This committee is responsible for approving
all risk management policies and trading guidelines for particular specialist
stocks, after receiving input and proposals by the floor management committee.
In addition, our executive operating committee reviews all unusual situations
reported to it by our floor management committee.

FLOOR MANAGEMENT COMMITTEE. Our floor management committee is composed of
Messrs. Corso, Hayward, Naughton, Gallagher and Pickett. This committee is
responsible for formulating and overseeing our overall risk management policies
and risk guidelines for each of our specialist stocks. In arriving at these
policies and guidelines, our floor management committee considers the advice and
input of our floor team captains. Our floor management committee meets with all
floor team captains no less than once a month to review and, if necessary,
revise the risk management policies for our company as a whole and/or for
particular specialist stocks. In addition, a member of our floor management
committee is always available on the trading floor to review and assist with any
unusual situations reported by a captain. Our floor management committee reports
to our executive operating committee about each of these situations.

FLOOR TEAM CAPTAINS. We have ten floor team captains who monitor the
activities of our specialists throughout the trading day from various positions
at our trading posts. The captains observe trades and constantly review trading
positions in real-time through our information systems. In

addition, the captains are readily available to assist our specialists in
determining when to deviate from our policies and guidelines to react to any
unusual situations or market conditions. The captains must report these unusual
situations to management, including any deviations from our policies and
guidelines. Captains meet with each specialist at least once a week to evaluate
the specialist's adherence to our risk management policies and guidelines.
Captains also meet among themselves at least twice weekly to review risk
policies and guidelines and, if appropriate, make new recommendations to the
floor management committee.

SPECIALISTS. Our specialists conduct auctions based upon the conditions of
the marketplace. In doing so, specialists should observe our risk management
policies and guidelines as much as practicable. Specialists must immediately
notify a captain of any unusual situations or market conditions requiring a
deviation from our policies and guidelines.

We rely heavily on our information systems in conducting our risk
management. Management members and captains must constantly monitor our
positions and transactions in order to mitigate our risks and identify
troublesome trends as they occur. We have invested substantial capital in
real-time, on-line systems which give management instant access to specific
trading information at any time during the trading day, including:

- our aggregate long and short positions;

- the various positions of any one of our trading professionals;

- our overall position in a particular stock;

- capital and profit-and-loss information on an aggregate, per specialist or
per issue basis; and

- average position size.

CIRCUIT BREAKER RULES. The NYSE has instituted certain circuit breaker
rules intended to halt trading in all NYSE-listed stocks in the event of a
severe market decline. The circuit breaker rules impose temporary halts in
trading when the Dow Jones Industrial Average drops a certain number of points.
Effective January 2, 2001, circuit breaker levels are set quarterly at 10, 20
and 30 percent of the Dow Jones Industrial Average closing values of the
previous month, rounded to the nearest 50 points.

LISTED COMPANY SERVICES

We are committed to providing our listed companies with a high level of
service, in addition to our specialist functions on the trading floor. We have a
Corporate Relations Department, consisting of seven full-time employees and one
independent consultant devoted to serving our listed companies. The most
important function of the Corporate Relations Department is to provide current
information to the listed companies. Upon request, our Corporate Relations
Department provides our listed companies with the following reports:

- daily reports on the trading results of their stock

- real-time data regarding intra-day trading activity in their stock; and

- weekly, monthly and yearly reports which analyze short and long term
trading trends in their stock.

In addition to providing trading information, we help to educate our listed
companies on general market trends. We organize annual educational conferences
that review trends in the securities industry and NYSE trading. We also publish
for and distribute to our listed companies a periodic newsletter that reviews
market trends. Finally, we survey our specialist companies annually on the
quality of our services, and use the information obtained in these surveys to
continually improve our services.

DIRECT ACCESS BUSINESS

Our Henderson Brothers subsidiary places its customers in direct contact
with the NYSE. Utilizing its easy-to-use web-based technology, Henderson
provides institutional customers with the choice of two conduits for sending
their order flow directly to the point of sale on the floor of the NYSE. Orders
that require special attention can be sent to one of Henderson's licensed floor
brokers for customized handling. Otherwise, the customer can send their orders
directly to the specialist's order book using the NYSE's SUPERDOT system.
Henderson's brokers take advantage of the NYSE's advanced wireless technology to
communicate directly with its trading customers. By employing the advanced
technology, Henderson customers receive extremely fast trade executions and
confirmations. All customer orders are treated with strict confidentiality and
anonymity, allowing for the best execution with the least market impact. In
addition, Henderson's customers are given all the benefits of straight through,
seamless trade processing. Henderson clears and delivers the trades directly to
its customers' depository accounts.

NYSE MEMBERSHIPS

NYSE memberships are granted only to individuals, and each individual
specialist must own or lease a NYSE membership. As of December 31, 2000, we had
73 specialists, each of whom owned or leased a membership under the following
arrangements:

- 12 memberships were owned directly by 12 of our employees;

- 25 were owned by specialists and one was owned by an employee of our
Henderson Brothers subsidiary, all of these seats of which are financed by
LaBranche & Co. LLC pursuant to so-called A-B-C agreements; and

- 38 were leased by 38 of our specialists from other individual members and
we pay and guarantee the lease payments.

AMEX OPTIONS SPECIALIST ACCOUNT

In December 2000, we purchased the assets and operations of an AMEX options
specialist unit. We now run this business through LaBranche & Co. LLC. This unit
acts as the specialist in the options

of 21 common stocks, including Electronic Data Systems, Global Crossing and
Exodus Communications. We believe that this transaction enhances our commitment
to the listed auction market and is an important step in the implementation of
our growth strategy. As of September 30, 2000, the two AMEX memberships utilized
by this specialist unit were leased by two specialist employees of that unit,
and LaBranche & Co. LLC pays and guarantees the rental payments due under these
leases.

OUR INFORMATION AND COMMUNICATIONS SYSTEMS AND THE NYSE'S SUPER-DOT SYSTEM

As a self-clearing broker-dealer, we have made significant investments in
our trade processing systems. Our use of and dependence on technology have
allowed us to maintain our significant growth over the past several years. In
addition to using consultants who primarily service the specialist industry, we
have an in-house information technology staff. We currently clear an average of
about 60,000 principal trades per day. Our information systems send and receive
data from the NYSE through a dedicated data feed.

Our systems enable us to monitor, on a real-time basis, our profits and
losses along with our trading positions. The NYSE supplies us with specialist
position reporting system terminals both on the trading floor and in our
offices. These terminals allow us to monitor our trading profits and losses as
well as our positions.

We have a back-up disaster recovery center in Hoboken, NJ. The back-up
system operates as a mirror image of our primary computer system in New York
City as we have a direct connection between the two sites which we utilize to
back-up all data on an hourly basis. On a regular basis, we test both systems to
assure that they are fully operational.

In executing trades on the NYSE, we receive electronic orders from the
Super-DOT system, an order routing system operated by the NYSE. The Super-DOT
System is designed to handle individual orders of up to 100,000 shares and is
essentially an electronic broker. Orders that originate through the Super-DOT
system are routed directly to us through our computer system at the NYSE. When
we receive an order from the Super-DOT system, we conduct the same auction
process and we are subject to the same obligations as with any other order.

Our information technology staff has developed software which enables our
corporate relations staff and our specialists to share information with each
other regarding upcoming company and industry conferences. In addition, we
monitor each of our specialist stocks intra-day to see if there are any
significant price and/or volume variances of which we should alert the listed
company. This has proven to be a valuable customer service tool.

OUR PROPRIETARY TRADING

In 1995, we initiated a proprietary trading program, seeking to leverage our
trading and market experience. Our strategy is short-term oriented, and most of
our positions are intra-day and not held overnight. Our seven traders focus
primarily on stocks listed on the NYSE. In 2000, we derived 0.5% of our revenues
from our proprietary trading. Our proprietary trading desk utilizes a Windows NT
based trade reporting system which captures all trades executed by the trading
desk and marks all positions to market. We are not permitted to trade in stocks
for which we act as specialist.

We have taken the following actions to manage the risks associated with our
proprietary trading:

- for 2000, we limited our capital commitment for our individual proprietary
traders to an aggregate maximum of $21.5 million intra-day and overnight
positions of up to $13.5 million per day;

- each of our non-executive proprietary traders has specific trading limits,
which may not be exceeded without the approval of executive management.
Our most experienced trader may invest up to $12.0 million per day and may
hold overnight positions up to $7.5 million. Each of our other traders has
daily investment limits of $5.0 million or less and overnight investment
limits of $3.0 million or less, depending on his experience; and

- one of our managing directors oversees all our proprietary trading and has
the authority to instruct the proprietary trading desk to liquidate
positions or otherwise reduce risk. He reports directly to Michael
LaBranche, our Chairman, Chief Executive Officer and President.

SPECIALIST COMPANIES

As of December 31, 2000, we acted as specialist for 386 common stocks listed
on the NYSE. Our listed companies operate in a variety of industries, including
financial services, media, oil and gas, retail, technology and
telecommunications. They range in market capitalization from some of the
smallest on the NYSE to some of its largest and well-known corporations. We also
represented 69 foreign listings on the NYSE as of December 31, 2000 and 42
foreign listings as of December 31, 1999. The following is a list of our top 50
listed companies in terms of market capitalization as of December 31, 2000 in
order of their respective global market capitalization:

Exxon Mobil Corporation Lucent Technologies Inc.
Merck & Co., Inc. Ford Motor Co.
Nokia Corporation Taiwan Semiconductor Manufacturing Company
GlaxoSmithKline plc AT&T Wireless Group, Inc.
SBC Communications Inc. Diageo plc
HSBC Holdings plc Cable and Wireless plc
Toyota Motor Corporation ABN Amro Holding N.V.
Novartis AG Clear Channel Communications, Inc.
TOTAL Fina Elf S.A. First Union Corporation
Tyco International Ltd. JP Morgan Chase
Berkshire Hathaway, Inc. Class A Household International, Inc.
Morgan Stanley Dean Witter & Co. Compaq Computer Corporation
Schering-Plough Corp. Agilent Technologies, Inc.
ING Groep N.V. National Australia Bank, Ltd.
American Express Company CVS Corporation
Medtronic, Inc. San Paolo IMI S.p.A.
Qwest Communications International Inc. Kroger Co.
AT&T Corp. Firstar Corporation
Viacom Inc. The Gap, Inc.
Chevron Corporation First Data Corp.
Koninklijke Philips Electronics N.V. United Microelectronics Corporation
Federal Home Loan Mortgage Corp. SunTrust Bank, Inc.
Minnesota Mining & Manufacturing Company Lowes Companies Inc.
Enel S.p.A. The News Corporation Limited
Schlumberger Limited Lehman Brothers Holdings, Inc.

MARKETING

It is a priority for our management to proactively identify potential
listing companies before the allocation process begins. We contact these
companies and commence our marketing efforts upon determining that they are
considering listing on the NYSE. Our marketing efforts typically consist of

members of our management group visiting with the companies that are considering
listing on the NYSE and describing our services. We also provide written
literature describing our operations, our listed companies, our 75-year history
as a specialist firm and our industry in general.

REGULATORY MATTERS

GENERAL

The securities industry in the United States, including all broker-dealers,
is subject to extensive regulation under both federal and state laws. In
addition, the SEC and the NYSE require strict compliance with their rules and
regulations. As a matter of public policy, regulatory bodies are charged with
safeguarding the integrity of the securities and other financial markets and
with protecting the interests of investors participating in those markets.

As a broker-dealer, we are subject to regulations concerning operational and
financial aspects of our business. We are subject to extensive registration
requirements with various government entities and self-regulatory organizations,
commonly referred to as SROs, with which we must comply before we can conduct
our business. We are also subject to laws, rules and regulations forcing us to
comply with financial reporting requirements, trade practices, capital structure
requirements, and record retention requirements governing the conduct of our
directors, officers and employees. Failure to comply with any of these laws,
rules or regulations could result in censure, fine, the issuance of
cease-and-desist orders or the suspension or disqualification of our directors,
officers or employees, and other adverse consequences, which could have an
adverse effect on our business.

As a NYSE specialist firm, we are under constant review by the NYSE on all
aspects of our operations and financial condition. As part of the price
discovery mechanism implemented by the NYSE, every specialist transaction is
published immediately on the tape and is broadcast worldwide. The NYSE also
employs sophisticated monitoring and stringent rules approved by the SEC. The
NYSE's Market Surveillance Division examines specialists' trading in all stocks,
every trading day, including specialists' decisions to trade or to not trade as
principal.

CAPITAL REQUIREMENTS

As a broker-dealer, we are subject to SEC Rule 15c3-1, which requires
minimum net regulatory capital. We are required to maintain minimum net capital,
as defined, equivalent to the greater of $100,000 or 1/15 of our aggregate
indebtedness, as defined. At December 31, 2000, our net capital, as defined by
this rule, was $293.4 million and exceeded minimum requirements by
$290.3 million.

The NYSE also requires members registered as specialists to maintain a
minimum regulatory capital dollar amount to establish that they can meet, with
their own net liquid assets, their position requirement. Under recent changes to
Rule 104, the NYSE's minimum net liquid asset requirements, specialist units
that exceed five percent in any of the NYSE's four concentration measures must
maintain minimum net liquid assets based upon the securities for which they act
as the specialist. The requirements state that the net liquid assets must be
equivalent to $4.0 million for each stock in the Dow Jones Industrial Average,
$2.0 million for each stock in the S&P 100 Stock Price Index, excluding stocks
included in the previous classification, $1.0 million for each stock in the S&P
500 Stock Price Index, excluding stocks included in the previous classification,
$500,000 for each common stock, excluding bond funds and stocks included in the
previous classifications, and $100,000 for each stock not included in any of the
above classifications. In addition, the NYSE requires any new specialist
entities that result from a merger, acquisition, consolidation or other
combination of specialist entities to maintain net liquid assets equivalent to
the greater of either (1) the aggregate net liquid assets of the specialist
entities prior to their combination or (2) the new capital requirements
prescribed under Rule 104. LaBranche & Co. LLC's net liquid asset requirement
was $284.3 million as of December 31, 2000, and it actually had net liquid
assets of $305.0 million. "Net liquid assets" for a specialist firm that

also engages in transactions other than specialist activities is based upon its
excess net capital as determined in accordance with SEC Rule 15c3-1. As of
December 31, 2000, LaBranche & Co. LLC's NYSE minimum required dollar amount of
net liquid assets was $284.3 million compared to actual net liquid assets of
about $305.0 million.

Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.

COMPETITION

We obtain each of our new listings on the NYSE by participating in an
allocation process. As part of this process, either the allocation committee of
the NYSE or the listing company chooses the specialist firm. We compete with
other specialist firms based on a number of factors, including:

- the strength of our capital base;

- our willingness to commit our own capital and trade for our own account
while conducting our specialist operations; and

- the ancillary services we offer our specialist companies, such as
providing information on the trading activities in their stocks.

The following is a list of the top ten specialist units as of December 31,
2000, based on their number of common stock listings:

- Fleet Specialists, Inc.

- Spear, Leeds & Kellogg, L.P. (recently acquired by The Goldman Sachs
Group, Inc.)

- LaBranche & Co. LLC

- Van Der Moolen Specialists USA, LLC

- Wagner, Stott, Mercator LLC

- RPM's specialist corporation

- Bear/Hunter Specialists, LLC

- Performance Specialist Group LLC

- Benjamin Jacobson & Sons LLC (in the process of being acquired by The
Goldman Sachs Group, Inc.)

- Susquehanna Specialists, Inc.

The competition for obtaining new listed companies is intense. We expect
competition to continue and intensify in the future. Some of our competitors may
have significantly greater financial resources than we have and may also have
greater name recognition. These competitors may be able to respond more quickly
to new or evolving opportunities and listed company requirements. They may also
be able to undertake more extensive promotional activities to attract new
listing companies. In addition, the specialist industry has recently been
consolidating. The combined companies resulting from the consolidation may have
a stronger capital position. This trend has intensified the competition in our
industry. We cannot be sure that we will be able to compete effectively with our
current or future competitors. We also cannot be sure that the competitive
pressures we face will not have an adverse effect on our business, financial
condition and/or operating results.

NYSE-listed stocks may be traded:

- by NYSE members over-the-counter; and

- by non-NYSE members over-the-counter.

Technological advances have also contributed to the recent emergence of
trading through alternative trading systems, such as electronic communication
networks and crossing systems. In April 1999, the SEC ruled that alternative
trading systems can apply and, in specified cases, are required to register as
stock exchanges, subject to regulation as a stock exchange. This would enable
NYSE members to trade all NYSE-listed stocks on these networks, regardless of
when the stocks were originally listed. These networks may be developed,
organized and operated by large brokerage houses and investment banks with more
substantial capital, better access to technology and direct access to investors.
As a result, these parties may be well-positioned to direct trading to these
networks. These alternative trading systems may adversely affect the trading of
NYSE-listed stock through specialists on the NYSE. That, in turn, would have an
adverse effect on our business.

The NYSE faces competition from Nasdaq for new listings. Nasdaq continues to
grow and gain in popularity, attracting companies that might otherwise have
listed on the NYSE. In recent years in particular, many high technology
companies have opted to be quoted on Nasdaq, even though many of them would have
qualified for NYSE listing. If more companies decide to be quoted on Nasdaq as
opposed to listing their stocks on the NYSE, trading volume on the NYSE could be
adversely affected.

EMPLOYEES

As of December 31, 2000, we had 266 full-time employees, including 44
managing directors with:

- 75 specialists, including 42 managing directors and two AMEX options
specialists;

- seven traders in our proprietary trading department;

- 143 trading assistants;

- seven corporate relations department employees; and

- 32 management, administration and finance staff, including two managing
directors.

Our employees are not covered by a collective bargaining agreement. We have
never experienced an employment-related work stoppage. We consider our employee
relations to be good.

PROPERTIES

Our offices are located at One Exchange Plaza, New York, New York. We lease
about 36,000 square feet under four separate leases, expiring in January 2008.
In addition, we lease four trading posts on the floor of the NYSE. We believe
that our current leased space is suitable and adequate for the operation of our
business as presently conducted and as contemplated to be conducted in the
immediate future.

LEGAL PROCEEDINGS

We are not a party to any material legal proceeding.

MANAGEMENT OF LABRANCHE

Our directors and executive officers are as follows:

NAME AGE POSITION
---- -------- -----------------------------------------------------

Michael LaBranche...................... 45 Chairman, Chief Executive Officer and President
James G. Gallagher..................... 53 Executive Vice President and Director
Alfred O. Hayward, Jr.................. 52 Executive Vice President and Director
S. Lawrence Prendergast................ 59 Executive Vice President, Finance and Director
Harvey S. Traison...................... 61 Senior Vice President, Chief Financial Officer and
Director
E. Margie Filter....................... 61 Director
Thomas E. Dooley....................... 45 Director
Michael Robbins........................ 66 Director
Michael J. Naughton.................... 55 Senior Vice President, Specialist Operations

MICHAEL LABRANCHE has been our Chairman, Chief Executive Officer and
President since our initial public offering in August 1999. Mr. LaBranche has
served as Chairman of the Managing Committee of LaBranche & Co. LLC since 1996,
as a member of the Managing Committee of LaBranche & Co. LLC since 1988 and as a
specialist with LaBranche & Co. LLC since 1977. He currently is a Governor of
the NYSE and is a member of the NYSE's Market Performance Committee.

JAMES G. GALLAGHER has been our Executive Vice President and a director
since our initial public offering in August 1999. Mr. Gallagher has served as a
member of the Managing Committee of LaBranche & Co. LLC since 1998. From 1980 to
July 1998, Mr. Gallagher was a specialist and managing partner with Fowler,
Rosenau & Geary, LLC. Mr. Gallagher is currently a NYSE Senior Floor Official.
Mr. Gallagher has also served for seven years as a NYSE Floor Governor.

ALFRED O. HAYWARD, JR. has been our Executive Vice President and a director
since our initial public offering in August 1999. Mr. Hayward has been a
specialist with LaBranche & Co. LLC since 1983 and has served as a member of the
Managing Committee of LaBranche & Co. LLC since 1994. He currently sits on the
NYSE Arbitration Panel and is involved with NYSE education programs.
Mr. Hayward has served as a NYSE Floor Official and has also served as the
Chairman of the Allocation Committee.

S. LAWRENCE PRENDERGAST has been our Executive Vice President, Finance and a
director since our initial public offering in August 1999. From May 1997 to
August 1999, Mr. Prendergast was the Chairman and CEO of AT&T Investment
Management Corp. Prior to 1997, Mr. Prendergast was the Vice President and
Treasurer of AT&T for 14 years. Mr. Prendergast currently is a director of AT&T
Investment Management Corp., a money management subsidiary of AT&T.

E. MARGIE FILTER has been a director of LaBranche since October 1999.
Ms. Filter joined Xerox Corporation in 1973, and is currently Vice President,
Treasurer and Secretary of Xerox Corporation and President and Chief Executive
Officer of Xerox Credit Corporation. Ms. Filter is also a director of Baker
Hughes Inc. and Briggs and Stratton Corporation.

THOMAS E. DOOLEY has been a director of LaBranche since March 2000.
Mr. Dooley is Co-Chairman and Chief Executive Officer of DND Capital Partners, a
venture capital and investment advisory firm that specializes in the media and
telecommunications markets. Prior to forming DND Capital Partners in June 2000,
Mr. Dooley was Deputy Chairman of Viacom Inc. He was also a member of Viacom's
Executive Committee, its Board of Directors and held the title of Executive Vice
President, Finance, Corporate Development and Communications. Mr. Dooley
currently is a director of the International Radio & Television Society.
Additionally, he is a member of the Cable and Telecommunications Association for
Marketing (CTAM), the Museum of Television and Radio and the American Management
Association.

HARVEY S. TRAISON has been our Senior Vice President and Chief Financial
Officer and a director since March 2000. As of December 31, 1999, Mr. Traison
retired from the position of Vice President, Treasurer and Member of the Board
of Directors of DaimlerChrysler North America Holding Corporation and
DaimlerChrysler Canada Finance Inc. Mr. Traison joined Daimler-Benz (a
predecessor of DaimlerChrysler) in 1984.

MICHAEL J. NAUGHTON has been our Senior Vice President since our initial
public offering in August 1999. Mr. Naughton has been a specialist with
LaBranche & Co. LLC since 1979 and was appointed to the Managing Committee of
LaBranche & Co. LLC in 1990. Mr. Naughton has notified us of his intention to
retire as of March 31, 2001.

MICHAEL ROBBINS has been a director of LaBranche since December 2000.
Mr. Robbins has been chairman of Robbins & Henderson, LLC, a broker-dealer firm,
since 1995. In addition, Mr. Robbins has been a member of the NYSE since 1962,
has been a governor and floor official of the NYSE since 1991 and currently
holds positions on several governing committees of the NYSE.

There are no family relationships among any of our directors and executive
officers.

BOARD COMMITTEES

Our Board of Directors has an audit committee and a compensation committee.

The audit committee of our Board of Directors was established on March 17,
2000 and is composed of E. Margie Filter, Thomas E. Dooley and Michael Robbins.
The audit committee reviews, acts on and reports to our Board of Directors with
respect to various auditing and accounting matters, including the recommendation
of our auditors, the scope of our annual audits, fees to be paid to our
auditors, the performance of our independent auditors and our accounting
practices. The audit committee is comprised solely of independent directors.

The compensation committee of our Board of Directors was established on
March 17, 2000 and is composed of E. Margie Filter, Thomas E. Dooley, Michael
Robbins and Michael LaBranche. The compensation committee recommends, reviews
and oversees salaries, bonuses, benefits and equity incentives for our
employees, consultants and directors. The compensation committee also
administers our incentive compensation plans. The compensation committee is
comprised of a majority of independent directors.

Prior to March 17, 2000, the duties described above were performed by our
Board of Directors.

DIRECTOR COMPENSATION

We have appointed three non-employee directors. Each of our non-employee
directors currently receives an annual retainer of $28,000 and attendance fees
of $1,500 per board meeting and $1,000 per committee meeting attended. The
attendance fees are paid after the end of each year in shares of our common
stock under our Equity Incentive Plan. Our employee directors do not receive any
additional compensation for serving on our Board of Directors or any committee
of our board.

EXECUTIVE COMPENSATION

Prior to our reorganization transactions in August 1999, many of our
managing directors were members of LaB Investing Co. L.L.C., the former general
partner of LaBranche & Co. LLC (when it was a partnership). The aggregate amount
of compensation received by all our managing directors generally approximated
LaB Investing Co. L.L.C.'s interest in LaBranche & Co. LLC's income before
managing directors' compensation. These payments of compensation were allocated
among our managing directors based on the managing directors' respective
percentage interests in the profits of LaB Investing Co. L.L.C. Since our
reorganization from partnership to corporate form, our managing

directors, including our executive officers, receive compensation in the form of
salary plus participation in our Equity Incentive Plan and our Annual Incentive
Plan.

The following table sets forth the annual compensation we paid during fiscal
2000 and 1999 to our Chief Executive Officer and our four other highest paid
executive officers named in the table whose total salary for fiscal 2000 and
1999 exceeded $100,000 for services rendered to LaBranche and its subsidiaries
in all capacities. The amounts for 1999 reflect the amounts paid to these
individuals under the compensation arrangements in effect prior to our
reorganization in August 1999, plus amounts paid under the restructured
compensation plan following our reorganization. As a result, these amounts may
not be indicative of amounts to be paid to the named executive officers in
future years.

SUMMARY COMPENSATION TABLE

POST-REORGANIZATION
--------------------------------------------------
LONG TERM
COMPENSATION
------------- PRE-REORGANIZATION
ANNUAL ------------------
COMPENSATION SECURITIES
------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) STOCK OPTIONS COMPENSATION(2)
--------------------------- -------- -------- ------------ ------------- ------------------

Michael LaBranche .................... 2000 $250,000 $3,450,000 -- $ --
Chairman, Chief Executive Officer 1999 93,750 815,460 500,000 4,226,312
and President

James G. Gallagher ................... 2000 250,000 1,075,000 -- --
Executive Vice President 1999 93,750 375,625 250,000 2,826,863

Alfred O. Hayward, Jr. ............... 2000 250,000 1,950,000 -- --
Executive Vice President 1999 93,750 500,460 100,000 2,831,843

Vincent J. Flaherty .................. 2000 229,167 900,000 --(3) --
Senior Vice President, Floor 1999 93,750 300,460 50,000 4,010,514
Operations

Michael J. Naughton .................. 2000 250,000 700,000 -- --
Senior Vice President, Specialist 1999 93,750 250,460 100,000 2,831,843
Operations

------------------------

(1) Reflects bonus amount earned in such fiscal year.

(2) Reflects managing directors' compensation from our partnership paid to our
named executive officers before our reorganization.

(3) Mr. Flaherty forfeited options to purchase 33,333 shares of common stock due
to his retirement from LaBranche on November 30, 2000.

The following table sets forth certain summary information concerning
individual grants of stock options made during the year ended December 31, 2000
to each of our named executive officers.

OPTION GRANTS IN LAST FISCAL YEAR

We did not grant any options to our named executive officers during the year
ended December 31, 2000. The following table sets forth the number of options
and value of unexercised options held by each of our named executive officers at
December 31, 2000.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT YEAR
OPTIONS AT YEAR END END
--------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ------------- -------------

Michael LaBranche............................. 166,667 333,333 $2,760,422 $5,520,828
James G. Gallagher............................ 83,333 166,667 1,380,203 2,760,422
Alfred O. Hayward, Jr......................... 33,333 66,667 552,078 1,104,172
Michael J. Naughton........................... 33,333 66,667 552,078 1,104,172

EMPLOYMENT AGREEMENTS AND NONCOMPETITION AGREEMENTS

As part of the reorganization of our firm from partnership to corporate form
in anticipation of our initial public offering, our managing directors, all of
whom were members of LaB Investing Co. L.L.C. prior to the initial public
offering, exchanged their membership interests in LaB Investing Co. L.L.C. for
shares of our common stock. We have entered into employment agreements, pledge
agreements and agreements regarding noncompetition and other covenants with all
members who continued as managing directors after our initial public offering,
including each managing director who is a member of our board of directors or is
an executive officer. We have also entered into an employment agreement and
noncompetition agreement with S. Lawrence Prendergast, our Executive Vice
President, Finance, and an employment agreement with Harvey S. Traison, our
Senior Vice President and Chief Financial Officer, which contains comparable
provisions regarding noncompetition. The material terms of the employment,
noncompetition and pledge agreements are described below.

THE EMPLOYMENT AGREEMENTS

Each employment agreement, other than the employment agreements with
Messrs. Prendergast and Traison, has an initial term of at least one but not
more than five years, requires the employee to devote his entire working time to
our business and affairs, contains various restrictive covenants and is
terminable on 90 days' notice by either party. The employment agreement with
Mr. Prendergast has an initial term of one year, requires him to devote his time
as is reasonably necessary for him to perform his duties and responsibilities
and is terminable on 30 days' notice by either party. The employment agreement
with Mr. Traison has an initial term of three years, requires him to devote
substantially all his business time to the performance of his duties and
responsibilities, is terminable on 90 days' notice by either party and provides
for automatic one-year renewals, subject to notice of termination.

THE NONCOMPETITION AGREEMENTS

Each noncompetition agreement contains the following provisions:

CONFIDENTIALITY. The managing director or executive officer who is a party
to the agreement is required to protect and use "confidential information" in
accordance with the restrictions which we place on its use and disclosure.

NONCOMPETITION. During employment and until the later of 12 months
following termination of employment with us or the fifth anniversary of our
initial public offering, the managing director or executive officer who is a
party to the agreement may not:

- form, or acquire a 5% or greater ownership, voting or profit participation
interest in, any competitive enterprise; or

- associate with any competitive enterprise and in connection with such
association engage in, or directly or indirectly manage or supervise
personnel engaged in, any business activity that is related to his or her
activities with us.

For this purpose, a "competitive enterprise" is any business enterprise that
engages in activity, or owns or controls a significant interest in an entity
that engages in activity that competes, directly or indirectly, with any
activity in which we are engaged. These activities include, without limitation,
specialist services and/or securities brokerage, sales, lending, custody,
clearance, settlement or trading.

NONSOLICITATION. During employment and until the later of 12 months
following termination of employment with us or the fifth anniversary of our
initial public offering, the managing director or executive officer who is a
party to the agreement may not, directly or indirectly:

- solicit any of our listed companies;

- interfere with or damage any relationship between us and any of our listed
companies or prospective allocated companies; or

- solicit any of our employees to apply for, or accept employment with, any
competitive enterprise.

TRANSITION ASSISTANCE. Each noncompetition agreement also provides that the
managing director or executive officer who is a party to the agreement will take
all actions and do all things reasonably requested by us during a 90-day
transition period following termination of employment to maintain the business,
goodwill and business relationships in which or with which he or she was
previously involved on our behalf.

LIQUIDATED DAMAGES. If a managing director breaches the noncompetition or
nonsolicitation provisions of the noncompetition agreement before the later of
12 months following termination of employment with us or the fifth anniversary
of the date of our initial public offering, then he or she will be liable for
liquidated damages in an amount equal to 75% of the aggregate value of the
common stock and cash received by that managing director from us in exchange for
his or her membership interest in LaB Investing Co. L.L.C. The noncompetition
agreement with our Executive Vice President, Finance does not provide for the
payment of liquidated damages. The noncompetition provisions of the employment
agreement with our Senior Vice President/Chief Financial Officer also does not
provide for the payment of liquidated damages.

THE PLEDGE AGREEMENTS

Under the pledge agreements, the liquidated damages obligations under the
noncompetition agreements are secured by a pledge of common stock with an
initial value equal to 100% of the liquidated damages amount. A managing
director's pledge agreement will terminate on the earliest to occur of:

- the death of the managing director;

- the fifth anniversary of the date of the completion of our initial public
offering; or

- payment in cash or other satisfaction by the managing director of all
liquidated damages incurred.

NONEXCLUSIVITY AND ARBITRATION

The liquidated damages and pledge arrangements discussed above are not
exclusive of any injunctive relief to which we may be entitled for a breach of a
covenant against competition or solicitation. Prior to and after the expiration
of the pledge agreements, we will be entitled to all available remedies for a
breach of the noncompetition agreements. The employment and noncompetition
agreements generally provide that any disputes thereunder will be resolved by
binding arbitration.

INCENTIVE AWARDS TO LABRANCHE'S EMPLOYEES

THE EQUITY INCENTIVE PLAN

As of December 31, 2000, there were outstanding, under our Equity Incentive
Plan, (1) options granted to our executive officers to purchase an aggregate of
1,150,000 shares of our common stock at a purchase price of $14.00,
(2) restricted stock units for 950,262 shares of common stock granted to our
employees who are not managing directors, (3) 300,000 shares of restricted stock
issued to three floor brokers at our Henderson Brothers subsidiary and (4) 368
shares of unrestricted stock issued to one of our independent directors as
compensation for her attendance at board meetings in 1999. Subject to continuing
service with the firm and certain other conditions, the options already granted
generally are exercisable in three equal annual installments commencing on the
first anniversary of the date of the grant. The outstanding restricted stock
units generally will vest in three equal annual installments commencing on
August 24, 2002 (the third anniversary of our August 24, 1999 initial public
offering).

TYPES OF AWARDS. The Equity Incentive Plan provides for grants of options
to purchase shares of common stock, including options intended to qualify as
incentive stock options ("ISOs") (within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended), and options which do not qualify as
ISOs ("NQSOs"), restricted shares of our common stock, restricted stock units,
the value of which is tied to shares of our common stock, and other equity-based
awards related to our common stock.

AVAILABLE SHARES. A maximum of 4,687,500 shares of our common stock has
been reserved for issuance under the Equity Incentive Plan. The number, class
and exercise price per share will be adjusted proportionately or as otherwise
appropriate to reflect any increase in, decrease in, or exchange of the
outstanding shares of our common stock through merger, consolidation,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend or similar corporate transaction. These shares may be authorized but
unissued shares of our common stock or issued shares of our common stock held in
our treasury or otherwise acquired for the purposes of the Equity Incentive
Plan. New awards may be granted under the Equity Incentive Plan with respect to
shares of our common stock covered by any award that terminates or expires by
its terms (by cancellation or otherwise) or with respect to shares of our common
stock that are withheld or surrendered to satisfy a recipient's income tax or
other withholding obligations or tendered to pay the purchase price of any
award. As of December 31, 2000, there were available 2,270,203 shares of our
common stock with respect to which awards may be granted under the Equity
Incentive Plan.

The maximum number of shares of our common stock with respect to which
options, restricted stock, restricted stock units or other equity-based awards
may be granted under the Equity Incentive Plan during any calendar year to any
employee may not exceed 500,000 shares, subject to adjustment upon certain
corporate transactions (as described above).

ELIGIBILITY. Awards under the Equity Incentive Plan may be granted to any
of our directors, officers, managing directors or other employees, including any
prospective employee, and to any of our advisors or consultants selected by the
compensation committee of our Board of Directors.

100

ADMINISTRATION. The Equity Incentive Plan is administered by the
compensation committee of our board of directors. The compensation committee has
full discretion and authority to make awards under the Equity Incentive Plan, to
apply and interpret the provisions of the Equity Incentive Plan and to take such
other actions as may be necessary or desirable in order to carry out the
provisions of the Equity Incentive Plan. The determinations of the compensation
committee on all matters relating to the Equity Incentive Plan and the options,
restricted stock, restricted stock units and other equity-based awards granted
thereunder are final, binding and conclusive.

STOCK OPTIONS. The compensation committee may authorize the grant of ISOs
and NQSOs in such amounts and subject to such terms and conditions as it may
determine. The exercise price of an option granted under the Equity Incentive
Plan may not be less than the fair market value of our common stock on the date
of grant (as determined under the plan). Unless sooner terminated or exercised,
options will generally expire ten years from the date of grant. Payment for
shares acquired upon the exercise of an option may be made (as determined by the
compensation committee) in cash and/or such other form of payment as may be
permitted from time to time, which may include previously-owned shares of our
common stock or pursuant to a broker's cashless exercise procedure. Except as
otherwise permitted by the compensation committee, no option may be exercised
more than 30 days after termination of the optionee's service (or, if the
optionee's service is terminated by reason of disability or death, one year
thereafter). If an optionee's employment is terminated for cause, the options
held by such optionee immediately terminate. An optionee has none of the rights
of a stockholder with respect to shares subject to an option until the issuance
of such shares.

RESTRICTED STOCK. The compensation committee may grant restricted shares of
our common stock in amounts, and subject to terms and conditions (such as time
and/or performance-based vesting criteria), as it may determine. Generally,
prior to vesting, the recipient has the rights of a stockholder with respect to
the restricted stock, subject to any restrictions and conditions as the
compensation committee may include in the award agreement.

RESTRICTED STOCK UNITS. The compensation committee may grant restricted
stock units, the value of which is tied to shares of our common stock, in
amounts, and subject to terms and conditions, as the compensation committee may
determine. Recipients of restricted stock units have only the rights of general
unsecured creditors and no rights as a stockholder until the common stock
referenced by the restricted stock units is delivered to the recipient.

OTHER EQUITY-BASED AWARDS. The compensation committee may grant other types
of equity-based awards related to our common stock under the Equity Incentive
Plan, including the grant of unrestricted shares of our common stock and stock
appreciation rights, in amounts and subject to terms and conditions as the
compensation committee may determine. These awards may involve the transfer of
actual shares of common stock or the payment in cash or otherwise of amounts
based on the value of shares of our common stock.

CHANGE IN CONTROL. The compensation committee may provide, in any award
agreement, for provisions relating to a "change in control" of us or any of our
subsidiaries or affiliates, including, without limitation, the acceleration of
the exercisability of, or the lapse of restrictions with respect to, the award.

NONASSIGNABILITY. Except to the extent otherwise provided in an award
agreement or approved by the compensation committee with respect to NQSOs, no
award granted under the Equity Incentive Plan will be assignable or transferable
other than by will or by the laws of descent and distribution and all awards
will be exercisable during the life of a recipient only by the recipient or his
or her legal representative.

101

AMENDMENT AND TERMINATION. The Equity Incentive Plan may be amended or
terminated at any time by our board of directors, subject, however, to
stockholder approval in the case of certain material amendments, such as an
increase in the number of shares available under the Equity Incentive Plan or a
change in the class of individuals eligible to participate in the Equity
Incentive Plan.

U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description
of the material U.S. federal income tax consequences generally applicable to
awards granted under the Equity Incentive Plan.

The grant of an option will have no income tax consequences to the recipient
or to us. Upon the exercise of an option, other than an ISO, the recipient
generally will recognize ordinary income equal to the excess of the fair market
value of the shares of common stock subject to the option on the date of
exercise over the exercise price for such shares (i.e., the option spread), and
we generally will be entitled to a corresponding tax deduction in the same
amount. Upon the sale of the shares of our common stock acquired pursuant to the
exercise of an option, the recipient will recognize capital gain or loss equal
to the difference between the selling price and the sum of the exercise price
plus the amount of ordinary income recognized on the exercise.

A recipient generally will not recognize ordinary income upon the exercise
of an ISO (although, on exercise, the option spread is an item of tax preference
potentially subject to the alternative minimum tax), and we will not receive any
deduction. If the stock acquired upon exercise of an ISO is sold or otherwise
disposed of within two years from the grant date or within one year from the
exercise date, then gain realized on the sale generally is treated as ordinary
income to the extent of the ordinary income that would have been realized upon
exercise if the option had not been an ISO, and we generally will be entitled to
a corresponding deduction in the same amount. Any remaining gain is treated as
capital gain.

If the shares acquired upon the exercise of an ISO are held for at least two
years from the grant date and one year from the exercise date and the recipient
is employed by us at all times beginning on the grant date and ending on the
date three months prior to the exercise date, then all gain or loss realized
upon the sale will be capital gain or loss and we will not receive any
deduction.

In general, an individual who receives an award of restricted stock will
recognize ordinary income at the time such award vests in an amount equal to the
difference between the value of the vested shares and the purchase price for
such shares, if any, and we generally will be entitled to a deduction in an
amount equal to the ordinary income recognized by the recipient at such time.

The recipient of an award of restricted stock units generally will recognize
ordinary income upon the issuance of the shares of common stock underlying such
restricted stock units in an amount equal to the difference between the value of
such shares and the purchase price for such units and/or shares, if any, and we
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the recipient at such time.

With respect to other equity based awards, upon the payment of cash or the
issuance of shares or other property that is either not restricted as to
transferability or not subject to a substantial risk of forfeiture, the
participant generally will recognize ordinary income equal to the cash or the
fair market value of shares or other property delivered, less any amount paid by
the participant for such award. Generally, we will be entitled to a deduction in
an amount equal to the ordinary income recognized by the participant.

THE ANNUAL INCENTIVE PLAN

We adopted the LaBranche & Co Inc. Annual Incentive Plan at the time of our
initial public offering in August 1999. Our managing directors and other
employees selected by the compensation committee of our board of directors are
eligible to participate in the Annual Incentive Plan. Under this

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plan, a compensation pool of up to 30% of our pre-tax income, or such lesser
percentage determined by the compensation committee, is set aside for our
managing directors and other employees selected by the compensation committee to
participate in this plan. In determining the 30% compensation pool, each
managing director's salary of $250,000 per year and the compensation expenses
relating to the awards under our Equity Incentive Plan are deducted. Under the
plan, no individual participant may receive more than 25% of the compensation
pool for any fiscal year. The amounts payable under the Annual Incentive Plan to
our plan participants are reviewed on an annual basis and are based on such
factors and considerations as the compensation committee deems appropriate in
individual cases and on our operating results and the overall performance of
these participants. An award by the compensation committee to our managing
directors and other employees is completely discretionary. The Annual Incentive
Plan may be amended or terminated at any time by our board of directors.

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PRINCIPAL STOCKHOLDERS OF LABRANCHE

The following table sets forth information as of January 31, 2001 regarding
the beneficial ownership of our common stock by:

- each person known by us to own beneficially more than five percent of the
outstanding common stock;

- each of our directors;

- each executive officer named in the Summary Compensation Table (see
"Executive Compensation" above); and

- all our directors and executive officers as a group.

All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated. Unless otherwise indicated, the address
of each beneficial owner is: c/o One Exchange Plaza, New York, New York 10006.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock issuable pursuant to
options, to the extent such options are currently exercisable or convertible
within 60 days of January 31, 2001, are treated as outstanding for purposes of
computing the percentage of the person holding such securities but are not
treated as outstanding for purposes of computing the percentage of any other
person.

PERCENTAGE
SHARES OF SHARES
NAME AND ADDRESS BENEFICIALLY BENEFICIALLY
OF BENEFICIAL OWNER(1) OWNED OWNED
---------------------- ------------------ ------------

George M. L. (Michael) LaBranche, IV................. 3,677,761 7.4
James G. Gallagher................................... 2,285,433 4.6
Alfred O. Hayward, Jr................................ 1,941,401 3.9
S. Lawrence Prendergast.............................. 107,000 *
E. Margie Filter..................................... 1,871 *
Thomas E. Dooley..................................... 451 *
Michael Robbins...................................... 4,052 *
Harvey S. Traison.................................... 4,000 *
Michael J. Naughton.................................. 1,991,401 4.0
All executive officers and directors as a group...... 10,013,370 20.2

------------------------

* Less than 1%

(1) In connection with our initial public offering in August 1999, our managing
directors at that time entered into a stockholders' agreement pursuant to
which they agreed to vote their respective shares as determined by a
majority of Messrs. LaBranche, Gallagher and Hayward. Messrs. LaBranche,
Gallagher and Hayward individually beneficially own an aggregate of
7,904,595 shares of common stock, constituting about 16.0% of the
outstanding shares of our common stock. As a result of the stockholders'
agreement, Messrs. LaBranche, Gallagher and Hayward, acting together as a
group, may be deemed to beneficially own an aggregate of 34,878,109 shares
of common stock (including the 7,904,595 shares beneficially owned by them
individually), constituting about 70.6% of the outstanding shares of our
common stock. Each of Messrs. LaBranche, Gallagher and Hayward disclaims
beneficial ownership of any and all shares of common stock held by any
person or entity other than him.

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LABRANCHE'S RELATED PARTY TRANSACTIONS

LEASE PAYMENT ON MEMBERSHIPS

Some of our executive officers have contributed the use of their NYSE
memberships to LaBranche & Co. LLC and receive lease payments from LaBranche &
Co. LLC based on the market value of the memberships. For 2000, the named
executive officers listed below received payments from LaBranche & Co. LLC in
the amounts set forth opposite their names:

NAME LEASE INCOME
---- ------------

Michael LaBranche........................................... $276,000
James G. Gallagher.......................................... 276,000
Michael J. Naughton......................................... 276,000

INTEREST ON INDEBTEDNESS

A family member of Mr. Flaherty holds $600,000 of subordinated indebtedness
due August 31, 2001, which currently bears interest at an annual rate of 10.0%
payable on a quarterly basis. Mr. LaBranche's spouse holds $1.3 million of
secured subordinated indebtedness due March 2, 2002, which currently bears
interest at an annual rate of 8.0% payable on a quarterly basis. The agreements
relating to this debt have automatic rollover provisions which extend the
maturities for an additional year, unless the lender provides notice at least
seven months prior to maturity. The interest income in 2000 for Mr. Flaherty's
family member was $60,000 and the interest income in 2000 for Mr. LaBranche's
spouse was $108,333.

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DESCRIPTION OF RPM'S BUSINESS

The following description of the business of RPM does not give effect to the
merger or any changes in RPM's business that LaBranche may effect following
closing.

OVERVIEW

During 2000, RPM was the sixth largest specialist firm on the New York Stock
Exchange based on its shares of NYSE common stock trading volume and total
number of common stock listings. RPM began its specialist operations in 1925,
and as of December 31, 2000 acted as specialist for 203 NYSE listed stocks,
including 129 NYSE listed common stocks. These listed stocks included 15 of the
250 most actively traded common stocks, 21 of the stocks comprising the S&P 500
and three of the 30 Dow Jones Industrial Average stocks. Selected stocks handled
by RPM as specialist include Bristol-Myers Squibb Company, Cigna Corporation,
CSX Corporation, Delta Air Lines, E.I. duPont de Nemours, Eastman Kodak Company,
H.J. Heinz Company, Philip Morris Companies, Inc., United Parcel Service, Wells
Fargo & Company and Whirlpool Corporation. RPM's strong portfolio of U.S.
companies is enhanced by a diverse portfolio of foreign companies including
Telecom Brasileiras S.A. (Telebras) of Brazil, Nippon Telegraph & Telephone
Corporation of Japan, ScottishPower, Jefferson Smurfit Group PLC of Ireland,
Tele Danmark A/S, Compania De Telecomunicaciones De Chile S.A. (Chilean
Telephone), Telecom Argentina Stet-France Telecom S.A., Grupo Televisa, S.A. and
Cemex, S.A. de C.V. of Mexico.

RPM also has provided clearing, execution and other services to a variety of
customers including NYSE specialist firms, broker-dealers, financial
institutions, traders and professional investors for the past 25 years. These
services are provided utilizing RPM's in-house data processing system, which
enables tailor-made reports to be provided to RPM's clients. RPM clears for its
specialist operations, and these clearing activities for the specialist
operations accounted for about 5.6% of RPM's clearing revenues for the fiscal
year ended April 28, 2000 and about 5.3% of RPM's clearing revenues for the six
months ended October 27, 2000.

COMPETITIVE ADVANTAGES

RPM is committed to providing the highest quality service to its various
constituencies. It believes that its success is based on the following factors:

- POSITION AS A LEADING SPECIALIST. RPM is one of the leaders in the NYSE
specialist industry. According to rankings maintained by the NYSE, RPM was
the sixth largest NYSE specialist based on its shares of NYSE common stock
trading volume and total number of common stock listings as of and for the
twelve months ended December 31, 2000. RPM also has been typically ranked
in the top tier on quarterly evaluations issued by the NYSE since the
inception of its tiered system seven years ago.

- ABILITY TO PROVIDE SPECIALIST AND CLEARING ACTIVITIES. RPM believes that
its ability to provide both specialist and clearing activities gives it a
competitive advantage because its clearing corporation is able to act as
clearing agent for its specialist corporation.

- HIGH QUALITY PORTFOLIO OF SPECIALIST STOCKS IN MULTIPLE INDUSTRIES. As of
December 31, 2000, RPM acted as specialist for more than 200 stocks. RPM's
listed companies operate in a variety of

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areas including chemical, electrical products, financial services,
utilities and telecommunications. RPM has been successful in competing for
new stock listings, having been awarded 45 new securities over the past
three years.

- EXCELLENT GROWTH WITH STRONG FUNDAMENTALS. The NYSE is the largest
securities market in the world, and RPM expects that long-term growth in
trading on the NYSE will continue. The average daily volume of securities
traded on the NYSE increased to 1.04 billion shares in 2000 from
346.1 million shares in 1995. For the nine-month period ended October 27,
2000, the average daily volume of securities traded on the NYSE increased
to 1.0 billion shares.

- EFFECTIVE RISK MANAGEMENT AND CONSERVATIVE BUSINESS PRACTICES. RPM uses
risk management programs which it has strengthened in the past year. In
addition, RPM does not engage in derivative transactions (other than
occasional listed options trading by the specialists), so it has limited
exposure to interest rates or currency fluctuations. See "RPM's Specialist
Activities--Business Risks and Risk Management."

- HIGHLY VARIABLE EXPENSE STRUCTURE TIED DIRECTLY TO REVENUES. RPM's expense
structure is highly variable, consisting primarily of compensation to
specialists, which is directly tied to trading revenues. As a result, if
trading revenues decline, compensation expense is reduced accordingly.
Compensation expense represented 67.0%, 65.0%, 56.0% and 63.0% of total
expenses for the years ended April 24, 1998, April 30, 1999, April 28,
2000 and the six months ended October 27, 2000, respectively.

- STRONG CASH FLOWS. RPM has historically generated, and expects to continue
generating, strong cash flows. For the fiscal years ended April 30, 1999
and April 28, 2000, EBITDA was $39.4 million and $29.6 million,
respectively. EBITDA for the six months ended October 27, 2000 was
$16.4 million.

- HIGHLY EXPERIENCED MANAGEMENT. RPM is led by an experienced management
team. Members of RPM's management team for its specialist operations have
an average of 22 years of industry experience and 12 years with RPM, and
members of RPM's management team for its clearing operations have an
average of 25 years of industry experience and 10 years with RPM. Members
of RPM's current management team have initiated a number of changes that
have significantly improved RPM's financial performance, market reputation
and product portfolio. These changes include:

- adopting a market-driven, order-flow enhancing trading strategy;

- emphasizing regular communication with listed companies and NYSE floor
brokers;

- hiring highly experienced management and traders; and

- leveraging existing stocks to enhance new stock allocations.

- STRONG AND HIGHLY LIQUID BALANCE SHEET. As of October 27, 2000, the
majority of RPM's assets were comprised of cash and cash equivalents, a
highly diversified inventory of readily marketable securities, and
short-term receivables collateralized by readily marketable securities.
Marketable securities are marked to market daily for financial statement
purposes and continuously marked to market for risk management and
regulatory purposes.

RPM'S SPECIALIST ACTIVITIES

INDUSTRY BACKGROUND. For a description of the specialist industry, see
"Description of LaBranche's Business--Industry Background."

ACTIVITIES. As a NYSE specialist, RPM acts as both a market maker (in
principal transactions) and agent. In its dealer or market maker function, RPM
takes positions in the specialty stock for its own

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account and may do so in expectation of making trading profits. For the fiscal
year ended April 28, 2000, 62.1% of RPM's specialist revenues, or
$42.2 million, were accounted for by trading profits from positions RPM took in
its specialty stocks for its own account; and for the six months ended
October 27, 2000, 78.3% of RPM's specialist revenues or $37.8 million were
accounted for by trading profits from positions RPM took in its specialty
stocks. For the year ended April 28, 2000, 32.4% of RPM's specialist revenues or
$22.7 million were accounted for by floor brokerage fees generated from engaging
in its agency function; and for the six months ended October 27, 2000, 15.8% of
RPM's specialist revenues or $7.6 million were accounted for by floor brokerage
fees generated from engaging in its agency function. RPM's specialist revenues
have grown considerably over the last five fiscal years, with the exception of
losses relating to the initial trading of a single stock in November 1999. This
growth has been accomplished through:

- improved principal trading in RPM's specialty stocks;

- increases in the number of specialty stocks handled; and

- overall volume growth on the NYSE.

LISTINGS BY INDUSTRY. Following is the breakdown by percentage of the
industries in which RPM's listed companies operated as of December 31, 2000:

- 50.6% were industrial companies;

- 7.6% operated in the financial industry;

- 21.8% were funds, trusts or REITs;

- 13.5% operated in the utilities industry;

- 5.3% operated in the telecommunications industry; and

- 1.2% were conglomerates.

LISTED COMPANIES. RPM's listed companies include the following stocks
listed in the Dow Jones Industrial Average:

- E.I. du Pont de Nemours & Co.;

- Eastman Kodak Company; and

- Philip Morris Companies, Inc.

In addition to DuPont and Eastman Kodak, which are S&P 100 listed companies,
RPM's listed companies include the following S&P 100 stocks:

- American Electric Power;

- Bristol-Myers Squibb Company;

- Cigna Corporation;

- Delta Air Lines, Inc.;

- Hartford Financial Services Group;

- H.J. Heinz Company;

- Wells Fargo & Co.; and

- Exelon Corporation.

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NYSE MEMBERSHIPS. Under NYSE rules, each individual specialist must have a
seat in order to trade. As of December 31, 2000, RPM had 27 specialists. RPM
currently has access to 27 seats including:

- ten NYSE seats, which are owned by RPM and used by RPM's individual
specialists, pursuant to so-called A-B-C agreements;

- 15 seats leased from third parties; and

- two seats that are owned by employees and have been contributed to RPM for
its use.

STOCK ALLOCATION PROCESS. Companies that elect to list their shares on the
NYSE are assigned to a single specialist unit through the NYSE stock allocation
process. In 1997, the NYSE changed its allocation policy so as to allow a
listing company the option of having its stock assigned by a committee or having
the committee select a pool of three to five specialists from which the company
makes the final selection. Most newly listed companies choose the latter option.
From the inception of the new interview process in 1997 through December 31,
2000, RPM has participated in 71 interviews and was selected by companies 33
times, representing a success rate of 46.5%. RPM has in place a listed company
services program that appeals to newly-listed companies and maintains an
excellent relationship with existing listed companies, who often refer companies
considering listing on the NYSE to RPM.

