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EXHIBIT 2.1
MERGER AGREEMENT
THIS AGREEMENT, dated as of June 30, 2000, among PINNACLE
GLOBAL GROUP, INC., a Texas corporation (the "Parent"), SANDERS MORRIS HARRIS,
INC., a Texas corporation (the "SMH"), BLACKFORD SECURITIES CORPORATION, a New
York corporation (the "Company"), and ARNOLD J. BARTON, RICHARD D. GRIMES, JACK
D. SEIBALD, ALLISON WEISS, DEBORAH WEISS, NEIL LAURO, and JOHN CONLON, the
shareholders of the Company (together, the "Sellers" or the "Shareholders");
W I T N E S S E T H:
WHEREAS, the Company owns and operates an
institutionally-oriented broker-dealer firm specializing in listed and
over-the-counter (OTC) equities and options, and is a member of the National
Association of Securities Dealers ("NASD"), and the Shareholders collectively
own all of the issued and outstanding capital stock of the Company (the
"Shares"); and
WHEREAS, the parties desire that the Company merge with and
into SMH in a statutory merger (the "Merger") to be consummated under the laws
of the States of Texas and New York and upon the terms and conditions and for
the consideration herein set forth and in the Plan of Merger among the Parent,
SMH and the Company in the form attached as Exhibit A hereto (the "Plan of
Merger");
NOW, THEREFORE, the parties agree as follows:
1. REORGANIZATION AND MERGER.
1.1. THE MERGER. Simultaneously with the execution and
delivery of this Agreement, the Plan of Merger shall be executed and
delivered by the Parent, SMH and the Company. Subject to the terms and
conditions set forth in this Agreement and in the Plan of Merger, at
the Effective Time of the Merger (as defined in the Plan of Merger),
the Company shall be merged with and into SMH in accordance with the
laws of the States of Texas and New York and the Plan of Merger. SMH,
the corporation surviving the Merger, is sometimes herein referred to
as the "Surviving Corporation." At the Effective Time of the Merger,
each share of Class A Voting Common Stock, $1.00 par value, of the
Company issued and outstanding immediately prior to the Effective Time
of the Merger, and each share of Class B Nonvoting Common Stock, $1.00
par value, of the Company issued and outstanding immediately prior to
the Effective Time of the Merger, shall, by virtue of the Merger,
automatically be converted into and become, at the Effective Time of
the Merger, the right to receive from Parent an amount (herein called
the "Merger Consideration") which shall be paid and allocated as
follows: $5,513,342 shall be paid in cash (the "Cash Consideration");
and 1,000,000 shares of Parent Common Stock (the "Stock
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Consideration"). The parties further agree the Cash Consideration shall
be decreased, dollar-for-dollar, by the amount of any long-term debt
(as determined in accordance with generally accepted accounting
principles) of the Company as of the Closing Date and by the amount
that the Company's working capital (as determined in accordance with
generally accepted accounting principles) is less than an amount as of
the Closing Date that is the greater of: (i) $ 75,000; or (ii) any such
larger amount that may be required by any regulatory or governmental
body that governs the operations of the Company.
1.2. Section 368 REORGANIZATION. Notwithstanding anything in
this Agreement to the contrary, including but not limited to Section
1.1, it is the intention of the parties that the Merger constitute a
"reorganization" within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), in accordance
with Section 368(a)(2)(D) of the Code. Accordingly, notwithstanding
anything to the contrary in this Agreement, in order that the Merger
will not fail to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations
under Section 368(a) of the Code, as reasonably determined by Ryan &
Sudan, L.L.P. , Parent's attorneys , the Cash Consideration shall be
reduced, and the Stock Consideration shall be increased, pro rata, to
the extent necessary (as mutually agreed by the parties) to permit,
Ryan & Sudan, L.L.P. to render the tax opinion contemplated by Section
7.9. The parties agree to file all of their respective tax returns and
reports in a manner consistent with such intention, and to not take any
filing position in a manner inconsistent with such intention unless
compelled to do so by court order or administrative decree. Each party
agrees to furnish such information and take such action as may be
reasonably requested of the other party in connection with the
foregoing (which action shall not include any change in the commercial
terms of the Merger and the other transactions incident thereto). In no
event, however, shall the Parent or the Surviving Corporation be
required to incur any out-of-pocket expenses in defending such position
or providing such information or taking such action, nor shall the
foregoing constitute a warranty or guaranty that the Merger will in
fact constitute such a reorganization.
1.3. SHAREHOLDER CONSENT; WAIVER OF DISSENTERS' RIGHTS. Each
Shareholder, in his capacity as a shareholder of the Company, and the
Parent, in its capacity as a shareholder of SMH, hereby (i) consent to
the Merger pursuant to Section 903 of the New York Business Corporation
Law, as amended (the "New York BCL"), and Article 5.03 of the Texas
Business Corporation Act (the "TBCA"), and (ii) irrevocably and
unconditionally waive all dissenters' and other similar rights with
respect to the Merger under and pursuant to Section 910, ET SEQ. of the
New York BCL.
1.4. POST-CLOSING TAX MATTERS. The Shareholders shall be fully
responsible for all federal, state and local taxes (including, but not
limited to, income taxes) of the Company accrued through the Closing
and for completing, filing and handling all tax returns and reports in
respect of all periods through Closing and consummation of the Merger,
including responding to any inquiries, examinations or audits regarding
such taxes, returns and reports.
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Without limiting the generality of the foregoing, the Shareholders will
arrange through their in-house accountant for the preparation of a
short-period federal income tax return for the Company's current year
through the Closing Date (after which time the Surviving Corporation
will be included as part of the consolidated group of which the Parent
is the parent corporation), based upon information furnished by the
Shareholders (and for which the Shareholders shall be solely
responsible), and the Shareholders shall pay all federal income taxes
in respect thereof and the cost of tax preparation by such accounting
firm. The Shareholders shall furnish the Parent with a copy of such
return and keep the Parent reasonably advised as to the status of such
filings.
1.5. FURTHER ASSURANCES. The Shareholders agree to execute and
deliver from time to time after the Effective Time of the Merger, at
the reasonable request of the Parent, and without further
consideration, such additional instruments of conveyance and transfer,
and to take such other action as the Parent may reasonably require to
more effectively carry out the terms and provisions of the Merger and
the other transaction contemplated by this Agreement.
1.6. TIME AND PLACE OF CLOSING. The Closing of the Merger (the
"Closing") shall occur at the offices of Blackford Securities
Corporation, 1010 Franklin Avenue, Suite 303, Garden City, New York
11530, on or before July 1, 2000, or at such other date, time or place
as may be mutually agreed upon by the parties, but in no event later
than September 1, 2000. The date and time of the Closing is herein
called the "Closing Date". At the Closing, the Shareholders shall
surrender for cancellation pursuant to the Merger all certificates
representing their respective shares of capital stock of the Company,
against receipt from the Parent of the Merger Consideration. All action
to be taken at the Closing as hereinafter set forth, and all documents
and instruments executed and delivered, and all payments made with
respect thereto, shall be considered to have been taken, delivered or
made simultaneously, and no such action or delivery or payment shall be
considered as complete until all action incident to the Closing has
been completed.
1.7. RELATED TRANSACTIONS. In addition to the Merger, at the
Closing the Company, on the one hand, and each of Arnold J. Barton,
Richard D. Grimes, and Jack D. Seibald, on the other hand, shall each
execute and deliver to the other an Employment Agreement to be dated
the Closing Date and in substantially the forms collectively attached
hereto, respectively, as Exhibit B. In addition, prior to the Closing,
the Company shall distribute to the Shareholders all of the shares of
Common Stock of Antigenics, Inc., held by the Company.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers hereby severally (for purposes of Section 2.1), and
for all other purposes, jointly and severally, hereby make the representations
and warranties contained in this Section 2, to
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Parent and SMH as of the date hereof, and all such representations and
warranties shall survive the Closing Date:
2.1 OWNERSHIP OF SHARES. Sellers are the record and beneficial owners
of all of the issued and outstanding capital stock of the Company as set forth
next to his name on Schedule 2.1 attached hereto. The Shares are not subject to,
nor were they issued in violation of, any preemptive rights. Sellers own and
hold and are passing on to Parent good and valid title to the Shares, free and
clear of all agreements, liens, encumbrances, pledges, options, proxies, voting
trusts, voting agreements, charges or assessments of any kind whatsoever, and
Sellers will have full right and power to sell, assign, exchange, transfer and
deliver the Shares to Parent, as provided in this Agreement. The Company has
previously disclosed to Parent true and correct copies of all subordinated
capital agreements of Company as currently in effect, and copies of each other
agreement as currently in effect by which Company borrows an amount representing
more than 5% of its gross assets.
2.2 STOCKHOLDER AGREEMENTS. Other than the rights and obligations
arising under this Agreement and except for those agreements that may be listed
on Schedule 2.2, Sellers are not a party to and the Shares are not subject to
any other agreement relating to a right of first refusal with respect to the
purchase or sale of capital stock of the Company or any voting agreement, proxy,
shareholder agreement, voting trust, or any other agreement or understanding
with respect to the Shares. The agreements set forth on Schedule 2.2, if any,
will be terminated or extinguished on the Closing Date and releases obtained
from all of the parties to those Agreements.
2.3 CORPORATE ORGANIZATION, AUTHORIZATION, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and has all requisite corporate power and authority to
conduct its business as it is now being conducted and to own or lease the
properties and assets it now owns or holds under lease. The Company is duly
registered, licensed and qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such registration, licensing or
qualification (including, but not limited to, licensing or registration as a
broker-dealer, investment adviser, municipal securities dealer, government
securities dealer, insurance agency, insurance broker, or insurance advisor) and
where the failure to so qualify would have a material adverse effect on the
Company and is a member or member organization in good standing of each self
regulating organization ("SRO") in which membership is required by the nature of
its business and where the failure to be a member or member organization would
have a material adverse effect on the Company. Schedule 2.3 includes a complete
schedule listing all jurisdictions in which it is licensed or registered and all
SROs in which it is a member, member organization or participant, in each case
indicating the specific entity that is licensed, registered or a member, member
organization or participant, the nature of the license, registration or
membership and (if applicable) the next renewal or expiration date of such
license, registration or membership. The Company is duly registered, qualified
to do business and in good standing as a broker-dealer with the Securities
Exchange Commission (the "SEC"), and is a member organization in good standing
of the NASD. True, correct and complete copies of the Articles of Incorporation,
as amended to date, and Bylaws, as amended to date, of the Company, certified by
its corporate secretary, as are now in effect are attached hereto as Schedule
2.3.
