<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996
REGISTRATION NO. 33-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
FINANCIAL SERVICES ACQUISITION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 9999 59-3262958
<S> <C>
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
667 MADISON AVENUE
NEW YORK, NEW YORK 10021
(212) 246-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------
GILBERT SCHARF
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
FINANCIAL SERVICES ACQUISITION CORPORATION
667 MADISON AVENUE
NEW YORK, NEW YORK 10021
(212) 317-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------
Copies to:
PATRICK J. FOYE, ESQ. WILLIAM J. HEWITT, ESQ.
ROGER E. SCHWED, ESQ. REBOUL, MACMURRAY, HEWITT,
SKADDEN, ARPS, SLATE, MAYNARD & KRISTOL 45
MEAGHER & FLOM ROCKEFELLER PLAZA NEW YORK,
919 THIRD AVENUE NEW YORK 10011
NEW YORK, NEW YORK 10022 (212) 841-5700
(212) 735-3000
-------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effectiveness of this Registration Statement and the
satisfaction or waiver of all other conditions to the Merger described in the
Proxy Statement/Prospectus.
-------------
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
-------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM PROPOSED MAXIMUM
BEING AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- -------------------------------------- --------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share ("Common Stock") ............... 4,641,666(1) N.A. $19,375,869.80(2) $ 6,681.33(3)
- -------------------------------------- --------------- ----------------
Series B Redeemable Common Stock
Purchase Warrants ("Warrants") ...... 7,566,666(4) N.A.
- -------------------------------------- --------------- ---------------- ----------------- ----------------
Shares of Common Stock underlying the
Warrants ............................. 7,566,666 N.A. $37,833,330.00(5) $13,045.98(3)
- -------------------------------------- --------------- ---------------- ----------------- ----------------
Shares issued pursuant to the Unit
Purchase Option Exchange ............. 225,000 N.A. $ 1,161,000.00(6) $ 400.34(3)
- -------------------------------------- --------------- ---------------- ----------------- ----------------
Total Registration Fee: $12,172.31(7)
================================================================================================================
</TABLE>
<PAGE>
(1) Estimated maximum number of shares of Common Stock issuable in
connection with the Merger, calculated on the basis of (i) 4,416,666
shares of Common Stock currently outstanding and (ii) an additional
225,000 shares of Common Stock that may be issued to EBIC stockholders
as a result of the Unit Purchase Option Exchange described in the Proxy
Statement/Prospectus.
(2) Estimated pursuant to Rule 457 (f) under the Securities Act of 1933, as
amended (the "Securities Act"), calculated by (i) multiplying (x)
1,671,290, the number of shares of Class B Common Stock, par value
$.001 per share, of Euro Brokers Investment Corporation ("EBIC Common
Stock") being acquired and cancelled in the Merger in exchange for the
Common Stock and Warrants of the Registrant, by (y) $23.62, the
unaudited book value per share of EBIC Common Stock as of March 31,
1996, as adjusted in accordance with the Merger Agreement described in
the Proxy Statement/Prospectus, and then (ii) subtracting $20,100,000,
the parties' estimate of the aggregate cash consideration to be paid by
the Registrant in the Merger.
(3) Calculated pursuant to Section 6(b) of the Securities Act as 1/29th of
1 per centum of the Proposed Maximum Aggregate Offering Price.
(4) Estimated maximum number of Warrants issuable in connection with the
Merger, calculated on the basis of 7,566,666 Warrants currently
outstanding.
(5) Calculated pursuant to Rule 457(i) under the Securities Act, calculated
by multiplying (i) $5.00, the per share exercise price for each Warrant,
by (ii) 7,566,666.
(6) Estimated pursuant to Rule 457(f) under the Securities Act, calculated
by multiplying (i) $5.16, the average of the bid and ask price of a
share of Common Stock as reported on the OTC Bulletin Board on June 21,
1996, by (ii) 225,000.
(7) Total of the above registration fees, less, pursuant to Rule 457(b)
under the Securities Act, the $7,955.34 fee paid in connection with the
Schedule 14A of the Registrant, dated April 19, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROXY STATEMENT/PROSPECTUS
OF THE INFORMATION REQUIRED BY THE ITEMS OF FORM S-4
<TABLE>
<CAPTION>
S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
- ------------------------------------------------------------- --------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front Cover Page of Registration Statement; Cross
Cover Page of Prospectus Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page; Available Information;
Prospectus Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges, Summary; Risk Factors
and Other Information
4. Terms of the Transaction Summary; The Merger; The Merger Agreement;
Description of FSAC Capital Stock; Comparison of
Stockholder Rights
5. Pro Forma Financial Information Summary; FSAC and EBIC Unaudited Pro Forma
Financial Information; Comparative Per Share Data;
Capitalization
6. Material Contacts with the Company Being Acquired Summary; The Merger
7. Additional Information Required for Reoffering by *
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification *
for Securities Act Liabilities
10. Information with Respect to S-3 Registrants *
11. Incorporation of Certain Information by Reference *
12. Information with Respect to S-2 or S-3 Registrants *
13. Incorporation of Certain Information by Reference *
14. Information with Respect to Registrants Other Than Summary; Risk Factors; Management's Discussion and
S-3 or S-2 Registrants Analysis of Financial Condition and Results of
Operations of FSAC; Business of FSAC; Security
Ownership of Certain Beneficial Owners of EBIC and
FSAC; Index to Financial Statements;
15. Information with Respect to S-3 Companies *
16. Information with Respect to S-2 or S-3 Companies *
17. Information with Respect to Companies Other Than S-2 Summary; Risk Factors; Management's Discussion and
or S-3 Companies Analysis of Financial Condition and Results of
Operations of EBIC; Business of EBIC; Security
Ownership of Certain Beneficial Owners of EBIC and
FSAC; Index to Financial Statements
18. Information if Proxies, Consents or Authorizations Summary; The Special Meetings; The Merger; The
are to be Solicited Merger Agreement
19. Information if Proxies, Consents or Authorizations *
are not to be Solicited, or in an Exchange Offer
<FN>
- ------------
* Omitted because inapplicable or answer is negative.
</TABLE>
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
TWO WORLD TRADE CENTER
SUITE 8400
NEW YORK, NY 10048
June 25, 1996
Dear Stockholder:
On behalf of our Board of Directors, I am pleased to invite you to attend
a Special Meeting of Stockholders of Euro Brokers Investment Corporation
("EBIC"), which will be held at 10:00 a.m., local time, on Monday July 15, 1996
at the New York office of EBIC.
At this meeting, EBIC stockholders will be asked to approve the Agreement
and Plan of Merger, dated as of March 8, 1996 (as amended, the "Merger
Agreement"), by and among Financial Services Acquisition Corporation
("FSAC"), EBIC Acquisition Corp., a wholly owned subsidiary of FSAC ("Merger
Sub"), and EBIC, pursuant to which Merger Sub will merge with and into EBIC
(the "Merger"), with EBIC being the surviving corporation and becoming a
subsidiary of FSAC.
THE BOARD OF DIRECTORS OF EBIC, AFTER CAREFUL CONSIDERATION, HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE STOCKHOLDERS OF EBIC. ACCORDINGLY, THE BOARD HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE IN FAVOR OF APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL MEETING. Please note that
Welsh, Carson, Anderson & Stowe VI, L.P., a Delaware limited partnership
("WCAS"), holds approximately 51% of the outstanding shares of Class B Common
Stock, par value $.001 per share ("EBIC Common Stock"), of EBIC, and the vote
of WCAS, by itself, would be sufficient to approve and adopt the Merger
Agreement.
Under the terms of the Merger Agreement, at the closing of the Merger (the
"Closing"), each outstanding share of EBIC Common Stock (other than shares
held in treasury and shares as to which appraisal rights have been duly
demanded) will be converted into the right to receive, subject to certain
adjustments and escrow arrangements, consideration consisting of
approximately (i) 2.64 shares of Common Stock, par value $.001 per share
("FSAC Common Stock"), of FSAC (the "Stock Exchange Ratio"), (ii) 4.53 Series
B Redeemable Common Stock Purchase Warrants (the "Merger Warrants"), of FSAC
(the "Warrant Exchange Ratio") and (iii) $9.57 in cash, without interest (the
"Cash Consideration"). The foregoing consideration reflects, and is subject
to adjustment to maintain, the intentions of the parties that (x) the holders
of EBIC Common Stock who do not exercise appraisal rights (subject to certain
escrow arrangements and disregarding cash payments in lieu of fractional
interests) collectively receive a post-Merger 50% interest in FSAC by
acquiring a number of shares of FSAC Common Stock and a number of Merger
Warrants equal to the number of shares of FSAC Common Stock and the number of
Redeemable Common Stock Purchase Warrants of FSAC outstanding, respectively,
immediately prior to the Merger (after giving effect to certain adjustments)
and (y) the respective pre-Merger contributions of FSAC stockholders and EBIC
stockholders to the post-Merger consolidated net worth of FSAC be equalized,
subject to certain adjustments, by the payment to EBIC stockholders of the
Cash Consideration.
Consistent with the foregoing intentions, and based on certain specific
adjustments contemplated by the Merger Agreement, it is expected at the
Closing that the Stock Exchange Ratio will neither exceed approximately 2.78
nor be less than approximately 2.21, and that the Warrant Exchange Ratio will
not have materially changed. The Cash Consideration at Closing will be
adjusted to reflect the then-existing difference between FSAC and EBIC's
respective net worths (each as calculated in accordance with the Merger
Agreement). Based primarily on increases in EBIC's net worth that have
occurred since the signing of the Merger Agreement (and that are currently
anticipated through the end of June 1996), FSAC and EBIC estimate that the
Cash Consideration would be adjusted to approximately $12.03 per share were the
Merger to occur on June 30, 1996. To the extent that EBIC's net worth changes
further during the period between July 1, 1996 and the actual Closing (which
is currently anticipated to occur in mid- or
<PAGE>
late-August 1996), or actual increases in EBIC's net worth from April 1, 1996
through June 30, 1996 vary from the preliminary assessments and estimates of
the same used by management in arriving at the above $12.03 figure, the Cash
Consideration will be adjusted further, with every approximately $167,000
increase or decrease in EBIC net worth having the effect of increasing or
decreasing, as the case may be, the Cash Consideration by approximately $.10 per
share. In addition, to the extent that FSAC stockholders exercise certain rights
of redemption in connection with the Merger, the Cash Consideration will be
increased by approximately $.32 per share for every approximately 100,000
shares of FSAC Common Stock so redeemed (up to a maximum additional
approximately $2.27).
Because of the variety of possible adjustments to the merger consideration
that may be necessary to maintain the intentions of the parties described
above, FSAC and EBIC have agreed to resolicit the approval of the Merger by
their respective stockholders if (subject to certain escrow arrangements) the
final Stock Exchange Ratio falls outside of the range of approximately 2.21
to 2.78, the final Warrant Exchange Ratio changes by more than 10% from the
approximate Warrant Exchange Ratio of 4.53 or the final Cash Consideration is
less than $9.00 or greater than $17.50.
A Notice of the Special Meeting and a Proxy Statement/Prospectus
containing detailed information concerning the Merger and certain other
related transactions is attached. I urge you to read this material carefully.
Notwithstanding the holdings of WCAS, your participation in this meeting, in
person or by proxy, is important. Please mark, date, sign and return the
enclosed proxy as soon as possible, whether or not you plan to attend the
Special Meeting. DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
Sincerely,
DONALD R.A. MARSHALL
Chief Executive Officer
and President
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
TWO WORLD TRADE CENTER
SUITE 8400
NEW YORK, NY 10048
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of Stockholders of Euro Brokers Investment Corporation
("EBIC") will be held on Monday, July 15, 1996, at 10:00 a.m., local time, at
Two World Trade Center, Suite 8400, New York, New York, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of March 8, 1996 (as amended, the
"Merger Agreement"), a copy of which is attached as Annex I to the
accompanying Proxy Statement/Prospectus, among Financial Services
Acquisition Corporation ("FSAC"), EBIC Acquisition Corp., a wholly owned
subsidiary of FSAC ("Merger Sub"), and EBIC, pursuant to which Merger Sub
will be merged with and into EBIC (the "Merger"), with EBIC being the
surviving corporation and becoming a wholly-owned subsidiary of FSAC.
Under the terms of the Merger Agreement, upon consummation of the Merger,
each outstanding share of Class B Common Stock, par value $.001 per share
("EBIC Common Stock"), of EBIC (other than shares held in the treasury of
EBIC, shares owned by any subsidiary of EBIC or shares owned by FSAC, all
of which will be cancelled, and other than shares of EBIC Common Stock as
to which appraisal rights have been duly demanded pursuant to Section 262
of the General Corporation Law of the State of Delaware) will be converted
into the right to receive, subject to certain adjustments and escrow
arrangements, (i) 2.6426688 shares of Common Stock, par value $.001 per
share, of FSAC, (ii) 4.5274405 Series B Redeemable Common Stock Purchase
Warrants of FSAC and (iii) $9.5734433 in cash, without interest. Based
primarily on increases in EBIC's net worth that have occurred since the
signing of the Merger Agreement and that are currently anticipated through
the end of June 1996, FSAC and EBIC estimate that the cash portion of the
consideration to be received in the Merger would be adjusted to
approximately $12.03 per share were the Merger to occur on June 30, 1996.
To the extent that EBIC's net worth changes further during the period
between July 1, 1996 and the actual closing of the Merger (which is
currently anticipated to occur in mid- or late-August 1996) or
stockholders of FSAC exercise certain rights of redemption, the cash
portion of the consideration to be received in the Merger will be adjusted
further. The determination of the final consideration to be received is
more fully described in the accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or at any and all adjournments or postponements thereof.
The accompanying Proxy Statement/Prospectus and the annexes thereto,
including the Merger Agreement, form a part of this Notice.
The Board of Directors has fixed the close of business on June 21, 1996,
as the record date for determination of stockholders entitled to notice of,
and to vote at, the Special Meeting. Only holders of record of EBIC Common
Stock at that time are entitled to notice of, and to vote at, the Special
Meeting. Each share of EBIC Common Stock entitled to be voted at the Special
Meeting is entitled to one vote. Holders of EBIC Common Stock who follow the
procedures set forth in Section 262 of the Delaware General Corporation Law
(see Annex III to the accompanying Proxy Statement/Prospectus), including
making a timely written demand for appraisal and filing a petition in the
Delaware Court of Chancery, will be entitled to appraisal rights in
connection with the Merger. The Merger will be consummated on the date that
each condition to the Merger, including the approvals of the stockholders of
each of EBIC and FSAC and appraisal rights not being demanded with respect to
more than 10% of the outstanding shares of EBIC Common Stock, is either
waived or satisfied. FSAC stockholder approval will not be solicited unless
and until EBIC stockholders have approved the Merger Agreement and,
accordingly, it is not expected that the Merger will be consummated until
mid- or late-August 1996.
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING ENVELOPE.
By Order of the Board of Directors
BRIAN G. CLARK
Secretary
June 25, 1996
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
PROXY STATEMENT
FINANCIAL SERVICES ACQUISITION CORPORATION
PROSPECTUS
INTRODUCTION
This Proxy Statement/Prospectus (this "Proxy Statement/Prospectus") is
being furnished to holders of record as of June 21, 1996 (the "EBIC Record
Date") of the Class B Common Stock, par value $.001 per share ("EBIC Common
Stock"), of Euro Brokers Investment Corporation ("EBIC"), in connection with
the solicitation of proxies by the Board of Directors of EBIC for use at its
Special Meeting of Stockholders, to be held on July 15, 1996 at 10:00 a.m.,
local time, and any adjournments or postponements thereof (the "EBIC Special
Meeting"). At the EBIC Special Meeting, stockholders of EBIC will consider
and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of March 8, 1996 (as it may be amended, modified, or
supplemented from time to time, the "Merger Agreement"), by and among
Financial Services Acquisition Corporation ("FSAC"), EBIC Acquisition Corp.,
a wholly owned subsidiary of FSAC ("Merger Sub"), and EBIC. A copy of the
Merger Agreement is attached hereto as Annex I and is incorporated herein by
reference. The Merger Agreement provides, subject to the satisfaction or
waiver of certain conditions, that Merger Sub will be merged with and into
EBIC (the "Merger"), with EBIC surviving the Merger as a wholly owned
subsidiary of FSAC. At the effective time of the Merger (the "Effective
Time"), each outstanding share of EBIC Common Stock (other than shares held
in the treasury of EBIC, shares owned by any subsidiary of EBIC and shares
owned by FSAC, all of which will be cancelled, and other than shares as to
which appraisal rights shall have been duly demanded ("Dissenting Shares")
pursuant to Section 262 of the Delaware General Corporation Law (the "DGCL"))
will be converted into the right to receive, subject to certain adjustments
and escrow arrangements, (i) 2.6426688 newly-issued shares of Common Stock,
par value $.001 per share ("FSAC Common Stock"), of FSAC (the "Stock Exchange
Ratio"), (ii) 4.5274405 newly-issued Series B Redeemable Common Stock
Purchase Warrants ("Merger Warrants") of FSAC (the "Warrant Exchange Ratio"
and, together with the Stock Exchange Ratio, the "Exchange Ratios"), the form
of which is attached as Annex II to this Proxy Statement/Prospectus and (iii)
$9.5734433 in cash, without interest (the "Per Share Cash Consideration" and,
together with the per share consideration described in the preceding clauses
(i) and (ii), the "Merger Consideration"). Cash will be paid in lieu of
fractional shares of FSAC Common Stock or Merger Warrants.
Holders of EBIC Common Stock who do not vote in favor of the Merger and who
comply with each of the requirements of Section 262 of the DGCL have the right,
in connection with the Merger, to have the "fair value" of their shares of EBIC
Common Stock judicially appraised and to be paid such appraisal value, in lieu
of the Merger Consideration, in accordance with the provisions of Section 262, a
copy of which is attached hereto as Annex III. See "THE MERGER -- EBIC
Stockholders' Rights of Appraisal" and Annex III.
The Exchange Ratios will be adjusted as necessary to provide that, at the
closing of the Merger (the "Closing"), the stockholders of EBIC who do not
exercise appraisal rights will own in the aggregate, subject to certain
escrow arrangements (see "THE MERGER AGREEMENT --Certain Related Agreements
- -- Escrow Agreement") and the payment of cash in lieu of fractional shares,
a 50% post-Merger interest in FSAC by having acquired (i) a number of shares of
FSAC Common Stock equal to the number of shares of FSAC Common Stock outstanding
immediately prior to the Merger (after giving effect to (x) any exercise by FSAC
stockholders of certain redemption rights (see "THE MERGER -- FSAC Redemption
Rights") and (y) the Unit Purchase Option Exchange (as hereinafter defined), if
any (see "THE MERGER --Certain Related Transactions -- Unit Purchase Option
Exchange")) and (ii) a number of Merger Warrants equal to the number of
Redeemable Common Stock Purchase Warrants of FSAC, of all series (the "FSAC
Warrants"), outstanding immediately prior to the Merger. Consistent with the
foregoing intentions, and based on the specific adjustments contemplated by the
Merger Agreement, it is expected that at the Closing the Stock Exchange Ratio
will neither exceed 2.7772954 nor be less than 2.2138588, and that the Warrant
Exchange Ratio will not have materially changed.
The Per Share Cash Consideration, which was originally determined for
purposes of the Merger Agreement by reference to the difference between
FSAC and EBIC's respective net worths at
----------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JUNE 25, 1996.
<PAGE>
December 31, 1995, will also be adjusted prior to the Merger to reflect the
then-existing difference between the respective pre-Merger net worths of FSAC
and EBIC (on a consolidated basis), subject in each case to certain other
adjustments, with the intention generally of equalizing the respective
pre-Merger contributions of FSAC stockholders and EBIC stockholders to the
post-Merger consolidated net worth of FSAC. Based primarily on increases in
EBIC's net worth that have occurred since the signing of the Merger Agreement
(and that are currently anticipated through the end of June 1996), FSAC and
EBIC estimate that the Per Share Cash Consideration would be adjusted to
approximately $12.03 were the Merger to occur on June 30, 1996. To the extent
that EBIC's net worth changes further during the period between July 1, 1996
and the actual Closing (which is currently anticipated to occur in mid- or
late- August 1996), or actual increases in EBIC's net worth from April 1,
1996 through June 30, 1996 vary from the preliminary assessments and
estimates of the same used by management in arriving at the above $12.03
figure, the Per Share Cash Consideration will be adjusted further, with every
approximately $167,000 increase or decrease in EBIC net worth having the
effect of increasing or decreasing, as the case may be, the Per Share Cash
Consideration by approximately $.10. In addition, to the extent that FSAC
stockholders exercise certain rights of redemption in connection with the
Merger, the Per Share Cash Consideration will be increased by approximately
$.32 for every approximately 100,000 shares of FSAC Common Stock so redeemed
(up to a maximum additional approximately $2.27, representing the maximum
redemption permitted by FSAC's Certificate of Incorporation).
Because of the variety of possible adjustments to the Merger Consideration
that may be necessary to maintain the intentions of the parties described
above, FSAC and EBIC have agreed to resolicit the approval of the Merger by
their respective stockholders if (subject to certain escrow arrangements) the
final Stock Exchange Ratio falls outside of the range of 2.2138588 to
2.7772954, the final Warrant Exchange Ratio changes by more than 10% from
4.5274405 or the final Per Share Cash Consideration is less than $9.00 or
greater than $17.50.
Consummation of the Merger is conditioned on the prior satisfaction or
waiver (if permissible under applicable law) of a number of conditions, of
which approval by EBIC stockholders is but one. See "THE MERGER AGREEMENT --
Conditions to Consummation of the Merger." FSAC stockholder approval of the
Merger Agreement and of certain related transactions is also necessary in
order to consummate the Merger, but will not be solicited unless and until
EBIC stockholders have approved and adopted the Merger Agreement.
Accordingly, it is not expected that the Merger will be consummated until
August 1996.
Welsh, Carson, Anderson & Stowe VI, L.P., a Delaware limited partnership
("WCAS"), together with its affiliates, holds approximately 54% of the
outstanding shares of EBIC Common Stock, of which approximately 51% are owned
directly by WCAS. The vote of WCAS, by itself, would be sufficient to approve
and adopt the Merger Agreement at the EBIC Special Meeting. In addition, the
current directors and executive officers of EBIC and their affiliates may be
deemed to beneficially own an aggregate additional approximately 29.5% of the
outstanding shares of EBIC Common Stock.
In connection with the Merger, FSAC has entered into an agreement (the
"Unit Purchase Option Agreement") with the holders of its outstanding options
(the "Unit Purchase Options") to acquire 333,333 Units of FSAC (the "Advisor
Units"), which options were sold in FSAC's initial public offering (the
"IPO") to the underwriters therefor and certain designees thereof. Each
Advisor Unit consists of one share of FSAC Common Stock and two FSAC
Warrants. The Unit Purchase Option Agreement provides for the exchange,
contingent upon and effective immediately following the Merger, of all Unit
Purchase Options for an aggregate of 225,000 newly-issued shares of FSAC
Common Stock (the "Unit Purchase Option Exchange"). If the Unit Purchase
Option Exchange is consummated on such terms, the aggregate Merger
Consideration will be adjusted to include an additional 225,000 shares of
FSAC Common Stock. If the Unit Purchase Option Agreement is not consummated
for any reason, the aggregate Merger Consideration instead will include such
additional amount of cash as is agreed upon between FSAC and EBIC or, if such
amount cannot be agreed upon, an additional 333,333 newly issued Unit
Purchase Options. See "RISK FACTORS -- Effects of Unit Purchase Option
Exchange" and "THE MERGER -- Certain Related Transactions -- Unit Purchase
Option Exchange."
ii
<PAGE>
The Merger Agreement contemplates 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 (including the Merger Warrants) that are
then outstanding, on the basis of one share of FSAC Common Stock for a number
of FSAC Warrants to be mutually agreed upon between FSAC and WCAS. There can
be no assurance, however, that the Exchange Offer will be made or, if made,
as to the exchange ratio at which it will occur or the other terms and
conditions thereof. See "RISK FACTORS -- Effects of Exchange Offer" and "THE
MERGER -- Certain Related Transactions -- Exchange Offer." Certain
stockholders of FSAC and EBIC have agreed, if the Exchange Offer is made, to
tender the FSAC Warrants held by them at such time (including Merger
Warrants) in numbers proportionate to the aggregate tenders of FSAC Warrants
made by other holders in the Exchange Offer. See "THE MERGER AGREEMENT --
Certain Related Agreements -- Security Transfer Agreement."
FSAC has filed a Registration Statement on Form S-4 (together with any
amendments thereto, the "Registration Statement") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), covering the shares of FSAC
Common Stock and the Merger Warrants to be issued in connection with the
Merger, as well as the shares of FSAC Common Stock issuable upon exercise of
the Merger Warrants (the "Warrant Shares") and the shares of FSAC Common
Stock issuable in the Unit Purchase Option Exchange, if any. This Proxy
Statement/Prospectus also constitutes the Prospectus of FSAC filed as and
forming a part of the Registration Statement. The information contained in
this Proxy Statement/ Prospectus with respect to EBIC and its affiliates has
been supplied by EBIC, and the information with respect to FSAC and its
affiliates has been supplied by FSAC.
This Proxy Statement/Prospectus and the accompanying materials are first
being mailed to stockholders of EBIC on or about June 25, 1996.
THE FSAC COMMON STOCK AND MERGER WARRANTS OFFERED HEREBY
INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT
PAGES 17 THROUGH 24 OF THIS PROXY STATEMENT/PROSPECTUS.
THE SECURITIES OF FSAC TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FSAC OR EBIC. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF FSAC OR EBIC SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
FSAC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by FSAC with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's Regional Offices at
Seven World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West
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Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
FSAC has filed with the Commission the Registration Statement with respect
to the FSAC Common Stock and Merger Warrants to be issued pursuant to the
Merger Agreement, the underlying Warrant Shares and the FSAC Common Stock to
be issued pursuant to the Unit Purchase Option Exchange. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information
may be obtained from the Commission's principal office in Washington, D.C.
Statements contained in this Proxy Statement/Prospectus as to the contents of
any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
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TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
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<S> <C>
INTRODUCTION ..................................................................... i
AVAILABLE INFORMATION ............................................................ iii
SUMMARY .......................................................................... 1
Business of EBIC ............................................................ 1
Business of FSAC ............................................................ 1
Risk Factors ................................................................ 2
EBIC Special Meeting ........................................................ 5
FSAC Special Meeting ........................................................ 5
The Merger .................................................................. 6
Certain Related Transactions ................................................ 9
Recommendations of the Boards of Directors .................................. 10
Reasons for the Merger ...................................................... 10
Interests of Certain Persons in the Merger .................................. 11
Accounting Treatment ........................................................ 12
Certain Federal Income Tax Consequences ..................................... 12
EBIC Stockholders' Appraisal Rights ......................................... 12
FSAC Redemption Rights ...................................................... 13
Conditions to the Merger; Termination of the Merger Agreement ............... 13
Nasdaq National Market Listing .............................................. 14
Regulatory Approvals Required ............................................... 14
Certain Related Agreements .................................................. 14
Market Prices of FSAC Securities ............................................ 15
No Public Market for EBIC Securities ........................................ 16
RISK FACTORS ..................................................................... 17
Limited Trading Market for FSAC Common Stock and FSAC Warrants .............. 17
Possible Volatility of Prices for FSAC Common Stock and FSAC Warrants ....... 17
Shares Eligible for Future Sale ............................................. 18
Effects of Exchange Offer ................................................... 19
Effects of Unit Purchase Option Exchange .................................... 19
Dependence on Key Employees ................................................. 19
Authority of FSAC to Issue Additional Securities ............................ 20
Concentration of Voting Control; Staggered Board ............................ 20
Determination of Merger Consideration; Absence of Fairness Opinion .......... 21
Current Prospectus and State Blue Sky Registration Required in Connection
with Exercise of FSAC Warrants ............................................. 21
Potential Redemption of FSAC Warrants ....................................... 21
Effect of Changes in General Economic and Financial Conditions .............. 22
Government Regulation ....................................................... 22
Consolidating Supervisor .................................................... 22
Competition ................................................................. 23
European Market Unification ................................................. 23
Liability for Unsettled Trades .............................................. 23
Lack of Business Diversification ............................................ 23
Dividends Unlikely .......................................................... 24
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SECTION PAGE
- ------- ----
SELECTED FINANCIAL DATA OF FSAC .................................................. 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF FSAC ............................................................... 25
SELECTED FINANCIAL DATA OF EBIC .................................................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF EBIC ............................................................... 29
History ..................................................................... 29
Overview .................................................................... 29
Liquidity and Capital Resources ............................................. 36
FSAC AND EBIC UNAUDITED PRO FORMA FINANCIAL INFORMATION .......................... 38
COMPARATIVE PER SHARE DATA ....................................................... 43
CAPITALIZATION ................................................................... 44
MARKET PRICES OF FSAC SECURITIES ................................................. 45
Stock Price Performance Comparison .......................................... 46
NO PUBLIC MARKET FOR EBIC SECURITIES ............................................. 47
THE SPECIAL MEETINGS ............................................................. 47
EBIC Special Meeting ........................................................ 47
FSAC Special Meeting ........................................................ 48
Solicitation of Proxies ..................................................... 49
THE MERGER ....................................................................... 50
Form of Merger; Effective Time .............................................. 50
Merger Consideration ........................................................ 50
Determination and Adjustment of Merger Consideration ........................ 51
Conditions to the Merger .................................................... 53
Certain Related Transactions ................................................ 54
Background of the Merger .................................................... 54
Reasons for the Merger; Recommendations of the Boards of Directors .......... 56
Interests of Certain Persons in the Merger .................................. 58
Nasdaq Listing .............................................................. 60
Regulatory Approvals ........................................................ 60
Certain Federal Income Tax Consequences ..................................... 61
Accounting Treatment ........................................................ 62
Resales of FSAC Securities .................................................. 62
Absence of Fairness Opinion ................................................. 63
EBIC Stockholders' Rights of Appraisal ...................................... 64
FSAC Redemption Rights ...................................................... 66
THE MERGER AGREEMENT ............................................................. 66
Certain Representations and Warranties ...................................... 66
Conduct of Business of EBIC Pending the Merger .............................. 67
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SECTION PAGE
- ------- ----
Conditions to Consummation of the Merger .................................... 68
No Solicitation ............................................................. 69
Certain Other Covenants ..................................................... 70
Amendment and Waiver ........................................................ 70
Directors' Indemnification .................................................. 70
Merger Agreement Indemnification ............................................ 70
Termination ................................................................. 71
Fees and Expenses ........................................................... 71
Closing True-Up Procedures .................................................. 72
Adjustment of Exchange Ratios and Cash Consideration ........................ 73
No Fractional Securities .................................................... 73
Procedures for Exchange of EBIC Common Stock Certificates ................... 74
Certain Related Agreements .................................................. 75
FSAC Special Meeting Proposals .............................................. 77
DESCRIPTION OF FSAC CAPITAL STOCK ................................................ 80
General ..................................................................... 80
FSAC Units .................................................................. 80
FSAC Common Stock ........................................................... 80
Preferred Stock ............................................................. 80
FSAC Warrants ............................................................... 81
Merger Warrants ............................................................. 81
Advisor Units and Bridge Warrants ........................................... 82
Delaware Anti-Takeover Law .................................................. 82
COMPARISON OF STOCKHOLDER RIGHTS ................................................. 83
Voting and Other Rights ..................................................... 83
Certain Business Combinations ............................................... 83
Election of Directors ....................................................... 83
Removal of Directors ........................................................ 84
Amendment of Certificate of Incorporation ................................... 84
Special Meetings ............................................................ 84
Action by Written Consent ................................................... 85
Indemnification of Officers and Directors ................................... 85
Director Liability .......................................................... 85
BUSINESS OF FSAC ................................................................. 86
General ..................................................................... 86
Characteristics of a Specified Purpose Acquisition Company(Registered
Trademark) .................................................................. 86
Subsidiaries ................................................................ 88
Competition ................................................................. 88
Management and Employees .................................................... 88
Properties .................................................................. 89
Legal Proceedings ........................................................... 89
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SECTION PAGE
- ------- ----
MANAGEMENT OF FSAC ............................................................... 90
Compliance with Section 16(a) of the Exchange Act ........................... 92
Executive Compensation ...................................................... 92
Certain Other Relationships and Related Transactions ........................ 92
BUSINESS OF EBIC ................................................................. 93
Overview .................................................................... 93
Products .................................................................... 93
Communications Network and Information Systems .............................. 95
Personnel ................................................................... 95
Regulation .................................................................. 96
Competition ................................................................. 96
Facilities .................................................................. 96
Legal Proceedings ........................................................... 97
Proposed Joint Venture ...................................................... 97
MANAGEMENT OF EBIC ............................................................... 98
Executive Compensation ...................................................... 98
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF EBIC
AND FSAC ........................................................................ 100
Beneficial Ownership of Shares of EBIC Common Stock ......................... 100
Beneficial Ownership of Shares of FSAC Common Stock ......................... 101
LEGAL MATTERS .................................................................... 102
EXPERTS .......................................................................... 102
STOCKHOLDER PROPOSALS ............................................................ 102
</TABLE>
viii
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LIST OF ANNEXES
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<S> <C>
Annex I Merger Agreement
Annex II Form of Merger Warrant
Annex III Section 262 of the Delaware General Corporation Law Relating to Appraisal
Rights
Annex IV Form of Certificate of Merger
Annex V Forms of Certificates of Amendment to the FSAC Certificate of Incorporation
Annex VI Form of FSAC Option Plan
Annex VII Escrow Agreement
Annex VIII Security Transfer Agreement
Annex IX Majority Stockholders' Agreement
Annex X Form of Registration Rights Agreement
</TABLE>
ix
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in this
Proxy Statement/Prospectus, the Annexes hereto and the Registration
Statement. Stockholders are urged to read this Proxy Statement/ Prospectus
and the Annexes hereto in their entirety. Capitalized terms used herein and
not defined have the meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus. See "RISK FACTORS" for certain information that should
be reviewed carefully in considering the Merger.
BUSINESS OF EBIC
Euro Brokers Investment Corporation ("EBIC"), through its subsidiaries,
acts as a wholesale broker of money market instruments, derivatives and
selected fixed income securities. EBIC functions primarily as an
intermediary, matching the needs of financial institutions. EBIC generally
does not seek to take principal positions, but rather relies almost
exclusively on commissions to generate revenues. EBIC's customers are
primarily multinational banks, securities dealers and other financial
institutions.
As an intermediary, EBIC assists in the efficient and rapid execution of
trades between financial and other institutions by identifying counterparties
with reciprocal interests and negotiating and executing transactions on their
behalf. EBIC's sales force, telecommunications network and proprietary screen
display systems provide customers with up-to-date market information,
including arbitrage opportunities, and access to an extensive worldwide
client base. In addition, by not disclosing the parties' identities until
execution or settlement of the trade, EBIC permits anonymity, which allows
the principals involved more flexibility within the market by not publicizing
their investment positions or intentions. EBIC's business falls into three
primary brokerage groups: (i) cash products, (ii) derivative products and
(iii) securities and repurchase agreements. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EBIC" and
"BUSINESS OF EBIC."
The mailing address of the principal executive offices of EBIC is Two
World Trade Center, Suite 8400, New York, New York 10048, and the telephone
number is (212) 748-7000.
BUSINESS OF FSAC
Financial Services Acquisition Corporation ("FSAC") was organized on
August 18, 1994 as a Specified Purpose Acquisition Company(Registered
Trademark) (a "SPAC(Registered Trademark)"), with the objective of acquiring
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"). Since its
inception, FSAC has not engaged in any substantive commercial business, and
its sole activities have been to evaluate and select an appropriate Target
Business and to structure, negotiate and consummate a Business Combination
with such Target Business. FSAC may ultimately acquire more than one
business; however, FSAC's initial Business Combination must be with a Target
Business whose fair market value is at least 80% of the net assets of FSAC at
the time of the Business Combination. See "BUSINESS OF FSAC."
FSAC consummated its initial public offering (the "IPO") in December 1994,
and received net proceeds of approximately $19,150,000 after payment of
offering expenses. A substantial portion of the net proceeds ($17,415,000)
was placed in an interest-bearing trust account (the "Trust") until the
earlier of (i) the consummation of a Business Combination with a Target
Business or (ii) the liquidation of FSAC. The remaining net proceeds of the
IPO which were not placed in the Trust and the interest earned thereon have
been used by FSAC to identify, evaluate and select a suitable Target
Business, and structure, negotiate and consummate a Business Combination, as
well as for general, administrative and organizational expenses. If the
Merger is consummated, it is anticipated that all or substantially all of the
IPO proceeds held in the Trust, together with interest earned thereon, will
be paid to holders of EBIC Common Stock (subject to certain escrow
arrangements) as the cash portion of the Merger Consideration.
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In the event FSAC does not consummate a Business Combination by December
7, 1996, FSAC is obligated to dissolve and to distribute the amount in the
Trust, estimated to be approximately $5.40 per share at that date (the
"Distribution Amount"), plus any remaining net assets of FSAC, to FSAC
stockholders in respect of their shares of Common Stock, par value $.001 per
share ("FSAC Common Stock"), of FSAC (other than the 833,333 shares of FSAC
Common Stock (the "Pre-IPO Shares") held by the FSAC stockholders (the
"Initial FSAC Stockholders") prior to the IPO). On June 21, 1996, the most
recent date for which it was practicable to obtain market price information
before the printing of this Proxy Statement/Prospectus, the high and low closing
bid prices for FSAC Common Stock as reported on the OTC Bulletin Board (the "OTC
Bulletin Board") of the National Association of Securities Dealers, Inc. (the
"NASD") were each $5 1/16. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FSAC" and
"MARKET PRICES OF FSAC SECURITIES."
EBIC Acquisition Corp., a wholly owned subsidiary of FSAC ("Merger Sub"),
is a Delaware corporation organized on February 15, 1996 solely for purposes
of facilitating the Merger.
The mailing address of the principal executive office of each of FSAC and
Merger Sub is 667 Madison Avenue, New York, New York 10021, and the telephone
number is (212) 317-1000. "SPAC(Registered Trademark)" and "Specified Purpose
Acquisition Company(Registered Trademark)" are registered service marks of
GKN Securities Corp.