BUSINESS RISKS AND RISK MANAGEMENT. As a result of the specialist's duty to
maintain a fair and orderly market under applicable rules, the specialist is
required to effect transactions for its own dealer's account when lack of price
continuity, lack of depth, or disparity between supply and demand exists or is
reasonably to be anticipated. The specialist is therefore required to assume
certain risks if there is an absence of buying or selling by the public in the
specialist's assigned stock. In a declining market for a specialty stock where
there are few buyers and many sellers, to fulfill the specialist's function of
maintenance of a fair and orderly market, the specialist generally is required
to buy stock for its own account at, potentially, progressively lower prices and
have the risk of loss associated with purchasing the specialty stock in a
progressively declining market. Similarly, in a rising market for a specialty
stock where there are few sellers and many buyers, the specialist generally is
required to sell stock from its own positions and might be forced to sell stock
at prices far below those which the specialist believes the securities to be
worth, or, if the specialist does not have stock in its inventory, the
specialist is required to borrow stock to sell short into a rising market, which
could also cause a loss to the specialist.

Although the specialist has a duty to maintain a fair and orderly market,
the rules are sufficiently flexible to allow the specialist to reduce its
potential exposure in situations where its specialty stock is either rapidly
declining or rapidly rising. In the conduct of its agency business, RPM, as a
NYSE member, is responsible for settlement of such transactions and, if payment
for securities purchased or delivery of securities sold is not made, RPM may be
liable for those transactions and may suffer a loss. With regard to RPM's
portfolio of specialist stocks, poor performance in a particular stock could
result in the reallocation of that stock to another specialist. RPM also could
lose the stock of a particular company to another specialist if that company is
the subject of a takeover but not the surviving company in the transaction. RPM,
however, could be on the receiving end of either of these potential stock
reallocations with respect to the stocks of other specialists.

Although the above risks are present in RPM's operation of its business, RPM
employs risk management programs to attempt to minimize these risks. These
programs include:

- real-time position management systems;

- automated alert systems;

- intra-day management reports;

109

- conservative trading strategies;

- overnight trading to reduce positions and diversify holdings;

- compliance programs; and

- management supervision.

RPM also benefits from the additional monitoring of positions and capital
provided to all of the specialists by the NYSE on a daily basis.

After experiencing significant trading losses in United Parcel
Service, Inc. stock in November 1999, RPM conducted a comprehensive review of
its risk management policies and implemented revised procedures. The new
procedures establish more stringent risk tolerance levels and significantly
limit individual trader discretion within specific position guidelines. Under
the new procedures, two directors have been designated position managers. These
directors monitor RPM's overall positions and the positions in each specialist
stock throughout the trading day. If, during the trading day, RPM's overall
positions grow too one-sided (long versus short), or a position in a particular
security grows unusually large, one or more specialists may be instructed to use
their best efforts to reduce positions. They also establish position limits for
each security handled by RPM based on a formula approved by RPM's board of
directors. These limits are updated monthly based on the current price and
volume for each security. Senior management approval, including in certain cases
unanimous board approval, is required to exceed position limits.

Risk management for specialists begins with a sound trading strategy. RPM
trades aggressively throughout the day when the risks of trading are the lowest,
and attempts to maintain relatively small overnight positions when risk becomes
relatively greater. RPM tries to buy and sell nearly identical amounts of stock
every day and its average net overnight positions are less than 1/20th the
amount of purchases and sales on an average day. During the trading day, RPM
uses two automated risk management systems:

- the position management system, which monitors every principal trade in
every stock traded by RPM, and shows the amount of shares purchased, sold,
current position, and daily and monthly profits and losses for each stock
and for RPM in general on a real-time basis, and

- a proprietary system that monitors the activity in all of RPM's specialist
stocks and alerts management to unusual market situations; this system
generates additional reports during the day to ensure the position
management system's accuracy, and if any stock demonstrates unusual market
activity or price fluctuations this system sends an automatic message to
all of the members of RPM's management committee who can intervene to
ensure that the specialist is handling the situation properly.

In addition, several times throughout the trading day a verification system
is used to ensure the accuracy of the position management system. Each
specialist is provided with a position limit for every security handled by him
or her. Before establishing a position greater than the position limit, the
specialist must get the approval of at least one of RPM's directors. Positions
that significantly exceed position limits require additional approvals based on
specific criteria, and a position of $30 million or more in any security
requires unanimous consent of all of RPM's directors and then only in situations
in which the position can be easily liquidated or hedged. Under no circumstances
will RPM establish a position in excess of $100 million in any one security; and
with the exception of the trading in UPS in November 1999, RPM has never held a
position of this size.

RPM's management committee meets weekly to discuss specific trading
situations and individual specialist performance. RPM periodically reviews a
wide array of statistical data and makes decisions on the assignment of stocks
to individual specialists. RPM assigns difficult or high-risk securities to its
most senior traders, all of whom are holders of its equity. RPM may reassign
other securities if an

110

individual specialist has suffered a significant loss in a security. This
practice is intended to eliminate the tendency for a trader to take additional
risk in an effort to "make up" for previous losses. RPM's trading philosophy
emphasizes repeated small profits and conservative short-term trading, rather
than taking risks associated with seeking large profits in a single trade.

MARKETING STRATEGY. It is a priority for RPM's management to proactively
identify potential listing companies before the allocation process begins. RPM
contacts these companies and commences its marketing efforts upon determining
that they are considering listing on the NYSE. RPM's marketing efforts typically
consist of members of its management group visiting with the companies that are
considering listing on the NYSE and describing its services. RPM also provides
written literature describing its operations, its listed companies, its 75-year
history as a specialist firm and the specialist industry in general.

RPM'S CLEARING ACTIVITIES

OVERVIEW. RPM is a provider of securities clearing and other related
services to individual and institutional clients, including traders,
professional investors, institutions and broker-dealers. RPM provides its
clearing customers with securities clearing services that include clearing and
custody services, customer account maintenance and customized data processing
services. As of December 31, 2000, RPM maintained about 4000 active customer
accounts. For the six months ended October 27, 2000, RPM recognized about
$11.9 million in clearance fees, commissions and floor brokerage revenues from
its clearing operations, which accounted for about 17.6% of RPM's total revenues
for the period. RPM clears for its specialist operations, and such clearing
activities accounted for about 80.0% of its clearing transactions and 5.6% of
its clearing revenues for the year ended April 28, 2000.

INDUSTRY BACKGROUND. Several significant trends have influenced the market
for securities clearing and related services, including an increase in equity
trading volumes. The average daily volume of securities traded on the Nasdaq
grew to 1.1 billion shares in 1999 from 401.4 million shares in 1995. For the
nine-month period ended October 27, 2000, the average daily volume of securities
traded on the Nasdaq increased to 1.6 billion shares. The average daily volume
of securities traded on the NYSE increased to 809.2 million shares in 1999 from
346.1 million shares in 1995. The increases in trading volumes have increased
the number of transactions required to be executed, processed and settled.

SOLUTIONS AND STRATEGIES. RPM's goal is to be a provider of securities
clearing and other related services to a wide range of customers including high
net worth professional traders, institutions and prime broker-dealers. To
accomplish this goal, RPM is pursuing the following strategies:

- BE SELECTIVE IN THE CUSTOMERS RPM SERVES. RPM is selective in the clients
that it serves. When determining whether to accept a prospective customer,
RPM evaluates the client's experience in the industry and its financial
condition. After selecting a customer, RPM continues to monitor the
customer's activities as part of its risk assessment program. RPM has
continued to follow these selection standards and monitor its customers,
which it believes will promote its ongoing success by allowing it to
create long-term relationships with customers who demonstrate growth
potential, while minimizing turnover among its client base as well as its
exposure to litigation.

- PROVIDE TIMELY, UPDATED INFORMATION TO ENHANCE AND DIFFERENTIATE RPM'S
SERVICE OFFERINGS. RPM's systems enable it to update customer information
and process transactions in real time as RPM receives them from its
customers.

- INVEST IN AND DEVELOP ITS EMPLOYEES. RPM believes that investing in people
is critical to delivering best execution practices and high quality client
service. RPM has aggressively recruited high caliber people and has
attempted to retain these individuals by providing appropriate
compensation incentives.

111

EXECUTION AND CLEARING SERVICES. In a clearing transaction, the identity of
its client's customer is known to RPM and RPM maintains the customer's account
and performs a variety of services as agent for the customer. The execution and
clearing process requires the performance of a series of complex steps, many of
which are accomplished with data processing equipment. The execution process
begins when RPM accepts its customer's order for the purchase or sale of
securities and electronically transmits the order for execution. When RPM routes
a trade for execution, RPM receives information electronically from the market
maker, electronic communication network or exchange and this information is
electronically entered into RPM's processing system. As RPM executes
transactions, or as they are reported to it by RPM's clearing customers,
customer account balances and records are updated on a real-time basis both in
the customer's databases and in RPM's own proprietary databases.

After the execution process is complete, RPM clears the transaction by
taking possession of the cash of its client's customer, if securities are being
purchased, or certificates, if securities are being sold, and by delivering cash
or certificates to the broker for the other party to the transaction. Both RPM
and its customers generally require that cash, margin buying power or securities
be in the customer's account prior to the execution of an order. RPM deducts the
money, or credits the proceeds, due on the transaction from the customer's
account, including the commission charged by the customer, withholds from the
commission RPM's charge for execution and clearing and any other amounts due to
RPM, and remits the net commission to the customer on a monthly basis. Cash or
certificates received by RPM for its customer will generally be held in the
account on behalf of the customer. RPM sends the customer a monthly or quarterly
statement of the customer's account on behalf of the customer.

The clearing functions for multiple transactions involving brokerage firms
are even more complex. Instead of matching each purchaser and seller in a
transaction and making delivery to and receiving payment from each of them, the
securities industry has established a netting process through which securities
and money are delivered or received between brokerage firms using central
clearing houses such as the DTC or the National Securities Clearing Corporation.

ADDITIONAL CUSTOMER SERVICES. To maintain the personalized services RPM's
clearing customers require, RPM provides the following additional services to
its clearing customers:

- listed executions on all major equity and option exchanges;

- over-the-counter execution;

- in-house fixed income executions or acting in an agency capacity;

- electronic order entry and on-line activity, positions and profit and loss
reports; and

- mutual fund transaction services.

RPM'S CLEARING CUSTOMERS. RPM's target clearing customers range from high
net worth professional traders to broker-dealers and other institutions. No
clearing customer accounted for more than 10% of RPM's clearing revenues for the
year ended April 28, 2000 or the six months ended October 27, 2000. Before
conducting business with a customer, RPM reviews a variety of factors relating
to the prospective customer, including the prospective customer's experience in
the securities industry, financial condition and personal background (or
personal background of the principals of the firm).

RISK MANAGEMENT. RPM attempts to minimize the risks inherent in its
clearing activities. When determining whether to accept a new customer, RPM
evaluates, among other factors, the person's or company's experience in the
industry, the prospective customer's financial condition and (in the case of
corporate clients) the background of the principals of the firm. In addition, it
has multiple layers of protection, including the balances in customers'
accounts, customers' commissions on deposit, clearing deposits and equity in
customer firms, in the event that a customer or one of its customers does not

112

deliver payment for its services. RPM's customer and clearing agreements require
industry arbitration in the event of a dispute. Arbitration is generally less
expensive and more timely than dispute resolution through the court system.

SALES AND MARKETING. A number of RPM's senior executives solicit clearing
customers as part of their job functions. RPM also markets its clearing services
through its web site, and participates in industry conferences.

SALE OF INVESTMENT DIVISION. On February 5, 2000, RPM's clearing
corporation entered into an agreement with Josephthal & Co., Inc. pursuant to
which RPM's clearing corporation agreed to sell its retail investment division
customer accounts and related assets to Josephthal, and Josephthal agreed to
hire some of RPM's investment division employees. As consideration for the
purchase, Josephthal assumed some of the liabilities of RPM's clearing
corporation relating to those assets, including liabilities of up to $250,000
for customer claims, and agreed to pay to RPM's clearing corporation $60,000 in
cash plus a percentage of gross revenues, if any, generated from the acquired
assets (fifteen percent of revenues generated during the three month period
between March 1, 2001 and June 1, 2001 and ten percent of revenues generated
during the fifteen month period between June 1, 2001 and September 1, 2002).

TECHNOLOGY

RPM's success is largely attributable to management's ability to identify
and deploy emerging technologies that facilitate securities clearing. Technology
has enhanced its ability to handle an increasing volume of transactions without
a corresponding increase in personnel. RPM uses technology to provide
customized, detailed account information to its customers and their customers.
RPM strives to develop and implement straight-through processing solutions in
all of its operation processes. This means that it examines each process to
determine ways to minimize manual intervention and to maximize automated or
straight-through processing. Its objective in each process is to intervene
manually only to handle exceptions, and to allow normal transactions to process
automatically. This growth in efficiency allows RPM to handle more transactions
without adding staff in proportion to its transaction volume.

COMPETITION

SPECIALIST MARKET. Like LaBranche, RPM obtains each of its new listings on
the NYSE by participating in an allocation process. As part of this process,
either the allocation committee of the NYSE or the listing company chooses the
specialist firm. RPM expects the intense competition for obtaining new listed
companies to continue and intensify in the future. For a list of the top ten
specialist units as of December 31, 2000, based on their number of common stock
listings, see "Description of LaBranche's Business--Competition." The proposed
merger of RPM with and into LaBranche is an example of the recent consolidation
in the specialist industry, which is attributable, in large part, to the
specialists' need to accumulate stocks, and the combined companies resulting
from the consolidation in the specialist industry may have a stronger capital
position. RPM believes that because of its strong reputation and capital base,
it has competed well in the allocation process, but believes it can compete even
more effectively in combination with LaBranche.

Although the merits of a given specialist firm go beyond quantitative ones,
encompassing qualitative criteria such as the level of service and client
responsiveness, the allocation committee uses objective benchmarks to evaluate
specialist firms. There are several benchmarks used to measure specialists, but
the most widely used is the SPEQ, or Specialist Performance Evaluation
Questionnaire. The SPEQ is a quarterly survey of floor brokers rating the
performance of each specialist with which its does business. The SPEQ places
each specialist into one of four tiers, one being the best and four

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being the worst. RPM has consistently been in the first tier. For a further
description of competitors in the NYSE specialist market, see "Description of
LaBranche's Business--Competition."

Trading in NYSE listed securities also takes place at market centers away
from the NYSE, which, of course, reduces business for NYSE specialists. These
marketplaces include other "regional" exchanges, the over-the-counter or third
market, and computerized market centers such as Instinet. The NYSE has competed
effectively with other market centers based on its agency auction market. The
NYSE spends millions of dollars upgrading its technology to improve the open
auction market. A substantial part of these expenditures benefits the specialist
directly. As the NYSE continues to maintain its market share relative to other
market centers and the number of listed companies on the NYSE continues to
increase, the potential for continued growth of RPM's specialist business
increases. For a further description of market center competition in the
specialist industry, see "Description of LaBranche's Business--Competition."

CLEARING SERVICES. The market for securities clearing services is highly
competitive. RPM expects competition to continue and intensify in the future.
RPM encounters direct competition from firms that offer services to a variety of
persons and institutions. Some of these competitors include:

- Spear, Leeds & Kellogg, L.P. (recently acquired by The Goldman Sachs
Group, Inc.);

- Ernst Investec;

- Southwest Securities, Inc.; and

- U.S. Clearing (a division of Fleet Securities, Inc.).

RPM encounters indirect competition from many other clearing firms that
provide clearing and execution services to the securities industry. RPM believes
that the principal competitive factors affecting the market for its clearing
services are price, technology, financial strength, client service and breadth
of services. Based on management's experience, RPM believes that it presently
competes effectively with respect to each of these factors.

A number of competitors have significantly greater financial, technical,
marketing and other resources than RPM. Some of RPM's competitors offer a wider
range of services and products than RPM offers and have greater name recognition
and more extensive client bases. These competitors may be able to respond more
quickly to new or evolving opportunities, technologies and client requirements
than RPM, and may be able to undertake more extensive promotional activities and
offer more attractive terms to clients. Recent advancements in computing and
communications technology are substantially changing the means by which
securities transactions are effected and processed, including more direct access
online to a wide variety of services and information, and have created a demand
for more sophisticated levels of client service. The provision of these services
may entail considerable cost without an offsetting increase in revenues.
Moreover, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties or may
consolidate to enhance their services and products. New competitors or alliances
among competitors may emerge and they may acquire significant market share.
Additionally, large brokerage firms that currently perform their own clearing
functions may decide to start marketing their clearing services to other
brokerage firms.

GOVERNMENT REGULATION

GENERAL. The securities industry in the United States is subject to
extensive regulation under both federal and state laws. In addition, the SEC,
the NASD, the NYSE, other self-regulatory organizations, commonly known as SROs,
and other regulatory bodies, such as state securities commissions, require
strict compliance with their rules and regulations. As a matter of public
policy, regulatory bodies are charged with safeguarding the integrity of the
securities and other financial markets and with protecting

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the interests of investors participating in those markets, not protecting
creditors or stockholders of broker-dealers. Companies that operate in the
securities industry are subject to regulation concerning many aspects of their
business, including trade practices, capital structure, record retention and the
conduct of directors, officers and employees. Failure to comply with any of
these laws, rules or regulations could result in censure, fine, the issuance of
cease-and-desist orders or the suspension or disqualification of RPM's
directors, officers or employees. RPM has, in the past, been subject to claims
arising from the violation of such laws, rules and regulations. In the past five
years, RPM's regulated companies have paid aggregate fines of less than $135,000
for infractions of these rules and regulations, including less than $85,000 paid
by RPM's specialist corporation and less than $50,000 paid by RPM's clearing
corporation. Neither RPM nor any of its directors, officers or employees is
currently subject to any cease-and-desist orders, suspensions or
disqualifications under the rules of any of these regulatory organizations. An
adverse ruling in the future against RPM or its directors, officers or
employees, including censure or suspension, could result in RPM or its
directors, officers and other employees being required to pay a substantial fine
or settlement, and could result in their suspension or expulsion.

The regulatory environment in which RPM operates is subject to change. RPM's
profitability may be adversely affected as a result of new or revised
legislation or regulations imposed by the SEC, other United States or foreign
governmental regulatory authorities or the NASD. RPM may also be adversely
affected by changes in the interpretation or enforcement of existing laws and
rules by these governmental authorities and the NASD. Additional regulation,
changes in existing laws and rules, or changes in interpretations or enforcement
of existing laws and rules often directly affect the method of operation and
profitability of securities firms. RPM cannot predict what effect any such
changes might have.

NYSE. As a NYSE specialist firm, RPM is under constant review by the NYSE
on all aspects of its operations and financial condition. As part of the price
discovery mechanism implemented by the NYSE, every specialist transaction is
published immediately on the tape and is broadcast worldwide. The NYSE also
employs sophisticated monitoring and stringent rules approved by the SEC. The
NYSE's Market Surveillance Division examines specialists' trading in all stocks,
every trading day, including specialists' decisions to trade or to not trade as
principal.

NET CAPITAL RULE. The net capital rule, which specifies minimum net capital
requirements for registered broker-dealers, is designed to measure the general
financial integrity and liquidity of a broker-dealer and requires that at least
part of its assets be kept in relatively liquid form. In general, net capital is
defined as net worth, plus qualifying subordinated borrowings, less specified
mandatory deductions that result from excluding assets that are not readily
convertible into cash and from the conservative valuation of other specified
assets. Among these deductions are adjustments, which are commonly called
"haircuts," which reflect the possibility of a decline in the market value of
firm inventory prior to disposition. Failure to maintain the required net
capital may subject RPM to suspension or revocation of registration by the SEC
and suspension or expulsion by the NASD and other regulatory bodies and, if not
cured, could ultimately require its liquidation. The net capital rule prohibits
payments of dividends, redemption of stock, the prepayment of subordinated
indebtedness and the making of any unsecured advance or loan to a stockholder,
employee or affiliate, if such payment would reduce its net capital below
required levels.

The net capital rule also provides that the SEC may restrict for up to 20
business days any capital withdrawal, including the withdrawal of equity
capital, or unsecured loans or advances to stockholders, employees or
affiliates, if such capital withdrawal, together with all other net capital
withdrawals during a 30-day period, exceeds 30% of excess net capital and the
SEC concludes that the capital withdrawal may be detrimental to the financial
integrity of the broker-dealer. In addition, the net capital rule provides that
the total outstanding principal amount of a broker-dealer's indebtedness under
specified subordination agreements, the proceeds of which are included in its
net capital, may not exceed 70% of the sum of the outstanding principal amount
of all subordinated indebtedness included in net capital,

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par or stated value of capital stock, paid in capital in excess of par, retained
earnings and other capital accounts for a period in excess of 90 days.

A change in the net capital rule, the imposition of new rules or any
unusually large charges against net capital could limit some of RPM's operations
that require the intensive use of capital and also could restrict RPM's ability
to withdraw capital from RPM's broker-dealer subsidiaries, which in turn could
limit RPM's ability to pay dividends, repay debt or repurchase shares of
outstanding stock. A significant operating loss or any unusually large charge
against net capital could adversely affect RPM's ability to expand or even
maintain its present levels of business.

SPECIALIST MARKET. As a broker-dealer, RPM's specialist corporation is
subject to SEC Rule 15c3-1, which requires minimum net regulatory capital. RPM's
specialist corporation computes its net capital requirements under the uniform
net capital rule on what is known as the "alternative method", and at
October 27, 2000, RPM's specialist corporation's required minimum net capital
under the uniform net capital rule was $250,000. At October 27, 2000, RPM's
specialist corporation had net capital of $110.0 million, which exceeded the
foregoing requirements by about $109.7 million.

The NYSE also requires members registered as specialists to maintain a
minimum regulatory capital dollar amount to establish that they can meet, with
their own net liquid assets, their position requirement. Effective October 31,
2000, the NYSE changed Rule 104, its minimum net liquid asset requirements.
These changes require specialist units that currently exceed five percent in any
of the NYSE's four concentration measures to maintain minimum net liquid assets
based upon the securities for which they act as the specialist. The requirements
state that the net liquid assets must be equivalent to:

- $4.0 million for each stock in the Dow Jones Industrial Average;

- $2.0 million for each stock in the S&P 100 Stock Price Index, excluding
stocks included in the previous classification;

- $1.0 million for each stock in the S&P 500 Stock Price Index, excluding
stocks included in the previous classifications;

- $500,000 for each common stock, excluding bond funds and stocks included
in the previous classifications; and

- $100,000 for each stock not included in any of the above classifications.

As of October 27, 2000, RPM's specialist corporation's net liquid assets
were about $111.1 million, $94.6 million in excess of its requirement of
$16.5 million on that date. As of October 31, 2000, due to the NYSE's changes to
Rule 104, the net liquid assets required for RPM's specialist corporation
increased to $106.6 million. On that date, RPM's specialist corporation had net
liquid assets of about $111.1 million, which was about $4.5 million more than
the new NYSE requirement. Failure to maintain the required net capital and net
liquid assets may subject RPM to suspension or revocation of SEC registration or
suspension or expulsion by the NYSE.

CLEARING ACTIVITIES. As a broker-dealer, RPM's clearing corporation is
subject to SEC Rule 15c3-1, which requires minimum net regulatory capital. Like
RPM's specialist corporation, RPM's clearing corporation computes its net
capital requirements under the uniform net capital rule on what is known as the
"alternative method" and at October 27, 2000, RPM's clearing corporation was
required to maintain minimum net capital, equal to the greater of $250,000 or
2.0% of aggregate debits, which as of such date, were about $1.0 million. At
October 27, 2000, RPM's clearing corporation's net capital was about
$15.8 million and exceeded its minimum requirement of $1.0 million by about
$14.8 million.

As a member firm of the NASD, RPM's activities are closely monitored for
compliance with the federal securities laws and the rules and regulations of the
NASD itself. NASD Regulation, Inc., a

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separate, independent subsidiary of the NASD, monitors the activities of members
and regulates certain securities markets for the ultimate benefit and protection
of the investing public. NASD Regulation, Inc. carries out these
responsibilities through:

- the education, registration and testing of securities professionals;

- on-site examinations to determine compliance with applicable laws and
rules;

- continuous automated surveillance of the Nasdaq and over-the-counter
securities markets; and

- the review of member advertisements and sales literature.

NASD Regulation, Inc. also maintains the qualification, employment, and
disclosure histories of the registered securities employees of member firms
through the automated, electronic Web Central Registration Depository system.

NASD Regulation, Inc. may initiate disciplinary action against RPM and/or
its employees if it finds, among other things, that:

- RPM's supervisory systems are inadequate;

- RPM employs unregistered individuals to perform registered functions;

- RPM's employees engage in securities sales practice violations;

- RPM extends credit to clients in violation of Regulation T of the Federal
Reserve; or

- RPM has failed to comply with net capital requirements of Securities
Exchange Act Rule 15c3-1.

Such actions may result in penalties to RPM, its principals and/or other
employees in the form of censures, fines, suspensions, undertakings, bars from
association with other members or the revocation of RPM's NASD membership.

In addition, as a NYSE member organization, RPM's activities, including all
aspects of its trading, operations and financial condition, are under constant
review by the NYSE for compliance with applicable securities laws and rules. To
become a member firm, a company must meet the rigorous professional standards
set by the NYSE. With respect to market integrity and trade disclosure, the
price discovery mechanism implemented and called for in the NYSE's rules
requires that all transactions in applicable securities be reported and
"printed" to the NYSE's consolidated tape in an effort to assure market
transparency. Subject to certain exceptions, this trade reporting must occur
within a specified time period after execution. In connection with this
requirement, among other things, the NYSE employs sophisticated surveillance
techniques to enforce its rules and regulations. Furthermore, the NYSE's Market
Surveillance Division examines specialist trading in all stocks each trading
day, including each specialists' participation, or lack thereof, in a given
security.

FACILITIES

As of December 31, 2000, RPM leased about 43,500 square feet of office space
at 20 Broad Street, 14 Wall Street and One Exchange Plaza in New York, New York,
and leased one trading post on the NYSE floor. Aggregate annual base rent for
such properties is about $1.1 million.

Through its subsidiary Remco and Remco's subsidiaries, RPM engages in real
estate management activities, and in connection with these activities manages
and holds real estate. In connection with, and prior to the consummation of, the
merger, RPM will dispose of Remco and its properties to George E. Robb, Jr.,
RPM's President and controlling stockholder, in connection with Mr. Robb, Jr.'s
relinquishment of his controlling interest in RPM.

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EMPLOYEES

As of December 31, 2000, RPM had 227 full-time employees, including 123
employees in its clearing operations, 97 employees in its specialist operations,
four employees in its financial services operations and three employees in its
real estate management operations. These employees include:

- four senior management personnel;

- 27 specialists; and

- 54 trading assistants.

None of the above employees is covered by a collective bargaining agreement,
and RPM has never experienced an employment-related work stoppage. RPM considers
its employee relations to be excellent.

LEGAL PROCEEDINGS

RPM is a party to legal proceedings arising in the ordinary course of its
business. While any legal proceeding has an element of uncertainty, RPM believes
that the final outcome of such matters will not have a material adverse effect
on its financial position or future liquidity. Furthermore, RPM knows of no
material legal proceedings, pending or threatened, or judgments entered, against
any director or officer of RPM in his or her capacity as such.

MANAGEMENT OF RPM

The following are the directors and executive officers of RPM (and their
positions with RPM) who will serve as directors and/or executive officers of the
combined company following the merger:

NAME AGE POSITION
---- -------- --------

George E. Robb, Jr........................ 44 President and Director
Robert M. Murphy.......................... 44 Executive Vice President and Director

GEORGE E. ROBB, JR. is President and a director of RPM's specialist
corporation. He has been employed by RPM since February 1976. He became a
specialist in 1977, and has over 25 years of experience in the specialist
business.

ROBERT M. MURPHY is an Executive Vice President and a director of RPM and
serves as President and Chief Executive Officer of RPM's specialist corporation.
He has been with RPM since October 1985. He previously worked for M.J. Meehan &
Co., another NYSE specialist firm, where he became a member (specialist) of the
NYSE in 1982. Mr. Murphy is a member of the board of directors of the NYSE. He
serves on the board's Market Performance Committee, Finance and Audit Committee,
Committee for Review, Technology Planning and Oversight Committee and
subcommittee on Floor Facilities. He is also liaison to the Institutional
Traders Advisory Committee. Previously, he was a NYSE governor and floor
official. Mr. Murphy recently completed a three-year term on the board of the
Securities Industry Association and served two terms as a director of the
Specialist Association.

Each of these persons serves as a member of Executive Committee of RPM's
board of directors. Each director of RPM serves until his successor is duly
elected and qualified. Officers serve at the discretion of the board of
directors.

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RPM'S EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth information for the fiscal year ended
April 28, 2000 as to the compensation paid to Messrs. Robb and Murphy.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
YEAR ENDED -------------------
NAME AND PRINCIPAL POSITION APRIL 28, SALARY BONUS
--------------------------- ---------- -------- --------

George E. Robb, Jr., President.............................. 2000 $425,000 $830,131
Robert M. Murphy, Executive Vice President.................. 2000 375,000 823,645

RPM has entered into a supplemental executive retirement plan, or SERP,
agreement with Robert M. Murphy. The SERP agreement provides for a supplemental
retirement benefit equal to $20,833 per month for 240 months, beginning on the
later of the date Mr. Murphy terminates his employment with RPM or the date he
reaches age 56. The benefit is subject to four-year vesting commencing on
August 1, 1997, but the agreement provides that upon a change in control of RPM
the SERP benefits fully vest and become immediately payable. The merger of RPM
into LaBranche will constitute a change in control of RPM. As a result,
commencing on the date of closing of the merger, Mr. Murphy will immediately
become entitled to a lump sum payment of his entire SERP benefit, totaling
$5.0 million. The SERP agreement also provides for retiree medical and long-term
care benefits. RPM has also entered into a SERP agreement with Mr. Robb, Jr.
providing for retiree medical and long-term care benefits.

Neither Mr. Robb, Jr. nor Mr. Murphy receives any compensation for his
services as a director of RPM.

OPTION GRANTS IN FISCAL YEAR 2000

No options or stock appreciation rights were granted to Messrs. Robb, Jr. or
Murphy during the year ended April 28, 2000.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 2000 AND YEAR-END OPTION
VALUES

No options or stock appreciation rights were exercised by Mr. Robb, Jr. or
Mr. Murphy during the year ended April 28, 2000. The value of unexercised
in-the-money options held by them at April 28, 2000 is calculated based on the
net book value of the option shares on April 28, 2000 which was $1,329 per
share, as determined by RPM's board of directors, less the aggregate exercise
price of the options.

NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT YEAR END MONEY OPTIONS AT YEAR END
--------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ------------- -------------

George E. Robb, Jr............................ -- -- -- --
Robert M. Murphy.............................. 5,000 -- $5,267,650 --

PRINCIPAL STOCKHOLDERS OF RPM

The following table sets forth as of January 31, 2001 the number of shares
of RPM common stock and the percentage of the outstanding shares of such class
that are beneficially owned by

- each person who is the beneficial owner of more than 5% of the outstanding
shares of RPM common stock;

- each of the directors of RPM;

- each of the executive officers of RPM; and

- all of the directors and executive officers of RPM as a group.

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NUMBER OF SHARES OF
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED
------------------- --------------------- ------------------

George E. Robb, Jr........................................ 36,000 51.36%
Cornelius F. Bodtmann..................................... 1,100(3) 1.54%
Nathan J. Mistretta....................................... 8,000 11.41%
Robert M. Murphy.......................................... 15,000(4) 19.97%
James B. Robb............................................. 6,000 8.56%
Frederick F. Tramutola, Jr................................ 5,000(5) 7.03%
All executive officers and directors as a group (6
persons)................................................ 71,100(6) 92.10%

------------------------

(1) Unless otherwise indicated, the address of each stockholder is in care of
RPM, 20 Broad Street, New York, New York 10005.

(2) Unless otherwise indicated, RPM believes that all persons named in the table
have sole voting and investment power with respect to all shares of RPM
common stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities which may be acquired by such person within
60 days from the date of this proxy statement/prospectus upon the exercise
of options, warrants, options or convertible securities. Each beneficial
owner's percentage ownership is determined by assuming that the warrants,
options or convertible securities that are held by such person (but not
those held by any other person) and which are exercisable or convertible
within 60 days of the date of this proxy statement/prospectus, have been
exercised.

(3) Consists of vested options to purchase shares of common stock of RPM.

(4) Includes vested options to purchase 5,000 shares of common stock of RPM.

(5) Includes vested options to purchase 1,000 shares of common stock of RPM.

(6) Includes vested options to purchase 7,100 shares of common stock of RPM held
by such officers and directors.

Because RPM's directors and executive officers hold substantially all the
outstanding common stock of RPM, a vote by such directors and executive officers
in favor of the merger will be sufficient to approve the merger.
Messrs. Mistretta, Tramutola, Murphy, James B. Robb and George E. Robb, Jr. also
hold non-voting preferred stock that will be redeemed prior to the consummation
of the merger. See "Description of Capital Stock of RPM--Preferred Stock."

RPM'S RELATED PARTY TRANSACTIONS

Pursuant to a series of five promissory notes from George E. Robb, Jr. to
RPM dated between 1994 and 1995, Mr. Robb Jr. owed RPM an aggregate of about
$0.5 million as of December 31, 2000; and pursuant to a series of eleven
promissory notes from Mr. James B. Robb to RPM dated between 1986 and 1989,
Mr. James B. Robb owed RPM an aggregate of about $0.2 million as of
December 31, 2000. Mr. George E. Robb, Jr. is RPM's President and Mr. James B.
Robb is George E. Robb, Jr.'s brother and a Senior Vice President and a director
of RPM. These obligations will remain in effect following the merger. Pursuant
to a consulting agreement with Ms. Deborah Larrinaga, the ex-spouse of
Mr. George E. Robb, Jr., Ms. Larrinaga is paid $100,000 per year; this
consulting agreement will be terminated on the consummation of the merger. In
December 2000, RPM sold a Loxahatchee, Florida condominium unit owned by RPM to
Clare P. Robb, Mr. Robb, Jr.'s mother, for a sales price of $240,000.

Through Remco, RPM's subsidiary, RPM conducts real estate management
operations and, through Remco's subsidiaries, owns real property. Prior to the
merger, RPM will dispose of Remco to George E. Robb, Jr., RPM's President and
controlling stockholder. As of December 31, 2000, the recorded net book value of
Remco and its subsidiaries was about $7.3 million. See "Description of RPM's
Business--Properties."

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DESCRIPTION OF LABRANCHE'S CAPITAL STOCK

LaBranche's authorized capital stock consists of 200,000,000 shares of
common stock, $.01 par value, and 10,000,000 shares of preferred stock, $.01 par
value. Upon the closing of the RPM merger, and after giving effect to the
issuance of 6,924,337 shares of common stock and 100,000 shares of Series A
preferred stock in the merger, there will be 56,028,198 shares of LaBranche
common stock and 100,000 shares of LaBranche Series A preferred stock issued and
outstanding.

COMMON STOCK

Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of LaBranche common
stock are entitled to receive dividends out of assets legally available therefor
at such times and in such amounts as LaBranche's board of directors from time to
time may determine. Holders of common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not authorized by LaBranche's certificate of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The common stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon LaBranche's liquidation, dissolution or winding-up, the assets
legally available for distribution to its stockholders will be distributed
ratably among the holders of its common stock after payment of liquidation
preferences, if any, on any outstanding shares of preferred stock and payment of
other claims of creditors.

LaBranche common stock is listed on the NYSE under the symbol "LAB." The
LaBranche common stock to be issued to RPM stockholders in the merger will be
listed on the NYSE.

PREFERRED STOCK

The 10,000,000 authorized shares of LaBranche's preferred stock may by
issued in one or more series without further stockholder authorization, and
LaBranche's board of directors is authorized to fix and determine the terms,
limitations and relative rights and preferences of the preferred stock, to
establish series of preferred stock and to fix and determine the variations as
among series. Preferred stock has priority over LaBranche's common stock with
respect to dividends and other distributions, including the distribution of
assets upon liquidation, and LaBranche may be obligated to repurchase or redeem
it. LaBranche's board of directors can issue preferred stock without the
approval of its common stockholders. Preferred stock may have voting and
conversion rights (including multiple voting rights) which could adversely
affect the rights of holders of its common stock. In addition to having a
preference with respect to dividends or liquidation proceeds, its preferred
stock may be entitled to the allocation of capital gains from the sale of
LaBranche's assets. LaBranche does not have any present plans to issue any
shares of preferred stock other than the Series A preferred stock being issued
in connection with the merger.

SERIES A PREFERRED STOCK

Prior to the effective time of the merger, LaBranche will file a certificate
of designations, preferences and rights for its Series A preferred stock with
the Delaware secretary of state. At present, other than the Series A preferred
stock to be issued in the merger, LaBranche has no intention to issue any
additional shares of preferred stock.

DIVIDENDS. A holder of a share of LaBranche Series A preferred stock is
entitled to receive a cumulative cash dividend at an annual rate of 8% of the
original issue price of such share until the fourth anniversary of its original
issue date, at an annual rate of 10% thereafter until the fifth anniversary of
its original issue date and at an annual rate of 10.8% after the fifth
anniversary of its original issue date. Dividends are payable on the first day
of January and the first day of July of each year (or if such date is not a
regular business day, then the next business day thereafter), commencing

121

on July 1, 2001. Dividends on the issued and outstanding shares of Series A
preferred stock will be preferred and cumulative and will accrue from day to day
from the date on which they are originally issued.

VOTING RIGHTS. In addition to any other vote required by the DGCL, the vote
or written consent of holders of at least a majority of the outstanding shares
of Series A preferred stock, voting separately as a class, will be necessary for
effecting or validating the following actions:

- Amending, altering or repealing any provision of LaBranche's Certificate
of Incorporation or Bylaws that alters, changes or waives any powers,
preferences, rights, privileges, qualifications, limitations or
restrictions with respect to the Series A preferred stock;

- The authorization, creation or issuance of any class or series of shares
of stock that ranks senior to or equal to the Series A preferred stock as
to the payment of dividends or other distributions or contains any
mandatory or optional redemption provision;

- Any change in the total number of authorized shares of Series A preferred
stock;

- Any redemption or repurchase of LaBranche's junior securities except for
(i) a redemption or repurchase of shares of its common stock effectuated
pursuant to an offer made concurrently with a redemption or repurchase
offer to the holders of shares of Series A preferred stock in total dollar
amounts equal to that of the offer made to the holders of LaBranche's
common stock, and (ii) LaBranche's acquisition of common stock pursuant to
good faith agreements to repurchase or redeem shares of common stock held
by its directors, officers and employees; and

- Any of the following transactions or series of related transactions if, in
connection with or as a result of such transaction or series of related
transactions, the holders of Series A preferred stock are not entitled to
receive cash for the shares of Series A preferred stock in an amount equal
to their aggregate liquidation preference:

- a consolidation or merger of LaBranche into another corporation or entity
(other than for the purpose of reincorporating in another jurisdiction),
a share exchange with another corporation or a corporate reorganization
in which the holders of LaBranche's voting power immediately before such
consolidation, merger, share exchange or reorganization own less than 50%
of the resulting or surviving entity's voting power immediately following
such transaction;

- a transaction or series of related transactions that requires a vote of
the holders of LaBranche's common stock and in which more than 50% of
LaBranche's voting power is transferred to persons other than those who
held that voting power immediately before such transaction or
transactions;

- a transaction or series of related transactions in which LaBranche issues
more than 50% of its voting power to persons other than those who held
such voting power immediately before such transaction or transactions; or

- a sale, lease or other disposition of its assets resulting in LaBranche
no longer owning a direct or indirect interest in 50% or more of its and
its subsidiaries' tangible and intangible assets.

LIQUIDATION RIGHTS. In the event of a liquidation, dissolution or winding
up of LaBranche, each holder of Series A preferred stock will be entitled to be
paid, prior to all other classes of LaBranche stock or other equity securities,
out of its assets an amount per share of Series A preferred stock equal to the
sum of that share's liquidation preference and all accrued and unpaid dividends
on that share.

REPURCHASE OFFERS. LaBranche may not, and may not permit any of its
subsidiaries or affiliates to, acquire directly or indirectly by purchase or
otherwise any of the outstanding shares of Series A preferred stock except
pursuant to an offer made equally and ratably to all holders of shares of

122

Series A preferred stock to purchase or otherwise acquire the shares of
Series A preferred stock held by them for the same amount and type of
consideration and upon the same terms and conditions.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless

- the corporation has elected in its certificate of incorporation or bylaws
not to be governed by the Delaware anti-takeover law (we have not made
such an election);

- the business combination was approved by the board of directors of the
corporation before the other party to the business combination became an
interested stockholder;

- upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also
officers or held in employee stock plans in which the employees do not
have a right to determine confidentially whether to tender or vote stock
held by the plan); or

- the business combination was approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the
interested stockholder did not own. The three-year prohibition does not
apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had
not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested
stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as a stockholder who becomes beneficial
owner of 15% or more of a Delaware corporation's voting stock.

Section 203 could have the effect of delaying, deferring or preventing a
change in control of LaBranche. In addition, provisions of LaBranche's
certificate of incorporation and bylaws, which are summarized in the following
paragraphs, may have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by LaBranche's stockholders.

CLASSIFIED BOARD OF DIRECTORS

LaBranche's board of directors is divided into three classes of directors
serving staggered three-year terms. About one-third of the board of directors
are elected each year. These provisions, when coupled with the provision of
LaBranche's certificate of incorporation authorizing the board of directors to
fill vacant directorships or increase the size of the board of directors, may
deter a stockholder from removing incumbent directors and simultaneously gaining
control of the board of directors by filling the vacancies created by such
removal with its own nominees.

123

STOCKHOLDER ACTION; SPECIAL MEETINGS OF STOCKHOLDERS

LaBranche's bylaws provide that its stockholders may not take action by
written consent, but only at an annual or special meeting of stockholders.
LaBranche's by-laws further provide that special meetings of its stockholders
may be called only by the chairman of the board of directors or a majority of
the board of directors.

SUPERMAJORITY VOTING PROVISIONS

LaBranche's certificate of incorporation provides that the affirmative vote
of at least two-thirds of its stockholders is required to amend the provisions
of its certificate of incorporation and by-laws relating to the classification
of the board of directors, stockholder action by written consent and the calling
of special meetings.

AUTHORIZED BUT UNISSUED SHARES

LaBranche's authorized but unissued shares of common stock and preferred
stock are available for future issuance without stockholder approval. These
additional shares may be utilized for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued common stock
and preferred stock could render more difficult or discourage an attempt to
obtain control of LaBranche by means of a proxy contest, tender offer, merger or
otherwise.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

LaBranche has entered into indemnification agreements with its current
directors and executive officers. These agreements may have the practical effect
in some cases of eliminating LaBranche's stockholders' ability to collect
monetary damages from its directors. LaBranche believes that these contractual
agreements and the provisions in its certificate of incorporation and by-laws
are necessary to attract and retain qualified persons as directors and officers.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for LaBranche's common stock is Firstar
Bank, N.A.

124

DESCRIPTION OF RPM'S CAPITAL STOCK

The following summary of the terms of RPM's capital stock prior to
completion of the merger is not meant to be complete and is qualified by
reference to RPM's charter and by-laws. Copies of RPM's charter and by-laws are
incorporated herein by reference and will be sent to holders of shares of RPM's
common stock upon request.

AUTHORIZED CAPITAL STOCK

Under RPM's charter, RPM's authorized capital stock consists of 279,117
shares. Of these shares, 200,050 are designated as common stock, $.10 par value
per share, and 79,067 are designated as preferred stock, $.10 par value per
share. The preferred stock is divided into:

- 21,000 shares of First Preferred Stock;

- 300 shares of Second Preferred Stock;

- 35,491 shares of Third Preferred Stock; and

- 22,276 shares of Fourth Preferred Stock.

All the outstanding shares of preferred stock will be redeemed prior to the
consummation of the merger.

COMMON STOCK

OUTSTANDING. As of the record date for the special meeting, 70,100 shares
of RPM common stock were issued and outstanding, and an additional 28,100 shares
of common stock were subject to issuance upon exercise of outstanding stock
options. The outstanding shares of RPM common stock are duly authorized, validly
issued, fully paid and non-assessable.

VOTING RIGHTS. Each holder of RPM common stock is entitled to one vote for
each share of RPM common stock held of record on the applicable record date on
all matters submitted to a vote of stockholders.

DIVIDEND RIGHTS. After the payment or declaration and setting aside of a
dividend of $5.00 per share on shares of preferred stock for a fiscal year,
RPM's board of directors may, from time to time, (but is not required to)
declare a dividend on the shares of common stock payable in cash, securities
(other than shares of First, Second, Third or Fourth Preferred Stock) or other
property to the holders thereof.

RIGHTS UPON LIQUIDATION. After payment in full of the amounts due to all
the holders of shares of preferred stock, each of the holders of shares of
common stock is entitled to receive a portion of the remaining assets of RPM
available for distribution to its stockholders in liquidation, in proportion to
the number of shares of such stock held.

PREEMPTIVE RIGHTS. Holders of RPM common and preferred stock have no
preemptive rights to purchase, subscribe for, or otherwise acquire any unissued
or treasury shares or other securities.

PREFERRED STOCK

OUTSTANDING. As of the record date for the special meeting, 26,640 shares
of RPM preferred stock were issued and outstanding, including 14,887 shares of
Third Preferred Stock and 11,753 shares of Fourth Preferred Stock. No shares or
First Preferred Stock or Second Preferred Stock are outstanding. All the
preferred stock will be redeemed prior to the consummation of the merger.

125

BLANK CHECK PREFERRED. RPM's board of directors has no authority to issue
blank check preferred stock.

VOTING RIGHTS. Except as otherwise provided by law, holders of shares of
preferred stock have no voting power and are not entitled to notice of any
meeting of the stockholders of RPM.

DIVIDEND RIGHTS. RPM's board of directors may (but is not required to)
declare a dividend on shares of each class of preferred stock, payable in cash,
equal to a maximum of $5.00 per share with respect to any fiscal year. For
dividend payment purposes, all outstanding First, Second, Third and Fourth
Preferred Stock is considered as one class. The holders of preferred stock are
entitled to participate ratably, share for share, without preference of one
class over any other, in such dividend. The dividend, if any, on the preferred
stock is payable within thirty (30) days after the filing of the federal income
tax return for the fiscal year as RPM's board of directors shall determine, and
is payable out of surplus only. Dividends on the preferred stock are not
cumulative and cease to be an obligation of RPM if not paid when due. No
dividends or other distributions in cash, securities or other property may be
made on the common stock with respect to any fiscal year unless a dividend on
the preferred stock equivalent to $5.00 per share has previously been paid or
declared for that fiscal year and, if declared but unpaid, a sum sufficient for
the payment thereof has been set apart.

RIGHTS UPON LIQUIDATION. On liquidation, holders of each series of
preferred stock are entitled to receive $100 for each share of preferred stock
held. The holders of the First Preferred Stock have first priority as to
liquidation and are entitled to receive $100 per share held by them before
holders of other preferred stock receive their liquidation value. The holders of
the Second Preferred Stock have second priority, the holders of the Third
Preferred Stock have third priority, and the holders of the Fourth Preferred
Stock have fourth priority as to liquidation distributions. Following payment to
holders of the preferred stock, holders of the common stock are entitled to
liquidation distributions.

REDEMPTION RIGHTS OF CAPITAL STOCK

RPM has the right, at any time, to redeem all (but not less than all) of the
shares of all classes of RPM capital stock. Whenever any holder of capital stock
who is required to be approved by the NYSE ceases to be so approved, RPM has the
right to require the holder to reduce his or her ownership to the level required
by the NYSE; and in such event RPM may purchase all or some of the holder's
shares as necessary. In addition, each holder of shares of capital stock of RPM
has the right to require RPM to redeem all (but not less than all) of the shares
of RPM's capital stock held by such stockholder. RPM may elect, within 60 days
after it gets a redemption notice, to dissolve and liquidate. Holders of
preferred stock are entitled to receive $100 for each share redeemed, and
holders of common stock are entitled to receive the net book value per share for
each share redeemed (as determined in accordance with RPM's charter) plus 10%
interest from the date of determination of RPM's net book value, but RPM will
not be required to pay more than (a) the proposed price offered by the proposed
transferee for all of such shares or (b) the aggregate consideration for such
shares, which is less. The redemption price is payable in cash or partly in cash
and partly evidences of debt of RPM, so long as the cash paid is not less than
20% of the redemption price, and so long as the evidences of debt comply with
the requirements relating to them contained in the charter. RPM cannot redeem
shares of stock if it does not have funds legally available for such redemption.
The redemption rights automatically terminate if RPM makes an underwritten
public offering of its capital stock or a bankruptcy event occurs.

All the outstanding shares of preferred stock will be repurchased prior to
the consummation of the merger.

126

MATERIAL DIFFERENCES IN RIGHTS OF LABRANCHE AND RPM STOCKHOLDERS

Upon consummation of the merger, the RPM stockholders will become
stockholders of LaBranche, a Delaware corporation, and their rights will be
governed by LaBranche's charter and bylaws, which differ in certain material
respects from RPM's charter and bylaws. As stockholders of LaBranche, former RPM
stockholders will continue to be governed by Delaware law. Copies of the
LaBranche charter and bylaws and the RPM charter and bylaws, in each case as in
effect on the date of this proxy statement/prospectus, are filed as exhibits to
the registration statement of which this proxy statement/prospectus forms a
part.

LABRANCHE RPM
--------------------------------------------- ---------------------------------------------

AUTHORIZED CAPITAL STOCK

The authorized capital stock of LaBranche The authorized capital stock of RPM consists
consists of 200 million shares of common of 200,050 shares of common stock, par value
stock, par value $0.01 per share, and $.10 per share, 21,000 shares of non-voting
10 million shares of preferred stock, par First Preferred Stock, par value $.10 per
value $0.01 per share. share, 300 shares of non-voting Second
LaBranche may, by resolution of its board of Preferred Stock, par value $.10 per share,
directors, and without any further vote or 35,491 shares of non-voting Third Preferred
action by its stockholders, authorize and Stock, par value $.10 per share, and 22,276
issue, subject to certain limitations shares of non-voting Fourth Preferred Stock,
prescribed by law, up to 10 million shares of par value $.10 per share.
preferred stock. The preferred stock may be The holders of RPM preferred stock have
issued in one or more series of shares. With certain rights, preferences and privileges
respect to any series, the board of directors relating to the receipt of dividends and the
may determine the designation and the number distribution of assets upon a liquidation,
of shares, preferences, limitations and dissolution or winding up of RPM. Prior to
special rights, including dividend rights, the closing of the merger, RPM will
conversion rights, voting rights, redemption repurchase its outstanding preferred stock.
rights and liquidation preferences. Because
of the rights that may be granted, the
issuance of preferred stock may delay, defer
or prevent a change of control. No shares of
preferred stock currently are outstanding. In
connection with the merger, LaBranche expects
to issue 100,000 shares of its Series A
preferred stock.

SIZE OF THE BOARD

The LaBranche board currently consists of The RPM board currently consists of six
eight directors. Under the LaBranche bylaws, directors serving one-year terms. The board
the number of directors constituting the must consist of the number of directors
board may be no fewer than one. The number of elected at the last annual meeting of RPM's
directors may be increased at any time by the stockholders. The number of members of the
vote of a majority of the directors then in board of directors may be decreased to a
office. number not less than one or increased to a
number not more than nine by the vote of the
stockholders or the board of directors.

127

LABRANCHE RPM
--------------------------------------------- ---------------------------------------------

CLASSIFICATION OF THE BOARD OF DIRECTORS

The LaBranche board is divided into three The RPM board is not divided into classes.
classes. Each class must be as nearly equal Directors are elected at each annual meeting
in number as possible. Each class of of stockholders for a term of one year.
directors serves a staggered three-year term,
and the term of each of the other two classes
of directors expires in one of the next two
succeeding years.

BOARD MEETINGS

Under the LaBranche bylaws, regular meetings Under the RPM bylaws, each regular meeting of
of the board of directors are held each year the board of directors is held at a time and
at the place of, and immediately following, place specified in a resolution adopted by
the annual meeting of stockholders. Other the board or if there is no such resolution
regular meetings of the board of directors then in effect, as specified in a notice of
may be held at such times and places as the the meeting or in a waiver of notice signed
board of directors may provide, by by the entire board of directors. If the time
resolution, without notice other than the and place of a regular meeting has been fixed
resolution. by a resolution of the board of directors
Under the LaBranche bylaws, special meetings then in effect, notice of the regular meeting
of the board of directors may be called by: need not be given except as otherwise
- the Chairman; provided by statute.
- the President; or Under the RPM bylaws, special meetings of the
- the Secretary, if the Secretary board of directors may be called by the
receives written request from two President upon at least two days' prior
or more directors. notice to each director.
Written notice of the meeting must be
given to each director in a manner reasonably
calculated to reach the director at least 48
hours prior to the meeting.

REMOVAL OF DIRECTORS

Under the LaBranche bylaws, directors may Under the RPM bylaws, directors may be
only be removed for cause as defined in the removed with or without cause by the holders
Delaware General Corporation Law. of a majority of the outstanding RPM shares
entitled to vote for the election of
directors.

128

LABRANCHE RPM
--------------------------------------------- ---------------------------------------------

DIVIDENDS

Common stockholders are entitled to receive Holders of RPM common stock and preferred
ratable dividends when, as and if declared by stock are entitled to receive ratable
LaBranche's board of directors. The holders dividends when, as and if declared by the
of the Series A Preferred Stock are entitled board of directors. The entitlement of the
to receive a cumulative cash dividend at an holders of the common stock to dividends, is
annual rate of 8% per share of the original subject to the preferential dividend rights
issue price of such shares until the fourth of the preferred stockholders to receive
anniversary of the date on which LaBranche dividends in the amount of up to $5 per share
originally issued shares of Series A per fiscal year. See "Description of RPM's
Preferred Stock, and at an annual rate of 10% Capital Stock--Preferred Stock--Dividend
thereafter until the fifth anniversary of the Rights."
date on which we originally issued shares of
Series A Preferred Stock and at an annual
rate of 10.8% after the fifth anniversary of
the date on which LaBranche originally issued
shares of Series A Preferred Stock.
Dividends are payable on the first day of
January and the first day of July of each
year (or if such date is not a regular
business day, then the next business day
thereafter), commencing on July 1 2001.
Dividends on the issued and outstanding
shares of Series A Preferred Stock shall be
preferred and cumulative and shall accrue
from day to day from the date on which we
originally issue shares of Series A
Preferred Stock.

