UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number 1-9143
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RODMAN & RENSHAW CAPITAL GROUP, INC.
- - -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3111956
- - ----------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
233 S. Wacker Drive, Suite 4500, Chicago, IL 60606
- - -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 312/526-2000
--------------
- - -------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by 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
------- ------
Shares of common stock outstanding at August 1, 1996: 6,645,802
par value $.09.
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -
Condensed Consolidated Statements of Financial Condition
as of June 30, 1996 (unaudited) and December 31, 1995.
Condensed Consolidated Statements of Operations (unaudited)
for the three and six months ended June 30, 1996 and
June 30, 1995.
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended June 30, 1996 and
June 30, 1995.
Notes to Condensed Consolidated Financial Statements
(unaudited) - June 30, 1996.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
<TABLE>
June 30
1996 December 31
(unaudited) 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 15,279 $ 9,001
Securities purchased under agreements
to resell - 2,204
Cash and short-term investments required to
be segregated under federal regulations 7,845 7,398
Receivables:
Customers - 49,544
Brokers, dealers, and clearing
organizations 30,576 16,298
Securities owned - at market 9,407 16,489
Memberships in securities and commodities
exchanges at cost(market value 06/30/96 -
$1,639; 12/31/95 - $1,219) 272 272
Furniture, fixtures and leasehold improvements,
at cost, less accumulated depreciation and
amortization (06/30/96 - $5,437; 12/31/95 -
$5,132) 8,193 8,560
Prepaid expenses and other assets 10,069 9,567
Deferred income taxes (Net of valuation
allowance: 06/30/96 - $19,419;
12/31/95 - $17,059) - -
__________ ___________
$ 81,641 $ 119,333
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings from banks $ - $ 30,672
Short-term note payable to affiliate 26,500 26,500
Payables:
Customers 7,673 18,914
Brokers, dealers, and clearing
organizations - 13,549
Securities sold but not yet purchased,
at market 24,852 4,964
Accrued commissions 2,460 2,155
Accounts payable and accrued expenses 16,154 21,136
_________ ___________
77,639 117,890
<PAGE>
Liabilities subordinated to the claims
of general creditors - -
Stockholders' equity:
Convertible non-voting preferred stock,
$.01 par value, 5,000,000 shares authorized;
145 shares issued at 06/30/96 and 50 shares
issued at 12/31/95 - -
Common stock, $.09 par value: 20,000,000
shares authorized; 6,646,000 issued at
06/30/96 and 12/31/95 598 598
Additional paid-in capital 45,249 35,749
Accumulated deficit (41,845) (34,904)
__________ ___________
4,002 1,443
__________ ___________
$ 81,641 $ 119,333
========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Commissions $ 5,307 $ 8,115 $ 10,547 $ 14,574
Principal 9,728 6,263 16,390 11,830
Interest 721 3,635 1,361 7,238
Fee income 3,218 1,850 5,035 2,983
Other 800 662 1,414 1,379
_________ ________ ________ ________
TOTAL REVENUES 19,774 20,525 34,747 38,004
EXPENSES:
Employee compensation
and benefits 13,578 13,824 26,394 25,348
Commissions, floor brokerage
and clearance 1,041 1,318 2,153 2,526
Interest 885 2,720 2,386 5,680
Communications 1,498 2,455 2,979 4,275
Occupancy and equipment 1,758 1,593 3,169 2,975
Professional fees 806 1,392 1,249 2,315
Other operating expense 1,898 1,228 3,358 2,115
_________ ________ ________ _______
TOTAL EXPENSES 21,464 24,530 41,688 45,234
_________ ________ ________ ________
Loss before taxes (1,690) (4,005) (6,941) (7,230)
Tax benefit - - - (1,019)
_________ ________ ________ ________
NET LOSS $ (1,690) $ (4,005) $ (6,941) $ (6,211)
========= ======== ======== ========
Earnings per share data:
NET LOSS PER COMMON SHARE $ (0.25) $ (0.60) $ (1.04) $ (0.99)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,646 6,646 6,646 6,291
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
<TABLE>
SIX MONTHS ENDED
June 30 June 30
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,941) $ (6,211)
Adjustments to reconcile net loss to
net cash flows provided by (used in)
operating activities:
Gain on sale of fixed assets (8)
Gain on sales of exchange memberships - (380)
Deferred income taxes - (1,019)
Depreciation and amortization 473 504
Net changes in operating assets
and liabilities:
Securities purchased under
agreements to resell 2,204 29,651
Cash and short-term investments
required to be segregated under
federal regulations (447) 1,467
Receivables from and payables
