1
EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
As of May 27, 1999
among
▇▇▇▇▇ ▇▇▇▇▇ CAPITAL GROUP, INC.
and
FHGB ACQUISITION CORPORATION
and
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ INC.
and
G-TRADE CAPITAL CORP.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ HOLDINGS, INC.
2
INDEX OF HEADINGS
Page
----
ARTICLE I
Definitions.......................................................................................................1
ARTICLE II
The Merger........................................................................................................5
2.1 The Merger......................................................................................5
2.2 Effect of the Merger............................................................................5
2.3 Articles of Incorporation; Bylaws...............................................................5
2.4 Directors and Officers..........................................................................5
2.5 Effect on Capital Stock.........................................................................5
2.5.1 Conversion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock..............................................5
2.5.2 Capital Stock of FHGB..................................................................6
2.5.3 Adjustments to Conversion Ratio........................................................6
2.6 Surrender of Certificates.......................................................................6
2.6.1 Exchange Agent.........................................................................6
2.6.2 ▇▇▇▇▇ ▇▇▇▇▇ to Provide ▇▇▇▇▇ ▇▇▇▇▇ Common Stock........................................6
2.6.3 Conversion Procedures..................................................................6
2.6.4 Distributions With Respect to Unexchanged Shares.......................................7
2.6.5 Transfers of Ownership.................................................................7
2.6.6 Required Withholding...................................................................7
2.6.7 No Liability...........................................................................7
2.7 No Further Ownership Rights in ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock......................................7
2.8 Lost, Stolen or Destroyed Certificates..........................................................7
2.9 Classes of Stock Entitled to Vote on Merger.....................................................8
2.10 Former Name of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇...................................................................8
ARTICLE III
Representations and Warranties of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇..................................................................8
3.1 Organization....................................................................................8
3.2 Authorization; Enforceability...................................................................8
3.3 No Violation or Conflict........................................................................8
3.4 Consent of Governmental Authorities.............................................................9
3.5 Financial Statements............................................................................9
3.6 Compliance with Laws............................................................................9
3.7 Legal Proceedings..............................................................................10
3.8 Brokers........................................................................................10
3.9 Absence of Material Adverse Changes............................................................10
3.10 Articles of Incorporation, Bylaws and Minute Books.............................................11
3.11 Capitalization.................................................................................11
3.12 Rights, Warrants, Options......................................................................11
3.13 Properties.....................................................................................12
- ii -
3
3.14 Governmental Authorizations....................................................................12
3.15 Insurance......................................................................................13
3.16 Employment Matters.............................................................................13
(a) Labor Unions..........................................................................13
(b) Employment Policies...................................................................13
(c) Employment Agreements.................................................................13
(d) Employee Benefit Plans................................................................13
(e) Personnel.............................................................................14
(f) Labor Practices.......................................................................14
3.17 Material Agreements............................................................................15
3.18 List of Accounts...............................................................................16
3.19 Inventory of Securities........................................................................16
3.20 Related Party Transactions.....................................................................16
3.21 Tax Matters....................................................................................16
3.22 Guaranties.....................................................................................17
3.23 Absence of Certain Business Practices..........................................................17
3.24 Proxy Statement and Disclosure Documents.......................................................17
3.25 Broker-Dealer Registration; Regulatory Issues..................................................17
3.26 Year 2000 Problems.............................................................................19
3.27 Investment Representations.....................................................................19
3.28 Subscription Receivables; Energy Fund..........................................................19
3.29 Disclosure.....................................................................................19
ARTICLE IV
Representations and Warranties of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB...........................................................20
4.1 Organization...................................................................................20
4.2 Authorization; Enforceability..................................................................20
4.3 No Violation or Conflict.......................................................................20
4.4 Consent of Governmental Authorities............................................................20
4.5 Financial Statements; Commission Reports.......................................................21
4.6 Compliance with Laws...........................................................................21
4.7 Legal Proceedings..............................................................................22
4.8 Brokers........................................................................................22
4.9 Absence of Material Adverse Changes............................................................22
4.10 Articles of Incorporation, Bylaws and Minute Books.............................................22
4.11 Capitalization.................................................................................22
4.12 Rights, Warrants, Options......................................................................22
4.13 Properties.....................................................................................23
4.14 Governmental Authorizations....................................................................23
4.15 Insurance......................................................................................23
4.16 Employment Matters.............................................................................23
(a) Labor Unions..........................................................................23
(b) Employment Policies...................................................................23
(c) Employment Agreements.................................................................23
(d) Employee Benefit Plans................................................................24
(e) Personnel.............................................................................24
(f) Labor Practices.......................................................................24
4.17 Material Agreements............................................................................24
4.18 List of Accounts...............................................................................25
4.19 Business.......................................................................................25
- iii -
4
4.20 Related Party Transactions.....................................................................25
4.21 Tax Matters....................................................................................25
4.22 Guaranties.....................................................................................26
4.23 Validity of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock...........................................................26
4.24 Absence of Certain Business Practices..........................................................26
4.25 Proxy Statements...............................................................................26
4.26 Disclosure.....................................................................................26
ARTICLE V
Covenants........................................................................................................26
5.1 Interim Operations of ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇...........................................27
5.2 Access.........................................................................................28
(a) ▇▇▇▇▇ ▇▇▇▇▇ Access....................................................................28
(b) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Access.................................................................28
5.3 Confidentiality................................................................................28
5.4 Notification...................................................................................29
5.5 Consent of Governmental Authorities and Others.................................................29
5.6 Reasonable Efforts.............................................................................29
5.7 No Other Negotiations..........................................................................29
5.8 Cooperation....................................................................................30
5.9 Shareholder Approval...........................................................................30
5.10 Public Statements..............................................................................30
5.11 Commission Filings.............................................................................30
5.12 Listing........................................................................................30
5.13 Employment Agreements..........................................................................30
5.14 No Securities Transactions.....................................................................30
5.15 Old ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan........................................................................31
5.16 Investment Intent Letters......................................................................31
5.17 Name Change....................................................................................31
5.18 Resignations...................................................................................31
5.19 Shareholders' Agreements.......................................................................31
5.20 Employment Agreements..........................................................................31
5.21 Demand Registration Rights.....................................................................31
5.22 Releases.......................................................................................31
5.23 Life Insurance.................................................................................31
ARTICLE VI
Additional Agreements............................................................................................31
6.1 Investigation; Notices.........................................................................31
6.2 Survival of the Representations and Warranties.................................................31
6.3 Securities Activities..........................................................................32
6.4 Voting Agreement...............................................................................32
6.5 Tax-Free Reorganization........................................................................32
6.6 Indemnification; Insurance.....................................................................32
6.7 Further Assurances.............................................................................33
6.8 ▇▇▇▇▇ ▇▇▇▇▇ Amendment to Articles of Incorporation.............................................33
6.9 Use of Name....................................................................................33
- iv -
5
ARTICLE VII
Closing; Conditions Precedent; Termination.......................................................................33
7.1 Closing........................................................................................33
7.2 Mutual Conditions Precedent....................................................................33
(a) Governmental Consents.................................................................33
(b) No Litigation.........................................................................33
(c) Shareholder Approval..................................................................34
(d) Releases..............................................................................34
7.3 Conditions Precedent to the Obligations of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇......................................34
(a) Representations and Warranties True...................................................34
(b) Covenants Performed...................................................................34
(c) Consents..............................................................................34
(d) Opinion of Counsel....................................................................34
(e) Certificate of ▇▇▇▇▇ ▇▇▇▇▇............................................................34
(f) Minimum Cash..........................................................................34
(g) Resignations..........................................................................34
(h) Records...............................................................................34
(i) Employment Agreements.................................................................34
7.4 Conditions Precedent to the Obligations of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB................................35
(a) Representations and Warranties True...................................................35
(b) Covenants Performed...................................................................35
(c) No Material Adverse Change............................................................35
(d) Consents..............................................................................35
(e) Opinion of Counsel....................................................................35
(f) Certificate of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, G-Trade and Holdings...................................35
(g) Auditor's Letters.....................................................................35
(h) Shareholders' Agreements..............................................................35
(i) Employment Agreements.................................................................35
(j) Dissenters' Rights....................................................................35
(k) Investment Intent Letters.............................................................36
7.5 Termination; Termination Fee...................................................................36
ARTICLE VIII
Miscellaneous....................................................................................................37
8.1 Notices........................................................................................37
8.2 Entire Agreement...............................................................................37
8.3 Assignment.....................................................................................37
8.4 Waiver and Amendment...........................................................................37
8.5 No Third Party Beneficiary.....................................................................37
8.6 Severability...................................................................................37
8.7 Expenses.......................................................................................38
8.8 Headings.......................................................................................38
8.9 Counterparts; Construction.....................................................................38
8.10 Litigation; Prevailing Party...................................................................38
8.11 Injunctive Relief..............................................................................38
8.12 Remedies Cumulative............................................................................38
8.13 Participation of Parties; Construction: Independent Counsel....................................38
8.14 Governing Law..................................................................................38
8.15 Jurisdiction and Venue.........................................................................38
- v -
6
LIST OF SCHEDULES................................................................................................42
LIST OF EXHIBITS.................................................................................................44
- vi -
7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("AGREEMENT") is entered into as of
May 27, 1999, among ▇▇▇▇▇ ▇▇▇▇▇ Capital Group, Inc., a Florida corporation
("▇▇▇▇▇ ▇▇▇▇▇"), FHGB Acquisition Corporation, a New York corporation ("FHGB'),
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Inc., a New York corporation ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇"), G-Trade Capital
Corp., a New York corporation ("G-TRADE"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Holdings, Inc., a
Delaware corporation which is a wholly-owned subsidiary of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
("HOLDINGS").
PRELIMINARY STATEMENTS
1. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is a privately-held securities brokerage and trading
firm which provides investment banking and research services and is engaged in
the institutional and retail sale of securities, G-Trade is a wholly-owned
subsidiary of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ which is a broker in formation and Holdings is a
newly-formed subsidiary of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ which has not conducted any
operations.
2. ▇▇▇▇▇ ▇▇▇▇▇ is a public company that was formed to seek to effect a
merger or other business combination with an operating or development-stage
company.
3. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, G-Trade and Holdings believe that it is
in their respective best interests and in the best interests of their respective
shareholders for FHGB to merge with and into ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, all upon the terms
and subject to the conditions of this Agreement.
AGREEMENT
In consideration of the preliminary statements and the respective
covenants, representations and warranties contained in this Agreement, the
parties agree as set forth below.
ARTICLE I
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms when used in this Agreement shall have the meanings indicated below:
"AFFILIATE" has the meaning specified in Rule 144 promulgated by the
Commission under the Securities Act.
"AGREEMENT" means this Agreement and Plan of Merger, together with all
exhibits and schedules referred to herein.
"CERTIFICATE OF MERGER" has the meaning set forth in SECTION 2.1.
"CERCLA" has the meaning set forth in SECTION 3.6(b) of this Agreement.
"CERTIFICATES" has the meaning set forth in SECTION 2.6.3.
"CLOSING" has the meaning set forth in SECTION 7.1 of this Agreement.
8
"CLOSING DATE" has the meaning set forth in SECTION 7.1 of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"COMMISSION" means the Securities and Exchange Commission.
"CONSENT" means any consent, approval, waiver or authorization of, or
any registration, qualification, designation, declaration or filing with any
Person.
"CONVERSION RATIO" has the meaning set forth in SECTION 2.5.1.
"EFFECTIVE DATE" has the meaning set forth in SECTION 7.1.
"EFFECTIVE TIME" has the meaning set forth in SECTION 7.1.
"EMPLOYMENT AGREEMENTS" has the meaning specified in SECTION 5.13.
"ENVIRONMENTAL LAWS" means all Laws relating to pollution or protection
of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, Laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or industrial, toxic
or hazardous substances or wastes into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemicals, pollutants, contaminants, or industrial,
toxic or hazardous substances or wastes, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses, notices or
notice letters, orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder.
"ERISA" has the meaning set forth in SECTION 3.16(d) of this Agreement.
"EXCHANGE AGENT" has the meaning set forth in SECTION 2.6.1.
"FLORIDA BCA" means the Business Corporation Act of the State of
Florida, as amended.
"FHGB COMMON STOCK" means the common stock of FHGB, par value, $.0001
per share.
"▇▇▇▇▇ ▇▇▇▇▇ COMMON STOCK" means the common stock of ▇▇▇▇▇ ▇▇▇▇▇, par
value $.0001 per share.
"▇▇▇▇▇ ▇▇▇▇▇ COMMISSION REPORTS" has the meaning specified in SECTION
4.5.
"▇▇▇▇▇ ▇▇▇▇▇ FINANCIAL STATEMENTS" has the meaning specified in SECTION
4.5.
"▇▇▇▇▇ ▇▇▇▇▇ MATERIAL ADVERSE EFFECT" has the meaning set forth in
SECTION 4.1 of this Agreement.
"▇▇▇▇▇ ▇▇▇▇▇ MATERIAL AGREEMENTS" has the meaning set forth in SECTION
4.17 of this Agreement.
"▇▇▇▇▇ ▇▇▇▇▇ PROXY STATEMENT" means the proxy statement to be provided
to the shareholders of ▇▇▇▇▇ ▇▇▇▇▇ in connection with the meeting of its
shareholders contemplated hereby.
"▇▇▇▇▇ ▇▇▇▇▇ RELATED PARTY" and "▇▇▇▇▇ ▇▇▇▇▇ RELATED PARTIES" have the
meanings set forth in SECTION 4.20 of this Agreement.
2
9
"G-TRADE COMMON STOCK" means the common stock of G-Trade, no par value.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ COMMON STOCK" means the common stock of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
par value $.01 per share.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ DISCLOSURE DOCUMENT" means the disclosure materials to
be provided to the shareholders of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in connection with the meeting
of its shareholders contemplated hereby.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 3.5 of this Agreement.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INTELLECTUAL PROPERTY" has the meaning set forth in
SECTION 3.13(b) of this Agreement.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MATERIAL ADVERSE EFFECT" has the meaning set forth in
SECTION 3.1 of this Agreement.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MATERIAL AGREEMENTS" has the meaning set forth in
SECTION 3.17 of this Agreement.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PENSION PLAN" has the meaning set forth in SECTION
3.16(d) of this Agreement.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLANS" has the meaning set forth in SECTION 3.16(d) of
this Agreement.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ RELATED PARTY" and "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ RELATED PARTIES"
have the meanings set forth in SECTION 3.20.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ WELFARE PLAN" has the meaning set forth in SECTION 3.16
of this Agreement.
"GOVERNMENTAL AUTHORITY" means any federal, state, municipal, local,
foreign or other judicial, arbitral, governmental or regulatory authority or
organization, body, entity, agency or instrumentality, or any political
subdivision thereof.
"GUARANTY" means, as to any Person, any contract, agreement or
understanding of such Person pursuant to which such Person guarantees the
indebtedness, liabilities or obligations of others, directly or indirectly, in
any manner, including agreements to purchase such indebtedness, liabilities or
obligations, or to supply funds to or in any manner invest in others, or to
otherwise assure the holder of such indebtedness, liabilities or obligations
against loss, or any "keep well" or similar arrangement.
"HOLDINGS COMMON STOCK" means the common stock of Holdings, par value
$.001 per share.
"HOLDINGS PREFERRED STOCK" means the preferred stock of Holdings, par
value $.001 per share.
"INTANGIBLE PROPERTY" means, as to any Person, all foreign and domestic
trademarks, trademark rights, trade names, trade dress, trade name rights,
service marks, brands and copyrights (or pending registrations and applications
therefor) owned, used or controlled by such Person, and all other intellectual
property and proprietary rights, including trade secrets, technology, know-how
and other information owned, held or used by such Person.
"IRS" means the Internal Revenue Service or any successor agency.
"KNOWLEDGE" or "KNOWN" means, with respect to any representation or
warranty or other statement in this Agreement qualified by the knowledge of any
party, that such party has made a reasonable investigation as to the matters
that are the subject of such representation, warranty or other statement. Where
reference is made to the knowledge of any party, such reference shall mean the
knowledge of the officers and directors of such party and their respective
Subsidiaries, all of whom shall be deemed to have conducted the investigation
required by this definition. The "knowledge" of all of the Principal
Shareholders shall be imputed to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
3
10
"LAW" means each and every law, ordinance, statute, common law,
regulation, judgment, directive, ruling, order and other legal requirement of
any Governmental Authority, self-regulatory organization or other entity,
including, but not limited to, those relating to securities and broker-dealers.
"MERGER" has the meaning set forth in Article II of this Agreement.
"NASD" means National Association of Securities Dealers, Inc.
"NEW YORK BCL" mean the New York Business Corporation Law, as amended.
"OLD ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLAN" has the meaning specified in SECTION 5.15.
"ORDER" means any judgment, injunction, notice, suit, decree or order
of any Governmental Authority, court, ordinance, entity, arbitral entity or
self-regulatory organization.
"PBGC" has the meaning set forth in SECTION 3.16(d) of this Agreement.
"PERMIT" means any consent, authorization, approval registration,
qualification, filing, franchise, certificate, license or permit of any
Governmental Authority, self-regulatory organization or other Person.
"PERSON" means any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or Governmental Authority or any other entity.
"PRINCIPAL SHAREHOLDERS" shall mean the individuals whose names are set
forth on SCHEDULE 1.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SRO REPORTS" means, as to a Person, all forms, reports, statements and
documents required to be filed by a Person with NASD, any stock exchange or any
other self-regulatory organizations since January 1, 1995.
