Exhibit 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
FMFG OWNERSHIP, INC.,
FMFG ACQUISITIONCO, INC.,
and
FIRST MONTAUK FINANCIAL CORP.
Dated as of May 5, 2006
TABLE OF CONTENTS
Page
4846-7790-1056.5/i
ARTICLE I
THE MERGER
Section 1.01. The Merger.................................................................................1
Section 1.02. Closing....................................................................................1
Section 1.03. Effective Time.............................................................................1
Section 1.04. Effects of the Merger......................................................................2
Section 1.05. Certificate of Incorporation and Bylaws of the Surviving Corporation.......................2
Section 1.06. Directors..................................................................................2
Section 1.07. Officers...................................................................................2
ARTICLE II
CONVERSION OF SHARES; PAYMENT FOR SHARES
Section 2.01. Effect on Stock............................................................................2
Section 2.02. Company Stock Options and Warrants.........................................................3
Section 2.03. Payment for Shares.........................................................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization, Qualification, Etc...........................................................6
Section 3.02. Capital Stock..............................................................................7
Section 3.03. Corporate Authority Relative to This Agreement; No Violation...............................7
Section 3.04. Reports and Financial Statements...........................................................8
Section 3.05. No Undisclosed Material Liabilities.......................................................10
Section 3.06. Leases....................................................................................10
Section 3.07. No Violation of Law; Lawful Operations....................................................10
Section 3.08. Environmental Laws and Regulations........................................................10
Section 3.09. Employee Benefit Plans....................................................................11
Section 3.10. Absence of Certain Changes or Events......................................................13
Section 3.11. Title.....................................................................................13
Section 3.12. Investigations; Litigation................................................................13
Section 3.13. Governmental Licenses.....................................................................13
Section 3.14. Tax Matters...............................................................................15
Section 3.15. Opinion of Financial Advisor..............................................................17
Section 3.16. Material Contracts........................................................................17
Section 3.17. Intellectual Property Rights..............................................................17
Section 3.18. Finders or Brokers........................................................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.01. Organization, Qualification, Etc..........................................................18
Section 4.02. Corporate Authority Relative to This Agreement; No Violation..............................18
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.01. Investigation and Access to Information...................................................19
Section 5.02. Additional Reports and Information........................................................20
Section 5.03. Conduct of Business by the Company........................................................20
Section 5.04. No Solicitation...........................................................................22
Section 5.05. Change of Control Provisions..............................................................24
Section 5.06. Company Stock Outstanding.................................................................24
Section 5.07. Company Recommendation of Approval........................................................24
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Antitakeover Statute......................................................................24
Section 6.02. Public Announcements......................................................................25
Section 6.03. Notices of Certain Events.................................................................25
Section 6.04. Delisting.................................................................................25
Section 6.05. Stockholder Approval; Proxy Solicitation; Other Filings...................................25
Section 6.06. Efforts To Consummate; Further Assurances.................................................27
Section 6.07. Updating of Schedules.....................................................................27
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01. Conditions to the Obligation of Parent and Merger Sub.....................................28
Section 7.02. Conditions to the Obligation of the Company...............................................31
ARTICLE VIII
TERMINATION
Section 8.01. Termination or Abandonment................................................................32
Section 8.02. Parent Termination Fee and Expenses.......................................................33
Section 8.03. Company Termination Fee and Expenses......................................................34
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section 9.01. No Survival of Representations, Warranties, Covenants and Agreements......................34
Section 9.02. Indemnification and Insurance.............................................................34
ARTICLE X
MISCELLANEOUS
Section 10.01. Counterparts; Effectiveness...............................................................35
Section 10.02. Governing Law.............................................................................36
Section 10.03. Jurisdiction..............................................................................36
Section 10.04. Notices...................................................................................36
Section 10.05. Assignment; Binding Effect................................................................37
Section 10.06. Severability..............................................................................37
Section 10.07. Enforcement of Agreement..................................................................37
Section 10.08. Entire Agreement; No Third-Party Beneficiaries............................................37
Section 10.09. Headings..................................................................................37
Section 10.10. Fees and Expenses.........................................................................37
Section 10.11. Amendment or Supplement...................................................................38
Section 10.12. Extension of Time, Waiver, Etc............................................................38
ARTICLE XI
DEFINITIONS
Section 11.01. Definitions...............................................................................38
Section 11.02. Generally Accepted Accounting Principles..................................................43
Section 11.03. Construction..............................................................................43
EXHIBIT A FORM OF PAYING AGENT AGREEMENT
EXHIBIT B OPINION OF COMPANY COUNSEL
EXHIBIT C FORM OF VOTING AGREEMENTS
EXHIBIT D KEY EXECUTIVES
EXHIBIT E OPINION OF PARENT'S COUNSEL
ANNEX I DISCLOSURE SCHEDULES
ii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into effective as of May 5, 2006 among FMFG OWNERSHIP, INC., a Delaware
corporation ("Parent"), FMFG ACQUISITIONCO, INC., a New Jersey corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and FIRST MONTAUK FINANCIAL
CORP., a New Jersey corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the respective managing members and boards of directors of
Parent, Merger Sub and the Company have approved the acquisition of the Company
by Parent upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the respective managing member or board of directors of
Parent, Merger Sub and the Company have approved and declared the advisability
of this Agreement and the merger of the Merger Sub with and into the Company
(the "Merger") in accordance with the New Jersey Corporation Act (the "NJCA")
and upon the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, Parent, Merger Sub and the Company agree
as follows:
ARTICLE I
THE MERGER
Section 1.01. ....The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and in accordance with the NJCA, the Company shall be
merged with and into the Merger Sub at the Effective Time of the Merger.
Following the Merger, the separate corporate existence of the Company shall
cease, and the Merger Sub shall continue as the surviving corporation (the
"Surviving Corporation") under the name First Montauk Financial Corp., and as a
wholly owned subsidiary of Parent.
Section 1.02. ....Closing. Unless this Agreement shall have been terminated
pursuant to Section 8.01, and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date") that shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VII at the offices
of the Company unless another time, date or place is agreed to in writing by the
parties hereto.
Section 1.03. ....Effective Time. On the Closing Date, the parties shall execute
and file in the office of the Secretary of State of the State of New Jersey a
certificate of merger (the "Certificate of Merger") executed in accordance with
the NJCA and shall make all such other filings or recordings as may be required.
The Merger shall become effective at the time of filing of the Certificate of
Merger, or at such later time as is agreed upon by the parties hereto and set
forth therein (such time as the Merger becomes effective is referred to herein
as the "Effective Time").
Section 1.04. ....Effects of the Merger. The Merger shall have the effects set
forth in applicable provisions of the NJCA.
Section 1.05. ....Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) The certificate of incorporation of Merger Sub as in effect immediately
prior to the Effective Time shall become the certificate of
incorporation of the Surviving Corporation after the Effective Time,
until thereafter amended as provided by the NJCA and such certificate
of incorporation.
(b) The bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall become the bylaws of the Surviving Corporation
after the Effective Time, until thereafter amended as provided by the
NJCA, the certificate of incorporation of the Surviving Corporation and
such bylaws.
Section 1.06. Directors. The board of directors of Merger Sub immediately prior
to the Effective Time shall become the board of directors of the Surviving
Corporation, until the earlier of their death, resignation or removal or until
their respective successors are duly elected and qualified.
Section 1.07. Officers. The officers of Merger Sub immediately prior to the
Effective Time shall become the officers of the Surviving Corporation, until the
earlier of their death, resignation or removal or until their respective
successors are duly appointed and qualified.
ARTICLE II
CONVERSION OF SHARES; PAYMENT FOR SHARES
Section 2.01. Effect on Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the Company, Parent, Merger Sub or the
holders of any securities of the Company, Parent or Merger Sub:
(a) Each share of common stock, no par value (the "Common Stock"), each share
of Series A Convertible Preferred Stock, $.10 par value per share (the
"Series A Convertible Preferred Stock") and each share of Series B
Convertible Preferred Stock, $.10 par value per share (the "Series B
Convertible Preferred Stock") of the Company (collectively, the Common
Stock, the Series A Convertible Preferred Stock and the Series B
Convertible Preferred Stock are sometimes hereinafter referred to as the
"Company Stock") that is, immediately prior to the Effective Time,
authorized but unissued (even if reserved), held in the Company's treasury
or by any of the Company's direct or indirect wholly owned subsidiaries
immediately prior to the Effective Time, and each share of Company Stock
that is owned by Parent, Merger Sub or any other wholly owned subsidiary of
Parent (collectively, the "Excluded Shares") shall automatically be
cancelled and retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor.
(b) Subject to Section 5.06 and Section 10.10, each issued and outstanding
share of Company Stock (other than shares to be cancelled in accordance
with Section 2.01(a) and Dissenting Shares) shall, at the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive in cash per share payable
to the holder thereof, without interest thereon (the "Merger
Consideration"), upon surrender and exchange of the certificate
representing such share of Company Stock the following amounts: (i) each
share of Common Stock, $1.00; (ii) each share of Series A Convertible
Preferred Stock, $2.00; and (iii) each share of Series B Convertible
Preferred Stock, $10.00; provided however, that the maximum aggregate
amount of Merger Consideration including the Option Amount (defined in
Section 2.02) shall not exceed $22,900,000. As of the Effective Time, all
such shares of Company Stock shall no longer be outstanding, shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Stock (the
"Certificates") shall cease to have any rights with respect thereto, except
the right to receive Merger Consideration.
(c) Notwithstanding any provision of this Agreement to the contrary, each
outstanding share of Company Stock that is issued and outstanding
immediately prior to the Effective Time and the holder of which (i) has not
voted in favor of the Merger, (ii) has filed a written notice of dissent
and has made written demand for the payment of the fair value of shares
pursuant to and in accordance with Section 14A:11-2 of the NJCA and (iii)
has not effectively withdrawn or lost such right to receive payment of the
fair value of shares (a "Dissenting Share") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to Section
2.01(b). The holder thereof shall instead be entitled to receive payment of
the appraised value of such shares of Company Stock held by them in
accordance with the provisions of Section 14A:11-3 of the NJCA; provided,
however, that any Dissenting Share held by a person at the Effective Time
who shall, after the Effective Time, withdraw the demand for appraisal or
lose the right of appraisal, in either case pursuant to the NJCA, shall be
deemed to be converted into, as of the Effective Time, the right to receive
the Merger Consideration pursuant to Section 2.01(b). The Company shall
give Parent prompt notice of any written demands for appraisal, withdrawals
of demands for appraisal and any other instruments served pursuant to the
applicable provisions of the NJCA relating to the appraisal process
received by the Company. Notwithstanding anything to the contrary in this
Section 2.01(c), if (A) the Merger is rescinded or abandoned or (B) the
stockholders of the Company revoke the authority to effect the Merger, the
right of any stockholder of the Company to be paid the fair value of such
stockholder's Dissenting Shares pursuant to the NJCA shall cease.
(d) Each issued and outstanding share of common stock, par value $0.001 per
share, of Merger Sub shall be converted into one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
Section 2.02. Company Stock Options and Warrants. Each holder of an Option
outstanding under the 1992 Non-Executive Director Stock Option Plan, as amended,
the 2002 Non-Executive Director Stock Option Plan, the 1992 Incentive Stock
Option Plan, as amended, the Second Amended and Restated 2002 Incentive Stock
Option Plan and/or the 1996 Senior Management Incentive Plan as amended
(collectively, the "Option Plans") and each holder of a warrant ("Warrant") to
acquire a share of the Company's Common Stock, shall, if such Option or Warrant
is exercisable as of the Effective Date (collectively an Option and a Warrant
are referred to as a "Vested Option"), be converted into the right to receive an
amount in cash (the "Option Amount") equal to the Merger Consideration less the
exercise price therefor. As promptly as practicable following the Effective
Time, the Surviving Corporation shall pay to each holder of one or more options
the applicable Option Amount (less any applicable withholding taxes). On the
Closing Date, the Surviving Corporation shall deposit in a bank account not
within the Company's control an amount of cash equal to the aggregate payments
to be made pursuant to the prior sentence together with instructions that such
cash be promptly distributed following the Effective Time to the holders of such
options in accordance with this Section.
