SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X ] Preliminary proxy statement [ ] Confidential, for Use of
the Commission Only
[ ] Definitive proxy statement (as permitted by Rule
14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
GREG MANNING AUCTIONS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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GREG MANNING AUCTIONS, INC.
775 PASSAIC AVENUE
WEST CALDWELL, NEW JERSEY 07006
January 14, 2000
To the shareholders of Greg Manning Auctions, Inc.:
You are cordially invited to attend a special meeting of shareholders
of Greg Manning Auctions, Inc. ("GMAI") to be held on Friday, February 18, 2000,
at 10:00 a.m., local time, at GMAI's corporate headquarters at 775 Passaic
Avenue, West Caldwell, New Jersey 07006. Following this letter are a notice of
the special meeting and a proxy statement describing the business to be
conducted at the special meeting.
Only GMAI shareholders of record at the close of business on December
27, 1999, will be entitled to vote at the special meeting and at any
adjournments or postponements of that meeting. For the ten days prior to the
special meeting, a complete list of shareholders entitled to vote at the special
meeting will be open to examination at GMAI's corporate headquarters, during
ordinary business hours, by any shareholder for any relevant purpose.
We hope you will attend the special meeting in person. Whether or not
you plan to attend, please complete, sign, date and return the enclosed proxy
promptly in the accompanying postage-paid reply envelope to assure that your
shares are represented at the special meeting. If you have any questions or
require additional information about the special meeting or the transactions
giving rise to the special meeting, please call Martha Husick, Corporate
Secretary, at (973) 882-0004.
Sincerely,
/s/ Greg Manning
----------------------------------------------
GREG MANNING
Chairman of the Board, Chief Executive Officer
and President
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GREG MANNING AUCTIONS, INC.
775 PASSAIC AVENUE
WEST CALDWELL, NEW JERSEY 07006
(973) 882-0004
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 18, 2000
We hereby give you notice that a special meeting of shareholders of
Greg Manning Auctions, Inc. ("GMAI") will be held on Friday, February 18, 2000,
at 10:00 a.m., local time, at GMAI's corporate headquarters at 775 Passaic
Avenue, West Caldwell, New Jersey 07006, to consider the following proposals:
1. To approve the issuance of up to 1,754,385 shares of GMAI common stock
to shareholders of Spectrum Numismatics International, Inc.
("Spectrum") in connection with the merger of Spectrum Acquisition,
Inc., a wholly-owned subsidiary of GMAI ("Sub"), into Spectrum pursuant
to a Merger Agreement dated December 8, 1999 between GMAI, Sub,
Spectrum and the shareholders of Spectrum.
2. To approve an amendment to GMAI's restated certificate of incorporation
to increase the number of authorized shares of GMAI common stock from
20 million to 40 million.
3. To approve the following amendments to GMAI's 1997 Stock Incentive
Plan:
o an amendment to increase from 1,150,000 to 1,750,000 the total
number of shares that GMAI may issue in any given year under GMAI's
1993 Stock Option Plan and the 1997 Stock Incentive Plan ;
o an amendment to increase from 100,000 to 200,000 the total number of
shares that GMAI may issue in any given year to an individual
employee of GMAI under the 1993 Stock Option Plan and the 1997 Stock
Incentive Plan; and
o an amendment to change the definition of the term "change of
control."
4. To transact such other business as may properly come before the special
meeting or any adjournment or postponement of the special meeting.
Only shareholders of record at the close of business on December 27,
1999, are entitled to notice of, and to vote at, the special meeting and any
adjournment or postponement of the special meeting.
The board of directors of GMAI unanimously recommends that shareholders
vote "FOR" each of the above proposals.
Whether or not you plan to attend the special meeting in person, please
complete, sign, date and return the enclosed proxy in the accompanying
postage-paid reply envelope. Shareholders attending the special meeting may vote
in person even if they have returned a proxy. By promptly returning your proxy,
you will greatly assist us in preparing for the special meeting.
By order of the board of directors,
/s/ Greg Manning
-----------------------------------
Greg Manning
Chairman of the Board, Chief
Executive Officer and President
West Caldwell, New Jersey
January 14, 2000
<PAGE>
GREG MANNING AUCTIONS, INC.
775 PASSAIC AVENUE
WEST CALDWELL, NEW JERSEY 07006
PROXY STATEMENT
FOR THE
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 18, 2000
GENERAL INFORMATION
SPECIAL MEETING
Commencing on or about January 14, 2000, Greg Manning Auctions, Inc., a
New York corporation ("GMAI"), is furnishing this proxy statement and the
enclosed proxy to its shareholders in connection with a special meeting of
shareholders of GMAI to be held on February 18, 2000 for the purposes set forth
in the accompanying notice of special meeting of shareholders.
RECORD DATE
Only shareholders of record as of the close of business on December 27,
1999 (the "Record Date"), will be entitled to vote at the special meeting and
any adjournment thereof. As of the Record Date, there were 6,872,746 shares of
GMAI common stock issued and outstanding. Each shareholder of record as of the
Record Date is entitled to one vote at the special meeting for each share of
GMAI common stock held.
Solicitation of Proxies
GMAI will bear the cost of soliciting proxies. In addition, GMAI will
solicit shareholders by mail with the assistance of its regular employees and
will ask banks and brokers, and other custodians, nominees and fiduciaries, to
solicit those of their customers who have stock of GMAI registered in the names
of those persons, and GMAI will reimburse them for their reasonable
out-of-pocket costs. GMAI may use the services of its officers, directors and
others to solicit proxies, personally or by e-mail, facsimile, telephone or
other forms of communication, without additional compensation. GMAI has retained
ADP Proxy Servers to act as information agent in connection with the
solicitation of proxies. GMAI expects to pay ADP Proxy Servers approximately
$7,000, plus reasonable out-of-pocket costs and expenses, for its services in
connection with the special meeting.
Proxies; Voting and Revocation
Shares of GMAI common stock that are represented by a properly executed
proxy received prior to the vote at the special meeting and not revoked will be
voted at the special meeting as directed in the proxy. If a proxy is submitted
and no directions are given, the proxy will be voted for in favor of the
proposals.
Only shares affirmatively voted in favor of any proposal (including
properly executed proxies not containing voting instructions) will be counted as
vote in favor of that proposal. Failure to submit a proxy (or to vote in person)
or abstention from voting will have the same effect as a vote against the
proposal. Under New York law, shares represented by proxies that reflect
abstentions or "broker non-votes" (that is, shares held by a broker or nominee
that are represented at the special meeting, but with respect to which that
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of all business.
Because shares with respect to which shareholders abstain are deemed to be
present and entitled to vote, abstentions as to any proposal will have the same
effect as a vote against the proposal. Broker non-votes, however, will be
treated as not voted for purposes of determining approval of any proposal and
will not be counted as votes for or against any proposal.
<PAGE>
Proxy holders may, in their discretion, vote shares to adjourn the
special meeting to permit further solicitation of proxies in favor of any one or
more proposals. Shares of common stock with respect to which a proxy is signed
and returned indicating a vote against any proposal may not be voted in favor of
adjournment.
Votes will be tabulated at the special meeting by inspectors of
election.
A shareholder of record may revoke a proxy at any time prior to its
being voted by filing an instrument of revocation with Martha Husick, the
Corporate Secretary of GMAI, by filing a further duly executed proxy bearing a
later date, or by appearing at the special meeting in person, notifying the
Secretary, and voting by ballot at the special meeting. Any shareholder of
record attending the special meeting may vote in person whether or not he or she
has previously submitted a proxy, but the mere presence of a shareholder at the
special meeting will not, absent notification of the Corporate Secretary of
GMAI, constitute revocation of a previously submitted proxy.
Quorum
GMAI's by-laws provide that a majority of all of the shares of GMAI
common stock entitled to vote, whether present in person or represented by
proxy, will constitute a quorum for the transaction of business at the special
meeting.
Required Votes; Principal Shareholders
The affirmative vote of a majority of the shares represented at the
special meeting and entitled to vote is required to approve each proposal.
As of the Record Date, 6,872,746 shares of GMAI common stock were
issued, outstanding and entitled to vote. Of those shares, approximately 38%
were held by directors and executive officers of GMAI, its subsidiaries and
their respective affiliates. Mr. Greg Manning, the Chairman of the Board, Chief
Executive Officer and President of GMAI, who owned as of the Record Date, 22% of
the outstanding GMAI common stock, has agreed to vote in favor of proposal No.
1, and has indicated that he intends to vote in favor of proposal No. 2
and proposal No. 3.
ATTENDANCE OF ACCOUNTANTS
Representatives of Amper, Politziner & Mattia P.A. will be present at
the special meeting of shareholders. They will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
The matters to be considered at the special meeting are of great
importance to the shareholders of the GMAI. Accordingly, GMAI shareholders are
urged to read this proxy statement and carefully consider the information
presented in this proxy statement, and to complete, date, sign and promptly
return the enclosed proxy in the enclosed postage-paid reply envelope.
FORWARD-LOOKING STATEMENTS
Certain statements in this proxy statement, including certain
statements contained under the heading "Reasons for the Merger" in the
discussion of proposal No. 1, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. The assumptions reflected in these statements are subject to
certain risks, uncertainties and other factors, including changes in general
economic or business conditions or those affecting the Internet or the
collectibles or coin businesses, uncertainty as to the future profitability of
GMAI and Spectrum, and uncertainty as to the compatibility of GMAI's and
Spectrum's cultures.
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PROPOSAL NO. 1
ISSUANCE OF UP TO 1,754,385 SHARES OF GMAI COMMON STOCK
IN CONNECTION WITH THE ACQUISITION OF SPECTRUM
NUMISMATICS INTERNATIONAL, INC.
INTRODUCTION
On December 8, 1999, GMAI entered into a Merger Agreement between GMAI,
Spectrum Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary
of GMAI ("Sub"), Spectrum Numismatics International, Inc. ("Spectrum"), Warren
Trepp, as trustee of the Rabard Trust dated August 25, 1989 (the "Rabard
Trust"), Gregory N. Roberts and Sharon Roberts (the "Roberts"), and Elaine
Dinges (the Rabard Trust, the Roberts and Ms. Dinges, each a "Spectrum
Shareholder" and collectively the "Spectrum Shareholders"). The Merger Agreement
provides for the merger of Sub with and into Spectrum, with Spectrum continuing
as a wholly-owned subsidiary of GMAI (that merger, the "Merger"). The Merger
will become effective upon the filing of a certificate of merger with the
Secretary of State of the State of Delaware and articles of merger with the
Secretary of State of the State of California (the "Effective Time").
The Spectrum Shareholders own all the issued and outstanding capital
stock of Spectrum. If the Merger is effected, the Spectrum Shareholders will
exchange all of their issued and outstanding shares of Spectrum common stock for
shares of GMAI common stock. Of the GMAI common stock to be issued to the
Spectrum Shareholders, the Rabard Trust, the Roberts and Ms. Dinges will receive
51.685%, 39.003% and 9.312% respectively. The aggregate value of the GMAI common
stock to be issued in the Merger to the Spectrum Shareholders is $25,000,000,
minus any expenses over $200,000 incurred by Spectrum in connection with the
Merger. Pursuant to the terms of the Merger Agreement, GMAI common stock that
will be issued to the Spectrum Shareholders will be valued at $14.25 per share.
The parties negotiated the price taking into account the then-current market
price of GMAI common stock. Once the shares are exchanged, the Spectrum
Shareholders will own up to 25.51% of the total issued and outstanding shares of
GMAI common stock.
SHAREHOLDER APPROVAL REQUIRED
Under National Association of Securities Dealers, Inc. Rule
4310(c)(25)(H)(i)(c), companies that are listed on the Nasdaq National Market
must obtain shareholder approval prior to issuing a number of shares in excess
of 20% of the then-outstanding shares. Issuance of shares of GMAI common stock
to the Spectrum Shareholders in the Merger represents such an issuance, and so
must be approved by a majority of GMAI's shareholders.
THE COMPANIES
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, New Jersey 07006
Telephone (973) 882-0004
GMAI was founded by Greg Manning, its Chairman, Chief Executive Officer
and President, who has conducted public auctions of stamps since 1966. Based in
West Caldwell, New Jersey, with offices in Kingston, New York, GMAI has
approximately 75 full-time employees.
GMAI believes, based on its knowledge of the market, that it is one of
the largest auction houses of stamps in the world (although there is no publicly
available data with respect to stamp auction sales). In addition to stamps,
stamp collections and stocks, however, GMAI's expanded product line includes
items such as sports trading cards and memorabilia, movie posters, fine art,
rare coins, diamonds, comic books, Hollywood and rock 'n' roll memorabilia,
manuscripts and autographs.
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Furthermore, GMAI has refocused its business towards the electronic
commerce industry. In October 1998, GMAI acquired Teletrade, Inc., which
pioneered interactive telephone auctioning and is a leading Internet auctioneer
of coins, diamonds, and sports cards. Teletrade's website is www.teletrade.com.
GMAI is also seeking to leverage its position as a preeminent traditional global
stamp auction house to become a high-end, full-service, state-of-the-art, fine
collectibles auction company with the most comprehensive services available in
the industry. It is the first publicly owned auction company to operate
real-time auctions simultaneously over the Internet and via telephone while
providing confidential transmission of bidder and seller information over the
Internet. GMAI will soon inaugurate Internet bidding for live auctions as well.
Its website is www.gregmanning.com.
GMAI believes that there are two major trends in the collectibles
marketplace that will have a positive influence on GMAI's business: first, the
number of collectors and the interest in collecting is growing, both in the U.S.
and globally; and second, the Internet is playing a key role in driving this
heightened interest in collecting. GMAI believes it is now well positioned to
become a premier collectibles destination site on the Internet.
GMAI conducts its operations directly and through its subsidiaries:
o GMAI itself, which conducts the world's largest auctions of intact
stamp collections, stocks and accumulations;
o Ivy & Mader Philatelic Auctions, Inc., which conducts auctions and produces a
deluxe catalog selling high-end individual stamps, sets and covers;
o Greg Manning Galleries, Inc., which conducts mail, fax and telephone
auctions of many of the more popular priced stamps and covers;
o CEE JAY Auctions, which holds public auctions and generally sells
lower-priced individual stamps, covers and large lots; and
o Teletrade, Inc., which conducts live auctions on the Internet and
via telephone of rare coins, diamonds and sports cards.
In addition to conducting its operations in the U.S., GMAI's goal is to
become a leading destination site on the Internet for collectors throughout the
world. In furtherance of this goal, GMAI has recognized the growth opportunities
that exist in Asia and Europe, where the Internet has not had the same
penetration as it has to date in the U.S. Accordingly, in 1999, GMAI established
one of the first online collectibles auction houses in China, GMAI-ASIA.com, and
conducted, GMAI believes, the first ever online Internet stamp auction in that
country. In addition, in 1999 GMAI, in a joint venture with Afinsa Bienes
Tangibles, S.A., formed GMAI-Europe.com to conduct Internet auction and retail
sales in Europe from a newly established office in Madrid, Spain. (Afinsa Bienes
Tangibles, S.A. owns approximately 16.2% of GMAI common stock.)
GMAI is also establishing strategic alliances with companies that, it
believes, will help it to reach the broadest possible universe of collectors.
During 1999, GMAI signed a joint marketing agreement with AT&T Labs to promote
GMAI's high-end auction services and AT&T Labs' DjVu technology on AT&T Worldnet
Services Internet home page. GMAI also signed a definitive agreement with
Butterfield & Butterfield, a wholly-owned subsidiary of eBay Inc., as a result
of which GMAI is a significant participant in eBay's "Great Collections"
website, which features premier offerings of collectibles and fine art from
around the world.
GMAI seeks to provide the highest quality service and personal
attention to its clients. GMAI's longevity in its core auction business selling
rare stamps, stamp collections and stocks has enabled it to develop an
international network of clients, both dealers and collectors, buyers and
sellers, who use GMAI's services on a consistent basis. GMAI believes that its
extensive auction and marketing experience in the rare stamp markets can be
applied in other areas of the collectibles business. GMAI acted on that belief
in acquiring Teletrade, and GMAI may make further such acquisitions in the
future.
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SPECTRUM NUMISMATICS INTERNATIONAL, INC.
P.O. Box 18523
Irvine, California 92623
Telephone (949) 955-1250
Spectrum, a wholesaler of rare coins, was founded in 1991 by Warren
Trepp.
Mr. Trepp is a prominent Wall Street figure and coin collector. At age
21, he was made the youngest limited partner at Bear Stearns & Co., Inc.. Among
the positions he has occupied subsequently, he was Executive Vice President at
Dean Whitter Reynolds Inc. in charge of fixed income trading, and was head
trader for Michael Milken's high-yield bond and equity department at Drexel
Burnham Lambert Group, Inc., where he was responsible for investing and trading
over $4 billion of Drexel's capital. Since 1991, Mr. Trepp has been investing
privately in a range of companies, including collectibles to high technology.
Gregory N. Roberts, Spectrum's President, has been involved in the
business of buying and selling rare coins since 1979. For more information on
Mr. Roberts, see "Management After the Merger--Management of GMAI."
Based in Santa Ana, California, Spectrum has seven full-time employees.
The majority of Spectrum's revenue comes from wholesale trading of coins and
supplying coin retailers and auction houses. Spectrum does, however, sell to a
few large private customers. Spectrum has developed a broad network of clients
who repeatedly use Spectrum's services. Spectrum's many strategic alliances and
connections throughout the coin industry on both the purchasing and distribution
side have benefited from the high quality of service and personal attention
Spectrum provides to its clients.
Spectrum currently buys and sells, in the aggregate, over $8,000,000
worth of coins monthly. Based on its knowledge of the market, Spectrum believes
it is one of the largest wholesalers of rare coins in the United States
(although there is no publicly available data with respect to sales). With over
120 years of combined experience in the coin industry, Spectrum's staff has the
expertise and avenues to handle any size deal or coin. Spectrum's offerings
range in price from $50 to $2,000,000. Some of Spectrum's recent achievements
include the following:
o In 1997, Spectrum acquired the Wells Fargo(R) Nevada Gold Hoard, a
huge cache of 1908 gold pieces with an estimated retail value of $30
million.
o In 1997, Spectrum paid $1,815,000 for the 1804 Eliasberg silver
dollar, then the highest price ever paid for a single coin. Spectrum
quickly resold the coin for a profit.
o In 1993 Spectrum acquired the King of Siam proof set for $1,815,000,
and placed the set with a private collector for a profit. This
storied proof set included a Class I specimen of the famed 1804
silver dollar, an 1804 gold eagle, and several other 1834 special
proof strikings of the coins that were in circulation in 1834.
There are currently two major trends occurring in the coin industry
that have a positive influence on Spectrum's business. First, the number of
collectors with discretionary income is growing. Those who collected coins in
the 1960s and 1970s when young are now in a financial position to purchase the
coins they once coveted but were unable to afford. As a result, the coin
industry has witnessed an influx of large sums of money, and this has helped
Spectrum to grow. Second, with the increasing popularity of the Internet, the
average coin collector now has access to information that used to be available
only through direct mail. As a result, Spectrum has access to millions of
potential new consumers, and Spectrum believes this customer pool is likely to
increase. Through Spectrum's relationship with GMAI, Spectrum believes it will
position itself to become the premier wholesaler of rare coins in the country.
To assist you in assessing the implications of the Merger, attached as
Annex A are the pro forma condensed combined balance sheet (unaudited) as of
September 30, 1999 and condensed combined statements of operations (unaudited)
for the years ended June 30, 1998 and 1999 and for the three-month
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periods ended September 30, 1998 and 1999, giving effect to the acquisition of
all of the outstanding shares of Spectrum by GMAI. In addition, incorporated by
reference to this proxy statement is the information set forth in the annual
report of GMAI on Form 10-KSB, which has been filed with the Securities and
Exchange Commission ("SEC") for the fiscal year ended June 30, 1999 and the
latest quarterly report of GMAI on Form 10-QSB, which has been filed with the
SEC for the quarter ended September 30, 1999.
The pro forma condensed combined consolidated balance sheet and
statements of operations were derived by applying pro forma adjustments to
GMAI's historical audited and unaudited consolidated financial statements
incorporated by reference herein.
BACKGROUND OF THE MERGER
In mid-1999, Gregory N. Roberts, President of Spectrum, and Greg
Manning, the Chairman of the Board, Chief Executive Officer and President of
GMAI, discussed the possibility of combining the operations of Spectrum and
GMAI, and whether the companies were strategically compatible.
In early August 1999, Greg Manning and Richard Cohen of GMAI met at
GMAI's offices with the three Spectrum Shareholders, Gregory Roberts, Elaine
Dinges, who is also the Chief Financial Officer of Spectrum, and Warren Trepp.
At this meeting, the parties discussed Spectrum's business and operations, the
potential synergies between the companies, and the basic terms of a merger, and
reviewed Spectrum's financial statements.
Over the course of the next couple of weeks, GMAI personnel, together
with GMAI's independent accountants, Amper, Politziner & Mattia P.A., conducted
additional due diligence of Spectrum, including two visits to Spectrum's offices
as well as visits to Spectrum's accounting firm and attorneys. Final
negotiations were held in New York City on December 7 and 8, 1999.
At a meeting held on December 7, 1999, after a presentation by GMAI's
legal counsel, the board of directors of GMAI reviewed at length the proposed
terms of the Merger. After further deliberations the next day, the board of
directors of GMAI authorized GMAI to enter into the Merger Agreement as
negotiated by the parties, subject to approval by GMAI's shareholders and
receipt by GMAI of a letter from an independent financial consultant attesting
as to the fairness to GMAI and its shareholders of the consideration agreed to.
The board also approved the anticipated accounting treatment for the Merger as a
pooling of interests. On December 8, 1999, the parties signed the Merger
Agreement. GMAI has since engaged an independent financial consultant to provide
the fairness opinion.
REASONS FOR THE MERGER
In authorizing GMAI to enter into the Merger Agreement the members of
the board considered various factors, including, but not limited to, the
following, all of which they believe support their decision:
o Spectrum's business, its current financial condition and results of
operations, and its prospects;
o GMAI's plan to further develop its Internet auction and retail
sales, which would require that GMAI acquire inventory to sell on
the Internet;
o the compatibility of GMAI's and Spectrum's operations and
management cultures, specifically the way Spectrum's strong
emphasis on employee and customer relations would complement GMAI's
pursuit of the same goals, and the likelihood that Spectrum's
dynamic management culture would integrate well with a similar
culture at GMAI;
o the terms of the Merger Agreement, which the board considered to be
fair and standard for transactions of this nature, and its legal
and tax implications; and
o that the consideration being issued by GMAI consists entirely of
GMAI common stock and, the board believes, represents fair
consideration for the business to be acquired.
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In view of the wide variety of factors considered, the board did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered or determine that any factor
was of particular importance in reaching its determination that the potential
benefits of the Merger and the share issuance outweighed the potential risks and
is fair to, and in the best interests of, GMAI shareholders. Individual
directors may have given differing weights to the different factors.
THE MERGER AGREEMENT
The following is a summary of all material provisions of the Merger
Agreement. The Merger Agreement is attached as Annex B, and you should read it
if you wish to have a complete understanding of its terms.
Merger Consideration
At the Effective Time, by virtue of the Merger, all issued and
outstanding shares of Spectrum common stock will be converted into the right to
receive a number of shares of GMAI common stock equal to (1) $25 million (the
value ascribed to Spectrum) minus any expenses in excess of $200,000 incurred by
Spectrum in connection with the Merger, divided by (2) $14.25 (the value
ascribed to one share of GMAI common stock). The Spectrum Shareholders will be
issued up to 1,754,385 shares in the Merger; the total expenses incurred by
Spectrum in the Merger have not yet been determined, the exact number of shares
issued in the Merger will not be known until the closing. The number of shares
of GMAI common stock issued in the Merger will not be affected by any increase
or decrease in the market value of GMAI common stock prior to the closing.
Each Spectrum Shareholder will receive a percentage of the shares
issued equal to the percentage he or she holds of the total issued and
outstanding shares of Spectrum common stock. The Merger Agreement provides,
however, that no fractional shares of GMAI common stock will be issued, and so
each Spectrum Shareholder will receive a cash payment equal to the value of any
fraction of a share of GMAI common stock he or she would otherwise have received
in exchange for his or her shares of Spectrum common stock.
Exchange of Shares
Each Spectrum Shareholder is required to surrender at the Closing each
certificate representing his or her shares of Spectrum common stock for shares
of GMAI common stock, and each holder of Spectrum common stock surrendering his
or her certificates will promptly thereafter receive a certificate representing
the number of whole shares of GMAI common stock to which the holder is entitled
and a check for cash payable in lieu of any fractional shares of GMAI common
stock.
After the closing date, each certificate representing shares of
Spectrum common stock, until so exchanged, will be deemed, for all purposes, to
evidence the right to receive the number of shares of GMAI common stock into
which those shares of Spectrum common stock are to be converted and the right to
receive a cash payment in lieu of any fractional share of GMAI common stock.
Representations
The Merger Agreement contains various customary representations made by
GMAI, Sub, Spectrum and the Spectrum Shareholders.
Each Spectrum Shareholder made the following representations:
o that the Spectrum Shareholder has full legal capacity and authority to
execute and deliver the Merger Agreement and other Transaction Document (as
defined in the Merger Agreement);
o that the Merger Agreement constitutes the valid and binding obligation on
that Spectrum Shareholder;
o that the Spectrum Shareholder does not need to obtain the consent of any
person to execute and deliver the Merger Agreement;
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o that execution and delivery of the Merger Agreement by the Spectrum
Shareholder will not result in any violations;
o that the Spectrum Shareholder owns its shares of Spectrum common stock free
and clear of any liens;
o that there are no proceedings pending against the Spectrum Shareholder;
o that the Spectrum Shareholder fully understands the terms under which
shares of GMAI common stock are to be issued and that GMAI has made itself
available to provide any information to verify the accuracy of the
information contained in the Merger Agreement; o that the Spectrum
Shareholder has not made any representations under the Merger Agreement
that are misleading; and
o that during the past five years, no petition has been filed against the
Spectrum Shareholder under any law pertaining to insolvency or bankruptcy.
Each of GMAI, Sub and Spectrum made the following representations:
o that it is duly organized, validly existing and in good standing in its
state of incorporation;
o that it has the full power and authority to execute and deliver the Merger
Agreement, the other Transaction Documents and perform its obligations
thereunder;
o that it is not required to obtain consents in connection with its execution
and delivery of the Merger Agreement and the other Transaction Documents,
and that execution and delivery will not result in any violations; and
o that its capitalization is as stated.
Spectrum made additional representations as to other matters, including
the following:
o that its ownership interests are as stated;
o that its financial statements present fairly, in all material respects, its
financial position and results of operations;
o that it has valid title to all its properties and that those properties and
other assets are in good operating condition;
o that 98% of its account receivables are, or will be as of the closing,
current and collectible;
o that all of its inventory of coins is salable in the ordinary course of
business;
o that it has maintained a valid election as an "S" corporation and has filed
accurate returns on a timely basis;
o that it is in compliance with all applicable laws and permits;
o that it is not the subject of any proceedings against it or any of its
properties or assets;
o that except as disclosed, certain events have not occurred since the date
of the Interim Balance Sheet (as defined in the Merger Agreement); and
o that it has listed the principal contracts to which it is party.
GMAI made additional representations as to other matters, including the
following:
o that GMAI has complied with the filing requirements with the SEC and that
those filings do not contain any untrue statement of a material fact; and
o that since January 1, 1999, there have been no material adverse changes in
GMAI's business other than general changes in GMAI's industry.
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Obligations
The Merger Agreement provides for certain obligations of the parties.
GMAI has the following obligations:
o GMAI shall use its best efforts to have two nominees of the Spectrum
Shareholders reasonably acceptable to GMAI appointed to the board of
directors of GMAI, either by appointing those nominees to any vacancies on
the board of directors then existing or occurring thereafter, or by
including those nominees in the slate of candidates proposed by the board
of directors of GMAI at the next meeting after the Effective Time at which
directors of GMAI are elected;
o until such time as the Spectrum Shareholders own fewer than 800,000 shares
of GMAI common stock (as adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend, reorganization, recapitalization,
split-up, combination or exchange of shares), the Spectrum Shareholders
will be entitled to nominate two members of the board of directors of GMAI;
o GMAI shall hold a special meeting of GMAI shareholders for purposes of
voting on the Merger and the Merger Agreement, and shall prepare the
related proxy statement;
o GMAI shall prepare and file a permit application with the California
Department of Corporations for purposes of qualifying the shares issued in
the Merger for an exemption from the registration requirements of the
Securities Act pursuant to Section 3(a)(10) of the Securities Act;
o GMAI shall within 30 days following the initial 30-day period after the
Effective Time file a Form 8-K or a press release of the combined financial
statements of GMAI and Spectrum for that 30-day period ;
o GMAI shall cause Spectrum to distribute pro rata to the Spectrum
Shareholders an amount equal to the tax liability of the Spectrum
Shareholders attributable to their ownership interest in the Spectrum
common stock arising out of Spectrum's operations from January 1, 2000 to
the Effective Time; and
o GMAI shall prior to or at the closing cause to be removed all guarantees
provided by Warren Trepp in connection with the credit facilities provided
to Spectrum by Bank of America or shall cause to be made available to
Spectrum one or more alternative credit facilities for purposes of paying
off the balance of the Bank of America facility, and shall cause to be
repaid amounts (as of the date of the Merger Agreement, a total of $2
million) owed by Spectrum to certain entities affiliated with Warren Trepp
(GMAI intends to effect this repayment through one or more new credit
facilities).