AMENDMENTS TO THE CERTIFICATE OF INCORPORATION

Article Sixth, relating to the repeal or The charter of RPM may be amended in any
alteration of the bylaws, and Article manner provided by Delaware law.
Seventh, relating to voting of stockholders,
of LaBranche's amended and restated
certificate of incorporation state that those
Articles may not be repealed or amended
unless the action is approved by (1) a
majority of continuing directors (in addition
to the vote of a majority of stockholders as
required by the DGCL) or (2) in the event an
interested stockholder has directly or
indirectly proposed an amendment. The
affirmative vote of (A) 80% of the voting
shares or (B) 66 2/3% of the voting shares
held by the disinterested stockholders.

129

LABRANCHE RPM
--------------------------------------------- ---------------------------------------------

AMENDMENTS TO THE BYLAWS

The LaBranche bylaws may be altered, amended The RPM bylaws may be amended or repealed by
or repealed by the board of directors at any majority vote of the board of directors so
annual or regular meeting of the board of long as the proposed action relating to the
directors, or at a special meeting of the bylaws is stated in the notice of such
board of directors if notice of such special meeting. A majority of the
alteration, amendment or repeal is contained outstanding shares of RPM stock entitled to
in the notice of such special meeting. Bylaws vote in respect thereof, by vote at an annual
relating to special meetings of the or special meeting or by written consent, may
stockholders, number, election and term of amend or repeal any bylaw provision.
board members, and the provision relating to
filling board vacancies, removing directors
and appointing new directors may not be
repealed or amended unless approved by either
(i) majority of the continuing directors or
(ii) the affirmative vote of the holders of
(A) 80% of the outstanding voting shares
voting as a single class and (B) if an
interested stockholder, 66 2/3% of
outstanding shares not beneficially owned by
the interested stockholders.

RESTRICTIONS ON SPECIAL MEETINGS OF THE STOCKHOLDERS

Under the LaBranche bylaws, special meetings Under the RPM bylaws, special meetings of the
of the stockholders may only be called by: stockholders may be called by the board of
- the Chairman of its board of directors, directors or by the President.
or
- its Secretary within 10 days after
receipt of the written request of a
majority of its directors.

TRANSACTIONS WITH INTERESTED STOCKHOLDERS

As a publicly held corporation, LaBranche is RPM is not publicly held, and accordingly, is
subject to Section 203 of the DGCL. Section not subject to Section 203 of the Delaware
203 of the DGCL generally prohibits certain General Corporation Law.
"business combinations" between a Delaware
corporation and an "interested stockholder."
An "interested stockholder" is generally
defined as a person who, together with any
affiliates or associates of such person,
beneficially owns, or within three years
owned, directly or indirectly, 15% or more of
the outstanding voting shares of a Delaware
corporation. See "Description of LaBranche's
Capital Stock--Delaware Anti-Takeover Law and
Certain Charter Provisions."

The DGCL contains provisions enabling a
corporation to avoid Section 203's
restrictions if stockholders holding a
majority of the corporation's voting stock
approve an amendment to the corporation's
certificate of incorporation or bylaws to
avoid the restrictions. LaBranche has

130

LABRANCHE RPM
--------------------------------------------- ---------------------------------------------

not and does not currently intend to "elect
out" of application of Section 203 of the
DGCL.

REDEMPTION RIGHTS

The LaBranche stockholders are subject to no Under RPM charter, RPM has the right, at any
redemption rights. time, to redeem all (but not less than all)
shares of all classes of outstanding RPM
capital stock held by any stockholder; and if
any holder of shares wants to transfer his or
her shares, RPM has a right of first refusal
to redeem such shares.

ACTION BY WRITTEN CONSENT

LaBranche's bylaws provide that its Under the RPM bylaws, RPM's stockholders may
stockholders may not take action by written take action by written consent of the holders
consent, but only at an annual or special of outstanding stock having not less than the
meeting of stockholders. minimum number of votes that would be
necessary to take such action at a meeting at
which all shares entitled to vote thereon
were present and voted.

VOTING

In addition to any other vote required by the Except as otherwise required by law, holders
DGCL, the vote or written consent of holders of shares of RPM preferred stock have no
of at least a majority of the outstanding voting power.
shares of Series A preferred stock, voting
separately as a class, is necessary for
validating various actions. See "Description
of LaBranche's Capital Stock--Series A
Preferred Stock--Voting Rights."

131

MARKET PRICE INFORMATION

LaBranche's initial public offering was completed on August 24, 1999 and its
common stock is traded on the NYSE under the symbol "LAB." RPM is a privately
held company and its stock is not traded or quoted in any public market. The
following table shows, for the calendar quarters indicated, based on published
financial sources, the high and low closing sale prices of shares of LaBranche
common stock on the NYSE:

PRICE PER SHARE
CALENDAR -------------------
PERIOD HIGH LOW
-------- -------- --------

The table below presents:

- the last reported sale price of one share of LaBranche common stock on the
dates indicated, as reported by the NYSE; and

- the market value of one share of RPM common stock on an equivalent per
share basis.

In each case below, it is assumed that the merger had been completed on each of
January 18, 2001, the last full trading day before the public announcement of
the execution of the merger agreement, and on February 28, 2001, the last day
for which this information could be calculated before the date of this proxy
statement/prospectus. The equivalent price per share data for the RPM common
stock has been determined by multiplying the last reported sale price of one
share of LaBranche common stock on each of the indicated dates by 98.778 and
then adding $1,426.53, the liquidation value of the LaBranche Series A preferred
stock issuable to the RPM stockholders for each share of RPM common stock held
by them.

EQUIVALENT PRICE
LABRANCHE PER SHARE OF
DATE COMMON STOCK RPM COMMON STOCK
---- ------------ ----------------

January 18, 2001............................. $36.88 $5,069.46
February 28, 2001............................ $43.40 $5,713.50

There are 13 holders of RPM common stock, seven holders of RPM's Third
Preferred Stock and six holders of RPM's Fourth Preferred Stock (which preferred
stock will be repurchased before the consummation of the merger), and 21 holders
of options to purchase RPM's common stock. See "Principal Stockholders of RPM"
and "Description of RPM's Capital Stock."

132

CASH DIVIDEND POLICY

LaBranche has never declared or paid cash dividends on its capital stock.
Other than the dividends payable on the Series A preferred stock in the future,
LaBranche currently anticipates that it will retain earnings to support its
operations and to finance the growth and development of its business, and it
does not anticipate paying any cash dividends on its common stock in the future.
RPM has never paid dividends on its common stock.

133

LEGAL MATTERS

The validity of issuance of the LaBranche common stock and Series A
preferred stock to be issued to RPM stockholders in the merger will be passed
upon for LaBranche by Fulbright & Jaworski L.L.P., New York, New York. It is a
condition to the completion of the merger that RPM receive confirmation of the
opinion issued by its counsel, Kelley Drye & Warren LLP, and annexed hereto as
ANNEX C, that the merger will qualify as a "reorganization" under
Section 368(a) of the Internal Revenue Code, as amended.

EXPERTS

The audited financial statements and schedules of LaBranche & Co Inc. and
Subsidiaries included in this proxy statement/prospectus have been audited by
Arthur Andersen LLP, independent auditors, as stated in their reports appearing
herein.

The audited financial statements of RPM included in this proxy
statement/prospectus have been audited by PricewaterhouseCoopers LLP, RPM's
independent accountants, as stated in their report appearing herein.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement under the Securities Act
on Form S-4 with respect to the proposed merger (together with all amendments
and exhibits thereto, the "Registration Statement"), and are subject to the
informational requirements of the Exchange Act and, in accordance therewith,
file reports, proxy statements and other information with the SEC. For further
information with respect to LaBranche & Co Inc., please refer to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this proxy statement/ prospectus
as to the contents of any contract, agreement of any other document referred to
are not necessarily complete; reference is made in each instance to the copy of
such contract or document filed as an annex to this proxy statement/prospectus
or exhibit to the Registration Statement. Each such statement is qualified in
all respects by such reference to such annex or exhibit. A copy of the
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge and obtained at prescribed rates at the Public
Reference Section of the SEC at its principal offices, located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and may be inspected without charge at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Registration Statement, including the exhibits and
schedules thereto, is also available at the SEC's site on the World Wide Web at
http://www.sec.gov.

You may request a copy of LaBranche's annual, quarterly and special reports,
proxy statements and other information, at no cost, by writing or telephoning
LaBranche at the following address:

LaBranche & Co. Inc.
Attention: Investor Relations
One Exchange Plaza, 25th Floor
New York, New York 10006
Telephone: (212) 425-1000

Both LaBranche and RPM have web sites. LaBranche's web site is located at
www.labranche.com, and RPM's web site is located at www.robbpeck.com. The
information contained in those web sites is not part of this proxy
statement/prospectus and should not be relied upon in connection with the
matters presented herein.

134

INDEX TO FINANCIAL STATEMENTS

LABRANCHE & CO INC. AND SUBSIDIARIES PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Condensed Consolidated Financial Information
Overview (unaudited)...................................... F-3
Pro Forma Condensed Consolidated Statement of Financial
Condition as of September 30, 2000 (unaudited)............ F-6
Pro Forma Condensed Consolidated Statement of Operations for
the Nine Months Ended September 30, 2000 (unaudited)...... F-7
Pro Forma Condensed Consolidated Statement of Operations for
the Year Ended December 31, 1999 (unaudited).............. F-8
Notes to Pro Forma Condensed Consolidated Financial
Information (unaudited)................................... F-9
LABRANCHE & CO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Statements of Financial Condition as
of September 30, 2000 (unaudited)......................... F-12
Condensed Consolidated Statements of Operations for the Nine
Months Ended September 30, 2000 and September 30, 1999
(unaudited)............................................... F-13
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and September 30, 1999
(unaudited)............................................... F-14
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-16
LABRANCHE & CO INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS
Report of Independent Public Accountants.................... F-21
Consolidated Statements of Financial Condition as of
December 31, 1999 and 1998................................ F-22
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-23
Consolidated Statements of Changes in Stockholders'
Equity/Members' Capital for the Years Ended December 31,
1999, 1998 and 1997....................................... F-24
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-25
Notes to Consolidated Financial Statements.................. F-26
LABRANCHE & CO INC. (PARENT COMPANY ONLY) CONDENSED
FINANCIAL STATEMENTS
Condensed Statements of Financial Condition as of December
31, 1999 and 1998......................................... F-36
Condensed Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-37
Condensed Statement of Changes in Stockholders'
Equity/Members' Capital for the Years Ended December 31,
1999, 1998 and 1997....................................... F-38
Condensed Statements of Cash Flow for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-39
Note to Condensed Financial Statements...................... F-40

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-41
Financial Statements:
Financial Statements as of April 28, 2000 and April 30,
1999 and for each of the three years in the period ended
April 28, 2000:

Consolidated Statements of Financial Condition as of
April 28, 2000 and April 30, 1999...................... F-42
Consolidated Statements of Income for the fiscal years
ended April 28, 2000, April 30, 1999 and April 24,
1998................................................... F-43
Consolidated Statement of Changes in Redeemable Stocks
and Other Equity for the fiscal years ended April 28,
2000, April 30, 1999 and April 24, 1998................ F-44

F-1

Consolidated Statements of Cash Flows for the fiscal
years ended April 28, 2000, April 30, 1999 and April
24, 1998............................................... F-45
Notes to Consolidated Financial Statements.............. F-46

Unaudited Financial Statements as of October 27, 2000 and
for the six-month period ended October 29, 2000

Condensed Consolidated Statement of Financial Condition
as of October 27, 2000................................. F-58
Condensed Consolidated Statements of Income for the six
months ended October 27, 2000 and October 29, 1999..... F-59
Condensed Consolidated Statement of Changes in
Redeemable Stocks and Other Equity for the six months
ended October 27, 2000................................. F-60
Condensed Consolidated Statements of Cash Flows for the
six months ended October 27, 2000 and October 29,
1999................................................... F-61
Notes to Condensed Consolidated Financial Statements.... F-62

F-2

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
OVERVIEW
(UNAUDITED)

GENERAL

The following pro forma condensed consolidated financial information is
based on the historical consolidated financial statements of LaBranche after
giving effect to the reorganization and related transactions to convert
LaBranche from partnership to corporate form (the "Reorganization
Transactions"), the acquisitions of Henderson Brothers Holdings, Inc
("Henderson") and Webco Securities, Inc. ("Webco"), and the proposed acquisition
of RPM and related transactions (the "RPM Acquisition" and together with the
Henderson and Webco acquisitions, the "Acquisitions and Related Transactions").
The Reorganization Transactions and the Acquisitions and Related Transactions
are described in greater detail below. The pro forma condensed consolidated
statement of financial condition of LaBranche reflects its financial condition
on September 30, 2000, as if the RPM Acquisition had occurred on September 30,
2000. The pro forma condensed consolidated statement of operations for the nine
months ended September 30, 2000 presents the results of LaBranche as if the
Acquisitions and Related Transactions occurred on January 1, 2000. The pro forma
condensed consolidated statement of operations for the year ended December 31,
1999 presents the results of LaBranche as if the Reorganization Transactions and
the Acquisitions and Related Transactions had occurred on January 1, 1999.

The pro forma condensed consolidated financial information has been prepared
by LaBranche's management and is not necessarily indicative of the results that
would have been achieved had the Reorganization Transactions and the
Acquisitions and Related Transactions occurred on the dates indicated or that
may be achieved in the future. The unaudited pro forma financial information
should be read in conjunction with the audited historical financial statements
of LaBranche and RPM included elsewhere in this proxy statement/prospectus.

REORGANIZATION TRANSACTIONS

On August 24, 1999, LaBranche reorganized from partnership to corporate
form, with the members of LaB Investing Co. L.L.C. exchanging their membership
interests for common stock in LaBranche, and completed its initial public
offering. In that offering, LaBranche sold 10,500,000 shares of common stock and
received net proceeds of $134.8 million. Concurrently with the offering,
LaBranche issued $100.0 million aggregate principal amount of senior notes.

The redemption of limited partners' interest was accounted for as a step
acquisition under the purchase method of accounting. The excess of purchase
price over the limited partners' capital accounts was allocated to intangible
assets with corresponding respective lives as follows:

INTANGIBLE ASSET AMOUNT LIFE
---------------- -------- --------

Specialist Stock Listing.................................. $ 93.6 40 years
Trade Name................................................ 26.6 40 years
Goodwill.................................................. 7.2 15 years
------
$127.4
======

HENDERSON AND WEBCO ACQUISITIONS

Effective March 2, 2000, LaBranche acquired all the outstanding capital
stock of Henderson for an aggregate purchase price of approximately
$228.4 million. The acquisition was accounted for under the purchase method of
accounting. The results of Henderson's operations have been included in

F-3

LaBranche's condensed consolidated financial statements since March 2, 2000. The
excess of purchase price over fair value of approximately $204.9 million was
allocated to intangible assets with corresponding respective lives as follows:

INTANGIBLE ASSET AMOUNT LIFE
---------------- -------- --------

Specialist Stock Listing.................................. $ 87.7 40 years
Goodwill.................................................. 117.2 15 years
------
$204.9
======

Effective March 9, 2000, LaBranche acquired Webco for an aggregate purchase
price of $11.0 million in cash, $3.0 million in senior promissory notes and
2.8 million shares of LaBranche's common stock. The acquisition was accounted
for under the purchase method of accounting. The results of operations formerly
conducted by Webco have been included in LaBranche's condensed consolidated
financial statements since March 9, 2000. The excess of purchase price over fair
value of approximately $28.8 million was allocated to intangible assets with
corresponding respective lives as follows:

INTANGIBLE ASSET AMOUNT LIFE
---------------- -------- --------

Specialist Stock Listing.................................. $ 9.8 36 years
Goodwill.................................................. 19.0 15 years
-----
$28.8
=====

The allocation of purchase price and determination of useful lives was based
upon an independent appraisal. The useful life of the specialist stock list was
determined based upon analysis of historical turnover characteristics of the
specialist stocks.

Effective March 2, 2000, LaBranche incurred senior subordinated indebtedness
with a principal amount of $250.0 million. The proceeds of the indebtedness, net
of a discount of approximately $4.3 million and issuance costs of approximately
$6.9 million, were used for the acquisition of Henderson and partially for the
acquisition of Webco and to pay related transaction costs of both acquisitions.

RPM ACQUISITION

LaBranche will account for the RPM Acquisition under the purchase method of
accounting. Accordingly, LaBranche will establish a new basis of accounting for
RPM's assets and liabilities based upon their fair values and the value of the
merger consideration including the costs associated with the acquisition. The
purchase accounting adjustments made in connection with the development of pro
forma condensed consolidated financial statements are preliminary and have been
made solely for purposes of developing such pro forma consolidated financial
information. The financial statement amounts associated with ROBB PECK McCOOEY
Real Estate Management Corporation & Subsidiaries ("RPM Real Estate"), RPM Asset
Management and ROBB PECK McCOOEY Clearing Corporation Investment Division ("RPM
Investment Division"), for the respective periods have been reversed as none of
these business lines will be acquired by LaBranche. The pro forma adjustments do
not reflect any operating efficiencies or cost savings that may be achieved with
respect to the combined company.

Actual compensation expense for RPM has been adjusted for nine employees of
RPM who will become managing directors of LaBranche with annual base salaries of
$250,000 each and will become eligible to participate in LaBranche's Annual
Incentive Plan. No other compensation adjustments have been made in connection
with the development of the pro forma condensed consolidated results of
operations. Additionally, compensation expense includes $2.4 million for three
employees of RPM who

F-4

plan to retire upon the completion of the RPM Acquisition. Accordingly,
management believes the pro forma compensation expense may not reflect future
cost savings once comprehensive compensation policies are implemented for the
combined companies.

Under the terms of the merger agreement, LaBranche will acquire RPM for an
aggregate of approximately 6.9 million shares of common stock and shares of
nonconvertible preferred stock having an aggregate face value of approximately
$100.0 million and estimated fair value of approximately $89.1 million. In
addition, all obligations under RPM's outstanding option agreements with
employees will be assumed, with each option to purchase RPM common stock being
converted into an option to purchase 98.778 shares of LaBranche common stock.
The excess of purchase price over fair value of approximately $448.5 million has
been allocated to intangible assets on a preliminary basis with the
corresponding respective lives as follows:

INTANGIBLE ASSET AMOUNT LIFE
---------------- -------- --------

Specialist Stock Listing.................................. $180.0 40 years
Goodwill.................................................. 268.5 15 years
------
$448.5
======

The allocation of purchase price and determination of useful lives for the
acquisition was based upon an independent appraisal as of a preliminary date.
The useful life of the specialist stock list was determined based upon analysis
of historical turnover characteristics of the specialist stocks.

F-5

LABRANCHE & CO INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 2000
(UNAUDITED)
(000'S OMITTED)

PRO FORMA PRO FORMA FOR
(A) ADJUSTMENTS FOR THE THE RPM
HISTORICAL RPM RPM ACQUISITION ACQUISITION
---------- -------- ------------------- -------------

ASSETS
CASH AND CASH EQUIVALENTS........................ $ 67,927 $ 14,095 $ (650)(b) $ 65,432
(13,445)(c)
(2,495)(d)
CASH SEGREGATED UNDER FEDERAL REGULATIONS........ 2,537 29,876 -- 32,413
SECURITIES PURCHASED UNDER AGREEMENTS TO
RESELL......................................... 156,709 -- -- 156,709
RECEIVABLE FROM BROKERS AND
DEALERS........................................ 82,510 160,073 (7,730)(c) 234,853
RECEIVABLE FROM CUSTOMERS........................ 1,274 31,722 -- 32,996
SECURITIES OWNED, at market value:
Corporate equities............................. 131,127 27,744 -- 158,871
Other.......................................... 4,538 3,419 (420)(b) 7,537
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at
market value................................... 19,800 3,300 -- 23,100
EXCHANGE MEMBERSHIPS OWNED, at cost.............. 50,300 3,829 16,171 (e) 70,300
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at
cost, less accumulated depreciation and
amortization................................... 2,779 9,033 (7,661)(b) 4,151
INTANGIBLE ASSETS................................ 392,254 7,320 448,458 (f) 840,712
(7,320)(f)
OTHER ASSETS..................................... 20,458 31,567 (457)(b) 51,568
-------- -------- --------- ----------
Total assets............................... $932,213 $321,978 $ 424,451 $1,678,642
======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable.................................. $ -- $ 2,536 $ (1,550)(b) $ 986
Payable to brokers and dealers................. 2,071 45,299 -- 47,370
Payable to customers........................... 3,767 71,652 -- 75,419
Securities sold, but not yet purchased, at
market value................................. 49,706 8,745 -- 58,451
Accounts payable and other accrued expenses.... 43,894 39,978 30,152 (g) 107,112
(6,912)(b)
Income tax liabilities......................... 2,666 4,496 -- 7,162
Deferred tax liabilities....................... 61,788 -- 93,181 (f) 154,969
-------- -------- --------- ----------
163,892 172,706 114,871 451,469
LONG TERM DEBT................................... 355,775 -- -- 355,775
-------- -------- --------- ----------
SUBORDINATED LIABILITIES
Exchange memberships, at market value.......... 19,800 3,300 -- 23,100
Other subordinated indebtedness................ 46,508 45,518 (21,175)(c) 70,851
-------- -------- --------- ----------
66,308 48,818 (21,175) 93,951
STOCKHOLDERS' EQUITY............................. 346,238 100,454 439,255 (h) 777,447
(7,320)(f)
(100,454)(i)
(726)(b)
-------- -------- --------- ----------
Total liabilities and stockholders'
equity................................... $932,213 $321,978 $ 424,451 $1,678,642
======== ======== ========= ==========

F-6

LABRANCHE & CO INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE DATA)

PRO FORMA
ADJUSTMENTS
FOR THE PRO FORMA
HENDERSON FOR THE
AND HENDERSON AND
(J) (K) WEBCO WEBCO (R)
HISTORICAL WEBCO HENDERSON ACQUISITIONS ACQUISITIONS RPM
---------- -------- ---------- ------------ -------------- --------

REVENUES:
Net gain on principal
transactions................... $203,174 $1,972 $7,178 $ -- $212,324 $ 67,877
Commissions...................... 32,367 712 2,910 -- 35,989 15,903
Other............................ 11,995 145 (275) -- 11,865 28,573
-------- ------ ------ -------- -------- --------
Total revenues............... 247,536 2,829 9,813 -- 260,178 112,353
EXPENSES:
Employee compensation and related
benefits....................... 64,435 2,091 6,635 6,678 (l) 79,839 46,446
Lease of exchange memberships.... 8,127 -- -- -- 8,127 3,208
Interest......................... 29,910 17 1,634 5,027 (m) 35,057 5,934
42 (n)
(1,573)(o)
Exchange, clearing and brokerage
fees........................... 3,631 191 254 -- 4,076 5,824
Depreciation and amortization of
intangibles.................... 12,404 -- -- 1,996 (p) 14,400 1,251
Occupancy........................ 936 -- 38 -- 974 1,629
Communications................... 1,133 -- 27 -- 1,160 2,182
Legal and professional fees...... 1,741 -- 350 -- 2,091 1,030
Other............................ 4,826 441 727 -- 5,994 5,352
-------- ------ ------ -------- -------- --------
Total expenses before
provision for income
taxes...................... 127,143 2,740 9,665 12,170 151,718 72,856
-------- ------ ------ -------- -------- --------
Income before provision for
income taxes............... 120,393 89 148 (12,170) 108,460 39,497
PROVISION FOR INCOME TAXES......... 60,764 (200) 250 (4,847)(q) 55,967 18,484
-------- ------ ------ -------- -------- --------
Net income....................... $ 59,629 $ 289 $ (102) $ (7,323) $ 52,493 $ 21,013
======== ====== ====== ======== ======== ========
Diluted weighted average shares
outstanding.................... 48,272
========
Diluted net earnings per share... $ 1.24
========

PRO FORMA
FOR THE
HENDERSON
AND WEBCO
PRO FORMA ACQUISITIONS
ADJUSTMENTS FOR AND THE
THE RPM RPM
ACQUISITION ACQUISITION
--------------- ------------

REVENUES:
Net gain on principal
transactions................... $ -- $280,201
Commissions...................... -- 51,892
Other............................ (3,367)(s) 37,071
-------- --------
Total revenues............... (3,367) 369,164
EXPENSES:
Employee compensation and related
benefits....................... (2,966)(s) 125,249
(5,979)(t)
2,250 (u)
1,094 (v)
4,565(w)
Lease of exchange memberships.... -- 11,335
Interest......................... (162)(s) 39,590
(1,239)(x)

Exchange, clearing and brokerage
fees........................... (140)(s) 9,760
Depreciation and amortization of
intangibles.................... (132)(s) 31,972
16,798 (y)
(345)(z)
Occupancy........................ (298)(s) 2,305
Communications................... (473)(s) 2,869
Legal and professional fees...... (246)(s) 2,875
Other............................ (757)(s) 10,589
-------- --------
Total expenses before
provision for income
taxes...................... 11,970 236,544
-------- --------
Income before provision for
income taxes............... (15,337) 132,620
PROVISION FOR INCOME TAXES......... (632)(s)(q) 73,819
-------- --------
Net income....................... $(14,705) $ 58,801
======== ========
Diluted weighted average shares
outstanding.................... 56,743(jj)
========
Diluted net earnings per share... $ 0.90(kk)
========

F-7

LABRANCHE & CO INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE DATA)

PRO FORMA PRO FORMA
ADJUSTMENTS FOR FOR THE
THE REORGANIZATION REORGANIZATION (J) (K)
HISTORICAL TRANSACTIONS TRANSACTIONS WEBCO HENDERSON
---------- ------------------ -------------- -------- ---------

REVENUES:
Net gain on principal transactions............ $150,971 $ -- $150,971 $ 7,474 $52,470
Commissions................................... 37,222 -- 37,222 5,714 23,663
Other......................................... 12,844 -- 12,844 555 5,956
-------- -------- -------- ------- -------
Total revenues.............................. 201,037 -- 201,037 13,743 82,089
EXPENSES:
Employee compensation and related benefits.... 34,268 29,180 (aa) 63,448 7,912 43,263
Lease of exchange memberships................. 8,416 -- 8,416 392 --
Interest...................................... 8,286 6,129 (bb) 15,091 -- 4,178
981 (cc)
18 (dd)
(323)(ee)
Exchange, clearing and brokerage fees......... 3,709 -- 3,709 609 1,765
Amortization of intangibles................... 4,623 2,185 (ff) 6,808 -- --
Occupancy..................................... 1,411 -- 1,411 119 217
Communications................................ 1,193 -- 1,193 -- 137
Legal and professional fees................... 1,622 -- 1,622 -- 887
Other......................................... 3,041 -- 3,041 537 6,974
-------- -------- -------- ------- -------
Total expenses before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... 66,569 38,170 104,739 9,569 57,421
-------- -------- -------- ------- -------
Income before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... 134,468 (38,170) 96,298 4,174 24,668
MANAGING DIRECTORS' COMPENSATION................ 56,191 (56,191)(gg) -- -- --
Income before limited partners' interest in
earnings of subsidiary and provision for
taxes..................................... 78,277 18,021 96,298 4,174 24,668
LIMITED PARTNERS' INTEREST IN EARNINGS OF
SUBSIDIARY.................................... 25,344 (25,344)(hh) -- -- --
-------- -------- -------- ------- -------
Income before provision for income taxes.... 52,933 43,365 96,298 4,174 24,668
PROVISION FOR INCOME TAXES...................... 23,899 23,451 (ii) 47,350 1,914 12,317
-------- -------- -------- ------- -------
Net income.................................... $ 29,034 $ 19,914 $ 48,948 $ 2,260 $12,351
======== ======== ======== ======= =======
Diluted weighted average shares outstanding... 40,443
========
Diluted net earnings per share................ $ 0.72
========

PRO FORMA FOR THE
PRO FORMA REORGANIZATION PRO FORMA
ADJUSTMENTS FOR TRANSACTIONS AND ADJUSTMENTS
THE HENDERSON AND THE HENDERSON AND (R) FOR THE RPM
WEBCO ACQUISITIONS WEBCO ACQUISITIONS RPM ACQUISITION
------------------ ------------------ --------- ------------

REVENUES:
Net gain on principal transactions............ $ -- $210,915 $35,761 $ --
Commissions................................... -- 66,599 25,532 --
Other......................................... -- 19,355 29,724 (5,442)(s)
-------- -------- ------- --------
Total revenues.............................. -- 296,869 91,017 (5,442)
EXPENSES:
Employee compensation and related benefits.... (23,713)(l) 90,910 44,548 (4,174)(s)
(5,221)(t)
3,000 (u)
1,459 (v)
(7,816)(w)
Lease of exchange memberships................. -- 8,808 3,699 --
Interest...................................... 31,032 (m) 46,613 5,508 (176)(s)
250 (n) (1,630)(x)
(3,938)(o)

Exchange, clearing and brokerage fees......... -- 6,083 5,522 (315)(s)
Amortization of intangibles................... 11,543 (p) 18,351 1,904 (167)(s)
22,397(y)
(460)(z)
Occupancy..................................... -- 1,747 2,126 (425)(s)
Communications................................ -- 1,330 2,886 (686)(s)
Legal and professional fees................... -- 2,509 1,221 (311)(s)
Other......................................... -- 10,552 7,323 (744)(s)
-------- -------- ------- --------
Total expenses before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... 15,174 186,903 74,737 4,731
-------- -------- ------- --------
Income before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... (15,174) 109,966 16,280 (10,173)
MANAGING DIRECTORS' COMPENSATION................ -- -- -- --
Income before limited partners' interest in
earnings of subsidiary and provision for
taxes..................................... (15,174) 109,966 16,280 (10,173)
LIMITED PARTNERS' INTEREST IN EARNINGS OF
SUBSIDIARY.................................... -- -- -- --
-------- -------- ------- --------
Income before provision for income taxes.... (15,174) 109,966 16,280 (10,173)
PROVISION FOR INCOME TAXES...................... (3,415)(q) 58,166 7,280 4,124 (s)(q)
-------- -------- ------- --------
Net income.................................... $(11,759) $ 51,800 $ 9,000 $(14,297)
======== ======== ======= ========
Diluted weighted average shares outstanding...

Diluted net earnings per share................

PRO FORMA
FOR THE
REORGANIZATION
TRANSACTIONS,
THE HENDERSON
AND WEBCO
ACQUISITIONS
AND THE RPM
ACQUISITION
--------------

REVENUES:
Net gain on principal transactions............ $246,676
Commissions................................... 92,131
Other......................................... 43,637
--------
Total revenues.............................. 382,444
EXPENSES:
Employee compensation and related benefits.... 122,706

Lease of exchange memberships................. 12,507
Interest...................................... 50,315

Exchange, clearing and brokerage fees......... 11,290
Amortization of intangibles................... 42,025

Occupancy..................................... 3,448
Communications................................ 3,530
Legal and professional fees................... 3,419
Other......................................... 17,131
--------
Total expenses before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... 266,371
--------
Income before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and provision
for income taxes.......................... 116,073
MANAGING DIRECTORS' COMPENSATION................ --
Income before limited partners' interest in
earnings of subsidiary and provision for
taxes..................................... 116,073
LIMITED PARTNERS' INTEREST IN EARNINGS OF
SUBSIDIARY.................................... --
--------
Income before provision for income taxes.... 116,073
PROVISION FOR INCOME TAXES...................... 69,570
--------
Net income.................................... $ 46,503
========
Diluted weighted average shares outstanding... 56,121(jj)
========
Diluted net earnings per share................ $ 0.65(kk)
========

F-8

LABRANCHE & CO INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)

a. Reflects the historical statement of financial condition of RPM as of
September 30, 2000.

b. Reflects the reversal of the historical balances of RPM Real Estate and RPM
Asset Management as of September 30, 2000, as LaBranche will not acquire
these business lines.

c. Reflects the repayment of approximately $21.2 million of subordinated debt
of RPM prior to the completion of the RPM Acquisition. Repayment is assumed
to be applied first to reduce available cash and the remainder to reduce
receivable from brokers and dealers.

d. Reflects the estimated payments for professional services provided in
connection with the RPM Acquisition.

e. Reflects the write-up of the exchange memberships acquired in the RPM
Acquisition to fair market value from historical cost based on the last
consummated sale as of December 31, 2000.

f. Reflects a total of $448.5 million of purchase price allocated to
intangibles for the RPM Acquisition, as well as the reversal of
$7.3 million of intangible assets remaining from RPM's prior transactions.
The amount allocated to intangibles was also adjusted to record deferred
tax liabilities at an estimated rate of 47.5% related to the excess of
purchase price allocated to exchange memberships and intangible assets,
other than goodwill.

g. Reflects the recognition of the present value of $40.0 million of
compensation payable under the RPM Deferred Compensation Plan to certain
RPM employees 81 months after the completion of the RPM Acquisition.

h. Reflects the issuance in connection with the RPM Acquisition of an
aggregate of approximately 6.9 million shares of LaBranche common stock and
shares of nonconvertible preferred stock having an aggregate face value of
approximately $100.0 million and an estimated fair value of approximately
$89.1 million. In addition, all obligations under RPM's outstanding option
agreements with employees will be assumed and each option to purchase RPM
common stock will be converted into a vested option to purchase 98.778
shares of LaBranche common stock. In determining consideration paid, the
measurement date of January 18, 2001 is used for valuing the shares of
common stock to be issued. The measurement date, for accounting purposes,
is the last date the consideration becomes fixed without subsequent
revision. For purposes of determining the consideration paid for the pro
forma financial statements, 6.9 million shares of common stock and the
replacement options were assumed to be issued at a market price of $37.63
per share. The market price was calculated using a volume weighted average
of the closing price of the stock for the three business days before and
the three business days after January 18, 2001, the date of the merger
agreement for accounting purposes.

i. Reflects the elimination of the stockholders' equity of RPM.

j. Reflects the historical results of operations of Webco for the period from
January 1, 2000 to March 9, 2000 and for the year ended December 31, 1999,
respectively.

k. Reflects the historical results of operations of Henderson for the period
from January 1, 2000 to March 2, 2000 and for the year ended December 31,
1999, respectively.

l. Employee compensation and benefits was adjusted to reverse actual
compensation paid to Henderson and Webco employees based upon new
compensation arrangements to which these employees became subject upon
becoming employees of LaBranche. Eighteen Henderson and Webco employees
became eligible to participate in LaBranche's Annual Incentive Plan and
were entitled to receive a base annual compensation and bonus as described
in Note aa below.

m. Reflects the interest expense on $250.0 million principal amount of senior
subordinated notes, including the accretion of approximately $4.3 million of
discount and the amortization of $6.9 million of debt issuance costs based
on an effective interest rate of approximately 13.0%. This excludes any
payment made pursuant to an Excess Cash Flow Offer.

F-9

n. Reflects the interest expense for $2.5 million of senior promissory notes,
issued to Webco stockholders to indemnify LaBranche for breaches of
representations and warranties at an interest rate of 10.0%.

o. Reflects the reversal of the actual interest expense incurred prior to the
repayment of $54.1 million of Hendersons' subordinated debt.

p. Reflects the amortization of intangibles, on a straight-line basis, related
to the Henderson and Webco acquisitions.

q. Reflects the consolidated federal, state and local taxes for the combined
company at an estimated tax rate of approximately 47.5%, including the
deferred tax benefit related to the amortization of the deferred tax
liability established in connection with the recording of the specialist
stock listings at the respective estimated lives of the intangible assets.

r. Reflects the historical results of operations of RPM for the nine months
ended September 30, 2000 and for the year ended December 31, 1999,
respectively.

s. Reflects the reversal of the historical results of operations of RPM Real
Estate, RPM Asset Management and RPM Investment Division for the nine
months ended September 30, 2000 and for the year ended December 31, 1999,
respectively, as LaBranche will not acquire these RPM business lines.

t. Reflects the reversal of actual compensation expense related to RPM's stock
option agreements with employees. These RPM options will be converted into
vested options to buy LaBranche common stock at the time of the RPM
Acquisition.

u. Reflects the pro rata compensation expense for the $9.0 million retention
bonus pool payable to certain employees of RPM on the third anniversary of
the RPM acquisition.

v. Reflects the accretion expense, using an effective interest method, for the
approximately $9.8 million discount on the RPM Deferred Compensation Plan.

w. Employee compensation and benefits was adjusted to reverse actual
compensation paid to RPM employees based upon new compensation arrangements
to which those employees will be subject upon becoming employees of
LaBranche. Nine RPM employees will become entitled to participate in
LaBranche's Annual Incentive Plan and will be entitled to receive a base
annual compensation and bonus as described in Note aa below.

x. Reflects the reversal of the actual interest expense incurred prior to the
repayment of $21.2 million of RPM's subordinated debt.

y. Reflects the amortization of intangibles, on a straight-line basis, related
to the RPM Acquisition.

z. Reflects the reversal of the amortization of RPM's existing intangible
assets prior to the RPM Acquisition.

aa. Employee compensation and benefits was adjusted to reflect managing
directors' compensation based on the revised compensation policies which
were implemented at the time of the Reorganization Transaction in August
1999. Under this policy, a compensation pool of up to 30% of pre-tax income
is set aside for managing directors and other employees. The pro forma
compensation adjustment reflects managing directors' compensation, which is
comprised of an annual base salary of approximately $8.5 million (34
managing directors at $250,000), and the remaining balance as bonus. The
pro forma adjustment also includes compensation expenses related to
employee restricted stock awards of $14.8 million which vest over 5 years
and result in an annual expense of approximately $3.0 million. The pro
forma adjustment does not include any other compensation expenses related
to employees who are not managing directors.

bb. Reflects the interest expense for the $100.0 million of senior notes,
issued on August 24, 1999, based upon an interest rate of 9.5%.

cc. Reflects the interest expense for the $16.0 million senior note, issued on
August 24, 1999, based on an interest rate of 9.5%.

dd. Reflects the interest expense for the $350,000 of subordinated
indebtedness, issued on August 24, 1999, based on an interest rate of 8.0%.

F-10

ee. Reflects the reversal of the actual interest expense, incurred prior to the
Reorganization Transactions, related to the $5.0 million of subordinated
indebtedness repaid, based on an interest rate of 10.0%.

ff. Reflects the amortization of intangibles, on a straight-line basis,
related to the redemption of limited partners' interest.

gg. Managing directors' compensation was adjusted to reverse the actual amounts
recorded prior to the Reorganization Transactions.

hh. Reflects reversal of actual limited partners' interest in earnings of
subsidiary prior to the Reorganization Transactions.

ii. Reflects federal, state and local income taxes at an estimated tax rate of
approximately 47.5%, as a result of the Reorganization Transactions.

jj. Reflects the weighted average shares outstanding, assuming the common
stock issued to former RPM and Webco stockholders was issued on
January 1, 2000 and January 1, 1999, respectively. In addition, reflects
potential dilutive effect on the common shares, including the options to
buy LaBranche common stock issued to RPM option holders using the average
stock price of LaBranche common stock for the nine months ended
September 30, 2000 and for the year ended December 31, 1999 respectively.

kk. Reflects earnings per share calculated by dividing net income less
dividends on the nonconvertible preferred stock issued to RPM stockholders
for the nine months ended September 30, 2000 and for the year ended
December 31, 1999, respectively, by the weighted average shares outstanding
as calculated in Note jj above.

F-11

LABRANCHE & CO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

(000'S OMITTED EXCEPT PER SHARE DATA)

AS OF
SEPTEMBER 30,
2000
-------------

ASSETS

CASH AND CASH EQUIVALENTS................................... $ 67,927
CASH SEGREGATED UNDER FEDERAL REGULATIONS................... 2,537
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL............. 156,709
RECEIVABLE FROM BROKERS AND DEALERS......................... 82,510
RECEIVABLE FROM CUSTOMERS................................... 1,274
SECURITIES OWNED, at market value:
Corporate equities........................................ 131,127
United States Government obligations...................... --
Other..................................................... 4,538
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market value... 19,800
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of $42,900
and $9,200)............................................... 50,300
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less
accumulated depreciation and amortization of $1,776 and
$1,250, respectively...................................... 2,779
INTANGIBLE ASSETS, net of accumulated amortization
Specialist Stock List..................................... 187,184
Trade Name................................................ 25,842
Goodwill.................................................. 179,228
OTHER ASSETS................................................ 20,458
--------
Total assets................................................ $932,213
========
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Payable to brokers and dealers.............................. $ 2,071
Payable to customers........................................ 3,767
Securities sold, but not yet purchased, at market value..... 49,706
Accounts payable and other accrued expenses................. 43,894
Income taxes payable........................................ 2,666
Deferred tax liabilities.................................... 61,788
--------
163,892
--------

LONG TERM DEBT.............................................. 355,775
--------
SUBORDINATED LIABILITIES
Exchange memberships, at market value....................... 19,800
Other subordinated indebtedness............................. 46,508
--------
66,308
--------
PREFERRED STOCK, $.01 par value, 10,000,000 shares
authorized; None issued and outstanding................... --

COMMON STOCK, $.01 par value, 200,000,000 shares authorized;
48,975,352 and 45,875,000 shares issued and outstanding as
of September 30, 2000 and December 31, 1999
respectively.............................................. 490

ADDITIONAL PAID-IN-CAPITAL.................................. 271,498

RETAINED EARNINGS........................................... 82,371

UNEARNED COMPENSATION....................................... (8,121)
--------
346,238
--------
Total liabilities and stockholders' equity.................. $932,213
========

The accompanying notes are an integral part of these condensed consolidated
statements.

F-12

LABRANCHE & CO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
(000'S OMITTED EXCEPT PER SHARE DATA)

FOR THE NINE MONTHS
ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------

REVENUES:
Net gain on principal transactions........................ $203,174 $109,528
Commissions............................................... 32,367 26,662
Other..................................................... 11,995 8,945
-------- --------
Total revenues.......................................... 247,536 145,135
-------- --------
EXPENSES:
Employee compensation and related benefits................ 64,435 19,042
Interest.................................................. 29,910 4,515
Depreciation and amortization of intangibles.............. 12,404 2,905
Lease of exchange memberships............................. 8,127 6,286
Exchange, clearing and brokerage fees..................... 3,631 2,876
Other..................................................... 8,636 4,600
-------- --------
Total expenses before managing directors' compensation and
limited partners' interest in earnings of subsidiary and
provision for income taxes................................ 127,143 40,224
-------- --------
Income before managing directors' compensation and limited
partners' interest in earnings of subsidiary and provision
for income taxes.......................................... 120,393 104,911

MANAGING DIRECTORS' COMPENSATION............................ -- 56,191
-------- --------
Income before limited partners' interest in earnings of
subsidiary and provision for income taxes................. 120,393 48,720

LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY........ -- 25,344
-------- --------
Income before provision for income taxes.................... 120,393 23,376

PROVISION FOR INCOME TAXES.................................. 60,764 9,913
-------- --------
Net income.................................................. $ 59,629 $ 13,463
======== ========
Weighted average common shares outstanding:
Basic..................................................... 47,970 38,612
Diluted................................................... 48,272 38,612

Earnings per share:
Basic..................................................... $ 1.24 $ 0.35
Diluted................................................... 1.24 0.35

The accompanying notes are an integral part of these condensed consolidated
statements.

F-13

LABRANCHE & CO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(000'S OMITTED)

FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2000 1999
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 59,629 $ 13,463
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization........................... 13,439 3,490
Compensation expense related to stock compensation
awards................................................ 2,325 309
Undistributed limited partners interest in earnings of
subsidiary............................................ -- 96
Deferred tax benefit.................................... (49) --
Change in assets and liabilities:
Securities purchased under agreements to resell......... (131,287) 2,124
Receivable from brokers and dealers..................... (45,013) (27,623)
Receivable from customers............................... (1,274) --
Corporate equities...................................... 17,436 41,884
United States Government obligations.................... 1,471 15
Other securities owned.................................. (2,023) (375)
Other assets............................................ (13,271) (28)
Payable to brokers and dealers.......................... (5,655) (2,472)
Payable to customers.................................... 3,767 921
Securities sold, but not yet purchased.................. 12,806 (44,284)
Accounts payable and other accrued expenses............. 26,356 (16,905)
Income taxes payable.................................... (5,293) 5,529
--------- ---------
Net cash used in operating activities................. (66,636) (23,856)
--------- ---------
Cash Flows From Investing Activities:
Net cash received from Webco acquisition.................. 8,370 --
Net cash paid for Henderson acquisition................... (192,734) --
Repayment of note payable................................. (6,000) --
Payments to limited partners for redemption of interest
upon reorganization..................................... -- (140,186)
Payments for office equipment and leasehold
improvements............................................ (2,003) --
--------- ---------
Net cash used in investing activities................. (192,367) (140,186)
--------- ---------
Cash Flows From Financing Activities:
Net cash received from issuance of senior subordinated
debt.................................................... 245,693 3,435
Repayment of subordinated debt............................ -- (5,000)
Net proceeds from initial public offering................. -- 134,794
Net proceeds from long term debt.......................... -- 97,276
Payments to members upon reorganization................... -- (9,025)
Proceeds from contributions of capital.................... -- 18,096
Payments for distributions of capital..................... -- (8,095)
--------- ---------
Net cash provided by financing activities............. 245,693 231,481
--------- ---------
(Decrease)/Increase in cash and cash equivalents...... (13,310) 67,439
--------- ---------
CASH AND CASH EQUIVALENTS, beginning of period.............. 83,774 4,722
CASH AND CASH EQUIVALENTS, end of the period................ $ 70,464 $ 72,161
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest.................................................. $ 28,640 $ 4,624
Income taxes.............................................. 66,848 6,200

F-14

LABRANCHE & CO INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)

(000'S OMITTED)

FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2000 1999
------------ ------------

SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES:
Acquisitions:
Intangibles assets...................................... $ 171,936 $ --
Fair value of tangible assets acquired, other than
cash.................................................. 33,863 --
Deferred tax liabilities related to intangible assets... 61,774 --
Common stock issuance................................... 32,312 --
Increase in additional paid in capital related to stock
based compensation...................................... 2,325 --
Issuance of restricted stock to employees................. 8,313 --
Issuance of subordinated debt and common stock for
redemption of limited partner interests upon
reorganization.......................................... -- 23,821

The accompanying notes are an integral part of these condensed consolidated
statements

F-15

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The condensed consolidated financial statements include the accounts of
LaBranche & Co Inc., a Delaware corporation (the "Holding Company"), and its
subsidiaries, LaBranche & Co. LLC, a New York limited liability company
("LaBranche"), and Henderson Brothers, Inc., a Delaware corporation ("Henderson
Brothers" and, collectively with the Holding Company and LaBranche, the
"Company"). The Holding Company is the sole member of LaBranche and 100% owner
of Henderson Brothers. LaBranche is a registered broker-dealer and operates
primarily as a specialist in certain equity securities listed on the New York
Stock Exchange, Inc. (the "NYSE").

On August 24, 1999, the Company reorganized from partnership to corporate
form and completed its initial public offering. In that offering, the Company
sold 10,500,000 shares of common stock and received net proceeds of $134.8
million. Concurrently with the offering, the Company issued $100.0 million
aggregate principal amount of Senior Notes that bear interest at a rate of 9.5%
annually and mature on August 15, 2004.

Effective March 2, 2000, the Holding Company acquired all the outstanding
capital stock of Henderson Brothers Holdings, Inc., which in turn wholly owned
Henderson Brothers, for an aggregate purchase price of approximately $228.4
million. In addition, effective March 9, 2000, the Holding Company acquired,
through a merger, Webco Securities, Inc. ("Webco"), a specialist on the NYSE,
for an aggregate purchase price of $11.0 million in cash, $3.0 million in senior
promissory notes and 2.8 million shares of the Company's common stock. In
connection with the acquisitions of Henderson Brothers Holdings, Inc. and Webco,
the Holding Company issued $250.0 million aggregate principal amount of Senior
Subordinated Notes that bear interest at a rate of 12.0% annually and mature on
March 2, 2007.

2. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL INFORMATION

The unaudited interim condensed consolidated financial information as of
September 30, 2000 and for the nine months ended September 30, 2000 and 1999 are
presented in the accompanying condensed consolidated financial statements. The
unaudited interim condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial information. The unaudited interim condensed consolidated financial
information reflects all adjustments, which are, in the opinion of management,
necessary for a fair presentation of the results for such periods. This interim
condensed consolidated financial information as of September 30, 2000 should be
read in conjunction with the audited consolidated financial statements and notes
thereto as of December 31, 1999 included on pages F-22 to F-35. Results of the
interim periods are not necessarily indicative of results to be obtained for a
full fiscal year.

3. INCOME TAXES

Prior to its conversion to corporate form, the Company operated as a
partnership and generally was not subject to U.S. federal and state income
taxes. The earnings of the Company, however, were subject to local
unincorporated business taxes. The members of LaB Investing and the limited
partners of LaBranche were taxed on their respective proportionate shares of
LaBranche's taxable income or loss. Effective with its conversion from
partnership to corporate form on August 24, 1999, the Company

F-16

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3. INCOME TAXES (CONTINUED)
became subject to U.S. federal, state and local corporate income taxes. Prior to
LaBranche's conversion to a limited liability company, as of June 30, 2000,
LaBranche remained subject to unincorporated business tax. The Company accounts
for taxes in accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes", which requires the recognition
of tax benefits or expenses on temporary differences between the financial
reporting and tax bases of its assets and liabilities. Deferred tax assets and
liabilities relate to stock-based compensation, amortization of intangibles and
differences in the accounting and tax basis of certain assets acquired. The
Company's effective tax rate for the nine months ended September 30, 2000
differs from the federal statutory rate primarily due to non-deductible
amortization of intangibles. The components of provision for income taxes
reflected on the condensed consolidated statements of operations are set forth
below (000's omitted):

NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------

Current federal, state and local taxes..... $59,488 $5,529
Deferred tax (benefit)/provision........... (49) 96
Unincorporated business tax................ 1,325 4,288
------- ------
Total provision for income taxes..... $60,764 $9,913
======= ======

4. REGULATORY REQUIREMENTS

LaBranche, a specialist and member of the NYSE and subsidiary of the Holding
Company, is subject to SEC Rule 15c3-1 adopted and administered by the NYSE and
the SEC. LaBranche is required to maintain minimum net capital, as defined,
equivalent to the greater of $100,000 or 1/15 of aggregate indebtedness, as
defined.

As of September 30, 2000 and as of December 31, 1999, LaBranche's net
capital, as defined under SEC Rule 15c3-1, was $313.4 million and $161.4
million, respectively, and exceeded minimum requirements by $310.9 million and
$159.9 million, respectively. LaBranche's aggregate indebtedness to net capital
ratio as of September 30, 2000 and December 31, 1999 was .12 to 1 and .13 to 1,
respectively.

As of September 30, 2000 and December 31, 1999, LaBranche's NYSE minimum
required dollar amount of net liquid assets, as defined, was $284.3 million and
$93.6 million, respectively, compared to actual net liquid assets, as defined,
of $326.0 million and $175.9 million, respectively.

F-17

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5. COMMITMENTS

Minimum rental commitments under existing non-cancelable leases for office
space and equipment are as follows:

YEAR ENDING DECEMBER 31:
------------------------

2000........................................................ $ 256,875
2001........................................................ 1,082,358
2002........................................................ 1,026,650
2003........................................................ 807,750
2004........................................................ 807,750
Thereafter.................................................. 2,687,020

These leases contain escalation clauses providing for increased rentals
based upon maintenance and tax increases.

During the third quarter of 2000, the Company agreed to invest up to $2.0
million in a joint venture in an electronic trading and communications network.

6. SUBORDINATED LIABILTITES

LaBranche is a party to subordinated loan agreements under which it has
indebtedness approved by the NYSE for inclusion as net capital, as defined.
Interest is payable quarterly at various annual rates. Six of the agreements,
representing $4,173,000, mature within the last three months of 2000, one
agreement, representing $400,000, matures within the first six months of 2001,
five agreements, representing $2,650,000, mature within the last six months of
2001 and six agreements, representing $2,985,000, mature within the first six
months of 2002. These agreements all have automatic rollover provisions, and the
scheduled maturity date of each agreement will be extended an additional year,
unless the lender gives LaBranche seven months' advance notice that the maturity
date will not be extended. Two of the holders representing $850,000 of
subordinated loan agreements maturing in November 2000 have notified LaBranche
that the scheduled maturity date will not be extended. In addition, five holders
representing $3,723,000 of subordinated loan agreements maturing in December
2000 and January 2001 have notified LaBranche that the scheduled maturity date
will not be extended.

During the quarter ended September 30, 2000, the Company loaned to certain
employees an aggregate of $4.5 million, with an annual interest rate equal to
the monthly broker call rate. This loan was secured by shares of the Company's
common stock owned by such employees.

The principal amount and all accrued and unpaid interest will be forgiven
and recognized as compensation expense over three years, subject to the
employees' continuing service with the Company and other restrictions.

7. EARNINGS PER SHARE

Earnings per share ("EPS") are computed in accordance with SFAS No. 128,
"Earnings Per Share". Basic EPS is calculated by dividing net income by the
weighted-average number of common shares outstanding. Diluted EPS includes the
determinants of basic EPS and, in addition, gives effect to dilutive potential
common shares. For purposes of determining weighted average shares outstanding
for periods prior to the Company's reorganization from partnership to corporate
form, the outstanding

F-18

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

7. EARNINGS PER SHARE (CONTINUED)
shares were determined based on the conversion ratio of members' capital to
common stock issued to the members upon reorganization.

