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Form 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________________ TO
COMMISSION FILE NUMBER 1-9143
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RODMAN & RENSHAW CAPITAL GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 36-3111956
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
233 S. Wacker Dr., Ste. 4500, Chicago, IL 60606
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (312) 526-2000
----------------
area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which Registered
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Common Stock, par New York Stock Exchange
value $0.09 per share
Securities registered pursuant to Section 12(g)
of the Act: None
----------
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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As of February 29, 1996, 6,645,802 shares of Common Stock, par value $0.09
per share, were outstanding, and the aggregate market value of the shares of
Common Stock of the Registrant held by non-affiliates (based upon the closing
price of the Registrant's shares on the New York Stock Exchange on February 29,
1996, which was $1.625) was $3,514,280.25.
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PART I.
ITEM 1. BUSINESS
Rodman & Renshaw Capital Group, Inc. (the "Company") is a holding company
which was incorporated in Delaware on November 20, 1980, as the successor,
through its subsidiaries, to the business of Rodman & Renshaw, a partnership
which commenced operations in Chicago in 1951. Unless the context otherwise
requires, the "Company" as used herein shall also include all subsidiaries of
Rodman & Renshaw Capital Group, Inc. The Company, through its principal
subsidiary, Rodman & Renshaw, Inc. ("Rodman"), is a full-service securities
broker-dealer and commodities futures commission merchant with memberships on
the New York Stock Exchange ("NYSE") and other principal stock exchanges. The
Company offers a comprehensive range of investment banking, research and
investor services to meet the needs of business organizations, tax-exempt
entities, financial institutions and fiduciaries, other securities and
commodities dealers and individual investors.
Rodman acts as a broker and dealer in the purchase and sale of securities,
commodities and financial futures. The corporate finance department provides
investment banking advice, underwritings and merger and acquisition consulting,
and assists its clients in obtaining funds for leveraged acquisitions,
corporate expansion or recapitalization financings, municipality and other
tax-exempt entity financings, and private placements. Rodman provides
financial institutions, fiduciaries and other investors with research on over
240 companies within a broad range of industries. Rodman's equity and fixed
income departments provide integrated research, sales distribution and
principal market making for institutional and retail customers and investment
banking clients. Its retail group provides brokerage services to high net
worth and other individuals. Through its other subsidiaries, the Company also
provides investment advisory services and acts as general partner and commodity
pool operator for commodity limited partnerships.
On December 22, 1993, the Mexican brokerage firm Abaco Casa de Bolsa, S.A.
de C.V., Abaco Grupo Financiero ("Abaco"), acquired 54% of the Company's
outstanding shares through a tender offer. Abaco is a brokerage subsidiary of
Abaco Grupo Financiero, S.A. de C.V. ("Parent"), a multi-faceted financial
services holding company based in Monterrey, Mexico. In addition to Abaco,
Parent owns a commercial bank, Confia, S.A. Institucion de Banca Multiple,
Abaco Grupo Financiero ("Confia, S.A."), leasing company, foreign exchange
house, factoring firm and insurance company, all based in Mexico. Parent's
shares are traded on the Mexican Stock Exchange. During the period December
1993 through December 1995, the Abaco group provided the Company with a total
of $20,000,000 in additional equity capital and $26,500,000 in short-term debt.
Abaco currently owns 69.6% of the Company's outstanding common stock. See Item
7. Management's Discussion and Analysis of Financial Condition, Results of
Operations - Liquidity and Capital Resources, and Item 12. Security Ownership
of Certain Beneficial Owners and Management.
On March 28, 1995, Rodman acquired certain of the assets and hired
approximately 60 employees of the institutional equities, investment banking
and research departments of Mabon Securities Corp., a New York based securities
broker- dealer. The transaction was consistent with the Company's plan to
reposition itself as an integrated, research driven investment banking,
institutional equity, fixed income and retail firm concentrating on middle
market U.S. companies and Mexican corporations. During 1995, the Company also
decided to divest a majority of its futures business and substantially downsize
and refocus its fixed income business.
In January, 1996, the Company began outsourcing its securities processing
functions. It now clears customer accounts through Correspondent Services
Corporation ("CSC"), a wholly-owned subsidiary of PaineWebber, Incorporated, on
a fully disclosed basis.
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The Company's executive offices are located in the Sears Tower at 233 S.
Wacker Drive, Suite 4500, Chicago, Illinois 60606 and its principal telephone
number is (312) 526-2000. The Company also has offices in New York, San
Francisco, Dallas, Boston and Kansas City.
REVENUES BY SOURCE
In 1994, the Company changed its fiscal year from the year ending on the
last Friday in June to a calendar year. The following table sets forth certain
information regarding the revenues of the Company by source, for the year ended
December 31, 1995, the transition period from June 25, 1994 to December 31,
1994 (the "Transition Period"), and the fiscal years ended June 24, 1994 and
June 25, 1993. See Note 2 to the Consolidated Financial Statements enclosed
herein for a discussion of accounting changes in fiscal 1993.
(in thousands)
<TABLE>
<CAPTION>
Transition
Year Period Year Year
Ended (6/25/94- Ended Ended
12/31/95 12/31/94) 06/24/94 06/25/93
--------- --------- -------- --------
<S> <C> <C> <C> <C>
COMMISSIONS
Commodities $ 8,385 $ 8,279 $19,833 $26,031
Listed securities 11,457 1,915 6,080 9,386
Over-the-counter securities 4,161 1,360 2,446 2,387
Options 876 316 799 914
------- ------- ------- -------
TOTAL COMMISSIONS 24,879 11,870 29,158 38,718
PRINCIPAL
Institutional credits:
Bonds 12,624 4,494 13,117 17,382
Equity and debt underwritings 3,183 80 644 925
Over-the-counter stocks 3,342 1,101 575 202
------- ------- ------- -------
19,149 5,675 14,336 18,509
Retail credits:
Bonds 1,148 1,164 3,844 5,586
Equity and debt underwritings 6,898 1,068 2,724 3,479
Over-the-counter stocks 2,050 1,273 2,712 1,388
Mutual funds 1,167 627 1,811 1,533
------- ------- ------- -------
11,263 4,132 11,091 11,986
------- ------- ------- -------
Total Credits 30,412 9,807 25,427 30,495
Market-making and dealer
transactions:
Corporate fixed income and
government zero coupon bonds ( 423) (1,136) 500 408
Over-the-counter stocks (2,375) 231 1,600 1,211
Other ( 986) (1,869) (214) 102
------- -------- -------- -------
Total market-making and
dealer transactions (3,784) (2,774) 1,886 1,721
------- ------- ------- -------
TOTAL PRINCIPAL 26,628 7,033 27,313 32,216
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
INTEREST
Market-making;
securities inventory 4,594 4,975 4,412 5,238
Margin accounts 3,951 1,362 2,420 3,452
Securities finder service 1,592 1,535 2,381 1,868
------- ------- ------- -------
TOTAL INTEREST 10,137 7,872 9,213 10,558
FEE INCOME
Corporate and municipal finance 4,648 3,723 7,269 2,410
Limited partnerships 424 78 95 415
Advisory services 2,993 75 234 320
------- ------- ------- -------
TOTAL FEE INCOME 8,065 3,876 7,598 3,145
OTHER 2,816 1,543 4,035 2,672
------- ------- ------- -------
TOTAL REVENUES $72,525 $32,194 $77,317 $87,309
======= ======= ======= =======
</TABLE>
COMMISSIONS
Commissions from securities and commodities brokerage activities
represented approximately 34% of the Company's revenue in 1995, 37% in the
Transition Period and 38% and 44% in the fiscal years ended June 24, 1994 and
June 25, 1993, respectively. Commissions on commodity brokerage represented
approximately 34% of the Company's total commission revenue for 1995, 70% for
the Transition Period and 68% and 67% in the fiscal years ended June 24, 1994
and June 25, 1993, respectively.
Rodman executes customer orders to buy and sell securities and commodity
futures contracts. Rodman charges commissions competitive within the industry.
PRINCIPAL TRANSACTIONS
Rodman acts as principal to effect transactions in the equity, fixed
income and over-the-counter markets for institutional and retail customers, as
well as for other broker-dealers. Principal transactions, including market
making, require the maintenance of inventories of securities for resale. These
inventories are valued at market, and accordingly, gains and losses are
included in the results of operations. Rodman monitors its inventory aging and
turnover and employs various hedging strategies which attempt to mitigate the
negative effects of changing market conditions.
Institutional and Retail Credits. Rodman acts as principal in executing
trades in fixed income securities and in over-the-counter stocks for
institutional and individual customers, underwrites equity and debt securities,
and sells shares in mutual funds. In connection with these transactions,
Rodman receives, in lieu of commissions, credits in the form of mark-ups or
mark-downs from the price of the security.
Rodman employs traders and salespersons in its Boston, Chicago, New York
and San Francisco offices to service institutional clients such as insurance
companies, banks, state and municipal pension funds and investment advisors.
Market-making and Dealer Transactions. Rodman employs traders and
salespersons to make secondary markets in investment grade corporate fixed
income securities. Rodman employs over-the-counter traders to make secondary
markets in approximately 170 equity securities. Rodman maintains inventories
of over-the-counter stocks to facilitate sales, primarily for institutional and
individual customers. Rodman employs taxable and municipal bond traders and
salespersons and maintains inventories of taxable and municipal bonds to
facilitate transactions with its retail and institutional customers. See Note
7 to the Consolidated Financial Statements for the
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market value of the Company's long and short securities inventory positions at
December 31, 1995.
The Company does not conduct proprietary trading or invest in commodity
futures, forward contracts, or commodity options. Rodman does utilize
commodity futures contracts and other fixed income instruments to hedge its
fixed income inventory positions. The extent of hedging utilizing these
contracts is not material to the Company's financial condition or results of
operations. At December 31, 1995, the Company had no long or short open
futures positions and no short option positions. See Note 16 to the
Consolidated Financial Statements.
INTEREST
Rodman earns interest revenue principally from financing customers'
purchases of securities, from securities inventories carried for resale to
customers and from short-term investments.
Margin Accounts. Interest is charged to customers on the amount loaned to
finance margin transactions. Financing of margin purchases is an important
source of revenue to Rodman since the interest rate paid by the customer on the
funds loaned to them exceeds Rodman's cost of short-term funds. Interest rates
charged to customers on such loans range from zero to two and one-half percent
over the broker call rate (the rate paid to banks by brokers on loans
collateralized by marketable securities) depending upon the average net margin
balance in the customer's account and the volume of the customer's
transactions. As a result of the conversion to clear its customer business
through CSC, Rodman now shares the interest charged to customers with CSC.
Securities Finder Service. Prior to February 1996, Rodman operated a
securities finder service which matched the specific needs of broker-dealers
that needed to borrow securities to make deliveries on short sales, or for
other reasons, with organizations that had excess securities legally available
for lending. Rodman also loaned securities itself. In performing this
service, Rodman assumed a principal position, recording funds received against
securities loaned as liabilities and funds advanced against securities borrowed
as assets. Such loans and borrowings were collateralized through initial cash
deposits and subsequent deposits made as a result of daily marking-to-market of
the underlying securities. As a result of the conversion to clear its customer
business through CSC, Rodman ceased conducting this activity in February 1996.
FEE INCOME
Fee income represented approximately 11% of the Company's total revenue
for 1995. The Company derives fee income primarily from the following areas:
Investment Banking. Rodman's investment banking department provides
financial advice to and raises capital for corporate clients. It also advises
clients in connection with mergers and acquisitions. This department arranges
public offerings and private placements of equity and debt securities directly
with institutional and individual investors. Rodman also provides advice to
clients with respect to matters such as financial planning and corporate
recapitalizations.
Municipal Finance. Rodman acts as a manager or co-manager of negotiated
public offerings and private placements of tax-exempt securities issued by
state and municipal governments, power agencies, industrial development and
pollution control financing authorities, sewer and water authorities and state
and local housing authorities.
Portfolio Management Services. Rodman Advisory Services Inc., a wholly
owned subsidiary of the Company, provides investment advisory consulting
services to individuals, municipalities and employee benefit plans.
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COMPETITION
The Company competes for customers on the basis of price, range of
services, quality of services, financial resources and reputation. The Company
encounters intense competition in all aspects of the securities and commodities
business and competes for customers and personnel directly with other
securities and commodities firms, a number of which have greater resources and
offer a wider range of financial services. Further, the Company's recent
substantial losses have impeded its ability to compete in certain areas of its
business.
In addition, there is increasing competition from other sources, such as
commercial banks and insurance companies. Several leading commercial banks
have obtained approval from the Federal Reserve Board to enter into various new
business activities, such as underwriting securities, and pending legislative
proposals would permit all commercial banks to engage in activities similar to
the Company's. These developments may lead to the creation of a greater number
of integrated financial services firms that may be able to compete more
effectively than the Company for investment funds by offering a greater range
of financial services.
EMPLOYEES
As of March 1, 1996, the Company employed approximately 343 full-time
employees. The following analysis demonstrates the changes in personnel
consistent with the restructuring the Company has undergone in the past two
years:
<TABLE>
<CAPTION>
March 1994 March 1996
---------- ----------
<S> <C> <C>
Retail securities representatives 70 52
Institutional equity sales and trading reps. 3 48
Institutional fixed income sales and trading reps. 50 32
Investment banking reps. 13 23
Research analysts 1 27
Commodities associated persons 37 4
--- ---
Total producers 174 186
Administrative and Clerical 290 157
--- ---
Total 464 343
=== ===
</TABLE>
None of the Company's employees is covered by a collective bargaining
agreement. Competition for experienced financial services personnel is keen in
the securities and commodities industry and, from time to time, the Company may
experience losses of valuable personnel.
REGULATION
Rodman is registered as a broker-dealer with the Securities and Exchange
Commission (the "SEC") and in all 50 states and the District of Columbia.
Rodman also is registered as a futures commission merchant with the Commodity
Futures Trading Commission (the "CFTC"). The securities and commodities
industry in the United States is subject to extensive regulation under both
federal and state laws. The SEC is the federal agency responsible for the
administration of the federal securities laws. The CFTC is the federal agency
responsible for the administration of federal laws governing commodities
transactions. Much of the regulation of broker-dealers and futures commission
merchants has been delegated to self-regulatory organizations, principally the
National Association of Securities Dealers and national securities and
commodities exchanges. The NYSE and the National Futures Association have been
designated by the SEC and the CFTC, respectively, as Rodman's primary
regulators. These self-regulatory organizations adopt rules (subject to
approval by the SEC and the CFTC) that govern the
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industry and the conduct of business. Rodman Advisory Services Inc. is
registered as an investment adviser with the SEC.
Broker-dealers and futures commission merchants are subject to regulations
that cover all aspects of the securities and commodities business, including
sales methods, trade practices, use and safekeeping of customers' funds and
securities, capital structure, recordkeeping and the conduct of directors,
officers and employees. Under certain circumstances, these regulations could
limit the ability of the Company to make withdrawals of capital from Rodman.
Additional legislation, changes in rules promulgated by the SEC and CFTC and
self-regulatory organizations, or changes in the interpretation or enforcement
of existing legislation and rules may directly affect the method of operation
and profitability of broker-dealers and futures commission merchants. The SEC,
CFTC, self-regulatory organizations, and state securities commissions may
conduct audits and administrative proceedings which can result in censure,
fine, the issuance of cease-and-desist orders or the suspension or expulsion of
a broker-dealer or futures commission merchant, or its officers or employees.
The principal purpose of regulation and discipline of broker-dealers and
futures commission merchants is the protection of customers and the securities
and commodities markets, rather than the protection of creditors and
stockholders of broker-dealers and futures commission merchants.
The Company is a member of the Securities Investor Protection Corporation
("SIPC"), which provides, in the event of the liquidation of a broker-dealer,
protection for customers' accounts held by the firm of up to $500,000 for each
customer, subject to a limitation of $100,000 for claims for cash balances.
SIPC is funded through assessments on registered broker-dealers, which
assessments may not exceed 1% of a broker-dealer's gross revenues. SIPC
assessments currently are .095% of Rodman s gross securities related revenues,
as defined. As Rodman's clearing broker, CSC provides Rodman customers,
through a private insurer, with protection of between $4.5 million and $20
million in excess of available SIPC limits, depending on the type of account
and subject to certain limitations. Additional protection may be purchased by
individual customers subject to the limitations of the contract.
NET CAPITAL REQUIREMENTS
As a registered broker-dealer, Rodman is subject to SEC Rule 15c3-1, the
Uniform Net Capital Rule, which is monitored by the NYSE, together with certain
additional requirements set forth in the NYSE's Rule 325. The Uniform Net
Capital Rule is designed to measure the general financial integrity and
liquidity of a broker-dealer and requires that at least a portion of a
broker-dealer's assets be kept in relatively liquid form. As a futures
commission merchant, Rodman is subject to the net capital requirements of the
CFTC. Both SEC and CFTC rules specify minimum net capital levels as discussed
below.
Rodman has elected to compute net capital under the alternative method of
calculation permitted by the Uniform Net Capital Rule. At December 31, 1995,
these rules required that Rodman maintain minimum net capital, as defined,
equal to the greater of 2% of aggregate debits arising from securities customer
transactions or $1,000,000, or 4% of the funds required to be segregated for
commodities customers pursuant to the Commodity Exchange Act. As a result of
the conversion to clear its customer business through CSC, in February, 1996,
Rodman's net capital requirement pursuant to these rules was reduced to the
greater of $250,000 or 4% of the funds required to be segregated for
commodities customers. See Note 18 to the Consolidated Financial Statements.
Failure to maintain the required net capital may subject a firm to
suspension or revocation of registration by the SEC and suspension or expulsion
by the NYSE and other regulatory bodies and ultimately may require its
liquidation. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.
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ITEM 2. PROPERTIES
The headquarters of the Company are located at 233 South Wacker Drive,
Suite 4500, Chicago, Illinois. Branch offices are located in New York, San
Francisco, Dallas, Boston and Kansas City. All of the offices are leased on a
long-term basis under leases which expire at various dates from 1996 to 2010.
See Note 13 to the Consolidated Financial Statements for the minimum annual
rentals in succeeding fiscal years under all noncancellable leases with terms
in excess of one year, as of December 31, 1995.
ITEM 3. LEGAL PROCEEDINGS
Many aspects of the Company's business involve risks of liability. The
Company has been named as a defendant in civil actions arising in the ordinary
course of business out of its activities as a broker-dealer in securities and
as a futures commission merchant. The Company also may be required to
contribute to any adverse judgments or settlements in actions arising out of
its participation in various underwritten offerings of securities. The
ultimate outcome of such matters cannot be predicted with certainty. In the
opinion of management of the Company, however, after consultation with outside
legal counsel, the ultimate resolution of pending litigation will not have a
material adverse effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
SUPPLEMENTARY FINANCIAL DATA
QUARTERLY DATA (UNAUDITED)
(in thousands of dollars except per share data)
<TABLE>
<CAPTION>
INCOME (LOSS)
BEFORE
TAXES AND
CUMULATIVE
EFFECT OF
ACCOUNTING FOR INCOME STOCK PRICE
INCOME NET INCOME (LOSS) RANGE
REVENUES EXPENSES TAXES (LOSS) PER SHARE HIGH LOW
-------- -------- ----- ------ ----- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal year 1995
Quarter Ended:
03/31/95 $17,479 $20,702 $( 3,223) $( 2,206) $( .37) $4.750 $3.375
06/30/95 20,525 24,530 ( 4,005) ( 4,005) ( .60) 5.000 3.875
09/30/95 19,103 25,691 ( 6,588) ( 8,208) (1.24) 4.250 2.750
12/31/95 15,418 28,618 (13,200) (15,563) (2.42) 3.000 1.375
------- ------- --------- --------- -------
TOTAL: $72,525 $99,541 $(27,016) $(29,982) $(4.63)
======= ======= ========= ========= =======
Transition Period
Quarter Ended:
09/30/94 $19,367 $21,301 $( 1,934) $( 1,949) $( .43) $6.000 $5.000
12/31/94 12,827 17,225 ( 4,398) ( 2,215) ( .48) 5.500 3.625
------- ------- -------- --------- -------
TOTAL: $32,194 $38,526 $( 6,332) $( 4,164) $( .91)
======= ======= ========= ========= =======
Fiscal year 1994
Quarter Ended:
09/24/93 $26,355 $22,557 $ 3,798 $ 2,859 $ .61 $9.750 $5.375
12/31/93 23,441 25,469 ( 2,028) ( 1,643) ( .38) 9.750 7.125
03/25/94 14,593 17,707 ( 3,114) ( 2,088) ( .46) 7.875 5.750
06/24/94 12,928 29,015 (16,087) (15,629) (3.46) 6.875 5.000
------- ------- -------- -------- -------
TOTAL: $77,317 $94,748 $(17,431) $(16,501) $(3.69)
======= ======= ========= ========= =======
</TABLE>
The common stock of Rodman & Renshaw Capital Group, Inc. is listed on the NYSE.
The trading symbol is RR. At February 29, 1996, the approximate number of
stockholders of record was 190.
The Company has declared no dividends during the past three years. See Note 12
to the Company's Consolidated Financial Statements for a discussion of
potential restrictions on the payment of dividends and Note 10 for a discussion
of dividends on preferred stock.
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ITEM 6. SELECTED FINANCIAL DATA
(in thousands of dollars except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended Last Friday in June
-------------------------------------
Year Ended Transition
12/31/95 Period 1994 1993 1992 1991
-------- ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues (1) $ 72,525 $ 32,194 $ 77,317 $ 87,309 $ 84,378 $ 76,590
Expenses (1) 99,541 38,526 94,748 86,761 81,175 78,962
--------- --------- --------- -------- -------- ---------
Income(loss) before
income taxes (27,016) (6,332) (17,431) 548 3,203 (2,372)
Net income (loss) (29,982) (4,164) (16,501) 256 1,989 (1,595)
Net income (loss)
per common share (4.63) (.91) (3.69) 0.06 0.46 (0.37)
Cash dividends per share -0- -0- -0- -0- -0- -0-
BALANCE SHEET DATA
Total assets (1) $119,333 $454,331 $300,664 $310,198 $321,890 $242,563
Total
liabilities (1) 117,890 424,032 263,325 271,288 282,772 205,434
Liabilities
subordinated to the claims of
general creditors -0- 3,874 6,750 8,000 8,500 8,500
Total stockholders'
equity 1,443 26,425 30,589 30,910 30,618 28,629
Book value
per common share (2) .22 5.77 6.68 7.07 7.01 6.56
Book value
per common share assuming
conversion at 12/31/94 (2) --- 3.98 --- --- --- ---
</TABLE>
_____________
(1) See Note 2 to the Consolidated Financial Statements regarding accounting
changes.
(2) Effective June 24, 1994, the Company issued to Abaco for an aggregate
price of $15 million, 150 shares of Series A non-voting preferred stock
convertible into the Company's common stock, with the amount received
allocated to the book value per then outstanding common share during 1994
and during the Transition Period. On January 31, 1995, the shares of
Series A preferred stock held by Abaco were converted into a total of
2,068,965 shares of common stock. In December 1995, the Company issued to
Abaco for an aggregate price of $5 million, 50 shares of Series B
non-voting preferred stock convertible into common stock upon the
commencement of a rights offering to all stockholders. In the conversion,
the $5 million would be divided by the book value per common share as of
the end of the previous month to determine the number of common shares to
be issued to Abaco.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT
Like other securities brokerage and investment banking firms, the Company
conducts its businesses in highly volatile markets. Consequently, the
Company's results of operations are affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and volatility
of interest rates, currency and security valuations, competitive conditions and
the size, number and timing of transactions. In periods of unfavorable market
activity, profitability can be adversely affected because certain expenses
remain relatively fixed. As a result, revenues and net earnings can vary
significantly from quarter to quarter and year to year.
The 1995 fiscal year was a profitable year for the securities industry
generally. Nonetheless, Rodman experienced a significant loss. The loss was
due in large part to capital constraints and to costs related to the downsizing
of the Company's commodities
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and institutional fixed income businesses, the restructuring of its securities
related businesses and the upgrading of its infrastructure. The continuing
losses also prompted certain customers and counterparties to reevaluate and in
some cases suspend their relationship with Rodman, further impacting earnings.
OUTLOOK
Until the Company returns to profitability, it will have significant
difficulty obtaining credit, hiring and retaining talented employees and in
some areas attracting and retaining customers. However, management of the
Company believes that the Company has already incurred the major costs
attributable to the Company's restructuring and that the Company now is focused
on higher margin businesses. Management continues to implement measures to
reduce the Company's costs further. In addition, Parent has provided the
Company with a letter agreeing to unconditionally support it through March 31,
1997. Such support may include, with previous receipt of requisite approvals
from Mexican governmental authorities, infusions of capital, conversion of
short-term debt to long-term debt or long-term debt to equity, if required, to
continue to sustain Rodman's operations and allow it to maintain the required
net capital pursuant to the SEC's Uniform Net Capital Rule 15c-1. To that end,
Parent has agreed to provide the Company with a total of $9.5 million in equity
capital in March and April, 1996. On March 29, 1996, Abaco provided $5 million
of this equity infusion to the Company. (See "Liquidity and Capital
Resources," below, and Note 18 to the Consolidated Financial Statements.)
Therefore, while the Company will report a loss for 1996 as a whole, it expects
to achieve profitability by the fourth quarter of 1996 as a result of these
changes and the support from Abaco. Actual results for the year will depend
upon a number of factors, including financial market conditions generally and
the market for new securities issuances in particular, Rodman's ability to
reinstate relationships with institutional customers and counterparties, and
its ability to attract and retain qualified personnel.
RESULTS OF OPERATIONS
The results of operations should be read in conjunction with the Company's
consolidated statements of operations and related notes. Following completion
of the fiscal year ended June 24, 1994, the Company changed its fiscal year
from the last Friday in June to a calendar year end.
The following table summarizes the changes in the major categories of
revenues and expenses (including the nonrecurring expenses and restructuring
charge) for the year ended December 31, 1995, the Transition Period and the
fiscal year ended June 24, 1994 (dollar amounts in thousands):
<TABLE>
<CAPTION>
Increase (Decrease)
1/1/95 - 12/31/95
vs. Transition Period vs. FISCAL YEARS
1/1/94 - 12/31/94 06/26/93 - 12/31/93 1994 vs. 1993
----------------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Commissions $ (404) (2%) $ (3,875) (25%) $(9,560) (25%)
Principal 11,525 76% (12,211) (63%) (4,903) (15%)
Interest (2,117) (17%) 3,042 63% (1,345) (13%)
Fee income 2,577 47% (2,109) (35%) 4,453 142%
Other 771 38% (1,990) (56%) 1,363 51%
------- ----- -------- ----- -------- -----
TOTAL: $12,352 21% $(17,143) (35%) $(9,992) (11%)
======= ===== ========= ===== ======== =====
EXPENSES
Employee compensation
and benefits $14,467 33% $(6,650) (23%) $ (34) 0%
Commissions, floor
brokerage and clearing (1,416) (26%) (1,720) (42%) (1,580) (18%)
Interest 1,562 18% 2,942 98% (1,421) (20%)
Communication 2,677 43% 125 4% (740) (11%)
Occupancy and equipment 2,345 39% 65 2% (512) (8%)
Professional fees 1,794 59% (2,197) (74%) 2,517 93%
Other operating (3,780) (29%) (1,606) (53%) 5,942 123%
Restructuring charge (3,815) (100%) -0- -0- 3,815 100%
------- ------ -------- ----- ------- -----
TOTAL: $13,834 16% $(9,041) (19%) $7,987 9%
======= ====== ======== ===== ======= =====
</TABLE>
- 12 -
<PAGE> 13
Revenues for the year ended December 31, 1995 totaled $72.53 million, a
21% increase from the twelve month period ended December 31, 1994. During the
fiscal year ended June 24, 1994, the Company s revenues decreased approximately
11% to $77,317,000.
The Company recorded a net loss of $29.98 million or $4.63 per common
share for the year ended December 31, 1995. The Company recorded a net loss of
$4,164,000 or $.91 per common share for the Transition Period. The Company
recorded a net loss for fiscal 1994 of $16,501,000, or $3.69 per common share,
compared with fiscal 1993 net income of $256,000, or $.06 per common share.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1994
REVENUES
Commission revenue for the year ended December 31, 1995, decreased 2% to
$24.88 million compared to the twelve month period ended December 31, 1994.
This decrease is comprised of a significant decrease of commodities commission
revenues (estimated to be approximately $18 million on an annualized basis)
resulting from the decision to divest a majority of the Company's commodities
business, offset by a significant increase in securities commission revenues.
The increase in securities commission revenues results from the hiring of more
productive retail securities representatives and the addition of the
institutional equity department discussed above.
Revenues from principal transactions, which include realized and
unrealized gains and losses on securities held for resale to customers,
increased 76% to $26.63 million as compared to $15.10 million during the twelve
month period ended December 31, 1994. This increase is primarily due to market
conditions.
Interest income decreased 17% to $10.14 million for the year ended
December 31, 1995. This is due in part to the decline in commodities business
and the corresponding decrease in commodities customers' cash balances. In
addition, due to decreases in regulatory capital and working capital during the
year, as discussed above, the Company significantly reduced its securities
inventory positions in 1995, as compared to 1994.
Fee income was also positively impacted by the hiring of the majority of
the investment banking personnel from Mabon Securities Corp. In 1995, the
Company's fee income rose 47% to $8.07 million for the year ended December 31,
1995.
Other revenue increased to $2.82 million for the year ended December 31,
1995, primarily due to a $1.18 million gain on the sale of commodities exchange
memberships.
EXPENSES
Employee compensation and benefit expense increased 33% from the previous
twelve month period ended December 31, 1994. This increase results primarily
from the hiring of the institutional equities, investment banking and research
department personnel of Mabon Securities Corp. as discussed above. During
1995, the Company effectively incurred nine months of fixed expenses, yet
realized approximately six months of revenues due to a lag in revenue
production caused by the transition of customer accounts and relationships.
Commissions, floor brokerage and clearing expenses decreased 26% to $4.0
million compared to the twelve month period ended December 31, 1994,
commensurate with the shift to a non-clearing futures commission merchant.
Interest expense increased 18% to $10.22 million for the year ended
December 31, 1995 from $8.66 million for the comparable period one year ago.
This increase is due primarily to the increase in short term borrowings from
Confia, S.A. at the dollar interest rates prevailing in Mexico, as compared to
the lower U.S. bank rates.
- 13 -
<PAGE> 14
For the year ended December 31, 1995, occupancy and equipment expense
increased 39% to $8.36 million, reflecting the absorption of the Mabon
Securities Corp. personnel in Boston, San Francisco and New York and the
relocation of Rodman's New York and Chicago offices.
Professional fees increased 59% for the year ended December 31, 1995 to
$4.83 million. The Company incurred several nonrecurring professional expenses
during 1995 as part of the restructuring of its business and upgrading of its
infrastructure. The expenses included consulting fees, legal fees, and
employment agency fees.
Other expenses decreased 58% to $5.40 million for the year ended December
31, 1995. The previous twelve month period included certain significant
non-recurring expenses and losses as discussed below.
TAX ISSUE
The Company recorded a provision for income taxes as it increased the
valuation allowance due to the uncertainty of realizing the benefit of recorded
deferred tax assets. See Note 15 to the Consolidated Financial Statements.
The Company will periodically review the achievement of its business goals
and evaluate its ability to recognize the deferred tax asset. In the event the
Company does not achieve its business plans, it may not be able to realize the
deferred tax asset.
The Company's net operating loss carryforward expires between the years
2008 and 2010. The Company has not had operating or tax credit carryforwards
expire unused. Historically, there have not been material differences between
pretax earnings for financial reporting purposes and taxable income for income
tax purposes.
SIX MONTHS ENDED DECEMBER 31, 1994 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1993
REVENUES
During the Transition Period, commission revenues decreased 25% from the
comparable six month period in 1993 to $11,870,000, a function of the changes
in the number of revenue producing personnel and the lag in revenue production
for those employees who commenced employment during the Transition Period.
Revenues from principal transactions, which include realized and
unrealized gains and losses on securities held for resale to customers,
decreased 63% from the comparable six month period in 1993 to $7,033,000,
primarily due to market conditions. The Company aggressively hired experienced
traders and salespersons in the institutional fixed income department during
the Transition Period.
During the Transition Period, interest income increased 63% from the
comparable six month period in 1993 to $7,872,000. The increase was due to
higher interest rates earned on increased balances of securities inventories
and increased commodities customers cash deposits. In addition, average
securities customers margin receivables began to increase in the Transition
Period and the Company increased its efforts in the stock loan and securities
finders business.
Fee income decreased 35% from the comparable six month period in 1993 to
$3,876,000. The timing of revenue recognition on investment banking
transactions is a function of when the transactions are completed. The Company
completed 3 and 11 investment banking transactions during the six month periods
ended December 31, 1994 and 1993, respectively.
- 14 -
<PAGE> 15
Other revenue decreased 56% from the comparable six month period in 1993
to $1,543,000. The Company realized a $696,000 gain on the sale of a Chicago
Board of Trade exchange membership during the Transition Period. The Company
realized nonrecurring gains of $2,551,000 from the sale of businesses in the
comparable six month period ended December 31, 1993.
EXPENSES
During the Transition Period, employee compensation and benefits expense
decreased 23% from the comparable six month period in 1993 to $21,886,000.
This decrease is the net effect of reduced variable compensation related to the
decrease in commission revenues and an increase in fixed compensation expense
resulting from the employment of new management and producers with temporarily
enhanced commission payouts.
Commissions, floor brokerage, and clearing expenses decreased 42% from the
comparable six month period in 1993 to $2,328,000, commensurate with the
decrease in commission revenues.
Interest expense increased 98% from the comparable six month period in
1993 to $5,933,000 due to higher interest rates on increased securities
inventory balances and the effect of increased short-term borrowings from
Abaco. See Note 9 to the Consolidated Financial Statements.
Professional fees decreased 74% from the comparable six month period in
1993 to $763,000. The Company paid approximately $1,600,000 in nonrecurring
professional fees related to the ownership change transaction during the period
ended December 31, 1993, as discussed below. Other operating expenses
decreased 53% from the comparable six month period in 1993 to $1,443,000,
primarily related to a significant decrease in errors, bad debt and legal
settlements.
The Company recorded an income tax benefit of $2,168,000 for the
Transition Period as management believed that this benefit will be realized in
connection with the Company's intended tax strategies and projected future
income.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
REVENUES
Commission revenue decreased 25% in fiscal 1994 to $29,158,000, largely a
function of the reduced volume in the securities and futures markets and losses
of revenue producing personnel.
Revenues from principal transactions, which include realized and
unrealized gains and losses on securities held for resale, decreased 15% to
$27,313,000 in fiscal 1994 primarily due to losses incurred as a result of
volatility in the debt markets.
Interest income decreased 13% in fiscal 1994 to $9,213,000 due to a
decrease in average customer margin receivables and a reduction of firm
inventory carried for sale to customers.
Fee income increased 142% in fiscal 1994 to $7,598,000. The timing of
revenue recognition on investment banking transactions is a function of when
the transactions are completed. The Company completed 18 investment banking
transactions during fiscal 1994, as compared to 7 during fiscal 1993.
The Company realized nonrecurring net gains of $2,551,000 in fiscal 1994
from the sales of its London futures and option operations and its Chicago
Stock Exchange specialist operation. The London futures and options branch was
sold because of recurring losses.
- 15 -
<PAGE> 16
The Chicago Stock Exchange specialist operation was sold because the Company
changed its long-term strategic plan.
EXPENSES
Nonrecurring Expenses and Restructuring Charge. As noted above, the
Company incurred several material nonrecurring expenses and a restructuring
charge during fiscal 1994. These items are recorded in various financial
statement line items including Employee Compensation and Benefits, Professional
Fees and Other Operating Expenses. Such items are summarized below by the type
of transaction which gave rise to the expense or charge.
<TABLE>
<S> <C>
Ownership change transaction $ 6,401,000
Restructuring charge 3,815,000
Litigation and settlements 3,427,000
Employee related 1,178,000
Other 3,545,000
-----------
Total nonrecurring expenses
and restructuring charge $18,366,000
===========
</TABLE>
The components of the $6,401,000 incurred in the ownership change transaction
are as follows:
<TABLE>
<S> <C>
Employee option tender $ 2,026,000
Professional fees 1,604,000
Employee costs (hiring
and severance) 2,231,000
Other 540,000
-----------
$ 6,401,000
===========
</TABLE>
The Company has recorded a restructuring charge totaling approximately
$3,815,000 related to office relocations in Chicago and New York during 1995.
This figure includes the costs of abandoning certain leasehold improvements (a
net noncash charge of approximately $450,000) and certain lease obligations for
space which management believes it will be unable to sublet after the moves.
Any sublease revenues realized in the future will be recorded as a reduction of
occupancy costs.
Rodman incurred expenses totaling $3,427,000 related to certain legal
settlements during the year ended June 24, 1994. This amount does not include
the costs of normal recurring litigation inherent in day-to-day operations.
Rodman incurred certain employee related expenses totaling $1,178,000
during fiscal 1994 in connection with the severance of certain employees,
employment fees and other costs associated with the new hirings.
Other nonrecurring expenses totaling $3,545,000 include expenses and
allowances incurred in connection with the termination of Rodman's high-yield
fixed income securities business and liquidation of the related portfolio.
Rodman terminated its high-yield fixed income business because it determined
that the earnings to be derived from such business were insufficient to justify
the costs and risks involved in conducting the business. In connection with
the termination of the business, Rodman made the decision to repurchase certain
high-yield bonds held in the accounts of certain of its customers or to reprice
high-yield bonds that such customers continued to hold by refunding to them
part of their initial purchase price. The expenses incurred in connection with
the termination of the business included $1.1 million attributable to these
repurchase and repricing transactions. The remainder of the $3,545,000
includes professional and consulting fees and write-offs of certain deferred
expenses and receivables.
- 16 -
<PAGE> 17
Substantially all of the nonrecurring expenses discussed above were paid
during fiscal 1994. A restructuring charge liability of $817,000 will be paid
in 1996.
Total Expenses. Total expenses increased $7,987,000 to $94,748,000 in
fiscal 1994, following an increase of $5,586,000 in fiscal 1993. The following
discussion focuses on the changes in expenses by financial statement line item
after excluding the nonrecurring expenses discussed above. The nonrecurring
expenses were summarized above by transaction type, not by financial statement
line item.
