Table of Contents
ARTICLE 1
CERTAIN DEFINITIONS...............................................................................................2
Section 1.1 Certain Definitions...............................................................................2
ARTICLE 2
THE MERGER........................................................................................................8
Section 2.1 The Merger........................................................................................8
Section 2.2 Conversion of Shares and Merger Consideration.....................................................9
Section 2.3 Surrender and Payment............................................................................11
Section 2.4 Stock Options, Restricted Stock and Warrants.....................................................12
Section 2.5 Adjustments......................................................................................13
Section 2.6 Fractional Shares................................................................................13
Section 2.7 Withholding Rights...............................................................................14
Section 2.8 Lost Certificates................................................................................14
Section 2.9 Shares Held by Company Affiliates................................................................14
Section 2.10 Appraisal Rights................................................................................14
ARTICLE 3
THE SURVIVING CORPORATION........................................................................................15
Section 3.1 Certificate of Incorporation of the Surviving Corporation........................................15
Section 3.2 Bylaws of the Surviving Corporation..............................................................15
Section 3.3 Directors and Officers of the Surviving Corporation..............................................15
Section 3.4 Officers of the Surviving Corporation............................................................15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................................16
Section 4.1 Organization and Qualification...................................................................16
Section 4.2 Capitalization...................................................................................17
Section 4.3 Authority........................................................................................18
Section 4.4 Governmental Authorization.......................................................................18
Section 4.5 Non-Contravention................................................................................18
Section 4.6 Board Recommendation; State Takeover Statutes....................................................19
Section 4.7 Subsidiaries.....................................................................................19
Section 4.8 SEC Filings......................................................................................20
Section 4.9 Disclosure Documents.............................................................................20
Section 4.10 Absence of Certain Changes......................................................................21
Section 4.11 No Undisclosed Material Liabilities.............................................................22
Section 4.12 Litigation......................................................................................22
Section 4.13 Taxes...........................................................................................22
Section 4.14 Employees and Employee Benefit Plans............................................................24
Section 4.15 Compliance with Law.............................................................................26
Section 4.16 Contracts.......................................................................................27
Section 4.17 Finders' or Advisors' Fees......................................................................27
Section 4.18 Environmental Matters...........................................................................27
Section 4.19 Labor Matters...................................................................................28
Section 4.20 Real Property...................................................................................29
Section 4.21 Proprietary Rights..............................................................................29
Section 4.22 Insurance.......................................................................................30
Section 4.23 Opinion of Financial Advisor....................................................................31
Section 4.24 Takeover Statutes; Rights Agreement.............................................................31
Section 4.25 Transactions with Affiliates....................................................................31
Section 4.26 Interests in Other Entities.....................................................................31
Section 4.27 Information as to the Company...................................................................32
Section 4.28 Company Insurance Subsidiaries..................................................................32
Section 4.29 Information as to the Company...................................................................33
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT.........................................................................33
Section 5.1 Organization and Qualification...................................................................33
Section 5.2 Capitalization...................................................................................34
Section 5.3 Authority........................................................................................35
Section 5.4 Governmental Authorization.......................................................................35
Section 5.5 Non-Contravention................................................................................36
Section 5.6 Board Recommendation.............................................................................36
Section 5.7 Subsidiaries.....................................................................................36
Section 5.8 SEC Filings......................................................................................37
Section 5.9 Disclosure Documents.............................................................................37
Section 5.10 Absence of Certain Changes......................................................................38
Section 5.11 No Undisclosed Material Liabilities.............................................................39
Section 5.12 Litigation......................................................................................39
Section 5.13 Taxes...........................................................................................39
Section 5.14 Employees and Employee Benefit Plans............................................................41
Section 5.15 Compliance with Law.............................................................................42
Section 5.16 Contracts.......................................................................................43
Section 5.17 Finders' or Advisors' Fees......................................................................43
Section 5.18 Environmental Matters...........................................................................43
Section 5.19 Labor Matters...................................................................................44
Section 5.20 Real Property...................................................................................44
Section 5.21 Proprietary Rights..............................................................................45
Section 5.22 Insurance.......................................................................................46
Section 5.23 Opinion of Financial Advisor....................................................................46
Section 5.24 Interests in Other Entities.....................................................................46
Section 5.25 Officer and Director Information................................................................46
Section 5.26 Trading with the Enemy Act; Patriot Act.........................................................47
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ARTICLE 6
COVENANTS RELATING TO CONDUCT OF BUSINESS........................................................................48
Section 6.1 Conduct of Business..............................................................................48
Section 6.2 Governmental Filings.............................................................................51
Section 6.3 No Solicitation by the Company...................................................................52
Section 6.4 No Solicitation by Parent........................................................................53
Section 6.5 Consents of Parent's and the Company's Accountants...............................................54
Section 6.6 Notification of Certain Matters..................................................................54
Section 6.7 SEC Filings......................................................................................55
ARTICLE 7
ADDITIONAL COVENANTS OF PARENT AND THE COMPANY...................................................................56
Section 7.1 Preparation of Proxy Statement; Stockholders Meetings............................................56
Section 7.2 Intentionally Ommitted...........................................................................58
Section 7.3 Access to Information............................................................................58
Section 7.4 Reasonable Commercial Efforts....................................................................58
Section 7.5 Public Announcements.............................................................................60
Section 7.6 Notification of Certain Matters..................................................................60
Section 7.7 Expenses.........................................................................................61
Section 7.8 Affiliates.......................................................................................61
Section 7.9 NSM Listing......................................................................................61
Section 7.10 Resignation of Officers and Directors...........................................................61
Section 7.11 Indemnification.................................................................................61
ARTICLE 8
CONDITIONS TO THE MERGER.........................................................................................62
Section 8.1 Conditions to the Obligations of Each Party......................................................62
Section 8.2 Conditions to the Obligations of Parent and MERGER SUB...........................................63
Section 8.3 Conditions to the Obligations of the Company.....................................................64
ARTICLE 9
TERMINATION......................................................................................................65
Section 9.1 Termination......................................................................................65
Section 9.2 Termination by Parent............................................................................66
Section 9.3 Termination by the Company.......................................................................66
Section 9.4 Procedure for Termination........................................................................67
Section 9.5 Effect of Termination............................................................................67
ARTICLE 10
MISCELLANEOUS....................................................................................................68
Section 10.1 Notices.........................................................................................68
Section 10.2 Non-Survival of Representations and Warranties..................................................68
Section 10.3 Amendments; No Waivers..........................................................................69
Section 10.4 Successors and Assigns..........................................................................69
Section 10.5 Governing Law...................................................................................69
Section 10.6 Jurisdiction....................................................................................69
Section 10.7 Waiver of Jury Trial............................................................................69
Section 10.8 Counterparts; Effectiveness.....................................................................70
Section 10.9 Entire Agreement................................................................................70
Section 10.10 Captions........................................................................................70
Section 10.11 Severability....................................................................................70
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Exhibit A-1 Company Stockholder Voting Agreement.............................................................72
Exhibit A-2 Parent Stockholder Voting Agreement..............................................................73
Exhibit B Affiliate Agreement.................................................................................74
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 10, 2005 (the
"Agreement"), by and among FIRST MONTAUK FINANCIAL CORP., a New Jersey
corporation (the "Company"), OLYMPIC CASCADE FINANCIAL CORPORATION, a Delaware
corporation ("Parent"), and FMFC ACQUISITION CORPORATION, a Delaware corporation
and a wholly owned subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, MERGER SUB and
the Company have approved this Agreement, and deem it advisable and in the best
interests of each corporation and its respective stockholders to consummate the
merger of MERGER SUB with and into the Company upon the terms and subject to the
conditions of this Agreement; and
WHEREAS, pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding shares
of common stock of the Company shall be converted into the right to receive
shares of voting common stock of Parent, all of the issued and outstanding
shares of preferred stock of the Company shall be converted into the right to
receive shares of preferred stock of Parent and all outstanding options and
warrants to purchase shares of common stock of the Company which are not
exercised prior to the Merger shall be assumed by Parent; and
WHEREAS, Parent and MERGER SUB, on the one hand, and the Company, on
the other hand, have required, as a condition to their respective willingness to
enter into this Agreement, that certain shareholders of the Company (including,
without limitation, shareholders holding Company Series B Preferred Stock (as
hereinafter defined)) and certain shareholders of the Parent enter into a
Stockholder Voting and Support Agreement (the "Company Stockholder Voting
Agreement") with Parent and MERGER SUB, and a Stockholder Voting and Support
Agreement (the "Parent Stockholder Voting Agreement") with the Company,
respectively, substantially in the forms attached hereto as Exhibits A-1 and
A-2, concurrently with the execution and delivery of this Agreement; and
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and be accounted for as a purchase transaction;
and
WHEREAS, each of the parties hereto desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"Agreeing Party" has the meaning assigned in Section 6.1.
"Agreement" has the meaning assigned in the Preamble.
"Approvals" has the meaning assigned in Section 8.1(c).
"Certificates" has the meaning assigned in Section 2.3(a).
"Change in the Company Recommendation" has the meaning assigned in
Section 7.1(b).
"Change in the Parent Recommendation" has the meaning assigned in
Section 7.1(c).
"Closing" has the meaning assigned in Section 2.1(d).
"Closing Date" has the meaning assigned in Section 2.1(d).
"COBRA" has the meaning assigned in Section 4.14(f).
"Code" has the meaning assigned in the Preamble.
"Company" has the meaning assigned in the Preamble.
"Company Acquisition Proposal" shall have the meaning assigned in
Section 6.3.
"Company Affiliate" shall have the meaning assigned in Section 7.8.
"Company Agreements" has the meaning assigned in Section 4.5.
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of September 30, 2004.
"Company Balance Sheet Date" means September 30, 2004.
"Company Common Share" has the meaning assigned in Section 2.2(a)(ii).
"Company Common Stock" has the meaning assigned in Section 4.2.
"Company Convertible Debt" has the meaning assigned in Section 4.2. .
"Company Debentures" shall mean the Company's 6% Convertible Debentures
issued pursuant to the Company's private placement memoranda dated September 30,
2002 and July 30, 2003.
"Company Disclosure Schedule" has the meaning assigned in the
introductory clause to Article 4.
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"Company Employment Agreements" has the meaning assigned in Section
4.14(a).
"Company Expenses" has the meaning assigned in Section 9.5.
"Company Fairness Opinion" has the meaning assigned in Section 4.23.
"Company Financial Statements" shall mean the audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company.
"Company Insurance Subsidiaries" shall mean Montauk Insurance Services,
Inc., Montauk Insurance Services, Inc. of Alabama and Montauk Insurance
Services, Inc.
"Company Intellectual Property" has the meaning assigned in Section
4.21.
"Company Licenses" has the meaning assigned in Section 4.21
"Company Permits" has the meaning assigned in Section 4.15(a).
"Company Preferred Stock" shall mean the Company's Series A Preferred
Stock and the Company's Series B Preferred Stock as more fully described in
Section 4.2.
"Company Recommendation" has the meaning assigned in Section 7.1(b).
"Company Record Date" shall mean the date of record set by the Board of
Directors of the Company for the determination of whether a holder of Company
Common Stock is entitled to vote at the Company Stockholders Meeting.
"Company Returns" has the meaning assigned in Section 4.13(b).
"Company SEC Documents" has the meaning assigned in Section 4.8.
"Company Securities" has the meaning assigned in Section 4.2.
"Company Stock Options" has the meaning assigned in Section 2.4(a).
"Company Stock Plans" has the meaning assigned in Section 2.4(a).
"Company Stockholder Approval" has the meaning assigned in Section 4.3.
"Company Stockholders Meeting" has the meaning assigned in Section 4.3.
"Company Trade Secrets" has the meaning assigned in Section 4.21.
"Company Triggering Event" has the meaning assigned in Section 9.2.
"Company Warrants" has the meaning assigned in Section 4.2.
"Costs" has the meaning assigned in Section 7.11(a).
"Dissenting Shares" has the meaning assigned in Section 2.10.
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"Dissenting Shareholders" has the meaning assigned in Section 2.10.
"DGCL" has the meaning assigned in Section 2.1(a).
"Effective Time" has the meaning assigned in Section 2.1(b).
"Employee Plans" has the meaning assigned in Section 4.14(b).
"End Date" has the meaning assigned in Section 9.1(b).
"Environment" means air, surface water, ground water, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish or other natural resources.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other law relating to Hazardous Materials,
including the Comprehensive, Environmental Response Compensation and Liability
Act of 1980, as amended, the Clean Air Act 1990, as amended, the Federal Water
Pollution Control Act of 1948, as amended, the Solid Waste Disposal Act of 1976,
as amended, the Federal Insecticide, Fungicide and Rodenticide Act of 1996, as
amended and the Safe Drinking Water Act of 1974, as amended.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites relating to investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding, or
investigation, formal or informal, related to or arising from any location at
which there has been a Release or threatened or suspected Release of a Hazardous
Material.
"Environmental Permit" means any permit, license, approval, consent or
authorization required under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued by or
entered into with a governmental entity or regulatory authority.
"ERISA" has the meaning assigned in Section 4.14(b).
"Exchange Act" has the meaning assigned in Section 4.4.
"Exchange Agent" has the meaning assigned in Section 2.3(a).
"Exchange Ratio" has the meaning assigned in Section 2.2(a)(iii).
"Form S-4" has the meaning assigned in Section 4.9(a).
"FMSC" means First Montauk Securities Corp., a wholly owned subsidiary
of the Company
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Hazardous Material" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, or (b) any
chemicals, materials, substances or wastes which are now defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import under any
Environmental Law.
4
"Indemnified Parties" has the meaning assigned in Section 7.11(a).
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement/Prospectus" has the meaning assigned in Section
4.9(a).
"Knowledge" with respect to the "Knowledge" of a party means that such
party will be deemed to have "Knowledge" of a particular fact or matter if any
individual who is serving as a director or officer of such party or any of its
Subsidiaries, has actual knowledge of such fact or matter, after due and
diligent inquiry.
"Lien" has the meaning assigned in Section 4.5.
"Material Adverse Effect" means any change, violation, inaccuracy,
circumstance or effect that is materially adverse to the business, properties,
assets (including intangible assets), liabilities, capitalization, results of
operations or financial condition of either party and its Subsidiaries, taken as
a whole, as the case may be.
"Merger" has the meaning assigned in Section 2.1(a).
"Merger Consideration" has the meaning assigned in Section 2.2(b).
"MERGER SUB" has the meaning assigned in the Preamble.
"NASD" means the NASD, Inc.
"National" means National Securities Corporation, a State of Washington
corporation.
"NJBCA" has the meaning assigned in Section 2.1(a).
"Nonplan Stock Options" has the meaning assigned in Section 2.4(a).
"Parent" has the meaning assigned in the Preamble.
"Parent Acquisition Proposal" has the meaning assigned in Section 6.4.
"Parent Agreements" has the meaning assigned in Section 5.5.
"Parent Balance Sheet" means the consolidated balance sheet of the
Parent as of September 30, 2004.
"Parent Balance Sheet Date" means September 30, 2004.
"Parent Common Stock" means the Common Stock of Parent.
"Parent Debenture" has the meaning assigned in Section 2.4(e).
"Parent Disclosure Schedule" has the meaning assigned in the
introductory clause to Article 5.
5
"Parent Employment Agreements" has the meaning assigned in Section
5.14(a).
"Parent Expenses" has the meaning assigned in Section 9.5.
"Parent Fairness Opinion" has the meaning assigned in Section 5.23.
"Parent Financial Statements" shall mean the audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Parent.
"Parent Intellectual Property" has the meaning assigned in Section
5.21.
"Parent Licenses" has the meaning assigned in Section 5.21.
"Parent New Preferred Stock" shall mean a newly designated Series B
Preferred Stock and Series C Preferred Stock.
"Parent Permits" has the meaning assigned in Section 5.15(a).
"Parent Preferred Stock" has the meaning assigned in Section 5.2.
"Parent Record Date" shall mean the date of record set by the Board of
Directors of the Parent for the determination of whether a holder of Parent
Common Stock is entitled to vote at the Parent Stockholders Meeting.
"Parent Recommendation" has the meaning assigned in Section 7.1(c).
"Parent Representatives" has the meaning assigned in Section 6.4.
"Parent Returns" has the meaning assigned in Section 5.13(a).
"Parent Securities" shall have the meaning assigned in Section 5.2.
"Parent SEC Documents" has the meaning assigned in Section 5.8.
"Parent Stockholder Approval" has the meaning assigned in Section 5.3.
"Parent Stockholders Meeting" has the meaning assigned in Section 5.3.
"Parent Trade Secrets" has the meaning assigned in Section 5.21.
"Parent Triggering Event" has the meaning assigned in Section 9.3.
"Parent Warrants" has the meaning assigned in Section 5.2.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"OTC" means the Over-the-Counter Market as reported by the National
Daily Quotation Service published by the National Quotation Bureau, Inc and the
Electronic Bulletin board maintained by the NASD.
"Qualifying Amendment" means an amendment or supplement to the Joint
Proxy Statement/Prospectus or Form S-4 (including by incorporation by reference)
to the extent it contains (a) a Change in the Parent Recommendation or a Change
in the Company Recommendation (as the case may be), (b) a statement of the
reasons of the Board of Directors of Parent or Company (as the case may be) for
making such a Change in the Parent Recommendation or Change in the Company
Recommendation (as the case may be) and (c) additional information reasonably
related to the foregoing.
"Real Property Lease" has the meaning assigned in Section 4.20(b).
"Regulatory Law" means, all federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate (a) mergers, acquisitions or other business combinations, (b) foreign
investment, or (c) actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition.
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"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Required Approvals" has the meaning assigned in Section 7.4(a).
"Required Company Stockholder Vote" has the meaning assigned in Section
4.9(c).
"Restricted Stock Purchase Agreement" means a Restricted Stock Purchase
Agreement in the form utilized under one of the Company Stock Plans pursuant to
which the Company has sold Company restricted stock or issued Company stock
purchase rights or as may otherwise have been entered into by the Company prior
to the date of this Agreement.
"RIA Governmental Authorization" has the meaning assigned in Section
4.16(d).
"Sarbanes-Oxley" has the meaning assigned in Section 4.8.
"SEC" has the meaning assigned in Section 2.4(c).
"Securities Act" has the meaning assigned in Section 2.4(c).
"Site" means any of the real properties currently owned, leased,
occupied, used or operated by the Company, including all soil, subsoil, surface
waters and groundwater.
"Subsidiary" when used with respect to any Person means any other
Person, whether incorporated or unincorporated, of which (a) more than fifty
percent (50%) of the securities or other ownership interests or (b) securities
or other interests having by their terms ordinary voting power to elect more
than fifty percent (50%) of the board of directors or others performing similar
functions with respect to such corporation or other organization, is directly
owned or controlled by such Person or by any one or more of its Subsidiaries.
"Superior Proposal" has the meaning assigned in Section 6.3.
"Surviving Corporation" has the meaning assigned in Section 2.1(a).
"Tail Coverage" has the meaning assigned in Section 7.11(b).
"Takeover Laws" means (a) any "moratorium," "control share
acquisition," "fair price," "supermajority," "affiliate transactions" or
"business combination statute or regulation" or other similar state antitakeover
laws and regulations, (b) Section 203 of the DGCL and (c) Sections 14A:10. et
seq. of the NJBCA.
"Tax" has the meaning assigned in Section 4.13(a).
"Taxing Authority" has the meaning assigned in Section 4.13(a).
"Third Party Expenses" means all legal, accounting, printing and
financial advisory fees and expenses of third parties, whether payable in cash
or securities, incurred by a party to this Agreement in connection with the
negotiation and effectuation of all terms and conditions of this Agreement and
the transactions contemplated hereby.
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ARTICLE 2
THE MERGER
Section 2.1 The Merger.
(a) At the Effective Time (as hereafter defined), in accordance with the
provisions of this Agreement, the General Corporation Law of the State of
Delaware (the "DGCL"), and the New Jersey Business Corporation Act (the
"NJBCA"), MERGER SUB shall be merged with and into the Company (the "Merger"),
whereupon the separate existence of MERGER SUB shall cease and the Company shall
be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger and a wholly owned subsidiary of Parent.
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company and
MERGER SUB shall file a Certificate of Merger with the Secretary of State of
Delaware meeting the requirements of the DGCL, and a certificate of merger with
the Secretary of State of New Jersey meeting the requirements of the NJBCA,
execute, acknowledge, deliver, file and/or record all such other instruments,
and take all such other actions, as may be required in order to cause the Merger
to become effective in accordance with the provisions of the DGCL and NJBCA. The
Merger shall become effective at such time as the certificate of merger is duly
filed with the Secretary of State of the State of Delaware and the Secretary of
State of New Jersey or at such later time as is specified in the certificate of
merger (the "Effective Time"). For accounting purposes, the effective date of
the Merger shall be the first day of the month in which the Closing occurs.
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, property and powers and be subject to all of
the restrictions, disabilities, debts and duties of the Company and MERGER SUB,
all as provided under the DGCL and the NJBCA.
(d) Unless this Agreement shall have been earlier terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article 9
hereof, the closing of the Merger (the "Closing") shall take place (i) at the
offices of Littman Krooks LLP, 655 Third Avenue, New York, New York 10017 as
soon as practicable, but in any event within three (3) business days after the
day on which the last to be fulfilled or waived of the conditions set forth in
Article 8 hereof (than those conditions that by their nature are to be fulfilled
at the Closing, but subject to the fulfillment or waiver of such conditions)
shall be fulfilled or waived in accordance with this Agreement or (ii) at such
other time, place and date as is mutually agreed to in writing by the parties
hereto. The date of the Closing is referred to in this Agreement as the
"Closing Date."
Section 2.2 Conversion of Shares, Preferred Stock and Merger Consideration.
(a) As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(i) Each share of common stock of MERGER SUB that is issued and
outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of common
stock, no par value per share, of the Surviving Corporation, with the same
rights, powers and privileges as the shares so converted, and such shares
shall constitute the only outstanding shares of capital stock of the
Surviving Corporation. From and after the Effective Time, all certificates
representing the common stock of MERGER SUB shall be deemed for all
purposes to represent the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with this Section
2.2(a)(i).
(ii) Each share of Company Common Stock (a "Company Common Share")
held by the Company as treasury stock or owned by any subsidiary of the
Company, by Parent or by any subsidiary of Parent immediately prior to the
Effective Time, shall be canceled and extinguished and no consideration
whatsoever shall be made with respect thereto.
(iii) Each Company Common Share issued and outstanding immediately
prior to the Effective Time (and except as otherwise provided in Section
2.2(a)(ii)), shall be converted into a right to receive 0.5055 (the
"Exchange Ratio") shares of Parent common stock (the "Parent Common
Stock"), plus any cash in lieu of fractional shares of Parent Common Stock,
as provided in Section 2.6 hereof.
8
(iv) Each share of Company Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be converted into
a right to receive one share of Parent Series B Preferred Stock. Each share
of Company Series B Preferred Stock issued and outstanding immediately
prior to the Effective Time shall be converted into a right to receive one
share of Parent Series C Preferred Stock (in each instance, except as
otherwise provided in Section 2.2(a)(v)). The Parent Series B Preferred
Stock shall have terms in form and substance substantially equivalent to
those contained in the Company Series A Preferred Stock and the Parent
Series C Preferred Stock shall have terms in form and substance
substantially equivalent to those contained in the Company Series B
Preferred Stock, in each instance giving effect to the Exchange Ratio to
the conversion ratios contained therein.
(v) Each share of Company Preferred Stock held by the Company as
treasury stock or owned by any subsidiary of the Company, by Parent or by
any subsidiary of Parent immediately prior to the Effective Time, shall be
canceled and extinguished and no consideration whatsoever shall be made
with respect thereto.
(b) The Parent Common Stock to be received as consideration pursuant to the
Merger by each holder of Company Common Stock (together with cash in lieu of
fractional shares of Parent Common Stock, as provided in Section 2.6 hereof) and
the Parent Preferred Stock to be received as consideration pursuant to the
Merger by each holder of Company Preferred Stock, which is the only
consideration being received by the holders of the Company's capital stock, is
referred to collectively herein as the "Merger Consideration."
(c) From and after the Effective Time, all shares of Company Common Stock
and Company Preferred Stock (collectively "Company Shares") converted in
accordance with Sections2.2(a)(iii) and (iv) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Company Shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration, as applicable, and any dividends payable pursuant to Section
2.3(f) hereof. From and after the Effective Time, the stock transfer books of
the Company shall be closed as to holders of Company Common Stock and Company
Preferred Stock immediately prior to the Effective Time and no transfer of
Company Common Stock or Company Preferred Stock by any such holder shall
thereafter be made or recognized.
Section 2.3 Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint a bank or trust
company as agent (the "Exchange Agent") for the purpose of exchanging
certificates representing Company Shares (the "Certificates") for the Merger
Consideration. Parent will make available to the Exchange Agent, as needed, the
Merger Consideration to be delivered in respect of the Company Shares. Promptly
after the Effective Time, Parent will send, or will cause the Exchange Agent to
send, to each holder of record at the Effective Time of Company Shares a letter
of transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates to the Exchange Agent).
(b) Each holder of Company Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
Certificate, together with a properly completed letter of transmittal, will be
entitled to receive the Merger Consideration payable in respect of the Company
Shares represented by such Certificate. Until so surrendered, each such
Certificate shall, after the Effective Time, represent for all purposes only the
right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be registered in the
name of a Person other than the Person in whose name the applicable surrendered
Certificate is registered, it shall be a condition to such registration that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such registration shall pay to
the Exchange Agent any transfer or other taxes required as a result of such
registration in the name of a Person other than the registered holder of such
Certificate or establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Company Shares. If, after the Effective Time, Certificates are
presented to the Exchange Agent, the Surviving Corporation or the Parent, they
shall be canceled and exchanged for the consideration provided for, and in
accordance with the procedures set forth, in this Article 2.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.3(a) hereof that remains unclaimed by the holders of
Company Shares one (1) year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged such holder's
Company Shares for the Merger Consideration in accordance with this Section 2.3
prior to that time shall thereafter look only to Parent for delivery of the
Merger Consideration in respect of such holder's Company Shares. Notwithstanding
the foregoing, Parent, the Exchange Agent and the Surviving Corporation shall
9
not be liable to any holder of Company Shares for any Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) No dividends or other distributions with respect to Parent Common Stock
and Parent Preferred Stock issued in the Merger shall be paid to the holder of
any unsurrendered Certificates until such Certificates are surrendered as
provided in this Section 2.3. Subject to the effect of applicable laws,
following such surrender, there shall be paid, without interest, to the record
holder of the Parent Common Stock and Parent Preferred Stock issued in exchange
therefor (i) at the time of such surrender, all dividends and other
distributions payable in respect of such Parent Common Stock and Parent
Preferred Stock with a record date after the Effective Time and a payment date
on or prior to the date of such surrender and not previously paid, and (ii) at
the appropriate payment date, the dividends or other distributions payable with
respect to such Parent Common Stock and Parent Preferred Stock with a record
date after the Effective Time but with a payment date subsequent to such
surrender. For purposes of dividends or other distributions in respect of Parent
Common Stock and Parent Preferred Stock, all Parent Common Stock and Parent
Preferred Stock to be issued pursuant to the Merger shall be entitled to
dividends pursuant to the immediately preceding sentence as if issued and
outstanding as of the Effective Time.