RISK FACTORS
STOCKHOLDERS SHOULD CAREFULLY EVALUATE CERTAIN RISK FACTORS, INCLUDING THE
FOLLOWING, IN CONSIDERING THE MERGER. FOR A MORE COMPLETE DISCUSSION OF THE
RISK FACTORS NOTED BELOW, SEE "RISK FACTORS" AT PAGES 17 THROUGH 24 OF THIS
PROXY STATEMENT/PROSPECTUS.
o LIMITED TRADING MARKET FOR FSAC COMMON STOCK AND FSAC WARRANTS. FSAC
Common Stock and the Redeemable Common Stock Purchase Warrants (all
series thereof, "FSAC Warrants") of FSAC are traded in the
over-the-counter market and quoted on the OTC Bulletin Board. There
has been only a limited trading market for such securities and there
can be no assurance that an active or regular trading market will
develop after the Merger. See "MARKET PRICES OF FSAC SECURITIES."
o POSSIBLE VOLATILITY OF PRICES FOR FSAC COMMON STOCK AND FSAC
WARRANTS. FSAC believes that before the public announcement of the
execution of the Merger Agreement the market price of the FSAC Common
Stock was based primarily on the Distribution Amount in the event FSAC
was obligated to liquidate, and to a lesser degree upon the anticipation
of FSAC entering into a Business Combination. FSAC believes that after
the public announcement, the market price of FSAC Common Stock continued
to be based in part upon the Distribution Amount, but to a greater degree
upon the likelihood of consummation of the Merger, and the market
perception of the prospects for EBIC's business. If the Merger is
consummated, it is anticipated that the price of FSAC Common Stock will
reflect the value of the combined 1assets and business of FSAC and EBIC
on a pro forma consolidated basis and the increase in the amount of
outstanding securities of FSAC, as well as the liquidity of such
securities. These and other factors could cause market prices for FSAC
securities to fluctuate significantly.
o SHARES ELIGIBLE FOR FUTURE SALE. A substantial amount of FSAC Common
Stock, including the shares to be issued in the Merger to the majority
stockholder of EBIC, are subject to agreements which prohibit their
sale for a period of time. When such shares become available for
resale, sales of substantial numbers of shares of FSAC Common Stock in
the public market could materially
2
<PAGE>
adversely affect the market prices for FSAC Common Stock and FSAC
Warrants. See "THE MERGER AGREEMENT -- Certain Related Agreements --
Security Transfer Agreement."
o EFFECTS OF EXCHANGE OFFER. If the Exchange Offer does not occur and
all of the FSAC Warrants that will be outstanding following the Merger
were exercised, 15,133,332 shares of FSAC Common Stock would be
issued, with aggregate proceeds to FSAC from such exercises of
approximately $75.7 million. If the Exchange Offer is made and
consummated, significant additional shares of FSAC Common Stock will
be issued sooner than anticipated (the exact number depending on the
exchange ratio and the number of warrants tendered), but fewer FSAC
Warrants will remain outstanding, thereby resulting in fewer shares of
FSAC Common Stock being issued pursuant to future exercises of FSAC
Warrants.
o EFFECTS OF UNIT PURCHASE OPTION EXCHANGE. If the Unit Purchase Option
Exchange does not occur, 333,333 shares of FSAC Common Stock and
666,666 FSAC Warrants would be issued if all of the 333,333 Unit
Purchase Options currently outstanding were exercised, with aggregate
proceeds to FSAC from such exercises of approximately $3.3 million. An
additional 666,666 shares of FSAC Common Stock would be issued if the
666,666 FSAC Warrants received upon exercise of the Unit Purchase
Options were, in turn, exercised, with incremental aggregate proceeds
to FSAC of approximately $4.2 million. In addition, pursuant to the
Merger Agreement, the Merger Consideration would include an additional
agreed-upon amount of cash to reflect the fact that the Unit Purchase
Options are remaining outstanding or, if such amount cannot be agreed
upon, would include an aggregate of 333,333 newly-issued Unit Purchase
Options. If the Unit Purchase Option Exchange is consummated, an
additional 225,000 shares of FSAC Common Stock will be issued to the
current holders of the Unit Purchase Options, the aggregate Merger
Consideration will be increased by 225,000 shares of FSAC Common Stock
(but the additional agreed-upon cash component, or additional Unit
Purchase Options in lieu thereof, will be eliminated) and no Unit
Purchase Options will remain outstanding.
o DEPENDENCE ON KEY EMPLOYEES. EBIC is, and following consummation of
the Merger, FSAC will be, to a significant extent, dependent on the
customer connections, performance and experience of certain key
management and sales personnel. Although each of FSAC and EBIC has, or
expects to have at the time of the Merger, employment agreements with
many of these key persons, there can be no assurance that such
employment agreements will be renewed or effective in retaining such
persons' services or that other key personnel will remain with EBIC
and FSAC. See "THE MERGER -- Interest of Certain Persons in the
Merger," "MANAGEMENT OF FSAC" and "MANAGEMENT OF EBIC."
o AUTHORITY OF FSAC TO ISSUE ADDITIONAL SECURITIES. FSAC's Certificate
of Incorporation currently authorizes the issuance of 14,000,000
shares of FSAC Common Stock. Following consummation of the Merger,
FSAC's Certificate of Incorporation will authorize the issuance of
30,000,000 shares of FSAC Common Stock and it is expected (assuming
consummation of the Unit Purchase Option Exchange and no exercise by
FSAC stockholders of their Redemption Rights) that there will be
outstanding on a pro forma basis 9,283,332 shares of FSAC Common
Stock, with 15,133,332 shares reserved for issuance upon exercise of
the outstanding FSAC Warrants and, subject to the approval of FSAC
stockholders, 1,800,000 shares reserved for issuance pursuant to the
FSAC 1996 Stock Option Plan (the "FSAC Option Plan"), leaving
3,783,336 authorized shares available for other issuances. Any
additional issuances of authorized but unissued (and unreserved)
shares of FSAC Common Stock may dilute the interests of FSAC's
stockholders. See "THE MERGER AGREEMENT -- FSAC Special Meeting
Proposals -- The Charter Amendments" and "DESCRIPTION OF FSAC CAPITAL
STOCK."
o CONCENTRATION OF VOTING CONTROL; STAGGERED BOARD. Upon consummation of
the Merger, it is anticipated that Welsh, Carson, Anderson & Stowe,
VI, L.P., a Delaware limited partnership ("WCAS"), and its affiliates
will control approximately 27% of the outstanding shares of FSAC
3
<PAGE>
Common Stock, with the current directors and officers of FSAC, the
current executive management of EBIC and other current employees of
EBIC together controlling an additional approximately 37% of such
shares. Such concentration of control in a single major stockholder
and in directors, officers and employees may have an adverse effect on
the market prices for FSAC securities. In addition, upon consummation
of the Merger, FSAC will have an eight-person, three-class staggered
board of directors, six of whom will be FSAC designees and two of whom
will be EBIC designees. The classified Board of Directors is likely to
have the effect of perpetuating control of FSAC in the current
directors of FSAC until at least the second annual meeting of FSAC
stockholders following the Merger. See "THE MERGER AGREEMENT -- FSAC
Special Meeting Proposals -- The Charter Amendments."
o DETERMINATION OF MERGER CONSIDERATION; ABSENCE OF FAIRNESS
OPINION. Prior to the Merger, there was no public market for the
shares of EBIC Common Stock. The Merger Consideration has been
determined by negotiations between FSAC and EBIC and may not be
indicative, on a per share basis, of the fair market value of a share
of EBIC Common Stock. Neither EBIC nor FSAC has sought or obtained an
opinion from an investment banker regarding the fairness of the Merger
or the Merger Consideration to the stockholders of either company. See
"THE MERGER -- Reasons for the Merger; Recommendations of the Boards
of Directors," "--Interests of Certain Persons in the Merger" and "--
Absence of Fairness Opinion."
o CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED IN
CONNECTION WITH EXERCISE OF FSAC WARRANTS. FSAC will be able to issue
shares of FSAC Common Stock upon exercise of the FSAC Warrants
(including the Merger Warrants) only if there is then a current
prospectus relating to such shares under an effective registration
statement filed with the Securities and Exchange Commission, and only
if such shares are qualified for sale or exempt from qualification
under applicable state securities laws of the jurisdictions in which
the various holders of FSAC Warrants reside. Although FSAC is
obligated to use its best efforts to meet such requirements, there can
be no assurance that FSAC will be able to do so.
o POTENTIAL REDEMPTION OF FSAC WARRANTS. The FSAC Warrants (including
the Merger Warrants) may be redeemed by FSAC, at a price of $.01 per
warrant, at any time after they become exercisable, subject to not
less than 30 days' prior written notice to holders thereof, provided
that the last sale price of FSAC Common Stock has been at least $8.50
per share for the 20 consecutive trading days ending on the third day
prior to the day on which notice is given.
o EFFECT OF CHANGES IN GENERAL ECONOMIC AND FINANCIAL CONDITION. The
profitability and success of EBIC is, and, following the Merger, of
FSAC will be, dependent to a great extent upon general economic
conditions. EBIC's business may be directly affected by national and
international economic and political conditions, broad trends in
business and finance, the level and volatility of interest rates and
fluctuations in volume and price levels in the securities and
commodities markets.
o GOVERNMENT REGULATION. EBIC is subject to extensive regulation at
international, federal and state levels by various regulatory bodies
which are charged with safeguarding the integrity of the securities
and other financial markets and protecting the interests of customers.
Failure either to maintain compliance with existing applicable
regulations or to satisfy the requirements of new regulations could
result in the loss or suspension of licenses or permits or civil or
criminal liability or monetary penalties. See "THE MERGER --
Regulatory Approvals" and "BUSINESS OF EBIC -- Regulation."
o CONSOLIDATING SUPERVISOR. Recently, the Securities and Futures
Authority (the "SFA") in the United Kingdom has issued new rules with
respect to European Community ("EC") directives regarding consolidated
supervision. The SFA has categorized EBIC's U.K. subsidiary as a
Category D firm which, as such, satisfies the SFA's capital adequacy
rules. However, should EBIC's U.K. business expand or change, such SFA
rules, if applied to EBIC and its subsidiaries, could result in EBIC
and/or its United Kingdom subsidiaries having to meet more stringent
capital adequacy requirements. See "THE MERGER -- Regulatory
Approvals" and "BUSINESS OF EBIC -- Regulation."
4
<PAGE>
o COMPETITION. The financial brokerage industry is highly competitive
and EBIC encounters competition from several companies with
significantly greater resources than EBIC and access to wider pools of
potential clients. In addition, the development of new technologies
may expose the money brokerage industry to the possibility of losing
clients to companies and products that facilitate fully automated
dealing, without intermediaries. See "BUSINESS OF EBIC --Competition."
o EUROPEAN MARKET UNIFICATION. The introduction of a single currency for
the EC would eliminate the European cross-currency market and could
have a significant impact on EBIC's business. Moreover, deregulation
within the EC could increase the competition faced by EBIC.
o LIABILITY FOR UNSETTLED TRADES. EBIC functions primarily as an
intermediary, matching the trading needs of financial institutions.
Some of these transactions are executed directly by both
counterparties; other transactions are completed with EBIC acting as a
matched riskless principal in which the respective counterparties know
EBIC as the counterparty. In the process of executing brokerage
transactions, from time to time miscommunications arise whereby
transactions are completed with only one counterparty ("out trades"),
thereby creating a potential liability for EBIC. Out trades typically
become known to EBIC on the day of the trade or, as a result of the
settlement process, within a few days of the trade. In general, EBIC
does not experience a high incidence of out trades, but in those
situations in which they occur, EBIC typically disposes of the
unmatched position within a short time frame. While out trades have
not had a significant adverse effect on EBIC to date, there can be no
guarantee that the incidence of such occurrences will not increase in
the future or that they will not have a material adverse effect on the
financial condition of EBIC.
o LACK OF BUSINESS DIVERSIFICATION. Upon consummation of the Merger,
FSAC will be a holding company which will have virtually no operations
or material assets other than all of the outstanding shares of EBIC
Common Stock.
o DIVIDENDS UNLIKELY. FSAC has not paid any dividends on the FSAC Common
Stock to date. It is the present intention of the Board of Directors
to retain all earnings, if any, for use in FSAC's business operations
and accordingly, the Board does not anticipate paying any dividends on
FSAC Common Stock in the foreseeable future.
EBIC SPECIAL MEETING
A Special Meeting of EBIC stockholders (the "EBIC Special Meeting") will
be held on Monday, July 15, 1996 at 10:00 a.m., local time, at the New York
offices of EBIC. At the EBIC Special Meeting, holders of Class B Common Stock,
par value $.001 per share ("EBIC Common Stock"), of EBIC will be asked to
approve and adopt the Merger Agreement. Only holders of record of EBIC Common
Stock at the close of business on June 21, 1996 (the "EBIC Record Date") will be
entitled to receive notice of and to vote at the EBIC Special Meeting. Each
share of EBIC Common Stock is entitled to one vote. As of the EBIC Record Date,
there were 1,671,290 shares of EBIC Common Stock outstanding. The affirmative
vote of the holders of a majority of such outstanding shares of EBIC Common
Stock is required to approve and adopt the Merger Agreement. A majority of the
outstanding shares of EBIC Common Stock must be represented in person or by
proxy at the EBIC Special Meeting in order for a quorum to be present. A
stockholder who abstains from a vote by registering an abstention vote will
be deemed present at the meeting for quorum purposes but will not be deemed
to have voted on the Merger Agreement. A failure to vote shares, either by
abstention or non-vote, will have the same effect as a vote against the
Merger Agreement. Holders of EBIC Common Stock who follow the procedures set
forth in Section 262 of the Delaware General Corporation Law (the "DGCL"),
including making a timely written demand for appraisal and filing a petition
in the Delaware Court of Chancery, will be entitled to appraisal rights in
connection with the Merger. See "THE MERGER -- EBIC Stockholders' Rights of
Appraisal."
WCAS, together with its affiliates, holds 907,602, or approximately 54%,
of the outstanding shares of EBIC Common Stock, of which 850,884, or
approximately 51%, are owned directly by WCAS. The vote of WCAS, by itself,
would be sufficient to approve and adopt the Merger Agreement. In addition,
the
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current directors and executive officers of EBIC beneficially own an
aggregate additional 492,352, or approximately 29.5%, of the outstanding
shares of EBIC Common Stock.
FSAC SPECIAL MEETING
A Special Meeting of FSAC Stockholders (the "FSAC Special Meeting") will
be held only subsequent to EBIC stockholder approval and adoption of the
Merger Agreement at the EBIC Special Meeting. It is anticipated that the FSAC
Special Meeting will occur in mid- or late-August, 1996. Only holders of shares
of FSAC Common Stock of record at the close of business on the record date set
for the FSAC Special Meeting (the "FSAC Record Date") will be entitled to notice
of and to vote at the FSAC Special Meeting. Each share of FSAC Common Stock
is entitled to one vote. As of the date of this Proxy Statement/Prospectus
there were 4,416,666 shares of FSAC Common Stock outstanding and it is
expected that the same number will be outstanding and entitled to vote at the
FSAC Record Date.
At the FSAC Special Meeting, holders of FSAC Common Stock will consider
and vote upon (i) a proposal to approve and adopt the Merger Agreement, (ii)
a proposal to elect eight persons to the FSAC Board of Directors (including
two EBIC representatives), (iii) a proposal to approve certain amendments to
FSAC's Certificate of Incorporation (the "Charter Amendments"), (iv) a
proposal to adopt the FSAC Option Plan and (v) such other matters as may be
properly brought before the meeting. The Charter Amendments provide for (x)
immediately prior to the effectiveness of the Merger, (1) the name change of
FSAC to "Financial Services Corporation" and (2) an increase in the
authorized shares of FSAC Common Stock from 14,000,000 to 30,000,000 and (y)
immediately after the effectiveness of the Merger, (1) the classification of
the Board of Directors into three classes serving staggered terms, with the
initial number of directors to be eight, (2) the elimination of stockholders'
ability to act by written consent, (3) the restriction of the ability to call
special meetings of stockholders to the Chairman and the President of FSAC or
to an affirmative vote of a majority of the Board of Directors and (4) a
requirement of an 80% supermajority vote to amend any of the provisions
described in this clause (y). The full text of the Charter Amendments is set
forth in the Forms of Certificates of Amendment to the Certificate of
Incorporation of FSAC attached hereto as Annex V. See "THE MERGER AGREEMENT
- --FSAC Special Meeting Proposals -- The Charter Amendments."
The presence at the FSAC Special Meeting, in person or by properly
executed proxy, of the holders of a majority of outstanding shares of FSAC
Common Stock entitled to vote at the FSAC Special Meeting will constitute a
quorum. Assuming a quorum is present at the FSAC Special Meeting, the
affirmative vote by the holders of a majority of outstanding shares of FSAC
Common Stock is required to approve and adopt the Merger Agreement.
Notwithstanding the foregoing, if FSAC stockholders holding 20% or more of
the 3,583,333 shares of FSAC Common Stock that were issued in the IPO (the
"FSAC Public Shares"), or 716,667 shares, vote such shares against the Merger
and properly exercise their right to demand redemption of such shares
("Redemption Rights"), see "THE MERGER -- FSAC Redemption Rights," FSAC,
pursuant to its Certificate of Incorporation, is not permitted to consummate
the Merger. Moreover, EBIC has a right not to consummate the Merger if the
number of FSAC Public Shares with respect to which Redemption Rights are duly
demanded ("Redemption Shares") exceeds 10% of the number of shares of FSAC
Common Stock outstanding at the time of the Merger (giving effect to the Unit
Purchase Option Exchange, if any), although this right is in turn subject to
an FSAC stockholder right to cure. See "THE MERGER -- FSAC Redemption Rights"
and "THE MERGER AGREEMENT -- Conditions to the Merger."
With respect to approval and adoption of the Merger Agreement, the Initial
FSAC Stockholders are required to vote their Pre-IPO Shares (constituting
approximately 18.9% of the currently outstanding shares of FSAC Common Stock)
in accordance with the vote of the majority in interest of the FSAC Public
Shares. The Initial FSAC Stockholders also own an aggregate of 597,000 FSAC
Public Shares (constituting approximately 13.5% of the currently outstanding
shares) and have indicated that they currently intend to vote such shares in
favor of approval and adoption of the Merger Agreement. The six current
directors of FSAC (which include FSAC's only two officers) constitute all of
the Initial FSAC Stockholders.
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THE MERGER
Form of Merger; Effective Time
The Merger Agreement, which is attached as Annex I to this Proxy
Statement/Prospectus, provides that as promptly as practicable after the
approval and adoption of the Merger Agreement by the respective stockholders
of FSAC and EBIC and the satisfaction or, if permissible, waiver of the other
conditions to the Merger, a Certificate of Merger, the form of which is
attached as Annex IV to this Proxy Statement/Prospectus, will be filed with
the Secretary of State of the State of Delaware. Pursuant to such
certificate, the Merger will become effective (the date and time of such
filing, or such later time as is specified in such certificate, being the
"Effective Time"). EBIC will be the surviving corporation (the "Surviving
Corporation") in the Merger and become a wholly owned subsidiary of FSAC. The
name of the Surviving Corporation will be "Euro Brokers Investment
Corporation." Pursuant to the Charter Amendments, the name of FSAC will be
changed to "Financial Services Corporation."
Merger Consideration
Pursuant to the terms of the Merger Agreement, at the Effective Time each
outstanding share of EBIC Common Stock (other than shares held in the
treasury of EBIC, shares owned by any subsidiary of EBIC and shares owned by
FSAC, all of which will be cancelled, and other than shares as to which
appraisal rights shall have been duly demanded ("Dissenting Shares") pursuant
to Section 262 of the DGCL) will be converted into the right to receive,
subject to certain adjustments and escrow arrangements (see "THE MERGER
AGREEMENT -- Certain Related Agreements -- Escrow Agreement"), (i) 2.6426688
(the "Stock Exchange Ratio") newly-issued shares of FSAC Common Stock, (ii)
4.5274405 (the "Warrant Exchange Ratio" and, together with the Stock Exchange
Ratio, the "Exchange Ratios") newly-issued Series B Redeemable Common Stock
Purchase Warrants ("Merger Warrants") of FSAC and (iii) $9.5734433 in cash,
without interest (the "Per Share Cash Consideration" and, together with the
per share consideration described in the preceding clauses (i) and (ii), the
"Merger Consideration"). The Merger Warrants, the form of which is attached
as Annex II to this Proxy Statement/Prospectus, will have substantially the
same terms and conditions as the Redeemable Common Stock Purchase Warrants of
FSAC (all series thereof, "FSAC Warrants") issued in the IPO. Cash will be
paid in lieu of fractional shares of FSAC Common Stock and fractional Merger
Warrants.
The Exchange Ratios will be adjusted as necessary to provide that, upon
consummation of the Merger, the stockholders of EBIC who do not exercise
appraisal rights will own in the aggregate, subject to certain escrow
arrangements (see "THE MERGER AGREEMENT -- Certain Related Agreements --
Escrow Agreement") and the payment of cash in lieu of fractional shares, (i)
a number of shares of FSAC Common Stock equal to the number of shares of FSAC
Common Stock outstanding immediately prior to the Merger (after giving effect
to (x) any exercise by FSAC stockholders of their Redemption Rights and (y)
the Unit Purchase Option Exchange, if any) (see "THE MERGER -- Certain
Related Transactions -- Unit Purchase Option Exchange") and (ii) a number of
Merger Warrants equal to the number of FSAC Warrants outstanding immediately
prior to the Merger. The Per Share Cash Consideration will also be adjusted
prior to the Merger to reflect the then-existing difference between the
respective pre-Merger net worths of FSAC and EBIC (on a consolidated basis),
subject in each case to certain other adjustments, with the intention
generally of equalizing the respective pre-Merger contributions of FSAC
stockholders and EBIC stockholders to the post-Merger consolidated net worth
of FSAC.
Based primarily on increases in EBIC's net worth that have occurred since
the signing of the Merger Agreement, the Per Share Cash Consideration would
have been adjusted to approximately $11.37 if the Merger had occurred on
March 31, 1996. Based on preliminary assessments of further increases in EBIC's
net worth that have occurred since March 31, 1996 (and that are currently
anticipated through the end of June 1996), FSAC and EBIC estimate that the Per
Share Cash Consideration would be adjusted further to approximately $12.03 were
the Merger to occur on June 30,
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1996. In addition, to the extent that EBIC's net worth changes further during
the period between July 1, 1996 and the actual Closing (which is currently
anticipated to occur in mid- or late-August 1996), or actual increases in
EBIC's net worth from April 1, 1996 through June 30, 1996 vary from the
preliminary assessments and estimates of the same used by management in
arriving at the above $12.03 figure, the Per Share Cash Consideration will be
adjusted further, with every approximately $167,000 increase or decrease in
EBIC net worth having the effect of increasing or decreasing, as the case may
be, the Per Share Cash Consideration by approximately $.10. In addition, to
the extent that holders of FSAC Public Shares exercise their Redemption
Rights, the Per Share Cash Consideration will be increased by approximately
$.32 for every approximately 100,000 Redemption Shares (up to an additional
approximately $1.47 if there are 464,166 Redemption Shares, the maximum
number permitted under the Merger Agreement without EBIC's consent, or, assuming
such consent, up to a maximum additional approximately $2.27 if there are
716,666 Redemption Shares, the maximum number permitted by FSAC's Certificate of
Incorporation).
Determination and Adjustment of Merger Consideration
In order to give effect to the intent of the parties that EBIC
stockholders who do not exercise appraisal rights receive a 50% aggregate
interest in the post-Merger capitalization of FSAC (subject to certain escrow
arrangements and the payment of cash in lieu of fractional interests), the Stock
Exchange Ratio was initially set at 2.6426688, the quotient obtained by dividing
4,416,666, the number of shares of FSAC Common Stock outstanding as of March 5,
1996, by 1,671,290, the number of shares of EBIC Common Stock outstanding as of
March 5, 1996 (the "Outstanding EBIC Shares"), and the Warrant Exchange Ratio
was initially set at 4.5274405, the quotient obtained by dividing 7,566,666, the
number of FSAC Warrants outstanding as of March 5, 1996, by the Outstanding EBIC
Shares. The Merger Agreement provides for the Exchange Ratios to be adjusted
prior to the Merger, in order to maintain such 50% interest, by reflecting
any changes to the number of outstanding shares of FSAC Common Stock, FSAC
Warrants and EBIC Common Stock that occur (or, for purposes of such
adjustments, are deemed to occur) prior to the Merger. Pursuant to its
underwriting agreement entered into in connection with the IPO, FSAC has
agreed that until it consummates a Business Combination it will not issue any
additional shares of FSAC Common Stock or any options or other securities
convertible into FSAC Common Stock. Accordingly, the number of outstanding
shares of FSAC Common Stock and outstanding FSAC Warrants should remain at
4,416,666 and 7,566,666, respectively, as of the Effective Time. However, for
purposes of the quotients calculated above, the Merger Agreement provides
that the number of outstanding shares of FSAC Common Stock will be deemed to
increase by the 225,000 shares issued in the Unit Purchase Option Exchange,
if the Unit Purchase Option Exchange is consummated, and deemed to decrease
by the number of shares of FSAC Common Stock with respect to which Redemption
Rights are exercised. The Merger Agreement also prohibits EBIC from issuing
or redeeming any shares of its capital stock prior to the Effective Time
without the prior consent of FSAC and, as a result, it is anticipated that
the number of outstanding shares of EBIC Common Stock will remain at
1,671,290 as of the Effective Time. Accordingly, it is not expected (i) that
the Stock Exchange Ratio will exceed 2.7772954 (the quotient obtained by
dividing (x) 4,416,666 plus 225,000 (the maximum number of shares of FSAC
Common Stock to be issued in the Unit Purchase Option Exchange) by (y)
1,671,290) or be less than 2.2138588 (the quotient obtained by dividing (x)
4,416,666 minus 716,666 (the maximum number of Redemption Shares at which
FSAC is still permitted, pursuant to its Certificate of Incorporation, to
consummate the Merger) by (y) 1,671,290) or (ii) that the Warrant Exchange
Ratio will materially change from 4.5274405. See "THE MERGER -- Determination
and Adjustment of Merger Consideration" and "THE MERGER AGREEMENT --
Adjustment of Exchange Ratios and Cash Consideration."
In order to give effect to the intent of the parties that the pre-Merger
respective contributions of FSAC stockholders and EBIC stockholders to the
post-Merger consolidated net worth of FSAC be equalized (subject to certain
adjustments), the Per Share Cash Consideration was initially set at the
quotient obtained by dividing $16 million, the parties' then-estimate of the
likely difference between the respective net worths (as determined in
accordance with the Merger Agreement) of FSAC and EBIC immediately prior to
the Merger, by the Outstanding EBIC Shares. The Merger Agreement provides for
the Per Share Cash Consideration to be adjusted prior to the Merger,
generally in order to maintain such
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equalization principle, by reflecting any changes to the respective net
worths (as determined in accordance with the Merger Agreement) of FSAC and
EBIC that occur (or, for purposes of such adjustment, are deemed to occur)
prior to the Merger (as well as any change in the number of outstanding
shares of EBIC Common Stock). For example, amounts paid by FSAC to
stockholders exercising their Redemption Rights will be deemed to decrease
the net worth of FSAC (and thereby increase the aggregate cash portion of the
Merger Consideration (the "Aggregate Cash Consideration") by the same
amount). Based primarily on increases in EBIC's net worth that have occurred
since the signing of the Merger Agreement, the Aggregate Cash Consideration
would have been adjusted from $16 million to approximately $19 million if the
Merger had occurred on March 31, 1996. Based on preliminary assessments of
further increases in EBIC's net worth that have occurred since March 31, 1996
(and that are currently anticipated through the end of June 1996), FSAC and EBIC
estimate that the Aggregate Cash Consideration would be adjusted further to
approximately $20.1 million were the Merger to occur on June 30, 1996. In
addition, to the extent that EBIC's net worth changes further during the period
between July 1, 1996 and the actual Closing (which is currently anticipated to
occur in mid- or late-August 1996), or actual increases in EBIC's net worth from
April 1, 1996 through June 30, 1996 vary from the preliminary assessments and
estimates of the same used by management in arriving at the above $20.1 million
figure, the Aggregate Cash Consideration will be adjusted further, with every
approximately $1.00 increase or decrease in EBIC net worth having the effect
of increasing or decreasing, as the case may be, the Aggregate Cash
Consideration by approximately the same amount. See "THE MERGER AGREEMENT --
Adjustment of Exchange Ratios and Cash Consideration" and "-- Closing True-Up
Procedures."
In addition, if the Unit Purchase Option Exchange is not consummated, the
Merger Agreement provides for the Merger Consideration to be increased (in
lieu of the additional 225,000 shares) by an additional amount of cash to be
agreed upon between FSAC and EBIC to reflect the fact that the Unit Purchase
Options will remain outstanding or, if such amount cannot be agreed upon, by
an aggregate of 333,333 newly-issued Unit Purchase Options. See "THE MERGER
- -- Certain Related Transactions -- Unit Purchase Option Exchange."
Because of the variety of possible adjustments to the Merger Consideration
that may be necessary to maintain the intentions of the parties described
above, FSAC and EBIC have agreed to resolicit the approval of the Merger by
their respective stockholders if (subject to the escrow arrangements
described below) the final Stock Exchange Ratio falls outside of the range of
2.2138588 to 2.7772954, the final Warrant Exchange Ratio changes by more than
10% from 4.5274405 or the final Per Share Cash Consideration is less than
$9.00 or greater than $17.50.
The Merger Consideration to be received is also subject to certain escrow
arrangements entered into in connection with the Merger Agreement, pursuant
to which, among other things, 10% of the shares of FSAC Common Stock to be
issued in the Merger and $2 million of the aggregate cash portion of the
Merger Consideration will be escrowed for certain post-Merger periods and
certain purposes. See "THE MERGER AGREEMENT -- Merger Agreement
Indemnification," "--Closing True-Up Procedures" and "-- Certain Related
Agreements -- Escrow Agreement."
CERTAIN RELATED TRANSACTIONS
Unit Purchase Option Exchange
In connection with the Merger, FSAC has entered into an agreement (the
"Unit Purchase Option Agreement") with the holders of its outstanding options
to acquire 333,333 Units of FSAC (the "Unit Purchase Options"), which options
were issued to the underwriters for the IPO and certain designees thereof.
The Unit Purchase Option Agreement provides for the exchange, contingent upon
and effective immediately following the Merger, of all Unit Purchase Options
for an aggregate of 225,000 newly-issued shares of FSAC Common Stock (the
"Unit Purchase Option Exchange"). See "RISK FACTORS -- Effects of Unit
Purchase Option Exchange" and "THE MERGER --Certain Related Transactions --
Unit Purchase Option Exchange."
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Exchange Offer
The Merger Agreement contemplates 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 (including the Merger Warrants) that are
then outstanding on the basis of one share of FSAC Common Stock for a number
of FSAC Warrants to be mutually agreed upon between FSAC and EBIC's majority
stockholder, WCAS. There can be no assurance, however, that the Exchange
Offer will be made or, if made, as to the exchange ratio at which it will
occur or the other terms and conditions thereof. See "RISK FACTORS -- Effects
of Exchange Offer" and "THE MERGER -- Certain Related Transactions --Exchange
Offer." Certain stockholders of FSAC and EBIC have agreed, if the Exchange
Offer is made, to tender the FSAC Warrants held by them at such time
(including Merger Warrants) in numbers proportionate to the aggregate tenders
of FSAC Warrants made by other holders in the Exchange Offer. See "THE MERGER
AGREEMENT -- Certain Related Agreements -- Security Transfer Agreement."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
EBIC
The Board of Directors of EBIC has unanimously approved the Merger
Agreement (together with the Merger and all other transactions contemplated
thereby) and determined that the terms of the proposed Merger are fair to and
in the best interests of EBIC stockholders. THE EBIC BOARD UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF EBIC COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. See "THE MERGER -- Background of the Merger" and "--
Reasons for the Merger; Recommendations of the Boards of Directors."
FSAC
The Board of Directors of FSAC has unanimously approved the Merger
Agreement (together with the Merger and all other transactions contemplated
thereby) and determined that the terms of the proposed Merger are fair to and
in the best interests of FSAC stockholders. The FSAC Board has also approved
the Charter Amendments and the FSAC Option Plan. The FSAC Board unanimously
has determined to recommend that holders of FSAC Common Stock vote to approve
and adopt each of the Merger Agreement, the Charter Amendments and the FSAC
Option Plan at the FSAC Special Meeting. See "THE MERGER -- Background of the
Merger" and "-- Reasons for the Merger; Recommendations of the Boards of
Directors."
REASONS FOR THE MERGER
EBIC
In reaching its conclusion to approve and adopt the Merger Agreement (and
the transactions contemplated thereby), the EBIC Board of Directors considered
that the Merger would enable EBIC stockholders to increase their investment
liquidity over the liquidity of their current investment in EBIC by providing
them with a public market, while at the same time retaining, as stockholders of
FSAC, an investment in the EBIC business and providing an immediate return on
their investment via the Per Share Cash Consideration. In reaching its
conclusion, the EBIC Board evaluated a number of factors, including the terms
and conditions of the Merger Agreement, the amount of cash available to FSAC,
the business operations and prospects of EBIC on a historical basis and of EBIC
and FSAC on a pro forma combined basis, the business experience of FSAC's
management and the expenses of completing a public offering of EBIC Common
Stock. See "THE MERGER -- Reasons for the Merger; Recommendations of the Boards
of Directors."
FSAC
In reaching its conclusion to approve and adopt the Merger Agreement (and
the transactions contemplated thereby), the FSAC Board of Directors
considered a number of factors, including the
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results of its due diligence investigation of EBIC, the Board's and
management's belief that the consideration to be paid to EBIC stockholders
pursuant to the Merger Agreement is fair to FSAC and its stockholders, the
proposed terms and conditions of the Merger Agreement and the related
agreements provided for therein, the experience and capabilities of FSAC's
and EBIC's respective Boards and managements and certain potential risks
associated with the transaction. See "THE MERGER -- Reasons for the Merger;
Recommendations of the Boards of Directors." The FSAC Board also took into
account certain potential conflicts of interest of FSAC's directors, officers
and significant stockholders, including that unless FSAC consummates the
Merger or another Business Combination, such persons' Pre-IPO Shares and FSAC
Warrants will have no value. See "THE MERGER -- Interests of Certain Persons
in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stockholders should be aware that certain members of FSAC's and EBIC's
management and Boards of Directors and certain significant FSAC and EBIC
stockholders have certain interests in the Merger that are in addition to the
interests of stockholders of FSAC and EBIC generally. See "THE MERGER --
Interests of Certain Persons in the Merger."
Holdings of FSAC Securities
Each of the current directors and executive officers of FSAC owns Pre-IPO
Shares, as well as shares of FSAC Common Stock and FSAC Warrants purchased
pursuant to the IPO or thereafter in the open market or in privately
negotiated transactions. In the aggregate, the current directors and
executive officers of FSAC own 833,333 Pre-IPO Shares, 597,000 FSAC Public
Shares and 1,399,000 FSAC Warrants. If FSAC is liquidated as a result of its
failure to consummate the Merger or another Business Combination by December
7, 1996, neither the Pre-IPO Shares nor the FSAC Warrants would participate
in any distribution of FSAC assets and would be valueless. In addition, one
of the general partners of WCAS acquired in the IPO, and still owns, 100,000
FSAC Units.
Employment Agreements
In connection with the Merger Agreement, FSAC entered into an employment
agreement with Gilbert D. Scharf, its President and Chief Executive Officer,
and EBIC entered into employment agreements with Donald R.A. Marshall, its
President and Chief Executive Officer, and Keith E. Reihl, its Senior Vice
President and Treasurer (collectively, the "Employment Agreements"). The
Employment Agreements, among other things, provide each of Messrs. Scharf and
Marshall with initial annual salaries of $450,000, and Mr. Reihl with an
initial annual salary of $300,000. The Employment Agreements, although
executed as of March 8, 1996, are contingent upon, and do not become
effective until, consummation of the Merger.
FSAC Option Plan
The FSAC Option Plan has been adopted by the FSAC Board of Directors,
subject to the approval of FSAC stockholders. 1,800,000 shares of FSAC Common
Stock will be reserved for issuance under the FSAC Option Plan. Pursuant to
the FSAC Option Plan, no individual may be granted an option or options for
more than 500,000 shares of FSAC Common Stock in any calendar year. Although
no options have as yet been granted, it is expected that certain officers and
employees of FSAC and EBIC will receive grants following the Effective Time.
See "THE MERGER AGREEMENT -- FSAC Special Meeting Proposals -- The FSAC
Option Plan."
Boards of Directors
If all the nominees for election to the FSAC Board of Directors are
elected and the Merger is consummated, the members of the FSAC Board of
Directors will be Gilbert D. Scharf, Michael J. Scharf,
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Denis Martin, Larry S. Kopp, William B. Wigton, Frederick B. Whittemore,
Donald R. A. Marshall and James W. Stevens. Each such nominee, other than
Messrs. Marshall, Wigton and Stevens, is currently a director and stockholder
of FSAC. Mr. Marshall is currently the Chairman, President, Chief Executive
Officer and a director of EBIC. Mr. Wigton is currently a Managing Partner at
Merrion Group, L.P. Mr. Stevens is a former Executive Vice-President of The
Prudential Insurance Company of America. See "MANAGEMENT OF FSAC." The Board
of Directors of the Surviving Corporation will initially consist of Messrs.
Marshall and Reihl, Patrick J. Welsh and Bruce K. Anderson, the current Board
of Directors of EBIC, and, pursuant to the Merger Agreement, Gilbert D.
Scharf and Michael J. Scharf as designees of FSAC. It is contemplated that
Messrs. Welsh and Anderson will resign immediately following the Merger and
be replaced on the Surviving Corporation Board by Mr. Stevens and Mr. Daniel
G. Bergstein. It is also contemplated that Gilbert D. Scharf will be
appointed to the Board of Directors of a number of subsidiaries of the
Surviving Corporation. See "MANAGEMENT OF EBIC." Immediately following the
Merger, (i) EBIC and FSAC will take all action necessary to cause Gilbert
Scharf to become Vice-Chairman of EBIC and (ii) FSAC will use its best
efforts to take all necessary action to cause Donald Marshall to be appointed
Vice-Chairman of FSAC.
Indemnification
Pursuant to the Merger Agreement, the Surviving Corporation has agreed to
provide certain indemnification to the current directors and officers of
EBIC. See "THE MERGER AGREEMENT -- Directors' Indemnification."
Registration Rights
Prior to and as a condition of the Merger, a Registration Rights Agreement
is to be executed by FSAC that will provide two demand registration rights
and certain ancillary registration rights, in each case effective only for
periods after November 30, 1996, with respect to all shares of FSAC Common
Stock (including shares received upon exchange or exercise of FSAC Warrants)
held by WCAS and certain related investors, the Initial FSAC Stockholders and
the five members of EBIC management ("EBIC Management") who are also parties
to the Security Transfer Agreement. See "THE MERGER AGREEMENT -- Certain
Related Agreements -- Registration Rights Agreement."
ACCOUNTING TREATMENT
For accounting and financial reporting purposes the Merger will be
accounted for as a recapitalization of EBIC, with the issuance of shares by
EBIC for the net assets of FSAC, consisting primarily of cash. Since FSAC is
a SPAC(Registered Trademark) with no business operations other than the
search for a suitable Target Business, its assets will be recorded in the
balance sheet of the combined company at book value. The unaudited pro forma
financial information contained in this Proxy Statement/Prospectus has been
prepared on this basis.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger will be treated as a taxable transaction for federal income tax
purposes. Holders of EBIC Common Stock who receive the Merger Consideration
pursuant to the Merger will generally recognize gain or loss equal to the
difference between the fair market value of the Merger Consideration received
and the stockholder's aggregate tax basis in the EBIC Common Stock
surrendered. See "THE MERGER -- Certain Federal Income Tax Consequences."
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PRECISE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE MERGER AND
RELATED TRANSACTIONS.
EBIC STOCKHOLDERS' APPRAISAL RIGHTS
Under Delaware law, stockholders of EBIC who do not vote in favor of the
Merger and who comply with the requirements of Section 262 of the DGCL
("Section 262") have the right, in connection with the
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Merger, to have the "fair value" of their shares of EBIC Common Stock
judicially appraised and to be paid such appraisal value in accordance with
the provisions of Section 262. Any demand for appraisal must be made in
writing and delivered to EBIC prior to the vote on the Merger Agreement at
the EBIC Special Meeting. Submission of a proxy instructing that shares be
voted against approval of the Merger Agreement by itself does not constitute
such a demand. Moreover, voting in favor of the Merger, or delivering a proxy
in connection with the EBIC Special Meeting (unless the proxy votes against,
or expressly abstains from the vote on the Merger) will constitute a waiver
of a stockholder's appraisal rights and will nullify any written demand for
appraisal submitted by such stockholder. Any failure to take all the steps
required under Section 262 on a timely basis, including the filing of a
petition with the Delaware Chancery Court, may result in the loss of
appraisal rights. A copy of Section 262 is attached hereto as Annex III. See
"THE MERGER -- EBIC Stockholders' Rights of Appraisal" and Annex III. The
obligations of FSAC and Merger Sub to effect the Merger are subject to the
condition in the Merger Agreement that the aggregate number of shares
electing appraisal rights pursuant to Section 262 shall not constitute more
than 10% of the Outstanding EBIC Shares. See "THE MERGER AGREEMENT --
Conditions to the Merger."
FSAC REDEMPTION RIGHTS
Holders of FSAC Public Shares who vote such shares against the proposal to
approve and adopt the Merger Agreement have the right to demand the
redemption of such shares for cash if the Merger is approved and consummated.
Notwithstanding the foregoing, if 20% or more of the outstanding FSAC Public
Shares are voted against the Merger Agreement (and have Redemption Rights
properly demanded with respect to them), FSAC, pursuant to its Certificate of
Incorporation, is not permitted to consummate the Merger. Moreover, it is a
condition to EBIC's obligation to consummate the Merger that the number of
Redemption Shares does not constitute more than 10% of the number of shares
of FSAC Common Stock outstanding at the time of the Merger (giving effect to
the Unit Purchase Option Exchange, if any), although this right is in turn
subject to an FSAC stockholder right to cure any non-satisfaction of such
condition (see "THE MERGER AGREEMENT -- Conditions to the Merger"). To be
effective, Redemption Rights must be exercised by FSAC stockholders as
described more fully elsewhere in this Proxy Statement/Prospectus. The per
share redemption price will be equal to approximately $5.30 per share,
calculated by dividing the amount in the Trust as of the FSAC Record Date,
including interest thereon, by the number of FSAC Public Shares (the
"Redemption Price"). FSAC stockholders have no appraisal or dissenters'
rights with respect to the Merger. See "THE MERGER -- FSAC Redemption
Rights."
