SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly period Ended March 31, 1996
Commission File Number 0-25056
FINANCIAL SERVICES ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 59-3262958
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
667 Madison Avenue
New York, New York 10021
(Address of principal executive office)
(212) 246-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares of common stock, par value $.001 per
share, of registrant outstanding as of May 14, 1996 was 4,416,666.
The Exhibit Index is on Page 22
FINANCIAL SERVICES ACQUISITION CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Contents F-2
Balance Sheets F-3
Statements of Operations F-4
Statement of Common Stock, Common Stock Subject to
Possible Conversion, Preferred Stock, Additional
Paid-in Capital and Retained Earnings
Accumulated During the Development Stage F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 21
Exhibit Index 22
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Financial Services
Acquisition Corporation
(a corporation in the
development stage)
Financial Statements
Periods Ended March 31, 1995 and 1996
Financial Services Acquisition Corporation
(a corporation in the development stage)
Contents
FINANCIAL STATEMENTS:
Balance sheets F-3
Statements of operations F-4
Statement of common stock, common stock subject
to possible conversion, preferred stock,
additional paid-in capital and retained earnings
accumulated during the development stage F-5
Statements of cash flows F-6
Notes to financial statements F-7 - F-12
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
==============================================================================
December 31, March 31,
1995 1996
- - ------------------------------------------------------------------------------
ASSETS (audited) (unaudited)
Cash and cash equivalents $ 159,657 $ 38,395
Short-term investment and accrued interest thereon 1,116,214 1,008,094
U.S. Government security deposited in Trust Fund
and accrued interest thereon (Note 2) 18,489,353 18,718,730
Deferred acquisition costs (Note 8) 60,000 622,500
Prepaid expenses 5,000 -
Organization costs, less amortization
of $13,937 and $17,210 51,526 48,253
- - ------------------------------------------------------------------------------
$19,881,750 $20,435,972
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and taxes $ 253,496 $ 687,498
Deferred income taxes 42,000 42,000
Commitment (Note 4)
Common stock, subject to possible conversion,
716,666 shares at conversion value (Note 2) 3,696,022 3,741,874
Preferred stock, $.001 par value - shares
authorized 1,000,000; none issued (Note 5) - -
Common stock, $.001 par value - shares
authorized 14,000,000; issued and outstanding
4,416,666 (which includes 716,666 shares
subject to possible conversion) (Notes 3 and 6) 3,700 3,700
Additional paid-in capital 15,710,140 15,710,140
Retained earnings accumulated
during the development stage 176,392 250,760
- - ------------------------------------------------------------------------------
$19,881,750 $20,435,972
==============================================================================
See accompanying notes to financial statements.
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
Period
from
August 18,
1994
Three months Three months (inception)
ended ended to
March 31, March 31, March 31
1995 1996 1996
- - -----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
INCOME:
Interest $ 275,666 $ 244,118 $1,413,159
- - -----------------------------------------------------------------------------
EXPENSES:
General and administrative 48,324 40,375 220,206
Acquisition costs (Note 7) - - 239,817
Occupancy (Note 4) 15,000 15,000 80,000
Amortization of financing costs,
debt discount and organization costs 3,273 3,273 56,710
State franchise taxes 4,550 3,250 20,214
Interest (Note 3) - - 3,836
- - ------------------------------------------------------------------------------
TOTAL EXPENSES 71,147 61,898 620,783
- - ------------------------------------------------------------------------------
NET INCOME BEFORE TAXES ON
INCOME 204,519 182,220 792,376
TAXES ON INCOME 86,000 62,000 281,000
- - ------------------------------------------------------------------------------
NET INCOME FOR THE PERIOD $ 118,519 $ 120,220 $ 511,376
NET INCOME PER SHARE $ .03 $ .03
==============================================================================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,416,666 4,416,666
==============================================================================
See accompanying notes to financial statements.
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF COMMON STOCK, COMMON STOCK SUBJECT TO POSSIBLE CONVERSION,
PREFERRED STOCK, ADDITIONAL PAID-IN CAPITAL AND RETAINED EARNINGS
ACCUMULATED DURING THE DEVELOPMENT STAGE
Period from August 18, 1994 (inception) to March 31, 1996
- - ---------------------------------------------------------------------------------------------------------------------------------
Common stock Retained
subject to Preferred earnings
Common stock possible conversion stock accumulated
----------------------- ---------------------- -------------- Additional during the
Number of Number of Number of paid-in development
shares Amount shares Amount shares Amount capital stage
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 18, 1994 - $ - - $ - - $- $ -- $ -
Original issuance of common
stock 833,333 833 - - - - 24,167 -
Issuance of warrants to
purchase common stock - - - - - - 20,000 -
Sale of 3,583,333 units,
net of underwriting discounts
and offering expenses 2,866,667 2,867 716,666 3,481,258 - - 15,665,973 -
Net loss for the period - - - - - - -- (6,976)
Accretion to conversion value
of common stock - - - 12,114 - - -- (12,114)
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 3,700,000 3,700 716,666 3,493,372 - - 15,710,140 (19,090)
Net income for the year - - - -- - - -- 398,132
Accretion to conversion value
of common stock - - - 202,650 - - -- (202,650)
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 3,700,000 3,700 716,666 3,696,022 - - 15,710,140 176,392
Net income for the quarter
(unaudited) - - - -- - - -- 120,220
Accretion to conversion value
of common stock (unaudited) - - - 45,852 - (45,852)
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1996 (UNAUDITED) 3,700,000 $3,700 716,666 $ 3,741,874 - $- $ 15,710,140 $250,760
- - ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Three months Three months Period from August 18,
ended ended 1994 (inception) to
March 31, 1995 March 31, 1996 March 31, 1996
- - ------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 118,519 $ 120,220 $ 511,376
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred income taxes - - 42,000
Amortization of financing costs, debt
discount and organization costs 3,273 3,273 56,710
Interest on U.S. Government securities in Trust Fund (247,291) (229,377) (1,303,732)
Interest on short-term investments - (12,395) (28,617)
(Increase) decrease in prepaid expenses (27,932) 5,000 -
Increase (decrease) in accrued expenses (39,660) 434,002 687,498
- - ------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (193,091) 320,723 (34,765)
- - ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
U.S. Government security deposited in Trust Fund
- December 1994 - - (17,414,998)
Cumulative maturities of U.S. Government securities
deposited in Trust Fund - 18,616,000 90,660,713
Cumulative acquisitions of U.S. Government securities
reinvested in Trust Fund - (18,616,000) (90,660,713)
Cumulative maturities of short-term investment - 1,120,000 1,120,000
Cumulative acquisitions of short-term investments - (999,485) (2,099,477)
Deferred acquisition costs - (562,500) (622,500)
- - ------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - (441,985) (19,016,975)
- - ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and issuance of warrants - - 200,000
Proceeds from public offering of 3,583,333 units, net
of undewriting discounts and offering expenses - - 19,150,098
Repayment of notes payable - - (200,000)
Proceeds from sale of 833,333 shares of common stock
to founding stockholders - - 25,000
Deferred financing costs - - (19,500)
Organization costs - - (65,463)
- - ------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - - 19,090,135
- - ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (193,091) (121,262) 38,395
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,783,022 159,657 -
- - ------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,589,931 $ 38,395 $ 38,395
- - ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ - $ - $ 3,836
Income taxes - 179,680 179,680
- - ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
Financial Services Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
(Information as of March 31, 1996 and for the
three months ended March 31, 1995 and 1996 is unaudited).
1. Summary of Ac- Income Taxes
counting Poli-
cies Financial Services Acquisition Corporation (the
"Company") follows Statement of Financial Account-
ing Standards No. 109 ("SFAS No. 109"), "Account-
ing for Income Taxes". SFAS No. 109 is an asset
and liability approach that requires the recogni-
tion of deferred tax assets and liabilities for
the expected future tax consequences of events
that have been recognized in the Company's finan-
cial statements or tax returns ("temporary differ-
ences"). Temporary differences resulted from the
Company using the cash basis for income tax pur-
poses.
Organization Costs
Organization costs are amortized over 60 months.
Net Income Per Share
Net income per common share is computed on the
basis of the weighted average number of common
shares outstanding during the period including
common stock equivalents (unless antidilutive)
which would arise from the exercise of stock warrants.
Cash Equivalents
For purposes of the statements of cash flows, the
Company considers all highly liquid debt instru-
ments purchased with an original maturity of three
months or less to be cash equivalents (other than
instruments deposited in Trust Fund or described
below under "Short-term Investment").
Trust Fund
U.S. Government security deposited in Trust Fund
at March 31, 1996 represents a U.S Treasury bill
purchased on February 15, 1996 and maturing
April 25, 1996. The cost of the security was
$18,616,195.
Short-term Investment
The short-term investment at March 31, 1996 repre-
sents a U.S. Treasury bill purchased on Janu-
ary 26, 1996 at a cost of $999,485 which matures
on April 25, 1996.
Investments
The Company follows Statement of Financial Ac-
counting Standards No. 115 ("SFAS No. 115"), "Ac-
counting for Certain Investments in Debt and Equi-
ty Securities" with no material impact on the
Company's financial position.
Interim Results (unaudited)
The accompanying balance sheet as of March 31,
1996 and the related statements of operations,
common stock, common stock subject to possible
conversion, preferred stock, additional paid-in
capital and retained earnings accumulated during
the development stage and cash flows for the three
months ended March 31, 1995 and 1996 are unaudit-
ed. In the opinion of management, these financial
statements have been prepared on the same basis as
the audited financial statements and include all
adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation
of financial data for such periods. The interim
operating results are not necessarily indicative
of the results for a full year.
Use of Estimates
The preparation of financial statements in confor-
mity with generally accepted accounting principles
requires management to make assumptions that af-
fect the reported amounts of assets and liabili-
ties and disclosure of contingent assets and lia-
bilities at the date of the financial statements
and the reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from those estimates.
2. Organization The Company was incorporated in Delaware on Au-
and Business gust 18, 1994 with the objective of acquiring or
Operations merging with an operating business in the finan-
cial services industry. The Company's founding
stockholders (the "Initial Stockholders") pur-
chased 833,333 of its common shares, $.001 par
value (the "Pre-IPO Shares"), for $25,000 in Au-
gust 1994.
The registration statement for the Company's ini-
tial public offering ("Offering") was effective
November 30, 1994. The Company consummated the
Offering in December 1994 and raised net proceeds
of $19,150,098 (Note 3). The Company's management
had broad discretion with respect to the specific
application of the net proceeds of the Offering,
although substantially all of the net proceeds of
the Offering were intended to be generally applied
toward consummating a business combination with an
operating business in the financial services in-
dustry ("Business Combination"). There is no as-
surance that the Company will be able to success-
fully effect a Business Combination. $17,414,998
of the Offering's proceeds was deposited in an
interest-bearing trust account ("Trust Fund") to
be held until the earlier of (i) the consummation
of a Business Combination or (ii) liquidation of
the Company. The Trust Fund indenture limits in-
vestments to U.S. Government securities with matu-
rities of 180 days or less. The remaining proceeds
will be used to pay for business, legal and ac-
counting due diligence on prospective acquisi-
tions, and continuing general and administrative
expenses in addition to other expenses.
The Company, after signing a definitive agreement
for a Business Combination, is required to submit
such transaction for stockholder approval. In
connection with the vote on such Business Combina-
tion, all of the Initial Stockholders, consisting
of all of the current officers and directors of
the Company, have agreed that all the Pre-IPO
Shares owned by them will be voted with the major-
ity of all the shares of common stock sold in the
Offering (the "Public Shares"). After consummation
of the Company's first Business Combination, this
voting provision will no longer be applicable.
With respect to the first Business Combination
which is approved and consummated, any holder of
Public Shares who votes against the Business Com-
bination may demand that the Company convert his
or her shares into cash. The per share conversion
price will equal the amount in the Trust Fund as
of the record date for determination of stockhold-
ers entitled to vote on the Business Combination
divided by the number of Public Shares. The Compa-
ny will not consummate a Business Combination if
20% or more of the Public Shares are voted against
the Business Combination and have conversion
rights with respect to them exercised. According-
ly, 19.99% of the aggregate number of Public
Shares may be converted to cash in the event of a
Business Combination. Holders of Public Shares
exercising such conversion rights are entitled to
receive their per share interest in the Trust Fund
computed without regard to the Pre-IPO Shares.
Accordingly, a portion of the net proceeds from
the Offering (19.99% of the amount held in the
Trust Fund) has been classified as common stock
subject to possible conversion in the accompanying
balance sheet at the conversion value.
The Company's Certificate of Incorporation pro-
vides for mandatory liquidation of the Company in
the event that the Company does not consummate a
Business Combination within 24 months from the
consummation of the Offering. In the event of
liquidation, it is likely that the per share value
of the residual assets remaining available for
distribution (including Trust Fund assets) will be
less than the initial public offering price per
share in the Offering (assuming no value is at-
tributed to the Warrants contained in the Units
offered in the Offering discussed in Note 3).
3. Public Offering On December 7, 1994, the Company sold 3,333,333
units ("Units") in the Offering. On December 20,
1994, a further 250,000 Units were sold. Each Unit
consists of one share of the Company's common
stock, $.001 par value, and two Redeemable Common
Stock Purchase Warrants ("Warrants"). Each Warrant
entitles the holder to purchase from the Company
one share of common stock at an exercise price of
$5.00 during the period commencing on the consum-
mation of a Business Combination and ending Novem-
ber 30, 2001. The Warrants will be redeemable at a
price of $.01 per Warrant upon 30 days' notice at
any time, only in the event that the last sale
price of the common stock is at least $8.50 per
share for 20 consecutive trading days ending on
the third day prior to the date on which notice of
redemption is given.
The Company issued an aggregate of $200,000 of
promissory notes to certain accredited investors.
These notes bore interest at the rate of 10% per
annum and were repaid on the consummation of the
Company's Offering with accrued interest thereon
of $3,836. In addition, the investors were issued
400,000 warrants ("Bridge Warrants") (valued at
$0.05 per warrant - aggregate $20,000) which are
identical to the Warrants discussed above, except
that they are not redeemable by the Company until
90 days after the consummation of a Business Com-
bination.
In connection with the Offering, the Company also
sold 333,333 Unit Purchase Options (the "IPO Op-
tions") to the Offering underwriters and certain
of their designees. Each IPO Option entitles the
holder thereof to acquire one share of common
stock and two warrants (which are identical to the
Warrants discussed above, except that the exercise
price per warrant is $6.25 and their expiration
date is November 30, 1999).
4. Commitment The Company presently occupies office space pro-
vided by an affiliate of certain stockholders of
the Company. Such affiliate has agreed that, com-
mencing on the effective date of the Offering
through the consummation of a Business Combina-
tion, it will make its office space and certain
office and secretarial services available to the
Company, as may be required by the Company from
time to time. The Company has been paying $5,000
per month for such services.
5. Preferred Stock The Company is authorized to issue 1,000,000
shares of preferred stock with such designations,
voting and other rights and preferences as may be
determined from time to time by the Board of Di-
rectors.
6. Common Stock At March 31, 1996, 8,566,665 shares of common
stock were reserved for issuance upon exercise of
the Warrants, the Bridge Warrants, the IPO Options
and the warrants issuable upon exercise of the IPO
Options.
7. Acquisition On May 16, 1995, the Company executed a letter of
Costs intent to acquire all of the outstanding capital
stock of Cedar Street Securities Corp. and a seat
on the New York Stock Exchange. On July 14, 1995,
the letter of intent was terminated. The costs of
$239,817 relating to this proposed acquisition
were expensed during the year ended December 31,
1995.
8. Proposed Acqui- On March 8, 1996, the Company entered into an
sition agreement to acquire Euro Brokers Investment Cor-
poration ("Euro Brokers"), a privately held inter-
national and domestic inter-dealer broker for a
broad range of financial instruments. Under the
terms of the agreement, each outstanding share of
Euro Brokers common stock will be converted into
the right to receive approximately (i) 2.64 shares
of the Company's common stock (approximately
4,416,666 shares), (ii) 4.53 of the Company's
redeemable common stock purchase warrants (approx-
imately 7,566,666 warrants), and (iii) $9.57 in
cash (approximately $16,000,000), subject to cer-
tain adjustments. Completion of this transaction
is subject to certain conditions, including
stockholders' approvals and receipt of certain
regulatory approvals. Costs relating to this pro-
posed acquisition, primarily professional fees,
aggregated $622,500 at March 31, 1996, and have
been deferred.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Services Acquisition Corporation (the "Com-
pany") is a Specified Purpose Acquisition Company(R) , the objec-
tive of which is to acquire an operating business in the
financial services industry (a "Target Business") by merger,
exchange of capital stock, asset or stock acquisition or other
similar type of transaction (a "Business Combination").
In August 1994, the Company issued 833,333 shares (the
"Pre-IPO Shares") of its Common Stock, par value $.001 per
share ("Common Stock"), to six initial stockholders. In
September 1994, the Company raised $200,000 in bridge financ-
ing (the "Bridge Financing") in order to pay certain organiza-
tional expenses, the costs of the Bridge Financing and certain
costs of its initial public offering ("IPO"). Thirteen inves-
tors in the Bridge Financing loaned an aggregate of $200,000
to the Company and were issued promissory notes in that amount
payable at the consummation of the IPO, bearing interest at
the rate of 10% per annum, and 400,000 bridge warrants (the
"Bridge Warrants").
The IPO was consummated in December 1994, with the
Company selling 3,583,333 units ("Units") (which includes
250,000 Units sold as part of the underwriters' over-allotment
option). Each Unit consists of one share of Common Stock and
two Redeemable Common Stock Purchase Warrants of the Company
(the "Public Warrants"). In the IPO, the Company received net
proceeds of approximately $19,150,000 after payment of offer-
ing expenses. From these proceeds, the Company repaid the
Bridge Financing promissory notes and interest. The Company's
management had broad discretion with respect to the specific
application of the net proceeds of the IPO, although substan-
tially all of the net proceeds were intended to be generally
applied toward consummating a Business Combination with a
Target Business. There is no assurance that the Company will
be able to successfully effect a Business Combination. A
majority of the net proceeds (approximately $17,415,000) was
placed in an interest-bearing trust account (the "Trust Fund")
until the earlier of (i) the consummation of a Business Combi-
nation or (ii) liquidation of the Company. The Trust Agree-
ment relating to the Trust Fund limits investments to U.S.
Government securities with a maturity of 180 days or less. As
of March 31, 1996 and December 31, 1995, the Trust Fund con-
sisted of approximately $18,719,000 and $18,489,000, respec-
tively, of U.S. Government securities (including accrued
interest thereon). The remaining proceeds of the IPO, and the
interest thereon, have been and are being used to pay for
business, legal and accounting due diligence on prospective
acquisitions, and for the general and administrative expenses
and taxes of the Company, including, but not limited to, legal
and accounting fees and administrative support expenses in
connection with the Company's reporting obligations to the
Securities and Exchange Commission. During the quarter ended
March 31, 1996, general and administrative expenses were
approximately $40,000, as compared to $48,000 in the quarter
ended March 31, 1995. As of March 31, 1996 and December 31,
1995, the Company had approximately $1,046,000 and $1,276,000,
respectively, of cash and cash equivalents and short-term
investments, other than assets held in the Trust Fund.
On May 16, 1995, the Company announced that it had
entered into a letter of intent with respect to a potential
Business Combination. On July 14, 1995, the Company announced
that negotiations with respect to the proposed acquisition had
been terminated. Approximately $240,000 of costs relating to
negotiation of the proposed transaction were expensed during
the year ended December 31, 1995.
On March 8, 1996, the Company announced that it had
entered into an Agreement and Plan of Merger, dated as of
March 8, 1996 (the "Merger Agreement"), with Euro Brokers
Investment Corporation ("Euro Brokers"), pursuant to which a
newly-formed wholly owned subsidiary of the Company ("Sub")
will merge with and into Euro Brokers (the "Merger"), with
Euro Brokers thereafter becoming a direct, wholly owned sub-
sidiary of the Company. Consummation of the Merger is subject
to a number of conditions, including, but not limited to,
receipt of stockholder approvals and certain regulatory ap-
provals.
In the event the Company does not consummate the
Merger or an alternative business combination by December 7,
1996, the Company will be dissolved and will distribute to all
holders of Common Stock sold in the IPO (the "Public Shares"),
in proportion to their respective interests in all such Public
Shares, an aggregate sum equal to the amount in the Trust
Fund, inclusive of any after tax interest thereon, plus any
remaining net assets of the Company. Pre-IPO Shares, Public
Warrants and Bridge Warrants have no rights to participate in
any such distribution from the Trust Fund. During the quarter
ended March 31, 1996, the Company earned approximately
$229,000 of interest on amounts deposited in the Trust Fund,
as compared to $247,000 during the quarter ended March 31,
1995. Pursuant to the Company's Certificate of Incorporation,
a holder of Public Shares also is entitled to receive funds
from the Trust Fund in the event that such holder votes
against a Business Combination and demands conversion of his
or her shares into cash ("Redemption Rights"), and such Busi-
ness Combination is actually consummated by the Company,
although the Company is not permitted to consummate a Business
Combination if 20% or more of the Public Shares exercise such
Redemption Rights.
Substantially all of the Company's working capital
needs are attributable to the identification, evaluation and
selection of a suitable Target Business and thereafter, once
identified, to the structuring, negotiation and consummation
of a Business Combination with such Target Business. Such
working capital needs have been, and are expected to continue
to be, satisfied from the net proceeds of the IPO.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The Merger Agreement provides that as a result of the
Merger, each outstanding share of common stock of Euro Brokers
(other than shares, if any, as to which dissenters' rights of
appraisal are validly exercised and not withdrawn) will be
converted into the right to receive, subject to certain ad-
justments and escrow arrangements, approximately (i) 2.64
newly-issued shares of Common Stock, (ii) 4.53 newly-issued
Series B Redeemable Common Stock Purchase Warrants of the
Company (the "Merger Warrants"), with terms and conditions
substantially the same as the Public Warrants, and (iii) $9.57
in cash, without interest (collectively, the "Merger Consider-
ation"). In the aggregate, it is expected that approximately
(x) 4,416,666 shares of Common Stock (subject to increase by
225,000 shares if the Unit Option Exchange described below is
consummated, and subject to decrease to the extent that hold-
ers of Public Shares exercise Redemption Rights), (y)
7,566,666 Merger Warrants and (z) $16,000,000 in cash (being
an estimate of the difference, immediately prior to the Merg-
er, between the adjusted net worths of the Company and Euro
Brokers, and subject to increase or decrease, as the case may
be, to reflect such actual difference) will be paid as consid-
eration to effect the Merger, having an overall value of
approximately $43.8 million based on the closing bid prices
for the Common Stock and Public Warrants on May 13, 1996. No
fractional shares of Common Stock or Merger Warrants will be
issued in the Merger.
Pursuant to the Merger Agreement, it is contemplated
that as soon as reasonably practicable following consummation
of the Merger, the Company will commence an exchange offer
(the "Exchange Offer") to acquire all outstanding Bridge
Warrants, Public Warrants and Merger Warrants (collectively,
the "Warrants") on the basis of one newly-issued share of
Common Stock for a number of Warrants to be mutually agreed
upon post-Merger between the Company and Euro Broker's major-
ity stockholder (the "Stockholder"). There can be no assur-
ances that the Exchange Offer will be made or consummated.
Pursuant to the Merger Agreement, it is also contem-
plated that the Company will enter into an agreement with the
holders of the existing 333,333 Unit Purchase Options to exchange all
such Unit Purchase Options for a total of 225,000 shares of Common
Stock, contingent upon effectiveness of the Merger (the "Unit
Option Exchange"). There can be no assurances that the Unit
Option Exchange will be agreed to or consummated. If the Unit
Option Exchange is not consummated, the aggregate Merger
Consideration will be adjusted to include such additional cash
consideration as the Company and Euro Brokers may mutually
agree or, absent such agreement, a like number of newly-issued
Unit Purchase Options.
The Company has also entered into a Security Transfer
Agreement, dated as of March 8, 1996 (the "Security Transfer
Agreement"), with the Stockholder, certain members of Euro
Brokers management (the "Management") and certain stockholders
of the Company which (i) prohibits any sales or other disposi-
tions (with certain exceptions) during the period following
the Merger and continuing through November 30, 1996 (the
"Lock-up Period") with respect to any shares of Common Stock
(other than certain shares previously placed in escrow in
connection with the IPO) and any Warrants held by the signato-
ries thereto and (ii) obligates each such signatory to tender
for exchange (and not withdraw) in the Exchange Offer, if any,
such percentage of the Warrants held by such signatory as is
equal to the percentage of all Warrants held by parties other
than such signatories that is tendered for exchange pursuant
to the Exchange Offer.
The Company and Sub have also entered into a Majority
Stockholders' Agreement, dated as of March 8, 1996 (the "Ma-
jority Stockholders' Agreement"), with the Stockholder, pursu-
ant to which the Stockholder has made certain representations
and agreements in connection with the transactions contemplat-
ed by the Merger Agreement.
The Company and Sub have also entered into an Escrow
Agreement, dated as of March 8, 1996 (the "Escrow Agreement"),
with Euro Brokers and certain others, providing for the depos-
it into escrow, pending the occurrence or non-occurrence of
certain events and the making of certain adjustments contem-
plated by the Merger Agreement, of certain portions of the
Merger Consideration as well as certain other consideration.
The Company has also agreed to enter into a Registra-
tion Rights Agreement, prior to and as a condition of the
Merger, providing certain demand and ancillary registration
rights following the termination of the Lock-up Period with
respect to the shares of Common Stock then held by the Stock-
holder, the Management and certain other stockholders of Euro Brokers
and the pre-IPO stockholders of the Company.
The Company has also entered into an Employment Agree-
ment, dated as of March 8, 1996 (the "Employment Agreement"),
with its President and Chief Executive Officer. The Employ-
ment Agreement, however, does not take effect unless and until
the Merger is consummated.
In connection with the Merger Agreement, the Company's
Board of Directors has approved certain amendments to the
Company's Certificate of Incorporation (the "Charter Amend-
ments") providing for, among other things, (i) an increase in
the authorized shares of Common Stock from 14,000,000 shares
to 30,000,000 shares and (ii) the implementation of a three-
class staggered Board of Directors (on which it is contemplat-
ed that two designees of Euro Brokers will serve). The Char-
ter Amendments will only become effective if approved by the
Company's stockholders and the Merger is about to be or has
been consummated.
Copies of the Merger Agreement, the Security Transfer
Agreement, the Majority Stockholders' Agreement, the Escrow
Agreement and the Employment Agreement are attached as Exhib-
its to this Form 10-Q and incorporated herein by reference.
The foregoing summaries of such documents do not purport to be
complete and are qualified in their entirety by reference to
the full texts thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description
2.1 Agreement and Plan of Merger, dated as of March 8,
1996, as amended, by and among the Company, Sub and
Euro Brokers, without exhibits and schedules.
2.2 Security Transfer Agreement, dated as of March 8,
1996, by and among the Company, certain stockholders
of the Company and certain stockholders of Euro Bro-
kers.
2.3 Majority Stockholders' Agreement, dated as of March 8,
1996, by and among the Company, Sub and Welsh, Carson,
Anderson & Stowe VI, L.P.
2.4 Escrow Agreement, dated as of March 8, 1996, by and
among the Company, Sub, certain stockholder represen-
tatives and United States Trust Company of New York,
as escrow agent.
10.8 Employment Agreement, dated as of March 8, 1996, by and
between the Company and Gilbert Scharf.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31, 1996, the Company
filed a Current Report on Form 8-K, dated March 8, 1996,
reporting in Item 5 thereof ("Other Events") the execution of
the Merger Agreement and certain related agreements.
SIGNATURES
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 autho-
rized.
FINANCIAL SERVICES ACQUISITION CORPORATION
(Registrant)
Date: May 15, 1996 /s/ Gilbert D. Scharf
________________________________________________
Gilbert D. Scharf, Chairman of the Board,
President and Chief Executive Officer
Date: May 15, 1996 /s/ Michael J. Scharf
_________________________________________________
Michael J. Scharf, Vice President, Secretary
and Treasurer (Chief Financial and Principal
Accounting Officer)
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
2.1 Agreement and Plan of Merger, dated as of March 8,
1996, as amended, by and among the Company, EBIC
Acquisition Corp. ("Sub") and Euro Brokers Investment
Corporation ("Euro Brokers"), without exhibits and
schedules.
2.2 Security Transfer Agreement, dated as of March 8, 1996,
by and among the Company, certain stockholders of the
Company and certain stockholders of Euro Brokers.
2.3 Majority Stockholders' Agreement, dated as of March 8,
1996, by and among the Company, Sub and Welsh,
Carson, Anderson & Stowe VI, L.P.
2.4 Escrow Agreement, dated as of March 8, 1996, by and
among the Company, Sub, certain stockholder representa-
tives and United States Trust Company of New York,
as escrow agent.
10.8 Employment Agreement, dated as of March 8, 1996, by
and between the Company and Gilbert Scharf.
27.1 Financial Data Schedule
_____________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
FINANCIAL SERVICES ACQUISITION CORPORATION,
EBIC ACQUISITION CORP.