"SUBSIDIARY" of any Person means any Person, whether or not
capitalized, in which such Person owns, directly or indirectly, an equity
interest of 50% or more, or any Person which may be controlled, directly or
indirectly, by such Person, whether through the ownership of voting securities,
by contract, or otherwise.
"SURVIVING CORPORATION" has the meaning set forth in SECTION 2.1.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, transportation, transportation excise, registration, value added,
documentary stamp, excise, natural resources, severance, stamp, occupation,
premium, windfall profit, environmental, customs, duties, real property,
personal property, capital stock, social security, unemployment, disability,
payroll, license, employee or other withholding, or other tax or governmental
charge, of any kind whatsoever, including any interest, penalties or additions
to tax or additional amounts in respect of the foregoing; the foregoing shall
include any transferee or secondary liability for a Tax and any liability
assumed by agreement or arising as a result of being (or ceasing to be) a member
of any affiliated group (or being included (or required to be included) in any
tax return relating thereto).
"TERMINATION DATE" has the meaning set forth in SECTION 7.5 of this
Agreement.
"VOTING AGREEMENT" has the meaning set forth in SECTION 6.4 of this
Agreement.
4
11
ARTICLE II
THE MERGER
2.1 THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of applicable
Law, FHGB shall be merged with and into ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "MERGER"), the
separate corporate existence of FHGB shall cease and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall
continue as the surviving corporation. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"SURVIVING CORPORATION". Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing a Certificate
of Merger, substantially in the form of EXHIBIT G, with the Secretary of State
of the State of New York in accordance with the relevant provisions of the New
York BCL ("CERTIFICATE OF MERGER").
2.2 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
New York Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and FHGB shall vest in the Surviving Corporation,
and all debts, liabilities and duties of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and FHGB shall become
the debts, liabilities and duties of the Surviving Corporation.
2.3 ARTICLES OF INCORPORATION; BYLAWS.
2.3.1 At the Effective Time, the Articles of Incorporation of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by Law and such Articles of Incorporation of the Surviving
Corporation.
2.3.2 The Bylaws of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as in effect immediately
prior to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
2.4 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ immediately prior to the Effective Time, until their
respective successors are duly appointed.
2.5 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the parties, or the holders of any
of the following securities, the following shall occur:
2.5.1 CONVERSION OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ COMMON STOCK. Each share of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock issued and outstanding immediately prior to the
Effective Time, will be canceled and extinguished and automatically converted
(subject to SECTION 2.5.3) into the right to receive 21,917 shares of ▇▇▇▇▇
▇▇▇▇▇ Common Stock ("CONVERSION RATIO") upon surrender of the certificate
representing such share of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock in the manner
provided herein (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (or other indemnity required by the Exchange Agent) in
the manner provided herein); PROVIDED, HOWEVER, that in the event that shares of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock are redeemed after the date hereof pursuant to the
terms of agreements with shareholders in effect on the date hereof or ▇▇▇▇▇
▇▇▇▇▇ consents to the issuance of additional shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common
Stock pursuant to SECTION 5.1(ii), then the Conversion Ratio shall be deemed
automatically modified to the nearest lower whole number equal to the product of
(i) 21,917 and (ii) a fraction, the numerator of which is 730 and the
denominator of which is equal to the number of shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common
Stock outstanding immediately prior to the Effective Time, assuming that none of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ shareholders had exercised dissenters' rights; PROVIDED,
FURTHER, notwithstanding anything to the contrary set forth herein, in no event
shall the aggregate number of shares issuable under this SECTION 2.5.1 exceed
16,000,000, less the number of shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock
5
12
into which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock would be converted into but for the
exercise of dissenters' rights by the holders of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock.
Subject to applicable terms, if any shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with ▇▇▇▇▇▇
▇▇▇▇▇▇▇, then the shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock issued in exchange for
such shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock will also be unvested to the same
extent and subject to the same repurchase option, risk of forfeiture or other
condition, as applicable, and the certificates representing such shares of ▇▇▇▇▇
▇▇▇▇▇ Common Stock may accordingly be marked with appropriate legends.
2.5.2 CAPITAL STOCK OF FHGB. Each share of FHGB Common Stock
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger, automatically be converted into one validly issued, fully paid
and nonassessable share of Common Stock of the Surviving Corporation. Each
certificate evidencing ownership of shares of FHGB Common Stock shall evidence
ownership of such shares of capital stock of the Surviving Corporation.
2.5.3 ADJUSTMENTS TO CONVERSION RATIO. Subject to SECTION
7.3(f), notwithstanding anything to the contrary set forth herein, if the amount
of cash and cash equivalents of ▇▇▇▇▇ ▇▇▇▇▇ less the amount of liabilities of
▇▇▇▇▇ ▇▇▇▇▇ plus any amounts paid or payable to NASDAQ for Small Cap listing
fees by ▇▇▇▇▇ ▇▇▇▇▇ plus any director's and officer's insurance premiums paid or
payable by ▇▇▇▇▇ ▇▇▇▇▇ (all calculated in accordance with generally accepted
accounting principles) at the Effective Time ("NET CASH ASSETS") is less than
$4,500,000, then the Conversion Ratio shall be automatically adjusted to the
nearest lower whole number by multiplying it by a fraction, the numerator of
which is 4,500,000 and the denominator of which is the Net Cash Assets.
2.6 SURRENDER OF CERTIFICATES.
2.6.1 EXCHANGE AGENT. American Stock Transfer & Trust Company,
Frost ▇▇▇▇▇'▇ transfer agent, shall act as the exchange agent (the "EXCHANGE
AGENT") in the Merger.
2.6.2 ▇▇▇▇▇ ▇▇▇▇▇ TO PROVIDE ▇▇▇▇▇ ▇▇▇▇▇ COMMON STOCK.
Promptly after the Effective Time, ▇▇▇▇▇ ▇▇▇▇▇ shall make available to the
Exchange Agent for exchange in accordance with this Article II, the shares of
▇▇▇▇▇ ▇▇▇▇▇ Common Stock issuable pursuant hereto in exchange for outstanding
shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock.
2.6.3 CONVERSION PROCEDURES. Promptly after the Effective
Time, ▇▇▇▇▇ ▇▇▇▇▇ shall cause the Exchange Agent to mail to each holder of
record (as of the Effective Time) a certificate or certificates (the
"CERTIFICATES") which immediately prior to the Effective Time represented
outstanding shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock whose shares were converted
into the right to receive shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock in the Merger, (i)
a letter of transmittal in customary form (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 Exchange Agent and shall be in
such form and have such other provisions as ▇▇▇▇▇ ▇▇▇▇▇ may reasonably specify )
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock. Upon
surrender of Certificates for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by ▇▇▇▇▇ ▇▇▇▇▇, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock into which their shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Common Stock were converted at the Effective Time in accordance with the
Conversion Ratio, and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed from and
after the Effective Time, for all corporate purposes to evidence only the
ownership of the number of full shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock into which
such shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock shall have been so converted. All
certificates issued as a result of the
6
13
conversion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock in the Merger representing ▇▇▇▇▇ ▇▇▇▇▇
Common Stock will bear restrictive legends to the effect that the shares
represented by such certificates have not been registered under the Securities
Act and can only be transferred in compliance therewith.
2.6.4 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the date of this
Agreement with respect to ▇▇▇▇▇ ▇▇▇▇▇ Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock represented thereby
(subject to SECTION 2.8) until the holders of record of such Certificates shall
surrender such Certificates in accordance with this SECTION 2.6 (subject to
SECTION 2.8). Subject to applicable Law, following surrender of any such
Certificates, the Exchange Agent shall deliver to the record holders thereof,
without interest, certificates representing whole shares of ▇▇▇▇▇ ▇▇▇▇▇ Common
Stock issued in exchange therefor.
2.6.5 TRANSFERS OF OWNERSHIP. If certificates representing
shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock are to be issued in a name other than that in
which the Certificates surrendered in exchange therefor are registered, it will
be a condition of the issuance thereof that the Certificates so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have paid to ▇▇▇▇▇ ▇▇▇▇▇ or any agent
designated by it any transfer or other taxes required by reason of the issuance
of certificates representing shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock in any name
other than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of ▇▇▇▇▇ ▇▇▇▇▇ or any agent designated by it
that such tax has been paid or is not payable.
2.6.6 REQUIRED WITHHOLDING. Each of the Exchange Agent, ▇▇▇▇▇
▇▇▇▇▇ and the Surviving Corporation shall be entitled to deduct and withhold
from any consideration payable or otherwise deliverable pursuant to this
Agreement to any holder or former holder of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock such
amounts as may be required to be deducted or withheld therefrom under the Code
or under any provision of state, local or foreign tax law or under any other
applicable Law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been paid.
2.6.7 NO LIABILITY. Notwithstanding anything to the contrary,
neither the Exchange Agent, ▇▇▇▇▇ ▇▇▇▇▇, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock or
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.7 NO FURTHER OWNERSHIP RIGHTS IN ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ COMMON STOCK. All
shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock issued upon the surrender for exchange of
shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock in accordance with the terms hereof shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock which were outstanding immediately prior to the
Effective Time. If after the Effective Time Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
2.8 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock into which the shares of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock represented by such Certificates were converted;
provided, however, that ▇▇▇▇▇ ▇▇▇▇▇ may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of ▇▇▇▇▇
▇▇▇▇▇ Common Stock, require the owner of such lost, stolen or destroyed
Certificates to indemnify ▇▇▇▇▇ ▇▇▇▇▇ against any claim that may be made against
Frost
7
14
▇▇▇▇▇, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.9 CLASSES OF STOCK ENTITLED TO VOTE ON MERGER. With respect to both
FHGB and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the only class of stock of the constituent corporations
entitled to vote on the Merger is FHGB Common Stock and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common
Stock.
2.10 FORMER NAME OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ was incorporated in
the State New York on September 23, 1983 under the name "Gaines, Berland,
▇▇▇▇▇▇▇ & Silvershein Inc." On May 25, 1984, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ filed a certificate
of amendment to its certificate of incorporation to change its name to "▇▇▇▇▇▇,
▇▇▇▇▇▇▇ Inc."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
In order to induce ▇▇▇▇▇ ▇▇▇▇▇ and FHGB to enter into this Agreement
and to consummate the transactions contemplated hereby, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, makes
the representations and warranties set forth below to ▇▇▇▇▇ ▇▇▇▇▇ and FHGB.
3.1 ORGANIZATION. Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the Laws
of its state of incorporation. Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries is
duly qualified to transact business as a foreign corporation in all
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the financial condition,
results of operations, assets, liabilities, prospects or business of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and its Subsidiaries on a consolidated basis (a "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MATERIAL
ADVERSE EFFECT"). Each jurisdiction in which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries is qualified to transact business as a foreign corporation or
licensed to do business as a broker-dealer is listed on SCHEDULE 3.1. Each of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries has the corporate authority to (i) own or
lease and operate its properties and (ii) conduct its business as presently
conducted. Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries has the corporate
authority to execute, deliver and perform this Agreement. G-Trade is a broker in
formation, which has filed (or will file) all necessary items with the
Commission, NASD and other Governmental Authorities and self-regulatory
organizations for it to become a licensed broker-dealer. G-Trade is an
newly-formed company, which has never engaged in any business activity other
than seeking to obtain all necessary Consents and Permits to become a registered
broker-dealer. Holdings is a newly formed company, which has never engaged in
any business activity.
3.2 AUTHORIZATION; ENFORCEABILITY. Subject to the receipt of
shareholder approval by the shareholders of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the execution,
delivery and performance of this Agreement by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its
Subsidiaries and the consummation by them of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries. This Agreement has been duly
executed and delivered by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries, and constitutes
the legal, valid and binding obligations of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries,
enforceable against them in accordance with their terms, except to the extent
that their enforcement is limited by bankruptcy, insolvency, reorganization or
other Laws relating to or affecting the enforcement of creditors' rights
generally or by general principles of equity.
3.3 NO VIOLATION OR CONFLICT. The execution, delivery and performance
of this Agreement by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries and the consummation by
them of the transactions contemplated hereby and thereby: (i) do not and will
not violate or conflict with any provision of Law or any Order specifically
naming ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or any of its Subsidiaries or any Principal Shareholder,
or any provision of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ or any of its Subsidiaries' Articles or
Certificate of Incorporation or Bylaws; and (ii) do not and will not, with or
8
15
without the passage of time or the giving of notice, (a) result in the breach
of, or constitute a default, cause the acceleration of performance, permit the
unilateral modification or termination of, or require any Consent under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or pursuant to, any material
instrument or agreement to which any of them is a party or by which any of them
or their respective properties may be bound or affected; or (b) result in any
violation, suspension, revocation, impairment, forfeiture or nonrenewal of any
Permit or Consent.
3.4 CONSENT OF GOVERNMENTAL AUTHORITIES. Except as set forth on
SCHEDULE 3.4, and other than in connection with the New York BCL, no Consent or
Permit from, of or with any Governmental Authority or self-regulatory
organization is required to be made or obtained by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries or any Principal Shareholder in connection with the execution,
delivery or performance by them of this Agreement or the consummation by them of
the transactions contemplated hereby. There is no unresolved objection to the
Merger made by any Governmental Authority or self-regulatory organization.
3.5 FINANCIAL STATEMENTS. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has previously delivered to
▇▇▇▇▇ ▇▇▇▇▇, a true and complete copy of the balance sheets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
for the fiscal years ended August 31, 1998, 1997, 1996, 1995 and 1994, and the
statements of income, cash flows and retained earnings of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for the
fiscal years then ended, including any related notes, audited for the 1998,
1997, 1996, 1995 and 1994 fiscal years by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ independent certified
public accountants pursuant to their audit of the financial records of ▇▇▇▇▇▇
▇▇▇▇▇▇▇, and the balance sheets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as of February 28, 1999, and
the statements of income, cash flows and retained earnings of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for
the three-month period ended February 28, 1999 (collectively, the "▇▇▇▇▇▇
▇▇▇▇▇▇▇ FINANCIAL STATEMENTS"). Except as indicated on SCHEDULE 3.5, the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Financial Statements: (i) have been prepared in accordance with the
books of account and records of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, which books and records have
been maintained in a consistent manner; (ii) fairly present in all material
respects ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ and its Subsidiaries' financial condition, assets,
liabilities, equity and the results of their operations at the dates and for the
periods specified in those statements; and (iii) have been prepared in
accordance with generally accepted accounting principles (except for a lack of
footnotes with respect to unaudited financial statements) consistently applied
with prior periods. Other than as disclosed by the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financial
Statements dated February 28, 1999 or specifically noted on SCHEDULE 3.17,
neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its Subsidiaries has any liabilities,
commitments or obligations (which reasonably could be expected to be material to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries on a consolidated basis) of any nature
whatsoever, whether accrued, contingent or otherwise (other than nonmaterial
liabilities, commitments or obligations incurred since February 28, 1999 in the
ordinary course of business consistent with past practices to Persons other than
Affiliates of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇) or any unrealized or anticipated losses (which
reasonably could be expected to be material to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its
Subsidiaries on a consolidated basis) from any commitments of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
any of its Subsidiaries, and, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, there is no
reasonable basis for assertion against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries
of any such liability, commitment, obligation or loss. Except as set forth on
SCHEDULE 3.5, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, there is no basis for assertion
against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ any of its Subsidiaries of any claim, liability,
commitment or obligation of any nature, whether absolute, accrued or contingent,
and whether due or to become due, which is not included, disclosed or noted in
the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financial Statements which could be, individually or in the
aggregate, material. G-Trade and Holdings have no liabilities of any nature,
whether accrued, contingent or otherwise, except for liabilities not exceeding
$100,000 in the aggregate. Except as set forth on SCHEDULE 3.5, G-Trade and
Holdings have no assets in excess of $100,000 in the aggregate.
3.6 COMPLIANCE WITH LAWS.
(a) Except as previously disclosed in writing, each of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and its Subsidiaries and their respective officers, directors and
employees and the Principal Shareholders are, and during the past six years have
been, in compliance with all Laws and Orders applicable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
its Subsidiaries and their respective businesses and properties. Except as
previously disclosed in writing, neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor
9
16
any of its Subsidiaries nor any of the Principal Shareholders nor any of there
Affiliates has received notification from any Governmental Authority or
self-regulatory organization asserting that any of them may not (or questioning
or investigating whether any of them may not) be in material compliance with or
may have violated any Law or Order, or threatening to revoke any Consent or
Permit, and neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its Subsidiaries nor any of their
respective officers, directors or employees is subject to any agreement or
consent decree or Order with any Governmental Authority or self-regulatory
organization arising out of previously asserted violations nor is there any
factual basis for any of the foregoing. ▇▇▇▇▇ ▇▇▇▇▇ has been furnished with true
and correct copies of all records of inspections, audits and reports of any of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ or its Subsidiaries' businesses or and properties during the
last three years under applicable Laws or conducted by insurance companies,
self-regulatory organizations, consultants or other Persons; and all
deficiencies noted therein have been corrected. ▇▇▇▇▇ ▇▇▇▇▇ has been furnished
with true and correct copies of all correspondence and other filings made to or
received from any Governmental Authority or self-regulatory organization
regarding ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries within the last three years.
(b) Without limiting the generality of SECTION 3.6(a), there
are, with respect to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries, no past or present
material violations of any Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents
or contractual obligations which may give rise to any common law or other legal
liability, including, without limitation, liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
the rules and regulations promulgated thereunder ("CERCLA"), or similar Laws.