The Spectrum Shareholders have the following obligations:
o no Spectrum Shareholder may transfer or encumber his or her shares of
Spectrum common stock;
o at closing Gregory N. Roberts and Elaine Dinges shall each enter into an
employment agreement with Spectrum in the form attached;
o each Spectrum Shareholder shall enter into a noncompetition agreement with
GMAI and Spectrum; and
o each Spectrum Shareholder shall enter into an agreement in the form
attached restricting his or her resale of shares of GMAI common stock
received in the Merger.
Spectrum has agreed to fulfill the following obligations:
o the business of Spectrum will be run in the ordinary course of business
between the date the Merger Agreement was signed and the earlier of the
closing date and termination of the Merger Agreement;
o Spectrum may not seek an alternative acquisition transaction;
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o Spectrum shall cooperate with GMAI in preparing and filing a permit
application for purposes of qualifying the shares issued in the Merger for
exemption from registration pursuant to Section 3(a)(10) of the Securities
Act ;
o Spectrum shall use its best efforts to encourage certain employees of
Spectrum to enter into employment agreements;
o between the date of the Merger Agreement and the earlier of the closing
date and termination of the Merger Agreement, Spectrum shall provide GMAI
with access to information; and
o that Spectrum will make certain adjustments to their financial statements
prior to the Effective Time to comply with filing requirements under the
Securities Exchange Act.
Conditions to the Merger
The obligation of GMAI and Sub to consummate the Merger is subject to
the satisfaction, or waiver by GMAI, of various conditions at or prior to the
closing, including the following:
o that there are no proceedings pending or to GMAI's knowledge, threatened in
writing against GMAI that interfere with any of the transactions
contemplated by the Merger Agreement or any of the other the Transaction
Documents;
o that no court order preventing consummation of the Merger is in effect;
o that the representations of Spectrum and of the Spectrum Shareholders
contained in the Merger Agreement were accurate as of the date of the
Merger Agreement and are accurate as of the closing date, in all respects
(in the case of any representation containing any materiality
qualification) or in all material respects (in the case of any
representation without any materiality qualification);
o that Spectrum and the Spectrum Shareholders have performed in all material
respects those obligations that they are required to perform prior to the
Effective Time;
o that GMAI has received from Spectrum an "Affiliate Letter" identifying all
persons who are or who may be deemed, immediately prior to the Effective
Time, "Affiliates" of Spectrum for purposes of qualifying the Merger for
pooling-of-interests accounting treatment ;
o that GMAI has received a written agreement substantially in the form
attached to the Merger Agreement from each person identified in the
Affiliate Letter;
o that GMAI has received all certificates representing issued and outstanding
shares of Spectrum Common Stock;
o that the permit application seeking exemption from registration under the
Securities Act of the shares issued in the Merger has been approved by the
California Department of Corporations; and
o that GMAI has received a written opinion of an investment bank or valuation
company that the consideration GMAI is to receive in connection with the
Merger is fair to GMAI and its shareholders from a financial point of view.
The obligation of Spectrum to consummate the Merger is subject to the
satisfaction, or waiver by Spectrum, of the following conditions at or prior to
the Effective Time:
o that here are no proceedings pending or, to Spectrum's knowledge,
threatened in writing against Spectrum or any Stockholder that interfere
with any of the transactions contemplated by the Merger Agreement or any of
the other the Transaction Documents;
o that no order of any governmental body preventing consummation of the
Merger is in effect;
o that Spectrum and the Spectrum Shareholders have obtained any consent
required in connection with their execution and delivery of the Merger
Agreement and performance of their obligations thereunder;
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o that the representations of GMAI contained in the Merger Agreement were
accurate as of the date of the Merger Agreement and are accurate as of the
closing date, in all respects (in the case of any representation containing
any materiality qualification) or in all material respects (in the case of
any representation without any materiality qualification);
o that GMAI has performed in all material respects those obligations that it
is required to perform prior to the Effective Time; and
o that the permit application seeking exemption from registration under the
Securities Act of the shares issued in the Merger has been approved by the
California Department of Corporations.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the
Effective Time:
o by written agreement of the parties;
o by either GMAI or Spectrum, if the closing has not occurred by March 1,
2000, unless the party seeking termination has contributed materially to
the failure of the Merger being consummated by that date;
o by either GMAI or Spectrum if a government body issues a nonappealable
order that permanently restrains, enjoins or prohibits the Merger, unless
the party seeking termination has contributed materially to the issuance of
the order;
o by either GMAI or Spectrum if GMAI's shareholders do not approve the Merger
Agreement at the special meeting;
o by GMAI, if Spectrum breaches any representation or obligation that is not
curable prior to March 1, 2000, by GMAI or Spectrum; and
o by Spectrum, if any time the Market Value of GMAI Common Stock (as defined
in the Merger Agreement) falls below $8.00.
If the Merger Agreement is terminated, it will cease to have any effect
and all obligations of the parties other than those relating to indemnification
and certain other matters will terminate, except that if the Merger Agreement is
terminated by a party because of a breach by another party or because one or
more of the conditions to the terminating party's obligations under the Merger
Agreement are not satisfied as a result of another party's failure to comply
with its obligations under the Merger Agreement or the inaccuracy of any
representation made in the Merger Agreement by another party, the terminating
party's right to pursue all legal remedies survives the termination unimpaired.
If the Merger Agreement is terminated due to failure by GMAI to receive
approval of GMAI shareholders by March 1, 2000, GMAI shall reimburse Spectrum
for all reasonable Offset Expenses (as defined in the Merger Agreement).
Indemnification
Spectrum (prior to the Effective Time) and the Spectrum Shareholders
(following the Effective Time) shall indemnify GMAI, without duplication,
against the following Indemnifiable Losses (as defined in the Merger Agreement):
o those arising out of breach by Spectrum or any of the Spectrum Shareholders
of any of their obligations under the Merger Agreement;
o those arising out of any inaccuracy in any representation by Spectrum in
the Merger Agreement;
o those arising out of any inaccuracy in any representation by the Spectrum
Shareholders in the Merger Agreement (with certain exceptions); and
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o those arising out of the failure of the Spectrum Shareholders to pay any
and all expenses in excess of $200,000 incurred by Spectrum in connection
with the Merger as to which Spectrum fails to certify prior to the closing.
GMAI shall indemnify Spectrum (prior to the Effective Time) and the
Spectrum Shareholders (after the Effective Time), without duplication, against
the following Indemnifiable Losses:
o those arising out of breach by GMAI of any of its obligations under the
Merger Agreement; and
o those arising out of any inaccuracy in any representation by GMAI in the
Merger Agreement.
In order to be entitled to indemnification under the Merger Agreement
in connection with a claim made by any person against any other person entitled
to indemnification, the indemnified party must follow certain customary
procedures relating to indemnification as provided in the Merger Agreement.
GMAI's exclusive remedy with respect to any claims of GMAI under the
Merger Agreement will be pursuant to the indemnification provisions of the
Merger Agreement and the escrow agreement (see "Other Transaction Documents").
Other than with respect Indemnifiable Losses arising out of any inaccuracy in
certain representations by the Spectrum Shareholders in the Merger Agreement and
Indemnifiable Losses arising out of the failure of the Spectrum Shareholders to
pay any and all expenses incurred by Spectrum in connection with the Merger in
excess of those as to which Spectrum certifies prior to the closing, the
Spectrum Shareholders will not be liable for any obligations under the Merger
Agreement until the aggregate of any amounts for which GMAI is entitled to
indemnification under the Merger Agreement exceeds $250,000, and will thereafter
only be liable for that excess.
Each of the Spectrum Shareholders shall also indemnify GMAI against any
taxes owed by Spectrum for any taxable year or period ending on or before the
Effective Time, unless Spectrum owes those taxes as a result of any unilateral
act or omission to act on the part of Spectrum after the Effective Time.
OTHER TRANSACTION DOCUMENTS
Signed Concurrently with the Merger Agreement
Greg Manning, Chairman of the Board, Chief Executive Officer and
President of GMAI, agreed in a voting agreement with Spectrum to vote in favor
of the Merger Agreement. The shares owned by Mr. Manning represented as of the
Record Date approximately 22% of the outstanding shares of GMAI common stock. In
addition, in separate voting agreements with GMAI, the Spectrum Shareholders
agreed to vote in favor of the Merger Agreement.
To Be Signed at Closing
Under the terms of the Merger Agreement, the closing of the Merger
Agreement is conditioned on the concurrent execution of the following
agreements:
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Escrow Agreement. At the Closing, GMAI, the Spectrum Shareholders, a
representative of the Spectrum Shareholders and an escrow agent will enter into
an escrow agreement pursuant to which GMAI will deposit with the escrow agent
10% of the GMAI common stock to be issued to the Spectrum Shareholders in the
Merger. In the event that Spectrum or any of the Spectrum Shareholders are in
breach of their respective obligations under the Merger Agreement or any
representation made in the Merger Agreement by any of them is inaccurate, and
GMAI thereafter suffers an Indemnifiable Loss, GMAI will be entitled recover
from the escrow account a number of shares of a value equal to that
Indemnifiable Loss. For this purpose, the shares held in escrow will be valued
at $14.25, the value used to determine the number of shares of GMAI common stock
issued in the Merger. The escrow agreement provides for certain procedures under
which the parties may dispute and resolve a claim.
Employment Agreements. At the Closing, GMAI will enter into employment
agreements with Gregory N. Roberts and Elaine Dinges, each of whom is a member
of Spectrum's senior management. The employment agreements provide for each
employee to work on a full time basis with GMAI for a period of five years from
the closing date. Concurrently with the execution and deliver of the employment
agreements, each of Mr. Roberts and Ms. Dinges will pursuant to a stock option
agreement be issued options to purchase 150,000 and 100,000 shares of GMAI
common stock respectively.
Noncompetition Agreements. At the closing, each of Gregory N. Roberts,
Elaine Dinges and Warren Trepp will enter into a noncompetition agreement with
Spectrum and GMAI in which he or she agrees that until the sooner of (1) the
fifth anniversary of the date of the agreement and (2) the date that none of
GMAI and its affiliates is any longer engaged in the wholesale or retail
purchase or sale of retail coins, he or she will not, in the U.S., Canada or
Mexico, engage directly or indirectly in any manner in the wholesale or retail
purchase or sale of rare coins. Mr. Trepp's noncompetition agreement contains
exceptions to this restriction that are intended to allow Mr. Trepp to continue
to purchase and sell rare coins in his capacity as a collector. Each
noncompetition agreement also prohibits Mr. Roberts, Ms. Dinges and Mr. Trepp
from soliciting Spectrum or GMAI employees, contacting Spectrum or GMAI
customers with whom he or she had contact, and disclosing confidential
information.
Agreement Regarding Sale of Stock. At the closing, GMAI and the
Spectrum Shareholders will enter into an agreement specifying certain rights and
obligations of the Spectrum Shareholders in connection with the sale of shares
of GMAI common stock acquired by each Spectrum Shareholders in the Merger.
Absent the prior written consent of GMAI, which GMAI may withhold in its sole
discretion, the Spectrum Shareholders may not do the following:
o sell any GMAI common stock at any time prior to the date GMAI publicly
releases consolidated financial results that include at least 30 days of
combined operations of GMAI and Spectrum; and
o prior to the one-year anniversary of the date of the agreement, sell any
GMAI common stock in excess of 253,891 shares (for Warren Trepp), 191,593
shares (for Gregory N. Roberts), and 45,743 shares (for Elaine Dinges).
Note that GMAI has filed a permit application with the California
Department of Corporations seeking exemption from registration under the
Securities Act of shares issued in the Merger. This exemption would be pursuant
to Section 3(a)(10) of the Securities Act, and would result in the shares issued
in the Merger not being deemed restricted securities. Accordingly, separately
from the restrictions provided for in the Agreement Regarding the Sale of
Securities, to the extent the Spectrum Shareholders are affiliates of GMAI after
the Merger, they would only be able to resell the shares issued to them in the
Merger in accordance with the provisions of Rule 144 other than the one-year
holding period requirement of Rule 144(d).
MANAGEMENT AFTER THE MERGER
Management of GMAI
The Merger Agreement provides that GMAI shall use its best efforts to
have two nominees of the Spectrum Shareholders reasonably acceptable to GMAI
appointed to the board of directors of GMAI. The Spectrum
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Shareholders have named as their nominees Gregory N. Roberts and James M. Davin,
and at the closing GMAI intends to appoint Mr. Roberts and Mr. Davin to fill two
vacancies on the board of directors of GMAI.
Set forth below is certain information regarding Mr. Roberts and Mr. Davin:
Gregory N. Roberts. Mr. Roberts has been buying and selling coins
professionally for over 23 years. During the last five years, he has acted as
President and coin trader of Spectrum. In this capacity, Mr. Roberts has
personally supervised the sale of over $150,000,000 worth of rare coins and
bullion for Spectrum. In particular, he has participated in the purchase and
subsequent sale of many important classic rarities including the
Eliasberg-Stickney 1804 Silver Dollar purchase in 1997 for over $1,800,000, and
one of two known 1861 Pacquet $20 Liberty Gold Coins for nearly $1,000,000. Mr.
Roberts has also been the major buyer on behalf of Spectrum at all major
auctions. He expanded sales at Spectrum from approximately $26,000,000 in 1994
to over $50,000,000 in 1999. Mr. Roberts is also a lifetime member of the
American Numismatic Association and a member of the Professional Numismatists
Guild.
James A. Davin. Mr. Davin has since 1993 been President of Davin
Capital Corporation, a private investment company and Davin Capital, L.P., a
private investment partnership. Mr. Davin is also a trustee and member of the
Finance Committee of Blair Academy, an independent school in Blairstown, New
Jersey and a member of the Graduate Advisory Board of the Georgetown University
School of Business, from which he graduated in 1967. Mr. Davin's investment
career started in 1969 at First Boston, from which he departed in 1988 as
Managing Director to join Drexel Burnham Lambert Group, Inc. In 1990, Mr. Davin
left Drexel Burnham Lambert Group, Inc. as Executive Vice President, Senior
Trading Official, a position mandated by the SEC under the company's agreement
with the U.S. Attorney's office, after which he joined Lehman Brothers. Mr.
Davin departed Lehman Brothers in 1993 as Managing Director to serve as Vice
Chairman of Craig Drill Capital, a private investment fund in New York. Mr.
Davin has been an active member of the National Association of Securities
Dealers, for which he was Chairman and Vice President of the Board of Governors
in 1987 as well as a board member from 1985 until 1988.
Management of Spectrum
Following the Merger, the following persons will be the directors of
Spectrum:
Name Position
---- --------
Gregory N. Roberts Director
Greg Manning Director
James A. Smith Director
Elaine Dinges Director
Following the Merger, the following persons will be officers of
Spectrum:
Name Position
---- --------
Gregory N. Roberts President
Greg Manning Vice President
James A. Smith Vice President
Elaine Dinges Chief Operating Officer and Secretary
Andrew Glassman Chief Financial Officer
OTHER MATTERS PERTAINING TO THE MERGER AGREEMENT
Regulatory Filings and Approvals
Neither GMAI nor Spectrum is aware of any material governmental or
regulatory approval required for completion of the Merger, other than compliance
with the corporate law of Delaware and California.
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Anticipated Accounting Treatment
GMAI and Spectrum expect that the Merger will qualify to be accounted
for as a pooling-of-interests, meaning that for accounting and financial
reporting purposes, GMAI and Spectrum will be treated as if they had always been
combined.
For the Merger to qualify as a pooling-of-interests for accounting and
financial reporting purposes, GMAI and Spectrum, and their respective
affiliates, must meet the criteria for pooling-of-interests accounting treatment
as established in opinions published by the Accounting Principles Board and
interpreted by the Financial Accounting Standards Board and the SEC. These
opinions are complex and the interpretation of them is subject to change.
The availability of pooling of interests accounting treatment for the
Merger depends in part upon circumstances and events occurring after the
effective time of the Merger. For example, there must be no significant changes
in the business of the combined companies, including significant dispositions of
assets for a period of two years following the Effective Time. Furthermore, the
affiliates of GMAI and Spectrum must not sell or otherwise reduce their risk
with respect to any shares of GMAI common stock (except for a minimal number as
defined by certain SEC rules and regulations) during the period beginning 30
days before the Effective Time and continuing until the day GMAI publicly
announces financial results of GMAI and Spectrum covering at least 30 days of
combined operations. If affiliates of GMAI or Spectrum sell their shares of GMAI
common stock prior to that time, the Merger may not qualify for accounting
treatment as a pooling-of-interests for financial reporting purposes.
GMAI could be adversely affected if the Merger were to not qualify as a
pooling of interests. For example, the combined financial results of GMAI and
Spectrum could be adversely affected, resulting in a possible decline in the
market price of GMAI common stock as a result of the combined financial results
being inconsistent with market expectations.
Appraisal Rights
New York law does not require that holders of GMAI common stock who
object to the Merger and who vote against or abstain from voting in favor of the
share issuance be afforded any appraisal rights or the right to receive cash for
their shares of GMAI common stock, and GMAI does not intend to make available
such rights to its shareholders.
Material Federal Income Tax Consequences of the Merger
In the opinion of Kramer Levin Naftalis & Frankel LLP, counsel to GMAI,
and Frye & Hsieh, LLP counsel to Spectrum, the Merger will qualify as a tax-free
reorganization for federal income tax purposes under Section 368 of the Internal
Revenue Code of 1986. Because your shares of GMAI common stock will remain
unchanged as a result of the Merger, you will not recognize any gain or loss for
federal income tax purposes. In addition, GMAI should not recognize any gain or
loss for federal income tax purposes as a result of the Merger.
Listing of GMAI Shares
GMAI will list on the Nasdaq National Market the shares of GMAI common
stock to be issued in connection with the Merger.
Price Range of GMAI Common Stock
The last price of the GMAI common stock on December 8, 1999, which was
the last trading day prior to the announcement of the Merger Agreement, was
$14.25, as reported by the Nasdaq National Market.
RECOMMENDATION OF THE BOARD
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The board of directors recommends that you vote "FOR" the proposal to
issue shares of GMAI common stock to the Spectrum Shareholders in connection
with the Merger.
PROPOSAL NO. 2
AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
Introduction
GMAI's restated certificate of incorporation authorizes GMAI to issue
up to 20 million shares of common stock and 10 million shares of preferred
stock. On December 9, 1999, the board of directors of GMAI adopted a resolution
proposing that the certificate be amended to increase the authorized number of
shares of common stock to 40 million, and calling for the proposed amendment to
be submitted to the GMAI shareholders for their approval.
CURRENT USE OF SHARES
As of December 27, 1999, GMAI had approximately 6,872,746 shares of
common stock outstanding, had approximately 742,875 shares reserved for future
issuance under GMAI's 1997 Stock Option Plan (the "1997 Plan"), of which
approximately 704,375 shares were covered by outstanding options and
approximately 38,500 shares were available for grant or purchase, and had
approximately 155,000 shares reserved for issuance upon exercise of options
issued outside of the 1997 Plan. Based upon the foregoing number of outstanding
and reserved shares of common stock, as of December 27, 1999, GMAI had
approximately 10,474,993 shares remaining available for other purposes.
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The following is the text of the first paragraph of Article IV of the
certificate of GMAI, as it would read upon being amended as proposed:
"The total number of shares of all classes of capital stock
that the Corporation shall have authority to issues is Fifty Million
(50,000,000), consisting of:
(a) Forty Million (40,000,000) shares of Common stock
with a par value of $.01 per share (the "Common
stock"); and
(b) Ten Million (10,000,000) shares of Preferred Stock
with a par value of $.01 per share (the "Preferred
Stock")."
PURPOSE AND EFFECT OF PROPOSED AMENDMENT
The board of directors of GMAI believes that increasing the number of
shares of common stock that GMAI is authorized to issue would give GMAI
additional flexibility, in that GMAI would be better positioned to maintain an
optimal stock price by means of one or more stock splits or stock dividends,
raise additional equity capital, adopt additional employee benefit plans or
reserve additional shares for issuance under such plans, or use GMAI stock to
make additional acquisitions.
No additional action or authorization by GMAI's shareholders would be
necessary for GMAI to issue any additional shares once authorized, unless
required by applicable law or the rules of any stock exchange or national
securities association trading system on which GMAI common stock is then listed
or quoted. GMAI reserves the right to seek a further increase in authorized
shares from time to time in the future as considered appropriate by the board of
directors.
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GMAI's articles of incorporation do not grant GMAI's shareholders
preemptive rights with respect to GMAI. Consequently, should the board of
directors elect to issue additional shares of common stock, existing
shareholders would not have any preferential rights to purchase those shares. In
addition issuance of additional shares of common stock could dilute the earnings
per share, voting power, and the percentage of shareholdings of current
shareholders.
RECOMMENDATION OF THE BOARD
The board of directors recommends that you vote "FOR' the proposal to
amend GMAI's articles of incorporation to increase the number of authorized
shares of common stock from 20 million shares to 40 million.
PROPOSAL NO. 3
CERTAIN AMENDMENTS TO THE 1997 STOCK OPTION PLAN
INTRODUCTION
In 1993, GMAI's board of directors adopted and GMAI's shareholders
approved the 1993 Stock Option Plan, as amended (the "1993 Plan"), which
provides for the granting of options to purchase up to 650,000 shares of common
stock. Under the 1993 Plan, the board has made grants of options as a means of
providing incentives to officers, employees and consultants, enabling them to
realize compensation based on increases in shareholder value. Grants have been
made to persons who have been, and are expected to continue to be, important in
helping GMAI achieve and continue its rapid growth.
In 1997, GMAI's board of directors adopted and GMAI's shareholders
approved the 1997 Stock Plan, which, among other things, increased the number of
shares available to be issued under the 1993 Plan and the 1997 Plan to 850,000
in the aggregate. Awards under the 1997 Plan may be made in the form of (1)
incentive stock options, (2) non-qualified stock options, (3) stock appreciation
rights, (4) restricted stock, (5) restricted stock units, (6) dividend
equivalent rights and (7) other stock-based awards. Awards may be made to such
directors, officers and other employees of GMAI and its subsidiaries (including
employees who are directors and prospective employees who become employees), and
to such consultants to GMAI and its subsidiaries, as the board committee in its
discretion selects.
In 1999, GMAI's board of directors adopted and GMAI's shareholders
approved an amendment to the 1997 Plan that increased the number of shares
available to be issued under the 1993 Plan and the 1997 Plan by 300,000 to
1,150,000 in the aggregate.
As of January 3, 2000, options to purchase a total of 704,375 shares of
common stock were outstanding under both the 1993 Plan and the 1997 Plan and,
accordingly, 38,500 shares remained available for grants under both plans.
Amendment to Increase the Number of Shares Available for Issuance By 600,000 to
an Aggregate of 1,750,000
The total number of shares currently available to be issued under the
1993 Plan and the 1997 Plan in the aggregate is 1,150,000. The board of
directors believes that in light of GMAI's continuing growth, the possibility
that it may make acquisitions in the future, and its need to continue to attract
and retain talented employees, including senior executives, GMAI will in the
next few years need to grant options to purchase a greater number of shares than
remain authorized under the 1997 Plan. GMAI's failure to make available such
grants when necessary would, in the board's judgment, harm GMAI's future growth
and profitability.
Accordingly, the board of directors has approved, subject to
shareholder approval, the following amendment to the first sentence of Section
1.5.1 of the 1997 Plan, which would increase the number of shares available for
issuance under the 1997 Plan and the 1993 Plan by 600,000, to an aggregate of
1,750,000 shares:
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"1.5.1 The total number of shares of common stock of the Company, par
value $.01 per share ("Common Stock") which may be issued in connection with
awards granted under the Plan shall, together with any shares issued in
connection with awards granted under the Greg Manning Auctions, Inc. 1993 Stock
Option Plan, as amended (the "1993 Plan"), not exceed 1,750,000."
Amendment to Increase the Number of Shares Available for Issuance to Any One
Employee from 100,000 Shares to 200,000.
Under the 1997 Plan, the total number of shares of common stock with
respect to which stock options and stock appreciation rights may be granted to
any one employee of GMAI or a subsidiary during any one-year period cannot
exceed 100,000.
The board believes that just as it needs to increase the number of
shares available for issuance under the 1993 Plan and the 1997 Plan in order to
remain competitive, it also needs to raise the maximum number of options that it
may grant to any one employee in any given one-year period. The immediate need
for this amendment is that as part of the stock option grants it is making to
employees of Spectrum, GMAI intends to grant to Gregory N. Roberts, President of
Spectrum, options to purchase 150,000 shares of GMAI common stock.
Accordingly, the board of directors has approved, subject to
shareholder approval, the following amendment to Section 1.5.2 of the 1997 Plan:
"1.5.2 The total number of shares of Common Stock with respect to
which stock options and stock appreciation rights may be granted to any one
employee of the Company or a subsidiary during any one-year period shall not
exceed 200,000." Amendment to Change the Meaning of the Term "Change In Control"
Under the 1997 Plan, if at the time of a "change in control" there are
outstanding any option and stock appreciation that had been granted at least one
year before the change in control those options and stock appreciation rights
fully vest and become immediately exercisable unless that individual's
applicable Plan Agreement expressly provides otherwise.
A change of control occurs when, among other events, any "person," as
that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act, is
or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act), directly or indirectly, by purchase or by acquisition or
agreement to act in concert or otherwise, of 15% or more of the outstanding
shares of GMAI common stock.
As it stands, this event does not take into account the circumstances
under which the event would occur yet be approved by the board of directors. The
board believes this provision was intended to address circumstances in which any
person becomes a beneficial owner of 15% or more of GMAI common stock without
the approval of the board of directors. The board believes it would be in the
best interests of GMAI and its shareholders to amend to meaning of "change of
control" so that a change of control does not occur if a person becomes a
beneficial owner with the approval of the board of directors of GMAI.
Accordingly, the board of directors has approved, subject to
shareholder approval, the following amendment to Section 3.7.1(a) of the 1997
Plan (the new language is marked in italics):
"3.7.1 For the purpose of this Section 3.7, a "change in control" shall
be deemed to have occurred upon the happening of any of the following events:
(a) any "person", as such term is used in Sections 13(d) and 14(d) of
the 1934 Act, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the 1934), directly or indirectly, whether by purchase or acquisition or
agreement to act in concert or otherwise, of 15% or more of the outstanding
shares of Common Stock of the Company, other than with the approval of the board
of directors."
18
<PAGE>
RECOMMENDATION OF THE BOARD
The board of directors recommends that you vote "FOR" approval of each
of the above amendments to the 1997 Plan
INCORPORATION BY REFERENCE
Incorporated by reference to this proxy statement is the information
set forth in the annual report of GMAI on Form 10-KSB, which has been filed with
the SEC for the fiscal year ended June 30, 1999 and the latest quarterly report
of GMAI on Form 10-QSB, which has been filed with the SEC for the quarter ended
September 30, 1999.
All documents filed by GMAI pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this proxy statement and
prior to the date of the special meeting will be deemed incorporated by
reference in this proxy statement from the date those documents are filed. All
information appearing in this proxy statement is qualified in its entirety by
the information and financial statements (including notes thereto) appearing in
the documents incorporated by reference in this proxy statement.
GMAI will furnish to any shareholder, without charge, a copy of these
documents upon written request to Martha Husick, Corporate Secretary, 775
Passaic Avenue, West Caldwell, New Jersey 07006. A copy of any exhibits to these
documents will be furnished to any shareholder upon written request and payment
of a nominal fee.
<PAGE>
Annex A
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The pro forma combined consolidated balance sheets and statements of
operations were derived by applying pro forma adjustments to GMAI's historical
audited and unaudited consolidated financial statements incorporated by
reference herein.
We have provided unaudited condensed combined financial statements of
Greg Manning Auctions, Inc. ("GMAI") and Spectrum Numismatic International, Inc.
("Spectrum") after giving effect to the merger, which are referred to as "pro
forma" information. In presenting these unaudited pro forma condensed combined
financial statements, we treated our companies as if they have been combined for
accounting and financial reporting purposes. This method is known as the
"pooling of interest" method of accounting. You should be aware that these
unaudited pro forma condensed combined financial statements are presented for
illustrative purposes only and may not be indicative of the operating results or
financial position that would have occurred or that will occur after the
consummation of the merger.
The unaudited pro forma information set forth below gives effect to the
merger of GMAI and Spectrum as if it had been completed on July 1, 1997, for
purposes of the statement of operations, and as if it had been completed on
September 30, 1999 for balance sheet purposes, subject to the assumptions and
adjustments in the accompanying notes to the pro forma information.
The unaudited condensed combined financial information is derived from
the historical financial statements of GMAI and Spectrum.
