EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July
31, 2000 is by and between GlobalNetSecurities Mergerco, Inc., a New York
corporation ("Mergerco"), GlobalNet ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
("GLBN"), ▇▇▇▇▇▇ ▇▇▇▇ Securities Group, Inc., a New York corporation ("▇▇▇▇▇▇"),
and the stockholders of ▇▇▇▇▇▇ listed on Exhibit A attached hereto and made a
part hereof (the "Stockholders").
R E C I T A L S:
A. The Stockholders own all of the issued and outstanding shares (the
"▇▇▇▇▇▇ Shares") of common stock, par value $.0001 per share, of ▇▇▇▇▇▇ (the
"▇▇▇▇▇▇ Common Stock").
B. GLBN owns all of the issued and outstanding shares of Mergerco.
C. The respective Boards of Directors of GLBN, Mergerco and ▇▇▇▇▇▇ and
the Stockholders deem it advisable and generally to the advantage and welfare of
all the parties that Mergerco be merged with and into ▇▇▇▇▇▇ under the terms and
conditions set forth herein (the "Merger"), and that the Merger to be effective
pursuant to the New York Business Corporation Law.
D. For United States income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Code and that this Agreement qualifies as a plan of
reorganization as defined in Treasury Regulation 1.368-2(g).
E. On the Effective Date (as defined below) of the Merger, each
outstanding share of ▇▇▇▇▇▇ Common Stock shall be converted into 13,302.753
shares of GLBN Common Stock, $.001 par value per share (the "GLBN Common
Stock").
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, Mergerco, GLBN, ▇▇▇▇▇▇ and
the Stockholders agree as follows:
1. Definitions.
"Adverse Consequences" means all material charges, complaints, notices,
actions, suits, proceedings, hearings, investigations, claims, demands,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including all attorneys' fees and court costs
in any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before an arbitrator.
"Affiliate" means, with regard to any person, (a) any person, directly
or indirectly, controlled by, under common control of, or controlling such
person, (b) any person that, through contract, relationship or otherwise, can
direct or cause direction of management of such person's affairs, (c) any
director, officer, partner or individual holding a similar position in respect
of such person, and (d) any member of such person's family residing in the same
household.
"Agency" has the meaning set forth in Section 7(hh)(ii).
"Assets" means all of ▇▇▇▇▇▇'▇ property and assets, real, personal or
mixed, tangible or intangible, of every kind or description, wherever located.
"Balance Sheet" has the meaning set forth in Section 7(u)(i) below.
"Balance Sheet Date" has the meaning set forth in Section 7(u)(i)
below.
"Business" means the operation as a full service securities
broker-dealer as currently conducted by ▇▇▇▇▇▇.
"Closing" has the meaning set forth in Section 5 below.
"Closing Date" has the meaning set forth in Section 5 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in Section 8(d)
below.
"▇▇▇▇▇▇ Benefit Plans" has the meaning set forth in Section 7(y) below.
"▇▇▇▇▇▇ Common Stock" has the meaning set forth in the recitals to this
Agreement.
"▇▇▇▇▇▇ Disclosure Schedule" has the meaning set forth in Section 7
below.
"▇▇▇▇▇▇ ERISA Plan" has the meaning set forth in Section 7(y) below.
"▇▇▇▇▇▇ Financial Statements" has the meaning set forth in Section
7(u)(i) below.
"▇▇▇▇▇▇ Intellectual Property" means all (a) trademarks, service marks,
trade dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data, and
documentation (other than software licensed from third parties), (d) trade
secrets and confidential Business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, underwriting processes and techniques, research
and development information, plans, proposals, copyrightable works, financial,
marketing, and Business data, pricing and cost information, Business and
marketing plans, and client lists and information), (e) other proprietary
rights, and (f) copies and tangible embodiments thereof (in whatever form or
medium).
"▇▇▇▇▇▇ Shares" has the meaning set forth in the recitals to this
Agreement.
"Difference" means (A) the sum of (x) the number of GLBN Shares then
held by a Stockholder multiplied by the October Value, plus (y) the gross
proceeds received by such Stockholder for GLBN Shares previously sold by such
Stockholder, less (B) the product of $12.50 multiplied by the number of GLBN
Shares set forth opposite such Stockholder's name on Exhibit A. For purposes of
this definition, the gross proceeds received by the Stockholder shall include
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such Stockholders pro rata portion of the GLBN Indemnity Common Stock (as
defined in the Escrow Agreement) released to GLBN pursuant to and valued in
accordance with the terms of the Escrow Agreement.
"Documents" has the meaning set forth in Section 7(b) below.
"Effective Date" has the meaning set forth in Section 2(b) below.
"Encumbrances" means mortgages, charges, pledges, security interests,
liens, encumbrances, actions, claims, demands and equities of any nature
whatsoever or howsoever arising and any rights or privileges capable of becoming
any of the foregoing.
"ERISA" has the meaning set forth in Section 7(y) below.
"Escrow Agent" shall be Broad and ▇▇▇▇▇▇.
"Escrow Agreement" has the meaning set forth in Section 2(d) below.
"Exchange" has the meaning set forth in the recitals to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules promulgated thereunder.
"GAAP" means United States generally accepted accounting principles,
the accounting principles and auditing standards so described and promulgated by
the American Institute of Certified Public Accountants which are applicable as
at the date on which any calculation or audit, as applicable, made hereunder is
to be effective or as at the date of any financial statements or audit opinion
referred to herein, as the case may be, consistently applied in accordance with
past practices.
"GLBN Common Stock" has the meaning set forth in the recitals to this
Agreement.
"GLBN Intellectual Property" means all (a) trademarks, service marks,
trade dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data, and
documentation (other than software licensed from third parties), (d) trade
secrets and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, underwriting processes and techniques, research
and development information, plans, proposals, copyrightable works, financial,
marketing, and business data, pricing and cost information, business and
marketing plans, and client lists and information), (e) other proprietary
rights, and (f) copies and tangible embodiments thereof (in whatever form or
medium).
"GLBN Preferred Stock" has the meaning set forth in Section 6(g)(ii).
"GLBN Shares" has the meaning set forth in Section 2(d) below.
"Holdback Amount" has the meaning set forth in Section 2(d) below.
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"Indemnitee" has the meaning set forth in Section 12(c) below.
"Indemnitor" has the meaning set forth in Section 12(c) below.
"Knowledge" means and includes only (i) with respect to each
Stockholder, the actual knowledge or awareness of each Stockholder and (ii) with
respect to ▇▇▇▇▇▇, the actual knowledge or awareness of the Stockholders (except
for Messrs. Dubofsky and ▇▇▇▇▇▇) and the actual knowledge and awareness of
▇▇▇▇▇▇'▇ officers, directors or key employees primarily responsible for the
matter in question and (iii) the knowledge or awareness which a prudent business
person would have obtained in the conduct of his business after making
reasonable inquiry and reasonable diligence with respect to the particular
matter in question. In particular, the knowledge or awareness of ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇ shall be
imputed to ▇▇▇▇▇▇ and to each other.
"Law(s)" shall mean any statute, regulation, rule, judgment, ordinance,
order, decree, stipulation, injunction, charge or other restrictions of any
federal, state, or local government, governmental agency or court.
"Leased Premises" means all premises leased by ▇▇▇▇▇▇ under the Lease.
"Lease" means the lease under which ▇▇▇▇▇▇ leases its real property, as
listed in Schedule 7(p) of the ▇▇▇▇▇▇ Disclosure Schedule to be attached hereto.
"Liability" means any liability, obligation, debt or commitment
(whether known or unknown, whether absolute or contingent, accrued or unaccrued,
asserted or unasserted, liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lock-Up" has the meaning set forth in Section 7(c) below.
"Material Adverse Effect" or "Material Adverse Change" means the
conduct or matter in question has a material adverse effect on the business,
operations, property or financial or other condition of Mergerco or GLBN, taken
as a whole, or in the case of ▇▇▇▇▇▇, involves a matter or liability exceeding
$25,000, or on the ability of ▇▇▇▇▇▇, Mergerco or GLBN, as the case may be, to
consummate the transactions contemplated hereby.
"Maximum Number" means 1,100,000 shares of GLBN Common Stock.
"Maximum Cash Amount" means an amount equal to 25% of the sum of: (i)
the value of GLBN Shares issuable to the Stockholders on the Effective Date,
determined by reference to the mean between the high and low sale price of a
share of GLBN Common Stock on the Effective Date as reported on the Nasdaq
National Market, and, for this purpose, excluding the Holdback Amount, the
▇▇▇▇▇▇ Escrow Amount and the Supplemental GLBN Shares; plus (ii) the value of
the Supplemental GLBN Shares issued to the Stockholders, determined by reference
to the lower of the mean between the high and low sale price of a share of GLBN
Common Stock on the Effective Date or date that such Supplemental GLBN Shares
are issued to the Stockholders in each case as reported on the Nasdaq National
Market (or other national securities exchange on which the
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GLBN Common Stock shall at such time be listed), less any portion of such
payment of Supplemental GLBN Shares or cash payment pursuant to Section 3
treated as interest or in the nature of interest pursuant to Section 483 or 1274
of the Code; plus (iii) the value of any portion of the Holdback Amount and the
▇▇▇▇▇▇ Escrow Amount released from the Escrow Agreement to the Stockholders (and
not transferred to ▇▇. ▇▇▇▇▇▇), determined by reference to the lower of the mean
between the high and low sale price of a share of GLBN Common Stock on the
Effective Date or on the date that such GLBN Shares are released from the Escrow
Agreement to the Stockholders, in each case, as reported on the Nasdaq National
Market (or other national securities exchange on which the GLBN Common Stock
shall at such time be listed).
"Merger" has the meaning set forth in the recitals to this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"NYBCL" means the New York Business Corporation Law.
"October Value" means the average closing sale price of a share of GLBN
Common Stock as reported on the Nasdaq National Market or any other stock
exchange or national securities exchange on which the GLBN Common Stock shall at
such time be listed for the ten (10) consecutive trading days ending with and
including October 31, 2001.
"Operative Agreements" has the meaning set forth in Section 6(e) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Person" means and includes any individual, corporation, partnership,
firm, joint venture, syndicate, association, trust, government, governmental
agency or board or commission or authority, and any other form of entity or
organization.
"▇▇▇▇▇▇ Escrow Amount" has the meaning set forth in Section 2(d)(2)
below.
"Release Date" has the meaning set forth in Section 2 below.
"SEC" means the Securities and Exchange Commission.
"SEC Filings" has the meaning set forth in Section 6(k) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means an agreement granting a creditor or client
of ▇▇▇▇▇▇ a Security Interest in any of ▇▇▇▇▇▇'▇ Assets, tangible or intangible,
which Security Interest may be perfected either by the secured party taking
possession of the collateral described in the agreement or by filing financing
statements in the proper public records.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other Lien, whether or not arising in the Ordinary
Course of Business or incurred in connection with the borrowing of money,
created by or arising under a Security Agreement.
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"SRO" has the meaning set forth in Section 7(x).
"Supplemental GLBN Shares" means such number of additional shares of
GLBN Common Stock equal to the Difference divided by the October Value. In no
event shall any fractional Supplemental GLBN Shares be issued; fractional shares
of (x).4 or less shall be rounded down to the nearest whole share and (y).5 or
greater shall be rounded up to the nearest whole share.
"Surviving Corporation" has the meaning set forth in Section 2(a)
below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated,
or other tax, including any interest, penalty, or addition thereto.
"Third Party Claim" has the meaning set forth in Section 12(c).
"Transactions" has the meaning set forth in Section 2(e) below.
"Unwind Arbiter" has the meaning set forth in Section 2(e) below.
2. The Merger.
(a) The Merger.
(i) Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the NYBCL, at the Effective Date,
Mergerco shall be merged with and into ▇▇▇▇▇▇. As a result of the Merger, the
separate existence of Mergerco shall thereupon cease, and ▇▇▇▇▇▇ shall continue
as the surviving corporation of the Merger (the "Surviving Corporation").
