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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 19, 1998
GILMAN & CIOCIA, INC.
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(Name of small business issuer in its charter)
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Delaware 000-22996 11-2587324
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(State or jurisdiction Commission (I.R.S.Employer
of incorporation or file Identification
organization) number No.)
475 Northern Boulevard, Great Neck, NY 11021
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(Address of principal executive offices) (Zip Code)
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(516) 482-4860
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(Issuer's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 19, 1998, Gilman & Ciocia, Inc., a Delaware corporation
(the "Company"), consummated the acquisition (the "Acquisition") of all of the
issued and outstanding capital stock of North Shore Capital Management Corp., a
New York corporation ("North Shore"), and North Ridge Securities Corp., a New
York corporation ("North Ridge"), pursuant to a Stock Purchase Agreement among
the Company, Daniel Levy ("Levy") and Joseph Clinard ("Clinard").
North Ridge is a registered securities broker/dealer and a member of
the National Association of Securities Dealers, Inc., and North Shore is a
management company. The principal assets of North Ridge and North Shore as of
June 30, 1998 consisted of $38,104 of accounts receivables; $463,727 of
commissions receivables; $16,105 in prepaid expenses, $150,146 in office
furniture and equipment, $37,994 in security deposits.
The Company delivered at the closing (the "Closing") of the Acquisition
$4,500,000 for all outstanding shares of common stock of North Shore, par value
$1.00, and $500,000 for all outstanding shares of common stock of North Ridge,
par value $1.00, and $250,000 to be allocated according to the net assets of
North Shore and North Ridge, or total acquisition consideration of $5,250,000.
The acquisition consideration was paid to Levy and Clinard, North Shore's and
North Ridge's sole shareholders, in the form of $2,250,000 in cash to Levy,
$750,000 by a 45-day promissory note to Levy, $1,500,000 in cash to Clinard,
$500,000 by a 45-day promissory note to Clinard and $250,000 in cash to
Steinberg,
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Fineo, Berger & Burlant, P.C. as escrow agent to hold as security for certain
indemnities that Levy and Clinard provided to the Company.
In addition, at the Closing, the Company entered into a Noncompetition
Agreement with Levy and Clinard dated November 19, 1998 restricting them from,
among other activities, competing with the Company for a period of five years
from the Closing.
The amount of consideration paid by the Company as set forth above was
determined by arms-length negotiations between the parties involved.
At the Closing, North Ridge entered into a one-year Consulting
Agreement with Clinard, commencing as of November 1, 1998, whereby he will
receive compensation in the form of commissions. Clinard will also receive
health insurance for the duration of the Consulting Agreement.
North Shore and North Ridge also entered into an Employment Agreement
with Levy, commencing as of November 1, 1998. Levy will also receive health
insurance for the duration of the Employment
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Agreement. The Company also granted stock options to Levy pursuant to a Stock
Option Agreement.
The source of funds used to effect the Acquisition was the the
Company's cash reserves accumulated predominately from the exercise of the
Company's Redeemable Public Warrants in October 1998, and drawings under the
Company's operating line of credit with State Bank of Long Island.
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(a) Financial Statements of Business Acquired.
To be filed by amendment.
(b) Pro-Forma Financial Information.
To be filed by amendment.
(c) Exhibits.
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Exhibit No. Description
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1 Stock Purchase Agreement dated November 19,
1998, by and among Gilman & Ciocia, Inc.,
Daniel R. Levy, and Joseph Clinard.
2 Non-competition Agreement dated as of November
19, 1998 by and among Daniel R. Levy, Joseph
Clinard, and Gilman & Ciocia, Inc.
3 Employment Agreement dated as of November
19, 1998 between Daniel R. Levy, and North
Shore Capital Management Corp., and North
Ridge Securities Corp.
4 Stock Option Agreement dated as of the 19th day
of November, 1998 between Gilman & Ciocia,
Inc., and Daniel R. Levy.
5 Consulting Agreement dated as of November 19,
1998 between Joseph Clinard, and North Ridge
Securities Corp.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: December 3, 1998
GILMAN & CIOCIA, INC.
By:/s/ James Ciocia
James Ciocia
President (authorized signatory)
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EXHIBIT INDEX
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Exhibit No. Description
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1 Stock Purchase Agreement dated November 19,
1998, by and among Gilman & Ciocia, Inc.,
Daniel R. Levy, and Joseph Clinard.
2 Non-competition Agreement dated as of November
19, 1998 by and among Daniel R. Levy, Joseph
Clinard, and Gilman & Ciocia, Inc.
3 Employment Agreement dated as of November
19, 1998 between Daniel R. Levy, and North
Shore Capital Management Corp., and North
Ridge Securities Corp.
4 Stock Option Agreement dated as of the 19th day
of November, 1998 between Gilman & Ciocia,
Inc., and Daniel R. Levy.
5 Consulting Agreement dated as of November 19,
1998 between Joseph Clinard, and North Ridge
Securities Corp.
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Exhibit 1
STOCK PURCHASE AGREEMENT
AGREEMENT dated November 19, 1998, by and among Gilman & Ciocia, Inc.,
a Delaware corporation with a principal office at 475 Northern Boulevard, Great
Neck, NY 11021 ("Purchaser"), Daniel R. Levy, an individual with an address at
17 Buttonwood Drive, Dix Hills, New York 11746 ("Levy"), and Joseph Clinard, an
individual with an address at 3 Coyler Drive, Greenlawn, New York 11740
("Clinard") (Levy and Clinard will be referred to herein as "Sellers" and
individually as a "Seller").
W I T N E S S E T H :
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the capital stock of North Shore Capital Management
Corp., a New York corporation ("North Shore"), and North Ridge Securities Corp.,
a New York corporation ("North Ridge") (collectively, North Shore and North
Ridge will be referred to herein as the "Company"), upon the terms hereinafter
set forth;
NOW, THEREFORE, in consideration of the covenants set forth herein and
in reliance on the representations and warranties contained herein, the parties
hereto hereby agree as follows:
Section 1. Purchase and Sale of Stock.
On the Closing Date (hereinafter defined), Seller shall sell, assign,
transfer and deliver, unto Purchaser, and its successors and assigns forever,
free and clear of all Liens (as defined in Section 5.5 hereof) all right, title,
interest and claims in or to all of the issued and outstanding capital stock
(the "Shares") of the Company.
Section 2. Status of Assets and Liabilities.
2.1. Acquired Assets. Sellers jointly and severally represent and
warrant to Purchaser and acknowledge and confirm that each such representation
and warranty shall be deemed to be material and that Purchaser is relying upon
such representations and warranties in connection with the execution, delivery
and performance of this Agreement, any investigation made by Purchaser or on its
behalf notwithstanding, except as otherwise specifically set forth herein and in
the Schedules hereto: the Company owns free and clear of Liens (as defined in
Section 5.5 hereof) or is using, pursuant to a valid and effective license or
lease described in the Schedules hereto, all of the business, properties,
contracts and assets of the Company or used by the Company in its business as
conducted since January 1, 1998, real, personal or mixed, tangible or
intangible, together with the goodwill of the Company, all as the same existed
on June 30, 1998, except for those assets disposed of in the ordinary course of
business consistent with past practice in arms-length
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transactions with unaffiliated parties, together with any additions thereto
after such date, (hereinafter, other than the Excluded Assets (as defined in
Section 2.2 below) sometimes together referred to as the "Acquired Assets").
2.2. Excluded Assets. The Acquired Assets do not include
the assets (herein collectively referred to as the "Excluded
Assets") of the Company as follows:
(a) counterclaims and cross claims to the extent relating to
any liability against which the Sellers indemnify Purchaser hereunder;
(b) insurance claims and rights under insurance policies to
the extent relating to any liability against which the Sellers indemnify
Purchaser hereunder;
(c) the personal property listed on Schedule 2.2 hereto; and
(d) the remaining installments totaling $185,000 due to the
Company from Met Life in connection with the settlement of the litigation
entitled North Shore Management Corp., et al. v. Metropolitan Life Insurance
Company, et al., New York State Supreme Court, Suffolk County (Index No.
94-17852).
in each case, to the extent not reflected as an asset on any
balance sheet of the Company.
Section 3. Consideration. The purchase price (the "Purchase Price") for
the Shares shall be total consideration of $5,000,000 plus the difference (such
difference being referred to herein as the "Excluded Cash Amount") of the
Company's tangible assets, other than property, plant and equipment, minus all
of its liabilities as of October 31, 1998 determined in accordance with
generally accepted accounting principles applied on a consistent basis with the
Company's June 30, 1998 financials, which shall be delivered in good funds to
Sellers at the Closing (as that term is defined in Section 4 below), to be
allocated as follows: $4,500,000 to the Shares of North Ridge and $500,000 to
the Shares of North Shore, and the Excluded Cash Amount in accordance with the
balance sheets of the Company as of October 31, 1998, provided that for every
$1.00 less than $5.5 million that North Ridge and North Shore generate in
combined net revenues (meaning gross revenues earned by such companies less bad
debt and consumer refunds) from all sources from January 1, 1999 to December 31,
1999, the Purchase Price shall be reduced $.91. Upon determination of such
combined net revenues, Sellers shall pay to the Purchaser the amount of any such
reduction in Purchase Price. Any provision herein to the contrary
notwithstanding, no price adjustment shall be made if the Purchaser shall be or
have been a debtor in bankruptcy, whether by voluntary or involuntary action, at
any time prior to December 31, 1999, and no Purchase Price reduction shall be
made on
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account of lost revenues resulting from the suspension or permanent cessation of
the Company's operations pursuant to an injunction obtained by the Securities
and Exchange Commission. The Purchaser shall pay $250,000 in respect of the
Excluded Cash Amount in accordance with Section 8.5 below. Purchase price shall
be paid 60% to Levy and 40% to Clinard.
Section 4. Closing. The consummation of the purchase and sale of the
Shares contemplated by this Agreement (the "Closing") shall take place on or
about the date hereof (the "Closing Date").
Section 5. Representations and Warranties of Sellers. Sellers, jointly
and severally, represent and warrant to Purchaser as follows, and acknowledge
and confirm that each such representation and warranty shall be deemed to be
material and that Purchaser is relying upon such representations and warranties
in connection with the execution, delivery and performance of this Agreement,
notwithstanding any investigation made by Purchaser or on its behalf.
5.1. Proper Authority and Structure. The Company has the power and
authority to own, lease and operate its properties and to carry on its business
as now conducted. The Company has no subsidiaries or equity investments in any
entities.
5.2. Consents, Authorizations and Binding Effect.
(a) Sellers may execute, deliver and perform this Agreement
without the necessity of obtaining any consent, approval, authorization or
waiver or giving any notice or otherwise.
(b) This Agreement has been duly authorized, executed and
delivered by Sellers and constitutes the legal, valid and binding obligation of
Sellers, enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement will not:
(i) conflict with, result in the breach of, constitute a
default, with or without notice and/or lapse of time, under, result in
being declared void or voidable any provision of, or result in any
right to terminate or cancel any contract, lease, agreement, license,
commitment or purchase order to which Company or Sellers or any of
their properties is bound;
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(ii) conflict with either Company's Certificates of
Incorporation or By-Laws, which are annexed hereto, together with all
amendments thereto, as Schedule 5.2(b);
(iii) constitute a violation of any statute, judgment, order,
decree or regulation or rule of any court, governmental authority or
arbitrator applicable or relating to any of Sellers, the Company's
assets or the business and operations of either of North Ridge or North
Shore (collectively, the "Business"), excluding, however, the
following: any consent, approval, authorization or similar action that
my be required by any federal, state, and/or municipal agency, the
National Association of Securities Dealers, Inc., or any other
regulatory body with regard to securities or anti-trust laws governing
Purchaser, Purchaser's business, or Purchaser's involvement in the
transaction contemplated hereby; or
(iv) result in the acceleration of any debt or other
obligation of Sellers or the Company or the creation of any Lien (as
defined in Section 5.5) upon any of the Company's assets.
5.3. Owners of Company. Sellers are the only beneficial or registered
owners of the Company, and the true and correct addresses of all of their
residences are set forth on the first page hereof.
5.4. Financial Representations.
(a) The Sellers have caused to be maintained the Company's
books of account in accordance with applicable laws, rules and regulations, and
such books and records are and, during the periods covered by the Financial
Statements (hereinafter defined), were correct and complete in all respects, and
completely and accurately reflect the transactions of the Business and the
income, expenses, assets and liabilities of the Business, including the nature
thereof and the transactions giving rise thereto.
(b) Included in Schedule 5.4 are the audited balance sheets of
the Business as of June 30, 1998 and June 30, 1997, and the related audited
statements of income and of cash flows for the fiscal years ended each such June
30th, reported on by Lawrence B. Goodman & Company, P.A. and the unaudited
balance sheet of the Business as of September 30, 1998 and the related
statements of income for the 3 months ended September 30, 1997 and September 30,
1998, (the balance sheet of the Business as of September 30, 1998 being referred
to as the "Balance Sheet")
(c) The Financial Statements have been prepared from the books
of account of the Seller, in conformity with generally accepted accounting
principles consistently applied ("GAAP"), and present fairly the financial
position of the Business as of the
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date of such statements and the results of operations of the Business for the
periods covered thereby. The Financial Statements reflect all necessary
adjustments and reserves for losses and contingencies.
(d) Except as indicated on Schedule 5.9(a) hereto, the
Business and the Company have no liabilities (including, without limitation,
unasserted claims, whether known or unknown, matured or unmatured, absolute,
contingent or otherwise) that, in accordance with GAAP, are required to be
reflected, and are not reflected or are in excess of the amount reflected, in
the Balance Sheet or notes thereto except those incurred since the date of the
Balance Sheet in the ordinary course of business, consistent with past practice,
in arms' length transactions with unrelated parties, and which do not have and
cannot reasonably be expected to have, in the aggregate, a material adverse
effect on the business, financial condition or prospects of the Business (a
"Material Adverse Effect").