Section 2.4 Stock Options, Restricted Stock, Warrants and Debentures.
(a) At the Effective Time, each outstanding option to purchase Company
Shares that is either: (a) granted under the Company's plans identified in
Section 2.4 of the Company Disclosure Schedule (as defined in the introductory
clause to Article 4 below) as being the only compensation or benefit plans or
agreements pursuant to which Company Shares may be issued (collectively, the
"Company Stock Plans"), or (b) granted outside of the Company Stock Plans and
identified in Section 2.4 of the Disclosure Schedule (the "Nonplan Stock
Options"), whether vested or not vested (collectively, the "Company Stock
Options"), shall be deemed assumed by Parent and shall thereafter be deemed to
constitute an option to acquire, on the same terms and conditions (including any
provisions for) as were applicable under such Company Stock Option prior to the
Effective Time (in accordance with the past practice of the Company with respect
to interpretation and application of such terms and conditions), the number
(rounded to the nearest whole number) of shares of Parent Common Stock
determined by multiplying (x) the number of Company Shares subject to such
Company Stock Option immediately prior to the Effective Time by (y) the Exchange
Ratio, at a price per share of Parent Common Stock (rounded up to the nearest
whole cent) equal to (a) the exercise price per Company Share otherwise
purchasable pursuant to such Company Stock Option divided by (b) the Exchange
Ratio. The parties intend that the conversion of the Company Stock Options
hereunder will meet the requirements of Section 424(a) of the Code in the case
of incentive stock options and this Section 2.4(a) shall be interpreted or
modified consistent with such intention. The terms of the Company Stock Plans
permit the assumption of options to purchase Company Common Stock as provided in
this Section 2.4(a), without the consent or approval of the holders of such
options, shareholders or otherwise. Except as set forth on Section 2.4(a) of the
Company Disclosure Schedule, the Merger will not terminate or accelerate any
Company Stock Option or any right of exercise, vesting or repurchase relating
thereto with respect to Parent Common Stock acquired upon exercise of such
assumed Company Stock Option. Holders of Company Stock Options will not be
entitled to acquire Company Shares after the Merger. In addition, prior to the
Effective Time, the Company will make any amendments to the terms of such stock
option or compensation plans, arrangements or agreements that are necessary to
give effect to the transactions contemplated by this Section 2.4 (including
without limitation the increase of number of shares authorized thereunder and/or
the adoption of a new stock option plan).
(b) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
pursuant to the terms set forth in this Section 2.4.
(c) No later than ninety (90) days following the Effective Time, Parent
shall use its reasonable efforts to file with the Securities and Exchange
Commission (the "SEC") a registration statement on an appropriate form or a
post-effective amendment to a previously filed registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Parent Common Stock subject to options and other equity-based awards described
in this Section 2.4, and shall use its reasonable efforts to maintain the
current status of the prospectus contained therein, as well as comply with any
applicable state securities or "blue sky" laws, for so long as such options or
other equity-based awards remain outstanding.
(d) Each Company Warrant that remains outstanding following the Effective
Time shall continue to have, and be subject to, the same terms and conditions
set forth in the documents governing such Company Warrant immediately prior to
the Effective Time, except that (i) such Company Warrant will be exercisable for
that number of whole shares of Parent Common Stock as is equal to the product of
(w) the number of Company Shares that were purchasable under the Company Warrant
immediately prior to the Effective Time by (x) the Exchange Ratio, rounded to
the nearest whole number of shares of Parent Common Stock and (ii) the per share
exercise price for Parent Common Stock issuable upon exercise of such Company
Warrant will be equal to (y) the aggregate exercise price of such Company
Warrant immediately prior to the Effective Time divided by (z) the number of
shares of Parent Common Stock for which such Company Warrant shall be
exercisable as determined in accordance with the preceding clause (i), rounded
to the nearest whole cent.
10
(e) Each Debenture that remains outstanding following the Effective Time
shall be deemed converted, without any further action of the holder thereof,
into a new debenture of the Parent ("Parent Debenture"), and be subject to, the
same terms and conditions set forth in the documents governing the Debenture
immediately prior to the Effective Date, except that (i) the Parent Debenture
will be convertible for that number of whole shares of Parent Common Stock as is
equal to the product of (w) the number of Company Shares that were purchasable
under the Debenture immediately prior to the Effective Time by (x) the Exchange
Ratio, rounded to the nearest whole number of shares of Parent Common Stock and
(ii) the per share conversion price for Parent Common Stock issuable upon the
Parent Debenture will be equal to (y) the aggregate conversion price of the
Debenture immediately prior to the Effective Time divided by (z) the number of
shares of Parent Common Stock for which the Parent Debenture shall be
exercisable as determined in accordance with the preceding clause (i), rounded
to the nearest whole cent. Promptly after the Effective Time, Parent will send
(or will cause the Exchange Agent to send) to each holder of the Debentures then
outstanding at the Effective Time a Parent Debenture.
Section 2.5 .....Adjustments. If at any time during the period between the date
of this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of Parent or the Company (other than as contemplated in Section
4.2 hereof or permitted under this Agreement) shall occur, including, without
limitation, by reason of any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any stock dividend thereon
with a record date during such period, the Merger Consideration shall be
appropriately adjusted.
Section 2.6 Fractional Shares
(a) No fractional shares of Parent Common Stock shall be issued in the
Merger, but in lieu thereof, each holder of Company Shares otherwise entitled to
a fractional share of Parent Common Stock will be entitled to receive from the
Exchange Agent, in accordance with the provisions of this Section 2.6 hereof, a
cash payment in lieu of such fractional shares of Parent Common Stock in an
amount equal to the product obtained by multiplying (i) the fractional share of
Parent Common Stock to which such holder otherwise would be entitled to by (ii)
the average closing price on the Over-the-Counter Bulletin Board of a share of
Parent Common Stock for the five (5) trading days immediately preceding the
Closing Date.
(b) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Company Shares in lieu of any fractional shares
of Parent Common Stock, the Exchange Agent shall make available such amounts to
such holders of Company Shares without interest.
Section 2.7 Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article 2 such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Company Shares in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent, as
the case may be.
Section 2.8 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Exchange Agent, the posting by such Person of a bond, in such reasonable
amount as the Exchange Agent may direct, as indemnity against any claim that may
be made against it, the Surviving Corporation or the Exchange Agent with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate, the Merger Consideration to be paid in respect
of the Company Shares represented by such Certificate, as contemplated by this
Article 2.
Section 2.9 Shares Held by Company Affiliates. Anything to the contrary herein
notwithstanding, no shares of Parent Common Stock (or certificates therefor)
shall be issued in exchange for any Certificate to any Person who may be an
"affiliate" of the Company (identified pursuant to Section 7.8 hereof) until
such Person shall have delivered to Parent a duly executed letter as
contemplated in Section 7.8 hereof. Such Person shall be subject to the
restrictions described in such letter, and such shares (or certificates
therefor) shall bear a legend describing such restrictions.
11
Section 2.10 Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, but only to the extent required by the NJBCA, shares of the Company
Shares that are issued and outstanding immediately prior to the Effective Time
and are held by holders of shares of Company Shares who comply with all the
provisions of the NJBCA (each such share, a "Dissenting Share") concerning the
right of holders of shares of Company Shares to dissent from the Merger and
require appraisal of their shares ("Dissenting Shareholders") shall not be
converted into the right to receive the Merger Consideration but shall become
the right to receive such consideration as may be determined to be due such
Dissenting Shareholder pursuant to the laws of the State of New Jersey;
provided, however, that if any Dissenting Shareholder shall subsequently
withdraw his or her demand for appraisal or fail to establish or perfect or
otherwise lose his or her appraisal rights as provided by applicable law, then
such Dissenting Shareholder or Shareholders, as the case may be, shall forfeit
the right to appraisal of such Dissenting Shares and each of such Dissenting
Shares shall thereupon be deemed to have been converted into and represent only
the right to receive the Parent Shares, as if such Dissenting Share had not been
a Dissenting Shares at the Effective Time, without any interest thereon, upon
surrender of the certificate representing such shares, and such shares shall
thereupon no longer be a Dissenting Shares. The Company shall give Parent (A)
prompt notice of any written demands for appraisal of shares of Company Shares,
withdrawals of demands for appraisal and any other related instruments received
by the Company, and (B) the opportunity to direct all negotiations and
proceedings with respect to any such demands for appraisal. The Company will
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisal or settle, offer or otherwise
negotiate to settle any demand.
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.1 Certificate of Incorporation of the Surviving Corporation. The
certificate of incorporation of MERGER SUB in effect at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation until amended
in accordance with applicable law, except that the name of the Surviving
Corporation shall be changed to the current name of the Company.
Section 3.2 Bylaws of the Surviving Corporation. The bylaws of MERGER SUB in
effect at the Effective Time shall be the bylaws of the Surviving Corporation
until amended in accordance with applicable law.
Section 3.3 Directors of the Surviving Corporation. The following persons shall
be the initial members of the Board of Directors of the Surviving Corporation,
each to hold office in accordance with the applicable provisions of law:
Mark Goldwasser
Victor Kurylak
Section 3.4 Officers of the Surviving Corporation. The following persons shall
be the initial officers of the Surviving Corporation, each to hold office in
accordance with the applicable provisions of law:
Name Office(s)
Victor Kurylak Chief Executive Officer and member of the
Office of the Chief Executive Officer
Mark Goldwasser President
Chief Operating Officer
Member of the Office of the Chief
Executive Officer
Robert Rabinowitz General Counsel, Secretary and Vice
President
Mindy Horowitz Chief Financial Officer
Brian Friedman Executive Vice President
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically disclosed in the Company Disclosure Schedule
delivered by the Company to Parent immediately prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and MERGER SUB as follows:
12
Section 4.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey and has all requisite
power and authority to own, lease and operate its respective properties and to
carry on its business as now being conducted.
(b) The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which the nature of its business requires such qualification, which states or
jurisdictions are listed on Section 4.1(b) of the Company Disclosure Schedule,
except where the failure to be so qualified or in good standing, taken together
with all other such failures, would not have a Material Adverse Effect on the
Company.
(c) The Company has heretofore furnished or made available to Parent
complete and correct copies of (i) the charter documents (including the articles
or certificate of incorporation and bylaws, if any), as most recently amended to
date of the Company and each of its Subsidiaries and (ii) any code of conduct or
similar policy adopted by the Company and each of its Subsidiaries. Each such
charter document is in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation or any of the provisions of its respective charter
documents. The corporate minute books of the Company are complete in all
material respects and the minutes and consents contained therein accurately
reflect the actions that were taken at a duly called and held meeting or by
consent without a meeting. All material actions by the Company which required
director or shareholder approval are reflected in the corporate minute books of
the Company. The Company is not in material violation or breach of, or in
material default with respect to, any term of its Certificate of Incorporation
(or other charter documents) or by-laws.
Section 4.2 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, no par value per share (the
"Company Common Stock") and 5,000,000 shares of Preferred Stock, consisting of
625,000 shares of Series A Convertible Preferred Stock, $0.10 par value per
share (the "Company Series A Preferred Stock") and 445,102 shares of Series B
Preferred Stock (the "Company Series B Preferred Stock" and together with the
Company Series A Preferred Stock, the "Company Preferred Stock"). As of February
9, 2005, (a) 14,698,509 shares of Company Common Stock were issued and
outstanding, (b) 305,369 shares of Company Series A Preferred Stock were issued
and outstanding, (c) 197,824 shares of Company Series B Preferred Stock were
issued and outstanding, (d) 17,000,000 shares of Company Common Stock were
reserved for issuance pursuant to the Company Stock Plans, of which stock
options to purchase an aggregate of 3,127,698 shares of Company Common Stock
were outstanding, and no shares of Company Common Stock were reserved for
issuance pursuant to Non plan Stock Options, (e) 3,885,946 shares of Company
Common Stock were reserved for issuance upon exercise of warrants ("Company
Warrants"), of which 3,072,446 were reserved for issuance upon exercise of
Series C Warrants, exercisable at $7.00 per share until February 17, 2005, (f)
2,890,000 shares of Company Common Stock were reserved for issuance upon
conversion of debentures and/or convertible debt ("Company Convertible Debt")
and (g) no Company Shares were held in the Treasury of the Company or any of its
Subsidiaries. All the outstanding shares of the Company's Common Stock are, and
all Company Shares that may be issued pursuant to the exercise of outstanding
Company Stock Options, the Company Warrants and the Company Convertible Debt
will be, when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Except as disclosed in this
Section 4.2 or in Section 4.2 of the Company Disclosure Schedule, there are
outstanding (x) no shares of capital stock or other voting securities of the
Company, (y) no securities or indebtedness of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
and (z) no options, warrants or other rights to acquire from the Company, and no
preemptive or similar rights, subscription or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of the Company, obligating the Company to issue, transfer
or sell, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company or obligating
the Company to grant, extend or enter into any such option, warrant,
subscription or other right, convertible security, agreement, arrangement or
commitment (the items in clauses (x), (y) and (z) being referred to collectively
as the "Company Securities"). There are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any Company Securities, except as set forth in the terms and conditions of the
Company Debentures and the Company's Series B Convertible Redeemable Preferred
Stock. There are not as of the date hereof and there will not be at the
Effective Time any stockholder agreements, voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party or by
which it is bound relating to the voting of any shares of the capital stock of
the Company or any agreements, arrangements, or other understandings to which
the Company or any of its Subsidiaries is a party or by which it is bound that
will limit in any way the solicitation of proxies by or on behalf of the Company
from, or the casting of votes by, the stockholders of the Company with respect
to the Merger.
13
Section 4.3 Authority. The Company has full corporate power and authority
to execute and deliver this Agreement and, subject to the requisite approval of
its stockholders, to perform its obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly and validly authorized
and approved by Company's Board of Directors. The Board of Directors of the
Company has directed that this Agreement be submitted to the Company's
stockholders for approval at a meeting of the Company's stockholders for the
purpose of approving the Merger and this Agreement (the "Company Stockholders
Meeting"), and, except for the approval of this Agreement and the Merger by the
affirmative vote of holders of a majority of the outstanding shares of the
Company Common Stock (the "Company Stockholder Approval"), no other corporate
proceedings are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and (assuming due authorization, execution
and delivery by Parent and MERGER SUB) it constitutes a legal, valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, (b) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies and (c)
as limited by applicable rules and regulations of the NASD with respect to
change of control of a registered broker-dealer.
Section 4.4 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation of the Merger
by the Company require no consent of, or filing with, any governmental body,
agency, official or authority other than (a) the filing of a certificate of
merger in accordance with DGCL and the NJBCA, (b) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"), (c) compliance with
any applicable requirements of the NASD and state blue sky commissioners, (d)
compliance with any applicable requirements of the Securities Act and state
securities laws, and (e) other actions or filings which if not taken or made
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 4.5 Non-Contravention. Except as disclosed in Section 4.5 of the
Company Disclosure Schedule, the execution, delivery and performance by the
Company of this Agreement and its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby do not and will not (a)
violate, contravene or conflict with the certificate of incorporation or bylaws
of the Company, (b) violate, 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 the Company or any of its Subsidiaries,
(c) constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company or any of
its Subsidiaries or to a loss of any benefit to which the Company or any of its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon the Company or any of its Subsidiaries (the "Company
Agreements") or any license, franchise, lease, permit or other similar
authorization held by the Company or any of its Subsidiaries, or (d) result in
the creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries. For purposes of this Agreement, "Lien" means any mortgage, lien,
pledge, hypothecate, charge, security interest or encumbrance of any kind in
respect of such asset other than any such mortgage, lien, pledge, charge,
security interest or encumbrance (i) for Taxes (as defined in Section 4.13
hereof) not yet due or being contested in good faith (and for which adequate
accruals or reserves have been established on the Company Balance Sheet (as such
term is defined in Section 4.9 hereof), as the case may be); (ii) which is a
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
lien arising in the ordinary course of business; (iii) statutory or common law
liens to secure obligations to landlords, lessors or renters under leases or
rental agreements confined to the premises rented or (iv) deposits or pledges
made in connection with, or to secure payment of, workers' compensation,
unemployment insurance, or other social security programs mandated under laws
applicable to the Company. Except as disclosed in Section 4.5 of the Company
Disclosure Schedule, neither the Company nor any Subsidiary of the Company is a
party to any agreement that expressly limits the ability of the Company or any
Subsidiary of the Company, or would limit Parent or any Subsidiary of Parent
after the Effective Time, to compete in or conduct any line of business or
compete with any Person or in any geographic area or during any period of time.
Section 4.6 Board Recommendation; State Takeover Statutes. The Board of
Directors of the Company has (a) approved and adopted this Agreement, (b)
determined that this Agreement and the transaction contemplated by this
Agreement are advisable, fair to and in the best interests of the Company and
the stockholders of the Company, (c) resolved to recommend adoption of this
Agreement to the stockholders of the Company, and (d) taken and will take all
actions necessary to ensure that the restrictions applicable to business
combinations contained in Section 14A:10. et seq. of the NJBCA are, and will be,
inapplicable to the execution, delivery and performance of this Agreement and to
the consummation of the Merger. No other state takeover statute or similar legal
requirement applies or purports to apply to the Merger, this Agreement or any of
the transactions contemplated hereby.
14
Section 4.7 Company Subsidiaries. Each of the Company's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each of the Company's Subsidiaries is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, which states or
jurisdictions are listed on Section 4.7 of the Company Disclosure Schedule,
except where the failure to be so qualified or in good standing, taken together
with all other such failures, would not have a Material Adverse Effect on the
Company. Section 4.7 of the Company Disclosure Schedule lists the only
Subsidiaries of the Company as of the date hereof, and all Subsidiaries of the
Company thereafter formed or acquired. All of the outstanding shares of capital
stock of the Subsidiaries of the Company are validly issued, fully paid and
nonassessable and are owned by the Company free and clear of all liens, claims,
charges or encumbrances, and there are no irrevocable proxies with respect to
such shares. There are no restrictions on the Company to vote the stock of any
of its Subsidiaries.
Section 4.8 SEC Filings. The Company has filed with the SEC true and
complete copies of all forms, reports, schedules and other documents required to
be filed by it under the Exchange Act or the Securities Act since January 1,
2000 (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The financial
statements included in the Company SEC Documents were prepared in accordance
with GAAP consistently applied (except as may be otherwise indicated in the
notes thereto), and fairly present the financial position of the Company as at
the dates thereof and its results of operations and cash flows for the periods
indicated. Except as set forth in Section 4.8 of the Company's Disclosure
Schedule, none of the Company's Subsidiaries is required to file any forms,
reports or other documents with the SEC. Additionally, since the adoption of the
Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") and to the extent that the Company
is subject to Sarbanes-Oxley, the Company has complied in all material respects
with the applicable laws, rules and regulation under Sarbanes-Oxley.
Section 4.9 Disclosure Documents.
(a) The joint proxy statement of the Company and Parent relating to the
required meetings of stockholders of the Company and Parent contemplated by
Section 7.1(a) hereof and the prospectus of Parent relating to the shares of
Parent Common Stock to be issued in connection with the Merger (the "Joint Proxy
Statement/Prospectus") to be filed with the SEC in connection with the Merger
and the registration statement on Form S-4 of Parent (the "Form S-4") to be
filed under the Securities Act relating to the issuance of Parent Common Stock
in the Merger, and any amendments or supplements thereto, will, when filed,
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act.
(b) Neither the Joint Proxy Statement/Prospectus to be filed with the SEC,
nor any amendment or supplement thereto, will, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to
stockholders of Company or at the time such stockholders vote on the adoption
and approval of this Agreement and the transactions contemplated hereby, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Neither the Form S-4
nor any amendment or supplement thereto will, at the time it becomes effective
under the Securities Act or at the Effective Time, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. No
representation or warranty is made by the Company in this Section 4.9 with
respect to statements made or incorporated by reference therein based on
information supplied by Parent for inclusion or incorporation by reference in
the Joint Proxy Statement/Prospectus or the Form S-4.
15
(c) The affirmative vote of the holders of a majority of the shares of
Company Common Stock and the affirmative vote of the holders of a majority of
the shares of Company Series A Preferred Stock outstanding on the Company Record
Date (the "Required Company Stockholder Vote") are the only votes of the holders
of any class or series of the Company's capital stock necessary to adopt this
Agreement.
Section 4.10 Absence of Certain Changes. Except as set forth in Section 4.10
of the Company Disclosure Schedule, and except as expressly permitted by this
Agreement, since September 30, 2004 (the "Company Balance Sheet Date"), the
Company and each Subsidiary has conducted its respective business in the
ordinary course consistent with past practice and, without limiting the
generality of the foregoing:
(a) There has been no event, occurrence or development of a state of
circumstances or facts that, individually or in the aggregate, has had or would
be reasonably likely to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole;
(b) There has not been any amendment or change in the Certificate of
Incorporation or Bylaws of the Company of its Subsidiaries;
(c) The Company has not nor has any Subsidiary of the Company incurred
additional debt for, borrowed money, or incurred any obligation or liability
which individually or in the aggregate exceeded $25,000, except for settlements
of litigations, arbitrations or other claims or proceedings which may be made by
the Company or any Subsidiary as described in Section 4.10(c) of the Company's
Disclosure Schedule;
(d) The Company has not nor has any Subsidiary declared or made any
dividend, payment or other distribution on or with respect to any share of
capital stock, or redeemed, purchased or otherwise acquired any shares of its
capital stock or any option, warrant or other right to purchase or acquire any
such shares other than, in the case of any Subsidiary, to the Company;
(e) Neither the Company nor its Subsidiaries has made any change in
accounting principles or methods, except in so far as may be required under
GAAP;
(f) The Company has not nor has any Subsidiary of the Company entered into
any material transaction or contract, or made any material commitment to do the
same, except in the ordinary course of business consistent with past practice;
(g) The Company has not nor has any Subsidiary of the Company increased or
prepaid its indebtedness for borrowed money, except current borrowings under
credit lines listed on Section 4.10(g) of the Company Disclosure Schedule or
made any loan to any Person other than to any employee for normal travel and
expense advances;
(h) The Company has not nor has any Subsidiary of the Company granted any
increase in the rate of wages, salaries, bonuses or other remuneration of any
employee who, whether as a result of such increase or prior thereto, receives
aggregate compensation from the Company or its Subsidiaries at an annual rate of
$50,000 or more, or except in the ordinary course of business to any other
employees;
(i) The Company has not nor has any Subsidiary of the Company entered into
an employment or exclusive consultant agreement which is not cancelable without
penalty or other financial obligation within 30 days; and
(j) The Company has not nor has any Subsidiary of the Company agreed,
whether or not in writing, to do any of the actions set forth in any of the
above clauses.
Section 4.11 No Undisclosed Material Liabilities. Since the Balance Sheet
Date, except as set forth in Section 4.11 of the Company Disclosure Schedule,
there are no material liabilities of the Company or any Subsidiary of the
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(i) Liabilities incurred in the ordinary course of business and consistent
with past practice;
(ii) Liabilities disclosed in the Company SEC Documents filed prior to the
date hereof; or
(iii) Liabilities under this Agreement.
16
Section 4.12 Litigation. Except as disclosed in the Company's SEC Documents
or on Section 4.12 of the Company's Disclosure Schedule, there is no claim,
dispute, action, proceeding, arbitration, notice, order, suit, appeal or
investigation, at law or in equity, pending or, to the Company's Knowledge,
threatened, against the Company or any Subsidiary of the Company, any of their
respective directors, officers, employees or agents, or involving any of their
respective assets or properties before any court, agency, authority, arbitration
panel or other tribunal which, if determined adversely, would have a Material
Adverse Effect on the Company. Except as disclosed in the Company's SEC
Documents, neither the Company nor any Subsidiary is subject to any order, writ,
injunction or decree of any court, agency, authority, arbitration panel or other
tribunal, nor is the Company or any Subsidiary in default with respect to any
notice, order, writ, injunction or decree which would have a Material Adverse
Effect on the Company.
Section 4.13 Taxes.
(a) For purposes of this Agreement, "Tax" (and, with correlative meaning,
"Taxes" and "Taxable") means any and all taxes, including without limitation (i)
any income, profits, alternative or add-on minimum tax, gross receipts, sales,
use, value-added, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, net
worth, premium, property, environmental or windfall profit tax, custom, duty or
other tax, governmental fee or assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental entity responsible for the imposition of any such
tax (domestic or foreign) (a "Taxing Authority"), (ii) any liability for the
payment of any amounts of the type described in clause (i) above as a result of
being a member of an affiliated, consolidated, combined or unitary group for any
Taxable period or as the result of being a transferee or successor thereof, and
(iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) above as a result of any express or implied obligation to
indemnify any other Person.
(b) All Tax returns, statements, reports and forms (including estimated Tax
returns and reports and information returns and reports) required to be filed
with any Taxing Authority with respect to any Taxable period ending on or before
the Effective Time, by or on behalf of the Company or any Subsidiary of the
Company (collectively, the "Company Returns"), have been or will be filed when
due (including any extensions of such due date), and all amounts shown to be due
thereon on or before the Effective Time have been or will be paid on or before
such date, other than such Taxes which are adequately reserved for in accordance
with GAAP. The Company Financial Statements fully accrue all actual and
contingent liability for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. The Company Financial Statements (i) fully
accrue consistent with past practices and in accordance with GAAP all actual and
contingent liabilities for Taxes with respect to all periods through the date of
the Company Financial Statements and (ii) properly accrue consistent with past
practices and in accordance with GAAP all liabilities for Taxes payable after
the Company Balance Sheet Date with respect to all transactions and events
occurring on or prior to such date. All information set forth in the notes to
the Company Financial Statements relating to Tax matters is accurate in all
material respects.