3.7 LEGAL PROCEEDINGS. Except as previously disclosed in writing,
neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its Subsidiaries (and to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇
knowledge none of its officers, directors or employees) nor any of the Principal
Shareholders is, a party to any pending or, to the knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
threatened, legal, administrative or other proceeding, arbitration or
investigation relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ or any of its Subsidiaries'
businesses or the securities business, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has no knowledge of
any set of facts which could reasonably be expected to result in any legal,
administrative or other proceeding, arbitration or investigation involving any
of them. Except as previously disclosed in writing, neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor
any of its Subsidiaries (and to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, none of its
officers, directors or employees) is subject to any Order of any court, judicial
entity, arbitral entity, self-regulatory organization or Governmental Authority.
Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries and their respective officers,
directors and employees is in compliance with the terms of each Order set forth
on SCHEDULE 3.7. None of the items set forth on SCHEDULE 3.7 could, individually
or in the aggregate, reasonably be expected to have a ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Material
Adverse Effect. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is of the reasonable belief, after consultation
with counsel, and based upon ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ reasonable belief as to how a
court would apply the law to the facts, that the final resolution of the
arbitration matter styled ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ET AL. will not result in any
material liability to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
3.8 BROKERS. Except as otherwise set forth on SCHEDULE 3.8, neither
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its Subsidiaries has employed any financial advisor,
broker or finder and none has incurred and none will incur any broker's,
finder's, investment banking or similar fees, commissions or expenses to any
other party in connection with the transactions contemplated by this Agreement.
3.9 ABSENCE OF MATERIAL ADVERSE CHANGES. Except as set forth on
SCHEDULE 3.9, or otherwise expressly disclosed herein, from August 31, 1998 to
the date hereof: (i) each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries has conducted
its businesses in the ordinary and usual course consistent with past practices;
(ii) there has been no occurrence which could reasonably be expected to cause or
have a ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Material Adverse Effect; (iii) neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor
any of its Subsidiaries has engaged or agreed to engage in any of the actions
described in SECTION 5.1 (except subsections (xiii) and (xvi) thereof).
10
17
3.10 ARTICLES OF INCORPORATION, BYLAWS AND MINUTE BOOKS. True and
complete copies of the Articles or Certificates of Incorporation, as amended to
date, Bylaws, as amended to date, and minute books of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its
Subsidiaries have been delivered by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇▇ ▇▇▇▇▇. Such
documents contain complete and accurate records in all material respects and
have embodied therein copies of minutes of all meetings and actions by written
consent of the incorporators, boards of directors (and committees thereof) and
shareholders of such entities from the date of incorporation to the date hereof;
and such items accurately reflect all material actions taken by such Persons.
3.11 CAPITALIZATION. The authorized capital stock of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
consists solely of 1,000 shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock and 100,000
shares of preferred stock, par value $10.00 per share. The authorized capital
stock of G-Trade consists of 200 shares of G-Trade Common Stock. The authorized
capital stock of Holdings consists of 1,000,000 shares of Holdings Common Stock
and 1,000,000 shares of Holding Preferred Stock. None of such preferred stock is
issued and outstanding. There are 730 shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock
issued and outstanding, which are legally and beneficially owned by the parties
set forth on SCHEDULE 3.11 hereto. There are 100 shares and 100 shares,
respectively, of G-Trade Common Stock and Holdings Common Stock issued and
outstanding, all of which are legally and beneficially owned by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
The Principal Shareholders own in the aggregate 567 shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Common Stock, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ owns 100 and 100 shares of G-Trade Common Stock
and Holdings Common Stock, respectively, free and clear of any liens, charges,
encumbrances, shareholders' agreements (except those referenced on SCHEDULE
3.11, which shall be terminated prior to the Effective Time), voting agreements,
rights of first refusal, voting trusts or other restrictions of any nature
whatsoever, and a vote of such shares in favor of the Merger and the
transactions contemplated hereby would be sufficient for shareholder approval
thereof. Except as set forth on SCHEDULE 3.11, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, no
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Common Stock owned by any Person other than a Principal
Shareholder is subject to any lien, charge, encumbrance, shareholders'
agreement, voting agreement, right of first refusal, voting trust or other
restriction. All shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ and each of its Subsidiaries'
outstanding capital stock have been duly authorized, are validly issued and
outstanding, and are fully paid and nonassessable. No securities issued by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries from the date of incorporation to the
date hereof were issued in violation of any statutory or common law preemptive
rights. There are no dividends which have accrued or been declared but are
unpaid on the capital stock of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries. All
Taxes (including documentary stamp taxes) required to be paid in connection with
the issuance by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries of their capital stock
have been paid. All authorizations required to be obtained from or registrations
required to be effected with any Person in connection with the issuances of
securities by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and each of its Subsidiaries from their respective
dates of incorporation to the date hereof have been obtained or effected and all
securities of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries have been issued in accordance
with the provisions of all applicable securities and other Laws. G-Trade and
Holdings are ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ only Subsidiaries; and neither Holdings nor
G-Trade has any Subsidiaries. Except as set forth on SCHEDULE 3.11, neither
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its Subsidiaries has any equity investment in any
other corporation, association, partnership, joint venture or other entity,
except for marketable securities of publicly-held companies held in the ordinary
course of its brokerage business.
3.12 RIGHTS, WARRANTS, OPTIONS. There are no outstanding: (i)
securities or instruments convertible into or exercisable for any of the capital
stock or other equity interests of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or
to which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries is a party; (ii) options,
warrants, subscriptions or other rights to acquire capital stock or other equity
interests of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries issued by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
or any of its Subsidiaries or any other Person; or (iii) commitments, agreements
or understandings of any kind to which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries
is a party, including employee benefit arrangements, relating to the issuance or
repurchase (except pursuant to existing agreements with shareholders) by ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or any of its Subsidiaries of any capital stock or other equity
interests of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, any such securities or
instruments convertible into or exchangeable for capital stock or other equity
interests of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or any such options,
warrants or rights.
11
18
3.13 PROPERTIES.
(a) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has valid title to all properties,
interests in properties and assets (real and personal) as reflected in the
balance sheets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as of February 28, 1999 or acquired after
February 28, 1999 (except properties, interests in properties and assets sold or
otherwise disposed of since February 28, 1999, in the ordinary course of
business to Persons other than Affiliates of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇), and all of its
other properties, interests in properties and assets (real and personal), free
and clear of all mortgages, liens, pledges, charges or encumbrances of any kind
or character, except the lien of current Taxes not yet due and payable and liens
which are not in the aggregate material. SCHEDULE 3.13(a) lists all such liens
and the properties and assets encumbered. None of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its
Subsidiaries own any real property. SCHEDULE 3.13(a) lists each piece of real
property leased or utilized by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any its Subsidiaries, including
the owner or lessee thereof, the location thereof and the use to which it is put
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and/or any of its Subsidiaries. The facilities and equipment
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries necessary to the operations of their
business are in good operating condition and repair sufficient for the operation
of their businesses as presently conducted. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has delivered to
▇▇▇▇▇ ▇▇▇▇▇ a true and correct copy of all leases under which it or its
Subsidiaries occupy real property. All of such leases are valid, subsisting and
in full force and effect and all amounts due thereunder have been paid. There
has been no material default under any such lease or any waiver, indulgence or
postponement of performance. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries enjoy peaceful
and undisturbed possession under such leases, none of which contain provisions
which would materially impair or adversely affect their ability to operate their
businesses as operated in the past or contemplated to be operated in the future.
The continuation, validity and effectiveness of such leases will not be
materially adversely effected by the transactions contemplated hereby. Except
for those assets leased or licensed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its Subsidiaries and
listed on SCHEDULE 3.13(a), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its Subsidiaries own all assets
used in their business.
(b) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or one of its Subsidiaries owns, is
licensed to use or is otherwise entitled to use, all material patents,
trademarks, trade names, service marks, copyrights and applications for any of
the foregoing, together with all other technology, know-how, tangible or
intangible proprietary information or material and formulae used in or necessary
to their businesses (the "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INTELLECTUAL PROPERTY"). Except as set
forth on SCHEDULE 3.13(b), no royalties, license fees or similar payments are
payable in connection with the use of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Intellectual Property.
SCHEDULE 3.13(b) lists all patents, trademarks, trade names, service marks,
copyrights and applications included in the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Intellectual
Property. Except as disclosed on SCHEDULE 3.13(b), no claims have been asserted
in writing to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or, to the knowledge of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, otherwise asserted or threatened, by any Person (i) to the
effect that the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Intellectual Property associated or utilized in
connection with the provision of services or the sale or use of any product or
process as now used or offered by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries
infringes on any intellectual property rights of any other Person, (ii) against
the use by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries of any of the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Intellectual Property or (iii) challenging or questioning the validity
or effectiveness of any of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Intellectual Property. All granted
and issued patents and all registered trademarks and copyrights listed on
SCHEDULE 3.13(b) are valid and subsisting.
3.14 GOVERNMENTAL AUTHORIZATIONS. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries
and their respective officers, directors and employees have in full force and
effect, and have in the past at all times had in full force and effect, all
Consents and Permits required under applicable Law or by self-regulatory
organizations for the ownership of their properties and operation of their
businesses, free from unreasonable restrictions, including, but not limited to,
those Consents and Permits necessary to enable them to sell securities in any
jurisdiction in which any of them operates. Except as set forth on SCHEDULE
3.14, none of the transactions contemplated hereby could reasonably be expected
to have an adverse effect on the status of any such Permit or Consent or require
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or their Affiliates to obtain any
additional Consent or Permit to continue to operate the business of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and its Subsidiaries as presently conducted. True and complete copies of
all correspondence between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries and the
Commission and all self-regulatory organizations since January 1, 1996 has been
made available to ▇▇▇▇▇ ▇▇▇▇▇. A true and complete list of all such
12
19
Consents and Permits is set forth on SCHEDULE 3.14. There has at all times been
compliance with all such Permits and Consents, except for non-compliance which
has been, or is in the process of being, cured at a cost which is not material
and without restrictions which are material.
3.15 INSURANCE. SCHEDULE 3.15 sets forth a list and description of all
insurance policies existing as of the date hereof providing insurance coverage
of any nature to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries. All such policies
are in full force and effect and are enforceable in accordance with their terms,
free of any right of termination on the part of any insurance carrier. Except as
set forth on SCHEDULE 3.15, no claims have been made under any such policy.
3.16 EMPLOYMENT MATTERS.
(a) LABOR UNIONS. None of the employees of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
any of its Subsidiaries is represented by any labor union, and neither ▇▇▇▇▇▇
▇▇▇▇▇▇▇ nor any of its Subsidiaries is subject to any labor or collective
bargaining agreement. None of the employees of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries is known by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to be engaged in organizing any labor
union or other employee group that is seeking recognition as a bargaining unit.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries have not experienced any strike, work
stoppage or labor disturbance with any group of employees, and to ▇▇▇▇▇▇
▇▇▇▇▇▇▇'▇ knowledge, no set of facts exists which could reasonably be expected
to lead to any of the foregoing events.
(b) EMPLOYMENT POLICIES. Except as set forth on SCHEDULE
3.16(b), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has provided to ▇▇▇▇▇ ▇▇▇▇▇, and FHGB, all of ▇▇▇▇▇▇
▇▇▇▇▇▇▇'▇ and its Subsidiaries' employee policies (written or otherwise),
employee manuals or other written statements of rules or policies concerning
employment.
(c) EMPLOYMENT AGREEMENTS. Except as set forth on SCHEDULE
3.16(c), there are no employment, consulting, severance or indemnification
arrangements, agreements, or understandings between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries and any officer, director, consultant or employee. Except as set
forth on SCHEDULE 3.16(c), the terms of employment or engagement of all
employees, agents, consultants and professional advisors of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
any of its Subsidiaries are such that their employment or engagement may be
terminated by not more than two weeks' notice given at any time without
liability for payment of compensation or damages and neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor
any of its Subsidiaries has entered into any agreement or arrangement for the
management of its business or any part thereof other than with its directors or
employees.
(d) EMPLOYEE BENEFIT PLANS. SCHEDULE 3.16(d) sets forth a
complete list of all pension, retirement, stock purchase, stock bonus, stock
ownership, stock option, profit sharing, savings, medical, disability,
hospitalization, insurance, deferred compensation, bonus, incentive, welfare or
any other employee benefit plan, policy, agreement, commitment, arrangement or
practice currently or previously maintained by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its
Subsidiaries for any of their directors, officers, consultants, employees,
former employees, or spouses or dependents of employees or former employees (the
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLANS"). SCHEDULE 3.16(d) also identifies each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Plan which constitutes an "employee pension benefit plan" ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇
PENSION PLAN") or an "employee welfare benefit plan" ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇ WELFARE
PLAN"), as such terms are defined in the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder
("ERISA"). True and accurate copies of all ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plans, together with
the most recent annual reports and summary plan descriptions, have been
furnished to ▇▇▇▇▇ ▇▇▇▇▇ and in the case of any unwritten ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan, a
written description has been furnished to ▇▇▇▇▇ ▇▇▇▇▇. No ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plans
is a "multiemployer plan," as such term is defined in ERISA, or is subject to
Title IV of ERISA. No ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan is or was a defined benefit plan as
defined in Section 3(35) of ERISA or a pension plan subject to the funding
standards of Section 302 of ERISA or Section 412 of the Code. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has
the right to amend or terminate, without the consent of any other person, each
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan, except as proscribed by law. The termination of the Old
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan has not and will not result in any cost, expense or
liability to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in excess of $10,000 in the aggregate.
13
20
Each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Pension Plan has been determined by the IRS to be
qualified under Section 401(a) of the Code, and each such plan remains so
qualified; and, no facts or circumstances exist which could result in the
revocation of such qualification. Each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan which is
intended to meet the requirements for tax-favored treatment under Subchapter B
of Chapter 1 of the Code to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge meets such requirements.
Each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan has been administered in accordance with its terms and
the Code, and each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Pension Plan and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan
has been administered in accordance with ERISA. With respect to each ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Plan, all reports, returns and similar documents required to be filed
with any governmental agency or distributed to any participant have been duly or
timely filed or distributed. No facts or circumstances exist which might give
rise to any liability of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries to the
Pension Benefit Guaranty Corporation or any successor agency (the "PBGC") or
which could reasonably be anticipated to result in any claims being made against
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or any Subsidiary thereof by the PBGC. No facts or
circumstances exist which might give rise to any liability of any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Plan, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or any Subsidiary thereof to any other Person.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has paid all amounts required under applicable Law, any ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Pension Plan and any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan to be paid as a
contribution to each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Pension Plan and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan
through the date hereof. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ set aside adequate reserves to meet
contributions which are not yet due under any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Pension Plan or
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan. Neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, any of its Subsidiaries nor
any other Person has engaged in any transaction or taken any other action with
respect to any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plan which would subject ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ or any Subsidiary thereof to: (i) any Tax, penalty or liability for
prohibited transactions under ERISA or the Code; (ii) any Tax under Code
Sections 4971, 4972, 4976, 4977 or 4979; or (iii) a penalty under ERISA Sections
502(c) or 502(l). None of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, or any
director, officer or employee of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, to
the extent it or he is a fiduciary with respect to any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Pension
Plan or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan, has breached any of its or his
responsibilities or obligations imposed upon fiduciaries under ERISA or the Code
or which could result in any claim being made under, by or on behalf of any
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Pension Plan or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan or any participant or
beneficiary thereof. Each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan which is a group health
plan within the meaning of Code Section 5000(b)(1) complies in all material
respects with and in each and every case has complied in all material respects
with the applicable requirements of Code Section 4980B and Part 6 of Title I of
ERISA and the Health Insurance Portability and Accountability Act of 1996. No
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Welfare Plan is a multi-employer welfare arrangement as defined
in Section 3(40) of ERISA. The consummation of the transactions contemplated by
this Agreement will not entitle any individuals to severance, separation or
termination pay, or similar benefits, and will not accelerate the time of
payment or vesting or increase the amount of compensation due to any individual.
(e) PERSONNEL. SCHEDULE 3.16(e) sets forth the names of all
directors and officers of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and each of its Subsidiaries. Except as
disclosed in the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financial Statements, there are no material sums
due to any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ or any of its Subsidiary's employees.
(f) LABOR PRACTICES. No unfair labor practice complaints have
been filed against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, and neither ▇▇▇▇▇▇
▇▇▇▇▇▇▇ nor any of its Subsidiaries has received any notice or communication
reflecting any intention or threat to make or file such a complaint. No person
has made any claim, and to the knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, there is no basis
for any claim against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries arising out of
any Law relating to discrimination, employment practices or employee complaints
of illegal activity. Neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor either of its Subsidiaries has
terminated any employee nor does either have any plans to terminate any employee
which could give rise to liability under the Worker Adjustment and Retraining
Notification Act.