5.5. Title and Condition of Assets.
(a) The Sellers have good and marketable title to the Shares,
free and clear of liens, encumbrances, claims of third parties, security
interests, mortgages, pledges, agreements, options and rights of others of any
kind whatsoever, whether or not filed, recorded or perfected, and including,
without limitation, any conditional sale or title retention agreement or lease
in the nature thereof or any financing statements filed in any jurisdiction or
any agreement to give any such financing statements (hereinafter collectively
referred to as "Liens").
(b) North Ridge and North Shore have good and marketable title
to the Acquired Assets free and clear of Liens or are using them pursuant to a
valid and effective license or lease described in the Schedules hereto.
(c) The equipment and the other tangible assets included in
the Acquired Assets and listed on Schedule 5.5 hereto are in good operating
condition, order and repair, are suitable for the purposes for which they are
being used and constitute all of the assets used in the operations of, and
necessary to operate, the Business as conducted during the two years prior to
the date hereof. None of the Acquired Assets has been affected by any fire,
accident, act of God or any other casualty that materially and adversely impairs
its function in the Business. The Business is not conducted under any
restriction imposed upon the Company (but not imposed upon other similar
businesses in the locality where its business is located).
(d) Schedule 5.5 hereto includes a complete and correct list
and a summary description of all material tangible personal property in the
nature of equipment owned or leased by the Company and used in connection with
the Business. None of such property is leased.
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5.6. [Omitted]
5.7. [Omitted]
5.8. Insurance.
(a) Schedule 5.8 hereto contains a copy of all of the policies
of insurance maintained by the Company. Such policies are underwritten by
financially sound and reputable insurers.
(b) No claims are pending or, to the knowledge of the Company,
threatened under any of the Company's casualty or liability insurance policies,
and no claim has been made thereunder during the three (3) years preceding the
date hereof. All premiums due and payable thereon have been paid, and all such
policies are in full force and effect in accordance with their respective terms.
No outstanding claims or liabilities, exist, whether fixed or contingent, under
any medical reimbursement plan or any other plan or policy under which the
Company acts as a self-insured.
5.9. Litigation and Compliance.
(a) Except as disclosed on Schedule 5.9(a) annexed hereto,
there are no actions, suits, claims or proceedings or governmental or
administrative investigations pending or, to the knowledge of Sellers or the
Company, threatened, nor, to the knowledge of Company, is there any reasonable
basis for any such action, suit, claim or proceeding (i) by, against or
otherwise involving any of Sellers, the Company, or any of Company's officers,
directors, employees or agents, any of the Acquired Assets or any asset or
property of others leased or used by the Company pursuant to an agreement or
(ii) which questions or challenges the validity of this Agreement or any action
taken or to be taken pursuant to this Agreement.
(b) The Company is in substantial compliance with, is not in
default or violation in any material respect under, and has not been charged
with or received any notice at any time of any violation by it of, any statute,
law, ordinance, regulation, rule, decree or order applicable to the business or
operations of the Company. North Ridge is registered with the National
Association of Securities Dealers (the "NASD") as a registered Broker/Dealer and
such registration is current in all respects. Neither the Company nor to the
best knowledge of the Company any of its employees is the subject of any
disciplinary proceedings before, or under investigation by, the NASD, the United
States Securities and Exchange Commission (the "SEC"), any securities exchanges
or markets, any state securities division or other regulatory bodies except as
provided for in Schedule 5.9(b). Neither the Company nor the Sellers have
received during the two years prior to the date hereof any written complaints or
requests for refunds of commissions paid. Annexed hereto as Schedule 5.9(b) are
the Forms U-4 for all registered representatives and
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principals of the Company and all Forms BD and amendments thereto filed with the
SEC during the three years prior to the date hereof. All such filings were to
the best knowledge of the Company true and accurate in all material respects
when filed and no further amendment thereof is currently (until the execution
hereof) required.
(c) None of the Company, nor any of the Acquired Assets or
transactions contemplated under this Agreement, is subject to any judgment,
order or decree entered in any lawsuit or proceeding applicable to the Business
and operations of the Company.
(d) The Company has duly filed all reports and returns
required to be filed by it with governmental authorities and has obtained all
governmental permits and licenses and other governmental consents, except as may
be required after the execution of and closing under this Agreement. All of such
material permits, licenses and consents are in full force and effect, and no
proceedings for the suspension or cancellation of any of them, and no
investigation relating to any of them, is pending or, to the best knowledge of
Sellers, threatened, and none of them will be affected by the consummation of
the transactions contemplated hereby.
(e) The Company has operated, and will through the Closing
Date operate, in material compliance with all laws, rules, statutes, ordinances,
orders and regulations, including, without limitation, those applicable to the
Company under the Occupational Safety and Health Act of 1970, as amended, or any
equivalent state law. The Company has received no notice of any violation
thereof, nor are Sellers or the Company aware of any basis therefor.
5.10. Taxes.
(a) The Company has, or on or before the Closing Date will
have, duly filed all tax reports and returns required to be filed in respect of
its business and operations and the Acquired Assets as of June 30, 1998. All
such tax reports and returns are or will be complete, accurate and in compliance
with all relevant laws and regulations in all material respects, and, none has
been audited by any governmental authority. The Company has, or on or before the
Closing Date will have, paid and discharged all federal, state, local and
foreign taxes, interest, penalties or other payments required, as the case may
be, to be paid and then currently due as shown on such tax reports and returns
or otherwise in respect of the Acquired Assets and the business, operations and
employees of the Company as of October 31, 1998. To the knowledge of Company, no
audit of Sellers or the Company is planned or threatened. The Company has
withheld proper and accurate amounts from its employees' compensation in
substantial compliance with all withholding and similar provisions of the IRS
Code of 1986, as amended, and any other applicable law.
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(b) The Company has received no notice of any tax deficiency
outstanding, proposed or assessed against it, nor does the Company have any
knowledge of any basis for any tax deficiency or assessment, nor has the Company
executed any waiver of any statute of limitations on the assessment or
collection of any tax. No tax liens are upon, pending against or, to the
knowledge of the Sellers or the Company, threatened against any Acquired Assets.
5.11. Intangible Assets.
(a) "Intellectual Property" means and includes
(i) trademarks, trademark registrations, service
marks, service mark registrations, applications for trademark and
service mark registrations, trade names, copyrights and copyright
registration;
(ii) license agreements with respect to any of the
foregoing intellectual property;
(iii) all printed or other written material and all
other copyrightable property;
(iv) all material trade secrets; and
(v) all computer software, programs, and
applications.
(b) No material Intellectual Property other than that included
in the Acquired Assets ("Company Intellectual Property") is used or necessary in
connection with the conduct of the Business. No claim is pending or to the best
knowledge of the Company threatened against Sellers or the Company by any person
or entity relating to (i) any of the Company Intellectual Property, or its use
included in the Acquired Assets; (ii) infringement by the Company on the
Intellectual Property rights of any person or entity; or (iii) infringement by
any person or entity on the Company Intellectual Property rights included in the
Acquired Assets. To the knowledge of the Company and Sellers, no valid basis
exists for any claims referred to in this Section 5.11(b).
(c) The current computer software, programming and
applications used by the Company, or held by it for use in the operation of the
Business (the "Software"), to the extent they have been designed or developed by
Sellers or by consultants on Sellers' behalf or on behalf of the Company, are
original and are protected by the copyright laws of the United States, and
Sellers or the Company have complete rights to and ownership of such Software.
All work performed in connection therewith was "work- for-hire" under the United
States Copyright Act, or the product thereof has been assigned in full to
Sellers or the Company. To the best knowledge of the Company, no part of such
Software or
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the use thereof infringes upon the rights of any other person or entity, or
violates or infringes upon any common law or statutory rights of any other
person or entity, including, without limitation, rights relating to defamation,
contractual rights, copyrights, patents, trade secrets and rights of privacy or
publicity. Neither of the Sellers nor the Company has sold, assigned, licensed,
distributed or in any other way disposed of or encumbered the Software.
(d) The Software, to the extent it is licensed from any third
party licensor or constitutes "off-the-shelf" software, is held by the Company
legitimately and is fully and freely transferable without any third party
consent and is not limited to use on any hardware and/or any site or sites. All
of the Company's computer hardware, and all computer hardware of the Seller used
or dedicated to use in the Business, has, and has had, only
legitimately-licensed software installed therein.
(e) To the best knowledge of the Company, the Software is free
from any significant software defect or programming or documentation error,
operates and runs in a reasonable and efficient business manner, conforms to the
specifications thereof, and, with respect to owned Software, the applications
can be recreated from their associated source code, which is in the Company's
sole custody and control.
(f) Neither of the Sellers nor the Company nor any employee or
agent of either of the Sellers or the Company has knowingly altered the data, or
any Software or supporting software that may in turn damage the integrity of the
data, stored in electronic, optical or magnetic form. Seller has no knowledge of
the existence of any bugs or viruses with respect to the Software.
(g) Seller and the Company shall, to the maximum possible
extent, pass through to Purchaser all manufacturer's and supplier's warranties
and support contracts for the Software that is not owned by Seller or the
Company, and Seller shall upon Purchaser's reasonable request, execute each and
every document that is necessary or appropriate to effectuate Purchaser's
obtaining and enjoying the benefits of any such pass-through warranty.
(h) Seller has furnished all documentation relating to the
use, maintenance and operation of the Software, all of which, to the knowledge
of Seller, is true and accurate.
(i) Schedule 5.11(i) includes a list of all trademarks,
service marks and copyrights included in the Acquired Assets and indicating
those which are subject to the filing of an affidavit of use or renewal.
5.12. Employees. The Company has good relations with its
current and former employees and current and former independent
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contractors and has not received any material complaint from, and has not
engaged in any material dispute with, any of such employees and independent
contractors and affiliated brokers during the twelve (12) months prior to the
date hereof except for terminations set forth on Schedule 5.17. Annexed hereto
as Schedule 5.12 is the Company's registered representative agreement with
Clinard. Any provision in this Section 5.12 to the contrary notwithstanding,
Sellers give no assurance or guarantee that any one or more employees and/or
independent contractors will not terminate his or her relationship with the
Company upon or at any time after the execution hereof, although neither the
Company nor either of the Sellers has received any notice that any such
termination is planned.
5.13. ERISA. Apart from a health plan that is not unusual in the
Company's industry, the Company has no employee benefit plan (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), written or oral employment or consulting agreement,
severance pay plan, employee relations policy, practice or arrangement,
agreements with respect to leased or temporary employees, vacation plan or
arrangement, sick plan, stock purchase plan, stock option plan, fringe benefit
plan, bonus plan and any deferred compensation agreement, plan or program
covering any present or former employee of the Company including any plan which
is, or at any time was, sponsored or maintained by (or to which contributions
are, were, or at any time were required to have been, made by) the Company or
any other organization which is a member of a controlled group of organizations
(within the meaning of Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended) of which the Company is a member (the "Controlled
Group").
5.14. Labor Relations.
(a) No employee of any the Company is covered by any
collective bargaining agreement.
(b) The Company has complied, and is currently in compliance,
in all material respects with applicable laws (including, without limitation,
ERISA), rules and regulations relating to the employment of labor, including
without limitation those relating to wages, hours, unfair labor practices,
discrimination and payment of social security and similar taxes.
5.15. Contracts. Etc.
(a) All contracts, leases, agreements, licenses, commitments
and orders to which either or both of Sellers in connection with the Business or
the Company is a party or by which Company or any of its assets is bound
("Contracts") are attached as Schedule 5.15.
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(b) All such Contracts, are valid and in full force and effect
and constitute the legal, valid and binding obligations of the Company and the
other parties thereto, and there are no existing defaults by either of the
Company, or, to the knowledge of the Company, by any other party thereto, and,
to the knowledge of the Company, no event, act or omission has occurred that
(with or without notice, lapse of time and/or the happening or occurrence of any
other event) would result in a material default thereunder. No option exists or
will arise as a result of the Closing to amend or terminate any Contract. No
party to any Contract is paying liquidated damages in lieu of performance.
(c) None of such Contracts is to be performed by the Company
at a price that would result in a loss to the Company.
(d) Neither of the Sellers nor the Company has entered into
any agreement or arrangement with Louis P. Karol to pay or cause to be paid any
compensation to him or any person or entity affiliated with him on account of
the transaction contemplated herein.
5.16. Customers and Suppliers.
(a) The Company is unaware of any loss or threatened loss of
any business from any customer. The Company has not received any material
complaint from, and is not engaged in any material dispute with, any customer or
supplier.
(b) Nothing has come to the attention of either of the Sellers
or the Company that should reasonably lead him or it to believe that any
customers or suppliers of the Company will terminate or curtail its business
relationship with the Company as a result of the Closing hereunder.