CONDITIONS TO THE MERGER; TERMINATION OF THE MERGER AGREEMENT
The obligations of FSAC and EBIC to consummate the Merger are subject to
various conditions specified in the Merger Agreement, including (i) obtaining
the requisite FSAC and EBIC stockholder approvals of the Merger Agreement,
(ii) the representations and warranties of FSAC and EBIC in the Merger
Agreement being true and correct in all material respects at the Effective
Time, (iii) the covenants and agreements in the Merger Agreement having been
performed and complied with in all material respects, (iv) the absence of any
pending claim, action, suit, investigation or governmental proceeding or law
which would render the Merger unlawful, (v) the approval of the Charter
Amendments by the requisite vote of the holders of FSAC Common Stock, (vi)
the receipt of certain opinions of counsel, (vii) the execution and delivery
of each of the Related Agreements (as defined in the Merger Agreement) and
(viii) the receipt of certain necessary consents, approvals and waivers,
including expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Early
termination of such waiting period was granted on April 16, 1996. In
addition, it is a condition of FSAC's obligation to consummate the Merger
that the number of Dissenting Shares not be more than 10% of the Outstanding
EBIC Shares, and it is a condition of EBIC's obligation to consummate the
Merger (subject to certain cure rights of FSAC) that the number of Redemption
Shares not exceed 10% of the number of shares of FSAC Common Stock
outstanding at the time of the Merger (giving effect to the Unit Purchase
Option Exchange, if any).
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<PAGE>
The Merger Agreement can be terminated by (i) mutual consent of FSAC and
EBIC, (ii) either party if the Merger is not consummated before August 31,
1996 (other than by reason of a breach by the terminating party), (iii)
either party if the other party materially breached any material agreement or
covenant in the Merger Agreement, which breach remains uncured after 30 days
following written notice thereof , (iv) either party if the other party's
representations and warranties were inaccurate and such inaccuracy has a
material adverse effect on such other party or (v) either party if there is a
final and nonappealable order preventing consummation of the Merger. In the
event of certain terminations of the Merger Agreement, including if EBIC
stockholders fail to approve and adopt the Merger Agreement at the EBIC
Special Meeting, EBIC is obligated to pay FSAC certain termination fees. See
"THE MERGER AGREEMENT -- Fees and Expenses."
NASDAQ NATIONAL MARKET LISTING
FSAC is obligated under the Merger Agreement to use its reasonable efforts
(i) to prepare and file an application with the NASD to list FSAC Common
Stock and FSAC Warrants (including the Merger Warrants) on the Nasdaq
National Market and (ii) to cause such application to be approved as soon as
reasonably practicable following the Effective Time. Such listing is not a
condition to consummation of the Merger.
REGULATORY APPROVALS REQUIRED
Certain aspects of the Merger will require notifications to, and/or
approvals from, certain United States (state and federal) authorities and
certain authorities in England, Canada, Japan and Hong Kong. See "THE MERGER
- -- Regulatory Approvals."
CERTAIN RELATED AGREEMENTS
The following related agreements were entered into or the form was
negotiated in connection with the execution of the Merger Agreement. See "THE
MERGER AGREEMENT --Certain Related Agreements."
Escrow Agreement
In connection with the Merger, FSAC has entered into an Escrow Agreement,
dated as of March 8, 1996 (the "Escrow Agreement"), by and among FSAC, Merger
Sub, EBIC, Donald Marshall, WCAS and United States Trust Company of New York,
as escrow agent, which provides for, among other things, the deposit of (i)
10% of the shares of FSAC Common Stock to be issued in the Merger, in order
to pay, among other things, indemnities, if any, that become owed to FSAC
under the Merger Agreement, (ii) $2 million of the cash comprising the Merger
Consideration, to make certain Per Share Cash Consideration adjustments, if
any, and to make payment with respect to Dissenting Shares, if any, and (iii)
to the extent there are any Dissenting Shares, (x) an additional portion of
the cash comprising the Merger Consideration equal to the aggregate book
value of such Dissenting Shares and (y) additional stock and warrant
certificates representing FSAC Common Stock and Merger Warrants (the "Section
262 Securities") that, but for their demand of appraisal rights, the holders
of such Dissenting Shares would have received (in order to ensure that
non-dissenting EBIC stockholders own 50% of the outstanding shares of FSAC
Common Stock and FSAC Warrants after the Merger). As a result of the Escrow
Agreement and the arrangements contemplated thereby, holders of EBIC Common
Stock will initially receive less than the full Merger Consideration. The
existence and scope of any drawdowns of the amounts deposited in escrow will
determine whether holders of EBIC Common Stock ultimately receive a final
amount different from the Merger Consideration. See "THE MERGER AGREEMENT --
Certain Related Agreements -- Escrow Agreement."
Security Transfer Agreement
In connection with the Merger, FSAC has also entered into a Security
Transfer Agreement, dated as of March 8, 1996, with Gilbert Scharf, Michael
Scharf, WCAS, WCAS Information Partners, L.P., a
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Delaware limited partnership, and EBIC Management which (i) prohibits any
sales or other dispositions (with certain exceptions) by such persons during
the period commencing at the Effective Time and continuing through November
30, 1996 with respect to any shares of FSAC Common Stock (other than Pre-IPO
Shares, which are separately held in escrow until December 7, 1997) and FSAC
Warrants held by such persons and (ii) obligates each such person to tender
for exchange (and not withdraw) in the Exchange Offer, if any, their FSAC
Warrants (including Merger Warrants) in numbers proportionate to the
aggregate tenders of FSAC Warrants made by other holders in the Exchange
Offer.
Majority Stockholders' Agreement
FSAC and Merger Sub have also entered into a Majority Stockholders'
Agreement, dated as of March 8, 1996, with WCAS, pursuant to which WCAS has
made certain representations and agreements in connection with the
transactions contemplated by the Merger Agreement.
Registration Rights Agreement
Prior to and as a condition of the Merger, a Registration Rights Agreement
will be executed by FSAC that will provide two demand registration rights,
and certain "piggy-back" registration rights, in each case effective only for
periods after November 30, 1996, with respect to all shares of FSAC Common
Stock (including shares received upon exchange or exercise of FSAC Warrants,
including Merger Warrants) held by WCAS and certain related investors, the
Initial FSAC Stockholders and EBIC Management. The first demand may only be
initiated by holders of at least a majority of the total outstanding shares
of FSAC Common Stock issued in the Merger to WCAS and certain related
investors (excluding certain shares held in escrow), but will extend to the
other stockholders who are parties to the agreement. The second demand may be
made by holders of a majority of the total outstanding shares of FSAC Common
Stock held by all stockholders who are parties to the agreement (excluding
certain shares held in escrow). In certain circumstances the shares to be
registered pursuant to an underwritten public offering may be reduced or the
registration may be delayed.
MARKET PRICES OF FSAC SECURITIES
FSAC Common Stock, FSAC Warrants (each entitling the holder thereof to
purchase one share of FSAC Common Stock for $5.00 per share) and FSAC Units
(each consisting of one share of FSAC Common Stock and two FSAC Warrants) are
quoted on the OTC Bulletin Board under the symbols "FSAT," "FSATW" and
"FSATU," respectively.
The following table sets forth the range of high and low closing bid
prices for each of the FSAC Units, FSAC Common Stock and FSAC Warrants for
the period since December 7, 1994, when the FSAC Common Stock and FSAC
Warrants commenced public trading, as reported by the OTC Bulletin Board. The
price per FSAC Unit in the IPO was $6.00. The OTC Bulletin Board is a NASD
sponsored and operated automated inter-dealer quotation system for equity
securities not included in the Nasdaq Stock Market National Market System.
Such over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily reflect
actual transactions. FSAC has never paid cash dividends on any of its capital
stock.
15
<PAGE>
<TABLE>
<CAPTION>
FSAC FSAC FSAC
COMMON STOCK WARRANTS UNITS
HIGH LOW HIGH LOW HIGH LOW
-------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
1994:
Fourth Quarter (beginning December 7) .... $4 1/4 $4 1/4 $ 7/8 $ 7/8 $6 $5 3/4
1995:
First Quarter ............................. $4 3/8 $4 1/4 $ 7/8 $ 5/8 $5 3/4 $5 3/4
Second Quarter ............................ 4 9/16 4 1/4 3/4 5/8 5 3/4 5 3/4
Third Quarter ............................. 4 5/8 4 1/2 3/4 11/16 5 3/4 5 3/4
Fourth Quarter ............................ 4 5/8 4 3/8 11/16 1/2 5 3/4 5 3/4
1996:
First Quarter ............................. $4 7/8 $4 5/8 $ 27/32 $ 1/2 $5 3/4 $5 3/4
Second Quarter (through June 21, 1996) .... 5 1/16 4 7/8 1 1/16 23/32 6 1/8 5 3/4
</TABLE>
On June 21, 1996, the most recent date for which it was practicable to
obtain market price information before the printing of this Proxy
Statement/Prospectus, the high and low closing bid prices, as reported on the
OTC Bulletin Board, were (i) for FSAC Common Stock, a high of $5 1/16 and a low
of $5 1/16, (ii) for FSAC Warrants, a high of $1 1/16 and a low of $1 1/16 and
(iii) for FSAC Units, a high of $6 1/8 and a low of $6 1/8. Based on such bid
prices for FSAC Common Stock and FSAC Warrants, and assuming an estimated Per
Share Cash Consideration of $12.03, the Merger Consideration (prior to giving
effect to any further adjustments or escrow arrangements) would have
an indicated per share value of $30.22.
EBIC stockholders are urged to obtain current market quotations for FSAC
Common Stock and FSAC Warrants.
NO PUBLIC MARKET FOR EBIC SECURITIES
EBIC Common Stock is not registered under the Exchange Act, listed on any
securities exchange or traded in the over-the-counter market. There have been
no dividends paid on any shares of the capital stock of EBIC in its current,
or either of its last two, fiscal years. As of March 31, 1996, the unaudited
per share book value of EBIC Common Stock was $20.72.
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RISK FACTORS
THE FOLLOWING ARE CERTAIN RISK FACTORS OR INVESTMENT CONSIDERATIONS THAT
SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE MERGER, IN ADDITION TO THE
RISKS AND OTHER INFORMATION DESCRIBED ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS.
LIMITED TRADING MARKET FOR FSAC COMMON STOCK AND FSAC WARRANTS
FSAC Common Stock and FSAC Warrants are currently traded in the
over-the-counter market and quoted on the OTC Bulletin Board (the "OTC
Bulletin Board") of the National Association of Securities Dealers, Inc. (the
"NASD"). There has been only a limited trading market for FSAC Common Stock
and FSAC Warrants (and the bundled FSAC Units, each of which is comprised of
one share of FSAC Common Stock and two FSAC Warrants ("FSAC Units")). There
can be no assurance that an active or regular trading market will develop or
continue after the Merger for either FSAC Common Stock or FSAC Warrants
(including the Merger Warrants). Consequently, the holders of FSAC Common
Stock and FSAC Warrants may not be able to sell them at any particular time
or at prices that reflect their actual value. FSAC will apply to have FSAC
Common Stock and FSAC Warrants included in the Nasdaq National Market
following consummation of the Merger, but no assurance can be given that such
listings will occur or be maintained, and such listings are not a condition
to the Merger.
POSSIBLE VOLATILITY OF PRICES FOR FSAC COMMON STOCK AND FSAC WARRANTS
FSAC believes that before the public announcement of the execution of the
Merger Agreement, the market price of FSAC Common Stock was based primarily
on the per share amount distributable, in the event FSAC was obligated to
liquidate (the "Distribution Amount"), from the interest-bearing trust
account (the "Trust") into which most of the proceeds from the IPO were
deposited, and to a lesser degree upon the anticipation of FSAC fulfilling
its business objective of acquiring 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"). The market price of FSAC Warrants, which are not entitled to
share in the Distribution Amount, was believed to be based primarily on their
exercise price, the likelihood of a Business Combination being announced and
consummated and the anticipated effects on the market price of FSAC Common
Stock if such a Business Combination were consummated. FSAC believes that
after the public announcement, the market price of FSAC Common Stock
continued to be based in part upon the Distribution Amount, but to a greater
degree upon the likelihood of consummation of the Merger and the market
perception of the prospects for EBIC's business.
If the Merger is consummated, it is anticipated that the price of FSAC
Common Stock will reflect the value of the assets and business of FSAC and
EBIC on a pro forma consolidated basis and the increase in the amount of
outstanding securities of FSAC, as well as the liquidity of such securities.
On a pro forma basis (see "CAPITALIZATION"), and assuming no FSAC
stockholders exercise their right under certain circumstances to demand the
redemption of their shares ("Redemption Rights") by FSAC (see "THE MERGER --
FSAC Redemption Rights"), it is expected that (i) the number of outstanding
shares of FSAC Common Stock will increase from 4,416,666 to 8,833,332 (or
9,283,332 if the Unit Purchase Option Exchange is consummated), (ii) the
number of outstanding FSAC Warrants will increase from 7,566,666 to
15,133,332 and (iii) the total stockholders' equity of FSAC will
approximately double (depending upon the number of Dissenting Shares, the
final adjustments to the cash portion of the Merger Consideration and a
number of other factors). The large number of shares of FSAC Common Stock and
FSAC Warrants outstanding, the prospect of substantial exercises of FSAC
Warrants (prior to any Exchange Offer or possible redemption of FSAC Warrants
by FSAC), notwithstanding that such exercises would contribute significant
cash amounts to FSAC, and the prospect of issuances of options under the FSAC
1996 Stock Option Plan, if approved by FSAC stockholders (the "FSAC Option
Plan"), may have a material adverse impact on the market prices for FSAC
Common Stock and FSAC Warrants. In addition, anticipation of the Exchange
Offer and/or consummation of the same could have a similar effect, since the
Exchange Offer, although it would reduce the number of outstanding FSAC
Warrants, would result in the issuance of additional shares of FSAC Common
Stock (the exact number depending upon the final exchange ratio
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<PAGE>
that is agreed upon and the number of FSAC Warrants that are tendered)
without the payment of any cash or other consideration that would add to
FSAC's total stockholders' equity. Finally, factors following the Merger,
such as announcements of quarterly financial results, competitive
developments, changes in U.S. or foreign government regulations or capital
requirements, sales of substantial blocks of FSAC securities by the holders
thereof (see "-- Shares Eligible for Future Sale"), and the issuance of
additional FSAC securities in connection with possible future acquisitions or
financings, if any, among other things, could cause the market prices for
FSAC Common Stock and FSAC Warrants to fluctuate significantly.
SHARES ELIGIBLE FOR FUTURE SALE
Approximately 4,088,210 (4,271,006 if the Unit Purchase Option Exchange is
consummated) shares of FSAC Common Stock, consisting of 81% of the FSAC
Common Stock to be issued in the Merger and 11% of the currently outstanding
FSAC Common Stock, and 7,197,350 FSAC Warrants, consisting of 81% of the
Merger Warrants and 14% of the currently outstanding FSAC Warrants, will be
subject to the terms of the Security Transfer Agreement, dated as of March 8,
1996 (the "Security Transfer Agreement"), by and among Gilbert Scharf,
Michael Scharf, WCAS, WCAS Information Partners, L.P., a Delaware limited
partnership ("WCAS Info"), and certain members of EBIC management ("EBIC
Management"), which effectively prohibits their sale or other disposition
(other than by gift or laws of descent) prior to November 30, 1996. See "THE
MERGER AGREEMENT -- Certain Related Agreements -- Security Transfer
Agreement." Separately, 10% of all shares of FSAC Common Stock issued in the
Merger, including shares subject to the Security Transfer Agreement (the
"Escrow Shares"), will be subject to the restrictions of the Escrow
Agreement, dated as of March 8, 1996 (the "Escrow Agreement"), by and among
FSAC, Merger Sub, EBIC, Donald Marshall, WCAS and United States Trust Company
of New York, as escrow agent (the "Escrow Agent"). See "THE MERGER AGREEMENT
- -- Certain Related Agreements -- Escrow Agreement." Moreover, all of the
833,333 shares of FSAC Common Stock issued prior to the IPO (the "Pre-IPO
Shares"), constituting an additional approximately 18.9% of the currently
outstanding shares of FSAC Common Stock, are subject to separate lock-up
agreements with the IPO underwriters (the "IPO Lock-up Agreements")
prohibiting their sale or disposition prior to December 7, 1997.
Consequently, of the total 9,283,332 shares potentially outstanding
immediately following the Merger (assuming consummation of the Unit Purchase
Option Exchange, no Dissenting Shares and no exercise by FSAC stockholders of
their Redemption Rights) the only shares of FSAC Common Stock available for
resale in the public market (until at least November 30, 1996) would be
approximately an aggregate 4,091,927 shares. These shares would be comprised
of (i) the approximately 3,083,333 currently outstanding shares of FSAC
Common Stock that are not and will not be subject to any agreements which
preclude sale or transfer, (ii) the approximately 870,660 shares of FSAC
Common Stock to be issued in the Merger that will not be subject to the
Security Transfer Agreement (less the 10% thereof, or 87,066 shares, that
will be subject to the Escrow Agreement) and (iii) the 225,000 shares of FSAC
Common Stock to be issued to the holders of the Unit Purchase Options in the
Unit Purchase Option Exchange. In addition, (x) shares of FSAC Common Stock
issued upon exercise of the existing FSAC Warrants (other than the
approximately 14% of the existing FSAC Warrants held by persons who are
signatories to the Security Transfer Agreement), (y) shares of FSAC Common
Stock received upon exercise of the Merger Warrants (other than the
approximately 81% of the Merger Warrants that will be held by persons who are
signatories to the Security Transfer Agreement) and (z) if the Unit Purchase
Option Exchange is not consummated, shares of FSAC Common Stock received upon
exercise of the Unit Purchase Options (and upon exercise of the FSAC Warrants
received upon exercise thereof), would be available for resale in the public
market. After November 30, 1996, all of the shares of FSAC Common Stock
outstanding (other than the Pre-IPO Shares and the Escrow Shares) or
receivable upon exercise of any of the FSAC Warrants outstanding will be
available for resale in the public market (subject to the limitations of Rule
144 under the Securities Act, where applicable). Moreover, pursuant to the
Registration Rights Agreement to be entered into prior to and as a condition
of the Merger by FSAC, WCAS and certain related investors, WCAS Info, EBIC
Management and the Initial FSAC Stockholders (the "Registration Rights
Agreement"), persons holding in the aggregate what will be approximately
4,102,646 shares, or 44%, of the outstanding FSAC Common Stock following the
Merger (assuming consummation of the Unit Purchase Option Exchange and
excluding any such shares that are Escrow Shares or subject to the IPO
Lock-up Agreements) and approximately 7,748,744, or 51%, of the
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<PAGE>
outstanding FSAC Warrants following the Merger (without giving effect to any
Exchange Offer) will be entitled, effective only for periods after November
30, 1996, to certain demand and ancillary registration rights with respect to
their shares of FSAC Common Stock (including shares received upon exchange or
exercise of their FSAC Warrants). See "THE MERGER AGREEMENT --Certain Related
Agreements -- Registration Rights Agreement." Sales of substantial numbers of
shares of FSAC Common Stock in the public market could materially adversely
affect the market prices for FSAC Common Stock and FSAC Warrants.
EFFECTS OF EXCHANGE OFFER
If the Exchange Offer does not occur, 15,133,332 shares of FSAC Common
Stock could be issued if all of the FSAC Warrants that will be outstanding
following the Merger were exercised, with aggregate proceeds to FSAC from
such exercises of approximately $75.7 million. If the Exchange Offer is made
and consummated, a significant number of additional shares of FSAC Common
Stock will be issued sooner than anticipated (the exact number depending upon
the exchange ratio that is agreed upon and the number of FSAC Warrants
tendered), but fewer FSAC Warrants will remain outstanding, thereby resulting
in fewer shares of FSAC Common Stock being issued pursuant to future
exercises of FSAC Warrants. Determination of the precise exchange ratio will
depend on a number of factors, including the outcome of discussions between
FSAC and WCAS, the post-Merger trading prices of FSAC Common Stock and FSAC
Warrants, the results of any financial advice sought by either or both of
FSAC and WCAS and a review of the terms of warrant exchange offers made by
other SPACs(Registered Trademark). Because the Exchange Offer will not
involve any cash or other consideration (other than the cancellation of the
FSAC Warrants), there will be no effect on FSAC's cash or total stockholders'
equity (other than transaction costs), but there will be a dilutive effect on
FSAC's stockholders' equity on a per share basis, as well as on voting power
and FSAC's earnings per share. There can be no assurance, however, that the
Exchange Offer will be made or, if made, as to the exchange ratio at which it
will occur or the other terms and conditions thereof.
EFFECTS OF UNIT PURCHASE OPTION EXCHANGE
If the Unit Purchase Option Exchange does not occur, 333,333 shares of
FSAC Common Stock and 666,666 FSAC Warrants will be issued if all of the
333,333 Unit Purchase Options currently outstanding are exercised, with
aggregate proceeds to FSAC from such exercises of approximately $3.3 million.
An additional 666,666 shares of FSAC Common Stock will be issued if the
666,666 FSAC Warrants received upon exercise of the Unit Purchase Options
are, in turn, exercised, with incremental aggregate proceeds to FSAC of
approximately $4.2 million. In addition, pursuant to the Merger Agreement,
the Merger Consideration will include an additional agreed-upon amount of
cash to reflect the fact that the Unit Purchase Options will remain
outstanding or, if such amount cannot be agreed upon, will include an
aggregate of 333,333 newly-issued Unit Purchase Options. If the Unit Purchase
Option Exchange is consummated, an additional 225,000 shares of FSAC Common
Stock will be issued to the current holders of the Unit Purchase Options, the
aggregate Merger Consideration will be increased by 225,000 shares of FSAC
Common Stock (but the additional agreed-upon cash component, or additional
Unit Purchase Options in lieu thereof, will be eliminated) and no Unit
Purchase Options will remain outstanding. Because the Unit Purchase Option
Exchange will not involve any cash or consideration (other than the
cancellation of the Unit Purchase Options), there will be no effect on FSAC's
cash or total stockholders' equity (other than transaction costs), but there
will be a dilutive effect on FSAC's stockholders' equity on a per share
basis, as well as on voting power and FSAC's earnings per share.
DEPENDENCE ON KEY EMPLOYEES
The brokerage business is inherently reliant on relationships with clients
that develop over time, and certain of EBIC's brokers have established
long-term associations with customers. EBIC's and, following the Merger,
FSAC's success depends to a significant extent on these connections and on
the performance and experience of a number of key management and sales
personnel. The loss of one or more of these key employees could have a
material adverse effect on EBIC and, following the Merger, FSAC. While EBIC
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<PAGE>
and FSAC have entered into, or at the time of the Merger expect to have
entered into, employment agreements with many of their key employees, and
neither EBIC nor FSAC has any reason to believe that other key personnel will
not remain with EBIC and, following the Merger, FSAC, there can be no
assurance that such employment agreements will be renewed or effective in
retaining such persons' services or that other key personnel will remain with
EBIC and FSAC indefinitely. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EBIC," "THE MERGER --
Interests of Certain Persons in the Merger -- Employment Agreements,"
"MANAGEMENT OF EBIC" and "MANAGEMENT OF FSAC." Nor can there be any guarantee
that EBIC or FSAC will be able to attract and retain qualified, experienced
individuals, whether to replace current personnel or as a result of
expansion, because competition within the brokerage industry for such
individuals is intense. EBIC maintains key person insurance on the lives of
certain of its employees, but any proceeds therefrom would not necessarily
fully mitigate the consequences to EBIC's business of their deaths. See
"MANAGEMENT OF EBIC."
AUTHORITY OF FSAC TO ISSUE ADDITIONAL SECURITIES
FSAC's Certificate of Incorporation currently authorizes the issuance of
14,000,000 shares of FSAC Common Stock. As of the date of this Proxy
Statement/Prospectus, there were 4,416,666 shares of FSAC Common Stock
outstanding and 8,566,665 shares reserved for issuance upon exercise of
outstanding FSAC Warrants and Unit Purchase Options (and the FSAC Warrants
included therein), leaving 1,016,669 authorized shares available for other
issuances. Following consummation of the Merger, which is conditioned upon,
among other things, approval of the Charter Amendments, FSAC's Certificate of
Incorporation will authorize the issuance of 30,000,000 shares of FSAC Common
Stock (see "THE MERGER AGREEMENT -- FSAC Special Meeting Proposals --
Additional Common Stock Amendment"), and it is expected that there will be
outstanding, on a pro forma basis (assuming consummation of the Unit Purchase
Option Exchange, no Dissenting Shares and no exercise by FSAC stockholders of
their Redemption Rights), 9,283,332 shares of FSAC Common Stock, with
15,133,332 shares reserved for issuance upon exercise of then-outstanding
FSAC Warrants, leaving 5,583,336 authorized shares available for other
issuances (including under the FSAC Option Plan; see "THE MERGER AGREEMENT --
FSAC Special Meeting Proposals -- The FSAC Option Plan"). Assuming the
Exchange Offer is made and consummated following the Merger, the number of
shares of FSAC Common Stock outstanding would increase and the shares
reserved for issuance with respect to FSAC Warrants would decrease (in
accordance with the agreed-upon exchange ratio and depending on the number of
FSAC Warrants tendered). Because it is expected that a greater number of FSAC
Warrants would be exchanged for a lesser number of shares of FSAC Common
Stock, the number of authorized shares available for other issuances would
increase. Subject to the rules of the NASD, the FSAC Board is empowered,
without stockholder approval, to issue any or all of the authorized but
unissued (and unreserved) shares of FSAC Common Stock. Any such additional
issuances (depending on the consideration, if any, received) may dilute the
interests of FSAC stockholders.
In addition, FSAC's Certificate of Incorporation currently authorizes (and
following effectiveness of the Charter Amendments will continue to authorize)
the issuance of 1,000,000 shares of Preferred Stock, par value $.001 per
share ("FSAC Preferred Stock"), with such designations, rights and
preferences as may be determined from time to time by the FSAC Board. Subject
to the rules of the NASD, the FSAC Board is empowered, without stockholder
approval, to issue FSAC Preferred Stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting
power or other rights of the holders of FSAC Common Stock and FSAC Warrants.
Moreover, FSAC Common Stock and FSAC Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of FSAC. Except as contemplated by the Merger and the
related transactions, as discussed in this Proxy Statement/Prospectus, FSAC
has no current intention to issue any FSAC Common Stock or FSAC Preferred
Stock. See "DESCRIPTION OF FSAC CAPITAL STOCK."
CONCENTRATION OF VOTING CONTROL; STAGGERED BOARD
Upon consummation of the Merger, it is anticipated that WCAS and its
affiliates will hold approximately 27% of the outstanding shares of FSAC
Common Stock, with the current directors and
20
<PAGE>
officers of FSAC holding an additional approximately 14%, EBIC Management
holding an additional approximately 15% and other current employees of EBIC
controlling an additional approximately 8%. Such concentration of control in
a single major stockholder and in directors, officers and employees may have
an adverse effect on the market prices for FSAC securities.
In addition, upon consummation of the Merger, as a result of the Charter
Amendments (as hereinafter defined) and the election of directors to occur at
the Special Meeting of FSAC stockholders to be held in connection with the
Merger (the "FSAC Special Meeting"), FSAC will have an eight-person,
three-class staggered Board of Directors, on which two of the representatives
will be designees of EBIC. The classified Board of Directors is likely to
have the effect of perpetuating control of FSAC, at least through the second
annual meeting of stockholders of FSAC following the Merger, in the current
directors of FSAC, and may, in conjunction with the Charter Amendments
relating to eliminating actions by written consent, restricting the ability
of FSAC stockholders to call special meetings of FSAC stockholders and
requiring an 80% supermajority vote to amend such provisions, have the effect
of discouraging, delaying or preventing a change in control of FSAC and/or
have an adverse effect on the market prices for FSAC securities. See "THE
MERGER AGREEMENT -- FSAC Special Meeting Proposals -- The Charter
Amendments."
DETERMINATION OF MERGER CONSIDERATION; ABSENCE OF FAIRNESS OPINION
Prior to the Merger, there has been no public market for the shares of
EBIC Common Stock. The Merger Consideration has been determined by
negotiations between FSAC and EBIC, and is intended, subject to certain
adjustments and escrow arrangements, (i) to provide EBIC stockholders who do
not exercise appraisal rights with a post-Merger pro forma 50% ownership
interest in FSAC and (ii) to include sufficient cash consideration generally
to equalize the pre-Merger respective contributions of FSAC stockholders and
EBIC stockholders to the post-Merger consolidated net worth of FSAC. See "THE
MERGER -- Merger Consideration." There can be no assurance that the Merger
Consideration on a per share basis is indicative of the fair market value of
a share of EBIC Common Stock. Neither EBIC nor FSAC has sought or obtained an
opinion from an investment banker regarding the fairness of the Merger or the
Merger Consideration to the stockholders of either company. See "THE MERGER
- -- Reasons for the Merger; Recommendations of the Boards of Directors,"
"--Interests of Certain Persons in the Merger" and "-- Absence of Fairness
Opinion."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED IN CONNECTION
WITH EXERCISE OF FSAC WARRANTS
FSAC will be able to issue shares of FSAC Common Stock upon exercise of
FSAC Warrants (including the Merger Warrants) only if there is then a current
prospectus relating to the underlying FSAC Common Stock under an effective
registration statement filed with the Commission, and only if such FSAC
Common Stock is qualified for sale or exempt from qualification under
applicable state securities laws of the jurisdictions in which the various
holders of FSAC Warrants reside. Although FSAC is obligated to use its best
efforts to meet such requirements, there can be no assurance that FSAC will
be able to do so. FSAC Warrants may be deprived of any value and the market
for FSAC Warrants may be limited if a current prospectus covering the
underlying FSAC Common Stock is not then effective or if such FSAC Common
Stock is not qualified or exempt from qualification in the jurisdictions in
which the holders of FSAC Warrants reside.
POTENTIAL REDEMPTION OF FSAC WARRANTS
FSAC Warrants (including the Merger Warrants) may be redeemed by FSAC, at
a price of $.01 per warrant, at any time after they become exercisable,
subject to not less than 30 days' prior written notice to the holders
thereof, provided that the last sale price of FSAC Common Stock has been at
least $8.50 per share for the 20 consecutive trading days ending on the third
day prior to the day on which notice is given. Notice of the redemption of
FSAC Warrants could force the holders thereof to exercise FSAC Warrants and
pay the exercise price at a time when it may be disadvantageous for them to
do so, to sell FSAC Warrants at the then current market price when they might
otherwise wish to continue to hold FSAC Warrants, or to accept the $.01 per
warrant redemption price.
21
<PAGE>
EFFECT OF CHANGES IN GENERAL ECONOMIC AND FINANCIAL CONDITIONS
The profitability and success of EBIC is, and, following the Merger, of
FSAC will be, dependent to a great extent upon general economic conditions.
EBIC's business may be directly affected by national and international
economic and political conditions, broad trends in business and finance, the
level and volatility of interest rates and fluctuations in volume and price
levels in the securities and commodities markets. Lower price levels of
securities may result in reduced volume of transactions, and may also result
in other losses.
GOVERNMENT REGULATION
EBIC and its subsidiaries, in the ordinary course of their business, are
subject to extensive regulation at international, federal and state levels by
various regulatory bodies which are charged with safeguarding the integrity
of the securities and other financial markets and protecting the interests of
customers. These regulations include both initial licensing thresholds and
ongoing disclosure obligations. In the United States, EBIC and/or its
subsidiaries are subject to the jurisdiction, regulations and requirements of
the Commission, the NASD, the National Futures Association (the "NFA"), the
Commodities Futures Trading Commission, the New York Cotton Exchange and
applicable state regulatory entities. During May 1996, EBIC's U.S.
broker-dealer subsidiary became a member of Government Securities Clearing
Corporation. In addition, EBIC and/or its subsidiaries must comply with the
requirements of several foreign agencies charged with monitoring participants
in the brokerage industry. These authorities include The Bank of England, the
Securities and Futures Authority (the "SFA") and the Director General of Fair
Trading in the United Kingdom, the Ontario Securities Commission, the Hong
Kong Foreign Exchange and Deposit Brokers' Association, the Bank of Japan and
the Japanese Ministry of Finance. See "THE MERGER -- Regulatory Approvals"
and "BUSINESS OF EBIC --Regulation." The compliance requirements of these
different overseer bodies may include, but are not limited to, net capital or
stockholders' equity requirements. Failure either to maintain compliance with
existing applicable regulations or to satisfy the requirements of new
regulations could result in the loss or suspension of licenses or permits or
civil or criminal liability or monetary penalties. While EBIC believes that
it, its subsidiaries and their respective employees are currently in
compliance with applicable regulatory obligations, there can be no assurance
that future changes or developments relating to the regulation of the
business of EBIC and its subsidiaries will not have a material adverse effect
on their financial condition.
CONSOLIDATING SUPERVISOR
In addition to the requirements of the various countries and jurisdictions
discussed above, as part of the harmonization process within the European
Community (the "EC"), member countries are required to adopt European
legislation, including an Investment Services Directive ("ISD") and Capital
Adequacy Directive ("CAD") which are designed to regulate the European
market, with the result that the qualification thresholds and ongoing
compliance requirements affecting EBIC have recently undergone change. The
SFA has issued new rules with respect to the ISD and CAD of the EC, and in
particular regarding consolidated supervision. These rules impose varying
capital thresholds on EBIC's U.K. subsidiaries depending upon, among other
things, the activities of such subsidiaries. The application of these rules
to EBIC and its subsidiaries could result in EBIC and/or its subsidiaries
having to meet more stringent capital adequacy requirements. The SFA has
conditionally confirmed the categorization of EBIC's U.K. subsidiary, Euro
Brokers Financial Services Limited ("EBFSL"), as a "Category D" firm which,
as such, is not subject to the consolidated supervision rules. Accordingly,
EBIC believes that none of the currently conducted operations of EBFSL or its
other U.K. subsidiaries subject any of them to any capital requirements of
the SFA for which they are not in compliance. It is possible that future
activities of such subsidiaries, including any activities that cause the loss
of EBFSL's categorization as a Category D Firm, may require the allocation of
additional capital. The SFA had also raised a concern regarding the technical
solvency of EBIC's U.K. holding subsidiary, Euro Brokers Holdings Limited
("EBHL"), which concern was resolved principally by restructuring the capital
of EBHL. See "BUSINESS OF EBIC -- Regulation."
22
<PAGE>
COMPETITION
The financial brokerage industry is highly competitive. The success of a
company within this industry is dependent on the experience of and extent of
client networks developed by its personnel, its range of products, its
commission rates (including volume discounting) and the general quality,
speed and reliability of its service. While there are not many large
international money brokers and entry into this industry is costly, EBIC
encounters competition from several companies which are divisions of much
larger financial services conglomerates and therefore have significantly
greater resources than EBIC, in addition to access to a wider pool of
potential clients. Moreover, all brokerage firms are subject to the pressures
of offering their services at a lower price. The use of volume discounting
has become more widespread in recent years. As a result, increases in market
volumes do not necessarily result in proportionate increases in brokerage
commissions and revenues.
As global communication advances and new technologies are developed, the
money brokerage industry will become more susceptible to the possibility of
losing clients to companies and products that facilitate fully automated
dealing, allowing principals to circumvent the intermediary and obviating the
need for the money broker. In particular, Electronic Brokering Systems and
Reuters 2000-2 are each electronic systems that have reduced the need for
voice brokering by matching parties via a computerized network. While these
systems so far are viable only in markets involving very standardized
products, and EBIC believes that more complex financial vehicles, in
particular derivatives, are not amenable to fully electronic matching, there
can be no guarantee that such systems will not be developed in the future. If
developed, such systems could have a significant adverse effect on EBIC's
business.
EUROPEAN MARKET UNIFICATION
The introduction of a single currency for the EC would eliminate the
European cross-currency market and have a significant adverse impact on
EBIC's business. Moreover, deregulation within the EC will allow brokers from
any EC country to conduct business in any other EC country without the
necessity of complying with the specific local regulations, and could
increase the competitive challenges faced by EBIC.
LIABILITY FOR UNSETTLED TRADES
EBIC functions primarily as an intermediary, matching the trading needs of
financial institutions by providing specialized services. Some of these
transactions are executed on a name give-up basis, that is, once the specific
economic terms of a proposed transaction are agreed, the names of the
individual counterparties are disclosed and, subject to acceptance of credit,
the transaction is completed directly by both counterparties. Other
transactions are completed with EBIC acting as a matched riskless principal
in which the respective counterparties to the transaction know EBIC as a
counterparty. The transactions are then settled through a clearing
institution. In the process of executing brokerage transactions, from time to
time in the fast moving markets in which EBIC operates, miscommunications can
arise whereby transactions are completed with only one counterparty ("out
trades"), thereby creating a potential liability for EBIC. These occurrences
typically become known to EBIC on the day of the trade or, as a result of the
settlement process, within a few days of the trade. Out trades generally
increase with increases in the volatility of the market, particularly in
Emerging Market debt products. In general, EBIC does not experience a high
incidence of out trades, but in those situations in which they occur, EBIC
typically disposes of the unmatched position within a short time frame. While
out trades have not had a significant adverse affect on EBIC to date, there
can be no guarantee that the incidence of such occurrences will not increase
in the future or that they will not have a material adverse effect on the
financial condition of EBIC.
LACK OF BUSINESS DIVERSIFICATION
Upon consummation of the Merger, FSAC will be a holding company which will
have virtually no operations or material assets other than all of the
outstanding shares of EBIC Common Stock. Accordingly, the prospects for
FSAC's performance and the market prices for FSAC securities may be entirely
dependent upon the future performance of EBIC, and FSAC may not have the
resources to diversify its operations or benefit from the possible spreading
of risks or offsetting of losses.
23
<PAGE>
DIVIDENDS UNLIKELY
FSAC has not paid any dividends on the FSAC Common Stock to date. Nor has
EBIC paid any dividends on shares of its capital stock in its current, or
either of its last two, fiscal years. The payment of dividends after the
Merger will be contingent upon FSAC's consolidated revenues and earnings, if
any, capital requirements and general financial condition. It is the present
intention of FSAC's Board of Directors to retain all earnings, if any, for
use in FSAC's business operations and, accordingly, FSAC does not anticipate
paying any dividends on FSAC Common Stock in the foreseeable future.
SELECTED FINANCIAL DATA OF FSAC
The following selected historical financial data as of December 31, 1994
and December 31, 1995, and for the periods then ended, are derived from the
financial statements of FSAC, which have been audited by BDO Seidman, LLP,
independent certified public accountants, and are included elsewhere in this
Proxy Statement/Prospectus. The selected historical financial data as of
March 31, 1996 and for the three months ended March 31, 1995 and March 31,
1996 and for the period August 18, 1994 (inception) to March 31, 1996 is
derived from the unaudited financial statements of FSAC, also included
elsewhere herein. Such unaudited data includes, in FSAC management's opinion,
all normal recurring adjustments necessary to present fairly the results of
operations and financial position of FSAC for such periods. Results for
interim periods are not necessarily indicative of the results to be expected
for an entire fiscal year. The data should be read in conjunction with the
financial statements, together with the related notes thereto, of FSAC
included elsewhere herein and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FSAC."