14
21
3.17 MATERIAL AGREEMENTS.
(a) SCHEDULE 3.17 sets forth a list of all written and oral
agreements, arrangements or commitments (collectively, the "▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MATERIAL AGREEMENTS") to which either ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries
is a party or by which it or any of their respective assets are bound which are
material to the financial position or results of operations of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and its Subsidiaries on a consolidated basis, including, but not limited to: (i)
contract, commitment, agreement or relationship resulting in a commitment or
potential commitment for expenditure or other obligation or potential
obligation, or which provides for the receipt or potential receipt, involving in
excess of $100,000, or series of related contracts, commitments, agreements or
relationships that in the aggregate give rise to rights or liabilities exceeding
such amount; (ii) contract or commitment for the employment or retention of any
employee, consultant or agent or any other type of contract with any employee,
consultant or agent providing for annual payments in excess of $100,000; (iii)
indenture, mortgage, promissory note, loan agreement, guarantee or other
agreement or commitment relating to the borrowing of money, encumbrance of
assets or guaranty of any obligation; (iv) licensing or royalty agreements or
agreements providing for other similar rights or agreements with third parties
relating to the supply or use of products or materials or any intellectual
property; (v) any plan of a type referenced in SECTION 3.16; (vi) agreements
which restrict ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries from engaging in any
line of business or from competing with any other Person anywhere in the world;
(vii) arrangements for the sale of any of the assets, property or rights of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, except for agreements to sell
products or services in the ordinary course of business consistent with past
practices; (viii) agreement, contract or arrangement with any Affiliate of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or any Affiliate of any officer,
director or employee of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries; (ix) guaranty
of the obligations of any third party; (x) any indemnification, contribution or
similar agreement or arrangement pursuant to which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries may be required to make or is entitled to receive any
indemnification or contribution to or from any other Person except to the extent
provided in the Articles of Incorporation or Bylaws of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; (xi)
agreement with any self-regulatory organization and clearing agreement; (xii)
contract regarding the purchase or sale of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries' securities; or (xiii) any other contract, agreement or instrument
which cannot be terminated without penalty to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and/or its
Subsidiaries upon the provision of not greater than 30 days notice. True and
complete copies of all ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Material Agreements have been delivered to
▇▇▇▇▇ ▇▇▇▇▇.
(b) Except as set forth on SCHEDULE 3.17, all ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Material Agreements have been entered into on an "arms-length" basis with
parties who are not Affiliates of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Material
Agreements are each in full force and effect and are the valid and legally
binding obligations of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or the applicable Subsidiary which is a
party to same and, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, have not been materially
breached by any of the other parties thereto and are valid and binding
obligations of the other parties thereto. Neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its
Subsidiaries is in default under its Articles or Certificate of Incorporation or
Bylaws or in material default or alleged material default under any Material
Agreement to which it is a party, and no event has occurred which with the
giving of notice or lapse of time or both would constitute such a default.
Except as set forth on SCHEDULE 3.17, the continuation, validity and
effectiveness of each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Material Agreement under the current terms
thereof will in no way be affected by the consummation of the transactions
contemplated hereby and all of such items will inure to the benefit of ▇▇▇▇▇
▇▇▇▇▇ (as the parent of the surviving corporation in the Merger). Either ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or one of its Subsidiaries has performed all the obligations required to
be performed by it to date and is not in material default or alleged to be in
material default in any respect under any agreement, lease, contract,
commitment, instrument or obligation required to be listed or described on any
schedule to this Agreement, and there exists no event, condition or occurrence
which, after notice or lapse of time, or both, would constitute such a default
by it or, to the best of its knowledge, any other party to any of the foregoing.
15
22
3.18 LIST OF ACCOUNTS. SCHEDULE 3.18 sets forth, as of the date hereof:
(i) the name and address of each bank or other institution in which ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or any of its Subsidiaries maintains an account (cash, securities or
other) or safe deposit box; (ii) the name and phone number of the contact person
at such bank or institution; (iii) the account number of the relevant account
and a description of the type of account; and (iv) the persons authorized to
transact business in such accounts.
3.19 INVENTORY OF SECURITIES. Except as set forth on SCHEDULE 3.19,
neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor its Subsidiaries, as of the date hereof, has any
ownership positions (long, short or otherwise) in the securities of any
publicly-held company valued in excess of $100,000.
3.20 RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE 3.20,
no director, officer, shareholder or employee of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries or any Principal Shareholder (individually a "▇▇▇▇▇▇ ▇▇▇▇▇▇▇
RELATED PARTY" and collectively the "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ RELATED PARTIES") or any
Affiliate of any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Related Party: (i) owns (or during the past
three years has owned), directly or indirectly, any interest in any Person which
is a competitor or potential competitor of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, or a supplier or
potential supplier of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, except for the ownership of not more than
4.9% of the outstanding stock of any company listed by a national stock exchange
or the NASDAQ stock market or the OTC bulletin board, (ii) owns (or during the
past three years has owned), directly or indirectly, in whole or in part, any
material property, asset (other than cash) or right, real, personal or mixed,
tangible or intangible, which is associated with or necessary in the operation
of the business of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; or (iii) has (or during the past three years
has had) an interest in or is (or during the past three years has been),
directly or indirectly, a party to any contract, agreement, lease or arrangement
pertaining or relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
3.21 TAX MATTERS.
(a) Except as set forth on SCHEDULE 3.21(a), all federal,
state, local and foreign Tax returns and Tax reports, if any, required to be
filed with respect to the business or assets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its
Subsidiaries have been filed with the appropriate Governmental Authorities in
all jurisdictions in which such returns and reports are required to be filed;
all of the foregoing as filed are true, correct and complete, and reflect
accurately all liability for Taxes of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries for
the periods for which such returns relate; and all amounts shown as owing
thereon have been paid. None of such returns or reports have been audited by any
Governmental Authority.
(b) All Taxes, if any, payable by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its
Subsidiaries or relating to or chargeable against any of their assets, revenues
or income have been fully paid by such date or provided for by adequate reserves
in the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financial Statements, and available to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
all similar items due through the Closing will have been fully paid by that date
or provided for by adequate reserves on the books of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its
Subsidiaries, which reserves shall remain available to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, through
the Closing.
(c) None of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries will
have any liability with respect to any such Taxes including, but not limited to,
interest and/or penalties, in excess of the amount so paid or the reserves so
established on the books of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries. Neither ▇▇▇▇▇▇
▇▇▇▇▇▇▇ nor any of its Subsidiaries is delinquent in the payment of any Tax. No
deficiencies for any Tax have been asserted against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its
Subsidiaries with respect to any Taxes which have not been paid, settled or
adequately provided for and there exists no basis for the making of any such
deficiency, assessment or charge.
(d) Neither ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ nor any of its Subsidiaries has
waived any restrictions on assessment or collection of taxes or consented to the
extension of any statute of limitations relating to federal, state, local or
foreign taxation.
16
23
3.22 GUARANTIES. Except as set forth on SCHEDULE 3.22, neither ▇▇▇▇▇▇
▇▇▇▇▇▇▇ nor any of its Subsidiaries is a party to any Guaranty.
3.23 ABSENCE OF CERTAIN BUSINESS PRACTICES. No employee or agent of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, and no officer or director or
Principal Shareholder of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries and no other
Person acting at the direction of any of the foregoing or associated or
Affiliated with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries, and no other Person
for whom ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries may be responsible, acting
alone or together, has (i) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, trading
company, shipping company, governmental employee or other Person with whom
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries has done business directly or
indirectly, or (ii) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other Person who is or may be in a position to help or
hinder the business of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and any of its Subsidiaries (or assist
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries in connection with any actual or
proposed transaction), in either event which (a) may subject ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
any of its Subsidiaries to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, or (b) if not given, may have an adverse
effect on the results of operations, assets, business, operations or prospects
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries or may lead to suit or penalty in
any private or governmental litigation or proceeding. None of the foregoing
Persons has, directly or indirectly, offered, paid, or agree to pay to any
Person or solicited, received or agreed to receive from any such Person,
directly or indirectly, any money or anything of value for the purpose or with
the intent of (i) obtaining or maintaining business for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of
its Subsidiaries, (ii) facilitating the purchase or sale of any product or
service, or (iii) avoiding the imposition of any fine or penalty, in any manner
which is in violation of any applicable Law.
3.24 PROXY STATEMENT AND DISCLOSURE DOCUMENTS. None of the information
relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries included in the ▇▇▇▇▇
▇▇▇▇▇ Proxy Statement or the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Disclosure Document at the
respective times that they are mailed to Frost ▇▇▇▇▇'▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇
shareholders and at the times the ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shareholders'
meetings take place to approve the Merger (subject, if required, to a reasonable
period of time for the parties hereto to take such action necessary to
supplement or amend such documents), contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All information in such documents relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
including any amendments thereto, will comply with, and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Disclosure Document shall be distributed to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ shareholders in
accordance with applicable Laws and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ Articles of Incorporation
and Bylaws.
3.25 BROKER-DEALER REGISTRATION; REGULATORY ISSUES.
(a) Except as set forth on SCHEDULE 3.25, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is
registered as a broker-dealer with the Commission and the New York Bureau of
Securities, and is a member in good standing of the NASD, and G-Trade has made
(or will make) all filings necessary to apply therefor.
(b) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has filed all Form BDs (including all
amendments thereto) required to be filed with the Commission, each of which has
complied with the Exchange Act, as amended, each as in effect on the date so
filed. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has heretofore furnished to ▇▇▇▇▇ ▇▇▇▇▇ correct and
complete copies of such Form BDs (including all amendments thereto). None of
such Form BDs contained, when filed, any untrue statement of material fact
required to be stated or incorporated by reference therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent amended or superseded by a subsequent
filing with the Commission (a copy of which has been provided to ▇▇▇▇▇ ▇▇▇▇▇
prior to the date hereof), none of the Form BDs (including all amendments
thereto) contains any untrue statement of a material fact required to be stated
or incorporated by reference therein or necessary in order
17
24
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. All copies of such Form BDs (including all
amendments thereto) required to be filed with any state have been filed in a
timely manner. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is not subject to the Investment Advisors Act of
1940.
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has filed all SRO Reports required to be
filed with any self-regulatory organizations since January 1, 1995, each of
which has complied with the rules of the self-regulatory organization, each as
in effect on the date so filed. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has heretofore furnished to ▇▇▇▇▇
▇▇▇▇▇ correct and complete copies of the SRO Reports. None of the SRO Reports
contained, when filed, any untrue statement of material fact required to be
stated or incorporated by reference therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent revised or superseded by a subsequent filing
with the self-regulatory organization (a copy of which has been provided to
▇▇▇▇▇ ▇▇▇▇▇ prior to the date thereof), none of the SRO Reports contains any
untrue statement of a material fact or omits to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has registered as a broker-dealer in each
jurisdiction in which such registration has been required since January 1, 1995.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has filed or caused to be filed all forms, reports, statements,
and documents (including all Form U-4s on behalf of registered representatives)
required to be filed with any state since January 1, 1995. Any such forms,
reports, statements, and documents are accurate in all material respects.
(e) True and correct copies of all DRP's with respect to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ personnel have been made available to ▇▇▇▇▇ ▇▇▇▇▇. A true and
correct copy of all audits, inspections and reports of, and correspondence from
and to, all self regulatory organizations within the last three years with
respect to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ have been made available to ▇▇▇▇▇ ▇▇▇▇▇. A true and
complete copy of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ focus reports for the last three fiscal years
has been made available to ▇▇▇▇▇ ▇▇▇▇▇, as well as a true and complete copy of
the compliance manuals of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. Such focus reports have been prepared
and filed in compliance with all NASD rules and regulations. True and complete
copies of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ clearing agreement, NASD restriction letter, form of
customer agreement, and agreements concerning discretionary accounts have been
made available to ▇▇▇▇▇ ▇▇▇▇▇. Set forth on SCHEDULE 3.25 is a list of all
audits, citations relating to the business of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, complaints and or
pending disciplinary proceedings and known regulatory proceedings relating to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its personnel. Schedule 3.25 also sets forth a true and
complete list of all branch offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and their addresses and
dates of commencement of operations. SCHEDULE 3.25 also sets forth a list of all
SIPC claims since January 1, 1996. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ obtained all necessary Permits
and Consents from NASD and all Governmental Authorities to operate such branch
offices.
(f) All customer complaints reportable pursuant to NASD Notice
to Members 95-81 (including all amendments thereto and NASD interpretations
thereof) ("95-81") which have been made against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its registered
representatives in writing since January 1, 1996, have been reported in
accordance with 95-81, all such complaints are set forth in SCHEDULE 3.25, and
copies of each such complaint have been made available to ▇▇▇▇▇ ▇▇▇▇▇. Except as
noted on SCHEDULE 3.25 none of such complaints which have been disposed of
currently requires any payment or other action to be made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is in compliance with all net capital rules and all net capital
regulations of NASD and the Commission.
(g) To the best of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, the reserves
set forth in the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financial Statements as of February 28, 1999,
are reasonably expected to be adequate and sufficient to satisfy all
liabilities, contingent or otherwise, with respect to any and all filed,
pending, known customer complaints ("Customer Complaints"), including any and
all regulatory proceedings, investigations or actions, whether pending or known.
There are no known threatened Customer Complaint, regulatory proceedings,
investigations or actions which individually or in the aggregate could
reasonably be expected to have a material impact on such
18
25
reserves. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has no current intention to cause ▇▇▇▇▇ ▇▇▇▇▇ to go
private, or to have or cause its capital stock to become delisted from any
exchange or any inter-dealer quotation system, or to become liquidated or
dissolved after the Effective Time.
(h) To the best of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
has complied with all material restrictions on the operation of its business set
forth in any NASD restriction letter, as amended. To the best of ▇▇▇▇▇▇
▇▇▇▇▇▇▇'▇ knowledge, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has complied with all the material terms
prescribed in its compliance manuals and written supervisory manuals.
3.26 YEAR 2000 PROBLEMS. To ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ knowledge, all Year 2000
Problems (as defined below) with respect to the internal systems of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and its Subsidiaries have been (or, prior to December 31, 1999, will be)
corrected, remediated and resolved, except where the failure to do so could not
reasonably be expected to have a ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Material Adverse Effect,
individually or in the aggregate. "Year 2000 Problems" shall mean, with respect
to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries, limitations on the capacity or readiness
of any of their Year 2000 Date-Sensitive Systems/Components to accurately
accept, create, manipulate, short, sequence, calculate, compare or output
calendar date information with respect to calendar year 1999 or any subsequent
calendar year beginning on or after January 1, 2000 (including leap year
computations), including, without limitation, exchanges of information among
Year 2000 Date-Sensitive Systems/Components of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its
Subsidiaries and exchanges of information among them and Year 2000
Date-Sensitive Systems/Components of third parties and functionality of
peripheral interfaces, firmware and embedded microchips. "Year 2000
Date-Sensitive System/Component" shall mean, as to any Person, any system
software, network software, applications software, data base, computer file,
embedded microchip, firmware or hardware that accepts, creates, manipulates,
sorts, sequences, calculates, compares or outputs calendar-related data
accurately, such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has completed its
Form BD-Y2K in accordance with NASD rules and regulations and the instructions
thereto, and filed such Form in a timely manner; the information contained
therein is true, correct and complete; and a true, correct and complete copy
thereof has been provided to ▇▇▇▇▇ ▇▇▇▇▇.
3.27 INVESTMENT REPRESENTATIONS. Each of the shareholders of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ has had (or prior to the meeting of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ shareholders
contemplated hereby will have) both the opportunity to ask questions of and
receive answers from the officers and directors of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇
▇▇▇▇▇ with respect to the transactions contemplated hereby and the business of
the parties hereto, and to receive such additional information as they have
requested with respect thereto. Each shareholder of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has
represented that he is an "Accredited Investor" within the meaning of Regulation
D promulgated under the Securities Act and that he is a sophisticated investor;
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has no reasonable basis to believe that any such
representation is not true. The name of each legal and beneficial owner of
interests in the shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is set forth on SCHEDULE 3.27 and,
except as set forth on SCHEDULE 3.27, each such owner is a bona fide resident of
the State of New York. Each shareholder of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has been provided with
a copy of this Agreement and the Commission filings referred to herein.
3.28 SUBSCRIPTION RECEIVABLES; ENERGY FUND. All subscription
receivables which have ever been reflected on any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financial
Statement have subsequently been paid in full or otherwise satisfied to ▇▇▇▇▇▇
▇▇▇▇▇▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Energy Fund, L.P. will be terminated, liquidated and
dissolved, all at no cost, liability or expense to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any
Subsidiary, and it is not engaged in any business activities.
3.29 DISCLOSURE. No representation or warranty of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
contained in this Agreement or the schedules hereto, and no certificate or
notice furnished by or on behalf of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of its Subsidiaries to
▇▇▇▇▇ ▇▇▇▇▇ or its agents pursuant to this Agreement, contains or will contain
any untrue
19
26
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. None of
the Principal Shareholders or any executive officer or director of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or any of its Subsidiaries has been the subject of any of the events
referenced in Section 401(f) of Regulation S-K.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇ ▇▇▇▇▇ AND FHGB
In order to induce ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to enter into this Agreement and to
consummate the transactions contemplated hereby, ▇▇▇▇▇ ▇▇▇▇▇ and FHGB jointly
and severally make the representations and warranties set forth below to ▇▇▇▇▇▇
▇▇▇▇▇▇▇.
4.1 ORGANIZATION. Each of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB is a corporation duly
organized, validly existing and in good standing under the Laws of its state of
incorporation. Each of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB is duly qualified to transact
business as a foreign corporation in all jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the financial condition, results of operations,
assets, liabilities, prospects or business of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB on a
consolidated basis (a "▇▇▇▇▇ ▇▇▇▇▇ MATERIAL ADVERSE EFFECT"). Each jurisdiction
in which ▇▇▇▇▇ ▇▇▇▇▇ or FHGB is qualified to transact business as a foreign
corporation is listed on SCHEDULE 4.1. Each of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB has the
corporate authority to (i) own or lease and operate its properties and (ii)
conduct its business as presently conducted. Each of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB has
the corporate authority to execute, deliver and perform this Agreement.