5.17. Absence of Certain Changes, Etc. Since January 1, 1998, except as
disclosed in Schedule 5.17 annexed hereto: no event or other development has
occurred that would indicate that a material loss or decline in business will
occur in the future; no compensation increase for any employee in excess of 10%
on an annual basis has been granted or promised; the Company has not established
or made any bonus, profit sharing, retirement or other similar payment, plan or
arrangement, nor has the Company entered into any union contract or any
employment agreement, or agreement with any preparer or sales agent or any
franchise agreement, independent dealer/distributor agreement or other contract
or arrangement with respect to the performance of services for the Company; no
new employee has been retained; nothing has come to the attention of the Company
that would lead it to believe that any material adverse change in the business,
operations, or prospects of the Business or in the condition of any of the
Acquired Assets, or the assets or properties of others leased or used by
Company, has occurred or is likely to occur; the Company has not suffered any
material damage, destruction or loss to any of its material assets; the Company
has not entered
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<PAGE> 12
into any transaction or contract, or amended any contract, which might have a
Material Adverse Effect on the business, financial condition or prospects of the
Company; the Company has not canceled or waived any claim or right of material
value; neither the Company nor the Sellers have leased or allowed any Lien to
arise upon any of the Acquired Assets, or acquired or committed to acquire any
material capital assets except for fair market price, in the ordinary course of
business, consistent with prior practice, in arms-length transaction with
unaffiliated parties; the Company has not delayed or accelerated collection of
any note or receivable beyond the usual and customary period therefor or the
legal maturity thereof; the Company has not entered into any contract for the
purchase of real property or exercised any option to extend or terminate any
lease of real property; the Company has not declared or paid any dividend or
distributed any asset in respect of any security, whether as a distribution,
repurchase, redemption or otherwise; Sellers have operated the Business
diligently and only in the usual, ordinary manner and, to the extent consistent
with such operation, (i) preserved its current business organization intact,
(ii) preserved its current relationships with employees, customers, suppliers
and all other persons having business dealings with them and (iii) maintained in
force the insurance policies referred to in Section 5.8 hereof; Sellers have
caused the Company to maintain its books, accounts and records in the usual and
ordinary manner, and in a manner that fairly and correctly reflects its income,
expenses, assets and liabilities in accordance with GAAP; Sellers have not
modified or changed any existing right, concession, license, lease, contract,
commitment or agreement, and no sale or other disposition of any right or
privilege accruing to the Sellers relating to the Business has occurred, except
as otherwise provided herein; the Company has not delayed in the payment of any
account payable or indebtedness beyond the usual and customary period therefor
or the legal maturity thereof; neither the Company nor the Sellers has incurred
any indebtedness other than that (i) incurred in the usual and ordinary course
of business, or (ii) incurred pursuant to existing contracts disclosed in the
Schedules hereto, in all cases not exceeding $5,000 in the aggregate; and the
Company has not made any agreement, commitment or arrangement to take any action
inconsistent with the obligations under, or prohibited by, this Section 5.17.
5.18. Fraudulent Conveyances; Bankruptcy. Sellers are not entering into
this Agreement with the intent to hinder, delay or defraud present or future
creditors of Sellers or of the Company. Sellers are now solvent and are not
involved as debtor in any bankruptcy or similar proceeding.
5.19. Related Party Transactions. The Company has not, except as
disclosed in Schedule 5.19 annexed hereto, engaged in any transactions, or
entered into any contracts with, in the last year, any other person, corporation
or entity, directly or
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<PAGE> 13
indirectly, affiliated with any of Sellers or the Company or any
members of Sellers' families.
Section 6. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Sellers as follows, and acknowledges that Sellers are
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by Sellers or on their behalf.
6.1. Authorizations and Binding Effect. Purchaser is duly licensed to
carry on its business as currently conducted in the State of New York. This
Agreement has been duly executed and delivered by Purchaser and constitutes the
legal, valid and binding obligation of Purchaser, enforceable in accordance with
its terms. The execution, delivery and performance of this Agreement does not
and will not:
(i) conflict with, result in the breach of, constitute a
default, with or without notice and/or lapse of time, under, result in
being declared void or voidable any provision of, or result in any
right to terminate or cancel any contract, lease or agreement to which
Purchaser or any of its properties is bound;
(ii) constitute a violation of any statute, judgment, order,
decree or regulation or rule of any court, governmental authority or
arbitrator applicable or relating to Purchaser;
(iii) result in the acceleration of any debt or other
obligation of Purchaser;
(iv) conflict with Purchaser's Certificate of Incorporation or
By-Laws; or
(v) render Purchaser insolvent as that term is defined under
11 U.S.C. Section 101(32).
6.2. Judgments. No judgments exist against Purchaser or
any of Purchaser's assets.
6.3. Litigation. No actions, suits, claims, proceedings or
investigations (whether or not purportedly on behalf of or against Purchaser),
are pending or threatened against Purchaser at law or in equity that relate to
the transactions contemplated by this Agreement or that will prohibit Purchaser
from performing the obligations to be performed by it hereunder.
6.4. Nonreliance. Purchaser has not relied in entering into this
Agreement on any representation or warranty of Sellers regarding the revenues of
the Company from and after July 1, 1998, except indirectly as specifically set
forth herein.
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<PAGE> 14
6.5. Financing. Purchaser has sufficient liquid assets or available
credit to complete the terms of the transaction contemplated by this Agreement.
6.6. Execution. Purchaser may execute, deliver and perform this
Agreement without the necessity of obtaining any consent, approval,
authorization or waiver or giving any notice or otherwise.
Section 7. Covenants.
7.1. Employment and Noncompete Agreements. Levy shall enter into an
Employment Agreement with the Company at the Closing. Sellers shall enter into a
Noncompetition Agreement with Purchaser at the Closing. Clinard shall be
retained by the Company as a financial consultant and shall enter into a
Consulting Agreement with North Ridge at the Closing.
7.2. Taxes. Sellers shall pay all of the sales taxes or transfer taxes
or fees payable as a direct result of the consummation of the transactions
contemplated hereby, including the New York State stock transfer tax.
7.3. Confidentiality. All parties hereto shall keep in strict
confidence all information pertaining to the business of the Company and
Purchaser and relating to this Agreement, including, without limitation, the
terms of such transaction, except as may be required by securities law or other
laws.
7.4. Performance of Contracts. Purchaser shall cause the Company to
perform its obligations under each of the contracts listed on Schedule 5.15 to
the extent arising from and after the Closing, except to the extent that the
Company asserts defenses in good faith to such performance.
7.5. E&O Insurance. Purchaser shall cause the Company to maintain in
force errors and omissions insurance covering the Sellers as employees and/or
consultants of the Company comparable to such insurance maintained by the
Company prior to June 30, 1998.
Section 8. Survival of Representations and Warranties;
Indemnifications; Escrow.
8.1. Survival. The representations, warranties and agreements made in
Sections 5 and 6 hereof and in the Schedules hereto by Sellers, Purchaser and
the Company shall remain operative and in full force for a period of eighteen
months after the Closing Date, except with respect to Sections 5.3, 5.5 and with
respect to tax matters, as to which such representations and warranties shall
continue to survive for a period of any applicable statutes of limitation,
regardless of any investigation made by or on behalf of any party.
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<PAGE> 15
8.2. Indemnification by Seller. To the extent Purchaser or the Company
does not receive reimbursement from the insurance policy referred to in Section
7.5 above, Sellers shall defend and indemnify Purchaser from any and all losses,
liabilities, proceedings, claims, settlements, judgments, fines, assessments,
damages and expenses (including reasonable attorneys' fees and litigation
expenses, whether arising out of a third party claim or relating to recovering
indemnifiable damages from Company) (collectively, the "indemnifiable damages")
that Purchaser may suffer or incur in whole or in part by reason of, or which
may arise out of: (i) the inaccuracy of any of the representations of Company or
each of the Sellers in this Agreement subject to the time periods as set forth
in 8.1; (ii) the breach by Company or any of the Sellers of any of the covenants
or warranties herein subject to the time periods as set forth in 8.1; (iii) any
and all liabilities (including, without limitation, unasserted claims, whether
known or unknown, matured or unmatured, absolute, contingent or otherwise) that
are not reflected or are in excess of the amount reflected, in the Balance Sheet
or notes thereto except those incurred since the date of the Balance Sheet in
the ordinary course of business, consistent with past practice, in arms' length
transactions with unrelated parties so long as Purchaser's claim under this
clause is made in writing to Seller prior to 18 months after Closing; and (iv)
the litigation entitled Essex National Securities, Inc., Annuity Agency of New
York, Inc., and The Bank of New York, v. Sergio Toscano d/b/a Village
Investments, North Shore Capital Management Corp., and North Ridge Securities
Corp. to the extent of damages accrued through date of Closing.
8.3. Indemnification by Purchaser. Purchaser shall defend, hold
harmless and indemnify Seller from any and all "indemnifiable damages" that
Seller may suffer or incur by reason of: (i) the inaccuracy or breach of any of
the representations and warranties of Purchaser herein; (ii) the breach by
Purchaser of any of the covenants or warranties herein;(iii) any claim for
breach of Purchaser's obligation to perform contracts under Section 7.4 above;
(iv) failure of Purchaser to comply with any rule or regulation of the
Securities and Exchange Commission or the National Association of Securities
Dealers, Inc. or involving anti-trust matters to the extent governing
Purchaser's business as same relates to this transactions; or (v) any claim by
Louis P. Karol for a commission or fee in connection with the introduction of
the parties hereto.
8.4. Notice and Right to Defend Third Party Claims and
Perform Remediation.
(a) Promptly upon receipt of notice of any third party claim,
demand or assessment or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought on account of an indemnity agreement
contained in this Section 8, the party seeking indemnification (the
"Indemnitee") shall notify in writing, within sufficient time to respond to such
claim or
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<PAGE> 16
answer or otherwise plead in such action, the party from whom indemnification is
sought (the "Indemnitor") thereof; provided, however, that failure or delay to
supply such notice shall not relieve Indemnitor of their indemnification
obligation hereunder except to the extent that Indemnitor is actually prejudiced
by such failure or delay.
(b) In case any claim, demand or assessment is asserted or
suit, action or proceeding commenced against an Indemnitee (collectively a
"Claim") and it notifies the Indemnitor of the commencement thereof, if the
Indemnitor acknowledges its indemnification obligations therefor hereunder,
then, the Indemnitor shall be entitled to participate therein, and, to the
extent that it may wish, to assume the defense, conduct or settlement thereof,
with counsel satisfactory to the Indemnitee, whose consent to the selection of
counsel shall not unreasonably be withheld. After notice from the Indemnitor to
the Indemnitee of its election so to assume the defense, conduct or settlement
thereof, the Indemnitor shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense, conduct or settlement thereof; provided, however, that if the
Indemnitee has any separate defense from those of the Indemnitor, the Indemnitee
shall have the right to be represented by its own counsel at the Indemnitor's
expense. The Indemnitee shall have the right in any event to participate in any
such defense with its own counsel at its own expense. The Indemnitee will
cooperate with the Indemnitor in connection with any such Claim and make
personnel, books and records relevant to the Claim available to the Indemnitor
at Indemnitor's expense. In the event that the Indemnitor fails timely to
defend, contest or otherwise protect against any such Claim, the Indemnitee
shall have the right to defend, contest or otherwise protect against the same
and may make any compromise or settlement thereof and recover the entire cost
thereof from the Indemnitor, including, without limitation, reasonable
attorneys' fees, disbursements and all amounts paid as a result of such Claim or
compromise or settlement thereof.
(c) Anything to the contrary herein notwithstanding, prior to
finally settling any such Claim, the Indemnitor shall give to the Indemnitee
prompt notice of its intention to settle same and the terms of such proposed
settlement and acknowledging its indemnification responsibility therefor
hereunder. If the Indemnitee shall object to such proposed settlement within 10
days, then the Indemnitee shall thereafter, at its sole expense, assume the
control and defense of such claim, suit, action, investigation or proceeding and
in such event the liability of the Indemnitor shall be limited to the amount for
which the same could have been settled as proposed by the Indemnitor. If the
Indemnitee does not object to the terms of the proposed settlement within the
aforesaid 10-day period, then the Indemnitor shall have the right to consummate
such proposed settlement upon the terms set forth in the aforesaid notice.
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<PAGE> 17
8.5. Escrow. The amount of the Excluded Cash Amount shall be held in
escrow by Steinberg, Fineo, Berger & Burlant, P.C., as escrow agent, to satisfy
obligations of the Sellers under the indemnification provisions of this Section
8 and price adjustments under Section 3 until 18 months after the Closing, at
which time such escrow shall be immediately released except to the extent of the
amount equal to any bona fide claim under this Section 8 or Section 3 of which
Purchaser shall have delivered to the escrow agent notice in reasonable detail
during such 18-month period after Closing and not resolved during such 18-month
period.
Section 9. Further Actions. From time to time, as and when requested by
Purchaser, Sellers shall execute and deliver such documents and instruments and
shall take such further or other actions as Purchaser may deem necessary or
desirable to carry out the intent and purposes of this Agreement, to convey,
transfer, assign and deliver to Purchaser, and its successors and assigns, the
Shares, to vest in the Company the Acquired Assets (or to evidence any of the
foregoing) and to consummate and give effect to the other transactions
contemplated hereby.
Section 10. Broker's Fees. Each of the Company, Sellers and Purchaser
represents that it has not used or retained any broker or finder in connection
with the transactions contemplated hereby, other than Louis Karol, Esq., the
fees of which shall be paid by Purchaser.
Section 11. Expenses. Except as otherwise specifically provided herein,
Levy and Clinard, collectively, and Purchaser shall bear their own, legal fees
and other costs and expenses with respect to the negotiation, execution and the
delivery of this Agreement and the consummation of the transactions hereunder,
and the Acquired Assets shall not be reduced or impaired by the payment or
accrual of any such costs and expenses by Company.
Section 12. Entire Agreement. This Agreement, which includes the
Schedules and Exhibits hereto and the other documents, agreements and
instruments executed and delivered pursuant to or in connection with this
Agreement, contains the entire agreement between Sellers and Purchaser with
respect to the transactions contemplated by this Agreement and supersedes all
prior arrangements or understandings with respect thereto.
Section 13. Construction.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(b) Any pronoun herein shall include all genders and/or the
plural or singular as appropriate from the context.
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<PAGE> 18
Section 14. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient when
delivered personally or telecopied by confirmed facsimile, or three (3) business
days after mailing by registered or certified mail, return receipt requested, or
the next business day if sent by nationally recognized overnight courier
providing for a return receipt, in each case postage prepaid, addressed as
follows:
If to Purchaser:
Gilman & Ciocia, Inc.