and
EURO BROKERS INVESTMENT CORPORATION,
Dated as of March 8, 1996
_____________________________________________________
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER . . . . . . . . . . . 3
Section 1.1 The Merger . . . . . . . . . . . . . . . 3
Section 1.2 Effective Time of the Merger . . . . . . 3
Section 1.3 Closing . . . . . . . . . . . . . . . . . 3
ARTICLE II
THE SURVIVING CORPORATION . . . . . . . . 4
Section 2.1 Certificate of Incorporation . . . . . . 4
Section 2.2 By-Laws . . . . . . . . . . . . . . . . . 4
Section 2.3 Directors and Officers of Surviving
Corporation . . . . . . . . . . . . . . 4
ARTICLE III
CONVERSION OF SHARES AND OTHER MATTERS . . . . 4
Section 3.1 Intended Effects of Merger . . . . . . . 4
Section 3.2 Conversion of Shares . . . . . . . . . . 6
Section 3.3 Escrowed Merger Consideration . . . . . . 7
Section 3.4 Dissenting Shares; Certain Releases from
Escrow . . . . . . . . . . . . . . . . 8
Section 3.5 No Fractional Securities . . . . . . . . 10
Section 3.6 Adjustment of Exchange Ratios and Cash
Consideration . . . . . . . . . . . . . 11
Section 3.7 Closing True-Up Procedures . . . . . . . 12
Section 3.8 Exchange of Company Stock; Other
Procedures . . . . . . . . . . . . . . 18
Section 3.9 Dividends; Escheat . . . . . . . . . . . 20
Section 3.10 Closing of Company Transfer Books . . . . 20
Section 3.11 Further Assurances . . . . . . . . . . . 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . 21
Section 4.1 Organization . . . . . . . . . . . . . . 21
Section 4.2 Capitalization . . . . . . . . . . . . . 22
Section 4.3 Company Subsidiaries . . . . . . . . . . 23
Section 4.4 Authority Relative to this Agreement . . 23
Section 4.5 Consents; No Violations . . . . . . . . . 24
Section 4.6 Reports and Financial Statements;
Undisclosed Liabilities . . . . . . . . 25
Section 4.7 Absence of Certain Changes . . . . . . . 26
Section 4.8 Approvals . . . . . . . . . . . . . . . . 26
Section 4.9 Litigation . . . . . . . . . . . . . . . 26
Section 4.10 No Default . . . . . . . . . . . . . . . 27
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . 28
Section 4.12 Title to Properties; Encumbrances . . . . 32
Section 4.13 List of Properties, Contracts and Other
Data . . . . . . . . . . . . . . . . . 33
Section 4.14 Intellectual Property; Trade Secrets . . 34
Section 4.15 Compliance with Applicable Law . . . . . 37
Section 4.16 Information in Disclosure Documents and
Registration Statement . . . . . . . . 42
Section 4.17 Employee Benefit Plans; ERISA . . . . . . 42
Section 4.18 Environmental Laws and Regulations . . . 44
Section 4.19 Condition of Assets . . . . . . . . . . . 45
Section 4.20 Insurance . . . . . . . . . . . . . . . . 46
Section 4.21 Absence of Certain Business Practices . . 46
Section 4.22 Vote Required . . . . . . . . . . . . . . 47
Section 4.23 DGCL Section 203 . . . . . . . . . . . . 47
Section 4.24 Affiliate Transactions . . . . . . . . . 48
Section 4.25 Brokers . . . . . . . . . . . . . . . . . 48
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FSAC . . . . 48
Section 5.1 Organization . . . . . . . . . . . . . . 48
Section 5.2 Capitalization . . . . . . . . . . . . . 49
Section 5.3 Authority Relative to this Agreement . . 50
Section 5.4 Consents; No Violations . . . . . . . . . 51
Section 5.5 Reports and Financial Statements;
Undisclosed Liabilities . . . . . . . . 52
Section 5.6 Absence of Certain Changes; Business of
FSAC . . . . . . . . . . . . . . . . . 53
Section 5.7 Approvals . . . . . . . . . . . . . . . . 53
Section 5.8 Litigation . . . . . . . . . . . . . . . 53
Section 5.9 No Default . . . . . . . . . . . . . . . 53
Section 5.10 Taxes . . . . . . . . . . . . . . . . . . 54
Section 5.11 Compliance with Applicable Law . . . . . 55
Section 5.12 Information in Disclosure Documents and
Registration Statement . . . . . . . . 55
Section 5.13 Vote Required . . . . . . . . . . . . . . 56
Section 5.14 List of Contracts . . . . . . . . . . . . 57
Section 5.15 Funds . . . . . . . . . . . . . . . . . . 57
Section 5.16 Brokers . . . . . . . . . . . . . . . . . 57
Section 5.17 Affiliate Transactions . . . . . . . . . 57
Section 5.18 No Properties, Encumbrances, Leasehold
Interests or Insurance . . . . . . . . 58
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER . . . . 58
Section 6.1 Conduct of Business by the Company
Pending the Merger . . . . . . . . . . 58
Section 6.2 Conduct of Business by FSAC Pending the
Merger . . . . . . . . . . . . . . . . 60
Section 6.3 Conduct of Business of Sub . . . . . . . 61
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . 62
Section 7.1 Access and Information . . . . . . . . . 62
Section 7.2 No Solicitation. . . . . . . . . . . . . 62
Section 7.3 Registration Statement . . . . . . . . . 64
Section 7.4 Proxy Statements; Stockholder Approvals . 64
Section 7.5 Compliance with the Securities Act . . . 66
Section 7.6 Reasonable Best Efforts . . . . . . . . . 66
Section 7.7 Related Agreements . . . . . . . . . . . 67
Section 7.8 FSAC Option Plan . . . . . . . . . . . . 68
Section 7.9 Unit Purchase Option Exchange . . . . . . 68
Section 7.10 Charter Amendments . . . . . . . . . . . 69
Section 7.11 NASDAQ National Market . . . . . . . . . 69
Section 7.12 Exchange Offer . . . . . . . . . . . . . 69
Section 7.13 Stockholder Loans . . . . . . . . . . . . 70
Section 7.14 Directors and Officers . . . . . . . . . 70
Section 7.15 Public Announcements . . . . . . . . . . 71
Section 7.16 Directors' and Officers'
Indemnification . . . . . . . . . . . . 71
Section 7.17 Expenses . . . . . . . . . . . . . . . . 71
Section 7.18 Supplemental Disclosure . . . . . . . . . 72
Section 7.19 Letters of Accountants . . . . . . . . . 72
Section 7.20 Conversion Share Excess . . . . . . . . . 73
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . 73
Section 8.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . 73
Section 8.2 Conditions to Obligations of FSAC and
Sub to Effect the Merger . . . . . . . 75
Section 8.3 Conditions to Obligation of the Company
to Effect the Merger . . . . . . . . . 77
ARTICLE IX
TERMINATION . . . . . . . . . . . 78
Section 9.1 Termination . . . . . . . . . . . . . . . 78
Section 9.2 Effect of Termination . . . . . . . . . . 79
ARTICLE X
INDEMNIFICATION . . . . . . . . . . 81
Section 10.1 Survival of Representations and
Warranties . . . . . . . . . . . . . . 81
Section 10.2 Indemnification of FSAC . . . . . . . . . 81
Section 10.3 Escrow Deposit; Recourse Against Escrow
Securities . . . . . . . . . . . . . . 82
Section 10.4 Representatives . . . . . . . . . . . . . 83
Section 10.5 Certain Limitations on Liability . . . . 84
Section 10.6 Exclusive Remedy . . . . . . . . . . . . 84
ARTICLE XI
GENERAL PROVISIONS . . . . . . . . . 84
Section 11.1 Amendment and Modification . . . . . . . 84
Section 11.2 Waiver . . . . . . . . . . . . . . . . . 85
Section 11.3 Investigations . . . . . . . . . . . . . 85
Section 11.4 Notices . . . . . . . . . . . . . . . . . 85
Section 11.5 Descriptive Headings; Interpretation . . 86
Section 11.6 Entire Agreement; Assignment . . . . . . 87
Section 11.7 Governing Law . . . . . . . . . . . . . . 87
Section 11.8 Severability . . . . . . . . . . . . . . 87
Section 11.9 Consolidating Supervisor . . . . . . . . 88
Section 11.10 Counterparts . . . . . . . . . . . . . . 88
Exhibits
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Security Transfer Agreement
Exhibit C - Form of Majority Stockholders' Agreement
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Warrant Certificate
Exhibit F - Form of Affiliate Letter
Glossary of Defined Terms
Term Section
Acquisition Transaction . . . . . . . . . . . . . . . . . 7.2(a)
Actual Company Stock Number . . . . . . . . . . . . . . . 3.6(a)
Actual Dissenting Shares . . . . . . . . . . . . . . . . 3.4(a)
Actual Outstanding FSAC Shares . . . . . . . . . . . . . 3.6(a)
Actual Outstanding FSAC Warrants . . . . . . . . . . . . 3.6(a)
Adjusted Conversion Shares . . . . . . . . . . . . . . . 3.6(b)
Affiliates . . . . . . . . . . . . . . . . . . . . . . . 7.5(a)
Affiliate Letters . . . . . . . . . . . . . . . . . . . . 7.5(b)
Agreement . . . . . . . . . . . . . . . . . . . . . . . Preamble
Amount . . . . . . . . . . . . . . . . . . . . . . . . . 3.7(e)
Applicable Law . . . . . . . . . . . . . . . . . . . . . 4.15(a)
Arbitrator . . . . . . . . . . . . . . . . . . . . . 3.7(d)(ii)
Bank . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iv)
Cash Escrow Amount . . . . . . . . . . . . . . . . . . . . . 3.3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Charter Amendment . . . . . . . . . . . . . . . . . . . Preamble
Class A Company Common Stock . . . . . . . . . . . . . . 3.2(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Company . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company's Closing Balance Sheet . . . . . . . . . . . .3.7(h)
Company's Closing Cash Equivalents . . . . . . . . . . . 8.2(c)
Company's Closing Defined Net Worth . . . . . . . . . . . 3.7(h)
Company Common Stock . . . . . . . . . . . . . . . . . . 3.2(a)
Company's Final Statement . . . . . . . . . . . . . . . . 3.7(b)
Company Financial Statements . . . . . . . . . . . . . . 4.6(a)
Company Material Adverse Effect . . . . . . . . . . . . . . . 4.1
Company Permits . . . . . . . . . . . . . . . . . . . . . 4.15(b)
Company Plans . . . . . . . . . . . . . . . . . . . . . . 4.17(a)
Company Rights . . . . . . . . . . . . . . . . . . . . . . . 3.1
Company Stock . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Company Stock Number . . . . . . . . . . . . . . . . . . 3.2(a)
Computer Software . . . . . . . . . . . . . . . . . . . . 4.14(e)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . 7.1
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5
Conversion Rights . . . . . . . . . . . . . . . . . . . . 3.6(a)
Conversion Shares . . . . . . . . . . . . . . . . . . . . 3.6(a)
Currently Outstanding FSAC Shares . . . . . . . . . . . . 3.2(a)
Currently Outstanding FSAC Warrants . . . . . . . . . . . 3.2(a)
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2
Disputed Estimates . . . . . . . . . . . . . . . . . . 3.7(a)(i)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Dissenter . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Dissenting Shares . . . . . . . . . . . . . . . . . . . . 3.4(a)
EBCL . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(vi)
EBFSL . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iii)
EBIL . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iv)
EBMI . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(i)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . 1.2
Employment Agreements . . . . . . . . . . . . . . . . . Preamble
Environmental Laws . . . . . . . . . . . . . . . . . . . 4.18(a)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 4.17(a)
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . 4.17(a)
Escrow Agent . . . . . . . . . . . . . . . . . . . . . Preamble
Escrow Agreement . . . . . . . . . . . . . . . . . . . Preamble
Escrow Stock . . . . . . . . . . . . . . . . . . . . . . . . 3.3
Estimated Aggregate Cash Consideration . . . . . . . . . 3.2(a)
Excess Conversion Amount . . . . . . . . . . . . . . . . 8.3(d)
Excess Conversion Shares . . . . . . . . . . . . . . . . 8.3(d)
Exchange Act . . . . . . . . . . . . . . . . . . . . 4.15(c)(i)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . 3.8(a)
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . 7.12
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Failed Dissenter . . . . . . . . . . . . . . . . . . . . 3.4(d)
Final Statements . . . . . . . . . . . . . . . . . . . . 3.7(b)
Fractional Cash Amount . . . . . . . . . . . . . . . . . 3.8(a)
FSA . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iii)
FSAC . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
FSAC Closing Balance Sheet . . . . . . . . . . . . . . . 3.7(g)
FSAC Closing Cash Equivalents . . . . . . . . . . . . . . 3.7(g)
FSAC Common Stock . . . . . . . . . . . . . . . . . . . Preamble
FSAC Final Statement . . . . . . . . . . . . . . . . . . 3.7(b)
FSAC Financial Statements . . . . . . . . . . . . . . . . 5.5(a)
FSAC Material Adverse Effect . . . . . . . . . . . . . . . . 5.1
FSAC Option Plan . . . . . . . . . . . . . . . . . . . . . . 7.8
FSAC Preferred Stock . . . . . . . . . . . . . . . . . . 5.2(a)
FSAC SEC Reports . . . . . . . . . . . . . . . . . . . . 5.5(a)
FSAC Warrants . . . . . . . . . . . . . . . . . . . . . Preamble
GAAP . . . . . . . . . . . . . . . . . . . . . . . . 3.7(d)(iii)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . 4.5
Grey Paper . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iv)
HKFE . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(v)
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
IDAC . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(vii)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . 10.2
Insurance Policy . . . . . . . . . . . . . . . . . . . . . 4.20
Intellectual Property . . . . . . . . . . . . . . . . . . 4.14(a)
Liabilities . . . . . . . . . . . . . . . . . . . . . . . 4.6(b)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3
Majority Stockholders' Agreement . . . . . . . . . . . Preamble
Management . . . . . . . . . . . . . . . . . . . . . . Preamble
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Merger Consideration . . . . . . . . . . . . . . . . . . 3.2(a)
Merger Warrants . . . . . . . . . . . . . . . . . . . . . . . 3.1
Merger Stock . . . . . . . . . . . . . . . . . . . . . . . . 3.1
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
NFA . . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(ii)
Negative Cash Adjustment . . . . . . . . . . . . . . 3.7(f)(ii)
New Options . . . . . . . . . . . . . . . . . . . . . . . . . 7.9
1994 Prospectus . . . . . . . . . . . . . . . . . . . . . . . 3.1
Notice of Disagreement . . . . . . . . . . . . . . . . . 3.7(c)
Ontario Acts . . . . . . . . . . . . . . . . . . . . 4.15(c)(vi)
OTC Bulletin Board . . . . . . . . . . . . . . . . . . . . . 3.5
Participating Holder . . . . . . . . . . . . . . . . . . 3.4(d)
Per Share Book Value . . . . . . . . . . . . . . . . . . . . 3.3
Per Share Cash Consideration . . . . . . . . . . . . . . 3.2(a)
Pink Sheets . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Positive Cash Adjustment . . . . . . . . . . . . . . . 3.7(f)(i)
Proportionate Interest . . . . . . . . . . . . . . . . . 3.4(f)
Proxy Statements . . . . . . . . . . . . . . . . . . . . . 4.16
Public Stockholders . . . . . . . . . . . . . . . . . . . 3.6(a)
Registration Rights Agreement . . . . . . . . . . . . . Preamble
Registration Statement . . . . . . . . . . . . . . . . . . 4.16
Related Agreements . . . . . . . . . . . . . . . . . . Preamble
SEC . . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(i)
Section 262 Escrow Securities . . . . . . . . . . . . . . . . 3.3
Securities Act . . . . . . . . . . . . . . . . . . . . . 5.5(a)
Security Transfer Agreement . . . . . . . . . . . . . . Preamble
Service . . . . . . . . . . . . . . . . . . . . . . . . . 4.11(a)
SFA . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iii)
Stock Exchange Ratio . . . . . . . . . . . . . . . . . . 3.2(a)
Stock Purchase Agreement . . . . . . . . . . . . . . . . 4.10(b)
Stockholder Loans . . . . . . . . . . . . . . . . . . . . 3.7(h)
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Sub Common Stock . . . . . . . . . . . . . . . . . . . . 3.2(c)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . 1.1
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11(c)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . 4.11(c)
Termination Payment . . . . . . . . . . . . . . . . . . . 9.2(b)
TSA . . . . . . . . . . . . . . . . . . . . . . . . 4.15(c)(iii)
UK Subsidiaries . . . . . . . . . . . . . . . . . . . . . 4.11(b)
Unaudited Balance Sheet . . . . . . . . . . . . . . . . . 4.6(a)
Unit Purchase Option Exchange . . . . . . . . . . . . . . . . 7.9
Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . 3.1
Warrant Exchange Ratio . . . . . . . . . . . . . . . . . 3.2(a)
Warrant Shares . . . . . . . . . . . . . . . . . . . . . . 4.16
WCAS . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March
8, 1996 (this "Agreement"), by and among Financial Ser-
vices Acquisition Corporation, a Delaware corporation
("FSAC"), EBIC Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of FSAC ("Sub"), and Euro
Brokers Investment Corporation, a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors of each of
FSAC, Sub and the Company deem it advisable and in the
best interests of their respective companies and stock-
holders that FSAC acquire the Company pursuant to the
terms and conditions of this Agreement, and, in further-
ance of such acquisition, such Boards of Directors have
approved the Merger (as hereinafter defined) of Sub with
and into the Company in accordance with the terms of this
Agreement and the General Corporation Law of the State of
Delaware (the "DGCL");
WHEREAS, concurrently with the execution and
delivery of this Agreement and as a condition and induce-
ment to FSAC and Sub's willingness to enter into this
Agreement, the Company is entering into an escrow agree-
ment with FSAC, Sub and United States Trust Company of
New York, as escrow agent (the "Escrow Agent"), in the
form attached hereto as Exhibit A (the "Escrow Agree-
ment") with respect to certain of the shares of Common
Stock, par value $.001 per share (the "FSAC Common
Stock"), of FSAC, warrants and cash to be issued as
consideration in the Merger;
WHEREAS, concurrently with the execution and
delivery of this Agreement and as a condition and induce-
ment to FSAC and Sub's willingness to enter into this
Agreement, FSAC, FSAC's Chairman, Gilbert Scharf, FSAC's
Secretary, Michael Scharf, Welsh, Carson, Anderson &
Stowe VI, L.P., a Delaware limited partnership ("WCAS"),
and certain members of management of the Company (the
"Management") are entering into a Security Transfer
Agreement in the form attached hereto as Exhibit B (the
"Security Transfer Agreement") imposing certain restric-
tions on certain dispositions of shares of FSAC Common
Stock (including certain shares of Merger Stock, as
hereinafter defined) and of the Redeemable Common Stock
Purchase Warrants of FSAC (all series thereof, including
the Merger Warrants as hereinafter defined, collectively
the "FSAC Warrants");
WHEREAS, concurrently with the execution and
delivery of this Agreement and as a condition and induce-
ment to FSAC and Sub's willingness to enter into this
Agreement, FSAC, Sub and WCAS are entering into a Majori-
ty Stockholders' Agreement, in the form attached hereto
as Exhibit C (the "Majority Stockholders' Agreement")
with respect to, among other things, the making of cer-
tain representations and certain agreements by WCAS in
connection with the Merger and the transactions contem-
plated thereby;
WHEREAS, in connection with the transactions
contemplated by this Agreement, certain key officers of
the Company and FSAC have entered into employment agree-
ments with the Company and FSAC respectively (the "Em-
ployment Agreements"), the effectiveness of which is
conditioned upon consummation of the Merger;
WHEREAS, in connection with the transactions
contemplated by this Agreement and as a condition to
consummation of the Merger, FSAC, certain stockholders of
FSAC and certain stockholders of the Company will enter
into a Registration Rights Agreement in the form attached
hereto as Exhibit D (the "Registration Rights Agreement"
and, together with the Escrow Agreement, the Security
Transfer Agreement, the Majority Stockholders' Agreement,
the Warrant Agreement (as hereinafter defined) and the
Employment Agreements, the "Related Agreements") with
respect to certain shares of FSAC Common Stock; and
WHEREAS, the Board of Directors of FSAC has
approved amendments to FSAC's Certificate of Incorpora-
tion that, subject to adoption thereof by the stockhold-
ers of FSAC, will (i) increase the number of authorized
shares of FSAC Common Stock from 14,000,000 to 30,000,000
and (ii) upon consummation of the Merger (w) delete
certain provisions of the Certificate of Incorporation
that are no longer relevant, (x) implement a three-class
staggered board of directors for FSAC, (y) prohibit
actions by written consent of stockholders and (z) change
the name of FSAC to Financial Services Corporation (the
"Charter Amendments").
NOW, THEREFORE, in consideration of the forego-
ing and the respective representations, warranties,
covenants and agreements set forth herein, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. In accordance with
the provisions of this Agreement and the DGCL, at the
Effective Time (as hereinafter defined), Sub shall be
merged with and into the Company (the "Merger"), the
separate corporate existence of Sub shall thereupon
cease, and the Company shall be the surviving corporation
in the Merger (sometimes hereinafter called the "Surviv-
ing Corporation") and shall continue its corporate exis-
tence under the laws of the State of Delaware. The
Merger shall have the effects set forth in Section 259 of
the DGCL.
Section 1.2 Effective Time of the Merger.
The Merger shall become effective at the time of filing
of, or at such later time specified in, a properly exe-
cuted Certificate of Merger, in the form required by and
executed in accordance with the DGCL, filed with the
Secretary of State of the State of Delaware in accordance
with the provisions of Section 251 of the DGCL. Such
filing shall be made as soon as practicable after the
Closing (as hereinafter defined). When used in this
Agreement, the term "Effective Time" shall mean the date
and time at which the Merger shall become effective.
Section 1.3 Closing. The closing of the
transactions contemplated by this Agreement (the "Clos-
ing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom, 919 Third Avenue, New York, New
York, at 10:00 a.m., local time, on the day on which all
of the conditions set forth in Article VIII are satisfied
or waived or on such other date and at such other time
and place as FSAC and the Company shall agree (such date,
the "Closing Date").
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation.
The Certificate of Incorporation of Sub in effect at the
Effective Time shall be the Certificate of Incorporation
of the Surviving Corporation until amended in accordance
with applicable law, except that the name of the Surviv-
ing Corporation shall be "Euro Brokers Investment Corpo-
ration."
Section 2.2 By-Laws. The By-Laws of Sub as
in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation until amended in accordance
with applicable law.
Section 2.3 Directors and Officers of Surviv-
ing Corporation.
(a) The directors of the Company at the
Effective Time shall be the initial directors of the
Surviving Corporation and, subject to the provisions of
Section 7.14(b), shall hold office from the Effective
Time until their respective successors are duly elected
or appointed and qualified in the manner provided in the
Certificate of Incorporation or By-Laws of the Surviving
Corporation or as otherwise provided by law.
(b) The officers of the Company at the
Effective Time shall be the initial officers of the
Surviving Corporation and, subject to the provisions of
Section 7.14(b), shall hold office from the Effective
Time until their respective successors are duly elected
or appointed and qualified in the manner provided in the
Certificate of Incorporation or By-Laws of the Surviving
Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES AND OTHER MATTERS
Section 3.1 Intended Effects of Merger. It
is the intention of the parties that (i) as a result of
and immediately following consummation of the Merger, the
holders of record (each, a "Holder" and, collectively,
the "Holders") of a certificate or certificates which
immediately prior to the Effective Time represented
outstanding shares of Company Stock (as hereinafter
defined) (each, a "Certificate" and, collectively, the
"Certificates") will (subject to the terms of the Escrow
Agreement) acquire, in the aggregate, assuming there are
no Dissenting Shares (as hereinafter defined) and no
outstanding options, warrants or other rights to acquire
shares of Company Stock ("Company Rights"), and disre-
garding any payments of cash in lieu of fractional inter-
ests, a fifty percent (50%) interest in FSAC by acquiring
a number of shares of newly-issued FSAC Common Stock (the
"Merger Stock") and a number of newly-issued FSAC War-
rants, which warrants will be denominated as "Series B
Redeemable Stock Purchase Warrants" of FSAC, will be
represented by certificates substantially in the form
attached hereto as Exhibit E, will entitle the holder to
receive the same securities for the same exercise price
as are receivable by the holders of the existing FSAC
Warrants upon any exercise of such FSAC Warrants after
the Effective Time, and will otherwise have substantially
the same terms and conditions as the FSAC Warrants sold
pursuant to the Prospectus, dated November 30, 1994, of
FSAC (hereinafter the "1994 Prospectus"), except that the
warrants will be issued pursuant to a new warrant agree-
ment (the "Warrant Agreement") between FSAC and such
warrant agent as is mutually agreed to by FSAC and the
Company (the "Merger Warrants"), equal to the number of
shares of FSAC Common Stock and the number of FSAC War-
rants outstanding, respectively, immediately prior to the
Effective Time ((x) reduced by the number of any Conver-
sion Shares (as hereinafter defined) or, alternatively,
if applicable as a result of the satisfaction of the
requirements of the proviso to Section 8.3(d), the number
of any Adjusted Conversion Shares (as hereinafter de-
fined) and (y) after giving effect, if it occurs, to the
Unit Purchase Option Exchange (as defined in and contem-
plated by Section 7.9)) and (ii) the respective pre-
Merger contributions of FSAC and the Company to the post-
Merger consolidated net worth of FSAC be equalized (sub-
ject to the adjustments contemplated by Sections 3.7(h)
and 3.7(j)) by the payment by FSAC (using funds, to the
extent necessary, obtained from the Company as provided
by Section 3.8(a)) to the Holders in the Merger of cash
consideration (in addition to the Merger Stock, the
Merger Warrants and any payments in lieu of fractional
shares).
Section 3.2 Conversion of Shares. In order
to implement the intention of the parties stated in
Section 3.1, by virtue of the Merger and without any
action on the part of the holder thereof:
(a) Each share of Class B Common Stock,
par value $.001 per share (the "Company Common Stock")
and Class A Common Stock, par value $.01 per share (the
"Class A Company Common Stock" and, together with the
Company Common Stock, the "Company Stock"), of the Compa-
ny issued and outstanding immediately prior to the Effec-
tive Time shall, except as otherwise provided in Sections
3.2(b), 3.4 and 3.5 (and subject to the provisions of
Section 3.3), be converted into the right to receive:
(i) 2.6426688 shares of Merger Stock (as adjusted pursu-
ant to Section 3.6, the "Stock Exchange Ratio"), (ii)
4.5274405 Merger Warrants (as adjusted pursuant to Sec-
tion 3.6, the "Warrant Exchange Ratio" and, together with
the Stock Exchange Ratio, the "Exchange Ratios") and
(iii) $9.5734433 in cash, without interest (as adjusted
pursuant to Sections 3.6(b) and 3.7, the "Per Share Cash
Consideration" and, together with the per share amounts
payable pursuant to the Exchange Ratios, hereinafter the
"Merger Consideration"). The Exchange Ratios and the Per
Share Cash Consideration set forth above have been deter-
mined based on an estimate of the cash portion of the
Merger Consideration as described in clause (ii) of
Section 3.1 equal to $16 million (the "Estimated Aggre-
gate Cash Consideration"), the 4,416,666 shares of FSAC
Common Stock (the "Currently Outstanding FSAC Shares")
and 7,566,666 FSAC Warrants (the "Currently Outstanding
FSAC Warrants") that were outstanding as of March 5, 1996
and the 1,671,290 shares of Company Common Stock that
were outstanding on a fully-diluted basis (the "Company
Stock Number") as of March 5, 1996, and are each subject
to adjustment as set forth in this Article III to reflect
certain changes that may have occurred as of the Effec-
tive Time in such number of shares, warrants and rights
outstanding. Payment of the Merger Consideration shall
be made only in accordance with, and is subject to the
provisions and adjustments of, this Article III and the
Escrow Agreement.
(b) All shares of Company Stock that are
(i) held by the Company as treasury shares or owned by
any Subsidiary (as hereinafter defined) of the Company or
(ii) owned by FSAC shall be cancelled and retired and
cease to exist, and no securities of FSAC, cash or other
consideration shall be delivered in exchange therefor.
As used in this Agreement, the term "Subsidiary" means,
with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of
which (x) such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the
general partnership interests of which held by such party
or any Subsidiary of such party do not have a majority of
the voting interest in such partnership) or (y) at least
a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of
the board of directors or others performing similar
functions with respect to such corporation or other
organization is directly or indirectly owned or con-
trolled by such party and/or one or more of its Subsid-
iaries.
(c) Each share of Common Stock, par value
$.01 per share ("Sub Common Stock"), of Sub issued and
outstanding immediately prior to the Effective Time shall
be converted into and become one fully paid and nonas-
sessable share of Common Stock, par value $.01 per share,
of the Surviving Corporation.
Section 3.3 Escrowed Merger Consideration.
Notwithstanding Section 3.2, at the Effective Time, FSAC
shall deposit with the Escrow Agent under the Escrow
Agreement, the following portions of the aggregate Merger
Consideration: (i) 10 percent (10%) of the Merger Stock
(the "Escrow Stock") and (ii) an amount in cash (the
"Cash Escrow Amount") equal to the sum of (x) $2,000,000
plus (y) the product of (1) the number of Dissenting
Shares and (2) the book value per share of Company Stock
(the "Per Share Book Value") as determined by dividing
the Stockholders' Equity reflected on the Company's
Closing Balance Sheet (as hereinafter defined) by the
Actual Company Stock Number (as hereinafter defined). In
addition, to the extent there are any Dissenting Shares,
FSAC shall also deposit at such time with the Escrow
Agent under the Escrow Agreement, additional stock and
warrant certificates representing the aggregate whole
number of shares of Merger Stock and Merger Warrants
that, in the absence of the exercise of their appraisal
rights, would have been payable as Merger Consideration
to Dissenters (as hereinafter defined), if any, with
respect to Dissenting Shares (the "Section 262 Escrow
Securities"). The Merger Consideration otherwise dis-
tributable as of the Effective Time to each Holder in
connection with the Merger as provided in Section 3.2
shall be proportionally reduced to reflect the deposit in
escrow of those portions of the aggregate Merger Consid-
eration required to be deposited in escrow as described
in this Section 3.3, and such portions of the Merger
Consideration so deposited in escrow shall be released to
Holders, FSAC or the Company, as the case may be, only in
accordance with the terms of the Escrow Agreement and
this Agreement.
Section 3.4 Dissenting Shares; Certain Re-
leases from Escrow.
(a) Notwithstanding Section 3.2, each
share of Company Stock outstanding as of immediately
prior to the Effective Time and as to which appraisal
rights shall have been duly demanded under the DGCL
("Dissenting Shares") shall be converted into the right
to receive, in lieu of the Merger Consideration, payment
by the Surviving Corporation of the appraised value of
such share to the extent permitted by and in accordance
with the provisions of Section 262 of the DGCL; provided,
however, that (i) if any holder of Dissenting Shares (a
"Dissenter") shall, under the circumstances permitted by
the DGCL, subsequently deliver a written withdrawal of
such holder's demand for appraisal of such shares, or
fail to establish such holder's entitlement to rights to
payment as provided in said Section 262, or (ii) if
neither any Dissenter nor the Surviving Corporation has
filed a petition demanding a determination of the value
of all Dissenting Shares within the time provided in said
Section 262, such Dissenter or Dissenters (as the case
may be) shall forfeit such right to payment for such
Dissenting Shares and such Dissenting Shares shall there-
upon be deemed to have been converted into the right to
receive, without interest, the Merger Consideration as of
the Effective Time. The Dissenting Shares, less any such
shares with respect to which a Dissenter fails to perfect
his or her appraisal rights as contemplated by this
Section 3.4(a), are hereinafter referred to as the "Actu-
al Dissenting Shares." The Surviving Corporation shall
be solely responsible for, and shall pay out of its own
funds any amounts which become due and payable to holders
of Dissenting Shares, and, subject to the other provi-
sions of this Section 3.4, such amounts shall not be paid
directly or indirectly by FSAC.
(b) The Company shall promptly provide
FSAC with copies of any written demand for appraisal
rights received by the Company, and FSAC shall have the
right to participate in all negotiations and proceedings
with respect to any such demand. The Company shall not,
except with the prior written consent of FSAC, make any
payment with respect to, or settle or offer to settle,
any such demand.
(c) To the extent that the Surviving
Corporation makes any payments to Dissenters with respect
to their Dissenting Shares, the Surviving Corporation
shall be entitled to and shall draw down (i) from the
Cash Escrow Amount such portion as is equal to the aggre-
gate amount of such payments and (ii) to the extent the
Cash Escrow Amount then remaining is insufficient, from
the Escrow Stock for the balance thereof, in each case in
accordance with the terms and the provisions of the
Escrow Agreement and this Article III.
(d) After payments have been made (or the
right to payment has been forfeited) with respect to all
Dissenting Shares, the Escrow Agent shall be instructed
by all parties to release the Section 262 Escrow Securi-
ties as follows: (i) first, to pay the Merger Consider-
ation (other than the Per Share Cash Consideration) to
any Dissenter who failed to perfect his or her appraisal
rights (as contemplated by Section 3.4(a)) and therefore
did not receive any payment for his or her Dissenting
Shares (a "Failed Dissenter"); and (ii) second, to pay to
each Holder who did not duly demand appraisal rights or
who is a Failed Dissenter (each a "Participating Hold-
er"), as additional consideration in connection with the
Merger, such Participating Holder's Proportionate Inter-
est (as hereinafter defined) in the shares of Merger
Stock and the Merger Warrants, respectively, comprising
the Section 262 Escrow Securities that remain after any
releases of the same made pursuant to the immediately
preceding clause (i). Any payments made pursuant to this
Section 3.4(d) shall be subject to Section 3.5 below and,
in the case of clause (ii) above, shall be deemed to
constitute additional Merger Consideration.
(e) Following the making of whichever of
the two adjustments contemplated by Sections 3.7(f)(i)
and (ii) below is applicable, and provided that all
payments have been made (or the right to payment has been
forfeited) with respect to all Dissenting Shares, the
Escrow Agent shall be instructed by all parties to re-
lease the remaining Cash Escrow Amount, if any, as fol-
lows: (i) first, to pay to any Failed Dissenter the same
portion of the Per Share Cash Consideration actually paid
to the other Holders (other than Dissenters) following
the Effective Time after giving effect to the deposit of
the Cash Escrow Amount in escrow as provided in Section
3.3; and (ii) second, to pay to each Participating Holder
the balance of the Per Share Cash Consideration to which
such Participating Holder will be entitled as a result of
the release of the Cash Escrow Amount, it being under-
stood that the amount of the Cash Escrow Amount to be
released to each such Participating Holder (and the only
balance of the Per Share Cash Consideration to which such
Participating Holder will be entitled), shall be such
Participating Holder's Proportionate Interest in the
remaining cash, if any, comprising the Cash Escrow
Amount.
(f) A Holder's "Proportionate Interest"
shall mean the fraction obtained by dividing (i) the
number of shares of Company Stock held of record by such
Holder as of immediately prior to the Effective Time by
(ii) the number of shares remaining after subtracting (x)
the Actual Dissenting Shares from (y) the Actual Company
Stock Number (as hereinafter defined).
Section 3.5 No Fractional Securities. No
certificates or scrip representing fractional interests
in shares of Merger Stock or Merger Warrants shall be
issued in the Merger (including in connection with any
releases of such securities from any escrow arrangements
contemplated by this Agreement). All fractional inter-
ests in a share of Merger Stock that a Holder would
otherwise be entitled to receive as a result of the
Merger shall be aggregated, and all fractional interests
in a Merger Warrant that a Holder would otherwise be
entitled to receive as a result of the Merger shall be
aggregated. If, after such aggregation, a fractional
interest in a share of Merger Stock or a Merger Warrant
would result, such Holder shall be entitled to receive,
in lieu thereof, an amount in cash determined by multi-
plying (i) the fractional interest in a share of Merger
Stock or a Merger Warrant, as the case may be, to which
such Holder would otherwise be entitled and (ii) the
average of the per share closing bid price of a share of
FSAC Common Stock or an FSAC Warrant, as the case may be,
(x) on the OTC Bulletin Board (the "OTC Bulletin Board")
of the National Association of Securities Dealers (the
"NASD") or (y) if not quoted at such time on the OTC
Bulletin Board, in the NQB Pink Sheets published by the
National Quotation Bureau Incorporated (the "Pink
Sheets"), in each case for the five trading days immedi-
ately preceding the Effective Time. Any amounts paid to
a Holder pursuant to this Section 3.5 shall be deemed to
be part of the Merger Consideration. Pending such pay-
ment, no fractional interest in a share of Merger Stock
or a Merger Warrant shall entitle the owner thereof to
vote or to any rights of a security holder.
Section 3.6 Adjustment of Exchange Ratios and
Cash Consideration.
(a) (i) FSAC, by its chief executive
officer, shall certify to the Company on, or immediately
following, the Closing Date, (x) the actual number of
shares of FSAC Common Stock outstanding as of immediately
prior to the Effective Time, including after giving
effect to any Unit Purchase Option Exchange as provided
in Section 7.9 (the "Actual Outstanding FSAC Shares") and
(y) the actual number of FSAC Warrants outstanding as of
immediately prior to the Effective Time (the "Actual
Outstanding FSAC Warrants"), (ii) FSAC, by its chief
executive officer, shall certify to the Company promptly
following the FSAC stockholder meeting contemplated by
Section 7.4(b), the aggregate number of shares of FSAC
Common Stock (the "Conversion Shares") as to which Public
Stockholders (as such term is defined in the 1994 Pro-
spectus, hereinafter the "Public Stockholders") have duly
requested conversion rights ("Conversion Rights") in
connection with the Merger and in accordance with FSAC's
Certificate of Incorporation, and (iii) the Company, by
its chief executive officer, shall certify to FSAC on, or
immediately following, the Closing Date, the actual
number of shares of Company Stock outstanding on a fully-
diluted basis as of immediately prior to the Effective
Time (the "Actual Company Stock Number"). Such certifi-
cations shall be treated as additional representations
and warranties made under this Agreement.
(b) In accordance with such certifica-
tions: (i) the Stock Exchange Ratio shall be adjusted to
equal the quotient obtained by dividing (x) the differ-
ence obtained by subtracting (A) the Conversion Shares
(reduced by the number of Excess Conversion Shares (as
hereinafter defined), if any, for which the requirements
of the proviso in Section 8.3(d) have been satisfied,
hereinafter the "Adjusted Conversion Shares") from (B)
the Actual Outstanding FSAC Shares, by (y) the Actual
Company Stock Number; (ii) the Warrant Exchange Ratio
shall be adjusted to equal the quotient obtained by
dividing (x) the Actual Outstanding FSAC Warrants by (y)
the Actual Company Stock Number; and (iii) the Per Share
Cash Consideration shall be adjusted to equal the quo-
tient obtained by dividing (x) the Estimated Aggregate
Cash Consideration (as adjusted, if applicable, pursuant
to Section 3.7(a)(ii)) by (y) the Actual Company Stock
Number.
Section 3.7 Closing True-Up Procedures.
(a) (i) Commencing no later than twenty
(20) business days prior to the Closing Date, each
of FSAC and the Company shall cause its respective
chief financial officers and independent certified
public accountants to consult with each other in
good faith in order to reach mutual agreement upon,
and deliver to each other, no later than five (5)
business days prior to the Closing Date, (x) in the
case of FSAC, a good-faith estimate of the FSAC
Closing Balance Sheet (as hereinafter defined) and a
good faith estimate of FSAC Closing Cash Equivalents
(as hereinafter defined) as derived therefrom and
(y) in the case of the Company, a good-faith esti-
mate of the Company's Closing Balance Sheet (as
hereinafter defined) and good faith estimates of the
Company's Closing Defined Net Worth, the Company's
Closing Cash Equivalents and the Per Share Book
Value (each as hereinafter defined), each as derived
therefrom. If, after making good faith efforts to
do so, FSAC and the Company have not, prior to the
close of business on the business day immediately
preceding the Closing Date, agreed upon the esti-
mates of both FSAC Closing Cash Equivalents and the
Company's Closing Defined Net Worth, and the aggre-
gate amount of the disagreements with respect to
such estimates is in excess of $1 million (the
"Disputed Estimates"), FSAC and the Company shall
immediately refer the Disputed Estimates to the
Arbitrator (as hereinafter defined) for resolution
in accordance with the expedited procedures set
forth on Schedule 3.7(a). The Closing Date and the
adjustments contemplated below by Section 3.7(a)(ii)
shall be delayed (and, if implicated, the termina-
tion right in Section 9.1(b) tolled) until the
Arbitrator has made a determination in accordance
with such procedures.