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS INC.
and SPECTRUM NUMISMATICS INTERNATIONAL, INC.
Pro Forma Condensed Combined Balance Sheet
September 30, 1999
(Unaudited)
---------------------------
Historical
---------------------------
Pro Forma
GMAI Spectrum Adjustments Combined
---- -------- ----------- --------
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 348,046 $ 988,466 $ $ 1,336,512
Accounts receivable 2,656,733 2,656,733
Auctions receivable 6,724,814 6,724,814
Auctions receivable-related party 850,000 850,000
Advances to consignors 3,427,233 3,427,233
Inventory 6,627,510 9,571,784 16,199,294
Deferred tax asset 746,788 746,788
Prepaid expenses and deposits 379,172 85,514 464,686
----------- ----------- ----------- -----------
Total current assets 19,103,563 13,302,497 32,406,060
Property and equipment (net) 781,041 25,022 806,063
Goodwill (net) 4,445,038 4,445,038
Customer lists (net) 331,667 331,667
Trademarks (net) 2,862,500 2,862,500
Investment in joint venture and other 382,409 633,983 1,016,392
Marketable securities 385,000 385,000
Other non-current assets 2,842,494 27,627 2,870,121
----------- ----------- ---------- -----------
Total assets $30,748,712 $14,374,129 $ $45,122,841
=========== =========== ========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Demand notes payable $ 3,662,000 $ 4,925,000 $ $ 8,587,000
Notes payable 2,156,869 2,156,869
Notes payable - related party 4,750,000 4,750,000
Payable to third party consignors 2,843,463 2,843,463
Accounts payable 989,394 3,689,655 4,679,049
Accrued expenses 1,593,013 10,400 1,603,413
----------- ----------- ---------- -----------
Total current liabilities 11,244,739 13,375,055 24,619,794
Minority interest 8,240 8,240
Notes payable - long term 678,496 678,496
----------- ----------- ---------- -----------
Total liabilities 11,923,235 13,383,295 25,306,530
Stockholders' equity 18,825,477 990,834 19,816,311
----------- ----------- ---------- -----------
Total liabilities and
stockholders' equity $30,748,712 $14,374,129 $ $45,122,841
=========== =========== ========== ===========
See accompanying notes to unaudited pro forma condensed combined financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
and SPECTRUM NUMISMATICS INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended June 30, 1998
(Unaudited)
---------------------------
Historical
---------------------------
Pro Forma Pro Forma
GMAI Spectrum Adjustments Combined
---- -------- ----------- --------
<S> <C> <C> <C> <C>
Aggregate sales $ 22,487,908 $ 48,486,660 $ $ 70,974,568
============ ============ ============
Operating revenues
Sales of merchandise $ 6,143,990 $ 48,486,660 $ $ 54,630,650
Commissions earned 2,546,431 2,546,431
------------ ------------ ------------
8,690,421 48,486,660 57,177,081
Operating expenses
Cost of merchandise sold 4,568,670 41,587,592 46,156,262
General and administrative 4,266,507 3,251,527 (1,419,882) 6,098,152
Marketing 580,999 1,164,800 1,745,799
------------ ------------ ------------ ------------
Operating income (loss) (725,755) 2,482,741 1,419,882 3,176,868
Other income (expense)
Gain on sale of
marketable securities 672,452 672,452
Gain on sale of investment --
Interest income 376,932 58,256 435,188
Interest expense (610,181) (1,235,948) (1,846,129)
Income from operations of --
investments 169,796 169,796
------------ ------------ ------------ ------------
Income (loss) before income taxes (286,552) 1,474,845 1,419,882 2,608,175
Provision for (benefit from)
income taxes (55,000) 1,157,891 1,102,891
------------ ------------ ------------ ------------
Net Income (loss) $ (231,552) $ 1,474,845 $ 261,991 $ 1,505,284
============ ============ ============ ============
Basic earnings (loss) per share:
Weighted average shares outstanding 4,419,997 6,174,383
============ ============
Earnings (loss) per share $ (0.05) $ 0.24
============ ============
Diluted earnings (loss) per share:
Weighted average shares outstanding 4,419,997 6,233,038
============ ============
Earnings (loss) per share $ (0.05) $ 0.24
============ ============
See accompanying notes to unaudited pro forma condensed combined financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
and SPECTRUM NUMISMATICS INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended June 30, 1999
(Unaudited)
----------------------------------
Historical
----------------------------------
Pro Forma Pro Forma
GMAI Spectrum Adjustments Combined
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Aggregate sales $ 39,602,859 $ 62,664,403 $ $102,143,188
============ ============ ============
Operating revenues
Sales of merchandise $ 9,865,894 $ 62,664,403 $ $ 72,530,297
Commissions earned 4,933,481 4,933,481
------------ ------------ ------------ ------------
Total revenues 14,799,375 62,664,403 -- 77,463,778
Operating expenses
Cost of merchandise sold 7,069,174 58,601,750 65,670,924
General and administrative 6,785,720 2,693,817 $ (626,410) 8,853,127
Marketing 1,556,206 476,453 2,032,659
------------ ------------ ------------ ------------
Operating Income (Loss) (611,725) 892,383 626,410 907,068
Other income (expense)
Gain on sale of marketable
securities 2,023,206 2,023,206
Gain on sale of investment 531,834 531,834
Interest income 365,315 87,076 452,391
Interest expense (720,712) (904,170) (1,624,882)
Income (loss) from operations
of investments (19,430) 138,306 118,876
Minority interest (6,640) (6,640)
------------ ------------ ------------ ------------
Income (loss) before income 1,036,654 738,789 626,410 2,401,853
taxes
Provision for income taxes 456,000 12,800 587,200 1,056,000
------------ ------------ ------------ ------------
Net income (loss) $ 580,654 $ 725,989 $ 39,210 $ 1,345,853
============ ============ ============ ============
Basic earnings per share:
Weighted average shares outstanding 5,601,251 7,355,637
============ ============
Basic Earnings per Share $ 0.10 $ 0.18
============ ============
Diluted earnings per share:
Weighted average share outstanding 6,044,608 7,798,994
============ ============
Diluted Earnings per Share $ 0.10 $ 0.17
============ ============
See accompanying notes to unaudited pro forma condensed combined financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
and SPECTRUM NUMISMATICS INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the three months ended September 30, 1998
(Unaudited)
----------------------------
Historical
----------------------------
Pro Forma Pro Forma
GMAI Spectrum Adjustments Combined
<S> <C> <C> <C> <C>
Aggregate sales $ 4,482,208 $ 15,674,800 $ $ 20,157,008
============ =========== ============
Operating revenues
Sales of merchandise $ 996,629 $ 15,674,800 $ $ 16,671,429
Commissions earned 601,449 601,449
------------ ------------ ----------- ------------
1,598,078 15,674,800 17,272,878
Operating expenses
Cost of merchandise sold 722,166 14,403,329 15,125,495
General and administrative 859,771 891,749 (320,011) 1,431,509
Marketing 132,218 170,365 302,583
------------ ------------ ----------- ------------
Operating income (loss) (116,077) 209,357 320,011 413,291
Other income (expense)
Gain on sale of
marketable securities 556,817 556,817
Gain on sale of investment --
Interest income 96,642 11,510 108,152
Interest expense (102,690) (276,444) (379,134)
Income (loss) from --
operations of investments 59,435 59,435
Minority interest --
------------ ------------ ------------ ------------
Income before income taxes 434,692 3,858 320,011 758,561
Provision for (benefit from)
income taxes 225,071 129,548 354,619
------------ ------------ ------------ ------------
Net Income $ 209,621 $ 3,858 $ 190,463 $ 403,942
============ ============ ============ ============
Basic Earnings (loss) per share:
Weighted average shares outstanding 4,419,997 6,174,383
============ ============
Earnings (loss) per share $ 0.05 $ 0.07
============ ============
Diluted earnings (loss) per share
Weighted average shares outstanding 4,796,528 6,550,914
============ ============
Earnings (loss) per share $ 0.04 $ 0.06
============ ============
See accompanying notes to unaudited pro forma condensed combined financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREG MANNING AUCTIONS, INC.
and SPECTRUM NUMISMATICS INTERNATIONAL, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the three months ended September 30, 1999
(Unaudited)
------------------------------
Historical
------------------------------
Pro Forma Pro Forma
GMAI Spectrum Adjustments Combined
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Aggregate sales $ 10,067,884 $ 11,627,150 $ $ 21,695,034
============ ============ ============
Operating revenues
Sales of merchandise 2,378,389 11,627,150 $ $ 14,005,539
Commissions earned 1,264,106 1,264,106
------------ ------------ ------------
Total revenues 3,642,495 11,627,150 15,269,645
Operating expenses
Cost of merchandise sold 1,858,199 10,987,954 12,846,153
General and administrative 2,153,793 451,917 $ (10,512) 2,595,198
Marketing 523,928 36,100 560,028
------------ ------------ ------------ ------------
Operating income (loss) (893,425) 151,179 10,512 (731,734)
Other Income (Expense)
Gain on sale of marketable
securities 14,494 14,494
Interest income 224,286 8,878 233,164
Interest expense (170,832) (249,580) (420,412)
Income (loss) from operations
of investments (59,313) 7,943 (51,370)
Minority interest (79) (79)
------------ ------------ ------------ ------------
Income (loss) before income (884,790) (81,659) 10,512 (955,937)
taxes
Provision for income taxes (407,786) (28,459) (436,245)
------------ ------------ ------------ ------------
Net income (loss) (477,004) (81,659) $ 38,971 $ (519,692)
============ ============ ============ ============
Basic and diluted earnings per share:
Weighted average shares outstanding 6,781,941 8,536,327
============ ============
Basic loss per share $ (0.07) $ (0.06)
============ ============
See accompanying notes to unaudited pro forma condensed combined financial statements
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Basis of presentation
The unaudited pro forma condensed combined financial statements assume a
business combination between GMAI and Spectrum accounted for using the pooling
of interests method and are based upon the respective historical financial
statements and the accompanying notes of GMAI and Spectrum.
At the Effective Time, by virtue of the Merger, all issued and outstanding
shares of Spectrum common stock will be converted into the right to receive a
number of shares of GMAI common stock equal to (1) $25 million (the value
ascribed to Spectrum) minus any expenses in excess of $200,000 incurred by
Spectrum in connection with the merger, divided by (2) $14.25 (the value
ascribed to one share of GMAI common stock). The Spectrum Shareholders will be
issued up to 1,754,385 shares in the Merger; the total expenses incurred by
Spectrum in the Merger have not yet been determined, the exact number of shares
issued in the Merger will not be known until the closing. The number of shares
of GMAI common stock issued in the Merger will not be affected by any increase
in the market value of GMAI common stock prior to the closing.
Each Spectrum Shareholder will receive a percentage of the shares issued equal
to the percentage he or she holds of the total issued and outstanding shares of
Spectrum common stock. The Merger Agreement provides, however, that no
fractional shares of GMAI common stock will be issued, and so each Spectrum
Shareholder will receive a cash payment equal to the value of any fraction of a
share of GMAI common stock he or she would otherwise have received in exchange
for his of her shares of Spectrum common stock.
Because the transaction has not been completed, the costs of the merger can only
be estimated at this time. The unaudited pro forma condensed combined statements
of operations for all periods presented excludes the positive effects of
potential cost savings and operating synergies which may be achieved upon
combining the resources of the companies and transaction costs of approximately
$300,000 to $450,000, including legal, accounting fees and other professional
fees.
(2) General and administrative expenses
The pro forma adjustments to general and administrative expenses for the years
ended June 30, 1998 and 1999 and for the three-month periods ended September 30,
1998 and 1999 consist of (a) adjustments to salaries, reflecting certain
employment agreements to be executed in conjunction with the Merger, and (b)
elimination of bonuses and shareholder distributions actually made which are
inconsistent with the above-mentioned employment agreements. The total
adjustments decreased general and administrative expenses by $1,419,882 and
$626,410 for the years ended June 30, 1998 and 1999, respectively and $320,011
and $10,512 for the three-month periods ended September 30, 1998 and 1999,
respectively.
(3) Income Tax
The pro forma adjustments for income taxes for the years ended June 30, 1998 and
1999 and for the three month periods ended September 30, 1998 and 1999 are the
estimates of the federal and state income taxes that would be due assuming
Spectrum was acquired on July 1, 1997. No federal or state income tax or tax
benefit was previously recorded by Spectrum because Spectrum had elected to be
taxed under the S Corporation provisions of the Internal Revenue Code.
(4) Earnings per share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share is computed by dividing income available
to common shareholders by the weighted average number of common shares
outstanding during the period increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common
shares had been issued. The dilutive effect of the outstanding options would be
reflected in diluted earnings per share by application of the treasury stock
method.
<PAGE>
Annex B
MERGER AGREEMENT
================================================================================
MERGER AGREEMENT
dated December 8, 1999,
between
GREG MANNING AUCTIONS, INC.
SPECTRUM ACQUISITION, INC.
SPECTRUM NUMISMATICS INTERNATIONAL, INC.
WARREN TREPP, as trustee
GREGORY N. ROBERTS
SHARON ROBERTS
and
ELAINE DINGES
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE MERGER......................................................1
1.1 The Merger......................................................1
1.2 Closing; Effective Time.........................................1
1.3 Effects of the Merger...........................................1
1.4 Articles of Incorporation and By-Laws...........................2
1.5 Directors and Officers..........................................2
1.6 Conversion of Stock.............................................2
1.7 Closing of Spectrum Transfer Books..............................3
1.8 Exchange of Certificates........................................3
1.9 Escrow of Shares................................................3
1.10 Tax-Free Reorganization.........................................3
ARTICLE 2 REPRESENTATIONS CONCERNING THE STOCKHOLDERS.....................3
2.1 Authority.......................................................3
2.2 Consents........................................................4
2.3 No Violations...................................................4
2.4 Title to Shares.................................................4
2.5 Proceedings.....................................................4
2.6 Investment Representations of Stockholders......................4
2.7 Disclosure......................................................4
2.8 Pooling Matters.................................................5
2.9 Bankruptcy Proceedings..........................................5
ARTICLE 3 REPRESENTATIONS CONCERNING SPECTRUM.............................5
3.1 Organization and Good Standing..................................5
3.2 Authority.......................................................5
3.3 Consents........................................................6
3.4 No Violations...................................................6
3.5 Capitalization..................................................6
3.6 Ownership Interests.............................................7
3.7 Financial Statements............................................7
3.8 Books and Records...............................................7
3.9 Real Property...................................................7
3.10 Title to Properties; Liens......................................7
3.11 Condition and Sufficiency of Assets.............................7
3.12 Customers and Suppliers.........................................8
3.13 Accounts Receivable.............................................8
3.14 Inventory.......................................................8
3.15 No Undisclosed Liabilities......................................8
3.16 Taxes...........................................................8
3.17 Environmental Matters...........................................9
3.18 Compliance With Laws; Permits..................................10
3.19 Proceedings; Orders............................................10
i
<PAGE>
Page
----
3.20 Absence of Certain Changes and Events..........................10
3.21 Contracts......................................................11
3.22 ERISA and Employee Benefit Matters.............................13
3.23 Employees......................................................14
3.24 Deposit Accounts...............................................14
3.25 Intellectual Property Assets...................................14
3.26 Conduct of Business; Use of Name...............................15
3.27 Insurance......................................................15
3.28 Brokers Or Finders.............................................15
3.29 Year 2000 Compliance...........................................15
3.30 Affiliated Transactions........................................16
3.31 Disclosure.....................................................16
3.32 Pooling Matters................................................16
ARTICLE 4 REPRESENTATIONS OF GMAI........................................16
4.1 Organization and Good Standing.................................16
4.2 Authority......................................................16
4.3 Consents.......................................................17
4.4 No Violations..................................................17
4.5 Capitalization.................................................17
4.6 Filings With the SEC...........................................18
4.7 Proceedings....................................................18
4.8 No Material Adverse Effect.....................................18
4.9 Brokers or Finders.............................................18
4.10 Pooling Matters................................................18
ARTICLE 5 CERTAIN OBLIGATIONS OF GMAI....................................19
5.1 Board Representation...........................................19
5.2 Certain Records................................................19
5.3 Stockholders'Meeting; Materials to Stockholders................19
5.4 Registration Exemption.........................................19
5.5 Interim Earnings Announcement..................................20
5.6 Tax Distribution...............................................20
5.7 Indebtedness...................................................20
ARTICLE 6 CERTAIN OBLIGATIONS OF THE STOCKHOLDERS........................20
6.1 No Encumbrances on Shares......................................20
6.2 Employment Agreements..........................................20
6.3 Noncompetition Agreements......................................20
6.4 Agreement Regarding Sale of Shares.............................21
ARTICLE 7 CERTAIN OBLIGATIONS OF SPECTRUM................................21
7.1 Operation of the Business of Spectrum..........................21
ii
<PAGE>
Page
----
7.2 Negative Covenant..............................................21
7.3 No Solicitation................................................21
7.4 Registration Exemption.........................................22
7.5 Certain Employment Agreement...................................22
7.6 Access and Information.........................................22
7.7 Adjustments to Financial Statements............................22
7.8 Updated Schedules..............................................22
ARTICLE 8 CONDITIONS TO CONSUMMATION OF THE MERGER.......................23
8.1 Conditions to Obligations of GMAI and Sub......................23
8.2 Conditions to Obligations of Spectrum..........................24
ARTICLE 9 TERMINATION....................................................26
9.1 Termination....................................................26
9.2 Effect of Termination..........................................27
ARTICLE 10 INDEMNIFICATION................................................27
10.1 Indemnification by Spectrum and the Stockholders...............27
10.2 Indemnification by GMAI........................................28
10.3 Procedures Relating to Indemnification.........................28
10.4 Limitation on Indemnification..................................29
10.5 Tax Indemnity..................................................30
ARTICLE 11 DEFINITIONS....................................................31
ARTICLE 12 MISCELLANEOUS..................................................35
12.1 Governing Law..................................................35
12.2 Jurisdiction; Service of Process...............................35
12.3 Survival of Representations....................................36
12.4 Notices........................................................36
12.5 Severability...................................................37
12.6 Public Announcements...........................................37
12.7 Amendment......................................................38
12.8 Expenses.......................................................38
12.9 Entire Agreement...............................................38
12.10 Counterparts...................................................38
12.11 No Third-Party Rights..........................................38
12.12 Pooling Accounting and Tax Treatment...........................38
12.13 Best Efforts...................................................38
iii
<PAGE>
<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
<S> <C> <C>
Accounts Receivable..........................8 Merger......................................1
Acquisition Transaction.....................21 Merger Certificates.........................1
Affiliate...................................31 Merger Consideration........................2
Affiliate Letter............................23 Offset Expenses............................33
Agreement....................................1 Order......................................33
Applicable Intellectual Property Assets.....14 Ordinary Course of Business................33
Balance Sheet................................7 Permit.....................................33
CGCL........................................31 Permit Application.........................19
Claim.......................................29 Permitted Lien.............................34
Closing......................................1 Person.....................................34
Closing Date.................................1 Proceeding.................................34
Code........................................31 Proxy Statement............................19
Consent.....................................31 Release....................................34
Contract....................................31 Remedial Action............................34
control.....................................31 Representative.............................34
DGCL........................................31 Roberts.....................................1
Effective Time...............................1 SEC........................................34
Environmental Claim.........................31 Securities Act.............................34
Environmental Law...........................32 Special Meeting............................19
ERISA.......................................32 Spectrum....................................1
Escrow Agreement.............................3 Spectrum Aggregate Value....................2
Escrow Shares................................3 Spectrum Common Stock.......................2
Exchange Act................................32 Spectrum Indemnitees.......................34
GAAP........................................32 Spectrum Plans.............................13
GMAI.........................................1 Spectrum Series A Common Stock..............2
GMAI Common Stock............................2 Spectrum Series B Common Stock..............2
GMAI Indemnitees............................32 Spectrum Terminating Change................26
GMAI Preferred Stock........................17 Spectrum's Knowledge.......................34
GMAI SEC Documents..........................18 Stockholder.................................1
GMAI Terminating Change.....................26 Sub.........................................1
GMAI's Knowledge............................32 Surviving Corporation.......................1
Governmental Body...........................32 Systems....................................15
Hazardous Material..........................32 Tax Benefit................................34
Indemnifiable Losses........................32 Tax Cost...................................35
Indemnified Party...........................28 Tax Return.................................35
Indemnifying Party..........................28 Taxes......................................35
Intellectual Property Assets................33 Terminating Breach.........................26
Interim Balance Sheet........................7 Terminating Change.........................26
IRS.........................................33 Third Party Claim..........................28
Law.........................................33 Transaction Documents......................35
Lien........................................33 Transfer Taxes.............................35
Market Value of GMAI Common Stock...........33 Trust.......................................1
Material Adverse Effect.....................33 Year 2000 Compliant........................15
</TABLE>
iv
<PAGE>
MERGER AGREEMENT
This Merger Agreement (this "Agreement") is dated December 8, 1999, and
is between GREG MANNING AUCTIONS, INC., a New York corporation ("GMAI"),
SPECTRUM ACQUISITION, INC., a Delaware corporation and a wholly-owned subsidiary
of GMAI ("Sub"), SPECTRUM NUMISMATICS INTERNATIONAL, INC., a California
corporation ("Spectrum"), and WARREN TREPP, as trustee of the Rabard Trust dated
August 25, 1989 (the "Trust"), GREGORY N. ROBERTS and SHARON ROBERTS
(collectively, "Roberts"), and ELAINE DINGES, each an individual (the Trust,
Roberts, and Ms. Dinges each a "Stockholder" and collectively the
"Stockholders").
The parties wish to effect the acquisition of Spectrum by GMAI through
a merger of Sub into Spectrum, and intend that this merger be treated as a "plan
of reorganization" within the meaning of Section 368 of the Code, and be
accounted for as a pooling of interests.
The parties therefore agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms of this Agreement and in accordance
with the DGCL and the CGCL, the parties shall cause Sub to merge with and into
Spectrum (that merger, the "Merger"). At the Effective Time, the separate
corporate existence of Sub will cease, and Spectrum will continue as the
surviving corporation of the Merger (in that capacity, the "Surviving
Corporation") and will be a wholly-owned subsidiary of GMAI.
1.2 Closing; Effective Time. The parties shall hold the closing of the
Merger (the "Closing") at the offices of Kramer Levin Naftalis & Frankel LLP,
919 Third Avenue, New York, NY 10022 at 10:00 a.m., local time, on a date
specified by the parties that may be no later than the second business day after
satisfaction or waiver of the conditions set forth in ARTICLE 8 (the "Closing
Date"). Simultaneously with, or as promptly as practicable after, the Closing
the parties shall cause a certificate of merger to be filed with the Secretary
of State of Delaware in accordance with Section 252 of the DGCL and a
certificate of merger to be filed with the Secretary of State of California in
accordance with Section 1108 of the CGCL (those documents collectively, the
"Merger Certificates") and shall take all further actions required by law to
make the Merger effective. The Merger will be effective once both Merger
Certificates have been duly filed, unless a later time is specified in the
Merger Certificates (the time of effectiveness of the Merger, the "Effective
Time").
1.3 Effects of the Merger. The Merger will have the effects specified in
this Agreement and in the DGCL and the CGCL.
1.4 Articles of Incorporation and By-Laws. The articles of incorporation
and by-laws of the Surviving Corporation immediately after the Effective Time
will be substantially in a form reasonably acceptable to GMAI and the
Stockholders.
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1.5 Directors and Officers. The directors and officers of Sub immediately
prior to the Effective Time will be the directors and officers of the Surviving
Corporation immediately after the Effective Time, and they will each hold office
in accordance with the articles of incorporation and by-laws of the Surviving
Corporation and the CGCL.
1.6 Conversion of Stock.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the parties, the following will occur:
(1) all shares of Series A common stock, no par value, of Spectrum (the
"Spectrum Series A Common Stock") and Series B common stock, no par
value, of Spectrum (the "Spectrum Series B Common Stock"; together with
the Spectrum Series A Common Stock, the "Spectrum Common Stock")
outstanding immediately prior to the Effective Time (other than shares
held by Spectrum as treasury stock) will be converted into and become
the right to receive, in the aggregate, the Merger Consideration;
(2) all shares of Spectrum Common Stock held at the Effective Time by
Spectrum as treasury stock will be canceled and no payment will be made
with respect to those shares; and
(3) each share of capital stock of Sub outstanding immediately prior to the
Effective Time will be converted into and become one validly issued,
fully-paid, and nonassessable share of common stock of the Surviving
Corporation.
(b) Subject to Section 1.9, each of Mr. Trepp, Mr. Roberts and Ms.
Dinges will be allocated 51.685%, 39.003% and 9.312%, respectively, of the
Merger Consideration (in each case rounded down to the nearest whole share and
subject to the payment of cash for fractional shares as provided in Schedule
1.8).
(c) For the purpose of this Section 1.6, the following terms have the
following meanings:
(1) "GMAI Common Stock" means the common stock, par value $0.01 per share,
of GMAI;
(2) "Merger Consideration" means that number of shares of GMAI Common Stock
equal to the Spectrum Aggregate Value divided by $14.25; and
(3) "Spectrum Aggregate Value" means $25,000,000 minus the Offset Expenses.
(d) The Merger Consideration will be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into shares of GMAI Common Stock or
Spectrum Common Stock, as the case may be), reorganization, recapitalization,
split up, combination or exchange of shares, or other like event with respect to
shares of GMAI Common Stock or Spectrum Common Stock, as the case may be,
occurring after the date of this Agreement and prior to the Effective Time.
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1.7 Closing of Spectrum Transfer Books. After the Effective Time, the
Surviving Corporation shall close the stock transfer books of Spectrum and shall
not make any transfers of Spectrum Common Stock. If, after the Effective Time,
certificates representing shares of Spectrum Common Stock are presented to the
Surviving Corporation, the Surviving Corporation shall cancel those certificates
and issue in exchange certificates representing GMAI Common Stock.
1.8 Exchange of Certificates. The procedures for exchanging outstanding
shares of Spectrum Common Stock for shares of GMAI Common Stock pursuant to the
Merger and this Merger Agreement are set forth in Schedule 1.8.
1.9 Escrow of Shares. At the Effective Time, GMAI shall deposit a number of
shares of GMAI Common Stock equal to 10% of the Merger Consideration (the
"Escrow Shares") with an escrow agent reasonably satisfactory to Spectrum and
GMAI to be held and disbursed by that escrow agent in accordance with the form
of escrow agreement attached as Exhibit A (the "Escrow Agreement"). Those shares
will be deducted pro rata from the shares of GMAI Common Stock allocable to each
former holder of Spectrum Common Stock. To the extent GMAI is entitled to make a
claim against the Escrow Shares pursuant to this Agreement, GMAI may set off and
apply against Indemnifiable Losses the Escrow Shares in accordance with the
terms of this Agreement and of the Escrow Agreement.
1.10 Tax-Free Reorganization. The parties intend that (1) the Merger be a
reorganization within the meaning of Section 368 of the Code and (2) this
Agreement be a "plan of reorganization" within the meaning of the regulations
promulgated under Section 368 of the Code.
ARTICLE 2
REPRESENTATIONS CONCERNING THE STOCKHOLDERS
Each Stockholder represents to GMAI and Sub as to itself as follows:
2.1 Authority.
(a) That Stockholder has full legal capacity to execute and deliver
this Agreement and the other Transaction Documents to which he or she is a party
and to perform his or her obligations hereunder and thereunder.
(b) Assuming that GMAI and Sub have duly authorized execution and
delivery of this Agreement, this Agreement constitutes the valid and binding
obligation of that Stockholder, enforceable in accordance with its terms, except
as enforceability is limited by (1) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally,
or (2) general principles of equity, whether considered in a proceeding in
equity or at law.
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2.2 Consents. Except as set forth on Schedule 2.2, that Stockholder is not
required to obtain the Consent of any Person, including the Consent of any party
to any Contract to which Spectrum is a party, in connection with execution and
delivery of this Agreement and the other Transaction Documents and performance
of his or her obligations hereunder and thereunder.
2.3 No Violations. That Stockholder's execution and delivery of this
Agreement and the other Transaction Documents to which he or she is party and
performance of his or her obligations hereunder and thereunder do not and will
not (1) conflict with, result in a breach of, constitute a default under (or an
event which, with notice or lapse of time or both, would constitute a default
under), accelerate the performance required by, result in the creation of any
Lien upon any of the properties or assets of that Stockholder under, or create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under, any Contract to which that Stockholder is a party or by which
any properties or assets of that Stockholder are bound, or (2) violate any Law
or Order to which that Stockholder is subject.
2.4 Title to Shares. That Stockholder owns beneficially and of record, free
and clear of any Liens, the number of shares of Spectrum Common Stock set forth
in Schedule 2.4 opposite his or her name, and there exist no stockholder
agreements, voting trusts, proxies, or other Contracts with respect the sale,
transfer, registration or voting of shares of GMAI Common Stock held by that
Stockholder.