Section 2.03. Payment for Shares.
(a) Escrow of Deposit. Within two (2) business days after the execution of this
Agreement, Parent shall pay to Signature Bank, NA (the "Escrow Agent") the
sum of $2,000,000 (the "Merger Consideration Deposit") to be held in Escrow
pursuant to the terms of the agreement between Company, Parent and Merger
Sub (the "Escrow Agreement"). The Escrow Agreement shall provide that so
long as no default exists under the terms of this Agreement, on the Closing
Date, the Escrow Agent shall transfer the Merger Consideration Deposit to
the Paying Agent. The Escrow Agreement shall further provide that if this
Agreement is terminated by Parent or Merger Sub for any reason other than
pursuant to Section 8.01, then the Escrow Agent shall pay the Merger
Consideration Deposit Amount to the Company in immediately available funds
on the second business day following such termination of this Agreement.
(b) Paying Agent. Prior to the Effective Time;
(i) Parent shall appoint a bank or trust company reasonably
acceptable to the Company to act as paying agent (the "Paying
Agent") for payment of the Merger Consideration;
(ii) Parent shall deposit or cause to be deposited with the Paying
Agent a cash amount equal to the aggregate Merger
Consideration, less the Merger Consideration Deposit, to which
holders of shares of Company Stock shall be entitled upon
consummation of the Merger; and
(iii) the Escrow Agent shall deposit the Merger Consideration
Deposit with the Paying Agent.
The amount deposited with the Paying Agent pursuant to subsection
(b)(ii) and (b)(iii) shall be held for the benefit of and distributed
to such holders in accordance with this Section and the Paying Agent
Agreement substantially in the form of Exhibit A. The Paying Agent
shall agree to hold such funds (such funds, together with earnings
thereon, being referred to herein as the "Payment Fund") for delivery
as contemplated by this Section. If for any reason (including losses)
the Payment Fund is inadequate to pay the cash amounts to which holders
of shares of Company Stock shall be entitled, Parent shall in any event
remain liable, and shall make available to the Surviving Corporation
additional funds, for the payment thereof. The Paying Agent shall,
pursuant to irrevocable instructions, pay the aggregate Merger
Consideration out of the Payment Fund, and the Payment Fund shall not
be used for any other purpose.
(c) Exchange Procedures. As soon as reasonably practicable after the Effective
Time, the Surviving Corporation shall cause the Paying Agent to mail to
each holder of record of a Certificate whose shares are converted pursuant
to Section 2.01(b) into the right to receive the Merger Consideration per
share of Company Stock represented thereby (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such
other provisions as the Surviving Corporation may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration per share of Company Stock
represented thereby. Upon surrender of a Certificate for cancellation to
the Paying Agent, together with such letter of transmittal duly executed
and completed in accordance with its terms, the holder of such Certificate
shall be entitled to receive in exchange therefor cash equal to the Merger
Consideration per share multiplied by the number of shares of Company Stock
formerly represented by such Certificate, which such holder has the right
to receive pursuant to the provisions of this Article II, payable by check
and the Certificate so surrendered shall forthwith be canceled. In no event
shall the holder of any Certificate be entitled to receive interest on any
funds to be received in the Merger. In the event of a transfer of ownership
of Company Stock that is not registered in the transfer records of the
Company, a check representing the Merger Consideration per share of Company
Stock represented thereby may be issued to a transferee if the Certificate
representing such Company Stock is presented to the Paying Agent
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 2.03(b), each Certificate
(other than for Dissenting Shares and Excluded Shares) shall be deemed at
all times after the Effective Time and for all corporate purposes of the
Surviving Corporation, to represent only the right to receive upon such
surrender the Merger Consideration per share of Company Stock represented
thereby as contemplated by this Article II, including as limited by
paragraphs (c), (e) and (h) below.
(d) No Further Ownership Rights in Company Stock; Stock Transfer Books. All
cash paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article II shall be deemed payment in full
satisfaction of all rights pertaining to the shares of Company Stock
theretofore represented by such Certificates. After the Effective Time
there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Stock that were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be cancelled against delivery
of the Merger Consideration per share of Company Stock theretofore
represented by such Certificate, except as otherwise provided by law.
(e) Termination of Payment Fund. Any portion of the Payment Fund remaining
undistributed to the holders of the Certificates six months after the
Effective Time shall be delivered to Surviving Corporation upon demand, and
any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Surviving Corporation for payment
of their claim for Merger Consideration.
(f) No Liability. Neither the Company, Parent, Merger Sub, the Surviving
Corporation nor the Paying Agent shall be liable to any person with respect
to cash from the Payment Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) Investment of Exchange Fund. The Paying Agent shall invest all cash
included in the Payment Fund as directed by Parent. Any interest and other
income resulting from such investments shall be paid to the Surviving
Corporation.
(h) Lost Certificates. For any Certificate that has 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
in the sole discretion of the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent will issue the applicable
Merger Consideration in exchange for such lost, stolen or destroyed
Certificate.
(i) Withholding Rights. Each of the Paying Agent and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Stock
such amounts as are required to be deducted and withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holder of the shares of Company Stock in respect of which such
deduction and withholding was made.
(j) Adjustment of Merger Consideration. If, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of
Company Stock shall have been changed into a different number of shares or
a different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, split, combination, exchange,
recapitalization or other similar transaction, the Merger Consideration
shall be appropriately adjusted so that the aggregate amount payable
pursuant to this Agreement shall not have increased or decreased as a
result of such adjustment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and each of its Subsidiaries hereby jointly and severally
represent and warrant, each with respect to itself and with respect to the
others, to Parent that the statements contained in this Article III are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article III and
except as set forth in the Disclosure Schedules as updated as of the Closing
Date pursuant to Section 6.07). The Disclosure Schedules in Annex I will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Article III.
Section 3.01. Organization, Qualification, Etc.
(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 the corporate
power and authority to own its properties and assets and to carry on its
business as it is now being conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
properties or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Copies of the Company's certificate of
incorporation and bylaws have been delivered to Parent and are complete and
correct and in full force and effect.
(b) The Company conducts certain of its operations through the subsidiary
corporations set forth on Schedule 3.01 (collectively, the "Subsidiaries").
Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the state of incorporation and has the
corporate power and authority to own its properties and assets and to carry
on its business as it is now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. Copies of each Subsidiary's
certificate of incorporation and bylaws have been delivered to Parent and
are complete and correct and in full force and effect. The Company owns
100% of the issued and outstanding capital stock of each of the
Subsidiaries, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
security interests, options, warrants, purchase rights, contracts,
commitments and equities claims and demands. The Company does not control,
directly or indirectly, and does not have any direct or indirect equity
participation in any other corporation, partnership, trust or other
business association.
Section 3.02. Capital Stock.
(a) The authorized stock of the Company consists of 60,000,000 shares of
Common Stock, no par value, and 5,000,000 shares of Preferred Stock,
$.10 par value per share. As of the date of this Agreement, 16,044,793
shares of Common Stock, 305,369 shares of Series A Convertible
Preferred Stock and 197,824 shares of Series B Convertible Preferred
Stock have been issued. Except as disclosed in Disclosure Schedule
3.02(a), as of the date of this Agreement, no shares of Company Stock
were held in the treasury of the Company. All of the issued and
outstanding shares of Company Stock have been duly authorized for
issuance and were validly issued and are fully paid and nonassessable.
(b) Other than Options for 2,323,402 shares of Common Stock granted
pursuant to the Company Option Plans and the Company's Warrants to
purchase 464,724 shares of Common Stock, the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock and$1,220,000
of Convertible Debentures, there are no outstanding subscriptions,
options, warrants, convertible securities, conversion rights,
preemptive or other rights or other arrangements or commitments
obligating the Company to issue any shares of its stock. The Company
has no outstanding stock appreciation, phantom stock or similar rights.
The Company has no obligation, contingent or otherwise, to reacquire
any shares of the Company Stock.
(c) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of the Company having the right to vote on any matters on
which stockholders may vote are issued or outstanding.
Section 3.03. Corporate Authority Relative to This Agreement; No Violation.
(a) The Company has the corporate power and authority to enter into this
Agreement and, subject to the approval of this Agreement and the Merger by
the holders of a majority of the outstanding shares of (i) Common Stock and
Series B Convertible Preferred Stock voting together, (ii) the Series A
Convertible Preferred Stock voting separately as a class, and (iii) the
Series B Convertible Preferred Stock voting separately as a class
(collectively such votes are referred to as the "Stockholder Approval"), to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the board of directors of the Company.
No other corporate proceedings on the part of the Company, other than
obtaining Stockholder Approval in accordance with the NJCA, the certificate
of incorporation and the bylaws of the Company, are necessary to authorize
the consummation of the transactions contemplated hereby on behalf of the
Company. This Agreement has been duly and validly executed and delivered by
the Company and, subject to Stockholder Approval and approval by the NASD
and any other required Governmental Authorities, and assuming this
Agreement constitutes a valid and binding agreement of the other parties
hereto, this Agreement constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except that enforcement hereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(b) The board of directors of the Company has determined that the transactions
contemplated by this Agreement are in the best interests of the Company and
its stockholders and has declared the advisability of this Agreement and
will recommend to such stockholders that they approve and adopt this
Agreement. Based on the representations and warranties of Parent and Merger
Sub contained in Section 4.02(b), the board of directors of the Company has
taken all necessary and appropriate action so that Chapter 10A of the NJCA
will be inapplicable to this Agreement and the transactions contemplated
hereby. To the Knowledge of the Company, no other state takeover statute is
applicable to the Merger or the other transactions hereby.
(c) The Company is not subject to or obligated under any charter, bylaw or
contract provision or any license, franchise or permit, or subject to any
order or decree, that, by its terms, would be breached or violated or would
accelerate any payment or obligation, trigger any right of first refusal or
other purchase right as a result of the Company executing or, subject to
the adoption of this Agreement by its stockholders, carrying out the
transactions contemplated by this Agreement, except for any breaches or
violations that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Other than in connection with or in
compliance with (i) the provisions of the NJCA, (ii) the Securities Act of
1933, as amended (the "Securities Act"), (iii) the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (iv) Section 4043 of ERISA, (v)
any applicable United States competition, antitrust and investment law,
(vi) the securities or blue sky laws of the various states and (vii)
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or
required approval necessitated by the transactions contemplated by this
Agreement, no authorization, consent or approval of, or filing with, any
Governmental Authority is necessary for the consummation by the Company of
the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings the failure to obtain or
make which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or substantially impair or delay the
consummation of the transactions contemplated hereby.
Section 3.04. Reports and Financial Statements.
(a) The Company has previously furnished or made available to Parent true and
complete copies of:
(i) the audited consolidated financial statements of the Company and its
Subsidiaries as of, and for the year ended December 31, 2005 (the "2005
Financial Statements");
(ii) the Company's Annual Reports on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") for each of the years ended December
31, 2003, 2004 and 2005;
(iii) each definitive proxy statement filed by the Company with the SEC;
(iv) each final prospectus filed by the Company with the SEC, except any
final prospectus relating to a Registration Statement on Form S-8; and
(v) all Current Reports on Form 8-K and Quarterly Reports on Form 10-Q
filed by the Company with the SEC since December 31, 2004.
(b) The 2005 Financial Statements and the audited consolidated financial
statements and unaudited consolidated interim financial statements included
in the Company SEC Reports (including any related notes and schedules)
fairly present the financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods or as of the dates then ended (subject, in the case
of the unaudited interim financial statements, to normal recurring year-end
adjustments), in each case in accordance with accounting principles
generally accepted in the United States ("GAAP") consistently applied
during the periods involved (except as otherwise disclosed in the notes
thereto).