(ii) If, based on such estimates (as
finally agreed or determined), the Amount (as here-
inafter defined) required to be calculated pursuant
to Section 3.7(e) below would be in excess of the
Estimated Aggregate Cash Consideration, the Estimat-
ed Aggregate Cash Consideration shall be adjusted
(before the deposit of monies with the Exchange
Agent, as hereinafter defined, contemplated by
Section 3.8(a)) by increasing it by the amount of
such excess. If, based on such estimates (as final-
ly agreed or determined), the Amount as so calculat-
ed would be less than the Estimated Aggregate Cash
Consideration, the Estimated Aggregate Cash Consid-
eration shall be adjusted (before the deposit of
monies with the Exchange Agent contemplated by
Section 3.8(a)) by decreasing it by the amount of
such shortfall.
(b) As soon as practicable, but in no
event later than thirty (30) days following the Closing
Date, (i) FSAC shall prepare and deliver to the Company
and the Representatives (as hereinafter defined) a final
statement of FSAC Closing Cash Equivalents (the "FSAC
Final Statement"), together with the FSAC Closing Balance
Sheet and (ii) the Company shall prepare and deliver to
FSAC a final statement of the Company's Closing Defined
Net Worth (the "Company's Final Statement" and, together
with the FSAC Final Statement, the "Final Statements"),
and the Company's Closing Balance Sheet. Each party's
Final Statement shall be accompanied by a certificate
attesting to its accuracy of such party's chief financial
officer or independent certified public accountants.
(c) Each party shall be entitled to
inspect all of the work papers, schedules and other
supporting papers of the other (and the other's accoun-
tants) relating to the other's estimates to be delivered
pursuant to Section 3.7(a)(i), the other's Final State-
ment and the Company's Closing Balance Sheet and the FSAC
Closing Balance Sheet, both during the period of their
preparation and after their delivery. If any party in
good faith disputes the accuracy or fairness of the Final
Statement of the other (it being understood that any
mutual agreement or Arbitrator's decision reached on the
estimates provided pursuant to Section 3.7(a)(i) shall
not prejudice any party's right to dispute the other's
Final Statement), such party shall so notify the other
within thirty (30) days after receipt thereof, which
notice (the "Notice of Disagreement") shall specify in
reasonable detail the nature of the reasons for such
party's objections and what such party believes is the
correct amount to be set forth in such Final Statement.
If a party does not timely deliver a Notice of Disagree-
ment with respect thereto, then the FSAC Closing Cash
Equivalents and/or the Company's Closing Defined Net
Worth, as the case may be, shall be as stated in the
relevant Final Statement. If a Notice of Disagreement is
timely delivered, then the FSAC Closing Cash Equivalents
and/or the Company's Closing Defined Net Worth shall be
determined as provided in Section 3.7(d).
(d) (i) If a Notice of Disagreement(s) is
timely given, FSAC and the Representatives shall use
their respective good faith efforts to resolve the
disputed matters and, if they are able to do so, the
FSAC Closing Cash Equivalents and/or the Company's
Closing Defined Net Worth, as the case may be, shall
be determined in accordance with such parties'
agreement.
(ii) If, within fifteen (15) days after
delivery of a Notice of Disagreement, no agreement
has been reached with respect thereto, the disputed
items shall, at the initiation of either FSAC or the
Representatives, be referred to an audit partner
knowledgeable about the financial services industry
at KPMG Peat Marwick LLP, New York, New York, or
such other "big six" accounting firm and office as
FSAC and the Representatives may agree upon (the
"Arbitrator"), for determination in accordance with
the terms of this Agreement. The Arbitrator shall
be instructed to render its determination as soon as
reasonably practicable, but in no event later than
forty-five (45) days after referral of the matter(s)
in dispute. The FSAC Closing Cash Equivalents
and/or the Company's Closing Defined Net Worth, as
the case may be, shall then be determined by the
Arbitrator.
(iii) The determinations of the Arbitra-
tor shall be made in accordance with generally
accepted accounting principles ("GAAP") and the
terms of this Agreement and shall be final and
binding upon the parties and shall not, in the
absence of manifest error, be subject to judicial
review.
(iv) The fees and expenses of the Arbi-
trator shall be paid by FSAC.
(e) After the final determination of the
FSAC Closing Cash Equivalents and the Company's Closing
Defined Net Worth, the parties shall calculate the dif-
ference obtained (the "Amount") by subtracting (i) the
amount of the FSAC Closing Cash Equivalents as so deter-
mined from (ii) the amount of the Company's Closing
Defined Net Worth as so determined.
(f)(i) If the Amount is greater than the
Estimated Aggregate Cash Consideration (as adjusted
pursuant to Section 3.7(a)(ii) above), FSAC shall
deliver to the Escrow Agent, as an addition to the
Cash Escrow Amount, an amount of cash equal to such
excess (the "Positive Cash Adjustment"); provided,
however, that in no event shall FSAC be required to
pay a Positive Cash Adjustment in excess of $2
million.
(ii) If the Estimated Aggregate Cash
Consideration (as adjusted pursuant to Section
3.7(a)(ii) above) is greater than the Amount, all
parties shall instruct the Escrow Agent to release
to FSAC such portion of the Cash Escrow Amount as is
equal to such excess (the "Negative Cash Adjust-
ment"), provided, however, that in no event shall
FSAC be entitled to receive a payment of a Negative
Cash Adjustment in excess of $2 million.
(g) The term "FSAC Closing Cash Equiva-
lents" shall mean the sum of the following balance sheet
line items of FSAC, as reflected on a consolidated bal-
ance sheet of FSAC prepared as of the close of business
on the business day immediately preceding the Effective
Time (the "FSAC Closing Balance Sheet"), in accordance
with GAAP and on a basis consistent with the preparation
of the audited Balance Sheet of FSAC as of December 31,
1994: (i) cash and cash equivalents (after giving effect
to any payments or accruals with respect to Public Stock-
holders in respect of the Conversion Shares (or, if
applicable, the Adjusted Conversion Shares, in which
event, effect will also be given to the payments to FSAC
of the Excess Conversion Amounts)), plus (ii) U.S. Gov-
ernment and government agency securities deposited in the
Trust Fund (as defined in the 1994 Prospectus) and ac-
crued interest thereon, plus (iii) prepaid expenses,
minus (iv) accounts payable and other liabilities (in-
cluding accrued liabilities) of FSAC (other than (x)
accounts payable and other liabilities in respect of
expenses to be shared by FSAC and the Company pursuant to
Section 7.17 and Schedule 3.7(a) and (y) accrued liabili-
ties with respect to the possible exercise of Conversion
Rights). FSAC agrees to use the FSAC Closing Balance
Sheet to prepare its estimate of the FSAC Closing Cash
Equivalents and FSAC's Final Statement that are contem-
plated by this Section 3.7.
(h) The term "Company's Closing Defined
Net Worth" shall mean the stockholders' equity of the
Company, as reflected on a consolidated balance sheet of
the Company prepared as of the close of business on the
business day immediately preceding the Effective Time
(the "Company's Closing Balance Sheet"), in accordance
with GAAP and on a basis consistent with the preparation
of the audited consolidated Balance Sheet of the Company
as of December 31, 1995, with the following adjustments:
(i) goodwill shall not exceed $2.4 million, (ii) assets
shall not include any notes receivable from or loans to
stockholders (evidenced in writing or otherwise) with
respect to the purchase of Common Stock of the Company
(the "Stockholder Loans") (except to the extent such
loans or notes have been repaid in cash in accordance
with Section 7.13), (iii) compensation loans and loans
related to clearing member seats, to the extent reflected
in assets, shall for the purposes of such calculation be
deemed offset by an equal liability, (iv) reserves of the
Company shall, for the purposes of such calculation, be
deemed to be established, increased, reversed or other-
wise varied as FSAC and the Company may separately agree
in writing prior to the Closing and (v) with respect to
adjustments, accruals and other items that are normally
made or assessed under GAAP or the Company's standard
accounting practices at the end of a monthly, quarterly,
semi-annual, annual or other period that would end after
the Closing Date, a pro-rated portion of such adjustment,
accrual or other item shall be made for the portion of
such period ending as of the Closing Date (including,
without limitation, a pro-rated portion of all bonuses
payable to officers and employees for the six-month
period ending June 30, 1996).
(i) The Company agrees to use the
Company's Closing Balance Sheet, as so adjusted, to
prepare its estimate of the Company's Closing Defined Net
Worth and the Company's Final Statement that are contem-
plated by this Section 3.7. Notwithstanding the forego-
ing, the parties agree and acknowledge that the adjust-
ments to the Company's Closing Balance Sheet required or
permitted by Section 3.7(h): (i) reflect the results of
their economic bargaining and are not necessarily reflec-
tive of the requirements of GAAP or prudent financial
statements, (ii) are intended to be binding solely for
purposes of preparing the Company's Closing Balance Sheet
and making the Merger Consideration adjustments contem-
plated by Article III and (iii) are not intended to be
binding on the Company in the preparation of its future
financial statements.
(j) The Company and FSAC acknowledge that
the audited consolidated balance sheet of the Company as
of December 31, 1995 includes a reserve of $450,000 that
may or may not prove necessary depending on the outcome
of certain other events, which outcome is expected to be
known no later than December 31, 1996. If the outcome is
definitively known prior to the Closing Date, the reserve
shall be retained, reversed or adjusted in accordance
with the outcome for purposes of the Company's Closing
Balance Sheet. If (i) the outcome becomes definitively
known after the Closing Date but on or prior to December
31, 1996 and (ii) does not require full utilization of
the reserve, it is agreed that, promptly after the out-
come, but no later than January 15, 1997, the Surviving
Corporation shall distribute to Participating Holders, as
additional Merger Consideration hereunder in accordance
with their respective Proportionate Interests, the unuti-
lized portion of the reserve. If the outcome does not
become definitively known until after December 31, 1996,
no such distribution shall be made.
(k) Any amounts payable pursuant to the
preceding Section 3.7(f) shall be released or paid not
later than five (5) business days after the final deter-
mination of the FSAC Closing Cash Equivalents and the
Company's Closing Defined Net Worth pursuant to Sections
3.7(c) or 3.7(d), as the case may be. All amounts re-
leased from Escrow shall be released with interest earned
thereon as specified in the Escrow Agreement. All other
payments (other than any payment pursuant to Section
3.7(j)) shall include interest for the period from, but
not including, the Closing Date through the date of such
payment, at the rate for 30-day commercial paper set
forth in the "Money Rates" column of the Wall Street
Journal published on the Closing Date.
Section 3.8 Exchange of Company Stock; Other
Procedures.
(a) Prior to the Closing Date, FSAC shall
designate a bank or trust company reasonably acceptable
to the Company to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the
Effective Time, and after giving effect to the adjust-
ments contemplated by Section 3.7(a)(ii) and any
upstreaming of funds contemplated by the last sentence of
this Section 3.8(a), FSAC shall deposit with or for the
account of the Exchange Agent (i) stock certificates
representing the aggregate number of whole shares of
Merger Stock issuable pursuant to Section 3.2 (as adjust-
ed pursuant to Section 3.6) in exchange for outstanding
shares of Company Stock (less certificates representing
the shares of Escrow Stock to be deposited in escrow
pursuant to the Escrow Agreement, as contemplated by
Section 3.3), which shares of Merger Stock shall be
deemed to have been issued at the Effective Time, (ii)
warrant certificates representing the aggregate number of
whole Merger Warrants issuable pursuant to Section 3.2
(as adjusted pursuant to Section 3.6) in exchange for
outstanding shares of Company Stock, which Merger War-
rants shall be deemed to have been issued at the Effec-
tive Time, (iii) the Estimated Aggregate Cash Consider-
ation (as adjusted pursuant to Sections 3.6 and 3.7, but
less the Cash Escrow Amount to be deposited in escrow
pursuant to the Escrow Agreement, as contemplated by
Section 3.3) and (iv) sufficient cash to pay the amounts
contemplated by Section 3.5 (the "Fractional Cash
Amount"). Notwithstanding the foregoing or anything else
to the contrary in this Agreement, it is understood and
agreed by the parties that if and to the extent that, at
any time that FSAC is obligated to deposit the Estimated
Aggregate Cash Consideration and the Fractional Cash
Amount pursuant to this Section 3.8(a) or pay a Positive
Cash Adjustment pursuant to Section 3.7(f)(i), FSAC's
cash and cash equivalents on hand (including proceeds of
the Trust Fund) are insufficient to do so, or would leave
FSAC, on a stand-alone basis, with liabilities in excess
of assets, FSAC shall make such deposits or payments by
obtaining the additional necessary funds from the Company
and/or its Subsidiaries (by dividend, distribution,
intercompany loan or otherwise).
(b) As soon as practicable after the
Effective Time, FSAC shall cause the Exchange Agent to
mail to each Holder of a Certificate or Certificates that
were converted pursuant to Section 3.2 into the right to
receive the Merger Consideration (i) a form of letter of
transmittal specifying that delivery shall be effected,
and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to
the Exchange Agent and (ii) instructions for use in
surrendering such Certificates in exchange for the Merger
Consideration (subject to the portions thereof that have
been deposited in escrow). Upon surrender of a Certifi-
cate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration (subject to
the portions thereof that have been deposited in escrow),
after giving effect to any required tax withholdings, and
the Certificate so surrendered shall forthwith be cancel-
led. In the event of a transfer of ownership of Company
Stock which is not registered in the transfer records of
the Company, the Merger Consideration (subject to the
portions thereof that have been deposited in escrow) may
be issued to a transferee if the Certificate representing
such Company Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and
effect such transfer, and by evidence that any applicable
stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 3.8(b), each Certificate
shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender
the Merger Consideration (subject to the portions thereof
that have been deposited in escrow) as contemplated by
this Article III.
Section 3.9 Dividends; Escheat. No dividends
or distributions that are declared on shares of FSAC
Common Stock or FSAC Warrants will be paid to a person
entitled to receive certificates representing shares of
Merger Stock or Merger Warrants until such person surren-
ders his, her or its Certificates. Upon such surrender,
there shall be paid to the person in whose name the
certificates representing such shares of Merger Stock or
Merger Warrants shall be issued, any dividends or distri-
butions with respect to such shares of Merger Stock or
Merger Warrants, as the case may be, which have a record
date after the Effective Time and shall have become
payable between the Effective Time and the time of such
surrender. In no event shall the person entitled to
receive such dividends or distributions be entitled to
receive interest thereon. Promptly following the date
which is six months after the Effective Time, the Ex-
change Agent shall deliver to FSAC all cash, certificates
and other documents in its possession relating to the
transactions described in this Agreement, and any holders
of Company Stock who have not theretofore complied with
this Article III shall look thereafter only to FSAC for
the Merger Consideration to which they are entitled
pursuant to this Article III. Notwithstanding the fore-
going, neither the Exchange Agent nor any party hereto
shall be liable to a holder of Company Stock for any
Merger Consideration delivered to a public official
pursuant to applicable abandoned property, escheat or
similar laws.
Section 3.10 Closing of Company Transfer
Books. As of the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of
shares of Company Stock shall thereafter be made. If,
after the Effective Time, Certificates are presented to
the Surviving Corporation or FSAC, they shall be cancel-
led and exchanged as provided in this Article III.
Section 3.11 Further Assurances. If, at any
time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or
things are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Surviving Corpora-
tion its right, title or interest in, to or under any of
the rights, properties or assets of either of Sub or the
Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the
officers of the Surviving Corporation shall be authorized
to execute and deliver, in the name and on behalf of each
of Sub and the Company or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and
do, in such names and on such behalves or otherwise, all
such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, proper-
ties or assets in the Surviving Corporation or otherwise
to carry out the purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to FSAC and
Sub as follows:
Section 4.1 Organization. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now
being conducted and presently is proposed to be conduct-
ed. The Company is duly qualified as a foreign corpora-
tion to do business, and is in good standing, in each
jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to
be so qualified will not have a material adverse effect,
individually or in the aggregate, on the financial condi-
tion, results of operations, business, assets, liabili-
ties, prospects or properties of the Company and its
Subsidiaries taken as a whole, or the ability of the
Company to consummate the Merger and the other transac-
tions contemplated by this Agreement (a "Company Material
Adverse Effect").
Section 4.2 Capitalization.
(a) The authorized capital stock of the
Company consists of 2,000,000 shares of Company Common
Stock and 2,000,000 shares of Class A Company Common
Stock. As of March 5, 1996, (i) 1,671,290 shares of
Company Common Stock were outstanding and no shares of
Company Common Stock were held in treasury and (ii) no
shares of Class A Company Common Stock were outstanding
and 217,450 shares of Class A Company Common Stock were
held in treasury. All of the issued and outstanding
shares of Company Common Stock are validly issued, fully
paid and nonassessable. The outstanding shares of capi-
tal stock of the Company and its Subsidiaries are not
subject to, nor were they issued in violation of, any
preemptive rights of stockholders or to any right of
first refusal or other similar right in favor of any
person. All of the outstanding shares of capital stock
of the Company are owned of record and, to the knowledge
of the Company, beneficially as set forth in Schedule
4.2(a).
(b) Except as set forth in Schedule
4.2(b), (i) there is no outstanding right, subscription,
warrant, call, unsatisfied preemptive right, option or
other agreement or arrangement of any kind (contingent or
other) to purchase or otherwise to receive from the
Company or any of its Subsidiaries any of the authorized
but unissued (or treasury) shares of the capital stock or
any other security of the Company or any of its Subsid-
iaries, (ii) there is no outstanding security of any kind
convertible into or exchangeable for such capital stock,
(iii) none of the Company or any of its Subsidiaries has
any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof, (iv)
there is no voting trust or other agreement or under-
standing to which the Company or any of its Subsidiaries
is a party or is bound with respect to the voting of the
capital stock of the Company or any of its Subsidiaries
and (v) there is no written agreement or written arrange-
ment between the Company or any of its Subsidiaries and
any other person (including any current officer or em-
ployee) with respect to the sharing of revenues, profits
or earnings of the Company or any of its Subsidiaries,
business units or desks.
Section 4.3 Company Subsidiaries. Schedule
4.3 contains a complete and accurate list of all direct
and indirect Subsidiaries of the Company, setting forth
as to each such Subsidiary the jurisdiction of its incor-
poration, the number of shares of each class of its
authorized and outstanding capital stock and the record
and beneficial ownership of all such outstanding shares.
Each Subsidiary of the Company that is a corporation is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorpora-
tion. Each Subsidiary of the Company that is a partner-
ship is duly formed and validly existing under the laws
of its jurisdiction of formation. Each Subsidiary of the
Company has the corporate power or the partnership power,
as the case may be, to carry on its business as it is now
being conducted or presently proposed to be conducted.
Each Subsidiary of the Company is duly qualified as a
foreign corporation or a foreign partnership, as the case
may be, authorized to do business, and is in good stand-
ing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except
where the failure to be so qualified will not have a
Company Material Adverse Effect. All of the outstanding
shares of capital stock of the Subsidiaries of the Compa-
ny that are corporations are validly issued, fully paid
and nonassessable. Except as set forth in Schedule 4.3,
all of the outstanding shares of capital stock of, or
other ownership interests in, each Subsidiary of the
Company are owned by the Company or a Subsidiary of the
Company free and clear of any liens, pledges, security
interests, claims, charges or other encumbrances of any
kind whatsoever ("Liens").
Section 4.4 Authority Relative to this Agree-
ment. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and all
Related Agreements and other agreements to be executed by
it pursuant to this Agreement and to consummate the
transactions contemplated hereby and thereby. The execu-
tion and delivery of this Agreement and all Related
Agreements and other agreements to be executed by the
Company pursuant to this Agreement, and the consummation
by the Company of the transactions contemplated on its
part hereby and thereby, have been duly authorized by the
Company's Board of Directors and, except for the approval
of the Company's stockholders to be sought at the
stockholders' meeting contemplated by Section 7.4(a) with
respect to this Agreement, no other corporate proceedings
on the part of the Company are necessary to authorize
this Agreement or any Related Agreement or other agree-
ment to be executed by the Company pursuant to this
Agreement or for the Company to consummate the transac-
tions contemplated hereby or thereby. Each of this
Agreement and all Related Agreements and other agreements
to be executed by the Company pursuant to this Agreement
has been duly and validly executed and delivered by the
Company and constitutes a valid and binding agreement of
the Company, enforceable against the Company in accor-
dance with its respective terms.
Section 4.5 Consents; No Violations. Neither
the execution, delivery and performance by the Company of
this Agreement nor any Related Agreement or other agree-
ment to be executed by the Company pursuant to this
Agreement, nor the consummation by the Company of the
transactions contemplated hereby or thereby, will
(i) conflict with or result in any breach of any provi-
sions of the charter, by-laws or other organizational
documents of the Company or any of its Subsidiaries, (ii)
except as set forth in Schedule 4.5, result in a viola-
tion or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or accelera-
tion) under, or result in the creation of a Lien on any
property or asset of the Company or any of its Subsidiar-
ies pursuant to, any of the terms, conditions or provi-
sions of any note, bond, mortgage, security and pledge
agreement, indenture, or any material license, contract,
agreement, commitment or other instrument or obligation
(each, a "Contract") to which the Company or any of its
Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, (iii) except as
set forth in Schedule 4.5, constitute a change of control
under, or require the consent from or the giving of
notice to a third party pursuant to, the terms, condi-
tions or provisions of any such Contract, or (iv) violate
any law, order, writ, injunction, decree, statute, rule
or regulation of any federal, state, local or foreign
court, arbitral tribunal, administrative agency or com-
mission or other governmental or other regulatory author-
ity or administrative agency or commission or of any
self-regulatory organization (collectively, a "Governmen-
tal Entity") applicable to the Company, any of its Sub-
sidiaries or any of their properties or assets.
Section 4.6 Reports and Financial Statements;
Undisclosed Liabilities.
(a) The Company has furnished or made
available to FSAC (i) the audited consolidated balance
sheets of the Company and its Subsidiaries as of December
31, 1992, 1993, 1994 and 1995 and the related consolidat-
ed statements of income, stockholders' equity and cash
flows for the fiscal years then ended, certified by Price
Waterhouse LLP, and (ii) the unaudited consolidated
balance sheet of the Company and it Subsidiaries as of
January 31, 1996 (the "Unaudited Balance Sheet") and the
related unaudited consolidated statements of income,
stockholders' equity and cashflows for the one-month
period then ended (collectively, the "Company Financial
Statements"). The Company Financial Statements (other
than the Unaudited Balance Sheet) have been prepared in
accordance with GAAP consistently applied throughout the
periods indicated (except as otherwise noted therein) and
fairly present the consolidated financial position of the
Company and its Subsidiaries as at the dates thereof and
the consolidated results of operations and cash flows of
the Company and its Subsidiaries for the periods then
ended. The Unaudited Balance Sheet has been prepared in
accordance with the Company's internal accounting prac-
tices on a basis consistent with the preparation of its
monthly Management Reports during 1995. Except as set
forth in Schedule 4.6(a), since December 31, 1995, there
has been no change in any of the significant accounting
(including tax accounting) policies, practices or proce-
dures of the Company or any of its consolidated Subsid-
iaries.
(b) Except as reflected in the Company
Financial Statements or the notes thereto or as set forth
in Schedule 4.6 hereto, none of the Company or its Sub-
sidiaries had any obligations or liabilities, absolute,
accrued or contingent ("Liabilities"), as of the respec-
tive dates of the balance sheets included in the Company
Financial Statements of a type required by GAAP to be
reflected in a consolidated balance sheet (or the notes
thereto). Except as will be reflected in the Company's
Closing Balance Sheet or the notes thereto, none of the
Company or its Subsidiaries will have any material Lia-
bilities as of the date thereof. Since December 31,
1995, none of the Company or its Subsidiaries has in-
curred any material Liabilities, except in connection
with the transactions contemplated by this Agreement and
except in the ordinary course of business and consistent
with past practices.
(c) The commissions receivable reflected
on the Unaudited Balance Sheet and that will be reflected
on the Company's Closing Balance Sheet are and will be
bona fide commissions receivable created in the ordinary
course of business and are and will be good and collect-
ible within periods of time normally prevailing in the
industry at the aggregate recorded amounts thereof, net
of reserves for doubtful accounts reflected on the
Company's Closing Balance Sheet.
Section 4.7 Absence of Certain Changes.
Except as set forth in Schedule 4.7, since December 31,
1995, (a) neither the Company nor any of its Subsidiaries
has conducted its business and operations other than in
the ordinary course of business and consistent with past
practices or taken any actions that, if it had been in
effect, would have violated or been inconsistent with the
provisions of Section 6.1 and (b) there has not been any
fact, event, circumstance or change affecting or relating
to the Company or any of its Subsidiaries which has had
or would have a Company Material Adverse Effect.
Section 4.8 Approvals. Except as set forth
in Schedule 4.8, no filing with, or a permit, authoriza-
tion, notification, consent or approval of, any Govern-
mental Entity is required or necessary for (i) the valid
execution, delivery and performance by the Company of
this Agreement and all Related Agreements and other
agreements to be executed by the Company pursuant to this
Agreement, (ii) the consummation by the Company of the
transactions contemplated hereby or thereby or (iii) the
conduct of the business of the Company and its Subsidiar-
ies after the Effective Time in substantially the manner
in which it is currently being conducted.
Section 4.9 Litigation. Except as set forth
in Schedule 4.9 hereto, there is no action, suit, arbi-
tration, investigation or proceeding pending or, to the
knowledge of the Company, threatened against or affecting
the Company, any of its Subsidiaries, or any of its or
their respective properties or rights, nor is there any
judgment, decree, injunction or order of any Governmental
Entity against the Company or any of its Subsidiaries,
which in any such case will or is reasonably likely to
have a Company Material Adverse Effect. Nor, to the
knowledge of the Company, does there exist any basis for
any such action, suit, arbitration, investigation, pro-
ceeding, judgment, decree, injunction or order.
Section 4.10 No Default.
(a) Except as set forth in Schedule 4.10,
neither the Company nor any Subsidiary of the Company is
in default or violation (and no event has occurred which
with notice or the lapse of time or both would constitute
a default or violation) of any term, condition or provi-
sion of (i) its charter, by-laws or comparable organiza-
tional documents, (ii) any provision of the convertible
purchase price notes of certain Subsidiaries of the
Company or (iii) any Contract to which the Company or any
of its Subsidiaries is a party or by which they or any of
their properties or assets may be bound, except, in the
case of clause (iii), for defaults or violations which
would not have a Company Material Adverse Effect.
(b) In connection with the Stock Purchase
Agreement, dated as of May 10, 1994, among the Company,
WCAS and certain others (the "Stock Purchase Agreement")
and the transactions contemplated thereby, the following
events have heretofore occurred or will occur prior to
the Closing (defined terms used in the balance of this
Section 4.10(b) shall have the meanings assigned to them
in the Stock Purchase Agreement): (i) the termination of
the Stockholders Agreement, the Pledge Agreement, the
Escrow Agreement (without having effected the Recapital-
ization and without the Company or its Subsidiaries
having incurred any liability in connection therewith,
whether to its debt or equity holders or otherwise), the
Note Purchase Agreement and the agreements listed on
Schedule 4.02(d) to the Stock Purchase Agreement, (ii)
the release and termination of all security interests
held by WCAS in the assets of the Company and its Subsid-
iaries (including by the filing of UCC-3 financing state-
ments in the jurisdictions listed on Schedule 4.02(c) to
the Stock Purchase Agreement) and (iii) the delivery to
the Company of all of the notes and stock certificates
listed on Schedule 4.02(e) to the Stock Purchase Agree-
ment, together with stock powers and other transfer
forms, as applicable, duly executed in blank.
Section 4.11 Taxes.
(a) The Company has heretofore delivered
or will make available to FSAC true, correct and com-
plete copies of the consolidated federal, state, local
and foreign income, franchise sales and other Tax Returns
(as hereinafter defined) filed by the Company and the
Company's Subsidiaries for each of the Company's fiscal
years ended December 31, 1990, 1991, 1992, 1993 and 1994
inclusive. The Company has duly filed, and each of its
Subsidiaries has duly filed, all material federal, state,
local and foreign income, franchise, sales and other Tax
Returns required to be filed by the Company or any of its
Subsidiaries. All such Tax Returns are true, correct and
complete in all material respects, and the Company and
each of its Subsidiaries has duly paid, all Taxes (as
hereinafter defined) required to be paid in respect of
the periods covered by such returns and has made adequate
provision for payment of all accrued but unpaid Taxes
anticipated in respect of all periods since the periods
covered by such Tax Returns. Except as set forth in
Schedule 4.11, all deficiencies assessed as a result of
any examination of Tax Returns of the Company or any of
its Subsidiaries by federal, state, local or foreign tax
authorities have been paid or reserved on the Company
Financial Statements in accordance with GAAP consistently
applied, and true, correct and complete copies of all
revenue agent's reports, "30-day letters," or "90-day
letters" or similar statements proposing or asserting any
Tax deficiency against the Company or any of its Subsid-
iaries for any open year have been heretofore delivered
to FSAC. The Company has heretofore delivered or will
make available to FSAC true, correct and complete copies
of all written tax-sharing agreements and written de-
scriptions of all such unwritten agreement or arrange-
ments to which the Company or any of its Subsidiaries is
a party. Except as set forth in Schedule 4.11, no issue
has been raised during the past five years by any feder-
al, state, local or foreign taxing authority which, if
raised with regard to any other period not so examined,
could reasonably be expected to result in a proposed
deficiency for any other period not so examined. Except
as set forth in Schedule 4.11, neither the Company nor
any of its Subsidiaries has granted any extension or
waiver of the statutory period of limitations applicable
to any claim for Taxes. The consolidated federal income
tax returns of the Company and its Subsidiaries have not
been examined by the Internal Revenue Service (the "Ser-
vice"). Except as set forth in Schedule 4.11, (i) nei-
ther the Company nor any of its Subsidiaries is a party
to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of
Section 280G of the Code; (ii) no consent has been filed
under Section 341(f) of the Code with respect to any of
the Company or its Subsidiaries; (iii) neither the Compa-
ny nor any of its Subsidiaries has participated in, or
cooperated with, an international boycott within the
meaning of Section 999 of the Code; and (iv) neither the
Company nor any of its Subsidiaries has issued or assumed
any corporate acquisition indebtedness, as defined in
Section 279(b) of the Code, or any obligations described
in Section 279(a)(2) of the Code. The Company and each
Subsidiary of the Company have complied (and until the
Effective Time will comply) in all material respects with
all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid
over to the proper governmental authorities all amounts
required to be so withheld and paid over under all appli-
cable laws.
(b) With respect to each of the Company's
subsidiaries organized under the laws of, or operating
in, the United Kingdom (collectively, the "UK Subsidiar-
ies"):
(i) There are no current arrangements,
agreements, exemptions or dispensations obtained by
any UK Subsidiary from any Tax authority permitting
payment without deduction for or on account of Tax.
(ii) The UK Subsidiaries have no out-
standing entitlement to make any claim, election,
appeal or postponement for relief or repayment under
any Tax statute other than those claims, elections,
appeals or postponements which the UK Subsidiaries
normally make in the course of completing their tax
affairs.
(iii) The UK Subsidiaries have not taken
any action which has had or might have the result of
altering, prejudicing or in any way disturbing, in
all cases in any material respect, any arrangement
or agreement which it has previously negotiated in
respect of Tax.
(iv) Except as disclosed on Schedule
4.11, the UK Subsidiaries will not become liable to
pay or make reimbursement or indemnity in respect of
any Tax in consequence of the failure by any other
person to discharge that Tax.
(v) No rents, interest, annual payments
or other sums of an income nature which the UK
Subsidiaries are under an existing obligation to pay
in the future are or, so far as the Company is
aware, may be wholly or partially disallowable as
deductions or charges in computing profits for the
purposes of Tax.
(vi) Except as disclosed on Schedule
4.11, the UK Subsidiaries have not been involved in
any transaction or series of transactions, which, or
any part of which, may for any Tax purposes be
disregarded or reconstructed by reason of any motive
to avoid, reduce or delay a possible liability to
Tax.
(vii) The UK Subsidiaries are persons
registered and fully liable for the purposes of
United Kingdom value added tax and no such registra-
tion is subject to any conditions. The UK Subsid-
iaries are not part of a group for the purpose of
United Kingdom value added tax. The UK Subsidiaries
have materially complied with all statutory provi-
sions, rules, regulations, orders and directions
concerning United Kingdom value added tax.
(viii) The UK Subsidiaries have only
disposed of or acquired an asset in circumstances
such that the disposal or acquisition would be
treated for Tax purposes as an arms length transac-
tion. No election has been made either under Sec-
tion 35 TCGA 1992 (re-basing) or Sections 152 to 162
or 165 (inclusive) of the Taxation of Changeable
Gains Act 1992 (replacement of business assets) in
respect of any assets held by a UK Subsidiary.
(ix) No legally binding arrangement or
agreement has been entered into by a UK Subsidiary
under which Tax losses or Tax reliefs for any period
commencing after the Closing are obliged or agreed
to be surrendered or claimed and there exist no
obligations on any UK Subsidiary to make any payment
for any such Tax losses or Tax reliefs.
(x) No securities issued by any UK
Subsidiary and remaining in issue at the date hereof
were issued in such circumstances that the interest
or part thereof payable thereon fails to be treated
as a distribution under section 209 of the Income &
Corporation Taxes Act 1988 (meaning of "distribu-
tion").
(xi) Except as disclosed on Schedule
4.11, the UK Subsidiaries have not at any time
entered into any transactions for which consent from
the United Kingdom treasury or other Tax authority
was required without having obtained such consent.
(xii) The UK Subsidiaries have not been a
party to any transaction or arrangement whereby they
are liable for Tax or stamp duty reserve tax under
or by virtue of operating or being deemed to operate
as a branch, agency or broker.
(xiii) All documents in the possession or
under the control of any UK Subsidiary to which a UK
Subsidiary is a party and which attract stamp duty
have been duly stamped and no claim for exemption
from or reduction of stamp duty is outstanding. The
UK Subsidiaries have not since December 31, 1995
entered into any transactions in respect of which it
may be liable for stamp duty reserve tax.
(c) For purposes of this Agreement, the
term "Taxes" shall mean all taxes, charges, fees, levies,
duties, imports or other assessments, including, without
limitation, income, gross receipts, excise, property,
sales, use, transfer, gains, license, payroll, withhold-
ing, capital stock and franchise taxes, corporation tax,
advance corporation tax, capital gains tax, national
insurance contributions, indenture tax and asset taxes
imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto.