(ii) The following individuals shall be appointed as
officers of the Surviving Corporation in the following capacities immediately
following the Effective Date:
▇▇▇▇ ▇. ▇▇▇▇▇▇ President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Secretary and Treasurer
(iii) the following individuals shall be elected as
directors of the Surviving Corporation immediately following the Effective Date,
in each case, until their respective successors are duly elected and qualified:
▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
(iv) The Merger shall have the effects set forth in
Section 906 of the NYBCL.
(b) Effective Date. The Merger shall become effective on the
date and at the time (the "Effective Date") on which a properly executed
certificate of merger is filed and becomes effective with the Secretary of State
of the State of New York. The Certificate of Merger so filed shall be
substantially in the form of Exhibit B attached hereto with such changes as the
Boards of Directors of Mergerco and ▇▇▇▇▇▇ shall mutually approve.
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(c) Conversion Price. Subject to the provisions contained in
this Agreement, each outstanding share of ▇▇▇▇▇▇ Common Stock will be converted
into the right to receive 13,302.753 shares of GLBN Common Stock.
(d) Manner of Converting Shares.
(i) Subject to the provisions hereof, at the Effective
Date, by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations shall be converted as
follows:
(1) Each of the shares of capital stock of Mergerco
issued and outstanding immediately prior to the Effective Date shall remain
outstanding as shares of common stock of the Surviving Corporation; and
(2) Each outstanding share of ▇▇▇▇▇▇ Common Stock held
by the Stockholders shall be converted into 13,302.753 shares (or an aggregate
to all Stockholders of 1,450,000 shares of GLBN Common Stock) of GLBN Common
Stock in accordance with the provisions of Section 2(c) above (the "GLBN
Shares"), and (x) 75,000 shares of the GLBN Shares (the "Holdback Amount") and
(y) an additional 100,000 shares of the GLBN Shares (the "▇▇▇▇▇▇ Escrow Amount")
shall be then transferred to the Escrow Agent pursuant to the terms and
conditions of an Escrow Agreement between Mergerco, GLBN, the Stockholders and
the Escrow Agent (the "Escrow Agreement") in the form annexed hereto as Exhibit
C. The Holdback Amount, net of any amounts set off pursuant to Section 12(g)
hereof, shall be released to the Stockholders 12 months after the Closing Date
(the "Release Date") pursuant to the terms and conditions of the Escrow
Agreement. The ▇▇▇▇▇▇ Escrow Amount shall be released to the Stockholders
pursuant to the terms and conditions of the Escrow Agreement. No fraction of a
share of GLBN Common Stock will be issued. Instead, each fraction of a share
shall be rounded so that the Stockholders shall receive the number of GLBN
Common Stock set forth on Exhibit A.
(e) Unwinding Contingency. In the event that the approval of
the transactions described herein by the NASD has not been procured on or before
December 31, 2000, then the transactions described herein (the "Transactions")
shall be rescinded and GLBN shall return to the Stockholders all of the issued
and outstanding shares of ▇▇▇▇▇▇ and the Stockholders shall return to GLBN, the
GLBN Shares. If the Transactions are rescinded pursuant to this Section, they
shall be rescinded as of the Closing Date and each of the Stockholders, GLBN and
Mergerco shall take reasonable actions to place each other, from an economic
perspective, in the same relative position they would have been in if the
Transactions had never occurred. If the Transactions are so rescinded, it is the
intention of the Parties that the transactions be deemed never to have occurred
for Tax purposes and the Parties shall file all Tax returns consistent with such
intention. Any disputes with respect to the procedures for, and actions with
respect to the unwinding of the Transactions will be subject to resolution by a
nationally recognized independent public accounting firm determined by agreement
of the Stockholders and GLBN at the time of the unwinding (the "Unwind
Arbiter"); provided, however, that GLBN shall be responsible for any fees and
expenses incurred by the Unwind Arbiter. If the Parties are unable to agree upon
an Unwind Arbiter, each Party shall select an arbiter and the selected arbiters
shall appoint the Unwind Arbiter. The decision of the Unwind Arbiter shall be
final and binding on the Parties.
3. Contingent Payments.
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(a) Supplemental GLBN Shares. Notwithstanding the foregoing, if the
October Value is less than $12.50, then each Stockholder will be entitled to
receive the Supplemental GLBN Shares; provided, however, that in no event shall
GLBN be required to deliver an aggregate amount of Supplemental GLBN Shares in
excess of the Maximum Number. GLBN shall issue and deliver the Supplemental GLBN
Shares to the Stockholders as promptly as practicable but in no event later than
November 30, 2001.
(b) Contingent Cash Payments. In the event the product of the
Maximum Number and the October Value is less than the aggregate amount of the
Difference (this shortfall is hereinafter referred to as the "Shortfall"), then
GLBN shall pay cash to each Stockholder (pro rata in proportion to their
respective Difference) in an amount equal to the Shortfall; provided, however,
that in no event shall GLBN be required to make aggregate cash payments pursuant
to this Section 3 in excess of the Maximum Cash Amount. GLBN shall deliver the
applicable cash payments to the Stockholders as promptly as practicable but in
no event later than November 30, 2001.
4. No Other Consideration. Other than as described in Sections 2 and 3
above, the Parties do not contemplate the exchange or payment of any other
consideration, regardless of form. The GLBN Shares to be issued in connection
with the consummation of the Exchange will not be registered pursuant to the
Securities Act or under the applicable securities laws of the respective states
where Mergerco, GLBN or ▇▇▇▇▇▇ are incorporated except as provided for herein.
The number of ▇▇▇▇▇▇ Shares held by each Stockholder and the number of GLBN
Shares that each Stockholder shall receive after the Exchange are all set forth
on Exhibit A attached hereto.
5. Closing.
(a) The closing of the transactions contemplated hereby (the
"Closing") will take place at the offices of ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇,
LLP in New York on July 31, 2000, or at such other time and at such other place
as may be mutually agreed upon by GLBN, Mergerco, ▇▇▇▇▇▇ and the Stockholders
(the "Closing Date").
(b) Documents to be Delivered by ▇▇▇▇▇▇ and the Stockholders. At
the Closing, the Stockholders will deliver, or cause to be delivered, to
Mergerco the following:
(i) certificates of compliance or certificates of good
standing of ▇▇▇▇▇▇, as of the most recent practicable
date, from the State of New York;
(ii) stock certificates for the ▇▇▇▇▇▇ Shares duly endorsed in
blank for transfer;
(iii) duly executed employment agreements for ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ substantially in the form as
attached hereto as Exhibit D;
(iv) certificates of incumbency for the authorized officers of
▇▇▇▇▇▇;
(v) an opinion of counsel to ▇▇▇▇▇▇ substantially in the form
as attached hereto as Exhibit E;
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(vi) duly executed Escrow Agreement between the Stockholders,
Mergerco, GLBN and the Escrow Agent, substantially on the
form attached hereto as Exhibit C;
(vii) a certificate of the Chief Executive Officer or President
and Secretary of ▇▇▇▇▇▇ on the form attached hereto as
Exhibit F;
(viii) such other evidence of the performance of all covenants
and satisfaction of all conditions required of ▇▇▇▇▇▇ and
the Stockholders by this Agreement, at or prior to the
Closing, as Mergerco or GLBN or its counsel may
reasonably require;
(ix) duly executed Registration Rights Agreement between GLBN
and the Stockholders, substantially in the form as
attached hereto as Exhibit G;
(x) duly executed Lock Up Agreements (the "Lock Up") for
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ substantially in the form attached hereto as
Exhibit I;
(xi) certified copy of resolutions of the directors and the
Stockholders of ▇▇▇▇▇▇ approving the transactions set
forth in this agreement; and
(xii) duly executed Certificate of Merger in the form attached
hereto as Exhibit B.
(c) Documents to be Delivered by Mergerco and GLBN. Mergerco and GLBN
will deliver or cause to be delivered to ▇▇▇▇▇▇ and the Stockholders:
(i) certificates of good standing of Mergerco and GLBN, as of
the most recent practicable date, from the appropriate
governmental authority of the jurisdictions of Mergerco
and GLBN's organization and any other United States
jurisdictions in which Mergerco and GLBN are qualified to
do business;
(ii) stock certificates representing the GLBN Shares;
(iii) duly executed employment agreements for ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ substantially in the form as
attached hereto as Exhibit D;
(iv) a certified copy of resolutions of the directors of
Mergerco and GLBN approving the transactions set forth in
this Agreement;
(v) certificates of incumbency for the authorized officers of
Mergerco and GLBN;
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(vi) an opinion of counsel to Mergerco and GLBN substantially
in the form as attached hereto as Exhibit H;
(vii) duly executed Escrow Agreement between the Stockholders,
Mergerco, GLBN and the Escrow Agent, substantially in the
form attached hereto as Exhibit C;
(viii) duly executed Registration Rights Agreement between GLBN
and the Stockholders substantially in the form as
attached hereto as Exhibit G;
(ix) a certificate of the Chief Executive Officer or President
and Secretary of each of Mergerco and GLBN substantially
in the form attached hereto as Exhibit I;
(x) such other evidence of the performance of all covenants
and satisfaction of all conditions required of Mergerco
and GLBN by this Agreement, at or prior to the Closing,
as the Stockholders or ▇▇▇▇▇▇ or its counsel may
reasonably require; and
(xi) duly executed Certificate of Merger in the form annexed
hereto as Exhibit B.
6. Representations and Warranties of Mergerco and GLBN. Mergerco and
GLBN, jointly and severally, represent and warrant that as of the date hereof:
(a) Investment Intent. The ▇▇▇▇▇▇ Shares are being acquired by GLBN
for its own account with no intention of distributing the ▇▇▇▇▇▇ Shares to
others. GLBN does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or otherwise distribute to any person or to
have any person sell, transfer or otherwise distribute the ▇▇▇▇▇▇ Shares. Except
as specifically contemplated hereby, GLBN is not presently engaged nor plans to
engage within the presently foreseeable future in any discussion with any person
regarding such a sale, transfer or other distribution of the ▇▇▇▇▇▇ Shares or
any interest therein.
(b) Compliance with Federal and State Securities Laws. GLBN
understands that the ▇▇▇▇▇▇ Shares have not been registered under the Securities
Act. GLBN understands that the ▇▇▇▇▇▇ Shares must be held indefinitely unless
the sale or other transfer thereof is subsequently registered under the
Securities Act or an exemption from such registration is available. GLBN
understands that its right to transfer the ▇▇▇▇▇▇ Shares will be subject to
certain restrictions, which include restrictions against transfer under the
Securities Act and applicable state securities laws. In addition to such
restrictions, GLBN realizes that it may not be able to sell or dispose of the
▇▇▇▇▇▇ Shares as there may be no public or other market for the ▇▇▇▇▇▇ Shares.
GLBN understands that certificates evidencing the ▇▇▇▇▇▇ Shares shall bear a
legend substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE,
10
SOLD, TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE LAW OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
(c) Corporate Organization. GLBN and Mergerco each are duly
organized, validly existing and in good standing under the laws of the states of
Delaware and New York, respectively, and each has full corporate power,
authority and legal right to own its properties and to conduct the businesses in
which it is now engaged. GLBN is duly licensed or qualified to transact business
as a foreign corporation and is in good standing in each jurisdiction where the
ownership or lease of its assets or the operation of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on GLBN. All of the capital stock of Mergerco is owned
of record and beneficially by GLBN. Mergerco was formed solely for the purpose
of effecting this Merger.
(d) Authority. Each of Mergerco and GLBN have the corporate power
and authority to execute and deliver this Agreement and to perform all of their
respective covenants and agreements hereunder. This Agreement and the
transactions contemplated hereby have been duly approved by the Board of
Directors of each of Mergerco and GLBN.
