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REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated April 5, 1999, by and among Gilman & Ciocia, Inc., a
Delaware corporation with a principal office at 475 Northern Boulevard, Great
Neck, NY 11021 ("G&C"), Prime Financial Services, Inc., a New York corporation
with a principal office at 11 Raymond Avenue, Poughkeepsie, NY 12603, Michael
Ryan, an individual with an address at 11 Raymond Avenue, Poughkeepsie, NY 12603
("Ryan"), and Ralph Porpora, an individual with an address at 11 Raymond Avenue,
Poughkeepsie, NY 12603 ("Porpora") (PFSI, Ryan, and Porpora will be referred to
collectively herein as "Stockholders").
WHEREAS, G&C and Stockholders have entered into a Asset and Stock
Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to
which G&C and Prime Financial Services, Inc., a Delaware corporation, will
acquire from Stockholders all of the outstanding capital stock of Prime Capital
Services, Inc., a New York corporation ("PCSI"), and Asset and Financial
Planning, Ltd., a New York corporation ("AFPL"), and certain assets of PFSI used
in the insurance brokerage business and/or in the business of managing the
operations of PCSI and AFPL, in exchange for common stock of G&C, as described
in the Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreement, each of the Stockholders
will receive G&C Common Stock, which stock will have certain registration
rights, as more fully described herein,
NOW, THEREFORE, in consideration of the mutual covenants of the parties
and other consideration, the receipt of which is hereby acknowledged by the
parties, the parties hereby agree as follows:
1. UNDEFINED TERMS. Each capitalized term contained herein and not
defined herein shall have the definition attributed to it in the Purchase
Agreement.
2. REGISTRATION RIGHTS.
(a) So long as the G&C Common Stock held by the Stockholders
remains restricted, G&C shall send written notice to the Stockholders at least
thirty (30) days prior to the filing by G&C of each and every registration
statement or notification to be filed during such period under the Securities
Act of 1933, as amended (the "Securities Act") (other than a registration
relating to employee benefit plans, and an acquisition transaction or similar
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registered on Form S-4), covering the sale of G&C Common Stock, and give to the
Stockholders the right to have the Stockholder's Purchase Price Shares
(collectively, the "Registrable Shares") then held by such Stockholders included
in any such registration statement or pre-effective amendment thereto or
notification. If a Stockholder desires to have Stockholder's Registrable Shares
registered, the Stockholder must deliver a written notice to G&C. Such notice
must be received by G&C within 15 days after the date of G&C's written notice to
the Stockholder and must indicate the full name and address of the Stockholder
and the number of shares to be included for sale in such registration statement
or notification and must include evidence showing that the shares requested to
be registered were issued pursuant to the Purchase Agreement.
(b) In the event that any of the Stockholders are unable to
register any of the Registrable Shares under Section 2(a) above within one year
of the date hereof, G&C shall on one occasion use its reasonable commercial
efforts to register the sale of the unregistered Registrable Shares, subject to
all of the terms and conditions of this Agreement, upon the request of all of
the holders of such unregistered Registrable Shares.
(c) The registration rights described in Section 2(a) and 2(b)
herein shall be limited by the following terms and conditions: (i) if the
Stockholders can then sell the number of Registrable Shares requested to be
included in any such registration statement in any three-month period pursuant
to Rule 144 (or any successor rule) under the Securities Act, G&C need not so
include such shares in any registration statement; (ii) in connection with an
offering by G&C of any of its securities, if the managing underwriter or other
selling agent shall impose a limitation on the number of shares of G&C Common
Stock and other securities of G&C that may be included in such registration
because, in its reasonable judgment, such limitation is necessary to effect an
orderly public distribution or complete the offering, such limitation shall be
imposed as to all such securities as follows: (A) all securities, up to such
limitation, to be sold by G&C may, at G&C's option, be included; and then (B) to
the extent such limitation has not been reached, such of the Registrable Shares
as all of the Stockholders have requested to be included in such registration
shall be included pro rata on the basis of the total number of shares of G&C
Common Stock owned by all holders of G&C's securities with registration rights
similar to Stockholders' Pigyback Right who have requested registration of their
securities of G&C (it being understood that the effect of such limitation may be
to prevent every holder of G&C's securities from exercising any registration
right at such time); (iii) if requested by G&C's underwriter in writing,
Stockholders shall agree not to sell any Registrable Shares pursuant to such
registration statement prior to the period ending six months after the effective
date of the registration statement, PROVIDED, HOWEVER, that in such case the
effectiveness of the registration shall be maintained by G&C for a period of at
least 60 days after the end of such holdback period; (iv) anything herein to the
contrary notwithstanding, G&C may at any time prior to the effective date of any
such registration statement, in its own best judgment, decide to withdraw, or
delay for up to 90 days, such registration or the effective date thereof without
any liability to Stockholders therefor; and (v) if the offering made pursuant to
such registration statement is to be made by an underwriter and the underwriter
wishes to sell the Registrable Shares in the underwritten offering, then
Stockholders must use the underwriter selected by G&C for any Registrable Shares
sold, and any additional
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underwriting commissions or non-accountable expense allowance relating to the
size of the offering shall be deemed Stockholder's selling expenses for the
purposes of Section 4 herein. Nothing herein shall prevent the Stockholders from
selling Registrable Shares under Rule 144 under the Securities Act, and counsel
for G&C shall provide an opinion as to any such Rule 144 sale if, in the opinion
of such counsel, such sale is permitted under Rule 144.