4.2 AUTHORIZATION; ENFORCEABILITY. Subject to the receipt of
shareholder approval, the execution, delivery and performance of this Agreement
by ▇▇▇▇▇ ▇▇▇▇▇ and FHGB and the consummation by ▇▇▇▇▇ ▇▇▇▇▇ and FHGB of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB. This Agreement has been
duly executed and delivered by ▇▇▇▇▇ ▇▇▇▇▇ and FHGB and constitutes the legal,
valid and binding obligations of them, enforceable against them in accordance
with their terms, except to the extent that their enforcement is limited by
bankruptcy, insolvency, reorganization or other Laws relating to or affecting
the enforcement of creditors' rights generally or by general principles of
equity.
4.3 NO VIOLATION OR CONFLICT. Except as set forth on SCHEDULE 4.3, the
execution, delivery and performance by ▇▇▇▇▇ ▇▇▇▇▇ and FHGB of this Agreement
and the consummation by ▇▇▇▇▇ ▇▇▇▇▇, and FHGB of the transactions contemplated
hereby; (i) do not and will not violate or conflict with any provision of Law or
any Order specifically naming ▇▇▇▇▇ ▇▇▇▇▇ or any of its Subsidiaries, or any
provision of Frost ▇▇▇▇▇'▇ or FHGB's Articles of Incorporation or Bylaws; and
(ii) do not and will not, with or without the passage of time or the giving of
notice, (a) result in the breach of, or constitute a default, cause the
acceleration of performance, permit the unilateral modification or termination
of, or require any Consent under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of ▇▇▇▇▇ ▇▇▇▇▇ or any of its
Subsidiaries pursuant to, any material instrument or agreement to which ▇▇▇▇▇
▇▇▇▇▇ or any of its Subsidiaries is a party or by which ▇▇▇▇▇ ▇▇▇▇▇ or any of
its Subsidiaries or their respective properties may be bound or affected; or (b)
result in any violation, suspension, revocation, impairment, forfeiture or
nonrenewal of any Permit or Consent.
4.4 CONSENT OF GOVERNMENTAL AUTHORITIES. Other than in connection with
the Florida BCA, the New York BCL, the Exchange Act, the Securities Act of 1933,
as amended ("SECURITIES ACT"), and the state securities Laws of any
jurisdiction, no Consent or Permit from, of or with any Governmental Authority
is required to be made by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB in connection with the execution,
delivery or performance by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB of this Agreement or the
consummation by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB of the transactions contemplated
20
27
hereby. There is no unresolved objection to the Merger made by any Governmental
Authority or self-regulatory organization.
4.5 FINANCIAL STATEMENTS; COMMISSION REPORTS. Except as set forth on
SCHEDULE 4.5, the financial statements of ▇▇▇▇▇ ▇▇▇▇▇ included in the ▇▇▇▇▇
▇▇▇▇▇ Commission Reports (the "▇▇▇▇▇ ▇▇▇▇▇ FINANCIAL STATEMENTS"), as of the
dates thereof, and for the periods covered thereby: (i) have been prepared in
accordance with the books of account and records of ▇▇▇▇▇ ▇▇▇▇▇; (ii) fairly
present in all material respects Frost ▇▇▇▇▇'▇ financial condition, assets,
liabilities and equity as of the dates thereof; and (iii) have been prepared in
accordance with generally accepted accounting principles consistently applied.
Other than as disclosed by the ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements dated March 31,
1999 or on SCHEDULE 4.5, neither FHGB nor ▇▇▇▇▇ ▇▇▇▇▇ has any liabilities,
commitments or obligations (which reasonably could be expected to be material to
▇▇▇▇▇ ▇▇▇▇▇ and FHGB on a consolidated basis) of any nature whatsoever, whether
accrued, contingent or otherwise (other than nonmaterial liabilities,
commitments or obligations incurred since March 31, 1999 in the ordinary course
of business consistent with past practices to Persons other than Affiliates of
▇▇▇▇▇ ▇▇▇▇▇) or any unrealized or anticipated losses (which reasonably could be
expected to be material to ▇▇▇▇▇ ▇▇▇▇▇) from any commitments of ▇▇▇▇▇ ▇▇▇▇▇,
and, to Frost ▇▇▇▇▇'▇ knowledge, there is no reasonable basis for assertion
against ▇▇▇▇▇ ▇▇▇▇▇ of any such liability, commitment, obligation or loss. Any
supporting schedules included in the ▇▇▇▇▇ ▇▇▇▇▇ Commission Reports present
fairly, in all material respects, the information required to be stated therein.
Such ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements and supporting schedules: (i) were prepare
in accordance with Regulation S-X promulgated by the Commission; (ii) present
fairly in all material respects the financial condition of ▇▇▇▇▇ ▇▇▇▇▇ and the
results of operations as at and for the respective periods then ended; and (iii)
except as otherwise noted in the ▇▇▇▇▇ ▇▇▇▇▇ Commission Reports, were prepared
in conformity with generally accepted accounting principals applied on a
consistent basis. To the extent any such ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements and
supporting schedules are audited, they were audited by independent public
accountants within the meaning of the rules promulgated by the Commission. ▇▇▇▇▇
▇▇▇▇▇ has heretofore furnished or made available to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ entire and
complete copy of each report (the "▇▇▇▇▇ ▇▇▇▇▇ COMMISSION REPORT") filed by
▇▇▇▇▇ ▇▇▇▇▇ with the Commission pursuant to the Securities Exchange Act of 1934,
as amended ("EXCHANGE ACT") since its inception. None of the ▇▇▇▇▇ ▇▇▇▇▇
Commission Reports, as of the dates they were respectively filed with the
Commission, contained any untrue statement of a Material fact or omitted to
state or 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.
4.6 COMPLIANCE WITH LAWS.
(a) Each of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB is in compliance with all
Laws and Orders applicable to it or its properties. Neither ▇▇▇▇▇ ▇▇▇▇▇ nor FHGB
has received notification from any Governmental Authority asserting that it may
not be in compliance with or may have violated any of the Laws which said
Governmental Authority enforces, or threatening to revoke any Consent or Permit,
and neither ▇▇▇▇▇ ▇▇▇▇▇ nor FHGB is subject to any agreement or consent decree
with any Governmental Authority arising out of previously asserted violations.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has been furnished with true and correct copies of all records of
inspections and reports of any of Frost ▇▇▇▇▇'▇ or FHGB's businesses or
properties since incorporation under applicable Laws or conducted by insurance
companies, consultants or other Persons; and all deficiencies noted therein have
been corrected. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ has been furnished with true and correct copies
of all correspondence and other filings made to or received from any
Governmental Authority regarding ▇▇▇▇▇ ▇▇▇▇▇ or FHGB since their incorporation.
(b) There are, with respect to ▇▇▇▇▇ ▇▇▇▇▇ and FHGB, no past
or present violations of any Environmental Laws, releases of any material into
the environment, actions, activities, circumstances, conditions, events,
incidents or contractual obligations which may give rise to any common law or
other legal liability, including, without limitation, under CERCLA or similar
state or local laws.
21
28
4.7 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 4.7, neither
▇▇▇▇▇ ▇▇▇▇▇ nor FHGB is, nor since incorporation has been, a party to any
pending or, to the knowledge of ▇▇▇▇▇ ▇▇▇▇▇, threatened, legal, administrative
or other proceeding, arbitration or investigation, and ▇▇▇▇▇ ▇▇▇▇▇ has no
knowledge of any set of facts which could reasonably be expected to result in
any legal, administrative or other proceeding, arbitration or investigation
involving ▇▇▇▇▇ ▇▇▇▇▇ or FHGB. Except as set forth on SCHEDULE 4.7, neither
▇▇▇▇▇ ▇▇▇▇▇ nor FHGB is subject to any Order of any court or Governmental
Authority. Each of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB is in compliance with the terms of each
Order set forth on SCHEDULE 4.7. None of the items set forth on SCHEDULE 4.7
could, individually or in the aggregate, reasonably be expected to have a ▇▇▇▇▇
▇▇▇▇▇ Material Adverse Effect.
4.8 BROKERS. Except as set forth on SCHEDULE 4.8, neither ▇▇▇▇▇ ▇▇▇▇▇
nor FHGB has employed any financial advisor, broker or finder and none has
incurred and none will incur any broker's, finder's, investment banking or
similar fees, commissions or expenses to any other party in connection with the
transactions contemplated by this Agreement.
4.9 ABSENCE OF MATERIAL ADVERSE CHANGES. Except as set forth on
SCHEDULE 4.9, from March 31, 1999 to the date hereof: (i) each of ▇▇▇▇▇ ▇▇▇▇▇
and FHGB has conducted its businesses in the ordinary and usual course
consistent with past practices; (ii) there has been no occurrence which is
reasonably likely to cause ▇▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect; and (iii)
neither ▇▇▇▇▇ ▇▇▇▇▇ nor FHGB has engaged or agreed to engage in any of the
actions described in SECTION 5.1 (except subsections (xiii) and (xvi) thereof).
4.10 ARTICLES OF INCORPORATION, BYLAWS AND MINUTE BOOKS. True and
complete copies of the Articles of Incorporation, as amended to date, Bylaws, as
amended to date, and minute books of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB have been delivered by
▇▇▇▇▇ ▇▇▇▇▇ to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. Such documents books contain complete and
accurate records in all material respects and have embodied therein copies of
minutes of all meetings and actions by written consent of the incorporators,
boards of directors (and committees thereof) and shareholders of such entities
from the date of incorporation to the date hereof; and such items accurately
reflect all material actions taken by such Persons.
4.11 CAPITALIZATION. As of the date hereof, the authorized capital
stock of ▇▇▇▇▇ ▇▇▇▇▇ consists of 100,000,000 shares of ▇▇▇▇▇ ▇▇▇▇▇ Common Stock,
of which 2,657,202 shares are issued and outstanding. All shares of Frost
▇▇▇▇▇'▇ and FHGB's outstanding capital stock have been duly authorized, are
validly issued and outstanding, and are fully paid and nonassessable. No
securities issued by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB from the date of its incorporation to
the date hereof were issued in violation of any statutory or common law
preemptive rights. There are no dividends which have accrued or been declared
but are unpaid on the capital stock of ▇▇▇▇▇ ▇▇▇▇▇ or FHGB. All Taxes (including
documentary stamp taxes) required to be paid in connection with the issuance by
▇▇▇▇▇ ▇▇▇▇▇ or FHGB of Frost ▇▇▇▇▇'▇ and FHGB's capital stock have been paid.
All authorizations required to be obtained from or registrations required to be
effected with any Person in connection with the issuances of securities by ▇▇▇▇▇
▇▇▇▇▇ and FHGB from their respective dates of incorporation to the date hereof
have been obtained or effected and all securities of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB have
been issued in accordance with the provisions of all applicable securities and
other Laws. The authorized capital stock of FHGB consists of 100 shares of FHGB
Common Stock, all of which are issued and outstanding and owned by ▇▇▇▇▇ ▇▇▇▇▇,
free and clear of all liens, charges, claims or encumbrances. FHGB is Frost
▇▇▇▇▇'▇ sole Subsidiary. Neither ▇▇▇▇▇ ▇▇▇▇▇ nor FHGB has any equity investment
in any other corporation, association, partnership, joint venture or other
entity. Except as set forth on SCHEDULE 4.11, ▇▇▇▇▇ ▇▇▇▇▇ has granted no
registration rights with respect to ▇▇▇▇▇ ▇▇▇▇▇ Common Stock.
4.12 RIGHTS, WARRANTS, OPTIONS. Except as set forth on SCHEDULE 4.12,
there are no outstanding: (i) securities or instruments convertible into or
exercisable for any of the capital stock or other equity interests of ▇▇▇▇▇
▇▇▇▇▇ or FHGB or any other Person issued by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB or to which
▇▇▇▇▇ ▇▇▇▇▇ or FHGB is a party; (ii) options, warrants, subscriptions or other
rights to acquire capital stock or other equity interests of ▇▇▇▇▇ ▇▇▇▇▇ or FHGB
issued by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB; or (iii) commitments, agreements or
understandings of
22
29
any kind to which ▇▇▇▇▇ ▇▇▇▇▇ or FHGB is a party, including employee benefit
arrangements, relating to the issuance or repurchase by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB of
any capital stock or other equity interests of ▇▇▇▇▇ ▇▇▇▇▇ or FHGB, any such
securities or instruments convertible into or exchangeable for capital stock or
other equity interests of ▇▇▇▇▇ ▇▇▇▇▇ or any such options, warrants or rights.
4.13 PROPERTIES. ▇▇▇▇▇ ▇▇▇▇▇ and FHGB have valid title to all
properties, interests in properties and assets as reflected in the consolidated
balance sheet of ▇▇▇▇▇ ▇▇▇▇▇ as of March 31, 1999 or acquired after March 31,
1999 (except properties, interests in properties and assets sold or otherwise
disposed of since March 31, 1999 in the ordinary course of business to Persons
other than Affiliates of ▇▇▇▇▇ ▇▇▇▇▇), free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except the lien of
current Taxes not yet due and payable. ▇▇▇▇▇ ▇▇▇▇▇ and FHGB own no real
property. SCHEDULE 4.13 lists each piece of real property leased by ▇▇▇▇▇ ▇▇▇▇▇.
The facilities and equipment of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB necessary to the operations
of their business are in good operating condition and repair sufficient for the
operation of the business as presently conducted. Except for those assets leased
or licensed by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB and listed on SCHEDULE 4.13, ▇▇▇▇▇ ▇▇▇▇▇ or
FHGB own all assets used in their business.
4.14 GOVERNMENTAL AUTHORIZATIONS. ▇▇▇▇▇ ▇▇▇▇▇ and FHGB have in full
force and effect all Consents and Permits required under applicable Law for the
ownership of their properties and operation of their businesses as presently
operated free from unreasonable restrictions. Except as set forth on SCHEDULE
4.14, none of the transactions contemplated hereby could reasonably be expected
to have an adverse effect on the status of any such Permit. None of the
transactions contemplated hereby could reasonably be expected to have an adverse
effect on the status of any such Permit or Consent or require ▇▇▇▇▇ ▇▇▇▇▇ or its
Affiliates to obtain any additional Consent or Permit to continue to operate its
business as previously conducted. A true and complete list of all such Consents
and Permits is set forth on SCHEDULE 4.14. There has at all times been
compliance with all such Permits and Consents.
4.15 INSURANCE. SCHEDULE 4.15 sets forth a list and description of all
insurance policies existing as of the date hereof providing insurance coverage
of any nature to ▇▇▇▇▇ ▇▇▇▇▇ and FHGB. All such policies are in full force and
effect and are enforceable in accordance with their terms, free of any right of
termination on the part of any insurance carrier. No claims have been made on
any such policies.
4.16 EMPLOYMENT MATTERS.
(a) LABOR UNIONS. None of the employees of ▇▇▇▇▇ ▇▇▇▇▇ or FHGB
is represented by any labor union, and neither ▇▇▇▇▇ ▇▇▇▇▇ or FHGB is subject to
any labor or collective bargaining agreement. None of the employees of ▇▇▇▇▇
▇▇▇▇▇ or FHGB is known by ▇▇▇▇▇ ▇▇▇▇▇ to be engaged in organizing any labor
union or other employee group that is seeking recognition as a bargaining unit.
▇▇▇▇▇ ▇▇▇▇▇ and FHGB have not experienced any strike, work stoppage or labor
disturbance with any group of employees, and to Frost ▇▇▇▇▇'▇ knowledge, no set
of facts exists which could reasonably be expected to lead to any of the
foregoing events.
(b) EMPLOYMENT POLICIES. ▇▇▇▇▇ ▇▇▇▇▇ has provided to ▇▇▇▇▇▇
▇▇▇▇▇▇▇ all of Frost ▇▇▇▇▇'▇ and FHGB's employee policies (written or
otherwise), employee manuals or other written statements of rules or policies
concerning employment.
(c) EMPLOYMENT AGREEMENTS. Except as set forth on SCHEDULE
4.16(c), there are no employment, consulting, severance or indemnification
arrangements, agreements, or understandings between ▇▇▇▇▇ ▇▇▇▇▇ or FHGB and any
officer, director, consultant or employee. Except as set forth on SCHEDULE
4.16(c), the terms of employment or engagement of all employees, agents,
consultants and professional advisors of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB are such that
their employment or engagement may be terminated by not more than two weeks'
notice given at any time without liability for payment of compensation or
damages and neither ▇▇▇▇▇ ▇▇▇▇▇ nor
23
30
FHGB has entered into any agreement or arrangement for the management of its
business or any part thereof other than with its directors or employees.
(d) EMPLOYEE BENEFIT PLANS. ▇▇▇▇▇ ▇▇▇▇▇ has no pension,
retirement, stock purchase, stock bonus, stock ownership, stock option, profit
sharing, savings, medical, disability, hospitalization, insurance, deferred
compensation, bonus, incentive, welfare or any other employee benefit plan,
policy, agreement, commitment, arrangement or practice currently or previously
maintained by ▇▇▇▇▇ ▇▇▇▇▇ or FHGB for any of their directors, officers,
consultants, employees or former employees. ▇▇▇▇▇ ▇▇▇▇▇ has no plan which
constitutes an "employee pension benefit plan" or an "employee welfare benefit
plan", as such terms are defined in ERISA.