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2.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 5,000 authorized shares of Class A Common Voting Stock, $1.00 par
value per share, of which 631 shares are issued and outstanding; 5,000
authorized shares of Class B Nonvoting Common Stock, $1.00 par value, of which
95 shares are issued and outstanding; and no shares of Common Stock are held in
its treasury. All of such issued shares are validly issued, fully paid and
nonassessable. The Company does not have outstanding, and is not bound by, any
subscriptions, options, warrants, calls, commitments or agreements to issue any
additional shares of its capital stock, including any right of conversion or
exchange under any outstanding security or other instrument, and the Company is
not obligated to issue any shares of capital stock for any purpose. There are no
unsatisfied preemptive rights in respect of the Company's capital stock.
2.5 DUE EXECUTION AND ENFORCEABILITY. Each of the Company and the
Sellers have full power and authority to execute and deliver this Agreement and
all other agreements contemplated hereby, and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Sellers and by the Company and constitutes the valid, binding and legally
enforceable obligation of Sellers and the Company, enforceable in accordance
with its terms, except to the extent that enforcement may be affected by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the enforcement of the rights and remedies of creditors generally and
general equitable principles.
2.6 APPROVAL OF TRANSACTIONS. Sellers, as the owners of 100% of the
voting stock of the Company, have or by the Closing will have (i) approved the
transactions and agreements herein to which the Company is a party, and (ii)
authorized the officers and directors of the Company to take such actions as any
of them may deem appropriate in order to accomplish the transactions
contemplated hereby.
2.7 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as set forth on
Schedule 2.28, neither the execution and delivery of this Agreement by the
Company and Sellers nor the consummation of the transactions contemplated hereby
will violate, require any filing, consent or approval under, be in conflict
with, or constitute a default under (i) any law, ordinance or governmental rule
or regulation known to the Sellers to which the Company or Sellers is subject,
(ii) any judgment or order of any court or any other governmental authority
known to the Sellers which is applicable to the Company or Sellers, or (iii) the
Articles of Incorporation or Bylaws of the Company. Except as set forth on
Schedule 2.28, such execution, delivery and consummation will not violate, be in
conflict with, or constitute a default under (with or without the giving of
notice or lapse of time, or both) any note, lease, loan agreement, or other
agreement, instrument, document, or understanding (written or oral) to which the
Company or the Sellers is a party or by which any of their properties or other
assets may be subject, except for any violations, conflicts or defaults which in
the aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby.
2.8 SUBSIDIARIES, AFFILIATES, ETC. Except for inventory or investment
accounts held or maintained in the usual and ordinary course of business, and
except as otherwise disclosed on Schedule 2.8 and Schedule 2.30 (which includes
a description of the Company's portfolio of
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investments), the Company does not own any shares of stock or other security
of any corporation or any equity interest in a partnership, joint venture or
other business entity, and the Company does not control any other
corporation, partnership, joint venture or other business entity by means of
ownership, management contract or otherwise.
2.9 FINANCIAL STATEMENTS. Seller has delivered to Parent as set out
below the following financial statements of the Company as Schedule 2.9:
(a) Audited balance sheets of the Company as of September 30,
1999, September 30, 1998, and September 30, 1997 and the
related unaudited income statements and statements of cash
flows for the fiscal years then ended;
(b) The May Balance Sheet, which is as of May 31, 2000 (the "May
Balance Sheet Date") and the Company's related unaudited
income statement prepared by management for the period then
ended, which has been reviewed by the Company's in house
accountant .
The financial statements referred to in this Section 2.9 have been prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved; and all of the financial
statements referred to in Paragraph 2.9 present fairly, in all respects, the
financial positions to which they relate at the respective dates thereof in a
manner consistent with past practice, the related results of operations for the
periods therein referred to, and the related changes in financial position for
such periods. Except as and to the extent disclosed and specifically reserved
for or against in the May Balance Sheet or disclosed in the notes thereto,
Exhibit Y, Schedule 2.15 or Schedule 2.15(b) or as incurred by the Company in
the ordinary course of business (and not in violation of any representation,
warranty or other term or provision of this Agreement), since the date of the
May Balance Sheet, the Company has not incurred or become liable for and is not
subject to any liability or obligation of any kind, whether accrued, absolute,
fixed, contingent or otherwise, and whether due or to become due. There is no
basis for assertion against the Company of any material claim or liability of
any nature or amount which is not fully disclosed in the May Balance Sheet or in
the notes thereto, Exhibit Y, Schedule 2.15 or Schedule 2.15(b). Except as set
forth in Schedule 2.9 and Schedule 2.10, there is no oral or written guarantee,
assurance or other credit maintenance arrangement by the Company of any
obligation of any person or entity for the borrowing of money, for the payment
of any monetary obligation of any nature whatsoever (whether due or to become
due), or for the performance of any obligation of any nature whatsoever or
otherwise.
2.10 LIABILITIES. Schedule 2.10 is a list, as of May 31, 2000, of all
liabilities of the Company of any nature, character and description, whether
accrued, absolute, contingent, unliquidated, or otherwise, whether due or to
become due, together with, in the case of those liabilities which are not fixed,
an estimate of the maximum amount which may be payable. Except as set forth on
Schedule 2.10 or as accrued or reserved against on the face of the May Balance
Sheet,
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the Company has not and will not have any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise.
2.11 ACCOUNTS AND NOTES RECEIVABLE; CASH AND CASH EQUIVALENTS. Sellers
have delivered to Parent a list (Schedule 2.11), as of May 31, 2000, of the
accounts receivable (whether billed or unbilled) and notes receivable of the
Company and its subsidiaries. Except to the extent collected prior to the date
hereof, all of the Company's accounts and notes (net of any reserve on the May
Balance Sheet) are collectable in the amounts shown on Schedule 2.11 and the
accounts and notes receivable reflected on the books and records of the Company
as outstanding on the Closing Date (including those on Schedule 2.11) are valid
debts owing to the Company arising in the ordinary course of business, and such
accounts and notes receivable are by their terms payable and will be collected
(net of any reserve on the May Balance Sheet) within ninety (90) days of the
invoice date of each such receivable, except for those accounts described on
Schedule 2.11 which will be collected within a longer period of time. As of May
31, 2000, the cash and cash equivalents of the Company were $2,319,425 and such
cash and cash equivalents have been utilized since May 31, 2000 only for the
proper conduct of the Company's business, in the ordinary course of its
business. "Cash equivalents" shall mean liquid investments with maturities of
three (3) months or less. As of the Closing, the net amount of cash and cash
equivalents, net of current and long-term liabilities and accrued expenses, is
$1,513,342.
2.12 PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
(a) "Proprietary Rights" shall mean all of the following items
owned by or licensed to the Company, and any and all
corresponding rights that, now or prior to Closing, may be
secured by the Company throughout the world: (i) patents,
patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to
practice) and any reissue, continuation, continuation-in-part,
division, revision, extension or reexamination thereof; (ii)
trademarks, service marks, trade dress, logos, trade names and
corporate names together with all goodwill associated
therewith, copyrights registered or unregistered and
copyrightable works and mask works; (iii) all registrations,
applications and renewals for any of the foregoing; (iv) trade
secrets and confidential information (including, without
limitation, ideas, formulae, compositions, know-how,
manufacturing and production processes and techniques,
research and development information, drawings,
specifications, designs, plans, proposals, technical data,
financial, business and marketing plans, and customer and
supplier lists and related information); (v) computer software
and software systems (including, without limitation, data,
databases and related documentation); (vi) other proprietary
rights; (vii) licenses or other agreements to or from third
parties regarding the foregoing; and (viii) all copies and
tangible embodiments of the foregoing (in whatever form or
medium), in each case including, without limitation, the items
set forth on Schedule 2.12.
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(b) Schedule 2.15 and 2.15(b) set forth a complete and correct
list of: (i) all patented or registered Proprietary Rights and
all pending patent applications or other applications for
registration of Proprietary rights owned, filed or used by the
Company, (ii) all trade names and unregistered trademarks used
by the Company, (iii) all material unregistered copyrights,
mask works, and computer software owned or used by the
Company, and (iv) all licenses or similar agreements or
arrangements to which the Company is a party either as
licensee or licensor for the Proprietary Rights, other than
temporary rights arising under consulting agreements with
customers of the Company related to specific consulting
projects, and licenses customarily required for use in
connection with pre-packaged consumer or personal computer
software.
(c) Except as set forth in Schedules 2.15 and 2.15(b) and 2.28,
(i) the Company owns and possesses all right, title and
interest in and to, or has a valid and enforceable right to
use, each of the Proprietary Rights free and clear of all
liens, and no claim by any third party contesting the
validity, enforceability, use or ownership of any of the
Proprietary Rights has been made, is currently outstanding or
to Sellers' knowledge is threatened, (ii) the Proprietary
Rights comprise all proprietary rights necessary for the
operation of the business of the Company as currently
conducted, and as currently proposed to be conducted, (iii)
the loss or expiration of any Proprietary Right or related
group of Proprietary Rights has not and would not result in a
material adverse affect on the Company, and no such loss or
expiration is threatened or pending, (iv) the Company has not
received any notices of, nor is the Company aware of any facts
which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with
respect to any Proprietary Right including, without
limitation, any demand or request that the Company license
rights from a third party, (v) the Company has not infringed,
misappropriated or otherwise conflicted with any proprietary
rights of any third parties and the Sellers are not aware of
any infringement, misappropriation or conflict which shall
occur as a result of the continued operation of the Company's
business as currently conducted or as currently proposed to be
conducted, and (vi) the Proprietary Rights owned or licensed
to the Company have not been infringed, misappropriated or
conflicted by any third party.
(d) All of the Proprietary Rights are or shall be owned by, or
licensed to, the Company at the time of the Closing. The
transactions contemplated by this Agreement shall have no
adverse effect on the Company's right, title and interest in
and to any of the Proprietary Rights. Except as set forth in
Schedule 2.15, 2.15(b) and 2.28, the Company has not disclosed
any of their trade secrets or confidential information
existing at the date of this Agreement to any third party
other than pursuant to a written confidentiality agreement.