3. STOCKHOLDERS' OBLIGATIONS. In connection with any registration
statement or notification filed pursuant to the foregoing section:
(a) if the Stockholders have requested that their Registrable
Shares be covered by such registration statement or notification, the
Stockholders shall furnish to G&C in writing such appropriate information
(relating to the intention of the Stockholders as to proposed methods of sale or
other disposition of such shares) and the identity of and compensation to be
paid to any proposed underwriters to be employed in connection therewith
together with such other related information as G&C, any underwriter, or the
Securities and Exchange Commission ("Commission"), the NASDAQ Stock Market, or
any other regulatory authority may request;
(b) all Stockholders registering Registrable Shares shall
agree that they shall, execute, deliver and/or file with or supply to G&C, any
underwriters, the Commission and/or any state or other regulatory authority such
information, documents, representations, undertakings and/or agreements
reasonably necessary to carry out the provisions of the registration covenants
contained in this Agreement and/or to effect the registration or qualification
of their shares under the Securities Act and/or of the laws and regulations of
any state or governmental instrumentality where G&C's securities are to be
offered;
(c) G&C shall furnish to each Stockholder whose Registrable
Shares are being sold such number of copies of the prospectus or circular
(including each preliminary, amended of supplemental prospectus or circular) as
such Stockholder may reasonably request in order to facilitate sale of such
shares; and
(d) Stockholders shall execute such documents as G&C may
reasonably request confirming the Stockholders' obligations under Rule 10b-6
promulgated under the Securities Exchange Act of 1934, as amended, and any other
applicable rule or statutory provision.
4. EXPENSES. With respect to a registration statement or notification
filed pursuant to Section 2(a) or 2(b) above, all of G&C's expenses and
disbursements arising in connection with such registration (other than expenses
related to the size of the offering, such as commissions and non-accountable
expenses) shall be paid by G&C. Each Stockholder shall pay such Stockholder's
own selling expenses and counsel and similar fees.
5. PERIOD OF EFFECTIVENESS. G&C shall be obligated to keep any
registration statement or notification filed by it under Section 2(a) or 2(b)
herein effective for a period of 60 days after the later of the actual effective
date of such registration statement or the end of any period during
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which the Stockholders have refrained from selling Registrable Shares pursuant
to a request from G&C's underwriter pursuant to Section 2(c) herein, or, if
later, so long as no amendment to the registration statement or supplement to
the prospectus is required.
6. BLUE SKY. G&C shall use its best efforts to register or qualify the
shares covered by any registration statement under the Securities Act filed on
behalf of the Stockholders pursuant to this Agreement under such securities or
Blue Sky laws in such jurisdictions within the United States as each of the
Stockholders may reasonably request; PROVIDED, HOWEVER, that G&C reserves the
right not to register or qualify such shares in any jurisdiction where such
shares do not meet the requirements of such jurisdiction or where G&C is
required to qualify as a foreign corporation to do business in such jurisdiction
and is not so qualified therein or where G&C is required to file any general
consent to service of process.
7. DEREGISTRATION OF UNSOLD SHARES. In the event that a Stockholder has
not sold all the Registrable Shares included in a registration statement
pursuant to this Agreement on or prior to the expiration of the period specified
in Section 5 herein, the Stockholders hereby agree that G&C may deregister by
post-effective amendment any such shares covered by the registration statement
or notification and not sold on or prior to such date. G&C shall notify the
Stockholders of the filing and effective date of such post-effective amendment.
8. REVISION OF PROSPECTUS. Upon notification by G&C that the prospectus
in respect of any public offering covered by the provisions hereof is in need of
revision, the Stockholders shall immediately upon receipt of such notification
(i) cease to offer or sell any securities of G&C that must be accompanied by
such prospectus; (ii) return all such prospectuses to G&C; and (iii) not offer
or sell any securities of G&C until G&C has given the Stockholders notification
permitting them to resume offers and sales. G&C shall exert its best reasonable
efforts to revise such prospectus promptly, file any post-effective amendment
necessary in connection therewith, and supply to the Stockholders as many copies
of the current prospectus as the Stockholders reasonably request.