The computations of basic and diluted EPS are set forth below (000's
omitted, except per share data):

NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------- -------------

Numerator for basic and diluted earnings per share--net
income.................................................... $59,629 $13,463
Denominator for basic earnings per share--weighted-average
number of common shares................................... 47,970 38,612
Stock options........................................... 90 --
Restricted stock........................................ 7 --
Restricted stock units.................................. 205 --
------- -------
Denominator for diluted earnings per share--weighted-average
number of common shares................................... 48,272 38,612
Basic earnings per share.................................... $ 1.24 $ 0.35
Diluted earnings per share.................................. $ 1.24 $ 0.35

8. EMPLOYEE INCENTIVE PLANS

During August and September 2000, the Company issued to certain newly hired
employees an aggregate of 200,000 and 100,000 shares of restricted stock,
respectively, each with an issue cost of $.01 and a fair market value of $26.50
and $30.13 per share, respectively. The restricted stock, which is subject to
continuing service with the Company, will vest in three annual installments on
each anniversary of the grant date. For purposes of determining compensation
expense, the total expense of approximately $8.3 million is being recognized
over the three-year vesting period on a straight-line basis.

9. PRO FORMA FINANCIAL INFORMATION

The following 1999 pro forma consolidated results give effect to the
Company's August 1999 reorganization from partnership to corporate form and
related transactions, which include the acquisition of LaBranche's limited
partnership interests, and the application of the net proceeds from the
Company's August 1999 initial public offering and Senior Note offering (the
"Reorganization Transactions") as if the Reorganization Transactions occurred as
of January 1, 1999. In addition, the 1999 pro forma consolidated results give
effect to the acquisition of all the outstanding capital stock of Henderson
Brothers, the acquisition of Webco Securities and the issuance of the Senior
Subordinated Notes as if they occurred as of January 1, 1999. The 2000 pro forma
consolidated results give effect to the March 2000 acquisitions of Henderson
Brothers and Webco Securities and the issuance of the

F-19

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. PRO FORMA FINANCIAL INFORMATION (CONTINUED)
Senior Subordinated Notes as if they all occurred as of January 1, 2000. The pro
forma impact on revenues, pre-tax income and earnings are as follows (000's
omitted, except per share data):

FOR THE NINE MONTHS
ENDED
SEPTEMBER 30,
-------------------------
2000 1999
----------- -----------
(PRO-FORMA) (PRO-FORMA)

Revenues.............................................. $260,178 $170,405
Pre-Tax Income........................................ 101,585 63,245
Net Income............................................ 48,214 28,755
EPS................................................... $ 0.99 $ 0.69

10. SUBSEQUENT EVENT

Effective January 18, 2001 the Company entered into a merger agreement to
acquire ROBB PECK McCOOEY Financial Services, Inc. ("Robb Peck McCooey") for an
aggregate of approximately 6.9 million shares of the Company's common stock and
shares of the Company's nonconvertible preferred stock having an aggregate face
value of approximately $100.0 million and an estimated fair value of
approximately $89.1 million. In addition, the Company would assume Robb Peck
McCooey's obligations under the outstanding option agreements with Robb Peck
McCooey's employees. Thus, each option to purchase Robb Peck McCooey common
stock will be replaced with a vested option to purchase 98.778 shares of the
Company's common stock. The acquisition will be accounted for under the purchase
method and the results of Robb Peck McCooey operations will be included in the
Company's consolidated financial statements from the closing date of the
transaction.

F-20

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of

LaBranche & Co Inc. and Subsidiaries:

We have audited the accompanying consolidated statements of financial
condition of LaBranche & Co Inc. and Subsidiaries (collectively, the "Company")
as of December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in stockholders' equity/members' capital and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements and the condensed financial statements referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LaBranche & Co Inc. and
Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The parent company only condensed
financial statements appearing on pages F-36 through F-40 are presented for the
purpose of complying with the Securities and Exchange Commission's rules and are
not part of the basic financial statements. Such statements have been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

New York, New York

January 24, 2000

F-21

LABRANCHE & CO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED, EXCEPT SHARE DATA)

DECEMBER 31,
-------------------
1999 1998
-------- --------

ASSETS
CASH AND CASH EQUIVALENTS................................... $ 83,774 $ 4,722
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL............. 25,422 21,100
RECEIVABLE FROM BROKERS, DEALERS AND CLEARING
ORGANIZATIONS............................................. 33,662 54,808
SECURITIES OWNED, at market value:
Corporate equities........................................ 148,563 114,994
United States Government obligations...................... 1,471 1,468
Other..................................................... 2,515 1,360
COMMISSIONS RECEIVABLE...................................... 3,835 3,009
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market value... 20,700 12,250
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of $9,200
and $4,900, respectively)................................. 6,300 6,300

OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less
accumulated depreciation and amortization of $1,250 and
$729, respectively........................................ 1,355 1,647
INTANGIBLE ASSETS, net of accumulated amortization:
Specialist Stock List..................................... 92,789 --
Trade Name................................................ 26,340 --
Goodwill.................................................. 51,212 47,532

OTHER ASSETS................................................ 7,187 3,011
-------- --------
Total assets............................................ $505,125 $272,201
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY/MEMBERS' CAPITAL

LIABILITIES:
Payable to brokers and dealers............................ $ 7,726 $ 3,892
Securities sold, but not yet purchased, at market value... 36,900 67,896
Accrued compensation...................................... 12,016 17,735
Accounts payable and other accrued expenses............... 5,522 6,347
Other liabilities......................................... 7,959 1,341
-------- --------
70,123 97,211
-------- --------
LONG TERM DEBT.............................................. 115,822 --
-------- --------
COMMITMENTS................................................. -- --
SUBORDINATED LIABILITIES:
Exchange memberships, at market value..................... 20,700 12,250
Other subordinated indebtedness........................... 46,508 48,073
-------- --------
67,208 60,323
-------- --------
LIMITED PARTNERS' INTEREST IN SUBSIDIARY.................... -- 37,574
-------- --------
STOCKHOLDERS' EQUITY/MEMBERS' CAPITAL:
Preferred Stock ($.01 par value, 10,000,000 shares
authorized; none issued and outstanding).................. -- --
Common stock (par value $.01 per share; 200,000,000 shares
authorized, 45,875,000 shares issued and outstanding) 459 --
Additional paid-in-capital.................................. 228,771 --
Retained earnings........................................... 22,742 --
-------- --------
Stockholders' equity/members' capital....................... 251,972 77,093
-------- --------
Total liabilities and stockholders' equity/members'
capital................................................. $505,125 $272,201
======== ========

The accompanying notes are an integral part of these consolidated statements.

F-22

LABRANCHE & CO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED, EXCEPT PER SHARE DATA)

FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------

REVENUES:
Net gain on principal transactions........................ $150,971 $95,048 $47,817
Commissions............................................... 37,222 26,576 15,186
Other..................................................... 12,844 4,787 4,637
-------- ------- -------
Total revenues.......................................... 201,037 126,411 67,640
-------- ------- -------
EXPENSES:
Employee compensation and benefits........................ 34,268 13,921 8,108
Lease of exchange memberships............................. 8,416 6,568 3,727
Interest.................................................. 8,286 3,577 1,566
Amortization of intangibles............................... 4,623 2,526 737
Exchange, clearing and brokerage fees..................... 3,709 2,898 2,042
Legal and professional fees............................... 1,622 916 620
Occupancy................................................. 1,411 1,121 465
Communications............................................ 1,193 964 709
Other..................................................... 3,041 2,285 1,934
-------- ------- -------
Total expenses before managing directors' compensation,
limited partners' interest in earnings of subsidiary and
provision for income taxes.............................. 66,569 34,776 19,908
-------- ------- -------
Income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and
provision for income taxes.............................. 134,468 91,635 47,732
MANAGING DIRECTORS' COMPENSATION............................ 56,191 58,783 30,008
-------- ------- -------
Income before limited partners' interest in earnings of
subsidiary and provision for income taxes............... 78,277 32,852 17,724
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY........ 25,344 26,292 14,354
-------- ------- -------
Income before provision for income taxes.................. 52,933 6,560 3,370
PROVISION FOR INCOME TAXES.................................. 23,899 3,900 1,881
-------- ------- -------
Net income................................................ $ 29,034 $ 2,660 $ 1,489
======== ======= =======
Weighted average shares outstanding....................... 40,443 24,318 10,329
======== ======= =======
Basic and diluted earnings per share...................... $ 0.72 $ 0.11 $ 0.14
======== ======= =======

The accompanying notes are an integral part of these consolidated statements.

F-23

LABRANCHE & CO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY/MEMBERS' CAPITAL
(000'S OMITTED)

COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED MEMBERS'
SHARES AMOUNT CAPITAL EARNINGS CAPITAL TOTAL
-------- -------- ---------- -------- -------- --------

BALANCE, December 31, 1996.......................... -- $ -- $ -- $ -- $13,735 $ 13,735
Net income........................................ -- -- -- -- 1,489 1,489
Contributions to capital.......................... -- -- -- -- 28,574 28,574
Distributions of capital.......................... -- -- -- -- (6,140) (6,140)
------ ------- -------- ------- ------- --------
BALANCE, December 31, 1997.......................... -- -- -- -- 37,658 37,658
Net income........................................ -- -- -- -- 2,660 2,660
Contributions to capital.......................... -- -- -- -- 66,563 66,563
Distributions of capital.......................... -- -- -- -- (29,788) (29,788)
------ ------- -------- ------- ------- --------
BALANCE, December 31, 1998.......................... -- -- -- -- 77,093 77,093
Net income through August 23, 1999................ -- -- -- -- 6,292 6,292
Contributions to capital.......................... -- -- -- -- 18,096 18,096
Distributions of capital.......................... -- -- -- -- (8,095) (8,095)
------ ------- -------- ------- ------- --------
BALANCE, pre-reorganization......................... -- -- -- -- 93,386 93,386
Exchange of membership interests for shares of
common stock.................................... 35,375 354 93,032 -- (93,386) --
Initial public offering of common stock........... 10,500 105 134,689 -- -- 134,794
------ ------- -------- ------- ------- --------
BALANCE, post-reorganization and initial public
offering............................................ 45,875 459 227,721 -- -- 228,180
Net income (August 24, 1999 through December 31,
1999)........................................... -- -- -- 22,742 -- 22,742
Compensation related to restricted stock units
granted......................................... -- -- 1,050 -- -- 1,050
------ ------- -------- ------- ------- --------
BALANCE, DECEMBER 31, 1999........................ 45,875 $ 459 $228,771 $22,742 $ -- $251,972
====== ======= ======== ======= ======= ========

The accompanying notes are an integral part of these consolidated statements.

F-24

LABRANCHE & CO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 29,034 $ 2,660 $ 1,489
Adjustments to reconcile net income to net cash (used in)
operating activities-
Depreciation and amortization........................... 5,348 3,020 909
Undistributed limited partners interest in earnings of
subsidiary............................................ -- 3,646 1,241
Compensation related to the restricted stock units........ 1,050 -- --
Deferred tax provision.................................. 335 -- --
Changes in assets and liabilities
Securities purchased under agreements to resell......... (4,322) (6,100) (8,500)
Receivable from brokers, dealers and clearing
organizations......................................... 21,146 3,366 (40,188)
Corporate equities...................................... (33,569) (77,967) (6,338)
United States government obligations.................... (3) 998 1
Other securities owned.................................. (1,155) -- --
Commissions receivable.................................. (826) -- --
Other assets............................................ (4,161) (1,970) (2,047)
Payable to brokers and dealers.......................... 3,834 2,231 (2,731)
Securities sold, but not yet purchased.................. (30,996) 28,569 20,591
Accrued compensation.................................... (5,719) 8,891 (5,322)
Accounts payable and other accrued expenses............. (2,166) 2,379 1,371
Income taxes payables................................... 7,624 -- --
--------- ------- -------
Net cash (used in) operating activities................. (14,546) (30,277) (39,524)
--------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of office equipment and leasehold
improvements............................................ (228) (1,550) (278)
Payments to limited partners for redemption of
interests............................................... (140,186) -- --
--------- ------- -------
Net cash (used in) investing activities................. (140,414) (1,550) (278)
--------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of subordinated debt........... 3,435 16,750 28,900
Repayment of subordinated debt............................ (5,000) -- (896)
Net proceeds from the initial public offering............. 134,794 -- --
Proceeds from the issuance of long term debt.............. 99,807 -- --
Payments to members upon reorganization................... (9,025) -- --
Proceeds from contributions of capital.................... 18,096 46,598 10,948
Payments for distributions of capital..................... (8,095) (29,788) (6,140)
--------- ------- -------
Net cash provided by financing activities............... 234,012 33,560 32,812
--------- ------- -------
Increase (decrease) in cash and cash equivalents........ 79,052 1,733 (6,990)
CASH AND CASH EQUIVALENTS, beginning of year................ 4,722 2,989 9,979
--------- ------- -------
CASH AND CASH EQUIVALENTS, end of year...................... $ 83,774 $ 4,722 $ 2,989
========= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest.................................................. $ 4,557 $ 8,788 $ 4,360
Income taxes.............................................. $ 17,989 $ 2,244 $ 2,161
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES
Excess of purchase price over fair value of assets
acquired for issuance of membership interest and limited
partnership interests in subsidiary..................... $ -- $25,815 $24,980
Exchange of membership interests for shares of common
stock................................................... $ 93,386 $ -- $ --
Issuance of subordinated debt and shares of common stock
for redemption of limited partner interests upon
reorganization.......................................... $ 23,821 $ -- $ --

The accompanying notes are an integral part of these consolidated statements.

F-25

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The consolidated financial statements include the accounts of LaBranche &
Co Inc., a Delaware corporation (the "Holding Company"), and its subsidiaries,
LaB Investing Co. L.L.C., a New York limited liability company ("LaB
Investing"), and LaBranche & Co., a New York limited partnership (collectively,
the "Company"). LaB Investing is the sole general partner of LaBranche & Co. and
has a partnership interest in LaBranche & Co. of 84.1%. The Holding Company is
the sole limited partner of LaBranche & Co. and owns the remaining partnership
interest of 15.9%. The Holding Company is also the sole member of LaB Investing,
thereby providing the Holding Company with 100.0% ownership in LaBranche & Co.
LaBranche & Co. operates primarily as a specialist in certain equity securities
listed on the New York Stock Exchange, Inc. ("NYSE").

2. INITIAL PUBLIC OFFERING AND DEBT ISSUANCE

On August 24, 1999, the Company reorganized from partnership to corporate
form, upon the members of LaB Investing exchanging their membership interests
for common stock in the Holding Company, and completed its initial public
offering. In that offering, the Company sold 10,500,000 shares of common stock
and received net proceeds of $134.8 million. Concurrently with the offering, the
Company issued $100.0 million aggregate principal amount of senior notes. See
Note 12 for further information regarding the long term debt.

3. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Management does not believe
that actual results will differ materially from these estimates.

INTANGIBLE ASSETS

Intangible assets are comprised of the Company's specialist stock list,
trade name, and goodwill from acquisitions and the limited partner buyout that
occurred in concurrence with our reorganization to corporate form. The
specialist stock list and trade name are being amortized on a straight-line
basis over 40 years and the goodwill is being amortized on a straight-line basis
over 15 years. The allocation of purchase price and determination of useful
lives were based upon an independent appraisal. The useful life of the
specialist stock list was determined based upon analysis of historical turnover
characteristics of the specialist stocks.

The Company continually evaluates whether later events and circumstances
have occurred that indicate the remaining estimated useful life may warrant
revision or that the remaining balance may not be recoverable. When factors
indicate that intangible assets should be evaluated for possible impairment, the
Company uses an estimate of undiscounted net income over the remaining life in
measuring whether the assets are recoverable.

EXCHANGE MEMBERSHIPS

Exchange memberships owned by the Company are carried at cost.

F-26

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain members of the Company have contributed the use of 9 memberships on
the NYSE to the Company. These memberships are subordinated to claims of general
creditors and are carried at market value with a corresponding amount recorded
in subordinated liabilities. Lease payments are paid by the Company to its
members for the use of the exchange memberships at a rate that is commensurate
with the rent paid to nonaffiliated parties for the use of their exchange
memberships.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments with
maturities of less than three months.

SECURITIES TRANSACTIONS

Securities transactions and the related revenues and expenses are recorded
on a trade date basis. Securities owned and securities sold, but not yet
purchased are reflected at market value and unrealized gains and losses are
reflected in net gain on principal transactions. Dividends and Securities and
Exchange Commission ("SEC") fees are also included in net gain on principal
transactions. Dividend income and expense are recognized on the payable date,
which does not differ materially from the ex-date.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of office equipment and leasehold improvements.

COLLATERALIZED FINANCING TRANSACTIONS

Securities purchased and sold under agreements to resell and repurchase, as
well as securities borrowed and loaned for which cash is deposited or received,
are treated as collateralized financing transactions and are recorded at
contract amount.

COLLATERAL

The Company continues to report assets as owned when they are pledged as
collateral in secured financing arrangements and the secured party cannot sell
or repledge the assets or the Company can substitute collateral or otherwise
redeem it on short notice. The Company continues not to report securities
received as collateral in secured financing arrangements because the debtor
typically has the right to substitute or redeem the collateral on short notice.

REPORTABLE OPERATING SEGMENT

The Company considers its present operations to be one reportable segment
for purposes of presenting consolidated financial information and for evaluating
its performance. The financial statement information presented in the
accompanying consolidated financial statements is consistent with the
preparation of financial information for the purpose of internal use.

F-27

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MANAGING DIRECTORS' COMPENSATION

Prior to the reorganization on August 24, 1999 the managing directors of
LaBranche & Co. were the members of LaB Investing. LaBranche & Co. paid out
substantially all of its earnings as compensation expense to its managing
directors. Subsequent to August 24, 1999, the managing directors of the Company
are compensated based on an annual salary as well as an incentive based
compensation pool which is determined based upon a certain percentage of pre-tax
income.

NEW ACCOUNTING PRONOUNCEMENT

The Financial Accounting Standard Board has issued Statement of Financial
Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative
Instruments and Hedging Activities," which is effective for periods beginning
after June 15, 2000. Management does not believe the impact of the adoption of
SFAS No. 133 on the Company's financial position or results of operations, will
be material.

4. RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS

The balances presented as receivables from and payables to brokers,
dealers and clearing organizations consists of the following at December 31,
1999 and December 31, 1998:

FOR THE YEARS
ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------

Receivable from brokers, dealers and clearing organizations:
Pending trades, net....................................... $ -- $34,390
Securities borrowed....................................... 26,230 17,386
Receivable from clearing organizations.................... 3,373 1,813
Securities failed to deliver.............................. 827 1,219
Other receivables from brokers and dealers................ 3,232 --
------- -------
$33,662 $54,808
======= =======
Payable to brokers and dealers:
Pending trades, net......................................... $ 6,435 $ --
Securities failed to receive................................ 1,264 3,892
Other payables to brokers and dealers....................... 27 --
------- -------
$ 7,726 $ 3,892
======= =======

5. INCOME TAXES

Prior to its conversion to corporate form, LaBranche & Co. operated as a
partnership and generally was not subject to U.S. federal and state income
taxes. The earnings of LaBranche & Co., however, were subject to local
unincorporated business taxes. The members were taxed on their proportionate
share of the partnership's taxable income or loss. Effective with its conversion
from partnership to corporate form on August 24, 1999, the Company became
subject to U.S. federal, state

F-28

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES (CONTINUED)
and local corporate income taxes. The Company accounts for taxes in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes", which requires the recognition of tax benefits or expenses on
temporary differences between the financial reporting and tax bases of its
assets and liabilities. Deferred tax assets and liabilities relate to
stock-based compensation and amortization of certain intangibles. As a result of
its conversion to corporate form, the Company recognized the tax effect of the
change in its income tax rate on the earnings attributable to the period from
August 24, 1999 to December 31, 1999. The Company's effective tax rate differs
from the federal statutory rate primarily due to its conversion to corporate
form and non-deductible amortization of intangibles. The components of provision
for income taxes reflected on the consolidated statements of operations are set
forth below:

YEARS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------

Current federal, state and local taxes.................. $18,346 $ -- $ --
Unincorporated business tax............................. 5,218 3,900 1,881
Deferred tax provision.................................. 335 -- --
------- ------ ------
Total provision for income taxes.................. $23,899 $3,900 $1,881
======= ====== ======

6. CAPITAL AND NET LIQUID ASSET REQUIREMENTS

LaBranche & Co., as a specialist and member of the NYSE, is subject to SEC
Rule 15c3-1 as adopted and administered by the NYSE and the SEC. LaBranche & Co.
is required to maintain minimum net capital, as defined, equivalent to the
greater of $100,000 or 1/15 of aggregate indebtedness, as defined.

As of December 31, 1999 and 1998, LaBranche & Co.'s net capital, as defined
under SEC Rule 15c3-1, was $161.4 million and $86.5 million, respectively, and
exceeded minimum requirements by $159.9 million and $85.2 million, respectively.
LaBranche & Co.'s aggregate indebtedness to net capital ratio was .13 to 1 and
.24 to 1, respectively.

The NYSE also requires members registered as regular specialists to
establish that they can meet, with their own net liquid assets, a minimum dollar
amount which shall be the greater of $1.0 million or 25% of their position
requirement ("Rule 104.2"). In 1998, due to the concentration of LaBranche &
Co.'s specialist book, the NYSE required LaBranche & Co. to maintain minimum net
liquid assets of the greater of 120% of LaBranche & Co.'s Rule 104.2 position
requirement, or $90.0 million, adjusted by the amount of the position
requirement for any new stock allocations. The position requirement is the
ability to assume positions in stocks in which they are registered of 30,000
shares of each S&P 500 common stock, 22,500 shares in all other common stocks,
4,500 shares in each convertible preferred stock and 1,800 shares in each
nonconvertible preferred stock. The term "net liquid assets" for a specialist
who also engages in transactions other than specialist activities is based on
its excess net capital determined in accordance with SEC Rule 15c3-1.

As of December 31, 1999 and 1998, LaBranche & Co.'s NYSE minimum required
dollar amount of net liquid assets, as defined, was $93.6 million and
$90.6 million, respectively, compared to actual net liquid assets, as defined,
of $175.9 million and $103.1 million, respectively.

F-29

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. ACQUISITIONS

Effective July 1, 1997, LaBranche & Co. acquired a portion of the specialist
operations of Stern Bros., LLC for an aggregate purchase price of approximately
$9.3 million, representing an 8.3% total general partners' interest in
LaBranche & Co. The goodwill associated with the acquisition was approximately
$7.8 million.

Effective August 1, 1997, LaBranche & Co. acquired the specialist operations
of Ernst, Homans, Ware & Keelips for an aggregate purchase price of
approximately $18.5 million, representing general and limited partnership
interests totaling 16.4%. The excess purchase price over fair value of net
assets acquired was approximately $17.2 million.

Effective July 1, 1998, LaBranche & Co. acquired the specialist operations
of Fowler, Rosenau & Geary, L.L.C. ("Fowler") for an aggregate purchase price of
approximately $45.0 million, representing a 22.4% total general and limited
partners' interest in LaBranche & Co. The excess purchase price over fair value
of net assets acquired was approximately $25.8 million.

Effective August 24, 1999, the limited partnership interests of
$37.1 million in LaBranche & Co. were acquired at an excess purchase price of
$127.4 million over the limited partners' capital balances. The redemption of
the limited partners' interests is accounted for as a step acquisition under the
purchase method of accounting. The excess of purchase price over the limited
partners' capital balances was allocated to intangible assets and assigned lives
as follows:

ORIGINAL AMOUNT LIFE
------------------- --------

Specialist Stock List............................... $ 93.6 million 40 years
Trade Name.......................................... 26.6 million 40 years
Goodwill............................................ 7.2 million 15 years
--------
$127.4 million
========

8. COMMITMENTS

During 1998, LaBranche & Co. secured a $75.0 million committed line of
credit with a U.S. commercial bank. The agreement matured on June 25, 1999. In
June 1999, the Company amended and extended the committed line of credit to
$100.0 million through June 23, 2000.

Minimum rental commitments under existing noncancellable leases for office
space and equipment are as follows:

YEAR ENDING DECEMBER 31:
------------------------

2000................................................... $ 673,006
2001................................................... 771,750
2002................................................... 801,750
2003................................................... 807,750
2004................................................... 807,750
Thereafter............................................. 3,372,000

These leases contain escalation clauses providing for increased rentals
based upon maintenance and tax increases.

F-30

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SUBORDINATED LIABILITIES

LaBranche & Co. is a party to subordinated loan agreements under which it
has indebtedness approved by the NYSE for inclusion as net capital, as defined.
Interest is payable quarterly at various annual rates. Eleven of the agreements
representing $6,823,000 mature within the last six months of 2000 and seven
agreements representing $3,385,000 mature within the first six months of 2001.
These agreements all have automatic rollover provisions, and each scheduled
maturity date will be extended an additional year, unless the lender gives
LaBranche & Co. seven months' advance notice that the maturity date will not be
extended. Interest expense incurred for the years ended December 31, 1999, 1998
and 1997 on these agreements was approximately $1.1 million, $1.3 million and
$1.2 million, respectively. Two of the holders representing $850,000 of
subordinated loan agreements maturing in November 2000 have notified
LaBranche & Co. that the scheduled maturity date will not be extended.

LaBranche & Co. also issued seven notes representing aggregate indebtedness
of $20,000,000 which mature on September 15, 2002 and bear interest at an annual
rate of 8.17% payable on a quarterly basis. LaBranche & Co. also issued five
notes representing aggregate indebtedness of $15,000,000 which mature on
June 3, 2008 and bear interest at an annual rate of 7.69% payable on a quarterly
basis. These notes are senior to all other subordinated notes of LaBranche & Co.
Interest expense incurred for the years ended December 31, 1999, 1998 and 1997
on these notes was approximately $2.8 million, $2.3 million and $340,000,
respectively. The agreements covering these subordinated notes require the
Company to comply with certain covenants that, among other things, restrict the
type of business in which the Company may engage, sets certain net capital
levels and prohibits restricted payments.

LaBranche & Co. also issued a subordinated note for $1,300,000 due March 2,
2001 with an annual rate of 10.0%, payable on a quarterly basis. Interest
expense incurred for the year ended December 31, 1999 on the note was
approximately $123,333. This agreement has an automatic rollover provision, and
the scheduled maturity date will be extended an additional year, unless the
lender gives LaBranche & Co. seven months' advance notice that the maturity date
will not be extended.

Exchange memberships contributed pursuant to subordination agreements in the
amount of $20,700,000 comprise the remaining subordinated liabilities.

10. EARNINGS PER SHARE

Earnings per share ("EPS") are computed in accordance with SFAS No. 128,
"Earnings Per Share". Basic EPS is calculated by dividing net income by the
weighted-average number of common shares outstanding. For purposes of
determining weighted average shares outstanding for periods prior to the
Company's reorganization from partnership to corporate form, the outstanding
shares were determined based on the conversion ratio of members' capital to
common stock issued to the members upon reorganization.

F-31

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EARNINGS PER SHARE (CONTINUED)
The computations of basic and diluted EPS are set forth below (000's
omitted, except per share data):

YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------

Numerator for basic and diluted earnings per share-
net income....................................... $29,034 $ 2,660 $ 1,489
Denominator for basic and diluted earnings per
share-weighted-average number of common shares... 40,443 24,318 10,329
Basic and diluted earnings per share............... $ 0.72 $ 0.11 $ 0.14

Under the treasury stock method of accounting, restricted stock units
representing 1,062,600 shares of common stock and options to purchase an
aggregate of 1,200,000 shares of common stock were not included in the
calculation of diluted earnings per share due to their antidilutive effect.

11. EMPLOYEE INCENTIVE PLANS

EQUITY INCENTIVE PLAN

The Company has elected to account for stock-based employee compensation
plans in accordance with Accounting Principles Board Opinion ("APB") No. 25 as
permitted by SFAS No. 123, "Accounting for Stock-Based Compensation". In
accordance with APB No. 25, compensation expense is not recognized for stock
options that have no intrinsic value on the date of grant.

The Company sponsors an Equity Incentive Plan which provides for grants of
incentive stock options, nonqualified stock options, restricted shares of common
stock, restricted stock units, unrestricted shares and stock appreciation
rights.

A maximum of 4,687,500 shares of common stock has been reserved for issuance
under the Equity Incentive Plan. The maximum number of shares of common stock
with respect to which options, restricted stock, restricted stock units or other
equity-based awards may be granted under the Equity Incentive Plan during any
calendar year to any employee may not exceed 500,000 shares, subject to
adjustment upon certain corporate transactions.

On August 18, 1999, restricted stock units with respect to 1,059,000 shares
of common stock were granted to employees who were not managing directors with
an issue cost of $0 to the employees and a fair market value of $14 per share.
In October 1999, restricted stock units for an additional 3,600 shares of common
stock were issued to an employee with an issue cost of $0. The restricted stock
units, which are subject to continuing service with the Company and other
restrictions, will generally vest in three annual installments commencing on the
third anniversary of the grant date. Compensation expense is being recognized
over the five-year vesting period on a straight-line basis. For the year ended
December 31, 1999, the Company recorded compensation expense and a credit to
additional paid-in capital of approximately $1.1 million related to these
restricted stock units.

STOCK OPTIONS

On August 18, 1999, options to purchase an aggregate of 1,200,000 shares of
common stock were granted to executive officers of the Company at market value.
Of these options, options to purchase

F-32

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. EMPLOYEE INCENTIVE PLANS (CONTINUED)
1,000,000 shares, which are subject to continuing service with the Company and
other restrictions, will become exercisable in three equal annual installments
commencing on the first anniversary of the date of grant. The options to
purchase the remaining 200,000 shares vested on January 7, 2000 and 100,000
shares become exercisable on July 7, 2000 and 100,000 shares on July 7, 2001. As
of December 31, 1999, there were no options exercisable. These options will
generally expire ten years from the date of grant, unless sooner terminated or
exercised. Pursuant to APB No. 25, no compensation expense was recognized since,
on the date of grant, these options had no intrinsic value. As of December 31,
1999, the outstanding options had an exercise price of $14 and a remaining life
of approximately 10 years.

The estimated fair value of options granted was $4.97 per option. Fair value
is estimated as of the grant date based on a binomial option pricing model using
the following assumptions:

Risk-free interest rate..................................... 5.25%
Expected life............................................... 7 years
Expected volatility......................................... 40%
Dividend yield.............................................. 0%

In accordance with SFAS No. 123, compensation expense was not recognized on
the date of the grant of the options since these options had no intrinsic value.
If the Company were to recognize compensation expense under the fair-value based
method of SFAS No. 123, the net income would have decreased by approximately
$843,000 resulting in pro forma net income and earnings per share as follows:

YEAR ENDED
DECEMBER 31, 1999
-----------------
(000S OMITTED, EXCEPT
PER SHARE DATA)

Net income, as reported................................... $29,034
Pro forma net income...................................... 28,191
EPS, as reported.......................................... $ 0.72
Pro forma EPS............................................. 0.70

The effect of applying SFAS No. 123 in the pro forma disclosure above may
not be representative of the potential pro forma effect on net income in future
periods.

ANNUAL INCENTIVE PLAN

The Company also sponsors an Annual Incentive Plan. Managing directors and
other employees designated by management will be eligible to participate. Under
this plan, a compensation pool of up to 30% of the Company's pre-tax income, or
such lesser percentage determined by the compensation committee, will be set
aside for managing directors and other employees selected by the compensation
committee to participate in this plan. In determining the compensation pool, the
compensation expense relating to the grant of restricted stock units at the time
of the reorganization of the Company to corporate form is deducted. Under the
plan, no individual participant may receive more than 25% of the compensation
pool for any fiscal year.

F-33

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. LONG TERM DEBT

Effective August 24, 1999, the Holding Company issued $100.0 million
aggregate principal amount of senior notes. The notes bear interest at a rate of
9.5% annually and mature on August 15, 2004. The carrying value of the senior
notes as of December 31, 1999 was $99.8 million. The discount on the bond is
being amortized as an adjustment to interest expense over the life of the senior
notes. Debt issuance costs incurred as a result of the senior note offering are
approximately $2.5 million, which are being amortized as on a straight line
basis over the life of the senior notes. Interest expense incurred for the year
ended December 31, 1999 was approximately $3.3 million. The indenture covering
the senior notes includes certain covenants that, among other things, limits the
Company's ability to: borrow money; pay dividends or repurchase stock; make
investments; engage in transactions with stockholders and affiliates; create
liens on assets; and sell assets or engage in mergers and consolidations except
in accordance with certain specified conditions, as defined.

In addition, in connection with the reorganization of the Company from
partnership to corporate form on August 24, 1999, the Holding Company issued a
note in an aggregate principal amount of $16.0 million as partial payment for
the acquisition of a limited partner interest. Of the $16.0 million total,
$6.0 million is payable on the first anniversary of issuance, $5.0 million is
payable on the second anniversary of issuance and $5.0 million is payable on the
third anniversary of issuance. The note bears interest at the annual rate of
9.5%. Interest expense incurred for the year ended December 31, 1999 was
approximately $538,000.

13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires companies to report the fair value of
financial instruments for certain assets and liabilities. Substantially all of
the Company's financial instruments are short-term in nature or carry market
interest rates and, accordingly, approximate fair value.

The fair value of the fixed rate debt at December 31, 1999, in millions, is
as follows:

CARRYING VALUE FAIR VALUE
-------------- ----------

Senior Debt.......................................... $99.8 $97.0
Fixed Rate Note...................................... $16.0 $15.9

The fair value of the senior notes was determined based upon its market
value as of December 31, 1999. The fair value of the fixed rate note was
determined using current market rates to discount its cash flows.

14. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET
RISK

As a specialist on the NYSE, LaBranche & Co. is engaged in various
securities trading and lending activities. In connection with its activities as
a specialist, LaBranche & Co. assumes positions in stocks for which it is
responsible. LaBranche & Co. is exposed to credit risk associated with the
nonperformance of counterparties in fulfilling their contractual obligations
pursuant to these securities transactions. LaBranche & Co. is exposed to market
risk associated with the sale of securities not yet purchased, which can be
directly impacted by volatile trading on the NYSE. Additionally, in the event of
nonperformance and unfavorable market price movements, LaBranche & Co. may be
required to purchase or sell financial instruments, which may result in a loss
to LaBranche & Co.

F-34

LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET
RISK (CONTINUED)
LaBranche & Co. enters into collateralized financing agreements in which it
extends short-term credit to major financial institutions. LaBranche & Co.
controls access to the collateral pledged by the counterparties, which generally
consists of U.S. equity and government securities. The value and adequacy of the
collateral are continually monitored. Consequently, the risk of credit loss from
counterparties' failure to perform in connection with collateralized lending
activities is minimal.

15. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The 1998 pro forma consolidated results give effect to LaBranche & Co.'s
July 1998 acquisition of Fowler and its reorganization from partnership to
corporate form and related transactions, which include the acquisition of
LaBranche & Co's limited partnership interests, and the application of the net
proceeds from the Company's August 1999 initial public offering and senior note
offering (the "Reorganization Transactions") as if the Reorganization
Transactions occurred as of January 1, 1998. The 1999 pro forma consolidated
results give effect to the Reorganization Transactions as if they occurred as of
January 1, 1999. The pro forma impact on revenues, pre-tax income and earnings
are as follows (000's omitted, except per share data):

YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998
----------- -----------
(PRO FORMA) (PRO FORMA)

Revenues.............................................. $201,037 $137,850
Pre-Tax Income........................................ 100,153 59,429
Net Income............................................ 53,988 31,791
EPS................................................... $ 1.18 $ 0.69

16. SUBSEQUENT EVENTS (UNAUDITED)

Subsequent to year-end the Company acquired Henderson Brothers
Holdings, Inc. ("Henderson"), a specialist firm on the NYSE. Under the terms of
the acquisition, the Company will acquire all of the outstanding capital stock
of Henderson for approximately $230 million in cash. In addition, the Company
has acquired Webco Securities Inc. ("Webco"), another specialist firm on the
NYSE. Under the terms of the acquisition, the Company acquired Webco for
$11.0 million in cash, an aggregate of approximately $3 million in senior
promissory notes and approximately 2.8 million shares of the Company's common
stock. Both of these acquisitions will be accounted for under the purchase
method.

During February 2000, a U.S. commercial bank increased and extended its
committed line of credit to LaBranche & Co. from $100.0 million to
$200.0 million through February 2, 2001.

F-35

LABRANCHE & CO INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED EXCEPT PER SHARE DATA)

DECEMBER 31,
-------------------
1999 1998
-------- --------

ASSETS
CASH AND CASH EQUIVALENTS................................... $ 46,872 $ 21
SECURITIES PURCHASED UNDER AGREEMENT TO RESELL.............. 1,422 --
INVESTMENT IN SUBSIDIARIES, AT EQUITY VALUE................. 321,370 77,072
OTHER....................................................... 14,041 --
-------- -------
Total Assets............................................ $383,705 $77,093
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY/MEMBERS' CAPITAL
LIABILITIES:
Income taxes payable.................................... $ 7,960 $ --
Accounts payable and other liabilities.................. 7,951 --
-------- -------
15,911 --
-------- -------
LONG TERM DEBT.............................................. 115,822 --
-------- -------
STOCKHOLDERS' EQUITY/MEMBERS' CAPITAL:
Preferred stock ($.01 par value, 10,000,000 shares
authorized; none issued and outstanding).................. -- --
Common stock (par value $.01 per share; 200,000,000 shares
authorized, 45,875,000 shares issued and outstanding)..... 459 --
Additional paid-in-capital.................................. 228,771 --
Retained earnings........................................... 22,742 --
-------- -------
Stockholders' equity/members' capital....................... 251,972 77,093
-------- -------
Total liabilities and stockholders' equity/members'
capital................................................... $383,705 $77,093
======== =======

See accompanying note to condensed financial statements.

F-36

LABRANCHE & CO INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
(000'S OMITTED)

FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
-------- ---------- --------

REVENUE:
Equity earnings from investment in subsidiaries........... $31,476 $2,663 $1,480
Investment income......................................... 910 -- --
------- ------ ------
Total revenue........................................... 32,386 2,663 1,480
------- ------ ------
EXPENSES:
Interest.................................................. 3,879 -- --
Employee compensation and related benefits................ 1,050 -- --
Other expenses............................................ 504 3 1
------- ------ ------
Total expenses.......................................... 5,433 3 1
------- ------ ------
Income before income tax benefit.......................... 26,953 2,660 1,479
------- ------ ------
INCOME TAX BENEFIT.......................................... (2,081) -- (10)
Net income................................................ $29,034 $2,660 $1,489
======= ====== ======

See accompanying note to condensed financial statements.

F-37

LABRANCHE & CO INC.
(PARENT COMPANY ONLY)

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS'

EQUITY/MEMBERS' CAPITAL
(000'S OMITTED)

COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED MEMBERS'
SHARES AMOUNT CAPITAL EARNINGS CAPITAL TOTAL
-------- -------- ---------- -------- -------- --------

BALANCE, December 31, 1996................... -- $ -- $ -- $ -- $13,735 $ 13,735
Net income................................... -- -- -- -- 1,489 1,489
Contributions to capital..................... -- -- -- -- 28,574 28,574
Distributions of capital..................... -- -- -- -- (6,140) (6,140)
------ ------ -------- ------- ------- --------
BALANCE, December 31, 1997................... -- -- -- -- 37,658 37,658
Net income................................... -- -- -- -- 2,660 2,660
Contributions to capital..................... -- -- -- -- 66,563 66,563
Distributions of capital..................... -- -- -- -- (29,788) (29,788)
------ ------ -------- ------- ------- --------
BALANCE, December 31, 1998................... -- -- -- -- 77,093 77,093
Net income through August 23, 1999........... -- -- -- -- 6,292 6,292
Contributions to capital..................... -- -- -- -- 18,096 18,096
Distributions of capital..................... -- -- -- -- (8,095) (8,095)
------ ------ -------- ------- ------- --------
BALANCE, pre-reorganization.................. -- -- -- -- 93,386 93,386
Exchange of membership interest for shares of
common stock............................... 35,375 354 93,032 -- (93,386) --
Initial public offering of common stock...... 10,500 105 134,689 -- -- 134,794
------ ------ -------- ------- ------- --------
BALANCE post-reorganization and initial
public offering............................ 45,875 459 227,721 -- -- 228,180
Net income (August 24, 1999 through
December 31, 1999)......................... -- -- -- 22,742 -- 22,742
Compensation related to restricted stock
units granted.............................. -- -- 1,050 -- -- 1,050
------ ------ -------- ------- ------- --------
BALANCE, December 31, 1999................... 45,875 $ 459 $228,771 $22,742 $ -- $251,972
====== ====== ======== ======= ======= ========

See accompanying note to condensed financial statements.

F-38

LABRANCHE & CO INC.
(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOW
(000'S OMITTED)

FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
-------- ---------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 29,034 $ 2,660 $ 1,489
Adjustments to reconcile net income to net cash used in
operating activities
Amortization of debt issuance costs and bond discount... 204 -- --
Compensation expense related to restricted stock
units................................................. 1,050 -- --
Equity earnings from investment in subsidiaries......... (33,557) (19,477) (6,343)
Deferred tax benefit.................................... (483) -- --
Changes in assets and liabilities--
Securities purchased under agreements to resell......... (1,422) -- --
Other assets............................................ (11,478) 13 26
Accounts payable and other liabilities.................. 13,830 -- (10)
-------- ------- -------
Net cash used in operating activities....................... (2,822) (16,804) (4,838)
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from contributions of capital.................... 20,000 46,598 10,948
Payments for distributions of capital..................... (50,717) (29,788) (6,140)
Payments to limited partners for redemption of interests
and repayment of subordinated debt upon
reorganization.......................................... (145,186) -- --
-------- ------- -------
Net cash provided by (used in) investing activities....... (175,903) 16,810 4,808
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of long term debt.............. 99,807 -- --
Net proceeds from the initial public offering............. 134,794 -- --
Payments to members upon reorganization................... (9,025) -- --
-------- ------- -------
Net cash provided by financing activities................. 225,576 -- --
-------- ------- -------
Net change in cash.......................................... 46,851 6 (30)
CASH AND CASH EQUIVALENTS, beginning of year................ 21 15 45
-------- ------- -------
CASH AND CASH EQUIVALENTS, end of year...................... $ 46,872 $ 21 $ 15
======== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Income taxes.............................................. $ 11,750 $ 3 $ 11
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Membership interests issued for acquisitions.............. $ -- $19,965 $17,626
Exchange of membership interests for shares of common
stock................................................... $ 93,386 $ -- $ --
Issuance of subordinated debt and shares of common stock
for redemption of limited partner interests upon
reorganization.......................................... $ 23,821 $ -- $ --

See accompanying note to condensed financial statements.

F-39

LABRANCHE & CO INC.
(PARENT COMPANY ONLY)
NOTE TO CONDENSED FINANCIAL STATEMENTS

1. NOTE TO CONDENSED FINANCIAL STATEMENTS

The condensed financial statements of LaBranche & Co Inc. (Parent Company
Only) should be read in conjunction with the consolidated financial statements
of LaBranche & Co Inc. and Subsidiaries and the notes thereto contained
elsewhere in this prospectus.

F-40

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

ROBB PECK McCOOEY Financial Services, Inc.:

In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of income, changes in
redeemable stocks and other equity and cash flows present fairly, in all
material respects, the consolidated financial position of ROBB PECK McCOOEY
Financial Services, Inc. and its Subsidiaries (the "Company") as of April 28,
2000 and April 30, 1999, and the results of their consolidated operations and
their consolidated cash flows for each of the three fiscal years in the period
ended April 28, 2000, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

New York, New York
July 7, 2000

F-41

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

APRIL 28, 2000 AND APRIL 30, 1999

2000 1999
------------ ------------

ASSETS
Cash and cash equivalents (Note 1).......................... $ 15,528,200 $ 23,329,600
U.S. Treasury Bills, at market value........................ 25,008,700 20,798,600
U.S. Treasury Bills segregated in compliance with Federal
regulations (Note 2)...................................... 41,878,500 41,625,500
Deposits with clearing organizations (2000: Cash of
$4,030,500 and U.S. Treasury Bills of $5,571,600, at
market value; 1999: Cash of $3,870,100 and U.S. Treasury
Bills of $619,900, at market value)....................... 9,602,100 4,490,000
Receivable from brokers and dealers (Note 3)................ 97,202,600 89,489,800
Receivable from customers (Note 4).......................... 30,292,400 29,876,200
Securities owned, at market value, primarily common and
preferred stock........................................... 25,325,900 30,552,600
Memberships in exchanges
Owned, at cost (market value for 2000: $19,830,000, and
1999: $29,988,000)...................................... 3,828,700 3,828,700
Contributed for the use of the Company, at market value
(Note 6)................................................ 5,100,000 7,800,000
Intangible assets
Specialists Stocks, net of accumulated amortization for
2000:
$3,633,700, and 1999: $3,295,300 (Note 1)................. 4,417,400 4,755,800
Franchise Rights, net of accumulated amortization for
2000:
$1,775,200, and 1999: $1,653,500 (Note 1)................. 3,093,900 3,215,600
Investment in real estate, net of accumulated depreciation
for 2000: $93,200, and 1999: $52,300...................... 10,114,400 6,594,400
Secured demand note collateralized by marketable securities
(Note 6).................................................. 2,175,000 1,175,000
Fixed assets and leasehold improvements, at cost, net of
accumulated depreciation and amortization for 2000:
$5,805,900, and 1999: $5,047,700 (Note 1)................. 1,462,000 2,064,700
Deferred income taxes (Note 1).............................. 5,324,400 2,872,600
Other assets................................................ 13,431,000 10,766,700
------------ ------------
TOTAL ASSETS............................................ $293,785,200 $283,235,800
============ ============
LIABILITIES, REDEEMABLE STOCKS AND OTHER EQUITY
Bank loans (Note 5)....................................... $ 5,000 $ 5,000
Borrowings (Note 6)....................................... 9,477,700 10,158,100
Payable to brokers and dealers (Note 3)................... 18,650,900 44,774,400
Payable to customers (Note 4)............................. 84,010,500 69,179,700
Securities sold, but not yet purchased, at market value,
primarily common and preferred stock.................... 17,890,700 15,234,100
Accounts payable and accrued liabilities (Note 11)........ 33,319,700 29,231,900
Long term borrowings (Note 6)............................. 37,534,500 27,634,500
------------ ------------
TOTAL LIABILITIES....................................... 200,889,000 196,217,700
------------ ------------
Commitments (Note 7)
Redeemable Third Preferred Stock (par value $.10 per share;
liquidation value $100.00 per share; 35,491 shares
authorized, 24,775 shares issued and 14,887 shares
outstanding), stated at redemption value (Note 12)........ 1,488,700 1,488,700
Redeemable Fourth Preferred Stock (par value $.10 per share;
liquidation value $100.00 per share; 22,276 shares
authorized, 16,846 issued and 11,753 outstanding), stated
at redemption value (Note 12)............................. 1,175,300 1,175,300
Redeemable Common Stock (par value $.10 per share, 200,050
shares authorized; 100,010 shares issued; 68,100 shares
outstanding for 2000 and 75,100 shares outstanding for
1999), stated at redemption value (Note 12)............... 90,472,900 89,584,500
Additional paid-in-capital.................................. 421,600 421,600
Retained earnings........................................... 16,039,800 2,202,400
Treasury stock (at cost).................................... (16,702,100) (7,854,400)
------------ ------------
TOTAL LIABILITIES, REDEEMABLE STOCKS AND OTHER EQUITY... $293,785,200 $283,235,800
============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-42

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED APRIL 28, 2000, APRIL 30, 1999 AND APRIL 24, 1998

2000 1999 1998
------------ ------------ ------------

Revenues
Trading and investment gains, net................ $ 44,124,200 $ 76,344,100 $ 75,154,600
Floor brokerage.................................. 24,785,500 25,066,500 22,662,100
Clearance fees and commissions................... 18,873,100 15,456,000 17,281,400
Interest......................................... 9,844,000 7,075,100 6,400,200
Dividends........................................ 1,197,700 887,300 597,100
Underwriting income.............................. 1,639,100 -- --
Other............................................ 1,271,600 966,400 1,616,900
------------ ------------ ------------

Total revenues............................... 101,735,200 125,795,400 123,712,300
------------ ------------ ------------
Expenses
Compensation and benefits (Notes 7, 10 and 11)... 41,710,300 57,428,100 51,318,700
Floor brokerage and clearance fees............... 5,287,400 3,659,300 4,979,800
Occupancy, equipment rental and
communications (Note 7)........................ 4,890,600 5,105,800 4,739,400
Interest......................................... 6,142,300 5,595,800 3,640,200
Leased exchange seats............................ 3,926,800 3,309,100 2,534,700
Depreciation and amortization.................... 1,799,900 1,588,100 1,094,100
Other............................................ 10,224,500 11,250,500 8,708,000
------------ ------------ ------------

Total expenses............................... 73,981,800 87,936,700 77,014,900
------------ ------------ ------------
Income before provision
for income taxes........................... 27,753,400 37,858,700 46,697,400
------------ ------------ ------------

Provision for income taxes (Note 1)
Current:
Federal........................................ 9,979,700 14,408,700 16,182,200
State and local................................ 5,499,700 8,110,600 9,300,700

Deferred:
Federal........................................ (1,472,200) (2,954,100) (2,243,800)
State and local................................ (979,600) (1,965,400) (1,524,500)
------------ ------------ ------------

13,027,600 17,599,800 21,714,600
------------ ------------ ------------

Net income................................... $ 14,725,800 $ 20,258,900 $ 24,982,800
============ ============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-43

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE STOCKS AND OTHER EQUITY
FOR THE FISCAL YEARS ENDED APRIL 28, 2000, APRIL 30, 1999 AND APRIL 24, 1998

REDEEMABLE THIRD REDEEMABLE FOURTH
PREFERRED STOCK PREFERRED STOCK
(35,491 SHARES (22,276 SHARES REDEEMABLE CLASS A
AUTHORIZED PAR AUTHORIZED PAR COMMON STOCK CLASS B COMMON
VALUE $.10, VALUE $.10, (200,000 SHARES STOCK (50 SHARES
LIQUIDATION LIQUIDATION AUTHORIZED PAR AUTHORIZED PAR
VALUE $100.00) VALUE $100.00) VALUE $.10) VALUE $.10)
---------------------- ---------------------- ------------------------ ----------------------
SHARES REDEMPTION SHARES REDEMPTION SHARES REDEMPTION SHARES REDEMPTION
ISSUED(1) VALUE ISSUED(2) VALUE ISSUED(3) VALUE ISSUED VALUE)
--------- ---------- --------- ---------- --------- ------------ --------- ----------

Balance, April 26, 1997... 24,775 $1,586,500 16,846 $1,257,200 100,009 $ 38,579,200 1 $ --
Purchase of treasury
stock...................
Net income................
Recording of redeemable
stock at its redemption
value................... 25,204,700
------ ---------- ------ ---------- -------- ------------ --------- ---------
Balance, April 24, 1998... 24,775 1,586,500 16,846 1,257,200 100,009 63,783,900 1 --
Purchase of treasury
stock...................
Conversion of class A
common stock and
class B common stock
into common stock....... (100,009) (63,783,900) (1) --
Net income................
Recording of redeemable
stock at its redemption
value................... (97,800) (81,900)
------ ---------- ------ ---------- -------- ------------ --------- ---------
Balance April 30, 1999.... 24,775 1,488,700 16,846 1,175,300 -- -- -- --
Purchase of treasury
stock...................
Net income................
Recording of redeemable
stock at its redemption
value...................
------ ---------- ------ ---------- -------- ------------ --------- ---------
Balance, April 28, 2000... 24,775 $1,488,700 16,846 $1,175,300 -- $ -- -- $ --
====== ========== ====== ========== ======== ============ ========= =========

REDEEMABLE COMMON
STOCK (200,050 SHARES
AUTHORIZED PAR
VALUE $.10)
----------------------- ADDITIONAL TREASURY
SHARES REDEMPTION PAID-IN RETAINED STOCK,
ISSUED(3) VALUE CAPITAL EARNINGS AT COST
--------- ----------- ---------- ----------- ------------

Balance, April 26, 1997... -- $ -- $421,600 $ 7,786,300 $ (4,713,600)
Purchase of treasury
stock................... (2,115,100)
Net income................ 24,982,800
Recording of redeemable
stock at its redemption
value................... (25,204,700)
------- ----------- -------- ----------- ------------
Balance, April 24, 1998... -- -- 421,600 7,564,400 (6,828,700)
Purchase of treasury
stock................... (1,025,700)
Conversion of class A
common stock and
class B common stock
into common stock....... 100,010 63,783,900
Net income................ 20,258,900
Recording of redeemable
stock at its redemption
value................... 25,800,600 (25,620,900)
------- ----------- -------- ----------- ------------
Balance April 30, 1999.... 100,010 89,584,500 421,600 2,202,400 (7,854,400)
Purchase of treasury
stock................... (8,847,700)
Net income................ 14,725,800
Recording of redeemable
stock at its redemption
value................... 888,400 (888,400)
------- ----------- -------- ----------- ------------
Balance, April 28, 2000... 100,010 $90,472,900 $421,600 $16,039,800 $(16,702,100)
======= =========== ======== =========== ============

------------------------------
(1) Includes 9,888 shares held in treasury at April 28, 2000 and April 30, 1999
and 8,910 shares held in treasury at April 24, 1998.

(2) Includes 5,093 shares held in treasury at April 28, 2000 and April 30, 1999
and 4,274 shares held in treasury at April 24, 1998.

(3) Includes 31,910, 24,910 and 23,910 shares held in treasury at April 28,
2000, April 30, 1999 and April 24, 1998, respectively.

The accompanying notes are an integral part of these consolidated financial
statements.