to customers, brokers, dealers
and clearing organizations 10,476 (78,359)
Securities owned 7,082 40,015
Prepaid expenses and other assets (502) (7,891)
Recoverable income taxes - 1,286
Securities sold but not yet purchased 19,888 800
Accrued commissions 305 1,221
Accounts payable and accrued expenses (4,982) 18,392
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 27,556 (532)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and
leasehold improvements (net) (106) (6,346)
Sales of exchange memberships - 1,945
NET CASH FLOWS USED IN
INVESTING ACTIVITIES (106) (4,401)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term
borrowings from banks (30,672) 4,743
Payment of notes subordinated to
claims of general creditors - (1,374)
Proceeds from issuance of convertible
non-voting preferred stock 9,500 -
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES (21,172) 3,369
<PAGE>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,278 (1,564)
Cash and cash equivalents at beginning
of period 9,001 7,011
Cash and cash equivalents at end of period $ 15,279 $ 5,447
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
- - ------------------------------
The unaudited condensed consolidated financial statements of Rodman
& Renshaw Capital Group, Inc. and subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management of the
Company, all adjustments considered necessary for a fair
presentation of the financial condition and results of operations of
the Company for the periods presented have been included. Although the
Company has stock options outstanding, such stock options do not have a
dilutive effect on earnings per share; accordingly, the primary and fully
diluted loss per share calculations are not different. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Report on Form 10-K for
the year ended December 31, 1995.
NOTE B - ASSETS SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS
- - --------------------------------------------------------------
The Company was holding in safekeeping $979,000 and $1,664,000 of
securities owned by customers as of June 30, 1996, and December 31,
1995, respectively. In accordance with applicable regulations, these
securities are not included in the Condensed Consolidated Statement of
Financial Condition.
NOTE C - NET CAPITAL REQUIREMENT AND DIVIDEND RESTRICTIONS
- - ----------------------------------------------------------
The Company's primary subsidiary, Rodman & Renshaw, Inc.("Rodman"),
a registered broker-dealer and futures commission merchant, is
subject to the minimum net capital rules of the Securities and
Exchange Commission (the "SEC"), Commodity Futures Trading Commission
(the "CFTC"), and the capital rules of the New York Stock Exchange, Inc.
(the "NYSE"), of which Rodman is a member. Rodman has elected to use
the alternative net capital method permitted by the SEC rule. At
December 31, 1995, these rules required that Rodman maintain minimum
net capital, as defined in such rules, equal to the greater of 2% of
aggregate debits arising from customer securities transactions or
$1,000,000, or 4% of the funds required to be segregated for
customers pursuant to the Commodity Exchange Act. In January 1996,
Rodman changed its business operation from a clearing securities
broker to a non-clearing securities 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's
minimum 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.
The NYSE may require a member firm to reduce its business if its net
capital is less than the greater of $312,500 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 $375,000 or 7% of the funds required to be
segregated. At June 30, 1996, and December 31, 1995, Rodman had net
capital, as defined, of $16.8 million and $15.4 million, respectively,
or $16.5 million and $14.3 million, respectively, in excess of the
minimum net capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The results of operations should be read in conjunction with the
Company's condensed consolidated statements of income. The
Company's principal activities -- securities and commodities
brokerage, principal trading for servicing its customers, and
investment banking services -- are highly competitive and extremely
volatile. The earnings of the Company are subject to wide
fluctuations since many factors over which the Company has little or
no control -- such as the overall volume of activity in the securities,
futures and options markets and the volatility and general level of
market prices and interest rates -- may affect its operations. In
addition, results of operations for any particular interim period may
not be indicative of results to be expected for the year ending
December 31, 1996.