(c) The Company has filed all forms, reports, statements, schedules and other
documents (including all annexes, exhibits, schedules, amendments and
supplements thereto) required to be filed by it with the SEC since December
31, 2002 (such forms, reports, statements, schedules and documents filed by
it with the SEC, including any such forms, reports, statements, schedules
and other documents filed by the Company with the SEC after the date of
this Agreement and prior to the Closing Date, are referred to herein,
collectively, as the "SEC Reports") and with respect to the SEC Reports
filed by the Company after the date of this Agreement and prior to the
Closing Date, will deliver or make available to the Parent all of such SEC
Reports in the form filed with the SEC. As of their respective filing
dates, the SEC Reports (including all information incorporated therein by
reference) (i) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and
(ii) 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 the light of the circumstances under
which they were made, not misleading. To the Knowledge of the Company, the
Company has timely filed all reports, including but not limited to reports
on Forms 10-K, 10-Q, 8-K and proxy statements required to be filed by it
with the SEC under the rules and regulations of the SEC. Except with
respect to First Montauk Securities Corp. ("First Montauk Securities"), a
wholly-owned subsidiary of the Company and a registered broker-dealer with
the SEC and the NASD (as hereinafter defined in Section 3.13(b)), none of
the Company's Subsidiaries are required to file any forms, reports or other
documents with the SEC.
Section 3.05. No Undisclosed Material Liabilities. Neither the Company nor any
of its Subsidiaries have any liabilities or obligations of any nature, required
to be reflected on a balance sheet prepared in accordance with GAAP whether or
not accrued, contingent or otherwise, and there is no existing condition,
situation or set of circumstances which would reasonably be expected to result
in such a liability or obligation, except (a) liabilities or obligations
reflected in the 2005 Financial Statements or (b) liabilities or obligations
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 3.06. Leases. The Company has delivered to Parent correct and complete
copies of any and all Material Leases to which the Company or any of its
Subsidiaries is a party as set forth in Schedule 3.06. Each Lease is legal,
valid, binding, enforceable and in full force and effect and will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transaction contemplated hereby. Neither
the Company nor any of its Subsidiaries are in breach or default under any
Material Lease and no event has occurred which, with notice or lapse of time,
would constitute a breach or default of such Material Lease by the Company or
any of its subsidiaries or permit termination, modification or acceleration
thereof by the respective lessor, and no party to any such Material Lease has
repudiated any provision thereof, except for such breaches, defaults or
repudiations which, would not individually or in the aggregate, have a Material
Adverse effect on the Company. There are no disputes, oral agreements or
forbearance programs in effect as to any Material Lease. All facilities leased
thereunder are supplied with utilities and other services necessary for the
operation of said facilities.
Section 3.07. No Violation of Law; Lawful Operations. The business of the
Company and its Subsidiaries has been and currently is being conducted in
compliance with all statutes, regulations, orders, covenants, restrictions and
plans of Governmental Authorities, except where the failure to so comply would
not have a Material Adverse Effect on the Company.
Section 3.08. Environmental Laws and Regulations.
(a) The Company and each of its Subsidiaries are in compliance with all
applicable international, federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), which compliance includes, but is not limited
to, the possession by the Company and its Subsidiaries of all material
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof, except for noncompliance which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries have received written
notice of, or is the subject of, any actions, causes of action, claims,
investigations, demands or notices by any person asserting an
obligation to conduct investigations or cleanup activities under
Environmental Law or alleging liability under or noncompliance with any
Environmental Law (collectively, "Environmental Claims") that would,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(c) To the Knowledge of the Company, there are no facts, circumstances or
conditions in connection with the operation of its business or any
currently or formerly owned, leased or operated facilities that are
reasonably likely to lead to any Environmental Claims in the future
that would, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 3.09. Employee Benefit Plans.
(a) Schedule 3.09 contains a true and complete list of each "employee benefit
plan" (within the meaning of Section 3(3) of ERISA), including, but not
limited to, pension, profit sharing, 401(k), severance, welfare, disability
and deferred compensation, and all other material employee benefit plans,
agreements, programs, policies or arrangements including, but not limited
to, stock purchase, stock option, employment, change-in-control, fringe
benefit, bonus and incentive, whether or not subject to ERISA, whether
formal or informal, oral or written, legally binding or not, under which
any employee or former employee of the Company or any Subsidiary has any
present or future right to benefits or under which the Company or any
Subsidiary has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as
the "Company Plans" but shall be separately identified on Schedule 3.09.
(b) The Company represents and warrants that:
(i) each Company Plan has been established and administered in accordance
with its terms, and each such Company Plan and the Company are in all
material respects in full compliance with the applicable provisions of
ERISA, the Code and other federal and state applicable laws, rules and
regulations with respect thereto except for noncompliance which would
not, individually or in the aggregate, have a Material Adverse Effect
on the Company;
(ii) the Company has received, with respect to each Company Plan that is an
"employee pension benefit plan" (within the meaning of ERISA Section
3(2)), a favorable determination letter as to its qualification. To the
Knowledge of the Company each trust for each such Company Plan is
exempt from federal income tax under Code Section 501(a). To the
Knowledge of the Company, no event has occurred or circumstance exists
that will or could give rise to disqualification or loss of tax-exempt
status of any such Company Plan or trust;
(iii) to the Knowledge of the Company, no event has occurred and no condition
exists that likely could subject the Company to any tax, fine, lien,
penalty or other liability imposed by ERISA (including any breach of
fiduciary responsibility by any director, officer or employee), the
Code or other applicable laws, rules and regulations;
(iv) for each Company Plan with respect to which a Form 5500 has been filed,
no material change has occurred with respect to the matters covered by
the most recent Form 5500 since the date thereof;
(v) to the Knowledge of the Company, no "reportable event" (as such term is
defined in ERISA Section 4043), "prohibited transaction" (as such term
is defined in ERISA Section 406 and Code Section 4975) or "accumulated
funding deficiency" (as such term is defined in ERISA Section 302 and
Code Section 412 (whether or not waived)) has occurred with respect to
any Company Plan and no Company Plan is a Multiemployer Plan within the
meaning of ERISA Section 4001(a)(3);
(vi) all contributions and payments made or accrued with respect to all
Company Plans and other benefit obligations are deductible under Code
Section 162 or Section 404. No amount or any asset of any Company Plan
is subject to tax as unrelated business taxable income;
(vii) to the Knowledge of the Company, no event has occurred or circumstance
exists that could result in a material increase in premium costs of
Company Plans and other benefit obligations that are insured or a
material increase in benefit costs of such plans and obligations that
are self-insured;
(viii) except to the extent required under ERISA Section 601 et seq. and Code
Section 4980B, the Company does not provide health or welfare benefits
for any retired or former employee and is not obligated to provide
health or welfare benefits to any active employee following such
employee's retirement or other termination of service;
(ix) the Company has the right to modify and terminate each Company Plan
with respect to both retired and active employees;
(x) to the Knowledge of the Company, the Company has complied with
the provisions of ERISA Section 601 et seq. and Code Section
4980B;
(xi) except as may be expressly prohibited by this Agreement, the Merger
will result in the payment, vesting or acceleration of any benefit
under any Company Plan; and
(c) With respect to any Company Plan, (i) no actions, suits or claims
(other than claims for benefits made in the ordinary course of the
Company Plan's operation) are pending or, to the Knowledge of the
Company, threatened; (ii) to the Knowledge of the Company, no facts or
circumstances exist that reasonably could give rise to any such
actions, suits or claims; and (iii) no written or oral communication
has been received from the PBGC in respect of any Company Plan subject
to Title IV of ERISA concerning the funded status of any such Company
Plan or any transfer of assets and liabilities from any such Company
Plan in connection with the transactions contemplated herein.
(d) Full payment has been made of all amounts which are due to any of the
Company Plans. Furthermore, the Company has made adequate provision for
reserves to meet contributions that have not been made because they are
not yet due under the terms of any of the Company Plans.
Section 3.10. Absence of Certain Changes or Events. Other than the transactions
contemplated or permitted by this Agreement or as disclosed in the 2005
Financial Statements, since January 1, 2006, (a) the businesses of the Company
and its Subsidiaries have been conducted in the ordinary course consistent with
past practice and (b) there has not been any event, occurrence, development or
state of circumstances or facts that if occurring after the date hereof would
violate Section 5.03 hereof or which has had a Material Adverse Effect on the
Company.
Section 3.11. Title. The Company is the owner of good and marketable title to
all of its assets, free and clear of all liabilities, liens, charges, claims,
licenses, rights, encumbrances and restrictions on transfers, and no financing
statement covering all or any portion of its assets and naming the Company as
debtor has been filed in any public office, and the Company has not signed any
financing statement or security agreement as debtor or borrower which financing
statement or security agreement covers all or any portion of its assets. All
material properties and assets, real and personal, that are owned, leased or
licensed by the Company and used for the conduct of its affairs have been in
good operating condition for the purposes for which they are intended to be
used.
Section 3.12. Investigations; Litigation.
(a) Except as set forth in Schedule 3.12(a), to the Knowledge of the
Company, there is no investigation or review being undertaken or that
is pending by any Governmental Authority with respect to the Company or
any of its Subsidiaries that would, individually or in the aggregate,
have a Material Adverse Effect on the Company, nor has any governmental
body or authority notified the Company of an intention to conduct the
same.
(b) Except as set forth in Schedule 3.12(b), to the Knowledge of the
Company, there are no actions, suits or proceedings pending or to
threatened against or affecting the Company or its Subsidiaries or
their officers or directors, in their capacities as such, or any of
their respective properties at law or in equity, or before any federal,
state, local or foreign court or Governmental Authority, that,
individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on the Company.
Section 3.13. Governmental Licenses.
(a) Schedule 3.13 contains a complete and accurate list of each license, permit
and other governmental authorization ("Governmental Licenses") that is held
by the Company or any of its Subsidiaries or that is required in connection
with the business of the Company or any of its Subsidiaries. Each
Governmental License listed or required to be listed in Schedule 3.13 is
valid and in full force and effect and the Company and its Subsidiaries
have been in compliance in all material respects with all of the terms and
requirements thereof.
(b) The Company and each of its Subsidiaries and each of their respective
officers, director and employees has all Governmental Authorizations,
including franchises, authorizations, memberships, approvals, orders,
consents, licenses, certificates, permits, registrations, qualifications or
other rights and privileges, including, without limitation, from the
National Association of Securities Dealers ("NASD"), and any clearing
agency (collectively, "Permits") necessary to permit the ownership of
property and the conduct of business as presently conducted by the Company
and its subsidiaries, and all such Permits are valid and in full force and
effect, except where the failure to obtain or maintain such a Permit would
not have a Material Adverse Effect.
(c) First Montauk Securities is registered as a broker-dealer with the SEC, is
a duly qualified member in good standing of the NASD and is duly qualified
or registered as a broker-dealer in each jurisdiction where the failure to
be so qualified or registered would have a Material Adverse Effect. Neither
the Company nor any Company Subsidiary other than First Montauk Securities
is required to be registered or qualified as a broker-dealer with the SEC
or in United States any jurisdiction where the failure to be so registered
or qualified would have a Material Adverse Effect.