475 Northern Boulevard
Great Neck, NY 11021
Attn: Chief Financial Officer
Facsimile: (516) 482-5014
with a copy to:
Akabas & Cohen
488 Madison Avenue, 11th Floor
New York, New York 10022
Attn: Seth Akabas, Esq.
Facsimile: (212) 308-8582
If to Sellers:
Daniel R. Levy
17 Buttonwood Drive
Dix Hills, New York 11746
Joseph Clinard
3 Coyler Drive
Greenlawn, New York 11740
With a copy to:
Steinberg, Fineo, Berger & Burlant, P.C.
1001 Franklin Avenue, Suite #302
Garden City, NY 11530
Attn: Stuart Steinberg, Esq.
Facsimile: (516) 747-0382
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed, effective ten (10) days
after such notice.
Section 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts entered into, executed and to be performed wholly in such state.
Section 16. Assignability. This Agreement shall not be assignable
otherwise than by operation of law by any party hereto without the prior written
consent of the other parties, and any purported assignment without such prior
written consent shall be
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<PAGE> 19
void, except that Purchaser may assign this agreement to a corporation
controlling, controlled by or under common control with the Purchaser, provided
that in such case Purchaser shall retain responsibility for the assignees
performance hereunder.
Section 17. Waivers and Amendments. Any waiver of any term or condition
of this Agreement, or any amendment or supplementation of this Agreement, shall
be effective only if in writing executed by the party against whom such waiver,
amendment or supplementation is sought to be charged. A waiver of any breach or
failure to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
Section 18. Third Party Rights. Any other provision of
this Agreement to the contrary notwithstanding, this Agreement
shall not create benefits for any third party.
Section 19. Illegalities. In the event that any provision contained in
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and the remaining provisions of this
Agreement shall not, at the election of the party for whose benefit the
provision exists, be in any way impaired.
Section 20. Counterparts. This Agreement may be executed n
multiple counterparts all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Sellers have signed and Purchaser has caused this
Agreement to be executed by its duly authorized officer, as of the date first
above written.
GILMAN & CIOCIA, INC.
By: \s\ James Ciocia \s\ Daniel Levy
--------------------- ------------------------
Name: James Ciocia DANIEL R. LEVY
Title: President
\s\ Joseph Clinard
------------------
JOSEPH CLINARD
Escrow Accepted
Steinberg, Fineo, Berger
& Burlant, P.C.
By:\s\ Stuart Steinberg
---------------------
Stuart Steinberg
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<PAGE> 20
LIST OF SCHEDULES AND OTHER DOCUMENTS
Basic Agreements
Stock Purchase Agreement
Non-competition Agreement
Clinard Client List
Levy Client List
Employment Agreement Levy
Clinard Client List
Levy Client List
Stock Option Agreement
Consulting Agreement Clinard
Clinard Client List
Levy Client List
Employment Agreement Michalik
Schedules (responsibility)
2.2 excluded personal property
5.2(b): Certificates of Incorporation; By-Laws
5.4: Financial Statements (Sacher)
5.5: tangible property
5.8: insurance policies
5.9(a): litigation (SFB&B)
5.9(b): Forms U-4 and Form BD and all amendments (Levy)
5.11(i): trademarks, service marks and copyrights
5.12: Registered Representative Contract of Clinard
5.15: contracts and leases
5.17: certain changes (SFB&B and Levy)
5.19: related party transactions (SFB&B and Levy)
Other Documents (Gilman & Ciocia, Inc.)
Opinion of Akabas & Cohen
Good Standing Certificate of Purchaser
Board Consent of Purchaser
Prospectus
<PAGE> 21
Other Documents (Sellers)
Good Standing Certificates for each Company (SFB&B)
North Shore
North Ridge
Lien Searches on Company and Sellers (A&C)
North Shore
North Ridge
Daniel Levy
Joseph Clinard
Opinion of Sellers' counsel (SFB&B)
Minute Books (SFB&B)
Closing Deliveries
Checks
Levy $3,000,000
Clinard $2,000,000
SFB&B, as escrowee $250,000
Stock Certificates with tax stamps (SFB&B)
Stock Powers(SFB&B)
Post Closing Shareholder Consent of each Company (A&C)
Post Closing Board Consent of each Company (A&C)
<PAGE> 1
Exhibit 2
NONCOMPETITION AGREEMENT
AGREEMENT dated as of November 19, 1998 by and among Daniel R. Levy, an
individual with an address at 17 Buttonwood Drive, Dix Hills, New York
11746("Levy"), Joseph Clinard, an individual with an address at 3 Coyler Drive,
Greenlawn, New York 11740 ("Clinard") (Levy and Clinard shall be referred to
herein collectively as the "Sellers" and individually as a "Seller") and Gilman
& Ciocia, Inc., a Delaware corporation with a principal office at 475 Northern
Boulevard, Great Neck, NY 11021 ("G&C").
W I T N E S S E T H :
WHEREAS, G&C and the Sellers have entered into a Stock Purchase
Agreement dated November 19, 1998, (the "Stock Purchase Agreement") pursuant to
which G&C shall purchase the stock of both North Shore Capital Management Corp.
and North Ridge Securities Corp. (collectively, the "Acquired Companies") for
cash, as described in the Stock Purchase Agreement; and
WHEREAS, in order to preserve for G&C the goodwill of the Acquired
Companies to be acquired by G&C from the Sellers pursuant to the Stock Purchase
Agreement, the Sellers have agreed not to compete with G&C or the Acquired
Companies, as described more fully herein,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree hereby as follows:
Section 1. RESTRICTIONS. (a) The parties hereto confirm that the
Sellers are each aware of important business information (i) relating to the
processes, designs and/or systems used by the Acquired Companies and (ii)
relating to the customers (including, without limitation, customer lists, call
lists, prices and all data about customers) and employees, consultants,
independent contractors, service providers and suppliers which shall not include
product providers of the Acquired Companies, which together constitutes the
substantial portion of the goodwill of the Acquired Companies acquired by G&C
under the Stock Purchase Agreement. The parties hereto further confirm that it
is reasonably necessary to protect and maintain the goodwill of the Acquired
Companies, which G&C acquired pursuant to the Stock Purchase Agreement, and to
prevent the usurpation by the Sellers (or any Person (hereinafter defined)
employing the Sellers at a later date) of all or any portion of such goodwill,
which was acquired by G&C, that the Sellers agree, and accordingly each Seller
does agree, that he will not directly or indirectly, for
<PAGE> 2
or on behalf of himself or any Person (hereinafter defined) at any time for a
period of five years from the date hereof:
(i) employ or otherwise obtain services from, or solicit or otherwise
attempt to employ or otherwise obtain services from, or assist any
Person in employing or otherwise obtaining services from or attempting
to employ or otherwise obtain services from, any person who is then, or
at any time during the preceding twelve months shall have been, in the
employ of or otherwise retained by G&C or either of the Acquired
Companies; or
(ii) solicit any Person who was a customer of G&C or either of the
Acquired Companies at any time during the two years prior to the date
hereof for the purpose of supplying to such Person any product or
service that was supplied or shall hereafter have been supplied by G&C
or either of the Acquired Companies, or for such Person to reduce, or
cease to receive, the level of products or services that such customer
had been or shall have been receiving from G&C or either of the
Acquired Companies, except in the case of Levy, the clients of Levy as
listed on Schedule B, and except in the case of Clinard, the clients of
Clinard as listed on Schedule A, and in the case that Levy and Clinard
both cease to be employed or retained by the Company, the clients on
Schedules A and B jointly.
As used herein, the term "Person" means any person, corporation, limited
liability company, partnership, trust or other entity.
(b) The Sellers acknowledge that they have been informed that
it is the policy of the Company to maintain as secret and confidential all
information (i) relating to the products, processes, designs and/or systems used
by the Company and (ii) relating to the customers (including, without
limitation, customer lists, call lists, prices and all data about customers) and
employees, consultants, independent contractors, service providers and suppliers
of G&C not including product providers of either of the Acquired Companies (all
such information hereafter referred to as "Confidential Information"). The
Sellers further acknowledge that such Confidential Information has been acquired
pursuant to the Stock Purchase Agreement or assembled by G&C or the Acquired
Companies at great cost to such party, through the expenditure of extensive
resources of such entity over a long period and is of great value to G&C. The
parties hereto recognize that the services to be performed by the Sellers are
special and unique, and that by reason of Levy's employment and Clinard's
engagement by the Company and their rendering services to G&C and the Acquired
Companies, they have and will acquire Confidential Information as aforesaid. The
parties hereto confirm that it is reasonably necessary to protect G&C's goodwill
that the Sellers agree, and accordingly each Seller does agree, that he will
not, directly or
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<PAGE> 3
indirectly (except where authorized by the Board of Directors of G&C, for the
benefit of either of such parties), for or on behalf of himself or any Person,
at any time for a period of five years from the date hereof: (i) divulge to any
Person other than the Company (hereinafter referred to collectively as a "third
party"), or use or cause to authorize any third parties to use, any such
Confidential Information except in the case of Levy, information regarding the
clients listed on Schedule B, and except in the case of Clinard, information
regarding the clients listed on Schedule A, and in the case that Levy and
Clinard both cease to be employed or retained by the Company, information
regarding the clients on Schedules A and B jointly) or any other information
regarded as confidential and valuable by G&C or either of the Acquired Companies
that he knows or should know is regarded as confidential and valuable by such
party (whether or not any of the foregoing information is actually novel or
unique or is actually known to others and whether or not the Confidential
Information is labeled as confidential or secret); or (ii) negotiate for or
enter into any arrangement, contract or commitment to do any of the foregoing
prohibited acts.
Section 2. INJUNCTIVE RELIEF. Each of the Sellers acknowledges that any
breach or threatened breach by him of any provision of this Agreement will,
because of the unique nature of the transaction which will take place pursuant
to the Stock Purchase Agreement, cause irreparable harm to G&C and the Acquired
Companies and leave G&C without any adequate remedy at law and shall entitle
G&C, in addition to any other legal remedies available to it, including offset
for damages of any amounts owing from G&C to the Sellers, to apply to any court
of competent jurisdiction to enjoin such breach or threatened breach without the
need to specifically prove irreparable harm or the inadequacy of legal remedies
or to post any bond.
Section 3. ACKNOWLEDGMENT OF REASONABLENESS. Each Seller and the
Company each acknowledges that the type and periods of restriction imposed
herein are fair and reasonable and are reasonably required for the protection of
G&C and the Acquired Companies and the goodwill associated with the business of
each of the Acquired Companies and are given as an integral part of the
acquisition by G&C of the business and goodwill of the Acquired Companies.
Section 4. SEVERABILITY. The parties hereto understand and intend that:
(a) each restriction agreed to by the Sellers hereinabove shall be construed as
separable and divisible from every other restriction; (b) the unenforceability,
in whole or in part, of any such restriction in any one or more jurisdictions,
shall not affect the enforceability of the remaining restrictions in such
jurisdiction or jurisdictions or the enforceability of any restriction in other
jurisdictions and this Agreement shall be construed in such jurisdiction in all
respects as if such invalid or unenforceable provisions were omitted; and (c)
one or
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<PAGE> 4
more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant.
Section 5. ENTIRE AGREEMENT. This Agreement, together with the
documents referred to herein and in the Stock Purchase Agreement, contains the
entire agreement among the parties hereto and supersedes all prior arrangements
or understandings.
Section 6. CONSTRUCTION. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement. Any pronoun herein shall include all genders
and/or the plural or singular as appropriate from the context.
Section 7. NOTICES. All notices or other communications that are
required or permitted hereunder shall be in writing and sufficient when
delivered in accordance with the notice provisions under the Stock Purchase
Agreement.
Section 8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts entered into, executed and to be performed wholly in such state.
Section 9. ASSIGNABILITY. This Agreement shall not be assignable
otherwise than by operation of law by any party hereto without the prior written
consent of the other parties, and any purported assignment without such prior
written consent shall be void, except that the Company may assign this Agreement
to an affiliate or an entity purchasing all, or substantially all, of its
assets.
Section 10. WAIVERS AND AMENDMENTS. Any waiver of any term or condition
of this Agreement, or any amendment or supplementation of this Agreement, shall
be effective only if in writing executed by the party against whom such waiver,
amendment or supplementation is sought to be charged. A waiver of any breach or
failure to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
Section 11. ILLEGALITIES. In the event that any provision contained in
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and the remaining provisions of this
Agreement shall not, at the election of the party for whose benefit the
provision exists, be in any way impaired, and in lieu of such provision
determined to be invalid, illegal or unenforceable a new provision shall be
automatically and without further action of the parties hereto substituted that
is as similar as possible to such invalid, illegal or unenforceable
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<PAGE> 5
provision to accomplish the intent and purpose thereof and still be valid, legal
and enforceable. More particularly, if any provision hereof is determined by any
court or other tribunal having jurisdiction thereof to be unenforceable because
of the duration or scope thereof, then the duration or scope of such provision
shall be automatically and without further action of the parties hereto reduced
to the extent that in the judgment of such court or other tribunal would be
necessary to render it enforceable.
Section 12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned corporation has caused this
Agreement to be executed by its duly authorized officer, and Levy has executed
this Agreement, as of the date first above written.
GILMAN & CIOCIA, INC.
By: \s\ James Ciocia \s\ Daniel R. Levy
------------------- ------------------
Name: James Ciocia DANIEL R. LEVY
Title: President
\s\ Joseph Clinard
- -------------------------
JOSEPH CLINARD
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<PAGE> 1
Exhibit 3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of November 19, 1998 between Daniel R.
Levy, an individual with an address at 17 Buttonwood Drive, Dix Hills, New York
11746 (the "Employee"), and North Shore Capital Management Corp., a New York
corporation ("North Shore"), and North Ridge Securities Corp., a New York
corporation ("North Ridge") (collectively, North Shore and North Ridge will be
referred to herein as the "Company"), having an office at 1895 Walt Whitman
Road, Melville, New York 11747.