<TABLE>
<CAPTION>
AUGUST 18, 1994 PERIOD FROM
(INCEPTION) TO YEAR ENDED THREE MONTHS AUGUST 18, 1994
DECEMBER 31, DECEMBER 31, ENDED MARCH 31, THREE MONTHS ENDED (INCEPTION) TO
1994 1995 1995 MARCH 31, 1996 MARCH 31, 1996
--------------- -------------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Income:
Interest income ............ $ 67,014 $1,102,027 $ 275,666 $ 244,118 $1,413,159
Expenses:
Acquisition costs .......... -- 239,817 -- -- 239,817
General, administrative,
occupancy and other ....... 73,990 245,078 71,147 61,898 380,966
Taxes ...................... -- 219,000 86,000 62,000 281,000
Net income (loss) ........... (6,976) 398,132 118,519 120,220 511,376
Net income (loss) per share (.00) .09 .03 .03
Weighted average common
shares outstanding ......... 1,446,296 4,416,666 4,416,666 4,416,666
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
----------------- ----------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .................. $ 1,783,022 $ 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 ......... 17,475,598 18,489,353 18,718,730
Total assets ............................... 19,323,238 19,881,750 20,435,972
Total liabilities .......................... 135,116 295,496 729,498
Common stock subject to possible conversion 3,493,372 3,696,022 3,741,874
Stockholders' equity ....................... 15,694,750 15,890,232 15,964,600
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF FSAC
FSAC is a Specified Purpose Acquisition Company(Registered Trademark)
("SPAC(Registered Trademark)"), the objective 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"). The financial
services industry includes entities of various types which provide a broad
array of financial services to their customers, including commercial banks,
thrift institutions, investment banking and securities brokerage firms, money
management firms, insurance companies and businesses which provide support
services for financial institutions.
In August 1994, FSAC issued 833,333 Pre-IPO Shares for an aggregate
purchase price of $25,000, or $0.03 per share, to six initial stockholders
(the "Initial FSAC Stockholders"). In September 1994, FSAC raised $200,000 in
bridge financing (the "Bridge Financing") in order to pay certain
organizational expenses, certain costs of the Bridge Financing and certain
costs of FSAC's IPO. Thirteen investors in the Bridge Financing loaned an
aggregate of $200,000 to FSAC 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, and FSAC received net proceeds
of approximately $19,150,000 after payment of offering expenses. From these
proceeds, FSAC repaid the Bridge Financing promissory notes and interest.
FSAC's management had broad discretion with respect to the specific
application of the net proceeds of the IPO, although substantially all of the
net proceeds were intended to be generally applied toward consummating a
Business Combination with a Target Business. A majority of the net proceeds
(approximately $17,415,000) was placed in the Trust until the earlier of
FSAC's consummation of a Business Combination or liquidation of FSAC. The
agreement governing the Trust limits Trust investments to U.S. Government
securities with a maturity of 180 days or less. As of March 31, 1996,
December 31, 1995 and December 31, 1994, the Trust consisted of approximately
$18,719,000, $18,489,000 and $17,476,000, respectively, in U.S. Government
securities (including accrued interest thereon). If the Merger is
consummated, it is anticipated that all or substantially all of the IPO
proceeds held in the Trust will be paid to holders of EBIC Common Stock
(subject to certain escrow arrangements) as the cash portion of the aggregate
Merger Consideration. 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 in connection with prospective acquisitions, and for
continuing general and administrative expenses, as well as other expenses.
During the quarter ended March 31, 1996, general and administrative,
occupancy and other expenses (other than acquisition costs) were
approximately $62,000, as compared to approximately $71,000 in the quarter
ended March 31, 1995. As of March 31, 1996, December 31, 1995 and December
31, 1994, FSAC had approximately $1,046,000, $1,276,000 and $1,783,000,
respectively, of cash and cash equivalents and short-term investments, other
than assets held in the Trust.
On May 16, 1995, FSAC announced that it had entered into a letter of
intent with respect to a potential Business Combination. On July 14, 1995,
FSAC announced that negotiations with respect to that proposed acquisition
had been terminated. See "THE MERGER --Background of the Merger."
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, FSAC announced that it had entered into the Merger
Agreement. The Merger Agreement provides that, as a result of the Merger,
each outstanding share of EBIC Common Stock (other than shares, if any, held
in the treasury of EBIC, owned by any subsidiary of EBIC or owned by FSAC,
all of which will be cancelled, and other than Dissenting Shares, if any),
will be converted into the right to receive, subject to certain adjustments
and escrow arrangements, approximately (i) 2.64 newly-issued shares of FSAC
Common Stock, (ii) 4.53 Merger Warrants and (iii) $9.57 in cash (which, based
on the March 31, 1996 net worths of FSAC and EBIC, would have been adjusted
to approximately $11.37 if the Merger had been consummated at such time),
without interest. See "THE MERGER -- Merger Consideration" and "--
Determination and Adjustment of Merger Consideration."
25
<PAGE>
In the event FSAC does not consummate the Merger or an alternative
Business Combination by December 7, 1996, FSAC will be dissolved and will
distribute to all holders of FSAC Common Stock issued in the IPO ("FSAC
Public Shares"), in proportion to their respective interests in all such FSAC
Public Shares, an aggregate sum equal to the amount in the Trust, inclusive
of any after-tax interest thereon, plus any remaining net assets of FSAC. The
holders of the Pre-IPO Shares and of FSAC Warrants have no rights to
participate in any such distribution from the Trust. During the quarter ended
March 31, 1996, FSAC earned approximately $229,000 of interest on amounts
deposited in the Trust, as compared to $247,000 during the quarter ended
March 31, 1995. A holder of FSAC Public Shares also is entitled to receive
funds from the Trust in the event that such holder exercises his or her
Redemption Rights, although FSAC is not permitted to consummate a Business
Combination if Redemption Rights have been exercised with respect to 20% or
more of the FSAC Public Shares.
Substantially all of FSAC's working capital needs are attributable to the
identification, evaluation and selection of a suitable Target Business and
thereafter, 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.
26
<PAGE>
SELECTED FINANCIAL DATA OF EBIC
The following selected financial information as of and for the years ended
December 31, 1991, 1992, 1993, 1994 and 1995 is derived from the consolidated
financial statements of EBIC, some of which appear elsewhere herein and have
been audited by Price Waterhouse LLP, independent accountants. The selected
financial data as of and for the periods ended March 31, 1995 and 1996 have
been derived from unaudited financial statements also appearing herein and
which, in the opinion of the management of EBIC, include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
statement of the results of unaudited periods. The data should be read in
conjunction with the financial statements of EBIC, together with the related
notes thereto included elsewhere herein and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EBIC." Amounts
presented below include reclassifications of certain revenue and expense
items which are not directly associated with operations. Such
reclassifications include interest income, interest expenses, foreign
exchange effects and other non-operating items.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------------------- ---------------------------
1991 1992 1993 1994 1995 1995 1996
----------- ------------- ------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenue:
Commission income . $95,046,059 $113,931,938 $135,577,625 $144,586,661 $171,576,327 $43,659,170 $48,339,964
Other income ...... 665,382 424,094 722,838 207,522 518,052 74,748 33,477
----------- ------------- ------------- ------------- ------------ ----------- ------------
95,711,441 114,356,032 136,300,463 144,794,183 172,094,379 43,733,918 48,373,441
----------- ------------- ------------- ------------- ------------ ----------- ------------
Operating Costs:
Payroll and related
costs ........... 57,047,879 71,104,552 86,763,854 96,207,365 110,915,257 28,569,041 28,353,853
Communication costs 10,825,592 12,412,982 12,987,800 15,633,010 17,187,573 4,683,240 3,948,713
Travel and
entertainment .... 6,304,249 7,671,840 8,681,483 10,493,903 10,224,384 2,540,839 2,609,881
Depreciation and
amortization ..... 4,762,289 3,857,122 4,192,404 4,248,181 4,568,164 1,157,164 1,171,970
Occupancy costs ... 2,662,968 2,868,475 4,452,232 5,640,070 5,854,525 1,520,584 1,500,966
Clearing fees ..... 863,445 3,647,556 3,777,710 1,285,906 1,191,695
General and
administrative ... 4,844,250 5,312,106 7,148,335 6,817,988 7,550,059 2,098,590 1,979,489
Write-off of goodwill 12,643,948
----------- ------------- ------------- ------------- ------------ ----------- ------------
86,447,227 103,227,077 137,733,501 142,688,073 160,077,672 41,855,364 40,756,567
----------- ------------- ------------- ------------- ------------ ----------- ------------
Operating Profit
(Loss) ........... 9,264,214 11,128,955 (1,433,038) 2,106,110 12,016,707 1,878,554 7,616,874
----------- ------------- ------------- ------------- ------------ ----------- ------------
Other Non-Operating Income
(Expenses):
Interest expense .. (3,291,086) (3,264,992) (2,702,759) (1,635,547) (775,077) (205,342) (148,058)
Other non-operating
expenses ......... (634,900) (631,900) (2,086,718) (520,607) (295,344) -- (25,281)
Other non-operating
income .......... 1,487,918 490,000 -- --
Interest Income ... 1,857,328 1,450,349 1,203,082 1,090,789 1,462,744 310,956 418,772
Foreign Exchange
gain (loss)....... 352,587 (1,581,467) 64,003 (17,139) 214,295 75,682 41,248
----------- ------------- ------------- ------------- ------------ ----------- ------------
(1,716,071) (4,028,010) (2,034,474) (592,504) 606,618 181,296 286,681
----------- ------------- ------------- ------------- ------------ ----------- ------------
Income (loss) before
provision for income
taxes and minority
interest ......... 7,548,143 7,100,945 (3,467,512) 1,513,606 12,623,325 2,059,850 7,903,555
Provision for Income
Taxes ............. 4,627,623 6,037,250 4,858,901 3,333,989 7,393,196 1,625,860 4,099,528
----------- ------------ ------------ ------------- ------------ ------------ ------------
Income (Loss) Before
Minority Interest.. 2,920,520 1,063,695 (8,326,413) (1,820,383) 5,230,129 433,990 3,804,027
Minority Interest .. (227,850) 371,020 (442,673) (250,480) (1,767,854) (531,299) (350,852)
----------- ------------ ------------- ------------- ------------ ------------ ------------
Net income (Loss) .. $ 2,692,670 $ 1,434,715 $ (8,769,086) $ (2,070,863) $ 3,462,275 $ (97,309) $ 3,453,175
=========== ============ ============= ============= ============ ============ ============
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------------------------------------------------------- ---------------
1991 1992 1993 1994 1995 1996
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ......................... $64,326,171 $72,163,710 $76,631,544 $71,914,532 $82,078,742 $80,313,989
Obligations under capitalized leases 3,164,984 3,209,983 2,766,961 2,804,836 2,284,806 2,298,188
Notes payable ........................ 28,164,336 28,236,068 27,080,598 9,830,284 7,880,032 7,834,318
Total liabilities .................... 50,321,819 52,452,868 65,695,698 43,360,381 50,185,747 45,285,692
Minority interest .................... 772,215 1,321,410 548,179 492,154 501,731 395,397
Stockholders' equity ................. 13,232,137 18,389,432 10,387,667 28,061,997 31,391,264 34,632,900
PER SHARE INFORMATION (a):
Book value ........................... $ 15.67 $ 16.84 $ 9.51 $ 20.40 $ 18.78 $ 20.72
Net income (loss) .................... 2.04 1.31 (8.03) (1.51) 2.07 2.07
Weighted average common shares
outstanding ......................... 2,069,514 1,092,071 1,091,896 1,375,513 1,671,290 1,671,290
</TABLE>
- ------------
(a) The computation of per share information for each year reflects the
inclusion of certain common stock equivalents where such effects are
dilutive. The computation is historical and does not give effect to
any transactions related to the Merger.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF EBIC
HISTORY
EBIC was incorporated in 1986 in connection with the acquisition of
certain businesses, which broker cash deposits and interest rate derivatives,
from various subsidiaries of MAI plc., a public company in the United
Kingdom. The purchase consideration approximated $25 million and included a
deferred purchase price note of $9 million due in three equal annual
installments beginning on November 30, 1989, and a convertible purchase price
note of approximately $10 million due in five equal annual installments
beginning on November 30, 1995. Such notes include interest at 6%. The
conversion feature of the convertible purchase price note expired unexercised
on December 1, 1993.
In separate transactions in December 1986 and December 1988, EBIC issued
an aggregate 217,450 shares of its Class A Common Stock, par value $.01 per
share ("EBIC Class A Common Stock"), to Trilon Bancorp Inc. ("Trilon") for
approximately $3.7 million and an aggregate 977,143 warrants for
approximately $5.1 million, which entitled the holder to purchase one share
of EBIC Class A Common Stock per warrant at any time through 1994, as
extended. In addition, EBIC executed two subordinated promissory notes in the
aggregate amount of $17,660,000, payable to Annetinvest B.V., an affiliate of
Trilon; $13,000,000 of the notes were due on December 16, 1996 and $4,660,000
were due on January 31, 1999. The shares of EBIC Class A Common Stock and the
warrants were all subsequently transferred to Eurobrokers International Inc.,
a subsidiary of Trilon ("EII").
In February 1994, WCAS invested $23 million in EBIC, evidenced by a Senior
Secured Note due December 31, 1995 (the "Note") in that principal amount. The
Note was secured by the pledge of stock of certain EBIC subsidiaries, and the
proceeds were used to retire the outstanding EBIC Class A Common Stock,
warrants and notes of EBIC held by EII and its affiliates (which stock and
warrants had represented a majority of the outstanding equity of EBIC, on a
fully diluted basis). In May 1994, WCAS and several related investors
purchased an aggregate 910,150 shares of EBIC Common Stock, representing
approximately 54% of the outstanding EBIC Common Stock, for an aggregate
purchase price of $25 million, or a per share price of $27.47. As partial
payment for the 850,884 shares WCAS purchased in this transaction, it
tendered the Note to EBIC for cancellation and released the pledged stock.
OVERVIEW
EBIC functions primarily as an intermediary, matching the needs of
financial institutions. EBIC transactions are principally of two types, (i)
transactions whereby EBIC acts only as a matching broker and (ii)
transactions whereby EBIC acts as a matched riskless principal. In
transactions involving cash deposits, derivative products and repurchase
agreements, the trades are executed on a name give-up basis and settled
directly between the counterparties with EBIC acting solely as a matching
broker. In these transactions EBIC is never a counterparty. In the second
type of transaction, primarily securities transactions, EBIC acts as a
matched riskless principal connecting buyers and sellers at exact prices.
EBIC does not earn a "spread" on any such transaction; rather earnings are
received through commissions. These transactions are settled through clearing
institutions within a few days of the transaction date. Except for short-term
positions in connection with its municipal securities brokerage (see
"BUSINESS OF EBIC -- Products"), EBIC does not seek to take positions for its
own account.
In the process of executing brokerage transactions, from time to time in
the fast moving markets in which EBIC operates, miscommunications can arise
whereby transactions are completed with only one counterparty ("out trades"),
thereby creating a potential liability for EBIC. These occurrences typically
become known to EBIC on the day of the trade or, as a result of the
settlement process, within a few days of the trade. Out trades generally
increase with increases in the volatility of the market, particularly in
Emerging Market debt products. In general, EBIC does not experience a high
incidence of out trades, but in those situations in which they occur, EBIC
typically disposes of the unmatched position within a short time frame.
29
<PAGE>
EBIC's revenues are derived almost exclusively from commissions generated
by its operating subsidiaries in New York, London, Tokyo and other major
international financial centers and through correspondent relationships with
other brokers throughout the world. Generally, EBIC receives a commission
from both counterparties in a trade, although in trades of certain products
only one party pays a commission. The dollar amount of the average EBIC
transaction varies significantly by the type of product and the duration of
the transaction. Generally, the average size of the transaction decreases as
the term of the transaction or of the underlying instrument increases.
Overnight cash deposits average $100 million, however, transactions may
exceed $500 million. Derivative transactions average $25 million, but may
exceed $100 million. Repurchase agreements average $25 million and may exceed
$500 million.
The largest single component of EBIC's expenses is compensation paid to
its brokers. Attracting and retaining qualified brokerage personnel with
strong customer relationships is a prerequisite in EBIC's business and in the
brokerage business in general. Brokers are generally compensated by a
combination of fixed salary and incentive payments based on commissions
generated by them or on the net profitability of their particular products.
For this purpose, revenue and direct expenses are regularly tracked by desk
(which may involve one or more products) at each location. Direct client
contact, including entertainment, is also an integral part of EBIC's
marketing program and represents another significant component of its
expenses.
The cost of maintaining its sophisticated trading room environments and
worldwide telecommunications network also comprises another significant
portion of EBIC's expenses. It is this infrastructure that enables EBIC to
support its existing client base and improve and expand its existing product
lines, as well as provide a base for offering brokerage services in newly
developing financial instruments. During the last five years, EBIC has added
to its product base such financial products as Emerging Market debt
instruments, energy related commodity swaps, Yen derivatives, including
options, and, for a period through a joint venture interest in 1992,
repurchase agreements and options on non-dollar denominated government bonds.
Expansion also generally leads to an increase in the number of brokerage
personnel since the market usually requires brokers to specialize in a single
product or group of related products, rather than to function as market
generalists.
The following table sets forth, for the periods indicated, summary
financial information for each of EBIC's geographic locations. Amounts
include the consolidation of the results of the operations of the Tokyo
Partnership (as hereinafter defined) and Hong Kong; EBIC's actual share, net
of minority interest, approximates 50%. The table also includes a summary of
the number of personnel in each EBIC office:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------------------------- ---------------------------
1991 1992 1993 1994 1995 1995 1996
----------- ------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Commission Income:
New York ........ $48,355,742 $ 57,134,705 $ 63,143,793 $ 66,090,388 $ 69,081,547 $17,482,337 $19,825,139
London .......... 35,544,904 46,790,505 63,266,608 61,226,002 65,715,235 17,197,289 19,947,614
Canada .......... 4,547,855 3,191,624 2,790,582 3,091,433 3,452,205 930,180 876,026
Tokyo ........... -- -- -- 6,965,106 24,601,532 5,737,633 6,000,053
Hong Kong ....... 6,597,558 6,815,104 6,376,642 7,213,732 8,725,808 2,311,731 1,691,132
----------- ------------ ------------ ------------ ------------ ----------- -----------
Total ........... $95,046,059 $113,931,938 $135,577,625 $144,586,661 $171,576,327 $43,659,170 $48,339,964
=========== ============ ============ ============ ============ =========== ===========
Operating Profit
(Loss):
New York ........ $ 9,849,991 $ 10,580,582 $ 2,541,645 $ 4,301,375 $ 3,021,226 $ 665,483 $ 1,775,932
London .......... (2,464,450) 309,484 (1,529,404) (2,960,188) 2,901,237 (683,371) 4,067,247
Canada .......... 895,266 144,593 66,735 (249,413) (874,440) (149,659) (96,857)
Tokyo ........... 503,173 372,767 (1,522,512) 1,140,723 6,985,361 1,987,267 2,083,172
Hong Kong ....... 480,234 (278,471) (989,502) (126,387) (16,677) 58,834 (212,620)
----------- ------------ ------------ ------------ ------------ ------------ -----------
Total .......... $ 9,264,214 $ 11,128,955 $ (1,433,038) $ 2,106,110 $ 12,016,707 $ 1,878,554 $ 7,616,874
30
<PAGE>
FOR THE THREE MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------------------------- ---------------------------
1991 1992 1993 1994 1995 1995 1996
----------- ------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) Before Tax
and
Minority Interest:
New York ........ $ 6,968,124 $ 9,438,512 $ 225,565 $ 3,089,709 $ 2,645,217 $ 614,458 $ 1,758,491
London .......... (1,424,125) (2,772,853) (1,305,441) (2,447,859) 3,783,500 (695,522) 4,345,310
Canada .......... 996,399 217,838 116,387 (219,617) (841,294) (142,529) (91,821)
Tokyo ........... 503,173 372,767 (1,522,512) 1,204,470 7,017,027 2,212,842 2,108,463
Hong Kong ....... 504,572 (155,319) (981,511) (113,097) 18,875 70,601 (216,888)
----------- ------------ ------------ ------------ ------------ ----------- -----------
Total .......... $ 7,548,143 $ 7,100,945 $(3,467,512) $ 1,513,606 $12,623,325 $ 2,059,850 $ 7,903,555
=========== ============ ============ ============ ============ =========== ===========
Net Income (Loss):
New York ........ $ 2,908,084 $ 4,511,963 $ (571,236) $ 418,316 $ 440,773 $ 44,258 $ 671,844
London .......... (1,445,466) (3,478,362) (5,922,785) (2,428,422) 1,711,233 (699,476) 2,683,174
Canada .......... 526,133 111,143 46,008 (176,748) (688,849) (96,255) (91,821)
Tokyo ........... 503,173 372,767 (1,522,512) 173,672 1,989,492 618,157 300,591
Hong Kong ....... 200,746 (82,796) (798,561) (57,681) 9,626 36,007 (110,613)
----------- ------------ ------------ ------------ ------------ ----------- -----------
Total .......... $ 2,692,670 $ 1,434,715 $(8,769,086) $(2,070,863) $ 3,462,275 $ (97,309) $3,453,175
=========== ============ ============ ============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
------------------------------------------------------------------------- --------------
1991 1992 1993 1994 1995 1996
------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Identifiable Assets:
New York ............. $27,149,833 $31,477,851 $38,677,487 $35,347,675 $38,962,574 $36,220,688
London ............... 29,343,369 32,954,232 32,383,739 29,412,600 31,767,594 34,137,882
Canada ............... 2,003,976 1,660,273 1,618,533 1,573,157 1,789,815 1,681,227
Tokyo ................ 3,011,407 3,355,156 2,189,856 3,823,416 7,656,963 6,568,256
Hong Kong ............ 2,875,659 2,716,198 1,761,929 1,757,684 1,901,796 1,705,936
------------- ------------- ------------- ------------- ------------- --------------
Total ............... $64,384,244 $72,163,710 $76,631,544 $71,914,532 $82,078,742 $80,313,989
============= ============= ============= ============= ============= ==============
Employees:
Brokers ...............
New York ............. 191 196 218 244 254 246
London ............... 197 274 264 294 243 253
Canada ............... 18 18 16 24 23 21
Tokyo ................ -- -- -- 28 37 41
Hong Kong ............ 60 64 64 65 62 59
------------- ------------- ------------- ------------- ------------- --------------
Total Brokers ....... 466 552 562 655 619 620
Administrative Staff 95 99 137 153 163 163
------------- ------------- ------------- ------------- ------------- --------------
Total Employees .... 561 651 699 808 782 783
============= ============= ============= ============= ============= ==============
</TABLE>
As noted from the above table, significant growth in commission income
occurred from 1991 through 1993. During this period, EBIC maintained
significant market share in most of its traditional products including
currency deposits, interest rate swaps and other derivative products. In
addition, EBIC enjoyed excellent growth from its new product expansion
efforts including, among others, Emerging Market debt and energy related
commodity swaps. In 1992, EBIC entered into a joint venture with Liberty
Brokerage, Inc., a U.S. government securities broker, to form Liberty Euro
Brokers ("LEB"), which offers services in non-dollar government securities
and repurchase agreements. From 1991 to 1993, commission income increased
$40.6 million, from $95.0 million to $135.6 million, of which the New York
and London offices accounted for $14.7 million and $27.7 million,
respectively (offset by a $1.8 million decrease in Canada). The commission
income increase in the New York office resulted from expansion into commodity
swaps and Emerging Market debt products, which in total accounted for $12.5
million of this increase. The London office increase resulted from a
combination of factors, including the success of LEB, the expansion of
Emerging Market debt and the extreme volatility of European currencies
resulting from the attempt at EC monetary unification. The above factors
accounted for $7.7 million, $4.3 million, and $5.8 million of the commission
income increase, respectively. The balance of the increase related to growth
in
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<PAGE>
EBIC's traditional products, primarily interest rate derivatives. The
decrease in Canada was principally due to the loss of the Canadian Treasury
bill unit to a competitor of EBIC.
In 1993, in recognition of certain business conditions and events, EBIC
reviewed the recorded value of its goodwill based on an evaluation of the net
present value of future cash flows from certain of its foreign subsidiaries
and affiliates. As a result, it was determined that there had been an other
than temporary impairment of goodwill and, accordingly, $12,643,948
attributable to such goodwill was written off.
In 1994, EBIC suffered the effects of several adverse factors. First, due
to preliminary merger discussions with a competitor of LEB, EBIC sold its
interest in LEB in the latter part of 1993 and in connection with such sale
EBIC's results of operations no longer include the results of that joint
venture. Second, a competitor attempted an aggressive entry into the interest
rate derivatives market, historically EBIC's most profitable product, by
offering above market compensation arrangements to brokers and substantially
discounted commission rates to customers. In connection therewith, EBIC lost
a number of its key employees both in New York and London, and was forced to
increase compensation arrangements to retain many others of its staff.
Additionally, commission rates came under intense pressure, and were
ultimately reduced for many products by as much as 50%. Separately, several
key brokers who worked in EBIC's commodity swap department left to set up
their own competing brokerage operation. Third, the unexpected increase in
U.S. interest rates, negative publicity surrounding the improper use of
derivatives and a lack of volatility in the EC all combined to reduce trading
volumes dramatically from previous levels. Fourth, EBIC proceeded with
efforts to expand into U.S. government securities, Yen derivatives in London
and Tokyo, forward Yen in London and New York and equity derivatives in Hong
Kong. Although some of these efforts proved successful, some did not.
Considering the difficult financial times being experienced in the
marketplace in general and by EBIC in particular, a number of operations were
subsequently discontinued. These factors taken together resulted in reduced
commissions for many of EBIC's products. At the same time, overall expenses
increased. In 1994, EBIC also entered into a partnership (the "Tokyo
Partnership") with Yagi Euro Corporation ("Yagi Euro"), in which EBIC holds a
15% equity interest, to broker certain derivative products in Tokyo. EBIC
holds a 50% interest in the Tokyo Partnership, through its Euro Brokers Tokyo
subsidiary. The profitability of the Tokyo Partnership offset some of the
adverse effects of the above mentioned conditions in 1994.
1995 began with a difficult operating environment for EBIC and for other
money brokers. Operating results continued to suffer from reduced trading
volumes, brokerage reductions and high costs. Furthermore, EBIC suffered a
number of weakened market relationships due to the departure of certain key
employees during 1994. During 1995, EBIC reviewed each of its desks and
products and, based on its evaluation of future prospects, reduced operating
costs, eliminated and/or combined individual desks with others, renegotiated
compensation arrangements and reduced the total number of brokers it
employed. It also refocused its attention on being one of the top three
brokers in each of the product groups in which it operated. Further, EBIC
believed that investment in technology, whether in the form of computer
pricing models, voice and data communication systems or its own proprietary
screen system, was of vital importance to its long-term future and thus
invested heavily in these areas. Additionally, EBIC hired several key
employees during the fourth quarter of 1995, and it anticipates that these
additions will have positive effects on its operating results in 1996.
Throughout 1995, EBIC maintained its significant market position in
Emerging Market debt products in New York and London, in Yen and other
currency derivatives in London and Tokyo, and in interest rate and bond
options in London. EBIC recognized significantly increased revenues and
income before tax from the Tokyo Partnership. This was largely caused by an
extremely volatile Yen market and the increased use of Yen derivatives by
dealers to hedge investment portfolios. EBIC's competitors have increased
their efforts in this market segment in 1995 and, accordingly, continued
growth in revenues and net income from the Tokyo Partnership cannot be
assured.
The first quarter of 1996 was marked by robust market activity in the
financial services industry. Market participants, including EBIC's customers,
many of whom were forced to operate under severely restricted trading limits
during much of 1995, adopted trading policies which allowed them more freedom
32
<PAGE>
to take market positions. This increased market activity, combined with the
cost reductions and consolidation of certain operations implemented
throughout 1995, resulted in significantly increased profitability for EBIC
in the first quarter of 1996. Increases in commission income were experienced
by each of the New York, London and Tokyo operations. EBIC does not
anticipate an increase of the same magnitude in the second quarter of 1996.
EBIC has historically incurred a high effective tax rate due to the
non-deductibility of certain expenses, including entertainment expenses, and
amortization of intangibles. The impact of these adjustments on the effective
tax rate is affected by the level of pre-tax accounting income. In 1992, the
effective tax rate was also affected by certain losses resulting from foreign
exchange remeasurement, which were recorded in the statement of operations
without a corresponding tax benefit.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995
Commission income for the first three months of 1996 increased $4,680,794
to $48,339,964, compared to $43,659,170 for the comparable period in 1995 and
the increase related principally to increases in New York and London. The
products which contributed most significantly to the increase included
Emerging Market debt products, interest rate swaps, interest rate options,
repurchase agreements and energy related commodity swaps. The increased
commission income from these products was partially offset by decreases in
commission income from currency deposits and forward foreign exchange.
Interest income for the 1996 period increased $107,816 to $418,772,
compared to $310,956 for the 1995 period, due to increased cash available at
December 31, 1995 versus 1994. Cash and cash equivalents at March 31, 1996
reflect a decrease from December 1995 due to the fact that significant
semi-annual bonus payments are made at the end of February.
Other income for first quarter 1996 decreased $75,705 to $74,725, compared
to $150,430 for the same period in 1995, due to decreased income from equity
affiliates and a decrease in foreign exchange gains.
Payroll and related costs for first quarter 1996 decreased $215,188 to
$28,353,853, compared to $28,569,041 for first quarter 1995. These costs, as
a percentage of commission income, decreased from 65% to 59%. This decrease
is primarily the result of management's undertaking in 1995 to eliminate
and/or consolidate unprofitable departments and the increase in brokerage
revenues in 1996 noted above.
Communication costs for first quarter 1996 decreased $734,527 to
$3,948,713, compared to $4,683,240 for first quarter 1995, primarily as a
result of efforts in the U.K. to cancel any unnecessary information service
subscriptions upon their expiration.
Travel and entertainment costs for first quarter 1996 increased $69,042 to
$2,609,881, compared to $2,540,839 for first quarter 1995, although as a
percentage of commission income, travel and entertainment expenses decreased
from 5.8% to 5.4%. The decrease reflects continued efforts to control such
costs and the positive effects of the increase in 1996 revenues.
Depreciation and amortization expense for the first three months of 1996
increased $14,806 to $1,171,970, compared to $1,157,164 for the same period
in 1995. This expense has remained relatively comparable from 1995 to 1996
and is reflective of the fact that EBIC completed the relocation of its
offices in 1993 and 1994 and has not incurred any major capital expenditures
since that time. Furniture and equipment, consisting primarily of
communications and computer equipment, is replaced and upgraded on a
continual basis.
Clearing fees for first quarter 1996 decreased $94,211 to $1,191,695,
compared to $1,285,906 for first quarter 1995. Such expense remained
relatively constant due to the offsetting effect of increased volume of
transactions and reduced per transaction fees.
General and administrative expenses for first quarter 1996 decreased by
$93,820 to $2,004,770, compared to $2,098,590 for first quarter 1995.
Interest expense for first quarter 1996 decreased by $57,284 to $148,058,
compared to $205,342 for first quarter 1995, primarily due to a paydown of
principal on EBIC's acquisition indebtedness.
33
<PAGE>
Occupancy costs for first quarter 1996 decreased by $19,618 to $1,500,966,
compared to $1,520,584 for first quarter 1995, due to the elimination of
certain duplicate rental obligations in Toronto as a result of the relocation
of that office.
Provision for income taxes for first quarter 1996 increased by $2,473,668
to $4,099,528, compared to $1,625,860 for first quarter 1995. The increase
was primarily the result of an increase in taxable income. The effective tax
rate improved significantly during the first quarter of 1996 due to the
improved profitability of EBIC, and the interaction with the non-deductible
expenses, which remain fairly constant from period to period.
Minority interest in consolidated subsidiary for the first quarter of 1996
decreased by $180,447 to $350,852, compared to $531,299 for the first quarter
of 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Commission income for the year ended December 31, 1995 increased
$26,989,666 to $171,576,327, compared to $144,586,661 for the year ended
December 31, 1994. The increase in commission income in 1995 was the result
of the inclusion of a full year of operations for several initiatives
undertaken in 1994, primarily the Tokyo Partnership, Yen derivatives, options
on government bonds and equity options. Nonetheless, revenues were adversely
impacted by reductions in commissions from interest rate swaps, energy
related commodity swaps and repurchase agreements in New York.
Interest income for 1995 increased $371,955 to $1,462,744, compared to
$1,090,789 for 1994, due to an increase in the average cash and cash
equivalents balances, accompanied by an increase in the average interest
rates earned on short-term investments.
Other income for 1995 of $732,347 primarily reflects earnings from equity
affiliates, principally Yagi Euro, and other income for 1994 of $697,522
primarily reflects a gain on the sale of exchange memberships.
Payroll and related costs for 1995 increased $14,707,892 to $110,915,257,
compared to $96,207,365 for 1994. These costs, as a percentage of commission
income, remained consistent in 1994 and 1995 and, in general, increased
proportionally with revenues, since competitive pressures continue to require
fixed salary plus incentive arrangements based on an individual or desk
basis. The 1995 results also include the costs incurred in connection with
the consolidation and elimination of certain products, while the cost
reductions associated therewith will not be fully realized until 1996.
Communication costs for 1995 increased $1,554,563 to $17,187,573, compared
to $15,633,010 for 1994. Increased costs resulted from an expansion in the
communications network in Emerging Market debt and the addition of certain
new products (as noted above) by the New York, Tokyo, Toronto and Hong Kong
offices. Such increases were partially offset by a reduction of costs in
London resulting from a consolidation of certain desks.
Travel and entertainment costs for 1995 decreased $269,519 to $10,224,384,
or 6.0% of commission income, compared to $10,493,903, or 7.3% of commission
income, for 1994. The reduction was the result of increased efforts to
control such expenses.
In 1995, depreciation and amortization expense, which consists principally
of depreciation of communication and computer equipment, automobile leases
and amortization of leasehold improvements, increased $319,983 to $4,568,164,
compared to $4,248,181 for 1994. This increase was the result of the
continued expansion of certain business in New York and the expansion of
EBIC's proprietary screen system in New York and London.
Clearing fees are fees for transaction settlements and credit enhancement
charged by clearing institutions in transactions where EBIC acts as the
riskless principal on a fully matched basis. These expenses increased
$130,154 to $3,777,710, compared to $3,647,556 for 1994, due to an increase
in the volume of transactions, offset by only a slight reduction in the per
transaction fee.
General and administrative expenses include such operating costs as
corporate insurance, office supplies and expenses, legal fees, audit and tax
fees, consulting fees, food costs and dues to various
34
<PAGE>
industry associations. These expenses for 1995 increased $489,669 to
$7,845,403, compared to $7,355,734 for 1994, partially due to costs
associated with the Tokyo Partnership, which for 1995 reflect a full year of
operations versus only a partial year for 1994 (during which the partnership
was formed).
Interest expense for 1995 decreased $860,470 to $775,077, compared to
$1,635,547 for 1994, due to the reduction of debt outstanding.
Provision for income taxes for 1995 increased $4,059,207 to $7,393,196,
compared to $3,333,989 for 1994. This increase was primarily the result of
the increase in taxable income. The 1995 effective tax rate includes the
effect of the non-deductibility of entertainment expenses, state and city
taxes and foreign income subject to higher income tax rates. The 1994
effective tax rate includes the effect of these elements and of foreign
losses for which no tax benefit was recognized.
Minority interest in consolidated subsidiary increased $1,517,374 to
$1,767,854 in 1995 from $250,480 in 1994 primarily due to increased
profitability of the Tokyo Partnership.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Commission income for 1994 increased $9,009,036 to $144,586,661, compared
to $135,577,625 for 1993. The increase in commission income was primarily the
result of revenue generated by the Tokyo Partnership. Commission income for
1994 is also reflective of increased business in the Emerging Market debt
products in New York and London due in part to the implementation of EBIC's
proprietary screen system and the establishment of a clearing arrangement
which allowed EBIC's customers to conduct business on an anonymous basis. The
increase in Tokyo and Emerging Market debt products was partially offset by
decreases in commission income related to commodity derivatives and
repurchase agreements and declining business conducted from the Los Angeles
office, which has since been closed.
Interest income for 1994 decreased $112,293 to $1,090,789, compared to
$1,203,082 for 1993, due to a decrease in the average interest rates earned
on short-term investments.
Other income for 1994 of $697,522 decreased by $1,577,237 from $2,274,759
in 1993, primarily due to the inclusion in 1993 of a gain of $1,487,918 on
the sale of EBIC's interest in LEB.
Payroll and related costs for 1994 increased $9,443,511 to $96,207,365,
compared to $86,763,854 for 1993. These costs increased from 64% of
commission income for 1993 to 66% of commission income for 1994. The increase
in the percentage of commission income was the result of competitive
pressures requiring higher fixed salary commitments, plus additional
incentive arrangements.
Communication costs for 1994 increased $2,645,210 to $15,633,010, compared
to $12,987,800 for 1993. The increase was the net result of higher
communication and information costs in the New York and London offices, as
well as an expansion of business in Hong Kong and Tokyo.
Travel and entertainment costs for 1994 increased $1,812,420 to
$10,493,903, or 7.3% of commission income, compared to $8,681,483, or 6.4% of
commission income, for 1993. The overall increase is reflective of the growth
in EBIC's Emerging Market debt products. The increase as a percentage of
revenue is reflective of efforts to maintain market share in areas of
declining revenue. Some areas, such as U.S. government securities and the Los
Angeles office, were subsequently closed.
In 1994, depreciation and amortization expense, which consists principally
of depreciation of communication and computer equipment, automobile leases
and amortization of leasehold improvements, increased $55,777 to $4,248,181,
compared to $4,192,404 for 1993. This increase was reflective of increased
amortization of leasehold improvements of $50,000 and $300,000, respectively,
for new offices in New York and London, which were occupied in March 1993 and
October 1993, respectively. The increase was partially offset by a decrease
of $300,000 relating to depreciation recorded by LEB, in which EBIC sold its
interest during 1993.
Clearing fees increased $2,784,111 to $3,647,556 for 1994, compared to
$863,445 for 1993, due to the growth in the volume of transactions in
Emerging Market debt products which utilize the clearing facility that was
established in July 1993.
35
<PAGE>
General and administrative expenses decreased $1,879,319 to $7,355,734 in
1994, compared to $9,235,053 in 1993. Approximately $1.6 million of the
decrease related to loss contingency provisions recorded in 1993 in
connection with interest rate swap transactions arranged on behalf of banks
and local authorities in the United Kingdom. See "BUSINESS OF EBIC -- Legal
Proceedings."
Interest expense decreased $1,067,212 to $1,635,547 in 1994, compared to
$2,702,759 in 1993, due to the reduction of debt outstanding pursuant to the
purchase of stock by WCAS and related investors in May 1994, the proceeds to
EBIC of which were used to repay debt obligations.
Occupancy costs represent expenses incurred in connection with various
operating leases in respect of EBIC's office premises and include base rent
and related escalations, maintenance, electricity and real estate taxes.
These costs increased $1,187,838 to $5,640,070 for 1994, compared to
$4,452,232 for 1993. The increase was reflective of leases for new premises
in New York and London, which took effect in March 1993 and October 1993,
respectively, and cover significantly more space.
In recognition of certain business conditions and events, in 1993 EBIC
reviewed the recorded value of goodwill based on an evaluation of the net
present value of future cash flows from certain of EBIC's foreign
subsidiaries and affiliates. As a result of this review, EBIC determined that
there had been an other than temporary impairment in the value of goodwill
and, accordingly, amounts aggregating $10,839,790, which were previously
attributable to goodwill associated with the acquisition of foreign
subsidiaries, and amounts aggregating $1,804,158, which were previously
attributable to goodwill associated with EBIC's investment in an affiliated
company, were written off as of December 31, 1993.
Provision for income taxes decreased $1,524,912 to $3,333,989 for 1994,
compared to $4,858,901 for 1993 due to the reduction in taxable income. The
provision for 1993 reflects the effect of the non-deductibility of the
goodwill write-off and the non-deductibility of entertainment expenses,
amortization of intangibles and state and city taxes.
Minority interest of $250,480 for 1994 is primarily related to Yagi Euro's
share in earnings of the Tokyo Partnership. Minority interest of $442,673 for
1993 relates to the minority shareholder's share of earnings of LEB prior to
its sale.
LIQUIDITY AND CAPITAL RESOURCES
EBIC has historically sought to meet its investing and financing cash flow
requirements from operating cash flows. Net cash provided from operating
activities was $13,390,412 and $10,384,058 for the years ended December 31,
1993 and 1995, respectively. Net cash used in operating activities was
$1,208,344 for the year ended December 31, 1994; the decrease in 1994
primarily relates to the timing of the payment of accrued compensation
payable, which accrual related to profits generated in 1993.
Major factors affecting operating cash flows are discussed in the Overview
section above, which describes significant trends in EBIC's business over the
three years ending December 31, 1995. On a regional basis, the London
operations experienced losses in 1994 and earlier, reflecting the costs of
efforts to expand the operations, and the write-off of goodwill in 1993. The
London operations were profitable in 1995 and the first quarter of 1996 and,
as a result of efforts taken in 1995 to refocus the business, many of the
conditions which led to losses in earlier periods are believed to have been
ameliorated.