(c) No Tax liability has been incurred since the date of the Company
Financial Statements other than in the ordinary course of business and adequate
provision has been made for all Taxes since that date in accordance with GAAP on
at least a quarterly or, with respect to employment taxes, monthly basis. The
Company and each Subsidiary of the Company have withheld and paid to the
applicable financial institution or Taxing Authority all amounts of Taxes
required to be withheld in all material respects. No Company Returns filed with
respect to federal income tax returns for Taxable years of the Company in the
case of the United States, have been examined by the Internal Revenue Service.
The Company has not nor has any Subsidiary of the Company been granted any
extension or waiver of the limitation period applicable to any Company Return.
(d) There is no claim, audit, action, suit, proceeding or, investigation
now pending or, to the Company's Knowledge, threatened against or with respect
to the Company or any Subsidiary of the Company in respect of any Tax or
assessment. There are no liabilities for Taxes with respect to any notice of
deficiency or similar document of any Tax Authority received by the Company or
any Subsidiary of the Company which have not been satisfied in full (including
liabilities for interest, additions to tax and penalties thereon and related
expenses). There are no liens for Taxes upon the assets of the Company or any
Subsidiary of the Company except liens for current Taxes not yet delinquent.
Except as may be required as a result of the Merger, the Company has not nor has
any Subsidiary of the Company been nor will it be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Effective Time.
17
(e) Except as set forth in Section 4.13 of the Company's Disclosure
Schedule, there is no contract, agreement, plan or arrangement, including
without limitation the provisions of this Agreement, covering any employee or
independent contractor or former employee or independent contractor of the
Company or any Subsidiary of the Company that, individually or collectively,
could, as a result of the transactions contemplated hereby, give rise to the
payment of any amount that would not be deductible pursuant to section 280G or
section 162 (m) of the Code. Other than pursuant to this Agreement, the Company
is not nor is any Subsidiary of the Company a party to or bound by (nor will
they prior to the Effective Time become a party to or bound by) any tax
indemnity, tax sharing or tax allocation agreement (whether written, unwritten
or arising under operation of federal law as a result of being a member of a
group filing consolidated tax returns, under operation of certain state laws as
a result of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than the Company
or any Subsidiary of the Company. None of the assets of the Company or any
Subsidiary of the Company (i) is property that the Company or any Subsidiary of
the Company is required to treat as owned by any other Person pursuant to the
so-called "safe harbor lease" provisions of former section 168(f)(8) of the
Code, (ii) directly or indirectly secures any debt the interest on which is tax
exempt under section 103(a) of the Code, or (iii) is "tax exempt use property"
within the meaning of section 168(h) of the Code. The Company has not nor has
any Subsidiary of the Company participated in (and prior to the Effective Time
the Company will not nor will any Subsidiary of the Company participate in) an
international boycott within the meaning of section 999 of the Code. The Company
has disclosed on its federal income tax returns all positions taken therein that
could give rise to a substantial understatement of federal income tax within the
meaning of section 6661 of the Code. The Company has previously provided or made
available to Parent complete and accurate copies of all the Company Returns and,
as reasonably requested by Parent, prior to or following the date hereof,
presently existing information statements, reports, work papers, Tax opinions
and memoranda and other Tax data and documents.
Section 4.14 Employees and Employee Benefit Plans.
(a) Except as set forth at Section 4.14(a) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary of the Company has entered into
any employment contract or arrangement with any director, officer, employee or
any other consultant or Person (i) which is not terminable by it at will without
liability, except as the right of the Company or such Subsidiary to terminate
its employees at will may be limited by applicable federal, state or foreign
law, or (ii) under which the Company or any Subsidiary of the Company could have
any material liability (collectively, the "Company Employment Agreements").
(b) Except as set forth in Section 4.14(b) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary of the Company maintains any
deferred compensation, pension, health, profit sharing, bonus, stock purchase,
stock option, fringe benefit, hospitalization, insurance, severance, change in
control, retention, workers' compensation, supplemental unemployment benefits,
vacation benefits, disability benefits, or any other employee benefit plan (as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or otherwise) or welfare benefit plan or obligation covering any of
its current or former officers, directors, employees or consultants ("Employee
Plans").
(c) The Company has made available to Parent true, complete and correct
copies of (i) each Company Employment Agreement, (ii) each Employee Plan (or, in
the case of any unwritten Employee Plans, descriptions thereof), (iii) the most
recent annual report on Form 5500 filed with the IRS with respect to each
Employee Plan (if any such report was required), (iv) the most recent summary
plan description for each Employee Plan for which such summary plan description
is required, (v) each trust agreement and group annuity contract relating to any
Employee Plan, (vi) each determination letter and any outstanding request for a
determination letter, and (vii) all correspondence with the IRS or the United
States Department of Labor relating to any outstanding controversy or audit.
Each Employee Plan complies in all material respects with applicable laws,
including, without limitation, ERISA and the Code.
(d) Each Employee Plan has been maintained, funded, operated and
administered in compliance in all material respects with all applicable laws and
regulations, including but not limited to, ERISA, the Code, and the Health
Insurance Portability and Accountability Act of 1996. Each Employee Plan that is
intended to be qualified under section 401(a) of the Code and each trust forming
a part thereof that is intended to be exempt from taxation under Section 501(a)
of the Code has received a favorable determination letter from the IRS as to its
qualification and tax-exempt status and nothing has occurred, whether by any
action or any failure to act, since the date of such determination letter that
could adversely affect the qualification of such Employee Plan or the tax-exempt
status of such related trust. No event has occurred and, to the Knowledge of the
Company, there currently exists no condition or set of circumstances in
connection with which the Company that could reasonably be expected to be
subject to any liability under the terms of any Employee Plans (other than for
benefits payable in the normal course of the operations of the Employee Plans),
ERISA, the Code or any other applicable law, including any liability under Title
IV of ERISA. Each Employee Plan can be amended or terminated in accordance with
its terms and any applicable law without any material liability to the Company
or any of its Subsidiaries. No Employee Plan is a "multiemployer plan" as
defined in section 3(37) of the ERISA and 414(f) of the Code, or a "multiple
employer plan" as described in section 4063(a) of ERISA and 413 of the Code, and
none of the Company, any of its Subsidiaries or any ERISA Affiliate has ever
contributed or had an obligation to contribute to any multiemployer plan or any
plan subject to Title IV of ERISA. For purposes of this Section 4.14, an "ERISA
Affiliate" is any organization that is a member of the controlled group of
organizations of the Company and its Subsidiaries (within the meaning of
sections 414(b), (c), (m) or (o) of the Code).
18
(e) Except as set forth in Section 4.14(e) of the Company Disclosure
Schedule, no current or former director, officer or other employee of, or
consultant to, the Company or any of its Subsidiaries will become entitled to
any retirement, severance or similar benefit or enhanced or accelerated benefit
(including any acceleration of vesting or lapse of repurchase rights or
obligations with respect to any employee stock option or other benefit under any
stock option plan or compensation plan or arrangement of the Company) as a
result of the transactions contemplated hereby.
(f) Except as set forth in Section 4.14(f) of the Company Disclosure
Schedule, no Employee Plan provides post-retirement health and medical, life or
other insurance benefits for retired employees of the Company or any of its
Subsidiaries (other than benefit coverage mandated by applicable statute,
including benefits provided pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as codified in Code section 4980B and ERISA sections
601 et seq., as amended from time to time ("COBRA")). The unfunded post
retirement benefit obligation (determined as of December 31, 2003 in accordance
with United States Financial Accounting Standards Board Statement No. 106) of
the Company and its Subsidiaries with respect to all post retirement benefits of
their current and former employees equals the amount set forth in the Company
Balance Sheet.
(g) There has been no amendment to, written interpretation or announcement
(whether or not written) by the Company or any of its affiliates relating to, or
change in employee participation or coverage under, any Employee Plan that would
increase materially the expense of maintaining such Employee Plan above the
level of the expense incurred in respect thereof for the twelve (12) months
ended on the Company Balance Sheet Date.
Section 4.15 Compliance with Law.
(a) All licenses, franchises, permits, clearances, consents, certificates
and other evidences of authority of the Company and its Subsidiaries which are
necessary to the conduct of the Company's and its Subsidiaries' respective
businesses ("Company Permits") are in full force and effect and the Company is
not nor is any Subsidiary in violation of any Company Permit in any respect,
except for such exceptions or violations that, individually or in the aggregate,
would not have, or be reasonably likely to have, a Material Adverse Effect.
Except for exceptions which would not have a Material Adverse Effect, the
businesses of the Company and its Subsidiaries have been conducted in accordance
with all applicable laws, regulations, orders and other requirements of
governmental authorities. No investigation or review by any governmental or
regulatory body or authority is pending or, to the Knowledge of Company,
threatened against the Company or its Subsidiaries, nor has any governmental or
regulatory body or authority indicated an intention to conduct the same, other
than, in each such case, those the outcome of which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company. There is no action or claim that is pending or threatened to revoke
or terminate any of such Company Permits or declare any such Company Permit
invalid in any material respect.
(b) The Company and its Subsidiaries possess and are in compliance with all
SEC, NASD, OTC and applicable state governmental authorizations (collectively,
"BD Governmental and SRO Authorizations") that are required to conduct the
broker-dealer business of the Company and its Subsidiaries including, without
limitation, all authorizations and licenses issued to any principal, officer or
employee of the Company used in connection with the conduct or operations of the
Company's and its Subsidiaries' business, except where the failure to obtain or
comply with such BD Governmental and SRO Authorization would not have a Material
Adverse Effect on the Company or on its Subsidiaries. Each of such BD
Governmental and SRO Authorizations are listed on Section 4.15(b) of the Company
Disclosure Schedule. Each of such BD Governmental and SRO Authorizations is
valid and in full force and effect and neither the Company, its Subsidiaries,
nor any of their respective employees received in writing, at any time since
January 1, 2002, other than as set forth on the Company's or its Subsidiaries'
Form BD, any notice or other communication from any governmental body regarding
(i) any actual or alleged violation of or failure to comply with any material
term or requirement of any BD Governmental and SRO Authorization, or (ii) any
actual or proposed revocation, withdrawal, suspension, cancellation, termination
of, or modification to any BD Governmental and SRO Authorization, except as may
be required to consummate the transaction contemplated hereby.
(c) Each of the Company's broker-dealer subsidiaries is, and at all times
since January 1, 2002 has been, in compliance with SEC Rule 15c-3(1) and Rule
15c-3(3) and in substantial compliance with the other provisions of Rule 15c-3.
19
(d) The Company and its Subsidiaries possess and are in compliance with all
SEC and applicable state governmental authorizations (collectively, "RIA
Governmental Authorizations") that are required to conduct the investment
adviser business of the Company and its Subsidiaries including, without
limitation, all authorizations and licenses issued to any principal, officer or
employee of the Company used in connection with the conduct or operations of the
Company's and its Subsidiaries' business, except where the failure to obtain or
comply with such RIA Governmental Authorization would not have a Material
Adverse Effect on the Company or on its Subsidiaries. Each of such RIA
Governmental Authorizations are listed on Section 4.15(d) of the Company
Disclosure Schedule. Each of such IRA Governmental Authorizations is valid and
in full force and effect and neither the Company, its Subsidiaries, nor any of
their respective employees received in writing, at any time since January 1,
2002, other than as set forth on the Company's or its Subsidiaries' Form ADV,
any notice or other communication from any governmental body regarding (i) any
actual or alleged violation of or failure to comply with any material term or
requirement of any RIA Governmental Authorization, or (ii) any actual or
proposed revocation, withdrawal, suspension, cancellation, termination of, or
modification to any RIA Governmental Authorization, except as may be required to
consummate the transaction contemplated hereby.
Section 4.16 Contracts. Each Company Agreement is legally valid and binding
and in full force and effect, and neither the Company nor any Subsidiary of the
Company has breached, is in default under or has received written notice of any
breach of or default under any Company Agreement except where such breach, taken
together with all other such breaches, would not have a Material Adverse Effect
on the Company. To the Company's Knowledge, no other party to any of the Company
Agreements has breached or is in default of any of its obligations thereunder.
Section 4.17 Finders' or Advisors' Fees. Except as set forth in Section 4.17
of the Company's Disclosure Section, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Company or any of its Subsidiaries who might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.
Section 4.18 Environmental Matters. Except as set forth in Section 4.18 of
the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries possesses any and all
Environmental Permits necessary to or required for the operation of its business
as currently conducted. The Company and its Subsidiaries will obtain, prior to
the Closing, any Environmental Permits that must be obtained as of or
immediately after the Closing in order for the Surviving Corporation and/or the
Company to conduct the business of the Company and its Subsidiaries as it was
conducted prior to the Closing.
(b) Each of the Company and its Subsidiaries is in compliance in all
material respects with (i) all terms, conditions and provisions of its
Environmental Permits; and (ii) all Environmental Laws.
(c) Each of the Company and its Subsidiaries has not received any notice of
alleged, actual or potential responsibility for, or any inquiry regarding, (i)
any release or threatened or suspected release of any Hazardous Material, or
(ii) any violation of Environmental Law, and there is no outstanding civil,
criminal or administrative investigation, action, suit hearing or proceeding
pending or threatened against the Company pursuant to any Environmental Law.
(d) Each of the Company and its Subsidiaries does not have any obligation
or liability with respect to any Hazardous Material, including any Release or
threatened or suspected Release of any Hazardous Material and any violation of
Environmental Law, and there have been no events, facts or circumstances which
could form the basis of any such obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from, in, to,
on, or under any Site and no Hazardous Material is present in, on, about or
migrating to or from any Site.
(f) Each of the Company and its Subsidiaries has not transported or
arranged for the treatment, storage, handling, disposal or transportation of any
Hazardous Material at, from or to any site or other location.
20
(g) No Site is a current or proposed Environmental Clean-up Site.
(h) There are no Liens under or pursuant to any Environmental Law on any
Site.
(i) There is no (i) underground storage tank, active or abandoned, (ii)
polychlorinated biphenyl containing equipment, (iii) asbestos-containing
material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any
Site. Any underground storage tank meets all current applicable upgrade
requirements.
(j) There have been no Environmental investigations, studies, audits,
tests, reviews or other analyses conducted which are in the Company's possession
with respect to any Site which have not been delivered to Parent prior to
execution of this Agreement.
(k) The Company and its Subsidiaries have provided all notifications and
warnings, made all reports, and kept and maintained all records required
pursuant to Environmental Laws.
Section 4.19 Labor Matters. There are no labor disputes or union
organization activities pending or, to the Company's Knowledge, threatened
between the Company or its Subsidiary and any of its employees. None of the
employees of the Company or any of its Subsidiaries belongs to any union or
collective bargaining unit. The Company and its Subsidiaries have complied in
all material respects with all applicable state and federal equal employment
opportunity and other laws and regulations related to employment or working
conditions, including all civil rights and anti-discrimination laws, rules and
regulations. The Company is not nor is any of its Subsidiaries the subject of
any material proceeding asserting that the Company or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization nor is there pending or, to the
Knowledge of the Company, threatened, any labor strike, dispute, walkout, work
stoppage, slowdown or lockout involving the Company or any of its Subsidiaries.
Section 4.20 Real Property.
(a) Owned Real Property. The Company does not own any real property
(including ground leases) or hold any option or right of first refusal or first
offer to acquire any real property, and the Company is not obligated by contract
or otherwise to purchase any real property.
(b) Leased Real Property. Section 4.20(b) of the Company Disclosure
Schedule contains an accurate and complete list of each Real Property Lease.
"Real Property Lease" is defined as any real property lease, sublease, license
or other occupancy agreement, including without limitation, any modification,
amendment or supplement thereto and any other related document or agreement
executed or entered into by the Company or Parent (including, without
limitation, any of the foregoing which the Company or Parent has subleased or
assigned to another Person and as to which the Company of Parent remains
liable). With respect to each Real Property Lease set forth on Section 4.20(b)
of the Company Disclosure Schedule: (a) it is valid, binding and in full force
and effect; (b) all rents and additional rents and other sums, expenses and
charges due to date have been paid; (c) the lessee has been in peaceable
possession since the commencement of the original term thereof; (d) no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor; (e) there exists no default or event of default by the
Company or by any other party thereto; (f) to the Company's Knowledge, there
exists no occurrence, condition or act which, with the giving of notice, the
lapse of time or the happening of any further event or condition, would become a
default or event of default by the Company thereunder; and (g) there are no
outstanding claims of breach or indemnification or notice of default or
termination thereunder. The Company holds the leasehold estate on each Real
Property Lease, free and clear of all Liens except for the liens of mortgagees
of the real property in which such leasehold estate is located. The real
property leased by the Company is adequate and suitable for the purposes for
which it is presently being used. The Company is in physical possession and
actual and exclusive occupation of the whole of each of its leased properties.
The Company does not owe any brokerage commission with respect to any Real
Property Lease.
Section 4.21 Proprietary Rights. Section 4.21 of the Company Disclosure
Schedule sets forth a list of all registered and material unregistered Company
Intellectual Property (as defined below) owned by the Company and used in the
conduct of its business and all agreements granting any right to use or practice
any right relating to the Company Intellectual Property (as defined below)
currently used in the conduct of the Company's business (the "Company
Licenses"). Except as set forth in Section 4.21 of the Company Disclosure
Schedule: (i) the Company or its Subsidiaries is the sole owner of all of its
rights under the Company Licenses free and clear of any liens, claims,
encumbrances or interests; (ii) the Company or its Subsidiaries is the sole
owner of, or has a valid right to use pursuant to a Company License, all patents
21
and patent applications; registered and unregistered trademarks, service marks,
trade names, trade dress, logos, company names and other source or business
identifiers, including all goodwill associated therewith; the names, likenesses
and other attributes of individuals; registered and unregistered copyrights,
computer programs and databases; trade secrets, proprietary technology,
know-how, industrial designs and other confidential information ("Company Trade
Secrets"); any pending applications for any of the foregoing (collectively, the
"Company Intellectual Property") currently used in the conduct of the Company's
business, free and clear of any liens, claims, encumbrances or interests, (iii)
the present or past operations of the Company or its Subsidiaries does not
infringe upon, violate, interfere or conflict with the rights of others with
respect to any Company Intellectual Property and no claim is pending or, to the
Company's Knowledge, threatened, to this effect; (iv) to the Company's
knowledge, none of the Company Intellectual Property is invalid or
unenforceable, or has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Company Intellectual Property and no claim is
pending or, to the Company's Knowledge, threatened, to this effect; (v) no
Company License provision or any other contract, agreement or understanding with
any party exists which would prevent the continued use by the Company or its
Subsidiaries (as currently used by the Company or its Subsidiaries) of any
Company Intellectual Property following the consummation of the transactions
contemplated hereby, except where such event would not have a Material Adverse
Effect on the Company, taken as whole; (vi) to the Company's Knowledge, no
person is infringing upon or otherwise violating any Company Intellectual
Property or Company License; (vii) there are no claims pending or, to the
Company's Knowledge, threatened in connection with any Company License; and
(viii) no Company Trade Secret has been disclosed by the Company or its
Subsidiaries to any third party except subject to an appropriate confidentiality
agreement or as required by a governmental authority. Additionally, to the
Knowledge of the Company, the Company has not infringed, misappropriated or
otherwise conflicted with any intellectual property rights or other similar
rights of any third parties, other than any of the foregoing which may have
occurred in the past and have been fully and finally resolved prior to the date
of this Agreement and the Company does not have any knowledge of any
infringement, misappropriation or conflict which will occur as a result of the
continued operation of the business of the Company and its Subsidiaries as
currently conducted or as currently proposed by the Company to be conducted
(assuming the transaction contemplated by this Agreement are not consummated).
Section 4.22 Insurance. The Company has provided Parent with copies of all
insurance policies to which the Company or its Subsidiary is a party or is a
beneficiary or named insured. All of the insurable properties of the Company and
its Subsidiaries are insured pursuant to insurance policies as the Company
reasonably believes is customary in the industry in which the Company and its
Subsidiaries are engaged. Such policies are in full force and effect, all
premiums due and payable with respect thereto have been paid, and no notice of
cancellation or termination has been received by the Company. Except as set
forth on Section 4.22 of the Company's Disclosure Schedule, there have been no
claims in excess of $25,000 asserted under any of the insurance policies of the
Company or its Subsidiaries in respect of all general liability, professional
liability, errors and omissions, property liability and worker's compensation
and medical claims since the Company's Balance Sheet Date.
Section 4.23 Opinion of Financial Advisor. The Company has received the
opinion of Capitalink, L.C. to the effect that, as of the date of such opinion,
the Exchange Ratio was fair from a financial point of view to the holders of
Company Shares (other than Parent or any of its Subsidiaries or affiliates),
and, as of the date hereof, such opinion has not been withdrawn (such opinion,
the "Company Fairness Opinion").
Section 4.24 Transactions with Affiliates. Except as set forth in the Company
SEC Documents or as set forth in Section 4.24 of the Company Disclosure
Schedules, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
22
Section 4.25 Interests in Other Entities. Other than as set forth in Section
4.25 of the Company Disclosure Schedule and except for the capital stock of its
Subsidiaries, the Company does not (i) own, directly or indirectly, of record or
beneficially, any shares of voting stock or other equity securities of any other
corporation, (ii) have any ownership interest, direct or indirect, of record or
beneficially, in any unincorporated entity, or (iii) have any obligation, direct
or indirect, present or contingent, (1) to purchase or subscribe for any
interest in, advance or loan monies to, or in any way make investments in, any
Person, or (2) to share any profits or capital investments or both.
Section 4.26 Officer and Director Information. During the past five years,
neither the Company, nor any of its officers or directors, nor any person
intended upon consummation of the Merger to be nominated by the Company to
become an officer or director of the Parent or any successor entity or
subsidiary, has been the subject of:
(a) A petition under the Federal bankruptcy laws or any other insolvency or
moratorium law or a petition seeking to appoint a receiver, fiscal agent or
similar officer for the business or property of the Company or such person, or
any partnership in which the Company or any such person was a general partner at
or within two years before the time of such filing, or any corporation or
business association of which any such person was an executive officer at or
within two years before the time of such filing;
(b) A conviction in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations which do not relate to driving
while intoxicated or driving under the influence of an intoxicating substance);
(c) Any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining the Company or any such person from, or otherwise limiting, the
following activities:
(i) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
United States Commodity Futures Trading Commission or an associated
person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation
of Federal, state or other securities laws or commodities laws;
(d) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any Federal, state or local authority barring, suspending or
otherwise limiting for more than 60 days the right of the Company or any such
person to engage in any activity described in the preceding sub-paragraph, or to
be associated with persons engaged in any such activity;
(e) a finding by a court of competent jurisdiction in a civil action or by
the Securities and Exchange Commission (the "Commission") to have violated any
securities law, regulation or decree and the judgment in such civil action or
finding by the Commission has not been subsequently reversed, suspended or
vacated; or
(f) a finding by a court of competent jurisdiction in a civil action or by
the United States Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding has
not been subsequently reversed, suspended or vacated. All items described in
clauses (a) through (f) above are collectively referred to herein as "Adverse
Events."
Section 4.27 Trading with the Enemy Act; Patriot Act. No sale of the Company's
securities nor the Company's use of the proceeds from such sale has violated the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto. Without limiting the foregoing, the Company (a) is not a person whose
property or interests in property are blocked pursuant to Section 1 of Executive
Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) and (b) does not engage in any dealings or transactions, and is
not otherwise associated with any such person. The Company is in material
compliance with the USA Patriot Act of 2001 (signed into law October 26, 2001).
Section 4.28 Company Insurance Subsidiaries.
(a) Except as set forth on Section 4.28 of the Company Disclosure Schedule,
neither the Company nor any of the Company Insurance Subsidiaries owns a captive
insurance company or has any investment or interest in any Person that assumes
underwriting risks. Except as set forth on Section 4.28 of the Company
23
Disclosure Schedule, no Contract between the Company or any Company Insurance
Subsidiary and any insurance carrier contemplates, or would cause such Person to
assume, any underwriting risk.
(b) The Company, the Company Insurance Subsidiaries and their respective
officers and employees hold and have made available to the Parent all insurance
agent and/or broker licenses and other licenses necessary for the Surviving
Corporation to operate the business as presently conducted and for such officers
and employees to sell or broker insurance or related insurance services. Section
4.28 of the Company Disclosure Schedule sets forth a true and correct list of
all such licenses. Such licenses are in good standing, and no disciplinary
proceeding with respect to the Company, the Company Insurance Subsidiaries,
their respective officers or employees is pending before any insurance
department.
(c) The Company or the Company Insurance Subsidiaries has the right to
receive commissions resulting from client accounts free and clear of all
encumbrances, and there are no claims concerning any right to receive
commissions resulting from client accounts made by any other Person. Neither the
Company nor the Company Insurance Subsidiaries have created an encumbrance on a
client account or has otherwise transferred any right to commissions arising out
of any client account.
(d) Neither the Company nor any of the Company Insurance Subsidiaries has,
to its Knowledge, engaged in price fixing, bid rigging or any other
anticompetitive activity of the type described in Complaint, Index No.
403342/2004, filed with the Supreme Court of the State of New York in the County
of New York on behalf of the People of the State of New York by Eliot Spitzer
against Marsh & McLennan Companies, Inc. and Marsh, Inc. on October 14, 2004.
Section 4.29 Information as to the Company. None of the representations or
warranties made by the Company with respect to the Company in this Agreement or
in any agreement or document executed and delivered pursuant hereto are false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein contained not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as specifically disclosed in the Parent Disclosure Schedule
delivered by the Parent to Company immediately prior to the execution of this
Agreement (the "Parent Disclosure Schedule"), the Parent represents and warrants
to the Company as follows:
Section 5.1 Organization and Qualification.
(a) Each of Parent and MERGER SUB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
Parent and MERGER SUB has all requisite corporate power and authority to own,
lease and operate its respective properties and to carry on its business as now
being conducted.
(b) Each of Parent and MERGER SUB is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which the nature of its business requires such
qualification, except where the failure to be so qualified or in good standing,
taken together with all other such failures, would not have a Material Adverse
Effect on Parent.
(c) Since the date of its incorporation, MERGER SUB has not engaged in any
activities other than in connection with or as contemplated by this Agreement.