2.5 Proceedings. There are no Proceedings pending or, to that Stockholder's
knowledge, threatened in writing against that Stockholder that challenge, or may
have the effect of preventing, delaying or making illegal, or otherwise
interfering with, any of the transactions contemplated by this Agreement or the
Transaction Documents, and to that Stockholder's knowledge no event or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding.
2.6 Investment Representations of Stockholders. That Stockholder has read
this Agreement and all other documents provided by GMAI in connection with this
Agreement, including the GMAI SEC Documents, and fully understands the terms
under which its GMAI Merger Shares are being issued to him or her pursuant to
this Agreement. GMAI has given that Stockholder the opportunity to ask questions
of and receive answers from GMAI concerning GMAI and the terms and conditions
under which shares of GMAI Common Stock will be issued to him or her and to
obtain any additional information that GMAI possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of
information furnished in connection with this Agreement or in response to any
request for information. That Stockholder is satisfied with the answers and
information GMAI has provided.
2.7 Disclosure. No representation made by that Stockholder in this
Agreement is inaccurate in any material respect or omits to state a material
fact necessary to make the statements made in this Agreement, in light of the
circumstances under which they were made, not misleading.
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2.8 Pooling Matters. That Stockholder has not, at any time following August
1, 1999, and through the date of this Agreement (except as set forth on Schedule
2.8), engaged in any sale, exchange, transfer, pledge, disposition of or grant
of any option, the establishment of any "short" or put-equivalent position with
respect to or the entry into any similar transaction intended to reduce his or
its risk of ownership of or investment in, any of the following: (1) any shares
of GMAI Common Stock or any securities which may be paid as a dividend or
otherwise distributed thereon or with respect thereto or issued or delivered in
exchange or substitution therefor; or (2) any option, right or other interest
with respect to any securities referred to in clause (1) of this Section 2.8; or
(3) any shares of Spectrum Common Stock. Except as set forth in Schedule 2.8, to
that Stockholder's knowledge, it does not individually or with one or both of
the other Stockholders control or have any Contract to acquire control of any
business involving the acquisition, disposition or auctioning of coins.
2.9 Bankruptcy Proceedings. During the past five years, no petition has
been filed against the Stockholder under any Law pertaining to insolvency or
bankruptcy
ARTICLE 3
REPRESENTATIONS CONCERNING SPECTRUM
Spectrum represents to GMAI and Sub as follows:
3.1 Organization and Good Standing.
(a) Spectrum is a corporation duly organized, validly existing and in
good standing under the laws of the State of California, with all necessary
corporate power and authority to own or use its assets and conduct its business
as it is now being conducted. Spectrum is duly qualified to do business as a
foreign corporation in, and is in good standing under the laws of, each state or
other jurisdiction in which either the ownership or use of its assets or the
nature of the business conducted by it requires that it be so qualified, except
where a failure to be so qualified is not reasonably likely to have a Material
Adverse Effect on Spectrum.
(b) Spectrum has delivered to GMAI a copy of the articles of
incorporation and by-laws of Spectrum as currently in effect.
3.2 Authority.
(a) Spectrum has full power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is party and to
perform its obligations hereunder and thereunder. Execution and delivery of this
Agreement and the other Transaction Documents to which it is party and
performance by Spectrum of its obligations hereunder and thereunder have been
duly authorized by the board of directors of Spectrum and no other corporate
proceedings on the part of Spectrum are necessary with respect thereto other
than authorization by the stockholders of Spectrum.
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(b) This Agreement constitutes the valid and binding obligation of
Spectrum, enforceable in accordance with its terms, except as enforceability is
limited by (1) any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally, or (2) general principles
of equity, whether considered in a proceeding in equity or at law.
3.3 Consents. Except as set forth in Schedule 3.3, Spectrum is not required
to obtain the Consent of any Person, including the Consent of any party to any
Contract to which Spectrum is a party, in connection with execution and delivery
of this Agreement and the other Transaction Documents and performance of its
obligations hereunder and thereunder.
3.4 No Violations. Except as set forth in Schedule 3.4, Spectrum's
execution and delivery of this Agreement and the other Transaction Documents to
which it is party and performance of its obligations hereunder and thereunder do
not (a) violate any provision of the articles of incorporation or by-laws of
Spectrum as currently in effect, (b) conflict with, result in a breach of,
constitute a default under (or an event that, with notice or lapse of time or
both, would constitute a default under), accelerate the performance required by,
result in the creation of any Lien upon any of the properties or assets of
Spectrum under, or create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under, any Contract to which Spectrum
is a party or by which any properties or assets of Spectrum are bound, or (c)
violate any Law or Order to which Spectrum is subject.
3.5 Capitalization.
(a) The authorized capital stock of Spectrum consists of 10,000 shares
of Series A Common Stock and 5,000 shares of Series B Common Stock.
(b) As of the date of this Agreement, (1) there are 3,025 shares of
Spectrum Series A Common Stock issued and outstanding, (2) there are 3,236
shares of Spectrum Series B Common Stock issued and outstanding, and (3) no
shares of Spectrum Common Stock are held in the treasury of Spectrum.
(c) All of the issued and outstanding shares of Spectrum Common Stock
have been duly authorized and are validly issued, fully paid, and nonassessable,
and all shares of Spectrum Common Stock that have been reserved for issuance
will, upon issuance in compliance with the terms of the instruments pursuant to
which they are to be issued, be duly authorized, validly issued, fully paid, and
nonassessable.
(d) Each Stockholder is the registered holder of the number of shares
of Spectrum Common Stock set forth in Schedule 2.4 opposite its name. Together
those shares of Spectrum Common Stock constitute all of the issued and
outstanding shares of Spectrum Common Stock.
(e) Except as set forth in Schedule 3.5(e), there are no options,
warrants, or other Contracts to which Spectrum is a party relating to the
issuance, sale, or transfer of any equity securities or other securities of
Spectrum. To Spectrum's Knowledge, there exist no stockholder agreements, voting
trusts, proxies, or other Contracts with respect the sale, transfer,
registration or voting of shares of Spectrum Common Stock.
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3.6 Ownership Interests. Except as set forth in Schedule 3.6, Spectrum does
not own, or have any Contract to acquire, any equity securities or other direct
or indirect ownership interest in any other Person that are not reflected on the
Interim Balance Sheet. Kensington Associates, LLC has no assets or liabilities
other than those reflected on the Interim Balance Sheet. Spectrum has previously
provided GMAI with a copy of the limited liability company agreement of
Kensington Associates, LLC.
3.7 Financial Statements. Spectrum has previously delivered to GMAI (1) the
audited balance sheet of Spectrum as of December 31, 1998 (the "Balance Sheet"),
and the related audited statements of income and cash flow for Spectrum for the
year then ended, and (3) the audited balance sheet of Spectrum as of September
30, 1999 (the "Interim Balance Sheet"), and the related audited statements of
income and cash flow for Spectrum for the nine months then ended. These
financial statements have been prepared in accordance with GAAP consistently
applied with past practice (except in each case as described in the notes
thereto) and on that basis present fairly, in all material respects, the
financial position and the results of operations and cash flow of Spectrum as of
the respective dates of and for the periods referred to in these financial
statements, subject, in the case of the Interim Financial Statements, to
year-end adjustments.
3.8 Books and Records. The books of account, minute books, stock record
books, and other records of Spectrum, all of which have been made available to
GMAI, have been properly kept and contain no inaccuracies except for those
inaccuracies that are not reasonably likely to have a Material Adverse Effect on
Spectrum. At the Closing, all of Spectrum's records will be in the possession of
Spectrum.
3.9 Real Property. Spectrum does not own any real property. Schedule 3.9
contains an accurate list of all leaseholds or other interests of Spectrum in
any real property.
3.10 Title to Properties; Liens. Except as set forth on Schedule 3.10,
Spectrum has sufficient title to the properties and assets (whether real,
personal, or mixed, and whether tangible or intangible) that it owns or purports
to own, including all the properties and assets reflected in the Balance Sheet
(except for personal property disposed of in the Ordinary Course of Business
since the date of the Balance Sheet), free and clear of all Liens except
Permitted Liens. Spectrum has a valid leasehold, license or other interest in
all of the other assets, real or personal, tangible or intangible, that it uses
in the operation of its business, free and clear of all Liens except Permitted
Liens.
3.11 Condition and Sufficiency of Assets. The building, plant, structures,
and equipment of Spectrum are structurally sound, are in good operating
condition and repair, reasonable wear and tear excepted, and are adequate for
the uses to which they are being put, and, to the Spectrum's Knowledge, the
building, plant, structures, and equipment of Spectrum is not in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost.
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3.12 Customers and Suppliers.
(a) Schedule 3.12(a) contains an accurate list of the name and address
of each customer that purchased in excess of 5% of Spectrum's sales of goods or
services during the 21 months ended on the date of the Interim Balance Sheet,
and since that date none of these customers has either terminated its
relationship with or significantly reduced its purchases from Spectrum or
indicated its intention to do so for any reason.
(b) Schedule 3.12(b) contains an accurate list of the name and address
of each supplier from which Spectrum purchased in excess of 5% of Spectrum's
purchases of goods or services during the 21 months ended on the date of the
Interim Balance Sheet, and since that date none of these suppliers has
terminated its relationship with or altered in a manner detrimental to Spectrum
its accommodations, sales, or services to Spectrum or indicated its intention to
do so for any reason.
3.13 Accounts Receivable. Except as set forth on Schedule 3.13, all
accounts receivable of Spectrum (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, 98% of the Accounts Receivable are or will be as of
the Closing Date current and collectible. Subject to the foregoing, each of the
Accounts Receivable either has been or will be collected in full, without any
set-off, within 90 days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract between Spectrum and any obligor
of an Account Receivable relating to the amount or validity of those Accounts
Receivable. Schedule 3.13 contains an accurate list of all Accounts Receivable
as of the date of the Interim Balance Sheet and their aging.
3.14 Inventory. All inventory of Spectrum, whether or not reflected in the
Balance Sheet or the Interim Balance Sheet, consists of coins salable in the
Ordinary Course of Business. The gross sales price of the inventory received by
Spectrum upon sale will be no less than the aggregate cost of the inventory.
3.15 No Undisclosed Liabilities. Except as set forth on Schedule 3.15
Spectrum has no liabilities of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof, and to Spectrum's Knowledge has no
other liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise), other than any such
liabilities or obligations that would not reasonably be expected to have a
Material Adverse Effect on Spectrum.
3.16 Taxes.
(a) Spectrum is a "small business corporation" and has maintained a
valid election to be an "S" corporation under Subchapter S of the Code, and the
equivalent provisions of all applicable state income tax statutes, since
February 22, 1991. Spectrum has filed on a timely basis (including any
extensions) with the appropriate Governmental Bodies in the
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applicable jurisdictions either each Tax Return of Spectrum that is due or a
valid request for extension with respect to that Tax Return. All Tax Returns
filed by Spectrum are true, correct and complete. Spectrum has paid fully on a
timely basis all Taxes due except those Taxes that Spectrum is contesting in
good faith by appropriate proceedings or as to which Spectrum has set aside
adequate reserves determined in accordance with GAAP and stated in the Balance
Sheet or the Interim Balance Sheet.
(b) There are no material claims or assessments pending against
Spectrum for any alleged deficiency in any Tax, there are no pending or to
Spectrum's Knowledge threatened audits or investigations for or relating to any
liability in respect of any Tax, and Spectrum has not been notified in writing
of any proposed Tax claims or assessments against Spectrum (other than in each
case, claims or assessments for which Spectrum has provided adequate reserves in
the Balance Sheet or the Interim Balance Sheet or which Spectrum is contesting
in good faith or which, when taken together, have not had and are not reasonable
likely to have a Material Adverse Effect on Spectrum). There are no Liens for
material amounts of Taxes on the properties or assets of Spectrum except for
statutory Liens for current Taxes not yet due and payable. Spectrum has not
given or been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of Spectrum or for which Spectrum
may be liable. Spectrum has no liability for the Taxes of any Person other than
Spectrum. Spectrum has not made any change in accounting methods, and has not
received a ruling from or signed an agreement with any Governmental Body, that
is likely to have a Material Adverse Effect on Spectrum. Spectrum has not, with
regard to any assets or property held, acquired or to be acquired by it, filed a
consent to the application of Section 341(f) of the Code, or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a "subsection (f)
asset" (as that term is defined in Section 341(f)(4) of the Code) owned by
Spectrum.
(c) Spectrum is not a party to any agreement, arrangement or contract
providing for the allocation, indemnification or sharing of Taxes. Spectrum is
not a party to any agreement, contract or arrangement that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(d) Spectrum is not, nor has it been for the five-year period preceding
the Closing, a U.S. real property holding corporation as defined in Section
897(c)(2) of the Code.
3.17 Environmental Matters.
(a) To Spectrum's Knowledge, the operations of Spectrum are and have
always been in compliance with all applicable Environmental Laws.
(b) To Spectrum's Knowledge, neither Spectrum nor any of its operations
are subject to any Order or Contract respecting (1) Environmental Laws, (2)
Remedial Action, (3) any Environmental Claim, or (4) the Release or threatened
Release of any Hazardous Material.
(c) To Spectrum's Knowledge, none of the operations of Spectrum
involves the generation, transportation, treatment, storage or disposal of
Hazardous Material.
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3.18 Compliance With Laws; Permits.
(a) Spectrum is, and at all times since January 1, 1997, has been, in
compliance with each Law that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its properties or
assets, except for noncompliance that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect on Spectrum.
(b) Spectrum has not received, at any time since January 1, 1997, any
written notice from any Governmental Body or any other Person regarding (A) any
alleged violation of any Law, or (B) any alleged obligation on the part of
Spectrum to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature under any Law.
(c) Schedule 3.18(c) contains an accurate list of each material Permit
held by Spectrum that relates to the business of, or to any of the properties or
assets owned or used by, Spectrum. Each Permit listed in Schedule 3.18(c) is
valid and in full force and effect.
3.19 Proceedings; Orders. There are no Proceedings pending or, to
Spectrum's Knowledge, threatened in writing against Spectrum or any properties
or assets of Spectrum, and there is no Order to which Spectrum, or any of the
properties or assets of Spectrum, is subject.
3.20 Absence of Certain Changes and Events. Except as set forth on Schedule
3.20, since the date of the Interim Balance Sheet, Spectrum has conducted its
business only in the Ordinary Course of Business and there has not occurred any
of the following:
(1) any acceleration, amendment, or change in Spectrum's authorized or
issued capital stock; grant of any stock option or right to purchase
shares of capital stock of Spectrum; issuance of any security
convertible into shares of capital stock of Spectrum; grant of any
registration rights; purchase, redemption, retirement, or other
acquisition by Spectrum of any shares of capital stock of Spectrum; or
declaration or payment of any dividend or other distribution (whether
in cash, stock, or property) in respect of shares of capital stock of
Spectrum;
(2) any amendment of the articles of incorporation or by-laws of Spectrum;
(3) any increase in the salary, bonus, or other compensation payable by
Spectrum to, or any increase in benefits payable under any Spectrum
Plan to, any director, officer, employee, consultant or independent
contractor, except for increases in the Ordinary Course of Business
consistent with Spectrum's past practice, or any entry into any
employment, consulting, incentive compensation, severance, or similar
Contract with any director, officer, employee, consultant or
independent contractor that is not terminable without liability on
notice of 30 days or less;
(4) any change in the period of exercisability of options granted under any
Spectrum Plan or authorization of cash payments in exchange for options
granted under any Spectrum Plan;
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(5) any incurrence of indebtedness for borrowed money, except for
borrowings and reborrowings under Spectrum's existing credit
facilities, any assumption or guarantee of the debt of any other
Person, or any loan or advance to any Person other than in the Ordinary
Course of Business;
(6) any damage to or destruction or loss of any asset or property of
Spectrum not fully covered by insurance that is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Spectrum;
(7) any sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of, or any mortgage, pledge, or
imposition of any Lien except Permitted Liens on, any property or asset
that is material, individually or in the aggregate, to the business of
Spectrum;
(8) any cancellation or waiver of any material claims or rights without
adequate consideration or a reasonable business purpose;
(9) any merger or consolidation with, or purchase of a substantial equity
interest in or all or a substantial portion of the assets of, any
Person;
(10) any material revaluation by Spectrum of any of its assets, including
any writing-down of the value of inventory, or writing-off of notes or
accounts receivable other than in the Ordinary Course of Business
consistent with past practice;
(11) any material change in the accounting methods used by Spectrum;
(12) any change, event or other circumstance that taken individually or in
the aggregate has had or could reasonably be expected to have a
Material Adverse Effect on Spectrum, except for general changes in the
industry in which Spectrum operates or in the economy; or
(13) entry by Spectrum into any Contract to do any of the foregoing.
3.21 Contracts.
(a) Schedule 3.21 contains a list of the following Contracts to which
Spectrum is party:
(1) each Contract relating to indebtedness of Spectrum for borrowed money
(whether incurred, assumed, guaranteed or secured by any asset);
(2) each Contract relating to the lending of more than $5,000 in any one
instance or $10,000 in the aggregate by Spectrum to any Person,
including any Affiliate of Spectrum;
(3) each Contract (or group of related Contracts) for the lease of personal
property to or from any Person providing for lease payments in excess
of $5,000 in any one instance or $10,000 in the aggregate per annum;
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(4) each Contract concerning a partnership or joint venture;
(5) each Contract (other than a Contract listed elsewhere in Schedule 3.21)
requiring that Spectrum maintain confidential any given information;
(6) each Contract in which Spectrum agrees not to compete in any line of
business, in any geographic area, or with any Person;
(7) each collective bargaining agreement or other Contract with a labor
union or other representative of a group of employees;
(8) each Contract for the employment by Spectrum of any individual on a
full-time, part-time, consulting, independent contracting, leased
employee or other basis;
(9) each Contract providing for indemnification of or by Spectrum (other
than a Contract listed elsewhere in Schedule 3.21);
(10) each Contract in which Spectrum agrees to provide products or services
to any Person, or receive products or services from any Person, for
consideration other than cash;
(11) each other Contract with a Spectrum customer;
(12) each Contract granting Spectrum the right to use any Intellectual
Property Assets of another Person (excluding Contracts granting
Spectrum rights to off-the-shelf commercial software), or granting
another Person the right to use, or restricting Spectrum's right to
use, Spectrum Intellectual Property Assets of Spectrum; and
(13) any other Contract (or group of related Contracts) that involve
consideration in excess of $20,000.
(b) Except as noted in Schedule 3.21, Spectrum has provided to GMAI a
copy of each Contract listed in Schedule 3.21.
(c) Each Contract to which Spectrum is a party identified or required
to be identified in Schedule 3.21 is in full force and effect and is valid and
enforceable in accordance with its terms, except as enforceability is limited by
(1) any applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally, or (2) general principles of equity,
whether considered in a proceeding in equity or at law.
(d) Spectrum is not in default under any Contract to which it is party,
and to Spectrum's Knowledge no event or circumstance has occurred that would,
with notice or lapse of time or both, constitute an event of default under any
material Contract to which Spectrum is a party.
(e) Except as set forth in Schedule 3.21(e), to Spectrum's Knowledge,
Spectrum is not party to any unwritten contract.
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3.22 ERISA and Employee Benefit Matters.
(a) Schedule 3.22(a) lists all material (1) "employee benefit plans,"
within the meaning of Section 3(3) of ERISA, of Spectrum, (2) bonus, stock
option, stock purchase, stock appreciation right, incentive, deferred
compensation, supplemental retirement, severance, and fringe benefit plans,
programs, policies or arrangements, and (3) employment or consulting agreements,
for the benefit of, or relating to, any current or former employee (or any
beneficiary thereof) of Spectrum, in the case of a plan described in (1) or (2)
above, that is currently maintained by Spectrum or with respect to which
Spectrum has an obligation to contribute, and in the case of an agreement
described in (3) above, that is currently in effect (the "Spectrum Plans").
Spectrum has heretofore made available to GMAI true and complete copies of the
Spectrum Plans and any amendments thereto, any related trust, insurance
contract, summary plan description, and, to the extent required under ERISA or
the Code, the most recent annual report on Form 5500 and summaries of material
modifications.
(b) No Spectrum Plan is (1) a "multiemployer plan" within the meaning
of Sections 3(37) or 4001(a)(3) of ERISA, (2) a "multiple employer plan" within
the meaning of Section 3(40) of ERISA or Section 413(c) of the Code, or (3) is
subject to Title IV of ERISA or Section 412 of the Code.
(c) There is no Proceeding pending or, to Spectrum's Knowledge,
threatened against the assets of any Spectrum Plan or, with respect to any
Spectrum Plan, against Spectrum other than Proceedings that would not reasonably
be expected to result in a material liability, and to Spectrum's Knowledge there
is no Proceeding pending or threatened in writing against any fiduciary of any
Spectrum Plan other than Proceedings that would not reasonably be expected to
result in a material liability.
(d) Each of the Spectrum Plans has been operated and administered in
all material respects in accordance with its terms and applicable law,
including, but not limited to, ERISA and the Code.
(e) Each of the Spectrum Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination, notification, or opinion letter from the IRS.
(f) No director, officer, or employee of Spectrum will become entitled
to retirement, severance or similar benefits or to enhanced or accelerated
benefits (including any acceleration of vesting or lapsing of restrictions with
respect to equity-based awards) under any Spectrum Plan solely as a result of
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents.
(g) No Spectrum Plan provides benefits or payments contingent upon,
triggered by, or increased as a result of a change in the ownership or effective
control of Spectrum.
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3.23 Employees.
(a) Schedule 3.23 lists the following information for each employee of
Spectrum as of the date of this Agreement, including each employee on leave of
absence or layoff status: (1) name; (2) job title; (3) current annual base
salary or annualized wages; (4) bonus compensation earned during 1998 and 1999
(projected); (5) vacation accrued and unused; and (6) service credited for
purposes of vesting and eligibility to participate under Spectrum Plans.
Spectrum pays no compensation to the members of its board of directors for
acting as such.
(b) To Spectrum's Knowledge, there exists no condition or state of
facts or circumstances relating to consummation of the transactions contemplated
by this Agreement or the other Transaction Documents that could have a material
adverse effect on Spectrum's relations with its employees.
(c) Spectrum does not have any obligation to reinstate any former
officer or employee of Spectrum. Spectrum is not required to make payments of
any kind (including severance payments) to any former director, officer,
employee, agent or independent contractor of Spectrum. No officer or employee of
Spectrum has indicated his or her intention to resign.
(d) No current or former officer or employee of Spectrum is currently
receiving any benefits from Spectrum because he or she is disabled.
(e) All of the officers and employees of Spectrum are in good standing
under the terms and conditions of their employment, and to Spectrum's Knowledge
there exists no problem or difficulty with the employment of such officer or
employee.
(f) Except as set forth in Schedule 3.23, Spectrum has paid all wages,
bonuses, commissions or other compensation due and payable to each of its
employees in accordance with its customary practice.
(g) Spectrum is not and has not been a party to any collective
bargaining agreement. Since January 1, 1997, there has not been, and to
Spectrum's Knowledge there is not threatened, any application for certification
of a collective bargaining agent.
3.24 Deposit Accounts. Schedule 3.24 lists (1) the name of each financial
institution in which Spectrum has an account or safe deposit box, (2) the name
or names in which each account or box is held, (3) the type of account, and (4)
the name of each Person authorized to draw on or have access to each account or
box.
3.25 Intellectual Property Assets. Schedule 3.25 contains an accurate list
of all Intellectual Property Assets used by Spectrum in the operation of its
business as it is currently conducted (the "Applicable Intellectual Property
Assets"). Spectrum owns or has the right to use all the Applicable Intellectual
Property Assets, free and clear of all Liens other than Permitted Liens. As of
the date of this Agreement, no Person has alleged in a written notice to
Spectrum that any activity in which Spectrum is engaged infringes upon or
misappropriates any Intellectual Property Assets of any other Person.
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3.26 Conduct of Business; Use of Name. The business carried on by Spectrum
has been conducted directly by Spectrum, and not through any Affiliate or
through any other Person. Spectrum owns and has the exclusive right, title and
interest in and to the name "Spectrum Numismatics International, Inc." for
corporate law purposes in the State of California, and except as set forth in
Schedule 3.26 to Spectrum's Knowledge no other Person has the right to use that
name or any confusing variation on that name in the U.S. in connection with the
operation of any business similar or related to the business conducted by
Spectrum.
3.27 Insurance. Schedule 3.27 lists all insurance policies held by or on
behalf of Spectrum, and the premiums under and expiration dates of those
policies. Each of those policies is in full force and effect and, to Spectrum's
Knowledge, is valid and enforceable in accordance with its terms. Spectrum is
not in default under any such policy nor has Spectrum failed to give any notice
or present any claim under any such policy in due and timely fashion, and to
Spectrum's Knowledge there exist no grounds for the insurer's canceling or
avoiding any of those policies or increasing the premiums of those policies, or
for reducing the coverage provided by those policies. Spectrum has previously
provided GMAI with a copy of each of those policies.
3.28 Brokers Or Finders. The Stockholders and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.29 Year 2000 Compliance.
(a) To Spectrum's knowledge, all computer hardware and software systems
used by Spectrum, whether owned or licensed by Spectrum or a contractor and
whether operated by Spectrum or a contractor (those systems, the "Systems"), are
Year 2000 Compliant.
(b) For purposes of this Section 3.29, "Year 2000 Compliant" means,
with respect to any system, that prior to, during, and after January 1, 2000,
that system will operate in all material respects during each such time periods
without material error relating to date data, as more specifically set forth
below:
(1) the system will not provide invalid or incorrect results as a result of
date data, including date data that represent or reference different
centuries or more than one century;
(2) date rollovers will not cause erroneous processing;
(3) calculating using date data will be free of material errors over the
range of dates that the system is expected to handle;
(4) explicit century values will be correctly stored and passed across all
applicable interfaces (including user interfaces);
(5) all leap year values will be correctly calculated and processed across
all applicable interfaces (including user interfaces);
(6) two-digit century designations are assigned an appropriate century; and
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(7) the systems has handled the date September 9, 1999, and stores and
passes that date across all interfaces (including user interfaces).
3.30 Affiliated Transactions. Schedule 3.30 lists any Contract between
Spectrum and any of the Stockholders or any director, officer, employee or any
other Affiliate of Spectrum or any of the Stockholders.
3.31 Disclosure. No representation made by Spectrum in this Agreement is
inaccurate in any material respect or omits to state a material fact necessary
to make the statements made in this Agreement, in light of the circumstances
under which they were made, not misleading.
3.32 Pooling Matters. Spectrum has not been a subsidiary or division of
another corporation at any time within two years prior to the date of this
Agreement. Spectrum has no interest and has never had any interest, direct or
indirect, as a shareholder or otherwise, in GMAI. Spectrum has not at any time
within two years prior to the date of this Agreement (1) except for stock
options exercised by Gregory N. Roberts, made any change in the equity interests
in its voting common stock, including distributions to stockholders (other than
normal dividend distributions, as determined by prior years' dividend
practices), additional issuances, exchanges or retirements of securities, or (2)
reacquired any shares of its voting common stock.
ARTICLE 4
REPRESENTATIONS OF GMAI
GMAI and Sub represent to Spectrum as follows:
4.1 Organization and Good Standing. Each of GMAI and Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of its incorporation, with all necessary corporate power and authority to
own or use its properties and assets and conduct its business as it is now being
conducted. Each of GMAI and Sub is duly qualified to do business as a foreign
corporation in, and is in good standing under the laws of, each state or other
jurisdiction in which either the ownership or use of its properties and assets
or the nature of the business conducted by it requires that it be so qualified,
except where the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect on GMAI.
4.2 Authority.
(a) GMAI and Sub have all requisite corporate power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is party and to perform its obligations hereunder and thereunder. Execution
and delivery of this Agreement and the other Transaction Documents to which it
is party and performance by each of GMAI and Sub of its obligations hereunder
and thereunder have been duly authorized, with respect to GMAI, by the board of
directors of GMAI and, with respect to Sub, by the Board of Directors of Sub and
by GMAI in its capacity as sole stockholder of Sub, and no other corporate
proceedings on the part of GMAI and Sub are necessary with respect thereto other
than, with respect to GMAI, approval by a the stockholders of GMAI.
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(b) This Agreement constitutes the valid and binding obligation of each
of GMAI and Sub, enforceable in accordance with its terms, except as
enforceability is limited by (1) any applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, or similar law affecting
creditors' rights generally, or (2) general principles of equity, whether
considered in a proceeding in equity or at law.
4.3 Consents. Neither GMAI nor Sub is required to obtain the Consent of any
Person, including the Consent of any party to any Contract to which GMAI or Sub
is a party, in connection with execution and delivery of this Agreement and
performance of its obligations under this Agreement.
4.4 No Violations. Execution and delivery by each of GMAI and Sub of this
Agreement and the other Transaction Documents to which it is party and
performance of its obligations hereunder and thereunder do not (1) violate any
provision of its articles of incorporation or by-laws as currently in effect,
(2) conflict with, result in a breach of, constitute a default under (or an
event that, with notice or lapse of time or both, would constitute a default
under), accelerate the performance required by, result in the creation of any
Lien upon any of its properties or assets under, or create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice under,
any Contract to which it is a party or by which any of its properties or assets
are bound, or (3) violate any Law or Order currently in effect to which it is
subject.