In 1993, EBIC completed the relocation of its two principal offices, New
York and London. In New York, EBIC entered into a fifteen-year lease and
received a substantial build-out allowance and rent free period. The lease
provides EBIC an option to terminate after ten years at a cost of $1,200,000.
The cost of new communications equipment, leasehold improvements exceeding
the landlord's build-out allowance and other capital expenditures incurred in
connection with this relocation approximated $4.0 million and was funded from
EBIC's existing capital resources. In London, EBIC entered into a twenty-five
year lease and received a significant rent free period. The lease also
provides EBIC with an option to terminate after ten years at no cost other
than the costs of restoring the premises to their original condition, which
is standard market practice. EBIC was also required to provide the landlord
with a letter of credit equal to
36
<PAGE>
one year's rent, or pounds sterling1,150,000, until certain operating income
conditions have been met for three consecutive years. The cost of new
communication equipment, leasehold improvements and other capital
expenditures incurred in connection with this relocation approximated $7.0
million and was funded from EBIC's existing capital resources.
The costs of relocation of offices in 1993 and related purchases of
equipment were generally met from existing capital resources. Purchases of
fixed assets at such levels are not expected in the near future.
In February 1994, EBIC issued to WCAS the Note aggregating $23,000,000,
which was scheduled to mature on December 31, 1995. The proceeds of the Note
were used to repay an existing subordinated note of EBIC in the principal
amount of $17,660,000 and to repurchase all the EBIC Class A Common Stock and
warrants outstanding at December 31, 1993. In May 1994, the Note was
cancelled as consideration for the purchase of EBIC Common Stock by WCAS. In
December 1995, EBIC paid $2,037,502, representing the first of five equal
annual installments due on notes issued by EBIC in connection with the
acquisition of the predecessor businesses in December 1986.
The recapitalization of debt in 1994 has favorably impacted cash
requirements, eliminating the need for interest payments of approximately $2
million per annum and principal repayments related thereto. The annual
installments on the remaining notes payable in the aggregate principal amount
of $7,880,032 with interest thereon are expected to be met from operating
activities.
EBIC and its subsidiaries, in the ordinary course of their business, are
subject to extensive regulation at international, federal and state levels by
various regulatory bodies which are charged with safeguarding the integrity
of the securities and other financial markets and protecting the interests of
customers. See "BUSINESS OF EBIC -- Regulation." The compliance requirements
of these different regulatory bodies may include, but are not limited to, net
capital or stockholders' equity requirements. In addition, the SFA has issued
new rules which could impose more stringent capital adequacy requirements on
EBIC in the United Kingdom in the future. EBIC has historically met
regulatory net capital or stockholders' equity requirements and believes it
will be able to continue to do so in the future.
37
<PAGE>
FSAC AND EBIC UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1995 and the three months ended March 31, 1996 and the
Unaudited Pro Forma Consolidated Statement of Financial Condition as of March
31, 1996, include the accounts of FSAC and EBIC. The unaudited pro forma
financial statements reflect the Merger accounted for as a recapitalization
of EBIC, with the issuance of shares by EBIC for the net assets of FSAC,
consisting primarily of cash. The pro forma financial statements were derived
by adjusting the historical financial statements of FSAC and EBIC for certain
transactions pursuant to the Merger described in the notes to the unaudited
pro forma consolidated financial statements.
The Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1995 and the three months ended March 31, 1996 were
prepared as if the Merger had occurred on January 1, 1995. The Unaudited Pro
Forma Consolidated Statement of Financial Condition was prepared as if the
Merger had occurred on March 31, 1996. The pro forma financial data does not
purport to be indicative of the results which actually could have been
obtained had such transaction been completed as of the assumed dates or which
may be obtained in the future.
The pro forma financial data should be read in conjunction with the
financial statements of FSAC and EBIC included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
FINANCIAL
SERVICES EURO BROKERS PRO FORMA ADJUSTMENTS PRO FORMA PRO FORMA
ACQUISITION INVESTMENT ---------------------------- ASSUMING NO ASSUMING 10%
CORPORATION CORPORATION DR. CR. REDEMPTION(1) REDEMPTION(1)
------------- -------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Commission income .............. $ -- $171,576,327 $ -- $ -- $171,576,327 $171,576,327
Interest income ................ 1,102,027 1,462,744 1,102,027(2) -- 1,462,744 1,462,744
Other income ................... -- 732,347 -- -- 732,347 732,347
------------- -------------- -------------- ------------ -------------- --------------
1,102,027 173,771,418 1,102,027 -- 173,771,418 173,771,418
------------- -------------- -------------- ------------ -------------- --------------
Costs and expenses:
Payroll and related costs ..... -- 110,915,257 480,000(3) -- 111,395,257 111,395,257
Communication costs ............ -- 17,187,573 -- -- 17,187,573 17,187,573
Travel and entertainment ...... -- 10,224,384 -- -- 10,224,384 10,224,384
Depreciation and amortization . 13,092 4,568,164 -- -- 4,581,256 4,581,256
Clearing fees .................. -- 3,777,710 -- -- 3,777,710 3,777,710
General and administrative
expenses ...................... 158,986 7,845,403 -- -- 8,004,389 8,004,389
Interest expense ............... -- 775,077 -- -- 775,077 775,077
State franchise taxes .......... 13,000 -- -- -- 13,000 13,000
Acquisition costs .............. 239,817 -- -- 239,817(4) -- --
Occupancy costs ................ 60,000 5,854,525 -- 60,000(5) 5,854,525 5,854,525
------------- -------------- -------------- ------------ -------------- --------------
484,895 161,148,093 480,000 299,817 161,813,171 161,813,171
------------- -------------- -------------- ------------ -------------- --------------
Income before provision for
income taxes and minority
interest ....................... 617,132 12,623,325 1,582,027 299,817 11,958,247 11,958,247
Provision for income taxes ..... 219,000 7,393,196 -- 513,000(6) 7,099,196 7,099,196
------------- -------------- -------------- ------------ -------------- --------------
Income before minority interest 398,132 5,230,129 1,582,027 812,817 4,859,051 4,859,051
Minority interest ............... -- (1,767,854) -- -- (1,767,854) (1,767,854)
------------- -------------- -------------- ------------ -------------- --------------
Net income ...................... $ 398,132 $ 3,462,275 $1,582,027 $ 812,817 $ 3,091,197 $ 3,091,197
============= ============== ============== ============ ============== ==============
Common stock shares outstanding 4,416,666 1,671,290 9,283,332(7) 8,355,000
(8)
Earnings per share .............. $0.09 $2.07 $0.33(9) $0.37(9)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
FINANCIAL
SERVICES EURO BROKERS PRO FORMA ADJUSTMENTS PRO FORMA PRO FORMA
ACQUISITION INVESTMENT -------------------------- ASSUMING NO ASSUMING 10%
CORPORATION CORPORATION DR. CR. REDEMPTION(1) REDEMPTION(1)
------------- -------------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Commission income ............. $ -- $48,339,964 $-- $ -- $48,339,964 $48,339,964
Interest income ............... 244,118 418,772 244,118(2) -- 418,772 418,772
Other income .................. -- 74,725 -- 74,725 74,725
------------- -------------- ------------ ------------ -------------- --------------
244,118 48,833,461 244,118 48,833,461 48,833,461
------------- -------------- ------------ ------------ -------------- --------------
Costs and expenses
Payroll and related costs .... -- 28,353,853 120,000(3) -- 28,473,853 28,473,853
Communication costs ........... -- 3,948,713 -- -- 3,948,713 3,948,713
Travel and entertainment ..... -- 2,609,881 -- -- 2,609,881 2,609,881
Depreciation and amortization 3,273 1,171,970 -- -- 1,175,243 1,175,243
Clearing fees ................. -- 1,191,695 -- -- 1,191,695 1,191,695
General and administrative
expenses ..................... 40,375 2,004,770 -- -- 2,045,145 2,045,145
Interest expense .............. -- 148,058 -- -- 148,058 148,058
State franchise taxes ......... 3,250 -- -- -- 3,250 3,250
Occupancy costs ............... 15,000 1,500,966 -- 15,000(5) 1,500,966 1,500,966
------------- -------------- ------------ ------------ -------------- --------------
61,898 40,929,906 120,000 15,000 41,096,804 41,096,804
------------- -------------- ------------ ------------ -------------- --------------
Income before provision for
income taxes and minority
interest ...................... 182,220 7,903,555 364,118 15,000 7,736,657 7,736,657
Provision for income taxes .... 62,000 4,099,528 -- 139,000(6) 4,022,528 4,022,528
------------- -------------- ------------ ------------ -------------- --------------
Income (loss) before minority
interest ...................... 120,220 3,804,027 364,118 154,000 3,714,129 3,714,129
Minority interest .............. -- (350,852) -- -- (350,852) (350,852)
------------- -------------- ------------ ------------ -------------- --------------
Net income ..................... $ 120,220 $ 3,453,175 364,118 154,000 3,363,277 3,363,277
============= ============== ============ ============ ============== ==============
Common stock shares outstanding 4,416,666 1,671,290 9,283,332 (7) 8,355,000 (8)
Earnings per share ............. $ 0.03 $ 2.07 $ 0.36 (9) $ 0.40 (9)
</TABLE>
39
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
1. The unaudited pro forma consolidated statement of operations is
presented, in the first instance, assuming that no FSAC stockholders
exercise Redemption Rights and, in the second instance, assuming that
holders of 464,166 shares of FSAC Common Stock exercise Redemption
Rights (representing the maximum number of shares with respect to which
redemption can be effected under the Merger Agreement without EBIC's
consent, assuming consummation of the Unit Purchase Option Exchange).
Pursuant to the FSAC Certificate of Incorporation, FSAC may not
consummate a Business Combination if holders with respect to 20% or
more in interest of the FSAC Public Shares vote against the Business
Combination and request redemption of such shares. However, the Merger
Agreement provides that as a condition to EBIC's obligation to
consummate the Merger, the number of shares of FSAC Common Stock with
respect to which redemption is actually effected may not exceed 10% of
the shares of FSAC Common Stock actually outstanding immediately prior
to the Merger (giving effect, however, to any Unit Purchase Option
Exchange).
2. For the year ended December 31, 1995, represents the elimination of
interest income of $1,102,027 on FSAC's short-term investments and
investment in a U.S. government security deposited in the Trust, which
will be liquidated upon consummation of the Merger to pay the cash
portion of the Merger Consideration. For the three months ended March
31, 1996, represents the quarterly elimination of interest income of
$244,118 on FSAC's short-term investments and investment in a U.S.
government security deposited in the Trust, which will be liquidated
upon consummation of the Merger to pay the cash portion of the Merger
Consideration.
3. For the year ended December 31, 1995, represents the annual salary to
be paid to the President of FSAC ($450,000) and the increase in annual
salaries to senior management of EBIC ($30,000) pursuant to the
Employment Agreements. For the three months ended March 31, 1996,
represents the quarterly portion of salary to be paid to the President
of FSAC ($112,500) and the quarterly portion of the increase in annual
salaries to senior management of EBIC ($7,500) pursuant to the
Employment Agreements.
4. For the year ended December 31, 1995, represents the elimination of
non-recurring costs, primarily professional fees, in connection with a
letter of intent relating to a proposed acquisition agreement which was
terminated in July 1995. These non-recurring costs are unrelated to the
Merger and would not have been incurred if the acquisition had occurred
on January 1, 1995.
5. Represents the elimination of FSAC occupancy expense due to the
consolidation of the office space of FSAC and EBIC.
6. Represents the income tax provision at an effective rate of 40% on the
adjustments described in notes 2 to 5 above.
7. This number is based on 4,416,666 shares of FSAC Common Stock currently
outstanding and the issuance of a like number of shares as part of the
Merger Consideration. In addition, this number of shares assumes
consummation of the Unit Purchase Option Exchange, in which all of the
outstanding 333,333 Unit Purchase Options will be exchanged, contingent
upon and immediately following effectiveness of the Merger, for 225,000
newly-issued shares of FSAC Common Stock. In such event, the aggregate
Merger Consideration, in order to maintain the 50% interest of EBIC
stockholders on a pro forma basis, will also be increased by 225,000
shares of FSAC Common Stock. If the Unit Purchase Option Exchange is
not consummated, this number would be 450,000 less, or 8,833,332.
8. This number of shares of FSAC Common Stock also assumes effectiveness
of the Unit Purchase Option Exchange. See note 7. If the Unit Purchase
Option Exchange is not consummated, this number would be 405,000 less,
or 7,950,000.
9. Based on market prices for FSAC Common Stock at and preceding March 31,
1996, the 15,133,332 FSAC Warrants that will be outstanding giving
effect to the Merger would have been anti-dilutive and, accordingly,
were not included in the per share calculations. If and when the
post-Merger market price of FSAC Common Stock exceeds the $5.00 per
share warrant exercise price, the FSAC Warrants will likely have a
significant dilutive impact on earnings per share (not taking into
account the effects of the Exchange Offer, if any).
40
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AS OF MARCH 31, 1996
PRO FORMA ADJUSTMENTS
------------------------------
FINANCIAL
SERVICES EURO BROKERS PRO FORMA PRO FORMA
ACQUISITION INVESTMENT ASSUMING NO ASSUMING 10 %
CORPORATION CORPORATION DR. CR. REDEMPTION(1) REDEMPTION(1)
------------- -------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ........ $ 38,395 $22,805,511 $18,718,730(2) $19,000,000(4) $23,577,002 $21,152,277
2,241,866(6) 1,227,500(3)
Restricted cash .................. 1,755,475 1,755,475 1,755,475
Commissions receivable ........... -- 21,687,505 -- -- 21,687,505 21,687,505
Equity in affiliated companies .. -- 2,815,865 -- -- 2,815,865 2,815,865
Receivable from clearing firm ... -- 3,976,787 -- -- 3,976,787 3,976,787
Short-term investment and accrued
interest thereon ................ 1,008,094 -- -- -- 1,008,094 1,008,094
US Government security deposited
in Trust and accrued interest
thereon ......................... 18,718,730 -- -- 18,718,730(2) -- --
Prepaid expenses and other assets -- 7,241,065 -- -- 7,241,065 7,241,065
Exchange memberships ............. -- 140,000 -- -- 140,000 140,000
Deferred taxes ................... -- 4,748,281 -- -- 4,748,281 4,748,281
Furniture, equipment and
leasehold improvements .......... -- 12,819,192 -- -- 12,819,192 12,819,192
Deferred acquisition costs ...... 622,500 -- -- 622,500(3) -- --
Intangible assets ................ 48,253 2,324,308 -- -- 2,372,561 2,372,561
------------- -------------- -------------- -------------- ------------- -------------
Total assets .................... $20,435,972 $80,313,989 $20,960,596 $39,568,730 $82,141,827 $79,717,102
============= ============== ============== ============== ============= =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accounts payable and accrued
liabilities .................... $ 687,498 $14,668,515 $ 600,000(3) $ -- $14,756,013 $14,756,013
Accrued compensation payable ... 12,971,036 -- -- 12,971,036 12,971,036
Accrued interest payable ........ -- 288,363 -- -- 288,363 288,363
Income taxes payable ............ -- 6,633,746 -- -- 6,633,746 6,633,746
Obligations under capitalized
lease .......................... -- 2,298,188 -- -- 2,298,188 2,298,188
Deferred taxes payable .......... 42,000 591,526 -- -- 633,526 633,526
Notes payable ................... -- 7,834,318 -- -- 7,834,318 7,834,318
------------- -------------- -------------- -------------- ------------- -------------
729,498 45,285,692 600,000 -- 45,415,190 45,415,190
------------- -------------- -------------- -------------- ------------- -------------
Minority interest ............... -- 395,397 -- -- 395,397 395,397
------------- -------------- -------------- -------------- ------------- -------------
Common stock, subject to
possible redemption ............ 3,741,874 -- 3,741,874(5) -- -- --
------------- -------------- -------------- -------------- ------------- -------------
Stockholders' equity:
Common stock, $.001 par value .. 3,700 -- -- 716(5) 9,283 8,355
-- 4,867(7)
Common stock .................... -- 1,671 1,671(7) -- -- --
Additional paid-in capital ..... 15,710,140 38,018,520 19,000,000(4) 3,741,158(5) 37,467,382 35,043,585
1,250,000(3) 250,760(8)
3,196(7)
Retained earnings (deficit) .... 250,760 (3,797,866) 250,760(8) -- (3,797,866) (3,797,866)
Notes receivable from
stockholders ................... -- (2,241,866) -- 2,241,866(6) -- --
Foreign translation adjustments -- 2,652,441 -- -- 2,652,441 2,652,441
------------- -------------- -------------- -------------- ------------- -------------
Total stockholders' equity ..... 15,964,600 34,632,900 20,505,627 6,239,367 36,331,240 33,906,515
------------- -------------- -------------- -------------- ------------- -------------
Total liabilities and
stockholders' equity ........... $20,435,972 $80,313,989 $24,847,501 $ 6,239,367 $82,141,827 $79,717,102
============= ============== ============== ============== ============= =============
</TABLE>
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
1. The unaudited pro forma consolidated statement of financial condition
is presented, in the first instance, assuming that no FSAC stockholders
exercise Redemption Rights and, in the second instance, assuming that
holders of 464,166 shares of FSAC Common Stock exercise Redemption
Rights (representing the maximum number of shares with respect to which
redemption can be effected under the Merger Agreement without EBIC's
consent, assuming consummation of the Unit Purchase Option Exchange).
Pursuant to the FSAC Certificate of Incorporation, FSAC may not
consummate a Business Combination if holders with respect to 20% or
more in interest of the FSAC Public Shares vote against the Business
Combination and request redemption of such shares. However, the Merger
Agreement provides that as a condition to EBIC's obligation to
consummate the Merger, the number of shares of FSAC Common Stock with
respect to which redemption is actually effected may not exceed 10% of
the shares of FSAC Common Stock actually outstanding immediately prior
to the Merger (giving effect, however, to any Unit Purchase Option
Exchange). Assuming such maximum redemption of 10% occurs, FSAC's cash
and stockholders' equity prior to the Merger would be reduced by
$2,424,725. Consequently, FSAC's unaudited pro forma consolidated
stockholders' equity would decrease from $36,331,240 to $33,906,515.
There were 1,671,290 shares of EBIC Common Stock outstanding as of
March 31, 1996. On a pro forma basis after the Merger, assuming no
redemption of shares of FSAC Common Stock, 9,283,332 shares of FSAC
Common Stock will be outstanding, which assumes 4,416,666 of previously
outstanding shares, 225,000 shares issued in respect of the Unit
Purchase Option Exchange, and 4,641,666 shares issued in exchange for
outstanding shares of EBIC Common Stock. If the Unit Purchase Option
Exchange is not consummated, 8,833,332 shares of FSAC Common Stock will
be outstanding. Where the maximum redemption of FSAC Common Stock of
10% permitted by the Merger Agreement is assumed, 8,355,000 shares of
FSAC Common Stock would be outstanding as of March 31, 1996, on a pro
forma basis, assuming consummation of the Unit Purchase Option Exchange
(7,950,000 shares if the Unit Purchase Option Exchange is not
consummated).
2. Represents the release of restricted cash from the Trust as a result of
the Merger.
3. Represents payment of $1,227,500 of the total estimated expenses of
$1,250,000 to be incurred by FSAC and EBIC in connection with the
Merger.
4. Represents payment of the estimated aggregate cash consideration of
$19,000,000 to holders of EBIC Common Stock under the terms of the
Merger Agreement (including adjustments to the cash consideration based
on changes in FSAC and EBIC's respective net worths through March 31,
1996).
5. Represents the reclassification of FSAC Common Stock subject to
possible redemption on the basis of the unaudited pro forma
consolidated statement of financial condition assumption that no FSAC
stockholders will exercise their Redemption Rights.
6. Represents the repayment of notes receivable from certain EBIC
stockholders concurrent with the Merger.
7. Represents the recapitalization of stockholders' equity based upon the
issuance of FSAC Common Stock in exchange for EBIC Common Stock.
8. Represents reclassification of FSAC retained earnings prior to the
Merger to additional paid-in capital.
42
<PAGE>
COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
HISTORICAL (1) PRO FORMA(2)(5)
--------------- ---------------
<S> <C> <C>
FSAC
Book Value per share at March 31, 1996 .... $4.46 $3.91
Cash Dividends per share:
Year ended December 31, 1995 .............. -- --
Three Months ended March 31, 1996 ........ -- --
Net Income per share:
Year ended December 31, 1995 .............. $0.09 $0.33
Three Months ended March 31, 1996 ........ $0.03 $0.36
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL(3) PRO FORMA(4)(5)
(WITHOUT GIVING
EFFECT TO ANY
MERGER-RELATED
TRANSACTIONS)
------------- ---------------
<S> <C> <C>
EBIC
Book Value per share at March 31, 1996 .... $20.72 $10.86
Cash Dividends per share:
Year ended December 31, 1995 .............. -- --
Three Months ended March 31, 1996 ........ -- --
Net Income per share:
Year ended December 31, 1995 .............. $2.07 $0.92
Three Months ended March 31, 1996 ........ $2.07 $1.01
</TABLE>
- ------------
(1) Calculated on the basis of 4,416,666 shares of FSAC Common Stock
outstanding.
(2) Calculated on the basis of 9,283,332 shares of FSAC Common Stock
outstanding on a pro forma basis, which assumes effectiveness of the
Unit Purchase Option Exchange and no FSAC stockholders exercising their
Redemption Rights.
(3) Calculated on the basis of 1,671,290 shares of EBIC Common Stock
outstanding.
(4) Calculated on the basis of the Stock Exchange Ratio of 2.7772954
(adjusted from 2.6426688 in order to reflect assumed consummation of
the Unit Purchase Option Exchange, but not any other adjustments),
prior to giving effect to any escrow arrangements. Also excludes the
Per Share Cash Consideration to be received by holders of EBIC Common
Stock.
(5) Based on market prices for FSAC Common Stock at and preceding March 31,
1996, the 15,133,332 FSAC Warrants that will be outstanding giving
effect to the Merger would have been anti-dilutive and, accordingly,
were not included in the per share calculations. If and when the
post-Merger market price of FSAC Common Stock exceeds the $5.00 per
share warrant exercise price, the FSAC Warrants will likely have a
significant dilutive impact on earnings per share (not taking into
account the effects of the Exchange Offer, if any).
43
<PAGE>
CAPITALIZATION
Set forth below is (i) the capitalization of FSAC as of March 31, 1996,
(ii) the consolidated capitalization of EBIC as of March 31, 1996 and (iii)
the pro forma consolidated capitalization of FSAC as of that date after
giving effect to the Merger. This information should be read in conjunction
with the other financial information pertaining to FSAC and EBIC, including
"FSAC AND EBIC UNAUDITED PRO FORMA FINANCIAL INFORMATION -- Unaudited Pro
Forma Consolidated Statement of Financial Condition" included elsewhere
herein.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-------------------------------------------
FSAC EBIC
HISTORICAL HISTORICAL PRO FORMA (1)
------------- ------------- -------------
<S> <C> <C> <C>
Common Stock subject to redemption ...... $ 3,741,874 $ -- $ --
------------- ------------- -------------
Stockholders' Equity
Preferred Stock(2) ...................... -- -- --
Common Stock ............................ 3,700(3) 1,671(4) 9,283(3)
Additional Paid-in Capital .............. 15,710,140 38,018,520 37,467,382
Retained Earnings (Accumulated Deficit) 250,760 (3,797,866) (3,797,866)
Notes Receivable from Stockholders ..... -- (2,241,866) --
Foreign Translation Adjustments ........ -- 2,652,441 2,652,441
------------- ------------- -------------
Total Stockholders' Equity ........... 15,964,600 34,632,900 36,331,240
------------- ------------- -------------
Total Capitalization ..................... $19,706,474 $34,632,900 $36,331,240
============= ============= =============
</TABLE>
- ------------
(1) The pro forma capitalization assumes consummation of the Unit Purchase
Option Exchange, no exercise of Redemption Rights, resulting total
Merger Consideration consisting of 4,641,666 shares of FSAC Common
Stock, 7,566,666 Merger Warrants and $19 million in cash (without
further adjustments), and repayment of notes receivable from certain
EBIC stockholders.
(2) Preferred Stock, $.001 par value, of FSAC: shares authorized
--1,000,000, historical and 1,000,000, pro forma; issued and
outstanding--none, historical and pro forma. There is no authorized
Preferred Stock of EBIC.
(3) Common Stock, $.001 par value, of FSAC: shares authorized --
14,000,000, historical and 30,000,000, pro forma; issued and
outstanding -- 4,416,666, including 716,666 shares subject to possible
redemption, historical and 9,283,332, pro forma (assuming consummation
of the Unit Purchase Option Exchange and no exercise of Redemption
Rights).
(4) Class A Common Stock, $0.01 par value, of EBIC: 2,000,000 shares
authorized, none outstanding. Class B Common Stock, $.001 par value, of
EBIC: 2,000,000 shares authorized, 1,671,290 issued and outstanding.
44
<PAGE>
MARKET PRICES OF FSAC SECURITIES
FSAC Common Stock, FSAC Warrants (each entitling the holder thereof to
purchase one share of FSAC Common Stock for $5.00 per share) and FSAC Units
(each consisting of one share of FSAC Common Stock and two FSAC Warrants) are
quoted on the OTC Bulletin Board under the symbols "FSAT," "FSATW" and
"FSATU," respectively.
The following table sets forth the range of high and low closing bid
prices for each of the FSAC Units, FSAC Common Stock and FSAC Warrants for
the period since December 7, 1994, when FSAC Common Stock and FSAC Warrants
commenced public trading, as reported by the OTC Bulletin Board. The price
per FSAC Unit in the IPO was $6.00. The OTC Bulletin Board is a NASD
sponsored and operated automated inter-dealer quotation system for equity
securities not included in the Nasdaq Stock Market National Market System.
Such over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily reflect
actual transactions.
<TABLE>
<CAPTION>
FSAC FSAC FSAC
COMMON STOCK WARRANTS UNITS
----------------- ----------------- -----------------
HIGH LOW HIGH LOW HIGH LOW
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
1994:
Fourth Quarter (beginning December 7) ..... $4 1/4 $4 1/4 $ 7/8 $ 7/8 $6 $5 3/4
1995:
First Quarter .............................. $4 3/8 $4 1/4 $ 7/8 $ 5/8 $5 3/4 $5 3/4
Second Quarter ............................. 4 9/16 4 1/4 3/4 5/8 5 3/4 5 3/4
Third Quarter .............................. 4 5/8 4 1/2 3/4 11/16 5 3/4 5 3/4
Fourth Quarter ............................. 4 5/8 4 3/8 11/16 1/2 5 3/4 5 3/4
1996:
First Quarter .............................. $4 7/8 $4 5/8 $27/32 $ 1/2 $5 3/4 $5 3/4
Second Quarter (through June 21, 1996) ..... 5 1/16 4 7/8 1 1/16 23/32 6 1/8 5 3/4
</TABLE>
On June 21, 1996, there were approximately 16 holders of record of FSAC
Common Stock and 22 holders of record of FSAC Warrants. FSAC believes that
certain holders of record hold a substantial number of shares of FSAC Common
Stock and FSAC Warrants as nominees for a significant number of beneficial
owners. Because the FSAC Units are separable into FSAC Common Stock and FSAC
Warrants, a transfer of FSAC Units is recorded by FSAC's transfer agent only
as a transfer of FSAC Common Stock and FSAC Warrants. Thus, the number of
holders of record of FSAC Units is not available.
On March 7, 1996, the last trading day before the public announcement of
the proposed Merger, the high and low bid prices, as reported on the OTC
Bulletin Board, were (i) for FSAC Common Stock, a high of $4 7/8 and a low of
$4 7/8 , (ii) for FSAC Warrants, a high of $ 3/4 and a low of $ 3/4 and (iii)
for FSAC Units, a high of $5 3/4 and a low of $5 3/4 .
On June 21, 1996, the most recent date for which it was practicable to
obtain market price information before the printing of this Proxy
Statement/Prospectus, the high and low closing bid prices, as reported on the
OTC Bulletin Board, were (i) for FSAC Common Stock, a high of $5 1/16 and a low
of $5 1/16, (ii) for FSAC Warrants, a high of $1 1/16 and a low of $1 1/16 and
(iii) for FSAC Units, a high of $6 1/8 and a low of $6 1/8. Based on such bid
prices for FSAC Common Stock and FSAC Warrants, and assuming an estimated Per
Share Cash Consideration of $12.03, the Merger Consideration (prior to giving
effect to any further adjustments or escrow arrangements) would have an
indicated per share value of $30.22.
FSAC has never paid dividends on any of its capital stock. Following the
Merger, it is the present intention of FSAC's Board of Directors to retain
all earnings, if any, for use in FSAC's business operations and, accordingly,
FSAC does not anticipate paying any dividends on FSAC Common Stock in the
foreseeable future.
EBIC stockholders are urged to obtain current market quotations for FSAC
Common Stock and FSAC Warrants.
45
<PAGE>
STOCK PRICE PERFORMANCE COMPARISON
The following graph compares cumulative total return of FSAC Common Stock
with the cumulative total return of (i) the Standard & Poor's Midcap 400
Index (the "S&P Index") and (ii) an industry peer group index consisting of
ten other publicly-traded SPACs(Registered Trademark) (the "Peer Index"). The
graph assumes $100 was invested on December 7, 1994 (the day FSAC Common
Stock was first traded on the OTC Bulletin Board) in shares of FSAC Common
Stock, stocks comprising the S&P Index and stocks comprising the Peer Index,
and the reinvestment of dividends.
FSAC has used an index of other SPAC(Registered Trademark) stocks for an
industry peer group because of the unique business purpose of the
SPACs(Registered Trademark) and the features of their securities and rights
of their security holders. The Peer Index is comprised of the following
SPACs(Registered Trademark), some of which have already completed their
initial Business Combinations: HDS Corporation, Concord Health Group, Inc.,
SourceMedia, Inc., International Metals Acquisition Corporation, Bogen
Communications, Zydeco Energy, Inc., Kellstrom Industries, Restructuring
Acquisition Corporation, Production Systems Acquisition Corporation and
Silver Diner, Inc.
SPAC INDEX
<TABLE>
<CAPTION>
PRICE INDEX
HDSX CHGR(3) SRCM(4) IMAC BGN ZNRG KELL RRAC PRAC SLVR SUM DIVISOR AVERAGE
---- ------- ------- ---- --- ---- ---- ---- ---- ---- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7-Dec-94 4.88 5.83 5.13 5.00 4.38 4.25 4.25 4.25 4.25 3.88 45.88 10.00 4.59
31-Dec-94 4.75 5.25 4.75 4.86 4.38 4.31 4.25 4.25 4.25 4.25 45.31 10.00 4.53
31-Jan-95 4.75 5.38 4.88 4.81 4.63 4.31 4.38 4.25 4.25 4.25 45.88 10.00 4.59
28-Feb-95 5.75 5.38 5.00 4.78 4.63 4.63 4.75 4.38 4.25 4.38 47.91 10.00 4.79
31-Mar-95 4.88 4.88 5.25 4.81 4.88 4.65 4.75 4.50 4.38 4.38 47.34 10.00 4.73
30-Apr-95 3.75 4.50 5.25 4.86 4.91 4.69 4.81 4.44 4.44 4.38 46.03 10.00 4.60
31-May-95 4.38 4.38 5.25 4.86 4.94 4.69 5.13 4.63 4.59 4.38 47.22 10.00 4.72
30-Jun-95 4.75 4.25 5.25 5.00 5.00 4.84 5.13 4.63 4.69 4.50 48.03 10.00 4.80
31-Jul-95 4.75 4.88 5.25 5.16 5.25 4.76 5.00 4.69 4.63 4.50 48.88 10.00 4.89
31-Aug-95 4.75 5.63 4.63 5.50 5.13 4.91 5.00 4.75 4.69 4.63 45.59 10.00 4.96
30-Sep-95 5.13 4.88 5.50 5.88 5.19 4.95 5.25 4.75 4.75 4.94 51.20 10.00 5.12
31-Oct-95 5.50 4.88 5.75 5.25 4.88 5.13 5.50 4.76 4.75 4.94 51.34 10.00 5.13
30-Nov-95 6.25 4.94 5.31 5.00 3.75 5.20 5.00 4.78 4.75 5.00 46.98 10.00 4.90
31-Dec-95 5.25 4.88 4.56 4.36 3.06 6.25 4.88 4.81 4.75 4.94 47.75 10.00 4.76
31-Jan-96 6.50 7.19 4.19 4.63 4.50 5.88 6.13 5.00 4.81 4.81 53.63 10.00 5.36
28-Feb-96 6.38 7.19 4.13 5.38 4.00 5.38 6.88 5.06 5.00 5.25 54.63 10.00 5.46
31-Mar-96 5.50 7.35 4.31 4.75 3.63 5.75 6.50 5.06 5.00 6.88 54.73 10.00 5.47
</TABLE>
- ------------------
(3) 5/31/96 price of $7.35 reflects the cash offer for CHGR by Multi-care
Companies.
(4) 6/31/95 to 3/31/96 prices reflect an adjustment (price divided by 2) to
normalize share prices as a result of 2 to 1 reverse split.
<TABLE>
<CAPTION>
FSAC UNITS COMMON STOCK WARRANTS
- ---- ----------- ------------- -----------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
1994
4Q 11/30 to 12/31 6 5-3/4 4-1/4 4-1/4 7/8 7/8
1995
1Q 1/1 to 3/31 5-3/4 5-3/4 4-3/8 4-1/4 7/8 5/8
2Q 4/1 to 6/30 5-3/4 5-3/4 4-9/16 4-1/4 3/4 5/8
3Q 7/1 to 9/30 5-3/4 5-3/4 4-5/8 4-1/2 3/4 11/16
4Q 10/1 to 12/31 5-3/4 5-3/4 4-5/8 4-3/8 11/16 1/2
1996
1Q 1/1 to 3/31 5-3/4 5-3/4 4-7/8 4-5/8 27/32 1/2
</TABLE>
<TABLE>
<CAPTION>
S&P MIDCAP 400 FSAC SPAC INDEX (2)
---------------------- ---------------------- ----------------------
PRICE RETURN PRICE RETURN PRICE RETURN
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
07-Dec-94 (1) 165.51 $100.00 4.25 $100.00 4.59 $100.00
31-Dec-94 169.44 $102.37 4.25 $100.00 4.53 $ 98.77
31-Jan-95 170.96 $103.29 4.25 $100.00 4.59 $100.00
28-Feb-95 179.55 $108.48 4.25 $100.00 4.79 $104.43
31-Mar-95 182.37 $110.19 4.25 $100.00 4.73 $103.19
30-Apr-95 185.32 $111.97 4.38 $102.94 4.60 $100.34
31-May-95 189.90 $114.74 4.50 $105.88 4.72 $102.93
30-Jun-95 197.37 $119.25 4.58 $107.35 4.80 $104.70
31-Jul-95 207.42 $125.32 4.50 $105.88 4.89 $106.54
31-Aug-95 210.87 $127.41 4.50 $105.88 4.96 $108.11
30-Sep-95 215.70 $130.32 4.63 $108.82 5.12 $111.62
31-Oct-95 209.90 $126.82 4.63 $108.82 5.13 $111.92
30-Nov-95 218.69 $132.13 4.56 $107.35 4.90 $106.78
31-Dec-95 217.84 $131.62 4.63 $108.82 4.78 $104.09
31-Jan-96 220.76 $133.38 4.63 $108.82 5.36 $116.90
28-Feb-96 227.87 $137.68 4.75 $111.76 5.46 $119.08
31-Mar-96 230.30 $139.15 4.88 $114.71 5.47 $119.29
</TABLE>
- ----------------
(1) First day of common stock trading
(2) SPAC Index is comprised of the average price return on the 10 SPACs that
preceded FSAC.
46
<PAGE> NO PUBLIC MARKET FOR EBIC SECURITIES
EBIC Common Stock is not registered under the Exchange Act, listed on any
securities exchange or traded in the over-the-counter market. Private
transactions occur from time to time, however, in which EBIC has been either
the buyer or the seller or the transaction has been entirely between
stockholders. WCAS and its affiliates acquired approximately 54% of the
outstanding shares of EBIC Common Stock in May 1994 at an average cost of
$27.47 per share. During 1995 and early 1996, sales and purchases between
stockholders (who were either current or former employees) occurred generally
at $18.50 per share. More recently, such sales and purchases have occurred at
prices of $21.00 per share. There have been no dividends paid on any shares
of the capital stock of EBIC in its current, or either of its last two,
fiscal years. As of March 31, 1996, the unaudited per share book value of
EBIC Common Stock was $20.72 (which does not give effect to the repayment of
approximately $2.2 million of notes receivables from EBIC stockholders, as
required concurrent with the Merger).
The foregoing data is solely for informational purposes, and is not
necessarily reflective of the fair market value of shares of EBIC Common
Stock at any time, which value may be significantly higher or lower than
prices set in privately negotiated transactions or book value.
THE SPECIAL MEETINGS
EBIC SPECIAL MEETING
Purpose of the Meeting
The EBIC Special Meeting will be held on Monday, July 15, 1996 at 10:00 a.m.
(local time) at the New York offices of EBIC. At the EBIC Special Meeting,
holders of EBIC Common Stock will consider and vote upon a proposal to approve
and adopt the Merger Agreement, including the Merger and the other transactions
contemplated thereby, and to transact such other business as may properly come
before the meeting or any adjournments thereof.
THE BOARD OF DIRECTORS OF EBIC HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, TOGETHER WITH THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED
THEREBY, AND RECOMMENDS THAT HOLDERS OF EBIC COMMON STOCK VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT.
Record Date; Stock Entitled to Vote; Quorum
Only stockholders of record of EBIC Common Stock at the close of business
on the EBIC Record Date, June 21, 1996, will be entitled to receive notice of
the EBIC Special Meeting and only holders of record of EBIC Common Stock at that
time will be entitled to vote on approval and adoption of the Merger
Agreement. As of the EBIC Record Date, there were 1,671,290 shares of EBIC
Common Stock outstanding and entitled to vote at the EBIC Special Meeting.
Each share of EBIC Common Stock is entitled to one vote. A majority of the
outstanding shares of EBIC Common Stock must be represented in person or by
proxy at the EBIC Special Meeting in order for a quorum to be present. A
stockholder who abstains from a vote by registering an abstention vote will
be deemed present at the meeting for quorum purposes but will not be deemed
to have voted on the particular matter.
Vote Required
Assuming a quorum is present at the EBIC Special Meeting, the affirmative
vote by the holders of a majority of the outstanding shares of EBIC Common
Stock is required to approve and adopt the Merger Agreement. Abstentions on
the proposal to approve and adopt the Merger Agreement will have the effect
of a negative vote because the proposal requires the affirmative vote of a
majority of the outstanding shares of EBIC Common Stock.
As of June 21, 1996, WCAS and its affiliates beneficially owned an
aggregate of 907,602 shares, or 54.4%, of the outstanding shares of EBIC
Common Stock, of which 850,884, or approximately 51%, are owned directly by
WCAS. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF EBIC AND FSAC."
The vote of WCAS, by itself, would be sufficient to constitute a quorum and
to
47
<PAGE>
approve and adopt the Merger Agreement. In addition, as of June 21, 1996, the
directors and executive officers of EBIC may be deemed to beneficially own an
aggregate additional 492,352 shares of EBIC Common Stock, or approximately
29.5% of the outstanding shares of EBIC Common Stock.
Proxies
Shares represented by properly executed proxies received in time for the
EBIC Special Meeting will be voted at such meeting in the manner specified by
the holder thereof. IF A CHOICE IS NOT INDICATED, THE PROXY WILL BE VOTED
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. It is not expected that
any matters other than those referred to herein will be brought before the
EBIC Special Meeting. If, however, other matters are properly presented, the
persons named as proxies will vote in accordance with their judgment with
respect to such matters.
The grant of a proxy on the enclosed form does not preclude a stockholder
from voting in person. A stockholder may revoke a proxy at any time prior to
its exercise by submitting a new proxy at a later date, by filing with the
Secretary of EBIC a duly executed revocation of proxy bearing a later date or
by voting in person at the EBIC Special Meeting. Attendance at the EBIC
Special Meeting will not of itself constitute revocation of a proxy.