(e) Enforceability. This Agreement, the Registration Rights
Agreement, the Employment Agreements, and the Escrow Agreement (collectively the
"Operative Agreements") have been duly executed and delivered by each of
Mergerco and GLBN and constitute valid and binding obligations of Mergerco and
GLBN, enforceable against each of them in accordance with their terms, except
that such enforcement may be limited by (i) bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditors' rights generally or by
the principles governing the availability of specific performance, injunctive
relief and other equitable remedies (regardless of whether such enforceability
is considered in equity or at law), including requirements of reasonableness and
good faith in the exercise of rights and remedies thereunder; and (ii)
applicable laws and court decisions which may limit or render unenforceable
certain terms and provisions contained therein, but which do not substantially
interfere with the practical realization of the benefits thereof, except for the
economic consequences of any procedural delay which may be imposed by, relate to
or result from such laws and court decisions.
(f) Noncontravention. The execution and delivery by Mergerco and
GLBN of each of the Operative Agreements, the consummation and performance of
the transactions herein contemplated, and compliance with the respective terms
hereof and thereof by each of Mergerco and GLBN of the Operative Agreements by
Mergerco and GLBN will not conflict with, result in a breach of or constitute a
default under any indenture, mortgage, deed of trust or other material
agreement, instrument or contract to which Mergerco or GLBN is now a party or by
which it or any of its assets or properties is bound or the Certificate of
Incorporation, as amended, or the bylaws of Mergerco or GLBN, in each case as
amended, or any law, order, rule or regulation, writ, injunction, judgment, or
decree of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over Mergerco or GLBN or any of their respective
business or properties, which conflict, breach or default could reasonably be
expected to have a Material Adverse Effect on Mergerco or GLBN.
(g) Capitalization.
11
(i) As of July 19, 2000, the authorized capital stock of
Mergerco consists of 105 shares of Mergerco Common Stock, $.98 par value per
share, of which one hundred shares are issued and outstanding and held by GLBN.
There are no outstanding rights, options or warrants to purchase Mergerco Common
Stock or any issued or outstanding securities of any nature convertible into
Mergerco Common Stock.
(ii) As of July 19, 2000, the authorized capital stock of GLBN
consists of (i) 25,000,000 shares of preferred stock, $.001 par value per share
(the "GLBN Preferred Stock"), of which no shares are issued and outstanding;
(ii) 50,000,000 shares of GLBN Common Stock, of which, 14,742,208 shares are
issued and outstanding; and (iii) 50,000,000 shares of GLBN Class A Common
Stock, $0.001 par value per share of which 34,224,874 shares are issued and
outstanding. The GLBN Disclosure Schedule sets forth a list of all options,
warrants or other securities exercisable for, convertible into or exchangeable
for GLBN Preferred Stock or GLBN Common Stock or other subscription, commitments
or agreements for GLBN to issue GLBN Preferred Stock or GLBN Common Stock, as of
the date hereof.
(h) Approvals. Except for approval by the NASD, the execution,
delivery and performance of this Agreement by Mergerco and GLBN does not require
(i) the consent, waiver, approval, license or authorization of or any filing
with any person not a party to this Agreement or any governmental authority; or
(ii) the approval or authorization of the stockholders of GLBN, except where the
failure to obtain any consent, waiver, approval, license or authorization would
not have a Material Adverse Effect on GLBN and Mergerco taken as a whole.
(i) Financial Statements. The audited consolidated financial
statements of GLBN as of December 31, 1999 included in the GLBN Form 10-KSB
filed with the SEC on March 30, 2000 and the unaudited consolidated financial
statements of GLBN for the quarter ended March 31, 2000 included in the GLBN
Form 10-QSB filed with the SEC on May 15, 2000 (collectively, the "GLBN
Financial Statements") were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may have been indicated
in the notes thereto or to the extent footnotes thereto have been omitted) and
fairly present (subject to normal audit adjustments in the case of the unaudited
statements) the financial position of GLBN at the dates thereof and the
consolidated results of the operations and statement of changes in financial
position for the periods then ended.
(j) Disclosure. The representations or warranties made by each of
Mergerco and GLBN in this Agreement or in any other document or certificate
furnished in connection herewith did not contain at the time made or, if set
forth herein, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they are made, not misleading in any
material respect.
(k) SEC Filings. GLBN is current in its filings with the SEC
pursuant to the requirements of the Securities Act and the Exchange Act and the
rules promulgated thereunder (the "SEC Filings"). The SEC Filings:
(i) complied with the requirements of the Securities Act and
the Exchange Act, as applicable; and
12
(ii) do not contain a misrepresentation of a material fact or
omit to state a material fact necessary to make the statements contained therein
not materially misleading.
(l) Undisclosed Liabilities. GLBN has no Liabilities, except for
(i) Liabilities set forth in the GLBN Financial Statements or otherwise set
forth in its SEC Filings; (ii) Liabilities that have arisen since March 31, 2000
in the Ordinary Course of Business that are not reasonably likely to have a
Material Adverse Effect; and (iii) Liabilities that singly or in the aggregate
would not have a Material Adverse Effect on GLBN.
(m) Legal Proceedings. Other than as set forth in GLBN's SEC
Filings or on the GLBN Disclosure Statement, there are no (i) actions, suits,
claims, investigations, or legal, administrative or arbitration proceedings
pending or threatened against GLBN or Mergerco, whether at law or equity, or
before or by any governmental authority; or (ii) judgments, decrees, injunctives
or orders of any governmental authority or arbitration against GLBN or Mergerco,
which, in any case, would prevent, enjoin or delay consummation of the Merger or
the transactions contemplated hereby or could have a Material Adverse Effect on
GLBN or Mergerco taken as a whole.
(n) Mergerco. Mergerco is a newly formed corporation, organized by
GLBN solely for the purposes of this Merger, and has no Liabilities.
(o) Intellectual Property. GLBN owns, is licensed or otherwise has
the right to use the GLBN Intellectual Property and the software used in its
business, except for the GLBN Intellectual Property and/or the software, the
loss of the use of which is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on GLBN. Unless specifically noted
in Schedule 6(o) of the GLBN Disclosure Schedule, (i) the use of the GLBN
Intellectual Property and the software by GLBN does not infringe upon or
otherwise violate the rights of any third party in or to such property (except
as any software licensed or sold to GLBN by unrelated Persons may involve such
infringement or violation) and (ii) no claim has been asserted or can be
asserted, by any Person against GLBN with respect to the use of any item of the
GLBN Intellectual Property or the software challenging or questioning the
validity or effectiveness of such use of any such item, except for such
infringements, violations or claims which are not reasonably likely,
individually or in the aggregate (together with the items set forth in Schedule
6(o) of the GLBN Disclosure Schedule), to have a Material Adverse Effect on
GLBN. GLBN has taken reasonable measures to protect the proprietary nature of
each material item of the GLBN Intellectual Property and the software, and to
maintain the confidentiality of all confidential information, that it owns or
uses.
(p) Absence Of Certain Changes Or Events. Except as contemplated by
this Agreement or as disclosed in any SEC Filing since March 31, 2000, GLBN has
conducted its business only in the Ordinary Course of Business and since such
date, there has not been (a) a Material Adverse Change in GLBN, its assets,
Liabilities, business, financial condition, (b) any declaration, setting aside
or payment of any dividend or distribution in respect of the shares of its
capital stock or any redemption, purchase or other acquisition of any of its
securities, or (c) any agreement by GLBN or Mergerco to take any of the actions
described in this Section 6(p) except as expressly contemplated by this
Agreement.
(q) Registration Statement. The information supplied by GLBN or
required to be supplied by GLBN (except to the extent revised or superseded by
amendments or supplements)
13
for inclusion in the registration statement, or any amendment or supplement
thereto, (the "Registration Statement") pursuant to the Registration Rights
Agreement shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act. Notwithstanding the foregoing, GLBN makes no
representation, warranty or covenant with respect to any information supplied or
required to be supplied by the Stockholders which is contained in or omitted
from any of the foregoing documents.
7. Representations and Warranties of ▇▇▇▇▇▇ and the Stockholders.
Except as set forth on ▇▇▇▇▇▇'▇ disclosure schedule attached hereto (the "▇▇▇▇▇▇
Disclosure Schedule"), each of the Stockholders severally represent and warrant
as to Sections 7(a), (b), (c), (d), (f), (g), (h) and (j) and each of ▇▇▇▇▇▇ and
the Stockholders (except for Dubofsky and ▇▇▇▇▇▇), jointly and severally, that
as of the date hereof:
(a) Securities Holders. Each of the Stockholders listed on Exhibit
A is the owner of record and beneficially of the ▇▇▇▇▇▇ Common Stock set forth
beside their respective names on Exhibit A.
(b) Receipt of Corporate Information. All requested documents
pertaining to Mergerco and GLBN and the GLBN Common Stock (the "Documents"),
have been delivered to such Stockholder and/or his or her advisors, and all of
the Stockholders' questions and requests for information have been answered to
the Stockholders' satisfaction.
(c) Stockholders' and ▇▇▇▇▇▇'▇ Obligations. The Operative
Agreements (including the Lock-Up Agreement as of the Closing Date constitute
the valid and legally binding obligations of each such Stockholder and ▇▇▇▇▇▇.
Neither the execution of the Operative Agreements including the Lock-Up, nor the
consummation of the transactions contemplated thereby, will constitute a
violation of or default under, or conflict with, any judgment, decree, statute
or regulation of any governmental authority applicable to ▇▇▇▇▇▇ or such
Stockholder, where applicable, or any contract, commitment, agreement or
restriction of any kind to which ▇▇▇▇▇▇ or such Stockholder, where applicable,
is a party, which would prevent the consummation of any of the transactions
contemplated by the Operative Agreements or the Lock-Up. The execution and
delivery of these Operative Agreements and Lock-Up do not, and the consummation
of the transactions described therein will not, violate any applicable law,
mortgage, lien, agreement, indenture, lease or understanding (whether oral or
written) of any kind outstanding relative to ▇▇▇▇▇▇ and such Stockholder, where
applicable, which would prevent the consummation of any of the transactions
contemplated by the Lock-Up and the Operative Agreements.
(d) Share Ownership. The ▇▇▇▇▇▇ Shares are free and clear of all
liens and encumbrances of any kind and nature and have not been sold, pledged,
assigned or otherwise transferred. There are no agreements to sell, pledge,
assign or otherwise transfer such ▇▇▇▇▇▇ Shares, except those contemplated by
this Agreement.
(e) Approvals. Except for approval by the NASD, the execution,
delivery and performance of this Agreement by ▇▇▇▇▇▇ and the Stockholders does
not require the consent,
14
waiver, approval, license or authorization of or any filing with any person not
a party to this Agreement or any governmental authority.
(f) Stockholder's Risks. Each Stockholder acknowledges and
understands that, notwithstanding the registration rights under Section 8(g)
herein, the acquisition of the GLBN Shares in the Exchange involves a high
degree of risk and is suitable only for persons of adequate financial means who
have no need for liquidity in this investment in that (i) such Stockholder may
not be able to liquidate the investment in the event of an emergency; (ii)
transferability is extremely limited; and (iii) in the event of a disposition,
such Stockholder could sustain a complete loss of his or her entire investment.
Such Stockholder is sufficiently experienced in financial and business matters
to be capable of evaluating the merits and risks of an investment in GLBN; has
evaluated such merits and risks, including risks particular to such
Stockholder's situation; and such Stockholder has determined that this
investment is suitable for the Stockholder. Such Stockholder has adequate
financial resources and can bear a complete loss of the Stockholder's
investment.
(g) Investment Intent. Notwithstanding the registration rights
under Section 8(g) herein, the GLBN Shares are being acquired for such
Stockholder's own account with no intention of distributing such securities to
others. Such Stockholder has no contract, undertaking, agreement or arrangement
with any person to sell, transfer or otherwise distribute to any person or to
have any person sell, transfer or otherwise distribute the GLBN Shares for such
Stockholder. Such Stockholder is not presently engaged or plans to engage within
the presently foreseeable future, in any discussion with any person regarding
such a sale, transfer or other distribution of the GLBN Shares or any interest
therein, except for those GLBN shares to be registered pursuant to the
registration rights in Section 8(g) herein.