(d) The Company and each of the Company's Subsidiaries is in compliance with
all applicable statutes, ordinances, orders, rules, regulations, by-laws
and policies promulgated by any Governmental Body, including, without
limitation, the NASD, which to the Knowledge of the Company apply to the
conduct of the Business, except where the failure to so comply would not
have a Material Adverse Effect. Neither the Company nor any of the
Company's Subsidiaries has ever entered into or been subject to any
judgment, consent decree, or administrative order with respect to any
aspect of the business, affairs, properties or assets of the Company or any
of the Company's Subsidiaries or, as of the date hereof, received any
notice of the institution against the Company of any civil, criminal or
administrative action, suit, proceeding or investigation from any
Governmental Body, including, without limitation, the NASD, and any
clearing agency, with respect to any aspect of the business, affairs,
properties or assets of the Company or any of the Company's Subsidiaries,
except as would not have a Material Adverse Effect.
(e) No event has occurred or circumstance exists that may (with or without
notice or lapse of time) (i) constitute or result directly or indirectly in
a violation of or a failure to comply with any term or requirement of any
Governmental License, or (ii) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental License except as would not have a
Material Adverse Effect on the Company.
(f) Neither the Company nor any of its Subsidiaries has received any notice or
other communication from any Governmental Authority or any other person
regarding (i) any actual, alleged, possible or potential violation of or
failure to comply with any term or requirement of any Governmental License
or any failure to obtain any required Governmental License, or (ii) any
actual, proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of or modification to any Governmental License.
(g) All applications required to have been filed for the renewal of the
Governmental Licenses have been duly filed on a timely basis with the
appropriate Governmental Authorities, and all other filings required to
have been made with respect to such Governmental Licenses have been duly
made on a timely basis with the appropriate Governmental Authorities except
as would not have a Material Adverse Effect on the Company.
Section 3.14. Tax Matters.
(a) All Tax Returns for all periods ending on or before the Closing Date that
are or were required to be filed by or with respect to the Company, either
separately or as a member of an affiliated group of corporations, have been
filed on a timely basis and in accordance with applicable laws, regulations
and administrative requirements. All such Tax Returns that have been filed
on or before the Closing Date were, when filed, and continue to be, true,
correct and complete in all material respects.
(b) The Company has made available to Parent all reports of and communications
for all open years from Internal Revenue Service agents and the
corresponding agents of other state, local and foreign governmental
agencies who have examined the respective books and records applicable to
the Company and its Subsidiaries. Schedule 3.14(b) describes all
adjustments in respect of the Company to income tax returns filed by, or on
behalf of, the Company or any affiliated group of corporations of which the
Company is or was a member, for all open taxable years, that have been
proposed by any representative of any governmental agency, and Schedule
3.14(b) describes the resulting Income Taxes, if any, proposed to be
assessed. All deficiencies proposed (plus interest, penalties and additions
to tax that were or are proposed to be assessed thereon, if any) as a
result of such examinations have been paid, reserved against or settled or,
as described in Schedule 3.14(b), are being contested in good faith by
appropriate proceedings. Except as set forth in Schedule 3.14(b), neither
the Company nor any Subsidiary of the Company has given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other entity) of any statute of limitations relating
to the payment of Taxes for which the Company may be liable.
(c) The Company has paid, or made provision for the payment of, all Taxes,
including personal property taxes, that have or may become due for all
periods ending on or before the Closing Date, including, without
limitation, all Taxes reflected on the Tax Returns referred to in this
Section 3.14, or in any assessment, proposed assessment or notice, received
by the Company or any Subsidiary of the Company, except such Taxes, if any,
as are set forth in Schedule 3.14(c) that are being contested in good faith
and as to which adequate reserves (determined in accordance with GAAP
consistently applied) have been provided. The charges, accruals and
reserves with respect to Taxes on the books of the Company are determined
in accordance with GAAP consistently applied. In all material respects, all
Taxes that the Company is or was required by law to withhold or collect
have been duly withheld or collected and, to the extent required, have been
paid to the appropriate governmental agency. There are no liens with
respect to Taxes upon any of the properties or assets, real or personal,
tangible or intangible, of the Company (except for Taxes not yet due).
(d) There are no closing agreements, requests for rulings or requests for
technical advice, in respect of any Taxes, pending between the Company and
any governmental agency.
(e) No consent to the application of Section 341(f)(2) of the Code has ever
been filed with respect to any property or assets held or acquired or to be
acquired by the Company.
(f) There is no existing tax-sharing agreement that may or will require that
any payment be made by or to the Company on or after the Closing Date.
(g) No property owned by the Company is property that Parent is or will be
required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform
Act of 1986, or is "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code.
(h) The Company has not agreed to and is not required to make any adjustment
pursuant to Section 481(a) of the Code, nor has the Internal Revenue
Service proposed any such adjustment or change in accounting method with
respect to the Company. The Company does not have any application pending
with any governmental agency requesting permission for any change in
accounting method.
(i) There is no contract, agreement, plan or arrangement covering any person
that, individually or collectively, as a consequence of this transaction
could give rise to the payment of any amount that would not be deductible
by Parent, the Surviving Corporation or the Company by reason of Section
280G of the Code.
(j) The Company does not own an interest in any (i) domestic international
sales corporation, (ii) foreign sales corporation, (iii) controlled foreign
corporation, or (iv) passive foreign investment company.
(k) The Company is not a party (other than as an investor) to any industrial
development bond.
(l) The Company was not a party to any deferred intercompany transaction that
will be restored (pursuant to the Treasury Regulations under Section 1502
of the Code) and will result in income or loss to the Company due to the
contemplated transaction.
(m) The Company is not, nor has it ever been, a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(n) None of the assets of the Company directly or indirectly secure any debt
the interest on which is tax-exempt under Section 103(a) of the Code.
Section 3.15. Opinion of Financial Advisor. The Company has received the opinion
of Capitalink, L.C. dated on or before the date of this Agreement, substantially
to the effect that the Merger Consideration is fair to the holders of the
Company Stock from a financial point of view.
Section 3.16. Material Contracts.
(a) Schedule 3.16(a) contains a complete and accurate list of each Company
Material Contract.
(b) Each Company Material Contract is valid and binding on the Company or its
Subsidiaries and is in full force and effect and, to the Knowledge of the
Company, is enforceable against the other party thereto, in each case,
except as enforceability may be subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws of
general applicability now or thereafter in effect relating to or affecting
creditors' rights, and to general equity principles (regardless of whether
enforcement is sought in a procedure in equity or at law). The Company and
its Subsidiaries are and have been in material compliance with all
applicable terms and requirements of each Company Material Contract. To the
Knowledge of the Company, each other party that has or had any obligation
or liability under any Company Material Contract is and has been in full
compliance with all applicable terms and requirements of such contract. To
the Knowledge of the Company, no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict
with or result in a violation or breach of, or give the Company or any of
its Subsidiaries or any other person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, any Company Material Contract. Neither
the Company nor any of its Subsidiaries has given to or received from any
other person any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation or breach
of, or default under, any Company Material Contract.
Section 3.17. Intellectual Property Rights. The Company and its Subsidiaries
have all right, title and interest in, or a valid and binding license to use,
all Intellectual Property individually or in the aggregate material to the
conduct of the businesses of the Company and its Subsidiaries taken as a whole.
Neither the Company nor any Subsidiary of the Company is in default (or with the
giving of notice or lapse of time, or both, would be in default) under any
license to use such Intellectual Property. To the Knowledge of the Company such
Intellectual Property is not being infringed by any third party and neither the
Company nor any Subsidiary of the Company is infringing any Intellectual
Property of any third party, except for such defaults and infringements that,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole.
Section 3.18. Finders or Brokers. Neither the Company nor any of its
Subsidiaries has employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
any fee or any commission in connection with or upon consummation of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant, each with respect to itself and with respect to the other, to the
Company that the statements made in this Article IV are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made them and as though the Closing Date were substituted for
the date of this Agreement throughout this Article IV).
Section 4.01. Organization, Qualification, Etc. Each of Parent and Merger Sub is
a corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization and
has the legal power and authority to own its properties and assets and to carry
on its business as it is now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its properties or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Parent or Merger Sub. Merger Sub has been formed for the sole purpose
of engaging in the transactions contemplated by this Agreement, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby. Merger Sub has not incurred, directly or indirectly,
through any subsidiary or affiliate, any obligations or liabilities or entered
into any agreements or arrangements with any person other than as contemplated
by this Agreement. The copies of Parent's and Merger Sub's organizational
documents that have been delivered to the Company are complete and correct and
in full force and effect.
Section 4.02. Corporate Authority Relative to This Agreement; No Violation.
(a) Each of Parent and Merger Sub has the legal power and authority to enter
into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
the board of directors of Parent and the board of directors of Merger Sub
and by the stockholders of Merger Sub and no other corporate proceedings on
the part of Parent or Merger Sub are necessary to authorize the
consummation of the transactions contemplated hereby. The board of
directors of Merger Sub has determined that the transactions contemplated
by this Agreement are in the best interests of Merger Sub and its
stockholders. The board of directors of Parent has determined that the
transactions contemplated by this Agreement are in the best interests of
Parent and its shareholder. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming this
Agreement constitutes a valid and binding agreement of the other parties
hereto, this Agreement constitutes a valid and binding agreement of Parent
and Merger Sub, enforceable against Parent and Merger Sub in accordance
with its terms, except that enforcement hereof may be limited by (A)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
(b) Neither Parent nor Merger Sub was, immediately prior to the execution of
this Agreement, an "interested stockholder" within the meaning of Chapter
10A of the NJCA.
(c) Neither Parent nor Merger Sub is subject to or obligated under any charter,
bylaw or contract provision or any license, franchise or permit, or subject
to any order or decree, which, by its terms, would be breached or violated
or would accelerate any payment or obligation, trigger any right of first
refusal or other purchase right as a result of Parent or Merger Sub
executing or carrying out the transactions contemplated by this Agreement,
except for any breaches or violations that would not, individually or in
the aggregate, have a Material Adverse Effect on Parent or Merger Sub.
Other than in connection with or in compliance with (i) the provisions of
the NJCA, (ii) the Securities Act, (iii) the Exchange Act, (iv) Section
4043 of ERISA, (v) any applicable United States competition, antitrust and
investments laws, (vi) the securities or blue sky laws of the various
states and (vii) filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the
transactions contemplated by this Agreement, no authorization, consent or
approval of, or filing with, any Governmental Authority is necessary for
the consummation by Parent or Merger Sub of the transactions contemplated
by this Agreement, except for such authorizations, consents, approvals or
filings the failure to obtain or make which would not, individually or in
the aggregate, have a Material Adverse Effect on Parent or Merger Sub or
substantially impair or delay the consummation of the transactions
contemplated hereby.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.01. Investigation and Access to Information. The Company shall afford
Parent and its officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours upon
reasonable notice, throughout the period prior to the earlier of the Effective
Time or the date, if any, on which this Agreement is earlier terminated pursuant
to Article VIII hereof (the "Termination Date"), to the Company's and its
Subsidiaries' properties, contracts, commitments, books and records and any
report, schedule or other document filed or received by it pursuant to the
requirements of federal or state securities laws and the Company and its
Subsidiaries shall use their reasonable best efforts to cause their respective
representatives to furnish promptly to Parent such additional financial and
operating data and other information as to the Company's and its Subsidiaries'
respective businesses and properties as Parent or its duly authorized
representatives may from time to time reasonably request. Parent agrees that it
will treat any such information in accordance with the terms of the first seven
(7) paragraphs of the Confidentiality Agreement, the terms of such paragraphs
being incorporated herein by reference. Notwithstanding any provision of this
Agreement to the contrary, no party shall be obligated to make any disclosure in
violation of applicable laws or regulations.
Section 5.02. Additional Reports and Information.
(a) The Company shall furnish to Parent copies of any reports of the type
referred to in Section 3.04 that it files with the SEC on or after the
date hereof, and the Company represents and warrants (other than with
respect to any information provided by Parent or Merger Sub
specifically for inclusion in such Report) that as of the respective
dates thereof such reports 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 were made, not misleading.