EBIC STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS AT THIS TIME. INSTRUCTIONS WITH RESPECT TO THE SURRENDER OF SUCH STOCK
CERTIFICATES WILL BE FURNISHED TO ALL EBIC STOCKHOLDERS OF RECORD AS SOON AS
PRACTICABLE AFTER CONSUMMATION OF THE MERGER. SEE "THE MERGER AGREEMENT --
PROCEDURES FOR EXCHANGE OF EBIC COMMON STOCK CERTIFICATES."
EBIC Stockholders' Appraisal Rights
Under Delaware law, stockholders of EBIC who do not vote in favor of the
Merger and who comply with the requirements of Section 262 of the DGCL
("Section 262") have the right, in connection with the Merger, to have the
"fair value" of their shares of EBIC Common Stock judicially appraised and to
be paid such appraisal value in accordance with the provisions of Section
262. Any demand for appraisal must be made in writing and delivered to EBIC
prior to the vote on the Merger Agreement at the EBIC Special Meeting.
Submission of a proxy instructing that shares be voted against approval of
the Merger Agreement by itself does not constitute such a demand. Moreover,
voting in favor of the Merger Agreement, or delivering a proxy in connection
with the EBIC Special Meeting (unless the proxy votes against, or expressly
abstains from the vote on the Merger Agreement) will constitute a waiver of a
stockholder's appraisal rights and will nullify any written demand for
appraisal submitted by such stockholder. ANY FAILURE TO TAKE ALL THE STEPS
REQUIRED UNDER SECTION 262 ON A TIMELY BASIS, INCLUDING THE FILING OF A
PETITION WITH THE DELAWARE CHANCERY COURT, MAY RESULT IN THE LOSS OF
APPRAISAL RIGHTS. A copy of Section 262 is attached hereto as Annex III. See
"THE MERGER --EBIC Stockholders' Rights of Appraisal" and Annex III. The
obligations of FSAC and Merger Sub to effect the Merger are subject to the
condition in the Merger Agreement that the aggregate number of shares
electing appraisal rights pursuant to Section 262 shall not constitute more
than 10% of the Outstanding EBIC Shares. See "THE MERGER AGREEMENT --
Conditions to the Merger."
FSAC SPECIAL MEETING
The FSAC Special Meeting will be held only subsequent to EBIC stockholder
approval and adoption of the Merger Agreement at the EBIC Special Meeting. It
is anticipated that the FSAC Special Meeting will occur in mid- or late-August,
1996. Only holders of record of FSAC Common Stock at the close of business on
the record date set for the FSAC Special Meeting (the "FSAC Record Date") will
be entitled to receive notice of the FSAC Special Meeting, and only holders of
record of FSAC Common Stock at that time will be entitled to vote at the FSAC
Special Meeting. As of the date of this Proxy Statement/Prospectus there are,
and it is expected that as of the FSAC Record Date there will be, 4,416,666
shares of FSAC Common Stock outstanding and entitled to vote at the FSAC
Special Meeting.
At the FSAC Special Meeting, holders of FSAC Common Stock will consider
and vote upon (i) a proposal to approve and adopt the Merger Agreement, (ii)
a proposal to elect eight persons to the FSAC
48
<PAGE>
Board of Directors (including two EBIC representatives), (iii) a proposal to
approve certain amendments to FSAC's Certificate of Incorporation (the
"Charter Amendments"), (iv) a proposal to adopt the FSAC Option Plan, and (v)
such other matters as may be properly brought before the FSAC Special Meeting
or any adjournments thereof. The Charter Amendments provide for (x)
immediately prior to the effectiveness of the Merger, (1) the name change of
FSAC to "Financial Services Corporation" (the "Name Change Amendment") and
(2) an increase in the authorized shares of FSAC Common Stock from 14,000,000
shares to 30,000,000 shares (the "Additional Common Stock Amendment") and (y)
immediately after the effectiveness of the Merger, (1) the classification of
the FSAC Board of Directors into three classes serving staggered terms, with
the initial number of directors to be eight (the "Classified Board
Amendment"), (2) the elimination of the ability of stockholders to act by
written consent (the "Stockholders' Action Amendment"), (3) the restriction
of the ability to call special meetings of stockholders to the Chairman and
the President of FSAC or to an affirmative vote of a majority of the Board of
Directors (the "Special Meeting Amendment") and (4) a requirement of an 80%
supermajority vote to amend any of the provisions described in this clause
(y) (the "Supermajority Amendment"). The full text of the Charter Amendments
is set forth in the Forms of Certificates of Amendment to the Certificate of
Incorporation of FSAC attached hereto as Annex V. See "THE MERGER AGREEMENT
- -- FSAC Special Meeting Proposals -- The Charter Amendments."
The presence at the FSAC Special Meeting, in person or by properly
executed proxy, of the holders of a majority of the outstanding shares of
FSAC Common Stock entitled to vote at the FSAC Special Meeting will
constitute a quorum. Assuming a quorum is present at the FSAC Special
Meeting, the affirmative vote of the holders of a majority of the shares of
FSAC Common Stock outstanding and entitled to vote is required to approve and
adopt the Merger Agreement. Notwithstanding the foregoing, if 20% or more of
the FSAC Public Shares, or 716,667 shares, are voted against the Merger (and
have Redemption Rights duly demanded with respect to them), FSAC, pursuant to
its Certificate of Incorporation, is not permitted to consummate the Merger.
Moreover, it is a condition to EBIC's obligation to consummate the Merger
that the number of FSAC Public Shares with respect to which Redemption Rights
are duly demanded ("Redemption Shares") not constitute more than 10% of the
number of shares of FSAC Common Stock outstanding immediately prior to the
Merger (giving effect to the Unit Purchase Option Exchange, if any). See "THE
MERGER -- FSAC Redemption Rights."
With respect to approval and adoption of the Merger Agreement, the Initial
FSAC Stockholders are required to vote their Pre-IPO Shares (constituting
approximately 18.9% of the currently outstanding shares of FSAC Common Stock)
in accordance with the vote of the majority in interest of the FSAC Public
Shares. The Initial FSAC Stockholders also own an aggregate of 597,000 FSAC
Public Shares (constituting approximately 13.5% of the currently outstanding
shares) and have indicated that they currently intend to vote such shares in
favor of approval and adoption of the Merger Agreement. The six current
directors of FSAC (which include FSAC's only two officers) constitute all of
the Initial FSAC Stockholders. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS OF EBIC AND FSAC."
If a quorum is present at the FSAC Special Meeting, those nominees for
director receiving a plurality of the votes cast at the FSAC Special Meeting
will be elected as directors. Assuming a quorum is present at the FSAC
Special Meeting, the affirmative vote of the holders of a majority of the
outstanding shares of FSAC Common Stock is required to approve the Charter
Amendments. Assuming a quorum is present at the FSAC Special Meeting, the
vote of a majority of the shares present or represented by proxy at the FSAC
Special Meeting is required to approve the adoption of the FSAC Option Plan.
SOLICITATION OF PROXIES
FSAC and EBIC will each bear the cost of the solicitation of proxies from
its own stockholders, except that FSAC and EBIC will share equally the cost
of printing and filing this Proxy Statement/ Prospectus and the proxy
statement to be used in connection with the FSAC Special Meeting. In addition
to solicitation by mail, the directors, officers and employees of each
company and its subsidiaries may solicit proxies from stockholders of such
company by telephone, facsimile or telegram or in person. Arrangements may
also be made with brokerage houses and other custodians, nominees and
fiduciaries
49
<PAGE>
for the forwarding of solicitation material to the beneficial owners of stock
held of record by such persons, and FSAC and EBIC will reimburse such
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
D.F. King & Co., Inc. will assist in the solicitation of proxies by FSAC
and the tabulation of votes for a fee of $7,000, plus reimbursement of its
reasonable out-of-pocket expenses.
THE MERGER
The discussion in this Proxy Statement/Prospectus of the Merger and the
other transactions contemplated thereby, and the description of their
principal terms, are subject to and qualified in their entirety by reference
to the full text of the Merger Agreement, a copy of which is attached to this
Proxy Statement/Prospectus as Annex I, and to the other Annexes to this Proxy
Statement/Prospectus, each of which is incorporated herein by reference.
At the EBIC Special Meeting, EBIC stockholders will be asked to approve
and adopt the Merger Agreement. THE BOARD OF DIRECTORS OF EBIC HAS
UNANIMOUSLY APPROVED AND RECOMMENDS THAT HOLDERS OF FSAC COMMON STOCK VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE EBIC SPECIAL
MEETING.
FORM OF MERGER; EFFECTIVE TIME
The Merger Agreement provides that as promptly as practicable after the
approval and adoption of the Merger Agreement by the respective stockholders
of FSAC and EBIC and the satisfaction or, if permissible, waiver of the other
conditions to the Merger, a Certificate of Merger, the form of which is
attached as Annex IV to this Proxy Statement/Prospectus, will be filed with
the Secretary of State of the State of Delaware (the date and time of such
filing, or such later time as is specified in such certificate, being the
"Effective Time"). At the Effective Time, pursuant to such Certificate of
Merger, Merger Sub will be merged with and into EBIC, with EBIC being the
surviving corporation (the "Surviving Corporation") and becoming a wholly
owned subsidiary of FSAC. The name of the Surviving Corporation will be "Euro
Brokers Investment Corporation." At the Effective Time, pursuant to the Name
Change Amendment, the name of FSAC will be changed to "Financial Services
Corporation."
MERGER CONSIDERATION
Pursuant to the terms of the Merger Agreement, at the Effective Time, each
share of EBIC Common Stock (other than shares held in the treasury of EBIC,
shares owned by any subsidiary of EBIC and shares owned by FSAC, all of which
will be cancelled, and other than Dissenting Shares, if any) will be
converted into the right to receive the Merger Consideration, which, subject
to certain adjustments and escrow arrangements (see "THE MERGER AGREEMENT --
Certain Related Agreements -- Escrow Agreement"), will consist of (i)
2.6426688 newly-issued shares of FSAC Common Stock, (ii) 4.5274405
newly-issued Merger Warrants and (iii) $9.5734433 in cash, without interest.
The Merger Warrants, the form of which is attached as Annex II to this Proxy
Statement/Prospectus will entitle the holder to receive the same securities
for the same exercise price as are receivable by the holders of the FSAC
Warrants sold in the IPO upon any exercise of such FSAC Warrants after the
Effective Time. Cash will be paid in lieu of fractional shares of FSAC Common
Stock or Merger Warrants.
The Exchange Ratios will be adjusted as necessary to provide that, upon
consummation of the Merger, the holders of EBIC Common Stock who do not
exercise appraisal rights will own in the aggregate (subject to certain
escrow arrangements (see "THE MERGER AGREEMENT -- Certain Related Agreements
- -- Escrow Agreement") and disregarding cash payments in lieu of fractional
interests) a 50% post-Merger interest in FSAC by having acquired (i) a number
of shares of FSAC Common Stock equal to the number of shares of FSAC Common
Stock outstanding immediately prior to the Merger (after giving effect to (x)
any exercise by FSAC stockholders of their Redemption Rights and (y) the Unit
Purchase Option Exchange, if any) and (ii) a number of Merger Warrants equal
to the number of FSAC Warrants outstanding immediately prior to the Merger.
Consistent with the foregoing
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intentions, and based on the specific adjustments contemplated by the Merger
Agreement, it is expected that at the Closing the Stock Exchange Ratio will
neither exceed 2.7772954 nor be less than 2.21385588, and that the Warrant
Exchange Ratio will not have materially changed.
The Per Share Cash Consideration, which was originally determined for
purposes of the Merger Agreement by reference to the difference between
FSAC and EBIC's respective net worths at December 31, 1995, will also be
adjusted immediately prior to the Merger to reflect the then-existing
difference between the respective pre-Merger net worths of FSAC and EBIC (on
a consolidated basis), subject in each case to certain other adjustments,
with the intention generally of equalizing the respective pre-Merger
contributions of FSAC stockholders and EBIC stockholders to the post-Merger
consolidated net worth of FSAC. Based primarily on increases in EBIC's net
worth that have occurred since the signing of the Merger Agreement, the Per
Share Cash Consideration would have been increased by an aggregate of
approximately $3 million, or to approximately $11.37 on a per share basis, if
the Merger had occurred on March 31, 1996. Based on preliminary assessments of
further increases in EBIC's net worth that have occurred since March 31, 1996
(and that are currently anticipated through the end of June 1996), FSAC and EBIC
estimate that the Per Share Cash Consideration would be increased further by an
aggregate of approximately $1.1 million, or to approximately $12.03 on a per
share basis, were the Merger to occur on June 30, 1996. In addition, to the
extent that EBIC's net worth changes further during the period between July
1, 1996 and the actual Closing (which is currently anticipated to occur in
mid- or late-August 1996), or actual increases in EBIC's net worth from April
1, 1996 through June 30, 1996 vary from the preliminary assessments and
estimates of the same used by management in arriving at the above $1.1
million and $12.03 figures, the Per Share Cash Consideration will be adjusted
further, with every approximately $167,000 increase or decrease in EBIC net
worth having the effect of increasing or decreasing, as the case may be, the
Per Share Cash Consideration by approximately $.10. In addition, to the
extent that holders of FSAC Public Shares exercise their Redemption Rights,
the Per Share Cash Consideration will be increased by approximately $.32 for
every approximately 100,000 Redemption Shares (up to an additional
approximately $1.47 if there are 464,166 Redemption Shares, the maximum
number permitted under the Merger Agreement without EBIC's consent, or, assuming
such consent, up to a maximum additional approximately $2.27 if there are
716,666 Redemption Shares, the maximum number permitted by FSAC's Certificate of
Incorporation). See "THE MERGER AGREEMENT -- Adjustment of Exchange Ratios and
Cash Considerations" and " -- Closing True-Up Procedures."
In the aggregate, it is expected that approximately 4,416,666 shares of
FSAC Common Stock (subject to increase by 225,000 shares if the Unit Purchase
Option Exchange is consummated and subject to decrease to the extent of any
Redemption Shares), 7,566,666 Merger Warrants and $20,100,000 in cash will be
paid as the Merger Consideration (subject to certain adjustments and escrow
arrangements), having an overall value of approximately $50.5 million,
based on the closing per share bid prices for FSAC Common Stock and FSAC
Warrants on June 21, 1996.
All shares of EBIC Common Stock converted into the right to receive the
Merger Consideration in the Merger will no longer be outstanding and will
automatically be cancelled and will cease to exist, and each certificate
previously representing any such shares will thereafter represent solely the
right to receive the Merger Consideration. Certificates previously
representing shares of EBIC Common Stock will be exchanged for the Merger
Consideration in consideration therefor, without interest but subject to
certain adjustments and escrow arrangements, upon the surrender of such
certificates as provided below. See "THE MERGER AGREEMENT -- Procedures for
Exchange of EBIC Common Stock Certificates."
Each share of common stock, par value $.01 per share, of Merger Sub issued
and outstanding immediately prior to the Effective Time will be converted
into one validly issued, fully paid and nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
DETERMINATION AND ADJUSTMENT OF MERGER CONSIDERATION
The Exchange Ratios are based on the 4,416,666 outstanding shares of FSAC
Common Stock, the 7,566,666 outstanding FSAC Warrants and the 1,671,290
outstanding shares of EBIC Common Stock (the "Outstanding EBIC Shares") that,
in each case, were respectively outstanding as of March 5, 1996. In order to
give effect to the intent of the parties that EBIC stockholders who do not
exercise appraisal rights
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receive a 50% aggregate interest in the post-Merger capitalization of FSAC
(subject to certain escrow arrangements and the payment of cash in lieu of
fractional interests), the Stock Exchange Ratio was initially set at 2.6426688,
the quotient obtained by dividing the 4,416,666 shares of FSAC Common Stock that
were outstanding as of March 5, 1996 by the Outstanding EBIC Shares, and the
Warrant Exchange Ratio was initially set at 4.5274405, the quotient obtained
by dividing the 7,566,666 FSAC Warrants that were outstanding as of March 5,
1996 by the Outstanding EBIC Shares. The Merger Agreement provides for the
Exchange Ratios to be adjusted prior to the Merger, in order to maintain such
50% interest, by reflecting any changes to the number of outstanding shares
of FSAC Common Stock, FSAC Warrants and EBIC Common Stock that occur (or for
purposes of such adjustments are deemed to occur) prior to the Merger.
Pursuant to its underwriting agreement entered into in connection with the
IPO, FSAC has agreed that until it consummates a Business Combination it will
not issue any additional shares of FSAC Common Stock or any options or other
securities convertible into FSAC Common Stock. Accordingly, the number of
outstanding shares of FSAC Common Stock and outstanding FSAC Warrants should
remain at 4,416,666 and 7,566,666, respectively, as of the Effective Time.
However, for purposes of the quotients calculated above, the Merger Agreement
provides that the number of outstanding shares of FSAC Common Stock will be
deemed to increase by the 225,000 shares issued in the Unit Purchase Option
Exchange, if the Unit Purchase Option Exchange is consummated, and be deemed
to decrease by the number of any Redemption Shares. The Merger Agreement also
prohibits EBIC from issuing or redeeming any shares of its capital stock
prior to the Effective Time without the prior consent of FSAC and, as a
result, it is anticipated that the number of outstanding shares of EBIC
Common Stock will remain at 1,671,290 as of the Effective Time. Accordingly,
it is not expected (i) that the Stock Exchange Ratio will exceed 2.7772954
(the quotient obtained by dividing (x) 4,416,666 plus 225,000 (the maximum
number of shares of FSAC Common Stock to be issued in the Unit Purchase
Option Exchange) by (y) 1,671,290) or be less than 2.2138588 (the quotient
obtained by dividing (x) 4,416,666 minus 716,666 (the maximum number of
Redemption Shares at which FSAC is still permitted, pursuant to its
Certificate of Incorporation, to consummate the Merger) by (y) 1,671,290) or
(ii) that the Warrant Exchange Ratio will change from 4.5274405. In any
event, the final Exchange Ratios, whether or not required to be adjusted,
will result (subject to certain escrow arrangements provided for in the
Merger Agreement and disregarding cash payments in lieu of fractional
interests) in holders of EBIC Common Stock who do not exercise appraisal
rights receiving in the aggregate a post-Merger 50% interest in the
outstanding shares of FSAC Common Stock and FSAC Warrants. See "THE MERGER
AGREEMENT --Adjustment of Exchange Ratios and Cash Consideration."
In order to give effect to the intent of the parties that the pre-Merger
respective contributions of FSAC stockholders and EBIC stockholders to the
post-Merger consolidated net worth of FSAC generally be equalized, the Per
Share Cash Consideration was initially set at the quotient obtained by
dividing $16 million, the parties' then-estimate of the likely difference
between the respective net worths (as determined in accordance with the Merger
Agreement) of FSAC and EBIC immediately prior to the Merger, by the
Outstanding EBIC Shares. The Merger Agreement provides for the Per Share Cash
Consideration to be adjusted prior to the Merger, in order to maintain such
equalization principle, by reflecting any changes to the respective net
worths (as determined in accordance with the Merger Agreement) of FSAC and
EBIC that occur (or for purposes of such adjustment are deemed to occur)
prior to the Merger (as well as any change in the number of outstanding
shares of EBIC Common Stock). For example, amounts paid by FSAC with respect
to Redemption Shares, if any, will be deemed to decrease such net worth of
FSAC (and thereby increase the aggregate cash portion of the Merger
Consideration (the "Aggregate Cash Consideration") by the same amount). Based
primarily on increases in EBIC's net worth that have occurred since the
signing of the Merger Agreement, the Aggregate Cash Consideration would have
been adjusted from $16 million to approximately $19 million if the Merger had
occurred on March 31, 1996. Based on preliminary assessments of further
increases in EBIC's net worth that have occurred since March 31, 1996 (and that
are currently anticipated through the end of June 1996), FSAC and EBIC estimate
that the Aggregate Cash Consideration would be adjusted further to approximately
$20.1 million were the Merger to occur on June 30, 1996. In addition, to the
extent that EBIC's net worth changes further during the period between July 1,
1996 and the actual Closing (which is currently anticipated to occur in mid- or
late-August 1996), or actual increases in EBIC's net worth from April 1, 1996
through June 30, 1996 vary from the preliminary assessments and estimates of
the same used by management in arriving at the above $20.1 million figure,
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the Aggregate Cash Consideration will be adjusted further, with every
approximately $1.00 increase or decrease in EBIC net worth having the effect
of increasing or decreasing, as the case may be, the Aggregate Cash
Consideration by approximately the same amount. See "THE MERGER AGREEMENT --
Adjustment of Exchange Ratios and Cash Consideration" and "-- Closing True-Up
Procedures."
The Merger Consideration is also subject to adjustment depending upon
whether or not the Unit Purchase Option Exchange is consummated. See "THE
MERGER -- Certain Related Transactions -- Unit Purchase Option Exchange."
Because of the variety of possible adjustments to the Merger Consideration
that may be necessary to maintain the intentions of the parties described
above, FSAC and EBIC have agreed to resolicit the approval of the Merger by
their respective stockholders if (subject to the escrow arrangements
described below) the final Stock Exchange Ratio falls outside of the range the
of 2.2138588 to 2.7772954, the final Warrant Exchange Ratio changes by more than
10% from 4.5274405 or the final Per Share Cash Consideration is less than
$9.00 or greater than $17.50.
The Merger Consideration to be received is also subject to certain escrow
arrangements entered into in connection with the Merger Agreement, pursuant
to which, for varying post-Merger periods, (i) the Escrow Shares, comprising
10% of the shares of FSAC Common Stock to be issued in the Merger, will be
escrowed to pay indemnities, if any, owed to FSAC under the Merger Agreement,
(ii) if there are any Dissenting Shares, (x) a portion of the Aggregate Cash
Consideration equal to the aggregate book value (as determined in accordance
with the Merger Agreement) of such Dissenting Shares will be escrowed to
assist in making payments under Section 262 with respect to such Dissenting
Shares and (y) additional stock and warrant certificates representing the
shares of FSAC Common Stock and Merger Warrants that, but for their demand of
appraisal rights, holders of such Dissenting Shares would have received in
the Merger, will be escrowed to be released to non-dissenting holders of EBIC
Common Stock (including dissenting holders who subsequently fail to perfect
their appraisal rights) in order to maintain such holders' post-Merger 50%
interest in FSAC, (iii) $2 million of the Aggregate Cash Consideration will
be escrowed to make additional payments under Section 262 with respect to
Dissenting Shares, if necessary, and to pay any post-Merger balance sheet
"true-ups" owed to FSAC, and (iv) additional cash, up to a maximum of $2
million, will be escrowed by FSAC to pay any post-Merger balance sheet
"true-ups" owed to EBIC. See "THE MERGER AGREEMENT -- Merger Agreement
Indemnification," "-- Closing True-Up Procedures" and "-- Certain Related
Agreements -- Escrow Agreement."
CONDITIONS TO THE MERGER
The Merger is subject to certain customary conditions, some of which may
be waived by EBIC and/or FSAC. The Merger is also subject to certain other
conditions which are not waivable. See "THE MERGER AGREEMENT -- Conditions to
the Merger." One such non-waivable condition is approval by EBIC stockholders
of the Merger Agreement. Such approval is being sought pursuant to this Proxy
Statement/Prospectus, and holders of EBIC Common Stock as of the EBIC Record
Date will vote for or against such approval at the EBIC Special Meeting.
In addition, stockholders of FSAC must approve and adopt the Merger
Agreement and the transactions contemplated by the Merger Agreement,
including the Charter Amendments. FSAC stockholder approval for such
proposals will not be solicited unless and until EBIC stockholders approve
and adopt the Merger Agreement. Accordingly, it is currentlyu anticipated that
the FSAC Special Meeting will occur in mid- or late-August, 1996. The Merger
will not be able to be consummated until after such meeting.
If the Merger is not consummated on or before August 31, 1996, either
party may terminate the Merger Agreement unless the failure to so consummate
the Merger by such date is due to the action or failure to act of the party
(or its stockholders or subsidiaries) seeking termination. See "THE MERGER
AGREEMENT -- Termination."
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CERTAIN RELATED TRANSACTIONS
Exchange Offer
The Merger Agreement contemplates that as soon as reasonably practicable
following consummation of the Merger (subject, however, to the advice of its
financial advisors), FSAC will commence the Exchange Offer to acquire all
FSAC Warrants (including the Merger Warrants) that are then outstanding on
the basis of one share of FSAC Common Stock for a number of FSAC Warrants to
be mutually agreed upon between FSAC and WCAS. Determination of the precise
exchange ratio will depend on a number of factors, including the outcome of
discussions between FSAC and WCAS, the post-Merger trading prices of FSAC
Common Stock and FSAC Warrants, the results of any financial advice sought by
either or both of FSAC and WCAS and a review of the terms of warrant exchange
offers made by other SPACs(Registered Trademark). See "RISK FACTORS --
Effects of Exchange Offer." In any event, there can be no assurance that the
Exchange Offer will be made or consummated or, if made, as to the timing,
pricing or other terms and conditions thereof. Pursuant to the Security
Transfer Agreement, certain stockholders of FSAC and EBIC have agreed, if the
Exchange Offer is made, to tender the FSAC Warrants held by them at such time
(including Merger Warrants) in numbers proportionate to the aggregate tenders
of FSAC Warrants made by other holders in the Exchange Offer. See "THE MERGER
AGREEMENT -- Certain Related Agreements -- Security Transfer Agreement."
If the Exchange Offer does not occur, 15,133,332 shares of FSAC Common
Stock could be issued, in addition to the pro forma 9,283,332 shares
anticipated to be outstanding following the Merger (assuming consummation of
the Unit Purchase Option Exchange and no exercise by FSAC stockholders of
their Redemption Rights), if all of the FSAC Warrants that will be
outstanding following the Merger were exercised, with aggregate proceeds to
FSAC from such exercises of approximately $75.7 million. If the Exchange
Offer is made and consummated, a significant number of shares of FSAC Common
Stock, in addition to the 9,283,332 shares, would be issued sooner than
anticipated, the exact number depending upon the exchange ratio that is
agreed upon and the number of FSAC Warrants tendered, but fewer FSAC Warrants
would remain outstanding, therefore resulting in fewer shares of FSAC Common
Stock being issued pursuant to future exercises of FSAC Warrants.
Unit Purchase Option Exchange
In connection with the IPO, FSAC sold the Unit Purchase Options to
purchase up to an aggregate of 333,333 Advisor Units to the underwriters for
the IPO and certain designees thereof. The Advisor Units are identical to the
FSAC Units, except that the warrants contained in the Advisor Units are
exercisable at $6.25 per share and expire on November 30, 1999. The Unit
Purchase Options are exercisable initially at $9.90 per Advisor Unit for the
four-year period ending November 30, 1999. In connection with the Merger,
FSAC has entered into the Unit Purchase Option Agreement with such holders of
the Unit Purchase Options, providing for the Unit Purchase Option Exchange,
which, contingent upon and effective immediately following the Merger, will
involve the exchange of all of the Unit Purchase Options for an aggregate of
225,000 newly-issued shares of FSAC Common Stock. The Unit Purchase Option
Agreement is attached as an exhibit to the Registration Statement, and is
incorporated herein by reference.
If the Unit Purchase Option Exchange is consummated, 225,000 newly-issued
shares of FSAC Common Stock will be issued to the holders of the Unit
Purchase Options and, pursuant to the Merger Agreement, the aggregate Merger
Consideration will be increased by 225,000 shares of FSAC Common Stock (with
the Stock Exchange Ratio adjusted accordingly). If the Unit Purchase Option
Exchange is not consummated, the Merger Agreement provides for the Merger
Consideration to be increased (in lieu of the additional 225,000 shares) by
an additional amount of cash to be agreed upon between FSAC and EBIC to
reflect the fact that the Unit Purchase Options will remain outstanding or,
if such amount cannot be agreed upon, by an aggregate of 333,333 newly-issued
Unit Purchase Options.
BACKGROUND OF THE MERGER
Following the IPO, FSAC initiated efforts to select and evaluate Target
Businesses in the financial services industry. Beginning in January 1995,
FSAC management met with investment bankers,
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consultants, business brokers, leveraged buy-out firms, venture capitalists
and others to identify potential acquisition candidates. FSAC initially
analyzed and evaluated a variety of possible Target Businesses, including
investment banks, securities and brokerage firms, commercial banks, savings
banks, insurance companies (life, property and casualty and motor), mortgage
banks, inter-dealer brokers, New York Stock Exchange specialists, asset
management companies and leasing companies. FSAC ultimately decided to focus
on the securities and brokerage business given the abilities and experience
of FSAC's management in this particular sector. FSAC also decided that its
limited capital base dictated focusing on a Target Business whose business
would not require capital to support security positions. Management believed
that the inter-dealer brokerage business represented an attractive
opportunity because, although capital is required for regulatory purposes and
credit standing, it is not necessarily needed to support brokered trades,
since the brokers do not seek to take a proprietary position in the
securities.
In April 1995, FSAC management met with Mabon Securities Corporation
("Mabon") and its advisors to discuss the possible acquisition of Mabon's
wholly owned subsidiary, Cedar Street Securities Corp. ("Cedar Street"). On
May 16, 1995, FSAC signed a letter of intent to acquire Cedar Street. Cedar
Street was a full service inter-dealer brokerage firm specializing in
brokering corporate bonds, preferred stocks, convertible bonds, U.S. Treasury
Zero Coupon bonds, Yankee bonds, and Emerging Market debt in New York and
Eurobonds and domestic European securities in London. On July 14, 1995, FSAC
terminated negotiations to acquire Cedar Street after it was unable to reach
mutually satisfactory definitive documentation to implement the terms of the
letter of intent.
During July 1995, FSAC resumed its search for a Target Business. At this
time, Gilbert Scharf, President and Chief Executive Officer of FSAC, renewed
a series of informal discussions he had over the course of the last year with
Russell L. Carson, a general partner of WCAS, with respect to the majority
stake investment in EBIC that had been acquired by WCAS in May 1994. Mr.
Scharf and Mr. Carson are friends, and Mr. Carson was an initial investor in
FSAC's IPO (acquiring 100,000 FSAC Units for his own account). As a result of
these discussions, Mr. Scharf met on August 15, 1995 with members of WCAS,
including Messrs. Welsh and Anderson, and with Donald Marshall, Chairman and
President of EBIC, to discuss the potential acquisition of EBIC by FSAC.
FSAC's preliminary investigation of EBIC revealed certain attractive
characteristics, including that EBIC had (i) a presence in the world's
leading financial centers, (ii) a quality infrastructure with the potential
to expand, (iii) advanced technology and communications, (iv) an experienced
senior management team and (v) a leading position in certain products.
On August 22, 1995, FSAC signed a confidentiality agreement with EBIC, and
EBIC subsequently provided FSAC with financial and other information
concerning EBIC. Beginning in early September 1995 (and continuing until
execution of the Merger Agreement) FSAC and its representatives periodically
met with EBIC management and its representatives to conduct initial business
due diligence.
Based on the results of such due diligence, on December 11, 1995, FSAC and
EBIC signed a letter agreement providing for a thirty-day exclusive
negotiating period with respect to a possible acquisition of EBIC by FSAC and
outlining the principle that the existing EBIC capital stock would be
converted into a 50% fully-diluted interest in FSAC (after equalization of
their respective net worths). On December 19, 1995, as required by FSAC's
underwriting agreement in connection with the IPO, EBIC signed a letter
agreement waiving any claim it might have for or against monies in the Trust
as a result of any negotiations, contracts or agreements with FSAC, other
than a claim for monies due upon consummation of a Business Combination.
Thereafter, representatives from Skadden, Arps, Slate, Meagher & Flom,
special counsel to FSAC ("Skadden Arps"), and from Theodore Goddard, FSAC's
special counsel in the United Kingdom, conducted legal, regulatory and
further due diligence with respect to EBIC. Separately, FSAC management
continued its due diligence, including meeting with EBIC management in their
offices in New York and London.
On January 10, 1996, FSAC and EBIC agreed to extend the exclusive
negotiating period through the end of January 1996. On January 16, 1996,
Skadden Arps delivered a draft of the Merger Agreement to EBIC's counsel,
Reboul, MacMurray, Hewitt, Maynard & Kristol ("Reboul MacMurray").
Negotiations with respect thereto and with respect to related documents
continued through the rest of January and February 1996. During this time,
the parties continued to extend the exclusive negotiating period.
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On February 28, 1996, the FSAC Board held a special meeting, with all
directors and Skadden Arps present, to discuss and review the status of the
proposed transaction. Management first reviewed for the Board its efforts
since the IPO at finding a suitable Target Business. Management then
described for and extensively discussed with the Board the business,
financial condition and prospects of EBIC and why management believed EBIC to
be an attractive acquisition candidate. Counsel then reviewed for the
directors the structure of the proposed transaction and the terms of the
then-current drafts of the Merger Agreement, the Security Transfer Agreement,
the Majority Stockholders' Agreement, the Registration Rights Agreement, the
Employment Agreements (as hereinafter defined), the Charter Amendments and
the FSAC Option Plan. Because negotiations with respect to these documents
were still ongoing, the FSAC Board determined to adjourn the meeting.
The FSAC Board reconvened the special meeting on March 1, 1996, again with
all directors and Skadden Arps present. Counsel reviewed for the Board the
current state of negotiations. The Board then discussed further the proposed
transaction and the business, financial results and prospects of EBIC. The
Board then voted unanimously to approve and adopt the Merger Agreement
(together with the Merger, the Charter Amendments, the FSAC Option Plan and
the other transactions contemplated thereby), and to recommend approval and
adoption of the Merger Agreement, the Charter Amendments and the FSAC Option
Plan to FSAC stockholders, subject, however, to the satisfactory final
negotiation and execution of the Merger Agreement.
On March 5, 1996, the EBIC Board of Directors held a special meeting at
which all the directors were present. In addition, Reboul MacMurray was
present. The structure, terms and conditions of the proposed transaction,
including the most recent draft of the Merger Agreement and the state of
negotiations with FSAC were discussed. The Board of Directors of EBIC then
voted unanimously to approve the Merger Agreement, subject to satisfactory
resolution of the still outstanding terms, and (subject to resolution of said
terms) to recommend to EBIC stockholders that they approve and adopt the
Merger Agreement.
On March 8, 1996, FSAC, Merger Sub and EBIC executed the Merger Agreement
and the related documents and jointly announced the proposed Merger in a
press release. On April 26, 1996, FSAC, Merger Sub and EBIC executed an
amendment to the Merger Agreement.
On April 19, 1996, FSAC filed preliminary proxy materials with respect to
the proposed Merger. On June 25, 1996, FSAC filed the Registration Statement
and was declared effective by the Commission.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
EBIC
The Board of Directors of EBIC believes that the Merger is in the best
interests of EBIC stockholders and that the Merger would allow EBIC and its
stockholders to realize the following objectives.
In determining to approve the Merger, the EBIC Board considered that the
Merger would provide EBIC stockholders with a public market for their equity
ownership in EBIC. The Board considered the alternative of an initial public
offering of EBIC Common Stock but determined that, in light of the costs of
such a transaction and the absence of any assurances that an offering could
be completed, the Merger provided a preferable means for EBIC stockholders,
after the expiration of any applicable restrictions on transferability of the
FSAC Common Stock and Merger Warrants to be received in the Merger, to
increase their investment liquidity over the liquidity of their current
investment in EBIC for which there is no public market. The EBIC Board
concluded that, at the same time, the Merger will allow EBIC stockholders to
retain an investment in the EBIC business by becoming stockholders of FSAC,
EBIC's new direct parent company. In addition, the cash component of the
Merger Consideration would provide EBIC stockholders with an immediate return
on their investment in EBIC.
In reaching its conclusion, the EBIC Board evaluated a number of factors,
including the terms and conditions of the Merger Agreement, the amount of
cash available in FSAC, the business operations and prospects of EBIC on a
historical basis and of EBIC and FSAC on a pro forma combined basis, the
business experience of FSAC's President, Gilbert D. Scharf, and the expenses
of completing a public
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offering of EBIC Common Stock. The Board of Directors of EBIC did not
consider one factor more than the others, or assign relative weights to the
factors it considered in arriving at its determination.
THE BOARD OF DIRECTORS OF EBIC UNANIMOUSLY RECOMMENDS THAT HOLDERS OF EBIC
COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
FSAC
At its March 1, 1996 meeting, the FSAC Board of Directors determined that
the Merger and the transactions contemplated thereby are fair to, and in the
best interests of, FSAC stockholders and determined to approve the Merger
Agreement (together with the Merger and all other transactions contemplated
thereby) and to recommend approval and adoption of the same by FSAC
stockholders. In arriving at and making these determinations, the FSAC Board
considered the following material factors:
1. The results of its due diligence investigation of EBIC, including
information concerning EBIC's assets and liabilities, financial performance,
results of operations, business condition and prospects. Specifically, the
FSAC Board viewed favorably EBIC's recent profitability, EBIC's role as a
"riskless" principal in its brokerage transactions and the potential for
growth of existing and new businesses of EBIC.
2. The belief of FSAC's Board and Management that the consideration to
be paid to EBIC stockholders pursuant to the Merger Agreement was fair to
FSAC and its stockholders. In this regard, the Board considered a number of
factors, including that current FSAC stockholders could be expected to own,
on a pro forma basis, approximately 50% of a post-Merger FSAC having
approximately twice the stockholders' equity (on a consolidated basis) of the
pre-Merger FSAC, and that such ownership would afford current FSAC
stockholders the opportunity to participate in the future possible growth and
anticipated profitability of EBIC.
3. The Board and management's belief that the fair market value of EBIC
and its subsidiaries, based upon standards generally accepted by the
financial community, such as earnings, potential sales, cash flow and book
value, exceeds 80% of the net assets of FSAC, and that, therefore, EBIC is a
permitted Target Business for a Business Combination. In arriving at this
view, the Board reviewed and relied upon the audited historical financial
statements of EBIC for each year in the two-year period ended December 31,
1994 and the unaudited historical financial statements of EBIC for the year
ended December 31, 1995 and the month ended January 31, 1996. See "-- Absence
of Fairness Opinion."
4. The proposed terms and conditions of the Merger Agreement and the
related agreements provided for therein. Specifically, the Board viewed
favorably (i) the scope of the representations of EBIC in the Merger
Agreement and FSAC's indemnification and escrow remedies for inaccuracies
therein, (ii) EBIC's obligation to pay a $2 million termination fee to FSAC
under certain circumstances if the Merger is not consummated, (iii) the
restrictions on certain resales of FSAC securities provided for in the
Security Transfer Agreement, (iv) WCAS's execution of the Majority
Stockholders' Agreement, (v) FSAC's six-person representation on, and the
existence of, a post-Merger eight-person, three-class FSAC Board of Directors
and (vi) the effect of the Employment Agreements and the FSAC Option Plan in
motivating and retaining key FSAC and EBIC personnel.
5. The extensive experience and capabilities of FSAC's Board and
management in the securities industry, combined with the extensive experience
and capabilities of EBIC's management team and the fact that management and
certain other key personnel will have a significant equity stake in the
success of the post-Merger FSAC.
6. Certain potential risks associated with the transaction, including
(i) the potential "overhang" on the post-Merger market price of FSAC
securities pending the making and consummation of the Exchange Offer and/or
from the registration rights afforded WCAS and other stockholders, (ii) the
dependence, to a certain extent, of EBIC's business on the customer
connections, performance and
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experience of key management and sales personnel, (iii) EBIC's losses from
operations for its 1994 fiscal year and the uncertainties associated with
sustaining EBIC's more recent profitability in late fiscal 1995 and early
fiscal 1996 and (iv) the amount of time likely to be needed to consummate the
Merger, the conditions to the Merger and the attendant risks of
non-consummation and, in such event, the potential difficulties associated
with FSAC's finding a suitable alternative Target Business for a Business
Combination prior to the date for FSAC's required liquidation.
In view of the wide variety of factors considered by the FSAC Board, it
did not find it practicable to quantify or otherwise attempt to assign
relative weights to the specific factors considered in making its
determination. However, as a general matter, the FSAC Board believed that the
factors discussed in paragraphs 1 through 5 supported its decision to approve
the Merger Agreement and outweighed the factors and the risks associated
therewith referred to in paragraph 6.