W I T N E S S E T H :
WHEREAS, Gilman & Ciocia, Inc. ("G&C"), Joseph Clinard and the Employee
have entered into a Stock Purchase Agreement dated as of November 19, 1998 (the
"Stock Purchase Agreement") pursuant to which G&C is purchasing the capital
stock of the Company for cash, as described in the Stock Purchase Agreement; and
WHEREAS, the Company wishes to employ the Employee as the president of
North Shore and North Ridge and the Employee wishes to accept such employment,
all on the terms hereinafter set forth,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree hereby as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as the president
of North Shore and North Ridge, and the Employee hereby accepts such employment,
subject to the terms and conditions hereinafter set forth, under the immediate
direction of the executive officers of G&C.
2. TERM, RENEWAL. The term of the Employee's employment hereunder shall
be deemed to have commenced on November 1, 1998 and shall continue thereafter
for a period of five (5) years, unless terminated earlier in accordance with the
terms hereof.
3. DUTIES.
(a) The duties of the Employee shall be managing the brokerage
business and the general affairs of the Company. The Employee shall serve the
Company loyally, faithfully and to the best of his abilities and shall devote
his full working time and efforts to the performance of his duties hereunder.
The Employee
<PAGE> 2
shall be available for travel as the needs of the business of the Company
require.
(b) The Employee agrees that he will not, during the term of
this Agreement, engage in any business activity that interferes with the
performance of his obligations under this Agreement.
4. COMPENSATION, BENEFITS, ETC..
(a) In consideration of the services to be rendered by the
Employee hereunder, the Company shall pay to the Employee, and he shall accept,
compensation at an annual rate of (omitted), payable biweekly or monthly, at the
Company's option. If the Company shall have satisfied the annual projections for
a year as set forth in Schedule A annexed hereto, Employee shall receive an
increase in annual compensation in the amount of (omitted) for the next year of
the term hereof. Any other provision of this Agreement to the contrary
notwithstanding, any commission payments due to the Employee by any party shall
be paid directly to G&C, or its appropriate subsidiary, and no other
compensation, except compensation described herein, shall be due to the
Employee.
(b) The Employee shall receive health insurance and paid
holidays, as are made available to other employees of the Company. The Employee
shall receive 4 weeks of paid vacation/personal/sick days each year, which may
be taken at any time up to 6 months after the year of accrual but not
thereafter, subject to the Company's prior approval, which shall not be
unreasonably withheld or delayed.
(c) The Employee shall receive reimbursement or inclusion on
the Company expense account for up to $1,000 per month of discretionary business
expenses, provided that receipts for such expenses are provided to the Company,
and $1,500 per month for car expenses.
(d) The Employee shall receive (omitted) options to purchase
common stock in G&C, par value $.01 (the "Stock"), at an exercise price of
$8.75. The options shall be in the form of the Company's standard employee stock
option and shall have a term of five (5) years from vesting. G&C shall register
the issuance of the shares underlying such options with the Securities and
Exchange Commission on Form S-8 and use its best efforts to maintain the
effectiveness of such registration during the exercisability of said Options.
(e) Except as hereinafter provided in Section 6, the Company
shall pay the Employee, for any period during which he is unable fully to
perform his duties because of physical or mental
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<PAGE> 3
disability or incapacity, an amount equal to the fixed compensation due him for
such period, less the aggregate amount of all income disability benefits that he
receives under or by reason of (i) any group health insurance plan; (ii) any
applicable compulsory state disability law; (iii) the Federal Social Security
Act; (iv) any applicable worker's compensation law or similar law; and (v) any
plan towards which the Company or any parent, subsidiary or affiliate of the
Company has contributed, such as group accident or health policies.
(f) North Ridge shall continue to insure itself and employees,
including Levy, under North Ridge's errors and omissions policy in effect as of
June 30, 1998 or under a reasonably comparable occurrence-based policy.
5. COVENANTS.
(a) The Employee agrees that all work produced by him under
this Agreement or otherwise for the Company or NRS shall be deemed to be a "work
made for hire" as defined in the federal Copyright Act, Title 17 of the United
States Code. Without further consideration, the Employee hereby irrevocably
assigns, transfers and sets over to the Company, its successors and assigns, all
of the Employee's right, title and interest in and to any and all developments,
processes, discoveries, technologies and creations and all copyrightable and
patentable works, materials and ideas (collectively "Inventions") and any
improvement to any Invention, whether or not patentable, copyrightable or
legally protectable or recognized as forms of property, and whether or not
completed or used in practice, together with all information and data relating
thereto (hereinafter "Proprietary Information") (including all designs,
drawings, prints, patterns, sketches, ideas, inventions, improvements, writings
and other works of authorship, theses, books, computer programs, lectures,
illustrations, photographs, scientific and mathematical models, prints and any
other subject matter that is or may become legally protectible or recognized as
a form of property) that have been conceived, made or suggested, or may
hereafter be conceived, made or suggested, either by the Employee or by others
with the assistance or other participation of the Employee, and (i) on the
Company's premises or during the Employee's usual working hours, or (ii)
otherwise related to the business of the Company or any affiliate of the
Company.
(b) The Employee shall disclose promptly to the Company any
and all Inventions and Proprietary Information when conceived or made by the
Employee, and report promptly to the Company all information of which the
Employee may become aware during the term of employment with the Company that
may be of benefit to the Company. During the period of his employment hereunder,
the Employee shall also disclose promptly to the Board of Directors of the
Company all material Inventions relating to the business, products, or projects
of the Company and/or
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<PAGE> 4
involving the use of the Company's time or, materials and/or facilities.
(c) Upon request by the Company, the Employee shall, without
compensation other than the Employee's usual and customary salary, bonus and
benefits hereunder, execute all such assignments and other documents and perform
all such acts necessary to enable the Company to obtain or uphold for its
benefit patents or copyrights for, and other rights to, such Inventions and
Proprietary Information relating thereto, which shall be owned by the Company,
whether or not the Employee is the inventor thereof.
(d) The Employee shall have the right to manage the Company in
the role of its chief operating officer, and shall have full authority in making
decisions with regards to the following:
(i) setting salaries of employees' of the Company
subject to G&C's overall salary policies;
(ii) maintaining the Company's holiday parties and
broker retreats as consistent with prior Company practice;
(iii) maintaining the Company's location through
the current term of its lease unless expansion of the Company's business
requires moving its offices, and, in general, maintaining the Company's office
in the same geographic vicinity;
(iv) writing checks on behalf of the Company
solely for advances on commissions and commissions for North Ridge's registered
representatives (provided that Employee shall provide the Company with
supporting documentation for each such check); and
(v) hiring and firing of employees, brokers and
consultants subject to the review of the Company's Board of Directors provided
that Employee may veto the hiring or retention of any broker on the basis of a
poor securities law compliance record.
(e) G&C shall cause the Employee to be elected as a member of
the Board of Directors of the Company during the term of employment.
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<PAGE> 5
6. DISABILITY AND DEATH.
(a) If the Employee, due to physical or mental disability or
incapacity, shall have been unable fully to perform his duties hereunder for any
60 days during any twelve (12) consecutive months, as determined in good faith
by the Board of Directors, then the Company may terminate this Agreement and the
Employee's employment hereunder by written notice to the Employee or his legal
guardian, effective immediately upon delivery of such notice.
(b) If the Employee shall die during the term of this
Agreement, this Agreement and the Employee's employment hereunder shall
terminate immediately upon the Employee's death.
7. TERMINATION OF EMPLOYMENT.
(a) The Company may at any time terminate this Agreement and
the Employee's employment hereunder by written notice to the Employee effective
immediately upon delivery of such notice if:
(i) the Employee shall commit any act whether or
not involving the Employee that constitutes a felony in the
jurisdiction involved; or
(ii) the Employee engages in repeated substance
abuse; or
(iii) the Board, after due inquiry and providing the
Employee with a reasonable opportunity to be heard, shall have
determined in good faith that the Employee committed wilful malfeasance
or gross misconduct in his performance hereunder, or any material act
of fraud or dishonesty against the Company.
(b) The Employee may at any time terminate this Agreement and
his employment hereunder by written notice to the Company effective immediately
upon delivery of such notice if:
(i) the Company shall have committed a material
breach of this Agreement that the Company shall not have cured for 30
days after notice of the particulars of the breach provided that if
such material breach cannot reasonably be cured in such 30-day period,
then only if the Company has not promptly begun or diligently pursued a
cure; or
(ii) the Company, G&C or their principal officers
undergo adverse publicity that renders the Company and G&C unable to
conduct their businesses for more than 60 days.
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<PAGE> 6
(c) All disputes, conflicts and claims related to this Article
7 shall be resolved by arbitration in New York City before the American
Arbitration Association ("AAA") in accordance with the rules of the AAA.
Judgement on any award may be entered in any court having jurisdiction thereof.
8. NON-DISCLOSURE OF CONFIDENTIAL
INFORMATION AND NON-COMPETITION.
(a) The Employee acknowledges that he has been informed that
it is the policy of the Company to maintain as secret and confidential all
information (i) relating to the products, processes, technologies, inventions,
designs and/or systems used by the Company and (ii) relating to the suppliers,
customers and employees of the Company (all such information hereafter referred
to as "Confidential Information"), and the Employee further acknowledges that
such Confidential Information is of great value to the Company. The parties
hereto recognize that the services to be performed by the Employee are special
and unique, and that by reason of his employment by the Company, he has and will
acquire Confidential Information as aforesaid. The parties hereto confirm that
it is reasonably necessary to protect the Company's goodwill that the Employee
agree, and accordingly the Employee does agree, that he will not directly or
indirectly (except where authorized by the Board of Directors of the Company for
the benefit of the Company), for or on behalf of himself or any Person
(hereinafter defined):
(i) at any time during his employment by the Company
or for 5 years after he ceases to be employed by the Company
for any reason, divulge to any Person other than the Company
(hereinafter referred to collectively as a "third party"), or
use or cause to authorize any third parties to use, any such
Confidential Information (except information regarding clients
of Employee listed on Schedule B as attached, and if both
Employee and Joseph Clinard cease to be employed or retained
by the Company then information regarding clients of both
Employee and Joseph Clinard as listed on Schedules B and A
respectively (hereinafter referred to as "Exempt Clients"), or
any other information regarded as confidential and valuable by
the Company that he knows or should know is regarded as
confidential and valuable by the Company (whether or not any
of the foregoing information is actually novel or unique or is
actually known to others and whether or not the Confidential
Information is labeled as confidential); or
(ii) at any time during his employment by the
Company, act as or be an officer, director, stockholder,
consultant or advisor, partner or employee of, or render any
service for, or have any profit-
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<PAGE> 7
sharing or other interest in, or lend money or make any other
financial accommodation for or on behalf of, or undertake any
business transaction with, any Person that engages in or is
planning or preparing to engage in either direct competition
with the Company or any corporate affiliate of the Company, or
the business of providing, within a ten-mile radius around the
site of any office of the Company or any affiliate of the
Company, the same services as those provided by the Company or
any corporate affiliate, except that he may hold securities
that are part of a publicly traded class of securities (not in
excess of 5% of the outstanding total of any class of such
securities) in competitive concerns so long as he discloses
such holding to the Company; or
(iii) at any time during his employment by the
Company engage in or plan or prepare to engage in (A)
competition with the Company or any corporate affiliate or (B)
the business of providing, within a ten-mile radius around the
site of any office of the Company or any affiliate of the
Company, the same services as those provided by the Company or
any corporate affiliate; or
(iv) at any time during his employment by the Company
and for a period of two years after he ceases to be employed
by the Company for any reason, attempt in any manner to
solicit, or instruct, assist or provide any services in
connection with the solicitation of, business from any Person
that is, or shall have been after the date hereof, a client of
the Company or any affiliate of the Company except Exempt
Clients (a "Client") (except on behalf of the Company), or
persuade, or attempt in any manner to persuade, or communicate
with, any Client to cease doing business or to reduce the
amount of business that any such Client except Exempt Clients
has customarily done or contemplates doing with the Company or
any affiliate of the Company, whether or not the relationship
between the Company and such Client was originally established
in whole or in part through the efforts of the Employee; or
(v) at any time during his employment by the Company
and for a period of two years after he ceases to be employed
by the Company for any reason, employ or otherwise obtain
services from, or solicit or otherwise attempt to employ or
otherwise obtain services from, or assist any Person in
employing or otherwise obtaining services from, or attempting
to employ or otherwise obtain services from, any person who is
then, or at any time during the preceding twelve months shall
have
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<PAGE> 8
been, in the employ of or retained by the Company and/or its
affiliates; or
(vi) at any time during his employment by the Company
and the applicable period thereafter specified in each of the
clauses above, negotiate for or enter into an agreement,
understanding or arrangement, or otherwise cause or authorize
any Person, to take any of the actions prohibited by such
clause.
As used herein, the term "Person" means any person, corporation, partnership or
other entity, and the term "Client" shall mean (i) anyone who is then a client
of the Company or any of its affiliates, (ii) anyone who was a client of the
Company at any time during the two-year period immediately preceding the alleged
prohibited conduct, and (iii) any prospective client that shall have met with a
registered representative of the Company. This Section 8 shall be assignable by
the Company in a sale of all or substantially all of the assets of the Company
and shall apply to the continuing business conducted with such transferred
assets and replacements thereof.
(b) The Employee shall, upon the expiration of his employment
by the Company for any reason, forthwith deliver up to the Company any and all
drawings, notebooks, keys and other documents and materials, or copies thereof,
in his possession or under his control that relate to any Confidential
Information, including any of same that relate to any Invention relating to the
business of the Company or any affiliate of the Company described in Section
5(a), or that are otherwise the property of the Company. This Section 8 and
Section 5(c) shall survive any expiration or other termination of this
Agreement.