For purposes of this Agreement, the term "Tax Return"
shall mean any report, return or other information or
document required to be supplied to a taxing authority in
connection with Taxes.
Section 4.12 Title to Properties; Encumbranc-
es; Leasehold Interests.
(a) Except as described in the following
sentence, each of the Company and its Subsidiaries has
good, valid and marketable title to, or a valid leasehold
interest in, all of its material properties and assets
(real, personal and mixed, tangible and intangible),
including, without limitation, all the properties and
assets reflected in the Unaudited Balance Sheet (except
for properties and assets disposed of in the ordinary
course of business and consistent with past practices
since February 1, 1996).
(b) None of such properties or assets are
subject to any Liens (whether absolute, accrued, contin-
gent or otherwise), except (i) as set forth in Schedule
4.12, (ii) liens for current taxes or assessments not yet
due or payable or which are being contested in good faith
by the Company, (iii) mechanic's, materialmen's and
similar liens which may have arisen in the ordinary
course of business and (iv) minor imperfections of title
and encumbrance, if any, which are not substantial in
amount and do not materially detract from the value of
the property or assets subject thereto and do not impair
the operations of any of the Company and its Subsidiaries.
(c) Each lease or agreement to which the
Company or any of its Subsidiaries is a party and under
which it is a lessee of any property, real or personal,
owned by any third party is a valid and subsisting agree-
ment, in each case without any material default of the
Company or its Subsidiaries, as the case may be, thereun-
der and, to the knowledge of the Company, without any
material default thereunder of any other party thereto.
The possession by the Company or its Subsidiaries of such
property has not been disturbed nor has any material
claim been asserted against the Company or any of its
Subsidiaries adverse to its or their respective rights in
such leasehold interests.
(d) None of the UK Subsidiaries has any
material actual or contingent liabilities in respect of
any freehold or leasehold land or buildings other than
those properties specified in Schedule 4.13(i), whether
as present or former freeholder or leaseholder or surety
or otherwise.
Section 4.13 List of Properties, Contracts
and Other Data. Annexed hereto as Schedule 4.13 is a
list setting forth the following:
(i) all leases of real property and all
material leases of personal property to which the
Company or any of its Subsidiaries is a party,
either as lessee or lessor;
(ii) all collective bargaining agree-
ments, employment and consulting agreements, execu-
tive compensation plans, bonus plans, deferred
compensation agreements, employee pension plans or
retirement plans, employee profit sharing plans,
employee stock purchase and stock option plans,
group life insurance, hospitalization insurance or
other similar plans or arrangements providing for
benefits to directors, officers or employees of, or
independent contractors or other agents for, the
Company or any of its Subsidiaries;
(iii) all Contracts to which the Company
or any of its Subsidiaries is a party, or to which
it or any of its or their respective assets or
properties are subject and which are not specifical-
ly referred to in clause (i) or (ii) above and which
(A) is a Contract or group of related Contracts
which exceeds $50,000 per annum in amount, (B)
contains warranties by the Company or such Subsid-
iary in excess of those customary in its business or
(C) cannot be performed in the normal course within
180 days after the Effective Time or canceled within
such period by the Company or such Subsidiary, as
the case may be, or any assignee, without breach or
greater than nominal penalty;
(iv) the names and current salaries (as
of January 1, 1996) and bonuses paid or declared in
the last twelve months of all officers and employees
of the Company and its Subsidiaries which were
$50,000 or more (broken down by desk); and
(v) all licenses, registrations, quali-
fications, permits, franchises and other authoriza-
tions held or required to be held by or issued to
the Company or any of its Subsidiaries in connection
with ownership of its or their respective assets and
properties or the conduct of its or their respective
business by any Governmental Entity or pursuant to
any Applicable Law (as hereinafter defined), other
than any of the same which (i) are not, in the
aggregate, material to the Company and its Subsid-
iaries, taken as a whole, and (ii) do not relate to
regulation of the business activities of the Company
or any of its Subsidiaries.
True and complete copies of all documents
and complete descriptions of all oral contracts (if any)
referred to in Schedule 4.13 have been provided or made
available to FSAC. Except as set forth in Schedule 4.13,
all material provisions of the Contracts referred to in
Schedule 4.13 are valid and enforceable obligations of
each of the Company and its Subsidiaries and, to the
knowledge of the Company, of the other parties thereto.
Except as set forth in Schedule 4.13, neither the Company
nor any of its Subsidiaries has been notified in writing
of any claim that any Contract referred to in Schedule
4.13 is not valid and enforceable in accordance with its
terms for the periods stated therein, or that there is
under any such Contract any existing default or event of
default or event which with notice or lapse of time or
both would constitute such a default, other than defaults
which would not have a Company Material Adverse Effect.
Section 4.14 Intellectual Property; Trade
Secrets.
(a) Except as set forth in Schedule
4.14(a), the Company and its Subsidiaries are the sole
and exclusive owners of all patents, patent applications,
patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, services marks, trade
secrets, registrations for and applications for registra-
tion of trademarks, service marks and copyrights, tech-
nology and know-how, rights in Computer Software (as
hereinafter defined) and other proprietary rights and
information and all technical and user manuals and docu-
mentation made or used in connection with any of the
foregoing (collectively, the "Intellectual Property")
used or held for use in connection with the businesses of
the Company or any of its Subsidiaries as currently
conducted, free and clear of all Liens.
(b) Schedule 4.14(b) sets forth a com-
plete and accurate list of (i) all grants, registrations
and applications for Intellectual Property, (ii) all
proprietary Computer Software owned by the Company or any
of its Subsidiaries, and (iii) all material non-propri-
etary Computer Software included in the Intellectual
Property. The Intellectual Property set forth in Sched-
ule 4.14(b)(i) and (ii), and to the Company's knowledge
in Schedule 4.14(b)(iii), is valid, subsisting, in proper
form and enforceable, and, to the extent that any of the
same is registered under Applicable Law, such registra-
tion has been duly maintained, including the submission
of all necessary filings and fees in accordance with the
legal and administrative requirements of the appropriate
jurisdictions, and no application or registration there-
for is the subject of any legal or governmental proceed-
ing before any registration authority in any jurisdic-
tion.
(c) The Company and each of its Subsid-
iaries owns or has the right to use all of the Intellec-
tual Property used by it or held for use by it in connec-
tion with its business. To the knowledge of the Company,
there are no conflicts with or infringements of any
Intellectual Property by any third party. The conduct of
the businesses of the Company and its Subsidiaries as
currently conducted does not conflict with or infringe in
any way any proprietary right of any third party, which
conflict or infringement would or is reasonably likely to
have a Company Material Adverse Effect or restrict in any
material fashion the current or currently proposed con-
duct of such businesses, and there is no claim, suit,
action or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its
Subsidiaries (i) alleging any such conflict or infringe-
ment with any third party's proprietary rights or (ii)
challenging the ownership, use, validity or enforceabili-
ty of any of the Intellectual Property.
(d) The Computer Software used in the
conduct of the business of the Company or any of its
Subsidiaries is either: (i) owned by the Company or such
Subsidiary of the Company, as the case may be, as the
result of internal development by an employee of the
Company or such Subsidiary of the Company; (ii) developed
on behalf of the Company or any of its Subsidiaries by a
consultant or contractor and all ownership rights therein
have been assigned or otherwise transferred to or vested
in the Company or such Subsidiary of the Company, as the
case may be; or (iii) licensed or acquired from a third
party pursuant to a written license, assignment, or other
Contract which is in full force and effect and of which
neither the Company nor any of its Subsidiaries have been
in material breach. Except as set forth in Schedule
4.14(d), (x) unless party to a confidential relationship,
no third party has had access to any of the source code
for any of the proprietary Computer Software and (y) no
act has been done or omitted to be done by the Company or
any of its Subsidiaries to impair or dedicate to the
public or entitle any Governmental Entity to hold aban-
doned any of the Computer Software.
(e) For purposes of this Agreement, the
term "Computer Software" shall mean (i) any and all
computer programs consisting of sets of statements and
instructions to be used directly or indirectly in comput-
er software or firmware, (ii) databases and compilations,
including without limitation any and all data and collec-
tions of data, whether machine readable or otherwise,
(iii) all versions of the foregoing (x) including without
limitation all screen displays and designs thereof, and
all component modules of source code or object code or
natural language code therefor, and (y) whether recorded
on papers, magnetic media or other electronic or non-
electronic device, (iv) all descriptions, flow-charts and
other work product used to design, plan, organize and
develop any of the foregoing, and (v) all documentation,
including, without limitation, all technical and user
manuals and training materials, relating to the forego-
ing.
(f) (i) No third party has claimed or
notified the Company or any of its Subsidiaries that any
person employed by or otherwise affiliated with the
Company or any of its Subsidiaries has, in respect of his
or her activities to date, violated any of the terms or
conditions of his or her employment contract with any
third party, or disclosed or utilized any trade secrets
or proprietary information or documentation of any third
party, or interfered in the employment relationship
between any third party and any of its employees, and
(ii) to the knowledge of the Company, no person employed
by or otherwise affiliated with the Company or its Sub-
sidiaries has employed any trade secrets or any informa-
tion or documentation proprietary to any former employer,
or violated any confidential relationship which such
person may have had with any third party, in connection
with the business of, or development or sale of any
products of, the Company or any of its Subsidiaries.
Section 4.15 Compliance with Applicable Law.
(a) The business and activities of the
Company and each of its Subsidiaries have been and are
being conducted in compliance with all provisions of all
applicable laws, statutes, ordinances, rules, regula-
tions, judgments, decrees or orders of any Governmental
Entity ("Applicable Law"), except for violations or
possible violations of laws, statutes, ordinances, rules
or regulations which do not have and would not have a
Company Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any written or, to
the knowledge of the Company, oral notice of any alleged
violations of any of the foregoing. Except for routine
supervisory investigations and reviews (none of which has
had or is reasonably expected to have a Company Material
Adverse Effect), to the knowledge of the Company, no
investigation or review by any Governmental Entity with
respect to the Company or its Subsidiaries is pending or
threatened and no Governmental Entity has indicated an
intention to conduct the same.
(b) Each of the Company and its Subsid-
iaries holds all licenses, permits, franchises and other
governmental authorizations necessary to the ownership of
its properties or the current or proposed conduct of its
business ("Company Permits"), and all such Company Per-
mits will remain in full force and effect immediately
following the Effective Time and will not in any way be
affected by, or terminate or lapse by reason of, the
consummation of the transactions contemplated by this
Agreement or the Related Agreements. No action or pro-
ceeding is pending or, to the Company's knowledge,
threatened, and to the Company's knowledge, no fact
exists or event has occurred, in any case, that has a
reasonable possibility of resulting in a revocation, non-
renewal, termination, suspension or other material im-
pairment of any material Company Permits.
(c) Without limiting the generality of
the representations and warranties made in Sections
4.15(a) and (b) above:
(i) Euro Brokers Maxcor, Inc. ("EBMI")
is duly registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and is a member in good standing of
the NASD, and the Form BD filed by EBMI with the
Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act complies as to form
with the requirements of the Exchange Act and the
rules and regulations of the SEC thereunder, is in
full force and effect and does not contain an untrue
statement of material fact or omit to state a mate-
rial fact necessary to make the statements therein
not misleading. EBMI is in compliance with all
Applicable Law in connection with its acting as a
broker-dealer and as a member of any self-regulatory
organization, including, without limitation, the net
capital rules set forth in Rule 15c3-1 promulgated
under the Exchange Act, the reserve requirements of
Rule 15c3-3 promulgated under the Exchange Act, the
margin rules promulgated by the Federal Reserve
Board under Section 8 of the Exchange Act, the
recordkeeping and reporting requirements relating to
broker-dealer trading systems set forth in Rule 17a-
23 promulgated under the Exchange Act, and the rules
and regulations promulgated pursuant to Sections
15(b)(3), (4), (6) and Section 15(c) of the Exchange
Act.
(ii) EBMI is a duly registered futures
commission merchant member under the Commodities
Exchange Act, is a member in good standing of the
National Futures Association (the "NFA"), and is a
member in good standing of the New York Cotton
Exchange, and the Form 7-R filed by EBMI with the
NFA complies as to form with the requirements of the
NFA, is in full force and effect and does not con-
tain an untrue statement of material fact or omit to
state a material fact necessary to make the state-
ments therein not misleading.
(iii) (u) Euro Brokers Financial Services
Limited ("EBFSL") is a member of the Securities and
Futures Authority Limited (the "SFA"), and is in
compliance, and has at all times complied, with the
rules of the SFA and (while they were in force) the
rules of The Securities Association ("TSA"), and
with the Financial Services Act 1986 (the "FSA") and
the regulations made under the FSA, other than any
such non-compliance which would not have a Company
Material Adverse Effect, (v) EBFSL is not and has
not been subject to any exercise of monitoring,
intervention or disciplinary powers by the TSA or
the SFA (other than any regular monitoring visits by
the TSA or the SFA), (w) all returns, documents and
other information which ought to be provided by
EBFSL to the TSA or the SFA in accordance with TSA
and SFA's rules have been so provided in a form
which was complete and accurate in all material
respects and within the time limits prescribed,
other than any such nonprovision which would not
have a Company Material Adverse Effect, (x) no
notice or advice has been received from the SFA and,
to the knowledge of the Company, no circumstances
exist which would lead to any alteration in the way
EBFSL carries on its business, restrict the same in
any way, or lead to expulsion from membership of SFA
or the imposition of any restrictions or conditions
or other requirements by the SFA, (y) EBFSL does not
and has not appointed any appointed representatives
as defined in Section 44 of the FSA and (z) no
complaints have been made to EBFSL or to any regula-
tory authority to which EBFSL is subject by any
EBFSL's customers or counterparties, and there are
no matters currently in existence which would be
likely to give rise to any such complaint, other
than any of the same which would not have a Material
Adverse Effect.
(iv) (t) Euro Brokers International
Limited ("EBIL") is included in the list maintained
by the Bank of England (the "Bank") for the purposes
of Section 43 of the FSA, (u) since the commencement
of Section 3 of the FSA, EBIL has not carried on any
investment business (as defined in the FSA) other
than transactions to which Schedule 5 of the FSA
applies or things done for the purposes of such
transactions, (v) EBIL is in compliance, and has at
all times complied, with the requirements published
in the Bank paper dated April 1988 entitled "The
regulations of the wholesale markets in sterling,
foreign exchange and bullion" and in the Bank Paper
dated December 1995 entitled "The regulation of the
wholesale cash and OTC derivatives markets (in
sterling, foreign currency and bullion)(together,
the "Grey Paper"), and the paper published by the
Bank entitled "The London Code of Conduct" as in
force from time to time, other than any such non-
compliance which would not have a Company Material
Adverse Effect, (w) all returns, documents and other
information which ought to be provided by EBIL to
the Bank in accordance with the Grey Paper or the
London Code of Conduct have been so provided in a
form which was complete and accurate in all material
respects and within the time limits prescribed,
other than any such nonprovision which would not
have a Company Material Adverse Effect, (x) no
notice or advice has been received from the Bank,
and to the knowledge of the Company, no circumstanc-
es exist which would lead to any alterations in the
way EBIL carries on its business, restrict the same
in any way or lead to removal from the list main-
tained by the Bank for the purposes of Section 43 of
the FSA or the imposition of any restrictions or
conditions or other requirements by the Bank, (y) no
notice or advice has been received from the Bank
that the Bank has not at any time been, or is not,
satisfied that the businesses of EBIL have been and
are being carried on in compliance with the Grey
Paper and the London Code of Conduct and that EBIL
has satisfied and satisfies the conditions imposed
by the Bank for admission to the list maintained by
the Bank for the purposes of Section 43 of the FSA
and (z) no complaints have been made to EBIL or to
any Governmental Entity to which EBIL is subject by
any of the respective counterparties or customers of
EBIL, and there are no matters currently in exis-
tence which would be likely to give rise to any such
complaint, other than any of the same which would
not have a Company Material Adverse Effect.
(v) Yagi Euro (Hong Kong) Ltd. is a
member of good standing of The Hong Kong Foreign
Exchange and Deposit Brokers Association ("HKFE"),
and is in compliance, and has at all times complied
with the rules and regulations of the HKFE, other
than any such non-compliance which would not have a
Company Material Adverse Effect. The business and
operations of Yagi Euro (Hong Kong) Ltd. do not
require it to comply with Section 48 of the Hong
Kong Securities Ordinance.
(vi) Euro Brokers Canada Limited
("EBCL") is duly registered as a limited market
dealer under the Securities Act (Ontario) and the
Commodity Futures Act (Ontario) (the "Ontario Acts")
and is a member in good standing of the Investment
Dealers Association of Canada, and all forms filed
by EBCL with the Ontario Securities Commission
pursuant to the Ontario Acts comply as to form with
the requirements of the Ontario Acts and the rules
and regulations of the Ontario Securities Commission
thereunder, are in full force and effect and do not
contain an untrue statement of material fact or omit
to state a material fact necessary to make the
statements therein not misleading.
(vii) EBCL is duly registered as an in-
ter-dealer bond broker under the by-laws and regula-
tions for the Investment Dealers Association of
Canada ("IDAC") and is a member in good standing,
and is in compliance, and has at all times complied,
with the by-laws and regulations of IDAC, other than
any such non-compliance which would not have a
Company Material Adverse Effect.
(viii) Euro Brokers Inc. is not required
to be registered as a broker-dealer under the Ex-
change Act, nor is it required to comply with Sec-
tion 48 of the Hong Kong Securities Ordinance.
(ix) The operations of Euro Brokers
Tokyo, Inc. do not bring it within the control of
the Bank of Japan, Ministry of Finance of Japan or
any other Governmental Entity in Japan.
(d) There are no pending or, to the
knowledge of the Company, proposed laws, statutes, ordi-
nances, rules or regulations of any Governmental Entity
relating to any of the businesses of the Company and its
Subsidiaries that, if enacted, would or is reasonably
likely to have a Company Material Adverse Effect.
Section 4.16 Information in Disclosure Docu-
ments and Registration Statement. None of the informa-
tion to be supplied by the Company or any of its Subsid-
iaries for inclusion in (i) the Registration Statement to
be filed with the SEC by FSAC on Form S-4 under the
Exchange Act for the purpose of registering the shares of
Merger Stock, the Merger Warrants and the shares of FSAC
Common Stock issuable upon exercise of the Merger War-
rants (the "Warrant Shares")(the "Registration State-
ment") or (ii) the joint or separate proxy statements to
be distributed in connection with FSAC's and the
Company's meetings of stockholders to vote upon this
Agreement (the "Proxy Statements"), will, in the case of
the Registration Statement, at the time it becomes effec-
tive and at the Effective Time, or, in the case of the
Proxy Statements or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy State-
ments and any amendments or supplements thereto, and at
the time of the meeting of stockholders of the Company to
be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any materi-
al fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 4.17 Employee Benefit Plans; ERISA.
(a) Schedule 4.13(ii) hereto sets forth a
true and complete list of each employee benefit plan,
arrangement or agreement that is maintained (the "Company
Plans") by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), which
together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The Company does not have any under-
standings or agreements (oral or written) for the payment
of bonuses or other contingent compensation to any of the
directors, officers or employees of it or any of its
Subsidiaries, which bonuses or other compensation have
not been paid or accrued for on the Company's Financial
Statements (or will be accrued for on the Company's
Closing Balance Sheet).
(b) Each of the Company Plans that is
subject to ERISA is in compliance with ERISA; each of the
Company Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified; no
Company Plan has an accumulated or waived funding defi-
ciency within the meaning of Section 412 of the Code;
neither the Company nor an ERISA Affiliate has incurred,
directly or indirectly, any material liability (including
any material contingent liability) pursuant to Title IV
of ERISA; no proceedings have been instituted to termi-
nate any Company Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in
Section 4043(b) of ERISA, has occurred with respect to
any Company Plan; neither the Company nor any ERISA
Affiliate has any announced plan or legally binding
commitment to create any additional Company Plans or to
amend or modify any existing Company Plans; and no condi-
tion exists that presents a material risk to the Company
or an ERISA Affiliate of incurring a liability pursuant
to Title IV of ERISA.
(c) The current value of the assets of
each of the Company Plans that is subject to Title IV of
ERISA, based upon the actuarial assumptions (to the
extent reasonable) presently used by the Company Plans,
exceeds the present value of the accrued benefits under
each such Company Plan; no Company Plan is a
multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA) and no Company Plan is a multiple
employer plan as defined in Section 413 of the Code; and
all contributions or other amounts payable by the Company
as of the Effective Time with respect to each Company
Plan in respect of current or prior plan years have been
either paid or accrued on the balance sheet of the Compa-
ny. There are no material pending, threatened or, to the
knowledge of the Company, anticipated claims (other than
routine claims for benefits) by, on behalf of or against
any of the Company Plans or any trusts related thereto.
(d) Neither the Company nor any ERISA
Affiliate, nor any Company Plan, nor any trust created
thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the
Company or any ERISA Affiliate, any Company Plan, any
such trust, or any trustee or administrator thereof, or
any party dealing with any Company Plan or any such trust
could be subject to either a material civil penalty
assessed pursuant to section 409 or 502(i) of ERISA or a
material tax imposed pursuant to section 4975 or 4976 of
the Code. No amounts payable under the Company Plans
will, individually or in the aggregate, fail to be de-
ductible for federal income tax purposes by virtue of
section 280G of the Code.
(e) Except (i) for coverage mandated by
Applicable Law, (ii) as provided in any insurance policy
listed in Schedule 4.20, (iii) any employment agreement
listed in Schedule 4.13(ii) or (iv) as expressly contem-
plated by this Agreement or the Employment Agreements,
neither the Company nor any ERISA Affiliate has committed
itself, orally or in writing, (x) to provide or cause to
be provided to any person any payments or provision of
any "welfare" or "pension" benefits (as defined in Sec-
tions 3(1) and 3(2) of ERISA) in addition to, or in lieu
of, those payments or benefits set forth under any Compa-
ny Plan, (y) to continue the payment of, or accelerate
the payment of, benefits under any Company Plan, except
as expressly set forth thereunder, or (z) to provide or
cause to be provided any postemployment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit to any person (including with-
out limitation any former current employee) except for
death benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA and benefits in
the nature of severance/redundancy pay.
(f) To the knowledge of the Company,
there is no activity involving any employees of the
Company or its Subsidiaries seeking to certify a collec-
tive bargaining unit or engaging in any other organiza-
tional activity.
Section 4.18 Environmental Laws and Regulations.
(a) Except as set forth in Schedule
4.18(a): (i) the Company and its Subsidiaries are in
material compliance with, and there are no outstanding
allegations by any person or entity that the Company or
its Subsidiaries has not been in compliance with, all
applicable laws, rules, regulations, common law, ordi-
nances, decrees, orders or other binding legal require-
ments relating to pollution (including the treatment,
storage and disposal of wastes and the remediation of
releases and threatened releases of materials), the
preservation of the environment, and the exposure to
materials in the environment or work place ("Environmen-
tal Laws") and (ii) the Company and its Subsidiaries
currently hold all permits, licenses, registrations and
other governmental authorizations (including exemptions,
waivers, and the like) and financial assurance required
under Environmental Laws for the Company and its Subsid-
iaries to operate their businesses as currently conduct-
ed.
(b) Except as set forth in Schedule
4.18(b), (i) to the knowledge of the Company there is no
friable asbestos-containing material in or on any real
property currently owned, leased or operated by the
Company or its Subsidiaries and (ii) there are and to the
knowledge of the Company there have been no underground
storage tanks (whether or not required to be registered
under any Applicable Law), dumps, landfills, lagoons,
surface impoundments, injection wells or other land
disposal units in or on any property currently owned,
leased or operated by the Company or its Subsidiaries.
(c) Except as set forth in Schedule
4.18(c), (i) neither the Company nor its Subsidiaries has
received (x) any written communication from any person
stating or alleging that any of them may be a potentially
responsible party under any Environmental Law (including,
without limitation, the Federal Comprehensive Environmen-
tal Response, Compensation, and Liability Act of 1980, as
amended) with respect to any actual or alleged environ-
mental contamination or (y) any request for information
under any Environmental Law from any Governmental Entity
with respect to any actual or alleged material environ-
mental contamination; and (ii) none of the Company, its
Subsidiaries or any Governmental Entity is conducting or
has conducted (or, to the knowledge of the Company, is
threatening to conduct) any environmental remediation or
investigation which could result in a material liability
of the Company or its Subsidiaries under any Environmen-
tal Law.
Section 4.19 Condition of Assets. All materi-
al tangible personal property, fixtures and equipment
comprising the assets of the Company and its Subsidiaries
are in good state of repair (ordinary wear and tear
excepted) and operating condition and are sufficient and
adequate to conduct the business of the Company and its
Subsidiaries on the date hereof.
Section 4.20 Insurance. All policies of fire,
liability, workers' compensation, and other forms of
insurance for events or occurrences arising or taking
place in the case of occurrence type insurance, and for
claims made and/or suits commenced in the case of claims-
made type insurance (each an "Insurance Policy"), and
providing insurance coverage to or for the Company or its
Subsidiaries between the date of this Agreement and the
Effective Time, are listed in Schedule 4.20 hereto and,
except as set forth in said Schedule 4.20, all premiums
with respect thereto covering all periods up to and
including any date as of which this representation is
being made have been paid or accrued, and no notice of
cancellation or termination has been received with re-
spect to any such Insurance Policy. All such Insurance
Policies are in full force and effect and provide insur-
ance, including without limitation liability insurance,
in such amounts and against such risks as is customary
for companies engaged in similar businesses to the Compa-
ny and its Subsidiaries to protect the employees, proper-
ties, assets, businesses and operations of the Company
and its Subsidiaries. All such Insurance Policies will
remain in full force and effect immediately following the
Effective Time and will not in any way be affected by, or
terminate or lapse by reason of, the consummation of the
transactions contemplated hereby or by any of the Related
Agreements.
Section 4.21 Absence of Certain Business
Practices. To the knowledge of the Company, neither the
Company nor any of its Subsidiaries, nor any officer,
director, employee or agent thereof, nor any other person
or entity acting on behalf of either the Company or any
of its Subsidiaries, acting alone or together, has (i)
received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic
benefits, regardless of their nature or type, from any
customer, supplier, governmental employee or other person
or entity with whom either the Company or any of its
Subsidiaries has done business directly or indirectly, or
(ii) directly or indirectly, given or agreed to give any
gift or similar benefit to any customer, supplier, gov-
ernmental employee or other person or entity who is or
may be in a position to help or hinder the business (or
assist either the Company or any of its Subsidiaries in
connection with any actual or proposed transaction),
which in the case of either clause (i) or (ii) above, (x)
would reasonably be expected to subject either the Compa-
ny or any of its Subsidiaries to any damage or penalty in
any civil, criminal or governmental litigation or pro-
ceeding, (y) if not given in the past, would reasonably
be expected to have had a Company Material Adverse Effect
or (z) if not continued in the future, would reasonably
be expected to have a Company Material Adverse Effect.
Section 4.22 Vote Required. The affirmative
vote of the holders of a majority of the outstanding
shares of capital stock of the Company entitled to vote
thereon, consisting of Company Common Stock, is the only
vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger.
The Board of Directors of the Company (at a meeting duly
called and held) has (i) approved this Agreement, the
Security Transfer Agreement, the Majority Stockholder
Agreement, the Employment Agreements, the Escrow Agree-
ment and all other agreements to be executed by the
Company pursuant to this Agreement, (ii) determined that
the transactions contemplated hereby and thereby are fair
to and in the best interests of the holders of Company
Common Stock and (iii) determined to recommend this
Agreement, the Merger and the other transactions contem-
plated hereby and thereby to such holders for approval
and adoption. Such approval is sufficient to remove (for
purposes of the exchange of shares provided for in the
Merger only) the restrictions on voluntary or involuntary
transfer that may be applicable to any shares of Company
Stock pledged to the Company pursuant to various Sub-
scription and Pledge Agreements entered into in connec-
tion with loans made by the Company to finance employee
purchases of shares of Company Stock.
Section 4.23 DGCL Section 203. Prior to the
date hereof, the Board of Directors of the Company has
approved this Agreement, the Security Transfer Agreement,
the Majority Stockholder Agreement, the Employment Agree-
ments, the Escrow Agreement and all other agreements to
be executed by the Company pursuant to this Agreement,
and the Merger and the other transactions contemplated
hereby and thereby, and such approval is sufficient to
render inapplicable to the Merger and any of such other
transactions the provisions of Section 203 of the DGCL.
Section 4.24 Affiliate Transactions. Except
as set forth in Schedule 4.24 and other than such advanc-
es, loans and payments between the Company and its Sub-
sidiaries made in the ordinary course of business and
consistent with past practices, neither the Company nor
any Subsidiary owes any amount or has any contract or
commitment or obligation that will survive the Effective
Time, to or with any affiliate of the Company or any of
its Subsidiaries, or any of the stockholders thereof, any
officer or director of the Company or any of its Subsid-
iaries, or any affiliate, associate or family member
thereof, and none of such persons owes any amount of
money in excess of $10,000 to the Company or any of its
Subsidiaries. Except as set forth in Schedule 4.24, none
of the persons referred to in the first sentence of this
Section 4.24 has any material interest in any significant
property, real or personal, tangible or intangible, of
the Company or any of its Subsidiaries.
Section 4.25 Brokers. No broker, finder or
financial advisor has acted on behalf of the Company in
connection with this Agreement, and there are no broker-
age, finder's or other fees or commissions payable in
connection with the Merger or the transactions contem-
plated by this Agreement based upon any arrangements made
by or on behalf of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FSAC
FSAC represents and warrants to the Company as
follows:
Section 5.1 Organization. FSAC is a corpora-
tion duly organized, validly existing and in good stand-
ing under the laws of the State of Delaware and has the
corporate power to carry on its business as it is now
being conducted and is proposed to be conducted. FSAC is
duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or
the nature of its activities make such qualification
necessary, except where the failure to be so qualified
will not have a material adverse effect, individually or
in the aggregate, on the financial condition, results of
operations, business, assets, liabilities, prospects or
properties of FSAC and its Subsidiaries taken as a whole,
or the ability of FSAC to consummate the Merger and the
other transactions contemplated by this Agreement (an
"FSAC Material Adverse Effect"). Sub is a corporation
duly organized, validly existing and in good standing
under the laws of the State of Delaware. Sub has not
engaged in any business (other than in connection with
this Agreement and the transactions contemplated hereby)
since the date of its incorporation. Except for Sub,
there are no other Subsidiaries of FSAC.
Section 5.2 Capitalization.
(a) The authorized capital stock of FSAC
(prior to the Charter Amendments) consists of 14,000,000
shares of FSAC Common Stock and 1,000,000 shares of
Preferred Stock, par value $.001 per share ("FSAC Pre-
ferred Stock"), of FSAC. As of March 5, 1996, (i)
4,416,666 shares of FSAC Common Stock were issued and
outstanding and FSAC Warrants to purchase 7,566,666
shares of FSAC Common Stock (including Bridge Warrants,
as defined in the 1994 Prospectus, to acquire 400,000
shares of FSAC Common Stock) were issued and outstanding,
and (ii) no shares of FSAC Preferred Stock were issued
and outstanding. A single share of FSAC Common Stock is
sometimes bundled with two FSAC Warrants as a Unit.
Subject to approval and adoption of the Charter Amend-
ments, all of the shares of FSAC Common Stock, all of the
Merger Warrants issuable in exchange for shares of Compa-
ny Stock at the Effective Time in accordance with this
Agreement and all Warrant Shares will be, when so issued,
duly authorized, validly issued, fully paid (subject to
the payment of the exercise price with respect to the
Warrant Shares) and nonassessable.
(b) The authorized capital stock of Sub
consists of 1,000 shares of Sub Common Stock, of which
100 shares, as of the date hereof, were issued and out-
standing. All of such outstanding shares are owned by
FSAC, and are validly issued, fully paid and nonassess-
able.
(c) Except as set forth in Schedule
5.2(c) or in the 1994 Prospectus, and except for the
transactions contemplated by this Agreement (including
the making of the Exchange Offer contemplated by (and as
defined in) Section 7.12 and the adoption of the FSAC
Option Plan contemplated by (and as defined in) Section
7.8), (i) there is no outstanding right, subscription,
warrant, call, unsatisfied preemptive right, option or
other agreement or arrangement of any kind to purchase or
otherwise to receive from FSAC or Sub any of the autho-
rized but unissued or treasury shares of the capital
stock or any other security of FSAC or Sub, (ii) there is
no outstanding security of any kind convertible into or
exchangeable for such capital stock, (iii) there is no
obligation (contingent or otherwise) of FSAC to purchase,
redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof and (iv)
there is no voting trust or other agreement or under-
standing to which FSAC or Sub is a party or is bound with
respect to the voting of the capital stock of FSAC or
Sub.
Section 5.3 Authority Relative to this Agree-
ment. Each of FSAC and Sub has the requisite corporate
power and authority to execute and deliver this Agreement
and all Related Agreements and other agreements to be
executed by it pursuant to this Agreement and to consum-
mate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and all
Related Agreements and other agreements to be executed by
FSAC or Sub pursuant to this Agreement, and the consumma-
tion by each of FSAC and Sub of the transactions contem-
plated on its part hereby and thereby, have been duly
authorized (i) in the case of FSAC, by FSAC's Board of
Directors and, except for the approvals of FSAC's stock-
holders to be sought at the stockholders' meeting contem-
plated by Section 7.4(b) with respect to this Agreement
and the Merger (including not having 20% or more in
interest of the Public Stockholders exercise their Con-
version Rights) and the Charter Amendments, no other
corporate proceedings on the part of FSAC are necessary
to authorize this Agreement or any Related Agreement or
other agreement to be executed by FSAC pursuant to this
Agreement or for FSAC to consummate the transactions
contemplated hereby or thereby and (ii) in the case of
Sub, by Sub's Board of Directors and by FSAC, as the sole
stockholder of Sub, and no other corporate proceedings on
the part of Sub are necessary to authorize this Agreement
or any Related Agreement or other agreement to be execut-
ed by Sub pursuant to this Agreement or for Sub to con-
summate the transactions contemplated hereby or thereby.
Each of this Agreement and all Related Agreements and
other agreements to be executed by FSAC pursuant to this
Agreement has been duly and validly executed and deliv-
ered by FSAC and constitutes a valid and binding agree-
ment of FSAC, enforceable against FSAC in accordance with
its terms. Each of this Agreement and all Related Agree-
ments and other agreements to be executed by Sub pursuant
to this Agreement has been duly and validly executed and
delivered by Sub and constitutes a valid and binding
agreement of Sub, enforceable against Sub in accordance
with its terms.
