UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 20, 2007
Gilman + Ciocia, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-22996 11-2587324
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
11 Raymond Avenue, Poughkeepsie, New York 12603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (845) 486-0900
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On August 20, 2007, Gilman + Ciocia, Inc. (the "Company") closed the sale (the
"Investment Purchase Closing") of 40,000,000 shares of its common stock, par
value $.01 per share (the "Common Stock"), at a price of $.10 per share (the
"Investment Purchase") pursuant to an Investor Purchase Agreement dated April
25, 2007 (the "Purchase Agreement") with Wynnefield Small Cap Value Offshore
Fund, Ltd., Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small
Cap Value, L.P.I and WebFinancial Corporation (the "Investment Purchasers").
The Investment Purchase Closing was contingent upon, among other things, the
purchase of an additional 40,000,000 shares of Common Stock at a price of $.10
per share in cash or by the conversion of outstanding debt or other liabilities
of the Company (the "Private Placement") by other purchasers (the "Private
Placement Purchasers") including officers, directors and employees of the
Company. Prime Partners II, LLC ("Prime Partners II"), a holding company owned
in part by Michael P. Ryan (the Company's President and Chief Executive Officer
and a member of the Company's Board of Directors, "Michael P. Ryan"), purchased
15,420,000 shares of Common Stock in the Private Placement by the conversion of
$1,542,000 of Company debt. The Placement Purchase Agreement entered into
between the Company and Prime Partners II, LLC dated August 13, 2007 for the
subscription of the Common Stock purchased is filed herewith as Exhibit 10.1.
The Debt Conversion Agreement dated August 13, 2007 entered into between the
Company and Prime Partners II, LLC is filed herewith as Exhibit 10.2. The
closing of the Private Placement (the "Private Placement Closing") occurred on
August 20, 2007 simultaneously with the Investment Purchase Closing.
In connection with the Investment Purchase Closing, the Company entered into a
Shareholders Agreement dated August 20, 2007 with the Investment Purchasers,
Michael P. Ryan, Carole Enisman (the Company's Executive Vice President of
Operations), Ted H. Finkelstein (the Company's Vice President and General
Counsel), Dennis Conroy, and Prime Partners, Inc. and Prime Partners II,
holding companies owned in part by Michael P. Ryan (the "Existing
Shareholders"). The Shareholders Agreement is filed herewith as Exhibit 10.3.
Pursuant to the terms of the Shareholders Agreement: at the Investment Purchase
Closing, the Investment Purchasers were given the right to designate two
directors (the "Investor Directors") for election to the Company's Board of
Directors (the "Board"); so long as the Existing Shareholders own at least 10%
of the outstanding shares of Common Stock, the Existing Shareholders have the
right to nominate two directors (the "Existing Shareholder Directors") for
election to the Board; the Investor Directors and the Existing Shareholder
Directors shall jointly nominate three independent directors; one of the
Investor Directors shall be appointed as a member of the Compensation Committee
of the Board and one of the Investor Directors shall have the right to attend
all Audit Committee meetings; the consent of one of the Investor Directors is
required for certain Company actions above designated thresholds, including the
issuance, redemption or purchase of equity or debt, the issuance of an omnibus
stock plan, the creation of any new class of securities, certain affiliate
transactions, changes to the Company's certificate of incorporation or bylaws,
entering into a merger, reorganization or sale of the Company or acquiring any
significant business assets, or material changes to the business line of the
Company; the Investor Shareholders agreed to a one year standstill agreement
concerning the acquisition of Company assets, Company securities, proxy
solicitations, voting trusts or tender offers; the Investor Purchasers were
granted a right of first refusal for future securities issued by the Company;
and the Company was granted a right of first refusal for sales of Common Stock
by the Investment Purchasers and by the Existing Shareholders.