F-44

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED APRIL 28, 2000 AND APRIL 30, 1999 AND APRIL 24, 1998

2000 1999 1998
----------- ----------- -----------

Cash flows from operating activities
Net income................................................ $14,725,800 $20,258,900 $24,982,800
----------- ----------- -----------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities
Depreciation and amortization........................... 1,799,900 1,588,100 1,094,100
Deferred income tax benefit............................. (2,451,800) (4,919,500) (3,768,300)
Provision for loss on investments....................... 92,600 400,000 600,000
(Increase) decrease in operating assets
U.S. Treasury Bills................................... (4,210,100) (929,600) 4,972,000
U.S. Treasury Bills segregated in compliance with
Federal regulations.................................. (253,000) (25,818,700) 4,475,200
Deposits with clearing organizations.................. (5,112,100) (278,000) (2,463,300)
Receivable from brokers and dealers................... (7,712,800) (22,283,500) (40,550,000)
Receivable from customers............................. (416,200) 4,827,900 (16,240,500)
Securities owned...................................... 5,226,700 36,487,200 (40,068,100)
Other assets.......................................... (3,284,100) (5,001,500) (2,899,400)
Increase (decrease) in operating liabilities
Payable to brokers and dealers........................ (26,123,500) (35,667,400) 54,835,400
Payable to customers.................................. 14,830,800 28,617,900 7,415,100
Securities sold, but not yet purchased................ 2,656,600 6,457,100 (1,250,800)
Accounts payable and accrued liabilities.............. 4,087,800 12,617,600 6,031,700
----------- ----------- -----------
TOTAL ADJUSTMENTS................................... (20,869,200) (3,902,400) (27,816,900)
----------- ----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES.......................................... (6,143,400) 16,356,500 (2,834,100)
----------- ----------- -----------
Cash flows from investing activities
Purchase of fixed assets and real estate.................. (3,729,900) (3,055,900) (2,121,400)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES............... (3,729,900) (3,055,900) (2,121,400)
----------- ----------- -----------
Cash flows from financing activities
Increase (decrease) in bank loans, net.................... -- (17,300,000) 11,800,000
Principal payments under subordinated borrowings and
promissory notes........................................ (1,128,100) (3,704,800) (2,108,400)
Issuance of senior exchangeable notes, promissory notes
and mortgage payable.................................... 3,200,000 21,692,000 --
Purchase of treasury stock................................ -- (205,100) --
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES........... 2,071,900 482,100 9,691,600
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH..................... (7,801,400) 13,782,700 4,736,100

Cash and cash equivalents, beginning of year................ 23,329,600 9,546,900 4,810,800
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.............. $15,528,200 $23,329,600 $ 9,546,900
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest................................................ $ 5,745,000 $ 5,335,600 $ 3,546,600
Income taxes............................................ $17,637,800 $19,791,200 $27,306,200

Supplemental disclosure of noncash financing activities
Increase (decrease) in memberships contributed and
subordinated borrowings (Note 6)........................ $(2,700,000) $ 3,000,000 $ 945,000
Purchase of treasury stock by the Company and offsetting
liabilities............................................. $ 8,847,700 $ 820,600 $ 2,115,100
Senior exchangeable notes exchanged into senior
subordinated borrowings (Note 6)........................ $19,000,000 $ 1,000,000 --
Issuance of liabilities pursuant to secured demand note
collateral agreement and secured demand note
(Note 6)................................................ $ 1,000,000 -- --

The accompanying notes are an integral part of these consolidated financial
statements.

F-45

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of ROBB PECK
McCOOEY Financial Services, Inc. and its subsidiaries, ROBB PECK McCOOEY
Specialist Corporation ("Specialist Corp."), ROBB PECK McCOOEY Clearing
Corporation ("Clearing Corp."), RPM Asset Management Corp. ("Asset Management")
and ROBB PECK McCOOEY Real Estate Management Corporation ("Real Estate")
(collectively, the "Company"). Specialist Corp. conducts specialist activities
on the New York Stock Exchange ("NYSE"). Clearing Corp., a member of the NYSE
and various other exchanges, is engaged in the business of clearing securities
transactions and also trades securities for its own account.

All intercompany balances and transactions have been eliminated.

Securities transactions, including related trading gains and losses, floor
brokerage and clearance revenues and expenses, are recorded on a trade-date
basis.

The Company accounts for income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured at enacted statutory tax
rates applicable to future years in which those temporary tax assets and
liabilities are expected to be recovered or settled.

Deferred income taxes arise principally from differences in the periods in
which certain items of revenue and expense are recorded for income tax and
financial reporting purposes; such items primarily include securities valuation,
compensation expense relating to the stock option plan and pension plan. At
April 28, 2000, the net deferred tax asset consists of $9,432,500 of deferred
tax liabilities and $14,756,900 of deferred tax assets. At April 30, 1999, the
net deferred tax asset consists of $10,530,000 of deferred tax liabilities and
$13,402,600 of deferred tax assets. The difference between the Company's
effective tax rate and the Federal statutory tax rate is principally due to
state and local taxes.

Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, but not exceeding five years. Leasehold improvements,
including amortization of assets recorded under a capital lease, are amortized
on a straight-line basis over the lesser of their economic useful lives or the
terms of the leases.

Intangible assets are being amortized on a straight-line basis over periods
not exceeding forty years. The rights to act as the specialist in certain NYSE
securities and the franchise rights of being a specialist are being amortized on
a straight-line basis over a period not exceeding 30 years and 40 years,
respectively. Exchange memberships acquired in acquisitions are recorded at cost
plus $2,909,300 of assigned intangibles. Intangibles assigned to memberships are
not being amortized.

Acquisition and issuance of treasury stock are recorded at cost and average
cost, respectively. The difference between the proceeds from the shares issued
and their average cost is added to additional paid-in capital. During the year
ended April 28, 2000, the Company repurchased and held in treasury 7,000 shares
of redeemable common stock for $8,847,700. During the year ended April 30, 1999,
the Company repurchased and held in treasury 978 shares of redeemable third
preferred stock, 819 shares of redeemable fourth preferred stock and 1,000
shares of redeemable common stock for $1,025,700. During the year ended
April 24, 1998 the Company repurchased and held in treasury 2,500 shares of
redeemable Class A common stock for $2,115,100.

F-46

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Real estate owned includes land and buildings and is recorded at cost. The
Company's policy is to annually assess any impairment in value. Such carrying
amounts would be adjusted, if necessary, to reflect an impairment in the value
of the assets.

Cash and cash equivalents are highly, liquid short term investments that
consist of cash and commercial paper of one issuer which is held in an account
at a major financial institution ($9,574,300 at April 28, 2000 and $13,021,800
at April 30, 1999).

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of April 28, 2000 and
April 30, 1999, and the reported amounts of revenues and expenses during the
fiscal years then ended. Actual results could differ from those estimates.

2. U.S. TREASURY BILLS SEGREGATED IN COMPLIANCE WITH FEDERAL REGULATIONS

U.S. Treasury Bills with a market value of $34,778,600 at April 28, 2000 and
$41,625,500 at April 30, 1999 are segregated in a special reserve bank account
for the benefit of customers under Rule 15c3-3 of the Securities and Exchange
Commission ("SEC").

In accordance with the SEC's no action letter dated November 3, 1998, the
Clearing Corp. has agreed to compute a Reserve Requirement for the proprietary
accounts of introductory firms as of April 28, 2000. The Clearing Corp.'s
deposit requirement was $7,922,700. The amount segregated at April 28, 2000 was
$7,099,900 with an additional $2,325,000 deposit made in accordance with the
rule.

3. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS

Amounts receivable from and payable to brokers and dealers at April 28, 2000
and April 30, 1999 include:

2000 1999
----------- -----------

Securities failed-to-deliver................................ $ 1,386,700 $22,291,400
Deposits on securities borrowed............................. 86,269,100 59,814,000
Amounts due from clearing associations...................... 1,535,800 3,657,700
Receivable from noncustomers................................ 277,800 1,030,900
Floor brokerage receivable.................................. 2,029,300 2,563,300
Adjustment to record inventory on a trade-date basis........ 5,267,900 --
Other....................................................... 436,000 132,500
----------- -----------
TOTAL RECEIVABLE........................................ $97,202,600 $89,489,800
=========== ===========
Securities loaned........................................... $ -- $ 3,001,500
Securities failed-to-receive................................ 5,855,300 20,145,300
Payable to Joint Trading Account............................ 9,798,100 5,403,400
Payable to noncustomers..................................... 2,439,400 11,092,100
Adjustment to record inventory on a trade-date basis........ -- 4,959,600
Other....................................................... 558,100 172,500
----------- -----------
TOTAL PAYABLE........................................... $18,650,900 $44,774,400
=========== ===========

F-47

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS (CONTINUED)
Securities failed-to-deliver represent receivables for securities sold that
have not been delivered by the Company for which settlement date has passed.
Securities failed-to-receive represent payables for securities purchased that
have not been received for which settlement date has passed.

Securities borrowed and securities loaned, which are transacted with other
brokers and dealers, are recorded at the amount of cash collateral advanced or
received, with fees recorded as interest revenue or expense over the life of the
transaction. Securities borrowed transactions require the Company to deposit
cash with the lenders. With respect to securities loaned, the Company receives
cash collateral in an amount generally in excess of the market value of
securities loaned. The Company monitors the market value of securities borrowed
and loaned on a daily basis, with additional cash collateral deposited or
refunded as necessary. Approximately 57% of the Company's deposits on securities
borrowed are with two brokers and dealers of which one is above 10% of total
assets.

In accordance with industry practice, the Company generally settles its
securities transactions within three business days after the trade date. The
Company is therefore exposed to risk of loss on its transactions in the event of
the counterparties' inability to meet the terms of their contracts, in which
case the Company may have to purchase or sell financial instruments at
prevailing market prices.

The Company participates in a Joint Trading Account which is cleared by a
subsidiary of the Company.

4. RECEIVABLE FROM AND PAYABLE TO CUSTOMERS

Receivable from and payable to customers include amounts due on cash and
margin transactions. Securities owned by customers are held as collateral for
receivables. Such collateral is not reflected in the financial statements.

5. BANK LOANS

Bank loans generally bear interest at the broker call loan interest rate and
are payable on demand. They are used to finance customers' margin balances,
receivables from brokers and dealers, and Company-owned securities, and are
collateralized by marketable securities with a market value of about $4,584,500
at April 28, 2000 and $12,138,700 at April 30, 1999. Such collateral consists
primarily of the Company's and customers' margin securities. The estimated fair
value of these borrowings approximates the related carrying value.

F-48

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. SUBORDINATED BORROWINGS AND PROMISSORY NOTES

2000 1999
----------- -----------

Subordinated borrowings:
12% Series 1 subordinated note due 2001 to 2004........... $ 1,000,000 $ 1,000,000
12 1/2% subordinated note due 2004........................ 2,000,000 2,000,000
9% promissory note due 2001 and 2000, respectively........ 295,000 295,000
10% promissory notes due 2001 and 2000, respectively...... 260,000 260,000
Exchange memberships, contributed for use of the
Company................................................. 5,100,000 7,800,000
Liabilities pursuant to secured demand note collateral
agreements,
9% due 2001 and 2000, respectively...................... 1,175,000 1,175,000
10% due 2002............................................ 1,000,000 --
7.95% senior subordinated notes due 2006.................. 20,000,000 1,000,000
----------- -----------
30,830,000 13,530,000
----------- -----------
Promissory Notes and other borrowings:
9 1/2% promissory notes due 2001 to 2003.................. 1,884,500 2,512,600
Promissory notes due 2001 to 2005 (10% at April 28,
2000)................................................... 8,847,700 --
5.65% promissory note due 2002 to 2004.................... 2,250,000 2,750,000
Senior exchangeable notes due 2005........................ -- 19,000,000
Prime + 1% mortgage due 2002 (10% at April 28, 2000)...... 3,200,000 --
----------- -----------
16,182,200 24,262,600
----------- -----------
Total borrowings............................................ 47,012,200 37,792,600
Less: Payments due within one year and exchange memberships
contributed for use of the Company........................ (9,477,700) (10,158,100)
----------- -----------
TOTAL LONG-TERM BORROWINGS.............................. $37,534,500 $27,634,500
=========== ===========

For the $8,847,700 of promissory notes due 2001 to 2005, interest shall be
at an annual rate of one percent over the prime rate printed in the Wall Street
Journal with a maximum rate of 10% per annum.

On June 14, 2000, the 12 1/2% subordinated note was extended to June 14,
2003.

As of April 28, 2000, principal payments on the promissory notes,
subordinated notes and mortgage, excluding exchange memberships and liabilities
pursuant to secured demand note collateral agreements, for fiscal 2001, 2002,
2003, 2004, 2005 and 2006 are $3,202,700, $6,347,700, $3,147,700, $5,269,500,
$1,769,600 and $20,000,000, respectively.

The estimated fair value of these borrowings approximates the related
carrying value.

Except for the 7.95% senior subordinated notes, the promissory notes and
subordinated borrowings are held primarily by employees and former stockholders
of the Company or its predecessor company.

Three exchange memberships have been contributed by employees and officers
of the Company for use by the Company. Subordinated borrowings in an amount
equal to the market value of the exchange memberships are reflected in the
consolidated statements of financial condition. The Company is required to pay
annual fees in relation to these exchange memberships, which have been charged
to income for the fiscal years ended April 28, 2000, April 30, 1999 and
April 24, 1998.

F-49

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. SUBORDINATED BORROWINGS AND PROMISSORY NOTES (CONTINUED)
Two subsidiaries of the Company have 9% and 10% secured demand note
collateral agreements due January 31 and April 30, 2001, respectively. These
agreements have been approved by the NYSE and are available in computing net
capital under the SEC Net Capital Rule 15c3-1. To the extent that such
borrowings may be required for a subsidiary's continued compliance with minimum
net capital requirements, they may not be repaid.

In June 1998, a subsidiary of the Company issued $20,000,000 of 7.85% senior
exchangeable notes due June 1, 2005. In December 1998 and November 1999,
$1,000,000 and $19,000,000 of senior exchangeable notes were exchanged into
7.95% senior subordinated notes. The notes contain certain financial, reporting
and other restrictive covenants. In the event of a change in control of the
Company, the Company will be required to make an offer to each noteholder to
repay the notes upon the change of control. These notes have been approved by
the NYSE and are available in computing net capital under the SEC Net Capital
Rule 15c3-1 and NYSE Rule 104.20.

In February 2000, the Company obtained a $3,200,000 mortgage due
February 17, 2002 in connection with the purchase of land and buildings. The
mortgage is collateralized by such land and buildings.

7. COMMITMENTS AND CONTINGENCIES

Under operating leases in effect as of April 28, 2000, with remaining
noncancelable lease terms in excess of one year, aggregate annual rentals for
office space and equipment are about as follows:

FISCAL YEAR
------------------------------------------------------------
2001........................................................ $1,099,600
2002........................................................ 889,400
2003........................................................ 475,000
2004........................................................ 148,000
----------
$2,612,000
==========

Certain of these leases have escalation clauses and renewal options. Rental
expense charged to income for the years ended April 28, 2000, April 30, 1999 and
April 24, 1998, under all leases, including equipment leased on a short-term
basis, was $1,333,700, $1,322,300 and $1,317,900, respectively.

The Company has employment agreements with various employees terminating
January 3, 2001 which require annual compensation. The agreements can be
terminated early only under certain circumstances. Compensation due under the
above agreements approximates $665,200 for fiscal year 2001. Salary and bonus
expense charged to income for the fiscal years ended April 28, 2000, April 30,
1999 and April 24, 1998 was $994,800, $1,617,300 and $1,401,000, respectively,
under all employment agreements.

8. NET CAPITAL REQUIREMENTS

Certain subsidiaries of the Company are subject to capital requirements of
regulatory agencies. Clearing Corp. is subject to the SEC Uniform Net Capital
Rule 15c3-1. At April 28, 2000, Clearing Corp.'s net capital, as defined, was
$13,751,900 in excess of its requirement of $1,075,800. At April 30, 1999,
Clearing Corp.'s net capital, as defined, was $8,831,500 in excess of its
requirement of $1,278,700.

F-50

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. NET CAPITAL REQUIREMENTS (CONTINUED)

Specialist Corp. is subject to the SEC's Uniform Net Capital Rule 15c3-1 as
well as NYSE Rule 104.20. At April 28, 2000, Specialist Corp.'s net capital was
$94,220,600 in excess of its requirement of $250,000 under the SEC's Uniform Net
Capital Rule 15c3-1, and $78,614,200 in excess of its requirement of $19,084,900
under NYSE Rule 104.20. At April 30, 1999, Specialist Corp.'s net capital was
$58,094,900 in excess of its requirement of $250,000 under the SEC's Uniform Net
Capital Rule 15c3-1, and $42,981,500 in excess of its requirement of $19,911,800
under NYSE Rule 104.20.

In November 1999, the NYSE proposed a change to its rules that would
increase the capital requirements for certain specialists, including the
Specialist Corp. The rule change, when and if it takes effect, is expected to
substantially reduce the excess of the Specialist Corp.'s net liquid assets over
its requirement. The Specialist Corp. expects to maintain compliance with the
new rules as they are currently proposed.

9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

In the normal course of business, the Company's customer and noncustomer
("customer") activities involve the execution, settlement and financing of
various customer securities transactions. These activities may expose the
Company to off-balance-sheet risk in the event that customers and counterparties
are unable to fulfill their contracted obligations.

The Company's customer securities activities are transacted on either a cash
or a margin basis. In margin transactions, the Company extends credit to
customers, subject to various regulatory and internal margin requirements,
collateralized by cash and securities in customers' accounts.

The Company seeks to control the risks associated with its customer
activities by requiring customers to maintain margin collateral in compliance
with various regulatory and internal guidelines. The Company monitors required
margin levels daily and, pursuant to said guidelines, requires customers to
deposit additional collateral, or reduce positions, where necessary.

In accordance with industry practice, the Company records customer
transactions on a settlement-date basis, generally three business days after the
trade date. The Company is therefore exposed to risk of loss on customer
transactions in the event of the customers' inability to meet the terms of their
contracts, in which case the Company may have to purchase or sell financial
instruments at prevailing market prices. The Company generally settles its
securities transactions within three business days after the trade date. The
Company is therefore exposed to risk of loss on its transactions in the event of
the counterparties' inability to meet the terms of their contracts, in which
case the Company may have to purchase or sell financial instruments at
prevailing market prices.

A significant portion of the Company's securities clearance activities
includes clearing transactions for professional traders. Due to the nature of
their operations, which may include short sales and option writing, the Company
may have significant credit exposure due to the potential inability of these
counterparties to meet their commitments in the event of volatile trading
markets. The Company seeks to control this risk by monitoring margin collateral
levels on a daily basis for compliance with both regulatory and internal
guidelines, and requests additional collateral where necessary.

In the normal course of business, the Company may sell securities not yet
purchased. Off-balance-sheet risk arises in the event that the market price of
the securities increases. The Company will eventually have to purchase these
securities back at prevailing market prices. The Company attempts to control
this risk by setting limits on the amount of equity available for investing and
by offsetting

F-51

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
positions with other securities. The Company monitors position concentrations to
manage its exposure to specific market events.

10. EMPLOYEE BENEFIT PLANS

The Company has a noncontributory defined benefit pension plan covering all
eligible full-time employees of the Company and its subsidiaries. The Company's
funding policy is to contribute annually an amount that can be deducted for
Federal income tax purposes by using an actuarial cost method and assumptions
different from those used for financial reporting.

The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements at April 28, 2000,
April 30, 1999 and April 24, 1998:

2000 1999 1998
----------- ----------- -----------

Benefit obligation..................................... $(9,722,800) $(8,548,400) $(6,697,800)
Fair value of plan assets.............................. 11,197,200 10,325,500 9,426,400
----------- ----------- -----------
Funded status.......................................... $ 1,474,400 $ 1,777,100 $ 2,728,600
=========== =========== ===========
Accrual cost recognized in the statement of financial
condition............................................ $ 482,000 $ 441,100 $ 607,500
=========== =========== ===========
Weighted-average assumptions
Discount rate........................................ 7.25% 7.50% 7.50%
Expected long-term return on plan assets............. 8.00% 8.00% 8.00%
Rate of compensation increase........................ 5.00% 5.00% 5.00%
Benefit cost........................................... $ 1,116,800 $ 847,600 $ 756,100
=========== =========== ===========
Employer contributions................................. $ 1,075,800 $ 1,014,000 $ 973,900
=========== =========== ===========

The Company has a profit-sharing plan covering all eligible full-time
employees. The annual contribution under the plan is determined at the
discretion of management and is based upon a specified percentage of each
participant's eligible compensation, as defined. A profit-sharing contribution
was not made during the fiscal years ended April 28, 2000, April 30, 1999 and
April 24, 1998.

The Company has a 401(k) plan covering all eligible full-time employees. The
annual contribution under the plan is determined at the discretion of
management. A 401(k) contribution was not made during the fiscal years ended
April 28, 2000, April 30, 1999 and April 24, 1998.

A supplemental executive retirement plan ("SERP"), which vests for employees
based on individual vesting periods, provides supplemental retirement and
medical benefits to certain members of senior management, commencing when the
executives leave the firm. The benefits relating to the plan vest over a period
of two to four years. Benefits totaling $15,389,500 are expected to be paid over
a period of 31 years for retirement benefits and 39 years for medical benefits.
The related expenses for the fiscal years ended April 28, 2000, April 30, 1999
and April 24, 1998 were $1,169,100, $2,062,200 and $1,501,500, respectively. The
liability related to the SERP included in accounts payable and accrued
liabilities as of April 28, 2000 and April 30, 1999 was $4,706,200 and
$3,537,100, respectively. In the

F-52

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)
event of a change in control of the Company, the benefits will become fully
vested and payable immediately to participants of the SERP.

11. STOCK OPTION PLAN

The Board of Directors of the Company granted options under a Stock Option
Agreement to certain directors and officers to purchase shares of the Company's
redeemable common stock based upon its Net Book Value as defined in the
Company's Articles of Incorporation ("Net Book Value"). The Net Book Value of
redeemable common stock is computed substantially as follows: Redeemable Stocks
and Other Equity of the Company in accordance with generally accepted accounting
principles in the United States plus the net after tax amount of the fair market
value of memberships in exchanges over cost minus the liquidation value of
redeemable preferred stock and the net after tax amount of intangible assets.
These options are accounted for as variable plan awards. Compensation expense is
measured at the end of each year as the amount by which the Net Book Value of
the shares underlying the options change in value and is accrued to expense over
the periods the employees perform their related services. The exercise price of
the options approximated the Net Book Value of the Company's stock on the date
of grant. The options vest over five years and have no expiration date. All
options which have not vested are forfeited upon termination of the director or
officer. In the event of a change in control of the Company, options will become
fully vested. Stock option compensation cost charged against income for the
fiscal years ended April 28, 2000, April 30, 1999 and April 24, 1998 was
$2,950,300, $8,790,200 and $5,304,800, respectively. Stock option compensation
payable included in accounts payable and accrued liabilities as of April 28,
2000 and April 30, 1999 was $19,139,300 and $16,278,500, respectively. The
following is a summary of stock option activity:

STOCK OPTIONS WITH AN EXERCISE PRICE OF:
--------------------------------------------------
$275 $400 $850 TOTAL
-------- -------- -------- --------

Outstanding at April 25, 1997............................... 17,200 1,000 18,200
Granted..................................................... 7,500 7,500
Redeemed.................................................... (900) (900)
------ ----- ----- ------
Outstanding at April 24, 1998............................... 17,200 100 7,500 24,800
Redeemed.................................................... (100) (100)
------ ----- ----- ------
Outstanding at April 30, 1999............................... 17,200 -- 7,500 24,700
Redeemed.................................................... (3,600) (600) (4,200)
Forfeited................................................... (600) (800) (1,400)
------ ----- ----- ------
Outstanding at April 28, 2000............................... 13,000 -- 6,100 19,100
====== ===== ===== ======

On May 1, 2000, the Company granted options to purchase 11,500 shares at
$1,350 to certain directors and officers.

12. REDEEMABLE PREFERRED AND COMMON STOCK

Redeemable securities are carried at their redemption value.

The Company may at any time redeem all the shares of redeemable preferred
and common stock of any stockholder. Stockholders have the right to sell all of
their shares to the Company upon written notice. Redemptions of redeemable
preferred and common stock are payable over a period of four years, with 20% of
the proceeds of the shares payable at the time of redemption and the remainder
of the proceeds to be paid over 4 years, which are included in promissory notes.
The redemption value of the preferred shares is based on their liquidation value
while the redemption value of the common shares is based on the Net Book Value
of the stock at the date the common shares are redeemed.

F-53

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC.
CONDENSED STATEMENTS OF FINANCIAL CONDITION (PARENT COMPANY ONLY)
APRIL 28, 2000 AND APRIL 30, 1999

2000 1999
------------ ------------

ASSETS
Cash........................................................ $ 4,081,900 $ 9,073,700
Receivable from brokers and dealers......................... -- 43,500
Receivable from affiliates.................................. 12,396,600 9,470,000
Securities owned, at market value, primarily common stock... -- 460,600
Intangible assets
Intangible assets allocated to subsidiaries exchange
memberships........................................... 2,909,300 2,909,300
Specialists Stocks, net of accumulated amortization for
2000:
$2,892,900, and 1999: $2,694,500 3,058,200 3,256,600
Franchise Rights, net of accumulated amortization for
2000:
$1,775,200, and 1999: $1,653,500 3,093,900 3,215,600
Investment in subsidiaries.................................. 98,383,000 80,274,700
Fixed assets and leasehold improvements, at cost, net of
accumulated depreciation and amortization for 2000:
$5,324,500, and 1999: $4,566,100.......................... 1,462,000 2,064,700
Deferred income taxes....................................... 5,324,400 2,872,600
Other assets................................................ 7,880,300 6,352,000
------------ ------------
TOTAL ASSETS............................................ $138,589,600 $119,993,300
============ ============
LIABILITIES, REDEEMABLE STOCKS AND OTHER EQUITY
Borrowings.................................................. $ 3,202,700 $ 1,787,700
Payable to affiliates....................................... 75,200 --
Accounts payable and accrued liabilities.................... 29,081,000 24,157,600
Long term borrowings........................................ 13,334,500 7,029,900
------------ ------------
TOTAL LIABILITIES....................................... 45,693,400 32,975,200
------------ ------------
Commitments
Redeemable Third Preferred Stock (par value $.10 per share;
liquidation value $100.00 per share; 35,491 shares
authorized, 24,775 shares issued and 14,887 shares
outstanding), stated at redemption value.................. 1,488,700 1,488,700
Redeemable Fourth Preferred Stock (par value $.10 per share;
liquidation value $100.00 per share; 22,276 shares
authorized, 16,846 issued and 11,753 outstanding), stated
at redemption value....................................... 1,175,300 1,175,300
Redeemable Common Stock (par value $.10 per share, 200,050
shares authorized; 100,010 shares issued; 68,100 shares
outstanding for 2000 and 75,100 shares outstanding for
1999), stated at redemption value......................... 90,472,900 89,584,500
Additional paid-in-capital.................................. 421,600 421,600
Retained earnings........................................... 16,039,800 2,202,400
Treasury stock (at cost).................................... (16,702,100) (7,854,400)
------------ ------------
TOTAL LIABILITIES, REDEEMABLE STOCKS AND OTHER EQUITY... $138,589,600 $119,993,300
============ ============

F-54

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (CONTINUED)

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC.
CONDENSED STATEMENTS OF INCOME (PARENT COMPANY ONLY)
FOR THE FISCAL YEARS ENDED APRIL 28, 2000, APRIL 30, 1999 AND APRIL 24, 1998

2000 1999 1998
----------- ----------- -----------

Revenues
Management fees..................................... $12,346,000 $15,463,300 $14,445,100
Equity in earnings of subsidiaries.................. 15,986,500 23,015,400 26,334,400
Investment gains, net............................... 166,300 93,900 166,900
Interest............................................ 599,900 642,900 520,200
Dividends........................................... 19,700 -- --
Other............................................... 7,300 7,300 7,300
----------- ----------- -----------
Total revenues.................................... 29,125,700 39,222,800 41,473,900
----------- ----------- -----------
Expenses
Compensation and benefits........................... 9,948,500 15,189,200 13,454,000
Occupancy, equipment rental and communications...... 185,600 131,200 112,900
Interest............................................ 1,232,200 1,260,500 1,191,700
Depreciation and amortization....................... 1,495,200 1,298,800 928,100
Other............................................... 2,424,900 3,160,100 1,697,900
----------- ----------- -----------
Total expenses.................................... 15,286,400 21,039,800 17,384,600
----------- ----------- -----------
Income before (benefit) provision for income
taxes............................................. 13,839,300 18,183,000 24,089,300
----------- ----------- -----------
Provision (benefit) for income taxes
Current:
Federal............................................. 70,200 195,800 308,500
State and local..................................... (99,200) 118,400 171,300

Deferred:
Federal............................................. (514,900) (1,435,200) (828,000)
State and local..................................... (342,600) (954,900) (545,300)
----------- ----------- -----------
(886,500) (2,075,900) (893,500)
----------- ----------- -----------
Net income........................................ $14,725,800 $20,258,900 $24,982,800
=========== =========== ===========

F-55

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (CONTINUED)

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)
FOR THE FISCAL YEARS ENDED APRIL 28, 2000, APRIL 30, 1999 AND APRIL 24, 1998

2000 1999 1998
----------- ----------- -----------

Cash flows from operating activities
Net income.......................................... $14,725,800 $20,258,900 $24,982,800
----------- ----------- -----------
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation and amortization..................... 1,495,200 1,298,800 928,100
Deferred income tax benefit....................... (857,500) (2,390,100) (1,373,300)
Equity in earnings of subsidiaries................ (15,986,500) (23,015,400) (26,334,400)
(Increase) decrease in operating assets
Receivable from brokers and dealers............... 43,500 (43,500) --
Receivable from affiliates........................ (2,926,600) (5,613,400) (2,212,800)
Securities owned.................................. 460,600 (27,500) (168,200)
Other assets...................................... (3,539,500) (6,475,300) (4,237,700)
Increase (decrease) in operating liabilities
Payable to affiliates............................. 75,200 (163,700) 94,200
Accounts payable and accrued liabilities.......... 4,923,400 11,104,400 5,089,800
----------- ----------- -----------
Total adjustments............................... (16,312,200) (25,325,700) (28,214,300)
----------- ----------- -----------
Net cash used in operating activities........... (1,586,400) (5,066,800) (3,231,500)
----------- ----------- -----------
Cash flows from investing activities
Purchase of fixed assets............................ (155,700) (438,700) (868,100)
----------- ----------- -----------
Net cash used in investing activities........... (155,700) (438,700) (868,100)
----------- ----------- -----------
Cash flows from financing activities
Dividends received from subsidiaries................ 6,950,000 11,940,000 13,000,000
Investment in subsidiaries.......................... (9,071,600) (3,072,200) (1,840,900)
Principal payments under subordinated borrowings and
promissory notes.................................. (1,128,100) (3,704,800) (1,958,400)
Issuance of promissory notes........................ -- 1,692,000 --
Purchase of treasury stock.......................... -- (205,100) --
----------- ----------- -----------
Net cash (used in) provided by financing
activities.................................... (3,249,700) 6,649,900 9,200,700
----------- ----------- -----------
Net increase (decrease) in cash................. (4,991,800) 1,144,400 5,101,100
Cash and cash equivalents, beginning of year.......... 9,073,700 7,929,300 2,828,200
----------- ----------- -----------
Cash and cash equivalents, end of year.......... $ 4,081,900 $ 9,073,700 $ 7,929,300
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest............................................ $ 790,000 $ 1,162,300 $ 1,130,000
Income taxes (on behalf of the consolidated
group)............................................ $17,637,800 $19,791,200 $27,306,200

Supplemental disclosure of noncash financing
activities
Purchase of treasury stock by the Company and
offsetting liabilities............................ $ 8,847,700 $ 820,600 $ 2,115,100

F-56

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The condensed unconsolidated financial statements of ROBB PECK McCOOEY
Financial Services, Inc. should be read in conjunction with the consolidated
financial statements of ROBB PECK McCOOEY Financial Services, Inc. and
subsidiaries and the notes thereto, which are included in this Form S-4.

Investments in subsidiaries are accounting for using the equity method.

These condensed unconsolidated financial statements have been prepared in
conformity with generally accepted accounting principles that require management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of April 28,
2000 and April 30, 1999, and the reported amounts of revenues and expenses
during the fiscal years then ended. Actual results could differ from those
estimates.

F-57

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

AS OF OCTOBER 27, 2000 (UNAUDITED)

Assets:
Cash and cash equivalents................................... $ 10,749,900
U.S. Treasury Bills segregated in compliance with Federal
regulations (Note 2)...................................... 52,650,800
Deposits with clearing organizations (Cash of $1,754,900 and
U.S. Treasury Bills of $5,340,100, at market value)....... 7,095,000
Receivable from brokers and dealers (Note 3)................ 146,147,100
Receivables from customers.................................. 25,558,000
Securities owned, at market value, primarily common stock... 11,839,400
Memberships in exchanges:
Owned, at cost (market value $23,020,100)................. 3,828,700
Contributed for the use of the Company, at market value
(Note 4)................................................ 4,000,000
Intangible assets:
Specialists Stocks, net of accumulated amortization of
$3,802,900.............................................. 4,248,200
Franchise Rights, net of accumulated amortization of
$1,836,000.............................................. 3,033,000
Investments in real estate, net of accumulated depreciation
of $107,200............................................... 7,722,000
Secured demand note collateralized by marketable securities
(Note 4).................................................. 10,175,000
Fixed assets and leasehold improvements, at cost, net of
accumulated depreciation and amortization of $5,614,500... 1,329,200
Deferred income taxes....................................... 5,324,400
Other assets................................................ 21,742,900
------------
Total assets............................................ $315,443,600
============
Liabilities, redeemable stock and other equity:
Bank loans.................................................. $ 5,000
Borrowings (Note 4)......................................... 17,510,600
Payable to brokers and dealers (Note 3)..................... 25,501,500
Payable to customers........................................ 83,458,700
Securities sold, but not yet purchased, at market value,
primarily common stock.................................... 9,462,700
Accounts payable and accrued liabilities.................... 44,505,200
Long term borrowings (Note 6)............................... 34,537,700
------------
Total liabilities....................................... 214,981,400

Redeemable Third Preferred Stock (par value .10 per share;
liquidation $100 per share; 35,491 shares authorized,
24,775 shares issued and 14,887 shares outstanding),
stated at redemption value................................ 1,488,700
Redeemable Fourth Preferred Stock (par value .10 per share;
liquidation $100 per share; 22,276 shares authorized,
16,846 shares issued and 11,753 shares outstanding),
stated at redemption value................................ 1,175,300
Redeemable Common Stock (par value .10 per share; 200,050
shares authorized, 100,010 shares issued and 67,600 shares
outstanding), stated at redemption value.................. 99,927,000
Additional paid-in capital.................................. 421,600
Retained earnings........................................... 14,816,000
Treasury stock (at cost).................................... (17,366,400)
------------
$315,443,600
============

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-58

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED OCTOBER 27, 2000 AND OCTOBER 29, 1999 (UNAUDITED)

2000 1999
----------- -----------

Revenues:

Trading and investment gains, net........................... $37,834,100 $26,431,100
Floor brokerage............................................. 8,955,900 11,958,400
Clearance fees and commissions.............................. 9,568,900 7,947,600
Interest.................................................... 7,215,600 4,280,900
Dividends................................................... 319,000 633,800
Underwriting income......................................... 700 765,600
Other 642,900 345,300
----------- -----------
Total revenues.......................................... 64,537,100 52,362,700
----------- -----------

Expenses:
Compensation and benefits (Note 6).......................... 31,065,500 22,644,000
Floor brokerage and clearance fees.......................... 3,378,700 1,967,100
Occupancy, equipment rental and communications.............. 2,619,800 2,481,600
Interest.................................................... 4,318,700 2,850,100
Leased exchange seats....................................... 2,136,600 1,794,700
Depreciation and amortization............................... 806,500 918,800
Other....................................................... 4,607,900 4,515,400
----------- -----------
Total expenses.......................................... 48,933,700 37,171,700
----------- -----------
Income before provision for income taxes.................. 15,603,400 15,191,000
Provision for income taxes.................................. 7,373,100 7,220,100
----------- -----------
Net income.................................................. $ 8,230,300 $ 7,970,900
=========== ===========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-59

ROBB PECK MCCOOEY

FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE STOCKS AND OTHER
EQUITY

FOR THE SIX MONTHS ENDED OCTOBER 27, 2000. (UNAUDITED)

REDEEMABLE THIRD REDEEMABLE FOURTH
PREFERRED PREFERRED
STOCK (35,491 SHARES STOCK (22,276 SHARES
AUTHORIZED AUTHORIZED
PAR VALUE $.10, PAR VALUE $.10, REDEEMABLE COMMON STOCK
LIQUIDATION LIQUIDATION VALUE (200,050 SHARES AUTHORIZED
VALUES $100.00) $100.00) PAR VALUE $.10)
---------------------- ---------------------- -------------------------- ADDITIONAL
SHARES REDEMPTION SHARES REDEMPTION SHARES REDEMPTION PAID-IN
ISSUED(1) VALUE ISSUED(2) VALUE ISSUED(3) VALUE CAPITAL
--------- ---------- --------- ---------- ---------- ------------- ----------

Balance April 28, 2000.................. 24,775 $1,488,700 16,846 $1,175,300 100,010 $90,472,900 $421,600
Purchase of treasury stock..............
Net Income..............................
Recording of redeemable stock at its
redemption value....................... 9,454,100
------- ---------- ------- ---------- -------- ----------- --------
Balance, October 27, 2000............... 24,775 $1,488,700 16,846 $1,175,300 100,010 $99,927,000 $421,600
======= ========== ======= ========== ======== =========== ========

TREASURY
RETAINED STOCK,
EARNINGS AT COST
----------- ------------

Balance April 28, 2000.................. $16,039,800 $(16,702,100)
Purchase of treasury stock.............. (664,300)
Net Income.............................. 8,230,300
Recording of redeemable stock at its
redemption value....................... (9,454,100)
----------- ------------
Balance, October 27, 2000............... $14,816,000 $(17,366,400)
=========== ============

------------------------

(1) Includes 9,888 shares held in treasury at October 27, 2000.

(2) Includes 5,093 shares held in treasury at October 27, 2000.

(3) Includes 32,410 held in treasury on October 27, 2000.

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-60

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 27, 2000 AND OCTOBER 29, 1999
(UNAUDITED)

2000 1999
------------ ------------

Cash flows from operating activities:
Net income................................................ $ 8,230,300 $ 7,970,900
------------ ------------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization........................... 806,500 918,800
(Increase) decrease in operating assets:
U.S. Treasury Bills................................... 25,008,700 (444,300)
U.S. Treasury Bills, segregated in compliance with
Federal regulations................................. (10,772,300) 2,538,000
Deposits with clearing organizations.................. 2,507,100 315,300
Receivable from brokers and dealers................... (48,944,500) (41,670,600)
Receivable from customers............................. 4,734,400 (3,156,500)
Securities owned...................................... 13,486,500 (5,829,300)
Other assets.......................................... (8,577,700) (1,145,500)
Increase (decrease) in operating liabilities:
Payable to brokers and dealers........................ 6,850,600 (1,926,800)
Payable to customers.................................. (551,800) (7,183,100)
Securities sold, but not yet purchased................ (8,428,000) 36,273,300
Accounts payable and accrued liabilities.............. 11,185,500 4,391,200
------------ ------------

Total adjustments................................... (12,695,000) (16,919,500)
------------ ------------

Net cash used in operating activities............... (4,464,700) (8,948,600)
------------ ------------

Cash flows from investing activities:
Sale (purchase) of fixed assets and real estate, net...... 2,214,600 (561,200)
------------ ------------

Net cash (used in) provided by investing
activities........................................ 2,214,600 (561,200)
------------ ------------

Cash flows from financing activities:
Principal payments under subordinated borrowings,
promissory notes and mortgage payable................... (2,528,200) (628,200)
------------ ------------

Net cash used in financing activities............... (2,528,200) (628,200)
------------ ------------

Net decrease in cash........................................ (4,778,300) (10,138,000)

Cash and cash equivalents, beginning of year................ 15,528,200 23,329,600
------------ ------------

Cash and cash equivalents, end of period............ $ 10,749,900 $ 13,191,600
============ ============

Supplemental disclosures for cash flow information:

Cash paid during the period for:
Interest.................................................. $ 3,844,000 $ 2,857,300
Income taxes.............................................. $ 10,255,000 $ 11,005,000

Supplemental disclosures of noncash financing activities:
Increase (decrease) in memberships contributed and
subordinated borrowings (Note 4)........................ $ (1,100,000) $ 150,000
Purchase of treasury stock by the Company and offsetting
liabilities............................................. $ 664,300
Issuance of liabilities pursuant to secured demand note
collateral agreement and secured demand note
(Note 4)................................................ $ 8,000,000

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-61

ROBB PECK MCCOOEY

FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of ROBB PECK
McCOOEY Financial Services, Inc. and its significant subsidiaries, ROBB PECK
McCOOEY Specialist Corporation ("Specialist Corp."), ROBB PECK McCOOEY Clearing
Corporation ("Clearing Corp."), RPM Asset Management Corp. ("Asset Management")
and ROBB PECK McCOOEY Real Estate Management Corporation ("Real Estate")
(collectively, the "Company"). Specialist Corp. conducts specialist activities
on the New York Stock Exchange ("NYSE"). Clearing Corp., a member of the NYSE
and various other exchanges, is engaged in the business of clearing securities
transactions and also trades securities for its own account. The consolidated
financial statements are unaudited and should be read in conjunction with the
audited condensed consolidated financial statements included elsewhere in this
prospectus.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.

The unaudited consolidated financial statements reflect all adjustments,
consisting only of normal recurring adjustments, that are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented. Interim period operating results may not be indicative of the
operating results for a full year.

2. U.S. TREASURY BILLS SEGREGATED IN COMPLIANCE WITH FEDERAL REGULATIONS

U.S. Treasury Bills with a market value of $43,548,700 are segregated in a
special reserve bank account for the benefit of customers under Rule 15c3-3 of
the Securities and Exchange Commission ("SEC").

In accordance with the SEC's no action letter dated November 3, 1998,
Clearing Corp. has agreed to compute a Reserve Requirement of the proprietary
accounts of introductory firms as of October 27, 2000. Clearing Corp.'s deposit
requirement was $8,255,300. The amount segregated at October 27, 2000 was
$9,102,200 with an additional $675,000 deposit made in accordance with the rule.

3. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS

Amounts receivable from and payable to brokers and dealers at October 27,
2000:

Securities failed-to-deliver................................ $ 6,689,900
Deposits on securities borrowed............................. 128,274,400
Receivable from noncustomers................................ 258,600
Floor brokerage receivable.................................. 1,593,600
Adjustment to record inventory on a trade-date basis........ 8,777,200
Other..................................................... 553,400
--------------
Total receivable........................................ $ 146,147,100
==============
Securities failed-to-receive................................ $ 9,226,800
Payable to Joint Trading Account............................ 8,400,200
Payable to noncustomers..................................... 7,165,400
Other....................................................... 709,100
--------------
Total payable........................................... $ 25,501,500
==============

F-62

ROBB PECK MCCOOEY

FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS (CONTINUED)
Securities borrowed and securities loaned, which are transacted with other
brokers and dealers, are recorded at the amount of cash collateral advanced or
received, with fees recorded as interest revenue or expense over the life of the
transaction. Securities borrowed transactions require the Company to deposit
cash with the lenders. With respect to securities loaned, the Company receives
cash collateral in an amount generally in excess of the market value of
securities loaned the Company monitors the market value of securities borrowed
and loaned on a daily basis, with additional cash collateral deposited or
refunded as necessary. Approximately 63% of the Company's deposits on securities
borrowed are with three brokers and dealers, all of which are above 10% of total
assets.

4. SUBORDINATED BORROWINGS AND PROMISSORY NOTES

Borrowings subordinated to the claims of general creditors and promissory
notes are as follows:

12% Series 1 subordinated note due 2001 to 2004............. $ 1,000,000
12 1/2% subordinated note due 2004.......................... 2,000,000
9% promissory note due 2001................................. 295,000
10% promissory notes due 2001............................... 260,000
Exchange memberships, contributed for use of the Company.... 4,000,000
Liabilities pursuant to secured demand note collateral
agreements,
9% due 2001............................................... 1,175,000
10% due 2002.............................................. 1,000,000
11% due 2002.............................................. 8,000,000
7.95% senior subordinated notes due 2006.................. 20,000,000
-----------
37,730,000
===========
Promissory notes and other borrowings:
9 1/2% promissory notes due 2001 to 2003.................. 1,256,300
Promissory notes due 2001 to 2005 (10.5% at October 27,
2000)................................................... 9,512,000
5.65% promissory note due 2002 to 2004...................... 2,000,000
Prime+ 1% mortgage due 2002 (10.5% at October 27, 2000)..... 1,550,000
14,318,300
===========
Total borrowings............................................ 52,048,300
Less: payments due within one year and exchange memberships
contributed for the use of the Company.................... 17,510,600
-----------
Total long-term borrowings.................................. $34,537,700
===========

Effective December 20, 2000, the 9% secured demand note was repaid.

5. NET CAPITAL REQUIREMENTS

Certain subsidiaries of the Company are subject to capital requirements of
regulatory agencies. Clearing Corp. is subject to the SEC Uniform Net Capital
Rule 15c3-1. At October 27, 2000, Clearing Corp.'s net capital, as defined, was
$14,825,800 in excess of its requirement of $958,100.

Specialist Corp. is subject to the SEC's Uniform Net Capital Rule 15c3-1 as
well as NYSE Rule 104.20. At October 27, 2000, Specialist Corp.'s net capital
was $109,714,500 in excess of its requirement of $250,000 under the SEC's
Uniform Net Capital Rule 15c3-1, and $94,631,100 in excess of its requirement of
$16,482,200 under NYSE Rule 104.20.

In November 1999, the NYSE proposed a change to its rules that would
increase the capital requirements for certain specialists, including Specialist
Corp. The rule change, when and if it takes

F-63

ROBB PECK MCCOOEY

FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. NET CAPITAL REQUIREMENTS (CONTINUED)
effect, is expected to substantially reduce the excess of Specialist Corp.'s net
liquid assets over its requirement. Specialist Corp. expects to maintain
compliance with the new Rules as they are currently proposed.

6. STOCK OPTION PLAN

Stock option compensation cost charged against income for the six months
ended October 27, 2000 and October 29, 1999 was $3,917,300 and $3,169,000,
respectively. Stock option compensation payable included in accounts payable and
accrued liabilities as of October 27, 2000 and October 29, 1999 was $21,237,000
and $19,358,000, respectively. The following is a summary of stock option
activity:

STOCK OPTIONS WITH AN EXERCISE PRICE OF:
$275 $850 $1,350 TOTAL
-------- -------- -------- --------

Outstanding at April 28, 2000... 13,000 6,100 -- 19,100
Granted......................... -- -- 11,500 11,500
-------- ------- -------- --------
Outstanding at October 27,
2000.......................... 13,000 6,100 11,500 30,600
======== ======= ======== ========

F-64

ANNEX A--AGREEMENT AND PLAN OF MERGER
ANNEX B--SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
ANNEX C--KELLEY DRYE & WARREN LLP TAX OPINION

ANNEX A

AGREEMENT AND PLAN OF MERGER
BETWEEN
LABRANCHE & CO INC.
AND
ROBB PECK MCCOOEY FINANCIAL SERVICES, INC.
DATED AS OF
JANUARY 18, 2001

TABLE OF CONTENTS

PAGE
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ARTICLE I DEFINITIONS................................................. A-1

ARTICLE II THE MERGER; REPRESENTATIVES; CLOSING DATE................... A-8

ARTICLE III NET BOOK VALUE DETERMINATIONS; ESCROWS; POST-CLOSING
ADJUSTMENT.................................................. A-12

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TARGET.................... A-13

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER................. A-23

ARTICLE VI PRE-CLOSING COVENANTS OF TARGET............................. A-28

ARTICLE VII PRE-CLOSING COVENANTS OF PURCHASER.......................... A-32

ARTICLE VIII ADDITIONAL PRE-CLOSING COVENANTS............................ A-33

ARTICLE IX CONDITIONS TO THE MERGER.................................... A-36

ARTICLE X POST-CLOSING COVENANTS...................................... A-40

ARTICLE XI TERMINATION OF AGREEMENT.................................... A-48

ARTICLE XII MISCELLANEOUS............................................... A-49

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is dated as of this
18th day of January, 2001, by and between LABRANCHE & CO INC., a Delaware
corporation ("PURCHASER"), and ROBB PECK MCCOOEY FINANCIAL SERVICES, INC., a
Delaware corporation ("TARGET"). Purchaser and Target are referred to
collectively herein as the "PARTIES."

W I T N E S S E T H:

WHEREAS, the respective Boards of Directors of Target and Purchaser have
approved the acquisition of Target by Purchaser through a merger of Target with
and into Purchaser (the "MERGER"), upon the terms and subject to the conditions
set forth in this Agreement, whereby each issued and outstanding share of common
stock, par value $0.10 per share, of Target (collectively, the "TARGET SHARES")
held by the holders of Target Shares (the "STOCKHOLDERS") will be exchanged for
(i) 98.778 shares of common stock, par value $.01 per share, of Purchaser
("PURCHASER COMMON STOCK") and (ii) shares of Series A Preferred Stock, par
value $.01 per share, of Purchaser ("PURCHASER SERIES A PREFERRED STOCK") having
an aggregate liquidation preference of $1,426.53 (subject to adjustment as
herein provided);

WHEREAS, the parties intend for the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and for this Agreement to constitute a "plan of
reorganization" within the meaning of Section 368(a) of the Code and the
Treasury Regulations promulgated thereunder; and

WHEREAS, the Parties desire to set forth certain representations, warranties
and covenants made by each to the other as an inducement to the execution and
delivery of this Agreement and to set forth certain additional agreements
related to the transactions contemplated hereby;

NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

ARTICLE I
DEFINITIONS

SECTION 1.1 DEFINITIONS

In this Agreement, the following words and phrases shall have the meanings
hereinafter set forth:

"ADJUSTED NET BOOK VALUE" in respect of Target as of the Closing Date shall
mean the amount of the Stockholders Equity (as defined below) of Target as of
the Closing Date adjusted by subtracting from such amount the following amounts
(determined as of the Closing Date):

(i) the aggregate liquidation value ($2,664,000 as of November 24, 2000)
of any then outstanding shares of Target Preferred Stock;

(ii) 53% (estimated at $995,676 as of November 24, 2000) of the
additional expense of accelerating the full vesting of any then unvested
Target Options;

(iii) 53% (estimated at $6,954,346 as of November 24, 2000) of the
additional expense of Target's accelerated payment of all amounts (including
those attributable to retiree medical and long-term care insurance benefits)
payable under the Target SERPs;

(iv) the unamortized portion of the goodwill associated with exchange
memberships (estimated at $2,909,392 as of November 24, 2000);

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(v) the unamortized portion of the goodwill associated with franchise
rights (estimated at $3,022,881 as of November 24, 2000);

(vi) the unamortized portion of the goodwill associated with specialist
stocks (other than those described in clauses (vii) and
(viii) below)(estimated at $2,942,478 as of November 24, 2000);

(vii) 53% (estimated at $561,640 as of November 24, 2000) of the
unamortized portion of the goodwill associated with specialist stocks-FBM;

(viii) 53% (estimated at $115,455 as of November 24, 2000) of the
unamortized portion of the goodwill associated with specialist
stocks-FSI/Adrian/RPM Joint Account;

(ix) 53% of the "amount of unfunded liabilities" (within the meaning of
Section 4001(a)(18) of ERISA and the regulations thereunder) with respect to
the Target Pension Plan, actuarially determined on a termination basis as of
the Closing Date (with such liabilities taking into account any benefits
projected to accrue for service during the 15-day period following the
Closing Date) by Target's actuary and agreed to by Purchaser's actuary using
the assumptions and methods specified in Schedule A; and

(x) the Stockholders Equity of REMCO, assuming for this purpose the
capitalization of any intercompany payables owed by REMCO to Target or to
any of the other Subsidiaries of Target ($7,215,302 as of November 24,
2000); and

(xi) 53% of the aggregate amount of benefits payable under the Deferred
Compensation Plan (not including interest);

and by adding to such amount the following amounts (in the case of clauses
(xii) and (xiii), determined as of the Closing Date):

(xii) the amount of any stock option compensation payable included in
Target's accrued liabilities (assuming for this purpose the acceleration of
the full vesting of any then unvested Target Options)(estimated at
$18,375,189 as of November 24, 2000;

(xiii) the amount of any surplus with respect to the Target Pension Plan,
actuarially determined on a termination basis in accordance with
clause (ix) above, and after taking into account applicable income taxes
(computed at a tax rate of 47%), excise tax under Code Section 4980, and any
use by Purchaser of such surplus to fund any Purchaser Plan;

(xiv) 53% of the aggregate amount of the benefits payable under the
Deferred Compensation Plan (not including interest);

(xv) $7,600,000 (subject to equitable adjustment in the event any
currently outstanding Target Options are exercised between the date hereof
and the Closing Date); and

PROVIDED, HOWEVER, that (to avoid duplication) with respect to clauses
(i) through (xi), the items in such clauses shall not be deducted to the extent
that Stockholders Equity as of the Closing Date already reflects the deduction
of the amounts of the items in such clauses (and the creation of related
deferred tax assets, in the case of any item for which only 53% would be
deducted), and that with respect to clauses (xii) through (xiii), the items in
such clauses shall not be added to the extent that Stockholders Equity as of the
Closing Date already reflects the addition of the amounts of the items in such
clauses (and the creation of related deferred tax liabilities, in the case of
any item for which only 53% would be added).

For purposes of the determination of Adjusted Net Book Value, "STOCKHOLDERS
EQUITY" shall mean the final recorded stockholders equity of Target and its
Subsidiaries or REMCO and its Subsidiaries, as the case may be, as of the
Closing Date, determined in accordance with GAAP and with the historical
practices of Target in preparing the Financial Statements (in the case of
Target, $105,203,581 as of

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November 24, 2000, and in the case of REMCO, $7,215,302 as of November 24,
2000), and in the case of Target, reflecting all transactions that are to take
place on the Closing Date and that are recorded in Target's books as of the
Closing Date.

"ADJUSTED NET BOOK VALUE DEFICIENCY" shall have the meaning given such term
in SECTION 3.4(b)(i) hereof.

"AFFILIATE" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Person specified.

"AFFILIATE LETTER" shall have the meaning given such term in
SECTION 9.1(aa) hereof.

"AFFILIATED GROUP" shall mean any affiliated group within the meaning of
Section 1504 of the Code or any similar group defined under a similar provision
of state, local or foreign law, including, but not limited to, any combined,
consolidated or unitary group.

"AGREEMENT" shall mean this Agreement and Plan of Merger.