(h) Compliance with Federal and State Securities Laws. Each
Stockholder understands, notwithstanding the registration rights in Section 8(g)
herein, the GLBN Shares have not been registered under the Securities Act. Each
Stockholder understands that the GLBN Shares must be held indefinitely unless
the sale or other transfer thereof is subsequently registered under the
Securities Act or an exemption from such registration is available. Each
Stockholder understands that such Stockholder's right to transfer the GLBN
Shares will be subject to certain restrictions, which include restrictions
against transfer under the Securities Act and applicable state securities laws.
In addition to such restrictions, each Stockholder realizes that it may not be
able to sell or dispose of the GLBN Shares as there may be no public or other
market for the GLBN Shares. Each Stockholder understands that certificates
evidencing the GLBN Shares shall bear a legend substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE LAW OR PURSUANT TO AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
(i) Corporate Organization. ▇▇▇▇▇▇ is duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has full corporate power, authority and legal right to own its properties
and to conduct the businesses in which it is now
15
engaged. ▇▇▇▇▇▇ is duly licensed or qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction where the ownership or
lease of its assets or the operation of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on ▇▇▇▇▇▇. ▇▇▇▇▇▇ does not have any subsidiaries.
(j) Enforceability. The Operative Agreements and the Lock-Up have
been duly executed and delivered and constitute the valid and legally binding
obligation of ▇▇▇▇▇▇ and each Stockholder, where applicable, enforceable against
▇▇▇▇▇▇ and the Stockholders, where applicable, in accordance with their terms
except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or by the principles governing the availability of specific
performance, injunctive relief and other equitable remedies (regardless of
whether such enforceability is considered in equity or at law), including
requirements of reasonableness and good faith in the exercise of rights and
remedies thereunder; and (ii) applicable laws and court decisions which may
limit or render unenforceable certain terms and provisions contained therein,
but which do not substantially interfere with the practical realization of the
benefits thereof, except for the economic consequences of any procedural delay
which may be imposed by, relate to or result from such laws and court decisions.
(k) Noncontravention. Neither the execution and delivery of the
Operative Agreements and the Lock-Up by ▇▇▇▇▇▇ and the Stockholders, nor the
consummation of the transactions contemplated thereby, nor the performance by
▇▇▇▇▇▇ and the Stockholders of their covenants and agreements hereunder (i)
violates any provision of the Certificate of Incorporation or Bylaws of ▇▇▇▇▇▇;
(ii) violates any existing law, statute, ordinance, regulation, or any order,
judgment or decree of any court or governmental agency to which ▇▇▇▇▇▇ is a
party or by which any of its assets are bound; or (iii) conflicts with or will
result in any breach of any of the terms of or constitute a default under or
result in the termination of or the creation of any Lien pursuant to the terms
of any indenture, mortgage, real property lease, securities purchase agreement,
credit or loan agreement or other material agreement to which ▇▇▇▇▇▇ is a party
or by which ▇▇▇▇▇▇ or any of its assets are bound, to the extent such violation
thereof, conflict therewith, breach thereof, default thereunder or termination
thereof would have a Material Adverse Effect on ▇▇▇▇▇▇.
(l) Capitalization. The authorized capital stock of ▇▇▇▇▇▇ consists
of 1,000,000 shares of ▇▇▇▇▇▇ Common Stock, of which, prior to the Merger, 109
shares are issued and outstanding. Schedule 7(l) of the ▇▇▇▇▇▇ Disclosure
Schedule sets forth a list of all options, warrants or other securities
exercisable for, convertible into or exchangeable for ▇▇▇▇▇▇ Common Stock or
other subscription, commitments or agreements for ▇▇▇▇▇▇ to issue ▇▇▇▇▇▇ Common
Stock. The ▇▇▇▇▇▇ Shares have been duly, legally and validly issued, and are
fully paid and nonassessable.
(m) Legal Proceedings. There are no (i) actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the knowledge of each of the Stockholders, threatened against ▇▇▇▇▇▇, whether
at law or in equity, in arbitration or before or by any governmental authority
or the NASD; (ii) judgments, decrees, injunctions or orders of any governmental
authority, the NASD or arbitrator against ▇▇▇▇▇▇; or (iii) any client
complaints, which, in any case, could have a Material Adverse Effect on ▇▇▇▇▇▇.
16
(n) Taxes. ▇▇▇▇▇▇ has accurately prepared and timely filed or has
had accurately prepared and timely filed on its behalf all Tax returns which are
required to be filed by it, and has paid all Taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other Taxes imposed on it or any of its property by any taxing authority
which are due and payable (other than, in each case, those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided in the ▇▇▇▇▇▇ Financial Statements; or which the failure to file or pay
would not result in a Material Adverse Effect on ▇▇▇▇▇▇), and to the Knowledge
of its Stockholders, no tax liens have been filed, nor have claims been asserted
in writing with respect to any such taxes, except for liens for Taxes not yet
due and payable. ▇▇▇▇▇▇ is and has been treated as a Subchapter S corporation
for federal income tax purposes and has made a valid Subchapter S election.
(o) Related Party Transactions. No current Stockholder, or current,
or to the Knowledge of the Stockholders, former director, officer or employee of
▇▇▇▇▇▇ nor any "affiliate" (as defined in the rules and regulations promulgated
under the Exchange Act) of any such person, is currently, or has been, directly
or indirectly through its affiliation with any other person or entity, a party
to any transaction (other than as an employee, consultant or stockholder) with
▇▇▇▇▇▇, as the case may be, providing for the furnishing of services by, or
rental of real or personal property from, or otherwise requiring cash payments
from or to any such person
(p) Leased Premises. Schedule 7(p) of the ▇▇▇▇▇▇ Disclosure
Schedule sets forth and describes all leases or agreements to lease under which
▇▇▇▇▇▇ leases any Real Property. Complete and correct copies of the Lease have
been provided to Mergerco. ▇▇▇▇▇▇ is exclusively entitled to all rights and
benefits as lessee under the Lease and ▇▇▇▇▇▇ has not sublet, assigned, licensed
or otherwise conveyed any rights in the Leased Premise or in the Lease to any
other Person. ▇▇▇▇▇▇ is not in default of any of its material obligations under
the Lease which would entitle the landlord thereunder to terminate the Lease,
and, to the Knowledge of Stockholders, none of the landlords or other parties to
the Lease are in default of any of their obligations under the Lease. To the
Knowledge of Stockholders, the use by ▇▇▇▇▇▇ of the Leased Premise is not in
breach of any building, zoning or other statute, by-law, ordinance, regulation,
covenant or restriction. ▇▇▇▇▇▇ has adequate rights of ingress to and egress
from the Leased Premise for the operation in the Ordinary Course of Business.
(q) Real Properties. ▇▇▇▇▇▇ does not own or have any right, title
or interest in any real property except for the ▇▇▇▇▇▇'▇ leasehold interest in
the Leased Premises.
(r) Title to Assets. ▇▇▇▇▇▇ is the owner of and has good and
marketable title to all of its properties and assets, including, without
limitation, all properties and assets reflected in the ▇▇▇▇▇▇ Financial
Statements and all properties and assets acquired by ▇▇▇▇▇▇ after Balance Sheet
Date, free and clear of all Encumbrances whatsoever, except for:
(i) the properties and assets disposed of, or utilized by
▇▇▇▇▇▇ since Balance Sheet Date in the Ordinary Course of Business;
(ii) the Encumbrances disclosed or reflected in the ▇▇▇▇▇▇
Financial Statements;
(iii) liens for Taxes not yet due and payable;
17
(iv) the Encumbrances described in Schedule 7(r) of the ▇▇▇▇▇▇
Disclosure Schedule; and
(v) those that would in the aggregate not have a Material
Adverse Effect on the Business.
No other Person owns any assets which are being used in the Business,
except for the Leased Premises and personal property leased by ▇▇▇▇▇▇. There are
no agreements or commitments to purchase property or assets by ▇▇▇▇▇▇, other
than in the Ordinary Course of Business.
(s) Intellectual Property. Schedule 7(s) of the ▇▇▇▇▇▇ Disclosure
Schedule sets forth an accurate, correct and complete list, as of the date
hereof, of (i) all registered trademarks, registered copyrights, registered
service marks, trade dress, logos, trade names and corporate names of ▇▇▇▇▇▇;
and (ii) all commercially available software (the "Software") purchased or
licensed by ▇▇▇▇▇▇ that has been expensed, if the cost of such Software was
greater than $15,000, and all such Software capitalized on ▇▇▇▇▇▇'▇ book and
records at any time within the last three (3) fiscal years. Unless specifically
noted in Schedule 7(s) of the ▇▇▇▇▇▇ Disclosure Schedule, ▇▇▇▇▇▇ owns, is
licensed or otherwise has the right to use the ▇▇▇▇▇▇ Intellectual Property and
the Software used in the Business, except for the ▇▇▇▇▇▇ Intellectual Property
and/or the Software, the loss of the use of which is not reasonably likely,
individually or in the aggregate (together with the items set forth in Schedule
7(s) of the ▇▇▇▇▇▇ Disclosure Schedule), to have a Material Adverse Effect on
▇▇▇▇▇▇. Unless specifically noted in Schedule 7(s) of the ▇▇▇▇▇▇ Disclosure
Schedule, (i) the use of the ▇▇▇▇▇▇ Intellectual Property and the Software by
▇▇▇▇▇▇ does not infringe upon or otherwise violate the rights of any third party
in or to such property (except as any Software licensed or sold to ▇▇▇▇▇▇ by
unrelated Persons may involve such infringement or violation) and (ii) no claim
has been asserted, and to the Stockholders Knowledge, no claim can be asserted,
by any Person against ▇▇▇▇▇▇ with respect to the use of any item of the ▇▇▇▇▇▇
Intellectual Property or the Software challenging or questioning the validity or
effectiveness of such use of any such item, except for such infringements,
violations or claims which are not reasonably likely, individually or in the
aggregate (together with the items set forth in Schedule 7(s) of the ▇▇▇▇▇▇
Disclosure Schedule), to have a Material Adverse Effect on ▇▇▇▇▇▇. ▇▇▇▇▇▇ has
taken reasonable measures to protect the proprietary nature of each material
item of the ▇▇▇▇▇▇ Intellectual Property and the Software, and to maintain the
confidentiality of all Confidential Information, that it owns or uses.
(t) Indebtedness. Schedule 7(t) of the ▇▇▇▇▇▇ Disclosure Schedule
describes, as of June 30, 2000, all outstanding loans of ▇▇▇▇▇▇. ▇▇▇▇▇▇ is
current on all payments of principal and interest with respect to such
indebtedness.
(u) Financial Statements.
(i) Schedule 7(u) of the ▇▇▇▇▇▇ Disclosure Schedule hereto
contains true and complete copies of (i) the unaudited balance sheet (the
"Balance Sheet") of ▇▇▇▇▇▇ as of June 30, 2000 (the "Balance Sheet Date") and
the related unaudited statements of income and cash flow for the five-month
period then ended, and (ii) the audited balance sheets of ▇▇▇▇▇▇ at December 31,
1997, 1998 and 1999 and the related audited statements of income, shareholders'
equity and cash flow for the fiscal years then ended (the financial statements
described in clauses (i) and (ii) above
18
together with the auditor's report and the notes thereto are collectively
referred to as the "▇▇▇▇▇▇ Financial Statements").
(ii) The ▇▇▇▇▇▇ Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis during the periods covered
thereby (except as may have been indicated in the notes thereto or to the extent
footnotes thereto have been omitted). The ▇▇▇▇▇▇ Financial Statements present
fairly the financial condition of ▇▇▇▇▇▇ as of the dates indicated therein and
the results of operations and changes in financial position of ▇▇▇▇▇▇ for the
period specified therein, subject in the case of Unaudited Financial Statements,
to normal year-end adjustments.