Section 5.4 Consents; No Violations. Neither
the execution, delivery and performance of this Agreement
nor any Related Agreement or other agreement to be exe-
cuted by FSAC or Sub pursuant to this Agreement by FSAC
or Sub, nor the consummation by FSAC and Sub of the
transactions contemplated hereby or thereby, will (i)
subject to approval and adoption of this Agreement, the
Merger and the Charter Amendment by FSAC stockholders
(including not having 20% or more in interest of the
Public Stockholders exercise their Conversion Rights),
conflict with or result in any breach of any provisions
of the Certificate of Incorporation or By-Laws of FSAC or
of Sub, (ii) except as set forth in Schedule 5.4, result
in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of a
Lien on any property or asset of FSAC or Sub pursuant to,
any of the terms, conditions or provisions of any Con-
tract to which FSAC or Sub is a party or by which either
of them or any of their properties or assets may be
bound, (iii) except as set forth in Schedule 5.4, consti-
tute a change of control under, or require the consent
from or the giving of notice to a third party pursuant
to, the terms, conditions or provisions of any such
Contract, or (iv) violate any law, order, writ, injunc-
tion, decree, statute, rule or regulation of any Govern-
mental Entity applicable to FSAC, Sub or any of their
properties or assets.
Section 5.5 Reports and Financial Statements;
Undisclosed Liabilities.
(a) FSAC has furnished or made available
to the Company true and complete copies of all reports
filed by FSAC with the SEC pursuant to the Exchange Act
or the Securities Act of 1933, as amended (the "Securi-
ties Act") since January 1, 1995 (collectively, the "FSAC
SEC Reports"). Such FSAC SEC Reports, as of their re-
spective dates, complied in all material respects with
the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and none of such SEC
Reports contained any untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading. The financial statements of FSAC includ-
ed in the FSAC SEC Reports, including, without limita-
tion, the FSAC Balance Sheet and the unaudited balance
sheet of FSAC as of September 30, 1995 (the "FSAC Finan-
cial Statements"), have been prepared in accordance with
GAAP consistently applied throughout the periods indicat-
ed (except as otherwise noted therein or, in the case of
unaudited statements, as permitted by Form 10-Q of the
SEC) and fairly present (subject, in the case of unaudit-
ed statements, to normal, recurring year-end adjustments
and any other adjustments described therein) the finan-
cial position of FSAC as at the dates thereof and the
results of operations and cash flows of FSAC for the
periods then ended. Since January 1, 1995, there has
been no change in any of the significant accounting
(including tax accounting) policies, practices or proce-
dures of FSAC.
(b) Except as reflected in the FSAC
Financial Statements or the notes thereto, neither FSAC
nor Sub had any material Liabilities as of the respective
dates of the balance sheets included in the FSAC Finan-
cial Statements. Since September 30, 1995, neither FSAC
nor Sub has incurred any material Liabilities, except for
(i) general and administrative expenses (in amounts
consistent with past such expenses), (ii) costs and
expenses incurred in connection with FSAC's purpose of
acquiring an operating business in the financial services
industry (including in connection with the transactions
contemplated by this Agreement), (iii) lease occupancy
costs, (iv) Delaware state franchise taxes, (v) amortiza-
tion of organization costs and (vi) federal, state and
local income taxes payable on FSAC's cash interest in-
come.
Section 5.6 Absence of Certain Changes;
Business of FSAC. Except as set forth in the FSAC SEC
Reports, since December 31, 1994, (i) FSAC has not con-
ducted any business or material operations other than in
connection with its organization and related financings,
its initial public offering, cash investment and Trust
Fund management and attempted acquisitions of an operat-
ing business in the financial services industry (includ-
ing the Company) and (ii) there has not been any fact,
event, circumstance or change affecting or relating to
FSAC or Sub which has had or would have an FSAC Material
Adverse Effect.
Section 5.7 Approvals. Except as set forth
in Schedule 5.7, no filing with, or a permit, authoriza-
tion, notification, consent or approval of, any Govern-
mental Entity is required or necessary for (i) the valid
execution, delivery and performance by FSAC or Sub of
this Agreement and all Related Agreements and other
agreements to be executed by FSAC or Sub pursuant to this
Agreement or (ii) the consummation by FSAC and Sub of the
transactions contemplated hereby or thereby.
Section 5.8 Litigation. There is no suit,
action, arbitration, investigation or proceeding pending
or, to the knowledge of FSAC, threatened against or
affecting FSAC or Sub, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity
against FSAC or Sub, which, in any such case will or is
reasonably likely to have an FSAC Material Adverse Ef-
fect. Nor, to the knowledge of FSAC, does there exist
any basis for any such action, suit, arbitration, inves-
tigation, proceeding, judgment, decree, injunction or
order.
Section 5.9 No Default. Except as set forth
in Schedule 5.9, neither FSAC nor Sub is in default or
violation (and no event has occurred which with notice or
the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (i) its
Certificate of Incorporation or By-Laws or (ii) any
Contract to which FSAC or Sub is a party or by which they
or any of their properties or assets may be bound, ex-
cept, in the case of clause (ii), for defaults or viola-
tions which would not have an FSAC Material Adverse
Effect.
Section 5.10 Taxes. FSAC has heretofore
delivered or will make available to the Company true,
correct and complete copies of the federal, state, local
and foreign income, franchise, sales and other Tax Re-
turns filed by FSAC for FSAC's year ended December 31,
1994, and FSAC was not required to file any Tax Returns
for any period ending prior to December 31, 1994. FSAC
has duly filed all material federal, state, local and
foreign income, franchise, sales and other Tax Returns
required to be filed by FSAC. All such Tax Returns are
true, correct and complete in all material respects, and
FSAC has duly paid all Taxes required to be paid in
respect of the periods covered by such returns and has
paid or made adequate provision for payment of all ac-
crued but unpaid Taxes anticipated in respect of all
periods since the periods covered by such Tax Returns.
All deficiencies assessed as a result of any examination
of Tax Returns of FSAC by federal, state, local or for-
eign tax authorities have been paid or reserved on FSAC
Financial Statements in accordance with GAAP consistently
applied, and true, correct and complete copies of all
revenue agent's reports, "30-day letters," or "90-day
letters" or similar statements proposing or asserting any
Tax deficiency against FSAC for any open year have been
heretofore delivered to the Company. FSAC has heretofore
delivered or will make available to the Company true,
correct and complete copies of all written tax-sharing
agreements and written descriptions of all such unwritten
agreement or arrangements to which FSAC is a party. No
issue has been raised during the past five years by any
federal, state, local or foreign taxing authority which,
if raised with regard to any other period not so exam-
ined, could reasonably be expected to result in a pro-
posed deficiency for any other period not so examined.
FSAC has not granted any extension or waiver of the
statutory period of limitations applicable to any claim
for Taxes. The federal income tax returns of FSAC have
not been examined by and settled with the Service. FSAC
is not a party to any agreement, contract or arrangement
that would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the
meaning of Section 280G of the Code; no consent has been
filed under Section 341(f) of the Code with respect to
FSAC; FSAC has not participated in, or cooperated with,
an international boycott within the meaning of Section
999 of the Code; and FSAC has not issued or assumed any
corporate acquisition indebtedness, as defined in Section
279(b) of the Code, or any obligations described in
Section 279(a)(2) of the Code. FSAC has complied (and
until the Effective Time will comply) in all material
respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (includ-
ing, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions
under any foreign laws) and has, within the time and in
the manner prescribed by law, withheld from employee
wages and paid over to the proper governmental authori-
ties all amounts required to be so withheld and paid over
under all applicable laws.
Section 5.11 Compliance with Applicable Law.
The business and activities of FSAC and Sub have been and
are being conducted in compliance with all provisions of
all Applicable Law, except for violations or possible
violations of laws, statutes, ordinances, rules or regu-
lations which do not have and are reasonably likely not
to have an FSAC Material Adverse Effect. FSAC has not
received any written or, to the knowledge of FSAC, oral
notice of any alleged violations of any of the foregoing.
To the knowledge of FSAC, no investigation or review by
any Governmental Entity with respect to FSAC is pending
or threatened and no Governmental Entity has indicated an
intention to conduct the same.
Section 5.12 Information in Disclosure Docu-
ments and Registration Statement. None of the informa-
tion to be supplied by FSAC or Sub for inclusion in (i)
the Registration Statement or (ii) the Proxy Statements
will, in the case of the Registration Statement, at the
time it becomes effective and at the Effective Time, or,
in the case of the Proxy Statements or any amendments
thereof or supplements thereto, at the time of the mail-
ing of the Proxy Statements and any amendments or supple-
ments thereto, and at the time of the meeting of stock-
holders of FSAC to be held in connection with the Merger,
contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy
Statements will comply as to form in all material re-
spects with the applicable provisions of the Securities
Act and the Exchange Act, and the rules and regulations
promulgated thereunder, except that no representation is
made by FSAC with respect to statements made therein
based on information supplied by the Company, any of its
Subsidiaries, WCAS or their respective representatives
for inclusion in either the Registration Statement or the
Proxy Statements or with respect to information concern-
ing the Company or any of its Subsidiaries, WCAS incorpo-
rated by reference in either the Registration Statement
or the Proxy Statements.
Section 5.13 Vote Required. The affirmative
vote of the holders of a majority of the outstanding
shares of FSAC Common Stock (provided, however, that less
than 20% in interest of the Public Stockholders exercise
their Conversion Rights) is the only vote of the holders
of any class or series of FSAC capital stock necessary to
approve the Merger, the issuance of shares of Merger
Stock and Merger Warrants pursuant thereto (and the
issuance of Warrant Shares pursuant to the exercise of
the Merger Warrants), and the Charter Amendments. The
affirmative vote of FSAC, as the sole stockholder of all
outstanding shares of Sub Common Stock, is the only vote
of the holders of any class or series of Sub capital
stock necessary to approve the Merger. The Board of
Directors of FSAC (at a meeting duly called and held) has
(i) approved this Agreement, the Escrow Agreement, the
Majority Stockholders' Agreement, the Security Transfer
Agreement, the Registration Rights Agreement and all
other agreements to be executed by FSAC pursuant to this
Agreement, (ii) determined that the transactions contem-
plated hereby and thereby are fair to and in the best
interests of the holders of FSAC Common Stock, (iii)
determined to recommend this Agreement, the Merger, the
Charter Amendments and the other transactions contemplat-
ed hereby and thereby to such holders, (iv) determined
that, as of February 28, 1996, the fair market value of
the Company and its Subsidiaries, based upon standards
generally accepted by the financial community, such as
earnings, potential sales, cash flow and book value, is
equal to or greater than 80% of the net assets of FSAC,
and (v) determined to cause FSAC, as the sole stockholder
of Sub, to approve and adopt this Agreement. The Board
of Directors of Sub (by unanimous written consent) has
approved this Agreement.
Section 5.14 List of Contracts. Except as set
forth on Schedule 5.14 and except for this Agreement and
the Related Agreements, neither FSAC nor Sub (i) is a
party to any Contract or group of related Contracts which
either exceed $50,000 per annum in amount or are other-
wise material to FSAC or Sub, contains warranties by FSAC
or Sub in excess of those customary in its business or
cannot be performed in the normal course within 180 days
after the Effective Time or cancelled within such period
by FSAC or Sub or any assignee, as the case may be,
without breach or greater than nominal penalty, (ii) is
or has been a party to any employment agreement or has
paid or declared any bonuses since their respective
inceptions except with respect to secretarial staff or
(iii) has any employee benefits plans.
Section 5.15 Funds. At the time required by
Section 3.8(a) for payment of the Estimated Aggregate
Cash Consideration to the Exchange Agent, FSAC will have
obtained the release from the Trust Fund of all funds
therein.
Section 5.16 Brokers. No broker, finder or
financial advisor has acted on behalf of FSAC or Sub in
connection with this Agreement, and there are no broker-
age, finder's or other fees or commissions payable in
connection with the Merger or the transactions contem-
plated by this Agreement (other than fees that may be
payable to GKN Securities Corp. in connection with the
Exchange Offer or exercise of FSAC Warrants) based upon
any arrangements made by or on behalf of FSAC or Sub.
Section 5.17 Affiliate Transactions. Except
as described in the 1994 Prospectus or as set forth in
Schedule 5.17, and except for the Employment Agreements,
neither FSAC nor Sub owes any material amount or has any
material contract or commitment or obligation that, in
either case, will survive the Effective Time, to or with
any affiliate of FSAC, any of the stockholders thereof,
any officer or director of FSAC or any affiliate, associ-
ate or family member thereof, and none of such persons
owes any material amount of money to FSAC or Sub. Except
as described in the 1994 Prospectus or as set forth in
Schedule 5.17, and except for the Employment Agreements
and their ownership of FSAC Common Stock and/or FSAC
Warrants, none of the persons referred to in the first
sentence of this Section 5.17 has any material interest
in any significant property, real or personal, tangible
or intangible, of FSAC or Sub.
Section 5.18 No Properties, Encumbrances,
Leasehold Interests or Insurance. Except for (i) the
funds in the Trust Fund, which currently are comprised of
a treasury bill maturing on April 25, 1996 in the amount
of $18,775,000, (ii) funds comprised of a treasury bill
maturing on April 25, 1996 in the amount of $1,012,000,
(iii) cash as of February 26, 1996 in the amount of
approximately $255,442, and (iv) as set forth in Schedule
5.17 or Schedule 5.18 hereto, neither FSAC nor Sub owns
directly or indirectly or has a leasehold interest in any
material properties or assets (real, personal and mixed,
tangible and intangible), and neither FSAC, nor Sub holds
any Insurance Policy.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Compa-
ny Pending the Merger. Prior to the Effective Time,
unless FSAC shall otherwise agree in writing, or except
as otherwise expressly contemplated by this Agreement:
(a) the Company shall conduct, and cause
each of its Subsidiaries to conduct, its business only in
the ordinary and usual course consistent with past prac-
tices and the Company shall use, and cause each of its
Subsidiaries to use, its reasonable best efforts to
preserve intact the present business organization, keep
available the services of its present officers and key
employees, and preserve the goodwill of those having
business relationships with it;
(b) the Company shall not, nor shall it
permit any of its Subsidiaries to, (i) amend its charter,
by-laws or other organizational documents, (ii) split,
combine or reclassify any shares of its outstanding
capital stock, (iii) declare, set aside or pay any divi-
dend or other distribution payable in cash, stock or
property (except with respect to dividends or other
distributions from any wholly-owned Subsidiary of the
Company to the Company or any other wholly-owned Subsid-
iary of the Company), or (iv) directly or indirectly
redeem or otherwise acquire any shares of its capital
stock or shares of the capital stock of any of its Sub-
sidiaries;
(c) the Company shall not, nor shall it
permit any of its Subsidiaries to, (i) authorize for
issuance, issue or sell or agree to issue or sell any
shares (including shares held in treasury) of, or rights
or securities of any kind to acquire or convertible into
any shares of, its capital stock or shares of the capital
stock of any of its Subsidiaries (whether through the
issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise); (ii)
merge or consolidate with another entity (except as
specifically described in paragraph B) of Schedule 4.7
hereto); (iii) acquire or purchase an equity interest in
or a substantial portion of the assets of another corpo-
ration, partnership or other business organization or
otherwise acquire any assets, or otherwise, except in the
ordinary and usual course of business and consistent with
past practices, enter into any material contract, commit-
ment or transaction; (iv) sell, lease, license, waive,
release, transfer, encumber, compromise or otherwise
dispose of any of its assets outside the ordinary and
usual course of business and consistent with past prac-
tices; (v) incur, assume, discharge or prepay any materi-
al Lien, any material indebtedness or any other material
Liabilities other than in the ordinary course of business
and consistent with past practices; (vi) assume, guaran-
tee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the
obligations of any other person other than a Subsidiary
of the Company in the ordinary course of business and
consistent with past practices; (vii) make any loans,
advances or capital contributions to, or investments in,
any other person, other than to a Subsidiary of the
Company or other than in the ordinary course of business
and consistent with past practice over the twelve-month
period immediately prior to the date hereof; (viii)
except after reasonable advance consultation with FSAC
(it being understood that approval by FSAC shall not be
required), authorize or make capital expenditures in
excess of $100,000 individually or $250,000 in the aggre-
gate; (ix) permit any insurance policy naming the Company
or any Subsidiary of the Company as a beneficiary or a
loss payee to be cancelled or terminated other than in
the ordinary course of business; or (x) enter into any
contract, agreement, commitment or arrangement providing
for a matter not permitted by clauses (i) through (ix)
above.
(d) the Company shall not, nor shall it
permit any of its Subsidiaries to, (i) amend (so as to
increase the benefits thereunder), adopt or enter into,
(except as may be required by Applicable Law) any Company
Plan or other arrangement for the current or future
benefit or welfare of any director, officer or current or
former employee; provided, however, that the Company
shall be permitted to enter into employment agreements in
the ordinary course of business and consistent with past
practices where such employment agreements do not include
any unusual or extraordinary provision with respect to
bonuses, options, pools, or other employment compensa-
tion; provided, further, that it is understood that the
Company will not enter into any such employment agreement
permitted by the preceding proviso without reasonable
advance consultation with FSAC (it being understood that
approval by FSAC shall not be required) if such employ-
ment agreement provides for an annual base salary equal
to or greater than $200,000; (ii) increase in any manner
the compensation or fringe benefits of, or pay or agree
to pay any bonus to, any director, officer or employee
(except in the ordinary course of business consistent
with past practices), or (iii) take any action to fund or
in any other way secure (except after reasonable advance
consultation with FSAC it being understood that FSAC
approval shall not be required) or to accelerate or
otherwise remove restrictions with respect to, the pay-
ment of compensation or benefits under any employee plan,
agreement, contract, arrangement or other Company Plan;
and
(e) the Company shall not, nor shall it
permit its Subsidiaries to, take any action with respect
to, or make any material change in, its accounting or tax
policies or procedures.
Section 6.2 Conduct of Business by FSAC
Pending the Merger. Prior to the Effective Time, unless
the Company shall otherwise agree in writing, or except
as otherwise expressly contemplated by this Agreement:
(a) FSAC shall not conduct any business,
incur any material liabilities or enter into any Con-
tracts, other than in each case in connection with cash
investments, Trust Fund management, general office admin-
istration, preparation for and consummation of the trans-
actions contemplated by this Agreement and the Related
Agreements and, provided that FSAC does not enter into
any material binding commitment with respect thereto, in
preparation for the post-Merger activities of FSAC and
its Subsidiaries;
(b) FSAC shall use its reasonable efforts
to preserve intact the present business organization, to
keep available the services of its present officers and
key employees, and preserve the goodwill of those having
business relationships with it;
(c) FSAC shall not (i) amend its Certifi-
cate of Incorporation (other than pursuant to the Charter
Amendments) or By-Laws; (ii) split, combine or reclassify
any shares of its outstanding capital stock; or (iii)
declare, set aside or pay any dividend or other distribu-
tion payable in cash, stock or property;
(d) FSAC shall not authorize for issu-
ance, issue or sell or agree to issue or sell any shares
of, or rights or securities of any kind to acquire or
convertible into any shares of, its capital stock (wheth-
er through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or other-
wise), except for (i) the issuance of shares of FSAC
Common Stock upon the exercise or exchange of FSAC War-
rants or Unit Purchase Options (as defined in the 1994
Prospectus) outstanding on the date of this Agreement
(including pursuant to the Unit Purchase Option Exchange
contemplated by Section 7.9) and (ii) any agreement,
pursuant to the Employment Agreements or otherwise, to
issue options to acquire FSAC Common Stock under the FSAC
Option Plan contemplated by Section 7.8; and
(e) neither FSAC nor Sub shall take any
action with respect to, or make any material change in,
its accounting or tax policies or procedures.
Section 6.3 Conduct of Business of Sub.
During the period from the date of this Agreement to the
Effective Time, Sub shall not engage in any activities of
any nature except as provided in or contemplated by this
Agreement or any of the Related Agreements.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of
the Company and FSAC shall (and shall cause its Subsid-
iaries and its and their respective officers, directors,
employees, auditors and agents to) afford to the other
and to the other's officers, employees, financial advi-
sors, legal counsel, accountants, consultants and other
representatives reasonable access during normal business
hours throughout the period prior to the Effective Time
to all of its books and records (other than attorney-
client privileged documents) and its properties, facili-
ties and personnel and, during such period, each shall
furnish promptly to the other a copy of each report,
schedule and other document filed or received by it
pursuant to the requirements of federal securities laws
or, in the case of the Company and its Subsidiaries,
pursuant to the rules or regulations of any self-regula-
tory organization, provided that no investigation pursu-
ant to this Section 7.1 shall affect any representations
or warranties made herein or the conditions to the obli-
gations of the respective parties to consummate the
Merger. The Company will also provide FSAC with copies
of its monthly unaudited financial statements promptly
after their preparation. Unless otherwise required by
law, each party agrees that it (and its Subsidiaries and
its and their respective representatives) shall treat and
hold in confidence all non-public information so acquired
(consistent, in the case of FSAC, with the terms of the
separate confidentiality agreement dated August 22, 1995
between FSAC and the Company (the "Confidentiality Agree-
ment")).
Section 7.2 No Solicitation.
(a) Prior to the Effective Time, the
Company agrees that neither it, any of its Subsidiaries
or its affiliates, nor any of the respective directors,
partners, officers, employees, agents or representatives
of the foregoing, will, directly or indirectly, solicit,
initiate, facilitate or encourage (including by way of
furnishing or disclosing non-public information) any
inquiries or the making of any proposal with respect to
any merger, consolidation or other business combination
involving the Company, or any Subsidiary of the Company
or the acquisition of all or any significant assets or
any capital stock of the Company, or any Subsidiary of
the Company (an "Acquisition Transaction"), or negotiate,
explore or otherwise engage in substantive discussions
with any person (other than FSAC and its representatives)
with respect to any Acquisition Transaction or enter into
any agreement, arrangement or understanding with respect
to any such Acquisition Transaction or which would re-
quire it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by this
Agreement. The Company agrees to immediately advise FSAC
in writing of any inquiries or proposals (or desire to
make a proposal) received by (or indicated to), any such
information requested from, or any such negotiations or
discussions sought to be initiated or continued with, any
of it, its Subsidiaries or affiliates, or any of the
respective directors, partners, officers, employees,
agents or representatives of the foregoing, in each case
from a person (other than FSAC and its representatives)
with respect to an Acquisition Transaction, and the terms
thereof, including the identity of such third party, and
to update on an ongoing basis or upon FSAC's request, the
status thereof.
(b) Prior to the Effective Time, FSAC
agrees that neither it, its affiliates, nor any of the
respective directors, officers, employees, agents or
representatives of the foregoing, will, directly or
indirectly, solicit, initiate, facilitate or encourage,
or negotiate, explore or otherwise engage in substantive
discussions with, any person (other than the Company,
WCAS and their respective representatives) with respect
to any acquisition (whether by purchase, merger, business
combination or otherwise) by FSAC of any equity interest
or material assets of any corporation or other business
organization other than the Company and its Subsidiaries
(and other than any such acquisition that would not
qualify as the initial acquisition of a Target Business
by FSAC, as described and defined in the 1994 Prospectus,
but rather is intended to enhance the operations of FSAC
after the acquisition of the Company as such a Target
Business), or enter into any agreement, arrangement or
understanding with respect to any such acquisition or
which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contem-
plated by this Agreement.
Section 7.3 Registration Statement. As
promptly as practicable, FSAC and the Company shall in
consultation with each other prepare and file with the
SEC the Proxy Statements and FSAC in consultation with
the Company shall prepare and file with the SEC the
Registration Statement. Each of FSAC and the Company
shall use its reasonable best efforts to have the Regis-
tration Statement declared effective. FSAC shall also
use its reasonable best efforts to take any action re-
quired to be taken under state securities or blue sky
laws in connection with the issuance of the shares of
FSAC Common Stock pursuant to this Agreement in the
Merger. The Company shall furnish FSAC with all informa-
tion concerning the Company and the holders of its capi-
tal stock and shall take such other action as FSAC may
reasonably request in connection with the Registration
Statement and the issuance of shares of FSAC Common Stock
(including Warrant Shares) and Merger Warrants. If at
any time prior to the Effective Time any event or circum-
stance relating to FSAC, Sub, the Company, any Subsidiary
of the Company, or their respective officers or directors
should be discovered by such party which should be set
forth in an amendment or a supplement to either the
Registration Statement or the Proxy Statements, such
party shall promptly inform the other thereof and take
appropriate action in respect thereof.
Section 7.4 Proxy Statements; Stockholder
Approvals.
(a) The Company, acting through its Board
of Directors, shall, in accordance with applicable law
and its Certificate of Incorporation and By-Laws, prompt-
ly and duly call, give notice of, convene and hold as
soon as practicable following the date upon which the
Registration Statement becomes effective a special meet-
ing of the holders of Company Stock for the purpose of
voting to approve and adopt this Agreement and the trans-
actions contemplated hereby, and (i) recommend approval
and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company
and include in the Proxy Statements such recommendation,
and (ii) take all reasonable and lawful action to solicit
and obtain such approval.
(b) FSAC, acting through its Board of
Directors, shall, in accordance with applicable law and
its Certificate of Incorporation and By-Laws, promptly
and duly call, give notice of, convene and hold as soon
as practicable following the date of the Company's spe-
cial meeting of holders of Company Stock referred to in
Section 7.4(a) a special meeting of the holders of FSAC
Common Stock for the purpose of (i) voting to approve and
adopt this Agreement, the Charter Amendments and the
other transactions contemplated hereby and (ii) electing
directors for all three classes of directors of FSAC to
be implemented by the staggered board provisions of the
Charter Amendments, including the two designees of the
Company contemplated by Section 7.14(a), to serve follow-
ing, and conditioned upon, consummation of the Merger,
and, subject to the fiduciary duties of the Board of
Directors of FSAC under applicable law as advised by
outside counsel, (i) recommend approval and adoption of
this Agreement, the Charter Amendments and the transac-
tions contemplated hereby, by the stockholders of FSAC
and include in the Proxy Statements such recommendation,
and (ii) take all reasonable and lawful action to solicit
and obtain such approval.
(c) FSAC and the Company, as promptly as
practicable (or with such other timing as they mutually
agree), shall cause the definitive Proxy Statements to be
mailed to their stockholders. At the stockholders'
meetings, each of FSAC and the Company shall vote or
cause to be voted in favor of approval and adoption of
this Agreement and the transactions contemplated hereby
all shares of FSAC Common Stock or shares of Company
Stock, respectively, as to which it holds proxies or is
otherwise entitled to vote at such time.
(d) At or prior to the Closing, each of
FSAC and the Company shall deliver to the other a certif-
icate of its Secretary setting forth the voting results
from its stockholders' meeting.
Section 7.5 Compliance with the Securities
Act.
(a) At least 30 days prior to the Effec-
tive Time, the Company shall cause to be delivered to
FSAC a list identifying all persons who were, in its
reasonable judgment, at the record date for its
stockholders' meeting convened in accordance with Section
7.4(a) hereof, "affiliates" of the Company as that term
is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates").
(b) The Company shall use its reasonable
best efforts to cause each person who is identified as
one of its Affiliates in its list referred to in Section
7.5(a) above to deliver to FSAC, at or prior to the
Effective Time, a written agreement, in the form attached
hereto as Exhibit F (the "Affiliate Letters").
(c) If any Affiliate of the Company
refuses to provide an Affiliate Letter, FSAC may place
appropriate legends on the certificates evidencing the
shares of Merger Stock and Merger Warrants to be received
by such Affiliate pursuant to the terms of this Agreement
and to issue appropriate stop transfer instructions to
the transfer agent for shares of FSAC Common Stock and
FSAC Warrants to the effect that the shares of Merger
Stock and Merger Warrants received by such Affiliate
pursuant to this Agreement only may be sold, transferred
or otherwise conveyed (i) pursuant to an effective regis-
tration statement under the Securities Act, (ii) in
compliance with Rule 145 promulgated under the Securities
Act, or (iii) pursuant to another exemption under the
Securities Act.
Section 7.6 Reasonable Best Efforts. Subject
to the terms and conditions herein provided, each of the
parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advis-
able under applicable laws and regulations to consummate
and make effective the transactions contemplated by this
Agreement and the Related Agreements, including, without
limitation, the obtaining of all necessary waivers,
consents and approvals and the effecting of all necessary
registrations and filings. Without limiting the general-
ity of the foregoing, as promptly as practicable, the
Company, FSAC and Sub (in conjunction with WCAS as pro-
vided in the Majority Stockholders' Agreement) shall (i)
make all filings and submissions under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") as may be reasonably required to be made
in connection with this Agreement, the Related Agreements
and the transactions contemplated hereby and thereby; and
(ii) make all filings and submissions as may be reason-
ably required in connection with this Agreement, the
Related Agreements and the transactions contemplated
hereby and thereby by any of the Commodity Futures Trad-
ing Commission, the NFA, the Bank, The SFA, the Ontario
Securities Commission, the IDAC, the HKFE, the Bank of
Japan and the Ministry of Finance (Japan). The Company
will also use its reasonable best efforts to obtain any
third-party consents or approvals listed on Schedule
4.5(ii) or (iii), and FSAC will also use its reasonable
best efforts to obtain any third party consents or ap-
provals listed on Schedule 5.4. Subject to Section 7.1
and the Confidentiality Agreement, the Company will
furnish to FSAC and Sub, and FSAC and Sub will furnish to
the Company, such information and assistance as the other
may reasonably request in connection with the preparation
of any such filings or submissions. Subject to Section
7.1 and the Confidentiality Agreement, the Company will
provide FSAC and Sub, and FSAC and Sub will provide the
Company, with copies of all material written correspon-
dence, filings and communications (or memoranda setting
forth the substance thereof) between such party or any of
its representatives and any Governmental Entity, with
respect to the obtaining of any waivers, consent or
approvals and the making of any registrations or filings,
in each case that is necessary to consummate the Merger
and the other transactions contemplated hereby. In case
at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of
this Agreement, the proper officers or employees of FSAC
and the Surviving Corporation shall take all such neces-
sary action.
Section 7.7 Related Agreements. As an essen-
tial inducement for the parties hereto to enter into this
Agreement, certain parties hereto (as applicable) are
concurrently entering into the Majority Stockholders'
Agreement, the Escrow Agreement and the Security Transfer
Agreement and have negotiated to substantially final form
the other Related Agreements. Each of the parties hereto
agrees that, prior to and as a condition to the Closing,
it will execute and deliver each such other Related
Agreement to which it is a party.
Section 7.8 FSAC Option Plan. FSAC agrees to
use its reasonable best efforts to solicit in the Proxy
Statement and obtain FSAC stockholder approval for an
employee stock option plan (the "FSAC Option Plan").
Subject to the receipt of such approval, FSAC agrees to
prepare and file with the SEC, as soon as practicable
after the Effective Time, a Registration Statement on
Form S-8 under the Securities Act in connection with the
FSAC Option Plan for purposes of registering the FSAC
Common Stock issuable thereunder.
Section 7.9 Unit Purchase Option Exchange.
FSAC agrees to use its reasonable best efforts to enter
into an agreement with the holder(s) of the Unit Purchase
Options providing for the exchange, contingent upon the
Merger, but effective as of immediately prior to the
Effective Time, of a number of shares of FSAC Common
Stock and/or other consideration, to be determined by
agreement of FSAC, the Company and such holders, for all,
but not less than all, of such Unit Purchase Options (the
"Unit Purchase Option Exchange"). The determination of
the Actual Outstanding FSAC Shares (and, if applicable,
the Actual Outstanding FSAC Warrants and/or the FSAC
Closing Cash Equivalents) contemplated by Section 3.6
shall take into account the results of the Unit Purchase
Option Exchange. If the Unit Purchase Option Exchange is
not agreed to or does not occur as of immediately prior
to the Effective Time, the Merger Consideration shall be
increased to include either (i) such additional Per Share
Cash Consideration as FSAC and the Company may mutually
agree or (ii) in the absence of such agreement, a number
of new unit purchase options, with terms entitling the
holders thereof to receive the same securities for the
same exercise price as are receivable by the holders of
the Unit Purchase Options after the Effective Time and
otherwise substantially identical to the Unit Purchase
Options (except that no registration rights, separate
from the Registration Rights Agreement, shall be applica-
ble thereto) (the "New Options"), equal to the quotient
obtained by dividing 333,333 by the Actual Company Stock
Number. If applicable, all interests in a New Option
that a Holder would otherwise be entitled to receive as a
result of the preceding sentence shall be aggregated and
if, after such aggregation, a fractional interest in a
New Option would result, such fractional interest shall
be rounded down so that each Holder is only issued a
whole number of New Options.
Section 7.10 Charter Amendments. FSAC agrees
to use its reasonable best efforts to solicit in the
Proxy Statement relating to its meeting of stockholders
and obtain FSAC stockholder approval for the Charter
Amendments. Subject to the receipt of such approval,
FSAC agrees to file the necessary Certificate of Amend-
ment with respect to the Charter Amendments with the
Secretary of State of the State of Delaware immediately
prior to the Effective Time (in the case of the Charter
Agreement increasing FSAC's authorized capital stock) and
immediately after the Effective Time (in the case of the
Charter Amendment implementing a staggered board).
Section 7.11 NASDAQ National Market. FSAC
shall use its reasonable best efforts (i) to prepare and
file an application with the NASD to list on the NASDAQ
National Market the FSAC Common Stock and the FSAC War-
rants and (ii) to cause such application to be approved
as soon as reasonably practicable following the Effective
Time. It is understood that such listing is not a condi-
tion to the occurrence of the Closing.
Section 7.12 Exchange Offer. It is contem-
plated that as soon as reasonably practicable following
consummation of the Merger (subject, however, to the
advice of its financial advisors), FSAC will commence an
exchange offer (the "Exchange Offer") to acquire all FSAC
Warrants that are outstanding, including if not thereto-
fore exchanged, the Bridge Warrants (as defined in the
1994 Prospectus), on the basis of one share of FSAC
Common Stock for a number of FSAC Warrants to be mutually
agreed post-Closing between FSAC and WCAS. In connection
therewith, it is contemplated that FSAC will, prior to
the Exchange Offer, attempt to enter into separate agree-
ments with the holders of the Bridge Warrants and the
Unit Purchase Options (if any such units, or warrants
issuable thereunder, are outstanding) pursuant to which
such holders will agree to exchange such securities,
subject to consummation of the Exchange Offer, for shares
of FSAC Common Stock on a basis to be negotiated and set
forth in such agreements. In connection with the Ex-
change Offer, certain stockholders of FSAC and the Compa-
ny have made certain commitments that are set forth in
the Security Transfer Agreement.