"AMEX" shall mean American Stock Exchange, Inc.

"AUDITED BALANCE SHEET" shall mean the audited balance sheet of Target as of
April 28, 2000, and the notes thereto, contained in the Financial Statements.

"AUDITED BALANCE SHEET DATE" shall mean April 28, 2000.

"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or legal
holiday under the Federal laws of the United States or the State of New York.

"CAUSE" shall mean, with respect to any employee of Purchaser or any of its
Affiliates: (i) a breach of any material term of employment or any other written
agreement between, and executed by each of, such employee and Purchaser or any
of its Affiliates which breach is not cured by such employee within twenty
(20) days of his or her receipt of written notice thereof; (ii) such employee's
willful material violation of any firm policy disclosed to him or her in writing
by Purchaser or such Affiliate (including in respect of hedging or confidential
information), as in effect from time to time, which violation is not cured by
such employee within twenty (20) days of receipt of written notice thereof;
(iii) such employee's conviction of, or pleading NOLO CONTENDERE to, a felony
crime; or (iv) such employee becoming subject to any "statutory
disqualification" within the meaning of Section 3(a)(39) of the Exchange Act.

"CBOE" shall mean Chicago Board of Options Exchange, Inc.

"CERTIFICATE OF MERGER" shall have the meaning given such term in
SECTION 2.3 hereof.

"CHOSEN COURTS" shall have the meaning given such term in SECTION 12.5
hereof.

"CLOSING" shall have the meaning given such term in SECTION 2.2 hereof.

"CLOSING DATE" shall have the meaning given such term in SECTION 2.2 hereof.

"CLOSING VALUE" shall have the meaning given such term in SECTION 2.7(b)
hereof.

"CODE" shall mean the Internal Revenue Code of 1986, as amended.

"CONTRACTS" shall have the meaning given such term in SECTION 4.13 hereof.

"DGCL" shall mean the Delaware General Corporation Law.

"DOL" shall mean the U.S. Department of Labor.

"DEFERRED COMPENSATION PLAN" shall have the meaning given such term in
SECTION 2.9 hereof.

"DISSENTING SHARES" shall have the meaning given such term in
SECTION 2.5(c) hereof.

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"EFFECTIVE TIME" shall have the meaning given such term in SECTION 2.4(a)
hereof.

"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit
Plan (as defined in ERISA Section 3(1)), or (e) any other material retirement,
bonus, incentive, profit-sharing, savings, change in control, employment,
consulting, collective bargaining, dependent care, employee assistance,
post-retirement welfare, retention, vacation, severance, disability or death
benefit plan, program, agreement, arrangement or understanding (whether or not
written).

"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).

"EQUITY PERCENTAGE" shall mean, in respect of any individual Stockholder or
Option Holder, or group of Stockholders or Option Holders, the fraction of which
the numerator is the aggregate number of Target Shares or shares of Target
Common Stock underlying Target Options held by such Stockholder, Option Holder
or group of Stockholders or Option Holders immediately prior to the Effective
Time and of which the denominator is the aggregate number of Target Shares and
shares of Target Common Stock underlying Target Options outstanding immediately
prior to the Effective Time.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

"ERISA AFFILIATE" shall have the meaning given such term in SECTION 4.17(b)
hereof.

"ESCROW AGENT" shall mean the escrow agent appointed pursuant to the Escrow
Agreement.

"ESCROW AGREEMENT" shall have the meaning given such term in SECTION 3.2
hereof.

"ESCROW EXPENSES" shall have the meaning given such term in SECTION 3.4(a)
hereof.

"ESCROW SHARES" means the shares of Purchaser Series A Preferred Stock to be
delivered by Purchaser to the Escrow Agent pursuant to SECTIONS 3.2 and 3.3
hereof.

"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.

"FINAL ADJUSTED NET BOOK VALUE" shall have the meaning given such term in
SECTION 3.4(a) hereof.

"FINANCIAL STATEMENTS" shall have the meaning given such term in
SECTION 4.8(a) hereof.

"FOURTH SERIES PREFERRED STOCK" shall have the meaning given such term in
SECTION 4.6 hereof.

"GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.

"GOOD REASON" means, with respect to any employee of Purchaser or any of its
Affiliates (i) Purchaser or any of its Affiliates has delegated to another or
others a material portion of such employee's duties or responsibilities, other
than for Cause or disability, including, in the case of Robert M. Murphy, his
removal from the office of Chief Executive Officer of LaBranche, or if he ceases
to be a member of the board of directors of Purchaser for any reason other than
his death, disability, voluntary resignation from such board or removal for
"cause" (within the meaning of applicable Delaware law), or (ii) Purchaser's or
any of its Affiliates' breach of any material term of any written agreement
between, and executed by each of, such employee and Purchaser or any of its
Affiliates, which breach is not cured by Purchaser or such Affiliate within
twenty (20) days of its receipt of written notice thereof.

"GOVERNMENTAL ENTITY" shall mean any court, self-regulatory organization,
administrative or regulatory agency or commission or other U.S., federal, state,
local, municipal or foreign government or governmental body, official, authority
or instrumentality.

"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.

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"INDEMNIFICATION AGREEMENT" shall have the meaning given such term in
SECTION 9.1(y) hereof.

"INDEPENDENT FIRM" shall mean such nationally recognized independent
certified public accounting firm as shall be mutually agreed upon by Purchaser
and the Representatives within 10 Business Days after the event which gives rise
to the need to refer any question to such firm pursuant to the terms hereof.

"IRS" shall mean the U.S. Internal Revenue Service.

"KNOWLEDGE" shall mean, with respect to a Person, the actual knowledge of
such Person after due investigation, including the knowledge of such Person's
directors and officers.

"LABRANCHE" shall mean LaBranche & Co. LLC, a New York limited liability
company of which Purchaser is the sole member.

"LIABILITIES" or "LOSSES" shall mean any and all losses, claims, damages,
deficiencies, obligations, assessments, judgments, fines, penalties, costs or
expenses, whether accrued or unaccrued, absolute, direct or indirect, contingent
or otherwise, including, without limitation, attorneys' fees, all costs of
investigation and defense, including defense of a claim ultimately determined to
be without merit.

"LIENS" shall mean all liens, charges, security interests, pledges, rights
or claims of others, restraints on transfer or other encumbrances of any nature
whatsoever.

"MATERIAL ADVERSE CHANGE" shall mean a change or a development which
results, or is reasonably likely to result, in a Material Adverse Effect.

"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, a material
adverse effect on the financial condition, business, liabilities (including
contingent liabilities) or results of operations of such Person and its
Subsidiaries taken as a whole.

"MEMBERSHIPS" shall have the meaning given such term in SECTION 4.13 hereof.

"MERGER" shall mean the merger of Target with and into Purchaser as
contemplated by this Agreement.

"MERGER CONSIDERATION" shall have the meaning given such term in
SECTION 2.5(a) hereof.

"MULTIEMPLOYER PLAN" has the meanings set forth in ERISA Section 3(37),
ERISA Section 4001(a)(3) and Code Section 414(f) and shall be deemed to include
any plan that is subject to ERISA Section 4063 or 4064.

"NASD" shall mean National Association of Securities Dealers, Inc.

"NET LIQUID ASSETS" shall have the same meaning as set forth in NYSE
Rule 104.20.

"NYSE" shall mean New York Stock Exchange, Inc.

"OLD CERTIFICATES" shall have the meaning given such term in SECTION 2.7(a)
hereof.

"OPTION AMENDMENT" shall have the meaning given such term in SECTION 2.7(e)
hereof.

"OPTION HOLDERS" shall mean those individuals who have been granted Target
Options that are outstanding and unexercised immediately prior to the Effective
Time.

"PARTIES" shall have the meaning given such term in the Recitals hereto.

"PBGC" shall mean Pension Benefit Guaranty Corporation.

"PERSON" shall mean an individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or other
entity, or a government or any agency or political subdivision thereof.

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"PRE-CLOSING TAX PERIOD" shall have the meaning given such term in
SECTION 10.4(a) hereof.

"PREFERRED AMOUNT" shall have the meaning given such term in
SECTION 3.4(b)(i) hereof.

"PROPERTY TAXES" shall have the meaning given such term in
SECTION 10.4(c)(i) hereof.

"PUBLIC REPORTS" shall have the meaning given such term in SECTION 5.8
hereof.

"PURCHASER" shall mean LaBranche & Co Inc.

"PURCHASER COMMON STOCK" shall have the meaning given such term in the
Recitals hereto.

"PURCHASER OPTION" shall have the meaning given such term in SECTION 2.7(e)
hereof.

"PURCHASER PERMITS" shall have the meaning given such term in SECTION 5.5
hereof.

"PURCHASER PLANS" shall have the meaning given such term in SECTION 5.17(a)
hereof.

"PURCHASER SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock, par value $.01 per share, of Purchaser.

"REMCO" shall mean ROBB PECK McCOOEY Real Estate Management Corp., a New
York corporation and a wholly-owned Subsidiary of Target, or any successor to
the assets and liabilities of such corporation.

"REGISTRATION RIGHTS AGREEMENT" shall have the meaning given such term in
SECTION 9.1(i) hereof.

"REGISTRATION STATEMENT" shall have the meaning given such term in
SECTION 8.2 hereof.

"REPRESENTATIVES" shall mean Mr. George E. Robb, Jr. and Mr. Robert M.
Murphy or their respective duly appointed successors pursuant to the terms of
this Agreement and the RPM Stockholder Agreements and the Indemnification
Agreement.

"REQUISITE STOCKHOLDER APPROVAL" shall have the meaning given such term in
SECTION 4.2 hereof.

"RETENTION BONUS POOL" shall have the meaning given such term in
SECTION 2.8 hereof.

"RPM STOCKHOLDER AGREEMENT" shall have the meaning given such term in
SECTION 9.1(j) hereof.

"RPMCC" shall mean ROBB PECK McCOOEY Clearing Corporation, a New York
corporation and a wholly-owned subsidiary of Target.

"RPMSC" shall mean ROBB PECK McCOOEY Specialist Corporation, a New York
corporation and a wholly-owned subsidiary of Target.

"SCHEDULES" shall mean the various schedules provided for herein.

"SEC" shall mean the Securities and Exchange Commission of the United
States.

"SECURITIES ACT" shall have the meaning given such term in SECTION 5.8
hereof.

"SERIES A PREFERRED STOCK CERTIFICATE OF DESIGNATION" shall mean the
Certificate of the Designations, Powers, Preferences and Rights of the Purchaser
Series A Preferred Stock, to be filed by Purchaser on the Closing Date, as set
forth in SECTION 2.2 hereof.

"STOCKHOLDERS" shall mean the holders of Target Shares immediately prior to
the Effective Time, each referred to individually herein as a "Stockholder." The
Stockholders and their ownership of Target Shares as of the date hereof are set
forth on SCHEDULE 4.6 hereto.

"STRADDLE PERIOD" shall have the meaning given such term in SECTION 10.4(c)
hereof.

"SUBSIDIARY" shall mean, with respect to any entity, any corporation,
limited liability company or other entity of which securities or other ownership
interests having ordinary voting power to elect a

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majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by such entity.

"TARGET" shall mean ROBB PECK McCOOEY Financial Services, Inc., together
with its predecessors.

"TARGET BENEFIT PLANS" shall have the meaning given such term in
SECTION 4.17(b) hereof.

"TARGET COMMON STOCK" shall mean the common stock of Target, $0.10 par value
per share.

"TARGET MEETING" shall have the meaning given such term in SECTION 8.1
hereof.

"TARGET OPTION" shall have the meaning given such term in SECTION 2.7(e)
hereof.

"TARGET PENSION AMENDMENT" shall mean an amendment to the Target Pension
Plan, and the taking of such actions as are necessary to comply with
Section 204(h) of ERISA (including the notice requirements thereunder) or other
applicable law, to terminate any and all future benefit accruals under the
Target Pension Plan.

"TARGET PENSION PLAN" shall mean the Robb Peck McCooey Pension Plan and
Trust, as amended.

"TARGET PERMITS" shall have the meaning given such term in SECTION 4.4
hereof.

"TARGET PREFERRED STOCK" shall have the meaning given such term in
SECTION 4.6 hereof.

"TARGET PROFIT SHARING PLAN" shall mean the Robb Peck McCooey Profit Sharing
Plan and Trust, as amended.

"TARGET SERPS" shall mean (i) the Supplemental Retirement Plan for Robert M.
Murphy, as amended, (ii) the Supplemental Retirement Plan for George E. Robb, as
amended, (iii) the Supplemental Retirement Plan for Cornelius F. Bodtmann, as
amended, (iv) the Supplemental Retirement Plan for Nathan J. Mistretta, as
amended, and (v) any other supplemental executive retirement plan or arrangement
maintained or entered into by Target or any of its Affiliates.

"TARGET SHARES" shall have the meaning given such term in the Recitals
hereto.

"TARGET TERMINATION FEE" shall have the meaning given such term in
SECTION 11.3 hereof.

"TAX" or "TAXES" shall mean any and all federal, state, local, foreign and
other taxes, levies, fees, imposts, duties and charges of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith or with respect thereto), including, without limitation, taxes imposed
on, or measured by, income, franchise, profits, or gross receipts, and also
sales, use, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, and gains taxes.

"TAX RETURN" shall mean returns, reports, information statements, and other
documentation (including any additional or supporting material) filed, or
required to be filed, in connection with the calculation, determination,
assessment or collection of any Tax.

"THIRD SERIES PREFERRED STOCK" shall have the meaning given such term in
SECTION 4.6 hereof.

"UNAUDITED BALANCE SHEET" shall mean the unaudited balance sheet of Target
as of November 24, 2000 contained in the Financial Statements.

"UNAUDITED BALANCE SHEET DATE" shall mean November 24, 2000.

SECTION 1.2 REFERENCE TO THIS AGREEMENT; INTERPRETATION

Numbered or lettered articles, sections and subsections herein contained
refer to articles, sections and subsections of this Agreement unless otherwise
expressly stated. The words "herein," "hereof,"

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"hereunder," "hereby," "this Agreement" and other similar references shall be
construed to mean and include this Agreement and the Schedules and Exhibits
referenced herein and all amendments thereof and supplements thereto unless the
context shall clearly indicate or require otherwise. The use of the words
"include," "including" and derivations thereof in this Agreement shall be deemed
to have the phrase "without limitation" attached thereto unless otherwise
expressly stated. Any reference in this Agreement to statutes or laws shall
include all amendments, modifications or replacements of the specific section
and provisions concerned and all rules and regulations promulgated thereunder,
unless the context requires otherwise.

ARTICLE II
THE MERGER; REPRESENTATIVES; CLOSING DATE

SECTION 2.1 THE MERGER

On and subject to the terms and conditions of this Agreement, the Merger
will take place at the Effective Time in accordance with the DGCL. Purchaser
shall be the corporation surviving the Merger.

SECTION 2.2 CLOSING

The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at the offices of Fulbright & Jaworski L.L.P., 666
Fifth Avenue, New York, New York, commencing at 10:00 a.m. local time on the
third Business Day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the Parties will take at the
Closing itself) or such other date and place as the Parties may mutually
determine (the "CLOSING DATE").

SECTION 2.3 DELIVERIES AT THE CLOSING

At the Closing, (i) Target and/or the Stockholders shall deliver to
Purchaser the various certificates, instruments, and documents referred to in
SECTION 9.1 below, (ii) Purchaser shall deliver to Target and/or the
Stockholders the various certificates, instruments, and documents referred to in
SECTION 9.2 below, (iii) Purchaser shall file with the Secretary of State of the
State of Delaware a duly executed Series A Preferred Stock Certificate of
Designation, substantially in the form attached hereto as EXHIBIT A;
(iv) Target and Purchaser shall file with the Secretary of State of the State of
Delaware a duly executed Certificate of Merger in substantially the form
attached hereto as EXHIBIT B (the "CERTIFICATE OF MERGER"), (v) Purchaser shall
deliver to the Stockholders the aggregate Merger Consideration described in
SECTION 2.5(b) below (less the Escrow Shares) in the manner provided in
SECTION 2.7 below, (vi) the Stockholders shall deliver certificates evidencing
the Target Shares to Purchaser and (vii) Purchaser shall deliver the Escrow
Shares to the Escrow Agent in accordance with SECTIONS 3.2 and 3.3 hereof.

SECTION 2.4 EFFECTS OF THE MERGER

(a) GENERAL. The Merger shall become effective at such time as Target and
Purchaser file the Certificate of Merger with the Secretary of State of the
State of Delaware or at such later time as specified in the Certificate of
Merger (the "EFFECTIVE TIME"). The Merger shall have the effect set forth in the
DGCL.

(b) From and after the Effective Time, the separate corporate existence of
Purchaser with its purpose, object, rights, privileges, powers, certificates and
franchises, shall continue unimpaired by the Merger. At the Effective Time, the
separate corporate existence of Target shall cease, and Purchaser shall succeed
to all the properties and assets of Target and to all debts, choses in action
and other

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interests due or belonging to Target and shall be subject to, and responsible
for, all debts, liabilities and duties of Target with the effects provided by
the applicable provisions of the DGCL.

(c) CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Purchaser in effect at and as of the Effective Time, as amended pursuant to the
Series A Preferred Stock Certificate of Designation, shall remain its
certificate of incorporation without any modification or amendment as a result
of the Merger.

(d) BYLAWS. The bylaws of Purchaser in effect at and as of the Effective
Time shall remain its bylaws without any modification or amendment as a result
of the Merger.

(e) DIRECTORS AND OFFICERS. The directors and officers of Purchaser in
office at and as of the Effective Time shall continue as directors and officers
of Purchaser (retaining their respective positions and terms of office), except
that Robert M. Murphy and George E. Robb, Jr. shall be appointed as new Class I
and Class II directors, respectively, of Purchaser.

SECTION 2.5 MERGER CONSIDERATION; CONVERSION OF OUTSTANDING TARGET SHARES

(a) For the purposes of this SECTION 2.5, the shares of Purchaser Common
Stock and Purchaser Series A Preferred Stock to be received by the Stockholders
in connection with the Merger are referred to in the aggregate as the "MERGER
CONSIDERATION."

(b) Except as provided in SECTION 2.6 hereof, but subject to the provisions
set forth in SECTIONS 3.2 and 3.3 hereof and the indemnification obligations of
the Stockholders set forth in ARTICLE X hereof, at the Closing, by virtue of the
Merger and without any action on the part of the Stockholders, each Target Share
outstanding immediately prior to the Effective Time shall be surrendered in
exchange for 98.778 shares of Purchaser Common Stock, and shares of Purchaser
Series A Preferred Stock having an aggregate liquidation preference of
$1,426.53.

(c) Notwithstanding anything in this Agreement to the contrary, Target
Shares outstanding immediately prior to the Effective Time and held by a
Stockholder who has demanded appraisal for such Target Shares in accordance with
Section 262 of the DGCL ("DISSENTING SHARES"), shall not be converted into the
right to receive the Merger Consideration as provided in SECTION 2.5(b).
Instead, such Stockholder shall be entitled to receive payment of the appraised
value of his Dissenting Shares in accordance with the provisions of Section 262
of the DGCL unless and until such Stockholder fails to perfect or withdraws or
otherwise loses his right to appraisal and payment under the DGCL. If, after the
Effective Time, any such Stockholder fails to perfect or withdraws or loses his
right to appraisal, his Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive the Merger
Consideration, if any, to which such Stockholder is entitled, without interest
or dividends thereon, upon the surrender, in the manner provided in SECTION 2.7
hereof, of the certificate(s) which formerly represented his Target Shares.
Target shall give Purchaser prompt notice of any demands received by Target for
appraisal of Target Shares and, prior to the Effective Time, Purchaser shall
have the right to participate in all negotiations and proceedings with respect
to such demands. Prior to the Effective Time, Target shall not, except with the
prior written consent of Purchaser, make any payment with respect to, or settle
or offer to settle, any such demands.

(d) Except as otherwise provided in SECTIONS 2.5(c) and 2.7 hereof, as of
and after the Effective Time, no holder of any certificate that immediately
before the Effective Time represented Target Shares shall have any rights as a
holder of Target Shares, other than to receive the Merger Consideration in
accordance with the terms hereof.

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SECTION 2.6 CANCELLATION OF TARGET CAPITAL STOCK OWNED AS TREASURY STOCK

At the Effective Time, all shares of Target capital stock, if any, that are
owned directly or indirectly by Target as treasury stock shall be canceled
without any consideration being payable therefor.

SECTION 2.7 EXCHANGE OF CERTIFICATES

(a) EXCHANGE PROCEDURES. At the Closing, each holder of record of a
certificate or certificates which immediately prior thereto represented issued
and outstanding Target Shares ("OLD CERTIFICATES") shall surrender such Old
Certificates, in exchange for certificates representing that number of duly
authorized whole shares of Purchaser Common Stock and whole or fractional shares
of Purchaser Series A Preferred Stock issuable to such holder in accordance with
SECTION 2.5, plus an amount of cash equal to the aggregate amount payable in
lieu of fractional shares of Purchaser Common Stock in accordance with
SECTION 2.7(b) hereof. Until so surrendered, the Old Certificates shall
represent, from and after the Effective Time, solely the right to receive the
Merger Consideration specified in SECTION 2.5, except as otherwise provided in
this SECTION 2.7. Old Certificates surrendered to Purchaser shall be canceled.

(b) NO FRACTIONAL SHARES. No fractional shares of Purchaser Common Stock
and no certificates or scrip therefor, or other evidence of ownership thereof,
will be issued upon the surrender for exchange of the Old Certificates. In lieu
of any such fractional share of Purchaser Common Stock, each holder of Target
Shares who would otherwise have been entitled to a fraction of a share of
Purchaser Common Stock upon consummation of the Merger shall be paid, upon
surrender of the Old Certificates, cash (rounded to the nearest whole cent),
without interest, in an amount equal to the product of (i) such fraction
multiplied by (ii) the volume-weighted average sales price per share of the
Purchaser Common Stock during the 20 consecutive trading days ending on and
including the second trading day immediately preceding the Closing Date, as
reported by Bloomberg Information Systems, Inc. (the "CLOSING VALUE").

(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. Notwithstanding any
other provision of this Agreement, no dividends or other distributions declared
or made after the Effective Time on Purchaser Common Stock or Purchaser
Series A Preferred Stock shall be paid to any Person holding an Old Certificate
evidencing Target Shares until such Old Certificate is surrendered for exchange
as provided herein. Subject to the effect of applicable laws, following
surrender of any such Old Certificate by any holder thereof, there shall be paid
to the holder of such surrendered Old Certificate, without interest (i) at the
time of such surrender, the amount of dividends or other distributions declared
and made with a record date after the Effective Time which theretofore became
payable with respect to the Purchaser Common Stock or Purchaser Series A
Preferred Stock, as applicable, represented thereby and not paid, less the
amount of any withholding taxes which may be required thereon, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to the time of such surrender and
a payment date subsequent to the time of such surrender payable with respect to
the Purchaser Common Stock or Purchaser Series A Preferred Stock, as applicable,
represented thereby, less the amount of any withholding taxes which may be
required thereon.

(d) CLOSING OF TARGET TRANSFER BOOKS. From and after the Effective Time,
the stock transfer books of Target shall be closed and no further transfer of
Target Shares shall thereafter be made. If, after the Effective Time, Old
Certificates are presented to Purchaser, they shall be canceled and exchanged
for the Merger Consideration as provided in SECTION 2.5 hereof and this
SECTION 2.7.

(e) ASSUMPTION OF OPTIONS. Immediately prior to the Effective Time, Target
and each Option Holder shall enter into an amendment substantially in the form
annexed hereto as EXHIBIT C (an "OPTION AMENDMENT") of the agreement pursuant to
which such Option Holder was granted his option

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to purchase shares of Target Common Stock (each, a "TARGET OPTION"). Each Target
Option which is outstanding and unexercised immediately prior to the Effective
Time shall be converted at the Effective Time into an option (a "PURCHASER
OPTION") to purchase 98.778 shares of Purchaser Common Stock per share of Target
Common Stock underlying such Target Option.

SECTION 2.8 RETENTION BONUS POOL

Effective as of the Effective Time, Purchaser shall establish a bonus pool
(the "RETENTION BONUS POOL") in an amount equal to $9,000,000, which shall be
paid by Purchaser to the employees listed on SCHEDULE 2.8 as bonus compensation
on the third anniversary of the Closing Date. The portion of the Retention Bonus
Pool payable to each such employee shall be determined by the majority vote of a
committee consisting of Robert M. Murphy, George E. Robb, Jr. and Michael
LaBranche (or, in each case, the successor appointed by such individual), which
determination shall be final, binding and conclusive on Purchaser and each such
employee. Notwithstanding the foregoing provisions of this SECTION 2.8, (i) any
such employee whose employment with Purchaser or one of its Affiliates is
terminated for Cause or who voluntarily terminates his employment for reasons
other than Good Reason shall no longer be eligible to participate in the
Retention Bonus Pool, and (ii) any payment out of the Retention Bonus Pool shall
be subject to the limitations on such payments set forth in the Series A
Preferred Stock Certificate of Designation.

SECTION 2.9 DEFERRED COMPENSATION PLAN

Effective as of the Effective Time, Purchaser shall succeed to Target's
liabilities and obligations under the Deferred Compensation Plan in
substantially the form attached hereto as EXHIBIT D to be adopted by Target on
or before the Closing Date (the "DEFERRED COMPENSATION PLAN").

SECTION 2.10 REPRESENTATIVES

George E. Robb, Jr. and Robert M. Murphy, acting unanimously, are hereby
constituted and appointed as the true and lawful agents and attorneys-in-fact of
the Stockholders (the "REPRESENTATIVES") with full power to appoint a substitute
or substitutes to act hereunder, with respect to all matters arising in
connection with the transactions contemplated hereby with full power and
authority to execute and deliver for and on behalf of the Stockholders all such
contracts, consents and other documents in connection therewith as the
Representatives may deem necessary or advisable (including the Escrow Agreement)
and to do and perform any and all acts and things whatsoever necessary or
advisable in the premises as fully as the Stockholders might or could do. The
Representatives shall have no liability for any actions taken or omitted by them
in the performance of their duties as Representatives unless in respect of such
actions or omissions they shall be finally adjudged by an arbitrator or court of
competent jurisdiction to have acted in bad faith or to have been grossly
negligent. Each Stockholder shall indemnify (pro rata based on his, her or its
Equity Percentage) each of the Representatives and hold each of them harmless
from all liabilities, losses, costs and expenses (including reasonable
attorneys' fees in respect of the investigation and defense of claims) which may
be incurred by him in connection with the performance of his duties as a
Representative, except to the extent, if any, that such liabilities, losses,
costs and expenses shall be finally adjudged by an arbitrator or court of
competent jurisdiction to have resulted from the bad faith or gross negligence
of such Representative.

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ARTICLE III
NET BOOK VALUE DETERMINATIONS;
ESCROWS; POST-CLOSING ADJUSTMENT

SECTION 3.1 ESTIMATED ADJUSTED NET BOOK VALUE FOR CLOSING PURPOSES

Target shall estimate the amount of its Adjusted Net Book Value as of the
Closing Date and shall deliver to Purchaser, at least three, but not more than
five, Business Days prior to the Closing Date, a written statement reflecting
Target's calculation of its estimated Adjusted Net Book Value prepared in a
manner consistent with the definition of Adjusted Net Book Value set forth in
SECTION 1.1 hereof.

SECTION 3.2 ADJUSTED NET BOOK VALUE ESCROW

At the Closing, 5% of the shares of Purchaser Series A Preferred Stock which
would otherwise be delivered to each Stockholder at the Closing shall be
deposited by Purchaser with the Escrow Agent at the Closing and thereafter shall
be held by the Escrow Agent pursuant to the escrow agreement in substantially
the form attached hereto as EXHIBIT E (the "ESCROW AGREEMENT") for the purpose
of providing for the respective obligations of the Stockholders to return shares
of Purchaser Series A Preferred Stock to Purchaser pursuant to SECTION 3.4(B)
hereof

SECTION 3.3 INDEMNITY ESCROW

At the Closing, shares of Purchaser Series A Preferred Stock having an
aggregate liquidation preference equal to the sum of (a) 10% of the value of the
aggregate Merger Consideration received at the Closing (assuming, for this
purpose, that the value of the Purchaser Common Stock is equal to its Closing
Value and that the value of the Purchaser Series A Preferred Stock is equal to
$1,000 per share), and (b) an amount equal to the product of (i) the aggregate
Equity Percentage of the Stockholders and (ii) $20,000,000, shall be deposited
by Purchaser with the Escrow Agent at the Closing and thereafter shall be held
by the Escrow Agent pursuant to the Escrow Agreement for the purpose of
providing for the respective indemnification obligations of the Stockholders
pursuant to SECTIONS 10.2 and 10.4 hereof.

SECTION 3.4 POST-CLOSING ADJUSTMENT TO MERGER CONSIDERATION

(a) Within fifteen (15) Business Days after the Closing, Purchaser shall
deliver to the Representatives its calculation of Target's Adjusted Net Book
Value as of the Closing Date (the "FINAL ADJUSTED NET BOOK VALUE") and related
supporting documentation. Within fifteen (15) Business Days after their receipt
of Purchaser's Final Adjusted Net Book Value calculation, the Representatives
shall have the right to object in writing thereto, setting forth a specific
description of their objections. If the Representatives do not so object during
such period, they shall be deemed to have agreed, for and on behalf of the
Stockholders, to Purchaser's Final Adjusted Net Book Value calculation. If the
Representatives do object to Purchaser's calculation of Target's Final Adjusted
Net Book Value and Purchaser and the Representatives cannot mutually agree on
the Final Adjusted Net Book Value calculation within ten (10) Business Days of
Purchaser's receipt of the Representatives' objection, the dispute shall be
promptly submitted to the Independent Firm. The Independent Firm shall be
directed to resolve such dispute within twenty (20) Business Days after
submission of the dispute by Purchaser and the Representatives. The decision of
the Independent Firm shall be final and binding upon the Stockholders and
Purchaser, and the Independent Firm's fees, costs and expenses ("ESCROW
EXPENSES") shall be paid by Purchaser but shall be borne pro rata by the
Stockholders (through the Escrow Agreement) and Purchaser based on the relative
amounts by which the Representatives' (on behalf of the Stockholders) and
Purchaser's respective calculations of the Final Adjusted Net Book Value vary
from that of the Independent Firm.

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(b) Based upon the Final Adjusted Net Book Value, as finally determined
pursuant to Section 3.4(a) hereof, the following post-Closing deliveries shall
be made, as applicable:

(i) If the aggregate liquidation preference of the shares of Purchaser
Series A Preferred Stock delivered to the Stockholders at the Closing
pursuant to SECTION 2.5(B) hereof (prior to the application of SECTIONS 3.2
and 3.3 hereof (the "PREFERRED AMOUNT") exceeds the Final Adjusted Net Book
Value, the Escrow Agent shall deliver to Purchaser, pursuant to and in
accordance with the Escrow Agreement, shares of Purchaser Series A Preferred
Stock with an aggregate liquidation preference equal to the sum of such
excess (the "ADJUSTED NET BOOK VALUE DEFICIENCY") and the Stockholders'
share of Escrow Expenses, if any. In the event the aggregate liquidation
preference of the shares of Purchaser Series A Preferred Stock delivered by
Purchaser to the Escrow Agent pursuant to SECTION 3.2 hereof exceeds the sum
of the amount of the Adjusted Net Book Value Deficiency and the
Stockholders' share of Escrow Expenses, if any, the shares of Purchaser
Series A Preferred Stock representing such excess shall be delivered by the
Escrow Agent to the Stockholders pursuant to and in accordance with the
Escrow Agreement. In the event the amount of the Adjusted Net Book Value
Deficiency and the Stockholders' share of Escrow Expenses, if any, exceeds
the aggregate liquidation preference of the shares of Purchaser Series A
Preferred Stock delivered to the Escrow Agent pursuant to SECTION 3.2
hereof, the Representatives, for and on behalf of the Stockholders, shall be
required to deliver to Purchaser shares of Purchaser Series A Preferred
Stock having an aggregate liquidation preference equal to such excess;

(ii) If the Final Adjusted Net Book Value is equal to the Preferred
Amount, there shall be no post-Closing delivery to Purchaser pursuant to
this SECTION 3.4(B), other than for the Stockholders' share of Escrow
Expenses, if any, and the Escrow Agent shall deliver to the Stockholders,
pursuant to and in accordance with the Escrow Agreement, all shares of
Purchaser Series A Preferred Stock delivered by Purchaser to the Escrow
Agent pursuant to SECTION 3.2 hereof.

(iii) If the Final Adjusted Net Book Value exceeds the Preferred Amount,
(A) the Escrow Agent shall deliver to the Stockholders, pursuant to and in
accordance with the Escrow Agreement, all the shares of Purchaser Series A
Preferred Stock delivered by Purchaser to the Escrow Agent pursuant to
SECTION 3.2 hereof, less the amount of the Stockholders' share of Escrow
Expenses, if any, and (B) Purchaser shall issue and deliver to each of the
Stockholders additional shares of Purchaser Series A Preferred Stock having
an aggregate liquidation preference equal to the product of (x) the amount
of such excess and (y) such Stockholder's Equity Percentage as a percentage
of the aggregate Equity Percentage of all the Stockholders.

(c) Any post-Closing delivery of shares of Purchaser Series A Preferred
Stock required to be made by either Purchaser or the Representatives (on behalf
of the Stockholders) pursuant to SECTION 3.4(B) hereof shall be made within five
(5) Business Days after the final determination of the Final Adjusted Net Book
Value pursuant to SECTION 3.4(A) hereof.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TARGET

As a material inducement to Purchaser to enter into this Agreement, Target
represents and warrants to Purchaser as of the date hereof and, subject to the
delivery by Target to Purchaser of new Schedules on or before the Closing Date
pursuant to the provisions of SECTION 6.6 hereof, as of the Closing Date that:

SECTION 4.1 CORPORATE EXISTENCE AND POWER

Each of Target and its Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction set
forth opposite its name on SCHEDULE 4.1 and has all

A-13

corporate power required to own, lease and operate its properties and to carry
on its business as now conducted. Each of Target and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except where a
failure or failures to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Target. Target has heretofore made
available to Purchaser or its agents true and complete copies of its and each of
its Subsidiaries' certificate of incorporation and by-laws as currently in
effect.

SECTION 4.2 CORPORATE AUTHORIZATION

The execution, delivery and performance by Target of this Agreement and the
other documents contemplated hereby to which it is or will be a party and the
consummation by Target of the transactions contemplated hereby are within
Target's corporate power and authority and have been duly authorized by all
necessary corporate action, subject to the affirmative vote of holders of a
majority of the issued and outstanding Target Shares for the purpose of
approving the Merger and this Agreement, as required by the DGCL (the "REQUISITE
STOCKHOLDER APPROVAL"). The Requisite Stockholder Approval is the only vote of
the holders of any of Target's capital stock necessary to approve the Merger,
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Target and constitutes, and each other document
contemplated hereby will be duly executed by Target and, when so executed and
delivered, will constitute, a valid and binding agreement of Target, enforceable
against it in accordance with their respective terms and conditions, except as
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or by general principles of equity,
whether considered in a proceeding in equity or at law.

SECTION 4.3 GOVERNMENTAL CONSENTS AND APPROVALS

Except as set forth on SCHEDULE 4.3, the execution, delivery and performance
by Target of this Agreement and the consummation of the Merger by Target require
no action by or in respect of, or filing with, any Governmental Entity, other
than any filings or registrations with, or authorizations, consents or approvals
of, Governmental Entities, the failure or failures of which would not,
individually or in the aggregate, have a Material Adverse Effect on Target and
could not materially adversely affect the ability of Target to consummate the
Merger.

SECTION 4.4 GOVERNMENTAL AUTHORIZATIONS, REGULATORY MATTERS AND ACCOUNT
DOCUMENTATION

Each of Target and its Subsidiaries has obtained all registrations,
qualifications, licenses, permits, franchises, orders or approvals of any
Governmental Entity or regulatory authority as are necessary under applicable
laws for Target and each of its Subsidiaries to own their respective properties
and conduct their respective businesses (collectively, "TARGET PERMITS"), and
all such Target Permits are in full force and effect, and no proceeding is
pending, or to the Knowledge of Target, RPMSC or RPMCC, threatened to revoke or
limit any Target Permit, except where the failure or failures to obtain any such
Target Permit or to keep it in full force and effect or the revocation(s) or
limitation(s) of any such Target Permit would not, individually or in the
aggregate, have a Material Adverse Effect on Target. RPMCC is and has been a
duly registered broker-dealer with the SEC and NASD and in the states where such
registration is required under the securities laws of such states, except where
the failure to do so would not have a Material Adverse Effect on Target. RPMSC
is and has been duly registered as a NYSE specialist. Except where the failure
to do so would not have a Material Adverse Effect on Target, the employees of
RPMSC are in compliance in all respects with all federal and state laws and NYSE
and SEC rules regulating broker-dealers and specialists or requiring
registration, licensing or qualification as a broker-dealer or specialist, and
the employees of RPMCC are in compliance in all respects with all federal and
state laws and NYSE, AMEX, CBOE, NASD and SEC rules regulating broker-dealers or
requiring registration, licensing or qualification as a broker-dealer.

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Each of Target and its Subsidiaries is a member in good standing and has all
material licenses and authorizations in self-regulatory or trade organizations
or registered clearing agencies required to permit the operation of its business
as presently conducted. Target has made available to Purchaser a true, correct
and complete copy of each of RPMSC's and RPMCC's Form BD, as amended to date,
filed with the appropriate self-regulatory or trade organizations. RPMCC has in
its files for substantially all of its existing customer accounts all material
applications, certificates, agreements and other material documentation
necessary in connection with the current and historical level and type of
trading or other activities engaged in within such accounts.

SECTION 4.5 NON-CONTRAVENTION

Except for those consents obtained or waived and except as set forth on
SCHEDULE 4.5, the execution, delivery and performance by Target of this
Agreement and the other documents contemplated hereby and the consummation by
Target of the Merger do not and will not: (a) contravene or conflict with the
certificate of incorporation or by-laws of Target or any of its Subsidiaries;
(b) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to Target or any of its Subsidiaries; (c) constitute a default under
or give rise to a right of termination, cancellation, acceleration, loss of any
material benefit or cause of action for damages upon breach under any agreement,
contract, license or other instrument binding upon Target or any of its
Subsidiaries, or any license, franchise, permit or other similar authorization
held by Target or any of its Subsidiaries; or (d) result in the creation or
imposition of any Lien on any asset of Target or of any of its Subsidiaries or
on any Target Shares, except, in the cases of clauses (b), (c) and (d), as could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Target.

SECTION 4.6 CAPITALIZATION

As of the date of this Agreement, the authorized capital stock of Target
consists of 200,050 shares of Target Common Stock, and 79,067 shares of
preferred stock, par value $0.10 per share (the "TARGET PREFERRED STOCK"),
including 35,491 shares of Third Series Preferred Stock, par value $0.10 per
share ("THIRD SERIES PREFERRED STOCK") and 22,276 shares of Fourth Series
Preferred Stock, par value $1.00 per share ("FOURTH SERIES PREFERRED STOCK"). As
of the date hereof, 70,100 Target Shares are issued and outstanding, 14,887
shares of Third Series Preferred Stock are issued and outstanding and 11,753
shares of Fourth Series Preferred Stock are issued and outstanding. Prior to the
Closing, all shares of Target Preferred Stock will be redeemed. All the issued
and outstanding Target Shares have been duly authorized, are validly issued,
fully paid and nonassessable and are held of record by the Stockholders as set
forth in SCHEDULE 4.6 hereto. Except as set forth herein and other than
44,191 shares of Target Common Stock held in treasury, there are no shares of
capital stock or other voting securities of Target issued or outstanding. Except
as set forth on SCHEDULE 4.6 hereto, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other contracts or commitments that could require Target to
issue, sell or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to Target.

SECTION 4.7 SUBSIDIARIES; JOINT VENTURES

Except as set forth in SCHEDULE 4.7 hereto, Target owns all the issued and
outstanding capital stock of each of its Subsidiaries (each of which is set
forth on SCHEDULE 4.7) free and clear of all Liens. None of Target's
Subsidiaries has any outstanding options or warrants to purchase its capital
stock or has issued any other securities exercisable or convertible into shares
of capital stock of such Subsidiary. Except as set forth in SCHEDULE 4.7 hereto
and except for equity interests that RPMSC and RPMCC own in connection with the
conduct of their respective specialist and clearing businesses, neither Target

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nor any of its Subsidiaries, directly or indirectly, owns any equity interests
in any Person that is not a Subsidiary of Target or of such Subsidiary.

SECTION 4.8 FINANCIAL STATEMENTS

(a) Target has delivered to Purchaser (i) true and complete copies of the
audited balance sheets of Target and each of its Subsidiaries as of April 28,
2000, April 30, 1999 and April 28, 1998 and the related audited statements of
operations, stockholders' equity and cash flows for the fiscal years then ended
and (ii) true and complete copies of the unaudited balance sheet of Target and
each of its Subsidiaries as of November 24, 2000, and the related statements of
operations and cash flows for the period from April 29, 2000 until November 24,
2000 (collectively, the "FINANCIAL STATEMENTS").

(b) The Financial Statements are in accordance with the books and records of
Target and its Subsidiaries in all material respects, have been prepared in
accordance with GAAP and present fairly in all material respects as of their
respective dates the financial condition and results of operations of Target and
its Subsidiaries; PROVIDED, HOWEVER, that the unaudited Financial Statements are
subject to normal year-end adjustments and lack footnotes and other presentation
items. As of the Unaudited Balance Sheet Date, there were no liabilities of
Target or any of its Subsidiaries of any kind whatsoever that were required by
GAAP to be reflected on the Unaudited Balance Sheet, whether accrued,
contingent, absolute, known, unknown, determined, determinable or otherwise, and
to the Knowledge of Target, RPMSC or RPMCC, there was no existing condition,
situation or set of circumstances which could reasonably have been expected to
result in such a liability, except for liabilities (i) reflected or reserved
against in said Unaudited Balance Sheet, (ii) disclosed on SCHEDULE 4.10, or
(iii) arising in the ordinary course of business after the date of said
Unaudited Balance Sheet that were not and could not reasonably have been
expected to have a Material Adverse Effect on Target.

(c) Since the Unaudited Balance Sheet Date, there has been no Material
Adverse Change in Target, whether as a result of any legislative or regulatory
change, revocation of any Target Permit or right to do business, fire,
explosion, accident, casualty, labor trouble, riot, condemnation, act of God, or
otherwise, other than as a result of changes, occurrences or events affecting
the securities industry as a whole.

SECTION 4.9 ABSENCE OF CERTAIN CHANGES

Except as set forth on SCHEDULE 4.9 or SCHEDULE 6.1 hereto, since the
Unaudited Balance Sheet Date, Target and each of its Subsidiaries has conducted
business in the ordinary course in all material respects and there has not been:
(a) any repurchase, redemption or other acquisition by Target or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, Target or any of its Subsidiaries; (b) any
amendment of any term of any outstanding capital stock of Target or any of its
Subsidiaries; (c) any change in any method of accounting or accounting practice
by Target or any of its Subsidiaries, except for any such change required by
reason of a concurrent change in GAAP or disclosed in the Financial Statements;
or (d) any (i) grant of any severance or termination pay to any current or
former director, officer or employee of Target or any of its Subsidiaries,
(ii) entering into of any written employment, severance, termination, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any current, former or prospective director, officer or employee
of Target or any of its Subsidiaries, (iii) increase in benefits payable under
any existing severance or termination pay policies or employment agreements, or
(iv) increase in compensation, bonus or other benefits payable to any director,
officer or employee of Target or any of its Subsidiaries, other than in the
ordinary course of business or as permitted by the proviso to SECTION 6.1(B).

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SECTION 4.10 NO UNDISCLOSED LIABILITIES

As of the date of any of the balance sheets included in the Financial
Statements, except for liabilities (i) reflected or reserved against in such
balance sheets or the notes thereto, if any, (ii) disclosed on SCHEDULE 4.10, or
(iii) arising in the ordinary course of business, neither Target nor any of its
Subsidiaries incurred any liabilities or obligations of any nature, whether or
not accrued, known or unknown, contingent or otherwise, which, if known, was
required by GAAP to be reflected on a consolidated balance sheet of Target
(including any notes thereto) as of any such date.

SECTION 4.11 LITIGATION

Except as set forth in SCHEDULE 4.11 hereto, there are no suits, actions,
proceedings or investigations pending or, to the Knowledge of Target, RPMSC and
RPMCC threatened against Target, any of its Subsidiaries or any of their
respective properties before any court or arbitrator or any Governmental Entity,
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect on Target. Neither Target nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree. To
the Knowledge of Target, RPMSC and RPMCC, there are no facts, events or
circumstances now in existence that reasonably could be expected to give rise to
any actions, suits, claims, proceedings or investigations that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
upon Target or the transactions contemplated hereby.

SECTION 4.12 COMPLIANCE WITH LAWS

Neither Target nor any of its Subsidiaries is in violation of any federal,
state, local or foreign law, ordinance or regulation or any order, judgment,
injunction, decree or other requirement of any court, arbitrator or Governmental
Entity, including laws relating to Taxes, labor and employment practices, and
Target has received no written notice of any violation of any laws related to
health and safety, zoning, pollution or protection of the environment, except
for violations which, individually or in the aggregate, could not be reasonably
expected to result in a Material Adverse Effect on Target. During the last three
years, except as set forth on SCHEDULE 4.12 hereto, neither Target nor any of
its Subsidiaries has received notice of, and there has not been any citation,
fine or penalty imposed against Target or any of its Subsidiaries for, any such
violation or alleged violation.

SECTION 4.13 CONTRACTS AND OTHER AGREEMENTS

SCHEDULE 4.13 lists all contracts, agreements, arrangements and
understandings to which Target or any of its Subsidiaries is a party, whether
written or oral, requiring aggregate annual payments by Target or any of its
Subsidiaries in excess of $90,000 (collectively, the "CONTRACTS"). Included
among the Contracts are ten (10) A-B-C agreements with respect to NYSE
memberships registered in the names of nominees of RPMSC and one (1) A-B-C
agreement with respect to an NYSE membership registered in the name of a nominee
of RPMCC (collectively, the "MEMBERSHIPS"). Each of the Contracts set forth on
SCHEDULE 4.13 is valid, in full force and effect, binding upon Target or its
Subsidiary, as the case may be, and to the Knowledge of Target, binding upon the
other parties thereto in accordance with its terms, and Target or each such
Subsidiary is not in material default under any of them. To the Knowledge of
Target, no other party to any Contract is in material default thereunder and no
condition exists that, with notice or lapse of time or both, would constitute a
material default thereunder. True and complete copies of all Contracts listed in
SCHEDULE 4.13 have been previously delivered or made available to Purchaser or
its agents.

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SECTION 4.14 PROPERTIES

(a) Target or one of its Subsidiaries owns and has good title to or has a
valid leasehold interest in, or valid contract rights to use, all tangible
assets and properties used in and material to its business, free and clear of
any Lien, except for (i) the Liens reflected on the Unaudited Balance Sheet,
(ii) assets and properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the Unaudited Balance Sheet Date,
(iii) Liens securing the liens of materialmen, carriers, landlords and like
persons, all of which are not yet due and payable, (iv) Liens arising under
equipment leases with third parties entered into in the ordinary course of
business, or (v) other imperfections of title or encumbrances that, individually
or in the aggregate, do not materially impair, and could not reasonably be
expected to materially impair, the current use and operation of the assets or
properties to which they relate. Neither Target nor any of its Subsidiaries has
received notice that any of such assets and properties is in violation in any
material respect of any existing law or any building, zoning, health, safety or
other ordinance, code or regulation.

(b) Other than REMCO and its Subsidiaries, neither Target nor any of its
Subsidiaries owns any real property. Each lease or agreement under which Target
or any of its Subsidiaries is a lessee or lessor of any property, real or
personal, is a valid and binding agreement of Target or such Subsidiary and, to
the Knowledge of Target, the other party thereto. No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
material default or event of default by Target or any of its Subsidiaries under
any such lease or agreement or, to the Knowledge of Target, by any other party
thereto. Target's or its Subsidiary's possession of such property has not been
disturbed and no claim has been asserted, whether in writing, or, to the
Knowledge of Target, oral, against Target or such Subsidiary materially adverse
to its rights in such leasehold interests.

(c) All items of machinery and equipment used by Target and its Subsidiaries
are in good operating condition and repair, normal wear and tear excepted, are
usable in the ordinary course of business, and are adequate and suitable for the
uses to which they are being put and conform in all material respects to all
applicable laws, ordinances, codes, rules, regulations and authorizations
relating to their construction, use and operation, in all cases other than as
would result, individually or in the aggregate, in a Material Adverse Effect on
Target.

SECTION 4.15 INTELLECTUAL PROPERTY

Target or one of its Subsidiaries, as applicable, either owns all right,
title and interest in and to, or possesses the right to use, all the patents,
patent applications, patent licenses, software (other than generally available
pre-packaged "off-the-shelf" software), licenses, trade names, trademarks,
copyrights, service marks, trademark registrations and applications, service
mark registrations and applications, and copyright registrations and
applications, trade secrets and technology ("INTELLECTUAL PROPERTY") used in the
conduct of their respective businesses. No claim of infringement or
misappropriation of patents, trademarks, trade names, service marks, copyrights
or trade secrets of any other Person has been made nor, to the Knowledge of
Target, threatened against Target or any of its Subsidiaries. To Target's
Knowledge, neither Target nor any of its Subsidiaries is infringing or
misappropriating any patents, trademarks, trade names, service marks, copyrights
or trade secrets of any other Person. Except as set forth on SCHEDULE 4.15 and
without limiting any other provisions hereof, neither Target nor any of its
Subsidiaries has granted any license, franchise or permit to any Person to use
any of the Intellectual Property of Target or any of its Subsidiaries.

SECTION 4.16 FINDER'S FEES

Except as set forth in SCHEDULE 4.16, there is no investment banker, broker,
finder or other financial intermediary which has been retained by, or is
authorized to act on behalf of, Target who is

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entitled to any fee or commission from Target or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.

SECTION 4.17 EMPLOYEES; EMPLOYEE BENEFITS

(a) SCHEDULE 4.17(A) sets forth a list of each employee (active or
otherwise, including any individual on the payroll of Target or any of its
Subsidiaries) of each of Target and its Subsidiaries, Target has previously
provided Purchaser with a true and complete list, as of the date hereof, of each
such employee's salary, including bonus, for the fiscal year ended April 28,
2000 (based on payroll periods ending with said fiscal year) and current annual
salary, excluding bonus, for the year ending April 30, 2001.

(b) SCHEDULE 4.17(B) contains a list of each employee benefit plan
(including any "employee benefit plan" as defined in Section 3(3) of ERISA,
whether or not subject to ERISA), and any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, restricted stock, savings, change in control,
employment, consulting, collective bargaining, dependent care, employee
assistance, fringe benefit, medical, dental, post-retirement welfare, retention,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other material plan, agreement, arrangement or understanding
(whether or not written) established, sponsored, maintained or contributed to by
Target, any of its Subsidiaries or any other entity that would be deemed a
"single employer" with Target or any of its Subsidiaries (an "ERISA AFFILIATE"),
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA on
behalf of any current or former employee, director, stockholder, beneficiary or
other personnel or with respect to which Target or any Subsidiary has any actual
or contingent liability (all of the foregoing being herein called the "TARGET
BENEFIT PLANS"). Target has delivered to Purchaser true and complete copies of
all contracts, plan documents, amendments, summary plan descriptions and other
material items governing or describing each Target Benefit Plan and any related
insurance, trust or other funding arrangement. With respect to each Target
Benefit Plan which is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA, Target has delivered to Purchaser, WHERE APPLICABLE, true
and complete copies of: (i) the most recent annual report (5500 series) filed
with the IRS or the DOL, including schedules thereto, (ii) the most recent
balance sheet and financial statement, (iii) the most recent determination
letter issued by the IRS, (iv) the two most recent actuarial valuation reports
and (v) any private letter ruling, opinion or determination letter, prohibited
transaction exemption or other communication received by or furnished to the
IRS, DOL or PBGC and any application therefor which has been withdrawn.

(c) Each Target Benefit Plan is maintained and administered, in all material
respects, in accordance with its terms and in compliance with applicable law,
including ERISA and the Code. Except as set forth on SCHEDULE 4.17(C), no event
has occurred and, to the Knowledge of Target, there exists no condition or set
of circumstances, which, individually or in the aggregate, could reasonably be
expected to result in any material liability in connection with any Target
Benefit Plan.

(d) All contributions, insurance premiums, benefits and other payments to or
under each Target Benefit Plan required with respect to all periods prior to the
Closing will have been or will be made prior to the Closing or will be made or
fully accrued for purposes of the Final Adjusted Net Book Value calculation.
Except with regard to liabilities that are satisfied in full prior to the
Closing and as set forth on SCHEDULE 4.17(D), none of Target and its
Subsidiaries and ERISA Affiliates have any unfunded liabilities pursuant to any
Target Benefit Plan that is an "employee pension plan" within the meaning of
Section 3(2) of ERISA, but is not intended to be qualified under Section 401(a)
of the Code. With respect to each Target Benefit Plan, (i) no application,
proceeding or other matter is pending before the IRS, DOL, PBGC or any other
Governmental Entity, (ii) no action, suit, proceeding or claim (other than
routine claims for benefits) is pending or, to the Knowledge of Target,
threatened, and (iii) to the Knowledge of Target, no facts exist which could
give rise to an action, suit,

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proceeding or claim which, if asserted, could reasonably be expected to result
in a material liability for Target or any of the Subsidiaries or the plan
assets.

(e) With respect to each funded Target Benefit Plan that is an "employee
pension plan" within the meaning of Section 3(2) of ERISA, (i) such plan is, and
has been since its inception, qualified under Section 401(a) of the Code, and
its related trust is, and has been since its inception, exempt from federal
income taxation under Section 501(a) of the Code, (ii) a favorable IRS
determination letter is currently in effect and, since the date of such letter,
such plan has not been amended or operated in a manner which, in either
instance, would adversely affect its qualified status, and no event has occurred
which has caused or could reasonably be expected to cause the loss of such
status, and (iii) except as set forth on SCHEDULE 4.17(E), there has been no
termination or partial termination of such plan within the meaning of
Section 411(d)(3) of the Code.