(c) The Employee agrees that any breach or threatened breach
by him of any provision of this Section 8 will, because of the unique nature of
the Employee's services and the Confidential Information entrusted to him as
aforesaid, cause irreparable harm to the Company and shall entitle the Company,
in addition to any other legal remedies available to it, to apply to any court
of competent jurisdiction to enjoin such breach or threatened breach, without
the need to show irreparable injury or to post any bond, which are hereby waived
by the Employee. The parties hereto understand and intend that each restriction
agreed to by the Employee hereinabove shall be construed as separable and
divisible from every other restriction, and the unenforceability, in whole or in
part, of any such restriction, in any jurisdiction, shall not affect the
enforceability of such restriction in any other jurisdiction or of the remaining
restrictions in any jurisdiction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances warrant.
The Employee further acknowledges that the Company is relying upon such
covenants as an inducement to provide the Employee with employment and in
connection therewith
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<PAGE> 9
to permit the Employee to have continued access to Confidential Information.
9. INDEMNIFICATION.
(a) In addition to the Company's obligation to maintain its
error and omissions insurance policy, the Company agrees to indemnify Employee
for any settlements, judgments, damages, costs, fees and expenses arising from
any suit, action or proceeding (collectively a "Claim") against the Employee
(including the litigation entitled Essex National Securities, Inc., Annuity
Agency of New York, Inc., and The Bank of New York, v. Sergio Toscano d/b/a
Village Investments, North Shore Capital Management Corp., and North Ridge
Securities Corp. except to the extent of indemnification under the Stock
Purchase Agreement): if based on or relating to (i) the Employee's own direct
action with a client of the Company, so long as such claim does not arise out of
Employee's personal negligence or fraudulent conduct in dealing with such
client, and (ii) transactions in which the Employee acted in a supervisory
capacity so long as Employee's conduct was not fraudulent in connection with
such transaction.
(b) The Employee shall immediately notify the Company in
writing, with sufficient time to respond to any Claim or threatened Claim or
answer or otherwise plead in any such action; provided that failure or delay to
supply such notice shall not relieve the Company of its indemnification
hereunder except to the extent that the Company is actually prejudiced by such
failure or delay.
(c) In case any Claim is asserted against the Employee, and it
notifies the Company of the commencement thereof, then the Company shall be
entitled to participate therein, and to the extent that it may wish, to assume
the defense, conduct or settlement thereof. After notice from the Company to the
Employee of its election so to assume the defense, conduct or settlement
thereof, the Company shall not be liable to the Employee for any legal or other
expenses subsequently incurred by the Employee in connection with the defense,
conduct or settlement thereof; provided, however, that if the Employee has
material separate defenses that counsel to the Company would be prohibited from
raising because of a conflict of interest, then the Employee shall have the
right to be represented by its own counsel at the Company's expense. The
Employee will cooperate with the Company in connection with any such Claim and
make personnel, books and records relevant to the Claim available to the
Company.
(d) Prior to finally settling any such Claim, the Company
shall give to the Employee prompt notice of its intention to settle same and the
terms of such proposed settlement. No
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<PAGE> 10
settlement of any Claim shall be made without the consent of the Company.
10. ENTIRE AGREEMENT. This Agreement, contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes any
prior agreement between the parties. No change, termination or attempted waiver
of any of the provisions hereof shall be binding unless in writing and signed by
the party against whom the same is sought to be enforced; PROVIDED, HOWEVER,
that the Employee's compensation may be increased at any time by the Company
without in any way affecting any of the other terms and conditions of this
Agreement, which in all other respects shall remain in full force and effect. No
action by either party shall be deemed a waiver of any right hereunder, and no
waiver of any right at any time shall operate as a waiver of any other right or
as a waiver of such right at any other time.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto, except that this agreement may not
be assigned by the Employee, or by the Company except to an affiliate of the
Company, in which case the Company shall remain liable for all of its
obligations hereunder.
12. GOVERNING LAW. All matters concerning the validity and
interpretation of and performance under this Agreement shall be governed by the
laws of the State of New York, except with respect to its conflict of laws
provisions.
13. NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient when delivered personally
or telecopied by confirmed facsimile, or three (3) business days after mailing
by registered or certified mail, return receipt requested, or the next business
day if sent by nationally recognized overnight courier providing for a return
receipt, in each case postage prepaid, addressed as follows:
If to Employer:
Gilman & Ciocia, Inc.
475 Northern Boulevard
Great Neck, NY 11021
Attn: Chief Financial Officer
Facsimile: (516) 482-5014
with a copy to:
Akabas & Cohen
488 Madison Avenue, 11th Floor
New York, New York 10022
Attn: Seth Akabas, Esq.
Facsimile: (212) 308-8582
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<PAGE> 11
If to Employee:
Daniel Levy
17 Buttonwood Drive
Dix Hills, New York 11746
With a copy to:
Stuart Steinberg, Esq.
Steinberg, Fineo, Berger & Burlant, P.C.
1001 Franklin Ave. Suite 302
Garden City, New York 11630
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed, effective ten (10) days
after such notice.
14. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement in any jurisdiction shall not affect the other
provisions hereof or such provision in other jurisdictions, and this Agreement
shall be construed in such jurisdiction in all respects as if such invalid or
unenforceable provisions were omitted. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision in such jurisdiction there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid and enforceable.
15. CONSTRUCTION. Throughout this Agreement, each pronoun shall be
deemed to include the masculine, the feminine and the neuter, the singular and
plural, and vice versa, where such meanings would be appropriate. The headings
herein are inserted only as a matter of convenience and reference, and they in
no way define, limit or describe the scope of this Agreement or the intent of
any provisions thereof.
16. FURTHER ASSURANCES. Each party shall execute such other documents
and instruments as shall be requested by the other party in order fully to
accomplish the purposes of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Employee has executed this Agreement and the
Company has caused this Agreement to be executed by its duly authorized officer
as of the date first above written.
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<PAGE> 12
NORTH SHORE CAPITAL MANAGEMENT
CORP.
\s\ Daniel R. Levy By:\s\ James Ciocia
DANIEL R. LEVY Name: James Ciocia
Title: Vice President
NORTH RIDGE SECURITIES CORP.
By:\s\ James Ciocia
Name: James Ciocia
Title: Vice President
Agreed as to
Section 4(d) and
Section 5(e)and
payments under
Sections 4(a)
and 4(c), and
maintenance of
insurance policy
under Section 4(f)
GILMAN & CIOCIA,
INC.
By:\s\ James Ciocia
Name: James Ciocia
Title: President
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<PAGE> 1
Exhibit 4
INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made as of this 19th day of November, 1998 between
Gilman & Ciocia, Inc., a Delaware corporation (the "Company"), and Daniel R.
Levy, an individual residing at 17 Buttonwood Drive, Dix Hills, New York 11746
(the "Optionee").
W I T N E S S E T H :
WHEREAS, the Company desires, in connection with the services
to be rendered by the Optionee and in connection with his employment with the
Subsidiaries, North Shore Capital Management Corp. and North Ridge Securities
Corp., to provide the Optionee with an opportunity to acquire Common Stock, par
value $.01 per share ("Common Stock"), of the Company on favorable terms and
thereby increase his proprietary interest in the progress and success of the
business of the Company,
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Company and the Optionee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a
determination by the Board of Directors of the Company on November 19, 1998 (the
"Date of Grant"), the Company, subject to the terms of this Agreement, and the
performance by Optionee of Optionee's obligations, hereby confirms that the
Optionee has been granted under the Company's 1993 Joint Incentive and
NonQualified Stock Option Plan (the "Plan") effective September 14, 1993 as a
matter of separate inducement and agreement, and in addition to and not in lieu
of other compensation for services, the right to purchase(hereinafter referred
to as the "Option") a maximum aggregate of (omitted) shares (the "Shares") of
Common Stock of the Company on the terms and conditions set forth, subject to
adjustment as provided in Section 9 hereof, such Option intended to qualify as
an Incentive Stock Option under Section 422 of the Internal Revenue Code 1986,
as amended (the "Code").
2. Vesting of Option. The Option shall vest with regard to one
fifth of the shares subject to the Option on the first anniversary of the Date
of Grant, with regard to one fifth of the shares subject
<PAGE> 2
to the Option on the second anniversary of the Date of Grant, with regard to one
fifth of the shares subject to the Option on the third anniversary of the Date
of Grant, with regard to one fifth of the shares subject to the Option on the
fourth anniversary of the Date of Grant, and with regard to one fifth of the
shares subject to the Option on the fifth anniversary of the Date of Grant. In
the event that the Company is acquired by another person or entity, or the
Company sells all or substantially all of the Company's assets, or if any person
or entity or a group of persons and/or entities not now owning more than 10% of
the issued and outstanding Common Stock comes to own 40% of the issued and
outstanding Common Stock, the entire Option shall vest immediately.
3. Purchase Price. The purchase price of the shares of Common
Stock covered by this Option is $8.75 subject to adjustment as provided in
Section 9 hereof.
4. Exercise of Option.
(a) Options vesting hereunder shall become
exercisable immediately after the date of vesting as and to the extent vested in
accordance with Section 2.
(b) The Option may be exercised in integral multiples
of 1,000 shares or all options remaining hereunder subject to the Option by
notice and payment to the Company as provided in Sections 11 and 16 hereof.
5. Term of Option.
(a) The term of the Option shall be a period of Five
(5) years from the Date of Vesting, subject to earlier termination or
cancellation as provided herein.
(b) The holder of the Option will not have any rights
to dividends or any other rights of a stockholder with respect to any shares of
Common Stock subject to the Option until such shares have been issued to him (as
evidenced by the appropriate entry on the books of a duly authorized transfer
agent of the Company) provided that the date of issuance shall not be earlier
than the Closing Date (as hereinafter defined) with respect to such shares
pursuant to Section 11 hereof, upon purchase of such shares upon exercise of the
Option.
6. Non-transferability of Option. The Option shall not be
transferable otherwise than by will, or by the laws of descent and distribution,
and the Option may be exercised during
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<PAGE> 3
the lifetime of the Optionee only by him. More particularly, but without
limiting the generality of the foregoing, the Option may not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or other process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option attempted contrary to the
provisions of this Agreement, or any levy of execution, attachment or other
process attempted upon the Option, shall be null and void and without effect.
Any attempt to make such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make such levy of execution,
attachment or other process shall cause the Option to terminate immediately upon
the happening of any such event if the Board of Directors of the Company, at any
time, should, in its sole discretion, so elect, by written notice to the
Optionee or to the person or persons then entitled to exercise the Option under
the provisions hereof; provided, however, that any such termination of the
Option under the foregoing provisions of this section 6 will not prejudice any
rights or remedies that the Company or any affiliate or subsidiary thereof may
have under this Agreement or otherwise.
7. Exercise upon Cessation of Employment.
(a) If the Optionee ceases to serve as an employee or
director of the Company or any affiliate or subsidiary thereof by reason of his
discharge for cause, as determined in good faith by the Board of Directors of
the Company, or by the reason of the voluntary resignation of the Optionee, then
the Option shall forthwith terminate, but vested options may be exercised for a
period of 30 days after termination. If, however, the Optionee for any other
reason ceases to serve, then the options vested at the date of such cessation
may, subject to the provisions of Section 6 hereof, be exercised to the same
extent the Optionee would have been entitled under Sections 2 & 4 hereof to
exercise the vested options hereunder. In any event the Option may not be
exercised after the expiration of the term provided in Section 5 hereof. Any
Option or part thereof not vested on the date of such cessation shall forthwith
terminate.
(b) The Option shall not be affected by any change of
duties of the Optionee so long as he continues to serve as an employee or
director of the Company or any affiliated corporation or subsidiary thereof. If
the Optionee is granted a temporary leave of absence, such leave of absence will
be deemed a continuation of his service to the Company for the purposes of this
Agreement only if and so long as the Company in its sole discretion consents
thereto. Retirement, whether or not pursuant to any retirement or pension plan
of the Company or any
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<PAGE> 4
subsidiary thereof, shall be deemed to be a cessation of service with written
consent for all purposes of this Agreement.
(c) Any termination of this Option by reason of
cessation of service, whether under this Section 7 or Section 8, shall be
without prejudice to any rights or remedies that the Company or any affiliated
corporation or subsidiary thereof may have against the Optionee hereunder or
otherwise.
8. Exercise upon Death or Disability.
(a) If the Optionee dies while he is serving as an
employee or director of the Company or any affiliated corporation or any
subsidiary thereof or within three months after he has ceased such service
(provided such cessation was not due to the Optionee's having resigned
voluntarily or been discharged for cause), during which period he would have
been entitled to exercise the Option under the provisions of Section 7 hereof,
the Option may, subject to the provisions of Section 6 hereof, be exercised to
the extent the Optionee would have been entitled under Section 2 hereof to
exercise the Option on the day preceding the date of his death, by the estate of
the Optionee or by the person or persons (including the estate of any such
person or persons who have died) who acquire the right to exercise the Option by
bequest or inheritance at any time within the period ending one year after the
death of the Optionee, at the end of which period the Options shall terminate.
In any event the Option may not be exercised after the expiration of the term
provided in Section 5 hereof.
(b) If the service of the Optionee for the Company or
any affiliated corporation or any subsidiary thereof is terminated by reason of
"disability", the Option may, subject to the provisions of Section 6 hereof, be
exercised to the extent the Optionee would have been entitled under Section 2
hereof to exercise the Options on the day preceding the date of his
"disability," at any time within the period ending one year after the
"disability" of the Optionee, at the end of which period the Option shall
terminate. In any event the Options may not be exercised after the expiration of
the term provided in Section 5 hereof.