The Company has taken all other commercially reasonable
actions to maintain and protect the Proprietary Rights and
shall continue
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to maintain and protect those rights prior to the Closing so
as to not adversely affect the validity or enforcement of such
Proprietary Rights.
(e) At the time of Closing, except as limited by the contracts
involving companies listed in Schedules 2.15 and 2.15(b),
Parent will be entitled to all income, royalties, damages and
payments relating to any of the Proprietary Rights due or
payable to the Company at the Closing or thereafter,
including, without limitation, damages and payments for past,
present or future infringements or misappropriations of any
Proprietary Rights, and the right to sue and recover for past
infringements or misappropriations of any Proprietary Rights.
2.13 REAL PROPERTY LEASES. Schedule 2.13 to this Agreement is a list of
all real estate leases to which the Company is a party. All leases listed on
Schedule 2.13 are valid and in full force, and, except as set forth in Schedule
2.28, there does not exist any default or event that with notice or lapse of
time, or both, would constitute a default under any of these leases.
2.14 FURNITURE, FIXTURES, AND LEASEHOLD IMPROVEMENTS. Schedule 2.14 to
this Agreement is a true and complete schedule describing and specifying the
location of all furniture, fixtures, and leasehold improvements owned by, in the
possession of, or used by the Company in connection with its business and
specifies if it is (i) owned (ii) leased or (iii) used by the Company. The
property listed in Schedule 2.14 constitutes all such tangible personal property
presently utilized by the Company in their respective business as now conducted.
All items of equipment described therein are (i) in good operating condition,
order and repair, subject to ordinary wear and tear, and have been maintained in
accordance with good and normal business practice, (ii) are adequate for the
purposes for which they are being used in the operations and business of the
Company as presently being conducted and, to Sellers' knowledge, without present
need for repair or replacement except in the ordinary course of the operations
and business of the Company, (iii) conform in all material respects with all
applicable legal requirements, and (iv) in the aggregate provide the capacity to
enable the Company to engage in commercial operation on a continuous basis
subject to normal maintenance and repair outages in the ordinary course of its
business.
2.15 MATERIAL CONTRACTS. Schedule 2.15 is an accurate list, as of the
date hereof, of all contracts, agreements, and understandings to which the
Company is a party or by which it or any of its property is bound with respect
to which the obligations of or the benefits to be received by the Company could
reasonably be expected to have a value in excess of $10,000 in any consecutive
12 month period (each a "Material Agreement"). Schedule 2.15 does not include
those insurance policies listed on Schedule 2.21, the Investment Contracts
listed on Schedule 2.17, or those employment agreements listed on Schedule 2.22,
but does include all other contracts, agreements, and understandings to which
the Company is a party including, but not limited to, joint venture or
partnership agreements, contracts with municipalities and labor organizations,
loan agreements, lease agreements, pension agreements, bonds, mortgages, liens,
pledges, guaranties or other security agreements, noncompetition agreements,
license or royalty agreements, agreements with respect to investing funds,
contracts relating to the distribution, marketing or sales of its services or
products,
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and warranty agreements with respect to its services or products, and Sellers
have delivered true copies of such agreements to Parent. Except to the extent
set forth on Schedule 2.15 and Schedule 2.28, the Company and, to the knowledge
of the Sellers, all other respective parties thereto have complied with all
material commitments and obligations under all such contracts and agreements and
there are not any pending unresolved claims of which the Company has received
notice.
2.16 MATERIAL CUSTOMERS.
(a) Schedule 2.16 is a true and complete list of all of the
material customers of the Company during the 12-month period
ended on September 30, 1999, each of which accounts for the
respective dollar amount of sales set forth opposite their
respective names on Schedule 2.16. A material customer shall
mean any customer representing five percent (5%) or more of
the revenues of the Company. Except as set forth on Schedule
2.16, to the best of Sellers' knowledge, none of such
customers have been lost and the Company has not received any
notice that there will be any loss of any of such customers or
any substantial decrease in sales to any of such customers.
Except as set forth on Schedule 2.16, Sellers have no
knowledge that any single customer representing five percent
(5%) or more of the revenues of the Company is currently
experiencing or has experienced within the last 12 months any
material financial difficulty that have resulted in late
payments, non-payments or cancelled purchase orders on the
part of such customer.
(b) Except as disclosed on Schedule 2.10 and 2.16, no officer,
director or employee of the Company and, to the best knowledge
of the Company and Sellers, no affiliate or associate (as such
terms are defined in Rule 12b-2 under the Securities Exchange
Act of 1934) of any such person (i) has any loan or other
obligation outstanding to or from the Company or for which the
Company is or may be liable under guaranty or otherwise, (ii)
has any material business relationship with the Company (other
than as a shareholder, employee or director), or (iii) to the
Company's knowledge, has any material interest in any person
with which the Company has entered into any contract or lease,
or with which the Company does business and which would
influence that person in doing business with the Company,
other than such contracts, leases or business relationships as
are on arms' length terms not less favorable to the Company
than would be available from an unaffiliated third party.
2.17 INVESTMENT CONTRACTS, FUNDS AND CLIENTS.
(a) Schedule 2.17 sets forth a list of (i) all of the clients
(identified by number, but not by name) to which the Company
provides investment management, investment advisory,
sub-advisory, administration or other services on the date
hereof pursuant to written advisory agreements (the
"Clients"), including an indication of whether the asset under
management is a mutual fund subject to regulation under the
Investment Company Act of 1940 (the "1940 Act"), (ii) each
contract or agreement, and all
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amendments thereto, in effect on the date hereof relating to
the rendering of investment advisory or management services,
including without limitation all sub-advisory services or
administration services to any Client or other person
(together with any such contract or agreement entered into
after the date hereof, the "Investment Contracts"), (iii) the
most recent date on which each Investment Contract with an
investment company was renewed or continued and (iv) the net
asset value of each Client's assets under management as of May
31, 2000. The aggregate amount of assets under management by
the Company pursuant to Investment Contracts is not less than
Thirteen Million Seven Hundred Thousand dollars ($13,700,000).
The Company does not provide investment management, investment
advisory, administration or other services except pursuant to
the Investment Contracts. None of the Investment Contracts, or
any other arrangements or understanding relating to the
rendering of investment advisory or management services,
including without limitation all sub-advisory services,
securities lending or administration services to any Client or
other Person, contains any undertaking by the Company to cap,
return or reimburse any or all fees thereunder, or provides
for performance-based fees.
(b) Schedule 2.17 indicates, to the best knowledge of the Company
and Sellers, each Client of the Company that is subject to
ERISA, and the accounts of such Clients have been managed in
compliance in all material respects with the applicable
requirements of ERISA and all other applicable laws and
regulations.
(c) No material controversy or disagreement exists between the
Company, on the one hand, and any Client(s), on the other as
required to be disclosed in the Company's form ADV, form BD
and other filings with any governmental entity of SRO.
2.18 AGREEMENTS WITH REGULATORY AGENCIES. As of the date of this
Agreement, the Company is not subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any resolutions at the
request of any SRO or governmental entity that materially restricts the conduct
of its business or that in any material manner relates to its capital adequacy,
its credit policies, its management or its business (each a "Regulatory
Agreement"), nor has the Company (i) been advised since January 1, 1997 by any
SRO or governmental entity that it is considering issuing or requesting any such
Regulatory Agreement or (ii) have knowledge of any pending or threatened
regulatory investigation.
2.19 INVESTMENT SECURITIES. The Company has good and marketable title
to all securities held by it (except securities sold under repurchase agreements
or held in any fiduciary or agency capacity), free and clear of any lien, except
to the extent such securities are pledged in the ordinary course of business
consistent with prudent business practices to secure obligations of the Company.
Such securities are valued on the books of the Company in accordance with GAAP.
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2.20 TITLE AND CONDITION OF PROPERTY. The Company has good and
marketable title to all property, assets and leasehold estates, real and
personal, owned and used in its business, including those reflected on the
Schedules to this Agreement, subject to no mortgage, pledge, lien, conditional
sales agreement, encumbrance or charge, except for liens reflected on Schedule
2.20 as securing specified liabilities (with respect to which no default exists)
and except for statutory liens for taxes not yet due or delinquent. There are no
claims against the Company and Sellers are not aware of any facts or
circumstances which could reasonably be expected to lead to any claims, which
would if determined adversely to the Company result in a lien against any of the
assets or property of the Company.
2.21 INSURANCE. To the best knowledge of Sellers and Company, Schedule
2.21 is a true and complete list, as of the date hereof, of all insurance
policies carried by the Company (with a notation as to the status of premiums
paid or payable thereon, specifying the insurer, the amount of coverage, the
deductible amount, the type of insurance, the policy number, the cash surrender
value, the owner, the beneficiary, the loss payee, and all pending claims
thereunder). The Company has not been refused any insurance by any insurance
carrier to which it has applied for insurance during the past three years
because of unacceptable risk.
2.22 EMPLOYEE ARRANGEMENTS. Schedule 2.22 is a true and complete list
showing all officers and directors of the Company and the rate of compensation
(and the portions thereof attributable to salary, commissions and bonuses,
respectively) of the officers and key employees of the Company, as of the date
of this Agreement, and showing all employment contracts and compensation
arrangements and benefit plans and classifications of employees covered thereby
as of the date of this Agreement. Sellers have provided Parent true and complete
copies of all of the Company's employment contracts and compensation
arrangements with its employees, and all non-compete agreements with employees,
and a copy of the Company's current major medical and employee health plans.
2.23 INDEPENDENT CONTRACTOR ARRANGEMENTS. Schedule 2.23 is a true and
complete list showing any independent contractors being retained by the Company
and the rate of compensation of such persons. Sellers have provided Parent true
and complete copies of all such contracts with such independent contractors.
2.24 EMPLOYEE BENEFIT, PENSION, BONUS PLANS, ETC.
(a) Except for the plans and agreements listed in Schedule 2.24
hereto, the Company is not and has not within the last three
years been a party to or obligated under any material plan,
program, trust, contract, agreement, or arrangement, either
oral or written, for the benefit of employees of the Company,
whether a single employer or multi-employer plan, and
including welfare, fringe benefit, pension, profit sharing,
retirement and deferred compensation plans ("Benefit Plans").