4.5 Capitalization.
(a) The authorized capital stock of GMAI consists of 20,000,000 shares
of GMAI Common Stock and 10,000,000 shares of preferred stock, par value $0.01
per share ("GMAI Preferred Stock").
(b) As of December 7, 1999, (1) there were approximately 6,872,745
shares of GMAI Common Stock issued and outstanding, (2) there were no shares of
GMAI Preferred Stock issued and outstanding, (3) no shares of GMAI Common Stock
were held in the treasury of GMAI, and (4) there were 37,500 shares of GMAI
Common Stock reserved for issuance under the GMAI 1993 Stock Option Plan, as
amended, and under the GMAI 1997 Stock Incentive Plan.
(c) All of the issued and outstanding shares of GMAI Common Stock have
been duly authorized and are validly issued, fully paid, and nonassessable, and
all shares of GMAI Common Stock that have been reserved for issuance will, upon
issuance in compliance with the terms of the instruments pursuant to which they
are to be issued, be duly authorized, validly issued, fully paid, and
nonassessable.
(d) When issued in accordance with the terms of this Agreement, the
shares of GMAI Common Stock to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid, and non-assessable.
(e) Except as set forth in GMAI's 1999 Proxy Statement filed with the
SEC, there are no options, warrants, or other Contracts to which GMAI is a party
relating to the issuance, sale, or transfer of any equity securities or other
securities of GMAI.
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(f) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $0.01 per share. All of the issued and outstanding
shares of common stock of Sub have been duly authorized and are validly issued,
fully paid, and nonassessable, and are owned by GMAI.
4.6 Filings With the SEC.
(a) Since January 1, 1997, GMAI has filed with the SEC all reports,
proxy statements, forms, and other documents that has been required by law to
file with the SEC (those documents, the "GMAI SEC Documents"). As of the date
they were each filed, giving effect to any amendments, (1) the GMAI SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, in effect on the date of
filing and (2) the GMAI SEC Documents do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) Each of the GMAI financial statements (including the related notes)
included in the GMAI SEC Documents have been prepared in accordance with GAAP
consistently applied with past practice and on that basis present fairly, in all
material respects, the financial position and the results of operations, changes
in stockholders' equity, and cash flows of GMAI as of the respective dates of
and for the periods referred to in these financial statements.
4.7 Proceedings. There are no Proceedings pending or, to GMAI's Knowledge,
threatened in writing against GMAI that question the validity of this Agreement
or any of the other Transaction Documents or any action taken or to be taken in
connection with the transactions contemplated by this Agreement or any of the
other Transaction Documents.
4.8 No Material Adverse Effect. Since January 1, 1999, there has been no
event, circumstance or occurrence that, taken individually or in the aggregate,
has had, or could reasonably be expected to have, a Material Adverse Effect on
GMAI, except for general changes in the industry in which GMAI operates or in
the economy.
4.9 Brokers or Finders. GMAI and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4.10 Pooling Matters. To GMAI's knowledge and based upon consultation with
its independent accounts, GMAI has provided to Spectrum and its independent
accountants all information concerning actions taken or agreed to be taken by
GMAI or any of its affiliates on or before the date of this Agreement, that, if
taken, might reasonably be expected to affect adversely the ability of GMAI to
account for the business combination to be effected by the Merger as a pooling
of interests, and GMAI has no knowledge, after inquiry of its independent
accountants, that such business combination cannot be accounted for in that
manner. For purposes of this Section 4.10, references to "knowledge" mean to the
actual knowledge of the Chief Executive Officer and Chief Financial Officer of
GMAI.
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ARTICLE 5
CERTAIN OBLIGATIONS OF GMAI
5.1 Board Representation. From the Effective Time, GMAI shall use its best
efforts to have two nominees of the Stockholders reasonably acceptable to GMAI
appointed to the board of directors of GMAI, either by appointing those nominees
to any vacancies on the board of directors then existing or occurring
thereafter, or by including those nominees in the slate of candidates proposed
by the board of directors of GMAI at the next meeting after the Effective Time
at which directors of GMAI are elected. Until such time as the Stockholders own
fewer than 800,000 shares of GMAI Common Stock (as adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend, reorganization,
recapitalization, split up, combination or exchange of shares), the Stockholders
will be entitled to nominate two members of the board of directors of GMAI.
5.2 Certain Records. GMAI shall permit Spectrum stockholders to retain (1)
all records and correspondence of Spectrum relating to any proposed sale,
merger, or similar transaction involving Spectrum, including any bids received
from potential acquirors and analyses relating to GMAI, and (2) copies of tax
returns, reports or forms filed on behalf of Spectrum and any information
reasonably related thereto.
5.3 Stockholders' Meeting; Materials to Stockholders.
(a) GMAI shall, in accordance with Section 602 of the NYBCL and GMAI's
articles of incorporation and by-laws, hold a special meeting of the
Stockholders (the "Special Meeting") as promptly as practicable after the date
hereof for the purpose of considering and taking action upon this Agreement and
the Merger, but in any event no later than February 19, 2000.
(b) GMAI shall (1) as promptly as practicable following the date of
this Agreement prepare and mail to its stockholders a proxy statement containing
information required to be disclosed to its stockholders in connection with the
vote of its stockholders to approve this Agreement and the Merger (that proxy
statement, together with any amendments or supplements, in each case in the form
mailed to GMAI's stockholders, the "Proxy Statement"), and shall include in the
Proxy Statement the recommendation of the board of directors of GMAI that the
stockholders vote in favor of approval of the Merger and approval and adoption
of this Agreement (which recommendation may not be withdrawn, amended or
modified), and (2) otherwise comply in all material respects with all legal
requirements applicable to the Special Meeting.
5.4 Registration Exemption. GMAI shall within 20 days following the date of
this Agreement prepare and file with the California Department of Corporations
an application for a permit pursuant to section 25142 of the California
Corporate Securities Law of 1968 (the "Permit Application") for purposes of
qualifying the Merger Consideration for exemption from registration pursuant to
Section 3(a)(10) of the Securities Act.
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5.5 Interim Earnings Announcement. GMAI shall within 30 days following the
initial 30-day period after the Effective Time file a Form 8-K or a press
release of the combined financial statements of GMAI and Spectrum for that
30-day period satisfying the pooling requirements for combined financial
statements.
5.6 Tax Distribution. GMAI shall cause Spectrum to distribute pro rata to
the Stockholders an amount of money equal to the Tax liability of the
Stockholders attributable to their ownership interest in Spectrum arising out of
Spectrum's operations from January 1, 2000 through the Effective Time, as
reasonably determined by Spectrum's accountants. GMAI shall cause Spectrum to
distribute that amount no later than 75 days after the close of that taxable
period.
5.7 Indebtedness. GMAI shall prior to or at the Closing cause to be removed
all guarantees provided by Warren Trepp in connection with the credit facilities
provided to Spectrum by Bank of America or shall cause to be made available to
Spectrum one or more alternative credit facilities for purposes of paying off
the balance of the Bank of America facility, and shall cause to be repaid all
amounts owed by Spectrum to Friendly Capital Partners, L.P., the Fremont Trust
dated May 16, 1994, and the Weled Family Trust dated February 10, 1994.
ARTICLE 6
CERTAIN OBLIGATIONS OF THE STOCKHOLDERS
6.1 No Encumbrances on Shares. Except pursuant to the terms of this
Agreement, no Stockholder may, without the prior written consent of GMAI,
directly or indirectly sell, assign, transfer, encumber or otherwise dispose of,
or enter into any Contract with respect to the direct or indirect sale,
assignment, transfer, encumbrance or other disposition of, any shares of
Spectrum Common Stock prior to the earlier of the Closing or termination of this
Agreement in accordance with its terms. No Stockholder may seek or solicit any
such acquisition or sale, assignment, transfer, encumbrance or other disposition
or any such Contract and shall notify GMAI promptly, and provide all details
requested by GMAI, he or she is approached or solicited, directly or indirectly,
by any Person with respect to any of the foregoing.
6.2 Employment Agreements. At the Closing, subject to satisfaction or
waiver of all conditions to the obligation of Spectrum to consummate the Merger,
Mr. Roberts and Ms. Dinges shall each execute and deliver an employment
agreement substantially in the form of Exhibit B-1 and Exhibit B-2,
respectively.
6.3 Noncompetition Agreements. At the Closing, subject to satisfaction or
waiver of all conditions to the obligation of Spectrum to consummate the Merger,
Warren Trepp, Gregory N. Roberts and Elaine Dinges shall each execute and
deliver a noncompetition agreement with Spectrum providing that for a term of
five years from the Closing Date, and in as broad a geographic territory as
counsel for Mr. Trepp, Mr. Roberts and Ms. Dinges and counsel for GMAI determine
in good faith would be reasonably likely to be enforced under California law, it
may not participate in a business that competes with Spectrum, with
determination of the nature of any business that competes with Spectrum to be
construed as broadly as counsel for
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Mr. Trepp, Mr. Roberts and Ms. Dinges and counsel for GMAI determine in good
faith would be reasonably likely to be enforced under California law.
6.4 Agreement Regarding Sale of Shares. At the Closing, subject to
satisfaction or waiver of all conditions to the obligation of Spectrum to
consummate the Merger, the Stockholders shall execute and deliver the Agreement
Regarding Sale of Shares substantially in the form of Exhibit C.
ARTICLE 7
CERTAIN OBLIGATIONS OF SPECTRUM
7.1 Operation of the Business of Spectrum. Between the date of this
Agreement and the earlier of the Closing Date and termination of this Agreement
in accordance with its terms, Spectrum shall:
(1) except as otherwise contemplated by this Agreement, conduct the
business of Spectrum only in the Ordinary Course of Business;
(2) use commercially reasonable efforts to preserve intact the current
business organization of Spectrum, keep available the services of the
current officers, employees, and agents of Spectrum, and maintain the
relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships
with Spectrum;
(3) confer with GMAI concerning operational matters of a material nature;
and
(4) otherwise report periodically to GMAI concerning the status of the
business, operations, and finances of Spectrum.
7.2 Negative Covenant. Except as otherwise contemplated by this Agreement
or set forth on Schedule 7.2, between the date of this Agreement and the Closing
Date Spectrum shall not without the prior consent of GMAI take any action that
is reasonably likely to cause, or fail to take any action, which failure is
reasonably likely to cause, the occurrence of any of the changes or events
specified in Section 3.20.
7.3 No Solicitation. Spectrum shall immediately cease any existing
discussions or negotiations with any Persons conducted prior to the date hereof
with respect to any merger, business combination, sale of assets (other than
sales permitted by this Agreement), sale of shares of capital stock or other
securities or similar transaction with respect to Spectrum involving any third
party and any of the Stockholders or Spectrum (an "Acquisition Transaction").
Spectrum, its directors, officers, employees or other Affiliates will not,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than GMAI or
its directors, officers, employees or other Affiliates or Representatives)
concerning any Acquisition Transaction. Spectrum will promptly communicate to
GMAI any such inquiries or proposals regarding an Acquisition Transaction and
the terms thereof. Spectrum shall use its reasonable best efforts to enforce the
applicable provisions of confidentiality agreements executed prior to the date
hereof with other potential purchasers of Spectrum regarding the
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destruction or return of non-public, confidential or proprietary information
concerning Spectrum provided to such parties pursuant to such confidentiality
agreements.
7.4 Registration Exemption. Spectrum shall cooperate with GMAI in the
preparation and filing with the Permit Application for purposes of qualifying
the Merger Consideration for exemption from registration pursuant to Section
3(a)(10) of the Securities Act.
7.5 Certain Employment Agreement. Spectrum shall use its best efforts to
encourage Andrew Glassman and Thad Olson to enter into employment agreements
with Spectrum after the Effective Time.
7.6 Access and Information. Between the date of this Agreement and the
earlier of termination of this Agreement or the Effective Time, and without
intending by this Section 7.6 to limit any of the other obligations of the
parties under this Agreement, Spectrum shall give, and shall direct its
accountants and legal counsel to give, GMAI and its Representatives, at
reasonable times and without undue disruption to or interference with the normal
conduct of the business and affairs of Spectrum, access as reasonably required
in connection with the transactions provided for in this Agreement to all
offices and other facilities and to all files, books and records of or
pertaining to the business and properties of Spectrum , and shall furnish GMAI
with such financial and operating data and other information with respect to the
business and properties of Spectrum as GMAI may from time to time reasonably
request. Spectrum shall cause its accountants to cooperate with GMAI and its
Representatives in making available to GMAI all financial information GMAI
reasonably requests, including, without limitation, the right to examine all
working papers pertaining to all Tax Returns and financial statements prepared
or audited by those accountants.
7.7 Adjustments to Financial Statements. Spectrum shall prior to the
Effective Time at the direction of GMAI make such adjustments to the Interim
Balance Sheet as are necessary to make the Interim Balance Sheet comply with
requirements for financial statements filed with the Securities and Exchange
Commission pursuant to the rules and regulations promulgated under the Exchange
Act.
7.8 Updated Schedules.
(a) Spectrum is as of the date of this Agreement providing GMAI with a
preliminary set of schedules relating to representations made by the
Stockholders and Spectrum in this Agreement, and Spectrum shall within the 10
business days following the date of this Agreement provide GMAI with an updated
set of those schedules, which, subject to Section 7.8(b) will serve as the
schedules of reference for purposes of determining the accuracy of the
representations made by the Stockholders and Spectrum in this Agreement.
(b) In the event that any updated schedule discloses facts or
circumstances not disclosed in that schedule as provided to GMAI as of the date
of this Agreement, and those facts or circumstances have had or would reasonably
be expected to have a Material Adverse Effect on Spectrum, the original schedule
will be the schedule of reference for purposes of determining the accuracy of
that representation.
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ARTICLE 8
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Obligations of GMAI and Sub. The obligation of GMAI and
Sub to consummate the Merger is subject to the satisfaction, or waiver by GMAI,
of the following conditions at or prior to the Closing:
(1) that there are no Proceedings pending or, to GMAI's Knowledge,
threatened in writing against GMAI that challenge, or may have the
effect of preventing, delaying or making illegal, or otherwise
interfering with, any of the transactions contemplated by this
Agreement or any of the other Transaction Documents;
(2) that no Order of any Governmental Body preventing consummation of the
Merger is in effect;
(3) that the representations of Spectrum contained in this Agreement were
accurate as of the date of this Agreement and are accurate as of the
Closing Date, in all respects (in the case of any representation
containing any materiality qualification) or in all material respects
(in the case of any representation without any materiality
qualification);
(4) that Spectrum has performed in all material respects those obligations
contained in ARTICLE 7 that it is required to perform prior to the
Effective Time;
(5) that GMAI has received a certificate signed by the chief executive
officer of Spectrum, dated the Closing Date, to the effect that, to
that officer's knowledge, the conditions set forth in clauses (3) and
(7) of this Section 8.1 have been satisfied or waived;
(6) that the representations of the Stockholders contained in this
Agreement were accurate as of the date of this Agreement and are
accurate as of the Closing Date, in all respects (in the case of any
representation containing any materiality qualification) or in all
material respects (in the case of any representation without any
materiality qualification);
(7) that the Stockholders have performed in all material respects those
obligations contained in ARTICLE 7 that they are required to perform
prior to the Effective Time;
(8) that GMAI has received a certificate signed by the Stockholders dated
the Closing Date, to the effect that, to their knowledge, the
conditions set forth in clauses (6) and (7) of this Section 8.1 have
been satisfied or waived;
(9) that Spectrum has executed the Merger Certificates;
(10) that GMAI has received from Spectrum a letter identifying all Persons
who are or who may be deemed, immediately prior to the Effective Time,
"Affiliates" of Spectrum for purposes of the rules and regulations of
the SEC relating to pooling-of-interests accounting treatment for
merger transactions (that letter, the "Affiliate Letter");
(11) that GMAI has received a written agreement substantially in the form of
Exhibit D from each Person identified in the Affiliate Letter;
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(12) that GMAI has received a copy of the articles of incorporation of
Spectrum, certified by the Secretary of State of California, and a
certificate of good standing for Spectrum from the Secretary of its
State of California;
(13) that GMAI has received evidence reasonably satisfactory to it that the
stockholders of each of GMAI and Spectrum have authorized each of GMAI
and Spectrum, respectively, to execute and deliver this Agreement and
the other Transaction Documents to which it is party and to perform its
obligations hereunder and thereunder;
(14) that GMAI has received all certificates representing issued and
outstanding shares of Spectrum Common Stock;
(15) that the Permit Application has been approved by the California
Department of Corporations;
(16) that GMAI has received a written opinion of an investment bank or
valuation company that the consideration GMAI is to receive in
connection with the Merger is fair to GMAI from a financial point of
view;
(17) that GMAI has received an opinion dated the Closing Date from Frye &
Hsieh, LLP regarding the subject matters addressed in Section 2.4 and
3.5 of this Agreement in form reasonably satisfactory to GMAI;
(18) that GMAI has received an opinion dated the Closing Date from Kramer
Levin Naftalis & Frankel LLP, in form reasonably satisfactory to GMAI
to the effect that, on the basis of the facts and representations set
forth in that opinion, or set forth in writing elsewhere and referred
to therein, for federal income tax purposes the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code and
that no gain or loss will be recognized by, and there will be no
corporate income tax liability to, GMAI or Spectrum by reason of the
Merger;
(19) that GMAI has been provided with documentation satisfactory to it in
its sole discretion evidencing that any employment agreements to which
Spectrum is party have been terminated;
(20) that GMAI has been provided with documentation satisfactory to it in
its sole discretion evidencing that that Shareholders Agreement dated
as of February 22, 1991, between certain stockholders of Spectrum has
been terminated; and
(21) that the Stockholders have executed the Escrow Agreement.
8.2 Conditions to Obligations of Spectrum. The obligation of Spectrum to
consummate the Merger is subject to the satisfaction, or waiver by Spectrum, of
the following conditions at or prior to the Effective Time:
(1) that here are no Proceedings pending or, to Spectrum's Knowledge,
threatened in writing against Spectrum or any Stockholder that
challenge, or may have the effect of preventing,
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delaying or making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement or the Transaction
Documents;
(2) that no Order of any Governmental Body preventing consummation of the
Merger is in effect;
(3) that Spectrum has obtained any Consent required by it in connection
with its execution and delivery of this Agreement and its performance
of its obligations under this Agreement;
(4) that each of the Stockholders has obtained any Consent required by him
or her in connection with his or her execution and delivery of this
Agreement and his or her performance of his or her obligations under
this Agreement;
(5) that the representations of GMAI contained in this Agreement were
accurate as of the date of this Agreement and are accurate as of the
Closing Date, in all respects (in the case of any representation
containing any materiality qualification) or in all material respects
(in the case of any representation without any materiality
qualification);
(6) that GMAI has performed in all material respects those obligations
contained in ARTICLE 5 that it is required to perform prior to the
Effective Time;
(7) that Spectrum has received a certificate signed by the chief executive
officer of GMAI, dated the Closing Date, to the effect that, to such
officer's knowledge, the conditions set forth in clauses (5) and (6) of
this Section 8.2 have been satisfied or waived;
(8) that Sub has executed the Merger Certificates;
(9) that GMAI has executed and delivered Employment Agreements;
(10) that Spectrum has received a copy of the articles of incorporation of
GMAI, certified by the Secretary of State of New York, a certificate of
good standing for GMAI from the Secretary of its State of New York, a
copy of the certificate of incorporation of Sub, certified by the
Secretary of State of Delaware, and a certificate of good standing for
GMAI from the Secretary of its State of Delaware;
(11) that Spectrum has received evidence reasonably satisfactory to it that
the stockholders of GMAI have authorized GMAI to execute and deliver
this Agreement and the other Transaction Documents to which it is party
and to perform its obligations hereunder and thereunder;
(12) that the Permit Application has been approved by the California
Department of Corporations; and
(13) that Spectrum has received an opinion of Frye & Hsieh, LLP dated the
Closing Date substantially to the effect that, on the basis of facts
and representations set forth in that opinion, or set forth in writing
elsewhere and referred to therein, for federal income tax purposes the
Merger will constitute a reorganization within the meaning of
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Section 368(a) of the Code and no gain or loss will be recognized by
Spectrum or its stockholders by reason of the receipt of the shares of
GMAI Common Stock in the Merger (it being understood that that opinion
will not extend to cash payments in lieu of fractional share
interests).
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated as follows, at any time
prior to the Effective Time:
(1) by written agreement of the parties;
(2) by either GMAI or Spectrum if the Closing has not occurred by March 1,
2000, except that the right to terminate this Agreement pursuant to
this clause (2) will not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger to be consummated on or prior to
that date;
(3) by either GMAI or Spectrum if a Governmental Body issues a
nonappealable final Order having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, except that the right to
terminate this Agreement pursuant to this clause (3) will not be
available to any party whose failure to comply with Section 12.13 has
contributed materially to the issuance of that Order;
(4) by either GMAI or Spectrum, if the requisite vote of stockholders of
GMAI is not obtained by March 1, 2000, or if the stockholders of GMAI
fail to approve the Merger and this Agreement at the Special Meeting;
(5) by GMAI, if any representation of Spectrum set forth in this Agreement
was inaccurate when made or becomes inaccurate such that the condition
set forth in Section 8.1(3) would not be satisfied (a "Spectrum
Terminating Change"), or by Spectrum, if any representation of GMAI and
Sub set forth in this Agreement was inaccurate when made or becomes
inaccurate such that the condition set forth in Section 8.2(5) would
not be satisfied (a "GMAI Terminating Change" and together with a
Spectrum Terminating Change, a "Terminating Change"), in either case
other than by reason of a Terminating Breach, except that if any such
Terminating Change is curable prior to March 1, 2000, by Spectrum or
GMAI, as the case may be, for so long as Spectrum or GMAI, as the case
may be, continues to exercise its reasonable best efforts to effect
such cure, GMAI or Spectrum, as the case may be, may not terminate this
Agreement under this clause (5), but may to the extent authorized
thereby terminate pursuant to any other provision of this Section 9.1;
(6) by GMAI or Spectrum, upon a breach of any obligation on the part of
Spectrum or GMAI, respectively, set forth in this Agreement such that
the conditions set forth in Sections 8.1(7) or 8.2(6), as the case may
be, would not be satisfied (a "Terminating Breach"), provided that with
the exception of any breach of Spectrum's obligations under
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Section 7.3, if any Terminating Breach is curable prior to March 1,
2000, by Spectrum or GMAI, as the case may be, for so long as Spectrum
or GMAI, as the case may be, continues to exercise its reasonable best
efforts to effect such cure, GMAI or Spectrum, as the case may be, may
not terminate this Agreement under this clause (6), but may to the
extent authorized thereby terminate pursuant to any other provision of
this Section 9.1; or
(7) by Spectrum, if any time the Market Value of GMAI Common Stock falls
below $8.00.
9.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 9.1, this Agreement will cease to have any effect, and all obligations
of the parties under this Agreement, other than those set forth in ARTICLE 10
and Sections 12.1, 12.2, 12.6 and 12.8, will terminate, except that if this
Agreement is terminated by a party because of breach of this Agreement by
another party or because one or more of the conditions to the terminating
party's obligations under this Agreement are not satisfied as a result of
another party's failure to comply with its obligations under this Agreement or
the inaccuracy of any representation made in this Agreement by another party,
the terminating party's right to pursue all legal remedies will survive that
termination unimpaired. If GMAI or Spectrum terminates this Agreement due to
failure of stockholders of GMAI to authorize, by March 1, 2000, GMAI to execute
and deliver this Agreement and the other Transaction Documents to which it is
party and to perform its obligations hereunder and thereunder, GMAI shall
reimburse Spectrum for all reasonable Offset Expenses. For purposes of this
Section 9.2, the definition of Offset Expenses does not include the words "in
excess of $200,000."
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification by Spectrum and the Stockholders. Spectrum (prior to
the Effective Time) and the Stockholders (following the Effective Time) shall
indemnify the GMAI Indemnitees, without duplication, against the following
Indemnifiable Losses:
(1) Indemnifiable Losses arising out of breach by Spectrum or any of the
Stockholders of any of their obligations under this Agreement;
(2) Indemnifiable Losses arising out of any inaccuracy in any
representation by Spectrum in this Agreement;
(3) Indemnifiable Losses arising out of any inaccuracy in any
representation by the Stockholders in this Article 2 (except for
Sections 2.8 and 2.9); and
(4) Indemnifiable Losses arising out of the failure of the Stockholders to
pay any and all Offset Expenses incurred by Spectrum in excess of the
Offset Expenses set forth in the certificate provided pursuant to
Section 12.8.
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10.2 Indemnification by GMAI. GMAI shall indemnify the Spectrum Indemnitees
(prior to the Effective Time) and the Stockholders (after the Effective Time),
without duplication, against the following Indemnifiable Losses:
(1) Indemnifiable Losses arising out of breach by GMAI of any of its
obligations under this Agreement; and
(2) Indemnifiable Losses arising out of from any inaccuracy in any
representation by GMAI in this Agreement.
10.3 Procedures Relating to Indemnification. (a) In order to be entitled to
indemnification under this ARTICLE 10 in connection with a claim made by any
Person against any Person entitled to indemnification pursuant to this ARTICLE
10 (an "Indemnified Party"; any such claim, a "Third Party Claim"), that
Indemnified Party must do the following:
(1) notify the Person or Persons obligated to indemnify it (the
"Indemnifying Party") in writing, and in reasonable detail, of that
Third Party Claim promptly but in any event within 10 business days
after receipt of notice of that Third Party Claim, except that any
failure to give any such notification will only affect the Indemnifying
Party's obligation to indemnify the Indemnified Party if the
Indemnifying Party has been prejudiced as a result of that failure; and
(2) deliver to the Indemnifying Party promptly but in any event within 10
business days after the GMAI Indemnitee receives them a copy of all
notices and documents (including court papers) delivered to that GMAI
Indemnitee relating to that Third Party Claim.
(b) In the event of a Third Party Claim against one or more Indemnified
Parties, the Indemnifying Party will be entitled to participate in the defense
of that Third Party Claim and, if they so choose, to assume at their expense the
defense of that Third Party Claim with counsel selected by the Indemnifying
Party and reasonably satisfactory to the Indemnified Party. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party will not be liable to the Indemnified Party for any legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense of that Third Party Claim, except that if, under applicable standards of
professional conduct, there exists a conflict on any significant issue between
the Indemnified Party and the Indemnifying Party in connection with that Third
Party Claim, the Indemnifying Party shall pay the reasonable fees and expenses
of one additional counsel to act with respect to that issue to the extent
necessary to resolve that conflict. If the Indemnifying Party assumes defense of
any Third Party Claim, the Indemnified Party will be entitled to participate in
the defense of that Third Party Claim and to employ counsel, at its own expense,
separate from counsel employed by the Indemnifying Party, it being understood
that the Indemnifying Party will be entitled to control that defense. The
Indemnifying Party will be liable for the fees and expenses of counsel employed
by the Indemnified Party for any period during which the Indemnifying Party did
not assume the defense of any Third Party Claim (other than during any period in
which the Indemnified Party failed to give notice of the Third Party Claim as
provided above and a reasonable period after such notice). If the Indemnifying
Party chooses to defend or prosecute a Third Party Claim, all the parties shall
cooperate in the defense or prosecution of that Third Party Claim, including by
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retaining and providing to the Indemnifying Party records and information
reasonably relevant to that Third Party Claim, and making employees available on
a reasonably convenient basis. If the Indemnifying Party chooses to defend or
prosecute any Third Party Claim, the Indemnified Party will agree to any
settlement, compromise or discharge of that Third Party Claim that the
Indemnifying Party recommends and that by its terms obligates the Indemnifying
Party to pay the full amount of liability in connection with that Third Party
Claim, except that the Indemnifying Party may not without the Indemnified
Party's prior written consent agree to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term that
each claimant or plaintiff give to the Indemnified Party a release from all
liability with respect to that Third Party Claim. Whether or not the
Indemnifying Party has assumed the defense of a Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, that Third Party Claim without the Indemnifying Party's
prior written consent.
(c) In order for one or more Indemnified Parties to be entitled to any
indemnification under this Agreement in respect of a claim that does not involve
a Third Party Claim (a "Claim"), the GMAI Indemnitee must reasonably promptly
notify the Indemnifying Party of that Claim, and describe in reasonable detail
the basis for that Claim, except that any failure to give any such notification
will only affect the Indemnifying Party's obligation to indemnify the
Indemnified Party if the Indemnifying Party has been prejudiced as a result of
that failure. If the Indemnifying Party does not dispute that the Indemnified
Party is entitled to indemnification with respect to that Claim by notice to the
GMAI Indemnitee prior to the expiration of a 30-calendar-day period following
receipt by the Indemnifying Party of notice from the Indemnified Party of that
Claim, that Claim will be conclusively deemed a liability of the Indemnifying
Party and the Indemnifying Party shall pay the amount of that liability to the
Indemnified Party on demand or, in the case of any notice in which the amount of
the Claim (or any portion thereof) is estimated, on such later date as the
amount of the Claim (or any portion thereof) becomes finally determined. If the
Indemnifying Party has timely disputed their liability with respect to the
Claim, the Indemnifying Party and the Indemnified Party shall proceed in good
faith to negotiate a resolution of the Claim and, if the Claim is not resolved
through negotiations, the Indemnified Party may pursue such remedies as may be
available to enforce their rights to indemnification under this Agreement.