(b) From and after the date hereof and prior to the Effective Time or the
Termination Date, the Company shall prepare and deliver to Parent
quarterly and monthly financial statements, including balance sheets,
statements of operations and statements of cash flow, but excluding
footnotes thereto, within 10 days of the applicable filing date.
(c) Any unaudited consolidated interim financial statements delivered by
the Company pursuant to this Section 5.02 (including any related notes
and schedules) will fairly present the financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and
the results of operations and changes in financial position or other
information included therein for the periods or as of the date then
ended (subject, where appropriate, to normal year-end adjustments), in
each case in accordance with past practice and GAAP consistently
applied during the periods involved (except as otherwise disclosed in
the notes thereto).
Section 5.03. Conduct of Business by the Company. From and after the date hereof
and prior to the Effective Time or the Termination Date, and except (i) as may
be required by law (provided that any party availing itself of such exception
must first consult with the other party), (ii) as may be consented to in writing
by Parent or, (iii) as may be expressly permitted pursuant to this Agreement,
the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its operations
according to their ordinary and usual course of business in substantially
the same manner as heretofore conducted and shall use its reasonable best
efforts, and shall cause each of its Subsidiaries to use its reasonable
best efforts, to preserve intact its business organization and goodwill,
prevent adverse change in the financial condition, liabilities, assets,
business or operating results of the Company and prevent the destruction or
damage to or loss of any asset of the Company that would have a Material
Adverse Effect on the Company;
(b) shall, use reasonable efforts and shall cause each of its Subsidiaries to
use reasonable efforts to, keep available the services of its current
officers and other key employees, preserve its relationships with those
persons having business dealings with the Company and its Subsidiaries,
including, without limitation, brokers, agents, suppliers, vender and
customers;
(c) shall, and shall cause each of its Subsidiaries to, comply in all material
respects with all laws and orders of all Governmental Authorities
applicable to them;
(d) shall not declare, set aside or pay any dividends on, or make any
distribution with respect to, or redeem or purchase any outstanding shares
of its capital stock, except for the dividends payable with respect to
Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock consistent with past practices;
(e) shall not authorize or issue any shares of Stock or other securities
convertible into or in lieu of or in substitution for shares of its Stock
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) other than
upon the exercise of Options or warrants which are outstanding on the date
hereof, or in satisfaction of stock grants or stock based awards made prior
to the date hereof pursuant to the Company Option Plans or pursuant to any
individual agreements such as employment agreements or executive
termination agreements (in each case, as in effect on the date hereof);
(f) except in the ordinary course of their business, and in a manner consistent
with past practices, shall not, and shall not permit any of its
Subsidiaries to, authorize or effect any acquisition of assets or
securities, any disposition of assets or securities or any release or
relinquishment of a Company Material Contract;
(g) shall not, and shall not permit any of its Subsidiaries to, enter into
joint venture, partnership or similar arrangement;
(h) shall not propose or adopt any amendments to its corporate charter or
bylaws;
(i) except as required by law, shall not, and shall not permit any of its
Subsidiaries to (i) enter into, declare or amend in any respect the terms
of its Company Plans; (ii) enter into, adopt or amend any compensation,
severance, bonus or similar agreements or arrangements with any director or
officer; or (iii) except in the ordinary course of business, consistent
with past practice, increase in any manner the compensation or fringe
benefits of any employee not described in the preceding clause (ii) or pay
any such employee any benefit not required by an employee benefit plan or
arrangement as in effect as of the date hereof;
(j) except in the ordinary course of their business, and in a manner consistent
with past practices, shall not, and shall not permit any of its
Subsidiaries to (i) make capital expenditures or incur or assume any
additional indebtedness in excess of $100,000; (ii) create, or allow to be
imposed, any mortgage, pledge, security interest, lien or other encumbrance
on their assets; (iii) make any loans, advances or capital contributions
to, or investments in, any other person; (iv) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) not listed in Schedule 3.12; or (v)
change or modify any of its current financing terms, conditions or
facilities with banks and financial institutions except as necessary to
consummate the transaction set forth in this Agreement; provided, however,
that immediately after the date hereof the Company shall be permitted to
redeem all outstanding convertible debentures of the Company in accordance
with their terms and conditions.
(k) shall not, and shall not permit any of its Subsidiaries to, make any loans,
advances or capital contributions to, or investments in, any Stockholder or
affiliate thereof, or any employee of the Company or its Subsidiaries, in
any amount;
(l) shall not, and shall not permit any of its Subsidiaries to, (i) make any
Tax election or settle or compromise any Tax liability, (ii) change its
fiscal year or (iii) revalue any of its assets or (iv) change its methods
of accounting (including, without limitation, make any material write-off
or reduction in the carrying value of any assets) in effect at December 31,
2005, except as required by changes in GAAP;
(m) shall not, and shall not permit any of its Subsidiaries to, agree, in
writing or otherwise, to take any of the foregoing actions.
Notwithstanding any provision to the contrary contained in this
Section 5.03, neither Parent nor Merger Sub shall have, directly or indirectly,
any right to control or direct the Company's operations prior to the Effective
Time and prior to the Effective Time, the Company shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its operations.
Section 5.04. No Solicitation.
(a) The Company represents and warrants that it has terminated any discussions
or negotiations with any party (other than Parent) concerning any Takeover
Proposal prior to the date hereof. From and after the date hereof, the
Company will not, and shall use its reasonable best efforts not to permit
any of its officers, directors, employees, attorneys, financial advisors,
agents or other representatives or those of any of its Subsidiaries
(collectively, "Company Representatives") to, directly or indirectly,
solicit, initiate or knowingly encourage (including by way of furnishing
nonpublic information) any Takeover Proposal from any persons or engage in
or continue discussions or negotiations relating thereto, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover
Proposal, except that, so long as the Company is in compliance with its
obligations under this Section 5.04, the Company may, in response to a
Takeover Proposal that the board of directors determines is reasonably
likely to constitute a Superior Proposal that was not solicited by the
Company or any of its Company Representatives, and that did not result from
a breach of this Section, and subject to providing prior written notice of
its decision to take such action to Parent, (x) furnish information with
respect to the Company to any person making such a Takeover Proposal
pursuant to a customary confidentiality agreement with terms substantially
similar to those of the agreement to which Parent is a party with the
Company, and (y) participate in discussions or negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is agreed that any
action that is in violation of the restrictions set forth in the preceding
sentence by any executive officer or director of the Company or any
Subsidiary of the Company, whether or not such person is purporting to act
on behalf of the Company or any of its Subsidiaries or otherwise, shall be
deemed to be a breach of this Section 5.04 by the Company. The Company will
advise Parent orally (within one business day) and in writing (as promptly
as practicable) of the receipt of any inquiry or request for information
with respect to, or which could reasonably be expected to lead to, any
Takeover Proposal. In addition, the Company will provide Parent, within 24
hours of Company's receipt, with the material terms and conditions of any
Takeover Proposal (and any change in the material terms and conditions
thereof), and will promptly (but in no case later than two business days
thereafter) notify Parent of any determination by the Company's board of
directors that a Superior Proposal has been made. As used in this
Agreement, (i) "Takeover Proposal" shall mean any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or
purchase of business that constitutes 15% or more of the net revenues, net
income or the assets of the Company and its Subsidiaries taken as a whole,
or 15% or more of the voting securities of the Company or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of the voting
securities of the Company or any of its Subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement,
and (ii) "Superior Proposal" shall mean any Takeover Proposal made by a
third party within 45 days after the date hereof on terms that are
substantially the same or superior from a financial point of view to the
stockholders of the Company to the terms set forth in this Agreement,
including, without limitation, with respect to conditions to consummation,
financing and the percentage of outstanding equity securities acquired, as
determined by the board of directors of the Company in their good faith
judgment (based on the advice of an independent financial advisor or such
other matters as the Company's board of directors deems relevant).
(b) The board of directors of the Company shall not (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Merger Sub,
the approval or recommendation by such board of directors of this Agreement
or the Merger or (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal, unless, in each case, the Company
receives an unsolicited Takeover Proposal that is a Superior Proposal. The
board of directors of the Company may not enter into an agreement with
respect to a Takeover Proposal except in connection with a termination of
this Agreement as set forth in Article VIII. Nothing contained in this
Section 5.04 shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's stockholders
that, in the good faith reasonable judgment of the board of directors of
the Company after consultation with outside counsel, is required under
applicable law, provided that, except as otherwise permitted in this
Section 5.04, the Company does not withdraw or modify, or propose to
withdraw or modify, its position with respect to the Merger or approve or
recommend, or propose to approve or recommend, a Takeover Proposal.
Notwithstanding anything contained in this Agreement to the contrary, any
action by the board of directors of the Company permitted by, and taken in
accordance with, this Section 5.04 shall not constitute a breach of this
Agreement by the Company.
Section 5.05. Change of Control Provisions. To the extent that any employment
agreement, severance agreement or similar agreement, or any Company Option Plan,
Option, warrant or similar right to acquire shares of the Company's Common Stock
from the Company, (collectively the "Benefit Contracts") contains provisions
which allow or provide for the triggering or acceleration of any right, vesting,
payment, benefit or distribution, or the elimination or reduction of any waiting
period with regard to any of the foregoing (collectively the "Change of Control
Rights") upon the execution of this Agreement or the announcement of and/or the
performance of the transactions contemplated by this Agreement (including the
Merger), and if such Benefit Contracts also contain a provision providing that
the board of directors of the Company may except the foregoing events from
triggering such Change of Control Rights as a result of the execution of this
Agreement, or the announcement and/or performance of the transactions
contemplated by this Agreement (including the Merger), then the board of
directors of the Company shall not take any such action as is necessary to
prevent the triggering of such Change of Control Rights as a result of the
execution of this Agreement or the announcement and/or the performance of the
transactions contemplated by this Agreement or the completion of the Merger.
Section 5.06. Company Stock Outstanding. Between the date of this Agreement and
the Closing Date, the Company shall take all actions required to convert or
redeem, as the case may be, all outstanding warrants, options, convertible
debentures, stock rights, cumulations on preferred stock and any and all other
stock rights to shares of stock or shall, to the extent authorized, terminate
any of the foregoing so that on the Closing Date the maximum amount of Merger
Consideration, including the Option Amount, payable shall be $22,900,000.
Section 5.07. Company Recommendation of Approval. Subject to its fiduciary
duties, the Board of Directors of the Company shall recommend approval of the
Merger to the Company stockholders and will, as soon as practicable following
the execution of this Agreement, schedule a meeting of the Company's
stockholders (which may be its annual meeting) at which the Company's
stockholders will be asked to approve the Merger and, in connection therewith,
shall cause the Company to prepare and deliver a notice of stockholders meeting
and proxy statement in accordance with applicable law and the requirements of
federal securities laws as soon as practicable.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Antitakeover Statute. If any "fair price," "moratorium," "control
share acquisition" or other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated hereby, each of the Company
and Parent and the members of their respective boards of directors shall grant
such approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated hereby.
Section 6.02. Public Announcements. Upon execution of this Agreement, the
parties hereto agree that a press release and Form 8-K filing shall be made. The
Company and Parent will consult with and provide each other the opportunity to
review and comment upon any press release or other public statement or filing
prior to the issuance of such press release or other public statement or filing
relating to this Agreement or the transactions contemplated herein and shall not
issue any such press release or other public statement or filing without the
prior approval of the other party, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such other public statement as
required by law or the NASD if it has (a) used its reasonable best efforts to
consult with the other party and to obtain such party's consent but has been
unable to do so in a timely manner and (b) faxed a copy of such release or
public statement to such other party at a reasonable time prior to issuing such
release or making such statement.
Section 6.03. Notices of Certain Events.
(a) Each party shall promptly notify any other party of:
(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by
this Agreement.
(b) Each party shall promptly notify the other parties of any proceedings
commenced or threatened against such party or any of its Subsidiaries
that relate to the consummation of the transactions contemplated by
this Agreement.