(e) PERSONNEL. SCHEDULE 4.16(e) sets forth the names of all
directors and officers of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB. Except as disclosed in the ▇▇▇▇▇
▇▇▇▇▇ Financial Statements, there are no material sums due to any of ▇▇▇▇▇ ▇▇▇▇▇
or FHGB employees.
(f) LABOR PRACTICES. No unfair labor practice complaints have
been filed against ▇▇▇▇▇ ▇▇▇▇▇ or FHGB, and neither ▇▇▇▇▇ ▇▇▇▇▇ nor FHGB has
received any notice or communication reflecting any intention to make or file
such a complaint. No person has made any claim, and to the knowledge of ▇▇▇▇▇
▇▇▇▇▇ or FHGB, there is no basis for any claim against ▇▇▇▇▇ ▇▇▇▇▇ or FHGB
arising out of any law relating to discrimination or employment practices.
4.17 MATERIAL AGREEMENTS.
(a) SCHEDULE 4.17 sets forth a list of all written and oral
agreements, arrangements or commitments (collectively, the "▇▇▇▇▇ ▇▇▇▇▇ MATERIAL
AGREEMENTS") to which either ▇▇▇▇▇ ▇▇▇▇▇ or FHGB is a party or by which it or
any of their respective assets are bound which are material to the financial
position or results of operations of ▇▇▇▇▇ ▇▇▇▇▇ and FHGB on a consolidated
basis including, but not limited to: (i) contract, commitment, agreement or
relationship resulting in a commitment or potential commitment for expenditure
or other obligation or potential obligation, or which provides for the receipt
or potential receipt, involving in excess of $25,000, or series of related
contracts, commitments, agreements or relationships that in the aggregate give
rise to rights or liabilities exceeding such amount; (ii) contract or commitment
for the employment or retention of any employee, consultant or agent or any
other type of contract with any employee, consultant or agent providing for
annual payments in excess of $25,000; (iii) indenture, mortgage, promissory
note, loan agreement, guarantee or other agreement or commitment relating to the
borrowing of money, encumbrance of assets or guaranty of any obligation; (iv)
licensing or royalty agreements or agreements providing for other similar rights
or agreements with third parties relating to the supply or use of products or
materials or any intellectual property; (v) any plan of a type referenced in
SECTION 4.16; (vi) agreements which restrict ▇▇▇▇▇ ▇▇▇▇▇ or FHGB from engaging
in any line of business or from competing with any other Person anywhere in the
world; (vii) agreements or arrangements for the sale of any of the assets,
property or rights of ▇▇▇▇▇ ▇▇▇▇▇ or FHGB, except for agreements to sell
products or services in the ordinary course of business consistent with past
practices; (viii) agreement, contract or arrangement with any Affiliate of ▇▇▇▇▇
▇▇▇▇▇ or FHGB or any Affiliate of any officer, director or employee of ▇▇▇▇▇
▇▇▇▇▇ or FHGB; (ix) guaranty of the obligations of any third party; (x) any
indemnification, contribution or similar agreement or arrangement pursuant to
which ▇▇▇▇▇ ▇▇▇▇▇ or FHGB may be required to make or is entitled to receive any
indemnification or contribution to or from any other Person except to the extent
provided in the Articles of Incorporation or Bylaws of ▇▇▇▇▇ ▇▇▇▇▇; or (xi) any
other contract, agreement or instrument which cannot be terminated without
penalty to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and its Subsidiaries, upon the provision of not
greater than 30 days notice.
(b) Except as set forth on SCHEDULE 4.17, all ▇▇▇▇▇ ▇▇▇▇▇
Material Agreements have been entered into on an "arms-length" basis with
parties who are not Affiliates of Frost Hanna. The Frost Hanna Material
Agreements are each in full force and effect and are the valid and legally
binding obligations of Frost Hanna or FHGB and, to Frost Hanna's knowledge, have
not been breached by any of the other parties thereto and
24
31
are valid and binding obligations of the other parties thereto. Neither Frost
Hanna nor FHGB is in default under its Articles of Incorporation or Bylaws or in
default or alleged default under any Frost Hanna Material Agreement to which it
is a party, and no event has occurred which with the giving of notice or lapse
of time or both would constitute such a default. Except as set forth on SCHEDULE
4.17, the continuation, validity and effectiveness of each Frost Hanna Material
Agreement under the current terms thereof will in no way be affected by the
consummation of the transactions contemplated hereby and all of such items will
inure to the benefit of Frost Hanna (as the parent of the surviving corporation
in the Merger). Frost Hanna has performed all the obligations required to be
performed by it to date and is not in default or alleged to be in default in any
respect under any agreement, lease, contract, commitment, instrument or
obligation required to be listed or described on any schedule to this Agreement,
and there exists no event, condition or occurrence which, after notice or lapse
of time, or both, would constitute such a default by it, or, to the best of its
knowledge, any other party to any of the foregoing.
4.18 LIST OF ACCOUNTS. SCHEDULE 4.18 sets forth, as of the date hereof:
(i) the name and address of each bank or other institution in which Frost Hanna
or FHGB maintains an account (cash, securities or other) or safe deposit box;
(ii) the name and phone number of the contact person at such bank or
institution; (iii) the account number of the relevant account and a description
of the type of account; and (iv) the persons authorized to transact business in
such accounts.
4.19 BUSINESS. Frost Hanna and FHGB have not engaged in any business
other than to seek to effect a business combination.
4.20 RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE 4.20,
no director, officer, shareholder or employee of Frost Hanna or FHGB
(individually a "FROST HANNA RELATED PARTY" and collectively the "FROST HANNA
RELATED PARTIES") or any Affiliate of any Frost Hanna Related Party: (i) owns,
directly or indirectly, any interest in any Person which is a competitor or
potential competitor of Frost Hanna, or a supplier or potential supplier of
Frost Hanna, except for the ownership of not more than 2% of the outstanding
stock of any company listed by a national stock exchange or the NASDAQ stock
market; (ii) owns, directly or indirectly, in whole or in part, any material
property, asset (other than cash) or right, real, personal or mixed, tangible or
intangible, which is associated with or necessary in the operation of the
business of Frost Hanna, as presently conducted; or (iii) has an interest in or
is, directly or indirectly, a party to any contract, agreement, lease or
arrangement pertaining or relating to Frost Hanna.
4.21 TAX MATTERS.
(a) All federal, state, local and foreign Tax returns and Tax
reports, if any, required to be filed with respect to the business or assets of
Frost Hanna and FHGB have been filed with the appropriate Governmental
Authorities in all jurisdictions in which such returns and reports are required
to be filed; all of the foregoing as filed are true, correct and complete, and
reflect accurately all liability for Taxes of Frost Hanna and FHGB for the
periods for which such returns relate; and all amounts shown as owing thereon
have been paid. None of such returns or reports have been audited by any
Governmental Authority. Neither Frost Hanna nor FHGB has filed any Tax
extension.
(b) All Taxes, if any, payable by Frost Hanna and FHGB or
relating to or chargeable against any of their assets, revenues or income have
been fully paid by such date or provided for by adequate reserves in the Frost
Hanna Financial Statements and all similar items due through the Closing will
have been fully paid by that date or provided for by adequate reserves on the
books of Frost Hanna and FHGB, which reserves shall remain available through the
Closing.
(c) None of Frost Hanna or FHGB will have any liability with
respect to any such Taxes including, but not limited to, interest and/or
penalties, in excess of the amount so paid or the reserves so
25
32
established on the books of Frost Hanna and FHGB. Neither Frost Hanna nor FHGB
is delinquent in the payment of any Tax. No deficiencies for any Tax have been
asserted against Frost Hanna or FHGB with respect to any Taxes which have not
been paid, settled or adequately provided for and there exists no basis for the
making of any such deficiency, assessment or charge.
(d) Neither Frost Hanna nor FHGB has waived any restrictions
on assessment or collection of taxes or consented to the extension of any
statute of limitations relating to federal, state, local or foreign taxation.
4.22 GUARANTIES. Neither Frost Hanna nor FHGB is a party to any
Guaranty.
4.23 VALIDITY OF FROST HANNA COMMON STOCK. The Frost Hanna Common Stock
to be issued in the Merger will, when issued in accordance with this Agreement,
be validly issued, fully paid and non-assessable.
4.24 ABSENCE OF CERTAIN BUSINESS PRACTICES. No employee or agent of
Frost Hanna or FHGB, and no officer or director of Frost Hanna or FHGB, and no
other Person acting at the direction of any of the foregoing or associated or
Affiliated with Frost Hanna or FHGB, and no other Person for whom Frost Hanna or
FHGB may be responsible, acting alone or together, has (i) received, directly or
indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer,
supplier, trading company, shipping company, governmental employee or other
Person with whom Frost Hanna or FHGB has done business directly or indirectly,
or (ii) directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, trading company, shipping company,
governmental employee or other Person who is or may be in a position to help or
hinder the business of Frost Hanna and FHGB (or assist Frost Hanna or FHGB in
connection with any actual or proposed transaction), in either event which (a)
may subject Frost Hanna or FHGB to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, or (b) if not given, may have an
adverse effect on the results of operations, assets, business, operations or
prospects of Frost Hanna or FHGB or may lead to suit or penalty in any private
or governmental litigation or proceeding.
4.25 PROXY STATEMENTS; DISCLOSURE DOCUMENT. None of the information
relating to Frost Hanna and FHGB included in the Frost Hanna Proxy Statement or
the Gaines Berland Disclosure Document (except as to the extent such information
relates to Gaines Berland or any of its Subsidiaries) at the respective times
that such documents are mailed to Gaines Berland's and Frost Hanna's
shareholders and at the time the Gaines Berland and Frost Hanna shareholders
meetings take place (subject, if required, to a reasonable period of time for
the parties hereto to take such action necessary to supplement or amend such
documents), contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Such documents, including any
amendments thereto, with respect to information pertaining to Frost Hanna, will
comply with, and the Frost Hanna Proxy Statement will be distributed to Frost
Hanna's shareholders in accordance with all applicable Laws and its Articles of
Incorporation and Bylaws.
4.26 DISCLOSURE. No representation or warranty of Frost Hanna or FHGB
contained in this Agreement or the schedules hereto, and no certificate or
notice furnished by or on behalf of Frost Hanna to Gaines Berland or their
agents pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading.
26
33
ARTICLE V
COVENANTS
During the period from the date of this Agreement to the Closing Date,
each of the parties, as applicable, agrees to perform the covenants set forth
below.
5.1 INTERIM OPERATIONS OF FROST HANNA AND GAINES BERLAND. Each of Frost
Hanna and Gaines Berland shall, and shall cause their respective Subsidiaries
to, operate their respective businesses only in the ordinary and usual course
consistent with past practices and shall use its reasonable efforts to (a)
preserve intact its business organization and the goodwill of its customers,
suppliers, employees and others having business relations with it and (b)
continuously maintain insurance coverage substantially equivalent to the
insurance coverage in existence on the date hereof. Except for entering into new
leases for real property and building and improving new offices at newly leased
premises, the sale of certain artwork owned by Gaines Berland, the distributions
of warrants to Principal Shareholders (which warrants were issued to Gaines
Berland from companies for which Gaines Berland acted as advisor, placement
agent or underwriter), and the funding of Gaines Berland's Subsidiaries'
operations in accordance with the terms hereof, or as otherwise expressly
contemplated herein or set forth on SCHEDULE 5.1, without the written consent of
the other (which shall not be unreasonably withheld), neither Frost Hanna nor
Gaines Berland shall, or shall or cause or permit any of its respective
Subsidiaries to: (i) except as expressly contemplated hereby, amend its Articles
or Certificate of Incorporation or Bylaws; (ii) issue, sell or authorize for
issuance or sale, shares of any class of its securities (including, but not
limited to, by way of stock split or dividend) or any subscriptions, options,
warrants, rights or convertible securities, except the issuance of not more than
100 shares of Common Stock to new employees of Gaines Berland who are accredited
investors and who are not currently Affiliates of Gaines Berland or any
Principal Shareholder in a manner which is lawful, does not adversely impact
Frost Hanna's shareholders and which could not result in liability to Gaines
Berland or Frost Hanna, and with the prior written consent of Frost Hanna (which
consent shall not be unreasonably withheld); (iii) redeem, purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock or any option,
warrant or other right to purchase or acquire any such shares, except for
redemptions of Gaines Berland Common Stock pursuant to the terms of agreements
with shareholders existing on the date hereof; (iv) declare or pay any dividend
or other distribution (whether in cash, stock or other property) with respect to
its capital stock; (v) voluntarily sell, transfer, surrender, abandon or dispose
of any of its assets or property rights (tangible or intangible), other than in
the ordinary course of business on arms-length terms to non-Affiliates
consistent with past practices; (vi) grant or make any mortgage or pledge or
subject itself or any of its properties or assets to any lien, charge or
encumbrance of any kind, except liens for Taxes not currently due or liens not
exceeding $100,000 in the aggregate; (vii) except for the use of margin credit
provided by its clearing broker in the case of Gaines Berland or its
Subsidiaries, create, incur or assume any liability or indebtedness for borrowed
money (including purchase money financing), except in the case of Gaines
Berland, in an amount not to exceed the amount reflected in the Gaines Berland
Financial Statements for February 28, 1999 in the aggregate; (viii) make or
commit to make any capital expenditures in excess of $100,000 in the aggregate;
(ix) grant any increase in the compensation payable or to become payable to
directors, officers or employees, other than merit increases to officers and
employees in the ordinary course of business consistent with past practices; (x)
enter into any agreement, arrangement or commitment that, if it existed on the
date hereof, would be a Frost Hanna Material Agreement or a Gaines Berland
Material Agreement, as the case may be, or amend or terminate any of same or any
existing Frost Hanna Material Agreement or Gaines Berland Material Agreement, as
the case may be; (xi) alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected;
(xii) enter into any commitment or transaction other than in the ordinary course
of business consistent with past practices or acquire the stock or a substantial
part of the business of any other Person; (xiii) take or omit to take any action
which would render any of its representations or warranties untrue or misleading
or which would be a breach of any of its covenants; (xiv) cancel or waive any
material debts, claims or rights or write off the value of any assets or
accounts receivable or increase the reserve for uncollectible
27
34
receivables, except as required by generally accepted accounting principles or
by Law; (xv) make any loans, advances or capital contributions to any Person,
except routine advances to employees in the ordinary course of their business in
non-material amounts or enter into or modify any termination or severance
arrangement with any employee or consultant; (xvi) take any action (other than
entering into this Agreement and consummating the transactions contemplated
hereby) which could reasonably be expected to have a Frost Hanna Material
Adverse Effect, in the case of Frost Hanna and its Subsidiaries, or a Gaines
Berland Material Adverse Effect, in the case of Gaines Berland and its
Subsidiaries; (xvii) make any Guaranty; (xviii) apply any of its assets to the
direct or indirect payment, discharge, satisfaction or reduction of any amount
payable directly or indirectly to or for the benefit of any Affiliate (except
for salary and benefits as currently in effect and except in accordance with
existing agreements and arrangements which have been disclosed to the other
parties in writing); or (xix) waive any stock repurchase rights, accelerate,
amend or change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant, director or other stock
plans or authorize cash payments in exchange for any options granted under any
of such plans; (xx) grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed on a schedule hereto,
or adopt any new severance plan; (xxi) amend or adopt any Gaines Berland Pension
Plan, Gaines Berland Plan, or Gaines Berland Welfare Plan; or (xxii) agree,
whether in writing or otherwise, to do any of the foregoing.
5.2 ACCESS.
(a) FROST HANNA ACCESS. Frost Hanna shall: (i) afford to
Gaines Berland and its agents and representatives reasonable access to the
properties, books, records and other information of Frost Hanna and FHGB,
provided that such access shall be granted upon reasonable notice and at
reasonable times during normal business hours in such a manner as to not
unreasonably interfere with normal business operations; (ii) use its reasonable
efforts to cause Frost Hanna's personnel, without unreasonable disruption of
normal business operations, to assist Gaines Berland in its investigation of
Frost Hanna and FHGB pursuant to this SECTION 5.2(a); and (iii) furnish promptly
to Gaines Berland all information and documents concerning the business, assets,
liabilities, properties and personnel of Frost Hanna and FHGB as Gaines Berland
may from time to time reasonably request. In addition, from the date of this
Agreement until the Closing Date, Frost Hanna shall cause one or more of its
officers to confer on a regular basis with officers of Gaines Berland and to
report on the general status of its ongoing operations.
(b) GAINES BERLAND ACCESS. Gaines Berland shall: (i) afford to
Frost Hanna and its agents and representatives reasonable access to the
properties, books, records and other information of Gaines Berland and its
Subsidiaries, provided that such access shall be granted upon reasonable notice
and at reasonable times during normal business hours in such a manner as to not
unreasonably interfere with normal business operations; (ii) use its reasonable
efforts to cause Gaines Berland's and its Subsidiaries' personnel, without
unreasonable disruption of normal business operations, to assist Frost Hanna in
its investigation of Gaines Berland and its Subsidiaries pursuant to this
SECTION 5.2(b); and (iii) furnish promptly to Frost Hanna all information and
documents concerning the business, assets, liabilities, properties and personnel
of Gaines Berland and its Subsidiaries as Frost Hanna may from time to time
reasonably request. In addition, from the date of this Agreement until the
Closing Date, Gaines Berland shall cause one or more of its officers to confer
on a regular basis with officers of Frost Hanna and to report on the general
status of its ongoing operations. Every two weeks, Gaines Berland shall provide
Frost Hanna with a summary of all complaints reportable under 95-81 against
Gaines Berland or any of its Subsidiaries, or their respective officers,
directors or employees.