10.4 Limitation on Indemnification.
(a) GMAI's exclusive remedy with respect to any claims of GMAI under
this Agreement will be pursuant to the indemnification provisions of this
ARTICLE 10.
(b) Other than with respect to Sections 10.1(3), 10.1(4) and 10.5, GMAI
may only recover from the Escrow Shares and other related property on deposit
under the Escrow Agreement any amounts for which it is entitled to
indemnification under this ARTICLE 10, and with respect to Section 10.5, GMAI
shall first recover such amounts from the Escrow Shares and other related
property under the Escrow Agreement until termination of the Escrow Agreement.
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(c) Other than with respect to Sections 10.1(3) and 10.1(4), the
Stockholders will not be liable for any obligations under this ARTICLE 10 until
the aggregate of any amounts for which GMAI is entitled to indemnification under
this ARTICLE 10 exceeds $250,000, and will only be liable for that excess.
10.5 Tax Indemnity.
(a) Each of the Stockholders is jointly and severally liable for and
indemnifies GMAI against Taxes owed by Spectrum for any taxable year or period
that ends on or before the Effective Time except that the Stockholders will not
be so liable if Spectrum owes any such Taxes as a result of any unilateral act
or omission to act on the part of Spectrum after the Effective Time. Any payment
under this Section 10.5 will be treated for tax purposes as an adjustment to the
Merger Consideration.
(b) The Stockholders shall cause to be filed when due unless extended
allowed under the Code all Tax Returns required to be filed on behalf of
Spectrum for taxable years or periods ending on or before the Effective Time.
(c) After the Effective Time, each of the Stockholders and GMAI and the
Surviving Corporation shall do the following:
(1) assist (and cause its Affiliates to assist) in all reasonable respects
each of the others in preparing any Tax Returns that it is responsible
for preparing and filing in accordance with this Section 10.5;
(2) cooperate in all reasonable respects in preparing for any audits of, or
disputes with Governing Bodies regarding, any Tax Returns of Spectrum;
(3) make available to the others and to any Governmental Body as reasonably
requested all information, records and documents relating to Taxes of
Spectrum or the Surviving Corporation as successor in interest to
Spectrum;
(4) provide timely notice to the other in writing of any pending or
threatened tax audits or assessments of Spectrum or the Surviving
Corporation as successor in interest to Spectrum for taxable periods
for which the others may have a liability under this Section 10.5; and
(5) furnish the others with copies of all correspondence received from any
Governmental Body in connection with any Tax audit or information
request with respect to any such taxable period.
(d) GMAI shall notify each of the Stockholders in writing upon receipt
by GMAI of notice of any pending or threatened federal, state, local or foreign
Tax audits or assessments that may affect the Tax liabilities of Spectrum for
which the Stockholders would be required to indemnify GMAI, except that failure
to comply with this Section 10.5(d) will not affect GMAI's right to
indemnification pursuant to this Section 10.5 except to the extent that that
failure materially impairs the Stockholders' ability to contest those Tax
liabilities.
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(e) The Stockholders may represent Spectrum's interests in any Tax
audit or Proceeding relating to Taxes allegedly owed by Spectrum for any taxable
period ending on or before the Effective Time, and to employ counsel of their
choice at their expense, except that GMAI and its Representatives will be
permitted, at GMAI's expense, to be present at, and participate in, any such
Proceeding. The Stockholders may not settle, either administratively or after
commencement of litigation, any claim for Taxes without the prior written
consent of GMAI.
ARTICLE 11
DEFINITIONS
When used in this Agreement, the following terms have the following
meanings:
"Affiliate" means, with respect to any given Person, (1) any other
Person at the time directly or indirectly controlling, controlled by or under
common control with that Person, (2) any other Person of which that Person at
the time owns or has the right to acquire, directly or indirectly, 10% or more
on a consolidated basis of any class of the capital stock or other ownership
interest, (3) any other Person which at the time owns or has the right to
acquire, directly or indirectly, 10% or more of any class of the capital stock
or other ownership interest of that Person, or (4) any director, officer or
employee of that Person. For purposes of this Agreement, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"CGCL" means the General Corporation Law of the State of California.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant thereto.
"Consent" means any approval, consent, ratification, filing,
declaration, registration, waiver, or other authorization (including any
Permit).
"Contract" means any written agreement, contract, obligation, promise,
arrangement, or undertaking that is legally binding.
"DGCL" means the General Corporate Law of the State of Delaware.
"Environmental Claim" means any notice of violation, action, claim,
demand, abatement or other order by any Governmental Body or any other Person
for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects an the environment, or for fines,
penalties or restrictions resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden accidental or non-accidental Releases) of, or exposure to,
any Hazardous Material in, into or onto the environment (including, without
limitation, the air, soil, surface water or groundwater) at, in, by, from or
related to any property owned, operated or leased by Spectrum or any activities
or operations thereof; (ii) the transportation, storage, treatment or disposal
of Hazardous Materials in
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connection with any property owned, operated or leased by the seller or its
operations or facilities; or (iii) the violation, or alleged violation, of any
Environmental Law or Order of any Governmental Body relating to environmental
matters connected with any property owned, leased or operated by Spectrum.
"Environmental Law" means any Law relating to the environment, natural
resources, or public or employee health and safety, and includes the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.,
the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 33 U.S.C.
ss. 2601 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., and the Occupational
Safety and Health Act, 29 U.S.C. ss. 651 et seq.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor law, and any rules or regulations issued pursuant thereto.
"GAAP" means generally accepted United States accounting principles.
"GMAI Indemnitees" means GMAI, each Affiliate of GMAI (including, after
the Effective Time, Spectrum), and each of its respective Representatives and
each of the heirs, executors, successors and assigns of any of the foregoing.
"GMAI's Knowledge" means the actual knowledge after due inquiry of Greg
Manning and James Smith.
"Governmental Body" means any (1) nation, state, county, city, town,
village, district, or other jurisdiction of any nature, (2) federal, state,
local, municipal, foreign, or other government, (3) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal,
including an arbitral tribunal), (4) multi-national organization or body, or (5)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
"Hazardous Material" means any substance, material or waste which is
regulated under Environmental Law, including, without limitation, any material,
substance or waste that is defined as a "hazardous waste," "hazardous material,"
or "hazardous substance" under any provision of Environmental Law.
"Indemnifiable Losses" means all losses, liabilities, Taxes, damages,
deficiencies, obligations, fines, expenses, claims, demands, actions, suits,
proceedings, judgments or settlements, whether or not resulting from Third Party
Claims, incurred or suffered by an Indemnitee, including interest and penalties
with respect thereto and out-of-pocket expenses and reasonable attorneys' and
accountants' fees and expenses incurred in the investigation or defense
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of any of the same or in asserting, preserving or enforcing any of the
Indemnity's rights hereunder, net of any amounts recovered or recoverable under
any insurance policy.
"Intellectual Property Assets" means, with respect to any Person, all
trademarks, patents, copyrights, and any applications for registration thereof,
and trade secrets of that Person, whether owned, used, or licensed by that
Person as licensee or licensor.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Law" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Lien" means any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Market Value of GMAI Common Stock" for any given day means the average
(rounded to the nearest one-thousandth of a dollar) of the closing prices of
GMAI Common Stock on the Nasdaq National Market for the 10 trading days ending
on the third trading day prior to that day, as reported by the eastern edition
of the Wall Street Journal or any other source agreed to in writing by GMAI and
Spectrum;
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the business, assets, properties, results of operations, or
condition (financial or otherwise) of that Person.
"Offset Expenses" means those transaction costs and expenses incurred
by Spectrum in excess of $200,000 for professional services rendered or
performed in connection with, arising out of, or directly in anticipation of,
the Merger and the other transactions contemplated by this Agreement or any of
the other Transaction Documents (including the related fees and expenses of
accountants, counsel and financial advisors).
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court, arbitral
tribunal, administrative agency, or other Governmental Body.
"Ordinary Course of Business" means, with respect to an action taken by
a Person, that that action is (1) consistent with the past practices of that
Person and taken in the ordinary course of the normal day-to-day operations of
that Person, and (2) is not required to be authorized by the board of directors
of that Person (or by any Person or group of Persons exercising similar
authority).
"Permit" means any approval, consent, license, permit, waiver, or other
authorization issued, granted, given, or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Law.
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"Permitted Lien" means (1) any Lien for taxes that are not yet due, or
(2) any carrier's, warehouseman's, mechanic's, materialman's, repairman's,
landlord's, lessor's or similar statutory Lien incidental to the ordinary course
of business.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Body or other entity.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching, or migration on or into the indoor or outdoor environment or into or
out of any property.
"Remedial Action" means all actions, including, without limitation, any
capital expenditures, required by any Governmental Body to (1) clean up, remove,
treat, or in any other way address any Hazardous Material or other substance,
(2) prevent the Release or threat of Release, or minimize the further Release of
any Hazardous Material or other substance so it does not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment, (3) perform pre-remedial studies and investigations or
post-remedial monitoring, or (4) bring facilities on any property owned,
operated or leased by Spectrum and the facilities located and operations
conducted thereon into compliance with all Environmental Laws.
"Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of that Person, including legal counsel, accountants, and financial advisors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and rules or regulations issued pursuant thereto.
"Spectrum Indemnitees" means Spectrum, each Affiliate of Spectrum, and
each of its respective Representatives and each of the heirs, executors,
successors and assigns of any of the foregoing.
"Spectrum's Knowledge" means the actual knowledge after due inquiry of
Gregory N. Roberts and Elaine Dinges.
"Tax Benefit" means the present value (determined using the applicable
long-term federal rate as defined in Section 1274(d) of the Code, or any
successor provision) of any present or future deduction, expense, loss, increase
in asset basis, credit or refund realized by GMAI, the GMAI Indemnitees or any
affiliate thereof.
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"Tax Cost" means the present value (determined using the applicable
long-term federal rate as defined in Section 1274(d) of the Code, or any
successor provision) of any present or future any income, gain, loss of
deduction, or decrease in asset basis realized by GMAI, the GMAI Indemnitees or
any affiliate thereof.
"Taxes" means all taxes, duties, assessments or governmental charges,
including income, gross receipts, windfall profits, value added, severance,
property, production, sales, use, license, excise, franchise, employment,
withholding or similar taxes, together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties,
imposed by any Governmental Body having the power to tax.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Law relating to any Tax.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement, the Escrow Agreement, and the other documents to be executed and
delivered by the parties as contemplated under this Agreement.
"Transfer Taxes" means all excise, sales, use, transfer (including real
property transfer or gains), stamp, documentary, filing, recordation and other
similar Taxes (but excluding Taxes based on income) resulting directly or
indirectly from the Merger together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Law. This Agreement is governed by the laws of the State of
New York, without giving effect to principles of conflict of laws, except that
the Merger is governed by the laws of the State of Delaware and California.
12.2 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
must be brought against any of the parties in the courts of the State of New
York, County of New York, or, if it has or can acquire jurisdiction, in the
United States District Court for the Southern District of New York, and each of
the parties consents to the jurisdiction of those courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any such action or proceeding may be served by
sending or delivering a copy of the process to the party to be served at the
address and in the manner provided for the giving of notices in Section 12.4.
Nothing in this Section 12.2, however, affects the right of any party to serve
legal process in any other manner permitted by law.
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12.3 Survival of Representations. The representations made in this
Agreement by the parties will survive until the first anniversary of the
Closing, except that the representations made by Spectrum in Section 3.16 will
survive until the applicable statute of limitations.
12.4 Notices.
(a) Every notice or other communication required or contemplated by
this Agreement must be in writing and sent by one of the following methods: (1)
personal delivery, in which case delivery is deemed to occur the day of
delivery; (2) certified or registered mail, postage prepaid, return receipt
requested, in which case delivery is deemed to occur the day it is officially
recorded by the U.S. Postal Service as delivered to the intended recipient; or
(3) next-day delivery to a U.S. address by recognized overnight delivery service
such as Federal Express, in which case delivery is deemed to occur upon receipt.
In each case, a notice or other communication sent to a party must be directed
to the address for that party set forth below, or to another address designated
by that party by written notice:
If to GMAI or Sub, to:
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, NJ 07006
Attention: Mr. Greg Manning
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Scott S. Rosenblum, Esq.
If to Spectrum, to:
Spectrum Numismatics International, Inc.
P.O. Box 1853
Irvine, CA 92623
Attention: President
with a copy to:
Frye & Hsieh, LLP
24955 Pacific Coast Highway
Suite A201
Malibu, CA 90265-4747
Attention: Douglas Frye, Esq.
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If to Warren Trepp, to:
Mr. Warren Trepp
585 Lakeshore Boulevard
Incline Village, NV 89450
If to Gregory N. Roberts, to:
Mr. Gregory N. Roberts
2625 Saint Andrews
Tustin, CA 92660
If to Elaine Dinges, to:
Ms. Elaine Dinges
53 Delcourt Drive
Newport Beach, CA 92660
(b) Notice not given in writing is effective only if acknowledged in
writing by a duly authorized Representative of the party to which it was given.
12.5 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.6 Public Announcements.
(a) The parties shall cooperate with respect to any public statement
regarding the transactions contemplated by this Agreement or any of the other
Transaction Documents.
(b) Spectrum may not make any public statement regarding the
transactions contemplated by this Agreement or any of the other Transaction
Documents without the prior written consent of GMAI, which GMAI may not
unreasonably withhold, unless Spectrum (1) believes, based upon advice of
counsel, that they are required by law to make that public statement, (2) makes
commercially reasonable efforts to limit or avoid making that public statement,
(3) provides GMAI with prior written notice of that public statement, and (4)
makes any changes to that public statement that GMAI reasonably requests.
(c) GMAI may not make any public statement regarding the transactions
contemplated by this Agreement or any of the other Transaction Documents without
the prior written consent of Spectrum, which Spectrum may not unreasonably
withhold, unless GMAI (1) believes, based upon advice of counsel, that it is
required by law to make that public statement, (2) makes commercially reasonable
efforts to limit or avoid making that public statement, (3) provides Spectrum
with prior written notice of that public statement, and (4) makes any changes to
that public statement that Spectrum reasonably request.
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12.7 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
12.8 Expenses. Except as provided in Section 9.2, if the Merger is not
consummated, each party shall bear its own transaction expenses (including fees
and disbursements of counsel, investment bankers and accountants). In the event
the Merger is consummated, GMAI and the Surviving Corporation shall be and
remain responsible for their costs and expenses and, additionally, the Surviving
Corporation shall be responsible for the Offset Expenses set forth on the
listing contemplated below, and shall pay the Offset Expenses upon presentation
of invoice at or promptly following the Closing. No later than two business days
before the Closing Date, Spectrum shall deliver to GMAI a certificate setting
forth a complete listing, or reasonably accurate estimate of, the Offset
Expenses.
12.9 Entire Agreement. This Agreement and the other agreement provided for
in this Agreement, together with all exhibits and schedules hereto and thereto,
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties.
12.10 Counterparts. This Agreement may be executed in several counterparts,
each of which is an original and all of which together constitute one and the
same instrument.
12.11 No Third-Party Rights. Nothing expressed or referred to in this
Agreement gives any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement, and this Agreement and all of its provisions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.12 Pooling Accounting and Tax Treatment. Each party shall use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling-of-interests. Each party hereto shall use its best
efforts to cause its respective Affiliates not to take any action that would
adversely affect the ability of GMAI to account for the business combination to
be effected by the Merger as a pooling-of-interests. None of GMAI, Sub, Spectrum
or any Stockholder may take any action, including, without limitation, the
acceleration of vesting of any options, restricted stock or other rights to
acquire shares of the capital stock of the Spectrum, which would reasonably be
expected to (1) interfere with GMAI's ability to account for the Merger as a
pooling-of-interests or (2) cause the Merger to fail to qualify as a tax-free
reorganization under Section 368 of the Code.
12.13 Best Efforts. Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement or
any of the other Transaction Documents as promptly as practicable including, but
not limited to, (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the transactions contemplated by this
Agreement or any of the other Transaction Documents and the taking of such
actions as are necessary to obtain any requisite approvals, consents, orders,
exemptions or waivers by any third party or Governmental Body and
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(ii) the satisfaction of all conditions to Closing at the earliest possible
time. Each party shall promptly consult with the other with respect to, provide
any necessary information not subject to legal privilege with respect to, and
provide the other (or its counsel) copies of, all filings made by such party
with any Governmental Body or any other information supplied by that party to a
Governmental Body in connection with this Agreement or any of the other
Transaction Documents and the transactions contemplated hereby and thereby.
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The undersigned hereby execute this Agreement on the date stated in the
introductory clause.
GREG MANNING AUCTIONS, INC.
By:______________________________
Greg Manning
President
SPECTRUM ACQUISITION, INC.
By:______________________________
Greg Manning
President
SPECTRUM NUMISMATICS
INTERNATIONAL, LTD.
By:______________________________
Gregory N. Roberts
President
By:______________________________
Elaine Dinges
Secretary
__________________________________
WARREN TREPP, as trustee of the
Rabard Trust dated August 25, 1989
__________________________________
GREGORY N. ROBERTS
__________________________________
SHARON ROBERTS
__________________________________
ELAINE DINGES
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is dated December __, 1999,
and is between GREG MANNING AUCTIONS, INC., a New York corporation ("GMAI"),
WARREN TREPP, as trustee of the Rabard Trust dated August 25, 1989, GREGORY N.
ROBERTS, ELAINE DINGES (each a "Stockholder" and collectively the
"Stockholders"), DOUGLAS FRYE, as the initial representative of the Stockholders
(the "Stockholder Representative"), and ________________________, as escrow
agent (the "Escrow Agent").
GMAI, the Stockholders, Spectrum Acquisition, Inc., a California
corporation and a wholly-owned subsidiary of GMAI ("Sub"), and Spectrum
Numismatics International, Inc., a California corporation ("Spectrum"), are
parties to a Merger Agreement pursuant to which GMAI is acquiring all the issued
and outstanding capital stock of Spectrum by means of a merger of Sub into
Spectrum (that agreement, the "Merger Agreement"). Any capitalized term used in,
but not defined in, this Agreement is as defined in the Merger Agreement.
The Merger Agreement requires that at the Effective Time GMAI deposit
with an escrow agent a number of shares of GMAI Common Stock equal to 10% of the
Merger Consideration, and if GMAI is entitled to indemnification under the
Merger Agreement, it may in specified circumstances only recover those losses by
claiming escrow shares. The Merger Agreement also requires that those escrow
shares be held and disbursed by an escrow agent pursuant to an escrow agreement.
The parties therefore agree as follows:
1. Establishment of Escrow Account. As promptly as practicable after the
Effective Time, GMAI shall provide the Escrow Agent with one or more stock
certificates representing 10% of the Merger Consideration (those shares, the
"Escrow Shares") together with, for each such certificate, a stock power
executed in blank by the appropriate Stockholder. The Escrow Agent or its
nominee shall, subject to the terms of this Agreement, hold in escrow, and
dispose of, the Escrow Shares and any and all property, including shares of GMAI
Common Stock or other securities and cash amounts, declared and paid as a
dividend or other distribution on or with respect to the Escrow Shares (that
which is so held in escrow, the "Escrow Account").
2. Voting of Escrow Shares. Unless and until they are returned to GMAI or
delivered to the Stockholders pursuant to the terms of this Agreement, only the
Stockholders may vote the Escrow Shares and any other voting securities held in
the Escrow Account.
3. Tax Matters. To the extent permitted by applicable law, including
Section 468B(g) of the Internal Revenue Code of 1986, as amended (the "Code"),
each Stockholder shall include all amounts earned on the Escrow Shares in his or
her gross income for federal, state and local income tax (collectively, "income
tax") purposes and pay any income tax resulting therefrom. Each Stockholder has
furnished the Escrow Agent with all information necessary to enable the Escrow
Agent to comply with any applicable reporting and backup withholding
requirements of the Code and all reporting and withholding information.
<PAGE>
4. Nonencumbrance of Escrow Shares. Except as contemplated under this
Agreement, prior to the date the Escrow Agent is required to deliver the Escrow
Shares to the Stockholders, no Stockholder may pledge, hypothecate, or incur any
lien or encumbrance on, or permit to be taken by any legal or equitable process
in satisfaction of any debt or other liability, any of the Escrow Shares or any
beneficial interest therein,.
5. Claims or Disputes Against Escrow Account. (a) At any time prior to the
Termination Date (as defined in Section 7), GMAI may make claims against the
Escrow Account for amounts due for indemnification or reimbursement under
Article 9 of the Merger Agreement. GMAI shall notify the Stockholder
Representative and the Escrow Agent in writing of each such claim. In each such
notice GMAI must do the following:
(1) state that GMAI has paid or incurred, or anticipates that it may be
required to pay or may incur, losses in a stated amount;
(2) specify in reasonable detail (to the extent then ascertainable)
individual items of loss included in the amount so stated, the date
each such item was paid or incurred, or the basis for any anticipated
liability;
(3) specify the nature of the claim to which each such item is related, and
the specific section of the Merger Agreement upon which the claim is
based; and
(4) include a representation from GMAI to the effect that GMAI has
delivered a copy of the notice to the Stockholder Representative prior
to or simultaneously with delivery of the notice to the Escrow Agent.
(b) The Escrow Agent is not required to ascertain whether the
Stockholder Representative has received a copy of any notice to the Escrow Agent
from GMAI. Upon receiving any notice from GMAI, the Escrow Agent shall
immediately advise GMAI and Stockholder Representative, and the Stockholder
Representative shall advise GMAI and the Escrow Agent in writing, of the date on
which it received that notice, which date will be deemed correct (absent
manifest error). In the event that the amount subject to the claim is
unliquidated, GMAI shall make a good faith estimate as to the amount of the
claim.
(c) The Stockholder Representative may dispute any claim made by
GMAI by giving written notice to GMAI and to the Escrow Agent within 15 business
days after the date on which it received from GMAI the notice relating to that
claim (that 15-day period, the "Response Period"). If the Escrow Agent receives
the Stockholder Representative's notice within the Response Period, the Escrow
Agent may presume that the notice was received by GMAI within the Response
Period.
(d) If the Stockholder Representative gives a timely written
notice of dispute pursuant to Section 5(c), the Escrow Agent shall continue to
hold the Escrow Account in accordance with the terms of this Agreement. If the
Stockholder Representative does not give timely written notice disputing a
claim, the Stockholders will be deemed to have acknowledged that the full amount
of that claim as stated in the claim may be paid out of the Escrow Account, and
the Escrow Agent shall promptly pay that claim from the Escrow Account to GMAI
after expiration of the Response Period. The Escrow Agent shall pay that claim
first in Escrow Shares
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(each share being valued on the basis of the Escrow Share Value as defined in
Section 5(g)), and, thereafter, if the claim has not been paid in full, in any
other assets then constituting part of the Escrow Account having a value equal
to the remaining amount of that claim. Upon payment of any claim, the Escrow
Agent shall provide the Stockholder Representative and GMAI with a written
notice evidencing what the payment consisted of and how any Escrow Shares were
valued.
(e) The Escrow Agent shall effect any payment or delivery of
Escrow Shares to GMAI (to the extent that payment or delivery is permitted under
this Agreement) by surrendering the certificate or certificates representing
those Escrow Shares to GMAI's transfer agent (American Stock Transfer & Trust
Company) or another transfer agent designated by GMAI in writing to the Escrow
Agent) for cancellation and transfer, on condition that the Escrow Agent have
received previously a copy of a letter from GMAI to GMAI's transfer agent (a
copy of which GMAI shall also provide to the Stockholder Representative)
instructing the transfer agent to promptly issue to the Escrow Agent, upon
receiving from the Escrow Agent pursuant to this Section 5(e) one or more
certificates representing Escrow Shares, a new certificate or certificates
representing the surplus Escrow Shares after giving effect to that payment or
delivery. The Escrow Agent shall effect any payment or delivery of assets in the
Escrow Account other than the Escrow Shares (to the extent that such payment or
delivery is permitted under this Agreement) in accordance with GMAI's written
direction from time to time.
(f) If the amount of the claim exceeds the aggregate value of the
Escrow Account, neither the Escrow Agent nor the Stockholders will be liable for
any deficiency.
(g) The value per share of the Escrow Shares for purposes of this
Agreement is $14.25 (the "Escrow Share Value"), except that the Escrow Share
Value will be appropriately increased or decreased in the event of any
combination or splitup (by way of stock dividend or otherwise) of GMAI Common
Stock. The Escrow Agent may make a good faith determination of the number of
Escrow Shares required to pay a claim, or it may rely on the determination of
GMAI, on condition that each such determination be based upon the Escrow Share
Value.
(h) All payments made by the Escrow Agent pursuant to any claim
(other than claims against any Stockholder for inaccuracy of any of the
representations made by him or her in Article 2 of the Merger Agreement) must be
applied to the Stockholders pro rata in accordance with their respective
percentages as set forth on Schedule 1. All claims paid out of the Escrow Shares
with respect to each Stockholder must be rounded down to the nearest whole
share. Under no circumstances will the Stockholders have any right to substitute
other property for the Escrow Account.
(i) The Escrow Agent will not be liable for its performance of
any calculations pursuant to this Section 5, including any determination with
respect to the number of Escrow Shares required to pay a claim pursuant to this
Section 5, except in the event of its gross negligence or willful misconduct in
performing those calculations.
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6. Disputed Claims. (a) If the Stockholder Representative disputes a claim
of GMAI as provided in Section 5, the Escrow Agent shall set aside a number of
Escrow Shares equal to the amount of the claim as set forth in the notice of the
claim divided by the Escrow Share Value (the "Set Aside Amount"). In the event
GMAI notifies the Escrow Agent in writing that GMAI has made or anticipates that
it will incur out-of-pocket expenditures or legal expenses in connection with
any such disputed claim with respect to which it is entitled to be indemnified
or reimbursed under the Merger Agreement, the Escrow Agent shall set aside a
number of Escrow Shares having an aggregate value equal to the amount of those
incurred or anticipated expenditures (to the extent they are reasonable), which
amount will be included in the Set Aside Amount. If GMAI and the Stockholder
Representative agree in writing, or it is determined through a proceeding
described in Section 6(b) that GMAI is not entitled to indemnification or
reimbursement with respect to that claim, the Escrow Agent shall no longer set
aside that number of Escrow Shares but shall continue to hold those Escrow
Shares, subject to the terms and conditions otherwise herein contained.
(b) If within 30 days of its receipt of notice from the Stockholder
Representative of a dispute the Escrow Agent does not receive written notice
executed by GMAI and the Stockholder Representative to the effect that the
disputed claim has been resolved, the Escrow Agent shall continue to hold the
Set Aside Amount until directed to dispose of it pursuant to (1) a final
non-appealable order of a court of competent jurisdiction or (2) instructions or
directions furnished in writing signed by both the Stockholder Representative
and GMAI. Upon receipt of such an order or direction, the Escrow Agent shall
promptly comply with that order or direction. In no event will the Escrow Agent
be responsible for any fees or expenses of any party to any litigation or
proceeding.
7. Termination; Distribution of Escrow Account. (a) This Agreement
terminates on the earlier of (1) the first anniversary of the date of this
Agreement, (2) the issuance of the first independent audit report for GMAI for
the fiscal year ending June 30, 2000, and (3) when there are no longer any
Escrow Shares or other assets constituting part of the Escrow Account (that
date, the "Termination Date"), except that if the Termination Date is as
specified in either clause (1) or clause (2) of this Section 7(a), there remain
assets in the Escrow Account, and there exists one or more outstanding claims as
to which the Escrow Agent has received notice pursuant to Section 5 prior to the
Termination Date, this Agreement will continue in effect until those claims have
been resolved and paid in full.
(b) GMAI shall provide the Escrow Agent with reasonable advance written
notice of the Termination Date, and when the Termination Date has occurred it
shall promptly notify the Escrow Agent in writing. Failure by GMAI to so notify
the Escrow Agent will not postpone the Termination Date.
(c) On the Termination Date or as soon thereafter as is practicable,
the Escrow Agent shall distribute all assets then remaining in the Escrow
Account, with interest (if any), less (1) the number of Escrow Shares
constituting any Set Aside Amount and (2) the number of Escrow Shares having a
value equal to the amount specified in any notice of a claim delivered to the
Escrow Agent pursuant to Section 5 prior to the Termination Date with respect to
which no Set Aside Amount has yet been established (assuming that the Escrow
Agent has not otherwise been instructed by GMAI and the Stockholder
Representative).
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(d) Once all remaining claims under this Agreement have been resolved
and the Escrow Agent has received a written notice executed by GMAI and the
Stockholder Representative to that effect (or a copy of a court order pursuant
to Section 6(b) to that effect) and any Escrow Shares or other assets to be
distributed to GMAI in connection therewith have been so distributed, the Escrow
Agent shall distribute all assets then remaining in the Escrow Account, if any,
to the Stockholders pro rata in accordance with their respective percentages set
forth on Schedule 1, and this Agreement will then terminate.