Section 6.04. Delisting. If, at the time of Closing, any class of Company Stock
of the Company is trading on The Nasdaq Stock Market Inc.'s National Market
System or the Small-Cap Market, each of the parties hereto agrees to cooperate
with each other in taking, or causing to be taken, all actions necessary to
delist such class of Company Stock from The Nasdaq Stock Market Inc.'s National
Market System or the Small-Cap Market, provided that such delisting shall not be
effective until after the Effective Time of the Merger.
Section 6.05. Stockholder Approval; Proxy Solicitation; Other Filings.
(a) Stockholder Approval; Proxy Solicitation. Unless the Company has received a
Takeover Proposal that was unsolicited and did not otherwise result from a
breach of Section 5.04 and the Company's board of directors determines that
such Takeover Proposal is reasonably likely to lead to a Superior Proposal,
the Company, acting through its board of directors, shall, in accordance
with applicable law as promptly as practicable, call for a meeting of its
stockholders at the earliest practicable time (which may be its annual
meeting) at which the Company will submit the Merger and the other
transactions contemplated hereby to the stockholders for approval as
required under the NJCA and its certificate of incorporation and bylaws
(the "Company Meeting"). In connection therewith, the Company shall take,
at its own expense, all steps necessary to the solicitation of proxies from
the stockholders including the preparation, filing and mailing of a letter
to stockholders, notice of meeting, proxy statement and form of proxy to be
distributed to stockholders in connection with such meeting and any
schedules required to be filed with the SEC in connection therewith (the
"Proxy Statement"). The Company together with Parent and Merger Sub will
proceed diligently with the preparation and filing of the Proxy Statement
with the SEC. Parent and Merger Sub shall furnish all information about
themselves, their business and operations and their owners and all
financial information to the Company as may be reasonably necessary in
connection with the preparation of the Proxy Statement. The Company will
provide Parent with a reasonable opportunity to review and comment on the
Proxy Statement and any amendment or supplement to the Proxy Statement
prior to filing such with the SEC and will provide Parent with a reasonable
number of copies of all such filings made with the SEC. The Company shall,
as promptly as practicable after receipt thereof, provide copies of any
written comments received from the SEC with respect to the Proxy Statement
to Parent and advise Parent of any oral comments with respect to the Proxy
Statement received from the SEC. Each of Parent and the Company shall use
all reasonable efforts to resolve all SEC comments with respect to the
Proxy Statement as promptly as practicable after receipt thereof. If the
Company learns of any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will prepare and mail to its
stockholders such an amendment or supplement to the extent required by
applicable federal securities laws. If any Parent or Merger Sub learns of
any event that should be set forth in an amendment or supplement to the
Proxy Statement, such party will promptly inform the Company of such event.
(b) NASD 1017 Application; Other Filings. The Company, Parent and Merger Sub
shall properly prepare and file any other filings required under the
Exchange Act or any other federal or state law relating to the Merger and
the transactions contemplated by this Agreement (including an application
for approval by the NASD pursuant to Rule 1017 of the rules and regulations
of the NASD (the "NASD 1017 Application")), and filings, if any, required
on Schedule 13E-3 promulgated under Rule 13e-3 of the Exchange Act)
(collectively, the "Other Filings"). Each of the Company, Parent and Merger
Sub shall promptly notify the other of the receipt of any comments on, or
any request for amendments or supplements to, the NASD 1017 Application by
the NASD or any of the Other Filings by the SEC or any other Governmental
Authority or official, and each of the Company, Parent and Merger Sub shall
supply the other with copies of all correspondence between it and each of
its subsidiaries and representatives, on the one hand, and the SEC, the
NASD or the members of their respective staffs or any other appropriate
governmental official, on the other hand, with respect to any of the Other
Filings or the NASD 1017 Application, as the case may be. The Company,
Parent and Merger Sub each shall use all reasonable efforts to obtain and
furnish the information required to be included in the NASD 1017
Application or any of the Other Filings.
(c) Information Provided. None of the information supplied by the Company
specifically for inclusion or incorporation by reference in the Proxy
Statement, the NASD 1017 Application or the Other Filings, or any amendment
thereof or supplement thereto, will, at the respective times filed with the
SEC, the NASD or other Governmental Authority, and with respect to the
Proxy Statement, at the date mailed to the Company's stockholders and at
the time of the Company Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy
Statement and Schedule 13E-3, and the NASD 1017 Application, as the case
may be, insofar as they relate to the Company or other information supplied
by the Company for inclusion therein, will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder, or the rules and regulations of the
NASD, as the case may be. The Company makes no representation, warranty or
covenant with respect to information concerning Merger Sub or Parent or
their affiliates included in the Proxy Statement or Schedule 13E-3 or the
NASD 1017 Application, or information supplied by Merger Sub or Parent for
inclusion in the Proxy Statement or the Schedule 13E-3 or the NASD 1017
Application. None of the information supplied by Merger Sub or Parent
specifically for inclusion or incorporation by reference in the Proxy
Statement, the NASD 1017 Application or the Other Filings, or any amendment
thereof or supplement thereto, will, at the respective times filed with the
SEC, the NASD or other Governmental Authority, and with respect to the
Proxy Statement, at the date mailed to the Company's stockholders and at
the time of the Company Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy
Statement and Schedule 13E-3, insofar as they relate to Merger Sub or
Parent or other information supplied by Merger Sub or Parent for inclusion
therein, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder. The NASD 1017 Application insofar as it relates to Merger Sub
or Parent or other information supplied by Merger Sub or Parent for
inclusion therein, will comply as to form in all material respects with the
rules and regulations of the NASD. Merger Sub and Parent make no
representation, warranty or covenant with respect to information concerning
the Company or its Subsidiaries included in the Proxy Statement, Schedule
13E-3 or the NASD 1017 Application, or information supplied by the Company
or its Subsidiaries for inclusion in the Proxy Statement or the Schedule
13E-3 or the NASD 1017 Application.
Section 6.06. Efforts To Consummate; Further Assurances. Subject to the terms
and conditions of this Agreement, the parties hereto shall use their reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary or desirable to consummate the transactions
contemplated herein. The parties hereto agree to execute and deliver promptly
such other documents, certificates, agreements, instruments and other writings
(including any amendments or supplements thereto) and to take, or cause to be
taken, such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated hereby,
including, but not limited to, promptly making their respective filings and
thereafter make any other required submissions under the HSR Act and taking all
such further action as reasonably may be necessary to resolve such objections,
if any, as the Federal Trade Commission, the Antitrust Division of the
Department of Justice, state antitrust enforcement authorities or competition
authorities of any other nation or other jurisdiction or any other person may
assert under relevant antitrust or competition laws with respect to the
transactions contemplated hereby.
Section 6.07. Updating of Schedules. The parties hereto agree that any
Disclosure Schedules delivered by the Company to Parent will be updated by the
Company as of the Closing Date, with any and all changes specifically marked, so
that the condition to the obligations of each of Parent and Merger Sub to effect
the Merger set forth in Section 7.01(a) shall have been fulfilled as of the
Closing Date.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01. Conditions to the Obligation of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, the compliance with which, or the occurrence of which, may be waived
prior to the Closing Date in writing by Parent and Merger Sub respectively in
their sole discretion.
(a) Continued Accuracy of Representations and Warranties. All representations
and warranties of the Company contained in this Agreement that are
qualified by materiality or a Material Adverse Effect or words of similar
effect shall be correct and complete in all respects as of the Closing Date
as if made on the Closing Date, and those representations and warranties of
the Company contained in this Agreement that are not so qualified shall be
correct and complete in all material respects as of the Closing Date as if
made on the Closing Date.
(b) Performance of Agreements. The Company shall have performed, complied with
and satisfied all covenants of the Company contained in this Agreement
required by this Agreement to be performed or satisfied by it at or prior
to the Closing Date in all material respects.
(c) The Company's Closing Certificate. At the Closing, the Company shall
furnish a certificate, signed by an officer of the Company, with necessary
board of directors resolutions attached thereto, dated the Closing Date, to
the effect that the conditions specified in Section 7.01 have been
satisfied.
(d) Secretary's Certificate. The Company shall have furnished a certificate of
its secretary certifying as to:
(i) the consent of the stockholders of the Company and the resolutions of
the Company's board of directors authorizing the execution, delivery
and performance of this Agreement by the Company and the execution,
delivery and performance of all documents to be executed, delivered and
performed by the Company at Closing; and
(ii) the incumbency of its officers executing this Agreement and the
documents delivered at Closing.
(e) No Injunctions, Orders or Restraints; Illegality. No preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission (an "Injunction") nor any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority shall
be in effect which would (i) make the consummation of the Merger illegal,
or (ii) otherwise prevent or prohibit the consummation of the transactions
contemplated in this Agreement, including the Merger; provided, however,
that prior to invoking this condition, Parent and Merger Sub shall use
their reasonable best efforts to have any such Injunction vacated.
(f) Consents and Authorizations. Other than the filing required under Section
1.03, the Company shall have delivered to Parent written confirmation of
all notices, filings, consents, approvals, including the Company
Stockholder Approval, regulatory approvals, permits, authorizations or
orders of and all registrations, declarations or filings with third
parties, including creditors, contract parties or public or Governmental
Authorities and the NASD (collectively the "Consents"), necessary for the
authorization, execution and delivery of or performance under this
Agreement by the Company or its Subsidiaries or the consummation by the
Company or its Subsidiaries of the transactions contemplated by this
Agreement except for such Consents, the absence of which would not have a
Material Adverse Effect on the Company. If the transaction would require
HSR Act clearance, the HSR Act pre-merger notification waiting period shall
have expired or have been terminated early and no challenge, proceeding,
claim or delay with respect to the transaction shall have been imposed by
the Federal Trade Commission, the Department of Justice or any other
governmental agency.
(g) Opinion of Counsel. The Company shall have delivered to Parent an opinion
of counsel to the Company substantially of the form and content set forth
in Exhibit B, addressed to Parent and dated as of the Closing Date.
(h) Appraisal Rights. No more than 4% of the Company's stock shall have
perfected appraisal rights under the NJCA.
(i) Change of Control. The Company shall have complied with all requisite
corporate procedures, including approval of the Merger and any other
matters relating to change of control by the Board of Directors and
stockholders of the Company.
(j) No Adverse Change. No material adverse change has occurred in the financial
condition, business affairs, operations or assets of the Company or any of
its subsidiaries (not disclosed in this Agreement or schedules thereto or
financial statements included in the schedules thereto) and no previously
undisclosed material liabilities or commitments of the Company or any of
its subsidiaries have been discovered.
(k) No Regulatory Change. No material adverse change has occurred in
governmental regulation for the services provided in connection with the
business of the Company or any of its subsidiaries.
(l) No Severance Payments. No severance, "golden parachute" or other similar
payments have been made or are due to the Company's or any of its
subsidiaries' personnel required as a result of the Merger, except as
disclosed on the disclosure schedules to this Agreement.
(m) Company Stock. The Company has no more than 22,900,000 shares of Stock
outstanding on an as converted basis. The Stock includes, 16,044,793 shares
of Common Stock, Options convertible into 2,323,402 shares of Common Stock,
305,369 shares of Series A Convertible Preferred Stock which are
convertible into 610,738 shares of Common Stock, Warrants to acquire
464,724 shares of Common Stock, 197,824 shares of Series B Convertible
Preferred Stock which are convertible into 1,978,240 shares of Common
Stock, and $1,220,000 of debentures which are convertible into 2,440,000
shares of Common Stock. In the event that any existing Preferred Stock,
Options or Warrants or other securities convertible into Common Stock are
issued or exercised after the date of this Agreement, but prior to the
Closing Date, the aggregate Merger Consideration shall not increase and the
Merger Consideration per share will be decreased proportionately.