(f) None of Target, its Subsidiaries, nor their ERISA Affiliates (or any of
their respective predecessors) contribute to, participate in or in any way,
directly or indirectly, have any actual or contingent liability with respect to
(i) any "Multiemployer Plan" or (ii) any plan which is not a Target Benefit Plan
but is subject to Title IV of ERISA.

(g) Except as set forth on Schedule 4.17(g) and except with regard to the
Target Pension Plan, none of the Target Benefit Plans is subject to the
requirements of Section 302 or Title IV of ERISA or Section 412 of the Code.
With respect to each Target Benefit Plan, no "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA and Section 412 of the Code), has
been or could be expected to be incurred, whether or not waived, and no excise
or other taxes have been or could be expected to be incurred or are due and
owing with respect to such plan. With respect to each Target Benefit Plan that
is or has been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code, all assets of such plan as of the Closing Date can be
liquidated immediately thereafter without penalty or charge and converted into
fixed income short-term securities. No security under Section 401(a)(29) of the
Code has been or could be expected to be required with respect to any Target
Benefit Plan. No "reportable event" within the meaning of Section 4043(b) of
ERISA has occurred or will occur or is continuing with respect to any Target
Benefit Plan, and the consummation of the transactions contemplated by this
Agreement will not constitute or directly or indirectly result in a reportable
event. All premiums due to PBGC by Target, its Subsidiaries and their ERISA
Affiliates have been paid on a timely basis. All records, data and information
maintained in connection with the Target Pension Plan and the Target Profit
Sharing Plan are true, complete and accurate in all material respects.

(h) With respect to each Target Benefit Plan that is an "employee benefit
plan" within the meaning of Section 3(3) of ERISA or which is a "plan" within
the meaning of Section 4975(e) of the Code, there has occurred no transaction
with respect to which Target, its Subsidiaries or any ERISA Affiliate will have
any liability, direct or indirect, and which is prohibited by Section 406 of
ERISA or which, to the Knowledge of Target, constitutes a "prohibited
transaction" under Section 4975(c) of the Code and the consummation of the
transactions contemplated by this Agreement will not result in such a
"prohibited transaction."

(i) Target, its Subsidiaries and their ERISA Affiliates have complied in all
material respects with the provisions of Section 4980B of the Code with respect
to each Target Benefit Plan which is a "group health plan" within the meaning of
Section 5001(b)(1) of the Code. Except as set forth on SCHEDULE 4.17(I) and
except with regard to plans, contracts, policies and arrangements that are or
will be terminated prior to the Closing (and with respect to which all
liabilities and obligations will be satisfied in full prior to the Closing),
none of Target, its Subsidiaries nor their ERISA Affiliates maintains,
contributes to, or is obligated under any plan, contract, policy or arrangement
providing health or death benefits (whether or not insured) to current or former
employees or other personnel beyond the termination of their employment or other
services (other than pursuant to Section 4980B of

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the Code). Except as set forth on SCHEDULE 4.17(I) and except with regard to
Target Benefit Plans that are or will be terminated prior to the Closing (and
with respect to which all liabilities and obligations will be satisfied in full
prior to Closing), no fact, circumstance or condition exists that would prevent
Target's unilateral amendment or termination (without participant's consent) of
any Target Benefit Plan that is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA.

(j) Except as set forth in SCHEDULE 4.17(J), the consummation of the
transactions contemplated by this Agreement will not (either alone or in
conjunction with another event, such as a termination of employment or other
services) result in any employee or other person receiving severance or
additional compensation which would not otherwise be payable absent the
consummation of the transaction contemplated by this Agreement or cause the
acceleration of the time of payment or vesting of any award or entitlement or
forgiveness of indebtedness under any Target Benefit Plan.

SECTION 4.18 TAXES

(a) All material Tax Returns required to be filed by or on behalf of Target
or any of its Subsidiaries, or any Affiliated Group of which Target or any of
its Subsidiaries is or was a member have been (or, prior to the Closing Date,
will be) timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns were required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, complete and correct in all material respects.

(b) All Taxes due and payable by or on behalf of Target or any of its
Subsidiaries or any Affiliated Group of which Target or any of its Subsidiaries
is or was a member or in respect of their income, assets or operations, have
been (or, prior to the Closing Date, will be) fully and timely paid (except to
the extent any failure to pay Taxes would not, individually or collectively,
have a Material Adverse Effect on Target), and adequate reserves or accruals for
Taxes of Target and its Subsidiaries have been provided in the books and records
of Target and its Subsidiaries in accordance with GAAP with respect to any
period for which Tax Returns have not yet been filed or for which Taxes are not
yet due and owing (except to the extent any failure to establish reserves or
accruals would not, individually or collectively, have a Material Adverse Effect
on Target). Target and its Subsidiaries have made all required estimated Tax
payments since the Audited Balance Sheet Date to avoid any underpayment penalty.

(c) Except as set forth in SCHEDULE 4.18(C), neither Target nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not limited to, any applicable statute of limitations), and no power of
attorney of Target or any of its Subsidiaries with respect to any Tax matter is
currently in force.

(d) Target and its Subsidiaries have complied in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have duly and timely withheld from employee salaries,
wages and other compensation and have paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.

(e) Purchaser has received or had access to complete copies of (A) all U.S.
federal, state, local and foreign income or franchise Tax Returns of Target and
its Subsidiaries relating to the Tax periods ended in April 1997, 1998 and 1999
and thereafter and (B) any audit report issued within the last three years
relating to Taxes due from or with respect to Target or any of its Subsidiaries,
or its income, assets or operations. SCHEDULE 4.18(E) sets forth any income or
franchise Tax Returns filed by or on behalf of Target or any of its Subsidiaries
which have been examined by any taxing authority.

A-21

(f) SCHEDULE 4.18(F) lists all types of Taxes paid and Tax Returns filed by
or on behalf of Target or any of its Subsidiaries relating to the Tax periods
ended in April 1997, 1998 and 1999 and thereafter in connection with an entity
or group of which Target or its Subsidiaries is or has been a member of an
Affiliated Group for any Tax purpose. No written claim has been made by a taxing
authority in a jurisdiction where Target or any of its Subsidiaries does not
file Tax Returns that Target or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction.

(g) Except as set forth in SCHEDULE 4.18(G), there are no audits or
investigations by any taxing authority or proceedings in progress, nor has
Target or any of its Subsidiaries received any written notice from any taxing
authority that it intends to conduct such an audit or investigation. No issue
has been raised by a U.S. federal, state, local or foreign taxing authority in
any current or prior examination which, by application of the same or similar
principles, would reasonably be expected to result in a proposed deficiency for
any subsequent Tax period.

(h) Except set forth on SCHEDULE 4.18(H) hereto, none of Target, its
Subsidiaries or any other Person (including any of the Stockholders) on behalf
of and with respect to Target or its Subsidiaries has (A) filed a consent
pursuant to Section 341(f) of the Code, (B) agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by Target or any of its Subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of
Target or its Subsidiaries, (C) executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law with respect to Target or its
Subsidiaries, or (D) requested any extension of time within which to file any
Tax Return of Target or any of its Subsidiaries, which Tax Return has since not
been filed prior to the end of the extension period.

(i) Except as set forth on SCHEDULE 4.18(I), no property owned by Target or
any of its Subsidiaries is (A) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (B) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (C) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code.

(j) Neither Target nor any of its Subsidiaries is a party to any Tax sharing
or similar agreement or arrangement (whether or not written) with any Person
other than Target or any of its Subsidiaries.

(k) Except as set forth in SCHEDULE 4.18(K), there is no contract,
agreement, plan or arrangement covering any person that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible by Target or any of its Affiliates by reason
of Section 280G or 162(m) of the Code.

(l) Neither Target nor any of its Subsidiaries is subject to any private
letter ruling of the IRS or comparable rulings of other taxing authorities.

(m) Neither Target nor any of its Subsidiaries has ever been a member of any
Affiliated Group of corporations for any Tax purposes other than an Affiliated
Group of which Target is or was the parent. Except as set forth in
SCHEDULE 4.18(M), neither Target nor any of its Subsidiaries owns any interest
in any entity that is treated as a partnership for U.S. federal income Tax
purposes or would be treated as a pass-through, transparent or disregarded
entity for any Tax purpose.

SECTION 4.19 LABOR MATTERS

Neither Target nor any of its Subsidiaries is a party to or otherwise bound
by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor

A-22

organization, nor, as of the date hereof, is Target or any of its Subsidiaries
the subject of any proceeding asserting that it has committed an unfair labor
practice or is seeking to compel it to bargain with any labor union or labor
organization nor, as of the date of this Agreement, is there pending or, to the
Knowledge of Target, threatened, any material labor strike, dispute, walkout,
work stoppage, slow-down or lockout involving Target or any of its Subsidiaries.

SECTION 4.20 BANK ACCOUNTS

SCHEDULE 4.20 contains a true, correct and complete list, as of the date
hereof, of the names, locations and account information of all banks, trust
companies, savings and loan associations and other financial institutions at
which Target and its Subsidiaries maintain safe deposit boxes or accounts of any
nature (other than brokerage accounts maintained in the ordinary course of
business).

SECTION 4.21 REPURCHASE OF TARGET PREFERRED STOCK

Target has the right to repurchase the Target Preferred Stock prior to the
Closing as contemplated by this Agreement.

SECTION 4.22 INSURANCE

Target has made available to Purchaser copies of all insurance agreements
and policies maintained by Target and its Subsidiaries or on which Target or any
of its Subsidiaries is listed as a beneficiary or additional insured and the
type and amounts of coverage thereunder. SCHEDULE 4.22 sets forth a list of all
such agreements and policies. All such agreements and policies are with
reputable insurers and cover such risks and in such amounts as are reasonably
necessary in the context of the business operations of Target and its
Subsidiaries. Such agreements and policies are in full force and effect, and
none of Target, its Subsidiaries, and, to the Knowledge of Target, any other
party thereto is in material default with respect to its obligations thereunder.

SECTION 4.23 RELATED PARTY TRANSACTIONS

Except as set forth on SCHEDULE 4.23 hereto, no current or former officer or
director (including, to the Knowledge of Target, their respective family
members), employee, stockholder or any associate (as defined in the rules
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), of Target or any of its Subsidiaries is presently, or, in the last three
years has been, (a) except for ordinary course compensation and benefits for
services rendered to Target or any of its Subsidiaries, a party to any
transaction or transactions with Target or such Subsidiary involving an amount
in excess of $50,000, individually, or $200,000 in the aggregate, other than on
an arms-length basis (including, without limitation, any contract, agreement or
other arrangement providing for the furnishing of services by, or rental of real
or personal property from, or otherwise requiring payments to, any such officer
or director (including, to the Knowledge of Target, their respective family
members), employee, stockholder or associate), or (b) to the Knowledge of
Target, the direct or indirect owner of an interest in any corporation, firm,
association or business organization which is a present, direct competitor of
Target or any of its Subsidiaries, except with respect to holdings of less than
1% of the capital stock of a publicly traded corporation.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER

As a material inducement to Target to enter into this Agreement, Purchaser
hereby represents and warrants to Target as of the date hereof and, subject to
the delivery by Purchaser to Target of new

A-23

Schedules on or before the Closing Date pursuant to the provisions of
SECTION 7.5 hereof, as of the Closing Date that:

SECTION 5.1 CORPORATE EXISTENCE AND POWER

Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all corporate powers
and all material licenses, authorizations, consents and approvals of or from all
Governmental Entities required to own, lease and operate its properties and to
carry on its business as now conducted. Purchaser is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property leased or owned by it or the nature of its
activities makes such qualification necessary, except where a failure or
failures to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser. Purchaser's certificate of incorporation
and by-laws as filed with the SEC as exhibits to Purchaser's Registration
Statement on Form S-1 (File No. 333-81079) have not been amended since the
effective date of such Registration Statement.

SECTION 5.2 CORPORATE AUTHORIZATION

The execution, delivery and performance by Purchaser of this Agreement and
the other documents contemplated hereby to which it is or will be a party and
the consummation by Purchaser of the transactions contemplated hereby are within
Purchaser's corporate power and authority and have been duly authorized by all
necessary corporate action. The approval or authorization of the stockholders of
Purchaser is not required in order for Purchaser to (a) execute this Agreement
and each such other document contemplated hereby or (b) consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and constitutes, and each such other document
contemplated hereby will be duly executed and delivered by Purchaser and, when
so executed and delivered, will constitute, a valid and binding agreement of
Purchaser, enforceable against it in accordance with their respective terms and
conditions, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity, whether considered in a proceeding in equity or at law.

SECTION 5.3 CAPITALIZATION

The authorized capital stock of Purchaser consists of 200,000,000 shares of
Purchaser Common Stock, of which, as of September 30, 2000, 48,675,352 shares
were issued and outstanding and no shares are held in treasury, and
(ii) 10,000,000 shares of Purchaser preferred stock, of which no shares are
issued and outstanding. The shares of Purchaser Common Stock and Purchaser
Series A Preferred Stock to be issued in connection with the Merger, when issued
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable. Except as disclosed in Purchaser's Public Reports, there are
no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to Purchaser. The Board of
Directors of Purchaser has authorized the issuance of Purchaser Series A
Preferred Stock pursuant to the Series A Preferred Stock Certificate of
Designation.

SECTION 5.4 GOVERNMENTAL CONSENTS AND APPROVALS

Except as set forth on SCHEDULE 5.4 hereto, the execution, delivery and
performance by Purchaser of this Agreement and the consummation of the Merger by
Purchaser require no action by or in respect of, or filing with, any
Governmental Entity, other than any filings or registrations with, or
authorizations, consents or approvals of, Governmental Entities, the failure or
failures of which would not, individually or in the aggregate, have a Material
Adverse Effect on Purchaser and would not materially adversely affect the
ability of Purchaser to consummate the Merger.

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SECTION 5.5 REGULATORY MATTERS

Purchaser and each of its Subsidiaries has obtained all registrations,
qualifications, licenses, permits, franchises, orders or approvals of any
Governmental Entity or regulatory authority as are necessary under applicable
laws for Purchaser and each of its Subsidiaries to own their respective
properties and conduct their respective businesses (collectively, "PURCHASER
PERMITS"), and all such Purchaser Permits are in full force and effect, and no
proceeding is pending, or to the Knowledge of Purchaser and its Subsidiaries,
threatened to revoke or limit any Purchaser Permit, except where the failure or
failures to obtain any such Purchaser Permit or to keep it in full force and
effect or the revocation(s) or limitation(s) of any Purchaser Permit would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser.
LaBranche is and has been duly registered as a broker-dealer with the SEC, NASD
and in the states where such registration is required under the securities laws
of such states in order to conduct its business as presently conducted and is
and has been duly registered as a NYSE specialist. Except where the failure to
do so would not have a Material Adverse Effect on Purchaser, the employees of
LaBranche are in compliance in all respects with all federal and state laws and
NYSE rules regulating broker-dealers and specialists or requiring registration,
licensing or qualification as a broker-dealer or specialist. Each of Purchaser
and its Subsidiaries is a member in good standing and has all material licenses
and authorizations in self-regulatory or trade organizations or registered
clearing agencies required to permit the operation of its business as presently
conducted.

SECTION 5.6 NON-CONTRAVENTION

Except for those consents obtained or waived, the execution, delivery and
performance by Purchaser of this Agreement and the other documents contemplated
hereby and the consummation by Purchaser of the Merger do not and will not:
(a) contravene or conflict with the certificate of incorporation or by-laws of
Purchaser or any of its Subsidiaries; (b) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Purchaser or any of
its Subsidiaries; (c) constitute a default under or give rise to a right of
termination, cancellation, acceleration, loss of any material benefit or cause
of action for damages upon breach under any agreement, contract, license or
other instrument binding upon Purchaser or any of its Subsidiaries, or any
license, franchise, permit or other similar authorization held by Purchaser or
any of its Subsidiaries, or (d) result in the creation or imposition of any Lien
on any asset of Purchaser or any of its Subsidiaries, except, in the case of
clauses (b), (c) and (d), as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser.

SECTION 5.7 FINDER'S FEES

Except for Donaldson, Lufkin & Jenrette or its successors, there is no
investment banker, broker, finder or other financial intermediary which has been
retained by, or is authorized to act on behalf of, Purchaser or any of its
Subsidiaries who is entitled to any fee or commission from Purchaser or any of
its Subsidiaries upon consummation of the transactions contemplated by this
Agreement.

SECTION 5.8 FILINGS WITH THE SEC

Purchaser has made available to Target copies of its annual report on
Form 10-K for the year ended December 31, 1999, and its quarterly reports on
Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000, each in the form (including exhibits and amendments thereto)
filed with the SEC (collectively, together with all of Purchaser's voluntary
filings with the SEC, the "PUBLIC REPORTS") and each of which was timely filed
with the SEC. Each of the Public Reports has complied with the Securities Act of
1933, as amended (the "SECURITIES ACT") or the Exchange Act, as applicable, in
all material respects. None of the Public Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make

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the statements made therein, in light of the circumstances under which they were
made, not misleading. There is no contract or other document of a character
required to be described in, or required to be filed as an exhibit to, the
Public Reports (including any such contract or document entered into or created
since the date of the last Public Report) which has not been so described or
filed as an exhibit. Purchaser has made all filings with the SEC that it has
been required to make under the Securities Act and the Exchange Act.

SECTION 5.9 FINANCIAL STATEMENTS

The financial statements included in the Public Reports (including the
related notes and schedules) are in accordance with the books and records of
Purchaser in all material respects, have been prepared in accordance with GAAP
and present fairly in all material respects the financial condition of Purchaser
and its Subsidiaries on a consolidated basis as of such dates and the results of
operations of Purchaser and its Subsidiaries on a consolidated basis for such
periods; PROVIDED, HOWEVER, that the interim statements are subject to normal
year-end adjustments and lack footnotes and other presentation items. As of
September 30, 2000, there were no liabilities of Purchaser or any of its
Subsidiaries of any kind whatsoever that were required to be disclosed on the
balance sheet included in its Form 10-Q for the quarter ended September 30,
2000, whether accrued, contingent, absolute, known, unknown, determined,
determinable or otherwise, and to the Knowledge of Purchaser and its
Subsidiaries, there was no existing condition, situation or set of circumstances
which could reasonably have been expected to result in such a liability, except
for liabilities (i) reflected or reserved against in said balance sheet, or
(ii) arising in the ordinary course of business after the date of said balance
sheet that were not and could not reasonably have been expected to have a
Material Adverse Effect on Purchaser.

SECTION 5.10 EVENTS SUBSEQUENT TO PURCHASER'S MOST RECENT PUBLIC REPORT

Except as set forth in SCHEDULE 5.10, since September 30, 2000, there has
not been any Material Adverse Change in Purchaser, other than changes,
occurrences or events affecting the securities industry as a whole. Except as
set forth in SCHEDULE 5.10, since September 30, 2000, (a) the business of
Purchaser and each of its Subsidiaries has been conducted in the ordinary course
and consistent with past practice in all material respects and (b) no event has
occurred or fact or circumstance arisen that, individually or taken together
with all other events, facts and circumstances, has had or is reasonably likely
to have a Material Adverse Effect on Purchaser, other than changes, occurrences
or events affecting the securities industry as a whole.

SECTION 5.11 LITIGATION

Except as set forth on SCHEDULE 5.11, there are no suits, claims, actions,
proceedings or investigations pending or, to the Knowledge of Purchaser,
threatened against Purchaser, any of its Subsidiaries or any of their respective
properties before any court or arbitrator or any Governmental Entity which,
individually or in the aggregate, would have a Material Adverse Effect on
Purchaser. To the Knowledge of Purchaser, there are no facts, events or
circumstances now in existence that reasonably could be expected to give rise to
any actions, suits, claims, proceedings or investigations that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect
on Purchaser or the transactions contemplated hereby.

SECTION 5.12 FAIRNESS OPINION

Donaldson, Lufkin & Jenrette or its successor has delivered to Purchaser,
and has not withdrawn, an opinion as to the fairness of the Merger to Purchaser
from a financial point of view.

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SECTION 5.13 SUBSIDIARIES; JOINT VENTURES

Except as set forth in SCHEDULE 5.13 hereto, Purchaser owns all the issued
and outstanding capital stock of each of its Subsidiaries (each of which is set
forth in SCHEDULE 5.13) free and clear of all Liens. None of Purchaser's
Subsidiaries has any outstanding options or warrants to purchase its capital
stock or has issued any other securities exercisable or convertible into shares
of capital stock of such Subsidiary. Except as set forth in SCHEDULE 5.13
hereto, neither Purchaser nor any of its Subsidiaries, directly or indirectly,
owns any equity interests in any Person that is not a Subsidiary of Purchaser or
of such Subsidiary.

SECTION 5.14 COMPLIANCE WITH LAWS

Neither Purchaser nor any of its Subsidiaries is in violation of any
federal, state, local or foreign law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
Governmental Entity, including laws relating to Taxes, labor and employment
practices, health and safety, zoning, pollution or protection of the
environment, except for violations which, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect on
Purchaser. During the last three years, except as set forth in SCHEDULE 5.14
hereto, neither Purchaser nor any of its Subsidiaries has received notice of,
and there has not been any citation, fine or penalty imposed against Purchaser
or any of its Subsidiaries for, any such violation or alleged violation.

SECTION 5.15 RESTRICTIONS ON DIVIDENDS

Except as set forth on SCHEDULE 5.15, neither Purchaser nor any of its
Subsidiaries is a party to any contract, agreement or other arrangement that
restricts the ability of Purchaser to pay dividends on the Purchaser Series A
Preferred Stock.

SECTION 5.16 TAXES

(a) All material Tax Returns required to be filed by or on behalf of
Purchaser, any of its Subsidiaries or any Affiliated Group of which Purchaser or
any of its Subsidiaries is or was a member have been (or, prior to the Closing
Date, will be) timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns were required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, complete and correct in all material respects.

(b) All Taxes due and payable by or on behalf of Purchaser, any of its
Subsidiaries or any Affiliated Group of which Purchaser or any of its
Subsidiaries is or was a member or in respect of their income, assets or
operations, have been (or, prior to the Closing Date, will be) fully and timely
paid (except to the extent any failure to pay Taxes would not, individually or
collectively, have a Material Adverse Effect on Purchaser), and adequate
reserves or accruals for Taxes of Purchaser and its Subsidiaries in accordance
with GAAP with respect to any period for which Tax Returns have not yet been
filed or for which material Taxes are not yet due and owing (except to the
extent any failure to establish reserves or accruals would not, individually or
collectively, have a Material Adverse Effect on Purchaser). Purchaser and its
Subsidiaries have made all required estimated Tax payments for the current
taxable year to avoid any underpayment penalty.

(c) Purchaser and its Subsidiaries have complied in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have duly and timely withheld from employee salaries,
wages and other compensation and have paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.

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(d) No claim has been made by a taxing authority in a jurisdiction where
Purchaser or any of its Subsidiaries does not file Tax Returns that Purchaser or
any of its Subsidiaries is or may be subject to taxation by that jurisdiction.

(e) Except as set forth in Schedule 5.16(e), there is no contract,
agreement, plan or arrangement covering any person that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible by Purchaser or any of its Affiliates by
reason of Section 280G or 162(m) of the Code.

(f) Purchaser has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii).

SECTION 5.1 EMPLOYEE BENEFITS

(a) Each Employee Benefit Plan currently maintained or contributed to by
Purchaser (the "PURCHASER PLANS") and each related trust insurance contract or
fund complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code, except where the failure to comply would not
have a Material Adverse Effect on Purchaser, and:

(i) all contributions (including all employer contributions and employee
salary reduction contributions) that are due have been paid to each
Purchaser Plan that is an Employee Pension Benefit Plan;

(ii) each Purchaser Plan that is intended to be qualified under
Section 401(a) of the Code has received a timely determination, opinion or
notification letter from the Internal Revenue Service to the effect that it
meets the requirements of Code Section 401(a);

(iii) none of the Purchaser Plans is or has ever been subject to Title IV
or Section 302 of ERISA or Section 412 of the Code; and

(iv) except as disclosed in Public Reports filed prior to the Closing,
no event has occurred and there exists no condition or set of circumstances
in connection with the Purchaser Plans, which individually or in the
aggregate, could reasonably be expected to result in any Material Adverse
Effect on Purchaser.

(b) With respect to each Purchaser Plan that Purchaser maintains or has
maintained or to which it contributes or has been required to contribute:

(i) no action, suit, proceeding, hearing or investigation with respect
to the administration or the investment of the assets of any such Purchaser
Plan (other than routine claims for benefits) is pending, except where the
action, suit, proceeding, hearing or investigation would not have a Material
Adverse Effect on Purchaser; and

(ii) neither Purchaser nor any other entity that would be deemed a
"single employer" with Purchaser under Section 414 of the Code or
Section 4001 of ERISA has incurred any material liability to PBGC (other
than PBGC premium payments) or otherwise under Title IV of ERISA (including
any withdrawal liability) with respect to any Purchaser Plan that is an
Employee Pension Benefit Plan.

ARTICLE VI
PRE-CLOSING COVENANTS OF TARGET

SECTION 6.1 NEGATIVE COVENANTS

Except as set forth on SCHEDULE 6.1 hereto, from the date hereof until the
Closing Date, Target and its Subsidiaries shall conduct their respective
businesses in the ordinary course in all material respects. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, except
as

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set forth on SCHEDULE 6.1 hereto or as contemplated by this Agreement, without
the written consent of Purchaser (which consent shall not be unreasonably
withheld), Target shall not:

(a) adopt or propose any change in its certificate of incorporation or
by-laws or the certificate of incorporation or by-laws of any of its
Subsidiaries;

(b) (i) enter into any written contract, agreement, plan or arrangement
covering any director, officer or employee of Target or any of its
Subsidiaries that provides for the making of any payments, the acceleration
of vesting of any benefit or right or any other entitlement contingent upon
(A) the Merger, except with respect to the vesting of the Target Options in
connection with the Merger or (B) the termination of employment after the
Merger, (ii) enter into or amend in any material respect (except as required
by law) any employment, consulting or similar agreement (oral or written) to
increase the compensation payable or to become payable by it or any of its
Subsidiaries to, or otherwise materially alter its employment or consulting
relationship with, any of its or any of its Subsidiaries' officers,
directors or consultants over the amount payable as of the date hereof, or
increase the compensation payable to any other employees (other than
increases in the ordinary course of business, consistent with past practice,
which, in the aggregate s to any one person do not exceed $50,000 on an
annual basis or otherwise would not have a Material Adverse Effect on
Target) or (iii) loan or advance any money to any officer, director,
employee, shareholder or consultant of Target or any of its Subsidiaries
(other than salary advances or advances against business expenses in the
ordinary course of business and consistent with past practice which, in the
aggregate as to any individual, do not exceed $50,000 on an annual basis or
which would not have a Material Adverse Effect on Target); PROVIDED,
HOWEVER, that nothing contained in this SECTION 6.1 shall prohibit Target
from taking any action with respect to the payment of bonuses or any other
compensation to officers, directors or employees of Target or any of its
Subsidiaries so long as the obligations created upon such action are not
binding upon Purchaser or any of its Subsidiaries after the Closing and are
fully satisfied prior to the Closing;

(c) issue or propose the issuance of, or consummate, enter into
negotiations for or accept any offers for, the issuance or sale of any
shares of its capital stock or securities convertible or exchangeable into
shares of its or any of its Subsidiaries' capital stock except for the
issuance of Target Shares in connection with the exercise of existing Target
Options;

(d) change the number of shares of authorized capital stock, grant any
option, warrant, call, commitment, right or agreement of any character
relating to its authorized or issued capital stock or permit any transfers
in the ownership of any of its Subsidiaries' capital stock, except for the
issuance of Target Shares in connection with the exercise of existing Target
Options;

(e) (i) pay any dividend or make any other distribution to holders of
its capital stock (ii) split, combine or reclassify any of its capital stock
or propose or authorize the issuance of any other securities in respect of
or in lieu of or in substitution for any shares of its capital stock, or
(iii) repurchase, redeem or otherwise acquire any shares of its capital
stock, EXCEPT FOR the repurchase of Target Preferred Stock prior to the
Closing;

(f) directly or indirectly merge or consolidate with another entity;

(g) incur any additional indebtedness for borrowed money (including,
without limitation, by way of guarantee or the issuance and sale of debt
securities or rights to acquire debt securities), other than
(i) indebtedness incurred in the ordinary course of business, or
(ii) indebtedness in an amount not to exceed $150,000 in the aggregate;

(h) other than in the ordinary course of business and consistent with
present practice (i) sell, lease or otherwise dispose of any of its assets
having a book or market value in excess of $150,000 in the aggregate or that
are otherwise material, individually or in the aggregate, to the business,
results of operations or financial condition of Target or any of its
Subsidiaries, or (ii) enter into, or

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consent to the entering into of, any agreement granting a preferential right
to sell, lease or otherwise dispose of any of such assets;

(i) (i) enter into any new line of business; (ii) change its or any of
its Subsidiaries' investment, liability and risk management and other
material policies in any material respect; (iii) incur or commit to any
capital expenditures, obligations or liabilities in connection therewith,
other than capital expenditures, obligations or liabilities that do not
exceed $50,000, individually, or $150,000, in the aggregate; (iv) acquire or
agree to acquire by merging or consolidating with, or acquire or agree to
acquire by purchasing a substantial portion of the assets of, or in any
other manner, any business or Person; (v) otherwise, except as to the
acquisition of materials and supplies, services and activities in the
ordinary course of business and consistent with past practices, acquire or
agree to acquire any assets for aggregate consideration in excess of
$150,000; (vi) except in the ordinary course of business and consistent with
past practice, make any investment in any Person; or (vii) enter into any
license, technology development or technology transfer agreement with any
other Person;

(j) adopt or amend any plan that is or would be a Target Benefit Plan
which results in a material increase in Target's or any of its Subsidiaries'
benefits or compensation expense, except as may be required by applicable
law to maintain a plan's tax qualified status and except for (i) increases
in the ordinary course of business and consistent with past practice, or
(ii) the creation of obligations of Target which will be fully satisfied
prior to the Closing;

(k) terminate any of its existing insurance policies or modify in any
material respect or reduce the coverage thereunder;

(l) settle or compromise, or agree to settle or compromise, any suit or
other litigation matter or matter in an arbitration proceeding for any
material amount (after taking into account any insurance proceeds to which
Target is entitled) or otherwise on terms which could reasonably be expected
to have a Material Adverse Effect on Target; and

(m) agree or commit to do any of the foregoing.

In the event Target shall request Purchaser to consent in writing to an action
otherwise prohibited by this SECTION 6.1, Purchaser shall use all reasonable
efforts to respond in a prompt and timely fashion.

SECTION 6.2 AFFIRMATIVE COVENANTS

Notwithstanding anything to the contrary contained in SECTION 6.1 hereto,
Target shall:

(a) use its commercially reasonable efforts to perform, and cause each of
its Subsidiaries to perform, all of their respective obligations as they become
due, cause RPMSC to solicit new specialist stocks in the ordinary course of
business, maintain their respective corporate records, keep their respective
accounts receivable current, and preserve their respective business organization
and properties intact, keep available the services of their respective employees
and preserve the goodwill of their respective clients and others with whom
business relationships exist; and

(b) use its commercially reasonable efforts to maintain RPMSC's and RPMCC's
registrations in good standing with the SEC, NASD, NYSE, AMEX, CBOE, any
regional market on which they conduct business, and with the states where such
registration is required under the securities laws of such states.

SECTION 6.3 ACCESS TO FINANCIAL, OPERATING AND TECHNICAL INFORMATION

From the date hereof until the Closing, Target will give Purchaser, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access, during normal business hours, upon reasonable notice and
without unnecessary disruption of the conduct of Target's business, to the
offices, properties, books and records of Target, will furnish to Purchaser, its
counsel, financial advisors,

A-30

auditors and other authorized representatives such financial and operating data
and all other technical information as such persons may reasonably request and
will instruct Target's employees, counsel and financial advisors to cooperate
with Purchaser in its investigation of the business of Target; PROVIDED,
HOWEVER, that no investigation pursuant to this SECTION 6.3 shall affect any
representation or warranty given by Target to Purchaser hereunder. All requests
for information made pursuant to this SECTION 6.3 shall be directed to the Chief
Financial Officer of Target or such Person as may be designated by him or her.
If requested by Purchaser and at Purchaser's expense up to $100,000, Target
will, and will direct its independent accountants to, cooperate in the
preparation of an audit of Target's financial statements (other than the audit
of Target's financial statements for the year ended April 30, 2001, if
necessary) and the inclusion of such financial statements with Purchaser's
filings with the SEC, including preparation of pro forma financial statements
required for any filings with the SEC and including provision of such records,
workpapers, audit reports and consents of Target's bookkeepers and independent
accountants as reasonably may be required by Purchaser in connection therewith.

SECTION 6.4 COMPLIANCE WITH OBLIGATIONS

Prior to the Closing, each of Target and its Subsidiaries shall comply in
all material respects with (i) all applicable federal, state, local and foreign
laws, rules and regulations, (ii) all material agreements and obligations,
including its certificate of incorporation and by-laws, by which it, its
properties or its assets may be bound, and (iii) all decrees, orders, writs,
injunctions, judgments, statutes, rules and regulations applicable to it, its
properties or its assets.

SECTION 6.5 ADVICE OF CHANGES

Target will promptly advise Purchaser in writing of: (a) any notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Merger; (b) any written notice or other
communication from any Governmental Entity in connection with the Merger;
(c) any actions, suits, claims, investigations or other judicial proceedings
commenced or, to the Knowledge of Target, threatened against it which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to this Agreement or which relate to the consummation of the
Merger; (d) any event known to its executive officers occurring subsequent to
the date of this Agreement that would render any representation or warranty of
Target contained in this Agreement, if made on or as of the date of such event
or the Closing Date, untrue, inaccurate or misleading in any material respect
(other than an event so affecting a representation or warranty which is
expressly limited to a state of facts existing at a time prior to the occurrence
of such event); and (e) any Material Adverse Change in Target, other than
changes, occurrences or events affecting the securities industry as a whole. No
advice or notice pursuant to this SECTION 6.5 shall be deemed to modify any
representation, warranty, covenant, condition or indemnity given by Target to
Purchaser hereunder. Failure to give or delay in giving advice or notice under
this SECTION 6.5 shall be deemed to be a breach of this Agreement only to the
extent Purchaser is actually and materially harmed thereby.

SECTION 6.6 UPDATING OF SCHEDULES

Target undertakes to revise and update all Schedules hereto as may be
necessary from the date hereof until the Closing Date. No such Schedules
provided and revisions made to such Schedules pursuant to this Section shall be
deemed to be accepted by Purchaser, cure any breach of any representation or
warranty of Target made in this Agreement, or be considered to constitute or
give rise to a waiver by Purchaser of any condition set forth in this Agreement,
unless Purchaser specifically agrees thereto in writing or initials such revised
or updated Schedule prior to Closing. Notwithstanding the foregoing, if
Purchaser waives in writing the condition set forth in SECTION 9.1(A) hereof and
the Closing occurs, Purchaser shall thereupon be deemed to have accepted all
revisions and updates to the Schedules delivered to Purchaser by Target on or
prior to the Closing Date which are attached to the officers' certificate
described in SECTION 9.1(A) hereof, and in such event, the representations and

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warranties contained in Article IV of this Agreement shall be deemed to be
amended to the extent provided in such revisions and updates.

ARTICLE VII
PRE-CLOSING COVENANTS OF PURCHASER

SECTION 7.1 NEGATIVE COVENANTS

Except as set forth on SCHEDULE 7.1 hereto, from the date hereof until the
Closing Date, Purchaser and its Subsidiaries shall conduct their respective
businesses in the ordinary course in all material respects. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, except
as contemplated hereby, without the written consent of Target (which consent
shall not be unreasonably withheld), Purchaser shall not:

(a) (i) pay any dividend or make any other distribution to holders of its
capital stock, or (ii) repurchase, redeem or otherwise acquire any shares of its
capital stock, other than in the ordinary course of business pursuant to an
agreement or arrangement with an employee or consultant providing for the
repurchase of such employee's or consultant's shares of Purchaser Common Stock
upon the termination of his employment with Purchaser or one of its
Subsidiaries;

(b) directly or indirectly merge or consolidate with another entity if, as a
result of such merger or consolidation, the holders of Purchaser's voting power
immediately prior to such merger or consolidation own less than 50% of the
resulting or surviving entity's voting power immediately after such merger or
consolidation;

(c) sell, lease or otherwise dispose of assets as a result of which
Purchaser no longer owns a direct or indirect interest in 50% or more of the
tangible and intangible assets of Purchaser and its Subsidiaries, taken as a
whole;

(d) authorize, create (by reclassification or otherwise) or issue any class
or series of shares of stock that ranks senior to or PARI PASSU with the
Purchaser Series A Preferred Stock as to the payment of dividends or other
distributions or as to the distribution of assets on liquidation, dissolution or
winding up of Purchaser; or

(e) agree or commit to do any of the foregoing.

SECTION 7.2 AFFIRMATIVE COVENANTS

Purchaser shall:

(a) perform, and cause each of its Subsidiaries to perform, all their
respective obligations as they become due, solicit new specialist stocks in the
ordinary course of business, maintain their respective corporate records, keep
their respective accounts receivable current, and use commercially reasonable
efforts to preserve their respective business organizations and properties
intact, keep available the services of their respective employees and preserve
the goodwill of their respective clients and others with whom they have business
relationships; and

(b) use commercially reasonable efforts to maintain its and its
Subsidiaries' respective registrations and good standing with the SEC, NASD,
NYSE, AMEX, any regional market on which they conduct business, and with the
states where such registration is required under the securities laws of such
states.

SECTION 7.3 COMPLIANCE WITH OBLIGATIONS

Prior to the Closing, each of Purchaser and its Subsidiaries shall comply in
all material respects with (i) all applicable federal, state, local and foreign
laws, rules and regulations, (ii) all material agreements and obligations,
including its certificate of incorporation and by-laws, by which it, its

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properties or its assets may be bound, and (iii) all decrees, orders, writs,
injunctions, judgments, statutes, rules and regulations applicable to it, its
properties or its assets.

SECTION 7.4 ADVICE OF CHANGES

Purchaser will promptly advise Target in writing of: (a) any notice or other
written communication from any Person alleging that the consent of such Person
is or may be required in connection with the Merger; (b) any written notice or
other communication from any Governmental Entity in connection with the Merger;
(c) any actions, suits, claims, investigations or other judicial proceedings
commenced or, to the Knowledge of Purchaser, threatened against it which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to this Agreement or which relate to the consummation of the
Merger; (d) any event known to its executive officers occurring subsequent to
the date of this Agreement that would render any representation or warranty of
Purchaser contained in this Agreement, if made on or as of the date of such
event or the Closing Date, untrue, inaccurate or misleading in any material
respect (other than an event so affecting a representation or warranty which is
expressly limited to a state of facts existing at a time prior to the occurrence
of such event); and (e) any Material Adverse Change in Purchaser, other than
changes, occurrences or events affecting the securities industry as a whole. No
advice or notice pursuant to this SECTION 7.4 shall be deemed to modify any
representation, warranty, covenant, condition or indemnity given by Purchaser to
Target hereunder. Failure to give or delay in giving advice or notice under this
SECTION 7.4 shall be deemed a breach of this Agreement only to the extent
Target, the Stockholders or the Option Holders are actually and materially
harmed thereby.

SECTION 7.5 UPDATING OF SCHEDULES

Purchaser undertakes to revise and update all Schedules hereto as may be
necessary from the date hereof until the Closing Date. No such Schedules
provided and revisions made to such Schedules pursuant to this Section shall be
deemed to be accepted by Target, cure any breach of any representation or
warranty of Purchaser made in this Agreement, or be considered to constitute or
give rise to a waiver by Target of any condition set forth in this Agreement,
unless Target specifically agrees thereto in writing or initials such revised or
updated Schedule. Notwithstanding the foregoing, if Target waives in writing the
condition set forth in SECTION 9.2(A) hereof and the Closing occurs, Target
shall thereupon be deemed to have accepted all revisions and updates to the
Schedules delivered to Target by Purchaser on or prior to the Closing Date which
are attached to the officers' certificate described in SECTION 9.2(A) hereof,
and in such event, the representations and warranties contained in Article V of
this Agreement shall be deemed to be amended to the extent provided in such
revisions and updates.

ARTICLE VIII
ADDITIONAL PRE-CLOSING COVENANTS

SECTION 8.1 TARGET MEETING

Subject to the terms and conditions contained herein, Target shall submit
this Agreement for approval to the Stockholders at a meeting to be duly held for
this purpose by Target (the "TARGET MEETING"). Target shall take all action in
accordance with applicable federal securities laws, the DGCL and its certificate
of incorporation and bylaws necessary to duly convene the Target Meeting. Target
shall use its reasonable best efforts, subject to applicable laws, rules and
regulations, to convene the Target Meeting as soon as reasonably practicable
after the date hereof. Target shall use its reasonable best efforts, subject to
applicable laws, rules and regulations, to take all action to solicit the
Requisite Stockholder Approval. Notwithstanding any withdrawal, modification or
change in the Target board of directors' recommendation to the Stockholders,
Target agrees to hold its Target Meeting in accordance with the provisions of
this SECTION 8.1. Prior to the Closing Date, Target shall deliver to Purchaser a
letter identifying all persons who, at the time of the Target Meeting, were
affiliates of Target for purposes of Rule 145 under the Securities Act.

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SECTION 8.2 REGISTRATION STATEMENT ON FORM S-4

(a) Purchaser shall cause, and Target shall cooperate with Purchaser to
cause, to be filed as soon as reasonably practicable after the date hereof with
the SEC a Registration Statement on Form S-4 with respect to the offer and
issuance of Purchaser Common Stock and Purchaser Series A Preferred Stock in the
Merger (the "REGISTRATION STATEMENT"). Each of Purchaser and Target shall use
its reasonable best efforts to cause the Registration Statement to comply with
applicable law and rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after it is filed with the SEC. Each of Purchaser and Target shall promptly
furnish to the other all information concerning itself, its stockholders and its
affiliates that may be required or reasonably requested in connection with any
action contemplated in this SECTION 8.2. If any event relating to Purchaser or
Target occurs, or if Purchaser or Target becomes aware of any information, that
should be disclosed in an amendment or supplement to the Registration Statement,
Purchaser or Target, as applicable, shall inform the other thereof and shall
cooperate with the other in filing such amendment or supplement with the SEC,
and if appropriate, in mailing such amendment or supplement to the Stockholders.
Purchaser will notify Target promptly upon the receipt of any comments from the
SEC or its staff or any other government officials for amendments or supplements
to the Registration Statement or additional information and will supply Target
with copies of all correspondence between Purchaser or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement or the Merger. Each of Target and Purchaser and its representatives
will cooperate as requested by the other in connection with responding to any
such comments or requests.

(b) Following the execution of this Agreement, Purchaser shall prepare and
file with the NYSE listing applications for the listing of securities on NYSE
covering the shares of Purchaser Common Stock issuable in the Merger or upon
exercise of the Purchaser Options, and use its reasonable best efforts to
obtain, prior to the Effective Time, approval for the listing of such shares of
Purchaser Common Stock, subject only to official notice of issuance. Target
shall as promptly as practicable furnish Purchaser with all information
concerning Target and its Subsidiaries as may be required for inclusion in such
listing applications.

(c) Each of Purchaser and Target agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Registration Statement or any amendment or
supplement to the Registration Statement will, (i) at the time the Registration
Statement and each amendment or supplement thereto, if any, is filed with the
SEC, (ii) at the time the Registration Statement becomes effective under the
Securities Act or (iii) at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. Each of Target and Purchaser further agrees that if it
shall become aware prior to the approval of the Merger by the Stockholders of
any information that would cause any of the statements made or supplied by such
party in the Registration Statement or any amendment or supplement thereto to be
false or misleading with respect to any material fact, or to omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, to promptly inform the other party thereof
and to take the necessary steps to correct such misstatement or omission.

(d) Purchaser will advise Target, promptly after Purchaser receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the Purchaser Common Stock for offering or
sale in any jurisdiction, of the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.

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SECTION 8.3 CONDUCT PRIOR TO CLOSING

Each of the Parties will use commercially reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in
ARTICLE IX, as applicable to it, and to cause the transactions contemplated by
this Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby. Neither Party shall take any action (or fail to take any
action) if such action (or failure to act) would, or could reasonably be
expected to, result in any of its representations and warranties set forth
herein being or becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in ARTICLE IX not being satisfied.

SECTION 8.4 NOTICES AND CONSENTS

Each of the Parties will give any notices to third parties, and use its
commercially reasonable efforts to obtain any third party consents, that the
other Party reasonably may request in connection with the matters referred to in
SECTION 4.5 above. Each of the Parties promptly will give any notices to, make
any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents, and approvals of governments and Governmental Entities
in connection with the matters referred to in SECTION 4.3 above. Without
limiting the generality of the foregoing, (i) Purchaser will take all actions
that may be necessary, proper, or advisable under federal and state securities
laws in connection with the offering and issuance of the Merger Consideration
pursuant to this Agreement, and (ii) each of the Parties will file any
notification and report forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act, and will make any further
filings pursuant thereto that may be necessary, proper or advisable in
connection therewith.

SECTION 8.5 FULL ACCESS

Each of Target and Purchaser will permit representatives of the other to
have full access at all reasonable times, and in a manner so as not to
unnecessarily interfere with the normal business operations of Purchaser or
Target, as the case may be, to all premises, properties, personnel, books,
records (including Tax records), contracts and documents of or pertaining to
Purchaser or Target, as the case may be. The Parties hereby confirm that each of
the letter agreements dated October 5, 2000 between Target and Purchaser
pertaining to confidentiality shall continue in full force and effect until the
Effective Time, or the termination of this Agreement pursuant to ARTICLE XI, and
thereafter as provided in said agreements.

SECTION 8.6 EXCLUSIVITY; NO OTHER OFFERS

Target shall not, nor shall Target authorize or permit any officer, director
or employee of, or any investment banker, attorney, accountant or other
representative retained by, Target to, (i) entertain, encourage, solicit or
initiate any inquiries or the making of any proposal that may reasonably be
expected to lead to any "takeover proposal" or (ii) participate in any
discussions or negotiations, or provide third parties with any information,
relating to any such inquiry or proposal. Target shall immediately advise
Purchaser of any such inquiries or proposals and shall provide Purchaser with
the terms of such proposal. As used in this SECTION 8.6, "TAKEOVER PROPOSAL"
shall mean any proposal outside the ordinary course of Target's business for a
merger or other business combination involving, directly or indirectly, Target
or for the acquisition of all or substantially all the equity interests in
Target or all or substantially all the assets of Target, other than the
transactions contemplated hereby.

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SECTION 8.7 PUBLIC ANNOUNCEMENTS

Each of Target and Purchaser will consult with the other before issuing any
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and, except as may be required by
applicable law, no such press release or public statement shall be issued
without the consent of both Target and Purchaser, which consent shall not be
unreasonably withheld or delayed.

ARTICLE IX
CONDITIONS TO THE MERGER

SECTION 9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER

The obligations of Purchaser hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing Date, of each of the following conditions
(any one or more of which may be waived by Purchaser, but only in a writing
signed by Purchaser):

(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Target contained in ARTICLE IV that are expressly qualified by
reference to materiality shall be true and correct in all respects as so
qualified, and the representations and warranties of Target contained in
ARTICLE IV that are not so qualified shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same force and
effect as if they had been made on the Closing Date (except to the extent a
representation or warranty speaks only as of an earlier date). Target shall have
provided Purchaser with a certificate executed by the Chief Executive Officer
and the Chief Financial Officer of Target, dated as of the Closing Date,
certifying compliance with this subsection (a).

(b) COVENANTS. Target shall have performed and complied with all its
covenants contained in ARTICLE VI that are expressly qualified by reference to
materiality in all respects as so qualified and with its covenants contained in
ARTICLE VI that are not so qualified in all material respects, in each case on
or before the Closing Date, and Target shall have provided Purchaser with a
certificate to such effect executed by the Chief Executive Officer and the Chief
Financial Officer of Target dated as of the Closing Date.

(c) REQUISITE STOCKHOLDER APPROVAL. Target shall have obtained the
Requisite Stockholder Approval, and such Requisite Stockholder Approval shall
not have been withdrawn.

(d) STOCKHOLDER APPROVAL OF DEFERRED COMPENSATION PLAN. Target shall have
obtained the required vote of more than 75% of the voting power of all
outstanding stock of the Target approving and adopting the Target Deferred
Compensation Plan in the manner required by Section 280(G)(5)(B) of the Code,
and such adoption shall not have been withdrawn.

(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "INJUNCTION")
preventing the consummation of the Merger shall be in effect. There shall not
have been any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger by any Federal or state
Governmental Entity which makes the consummation of the Merger illegal. No
statute, rule, regulation, executive order or decree shall have been enacted,
promulgated or enforced (and shall not have been repealed, superceded or
otherwise made inapplicable) by any Governmental Entity which prohibits the
consummation of the Merger (each Party agreeing to use its commercially
reasonable efforts to have any such order or decree lifted).

(f) NYSE MEMBERSHIPS. Target and its Subsidiaries collectively shall own
(through A-B-C agreements) at least 11 NYSE memberships as listed on
SCHEDULE 9.1(F), and LaBranche shall have entered into amended and restated
A-B-C agreements, amended and restated lease agreements and use

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and proceeds agreements with respect to each of the Memberships listed on
SCHEDULE 9.1(F) which, immediately prior to the Closing, are used by employees
of RPMSC, and an amended and restated A-B-C agreement with respect to the
Membership listed on Schedule 9.1(f) which, immediately prior to the Closing, is
used by an employee of RPMCC.

(g) NO MATERIAL ADVERSE CHANGE. There shall have been no Material Adverse
Change in Target since the date of this Agreement, other than changes,
occurrences or events affecting the securities industry as a whole.

(h) OPINION OF COUNSEL. Purchaser shall have received an opinion of Kelley
Drye & Warren LLP, counsel to Target, dated the Closing Date, in form and
substance reasonably acceptable to Purchaser.

(i) REGISTRATION RIGHTS AGREEMENT. George E. Robb, Jr. and Robert M.
Murphy shall have executed and delivered a registration rights agreement in
substantially the form attached as EXHIBIT F hereto (the "REGISTRATION RIGHTS
AGREEMENT").

(j) RPM STOCKHOLDER AGREEMENTS. Each of the Stockholders shall have
executed and delivered to Purchaser a stockholder agreement in substantially the
form attached as EXHIBIT G hereto (the "RPM STOCKHOLDER AGREEMENT").

(k) OPTION AMENDMENTS. Each of the Option Holders shall have executed and
delivered to Target an Option Amendment.

(l) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated or threatened by the SEC.

(m) REPAYMENT OF TARGET DEBT. All outstanding indebtedness of Target and
its Subsidiaries set forth on SCHEDULE 9.1(M) hereto shall have been repaid by
Target and its Subsidiaries, and reasonably satisfactory evidence of such
repayment shall have been furnished to Purchaser on or prior to the Closing
Date.

(n) NET LIQUID ASSETS. The Net Liquid Assets of RPMSC, as of the close of
business on the Business Day immediately preceding the Closing Date, taking into
account all payments contemplated hereby to be made by Target on the Closing
Date, shall be at least $65 million, and reasonably satisfactory evidence
thereof shall be furnished to Purchaser at the Closing.

(o) ADJUSTED NET BOOK VALUE. The Adjusted Net Book Value of Target (as
estimated pursuant to SECTION 3.1) shall be at least $85 million as of the
Closing Date, and reasonably satisfactory evidence thereof (in the form of an
update of the statement furnished to Purchaser pursuant to Section 3.1 hereof)
shall have been furnished to Purchaser prior to the Closing.

(p) FIRPTA AFFIDAVIT. Target shall have furnished Purchaser with a
certificate dated the Closing Date and sworn under penalty of perjury, to the
effect that Target is not a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.

(q) ESCROW AGREEMENT. The Representatives and the Escrow Agent shall have
executed and delivered to Purchaser the Escrow Agreement.

(r) SURRENDER OF CERTIFICATES. All Old Certificates shall have been
surrendered to Purchaser.

(s) REPURCHASE OF TARGET PREFERRED STOCK. All issued and outstanding
shares of Target Preferred Stock shall have been repurchased prior to the
Closing Date, and reasonably satisfactory evidence of such repurchase shall have
been furnished to Purchaser on or prior to the Closing Date. There shall be no
further liability of Target with respect to the Target Preferred Stock.

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(t) CERTAIN TARGET BENEFIT OBLIGATIONS. Target shall have furnished to
Purchaser a certificate executed by the Chief Executive Officer of Target
certifying that: (i) Target has fully satisfied all obligations and liabilities
under the Target SERPs and terminated the Target SERPs and related trusts prior
to the Closing and (ii) Target has adopted the Target Pension Amendment and has
provided timely notice of such amendment to affected participants in accordance
with Section 204(h) of ERISA.

(u) DISPOSITION OF REMCO. All of Target's interest in REMCO shall have
been distributed to George E. Robb, Jr., and reasonably satisfactory evidence
thereof shall have been provided to Purchaser on or prior to the Closing Date.

(v) CONSENTS. All material written consents, assignments, waivers or
authorizations that are required as a result of the Merger for the continuation
in full force and effect of any Contracts, set forth on SCHEDULE 4.13 hereto,
shall have been obtained without the imposition of material burdensome
conditions on Target or any of its Subsidiaries or Purchaser. Such material
consents are set forth on SCHEDULE 9.1(V) hereto.

(w) GOVERNMENTAL AUTHORIZATIONS. There shall have been obtained any and
all authorizations, permits, approvals and consents of any Governmental Entity
and regulatory authority, including the NYSE, AMEX, CBOE, SEC and NASD and the
expiration of the applicable waiting period under the HSR Act, that are
necessary so that the consummation of the Merger will be in compliance with
applicable laws, including federal and state securities laws, the failure to
comply with which would be reasonably likely to have a Material Adverse Effect
on Target or Purchaser or would be reasonably likely to adversely affect
Target's ability to consummate the transactions contemplated hereby.