All Benefit Plans listed in Schedule 2.24 and all trusts and
contracts relating thereto conform in all
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material respects to and are or were administered in material
compliance with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and, where
applicable, sections 401 and 501(a) of the Internal Revenue
Code of 1986, as amended ("IRC") and such other rules and
regulations which may have been applicable, including the
timely filing of all returns, reports and disclosure
statements and the payment of all funding requirements and
obligations required by ERISA, the IRC, and any such Benefit
Plan. The Company has made all required contributions under
such plans and trusts. There has not been any "defined benefit
plan" within the meaning of ERISA maintained by the Company or
any person, firm or corporation ("Affiliate") which is under
"common control" (within the meaning of Section 4001(b) of
ERISA) with the Company. The Company does not have nor has had
any multi-employer plan within the meaning of Section 3(37) of
ERISA or any defined benefit plan within the meaning of
Section 3(35) of ERISA.
(b) The Company has delivered to the Parent true and complete
copies of:
(i) all written Benefit Plans, as amended,
(ii) the most recent favorable determination letter
from the IRS or application to the IRS, where
applicable,
(iii) the most recent Annual Information Return (Form
5500 Series) for all current Benefit Plans, where
applicable, and
(iv) if any plans qualified under IRC Section 401(a)
have been terminated, any documents relating to
termination of the plan, including any opinion of
counsel passing upon the legality of the
termination and distribution.
2.25 EMPLOYEE RELATIONS. Except as disclosed in Schedule 2.25, there
are no controversies pending or threatened between the Company and any employee,
former employee or job applicant of the Company or any association or any group
of current or former employees of the Company, and the general relationship
between the Company and their employees is good. Seller has no reason to believe
that any salesman or other key employee is currently intending to leave or will
leave upon consummation of this Agreement. Except as set forth on Schedule 2.25,
the Company has not entered into any labor contracts with any bargaining agency
or union representing its employees, and no union is known to be organizing or
attempting to organize any of the employees of the Company who are not already
members of a labor union. Sellers will use their best efforts to ensure that the
services of all essential employees of the Company will continue to be available
on substantially the same terms and at the same locations for the continuation
of the business of the Company after the Closing. Except as set forth on
Schedule 2.22, the Company is not a party to and has not been a party to any
employment agreements, collective bargaining and labor agreements. The Company
has complied with all laws applicable to it relating to the employment of labor,
including any
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provisions relating to wages, hours, collective bargaining and the payment of
social security and other taxes.
2.26 BANK OR OTHER ACCOUNTS. Schedule A is a list showing as of the
date of this Agreement (i) the name of each institution in which the Company has
funds, certificates representing deposits, accounts, safe deposit boxes or
securities, (ii) the names in which the funds, certificates, boxes or securities
are held and (iii) the names of each person authorized to draw thereon or have
access thereto.
2.27 TAX MATTERS. Except as specifically disclosed on Schedule 2.27,
the Company has duly and timely filed all income, excise, corporate, franchise,
property, sales, payroll, withholding and other tax returns and reports required
to be filed by it as of the date hereof by the United States of America or any
state or any political subdivision thereof and has paid or established adequate
reserves for all taxes (including penalties and interest) which have or may
become due pursuant to such returns and any assessments which have been received
by it or otherwise. All such tax returns or reports fairly reflect the taxes of
the Company in all material respects for the periods covered thereby. The
Company is not delinquent in the payment of any tax, assessment or governmental
charge, there is no tax deficiency or delinquency asserted against the Company
and there is no unpaid assessment, proposal for additional taxes, deficiency or
delinquency in the payment of any of the taxes of the Company that could be
asserted by any taxing authority, nor of any material violation of any federal,
state, local or foreign tax law. No Internal Revenue Service audit of the
Company is pending or to the knowledge of the Company threatened, and the
results of any completed audits are properly reflected in the Company's
financial statements. The Company has not granted any extension to any taxing
authority of the limitation period during which any tax liability may be
asserted. The Company has committed no knowing or willful violation of any
federal, state, local or foreign tax laws. All monies required to be withheld by
the Company from employees or collected from customers for income taxes, social
security and unemployment insurance taxes and sales, excise and use taxes, and
the portion of any such taxes to be paid by the Company to governmental
agencies, have been collected or withheld and either paid to the respective
governmental agencies or set aside in accounts for such purpose, or such monies
have been approved, reserved against and entered upon the books of the Company.
Except as set forth on Schedule 2.27, there are no disputes as to taxes of any
nature payable by the Company. Sellers have delivered to Parent on or before the
date of this Agreement true and complete copies of all the federal and state tax
returns of the Company for each of the years ended September 30, 1995 through
September 30, 1999. The Company is not and has not been subject to any foreign
tax return requirements.
2.28 NO DEFAULTS UNDER CONTRACTS. To the best knowledge of the Company
and Sellers, all contracts, agreements, plans, leases, licenses, certificates,
insurance policies, permits and franchise agreements listed in any schedule
provided to Parent hereunder are valid and in full force and effect, except to
the extent disclosed in any schedule hereto. Except as set forth in Schedule
2.28, the Company has not breached any material provision of, nor is in default
in any material
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respect under the terms of, any such contract, agreement, lease, license, or
permit, and the Company is not in default in any material respect as to its
performance on any such contracts.
2.29 LITIGATION. Except as set forth in Schedule 2.29, to the best
knowledge of the Company and Sellers, the Company has complied with and is not
in default under, any law, rule, permit, regulation, ordinance, order, writ,
injunction or court decree applicable to it. Except as set forth in Schedule
2.29, the Company is not subject to any order, ruling, decree or judgment,
having continuing effect, of any court, arbitrator or governmental agency or
instrumentality. Except as set forth in Schedule 2.29, to the knowledge of the
Company, there are no actions, arbitrations, suits or proceedings instituted,
pending or threatened (or unasserted but considered by the Company probable of
assertion and which if asserted would be reasonably expected to have an
unfavorable outcome) against any present or former officer, director, employee
or customer of the Company, that might give rise to a claim for indemnification
and that (i) has a reasonable probability of an unfavorable outcome and (ii) in
the event of an unfavorable outcome, would, individually or in the aggregate,
have a material adverse effect on the Company.
2.30 COMPLIANCE WITH LAWS.
(a) Except as disclosed on Schedule 2.30, to the best knowledge of
the Company and Sellers, the Company, and any pooled
investment vehicles for which the Company acts as a fiduciary,
are and have been at all times within the past three years in
compliance with all statutes, regulations and SRO rules
applicable to the conduct of their businesses, and the Company
has not received notification form any agency or department of
federal, state or local government or SRO (i) asserting a
violation of any such statute, regulation or SRO rule, (ii)
threatening to revoke any license, franchise, permit,
government authorization or membership, or (iii) restricting
or in any way limited its operations, except for such failures
to comply, violations, revocations or restrictions which would
not, individually or in the aggregate, have a material adverse
effect on the Company.
(b) To the best knowledge of the Company and Sellers, the Company
has in place and adheres to compliance manuals, policies and
procedures, suitability standards, recordkeeping and
monitoring systems, training programs, audit routines, codes
of ethics and supervisory systems reasonably necessary to
assure compliance by the Company, and their officers,
directors and employees, with federal and state securities
laws, SRO rules, and applicable state or federal laws
regulating securities, insurance, and investment management,
or designed to detect improper transfers of funds or "money
laundering."
(c) To the best knowledge of the Sellers and Company, except as
disclosed on Schedule 2.30, within the past five years neither
the Company nor any of its officers, directors or employees
has been the subject of any disciplinary proceeding or
enforcement order arising under the securities laws, SRO
rules, or state or federal laws governing
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<PAGE>
securities, insurance, or investment advisory business, that
would be required to be, but has not been, disclosed on Forms
ADV or BD, and no such disciplinary proceeding or proceedings
for the issuance of an enforcement order is pending or except
as disclosed on Schedule 2.30, to the knowledge of the
Company, threatened.
(d) Except as disclosed on Schedule 2.30, neither the Company nor
to its knowledge any of its officers, directors or employees
within the past five years has been enjoined by order,
judgment or decree from engaging or continuing to engage in
any conduct or practice in connection with the purchase or
sale of securities, or insurance or in connection with the
investment management business.
(e) Except as disclosed on Schedule 2.30, neither the Company nor
to its knowledge any of its officers, directors or employees
are or has within the past five years been disqualified or
become ineligible to serve as, or subject to any
disqualification which would be the basis for any denial,
suspension or revocation of any license or registration to act
as, an investment adviser under the Investment Advisers Act
(or comparable state or SRO rules), a broker or dealer under
the Securities Exchange Act of 1934 (or comparable state or
SRO rules), or an insurance agent or broker under state
insurance laws or foreign insurance laws.
(f) For each offering and sale of securities since January 1,
1996, for which the Company has served as underwriter or
placement agent, the Company, as part of a Syndicate or Group
in an underwriting, reasonably relied on the investigation
conducted by the Managing and/or Lead Underwriters involved in
an offering. Based on this investigation of the issuer and the
securities being offered, the Company had reasonable grounds
to believe, and did believe at the time of such offer and
sale, that the statements contained in the offering documents
were true and that there was no omission to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, regardless of whether the
securities were registered under the Securities Act of 1933.
(g) Except as disclosed on Schedule 2.30, to the best knowledge of
the Company and Sellers, the Company is and has been in
compliance in all material respects with all federal, state
and local regulations and the common law relating to
employment and employment practices with respect to its
current and former employees, including, but not limited to,
the Fair Labor Standards Act, Title VII of the civil Rights
Act of 1964, the Age Discrimination in Employment Act, state
and local human rights laws, ERISA, the National Labor
Relations Act, state labor laws, the Worker Adjustment and
Retraining Notification Act, the Rehabilitation Act of 1974,
the Occupational Safety and Health Act, state workers'
compensation laws, state disability laws, state unemployment
laws, the Immigration Reform and Control Act of 1986, the
Polygraph Protection Act of 1988, the Equal Pay Act, the
Consolidated Omnibus Budget Reconciliation Act of 1986 and the
Americans With Disabilities Act.
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2.31 NO CONSENTS REQUIRED. Except as set forth on Schedule 2.28 , to
the best knowledge of the Company and Sellers, no consents are required by the
Company in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein, or to avoid or prevent any
acceleration of maturity or performance under, or any default or breach of, or
any material adverse effect with respect to any indebtedness, contract, right,
franchise, permit or other privilege to which the Company is a party or by which
any of their assets are bound.