(v) Events Subsequent to June 30, 2000.
Since the Balance Sheet Date, there has not been any Material
Adverse Change in ▇▇▇▇▇▇, its Assets, Liabilities, Business, financial
condition, operations, results of operations, or future prospects. Without
limiting the generality of the foregoing, since that date:
(i) ▇▇▇▇▇▇ has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) either involving more than $10,000 or outside the
Ordinary Course of Business;
(ii) ▇▇▇▇▇▇ has not imposed or, to the Stockholders Knowledge,
has any third party imposed any Security Interest upon any of ▇▇▇▇▇▇'▇ material
assets, tangible or intangible other than as described in the ▇▇▇▇▇▇ Disclosure
Schedule or in the Ordinary Course of Business;
(iii) ▇▇▇▇▇▇ has not made any capital expenditure (or series of
related capital expenditures) either involving more than $10,000 or outside the
Ordinary Course of Business;
(iv) ▇▇▇▇▇▇ has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans or acquisitions), other than in
connection with its proprietary trading account activities, either involving
more than $10,000 or outside the Ordinary Course of Business;
(v) ▇▇▇▇▇▇ has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations), involving more than
$10,000, outside the Ordinary Course of Business;
(vi) ▇▇▇▇▇▇ has not delayed or postponed (beyond the Ordinary
Course of Business) the payment of accounts payable and other liabilities;
(vii) ▇▇▇▇▇▇ has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $10,000 or outside the Ordinary Course of Business;
(viii) ▇▇▇▇▇▇ has not granted any license or sublicense of any
rights under or with respect to any ▇▇▇▇▇▇ Intellectual Property;
19
(ix) There has been no change made or authorized in ▇▇▇▇▇▇'▇
Certificate of Incorporation or Bylaws;
(x) ▇▇▇▇▇▇ has not issued, sold, or otherwise disposed of any
of its securities, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion or exercise) any of its securities;
(xi) ▇▇▇▇▇▇ has not declared, set aside, or paid any dividend
or distribution with respect to any of its securities or redeemed, purchased, or
otherwise acquired any of its securities;
(xii) ▇▇▇▇▇▇ has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to any of its Assets;
(xiii) ▇▇▇▇▇▇ has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
such existing contract or agreement;
(xiv) ▇▇▇▇▇▇ has not granted any increase in the base
compensation of any of ▇▇▇▇▇▇'▇ managers, officers, and employees other than in
the Ordinary Course of Business;
(xv) ▇▇▇▇▇▇ has not adopted any bonus, profit-sharing,
incentive compensation, pension, retirement, medical, hospitalization, life, or
other insurance, severance or other similar plan, contract, or commitment for
any of ▇▇▇▇▇▇'▇ directors, officers, and employees, or modified or terminated
any existing such plan, contract, or commitment;
(xvi) ▇▇▇▇▇▇ has not made any other material change in
employment terms for any of ▇▇▇▇▇▇'▇ directors, officers, and employees;
(xvii) There has been no occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
▇▇▇▇▇▇ which would have a Material Adverse Effect; and
(xviii) ▇▇▇▇▇▇ has not committed to any of the foregoing.
(w) Undisclosed Liabilities. ▇▇▇▇▇▇ has no Liabilities, except for,
(i) Liabilities set forth in the ▇▇▇▇▇▇ Financial Statements as described
herein, (ii) Liabilities that have arisen after the Balance Sheet Date in the
Ordinary Course of Business, and (iii) Liabilities that singly or in the
aggregate, would not have a Material Adverse Effect upon ▇▇▇▇▇▇.
(x) Internal Controls. ▇▇▇▇▇▇ maintains internal controls with
respect to its books, records, finances, client and margin accounts and other
operations as are required under rules and regulations promulgated by the SEC,
NASD and self regulatory organizations ("SRO"), and which are in accordance with
standard industry practices.
(y) Employee Benefit and Pension Plans.
(i) ▇▇▇▇▇▇ has provided true and complete copies (or, in the
case of bonus or other incentive plans, summaries thereof and financial data
with respect thereto) of all
20
material pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus or other
material incentive plans, all other material employee programs, arrangements or
agreements, whether arrived at through collective bargaining or otherwise, all
material medical, vision, dental or other health plans, all life insurance plans
and all other material employee benefit plans or fringe benefit plans,
including, without limitation, all "employee benefit plans" as that term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), currently adopted by, maintained by, sponsored in whole or
in part by, or contributed to by ▇▇▇▇▇▇ or any Affiliate thereof for the benefit
of any employee or under which any employee is eligible to participate and under
which ▇▇▇▇▇▇ could have any liability contingent or otherwise (collectively, the
"▇▇▇▇▇▇ Benefit Plans"). Any of the ▇▇▇▇▇▇ Benefit Plans which is an "employee
pension benefit plan", as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "▇▇▇▇▇▇ ERISA Plan". No ▇▇▇▇▇▇ Benefit Plan is or has
been a multi-employer plan within the meaning of Section 3(37) of ERISA.
Schedule 7(y) of the ▇▇▇▇▇▇ Disclosure Schedule lists of all of the ▇▇▇▇▇▇
Benefit Plans.
(ii) All ▇▇▇▇▇▇ Benefit Plans are in compliance with the
applicable terms of ERISA and the Code and any other applicable laws, rules and
regulations, such that any violation thereof would not have a Material Adverse
Effect on ▇▇▇▇▇▇.
(iii) All liabilities under any ▇▇▇▇▇▇ Benefit Plan are fully
accrued or reserved against in all material respects in the ▇▇▇▇▇▇ Financial
Statements in accordance with GAAP. No ▇▇▇▇▇▇ ERISA Plan which is a defined
benefit pension plan has any "unfunded current liability", as that term is
defined in Section 302(d)(8)(A) of ERISA, and the present fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities", as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements.
(iv) ▇▇▇▇▇▇ has no obligations for retiree health and life
benefits under any ▇▇▇▇▇▇ Benefit Plan or otherwise. There are no restrictions
on the rights of ▇▇▇▇▇▇ to amend or terminate any such ▇▇▇▇▇▇ Benefit Plan
without incurring any material liability thereunder, except for such
restrictions as would not have a Material Adverse Effect on ▇▇▇▇▇▇.
(v) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby or thereby will (i)
result in any payment (including, without limitation, severance, golden
parachute or otherwise) becoming due to any employees under any ▇▇▇▇▇▇ Benefit
Plan or otherwise, (ii) increase any benefits otherwise payable under any ▇▇▇▇▇▇
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
(z) Labor Matters and Employment Standards.
(i) ▇▇▇▇▇▇ is not subject to any agreement with any labor union
or employee association and has not made any commitment to or conducted
negotiations with any labor union or employee association with respect to any
future agreement and, to the Knowledge of the Stockholders, during the period of
5 years preceding the date of this Agreement there has been no attempt to
organize, certify or establish any labor union or employee association in
relation to any of the employees of ▇▇▇▇▇▇.
21
(ii) There are no existing or, to the Knowledge of the
Stockholders, threatened labor strikes or labor disputes, grievances,
controversies or other labor troubles affecting ▇▇▇▇▇▇ or the Business.
(iii) ▇▇▇▇▇▇ has complied in all material respects with all
laws, rules, regulations and orders applicable to it relating to employment,
including those relating to wages, hours, collective bargaining, occupational
health and safety, workers' hazardous materials, employment standards, pay
equity and workers' compensation. There are no outstanding charges or complaints
against ▇▇▇▇▇▇ relating to unfair labor practices or discrimination or under any
legislation relating to employees which would have a Material Adverse Effect
upon ▇▇▇▇▇▇.
(aa) Contracts. The ▇▇▇▇▇▇ Disclosure Schedule lists the following
contracts, whether written or oral, to which ▇▇▇▇▇▇ is a party:
(i) any contract to provide employee benefit administrative
services and health care management services other than those described in
Section 7(y);
(ii) any contract (or group of contracts) for the lease of
personal property from or to third parties providing for lease payments in
excess of $10,000 per annum;
(iii) any contract (or group of contracts) for the purchase or
sale of supplies, products, or other personal property, or for the furnishing or
receipt of services which either (x) calls for performance over a period of more
than one year and require payments or yields receipts of more than $10,000 in a
12 month period or (y) requires payments or yields receipts of more than $50,000
in the aggregate;
(iv) any contract concerning a partnership or joint venture;
(v) any contract (or group of contracts) under which it has
created, incurred, assumed, or guaranteed (or may create, incur, assume, or
guarantee) indebtedness (including capitalized lease obligations) involving more
than $10,000 or under which it has imposed (or may impose) a Security Interest
on any of its assets, tangible or intangible;
(vi) any contract concerning confidentiality or non-competition
or non-solicitation;
(vii) any contract with any of ▇▇▇▇▇▇'▇ managers, officers, and
employees in the nature of a collective bargaining agreement, employment
agreement, or severance agreement; and
(viii) any other contract (or group of related contracts)
either involving more than $10,000 or not entered into in the Ordinary Course of
Business.
▇▇▇▇▇▇ has delivered to GLBN a correct and complete copy of each
written contract listed in Schedule 7(aa) of the ▇▇▇▇▇▇ Disclosure Schedule.
With respect to each written contract so listed: (A) the written contract is
legal, valid, binding and enforceable as to ▇▇▇▇▇▇, in accordance with its terms
except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium or similar affecting the enforcement of creditors rights generally or
by the principles governing the availability of specific performance, injunctive
relief and other equitable remedies
22
(regardless of whether such enforceability is considered in equity or at law),
including requirements of reasonableness and good faith in the exercise of
rights and remedies thereunder; and (ii) applicable laws and court decisions
which may limit or render unenforceable certain terms and provisions contained
therein, but which do not substantially interfere with the practical realization
of the benefits thereof, except for the economic consequences of any procedural
delay which may be imposed by, relate to or result from such laws and court
decisions, and is in full force and effect; (B) the written contract (except for
each contract between ▇▇▇▇▇▇ and the parties executing employment agreements
attached hereto as Exhibit D) will continue to be legal, valid, binding, and
enforceable as to ▇▇▇▇▇▇ and in full force and effect on identical terms
following the Closing; (C) ▇▇▇▇▇▇ is not and, to the Knowledge of the
Stockholders, no other party is in breach or default, and no event has occurred
with notice or lapse of time, or both, that would constitute a breach or default
or permit termination, modification, or acceleration, under the written contract
which would result in a Material Adverse Effect on ▇▇▇▇▇▇; and (D) ▇▇▇▇▇▇ has
not, and to the Knowledge of the Stockholders no other party has, repudiated any
provision of the written contract in each case except those which would not have
a Material Adverse Effect.
(bb) Customer Accounts. Schedule 7(bb) of the ▇▇▇▇▇▇ Disclosure
Schedule lists, as of a date within five (5) business days of the date hereof,
all client accounts maintained by ▇▇▇▇▇▇, indicates whether such accounts are
discretionary, the net worth of each client's account, and whether the accounts
are cash or margin.
(cc) Accounts Payable. Schedule 7(cc) of the ▇▇▇▇▇▇ Disclosure
Schedule sets forth all of the accounts payable of ▇▇▇▇▇▇ over $7,500 as of a
date within five (5) business days of the date hereof, identifying each such
account by name, and total amount due thereunder. Accounts payable of ▇▇▇▇▇▇ are
reflected in accordance with GAAP in the books and records of ▇▇▇▇▇▇ and all
such payables represent accounts for bona fide purchases of goods or services by
▇▇▇▇▇▇ in connection with the Business.
(dd) Powers of Attorney. Except as may be required by the NASD,
there are no outstanding powers of attorney executed on behalf of ▇▇▇▇▇▇.