Section 7.13 Stockholder Loans. From the date
of this Agreement until two (2) days prior to the Closing
Date, the Company shall use its reasonable best efforts
to cause each of the Stockholder Loans to be either (i)
repaid in cash and/or (ii) agreed to be repaid with the
cash portion of the Merger Consideration otherwise dis-
tributable to such stockholder as evidenced by an assign-
ment and consent agreement (in a form reasonably accept-
able to FSAC) executed and delivered by such stockholder
to the Company (and copied to FSAC). To the extent that
any Stockholder Loan is not so repaid or agreed to be
repaid in full, the Company shall assign (in exchange for
cash consideration equal to the outstanding principal
amount thereof, together with accrued and unpaid inter-
est) the balance of such Stockholder Loan to members of
the Management and/or one or more designees of the fore-
going (other than the Company and its Subsidiaries) of
any or all of the foregoing at least two (2) days prior
to the Closing Date.
Section 7.14 Directors and Officers.
(a) The Company (i) hereby designates
Donald R.A. Marshall and (ii) prior to the preparation
and mailing of the Proxy Statements, shall designate one
additional person, reasonably acceptable to FSAC, to
serve as its nominees for election as directors to the
first (initial term of one year) and second (initial term
of two years) classes, respectively, of directors of FSAC
to be implemented by the Charter Amendment (it being
understood that the effectiveness of the staggered board
provisions of the Charter Amendment and of the election
of such designees will be conditioned upon consummation
of the Merger). FSAC agrees to effect the nomination of
such designees, to recommend to FSAC stockholders the
election of such designees, to include such recommenda-
tion in the Proxy Statement relating to its meeting of
stockholders and otherwise to use its best efforts to
effect their election. Immediately following the Clos-
ing, FSAC will also use its best efforts to take all
actions necessary to cause Donald Marshall to be appoint-
ed Vice-Chairman of FSAC.
(b) Immediately following the Closing, it
is agreed that FSAC and the Company will take all action
necessary to cause (i) Gilbert Scharf and Michael Scharf
to be appointed to the Board of Directors of the Company,
(ii) Gilbert Scharf to be appointed to the Board of
Directors of each of Euro Brokers Holdings Ltd. and Euro
Brokers Holdings Inc., (iii) the Company to establish an
Operations Committee of the Company consisting of three
individuals, one of whom will be Gilbert Scharf, and the
other two of whom shall be reasonably acceptable to the
Boards of Directors of FSAC and the Company and (iv)
Gilbert Scharf to become Vice-Chairman of the Company.
Section 7.15 Public Announcements. Each of
FSAC, Sub and the Company agrees that it will not issue
or cause to be issued any press release or otherwise make
any public statement with respect to this Agreement, the
Related Agreements or the transactions contemplated
hereby or thereby without the prior consent of the other
parties, which consent shall not be unreasonably withheld
or delayed; provided, however, that such disclosure can
be made without obtaining such prior consent if (i) the
disclosure is required by Applicable Law and (ii) the
party making such disclosure has first used its reason-
able best efforts to consult with the other parties about
the form and substance of such disclosure.
Section 7.16 Directors' and Officers' Indemni-
fication. All rights to indemnification, advancement of
litigation expenses and limitation of personal liability
existing in favor of the directors and officers of the
Company under the provisions existing on the date hereof
in the Company's Certificate of Incorporation or By-Laws
shall, with respect to any matter existing or occurring
at or prior to the Effective Time (including the transac-
tions contemplated by this Agreement), survive the Effec-
tive Time, and, as of the Effective Time, the Surviving
Corporation shall assume all obligations of the Company
in respect thereof as to any claim or claims asserted
prior to or within a six-year period immediately after
the Effective Time.
Section 7.17 Expenses. Except as otherwise
set forth in Section 9.2(b) and Schedule 3.7(a), whether
or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement, the Related
Agreements and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expens-
es, except that (i) the filing fee in connection with
filings under the HSR Act, (ii) the expenses incurred in
connection with printing the Registration Statement and
the Proxy Statement and (iii) the filing fees with the
SEC relating to the Registration Statement and the Proxy
Statement will be shared equally by FSAC and the Company.
Section 7.18 Supplemental Disclosure. The
Company shall give prompt notice to FSAC, and FSAC shall
give prompt notice to the Company, of (i) the occurrence,
or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause (x) any
representation or warranty contained in this Agreement of
the party giving such notice to be untrue or inaccurate
or (y) any covenant, condition or agreement contained in
this Agreement of the party giving such notice not to be
complied with or satisfied and (ii) any failure of which
it becomes aware of any party hereto to comply with or
satisfy any covenant, condition or agreement to be com-
plied with or satisfied by such party hereunder; provid-
ed, however, that the delivery of any notice pursuant to
this Section 7.18 shall not have any effect for the
purpose of determining the satisfaction of the conditions
set forth in Article VIII of this Agreement or otherwise
limit, offset or otherwise affect the remedies available
hereunder to any party.
Section 7.19 Letters of Accountants.
(a) FSAC shall use its reasonable best
efforts to cause to be delivered to the Company a letter
of BDO Seidman, LLP, FSAC's independent auditors, dated a
date within two business days before the date on which
the Registration Statement shall become effective and
addressed to the Company, in form and substance reason-
ably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public
accountants in connection with registration statements
similar to the Registration Statement, which letter shall
be brought down to the Effective Time.
(b) The Company shall use its reasonable
best efforts to cause to be delivered to FSAC a letter of
Price Waterhouse LLP, the Company's independent auditors,
dated a date within two business days before the date on
which the Registration Statement shall become effective
and addressed to FSAC, in form and substance reasonably
satisfactory to FSAC and customary in scope and substance
for letters delivered by independent public accountants
in connection with registration statements similar to the
Registration Statement, which letter shall be brought
down to the Effective Time.
Section 7.20 Conversion Share Excess. FSAC
agrees that if the number of Conversion Shares exceeds
10% of the Actual Outstanding FSAC Shares as described in
Section 8.3(d) and any one or more stockholders of FSAC
satisfy each of the requirements set forth in accordance
with the proviso to Section 8.3(d), FSAC shall enter into
a binding commitment prior to the Effective Time with
such stockholders to sell, immediately after and contin-
gent upon the Effective Time, a number of authorized but
unissued shares of FSAC Common Stock equal to the Excess
Conversion Shares (as hereinafter defined) for an aggre-
gate purchase price equal to the Excess Conversion Amount
(as hereinafter defined).
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obli-
gation to Effect the Merger. The respective obligations
of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the
following conditions, unless waived in writing (if per-
missible under Applicable Law) by each of FSAC and the
Company:
(a) HSR Approval. Any waiting period
applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seek-
ing to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated.
(b) Stockholder Approval and FSAC Conver-
sion Rights. (i) This Agreement and the transactions
contemplated hereby shall have been approved and adopted
by (x) the requisite vote (as described in Section 4.22)
of the stockholders of the Company in accordance with
Applicable Law and (y) by the requisite vote (as de-
scribed in Section 5.13) of the stockholders of FSAC, in
accordance with Applicable Law and (ii) less than twenty
percent (20%) in interest of FSAC's Public Stockholders
shall have exercised their Conversion Rights.
(c) Registration Statement. The Regis-
tration Statement shall have become effective under the
Exchange Act and shall not be the subject of any stop
order or proceeding by the SEC seeking a stop order.
(d) No Order. No Governmental Entity
(including a federal or state court) of competent juris-
diction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether tempo-
rary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consum-
mation of the Merger or any transaction contemplated by
this Agreement or the Related Agreements; provided,
however, that the parties shall use their reasonable best
efforts to cause any such decree, judgment, injunction or
other order to be vacated or lifted.
(e) Approvals. Other than the filing of
Merger documents in accordance with the DGCL, all autho-
rizations, consents, waivers, orders or approvals of, or
declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity that are
listed on Schedule 8.1(e), or the failure of which to
obtain, make or occur prior to the Effective Time would
have a material adverse effect at or after the Effective
Time on (i) FSAC or (ii) the Surviving Corporation and
its Subsidiaries taken as a whole, shall have been ob-
tained, been filed or have occurred. FSAC shall have
received all state securities or "blue sky" permits and
other authorizations necessary to issue the shares of
Merger Stock, Merger Warrants and Warrant Shares pursuant
to this Agreement.
(f) Charter Amendments. Each of the
Charter Amendments shall have been approved by the requi-
site vote of the stockholders of FSAC, and the Charter
Amendment providing for the increase in FSAC's authorized
capital stock shall have been filed with the Secretary of
State of the State of Delaware and have become effective
in accordance with the DGCL.
Section 8.2 Conditions to Obligations of FSAC
and Sub to Effect the Merger. The obligations of FSAC
and Sub to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived in writing
by FSAC:
(a) Representations and Warranties. (i)
The aggregate effect of all inaccuracies in the represen-
tations and warranties of the Company set forth in this
Agreement and of WCAS set forth in the Majority
Stockholders' Agreement do not and will not have a Compa-
ny Material Adverse Effect and (ii) the representations
and warranties of the Company set forth in this Agreement
and of WCAS set forth in the Majority Stockholders'
Agreement that are qualified with reference to a Company
Material Adverse Effect or materiality shall be true and
correct and the representations and warranties that are
not so qualified shall be true and correct in all materi-
al respects, in each case as of the date hereof, and,
except to the extent such representations and warranties
speak as of an earlier date, as of the Effective Time as
though made at and as of the Effective Time, and FSAC
shall have received certificates signed on behalf of each
of the Company and WCAS by the chief executive officer or
the chief financial officer of the Company and WCAS
respectively, to such effect.
(b) Performance of Obligations. Each of
the Company, its Subsidiaries and WCAS shall have per-
formed in all material respects all obligations required
to be performed by it under this Agreement or the Majori-
ty Stockholders' Agreement, as the case may be, at or
prior to the Effective Time, and FSAC shall have received
certificates signed on behalf of each of the Company and
WCAS by the chief executive officer or the chief finan-
cial officer of the Company and WCAS respectively, to
such effect.
(c) Certain Valuations. Each of the
following shall be true: (i) the Company's Closing De-
fined Net Worth, as estimated pursuant to Section
3.7(a)(i), shall not be less than $30 million and
(ii) the cash and cash equivalents of the Company as
reflected on the Company's Closing Balance Sheet, in
accordance with GAAP and on a basis consistent with the
preparation of the audited consolidated Balance Sheet of
the Company as of December 31, 1995 (the "Company's
Closing Cash Equivalents"), as estimated pursuant to
Section 3.7(a), shall not be less than $15 million.
(d) Related Agreements. Each of the
Company and WCAS and each member of Management shall have
executed and delivered each of the Related Agreements to
which it or he is a party and performed all obligations
of it required thereunder to be performed at or prior to
the Effective Time.
(e) Affiliate Letters. FSAC shall have
received the Affiliate Letters from each of the Affili-
ates of the Company, as contemplated by Section 7.5.
(f) Dissenting Shares. The aggregate
number of Dissenting Shares shall not constitute more
than 10% of the Company Stock Number.
(g) Legal Opinion. FSAC shall have
received an opinion of Reboul, MacMurray, Hewitt, Maynard
and Kristol, counsel to the Company, dated the day of the
Effective Time, addressed to FSAC and Sub and reasonably
acceptable to FSAC, addressing each of the matters set
forth in Schedule 8.2(g).
(h) Consolidating Supervisor. The UK
Subsidiaries (separately and on a consolidated basis)
shall be in compliance (without the necessity of re-
stricting their operations as currently or historically
conducted) with all applicable rules and regulations of
their Consolidating Supervisor (whether the SFA or the
Bank of England) in relation to capital adequacy and
financial resources requirements, and their consolidated
position under such rules and regulations as applied
shall not show any regulatory capital deficit (subject to
any waivers or non-enforcement arrangements granted by
the Consolidating Supervisor if all restructurings or
recapitalizations necessary to maintain in effect such
waivers or arrangements have been completed).
(i) Additional Officer's Certificate.
FSAC shall have received a certificate of the Company, by
its chief executive officer or chief financial officer,
to the effect that all outstanding shares of capital
stock of the Company's Subsidiaries are beneficially
owned, either directly or indirectly, by the Company and
are held free and clear of all Liens (other than the
Liens disclosed in the last paragraph of Schedule 4.12).
Section 8.3 Conditions to Obligation of the
Company to Effect the Merger. The obligation of the
Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived in writing
by the Company:
(a) Representations and Warranties. (i)
The aggregate effect of all inaccuracies in the represen-
tations and warranties of FSAC set forth in this Agree-
ment does not and will not have an FSAC Material Adverse
Effect and (ii) the representations and warranties of
FSAC contained in this Agreement that are qualified with
reference to an FSAC Material Adverse Effect or material-
ity shall be true and correct and the representations and
warranties that are not so qualified shall be true and
correct in all material respects as of the date hereof,
and, except to the extent such representations and war-
ranties speak as of an earlier date, as of the Effective
Time as though made on and as of the Effective Time, and
the Company shall have received a certificate signed on
behalf of FSAC by the chief executive officer or the
chief operating officer of FSAC to such effect.
(b) Performance of Obligations. Each of
FSAC and Sub shall have performed in all material re-
spects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time,
and the Company shall have received a certificate signed
on behalf of FSAC and Sub by the chief executive officer
or the chief operating officer of FSAC and Sub, respec-
tively, to such effect.
(c) Certain Valuations. FSAC shall have
delivered to the Company a certificate of the Trustee (or
other evidence reasonably satisfactory to the Company) to
the effect that the cash proceeds of the Trust Fund as of
the Closing Date (disregarding any amounts payable to
Public Stockholders in respect of Conversion Shares) will
be at least $18 million.
(d) FSAC Conversion Rights. The number
of Conversion Shares shall not exceed 10% of the Actual
Outstanding FSAC Shares, provided, however, that if the
number of Conversion Shares exceeds 10% (but not more
than 20%) of the Actual Outstanding FSAC Shares (such
excess being referred to herein as the "Excess Conversion
Shares"), then any one or more of the current stockhold-
ers of FSAC shall have the right, but not the obligation,
of satisfying the condition set forth in this Section
8.3(d) by (i) giving written notice to the Company,
within ten days after delivery of the certificate as to
the number of Conversion Shares as required by Section
3.6(a)(ii), of the exercise by such stockholders of such
right, and (ii) delivering to the Company within such
ten-day period written evidence of financing sufficient
to pay to FSAC an amount in cash equal to the aggregate
amount payable to stockholders of FSAC in respect of the
Excess Conversion Shares (the "Excess Conversion
Amount").
(e) Related Agreements. Each of FSAC,
Sub, Gilbert Scharf and Michael Scharf shall have execut-
ed and delivered each of the Related Agreements to which
it or he is a party and performed all obligations of it
required thereunder to be performed at or prior to the
Effective Time.
(f) Legal Opinion. The Company shall
have received an opinion of Skadden, Arps, Slate, Meagher
& Flom, special counsel to FSAC, dated the day of the
Effective Time, addressed to the Company, and reasonably
accepted to the Company, addressing each of the matters
set forth in Schedule 8.3(f).
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may
be terminated at any time prior to the Effective Time,
whether before or after approval by the stockholders of
FSAC or the Company:
(a) by mutual consent of FSAC and the
Company;
(b) by either FSAC or the Company, if the
Merger shall not have been consummated before July 31,
1996 (unless the failure to so consummate the Merger by
such date shall be due to the action or failure to act of
the party (or its stockholders or Subsidiaries) seeking
to terminate this Agreement, which action or failure to
act constitutes or constituted a breach of this Agree-
ment);
(c) by either FSAC or the Company, if any
permanent injunction or action by any Governmental Entity
of competent jurisdiction preventing the consummation of
the Merger shall have become final and nonappealable;
(d) by FSAC, if (i) there has been a
breach of any representations or warranties of the Compa-
ny set forth herein or of WCAS set forth in the Majority
Stockholders' Agreement, the effect of which is a Company
Material Adverse Effect, (ii) there has been a breach in
any material respect of any of the covenants or agree-
ments set forth in this Agreement or the Majority
Stockholders' Agreement on the part of the Company or
WCAS (as the case may be), which breach is not curable
or, if curable, is not cured within 30 days after written
notice of such breach is given by FSAC to the Company or
WCAS (as the case may be), (iii) the stockholders of the
Company fail to approve and adopt this Agreement and the
Merger at the stockholders' meeting of the Company con-
templated by Section 7.4 or (iv) the number of Dissenting
Shares is more than 10% of the Company Stock Number.
(e) by the Company, if (i) there has been
a breach of any representations or warranties of FSAC set
forth herein the effect of which is an FSAC Material
Adverse Effect, (ii) there has been a breach in any
material respect of any of the covenants or agreements
set forth in this Agreement on the part of FSAC or Sub,
which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is
given by the Company to FSAC, (iii) the stockholders of
FSAC fail to approve and adopt this Agreement and the
issuance of FSAC Common Stock, Merger Warrants and War-
rant Shares pursuant thereto at the stockholders' meeting
of FSAC contemplated by Section 7.4, or 20% or more in
interest of the Public Stockholders exercise their Con-
version Rights or (iv) the number of Conversion Shares
exceeds 10% of the Actual Outstanding FSAC Shares as
described in Section 8.3(d) and the condition has re-
mained unsatisfied in accordance with the proviso to said
Section 8.3(d) for a period of 10 days after the certifi-
cation provided by FSAC pursuant to Section 3.6(a)(ii).
Section 9.2 Effect of Termination.
(a) In the event of a termination of this
Agreement pursuant to this Article IX, the Merger shall
be deemed abandoned and this Agreement shall forthwith
become void, without liability on the part of any party
hereto, except as provided in this Section 9.2, Section
7.1 and Section 7.17, and except that nothing herein
shall relieve any party from liability for any breach of
this Agreement or any Related Agreement.
(b) If this Agreement shall have been
terminated (i) by FSAC pursuant to Section 9.1(d)(i),
(ii) or (iii), or pursuant to Section 9.1(d)(iv) to the
extent that the 10% threshold would not have been exceed-
ed if Dissenting Shares held by any of the Investor
Stockholders or the EBIC Management Stockholders (as such
terms are defined in the Registration Rights Agreement)
were disregarded, or (ii) by the Company pursuant to
Section 9.1(e) at a time when FSAC is already permitted
to terminate this Agreement pursuant to said Section
9.1(d) (i), (ii), (iii) or, as described in clause (i)
above, (iv), then in any such case the Company shall
promptly, but in no event later than two business days
after the date of such termination, pay FSAC a termina-
tion fee of $2 million, which amount (the "Termination
Payment") shall be payable in same day funds; provided,
however, that no fee shall be paid pursuant to this
Section 9.2(b) if the Company is already permitted to
terminate this Agreement pursuant to Section 9.1(e) other
than under the circumstances described in clause (ii)
above.
(c) Payment by the Company of the Termi-
nation Payment shall constitute full liquidated damages
and will be the sole remedy of FSAC and Sub (i) against
the Company (except for remedies that cannot be waived as
a matter of law) for any termination or breach (if there
is a termination) of any representation, warranty or
covenant hereunder and (ii) against WCAS for any termina-
tion or breach (if there is a termination) of any repre-
sentation, warranty or covenant under the Majority
Stockholders' Agreement or the Security Transfer Agree-
ment; provided, however, that FSAC shall be entitled to
reimbursement of its reasonable costs and expenses (in-
cluding attorney's fees) incurred, if any, in enforcing
its right to collect the Termination Payment.
(d) For the avoidance of doubt, the
Company confirms and agrees that, pursuant to the letter,
dated December 19, 1995, from the Company to FSAC with
respect to the Trust Fund, in the event that the Merger
is not consummated for any reason, the Company is not
entitled to make or pursue any right or claim whatsoever
that, directly or indirectly, seeks any of the funds of,
or other remedy with respect to, the Trust Fund.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival of Representations and
Warranties. All representations and warranties made by
the Company in this Agreement shall survive the Effective
Time and shall terminate at the close of business on the
day which is 12 months after the Effective Time. The
covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive
the Effective Time without limitation (except for those
which, by their terms, contemplate a shorter survival
period).
Section 10.2 Indemnification of FSAC. From
and after the Effective Time, to the extent provided in
this Article X, FSAC, including any person or entity that
was a stockholder, director, officer, employee or agent
of FSAC or Sub as of immediately prior to the Effective
Time (FSAC and such other persons and entities are col-
lectively hereinafter referred to as the "Indemnified
Parties") shall be entitled to be indemnified and held
harmless, but only to the extent of the Escrow Stock,
from and against any liabilities, claims, demands, judg-
ments, losses, costs, damages or expenses whatsoever
(including reasonable attorneys', consultants' and other
professional fees and disbursements of every kind, nature
and description) (collectively, "Damages") asserted
against, resulting to, imposed upon or incurred by an
Indemnified Party by reason of, resulting from or arising
out of:
(i) a breach of or inaccuracy in any
representation or warranty of the Company or WCAS
contained in this Agreement or any Related Agree-
ment; or
(ii) any breach of any covenant or agree-
ment of the Company or WCAS contained in this Agree-
ment or any Related Agreement.
For purposes of determining whether FSAC, as an Indemni-
fied Party, shall have had any Damages asserted against,
resulting to, imposed upon or incurred by it in connec-
tion with any of the matters described in the immediately
preceding clause (i) or (ii), FSAC shall be deemed to
have had asserted against, resulting to, imposed upon or
incurred by it any and all Damages asserted against,
resulting to, imposed upon or incurred by the Surviving
Corporation or any Subsidiary thereof in connection with
any of such matters.
Section 10.3 Escrow Deposit; Recourse Against
Escrow Securities. At the Effective Time, FSAC shall
deposit the Escrow Stock with the Escrow Agent pursuant
to the Escrow Agreement. Any claims by an Indemnified
Party for indemnification pursuant to this Article X from
the Holders shall be satisfied solely by recourse to the
Escrow Stock. Any claim by an Indemnified Party for
payment of such indemnification shall be made by giving
written notice of such claim, including in reasonable
detail the basis and the amount thereof, to each of the
Representatives (as hereinafter defined) and the Escrow
Agent. As set forth more specifically in the Escrow
Agreement, the claim, and the amount of Damages permitted
thereunder, shall be resolved by (i) the failure of
either of the Representatives to timely challenge it,
(ii) the mutual agreement of the Indemnified Party and
the Representatives or (iii) in the absence of timely
mutual agreement, binding arbitration. In accordance
with the terms of the Escrow Agreement, the Escrow Agent
shall release to FSAC shares of Escrow Stock having an
aggregate value equal to the Damages ultimately allowed
under such claim. FSAC shall thereupon retire (and hold
in treasury) or cancel such released shares and, if the
Indemnified Party with respect to such Damages is not
FSAC, pay or cause to be paid such damages to such Indem-
nified Party. For all purposes under this Article X, a
share of the Escrow Stock shall be valued at the average
of the closing bid price of a share of FSAC Common Stock
as reported (x) on the OTC Bulletin Board or (y) if not
quoted at such time on the OTC Bulletin Board, in the
Pink Sheets, in each case for the last five trading days
prior to the Effective Time.
Section 10.4 Representatives.
(a) Authority. For purposes of this
Article X and the Escrow Agreement, in view of the fact
that successful claims for indemnification will ultimate-
ly have the effect of reducing the Merger Consideration
payable to each Holder, WCAS shall act as the Representa-
tive on behalf of itself and all of the other Holders who
are WCAS affiliates and Donald R.A. Marshall shall act as
the Representative on behalf of himself and all other
Holders, in each case, subject to the provisions of
Section 10.4(b) below. Each Representative shall keep
the Holders for which it is acting as Representative
reasonably informed of its decisions of a material na-
ture. Each Representative (i) is authorized to take any
action deemed by it appropriate or reasonably necessary
to carry out the provisions of, and is authorized to act
on behalf of, the Holders for which it is acting as
Representative for all purposes related to this Article
X, including the acceptance of service of process upon
such Holders and the acceptance or compromise of claims
for indemnification, and (ii) all decisions and actions
of each Representative shall be binding and conclusive
upon the Holders for which it is acting as Representative
and may be relied upon by the Indemnified Parties and the
Escrow Agent.
(b) Standard of Conduct. Each Represen-
tative shall not be liable to any of the Holders or any
other party for any error of judgment, act done or omit-
ted by it in good faith, or mistake of fact or law unless
caused by its own gross negligence or willful misconduct.
In taking any action or refraining from taking any action
whatsoever each Representative shall be protected in
relying upon any notice, paper or other document reason-
ably believed by it to be genuine, or upon any evidence
reasonably deemed by it to be sufficient. Each Represen-
tative may consult with counsel in connection with its
duties and shall be fully protected in any act taken,
suffered or permitted by it in good faith in accordance
with the advice of counsel. No Representative shall be
responsible for determining or verifying the authority of
any person acting or purporting to act on behalf of any
party to this Agreement or the Escrow Agreement.
Section 10.5 Certain Limitations on Liability.
(a) The indemnification obligations
pursuant to this Article X shall be applicable only to
claims as to which written notice has been furnished
hereunder within 12 months after the Effective Time.
(b) Notwithstanding anything in the
foregoing provisions of this Article X to the contrary,
the Indemnified Parties shall be entitled to seek indem-
nification under this Article X only when the aggregate
of all claims for Damages under this Article X exceeds
$100,000, after which the Indemnified Parties shall be
entitled to seek indemnification starting with the first
dollar of such Damages.
(c) In no event shall any Holder have any
right, whether by way of contribution or otherwise, to
reimbursement from FSAC, the Surviving Corporation, the
Company or any of its Subsidiaries for any indemnifica-
tion payments made by release of Escrow Stock pursuant to
this Article X.
Section 10.6 Exclusive Remedy. Except for
remedies that cannot be waived as a matter of law, if the
Merger is consummated as contemplated herein, this Arti-
cle X shall be the exclusive remedy for breach of the
representations and warranties of the Company contained
herein or of WCAS contained in the Majority Stockholders'
Agreement or in any certificate delivered pursuant hereto.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Amendment and Modification. At
any time prior to the Effective Time, this Agreement may
be amended, modified or supplemented only by written
agreement (referring specifically to this Agreement) of
FSAC and the Company with respect to any of the terms
contained herein; provided, however, that after any
approval and adoption of this Agreement by the stockhold-
ers of FSAC or the Company, no such amendment, modifica-
tion or supplementation shall be made which under Appli-
cable Law requires the approval of such stockholders,
without the further approval of such stockholders.
Section 11.2 Waiver. At any time prior to the
Effective Time, FSAC and Sub, on the one hand, and the
Company, on the other hand, may (i) extend the time for
the performance of any of the obligations or other acts
of the other, (ii) waive any inaccuracies in the repre-
sentations and warranties of the other contained herein
or in any documents delivered pursuant hereto and (iii)
waive compliance by the other with any of the agreements
or conditions contained herein which may legally be
waived. Any such extension or waiver shall be valid only
if set forth in an instrument in writing specifically
referring to this Agreement and signed on behalf of such
party.
Section 11.3 Investigations. The respective
representations and warranties of FSAC and the Company
contained herein or in any certificates or other docu-
ments delivered prior to or as of the Effective Time
shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
Section 11.4 Notices. All notices and other
communications hereunder shall be in writing and shall be
delivered personally or by next-day courier or telecopied
with confirmation of receipt, to the parties at the
addresses specified below (or at such other address for a
party as shall be specified by like notice; provided that
notices of a change of address shall be effective only
upon receipt thereof). Any such notice shall be effec-
tive upon receipt, if personally delivered or telecopied,
or one day after delivery to a courier for next-day
delivery.
(a) If to FSAC or Sub, to:
Financial Services Acquisition
Corporation
667 Madison Avenue
11th Floor
New York, NY 10021
Attention: Gilbert Scharf
Telecopy: (212) 246-1514
with copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Roger Schwed, Esq.
Telecopy: (212) 735-2000
(b) if to the Company, to:
Euro Brokers Investment Corporation
Two World Trade Center
Suite 8400
New York, NY 10048
Attention: Donald Marshall
Telecopy: (212) 748-7329
with a copy to:
Reboul, MacMurray, Hewitt,
Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attention: William J. Hewitt, Esq.
Telecopy: (212) 841-5725
Section 11.5 Descriptive Headings; Interpreta-
tion. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Refer-
ences in this Agreement to Sections, Schedules, Exhibits
or Articles mean a Section, Schedule, Exhibit or Article
of this Agreement unless otherwise indicated. References
to this Agreement shall be deemed to include the Exhibits
and Schedules hereto, unless the context otherwise re-
quires. The term "person" shall mean and include an
individual, a partnership, a joint venture, a corpora-
tion, a trust, a Governmental Entity or an unincorporated
organization. References herein to "the knowledge of the
Company" or "the Company's knowledge" shall mean the
actual knowledge, of any one or more of the following:
Donald Marshall, Walter Dulski, Keith Reihl, Alistair
Johnstone, Brian Clark, Susan Tysk, Cindy Buggins, Mi-
chael Morrison, Stefan Stosik, David Coomber, Jeannette
Wilste, Charles Cheung and George Bart Peaslee.
Section 11.6 Entire Agreement; Assignment.
This Agreement (including the Schedules, Exhibits and
other agreements, certificates, documents and instruments
referred to herein or contemplated hereby), together with
the Related Agreements, the Confidentiality Agreement,
the letter, dated December 19, 1995, from the Company to
FSAC with respect to the Trust Fund, and the letter,
dated March 8, 1996, from FSAC to the Company (and ac-
knowledged by the Company) with respect to certain other
matters, constitute the entire agreement and supersede
all other prior agreements and understandings, both
written and oral, among the parties or any of them, with
respect to the subject matter hereof. Except for the
Indemnified Parties, this Agreement is not intended to
confer upon any person not a party hereto any rights or
remedies hereunder. This Agreement shall not be assigned
by operation of law or otherwise; provided that FSAC or
Sub may assign its rights and obligations hereunder to a
direct or indirect subsidiary of FSAC, but no such as-
signment shall relieve FSAC or Sub, as the case may be,
of its obligations hereunder.
Section 11.7 Governing Law. This Agreement
shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to
the provisions thereof relating to conflicts of law.
Section 11.8 Severability.
(a) The provisions of this Agreement
shall be deemed severable and the invalidity or
unenforceability of any provisions hereof shall not
affect the validity and enforceability of the other
provisions hereof. If any provision of this Agreement,
or the application thereof to any person or entity or any
circumstances, is invalid or unenforceable, (i) a suit-
able and equitable provision shall be substituted there-
for in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this
Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected
by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or
enforceability of such provision, or the application
thereof, in any other jurisdiction; provided, however,
that no application of this Section 11.8 shall be made
that defeats the economic intentions of the parties as
described in Section 3.1.
(b) Notwithstanding any other provi-
sion of this Agreement, no provision of this Agreement
which is of such a nature as to make the Agreement liable
to registration under the United Kingdom Restrictive
Trade Practices Act 1976 shall take effect until the day
after that on which particulars thereof have been duly
furnished to the Director General of Fair Trading pursu-
ant to the said Act. For the purpose of this Section
11.8(b), "Agreement" shall include any agreement forming
part of the same arrangement.
Section 11.9 Consolidating Supervisor. The
parties acknowledge and agree that the UK Subsidiaries
are currently in technical non-compliance with the rules
and regulations of the SFA, in its capacity as their
Consolidating Supervisor, relating to capital adequacy
and financial resources requirements and that such non-
compliance, notwithstanding anything to the contrary in
Article IV, shall not constitute a breach of or inaccura-
cy in any of the representations or warranties made by
the Company in said Article IV.
Section 11.10 Counterparts. This Agreement
may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of FSAC, Sub and the
Company has caused this Agreement to be executed on its
behalf by its officers thereunto duly authorized, all as
of the date first above written.
FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman, President and
Chief Executive Officer
EBIC ACQUISITION CORP.
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman and President
EURO BROKERS INVESTMENT
CORPORATION
By: /s/ Donald R. A. Marshall
Name: Donald R.A. Marshall
Title: President and Chief
Executive Officer
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1, dated as of April __,
1996 (this "Amendment"), entered into among Financial
Services Acquisition Corporation, a Delaware corporation
("FSAC"), EBIC Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of FSAC ("Sub"), and Euro
Brokers Investment Corporation, a Delaware corporation (the
"Company"). FSAC, Sub and the Company are collectively
referred to as the "Parties."
Whereas, the Parties have previously entered
into an Agreement and Plan of Merger, dated as of March 8,
1996 (the "Merger Agreement");
Whereas, the Parties desire to amend the
Merger Agreement;
NOW, THEREFORE, in consideration of the
foregoing and for other good and valuable consideration,
the receipt of which is hereby acknowledged the Parties
hereby agree as follows:
1. Amendment. Section 9.1(b) of the
Merger Agreement is hereby amended by substituting the date
"August 31, 1996" therein for the date "July 31, 1996" that
is currently therein.
2. Effect of Amendment. Except as ex-
pressly amended by this Amendment, the Merger Agreement
shall remain in full force and effect according to its
terms.
3. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall
be deemed an original but all of which shall constitute one
and the same agreement.
4. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of
the State of Delaware without giving effect to the provi-
sions thereof relating to conflicts of law.
IN WITNESS WHEREFORE, each of FSAC, Sub
and the Company has caused this Amendment to be executed on
its behalf by its officers thereunto duly authorized, all
as of the date first above written.
FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman, President and
Chief Executive Officer
EBIC ACQUISITION CORP.
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman and President
EURO BROKERS INVESTMENT
CORPORATION
By: /s/ Donald R.A. Marshall
Name: Donald R.A. Marshall
Title: President and Chief
Executive Officer
SECURITY TRANSFER AGREEMENT
SECURITY TRANSFER AGREEMENT
(this "Agreement"), dated as of March 8, 1996 by and among
Financial Services Acquisition Corporation, a Delaware
corporation ("FSAC"), Gilbert Scharf, the Chairman of FSAC,
Michael Scharf, the Secretary of FSAC, Welsh, Carson,
Anderson & Stowe, VI, L.P., a Delaware limited partnership
("WCAS VI"), WCAS Information Partners, L.P., a Delaware
limited partnership ("WCAS Info") and each other person set
forth on the execution pages hereof (each, together with
Gilbert Scharf, Michael Scharf, WCAS VI and WCAS Info, a
"Stockholder" and, collectively, the "Stockholders")
WHEREAS, FSAC, EBIC Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary
of FSAC ("Sub"), and Euro Brokers Investment Corporation, a
Delaware corporation ("EBIC"), concurrently with the execu-
tion and delivery of this Agreement will enter into an
Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), providing for, among other
things, the merger (the "Merger") of Sub with and into
EBIC, as a result of which the outstanding shares of Common
Stock, par value $.001 per share ("EBIC Common Stock"), of
EBIC will be converted into the right to receive (i) Common
Stock, par value $.001 per share ("FSAC Common Stock"), of
FSAC (any shares of FSAC Common Stock so received in the
Merger, hereinafter the "Merger Shares"), (ii) Series B
Redeemable Common Stock Purchase Warrants of FSAC (the
"Merger Warrants") and (iii) cash, without interest;
WHEREAS, it is contemplated
that as soon as reasonably practicable following consumma-
tion of the Merger (subject, however, to the advice of its
financial advisors), FSAC will commence an exchange offer
(the "Exchange Offer") to acquire all Redeemable Common
Stock Purchase Warrants ("FSAC Warrants") of FSAC (includ-
ing the Merger Warrants and, if not theretofore exchanged,
the Bridge Warrants (as defined in the Prospectus, dated
November 30, 1994, of FSAC)) that are outstanding, on the
basis of one share of FSAC Common Stock for a number of
FSAC Warrants (the "Warrant Exchange Ratio") to be mutually
agreed post-closing between FSAC and WCAS VI.