(x) WAIVERS OF APPRAISAL RIGHTS. All the Stockholders shall have waived
their rights to an appraisal with respect to their Target Shares under the DGCL.

(y) INDEMNIFICATION AGREEMENT. Each of the Option Holders shall have
executed and delivered to Purchaser an indemnification agreement substantially
in the form of EXHIBIT H hereto (the "INDEMNIFICATION AGREEMENT").

(z) ADDITIONAL CLOSING DOCUMENTS. Target shall have executed and delivered
to Purchaser any other documents and instruments as Purchaser may reasonably
require in order to effectuate the transactions contemplated by this Agreement.

(aa) AFFILIATE LETTER. Target shall have delivered to Purchaser the letter
referred to in SECTION 8.1 hereof, and each of the persons referred to in such
letter shall have executed and delivered to Purchaser a letter substantially in
the form of EXHIBIT I hereto (the "AFFILIATE LETTER").

SECTION 9.2 CONDITIONS TO OBLIGATIONS OF TARGET

The obligations of Target hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing Date, of each of the following conditions
(any one or more of which may be waived by Target, but only in a writing signed
by Target):

(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in ARTICLE V that are expressly qualified by
reference to materiality shall be true and correct in all respects as so
qualified, and the representations and warranties of Purchaser contained in
ARTICLE V that are not so qualified shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same force and
effect as if they had been made on the Closing Date (except to the extent a
representation or warranty speaks only as of an earlier date). Purchaser shall
have provided Target with a certificate executed by its Chief Executive Officer
and Chief Financial Officer, dated as of the Closing Date, certifying compliance
with this subsection (a).

(b) COVENANTS. Purchaser shall have performed and complied with all its
covenants contained in ARTICLE VII that are expressly qualified by reference to
materiality in all respects as so qualified and with

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all its covenants contained in ARTICLE VII that are not so qualified in all
material respects, in each case on or before the Closing Date, and Purchaser
shall have provided Target with a certificate to such effect executed by the
Chief Executive Officer and Chief Financial Officer of Purchaser, dated as of
the Closing Date.

(c) OPINION OF COUNSEL. Target shall have received an opinion of
Fulbright & Jaworski L.L.P., counsel to Purchaser, dated the Closing Date, in
form and substance reasonably acceptable to Target.

(d) REGISTRATION RIGHTS AGREEMENT. Purchaser shall have executed and
delivered the Registration Rights Agreement to each of Robert M. Murphy and
George E. Robb, Jr.

(e) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have been
initiated or threatened by the SEC.

(f) APPOINTMENT OF ROBERT M. MURPHY AS CHIEF EXECUTIVE OFFICER OF
LABRANCHE. Robert M. Murphy shall have been appointed as Chief Executive
Officer of LaBranche, effective as of the day next succeeding the Closing Date.

(g) REQUISITE STOCKHOLDER APPROVAL. Target shall have obtained the
Requisite Stockholder Approval, and such Requisite Stockholder Approval shall
not have been withdrawn.

(h) APPOINTMENT OF ROBERT M. MURPHY AND GEORGE E. ROBB, JR. AS DIRECTORS OF
PURCHASER. Robert M. Murphy and George E. Robb, Jr. shall have been appointed
as Class I and Class II directors, respectively, on the Board of Directors of
Purchaser, effective as of the day next succeeding the Closing Date.

(i) ESCROW AGREEMENT. Each of Purchaser and the Escrow Agent shall have
executed and delivered to the Representatives the Escrow Agreement.

(j) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No Injunction preventing the
consummation of the Merger shall be in effect. There shall not have been any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger by any federal or state Governmental
Entity which makes the consummation of the Merger illegal. No statute, rule,
regulation, executive order or decree shall have been enacted, promulgated or
enforced (and not repealed, superseded or otherwise made inapplicable) by any
court or Governmental Entity which prohibits the consummation of the Merger
(each Party agreeing to use its commercially reasonable efforts to have any such
order or decree lifted).

(k) GOVERNMENTAL AUTHORIZATIONS. There shall have been obtained any and
all authorizations, permits, approvals and consents of any Governmental Entity
and regulatory authority, including the NYSE, SEC, NASD, CBOE and AMEX and the
expiration of the applicable waiting period under the HSR Act, that are
necessary so that the consummation of the Merger will be in compliance with
applicable laws, including federal and state securities laws, the failure to
comply with which would be reasonably likely to have a Material Adverse Effect
on Target or Purchaser or would be reasonably likely to adversely affect
Purchaser's ability to consummate the transactions contemplated hereby.

(l) OPINION OF TAX COUNSEL. Target shall have received a written opinion,
dated as of the Closing Date, from Kelley Drye & Warren LLP, tax counsel to the
Company, to the effect that (i) the Merger will be treated for U.S. federal
income tax purposes as a "reorganization" within the meaning of Section 368(a)
of the Code and that Target and Purchaser will each be a "party" to that
reorganization within the meaning of Section 368(b) of the Code, it being
understood that in rendering such opinion, such tax counsel shall be entitled to
rely upon customary representations provided by Target and Purchaser
substantially in the form of EXHIBITS J and K.

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(m) FILING OF CERTIFICATE OF DESIGNATION. Purchaser shall have submitted
and received notice of acceptance for filing of the Series A Preferred Stock
Certificate of Designation with the Secretary of State of the State of Delaware.

(n) ADDITIONAL CLOSING DOCUMENTS. Purchaser shall have executed and
delivered to Target any other documents and instruments as Target may reasonably
require in order to effectuate the transactions contemplated by this Agreement.

ARTICLE X
POST-CLOSING COVENANTS

SECTION 10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES

All representations and warranties of Target and Purchaser contained in this
Agreement, all representations and warranties of Purchaser and the Stockholders
contained in the RPM Stockholder Agreements and all representations and
warranties of Purchaser and the Option Holders contained in the Indemnification
Agreement shall survive the Closing and shall remain in full force and effect
for a period of eighteen (18) months following the Closing Date and, thereafter,
to the extent a claim is made prior to such expiration with respect to any
breach of any representation or warranty, until such claim is finally determined
or settled. Notwithstanding the foregoing, the representations and warranties
contained in SECTION 4.17 shall survive until the expiration of the statute of
limitations applicable to claims brought under ERISA, and the representations
and warranties contained in SECTION 4.18 shall survive until the expiration of
the statute of limitations applicable to the assessment and collection of any
Taxes covered by such representations, which statutes of limitations shall not
be extended or tolled by Purchaser without the Representatives' prior written
approval unless requested to do so by the relevant Governmental Entity in
connection with a proceeding relating to claims brought under ERISA or the
assessment and collection of Taxes.

SECTION 10.2 INDEMNITY BY STOCKHOLDERS AND OPTION HOLDERS

(a) Subject to the limitations of SECTION 10.5, after the Effective Time,
the Stockholders and Option Holders shall indemnify, defend and hold harmless
Purchaser, its Subsidiaries and their respective officers, directors, employees,
agents and representatives (each a "PURCHASER INDEMNIFIED PARTY") from and
against and in respect of any and all Liabilities or Losses incurred or suffered
by a Purchaser Indemnified Party, arising out of, based upon or resulting from:

(i) The misrepresentation, breach or inaccuracy of any representations
or warranties of Target contained in ARTICLE IV of this Agreement or in any
certificate or instrument furnished by or on behalf of Target pursuant
hereto; or

(ii) The failure of Target to completely perform any of its covenants,
agreements or other obligations hereunder.

(b) Subject to the limitations of SECTION 10.5 hereof, after the Effective
Time, each of the Stockholders shall indemnify, defend and hold harmless each
Purchaser Indemnified Party from and against and in respect of any and all
Liabilities or Losses incurred or suffered by such Purchaser Indemnified Party,
arising out of, based upon or resulting from the misrepresentation, breach or
inaccuracy of any of the representations or warranties of such Stockholder
contained in his RPM Stockholder Agreement.

(c) Subject to the limitations of SECTION 10.5 hereof, after the Effective
Time, each of the Option Holders shall indemnify, defend and hold harmless each
Purchaser Indemnified Party from and against and in respect of any and all
Liabilities or Losses incurred or suffered by such Purchaser Indemnified Party,
arising out of, based upon or resulting from the misrepresentation, breach or
inaccuracy of any

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of the representations or warranties of such Option Holder contained in the
Indemnification Agreement.

SECTION 10.3 INDEMNITY BY PURCHASER

Subject to the limitations of SECTION 10.5 hereof, after the Effective Time,
Purchaser shall indemnify, defend and hold harmless the Stockholders and the
Option Holders and their respective heirs, assigns and personal representatives
(each a "STOCKHOLDER INDEMNIFIED PARTY") from and against and in respect of any
and all Liabilities or Losses incurred or suffered by the Stockholder
Indemnified Parties, arising out of, based upon or resulting from:

(a) The misrepresentation, breach or inaccuracy of any of the
representations or warranties of Purchaser contained in ARTICLE V of this
Agreement, the RPM Stockholder Agreements, the Indemnification Agreement or in
any certificate or instrument furnished by or on behalf of Purchaser pursuant
hereto or thereto; or

(b) The failure of Purchaser to completely perform any of its covenants,
agreements or other obligations hereunder.

SECTION 10.4 INDEMNIFICATION FOR TAXES

(a) The Stockholders' and Option Holders' respective indemnification
obligations pursuant to this Agreement shall apply, except to the extent
reserves or accruals for Taxes are taken into account in the determination of
the Final Adjusted Net Book Value of Target, to any and all Liabilities and
Losses for Taxes imposed upon or assessed against Target or any of its
Subsidiaries or the assets thereof (i) for all Tax periods ending on or before
the Closing Date and the portion ending on the Closing Date of any Tax period
that includes (but does not end on) the Closing Date, as determined pursuant to
SECTION 10.4(C) hereof (the "PRE-CLOSING TAX PERIOD") (including, except as
otherwise provided herein, any Tax liability arising as a result of the
transactions contemplated by this Agreement, but excluding any liability for
Taxes arising as a result of any breach by Purchaser of the covenants set forth
in SECTION 10.10 hereof), (ii) arising out of, based upon or resulting from any
breach or inaccuracy of any representations or warranties contained in
SECTION 4.18(A), (B), (D), (F), (H), (J), (K) and (M) hereof; (iii) by reason of
being a successor-in-interest or transferee of another entity; and (iv) with
respect to any and all Taxes of any member of an Affiliated Group of which
Target or any of its Subsidiaries is or was a member on or prior to the Closing
Date, including by reason of the application of Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation; PROVIDED, HOWEVER, that none of the Stockholders or Option Holders
shall be required to indemnify, defend or hold harmless any Purchaser
Indemnified Party from and against any Liabilities or Losses for Taxes imposed
upon or assessed against Target or any of its Subsidiaries or the assets thereof
arising by reason of any action in respect of a Tax liability for a Tax period
ending on or before the Closing Date or a Pre-Closing Tax Period taken or not
taken after the Closing Date by Purchaser or any of its Affiliates or any
transferee of the Purchaser or any of its Affiliates, except for any action or
inaction which is consistent with the Tax Return reporting positions of
Purchaser or Target or required by applicable law, the Merger Agreement or in
connection with any audit or Tax proceeding in respect of a Tax liability for a
Tax period ending on or before the Closing Date or a Pre-Closing Tax Period (a
"PURCHASER TAX ACT").

(b) Purchaser shall indemnify the Stockholders and the Option Holders from
(i) all Liabilities and Losses for Taxes of Target's Subsidiaries for any Tax
period ending after the Closing Date, except to the extent such Tax period began
before the Closing Date, in which case Purchaser's indemnity obligation shall
apply only to that portion of any such Taxes that are not attributable to the
Pre-Closing Tax Period, and (ii) all Liabilities and Losses for Taxes
attributable to (A) a breach by Purchaser of its obligations and covenants under
SECTION 10.10 hereof or (B) a Purchaser Tax Act.

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(c) In the case of any Taxes of Target or any of its Subsidiaries that are
payable for a Tax period that includes (but does not end on) the Closing Date (a
"STRADDLE PERIOD"), the portion of such Taxes for the Pre-Closing Tax Period
shall equal:

(i) in the case of real, personal and intangible property Taxes
("PROPERTY TAXES") of Target and its Subsidiaries, the amount of such Taxes
for the Straddle Period multiplied by a fraction the numerator of which is
the number of days in the Straddle Period on or prior to the Closing Date
and the denominator of which is the number of days in the entire Straddle
Period; and

(ii) in the case of Taxes of Target and its Subsidiaries other than
Property Taxes, the amount which would be payable if the relevant Tax period
ended on the Closing Date.

SECTION 10.5 LIMITATIONS ON INDEMNITY

(a) Notwithstanding any other provisions of this Agreement, in no event
shall:

(i) (x) a Purchaser Indemnified Party or a Stockholder Indemnified Party
(each, an "INDEMNIFIED PARTY") be entitled to make any claim for
indemnification under SECTION 10.2, 10.3 or 10.4 hereof with respect to the
inaccuracy, misrepresentation or breach of any representation or warranty
contained in this Agreement, an RPM Stockholder Agreement or the
Indemnification Agreement after the date on which such representation or
warranty ceases to survive pursuant to SECTION 10.1 hereof and (y) a
Purchaser Indemnified Party be entitled to make any claim for
indemnification under SECTION 10.4 hereof after the date on which the
representations and warranties contained in SECTION 4.18 cease to survive
under SECTION 10.1;

(ii) any Purchaser Indemnified Party be entitled to indemnification
under SECTION 10.2 or 10.4 hereof until the Liabilities and Losses suffered
by all the Purchaser Indemnified Parties and for which indemnification is
available thereunder exceed $1,000,000 in the aggregate, whereupon the
Purchaser Indemnified Parties shall be entitled to claim indemnification
only for Liabilities or Losses in excess of such $1,000,000 threshold for
which indemnification is available thereunder, PROVIDED, HOWEVER, that any
Liabilities and Losses suffered by a Purchaser Indemnified Party by reason
of the breach or inaccuracy of the representation of Target set forth in
Section 4.16 hereof shall not by subject to the $1,000,000 threshold
contained in this SECTION 10.5(A)(II), and, PROVIDED, FURTHER, that the
$1,000,000 threshold contained in this SECTION 10.5(A)(II) shall be
increased by the amount of any refund or credit of Taxes of Target or any of
its Subsidiaries in respect of any Tax period ending on or before the
Closing Date which Purchaser or any of its Subsidiaries becomes entitled to
receive prior to the expiration of the survival periods set forth in
SECTION 10.1 hereof;

(iii) any Stockholder Indemnified Party be entitled to indemnification
under SECTION 10.3 hereof until the Liabilities and Losses suffered by all
the Stockholder Indemnified Parties and for which indemnification is
available thereunder exceed $1,000,000 in the aggregate, whereupon the
Stockholder Indemnified Parties shall be entitled to claim indemnification
only for Liabilities or Losses in excess of such $1,000,000 threshold for
which indemnification is available thereunder;

(iv) the total indemnification liability of all the Stockholders
pursuant to this Agreement exceed, in the aggregate, the aggregate
liquidation preference of the shares of Purchaser Series A Preferred Stock
deposited with the Escrow Agent pursuant to SECTION 3.3 hereof, provided,
however, that the limitation contained in this SECTION 10.5(A)(IV) shall not
be applicable with respect to any claim for fraud, willful misconduct or
intentional misrepresentation or to any claim for a breach of the
representation of Target set forth in SECTION 4.16 hereof;

(v) the total indemnification liability of all the Option Holders
pursuant to this Agreement exceed, in the aggregate, an amount equal to the
sum of (A) 10% of the sum of (x) the aggregate Closing Value of the shares
of Purchaser Common Stock for which the Purchaser Options received by the
Option Holders pursuant to SECTION 2.7(E) hereof are exercisable, plus
(y) the amount of the

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benefits payable under the Deferred Compensation Plan (not including
interest), plus (B) an amount equal to the product of (x) the aggregate
Equity Percentage of the Option Holders and (y) $20,000,000, PROVIDED,
HOWEVER, that the limitation contained in this SECTION 10.5(A)(V) shall not
be applicable with respect to any claim for fraud, willful misconduct or
intentional misrepresentation or any breach of the representation of Target
set forth in Section 4.16 hereof; and

(vi) the total indemnification liability of Purchaser pursuant to this
Agreement exceed, in the aggregate, an amount equal to the aggregate amount
of the limitations contained in SECTION 10.5(A)(IV) and (V) hereof,
provided, however, that the limitation contained in this
SECTION 10.5(A)(VI) shall not be applicable with respect to any claim for
fraud, willful misconduct or intentional misrepresentation.

(b) If any event or circumstance shall exist which would otherwise entitle
either a Purchaser Indemnified Party or a Stockholder Indemnified Party (each,
an "INDEMNITEE") to indemnification under SECTION 10.2, 10.3 or 10.4 hereof, no
Liability or Loss shall be deemed to have been incurred or sustained by the
Indemnitee to the extent of any proceeds recovered or recoverable by such
Indemnitee or any of its Affiliates from any third party (including, without
limitation, any insurance company) with respect thereto. To the extent any
Stockholder, Option Holder or Purchaser makes any indemnification payment
hereunder in respect of a Liability or Loss for which the Indemnitee has a right
to recover against a third party (including, without limitation, any insurance
company), the Stockholders, the Option Holders or Purchaser, as the case may be,
shall be subrogated to the right of the Indemnitee to seek and obtain recovery
from such third party; PROVIDED, HOWEVER, that if such Stockholder, such Option
Holder or Purchaser, as the case may be, shall be prohibited from such
subrogation, the Indemnitee shall seek recovery from such third party on such
Stockholder's, Option Holder's or Purchaser's behalf and pay such recovery to
such Stockholder, such Option Holder or Purchaser, as the case may be.

(c) In the absence of fraud or willful misconduct, after the Effective Time,
the indemnification provisions in SECTIONS 10.2, 10.3 and 10.4 hereof shall be
the exclusive remedy of Purchaser, the Stockholders and the Option Holders with
respect to the matters to which such indemnification provisions are applicable
in accordance with this Agreement, the RPM Stockholder Agreements, the
Indemnification Agreement and the other agreements and documents executed
pursuant hereto or in connection herewith.

(d) The amount of any Liability or Loss for which indemnification is
provided under this ARTICLE X shall be (i) increased to take account of any net
Tax cost incurred by the Indemnitee arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net Tax benefit realized by the Indemnitee arising from the
incurrence or payment of any such Liability or Loss. In computing the amount of
any such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize
all other items of income, gain, loss, deduction or credit before recognizing
any item arising from the receipt of any indemnity payment under this ARTICLE X
or the incurrence or payment of any indemnified Liability or Loss. Any indemnity
payment under this ARTICLE X shall be treated as an adjustment to the Merger
Consideration for Tax purposes unless a final determination, within the meaning
of Section 1313(a) of the Code (which shall include the execution of a
Form 870-AD or successor form), with respect to the Indemnitee causes any such
payment not to be treated as an adjustment to the Merger Consideration for Tax
purposes.

(e) The indemnification obligation of each Stockholder with respect to any
Liability or Loss under SECTION 10.2(A) or 10.4 hereof shall equal such
Stockholder's pro rata share of such Liability or Loss, based on such
Stockholder's Equity Percentage. Each Stockholder shall be solely liable for any
indemnification obligation under SECTION 10.2(B) hereof with respect to any
breach of such Stockholder's representations and warranties contained in his RPM
Stockholder Agreement. For

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purposes of satisfying any indemnity claim out of the shares of Purchaser
Series A Preferred Stock deposited with the Escrow Agent pursuant to
SECTION 3.3 hereof, such shares shall be valued as provided in the Escrow
Agreement.

(f) The indemnification obligation of each Option Holder with respect to any
Liability or Loss under SECTION 10.2(A) or 10.4 hereof shall equal such Option
Holder's pro rata share of such Liability or Loss, based on such Option Holder's
Equity Percentage. Each Option Holder shall be solely liable for any
indemnification obligation under SECTION 10.2(C) hereof with respect to any
breach of such Option Holder's representations and warranties contained in the
Indemnification Agreement.

(g) Except as provided in SECTION 10.5(H) hereof, the Stockholders'
indemnification obligations in respect of Liabilities or Losses described in
SECTIONS 10.2(A) and 10.4 hereof shall be satisfied solely out of the shares of
Purchaser Series A Preferred Stock deposited with the Escrow Agent pursuant to
SECTION 3.3 hereof, and each Stockholder's indemnification obligation in respect
of Liabilities and Losses described in SECTION 10.2(B) hereof shall be satisfied
solely out of the shares of Purchaser Series A Preferred Stock deposited with
the Escrow Agent pursuant to SECTION 3.3 hereof and credited to such
Stockholder's Stockholder Account (as defined in the Escrow Agreement). The
Option Holders' indemnification obligations in respect of Liabilities and Losses
described in SECTIONS 10.2(A) and 10.4 hereof shall be satisfied solely by
reduction of the aggregate amount payable to the Option Holders pursuant to the
Deferred Compensation Plan in the manner provided in the Indemnification
Agreement, and each Option Holder's indemnification obligation in respect of
Losses and Liabilities described in SECTION 10.2(C) hereof shall be satisfied
solely out of the amount payable to such Option Holder pursuant to the Deferred
Compensation Plan.

(h) If, following the Termination Date (as defined in the Escrow Agreement),
the Escrow Agent shall distribute shares of Purchaser Series A Preferred Stock
(the "DISTRIBUTED ESCROW SHARES") to the Persons entitled to receive such
distributions in accordance with the terms of the Escrow Agreement (the "ESCROW
DISTRIBUTEES"), then the Purchaser Indemnified Parties may thereafter assert
claims against the Escrow Distributees for Losses and Liabilities (1) under
SECTION 10.2(A)(I) hereof, based upon or resulting from any misrepresentation,
breach or inaccuracy of any representation or warranty contained in
SECTION 4.17 or 4.18 of this Agreement, or (2) under SECTION 10.4 hereof, in
each case to the extent that such Purchaser Indemnified Parties would otherwise
be entitled to assert such claims against the Stockholders under the provisions
of SECTIONS 10.2(A) and 10.4 hereof, subject to the limitations set forth in
this SECTION 10.5 ("POST-ESCROW TERMINATION CLAIMS"); PROVIDED that the recourse
of such Purchaser Indemnified Parties in respect of Post-Escrow Termination
Claims shall be limited solely to (A) recovery from the respective Escrow
Distributees of the Distributed Escrow Shares received by them, but only to the
extent that such Distributed Escrow Shares shall remain in the hands of the
Escrow Distributees (or, in the case of the death or incapacity of any Escrow
Distributee, in the hands of such Escrow Distributee's heirs, assigns or legal
representatives), or (B) recovery from any Escrow Distributee (or, in the case
of the death or incapacity or such Escrow Distributee, from such Escrow
Distributee's heirs, assigns or legal representatives) who shall have sold or
otherwise disposed of any Distributed Escrow Shares, of the cash or other
proceeds of such sale or disposition. For the purposes of this subsection (h),
(i) the value of any Distributed Escrow Shares shall be as provided in the
Escrow Agreement; (ii) any securities distributable in exchange for any of the
Distributed Escrow Shares by reason of stock splits or recapitalizations shall
be treated as additional Distributed Escrow Shares subject to the provisions of
this subsection (h); (iii) any securities, cash or other property distributable
with respect to any Distributed Escrow Shares by reason of cash dividends, stock
dividends, liquidations, mergers, consolidations, spin-offs, split-offs or
similar transactions shall not be treated as Distributed Escrow Shares subject
to the provisions hereof or be otherwise recoverable by any Purchaser
Indemnified Party; and (iv) in the event that Purchaser repurchases any
Distributed Escrow Shares for cash, such cash shall not be treated as proceeds
of Distributed Escrow Shares subject to the provisions of this subsection (h).
Except as expressly provided in this SECTION 10.5(H), the

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Purchaser Indemnified Parties shall have no right to recover any amounts in
respect of Post-Escrow Termination Claims against the assets, income or property
of the Escrow Distributees or any other Persons.

SECTION 10.6 NOTICE AND DEFENSE OF CLAIMS

An Indemnitee shall give notice to the Representatives (on behalf of the
Stockholders and Option Holders) or Purchaser, as the case may be, promptly
after the Indemnitee has actual knowledge of any claim as to which indemnity may
be sought, PROVIDED that the failure of the Indemnitee to give notice as
provided herein shall not relieve the Stockholders, the Option Holders or
Purchaser, as the case may be, of their respective indemnification obligations
under this Agreement, except and only to the extent the Stockholders', the
Option Holders' or Purchaser's ability to defend against, mitigate or diminish
the amount of such claim is materially prejudiced by such failure. The
Representatives (on behalf of the Stockholders and Option Holders) or Purchaser,
as the case may be, shall have the right to assume the defense of any third
party claim for which indemnification is sought or any litigation resulting
therefrom, PROVIDED that the Indemnitee shall have the right to employ separate
counsel (including local counsel) to participate in the defense of any such
third party claim or litigation to which such Indemnitee is a party, but the
fees and expenses of such counsel shall be at the expense of the Indemnitee
unless (i) the employment of such counsel shall have been authorized in writing
by the Representatives or Purchaser, as the case may be, in connection with the
defense of such action, (ii) the Representatives or Purchaser, as the case may
be, shall not have employed counsel satisfactory to the Indemnitee to take
charge of the defense of such action within a reasonable time after notice of
the institution of such action, (iii) the Indemnitee shall have reasonably
concluded that there may be material defenses available to it that are different
from or additional to those available to the Representatives (on behalf of the
Stockholders and the Option Holders) or Purchaser, as the case may be, or
(iv) the use of counsel chosen by the Representatives or Purchaser, as the case
may be, to represent the Indemnitee would present such counsel with a conflict
of interest (in which case the Representatives or Purchaser, as the case may be,
shall not have the right to direct the defense of such action on behalf of the
Indemnitee), in any of which events the reasonable fees and expenses of such
counsel shall be borne by the Stockholders and the Option Holders or Purchaser,
as the case may be, as Losses and Liabilities subject to indemnification
hereunder. The Indemnitee agrees to cooperate with the Representatives or
Purchaser, as the case may be, and their counsel at the Stockholders' and the
Option Holders' or Purchaser's, as the case may be, expense and shall furnish
such information regarding itself or the claim in question as the
Representatives or Purchaser, as the case may be, may reasonably request in
writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.

SECTION 10.7 TAX MATTERS

(a) TRANSFER TAXES. All recordation, sales, use, stamp, filing, transfer,
documentary or similar fees or Taxes and related costs and fees relating to the
transactions contemplated by this Agreement shall be borne by Purchaser.

(b) PREPARATION OF TAX RETURNS; PAYMENT OF TAXES. Target shall file all
Tax Returns required to be filed by it or any of its Subsidiaries on or prior to
the Closing Date and such Tax Returns shall be prepared in a manner consistent
with prior practice, unless otherwise required by applicable law. Target shall
provide Purchaser with copies of such Tax Returns at least ten (10) Business
Days prior to the filing date. Purchaser shall be responsible for filing or
causing to be filed all Tax Returns required to be filed by or on behalf of
Target after the Closing Date. The Representatives shall be given the
opportunity to review and comment on any such Tax Returns that include any
Pre-Closing Tax Period prior to their completion and Purchaser shall make any
changes to such Tax Returns reasonably requested by the Representatives. To the
extent any Taxes shown to be due on such Tax Returns are

A-45

indemnifiable by the Stockholders and the Option Holders pursuant to this
Agreement, such Tax Returns shall be prepared in a manner consistent with prior
practice, unless otherwise required by applicable law.

(c) COOPERATION. The Representatives and Purchaser shall reasonably
cooperate, and shall cause their respective Affiliates, officers, employees,
agents, auditors and representatives reasonably to cooperate, in preparing and
filing all Tax Returns, including maintaining and making available to each other
all records necessary in connection with Taxes and in resolving all disputes and
audits with respect to all Tax periods relating to Taxes. Purchaser shall
(i) retain and maintain such records relating to any Pre-Closing Tax Periods
until the later of (x) the expiration of the applicable statute of limitations
of the relevant Tax period or (y) eight years following the due date of the Tax
Returns relating to the relevant Tax period, and (ii) allow the Representatives,
at mutually acceptable times and dates, to inspect, review and make copies of
such records from time to time, such activities to be conducted during normal
business hours.

(d) AUDITS. Purchaser and the Representatives shall promptly notify each
other in writing of any notice of which they become aware of any Tax audits of,
or assessments against, Target or any of its Subsidiaries for any Tax periods of
Target or any of its Subsidiaries beginning on or before the Closing Date. The
failure of notice of any such audit or assessment shall not relieve any Party of
its indemnification obligations under this Agreement except to the extent any
such failure actually prejudices the defense of any Tax claim. The
Representatives may, at the sole expense of the Stockholders and the Option
Holders, control the conduct of any audit or proceeding that may be the subject
of indemnification under SECTION 10.4 at such time and on such terms as they
shall deem appropriate or assume the entire defense thereof; PROVIDED, HOWEVER,
that Purchaser shall have the right, at its own expense, to consult with the
Representatives regarding any such audit or proceeding that may affect Purchaser
or any of its Subsidiaries for any period after the Closing Date and PROVIDED
FURTHER, that the Representatives shall in no event take any position in such
settlement or defense that subjects Purchaser or any of its Affiliates to any
civil fraud or any civil or criminal penalty without the prior written consent
of Purchaser, and PROVIDED FURTHER, that the Representatives and Purchaser, at
their own expense, shall jointly control any audits or proceedings with respect
to Straddle Periods. Notwithstanding the foregoing, the Representatives shall
not settle, without the prior written consent of Purchaser, which prior written
consent shall not be unreasonably withheld, any Tax claim involving a change in
the treatment of any item which would materially affect the Tax liability of
Purchaser or any of its Affiliates for a period subsequent to the Closing Date
unless the Tax claim relates to a past practice that has been finally determined
to be incorrect by the applicable taxing authority and the treatment under the
proposed settlement is expressly required by applicable tax laws (or judicial or
administrative interpretations thereof). Purchaser and its Affiliates shall have
the sole right to represent Target's Subsidiaries' interests in any Tax
proceeding relating to a Tax period beginning after the Closing Date. For the
avoidance of doubt, it is understood and agreed that costs that are at the
expense of Purchaser for purposes of this SECTION 10.7(D) shall not be deemed to
be a Liability or Loss for purposes of this ARTICLE X.

(e) TAX REPORTING. Purchaser shall report the Merger as a "reorganization"
under Section 368(a) of the Code for federal income tax purposes.

SECTION 10.8 EMPLOYEE BENEFIT MATTERS

(a) Promptly after the Closing, Purchaser shall take such steps as are
necessary to terminate the Target Pension Plan, the Target Profit Sharing Plan
and the Robb Peck McCooey 401(k) Plan. The trusts maintained as art of the
Target Pension Plan, the Target Profit Sharing Plan and the Robb Peck McCooey
401(k) Plan shall continue to be maintained until the final satisfaction of the
respective plan liabilities to participants and beneficiaries, which will be
completed promptly after the issuance by the IRS of favorable determination
letters with respect to the plan terminations and, with respect to the

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Target Pension Plan, consent to such termination by PBGC. Prior to the Closing,
Target shall use its reasonable best efforts to commence the termination process
for such plans, including the preparation and adoption of all necessary plan
amendments (other than with respect to the Robb Peck McCooey 401(k) Plan) and
commencing the preparation of all filings and notices. To the extent permitted
by applicable law, Purchaser may eliminate ancillary life insurance coverage
under the Target Pension Plan.

(b) Purchaser shall provide the individuals who are actively employed by
Target immediately prior to the Closing and who continue in active employment
with Purchaser or any of its Subsidiaries after the Closing (the "CONTINUING
EMPLOYEES") with base compensation and employee benefits during the period of
such continued employment that are, in the aggregate, not less favorable than
the base compensation and employee benefits provided to similarly situated
employees of Purchaser or such Subsidiary, as the case may be. To the extent
service is relevant for eligibility and vesting under Purchaser's or any of its
Subsidiaries' employee benefit or welfare plans, Continuing Employees shall be
given eligibility and vesting credit (but not credit for benefit accrual
purposes) for all service with Target or any of its Subsidiaries, PROVIDED that
such credit does not result in the duplication of benefits with respect to the
same period of service. With respect to each "group health plan" (as defined in
Section 5000(b)(1) of the Code) of Purchaser or any of its Subsidiaries in which
Continuing Employees are eligible to participate, Purchaser or such Subsidiary,
as the case may be, shall: (i) cause there to be waived any pre-existing
condition or eligibility limitations (to the extent such conditions and
limitations do not apply immediately prior to the Closing under the comparable
Target Benefit Plan), and (ii) give effect, in determining any deductible and
maximum out-of-pocket limitations applicable to Continuing Employees during the
plan year in which the Closing occurs, to claims incurred and amounts paid by
Continuing Employees under the comparable plan maintained by Target during the
plan year in which the Closing occurs. This SECTION 10.8 shall not be deemed to
create any contract between Purchaser or any of its Subsidiaries and any
employee of Target or its Subsidiaries which interferes with Purchaser's and
each of its Subsidiaries right to terminate the employment of any such
individual at any time.

(c) Unless otherwise determined by Purchaser on or prior to the Closing
Date, the individuals whose names are set forth on SCHEDULE 10.8(C) hereto shall
become managing directors of LaBranche with an annual base salary of $250,000
and shall be eligible to participate in the Annual Incentive Plan of Purchaser.

SECTION 10.9 FORM S-8 REGISTRATION

Purchaser shall use its reasonable best efforts to file and effect with the
SEC within ten (10) Business Days after the Closing Date a registration
statement on Form S-8 with respect to the shares of Purchaser Common Stock
covered by the Purchaser Options.

SECTION 10.10 BUSINESS CONTINUITY

Purchaser shall (a) continue at least one significant historic business line
of Target, or use at least a significant portion of Target's historic business
assets in a business, in each case within the meaning of Treasury Regulation
Section 1.368-1(d), and (b) not take or fail to take any action which would
otherwise prevent the Merger from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.

SECTION 10.11 INSURANCE AND INDEMNIFICATION

(a) Purchaser will provide each individual who served as a director or
officer of Target or any of its Subsidiaries at any time prior to the Effective
Time with liability insurance for a period of six (6) years after the Effective
Time no less favorable in coverage and amount than any applicable insurance of
Purchaser in effect as of the Effective Time, PROVIDED, HOWEVER, that if
Purchaser's existing

A-47

liability insurance expires, or is terminated or canceled by the insurance
carrier during such six year period, Purchaser will use its best efforts to
obtain as much liability insurance (no less favorable in coverage) as can be
obtained for the remainder of such period for a premium not in excess (on an
annualized basis) of 150% of the last annual premium paid prior to the date
hereof.

(b) From and after the Effective Time, Purchaser will indemnify each
individual who served as a director or officer of Target or any of its
Subsidiaries at any time prior to the Effective Time from and against any and
all Liabilities and Losses resulting from, based on, arising out of, or relating
to the fact that such individual is or was a director or officer of Target or
any of its Subsidiaries, to the extent that any such Loss or Liability pertains
to any matter or fact arising out of any act or omission prior to or at the
Effective Time (excluding this Agreement or any of the transactions contemplated
herein), to the fullest extent such individual would have been indemnified as a
director or officer of Target or any of its Subsidiaries prior to the Effective
Time and as then permitted under applicable law, PROVIDED, HOWEVER, that nothing
contained in this SECTION 10.11 shall in any manner be deemed to affect the
indemnification obligations thereunder of any party to an RPM Stockholder
Agreement.

SECTION 10.12 NET LIQUID ASSETS

Notwithstanding any provision in this Agreement to the contrary, in the
event of RPMSC's violation of its NYSE minimum Net Liquid Assets requirement
solely by reason of any of the payments by Target contemplated by
SECTION 9.1(M), (S) and (T) on or prior to the Closing Date, such violation
shall not be deemed a breach or default of any of Target's representations,
warranties, covenants or agreements contained in this Agreement.

ARTICLE XI
TERMINATION OF AGREEMENT

SECTION 11.1 TERMINATION

This Agreement may be terminated as provided below:

(a) by mutual written consent of Target and Purchaser;

(b) by Purchaser, if it is not is in material breach of its obligations
under this Agreement, and if (i) there has been a material breach by Target of
any of its representations, warranties and covenants hereunder such that
SECTION 9.1(A) or SECTION 9.1(B) will not be satisfied or (ii) if the Closing
shall not have occurred on or before June 30, 2001, by reason of the failure of
any condition precedent under SECTION 9.1 hereof (unless the failure results
primarily from Purchaser breaching any representation, warranty or covenant
contained in this Agreement), and, in case (i), such breach has not been cured
within fifteen (15) days after notice to Target;

(c) by Target, if it is not in material breach of its obligations under this
Agreement and if (i) there has been a material breach by Purchaser of any of its
representations, warranties and covenants hereunder such that SECTION 9.2(A) or
SECTION 9.2(B) will not be satisfied, or (ii) if the Closing shall not have
occurred on or before June 30, 2001, by reason of the failure of any condition
precedent under SECTION 9.2 hereof (unless the failure results primarily from
Target breaching any representation, warranty or covenant contained in this
Agreement), and, in case (i), such breach has not been cured within fifteen
(15) days after notice to Purchaser;

(d) by Purchaser if (i) the conditions to Closing set forth in SECTIONS
9.2(E), (J) and (K) shall have been satisfied, (ii) this Agreement shall not
have been terminated by Purchaser or Target pursuant to any subsection of this
SECTION 11.1 other than this subsection (d), (iii) the Requisite Stockholder
Approval shall not have been obtained within twenty-five (25) calendar days
after the date on which the Registration Statement shall have been declared
effective by the SEC and a sufficient number of

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copies of the final prospectus contained therein shall have been delivered by
Purchaser to Target to provide for the distribution thereof to all of the
Stockholders; provided that such 25-calendar day period shall be extended to up
to 25 Business Days to the extent necessary to comply with applicable law, rules
or regulations, and (iv) such failure to obtain the Requisite Stockholder
Approval shall be solely the result of (A) a failure by Target to hold the
Target Meeting or to solicit the written consent of the Stockholders in favor of
the Merger, in either case at or prior to the end of the period referred to in
clause (iii) above (unless such failure results solely from any action or
inaction on the part of Purchaser), or (B) the failure or refusal by
Stockholders holding in the aggregate a majority of the Target Shares
outstanding on the applicable record date to approve the Merger and approve and
adopt the Merger Agreement at the Target Meeting or to execute a written consent
of Stockholders approving the Merger and approving and adopting the Merger
Agreement;

(e) by Target, by giving written notice to Purchaser prior to the Closing if
the volume-weighted average sales price of Purchaser Common Stock during any
five (5) consecutive trading days prior to the Closing, as reported by Bloomberg
Information Systems, Inc., is less than $15.00 per share; and

(f) by Purchaser, by giving written notice to Target prior to the Closing if
the volume-weighted average sales price of Purchaser Common Stock during any
twenty (20) consecutive trading days prior to the Closing, as reported by
Bloomberg Information Systems, Inc., is greater than $38.00 per share.

SECTION 11.2 EFFECT OF TERMINATION

In the event of the termination of this Agreement pursuant to SECTION 11.1
hereof, this Agreement shall forthwith become void, PROVIDED, HOWEVER, that no
termination of this Agreement shall relieve either Party from liability
resulting from a willful material breach by such Party of any of its
representations, warranties, covenants or agreements set forth herein.

SECTION 11.3 TERMINATION FEE PAYMENTS

Notwithstanding the provisions of SECTION 11.2 hereof, in the event this
Agreement is terminated by Purchaser pursuant to SECTION 11.1(D) hereof, Target
shall pay to Purchaser (or to any Subsidiary of Purchaser designated in writing
by Purchaser to Target) the amount of $10,000,000 (the "TARGET TERMINATION
FEE"). Payment of the Target Termination Fee shall be made by wire transfer of
immediately available funds on the second Business Day after such termination.

ARTICLE XII
MISCELLANEOUS

SECTION 12.1 ASSIGNMENT: SUCCESSORS AND ASSIGNS

The provisions of this Agreement shall be binding upon, and inure to the
benefit of, the respective successors, assigns, heirs, executors and
administrators of the Parties. This Agreement shall not be assignable by either
Party without the prior written consent of the other Party.

SECTION 12.2 NOTICES

All notices, requests, consents and other communications under this
Agreement shall be in writing and shall be delivered by hand, by telecopier, by
nationally recognized overnight courier, by fax or mailed by first class
certified or registered mail, return receipt requested, postage prepaid:

(a) If to Target before the Closing, at:

ROBB PECK McCOOEY Financial Services, Inc.
20 Broad Street, 6th floor
New York, New York 10005
Attn: Robert M. Murphy
Fax: (212) 607-6198

A-49

with a copy to:

Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901-3229
Attn: Paul F. McCurdy, Esq.
Fax: (203) 327-2669

and

Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Attn: Bonnie A. Barsamian, Esq.
Fax: (212) 878-8375

(b) If to the Stockholders or the Option Holders after the Closing, to the
Representatives at:

c/o Robert M. Murphy
LaBranche & Co. LLC
One Exchange Plaza
New York, NY 10006
Fax: (212) 344-1469

and

c/o George E. Robb, Jr.
LaBranche & Co. LLC
One Exchange Plaza
New York, NY 10006
Fax: (212) 344-1469

with a copy to:

Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901-3229
Attn: Paul F. McCurdy, Esq.
Fax: (203) 327-2669

and

Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: Bonnie A. Barsamian, Esq.
Fax: (212) 878-8375

One Exchange Plaza, 25th Floor
New York, New York 10006
Attention: Mr. Michael LaBranche
Fax: (212) 344-1469

A-50

with a copy to:

Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, New York 10103
Attention: Jeffrey M. Marks, Esq.
Fax: (212) 318-3400

(Or at such other address or addresses as may have been furnished in writing by
notice given pursuant to this SECTION 12.2).

Notices provided in accordance with this SECTION 12.2 shall be deemed
delivered upon personal delivery, receipt by telecopy, fax or nationally
recognized overnight courier, or 48 hours after deposit in the mail in
accordance with the above.

SECTION 12.3 ENTIRE AGREEMENT

This Agreement, together with the instruments and other documents
contemplated to be executed and delivered in connection herewith, and the
confidentiality agreements described in SECTION 8.3 hereof, contain the entire
agreement and understanding of the Parties hereto, and supersede any prior
agreements or understandings between or among them, with respect to the subject
matter hereof, including, without limitation, that certain letter of intent
dated October 10, 2000 between Target and Purchaser.

SECTION 12.4 AMENDMENTS AND WAIVERS

This Agreement may not be amended or waived (either generally or in a
particular instance and either retroactively or prospectively) except by a
written instrument signed by both Purchaser and Target, prior to the Closing,
and by Purchaser and the Representatives after the Closing; PROVIDED, HOWEVER,
that any amendment effected subsequent to Requisite Stockholder Approval will be
subject to the restrictions contained in the DGCL, to the extent applicable. No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.

SECTION 12.5 ARBITRATION

Except as expressly provided herein, any controversy, dispute or claim
arising out of or relating to this Agreement, or the breach hereof, shall be
heard and resolved by a court of the State of New York or the Federal courts of
the United States of America located in the State of New York, in each case in
the borough of Manhattan (the "CHOSEN COURTS"). The Parties hereby irrevocably
submit to the exclusive jurisdiction of the Chosen Courts in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in the Chosen Courts or
that the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in the Chosen Courts. The Parties hereby consent
to and grant the Chosen Courts exclusive jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in such
manner as may be permitted by law shall be valid and sufficient service thereof.
Notwithstanding the foregoing, however, if required by the NYSE, any
controversy, dispute or claim shall be settled by arbitration in New York, New
York, in accordance with the rules of the NYSE, and any decision or judgment
rendered in any such arbitration

A-51

shall be final and binding on the Parties. In any court proceeding or
arbitration, each Party shall pay its own expenses and, in the case of
arbitration, the costs and forum fees of the arbitration proceeding shall be
divided equally between the Parties.

SECTION 12.6 THIRD PARTY BENEFICIARIES

Nothing in this Agreement is intended to, or shall be construed so as to
create any third party beneficiary to this Agreement or otherwise confer any
rights upon any Person that is not a Party; PROVIDED, HOWEVER, that after the
Effective Time, (a) the provisions of ARTICLE II above concerning payment of the
Merger Consideration and the conversion of Target Options are intended for the
benefit of the Stockholders and the Option Holders, respectively, (b) the
provisions in SECTION 10.3 hereof concerning indemnification are intended for
the benefit of the Persons specified therein, (c) the provisions of
SECTION 10.11 hereof concerning insurance and indemnification are intended for
the benefit of the Persons specified therein and their respective legal
representatives, (d) the provisions of SECTION 2.8 hereof concerning the
Retention Bonus Pool are intended for the benefit of the Persons specified
therein, and (e) the provisions of SECTION 2.9 hereof concerning the Deferred
Compensation Plan are intended for the benefit of the Persons eligible to
participate in the Deferred Compensation Plan.

SECTION 12.7 COUNTERPARTS

This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

SECTION 12.8 GOVERNING LAW

This Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of Delaware, without reference to its
conflicts of laws provisions.

SECTION 12.9 EXPENSES

Except as otherwise provided in this Agreement, each of the Parties will
bear its own costs and expenses (including any legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby.

A-52

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as an instrument of the date first above written.

LABRANCHE & CO INC.

By: /s/ GEORGE M.L. LABRANCHE, IV
---------------------------------------
George M.L. LaBranche, IV
Name:
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT
Title:

ROBB PECK MCCOOEY FINANCIAL SERVICES, INC.

By: /s/ GEORGE E. ROBB, JR.
---------------------------------------
George E. Robb, Jr.
Name:
PRESIDENT
Title:

A-53

AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER

AMENDMENT NO. 1 (this "AMENDMENT"), dated as of February 15, 2001, to the
Agreement and Plan of Merger, dated as of January 18, 2001 (the "AGREEMENT"), by
and between LaBranche & Co Inc. and ROBB PECK McCOOEY Financial Services, Inc.

WHEREAS, the parties desire to amend the Agreement as hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, representations and covenants contained herein, the parties hereto
agree as follows:

1. Except as specifically amended herein, the Agreement, and each and every
term thereof, shall remain in full force and effect. All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Agreement. All references in the Agreement to the "Agreement" shall be deemed to
refer to the Agreement, as amended by this Amendment.

2. Each Party represents and warrants that it has all requisite corporate
power and authority to enter into this Amendment.

3. Each of clauses (xi) and (xiv) in the definition of "ADJUSTED NET BOOK
VALUE" in Section 1.1 of the Agreement is amended to read in its entirety as
follows:

"53% of the aggregate amount of the benefits payable under the Deferred
Compensation Plan (not including interest) and the Retention Bonus Pool;"

4. Section 2.7(e) of the Agreement is amended to read in its entirety as
follows:

"(e) ASSUMPTION OF OPTIONS. Subject to the ratification by the
Stockholders in the manner required by Section 280G(b)(5)(B) of the Code, which
ratification shall not have been withdrawn prior to the Effective Time, Target
and each Option Holder shall enter, on or before the Closing Date, into an
amendment substantially in the form annexed hereto as EXHIBIT C (an "OPTION
AMENDMENT") of the agreement pursuant to which such Option Holder was granted
his option to purchase shares of Target Common Stock (each, a "TARGET OPTION").
Under the Option Amendments, each Target Option which is outstanding and
unexercised immediately prior to the Effective Time shall be converted at the
Effective Time into an option (a "PURCHASER OPTION") to purchase 98.778 shares
of Purchaser Common Stock per share of Target Common Stock underlying such
Target Option."

5. Section 2.8 of the Agreement is amended to read in its entirety as
follows:

"Section 2.8 RETENTION BONUS POOL. Subject to the approval by the
Stockholders in the manner required by Section 280G(b)(5)(B) of the Code, which
approval shall not have been withdrawn prior to the Effective Time, Purchaser
shall succeed, as of the Effective Time, to Target's liabilities and obligations
under the retention bonus pool to be adopted by Target on or before the Closing
Date (the "RETENTION BONUS POOL"). The Retention Bonus Pool shall be in an
amount equal to $9,000,000, which shall be paid to the employees listed on
SCHEDULE 2.8 as bonus compensation on the third anniversary of the Closing Date.
The portion of the Retention Bonus Pool payable to each such employee shall be
determined by the majority vote of a committee consisting of Robert M. Murphy,
George E. Robb, Jr. and Michael LaBranche (or, in each case, the successor
appointed by such individual), which determination shall be final, binding and
conclusive on Purchaser and each such employee. Notwithstanding the foregoing
provisions of this SECTION 2.8, (i) any such employee whose employment with
Purchaser or one of its Affiliates is terminated for Cause or who voluntarily
terminates his employment for reasons other than Good Reason shall no longer be
eligible to participate in the

A-54

Retention Bonus Pool, and (ii) any payment out of the Retention Bonus Pool shall
be subject to the limitations on such payments set forth in the Series A
Preferred Stock Certificate of Designation."

6. Section 2.9 of the Agreement is amended to read in its entirety as
follows:

"Section 2.9 DEFERRED COMPENSATION PLAN. Subject to the approval by the
Stockholders in the manner required by Section 280G(b)(5)(B) of the Code, which
approval shall not have been withdrawn prior to the Effective Time, Purchaser
shall succeed, as of the Effective Time, to Target's liabilities and obligations
under the Deferred Compensation Plan in substantially the form attached hereto
as Exhibit D to be adopted by Target on or before the Closing Date (the
"DEFERRED COMPENSATION PLAN")."

7. This Amendment may not be amended except by an instrument in writing
signed by all the Parties.

8. This Amendment shall be governed by and interpreted and construed in
accordance with the laws of the State of Delaware, without reference to its
conflicts of laws provisions.

9. This Amendment may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Amendment shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the Parties reflected hereon as the signatories.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.

LABRANCHE & CO INC.
By: /s/ George M.L. LaBranche, IV
--------------------------------------
Name: George M.L. LaBranche, IV
Title: Chairman, Chief Executive
Officer
and President

ROBB PECK MCCOOEY FINANCIAL SERVICES,
INC.
By: /s/ George E. Robb, Jr.
--------------------------------------
Name: George E. Robb, Jr.
Title: President

A-55

ANNEX B

ANNEX B--SECTION 262 OF THE DELAWARE GENERAL CORPORATION
LAW--APPRAISAL RIGHTS

Section 262. Appraisal rights.

(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a non stock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a non stock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to Section 251 (other than a merger effected pursuant to Section 251(g)
of this title), Section 252, Section 254, Section 257, Section 258, Section 263
or Section 264 of this title:

(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to SectionSection 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:

a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or

d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.

B-1

(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or

(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within
10 days after such effective date; provided, however, that if such second notice
is sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer

B-2

agent of the corporation that is required to give either notice that such notice
has been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled to
receive either notice, each constituent corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.

(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or

B-3

resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit discovery or
other pretrial proceedings and may proceed to trial upon the appraisal prior to
the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.

(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.

B-4

ANNEX C

[LETTERHEAD OF KELLEY DRYE & WARREN LLP]

February 16, 2001

ROBB PECK McCOOEY Financial Services, Inc.
20 Broad Street, 6th Floor
New York, NY 10005

Ladies and Gentlemen:

We have acted as counsel for ROBB PECK McCOOEY Financial Services, Inc., a
Delaware corporation ("RPM"), in connection with the merger (the "Merger") of
RPM with and into LaBranche & Co Inc., a Delaware corporation ("LaBranche"),
pursuant to that certain Agreement and Plan of Merger, dated as of January 18,
2001, as amended as of February 15, 2001 (as so amended, the "Merger
Agreement"), by and between LaBranche and RPM. Any capitalized term used but not
defined herein has the meaning given to such term in the Merger Agreement.

In connection with the foregoing, you have requested our opinion regarding
certain U.S. federal income tax consequences of the Merger. In providing our
opinion, we have examined the Merger Agreement, the registration statement on
Form S-4 (the "Registration Statement") filed with the Securities and Exchange
Commission on February 16, 2001, and such other documents and corporate records
as we have deemed necessary or appropriate for purposes of our opinion. In
addition, we have assumed that (i) the Merger will be consummated in accordance
with the provisions of the Merger Agreement and as described in the Registration
Statement, (ii) the statements concerning the Merger set forth in the Merger
Agreement and the Registration Statement are true, complete and correct,
(iii) the representations made by RPM and LaBranche, in their respective letters
delivered to us for purposes of this opinion (the "Representation Letters") are
true, complete and correct and (iv) any representations made in the
Representation Letters "to the best knowledge of" or similarly qualified are
correct without such qualification. If any of the above described assumptions
are untrue for any reason or if the Merger is consummated in a manner that is
different from the manner in which it is described in the Merger Agreement or
the Registration Statement, our opinions as expressed below may be adversely
affected and may not be relied upon. In addition, such opinions are conditioned,
among other things, not only upon such accuracy and completeness as of the date
hereof, but also the continuing accuracy and completeness thereof as of the
Effective Time. Moreover, we have assumed the absence of any change to any of
such instruments between the date thereof and the Effective Time.

Based upon the foregoing, for U.S. federal income tax purposes, it is our
opinion that: (i) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) RPM and LaBranche will each be a party to such reorganization within the
meaning of Section 368(b) of the Code; (iii) except with respect to the
transaction described in Section 9.1(u) of the Merger Agreement, no gain or loss
will be recognized for federal income tax purposes by RPM and LaBranche as a
result of the Merger; and (iv) except with respect to cash received in lieu of
fractional shares of Purchaser Common Stock, a Stockholder will not recognize
gain or loss on the exchange of Target Shares for shares of Purchaser Common
Stock and Purchaser Series A Preferred Stock.

Our opinions are based on current provisions of the Code, Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or the facts and circumstances
surrounding the Merger, or any inaccuracy in the statements, facts, assumptions
or representations upon which we have relied, may affect the continuing validity
of our opinions as set forth herein. We assume no

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responsibility to inform you of any such change or inaccuracy that may occur or
come to our attention. Finally, our opinions are limited to the tax matters
specifically covered hereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the Merger.

We hereby consent to the filing of this letter as an Annex to the prospectus
constituting part of the Registration Statement or as an exhibit to the
Registration Statement and to all references to our firm included in, or made
part of the Registration Statement. In giving such consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Commission promulgated
thereunder.

Sincerely,

/s/ KELLEY DRYE & WARREN LLP

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