(ee) Insurance. Schedule 7(ee) of the ▇▇▇▇▇▇ Disclosure Schedule
sets forth, with respect to each insurance policy (including policies providing
property, casualty, liability and workers' compensation coverage and bond and
surety arrangements) to which ▇▇▇▇▇▇ is a party, a named insured, or otherwise
the beneficiary of coverage as of the date of this Agreement (i) the name of the
insurer, (ii) the name of the policyholder, (iii) the name of each covered
insured, (iv) the policy number, and (v) the period of coverage. ▇▇▇▇▇▇ has
delivered to Mergerco true and complete copies of insurance policies to which
▇▇▇▇▇▇ was a party, a named insured or otherwise a beneficiary of coverage
during the past three years.
With respect to each insurance policy of ▇▇▇▇▇▇: (A) to the
Knowledge of the Stockholders, the policy is legal, valid, binding and
enforceable and in full force and effect; (B) neither ▇▇▇▇▇▇ nor, to the
Knowledge of the Stockholders, any other party is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and which would have a Material Adverse Effect on ▇▇▇▇▇▇, and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification, or acceleration, under the
policy; and (C) neither ▇▇▇▇▇▇ nor, to the Knowledge of the Stockholders,
23
any other party to the policy has repudiated any provision thereof. Schedule
7(ee) of the ▇▇▇▇▇▇ Disclosure Schedule describes any self-insurance
arrangements affecting ▇▇▇▇▇▇.
(ff) Licenses. ▇▇▇▇▇▇ owns or validly holds all licenses,
franchises, permits, approvals, authorizations and registrations that are
necessary for it to own, lease or operate its properties and assets and to
conduct its Business as now conducted and the failure to own or hold such
licenses, franchises, permits, approvals, authorizations and registrations would
not have a Material Adverse Effect on ▇▇▇▇▇▇. The Business has been and is being
conducted in compliance with all such licenses, franchises, permits, approvals,
authorizations and registrations, except where any noncompliance would not have
a Material Adverse Effect on ▇▇▇▇▇▇. All such licenses, franchises, permits,
approvals, authorizations and registrations are in full force and effect, and
there is no proceeding or investigation pending or, to the Stockholders'
Knowledge, threatened that would reasonably be expected to have a Material
Adverse Effect on ▇▇▇▇▇▇.
(gg) Brokers' Fees. ▇▇▇▇▇▇ does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which it,
Mergerco or GLBN could become liable or obligated.
(hh) Government Regulation.
(i) ▇▇▇▇▇▇ is duly registered as a securities broker-dealer
under the Exchange Act, and as a broker-dealer in all of the States listed on
Schedule 7(hh) of the ▇▇▇▇▇▇ Disclosure Schedule and ▇▇▇▇▇▇ is a member in good
standing of the NASD. Schedule 7(hh) sets forth a complete and accurate list of
all employees of ▇▇▇▇▇▇ who are registered as associated persons of a
broker-dealer with the NASD and the various state regulatory agencies as
applicable, as of a date within five (5) business days from the date hereof. No
other employee or agent of ▇▇▇▇▇▇ is required to be registered with the NASD as
an associated person or principal by virtue of his activities or otherwise.
▇▇▇▇▇▇ has delivered a true and correct copy of the NASD Membership Agreement
currently in effect to Mergerco. ▇▇▇▇▇▇ is in compliance with the terms of the
NASD Membership Agreement.
(ii) ▇▇▇▇▇▇ is in compliance with, or exempt from, all federal
and state laws and regulations relating or applicable to it and to its business,
including, without limitation, the Exchange Act, the Securities Act, the
Investment Advisors Act of 1940, as amended, the Investment Company Act of 1940,
as amended, the Commodities Exchange Act, all state Blue Sky laws, and all
rules, regulations, guidelines and policies promulgated under the foregoing, or
by the NASD, any SRO or other regulatory authority having jurisdiction over the
Company ("Agency"), except where such failure to comply would not have a
Material Adverse Effect on ▇▇▇▇▇▇. Neither ▇▇▇▇▇▇ nor any principal or
associated Person of ▇▇▇▇▇▇ has been subject to sanctions, fines or other
similar action by any Agency, SRO or the NASD. There are no ongoing, or to the
Stockholders' Knowledge, threatened actions, investigations or proceedings
naming ▇▇▇▇▇▇ or any of its associated Persons by any third party, including the
SEC, NASD, SRO, and any Agency.
(iii) ▇▇▇▇▇▇ has filed with the SEC and all other appropriate
Agencies and NASD, all forms, (including Form BD), financial and other reports
and all documents required to be filed pursuant to the foregoing laws and other
requirements and any other applicable laws, and the rules and regulations
thereunder, except where such failure to comply would not have a Material
Adverse Effect on ▇▇▇▇▇▇. ▇▇▇▇▇▇ has made available to Mergerco and GLBN, true
and
24
complete copies of all such forms, notices, registrations and other filings,
as amended to date, and copies of all current reports and information required
to be kept by ▇▇▇▇▇▇ pursuant to applicable federal and state statutes. The
information contained in such forms, registrations, filings and reports was true
and complete in all respects at the time of filing, and did not contain any
untrue statement of material fact or omit to state a material fact required to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and which would have a Material Adverse Effect on ▇▇▇▇▇▇.
(ii) Banking Arrangements. Schedule 7(ii) of the ▇▇▇▇▇▇ Disclosure
Schedule sets forth a complete list of the name of each bank in or with which
▇▇▇▇▇▇ has an account, credit line or safety deposit box, and a brief
description of each such account, credit line or safety deposit box, including
the names of all persons currently authorized to draw thereon or having access
thereto.
(jj) Disclosure. The representations or warranties made by each of
▇▇▇▇▇▇ and the Stockholders in this Agreement or in any other document or
certificate furnished in connection herewith did not contain at the time made
or, if set forth herein, do not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they are made, not misleading
in any material respect.
8. Covenants and Undertakings.
(a) Conduct of the Business of ▇▇▇▇▇▇ Prior to Closing. Except with
the prior consent in writing of GLBN, the Stockholders covenant, between the
date of this Agreement and the Closing, that ▇▇▇▇▇▇ will not take any action or
fail to take any action that will result in the Business of ▇▇▇▇▇▇ being
conducted otherwise than in the Ordinary Course of Business and that the
Stockholders will not, except as otherwise provided in this Agreement:
(i) cause the organization of ▇▇▇▇▇▇ to be dissolved;
(ii) cause ▇▇▇▇▇▇'▇ customary levels and standards of service,
Business practices and procedures to be changed in any material respect;
(iii) cause any existing bonds and policies of insurance
insuring ▇▇▇▇▇▇ and the Assets to be reduced from their present limits;
(iv) cause any contract, commitment, arrangement or transaction
to be entered into other than in the Ordinary Course of Business;
(v) cause any change to ▇▇▇▇▇▇'▇ Certificate of Incorporation or
Bylaws or to ▇▇▇▇▇▇'▇ authorized, issued or outstanding capital stock, or cause
any distributions or dividends on ▇▇▇▇▇▇'▇ capital stock to be paid other than a
distribution to Stockholders not to exceed $50,000 in the aggregate relating to
the tax liabilities of the Stockholders prior to the Closing Date;
(vi) cause any option or right to purchase any securities of
▇▇▇▇▇▇ to be granted or issued or cause any securities of ▇▇▇▇▇▇ to be
purchased, redeemed, retired or otherwise acquired, or cause any agreement to do
any of the foregoing to be entered into;
25
(vii) cause ▇▇▇▇▇▇'▇ accounting methods or practices to change;
(viii) cause the business records of ▇▇▇▇▇▇ to be maintained in
any manner other than in the same manner as currently maintained;
(ix) cause ▇▇▇▇▇▇ to fail to make capital expenditures, collect
receivables and pay payables other than in the Ordinary Course of Business;
(x) cause ▇▇▇▇▇▇ to take any action or fail to take any action
which would or could violate the rules and regulations promulgated by the SEC,
NASD or Agency or SRO and which could have a Material Adverse Effect on ▇▇▇▇▇▇;
and
(xi) without limiting the foregoing, cause any distribution of
cash or property to any person other than in the Ordinary Course of the
Business.
(b) Covenants. During the period commencing on the date hereof and
continuing through the Closing Date, the parties agree (except as expressly
contemplated by this Agreement or to the extent that the parties shall otherwise
consent in writing) that:
(i) Access. ▇▇▇▇▇▇ shall permit, and shall cause its members,
officers, directors, key employees and advisors to permit Mergerco and GLBN and
its accountants, counsel, other representatives and agents reasonable access
during normal business hours to the books and records, facilities, key
personnel, independent accountants and counsel, as reasonably requested by
Mergerco and GLBN or its representatives in connection with their due diligence
review of ▇▇▇▇▇▇ and its affairs and operations and, during such period, shall
furnish promptly to Mergerco and GLBN, without request, a copy of each report,
notice and other document filed or received by, or on behalf of, ▇▇▇▇▇▇ pursuant
to the requirements of applicable regulatory law and, upon request, all other
information pertaining to the Business, or ▇▇▇▇▇▇'▇ operations and personnel.
Mergerco and GLBN will conduct such review so as to minimize any interference
with the normal conduct of the Business. GLBN shall make its representatives
available to respond to appropriate questions from the Stockholders pertaining
to its financial condition, business and results of operations and shall, to the
extent allowed under applicable law, make available to the Stockholders for
inspection any documents relating to GLBN, its business or operations.
(ii) Obtaining Approvals. The parties hereto shall obtain (and
cooperate with each other in obtaining) any consent, authorization or approval
of, or exemption by, any governmental body or agency or instrumentality thereof
required to be obtained by ▇▇▇▇▇▇ or the Stockholders or GLBN or Mergerco in
connection with the transactions contemplated by this Agreement, and shall
obtain prior to the Closing each consent to, and authorization or approval of
any other person or entity to or as a result of, the consummation of the
transactions contemplated hereby.
(iii) Tax Assessments and Audits. ▇▇▇▇▇▇ shall furnish promptly
to Mergerco and GLBN a copy of all notices of proposed assessment or similar
notices or reports that are received from any taxing authority and which relate
to the operations of the Business for periods ending prior to the Closing Date.
26
(iv) Satisfaction of Conditions Precedent. The parties shall
use their commercially reasonable efforts to bring about the satisfaction of the
conditions precedent to Closing set forth in Sections 8, 9 and 10 of this
Agreement.
(v) Employee Matters. Except as otherwise provided in the
employment contracts to be executed in connection herewith between ▇▇▇▇▇▇ and
each of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, nothing in this Agreement shall be construed to (i) entitle any
employee (or leased employee) of ▇▇▇▇▇▇ to any position of employment or any
other arrangement or any specific compensation from Mergerco or GLBN or any
Affiliate of Mergerco or GLBN; (ii) entitle any employee of ▇▇▇▇▇▇ to any
benefits or service credit under any pension, profit sharing, health, or welfare
benefit plan or any severance plan sponsored by Mergerco or GLBN or any
Affiliate of Mergerco or GLBN; or (iii) obligate Mergerco or GLBN or any
Affiliate of Mergerco or GLBN to offer any particular benefit at any particular
level with respect to any such person. Unless otherwise specifically set forth
in an agreement in writing between such parties, the employment or other
relationship of any employee of ▇▇▇▇▇▇ who becomes an employee of Mergerco or
GLBN or any Affiliate of Mergerco or GLBN or any other right or benefit of such
employee shall be terminable at any time, with or without cause, by such
employee and the entity by which he or she is engaged.