Employee compensation and benefit expense, excluding nonrecurring expenses
totaling $5,358,000 as discussed above, totaled $44,696,000, a decrease of
$5,392,000, or 11%, from 1993 amounts. This decrease is the net effect of
reduced variable compensation related to the decrease in commission revenues
and an increase in fixed compensation expense resulting from the employment of
new management and producers.
Commissions, floor brokerage, and clearing expenses decreased 18% to
$7,141,000 in fiscal 1994, commensurate with the decrease in commission
revenues.
Interest expense decreased 20% to $5,714,000 in fiscal 1994 from
$7,135,000 in 1993. This is a result of lower interest rates in the first half
of fiscal 1994 when customer balances were relatively unchanged from the prior
year and decreased customer balances during the second half of the year.
Communication expense decreased 11% to $6,063,000 from $6,803,000 due to
the reduction in customer and market trading activity, the sale of the London
futures and option operations and negotiated reductions with certain
communication vendors.
Occupancy and equipment expense decreased 8% to $5,949,000 in fiscal 1994,
primarily due to the sale of the London futures and option operations in August
1993.
Professional fees, excluding the certain nonrecurring expenses of
$3,384,000, as discussed above, decreased 32% to $1,843,000 in fiscal 1994 due
to a reduction in consulting projects.
Other operating expenses, excluding certain nonrecurring expenses of
$5,809,000, as discussed above, increased 3% to $4,976,000 in fiscal 1994.
The Company recorded a net tax benefit of $930,000 for fiscal 1994. An
additional benefit of $4,518,000, was offset by a valuation allowance pursuant
to Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This valuation allowance has been recognized due to the uncertainty of
realizing the tax benefit of loss carry forwards and temporary differences
totaling $2,469,000 and $2,627,000, respectively, at June 24, 1994.
LIQUIDITY AND CAPITAL RESOURCES
As a registered broker-dealer and futures commission merchant, Rodman is
required by the SEC and CFTC to maintain specified amounts of net capital to
meet its customer obligations. In February 1996, Rodman's net capital
requirement was reduced as a result of its shift from clearing to non-clearing
status. See Notes 12 and 18 to the Consolidated Financial Statements. At
December 31, 1995, Rodman's net capital was $15,402,000, which was $14,291,000
in excess of the minimum required net capital. At December 31, 1994, Rodman's
net capital was $16,644,000, which was $11,038,000 in excess of the minimum
required net capital.
The Company's assets are substantially comprised of customer-related
receivables and securities inventory, both of which are highly liquid. The
principal sources of financing are stockholders' equity, customer payables,
short-term loans from banks and Confia, S.A. and other payables. Additionally,
Rodman maintains lines of credit with large financial institutions which
include daily demand loans, letters of credit and reverse
- 17 -
<PAGE> 18
repurchase agreements to meet financing needs. All of these lines of credit
require collateral to be pledged, and none of the borrowings can exceed the
value of the collateral. Certain Rodman lines of credit with financial
institutions other than Confia, S.A. have been terminated or significantly
reduced because of the Company's continuing losses. Management of the Company
believes that Rodman will establish new lines of credit and reestablish
previous lines once the Company receives additional capital and/or achieves
profitability.
On June 22, 1994, the Company borrowed $10 million from Confia, S.A.
During 1995, the Company obtained additional loans from Confia, S.A. in an
aggregate amount of $16.5 million. The Company required the additional loans
in order to continue to conduct its business because its losses were eroding
its net capital. On December 4, 1995, the Company paid all interest due on the
loans and consolidated the principal amounts, totaling $26.5 million, into a
single note due June 3, 1996 and bearing interest at an annual rate of 12%.
Based upon the letter of support that the Company received from Abaco,
management believes that it is the intention of Confia, S.A. to renew the loan
when it becomes due or to convert all or a portion of the loan to equity
pursuant to the Note Conversion Agreement discussed below, subject to receipt
of requisite approvals from Mexican government authorities. A renewal may be
on different terms than the original loan, depending upon market conditions and
Confia, S.A.'s internal lending policies at the time of renewal.
The Company entered into a Note Conversion Agreement with Confia, S.A.
dated September 29, 1995 and amended November 10, 1995, pursuant to which
Confia, S.A. has the right to convert all or a portion of the Company's
outstanding indebtedness to equity in the Company. The number of shares of
common stock to be issued upon a conversion would be determined by dividing the
amount of indebtedness to be converted by the book value per share of common
stock as of the end of the Company's most recent fiscal quarter (provided,
however, that if such book value per share were equal to or less than $.09,
which is the par value per share of the common stock, the denominator would be
$.09). Indebtedness is convertible only if the conversion receives stockholder
approval or if the conversion is made in connection with a rights offering to
all stockholders at the same effective per share price for a number of shares
proportional to the number to be issued upon the conversion. Confia, S.A. may
transfer the conversion right to Abaco or another corporation within the Abaco
group of affiliated companies.
In addition, in December 1995, the Company issued to Abaco 50 shares of
non-voting preferred stock at a price per share of $100,000, which shares are
convertible into Company common stock. In a conversion, the $5,000,000
preferred stock purchase price would be divided by the book value per share of
common stock as of the end of the most recent month to determine the number of
shares of common stock to be issued (provided, however, that if such book value
per share were equal to or less than $.09, which is the par value per share of
the common stock, the denominator would be $.09). The preferred stock is
convertible only in connection with a rights offering to all stockholders at
the same effective per share price for a number of shares proportional to the
number to be issued upon conversion at a price per share equal to such book
value per share or par value, as the case may be.
On February 9, 1996, the Company also received a letter from Parent
whereby Parent agreed to continue to unconditionally support the Company and
Rodman for the next year, up to and including March 31, 1997. Such support may
include, with previous receipt of requisite approvals from Mexican governmental
authorities, infusions of capital, conversion of short-term debt to long-term
debt or conversion of short or long-term debt to equity, if required, to
continue to sustain Rodman's operations and allow it to maintain the required
net capital pursuant to the SEC's Uniform Net Capital Rule 15c3-1. To that
end, Parent has agreed to provide the Company with a total of $9.5 million in
equity capital in March and April, 1996. On March 29, 1996, it provided $5
million of that total through the purchase by Abaco of 50 additional shares of
non-voting preferred stock at a price per share of $100,000. The terms of such
shares are identical to those of the preferred stock issued in December, 1995,
as discussed above.
- 18 -
<PAGE> 19
In addition to Abaco's commitment, the Company's senior management is in
the process of exploring the possibility of investing up to $1 million in new
capital in the Company, and of permitting certain additional Rodman employees
to invest directly in the firm in the near future.
During the fourth quarter of 1995, the Company finalized an equipment
leasing arrangement for approximately $6 million in financing in order to
minimize the impact of its Chicago and New York office relocations on its
liquidity. Confia, S.A., issued a standby letter of credit for the account of
the Company in the amount of $6 million as additional security for the
financing. If the letter of credit were drawn down, the resulting $6 million
of indebtedness that the Company would owe Confia, S.A. would carry the same
conversion rights as the Company's current indebtedness to Confia, S.A.
described above.
The Company currently has subordinated loans outstanding to Rodman, its
broker dealer subsidiary, in an aggregate amount of $26.5 million. The loans
are funded by the Company's borrowing from Confia, S.A. discussed above. It is
the intention of management of the Company and Rodman to extend these
subordinated borrowings through June, 1998. To the extent that such
subordinated borrowings are required for Rodman's continued compliance with
minimum net capital requirements, they may not be repaid. In the event that
the borrowing between the Company and Confia, S.A. were not renewed or
converted, Rodman would be required to curtail its business activities
substantially in order to reduce its minimum net capital requirements, then
would seek regulatory approval to repay its subordinated debt to the Company.
See Notes 9 and 12 to the Consolidated Financial Statements. Rodman obtained
regulatory approval to repay and repaid a $2.5 million subordinated note from
an unrelated party on October 2, 1995 with proceeds from a subordinated loan
from the Company which was funded by the borrowings from Confia, S.A.
The Uniform Net Capital Rule also provides that the total outstanding
principal amounts of a broker-dealer's indebtedness under certain subordination
agreements, the proceeds of which are includible in its net capital, may not
exceed for a period in excess of 90 days, 70% of the sum of the total
outstanding principal amounts of all subordinated indebtedness included in net
capital plus stockholder's equity (the "debt/equity ratio"). At December 31,
1995, Rodman's debt/equity ratio was 78.2%. In January 1996, the Company and
Rodman converted $5 million from short-term to long-term subordinated debt,
which is treated as equity for purposes of the Uniform Net Capital Rule,
thereby reducing the debt/equity ratio to 60%.
The Company does not anticipate any material capital expenditures during
1996. Future capital expenditures, if any, are expected to be funded by cash
generated from operations and other traditional means of financing.
CASH FLOWS
Operating Activities. Operating activities generated $5 million in net
cash in 1995, primarily as a result of the decrease in securities inventory.
In the Transition Period, the Company used $157,000 in net cash, exclusive of
the increase in securities purchased under agreements to resell of $21,631,000,
in operating activities. In fiscal 1994, the Company generated net cash and
cash equivalents of $3,188,000, exclusive of the increase in securities
purchased under agreements to resell of $13,423,000, from operating activities.
Investing Activities. In 1995, the Company generated $3.02 million in net
cash in investing activities, which represents the net effect of the sale of
commodity exchange memberships and the purchase of furniture and fixtures
relating to the moves in Chicago and New York. In the Transition Period, the
Company generated $700,000 in net cash from investing activities related to the
sale of a Chicago Board of Trade exchange membership. In fiscal 1994, the
Company generated $3,732,000 in net cash from investing activities, primarily
the result of the sale of its London futures and option operations and its
Chicago Stock Exchange specialist operation.
- 19 -
<PAGE> 20
Financing Activities. In 1995, the Company used $6.03 million in net cash
in financing activities, which represents the net effect of the reduction in
short term borrowings from banks and the increase in short term borrowings from
Confia, S.A. In the Transition Period, the Company generated $28,213,000 in
net cash from financing activities, which represents the net effect of an
increase in short-term borrowings from banks of $31,089,000 to finance
increased securities inventories and the payment of $2,876,000 in subordinated
borrowings. In fiscal 1994, the Company generated $5,957,000 in net cash from
financing activities, which represents debt and equity financing from Abaco and
Confia, S.A., net of reductions in short-term bank and subordinated borrowings.
INFLATION
The Company s assets are primarily monetary, consisting of cash,
securities inventory and receivables. These monetary assets are generally
liquid and turn over rapidly and, consequently, are not in general
significantly affected by inflation. However, the rate of inflation affects
various expenses of the Company, such as employee compensation and benefits,
communications, occupancy and equipment, which may not be readily recoverable
in the price of its services.
CERTAIN ACCOUNTING MATTERS
During fiscal year 1993 Rodman implemented the following accounting
changes:
1. Rodman changed its method of accounting for commission revenue and
expenses for commodity transactions executed for introducing brokers. For
1993, the net commission retained by the Company was recorded as revenue.
In previous years, the entire amount of commissions charged to customers
on introducing brokers were recorded as commission expense. See Note 2
for the effects on the Financial Statements. Rodman believes these
accounting changes better reflect the substance of the transactions.
2. Rodman adopted SFAS No. 109, "Accounting for Income Taxes." The
cumulative effect of this change was an $18,000 benefit.
In October, 1994, the FASB issued SFAS No. 119, "Disclosure about
Definitive Financial Instruments and Fair Value of Financial Instruments."
Rodman adopted this standard during the Transition Period. See Note 16 to the
Consolidated Financial Statements.
On April 11, 1994 the Board of Directors voted to change the Company s
fiscal year end to December 31. Accordingly, beginning in 1995, the Company's
fiscal year is a calendar year.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FASB 123"). FASB 123, which becomes effective in 1996,
encourages the adoption of a fair value based method of accounting for
stock-based compensation plans. The Company has elected to continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). Applying APB 25, the Company has not recognized
compensation expense because the exercise price of the Company's employee stock
options equals or exceeds the market price of the underlying stock on the date
of grant.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is submitted as a separate section
of this report. (See Index on page F-1)
- 20 -
<PAGE> 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by Regulation S-K Item 304 was previously
reported in the Company's Proxy Statement dated December 27, 1994, pertaining
to its Special Meeting of Stockholders held on January 31, 1995.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The following table sets forth each of the Company's current directors and
executive officers and his age, current positions with the Company, period of
service and business experience for the past five years.
Charles W. Daggs, III Age 48; Director, President and Chief
Executive Officer of the Company and President
of Rodman since April 11, 1994; Senior
Managing Director, Bear Stearns & Co.,
Incorporated, a financial services firm, from
1991 to 1994.
Peter Boneparth Age 36; Director since 1995; Executive Vice
President and Senior Managing Director of
Investment Banking for Rodman since March 28,
1995; Managing Director of Investment Banking
for Mabon Securities Corp., a financial
services firm, from 1989 to March 28, 1995.
Mr. Boneparth also serves as a director of
Marissa Christina, Inc.
John T. Hague Age 41; Executive Vice President and Chief
Financial Officer of the Company since June
28, 1994; Executive Vice President and
Director of Internal Audit of the Company from
April 11, 1994 to June 28, 1994; Senior
Manager with Deloitte & Touche, a certified
public accounting firm, from 1990 to April,
1994.
Francis L. Kirby Age 51; Director since 1994; Senior Managing
Director of Retail Financial Services for
Rodman since November 1995; Executive Vice
President of the Company since June 24, 1994;
Senior Vice President of Oppenheimer & Co.,
Inc., a financial services firm, from May 1993
to June 1994; Director and Executive Vice
President of the Company from 1981 to 1993.
Edwin J. McGuinn, Jr. Age 44; Director since 1995; Senior Managing
Director of Fixed Income for Rodman since
February 1996; Executive Vice President and
Senior Managing Director of Equities for
Rodman since March 28, 1995; Managing Director
of Mabon Securities Corp., a financial
services firm, from 1992 to 1994; investment
banker with Lehman Bros. from 1981 to 1992
with final position of Managing Director.
- 21 -
<PAGE> 22
Keith F. Pinsoneault Age 48; Director since 1994; Executive Vice
President of the Company since 1994; Chief
Operating Officer of the Company from
September 1994 to January 1996; Director of
Capital Markets for Rodman since January 1996;
Senior Portfolio Manager for Harris Bretall
Sullivan & Smith from 1991 to 1994.
Joseph P. Shanahan Age 48; Director since 1993; Executive Vice
President and Chief Operating Officer of
Rodman since February 8, 1996; Director of
Operations and Administration for Rodman from
January 2, 1996 to February 8, 1996; President
of Abaco International Corp., a wholly- owned
subsidiary of Abaco, from 1992 to 1996; Vice
President of Rodman from January 1994 to April
1994; consultant to Excalibur Management, Ltd.
from 1990 to 1992.
Alexander C. Anderson Age 47; Director since 1994; Research Director
of Abaco since 1989.
Ernesto Arechavala Age 31; Director since 1995; Director of
Administration and Finance for Abaco since
1993; Director of Operations for Abaco from
1991 to 1993.
Eduardo Camarena Legaspi Age 45; Director since 1993; Director of
International Affairs for Parent since 1987;
Chief Executive Officer of Abaco from 1991 to
1995; Director of Abaco from 1985 to 1995;
Director of Parent since 1992 and Director of
Confia, S.A. since 1991.
Jorge Antonio Garcia Garza Age 34; Director since 1993; General Counsel,
Secretary of the Board of Directors of Parent
since 1992; General Counsel of Abaco since
1985 and Secretary of Abaco's Board of
Directors since 1986; General Counsel of
Confia, S.A. since 1992, Secretary of the
Board of Directors of Confia, S.A. since 1993
and Director of Confia, S.A. since 1991.
Jorge Lankenau Rocha Age 51; Chairman of the Board of the Company
and Director since 1993; Chairman of the Board
of Parent since 1992 and of Abaco since 1985;
Chief Executive Officer of Abaco from 1985 to
1991; Chairman of the Board and Chief
Executive Officer of Confia, S.A. since 1991.
Thomas E. Meade Age 55; Director since 1994; Founder and
President of Private Capital Management, Inc.,
an investment management and consulting firm,
since 1993; President of Fidelity Brokerage, a
securities brokerage firm, from 1992 to 1993;
President of Kemper Securities/Boettcher, a
securities brokerage firm, from 1988 to 1992.
Rodrigo Padilla Age 48; Director since 1995; Director of
Parent since April 1992; Director of Abaco
since April 1992; Director of Confia, S.A.,
since April 1992.
Richard Pigott Age 55; Director since 1994; corporate merger
and acquisition advisor and private investor
since 1988. Mr. Pigott also serves as a
Director of Ameriwood Industries International
Corporation.
Federico Richardson Lamas Age 34; Director since 1995; National Sales
Manager of Abaco since 1995; investment
advisor with Abaco since 1986; Director of
Confia, S.A. since 1995.
- 22 -
<PAGE> 23
David S. Ruder Age 66; Director since 1993; Professor of Law,
Northwestern University School of Law since
1961; partner with Baker & McKenzie, an
international law firm, from 1990 to 1994 and
Senior Counsel since 1994; Chairman of the
Securities and Exchange Commission from 1987
to 1989. Member of the Board of Governors of
the National Association of Securities
Dealers, Inc., from 1990 to 1993. Mr. Ruder
also serves as a Director of Quixote
Corporation.
STOCK OWNERSHIP AND TRADING REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10% of
the Company's common stock to file initial stock ownership reports and reports
of changes in ownership with the SEC and the NYSE. The Company must also be
furnished with a copy of these reports. Based on Company records, Francis L.
Kirby, a director and executive officer of the Company, filed one late report
during 1995 with respect to one transaction. Rodrigo Padilla and Ernesto
Arechavala, directors of the Company, each filed one late Form 3 Initial
Statement of Beneficial Ownership of Securities. Edwin J. McGuinn, Jr., a
director and executive officer of the Company, filed one late report during
1996 with respect to one transaction in 1995.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
for the year ended December 31, 1995, the Transition Period, the fiscal year
ended June 24, 1994 and the fiscal year ended June 25, 1993 for the following
persons (the "named executive officers"): (i) the Company's chief executive
officer, and (ii) the other four executive officers at December 31, 1995
with the highest total salary and bonus for 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------
Awards
------
---------------------------------------------------------- Securities All Other
Other Annual Underlying Compensation
Name and Principal Position Period Salary($) Bonus ($) Compensation ($) Options (#) ($)(1)
--------------------------- ------ --------- --------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Daggs III(2) 1995 300,000 600,000 -0- -0- 924
President and Chief
Executive Officer Transition 150,000 -0- -0- -0- -0-
Period
1994 68,269 500,000 -0- 100,000 10,000
Peter Boneparth(3) 1995 153,846 650,000 -0- 20,000 -0-
Executive Vice President
Edwin J. McGuinn, Jr.(4) 1995 153,846 500,000 -0- 20,000 -0-
Executive Vice President
Keith F. Pinsoneault(5) 1995 150,000 100,000 -0- 20,000 924
Executive Vice President
Transition 75,000 50,000 -0- -0- -0-
Period
1994 13,077 8,718 -0- -0- -0-
</TABLE>
- 23 -
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
David H. Shulman(6) 1995 1,300,000 -0- 39,657 20,000 924
Executive Vice President
Transition 650,000 -0- 26,182 -0- -0-
Period
1994 299,363 -0- 1,031,263 5,000 873
</TABLE>
- - - - -----------
(1) Amounts included under "All Other Compensation" consist of (i) Company
matching funds under the Company s Retirement and Savings Plan and (ii) in
the case of Mr. Daggs, $10,000 in relocation expenses in fiscal 1994.
(2) Mr. Daggs joined the Company as President and Chief Executive Officer on
April 11, 1994. The figures in the Bonus column reflect amounts paid
pursuant to the terms of his employment agreement, discussed below.
(3) Mr. Boneparth became an executive officer of the Company on March 28,
1995. The figure in the Bonus column reflects a bonus for 1995 paid in
1996 pursuant to the terms of his employment agreement, discussed below.
(4) Mr. McGuinn became an executive officer of the Company on March 28, 1995.
The figure in the Bonus column includes a $200,000 signing bonus paid in
1995 and a $300,000 bonus for 1995 paid in 1996, both pursuant to the
terms of his employment agreement, discussed below.
(5) Mr. Pinsoneault became an executive officer of the Company on May 31,
1994.
(6) Mr. Shulman became an executive officer of the Company on February 14,
1994. He resigned as an officer of the Company on January 29, 1996. The
figures in the Other Annual Compensation column include (i) the cash value
that he received in 1995 for a life insurance policy previously purchased
by the Company under a discontinued employee benefit plan, and (ii) for
previous periods, deferred compensation and commissions.
- 24 -
<PAGE> 25
The following table presents information as to stock option awards to
each of the named executive officers during 1995. No stock appreciation rights
were granted.
Option Grants in Last Fiscal Year
Individual Grants
-----------------
<TABLE>
<CAPTION>
Number of Potential Realized Value at
Securities % of Total Assumed Annual Rates of Stock
Underlying Options Granted Exercise Price Appreciation for Option
Options to Employees in Price Expiration Term (1)
Name Granted (#) Fiscal Year ($/SH) Date 5% ($) 10% ($)
---- ----------- ----------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Daggs, III - - - - - -
Peter Boneparth 20,000(2) 2.43 2.00 12/07/05 103,116 237,497
Edwin J. McGuinn, Jr. 20,000(2) 2.43 2.00 12/07/05 103,116 237,497
Keith F. Pinsoneault 20,000(2) 2.43 2.00 12/07/05 103,116 237,497
David H. Shulman(3) 20,000(2) 2.43 2.00 12/07/05 103,116 237,497
</TABLE>
(1) The dollar amounts in these columns project the amount
that could be earned if the common stock appreciates at the
annual rates indicated from the date of grant and if the
options are held until the expiration dates shown. These
rates of appreciation are specified by the applicable rules of
the SEC and are not intended to forecast possible future
actual appreciation, if any, in the Company's stock prices.
(2) Options vest at 20% per year cumulatively and are
exercisable upon vesting.
(3) No longer employed by the Company. Options have been
cancelled.
- 25 -
<PAGE> 26
The following table provides information as to the number and value of
the options held by each named executive officer at December 31, 1995. The
Company has not granted stock appreciation rights.
Aggregated Option Exercises In Last Fiscal Year
and FY-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money Options
Options at FY-End (#) at FY-End ($)(1)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Charles W. Daggs III - - -/100,000 -/-
Peter Boneparth - - -/20,000 -/-
Edwin J. McGuinn, Jr. - - -/20,000 -/-
Keith F. Pinsoneault - - -/20,000 -/-
David H. Shulman(2) - - 9,600/26,400 -/-
</TABLE>
(1) All options listed in the table were out of the money at December 31,
1995, based on a closing stock price of $1.75 per share on such date.
(2) No longer employed by the Company. Options have been cancelled.
REMUNERATION OF DIRECTORS
Directors who are not otherwise employed by Parent, Abaco, the Company or
a subsidiary of the Company are entitled to receive:
- $2,500 for each meeting of the Board of Directors attended in
person;
- $500 for each meeting of the Board of Directors attended by
telephone;
- $2,500 for each meeting of a committee of the Board of
Directors attended in person (unless such meeting is on the
same day as a meeting of the Board of Directors); and
- $500 for each meeting of a committee of the Board of Directors
attended by telephone;
provided that such directors receive a minimum remuneration of $25,000 per
fiscal year. Such directors also receive an automatic grant of 7,500 stock
options each year with an exercise price equal to the market price of the
Company's common stock on the date of grant. The options fully vest after a
period of one year and terminate when the grantee ceases to be a director.
Directors who are otherwise employed by Parent, Abaco, the Company or a
subsidiary of the Company are not entitled to any additional compensation for
serving as directors.
- 26 -
<PAGE> 27
EMPLOYMENT AGREEMENTS
Charles W. Daggs, III, President and Chief Executive Officer of the
Company, began his employment on April 11, 1994. Under the terms of his
agreement, Mr. Daggs is entitled to receive a base salary of $300,000 per year.
Also, under the terms of his agreement, Mr. Daggs received or will be eligible
to receive performance-based compensation for each of the two twelve-month
periods commencing July 1, 1994 and July 1, 1995 based on the Company's income
before taxes ("IBT") for such periods. (At the time the Company and Mr. Daggs
entered into his agreement, these periods coincided with the Company's fiscal
years. The Company has since changed its fiscal year to a calendar year.) The
performance goal and the performance-based compensation are calculated as
follows:
<TABLE>
<CAPTION>
IBT PERFORMANCE-BASED COMPENSATION
(Without Giving Effect to Performance-Based
Compensation)
<S> <C>
$0 - $5,000,000 5% of IBT
$5,000,000.01 - $10,000,000 $250,000 plus 7.5% of IBT exceeding $5,000,000
$10,000,000.01 - $15,000,000 $625,000 plus 10% of IBT exceeding $10,000,000
More than $15,000,000 $1,125,000 plus percentage of IBT exceeding
$15,000,000 to be determined by the Board of
Directors of the Company but not to exceed 5%
</TABLE>
Notwithstanding the foregoing, the performance-based compensation for each of
the two twelve-month periods was to be or will be no less than $600,000. Mr.
Daggs received the $600,000 minimum for the twelve-month period commencing July
1, 1994. Mr. Daggs will receive no portion of the performance-based
compensation for the twelve-month period commencing July 1, 1995 unless he is
employed by the Company on June 30, 1996. His performance goal was approved by
the Company's stockholders at its annual meeting held on June 1, 1994.
Pursuant to the terms of his agreement, the Company also granted to Mr.
Daggs options to purchase 100,000 shares of Common Stock at a price of $6.50
per share, the fair market value of the Common Stock on his first day of
employment. 50% of such options will become exercisable on June 30, 1996, and
the remaining 50% will become exercisable on June 30, 1997, in each case
provided that Mr. Daggs is employed by the Company on such dates.
Mr. Daggs' employment agreement will be in effect through June 30, 1996,
subject to extension by mutual agreement and subject to earlier termination by
the Company for cause or upon Mr. Daggs' death or disability.
Rodman entered into a three-year employment agreement with Peter Boneparth
effective March 28, 1995, pursuant to which Mr. Boneparth became head of
Rodman's investment banking group. Under the terms of the agreement, Mr.
Boneparth received a $650,000 bonus paid in February, 1996. Mr. Boneparth
receives a guaranteed base salary of $200,000 per year. In addition, for 1996
and 1997 he will receive a guaranteed bonus equal to the greater of (i)
$650,000 or (ii) 14% of the total pre-tax profit (as defined in the agreement)
(the "Profit Bonus") of Rodman's investment banking group plus 25% of certain
revenues generated by him and allocated to the investment banking group. Each
bonus to which Mr. Boneparth may be entitled for a partial fiscal year shall
be pro rated. In the event that Rodman terminates Mr. Boneparth's employment
upon a sale or change in control of Rodman, Rodman must (i) continue to pay Mr.
Boneparth's salary and any minimum guaranteed bonuses to which he
- 27 -
<PAGE> 28
otherwise would have been entitled through the earlier of March 15, 1998, or
the one-year anniversary of his death, and (ii) pay to Mr. Boneparth any Profit
Bonus to which he otherwise would have been entitled in respect of the portion
of the fiscal year completed prior to the sale or change of control.
Rodman entered into a two-year employment agreement with Edwin J. McGuinn,
Jr. effective April 1, 1995, pursuant to which Mr. McGuinn became Senior
Managing Director of Rodman's institutional equity department. Under the terms
of the agreement, Mr. McGuinn received a $200,000 signing bonus in 1995. Mr.
McGuinn receives a guaranteed base salary of $200,000 per year. In addition,
in February, 1996, he received a bonus of $300,000. By February 14, 1997, he
will be entitled to receive a bonus equal to the greater of (i) $300,000, or
(ii) the sum of 1.5% of certain revenues derived from equity commissions and
public offerings, 10% of the foregoing revenues less direct expenses and
certain allocated expenses (as defined in the agreement), 6% of certain
revenues derived from Rodman's investment banking group less direct expenses
and certain allocated expenses (as defined in the agreement), and 25% of any
profit during the first year of operation from any business group of the
Company not in existence at the time of execution of the agreement and brought
into the Company due to his efforts. Each bonus to which Mr. McGuinn may be
entitled for a partial fiscal year shall be pro rated. In the event that
Rodman terminates Mr. McGuinn's employment upon a sale or change in control of
Rodman, Rodman must continue to pay Mr. McGuinn's base salary and applicable
bonuses through the earlier of April 1, 1997, or the one-year anniversary of
his death.
On February 14, 1994, Rodman entered into an employment agreement with
David H. Shulman, pursuant to which Mr. Shulman assumed the position of
Managing Director of the Fixed Income Group of Rodman. Under the agreement,
Mr. Shulman received fixed compensation of $1,300,000 per year and was entitled
to additional compensation equal to 15% of any net pretax profits of the Fixed
Income Group. The agreement was for a term of three years commencing February
14, 1994. However, Mr. Shulman resigned from Rodman on January 29, 1996,
therefore, Rodman's payment obligations under the contract have terminated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the sole members of the Company Compensation Committee were
Thomas E. Meade and Richard Pigott. Neither is or has been an officer or
employee of the Company or any of its subsidiaries.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 8, 1996 concerning
the beneficial ownership of the Company's Common Stock by (i) each stockholder
owning more than 5% of the outstanding Common Stock, (ii) each director of the
Company; (iii) each of the named executive officers (as listed in the Summary
Compensation Table in Item 11) and (iv) all current directors and executive
officers of the Company as a group.
- 28 -
<PAGE> 29
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Identity of Holder Ownership (1) of Class (2)
- - - - ------------------ ------------- ------------
<S> <C> <C>
Abaco(3) . . . . . . . . . . . . . . . . . . . . . . . . . . 4,431,968 69.6%
Montes Rocallosos
505 Sur, Residential San Agustin, 66260
Garza Garcia, N.L. Mexico
The business address for each of the following persons is:
Rodman & Renshaw, Inc.
233 West Wacker Drive, Ste. 4500
Chicago, Illinois 60606
Alexander C. Anderson(4) . . . . . . . . . . . . . . . . . 0 --
Ernesto Arechavala(4) . . . . . . . . . . . . . . . . . . . 0 --
Peter Boneparth . . . . . . . . . . . . . . . . . . . . . 5,000 *
Eduardo Camarena Legaspi(4) . . . . . . . . . . . . . . . . 0 --
Charles W. Daggs, III . . . . . . . . . . . . . . . . . . . 0 --
Jorge Antonio Garcia Garza(4) . . . . . . . . . . . . . . . 0 --
Francis L. Kirby . . . . . . . . . . . . . . . . . . . . . 1,000 *
Jorge Lankenau Rocha(4) . . . . . . . . . . . . . . . . . . 0 --
Edwin J. McGuinn, Jr. . . . . . . . . . . . . . . . . . . . 9,000 *
Thomas E. Meade . . . . . . . . . . . . . . . . . . . . . . 7,500 *
Rodrigo Padilla(4) . . . . . . . . . . . . . . . . . . . . 0 --
Richard Pigott . . . . . . . . . . . . . . . . . . . . . . 8,000 *
Keith F. Pinsoneault . . . . . . . . . . . . . . . . . . . 0 --
Federico Richardson Lamas(4) . . . . . . . . . . . . . . . 0 --
David S. Ruder . . . . . . . . . . . . . . . . . . . . . . 17,500 *
Joseph P. Shanahan(4) . . . . . . . . . . . . . . . . . . . 0 *
All current directors and executive
officers as a group (17 persons)(4) . . . . . . . . . . . 48,800 *
</TABLE>
- - - - ------------------
* Less than 1%
(1) Includes 25,700 shares of Common Stock subject to stock options vested
under the Company's 1994 Stock Option Plan or Non-Employee Director
Stock Option Plan exercisable within 60 days after March 8, 1996, as
follows: Mr. Meade, 7,500; Mr. Pigott, 7,500; Mr. Ruder, 7,500;
unnamed executive officer, 800.
(2) Pursuant to the requirements of Rule 13d-3(d)(1) promulgated under the
Securities Exchange Act of 1934, percentage ownership is calculated as
if the shares subject to stock options which are currently exercisable
or become exercisable within 60 days held by the persons identified in
the above table had been issued to them and were outstanding as of
March 9, 1996.
(3) Abaco also has the right to acquire Common Stock from the Company if
the Company issues stock and the result is that Abaco beneficially
owns less than 51% of the total voting power of the Company's stock.
Parent also is deemed the beneficial owner of Abaco's Common Stock.
- 29 -
<PAGE> 30
(4) Not included are shares held by Abaco, of which the referenced person
is a director and/or officer or with which the referenced person is
otherwise affiliated.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations for a discussion of the Company's transactions with
Abaco and Confia, S.A. See Item 11. Executive Compensation -- Employment
Agreements for a discussion of employment agreements between the Company and
certain executive officers.
Abaco International Corporation, a wholly-owned subsidiary of Parent based
in New York ("AIC"), subleases from the Company a portion of the New York
office space leased by the Company. Under the sublease, AIC is required to pay
annual rent to the Company in an amount that is a percentage of the total rent
that the Company pays under its lease equal to the percentage of the Company's
total space occupied by AIC. AIC's total rent for 1995 was $275,312. Its
total rent for 1996 is expected to be $130,080. Under the sublease, AIC also
is required to pay operating expenses and other payments charged to the Company
by the landlord under the Company's lease. The sublease expires on May 31,
1998.
David S. Ruder, a Director of the Company, is Senior Counsel to Baker &
McKenzie. Baker & McKenzie performs legal services for the Company, Abaco and
Parent.
As a matter of policy, the Company does not intend to make any loans to
directors or executive officers of the Company other than in margin
transactions conducted in the ordinary course of the business. Certain
directors and executive officers of the Company may maintain margin accounts
with Rodman pursuant to which Rodman may make loans for the purchase of
securities. All margin loans are made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do
not involve more than the normal risk of collectibility or present other
unfavorable features.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
The following are Consolidated Financial Statements of Rodman
& Renshaw Capital Group, Inc. and Subsidiaries:
Consolidated Statements of Financial Condition - December 31,
1995 and December 31, 1994.
Consolidated Statements of Operations - Year Ended December
31, 1995, Transition Period ended December 31, 1994, Fiscal
Years ended June 24, 1994 and June 25, 1993.
Consolidated Statements of Stockholders' Equity - Year Ended
December 31, 1995, Transition Period ended December 31, 1994,
Fiscal Years ended June 24, 1994 and June 25, 1993.
Consolidated Statements of Cash Flows - Year Ended December
31, 1995, Transition Period ended December 31, 1994, Fiscal
Years ended June 24, 1994 and June 25, 1993.
Notes to Consolidated Financial Statements.
- 30 -
<PAGE> 31
Financial Statement Schedules - All schedules for which
provision is made in the applicable accounting regulations of
the SEC are not required under the related instructions or are
applicable, and therefore have been omitted.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
(c) Exhibits - The following exhibits are included herein or are incorporated
by reference:
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession
2.1 Asset Purchase Agreement dated as of March 21, 1995
between the Company and Mabon Securities Corp. -
Incorporated by reference to Exhibit 2.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1995.
(3) Certificate of Incorporation and By-Laws
3.1 Certificate of Incorporation - Incorporated by reference
to Exhibit 3.1 of the Company's Annual Report on Form
10-K for the year ended June 24, 1994.
3.2 By-Laws.
(4) Instruments Defining the Rights of Security Holders
4.1 Certificate of Designations of Rights, Privileges and
Restrictions of Series B Non-Voting Convertible Preferred
Stock.
(10) Material Contracts (Asterisk indicates management contracts
or compensatory plans or arrangements)
10.1 Rodman & Renshaw Capital Group, Inc. Non-Employee
Director Stock Option Plan - Incorporated by reference to
Exhibit A to the Company's Proxy Statement dated April 5,
1994.*
10.2 Rodman & Renshaw Capital Group, Inc. 1994 Stock Option
Plan - Incorporated by reference to Exhibit B to the
Company's Proxy Statement dated April 25, 1994.*
10.3 Lease Agreement dated October 20, 1980 - Incorporated by
reference to Exhibit 10.3 to the Company's Form S-1
Registration Statement (Reg. No. 33-4649), which became
effective on May 29, 1986.
10.4 Deferred Compensation Plan (dated January 1, 1993) -
Incorporated by reference to Exhibit 10(b) of the
Company's Annual Report on Form 10-K for the year ended
June 25, 1993.*
10.5 Deferred Compensation Trust (dated January 1, 1993) -
Incorporated by reference to Exhibit 10(c) of the
Company's Annual Report on Form 10-K for the year ended
June 25, 1993.*
10.6 Supplemental Executive Retirement Plan (dated January 1,
1993) - Incorporated by reference to Exhibit 10(d) of the
Company's Annual Report on Form 10-K for the year ended
June 25, 1993 and Exhibit 5 to the Company's Schedule
14D-9 dated November 23, 1993.*
- 31 -
<PAGE> 32
10.7 Supplemental Executive Retirement Trust (dated January 1,
1993) - Incorporated by reference to Exhibit 10(e) of the
Company's Annual Report on Form 10-K for the year ended
June 25, 1993.*
10.8 Stock Purchase Agreement dated December 21, 1995 between
the Company and Abaco.
10.9 Promissory Note from the Company to Confia, S.A. dated
December 4, 1995.
10.10 Employment agreement between the Company and Charles W.
Daggs, III, dated April 11, 1994 - Incorporated by
reference to Exhibit 10.10 of the Company's Annual Report
on Form 10-K for the year ended June 24, 1994.*
10.11 Employment agreement between Rodman & Renshaw, Inc. and
David H. Shulman dated February, 1994 - Incorporated by
reference to Exhibit 10.11 of the Company's Annual Report
on Form 10-K for the year ended June 24, 1994.*
10.12 Employment agreement between the Company and F.L. Kirby
dated June 20, 1994 - Incorporated by reference to
Exhibit 10.12 of the Company's Annual Report on Form 10-K
for the year ended June 24, 1994.*
10.13 Acquisition Agreement dated as of November 17, 1993 among
the Company, Abaco and Parent - Incorporated by reference
to Exhibit (c)(1) to Schedule 14D-1 of Abaco and Parent
filed by EDGAR on January 18, 1994.