Also in connection with the Investment Purchase Closing, the Company entered
into a Registration Rights Agreement dated August 20, 2007 with the Investment
Purchasers and the Private Placement Purchasers (the "Holders"). The
Registration Rights Agreement is filed herewith as Exhibit 10.4. Pursuant to the
terms of the Registration Rights Agreement: subject to certain conditions, the
Company agreed to file for the Holders an Automatic Registration Statement (the
"Automatic Registration")no later than the later of forty five days after the
Investment Purchase Closing and thirty days after the Company has filed its Form
10-K for the fiscal year ending June 30, 2007; if the Company is unable to
register all Registrable Securities in the Automatic Registration, the Company
agreed to certain demand registrations by the Holders; the Company granted to
the Holders certain Tag-Along Registration rights; the Holders were given demand
registration rights on the happening of certain events; and the Company agreed
to delineated registration procedures.
The summaries of the terms of the Shareholders Agreement and the Registration
Rights Agreement are qualified in their entirety by the terms of such
agreements, which are filed herewith as Exhibits 10.3 and 10.4, respectively.
Item 3.02 Unregistered Sales of Equity Securities.
At the Investment Purchase Closing, the Company issued 40,000,000 shares of
Common Stock for proceeds of $4,000,000 pursuant to an exemption from the
registration requirements of the Securities Act of 1933 under Regulation D, Rule
506 ("Rule 506"). The proceeds from the Investment Purchase Closing were used as
follows: $2,375,000 was paid to Met Life Insurance Company of Connecticut
("Metlife"), formerly known as the Travelers Insurance Company, in full
satisfaction of the approximate $6,820,000 owed to Metlife by the Company;
$50,000 was paid to Wachovia Bank, National Association ("Wachovia") as a
principal payment, which reduced the Company's loan balance with Wachovia to
approximately $689,000; $19,208 was paid to Wachovia for a loan fee and legal
fees; and the $1,555,792 balance was paid to the Company to be used as working
capital.
At the Private Placement Closing, the Company also issued 16,910,000 shares of
Company Stock for cash proceeds of $1,691,000 and 23,090,000 shares of Common
Stock for the conversion of $2,309,000 of Company debt, including 15,420,000
shares issued to Prime Partners II, for the conversion of $1,542,000 of Company
debt. Such shares were issued pursuant to an exemption from the registration
requirements under Rule 506. The $1,691,000 cash proceeds from the Private
Placement Closing were disbursed as follows: $3,750 for escrow agent fees; and
the $1,687,250 balance was paid to the Company to be used to retire related
party debt.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 20, 2007, the Company entered into an employment agreement with
Michael P. Ryan, its President and Chief Executive Officer (the "Employment
Agreement"). The Employment Agreement contains the following salient terms: the
term is from July 1, 2007 to June 30, 2011; the base salary is $350,000 per
year; a bonus will be awarded to Mr. Ryan ranging from 40% of base salary to
100% of base salary if actual EBITDA results for a fiscal year exceed at least
85% of the EBITDA budgeted for such fiscal year; any commissions paid to Mr.
Ryan for personal production will reduce the bonus; a severance payment equal to
base salary and bonus (computed at 100% of base salary) will be paid to Mr. Ryan
for the greater of three years or the ending date of the term if he is
terminated as the result of an involuntary change of control, or the greater of
one year or the ending date of the term if he is terminated as the result of a
voluntary change of control. In addition, Mr. Ryan agreed to a one year covenant
not to compete with the Company and a two year covenant not to solicit customers
or employees of the Company or registered representatives of the Company's
broker dealer subsidiary.
This summary of the terms of the Employment Agreement is qualified in its
entirety by the terms of the Employment Agreement filed herewith as Exhibit 10.5
The text of the press release issued by the Company on August 20, 2007 for the
above Items 1.01, 3.02 and 5.02 is filed herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
Exhibit 10.1 Placement Purchase Agreement dated August 13, 2007
Exhibit 10.2 Debt Conversion Agreement dated August 13, 2007
Exhibit 10.3 Shareholder Agreement dated August 20, 2007
Exhibit 10.4 Registration Rights Agreement dated August 20, 2007
Exhibit 10.5 Employment Agreement between the Company and Michael P. Ryan dated
August 20, 2007
Exhibit 99.1 Press release dated August 20, 2007
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Gilman + Ciocia, Inc.
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(Registrant)
Date: August 23, 2007
------------------------ /s/ Ted H. Finkelstein
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Name: Ted H. Finkelstein
Title: Vice President and General Counsel