(vi) Taxes. The Stockholders shall cause ▇▇▇▇▇▇ to prepare and
file a federal tax return for periods or portions of periods prior to Closing as
a Subchapter S Corporation. All federal tax returns required to be filed for
periods or portions of periods as of the Closing Date and subsequent to the
Closing shall be the responsibility of Mergerco and GLBN. Neither Mergerco nor
GLBN shall be responsible for any federal, state or local taxes prior to the
Closing, such liabilities to be satisfied by the Stockholders. The Stockholders
shall not be responsible for any federal, state or local taxes subsequent to the
Closing. Mergerco and GLBN shall be responsible for any federal, state or local
taxes subsequent to the Closing. ▇▇▇▇▇▇ covenants and agrees that it will timely
pay any and all state and local sales and use taxes and transactions and use
taxes which become due prior to the Closing. GLBN and Mergerco covenant and
agree that they will timely pay any and all state and local sales and use taxes
and transactions and use taxes which become due on or after the Closing.
(vii) Exclusivity. Neither ▇▇▇▇▇▇, the Stockholders, nor any of
▇▇▇▇▇▇'▇ or the Stockholders' Affiliates or any of their respective members,
officers, or directors or any investment banker, attorney, accountant or other
representative retained by ▇▇▇▇▇▇ or any of ▇▇▇▇▇▇'▇ Affiliates, shall solicit
or encourage (including by way of furnishing information), or take any other
action to facilitate, any inquiries or the making of any proposal to acquire in
any manner the securities of ▇▇▇▇▇▇. ▇▇▇▇▇▇ shall immediately advise GLBN in
writing of any such proposals.
(viii) Exchange Act Requirements. The Stockholders covenant and
agree that they will cause ▇▇▇▇▇▇ to maintain compliance with all financial and
reporting requirements under the Exchange Act as well as all NASD regulatory
requirements of a securities broker-dealer, including, but not limited to, the
minimum net worth and capital requirements.
(ix) NASD Notification. The parties agree to cooperate in
giving notice to the NASD of the change of control of ▇▇▇▇▇▇ following the date
of this Agreement.
27
(c) Consents and Legal Conditions to Closing. Each of Mergerco,
GLBN, ▇▇▇▇▇▇ and the Stockholders will take all reasonable actions necessary to
comply promptly with all legal requirements that may be imposed on each of them
with respect to the Closing. Each party shall obtain, prior to Closing, all
consents required and shall deliver copies of such consents to the other party
immediately upon the receipt thereof.
(d) Confidentiality Obligations. Each party acknowledges that from
and after the Closing, each party and their respective Affiliates will have a
legitimate and continuing proprietary interest in the protection of trade
secrets and confidential information, knowledge and data of ▇▇▇▇▇▇ and the
Business of ▇▇▇▇▇▇ and any similar information with respect to Mergerco and GLBN
or any of their respective Affiliates (collectively, the "Confidential
Information"). Except as disclosure may be ordered by a governmental entity of
competent jurisdiction, each party agrees that it and its Affiliates will
maintain and cause to be maintained the confidentiality of all Confidential
Information, which is held by or known to any of them and shall not disclose the
Confidential Information to any improper person. In the event that any party or
any of its Affiliates is notified that it is or may become legally compelled to
disclose any of the Confidential Information, such person will provide the other
party with prompt written notice of the existence, terms and circumstances
surrounding such notice so that such other party may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Section. Each party hereby represents and warrants that neither they nor to
their Knowledge any of their Affiliates have disclosed any Confidential
Information to any third party that has not been advised of and agreed to be
bound by the confidentiality provisions hereof, nor shall they or any of their
Affiliates use any Confidential Information for any of their benefit or the
benefit of any other person outside of the transaction contemplated hereby or in
connection with the operation of the Business. Information, knowledge or data
shall not be deemed to be Confidential Information to the extent that it is or
becomes generally available to the public other than as a result of a wrongful
disclosure by any party hereto or its Affiliates, or becomes available to the
disclosing party on a nonconfidential basis from a source other than any party
hereto or its Affiliates.
(e) Intentionally left blank.
(f) Lock-Up Agreement. At the Closing, the Stockholders shall sign
a lock-up agreement, a form of which is attached hereto as Exhibit J.
(g) Registration Rights. After the Closing, GLBN agrees to register
450,000 shares of the GLBN Shares for sale under the Securities Act, pursuant to
the terms and conditions of the Registration Rights Agreement between GLBN and
the Stockholders, attached hereto as Exhibit G and to use its best efforts to
cause such registration statement to become effective on or before 120 days from
the Closing Date.
(h) Tax Treatment. From and after the Closing Date, GLBN will treat
the Merger as a reorganization within the meaning of Section 368(a) of the Code
for all tax purposes, will file with the Internal Revenue Service the
information required to be filed pursuant to Treasury Regulation Section
1.368-3(a), and will retain such records required to be retained pursuant to
Treasury Regulation Section 1.368-3(c). Following and after the Closing Date,
GLBN will cause ▇▇▇▇▇▇ to continue its historic business or use a significant
portion of its historic assets in a business. Following the Merger, GLBN will
not cause ▇▇▇▇▇▇ to issue additional shares of its stock (or securities,
options, warrants or instruments giving the holder thereof the right to acquire
28
▇▇▇▇▇▇ stock) or take any other action that would result in GLBN losing control
of ▇▇▇▇▇▇ within the meaning of section 368(c) of the Code, except that GLBN may
transfer all of the stock of ▇▇▇▇▇▇ to a corporation controlled by GLBN in
accordance with Treas. Reg. ss. 1.368-2(k)(2).
(i) ▇▇▇▇▇▇ Employment Agreement. From and after the Closing Date,
GLBN and ▇▇▇▇▇▇ ▇▇▇▇ shall use their best efforts to promptly negotiate and
enter into an employment agreement with ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ on terms
substantially similar to those contained in the Exhibit D, and providing that
▇▇. ▇▇▇▇▇▇ is to receive options to purchase 250,000 shares of the common stock,
par value $0.001 per share, of GlobalNet Securities Holding Corp., a subsidiary
of GLBN.
9. Conditions Precedent to Obligations of Mergerco and GLBN. The
obligations of Mergerco and GLBN to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or any of which may
be waived, in whole or in part, by Mergerco and GLBN, for purposes of
consummating such transactions. ▇▇▇▇▇▇ shall have delivered to Mergerco and GLBN
a certificate substantially in the form of Exhibit K hereto, dated as of the
Closing Date and certifying to the fulfillment of certain of the following
conditions. Such certificate shall be deemed representations and warranties of
▇▇▇▇▇▇ and the Stockholders hereunder.
(a) Representations True at Closing. The representations and
warranties made by ▇▇▇▇▇▇ and the Stockholders in this Agreement and the ▇▇▇▇▇▇
Disclosure Schedule shall be true and correct on the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of such date (except for changes disclosed in the above-described
certificate or occurring in the Ordinary Course of Business which do not singly
or in the aggregate constitute a Material Adverse Effect on ▇▇▇▇▇▇).
(b) Covenants of ▇▇▇▇▇▇ and the Stockholders. ▇▇▇▇▇▇ and the
Stockholders shall have performed in all material respects all of the covenants,
acts and undertakings to be performed by them on or prior to the Closing Date.
(c) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency, legislative body or the NASD to enjoin,
restrain, prohibit, or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, or which is related to or arises out of the
Business of ▇▇▇▇▇▇, if such action, proceeding, investigation, regulation or
legislation, in the reasonable judgment of Mergerco and GLBN, would have a
Material Adverse Effect.
(d) Opinion of Counsel. An opinion of counsel for shall have been
delivered to Mergerco and GLBN dated as of the Closing Date, substantially in
form and substance of the opinion attached hereto as Exhibit E.
(e) Consents, Approvals and Waivers. The execution and the delivery
of this Agreement and the consummation of the transactions contemplated hereby
shall have been approved by all third parties whose consent or waiver is
required, as set forth in Schedule 9(e) of the ▇▇▇▇▇▇ Disclosure Schedule, and
by all regulatory authorities whose approvals are required by law.
29
(f) Employment Agreements. Each of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered
to Mergerco an employment agreement substantially in the form of Exhibit D
hereto.
(g) Lock Up. Each of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered to GLBN a Lock Up
substantially in the form of Exhibit J.
(h) Escrow Agreement. Each of the Stockholders shall have entered
into the Escrow Agreement substantially in the form of Exhibit C.
10. Conditions Precedent to the Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or any of which may
be waived, in whole or in part, by the Stockholders. Mergerco or GLBN shall have
delivered to the Stockholders a certificate substantially in the form of Exhibit
L hereto, dated as of the Closing Date and certifying to the fulfillment of the
following conditions. Such certificate shall be deemed representations and
warranties of Mergerco and GLBN hereunder.
(a) Representations True at Closing. The representations and
warranties made by Mergerco and GLBN in this Agreement shall be true and correct
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such date (except for
changes disclosed in the above-described certificate or occurring in the
Ordinary Course of Business which do not singly or in the aggregate constitute a
Material Adverse Effect on Mergerco or GLBN).
(b) Covenants of Mergerco and GLBN. Each of Mergerco and GLBN shall
have performed all of the covenants, acts and undertakings to be performed by it
on or prior to the Closing Date.
(c) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency, legislative body or the NASD to enjoin,
restrain, prohibit, or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, if such action, proceeding, investigation,
regulation or legislation, in the reasonable judgment of ▇▇▇▇▇▇ would make it
inadvisable to consummate such transactions.
(d) Opinion of Counsel. An opinion of counsel for Mergerco and GLBN
shall have been delivered to the Stockholders dated as of the Closing Date,
substantially in form and substance of the opinion attached hereto as Exhibit H.
(e) Consents, Approvals and Waivers. The execution and the delivery
of this Agreement and the consummation of the transactions contemplated hereby
shall have been approved by all required corporate action, and by all third
parties whose consent or waiver is required pursuant to this Agreement, and by
all regulatory authorities as set forth in the ▇▇▇▇▇▇ Disclosure Schedule law
(except for the approval required by the NASD).
30
(f) Employment Agreements. ▇▇▇▇▇▇ shall have entered into
employment agreements with each of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ substantially in the form of Exhibit D hereto.
(g) Tax Opinion. The Stockholders shall have received the opinion
of ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP, in a form reasonably satisfactory to
the Stockholders, that the Merger should qualify as a reorganization within the
meaning of Section 368 of the Code.
11. Termination; Amendment.
(a) Termination. This Agreement may be terminated at any time prior
to the Closing Date by written notice from the terminating party, delivered in
accordance with Section 13 hereof, under the following circumstances:
(i) by mutual agreement of the parties hereto;
(ii) by Mergerco and GLBN if the Closing has not occurred on or
before December 31, 2000 (as such date may be extended pursuant to Section 5
hereof) for any reason other than a material default by Mergerco or GLBN
hereunder, or in the event of a material uncurable breach or default by ▇▇▇▇▇▇
or the Stockholders of any representation, warranty or covenant under this
Agreement; and
(iii) by the Stockholders if the Closing has not occurred on or
before December 31, 2000 (or such date may be extended pursuant to Section 5
hereof) for any reason other than a material default by any Stockholder or
▇▇▇▇▇▇, or in the event of a material uncurable breach or default by Mergerco or
GLBN of any representation, warranty or covenant under this Agreement.
(b) Effect.
(i) In the event of termination of this Agreement as set forth
herein, except a party's breach or default under this Agreement this Agreement
shall forthwith become void and there shall be no liability hereunder on the
part of any party hereto, or any officer, director, employee, agent or
representative of any party hereto or any Affiliate of a party hereto, except
that the provisions with respect to Confidential Information, publicity and
expenses contained in Sections 8(d), 15(a) and 15(c) shall survive the
termination of this Agreement.
(ii) In the event of termination of this Agreement due to a
party's breach or default under this Agreement, the other party shall be paid
the sum of $1 million dollars in full and complete satisfaction of any liability
hereunder, which payment shall be made within 30 days from the termination of
this Agreement.