Parent has made available to the Company true and complete copies of Parent and
MERGER SUB's certificates of incorporation and bylaws, as amended to the date
hereof. All of the issued and outstanding capital stock of MERGER SUB is owned
by Parent.
Section 5.2 Capitalization. The authorized capital stock of the Parent
consists of 30,000,000 shares of Common Stock, $0.02 par value per share (the
"Parent Common Stock") and 200,000 shares of Preferred Stock, consisting of
50,000 shares of Series A Convertible Preferred Stock, $0.01 par value per share
(the "Parent Series A Preferred"). As of February 1, 2005, (a) 4,995,878 shares
of Parent Common Stock were issued and outstanding, (b) 31,177 shares of Parent
Series A Preferred were issued and outstanding, (c)1,965,497 shares of Parent
Common Stock were reserved for issuance pursuant to the Parent Stock Plans, of
which stock options to purchase an aggregate of 1,021,250 shares of Parent
Common Stock were outstanding, and no shares of Parent Common Stock were
reserved for issuance pursuant to Nonplan Stock Options, (d) 2,313,530 shares of
Parent Common Stock were reserved for issuance upon exercise of warrants
("Parent Warrants") and (e) no Parent Shares were held in the Treasury of the
Parent or any of its Subsidiaries. As of the Effective Date, the Parent shall
authorize the Parent Series B Preferred Stock and the Parent Series C Preferred
Stock (or amend its charter documents to include same) in form and substance
reasonably satisfactory to the Company (the Parent Series A Preferred Stock, the
Parent Series B Preferred Stock and the Parent Series C Preferred Stock
collectively referred to as the "Parent Preferred Stock").
24
All the outstanding shares of the Parent's capital stock are duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
in this Section 5.2, or in Section 5.2 of the Parent Disclosure Schedule or in
the Parent SEC Documents, there are outstanding (x) no shares of capital stock
or other voting securities of the Parent, (y) no securities of the Parent
convertible into or exchangeable for shares of capital stock or voting
securities of the Parent, and (z) no preemptive or similar rights, subscription
or other rights, convertible securities, or agreements relating to the capital
stock of the Parent, obligating the Parent to issue, transfer or sell, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Parent or obligating the Parent to
grant, extend or enter into any such option, warrant, subscription or other
right, convertible security, agreement, arrangement or commitment (the items in
clauses (x), (y) and (z) being referred to collectively as the "Parent
Securities"). There are no outstanding obligations of the Parent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Parent Securities.
There are not as of the date hereof and there will not be at the Effective Time
any stockholder agreements, voting trusts or other agreements or understandings
to which the Parent or any of its Subsidiaries is a party or by which it is
bound relating to the voting of any shares of the capital stock of the Parent or
any agreements, arrangements, or other understandings to which the Parent or any
of its Subsidiaries is a party or by which it is bound that will limit in any
way the solicitation of proxies by or on behalf of the Parent from, or the
casting of votes by, the stockholders of the Parent with respect to the Merger.
Section 5.3 Authority. Each of Parent and MERGER SUB has full corporate power
and authority to execute and deliver this Agreement and, subject to the
requisite approval of its stockholders to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance of each of Parent and MERGER SUB of its obligations thereunder, and
the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the respective Boards of Directors of Parent
and MERGER SUB. Parent, as the sole stockholder of MERGER SUB, has approved this
Agreement and the transactions contemplated hereby. The Board of Directors of
Parent has directed that the issuance of Parent Common Stock pursuant to this
Agreement be submitted to Parent stockholders for approval at a meeting of
Parent stockholders (the "Parent Stockholders Meeting"), and, except for the
approval of the issuance of Parent Common Stock and Parent Preferred Stock in
the Merger by a majority vote at a meeting of Parent stockholders at which a
quorum is present (the "Parent Stockholder Approval"), no other corporate
proceedings are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and MERGER SUB and (assuming due authorization,
execution and delivery by the Company), it constitutes a legal, valid and
binding agreement of Parent and MERGER SUB, enforceable against each in
accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (b) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (c) applicable rules and regulations of the NASD with
respect to change of control of a registered broker-dealer. The shares of Parent
Common Stock and Parent Preferred Stock to be issued by Parent pursuant to the
Merger: (i) have been or will be duly authorized, and, when issued in accordance
with the terms of the Merger and this Agreement (or the applicable option
agreements), will be validly issued, fully paid and nonassessable and will not
be subject to preemptive rights; (ii) will, when issued in accordance with the
terms of the Merger and this Agreement (or the applicable option agreements), be
registered under the Securities Act, and to the extent reasonably able to do so,
registered or exempt from registration under applicable United States "Blue Sky"
laws; (iii) will, when issued in accordance with the terms of the Merger and
this Agreement, be eligible for listing on the OTC; and (iv) will be issued free
and clear of any Liens.
Section 5.4 Governmental Authorization. The execution, delivery and
performance by Parent and MERGER SUB of this Agreement and the consummation of
the Merger by Parent and MERGER SUB require no consent of, or filing with, any
governmental body, agency, official or authority other than (a) the filing of a
certificate of merger in accordance with DGCL and the NJBCA, (b) compliance with
any applicable requirements of the Exchange Act, (c) compliance with any
applicable requirements of the NASD and state blue sky commissioners, (d)
compliance with any applicable requirements of the Securities Act and state
securities laws, and (e) other actions or filings, which if not taken or made
would not, individually or in the aggregate, have a Material Adverse Effect.
25
Section 5.5 Non-Contravention. The execution, delivery and performance by
Parent and MERGER SUB of this Agreement and the obligations hereunder and the
consummation by Parent and MERGER SUB of the transactions contemplated hereby do
not and will not, except as set forth in Section 5.5 of the Parent's Disclosure
Schedule (a) assuming compliance with the matters referred to in Section 5.3,
contravene or conflict with the certificate of incorporation or bylaws of Parent
or MERGER SUB, (b) assuming compliance with the matters referred to in Section
5.4, violate, 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 Parent or any of its Subsidiaries, (c) violate, constitute
a default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Parent or any of its Subsidiaries or
to a loss of any benefit to which Parent or any of its Subsidiaries is entitled
under any provision of any material agreement, contract or other instrument
binding upon Parent or any of its Subsidiaries (the "Parent Agreements") or any
material license, franchise, permit or other similar authorization held by
Parent or any of its Subsidiaries, or (d) result in the creation or imposition
of any Lien on any asset of Parent or any of its Subsidiaries, except for such
contraventions, conflicts or violations referred to in clause (b) or defaults,
rights of termination, cancellation or acceleration, or losses or Liens referred
to in clause (c) or (d) which would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. Except as disclosed in Section 5.5 of the
Parent Disclosure Schedule, neither Parent nor any Subsidiary of Parent is a
party to any agreement that expressly limits the ability of Parent or any
Subsidiary of Parent to compete in or conduct any line of business of the
Company, or compete with any Person or in any geographic area or during any
period of time in connection therewith, except to the extent that any such
limitation, individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect on Parent after the Effective Time.
Section 5.6 Board Recommendation. The Board of Directors of the Parent has (a)
approved and adopted this Agreement, (b) determined that this Agreement and the
transactions contemplated by this Agreement are advisable, fair to and in the
best interests of the Parent, and (c) resolved to recommend the approval of
Merger, the adoption of the Merger Agreement and the approval of the issuance of
shares of Parent Common Stock in connection with the Merger.
Section 5.7 Parent Subsidiaries. Each of the Parent's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each of the Parent's Subsidiaries is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, which states or
jurisdictions are listed on Section 5.7 of the Parent Disclosure Schedule,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect on the Parent. Exhibit 21 to the Parent's Annual Report
on Form 10-K for the fiscal year ended September 30, 2004, as filed with the
SEC, lists the only Subsidiaries of the Parent at September 30, 2004, and all
Subsidiaries of the Parent thereafter formed or acquired are listed in Section
5.7 of the Parent Disclosure Schedule. All of the outstanding shares of capital
stock of the Subsidiaries of the Parent are validly issued, fully paid and
nonassessable and are owned by the Parent free and clear of all liens, claims,
charges or encumbrances, and there are no irrevocable proxies with respect to
such shares. Except as set forth in Section 5.7 of the Parent Disclosure
Schedule and except for the capital stock of its Subsidiaries, the Parent does
not own, directly or indirectly, any capital stock or other ownership interest
in any corporation, partnership, joint venture, limited liability company or
other entity which is material to the business of the Parent and its
Subsidiaries, taken as a whole. There are no restrictions on the Parent to vote
the stock of any of its Subsidiaries.
Section 5.8 SEC Filings. The Parent has filed with the SEC true and complete
copies of, all forms, reports, schedules and other documents required to be
filed by it under the Exchange Act or the Securities Act since January 1, 2001
(as such documents have been amended since the time of their filing,
collectively, the "Parent SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Parent SEC Documents,
including, without limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. Except
as set forth in Schedule 5.8 of the Parent's Disclosure Schedule, none of the
Parent's Subsidiaries is required to file any forms, reports or other documents
with the SEC. The financial statements included in the Parent SEC Documents were
prepared in accordance with GAAP consistently applied (except as may be
otherwise indicated in the notes thereto), and fairly present the financial
position of Parent as at the dates thereof and its results of operations and
cash flows for the periods indicated. None of Parent's Subsidiaries is required
to file any forms, reports or other documents with the SEC. Additionally, since
the adoption of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") and to the
extent that Parent is subject to Sarbanes-Oxley, Parent has complied in all
material respects with the applicable laws, rules and regulation under
Sarbanes-Oxley.
26
Section 5.9 Disclosure Documents.
(a) The Joint Proxy Statement/Prospectus to be filed with the SEC in
connection with the Merger and the Form S-4 to be filed under the Securities Act
relating to the issuance of Parent Common Stock in the Merger, and any
amendments or supplements thereto, will, when filed, subject to the last
sentence of Section 5.9(b), comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act.
(b) Neither the Joint Proxy Statement/Prospectus to be filed with the SEC,
nor any amendment or supplement thereto, will, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to
stockholders of Parent or at the time such stockholders vote on the adoption and
approval of this Agreement and the transactions contemplated hereby, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Neither the Form S-4 nor any amendment or
supplement thereto will at the time it becomes effective under the Securities
Act or at the Effective Time contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. No representation or warranty is made by
Parent in this Section 5.9 with respect to statements made or incorporated by
reference therein based on information supplied by the Company for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus or the Form
S-4.
(c) The affirmative vote of the holders of a majority of the outstanding
shares of Parent Common Stock on the Parent Record Date at a duly constituted
Parent Stockholders Meeting is the only vote of the holders of any class or
series of the Parent's capital stock necessary to adopt this Agreement and
approve the issuance of the Parent Common Stock in connection with the Merger.
Section 5.10 Absence of Certain Changes. Except as set forth in Section 5.10 of
the Parent Disclosure Schedule, and except as expressly permitted by this
Agreement, since September 30, 2004 (the "Parent Balance Sheet Date"), Parent
and each Subsidiary has conducted its respective business in the ordinary course
consistent with past practice and, without limiting the generality of the
foregoing:
(a) There has been no event, occurrence or development of a state of
circumstances or facts that, individually or in the aggregate, has had or would
be reasonably likely to have a Material Adverse Effect on Parent and its
Subsidiaries, taken as a whole;
(b) There has not been any amendment or change in the Certificate of
Incorporation or Bylaws of Parent or its Subsidiary;
(c) Parent has not nor has any Subsidiary of Parent incurred additional
debt for, borrowed money, or incurred any obligation or liability which
individually or in the aggregate exceeded $50,000, except in the ordinary course
of business consistent with past practice;
(d) Parent has not nor has any Subsidiary declared or made any dividend,
payment or other distribution on or with respect to any share of capital stock,
or redeemed, purchased or otherwise acquired any shares of its capital stock or
any option, warrant or other right to purchase or acquire any such shares, other
than, in the case of any Subsidiary, to Parent;
(e) Neither the Parent nor its Subsidiaries has made any change in
accounting principles or methods, except in so far as may be required under
GAAP;
(f) Neither the Parent nor any Subsidiary has entered into any material
transaction or contract, or made any commitment to do the same, except in the
ordinary course of business consistent with past practice except for settlements
of litigations, arbitrations or other claims or proceedings which may be made by
the Company or any Subsidiary;
(g) The Parent has not nor has any Subsidiary of the Parent granted any
increase in the rate of wages, salaries, bonuses or other remuneration of any
employee who, whether as a result of such increase or prior thereto, receives
aggregate compensation from the Parent or its Subsidiaries at an annual rate of
$50,000 or more, or except in the ordinary course of business to any other
employees;
(h) The Parent has not nor has any Subsidiary of the Parent entered into an
employment or exclusive consultant agreement which is not cancelable without
penalty or other financial obligation within 30 days; and
(i) The Parent has not nor has any Subsidiary of the Parent agreed, whether
or not in writing, to do any of the actions set forth in any of the above
clauses.
27
Section 5.11 No Undisclosed Material Liabilities. Since the Parent Balance Sheet
Date, there are no material liabilities of the Parent or any Subsidiary of the
Parent of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(a) Liabilities incurred in the ordinary course of business and consistent
with past practice;
(b) Liabilities disclosed in the Parent SEC Documents filed prior to the
date hereof; and
(c) Liabilities under this Agreement.
Section 5.12 Litigation. Except as disclosed in the Parent SEC Documents or on
Section 5.12 of the Parent's Disclosure Schedule, there is no claim, dispute,
action, proceeding, notice, order, suit, appeal or investigation, at law or in
equity, pending or, to the Parent's Knowledge, threatened, against the Parent or
any Subsidiary, any of their respective directors, officers, employees or
agents, or involving any of their respective assets or properties before any
court, agency, authority, arbitration panel or other tribunal which, if
determined adversely, would have a Material Adverse Effect on Parent. Except as
disclosed in the Company's SEC Documents or in Section 5.12 of the Parent's
Disclosure Schedule, the Parent is not nor is any Subsidiary subject to any
order, writ, injunction or decree of any court, agency, authority, arbitration
panel or other tribunal, nor is Parent or any Subsidiary in default with respect
to any notice, order, writ, injunction or decree which would have a Material
Adverse Effect on Parent.
Section 5.13 Taxes.
(a) All Tax returns, statements, reports and forms (including estimated Tax
returns and reports and information returns and reports) required to be filed
with any Taxing Authority with respect to any Taxable period ending on or before
the Effective Time, by or on behalf of Parent or any Subsidiary of Parent
(collectively, the "Parent Returns"), have been or will be filed when due
(including any extensions of such due date), and all amounts shown to be due
thereon on or before the Effective Time have been or will be paid on or before
such date, other than such Taxes which are adequately reserved for in accordance
with GAAP. The Parent Financial Statements fully accrue all actual and
contingent liability for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. The Parent Financial Statements (i) fully
accrue consistent with past practices and in accordance with GAAP all actual and
contingent liabilities for Taxes with respect to all periods through the date of
the Parent Financial Statements and (ii) properly accrue consistent with past
practices and in accordance with GAAP all liabilities for Taxes payable after
the Parent Balance Sheet Date with respect to all transactions and events
occurring on or prior to such date. All information set forth in the notes to
the Parent Financial Statements relating to Tax matters is accurate in all
material respects.
(b) No Tax liability has been incurred since the date of the Parent
Financial Statements other than in the ordinary course of business and adequate
provision has been made for all Taxes since that date in accordance with GAAP on
at least a quarterly or, with respect to employment taxes, monthly basis. The
Parent and each Subsidiary of Parent have, in all material respects, withheld
and paid to the applicable financial institution or Taxing Authority all amounts
of Taxes required to be withheld. No Parent Returns filed with respect to
federal income tax returns for Taxable years of the Parent in the case of the
United States, have been examined by the Internal Revenue Service. The Parent
has not nor has any Subsidiary of Parent been granted any extension or waiver of
the limitation period applicable to any Parent Return.
(c) There is no claim, audit, action, suit, proceeding or, investigation
now pending or, to Parent's Knowledge, threatened against or with respect to
Parent or any Subsidiary of Parent in respect of any Tax or assessment. There
are no liabilities for Taxes with respect to any notice of deficiency or similar
document of any Tax Authority received by the Parent or any Subsidiary of Parent
which have not been satisfied in full (including liabilities for interest,
additions to tax and penalties thereon and related expenses). There are no liens
for Taxes upon the assets of the Parent or any Subsidiary of Parent except liens
for current Taxes not yet delinquent. Except as may be required as a result of
the Merger, the Parent has not nor has any Subsidiary of Parent been nor will it
be required to include any adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Effective Time.
(d) There is no contract, agreement, plan or arrangement, including without
limitation the provisions of this Agreement, covering any employee or
independent contractor or former employee or independent contractor of the
Parent or any Subsidiary of Parent that, individually or collectively, could, as
a result of the transactions contemplated hereby, give rise to the payment of
any amount that would not be deductible pursuant to section 280G or section 162
(m) of the Code. Other than pursuant to this Agreement, the Parent is not nor is
any Subsidiary of Parent a party to or bound by (nor will they prior to the
Effective Time become a party to or bound by) any tax indemnity, tax sharing or
tax allocation agreement (whether written, unwritten or arising under operation
of federal law as a result of being a member of a group filing consolidated tax
returns, under operation of certain state laws as a result of being a member of
a unitary group, or under comparable laws of other states or foreign
jurisdictions) which includes a party other than the Parent or any Subsidiary.
None of the assets of the Parent or any Subsidiary of Parent (i) is property
that the Parent or any Subsidiary of Parent is required to treat as owned by any
other Person pursuant to the so-called "safe harbor lease" provisions of former
section 168(f)(8) of the Code, (ii) directly or indirectly secures any debt the
interest on which is tax exempt under section 103(a) of the Code, or (iii) is
"tax exempt use property" within the meaning of section 168(h) of the Code. The
Parent has not nor has any Subsidiary of Parent participated in (and prior to
the Effective Time the Parent will not nor will any Subsidiary of Parent
participate in) an international boycott within the meaning of section 999 of
the Code. The Parent has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement of
federal income tax within the meaning of section 6661 of the Code. The Parent
has previously provided or made available to the Company complete and accurate
copies of all the Parent Returns and, as reasonably requested by the Company,
prior to or following the date hereof, presently existing information
statements, reports, work papers, Tax opinions and memoranda and other Tax data
and documents.
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Section 5.14 Employees and Employee Benefit Plans.
(a) Except as set forth at Section 5.14(a) of the Parent Disclosure
Schedule, neither the Parent nor any Subsidiary of Parent has entered into any
employment contract or arrangement with any director, officer, employee or any
other consultant or Person (i) which is not terminable by it at will without
liability, except as the right of the Parent or such Subsidiary to terminate its
employees at will may be limited by applicable federal, state or foreign law, or
(ii) under which the Parent or any Subsidiary of Parent could have any material
liability (collectively, the "Parent Employment Agreements").
(b) Except as set forth in Section 5.14(b) of the Parent Disclosure
Schedule, neither the Parent nor any Subsidiary maintains any Employee Plans.
(c) The Parent has made available to the Company true, complete and correct
copies of (i) each Parent Employment Agreement, (ii) each Employee Plan (or, in
the case of any unwritten Employee Plans, descriptions thereof), (iii) the most
recent annual report on Form 5500 filed with the IRS with respect to each
Employee Plan (if any such report was required), (iv) the most recent summary
plan description for each Employee Plan for which such summary plan description
is required, (v) each trust agreement and group annuity contract relating to any
Employee Plan, (vi) each determination letter and any outstanding request for a
determination letter, and (vii) all correspondence with the IRS or the United
States Department of Labor relating to any outstanding controversy or audit.
Each Employee Plan complies in all material respects with applicable laws,
including, without limitation, ERISA and the Code.
(d) Each Employee Plan has been maintained, funded, operated and
administered in compliance in all material respects with all applicable laws and
regulations, including but not limited to, ERISA, the Code, and the Health
Insurance Portability and Accountability Act of 1996. Each Employee Plan that is
intended to be qualified under section 401(a) of the Code and each trust forming
a part thereof that is intended to be exempt from taxation under section 501(a)
of the Code has received a favorable determination letter from the IRS as to its
qualification and tax-exempt status and nothing has occurred, whether by any
action or any failure to act, since the date of such determination letter that
could adversely affect the qualification of such Employee Plan or the tax-exempt
status of such related trust. No event has occurred and, to the Knowledge of the
Parent, there currently exists no condition or set of circumstances in
connection with which the Parent that could reasonably be expected to be subject
to any liability under the terms of any Employee Plans (other than for benefits
payable in the normal course of the operations of the Employee Plans), ERISA,
the Code or any other applicable law, including any liability under Title IV of
ERISA. Each Employee Plan can be amended or terminated in accordance with its
terms and any applicable law without any material liability to the Parent or any
of its Subsidiaries. No Employee Plan is a "multiemployer plan" as defined in
section 3(37) of the ERISA and 414(f) of the Code, or a "multiple employer plan"
as described in section 4063(a) of ERISA and 413 of the Code, and none of the
Parent, any of its Subsidiaries or any ERISA Affiliate has ever contributed or
had an obligation to contribute to any multiemployer plan or any plan subject to
Title IV of ERISA. For purposes of this Section 5.14(d), an "ERISA Affiliate" is
any organization that is a member of the controlled group of organizations of
the Company and its Subsidiaries (within the meaning of sections 414(b), (c),
(m) or (o) of the Code).
(e) Except as set forth in Section 5.14(e) of the Parent Disclosure
Schedule, no current or former director, officer or other employee of, or
consultant to, the Parent or any of its Subsidiaries will become entitled to any
retirement, severance or similar benefit or enhanced or accelerated benefit
(including any acceleration of vesting or lapse of repurchase rights or
obligations with respect to any employee stock option or other benefit under any
stock option plan or compensation plan or arrangement of the Parent) as a result
of the transactions contemplated hereby.
(f) Except as set forth in Section 5.14(f) of the Parent Disclosure
Schedule, no Employee Plan provides post-retirement health and medical, life or
other insurance benefits for retired employees of the Parent or any of its
Subsidiaries (other than benefit coverage mandated by applicable statute,
including benefits provided pursuant to COBRA). The unfunded post retirement
benefit obligation (determined as of December 31, 2003 in accordance with United
States Financial Accounting Standards Board Statement No. 106) of the Parent and
its Subsidiaries with respect to all post retirement benefits of their current
and former employees equals the amount set forth in the Parent Balance Sheet.
(g) There has been no amendment to, written interpretation or announcement
(whether or not written) by the Parent or any of its affiliates relating to, or
change in employee participation or coverage under, any Employee Plan that would
increase materially the expense of maintaining such Employee Plan above the
level of the expense incurred in respect thereof for the twelve (12) months
ended on the Parent Balance Sheet Date.
29
Section 5.15 Compliance with Law.
(a) All licenses, franchises, permits, clearances, consents, certificates
and other evidences of authority of Parent and its Subsidiaries which are
necessary to the conduct of Parent's and its Subsidiaries' respective businesses
("Parent Permits") are in full force and effect and neither Parent nor any
Subsidiary is in violation of any Parent Permit in any respect, except for such
exceptions or violations that, individually or in the aggregate, would not have,
or be reasonably likely to have, a Material Adverse Effect. Except for
exceptions which would not have a Material Adverse Effect, the businesses of
Parent and its Subsidiaries have been conducted in accordance with all
applicable laws, regulations, orders and other requirements of governmental
authorities.
(b) Parent and its Subsidiary possess and are in substantial compliance
with all Governmental and SRO Authorizations that are required to conduct the
broker-dealer business of Parent and its Subsidiary including, without
limitation, all authorizations and licenses issued to any principal, officer or
employee of Parent and its Subsidiary used in connection with the conduct or
operations of Parent's and its Subsidiary's business, except where the failure
to obtain or comply with such Governmental and SRO Authorization would not have
a Material Adverse Effect on Parent or its Subsidiary. Each of such Governmental
and SRO Authorizations is valid and in full force and effect and neither Parent
nor its Subsidiary nor any of their respective employees received in writing, at
any time since January 1, 2004, other than as set forth on the Parent's and its
Subsidiary's Form BD, any notice or other communication from any governmental
body regarding (i) any actual or alleged violation of or failure to comply with
any material term or requirement of any Governmental and SRO Authorization, or
(ii) any actual or proposed revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental and SRO Authorization,
except as may be required to consummate the transaction contemplated hereby.
(c) Parent and its Subsidiary are, and at all times since January 1, 2004,
have been in compliance with SEC Rule 15c-3(1) and Rule 15c-3(3) and in
substantial compliance with the other provisions of Rule 15c-3.
Section 5.16 Contracts. Each Parent Agreement is legally valid and binding and
in full force and effect, except where the failure to be legally valid and
binding and in full force and effect would not have a Material Adverse Effect,
and there are no defaults thereunder, except those defaults that would not have
a Material Adverse Effect. To the Parent's Knowledge, no other party to any of
the Parent Agreements has breached or is in default of any of its obligations
thereunder.
Section 5.17 Finders' or Advisors' Fees. Except as set forth in Section 5.17 of
the Parent's Disclosure Schedule, there is no investment broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Parent or its Subsidiary who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
Section 5.18 Environmental Matters. Except as disclosed in the Parent SEC
Documents or as set forth in Section 5.18 of the Parent Disclosure Schedule:
(a) The Parent possesses any and all Environmental Permits necessary to or
required for the operation of its business as currently conducted, except where
the failure to possess such Environmental Permits would not cause a Material
Adverse Effect. The Parent will obtain, prior to the Closing, any Environmental
Permits that must be obtained as of or immediately after the Closing in order
for the Surviving Corporation and/or the Parent to conduct the business of the
Parent as it was conducted prior to the Closing.
(b) The Parent is in compliance in all material respects with (i) all
terms, conditions and provisions of its Environmental Permits; and (ii) all
Environmental Laws.
(c) The Parent has not received any notice of alleged, actual or potential
responsibility for, or any inquiry regarding, (i) any release or threatened or
suspected release of any Hazardous Material, or (ii) any violation of
Environmental Law, and there is no outstanding civil, criminal or administrative
investigation, action, suit hearing or proceeding pending or threatened against
the Parent pursuant to any Environmental Law.
(d) The Parent does not have any obligation or liability with respect to
any Hazardous Material, including any Release or threatened or suspected Release
of any Hazardous Material and any violation of Environmental Law, and there have
been no events, facts or circumstances which could form the basis of any such
obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from, in, to,
on, or under any Site and no Hazardous Material is present in, on, about or
migrating to or from any Site.