WHEREAS, certain of the shares
of FSAC Common Stock held by each of Michael Scharf and
Gilbert Scharf are subject to the terms of that certain
Escrow Agreement, dated November 30, 1994 (the "Escrow
Shares");
WHEREAS, concurrently with the
execution and delivery of the Merger Agreement and as a
condition and inducement to FSAC, EBIC and Sub's willing-
ness to enter into the Merger Agreement, the parties have
agreed to enter into this Agreement (i) imposing certain
restrictions on post-Merger dispositions by such parties
(other than FSAC) of (x) shares of FSAC Common Stock (other
than the Escrow Shares) held or acquired by them following
the Effective Time (as defined in the Merger Agreement),
including, without limitation, any Merger Shares and any
shares of FSAC Common Stock obtained upon conversion of any
FSAC Warrants (including any Merger Warrants) (any such
shares so held or acquired, hereinafter the "Shares") and
(y) FSAC Warrants (including any Merger Warrants) held or
acquired by them following the Effective Time (any warrants
so held or acquired, hereinafter the "Warrants") and (ii)
imposing certain obligations on the parties (other than
FSAC) to tender certain of their Warrants in the Exchange
Offer, if and when made.
NOW, THEREFORE, in consider-
ation of these premises and other good and valuable consid-
eration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
SECURITY TRANSFER RESTRICTIONS
AND EXCHANGE OFFER OBLIGATION
SECTION 1.1 Restriction. Each
Stockholder covenants and agrees with each other Stockhold-
er and FSAC not to, for the period commencing on the Effec-
tive Time (as defined in the Merger Agreement) and ending
on November 30, 1996, sell, pledge, encumber, dispose,
grant a security interest in or otherwise dispose of or
transfer (collectively, "Sell", the doing thereof being a
"Sale") any Shares or Warrants owned or acquired, benefi-
cially or of record, by such Stockholder following the
Effective Time and any such Sale or attempted Sale shall be
void. Notwithstanding the foregoing, a Stockholder who is
a natural person may Sell any of the Shares or Warrants so
held (i) by means of a gift to a member of such
Stockholder's immediate family or to a trust, the benefi-
ciary of which is such Stockholder or a member of such
Stockholder's immediate family or (ii) by virtue of the
laws of descent and distribution upon the death of such
Stockholder; provided, however, that the transferee in any
such Sale (a "Permitted Transferee") shall agree in writing
to be bound by the terms and conditions of this Agreement.
During the term of this Agreement, FSAC covenants and
agrees not to transfer or recognize any transfer on its
books and records by a Stockholder or a Permitted Transfer-
ee of any Shares or Warrants except for a Sale permitted
hereby and made in compliance herewith.
SECTION 1.2 Exchange Offer.
Notwithstanding anything to the contrary in Section 1.1,
each Stockholder hereby agrees with each other Stockholder
and FSAC to tender for exchange (and not withdraw) in the
Exchange Offer, at the Warrant Exchange Ratio, that portion
of the Warrants held by such Stockholder as is equal to the
amount, expressed as a percentage, obtained by dividing (i)
the number of FSAC Warrants (including the Bridge War-
rants), if any, tendered for exchange in the Exchange Offer
by persons or entities other than the Stockholders and
their Permitted Transferees (the "Public Warrant Holders"),
by (ii) the total number of FSAC Warrants (including the
Bridge Warrants) held by the Public Warrant Holders immedi-
ately prior to the consummation of the Exchange Offer.
ARTICLE II
STOCK CERTIFICATE LEGEND
SECTION 2.1 Each certificate
representing any Shares or Warrants to which this Agreement
applies shall conspicuously bear a legend in substantially
the following form:
"THE TRANSFER OF THE SECURITY REPRESENTED BY THIS CERTIFI-
CATE IS RESTRICTED UNDER AND SUBJECT TO THE TERMS OF AN
AGREEMENT TO WHICH THE COMPANY IS A PARTY, AS SUCH AGREE-
MENT MAY BE AMENDED, SUPPLEMENTED, OR OTHERWISE MODIFIED
FROM TIME TO TIME (THE"AGREEMENT"). A COPY OF THE AGREEMENT
IS ON FILE AT THE COMPANY'S OFFICE. THE HOLDER OF THIS
CERTIFICATE, BY HIS OR HER ACCEPTANCE HEREOF, AGREES TO BE
BOUND BY THE PROVISIONS OF THE AGREEMENT.
SECTION 2.2 At such time as
any Shares or Warrants shall no longer be subject to any of
the restrictions of this Agreement, FSAC shall take or
cause to be taken, at the request of any holder of such
Shares or Warrants, such action as shall be necessary so
that such holder shall be issued replacement certificates
representing such Shares or Warrants that do not refer to
such restrictions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby repre-
sents and warrants to each other Stockholder and FSAC as
follows:
SECTION 3.1 Authority Relative
to this Agreement. Such Stockholder (if it is a corpora-
tion, partnership or other legal entity) is duly organized
and validly existing under the laws of the jurisdiction of
its incorporation or organization. Such Stockholder has
all necessary power and authority (corporate or otherwise)
to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby have
been duly and validly authorized by all necessary action
(corporate or otherwise) on the part of such Stockholder,
and no other proceedings (corporate or otherwise) on the
part of such Stockholder are necessary to authorize this
Agreement or to consummate such transactions. This Agree-
ment has been duly and validly executed and delivered by or
on behalf of such Stockholder and constitutes a valid and
binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms.
SECTION 3.2 No Conflict. The
execution and delivery of this Agreement by such Stockhold-
er do not, and the performance of this Agreement by such
Stockholder will not, (i) conflict with or violate the
charter, by-laws, partnership agreement or comparable
organizational documents of such Stockholder (in the case
of a Stockholder that is a corporation, partnership or
other legal entity), (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to
such Stockholder or by which the Owned Shares (as defined
below) or Shares or Warrants held or to be held by such
Stockholder are or will be (during the term hereof) bound
or affected, (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancella-
tion of, or result in the creation of a lien or encumbrance
of any kind on any of such Owned Shares or Shares or War-
rants pursuant to, any agreement, contract, indenture,
notice or instrument to which such Stockholder is or will
be (during the term hereof) a party or by which such Stock-
holder or such Owned Shares or Shares or Warrants are or
will be (during the term hereof) bound or affected, or (iv)
except for applicable requirements, if any, of the Securi-
ties Exchange Act of 1934, as amended, require on behalf of
such Stockholder any filing with or notification to, or any
permit, authorization consent or approval of, any govern-
mental or regulatory authority, domestic or foreign.
SECTION 3.3 Title to Shares.
The shares set forth opposite such Stockholder's name on
the signature pages hereof (the "Owned Shares") constitute
all of the shares of FSAC Common Stock (other than Escrow
Shares) or EBIC Common Stock owned as of the date hereof
(either beneficially or of record) by such Stockholder.
ARTICLE IV
COVENANTS OF THE STOCKHOLDERS
SECTION 4.1 No Inconsistent
Arrangements. Each Stockholder hereby covenants and agrees
that, during the term of this Agreement, it shall not enter
into any contract, agreement, understanding or other ar-
rangement with respect to any of the Shares or Warrants
held by it that would involve a Sale, or a commitment to
make a Sale, in violation of the terms hereof, that would
cause any of such Stockholder's representations in Section
3.2 hereof to become untrue (if made as of the time of such
arrangement) or that would otherwise be inconsistent with
the terms hereof.
SECTION 4.2 Certain Events.
Each Stockholder hereby covenants and agrees with each
other Stockholder and FSAC that this Agreement, and the
obligations hereunder, shall attach during the term hereof
to any shares of FSAC Common Stock (other than the Escrow
Shares) or FSAC Warrants held or acquired (including,
without limitation, by dividend, purchase or exercise of an
option or warrant) by such Stockholder following the Effec-
tive Time and shall be binding upon any person or entity to
which legal or beneficial ownership of such FSAC Common
Stock or FSAC Warrants shall pass by operation of law,
including without limitation such Stockholder's administra-
tors or successors.
SECTION 4.3 Dissenter Shares.
Each Stockholder (other than Gilbert and Michael Scharf)
hereby covenants and agrees with and for the benefit of
FSAC that he, she or it will not, directly or indirectly,
solicit, facilitate or encourage the assertion or exercise
in connection with the Merger, by any other holder of EBIC
Common Stock, of such other holder's right to an appraisal
under Section 262 of the Delaware General Corporation Law
of the fair value of such holder's shares of EBIC Common
Stock.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Duration. This
Agreement shall remain in effect until the earlier to occur
of (i) the termination of the Merger Agreement and (ii)
November 30, 1996, and thereafter this Agreement shall
automatically terminate without further action by any party
hereto; provided, however, that Section 2.2 shall survive a
termination described in the preceding clause (ii) and, if
the Exchange Offer has not theretofore been consummated,
Section 1.2 shall survive a termination described in the
preceding clause (ii) until the earlier of (x) the consum-
mation of the Exchange Offer and (y) November 30, 1997.
SECTION 5.2 Specific Perfor-
mance. The parties hereto agree that if any of the provi-
sions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached,
irreparable damage would occur, no adequate remedy at law
would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific perfor-
mance of the terms hereof, without any requirement for
securing or posting any bond, in addition to any other
remedy at law or equity.
SECTION 5.3 Entire Agreement.
This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings,
both written and oral, among the parties hereto with re-
spect to the subject matter hereof.
SECTION 5.4 Amendment. This
Agreement may not be amended except by an instrument in
writing signed by the parties hereto and specifically
referencing this Agreement.
SECTION 5.5 Severability. The
provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provisions hereof
shall not affect the validity and enforceability of the
other provisions hereof. If any provision of this Agree-
ment, or the application thereof to any person or entity or
any circumstances, is invalid or unenforceable, (i) a
suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this
Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such inval-
idity or unenforceability affect the validity or enforce-
ability of such provision, or the application thereof, in
any other jurisdiction.
SECTION 5.6 Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without
giving effect to the provisions thereof relating to con-
flicts of law.
SECTION 5.7 Counterparts.
This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement
and shall become effective as to any Stockholder when one
or more counterparts have been signed by FSAC and such
Stockholder and delivered to FSAC and such Stockholder.
SECTION 5.8 Notices. All
notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight
courier (providing proof of delivery) to the parties at the
addresses specified below (or at such other address for a
party as shall be specified by like notice): (i) if to
FSAC, Gilbert Scharf or Michael Scharf to the address of
FSAC set forth in Section 11.4 of the Merger Agreement; and
(ii) if to any other Stockholder, to the address for such
Stockholder set forth opposite such Stockholder's name on
the execution pages hereof.
IN WITNESS WHEREOF, each of the
Stockholders and FSAC, have caused this Agreement to be duly
executed on the date hereof.
One World Financial Center WELSH, CARSON, ANDERSON
Suite 3601 & STOWE VI, L.P.
New York, New York 10281
By WCAS VI Partners, L.P.
General Partner
850,884 shares of EBIC Common Stock By: /s/ Patrick J. Welsh
Name:
Title:
One World Financial Center WCAS INFORMATION
Suite 3601 PARTNERS, L.P.
New York, New York 10281
By WCAS INFO Partners,
General Partner
14,562 shares of EBIC Common Stock By: /s/ Patrick J. Welsh
Name:
Title:
Two World Financial Center DONALD R.A. MARSHALL
Suite 8400
New York, New York 10281
197,823 shares of EBIC Common Stock /s/ Donald R.A. Marshall
Two World Financial Center ALISTAIR H. JOHNSTONE
Suite 8400
New York, New York 10281
119,870 shares of EBIC Common Stock /s/ Alistair H. Johnstone
Two World Financial Center KEITH E. REIHL
Suite 8400
New York, New York 10281
50,362 shares of EBIC Common Stock /s/ Keith E. Reihl
Two World Financial Center BRIAN G. CLARK
Suite 8400
New York, New York 10281
70,320 shares of EBIC Common Stock /s/ Brian G. Clark
Two World Financial Center WALTER E. DULSKI
Suite 8400
New York, New York 10281
53,977 shares of EBIC Common Stock /s/ Walter E. Dulski
GILBERT SCHARF
333,333 shares of FSAC Common Stock /s/ Gilbert Scharf
MICHAEL SCHARF
166,667 shares of FSAC Common Stock /s/ Michael Scharf
FINANCIAL SERVICES
ACQUISITION CORPORATION
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman, President
and Chief Executive
Officer
MAJORITY STOCKHOLDERS' AGREEMENT
MAJORITY STOCKHOLDERS' AGREEMENT (this "Agreement"), dated
as of March 8, 1996, by and among Financial Services Acquisition
Corporation, a Delaware corporation ("FSAC"), EBIC Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of FSAC ("Sub")
and Welsh, Carson, Anderson & Stowe, VI, L.P., a Delaware limited
partnership ("WCAS VI").
WHEREAS, FSAC, Sub and Euro Brokers Investment Corporation,
a Delaware corporation ("EBIC"), concurrently with the execution and
delivery of this Agreement will enter into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), provid-
ing for, among other things, the merger (the "Merger") of Sub with
and into EBIC, as a result of which the outstanding shares of Common
Stock, par value $.001 per share ("EBIC Common Stock"), of EBIC will
be converted into the right to receive (x) Common Stock, par value
$.001 per share, of FSAC, (y) Series B Redeemable Common Stock Pur-
chase Warrants of FSAC and (z) cash, without interest;
WHEREAS, as of the date hereof, WCAS VI owns (either
beneficially or of record) 850,884 shares of EBIC Common Stock;
WHEREAS, concurrently with the execution and delivery of
the Merger Agreement and as a condition and inducement to FSAC and
Sub's willingness to enter into the Merger Agreement, FSAC, Sub and
WCAS VI are entering into this Agreement with respect to, among
other things, the making of certain representations and certain
agreements by WCAS VI in connection with the Merger and the trans-
actions contemplated thereby.
NOW, THEREFORE, in consideration of these premises and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
Defined terms used in this Agreement without separate
definition shall, unless otherwise noted, have the meaning ascribed
to such terms in the Merger Agreement. Each of the parties hereto
acknowledges receipt and review of a copy of the Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WCAS VI
WCAS VI represents and warrants to each of FSAC and Sub as
follows:
Section 2.1. Organization. WCAS VI is a limited partner-
ship duly organized and validly existing under the laws of the State
of Delaware. The sole general partner of WCAS VI is WCAS VI Partners,
L.P., a limited partnership duly organized and validly existing under
the laws of the State of Delaware, and the general partners of WCAS
VI Partners, L.P. are the individuals identified on a separate list
heretofore furnished by WCAS VI to FSAC.
Section 2.2. Authority Relative to this Agreement.
WCAS VI has the requisite partnership power and authority to execute
and deliver this Agreement and all Related Agreements and other
agreements to be executed by it as contemplated by the Merger Agree-
ment (collectively, the "WCAS Documents") and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the WCAS Documents and the consum-
mation by WCAS VI of the transactions contemplated on its part
hereby and thereby, have been duly authorized by WCAS VI Partners,
as the general partner of WCAS VI, and no other partnership
proceedings on the part of WCAS VI are necessary to authorize this
Agreement or any WCAS Documents or for WCAS VI to consummate the
transactions contemplated hereby or thereby. Each of this Agreement
and all WCAS Documents has been duly and validly executed and
delivered by WCAS VI and constitutes a valid and binding agreement
of WCAS VI, enforceable against WCAS VI in accordance with its
respective terms.
Section 2.3. Consents; No Violations. Neither the execu-
tion, delivery and performance by WCAS VI of this Agreement nor any
WCAS Documents, nor the consummation by WCAS VI of the transactions
contemplated hereby or thereby, will (i) conflict with or result in
any breach of any provisions of the partnership agreement or other
organizational documents of WCAS VI, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination, cancel-
lation or acceleration) under, or result in the creation of a Lien on
any property or asset of the Company or any of its Subsidiaries
pursuant to, any of the terms, conditions or provisions of any Con-
tract to which WCAS VI is a party, (iii) require the consent from or
the giving of notice to a third party pursuant to, the terms, condi-
tions or provisions of any such Contract, or (iv) violate any law,
order, writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to WCAS VI.
Section 2.4. Approvals. Except as set forth in Schedule
4.8 to the Merger Agreement, no filing with, or a permit, authoriza-
tion, notification, consent or approval of, any Governmental Entity
is required or necessary for (i) the valid execution, delivery and
performance by WCAS VI of this Agreement and all WCAS Documents or
(ii) the consummation by WCAS VI of the transactions contemplated
hereby or thereby.
Section 2.5. Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by
WCAS VI with respect to itself for inclusion in (i) the Registration
Statement or (ii) the Proxy Statements, will, in the case of the
Registration Statement, at the time it becomes effective and at the
Effective Time or, in the case of the Proxy Statements or any amend-
ments thereof or supplements thereto, at the time of the mailing of
the Proxy Statements and any amendments or supplements thereto, and
at the time of the meeting of stockholders of EBIC to be held in
connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading.
Section 2.6. 1994 Stock Acquisition. In connection with
the Stock Purchase Agreement, dated as of May 10, 1994, among EBIC,
WCAS VI and certain others (the "Stock Purchase Agreement"), and the
transactions contemplated thereby, the following events have hereto-
fore occurred or will occur prior to the Closing of the Merger (de-
fined terms used in the balance of this Section 2.6 shall have the
meanings assigned to them in the Stock Purchase Agreement): (i) the
termination of the Stockholders Agreement, the Pledge Agreement, the
Escrow Agreement (without having effected the Recapitalization and
without EBIC or its Subsidiaries having incurred any liability, in
connection therewith, whether to its debt or equity holders or other-
wise), the Note Purchase Agreement and the agreements listed on
Schedule 4.02(d) to the Stock Purchase Agreement, (ii) the release and
termination of all security interests held by WCAS VI in the assets of
EBIC and its Subsidiaries (including by the filing of UCC-3 financing
statements in the jurisdictions listed on Schedule 4.02(c) to the
Stock Purchase Agreement) and (iii) the delivery to EBIC of all of the
notes and stock certificates listed on Schedule 4.02(e) to the Stock
Purchase Agreement, together with stock powers and other transfer
forms, as applicable, duly executed in blank.
Section 2.7. Brokers. No broker, finder or financial
advisor has acted on behalf of WCAS VI in connection with this Agree-
ment or the Merger, and there are no brokerage, finder's or other fees
or commissions payable in connection with this Agreement or the Merger
based upon any arrangements made by or on behalf of WCAS VI.
ARTICLE III
COVENANTS AND AGREEMENTS OF WCAS VI
WCAS VI covenants and agrees with each of FSAC and Sub as
follows:
Section 3.1. No Solicitation. Prior to the Effective
Time, WCAS VI agrees that neither it, nor any of its directors,
partners, officers, employees, agents or representatives of the
foregoing, will, directly or indirectly, solicit, initiate, facilitate
or encourage (including by way of furnishing or disclosing non-public
information) any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving
EBIC, or any of its Subsidiaries, or the acquisition of all or any
significant assets or any capital stock of EBIC (including any of the
shares of EBIC Common Stock held by WCAS VI), or any of its Subsidiar-
ies (an "Acquisition Transaction"), or negotiate, explore or otherwise
engage in substantive discussions with any person (other than FSAC,
EBIC and their respective representatives) with respect to any Acqui-
sition Transaction or enter into any agreement, arrangement or under-
standing with respect to (or consummate) any such Acquisition Transac-
tion or which would require EBIC to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by the
Merger Agreement. WCAS VI agrees to immediately advise FSAC in
writing of any inquiries or proposals (or desire to make a proposal)
received by (or indicated to), any such information requested from, or
any such negotiations or discussions sought to be initiated or contin-
ued with, any of it, its Subsidiaries, or any of the respective
directors, partners, officers, employees, agents or representatives of
the foregoing, in each case from a person (other than FSAC, EBIC and
their respective representatives) with respect to an Acquisition
Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon FSAC's request,
the status thereof.
Section 3.2. Reasonable Efforts. Subject to the terms and
conditions herein provided, WCAS VI hereby agrees to use its reason-
able efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, the Merger Agreement and
the Related Agreements to which it is a party, including, without
limitation, the obtaining of all necessary waivers, consents and
approvals and the effecting of all necessary registrations and filings
required to be obtained by WCAS VI. Without limiting the generality
of the foregoing, as promptly as practicable, WCAS VI (in conjunction
with EBIC, FSAC and Sub as provided in the Merger Agreement) shall (i)
make all filings and submissions under the HSR Act as may be reason-
ably required to be made by it in connection with this Agreement, the
Merger Agreement, the Related Agreements and the transactions contem-
plated hereby and thereby; and (ii) make all filings and submissions
as may be reasonably required to be made by it in connection with this
Agreement, the Merger Agreement, the Related Agreements and the
transactions contemplated hereby and thereby to or with any of the
Commodity Futures Trading Commission, the NFA, the Bank, The SFA, the
Ontario Securities Commission, the IDAC, the HKFE, the Bank of Japan
and the Ministry of Finance (Japan). WCAS VI will furnish to FSAC and
Sub, and FSAC and Sub will furnish to WCAS VI, such information and
assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. WCAS VI will provide
FSAC and Sub, and FSAC and Sub will provide WCAS VI, with copies of
all material written correspondence, filings and communications (or
memoranda setting forth the substance thereof) between such party or
any of its representatives and any Governmental Entity, with respect
to the obtaining of any waivers, consent or approvals and the making
of any registrations or filings, in each case that is necessary to
consummate the Merger and the other transactions contemplated in the
Merger Agreement and this Agreement. Unless otherwise required by
law, each party agrees that it (and its Subsidiaries and its and their
respective representatives) shall treat and hold in confidence all
non-public information so provided or shared with the other.
Section 3.3. Public Announcements. WCAS VI agrees that it
will not issue or cause to be issued any press release or otherwise
make any public statement with respect to this Agreement, the Merger
Agreement, the Related Agreements or the transactions contemplated
hereby or thereby without the prior consent of FSAC, which consent
shall not be unreasonably withheld or delayed; provided, however, that
such disclosure can be made without obtaining such prior consent if
(i) the disclosure is required by Applicable Law and (ii) WCAS VI has
first used its reasonable efforts to consult with FSAC about the form
and substance of such disclosure.
Section 3.4. Supplemental Disclosure. Until the Effective
Time, WCAS VI shall give prompt notice to FSAC of the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of
which would be likely to cause (i) any representation or warranty of
WCAS VI contained in this Agreement to be untrue or inaccurate or (ii)
any covenant or agreement of WCAS VI contained in this Agreement not
to be complied with or satisfied; provided, however, that the delivery
of any notice pursuant to this Section 3.4 shall not have any effect
for the purpose of determining the satisfaction of the conditions set
forth in Article VIII of the Merger Agreement or otherwise limit,
offset or otherwise affect any remedies available to any party.
ARTICLE IV
TERMINATION
Section 4.1. Termination. This Agreement shall automati-
cally terminate upon any termination of the Merger Agreement, without
the requirement of any further action by any party hereto.
ARTICLE V
GENERAL PROVISIONS
Section 5.1. Survival of Representations and Warranties.
All representations and warranties made by WCAS VI in this Agreement
shall survive the Effective Time and shall terminate at the close of
business on the day which is 12 months after the Effective Time.
Section 5.2. Amendment and Modification. At any time
prior to the Effective Time, this Agreement may be amended, modified
or supplemented only by written agreement (referring specifically to
this Agreement) of FSAC and WCAS VI with respect to any of the terms
contained herein.
Section 5.3. Waiver. At any time prior to the Effective
Time, FSAC and Sub, on the one hand, and WCAS VI, on the other hand,
may (i) extend the time for the performance of any of the obligations
or other acts of the other, (ii) waive any inaccuracies in the repre-
sentations and warranties of the other contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance by the
other with any of the agreements or conditions contained herein which
may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring
to this Agreement and signed on behalf of such party.
Section 5.4. Investigations. The representations and
warranties of WCAS VI contained herein shall not be deemed waived or
otherwise affected by any investigation made by any party hereto.
Section 5.5. Notices. All notices and other communica-
tions hereunder shall be in writing and shall be delivered personally
or by next-day courier or telecopied with confirmation of receipt, to
the parties at the addresses specified below (or at such other address
for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt
thereof). Any such notice shall be effective upon receipt, if person-
ally delivered or telecopied, or one day after delivery to a courier
for next-day delivery.
(a) If to FSAC or Sub, to:
Financial Services Acquisition
Corporation
667 Madison Avenue
11th Floor
New York, NY 10021
Attention: Gilbert Scharf
Telecopy: (212) 246-1514
with copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Roger Schwed, Esq.
Telecopy: (212) 735-2000
(b) if to WCAS VI to:
Welsh, Carson, Anderson
& Stowe VI, L.P.
One World Financial Center
Suite 3601
New York, NY 10281
Attention: Patrick Welsh
Telecopy: (212) 945-2016
with a copy to:
Reboul, MacMurray, Hewitt,
Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attention: William J. Hewitt, Esq.
Telecopy: (212) 841-5725
Section 5.6. Descriptive Headings. The headings contained
in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 5.7. Entire Agreement; Assignment. This Agreement
constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof.
This Agreement is not intended to confer upon any person not a party
hereto any rights or remedies hereunder. This Agreement shall not be
assigned by operation of law or otherwise; provided that FSAC or Sub
may assign its rights and obligations hereunder to a direct or indi-
rect subsidiary of FSAC, but no such assignment shall relieve FSAC or
Sub, as the case may be, of its obligations hereunder.
Section 5.8. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the provisions thereof relating to
conflicts of law.
Section 5.9. Severability. The provisions of this Agree-
ment shall be deemed severable and the invalidity or unenforceability
of any provisions hereof shall not affect the validity and enforce-
ability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any person or entity or any
circumstances, is invalid or unenforceable, (i) a suitable and equita-
ble provision shall be substituted therefor in order to carry out, so
far as may be valid and enforceable, the intent and purpose of such
invalid and unenforceable provision and (ii) the remainder of this
Agreement and the application of such provision to other persons,
entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect
the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 5.10. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of FSAC, Sub, and WCAS VI has
caused this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman, President and
Chief Executive Officer
EBIC ACQUISITION CORP.
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman and President
WELSH, CARSON, ANDERSON & STOWE
VI, L.P.
By WCAS VI Partners, L.P.,
General Partner
By: /s/ Patrick J. Welsh
Name:
Title:
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agree-
ment"), dated as of March 8, 1996 by and among Financial
Services Acquisition Corporation, a Delaware corporation
("FSAC"), EBIC Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of FSAC ("Sub"), Euro Brokers
Investment Corporation, a Delaware corporation (the "Compa-
ny"), Donald R.A. Marshall, President of the Company,
Welsh, Carson, Anderson & Stowe VI, L.P., a Delaware limit-
ed partnership ("WCAS VI" and, together with Mr. Marshall,
sometimes hereinafter referred to each as a "Representa-
tive" and together as the "Representatives") and United
States Trust Company of New York, as escrow agent (the
"Escrow Agent").
WHEREAS, FSAC, Sub and the Company,
concurrently with the execution and delivery of this Agree-
ment will enter into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), providing
for, among other things, the merger (the "Merger") of Sub
with and into the Company, as a result of which the out-
standing shares of Class B Common Stock, par value $.001
per share ("Company Common Stock"), of the Company will be
converted into the right to receive (x) Common Stock, par
value $.001 per share ("Merger Stock"), of FSAC, (y) Series
B Redeemable Common Stock Purchase Warrants ("Merger War-
rants"), of FSAC and (z) cash, without interest (the "Cash
Consideration");
WHEREAS, capitalized terms used but
not defined herein shall have the meanings assigned to such
terms in the Merger Agreement;
WHEREAS, Article III of the Merger
Agreement provides that (a) at the Effective Time, FSAC
shall deposit with the Escrow Agent (i) 10% of the Merger
Stock and (ii) $2 million of the Cash Consideration and
(iii) to the extent there are any Dissenting Shares, (x)
that portion of the Merger Stock and Merger Warrants that
otherwise would have been paid to the Dissenters and (y) an
additional portion of the Cash Consideration equal to the
product of the Per Share Book Value and the number of
Dissenting Shares, and (b) after the making of the adjust-
ments contemplated by Section 3.7 of the Merger Agreement,
FSAC shall deposit with the Escrow Agent, if applicable,
the Positive Cash Adjustment;
WHEREAS, all such securities and
cash that are deposited from time to time with the Escrow
Agent (together with all interest thereon, all accretions
thereto and all dividends with respect to the Escrow Stock,
hereinafter the "Escrow Funds") are to be held and released
by the Escrow Agent in accordance with the terms of this
Agreement and the Merger Agreement;
NOW, THEREFORE, in consideration of
the premises and the respective agreements hereinafter set
forth, the parties hereto hereby agree as follows:
ARTICLE I
DELIVERY OF ESCROW FUNDS
Section 1.1.(a) At the Effective
Time, FSAC shall deposit with the Escrow Agent (i) the
Escrow Stock, (ii) the Cash Escrow Amount and (iii) to the
extent there are any Dissenting Shares, the Section 262
Escrow Securities and (b) after the making of the adjust-
ments contemplated by Section 3.7 of the Merger Agreement,
FSAC shall deposit with the Escrow Agent, if applicable,
the Positive Cash Adjustment in accordance with and subject
to the limitations of Section 3.7(f)(i) of the Merger
Agreement (any Positive Cash Adjustment so deposited shall,
for purposes of this Agreement, be deemed to become part of
the Cash Escrow Amount). The Escrow Agent hereby acknowl-
edges receipt of the specific Escrow Funds identified on
Schedule 1.1 hereto. The Escrow Agent agrees to accept and
hold all Escrow Funds on deposit with it from time to time
in accordance with the terms of this Agreement.
ARTICLE II
INVESTMENT OF CASH ESCROW AMOUNT
Section 2.1. The Escrow Agent
shall promptly invest the Cash Escrow Amount, in such
instruments and of such maturities, as FSAC and the Repre-
sentatives may from time to time jointly instruct the
Escrow Agent in writing. In the absence of such instruc-
tions (including if such instructions are not provided at
the Effective Time), the Escrow Agent shall promptly invest
the Cash Escrow Amount, at its own discretion, in any or
all of the following instruments; provided, however, that
no such investment shall be of more than forty-five (45)
days' duration: (i) direct obligations of the United
States Treasury; (ii) commercial paper having a rating
respectively of P-1 and A-1+ from Moody's Investor's
Service ("Moody's") and Standard and Poor's Corporation
("S&P"); provided, however, that the long-term unsecured
debt rating of the issuing entity issued from Moody's is at
least Aa3; (iii) demand or time deposits in, or bankers
acceptance or certificates of deposit issued by, a bank
with commercial paper ratings from Moody's and S&P of
respectively P-1 and A-1+ and an unsecured long-term debt
rating from Moody's of at least Aa3; or (iv) shares in the
Money Fund, Government Money Fund and Treasury Money Fund
issued by UST Master Funds.
ARTICLE III
DEMANDS FOR PAYMENT AND RELEASE OF
CASH ESCROW AMOUNT AND SECTION 262 ESCROW SECURITIES
Section 3.1. In the event that
after the adjustments required by Section 3.7 of the Merger
Agreement there is a Negative Cash Adjustment, FSAC and the
Representatives shall jointly instruct the Escrow Agent to
release to FSAC from the Cash Escrow Amount the amount of
such Negative Cash Adjustment in accordance with and sub-
ject to the limitations of Section 3.7 (f)(ii) of the
Merger Agreement, and the Escrow Agent shall promptly
release to FSAC from the Cash Escrow Amount the amount of
such Negative Cash Adjustment, in accordance with such
instruction.
Section 3.2. After payments have
been made (or the right to payment has been forfeited) with
respect to all Dissenting Shares, FSAC and the Representa-
tives shall jointly instruct the Escrow Agent to release
the Section 262 Securities in accordance with the provi-
sions of Section 3.4(d) of the Merger Agreement, and the
Escrow Agent shall promptly release such Section 262 Escrow
Securities, in accordance with such instruction.
Section 3.3. To the extent that
the Surviving Corporation makes any payments to Dissenters
with respect to their Dissenting Shares (either pursuant to
a settlement with such Dissenters with the prior written
approval of FSAC or pursuant to Delaware court appraisal
proceedings), FSAC and the Representatives shall jointly
instruct the Escrow Agent (i) to release to the Surviving
Corporation from the Cash Escrow Amount the amount of such
payments and (ii) to the extent the Cash Escrow Amount then
remaining is insufficient therefor, to release to FSAC such
portion of the Escrow Stock as is equal to such shortfall
(valued in accordance with Section 4.8 hereof), and the
Escrow Agent shall promptly release the amount of such
payments to the Surviving Corporation from the Cash Escrow
Amount (and, if applicable, to FSAC from the Escrow Stock),
in accordance with such instruction.
Section 3.4. Following the making
of whichever of the two adjustments contemplated by Sec-
tions 3.7(f)(i) and (ii) of the Merger Agreement is appli-
cable, and provided that all payments have been made (or
the right to payment has been forfeited) with respect to
all Dissenting Shares, FSAC and the Representatives shall
jointly instruct the Escrow Agent to release the remaining
Cash Escrow Amount, if any, in accordance with the provi-
sions of Section 3.4(e) of the Merger Agreement, and the
Escrow Agent shall promptly release such remaining portion
of the Cash Escrow Amount, in accordance with such instruction.
Section 3.5. In the event that any
of FSAC or the Representatives at any time believes that
the terms of the Merger Agreement and/or Article III of
this Agreement require the provision of a joint instruction
to the Escrow Agent with respect to the release of Escrow
Funds, and either or both of the others do not agree (or do
not agree on the contents of the instruction), any of FSAC
or the Representatives may (i) with the consent of the
others, initiate arbitration in accordance with Article V
of this Agreement to resolve such dispute or (ii) absent
such consent, initiate suit in a court of appropriate
jurisdiction to resolve such dispute.