Notwithstanding a strong 1996 second quarter revenue level of $19.8
million, the Company experienced a net loss of $1.7 million during
the quarter; this was a significant improvement by approximately 58%
over the same period in 1995.
For the first six months of 1996, the Company's losses totaled
$6.9 million, essentially all in the first quarter, as steady improvements
were made monthly throughout the first half. Versus 1995, revenues were
lower by $3.3 million, reflecting a strategic transition in product lines.
The reduction of Commodities revenue in 1996, which comprised about one
third of the previous year's revenue, was essentially replaced by major
improvements in the Investment Banking and Institutional Equities business
units. Notwithstanding the absence of over $1 million of deferred tax
credits recorded in 1995, the net loss for the first half of 1996 was just
$700 thousand higher than the comparative 1995 period, reflecting the initial
benefits derived from strategic changes in our product mix and operating levels.
REVENUES
Revenues were $19.8 million in the second quarter of 1996, essentially
equal to the previous year. Management believes this was a major
accomplishment in light of the substantial changes in business mix.
Revenues were $34.7 million for the first six months of this year, or
about 9% lower than the previous year's results. Our Retail business as
well as our new Investment Banking and Institutional Equities business units
all demonstrated significant growth versus 1995 results. This positive
performance essentially offset the revenue shortfall of the Commodities
business, which management significantly reduced in 1995. Revenue for
Investment Banking doubled versus the first half of 1995 and substantially
contributed to improvement in Institutional Equities and Retail sales levels.
Interest income declined versus both the second quarter and six month
periods of 1995 as the Company reduced its security inventory positions
and converted to a non-clearing broker-dealer and futures commission
merchant.
EXPENSES
Expenses for the 1996 second quarter declined $3.1 million or 12% versus
the same period last year, a significant improvement considering essentially
a constant revenue level. For the first six months, expenses totaled $41.7
million or 8% lower than the first half of 1995. Overall at June 30, 1996,
the Company realized a reduction of about 25% in total employees versus
year end 1995; however, offsetting the lower number of people were higher
compensation levels required to build the Research and Investment Banking
business. Compensation, which accounted for 63% of total expenses in the
first half of 1996, was slightly higher due to these new business units.
Floor brokerage, clearance and communications expenses all declined as
compared to 1995, mainly reflecting savings from the change in business
line mix. Interest expense also declined in both 1996 periods, primarily
reflecting the decrease in security inventory positions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's assets are substantially comprised of cash, receivables
and securities inventory, which are all highly liquid. The principal
sources of financing are stockholders' equity, customer payables,
short-term loans from banks and affiliates, and other payables.
As a registered broker-dealer and futures commission merchant,
Rodman is required by the SEC and CFTC to maintain specific amounts
of net capital to meet its customers' obligations. As of June 30,
1996, Rodman's net capital, as defined, was $16.5 million in excess
of the required net capital.
On June 22, 1994, the Company borrowed $10 million from Confia, S.A.,
Institucion de Banca Multiple, Abaco Grupo Financiero ("Confia, S.A."),
an affiliated company of the Company's majority stockholder, Abaco Casa
de Bolsa, S.A. de C.V., Abaco Grupo Financiero ("Abaco"). 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 losses were eroding
its net capital. On December 4, 1995, the Company paid the 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%. The loan was renewed on June 3, 1996, for a six
month term ending December 3, 1996, at the same interest rate. On
February 9, 1996, the Company also received a letter from Abaco Grupo
Financiero, S.A. de C.V. ("Parent") whereby Parent agreed to continue to
unconditionally support the Company and Rodman for the next year, up to
and including March 31, 1997 ("Letter of Support"). Based upon the Letter
of Support, management believes that it is the intention of Confia, S.A. to
renew the $26.5 million loan when it becomes due. 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 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 million
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 of 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.
Accordingly, in the event of such a rights offering, each stockholder would
have the opportunity to purchase a sufficient number of shares at the offering
price to maintain his or her percentage ownership of the Company.