(e) The Escrow Agent shall effect such distributions of Escrow Shares
as it is required to make to the Stockholders under this Agreement by
surrendering the Escrow Shares to GMAI's stock transfer agent for cancellation
and transfer, on condition that it have received a copy of an irrevocable
instruction from GMAI to GMAI's transfer agent instructing the transfer agent to
immediately issue certificates for those Escrow Shares pro rata to the
Stockholders and send them to the Stockholder via overnight courier. GMAI shall
issue any such letter promptly.
8. Escrow Agent. (a) GMAI shall pay any fees of the Escrow Agent as GMAI
and the Escrow Agent may reasonably agree upon in connection with its execution
of this Agreement and performance of its obligations under this Agreement. The
Escrow Agent is also entitled to be reimbursed reasonable attorneys' fees and
expenses and other reasonable out-of-pocket expenses it incurs in performing its
obligations under this Agreement or in defending itself in any action in which
it becomes involved arising out of this Agreement.
(b) The Escrow Agent will not be liable for any act or omission to act
under this Agreement, including any and all claims made against the Escrow Agent
as a result of its holding the Escrow Account in its own name, except as a
result of its own negligence or willful misconduct or intentional failure to
comply with its obligations under this Agreement. Under no circumstances will
the Escrow Agent be liable for any special, punitive or consequential damages.
(c) GMAI shall indemnify the Escrow Agent from any and all claims,
losses, costs, liabilities, damages, suits, demands, judgments or expenses,
including but not limited to reasonable attorneys' fees and expenses
(collectively, "Damages"), claimed against or incurred by the Escrow Agent
arising out of or related, directly or indirectly, to this Agreement, other than
Damages arising out of or related to the Escrow Agent's gross negligence or
willful misconduct or intentional failure to comply with its obligations under
this Agreement. The Stockholders, severally but not jointly, shall promptly
reimburse GMAI for any Damages from which GMAI has indemnified the Escrow Agent
arising out of any action or omission to act on the part of any of the
Stockholders or the Stockholder Representative.
(d) The Escrow Agent may act upon any instrument or signature believed
by it to be genuine and may assume that any Person purporting to give any notice
or instruction under this Agreement and reasonably believed by it to be
authorized has been duly authorized to do so.
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(e) The Escrow Agent's duties will be determined only with reference to
this Agreement and applicable laws, and the Escrow Agent is not charged with
knowledge of or any duties or responsibilities in connection with any other
document or agreement, including, but not limited to, the Merger Agreement
(except with respect to defined terms contained in the Merger Agreement that are
used in this Agreement). In the event that the Escrow Agent is uncertain as to
its duties or rights under this Agreement, the Escrow Agent may refrain from
taking any action other than to keep safe the Escrow Account until it (1) has
received written instructions signed by GMAI and the Stockholder Representative
or (2) is directed otherwise by a court of competent jurisdiction.
(f) The Escrow Agent may at any time resign as escrow agent under this
Agreement by giving written notice of its resignation to GMAI and the
Stockholder Representative at least 30 days prior to the date that the Escrow
Agent specifies its resignation is to take effect. In that event, GMAI and the
Stockholder Representative shall negotiate in good faith to appoint a successor
escrow agent prior to the effective date of the Escrow Agent's resignation. Upon
the effective date of the Escrow Agent's resignation, the Escrow Agent shall
deposit the Escrow Account with the successor escrow agent or, if GMAI and the
Stockholder Representative have not appointed a successor escrow agent, with a
court of competent jurisdiction to act as successor escrow agent.
(g) The Escrow Agent may be removed for any reason by agreement of GMAI
and the Stockholder Representative. Upon the effective date of removal of the
Escrow Agent, the Escrow Agent shall deposit the Escrow Account with the
successor escrow agent or, if GMAI and the Stockholder Representative have not
appointed a successor escrow agent, with a court of competent jurisdiction to
act as successor escrow agent.
(h) Upon the delivery of the Escrow Fund pursuant to Section 8(f) or
8(g) to a successor escrow agent or court, the Escrow Agent will have not
further liability under this Agreement except in connection with prior acts. Any
successor escrow agent must agree to be bound by the terms of this Agreement.
(i) In the event that the Escrow Agent is at any time confronted with
inconsistent or conflicting claims or demands by any of the parties, the Escrow
Agent may interplead those parties in any court of competent jurisdiction and
request that that court determine the respective rights of those parties with
respect to this Agreement and, upon doing so, the Escrow Agent will have no
further responsibility to any party as a consequence of those claims or demands.
(j) The Escrow Agent may exercise any of its rights or perform any of
its obligations under this Agreement either directly or by or through its agents
or attorneys. The Escrow Agent is not required to examine, inquire into or pass
upon the validity, binding effect, execution or sufficiency of this Agreement or
of any amendment or supplement to this Agreement.
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9. Stockholder Representative. (a) The Stockholders have appointed the
Stockholder Representative (and any successor appointed in accordance with this
Section 9) as agent and attorney-in-fact, to serve as the Stockholder
Representative under this Agreement and to take all actions pursuant to this
Agreement. This appointment is coupled with an interest and is irrevocable,
except as expressly set forth herein with respect to appointing a successor
Stockholder Representative.
(b) The Stockholder Representative is authorized to take any action
deemed by him appropriate or necessary to carry out the provisions of, and to
determine the rights of the Stockholders under, this Agreement. The Stockholder
Representative shall serve as the agent of the Stockholders for all purposes
related to this Agreement, including without limitation service of process upon
the Stockholders. By his execution of this Agreement, the Stockholder
Representative accepts and agrees to diligently discharge the duties and
responsibilities of the Stockholder Representative set forth in this Agreement.
The authorization and designation of the Stockholder Representative under this
Section 9 is binding upon the successors, assigns, heirs and personal
representatives of each of the Stockholders. GMAI and the Escrow Agent may rely
upon this authorization and designation in dealing with the Stockholder
Representative, and are not required to inquire into the authority of any Person
reasonably believed by either of them to be the Stockholder Representative.
(c) All elections and decisions of the Stockholder Representative under
this Agreement will be conclusive, valid, binding and enforceable upon the
Stockholders. The Stockholder Representative shall keep the Stockholders
reasonably informed of any material elections and decisions he makes in his
capacity as Stockholder Representative.
(d) The Stockholder Representative is entitled to such compensation for
his services under this Agreement as the Stockholders and the Stockholder
Representative agree upon.
(e) The parties acknowledge that the Stockholder Representative is
acting as such as a matter of convenience to the Stockholders and will not be
liable under this Agreement for his actions taken in furtherance of the
authority granted in this Agreement except to the extent of his obligations as a
Stockholder.
(f) In the event the Stockholder Representative dies, resigns or
otherwise terminates his status as such or is removed by a majority in interest
of the Stockholders for which the Escrow Account is held (a "Majority in
Interest"), he will be succeeded by any Person appointed by a Majority in
Interest. If the Stockholders fail for any reason to elect a new Stockholder
Representative and during any period in which a vacancy exists, ___________
shall serve as the Stockholder Representative until a new Stockholder
Representative is elected as provided in this Section 9(f).
10. Governing Law. This Agreement is governed by the laws of the State of
New York, without giving effect to principles of conflict of laws.
11. Binding Effect. This Agreement is binding upon and inures to the
benefit of the parties and their respective heirs, successors and permitted
assigns.
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<PAGE>
12. Notices.
(a) Every notice or other communication required or contemplated by
this Agreement must be in writing and sent by one of the following methods: (1)
personal delivery, in which case delivery is deemed to occur the day of
delivery; (2) certified or registered mail, postage prepaid, return receipt
requested, in which case delivery is deemed to occur the day it is officially
recorded by the U.S. Postal Service as delivered to the intended recipient; or
(3) next-day delivery to a U.S. address by recognized overnight delivery service
such as Federal Express, in which case delivery is deemed to occur upon receipt.
In each case, a notice or other communication sent to a party must be directed
to the address for that party set forth below, or to another address designated
by that party by written notice:
If to GMAI to:
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, NJ 07006
Attention: Mr. Greg Manning
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Scott S. Rosenblum, Esq.
If to the Stockholder Representative to:
Frye & Hsieh, LLP
24955 Pacific Coast Highway
Suite A201
Malibu, CA 90265-4747
Attention: Douglas Frye, Esq.
If to Warren Trepp, to:
Mr. Warren Trepp
585 Lakeshore Boulevard
Incline Village, NV 89450
If to Gregory N. Roberts, to:
Mr. Gregory N. Roberts
2625 Saint Andrews
Tustin, CA 92660
8
<PAGE>
If to Elaine Dinges, to:
Ms. Elaine Dinges
53 Delcourt Drive
Newport Beach, CA 92660
(b) Notice not given in writing is effective only if acknowledged in
writing by a duly authorized Representative of the party to which it was given.
13. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
14. Amendment. This Agreement may not be amended except by an instrument in
Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.
15. Best Efforts. Each party shall from time to time execute, deliver and
file any and all other agreements, instruments or documents, and take any and
all actions, reasonably requested by any other party to give full force and
effect to this Agreement and the transactions contemplated hereby.
16. Counterparts. This Agreement may be executed in several counterparts,
each of which is an original and all of which together constitute one and the
same instrument.
9
<PAGE>
The undersigned hereby execute this Agreement on the date stated in the
introductory clause.
GREG MANNING AUCTIONS, INC.
By:___________________________________
Name:
Title:
______________________________________
WARREN TREPP
______________________________________
GREGORY N. ROBERTS
______________________________________
ELAINE DINGES
______________________________________
DOUGLAS FRYE, as Stockholder
Representative
[ESCROW AGENT]
By:___________________________________
Name:
Title:
10
<PAGE>
SCHEDULE 1
Warren Trepp
Gregory N. Roberts
Elaine Dinges
<PAGE>
EXHIBIT B-1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated ____________,
2000, and is between SPECTRUM NUMISMATICS INTERNATIONAL, LTD., a California
corporation ("Spectrum"), GREG MANNING AUCTIONS, INC, a New York corporation
("GMAI"), and GREGORY N. ROBERTS, an individual.
Concurrently with execution and delivery of this Agreement, Spectrum is
being acquired by GMAI by means of a merger of Spectrum Acquisition, Inc., a
Delaware corporation and a wholly-owned subsidiary of GMAI, into Spectrum. Mr.
Roberts was a stockholder of Spectrum, and in connection with the acquisition of
Spectrum by GMAI he is being issued shares of GMAI common stock in exchange for
his shares of Spectrum common stock.
Mr. Roberts has been employed by Spectrum as its President. Spectrum
now wishes to continue to employ Mr. Roberts on the terms and conditions set
forth in this Agreement, and Mr. Roberts wishes to be so employed.
Spectrum and Mr. Roberts therefore agree as follows:
1. Employment; Term. Spectrum hereby employs Mr. Roberts, and Mr.
Roberts hereby accepts employment with Spectrum, in accordance with and subject
to the terms and conditions set forth in this Agreement. The term of this
Agreement (the "Term") commences on the date of this Agreement and, unless
earlier terminated in accordance with Section 6, will terminate on the fifth
anniversary of the date of this Agreement. Prior to the end of the Term Spectrum
and Mr. Roberts may by written agreement signed by them extend the Term for one
or more additional one-year periods.
2. Duties. (a) During the Term, Mr. Roberts shall serve as President of
Spectrum and shall report to the board of directors of Spectrum. Mr. Roberts
will have such duties and responsibilities as are customary for Mr. Roberts'
position and any other duties or responsibilities he may be reasonably assigned
by the board of directors.
(b) During the period Mr. Roberts is employed by Spectrum, Mr.
Roberts shall devote his full business time and best efforts to the business and
affairs of Spectrum. Mr. Roberts understands and acknowledges that Mr. Roberts'
duties will require business travel from time to time.
3. Compensation. Spectrum shall pay Mr. Roberts a salary of $300,000
per annum, which will increase to $400,000 per annum on the fourth anniversary
of the date of this Agreement if on that date Mr. Roberts remains employed with
Spectrum (that salary, the "Base Salary"). Payment of the Base Salary will be in
accordance with Spectrum's standard payroll practices and subject to all legally
required or customary withholdings.
<PAGE>
4. Stock Options. Concurrently with execution and delivery of this
Agreement, GMAI shall, pursuant to a Stock Option Agreement between GMAI and Mr.
Roberts in the form of Exhibit A, grant to Mr. Roberts options to purchase
150,000 shares of common stock of GMAI.
5. Benefits. Upon submission by Mr. Roberts of vouchers in accordance
with Spectrum's standard procedures, Spectrum shall reasonably promptly
reimburse Mr. Roberts for all reasonable and necessary travel, business
entertainment and other business expenses incurred by Mr. Roberts in connection
with the performance of his duties under this Agreement.
(b) Mr. Roberts is entitled to participate in any and all medical
insurance, group health, disability insurance and other benefit plans that are
made generally available by Spectrum to employees of Spectrum, provided that the
medical, group health and disability insurance benefits provided by Spectrum to
Mr. Roberts shall be substantially as favorable to Mr. Roberts or more favorable
to Mr. Roberts as those generally provided by GMAI to its senior executives.
Spectrum shall pay all premiums and deductibles payable in connection with
medical insurance provided for Mr. Roberts. Additionally, Mr. Roberts is
entitled to receive four weeks paid vacation a year and paid holidays made
available pursuant to Spectrum's policy to all employees of Spectrum. Spectrum,
in its sole discretion, may at any time amend or terminate any such benefit
plans or programs, upon not less than 30 days' prior written notice to Roberts.
(c) Upon submission of vouchers in accordance with Spectrum's
standard procedures, Spectrum shall reasonably promptly directly pay or
reimburse Mr. Roberts for his reasonable motor vehicle costs and related
expenses, such as insurance, repairs, maintenance, and gas, up to $750.00 per
month.
6. Termination. Mr. Roberts' employment hereunder may be terminated
prior to the end of the Term under the following circumstances:
(a) Mr. Roberts' employment hereunder will terminate upon Mr.
Roberts' death.
(b) Except as otherwise required by law, Spectrum may terminate
Mr. Roberts' employment hereunder at any time after Mr. Roberts becomes Totally
Disabled. For purposes of this Agreement, Mr. Roberts will be "Totally Disabled"
as of the earlier of (1) the date Mr. Roberts becomes entitled to receive
disability benefits under Spectrum's long-term disability plan and (2) Mr.
Roberts' inability to perform the duties and responsibilities contemplated under
this Agreement for a period of more than 120 consecutive days due to physical or
mental incapacity or impairment.
(c) Spectrum may terminate Mr. Roberts' employment hereunder for
Cause at any time after providing written notice to Mr. Roberts. For purposes of
this Agreement, "Cause" means any of the following:
(1) Mr. Roberts' neglect or failure or refusal to perform his duties under
this Agreement (other than as a result of total or partial incapacity
due to physical or mental illness);
2
<PAGE>
(2) Any act by or omission of Mr. Roberts that materially injures the
reputation, business, or business relationship of Spectrum or any of
its affiliates;
(3) Mr. Roberts' conviction (including conviction on a nolo contendere
plea) of a felony or any crime involving, in the good faith judgment of
Spectrum, fraud, dishonesty or moral turpitude;
(4) the breach of an obligation set forth in Section 8, 9 or 10 and
(5) any other material breach of this Agreement.
In the cases of "neglect or failure" to perform his duties under this Agreement,
as set forth in 6(c)(1) above, or material breach as set forth in 6(c)(5) above,
a termination by Spectrum with Cause shall be effective only if, within 30 days
following delivery of a written notice by Spectrum to Mr. Roberts that Spectrum
is terminating his employment with Cause, Mr. Roberts has failed to cure the
circumstances giving rise to Cause.
(d) Spectrum may terminate Mr. Roberts' employment hereunder for
any reason, upon 30 days' prior written notice.
(e) Mr. Roberts may terminate his employment hereunder for Good
Reason at any time after providing written notice to Spectrum. For the purposes
of this Agreement, "Good Reason" means any of the following:
(1) Spectrum decreases or fails to pay Mr. Roberts' Base Salary provided in
Section 3 or the benefits described in Section 5 above;
(2) Mr. Roberts no longer holds the office of President or an office of
equivalent stature, or his functions and/or duties are materially
diminished; or
(3) Mr. Roberts' job site is relocated to a location which is more than
thirty (30) miles from the current location, unless the parties
mutually agree to relocate more than thirty (30 miles from the current
location.
A termination by Mr. Roberts with Good Reason shall be effective only if, within
30 days following delivery of a written notice by Mr. Roberts to Spectrum that
Mr. Roberts is terminating his employment with Good Reason, Spectrum has failed
to cure the circumstances giving rise to Good Reason.
7. Compensation Following Termination Prior to the End of the Term. In
the event that Mr. Roberts' employment hereunder is terminated prior to the end
of the Term, Mr. Roberts will be entitled only to the following compensation and
benefits upon such termination:
(a) In the event that Mr. Roberts' employment hereunder is
terminated prior to the expiration of the Term by reason of Mr. Roberts' death
or Total Disability, pursuant to Section 6(a) or 6(b), Spectrum shall pay the
following amounts to Mr. Roberts (or Mr. Roberts' estate, as the case may be):
3
<PAGE>
(1) any accrued but unpaid Base Salary (as determined pursuant to Section
3) for services rendered to the date of termination;
(2) any incurred but unreimbursed expenses required to be reimbursed
pursuant to Section 5(a) or 5(b);
(3) any vacation accrued and unused to the date of termination.
In addition, for a period of six (6) months, beginning on the date of
termination of Mr. Roberts' employment by reason of death or Total Disability,
Spectrum will, at its expense, provide medical and group hIealth insurance
benefits to Mr. Roberts (or his family, as the case may be), which benefits
shall be substantially as favorable or more favorable to Mr. Roberts (or his
family as the case may be) as those provided to him (or his family as the case
may be) immediately preceding the termination of his employment.
(b) In the event that Mr. Roberts' employment hereunder is
terminated prior to the expiration of the Term by Spectrum for cause, pursuant
to Section 6(c), Spectrum shall pay the following amounts to Mr. Roberts:
(1) any accrued but unpaid Base Salary (as determined pursuant to Section
3) for services rendered to the date of termination;
(2) any incurred but unreimbursed expenses required to be reimbursed
pursuant to Section 5(a) or 5(b);
(3) any vacation accrued and unused to the date of termination.
(c) In the event that Mr. Roberts' employment hereunder is
terminated by Spectrum without Cause pursuant to Section 6(d), or by Mr. Roberts
with Good Reason pursuant to Section 6(e), Spectrum shall pay the following
amounts to Mr. Roberts:
(1) any accrued but unpaid Base Salary (as determined pursuant to Section
3) for services rendered to the date of termination;
(2) any incurred but unreimbursed expenses required to be reimbursed
pursuant to Section 5(a) or 5(b);
(3) any vacation accrued and unused to the date of termination; and
(4) continued payment of the Base Salary in accordance Section 3 until the
expiration of the Term in accordance with Spectrum's standard payroll
practices.
(d) The benefits to which Mr. Roberts may be entitled upon
termination pursuant to the plans, policies and arrangements referred to in
Section 5(b) will be determined and paid in accordance with the terms of those
plans, policies and arrangements.
(e) Except as may be provided under this Agreement, under the
terms of any incentive compensation, employee benefit, or fringe benefit plan
applicable to Mr. Roberts at the
4
<PAGE>
time of termination of Mr. Roberts' employment prior to the end of the Term, Mr.
Roberts will not be entitled to receive any other compensation, or to
participate in any other plan, arrangement or benefit, with respect to any
future period after his termination or resignation.
8. Proprietary Information. (a) Mr. Roberts acknowledges that during
the course of his employment with Spectrum he will necessarily have access to
and make use of proprietary information and confidential records of Spectrum and
GMAI. Mr. Roberts shall not during the Term or at any time thereafter directly
or indirectly use for his own purpose or for the benefit of any person or entity
other than Spectrum or GMAI nor otherwise disclose, any proprietary information
to any person or entity, unless that disclosure has been authorized in writing
by Spectrum or GMAI or is otherwise required by law.
(b) Mr. Roberts understands that subject to Section 8(c), the term
"proprietary information" includes, but is not limited to, the following:
(1) the name and address of any customer, vendor or affiliate of Spectrum
or GMAI or any information concerning the transactions or relations of
any such customer, vendor or affiliate with Spectrum or GMAI or any of
Spectrum's or GMAI's partners, principals, directors, officers or
agents;
(2) any information concerning any product, technology, or procedure
employed by Spectrum or GMAI but not generally known to their
customers, vendors or competitors, or under development by or being
tested by Spectrum or GMAI but not at the time offered generally to
customers or vendors;
(3) any information relating to Spectrum's or GMAI's computer software,
computer systems, pricing or marketing methods, sales margins, cost of
goods, cost of material, capital structure, operating results,
borrowing arrangements or business plans;
(4) any information which is generally regarded as confidential or
proprietary in any line of business engaged in by Spectrum or GMAI;
(5) any business plans, budgets, advertising or marketing plans of Spectrum
of GMAI;
(6) any information contained in any of Spectrum's or GMAI's written or
oral policies and procedures or manuals;
(7) any information belonging to customers, vendors or affiliates of
Spectrum or GMAI or any other person or entity which Spectrum or GMAI
has agreed to hold in confidence;
(8) any inventions, innovations or improvements covered by this Agreement;
(9) salary, staffing and employment information of Spectrum or GMAI; and
(10) all materials relating to or embodying any of the foregoing, whether in
a handwritten, printed, graphic, video, audio, electronic or other
medium.
5
<PAGE>
(c) Mr. Roberts acknowledges that information that is not novel or
copyrighted or patented may nonetheless be proprietary information.
(d) The term "proprietary information" does not include
information known by Mr. Roberts prior to his employment by Spectrum or
information generally available to and known by the public or information that
is or becomes available to Mr. Roberts on a non-confidential basis from a source
other than Spectrum or GMAI or their respective directors, officers, employees,
partners, principals or agents (other than as a result of a breach of any
obligation of confidentiality).
9. Surrender of Records. All proprietary information is and will remain
the sole property of Spectrum or (GMAI as the case may be) during the Term and
thereafter. Following termination of his employment hereunder for any reason Mr.
Roberts may not retain any proprietary information, and shall promptly return to
Spectrum (or GMAI as the case may be) any proprietary information in his
possession.
10. Intellectual Property. All inventions, innovations or improvements
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether patent, copyright, trademark, service mark, or otherwise)
conceived or made by Mr. Roberts, either alone or jointly with others, in the
course of his employment by Spectrum, and any derivatives of any such
inventions, innovations, or improvements, belong to Spectrum. Mr. Roberts shall
promptly disclose to Spectrum in writing all such inventions, innovations or
improvements and perform all actions reasonably requested by Spectrum to
establish and confirm ownership by Spectrum, including, but not limited to,
cooperating with and assisting Spectrum in obtaining patents, copyrights,
trademarks, or service marks for Spectrum in the United States and in foreign
countries. Mr. Roberts agrees that any application filed by Mr. Roberts within
one year after the termination of his employment hereunder will be presumed to
constitute an invention that was made during his employment unless he can
provide evidence satisfactory to Spectrum to the contrary.
11. Confidentiality. Mr. Roberts shall keep confidential the terms of
this Agreement. This provision does not prohibit Mr. Roberts from providing this
information to his attorneys or accountants for purposes of obtaining legal or
tax advice or as otherwise required by law. Spectrum shall not disclose the
terms of this Agreement except as necessary in the ordinary course of its
business or as required by law.
12. Enforcement. Mr. Roberts acknowledges that, by virtue of his
position, his services and access to and use of confidential records and
proprietary information, any violation by him of any of the undertakings
contained in Sections 8 through 11 would cause Spectrum and GMAI immediate,
substantial and irreparable injury for which it has no adequate remedy at law.
Accordingly, Mr. Roberts consents to Spectrum and GMAI seeking entry of an
injunction or other equitable relief from a court of competent jurisdiction
restraining any violation or threatened violation of any undertaking contained
in Sections 8 through 11. Mr. Roberts waives posting by Spectrum and GMAI of any
bond otherwise necessary to secure any such injunction or other equitable
relief. Rights and remedies provided for in this Section 12 are cumulative and
shall be in addition to rights and remedies otherwise available to the parties
hereunder or under any other agreement or applicable law.
6
<PAGE>
13. Notices. (a) Every notice or other communication required or
contemplated by this Agreement must be in writing and sent by one of the
following methods: (1) personal delivery, in which case delivery is deemed to
occur the day of delivery; (2) certified or registered mail, postage prepaid,
return receipt requested, in which case delivery is deemed to occur the day it
is officially recorded by the U.S. Postal Service as delivered to the intended
recipient; or (3) next-day delivery to a U.S. address by recognized overnight
delivery service such as Federal Express, in which case delivery is deemed to
occur one business day after being sent. In each case, a notice or other
communication sent to a party must be directed to the address for that party set
forth below, or to another address designated by that party by written notice:
If to Spectrum or GMAI, to:
Spectrum Numismatics International, Inc.
P.O. Box 1853
Irvine, CA 92623
Attention: Board of Directors
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, NJ 07006
Attention: Greg Manning
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
If to Mr. Roberts, to:
Mr. Greg Roberts
[Address]
with a copy to:
[Name and address]
14. Assignability; Binding Effect. This Agreement is a personal
contract calling for the provision of unique services by Mr. Roberts, and Mr.
Roberts' rights and obligations hereunder may not be sold, transferred,
assigned, pledged or hypothecated. In the event of any attempted assignment or
transfer of rights hereunder by Mr. Roberts contrary to the provisions of this
Agreement (other than as may be required by law), Spectrum will have no further
liability for payments under this Agreement. The rights and obligations of
Spectrum and GMAI under this Agreement bind and run in favor of the successors
and assigns of Spectrum and GMAI.
7
<PAGE>
15. Complete Understanding. This Agreement constitutes the complete
understanding between the parties with respect to the employment of Mr. Roberts
by Spectrum and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter of this
Agreement.
16. Amendments; Waivers. This Agreement may not be amended except by an
instrument in writing signed on behalf of Spectrum and Mr. Roberts and GMAI. No
waiver by any party of any breach under this Agreement will be deemed to extend
to any prior or subsequent breach or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence. Waiver by either party of any
breach by the other party will not operate as a waiver of any other breach,
whether similar to or different from the breach waived. No delay on the part of
Spectrum or Mr. Roberts in the exercise of any of their respective rights or
remedies will operate as a waiver of that right.
17. Severability. If any provision of this Agreement or its application
to any person or circumstances is determined by any court of competent
jurisdiction to be unenforceable to any extent, that unenforceable provision
will be deemed eliminated to the extent necessary to permit the remaining
provisions to be enforced, and the remainder of this Agreement, or the
application of the unenforceable provision to other persons or circumstances,
will not be affected thereby. If any provision of this Agreement, or any part
thereof, is held to be unenforceable because of the scope or duration of or the
area covered by that provision, the court making that determination shall reduce
the scope, duration of or area covered by that provision or otherwise amend the
provision to the minimum extent necessary to make that provision enforceable to
the fullest extent permitted by law.
18. Survivability. The provisions of this Agreement that by their terms
call for performance subsequent to termination of Mr. Roberts' employment
hereunder, or of this Agreement, will survive such termination.
19. Governing Law. This Agreement is governed by the laws of the State
of California, without giving effect to principles of conflict of laws.
20. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement must be brought against any of the parties in the courts of the State
of California, County of Orange, or, if it has or can acquire jurisdiction, in
the United States District Court for the __________ District of California, and
each of the parties consents to the jurisdiction of those courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served by sending or delivering a copy of the process to the party to be served
at the address and in the manner provided for the giving of notices in Section
13. Nothing in this Section 20, however, affects the right of any party to serve
legal process in any other manner permitted by law.
8
<PAGE>
The undersigned hereby execute this Agreement on the date stated in the
introductory clause.
SPECTRUM NUMISMATICS
INTERNATIONAL, LTD.
By:______________________________
Name:
Title:
GREG MANNING AUCTIONS, INC.
By:______________________________
Name:
Title:
_________________________________
GREGORY N. ROBERTS
9
<PAGE>
EXHIBIT B-2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated ____________,
2000, and is between SPECTRUM NUMISMATICS INTERNATIONAL, LTD., a California
corporation ("Spectrum"), GREG MANNING AUCTIONS, INC, a New York corporation
("GMAI"), and ELAINE DINGES, an individual.
Concurrently with execution and delivery of this Agreement, Spectrum is
being acquired by GMAI by means of a merger of Spectrum Acquisition, Inc., a
California corporation and a wholly-owned subsidiary of GMAI, into Spectrum. Ms.
Dinges was a stockholder of Spectrum, and in connection with the acquisition of
Spectrum by GMAI she is being issued shares of GMAI common stock in exchange for
her shares of Spectrum common stock.
Ms. Dinges has been employed by Spectrum as its Chief Financial Officer
and Chief Operating Officer. Spectrum now wishes to continue to employ Ms.