ARTICLE IV
DEMANDS FOR PAYMENT AND RELEASE OF ESCROW STOCK
Section 4.1. If an Indemnified
Party, including FSAC (the "Payee") claims indemnification
from and against Damages in accordance with Article X of
the Merger Agreement, the Payee may deliver to the Escrow
Agent a certificate (the "Certificate") demanding that the
Escrow Agent release to the Payee a number of shares of the
Escrow Stock (the "Demand Amount") having a valuation
(pursuant to Section 4.8 hereof) that is equal to the
Damages. The Certificate shall (i) specify the amount of
the Damages and the Demand Amount, (ii) attach the calcula-
tion of the Damages and the Demand Amount, including in
reasonable detail the basis thereof, and (iii) certify that
each Representative and FSAC (if not the Payee) have been
delivered a copy of the Certificate. Upon its receipt, the
Escrow Agent shall also promptly forward a copy of the
Certificate to FSAC (if not the Payee) and each Representa-
tive.
Section 4.2. Unless each of the
Escrow Agent, FSAC (if not the Payee) and the Payee re-
ceives a written notice of objection (an "Objection") to
the Certificate from a Representative within twenty (20)
business days after the date of the Escrow Agent's forward-
ing to such Representative of the Certificate, the Repre-
sentatives shall be deemed to have consented to the release
from the Escrow Funds of the Demand Amount specified in the
Certificate (the "Deemed Consent Amount"), and the Certifi-
cate shall automatically become effective without further
action. Any Objection delivered by a Representative shall
also certify that such Objection has been delivered to each
of FSAC (if not the Payee) and the Payee. Upon its re-
ceipt, the Escrow Agent shall also promptly forward a copy
of such Objection to FSAC (if not the Payee) and the Payee.
Section 4.3. Any release of Escrow
Stock pursuant to this Agreement, regardless of the identi-
ty of the Payee delivering the Certificate, shall be made
only to FSAC. FSAC shall thereupon retire (and hold in
treasury) or cancel, in its discretion, such released
shares and, if the Payee is not FSAC, pay or cause to be
paid to the Payee, promptly following FSAC's receipt of
such released Escrow Stock, an amount of cash equal to the
valuation of such Escrow Stock (pursuant to Section 4.8
hereof).
Section 4.4. Notwithstanding
anything to the contrary in Sections 4.2, 4.5 or 4.6, the
Escrow Agent shall not release Escrow Stock until the
aggregate amount of the Cleared Damages (as hereinafter
defined) exceeds One Hundred Thousand Dollars ($100,000).
Once the aggregate amount of such Cleared Damages exceeds
$100,000, the Escrow Agent shall release to FSAC the full
amount of such Cleared Damages (including the amounts
aggregating to less than the $100,000 threshold). For each
subsequent Certificate delivered by a Payee to the Escrow
Agent, the Escrow Agent shall release to FSAC, in satisfac-
tion of any Cleared Damages with respect to such Certifi-
cate, an amount equal to the lesser of (i) such Cleared
Damages and (ii) the remaining balance of the Escrow Stock.
The term "Cleared Damages" shall refer to and mean as many
of the following as are applicable to any Certificate: (i)
the Deemed Consent Amount, (ii) the Unchallenged Amount (as
hereinafter defined), (iii) the Award Amount (as hereinaf-
ter defined) and (iv) the Instructed Amount (as hereinafter
defined).
Section 4.5. In the event that a
Representative delivers to the Escrow Agent, FSAC (if not
the Payee) and the Payee an Objection to the Certificate
within the time frame specified in Section 4.2, the Escrow
Agent shall not release any of the Escrow Stock to FSAC in
satisfaction of the Demand Amount unless and until the
Escrow Agent receives (i) a certified copy of an award in
arbitration from the Arbitrator (as defined below) specify-
ing the amount of Escrow Stock, if any, so to be released
(the "Award Amount") or (ii) a subsequent joint instruction
from FSAC and the Representatives instructing the amount of
Escrow Stock so to be released (the "Instructed Amount").
If both Representatives deliver an Objection within the
time frame specified in Section 4.2, the arbitrations with
respect to each Objection shall be heard together. Prompt-
ly upon receipt of such a certified copy of an award (or a
subsequent joint instruction), the Escrow Agent shall
release the portion of the Escrow Stock as specified there-
in, if any, to FSAC in accordance with such award (or
instruction), and such release shall be deemed to satisfy
the Demand Amount of the Certificate.
Section 4.6. In any Objection to
the Certificate, a Representative may state an objection to
all or a portion of the Demand Amount sought in the Certif-
icate. If such Representative objects to only a portion of
such Demand Amount, such Objection shall instruct the
Escrow Agent to release, and the Escrow Agent shall re-
lease, to FSAC, in satisfaction of the unobjected-to por-
tion of the Demand Amount, a portion of the Escrow Stock
equal to such unobjected-to portion (the "Unchallenged
Amount"). If both Representatives deliver Objections which
object to only a portion of the Demand Amount, the Escrow
Agent shall release a portion of the Escrow Stock equal to
(and the Unchallenged Amount shall constitute) the lesser
unobjected-to portion of the Demand Amount.
Section 4.7. Notwithstanding
anything to the contrary contained in this Agreement, the
Escrow Agent shall release to each Holder a number of whole
shares of Escrow Stock equal to such Holder's Proportionate
Interest in the remaining Escrow Stock upon the date which
shall be 12 months after the Effective Time, unless prior
to such date any Payee has delivered a Certificate to the
Escrow Agent and such Payee's entitlement to Escrow Stock
has not been finally determined and satisfied in accordance
with the terms of this Agreement, in which case, the Escrow
Stock shall not be released to any Holder until final
determination and satisfaction of all such pending Certifi-
cates.
Section 4.8. For all purposes
under this Agreement, a share of Escrow Stock shall be
valued at the average closing bid price of a share of FSAC
Common Stock as reported (i) on the OTC Bulletin Board or
(ii) if not quoted at such time on the OTC Bulletin Board,
the Pink Sheets, in each case for the last five trading
days immediately preceding the Effective Time.
Section 4.9. Notwithstanding
anything to the contrary contained in this Agreement, the
Escrow Agent shall release the Escrow Funds, or any portion
thereof, in accordance with any instrument in writing
expressly referring to this Agreement and signed by FSAC
and each Representative.
ARTICLE V
ARBITRATION
Section 5.1 Each Representative
shall be entitled to dispute a Certificate, provided that
such Representative raises such dispute in an Objection
delivered to the Escrow Agent within the time frame speci-
fied in Section 4.2. Any Objection delivered by a Repre-
sentative as to the Certificate shall specify in reasonable
detail the nature of and the reasons for the objections
described therein and what such Representative believes the
Damages and the Demand Amount should be, if any, including
in reasonable detail the basis thereof.
Section 5.2 If, within 20 busi-
ness days after delivery of an Objection, the Payee, FSAC
(if not the Payee) and each Representative have been unable
to reach agreement with respect to any Demand Amount that
is the subject of such Objection (the "Challenged Amount"),
the dispute shall, at the instance of either FSAC or either
Representative, be referred to the Arbitrator (as defined
in the Merger Agreement) or, if any of FSAC or the Repre-
sentatives object, to a partner knowledgeable about the
financial services industry at such other nationally-recog-
nized accounting firm as the parties may agree and which is
not affiliated and does not have a conflict with any of the
parties (the "Arbitrator").
Section 5.3. The Arbitrator shall
be charged with making a determination, in accordance with
the Merger Agreement and this Agreement, of the Challenged
Amount and the Demand Amount. The parties making the
submission shall request the Arbitrator to render a deci-
sion within 60 days. Any such determination of the Arbi-
trator shall be final and binding upon the parties and
shall not, in the absence of manifest error, be subject to
judicial review.
Section 5.4. The fees and expenses
of the Arbitrator shall be paid by FSAC.
Section 5.5. The parties (on
behalf of themselves and any Holders they represent) agree
that any dispute arising as to the amount of any payment to
be made pursuant to Article X of the Merger Agreement shall
be resolved solely and exclusively pursuant to the proce-
dures set forth or contemplated in such Article X and this
Article V.
ARTICLE VI
RIGHTS OF AGENT
Section 6.1. The Escrow Agent
shall have no duties or responsibilities except those
expressly set forth herein.
Section 6.2. No person, firm or
corporation will be recognized by the Escrow Agent as a
successor or assignee of FSAC, Sub, the Company or either
Representative until there shall be presented to the Escrow
Agent evidence satisfactory to it of such succession or
assignment.
Section 6.3. The Escrow Agent may
rely upon any instrument in writing believed in good faith
by it to be genuine and sufficient and properly presented
and shall not be liable or responsible for any action taken
or omitted in accordance with the provisions thereof.
Section 6.4. The Escrow Agent
shall not be liable or responsible for any act it may do or
omit to do except for its negligence, bad faith or willful
misconduct. The Escrow Agent may consult with counsel and
shall be fully protected with respect to any action taken
or omitted by it in good faith on written advice of counsel.
Section 6.5. FSAC shall (i) reim-
burse the Escrow Agent for all reasonable expenses incurred
by the Escrow Agent in connection with its duties hereunder
and (ii) indemnify and hold harmless the Escrow Agent
against any and all losses, claims, liabilities, costs,
payments and expenses, including reasonable legal fees for
counsel who may be selected by the Escrow Agent, which may
be imposed upon or incurred by the Escrow Agent hereunder,
except as a result of the negligence, bad faith or willful
misconduct of the Escrow Agent. The compensation of the
Escrow Agent shall be $5,000 per annum for each year fol-
lowing the Effective Time (payable in full at the Effective
Time for the first year and thereafter payable quarterly in
advance) or as otherwise agreed upon from time to time by
FSAC, the Representatives and the Escrow Agent.
Section 6.6. Each party shall from
time to time deliver to the Escrow Agent certificates as to
the identity of the persons authorized to give instruc-
tions, certificates and notices hereunder and otherwise to
act on behalf of such party, which certificates shall
contain specimens of such persons' signatures.
ARTICLE VII
NO FRACTIONS; PAYMENT OF INTEREST
Section 7.1. No certificates or
scrip representing fractional interests in shares of Escrow
Stock or in Section 262 Securities shall be released by the
Escrow Agent. All fractional interests in a share of
Escrow Stock or in Section 262 Securities that a person at
any given time would otherwise be entitled to receive under
this Agreement shall be aggregated. If after such aggrega-
tion, a fractional interest in a share of Escrow Stock or
in Section 262 Securities would result, such fractional
interest shall be disregarded and such person shall only be
entitled to receive the resulting whole number of shares of
Escrow Stock and/or Section 262 Securities.
Section 7.2. All releases of cash
or securities from the Escrow Funds shall include, in the
case of cash, a pro rata amount of any interest earned
thereon while in escrow and, in the case of securities, any
dividends or distributions made thereon or other accretions
thereon while in escrow.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. FSAC, each Represen-
tative and any other relevant party to this Agreement shall
attempt in good faith to resolve any disputes arising
hereunder promptly.
Section 8.2. This Agreement shall
terminate after all Escrow Funds have been released in
accordance with the terms hereof.
Section 8.3. The section headings
contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpreta-
tion of this Agreement.
Section 8.4. All notices, re-
quests, demands, certificates or other communications
required or permitted to be given hereunder shall be in
writing and shall be deemed given if delivered personally
(including by courier), or sent by facsimile transmission.
Any such notice shall be deemed given when so delivered
personally, or if sent by facsimile transmission, when
transmitted, to the following addresses, or to such other
addresses (with copies to such other persons) as shall be
notified subsequently in writing in accordance herewith:
(a) if to FSAC, the Company or
Sub, to:
Financial Services Acquisition
Corporation
667 Madison Avenue
11th Floor
New York, NY 10021
Attention: Gilbert Scharf
Telecopy: (212) 246-1514
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Roger Schwed, Esq.
Telecopy: (212) 735-2000
(b) if to WCAS VI, to:
Welsh, Carson, Anderson & Stowe VI, L.P.
One World Financial Center
Suite 3601
New York, NY 10281
Attention: Patrick J. Welsh
Telecopy: (212) 945-2016
with a copy to:
Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, NY 10111
Attention: William J. Hewitt, Esq.
Telecopy: (212) 841-5725
(c) if to Mr. Marshall:
Euro Brokers Investment Corporation
Two World Trade Center
Suite 8400
New York, NY 10048
Attention: Donald R. A. Marshall
Telecopy: (212) 748-7329
(d) if to the Escrow Agent:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attention: Margaret Ciesmelewski
Telecopy: (212) 852-1626
A copy of any notice, request,
demand, certificate or other communication given hereunder
by any party shall be delivered to each other party to this
Agreement as well as to the addressee at the same time as
it is given to the addressee.
Section 8.5. This Agreement may be
executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 8.6. This Agreement shall
inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, personal
representatives, successors and assigns, provided that any
assignment of this Agreement or the rights hereunder by any
party hereto without the written consent of the other
parties shall be void. Except for Indemnified Parties,
nothing in this Agreement, express or implied, is intended
to confer upon any other person any rights or remedies
under or by reason of this Agreement.
Section 8.7. Subject to the arbi-
tration provisions hereof, this Agreement shall be governed
by and construed and enforced in accordance with the laws
of the State of Delaware.
Section 8.8. No consent or waiver,
expressed or implied, by any party to or of any breach or
default by any other in the performance by the other of its
obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default in
the performance by such party of the same or any obliga-
tions of the party. Except as otherwise expressly provided
herein, failure on the part of any party to complain of any
act or failure to act of the other party or to declare the
other party in default, irrespective of how long such
failure continues, shall not constitute a waiver by that
party of its rights under this Agreement or otherwise.
Section 8.9. No modification,
waiver or discharge of this Agreement shall bind any party
unless it is writing, specifically refers to this Agreement
and is signed by or on behalf of such party by a duly
authorized officer (in the case of a party that is a corpo-
ration) thereof.
Section 8.10. The provisions of
this Agreement shall be deemed severable and the invalidity
or unenforceability of any provisions hereof shall not
affect the validity and enforceability of the other provi-
sions hereof. If any provision of this Agreement, or the
application thereof to any person or entity or any circum-
stances, is invalid or unenforceable, (i) a suitable and
equitable provision shall be substituted therefor in order
to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid and unenforceable provi-
sion and (ii) the remainder of this Agreement and the
application of such provision to other persons, entities or
circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of
such provision, or the application thereof, in any other
jurisdiction.
Section 8.11. In the event of any
conflict between the terms of this Agreement and the Merger
Agreement, the terms of the Merger Agreement shall control.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed by
their authorized representatives, all as of the date first
above written.
FINANCIAL SERVICES ACQUISITION
CORPORATION
By /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman, President
and Chief Executive
Officer
EBIC ACQUISITION CORP.
By /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman and President
EURO BROKERS INVESTMENT
CORPORATION
By /s/ Keith E. Reihl
Name: Keith E. Reihl
Title: Senior Vice President
WELSH, CARSON, ANDERSON
& STOWE VI, L.P.
By WCAS VI Partners, L.P.
General Partner
By Patrick J. Welsh
DONALD R. A. MARSHALL
/s/ Donald R.A. Marshall
UNITED STATES TRUST COMPANY OF NEW YORK
By /s/ Margaret M. Ciesmelewski
Name: Margaret M. Ciesmelewski
Title: Assistant Vice President
EMPLOYMENT AGREEMENT
by and between
FINANCIAL SERVICES ACQUISITION CORPORATION
and
Gilbert Scharf
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 8,
1996, by and between Gilbert Scharf (the "Executive"), and
Financial Services Acquisition Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors
of the Company (the "Board") desires to employ the Executive
and the Executive desires to furnish services to the Company
on the terms and conditions hereinafter set forth; and
WHEREAS, the parties desire to
enter into this agreement setting forth the terms and condi-
tions of the employment relationship of the Executive with
the Company;
NOW, THEREFORE, in consideration
of the premises and the mutual agreements set forth below,
the parties hereby agree as follows:
(1) Employment. The Company
hereby agrees to employ the Executive, and the Executive
hereby accepts such employment, on the terms and conditions
hereinafter set forth.
(2) Term. The period of
employment of the Executive by the Company hereunder (the
"Employment Period") shall commence on the closing date (the
"Closing Date") of the merger contemplated by the Agreement
and Plan of Merger dated as of March 8, 1996 by and among
the Company, EBIC Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of the Company, and Euro
Brokers Investment Corporation, a Delaware corporation
("EBIC"), and ending on the third anniversary of the Closing
Date, unless further extended as provided in this Section 2
or sooner terminated in the event that the Executive's
employment is terminated without breach of this Agreement as
provided in Section 6. On the second anniversary of the
Closing Date and on each successive anniversary thereafter,
the term of the Executive's employment shall be automatical-
ly extended for one (1) additional year unless, on or prior
to such anniversary, the Company shall have delivered to the
Executive or the Executive shall have delivered to the
Company written notice that the term of the Executive's
employment hereunder will not be extended.
(3) Position and Duties.
During the Employment Period, the Executive shall serve as
Chairman of the Board, President and Chief Executive Officer
of the Company and Vice Chairman of the board of directors
of EBIC. The Executive's responsibilities and authority
shall include such responsibilities and authority as may
from time to time be assigned to the Executive by the Board,
provided that such responsibilities and authority are con-
sistent with the Executive's position with the Company.
(4) Compensation and Related
Matters.
(a) Base Salary. As
compensation for the performance by the Executive of his
obligations hereunder, during the Employment Period, the
Company shall pay the Executive a base salary at the rate of
$450,000 per annum ("Base Salary"). Base Salary shall be
paid in approximately equal installments in accordance with
the Company's customary payroll practices. Base Salary may
be increased from time to time in accordance with the normal
business practices of the Company and, if so increased,
shall not thereafter during the Employment Period be de-
creased.
(b) Bonuses. During the
Employment Period, the Executive shall be eligible to re-
ceive such annual bonus (the "Annual Bonus") as may be
awarded to him as the Board shall determine, but only if the
book value per share of the Company's common stock shall
have increased for the period with respect to which the
Annual Bonus is being determined, or if an annual incentive
plan is adopted by the Company or a subsidiary thereof, in
accordance with the terms of such plan.
(c) Expenses. The Company
shall promptly reimburse the Executive for all reasonable
business expenses incurred during the Employment Period by
the Executive in performing services hereunder, including
all expenses of travel and living expenses while traveling
on business or at the request of and in the service of the
Company, provided that such expenses are incurred and ac-
counted for in accordance with the policies and procedures
established by the Company.
(d) Other Benefits. The
Executive shall be entitled to participate in all of the
employee benefit plans and arrangements currently maintained
by the Company or a subsidiary thereof, in accordance with
the terms of such plans and arrangements, and shall be
entitled to participate in or receive benefits under any
employee benefit plan or arrangement made available by the
Company or a subsidiary thereof in the future to its execu-
tives and key management employees (including without limi-
tation each incentive plan, pension and retirement plan and
arrangement, supplemental pension and retirement plan and
arrangement, stock option plan, life insurance and health-
and-accident plan and arrangement, medical insurance plan,
disability plan, survivor income plan, relocation plan and
vacation plan), subject to and on a basis consistent with
the terms, conditions and overall administration of such
plans and arrangements. Nothing paid to the Executive under
any plan or arrangement presently in effect or made avail-
able in the future shall be deemed to be in lieu of the
salary payable to the Executive pursuant to subsection (a)
of this Section 4.
(e) Vacation. The Execu-
tive shall be entitled to the number of vacation days in
each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the
Company's vacation plan or policy as from time to time in
effect. The Executive shall also be entitled to all paid
holidays given by the Company to its executives.
(f) Services Furnished.
During the Employment Period, the Company shall furnish the
Executive with office space, stenographic assistance and
such other facilities and services as shall be suitable to
the Executive's position and adequate for the performance of
his duties as set forth in Section 3 hereof.
(5) Offices. Subject to
Section 3 hereof, the Executive agrees to serve without
additional compensation, if elected or appointed thereto, as
a director of the Company or any subsidiaries of the Company
and as a member of any committees of the board of directors
of any such corporations, and in one or more executive
positions of any of the Company's subsidiaries, provided
that the Executive is indemnified for serving in any and all
such capacities on a basis no less favorable than is cur-
rently provided to any other director of the Company or any
of its subsidiaries, or any such executive position, as the
case may be.
(6) Termination. The
Executive's employment hereunder may be terminated without
any breach of this Agreement only under the circumstances
set forth in the following subsections (a), (b), (c) and
(d):
(a) Death. The
Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a
result of the Executive's incapacity due to physical or
mental illness, the Executive shall have been absent from
the full-time performance of his duties hereunder for the
entire period of six consecutive months, and within thirty
(30) days after written Notice of Termination (as defined in
Section 7 hereof) is given shall not have returned to the
performance of his duties hereunder on a full-time basis,
the Company may terminate the Executive's employment hereun-
der for "Disability."
(c) Cause. The Company
may terminate the Executive's employment hereunder for
Cause. For purposes of this Agreement, the Company shall
have "Cause" to terminate the Executive's employment hereun-
der upon the occurrence of any of the following events:
(i) the conviction of the
Executive for the commission of a
felony; or
(ii) the willful and con-
tinuing failure by the Executive to
substantially perform his duties
hereunder (other than such failure
resulting from the Executive's inca-
pacity due to physical or mental
illness or subsequent to the issuance
of a Notice of Termination by the
Executive for Good Reason) after
demand for substantial performance is
delivered by the Company in writing
that specifically identifies the
manner in which the Company believes
the Executive has not substantially
performed his duties; or
(iii) the willful miscon-
duct by the Executive (including, but
not limited to, breach by the Execu-
tive of the provisions of Section 10
hereof) that is demonstrably and ma-
terially injurious to the Company or
its subsidiaries, whether monetarily
or otherwise.
Cause shall not exist unless and until the Company has
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds
(2/3) of the entire membership of the Board of Directors of
the Company at a meeting of such board called and held for
such purpose (after reasonable notice to the Executive and
an opportunity for the Executive, together with his counsel,
to be heard before such board), finding that in the good
faith opinion of such board, the Executive was guilty of the
conduct set forth in this Section 6(c) and specifying the
particulars thereof in detail. For purposes of this Section
6(c), no act or failure to act on the Executive's part shall
be considered "willful" unless done or failed to be done by
the Executive in bad faith and without reasonable belief
that the Executive's action or omission was in the best
interest of the Company.
(d) Good Reason. The
Executive may terminate his employment during the Employment
Period hereunder for "Good Reason" within 90 days after the
occurrence, without the written consent of the Executive, of
an event constituting a material breach of this Agreement by
the Company that has not been fully cured within ten (10)
days after written notice thereof has been given by the
Executive to the Company. The Executive's right to terminate
his employment hereunder for Good Reason shall not be af-
fected by his incapacity due to physical or mental illness.
(7) Termination Procedure.
(a) Notice of Termination.
Any termination of the Executive's employment by the Company
or by the Executive (other than termination pursuant to
Section 6(a) hereof) shall be communicated by written Notice
of Termination to the other party hereto in accordance with
Section 13. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
(b) Date of Termination.
"Date of Termination" shall mean (i) if the Executive's
employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated for
Disability pursuant to Section 6(b), thirty (30) days after
Notice of Termination (provided that the Executive shall not
have returned to the performance of his duties on a full-
time basis during such thirty (30) day period), (iii) if the
Executive's employment is terminated for Cause pursuant to
Section 6(c), the date specified in the Notice of Termina-
tion, which shall not be earlier than the date of the Notice
of Termination and (iv) if the Executive's employment is
terminated for any other reason, the date on which a Notice
of Termination is given or any later date (within 30 days)
set forth in such Notice of Termination.
(8) Compensation upon Termina-
tion or During Disability.
(a) Disability; Death.
During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical
or mental illness ("Disability Period"), the Executive shall
continue to receive his full Base Salary at the rate in
effect at the beginning of such period and continue as a
participant in all compensation and employee benefit plans
in which the Executive was participating pursuant to Section
4(d) until his employment is terminated pursuant to Section
6(b) and shall continue to receive such Base Salary for a
period of six months thereafter. Subsequent to the six-
month period following termination of the Executive's em-
ployment pursuant to Section 6(b), or in the event the
Executive's employment is terminated by reason of his death,
the Company shall have no further obligations to the Execu-
tive under this Agreement and the Executive's benefits shall
be determined under the Company's retirement, insurance and
other compensation programs then in effect in accordance
with the terms of such programs.
(b) By Company without
Cause or by the Executive for Good Reason. If during the
Employment Period the Executive's employment is terminated
by the Company other than for Cause or Disability or by the
Executive for Good Reason, then --
(i) in addition to any
amounts due the Executive pursuant to
Sections 4(a) or 4(b) hereof, the
Company shall continue to pay to the
Executive (or his legal representa-
tives or estate) his Base Salary as
in effect on the Date of Termination
for the remainder of the Employment
Period or, if greater, for one year;
and
(ii) the Company or a
subsidiary thereof shall maintain in
full force and effect, for the con-
tinued benefit of the Executive and
his dependents for the remainder of
the Employment Period or, if greater,
for one year, all medical, dental and
life insurance benefit plans and pro-
grams in which the Executive was en-
titled to participate immediately
prior to the Date of Termination,
provided that the Executive's contin-
ued participation is possible under
the general terms and provisions of
such plans and programs. In the
event that the Executive's participa-
tion in any such plan or program is
barred, the Company shall arrange to
provide the Executive and his depen-
dents with benefits substantially
similar to those which the Executive
and his dependents would otherwise
have been entitled to receive under
such plans and programs from which
their continued participation is
barred.
(c) By Company for Cause
or by the Executive Other than for Good Reason. If the
Executive's employment shall be terminated by the Company
for Cause or by the Executive other than for Good Reason,
then the Company shall pay the Executive his Base Salary (at
the rate in effect at the time Notice of Termination is
given) through the Date of Termination, and the Company
shall have no additional obligations to the Executive under
this Agreement except as set forth in subsection (d) of this
Section 8.
(d) Compensation Plans.
Following any termination of the Executive's employment, the
Company shall pay the Executive all unpaid amounts, if any,
to which the Executive is entitled as of the Date of Termi-
nation under any compensation plan or program of the Compa-
ny, at the time such payments are due.
(9) Mitigation. The Executive
shall not be required to mitigate the amount of any payment
provided for the Executive by seeking other employment or
otherwise, nor shall the amount of any payment or benefit
provided for the Executive hereunder be reduced by any
compensation earned by the Executive as the result of em-
ployment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Execu-
tive to the Company or otherwise except as is hereinafter
specifically provided in this Section 9. To the extent that
the Executive, during the relevant period described in
Section 8(b)(ii) hereof, shall receive from a subsequent
employer benefits similar to those to be provided under
Section 8(b)(ii), the benefits to be provided under the
provisions of said Section shall be correspondingly reduced.
(10) Confidential Information;
Noncompetition Requirement.
(a) Confidential Informa-
tion. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all trade secrets, confidential
information, and knowledge or data relating to the Company
and its businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company
and which shall not have been or now or hereafter have
become public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of this
Agreement). The Executive shall not, without the prior
written consent of the Company or as may otherwise be re-
quired by law or legal process, communicate or divulge any
such trade secrets, information, knowledge or data to anyone
other than the Company and those designated by the Company.
Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation
of this Section 10(a).
(b) Noncompetition Re-
quirement. During (1) any period that the Executive is
performing services hereunder, (2) a period of one (1) year
following a termination of the Executive's employment by the
Company for Cause or by the Executive other than for Good
Reason and (3) with respect to clauses (i) and (ii) of this
Section 10(b), any period that the Executive is entitled to
payment pursuant to Section 8(b)(i), the Executive agrees
that, without the prior written consent of the Company, he
shall not, directly or indirectly, with or without pay,
either as an employee, employer, consultant, agent, princi-
pal, partner, stockholder, corporate officer, director,
manager, investor, lender, advisor, owner, associate or in
any other individual or representative capacity, (i) solic-
it, entice, encourage or otherwise attempt to procure or
service by telephone or otherwise accounts from any custom-
ers (determined as of the Date of Termination) of the Compa-
ny or a subsidiary thereof for a business that is competi-
tive in any manner whatsoever (a "Competitive Business")
with the business in which the Company is then engaged (the
"Business"), (ii) solicit, entice or encourage any employee
(determined as of the Date of Termination) of the Company or
a subsidiary thereof to terminate such employee's employment
in order to work in a Competitive Business, or (iii) upon
the written request of the Company, engage or participate in
any Competitive Business unless such Competitive Business is
located more than seventy-five (75) miles from the site, as
of the Date of Termination, of the Company's executive
offices in New York and Connecticut; provided, however, that
trading by the Executive for his own benefit or in propri-
etary accounts shall not constitute a Competitive Business.
(c) Salary Continuation.
As additional consideration for the Executive's performance
of the covenant provided in subsection (b) (iii) of this
Section 10 relating to the twelve-month period following a
termination of his employment by the Company for Cause or by
the Executive other than for Good Reason, but only for so
long as the Executive shall continue to perform such cove-
nants, the Company shall pay the Executive for each month
during such twelve-month period an amount equal to one
twenty-fourth (1/24th) of the Executive's Base Salary. It
is agreed and understood that such payment constitutes full
and fair consideration to the Executive for observance of
such covenants and his possible abstinence from the Business
for such period.
(d) Injunctive Relief. In
the event of a breach or threatened breach of subsections
(a), (b) or (c) of this Section 10, the Executive agrees
that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach
or threatened breach, the Executive acknowledging that
damages would be inadequate and insufficient.
(11) Indemnification; Legal
Fees. The Company shall indemnify the Executive to the full
extent permitted by law and the by-laws of the Company for
all expenses, costs, liabilities and legal fees which the
Executive may incur in the discharge of his duties hereun-
der. The Company shall also reimburse the Executive for any
reasonable legal fees and expenses incurred by the Executive
in contesting or disputing any termination of the
Executive's employment hereunder or in seeking to obtain or
enforce any right or benefit provided by this Agreement, but
only if the Executive shall substantially prevail with
respect to the preponderance of the matters at issue. Such
payments shall be made within five (5) days after the
Executive's request for payment accompanied with such evi-
dence of his having prevailed (as described in the preceding
sentence) and such evidence of the fees and expenses in-
curred, as the Company may reasonably require. Any termina-
tion of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this
Section 11.
(12) Successors; Binding Agreement.
(a) Company's Successors.
The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of
the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succes-
sion had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as he would be
entitled to hereunder if the Company had terminated his
employment other than for Cause, except that for purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall
mean the Company as herein before defined and any successor
to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 12
or which otherwise becomes bound by all the terms and provi-
sions of this Agreement by operation of law.
(b) Executive's Succes-
sors. This Agreement and all rights of the Executive here-
under shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, execu-
tors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while
any amounts would still be payable to him hereunder if he
had continued to live, all such amounts unless otherwise
provided herein shall be paid in accordance with the terms
of this Agreement to the Executive's devisee, legatee, or
other designee or, if there be no such designee, to the
Executive's estate.
(13) Notice. For the purposes
of this Agreement, notices, demands and all other communica-
tions provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certi-
fied or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Gilbert Scharf
Box 1124
Ponte Vedra, Florida 32004
With a copy to the offices of
the Company
If to the Company:
Financial Services Acquisition
Corporation
667 Madison Avenue, 11th Floor
New York, New York 10021
or to such other address as any party may have furnished to
the others in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
(14) Miscellaneous. No provi-
sions of this Agreement may be modified, waived or dis-
charged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such offi-
cer of the Company as may be specifically designated by its
Board of Directors or its compensation committee. No waiver
by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
set forth expressly in this Agreement. This Agreement shall
be binding on all successors to the Company. The validity,
interpretation, construction and performance of this Agree-
ment shall be governed by the laws of the State of New York
without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal,
state or local law. The obligations of the Company under
Section 8 and of the Executive under Section 10 shall sur-
vive the expiration of the term of this Agreement. The
compensation and benefits payable to the Executive under
this Agreement shall be in lieu of any other severance
benefits to which the Executive may otherwise be entitled
upon his termination of employment under any severance plan,
program, policy or arrangement of the Company.
(15) Validity. The invalidity
or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in
full force and effect.
(16) Counterparts. This Agree-
ment may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(17) Entire Agreement. This
Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, ar-
rangements, communications, representations or warranties,
whether oral or written, by any officer, employee or repre-
sentative of any party hereto; and any prior agreement of
the parties hereto in respect of the subject matter con-
tained herein is hereby terminated and cancelled.
IN WITNESS WHEREOF, the parties
have executed this Agreement on the date first above written.
FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Michael Scharf
Name: Michael Scharf
Title: Vice President
/s/ Gilbert Scharf
Gilbert Scharf
TABLE OF CONTENTS
SECTION PAGE
1. Employment . . . . . . . . . . . 1
2. Term . . . . . . . . . . . . . . 1
3. Position and Duties . . . . . . 2
4. Compensation and Related Matters 2
(a) Base Salary . . . . . . . . 2
(b) Bonuses . . . . . . . . . . 2
(c) Expenses . . . . . . . . . . 2
(d) Other Benefits . . . . . . . 3
(e) Vacation . . . . . . . . . . 3
(f) Services Furnished . . . . . 3
5. Offices . . . . . . . . . . . . 3
6. Termination . . . . . . . . . . 4
(a) Death . . . . . . . . . . . 4
(b) Disability . . . . . . . . . 4
(c) Cause . . . . . . . . . . . 4
(d) Good Reason . . . . . . . . 5
7. Termination Procedure . . . . . 5
(a) Notice of Termination . . . 5
(b) Date of Termination . . . . 6
8. Compensation upon Termination or Dur-
ing Disability . . . . . . . . . 6
(a) Disability; Death . . . . . 6
(b) By Company
without Cause
or by the
Executive for
Good Reason . . . . . . . . 7
(c) By Company for
Cause or by
the Executive
Other than for
Good Reason . . . . . . . . 7
(d) Compensation Plans . . . . 8
9. Mitigation . . . . . . . . . . . 8
10. Confidential Information;
Noncompetition Requirement . . . 8
(a) Confidential Information . 8
(b) Noncompetition Requirement 9
(c) Salary Continuation . . . . 9
(d) Injunctive Relief . . . . . 10
11. Indemnification; Legal Fees . . 10
12. Successors; Binding Agreement . 10
(a) Company's Successors . . . 10
(b) Executive's Successors . . 11
13. Notice . . . . . . . . . . . . . 11
14. Miscellaneous . . . . . . . . . 12
15. Validity . . . . . . . . . . . . 12
16. Counterparts . . . . . . . . . . 12
17. Entire Agreement . . . . . . . . 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Financial Statements of Financial Services Acquisition Corporation for the
period ended March 31, 1996 and is qualified in its entirety by reference to
such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 38
<SECURITIES> 1008
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,436
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 15,961
<TOTAL-LIABILITY-AND-EQUITY> 20,436
<SALES> 0
<TOTAL-REVENUES> 244
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 62
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 182
<INCOME-TAX> 62
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