The support referred to in the February 9, 1996 letter 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 had agreed to provide the Company with a total of $9.5
million in equity capital in March and April, 1996. On March 29, 1996, Parent
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. On April 30, 1996, Abaco provided the remaining $4.5 million
through the purchase of 45 additional shares of non-voting preferred stock
at a price per share of $100,000. The terms of such shares are substantially
identical to those of the preferred stock issued in December, 1995, as
discussed above. At June 30, 1996, the book value per share of the Company's
common stock was approximately $0.60. Full conversion of the Company's
preferred stock held by Abaco at such price, assuming only Abaco's exercise
of its conversion rights, would entail the issuance of approximately 24 million
shares of common stock. In the event that such conversion were made at a time
when the book value per share of the Company's common stock was less than
$0.09, the conversion would entail the issuance of approximately 160 million
shares of common stock. In the event that the Company's outstanding indebted-
ness to Confia also were converted, such conversion would entail the issuance
of an additional 44 million shares of common stock if the book value per share
were $0.60 and 295 million shares of common stock if such book value was less
than $0.09 per share.
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. is not renewed or
converted, Rodman will be required to curtail its business activities
substantially in order to reduce its minimum net capital requirements, and
then it would seek regulatory approval to repay its subordinated debt to the
Company.
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 stockholders' 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%. As of
June 30, 1996, the debt/equity ratio was 52%.
In the six months ended June 30, 1996, the Company provided cash and
cash equivalents of $27.6 million from operating activities primarily
related to an increase in short security inventory positions. In the
six months ended June 30, 1995, the Company's operations used $0.5 million.
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The following exhibits are included
herein or are incorporated by reference
(10.25) Stock Purchase Agreement dated April 30,
1996 between the Company and Abaco Casa
de Bolsa, S.A. de C.V., Abaco Grupo
Financiero.
(10.26) Promissory Notes from the Company to
Confia, S.A., dated June 3, 1996.
(10.27) Employment Agreement dated May 14, 1996
between the Company and William C. Dennis,
Jr., Executive Vice President and Chief
Financial Officer.
(10.28) Employment Agreement dated July 1, 1996
between the Company and Gilbert R. Ott,
Jr., Executive Vice President, Secretary
and General Counsel.
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the
quarter ended June 30, 1996.<PAGE>
SIGNATURES
-----------
Pursuant to the requirement of 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.
(Registrant)
Date: August 13, 1996 By: /s/ William C. Dennis, Jr.
---------------------------------
William C. Dennis, Jr.
Chief Financial Officer
Date: August 13, 1996 By: /s/ Charles W. Daggs, III
----------------------------------
Charles W. Daggs, III
President and Chief Executive
Officer
C:\WP51\FILINGS\6-96-4.10Q
EXHIBIT 10.25
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of the 30th day of April, 1996,
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 45 shares of Series D, 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. 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.$4,500,000.
3. Closing. The purchase and sale of the Shares shall take
place at the offices of the Company, on April 30th, 1996, 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>
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, 100 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 December 31, 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.
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.
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 stockholders of the Company approve an amendment
to the Company's Certificate of Incorporation increasing its authorized
shares of common stock to a number sufficient to allow such an
offering, 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). The Company 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.
F. Parity. The Series B, Series C and Series D non-voting
preferred stock of the Company purchased by Abaco shall be "Parity Stock"
(as defined in the Certificate of esignations for each such series) with
respect to each other.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
ATTEST: RODMAN & RENSHAW CAPITAL
GROUP, INC.
By: /s/ Emily Merida By: /s/ Charles W. Daggs, III
Title: Admin. Assist. Title: President and Chief
Executive Officer
ATTEST: ABACO CASA DE BOLSA, S.A. DE C.V.,
ABACO GRUPO FINANCIERO
By: /s/ Juan Pablo Raigosa By: /s/ Gerardo Santos
Title: Corporate Counsel Title: Director of Administration
Monterrey Office
EXHIBIT 10.26
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 $20,000,000.00 (Twenty Million 00/100 U.S.