(c) A temporary disability may in the sole discretion
of the Board of Directors or the Committee, as the case may be, be deemed
hereunder to be a continuation of service for the Company if such disability
lasts less than 90 days, or, in the case of a disability longer than 90 days, if
the Company in its sole discretion contractually guarantees the Optionee's right
to return to work after such disability.
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<PAGE> 5
9. Adjustments. In the event of a stock dividend, stock
split-up, share combination, exchange of shares, recapitalization, merger,
consolidation, acquisition or disposition of property or shares, reorganization,
liquidation, stock sale or option grant below market price or the exercise price
hereof, or other similar changes or transactions of or by the Company after the
Date of Grant, the Board of Directors of the Company shall make (or shall
undertake to have the Board of Directors of any corporation that merges with, or
acquires the assets of, the Company make) such adjustment of the number or class
of shares then covered by the Options, or of the option price, or both, as it
shall, in its reasonable discretion, deem appropriate to give proper effect to
such event; provided, however, that no such adjustment shall be made so as to
constitute a modification, extension or renewal of the Options within the
meaning of Section 424(h) of the Code.
10. Registration. The shares of Common Stock subject hereto
and issuable upon the exercise hereof may not be registered under the Securities
Act of 1933, as amended (the "Act"), and, if required upon the request of
counsel to the Company, the Optionee shall give a representation as to his
investment intent and other matters with respect to such shares prior to their
issuance as set forth in Section 11 hereof.
11. Method of Exercise of Option.
(a) Subject to the terms and conditions of this
Agreement, the Option shall be exercisable by notice and payment to the Company
in accordance with the procedure prescribed herein. Each notice shall:
(i) state the election to exercise the Option and the
number of shares in respect of which it is being exercised;
(ii) contain a representation and agreement as to
investment intent and other matters, if required by counsel to
the Company with respect to such shares, in a form
satisfactory to counsel for the Company; and
(iii) be signed by the person or persons entitled to
exercise the Options and, if the Options are being exercised
by any person or persons other than the Optionee, be
accompanied by proof, satisfactory to counsel of the Company,
of the right of such person or persons to exercise the
Options.
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<PAGE> 6
(b) Upon receipt of such notice, the Company shall
specify, by written notice to the Optionee, a date and time (such date and time
being herein called the "Closing Date") and place for payment of the full
purchase price of such shares. The closing date shall not be more than fifteen
days from the date the notice of exercise is received by the Company unless
another date is agreed upon by the Company and the Optionee or is required upon
advise of counsel of the Company in order to meet the requirements of Section 12
hereof.
(c) Payment of the purchase price of any shares of
Common Stock, in respect of which the Option shall be exercised, shall be made
by the Optionee at a place specified by the Company on or before the Closing
Date by delivering to the Company a certified or bank cashier's check payable to
the order of the Company. The Option shall be deemed to have been exercised with
respect to any particular shares of Common Stock, if, and only if, the preceding
provisions of this Section 11 and the provisions of Section 12 hereof shall have
been complied with, in which event the Option shall be deemed to have been
exercised on the Closing Date. Anything in this agreement to the contrary
notwithstanding, any notice of exercise given pursuant to the provisions of this
Section 11 shall be void and of no effect if all the preceding provisions of
this Section 11 and the provisions of Section 12 shall not have been complied
with. The certificate or certificates for shares of Common Stock as to which the
Option shall be exercised shall be registered in the name of the Optionee or, if
the Optionee so requests in the notice exercising the Option, shall be
registered in the name of the Optionee and another person jointly, with right of
survivorship, and shall be delivered on the Closing Date to the Optionee at the
place specified for the closing, but only upon compliance with all of the
provisions of this Agreement. If the Optionee fails to accept delivery of and
pay for all or any part of the number of shares specified in such notice upon
tender or delivery thereof on the Closing date, his right to exercise the Option
with respect to such undelivered shares may be terminated in the sole discretion
of the Board of Directors of the Company. The Option may be exercised only with
respect to full shares.
(d) Cashless Exercise. Anything in this Agreement to
the contrary notwithstanding, the Optionee may pay the Exercise Price for the
Option by the surrender to the Company of a portion of the exercisable but
unexercised Option covering those Shares issued upon exercise (the "Option
Stock" ) having a Value (hereinafter defined) at the close of trading on the
trading day on which the Option is exercised (or the next trading day if
exercised on a nontrading day) equal to the product of the Exercise Price
multiplied by the shares of Option Stock with respect to which the Option shall
be exercised. The portion surrendered and the portion exercised may not exceed
in the
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<PAGE> 7
aggregate the exercisable but unexercised Option at the time of exercise.
"Value" means the product of the difference of the Market Price (hereinafter
defined) minus the Exercise Price multiplied by the number of shares of Option
Stock issuable with respect to the portion of the Option being surrendered.
"Market Price" means the last reported per share sale price of the Common Stock
as officially reported by the principal exchange or stock market on which the
Common Stock is listed or admitted to trading, or, if none, the OTC Bulletin
Board, or if not so listed, as determined in good faith by resolution of the
Board of Directors of the Company. If payment is made under this Section 11(d),
exercise of the Option shall be effected as set forth in Section 4 above and
this Section 11, but the exercise form shall specify that payment shall be made
under this Section 11(d) and that the Option is being exercised for either all
of the Option Stock available after surrender or all of such Option Stock up to
a specified number of shares of Option Stock.
12. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the Act and the rules
and regulations thereunder, and the requirements of any stock exchange or market
upon which the Common Stock may then be listed.
13. Resale of Common Stock.
(a) Upon any sale or transfer of the Common Stock
purchased upon exercise of the Option, unless such shares are registered under
the Act, the Optionee shall deliver to the Company an opinion of counsel
satisfactory to the Company to the effect that such common stock may be sold
without violating Section 5 of said Act.
(b) Unless registered under the Act, the Common Stock
issued upon exercise of the Option shall bear the following legend if required
by counsel for the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE FIRST
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH REGISTRATION IS
NOT REQUIRED.
14. Reservation of Shares. The Company shall at all times
during the term of the Option reserve and keep available
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<PAGE> 8
such number of shares of the class of stock then subject to the Option as will
be sufficient to satisfy the requirements of this Agreement.
15. Limitation of Action. The Optionee and the Company each
acknowledge that every right of action accruing to him or it, as the case may
be, and arising out of or in connection with this Agreement against the Company
or an affiliated corporation or subsidiary thereof, on the one hand, or the
Optionee, on the other hand, shall, irrespective of the place where an action
may be brought, cease and be barred by the expiration of three years from the
date of the act or omission in respect of which such right of action arises.
16. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person or by certified or registered mail, return
receipt requested, or by nationally recognized overnight courier service
providing for a signed return receipt, to the proper address. All notices to the
Company shall be addressed to it at 475 Northern Boulevard, Great Neck, NY
11021, with a copy to Akabas & Cohen, 488 Madison Avenue, New York NY 10022,
Attn: Seth A. Akabas, Esq. and to Steinberg, Fineo, Berger & Burlany, P.C., 1001
Franklin Ave., Suite 302, Garden City, New York 11530, Attn: Stuart Steinberg,
Esq. All notices to the Optionee shall be addressed to the Optionee at the
Optionee's address above specified. Anyone to whom a notice may be given under
this Agreement may designate a new address by notice to that effect, effective
upon actual receipt thereof.
17. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Optionee and all rights granted to the Company
under this Agreement shall be binding upon the Optionee's heirs, legal
representatives and successors.
18. Severability. In the event that any one or more provisions
of this Agreement shall be deemed to be illegal or unenforceable, such
illegality or unenforceability shall not affect the validity and enforceability
of the remaining legal and enforceable provisions hereof, which shall be
constructed as if such illegal or unenforceable provision or provisions had not
been inserted.
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<PAGE> 9
19. Governing Law. This Agreement will be construed
and governed in accordance with the laws of the State of New
York.
20. No Implied Employment Agreement. This Agreement shall not
be construed as changing the Optionee's status as an "at will" employee or as
giving the Optionee any right to be employed by the Company or any of its
subsidiaries or affiliates or interfering in any way with the right of the
Company or any of its subsidiaries or affiliates from terminating the employment
of the Optionee, subject to any written employment agreement in effect between
the Company and the Optionee.
21. Plan Governs Conflicts. In the event of a conflict between
the provisions of the Plan and the Provisions of this Agreement, the provisions
of the Plan, shall in all respects be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date and year first above written.
GILMAN & CIOCIA, INC.
By: \s\James Ciocia
Name: James Ciocia
Title: President
\s\ Daniel R. Levy
DANIEL R. LEVY
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<PAGE> 10
OPTION EXERCISE FORM
The undersigned hereby irrevocably elects to exercise
the within Option to the extent of purchasing shares of Common
Stock of GILMAN & CIOCIA, INC. and hereby makes payment of $
in cash or surrender of Option Value under Section 11(d) ,
in payment therefor.
Date Signature
Signature, if jointly held
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Option)
Name
(Please typewrite or print in block letters)
Address
Social Security or Taxpayer Identification Number
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<PAGE> 1
Exhibit 5
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of November 19, 1998 between Joseph
Clinard, an individual with an address at 3 Colyer Drive, Greenlawn, New York
11740 (the "Consultant"), and North Ridge Securities Corporation (the
"Company"), a New York corporation with a principal office at 1895 Walt Whitman
Road, Melville, New York 11747.
W I T N E S S E T H :
WHEREAS, Gilman & Ciocia, Inc. ("G&C"), Consultant and Daniel Levy have
entered into a Stock Purchase Agreement of November 19, 1998, (the "Stock
Purchase Agreement") pursuant to which Gilman & Ciocia, Inc. is purchasing the
capital stock of both North Shore Capital Management Corp. ("NSCM") and the
Company for cash, as described in the Stock Purchase Agreement; and
WHEREAS, the Company wishes to retain the Consultant as a registered
representative and municipal bonds principal of the Company, and the Consultant
wishes to accept such engagement, all on the terms hereinafter set forth,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree hereby as follows:
1. ENGAGEMENT. The Company hereby retains the Consultant as a
registered representative and municipal bonds principal of the Company, and the
Consultant hereby accepts such position, subject to the terms and conditions
hereinafter set forth, under the direction of the executive officers and the
Board of Directors of the Company (the "Board").
2. TERM, RENEWAL. The term of the Consultant's engagement hereunder
shall be deemed to have commenced on November 1, 1998 and shall continue
thereafter for a period of one (1) year and shall renew automatically for a year
unless terminated earlier in accordance with the terms hereof.
3. DUTIES.
(a) The duties of the Consultant shall be acting as a
registered representative and municipal bonds principal of the Company. The
Consultant shall serve the Company loyally, faithfully and to the best of his
abilities and shall devote a
<PAGE> 2
reasonable amount of working time and effort to the performance of his duties
hereunder. The Consultant shall be available for limited travel as the needs of
the business of the Company require.
(b) The Consultant agrees that he will not, during the term of
this Agreement, engage in any business activity that interferes with the
performance of his obligations under this Agreement.
4. COMPENSATION, BENEFITS, ETC..
(a) In consideration of the services to be rendered by the
Consultant hereunder, the Company shall pay to the Consultant, and he shall
accept, compensation in the form of commissions at a rate of (omitted) of the
net commissions earned by the Company on securities transactions for which the
Consultant shall have acted as primary registered representative, and
(omitted)of the standard agent's commission on life and disability insurance
products sold through NSCM and a commission to be negotiated between Consultant
and Company on single premium annuities, long-term health care, Medicare
supplement policies, etc., based upon the varying gross commissions received by
NSCM.
(b) The Consultant shall receive health insurance from the
Company as the Company provides its employees or under a reasonably comparable
policy.
(c) The Consultant shall receive reimbursement or be included
on the Company's expense account for up to $650 per month for car expenses.
(d) The Company shall maintain its error and omissions policy
in effect as of June 30, 1998 or a reasonably comparable occurrence-based
policy, including coverage of Consultant.
(e) The Company shall pay for all of Consultant's licensing
fees with the National Association of Securities Dealers, Inc. in connection
with his work for the Company.
5. COVENANTS.
(a) The Consultant agrees that all work produced by him,
excepting his financial planning book, under this Agreement or otherwise for the
Company shall be deemed to be a "work made for hire" as defined in the federal
Copyright Act, Title 17 of the United States Code. Without further
consideration, the Consultant hereby irrevocably assigns, transfers and sets
over to the Company, its successors and assigns, all of the Consultant's right,
title and interest in and to any and all developments, processes, discoveries,
technologies and creations and all copyrightable and patentable works, materials
and ideas (collectively "Inventions") and any improvement to any Invention,
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<PAGE> 3
whether or not patentable, copyrightable or legally protectible or recognized as
forms of property, and whether or not completed or used in practice, together
with all information and data relating thereto (hereinafter "Proprietary
Information") (including all designs, drawings, prints, patterns, sketches,
ideas, inventions, improvements, writings and other works of authorship, theses,
books, computer programs, lectures, illustrations, photographs, scientific and
mathematical models, prints and any other subject matter that is or may become
legally protectible or recognized as a form of property) that have been
conceived, made or suggested, or may hereafter be conceived, made or suggested,
either by the Consultant or by others with the assistance or other participation
of the Consultant, and (i) on the Company's premises or during the Consultant's
usual working hours, or (ii) otherwise related to the business of the Company or
any affiliate of the Company.
(b) The Consultant shall disclose promptly to the Company any
and all Inventions and Proprietary Information when conceived or made by the
Consultant, and report promptly to the Company all information of which the
Consultant may become aware during the term of employment with the Company that
may be of benefit to the Company. During the period of his employment hereunder,
the Consultant shall also disclose promptly to the Board of Directors of the
Company all material Inventions relating to the business, products, or projects
of the Company and/or involving the use of the Company's time, materials and/or
facilities.