5.3 CONFIDENTIALITY. Except as otherwise required by Law or in the
performance of obligations under this Agreement, any confidential or proprietary
information received by a party or its advisors from any other party shall be
kept confidential and shall not be used or disclosed for any purpose other than
in furtherance of the transactions contemplated by this Agreement. The
obligation of confidentiality shall not extend to information which (i) is or
becomes generally available to the public other than as a result of a disclosure
by a
28
35
party (or an Affiliate thereof) in violation of this Agreement, (ii) was in the
possession of a party prior to its receipt from such other party, (iii) becomes
available to a party on a nonconfidential basis from a source other than a party
to this Agreement, provided such source is not in violation of a confidentiality
agreement with the party providing such information or (iv) is required to be
disclosed by Law or any applicable rules of any stock exchange or the NASDAQ
stock market. Upon termination of this Agreement, each party shall, upon
request, promptly return or destroy any confidential information received from
the other party. The covenants of the parties contained in this SECTION 5.3
shall survive any termination of this Agreement.
5.4 NOTIFICATION. Each party to this Agreement shall promptly notify
the other parties in writing of the occurrence, or threatened occurrence, of:
(i) any event that, with the lapse of time or notice or both, would constitute a
breach of this Agreement by such party; (ii) any event that would cause any
representation or warranty made by such party in this Agreement to be false or
misleading in any respect; and (iii) any event which would have been required to
be disclosed herein had such event occurred on or prior to the date of this
Agreement. The updating of any schedule pursuant to this Section 5.4 shall not
be deemed to release any party for the breach of any representation, warranty or
covenant hereunder or of any other liability arising hereunder. If any event or
circumstance with respect to Gaines Berland or any Principal Shareholder should
occur or exist which would be required to be described in an amendment or
supplement to the Frost Hanna Proxy Statement or the Gaines Berland Disclosure
Document, or which would cause either such document to contain any untrue
statement of a material fact or omit to state a fact necessary to make the
statements contained therein not misleading, Gaines Berland shall promptly
notify Frost Hanna of such event or circumstance.
5.5 CONSENT OF GOVERNMENTAL AUTHORITIES AND OTHERS. Each of the parties
agrees to file, submit or request (and to cause its Affiliates to file, submit
or request) promptly after the date of this Agreement and to prosecute
diligently any and all Consents, Permits and Orders required to be filed or
submitted to any Governmental Authorities and to seek to resolve any objections
raised by any Governmental Authorities or self-regulatory organizations,
including those specified in SECTIONS 3.4 and 4.4. Each of Gaines Berland, and
Frost Hanna shall promptly make available to the other such information as each
of them may reasonably request relating to its business, assets, liabilities,
properties and personnel as may be required by each of them to prepare and file
or submit such applications and notices and any additional information requested
by any Governmental Authority, and shall update by amendment or supplement any
such information given in writing. Each of Gaines Berland, and Frost Hanna
represents and warrants to the other that such information, as amended or
supplemented, shall be true and not misleading.
5.6 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties shall use its reasonable efforts in good faith to
take or cause to be taken as promptly as practicable all reasonable actions that
are within its control to cause to be fulfilled: (i) those conditions precedent
to its obligations to consummate the Merger; and (ii) those actions upon which
the conditions precedent to the other party's obligations to consummate the
Merger are dependent. The parties shall use reasonable efforts to obtain all
Consents required in connection with the consummation of the transactions
contemplated by this Agreement.
5.7 NO OTHER NEGOTIATIONS. Except for the transactions contemplated by
this Agreement, unless and until this Agreement shall have been terminated as
provided herein, neither Gaines Berland nor any of its Subsidiaries nor Frost
Hanna shall (nor shall any of them permit any of their officers, directors,
agents, Subsidiaries or Affiliates to): directly or indirectly solicit,
encourage, initiate or participate in any negotiations or discussions with
respect to any offer or proposal to acquire all or any significant portion of
their business, properties or capital stock, whether by merger, purchase of
assets, strategic alliance or otherwise, or to sell any capital stock or debt of
them or their Subsidiaries in a public offering or otherwise. In the event any
party shall receive any such offer or proposal, it shall promptly inform the
others as to any such offer. In addition, none of such parties shall provide
other third parties with information to evaluate such a proposed transaction,
unless doing so is reasonably believed to be necessary to satisfy the fiduciary
duties of their respective Boards of Directors.
29
36
5.8 COOPERATION. The parties will cooperate with each other and shall
take all reasonable actions required to be taken under any applicable state blue
sky or securities laws to permit the issuance of the Frost Hanna Common Stock
pursuant to the Merger. The Frost Hanna Proxy Statement and the Gaines Berland
Disclosure Document shall be in form and substance reasonably acceptable to the
parties. The parties shall provide to one another written information about
themselves necessary for such documents to be prepared in compliance with
applicable law.
5.9 SHAREHOLDER APPROVAL. Each of Frost Hanna and Gaines Berland agrees
that it will take such action as may be necessary to duly and lawfully call,
notice, solicit proxies and convene as promptly as practicable a special meeting
of its respective shareholders for the purposes of (i) duly obtaining any
shareholder approvals required in connection with the transactions contemplated
hereby, (ii) in the case of Frost Hanna, amending Frost Hanna's Articles of
Incorporation to change its name to gbiNet, Inc., (iii) in the case of Frost
Hanna, electing the persons referenced on SCHEDULE 5.9 as directors of Frost
Hanna, effective as of the Effective Time, (iv) in the case of Frost Hanna,
amending Frost Hanna's Articles of Incorporation to add blank check preferred
stock in accordance with the Articles of Amendment attached hereto as EXHIBIT A,
and (v) in the case of Frost Hanna, to adopt the 1999 Performance Equity Plan,
the Annual Incentive Bonus Plan and the Special Performance Incentive Plan
(substantially in the form of EXHIBIT J). Each of Frost Hanna and Gaines Berland
agrees that its Board of Directors shall recommend in the Frost Hanna Proxy
Statement and the Gaines Berland Disclosure Document, respectively, and
otherwise that its shareholders approve the transactions contemplated hereby and
advise its shareholders that it has approved the Merger and the transactions
contemplated hereby and otherwise use its best efforts to obtain such approvals.
Each of Frost Hanna and Gaines Berland agrees that its Board of Directors shall
not withdraw, modify or change any such recommendation or recommend any other
transaction to its shareholders for approval.
5.10 PUBLIC STATEMENTS. The parties have agreed to the form of a press
release to be issued on the date hereof, a copy of which is attached as EXHIBIT
H. None of the parties hereto will issue any other public announcement and/or
press release concerning this Agreement without the prior written consent of the
other parties, which consents shall not be unreasonably withheld, except as
required by Law or the rules and regulations of NASD.
5.11 COMMISSION FILINGS. Frost Hanna shall timely file all reports and
other documents required to be filed by it with the Commission under the
Exchange Act (including a Form 8-K) from the date of this Agreement to the
Effective Date.
5.12 LISTING. Frost Hanna shall use its reasonable efforts as soon as
reasonably practicable to obtain, prior to the Effective Time, approval for
listing with NASD electronic bulletin board, the shares of Frost Hanna Common
Stock to be issued in the Merger. To the extent Frost Hanna would meet the
requirements for inclusion of the Frost Hanna Common Stock on the NASDAQ Small
Cap Market immediately after the Effective Time, the parties shall use their
best efforts to file the appropriate listing application with NASDAQ as soon as
reasonably practicable; provided, however, that any fees paid to NASDAQ shall
not be counted against the $4,500,000 threshold.
5.13 EMPLOYMENT AGREEMENTS. Gaines Berland shall cause each of the
Principal Shareholders to execute an Employment Agreement (including a
non-compete provision), effective as of the Effective Time, in the form of
EXHIBIT B hereto ("EMPLOYMENT AGREEMENTS").
30
37
5.14 NO SECURITIES TRANSACTIONS. Neither Gaines Berland nor any of its
Subsidiaries nor any Principal Shareholder shall engage in any transactions
involving the securities of Frost Hanna prior to the consummation of the Merger,
except that, after full dissemination of the transactions contemplated hereby,
Gaines Berland may act as agent for customers who place unsolicited orders for
Frost Hanna Common Stock, and Gaines Berland shall use its best efforts to cause
each of its officers, directors and employees not to engage in any such
restricted transaction.
5.15 OLD GAINES BERLAND PLAN. The Gaines Berland Retirement Trust
Profit Sharing Plan ("OLD GAINES BERLAND PLAN") shall be terminated as soon as
possible without cost, expense or liability to Gaines Berland, in excess of
$10,000 in the aggregate.
5.16 INVESTMENT INTENT LETTERS. Gaines Berland shall cause each of its
shareholders to execute and deliver to Frost Hanna an investment intent letter
in the form of EXHIBIT C.
5.17 NAME CHANGE. Immediately after the Effective Time, Frost Hanna
shall change its name to gbiNet, Inc.
5.18 RESIGNATIONS. Frost Hanna shall cause all of its officers and
directors to resign, effective the Effective Time.
5.19 SHAREHOLDERS' AGREEMENTS. Gaines Berland shall cause all
shareholders' agreements and similar arrangements with respect to Gaines Berland
Common Stock to be terminated prior to the Effective Time.
5.20 EMPLOYMENT AGREEMENTS. Frost Hanna shall cause all employment
agreements to which it is a party to be terminated.
5.21 DEMAND REGISTRATION RIGHTS. Frost Hanna shall use its reasonable
efforts to cause all demand registration rights with respect to its securities
to be terminated, if it can do so without cost or expense.
5.22 RELEASES. Gaines Berland shall cause the Principal Shareholders
and Frost Hanna shall cause its officers and directors to execute the general
releases ("Releases"), substantially in the form of EXHIBIT I.
5.23 LIFE INSURANCE. All insurance policies insuring the lives of
directors of Frost Hanna owned by Frost Hanna or as to which Frost Hanna is the
beneficiary shall be terminated or transferred to the designees of such
directors, so that Frost Hanna shall have no obligations to make premium
payments thereunder after the Effective Time.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 INVESTIGATION; NOTICES. The representations, warranties, covenants
and agreements set forth in this Agreement shall not be affected or diminished
in any way by the receipt of any notice pursuant to SECTION 5.4 or by any
investigation (or failure to investigate) at any time by or on behalf of the
party for whose benefit such representations, warranties, covenants were made.
All statements contained herein or in any schedule, certificate, exhibit, list
or other document delivered pursuant hereto shall be deemed to be
representations and warranties for purposes of this Agreement.
31
38
6.2 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties set forth in this Agreement shall terminate at the
Effective Time and shall not survive the Closing. No Principal Shareholder shall
be liable for any breach of any representation or warranty herein by Gaines
Berland.
6.3 SECURITIES ACTIVITIES. Gaines Berland agrees that no party to any
Employment Agreement shall engage in any action to the extent such party would
be prohibited from doing so under such Employment Agreement.
6.4 VOTING AGREEMENT. Each of the Principal Shareholders are,
concurrently with the execution and delivery hereof, executing and delivering a
Voting Agreement (the "VOTING AGREEMENT"), in the form of EXHIBIT D, pursuant to
which they will vote their Gaines Berland Common Stock in favor of the Merger.
6.5 TAX-FREE REORGANIZATION. The parties intend that the Merger be a
tax-free plan of reorganization in accordance with Section 368 of the Code, and
shall not take any position on any tax return inconsistent therewith.
6.6 INDEMNIFICATION; INSURANCE.
6.6.1 Frost Hanna shall, from and after the Effective Time,
indemnify, defend and hold harmless each person who is now, or who becomes prior
to the Effective Time, an officer or director of Frost Hanna or FHGB against (i)
all losses, claims, damages, costs, expenses, liabilities or judgments or amount
that are paid in settlement with the express written approval of the
indemnifying party (which approval shall not be withheld unreasonably) of or in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of Frost Hanna or FHGB, whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("INDEMNIFIED LIABILITIES"), and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated by this Agreement, in each case to
the full extent provided under the Articles of Incorporation and Bylaws of Frost
Hanna as in effect as of the date hereof or permitted under the Florida BCA, to
indemnify directors and officers.
6.6.2 For a period of six years after the Effective Date,
Frost Hanna shall, subject to applicable law, keep in effect provisions in its
Articles of Incorporation and Bylaws providing for exculpation of director and
officer liability and indemnification of the directors and officers of Frost
Hanna to the fullest extent permitted under the Florida BCA, which provision
shall not be amended except as required by applicable law or except to make
changes permitted by law that would enlarge the right of indemnification.
6.6.3 For a period of six years after the Effective Time,
Frost Hanna shall cause to be maintained in effect one or more policies of
directors' and officers' liability insurance with respect to any claim, action,
suit, proceeding or investigation arising from facts or events which occurred at
or before the Effective Time, and such policy or policies shall be with a
carrier or carriers satisfactory to the parties intended to be benefitted
thereby, and with the limits, deductibles and other characteristics no less
favorable than those set forth on SCHEDULE 6.6. Such policies shall be no less
favorable to the insureds than the policies acquired after the date of this
Agreement for the benefit of officers and directors of Frost Hanna. Any and all
such policies shall be issued by reasonably satisfactory insurance carriers,
shall have no uncustomary exclusions, and shall otherwise be in form and
substance satisfactory to those persons who are officers and directors of Frost
Hanna as of the date hereof. The premiums for such six-year period shall be paid
immediately after Closing and shall not be subtracted or counted in calculating
the minimum cash or cash equivalents required to be held as a condition to
Gaines Berland's obligations to close the transactions contemplated hereby
pursuant to Section 7.3(f).
32
39
6.6.4 The provisions of this Section 6.6 are intended for the
benefit of, and shall be enforceable by, each party indemnified pursuant to this
SECTION 6.6 and his or her heirs and representatives.
6.7 FURTHER ASSURANCES. The parties hereto shall deliver any and all
other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement.
6.8 FROST HANNA AMENDMENT TO ARTICLES OF INCORPORATION. Immediately
after the Effective Time, Frost Hanna will amend its Articles of Incorporation
as contemplated hereby.
6.9 USE OF NAME. After the Effective Time, none of the Principal
Shareholders shall establish or otherwise be associated with, as owner, partner,
shareholder, employee or otherwise, any entity engaged in any aspect of the
securities business which utilizes the name "Gaines" or "Berland" or any
variation thereof, or grant any other Person the right to do so; PROVIDED,
HOWEVER, notwithstanding anything to the contrary provided in this Agreement or
elsewhere, Joseph Berland will be permitted to us the name "Berland" or any
variation of "Berland" in connection with (i) the securities business so long as
it is in connection with Gaines Berland or so long as it is in furtherance of
the business of an organization with no more than five employees or independent
contractors or (ii) any business other than the securities business.
ARTICLE VII
CLOSING; CONDITIONS PRECEDENT; TERMINATION
7.1 CLOSING. Upon the terms and subject to the conditions hereof, the
consummation of the transactions contemplated by this Agreement (the "CLOSING")
shall take place at the offices of Gusrae, Kaplan & Bruno, 120 Wall Street, New
York, New York, as promptly as practicable and in any event within 15 days after
the satisfaction or waiver of the conditions precedent to the obligations of the
parties set forth in this Article VII (the "CLOSING DATE"), or on such other
date and at such other place as may be agreed to by the parties. At the Closing,
the parties shall deliver to each other such customary documents as may be
specified, or required to satisfy the conditions set forth, in SECTIONS 7.2, 7.3
and 7.4, and such other documents and instruments as each party may reasonably
request from the other parties. On the Closing Date, the parties shall cause to
be filed a Certificate of Merger with the Secretary of State of the State of New
York. The Closing shall be effective at 5:00 P.M., Eastern Time, on the date
(the "EFFECTIVE DATE") such Certificate of Merger are filed ("EFFECTIVE TIME").
All proceedings to be taken and all documents to be executed at the Closing
shall be deemed to have been taken, delivered and executed simultaneously, and
no proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
7.2 MUTUAL CONDITIONS PRECEDENT. The respective obligations of the
parties to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) GOVERNMENTAL CONSENTS. All Consents required by
Governmental Authorities and self-regulatory organizations for the consummation
of the transactions contemplated by this Agreement shall have been obtained
without any material conditions, and neither the Commission nor any
self-regulatory organization shall have raised any unresolved objection to the
Merger. All of such Consents shall have been obtained without the imposition of
any conditions which would materially adversely affect Frost Hanna's ability to
operate Gaines Berland or any of its Subsidiaries or business units following
the Closing.
(b) NO LITIGATION. No litigation, arbitration or other
proceeding shall be pending or, to the knowledge of the parties, threatened by
or before any court, arbitration panel or Governmental Authority; no Law
33
40
shall have been enacted after the date of this Agreement; and no judicial or
administrative decision shall have been rendered; in each case, which enjoins,
prohibits or materially restricts, or seeks to enjoin, prohibit or materially
restrict, the consummation of the transactions contemplated by this Agreement.
(c) SHAREHOLDER APPROVAL. Each of Frost Hanna and Gaines
Berland shall have obtained the approval of their respective shareholders
required for the consummation of the transactions contemplated therein; and the
approval of Frost Hanna's shareholders shall be the shareholder approval
required in Frost Hanna's prospectus, dated September 22, 1997.