2.32 BROKERS AND FINDERS. No broker or finder has acted directly or
indirectly for the Company or Sellers in connection with this Agreement or the
transactions contemplated hereby, and no other broker or finder is entitled to
any brokerage or finder's fee or other commission in respect thereof based in
any way on agreements, arrangements or understandings made by or on behalf of
the Company or Sellers. If any broker or finder retained by Sellers or Company
attempts to make a claim for any such fees, Sellers shall be solely responsible.
2.33 ABSENCE OF CHANGES. Except as disclosed by Sellers in this
Agreement or in any Schedule to this Agreement, since the May Balance Sheet
Date, there has been no material adverse change in the business, results of
operations, prospects, financial condition or liabilities (accrued, absolute,
contingent or otherwise), of the Company or the occurrence of any events of the
type prohibited in Section 4.2 hereof (as if the restriction in Section 4.2
commenced as of the date of this Agreement).
2.34 ACCOUNTING CONTROLS. The Company has devised and maintained
systems of internal accounting controls sufficient to provide reasonable
assurances, in the judgment of the Board of Directors of the Company, that (a)
all material transactions, are executed in accordance with management's general
or specific authorization, (b) all material transactions are recorded as
necessary to permit the preparation of financial statements in conformity with
GAAP consistently applied with respect to broker-dealers or any other criteria
applicable to such statements, (c) access to the material property and assets of
the Company is permitted only in accordance with management's general or
specific authorization, and (d) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
2.35 FIDUCIARY ACTIVITIES. Except as disclosed on Schedule 2.35 , to
the best knowledge of the Company and Sellers, the Company has properly
administered all accounts for which it acts as a fiduciary, including but not
limited to accounts for which any of them serves as an agent, custodian,
investment advisor or broker, in accordance with the terms of the governing
documents and applicable state and federal law and regulation and common law
except where the failure to so administer such accounts would not have a
material adverse effect on the Company.
2.36 ACQUISITION OF STOCK CONSIDERATION.
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(a) Each Seller hereby represents and warrants to Parent and SMH
that he is acquiring the Stock Consideration for his own
account and not with a view to, or for sale in connection
with, a distribution, as that term is used in Section 2(11) of
the 1933 Act, of the Stock Consideration.
(b) The Sellers have been informed and understand that the Parent
Common Stock issued pursuant to this Agreement shall bear the
following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE
SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH
TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF
1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS OR ANY
RULE OR REGULATION PROMULGATED THEREUNDER.
(c) Each Seller is an accredited investor as defined in Rule
501(a) promulgated under the 1933 Act.
(d) Each Seller acknowledges that the Parent Common Stock issued
as the Stock Consideration has not been registered under the
1933 Act or qualified under applicable state securities laws
and understands the restrictions on resale of such securities
imposed by the 1933 Act. The Parent and each Seller shall
execute at Closing that certain Registration Rights Agreement
attached hereto as Exhibit D. Each Seller further agrees to
provide to Parent prior to Closing such investment
representation letters and questionnaires as Parent may
reasonably require.
2.37 DISCLOSURE. No representation or warranty by Sellers in this
Agreement, nor in any exhibit or schedule delivered herewith, nor any statement
or certificate furnished or to be furnished by or on behalf of Sellers pursuant
to this Agreement or in connection with the consummation of the transactions
herein contemplated, contains, or will contain, any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements herein and therein not misleading. Notwithstanding any investigation
made at any time by or on behalf of Parent, and notwithstanding any actual or
implied knowledge or notice of any facts or circumstances which Parent may have
as a result of such investigation or otherwise, each Seller by his or her
execution and delivery of this Agreement acknowledges that the accuracy of such
representations, warranties, schedules, exhibits, statements and certificates
have been relied upon by Parent in entering into and in performing and observing
the obligations pursuant to this Agreement.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF PARENT AND SMH
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Parent and SMH each make the following representations and warranties
to Sellers as of the date hereof, and all such representations and warranties
shall be true, complete and correct as of the Closing Date, and shall survive
the Closing Date:
3.1 DUE ORGANIZATION AND GOOD STANDING. Each of Parent and SMH is a
Texas corporation, duly organized, validly existing and in good standing under
the laws of the State of Texas.
3.2 CORPORATE AUTHORIZATION. Each of Parent and SMH has full power and
authority to enter into this Agreement. Neither the execution nor delivery of
this Agreement by Parent or SMH, nor Parent's or SMH's performance hereunder
will result in a violation or breach of any term or provision, or constitute a
default or accelerate the performance required under, any indenture, mortgage,
deed of trust, or other contract or agreement to which Parent or SMH is a party
or by which Parent or SMH is bound or under any provision of its Certificate of
Incorporation or Bylaws. The execution, delivery and performance by Parent and
SMH of this Agreement has been duly authorized by the Board of Directors of
Parent, and no further corporate action is necessary on the part of Parent and
SMH to make this Agreement valid and binding upon Parent and SMH and enforceable
in accordance with its terms. This Agreement constitutes the valid, binding and
legally enforceable obligation of Parent and SMH, enforceable in accordance with
its terms, except to the extent that enforcement may be affected by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the enforcement of the rights and remedies of creditors generally and general
equitable principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 100,000,000
shares of common stock, par value $.01 (the "Parent Common
Stock") and 10,000,000 shares of preferred stock, $.01 par
value,. As of June 26, 2000, (i) 14,111,301 (net of treasury
stock) shares of Parent Common Stock are issued and
outstanding, (ii) no shares of preferred stock were issued and
outstanding, and (iii) 2,116,695 shares of Parent Common Stock
are reserved for issuance pursuant to Parent's stock incentive
plans and all other employee benefit plans of Parent. All of
the issued and outstanding shares of Parent Common Stock are
validly issued, fully paid and nonassessable.
(b) Except as disclosed in the quarterly and annual reports Parent
has filed with the SEC, (i) there is no outstanding right to
purchase or otherwise to receive from Parent any of the
outstanding authorized but unissued or treasury shares of the
capital stock or any other security of Parent, (ii) there is
no outstanding security of any kind convertible into or
exchangeable for such capital stock, and (iii) there is no
voting trust or other agreement or understanding to which
either Parent is a party or is bound with respect to the
voting of the capital stock of Parent.
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3.4 NO CONFLICTS. Neither the execution and delivery of this Agreement
by the Parent or SMH nor the consummation of the transactions contemplated
hereby will violate, require any filing, consent or approval under, be in
conflict with, or constitute a default under (i) any law, ordinance or
governmental rule or regulation known to the Parent or SMH to which the Parent
or SMH is subject, (ii) any judgment or order of any court or any other
governmental authority known to the Parent or SMH which is applicable to the
Parent or SMH, or (iii) the Certificate of Incorporation or Bylaws of the Parent
or SMH. Such execution, delivery and consummation will not violate, be in
conflict with, or constitute a default under (with or without the giving of
notice or lapse of time, or both) any note, lease, loan agreement, or other
agreement, instrument, document, or understanding (written or oral) to which the
Parent or SMH is a party or by which any of their properties or other assets may
be subject, except for any violations, conflicts or defaults which in the
aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby.
3.5 BROKER'S AND FINDER'S FEES. No broker or finder has acted directly
or indirectly for the Parent in connection with this Agreement or the
transactions contemplated hereby, and no other broker or finder is entitled to
any brokerage or finder's fee or other commission in respect thereof based in
any way on agreements, arrangements or understandings made by or on behalf of
the Parent. If any broker or finder retained by Parent attempts to make a claim
for any such fees, Parent shall be solely responsible.
3.6 GOVERNMENTAL AUTHORITIES AND CONSENTS. Except for consents from the
NASD and from all other regulatory bodies for which consent has been applied, no
consent, approval or authorization of any governmental or regulatory authority
or any other party or person is required to be obtained by Parent or SMH in
connection with its execution, delivery and performance of this Agreement and
the other agreements contemplated hereby to which Parent is a party or the
transactions contemplated hereby or thereby.
3.7 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to Parent's knowledge, threatened against or
involving the assets of Parent or SMH at law or in equity, or before or by any
federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would adversely affect Parent's or SMH's performance under this Agreement and
the other agreements contemplated hereby to which Parent or SMH is a party or
the consummation of the transactions contemplated hereby or thereby.
3.8 SEC DOCUMENTS; REGULATORY FILINGS. Parent has filed all SEC
documents required by the federal securities laws and such SEC documents
complied, as of their respective dates, in all material respects with the
securities laws. Parent and each of its subsidiaries has filed all reports
required by statute or regulation to be filed with any federal or state bank
regulatory agency, except where the failure to so file would not have a material
adverse effect on Parent, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in existence as of the date of
filing of such reports in all material respects.
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3.9 DISCLOSURE. No representation or warranty by Parent or SMH in this
Agreement, nor in any exhibit or schedule delivered herewith, nor any statement
or certificate furnished or to be furnished by or on behalf of Parent or SMH
pursuant to this Agreement or in connection with the consummation of the
transactions herein contemplated, contains, or will contain, any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements herein and therein not misleading. Notwithstanding any
investigation made at any time by or on behalf of Sellers, and notwithstanding
any actual or implied knowledge or notice of any facts or circumstances which
Sellers may have as a result of such investigation or otherwise, each of Parent
or SMH by its execution and delivery of this Agreement acknowledges that the
accuracy of such representations, warranties, schedules, exhibits, statements
and certificates have been relied upon by Sellers in entering into and in
performing and observing the obligations pursuant to this Agreement.