Dinges on the terms and conditions set forth in this Agreement, and Ms. Dinges
wishes to be so employed.
Spectrum and Ms. Dinges therefore agree as follows:
1. Employment; Term. Spectrum hereby employs Ms. Dinges, and Ms. Dinges
hereby accepts employment with Spectrum, in accordance with and subject to the
terms and conditions set forth in this Agreement. The term of this Agreement
(the "Term") commences on the date of this Agreement and, unless earlier
terminated in accordance with Section 6, will terminate on the fifth anniversary
of the date of this Agreement. Prior to the end of the Term Spectrum and Ms.
Dinges may by written agreement signed by them extend the Term for one or more
additional one-year periods.
2. Duties. (a) During the Term, Ms. Dinges shall serve as Chief
Financial Officer and Chief Operating Officer of Spectrum and shall report to
the President of Spectrum. Ms. Dinges will have such duties and responsibilities
as are customary for Ms. Dinges' position and any other duties or
responsibilities he may be reasonably assigned by the President of Spectrum.
(b) During the period Ms. Dinges is employed by Spectrum, Ms.
Dinges shall devote her full business time and best efforts to the business and
affairs of Spectrum. Ms. Dinges understands and acknowledges that Ms. Dinges'
duties will require business travel from time to time.
3. Compensation. Spectrum shall pay Ms. Dinges a salary of $175,000 for
the first year, which will increase by 5% per annum on each anniversary of the
date of this Agreement (that salary, including any increase thereof, the "Base
Salary"). Each per annum increase will be based on the Base Salary in effect for
the year immediately preceeding the anniversary date in question. Payment of the
Base Salary will be in accordance with Spectrum's standard payroll practices and
subject to all legally required or customary withholdings.
4. Stock Options. Concurrently with execution and delivery of this
Agreement, GMAI shall, pursuant to a Stock Option Agreement between GMAI and Ms.
Dinges in the form
<PAGE>
of Exhibit A, grant to Ms. Dinges options to purchase 100,000 shares of common
stock of GMAI.
5. Benefits. Upon submission by Ms. Dinges of vouchers in accordance
with Spectrum's standard procedures, Spectrum shall reasonably promptly
reimburse Ms. Dinges for all reasonable and necessary travel, business
entertainment and other business expenses incurred by Ms. Dinges in connection
with the performance of her duties under this Agreement.
(b) Ms. Dinges is entitled to participate in any and all medical
insurance, group health, disability insurance and other benefit plans that are
made generally available by Spectrum to employees of Spectrum, provided that the
medical, group health and disability insurance benefits provided by Spectrum to
Ms. Dinges shall be substantially as favorable to Ms. Dinges or more favorable
to Ms. Dinges as those generally provided by GMAI to its senior executives..
Spectrum shall pay all premiums and deductibles payable in connection with
medical insurance provided for Ms. Dinges. Additionally, Ms. Dinges is entitled
to receive four weeks paid vacation a year and paid holidays made available
pursuant to Spectrum's policy to all employees of Spectrum. Spectrum, in its
sole discretion, may at any time amend or terminate any such benefit plans or
programs, upon not less than 30 days' prior written notice to Ms. Dinges.
(c) [Upon submission of vouchers in accordance with Spectrum's
standard procedures, Spectrum shall reasonably promptly directly pay or
reimburse Ms. Dinges for her reasonable motor vehicle costs and related
expenses, such as insurance, repairs, maintenance, and gas, up to $750.00 per
month.]
6. Termination. Ms. Dinges' employment hereunder may be terminated
prior to the end of the Term under the following circumstances:
(a) Ms. Dinges' employment hereunder will terminate upon Ms.
Dinges' death.
(b) Except as otherwise required by law, Spectrum may terminate
Ms. Dinges' employment hereunder at any time after Ms. Dinges becomes Totally
Disabled. For purposes of this Agreement, Ms. Dinges will be "Totally Disabled"
as of the earlier of (1) the date Ms. Dinges becomes entitled to receive
disability benefits under Spectrum's long-term disability plan and (2) Ms.
Dinges' inability to perform the duties and responsibilities contemplated under
this Agreement for a period of more than 120 consecutive days due to physical or
mental incapacity or impairment.
(c) Spectrum may terminate Ms. Dinges' employment hereunder for
Cause at any time after providing written notice to Ms. Dinges. For purposes of
this Agreement, "Cause" means any of the following:
(1) Ms. Dinges' neglect or failure or refusal to perform her duties under
this Agreement (other than as a result of total or partial incapacity
due to physical or mental illness);
(2) Any act by or omission of Ms. Dinges that materially injures the
reputation, business, or business relationship of Spectrum or any of
its affiliates;
2
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(3) Ms. Dinges' conviction (including conviction on a nolo contendere plea)
of a felony or any crime involving, in the good faith judgment of
Spectrum, fraud, dishonesty or moral turpitude;
(4) the breach of an obligation set forth in Section 8, 9 or 10 and
(5) any other material breach of this Agreement.
In the cases of "neglect or failure" to perform her duties under this Agreement,
as set forth in 6(c)(1) above, or material breach as set forth in 6(c)(5) above,
a termination by Spectrum with Cause shall be effective only if, within 30 days
following delivery of a written notice by Spectrum to Ms. Dinges that Spectrum
is terminating her employment with Cause, Ms.
Dinges has failed to cure the circumstances giving rise to Cause.
(d) Spectrum may terminate Ms. Dinges' employment hereunder for
any reason, upon 30 days' prior written notice.
(e) Ms. Dinges may terminate her employment hereunder for Good
Reason at any time after providing written notice to Spectrum. For the purposes
of this Agreement, "Good Reason" means any of the following:
(1) Spectrum decreases or fails to pay Ms. Dinges' Base Salary provided in
Section 3 or the benefits described in Section 5 above;
(2) Ms. Dinges [no longer holds the office of Chief Financial Officer and
Chief Operating Officer or offices of equivalent stature], or Ms.
Dinges' functions and/or duties are materially diminished; or
(3) Ms. Dinges' job site is relocated to a location which is more than
thirty (30) miles from the current location, unless the parties
mutually agree to relocate more than thirty (30 miles from the current
location.
A termination by Ms. Dinges with Good Reason shall be effective only if, within
30 days following delivery of a written notice by Ms. Dinges to Spectrum that
Ms. Dinges is terminating her employment with Good Reason, Spectrum has failed
to cure the circumstances giving rise to Good Reason.
7. Compensation Following Termination Prior to the End of the Term. In
the event that Ms. Dinges' employment hereunder is terminated prior to the end
of the Term, Ms. Dinges will be entitled only to the following compensation and
benefits upon such termination:
(a) In the event that Ms. Dinges' employment hereunder is
terminated prior to the expiration of the Term by reason of Ms. Dinges' death or
Total Disability, pursuant to Section 6(a) or 6(b), Spectrum shall pay the
following amounts to Ms. Dinges (or Ms. Dinges' estate, as the case may be):
(1) any accrued but unpaid Base Salary (as determined pursuant to Section
3) for services rendered to the date of termination;
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<PAGE>
(2) any incurred but unreimbursed expenses required to be reimbursed
pursuant to Section 5(a) or 5(b);
(3) any vacation accrued and unused to the date of termination.
In addition, for a period of six (6) months, beginning on the date of
termination of Ms. Dinges' employment by reason of death or Total Disability,
Spectrum will, at its expense, provide medical and group health insurance
benefits to Ms. Dinges (or her family, as the case may be), which benefits shall
be substantially as favorable or more favorable to Ms. Dinges (or her family as
the case may be) as those provided to her (or her family as the case may be)
immediately preceding the termination of her employment.
(b) In the event that Ms. Dinges' employment hereunder is
terminated prior to the expiration of the Term by Spectrum for cause, pursuant
to Section 6(c), Spectrum shall pay the following amounts to Ms. Dinges:
(1) any accrued but unpaid Base Salary (as determined pursuant to Section
3) for services rendered to the date of termination;
(2) any incurred but unreimbursed expenses required to be reimbursed
pursuant to Section 5(a) or 5(b);
(3) any vacation accrued and unused to the date of termination.
(c) In the event that Ms. Dinges' employment hereunder is
terminated by Spectrum without Cause pursuant to Section 6(d), or by Ms. Dinges
with Good Reason pursuant to Section 6(e), Spectrum shall pay the following
amounts to Ms. Dinges:
(1) any accrued but unpaid Base Salary (as determined pursuant to Section
3) for services rendered to the date of termination;
(2) any incurred but unreimbursed expenses required to be reimbursed
pursuant to Section 5(a) or 5(b);
(3) any vacation accrued and unused to the date of termination; and
(4) continued payment of the Base Salary in accordance with Section 3 until
the expiration of the Term in accordance with Spectrum's standard
payroll practices.
(d) The benefits to which Ms. Dinges may be entitled upon
termination pursuant to the plans, policies and arrangements referred to in
Section 5(b) will be determined and paid in accordance with the terms of those
plans, policies and arrangements.
(e) Except as may be provided under this Agreement, under the
terms of any incentive compensation, employee benefit, or fringe benefit plan
applicable to Ms. Dinges at the time of termination of Ms. Dinges' employment
prior to the end of the Term, Ms. Dinges will not be entitled to receive any
other compensation, or to participate in any other plan, arrangement or benefit,
with respect to any future period after her termination or resignation.
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<PAGE>
8. Proprietary Information. (a) Ms. Dinges acknowledges that during the
course of her employment with Spectrum she will necessarily have access to and
make use of proprietary information and confidential records of Spectrum and
GMAI. Ms. Dinges shall not during the Term or at any time thereafter directly or
indirectly use for her own purpose or for the benefit of any person or entity
other than Spectrum or GMAI nor otherwise disclose, any proprietary information
to any person or entity, unless that disclosure has been authorized in writing
by Spectrum or GMAI or is otherwise required by law.
(b) Ms. Dinges understands that subject to Section 8(c), the term
"proprietary information" includes, but is not limited to, the following:
(1) the name and address of any customer, vendor or affiliate of Spectrum
or GMAI or any information concerning the transactions or relations of
any such customer, vendor or affiliate with Spectrum or GMAI or any of
Spectrum's or GMAI's partners, principals, directors, officers or
agents;
(2) any information concerning any product, technology, or procedure
employed by Spectrum or GMAI but not generally known to their
customers, vendors or competitors, or under development by or being
tested by Spectrum or GMAI but not at the time offered generally to
customers or vendors;
(3) any information relating to Spectrum's or GMAI's computer software,
computer systems, pricing or marketing methods, sales margins, cost of
goods, cost of material, capital structure, operating results,
borrowing arrangements or business plans;
(4) any information which is generally regarded as confidential or
proprietary in any line of business engaged in by Spectrum or GMAI;
(5) any business plans, budgets, advertising or marketing plans of Spectrum
of GMAI;
(6) any information contained in any of Spectrum's or GMAI's written or
oral policies and procedures or manuals;
(7) any information belonging to customers, vendors or affiliates of
Spectrum or GMAI or any other person or entity which Spectrum or GMAI
has agreed to hold in confidence;
(8) any inventions, innovations or improvements covered by this Agreement;
(9) salary, staffing and employment information of Spectrum or GMAI; and
(10) all materials relating to or embodying any of the foregoing, whether in
a handwritten, printed, graphic, video, audio, electronic or other
medium.
(c) Ms. Dinges acknowledges that information that is not novel or
copyrighted or patented may nonetheless be proprietary information.
(d) The term "proprietary information" does not include
information known by Ms. Dinges prior to her employment by Spectrum or
information generally available to and
5
<PAGE>
known by the public or information that is or becomes available to Ms. Dinges on
a non-confidential basis from a source other than Spectrum or GMAI or their
respective directors, officers, employees, partners, principals or agents (other
than as a result of a breach of any obligation of confidentiality).
9. Surrender of Records. All proprietary information is and will remain
the sole property of Spectrum or (GMAI as the case may be) during the Term and
thereafter. Following termination of her employment hereunder for any reason Ms.
Dinges may not retain any proprietary information, and shall promptly return to
Spectrum (or GMAI as the case may be) any proprietary information in her
possession.
10. Intellectual Property. All inventions, innovations or improvements
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether patent, copyright, trademark, service mark, or otherwise)
conceived or made by Ms. Dinges, either alone or jointly with others, in the
course of her employment by Spectrum, and any derivatives of any such
inventions, innovations, or improvements, belong to Spectrum. Ms. Dinges shall
promptly disclose to Spectrum in writing all such inventions, innovations or
improvements and perform all actions reasonably requested by Spectrum to
establish and confirm ownership by Spectrum, including, but not limited to,
cooperating with and assisting Spectrum in obtaining patents, copyrights,
trademarks, or service marks for Spectrum in the United States and in foreign
countries. Ms. Dinges agrees that any application filed by Ms. Dinges within one
year after the termination of her employment hereunder will be presumed to
constitute an invention that was made during her employment unless she can
provide evidence satisfactory to Spectrum to the contrary.
11. Confidentiality. Ms. Dinges shall keep confidential the terms of
this Agreement. This provision does not prohibit Ms. Dinges from providing this
information to her attorneys or accountants for purposes of obtaining legal or
tax advice or as otherwise required by law. Spectrum shall not disclose the
terms of this Agreement except as necessary in the ordinary course of its
business or as required by law.
12. Enforcement. Ms. Dinges acknowledges that, by virtue of her
position, her services and access to and use of confidential records and
proprietary information, any violation by her of any of the undertakings
contained in Sections 8 through 11 would cause Spectrum and GMAI immediate,
substantial and irreparable injury for which they have no adequate remedy at
law. Accordingly, Ms. Dinges consents to Spectrum and GMAI seeking entry of an
injunction or other equitable relief from a court of competent jurisdiction
restraining any violation or threatened violation of any undertaking contained
in Sections 8 through 11. Ms. Dinges waives posting by Spectrum and GMAI of any
bond otherwise necessary to secure any such injunction or other equitable
relief. Rights and remedies provided for in this Section 12 are cumulative and
shall be in addition to rights and remedies otherwise available to the parties
hereunder or under any other agreement or applicable law.
13. Notices. (a) Every notice or other communication required or
contemplated by this Agreement must be in writing and sent by one of the
following methods: (1) personal delivery, in which case delivery is deemed to
occur the day
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<PAGE>
of delivery; (2) certified or registered mail, postage prepaid, return receipt
requested, in which case delivery is deemed to occur the day it is officially
recorded by the U.S. Postal Service as delivered to the intended recipient; or
(3) next-day delivery to a U.S. address by recognized overnight delivery service
such as Federal Express, in which case delivery is deemed to occur one business
day after being sent. In each case, a notice or other communication sent to a
party must be directed to the address for that party set forth below, or to
another address designated by that party by written notice:
If to Spectrum or GMAI, to:
Spectrum Numismatics International, Inc.
P.O. Box 1853
Irvine, CA 92623
Attention: Board of Directors
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, NJ 07006
Attention: Greg Manning
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
If to Ms. Dinges, to:
Ms. Elaine Dinges
[Address]
with a copy to:
[Name and address]
14. Assignability; Binding Effect. This Agreement is a personal
contract calling for the provision of unique services by Ms. Dinges, and Ms.
Dinges' rights and obligations hereunder may not be sold, transferred, assigned,
pledged or hypothecated. In the event of any attempted assignment or transfer of
rights hereunder by Ms. Dinges contrary to the provisions of this Agreement
(other than as may be required by law), Spectrum will have no further liability
for payments under this Agreement. The rights and obligations of Spectrum and
GMAI under this Agreement bind and run in favor of the successors and assigns of
Spectrum and GMAI.
15. Complete Understanding. This Agreement constitutes the complete
understanding between the parties with respect to the employment of Ms. Dinges
by Spectrum and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter of this
Agreement.
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16. Amendments; Waivers. This Agreement may not be amended except by an
instrument in writing signed on behalf of Spectrum and Ms. Dinges and GMAI. No
waiver by any party of any breach under this Agreement will be deemed to extend
to any prior or subsequent breach or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence. Waiver by either party of any
breach by the other party will not operate as a waiver of any other breach,
whether similar to or different from the breach waived. No delay on the part of
Spectrum or Ms. Dinges in the exercise of any of their respective rights or
remedies will operate as a waiver of that right.
17. Severability. If any provision of this Agreement or its application
to any person or circumstances is determined by any court of competent
jurisdiction to be unenforceable to any extent, that unenforceable provision
will be deemed eliminated to the extent necessary to permit the remaining
provisions to be enforced, and the remainder of this Agreement, or the
application of the unenforceable provision to other persons or circumstances,
will not be affected thereby. If any provision of this Agreement, or any part
thereof, is held to be unenforceable because of the scope or duration of or the
area covered by that provision, the court making that determination shall reduce
the scope, duration of or area covered by that provision or otherwise amend the
provision to the minimum extent necessary to make that provision enforceable to
the fullest extent permitted by law.
18. Survivability. The provisions of this Agreement that by their terms
call for performance subsequent to termination of Ms. Dinges' employment
hereunder, or of this Agreement, will survive such termination.
19. Governing Law. This Agreement is governed by the laws of the State
of California, without giving effect to principles of conflict of laws.
20. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement must be brought against any of the parties in the courts of the State
of California, County of Orange, or, if it has or can acquire jurisdiction, in
the United States District Court for the __________ District of California, and
each of the parties consents to the jurisdiction of those courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served by sending or delivering a copy of the process to the party to be served
at the address and in the manner provided for the giving of notices in Section
13. Nothing in this Section 20, however, affects the right of any party to serve
legal process in any other manner permitted by law.
8
<PAGE>
The undersigned hereby execute this Agreement on the date stated in the
introductory clause.
SPECTRUM NUMISMATICS
INTERNATIONAL, LTD.
By:_____________________________
Name:
Title:
GREG MANNING AUCTIONS, INC.
By:____________________________
Name:
Title:
_______________________________
ELAINE DINGES
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EXHIBIT C
AGREEMENT REGARDING SALE OF STOCK
This Agreement Regarding Sale of Stock (this "Agreement") is dated
______________, 2000, and is between GREG MANNING AUCTIONS, INC., a New York
corporation, and WARREN TREPP, as trustee of the Rabard Trust dated August 25,
1989 (the "Trust"), GREGORY N. ROBERTS and SHARON ROBERTS (collectively,
"Roberts"), and ELAINE DINGES, each an individual (each of the Trust, Roberts
and Ms. Dinges, a "Stockholder" and collectively the "Stockholders").
GMAI, the Stockholders, Spectrum Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of GMAI ("Sub"), and Spectrum
Numismatics International, Inc., a California corporation ("Spectrum"), are
parties to a Merger Agreement pursuant to which GMAI is acquiring all the issued
and outstanding capital stock of Spectrum by means of a merger of Sub into
Spectrum (that agreement, the "Merger Agreement"; that merger, the "Merger")).
Pursuant to the Merger Agreement, the Stockholders are being issued
shares of common stock, par value $0.01 per share, of GMAI (those shares, the
"Merger Shares").
Pursuant to Section 3(a)(10) of the Securities Act, the Department of
Corporations of the State of California has approved the fairness of the Merger.
Consequently, the Merger Shares are exempt from registration under the
Securities Act, and furthermore any transfer of Merger Shares would not normally
be subject to the one-year holding period of Rule 144(d) promulgated under the
Securities Act, though any such transfer would be subject to other restrictions
provided for under Rule 144.
GMAI and the Stockholders wish to specify the certain rights and
obligations of the Stockholders in connection with sales of the Merger Shares.
In particular, GMAI and the Stockholders wish to provide that with the exception
of a limited number of Merger Shares stated in Section 2(2) below, the
Stockholders will in effect hold the Merger Shares as if the Department of
Corporations of the State of California had not approved the fairness of the
Merger and as if any transfer of Merger Shares were subject to all the
provisions of Rule 144, including the one-year holding period of Rule 144(d).
The parties therefore agree as follows:
1. Definitions. As used in this Agreement, the following terms
have the following meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any similar successor federal statute), and the rules and regulations
thereunder, as in effect from time to time.
"Reporting Event" means the date on which GMAI publicly releases
consolidated financial results that include at least 30 days of combined
operations of GMAI and Spectrum, which release may consist of a quarterly
earnings report, any filing with the SEC or any public announcement through
regular means.
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended (or any
similar successor federal statute), and the rules and regulations thereunder as
in effect from time to time.
"Sell" or "Sale" means, with respect to the Merger Shares, any offer,
issue, sale, contract to sell, grant of any option for the sale of, or other
transfer or disposition of, directly or indirectly, any of the Merger Shares.
2. Restrictions on Sale. Without the prior written consent of GMAI,
which consent GMAI may withhold in its sole discretion, no Stockholder may do
the following:
(1) sell any Merger Shares at any time prior to the Reporting Event;
(2) at any time prior to the one-year anniversary of the date of this
Agreement, Sell in the aggregate in excess of the following:
(A) in the case of Warren Trepp, 253,891 Merger Shares;
(B) in the case of Gregory N. Roberts, 191,593 Merger Shares; and
(C) in the case of Elaine Dinges, 45,743 Merger Shares.
3. Additional Obligations. Nothing herein affects any other obligations
of or restrictions applicable to the Stockholders with respect to any Sales of
the Merger Shares, including without limitation those set forth in the Exchange
Act and the Securities Act and those set forth in any policy adopted from time
to time by GMAI regarding trading by directors, officers, 10% stockholders or
employees of GMAI.
4. Adjustments. The number of Merger Shares set forth in Section 2 will
be appropriately adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend, reorganization, recapitalization, split up,
combination or exchange of shares, or other like event with respect to shares of
common stock of GMAI.
2
<PAGE>
5. Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, without the written consent of each
party hereto.
6. Notices. Every notice or other communication required or
contemplated by this Agreement must be in writing and sent by one of the
following methods: (1) personal delivery, in which case delivery is deemed to
occur the day of delivery; (2) certified or registered mail, postage prepaid,
return receipt requested, in which case delivery is deemed to occur the day it
is officially recorded by the U.S. Postal Service as delivered to the intended
recipient; or (3) next-day delivery to a U.S. address by recognized overnight
delivery service such as Federal Express, in which case delivery is deemed to
occur one business day after being sent. In each case, a notice or other
communication sent to a party must be directed to the address for that party set
forth below, or to another address designated by that party by written notice:
If to a Stockholder, at the most current address for that
Stockholder as it appears on the books of GMAI; and
If to GMAI, to:
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, NJ 07006
Attention: Mr. Greg Manning
Chairman, President and CEO
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
7. Successors and Assigns. This Agreement inures to the benefit of and
is binding upon the successors, transferees and assigns of the parties hereto.
8. Governing Law. This Agreement is governed by the laws of the State
of New York, without giving effect to principles of conflict of laws.
9. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement must be brought against any of the parties in the courts of the State
of New York, County of New York, or, if it has or can acquire jurisdiction, in
the United States District Court for the Southern District of New York, and each
of the parties consents to the jurisdiction of those courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served by sending or delivering a copy of the process to the party to be served
at the address and in the manner provided for the giving of
3
<PAGE>
notices in Section 6. Nothing in this Section 9, however, affects the right of
any party to serve legal process in any other manner permitted by law.
10. Entire Agreement. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.
4
<PAGE>
The undersigned hereby execute this Agreement on the date stated in the
introductory clause.
GREG MANNING AUCTIONS, INC.
By: ________________________________
Name:
Title:
____________________________________
WARREN TREPP
____________________________________
GREGORY N. ROBERTS
____________________________________
SHARON. ROBERTS
____________________________________
ELAINE DINGES
<PAGE>
EXHIBIT D
AFFILIATE AGREEMENT
______________, 2000
Greg Manning Auctions, Inc.
775 Passaic Avenue
West Caldwell, NJ 07006
Attention: Mr. Greg Manning
Re: Pooling Restrictions
--------------------
Gentlemen and Ladies:
Greg Manning Auctions, Inc., a New York corporation ("GMAI"), Spectrum
Acquisitions, Inc., a Delaware corporation and a wholly-owned subsidiary of GMAI
("Merger Sub"), Spectrum Numismatics International, Inc., a California
corporation ("Spectrum") and the stockholders of Spectrum have entered into a
Merger Agreement dated December 8, 1999 (the "Merger Agreement"; capitalized
terms not otherwise defined in this Agreement are as defined in the Merger
Agreement), pursuant to which Merger Sub will be merged (the "Merger") with and
into Spectrum and each outstanding share of Spectrum Common Stock will be
converted into the right to receive GMAI Common Stock.
The undersigned has been advised that the undersigned may be deemed to
be an "affiliate" of GMAI, as such term is used in Accounting Series Releases
130 and 135, as amended, although nothing contained in this Agreement shall be
construed as an admission that the undersigned is an affiliate of GMAI.
The undersigned has not at any time from and after 30 days prior to the
Effective Time of the Merger or in contemplation of the Merger engaged, and will
not, after the Effective Time and until such time as financial results covering
at least 30 days of combined operations of Spectrum and GMAI have been published
by the GMAI, sell, exchange, transfer, pledge, distribute or otherwise dispose
of (directly or indirectly), or grant any option, establish any "short" or
put-equivalent position or enter into any similar transaction (through
derivatives or otherwise) with respect to, any securities of GMAI; provided,
however, that subject to GMAI's prior written consent upon consultation with
GMAI's independent accountants, the undersigned may enter into any such
transaction (a "Permitted Transaction") if the manner of the transaction and the
number of the undersigned's GMAI Common Shares involved in the transaction do
not violate any Pooling Rules or any applicable law, rule or regulation.
The undersigned understands that the certificates representing the GMAI
Common Shares owned by the undersigned will be placed on the "stop-transfer
list" maintained by GMAI's transfer agent and will remain so listed until the
publication of such financial results;
<PAGE>
provided, however, that certificates representing GMAI Common Shares subject to
a Permitted Transaction may be removed from such "stop-transfer list" upon
written permission from GMAI.
This Agreement may be executed in counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same Agreement. This
Agreement is governed by the law of the State of New York, without reference to
conflict of laws principles. This Agreement may not be amended or modified, and
no provision of this Agreement may be waived, except in a writing signed by each
party to this Agreement. This Agreement is binding upon and inures to the
benefit of the parties' respective successors, assigns, heirs and personal
representatives.
Very truly yours,
__________________________________
Name:
Title:
Acknowledged and agreed to as of the date of this Agreement.
GREG MANNING AUCTIONS, INC.
By: ___________________________________
Name:
Title:
<PAGE>
PROXY CARD
GREG MANNING AUCTIONS, INC.
Special meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned shareholder of GREG MANNING AUCTIONS, INC. ("GMAI")
hereby revokes all previous proxies, acknowledges receipt of the Notice of
Special Meeting of Shareholders to be held on Friday, February 18, 2000, and the
related proxy statement, and appoints Greg Manning and James Smith, and each of
them, as proxies of the undersigned, with full power of substitution to vote all
shares of GMAI common stock that the undersigned is entitled to vote at special
meeting of GMAI shareholders to be held at GMAI's corporate headquarters at 775
Passaic Avenue, West Caldwell, New Jersey 07006, on February 18, 2000, at 10:00
a.m., local time, and at any adjournments thereof. The shares represented by the
proxy may only be voted in the manner specified below.
1. To approve the issuance of up to 1,754,385 shares of GMAI common stock
to shareholders of Spectrum Numismatics International, Inc.
("Spectrum") in connection with the Merger of Spectrum Acquisition,
Inc., a wholly-owned subsidiary of GMAI ("Sub"), into Spectrum pursuant
to a Merger Agreement dated December 8, 1999 between GMAI, Sub,
Spectrum and the shareholders of Spectrum.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve an amendment to GMAI's restated certificate of incorporation
to increase the number of authorized shares of GMAI common stock from
20 million to 40 million.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve the following amendments to GMAI's 1997 Stock Incentive Plan:
o an amendment to increase from 1,150,000 to 1,750,000 the total
number of shares that GMAI may issue in any given year under GMAI's
1993 Stock Option Plan and the 1997 Stock Incentive Plan;
o an amendment to increase from 100,000 to 200,000 the total number of
shares that GMAI may issue in any given year to an individual
employee of GMAI under the 1993 Stock Option Plan and the 1997 Stock
Incentive Plan; and
o an amendment to change the definition of the term "change of
control."
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and in their discretion, upon any other matters that may properly come before
the meeting or any adjournment thereof.
The board of directors recommends you vote "FOR" each of the above
proposals.
This proxy when properly executed will be voted in the manner directed
above. In the absence of direction for any proposal, this proxy will be voted
"FOR" that proposal.
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<PAGE>
(Continued on the other side.)
<PAGE>
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Please print the shareholder name exactly as it appears on this Proxy.
If the shares are registered in more than one name, the signature of each person
in whose name the shares are registered is required. A corporation should sign
in its full corporate name, with a duly authorized officer signing on behalf of
the corporation and stating his or her title. Trustees, guardians, executors,
and administrators should sign in their official capacity, giving their full
title as such. A partnership should sign in its partnership name, with an
authorized person signing on behalf of the partnership.
Dated: ____________, 2000
------------------------------------------
(Print Name)
------------------------------------------
(Authorized Signature)
I plan to attend the special meeting in person:
[ ] Yes
[ ] No