(f) Neither the Parent, nor any predecessor of the Parent, nor any entity
previously owned by the Parent, has transported or arranged for the treatment,
storage, handling, disposal or transportation of any Hazardous Material at, from
or to any site or other location.
30
(g) No Site is a current or proposed Environmental Clean-up Site.
(h) There are no Liens under or pursuant to any Environmental Law on any
Site.
(i) There is no (i) underground storage tank, active or abandoned, (ii)
polychlorinated biphenyl containing equipment, (iii) asbestos-containing
material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any
Site. Any underground storage tank meets all current applicable upgrade
requirements.
(j) There have been no Environmental investigations, studies, audits,
tests, reviews or other analyses conducted which are in the Parent's possession
with respect to any Site which have not been delivered to Parent prior to
execution of this Agreement.
(k) The Parent has provided all notifications and warnings, made all
reports, and kept and maintained all records required pursuant to Environmental
Laws, except where the failure to do so would not be reasonably expected to have
a Material Adverse Effect.
Section 5.19 Labor Matters. There are no labor disputes or union organization
activities pending or to Parent's Knowledge, threatened between Parent or a
Subsidiary and any of its employees. None of the employees of Parent or its
Subsidiary belongs to any union or collective bargaining unit. Parent and its
Subsidiary have complied in all material respects with all applicable state and
federal equal employment opportunity and other laws and regulations related to
employment or working conditions, including all civil rights and
anti-discrimination laws, rules and regulations. Parent is not nor is its
Subsidiary the subject of any material proceeding asserting that Parent or its
Subsidiary has committed an unfair labor practice or is seeking to compel it to
bargain with any labor union or labor organization nor is there pending or, to
the Knowledge of Parent, threatened, any labor strike, dispute, walkout, work
stoppage, slowdown or lockout involving Parent or its Subsidiary.
Section 5.20 Real Property.
(a) Owned Real Property. Parent does not own any real property (including
ground leases) or hold any option or right of first refusal or first offer to
acquire any real property, and Parent is not obligated by contract or otherwise
to purchase any real property.
(b) Leased Real Property. Section 5.20(b) of the Parent Disclosure Schedule
contains an accurate and complete list of each Real Property Lease. With respect
to each Real Property Lease set forth on Section 5.20(b) of the Parent
Disclosure Schedule: (a) it is valid, binding and in full force and effect; (b)
all rents and additional rents and other sums, expenses and charges due to date
have been paid; (c) the lessee has been in peaceable possession since the
commencement of the original term thereof; (d) no waiver, indulgence or
postponement of the lessee's obligations thereunder has been granted by the
lessor; (e) there exists no default or event of default by Parent or by any
other party thereto; (f) there exists no occurrence, condition or act which,
with the giving of notice, the lapse of time or the happening of any further
event or condition, would become a default or event of default by Parent
thereunder; and (g) there are no outstanding claims of breach or indemnification
or notice of default or termination thereunder. Parent holds the leasehold
estate on each Real Property Lease, free and clear of all Liens except for the
liens of mortgagees of the real property in which such leasehold estate is
located. The real property leased by Parent is adequate and suitable for the
purposes for which it is presently being used. Parent is in physical possession
and actual and exclusive occupation of the whole of each of its leased
properties. The Parent does not owe any brokerage commission with respect to any
Real Property Lease.
Section 5.21 Proprietary Rights. Section 5.21 of the Parent's Disclosure
Schedule sets forth a list of all registered and material unregistered Parent
Intellectual Property (as defined below) owned by the Parent and used in the
conduct of its business and all agreements granting any right to use or practice
any right relating to the Parent Intellectual Property (as defined below)
currently used in the conduct of the Parent's business (the "Parent Licenses").
Except as set forth in Section 5.21 of the Parent Disclosure Schedule, (i) the
Parent or its Subsidiary is the sole owner of all of its rights under the Parent
Licenses free and clear of any liens, claims, encumbrances or interests; (ii)
the Parent or its Subsidiary is the sole owner of, or has a valid right to use
pursuant to a Parent License, all patents and patent applications; registered
and unregistered trademarks, service marks, trade names, trade dress, logos,
company names and other source or business identifiers, including all goodwill
associated therewith; the names, likenesses and other attributes of individuals;
registered and unregistered copyrights, computer programs and databases; trade
secrets, proprietary technology, know-how, industrial designs and other
confidential information ("Parent Trade Secrets"); any pending applications for
any of the foregoing (collectively, the "Parent Intellectual Property")
currently used in the conduct of the Parent's business, free and clear of any
liens, claims, encumbrances or interests, (iii) to the Parent's Knowledge, the
present or past operations of the Parent or the Subsidiaries does not infringe
upon, violate, interfere or conflict with the rights of others with respect to
any Parent Intellectual Property and no claim is pending or, to the Parent's
Knowledge, threatened, to this effect; (iv) to the Parent's Knowledge, none of
the Parent Intellectual Property is invalid or unenforceable, or has not been
used or enforced or has failed to be used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of any of the Parent
Intellectual Property and no claim is pending or, to the Parent's Knowledge,
threatened, to this effect; (v) no Parent License provision or any other
contract, agreement or understanding with any party exists which would prevent
the continued use by the Parent or the Subsidiaries (as currently used by the
Parent or its Subsidiary) of any Parent Intellectual Property following the
consummation of the transactions contemplated hereby; (vi) to the Parent's
Knowledge, no person is infringing upon or otherwise violating any Parent
Intellectual Property or Parent License; (vii) there are no claims pending or,
to the Parent's Knowledge, threatened in connection with any Parent License; and
(viii) no Parent Trade Secret has been disclosed by the Parent or its Subsidiary
to any third party except subject to an appropriate confidentiality agreement or
as required by a governmental authority.
31
Section 5.22 Insurance. The Parent has provided the Company with copies of all
insurance policies to which the Parent or a Subsidiary is a party or is a
beneficiary or named insured. All of the insurable properties of the Parent and
its Subsidiaries are insured pursuant to insurance policies. Such policies are
in full force and effect, all premiums due and payable with respect thereto have
been paid, and no notice of cancellation or termination has been received by
Parent. There have been no claims in excess of $50,000 asserted under any of the
insurance policies of the Parent or its Subsidiary in respect of all general
liability, professional liability, errors and omissions, property liability and
worker's compensation and medical claims since the Parent's Balance Sheet Date.
Section 5.23 Opinion of Financial Advisor. The Parent has been advised by its
financial advisor, McColl Garella, LLC that in its opinion, as of the date of
this Agreement, the Exchange Ratio is fair from a financial point of view to the
Parent's stockholders and, as of the date hereof, such opinion has not been
withdrawn (such opinion, the "Parent Fairness Opinion").
Section 5.24 Interests in Other Entities. Other than as set forth in Section
5.24 of the Parent Disclosure Schedule and except for the capital stock of its
Subsidiaries, Parent does not (i) own, directly or indirectly, of record or
beneficially, any shares of voting stock or other equity securities of any other
corporation, (ii) have any ownership interest, direct or indirect, of record or
beneficially, in any unincorporated entity, or (iii) have any obligation, direct
or indirect, present or contingent, (1) to purchase or subscribe for any
interest in, advance or loan monies to, or in any way make investments in, any
Person, or (2) to share any profits or capital investments or both.
Section 5.25 Officer and Director Information. Except as set forth in the Parent
SEC Documents, during the past five years, neither the Parent, nor any of its
officers or directors, nor any person intended upon consummation of the Merger
to be nominated by the Parent to become an officer or director of the Parent or
any successor entity or subsidiary, has been the subject of:
(a) A petition under the Federal bankruptcy laws or any other insolvency or
moratorium law or a petition seeking to appoint a receiver, fiscal agent or
similar officer for the business or property of the Parent or such person, or
any partnership in which the Parent or any such person was a general partner at
or within two years before the time of such filing, or any corporation or
business association of which any such person was an executive officer at or
within two years before the time of such filing;
(b) A conviction in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations which do not relate to driving
while intoxicated or driving under the influence of an intoxicating substance);
(c) Any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining the Parent or any such person from, or otherwise limiting, the
following activities:
(i) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
United States Commodity Futures Trading Commission or an associated
person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment Parent, bank, savings
and loan association or insurance Parent, or engaging in or continuing
any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation
of Federal, state or other securities laws or commodities laws;
(d) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any Federal, state or local authority barring, suspending or
otherwise limiting for more than 60 days the right of the Parent or any such
person to engage in any activity described in the preceding sub-paragraph, or to
be associated with persons engaged in any such activity;
(e) a finding by a court of competent jurisdiction in a civil action or by
the Securities and Exchange Commission (the "Commission") to have violated any
securities law, regulation or decree and the judgment in such civil action or
finding by the Commission has not been subsequently reversed, suspended or
vacated; or
(f) a finding by a court of competent jurisdiction in a civil action or by
the United States Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding has
not been subsequently reversed, suspended or vacated. All items described in
clauses (a) through (f) above are collectively referred to herein as "Adverse
Events."
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Section 5.26 Trading with the Enemy Act; Patriot Act. No sale of the Parent's
securities nor the Parent's use of the proceeds from such sale has violated the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto. Without limiting the foregoing, the Parent (a) is not a person whose
property or interests in property are blocked pursuant to Section 1 of Executive
Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) and (b) does not engage in any dealings or transactions, and is
not otherwise associated with any such person. The Parent is in material
compliance with the USA Patriot Act of 2001 (signed into law October 26, 2001).
ARTICLE 6
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of the Agreement
or the Effective Time, the Company, on the one hand, and the Parent, on the
other hand, each agrees as to itself and its Subsidiaries (in each such case,
the "Agreeing Party") that (except as expressly contemplated or permitted by
this Agreement or Section 6.1 of the Company Disclosure Schedule or the Parent
Disclosure Schedule, as the case may be):
(a) Ordinary Course.
(i) The Agreeing Party and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore
conducted, and shall use their reasonable commercial efforts to keep
available the services of their respective present officers and key
employees, preserve intact their present lines of business, maintain
their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them to
the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time.
(ii) The Agreeing Party shall not, and shall not permit any of
its Subsidiaries to, (A) enter into any new material line of business
or (B) incur or commit to any capital expenditures or any obligations
or liabilities in connection therewith other than capital expenditures
and obligations or liabilities in connection therewith which do not
exceed $50,000 in the aggregate; provided, however, that either party
shall have the right to (i) incur or commit to any capital
expenditures or any obligations or liabilities in connection therewith
in excess of $50,000 provided that notice thereof is provided to the
other party and (ii) act as placement agent, selling group member or
underwrite securities offerings in the ordinary course of business on
behalf of its clients without any notice to the other party.
(b) Dividends; Changes in Share Capital. The Agreeing Party shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to: (i)
except as contemplated by the Parent Series A Preferred Stock and the Company
Series A Preferred Stock and the Company Series B Preferred Stock, declare or
pay any dividends on or make other distributions in respect of any of its
capital stock, except (x) the declaration and payment of regular dividends from
a Subsidiary of the Agreeing Party to the Agreeing Party or to another
Subsidiary of the Agreeing Party in accordance with past dividend practice, (y)
the declaration, subject to the applicable provisions of the NJBCA, of dividends
on the Company Series A Preferred Stock and on the Company Series B Preferred
Stock; and (z) the declaration, subject to the applicable provisions of the
DGCL, of dividends on the Parent Series A Preferred Stock; (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of the Agreeing Party which remains a wholly owned Subsidiary
after consummation of such transaction; or (iii) without the prior consent of
the other party, repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
(c) Issuance of Securities. The Agreeing Party shall not, and shall not
permit any of its Subsidiaries to, issue, deliver, sell, pledge or dispose of,
or authorize or propose the issuance, delivery, sale, pledge or disposition of,
any shares of its capital stock of any class, or any securities convertible into
or exercisable for, or any rights, warrants, calls or options to acquire, any
such shares, or enter into any commitment, arrangement, undertaking or agreement
with respect to any of the foregoing, other than or in connection with: (i) the
issuance of the Company Common Stock upon the exercise in accordance with their
present terms of the Company Warrants and the Company Stock Options outstanding
as of the date of this Agreement; (ii) the issuance of the Parent Common Stock
upon the exercise in accordance with their present terms of the Parent Stock
Options outstanding as of the date of this Agreement; (iii) the issuance of
stock options to newly-hired employees in the ordinary course of business
consistent with past practice; (iv) issuances, sales or deliveries by a wholly
owned Subsidiary of the Agreeing Party of capital stock to such Subsidiary's
parent or another wholly owned Subsidiary of the Agreeing Party, (v) issuance of
up to 30,000 shares of the Parent's Common Stock to settle an outstanding
arbitration, (vi) the issuance of the Company's Common Stock pursuant to
outstanding convertible debentures as of the date hereof or (vii) issuance of
the Parent's and/or the Company's capital stock and/or convertible debt to third
parties in order to meet the conditions of Section 8.1(g) hereof.
(d) Governing Documents. Except to the extent required to comply with its
obligations hereunder (including without limitation the amendment of the
Parent's charter documents to authorize the Parent Series B Preferred Stock and
the Parent Series C Preferred Stock) or with applicable law, the Agreeing Party
shall not, and shall not permit its Subsidiaries to, amend or propose to so
amend its Certificate of Incorporation or its By Laws or other governing
documents.
33
(e) No Acquisitions. Neither Agreeing Party shall, nor shall it permit any
of its Subsidiaries to, acquire or agree to acquire by merger or consolidation,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets (excluding the acquisition of
assets used in the operations of the business of the Agreeing Party and its
Subsidiaries in the ordinary course, which assets do not constitute a business
unit, division or all or substantially all of the assets of the transferor).
Neither Agreeing Party shall, nor shall it permit its Subsidiaries to, enter
into any material joint venture, partnership or other similar arrangement.
(f) No Dispositions. Neither Agreeing Party shall, nor shall it permit any
of its Subsidiaries to, sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any substantial part of its assets (including
capital stock of Subsidiaries of the Agreeing Party) other than in the ordinary
course of business consistent with past practice.
(g) Insurance. Neither Agreeing Party shall, nor shall it permit any of its
Subsidiaries to, fail to renew any insurance policy naming it as a beneficiary
or a loss payee, or take any steps or fail to take any steps that would permit
any insurance policy naming it as a beneficiary or a loss payee to be canceled,
terminated or materially altered, except in the ordinary course of business and
consistent with past practice or in connection with the transactions
contemplated hereby.
(h) Investments; Indebtedness. Neither Agreeing Party shall, nor shall it
permit any of its Subsidiaries to: (i) make any loans, advances or capital
contributions to, or investments in, any other Person, other than (A) loans or
investments by the Agreeing Party or a Subsidiary of the Agreeing Party to or in
the Agreeing Party or any Subsidiary of the Agreeing Party, (B) in the ordinary
course of business consistent with past practice which are not, individually or
in the aggregate, material to the Agreeing Party and its Subsidiaries taken
together as a whole (provided that none of such transactions referred to in this
clause (B) presents a material risk of making it more difficult to obtain any
approval or authorization required in connection with the Merger under
Regulatory Law); or (ii) except in the ordinary course consistent with past
practice, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Agreeing Party or any of its
Subsidiaries, guarantee any debt securities of another Person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another Person (other than any wholly owned Subsidiary) or enter into any
arrangement having the economic effect of any of the foregoing.
(i) Compensation.
(i) Neither Agreeing Party shall increase the amount of
compensation of, or pay any severance to any director, officer or
employee (other than in the ordinary course of business consistent
with past practice or as contemplated by this Agreement) of the
Agreeing Party or any Subsidiary of the Agreeing Party, or make any
increase in, or commitment to increase, or accelerate the payment of
any employee benefits, grant any additional stock options (except as
permitted by Section 6.1(c)), adopt or amend or make any commitment to
adopt or amend any Employee Plan (except as otherwise expressly
provided by this Agreement or contemplated by existing obligations) or
fund or make any contribution to any Employee Plan or any related
trust or other funding vehicles, other than regularly scheduled
contributions to trusts funding qualified plans, entry into employment
agreements or similar arrangements with officers and certain employees
of National as previously disclosed to the Company or except with the
written consent of the other party; and
(ii) Neither Agreeing Party shall accelerate the vesting of, or
the lapsing of restrictions with respect to, any Company Stock Option
or Parent Stock Option, as the case may be, and any option granted or
committed to be granted after the date of this Agreement shall not
accelerate as a result of the approval or consummation of any
transaction contemplated by this Agreement.
(j) Tax Free Qualification. The Company and Parent shall use their best
efforts not to, and shall use their best efforts not to permit any of their
Subsidiaries to, take any action (including any action otherwise permitted by
this Section 6.1) that would prevent or impede the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code. Parent (i)
has no plan or intention to reacquire any of its stock issued in the Merger, or
to liquidate Company, merge Company with or into another corporation, sell or
otherwise dispose of the stock of Company (except for transfers to corporations
controlled by Parent), or to cause Company to sell or otherwise dispose of any
of its assets (other than transfers to corporations controlled by Company)
except for dispositions made in the ordinary course of business, and (ii) will
cause the Company to continue its historic business or use a significant portion
of its historic business assets in a business.
34
(k) Accounting Methods; Tax Matters. Except as disclosed in the Company SEC
Documents and the Parent SEC Documents, as the case may be, filed prior to the
date of this Agreement, or as required by a governmental entity, neither
Agreeing Party shall change in any material respect its methods of accounting in
effect at September 30, 2004, except as required by changes in GAAP as concurred
in by the Agreeing Party's independent public accountants. Neither Agreeing
Party shall: (i) change its fiscal year (other that with respect to the
determination of the fiscal year of the Parent following the Effective Date);
(ii) make any Tax election that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect; (iii) settle any
material Tax claim or assessment; or (iv) surrender any right to claim a
material Tax refund or to any extension or waiver of the limitations period
applicable to any material Tax claim or assessment.
(l) Litigation/Regulatory Investigation. Neither Agreeing Party shall, nor
shall it permit any of its subsidiaries to, settle or compromise any material
suit, action, proceeding or regulatory investigation pending (or arising after
the date of this Agreement but prior to the Effective Time) for an amount in
excess of $250,000 (but if in excess of $250,000 such Agreeing Party may settle
or compromise such claim with the prior notice to and consent of the other
party, such consent not to be unreasonably withheld or delayed) or enter into
any consent decree, injunction or similar restraint or form of equitable relief
in settlement of any suit, action, proceeding or regulatory investigation
pending, except for such consent decrees, injunctions or restraints which would
not individually or in the aggregate have a Material Adverse Effect.
(m) Intellectual Property. Neither Agreeing Party shall transfer or license
to any Person or otherwise extend, amend or modify any rights to any
Intellectual Property owned by either Agreeing Party, other than in the ordinary
course of business or pursuant to any contracts, agreements, arrangements or
understandings currently in place.
(n) Certain Actions. Other than as expressly permitted by Sections 9.1, 9.2
or 9.3, hereof, neither Agreeing Party shall take any action or omit to
take any action for the purpose of preventing, delaying or impeding the
consummation of the Merger or the other transactions contemplated by
this Agreement.
(o) No Related Actions. Neither Agreeing Party shall, nor shall it permit
any of its Subsidiaries to, agree or commit to do any of the foregoing.
Section 6.2 Governmental Filings. The Company and Parent shall (a) confer on a
reasonable basis with each other and (b) report to each other (to the extent
permitted by applicable law or regulation or any applicable confidentiality
agreement) on operational matters. The Company and Parent shall file all reports
and correspondence required to be filed by each of them with the SEC (and all
other Governmental Entities) and the NASD between the date of this Agreement and
the Effective Time and shall, if requested by the other party and (to the extent
permitted by applicable law or regulation or any applicable confidentiality
agreement) deliver to the other party copies of all such reports,
correspondence, announcements and publications promptly upon request.
Section 6.3 Other Company Acquisition Proposals. Except as otherwise provided in
this Section 6.3, the Company shall not, and shall not permit or authorize the
Company's Subsidiaries, its and their officers, directors, employees,
affiliates, agents or other representatives (including without limitation any
investment banker, financial advisor, attorney or accountant retained by it or
any of its Subsidiaries), directly or indirectly, to initiate, solicit or
knowingly encourage (including by way of furnishing information) any inquiries
or the making of any proposal relating to, any Company Acquisition Proposals (as
defined below), or enter into discussions (except as to the existence of these
provisions) or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Company Acquisition Proposal, or agree to, or endorse,
any Company Acquisition Proposal and the Company shall within twenty-four (24)
hours (without counting any hours falling on a Saturday or Sunday or nationally
recognized holiday) notify Parent of all relevant terms of any such inquiries or
proposals received by the Company or by any Subsidiary or by any such officer,
director, employee, agent, investment banker, financial advisor, attorney,
accountant or other representative relating to any of such matters and if such
inquiry or proposal is in writing, the Company shall within twenty-four (24)
hours (without counting any hours falling on a Saturday or Sunday or nationally
recognized holiday) deliver or cause to be delivered to Parent a copy of such
inquiry or proposal and within twenty-four (24) hours (without counting any
hours falling on a Saturday or Sunday or nationally recognized holiday) update
Parent as to any material changes (and provide Parent with copies of same if in
writing) with respect to such inquiry or proposal. Nothing contained in this
Agreement shall prevent the Company or its Board of Directors from: (a) making
any disclosure to its stockholders if, in the good faith judgment of its Board
of Directors, failure so to disclose would be inconsistent with its obligations
under applicable law; (b) negotiating with or furnishing information to any
Person who has made an unsolicited bona fide written Company Acquisition
Proposal; or (c) recommending such Company Acquisition Proposal to its
stockholders, if and only to the extent that, in the case of actions referred to
in clause (b) or clause (c), such Company Acquisition Proposal is a Superior
Proposal (as defined below) and Parent is given at least two (2) business days'
prior written notice of the identity of the third party and all material terms
and conditions of the Superior Proposal to respond to such Superior Proposal.
Nothing contained in this Agreement shall prevent the Board of Directors of the
Company from complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to a Company Acquisition Proposal; provided, however,
that the Board of Directors of the Company shall not recommend that the
stockholders of the Company tender their shares in connection with a tender
offer except to the extent the Board of Directors of the Company determines in
its good faith judgment that such a recommendation is required to comply with
the fiduciary duties of the Board of Directors of the Company to stockholders
under applicable law, after receiving the advice of outside legal counsel.
35
For purposes of this Agreement, a "Company Acquisition Proposal" means,
in respect of the Company, an unsolicited bona fide proposal for or in respect
of (i) a merger, consolidation, business combination, recapitalization, or
similar transaction involving the Company pursuant to which the stockholders of
the Company immediately preceding such transaction would hold less than fifty
percent (50%) of the aggregate equity interests in the surviving or resulting
entity of such transaction, (ii) a sale or other disposition by the Company of
assets representing in excess of fifty percent (50%) of the aggregate fair
market value of the Company's business immediately prior to such sale, or (iii)
the acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of fifty percent (50%) of the voting power of the then
outstanding shares of capital stock of the Company, from a Person that in the
reasonable judgment of Company's Board of Directors (based on advice from a
recognized investment bank, it being recognized for the purposes of this Section
6.3 that Capitalink, L.C. is a recognized investment bank) is financially
capable of consummating such proposal.
For purposes of this Agreement, a "Superior Proposal" means, an
unsolicited, bona fide written Company Acquisition Proposal (in respect of the
Company) or Parent Acquisition Proposal (in respect of the Parent) for or in
respect of at least a majority of the outstanding Company Shares or Shares of
the Parent on terms that the Board of Directors of the relevant entity
determines, in its good faith judgment (after consultation with its respective
financial advisors) to be more favorable to the relevant entity's stockholders
than the terms of the Merger; is from a Person that in the reasonable judgment
of the relevant entity's Board of Directors (after consultation with a
recognized investment bank) is financially capable of consummating such
proposal, and that in the reasonable judgment of the relevant entity's Board of
Directors (after consultation with a recognized investment bank), if accepted,
is reasonably likely to be consummated taking into account all legal, financial
and regulatory aspects of the offer and the Person making the offer.
Section 6.4 Other Parent Acquisition Proposals. Except as otherwise provided in
this Section 6.4, the Parent shall not, and shall not permit or authorize the
Parent's Subsidiaries, its and their officers, directors, employees, affiliates,
agents or other representatives (including without limitation any investment
banker, financial advisor, attorney or accountant retained by it or any of its
Subsidiaries), directly or indirectly, to initiate, solicit or knowingly
encourage (including by way of furnishing information) any inquiries or the
making of any proposal relating to, any Parent Acquisition Proposals (as defined
below), or enter into discussions (except as to the existence of these
provisions) or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Parent Acquisition Proposal, or agree to, or endorse,
any Parent Acquisition Proposal and the Parent shall within twenty-four (24)
hours (without counting any hours falling on a Saturday or Sunday or nationally
recognized holiday) notify the Company of all relevant terms of any such
inquiries or proposals received by the Parent or by any subsidiary or by any
such officer, director, employee, agent, investment banker, financial advisor,
attorney, accountant or other representative relating to any of such matters and
if such inquiry or proposal is in writing, the Parent shall within twenty-four
(24) hours (without counting any hours falling on a Saturday or Sunday or
nationally recognized holiday) deliver or cause to be delivered to the Company a
copy of such inquiry or proposal and within twenty-four (24) hours (without
counting any hours falling on a Saturday or Sunday or nationally recognized
holiday) update the Company as to any material changes (and provide the Company
with copies of same if in writing) with respect to such inquiry or proposal.
Nothing contained in this Agreement shall prevent the Parent or its Board of
Directors from: (a) making any disclosure to its stockholders if, in the good
faith judgment of its Board of Directors, failure so to disclose would be
inconsistent with its obligations under applicable law; (b) negotiating with or
furnishing confidential information to any Person who has made a bona fide
unsolicited written Parent Acquisition Proposal, or entering into an agreement
with such Person in connection with a Parent Acquisition Proposal; or (c)
recommending such Parent Acquisition Proposal to its stockholders, if and only
to the extent that, in the case of actions referred to in clause (b) or clause
(c), such Parent Acquisition Proposal is a Superior Proposal and the Company is
given at least two (2) business days' prior written notice of the identity of
the third party and all material terms and conditions of Superior Proposal to
respond to such Superior Proposal. Nothing contained in this Agreement shall
prevent the Board of Directors of the Parent from complying with Rule 14d-9 and
Rule 14e-2 promulgated under the Exchange Act with regard to a Parent
Acquisition Proposal; provided, however, that the Board of Directors of the
Parent shall not recommend that the stockholders of the Parent tender their
shares in connection with a tender offer except to the extent the Board of
Directors of the Parent determines in its good faith judgment that such
recommendation is required to comply with the fiduciary duties of the Board of
Directors of the Company to stockholders under applicable law after receiving
the advice of outside local counsel.