9. INDEMNIFICATION. As a condition to any filing pursuant to this
Agreement:
(a) G&C shall indemnify the Stockholders against any and all
losses, claims, damages, expenses or liabilities (including reasonable
attorneys' fees and other expenses reasonably incurred in defending any claim
covered by this indemnification or enforcing a claim under this indemnification)
to which the Stockholders may become subject under any federal or state
securities law, at common law, or otherwise, insofar as such losses, claims,
damages, expenses or liabilities are incurred in connection with claims by third
parties and arise directly out of any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
notification in which securities issued or issuable pursuant to the Purchase
Agreement are included and which is filed pursuant hereto, or in any related
preliminary prospectus, final prospectus or amended prospectus or offering
circular or other written information filed by G&C in any jurisdiction in order
to qualify the securities issuable hereunder
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under the securities laws thereof or with the Commission or the NASDAQ Stock
Market, or arise directly out of the omission or alleged omission to state
therein 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 were
made, not misleading, except to the extent that any such statement or omission
was made in reliance upon or in conformity with information furnished or
confirmed in writing to G&C by any of such Stockholders for use in such
registration statement or notification or prospectus or offering circular; and
(b) each of the Stockholders, individually and not jointly,
shall indemnify G&C, its representatives, officers and directors, against any
and all losses, claims, damages, expenses or liabilities (including reasonable
attorneys' fees and other expenses reasonably incurred in defending any claim
covered by this indemnification or enforcing a claim under this indemnification)
to which G&C is or may become subject under any federal or state securities law,
at common law, or otherwise, insofar as any such losses, claims, damages,
expenses or liabilities are incurred in connection with claims by third parties
and arise directly out of any untrue statement or alleged untrue statement of a
material fact contained in any such registration statement or notification in
which securities issued or issuable pursuant to the Purchase Agreement are
included or in related any preliminary prospectus, final prospectus or amended
prospectus or offering circular or other written information filed by G&C in any
jurisdiction in order to qualify the securities issuable hereunder under the
securities laws thereof or with the Commission or the NASDAQ Stock Market, or
arise directly out of the omission or alleged omission to state therein any
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, and only to the extent that any such statement or omission was made
in reliance upon or in conformity with information furnished to G&C by such
Stockholders for use in such registration statement, notification or prospectus,
but each Stockholder shall be liable only for his/her direct acts of commission
or omission giving rise to losses or damages and shall not be liable for the
acts of commission or omission by any other Stockholder.
10. NOTICES. Whenever notice is required to be given by any party
hereunder, such notice shall be deemed sufficient if given pursuant to the terms
of the Purchase Agreement and, if to a Stockholder, at the address listed above.
11. FURTHER ACTIONS. From time to time, as and when requested by G&C,
the Stockholders shall execute and deliver such documents and instruments and
shall take such further or other actions as G&C may reasonably deem necessary to
carry out the intent and purposes of this Agreement and to consummate and give
effect to the other transactions contemplated hereby.
12. ENTIRE AGREEMENT. This Agreement, and the other documents,
agreements and instruments executed and delivered pursuant thereto or in
connection therewith, contains the entire agreement between G&C and the
Stockholders with respect to the rights conferred by G&C relating to the
Purchase Price Shares and, in conjunction with the Purchase Agreement,
supersedes all prior arrangements or understandings with respect thereto,
whether written or oral.
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13. TERMINATION. This Agreement shall remain in full force and effect
until the later of (i) the first anniversary hereto or (ii) the date upon which
the Registrable Shares are no longer owned by the Stockholders. However, Section
9 shall survive the termination of this Agreement.
14. CONSTRUCTION.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(b) Each of the parties to this Agreement participated in the
drafting of this Agreement and the interpretation of any ambiguity contained in
this Agreement will not be affected by the claim that a particular party drafted
any provision hereof.
(c) Any pronoun herein shall include all genders and/or the
plural or singular as appropriate from the context.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entered into, executed and to be performed wholly in such state, except for its
conflict of laws provisions.
16. ASSIGNABILITY. This Agreement shall not be assignable otherwise
than by operation of law by any party hereto without the prior written consent
of the other parties, and any purported assignment without such prior written
consent shall be void, except that G&C may assign this Agreement to a
corporation controlling, controlled by or under common control with G&C,
provided that such assignment shall not relieve G&C of its obligations
hereunder.
17. WAIVERS AND AMENDMENTS. Any waiver of any term or condition of this
Agreement, or any amendment or supplementation of this Agreement, shall be
effective only if in writing executed by the party against whom such waiver,
amendment or supplementation is sought to be charged. A waiver of any breach or
failure to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
18. THIRD PARTY RIGHTS. Any other provision of this Agreement to the
contrary notwithstanding, this Agreement shall not create benefits for any third
party, including, without limitation, any subsequent holders of Registrable
Shares, except spouses, children and grandchildren of the original holders of
Registrable Shares who acquire Registrable Shares by gift, bequest or intestate
inheritance, who shall have the rights and obligations of the donor hereunder.
19. ILLEGALITIES. In the event that any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining
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provisions of this Agreement shall not, at the election of the party for whose
benefit the provision exists, be in any way impaired.
20. COUNTERPARTS. This Agreement may be executed in multiple
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned corporation has caused this
Agreement to be executed by its duly authorized officer, and each individual has
signed this Agreement, as of the date first above written.
GILMAN & CIOCIA, INC. PRIME FINANCIAL SERVICES, INC.,
a New York corporation
By:/s/ Thomas Povinelli By:/s/ Michael Ryan
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Name: Thomas Povinelli Name: Michael Ryan
Title: Chief Operating Officer Title: President
/s/ Michael Ryan /s/ Ralph Porpora
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MICHAEL RYAN RALPH PORPORA
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