(d) RELEASES. Each of the Releases shall have been executed
and delivered.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GAINES BERLAND. The
obligations of Gaines Berland to consummate the transactions contemplated by
this Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Frost Hanna and FHGB contained in this Agreement or in any
certificate or notice delivered pursuant to this Agreement shall be true and
correct in all material respects (except for representations and warranties
which are by their terms qualified by materiality, which shall be true and
correct in all respects after giving effect to the materiality qualifications
contained in such representations and warranties) as of the Closing Date with
the same force and effect as though made on and as of such date, except to the
extent that such representations and warranties by their terms are specifically
made as of an earlier date.
(b) COVENANTS PERFORMED. The covenants of Frost Hanna and FHGB
contained in this Agreement to be performed or complied with on or prior to the
Closing Date shall have been duly performed or complied with in all material
respects.
(c) CONSENTS. Frost Hanna shall have received all Consents
necessary to effectuate the transactions contemplated herein, all of which shall
have been obtained without the imposition of any materially adverse terms or
conditions.
(d) OPINION OF COUNSEL. Gaines Berland shall have received
from Akerman, Senterfitt & Eidson, P.A., legal counsel to Frost Hanna, an
opinion letter, dated the Closing Date, in form and substance reasonably
satisfactory to Gaines Berland, with respect to the matters set forth on EXHIBIT
E.
(e) CERTIFICATE OF FROST HANNA. Frost Hanna shall have
delivered to Gaines Berland a certificate executed by its President, dated the
Closing Date, certifying in such detail as Gaines Berland may reasonably request
(i) that the conditions specified in SECTIONS 7.3(a), (b) and (c) above have
been fulfilled and (ii) as to such other matters as Gaines Berland may
reasonably request.
(f) MINIMUM CASH. Frost Hanna shall have enough cash and cash
equivalent so that no adjustment to the Conversion Ratio shall be necessary
under SECTION 2.5.3.
(g) RESIGNATIONS. All of Frost Hanna's officers and directors
shall have resigned.
(h) RECORDS. Frost Hanna shall have turned over to Gaines
Berland all of its books and records.
(i) EMPLOYMENT AGREEMENTS. All employment agreements to which
Frost Hanna is a party shall have been terminated.
34
41
7.4 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FROST HANNA AND FHGB.
The obligations of Frost Hanna and FHGB to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Gaines Berland and the Principal Shareholders contained in
this Agreement or in any certificate or notice delivered pursuant to this
Agreement shall be true and correct in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true and correct in all respects after giving effect
to the materiality qualifications contained in such representations and
warranties) as of the Closing Date with the same force and effect as though made
on and as of such date, except to the extent such representations and warranties
by their terms are specifically made as of an earlier date.
(b) COVENANTS PERFORMED. The covenants of Gaines Berland and
the Principal Shareholders contained in this Agreement to be performed or
complied with on or prior to the Closing Date shall have been duly performed or
complied with in all material respects.
(c) NO MATERIAL ADVERSE CHANGE. There has been no Gaines
Berland Material Adverse Effect since February 28, 1999 and no event or
condition shall have occurred which has adversely affected or may reasonably be
expected to have a Gaines Berland Material Adverse Effect.
(d) CONSENTS. Gaines Berland shall have obtained all Consents
necessary to complete the transactions contemplated herein, all of which shall
have been obtained without the imposition of any materially adverse terms or
conditions.
(e) OPINION OF COUNSEL. Frost Hanna shall have received from
Gusrae, Kaplan & Bruno, Gaines Berland's counsel, an opinion letter, dated the
Closing Date, in form and substance reasonably satisfactory to Frost Hanna, with
respect to the matters set forth in EXHIBIT F.
(f) CERTIFICATE OF GAINES BERLAND, G-TRADE AND HOLDINGS.
Gaines Berland, G-Trade and Holdings shall have delivered to Frost Hanna a
certificate executed by their President, dated the Closing Date, certifying in
such detail as Frost Hanna may reasonably request, that the conditions specified
in SECTIONS 7.4(a), (b) and (c) above have been fulfilled, and certifying the
number of outstanding shares of Gaines Berland Common Stock immediately prior to
the Effective Time.
(g) AUDITOR'S LETTERS. Frost Hanna shall have received a
letter dated as of the date not more than three (3) days prior to the Effective
Date, the date of mailing of the Frost Hanna Proxy Statement and the Gaines
Berland Disclosure Document by Frost Hanna and Gaines Berland as contemplated
herein and the date of the shareholders' meetings of Frost Hanna and Gaines
Berland, from Goldstein Golub Kessler LLP, auditors for Gaines Berland addressed
to Frost Hanna and in form and substance customary for transactions of the type
contemplated hereby and reasonably satisfactory to Frost Hanna.
(h) SHAREHOLDERS' AGREEMENTS. All shareholders' agreements and
similar arrangements with respect to Gaines Berland Common Stock shall have been
terminated.
(i) EMPLOYMENT AGREEMENTS. Each of the Employment Agreements
shall have been executed and delivered.
(j) DISSENTERS' RIGHTS. The shareholders of Gaines Berland
shall not have duly exercised (and not withdrawn) dissenters' rights with
respect to 3% or more of the outstanding Gaines Berland Common Stock.
35
42
(k) INVESTMENT INTENT LETTERS. Each Shareholder of Gaines
Berland shall have executed and delivered an investment intent letter in the
form of EXHIBIT C.
7.5 TERMINATION; TERMINATION FEE. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing: (i) at any time by
mutual consent of the parties; (ii) by Frost Hanna or Gaines Berland if the
Closing has not occurred on or prior to October 31, 1999 (the "TERMINATION
DATE"), provided the failure of the Closing to occur by such date is not the
result of the failure of the party seeking to terminate this Agreement to
perform or fulfill any of its obligations hereunder; (iii) by Gaines Berland at
any time in its sole discretion if any of the representations or warranties of
Frost Hanna or FHGB in this Agreement are not in all material respects true and
accurate or if Frost Hanna or FHGB breaches in any material respect any covenant
(including, but not limited to, covenants under SECTION 5.9) contained in this
Agreement, provided that if such misrepresentation or breach is curable, it is
not cured prior to October 31, 1999, or such other date as the parties may agree
in writing; (iv) by Frost Hanna at any time in its sole discretion if any of the
representations or warranties of Gaines Berland in this Agreement are not in all
material respects true and accurate or if Gaines Berland breaches in any
material respect any covenant (including, but not limited to, covenants under
SECTION 5.9) contained in this Agreement, provided that if such
misrepresentation or breach is curable, it is not cured prior to October 31,
1999, or such other date as the parties may agree in writing; (v) by Frost Hanna
if Gaines Berland fails to obtain the required vote of its shareholders at a
meeting of shareholders duly convened therefor or at any adjournment thereof; or
(vi) by Frost Hanna or Gaines Berland if Frost Hanna fails to obtain the
required vote of its shareholders at a meeting of shareholders duly convened
therefor or at any adjournment thereof; provided, HOWEVER, that the right to
terminate this Agreement under SUBSECTIONS (v) AND (vi) shall not be available
to Frost Hanna, Gaines Berland, Holdings or G-Trade where the failure to obtain
shareholder approval of such party was caused by the act or failure to act of
such party and such act or failure to act constitutes a material breach by such
party of this Agreement; provided, further, that the right to terminate this
Agreement under SUBSECTION (vi) shall not be available to Gaines Berland if any
Person signing a Voting Agreement fails to vote in favor of the Merger and the
transactions contemplated hereby at the meeting of Gaines Berland's, Holdings'
and G-Trade's shareholders. If this Agreement is terminated pursuant to this
SECTION 7.5, written notice thereof shall promptly be given by the party
electing such termination to the other party and, subject to the expiration of
the cure periods provided in clauses (iii) and (iv) above, if any, this
Agreement shall terminate without further actions by the parties and, except as
provided in this SECTION 7.5, no party shall have any further obligations under
this Agreement; provided that any termination of this Agreement pursuant to this
SECTION 7.5 shall not relieve any party from any liability for any intentional
or willful breach or violation hereof; PROVIDED, FURTHER that a breach of
SECTION 5.9 shall not be deemed an intentional or willful breach if the Board of
Directors believed in good faith and upon advise of counsel that such a breach
was necessary for it to fulfill its fiduciary interests of its shareholders. In
the event of a termination of this Agreement, the exclusive remedy of the
parties hereunder (except for willful or intentional breaches) shall be as set
forth in this Section 7.5. Notwithstanding the termination of this Agreement,
the respective obligations of the parties under SECTIONS 5.3, and Article VIII
shall survive the termination of this Agreement.
In the event this Agreement is terminated by Gaines Berland pursuant to
SECTION 7.5(iii), Frost Hanna shall promptly, but in no event later than ten
business days after the date of such termination, pay to Gaines Berland,
Holdings and G-Trade a fee equal to $250,000 in immediately available funds. In
the event this Agreement is terminated by Frost Hanna pursuant to SECTION
7.5(iv), Gaines Berland, Holdings and G-Trade shall promptly, but in no event
later than ten business days after the date of such termination, pay to Frost
Hanna a fee equal to $250,000 in immediately available funds. In the event this
Agreement is terminated by Gaines Berland pursuant to SECTION 7.5(vi) after
Frost Hanna's Board of Directors withdrew its recommendation to its shareholders
to approve the Merger because it believed that it was required to do so to
satisfy its fiduciary duties to its shareholders, then Frost Hanna shall
promptly, but in no event later than 10 days after such termination, pay to
Gaines Berland a fee of $100,000 in immediately available funds. The parties
acknowledge that the provisions set forth in this SECTION 7.5 are an integral
part of the transactions contemplated by this Agreement, that without such
provisions the parties would not have entered into this Agreement and that the
above-referenced
36
43
fees are liquidated damages and not penalties, are intended to, among other
things, compensate the parties for expenses incurred in connection herewith.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. Any notice or other communication under this Agreement
shall be in writing and shall be delivered personally or sent by prepaid
overnight courier with guaranteed next day delivery to the parties at the
addresses set forth below their names on the signature pages of this Agreement
(or at such other addresses as shall be specified by the parties by like
notice). Such notices, demands, claims and other communications shall be deemed
given when actually received or in the case of delivery by overnight service
with guaranteed next day delivery, the next day or the day designated for
delivery. A copy of any notices delivered to Frost Hanna shall also be sent to
Teddy D. Klinghoffer, Esq., Akerman, Senterfitt & Eidson, P.A., One Southeast
Third Avenue, Miami, Florida 33131. A copy of any notices delivered to Gaines
Berland shall also be delivered to Martin Kaplan, Esq., Gusrae, Kaplan & Bruno,
120 Wall Street, New York, New York 10005.
8.2 ENTIRE AGREEMENT. This Agreement contains every obligation and
understanding among the parties relating to the subject matter hereof and merge
all prior discussions, negotiations and agreements, if any, between them, and
none of the parties shall be bound by any representations, warranties,
covenants, or other understandings, other than as expressly provided or referred
to herein.
8.3 ASSIGNMENT. This Agreement may not be assigned by any party without
the written consent of the other party. Subject to the preceding sentence, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, heirs, personal representatives, legal
representatives, and permitted assigns.
8.4 WAIVER AND AMENDMENT. Any representation, warranty, covenant, term
or condition of this Agreement which may legally be waived, may be waived, or
the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereof may
be amended by the parties hereto at any time. Any such waiver, extension or
amendment shall be evidenced by an instrument in writing executed on behalf of
the appropriate party by a person who has been authorized by its Board of
Directors to execute waivers, extensions or amendments on its behalf. No waiver
by any party hereto, whether express or implied, of its rights under any
provision of this Agreement shall constitute a waiver of such party's rights
under such provisions at any other time or a waiver of such party's rights under
any other provision of this Agreement. No failure by any party hereto to take
any action against any breach of this Agreement or default by another party
shall constitute a waiver of the former party's right to enforce any provision
of this Agreement or to take action against such breach or default or any
subsequent breach or default by such other party.
8.5 NO THIRD PARTY BENEFICIARY. Except as set forth in Section 6.6,
nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any Person other than the parties hereto and
their respective successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.
8.6 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.
37
44
8.7 EXPENSES. All expenses (including, without limitation, legal fees
and expenses, investment banking fees, fees and expenses of accountants)
incurred by Gaines Berland, Holdings and G-Trade in connection with the
transactions contemplated hereby will be borne by Gaines Berland , Holdings and
G-Trade and all expenses (including, without limitation, legal fees and
expenses, investment banking fees, fees and expenses of accountants) incurred by
Frost Hanna or FHGB in connection with the transactions contemplated hereby will
be borne by Frost Hanna, except that Harter Financial shall be issued 150,000
restricted shares of Frost Hanna Common Stock.
8.8 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
8.9 COUNTERPARTS; CONSTRUCTION. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. Any telecopied
version of any manually executed signature page shall be deemed a manually
executed original. Each provision of this Agreement shall be independent of all
other provisions, and no provision shall limit any other provision.
8.10 LITIGATION; PREVAILING PARTY. In the event of any litigation with
regard to this Agreement, the prevailing party shall be entitled to receive from
the non-prevailing party and the non-prevailing party shall pay upon demand all
reasonable fees and expenses of counsel for the prevailing party.
8.11 INJUNCTIVE RELIEF. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including, without limitation, injunctive relief, specific performance or
other equitable remedies in addition to all other remedies provided hereunder or
available to the parties hereto at law or in equity.
8.12 REMEDIES CUMULATIVE. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
8.13 PARTICIPATION OF PARTIES; CONSTRUCTION: INDEPENDENT COUNSEL. The
parties hereto acknowledge that this Agreement and all matters contemplated
herein, have been negotiated among all parties hereto and their respective legal
counsel and that all such parties have participated in the drafting and
preparation of this Agreement from the commencement of negotiations at all times
through the execution hereof. This Agreement shall be construed and interpreted
without regard to presumption or other rule or interpretation against the party
who may have had primary responsibility for drafting this Agreement. Each of the
Principal Shareholders has been represented by his own independent legal counsel
in connection with the transactions contemplated hereby.
8.14 GOVERNING LAW. This Agreement has been entered into and shall be
construed and enforced in accordance with the Laws of the State of New York
without reference to the choice of Law principles thereof.
8.15 JURISDICTION AND VENUE. This Agreement shall be subject to the
exclusive jurisdiction of the courts of the City, County and State of New York
which shall be the exclusive jurisdiction and venue for disputes, actions or
lawsuits arising out of or relating to this Agreement or the transactions
contemplated hereby. The parties to this Agreement agree that any breach of any
term or condition of this Agreement shall be deemed to be a breach occurring in
the City, County and State of New York by virtue of a failure to perform an act
required to be performed in the City, County and State of New York and
irrevocably and expressly agree to submit to the jurisdiction of the courts of
the City, County and State of New York for the purpose of resolving any disputes
among the parties relating to this Agreement or the transactions contemplated
hereby. The parties irrevocably waive, to the fullest extent permitted by Law,
any objection which they may now or hereafter have to the laying
38
45
of venue of any suit, action or proceeding arising out of or relating to this
Agreement, or any judgment entered by any court in respect hereof brought in the
City, County and State of New York, and further irrevocably waive any claim that
any suit, action or proceeding brought in the City, County and State of New York
has been brought in an inconvenient forum.
[SIGNATURE PAGE FOLLOWS]
39
46
IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
FROST HANNA CAPITAL GROUP, INC.
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 327 Plaza Real
Boca Raton, FL 33432
FHGB ACQUISITION CORPORATION
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 327 Plaza Real
Boca Raton, FL 33432
GAINES, BERLAND INC.
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 1055 Stewart Avenue
Beth Page, NY 11714
G-TRADE CAPITAL CORP.
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 1055 Stewart Avenue
Beth Page, NY 11714
40
47
GAINES BERLAND HOLDINGS, INC.
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 1055 Stewart Avenue
Beth Page, NY 11714
41
48
LIST OF SCHEDULES
SCHEDULE DESCRIPTION
-------- -----------
1 List of Principal Shareholders
3.1 Qualification
3.4 Consents of Governmental Authorities
3.5 Financial Statements
3.7 Legal Proceedings
3.8 Brokers
3.9 Material Adverse Changes
3.11 Capitalization
3.13(a) Liens
3.13(b) Intellectual Property
3.14 Governmental Authorizations
3.15 Insurance Policies
3.16(b) Employment
3.16(c) Employment
3.16(d) Plans
3.16(e) Personnel
3.17 Material Agreements
3.18 Accounts
3.19 Inventory of Securities
3.20 Related Party Transactions
3.21(a) Taxes
3.22 Guaranties
3.25 Broker-Dealer
3.27 Investment Intent
4.1 Qualification
4.3 No Violation or Conflict
4.5 Financial Statements
42
49
SCHEDULE DESCRIPTION
-------- -----------
4.7 Legal Proceedings
4.8 Brokers
4.9 Material Adverse Changes
4.11 Capitalization
4.12 Options
4.13 Properties
4.14 Consents and Permits
4.15 Insurance
4.16(c) Employment Agreements
4.16(e) Directors and Officers
4.17 Material Agreements
4.18 Accounts
4.20 Related Party Transactions
5.1 Interim Operations
5.9 Directors
6.6 Indemnification and Insurance
43
50
LIST OF EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
A Articles of Amendment
B Form of Employment Agreement
C Form of an Investment Intent Letter
D Form of Voting Agreement
E Form of Opinion of Counsel from Akerman, Senterfitt & Eidson, P.A.
F Form of Opinion of Counsel from Gusrae, Kaplan & Bruno
G Certificate of Merger
H Form of a Press Release
I Form of General Releases
J Plans
44