36
For purposes of this Agreement, a "Parent Acquisition Proposal" means,
in respect of the Parent, a bona fide proposal for or in respect of (i) a
merger, consolidation, business combination, recapitalization, or similar
transaction involving the Parent pursuant to which the stockholders of the
Parent immediately preceding such transaction would hold less than fifty percent
(50%) of the aggregate equity interests in the surviving or resulting entity of
such transaction, (ii) a sale or other disposition by the Parent of assets
representing in excess of fifty percent (50%) of the aggregate fair market value
of the Parent's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Parent), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of fifty percent (50%) of the voting power of the then outstanding shares
of capital stock of the Parent, from a Person that in the reasonable judgment of
Parent's Board of Directors (based on advice from a recognized investment bank,
it being recognized for the purposes of this Section 6.4 that McColl Garrella
LLC is a recognized investment bank) is financially capable of consummating such
proposal.
Section 6.5 Consents of Parent's and the Company's Accountants. Each of Parent
and the Company shall use commercially reasonable efforts to cause its
independent accountants to deliver to Parent a consent, dated the date on which
the Registration Statement shall become effective, in form reasonably
satisfactory to Parent and customary in scope and substance for consents
delivered by independent public accountants in connection with registration
statements on Form S-4 under the Securities Act.
Section 6.6 Notification of Certain Matters. Each Agreeing Party shall give
prompt notice to the other party of any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate, or any failure of an
Agreeing Party to comply with or satisfy in any respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, in
each case, such that any of the conditions set forth in Sections 8.1, 8.2 or 8.3
could reasonably be expected to not be satisfied; provided, however, that no
such notification shall affect the representations, warranties, covenants,
remedies or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(a) The Company shall give prompt notice to Parent, and Parent shall give prompt
notice to the Company, of (i) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it set forth in Article 8 hereof or the
failure of which would result in either Material Adverse Effect, as the case may
be, or (ii) any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transaction contemplated by this Agreement.
Section 6.7 SEC Filings.
(a) The Company will deliver promptly to Parent true and complete copies of
each report, registration statement or statement mailed by it to its security
holders generally or filed by it with the SEC, in each case subsequent to the
date of this Agreement and prior to the Effective Time. As of their respective
dates, such reports, including the consolidated financial statements included
therein, and statements (excluding any information therein provided by Parent or
MERGER SUB, as to which the Company makes no representation) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. Each of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in such reports, (i) shall comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, (ii) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) shall fairly present the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not,
or are not expected to be, material in amount.
(b) Parent will deliver promptly to the Company true and complete copies of
each report, registration statement or statement mailed by it to its security
holders generally or filed by it with the SEC, in each case subsequent to the
date of this Agreement and prior to the Effective Time. As of their respective
dates, such reports, including the consolidated financial statements included
therein, and statements (excluding any information therein provided by the
Company, as to which Parent makes no representation) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in all
material respects with all applicable requirements of law. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in such reports (i) shall comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (ii) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) shall fairly present the consolidated
financial position of Buyer and its Subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount.
37
ARTICLE 7
ADDITIONAL COVENANTS OF PARENT AND THE COMPANY
Section 7.1 Preparation of Proxy Statement; Stockholders Meetings.
(a) As promptly as reasonably practicable following the date hereof, Parent
and the Company shall cooperate in preparing and each shall cause to be filed
with the SEC mutually acceptable proxy materials that shall constitute the Joint
Proxy Statement/Prospectus and Parent shall prepare and file with the SEC the
Form S-4. The Joint Proxy Statement/Prospectus will be included as a prospectus
in and will constitute a part of the Form S-4 as Parent's prospectus. Each of
Parent and the Company shall use reasonable commercial efforts to have the Joint
Proxy Statement/Prospectus cleared by the SEC and the Form S-4 declared
effective by the SEC and to keep the Form S-4 effective as long as is necessary
to consummate the Merger and the transactions contemplated hereby. Each of
Parent and the Company shall, as promptly as practicable after receipt thereof,
provide the other party with copies of any written comments and advise each
other of any oral comments with respect to the Joint Proxy Statement/Prospectus
or Form S-4 received from the SEC. The parties shall cooperate and provide the
other party with a reasonable opportunity to review and comment on any amendment
or supplement to the Joint Proxy Statement/Prospectus and the Form S-4 prior to
filing such with the SEC and will provide each other with a copy of all such
filings made with the SEC. Notwithstanding any other provision herein to the
contrary, no amendment or supplement (including by incorporation by reference)
to the Joint Proxy Statement/Prospectus or the Form S-4 shall be made without
the approval of both Parent and the Company, which approval shall not be
unreasonably withheld or delayed; provided that, with respect to documents filed
by a party hereto that are incorporated by reference in the Form S-4 or Joint
Proxy Statement/Prospectus, this right of approval shall apply only with respect
to information relating to the other party or its business, financial condition
or results of operations; and provided, further, that Parent, in connection with
a Change in the Parent Recommendation, and the Company, in connection with a
Change in the Company Recommendation, may amend or supplement the Joint Proxy
Statement/Prospectus or Form S-4 (including by incorporation by reference)
pursuant to a Qualifying Amendment to effect such a Change, and in such event,
this right of approval shall apply only with respect to information relating to
the other party or its business, financial condition or results of operations,
and shall be subject to the right of each party to have its board of directors'
deliberations and conclusions to be accurately described. Parent will use
reasonable commercial efforts to cause the Joint Proxy Statement/Prospectus to
be mailed to Parent stockholders, and the Company will use reasonable commercial
efforts to cause the Joint Proxy Statement/Prospectus to be mailed to the
Company stockholders, in each case, as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Each party hereto will
advise the other party, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy Statement/ Prospectus or the
Form S-4. If, at any time prior to the Effective Time, any information relating
to Parent or the Company, or any of their respective affiliates, officers or
directors, is discovered by Parent or the Company and such information should be
set forth in an amendment or supplement to any of the Form S-4 or the Joint
Proxy Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party hereto discovering such information shall
promptly notify the other parties hereto and, to the extent required by law,
rules or regulations, an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and disseminated to the
stockholders of Parent and the Company.
(b) The Company shall duly take all lawful action to call, give notice of,
convene and hold the Company Stockholders Meeting as soon as practicable on a
date determined in accordance with the mutual agreement of Parent and the
Company for the purpose of obtaining the Company Stockholder Approval and,
subject to Section 6.3, shall take all lawful action to solicit the Company
Stockholder Approval. Notwithstanding anything to the contrary contained in this
Agreement, the Company may adjourn or postpone the Company Stockholders Meeting
to the extent necessary to ensure that any necessary supplement or amendment to
the Joint Proxy Statement/Prospectus is provided to the Company's stockholders
in advance of a vote on the Merger and this Agreement or, if as of the time for
which the Company Stockholders Meeting is originally scheduled (as set forth in
the Joint Proxy Statement/Prospectus) there are insufficient shares of the
Company Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company Stockholders Meeting.
The Board of Directors of the Company shall recommend the approval of the plan
of merger contained in this Agreement by the stockholders of the Company to the
effect as set forth in Section 4.3 (the "Company Recommendation"), and shall not
(i) withdraw, modify or qualify (or propose to withdraw, modify or qualify) in
any manner adverse to Parent such recommendation or (ii) take any action or make
any statement in connection with the Company Stockholders Meeting inconsistent
with such recommendation (collectively, a "Change in the Company
Recommendation"); provided, however, that the Board of Directors of the Company
may make a Change in the Company Recommendation pursuant to Section 6.3 hereof.
Notwithstanding any Change in the Company Recommendation, this Agreement shall
be submitted to the stockholders of the Company at the Company Stockholders
Meeting for the purpose of approving and adopting this Agreement and the Merger
and nothing contained herein shall be deemed to relieve the Company of such
obligation unless this Agreement shall have first been terminated as set forth
in Section 9.2 or Section 9.3.
38
(c) Parent shall duly take all lawful action to call, give notice of,
convene and hold the Parent Stockholders Meeting as soon as practicable on a
date determined in accordance with the mutual agreement of Parent and the
Company for the purpose of obtaining the Parent Stockholder Approval and,
subject to Section 6.4, shall take all lawful action to solicit the Parent
Stockholder Approval. Notwithstanding anything to the contrary contained in this
Agreement, Parent may adjourn or postpone the Parent Stockholders Meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Joint Proxy Statement/Prospectus is provided to Parent's shareholders in advance
of a vote on the approval of the Merger, the adoption of the Agreement and the
approval of the issuance of Parent Common Stock in the Merger and this Agreement
or, if as of the time for which the Parent Stockholders Meeting is originally
scheduled (as set forth in the Joint Proxy Statement/Prospectus) there are
insufficient shares of Parent Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Parent
Stockholders Meeting. The Board of Directors of Parent shall recommend the
approval of this Agreement and the issuance of Parent Common Stock in the Merger
by the stockholders of Parent as set forth in Section 5.3 (the "Parent
Recommendation"), and shall not (i) withdraw, modify or qualify (or propose to
withdraw, modify or qualify) in any manner adverse to the Company such
recommendation or (ii) take any action or make any statement in connection with
the Parent Stockholders Meeting inconsistent with such recommendation
(collectively, a "Change in the Parent Recommendation"); provided, however, that
the Board of Directors of Parent may make a Change in the Parent Recommendation
pursuant to Section 6.4 hereof. Notwithstanding any Change in the Parent
Recommendation, this Agreement shall be submitted to the stockholders of Parent
at the Parent Stockholders Meeting for the purpose of approving and adopting
this Agreement and the Merger and the issuance of Parent Common Stock in the
Merger and nothing contained herein shall be deemed to relieve Parent of such
obligation unless this Agreement shall have first been terminated as set forth
in Section 9.2 or Section 9.3.
Section 7.2 Intentionally Omitted.
Section 7.3 Access to Information. Upon reasonable notice, each of Parent and
the Company shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other party reasonable access during normal business hours and during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, each of
Parent and the Company shall (and shall cause its Subsidiaries to) furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of U.S. federal or state
securities laws or any other regulatory law, as applicable (other than documents
that such party is not permitted to disclose under applicable law), and (b) all
other information concerning it and its business, properties and personnel as
such other party may reasonably request; provided, however, that either Parent
or the Company may restrict the foregoing access to the extent that (i) any law,
treaty, rule or regulation of any governmental entity applicable to it or any
contract requires it or its Subsidiaries to restrict or prohibit access to any
such properties or information or (ii) the information is subject to
confidentiality obligations to a third party. Each of Parent and the Company
will hold any information obtained pursuant to this Section 7.3 in confidence.
Any investigation by either Parent or the Company shall not affect the
representations and warranties of the other.
Section 7.4 Reasonable Commercial Efforts.
(a) Subject to the terms and conditions of this Agreement, each party
hereto will use its reasonable commercial efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under this Agreement and applicable laws and regulations to consummate
the Merger and the other transactions contemplated by this Agreement as soon as
practicable after the date hereof, including (i) preparing and filing as
promptly as practicable all documentation to effect all necessary applications,
notices, petitions, filings, and other documents and to obtain as promptly as
practicable all necessary consents and all other consents, waivers, licenses,
orders, registrations, approvals, permits, rulings, authorizations and
clearances necessary or advisable to be obtained from any third party, any
governmental entity and/or self-regulatory body (including without limitation
the NASD) in order to consummate the Merger or any of the other transactions
contemplated by this Agreement (collectively, the "Required Approvals") and (ii)
taking all reasonable steps as may be necessary to obtain all such Required
Approvals. In furtherance and not in limitation of the foregoing, each of Parent
and the Company agrees, to the extent not already accomplished (i) to make, as
promptly as practicable, all necessary filings with governmental entities and/or
self-regulatory body (including without limitation the NASD) relating to the
Merger and the other transactions contemplated by this Agreement, and, to supply
as promptly as practicable any additional information or documentation that may
be requested pursuant to such laws or by such governmental entities or any other
applicable regulatory law and the receipt of Required Approvals under such other
laws or from such governmental entities as soon as practicable and (ii) not to
extend any waiting period under any applicable regulatory law, except with the
prior written consent of the other parties hereto (which consent shall not be
unreasonably withheld or delayed). Notwithstanding anything to the contrary in
this Agreement, neither Parent nor the Company nor any of their respective
Subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest or agree to divest any of their respective businesses or
assets, or to take or agree to take any action or agree to any limitation that
could reasonably be expected to have a Material Adverse Effect on Parent
(assuming the Merger has been consummated) or to substantially impair the
benefits to Parent and the Company expected, as of the date hereof, to be
realized from consummation of the Merger, and neither Parent or the Company
shall be required to agree to or effect any divestiture, hold separate any
business or take any other action that is not conditional on the consummation of
the Merger.
39
(b) Each of the Company and Parent shall, in connection with the efforts
referenced in Section 7.4(a) to obtain all Required Approvals, use its
reasonable commercial efforts to: (i) cooperate in all respects with each other
in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; (ii) subject to applicable law, permit the other party to review in
advance any proposed written communication between it and any governmental
entity; (iii) promptly inform each other of (and, at the other party's
reasonable request, supply to such other party) any communication (or other
correspondence or memoranda) received by such party from, or given by such party
to any governmental entity and of any material communication received or given
in connection with any proceeding by a private party, in each case regarding any
of the transactions contemplated hereby; and (iv) consult with each other in
advance to the extent practicable of any meeting or conference with any
governmental entity or, in connection with any proceeding by a private party,
with any other Person, and to the extent permitted by such applicable
governmental entity or other Person, give the other party the opportunity to
attend and participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
hereto contained in Section 7.4(a) and 7.4(b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is instituted
(or threatened to be instituted) challenging any transaction contemplated by
this Agreement as violative of any applicable regulatory law of the United
States, or if any statute, rule, regulation, executive order, decree, injunction
or administrative order is enacted, entered, promulgated or enforced by a
governmental entity that would make the Merger or the other transactions
contemplated hereby illegal or would otherwise prohibit or materially impair or
delay the consummation of the Merger or the other transactions contemplated
hereby, each of the Company and Parent shall cooperate in all respects with each
other and use its respective reasonable commercial efforts, including, subject
to Section 7.4(a), selling, holding separate or otherwise disposing of or
conducting their business in a specified manner, or agreeing to sell, hold
separate or otherwise dispose of or conduct their business in a specified manner
or permitting the sale, holding separate or other disposition of, any assets of
Parent, the Company or their respective Subsidiaries or the conducting of their
business in a specified manner, to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Merger or the other transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable so
as to permit consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 7.4 shall limit a party's right to terminate this Agreement
pursuant to Section 9.1(b) or Section 9.1(c) so long as such party hereto has up
to then complied with its obligations under this Section 7.4.
(d) Each of Parent and the Company and their respective Boards of Directors
shall, if any state takeover statute or similar statute becomes applicable to
this Agreement, the Merger or any other transactions contemplated hereby, take
all action reasonably necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on this Agreement, the Merger and the other
transactions contemplated hereby.
Section 7.5 Public Announcements. Before issuing any press release or otherwise
making any public statements with respect to the Merger, Parent and the Company
will consult with each other as to its form and substance and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law, the rules and regulations of the
SEC, the NASD or the OTC.
Section 7.6 Notification of Certain Matters. Each of the Company and Parent
shall give prompt notice to the other party of (a) any notice of, or other
communication relating to, a breach of this Agreement or event which, with
notice or lapse of time or both, would become a breach, received by it or any of
its Subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract to which it or any of its Subsidiaries is a
party or it, any of its Subsidiaries or any of its or their respective
properties is subject, which breach would be reasonably likely to have a
Material Adverse Effect on it, or (b) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.
Section 7.7 Expenses. Except as set forth in Section 9.5, Parent and the Company
shall bear their respective expenses incurred in connection with the Merger,
including, without limitation, the preparation, execution and performance of
this Agreement and the transactions contemplated hereby, and all Third Party
Expenses, except that expenses incurred in printing, mailing and filing
(including without limitation, SEC filing fees and stock exchange listing
application fees) the Form S-4 and the Joint Proxy Statement/Prospectus shall be
shared equally by the Company and the Parent.
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Section 7.8 Affiliates. Section 7.8 of the Disclosure Schedule contains a
complete and accurate list of those persons who may be deemed to be, in the
Company's reasonable judgment, "affiliates" of the Company within the meaning of
Rule 145 promulgated under the Securities Act (each, a "Company Affiliate" and
collectively, the "Company Affiliates"). The Company shall provide Parent with
such information and documents as Parent reasonably requests for purposes of
reviewing such list. The Company shall use commercially reasonable efforts to
cause each person who is identified as an "affiliate" in the Disclosure Schedule
to deliver to Parent, prior to the Effective Time, a written agreement in a form
attached hereto as Exhibit B pursuant to which they will confirm their
obligations under SEC Rule 145 as an "affiliate."
Section 7.9 OTC Listing. If but only if required by the OTC, Parent shall
promptly prepare and submit to the OTC an application or other notice covering
the shares of Parent Common Stock issuable in the Merger and upon exercise of
the Company Warrants, Company Options and Company Convertible Debt, and shall
use commercially reasonable efforts to obtain, prior to the Effective Time,
approval (if required) for the listing of such Parent Common Stock, subject to
official notice of issuance, if applicable.
Section 7.10 Payment of Dividends on Company Preferred Stock Parent and the
Company hereby covenant and agree that it is the intention of the parties that,
subject to the applicable provisions of the DGCL, the Parent shall declare and
pay, on the next scheduled dividend date after the Effective Date, dividends on
the Company Preferred Stock (including any cumulative and unpaid dividends on
the Parent Series B Preferred Stock received in the exchange for the former
Company Series A Preferred Stock and any cumulative and unpaid dividends on the
Parent Series C Preferred Stock received in the exchange for the former Company
Series B Preferred Stock).
Section 7.11 Indemnification.
(a) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to indemnify, defend and hold harmless each present
and former director and officer of the Company (when acting in such capacity)
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under the NJBCA and its certificate of
incorporation, bylaws and other agreements in effect on the date hereof to
indemnify such Person.
(b) The Parent shall procure, fund and maintain continuing directors and
officers liability insurance coverage for a period not to exceed six years after
the Effective Time (the "Tail Coverage") in an amount and upon terms
substantially equivalent, but not superior, to such insurance of the Company in
effect as of the date hereof, provided, in no event shall the Parent be required
to pay aggregate premiums for insurance under this section in excess of 200% of
the aggregate premiums paid by the Company in 2004.
ARTICLE 8
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party. The obligations of the
Company, Parent and MERGER SUB to consummate the Merger are subject to the
satisfaction (or, to the extent legally permissible, waiver) at or prior to the
Closing of the following conditions:
(a) Parent shall have obtained Parent Stockholder Approval and the Company
shall have obtained Company Stockholder Approval;
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
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(c) All required approvals, applications or notices with governmental
entities and/or self-regulatory agencies shall have been obtained, including,
without limitation, the NASD (the "Approvals"), except those Approvals the
failure of which to obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent or the
Company;
(d) The Form S-4 shall have been declared effective under the Securities
Act and no stop order suspending the effectiveness of the Form S-4 shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the SEC;
(e) The shares of Parent Common Stock to be issued in the Merger shall have
been approved for listing on the OTC, subject to official notice of issuance, if
required;
(f) As of the Closing Date, to be effective as of the Effective Time, (i)
the Board of Directors of Parent will consist of Messrs. Mark Goldwasser, Steven
B. Sands, William Kurinsky and Victor Kurylak, one other designee of each of the
Parent and the Company and one other mutually agreed upon designee, who shall
serve as chairman (and who shall not be any one of the four named foregoing
persons), (ii) the Board of Directors of the Parent Subsidiaries (including the
Surviving Corporation and its subsidiaries) shall consist of Messrs. Mark
Goldwasser and Victor Kurylak, (iii) except as set forth in Section 3.4, the
officers of the Parent Subsidiaries (including the Surviving Corporation and its
subsidiaries) shall consist of those persons who are officers of such entities
as of the Effective Date and (iv) the officers of the Parent shall consist of
those persons and those titles set forth in Section 3.4, except that Robert
Daskal shall be the Chief Financial Officer of Parent;
(g) Parent and/or the Company shall have successfully consummated a
financing (of equity, debt or a combination thereof) or series of related
financing between the date of this Agreement and the Effective Date of no less
than $4 million in the aggregate;
(h) Parent shall have entered into written employment agreements with
Messrs. Victor Kurylak and Mark Goldwasser in form and substance mutually
agreeable, which employment agreements shall (x) other than their specific
titles, be identical on all terms and conditions and (y) specify that neither
shall report to each other, but only to the Board of Directors of the Parent;
(i) No office of either National or FMSC conducting securities brokerage
business with (i) revenues that constitute more than 10% of the consolidated
revenues of the Parent or the Company, respectively, in the most recent fiscal
quarter or (ii) registered representatives representing more that 10% of the
total registered representatives of National or FMSC, respectively, terminated
their employment or affiliation with National or FMSC, as the case may be;
(j) The Company shall have entered into a separation and release agreement
with Mr. Herb Kurinsky pursuant to which Mr. Kurinsky shall have terminated his
employment agreement and status as a director with the Company in form and
substance reasonably acceptable to the Parent and the Company; and
(k) Each of the Agreeing Parties' respective clearing firms shall have
agreed that the transactions contemplated by this Agreement do not trigger
acceleration of indebtedness thereunder or shall otherwise modified their
existing clearing arrangements to consolidate same or made such other
arrangements reasonably acceptable to Parent and the Company.
Section 8.2 Conditions to the Obligations of Parent and MERGER SUB. The
obligations of Parent and MERGER SUB to consummate the Merger are subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:
(a) (i) The Company shall have performed in all material respects all of
its obligations and covenants hereunder required to be performed by it at or
prior to the Effective Time, (ii) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if made on the
Closing Date (provided that any such representation and warranty made as of a
specific date shall be true and correct as of such specific date), and (iii)
Parent shall have received a certificate signed by the chief executive officer
of the Company to the foregoing effect;
(b) The Company shall have received all consents, waivers and approvals
required in connection with the consummation of the transactions contemplated
hereby in connection with the agreements, contracts, investment advisory
agreements, licenses or leases set forth in Section 4.5 of the Company
Disclosure Schedule, except those consents, waivers or approvals the failure to
obtain would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company;
(c) There shall not be pending any suit, proceeding or investigation: (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement; (ii) relating to
the Merger and seeking to obtain from Parent or any of its Subsidiaries any
damages that may be material to Parent; (iii) seeking to prohibit or limit in
any material respect Parent's ability to vote, receive dividends with respect to
or otherwise exercise ownership rights with respect to the stock of the
Surviving Corporation; or (iv) which, if adversely determined could have a
Material Adverse Effect on the Company or Parent; and
(d) There shall have not occurred any event or change since the date of the
Agreement that has had or could reasonably be expected to have a Material
Adverse Effect on the Company.
42
(e) The Company shall have received from Capitalink, L.C. an opinion as to
the fairness to the Company from a financial point of view of the consideration
to be offered by Parent in connection with the transactions contemplated hereby;
and
(g) Parent shall have received reasonably acceptable documentation relating
to the termination of the Company's stock option plans and releases from all
participants in such plan.
Section 8.3 Conditions to the Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction (or, to the
extent legally permissible, waiver) of the following further conditions:
(a) Parent shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of Parent contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if made on the Closing Date
(provided that any such representation and warranty made as of a specific date
shall be true and correct as of such specific date), except for such
inaccuracies that individually or in the aggregate do not have a Material
Adverse Effect on Parent as of the Closing Date and except for changes
contemplated by this Agreement, and (iii) the Company shall have received a
certificate signed by the chief executive officer of Parent to the foregoing
effect;
(b) Parent shall have received all consents, waivers and approvals required
in connection with the consummation of the transactions contemplated hereby in
connection with the agreements, contracts, licenses or leases set forth in
Section 5.5 of the Parent Disclosure Schedule, except those consents, waivers or
approvals the failure to obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Parent;
(c) There shall not be pending any suit, proceeding or investigation: (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement; (ii) relating to
the Merger and seeking to obtain from Company or any of its Subsidiaries any
damages that may be material to Company; (iii) seeking to prohibit or limit in
any material respect Company's ability to vote, receive dividends with respect
to or otherwise exercise ownership rights with respect to the stock of the
Surviving Corporation; or (iv) which, if adversely determined could have a
Material Adverse Effect on the Company or Parent.
(d) There shall have not occurred any event or change since the date of the
Agreement that has had or could reasonably be expected to have a Material
Adverse Effect on Parent; and
(e) Parent shall have received from McColl Garella LLC an opinion as to the
fairness to the Parent from a financial point of view of the consideration to be
offered by Parent in connection with the transactions contemplated hereby.
ARTICLE 9
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company or Parent:
(a) By mutual consent of Parent and the Company;
(b) By either Parent or the Company if the Merger shall not have been
consummated on or before August 31, 2005 (the "End Date"), which date may be
extended by mutual written consent of the parties hereto; provided, however,
that the right to terminate this Agreement under this Section 9.1(b) shall not
be available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a material breach of this
Agreement.
(c) by either Parent or the Company, if any governmental entity shall have
issued an order (other than a temporary restraining order), decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger, and such order, decree, ruling or other action shall have become final
and nonappealable; provided that the party seeking to terminate this Agreement
shall have used commercially reasonable efforts to avoid, remove or lift such
order, decree or ruling; or
43
(d) by either Parent or the Company, if either the Company Stockholder
Approval or the Parent Stockholder Approval has not been obtained by reason of
the failure to obtain the required vote at the Company Stockholder Meeting or
the Parent Stockholder Meeting as applicable; or
(e) by either Parent or the Company, if more than 5% of the outstanding
shares of the Company common shares having properly demanded appraisal rights;
or
(f) by either Parent or the Company, if the NASD does not approve the
change of control of either National or FMSC, or if such change of control would
be approved, the NASD would assess or impose fines, penalties or similar
required payments of $250,000 or more; or
(g) by either Parent of the Company on or before February 28, 2005 if the
result of their respective due diligence investigation of the other party is not
reasonably satisfactory to itself; provided, however, that the foregoing shall
not terminate or waive the right of either party to conduct continuing due
diligence investigation of the other party thereafter.