In reaching its conclusion to approve and adopt the Merger Agreement, the
FSAC Board also was aware of certain conflicts of interest of FSAC's
directors, officers and significant stockholders, including that unless FSAC
consummates the Merger or another Business Combination, such persons' Pre-IPO
Shares and FSAC Warrants would have no value. See "THE MERGER --Interests of
Certain Persons in the Merger." The FSAC Board did not consider liquidation
as a desirable alternative business strategy to consummating the Merger
because it believed that the Merger is fair to, and in the best interests of,
FSAC and its stockholders and is consistent with FSAC's business objective of
effecting a Business Combination with a suitable Target Business and because
of certain applicable SPAC(Registered Trademark) characteristics, including
the stockholder approval requirement and the availability of Redemption
Rights.
THE BOARD OF DIRECTORS OF FSAC HAS UNANIMOUSLY DETERMINED TO RECOMMEND
THAT HOLDERS OF FSAC COMMON STOCK VOTE TO APPROVE AND ADOPT THE MERGER
AGREEMENT AT THE FSAC SPECIAL MEETING.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, stockholders should be aware that certain
members of FSAC and EBIC's management and Boards of Directors and certain
significant FSAC and EBIC stockholders have certain interests in the Merger
that are in addition to the interests of stockholders of FSAC and EBIC
generally. The Boards of Directors of FSAC and EBIC were aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
Holdings of FSAC Securities
Each of the current directors and executive officers of FSAC owns Pre-IPO
Shares, as well as shares of FSAC Common Stock and/or FSAC Warrants purchased
pursuant to the IPO or thereafter in the open market or in privately
negotiated transactions. Such persons (who constitute all of the Initial FSAC
Stockholders) hold a total of 833,333 Pre-IPO Shares acquired for an
aggregate consideration of $25,000 (or $.03 per share). In addition, certain
of such persons acquired a total of 597,000 FSAC Units in the IPO (each FSAC
Unit consisting of one share of FSAC Common Stock and two FSAC Warrants) for
an aggregate consideration of $3,582,000 (or $6.00 per FSAC Unit).
Thereafter, certain of such persons acquired a total of 205,000 FSAC Warrants
in privately negotiated transactions for an aggregate consideration of
$186,550 (or $.91 per FSAC Warrant). In addition, one of the general partners
of WCAS acquired in the IPO, and still owns, 100,000 FSAC Units.
If FSAC is liquidated as a result of its failure to consummate the Merger
or another Business Combination by December 7, 1996, the current directors
and executive officers of FSAC would not participate in any Distribution
Amount with respect to their Pre-IPO Shares. Thus, unless FSAC consummates
the Merger or another Business Combination, such persons' Pre-IPO Shares and
FSAC Warrants will have no value. Moreover, if the Merger or another Business
Combination is not consummated, the Distribution Amount to be distributed to
all holders of FSAC Public Shares, including such persons with respect to
their aggregate 597,000 FSAC Public Shares, estimated to be $5.40 per share,
will be less than the IPO price of $6.00 per FSAC Unit.
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Employment Agreements
In connection with the Merger Agreement, as of March 8, 1996, FSAC entered
into an employment agreement with Gilbert Scharf, its President and Chief
Executive Officer, and EBIC entered into employment agreements with Donald
Marshall, its President and Chief Executive Officer, and Keith Reihl, its
Senior Vice President and Treasurer (collectively, the "Employment
Agreements"). The Employment Agreements, although executed, are contingent
upon, and do not become effective unless and until, consummation of the
Merger.
The following is a summary of the material provisions of the Employment
Agreements. The term of each of the Employment Agreements is three years,
beginning on the date of the Effective Time, with annual, automatic one-year
extensions beginning on the second anniversary of such date unless either
party gives notice of nonrenewal at least 90 days prior to such anniversary.
Mr. Scharf's Employment Agreement provides that he will be Chairman of the
FSAC Board of Directors, President and Chief Executive Officer of FSAC and
Vice-Chairman of the Board of Directors of EBIC, with an annual salary of
$450,000, as from time to time increased by the FSAC Board of Directors. Mr.
Marshall's Employment Agreement provides that he will be Chairman of the EBIC
Board of Directors, President and Chief Executive Officer of EBIC and
Vice-Chairman of the FSAC Board of Directors, with an annual salary of
$450,000, as from time to time increased by the EBIC Board of Directors. Mr.
Reihl's Employment Agreement provides that he will be Chief Financial Officer
and a member of the EBIC Board of Directors, with an annual salary of
$300,000, as from time to time increased by the EBIC Board of Directors. Each
Employment Agreement provides for annual bonuses that will be determined by
the applicable board of directors, but only if the book value per share of
FSAC Common Stock increases during the applicable period, and for
participation in current and future employee benefit plans. If the
executive's employment is terminated by death, by the employer for "cause"
(as defined in the Employment Agreement) or by the executive other than for
"good reason" (as defined in the Employment Agreement), he will be entitled
to no further payments under the agreement. If the executive's employment is
terminated for "disability" (as defined in the Employment Agreement), he will
be entitled to an additional six months of base salary, followed by such
benefits as are provided under the applicable disability plan. If the
executive's employment is terminated by the employer without "cause" or by
the executive for "good reason," the executive will be entitled to (i)
continuation of base salary to the end of the employment term or, if longer,
for one year; and (ii) continuation of coverage under all health, medical and
life insurance benefit plans for the longer of one year and the remainder of
the employment term or, if earlier, until the executive is reemployed and is
entitled to similar benefits from his new employer. Each executive is
prohibited from disclosing confidential information at any time during and
after termination of employment and is subject to noncompetition covenants
under specified conditions and for specified periods.
FSAC Option Plan
The FSAC Option Plan has been adopted by the FSAC Board of Directors,
subject to the approval of FSAC stockholders. 1,800,000 shares of FSAC Common
Stock will be reserved for issuance under the FSAC Option Plan. Pursuant to
the FSAC Option Plan, no individual may be granted an option or options for
more than 500,000 shares of FSAC Common Stock in any calendar year. Although
no options have as yet been granted, it is expected that certain officers and
employees of FSAC and EBIC will receive grants following the Effective Time.
See "THE MERGER AGREEMENT -- FSAC Special Meeting Proposals -- FSAC Option
Plan."
Board of Directors
If all the nominees for election to the FSAC Board of Directors are
elected and the Merger is consummated, the members of the FSAC Board of
Directors will be Gilbert D. Scharf, Michael J. Scharf, Denis Martin, Larry
S. Kopp, William B. Wigton, Frederick B. Whittemore, Donald R.A. Marshall and
James W. Stevens. Each such nominee, other than Messrs. Marshall, Wigton and
Stevens, is currently a director and stockholder of FSAC. Mr. Marshall is
currently the Chairman, President, Chief Executive Officer and a director of
EBIC. Mr. Wigton is currently a Managing Partner at Merrion Group, L.P. Mr.
Stevens is a former Executive Vice President of The Prudential Insurance
Company of America. See "MANAGEMENT OF FSAC."
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The Board of Directors of the Surviving Corporation will initially consist
of Donald R.A. Marshall, Keith E. Reihl, Patrick J. Welsh and Bruce K.
Anderson, the current Board of Directors of EBIC, and, pursuant to the Merger
Agreement, Gilbert D. Scharf and Michael J. Scharf, as designees of FSAC. It
is contemplated that Messrs. Welsh and Anderson will resign immediately
following the Merger and be replaced on the Board of the Surviving
Corporation by Mr. Stevens and Mr. Daniel G. Bergstein, a partner at the law
firm of Paul, Hastings, Janofsky & Walker, one of EBIC's outside counsel. It
is also contemplated that Gilbert Scharf will be appointed to the Board of
Directors of a number of subsidiaries of the Surviving Corporation. See
"MANAGEMENT OF EBIC."
The Merger Agreement provides that immediately following the Effective
Time, (i) EBIC and FSAC will take all action necessary to cause Gilbert
Scharf to become Vice-Chairman of EBIC and (ii) FSAC with use its best
efforts to take all necessary action to cause Donald Marshall to be appointed
Vice-Chairman of FSAC.
Indemnification
Pursuant to the Merger Agreement, the Surviving Corporation has agreed to
provide certain indemnification to current directors and officers of EBIC.
See "THE MERGER AGREEMENT -- Directors' Indemnification."
Registration Rights
Prior to, and as a condition of, the Merger, the Registration Rights
Agreement is to be executed by FSAC and will provide two demand registration
rights and certain ancillary registration rights (in each case, effective
only for periods after November 30, 1996) with respect to all shares of FSAC
Common Stock (including shares received upon exchange or exercise of FSAC
Warrants) held by WCAS and certain related investors, the Initial FSAC
Stockholders and the five members of EBIC Management who are also parties to
the Security Transfer Agreement. See "THE MERGER AGREEMENT -- Certain Related
Agreements -- Registration Rights Agreement."
NASDAQ LISTING
The Merger Agreement requires FSAC to use its reasonable efforts (i) to
prepare and file an application with the NASD to list the FSAC Common Stock
and the FSAC Warrants (including the Merger Warrants) on the Nasdaq National
Market and (ii) to cause such application to be approved as soon as
reasonably practicable following the Effective Time. Such listings are not a
condition to the Merger, and there can be no assurance that the FSAC
securities will be deemed eligible for such listings or that such listings
will occur (or remain in effect) at any time after the Merger.
REGULATORY APPROVALS
Consummation of the Merger is subject to the expiration or termination of
all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). Early termination of such waiting period
was granted on April 16, 1996. Issuance of shares of FSAC Common Stock and
Merger Warrants in the Merger is subject to the Registration Statement being
declared effective by the Commission (which occurred on June 25, 1996) and
the qualification for sale or exemption from qualification under applicable
state securities laws of the jurisdictions in which the various holders of
EBIC Common Stock reside.
Certain aspects of the Merger will also require notifications to, and/or
approvals from, certain other United States (state and federal) authorities
and certain authorities in England, Canada, Japan and Hong Kong. The indirect
change of control of EBIC's U.K. subsidiary, EBFSL, to be effected by the
Merger requires prior notification to, and the consent of, the SFA. Such
notification was made on April 17, 1996. EBIC has no reason to believe that
the SFA's consent will not be forthcoming, although the time period between
filing and receipt thereof can be as long as two to three months. In the case
of EBIC's subsidiary, Euro Brokers International Ltd., the Merger requires
prior notification to The Bank of England. Such notification was also made on
April 17, 1996. Prior notification is also required in connection with the
regulation of Euro Brokers Canada Ltd. by the Ontario Securities Commission,
which notification was provided on March 15, 1996.
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As a matter of regulation, certain other notifications are only required
subsequent to the consummation of the Merger, although, as a matter of
protocol, EBIC expects to make most of such notifications prior to the
Effective Time. Although EBIC has already informed the NASD, The New York
Cotton Exchange and the NFA of the indirect ownership changes with respect to
EBIC's U.S. broker-dealer subsidiary, Euro Brokers Maxcor Inc., that will be
effected by the Merger, formal subsequent notification and filing of amended
forms is also required and is expected to be made immediately following the
Effective Time. Subsequent notification of the indirect ownership changes
will also be provided to the appropriate regulators in Tokyo and Hong Kong
with respect to EBIC's operations in these locales. Other regulators or
self-regulatory organizations receiving subsequent notifications are likely
to include the Director General of Fair Trading (U.K.), the Hong Kong
Association of Banks and Market Practices Committee and the Hong Kong Foreign
Exchange and Deposit Brokers' Association.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger to holders of EBIC Common Stock. The summary does
not address all aspects of federal income taxation that may be relevant to
particular stockholders and thus, for example, may not be applicable to
stockholders who are not citizens or residents of the United States or
stockholders who are employees and who acquired their stock pursuant to the
exercise of options or as compensation; nor does this summary address the
effect of any applicable foreign, state, local or other tax laws. The
discussion assumes that each holder of EBIC Common Stock holds such stock as
a capital asset within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code"). STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE PRECISE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE PROPOSED TRANSACTIONS.
Exchange of EBIC Common Stock for FSAC Common Stock, Merger Warrants and
Cash
Each holder of EBIC Common Stock that does not exercise dissenter's rights
under Section 262 will receive FSAC Common Stock, Merger Warrants and cash
pursuant to the Merger. EBIC's counsel, Reboul MacMurray, is of the opinion
that: (i) the Merger will be treated as a taxable transaction for federal
income tax purposes; (ii) each holder of shares of EBIC Common Stock should
recognize capital gain or loss equal to the difference between the amount
realized by such stockholder and such stockholder's aggregate tax basis in
the shares of EBIC Common Stock surrendered; (iii) such amount realized will
equal the sum of the amount of cash plus the fair market value of the shares
of FSAC Common Stock and the fair market value of the Merger Warrants
received by such stockholder; (iv) such stockholder's gain or loss will be
long-term capital gain or loss if, as of the Effective Time, such stockholder
held the surrendered shares of EBIC Common Stock for more than one year; (v)
such stockholder's initial tax basis in the shares of FSAC Common Stock and
the Merger Warrants received will equal the fair market value of such shares
or warrants, respectively, as of the Effective Time; and (vi) such
stockholder's holding period for the shares of FSAC Common Stock and the
Merger Warrants received will commence as of the day following the date on
which the Effective Time occurs.
Reboul MacMurray has advised EBIC that a holder of EBIC Common Stock that
owns more than one "block" of shares of EBIC Common Stock (i.e., shares of
EBIC Common Stock acquired at the same time in a single transaction) must
determine its gain or loss separately for each block of shares, and that, as
a general matter, the amount of Merger Consideration received must be
allocated ratably among the blocks in the proportion that the number of
shares of EBIC Common Stock in a particular block bears to the total number
of shares of EBIC Common Stock held by such stockholder.
Dissenting Stockholders of EBIC
Although not covered by Reboul MacMurray's opinion due to the lack of
definitive authority, a holder of EBIC Common Stock who perfects his or her
dissenter's rights under Section 262 will likely recognize capital gain or
loss at the Effective Time equal to the difference between the amount
realized by such stockholder and such stockholder's adjusted tax basis in his
or her EBIC Common Stock. For this purpose, the amount realized generally
should equal the fair market value per share of EBIC Common
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Stock at the Effective Time. Gain or loss with respect to blocks of shares
should be determined in the manner described above. See "THE MERGER --EBIC
Stockholders' Rights of Appraisal."
Backup Withholding and Information Reporting
Reboul MacMurray has provided EBIC with the following advice regarding
back-up withholding and information reporting.
In general, information reporting requirements will apply to the amount
received by EBIC stockholders in the Merger if the amount received
constitutes "reportable payments." Federal income tax law requires that a
stockholder receiving the Merger Consideration must provide the Exchange
Agent (as payor) with such stockholder's correct taxpayer identification
number ("TIN") which, in the case of a stockholder who is an individual, is
his or her social security number, and certain other information, or
otherwise establish a basis for exemption from backup withholding. Exempt
stockholders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and information
reporting requirements.
If the Exchange Agent is not provided with the correct TIN or an adequate
basis for exemption, the stockholder may be subject to a penalty imposed by
the Internal Revenue Service (the "IRS") and the amount received by the
stockholder in the Merger may be subject to a 31% backup withholding tax. If
withholding results in an overpayment of taxes, a refund or credit may be
obtained, provided the required information is provided to the IRS.
To prevent backup withholding, each stockholder must complete the
Substitute Form W-9 that will be provided with the letter of transmittal for
exchanging such stockholder's stock certificates and either (i) provide the
stockholder's correct taxpayer identification number and certain other
information under penalties of perjury or (ii) provide an adequate basis for
exemption.
THE FOREGOING IS A SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND MAY NOT BE APPLICABLE TO ALL STOCKHOLDERS. ACCORDINGLY,
EACH HOLDER OF EBIC COMMON STOCK SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES TO SUCH HOLDER OF THE MERGER.
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, the Merger will be
accounted for as a recapitalization of EBIC, with the issuance of shares by
EBIC for the net assets of FSAC, consisting primarily of cash. Since FSAC is
a SPAC(Registered Trademark) with no business operations other than the
search for a suitable Target Business, its assets will be recorded in the
balance sheet of the combined company at book value. The unaudited pro forma
financial information contained in this Proxy Statement/Prospectus has been
prepared on this basis.
RESALES OF FSAC SECURITIES
The shares of FSAC Common Stock and the Merger Warrants issued pursuant to
the Merger will be freely transferable under the Securities Act, except for
shares issued to any stockholder who may be deemed to be an "affiliate" of
EBIC for purposes of Rule 145 under the Securities Act as of the date of the
EBIC Special Meeting. Affiliates are persons that directly or indirectly
control, are controlled by, or are under common control with, EBIC. For these
purposes, WCAS and the directors and certain officers of EBIC will be deemed
to be affiliates.
Subject to the restrictions of the Security Transfer Agreement (See "THE
MERGER AGREEMENT -- Certain Related Agreements -- Security Transfer
Agreement"), Rule 145 affiliates may generally offer and sell shares of FSAC
Common Stock and FSAC Warrants received in the Merger as long as: (i) FSAC
has filed with the Commission all reports required to be filed pursuant to
Section 13 of the Exchange Act during the 12 months preceding the sale, (ii)
the number of shares of FSAC Common Stock or FSAC Warrants sold by each such
affiliate within any three-month period does not exceed the greater of (x) 1%
of the outstanding shares of FSAC Common Stock or FSAC Warrants, as the case
may
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be, (y) the average weekly reported volume of trading in shares of FSAC
Common Stock or FSAC Warrants, as the case may be, on all national securities
exchanges and/or reported through the automated quotation system of a
registered securities association during the four calendar weeks preceding
the filing of the notice required by Rule 144(h) under the Securities Act, or
if no such notice is required, the date of execution of the transaction
directly with a market maker, or (z) the average weekly volume of trading in
such securities reported through the consolidated transaction reporting
system contemplated by Rule 11Aa3-1 under the Exchange Act during the
four-week period specified above, (iii) all shares of FSAC Common Stock or
FSAC Warrants, as the case may be, are sold in brokerage transactions and no
orders are solicited in connection with the sale and (iv) the broker does not
receive more than the usual and customary broker's commission in connection
with the sale.
In addition, affiliates who are parties to the Registration Rights
Agreement, subject to the terms and conditions of the Registration Rights
Agreement (see "THE MERGER AGREEMENT -- Certain Related Agreements --
Registration Rights Agreement"), may sell shares of FSAC Common Stock
(including shares received upon exchange or exercise of their FSAC Warrants)
under a current registration statement of FSAC effected pursuant to the
demand registration rights provided for in the Registration Rights Agreement
or, pursuant to the ancillary registration rights provided for in the
Registration Rights Agreement, under certain other current registration
statements of FSAC effected for other purposes, if any.
Regardless of whether the holder is an affiliate of EBIC or FSAC, the
terms of the FSAC Warrants (including the Merger Warrants) do not permit FSAC
to issue shares of FSAC Common Stock upon their exercise unless there is then
a current prospectus relating to such shares of FSAC Common Stock under an
effective registration statement filed with the Commission, and only if such
shares of FSAC Common Stock are qualified for sale or exempt from
qualification under applicable state securities laws of the jurisdictions in
which such holder resides. Although the Registration Statement on Form S-1
filed by FSAC with the Commission in connection with the IPO covers the
shares of FSAC Common Stock issuable upon exercise of the FSAC Warrants sold
in the IPO, and the Registration Statement covers the Warrant Shares issuable
upon exercise of the Merger Warrants, neither will necessarily be current
following consummation of the Merger unless FSAC prepares and files a new or
amended registration statement containing an updated prospectus. Although
FSAC is obligated to use its best efforts to meet the above requirements for
issuance of shares of FSAC Common Stock upon FSAC Warrants becoming
exercisable, there can be no assurance that FSAC will be able to do so.
ABSENCE OF FAIRNESS OPINION
Neither EBIC nor FSAC has sought or obtained an opinion from an investment
banker regarding the fairness of the Merger to the stockholders of either
company. It is a condition of the IPO prospectus that a Target Business have
a fair market value, as determined by the FSAC Board, of at least 80% of the
net assets of FSAC. FSAC is not required to obtain the opinion of an
investment banking firm as to the fair market value of the Target Business
unless the FSAC board determines that the financial statements of the Target
Business do not clearly indicate that such Target Business has a sufficient
fair market value. The FSAC board has determined that EBIC has and, at the
time of the Merger, will have a fair market value of at least 80% of FSAC's
net assets and that an opinion of an investment banking firm is not required.
In arriving at this determination, the Board reviewed and relied upon the
audited historical financial statements of EBIC for each year in the two-year
period ended December 31, 1994 and the unaudited historical financial
statements of EBIC for the year ended December 31, 1995 and the month ended
January 31, 1996. The Board also took into account that the structure of the
Merger, and in particular the principles of having EBIC stockholders receive
a post-Merger 50% interest in FSAC and adjusting the Per Share Cash
Consideration to reflect the difference (as adjusted) between the respective
net worths of FSAC and EBIC at the Closing, permits the Merger to be viewed
as a recapitalization of EBIC in which the fair market value of EBIC at the
time of the Merger is being reduced (through the payment of the Per Share
Cash Consideration) to 100% of the fair market value of FSAC. The Board did
not determine a specific fair market value for EBIC, but believed that in the
financial services industry (and particularly in the case of EBIC, given the
large cash component of its balance sheet) a company's book value serves as a
reasonable indicator of fair market value. In this regard, the Board also
noted that
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EBIC's unaudited stockholders' equity at December 31, 1995 was in excess of
$32 million, as compared to FSAC's net assets at such time of approximately
$15.7 million. The Board also reviewed other financial results and
measurements of EBIC at various times and over various periods that it
believed to be relevant, including EBIC's commission income, pre-tax income,
net income, cash flows and return on revenues.
EBIC STOCKHOLDERS' RIGHTS OF APPRAISAL
Under Section 262, EBIC stockholders who do not wish to accept the Merger
Consideration in exchange for their shares pursuant to the terms of the
Merger Agreement have the right to seek appraisal of the "fair value" of
their shares of EBIC Common Stock in the Delaware Court of Chancery. Under
Section 262, where a merger in connection with which stockholders will have
appraisal rights is to be submitted for approval at a meeting of such
stockholders, the corporation must notify, not less than 20 days prior to the
meeting, each of its stockholders entitled to appraisal rights that such
appraisal rights are available and include in such notice a copy of Section
262. This Proxy Statement/Prospectus constitutes such notice to the
stockholders of EBIC and Section 262 is set forth in its entirety as Annex
III to this Proxy Statement/Prospectus. The following discussion is not a
complete statement of Delaware law relating to appraisal rights and is
qualified in its entirety by reference to Annex III. THIS DISCUSSION AND
ANNEX III SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER OF EBIC COMMON STOCK WHO
WISHES EITHER TO EXERCISE STATUTORY APPRAISAL RIGHTS OR TO PRESERVE THE RIGHT
TO DO SO, AS FAILURE TO COMPLY WITH THE STATUTORY PROCEDURES WILL RESULT IN
THE LOSS OF APPRAISAL RIGHTS.
Stockholders of EBIC who desire to exercise their appraisal rights must
satisfy all of the following conditions. A written demand for appraisal of
such shares must be delivered to the Secretary of EBIC before the vote on the
adoption of the Merger Agreement at the EBIC Special Meeting on , 1996. The
address of the Secretary of EBIC is Two World Trade Center, Suite 8400, New
York, New York 10048, Attention: Secretary. This written demand for appraisal
of shares of EBIC Common Stock must be in addition to and separate from any
proxy or vote abstaining from or against the approval of the Merger
Agreement. NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, NOR FAILING TO
VOTE ON THE MERGER AGREEMENT WILL CONSTITUTE A SUFFICIENT WRITTEN DEMAND FOR
APPRAISAL WITHIN THE MEANING OF SECTION 262. The written demand for appraisal
of shares of EBIC Common Stock will be sufficient if it reasonably informs
EBIC of the identity of the stockholder and the intention of such stockholder
to demand appraisal of his or her shares.
Stockholders of EBIC electing to exercise their appraisal rights under
Section 262 must also either vote against or abstain from voting on adoption
of the Merger Agreement. IF A STOCKHOLDER OF EBIC RETURNS A SIGNED PROXY BUT
DOES NOT SPECIFY A VOTE AGAINST THE ADOPTION OF THE MERGER AGREEMENT OR A
DIRECTION TO ABSTAIN, THE PROXY WILL BE VOTED FOR THE ADOPTION OF THE MERGER
AGREEMENT, WHICH WILL HAVE THE EFFECT OF WAIVING SUCH STOCKHOLDER'S APPRAISAL
RIGHTS.
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the
certificate or certificates evidencing the shares of EBIC Common Stock held
by such stockholder. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, such demand must be
executed by the fiduciary. If the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, such demand must be
executed by all record owners. An authorized agent, including an agent for
two or more record owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the owner.
A record owner, such as a broker, who holds shares of EBIC Common Stock as
a nominee for others, may exercise appraisal rights with respect to the
shares held for all or less than all beneficial owners of shares as to which
such person is the record owner. In such case the written demand must set
forth the number of shares of EBIC Common Stock covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all shares of EBIC Common Stock outstanding
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in the name of such record owner. Beneficial owners who are not record owners
and who intend to exercise appraisal rights should instruct their record
owners to comply strictly with the statutory requirements with respect to the
exercise of appraisal rights before the date of the EBIC Special Meeting.
Within 10 days after the Effective Time, the Surviving Corporation must
send a notice as to the effectiveness of the Merger to each person who has
satisfied the foregoing provisions of Section 262. Within 120 days after the
Effective Time, but not thereafter, either EBIC, or any stockholder of EBIC
who has satisfied the foregoing requirements of Section 262 and who has held
his or her shares continuously since making the demand for appraisal
described above, may file a petition in the Delaware Court of Chancery, with
a copy served on the Surviving Corporation in the case of a petition filed by
a stockholder, demanding a determination of the fair value of the shares of
EBIC Common Stock of all stockholders entitled to appraisal. Subject to
withdrawals as described in the next sentence, any stockholder who has
complied with the foregoing requirements, upon written request, will be
entitled to receive from EBIC a statement setting forth the aggregate number
of shares of EBIC Common Stock not voted in favor of the Merger and with
respect to which demands for appraisal have been received and the aggregate
number of holders of such shares. Notwithstanding the foregoing, during the
first 60 days after the Effective Time any stockholder has the right to
withdraw his or her demand for appraisal and accept the per share Merger
Consideration. THE SURVIVING CORPORATION WILL NOT FILE A PETITION WITH
RESPECT TO THE APPRAISAL OF THE VALUE OF THE SHARES OF EBIC COMMON STOCK.
ACCORDINGLY, IT IS THE OBLIGATION OF STOCKHOLDERS TO INITIATE ALL NECESSARY
ACTIONS TO PERFECT THEIR APPRAISAL RIGHTS WITHIN THE TIME PERIODS PRESCRIBED
IN SECTION 262.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders
entitled to appraisal rights and will appraise the "fair value" of their
shares of EBIC Common Stock, exclusive of any element of value arising from
the accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
The Chancery Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their stock certificates to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings. If any stockholder
fails to comply with such direction, the Delaware Court of Chancery may
dismiss the proceedings as to such stockholder. Stockholders considering
seeking appraisal should be aware that the fair value of their shares as
determined under Section 262 could be more than, the same as or less than the
Merger Consideration they would receive pursuant to the Merger Agreement if
they did not seek appraisal of their shares. Any judicial determination of
the "fair value" of the shares of EBIC Common Stock could be based on
numerous considerations, including, but not limited to, the fair market value
of the shares prior to the Merger and the net asset value and earnings value
of EBIC. The costs of the action may be determined by the Chancery Court and
imposed upon the parties, including the Surviving Corporation, as the court
deems equitable. The Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all the shares entitled to appraisal.
Any EBIC stockholder who has duly demanded an appraisal remedy in
compliance with Section 262 will not, after the Effective Time, be entitled
to vote the shares subject to such demand for any purpose or be entitled to
the payment of dividends or other distributions on those shares, except for
dividends or other distributions payable to stockholders of record as of a
date prior to the Effective Time. For a discussion of certain federal income
tax consequences to a stockholder who perfects appraisal rights, see "THE
MERGER -- Certain Federal Income Tax Consequences -- Dissenting Stockholders
of EBIC."
If no petition for appraisal is filed within 120 days after the Effective
Time or if a stockholder delivers to EBIC written withdrawal of his or her
demand for an appraisal, either within 60 days after the Effective Time or
thereafter with the written approval of EBIC, then the right of such
stockholder to an appraisal will cease, and the shares of EBIC Common Stock
held by such holder will be converted into the right to receive the Merger
Consideration, without interest, in accordance with the Merger Agreement.
Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court
of Chancery will be dismissed as to any EBIC stockholder without the approval
of the Chancery Court, and such approval may be conditioned upon such terms
as the Chancery Court deems just.
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FSAC REDEMPTION RIGHTS
In accordance with FSAC's Certificate of Incorporation and the procedures
set out below, a holder of FSAC Public Shares who votes against the proposal
to approve and adopt the Merger Agreement has the right to demand redemption
of such shares for cash if the Merger is approved and consummated. However,
if 20% or more of the FSAC Public Shares, or 716,667 shares, are voted
against the Merger Agreement (and have Redemption Rights duly demanded with
respect to them), FSAC, pursuant to its Certificate of Incorporation, is not
permitted to consummate the Merger. Moreover, it is a condition to EBIC's
obligation to consummate the Merger that the number of Redemption Shares not
constitute more than 10% of the number of shares of FSAC Common Stock
outstanding immediately prior to the Merger (giving effect to the Unit
Purchase Option Exchange, if any). Accordingly, if 441,667 (or, if the Unit
Purchase Option Exchange is consummated, 464,167) FSAC Public Shares are
voted against the Merger Agreement (and have Redemption Rights duly demanded
with respect to them), EBIC is not obligated to consummate the Merger.
Notwithstanding the foregoing, any one or more of the current stockholders of
FSAC has the right under the Merger Agreement, but not the obligation, to
satisfy any non-fulfillment of such 10% condition by arranging within ten
days to pay FSAC the amount necessary to pay the aggregate redemption price
for the Redemption Shares in excess of such 10% threshold (the "Excess
Redemption Shares"), up to the maximum 20% of the FSAC Public Shares
threshold permitted by FSAC's Certificate of Incorporation, and FSAC shall
thereafter issue to such stockholder or stockholders a number of shares of
FSAC Common Stock equal to the number of such Excess Redemption Shares.
The per share redemption price will be equal to approximately $5.30,
calculated by dividing the amount in the Trust as of the FSAC Record Date
including interest thereon, by the number of FSAC Public Shares (the
"Redemption Price"). The Initial FSAC Stockholders do not have any Redemption
Rights with respect to their Pre-IPO Shares.
A holder of FSAC Public Shares desiring to exercise his or her Redemption
Rights (a "Redeeming Stockholder") must both (i) vote such shares, in person
or by properly executed proxy, "AGAINST" the proposal at the FSAC Special
Meeting to approve and adopt the Merger Agreement and (ii) deliver to FSAC
not later than 5:00 p.m., local time, on the day of the FSAC Special Meeting,
both (x) a written demand for redemption of such shares and (y) certificates
representing such shares, under cover of a properly completed and executed
transmittal letter. Delivery of a proxy directing a vote against the proposal
to approve and adopt the Merger Agreement will not constitute a sufficient
demand for redemption. The failure of a Redeeming Stockholder to satisfy each
of these requirements will terminate the Redeeming Stockholder's Redemption
Rights. Payments in respect of any Redemption Shares for which Redemption
Rights have been duly demanded will only be made if and when the Merger is
approved and consummated.
Redemption Rights only apply to the initial Business Combination effected
by FSAC. If the Merger is consummated, FSAC stockholders will not have
Redemption Rights in connection with future FSAC business combinations or
transactions, if any.
THE MERGER AGREEMENT
The discussion in this Proxy Statement/Prospectus of the Merger Agreement,
and the description of its principal terms, is subject to and qualified in
its entirety by reference to the full text of the Merger Agreement, a copy of
which is attached to this Proxy Statement/Prospectus as Annex I and
incorporated herein by reference. For the purposes of this discussion and to
ensure consistency with definitions used in the Merger Agreement, EBIC is
sometimes referred to herein as the "Company."
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
FSAC and EBIC relating to, among other things: (i) the due organization,
existence and good standing of, and similar corporate matters with respect
to, each party and its subsidiaries, (ii) each party's capital structure,
including outstanding rights, options and other interests with respect to its
capital stock, (iii) the authorization, execution, delivery, performance by
each party and enforceability of the Merger Agreement and the
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transactions contemplated thereby, (iv) the absence of any conflict with the
Certificate of Incorporation or By-laws of each party and its subsidiaries,
(v) the consents necessary under certain contracts and required governmental
or regulatory authorizations, consents or approvals, (vi) compliance with
applicable law, (vii) the financial statements of each party, and the absence
of undisclosed liabilities, (viii) certain matters relating to commissions
receivable of EBIC, (ix) documents filed or to be filed with applicable
regulatory authorities and the accuracy of the information contained therein,
(x) the conduct of business in the ordinary course and the absence of certain
changes or events having a material adverse effect, (xi) the absence of
certain litigations, (xii) the qualification, operation and liability under
certain employee benefit plans of EBIC, (xiii) the termination of certain
existing agreements to which EBIC is a party, and the release and termination
of certain security interests relating thereto, (xiv) certain tax matters and
the payment of taxes, (xv) the identification of affiliate transactions,
(xvi) the absence of certain unlawful business practices and transactions
relating to EBIC or any of its subsidiaries, directors, officers, agents or
employees, (xvii) compliance by EBIC with applicable environmental laws,
(xviii) the ownership or leasehold of real and personal property by EBIC and
its subsidiaries, (xix) ownership or leasehold of material properties or
assets by FSAC or Merger Sub, (xx) the condition of certain assets of EBIC
and its subsidiaries, (xxi) the adequacy of insurance coverage by EBIC and
its subsidiaries, (xxii) ownership of intellectual property rights by EBIC
and its subsidiaries, (xxiii) the availability of the funds in the Trust for
payment of the Merger Consideration, (xxiv) the stockholder votes required to
approve the Merger Agreement and (xxv) the absence of any broker or finder's
fees.
CONDUCT OF BUSINESS OF EBIC PENDING THE MERGER
EBIC has agreed that prior to the Effective Time, unless otherwise
consented to by FSAC in writing, EBIC will, and will cause its Subsidiaries
(as defined in the Merger Agreement) (i) to conduct its business only in the
ordinary and usual course consistent with past practice and (ii) to preserve
intact its business organizations, retain the services of its respective
officers and key employees and preserve the goodwill of those with which it
has business relationships.
In addition, EBIC will not, and will not permit any of its Subsidiaries,
unless otherwise consented to by FSAC in writing, to (i)(A) amend its
charter, by-laws or other organizational documents, (B) split, combine or
reclassify any shares of its outstanding capital stock, (C) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property (with certain exceptions for wholly-owned Subsidiaries) or (D)
directly or indirectly redeem or otherwise acquire any shares of its capital
stock or shares of the capital stock of any of its Subsidiaries; (ii)(A)
issue or sell any shares 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, (B) merge or consolidate with another
entity (except as specifically permitted), (C) acquire or purchase an equity
interest in or a substantial portion of the assets of another corporation,
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, commitment
or transaction, (D) sell or otherwise dispose of any of its assets outside
the ordinary and usual course of business and consistent with past practices,
(E) incur, discharge or prepay any material lien, any material indebtedness
or any other material liabilities other than in the ordinary course of
business and consistent with past practices, (F) assume or otherwise become
liable or responsible for the obligations of any other person other than a
Subsidiary of EBIC in the ordinary course of business and consistent with
past practices, (G) make any loans, advances or capital contributions to, or
investments in, any other person, other than to a Subsidiary of EBIC or other
than in the ordinary course of business and consistent with past practice
over the twelve-month period immediately prior to March 8, 1996, (H) except
after reasonable advance consultation with FSAC (although approval of FSAC is
not required), authorize or make capital expenditures in excess of $100,000
individually or $250,000 in the aggregate, (I) permit any insurance policy
naming EBIC or any of its Subsidiaries as a beneficiary or a loss payee to be
cancelled or terminated other than in the ordinary course of business or (J)
enter into any contract or arrangement providing for a matter not permitted
under this clause (ii); (iii)(A) 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 EBIC will be permitted to enter into
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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 compensation; provided, however, that EBIC will not enter into any
such employment agreement without reasonable advance consultation with FSAC
(although approval by FSAC is not required) if such employment agreement
provides for an annual base salary equal to or greater than $200,000, (B)
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 (C) take any
action to fund or in any other way secure (except after reasonable advance
consultation with FSAC (although approval by FSAC is not required)) or to
accelerate or otherwise remove restrictions with respect to, the payment of
compensation or benefits under any employee plan, agreement, contract,
arrangement or other EBIC plan; or (iv) take any action with respect to, or
make any material change in, its accounting or tax policies or procedures.
FSAC has agreed that prior to the Effective Time, unless otherwise
consented to by EBIC in writing, FSAC will (i) not conduct any business,
incur any material liabilities or enter into any contracts, other than in
each case in connection with its cash investments, Trust management, general
office administration, preparation for and consummation of the transactions
contemplated by the Merger Agreement 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; (ii) 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; (iii)
not (A) amend its Certificate of Incorporation (other than pursuant to the
Charter Amendments) or By-laws, (B) split, combine or reclassify any shares
of its outstanding capital stock or (C) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property; (iv) not
issue or sell any shares of, or rights or securities of any kind to acquire
or convertible into any shares of, its capital stock, except as permitted by
the Merger Agreement; and (v) not take any action with respect to, or make
any material change in, its accounting or tax policies or procedures. Prior
to the Effective Time, Merger Sub will not engage in any activities of any
nature except as provided in or contemplated by the Merger Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of FSAC, Merger Sub and EBIC to consummate the Merger are
subject to the satisfaction or waiver of various conditions, including (i)
the effectiveness of the Registration Statement, the absence of any stop
order suspending the effectiveness thereof and any proceedings for that
purpose initiated by the Commission, and the receipt by FSAC of all state
securities law permits and other authorizations necessary to issue securities
pursuant to the Merger Agreement, (ii) the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the requisite
holders of FSAC Common Stock and EBIC Common Stock under applicable law and
Redemption Rights being exercised with respect to less than 20% in interest
of the FSAC Public Shares, (iii) no governmental entity or federal or state
court of competent jurisdiction having enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, judgment, decree,
injunction or other order (whether temporary, preliminary or permanent) which
is in effect and which materially restricts, prevents or prohibits
consummation of the Merger or consummation of the transactions contemplated
thereby, (iv) the applicable waiting period under the HSR Act having expired
or been terminated and the absence of certain actions challenging or
enjoining the consummation of the Merger, (v) the receipt or filing, as the
case may be, of certain authorizations, consents, waivers, orders or
declarations and (vi) approval of the Charter Amendments by the requisite
vote of FSAC stockholders and Additional Common Stock Amendment having become
effective.
The obligations of FSAC and Merger Sub to effect the Merger and the
transactions contemplated by the Merger Agreement are also subject to the
following conditions: (i) the aggregate effect of all inaccuracies in the
representations and warranties of EBIC contained in the Merger Agreement and
of WCAS contained in the Majority Stockholders' Agreement not having a
material adverse effect on EBIC, (ii) the representations and warranties of
EBIC set forth in the Merger Agreement and of WCAS set forth in the Majority
Stockholders Agreement that have a materiality qualification being true and
correct and the representations and warranties that do not have such a
qualification being true and correct in all
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material respects, in each case as of March 8, 1996 and, except in certain
circumstances, as of the Effective Time, and FSAC having received certain
certificates to that effect, (iii) EBIC and its Subsidiaries and WCAS having
performed in all material respects all obligations required by the Merger
Agreement and the Majority Stockholders' Agreement to be performed at or
prior to the Effective Time, and FSAC having received certain certificates to
that effect, (iv) the aggregate number of Dissenting Shares not exceeding 10%
of the number of Outstanding EBIC Shares, (v) EBIC's estimated net worth not
being less than $30 million and EBIC's estimated cash and cash equivalents
(determined in accordance with the Merger Agreement) not being less than $15
million, (vi) EBIC, and certain members of EBIC management, having executed
and delivered certain agreements and performed certain obligations
thereunder, (vii) FSAC having received the opinion of Reboul MacMurray,
counsel to EBIC, dated the day of the Effective Time, addressed to FSAC and
Merger Sub and reasonably acceptable to FSAC, addressing certain matters set
forth in the Merger Agreement, (viii) FSAC having received from each person
who has been identified by EBIC to FSAC as an "affiliate" (as defined in the
Merger Agreement), a signed agreement to the effect as set forth in the
Merger Agreement, (ix) the U.K. Subsidiaries of EBIC being in compliance with
certain rules of their Consolidating Supervisor (as used in the Merger
Agreement) and such rules as applied not showing any regulatory capital
deficit (subject to certain waivers or other arrangements), and (x) FSAC
having received a certificate from EBIC to the effect that all outstanding
shares of capital stock of EBIC's Subsidiaries are beneficially owned,
directly or indirectly, by EBIC and held free and clear of liens, other than
as disclosed.