SECTION 4 - OTHER AGREEMENTS
4.1 RESTRICTED ACTIVITIES AND TRANSACTIONS OF SELLERS AND THE COMPANY.
Except as has been consented to in writing by Parent, Sellers and the Company
represent and warrant that from and after May 11, 2000, the Company has not
taken any of the following actions:
(a) issue, sell or deliver, split, reclassify, combine or
otherwise adjust, or agree to issue, sell or deliver, split,
reclassify, combine or otherwise adjust, any stock, bonds or
other corporate securities of which the Company is the issuer
(whether authorized and unissued or held in treasury), or
grant or issue, or agree to grant or issue, any options,
warrants or other rights (including convertible securities)
calling for the issue thereof;
(b) borrow, or agree to borrow, any funds or voluntarily incur,
assume or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability (absolute
or contingent), in excess of $5,000 except in the ordinary
course of business;
(c) mortgage or pledge any of its assets, tangible or intangible;
(d) except for the sale of inventory and other operating assets in
the ordinary course of business, sell, lease, license,
exchange or otherwise transfer, or agree to sell, lease,
license, exchange or otherwise transfer, any of its assets,
property or rights or cancel, or agree to cancel, any debts or
claims;
(e) enter, or agree to enter, into any agreement or arrangement
granting any preferential rights to purchase any of the
assets, property or rights of the Company or requiring the
consent of any party to the transfer or assignment of any such
assets, property or rights;
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(f) make or permit any amendment or termination of any material
contract, agreement or license to which it is a party;
(g) make any change in, or adopt, any profit-sharing bonus,
deferred compensation, insurance, pension, retirement,
severance or other employee benefit plan, payment or
arrangement or enter into any employment, consulting or
management contract;
(h) enter into any employment, labor or collective bargaining
agreement;
(i) except as set forth in Exhibit V, increase or agree to
increase the compensation payable or to become payable to any
officer, employee or agent, or, make any bonus or other type
of compensation payment to any such person;
(j) merge or consolidate with any other corporation, acquire
control of any other corporation or business entity, or take
any steps incident to, or in furtherance of, any of such
actions, whether by entering into an agreement providing
therefor or otherwise;
(k) except in the normal and ordinary course of business
consistent with past practices, and as set forth in Exhibit Y,
enter into any contract, agreement or course of action which
(i) may materially increase its liabilities or (ii) which
requires or will require expenditure of more than $5,000 in
the singular or $15,000 in the aggregate except for what has
been previously accrued for as described on the May 31 Balance
Sheet;
(l) except as required by law, make any alteration in the manner
of keeping its books, accounts or records, or in the
accounting practices therein reflected;
(m) except for distributions which shall be disclosed in writing
to Parent prior to Closing and which are made in the ordinary
course of business consistent with past practices, declare,
set aside or pay any dividend on its stock in cash, stock or
property or directly or indirectly redeem, purchase or
otherwise acquire any of its own stock, or make any other
distributions of its assets to its stockholders, or
reclassify, recapitalize, split up or otherwise adjust any of
its capital stock, or become obligated to do any of the
foregoing;
(n) amend or alter the certificate of incorporation or bylaws of
the Company;
(o) make, or agree to make, any investment in, advance to, or
acquisition of securities of any entity or person or provide,
or agree to provide, any guarantee of, assurance or support
arrangement involving any obligation of any person except in
the ordinary course of business;
(p) enter into any other transaction other than in the ordinary
course of business.
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4.2 PROHIBITION AGAINST CERTAIN ACTIVITIES. In consideration of the
mutual covenants and agreements provided for in this Agreement, including the
purchase and sale of the Shares, and in further consideration of the amounts
paid under Section 1.2 hereof, each of Arnold Barton, Richard Grimes, and Jack
Seibald (the "Bound Parties") hereby agree to the covenants set forth in Section
4.2 through 4.8 of this Agreement. The Bound Parties hereby covenant and agree
that they will not, directly or indirectly, either through any form of
ownership, or as a director, officer, principal, agent, employee, employer,
advisor, consultant, partner or in any individual or representative capacity
whatsoever, either for their own benefit or for the benefit of any other person,
without the prior written consent of the Parent's Board of Directors, for a
period of time which shall be two (2) years after the termination of such Bound
Parties' employment with SMH (or such shorter period of time as may be stated in
such Bound Parties' Employment Agreements attached hereto as Exhibit B), engage
in any of the following acts within the area of New York City (including the
five (5) boroughs of New York City), Westchester, Rockland, Suffolk, and Nassau
Counties, New York (including Long Island, New York), and the states of New
Jersey and Connecticut, which acts shall be considered violations of this
Section 4.2:
(a) Engage in institutional trading of stocks and options, prime
brokerage services, investment banking and syndication
services, research of companies, securities, and investments
for institutions, provided, however, the Bound Parties shall
be permitted to operate a hedge fund without being deemed in
violation of this Section 4.2 provided such hedge fund
maintains a relationship as a client of the Company, provided
the Company provides rates and service competitive in the
industry, and provided further that Jack Seibald shall be
permitted to continue to operate Whiteford Advisors, LLC and
Whiteford International Advisors, LLC, the hedge funds that
Jack Seibald is operating as of the date of this Agreement;
(b) Canvas, solicit, accept or perform any type of work performed
by the Company for any former or current customers of the
Company;
(c) Request or advise any customer of the Company or Parent to
withdraw, curtail or cancel any of its business with the
Company or Parent;
(d) Assist any person in soliciting any customer of the Company or
Parent for the performance of any type of work performed by
the Company or Parent;
(e) Induce or attempt to influence any employee of the Company or
Parent to terminate his or her employment with the Company or
Parent;
(f) Disclose or communicate to any other person, firm, or
corporation the names of any customers of the Company or
Parent or other knowledge of the operations and business of
the Company or Parent;
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(g) Employ or cause to be employed any individual employed by the
Company at any time prior to the Closing Date or Company or
Parent during the term of this Agreement;
(h) Overtly do or perform any act that is designed or intended to
materially and adversely affect the goodwill or operation and
business of the Company or Parent; or
(i) Request, advise or attempt to influence any person which is a
source of materials, supplies, personnel, services, funds or
information for the Company or Parent to withdraw, cancel or
curtail the sale or furnishing of such items to the Company or
Parent.
(j) The parties agree that to the extent there is a conflict
between the provisions of this Section 4.3 and the
non-competition provisions of the Bound Parties' respective
Employment Agreements attached hereto as Exhibit B, the
provisions of the respective Employment Agreements shall
control.
4.3 ACKNOWLEDGEMENT OF NEED FOR COVENANTS. Insofar as the covenants set
out in Section 4.2 are concerned, each of the Bound Parties specifically
acknowledge and agree as follows:
(a) The covenants are reasonable and necessary to protect the
goodwill and the operations and business of the Parent and the
Company.
(b) The time duration of the covenants are reasonable and
necessary to protect the goodwill and the operations and
business of the Parent and the Company.
(c) The geographical area limitations of the covenants are
reasonable and necessary to protect the goodwill and the
operations and business of the Parent and the Company.
(d) The covenants are not oppressive to such Bound Parties and do
not impose a greater restraint on such Bound Parties than is
necessary to protect the goodwill and the operations and
business of the Parent and the Company.
4.4 JUDICIAL MODIFICATION. It is the express intention of the Parent
and each Bound Party to comply with all laws which may be applicable to the
covenants contained in Section 4.2. Therefore, the Parent and each Bound Party
have attempted to limit such Bound Party's right to compete only to the extent
necessary to protect (i) the Parent from unfair competition, and (ii) the
Parent's goodwill and its operations and business. The Parent and each Bound
Party recognize, however, that reasonable people may differ in making such a
determination. Consequently, the Parent and the Bound Parties hereby
specifically agree that, in the event that any covenant contained in Section 4.2
shall be determined by any court or other constituted legal authority to be
effective in any particular area or jurisdiction only if such covenant is
modified to limit its duration or scope, such covenant may be reformed or
modified by the judgment or order of such court or authority to reflect a lawful
and enforceable duration or scope. Such covenant shall automatically be deemed
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to be amended and modified with respect to that particular area or jurisdiction
so as to comply with the judgment or order of such court or authority and, as to
all other areas and jurisdictions covered by this Agreement, the terms and
provisions hereof shall remain in full force and effect as originally written.
4.5 VOID OR UNENFORCEABLE. In the event any covenants contained in
Section 4.2 shall be held by any court or other constituted legal authority to
be void or otherwise unenforceable in any particular area or jurisdiction
notwithstanding the operation of Section 4.2, such covenant automatically shall
be deemed to be amended so as to eliminate therefrom that particular area or
jurisdiction as to which such covenant is so held void or otherwise
unenforceable and, as to all other areas and jurisdictions covered by Section
4.5, the terms and provisions hereof shall remain in full force and effect as
originally written.
4.6 CONFIDENTIALITY AGREEMENT. Each of the Sellers acknowledge that he
or she may have acquired proprietary and confidential information in connection
with their association with the Company. Accordingly, each of the Sellers hereby
covenants and agrees not to use for his or her own benefit or otherwise, or
communicate to, divulge to, or use for the benefit of, any other person
Confidential Information and/or trade secrets disclosed to, discovered by or
otherwise known by such Seller through his or her employment and/or association
with the Company prior to the Closing which is not generally known in the
businesses in which the Company is engaged, it being the intent of this section
4.9 that Sellers will honor the Confidential Information and will not, directly
or indirectly, use the Confidential Information in such a way as to adversely
affect the Company or the Company's business relations. As used in this
Agreement, the term "Confidential Information" shall mean information of any
kind, nature or description which is disclosed to, discovered by or otherwise
known to a person by reason of such person's employment and/or association,
whether past, present or future, with another person and/or its affiliates,
which information is not generally known in the businesses in which the latter
person and/or its affiliates were or are engaged. Such information includes but
is not limited to ideas, discoveries, inventions, techniques, methods,
practices, processes, formulas, technical information, data, information
concerning products, goods, services and manufacturing methods, customers,
customer requirements, marketing methods and plans as well as any other
information regarding a person's methods of conducting its business, whether
patentable or not, and whether implemented or not, provided, that such
information shall not include information which is or becomes generally
available to the public other than as a result of a disclosure in breach of this
Agreement. It is understood between the parties that private hedge fund(s), if
any, that are managed by the Bound Parties are excepted from the customer
provisions of the definitions of Confidential Information.
4.7 DAMAGES. In the event any Seller violates any of the covenants set
out in Section 4.2 or 4.6, as applicable, the Parent and the Company shall
suffer irreparable damage and shall be entitled to full injunctive relief or
such other relief against such Seller as may be provided by law or in equity
together with such damages as may be provided at law or in equity. The Parent
shall be entitled as a matter of right to specific performance of the
requirements of Section 4.2 or 4.6, as applicable, or to temporary or permanent
injunctive relief against any breach of any provision of
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Section 4.2 or 4.6, as applicable, by a Seller. Any such Seller will be
responsible for all court costs and reasonable attorneys' fees incurred by the
Parent if it obtains specific performance of, or any injunction against
violation of, the requirements of Section 4.2 or 4.6, as applicable, provided
such actions are pursued by the Parent in good faith.