Section 9.2 Termination by Parent. This Agreement may be terminated by action of
the Board of Directors of Parent, at any time prior to the Effective Time,
before or after Company Stockholder Approval, if: (a) the Company shall have
failed to comply in any material respect with any of the covenants or agreements
contained in Article 2, Article 6 and Article 7 of this Agreement to be complied
with or performed by the Company at or prior to such date of termination;
provided, however, that if such failure to comply is capable of being cured
prior to the End Date, such failure shall not have been cured within thirty (30)
days of delivery to the Company of written notice of such failure; (b) there
exists a breach or breaches of any representation or warranty of the Company
contained in this Agreement such that the closing condition set forth in Section
8.2(a) would not be satisfied; provided, however, that if such breach or
breaches are capable of being cured prior to the End Date, such breaches shall
not have been cured within thirty (30) days of delivery to the Company of
written notice of such breach or breaches; (c) the Board of Directors of the
Parent or any committee thereof shall have caused Parent to enter into, or
recommended that Parent stockholders approve and adopt, any Parent Acquisition
Proposal; or (d) a Company Triggering Event (as defined below) shall have
occurred.
For the purposes of this Agreement, a "Company Triggering Event" shall
be deemed to have occurred if: (a) there shall have occurred a Change in Company
Recommendation; (b) the Company shall have failed to include in the Joint Proxy
Statement/Prospectus the recommendation of the Board of Directors of the Company
in favor of the adoption and approval of the Agreement and the approval of the
Merger; (c) the Board of Directors of the Company or any committee thereof shall
have approved or recommended any Superior Proposal with respect to the Company;
or (d) a tender or exchange offer relating to securities of the Company shall
have been commenced by a Person unaffiliated with Parent and the Company shall
not have sent to its security holders pursuant to Rule 14e-2 promulgated under
the Exchange Act, within ten (10) business days after such tender or exchange
offer is first published, sent or given, a statement disclosing that the Company
recommends rejection of such tender or exchange offer.
Section 9.3 Termination by the Company. This Agreement may be terminated at any
time prior to the Effective Time, before or after the approval by the
stockholders of the Company, by action of the Board of Directors of the Company,
if: (a) Parent shall have failed to comply in any material respect with any of
the covenants or agreements contained in Article 2, Article 6 and Article 7 of
this Agreement to be complied with or performed by Parent at or prior to such
date of termination; provided, however, that if such failure to comply is
capable of being cured prior to the End Date, such failure shall not have been
cured within thirty (30) days of delivery to Parent of written notice of such
failure; (b) there exists a breach or breaches of any representation or warranty
of Parent contained in this Agreement such that the closing condition set forth
in Section 8.3(a) would not be satisfied; provided, however, that if such breach
or breaches are capable of being cured prior to the End Date, such breaches
shall not have been cured within thirty (30) days of delivery to Parent of
written notice of such breach or breaches; (c) (i) the Board of Directors of the
Company authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal with respect to the Company and the Company
notifies Parent in writing in accordance with Section 6.3 that it intends to
enter into such an agreement, attaching the most current version of such
agreement (or a description of all material terms and conditions thereof) to
such notice and (ii) the Company upon such termination pursuant to this clause
(c) pays to Parent in immediately available funds the fees required to be paid
pursuant to Section 9.5, or (d) a Parent Triggering Event shall have occurred.
For the purposes of this Agreement, a "Parent Triggering Event" shall
be deemed to have occurred if: (a) there shall have occurred a Change in Parent
Recommendation; (b) the Board of Directors of the Parent or any committee
thereof shall have caused Parent to enter into, or recommended that Parent
stockholders approve and adopt, any Parent Acquisition Proposal; or (c) a tender
or exchange offer relating to securities of the Parent shall have been commenced
by a Person unaffiliated with Company and the Parent shall not have sent to its
security holders pursuant to Rule 14e-2 promulgated under the Exchange Act,
44
within ten (10) business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Parent recommends
rejection of such tender or exchange offer.
Section 9.4 Procedure for Termination. In the event of termination by Parent or
the Company pursuant to this Article 9, written notice thereof shall forthwith
be given to the other.
Section 9.5 Effect of Termination. In the event of termination of this Agreement
pursuant to this Article 9, this Agreement shall forthwith become null and void,
no party hereto (or any of its directors or officers) shall have any liability
or further obligation to any other party to this Agreement, except as provided
in this Section 9.5 and Section 7.7 hereof, and except to the extent that such
termination results from willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in Agreement in
which case such party shall be liable for all resulting liabilities or damages.
In the event of a termination by Parent under Section 9.2(d) hereof or a
termination by the Company pursuant to Section 9.3(c) hereof, the Company shall
pay to Parent an amount equal to Two Hundred Thousand Dollars ($200,000), plus
the actual out of pocket expenses that Parent has incurred and is expected to
incur after such termination in connection with the transactions contemplated by
this Agreement ("Parent Expenses") and which amount shall represent the entire
amount that Parent is entitled to receive with respect to such expenses,
including, but not limited to, fees and expenses of Parent's counsel,
accountants and financial advisors. In the event of a termination by the Company
under Section 9.3(d) hereof or a termination by the Parent pursuant to Section
9.2(c) hereof, the Parent shall pay to the Company an amount equal to Two
Hundred Thousand Dollars ($200,000), plus the actual out of pocket expenses that
the Company has incurred and is expected to incur after such termination in
connection with the transactions contemplated by this Agreement ("Company
Expenses") and which amount shall represent the entire amount that the Company
is entitled to receive with respect to such expenses, including, but not limited
to, fees and expenses of Company's counsel, accountants and financial advisors.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by facsimile (with
receipt confirmed and promptly confirmed by personal delivery, U.S. first class
mail, or courier), or by courier service, as follows:
If to Parent or MERGER SUB to:
Olympic Cascade Financial Corporation
120 Broadway
27th Floor
New York, New York 10271
Facsimile: 212 417-8010
Attn: Mark Goldwasser, President and Chief Executive Officer
with a copy to:
Littman Krooks LLP
655 Third Avenue, 20th Floor
New York, NY 10017
Facsimile: (212) 490-2990
Attention: Mitchell C. Littman, Esq.
If to the Company to:
First Montauk Financial Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Facsimile: 732-842-9047
Att: Chief Executive Officer
with a copy to:
Goldstein & DiGioia, LLP
45 Broadway, 11th Flour
New York NY 10016
Att.: Victor DiGioia, Esq.
Section 10.2 Non-Survival of Representations and Warranties. The representations
and warranties contained herein and in any certificate or other writing
delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
Section 10.3 Amendments; No Waivers.
(a) Any provision of this Agreement (including the Exhibits and Schedules
hereto) may be amended or waived prior to the Effective Time if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Parent and MERGER SUB, or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that after the adoption of
this Agreement by the stockholders of the Company, no such amendment or waiver
shall, without the further approval of such stockholders, alter or change (i)
the amount or kind of consideration to be received in exchange for any shares of
capital stock of the Company, or (ii) any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the holders of any
shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
45
Section 10.4 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto except that MERGER SUB may transfer or
assign, in whole or from time to time in part, to one or more of its affiliates,
its rights under this Agreement, but any such transfer or assignment will not
relieve MERGER SUB of its obligations hereunder.
Section 10.5 Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the State of Delaware, without regard to principles
of conflicts of law.
Section 10.6 Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the state or federal court of the State of Delaware, and each of the parties
hereby consents to the jurisdiction of such court (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in this Section 10.6 shall be deemed effective service
of process on such party.
Section 10.7 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.8 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts and by facsimile, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Section 10.9 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) constitute the entire agreement between the parties with
respect to the subject matter of this Agreement and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof. Except as expressly provided
in Section 7.11(d), no provision of this Agreement or any other agreement
contemplated hereby is intended to confer on any Person other than the parties
hereto any rights or remedies.
Section 10.10 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
Section 10.11 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first above written.
OLYMPIC CASCADE FINANCIAL CORPORATION
By:/s/ Mark Goldwasser
-----------------------------------------
Name: Mark Goldwasser
Title: President and Chief Executive Officer
MERGER SUB ACQUISITION CORPORATION
By:/s/ Mark Goldwasser
-----------------------------------------
Name: Mark Goldwasser
Title: Chief Executive Officer
FIRST MONTAUK FINANCIAL CORP.
By:/s/ Victor K. Kurylak
-----------------------------------------
Name: Victor K. Kurylak
Title: President and Chief Executive Officer
47
EXHIBIT A-1
COMPANY STOCKHOLDER VOTING AGREEMENT
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement") is made and entered into as of
February 10, 2005, between and among OLYMPIC CASCADE FINANCIAL CORPORATION, a
Delaware corporation ("Parent"), and the undersigned stockholder (the
"Stockholder") of FIRST MONTUAK FINANCIAL CORP., a New Jersey corporation (the
"Company"). All capitalized terms herein not otherwise defined shall have the
meaning ascribed to them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
date hereof (the "Merger Agreement") by and among Parent, MERGER SUB, a Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUB"), and the
Company, MERGER SUB is merging with and into the Company (the "Merger") and the
Company, as the surviving corporation of the Merger, will thereby become a
wholly owned subsidiary of Parent;
WHEREAS, the Stockholder is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of shares of the outstanding (i) common stock, no par value per share,
and (ii) Series B Preferred Stock, $0.10 par value per share, of the Company in
the amounts indicated on the final page of this Agreement (the "Shares"); and
WHEREAS, in consideration of the execution of the Merger Agreement by
Parent, the Stockholder agrees (i) not to transfer or otherwise dispose of any
of such Stockholder's Shares or New Shares (as defined below), or any and all
other shares or securities of the Company issued, issuable, exchanged or
exchangeable in respect of any Shares or New Shares (collectively with respect
to each Stockholder, the "Securities"), and (ii) agrees to vote such
Stockholder's Securities as set forth herein.
NOW, THEREFORE, in contemplation of the foregoing and in consideration
of the mutual agreements, covenants, representations and warranties contained
herein and intending to be legally bound hereby, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. The Stockholder agrees to be subject to such
Stockholder's Proxy (as defined in Section 3) and agrees that it will not take
or permit any action to, directly or indirectly, (i) transfer, sell, assign,
give, pledge, exchange or pledge, or otherwise dispose of or encumber the
Stockholder's Securities prior to the Expiration Date, or to make any offer or
agreement relating thereto, at any time prior to the Expiration Date; (ii)
deposit any of the Stockholder's Securities into a voting trust or enter into a
voting agreement or arrangement with respect to such Stockholder's Securities or
grant any proxy or power of attorney with respect thereto, in each case, in a
manner that conflicts or may conflict with the Stockholder's obligations
hereunder, or (iii) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect sale, assignment, transfer,
exchange or other disposition of or transfer of any interest in or the voting of
any of the Stockholder's Securities, in each case, in a manner that conflicts or
may conflict with the Stockholder's obligations hereunder. As used herein, the
term "Expiration Date" shall mean the earlier to occur of (i) the Effective Time
(as such terms is defined in the Merger Agreement), and (ii) the date on which
the Merger Agreement is terminated in accordance with its terms (including any
extensions to the Merger Agreement, as provided for therein).
1.2 New Shares. The Stockholder agrees that any shares or securities of the
capital stock of the Company that the Stockholder purchases or with respect to
which the Stockholder otherwise acquires beneficial ownership after the date of
this Agreement and prior to the Expiration Date (the "New Shares"), and any and
all other shares or securities of the Company issued, issuable, exchanged or
exchangeable in respect of any New Shares, shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares.
2. Agreement to Vote. At every meeting of the stockholders of the Company
called with respect to any of the following, and at every adjournment thereof,
and on every action or approval by written consent of the stockholders of the
Company with respect to any of the following, the Stockholder agrees to vote
such Stockholder's Securities: (i) in favor of approval of the Merger Agreement,
the Merger, the transactions contemplated thereby and any matter that could
reasonably be expected to facilitate the Merger; (ii) in favor of any
alternative structure as may be agreed upon by Parent and the Company to effect
the acquisition by Parent of the Company or of control of the Company; provided
that such alternative structure is on terms in the aggregate no less favorable
to the Company's stockholders than the terms of the Merger set forth in the
Merger Agreement; and (iii) against the consummation of any Superior Proposal or
any other action, proposal, agreement or transaction (other than the Merger, the
Merger Agreement or the transactions contemplated thereby) that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement, which could result in any
of the conditions to the Company's obligations under the Merger Agreement not
being fulfilled or which would be inconsistent with the Merger or any other
transaction contemplated by the Merger Agreement. Prior to the Expiration Date,
the Stockholder will not enter into any agreement or understanding with any
person or entity to vote or give instructions in any manner inconsistent with
this Section 2. This Agreement is intended to bind the Stockholder as a
stockholder of the Company only with respect to the specific matters set forth
herein.
3. Proxy. Concurrently with the execution of this Agreement, the
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable to the extent provided in
Section 14A:5-19 of the New Jersey Business Corporation Act covering the total
number of Securities beneficially owned or as to which beneficial ownership is
acquired (as such term is defined in Rule 13d-3 under the Exchange Act) by such
Stockholder. The Proxy shall not be terminated by any act of the Stockholder or
by operation of law, whether by the death or incapacity of the Stockholder or by
the occurrence of any other event or events (including, without limitation, the
termination of any trust or estate for which the Stockholder is acting as a
fiduciary or fiduciaries or the dissolution or liquidation of any corporation or
partnership). If between the execution hereof and the Expiration Date, the
Stockholder should die or become incapacitated, or if any trust or estate
holding the Securities should be terminated, or if any corporation or
partnership holding the Securities should be dissolved or liquidated, or if any
other such similar event or events shall occur before the Expiration Date,
certificates representing the Securities shall be delivered by or on behalf of
the Stockholder in accordance with the terms and conditions of the Merger
Agreement and this Agreement, and actions taken by Parent hereunder shall be as
valid as if such death, incapacity, termination, dissolution, liquidation or
other similar event or events had not occurred, regardless of whether or not
Parent has received notice of such death, incapacity, termination, dissolution,
liquidation or other event.
4. No Opposition. The Stockholder agrees not to take, or cause to be taken,
any action inconsistent with the consummation of the Merger and the transactions
contemplated by the Merger Agreement. The Stockholder agrees to take, or cause
to be taken, all actions necessary to facilitate, encourage or otherwise support
the Merger and the transactions contemplated by the Merger Agreement.
5. Acknowledgement. The parties acknowledge and agree that neither Parent,
nor Parent's successors, assigns, subsidiaries, divisions, employees, officers,
directors, stockholders, agents and affiliates shall owe any duty to, whether in
law or otherwise, or incur any liability of any kind whatsoever, including
without limitation, with respect to any and all claims, losses, demands, causes
of action, costs, expenses (including reasonable attorney's fees) and
compensation of any kind or nature whatsoever to the Stockholder in connection
with or as a result of any voting (or refrain from voting) by Parent of the
Securities subject to the Proxy hereby granted to Parent at any annual, special
or other meeting or action or the execution of any consent of the stockholders
of the Company. The parties acknowledge that, pursuant to the authority hereby
granted under the Proxy, Parent may vote the Securities in furtherance of its
own interests, and Parent is not acting as a fiduciary for the Stockholder.
6. Intentionally deleted
7. Representations, Warranties and Covenants of Stockholder. The
Stockholder hereby represents, warrants and covenants to Parent that:
7.1 Ownership. The Stockholder has good and marketable title to, and is the
sole legal and beneficial owner of the Shares, in each case free and clear of
all Liens. As of the date hereof, the Stockholder does not beneficially own any
shares or securities of the capital stock of the Company other than such
Stockholder's Shares.
7.2 Authorization. The Stockholder has all requisite power and authority to
execute and deliver this Agreement and the Proxy and to consummate the
transactions contemplated hereby and thereby and has sole voting power and sole
power of disposition, with respect to all of the Shares with no restrictions on
its voting rights or rights of disposition pertaining thereto. The Stockholder
has duly executed and delivered this Agreement and this Agreement is a legal,
valid and binding agreement of the Stockholder, enforceable against the
Stockholder in accordance with its terms.
7.3 No Violation. Neither the execution, delivery and performance of this
Agreement or the Proxy nor the consummation of the transactions contemplated
hereby and thereby will (i) require the Stockholder to file or register with, or
obtain any material permit, authorization, consent or approval of, any
governmental agency, authority, administrative or regulatory body, court or
other tribunal, foreign or domestic, or any other entity; (ii) violate, or cause
a breach of or default (or an event which with notice or the lapse of time or
both would become a default) under, any contract, agreement or understanding,
any statute or law, or any judgment, decree, order, regulation or rule of any
governmental agency, authority, administrative or regulatory body, court or
other tribunal, foreign or domestic, or any other entity or any arbitration
award binding upon the Stockholder; or (iii) cause the acceleration of any
obligation under or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrances on any property or asset of the Stockholder pursuant to any
provision of any indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, ordinance, regulation or decree to which the
Stockholder is subject or by which the Stockholder or any of the Stockholder's
properties or assets are bound. No proceedings are pending which, if adversely
determined, will have a material adverse effect on any ability to vote or
dispose of any of the Shares. The Stockholder has not previously assigned or
sold any of the Shares to any third party.
8. Further Assurances. The Stockholder hereby covenants and agrees to
execute and deliver, or cause to be executed or delivered, such additional
proxies, consents, waivers and other instruments, and undertake any and all
further action, necessary or desirable, in the reasonable opinion of Parent, to
carry out the purpose and intent of this Agreement and to consummate the Merger
under the terms of the Merger Agent or any other agreement to which such
Stockholder is a party.
9. Termination. This Agreement and the Proxies delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date; provided that nothing herein shall relieve any party from
liability hereof for breaches of this Agreement prior to the Expiration Date or
for breaches of Section 6 after the Expiration Date.
10. Miscellaneous.
10.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of this terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
10.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and insure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other; provided,
however, that each of Parent and MERGER SUB may freely assign its rights to
another director or indirect wholly owned subsidiary of Parent or MERGER SUB
without such prior written approval but no such assignment shall relieve Parent
or MERGER SUB of any of its obligations hereunder. Any purported assignment
without such consent shall be void.
10.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
the Stockholder set forth herein. Therefore, it is agreed that, in addition to
any other remedies that may be available to Parent upon such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
10.5 Notices. All notices that are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered by hand or national overnight courier
service, transmitted by telecopy or mailed by registered or certified mail,
postage prepaid (effective when delivered by hand or telecopy, one day after
dispatch by overnight courier, and three business days after dispatch by mail),
as follows:
(a) if to Parent or MERGER SUB, to:
Olympic Cascade Financial Corporation
120 Broadway
27th Floor
New York, New York 10271
Facsimile: 212 417-8010
Attn: Mark Goldwasser, President and Chief Executive
Officer
with a copy to:
Littman Krooks LLP
655 Third Avenue
New York, NY 10017
Attention: Mitchell C. Littman, Esq.
Facsimile No.: (212) 490-2990
Telephone No.: (212) 490-2020
(b) if to the Stockholder, to the address set forth
beneath such Stockholder's signature below.
10.6 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware without
giving effect to any choice or conflict of law provision, rule or principle
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
10.7 Entire Agreement. This Agreement, the Proxy and the Merger Agreement
contain the entire understanding of the parties in respect of the subject matter
hereof, and supersede all prior negotiations and understandings between the
parties with respect to such subject matters.
10.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.9 Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
10.10 Jurisdiction.Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the state or federal court of the State of Delaware, and each of the parties
hereby consents to the jurisdiction of such court (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in this Section 10.10 shall be deemed effective
service of process on such party.
10.11 No Limitation on Actions of the Stockholder as Director.
Notwithstanding anything to the contrary in this Agreement, in the event the
Stockholder is an officer or director of the Company, nothing in this Agreement
is intended or shall be construed to require the Stockholder, in the
Stockholder's capacity as a officer or director of the Company, to act or fail
to act in accordance with the Stockholder's fiduciary duties in such capacity.
10.12 Remedies Not Exclusive. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity will be cumulative and not alternative, and the exercise of any thereof
by either party will not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
10.13 Waiver of Jury Trial. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OT OF OR RELATED TO
THIS AGREEMENT, THE PROXY OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
10.14 Expenses. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement or the Proxy, the prevailing party
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
10.15 Disclosure. The Stockholder hereby authorizes Parent to publish or
disclosure in any Parent SEC Reports, including, without limitation, a Schedule
13D, its identity and the nature of its commitments, arrangements and
understandings under this Agreement.
10.16 Consent of Spouse. If the Stockholder is married, the Stockholder
agrees to deliver to Parent the Consent of Spouse attached hereto as Exhibit B
on the date hereof.
10.17 Legend on Share Certificates. Each certificate representing any
Securities shall be endorsed by the Company with a legend reading substantially
as follows:
"THE RIGHT TO VOTE THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A VOTING AGREEMENT, A COPY OF WHICH IS ON FILE
AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS."
[Remainder of the Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the day and year first above written.
OLYMPIC CASCADE FINANCIAL CORP.
By:
------------------------------------------
Title:
---------------------------------------
STOCKHOLDER
By:
------------------------------------------
Stockholder's Address for Notice:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Shares beneficially owned:
_______ shares of the Company Common Stock
_______ shares of the Company Series B
Preferred Stock
SIGNATURE PAGE TO VOTING AGREEMENT
EXHIBIT A
PROXY
TO VOTE STOCK OF
THE COMPANY
The undersigned stockholder of FIRST MONTUAK FINANCIAL CORP., a New
Jersey corporation (the "Company"), hereby irrevocably (to the full extent
permitted by Section 14A:5-19 of the New Jersey Business Corporation Act, except
as provided below) appoints Mark Goldwasser and Robert Daskal of OLYMPIC CASCADE
FINANCIAL CORPORATION, a Delaware corporation ("Parent"), and each of them, as
the sole and exclusive attorneys and proxies of the undersigned, with full power
of substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of the Company issued, issuable, exchanged or exchangeable
in respect thereof on or after the date hereof (collectively, the "Shares") in
accordance with the terms of this Proxy. The Shares beneficially owned by the
undersigned stockholder of the Company as of the date of this Proxy are listed
on the final page of this Proxy. Upon the undersigned's execution of this Proxy,
any and all prior proxies given by the undersigned with respect to any Shares
are hereby revoked and the undersigned agrees not to grant any subsequent
proxies with respect to the Shares until after the Expiration Date (as defined
below).
This Proxy is irrevocable (to the extent provided in Section 212 of the
Delaware General Corporation Law), is coupled with an interest and is granted
pursuant to that certain Voting Agreement dated as of February 10, 2005, by and
among Parent and the undersigned stockholder (the "Voting Agreement"), and is
granted in consideration of Parent entering into that certain Agreement and Plan
of Merger, dated as of February 10, 2005 (the "Merger Agreement"), by and among
the Company, Parent and MERGER SUB, a Delaware corporation and wholly owned
subsidiary of Parent ("MERGER SUB"). The Merger Agreement provides for the
merger of MERGER SUB with and into the Company (the "Merger") with the Company
as the surviving corporation. As used herein, the term "Expiration Date" shall
mean the earlier to occur of (i) the Effective Time (as such terms is defined in
the Merger Agreement), and (ii) the date on which the Merger Agreement is
terminated in accordance with its terms (including any extensions to the Merger
Agreement, as provided for therein).
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to Section 14A:5-6 of the New Jersey Business Corporation
Act), at every annual, special or other meeting or action of the stockholders of
the Company, as applicable, or at any adjournment thereof and in every written
consent in lieu of such meeting: (i) in favor of approval of the Merger
Agreement, the Merger, the transactions contemplated thereby and any matter that
could reasonably be expected to facilitate the Merger; (ii) in favor of any
alternative structure as may be agreed by Parent and the Company to effect the
acquisition by Parent of the Company or of control of the Company; provided that
such alternative structure is on terms in the aggregate no less favorable to the
Company's stockholders than the terms of the Merger set forth in the Merger
Agreement; and (iii) against the consummation of any Superior Proposal or any
other action, proposal, agreement or transaction (other than the Merger, the
Merger Agreement or the transactions contemplated thereby) that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement, which could result in any
of the conditions to the Company's obligations under the Merger Agreement not
being fulfilled or which would be inconsistent with the Merger or any other
transaction contemplated by the Merger Agreement. The attorneys and proxies
named above may not exercise this Proxy on any other matter except as provided
above. The undersigned stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the extent provided in Section 14A:5-19
of the New Jersey Business Corporation Act). This Proxy shall terminate, and be
of no further force and effect, automatically upon the Expiration Date.
Dated: February 10, 2005
------------------------------------------------
(Signature of Stockholder)
------------------------------------------------
(Print Name of Stockholder)
Shares beneficially owned:
_______ shares of the Company Common Stock
_______ shares of the Company Series B Preferred
Stock
EXHIBIT B
CONSENT OF SPOUSE
I, __________________________, spouse of ____________ ("Stockholder"),
have read and hereby approve the foregoing Voting Agreement. In consideration of
the benefits to which the Stockholder is entitled under the Voting Agreement, I
hereby agree to be irrevocably bound by the Voting Agreement and further agree
that any community property or other such interest shall be similarly bound by
the Voting Agreement. I hereby appoint my spouse as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Voting Agreement.
------------------------------------------------
Spouse of Stockholder
EXHIBIT A-2
PARENT STOCKHOLDER VOTING AGREEMENT
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement") is made and entered into as of
February 10, 2005, between and among FIRST MONTUAK FINANCIAL CORP., a New Jersey
corporation (the "Company"), and the undersigned stockholder (the "Stockholder")
of OLYMPIC CASCADE FINANCIAL CORPORATION, a Delaware corporation ("Parent"). All
capitalized terms herein not otherwise defined shall have the meaning ascribed
to them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
date hereof (the "Merger Agreement") by and among Parent, MERGER SUB, a Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUB"), and the
Company, MERGER SUB is merging with and into the Company (the "Merger") and the
Company, as the surviving corporation of the Merger, will thereby become a
wholly owned subsidiary of Parent;
WHEREAS, the Stockholder is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of shares of the outstanding (i) common stock, $0.02 par value per share,
and (ii) Series A Preferred Stock, $0.01 par value per share, of Parent in the
amounts indicated on the final page of this Agreement (the "Shares"); and
WHEREAS, in consideration of the execution of the Merger Agreement by
Company, the Stockholder agrees (i) not to transfer or otherwise dispose of any
of such Stockholder's Shares or New Shares (as defined below), or any and all
other shares or securities of Parent issued, issuable, exchanged or exchangeable
in respect of any Shares or New Shares (collectively with respect to each
Stockholder, the "Securities"), and (ii) agrees to vote such Stockholder's
Securities as set forth herein.