Dlls) lawful currency of the United States of America precisely on
December 02, 1996.
The SUBSCRIBER promises to pay on December 02, 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 35%.
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.
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 June 03,
1996.
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:
EXHIBIT 10.26
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 $6,500,000.00 (Six Million, Five Hundred
Thousand and 00/100 U.S. Dlls) lawful currency of the United States of
America precisely on December 02, 1996.
The SUBSCRIBER promises to pay on December 02, 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 35%.
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.
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 June 03,
1996.
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:
Exhibit 10.27
May 15, 1996
Mr. William C. Dennis, Jr.
312 Nod Hill Road
Wilton, CT 06897
Dear Bill:
We are pleased to confirm our offer of employment with Rodman
& Renshaw Capital Group, Inc. (the "Company") as Chief Financial
Officer.
1. Management Committee and other Offices. You will be a member
of the Company's Management Committee, and we expect you will
be nominated to the Company's Board of Directors. You will
also serve in such offices of the Company's subsidiaries as
may be reasonably designated by the Company.
2. Base Salary. Your base salary will be $150,000 per year
payable proportionately twice each month.
3. Bonus.
(a) You will receive a bonus of $100,000 at the end of the
first twelve months of your employment provided that you have
not terminated your employment or your employment has not been
terminated for cause prior to that date. If your employment
is terminated without cause prior to the end of such twelve
month period, you will be entitled to the portion of the
$100,000 which is determined as follows: Amount of Bonus =
$100,000 x D/365, where D equals the number of calendar days
elapsing from your date of employment until termination of
your employment.
(b) You will receive an interest-free loan of $150,000 within
30 days of your employment with the Company, in return for
which you will execute a note payable to the Company. One-
third of the loan will be forgiven on each of the first,
second and third anniversary dates of the date of your
employment. If you terminate your employment with the Company
or are terminated for cause, any unforgiven principal balance
on the note will become immediately due and payable. If the
Company terminates your employment without cause, any
unforgiven principal balance will be forgiven.
4. Incentive Compensation. Pursuant to the Company's existing
stock option plan, you will receive options to purchase
100,000 shares of the Company's Common Stock at an exercise
price of $2.00 per share. The options will become exercisable
at the rate of 20% annually commencing on the first
anniversary date of your employment and will have a ten year
duration subject to earlier termination in accordance with the
plan provided, however, that the options would be cancelled if
all of the common stock of the Company becomes held by a
single stockholder or affiliated group of stockholders
pursuant to a merger, tender offer or similar transaction(s)
prior to the first anniversary date of your employment. As
you are aware, there can be no assurance that the options will
be in-the-money during the period of exercisability, and the
Company currently does not have any other incentive
compensation plan generally applicable to executives. Upon
the establishment of such a plan during your employment, you
would receive incentive compensation opportunities
commensurate with the opportunities offered to other key
executives of the Company.
5. Other Benefits. You will be entitled to such other benefits
as are available generally to members of the Management
Committee of the Company.
6. Termination. You will be an "employee-at-will," which means
that the Company may terminate your employment at any time
with or without cause, provided that if the Company terminates
your employment without cause, then as your exclusive
severance benefit, you will be entitled to the applicable
benefits under the Company's then existing severance policy.
If you terminate your employment or are terminated for cause,
you will not be entitled to further salary or benefits.
7. Relocation. Reasonable limitations on expenses related to
your relocation to Chicago are to be implemented and prior
approval by the Company of any expenses must be obtained.
8. Representation. It is our understanding and you confirm that
you are currently bound by no employment agreement, nor are
you in possession of confidential or proprietary information
obtained in your prior employment which you intend to utilize
at the Company in furtherance of its business.
9. Condition. Our offer of employment is contingent upon (i)
reference checks from previous employers, (ii) the Company's
review of your Forms U-4 and U-5, (iii) your having a valid
transferrable registration, (iv) all prior regulatory
disciplinary history being properly disclosed, and (v) your
providing to the Company documentation verifying that you are
legally authorized to work in the United States.