12. Indemnification.
(a) Indemnification by Mergerco and GLBN. Mergerco and GLBN hereby
indemnify and hold harmless the Stockholders in respect of any and all Adverse
Consequences suffered by the Stockholders in connection with each and all of the
following:
31
(i) Any breach of any representation, warranty, covenant or
agreement made by Mergerco or GLBN in this Agreement, the GLBN Disclosure
Schedule or other document attached or delivered to the Stockholders in
connection with the transactions contemplated hereby; and
(ii) The breach of any covenant, agreement or obligation of
Mergerco or GLBN contained in this Agreement or the GLBN Disclosure Schedule or
any other instrument specifically contemplated by this Agreement;
(b) Indemnification by the Stockholders. Each of the Stockholders,
jointly and severally, except for those representations, warranties and
covenants which are solely attributable to a particular Stockholder which shall
be several and not joint, hereby indemnifies and holds harmless Mergerco and
GLBN in respect of any and all Adverse Consequences incurred by Mergerco and
GLBN in connection with each and all of the following:
(i) Any breach of any representation or warranty made by ▇▇▇▇▇▇
and/or such Stockholders in this Agreement, the ▇▇▇▇▇▇ Disclosure Schedule or
other document attached hereto or delivered to Mergerco and GLBN by ▇▇▇▇▇▇
and/or the Stockholders in connection with the transactions contemplated hereby;
and
(ii) The breach of any covenant, agreement, or obligation of
▇▇▇▇▇▇ and/or the Stockholders contained in this Agreement or the ▇▇▇▇▇▇
Disclosure Schedule or any other instrument specifically contemplated by this
Agreement.
(iii) Any claim or liability asserted after the Closing (which
would have been required to be set forth on the ▇▇▇▇▇▇ Disclosure Schedule) as a
result of any action or failure to act which occurred prior to the Closing (the
"Unknown Liabilities").
(c) Indemnification for Certain Specified Matters. Each of the
Stockholders (except for Messrs. Dubofsky and ▇▇▇▇▇▇), jointly and severally,
hereby indemnifies and holds harmless Mergerco and GLBN in respect of any and
all Adverse Consequences incurred by Mergerco and GLBN which in the aggregate
exceed $450,000 (the "Arbitration Amount") and which arise from those
liabilities set forth on Schedule 7(m) (the "Schedule 7(m) Liabilities" and
together with the Unknown Liabilities which would have been required to be
disclosed on Schedule 7(m) of the ▇▇▇▇▇▇ Disclosure Schedule, the "Stockholders'
Liabilities"). Notwithstanding anything herein to the contrary, the Stockholders
(except for Messrs. Dubofsky and ▇▇▇▇▇▇) shall be entitled to (x) select legal
counsel or other representative of their own choosing (which shall be reasonably
satisfactory to GLBN), at GLBN's cost and expense (GLBN shall not be entitled to
any indemnification or reimbursement by the Stockholders of any such cost and
expense), to represent ▇▇▇▇▇▇ ▇▇▇▇ and the Stockholders in connection with the
Stockholders' Liabilities, and (y) direct the defense, compromise or settlement
thereof. The Stockholders shall have an obligation to keep GLBN informed of the
status of the defense of any such Stockholders' Liability. Each of ▇▇▇▇▇▇ and
GLBN shall furnish the other with all documents, instruments and information
that the other shall reasonably request in connection with the Stockholders'
Liabilities.
(d) Procedure for Indemnification. Whenever any claim shall arise
for indemnification hereunder, the party seeking indemnification ("Indemnitee")
shall promptly notify the other party ("Indemnitor") of the claim and, when
known, the facts constituting the basis for such claim. If a direct claim, the
Indemnitor shall satisfy such clause within ten business days. If
32
any claim for indemnification hereunder results from or is in connection with
any claim or Adverse Consequence by a person who is not a party to this
Agreement ("Third Party Claim"), such notice shall also specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnitee shall give the Indemnitor prompt notice of any such claim and the
Indemnitor shall undertake the defense thereof by representatives of its own
choosing, reasonably satisfactory to the Indemnitee, at the expense of the
Indemnitor. The Indemnitee shall have the right to participate in any such
defense of a Third Party Claim with advisory counsel of its own choosing, at its
own expense. If the Indemnitor, within a reasonable time after notice of any
such Third Party Claim, fails to defend, the Indemnitee or any Affiliate of the
Indemnitee shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim on behalf of, and for the account of, the
Indemnitor, at the expense and risk of the Indemnitor. The Indemnitor shall not,
without the Indemnitee's written consent, settle or compromise any such Third
Party Claim or consent to entry of any judgment that does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to
Indemnitee and/or Indemnitee's Affiliate or Affiliates, as the case may be, an
unconditional release from all liability in respect of such Third Party Claim.
The Indemnitee shall not pay any claim covered by this right to indemnification
prior to giving the Indemnitor the notice of such claim required by this Section
12 and the opportunity provided herein to handle the claim itself.
(e) Limitations on Indemnification. Notwithstanding anything within
this section to the contrary, except with respect to the representations and
warranties referenced in Section 7(a), (c), (d), (f), (g), (h) and (j), GLBN and
Mergerco shall not be entitled to indemnification with respect to any claim
asserted under Section 12(b) unless the amount of such claims exceed $75,000
individually or in the aggregate ("Claim Threshold"). If the Claim Threshold is
met, GLBN and Mergerco shall be entitled to indemnification for such claims,
provided, however, that GLBN and Mergerco shall only be entitled to
indemnification in excess of the Claim Threshold. In addition, the Stockholders
liability (for indemnification or otherwise) with respect to the matters
described in Section 12 will be limited to the product of 1,450,000 and the
closing sale price of a share of GLBN Common Stock as reported on the Nasdaq
National Market on the date hereof.
(f) Payment. Except for indemnification through set-off, pursuant
to Section 12(g), all indemnification hereunder shall be effected upon demand by
payment of cash or delivery of a cashier's check in the amount of the
indemnification liability; provided, however, that to the extent necessary to
preserve the status of the Merger or a reorganization within the meaning of
Section 368(a) of the Code any indemnification by GLBN shall be paid in
additional GLBN Shares.
(g) Right to Set-Off. Upon notice to the Stockholder's
Representatives (as that term is defined in the Escrow Agreement) specifying in
reasonable detail the basis for such set-off, Mergerco or GLBN will set-off any
amount to which they may be entitled under this Section 12 against any unpaid
portion of the Holdback Amount as set forth in the Escrow Agreement and may
set-off any amount to which they may be entitled under this Section 12 against
any unpaid portion the Supplemental GLBN Shares, such shares to be valued at the
October Value.
(h) Survival. Each of the representations and warranties made by
each of the parties and the indemnities contained herein shall survive the
Closing and any investigation made with respect thereto for a period commencing
on the date hereof and ending 18 months from the
33
Closing Date; provided, however, that such indemnities shall survive as to any
claim or demand made prior to such 18 months until such claim or demand is fully
paid or otherwise resolved by the parties hereto in writing or by a court of
competent jurisdiction and except that representations and warranties as to
capitalization of ▇▇▇▇▇▇, title to the ▇▇▇▇▇▇ Shares shall survive indefinitely,
and representations, and warranties as to Taxes, OSHA and ERISA shall survive
until such claims have been barred by the applicable Statutes of Limitations
13. Notices. All notices, reports and other communications to Mergerco,
GLBN, ▇▇▇▇▇▇ or the Stockholders hereunder shall be in writing, shall refer
specifically to this Agreement and shall be hand delivered or sent by facsimile
transmission with receipt confirmed or by registered mail or certified mail,
return receipt requested, postage prepaid, in each case to the respective
persons and addresses specified below (or to such other persons or addresses as
may be specified in writing to the other party):
If to Mergerco, to: GlobalNetSecurities Mergerco, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to GLBN, to: GlobalNet ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.A.
Broad and ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇, to: ▇▇▇▇▇▇ ▇▇▇▇ Securities Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
If to the Stockholders, to: the address set forth on Exhibit A.
34
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice or communication given in conformity with this Section
13 shall be deemed to be effective when received by the addressee if delivered
by hand or overnight courier or by facsimile (with confirmed receipt), and three
days after mailing, if mailed.
14. No Implied Waivers; Rights Cumulative. No failure on the part of
any of the parties to this Agreement to exercise and no delay in exercising any
right, power, remedy or privilege under this Agreement or provided by statute or
at law or in equity or otherwise, including, without limitation, the right or
power to terminate this Agreement, shall impair, prejudice or constitute a
waiver of any such right, power, remedy or privilege or be construed as a waiver
of any breach of this Agreement or as an acquiescence therein, nor shall any
single or partial exercise of any such right, power, remedy or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, remedy or privilege.
15. Miscellaneous.
(a) Press Releases and Announcements. No party shall, and each
party shall cause its directors, shareholders, members, employees,
representatives and agents not to make, any public statements or issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other party; provided,
however, that any party may make any public disclosure (reasonably acceptable to
the other party) it believes in good faith is required by law or regulation (in
which case the disclosing party will advise the other party in writing prior to
making the disclosure.
(b) Further Assurances. At any time, and from time to time, each
party will execute such additional instruments and take such action as may be
reasonably requested by any other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
(c) Costs and Expenses. Each party hereto agrees to pay its or his
own costs and expenses incurred in negotiating this Agreement and consummating
the transactions described herein.
(d) Entire Agreement. This Agreement, including all schedules and
exhibits thereto, constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof. It supersedes all prior negotiations,
letters and understandings relating to the subject matter hereof.
(e) Choice of Law. This Agreement will be interpreted, construed
and enforced in accordance with the laws of the State of New York, without
giving effect to the application of the principles pertaining to conflicts of
laws.
(f) Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities
35
laws, shall be settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in New York, New York,
and judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof, and shall not be appealable. The prevailing
party in any such arbitration shall be entitled to recover its reasonable
attorneys' fees and expenses in connection with any such arbitration. Except as
otherwise provided herein, judicial proceedings may be commenced only to enforce
this Section or to enforce the results of arbitration; provided that such
prohibition shall not apply in the event that a court-ordered injunction is an
appropriate remedy for a breach of this Agreement.
(g) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the parties. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach or warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(h) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder.
(i) Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
(k) Construction. The parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
(l) Severability. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(m) Binding Nature. This Agreement will be binding upon and will
inure to the benefit of any heir or heirs, successor or successors of the
parties hereto.
(n) No Third-Party Beneficiaries. No person shall be deemed to
possess any third-party beneficiary right pursuant to this Agreement. It is the
intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
36
(o) Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably if any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled, in addition to any other remedy to which they
may be entitled, at law or in equity, to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter.
(p) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
[SIGNATURES ON FOLLOWING PAGE]
37
IN WITNESS WHEREOF, the parties hereto, through their duly authorized
officers, have executed this Agreement as of the date first written above.
GLBN: MERGERCO:
GLOBALNET ▇▇▇▇▇▇▇▇▇.▇▇▇, INC., GLOBALNET SECURITIES MERGERCO,
a Delaware corporation INC., a New York corporation
By: s/s ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: s/s ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------- ---------------------------
____________________, President Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Secretary
▇▇▇▇▇▇: STOCKHOLDERS:
▇▇▇▇▇▇ ▇▇▇▇ SECURITIES
GROUP, a New York corporation s/s ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
By: s/s ▇▇▇▇ ▇▇▇▇▇ s/s ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------- ------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
s/s ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
s/s ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
s/s ▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇
s/s ▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇ ▇▇▇▇▇
s/s ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
s/s ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
s/s ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
s/s ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
s/s ▇▇▇▇▇▇ Schariro
------------------------------
▇▇▇▇▇▇ SCHARIRO
38
EXHIBIT A
---------
Name and Address of Stockholder ▇▇▇▇▇▇ Shares Owned GLBN Shares to be Received
------------------------------- ------------------- --------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 15 199,538
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ 15 199,538
▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 9 119,728
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1 13,305
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ 5 66,517
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ 15 199,538
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 15 199,538
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 2 26,611
▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ 15 199,538
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 15 199,538
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ SCHARIRO 2 26,611
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------- ---------
TOTAL: 109 1,450,000
========= =========