(n) Company Capital. The Company has a minimum of $2,000,000 in equity as
reflected in its most recent consolidated balance sheet less, if
applicable, any amounts required to redeem the Company's convertible
debentures outstanding as contemplated by Section 5.03(j) hereof, and the
Company has certified the same. In addition, the regulatory capital of
First Montauk Securities, the Company's broker-dealer subsidiary shall not
be less than $1,500,000.
(o) Fairness Opinion. The Board of Directors of the Company has received an
opinion of the Company's financial advisor to the effect that the terms of
the Merger are fair to the stockholders of the Company from a financial
point of view.
(p) Voting Agreements. Existing shareholders holding a minimum of 5,300,000
shares of the voting stock of the Company have entered into a voting
agreement in the form of Exhibit C and dated as of the date of this
Agreement, in which such existing shareholders agree to vote in favor of
the Merger and "standstill" for a minimum of 60 days after the date of this
Agreement.
(q) Resignations. Parent shall have received the resignations, effective as of
the Closing, of each of the directors of the Company and its Subsidiaries
and each officer of the Company and its Subsidiaries, other than those
individuals identified in Exhibit D.
(r) Employment Agreements. Employment Agreements have been entered into by the
key executives of the Company identified in Exhibit D in form and substance
satisfactory to Parent.
(s) Professional Fees of Company. Any and all fees, of whatsoever nature,
including but not limited to those for attorneys, accountants, investment
bankers, any fees to consultants relating to the Transaction, including
such fees for a fairness opinion, and any brokerage fees of the Company
relating to the Transaction, including any such fees relating to any
special committee (excluding director fees) or special counsel to the Board
of Directors, shall not exceed the aggregate amount of $500,000. In the
event such fees exceed such amount, the total amount of Merger
Consideration paid under this Agreement shall be reduced by the amount by
which such professional fees exceed $500,000.
(t) Certificate of Merger. The Company shall deliver to Purchaser a fully
executed Certificate of Merger and written evidence that the Merger has
been approved by at least the portion of the Company's stockholders as
required by corporate law.
(u) Other Documents. The Company shall have delivered to Parent all other
documents reasonably requested by Parent and contemplated by this Agreement
or required to be delivered by the Company to Parent pursuant to this
Agreement and not previously delivered.
(v) Stockholder Approval. The Company Stockholder Approval shall have been
obtained.
Section 7.02. Conditions to the Obligation of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, the compliance with which, or
the occurrence of which, may be waived prior to the Closing Date in writing by
the Company in its sole discretion.
(a) Continued Accuracy of Representations and Warranties. All
representations and warranties of Parent and/or Merger Sub contained in
this Agreement that are qualified by materiality or a Material Adverse
Effect or words of similar effect shall be correct and complete in all
respects as of the Closing Date as if made on the Closing Date, and
those representations and warranties of Parent and Merger Sub contained
in this Agreement that are not so qualified shall be correct and
complete in all respects as of the Closing Date as if made on the
Closing Date.
(b) Performance of Agreements. Parent and Merger Sub shall have performed,
complied with and satisfied all covenants and agreements required by
this Agreement to be performed or satisfied by them at or prior to the
Closing Date.
(c) Capital Contribution. The Parent shall have capitalized the Merger Sub
with the sum of at least $3,000,000 in cash and the same shall be
reflected in the books and records of the Merger Sub as shareholder's
equity.
(d) Parent and Merger Sub's Closing Certificate. At the closing, Parent
shall furnish a certificate, signed by an officer of Parent and Merger
Sub, dated the Closing Date, to the effect that the conditions
specified in this Section 7.02 have been satisfied.
(e) Secretary's Certificate. Each of Parent and the Merger Sub shall have
furnished a certificate of its secretary certifying as to:
(i) the resolutions of the Company's board of directors authorizing the
execution, delivery and performance of this Agreement by Parent and
Merger Sub; and
(ii) the incumbency of its officers executing this Agreement and the
documents delivered at Closing.
(f) No Injunctions, Orders or Restraints; Illegality. No Injunction nor any
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority shall be in effect which would (i) make the
consummation of the Merger illegal, or (ii) otherwise prevent or
prohibit the consummation of the transactions contemplated in this
Agreement, including the Merger; provided however, that prior to
invoking this condition, the Company shall use its reasonable best
efforts to have any such Injunction vacated.
(g) Opinion of Counsel. Parent shall have delivered to the Company an
opinion of counsel to Parent substantially of the form and content set
forth in Exhibit E, addressed to the Company and dated as of the
Closing Date.
(h) Purchase Price. The Parent shall have caused the Merger Sub to have
funds available to pay the Merger Consideration on or prior to the
Closing Date.
(i) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
ARTICLE VIII
TERMINATION
Section 8.01. Termination or Abandonment. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Effective Time, whether before or after any approval of
the matters presented in connection with the Merger by the stockholders of the
Company:
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent if (i) the Effective Time shall not have
occurred on or before October 31, 2006 and (ii) the party seeking to
terminate this Agreement pursuant to this Section 8.01 shall not have
breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date;
(c) by either the Company or Parent if (i) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated prohibiting
the consummation of the Merger substantially on the terms contemplated
hereby or (ii) an order, decree, ruling or injunction shall have been
entered permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger substantially on the terms contemplated hereby
and such order, decree, ruling or injunction shall have become final and
nonappealable and the party seeking to terminate this Agreement pursuant to
this Section 8.01 shall have used its reasonable best efforts to remove
such injunction, order or decree;
(d) by the Company or Parent if (i) the Company Stockholder Approval
contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment thereof, or (ii) the NASD shall not have
approved the NASD 1017 Application;
(e) by the Company if the board of directors of the Company reasonably
determines that a Takeover Proposal constitutes a Superior Proposal, except
that the Company may not terminate this Agreement pursuant to this Section
8.01 unless and until (i) three business days have elapsed following
delivery to Parent of a written notice of such determination by the board
of directors of the Company and during such three-business-day period the
Company (A) informs Parent of the terms and conditions of the Takeover
Proposal and the identity of the person making the Takeover Proposal and
(B) the Company otherwise cooperates with Parent with respect thereto
(except that the board of directors of the Company shall not be required to
take any action that it believes, after consultation with outside legal
counsel, would present a reasonable possibility of violating its
obligations to the Company or the Company's stockholders under applicable
law) with the intent of enabling Parent to agree to a modification of the
terms and conditions of this Agreement so that the transactions
contemplated hereby may be effected, (ii) at the end of such
three-business-day period the board of directors of the Company continues
reasonably to believe that the Takeover Proposal constitutes a Superior
Proposal, (iii) simultaneously with such termination, the Company enters
into a definitive acquisition, merger or similar agreement to effect the
Superior Proposal and (iv) the Company pays to Parent the amount specified
in Section 8.02 within the time period specified in Section 8.02;
(f) by Parent if the board of directors of the Company shall have (i) withdrawn
or modified in a manner adverse to Parent its approval or recommendation of
this Agreement and the transactions contemplated hereby or (ii) approved or
recommended, or proposed publicly to approve or recommend, any Takeover
Proposal;
(g) by Parent if a tender offer or exchange offer for 50% or more of the
outstanding shares of capital stock of the Company is commenced by a party
other than Parent or an affiliate of Parent prior to the Company Meeting,
and the board of directors of the Company fails to recommend against
acceptance of such tender offer or exchange offer by its stockholders
(including by taking no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders) within the time period
specified by Rule 14e-2 under the Exchange Act;
(h) by either the Company or Parent if there shall have been a material breach
by the other of any of its representations or warranties (as such
representations or warranties made by the Company may be modified by the
Disclosure Schedules, as updated pursuant to Section 6.07), or covenants or
agreements contained in this Agreement, which if not cured would cause the
respective conditions set forth in Article VII, as the case may be, not to
be satisfied, and such breach is incapable of being cured or shall not have
been cured within 15 days after notice thereof shall have been received by
the party alleged to be in breach.
In the event of termination of this Agreement pursuant to this Section
8.01, this Agreement shall terminate (except for the confidentiality provisions
contained in Section 5.01 and the provisions of Sections 8.02, 8.03 and 10.10),
and there shall be no other liability on the part of the Company or Parent to
the other except liability arising out of an intentional breach of this
Agreement or as provided for in the Confidentiality Agreement.
Section 8.02. Parent Termination Fee and Expenses. Notwithstanding any provision
in this Agreement to the contrary, if this Agreement is terminated by the
Company pursuant to Section 8.01(e), then the Company shall pay to Parent a fee
equal to (A) 25% of (x) the per share consideration payable to the stockholders
of the Company pursuant to such Superior Proposal minus (y) the Merger
Consideration, multiplied by (B) the total number of shares of Company Stock
issued and outstanding as of the date of the termination; provided, however,
that in no event shall such amount be less than $1,000,000, nor greater than
$2,000,000 (the "Parent Topping Fee"). If this Agreement is terminated by Parent
pursuant to Section 8.01(f) or (g), then the Company shall pay to Parent a fee
equal $2,000,000 (the "Parent Breakup Fee"). Additionally, in the event this
Agreement is terminated by the Company pursuant to 8.01(e), then Company shall
reimburse Parent for its fees and out of pocket expenses incurred in connection
with the transactions set forth in this Agreement up to the total sum of
$500,000 (such amount includes any amounts paid or payable by the Company under
the Confidentiality Agreement). Such fees shall be payable in immediately
available funds on the second business day following the termination of this
Agreement. The parties hereto agree that Parent Topping Fee shall also be paid
to Parent in the event that (A) this Agreement is terminated by Parent pursuant
to Section 8.01(f) or (g), and (B) within 12 months immediately following the
date of such termination the Company enters into a definitive agreement with
respect to a Takeover Proposal; provided, however, that in such circumstance
such Parent Topping Fee shall be reduced by any amount paid by Company as a
Parent Breakup Fee. Such Parent Topping Fee shall be paid in immediately
available funds on the second business day following the execution of a
definitive agreement with respect to such a Takeover Proposal.
Section 8.03. Company Termination Fee and Expenses. Notwithstanding any
provision in this Agreement to the contrary, (i) if this Agreement is terminated
by the Company pursuant to Section 8.01(h) or (ii) in the event that this
Agreement is terminated by Company pursuant to Section 8.01(b) (except for
failure to satisfy the conditions contained in Section 7.02(f), then Parent
shall pay to Company a fee of $2,000,000 (the "Company Breakup Fee"). Such fees
shall be payable in immediately available funds on the second business day
following the termination of this Agreement.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section 9.01. No Survival of Representations, Warranties, Covenants and
Agreements. Except for the provisions of Section 5.01 relating to the treatment
of information in accordance with the Confidentiality Agreement, Section 8.02,
Section 8.03 and Section 10.10 and this Article IX, none of the representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement and no covenant or agreement that is to be performed entirely at or
prior to the Effective Time shall survive the Merger.
Section 9.02. Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless each present and
former director and officer of the Company 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 or pertaining to matters
existing or occurring at or prior to the Effective Time (including, without
limitation, in connection with the transactions contemplated by this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under the NJCA (and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph (a)
of this Section 9.02, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified
Party if such failure does not materially prejudice the Surviving
Corporation. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), the
Surviving Corporation shall have the right to assume the defense thereof
and the Surviving Corporation shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if the Surviving Corporation elects not to
assume such defense or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received.
(c) If Parent or any of its successors or assigns (i) shall consolidate with or
merge into any other corporation or entity and shall not be the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
shall transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent shall
assume all of the obligations set forth in this Section.
(d) The provisions of this Section are intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
ARTICLE X
MISCELLANEOUS
Section 10.01. Counterparts; Effectiveness. This Agreement may be executed in
two or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered (by telecopy or otherwise) to the other
parties.
Section 10.02. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey, without regard to the
principles of conflicts of laws thereof.