10. Effective Date. Your employment was effective as of May 7,
1996. You assumed the position of Chief Financial Officer of
the Company on May 9, 1996.
Please indicate your acceptance of the terms and conditions of
employment as stated above by signing the additional copy of this
letter and returning it to me.
Sincerely,
/s/ Charles W. Daggs, III
Charles W. Daggs, III
/s/ William C. Dennis, Jr. 5/16/96
William C. Dennis, Jr. Date
Exhibit 10.28
July 1, 1996
Mr. Gilbert R. Ott, Jr.
260 Highwood Circle
Oyster Bay, NY 11771
Dear Gil:
We are pleased to confirm our offer of employment with Rodman
& Renshaw Capital Group, Inc. (the "Company") as Executive Vice
President, Secretary and General Counsel.
1. Management Committee and other Offices. You will be a member
of the Company's Management Committee. You will also serve in
such offices of the Company's subsidiaries as may be
reasonably designated by the Company.
2. Base Salary. Your base salary will be $175,000 per year
payable proportionately twice each month.
3. Incentive Compensation. You will be entitled to participate
in annual discretionary bonus distributions consistent with
those made to members of the Company's Management Committee
and your position, performance, tenure and other factors and
in any new incentive compensation plan generally applicable to
executives which is established during your employment to the
extent approved by the Compensation Committee.
4. Other Benefits. You will be entitled to such other benefits
as are available generally to members of the Management
Committee of the Company.
5. Termination. You will be an "employee-at-will," which means
that the Company may terminate your employment at any time
with or without cause and you will not be entitled to further
payments, provided that if the Company terminates your
employment without cause, then as your exclusive severance
benefit, you will be entitled to the applicable benefits under
the Company's then existing severance policy. If you
terminate your employment or are terminated for cause, you
will not be entitled to further salary or benefits.
6. Relocation. You agree to relocate to Chicago if requested by
the Company. You would be reimbursed for reasonable
relocation expenses subject to prior approval by the Company.
7. Representations. It is our understanding and you confirm that
you are currently bound by no employment agreement, nor are
you in possession of confidential or proprietary information
obtained in your prior employment which you intend to utilize
at the Company in furtherance of its business. You represent
and agree that no representations, promises or agreements
regarding employment at Rodman have been made to you except as
set forth in this letter and that this letter supersedes any
prior discussions or understandings.
8. Condition. Our offer of employment is contingent upon Rodman
being satisfied in its sole discretion with all of the
following (i) reference checks from previous employers, (ii)
the Company's review of your Forms U-4 and U-5, (iii) your
having a valid transferrable registration, (iv) all prior
regulatory disciplinary history being properly disclosed, and
(v) your providing to the Company documentation verifying that
you are legally authorized to work in the United States.
9. Effective Date. Your employment will become effective on July
1, 1996.
Please indicate your acceptance of the terms and conditions of
employment as stated above by signing the additional copy of this
letter and returning it to me.
Sincerely,
/s/ Charles W. Daggs, III
Charles W. Daggs, III
/s/ Gilbert R. Ott, Jr. 6/20/96
Gilbert R. Ott, Jr. Date
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 23,124,000
<RECEIVABLES> 30,576,000
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 9,407,000
<PP&E> 8,193,000
<TOTAL-ASSETS> 81,641,000
<SHORT-TERM> 26,500,000
<PAYABLES> 26,287,000
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 24,852,000
<LONG-TERM> 0
<COMMON> 598,000
0
0
<OTHER-SE> 3,404,000
<TOTAL-LIABILITY-AND-EQUITY> 81,641,000
<TRADING-REVENUE> 16,390,000
<INTEREST-DIVIDENDS> 1,361,000
<COMMISSIONS> 10,547,000
<INVESTMENT-BANKING-REVENUES> 5,035,000
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 2,386,000
<COMPENSATION> 26,394,000
<INCOME-PRETAX> (6,941,000)
<INCOME-PRE-EXTRAORDINARY> (6,941,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,941,000)
<EPS-PRIMARY> (1.04)
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</TABLE>