4.8 WAIVERS. No waiver of compliance with any term, provision or
condition of this Section 4 shall be effective unless evidenced by an instrument
in writing duly executed by the party hereto sought to be charged with such
waiver. No waiver of any breach of any term or provision of Sections 4.2 through
4.9 shall be deemed to be a waiver of any preceding or succeeding breach of the
same or any other term or provision. No extension of time for or consent to the
performance of any obligation or act shall be deemed to be an extension of the
time for or consent to the performance of any other obligation or act.
4.9 AGREEMENTS REGARDING MANAGEMENT. The current management of the
Company, together with certain other key Company employees recommended by the
current Company management and approved by Parent's stock option committee,
shall be entitled to participate in any incentive stock option or restricted
stock plan instituted by Parent. The current management of the Company shall
manage the operations of the Company and will report to the Chairman of SMH.
Barton shall be elected to the board of directors of SMH.
SECTION 5 - INDEMNIFICATION
5.1 INDEMNIFICATION BY SELLERS. Each of the Sellers hereby severally
covenant and agree that he will indemnify and hold harmless Parent, SMH, and the
Company at all times from and after the date of this Agreement against any loss,
liability, damage or expense (including attorney's fees) which Parent, SMH, or
the Company may suffer, sustain or become subject to as a result of: (i) any
breach of any representation or warranty, or nonfulfillment of any covenant or
agreement on the part of the Sellers under this Agreement, or from any
misrepresentation in or omission from any list, schedule, certificate, or other
instrument furnished or to be furnished to the Parent pursuant to the terms of
this Agreement; (ii) any and all debts, liabilities or obligations of the
Company, direct or indirect, fixed, contingent or otherwise, which exist at or
as of the Closing or which arise after the Closing but which are based upon or
arise from any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed on or
before the date of the Closing, due or payable, except to the extent expressly
disclosed, described, or set forth in this Agreement or any schedule,
certificate, exhibit, or other instrument furnished on the date of execution of
this Agreement by or on behalf of Sellers or the Company under this Agreement;
or as incurred in the ordinary course of business, as permitted by this
Agreement;and (iii) all actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses, including, but not limited to attorneys' fees
and court costs, incident to any of the foregoing. Provided, however, that the
aggregate of any indemnification shall not exceed the amount received by the
Seller in consideration for the sale of his shares.
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5.2 INDEMNIFICATION BY PARENT AND SMH. Parent and SMH shall indemnify
Sellers and hold Sellers harmless from any and all claims, costs, damages,
losses, costs, expenses, obligations, liabilities, recoveries, suits, causes of
action, and deficiencies, including interest, penalties and reasonable
attorneys' fees, that it shall incur or suffer, which arise, result from or
relate to any breach of, or failure by the Parent or SMH to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by or on behalf of the Parent or SMH under this Agreement, and any and all debts
and liabilities of the Company arising after the Closing Date, except to the
extent such debts and liabilities are indemnified by the Sellers as set forth in
Section 5.1.
5.3 THIRD-PARTY CLAIMS. The indemnified party under Section 5.1 or 5.2
above (the "Indemnified Party") shall give the indemnifying party (the
"Indemnifying Party") written notice within thirty (30) days of receiving
written notice of any loss for which the Indemnified Party is entitled to
indemnification pursuant to this Section 5 (an "Indemnifiable Claim") resulting
from the assertion of liability by third parties. The Indemnifying Party shall
have thirty (30) days after receipt of notice to (i) cooperate in its defense or
(ii) assume its defense with experienced counsel, satisfactory to the
Indemnified Party. If, within thirty (30) days of receipt of notice of an
Indemnifiable Claim, the Indemnifying Party fails to cooperate or assume such
defense, the Indemnified Party shall have the right to undertake the defense,
compromise or settlement of such Indemnifiable Claim on behalf of and for the
account and risk of the Indemnifying Party.
5.4 OTHER CLAIMS. Indemnified Party shall give Indemnifying Party
written notice of any Indemnifiable Claim other than an Indemnifiable Claim
resulting from the assertion of liability by third parties. Indemnifying Party
shall have thirty (30) days following receipt of such notice to remedy the
inaccuracy, breach or misrepresentation on which the Indemnifiable Claim is
based.
5.5 THRESHOLD; LIMITATIONS. The Indemnified Party hereunder shall not
assert any claim(s) for indemnification under this Section 5 unless and until
the cumulative amount of any such claims exceed $50,000 in the aggregate, at
which time all such claims may be asserted. The indemnity obligations of the
parties hereunder shall expire if written notice of such claim or demand has not
been delivered by the Indemnified Party by the expiration of the applicable
statute of limitations for such claim. Seller's liability for any claims arising
out of or related to this Agreement and the transactions effected by this
Agreement shall be limited to Eight Million Dollars ($8,000,000).
5.6 ESCROW. The parties hereto have agreed that $375,000 of the cash
purchase price to be paid to Sellers (the "Escrow Amount") will be held in
escrow (the "Escrow") with Schupbach, Williams & Pavone, LLP, or with such other
mutually agreeable third party account, pursuant to the Escrow Agreement
attached hereto as Exhibit E, and will be held subject to the terms of this
Section 5.6 for a period of ninety (90) days from and after Closing (the "Escrow
Period") in order to serve as a fund from which an Indemnifiable Claim to which
the Parent and the Company are entitled may be paid and from which amounts may
be paid. In addition to any other rights and remedies that the
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Company and the Parent may have at law or in equity or under this Agreement, any
amounts for which the Company and the Parent is entitled to indemnification
under this Section 5 may be paid from such Escrow Amount. If Sellers contest the
Company and the Parent's right to any Indemnifiable Claim, and such dispute
cannot be settled within 90 days of the offset, the matter shall be submitted to
binding arbitration in Houston, Texas, in accordance with the rules of the
American Arbitration Association. At the end of the Escrow Period, any portion
of the Escrow Amount not credited to the Company and the Parent under this
Section 5.6 (and not the subject of a dispute between Purchaser and Sellers)
shall be paid to Sellers.
SECTION 6 - CONDITIONS PRECEDENT
TO OBLIGATIONS OF PARENT AND SMH
Each and every obligation of the Parent and SMH under this Agreement
has been subject to the fulfillment, of each of the following conditions, any
one or more of which may, in the absolute discretion of Parent and SMH, be
waived by Parent and SMH in writing:
6.1 SCHEDULES AND EXHIBITS. The timely receipt by Parent and SMH of all
schedules, exhibits, documents and related information as described in this
Agreement.
6.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Sellers contained in this Agreement and in the exhibits and schedules
delivered hereunder shall be deemed to have been made again at and as of the
Closing Date; shall then be true and correct in all material respects. Sellers
and the Company shall have performed and complied in all material respects with
all agreements and conditions required by this Agreement to be performed or
complied with by them prior to or on the Closing Date, and Parent shall have
been furnished a certificate of Sellers, dated the Closing Date, certifying to
the fulfillment of the foregoing conditions.
6.3 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any
court or administrative agency shall be in effect which restrains or prohibits
the transactions contemplated hereby or which restricts the right of the Company
or the Parent or SMH to own or operate any part of the business of the Company,
and no suit, action, investigation, inquiry or proceeding by any governmental
body or other person or legal or administrative proceeding shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby or which challenges the right of the Company or
the Parent or SMH to own or operate any part of the business of the Company.
6.4 NO MATERIAL ADVERSE CHANGE; DUE DILIGENCE. No material adverse
change in the results of operations, financial condition or business of the
Company shall have occurred, and the Company shall not have suffered any
material loss to their properties or assets, whether or not covered by
insurance, since May 11, 2000, which change, loss or damage affects or impairs
their ability to conduct their business. SMH shall have completed to its
safisfaction its due diligence investigation of the Company.
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6.5 APPROVAL AND CONSENTS. All approvals of applications to public
authorities, federal, state, foreign or local, and all approvals and consents of
any private persons, including all major suppliers and any banks or other
lending institutions, if any, the granting of which is necessary for the
consummation of this Agreement.
6.6 OPINION OF SELLERS' AND COMPANY'S COUNSEL. Sellers shall have
delivered to Parent and SMH an opinion of Schupbach, Williams & Pavone, LLP,
counsel for Sellers and the Company, dated the Closing Date, in form and
substance satisfactory to Parent and SMH and its counsel, in substantially the
same form as set forth in Exhibit "A" hereto.
6.7 TRANSFER OF PROPERTY DOCUMENTATION. Sellers and the Company shall
have furnished to the Parent any instruments of conveyance and transfer,
consents and waivers necessary or appropriate to effectively vest the Company in
their right, title and interest in and to their properties, assets and business,
in proper statutory form for recording if such recording is appropriate.
6.8 RESOLUTIONS. The Company shall have delivered to Parent copies of
the resolutions of their Board of Directors, authorizing and approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby, certified as true and correct on the Closing Date by their
Secretary or an Assistant Secretary.
6.9 EMPLOYMENT AGREEMENT. Each of Arnold J. Barton, Richard D. Grimes,
and Jack D. Seibald shall have entered into an Employment Agreement with SMH,
substantially in the forms attached hereto as Exhibit "B."
6.10 RESIGNATIONS. The current officers and directors shall have
tendered their resignations and the succeeding officers and directors shall be
appointed and elected, respectively.
6.11 CONSENTS OF CLIENTS. The Company shall have in place procedures to
obtain and deliver to Parent, within 30 days after Closing, the written consents
or approvals of Clients, in form and substance reasonably acceptable to parent
or new Investment Contracts, substantially in the form of the existing
Investment Contract with such Client, with respect to Investment Contracts
relating to assets under management by the Company, and such consents, approvals
or contracts shall be in full force or effect.
6.12 INVESTMENT REPRESENTATION LETTERS AND QUESTIONNAIRES. The Sellers
shall have executed such investment representation letters and questionnaires
concerning their acquisition of the Parent Common Stock as Parent shall
reasonably require.
6.13 REGISTRATION RIGHTS AGREEMENT. The Sellers and Parent shall have
executed the Registration Rights Agreement.