NOW, THEREFORE, in contemplation of the foregoing and in consideration
of the mutual agreements, covenants, representations and warranties contained
herein and intending to be legally bound hereby, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. The Stockholder agrees to be subject to such
Stockholder's Proxy (as defined in Section 3) and agrees that it will not take
or permit any action to, directly or indirectly, (i) transfer, sell, assign,
give, pledge, exchange or pledge, or otherwise dispose of or encumber the
Stockholder's Securities prior to the Expiration Date, or to make any offer or
agreement relating thereto, at any time prior to the Expiration Date; (ii)
deposit any of the Stockholder's Securities into a voting trust or enter into a
voting agreement or arrangement with respect to such Stockholder's Securities or
grant any proxy or power of attorney with respect thereto, in each case, in a
manner that conflicts or may conflict with the Stockholder's obligations
hereunder, or (iii) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect sale, assignment, transfer,
exchange or other disposition of or transfer of any interest in or the voting of
any of the Stockholder's Securities, in each case, in a manner that conflicts or
may conflict with the Stockholder's obligations hereunder. As used herein, the
term "Expiration Date" shall mean the earlier to occur of (i) the Effective Time
(as such terms is defined in the Merger Agreement), and (ii) the date on which
the Merger Agreement is terminated in accordance with its terms (including any
extensions to the Merger Agreement, as provided for therein).
1.2 New Shares. The Stockholder agrees that any shares or securities of the
capital stock of Parent that the Stockholder purchases or with respect to which
the Stockholder otherwise acquires beneficial ownership after the date of this
Agreement and prior to the Expiration Date (the "New Shares"), and any and all
other shares or securities of Parent issued, issuable, exchanged or exchangeable
in respect of any New Shares, shall be subject to the terms and conditions of
this Agreement to the same extent as if they constituted Shares.
2. Agreement to Vote. At every meeting of the stockholders of Parent called
with respect to any of the following, and at every adjournment thereof, and on
every action or approval by written consent of the stockholders of Parent with
respect to any of the following, the Stockholder agrees to vote such
Stockholder's Securities: (i) in favor of approval of the Merger Agreement, the
Merger, the transactions contemplated thereby and any matter that could
reasonably be expected to facilitate the Merger; (ii) in favor of any
alternative structure as may be agreed upon by Parent and the Company to effect
the acquisition by Parent of the Company or of control of the Company; provided
that such alternative structure is on terms in the aggregate no less favorable
to Parent's stockholders than the terms of the Merger set forth in the Merger
Agreement; and (iii) against the consummation of any Superior Proposal or any
other action, proposal, agreement or transaction (other than the Merger, the
Merger Agreement or the transactions contemplated thereby) that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of Parent under the Merger Agreement, which could result in any of the
conditions to Parent's obligations under the Merger Agreement not being
fulfilled or which would be inconsistent with the Merger or any other
transaction contemplated by the Merger Agreement. Prior to the Expiration Date,
the Stockholder will not enter into any agreement or understanding with any
person or entity to vote or give instructions in any manner inconsistent with
this Section 2. This Agreement is intended to bind the Stockholder as a
stockholder of Parent only with respect to the specific matters set forth
herein.
3. Proxy. Concurrently with the execution of this Agreement, the
Stockholder agrees to deliver to the Company a proxy in the form attached hereto
as Exhibit A (the "Proxy"), which shall be irrevocable to the extent provided in
Section 212 of the Delaware General Corporation Law, covering the total number
of Securities beneficially owned or as to which beneficial ownership is acquired
(as such term is defined in Rule 13d-3 under the Exchange Act) by such
Stockholder. The Proxy shall not be terminated by any act of the Stockholder or
by operation of law, whether by the death or incapacity of the Stockholder or by
the occurrence of any other event or events (including, without limitation, the
termination of any trust or estate for which the Stockholder is acting as a
fiduciary or fiduciaries or the dissolution or liquidation of any corporation or
partnership). If between the execution hereof and the Expiration Date, the
Stockholder should die or become incapacitated, or if any trust or estate
holding the Securities should be terminated, or if any corporation or
partnership holding the Securities should be dissolved or liquidated, or if any
other such similar event or events shall occur before the Expiration Date,
certificates representing the Securities shall be delivered by or on behalf of
the Stockholder in accordance with the terms and conditions of the Merger
Agreement and this Agreement, and actions taken by the Company hereunder shall
be as valid as if such death, incapacity, termination, dissolution, liquidation
or other similar event or events had not occurred, regardless of whether or not
the Company has received notice of such death, incapacity, termination,
dissolution, liquidation or other event.
4. No Opposition. The Stockholder agrees not to take, or cause to be taken,
any action inconsistent with the consummation of the Merger and the transactions
contemplated by the Merger Agreement. The Stockholder agrees to take, or cause
to be taken, all actions necessary to facilitate, encourage or otherwise support
the Merger and the transactions contemplated by the Merger Agreement.
5. Acknowledgement. The parties acknowledge and agree that neither the
Company, nor the Company's successors, assigns, subsidiaries, divisions,
employees, officers, directors, stockholders, agents and affiliates shall owe
any duty to, whether in law or otherwise, or incur any liability of any kind
whatsoever, including without limitation, with respect to any and all claims,
losses, demands, causes of action, costs, expenses (including reasonable
attorney's fees) and compensation of any kind or nature whatsoever to the
Stockholder in connection with or as a result of any voting (or refrain from
voting) by the Company of the Securities subject to the Proxy hereby granted to
the Company at any annual, special or other meeting or action or the execution
of any consent of the stockholders of Parent. The parties acknowledge that,
pursuant to the authority hereby granted under the Proxy, the Company may vote
the Securities in furtherance of its own interests, and the Company is not
acting as a fiduciary for the Stockholder.
6. Intentionally deleted
7. Representations, Warranties and Covenants of Stockholder. The
Stockholder hereby represents, warrants and covenants to the Company that:
7.1 Ownership. The Stockholder has good and marketable title to, and is the
sole legal and beneficial owner of the Shares, in each case free and clear of
all Liens. As of the date hereof, the Stockholder does not beneficially own any
shares or securities of the capital stock of Parent other than such
Stockholder's Shares.
7.2 Authorization. The Stockholder has all requisite power and authority to
execute and deliver this Agreement and the Proxy and to consummate the
transactions contemplated hereby and thereby and has sole voting power and sole
power of disposition, with respect to all of the Shares with no restrictions on
its voting rights or rights of disposition pertaining thereto. The Stockholder
has duly executed and delivered this Agreement and this Agreement is a legal,
valid and binding agreement of the Stockholder, enforceable against the
Stockholder in accordance with its terms.
7.3 No Violation. Neither the execution, delivery and performance of this
Agreement or the Proxy nor the consummation of the transactions contemplated
hereby and thereby will (i) require the Stockholder to file or register with, or
obtain any material permit, authorization, consent or approval of, any
governmental agency, authority, administrative or regulatory body, court or
other tribunal, foreign or domestic, or any other entity; (ii) violate, or cause
a breach of or default (or an event which with notice or the lapse of time or
both would become a default) under, any contract, agreement or understanding,
any statute or law, or any judgment, decree, order, regulation or rule of any
governmental agency, authority, administrative or regulatory body, court or
other tribunal, foreign or domestic, or any other entity or any arbitration
award binding upon the Stockholder; or (iii) cause the acceleration of any
obligation under or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrances on any property or asset of the Stockholder pursuant to any
provision of any indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, ordinance, regulation or decree to which the
Stockholder is subject or by which the Stockholder or any of the Stockholder's
properties or assets are bound. No proceedings are pending which, if adversely
determined, will have a material adverse effect on any ability to vote or
dispose of any of the Shares. The Stockholder has not previously assigned or
sold any of the Shares to any third party.
8. Further Assurances. The Stockholder hereby covenants and agrees to
execute and deliver, or cause to be executed or delivered, such additional
proxies, consents, waivers and other instruments, and undertake any and all
further action, necessary or desirable, in the reasonable opinion of the
Company, to carry out the purpose and intent of this Agreement and to consummate
the Merger under the terms of the Merger Agent or any other agreement to which
such Stockholder is a party.
9. Termination. This Agreement and the Proxies delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date; provided that nothing herein shall relieve any party from
liability hereof for breaches of this Agreement prior to the Expiration Date or
for breaches of Section 6 after the Expiration Date.
10. Miscellaneous.
10.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of this terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
10.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and insure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other; provided,
however, that the Company may freely assign its rights to another director or
indirect wholly owned subsidiary of the Company without such prior written
approval but no such assignment shall relieve the Company of any of its
obligations hereunder. Any purported assignment without such consent shall be
void.
10.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that the Company will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or agreements
of the Stockholder set forth herein. Therefore, it is agreed that, in addition
to any other remedies that may be available to the Company upon such violation,
the Company shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to the
Company at law or in equity.
10.5 Notices. All notices that are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered by hand or national overnight courier
service, transmitted by telecopy or mailed by registered or certified mail,
postage prepaid (effective when delivered by hand or telecopy, one day after
dispatch by overnight courier, and three business days after dispatch by mail),
as follows:
(a) if to the Company, to:
First Montauk Financial Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Facsimile:
Att: Chief Executive Officer
with a copy to:
Goldstein & DiGioia, LLP
45 Brodway, 11th Flour
New York NY 10016
Att.: Victor DiGioia, Esq.
(b) if to the Stockholder, to the address set forth
beneath such Stockholder's signature below.
10.6 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware without
giving effect to any choice or conflict of law provision, rule or principle
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
10.7 Entire Agreement. This Agreement, the Proxy and the Merger Agreement
contain the entire understanding of the parties in respect of the subject matter
hereof, and supersede all prior negotiations and understandings between the
parties with respect to such subject matters.
10.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.9 Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
10.10 Jurisdiction.Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the state or federal court of the State of Delaware, and each of the parties
hereby consents to the jurisdiction of such court (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in this Section 10.10 shall be deemed effective
service of process on such party.
10.11 No Limitation on Actions of the Stockholder as Director.
Notwithstanding anything to the contrary in this Agreement, in the event the
Stockholder is an officer or director of Parent, nothing in this Agreement is
intended or shall be construed to require the Stockholder, in the Stockholder's
capacity as a officer or director of Parent, to act or fail to act in accordance
with the Stockholder's fiduciary duties in such capacity.
10.12 Remedies Not Exclusive. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity will be cumulative and not alternative, and the exercise of any thereof
by either party will not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
10.13 Waiver of Jury Trial. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OT OF OR RELATED TO
THIS AGREEMENT, THE PROXY OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
10.14 Expenses. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement or the Proxy, the prevailing party
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
10.15 Disclosure. The Stockholder hereby authorizes the Company to publish
or disclosure in any the Company SEC Reports, including, without limitation, a
Schedule 13D, its identity and the nature of its commitments, arrangements and
understandings under this Agreement.
10.16 Consent of Spouse. If the Stockholder is married, the Stockholder
agrees to deliver to the Company the Consent of Spouse attached hereto as
Exhibit B on the date hereof.
10.17 Legend on Share Certificates. Each certificate representing any
Securities shall be endorsed by Parent with a legend reading substantially as
follows:
"THE RIGHT TO VOTE THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A VOTING AGREEMENT, A COPY OF WHICH IS ON FILE
AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS."
[Remainder of the Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the day and year first above written.
FIRST MONTAUK FINANCIAL CORP.
By:
---------------------------------------
Title:
------------------------------------
STOCKHOLDER
By:
---------------------------------------
Stockholder's Address for Notice:
------------------------------------------
------------------------------------------
------------------------------------------
Shares beneficially owned:
_______ shares of Parent Common Stock
_______ shares of the Parent Series A
Preferred
SIGNATURE PAGE TO VOTING AGREEMENT
EXHIBIT A
PROXY
TO VOTE STOCK OF
THE COMPANY
The undersigned stockholder of OLYMPIC CASCADE FINANCIAL CORPORATION, a
Delaware corporation ( "Parent"), hereby irrevocably (to the full extent
permitted by Section 212 of the Delaware General Corporation Law, except as
provided below) appoints Victor Kurylak of FIRST MONTUAK FINANCIAL CORP., a New
Jersey corporation ("Company"), and each of them, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting and related rights (to the full
extent that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of Parent that now are or hereafter may be beneficially
owned by the undersigned, and any and all other shares or securities of Parent
issued, issuable, exchanged or exchangeable in respect thereof on or after the
date hereof (collectively, the "Shares") in accordance with the terms of this
Proxy. The Shares beneficially owned by the undersigned stockholder of Parent as
of the date of this Proxy are listed on the final page of this Proxy. Upon the
undersigned's execution of this Proxy, any and all prior proxies given by the
undersigned with respect to any Shares are hereby revoked and the undersigned
agrees not to grant any subsequent proxies with respect to the Shares until
after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent provided in Section 212 of the
Delaware General Corporation Law), is coupled with an interest and is granted
pursuant to that certain Voting Agreement dated as of February 10, 2005, by and
among the Company and the undersigned stockholder (the "Voting Agreement"), and
is granted in consideration of the Company entering into that certain Agreement
and Plan of Merger, dated as of February 10, 2005 (the "Merger Agreement"), by
and among the Company, Parent and MERGER SUB, a Delaware corporation and wholly
owned subsidiary of Parent ("MERGER SUB"). The Merger Agreement provides for the
merger of MERGER SUB with and into the Company (the "Merger") with the Company
as the surviving corporation. As used herein, the term "Expiration Date" shall
mean the earlier to occur of (i) the Effective Time (as such terms is defined in
the Merger Agreement), and (ii) the date on which the Merger Agreement is
terminated in accordance with its terms (including any extensions to the Merger
Agreement, as provided for therein).
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to Section 228 of the Delaware General Corporation Law), at
every annual, special or other meeting or action of the stockholders of Parent,
as applicable, or at any adjournment thereof and in every written consent in
lieu of such meeting: (i) in favor of approval of the Merger Agreement, the
Merger, the transactions contemplated thereby and any matter that could
reasonably be expected to facilitate the Merger; (ii) in favor of any
alternative structure as may be agreed by Parent and the Company to effect the
acquisition by Parent of the Company or of control of the Company; provided that
such alternative structure is on terms in the aggregate no less favorable to
Parent's stockholders than the terms of the Merger set forth in the Merger
Agreement; and (iii) against the consummation of any Superior Proposal or any
other action, proposal, agreement or transaction (other than the Merger, the
Merger Agreement or the transactions contemplated thereby) that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of Parent under the Merger Agreement, which could result in any of the
conditions to the Parent's obligations under the Merger Agreement not being
fulfilled or which would be inconsistent with the Merger or any other
transaction contemplated by the Merger Agreement. The attorneys and proxies
named above may not exercise this Proxy on any other matter except as provided
above. The undersigned stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the extent provided in Section 212 of the
Delaware General Corporation Law). This Proxy shall terminate, and be of no
further force and effect, automatically upon the Expiration Date.
Dated: February 10, 2005
------------------------------------------------
(Signature of Stockholder)
------------------------------------------------
(Print Name of Stockholder)
Shares beneficially owned:
_______ shares of Parent Common Stock
_______ shares of the Parent Series A Preferred
EXHIBIT B
CONSENT OF SPOUSE
I, __________________________, spouse of ____________ ("Stockholder"),
have read and hereby approve the foregoing Voting Agreement. In consideration of
the benefits to which the Stockholder is entitled under the Voting Agreement, I
hereby agree to be irrevocably bound by the Voting Agreement and further agree
that any community property or other such interest shall be similarly bound by
the Voting Agreement. I hereby appoint my spouse as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Voting Agreement.
------------------------------------------------
Spouse of Stockholder
EXHIBIT B
AFFILIATE AGREEMENT
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (this "Agreement") is made and entered into as
of _______________, 2005 by and between OLYMPIC CASCADE FINANCIAL CORPORATION, a
Delaware corporation ("Parent"), and the undersigned stockholder (the
"Affiliate"), who may be deemed an affiliate of FIRST MONTAUK FINANCIAL CORP., a
New Jersey corporation (the "Company"), under applicable law. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed thereto
in the Merger Agreement (as defined below).
RECITALS:
WHEREAS, pursuant to an Agreement and Plan of Merger dated February 10,
2005 (the "Merger Agreement") by and among Parent, MERGER SUB, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and the
Company, Merger Sub is merging with and into the Company (the "Merger") and the
Company, as the surviving corporation of the Merger, will thereby become a
wholly owned subsidiary of Parent;
WHEREAS, the Affiliate has been advised that the Affiliate may be
deemed to be an "affiliate" of the Company, as the term "affiliate" is used for
purposes of Rule 144 and Rule 145 of the rules and regulations of the Securities
and Exchange Commission (the "Commission"); and
WHEREAS, the execution and delivery of this Agreement by the Affiliate
is a material inducement to, and in consideration of, Parent's willingness to
enter into the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Acknowledgments by Affiliate. The Affiliate understands and hereby
acknowledges that the representations, warranties and covenants by the Affiliate
set forth herein shall be relied upon by Parent, the Company and their
respective affiliates and legal counsel, and that substantial losses and damages
may be incurred by such persons if the representations and warranties of the
Affiliate contained herein are inaccurate or if the covenants of the Affiliate
contained herein are breached. The Affiliate hereby represents and warrants to
Parent that the Affiliate has carefully read this Agreement and the Merger
Agreement and has discussed the requirements of this Agreement with the
Affiliate's professional advisors, who are qualified to advise the Affiliate
with regard to such matters.
2. Representations and Warranties of the Affiliate. The Affiliate hereby
represents and warrants to Parent as follows: (i) the Affiliate is the sole
beneficial owner of the number of shares of the common stock of the Company, no
par value (the "Company Common Stock") set forth under the Affiliate's name on
the signature page hereto (the "Shares"); (ii) the Shares are not subject to any
claim, lien, pledge, charge, security interest or other encumbrance or to any
rights of first refusal of any kind; (iii) there are no options, warrants,
calls, rights, commitments or agreements of any kind or character, written or
oral, to which the Affiliate is party or by which the Affiliate is bound
obligating the Affiliate to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any Shares, or
obligating the Affiliate to grant or enter into any such option, warrant, call,
right, commitment or agreement; (iv) the Affiliate has the sole right to
transfer the Shares; (v) as of the date hereof, the Shares constitute all shares
of Company Common Stock owned, beneficially or of record, by the Affiliate; (vi)
the Shares are not subject to preemptive rights created by any agreement to
which the Affiliate is party or by which the Affiliate is bound; and (vii) the
Affiliate has not engaged in any sale or other transfer of the Shares in
contemplation of the Merger.
3. Application to Subsequently Acquired Shares. The Affiliate hereby agrees
that all shares of Company Common Stock and shares of the common stock of
Parent, par value $0.02 ("Parent Common Stock") acquired by the Affiliate
subsequent to the date hereof (including shares of Parent Common Stock acquired
in the Merger) shall be subject to the terms and conditions set forth in this
Agreement as if held by the Affiliate as of the date hereof.
4. Compliance with Rule 145 and the Securities Act.
(a) The Affiliate understands and hereby acknowledges that the Affiliate
has been advised that (A) the issuance of Parent Common Stock in connection with
the Merger is expected to be effected pursuant to a registration statement on
Form S-4 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and the resale of such shares will be subject to restrictions
set forth in Rule 145 under the Securities Act; and (B) Affiliate may be deemed
to be an "affiliate" of the Company as the term "affiliate" is used for purposes
of Rule 144 and Rule 145 of the rules and regulations of the Commission.
Accordingly, the Affiliate hereby agrees not to sell, transfer or otherwise
dispose of any Parent Common Stock issued to the Affiliate in the Merger unless
(i) such sale, transfer or other disposition is made in conformity with the
requirements of Rule 145(d) promulgated under the Securities Act; (ii) such
sale, transfer or other disposition is made pursuant to a registration statement
declared or ordered effective under the Securities Act, or an appropriate
exemption from the registration and prospectus delivery requirements of the
Securities Act; (iii) the Affiliate delivers to Parent a written opinion of
legal counsel, reasonably acceptable to Parent in form and substance, that such
sale, transfer or other disposition is otherwise exempt from the registration
and prospectus delivery requirements of the Securities Act; or (iv) an
authorized representative of the Commission shall have rendered written advice
to the Affiliate to the effect that the Commission would take no action, or that
the staff of the Commission would not recommend that the Commission take any
action, with respect to the proposed disposition if consummated.
(b) The Affiliate understands and hereby acknowledges that Parent will give
stop transfer instructions to its transfer agent with respect to any Parent
Common Stock issued to the Affiliate pursuant to the Merger, and there shall be
placed on the certificates representing such Parent Common Stock, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN
CONFORMITY WITH RULE 145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN
ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO
THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend), and Parent shall so instruct its transfer
agent, if the Affiliate delivers to Parent (i) satisfactory written evidence
that the Shares have been sold in compliance with Rule 145 (in which case, the
substitute certificate shall be issued in the name of the transferee); or (ii)
an opinion of counsel, in form and substance reasonably satisfactory to Parent,
to the effect that public sale of the Shares by the holder thereof is no longer
subject to Rule 145.
5. Termination. This Agreement shall be terminated, and be of no further
force and effect, automatically upon the termination of the Merger Agreement
pursuant to its terms (including any extension to the Merger Agreement as
provided for therein).
6. Miscellaneous.
(a) Waiver. No waiver by any party hereto of any condition or any breach of
any term or provision set forth in this Agreement shall be effective unless in
writing and signed by each party hereto. The waiver of a condition or any breach
of any term or provision of this Agreement shall not operate as or be construed
to be a waiver of any other previous or subsequent breach of any term or
provision of this Agreement.
(b) Severability. In the event that any term, provision, covenant or
restriction set forth in this Agreement, or the application of any such term,
provision, covenant or restriction to any person, entity or set of
circumstances, shall be determined by a court of competent jurisdiction to be
invalid, unlawful, void or unenforceable to any extent, the remainder of the
terms, provisions, covenants and restrictions set forth in this Agreement, and
the application of such terms, provisions, covenants and restrictions to
persons, entities or circumstances other than those as to which it is determined
to be invalid, unlawful, void or unenforceable, shall remain in full force and
effect, shall not be impaired, invalidated or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by
applicable law.
(c) Binding Effect; Assignment. This Agreement and all of the provisions
hereof shall be binding upon, and inure to the benefit of, the parties hereto
and their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the Affiliate may be assigned to any other person
without prior written consent of Parent.
(d) Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by each of the parties hereto.
(e) Specific Performance; Injunctive Relief. Each of the parties hereto
hereby acknowledge that (i) the representations, warranties, covenants and
restrictions set forth in this Agreement are necessary, fundamental and required
for the protection of Parent and the Company and to preserve for Parent the
benefits of the Merger; (ii) such covenants relate to matters which are of a
special, unique, and extraordinary character that gives each such
representation, warranty, covenant and restriction a special, unique, and
extraordinary value; and (iii) a breach of any such representation, warranty,
covenant or restriction, or any other term or provision of this Agreement, will
result in irreparable harm and damages to Parent and the Company that cannot be
adequately compensated by a monetary award. Accordingly, Parent and the
Affiliate hereby expressly agree that in addition to all other remedies
available at law or in equity, Parent and the Company shall be entitled to the
immediate remedy of specific performance, a temporary and/or permanent
restraining order, preliminary injunction, or such other form of injunctive or
equitable relief as may be used by any court of competent jurisdiction to
restrain or enjoin any of the parties hereto from breaching any representations,
warranties, covenants or restrictions set forth in this Agreement, or to
specifically enforce the terms and provisions hereof.
(f) Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the internal laws of the State of
Delaware without giving effect to any choice or conflict of law provision, rule
or principle (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Delaware.
(g) Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the state or federal court of the State of Delaware, and each of the parties
hereby consents to the jurisdiction of such court (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in this Section 10.6 shall be deemed effective service
of process on such party.
(h) Entire Agreement. This Agreement, the Merger Agreement and the other
agreements referred to in the Merger Agreement set forth the entire agreement
and understanding of Parent and the Affiliate with respect to the subject matter
hereof and thereof, and supersede all prior discussions, agreements and
understandings between Parent and the Affiliate with respect to the subject
matter hereof and thereof.
(i) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to Parent: Olympic Cascade Financial Corporation
120 Broadway, 27th floor
New York, NY 10271
Facsimile: 212 417-8010
Attn: Mark Goldwasser, Chief Executive Officer
with a copy to: Littman Krooks LLP
655 Third Avenue
New York, NY 10017
Attention: Mitchell C. Littman, Esq.
Facsimile: (212) 490-2990
If to the Affiliate: To the address for notice set forth on the
signature page hereof.
(j) Further Assurances. The Affiliate shall execute and deliver any
additional certificate, instruments and other documents, and take any additional
actions, as Parent may deem necessary or desirable, in the reasonable opinion of
Parent, to carry out and effectuate the purpose and intent of this Agreement and
the transactions contemplated hereby.
(k) Attorneys' Fees. In the event of any legal actions or proceeding to
enforce or interpret the terms and provisions hereof, the prevailing party shall
be entitled to reasonable attorneys' fees, whether or not the proceeding results
in a final judgment.
(l) Third Party Reliance. Legal counsel to Parent and the Company shall be
entitled to rely upon this Agreement.
(m) Survival. The representations, warranties, covenants and other terms
and provisions set forth in this Agreement shall survive the consummation of the
Merger.
(n) Remedies Not Exclusive. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity will
be cumulative and not alternative, and the exercise of any thereof by either
party will not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(o) Waiver of Jury Trial. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(p) Counterparts. This Agreement shall be executed in several counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Affiliate
Agreement to be duly executed as of the date first written above.
OLYMPIC CASCADE FINANCIAL CORP. AFFILIATE
By: By (Signature):
------------------------------ -----------------------------
Name: Print Name:
---------------------------- ---------------------------------
Title: Affiliate's Address for Notice:
---------------------------
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--------------------------------------------
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Shares beneficially owned:
______ shares of Company Common Stock
______ shares of Company Preferred Stock
_____ shares of Company Common Stock
issuable upon the exercise of
outstanding options, warrants and
other rights
SIGNATURE PAGE TO AFFILIATE AGREEMENT