10.14 Lease between Tower Leasing, Inc. and the Company -
Incorporated by reference to Exhibit 10.14 of the
Company's Annual Report on Form 10-K for the Transition
Period from June 25, 1995 through December 31, 1995.
10.15 First Amendment to the Rodman & Renshaw, Inc.
Supplemental Executive Retirement Plan - Incorporated by
reference to Exhibit 10.15 of the Company's Annual Report
on Form 10-K for the Transition Period from June 25, 1995
through December 31, 1995.*
10.16 Form of Option Agreement executed by recipients of
options under the Rodman & Renshaw Capital Group, Inc.
Non-Employee Director Stock Option Plan.*
10.17 Form of Option Agreement executed by recipients of
options under the Rodman & Renshaw Capital Group, Inc.
1994 Stock Option Plan.*
10.18 Employment Agreement dated as of March 16, 1995 between
Rodman & Renshaw, Inc. and Peter Boneparth -Incorporated
by reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1995.*
10.19 Employment Agreement dated as of April 1, 1995 between
Rodman & Renshaw, Inc. and Edwin J. McGuinn, Jr. -
Incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995.*
10.20 Master Lease Agreement dated May 31, 1995 between the
Company and Facility Capital Corporation and amendment
dated October 24, 1995.
10.21 Clearing Agreement dated September 15, 1995 between
Rodman & Renshaw, Inc. and Correspondent Services
Corporation.
- 32 -
<PAGE> 33
10.22 Note Conversion Agreement between the Company and Confia,
S.A. dated September 29, 1995 - Incorporated by reference
to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
10.23 Amendment No. 1, dated November 10, 1995, to Note
Conversion Agreement between the Company and Confia, S.A.
(21) Subsidiaries of the Registrant
------------------------------
21.1 Subsidiaries of the Registrant.
(23) Consents of Experts and Counsel
-------------------------------
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP.
(27) Financial Data Schedule
-----------------------
27.1 Financial Data Schedule.
- 33 -
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RODMAN & RENSHAW CAPITAL GROUP, INC.
By:/s/ Charles W. Daggs, III
-------------------------
Charles W. Daggs, III
President and Chief
Executive Officer
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Charles W. Daggs, III President, Chief Executive Officer, and March 28, 1996
------------------------- Director (Principal Executive Officer)
Charles W. Daggs, III
/s/ John T. Hague Chief Financial Officer (Principal March 28, 1996
----------------- Financial Officer and Accounting
John T. Hague Officer)
/s/ Alexander C. Anderson Director March 28, 1996
-------------------------
Alexander C. Anderson
/s/ Ernesto Arechavala Director March 28, 1996
----------------------
Ernesto Arechavala
/s/ Peter Boneparth Director March 28, 1996
-------------------
Peter Boneparth
/s/ Eduardo Camarena Legaspi Director March 28, 1996
----------------------------
Eduardo Camarena Legaspi
/s/ Jorge Antonio Garcia Garza Director March 28, 1996
------------------------------
Jorge Antonio Garcia Garza
/s/ Francis L. Kirby Director March 28, 1996
--------------------
Francis L. Kirby
/s/ Jorge Lankenau Rocha Director March 28, 1996
------------------------
Jorge Lankenau Rocha
/s/ Edwin J. McGuinn, Jr. Director March 28, 1996
-------------------------
Edwin J. McGuinn
</TABLE>
- 34 -
<PAGE> 35
<TABLE>
<S> <C> <C>
/s/ Thomas E. Meade Director March 28, 1996
-------------------
Thomas E. Meade
/s/ Rodrigo Padilla Director March 28, 1996
-------------------
Rodrigo Padilla
/s/ Richard Pigott Director March 28, 1996
------------------
Richard Pigott
/s/ Keith F. Pinsoneault Director March 28, 1996
------------------------
Keith F. Pinsoneault
/s/ Federico Richard Lamas Director March 28, 1996
--------------------------
Federico Richard Lamas
/s/ David S. Ruder Director March 28, 1996
------------------
David S. Ruder
/s/ Joseph P. Shanahan Director March 27, 1996
----------------------
Joseph P. Shanahan
</TABLE>
- 35 -
<PAGE> 36
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- - - - ----------------------------------------------------------------------
PAGE
REPORTS OF INDEPENDENT ACCOUNTANTS F-2
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION F-4
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
F-1
<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Rodman & Renshaw Capital Group, Inc.:
We have audited the accompanying consolidated statements of financial
condition of Rodman & Renshaw Capital Group, Inc. (the "Company," a
majority-owned subsidiary of Abaco Casa de Bolsa, S.A. de C.V., Abaco Grupo
Financiero) and subsidiaries as of December 31, 1995 and December 31, 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year ended December 31, 1995 and the six month transition
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company and its subsidiaries as of December 31, 1995 and December 31,
1994, and the results of their consolidated operations and cash flows for the
year ended December 31, 1995 and the six month transition period ended December
31, 1994, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
February 26, 1996, except as to the information
presented in Note 18, for which the date is March 29, 1996
F-2
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Rodman & Renshaw Capital Group, Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Rodman & Renshaw Capital Group, Inc.
(the "Company," a majority-owned subsidiary of Abaco Casa de Bolsa, S.A. de
C.V., Abaco Grupo Financiero) and subsidiaries for each of the two fiscal years
in the period ended June 24, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the results of operations and cash flows of the
Company and its subsidiaries for each of the two fiscal years in the period
ended June 24, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, in
fiscal 1993, the Company and its subsidiaries changed their methods of
accounting for commission revenues and expenses for commodity transactions
executed for introducing brokers and for income taxes.
/S/ Deloitte & Touche LLP
Chicago, Illinois
August 19, 1994
F-3
<PAGE> 39
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands except share amounts)
<TABLE>
<CAPTION>
- - - - ------------------------------------------------------------------------------------------------------------------------
December 31, December 31
1995 1994
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 9,001 $ 7,011
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL 2,204 35,054
CASH AND SHORT-TERM INVESTMENTS REQUIRED TO BE SEGREGATED UNDER FEDERAL
REGULATIONS (including reverse repurchase agreements: 1994 - $35,200) 7,398 39,215
RECEIVABLES
Customers 49,544 47,036
Brokers, dealers, and clearing organizations 16,298 155,408
SECURITIES OWNED - At market 16,489 144,500
MEMBERSHIPS IN SECURITIES AND COMMODITIES EXCHANGES-
At cost (market value: 1995 - $1,219; 1994 - $6,227) 272 3,850
FURNITURE, FIXTURES, AND LEASEHOLD IMPROVEMENTS-
At cost, less accumulated depreciation and amortization (1995 - $5,132; 1994 - $5,554) 8,560 2,298
PREPAID EXPENSES AND OTHER ASSETS 9,567 15,820
RECOVERABLE INCOME TAXES - 1,379
DEFERRED INCOME TAXES (Net of valuation allowance: 1995 - $17,059; 1994 - $5,246) - 2,760
-------- --------
TOTAL ASSETS $ 119,333 $454,331
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
SHORT-TERM BORROWINGS FROM BANKS $ 30,672 $ 54,331
SHORT-TERM NOTE PAYABLE TO AFFILIATE 26,500 10,000
PAYABLES:
Customers 18,914 89,878
Brokers, dealers, and clearing organizations 13,549 158,151
SECURITIES SOLD BUT NOT YET PURCHASED - At market 4,964 97,844
2,155 2,066
ACCRUED COMMISSIONS 21,136 11,762
-------- --------
117,890 424,032
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
COMMITMENTS AND CONTINGENCIES (NOTE 13)
LIABILITIES SUBORDINATED TO THE CLAIMS OF GENERAL CREDITORS - 3,874
STOCKHOLDERS' EQUITY:
Convertible non-voting preferred stock $.01 par value, 5,000,000 shares authorized;
shares issued: 1995 - 50 shares Series B; 1994 - 150 shares Series A - -
Common stock, $.09 par value; 20,000,000 shares authorized;
shares issued: 1995 - 6,646,000; 1994 - 4,577,000 598 412
Additional paid-in capital 35,749 30,935
Accumulated deficit (34,904) (4,922)
-------- --------
1,443 26,425
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 119,333 $454,331
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 40
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
- - - - ------------------------------------------------------------------------------------------------------------------
SIX MONTH TRANSITION
YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 24, JUNE 25,
1995 1994 1994 1993
<S> <C> <C> <C> <C>
REVENUES:
Commissions $ 24,879 $ 11,870 $ 29,158 $ 38,718
Principal 26,628 7,033 27,313 32,216
Interest 10,137 7,872 9,213 10,558
Fee income 8,065 3,876 7,598 3,145
Other 2,816 1,543 4,035 2,672
---------- ---------- ---------- ----------
Total revenues 72,525 32,194 77,317 87,309
EXPENSES:
Employee compensation and benefits 57,872 21,886 50,054 50,088
Commissions, floor brokerage, and clearing 4,004 2,328 7,141 8,721
Interest 10,217 5,933 5,714 7,135
Communications 8,865 3,180 6,063 6,803
Occupancy and equipment 8,360 2,993 5,949 6,461
Professional fees 4,825 763 5,227 2,710
Other operating expenses 5,398 1,443 10,785 4,843
Restructuring charge - - 3,815 -
---------- ---------- ---------- ----------
Total expenses 99,541 38,526 94,748 86,761
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES (27,016) (6,332) (17,431) 548
INCOME TAX EXPENSE (BENEFIT) 2,966 (2,168) (930) 310
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES (29,982) (4,164) (16,501) 238
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES - - - 18
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (29,982) $ (4,164) $ (16,501) $ 256
========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE DATA:
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES $ (4.63) $ (0.91) $ (3.69) $ 0.06
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES - - - -
---------- ---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE $ (4.63) $ (0.91) $ (3.69) $ 0.06
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,470,000 4,577,000 4,472,000 4,366,000
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 41
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
- - - - -----------------------------------------------------------------------------------------------------------------------
RETAINED
ADDITIONAL EARNINGS
PREFERRED COMMON PAID-IN (ACCUMULATED
STOCK STOCK CAPITAL DEFICIT) TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 26, 1992 $ $ 393 $ 14,738 $ 15,487 $ 30,618
Net income for the year 256 256
Proceeds from issuance of
7,200 shares of common
stock in connection with
employee stock option plan 36 36
---------- --------- ---------- ---------- ---------
BALANCE, JUNE 25, 1993 393 14,774 15,743 30,910
Net loss for the year (16,501) (16,501)
Proceeds from issuance of
204,920 shares of common
stock in connection with
employee stock option plan 19 1,161 1,180
Proceeds from issuance of
150 shares of convertible
non-voting preferred
stock, Series A, $.01 par value 15,000 15,000
---------- --------- ---------- ---------- ---------
BALANCE, JUNE 24, 1994 412 30,935 (758) 30,589
Net loss for the transition period (4,164) (4,164)
---------- --------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1994 412 30,935 (4,922) 26,425
Net loss for the year (29,982) (29,982)
Conversion of 150 shares of
convertible non-voting
preferred stock, Series A,
$.01 par value to 2,068,965
shares of common stock 186 (186)
Proceeds from issuance of
50 shares of convertible
non-voting preferred
stock, Series B, $.01 par value 5,000 5,000
---------- --------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1995 $ - $ 598 $ 35,749 $ (34,904) $ 1,443
========== ========= ========== ========== =========
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE> 42
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------------------------------------------------------
SIX MONTH TRANSITION
YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 24, JUNE 25,
1995 1994 1994 1993
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (29,982) $ (4,164) $(16,501) $ 256
Adjustment to reconcile net income (loss) to net cash flows
provided by (used in) operating activities:
Write-off of furniture, fixtures and leasehold improvements 748
Loss on sale of furniture, fixtures and leasehold improvements 219
Gain on sale of commodity exchange memberships and related assets (1,183) (696) (2,551) (172)
Deferred income taxes 2,760 (2,182) (171) (686)
Depreciation and amortization 1,362 378 988 1,093
Net changes in operating assets and liabilities:
Securities purchased under agreements to resell 32,850 (21,631) (13,423)
Cash and short-term investments required to be
segregated under federal regulations 31,817 (2,378) 25,962 (19,611)
Receivables from and payables to customers, brokers,
dealers and clearing organizations (78,964) 36,812 (9,575) 16,192
Securities owned 128,011 (103,564) 75 (7,032)
Prepaid expenses and other assets 6,253 (5,037) 2,168 (1,777)
Recoverable income taxes and income taxes payable 1,379 600 (1,617) (73)
Securities sold but not yet purchased (92,880) 84,056 (1,963) 5,448
Accrued commissions 89 351 (679) 64
Accounts payable and accrued expenses 3,272 (4,333) 6,304 (972)
--------- --------- -------- -------
Net cash flows provided by (used in) operating activities 5,003 (21,788) (10,235) (7,270)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture, fixtures, and leasehold improvements (1,922) (689) (438) (1,302)
Sales of furniture, fixtures and leasehold improvements 181 324
Purchases of memberships in security and commodity exchanges (11)
Sales of commodity exchange memberships and related assets 4,761 700 3,846 387
--------- --------- -------- -------
Net cash flows provided by (used in) investing activities 3,020 11 3,732 (926)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings from banks (23,659) 31,089 (18,973) 8,312
Increase in short-term note payable to affiliate 16,500 10,000
Proceeds from issuance of notes subordinated to claims of
general creditors 4,500
Payments of notes subordinatd to claims of general creditors (3,874) (2,876) (1,250) (5,000)
Proceeds from issuance of common stock in connection with
stock option plan 1,180 36
Proceeds from issuance of convertible non-voting preferred 5,000 15,000
stock --------- --------- -------- -------
Net cash flows provided by (used in) financing activities (6,033) 28,213 5,957 7,848
--------- --------- -------- -------
Net increase (decrease) in cash and cash equivalents 1,990 6,436 (546) (348)
Cash and cash equivalents - Beginning of period 7,011 575 1,121 1,469
--------- --------- -------- -------
Cash and cash equivalents - End of period $ 9,001 $ 7,011 $ 575 $ 1,121
========= ========= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 10,453 $ 4,939 $ 5,720 $ 7,135
========= ========= ======== =======
Cash paid for income taxes $ 26 $ 15 $ 824 $ 1,006
========= ========= ======== =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY:
A capital lease obligation of $6,102 was incurred when the Company entered into
a lease to acquire new furniture and equipment.
See notes to consolidated financial statements.
F-7
<PAGE> 43
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995, TRANSITION PERIOD
ENDED DECEMBER 31, 1994, AND FISCAL YEARS ENDED
JUNE 24, 1994, AND JUNE 25, 1993
- - - - --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts and transactions of Rodman & Renshaw Capital Group, Inc.
(the "Company") and its subsidiaries, all of which are wholly owned, including
Rodman & Renshaw, Inc. ("Rodman"), the Company's principal subsidiary, which
is a registered broker-dealer and futures commission merchant. All significant
intercompany balances and transactions have been eliminated in consolidation.
The Company's majority stockholder, Abaco Casa de Bolsa, S.A. de C.V., Abaco
Grupo Financiero ("Abaco"), is a brokerage subsidiary of Abaco Grupo
Financiero, S.A. de C.V. ("Abaco Grupo"). Abaco Grupo is a multi-faceted
financial services holding company based in Monterrey, Mexico. Abaco acquired
its majority interest in the Company through a tender offer for common shares
completed on December 22, 1993.
FISCAL YEAR - In 1994, the Company changed its fiscal year from the last
Friday in June to a calendar year end.
REVENUE RECOGNITION - Effective December 31, 1994, the Company changed
the method for recording purchases and sales of securities and the related
commission revenues and expenses from the settlement date basis to the trade
date basis to be in accordance with industry accounting principles. The effect
of utilizing the settlement date basis, as compared to the trade date basis, in
prior periods was not material. The cumulative effect of this change as of
June 25, 1994 and the effect of adopting this change on the net loss for the
six month transition period ended December 31, 1994 was not material. Commodity
transactions and resulting gains and losses are recorded on a trade date basis.
Commission revenues and expenses related to customers' commodity transactions
are recognized on a half-turn transaction basis. Investment banking revenue is
recorded as follows: management fees on offering date, sales concessions on
settlement date, and underwriting fees at the time the underwriting is
completed.
CASH AND CASH EQUIVALENTS - The Company considers unrestricted cash and
firm-owned investments with maturities of three months or less when purchased
to be cash and cash equivalents.
REVERSE REPURCHASE AGREEMENTS AND REPURCHASE AGREEMENTS - Securities
purchased under agreements to resell and securities sold under agreements to
repurchase are financing transactions which are collateralized by negotiable
securities and are carried at the amounts at which the securities will be
subsequently resold or repurchased, including accrued interest. The Company's
policy is to take possession of securities purchased under agreements to
resell. The Company monitors daily the market value of the underlying
securities acquired or delivered as compared to the contract amounts of the
resale or repurchase agreements including accrued interest. The Company
requires the prompt transfer of additional securities to mitigate any
material collateral deficiencies.
SECURITIES OWNED - Securities owned and securities sold but not yet purchased
are recorded at market value. Unrealized gains and losses are included in
revenues.
F-8
<PAGE> 44
FURNITURE, FIXTURES AND LEASEHOLD IMPROVEMENTS - Furniture,
fixtures and leasehold improvements are reported at cost, net of
accumulated depreciation and amortization. Furniture and fixtures are
depreciated using the straight-line method over the estimated useful
lives of the assets, generally three to fifteen years. Leasehold
improvements are amortized using the straight-line method over the
lesser of the estimated useful lives of the improvements or the
noncancelable period of the related lease.
INCOME TAXES - The Company and its subsidiaries file a
consolidated federal income tax return. The Company accounts for
income taxes under the provisions of the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires that an asset and liability approach be applied
and that deferred tax assets be adjusted currently using tax rates
expected to be in effect when taxes are estimated to be paid or
recovered on the reversal of timing differences.
EARNINGS (LOSS) PER SHARE - Earnings (loss) per share of common
stock is based on the weighted average number of shares outstanding
during each respective period. The effect of common stock
equivalents, including stock options and convertible preferred stock,
are anti-dilutive.
RECLASSIFICATIONS - Certain reclassifications have been made to
prior years' amounts to conform with current year presentations.
MANAGEMENT ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. ACCOUNTING CHANGES
In the first quarter of fiscal 1993, the Company implemented the
accounting changes described below:
The Company changed its method of accounting for commission
revenue and expenses for commodity transactions executed for
introducing brokers. The net commission retained by the Company was
recorded as revenue. Previously, the entire amount of commission
charged to customers on introducing broker transactions was recognized
as revenue, and amounts rebated to introducing brokers were recorded
as commission expense. The Company believes that the change better
reflects the economic services provided in introducing brokers'
activities. The change did not affect net income.
The Company adopted SFAS 109 and recorded an $18,000 cumulative
benefit in 1993.
3. RESTRUCTURING CHARGE
In the fourth quarter of fiscal 1994, the Company recorded a
restructuring charge of $3,815,000 related to the Company's decision
to move from its office space at its Chicago and New York premises.
This nonrecurring charge includes a write-off of leasehold
improvements and charges for future obligations on noncancelable
occupancy leases (net of rent abatement liability), lease termination
penalties and anticipated moving costs.
Included in the restructuring charge is the noncash write-off
of leasehold improvements totaling $568,000. Restructuring charges
for obligations on noncancelable occupancy leases, lease termination
penalties and anticipated moving costs relate to future cash outflows.
Accrued expenses at December 31, 1995, include $817,000 for lease
termination costs payable in 1996.
F-9
<PAGE> 45
4. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Rodman is a party to reverse repurchase agreements with various
financial institutions to enhance yields on amounts required to be
segregated under federal regulations or to meet the financing needs of
certain securities sold but not yet purchased transactions.
At December 31, 1995, the reverse repurchase agreement of $2,204,000
earns interest at a rate of 7.50%, and is collateralized by a U.S. Treasury
note with an approximate market value of $2,205,000. At December 31, 1994,
reverse repurchase agreements of $35,054,000, earned interest at rates
ranging from 4.50% to 5.25%, and were collateralized by U.S. Treasury notes
with an approximate market value of $35,081,000.
5. ASSETS SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS
Rodman is required under the Commodity Exchange Act and the Securities
Exchange Act of 1934 (the "Acts") to account for and segregate all customer
related assets, as defined by the Acts, in connection with regulated
commodities and securities transactions. Rodman has placed into a
segregated safekeeping account $1,664,000 and $83,370,000 of securities
owned by commodities customers as of December 31, 1995 and December 31,
1994, respectively. These securities are not included in the statement of
financial condition. At December 31, 1995, Rodman was in compliance with
the segregation requirements of the Commodity Exchange Act and has excess
segregated funds of $436,000.
At December 31, 1994, reverse repurchase agreements totaling
$35,200,000 earned interest at rates ranging from 5.30% to 5.50%, were
collateralized by U.S. Treasury notes and bonds with an approximate market
value of $35,213,000, and were held in a designated safekeeping account
pursuant to Commodity Futures Trading Commission (the "CFTC")
segregation requirements.
6. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS, AND CLEARING
ORGANIZATIONS
The components of receivables from and payables to brokers, dealers,
and clearing organizations, are as follows:
<TABLE>
<S> <C> <C>
1995 1994
Receivables:
Receivables from brokers and dealers
(net trade date accrual) $ 0 $ 63,813,000
Securities borrowed 4,988,000 46,510,000
Securities failed to deliver 3,253,000 6,490,000
Clearing organizations
and commodity carrying brokers 7,669,000 38,595,000
Other 388,000 0
----------- ------------
Total $16,298,000 $155,408,000
=========== ============
Payables:
Payables to brokers and
dealers (net trade date accrual) $ 2,469,000 $ 0
Securities loaned 8,443,000 151,802,000
Securities failed to receive 2,632,000 6,243,000
Clearing organizations 5,000 106,000
----------- ------------
Total $13,549,000 $158,151,000
=========== ============
</TABLE>
F-10
<PAGE> 46
7. SECURITIES
Securities owned and securities sold but not yet purchased are
recorded at market value, except for limited partnerships, and are
comprised of:
<TABLE>
<CAPTION>
1995 1994
Sold But Sold But
Not Yet Not Yet
Owned Purchased Owned Purchased
<S> <C> <C> <C> <C>
Bank notes $ 0 $ 22,000 $ 1,926,000 $ 22,000
Corporate debt securities 2,864,000 1,071,000 50,861,000 14,488,000
Equity securities 3,532,000 1,625,000 10,752,000 1,949,000
State and municipal
obligations 9,452,000 46,000 5,847,000 87,000
United States and Canadian
government and agency 1,009,000 2,200,000 75,498,000 81,298,000
obligations
Limited partnerships (368,000) (384,000)
------------- ------------ ------------ -----------
Total $ 16,489,000 $4,964,000 $ 144,500,000 $97,844,000
============ ========== ============= ===========
</TABLE>
Investments in limited partnerships (some of which are general
partnership interests) are recorded at cost, except for those
partnerships in which the Company exercises significant influence. Such
investments are recorded on the basis of the Company's equity therein.
8. SHORT-TERM BORROWINGS FROM BANKS
To finance the purchase of securities by customers on margin and
purchases for its own account, Rodman borrows from commercial banks.
Interest on the borrowings is paid at or below the broker call rate,
which at December 31, 1995 was 7.25%. At December 31, 1995, total
borrowings of $30,672,000 were collateralized by approximately
$15,190,000 of Rodman-owned securities and $37,853,000 of
customer-owned securities. At December 31, 1994, total borrowings of
$54,331,000 were collateralized by approximately $39,232,000 of
Rodman-owned securities, $23,996,000 of customer-owned securities and
$4,372,000 of other assets. The weighted average interest rate on
short-term borrowings, including the short-term note payable to
affiliate, as of December 31, 1995 and December 31, 1994 was 8.9% and
8.0%, respectively.
9. SHORT-TERM NOTE PAYABLE TO AFFILIATE
During 1994, the Company entered into two successive six-month
note agreements with Confia, S.A., Institucion de Banca Multiple, Abaco
Grupo Financiero ("Confia"), a wholly owned subsidiary of Abaco Grupo,
for $10,000,000 with an interest rate of 11.5% for the six month period
ended December 19, 1994, and 13.5% for the six month period ended
June 19, 1995.
During 1995 the Company entered into additional six month note
agreements with Confia. These agreements and the $10,000,000 agreement
discussed above were aggregated into a single note agreement on
December 4, 1995, for $26,500,000 with an interest rate of 12% and a
maturity date of June 3, 1996. In September 1995, the Company entered
into a note conversion agreement with Confia pursuant to which Confia
has the right to convert all or a portion of this debt to equity. The
number of shares to be issued upon conversion would be determined by
dividing the amount of debt to be converted by the book value per share
of the common stock as of the end of the Company's most recent fiscal
quarter. The conversion is allowable only with stockholder approval or
in conjunction with a rights offering to all stockholders.
F-11
<PAGE> 47
Interest expense on these borrowings totaled $2,200,000 and
$607,000 for the year ended December 31, 1995, and the transition
period ended December 31, 1994, respectively.
The aggregate amount was loaned by the Company to Rodman under
a subordinated revolving credit facility and subordinated note
agreement as follows:
Subordinated revolving note, interest
payable semi-annually at 9% per annum
(the "Revolving Notes") $21,500,000
Subordinated note, interest payable
semi-annually at 9% per annum
(the "Subordinated Note") 5,000,000
-----------
Total $26,500,000
===========
All of the Rodman borrowings are covered by agreements approved
by the New York Stock Exchange, Inc. (the "NYSE"), and the National
Futures Association, and are available for Rodman in computing
adjusted net capital under the uniform net capital rule of the
Securities and Exchange Commission (the "SEC"). To the extent that
such borrowings are required for Rodman's continued compliance with
minimum net capital requirements, they may not be repaid. The rights
of the Company to receive any payment from Rodman under the terms of
the borrowings are subordinated to the claims of all present and
future creditors of Rodman which arise prior to maturity.
Rodman has obtained a senior subordinated revolving credit
facility, amended November 10, 1995, with the Company, which
terminates on June 15, 1997, aggregating $25,000,000 pursuant to which
the Revolving Notes have been executed. The facility requires that
all indebtedness thereunder be repaid by June 15, 1998. As of
December 31, 1995, $21,500,000 has been borrowed under this facility.
This facility includes covenants that require, among other things,
that Rodman maintain capital and financial requirements, as defined in
the agreement.
The Subordinated Note is due on November 30, 1998.
In January 1996, Rodman converted $5,000,000 borrowed under the
senior subordinated revolving credit facility to a subordinated note
with a stated maturity date of January 31, 1999.
10. PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of $0.01
par value per share preferred stock. On June 24, 1994, the Company
issued 150 shares of Series A Non-voting Convertible Preferred Stock,
(the "Series A Stock") at $100,000 per share to Abaco. On January 31,
1995, upon the approval by the stockholders of the Company, the Series
A Stock was converted into 2,068,965 shares of common stock. For the
period beginning December 30, 1994, to the date of the conversion,
each share of the preferred stock was entitled to receive quarterly
cash dividends at a rate based on the Prime Rate plus two percent per
annum. Abaco waived the right to such dividends for the period
from December 30, 1994, to January 31, 1995.
On December 22, 1995, the Company issued 50 shares of Series B
Non-Voting Convertible Preferred Stock (the "Series B Stock") at
$100,000 per share to Abaco. The Series B Stock will automatically
convert into common stock upon the Company's commencement of a rights
offering to all stockholders. In a conversion, the $5,000,000
aggregate purchase price of the Series B Stock will be divided by the
book value per share of common stock as of the end of the previous
month to determine the number of common shares
F-12
<PAGE> 48
to be issued to Abaco (provided, however, that if such book value per
share were equal to or less than $.09, which is the par value per
share of the common stock, the denominator would be $.09). After
September 30, 1996, if the conversion has not occurred, each share of
Series B Stock will pay quarterly cash dividends at a rate based on
the Prime Rate plus two percent per annum.
Dividends on the Series B Stock are cumulative and payable when
declared by the Company's Board of Directors. No cash dividends or
distribution upon liquidation may be paid on the Company's common
stock if dividends or required redemptions of Preferred Stock are in
arrears.
11. STOCK OPTIONS
The Company's stock option plans provide for the granting of options
to officers, directors, nonemployee directors, and employees to
purchase shares of common stock at not less than market value on the
date of grant. All options expire no later than ten years from the
date of grant. Prior to June 24, 1993, the Company had also granted
non-qualified stock options. A summary of stock option activity
follows:
<TABLE>
<CAPTION>
Qualified Nonqualified
------------------- --------------------
Number Per Share Number Per Share
of Option of Option
Shares Price Shares Price
<S> <C> <C> <C> <C>
Outstanding at
June 26, 1992 997,440 $5.00-$8.00 42,800 $5.00-$7.50
Granted 311,775 5.00- 6.38 71,275 5.00- 6.38
Canceled (194,300) 5.00- 8.00 (37,400) 5.00- 7.50
Exercised (7,200) 5.00- 5.00 -
---------- --------
Outstanding at
June 25, 1993 1,107,715 5.00- 7.00 76,675 5.00- 6.38
Granted 121,500 5.00- 6.92 166,050 5.63- 5.63
Canceled (692,770) 5.00- 7.00 (83,780) 5.00- 6.13
Exercised (204,820) 5.00- 6.38 (100) 5.00- 5.00
---------- --------
Outstanding at
June 24, 1994 331,625 5.00- 6.50 158,845 5.00- 6.38
Granted - 38,500 5.13- 5.38
Canceled (91,680) 5.00- 6.18 (40,550) 5.00- 6.38
Reclassified (100,000) 6.50- 6.50 100,000 6.50- 6.50
--------- --------
Outstanding at
December 31, 1994 139,945 5.00- 6.00 256,795 5.00- 6.50
Granted 797,000 2.00- 2.00 47,500 4.13- 4.50
Canceled (82,985) 5.00- 5.13 (69,105) 5.00- 5.63
--------- --------
Outstanding at
December 31, 1995 853,960 $2.00-$6.00 235,190 $4.13-$6.50
======== =======
</TABLE>
Options outstanding at December 31, 1995, are exercisable at an
average price of $2.95.
F-13
<PAGE> 49
Effective June 30, 1993, the Company granted an aggregate of 166,050
nonqualified stock options to certain employees, 42,050 of which
remained outstanding at December 31, 1995. These nonqualified
options were not granted pursuant to a stock option plan.
In the fiscal year ended June 24, 1994, the Company's Board of
Directors and stockholders approved the 1994 Stock Option Plan,
pursuant to which the Company may issue nonqualified or qualified
options. There were 797,000 qualified and 25,000 nonqualified stock
options granted under this plan during the year ended December 31,
1995. As of December 31, 1995, there were 62,000 unoptioned shares
reserved and available for grant. Options granted under this plan
expire no later than ten years from the date of grant.
In the fiscal year ended June 24, 1994, the Company's Board of
Directors and stockholders approved the nonqualified Nonemployee
Director Stock Option Plan. There were 22,500 stock options granted
under this plan during the year ended December 31, 1995, and 355,000
unoptioned shares reserved and available for grant as of December 31,
1995. Options granted under this plan expire ten years from the date
of grant.
Pursuant to the Acquisition Agreement with Abaco, certain employees
canceled stock options which were exercisable prior to the Tender
Closing Date in consideration of the payment by the Company of an
amount equal to the excess of $10.50 over the per share exercise
price of such options, multiplied by the number of options
exercisable. The cancellation of 445,240 shares of stock options
resulted in the payment of $2,027,000 which was recorded as employee
compensation expense in the fiscal year ended June 24, 1994.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FASB 123"). FASB 123, which becomes
effective in 1996, encourages the adoption of a fair value based
method of accounting for stock-based compensation plans. The Company
has elected to continue to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
Applying APB 25, the Company has not recognized compensation expense
because the exercise price of the Company's employee stock options
equals or exceeds the market price of the underlying stock on the
date of grant.
12. NET CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS
As a registered broker-dealer and futures commission merchant,
Rodman is subject to the minimum net capital rules of the SEC (Rodman
has elected to use the alternative net capital method permitted by
these rules), the CFTC, and the NYSE, of which Rodman is a member.
These rules require that Rodman maintain minimum net capital, as
defined, equal to the greater of 2% of aggregate debits arising from
securities customer transactions or $1,000,000, or 4% of the funds
required to be segregated for commodities customers pursuant to the
Commodity Exchange Act. The NYSE may require a member firm to reduce
its business if its net capital is less than the greater of $125,000
or 6% of the funds required to be segregated and may prohibit a
member firm from expanding its business or paying cash dividends if
resulting net capital would be less than the greater of $150,000
or 7% of the funds required to be segregated.
At December 31, 1995, Rodman's net capital, as defined, was
$15,402,000, which was $14,291,000 in excess of the required net
capital.
In February 1996, Rodman's net capital requirement pursuant to these
rules will be reduced to the greater of $250,000 or 4% of the funds
required to be segregated for commodities customers. See Note 18.
F-14
<PAGE> 50
13. COMMITMENTS AND CONTINGENCIES
The Company and Rodman lease office space and certain equipment under
operating and financing leases. Leases for office facilities are
subject to escalation factors based on the operating experience of
the lessor. The capitalized lease obligation is included in accounts
payable and accrued expenses in the consolidated statement of
financial condition. This obligation is collateralized by a letter
of credit provided by Confia.
At December 31, 1995, future minimum lease payments under
noncancelable operating and financing leases with terms in excess of
one year are as follows:
1996 $3,684,000
1997 3,527,000
1998 3,484,000
1999 3,327,000
2000 3,029,000
2001 and thereafter 14,210,000
----------
Total minimum lease payments $31,261,000
===========
The aggregate annual rentals charged to operations were $3,232,000 in
the year ended December 31, 1995, $1,011,000 in the transition period
ended December 31, 1994, $2,656,000 in fiscal 1994, and $2,527,000 in
fiscal 1993.
At December 31, 1995, Rodman has a $2,250,000 letter of credit issued
by a bank which satisfies exchange margin requirements and is
collateralized by customer-owned securities with a market value of
$3,520,000. In February 1996, this letter of credit was cancelled.
Rodman, together with various other broker-dealers,
corporations, and individuals, has been named as a defendant in
several class action lawsuits that allege violations of federal and
state securities laws, and claim substantial damages. Rodman is also
a defendant in other pending civil actions, arbitration proceedings
and claims incidental to its securities and commodities business. The
ultimate outcome of these matters cannot be predicted with certainty.
In the opinion of management of the Company, after consultation with
outside legal counsel, the ultimate resolution of these matters will
not have a material adverse effect on the Company's financial
position.
14. BENEFIT PLANS
Rodman established a defined-contribution Retirement Savings Plan
(the "Savings Plan") on July 1, 1990, available to employees with one
year and a minimum of 1,000 hours of service. Under the
Savings Plan, Rodman matches employee contributions up to 25 percent
of an employee's before-tax contributions. Rodman's matching
contributions were $214,000 in the year ended December 31, 1995,
$66,000 in the transition period ended December 31, 1994, $153,000 in
fiscal 1994, and $145,000 in fiscal 1993.
On January 1, 1993, Rodman adopted the Supplemental Executive
Retirement Plan (the "SERP") and the Deferred Compensation Plan (the
"DCP"), retroactively to June 27, 1992. The SERP and DCP cover
designated senior employees. Under the DCP, eligible employees may
elect to defer compensation up to a maximum of 60% of base
compensation and 100% of annual bonus. The minimum contribution is
$200 per month. Contributions to the DCP are fully vested and
nonforfeitable.
F-15
<PAGE> 51
The SERP is a nonqualified, discretionary retirement plan. Rodman
contributions to the SERP are determined annually, at Rodman's
discretion based upon eligibility and bonus formulas. Participants
in the SERP vest in accordance with a ten-year schedule, based upon
annual eligibility. Benefits are payable upon retirement or death.
Rodman has the right to terminate the SERP at any time. The SERP
assets consist of insurance annuity products. There were no
contributions to the SERP during the year ended December 31, 1995,
the six month transition period ended December 31, 1994 and the
fiscal year ended June 24, 1994. During the fiscal year ended
June 25, 1993, contributions totaled $580,813.
15. INCOME TAXES
The components of the income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Six Month
Transition Period
Year Ended Ended Fiscal Year Ended
December 31, 1995 December 31, 1994 1994 1993
<S> <C> <C> <C> <C>
Current:
Federal $ 63,000 $ 0 $ (942,000) $ 193,000
State 143,000 15,000 183,000 214,000
Deferred-principally
federal 2,760,000 (2,183,000) (171,000) (97,000)
----------------- ---------------- --------------- ------------
Total income tax
expense (benefit) $ 2,966,000 $ (2,168,000) $ (930,000) $ 310,000
================== =============== =============== ===========
</TABLE>
The income tax provision was recorded in 1995 to adjust the valuation
allowance. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes and net operating losses.
Following is a summary of the significant components of the Company's
deferred tax assets and liabilities at December 31, 1995 and
December 31, 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 15,036,000 $ 5,139,000
Restructuring charges 278,000 1,107,000
Employee compensation and benefits 44,000 1,019,000
Allowance for bad debts 176,000 139,000
Interest 748,000
Foreign tax credit 125,000
Alternative minimum tax 104,000
Other 1,323,000 1,191,000
------------ -----------
Total assets 17,834,000 8,595,000
------------ -----------
Deferred tax liabilities:
Investment interests (683,000) (527,000)
Prepaid insurance (92,000) (62,000)
------------- -----------
Total liabilities (775,000) (589,000)
------------- -----------
Net deferred tax asset 17,059,000 8,006,000
Valuation allowance (17,059,000) (5,246,000)
------------- ------------
Deferred income taxes $ 0 $ 2,760,000
============ ===========
</TABLE>
F-16
<PAGE> 52
The valuation allowance has been recognized due to the uncertainty of
realizing the benefit of the loss carryforwards and temporary
differences. The Company has federal and state net operating loss
carryforwards of approximately $43,400,000 and $37,000,000,
respectively, which will expire between the years 2008 and 2010.
Differences between statutory and effective income tax rates arise
from state taxes and valuation allowances established in connection
with net operating losses and from permanent differences between tax
and financial reporting, including tax-exempt interest income.