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SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Each and every obligation of the Sellers under this Agreement has been
subject to the fulfillment, of each of the following conditions, any one or more
of which may, in the absolute discretion of Sellers, be waived in writing:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and SMH contained in this Agreement and in the exhibits and schedules
delivered hereunder shall be deemed to have been made again at and as of the
Closing Date and shall then be true and correct in all material respects. Parent
and SMH shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with prior to or on the Closing Date, and Sellers shall have been furnished a
certificate of Parent and SMH, dated the Closing Date, certifying to the
fulfillment of the foregoing conditions.
7.2 NO LITIGATION. No suit, action or other proceeding shall be pending
or threatened before any court or other governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
7.3 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
results of operations, financial condition or business of Parent shall have
occurred, and Parent or SMH shall not have suffered any material loss to its
properties or assets, whether or not covered by insurance, since the date of its
most recent audited balance sheet, which change, loss or damage affects or
impairs its ability to conduct its business.
7.4 APPROVAL AND CONSENTS. All approvals of applications to public
authorities, federal, state, foreign or local, and all approvals and consents of
any private persons, including all major suppliers and any banks or other
lending institutions, if any, the granting of which is necessary for the
consummation of this Agreement.
7.5 OPINION OF PARENT'S COUNSEL. Parent and SMH shall have delivered to
Sellers an opinion of Ryan & Sudan, L.L.P., counsel for Parent and SMH, dated
the Closing Date, in form and substance satisfactory to Sellers and their
counsel, in substantially the same form as set forth in Exhibit "C" hereto.
7.6 RESOLUTIONS. Parent and SMH shall have delivered to Sellers copies
of the resolutions of its Board of Directors, authorizing and approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby, certified as true and correct on the Closing Date by its
Secretary or an Assistant Secretary.
7.7 EMPLOYMENT AGREEMENT. Arnold J. Barton, Richard D. Grimes, and Jack
D. Seibald shall each have entered into an Employment Agreement with SMH,
substantially in the form attached hereto collectively as Exhibit "B."
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7.8 CONSIDERATION. Parent shall have delivered to each respective
Seller the Merger Consideration described in Section 1.2 to be delivered as of
the Closing Date.
7.9 TAX OPINION. Sellers shall have received an opinion of Ryan &
Sudan, L.L.P. , in form and substance reasonably satisfactory to Sellers and
Parent, dated as of the Closing Date, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion which
are consistent with the state of facts existing on the Effective Date, (i) the
Merger should be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and (ii) the gain, if any,
realized by the Seller as a result of the Merger, should be recognized by each
such holder, but in an amount not in excess of the amount of cash received. In
rendering the opinion described in this Section 7.9, Ryan & Sudan, L.L.P. will
rely on representations, assumptions and facts as provided by Sellers and
Parent, including without limitation the standard representations set forth in
Revenue Procedure 86-42, 1986-2 C.B.722.
7.10 REGISTRATION RIGHTS AGREEMENT. The Sellers and Parent shall have
executed the Registration Rights Agreement.
SECTION 8 - MISCELLANEOUS PROVISIONS
8.1 EXPENSES. Parent and Sellers shall each be responsible for their
own expenses in connection with this transaction, including but not limited to
legal expenses and out-of-pocket costs. Certain of such Sellers' expenses have
been paid or accrued for by the Company prior to Closing, and the parties agree
that the costs of such expenses have been factored into the determination of the
cash portion of the Merger Consideration to be paid at Closing. Any additional
costs and expenses incurred by Sellers in the preparation, negotiation and
execution of this Agreement that have not been so factored into the
determination of the Merger Consideration shall be the sole responsibility of
the Sellers, and Sellers shall indemnify and hold harmless Parent and SMH from
and against any and all liabilities or claims with respect to any such expenses,
costs or fees.
8.2 ASSIGNMENT. This Agreement and the rights of Sellers hereunder may
not be assigned (except by operation of law) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors and assigns of Parent
and SMH and the heirs and legal representatives of Sellers. Parent may assign
its rights under this Agreement for collateral security purposes to any lenders
providing financing to Parent, and any such lender may exercise all of the
rights and remedies of the Parent hereunder. Parent may assign its rights under
this Agreement, with prior notification, in whole or in part, to any subsequent
Parent of the Company, any of their divisions or any material portion of their
assets (whether such sale is structured as a sale of stock, a sale of assets, a
merger or otherwise).
8.3 ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits hereto) and the documents delivered pursuant thereto constitute the
entire agreement and understanding between Sellers and the Parent and SMH and
the Company, and supersede any prior agreement or
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understanding relating to the subject matter of this Agreement. This Agreement
may be modified and amended only by a written instrument executed by all parties
hereto.
8.4 MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
8.5 REMEDIES CUMULATIVE. The rights and remedies granted herein are
cumulative and not exclusive of any other right or remedy granted herein or
provided by law.
8.6 NOTICE. Any notice or communication required or permitted hereunder
shall be in writing and shall be deemed received when personally received by the
relevant party or if sent by mail, on the third day following the date when
deposited in the United States mail, certified or registered mail, postage
prepaid, to the relevant party at its or his address indicated below:
(a) If to Parent or to SMH:
Pinnacle Global Group, Inc.
5599 San Felipe, Suite 555
Houston, Texas 77056
Attn: Mr. Robert E. Garrison, II
President and CEO
Attn: Mr. Ben Morris,
President of SMH
With copy to:
Robert C. Beasley
Ryan & Sudan, LLP
Two Houston Center, Suite 3900
Houston, Texas 77010
(b) If to any of the Sellers:
Mr. Arnold J. Barton
----------------------------
----------------------------
Mr. Richard D. Grimes
----------------------------
----------------------------
Mr. Jack D. Seibald
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----------------------------
----------------------------
Allison Weiss
----------------------------
----------------------------
Deborah Weiss
----------------------------
----------------------------
Neil Lauro
----------------------------
----------------------------
John Conlon
----------------------------
----------------------------
With copy to:
----------------------------
----------------------------
----------------------------
----------------------------
Each party may change its, his or her address for purposes of this Section 8.6
by proper notice to the other parties.
8.7 COOPERATION OF SELLERS. Sellers shall deliver or cause to be
delivered on the Closing Date, and at such other times and places as shall be
reasonably agreed on, such instruments of conveyance and transfer and such
additional instruments as Parent may reasonably request for the purpose of
carrying out this Agreement. Sellers will cooperate and use their best efforts
to have the present officers, directors and employees of the Company cooperate
with Parent on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
8.8 CHOICE OF LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
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<PAGE>
8.9 SECTION AND SECTION HEADINGS. The section and section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
8.10 SEPARABILITY. If any covenant, condition or other provision of
this Agreement is declared by a court of last resort to be invalid and not
binding on Sellers and Parent, such declaration shall in no way effect the
validity of the other and remaining covenants, conditions and provisions of this
Agreement.
8.11 WAIVER. No delay in the exercise of any right under this Agreement
shall waive such right.
8.12 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to
this Agreement are hereby incorporated in and made a part of this Agreement.
8.13 PUBLIC NOTICES. Prior to the Closing, no public notices of this
Agreement, save and except any required by applicable laws, shall be made by
Parent or Sellers. All public notices prior to Closing must be mutually agreed
upon by Parent and Sellers.
IN WITNESS WHEREOF, the parties have executed this Agreement June 30, 2000.
"Parent"
PINNACLE GLOBAL GROUP, INC.
By: /s/ ROBERT E. GARRISON II
---------------------------------------------
Robert E. Garrison II
President
"SMH"
SANDERS MORRIS HARRIS, INC.
By: /s/ BEN T. MORRIS
---------------------------------------------
Ben T. Morris, President
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<PAGE>
"SELLERS"
/s/ ARNOLD J. BARTON
---------------------------------------------
Arnold J. Barton
/s/ RICHARD D. GRIMES
---------------------------------------------
Richard D. Grimes
/s/ JACK D. SEIBALD
---------------------------------------------
Jack D. Seibald
/s/ DEBORAH WEISS
---------------------------------------------
Deborah Weiss
/s/ ALLISON WEISS
---------------------------------------------
Allison Weiss
/s/ NEIL LAURO
---------------------------------------------
Neil Lauro
/s/ JOHN CONLON
---------------------------------------------
John Conlon
"COMPANY"
BLACKFORD SECURITIES
CORPORATION
By: /s/ ARNOLD J. BARTON
---------------------------------------------
Arnold J. Barton, President
MERGER AGREEMENT
----------------
List of Schedules and Exhibits
<TABLE>
<CAPTION>
SCHEDULES:
<S> <C>
2.1 List of Sellers with number and percentage of shares owned
2.2 List of Shareholder Agreements
2.3 Complete List of Jurisdictions Licensed and SRO Organizations; Company's Articles of
Incorporation and Bylaws
2.8 Description of Investments
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<PAGE>
2.9 Financial Statements of Company
2.10 Schedule of Liabilities
2.11 Accounts and Notes Receivables and Cash
2.12 List of all Patents, Trademarks, Copyrights, Patent Applications, etc.; Infringements of same
2.13 Real Property Leases
2.14 Furniture, Fixtures and Leasehold Improvements
2.15 Material Contracts
2.16 Material Customers
2.17 Investment Contracts and Clients
2.20 List of Liens, Pledges and Encumbrances
2.21 Copies of all Insurance Policies
2.22 Employment Arrangements
-List of all officers, directors, and key employees (with compensation and bonuses)
-List of all employee contracts and benefit plans for key employees
2.23 Independent Contractors
2.24 List of Employee Benefit, Pension, Bonus, Profit Sharing Plans
2.25 Employee or Labor Controversies or Disputes
2.26 Bank or Other Accounts and Persons Authorized to Draw on Accounts
2.27 Tax Matters, Disputes or Contingencies
2.28 Defaults under Contracts and Agreements
2.29 Litigation, Claims, or Investigations
2.30 Compliance Disclosures
2.31 Consents Required
2.32 Material Adverse Changes
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<PAGE>
6.2 Certificate of Seller and Company
7.1 Certificate of Parent and SMH
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
A Opinion of Sellers' Counsel
B Employment Agreements with Arnold J. Barton, Richard D. Grimes, and Jack D. Seibald
C Opinion of Parent's and SMH's Counsel
D Registration Rights Agreement
E Escrow Agreement
</TABLE>
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