Section 10.03. Jurisdiction. Each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any federal court located in the State of
New Jersey or any New Jersey state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
Section 10.04. Notices. All notices and other communications hereunder shall be
in writing (including telecopy or similar writing) and shall be effective (a) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 10.04 and the appropriate telecopy confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section 10.04:
To Parent or Merger Sub: Lara D. Coleman
FMFG Ownership, Inc.
10800 Midlothian Turnpike
Suite 309
Richmond, VA 23235
Telephone: (804) 594-3550
Facsimile: (804) 594-3556
copy to: Kutak Rock LLP
1650 Farnam Street
Omaha, NE 68102
Attention: Joseph O. Kavan, Esq.
Telephone: (402) 346-6000
Facsimile: (402) 346-1148
To the Company: First Montauk Financial Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Attention: Victor K. Kurylak
Telephone: (732) 842-4700
Facsimile: (732) 842-9047
copy to: Goldstein & DiGioia, LLP
45 Broadway, 11th Floor
New York, NY 10006
Attention: Victor J. DiGioia, Esq.
Telephone: (212) 599-3322
Facsimile: (212) 557-0295
Section 10.05. Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 10.06. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 10.07. Enforcement of Agreement. The parties hereto agree that money
damages or other remedies at law would not be a sufficient or adequate remedy
for any breach or violation of, or a default under, this Agreement by them and
that in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 10.08. Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof and thereof and, except for the provisions
of Section 9.02 hereof, is not intended to and shall not confer upon any Person
other than the parties hereto any rights or remedies hereunder.
Section 10.09. Headings. Headings of the Articles and Sections of this Agreement
are for convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
Section 10.10. Fees and Expenses. The parties hereto agree that each of the
Company and Parent shall bear its own costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby.
Section 10.11. Amendment or Supplement. At any time before or after approval of
the matters presented in connection with the Merger by the stockholders of the
Company and prior to the Effective Time, this Agreement may be amended or
supplemented by a writing signed by each of the parties hereto with respect to
any of the terms contained in this Agreement, except that following approval by
the stockholders of the Company there shall be no amendment or change to the
provisions hereof which by law or in accordance with the rules of any relevant
stock exchange requires further approval by such stockholders without such
further approval or any amendment or change not permitted under applicable law.
Section 10.12. Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, the parties hereto may:
(a) extend the time for the performance of any of the obligations or acts
of the other parties;
(b) waive any inaccuracies in the representations and warranties of the
other parties contained herein or in any document delivered pursuant
hereto; or
(c) waive compliance with any of the agreements or conditions of the other
parties contained herein.
Notwithstanding the foregoing, no failure or delay by a party hereto in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise of any
other right hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE XI
DEFINITIONS
Section 11.01. Definitions. In addition to the other terms defined herein, the
following terms used herein shall have the meanings herein specified (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Agreement" shall mean this Agreement and Plan of Merger, as the same
may be amended, restated, supplemented or modified from time to time in
accordance with the terms hereof.
"Benefit Contracts" shall have the meaning set forth in Section 5.05.
"Certificate of Merger" shall mean the certificate of merger referred
to in Section 1.03.
"Certificates" shall mean the certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Stock.
"Change of Control Rights" shall have the meaning set forth in Section
5.05.
"Closing" shall mean the closing of the Merger.
"Closing Date" shall mean the date referred to in Section 1.02.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued thereunder.
"Common Stock" shall mean the Company's Common Stock, no par value per
share.
"Company" shall mean First Montauk Financial Corp, a New Jersey
corporation.
"Company Breakup Fee" shall have the meaning set forth in Section 8.03.
"Company Material Contracts" shall mean any contract or other
arrangement, whether written or oral, to which the Company or any of the
Subsidiaries is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto could have a Material Adverse Effect on
the Company.
"Company Meeting" shall have the meaning set forth in Section 6.05(a).
"Company Plans" shall have the meaning set forth in Section 3.09.
"Company Representatives" shall have the meaning set forth in Section
5.04(a).
"Company Stock" shall mean the Common Stock, the Series A Convertible
Preferred Stock and the Series B Convertible Preferred Stock.
"Confidentiality Agreement" shall mean that certain letter agreement,
dated February 21, 2006, between an affiliate of the Parent and Merger Sub and
the Company.
"Consents" shall have the meaning set forth in Section 7.01(f).
"Costs" shall have the meaning set forth in Section 9.02(a).
"Disclosure Schedule" shall mean the disclosures of the Company set
forth in Annex I, as may be updated pursuant to Section 6.08.
"Dissenting Share" shall have the meaning set forth in Section 2.01(d).
"Effective Time" shall mean the time of filing the Certificate of
Merger.
"Environmental Claims" shall have the meaning set forth in Section
3.08.
"Environmental Laws" shall have the meaning set forth in Section 3.08.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Escrow Agent" shall have the meaning set forth in Section 2.03(a).
"Escrow Agreement" shall have the meaning set forth in Section 2.03(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Shares" shall have the meaning set forth in Section 2.01(a).
"GAAP" shall have the meaning as set forth in Section 11.02.
"Governmental Authorities" shall mean any department, division, branch,
office or official of a duly elected or appointed governmental office of any
country, state, province, county, parish or municipality.
"Governmental License" shall mean any license, permit and other
governmental authorization.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 as amended.
"Income Tax" shall mean any federal, state, local or foreign income
tax, including any interest, penalty or addition thereto, whether disputed or
not.
"Income Tax Return" shall mean any return, declaration, report, claim
for refund or information return or statement relating to Income Taxes,
including any schedule or attachment thereto and including any amendment
thereof.
"Indemnified Parties" shall have the meaning set forth in Section
9.02(a).
"Injunction" shall have the meaning set forth in Section 7.01(e).
"Intellectual Property" shall mean patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, copyrights
and copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing.
"Knowledge" shall mean with respect to any party, the actual knowledge
of any executive officer, director, general partner or managing member of such
party or any executive officer, director, general partner or managing member of
an affiliate of such party.
"Lease" shall mean any ownership interest in real or personal property
other than fee ownership.
"Material" shall mean an adverse effect of at least $500,000
individually or in the aggregate.
"Material Adverse Effect" shall mean, with respect to a party, such
state of facts, event, change or effect that has had, or would reasonably be
expected to have, a material adverse effect of at least $500,000, individually
or in the aggregate, on (i) the business, results of operations or financial
condition of such party, or (ii) the validity or enforceability of this
Agreement or the ability of such party to perform its obligations hereunder in a
timely fashion.
"Merger" shall mean the business combination contemplated in this
Agreement between Merger Sub and the Company.
"Merger Consideration" shall mean the amount referred to in Section
2.01(b).
"Merger Consideration Deposit" shall mean the amount referred to in
Section 2.03(a).
"Merger Sub" shall mean FMFG AcquisitionCo, Inc., a New Jersey
corporation.
"Multiemployer Plan" shall have the meaning as set forth in Section
3.09(b)(v).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASD 1017 Application" shall have the meaning set forth in Section
6.05(b).
"NJCA" shall mean the New Jersey Corporations Act.
"Option" shall mean any option or similar right entitling the holder
thereof to acquire shares of Company Stock.
"Option Amount" shall mean an amount equal to the applicable Merger
Consideration less the exercise price of an option.
"Option Plans" shall have the meaning set forth in Section 2.02.
"Other Filings" shall have the meaning set forth in Section 6.05(b).
"Parent" shall mean FMFG Ownership, Inc., a Delaware corporation.
"Parent Breakup Fee" shall have the meaning set forth in Section 8.02.
"Parent Topping Fee" shall have the meaning set forth in Section 8.02.
"Paying Agent" shall have the meaning set forth in Section 2.03(b)(i).
"Payment Fund" shall have the meaning set forth in Section 2.03(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permits" shall have the meaning set forth in Section 3.13(b).
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated association, or other
entity, or a government or any political subdivision or agency thereof.
"Preferred Stock" shall mean the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock.
"Proxy Statement" shall have the meaning set forth in Section 6.05(a).
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 3.04(c).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Convertible Preferred Stock" shall mean the Series A
Convertible Preferred Stock, $.10 par value per share.
"Series B Convertible Preferred Stock" shall mean the Series B
Convertible Preferred Stock, $.10 par value per share.
"Stock" means all shares of capital stock of a company, whether voting
or nonvoting, and including, without limitation, common stock and preferred
stock.
"Stockholder Approval" shall mean the approval of the Company's
stockholders holding at least a majority of the Common Stock and the Series B
Preferred Stock voting together and a majority of the Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock, each voting separately
as a single class.
"Subsidiary" means, as to any person, any corporation, partnership or
joint venture, whether now existing or hereafter organized or acquired: (a) in
the case of a corporation of which at least a majority of the outstanding shares
of stock having by the terms thereof ordinary voting power to elect a majority
of the board of directors of such corporation (other than stock having such
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person and/or one or more of
its Subsidiaries or (b) in the case of a partnership or joint venture, in which
such Person or a Subsidiary of such Person is a general partner or joint
venturer or of which a majority of the partnership or other ownership interests
are at the time owned by such Person and/or one or more of its Subsidiaries.
"Superior Proposal" shall have the meaning set forth in Section
5.04(a).
"Surviving Corporation" shall mean First Montauk Finance Corp., a
New Jersey corporation, as the surviving corporation of the Merger.
"Takeover Proposal" shall have the meaning set forth in Section
5.04(a).
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum or estimated tax, or
any other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto and including any amendment thereof.
"Termination Date" shall have the meaning set forth in Section 5.01.
"Treasury Regulations" shall mean the administrative rules and
regulations promulgated under the Internal Revenue Code of 1986, as amended.
"2005 Financial Statements" shall mean the audited consolidated
financial statements of the Company and its Subsidiaries as of, and for the year
ended December 31, 2005.
"Vested Option" shall have the meaning set forth in Section 2.02(b).
"Warrant" shall have the meaning set forth in Section 2.02.
Section 11.02. Generally Accepted Accounting Principles. All references in this
Agreement to generally accepted accounting principles ("GAAP") in the United
States consistently applied shall mean generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination. If after the date hereof the promulgation of rules,
regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accounts (or successors thereto or agencies with similar functions) result in a
material change in the method of calculation of financial covenants, standards
or terms found in this Agreement, the Company and the Purchasers agree to enter
into good faith negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating the Company's consolidated financial condition shall be the same
after such changes as if such changes had not been made.
Section 11.03. Construction. All capitalized words or terms herein have the
meaning ascribed to them as immediately thereafter. The captions or headings in
this Agreement are for convenience of reference only and in no way define, limit
or describe the scope or intent of any provisions or Sections of this Agreement.
All references in this Agreement to particular Articles or Sections are
references to the Articles or Sections of this Agreement, unless some other
references are clearly indicated. All accounting terms not specifically defined
in this Agreement shall be construed in accordance with the generally accepted
accounting principles as in effect on the date hereof. In this Agreement, unless
the context otherwise requires, (a) words describing the singular number shall
include the plural and vice versa, (b) words denoting any gender shall include
all genders and (c) the word "including" shall mean "including, without
limitation." This Agreement and the other instruments and documents to be
delivered pursuant hereto shall not be construed more favorably against one
party than the other based on who drafted the same, it being acknowledged that
all parties hereto contributed meaningfully to the drafting of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FIRST MONTAUK FINANCIAL CORP., as
the Company
By /s/ Victor K. Kurylak
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Name: Victor K. Kurylak
Title: President and Chief Executive Officer
FMFG OWNERSHIP, INC., as Parent
By /s/ Edward H. Okun
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Name: Edward H. Okun
Title: President and Chief Executive Officer
FMFG ACQUISITIONCO, INC., as the Merger Sub
By /s/ Edward H. Okun
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Name: Edward H. Okun
Title: President and Chief Executive Officer