A reconciliation of the effective income tax rate to the statutory
federal income tax rate is as follows:
<TABLE>
<CAPTION>
DECEMBER DECEMBER JUNE JUNE
1995 1994 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Statutory rate (34.0)% (34.0)% (34.0)% 34.0%
City and state income taxes, net of federal benefit:
New York City 0.2 0.2 0.5 15.2
Other 0.2 0.2 10.6
Goodwill amortization 9.7
Nondeductible interest 0.2 0.3 0.2 10.7
Tax-exempt interest (0.3) 0.7 (0.8) (31.7)
Net cash surrender value of
keyman life insurance (0.2) (0.4) (0.5) (18.4)
Political contributions 0.1 4.4
Meals and entertainment 0.5 0.7 0.2 6.3
Valuation allowance 43.7 25.9
Other 0.7 (1.5) 2.9 15.8
------ ------ ------ ------
Effective rate 11.0% (34.0)% (5.3)% 56.6%
====== ====== ====== ======
</TABLE>
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, DERIVATIVE
FINANCIAL INSTRUMENTS
Rodman maintains active inventory positions in a variety of fixed
income financial instruments. Most of these positions are customer
oriented, and inventory positions are established as necessary to
meet customers' demands. In addition, to anticipate customer demand
for such transactions, Rodman also carries an inventory of fixed
income financial instruments and maintains its access to market
liquidity by quoting bid and offer prices to, and trading with, other
market makers. These two activities constitute its proprietary
trading business and are essential to provide customers with fixed
income products at competitive prices. All positions are reported at
fair value and changes in fair value are reflected in trading income
as they occur. Rodman enters into transactions in derivative
financial instruments (primarily futures and options contracts traded
on exchanges) in order to facilitate its normal trading activities
and to manage its market and interest rate risk. Rodman has adopted
Financial Accounting Standards Board Statement No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments."
These financial instruments involve varying degrees of on and
off-balance sheet market and credit risk. Market risk is the
potential change in value of the financial instrument caused by
unfavorable changes in interest rates or the market values of the
securities underlying the instruments. Rodman monitors its exposure
to market risk through a variety of control procedures, including
daily review of trading positions. The extent of utilization of
these derivative financial instruments is insignificant to Rodman's
financial condition and results of operations.
F-17
<PAGE> 53
Counterparties to Rodman include domestic and foreign corporations,
governments and institutional and individual investors. Counterparty
credit risk is measured by the loss Rodman would record if its
counterparties failed to perform pursuant to terms of their
obligations to Rodman. The exposure to credit risk associated with
the nonperformance of these counterparties in fulfilling their
contractual obligations pursuant to securities and commodities
transactions can be directly impacted by volatile trading markets
which may impair the counterparties' ability to satisfy their
obligations. Rodman controls such risks by requiring minimum margins
for open positions in accordance with regulatory and Rodman
guidelines. Rodman monitors minimum margin levels daily and may
require additional collateral to be deposited with or returned to
Rodman when deemed necessary. Market declines could, however, reduce
the value of any collateral below the principal amount loaned, plus
accrued interest, before the collateral can be sold.
Rodman's customer financing and securities settlement activities
permit it to pledge customer margin securities as collateral in
support of various collateralized financial sources such as bank
loans, letters of credit, and securities loaned. Additionally,
Rodman pledges customer securities as collateral to satisfy margin
deposit requirements of various exchanges. In the event the
counterparty is unable to meet its contracted obligation to return
customer securities pledged as collateral, Rodman may be exposed to
the risk of acquiring the securities at prevailing market prices in
order to satisfy its customer obligations. Rodman seeks to control
this risk by monitoring the market value of securities pledged daily
and by requiring adjustments of collateral levels in the event of
excess market exposure. Credit limits are also established for such
activities and are monitored daily.
Rodman's counterparties primarily consist of domestic and foreign
corporations, governments, and institutional and individual
investors. Concentrations of credit risk can be affected by changes
in economic, industry or geographic factors. Rodman seeks to control
the potential for concentration risk through a variety of control
procedures described above.
Securities sold but not yet purchased commit Rodman to deliver
specified securities at predetermined prices. To satisfy the
obligation, Rodman must acquire the securities at market prices,
which may differ from the values on the statement of financial
condition.
Rodman's customer activities involve the execution, settlement
and financing of various customer securities and commodities
transactions. Customer securities activities are transacted on
either a cash or margin basis and customer commodity transactions are
generally transacted on a margin basis subject to individual exchange
regulations. In accordance with industry practice, Rodman records
customer transactions on a settlement date basis, which is generally
three business days after trade date. These transactions may expose
Rodman to off-balance-sheet risk in the event the customer is unable
to fulfill its contracted obligations and margin requirements are not
sufficient to fully cover losses which customers may incur. In the
event the customer fails to satisfy its obligations, Rodman may be
required to purchase or sell financial instruments at prevailing
market prices in order to fulfill the customer's obligations.
Rodman seeks to control the risks associated with its customer
activities by requiring customers to maintain margin collateral in
compliance with various regulatory and internal guidelines. Rodman
monitors required margin levels daily and, pursuant to such
guidelines, requires the customers to deposit additional collateral
or reduce positions, when necessary. Rodman also establishes credit
limits for customers engaged in commodity futures activities, which
are monitored daily.
In connection with these activities, Rodman enters into
collateralized reverse repurchase agreements, securities borrowing
and lending arrangements and certain other collateralized
transactions which may result in significant credit exposure in the
event the counterparty to the transaction is unable to fulfill their
contractual obligations. In accordance with industry practice,
securities borrowing arrangements are
F-18
<PAGE> 54
generally collateralized by cash or securities with a market value in
excess of the Rodman's obligation under the contract. Rodman
attempts to minimize credit risk associated with these activities by
monitoring customer credit exposure and collateral values daily and
requiring additional collateral to be deposited with or returned to
Rodman when deemed necessary.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amount of its financial
instruments is a reasonable estimate of fair value. Assets,
including cash and cash equivalents, cash and short-term investments
required to be segregated under federal regulations, and certain
receivables are carried at fair value or contracted amounts which
approximate fair value. Similarly, liabilities including short-term
notes payable to banks and certain payables are carried at amounts
approximating fair value.
Securities owned and securities sold but not yet purchased are
carried at fair value. Fair value for these instruments is estimated
using available market quotations for traded instruments. Market
quotations for traded instruments are obtained from various sources,
including the major securities exchanges and dealers.
The estimated fair value of the Company's liabilities subordinated to
the claims of general creditors, determined using discounted cash
flow analysis based upon borrowing rates for similar types of
borrowing arrangements, approximates carrying value.
18. SUBSEQUENT EVENTS
CONVERSION TO FULLY DISCLOSED OPERATION
In January 1996, Rodman changed its business operation from a
clearing broker to a non-clearing broker whereby Rodman's customer
accounts are introduced and cleared by a contracted clearing broker
on a fully disclosed basis. As a result of this conversion, Rodman
will not be required to perform a reserve requirement calculation as
required by SEC Rule 15c3-3 under the exemptive provision of that
rule.
ABACO COMMITMENT
In February 1996, the Company received a letter from Abaco Grupo, the
parent company of the majority stockholder, Abaco, whereby Abaco
Grupo agreed to continue to unconditionally support the Company and
Rodman, for the next year, up to and including March 31, 1997. Such
support may include, with previous receipt of requisite approvals
from Mexican governmental authorities, infusions of capital,
conversion of short-term debt to long-term debt or conversion of
short or long-term debt to equity, if required, to continue to
sustain Rodman's operations and allow it to maintain the required
net capital pursuant to the SEC's Uniform Net Capital Rule 15c3-1.
ISSUANCE OF PREFERRED SHARES
On March 29, 1996, the Company issued to Abaco 50 shares of
non-voting convertible preferred stock at a price per share of
$100,000. The terms of such shares are identical to those of the
preferred stock issued in December of 1995.
F-19
<PAGE> 55
19. TRANSITION PERIOD AND COMPARABLE PRIOR YEAR
As discussed in Note 1, effective December 31, 1994, the Company
changed its fiscal year from the last Friday in June to a calendar
year end. Results of operations for the six month transition period
ended December 31, 1994, and unaudited results of operations for the
comparable six month period are as follows:
<TABLE>
<CAPTION>
Six Month Transition Period Six Month Period
Ended December 31, 1994 Ended December 31, 1993
(unaudited)
<S> <C>
Total revenues $ 32,194,000 $ 49,337,000
Total expenses 38,526,000 47,567,000
--------------- ---------------
Income (loss) before income taxes (6,332,000) 1,770,000
Income tax provision (benefit) (2,168,000) 554,000
----------------- ---------------
Net income (loss) $ (4,164,000) $ 1,216,000
================= ================
</TABLE>
20. QUARTERLY OPERATING RESULTS (UNAUDITED)
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Income (loss)
Before taxes
and Cumulative
Effect of
Accounting for Income (loss)
Revenues Income Taxes Net income (loss) per share
----------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Quarter ended:
03/31/95 $ 17,479 $ (3,223) $ (2,206) $ (.37)
06/30/95 20,525 (4,005) (4,005) (.60)
09/30/95 19,103 (6,588) (8,208) (1.24)
12/31/95 15,418 (13,200) (15,563) (2.42)
------------ --------------- --------------- -------------
TOTAL $ 72,525 (27,016) (29,982) $ (4.63)
============ =============== =============== =============
Transition Period
Quarter ended:
09/30/94 $ 19,367 $ (1,934) $ (1,949) $ (.43)
12/31/94 12,827 (4,398) (2,215) (.48)
------------ --------------- --------------- -------------
TOTAL $ 32,194 $ (6,332) $ (4,164) $ (.91)
============ =============== =============== =============
Fiscal year 1994
Quarter ended:
09/24/93 $ 26,355 $ 3,798 $ 2,859 $ .61
12/31/93 23,441 (2,028) (1,643) (.38)
03/25/94 14,593 (3,114) (2,088) (.46)
06/24/94 12,928 (16,087) (15,629) (3.46)
------------ --------------- --------------- -------------
TOTAL $ 77,317 $ (17,431) $ (16,501) $ (3.69)
============ =============== =============== =============
Fiscal year 1993
Quarter ended:
09/25/92 $ 19,950 $ 70 $ 51 $ .01
12/31/92 21,950 627 318 .07
03/26/93 22,607 320 263 .06
06/25/93 22,802 (469) (376) (.08)
------------ --------------- --------------- -------------
TOTAL $ 87,309 $ 548 $ 256 $ .06
============ =============== =============== =============
</TABLE>
During the fourth quarter of 1995, an expense adjustment of
$1,906,000 was made for items previously accounted for during the
year as a deferred asset.
F-20
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
RODMAN & RENSHAW CAPITAL GROUP, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of The Corporate Trust Company, in the
City of Wilmington, in the County of New Castle, in the State of Delaware, and
said Company shall be the registered agent of this corporation in charge
thereof.
SECTION 2. OTHER OFFICES. The corporation may have other offices,
either within or outside of the State of Delaware, at such place or places as
the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders of
the corporation for the election of directors and the transaction of other
business shall be held, in each year, on the date and at the time as shall be
fixed by the Board of Directors and stated in the notice of said meeting.
Such annual meetings shall be general meetings open for the transaction of any
business within the powers of the corporation without special notice of such
business, except in cases in which special notice is required by statute, by
the certificate of incorporation or by these by-laws.
SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by
statute, special meetings of the stockholders shall be called by the Chairman
of the Board upon receipt of a written request therefor, stating the purpose
thereof and signed by a majority of the directors. No business other than that
stated in the notice described in the next succeeding section shall be
transacted at any special meeting without the unanimous consent of all of the
stockholders entitled to vote thereat.
SECTION 3. NOTICE OF MEETINGS. (a) Except as otherwise provided
by law, and as set forth in subsection (b) hereof, written or printed notice
stating the place, date and hour of the meeting and, in the case of a special
meeting, a brief statement of the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) nor more than sixty (60) days
<PAGE> 2
- 2 -
before the date of every meeting of stockholders, either personally or by mail,
by or at the direction of the President and Chief Executive Officer or the
Secretary, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his address as it appears on
the records of the corporation, with postage thereon prepaid. Whenever any
notice is required to be given under the provisions of Delaware law, the
certificate of incorporation or these by-laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether it be before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. It shall not be requisite to the validity of any meeting of
stockholders that notice thereof, whether prescribed by law, by the certificate
of incorporation or by these by-laws, shall have been given to any stockholder
who attends in person or by proxy. No notice other than by verbal announcement
need be given of any adjourned meetings of stockholders.
(b) Stockholders intending to nominate directors for election
must deliver written notice thereof to the Secretary of the corporation not
later than (i) with respect to an election to be held at an annual meeting of
stockholders, ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders, and (ii) with respect to an election
to be held at a special meeting of stockholders, the close of business on the
tenth day following the date on which notice of such meeting is first given to
stockholders. The notice shall set forth certain information concerning such
stockholder and his nominee(s), including their names and addresses, a
representation that the stockholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice, a description of all arrangements or
understandings between the stockholder and each nominee, such other information
as would be required to be included in a proxy statement soliciting proxies for
the election of the nominees of such stockholder and the consent of each
nominee to serve as a director of the Company if so elected. The chairman of
the annual or special meeting of the corporation may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
SECTION 4. PLACE OF MEETINGS. Annual and special meetings of
stockholders may be held at one of the corporation's offices or at such place
or places within or without the State of Delaware as shall be determined by
the Board of Directors.
SECTION 5. QUORUM. Except as otherwise required by law, the
certificate of incorporation or these by-laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at
<PAGE> 3
- 3 -
all meetings of the stockholders. In case a quorum shall not be present at any
meeting, a majority in interest of the stockholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be present. If upon the
reconvening of any such adjourned meeting a majority of the stock entitled to
vote shall be represented, any business may be transacted which might have been
transacted at the meeting as originally noticed, but only those stockholders
entitled to vote at the meeting as originally noticed shall be entitled to vote
at such time as it is reconvened.
SECTION 6. VOTING. Each stockholder entitled to vote in
accordance with the terms of the certificate of incorporation or these by-laws
shall be entitled to one (1) vote for each share of stock entitled to vote held
by such stockholder. Shares of its own stock belonging to the corporation
shall not be voted, directly or indirectly, at any meeting and shall not be
counted in determining the total number of outstanding shares at any given
time, but shares of its own stock held by the corporation in a fiduciary
capacity may be voted and shall be counted in determining the total number of
outstanding shares at any given time. When a quorum is present or represented
at any meeting of stockholders, the vote of the holders of a majority of the
shares present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which a different
vote is required by virtue of an express provision of law, the certificate of
incorporation or another section of these by-laws.
SECTION 7. PROXIES. Any stockholder entitled to vote at a meeting
of stockholders may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney-in-fact.
SECTION 8. LIST OF STOCKHOLDERS. At least ten (10) days prior to
each meeting of stockholders at which directors are to be elected, the
Secretary shall make or cause to be made a complete list of the stockholders
entitled to vote at the ensuing election, arranged in alphabetical order,
showing the mailing address of each according to the records of the corporation
and the number of voting shares held by each. Such list shall be kept on file
at the office of the corporation for a period of ten (10) days prior to such
meeting, and shall at all times during the usual hours for business be open to
the examination of any stockholder, and also shall be produced and kept at the
time and place of such election for the inspection of any stockholder during
the whole time thereof.
The original stock ledger or transfer book, or a duplicate thereof, kept
at the principal office of the corporation, shall be
<PAGE> 4
- 4-
prima facie evidence as to the stockholders who are entitled to examine such
list or stock ledger or transfer book or to vote at any meeting of stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWERS. The business and affairs of the corporation
shall be managed by or under the direction of a Board of Directors, which may
exercise all of the powers of the corporation except such as are by law, the
certificate of incorporation or these by-laws conferred upon or reserved to
the stockholders. Continuing and exclusive authority to fix, supervise and
control the professional business and other affairs of the corporation shall be
wholly vested in the Board of Directors.
SECTION 2. QUALIFICATIONS. Directors of this corporation shall
be Independent Directors (as defined below), Parent Directors (as defined
below), or Company Directors (as defined below). "Company Directors" are
employees of the corporation or its affiliates. The term of any Company
Director who ceases to qualify as provided in the foregoing sentence shall
immediately and without any further action terminate forthwith. "Parent
Directors" means such persons as are designated by Abaco Grupo Financiero, S.A.
de C.V. ("Parent"), as such designation may change from time to time. An
"Independent Director" means any person designated by Parent who (i) is in fact
independent and qualifies as an independent director in accordance with New
York Stock Exchange rules, (ii) is not connected with Parent or the corporation
or any of their respective affiliates as an officer, employee, trustee,
partner, director (other than of the corporation) or person performing similar
functions and (iii) has not been employed by the corporation or any of its
subsidiaries during the preceding year.
SECTION 3. NUMBER, ELECTION AND REMOVAL OF DIRECTORS. The number
of directors which shall constitute the whole Board of Directors shall be fixed
from time to time by resolution of the Board of Directors, but shall not be
less than eleven (11) nor more than twenty-one (21). Except as provided in
Section 10 of this Article III, directors shall be elected by a plurality of
the votes cast at Annual Meetings of Stockholders. At each annual meeting of
stockholders, directors shall be elected for a term expiring at the next annual
meeting of stockholders and until their successors have been duly elected and
qualified. Any director may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors.
SECTION 4. MEETINGS. Regular meetings of the Board of Directors
shall be held at the time and place determined by the Board of Directors.
<PAGE> 5
- 5 -
Special meetings of the Board of Directors may be called by the
Chairman of the Board or by a majority of the Parent Directors on the written
request of any director and shall be held at such time and such place or places
as may be determined by the directors, or as shall be stated in the call of the
meeting.
SECTION 5. NOTICE OF MEETINGS. No notice of regular meetings of
the Board of Directors need be given. Notice of the place, day and hour of
every special meeting shall be given to each director at least one (1) day
before the meeting, by delivering the same to him personally, by sending
the same to him by telefax or by leaving the same at his residence or usual
place of business, or, in the alternative, upon seven (7) days' notice, by
mailing it, postage prepaid, and addressed to him at his last known mailing
address, as reflected in the records of the corporation. It shall not be
requisite to the validity of any meeting of the Board of Directors that notice
thereof shall have been given to any director who attends, except where a
director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. No notice of
adjourned meetings of the Board of Directors need be specified in the notice or
waiver of notice of such meeting. All regular and special meetings of the
Board of Directors shall be open for the transaction of any business within the
powers of the corporation without special notice of such business, except in
those cases in which special notice is required by law, the certificate of
incorporation or by these by-laws.
SECTION 6. QUORUM. At all meetings of the Board of Directors, a
majority of the Board of Directors shall constitute a quorum. The act of the
majority of the whole Board of Directors shall be the act of the Board of
Directors, unless the act of a greater number is required by law, the
certificate of incorporation or these by-laws. In the absence of a quorum at a
meeting of the Board of Directors, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no notice thereof
need be given other than by announcement at the meeting which shall be
adjourned.
SECTION 7. INFORMAL ACTION. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of the Executive
Committee may be taken without a meeting, if a written consent to such
action is executed by all members of the Board of Directors or of the Executive
Committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or of the Executive Committee.
SECTION 8. COMPENSATION. Directors shall not receive any stated
salary for their services as directors or as members of
<PAGE> 6
- 6 -
committees, but by resolution of the Board of Directors a fixed fee and
expenses of attendance may be allowed for attendance at each meeting. Nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
SECTION 9. RESIGNATIONS. Any director, member of the Executive
Committee or officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no
time be specified, at the time of its actual receipt by the Chairman of the
Board, President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
SECTION 10. VACANCIES. Vacancies in the Board of Directors,
through death, resignation or otherwise, and newly created directorships
resulting from an increase in the number of directors, may be filled by a
majority of the remaining directors in office, though less than a quorum, or by
the sole remaining director, provided, however, that in all events Parent shall
be entitled to designate the director or directors to fill vacancies in the
Board of Directors through death, resignation or otherwise of any Parent
Director, and provided further that until December 23, 1996, if a vacancy in
the Board of Directors exists through death, resignation or otherwise of any
Company Director, and the Board of Directors by a majority vote of the whole
Board of Directors determines to replace that Director, then the other Company
Directors shall have the right, by majority vote, to designate an employee of
the Company or one of its affiliates, as a replacement for that Company
Director. Directors elected to fill vacancies shall hold office for a term
expiring at the next annual meeting of stockholders and until their successors
have been duly elected and qualified, or until their earlier resignation or
removal.
SECTION 11. CHAIRMAN AND VICE CHAIRMAN; PRESIDING OFFICER. The
Board of Directors, by resolution adopted by a majority of the whole Board of
Directors, shall elect a Chairman of the Board of Directors, who shall preside
at all meetings of the stockholders of the corporation and at all meetings of
the Board of Directors. The Board of Directors, by resolution adopted by a
majority of the whole Board of Directors, also may elect a Vice Chairman of the
Board of Directors, who, in the absence of the Chairman of the Board of
Directors, shall preside at meetings of the stocKholders of the corporation and
meetings of the Board of Directors. In the absence of the Chairman and Vice
Chairman of the Board of Directors, the Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate any Parent
Director to preside at a particular meeting of the stockholders of the
corporation or of the Board of Directors.
<PAGE> 7
- 7 -
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the whole Board of Directors, may designate
an Executive Committee consisting of three (3) or more directors. Except as
otherwise provided by law or by the Board of Directors, during the intervals
between the meetings of the Board of Directors the Executive Committee shall
have and may exercise all of the powers of the Board of Directors in the
management of the corporation. The Executive Committee shall keep regular
minutes of its proceedings and report the same to the Board of Directors at its
meeting next succeeding such action.
SECTION 2. MEETINGS OF EXECUTIVE COMMITTEE. The Executive
Committee shall fix its own rules of procedure and shall meet as provided by
such rules, and it also shall meet at the call of the Chairman of the Board of
Directors or a majority of the members of the Committee. A majority of the
members of the Executive Committee shall be necessary to constitute a quorum,
and the concurrence of a majority of the whole Executive Committee shall be
required in all matters to constitute the act of the Committee.
SECTION 3. EXECUTIVE COMMITTEE POWERS. For all purposes of these
by-laws, the words "Board of Directors," "directors," "Board" or any equivalent
term shall be construed to include "Executive Committee," it being the intent
that such Committee may, except as otherwise provided by law, have and
exercise all of the powers conferred upon the Board of Directors by law, the
certificate of incorporation and these by-laws.
SECTION 4. AUDIT COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, shall designate an Audit
Committee consisting of one (1) or both of the Independent Directors. It
shall be the Audit Committee's responsibility to:
- Recommend to the Board of Directors which accounting firm to
employ as the corporation's external auditor and review the
proposed discharge of any such firm.
- Review the external auditor's compensation, the proposed terms of
its engagement and its independence.
- Review the appointment and replacement of the corporation's
internal auditing personnel.
- Serve as a channel of communication between the external auditor
and the Board of Directors and between the
<PAGE> 8
- 8 -
corporation's internal auditing staff and the Board of Directors.
- Review the results of each external audit of the corporation, the
report of the audit, any related management letter, management's
responses to recommendations made by the external auditor in
connection with the audit, reports of the internal auditing staff
that are material to the corporation as a whole, and management's
responses to those reports.
- Review the corporation's annual financial statements, any
certification, report, opinion, or review rendered by the external
auditor in connection with those financial statements, and any
significant disputes between management and the external auditor
that arose in connection with the preparation of those financial
statements.
- Consider, in consultation with the external auditor and
the internal auditing staff, the adequacy of the corporation's
internal controls.
- Consider significant changes and other significant questions of
choice regarding the appropriate auditing and accounting
principles and practices to be used in the preparation of the
corporation's financial statements.
The Audit Committee shall meet at such times during the year as to
properly perform its responsibilities. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors when required. It
shall have authority to retain special counsel or experts as it deems
necessary.
SECTION 5. COMPENSATION COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the whole Board of Directors, shall
designate a Compensation Committee consisting of one (1) or both of the
Independent Directors. It shall be the Compensation Committee's responsibility
to:
- Review and recommend to the Board of Directors the annual
salary, bonus, stock options and other benefits, direct and
indirect, of the corporation's officers.
- Review new executive compensation programs; review on a
periodic basis the operation of the corporation's executive
compensation programs to determine whether they are properly
coordinated; establish and periodically review policies for the
administration of executive compensation programs; and take steps
to modify any executive compensation programs that yield payments
and
<PAGE> 9
- 9 -
benefits that are not reasonably related to executive
performance.
- Establish and periodically review policies in the area of
management perquisites.
The Compensation Committee shall meet at such times during the year as
to properly perform its responsibilities. It shall keep regular minutes of its
proceeding and report the same to the Board of Directors when required.
SECTION 6. NOMINATING COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the whole Board of Directors, shall
designate a Nominating Committee consisting of three (3) or more directors.
It shall be the Nominating Committee's responsibility to:
- Recommend to the Board of Directors the slate of nominees
of directors to be elected by the stockholders and any directors
to be elected by the Board of Directors, based upon a review of
the qualifications of such persons.
- Recommend to the Board of Directors the directors to be selected
for membership on the various committees of the Board of Directors.
The Nominating Committee shall meet at such times during the year as to
properly perform its responsibilities. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors when required.
SECTION 7. OTHER COMMITTEES. The Board of Directors, by
resolution adopted by the whole Board of Directors, may designate other
committees as it deems appropriate. Each such committee shall consist of one
(1) or more of the directors of the corporation, and to the extent provided by
the Board of Directors, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation, and
may have power to authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by the Board of Directors. The
committees shall keep regular minutes of their proceedings and report the same
to the Board of Directors when required.
SECTION 8. ABSENT MEMBERS. In the event a member of any committee
is absent or disqualified from any meeting thereof, the member or members
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint a Parent Director to sit at
the meeting in the place of any such absent or disqualified member.
<PAGE> 10
- 10 -
SECTION 9. MODIFICATIONS OF COMMITTEE RESPONSIBILITIES. The
Responsibilities of the Audit Committee, Compensation Committee, Nominating
Committee, and any other committees may be modified from time to time by the
Board of Directors by resolution or by adoption of charters of such
committees. Any charter of the Audit Committee, Compensation Committee, or
Nominating Committee, as such charter may be amended by the Board of Directors
from time to time, shall supersede the responsibilities enumerated in Sections
4, 5 and 6, respectively, of this Article IV, until such time as the charter is
revoked by the Board of Directors.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation, all of
whom shall be subject to the supervision and direction of the Board of
Directors, shall be a President and Chief Executive Officer, a Chief Financial
Officer, a Secretary and a Treasurer and may consist of such vice
presidents, assistant secretaries, assistant treasurers and other officers as
the Board of Directors shall determine. None of the aforesaid officers except
the President and Chief Executive Officer need be directors of the corporation.
The officers shall be elected by the Board of Directors from time to time. Any
two or more offices may be held by the same person.
SECTION 2. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President
and Chief Executive Officer shall have overall responsibility for the
formulation of corporate policies and purposes to be presented from time
to time to the Board of Directors for adoption on behalf of the corporation,
shall have responsibility for communicating said policies and purposes, as
adopted, to the officers, staff and employees of the corporation, and shall
have power to supervise and direct all officers and employees of the
corporation in the exercise of their duties. In the event that the Board of
Directors shall, pursuant to the authority granted by Article IV of these
bylaws, designate an Executive Committee, the President and Chief Executive
Officer shall be one of the directors designated to serve on such committee.
The Chief Executive Officer also shall serve as an ex officio member of each
and every other committee of the Board of Directors established pursuant to the
provisions of Article IV of these by-laws, except for the Audit and
Compensation Committees.
SECTION 3. CHIEF OPERATING OFFICER. Subject to direction from
the President and Chief Executive Officer, the Chief Operating Officer shall
have such general powers and duties of direction and control of the
business of the corporation as shall be necessary to carry out and give effect
to the corporate policies and purposes
<PAGE> 11
- 11 -
adopted by the Board of Directors. The Chief Operating Officer shall report
to the Board of Directors through, and shall be responsible to, the President
and Chief Executive Officer.
SECTION 4. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have overall responsibility for the financial affairs of the corporation,
including the preparation of all financial reports, audits and returns of the
corporation. He also shall have responsibility for making recommendations
concerning the corporation's fiscal policies and all financial matters
affecting the corporation. The Chief Financial Officer shall report to the
Board of Directors through, and shall be responsible to, the President and
Chief Executive Officer.
SECTION 5. VICE PRESIDENTS. The Vice President or Vice Presidents
shall perform such duties as may be assigned to him or them by any executive
officer of the corporation acting at the direction of the Board of Directors.
SECTION 6. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these by-laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person so
directed by the President and Chief Executive Officer, the Chief Operating
Officer or the Board of Directors. He shall record all of the proceedings of
the meetings of the stockholders of the corporation and of the Board of
Directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the Board of Directors or any other
executive officer of the corporation acting at the direction of the Board of
Directors. He shall have the custody of the seal of the corporation and shall
affix the same to all instruments requiring it, when authorized by the Board of
Directors, and attest the same.
SECTION 7. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or any other executive officer of the
corporation acting at the direction of the Board of Directors, taking proper
vouchers for such disbursements. He shall render to the Board of Directors, or
its designees (including the President and Chief Executive Officer, the Chief
Operating Officer and the Chief Financial Officer), whenever they may request
it, an account of all of his transactions as Treasurer and of the financial
condition of the corporation. If required by the Board of Directors, he shall
give the corporation a bond for the faithful
<PAGE> 12
- 12 -
discharge of his duties in such amount and with such surety as the Board of
Directors shall prescribe.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. If
desired, the Board of Directors may elect one or more Assistant Secretaries and
one or more Assistant Treasurers. The Assistant Secretaries and Assistant
Treasurers, if any, shall have such powers and shall perform such duties as
shall be assigned to them by the Board of Directors or any executive officer of
the corporation acting at the direction of the Board of Directors.
SECTION 9. EXECUTION OF DOCUMENTS. Except as otherwise authorized
or directed by the Board of Directors, either of the President and Chief
Executive Officer and the Chief Operating Officer, or in their absence, a
Vice President, may execute stock certificates, bonds, mortgages and other
contracts on behalf or the corporation and shall cause the corporate seal to be
affixed to any instrument requiring it.
SECTION 10. REMOVAL OF OFFICERS. Any officer of the corporation may be
removed by the Board of Directors whenever in its judgment the best interests
of the corporation will be served thereby.
ARTICLE VI
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, numbered
and with the seal of the corporation affixed, signed by the President and Chief
Executive Officer or the Chief Operating Officer and the Treasurer or an
Assistant Treasurer, or Secretary or Assistant Secretary, shall be issued to
each stockholder certifying the number of shares owned by him in the
corporation. If such certificate is countersigned by a transfer agent or
registrar other than the corporation or its employee, any other signature on
the certificate may be a facsimile.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the corporation
and alleged to have been lost or destroyed. However, the directors may, in
their discretion, require the owner of the lost or destroyed certificate,
or his legal representative, to give the corporation a bond, in such sum as
they may direct, not exceeding double the value of the stock, to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss of the certificate, or the issuance of a new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the
corporation shall be transferable only upon its books by the
<PAGE> 13
- 13 -
holders thereof in person or by their duly authorized attorneys or
legal representatives, and upon such transfer the old certificates shall be
surrendered to the corporation by the delivery thereof to the person in charge
of the stock and transfer books and ledgers, by whom they shall be canceled,
and new certificates shall thereupon be issued.
SECTION 4. DIVIDENDS. Subject to the provisions of the
certificate of incorporation, the Board of Directors may, out of funds legally
available therefor, at any regular or special meetings, declare dividends
upon the capital stock of the corporation as and when they deem expedient.
Before declaring any dividend there may be set apart out of any funds of the
corporation available for dividends, such sum or sums as the directors from
time to time in their absolute discretion deem proper for working capital or as
a reserve fund to meet contingencies or for equalizing dividends or for such
other purposes as the Board of Directors shall deem conducive to the interests
of the corporation.
SECTION 5. SEAL. The corporate seal shall be circular in form and
shall contain the name of the corporation and the words "CORPORATE SEAL
DELAWARE." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise .
SECTION 6. FISCAL YEAR. The fiscal year of the corporation shall
be as determined by the Board of Directors.
SECTION 7. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers, agent or
agents of the corporation, in such manner as shall be determined from time to
time by resolution of the Board of Directors.
SECTION 8. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required to be given by these by-laws, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be
sufficient if given by certified or registered mail, return receipt requested,
in a sealed post-paid wrapper, addressed to the person entitled thereto at his
last known address. Such notice shall be deemed to have been given on the day
of such mailing. Stockholders not entitled to vote shall not be entitled to
receive notice of any meetings except as otherwise provided by law.
Whenever any notice is required to be given under the provisions of any
law, the certificate of incorporation or these by-laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
<PAGE> 14
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SECTION 9. FIXING OF RECORD DATE. The Board of Directors may fix
in advance a date, not more than sixty (60) or less than ten (10) days
preceding the date of any meeting of stockholders, nor more than sixty (60)
days prior to the date for the payment of any dividend or the date for the
allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividends or to any such allotment of
rights or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and in such case such stockholders only as shall be
stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting, or to receive such allotment of rights or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
ARTICLE VII
AMENDMENTS
These by-laws may be amended or repealed and new by-laws may be adopted at
any regular or special meeting of the Board of Directors by the affirmative
vote of a majority of the entire Board of Directors.
ARTICLE VIII
INDEMNIFICATION
The corporation shall indemnify its officers, directors, employees and
agents to the fullest extent permitted by the General Corporation Law of the
State of Delaware.
Adopted January 10, 1994
Amended June 7, 1995
Amended February 8, 1996
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
OF
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
RODMAN & RENSHAW CAPITAL GROUP, INC.
A DELAWARE CORPORATION
Charles W. Daggs, III and James D. Van De Graaff certify that:
A. They are the duly elected and acting President and Corporate Secretary,
respectively, of Rodman & Renshaw Capital Group, Inc., a Delaware corporation
(the "Corporation").
B. Pursuant to the authority given by the Corporation's Certificate of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following recitals and resolutions:
WHEREAS, the Certificate of Incorporation of the Corporation
provides for a class of shares known as Preferred Stock,
consisting of five million (5,000,000) shares issuable from
time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is
authorized to fix by resolution or resolutions the rights,
preferences, privileges and restrictions granted to or imposed
upon the Preferred Stock or any series thereof; and
WHEREAS, the Corporation has no issued or outstanding shares
of Preferred Stock; and
WHEREAS, the Board of Directors desires, pursuant to its
authority as aforesaid, to designate fifty (50) shares of the
Preferred Stock as "Series B Non-
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Voting Convertible Preferred Stock" and to fix the rights,
preferences, privileges and restrictions relating to such series of
Preferred Stock;
NOW, WHEREFORE, BE IT RESOLVED, that the Board of Directors
hereby fixes the designation and the number of shares
constituting, and the rights, preferences, privileges and
restrictions relating to, the Series B Non-Voting Convertible
Preferred Stock:
1. Designation. This series of Preferred Stock shall be
designated "Series B Non-Voting Convertible Preferred Stock"
(the "Series B Preferred Stock").
2. Number of Shares and Par Value. The number of shares
constituting the Series B Preferred Stock shall be fifty (50).
Each share of the Series B Preferred Stock shall have a par
value of one cent ($.01).
3. Certain Definitions. Unless the context otherwise
requires, the terms defined in this paragraph 3 shall have,
for all purposes of this resolution, the meanings herein
specified.
Common Stock. The term "Common Stock" shall mean all
shares now or hereafter authorized of any class of Common
Stock of the Corporation and any other stock of the
Corporation, howsoever designated, authorized after the Issue
Date, which has the right (subject always to prior rights of
any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation
without limit as to per share amount.
Conversion Date. The term "Conversion Date" shall have
the meaning set forth in subparagraph 6(c) below.
Conversion Price. The term "Conversion Price" shall mean
the price per share of Common Stock used to determine the
number of shares of Common Stock deliverable upon conversion
of a share of the Series B Preferred Stock, which price shall
initially be $1.28 per share as determined pursuant to
subparagraph 6(b) below (based upon the Corporation's records
as at the close of October, 1995), subject to adjustment in
accordance with the provisions of subparagraph 6(e) below.
Current Market Price. The term "Current Market Price"
shall have the meaning set forth in subparagraph 6(f) below.
Dividend Payment Date. The term "Dividend Payment Date"
shall have the meaning set forth in subparagraph 4(a) below.
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Dividend Period. The term "Dividend Period" shall have
the meaning set forth in subparagraph 4(a) below.
Issue Date. The term "Issue Date" shall mean the date
that shares of Series B Preferred Stock are first issued by
the Corporation.
Junior Stock. The term "Junior Stock" shall mean, for
purposes of paragraphs 4, 5 and 8 below, the Common Stock and
any other class or series of stock of the Corporation issued
after the Issue Date not entitled to receive any dividends in
any Dividend Period unless all dividends required to have been
paid or declared and set apart for payment on the Series B
Preferred Stock shall have been so paid or declared and set
apart for payment and, for purposes of paragraphs 5 and 8
below, any class or series of stock of the Corporation issued
after the Issue Date not entitled to receive any assets upon
the liquidation, dissolution or winding up of the affairs of
the Corporation until the Series B Preferred Stock shall have
received the entire amount to which such stock is entitled
upon such liquidation, dissolution or winding up.
Parity Stock. The term "Parity Stock" shall mean, for
purposes of paragraphs 4, 5, 7 and 8 below, any other class or
series of stock of the Corporation issued after the Issue Date
entitled to receive payment of dividends on a parity with the
Series B Preferred Stock and, for purposes of paragraphs 4 and
8 below, any other class or series of stock of the Corporation
issued after the Issue Date entitled to receive assets upon
the liquidation, dissolution or winding up of the affairs of
the Corporation on a parity with the Series B Preferred Stock.
Senior Stock. The term "Senior Stock" shall mean, for
purposes of paragraphs 4, 5, 7 and 8 below, any class or
series of stock of the Corporation issued after the Issue Date
ranking senior to the Series B Preferred Stock in respect of
the right to receive dividends, and, for purposes of
paragraphs 4 and 8 below, any class or series of stock of the
Corporation issued after the Issue Date ranking senior to the
Series B Preferred Stock in respect of the right to receive
assets upon the liquidation, dissolution or winding up of the
affairs of the Corporation.
Subscription Price. The term "Subscription Price" shall
mean $100,000 per share.
Subsidiary. The term "Subsidiary" shall mean any
corporation of which shares of stock possessing at least a
majority of the general voting power in electing the board of
directors are, at the time as of which any determination is
<PAGE> 4
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being made, owned by the Corporation, whether directly or
indirectly through one or more Subsidiaries.