(c) Upon request by the Company, the Consultant shall, without
compensation other than the Consultant's usual and customary salary, bonus and
benefits hereunder, execute all such assignments and other documents and perform
all such acts necessary to enable the Company to obtain or uphold for its
benefit patents or copyrights for, and other rights to, such Inventions and
Proprietary Information relating thereto, which shall be owned by the Company,
whether or not the Consultant is the inventor thereof.
6. DISABILITY AND DEATH.
(a) If the Consultant, due to physical or mental disability or
incapacity, shall have been unable fully to perform his duties hereunder for any
60 days during any twelve (12) consecutive months, as determined in good faith
by the Board of Directors, then the Company may terminate this Agreement and the
Consultant's consultancy hereunder by written notice to the Consultant or his
legal guardian, effective immediately upon delivery of such notice.
(b) If the Consultant shall die during the term of this
Agreement, this Agreement and the Consultant's consultancy
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<PAGE> 4
hereunder shall terminate immediately upon the Consultant's
death.
7. TERMINATION OF CONSULTANCY.
(a) The Company may at any time terminate this Agreement and
the Consultant's consultancy hereunder by written notice to the Consultant
effective immediately upon delivery of such notice if:
(i) the Consultant shall commit any act whether
or not involving the Consultant that constitutes a felony in
the jurisdiction involved; or
(ii) the Consultant engages in repeated substance
abuse; or
(iii) the Board, after due inquiry and providing the
Consultant with a reasonable opportunity to be heard, shall have
determined in good faith that the Consultant committed wilful
malfeasance or gross misconduct in his performance hereunder, or any
material act of fraud or dishonesty against the Company; or
(iv) the Consultant shall have refused to obey a
directive of the Board of Directors or an Executive Officer of the
Company to perform an act that the Consultant is or should be able to
perform and that is within the role of registered representative and/or
a municipal bonds principal and which is not illegal or unethical for
30 days after receipt of a written directive to perform such act.
(b) The Consultant may at any time terminate this Agreement
and the Consultant's consultancy hereunder by written notice to the Company
effective immediately upon receipt of such notice if:
(i) the Company shall have committed a material
breach of this Agreement that the Company shall not have cured for 30
days after notice of the particulars of the breach, provided that if
such material breach cannot reasonably be cured in such 30-day period
then only if the Company shall not have promptly commenced or
diligently pursued a cure; or
(ii) the Company undergoes adverse publicity that
renders the Company unable to conduct its business for more than 60
days.
(c) the Consultant may terminate this Agreement by notice to
the Company of termination, to be effective 60 days after the Company's receipt
of such notice.
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<PAGE> 5
(d) All disputes, conflicts and claims related to this Article
7 shall be resolved by arbitration in New York City before the American
Arbitration Association ("AAA") in accordance with the rules of the AAA.
Judgement on any award may be entered in any court having jurisdiction thereof.
8. NON-DISCLOSURE OF CONFIDENTIAL
INFORMATION AND NON-COMPETITION.
(a) The Consultant acknowledges that he has been informed that
it is the policy of the Company and its affiliates to maintain as secret and
confidential all information (i) relating to the products, processes,
technologies, inventions, designs and/or systems used by the Company and its
affiliates and (ii) relating to the suppliers, customers and Consultants of the
Company and its affiliates (all such information hereafter referred to as
"Confidential Information"), and the Consultant further acknowledges that such
Confidential Information is of great value to the Company and its affiliates.
The parties hereto recognize that the services to be performed by the Consultant
are special and unique, and that by reason of his engagement by the Company and
its affiliates, he has and will acquire Confidential Information as aforesaid.
The parties hereto confirm that it is reasonably necessary to protect the
Company's goodwill that the Consultant agree, and accordingly the Consultant
does agree, that he will not directly or indirectly (except where authorized by
the Board of Directors of the Company for the benefit of the Company), for or on
behalf of himself or any Person (hereinafter defined):
(i) at any time during his engagement for the Company
or after he ceases to be retained by the Company for any reason,
divulge to any Person other than the Company (hereinafter referred to
collectively as a "third party"), or use or cause to authorize any
third parties to use, any such Confidential Information excepting
information regarding clients of Consultant listed on Schedule A as
attached, and if both Consultant and Daniel Levy cease to be employed
or retained by the Company then information regarding clients of both
Consultant and Daniel Levy as listed on Schedules A and B respectively
(hereinafter referred to as "Exempt Clients"), or any other information
regarded as confidential and valuable by the Company that he knows or
should know is regarded as confidential and valuable by the Company
(whether or not any of the foregoing information is actually novel or
unique or is actually known to others and whether or not the
Confidential Information is labeled as confidential); or
(ii) at any time during his engagement by the
Company, act as or be an officer, director, stockholder, consultant or
advisor, partner or Consultant of, or render
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<PAGE> 6
any service for, or have any profit-sharing or other interest in, or
lend money or make any other financial accommodation for or on behalf
of, or undertake any business transaction with, any Person that engages
in or is planning or preparing to engage in either direct competition
with the Company or any corporate affiliate of the Company, or the
business of providing, within a ten mile radius around the site of any
office of the Company or any affiliate of the Company, the same
services as those provided by the Company or any corporate affiliate,
except that he may hold securities that are part of a publicly traded
class of securities (not in excess of 5% of the outstanding total of
any class of such securities) in competitive concerns so long as he
discloses such holding to the Company; or
(iii) at any time during his engagement by the
Company, engage in or plan or prepare to engage in (A) competition with
the Company or any corporate affiliate or (B) the business of
providing, within a five-mile radius around the site of any office of
the Company or any affiliate of the Company, the same services as those
provided by the Company or any corporate affiliate; or
(iv) at any time during his engagement for the
Company and for a period of two years after he ceases to be retained by
the Company for any reason, attempt in any manner to solicit, or
instruct, assist or provide any services in connection with the
solicitation of, business from any Person that is, or shall have been
after the date hereof, a client of the Company or any affiliate of the
Company excepting Exempt Clients (a "Client") (except on behalf of the
Company), or persuade, or communicate with or attempt in any manner to
persuade, any Client to cease doing business or to reduce the amount of
business that any such Client has customarily done or contemplates
doing with the Company or any affiliate of the Company, whether or not
the relationship between the Company and such Client was originally
established in whole or in part through the efforts of the Consultant
excepting Exempt Clients; or
(v) at any time during his engagement with the
Company and for a period of two years after he ceases to be retained by
the Company for any reason, employ or otherwise obtain services from,
or solicit or otherwise attempt to employ or otherwise obtain services
from, or assist any Person in employing or otherwise obtaining services
from, or attempting to employ or otherwise obtain services from, any
person who is then, or at any time during the preceding twelve months
shall have been, in the employ of or retained by the Company and/or its
affiliates; or
(vi) at any time during his engagement by the Company
and the applicable period thereafter specified in
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<PAGE> 7
each of the clauses above, negotiate for or enter into an agreement,
understanding or arrangement, or otherwise cause or authorize any
Person, to take any of the actions prohibited by such clause.
As used herein, the term "Person" means any person, corporation, partnership or
other entity, and the term "Client" shall mean (i) anyone who is then a client
of the Company or any of its affiliates, (ii) anyone who was a client of the
Company at any time during the two-year period immediately preceding the alleged
prohibited conduct, and (iii) any prospective client that shall have met with a
registered representative of the Company. This Section 8 shall be assignable by
the Company in a sale of all or substantially all of the assets of the Company
and shall apply to the continuing business conducted with such transferred
assets and replacements thereof.
(b) The Consultant shall, upon the expiration of his engagement for the
Company for any reason, forthwith deliver up to the Company any and all
drawings, notebooks, keys and other documents and materials, or copies thereof,
in his possession or under his control that relate to any Confidential
Information, including any of same that relate to any Invention relating to the
business of the Company or any affiliate of the Company described in Section
5(a), or that are otherwise the property of the Company. This Section 8 and
Section 5(c) shall survive any expiration or other termination of this
Agreement.
(c) The Consultant agrees that any breach or threatened breach
by him of any provision of this Section 8 will, because of the unique nature of
the Consultant's services and the Confidential Information entrusted to him as
aforesaid, cause irreparable harm to the Company and shall entitle the Company,
in addition to any other legal remedies available to it, to apply to any court
of competent jurisdiction to enjoin such breach or threatened breach, without
the need to show irreparable injury or to post any bond, which are hereby waived
by the Consultant. The parties hereto understand and intend that each
restriction agreed to by the Consultant hereinabove shall be construed as
separable and divisible from every other restriction, and the unenforceability,
in whole or in part, of any such restriction, in any jurisdiction, shall not
affect the enforceability of such restriction in any other jurisdiction or of
the remaining restrictions in any jurisdiction, and that one or more or all of
such restrictions may be enforced in whole or in part as the circumstances
warrant. The Consultant further acknowledges that the Company is relying upon
such covenants as an inducement to provide the Consultant with employment and in
connection therewith to permit the Consultant to have continued access to
Confidential Information.
9. INDEMNIFICATION.
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(a) In addition to the Company's obligation to maintain its
errors and omissions insurance policy, the Company agrees to indemnify
Consultant for any settlements, judgments, damages, costs, fees and expenses
arising from any suit, action or proceeding (collectively a "Claim") against the
Consultant if based on or relating to (i) the Consultant's own direct action
with a client of the Company, so long as such claim does not arise out of
Consultant's personal negligence or fraudulent conduct in dealing with such
client, and (ii) transactions in which the Consultant acted in a supervisory
capacity, so long as Consultant's conduct was not fraudulent in connection with
such transaction.
(b) The Consultant shall immediately notify the Company in
writing, with sufficient time to respond to any Claim or threatened Claim or
answer or otherwise plead in any such action; provided that failure or delay to
supply such notice shall not relieve the Company of its indemnification
hereunder except to the extent that the Company is actually prejudiced by such
failure or delay.
(c) In case any Claim is asserted against the Consultant, and
it notifies the Company of the commencement thereof, then the Company shall be
entitled to participate therein, and to the extent that it may wish, to assume
the defense, conduct or settlement thereof. After notice from the Company to the
Consultant of its election so to assume the defense, conduct or settlement
thereof, the Company shall not be liable to the Consultant for any legal or
other expenses subsequently incurred by the Consultant in connection with the
defense, conduct or settlement thereof; provided, however, that if the
Consultant has material separate defenses that counsel to the Company would be
prohibited from raising because of a conflict of interest, then the Consultant
shall have the right to be represented by its own counsel at the Company's
expense. The Consultant will cooperate with the Company in connection with any
such Claim and make personnel, books and records relevant to the Claim available
to the Company.
(d) Prior to finally settling any such Claim, the Company
shall give to the Consultant prompt notice of its intention to settle same and
the terms of such proposed settlement. No settlement of any Claim shall be made
without the consent of the Company.
10. ENTIRE AGREEMENT. This Agreement, contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes any
prior agreement between the parties. No change, termination or attempted waiver
of any of the provisions hereof shall be binding unless in writing and signed by
the party against whom the same is sought to be enforced; PROVIDED, HOWEVER,
that the Consultant's compensation may be increased at any time by the Company
without in any way affecting
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any of the other terms and conditions of this Agreement, which in all other
respects shall remain in full force and effect. No action by either party shall
be deemed a waiver of any right hereunder, and no waiver of any right at any
time shall operate as a waiver of any other right or as a waiver of such right
at any other time.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto, except that this agreement may not
be assigned by the Consultant, or by the Company except to an affiliate of the
Company, in which case the Company shall remain liable for all of its
obligations hereunder.
12. GOVERNING LAW. All matters concerning the validity and
interpretation of and performance under this Agreement shall be governed by the
laws of the State of New York, except with respect to its conflict of laws
provisions.
13. NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient when delivered personally
or telecopied by confirmed facsimile, or three (3) business days after mailing
by registered or certified mail, return receipt requested, or the next business
day if sent by nationally recognized overnight courier providing for a return
receipt, in each case postage prepaid, addressed as follows:
If to Company:
Gilman & Ciocia, Inc.
475 Northern Boulevard
Great Neck, NY 11021
Attn: Chief Financial Officer
Facsimile: (516) 482-5014
with a copy to:
Akabas & Cohen
488 Madison Avenue, 11th Floor
New York, New York 10022
Attn: Seth Akabas, Esq.
Facsimile: (212) 308-8582
If to Consultant:
Joseph Clinard
3 Coyler Drive
Greenlawn, New York 11740
With a copy to:
Stuart Steinberg, Esq.
Steinberg, Fineo, Berger & Burlant, P.C.
1001 Franklin Avenue
Suite 302
Garden City, New York 11690
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Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed, effective ten (10) days
after such notice.
14. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement in any jurisdiction shall not affect the other
provisions hereof or such provision in other jurisdictions, and this Agreement
shall be construed in such jurisdiction in all respects as if such invalid or
unenforceable provisions were omitted. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision in such jurisdiction there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid and enforceable.
15. CONSTRUCTION. Throughout this Agreement, each pronoun shall be
deemed to include the masculine, the feminine and the neuter, the singular and
plural, and vice versa, where such meanings would be appropriate. The headings
herein are inserted only as a matter of convenience and reference, and they in
no way define, limit or describe the scope of this Agreement or the intent of
any provisions thereof.
16. FURTHER ASSURANCES. Each party shall execute such other documents
and instruments as shall be requested by the other party in order fully to
accomplish the purposes of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Consultant has executed this Agreement and the
Company has caused this Agreement to be executed by its duly authorized officer
as of the date first above written.
NORTH RIDGE SECURITIES
CORPORATION
\s\ Joseph Clinard By: James Ciocia
JOSEPH CLINARD Name: James Ciocia
Title: Vice President
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Payments under Section 4(a) and Section 4(c)
and maintenance of insurance
policy under Section 4(f) guaranteed
by
GILMAN & CIOCIA, INC.
By:\s\James Ciocia
-------------------------------
Name: James Ciocia
Title: President
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