4. Dividends.
(a) Subject to the prior preferences and other rights of
any Senior Stock and restrictions imposed by the terms of any
indebtedness of the Corporation, the holders of Series B
Preferred Stock shall be entitled to receive, out of funds
legally available for the purpose, cash dividends at a per
annum rate applied to the Subscription Price as determined
daily during each Dividend Period equal to the then most
recent "Prime Rate," as published in The Wall Street Journal
(or any successor publication) as the base rate on corporate
U.S. Dollar loans posted by at least 75% of the nation's 30
largest banks (or any publicly published comparable rate as
determined by the Board of Directors) plus two percent per
annum; such rate to change as and when such "Prime Rate"
changes and such rate to be determined on the basis of a 365
day year and the actual days elapsed during a Dividend Period.
Such dividends shall be cumulative from July 1, 1996, and
shall be payable in arrears, when and as declared by the Board
of Directors, on March 31, June 30, September 30 and December
31 of each year (each such date being herein referred to as a
"Dividend Payment Date"), commencing on September 30, 1996.
The period from July 1, 1996, through September 30, 1996, and
each quarterly period between consecutive Dividend Payment
Dates thereafter shall hereinafter be referred to as a
"Dividend Period." Each such dividend shall be paid to the
holders of record of the Series B Preferred Stock as their
names appear on the share register of the Corporation on the
corresponding Record Date. As used above, the term "Record
Date" means, with respect to the dividend payment on March 31,
June 30, September 30 and December 31, respectively, of each
year, the preceding March 30, June 29, September 29 and
December 30, or such other record date designated by the Board
of Directors of the Corporation with respect to the dividend
payable on such respective Dividend Payment Date. Dividends
on account of arrears for any past Dividend Periods may be
declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such date, not
exceeding 50 days preceding the payment date thereof, as may
be fixed by the Board of Directors. No dividends shall be
payable in respect of any period less than a full Dividend
Period.
(b) In the event that full cash dividends are not paid or
made available to the holders of all outstanding shares of
Series B Preferred Stock and of any Parity Stock, and funds
available shall be insufficient to permit payment in full in
cash to all such holders of the preferential amounts to which
they are then entitled, the entire amount available for
payment of cash dividends shall be
<PAGE> 5
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distributed among the holders of the Series B Preferred Stock and
of any Parity Stock ratably in proportion to the full amount to
which they would otherwise be respectively entitled, and any
remainder not paid in cash to the holders of the Series B Preferred
Stock shall cumulate as provided in subparagraph 4(c) below.
(c) If, on any Dividend Payment Date, the holders of the
Series B Preferred Stock shall not have received the full
dividends provided for in the other provisions of this
paragraph 4, then such dividends shall cumulate, whether or
not earned or declared, with additional dividends thereon for
each succeeding full Dividend Period during which such
dividends shall remain unpaid. Unpaid dividends for any
period less than a full Dividend Period shall cumulate on a
day-to-day basis and shall be computed on the basis of a 365
day year.
(d) So long as any shares of Series B Preferred Stock
shall be outstanding, the Corporation shall not declare or pay
on any Junior Stock any dividend whatsoever, whether in cash,
property or otherwise (other than dividends payable in shares
of the class or series upon which such dividends are declared
or paid, or payable in shares of Common Stock with respect to
Junior Stock other than Common Stock, together with cash in
lieu of fractional shares), nor shall the Corporation make any
distribution on any Junior Stock, nor shall any monies be paid
or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless all dividends to which
the holders of Series B Preferred Stock shall have been
entitled for all previous Dividend Periods shall have been
paid or declared and a sum of money sufficient for the payment
thereof set apart.
5. Distributions Upon Liquidation, Dissolution or Winding Up.
In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the
Corporation, subject to the prior preferences and other rights
of any Senior Stock, but before any distribution or payment
shall be made to the holders of Junior Stock, the holders of
the Series B Preferred Stock shall be entitled to be paid the
Subscription Price of all outstanding shares of Series B
Preferred Stock as of the date of such liquidation or
dissolution or such other winding up, plus any accrued and
unpaid dividends thereon to such date, and no more, in cash or
in property taken at its fair value as determined by the Board
of Directors. If such payment shall have been made in full to
the holders of the Series B Preferred Stock, and if payment
shall have been made in full to the holders of any Senior
Stock and Parity Stock of all amounts to which such holders
shall be entitled, the remaining assets and funds of the
Corporation shall be distributed among the holders of Junior
Stock, according to their respective shares and priorities.
If, upon any such liquidation, dissolution or other winding
<PAGE> 6
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up of the affairs of the corporation, the net assets of the
Corporation distributable among the holders of all outstanding
shares of the Series B Preferred Stock and of any Parity Stock
shall be insufficient to permit the payment in full to such
holders of the preferential amounts to which they are
entitled, then the entire net assets of the Corporation
remaining after the distributions to holders of any Senior
Stock of the full amounts to which they may be entitled shall
be distributed among the holders of the Series B Preferred
Stock and of any Parity Stock ratably in proportion to the
full amounts to which they would otherwise be respectively
entitled. Neither the consolidation or merger of the
Corporation into or with another corporation or corporations,
nor the sale of all or substantially all of the assets of the
Corporation to another corporation or corporations shall be
deemed a liquidation, dissolution or winding up of the affairs
of the corporation within the meaning of this paragraph 5.
6. Conversion Rights. The Series B Preferred Stock shall be
convertible into Common Stock as follows:
(a) Automatic Conversion. Each outstanding share of
Series B Preferred Stock shall automatically be converted,
without any further act of the Corporation or its
stockholders, into fully paid and nonassessable shares of
Common Stock at the Conversion Price then in effect, upon the
commencement of a rights offering to all stockholders of the
Corporation at a per share cash price equal to such Conversion
Price pursuant to which the stockholders of the Corporation
(other than the holders of Series B Preferred Stock whose
rights to purchase shares in the offering would be deemed
exercised and consummated by the conversion) could purchase
the number of shares proportional to the number of shares
issued upon conversion ("Rights Offering"). The Series B
Preferred Stock shall not otherwise be convertible.
(b) Conversion Price. Each share of Series B Preferred
Stock shall be converted into a number of shares of Common
Stock determined by dividing (i) the sum of (A) the
Subscription Price plus (B) any dividends on such share of
Series B Preferred Stock which such holder is entitled to
receive, but has not yet received, by (ii) the Conversion
Price in effect on the Conversion Date. The Conversion Price
at which shares of Common Stock shall initially be issuable
upon conversion of the shares of Series B Preferred Stock
shall be determined on a floating basis and shall equal the
book value per share of Common Stock from time to time
determined in accordance with generally accepted accounting
principles from the Corporation's financial records as at the
close of the full month immediately preceding the Conversion
Date (provided that, if it is not practicable to determine
such book value on a sufficiently timely basis to commence the
Rights Offering, then the Conversion Price shall be so
<PAGE> 7
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determined at the close of the full month second preceding the
Conversion Date). Such determination shall be made by the
independent auditors of the Company based on a review of the
financial records of the Company but without an audit. The
Conversion Price shall be subject to adjustment as set forth
in subparagraph 6(e). No payment or adjustment shall be made
for any dividends on the Common Stock issuable upon such
conversion.
(c) Mechanics of Conversion. Upon the occurrence of the
event specified in subparagraph 6(a), the outstanding shares
of Series B Preferred Stock shall be converted automatically
without any further action by the holders of such shares and
whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided
that the Corporation shall not be obligated to issue to any
such holder certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing
the shares of Series B Preferred Stock are either delivered to
the Corporation or any transfer agent of the Corporation.
Conversion shall be deemed to have been effected on the date
of the occurrence of the event specified in subparagraph 6(a)
and such date is referred to herein as the "Conversion Date."
Subject to the provisions of subparagraph 6(e), as promptly as
practicable thereafter (and after surrender of the certificate
or certificates representing shares of Series B Preferred
Stock to the Corporation or any transfer agent of the
Corporation) the Corporation shall issue and deliver to or
upon the written order of such holder a certificate or
certificates for the number of full shares of Common Stock to
which such holder is entitled and a check or cash with respect
to any fractional interest in a share of Common Stock as
provided in subparagraph 6(d). Subject to the provisions of
subparagraph 6(e), the person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed
to have become a holder of record of such Common Stock on the
applicable Conversion Date.
(d) Fractional Shares. No fractional shares of Common
Stock or script shall be issued upon conversion of shares of
Series B Preferred Stock. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion
of any shares of Series B Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the
then Current Market Price.
(e) Conversion Price Adjustments. The Conversion Price
shall be subject to adjustment from time to time as follows:
(i) Consolidation, Merger, Sale, Lease or Conveyance.
In case of any consolidation with or merger of the Corporation with
or into
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another corporation, or in case of any sale, lease or conveyance to
another corporation of the assets of the Corporation as an entirety
or substantially as an entirety, each share of Series B Preferred
Stock shall after the date of such consolidation, merger, sale,
lease or conveyance be convertible into the number of shares of
stock or other securities or property (including cash) to which the
Common Stock issuable (at the time of such consolidation,
merger, sale, lease or conveyance) upon conversion of such
share of Series B Preferred Stock would have been entitled
upon such consolidation, merger, sale, lease or conveyance;
and in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of
the holders of the shares of Series B Preferred stock shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any shares of stock or other securities
or property thereafter deliverable on the conversion of the
shares of Series B Preferred Stock.
(ii) Rounding of Calculations; Minimum Adjustment. All
calculations under this subparagraph (e) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this paragraph 6
to the contrary notwithstanding, no adjustment in the
Conversion Price shall be made if the amount of such
adjustment would be less than $0.05, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.05 or
more.
(iii) Timing of Issuance of Additional Common Stock Upon
Certain Adjustments. In any case in which the provisions of
this subparagraph (e) shall require that an adjustment shall
become effective immediately after a record date for an event,
the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any share of Series B Preferred
Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common
Stock issuable upon such conversion before giving effect to
such adjustment and (B) paying to such holder any amount of
cash in lieu of a fractional share of Common Stock pursuant to
subparagraph (d) of this paragraph 6; provided that the
Corporation upon request shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's
right to receive such additional shares, and such cash, upon
the occurrence of the event requiring such adjustment.
(f) Current Market Price. The Current Market Price at
any date
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shall mean, in the event the Common Stock is publicly
traded, the average of the daily closing prices per share of
Common Stock for 30 consecutive trading days ending no more
than 15 business days before such date (as adjusted for any
stock dividend, split, combination or reclassification that
took effect during such 30 business day period). The closing
price for each day shall be the last reported sale price
regular way or, in case no such reported sale takes place o
such day, the average of the last closing bid and asked prices
regular way, in either case on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading, or if not listed or admitted to trading
on any national securities exchange, the closing sale price
for such day reported by NASDAQ, if the Common Stock is traded
over-the-counter and quoted in the National Market System, or
if the Common Stock is so traded, but not so quoted, the
average of the closing reported bid and asked prices of the
Common Stock as reported by NASDAQ or any comparable system
or, if the Common Stock is not listed on NASDAQ or any
comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association
of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose. If the Common Stock is not
traded in such manner that the quotations referred to above
are available for the period required hereunder, Current
Market Price per share of Common Stock shall be deemed to be
the fair value as determined by the Board of Directors,
irrespective of any accounting treatment.
(g) Statement Regarding Adjustments. Whenever the
Conversion Price shall be adjusted as provided in subparagraph
6(e), the Corporation shall forthwith file, at the office of
any transfer agent for the Series B Preferred Stock and at the
principal office of the Corporation, a statement showing in
detail the facts requiring such adjustment and the Conversion
Price that shall be in effect after such adjustment, and the
Corporation shall also cause a copy of such statement to be
sent by mail, first class postage prepaid, to each holder of
shares of Series B Preferred Stock at its address appearing on
the Corporation's records.
(h) Costs. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to
the issuance or delivery of shares of Common Stock upon
conversion of any shares of Series B Preferred Stock; provided
that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in
the issuance or delivery of any certificate for such shares in
a name other than that of the holder of the shares of Series B
Preferred Stock in respect of which such shares are being
issued.
<PAGE> 10
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(i) Reservation of Shares. The Corporation shall reserve
at all times so long as any shares of Series B Preferred Stock
remain outstanding, free from preemptive rights, out of its
treasury stock (if applicable) or its authorized but unissued
shares of Common Stock, or both, solely for the purpose of
effecting the conversion of the shares of Series B Preferred
Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series B Preferred
Stock.
(j) Approvals. If any shares of Common Stock to be
reserved for the purpose of conversion of shares of Series B
Preferred Stock require registration with or approval of any
governmental authority under any federal or state law before
such shares may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as
expeditiously as possible endeavor to secure such registration
or approval, as the case may be. If, and so long as, any
Common Stock into which the shares of Series B Preferred Stock
are then convertible is listed on any national securities
exchange, the Corporation will, contemporaneously with the
conversion, cause to be listed and thereafter to keep listed
on such exchange, upon official notice of issuance, all shares
of such Common Stock issuable upon conversion.
(k) Valid Issuance. All shares of Common Stock which may
be issued upon conversion of the shares of Series B Preferred
Stock will upon issuance by the Corporation be duly and
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof,
and the Corporation shall take no action which will cause a
contrary result (including without limitation, any action
which would cause the Conversion Price to be less than the par
value, if any, of the Common Stock).
7. Voting Rights.
(a) The holders of the issued and outstanding shares of
Series B Preferred Stock have no voting rights except as set
forth herein and as required by law.
(b) Without the consent of the holders of at least
(i) a majority of the shares of Series B Preferred Stock
then outstanding, given in writing or by vote at a meeting of
holders of Series B Preferred Stock called for such purpose,
the Corporation will not (A) increase the authorized amount of
Series B Preferred Stock or (B) create any other class of
Parity Stock or Senior Stock or increase the authorized amount
of any such other class; and
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(ii) a majority of the shares of Series B Preferred Stock
then outstanding, given in writing or by vote at a meeting of
holders of Series B Preferred Stock called for such purpose,
the Corporation will not (A) other than as set forth in (i)
above, amend, alter or repeal any provision of the Certificate
of Incorporation or this Certificate so as to adversely affect
the rights, preferences or privileges of the Series B
Preferred Stock or (B) merge or consolidate with or into any
other person, or sell substantially all of its assets or
business to any other person, except that the Corporation may
merge with any person if the corporation is the entity
surviving such merger and such merger does not adversely
affect the rights, preferences and privileges of the Series B
Preferred Stock.
8. Covenants. In addition to any other rights provided by
law, so long as any Series B Preferred Stock is outstanding,
the Corporation, without first obtaining the affirmative vote
or written consent of the holders of not less than a majority
of such outstanding shares of Series B Preferred Stock, will
not:
(a) amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation
or By-Laws or to these resolutions if such action would alter
adversely or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of,
any Series B Preferred Stock, or increase or decrease the
number of shares of Series B Preferred Stock authorized
hereby;
(b) authorize or issue shares of any class or series of
stock not expressly authorized herein having any preference or
priority as to dividends, assets or other rights superior to
or on a parity with any such preference or priority of the
Series B Preferred Stock, or authorize or issue shares of
stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having
option rights to purchase, any shares of stock of the
Corporation having any preference or priority as to dividends,
assets or other rights superior to or on a parity with any
such preference or priority of the Series B Preferred Stock;
(c) reclassify any class or series of any Junior Stock
into Parity Stock or Senior Stock or reclassify any series of
Parity Stock into Senior Stock; or
(d) pay or declare any dividend on any Junior Stock
(other than dividends payable in shares of the class or series
upon which such dividends are declared or paid, or payable in
shares of Common Stock with respect to Junior Stock other than
Common Stock, together with cash in lieu of fractional shares
and dividends not in excess of dividends paid to the Series B
Preferred Stock)
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while the Series B Preferred Stock remains outstanding, or apply
any of its assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through subsidiaries or
otherwise, of any Junior Stock, except from employees of the
Corporation upon termination of employment or otherwise pursuant to
the terms of stock purchase or option agreements providing for the
repurchase of, or right of first refusal with respect to, such
Junior Stock entered into with such employees.
9. Exclusion of Other Rights. Except as may otherwise be
required by law, the Series B Preferred Stock shall not have
any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in
this resolution (as such resolution may be amended from time
to time) and in the Corporation's Certificate of
Incorporation. The shares of Series B Preferred Stock shall
have no preemptive or subscription rights. The Series B
Preferred Stock shall not be subject to redemption or the
operation of a retirement or sinking fund.
10. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and
shall not affect the interpretation of any of the provisions
hereof.
11. Severability of Provisions. If any right, preference or
limitation of the Series B Preferred Stock set forth in this
resolution (as such resolution may be amended from time to
time) is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as
so amended) which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation
shall, nevertheless, remain in full force and effect, and no
right, preference or limitation herein set forth shall be
deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
12. Status of Reacquired Shares. Shares of Series B Preferred
Stock which have been issued and converted or reacquired in
any manner shall (upon compliance with any applicable
provisions of the laws of the State of Delaware) have the
status of authorized and unissued shares of Preferred Stock
issuable in series undesignated as to series and may be
redesignated and reissued.
C. The authorized number of shares of Preferred Stock of the Corporation
is 5,000,000 and the number of shares constituting the Series B Non-Voting
Convertible Preferred Stock, consisting of the shares authorized hereby, is 50.
<PAGE> 13
- 13 -
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
December 21, 1995, on behalf of the Corporation, and certify under penalty of
perjury that this is the act and deed of the Corporation, and that the facts
stated herein are true.
/s/ Charles W. Daggs, III
--------------------------------
Charles W. Daggs, III, President
/s/ James D. Van De Graaff
--------------------------------
James D. Van De Graaff, Secretary
<PAGE> 1
EXHIBIT 10.8
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of the 21st day of December, 1995, by
and between Rodman & Renshaw Capital Group, Inc., a Delaware corporation (the
"Company"), and Abaco Casa de Bolsa, S.A. de C.V., Abaco Grupo Financiero, a
corporation incorporated under the laws of the United Mexican States ("Abaco").
RECITALS
WHEREAS, Abaco owns a majority of the outstanding shares of capital stock
of the Company; and
WHEREAS, Abaco desires to invest additional funds in the Company in
consideration of additional shares of capital stock of the Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties agree as follows:
1. PURCHASE AND SALE OF SHARES. At the Closing (as hereinafter defined),
the Company shall issue and sell to Abaco, and Abaco shall purchase from the
Company 50 shares of Series B, non-voting preferred stock, $0.01 par value, of
the Company as further described in Exhibit A hereto (the "Shares"). The
terms, conditions, and agreements relating to the Shares as set forth in
Exhibit A form a part of this Agreement and are binding upon the parties.
2.
2. CONSIDERATION AND PAYMENT. In consideration for the Shares, Abaco
shall pay the Company at the Closing by bank check or wire transfer the
aggregate amount of U.S.$5,000,000.
3. CLOSING. The purchase and sale of the Shares shall take place at the
offices of the Company, on December 21, 1995, at a mutually agreeable time (the
"Closing"). At the Closing, the Company shall deliver or cause to be delivered
to Abaco, certificates evidencing the Shares, duly issued to Abaco, and any and
all other documents necessary to issue the Shares, and Abaco shall deliver or
cause to be delivered to the Company, the purchase price as provided in Section
2.
<PAGE> 2
- 2 -
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Abaco as follows:
A. Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
B. Capitalization. The aggregate number of shares of capital stock
which the Company is authorized to issue is 20,000,000 shares of common stock,
$0.09 par value, 6,645,802 of which are presently issued and outstanding and
5,000,000 shares of preferred stock, $0.01 par value, none of which are issued
or outstanding. The Shares have been duly authorized and when issued and paid
for in accordance with this Agreement will be validly issued, fully-paid, and
non-assessable. The shares of common stock of the Company into which the
Shares are convertible have been duly reserved for such conversion, and when
issued pursuant to such conversion such shares of common stock will be validly
issued, fully paid, and non-assessable.
C. Authority, Execution and Delivery. The Company has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby have been duly authorized
by all requisite corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable in accordance with its
terms.
D. Financial Statements. The Company has furnished to Abaco the
financial statements for the Company as of September 30, 1995, which statements
have been prepared in accordance with generally accepted accounting
principles consistently applied and present fairly the financial position of
the Company as of the date thereof and the results of operations for the
periods covered thereby. The Company further represents and warrants that
there has been no material change in the financial position of the Company
since such date.
E. No Conflict. Except for the authorization of the listing of the
shares of common stock into which the Shares are convertible prior to such
conversion by the New York Stock Exchange and the filing of a Certificate of
Designations in respect of the Shares with the Secretary of State of Delaware,
no authorization or consent is required in connection with the execution,
delivery, or performance of this Agreement by the Company and such execution,
delivery or performance will not conflict with or result in a breach of the
Company's charter documents or any material instrument or agreement.
<PAGE> 3
- 3 -
5. REPRESENTATIONS AND WARRANTIES OF ABACO. Abaco hereby represents and
warrants to the Company as follows:
A. Corporate Organization. Abaco is a Mexican corporation, duly
organized, validly existing and in good standing under the laws of the United
Mexican States.
B. No Conflict. Except for approval by Mexican regulatory
authorities, no authorization or consent is required in connection with the
execution, delivery, or performance of this Agreement by Abaco and such
execution, delivery or performance will not conflict with or result in a breach
of Abaco's charter documents or any material instrument or agreement.
C. Authority, Execution and Delivery. Abaco has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance of this
Agreement and the consummation of the transaction contemplated hereby have been
duly authorized by all requisite corporate action on the part of Abaco. This
Agreement has been duly executed and delivered by Abaco and constitutes the
legal, valid and binding obligation of Abaco enforceable in accordance with its
terms.
D. Investment Intent. The Shares acquired by Abaco pursuant to this
Agreement, and the shares of common stock which may be acquired upon conversion
of the Shares, will be acquired by Abaco for its own account and not with a
view to, or for resale in connection with, any distribution of any of the
Shares. Abaco acknowledges that it is aware of the applicable limitations
under the Securities Act of 1933, as amended, upon the subsequent sale of the
Shares, or such common shares, as the case may be, and that accordingly,
certificates representing the Shares, or such common shares, as the case may
be, may bear an appropriate legend.
6. CONDITIONS TO CLOSING. The obligations of each of the parties to
consummate the transactions contemplated by this Agreement shall be subject to
the following conditions:
A. Representations and Warranties True. The representations and
warranties of the other party shall be true and accurate in all material
respects as of the date of the Closing, as if made on such date.
B. No Litigation. There shall be no order, and no proceeding or
investigation, pending or threatened, restricting or prohibiting the
transactions contemplated by this Agreement.
C. Certificate of Designations. The Company shall have filed a
Certificate of Designations in respect of the Shares with the Secretary of
State of Delaware.
<PAGE> 4
- 4 -
D. Mexican Regulatory Approvals. All requisite approvals by Mexican
regulatory approvals shall have been obtained.
7. RIGHTS OFFERING. The Company agrees to commence a rights offering
in accordance with Section 6(a) of Exhibit A as soon as practicable after the
availability of the annual report for the Company's fiscal year ended December
31, 1995, which offering will effect the conversion of the Shares into shares
of common stock of the Company in accordance with the terms of said Section
6(a), and further agrees to promptly thereafter cause such common shares to be
listed on the New York Stock Exchange.
8. MISCELLANEOUS PROVISIONS.
A. Amendment, Modification and Waiver. This Agreement may be amended,
modified and supplemented, in writing only, by mutual consent of the parties
hereto. No failure on the part of any party to exercise any right, power or
privilege hereunder shall operate as a waiver.
B. Assignment. The respective rights and obligations of the Company and
Abaco under this Agreement shall not be assignable by either the Company or
Abaco without the prior written consent of the other.
C. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
D. Entire Agreement. This Agreement including the exhibit hereto
contains the entire understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
E. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
<PAGE> 5
- 5 -
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: RODMAN & RENSHAW CAPITAL
GROUP, INC.
By: By:
---------------------------- ----------------------------------
Title: Title:
------------------------- -------------------------------
ATTEST: ABACO CASA DE BOLSA, S.A. DE C.V.,
ABACO GRUPO FINANCIERO
By: By:
---------------------------- ----------------------------------
Title: Title:
------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.9
CONFIA, S.A., INSTITUCION DE BANCA MULTIPLE,
ABACO GRUPO FINANCIERO
PROMISSORY NOTE
By means of this PROMISSORY NOTE, the SUBSCRIBER unconditionally promises to
pay to the order of Confia, S.A., Institucion de Banca Multiple, Abaco Grupo
Financiero, Grand Cayman Branch (the "BANK"), the principal amount of
USD$26,500,000.00 (Twenty-Six Million, Five Hundred Thousand and 00/100 U.S.
Dlls) lawful currency of the United States of America precisely on June 03,
1996.
The SUBSCRIBER promises to pay on June 03, 1996 interest on the principal
amount hereof an annual rate of interest of 12%.
In the event the SUBSCRIBER shall fail to pay the principal amount hereof as
and when due hereunder, the unpaid amount shall bear interest from the date
such payment was due until payment of such amount in full calculated on a daily
basis of a rate per annum of 50%.
Interest hereunder shall be computed on the basis of a year of 360 days for the
actual number of days elapsed.
The principal amount hereof and interest thereon shall be payable to the BANK
in New York, New York, U.S.A., at the office of Swiss Bank, Co. of New York,
for the credit of the BANK's account No. 101-WA-012297-000, in freely
transferable Dollars and in same day funds, no later than 12:00 noon (New York
time), on the date on which such payments are due.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a business day, (meaning a day of the year on which banks in
London, England, carry on transactions in Dollars and banks in New York City,
U.S.A. and in Mexico City, United Mexican States ("Mexico") are not required or
authorized to close), such payment shall become due on the next following
business day.
The SUBSCRIBER agrees to make all payments in respect of principal and interest
free and clear of and without deduction, charge or withholding, or any tax
liabilities imposed on such amounts, actually or in the future payable in any
jurisdiction. If at any time Mexico (or any other country entitled to do so)
or any political subdivision or any taxing authority thereof or therein shall
impose, charge or collect any tax, charge, withholding, deduction, levy, or any
other fiscal liability together with interest, penalties, fines, or charges
thereon (the "Taxes"), on or with respect hereto or to any payment hereunder,
the SUBSCRIBER agrees to pay, immediately to the appropriate tax authority, on
behalf of the BANK the amount of any such additional amounts required to ensure
the BANK received the full amount that the BANK would have received had no such
payment of taxes been made.
<PAGE> 2
The SUBSCRIBER and the GUARANTOR hereby irrevocably submit to the jurisdiction
of any New York State court or any United States court sitting in New York
City, New York, United States or any competent court of Mexico City, Mexico or
of the city of CHICAGO, ILLINOIS, USA, in any action or proceeding arising out
of or relating to this PROMISSORY NOTE, as the plaintiff in such action or
proceeding may elect and the SUBSCRIBER and the GUARANTOR hereby irrevocably
agree that all claims in respect of such action or proceeding may be heard and
determined in any of such courts. The SUBSCRIBER and the GUARANTOR irrevocably
waive, to the fullest extent permitted by law, any objection which it may now
or hereafter have to laying of venue of any suit, action or proceeding with
respect to this PROMISSORY NOTE brought in any court aforementioned, and the
SUBSCRIBER and the GUARANTOR further irrevocably waive any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. The SUBSCRIBER and the GUARANTOR hereby expressly waive
all rights to any other jurisdiction, which they may now or hereafter have any
reason of their present or subsequent domiciles.
The SUBSCRIBER and the GUARANTOR hereby consent to service of process upon them
in any action or proceeding arising out of or relating to this PROMISSORY NOTE:
(i) if in the State of New York, United States, at the address of CT
Corporation System (the "Process Agent"), (ii) and if in the Federal District
of Mexico or in CHICAGO, ILLINOIS, USA, at the domicile appearing under their
respective name in this signature page.
This PROMISSORY NOTE is executed in an English and Spanish version, both of
which shall bind the SUBSCRIBER and the GUARANTOR and constitute one and the
same PROMISSORY NOTE; provided however, that in the case of doubt as to the
proper interpretation or construction of this PROMISSORY NOTE, the English text
shall be controlling in all cases, except that in the case of any legal
proceeding instituted in any court of Mexico the Spanish text shall be
controlling.
This PROMISSORY NOTE is executed in Chicago, Illinois, USA, on December 04,
1995.
THE SUBSCRIBER
/s/ Charles W. Daggs
- - - - ------------------------------------------------
By: Rodman & Renshaw Capital Group, Inc.
Title: President and Chief Executive Officer
Address: Sears Tower
233 S. Wacker Dr., Ste. 4500
Chicago, Illinois 60603
THE GUARANTOR
- - - - ------------------------------------------------
By:
Title:
Address:
<PAGE> 1
EXHIBIT 10.16
OPTION AGREEMENT
UNDER THE
RODMAN & RENSHAW CAPITAL GROUP, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Rodman & Renshaw Capital Group, Inc. (the "Company") and
__________________________ (the "Grantee") hereby agree as follows:
ARTICLE 1
DEFINED TERMS
Every term defined or given a special meaning in the Rodman & Renshaw
Capital Group, Inc. Non-Employee Director Stock Option Plan (the "Plan") has
the same meaning whenever it is capitalized in this Agreement.
ARTICLE 2
OPTION TERMS
2.1 Grant. The Company hereby acknowledges that it has granted the
Grantee a non-qualified stock option ("Option") under the Plan entitling the
Grantee to purchase shares of Stock from the Company on the terms and subject
to the conditions specified in this Agreement and the Plan.
2.2 Grant Date. The Grant Date of this Option is July 1, _______.
2.3 Number of Shares. Unless and until an adjustment shall be
made pursuant to Section 12 of the Plan, the maximum number of shares of Stock
which may be purchased with this Option is 7,500.
2.4 Option Price. Unless and until an adjustment shall be made
pursuant to Section 12 of the Plan, the price at which shares of Stock may be
purchased from the Company upon any exercise of this Option is $_____ per
share. After any adjustment shall be made under Section 12 of the Plan, the
price at which shares of Stock may be purchased under this Option at any given
time shall be the price established as a result of all adjustments made to this
Option pursuant to Section 12 of the Plan, at or before the given time.
<PAGE> 2
- 2 -
2.5 Vesting Schedule. Except as may otherwise be expressly
authorized by the provisions of the Plan or this Agreement, this Option shall
not vest and may not be exercised prior to the twelve-month anniversary of the
Grant Date. This Option shall vest and shall be exercisable in full from and
after the twelve-monthly anniversary of the Grant Date.
2.6 Non-Qualified Stock Option. It is expressly intended that this
Option shall not constitute an "incentive stock option" under Section 422 of
the Code.
ARTICLE 3
EXERCISE
3.1 Time of Exercise. To the extent vested, this Option may be
exercised in one or more installments at such time as the person entitled to
exercise this Option may desire with respect to all shares of Stock then
available under this Option, provided that in no event may this Option be
exercised after its termination date (as determined in accordance with Section
3.3 of this Agreement) or in a manner or to an extent contrary to this
Agreement or the Plan.
3.2 Manner of Exercise. In connection with any exercise of this
Option, the person exercising this Option shall give the Secretary of the
Company a written notice (the "exercise notice") which: (i) shall identify
this Option; (ii) shall specify the number of shares of Stock with respect to
which this Option is then being exercised and shall state that the person
signing such notice agrees to purchase the shares so specified at the price and
on the terms established in this Agreement and the Plan; (iii) shall identify
the form of payment of the Option price; and (iv) shall be signed by the person
entitled to exercise this Option. This Option shall be deemed to have been
exercised on the date (the "exercise date") of the actual receipt of (i)
payment of the Option price and (ii) the exercise notice relating to such
exercise completed as required by this Section 3.2 (or completed in such other
form or manner as shall be approved by the Secretary) at the main office of the
Company in Chicago, Illinois.
3.3 Termination. This Option may not be exercised after its
termination date, i.e., this Option does not convey any right to purchase any
shares which the Grantee shall not have agreed to purchase in an exercise
notice delivered on or prior to the termination date in accordance with the
requirements of Section 3.2 of this Agreement. The "termination date" for this
Option shall occur on the earlier of the following dates: (i) the tenth
anniversary of the Grant Date (which date shall be deemed to be the "expiration
date" of this Option), or (ii) any date established under any of the provisions
of this Agreement or the Plan as the date after which this Option may not be
exercised.
<PAGE> 3
- 3 -
ARTICLE 4
THE PLAN TERMS
4.1 Plan Terms Control. This Option has been granted under the
Plan as in effect as of the Grant Date. The terms of the Plan as in effect as
of the Grant Date are attached as Exhibit A to this Agreement, are incorporated
into this Agreement by reference and shall control the rights and obligations
of the Company and the Grantee under this Agreement. Without limiting by
implication the generality of the preceding provisions, the Company and the
Grantee expressly agree that:
(a) the amount and nature of shares of Stock
subject to this Option and the Option price available
under this Option may be adjusted to the extent and in the
manner provided in Section 12 of the Plan; and
(b) the rights of the Grantee under this
Agreement may not be assigned or otherwise pass to any
other person until and unless the Grantee should die.
4.2 Effect of Subsequent Changes in the Plan. No change in the Plan
which shall be made after the Grant Date shall affect the rights of the Grantee
under this Agreement unless the Grantee shall have agreed in writing to such
change. No change in the Plan after the Grant Date shall inure to the benefit
of the Grantee except to the extent expressly permitted by the Committee. The
term "Plan" as applied under this Agreement as of any time means the Rodman &
Renshaw Capital Group, Inc. Non-Employee Director Stock Option Plan as amended
and in effect on the Grant Date and as amended after the Grant Date to the
extent effect is to be given to such amendment under the provisions of this
Section 4.2.
ARTICLE 5
GENERAL PROVISIONS
5.1 Compliance with Law. The Grantee understands that (a) the
Company has no obligation to register or to continue the registration of the
shares of Stock subject to this Option and (b) the applicable securities laws
may restrict the right of the Grantee to exercise this Option or to dispose of
any Stock which the Grantee may acquire upon any such exercise and may govern
the manner in which such Stock must be sold. Any other provision in this
Agreement or the Plan notwithstanding:
(i) If the Company deems necessary to comply
with the Securities Act of 1933, the Company may require a
written investment intent
<PAGE> 4
- 4 -
representation by the Grantee and may require that a
restrictive legend be affixed to certificates for shares
of Stock.
(ii) If, based upon the opinion of counsel for
the Company, the Company determines that the exercise or
nonforfeitability of, or delivery of benefits pursuant to,
this Option would violate any applicable provision of (A)
federal or state securities laws or (B) the listing
requirements of any national securities exchange on which
are listed any of the Company's equity securities, then
the Company may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the
Company shall use its best efforts to cause such exercise,
nonforfeitability or delivery to comply with all such
provisions at the earliest practicable date.
(iii) The Plan and this Agreement are subject to all laws and
regulations of any governmental authority which may be
applicable thereto; and notwithstanding any provision of
the Plan or this Agreement, the Grantee shall not be
entitled to exercise this Option or receive the benefits
thereof and the Company shall not be obligated to deliver
any Stock or pay any benefits to the Grantee if such
exercise, delivery, receipt or payment of benefits
would constitute a violation by the Grantee or the Company
of any provision of any such law or regulation.
The Company shall not be obligated to issue any shares of Stock by reason of
any exercise of this Option until and unless the Company shall have received
full payment for those shares of Stock. No one shall have rights as a
stockholder with respect to any Stock issuable under this Option until and
unless such Stock is issued and delivered by the Company.
5.2 Binding Agreement. Each party acknowledges that it is
intended that the other party may rely on the rights granted by this Agreement
and that this Agreement is supported by adequate consideration and is binding
on each party in accordance with its terms. This Agreement shall also be
binding upon and inure to the benefit of any successor to the Company.
5.3 Complete Agreement. This Agreement and the Plan contain the
complete agreement between the parties relating in any way to this Option or
the rights or obligations of the parties evidenced by this Agreement and
supersede any prior or contemporaneous understandings, agreements or
representations by or between the parties, written or oral, which may have
related to such subject matter in any way.
<PAGE> 5
- 5 -
5.4 No Oral Commitments. No party hereto shall have any right to
rely upon or enforce any representation, warranty or agreement made by any other
person either before of after the date hereof unless such representation,
warranty or agreement shall be set forth in a writing which shall have been
signed by the person to be held responsible for such representation, warranty
or agreement.
5.5 Amendments and Waivers. The provisions of this Agreement may be
amended and a person may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if such amendment, act or
omission has been approved in writing by the parties to this Agreement. No
course of dealing or any delay in exercising any rights hereunder shall operate
as a waiver of any rights of any person under this Agreement. A waiver upon
any one occasion shall not be construed as a bar or waiver of any right or
remedy on any future occasion.
5.6 Counterparts. Two or more duplicate originals of the written
instrument containing this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same agreement.
5.7 Headings. The headings used in this Agreement are for
convenience only, do not constitute a part of this Agreement, and shall not be
deemed to limit, characterize, or in any way affect any provision of this
Agreement.
5.8 Severability. If any provision of this Agreement or the Plan
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining provisions of this Agreement or the Plan, and
the Agreement and the Plan shall each be construed and enforced as if the
illegal or invalid provisions had never been set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Grant Date.
RODMAN & RENSHAW CAPITAL GROUP, INC.
By:
-----------------------------------
Its:
-----------------------------------
GRANTEE:
Agreement No.
---- ----------------------------------------
<PAGE> 1
EXHIBIT 10.17
OPTION AGREEMENT
UNDER THE
RODMAN & RENSHAW CAPITAL GROUP, INC.
1994 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
Rodman & Renshaw Capital Group, Inc. (the "Company") and
__________________ (the "Grantee") hereby agree as follows:
ARTICLE 1
DEFINED TERMS
Every term defined or given a special meaning in the Rodman & Renshaw
Capital Group, Inc. 1994 Stock Option Plan, a copy of which is Exhibit A hereto
and made a part hereof as set forth in Article 4 below (the "Plan"), has the
same meaning as provided in the Plan whenever it is capitalized in this
Agreement.
ARTICLE 2
OPTION TERMS
2.1. Grant. The Company hereby acknowledges that it has granted the
Grantee an incentive stock option ("Option") under the Plan entitling the
Grantee to purchase shares of Stock from the Company on the terms and subject
to the conditions specified in this Agreement and the Plan.
2.2 Grant Date. The Grant Date of this Option is _______________.
2.3 Number of Shares. Unless and until an adjustment shall be made
pursuant to Section 22 of the Plan, the maximum number of shares of Stock which
may be purchased with this Option is _____________.
2.4 Option Price. Unless and until an adjustment shall be made
pursuant to Section 22 of the Plan, the price at which shares of Stock may be
purchased from the Company upon any exercise of this Option is $____ per share.
After any adjustment shall be made under Section 22 of the Plan, the price at
which shares of Stock may be purchased under this Option at any given time
shall be the price established as a result of all adjustments made to this
Option pursuant to Section 22 of the Plan, at or before the given time.
<PAGE> 2
-2-
2.5 Vesting Schedule. Except as may otherwise be expressly
authorized by the provisions of the Plan or this Agreement, this Option shall
vest as follows: ___________________________________________________________.
2.6 Incentive Stock Option. It is expressly intended that this
Option shall constitute an "incentive stock option" under Section 422 of the
Code.
ARTICLE 3
EXERCISE
3.1 Time of Exercise. To the extent vested, this Option may be
exercised in one or more installments at such time as the person entitled to
exercise this Option may desire with respect to all shares of Stock then
available under this Option, provided that in no event may this Option be
exercised after its termination date (as determined in accordance with Section
3.5 of this Agreement) or in a manner or to an extent contrary to this
Agreement or the Plan. Notwithstanding the foregoing,
<PAGE> 3
- 3 -
the aggregate Fair Market Value of Stock (determined on the Grant Date) with
respect to all incentive stock options granted to the Grantee under the Plan
or any other employee stock option plan of the Company or any parent or
Subsidiary of the Company exercisable for the first time by the Grantee during
any calendar year shall not exceed $100,000.
3.2 Manner of Exercise. In connection with any exercise of this
Option, the person exercising this Option shall give the Secretary of the
Company a written notice (the "exercise notice") which: (i) shall identify
this Option; (ii) shall specify the number of shares of Stock with respect to
which this Option is then being exercised and shall state that the person
signing such notice agrees to purchase the shares so specified at the price and
on the terms established in this Agreement and the Plan; (iii) shall identify
the form of payment of the Option price; (iv) shall indicate whether the
Grantee has elected Share Withholding as provided in Section 3.3 below; and (v)
shall be signed by the person entitled to exercise this Option. This Option
shall be deemed to have been exercised on the date (the "exercise date") of the
actual receipt of (i) payment of the Option price and (ii) the exercise notice
relating to such exercise completed as required by this Section 3.2 (or
completed in such other form or manner as shall be approved by the Secretary)
at the main office of the Company in Chicago, Illinois.
3.3 Elective Share Withholding.
(a) Subject to subsection (b) below, the Grantee may elect the
withholding ("Share Withholding") by the Company of a portion of the
shares of Stock otherwise deliverable to such Grantee upon the exercise
of this Option (a "Taxable Event") having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required federal,
state, or local withholding tax liability attributable to the
Taxable Event; or
(ii) with the Committee's prior approval, a greater amount,
not to exceed the estimated total amount of the Grantee's tax
liability with respect to the Taxable Event.
(b) Each Share Withholding election shall be subject to the
following restrictions:
(i) the Grantee's election shall be subject to the Committee's
right to revoke such election at any time before the Grantee's
election;
(ii) if the Grantee is a Section 16 Grantee, such Grantee's
election shall be subject to the disapproval of the Committee
at any time;
<PAGE> 4
- 4 -
(iii) the Grantee's election must be made before the date (the
"Tax Date") on which the amount of tax to be withheld is
determined;
(iv) the Grantee's election shall be irrevocable;
(v) a Section 16 Grantee may not elect Share Withholding
within six months after the Grant Date of this Option (except
if the Grantee dies or incurs a Disability before the end of
the six-month period); and
(vi) except to the extent such condition may be waived by the
General Counsel of the Company, a Section 16 Grantee must elect
Share Withholding either six months before the Tax Date or
during the ten business day period beginning on the third
business day after the release of the Company's quarterly or
annual summary statement of sales and earnings.
3.4 Section 83(b) Election. The Committee may at any later date
prohibit the Grantee from making the election permitted under Section 83(b) of
the Code (i.e., an election to include in the Grantee's gross income in the
year of exercise the amounts specified in Section 83(b) of the Code). If the
Committee has not prohibited the Grantee from making such election, and the
Grantee shall, in connection with the exercise of this Option, make such
election, the Grantee shall notify the Company of such election within 10 days
of filing notice of the election with the Internal Revenue Service, in addition
to any filing and notification required pursuant to regulations issued under
the authority of Section 83(b) of the Code.
3.5 Termination. This Option may not be exercised after its
termination date, i.e., this Option does not convey any right to purchase any
shares which the Grantee shall not have agreed to purchase in an exercise
notice delivered on or prior to the termination date in accordance with the
requirements of Section 3.2 of this Agreement. The "termination date" for this
Option shall occur on the earlier of the following dates: (i) the tenth
anniversary of the Grant Date, or fifth anniversary if the Grantee is a 10%
Owner (which date shall be deemed to be the "expiration date" of this Option),
or (ii) any date established under any of the provisions of this Agreement or
the Plan as the date after which this Option may not be exercised.
3.6 Disqualifying Dispositions. The Grantee shall notify the
Company of any disposition of the Stock issued pursuant to the exercise of this
Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions) within 10 days of such
disposition.
<PAGE> 5
- 5 -
ARTICLE 4
THE PLAN TERMS
4.1 Plan Terms Control. This Option has been granted under the
Plan as in effect as of the Grant Date. The terms of the Plan as in effect as
of the Grant Date are attached as Exhibit A to this Agreement, are incorporated
into this Agreement by reference and shall control the rights and obligations
of the Company and the Grantee under this Agreement. To the extent that the
Plan and this Agreement are inconsistent, the Plan shall control. Without
limiting by implication the generality of the preceding provisions, the Company
and the Grantee expressly agree that:
(a) the amount and nature of shares of Stock
subject to this Option and the Option price available
under this Option may be adjusted to the extent and in the
manner provided in Section 22 of the Plan; and
(b) the rights of the Grantee under this
Agreement may not be assigned or otherwise pass to any
other person until and unless the Grantee should die.
4.2. Effect of Subsequent Changes in the Plan. No change in the
Plan which shall be made after the Grant Date shall affect the rights of the
Grantee under this Agreement unless the Grantee shall have agreed in writing to
such change. No change in the Plan after the Grant Date shall inure to the
benefit of the Grantee except to the extent expressly permitted by the
Committee. The term "Plan" as applied under this Agreement as of any time
means the Rodman & Renshaw Capital Group, Inc. 1994 Stock Option Plan as
amended and in effect on the Grant Date and as amended after the Grant Date to
the extent effect is to be given to such amendment under the provisions of this
Section 4.2.
<PAGE> 6
- 6 -
ARTICLE 5
GENERAL PROVISIONS
5.1 Compliance with Law. The Grantee understands that (a) the
Company has no obligation to register or to continue the registration of the
shares of Stock subject to this Option and (b) the applicable securities laws
may restrict the right of the Grantee to exercise this Option or to dispose of
any Stock which the Grantee may acquire upon any such exercise and may govern
the manner in which such Stock must be sold. Any other provision in this
Agreement or the Plan notwithstanding:
(i) If the Company deems necessary to comply
with the Securities Act of 1933, the Company may require a
written investment intent representation by the Grantee
and may require that a restrictive legend be affixed to
certificates for shares of Stock.
(ii) If, based upon the opinion of counsel for
the Company, the Company determines that the exercise or
nonforfeitability of, or delivery of benefits pursuant to,
this Option would violate any applicable provision of (A)
federal or state securities laws or (B) the listing
requirements of any national securities exchange on which
are listed any of the Company's equity securities, then
the Company may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the
Company shall use its best efforts to cause such exercise,
nonforfeitability or delivery to comply with all such
provisions at the earliest practicable date.
(iii) The Plan and this Agreement are subject
to all laws and regulations of any governmental authority
which may be applicable thereto; and notwithstanding any
provision of the Plan or this Agreement, the Grantee shall
not be entitled to exercise this Option or receive the
benefits thereof and the Company shall not be obligated to
deliver any Stock or pay any benefits to the Grantee if
such exercise, delivery, receipt or payment of benefits
would constitute a violation by the Grantee or the Company
of any provision of any such law or regulation.
The Company shall not be obligated to issue any shares of Stock by reason of
any exercise of this Option until and unless the Company shall have received
full payment for those shares of Stock. No one shall have rights as a
stockholder with respect to any Stock issuable under this Option until and
unless such Stock is issued and delivered by the Company to the Grantee.
<PAGE> 7
- 7 -
5.2 No Right to Employment. No obligation of the Company or any of
its Subsidiaries as to the length of any Grantee's employment shall be implied
by the terms of the Plan or this Agreement.
5.3 Binding Agreement. Each party acknowledges that it is intended
that the other party may rely on the rights granted by this Agreement and that
this Agreement is supported by adequate consideration and is binding on each
party in accordance with its terms. This Agreement shall also be binding upon
and inure to the benefit of any successor to the Company.
5.4 Complete Agreement. This Agreement and the Plan contain the
complete agreement between the parties relating in any way to this Option or
the rights or obligations of the parties evidenced by this Agreement and
supersede any prior or contemporaneous understandings, agreements or
representations by or between the parties, written or oral, which may have
related to such subject matter in any way.
5.5 No Oral Commitments. No party hereto shall have any right to
rely upon or enforce any representation, warranty or agreement made by any
other person either before of after the date hereof unless such representation,
warranty or agreement shall be set forth in a writing which shall have been
signed by the person to be held responsible for such representation, warranty
or agreement.
5.6 Amendments and Waivers. The provisions of this Agreement may
be amended and a person may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if such amendment,
act or omission has been approved in writing by the parties to this Agreement.
No course of dealing or any delay in exercising any rights hereunder shall
operate as a waiver of any rights of any person under this Agreement. A waiver
upon any one occasion shall not be construed as a bar or waiver of any right or
remedy on any future occasion.
5.7 Counterparts. Two or more duplicate originals of the written
instrument containing this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same agreement.
5.8 Headings. The headings used in this Agreement are for
convenience only, do not constitute a part of this Agreement, and shall not be
deemed to limit, characterize, or in any way affect any provision of this
Agreement.
5.9 Severability. If any provision of this Agreement or the Plan
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining provisions of this Agreement or the Plan, and
the Agreement and the Plan shall each be construed and enforced as if the
illegal or invalid provisions had never been set forth herein.
<PAGE> 8
- 8 -
5.10 Tax Treatment. To receive the tax treatment usually applicable to
incentive stock options, the Grantee will be required to meet certain
qualifications and will be subject to certain restrictions. The Company does
not provide tax advice to Grantees and tax rules are not only complex, but
constantly changing. Thus, it is recommended that the Grantee consult with his
or her tax adviser to determine which qualifications and restrictions may be
applicable to the Grantee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Grant Date.
RODMAN & RENSHAW CAPITAL GROUP, INC.
By:
-----------------------------------
GRANTEE:
Agreement No.
------ ----------------------------------
----------------------------------
<PAGE> 1
EXHIBIT 10.20
<TABLE>
<S> <C>
MASTER LEASE AGREEMENT FACILITY CAPITAL CORPORATION
333 West Wacker Drive, Suite 1750
Chicago, IL 60606
(312) 541-6000
LESSEE: Rodman & Renshaw Capital Group, Inc. MASTER LEASE AGREEMENT NUMBER:RODM-1
------------------------------------------------- ------
ADDRESS: 233 South Wacker Drive, Chicago, Illinois 60603 DATE: May 31, 1995
------------------------------------------------ ------------
</TABLE>
WHEREAS, FACILITY CAPITAL CORPORATION ("Lessor") desires to lease equipment to
Lessee, and Lessee desires to lease same from Lessor;
NOW THEREFORE, in consideration of the mutual promises contained herein, Lessor
and Lessee agree as follows:
1. LEASE
This Master Lease Agreement ("MLA") establishes the general terms and
conditions by which Lessor may lease to Lessee the equipment, together with all
additions, accessories and alterations now or hereinafter affixed thereto
(collectively, the "Equipment"), listed on each Equipment Schedule executed
periodically pursuant to this MLA. Each such Equipment Schedule shall
incorporate by reference the terms of this MLA, and shall constitute a separate
and distinct lease and contractual obligation of the Lessee. In this MLA, the
term "Lease" shall refer to an individual Equipment Schedule which incorporates
this MLA, and the term "Leases" shall refer to all such Equipment Schedules.
If the provisions of an Equipment Schedule conflict with the provisions of this
MLA, the provisions of such Equipment Schedule shall prevail.
2. TERM AND RENT PAYMENTS
The term of each Lease with respect to the Equipment shall begin on the date
("Acceptance Date") on which Lessee executes the confirmation of unconditional
acceptance described in section 5, and shall include any "Interim Term"
(defined below), the "Basic Term" set forth in the Equipment Schedule relating
thereto, any extension of the Basic Term, and any renewal term(s)
(collectively, the "Term"). If the Acceptance Date is the first day of a
calendar month, then such date shall also be the Commencement Date; otherwise,
the Commencement Date shall be the first day of the calendar month following
the Acceptance Date. The "Interim Term" as used herein shall be that period
from and including the Acceptance Date to the Commencement Date. Lessee shall
pay to Lessor on the Commencement Date, as additional rent, an amount equal to
one thirtieth (1/30) of the monthly rent payable during the Basic Term as set
forth in the Equipment Schedule (the "Monthly Rent") multiplied by the number
of days in the Interim Term. The Basic Term shall commence on the Commencement
Date.
Lessee's obligation to pay rent shall commence on the Acceptance Date of the
Lease. Lessee agrees to pay the total rent for the entire Term, which shall be
the total of all Monthly Rent and other required payments as set forth in the
Equipment Schedule plus such additional rent amounts as may become due
hereunder (the foregoing hereinafter collectively referred to as "Rent").
Except as otherwise provided in this Lease, Rent payments shall be monthly and
shall be payable in advance on the first day of each month during the Term of
this Lease beginning with the Commencement Date. All Rent payments shall be
due and payable whether or not Lessee has received notice or demand that such
Rent payments are due, and shall be sent or personally delivered to the address
of the Lessor as specified in the Equipment Schedule or as otherwise directed
by the Lessor in writing. TIME IS OF THE ESSENCE. PAYMENTS OF RENT WHICH ARE
NOT RECEIVED BY LESSOR ON OR BEFORE THE DUE DATE SHALL BE DELINQUENT AND SHALL
BE SUBJECT TO A TWO PERCENT (2%) LATE CHARGE FOR EACH FULL AND/OR FRACTIONAL
MONTH DELINQUENT (THE "LATE CHARGE RATE"). Such late charges shall be deemed
to be Rent and be due
(1)
<PAGE> 2
and payable within ten (10) days of Lessor's issuance of an invoice therefor.
If, upon expiration of the Basic Term hereof, the Equipment Schedule requires
Lessee, or grants Lessee the option, to elect to (a) purchase the Equipment,
(b) renew the Lease, or (c) return the Equipment to Lessor as hereinafter
provided, or any combination of the foregoing (hereinafter, the "Option" or
"Options"), then Lessee shall give written notice to Lessor not more than
twelve (12) months nor less than six (6) months prior to such expiration as to
which Option Lessee elects. If Lessee fails to so notify Lessor, then the
Basic Term of this Lease shall automatically be extended for successive monthly
periods until such time as Lessee has provided Lessor with six (6) months prior
written notice of its election. If Lessor and Lessee cannot agree on purchase
or renewal terms, the Basic Term of this Lease shall be automatically extended
for successive monthly periods until such time as a renewal rent is agreed upon
by the parties or a purchase or return of the Equipment is effected in
accordance with the terms of this Lease. If the Equipment Schedule requires
the Lessee to pay a minimum fair market value payment ("Minimum FMV Payment")
in connection with a purchase or return of the Equipment upon expiration of the
Basic Term, Lessee's obligation to pay such Minimum FMV Payment shall not abate
by reason of extension of the Basic Term as provided for in the two immediately
preceding sentences. If Lessee elects to renew the Lease in accordance with
the terms hereof and any Rent or other payment due hereunder shall be past due
upon expiration of the Basic Term (after taking effect of any extension as
provided for above), then, at the option of Lessor and without limiting
Lessor's rights pursuant to section 19 hereof, the Basic Term of the Lease may
be extended for successive monthly periods until such time as all Rent and
other payments then due (including those due as a result of extension of the
Basic Term) are received by Lessor, whereupon the renewal term will commence as
of the first day of the following month. Lessee shall pay the Monthly Rent
each month during any extension of the Basic Term. Each Option shall apply to
all, but not less than all, of the Equipment subject to the Lease. If any
Option to purchase is subject to Lessor's written consent, Lessor's consent may
be withheld with or without cause.
If Lessee purchases the Equipment pursuant to the terms of this Lease, the
purchase price shall be payable at the expiration of the Term hereof; if Lessee
fails to timely make such payment, Lessee shall pay as additional rent an
amount equal to one-thirtieth (1/30) of the Monthly Rent for each day
delinquent. Any such sale of the Equipment to Lessee will be made "as is,
where is" without representation or warranty of any kind except that Lessor
will warrant that it owns the Equipment free and clear of any liens, claims or
encumbrances created by Lessor. Except in the event of a purchase of the
Equipment by Lessee, Lessee agrees to return the Equipment to Lessor at
expiration of the Term in accordance with the terms of this Lease. Without
limiting the rights and remedies of Lessor in an event of default, if Lessee
fails for any reason to re-deliver the Equipment back to Lessor, an agent of
Lessor, or to a common carrier consigned for shipment to Lessor, in accordance
with Lessor's written instructions, within fourteen (14) days after expiration
of the Term of this Lease, then (a) Lessee shall pay as additional rent one
hundred fifty percent (150%) of one-thirtieth (1/30) of the Monthly Rent for
each of such fourteen (14) days and for each day thereafter until such
re-delivery, and (b) Lessee shall have no further right to the Equipment, but
until the Equipment is so returned the Lease shall remain in full force and
effect as to obligations of the Lessee thereunder. Any Minimum FMV Payment due
with the return of the Equipment shall be subject to late charges calculated at
the Late Charge Rate if not received by Lessor on or before expiration of the
Basic Term.
3. TITLE
This is an agreement of lease only. The Equipment is and shall at all times be
and remain the sole and exclusive personal property of Lessor. Nothing herein
shall be construed as conveying to Lessee any right, title, or interest in or
to the Equipment leased hereunder, except the express interest hereunder of
Lessee as a lessee to maintain possession and use of the Equipment for the Term
of this Lease. No options or agreements for renewal of the Lease or purchase
of the Equipment by Lessee exist, nor shall any be implied, except as
specifically stated in the Equipment Schedule.
All the Equipment shall remain personal property (even though said Equipment
may hereafter become attached or affixed to realty) and title thereto shall at
all times remain in Lessor exclusively. All replacement parts, substitutions,
modifications, repairs, alterations, additions, accessories and operating
controls incorporated in or affixed to the Equipment (herein collectively
called "additions" and included in the definition of Equipment) whether before
or after the Commencement Date of this Lease, shall become the sole and
exclusive property of Lessor upon being so incorporated or affixed, and shall
be returned to Lessor as provided in section 5. At any time during the Term of
this Lease, upon request of Lessor, Lessee will promptly affix to the Equipment
labels supplied by Lessor in accordance with Lessor's instructions, and keep
same affixed throughout the Term of this Lease.
Lessor is hereby authorized by Lessee, at the Lessee's expense, to (i) obtain
lien searches on Lessee, and (ii) cause this Lease or any statement or other
instrument in respect thereto, showing the interest of the Lessor in the
Equipment, to be filed or recorded, or re-filed or re-recorded, with any
governmental agency deemed appropriate by Lessor. Lessee agrees to promptly
execute and deliver, or cause to be executed and delivered, to Lessor any
statement or instrument requested by Lessor for the purpose of showing Lessor's
interest in the Equipment, including, without limitation, UCC financing
statements, security agreements and waivers of rights in the Equipment from
owners and mortgagees of real property wherein the Equipment is located.
Lessee hereby grants to Lessor a limited power of attorney to execute in
Lessee's name any UCC financing statements or other documents or instruments
deemed necessary by Lessor to protect Lessor's interests in the Equipment. If
any item of Equipment includes computer software, Lessee shall execute and
deliver, and shall cause the seller or supplier thereof to execute and deliver,
all such documents to Lessor as Lessor deems necessary to effectuate the
assignment of all applicable software licenses to Lessor. Lessee shall at its
expense (a) protect and defend Lessor's title to the Equipment from and against
all persons claiming by, through or under Lessee, (b) at all times keep the
Equipment free from any and all liens, encumbrances, attachments, levies,
executions, burdens, charges, or legal process of any and every type
whatsoever, (c) give Lessor immediate written notice of any of the above, and
(d) indemnify, defend and save Lessor harmless of and from any loss, cost or
expense (including attorneys' fees) that may be imposed on, incurred by, or
asserted against Lessor as a result of any of the events described in (a) or
(b) above.
(2)
<PAGE> 3
4. CHANGES IN EQUIPMENT COST
As used in this Lease, "Equipment Cost" means the total cost to Lessor
of purchasing and delivering the Equipment to Lessee and, subject to Lessor's
consent, may include taxes, transportation and other charges. To the extent
such taxes, transportation and other charges are excluded from Equipment Cost,
Lessee agrees to pay such amounts when due or, if paid by Lessor at its option,
to remit such amounts to Lessor in accordance with section 8 and section 16.
The amount of the Monthly Rent, security deposit, Minimum FMV Payment and other
amounts set forth on the Equipment Schedule are based on an estimate of the
total cost of the Equipment, which may, but need not be, set forth on the
Equipment Schedule, and such amounts shall be adjusted proportionately if the
Equipment Cost differs from said estimate. Lessee hereby authorizes Lessor to
so adjust the amounts set forth in the Equipment Schedule when the Equipment
Cost is known. Lessor will inform Lessee of the adjustments necessary to
reflect the Equipment Cost.
5. DELIVERY, ACCEPTANCE AND RETURN OF EQUIPMENT
Without limiting the rights of Lessor in the event of a default by Lessee,
Lessor shall at any time prior to the Acceptance Date have the right to
terminate this Lease if (a) there shall be, in the reasonable judgment of
Lessor, a material and adverse change in Lessee's financial condition, or (b)
Lessor, in good faith, otherwise deems itself insecure, or (c) said Equipment
is for any reason not delivered to, installed, and unconditionally accepted (as
evidenced by execution and delivery of the confirmation of unconditional
acceptance hereinafter described) within 90 days after the date of Lessee's
execution of the Equipment Schedule pertaining to such Equipment. Upon any
termination pursuant to this paragraph, Lessee shall forthwith pay to Lessor
all amounts then due under this Lease and any written agreements between Lessee
and Lessor in connection herewith (including, without limitation, any progress
payment agreement), whereupon if Lessee is not in default and has then fully
performed all of its obligations hereunder and under any such written
agreements, Lessor will, upon request of Lessee, transfer to Lessee without
warranty or recourse any rights that Lessor may then have with respect to such
Equipment.
Upon delivery and proper installation of the Equipment at the premises of the
Lessee as specified in the Equipment Schedule (the "Premises"), but in no event
later than 15 days after such delivery and installation, Lessee agrees to
promptly execute and deliver to Lessor a confirmation of unconditional
acceptance thereof in the form supplied by Lessor (the "Equipment Acceptance"
form). Lessee further agrees to promptly inform Lessor, and in any event prior
to executing the Equipment Acceptance, of any defects in the Equipment, or in
the installation thereof, which have come to the attention of Lessee or its
agents and which might give rise to a claim by Lessee against the seller or
manufacturer or any other person, and failure to do so shall be an
acknowledgement by Lessee that no such defects in the Equipment or its
installation exist to the knowledge of Lessee or its agents.
Except in the event of Lessee purchasing the Equipment from Lessor, upon
expiration of the Term of this Lease for any reason whatsoever, Lessee shall
return the Equipment to Lessor in good condition and repair, reasonable wear
and tear excepted, and operable within the applicable specifications published
by the seller or manufacturer thereof. Lessee shall make such return at its
expense, by causing the Equipment to be assembled, crated and loaded on board
such carrier as Lessor shall specify, and shipping the same, freight and
insurance prepaid, to the destination specified by Lessor; provided, however,
that Lessor shall reimburse Lessee for any freight charges incurred at the
direction of Lessor which may exceed the charges for shipment from the then
location of the Equipment to Lessor's principal place of business in Chicago,
Illinois. Lessee shall pay to Lessor on demand, as additional rent hereunder,
the costs of repairs and replacements (for items of Equipment worn or damaged
beyond repair) necessary to then place the Equipment in the condition required
by this Lease.
6. DISCLAIMER OF WARRANTIES
Lessee has selected and chosen the type and quality of Equipment herein leased
and the seller(s) and manufacturer(s) (hereinafter collectively referred to as
"Seller") thereof, as set forth in the Equipment Schedule. Lessor's purchase
of the Equipment is in connection with this Lease, and Lessee acknowledges that
Lessee has received and approved all the terms and conditions of such purchase
including, without limitation, all quotations, purchase orders, purchase
agreements and supply contracts. LESSOR MAKES NO WARRANTY, EITHER EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS, ADAPTABILITY OR
SUITABILITY FOR ANY PARTICULAR PURPOSE, AND AS TO LESSOR, LESSEE LEASES, HIRES
AND RENTS THE EQUIPMENT "AS IS." Lessee understands and agrees that neither
Seller, nor any agent of Seller, is an agent of Lessor or is in any manner
authorized to waive or alter any term or condition of this Lease. No
representation as to the Equipment or any other matter by Seller shall be
deemed Lessor's representation and in no way shall affect Lessee's duties to
perform its obligations as set forth in this Lease. Lessor shall not be liable
for any loss or damage suffered by Lessee or by any other person or entity,
direct or indirect or consequential, including, but not limited to, business
interruption and injury to persons or property, resulting from non-delivery or
late delivery, installation, failure or faulty operation, condition,
suitability, or use of the Equipment leased by Lessee hereunder, or for any
failure of any representations, warranties or covenants made by Seller. Any
claims of Lessee shall not be made against Lessor but shall be made, if at all,
solely and exclusively against Seller and persons other than the Lessor.
Lessor hereby authorizes Lessee to enforce during the term of this Lease, in
its name, but at Lessee's sole effort and expense, all warranties, agreements
or representations, if any, which may have been made by Seller to Lessor or to
Lessee, and Lessor hereby agrees to assign to Lessee solely for the purpose of
making and prosecuting any such claim, all rights which Lessor has against
Seller for breach of warranty or other representation respecting the Equipment.
At Lessor's option, all cash proceeds or equivalent thereof resulting from any
such claim shall be used to repair or replace the Equipment.
7. USE, CARE AND MAINTENANCE OF THE EQUIPMENT
Lessee shall, at its own expense, maintain the Equipment in good operating
condition, repair and appearance, and protect the same from deterioration
except for reasonable wear and tear alone. Lessee shall use the Equipment in
the ordinary course of Lessee's business only, within the normal capacity of
the Equipment, without abuse, and in the manner contemplated by the Seller.
Lessee shall comply with Seller's instructions relating to the Equipment, and
with any applicable laws and governmental regulations. When generally offered
by the Seller, Lessee shall, at its expense, keep in full force and effect,
throughout the Term of this Lease, a prime shift maintenance contract with such
Seller, and take such other actions necessary to ensure that the Equipment
remains eligible for such a contract upon expiration of the Term of this Lease.
Lessee shall not make any modification, alteration, or addition to the
Equipment (other than normal operating controls and accessories) without the
express written consent of Lessor which shall not unreasonably be withheld.
Lessee shall, at its sole cost and expense, make such repairs, alterations and
replacements to the Equipment as may be prescribed by Seller or required as a
matter of law. Lessee will not permit anyone other than the authorized
representatives of the Seller to effect any repair, replacement, alteration, or
addition to the Equipment, all of which
(3)
<PAGE> 4
shall be free and clear of all liens, claims and encumbrances and shall
immediately become the property of Lessor under the Lease.
Lessee shall retain uninterrupted possession and control of the
Equipment and shall at all times use it solely and continuously in the conduct
of Lessee's business. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE MAY NOT
(A) SELL, CONVEY, TRANSFER, ENCUMBER, PART WITH POSSESSION OF, ASSIGN OR
SUBLEASE, ANY ITEM OF EQUIPMENT OR ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER,
AND ANY SUCH PURPORTED TRANSACTION SHALL BE VOID AND OF NO FORCE OR EFFECT, (B)
RELOCATE OR OPERATE THE EQUIPMENT AT LOCATIONS OTHER THAN THE PREMISES, OR (C)
PLACE THE EQUIPMENT, OR ANY ITEM THEREOF, IN STORAGE. NO RELOCATION,
ASSIGNMENT, TRANSFER, SUBLEASE OR OTHER DISPOSITION BY LESSEE SHALL, IN ANY
MANNER WHATSOEVER, RELIEVE LESSEE OF ANY OF ITS OBLIGATIONS HEREUNDER, AND
LESSEE SHALL REMAIN PRIMARILY LIABLE TO PAY AND PERFORM ALL OF ITS OBLIGATIONS
HEREUNDER. In the event of relocation of the Equipment or any item thereof to
which Lessor consents, all costs of any nature whatsoever (including additional
taxes and insurance expense) resulting from such relocation shall be promptly
paid by Lessee. Lessor shall have the right, during normal business hours, to
enter Lessee's premises where the Equipment is located in order to inspect,
observe, affix labels or other markings, to remove, or to exhibit the Equipment
to prospective purchasers or future lessees thereof, or to otherwise protect
Lessor's interest therein, and Lessee shall cooperate in affording Lessor the
opportunity to do so.
8. TAXES AND OTHER CHARGES
THIS LEASE IS INTENDED TO BE A NET LEASE, AND PAYMENTS HEREUNDER ARE INTENDED
TO BE NET TO LESSOR. All taxes (including, without limitation, gross receipts
taxes, personal property taxes and sales, use and leasing taxes), assessments,
licenses, registration fees and other charges and together with penalties,
interest or fines relating thereto (collectively, "Taxes") that pertain to the
Equipment, its acquisition, purchase, use, ownership, transfer or lease which
accrue prior to or upon expiration of the Term of this Lease (except for
Lessor's federal or state net income taxes), whether such taxes are assessed or
would ordinarily be assessed against Lessor or Lessee, shall be timely paid by
the Lessee. To the extent possible under applicable law, Lessee agrees to
timely report, file, and pay when due such Taxes to the appropriate taxing
authority and shall send a copy of any such report or return to Lessor; in case
of failure of Lessee to so pay such Taxes, Lessor may pay all or any part of
such Taxes, in which event the Taxes so paid by Lessor plus expenses incurred
by Lessor in connection therewith (including, without limitation, attorneys'
fees) shall be immediately payable by Lessee to Lessor together with interest
thereon from the date(s) of Lessor's payment(s) to the date of Lessor's receipt
of Lessee's payment therefor at the rate per annum of the greater of 18% or
125% of the prime rate of interest as reported in The Wall Street Journal from
time to time but not more than the highest rate permitted by applicable law
(the "Delinquency Rate"). Notwithstanding the foregoing, Lessor may elect to
invoice Lessee for certain Taxes (including, without limitation, sales, use,
gross receipts or other tax that may be imposed on or measured by Rent) as
additional rent, which Lessee agrees to pay in accordance with Lessor's
invoices therefor.
Lessee shall promptly pay all costs, expenses, and obligations of every kind
and nature in connection with the use or operation of the Equipment which may
arise, accrue, or become due during the Term of this Lease, whether or not
specifically mentioned herein.
9. INDEMNITY
Lessee shall and does hereby agree to indemnify, defend and save Lessor and
Lessor's assignee(s) harmless of and from any and all loss, liability
(including negligence, tort and strict liability), damage (including, without
limitation, Lessee's loss of business or profits), injury, demand and expense
(including, without limitation, attorneys' fees) of any kind whatsoever arising
out of, on account of, or in connection with (a) this Lease, (b) the Equipment,
including, without limitation, its manufacture, selection, purchase, delivery,
nondelivery, installation, ownership, possession, seizure, attachment,
financing, operation, control, use, maintenance, deinstallation, and the return
thereof, and (c) the violation of any local, state or federal law, rule or
regulation pertaining to environmental regulation, contamination or cleanup.
This indemnity shall not be affected or terminated by reason of the expiration
of this Lease for any reason, with respect to all or any part of the Equipment,
and shall survive the Term of this Lease. However, this indemnity shall not
cover any liability, loss, damage, injury, demand or expense arising from
events which occur after the Equipment is returned to Lessor pursuant to the
terms of this Lease. Lessee agrees to notify Lessor immediately as to any
claim, suit, action, damage (including to the Equipment) or injury covered by
this section.
10. INSURANCE
Lessee shall, at its own expense, keep the Equipment (including all additions
thereto) insured against all risks of loss or damage from every and any cause
whatsoever in such form as is satisfactory to Lessor and in an amount
sufficient at all times to pay the greater of the full replacement cost of the
Equipment or the applicable stipulated loss value payment set forth in the
Equipment Schedule (the "Stipulated Loss Value Payment"). All such policies
shall protect Lessor and Lessor's assignee(s) and Lessee as their interests may
appear, and shall provide that all losses shall be payable to Lessor, and
adjusted solely with Lessor.
Lessee shall also, at its own expense, carry public liability insurance, with
Lessor and Lessor's assignee(s) as an additional insured, in such amounts with
such companies and in such form as is satisfactory to Lessor, with respect to
injury to person or property resulting from or based in any way upon or in any
way connected with or related to the installation, use or alleged use, or
operation of any or all of the Equipment, or its location or condition.
Lessee shall deliver to Lessor, prior to any payments for the Equipment,
certificates of insurance or other satisfactory evidence of such insurance, and
shall further deliver evidence of each renewal of these policies not less than
30 days prior to expiration thereof. Each such policy shall contain an
endorsement providing that the insurer will give Lessor not less than thirty
(30) days prior written notice of the effective date of any modification or
cancellation of such policy, or the failure by Lessee to timely pay all
required premiums, costs or charges with respect thereto.
In case of failure by Lessee to timely procure or maintain insurance required
hereunder, Lessor shall have the right, but not the obligation, to obtain such
insurance and any premium or other cost related thereto paid by Lessor shall be
immediately due and payable by Lessee to Lessor together with interest thereon
at the Delinquency Rate from the date(s) of Lessor's payment(s) to the date of
Lessor's receipt of Lessee's payment therefor. The maintenance of insurance
policies pursuant to the provisions of this section shall not limit any
obligation or liability of Lessee pursuant to section 9, section 11 or any
other provision of this Lease.
11. RISK OF LOSS
Until such time as the Equipment is returned and delivered to and accepted by
Lessor, pursuant to the terms hereof, Lessee hereby assumes and shall bear the
entire risk of loss, damage, theft, destruction or governmental requisition of
the Equipment or any portion thereof, from any cause whatsoever, commencing
with delivery of such Equipment to Lessee. Without limitation of the
foregoing, no loss, damage, theft, destruction or governmental requisition of
the Equipment shall relieve Lessee in any way from its obligations hereunder.
(4)
<PAGE> 5
Lessee shall promptly notify Lessor in writing of any loss, damage, theft,
destruction or governmental requisition of the Equipment. In the event of any
such loss, damage, theft, destruction or governmental requisition of any item
of the Equipment (the "Casualty Equipment"), Lessee shall, at the option of
Lessor: (a) promptly place, at Lessee's expense, the Casualty Equipment in good
repair, condition and working order in accordance with Seller's specifications
and to the satisfaction of Lessor; or (b) promptly replace, at Lessee's
expense, the Casualty Equipment with like equipment (the "Replacement
Equipment") of the same or a later model of equivalent or greater value and
substantially similar or improved in operating performance as compared to the
operating performance of the Casualty Equipment, with the same additions as the
Casualty Equipment, and in good repair, condition and working order in
accordance with Seller's specifications and to the satisfaction of Lessor; or
(c) immediately pay to Lessor the sum of all Rent and other amounts then
accrued and unpaid hereunder plus the Stipulated Loss Value Payment then
applicable for this Lease together with interest thereon at the Delinquency
Rate from the date such payment is due until the date payment in full is
received by Lessor. In the event Lessor elects or requires Lessee to repair or
replace any such item of Casualty Equipment pursuant to (a) or (b) of the
preceding sentence, this Lease shall remain in full force and effect without
abatement of rent, and the insurance proceeds received by Lessor, if any,
pursuant to section 10, after the use of such funds to pay any unpaid Rent or
other amounts then due hereunder, shall be paid to Lessee upon Lessee's
furnishing proof satisfactory to Lessor that such repair or replacement has
been completed in a satisfactory manner and fully paid for by Lessee.
Replacement Equipment acquired pursuant to (b) shall immediately become the
property of Lessor under this Lease and shall be conveyed to Lessor free and
clear of all liens, claims and encumbrances, and Lessee shall be entitled to
whatever interest Lessor may have in the Casualty Equipment "as is," in its
then condition and location without warranties of any type whatsoever, express
or implied. In the event Lessor elects option (c), then upon payment by Lessee
to Lessor of all sums required pursuant to (c): (i) this Lease shall terminate
and Lessee shall be entitled to whatever interest Lessor may have in the
Casualty Equipment "as is," in its then condition and location without
warranties of any type whatsoever, express or implied, and (ii) insurance
proceeds received by Lessor, if any, pursuant to section 10 on account of the
Equipment shall be paid to Lessee up to the amount of the applicable Stipulated
Loss Value Payment.
12. FINANCIAL INFORMATION
Lessee agrees that its applications, statements, and financial reports
submitted by it to Lessor, and those of any guarantor(s) of Lessee's
performance under this Lease and related agreements ("Guarantor"), are material
inducements to the execution by Lessor of this Lease. Lessee represents and
warrants that such applications, statements, and financial reports are, and all
information hereinafter furnished by Lessee to Lessor will be, true, correct
and complete in all material respects and fairly present the financial
condition of Lessee (and any Guarantor) for the respective periods covered
thereby, and that since the date thereof there has been no material adverse
change in such financial condition or operations. Lessee agrees to promptly
furnish to Lessor the annual financial statements of Lessee and of any
Guarantor, certified by independent certified public accountants, and such
interim financial statements and other financial information of Lessee and any
Guarantor as Lessor may require during the Term of this Lease. Lessee hereby
authorizes Lessor to make credit inquiries with Lessee's bank(s) and trade
references from time to time during the Term hereof, and Lessee agrees to
provide Lessor with current references upon Lessor's request and to authorize
such references to release credit information to Lessor.
Lessee covenants and agrees to provide written notice to Lessor and its assigns
if Lessee (a) ceases doing business as a going concern or, if a corporation,
ceases to be in good standing or files a statement of intent to dissolve; or
(b) makes an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a voluntary petition in
bankruptcy, is adjudicated a bankrupt or an insolvent, files a petition seeking
for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under the Federal Bankruptcy
Code or any similar Federal or state statute, law or regulation, or files an
answer admitting the material allegations of a petition filed against it in any
such proceeding, or fails to have such petition dismissed within thirty (30)
days after filing, or consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of it or all or any substantial part of its
assets or properties. Said notice shall be given within five (5) business days
after the occurrence of any of the foregoing.
13. DOCUMENTATION
Lessee covenants that it shall promptly and at its expense perform all acts and
execute and deliver to Lessor all documents which Lessor deems necessary or
desirable to implement the provisions of this Lease and establish and protect
the rights, interests and remedies of Lessor and its assigns hereunder. This
shall include, without limitation, providing to Lessor (a) the Progress Payment
Agreement, Equipment Schedule, Equipment Acceptance and annexes, amendments and
exhibits thereto; (b) Uniform Commercial Code financing statements, landlord
and mortgagee's waivers, and legal description(s) of the Premises; (c)
secretary and incumbency certificates; (d) guarantees; (e) acknowledgements of
assignment by Lessor; (f) insurance certificates; (g) copies of tax returns and
assessments; (h) cancelled checks and other proof of payment of Rent and other
amounts payable hereunder; (i) copies of maintenance contracts, if applicable;
and (j) certificates addressed to such persons as Lessor may direct stating
that this Lease is in full force and effect, that there are no amendments or
modifications thereto (or stating such amendments or modifications), that
Lessor is not in default of or breach hereunder (or stating all defaults or
breaches claimed by Lessee), setting forth the date to which Rent and other
payments due hereunder have been paid, and stating such other matters as Lessor
may request. All such documentation shall be in a form acceptable to Lessor.
14. TAX INDEMNITY
Lessee acknowledges that the Monthly Rent and other required payments as set
forth in the Equipment Schedule are computed under the assumption that Lessor
will be treated for Federal income tax purposes (and, to the extent allowable,
for state and local income tax purposes) as the owner of the Equipment and,
with respect to the Equipment Cost, will be entitled to accelerated cost
recovery deductions as provided under Section 167 and Section 168 of the
Internal Revenue Code of 1986 as amended (the "Code"), comparable deductions
for state and local income tax purposes, and any income tax credits which may
now or hereafter apply under the Code or otherwise (including, without
limitation, Investment Tax Credit) (collectively, "Tax Benefits"). Such Tax
Benefits are further assumed to commence not later than Lessor's taxable year
encompassing the Acceptance Date. Lessee represents and warrants to Lessor
that Lessor shall be entitled to take the Tax Benefits and that it has not, and
will not, during the Term of the Lease take any action or fail to take any
action which, under the Code, will result in the loss or delay of Lessor's
realization of all or any part of the Tax Benefits. Lessee agrees to account
for this Lease as a true lease for income tax purposes and will take no
position on any tax returns or any other document which is inconsistent
therewith. Any loss, theft, damage or destruction of the Equipment not
resulting in payment of the Stipulated Loss Value Payment shall also constitute
an act of Lessee for purposes of this section.
If Lessor's Tax Benefits are lost, reduced, delayed or otherwise
(5)
<PAGE> 6
made unavailable to Lessor (hereinafter called a "Loss") as a result of any act,
failure to act or misrepresentation by Lessee, then Lessee shall pay to Lessor,
as additional rent, that cash amount which provides Lessor with the same
after-tax rate of return on investment (using a 34% Federal income tax rate and
a 6.5% state income tax rate) as Lessor would have realized absent the Loss.
Such cash amount shall be paid by Lessee to Lessor not later than 15 days after
written demand therefor from Lessor accompanied by a written statement
reasonably detailing the Loss and the computation of the amount so payable.
15. OTHER COVENANTS AND WARRANTIES OF LESSEE
LESSEE AGREES THAT ITS OBLIGATIONS UNDER THIS LEASE INCLUDING, WITHOUT
LIMITATION, THE OBLIGATION TO PAY RENT AND ALL OTHER AMOUNTS DUE AND TO BECOME
DUE UNDER THE LEASE, ARE ABSOLUTE AND UNCONDITIONAL, AND SHALL CONTINUE IN FULL
FORCE AND EFFECT REGARDLESS OF ANY INABILITY OF LESSEE TO USE THE EQUIPMENT OR
ANY PART THEREOF FOR ANY REASON WHATSOEVER INCLUDING, WITHOUT LIMITATION, WAR,
ACT OF GOD, STORMS, GOVERNMENTAL REGULATIONS, STRIKE, OTHER LABOR TROUBLES,
LOSS, DAMAGE, DESTRUCTION, LOSS OF POSSESSION OR RIGHT OF POSSESSION,
DISREPAIR, OBSOLESCENCE, FAILURE OF OR DELAY IN DELIVERY OF THE EQUIPMENT,
FAILURE OF THE EQUIPMENT TO PROPERLY OPERATE FOR ANY CAUSE AND AT ANY TIME,
IMPROPER INSTALLATION OR CONDITION, SUITABILITY OR ADAPTABILITY OF THE
EQUIPMENT FOR LESSEE'S CAUSE OR PURPOSE, BREACH OF WARRANTY OR COVENANTS OR
OTHER ACTS BY SELLER, OR ANY OTHER CAUSE, AND THAT ITS OBLIGATIONS SHALL NOT
ABATE DUE TO ANY CLAIM OR DEFENSE AGAINST LESSOR, REGARDLESS OF THE NATURE
THEREOF. In the event of any alleged claim, including a claim which would
otherwise be in the nature of a set-off, against Lessor, Lessee shall fully
perform and pay its obligations hereunder (including all Rent, without set-off
or defense of any kind) and its only recourse against Lessor shall be by a
separate action.
To the extent permitted by applicable law, Lessee hereby waives any and
all rights and remedies conferred upon Lessee by sections 2A-401 and 2A-402,
and sections 2A-508 through 2A-522 of the Illinois Uniform Commercial Code
including, but not limited to, Lessee's rights to (i) cancel, terminate,
repudiate or rescind this Lease; (ii) suspend performance of any of its
obligations hereunder; (iii) revoke acceptance of the Equipment; (iv) recover
damages or Rent or the Equipment from Lessor for any breaches of warranty or
for any other reason; (v) a security interest in the Equipment in Lessee's
possession or control for any reason; (vi) sell or otherwise dispose of the
Equipment, or claim any expenses in connection therewith; (vii) deduct all or
any part of any claimed damages resulting from Lessor's default, if any, under
this Lease or any lease or other agreement at any time executed between Lessee
and Lessor; (viii) accept partial delivery of the Equipment; (ix) "cover" by
making any purchase or lease of, or contract to purchase or lease, equipment in
substitution of that due from Lessor; (x) recover any general, special,
incidental or consequential damages for any reason whatsoever; and (xi)
specific performance, replevin, detinue, sequestration, claim, and delivery of
the like for any item of Equipment identified to this Lease. To the extent
permitted by applicable law, Lessee also hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Equipment in mitigation of Lessor's damages
hereunder or which may otherwise limit or modify any of Lessor's rights or
remedies hereunder. Nothing in this paragraph shall be deemed to diminish
Lessee's right of quiet enjoyment under the Lease or to limit Lessee's rights
and remedies against the Seller of the Equipment.
In order to induce Lessor to enter into this Lease and to lease the Equipment
to Lessee hereunder, Lessee represents and warrants that: (a) ORGANIZATION.
Lessee is a corporation in good standing and qualified to do business in its
state of incorporation and in each State in which the Equipment will be
located. (b) POWER AND AUTHORITY. Lessee has the full power, authority and
legal right to execute, deliver, and perform this Lease, which has been duly
authorized by all necessary corporate action of Lessee. (c) ENFORCEABILITY.
This Lease has been duly executed and delivered by Lessee and constitutes the
legal, valid and binding obligation of the Lessee enforceable in accordance
with its terms. (d) CONSENTS. The execution, delivery and performance of this
Lease, including the commitment and payment of rent, does not (i) require the
consent of any stockholder, trustee, or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, or (ii)
contravene any law, governmental rule, regulation or order now binding on
Lessee, or the charter or by-laws of Lessee, or (iii) contravene the provisions
of, or constitute a default under, or result in the creation of any lien upon
any property of Lessee under any mortgage, instrument or other agreement to
which Lessee is a party or by which Lessee or its assets may be bound or
affected. (e) TITLE TO EQUIPMENT. On each Acceptance Date, Lessor shall have
good and marketable title to the Equipment subject to the Lease, free and clear
of all liens and encumbrances, except for the lien of the seller of the
Equipment which will be released upon receipt of payment. (f) NO LITIGATION.
There is no action, suit, investigation or proceeding by or before any court,
arbitrator, administrative agency or other governmental authority pending or
threatened against or affecting Lessee which (i) involves the Equipment or
transactions contemplated by this Lease, or (ii) if adversely determined, could
have a material adverse effect on the financial condition, business, or
operations of Lessee, or the ability of Lessee to perform its obligations
hereunder. (g) NO DEFAULT. Lessee is not in breach of or default under any
lease, loan agreement or other instrument to which Lessee is a party. Lessee,
if requested, shall provide at Lessee's expense an Opinion of Counsel
acceptable to Lessor affirming the covenants and warranties set forth in items
(a) through (g) of this paragraph and opining as to the matters set forth in
section 17 hereof.
16. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS
In the case of the failure of Lessee to comply with any provision of this
Lease, Lessor shall have the right, but not the obligation, to effect such
compliance on behalf of Lessee. In such event, all monies spent by and
expenses incurred by Lessor in effecting such compliance (including, without
limitation, attorneys' fees) shall be immediately due and payable by Lessee to
Lessor together with interest thereon at the Delinquency Rate from the date(s)
of Lessor's payment(s) to the date of Lessor's receipt of Lessee's payment
therefor.
17. PLEDGE OF ADDITIONAL COLLATERAL; DEBT SUBORDINATION; LETTER OF CREDIT
Prior to Lessor's disbursement of payment for Equipment (including
disbursements pursuant to any progress payment agreement), Lessee shall pledge
and grant to Lessor a first priority security interest in additional assets
(the "Additional Collateral") with a "Collateral Value" (as hereinafter
defined) equal to or greater than the Equipment Cost of such Equipment. Until
Lessor releases its security interest in the Additional Collateral pursuant to
the terms of this section, Lessee shall at its expense keep the Additional
Collateral free from any and all liens, encumbrances, attachments, levies,
executions, burdens, charges, or legal process of any and every type whatsoever
except for the security interest of Lessor. Subject to Lessor's review and
approval, the Additional Collateral may include (a) cash; (b) U.S. Treasury
bills; (c) American depositary receipts ("ADR's") for foreign stock; and (d)
member seats on the Chicago Board of Trade and/or the Chicago Mercantile
Exchange (the "Seats"). Collateral Value shall be the aggregate market value
of the Additional Collateral, less discounts of 20% and 50% for the ADR's and
Seats, respectively. Should the Collateral Value of the Additional Collateral
pledged for this Lease fall below the Equipment Cost at any time, Lessee shall
pledge and grant to Lessor supplementary Additional Collateral with a
Collateral Value equal to or greater than such shortfall within one (1)
business
(6)
<PAGE> 7
day after Lessor's demand therefor. Should the Collateral Value of
the Additional Collateral pledged for this Lease exceed the Equipment Cost at
any time, then if requested by Lessee, any excess Additional Collateral will be
released to Lessee after review and confirmation of such excess by Lessor.
Lessee may substitute cash for non-cash forms of Additional Collateral with
notice to Lessor. Lessee shall pay all costs, fees and expenses of any and
every kind whatsoever incurred in connection with the Additional Collateral and
Lessor's security interest therein, including, without limitation, brokerage
and attorneys' fees.
Lessee covenants to Lessor that Lessee's existing and future debt obligations
to Lessee's parent and affiliated companies (collectively, the "Inter-Company
Debt") shall be subordinated to Lessee's obligations under this Lease. Such
subordination shall remain in effect for the entire Term of this Lease, unless
earlier waived by Lessor pursuant to the provisions of the following paragraph.
Lessee shall provide written documentation of such subordination acceptable to
Lessor on or before the July 15, 1995.
On or before August 31, 1995 (subject to extension at the sole discretion of
Lessor by a writing signed by Lessor), Lessee shall, at its sole cost and
expense, deliver to Lessor an irrevocable standby letter of credit (the "Letter
of Credit") naming Lessor as sole beneficiary in a face amount equal to the
total Equipment Cost of the Leases, and in a form and content, and issued by a
bank, acceptable to Lessor. Upon Lessor's receipt and acceptance of the Letter
of Credit, then (i) Lessor shall release its security interest in the
Additional Collateral, (ii) the Inter-Company Debt subordination provisions of
the preceding paragraph will be waived, and (iii) the Monthly Rent due for
subsequent months of the Basic Term (exclusive of any Monthly Rent payment(s)
already received by Lessor) under each Lease shall be reduced by five one
hundredths of one percent (.05%) of Equipment Cost. Lessee shall thereafter
maintain the Letter of Credit for the entire Term of each Lease; in the event
the Letter of Credit shall expire prior to the end of the Term of any Lease,
then not less than 30 days prior to expiration of the existing Letter of
Credit, Lessee shall deliver to Lessor a substitute Letter of Credit with a
face amount equal to the total of the Stipulated Loss Value Payments then
applicable for the Leases, and in a form and content, and issued by a bank,
acceptable to Lessor. Lessee shall pay all costs, fees and expenses of any and
every kind whatsoever incurred in connection with the Letter of Credit, its
maintenance and substitution, including, without limitation, transfer fees
arising from any assignment of Lessor's interest hereunder to Assignees (as
hereinafter defined).
18. EVENTS OF DEFAULT
An event of default shall occur hereunder if (a) Lessee fails to pay
Rent or any other payment required hereunder within five (5) days after the
same is due and payable; or (b) Lessee breaches, or fails to perform or
observe, any other covenant, warranty, condition, or agreement made or given by
Lessee in this Lease or any other document furnished to Lessor in connection
herewith, and such breach or failure shall continue unremedied for a period of
ten (10) days after the date on which notice thereof shall be given by Lessor
to Lessee; or (c) Lessee ceases doing business as a going concern, or, if a
corporation, ceases to be in good standing or files a statement of intent to
dissolve, or abandons any or all of the Equipment; or (d) Lessee removes from
the Premises, places into storage, sells, conveys, transfers, encumbers, parts
with possession of, assigns or sublets any item of Equipment or any of its
rights or obligations hereunder (except with Lessor's prior written consent
pursuant to section 7) or Lessee shall otherwise create, incur, assume or
suffer to exist any mortgage, lien, pledge or other encumbrance or attachment
of any kind whatsoever upon or affecting the Equipment, the Additional
Collateral (or any item thereof) or this Lease or any of Lessor's or Lessee's
interests hereunder; or (e) without Lessor's prior written consent, Lessee
shall enter into any transaction of merger or consolidation in which it is not
the surviving entity or sell, transfer or dispose of all or substantially all
of its assets; or (f) Lessee, or any Guarantor, has made any material
misrepresentation, or failed to disclose a material fact, under this Lease or
in connection with any information submitted or furnished to Lessor by Lessee
or any Guarantor; or (g) Lessee makes an assignment for the benefit of
creditors, admits in writing its inability to pay its debts as they become due,
files a voluntary petition in bankruptcy, is adjudicated a bankrupt or an
insolvent, files a petition seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar arrangement
under the Federal Bankruptcy Code or any similar Federal or state statute, law
or regulation, or files an answer admitting the material allegations of a
petition filed against it in any such proceeding, or fails to have such
petition dismissed within thirty (30) days after filing, or consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of it or all
or any substantial part of its assets or properties; or (h) Lessee shall be in
breach of or default under any lease (including, without limitation, any lease
of the Premises) or other agreement at any time executed with Lessor or any
other lessor or with any lender to Lessee; or (i) any Guarantor shall (I)
terminate, repudiate, revoke or disavow any of Guarantor's obligations under
his, her or its guaranty or breach any of the terms of such guaranty, or (II)
suffer a material adverse change in his, her or its financial condition or
other adverse change from the date hereof including, without limitation,
Guarantor's death, dissolution, insolvency, liquidation or bankruptcy, and as a
result Lessor deems itself to be insecure; or (j) Lessee fails to pledge and
grant to Lessor the Additional Collateral, or fails to maintain the Additional
Collateral, in accordance with section 17 hereof; or (k) Lessee's Inter-Company
Debt obligations are not subordinated to Lessee's obligations under this Lease,
in accordance with Section 17 hereof; or (l) Lessee fails to provide and
maintain the Letter of Credit in accordance with section 17 hereof, or the
issuer of the Letter of Credit shall renounce or repudiate all or any part of
its obligations under the Letter of Credit; or (m) Lessee breaches, or fails to
perform or observe, any other covenant, warranty, condition or agreement made
or given by Lessee in section 17 of this Lease or any other document furnished
to Lessor in connection therewith.
19. REMEDIES
Upon the occurrence of any event of default and at any time thereafter Lessor
may, in its sole discretion, do any one or more of the following: (a) upon
notice to Lessee, cancel this Lease; (b) by notice to Lessee, require that
Lessee return the Equipment to Lessor in accordance with section 5; (c) without
court order or other process of law, enter upon the Premises where such
Equipment is located and, with respect to all or any item of the Equipment, (i)
dispose of, (ii) render unusable, or (iii) take immediate possession of and
remove, or any combination of the foregoing, which action(s) shall not
constitute a cancellation of this Lease; (d) refuse to purchase or deliver to
Lessee the Equipment or such portion thereof not purchased or delivered
theretofore; (e) by notice to Lessee, declare immediately due and payable the
sum of all Rent and other amounts then accrued and unpaid together with the
present value all future Rent and other sums reserved under the Lease for the
full term hereof (including any Minimum FMV Payment) discounted at the rate of
five percent (5%) per annum (the "Discount Rate"); (f) with or without
canceling this Lease, recover from Lessee as liquidated damages (and not as a
penalty) either (i) the sum of all Rent and other amounts accrued and unpaid
hereunder as of the date of default, plus the Stipulated Loss Value Payment
then applicable, plus all legal fees and other costs and expenses incurred by
Lessor as a result of the default or the exercise of Lessor's remedies,
together with interest on the foregoing at the Delinquency Rate from the date
of default to the date of actual payment; OR, at the option of Lessor or as
required by any applicable law (ii) the sum of all Rent and other amounts
accrued and unpaid hereunder as of the date of entry of judgement in favor of
Lessor, plus the present value as of the date of such
(7)
<PAGE> 8
judgement of all future Rent and other sums reserved under the Lease for the
full term hereof (including any Minimum FMV Payment) discounted at a rate per
anum equal to the Discount Rate, plus an amount that will fully compensate
Lessor for any loss of Tax Benefits and residual interest in the Equipment in
connection with or arising out of Lessee's default, plus all legal fees and
other costs and expenses incurred by Lessor as a result of the default or the
exercise of Lessor's remedies, together with interest on the foregoing at the
Delinquency Rate from the date of default to the date of actual payment, (g) at
any time prior to collection of a judgement for damages, sell or re-lease or
otherwise dispose of the Equipment or any item thereof, upon such terms and to
such parties as Lessor, in its sole discretion, may elect, and apply any net
cash proceeds (after deducting Lessor's costs in connection therewith) to the
account of Lessee's obligations hereunder with Lessee remaining liable for any
deficiency and with any excess being retained by Lessor; (h) draft on the
Letter of Credit; (i) exercise any right or remedy which may be available to
Lessor under any security document or applicable law pertaining to the
Additional Collateral; (j) exercise any right or remedy which may be available
to it under the Uniform Commercial Code or any other applicable law or proceed
by appropriate court action, without affecting Lessor's title or right to
possession of the Equipment, to enforce the terms hereof or to recover damages
for the breach hereof or to cancel this Lease.
Lessee shall be liable for all legal fees and other costs and expenses incurred
by Lessor and its assigns resulting from any of the foregoing events of default
or the exercise of Lessor's remedies, including placing the Equipment in the
condition required by section 5, in addition to the Rent and other amounts
payable by Lessee hereunder and all other amounts at any time owing by Lessee
to Lessor. All such legal fees, costs and expenses shall be payable by Lessee
upon demand and, except as otherwise provided herein, interest on the foregoing
shall be charged to Lessee at the Delinquency Rate from the date of such demand
until the date of Lessor's receipt of Lessee's payment therefor. No remedy
referred to in this section is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity. No express or implied waiver by
Lessor of any default shall constitute a waiver of any other default by Lessee
or a waiver of any of Lessor's rights, nor shall any delay by Lessor in
enforcing any of its rights be deemed a waiver thereof.
20. ASSIGNMENT BY LESSOR
Lessor may at any time transfer, assign or grant any or all of its interest
hereunder to others ("Assignees") with or without notice to Lessee. Such
Assignees shall have all of Lessor's rights but none of Lessor's obligations
hereunder unless expressly assumed by the Assignees, such obligations otherwise
remaining with Lessor. In the event that Lessor transfers or assigns its
interest hereunder, or grants a security interest in all or any part of this
Lease, the Equipment or sums payable hereunder, then Lessee shall (a) promptly
upon Lessor's request acknowledge such transfer, assignment or grant by
executing an acknowledgement of assignment or such other document(s) as may be
reasonably necessary to evidence, secure and complete such transfer, assignment
or grant; (b) upon receipt of instructions from Lessor, shall pay Rent and
other amounts due hereunder to the designated Assignee in accordance with said
instructions; and (c) not permit this Lease to be amended or the terms hereof
waived without the prior written consent of the Assignees. Lessee agrees that
its obligations hereunder, including its obligation to pay Assignees all Rent
and all other sums due and to become due hereunder, is absolute and
unconditional, and shall not be subject to, nor shall Lessee assert against the
Assignees, any abatement, reduction, recoupment, defense, setoff, claim or
counterclaim that Lessee may have against Lessor or any other party, including
Seller.
Lessee acknowledges and agrees that any transfer, assignment or grant by Lessor
will not materially change Lessee' duties and obligations under this Lease or
materially increase the burdens or risks imposed on Lessee. Notwithstanding
any such assignment, transfer or grant by Lessor, and so long as no event of
default shall have occurred hereunder, neither Lessor nor any Assignee shall
interfere with Lessee's right of quiet enjoyment, use and possession of the
Equipment in accordance with the terms hereof.
21. MISCELLANEOUS
IRREVOCABLE. This Lease is irrevocable by Lessee for the full Term hereof and
for the aggregate Rent and all other amounts herein reserved.
FINANCE LEASE. Lessee agrees and acknowledges that it is the intent of Lessee
and Lessor that this Lease qualify as a "finance lease" as defined in section
2A-103 of the Illinois Uniform Commercial Code.
APPLICATION OF PAYMENTS. Lessor shall have the exclusive right to determine
how, and in what amounts, payments received from Lessee (or any Guarantor) are
applied to amounts due and past due under the Leases, and such determination
shall be conclusive upon the Lessee and any Guarantor.
NOTICES. All notices and demands relating hereto shall be given in writing and
shall be deemed given when the same is (a) personally delivered with receipt
acknowledged or (b) mailed by certified mail, return receipt requested, with
proper postage prepaid, addressed to the party intended to be served at the
address set forth in the Equipment Schedule or at such other address designated
by notice served in accordance herewith.
SURVIVAL OF OBLIGATIONS. All obligations of Lessee shall survive the
expiration of the Term of this Lease.
SUCCESSORS AND ASSIGNS. This Lease is binding upon, and inures to the benefit
of, the parties hereto and their respective successors and assigns; provided,
however, that Lessee may not assign this Lease, or any of its rights or
obligations hereunder, without the prior written consent of Lessor as provided
in section 7 hereof.
MULTIPLE LESSEES. If more than one Lessee is named in the MLA or an Equipment
Schedule, the liability of each shall be joint and several.
NOT AN OFFER. Neither this MLA nor any Equipment Schedule shall be deemed to
constitute an offer or be binding upon Lessor until executed by Lessor's
authorized officer.
(8)
<PAGE> 9
SEVERABILITY. The invalidity or unenforceability of any provision of this
Lease, in whole or in part, shall not affect the validity or enforceability of
the remainder of any such provision or the remaining provisions of this Lease.
TITLES. Section titles are for reference purposes only and are not intended to
have legal effect or otherwise affect the interpretation of this MLA or any
Equipment Schedule.
COUNTERPARTS. Each Equipment Schedule may be executed in counterparts. Only
"Counterpart Number 1" of an Equipment Schedule, together with a photocopy of
the executed MLA shall constitute "Chattel Paper" or other "Collateral" within
the meaning of the Uniform Commercial Code.
LAW. This MLA and each Equipment Schedule are entered into under and shall be
construed in accordance with, and governed by, the laws of the State of
Illinois. LESSEE HEREBY CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN COOK COUNTY, ILLINOIS AND WAIVES ANY OBJECTIONS
WHICH LESSEE MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE
CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT. LESSEE EXPRESSLY WAIVES ANY
RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES BETWEEN LESSEE AND LESSOR OR LESSOR'S
ASSIGNEES.
ENTIRE AGREEMENT. Lessee represents that it has received, read and understands
this Master Lease Agreement, and agrees to be bound by its terms and
conditions. This Master Lease Agreement and the applicable Equipment Schedule,
together with addendums, exhibits and riders thereto: (i) constitute the entire
agreement between Lessee and Lessor with respect to the lease of the Equipment,
(ii) supersede all proposals, oral or written, and (iii) and may not be altered
or modified except by a writing signed by Lessee, Lessor and Lessor's
Assignees, if any.
Lessee's Initials ____________________
________________________
The person executing this Master Lease Agreement for and on behalf of Lessee
warrants and represents to Lessor, which representation and warranty shall
survive the expiration of the Term of this Lease for any reason whatsoever,
that this Lease and the execution hereof has been duly and validly authorized
by Lessee, constitutes a valid and binding obligation of Lessee, and that he
has the authority to make such execution for and on behalf of Lessee.
IN WITNESS WHEREOF, this Master Lease Agreement has been executed this 31st
day of May, 1995
LESSEE: LESSOR:
Rodman & Renshaw Capital Group, Inc. Facility Capital Corporation
------------------------------------ ----------------------------
By: By:
--------------------------------- -------------------------
Name: John T. Hague Name: Clyde D. Cady
------------------------------ ----------------------
Title: Chief Financial Officer Title: President
------------------------------ ---------------------
(9)
<PAGE> 10
FIRST AMENDMENT TO MASTER LEASE AGREEMENT
This First Amendment to Master Lease Agreement Number RODM-1 dated May 31, 1995
(the "MLA") between Facility Capital Corporation as lessor ("Lessor") and
Rodman & Renshaw Capital Group, Inc. as lessee ("Lessee").
WHEREAS, Lessor and Lessee mutually desire to amend the MLA;
NOW, THEREFORE, in consideration of the foregoing premises, and for valuable
consideration, the receipt of which is hereby acknowledged, Lessee and Lessor
hereby amend the MLA as follows:
1. Lessee's address is amended in its entirety to read as follows:
"233 South Wacker Drive, Sears Tower, Suite 4500, Chicago, IL 60606"
2. The following additional paragraph is inserted at the end of section 2 of
the MLA:
"Notwithstanding any provision to the contrary in this MLA or any
Equipment Schedule, Monthly Rent originally due on or before October 1,
1995 shall, to the extent not previously paid by Lessee, be due and
payable by Lessee to Lessor on the date of Lessor's [or its
assignee(s)'] reimbursement to Lessee for items of Equipment for which
Lessee remitted deposit(s) to Seller (as hereinafter defined).
3. Section 17 of the MLA is hereby amended as follows:
(a) In the second paragraph of section 17, the date "July 15, 1995" appearing
in the last line of said paragraph, is hereby deleted, and the date
"November 1, 1995" is substituted therefor.
(10)
<PAGE> 11
(b) The third paragraph of section 17 is hereby amended in its entirety to
read as follows:
"On or before November 1, 1995 (subject to extension at the sole discretion
of Lessor by a writing signed by Lessor), Lessee shall, at its sole cost and
expense, deliver to Lessor or Lessor's Assignees (as hereinafter defined) one
or more irrevocable standby letters of credit (which, together with all
substitutions and renewals thereof, shall be referred to collectively herein
as the "Letters of Credit" and singularly, a "Letter of Credit") naming
Lessor or Lessor's Assignees as sole beneficiary in an aggregate face amount
equal to the total Equipment Cost of the Leases, and in a form and content,
and issued by bank(s), acceptable to Lessor. Upon Lessor's receipt and
acceptance of the Letters of Credit, then (i) Lessor shall release its
security interest in the Additional Collateral, (ii) the Inter-Company Debt
subordination provisions of the preceding paragraph will be waived, and (iii)
the Monthly Rent due for subsequent months of the Basic Term (exclusive of
any Monthly Rent payment(s) already received by Lessor) under each Lease
which has commenced by November 1, 1995 shall be reduced by five one
hundredths of one percent (.05%) of Equipment Cost. Lessee shall thereafter
continuously maintain the Letters of Credit for the entire Term of each
Lease; in the event that any Letter of Credit shall expire prior to the end
of the Term of any Lease, then not less than 30 days prior to expiration of
such Letter of Credit, Lessee shall deliver to Lessor or Lessor's Assignees
substitute or renewal Letter(s) of Credit with face amount(s) which, together
with the face amounts of any Letters of Credit which are not then so
expiring, have an aggregate face amount not less than the lesser of the total
Equipment Cost of the Leases or the total of the Stipulated Loss Value
Payments then applicable for the Leases, and in a form and content, and
issued by bank(s), acceptable to Lessor. Lessor may at any time transfer its
interest under any one or more of the Letters of Credit to Lessor's Assignees
in connection with any assignment of Lessor's interest hereunder to such
Assignees. Lessee shall pay all costs, fees and expenses of any and every
kind whatsoever incurred in connection with the Letters of Credit, their
issuance, maintenance, substitution, and renewal, including, without
limitation, attorneys' fees and transfer fees arising from any assignment of
Lessor's interest hereunder."
(11)
<PAGE> 12
(c) The following additional paragraph is inserted after the third paragraph
at the end of section 17:
"If the proposed Letters of Credit are issued by a foreign bank, or a
domestic bank unacceptable to Lessor, then Lessee shall, at its sole
cost and expense, provide confirmations by domestic banks acceptable to
Lessor, which confirmations shall be in a form and content acceptable to
Lessor."
4. Subsection (l) of section 18 is hereby amended in its entirety to read as
follows:
"Lessee fails to provide and maintain the Letters of Credit or required
confirmations in strict accordance with section 17 hereof, or the issuer of
any Letter of Credit or confirmation shall renounce or repudiate all or any
part of its obligations under such Letter of Credit or confirmation;"
5. All other references in the MLA to "Letter of Credit" are hereby amended
to read "Letters of Credit."
Except as specifically amended and modified hereby, all of the terms and
conditions of the Leases shall stand and remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the Lessor and Lessee have executed this First Amendment to
Master Lease Agreement this 24th day of October, 1995.
LESSEE: LESSOR:
Rodman & Renshaw Capital Group, Inc. Facility Capital Corporation
By: By:
--------------------------------- -----------------------------
Name: Name:
------------------------------- ---------------------------
Title: Title:
------------------------------ -------------------------
(12)
<PAGE> 1
EXHIBIT 10.21
CLEARING AGREEMENT
This agreement, made this 15TH day of SEPTEMBER, 1995 (the "Agreement") between
Correspondent Services Corporation (hereinafter referred to as "CSC"), and
RODMAN & RENSHAW, INC. (hereinafter referred to as the "Correspondent").
WITNESSETH THAT:
WHEREAS, the Correspondent is desirous of availing itself of clearing,
execution and other services related to the securities business as more fully
set forth herein; and Whereas, CSC desires to extend the foregoing types of
services to the Correspondent. Now Therefore, in consideration of the mutual
covenants hereinafter set forth and other good and valuable consideration the
receipt of which is hereby acknowledged, the parties hereto hereby covenant and
agree as follows:
I. SERVICES
A. Services to be Performed by CSC
(i) CSC will execute orders for the Correspondent's proprietary
accounts and for the Correspondent's customers whose cash or margin
accounts have been accepted by CSC ("Introduced Accounts"), but only
insofar as such orders are transmitted by the Correspondent to CSC.
(ii) CSC will generate, prepare and mail confirmations respecting
each of the Introduced Accounts.
(iii) CSC will prepare and mail the summary monthly statements (or
quarterly statements if no activity in any Introduced Account occurs
during any quarter covered by such statement) to every Introduced
Account.
(iv) CSC will settle contracts and transactions in securities
(including options to buy or sell securities) (i) between the
Correspondent and other brokers and dealers, (ii) between the
Correspondent and the Introduced Accounts, and (iii) between the
Correspondent and persons other than the Introduced Accounts or
other brokers and dealers.
(v) CSC will engage in all cashiering functions for the
Introduced Accounts,
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including the receipt, delivery and transfer of securities
purchased, sold, borrowed and loaned, receiving and distributing
payment therefore, holding in custody and safekeeping all securities
and payments so received, the handling of margin accounts,
including paying and charging of interest, the receipt
and distribution of dividends and other distributions, and the
processing of exchange offers, rights offerings, warrants, tender
offers and redemptions. For purposes of the Securities and Exchange
Commission's financial responsibility rules and SIPC requirements,
the Correspondent's customers will be considered customers of CSC and
not customers of the Correspondent. Nothing herein shall cause the
Correspondent's customers to be construed or interpreted as customers
of CSC for any other purpose, or to negate the intent of any other
section of this agreement, including, but not limited to, the
delineation of responsibilities as set forth elsewhere in this
agreement. Upon mutual written agreement of the parties hereto, the
cashiering functions with respect to the receipt of securities and
the making and receiving payments therefor may be relinquished to the
Correspondent.
(vi) CSC will construct and maintain books and records of all
transactions executed or cleared through it and not specifically
charged to the Correspondent pursuant to the terms of this
Agreement, including a daily record of required margin and other
information required by Rule 432(a) of the rules of the Board of
Directors of the New York Stock Exchange, Inc. (the "Rules"), or by
the constitution, articles of incorporation, by-laws (or comparable
instruments) or rules, regulations or other instruments
corresponding to the foregoing, and the stated policies or practices
of any other securities exchange (the "Standards"), including but
not otherwise limited to any national securities exchanges
registered under the Securities Exchange Act of 1934, as amended
("National Securities Exchange").
B. Services Which Shall Not be Performed by CSC
Unless otherwise agreed to in a writing executed by the parties hereto,
CSC shall not engage in any of the following services on behalf of the
correspondent:
(i) Accounting, bookkeeping or recordkeeping, cashiering, or any
other services with respect to commodity transactions, and/or any
transaction other than securities transactions.
(ii) Preparation of the Correspondent's payroll records, financial
statements or any analysis or review thereof or any recommendations
relating thereto.
(iii) Preparation or issuance of checks in payment of the Correspondent's
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expenses, other than expenses incurred by CSC on behalf of the
Correspondent pursuant to this Agreement.
(iv) Payment of commissions, salaries or other remuneration to the
Correspondent's salespersons or any other employees of the
Correspondent.
(v) Preparation and filing of reports (the "Reports") with the
Securities and Exchange Commission, any state securities commission,
any National Securities Exchange, or other securities exchange or
securities association or any other regulatory or self-regulatory
body or agency with which the Correspondent is associated and/or by
which it is regulated. Furthermore, CSC will, at the request of the
Correspondent, furnish the Correspondent with any necessary
information and data contained in books and records kept by CSC and
not otherwise reasonably available to the Correspondent if such
information is required in connection with the preparation and
filing of Reports by the Correspondent.
(vi) Making and maintaining reports and records required to be
kept by the Correspondent by the Currency and Foreign Transactions
Reporting Act of 1970 and the regulations promulgated pursuant
thereto, or any similar laws or regulations enacted or adopted
hereafter.
(vii) Verification of the address changes of any Introduced Account.
(viii) Obtaining and verifying new account information, and insuring that
such information meets the requirements of Rule 405{1} of the Rules
and any other Rules or applicable standards.
(ix) Maintaining a record of all personal and financial information
concerning any Introduced Account and all orders received therefrom,
and maintaining all documents and agreements executed by any
Introduced Account.
(x) Holding for safekeeping of the securities of any Introduced
Account registered in the name of the Introduced Account.
(xi) Accepting deposits from the Correspondent in the form of coin
or currency of the United States or any other country.
II. CLEARING CHARGES
See Schedule "A" attached hereto and incorporated herein by reference.
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<PAGE> 4
Correspondent shall have sole discretion to determine the amount of
commission/mark up charged to its Introduced Accounts cleared by CSC.
CSC agrees to pay Correspondent all commissions and/or sales credits
received by CSC with respect to Correspondent's business less any amounts
due to CSC under this Agreement or otherwise and any expenses or other
sums to third parties paid on the Correspondent's behalf by CSC.
In no event shall the fees charged in this Article II for the above
services be in contravention of the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, the Investment Advisers Act of 1940,
as amended, or the Employee Retirement Income Security Act of 1974, as
amended, or any rules or regulations thereunder, or any other law, rule
or regulation, Federal, State or Local, or any constitution, by-law,
rule, regulation or instrument correspondent to the foregoing, or stated
policy or practice of any national securities exchange or other
securities exchange or association or other regulatory or self-regulatory
body or agency ("Laws and Regulations"). In the event that such fees are
deemed by CSC or the Correspondent to be in contravention of the Laws and
Regulations, they shall be replaced with fees mutually agreed upon in
writing by CSC and the Correspondent.
III. NOTATION ON STATEMENTS, CONFIRMATION AND OTHER WRITTEN MATERIAL
CSC shall carry all Introduced Accounts in the names of the
Correspondent's customers, with a notation on its books and records that
such Introduced Accounts were introduced by the Correspondent, and all
monthly or quarterly statements and confirmations relating to such
Introduced Accounts shall also indicate that the Introduced Accounts were
introduced by the Correspondent. In addition, account statements will
indicate that customer funds and securities received by CSC will be held
at CSC and will contain the telephone number of a contact area at CSC.
Inadvertent omission of such notations shall not be deemed to constitute
a breach of this Agreement. Copies of the forms covering the foregoing
shall be furnished by CSC to the Correspondent.
IV. OPENING OF ACCOUNTS
(i) At the time of the opening of each Introduced Account,
Correspondent shall furnish CSC with all financial and
personal information concerning such Introduced Accounts as
CSC may reasonably require. At the time of the opening of
Introduced Accounts which are margin accounts, the
Correspondent shall furnish CSC with executed customers'
agreements, hypothecation agreements and consents to loans of
securities (collectively, the "margin agreement"). CSC shall
supply the Correspondent with margin agreement forms
regarding margin accounts in sufficient quantities, such
forms to be submitted to CSC upon their completion by the
Correspondent. If any Introduced Account may have been
opened without CSC having previously received a properly
executed margin
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<PAGE> 5
agreement, failure of CSC to receive such margin agreements
shall not be deemed to be a waiver of the information
requirements set forth herein. Upon the written or
oral request of CSC, the Correspondent shall furnish CSC with
any other documents and agreements executed by the Introduced
Account on forms which shall be supplied by CSC in sufficient
quantities and which may reasonably be required by CSC in
connection with the opening, operating or maintaining of
Introduced Accounts. CSC may, at its option, mail margin
agreements or "new account" forms directly to the Introduced
Accounts upon notification by the Correspondent, and/or require
completion of its own margin agreement or "new account" forms
and, if required, option account agreements for the Introduced
Accounts. The Correspondent shall promptly provide CSC with
basic data and copies of documents relating to each of the
Introduced Accounts, including, but not otherwise limited to,
copies of records of any receipts of the Introduced Accounts'
funds and/or securities received directly by the Correspondent,
as shall be necessary for CSC to discharge its service
obligations hereunder.
(ii) All transactions in any Introduced Account are to be considered
cash transactions until such time as CSC has received margin
agreements, duly and validly executed in respect of such
Introduced Account. Nevertheless, it is intended that
Correspondent will obtain executed margin agreements within
the time periods set forth in procedural manuals provided by
CSC or any entity affiliated with CSC. In the event credit
is inadvertently extended with respect to such Introduced
Accounts, Correspondent shall indemnify and hold CSC harmless
from and against all loss, liability, damage, cost and expense
(including but not otherwise limited to fees and expenses of
legal counsel) arising therefrom.
(iii) At the time of the opening of any Introduced Account, the
Correspondent shall furnish CSC with the name of any principal
other than the account name for whom the Correspondent is
acting as agent, and written evidence of such authority.
(iv) The Correspondent shall have the sole and exclusive
responsibility for compliance with Rule 405(3) of the
Rules and shall specifically approve the opening of any new
account before forwarding such account to CSC as a potential
Introduced Account. CSC, in its reasonable business judgement,
reserves the right to reject any account which the
Correspondent may forward to CSC as a potential Introduced
Account. CSC also reserves the right to terminate any account
previously accepted by it as an Introduced Account.
(v) Pursuant to written notification received by the
Correspondent and
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forwarded to CSC, any account of the Correspondent may choose to
reject the services to be performed by CSC pursuant to this
Agreement and thus choose not to be serviced as an Introduced
Account pursuant hereto. Upon notice from another member
organization that an Introduced Account intends to transfer his
account thereto, CSC shall expedite such transfer and shall
have the sole and exclusive responsibility for compliance with
Rule 412 of the Rules.
(vi) It shall be the sole and exclusive responsibility of the
Correspondent to make every reasonable effort to ascertain the
essential facts relative to any Introduced Account and any
order therefore, in compliance with Rule 405(1) of the Rules,
including but not otherwise limited to ascertaining the
authority of all orders for Introduced Accounts, and the
genuineness of certificates, papers and signatures provided by
each Introduced Account. Any investment advice furnished to an
Introduced Account by the Correspondent shall be the sole and
exclusive responsibility of the Correspondent.
(vii) The Correspondent shall be solely and exclusively responsible
for the handling and supervisory review of any Introduced Accounts
over which the Correspondent's partners, officers or employees have
discretionary authority, as required by Rule 408 of the Rules and
any other applicable Laws and Regulations. The Correspondent shall
furnish CSC with such documentation with respect thereto as may be
requested by CSC. The Correspondent hereby agrees to indemnify and
hold CSC harmless against any loss, liability, damage, cost or
expense (including but not otherwise limited to fees and expenses
of legal counsel) suffered or incurred by CSC directly or
indirectly as a result of any liabilities or claims arising from
the exercise by the Correspondent, its partners, officers or
employees of discretionary authority over Introduced Accounts. The
Correspondent hereby warrants that with regard to any orders or
instructions given by the Correspondent with respect to such
discretionary accounts, its partners, officers or employees shall
have been fully and properly authorized relative thereto and that
the execution of such orders shall not be in violation of the Laws
and Regulations. Furthermore, the Correspondent hereby agrees to
indemnify and hold CSC harmless against any loss, liability,
damage, cost or expense (including but not otherwise limited to
fees and expenses to legal counsel) suffered or incurred by CSC
directly or indirectly as a result of any breach of the
Correspondent's said warranty.
(viii) The Correspondent shall have the sole and exclusive responsibility
for the handling and supervisory review of any Introduced Account
for an
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employee or officer of any member organization, self-regulatory
organization, bank, trust company, insurance company or other
organization engaged in the securities business, and for compliance
with Rule 407 of the Rules relating thereto. The Correspondent
shall furnish CSC with such documentation with respect
thereto as may be requested by CSC.
(ix) The Correspondent shall have the sole and exclusive
responsibility to insure that those of its customers who become
Introduced Accounts hereunder shall not be minors or subject to
those prohibitions existing under the Laws and Regulations generally
relating to the incapacity of any Introduced Account or any conflict
of interest relating to such Introduced Account.
(x) The Correspondent shall be solely and exclusively responsible
for any loss, liability, damage, cost or expense (including but not
otherwise limited to fees and expenses of legal counsel) sustained
or incurred by either the Correspondent or CSC, arising out of or
resulting from any orders the Correspondent has taken from
Introduced Account residing or being domiciled in jurisdictions in
which the Correspondent has not been or is no longer authorized to
do business.
(xi) It shall be the sole and exclusive responsibility of the
Correspondent to comply with the Laws and Regulations relating to
each Introduced Account which effect listed option transactions
including, but not limited to, approval by the Correspondent's
Registered Options Principal or Senior Registered Options Principal
(as applicable), delivery of required Options Disclosure Documents
(and Supplements where applicable) and option documentation.
V. TRANSACTIONS AND MARGIN
(i) It is understood that with respect to Introduced Accounts
which are margin accounts, CSC is responsible for compliance with
Regulation T, 12 C.F.R. Part 220, the Federal margin regulation
promulgated by the Board of Governors of the Federal Reserve System
(the "Board"), and any interpretative ruling issued by the Board,
and letter rulings of the Federal Reserve Bank of New York, Rules
and Interpretations of the New York Stock Exchange, Inc. and any
other applicable margin and margin maintenance requirements of the
Laws and Regulations. The Correspondent is responsible to CSC for
the collection of the margin required to support each transaction
for, and to maintain margin in, each Introduced Account and such
margin, in conformity with the above margin and margin maintenance
requirements. After such initial margin on each
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transaction has been received, maintenance margin calls shall
be generated by CSC and made by CSC or by the Correspondent at the
instructions of CSC. CSC shall have the right to modify, in its sole
discretion, the margin requirements of any Introduced Account from
time to time so that CSC may call for additional margin. Therefore,
CSC shall be the sole judge as to the amount of margin to be
required of and maintained by Introduced Accounts. CSC may impose
such margin by individual security within an account or by a
specified Introduced Account and such margin need not be of general
application to all accounts.
CSC shall impose no fees on the Correspondent, other than any
fees or charges imposed directly or by any regulatory body
with regard to margin extensions obtained by CSC pursuant to
written requests from a principal of the Correspondent.
(ii) On all transactions, the Correspondent shall be solely and
exclusively responsible to CSC for any loss, liability, damage, cost
or expense (including but not otherwise limited to fees and expenses
of legal counsel) incurred or sustained by the Correspondent or CSC
as result of the failure of any Introduced Account to make timely
payment for the securities purchased by it or timely and good
delivery of securities sold for it, or timely compliance by it with
margin or margin maintenance calls (provided that CSC has timely
issued such call and/or given notice thereof to the Correspondent or
if conditions creating such call should be reasonably known by
Correspondent), whether or not any margin extensions have been
granted by CSC pursuant to the request of the Correspondent, except
that no interest will be charged by CSC for cash shorts in Introduced
Accounts. The Correspondent agrees to be solely and exclusively
responsible for the payment and delivery of all "when issued" or
"when distributed" transactions which CSC may accept, forward or
execute for Introduced Accounts.
(iii) On all over-the-counter transactions for Introduced
Accounts, the Correspondent shall furnish CSC with the names of the
respective purchasing and selling broker-dealers (except as
otherwise provided in paragraph (iv) of this Section, as set forth
below), the names of the purchasing and selling customers, and the
wholesale and retail purchase and sale prices.
(iv) Should the Correspondent entrust the execution of an order in
an over-the-counter security to CSC or any entity affiliated with
CSC and the counter party is left at CSC's discretion, CSC will
assume the responsibility of paying the Correspondent that which the
counter party has failed to pay pursuant to the over-the-counter
order transaction (counter party risk). In
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the case the Correspondent executes its own over-the-counter order or
designates the counter party, it shall be understood that in the
event the over-the-counter dealer with whom the Correspondent dealt
or whom it designated fails to live up to its part of the
transaction, the Correspondent will assume the counter party risk
and reimburse CSC for any loss sustained thereby.
(v) The Correspondent shall be solely and exclusively responsible
for approving all orders for the Introduced Accounts and for
establishing procedures to insure that such approved orders are
transmitted properly to CSC for execution. CSC, in its reasonable
business judgement, reserves the right to reject any order which the
Correspondent may transmit to CSC for execution.
(vi) The Correspondent shall be solely and exclusively responsible
for the supervisory review of all orders for the Introduced Accounts
and shall insure that any orders and instructions given by it or any
of its employees to CSC pursuant to the terms of this Agreement
shall have been properly authorized in advance.
(vii) The Correspondent shall be solely and exclusively responsible for
sales and purchases for the Introduced Accounts that may create or
result in violation of any of the Laws and Regulations.
(viii) All transactions pursuant to the terms of this Agreement shall be
subject to the constitution, rules, by-laws, regulations, stated
practices, and customs and any modifications thereof of any national
securities exchange or other securities exchange or market and its
clearing house, if any, where executed, and the Laws and
Regulations. It is understood that the Correspondent assumes sole
and exclusive responsibility for compliance with the Laws and
Regulations in the same manner and to the same degree as if the
Correspondent were performing the services for the Introduced
Accounts that have been assumed by CSC pursuant to this Agreement,
except insofar as CSC may pursuant to paragraph (iv) of this
Section, as set forth above, select the counter party to a
particular transaction.
(ix) All transactions heretofore had between the Correspondent and
CSC with respect to orders given by or for the Introduced Accounts
and cleared through CSC shall be subject to the Provisions of this
Agreement.
VI. SUPERVISORY RESPONSIBILITY
(i) Correspondent shall have the sole and exclusive
responsibility for the review of all Introduced Accounts and for
compliance with any
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<PAGE> 10
supervisory responsibilities under Rule 405(2) of the Rules,
including but not otherwise limited to matters involving the
investment objectives of the Introduced Accounts, the reasonable
basis for recommendations made to Introduced Accounts, and the
frequency of trading in the Introduced Accounts, whether or not such
transactions are instituted by the Correspondent, its partners,
officers, employees or any registered investment advisor.
(ii) The Correspondent and CSC shall each be responsible for
compliance with any supervisory procedures under Rule 342 of the
Rules and, to the extent applicable, any other provisions of the
Laws and Regulations, including but not otherwise limited to
supervising the activities and training of their respective
registered representatives, as well as all of their other respective
employees in the performance of functions specifically allocated to
them pursuant to the terms of this Agreement.
VII. INFORMATION TO BE PROVIDED BY THE CORRESPONDENT
(i) The Correspondent shall provide CSC with copies of all
financial information and reports filed by the Correspondent with
the New York Stock Exchange, Inc. (if a member), the National
Association of Securities Dealers, Inc., the Securities and Exchange
Commission, and any other National Securities Exchange (where a
member) (including but not otherwise limited to monthly and
quarterly Financial and Operational Combined Uniform Single Reports,
i.e., "FOCUS" Reports) simultaneous with the filing therewith.
(ii) The Correspondent shall submit to CSC on an annual basis the
audited financial statements of the Correspondent, its parent
organization (if applicable) and, when requested by CSC, its
affiliated entities. In addition, the Correspondent shall submit to
CSC upon request, information and reports relating to the financial
integrity of Correspondent, its parent organization (if applicable)
and its affiliated entities, including but not otherwise limited to
information regarding the Correspondent's aggregate indebtedness
ratio and net capital.
(iii) The Correspondent shall provide CSC with all appropriate
data in its possession pertinent to the performance and supervision
of any function or responsibility specifically allocated to CSC
pursuant to the terms of this Agreement.
(iv) The Correspondent shall provide CSC with any amendment or
supplement to the Form BD of the Correspondent.
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<PAGE> 11
VIII. INFORMATION TO BE PROVIDED BY CSC
CSC shall provide the Correspondent with all appropriate data in its
possession pertinent to the proper performance and supervision of any
function specifically allocated to the Correspondent pursuant to the
terms of this Agreement. The Correspondent shall be responsible for and
shall promptly reimburse CSC for all costs incurred by CSC in connection
with the preparation and mailing of such information.
IX. CUSTOMER NOTIFICATION AND CORRESPONDENCE
(i) The Correspondent shall be solely and exclusively responsible
for informing its customers in a written correspondence, the form
and substance of which will be mutually agreed upon, prior to the
effective date of this Agreement, as to the general nature of the
services to be provided by CSC pursuant to this agreement and the
right of such customers to reject the services provided herein. Any
new customers of the Correspondent shall also be informed as
provided herein, verbally prior to such customers becoming
Introduced Accounts and in writing, once the new accounts have been
opened and accepted. The Correspondent shall be solely and
exclusively responsible for the payment of all costs incurred in
connection with the preparation and mailing of such customer
correspondence.
(ii) The Correspondent shall inform its customers pursuant to such
written correspondence that all inquiries and correspondence should
be directed to the Correspondent. All customer correspondence shall
be reviewed and responded to by the party responsible for the
specific area to which the inquiry or complaint relates pursuant to
the terms of this Agreement. In the event such correspondence is
not directed to such party originally, the Correspondent or CSC
shall expeditiously forward such correspondence to the appropriate
party.
X. ERRORS, CONTROVERSIES AND INDEMNITIES
(i) Errors, misunderstandings or controversies, except those
specifically otherwise covered in this Agreement, between the
Introduced Accounts and the Correspondent or any of its employees,
which shall arise out of acts or omissions of the Correspondent or
any of its employees (including, without limiting the foregoing, the
failure of the Correspondent to deliver promptly to CSC any
instructions received by the Correspondent from an Introduced
Account with respect to the voting, tender or exchange of shares
held in such Introduced Account), shall be the sole and exclusive
responsibility and liability of the Correspondent. In the event,
however, that by reason of such error, misunderstanding or
controversy, the
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<PAGE> 12
Correspondent in its discretion deems it advisable to commence an
action or proceeding against an Introduced Account, the
Correspondent shall indemnify and hold CSC harmless from any loss,
liability, damage, cost or expense (including but not otherwise
limited to fees and expenses of legal counsel) which CSC may incur
or sustain in connection therewith or under any settlement thereto.
If such error, misunderstanding or controversy shall result in the
bringing of an action or proceeding against CSC, the Correspondent
shall indemnify and hold CSC harmless from any loss, liability,
damage, cost or expense (including but not otherwise limited to
reasonable fees and expenses of legal counsel) which CSC may incur
or sustain in connection therewith or under any settlement thereof.
(ii) Errors, misunderstandings or controversies, except those
specifically otherwise covered in this Agreement, between the
Introduced Accounts and the Correspondent or any of its employees,
which shall arise out of acts or omissions of CSC or any of its
employees, shall be the sole and exclusive responsibility and
liability of CSC. In the event, however, that by reason of such
error, misunderstanding or controversy, CSC in its discretion
deems it advisable to commence an action or proceeding against an
Introduced Account, CSC shall indemnify and hold the Correspondent
harmless from any loss, liability, damage, cost or expense
(including but not otherwise limited to reasonable fees and expenses
of legal counsel) which the Correspondent may incur or sustain in
connection therewith or under any settlement thereof. If such
error, misunderstanding or controversy shall result in the bringing
of an action or proceeding against the Correspondent, CSC shall
indemnify and hold the Correspondent harmless from any loss,
liability, damage, cost or expense (including but not otherwise
limited to reasonable fees and expenses of legal counsel) which the
Correspondent may incur or sustain in connection therewith or under
any settlement thereof.
(iii) CSC and the Correspondent both agree to indemnify the other
and hold the other harmless from and against any loss, liability,
damage, cost or expense (including but not otherwise limited to
reasonable fees and expenses of legal counsel) arising out of or
resulting from any failure by the indemnifying party or any of its
employees to carry out fully the duties and responsibilities
assigned to the indemnifying party herein or any breach of any
representation or warranty herein by the indemnifying party under
this Agreement. The Correspondent hereby agrees to indemnify and
hold CSC harmless from and against any loss, liability, damage, cost
or expense (including but not otherwise limited to reasonable fees
and expenses of legal counsel) sustained or incurred in connection
herewith in the event any Introduced Account fails to meet any
initial margin call or subsequent maintenance calls, in conformity
with Section V hereof.
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(iv) The indemnification provisions in this Agreement, shall
remain operative and in full force and effect, regardless of the
termination of this Agreement, and shall survive any such
termination.
(v) Correspondent agrees to maintain, and to provide evidence
thereof to CSC, at least $250,000 blanket bond indemnity bond
insurance covering any and all acts of its employees, agents and
partners, with an insurance company reasonably acceptable to CSC,
listing CSC as an insured party and permitting CSC to assume the
policy in the event of the Correspondent ceasing operations.
XI. REPRESENTATIONS AND WARRANTIES
(a) The Correspondent represents and warrants as follows:
(i) The Correspondent will maintain at all times
while this Agreement is in full force and effect stated net
capital of not less than $100,000 unless CSC has otherwise
agreed in writing. The Correspondent will not carry customer,
broker or dealer accounts and will not receive or hold funds
under Rule 15c3-1 of the Securities Exchange Act of 1934, as
amended, for those persons. The Correspondent will
immediately notify CSC when [i] its Aggregate Indebtedness
Ratio reaches or exceeds 10 to 1, [ii] if the Correspondent
has elected to operate under paragraph [f] or Rule 15c3-1 of
the Securities Exchange Act of 1934, as amended, when its net
capital is less than 5% of aggregate debit items computed in
accordance with Rule 15c3-3, [iii] when the aggregate amount
of any withdrawals of equity capital and/or unsecured advances
or loans exceed 20% of excess net capital in any 30 day period
or 30% of excess net capital in any 90 day period or [iv] its
stated net capital is less than the minimum amount required
under this Agreement.
(ii) The Correspondent is a member of good standing of
the National Association of Securities Dealers, Inc. The
Correspondent will promptly notify CSC of any additional
exchange memberships or affiliations. The Correspondent shall
also comply with whatever non-member access rules have been
promulgated by any National Securities Exchange or any other
securities exchange of which it is not a member.
(iii) The Correspondent is and during the term of this
Agreement will remain duly registered or licensed and in good
standing as a broker/dealer under all applicable Laws and
Regulations.
(iv) The Correspondent has all the requisite authority
in conformity with all applicable Laws and Regulations to
enter into this Agreement and to retain
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<PAGE> 14
the services of CSC in accordance with the terms thereof.
(v) The Correspondent is in compliance, and during
the term of this Agreement will remain in compliance with [i]
the capital and financial reporting requirements of every
National Securities Exchange or other securities exchange
and/or securities association of which the Correspondent is a
member, [ii] the capital requirements of the Securities and
Exchange Commission, and [iii] the capital requirements of
every state in which the Correspondent is licensed as a
broker/dealer.
(vi) The Correspondent shall not generate and/or
prepare any statements, billings or confirmations respecting
any Introduced Account unless expressly so instructed in
writing by CSC.
(vii) The Correspondent shall keep confidential any
information it may acquire as a result of this Agreement
regarding the business and affairs of CSC, which requirement
shall survive the life of this Agreement.
(b) CSC represents and warrants as follows:
(i) CSC is a member in good standing of the National
Association of Securities Dealers, Inc., and the New York
Stock Exchange, Inc.
(ii) CSC is and during the term of this Agreement will
remain duly licensed and in good standing as a broker/dealer
under all applicable Laws and Regulations.
(iii) CSC has all the requisite authority, in
conformity with all applicable Laws and Regulations, to enter
into and perform this Agreement.
(iv) CSC is in compliance, and during the term of this
Agreement, will remain to compliance, with [i] the capital and
financial reporting requirements of every National Securities
Exchange and/or other securities exchange or association of
which it is a member, [ii] the capital requirements of the
Securities and Exchange Commission, and [iii] the capital
requirements of every state in which it is licensed as a
broker/dealer.
(v) CSC represents and warrants that the names and
addresses of the Correspondent's customers which have or which
may come to its attention in connection with the clearing and
related functions it has assumed under this Agreement are
confidential and shall not be utilized by CSC or an affiliate
thereof, except in connection with the functions performed by
CSC pursuant to this Agreement. CSC shall send no written
information to such customers other than statements, bills or
notices of transactions in
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<PAGE> 15
connection with its role as clearing agent. Notwithstanding
the foregoing, should an Introduced Account request, on an
unsolicited basis, that CSC or any entity affiliated with CSC
become its broker, acceptance or such Introduced Account by CSC or
any entity affiliated with CSC shall in no way violate this
representation and warranty, nor result in a breach of this
Agreement.
(vi) CSC shall keep confidential any information, including the
names and addresses of the Correspondent's customers, it may
acquire as a result of this Agreement regarding the business and
affairs of the Correspondent, which requirement shall survive the
life of this Agreement.
XII. TERMINATION - EVENT OF DEFAULT
Notwithstanding any provision in this Agreement, the following events or
occurrences shall constitute an Event of Default under this Agreement:
(i) Either CSC or the Correspondent shall fail to perform or
observe any term, covenant or condition to be performed or observed
by it hereunder and such failure shall continue to be unremedied for
a period of 30 days after written notice from the non-defaulting
party to the defaulting party specifying the failure and demanding
that the same be remedied; or
(ii) Any representation or warranty made by either CSC or the
Correspondent herein shall prove to be incorrect at any time in any
material respect; or
(iii) A receiver, liquidator or trustee of either CSC or the
Correspondent, or of its property, held by either party, is
appointed by court order and such order remains in effect for more
than 30 days; or either CSC or the Correspondent is adjudicated
bankrupt or insolvent; or any of its property is sequestered by
court order and such order remains in effect for more than 30 days;
or a petition is filed against CSC or the Correspondent under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, and is not dismissed within 30 days
after such filing; or
(iv) Either CSC or the Correspondent files a petition in voluntary
bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereinafter in effect, or consents to filing of any petition against
it under any such law; or
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<PAGE> 16
(v) Either CSC or the Correspondent makes an assignment for the
benefit of its creditors, or admits in writing its inability to pay
its debts generally as they become due, or consents to the
appointment of a receiver, trustee or liquidator of either CSC or
the Correspondent, or of any property held by either party; or
(vi) Either party hereto knowingly and willfully solicits or
causes to solicit for employment the employees of either party or
their affiliates/subsidiaries, successors or assignees without prior
consent of the other party; or
(vii) If research is provided by CSC or any entity affiliated with
CSC to the Correspondent and the Correspondent knowingly and
willfully reproduces or reprints in any fashion same or represents
to customers or to an unrelated third party that the research
supplied by CSC or such affiliated entity is that of the
Correspondent.
Upon the occurrence of any such Event of Default, the non-defaulting
party may, at its option, by notice to the defaulting party declare that
this Agreement shall be thereby terminated and such termination shall be
effective as of the date such notice has been sent or communicated to the
defaulting party.
XIII. REMEDIES CUMULATIVE
The enumeration herein of specific remedies shall not be exclusive of
any other remedies. Any delay or failure by any party of this Agreement
to exercise any right, power, remedy or privilege herein contained, or
now or hereafter existing under any applicable statute or law, shall not
be construed to be a waiver of such right, power, remedy or privilege or
to limit the exercise of such right, power, remedy or privilege. No
single, partial or other exercise of any such right, power, remedy or
privilege shall preclude the further exercise thereof or the exercise of
any other right, power, remedy or privilege.
XIV. MISCELLANEOUS
(i) As of the effective date of this Agreement CSC will not
convert or allow to be converted to its records as Introduced
Accounts customer accounts of the Correspondent that are partially
or totally unsecured, securities in the name of the Correspondent's
customers, or legal transfer securities (securities in the name of
estates, trust, joint ownership, foreign ownership and such), unless
previously approved in writing by CSC. If in error such accounts
are converted to CSC books or records, CSC reserves the right to
convert back to the Correspondent or its clearing agent said
customer accounts and the positions.
(ii) CSC shall have the power to place open orders as instructed
by the
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Correspondent as of the effective date of this Agreement, and
appropriate adjustments shall be made by CSC to reflect that
CSC has acted as broker on the open orders with specialists on any
national securities exchange or other securities exchange.
(iii) CSC shall have the power to effect appropriate adjustments
with respect to pending dividends and other distributions from the
effective date of this Agreement through the last payable date of
such pending dividends.
(iv) The Correspondent shall be responsible for providing annual
dividend and distribution information as contained in IRS Form 1087
(to include individual 1099 filings) and any other information
required to be reported by Federal, state or local tax laws, rules
or regulations, to its customers until the effective date of this
Agreement, whereupon CSC shall assume this function as to Introduced
Accounts.
(v) CSC shall have the power to allocate and make appropriate
adjustments for fails, reorganization accounts, other work in
process accounts, and overages relating to accounts of
the customers of the Correspondent that have become
Introduced Accounts pursuant to the terms of this Agreement.
(vi) The Correspondent shall assume all liabilities in connection
with the bad debts of all Introduced Accounts. Unsecured debits in
the Introduced Accounts shall be paid within 30 days of their origin
date, and it shall be the responsibility of the Correspondent to
collect such payments from its customers and transmit them to CSC
within such 30-day period. If any unsecured debit balances remain
outstanding beyond such 30-day period, CSC is authorized to apply as
payment of such debit balances commission fees owed to the
Correspondent in connection with transactions pursuant to this
Agreement.
(vii) Transfers of securities relating to Introduced Accounts
shall be frozen ten business days prior to the effective date of
this Agreement.
(viii) CSC shall limit its services pursuant to the terms of this
Agreement to that of clearing functions and the related services
expressly set forth herein and the Correspondent shall not hold
itself out as an agent of CSC or any of the subsidiaries or
companies controlled directly or indirectly by or affiliated with
CSC or its parent.
(ix) This Agreement supersedes any previous agreement and may be
modified only by a writing signed by both parties to this Agreement.
Such modification shall not be deemed as a cancellation of this
Agreement.
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(x) This Agreement shall be submitted to and/or approved by any
national securities exchange, or other regulatory and
self-regulatory bodies vested with the authority to review and/or
approve this Agreement or any amendment or modifications hereto. In
the event of any such disapproval, the parties hereto agree to
bargain in good faith to achieve the requisite approval. CSC will
file a fully executed copy of this agreement with the New York Stock
Exchange.
(xi) This Agreement may be canceled by either of the parties
hereto upon ninety (90) days' written notice; provided, however,
that this Agreement may be canceled by either party upon thirty (30)
days' written notice if (i) the net capital ratio of the other party
exceeds 10 to 1, (ii) when the aggregate amount of any withdrawals
of equity capital and/or unsecured advances or loans exceed 20% of
excess net capital in any 30 day period or 30% of excess net capital
in any 90 day period or (iii) its stated net capital is less than
the minimum amount required under this Agreement; and provided,
further, that this Agreement may be canceled by CSC at any time
between the date on which this Agreement is executed and the
effective date of this Agreement, if there is a material change in
the control or management of the Correspondent.
(xii) Any dispute or controversy between the Correspondent and CSC
relating to or arising out of this Agreement shall be settled by
arbitration before and under the rules of the Arbitration Committee
of the New York Stock Exchange, Inc., unless the transaction which
gave rise to such dispute or controversy was effected in another
exchange or market which provides arbitration facilities, in which
case it shall be settled by arbitration under such facilities.
(xiii) CSC will not be bound to make any investigation into the facts
surrounding any transaction that it may have with the Correspondent
on a principal or agency basis or that the Correspondent may have
with its customers or other persons, nor will CSC be under any
responsibility for compliance by the Correspondent with any Laws and
Regulations which may be applicable to the Correspondent. It is
understood that CSC will assist the Correspondent in any
investigation conducted by the Correspondent.
(xiv) To facilitate the keeping of records by CSC the
Correspondent will turn over promptly to CSC any and all cash
remittances and securities which the Correspondent receives from its
customer. Concurrently with the delivery of such funds or
securities to the Correspondent, it shall furnish CSC with such
information as may be relevant or necessary to enable CSC to record
promptly and properly such cash remittances and securities
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in the respective Introduced Accounts.
(xv) This Agreement shall be binding upon all successors, assigns
or transferees of both parties hereto, irrespective of any change
with regard to the name of or the personnel of the Correspondent or
CSC. Any assignments of this Agreement shall be subject to the
requisite review and/or approval of any regulatory or
self-regulatory agency or body whose review and/or approval must be
obtained prior to the effectiveness and validity of such assignment.
Except as indicated below, no assignment of this Agreement by
either party shall be valid unless consented to in writing by the
other party. Any assignment by CSC to any subsidiary or to a
company affiliated with or controlled directly or indirectly by CSC
will be deemed valid and enforceable in the absence of any consent
from Correspondent. Neither this Agreement nor any operation
hereunder is intended to be, shall not be deemed to be, and shall
not be treated as a general or limited partnership, association or
joint venture or agency relationship between the Correspondent and
CSC.
(xvi) Should the Correspondent in any way attempt to hold itself
out as, advertise or in any way represent that it is the agent of
CSC, CSC shall have the power, at is option, to terminate the
Agreement as an event of default as defined in Section XII of this
Agreement and the Correspondent shall be liable for any loss,
liability, damage, cost or expense (including but not otherwise
limited to reasonable fees and expenses of legal counsel) sustained
or incurred by CSC as a result of such representation of agency or
apparent authority to act as an agent of CSC or agency by estoppel.
(xvii) The Correspondent shall not, without having obtained the prior
written approval of CSC, agree to place or place any advertisement
in any newspaper, publication, periodical or any other media if such
advertisement in any manner makes reference to CSC, to any person or
entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with CSC and to the clearing arrangements and/or any of the
services embodied in this Agreement.
(xviii) The Laws and Regulations require that CSC must have proper
documentation to support any account opened on its books, including
Introduced Accounts. If, after reasonable requests therefor, the
necessary documents so as to enable CSC to comply with such account
documentation requirements of the Laws and Regulations have not been
received by CSC, the Correspondent shall receive notification that
no further orders will be accepted for the Introduced Accounts
involved. Should it happen that inadvertent orders are placed for
such accounts after
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this notice is received, no commission credit will be granted from
such order. On receipt of the necessary documents, this restriction
will be lifted on future commissions, but any commissions
withheld will be credited or paid. This Agreement is not in any way
intended to limit the responsibility of CSC under the Laws and
Regulations with respect to Introduced Accounts.
(xix) The construction and effect of every provision of this
Agreement, the rights of the parties hereunder and any questions
arising out of this Agreement, shall be subject to the statutory and
common law of the State of New York.
(xx) The headings preceding the text, articles and sections hereof
have been inserted for convenience and reference only and shall not
be construed to affect the meaning, construction or effect of this
Agreement.
(xxi) This Agreement shall cover only the type of services set
forth herein and is in no way intended nor shall be construed to
bestow upon the Correspondent any special treatment regarding any
other arrangements, agreements or understandings which presently
exist between Correspondent and CSC or which may hereinafter exist.
The Correspondent shall be under no obligation whatsoever to deal
with CSC or any of its subsidiaries or any companies controlled
directly or indirectly by or affiliated with CSC or its parent, in
any capacity other than as set forth in this Agreement. Likewise,
CSC shall be under no obligation whatsoever to deal with the
Correspondent or any of its affiliates in any capacity other than as
set forth in this Agreement.
(xxii) If any provision or condition of this Agreement shall be held to
be invalid or unenforceable by any court, or regulatory or
self-regulatory agency or body, such invalidity or unenforceability
shall attach only to such provision or condition. The validity of
the remaining provisions and conditions shall not be affected
thereby and this Agreement shall be carried out as if any such
invalid or unenforceable provision or condition were not
contained herein.
(xxiii) In the event that CSC assumes any contractual obligation on
behalf of the Correspondent relative to communication equipment, the
Correspondent hereby agrees to immediately absorb the remaining
portion of said contract if Correspondent terminates the
relationship with CSC. The Correspondent further agrees to absorb
any and all costs associated with the removal or relocation of any
communication equipment installed by or at the direction of CSC, if
this agreement is terminated by the Correspondent.
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(xxiv) Any unsecured debit residing in a customer account as a result of
the failure to perform on behalf of the customer and/or the
Correspondent will be the responsibility of the Correspondent.
Thirty (30) calendar days will be allowed for collection. If funds
are not received, CSC reserves the right to debit the Correspondent;
bad debit, collateral and/or commission refund account the amount of
the unsecured balance plus interest at the rate of 1/2% above the
prevailing broker call loan rate.
(xxv) The interest and handling expense (to include day charges)
for any DVP transaction that does not settle on a normal or regular
way basis or is rejected by the agent for any reason other than CSC
negligence is the responsibility of the Correspondent.
(xxvi) For the purposes of any and all notices, consents, directions,
approvals, restrictions, requests or other communications required
or permitted to be delivered hereunder, CSC's address shall be 120
Broadway, 8th Floor, New York, New York, 10271 and the
Correspondent's address shall be Sears Tower, Suite 4500, 233 South
Wacker Drive, Chicago, Illinois 60606, and either party may change
its address for notice purposes by giving written notice pursuant to
registered mail of the new address to the other party.
(xxvii) This Agreement shall become effective on or about September 15,
1995 or such date mutually agreed upon by the parties hereto.
Made and executed at _______________________________________ on the date
hereinabove set forth.
Accepted and Agreed to:
CORRESPONDENT FIRM
By:
------------------------
Title:
------------------------
Date:
------------------------
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Accepted and Agreed to:
CORRESPONDENT SERVICES CORPORATION (CSC)
By:
--------------------------------
Title:
--------------------------------
Date:
--------------------------------
22
<PAGE> 1
EXHIBIT 10.23
AMENDMENT NO. 1 TO
NOTE CONVERSION AGREEMENT
The Note Conversion Agreement dated as of September 29th, 1995 by and
between Rodman & Renshaw Capital Group, Inc. (the "Company") and Confia, S.A.,
Institucion de Banca Multiple, Abaco Grupo Financiero, a banking corporation
incorporated under the laws of the United Mexican States ("Confia") is hereby
amended as follows:
1. Amendments.
1.1 From and after the day hereof, the definition of the term
"Note" in Section 1 is hereby amended to delete the date of
"September 30, 1995" in clause (i) and to insert in lieu thereof
"November 10, 1995."
1.2 From and after the day hereof, Section 2 is hereby amended to
add the following sentence: "Confia further agrees to lend the
Company an additional $10,000,000 on or prior to November 10,
1995."
2. Miscellaneous. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, excluding that body of
laws relating to conflict of laws. Except as specifically amended hereby,
the Note Conversion Agreement shall remain in full force and effect in
accordance with its existing terms, but each reference in the Note
Conversion Agreement to "this Agreement," "hereunder," "hereof" or words
of like import, and references to the Note Conversion Agreement in any and
all instruments or documents in connection therewith shall, except where
the context otherwise requires, be deemed a reference to the Note
Conversion Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
RODMAN & RENSHAW CAPITAL GROUP, INC.
By: /s/ Charles W. Daggs, III
----------------------------------------
Name: Charles W. Daggs, III
Title: President & Chief Executive Officer
CONFIA, S.A., INSTITUCION DE BANCA
MULTIPLE, ABACO GRUPO FINANCIERO
By: /s/ Mario Velasco Coppel
----------------------------------------
Name: Mario S. Velasco Coppel
Title: Responsible Regional -
Monterrey
<PAGE> 1
EXHIBIT 21.1
RODMAN & RENSHAW CAPITAL GROUP, INC.
SUBSIDIARIES
<TABLE>
<CAPTION>
COMPANY STATE OF INCORPORATION
- - - - ----------------------------------------- ----------------------
<S> <C>
Rodman & Renshaw, Inc. Delaware
Rodman Advisory Services Inc. Delaware
Rodman & Renshaw Chicago Theatre Ltd. Delaware
Rodman & Renshaw Futures Management, Inc. Delaware
Rodman River West, Inc. Delaware
Rodman Trading, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Registration Statement No.
33-73206 on Form S-8 of Rodman & Renshaw Capital Group, Inc. and in
Registration Statement No. 33-56951 on Form S-8 of Rodman & Renshaw Capital
Group, Inc. of our report dated February 26, 1996, on our audit of the
consolidated financial statements of Rodman & Renshaw Capital Group, Inc. as of
December 31, 1995 and December 31, 1994 and for the year ended December 31,
1995, and for the transition period from June 25, 1994 through December 31,
1994, which report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
March 26, 1996
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-73206 of Rodman & Renshaw Capital Group, Inc. on Form S-8 and in
Registration Statement No. 33-56951 of Rodman & Renshaw Capital Group, Inc. on
Form S-8 of our report dated August 19, 1994 appearing in this Annual Report on
Form 10-K of Rodman & Renshaw Capital Group, Inc. for the year ended December
31, 1995.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 26, 1996
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