The obligations of EBIC to effect the Merger and the other transactions
contemplated by the Merger Agreement are also subject to the following
conditions: (i) the aggregate effect of all inaccuracies in the
representations and warranties of FSAC and Merger Sub contained in the Merger
Agreement not having a material adverse effect on FSAC, (ii) the
representations and warranties of FSAC and Merger Sub set forth in the Merger
Agreement that have a materiality qualification being true and correct and
the representations and warranties that do not have such a qualification
being true and correct in all material respects as of March 8, 1996 and,
except in certain circumstances, as of the Effective Time, and EBIC having
received a certificate to that effect, (iii) FSAC and Merger Sub having
performed in all material respects all obligations required by the Merger
Agreement to be performed at or prior to the Effective Time and EBIC having
received certain certificates to that effect, (iv) EBIC having received the
opinion of Skadden Arps, special counsel to FSAC and Merger Sub, dated as of
the Effective Time, addressed to EBIC and reasonably acceptable to EBIC,
addressing certain matters set forth in the Merger Agreement, (v) FSAC having
delivered to EBIC a certificate of the trustee of the Trust (or other
satisfactory evidence) to the effect that the cash proceeds of the Trust as
of the Closing Date (as defined in the Merger Agreement) (disregarding
amounts payable to Redeeming Stockholders) will be at least $18 million, (vi)
the number of Redemption Shares (subject to certain cure rights of FSAC) not
exceeding 10% of the number of shares of FSAC Common Stock outstanding at the
time of the Merger (giving effect for these purposes to the Unit Purchase
Option Exchange, if any) and (vii) FSAC, Merger Sub, Gilbert Scharf and
Michael Scharf having executed and delivered certain agreements and performed
certain obligations thereunder.
NO SOLICITATION
The Merger Agreement provides that prior to the Effective Time neither
EBIC, nor 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 any Acquisition Transaction (as defined in
the Merger Agreement), or negotiate, explore or otherwise engage in
substantive discussions with any person with respect to any Acquisition
Transaction. EBIC has an obligation to notify FSAC immediately of any
inquiries or proposals (or desires to make a proposal) received by (or
indicated to) EBIC or its representatives with respect to an Acquisition
Transaction. The Merger Agreement further provides that prior to the
Effective Time neither FSAC, nor any of 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 with respect to any business acquisition by FSAC
(other than an acquisition that would not qualify as an initial acquisition
of a Target Business).
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CERTAIN OTHER COVENANTS
The Merger Agreement contains various covenants of FSAC and EBIC relating
to, among other things: (i) each party using its reasonable best efforts to
have the Registration Statement declared effective, (ii) each party convening
a meeting of its stockholders and recommending approval and adoption of the
Merger Agreement by such stockholders, (iii) each party using its reasonable
best efforts to consummate and make effective the Merger and other
transactions contemplated by the Merger Agreement, (iv) FSAC using its
reasonable best efforts to solicit FSAC stockholder approval for the Charter
Amendments and the FSAC Option Plan, (v) the Unit Purchase Option Exchange,
(vi) FSAC using its reasonable best efforts to list FSAC Common Stock and
FSAC Warrants on the Nasdaq National Market, (vii) the Exchange Offer, (viii)
the making of public announcements with respect to the Merger, (ix) the
repayment of loans made by EBIC to employees to facilitate EBIC Common Stock
purchases, (x) the post-Merger board composition and managements of FSAC and
EBIC and (xi) FSAC's obligations with respect to excess Redemption Shares.
AMENDMENT AND WAIVER
The Merger Agreement may be amended, modified, or supplemented by written
agreement of FSAC and EBIC; provided, that after approval and adoption of the
Merger Agreement by the stockholders of FSAC or EBIC, no such amendment,
modification or supplementation can be made which under applicable law
requires the approval of such stockholders, without the further approval of
such stockholders.
At any time prior to the Effective Time, FSAC and Merger Sub, on the one
hand, or EBIC, 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 representations and warranties of the other contained in
the Merger Agreement or in any document delivered pursuant thereto and (iii)
waive compliance by the other with any of the agreements or conditions
contained in the Merger Agreement which legally may be waived.
DIRECTORS' INDEMNIFICATION
All rights to indemnification, advancement of litigation expenses and
limitation of personal liability existing in favor of the directors and
officers of EBIC under the provisions existing on March 8, 1996 in EBIC's
Certificate of Incorporation or By-laws will, with respect to any matter
existing or occurring at or prior to the Effective Time (including the
transactions contemplated by the Merger Agreement), survive the Effective
Time, and, as of the Effective Time, the Surviving Corporation will assume
all obligations of EBIC in respect thereof as to any claim or claims asserted
prior to or within a six-year period immediately after the Effective Time.
Pursuant to the By-laws of the Surviving Corporation, the Surviving
Corporation will (i) indemnify any person who is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he is or was a director or officer of
the Surviving Corporation against expenses (including attorneys' fees),
judgments, fines and settlement payments actually incurred if such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of the Surviving Corporation and, with
respect to any criminal proceeding, had no reasonable cause to believe such
person's conduct was unlawful, and (ii) pay in advance of the final
disposition of such action, suit or proceeding the expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Surviving
Corporation as authorized by the By-laws of the Surviving Corporation.
MERGER AGREEMENT INDEMNIFICATION
All representations and warranties made by EBIC in the Merger Agreement
will survive the Effective Time and will terminate at the close of business
on the day which is 12 months after the Effective
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Time. The covenants and agreements of the parties to the Merger Agreement
(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).
From and after the Effective Time, to the extent provided in the Merger
Agreement, FSAC, including any person or entity that was a stockholder,
director, officer, employee or agent of FSAC or Merger Sub as of immediately
prior to the Effective Time (FSAC and such other persons and entities defined
as the "Indemnified Parties") will be entitled to be indemnified and held
harmless from and against any Damages (as defined in the Merger Agreement)
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 EBIC or WCAS contained in the
Merger Agreement or certain related agreements; or (ii) any breach of any
covenant or agreement of EBIC or WCAS contained in the Merger Agreement or
certain related agreements.
The foregoing indemnification rights of FSAC are limited to claims made
within the first 12 months after the Effective Time. Indemnified Parties are
entitled to seek Damages only when the aggregate Damages for all claims
exceeds $100,000, provided, however, that once such threshold is attained,
the Damages sought may include the initial $100,000. Total Damages are
limited to the total amount of, and are only payable through releases of, the
Escrow Shares. The Escrow Shares will consist of 10%, or 441,666 shares
(464,167 shares if the Unit Purchase Option Exchange is consummated), of the
FSAC Common Stock to be issued in the Merger. Based on the high bid price for
FSAC Common Stock on June 21, 1996, the Escrow Shares (assuming consummation
of the Unit Purchase Option Exchange) have an indicated aggregate value of
approximately $2.35 million.
TERMINATION
The Merger Agreement can be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of EBIC or FSAC,
by (i) mutual consent of FSAC and EBIC; (ii) either party, if the Merger is
not consummated before August 31, 1996 (unless such failure is due to a
breach of the Merger Agreement by the party seeking termination); (iii)
either party, if there is any order which is final and nonappealable
preventing the consummation of the Merger; (iv) by FSAC, if (A) there has
been a breach of any representations or warranties of EBIC in the Merger
Agreement or of WCAS in the Majority Stockholders' Agreement, which has a
material adverse effect on EBIC, (B) there has been a breach in any material
respect of any of the covenants or agreements in the Merger Agreement or the
Majority Stockholders' Agreement on the part of EBIC 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 EBIC or WCAS (as the
case may be), (C) the stockholders of EBIC fail to approve and adopt the
Merger Agreement or (D) the number of Dissenting Shares is more than 10% of
the Outstanding EBIC Shares; (v) by EBIC if (A) there has been a breach of
any representations or warranties of FSAC in the Merger Agreement which has a
material adverse effect on FSAC, (B) there has been a breach in any material
respect of any of the covenants or agreements in the Merger Agreement on the
part of FSAC or Merger Sub, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by EBIC
to FSAC, (C) the stockholders of FSAC fail to approve and adopt the Merger
Agreement and the issuance of FSAC Common Stock, Merger Warrants and Warrant
Shares, or Redemption Rights are exercised with respect to 20% or more in
interest of the FSAC Public Shares or (D) the number of Redemption Shares
exceeds 10% of the outstanding shares of FSAC Common Stock as of immediately
prior to the Effective Time (giving effect for these purposes to the Unit
Purchase Option Exchange, if any) and no stockholders of FSAC arrange to pay
FSAC the aggregate Redemption Price with respect to the Excess Redemption
Shares.
FEES AND EXPENSES
Under the Merger Agreement, except as described below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby, will be borne
solely and entirely by the party which has incurred such expenses; provided,
that all costs and expenses incurred in connection with (i) printing the
Registration Statement,
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this Proxy Statement/Prospectus and the Proxy Statement of FSAC to be used in
connection with the FSAC Special Meeting, (ii) the filing fees with the
Commission relating to such documents and (iii) the filing fee under the HSR
Act, will be shared equally by FSAC and EBIC.
If the Merger Agreement is terminated (i) by FSAC pursuant to clause
(iv)(A), (B) or (C) of the section above entitled "Termination" (the
"Termination Section"), or pursuant to clause (iv)(D) of the Termination
Section to the extent that the 10% threshold would not have been exceeded 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 EBIC pursuant to clause (v) of the
Termination Section at a time when FSAC is already permitted to terminate the
Merger Agreement pursuant to clause (iv)(A), (B), (C) of the Termination
Section or, as described in clause (i) of this sentence, clause (iv)(D) of
the Termination Section, then in any such case EBIC will promptly, but in no
event later than two business days after the date of such termination, pay
FSAC a termination fee of $2 million, which amount (the "Termination
Payment") will be payable in same day funds, provided that no fee will be
paid if EBIC is already permitted to terminate the Merger Agreement pursuant
to clause (v) of the Termination Section other than under the circumstances
described in clause (ii) of this sentence. Payment by EBIC of the Termination
Payment will constitute full liquidated damages and will be the sole remedy
of FSAC and Merger Sub against EBIC (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 under the Merger
Agreement, and against WCAS for any termination or breach (if there is a
termination) of any representation, warranty or covenant under the Majority
Stockholders' Agreement or the Security Transfer Agreement, provided that
FSAC will be entitled to reimbursement of its reasonable costs and expenses
incurred, if any, in enforcing its right to collect the Termination Payment.
CLOSING TRUE-UP PROCEDURES
Commencing no later than 20 business days prior to the Closing Date (as
defined in the Merger Agreement), each of FSAC and EBIC will 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 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 defined in the Merger Agreement) and a
good faith estimate of FSAC Closing Cash Equivalents (as defined in the
Merger Agreement) as derived therefrom and (y) in the case of EBIC, a
good-faith estimate of the Company's Closing Balance Sheet (as defined in the
Merger Agreement) 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 defined in the Merger Agreement), each as derived therefrom.
EBIC, in preparing the Company's Closing Balance Sheet, is obligated pursuant
to the Merger Agreement to make certain adjustments thereto (solely for such
purpose) relating to, among other things, goodwill, treatment of certain
reserves and treatment of certain notes receivable from or loans to
stockholders. If, after making good faith efforts to do so, FSAC and EBIC
have not, prior to the close of business on the business day immediately
preceding the Closing Date, agreed upon the estimates of both FSAC Closing
Cash Equivalents and the Company's Closing Defined Net Worth, and the
aggregate amount of the disagreements with respect to such estimates is in
excess of $1 million (the "Disputed Estimates"), FSAC and EBIC will
immediately refer the Disputed Estimates to an arbitrator for resolution in
accordance with certain expedited procedures. The Closing Date and certain
adjustments will be delayed (and, if implicated, the right of termination at
August 31, 1996 tolled) until a determination is made in accordance with such
procedures.
If, based on such estimates (as finally agreed or determined), the Amount
(defined in the Merger Agreement as the difference obtained by subtracting
(i) the amount of the FSAC Closing Cash Equivalents as finally determined
from (ii) the amount of the Company's Closing Defined Net Worth as finally
determined) would be in excess of $16 million (the "Estimated Aggregate Cash
Consideration"), the Estimated Aggregate Cash Consideration will be adjusted
(before the deposit of monies with the Exchange Agent, as hereinafter
defined) by increasing it by the amount of such excess. If, based on such
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estimates (as finally agreed or determined), the Amount as so calculated
would be less than the Estimated Aggregate Cash Consideration, the Estimated
Aggregate Cash Consideration will be adjusted (before the deposit of monies
with the Exchange Agent) by decreasing it by the amount of such shortfall.
As soon as practicable, but in no event later than 30 days following the
Closing Date, (i) FSAC will prepare and deliver to EBIC and the
Representatives (as defined in the Merger Agreement) a final statement of
FSAC Closing Cash Equivalents (the "FSAC Final Statement"), together with the
FSAC Closing Balance Sheet and (ii) EBIC will 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. The Merger Agreement
includes a mechanism to resolve any dispute with respect to either or both of
the Final Statements.
After the final determination of the FSAC Closing Cash Equivalents and the
Company's Closing Defined Net Worth, the parties will calculate the Amount.
If the Amount is greater than the Estimated Aggregate Cash Consideration (as
previously adjusted), FSAC will deliver to the Escrow Agent, as an addition
to the Cash Escrow Amount (as hereinafter defined), an amount of cash equal
to such excess (the "Positive Cash Adjustment"); provided, however, that in
no event will FSAC be required to pay a Positive Cash Adjustment in excess of
$2 million. If the Estimated Aggregate Cash Consideration (as previously
adjusted) is greater than the Amount, FSAC, Merger Sub and EBIC will instruct
the Escrow Agent to release to FSAC such portion of the Cash Escrow Amount as
is equal to such excess (the "Negative Cash Adjustment"), provided, however,
that in no event will FSAC be entitled to receive a payment of a Negative
Cash Adjustment in excess of $2 million.
ADJUSTMENT OF EXCHANGE RATIOS AND CASH CONSIDERATION
FSAC, by its chief executive officer, will certify to EBIC (i) 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 the Unit Purchase Option Exchange, if any
(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") and (ii) promptly following the FSAC
stockholder meeting, the aggregate number of Redemption Shares. EBIC by its
chief executive officer, will certify to FSAC on, or immediately following,
the Closing Date, the actual number of shares of EBIC Common Stock
outstanding on a fully-diluted basis as of immediately prior to the Effective
Time (the "Actual Company Stock Number").
In accordance with such certifications: (i) the Stock Exchange Ratio will
be adjusted to equal the quotient obtained by dividing (x) the difference
obtained by subtracting (A) the Redemption Shares (reduced by the number of
Excess Redemption Shares, if any, for which FSAC stockholders have arranged
to pay FSAC the aggregate Redemption Price) from (B) the Actual Outstanding
FSAC Shares, by (y) the Actual Company Stock Number; (ii) the Warrant
Exchange Ratio will 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 will be adjusted to equal
the quotient obtained by dividing (x) the Estimated Aggregate Cash
Consideration (as adjusted, if applicable, pursuant to the provisions
described above in the first two paragraphs of the section entitled "Closing
True-Up Procedures") by (y) the Actual Company Stock Number.
NO FRACTIONAL SECURITIES
No certificates or scrip representing fractional interests in shares of
FSAC Common Stock or Merger Warrants will be issued in the Merger (including
in connection with any releases of such securities from any escrow
arrangements contemplated by the Merger Agreement). All such fractional
interests will be aggregated. If, after such aggregation, a fractional
interest in a share of FSAC Common Stock or a Merger Warrant would result,
such holder will be entitled to receive, in lieu thereof, an amount in cash
determined by multiplying (i) the fractional interest in a share of FSAC
Common Stock or a Merger Warrant, as the case may be, to which such holder
would otherwise be entitled by (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,
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(x) on the OTC Bulletin Board 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, in each case for the five trading days immediately
preceding the Effective Time. Pending such payment, no fractional interest in
a share of FSAC Common Stock or a Merger Warrant shall entitle the owner to
vote or to any other rights of a security holder.
PROCEDURES FOR EXCHANGE OF EBIC COMMON STOCK CERTIFICATES
Prior to the Closing Date, FSAC will designate a bank or trust company
reasonably acceptable to EBIC to act as Exchange Agent under the Merger
Agreement (the "Exchange Agent"). As soon as practicable after the Effective
Time, and after giving effect to certain adjustments, FSAC will deposit with
or for the account of the Exchange Agent (i) stock certificates representing
the aggregate number of whole shares of FSAC Common Stock issuable pursuant
to the Merger Agreement in exchange for outstanding shares of EBIC Common
Stock (less certificates representing the shares of FSAC Common Stock to be
deposited in escrow pursuant to the Escrow Agreement), (ii) warrant
certificates representing the aggregate number of whole Merger Warrants
issuable pursuant to the Merger Agreement in exchange for outstanding shares
of EBIC Common Stock, (iii) the Estimated Aggregate Cash Consideration (as
adjusted, but less the cash to be deposited in escrow pursuant to the Escrow
Agreement) and (iv) sufficient cash to make payments in lieu of fractional
interests of FSAC Common Stock and Merger Warrants (the "Fractional Cash
Amount"). 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 or make certain other payments under the Merger Agreement, and FSAC's
cash and cash equivalents on hand (including proceeds of the Trust) are
insufficient to do so, or would leave FSAC, on a stand-alone basis, with
liabilities in excess of assets, FSAC will make such deposits or payments by
obtaining the additional necessary funds from EBIC and/or its subsidiaries
(by dividend, distribution, intercompany loan or otherwise).
As soon as practicable after the Effective Time, FSAC will cause the
Exchange Agent to mail to each holder of an EBIC Common Stock certificate or
certificates (i) a form of letter of transmittal specifying that delivery
will be effected, and risk of loss and title to the EBIC Common Stock
certificates will pass, only upon proper delivery of the EBIC Common Stock
certificates to the Exchange Agent and (ii) instructions for use in
surrendering such EBIC Common Stock certificates in exchange for the Merger
Consideration (subject to the portions thereof that have been deposited in
escrow). Upon surrender of an EBIC Common Stock certificate to the Exchange
Agent for cancellation, together with such letter of transmittal, duly
executed, the holder of such EBIC Common Stock certificate will 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 EBIC Common Stock certificate so
surrendered will forthwith be cancelled. In the event of a transfer of
ownership of EBIC Common Stock which is not registered in the transfer
records of EBIC, the Merger Consideration (subject to the portions thereof
that have been deposited in escrow) may be issued to a transferee if the EBIC
Common Stock certificate representing such EBIC Common 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, each EBIC Common Stock certificate
will 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).
No dividends or distributions that are declared on shares of FSAC Common
Stock or FSAC Warrants (including Merger Warrants) will be paid to a person
entitled to receive certificates representing shares of FSAC Common Stock or
Merger Warrants, until the relevant EBIC Common Stock certificates are
surrendered. Upon surrender, there will be paid to the person in whose name
the certificates representing such shares of FSAC Common Stock or Merger
Warrants will be issued, any dividends or distributions with respect to such
shares of FSAC Common Stock or Merger Warrants, as the case may be, which
have a record date after the Effective Time and will have become payable
between the Effective Time and the time of such surrender. In no event will
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 Exchange Agent will deliver to FSAC all cash,
certificates and other documents
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in its possession, and any holders of EBIC Common Stock who have not complied
with the requirements described above must look to FSAC for the Merger
Consideration to which they are entitled.
To prevent backup withholding, each stockholder must provide the Exchange
Agent with such stockholder's correct taxpayer identification number and
certify that such stockholder is not subject to backup federal income tax
withholding by completing the Substitute Form W-9 that will be provided with
the letter of transmittal following consummation of the Merger.
EBIC STOCKHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A LETTER OF TRANSMITTAL AND
INSTRUCTIONS AND SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
CERTAIN RELATED AGREEMENTS
Escrow Agreement
The following is a summary of the material provisions of the Escrow
Agreement, which is attached as Annex VII to this Proxy Statement/Prospectus
and is incorporated herein by reference. The following summary does not
purport to be complete and is qualified in its entirety by reference to the
Escrow Agreement.
The Escrow Agreement provides that FSAC will deposit at the Effective Time
with the Escrow Agent (i) the Escrow Shares, comprising 10% of the FSAC
Common Stock to be issued in the Merger, (ii) $2 million of the Aggregate
Cash Consideration (the "Cash Escrow Amount"), (iii) to the extent there are
any Dissenting Shares, (x) an additional portion of the Aggregate Cash
Consideration equal to the product of the Per Share Book Value (as defined in
the Merger Agreement) of EBIC Common Stock and the number of Dissenting
Shares and (y) additional stock and warrant certificates representing the
shares of FSAC Common Stock and Merger Warrants that, but for their demand of
appraisal rights, holders of such Dissenting Shares would have received in
the Merger (the "Section 262 Securities") and (iv) if there is a Positive
Cash Adjustment, a cash amount, as an addition to the Cash Escrow Amount,
equal to such Positive Cash Adjustment. The Escrow Agent is to hold the cash
escrow funds in certain instruments or otherwise as agreed.
The Cash Escrow Amount will be released (i) to make payments to FSAC, to
reflect any Negative Cash Adjustment and (ii) to reimburse EBIC for any
payments its makes to dissenters with respect to their Dissenting Shares. To
the extent the Cash Escrow Amount is insufficient for such payments with
respect to Dissenting Shares, Escrow Shares will be released to make such
payments. Once the status of Dissenting Shares is resolved, the Section 262
Securities will be released, first to pay the non-cash portion of the Merger
Consideration to those dissenters who failed to perfect their appraisal
rights, and then pro rata to all former holders of EBIC Common Stock who did
not exercise and perfect appraisal rights (to ensure that such holders
received in the Merger 50% of the outstanding shares of FSAC Common Stock and
FSAC Warrants on a pro forma basis). The remaining Escrow Shares will be
released, if necessary, to pay indemnities owed to FSAC under the Merger
Agreement, and then, if there are no indemnity claims pending one year after
the Effective Time, pro rata to all former holders of EBIC Common Stock who
did not exercise and perfect appraisal rights. The Escrow Agreement provides
(i) a mechanism for FSAC and certain other persons to claim indemnification
and demand that Escrow Shares be released and (ii) arbitration procedures to
resolve any disputes.
As a result of the Escrow Agreement and the arrangements contemplated
thereby, holders of EBIC Common Stock will initially receive less than the
full Merger Consideration. The existence and scope of any drawdowns of the
amounts deposited in escrow will determine whether holders of EBIC Common
Stock ultimately receive a final amount different from the Merger
Consideration. If there are no Dissenting Shares, and no indemnities or
post-Merger balance sheet adjustments become payable to FSAC under the Merger
Agreement, there will be a delay in the receipt, but no change to the amount,
of the Merger Consideration. If there are post-Merger balance sheet
adjustments payable to EBIC under the Merger Agreement, the Per Share Cash
Consideration will increase. If there are Dissenting Shares, the Per Share
Cash Consideration will decrease, but the amount of FSAC Common Stock and
Merger
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Warrants received by former holders of EBIC Common Stock who did not exercise
and perfect appraisal rights will increase as a result of the release to such
holders of the Section 262 Securities. Reference is made to Article III of
the Merger Agreement and the full text of the Escrow Agreement, attached
hereto respectively as Annexes I and VII, for further detail on the exact
mechanisms of the Escrow Agreement and the arrangements contemplated thereby.
Security Transfer Agreement
The following is a summary of the material provisions of the Security
Transfer Agreement, which is attached as Annex VIII to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Security Transfer Agreement.
The Security Transfer Agreement (i) prohibits any sales or other
dispositions (with certain exceptions) by Gilbert Scharf, Michael Scharf,
WCAS, WCAS Info and EBIC Management, during the period commencing at the
Effective Time and continuing through November 30, 1996, with respect to any
shares of FSAC Common Stock (other than the Pre-IPO Shares, which are
separately held in escrow until December 7, 1997) and FSAC Warrants
(including Merger Warrants) held by such persons and (ii) obligates each such
person to tender for exchange (and not withdraw) in the Exchange Offer, if
any, their FSAC Warrants in numbers proportionate to the aggregate tenders of
FSAC Warrants made by other holders in the Exchange Offer.
Majority Stockholders' Agreement
The following is a summary of the material provisions of the Majority
Stockholders' Agreement, which is attached as Annex IX to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Majority Stockholders' Agreement.
Pursuant to the Majority Stockholders' Agreement, WCAS has made certain
agreements to facilitate the transactions contemplated by the Merger
Agreement, including a non-solicitation agreement and an agreement to use its
reasonable efforts to take action necessary to consummate and make the Merger
effective. WCAS has also made certain representations and warranties to FSAC
and Merger Sub, including as to: (i) due organization and existence, (ii)
authorization, execution, delivery, performance and enforceability of the
Merger Agreement, (iii) absence of conflict with its organizational documents
or with certain contracts and the absence of any required governmental or
regulatory authorization, consent or approval, (iv) documents to be filed
with the Commission and the accuracy of information contained therein, (v)
termination of certain existing agreements and the release and termination of
certain security interests and (vi) the absence of any broker or finder's
fees.
Registration Rights Agreement
The following is a summary of the material provisions of the Registration
Rights Agreement, to be executed prior to and as a condition of the Merger,
by and among FSAC, Gilbert Scharf, Michael Scharf, WCAS, certain WCAS
affiliates, EBIC Management and certain other FSAC and EBIC stockholders, the
form of which is attached as Annex X to this Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary does not purport
to be complete and is qualified in its entirety by reference to the form of
Registration Rights Agreement.
The Registration Rights Agreement provides for two demand registration
rights, which may not be requested prior to October 1, 1996 and which in any
event may not become effective until after November 30, 1996, with respect to
all shares of FSAC Common Stock (including shares received upon exchange or
exercise of FSAC Warrants) held by WCAS and certain related investors, the
Initial FSAC Stockholders and EBIC Management. The first request may only be
initiated by holders of at least a majority of the total outstanding FSAC
Common Stock issued in the Merger to WCAS and certain related investors
(excluding certain shares held in escrow) but will extend to the other
stockholders who are parties to the agreement. The second request may be made
by holders of at least a majority of the total outstanding
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FSAC Common Stock held by all stockholders who are parties to the agreement
(excluding certain shares held in escrow). The requests must specify the
manner of sale (which may be an underwritten public offering) and whether all
or a portion of such shares will be sold. Upon receipt of such requests, FSAC
will notify other holders of shares of FSAC Common Stock registrable under
the agreement and use its best efforts to register for public sale in
accordance with the method of disposition specified in such requests, the
number of shares specified in the request or in certain notices received from
other holders. FSAC may include in the registration statement certain shares
to be sold for its own account. In certain circumstances, the shares to be
included in any registration statement (if the method of disposition is an
underwritten public offering) may be reduced if the managing underwriter
considers that such inclusion would adversely affect the marketing of the
stock to be sold. The number of shares to be included in any registration
statement (other than an underwritten public offering) will not (subject to
certain exceptions), prior to June 30, 1997, exceed 50% of the number of
registrable shares of FSAC Common Stock. FSAC may postpone, generally for a
maximum of up to 60 days, filing a registration statement in certain
circumstances.
If FSAC, at any time after November 30, 1996 (other than in connection
with the Exchange Offer or certain other circumstances), proposes to register
FSAC Common Stock, it will offer the parties to the Registration Rights
Agreement certain "piggy-back" registration rights. In the event that any
such registration is an underwritten public offering, the shares to be
included on this basis may be reduced if the managing underwriter considers
that such inclusion would adversely affect the marketing of the stock to be
sold.
The expenses of FSAC incurred in complying with the demand rights and
"piggy-back" rights will be paid by FSAC, except for underwriting discounts,
selling commissions and transfer taxes and certain other expenses, which will
be borne by the participating sellers in proportion to the number of shares
sold by each, or otherwise as agreed. The Registration Rights Agreement
includes detailed provisions with respect to the procedures for registration
and indemnification.
FSAC SPECIAL MEETING PROPOSALS
In addition to the proposal to approve and adopt the Merger Agreement, at
the FSAC Special Meeting FSAC stockholders will also vote on each of the
matters described below.
Election of Directors
At the Effective Time, pursuant to the Classified Board Amendment, the
FSAC Board of Directors will be expanded to consist of eight members. The
nominees for directors will be Gilbert D. Scharf, Michael J. Scharf, Denis
Martin, Larry S. Kopp, William B. Wigton, Frederick B. Whittemore, Donald
Marshall and James W. Stevens. The eight directors are to be elected at the
FSAC Special Meeting. Messrs. Marshall and Stevens are designees of EBIC. See
"MANAGEMENT OF FSAC."
The FSAC Option Plan
The following description of the FSAC Option Plan is qualified in its
entirety by the complete text of the FSAC Option Plan, the form of which is
attached hereto as Annex VI.
The FSAC Option Plan has been adopted by the FSAC Board of Directors,
subject to the approval of FSAC stockholders. 1,800,000 shares of FSAC Common
Stock have been reserved for issuance under the FSAC Option Plan. Pursuant to
the FSAC Option Plan, no individual may be granted an option or options for
more than 500,000 shares of FSAC Common Stock in any calendar year. No
options may be granted under the FSAC Option Plan after the tenth anniversary
of its adoption. Options may be either "incentive stock options" within the
meaning of section 422 of the Code or nonqualified stock options and will
generally have an exercise price equal to the fair market value of a share of
FSAC Common Stock on the date of grant. The aggregate fair market value of
"incentive stock options" granted to any optionee under the FSAC Option Plan,
or any similar plan, that first become exercisable in any calendar year is
not to exceed $100,000. It is anticipated that the initial grant of options
under the FSAC Option Plan will provide that each option will become
exercisable as to 20% of the FSAC Common Stock covered by the option on the
first anniversary of the date the option was granted and as to an additional
20% of the FSAC
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Common Stock covered by the option on each successive anniversary of the date
the option was granted. Unless the terms of any specific grant provide
otherwise, each option will expire on the tenth anniversary of its grant or
upon a specified period after the termination of the optionee's employment,
as set forth in the FSAC Option Plan.
The Charter Amendments
The following description of the Charter Amendments is qualified in its
entirety by the complete text of the Charter Amendments, the forms of which
are attached hereto as Annex V.
The Charter Amendments have been adopted by the FSAC Board, subject to the
approval of FSAC stockholders, but will not become effective unless and until
the Merger has been or is about to be consummated. Conversely, unless FSAC
stockholders approve the Charter Amendments, the Merger will not be
consummated. Depending on the specific amendment, effectiveness of the
Charter Amendments will be either immediately prior to or immediately after
consummation of the Merger.
o The Classified Board Amendment. The Classified Board Amendment provides
(i) that the Board of Directors shall consist of not less than three nor more
than twelve directors, the exact number of directors to be determined from
time to time by resolution adopted by the affirmative vote of a majority of
the entire Board of Directors, with the initial number of directors to be set
at eight; (ii) for the classification of the Board of Directors into three
classes serving staggered terms, with each class to be as nearly equal in
size as possible; and (iii) that, subject to the requirements of the DGCL,
any vacancy on the Board of Directors be filled only by the remaining
directors then in office, even if such directors constitute less than a
quorum. The classified Board of Directors is likely to have the effect of
perpetuating control of FSAC in the current directors of FSAC, at least
through the second annual meeting of stockholders of FSAC following the
Merger. In addition, although the Classified Board Amendment is also intended
to encourage persons seeking to acquire control of FSAC to initiate such an
acquisition through arm's length negotiations with the Board of Directors,
the overall effect of the Classified Board Amendment, together with the
Stockholders' Action Amendment, the Special Meeting Amendment and the
Supermajority Amendment, may be to discourage a third party from making a
tender offer, hostile or otherwise, for a portion of or all of FSAC Common
Stock (including an offer at a premium over the then prevailing market value
of FSAC's equity securities) or otherwise attempting to obtain a substantial
position in the equity securities of FSAC in order to commence a proxy
contest or engage in other takeover-related actions even though some or a
majority of FSAC's stockholders might believe such actions to be beneficial.
See "RISK FACTORS -- Concentration of Voting Control; Staggered Board" and
"COMPARISON OF STOCKHOLDER RIGHTS --Election of Directors."
o Stockholders' Action Amendment. The Stockholders' Action Amendment,
prohibiting stockholder action by written consent, would give all
stockholders of FSAC the opportunity to participate in determining any
proposed action and would prevent the holders of a majority of the voting
stock from using the written consent procedure to take stockholder action
without affording all stockholders an opportunity to participate. On the
other hand, this amendment would prevent stockholders from taking action
other than at an annual or special meeting of stockholders at which the
proposal is submitted to stockholders in accordance with the advance notice
provisions of the FSAC By-laws. Moreover, if the Special Meeting Amendment is
adopted, FSAC Stockholders will not have the ability to call a special
meeting of stockholders. See "COMPARISON OF STOCKHOLDER RIGHTS -- Action by
Written Consent."
o Special Meeting Amendment. The Special Meeting Amendment would eliminate
the ability of stockholders to call special meetings. Eliminating the ability
of stockholders to call special meetings would mean that proposals for
stockholder action such as, for example, proposed amendments to the By-laws
or removals of directors for cause could, if the Board of Directors desired,
be delayed until the next annual meeting of stockholders. See "COMPARISON OF
STOCKHOLDER RIGHTS -- Special Meetings."
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o Supermajority Amendment. Amendments to FSAC's Certificate of
Incorporation currently require the approval of the holders of a majority of
the outstanding shares of stock entitled to vote thereon and, in certain
cases, a majority of the outstanding shares of each class of stock entitled
to vote thereon as a class. The DGCL permits provisions in a corporation's
certificate of incorporation that require a greater vote than the vote
otherwise required by law for any corporate action. Pursuant to the proposed
Supermajority Amendment, the affirmative vote of the holders of at least 80%
of FSAC's capital stock issued and outstanding and entitled to vote thereon
would be required for the amendment or repeal of or the adoption of any
provisions inconsistent with Article SIXTH of FSAC's Certificate of
Incorporation (which includes the provisions of the Classified Board
Amendment, the Stockholders' Action Amendment, the Special Meeting Amendment
and the Supermajority Amendment).
o Deletion of Certain SPAC(Registered Trademark) -- Related Provisions.
The current provisions of Article SIXTH of FSAC's Certificate of
Incorporation relate to the following SPAC(Registered Trademark)
characteristics: the requirement of stockholder approval of a Business
Combination, the availability of Redemption Rights, the requirement of
liquidation in the event that FSAC fails to consummate a Business Combination
by a certain date, the prohibition of distributions from the Trust to holders
of FSAC Public Shares, other than pursuant to Redemption Rights or
liquidation, and the implementation of a two-class staggered Board of
Directors. See "BUSINESS OF FSAC --Characteristics of a Specified Purpose
Acquisition Company(Registered Trademark)." Under FSAC's Certificate of
Incorporation, the provisions of its Article SIXTH by their own terms cease
to be effective upon the consummation of a Business Combination. As a matter
of completeness, the Charter Amendments delete these provisions, effective
immediately after the Effective Time.
o Additional Common Stock Amendment. The Additional Common Stock Amendment
would increase the authorized shares of FSAC Common Stock from 14,000,000 to
30,000,000. Although an increase in authorized shares of FSAC Common Stock is
necessary to permit consummation of the various transactions contemplated by
the Merger Agreement, the increase in FSAC Common Stock contemplated by the
Additional Common Stock Amendment will also result in a significant increase
in the amount of authorized but unissued and unreserved shares, which would
have the potential, depending on the amount of additional issuances and the
consideration, if any, received therefor, to dilute the interests of FSAC
stockholders after the Merger. See "RISK FACTORS -- Authority of FSAC to
Issue Additional Securities."
o Name Change Amendment. The Name Change Amendment would, immediately
prior to the Effective Time, change the name of FSAC to "Financial Services
Corporation."
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DESCRIPTION OF FSAC CAPITAL STOCK
GENERAL
FSAC is authorized to issue 14,000,000 shares of FSAC Common Stock, and
1,000,000 shares of FSAC Preferred Stock. As of June 21, 1996, there were
4,416,666 shares of FSAC Common Stock (including 833,333 Pre-IPO Shares)
issued and outstanding, no shares of FSAC Preferred Stock issued and
outstanding and FSAC Warrants to purchase 7,566,666 shares of FSAC Common
Stock (including Bridge Warrants to acquire 400,000 shares of FSAC Common
Stock) issued and outstanding. The following description of FSAC's capital
stock does not purport to be complete and is subject, and qualified in its
entirety by reference to the provisions of the DGCL and to FSAC's Certificate
of Incorporation, the Warrant Agreement, dated November 30, 1994, between
FSAC and Continental, as warrant agent, governing the Bridge Warrants, the
FSAC Warrants issued in the IPO and the FSAC Warrants issuable upon exercise
of the Unit Purchase Options, and the Warrant Agreement, dated June 5, 1996,
between FSAC and Continental, as warrant agent, governing the Merger
Warrants, each of which is attached or incorporated by reference as an
exhibit to the Registration Statement.
FSAC UNITS
Pursuant to the IPO, FSAC sold 3,333,333 FSAC Units (and an additional
250,000 FSAC Units as part of the underwriters' over-allotment) at $6.00 per
unit, each FSAC Unit consisting of one share of FSAC Common Stock and two
FSAC Warrants. The securities comprising the FSAC Units became separate and
transferable upon consummation of the IPO on December 7, 1994 and are
currently listed separately on the OTC Bulletin Board.
FSAC COMMON STOCK
The holders of FSAC Common Stock are entitled to one vote for each share
held of record on all matters voted on by stockholders. There is no
cumulative voting with respect to the election of directors, and therefore
the holders of more than 50% of the shares voting for the election of
directors can elect all directors then being elected. The FSAC Board is
currently divided into two classes such that each class of directors is
elected in alternating years. However, upon consummation of the Merger,
FSAC's Certificate of Incorporation will be amended to implement a staggered
board consisting of three classes such that each class of directors is
elected every third year. See "THE MERGER AGREEMENT -- FSAC Special Meeting
Proposals -- The Charter Amendments -- The Classified Board Amendment." The
holders of FSAC Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available
therefore.
In the event of a liquidation, dissolution or winding up of FSAC, the
holders of FSAC Common Stock (excluding Pre-IPO shares, with respect to which
the Initial FSAC Stockholders have waived any rights to share in any
distribution relating to a liquidation of FSAC due to FSAC's failure to
consummate a Business Combination) are entitled to share ratably in the
proceeds of the Trust and all other assets remaining available for
distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the FSAC
Common Stock. Holders of FSAC Common Stock as such have no preemptive or
other subscription rights. Except for the Redemption Rights, see "THE MERGER
- -- FSAC Redemption Rights," there are no redemption provisions applicable to
the FSAC Common Stock. All of the outstanding FSAC Common Stock is fully paid
and nonassessable. Pursuant to its IPO underwriting agreement with GKN
Securities Corp. ("GKN") and Barington Capital Group, L.P. (the "Underwriting
Agreement"), FSAC has agreed not to issue any additional shares of FSAC
Common Stock prior to consummation of a Business Combination.
PREFERRED STOCK
FSAC's Certificate of Incorporation authorizes the issuance of 1,000,000
shares of FSAC Preferred Stock with such designations, rights and preferences
as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue
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Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of FSAC's Common Stock, although the Underwriting Agreement prohibits
FSAC, prior to a Business Combination, from issuing Preferred Stock which
participates in any manner in the proceeds of the Trust or which votes as a
class with the FSAC Common Stock on a Business Combination. The rights of
holders of FSAC Common Stock will be subject to, and may be adversely
affected by, the rights of holders of any FSAC Preferred Stock that may be
issued in the future. In addition, the issuance of FSAC Preferred Stock could
have the effect of discouraging, delaying or preventing a change of control
of FSAC. Although FSAC does not currently intend to issue any shares of FSAC
Preferred Stock, there can be no assurance that it will not do so in the
future.
FSAC WARRANTS
Each FSAC Warrant (excluding FSAC Warrants issuable in connection with the
Unit Purchase Options) entitles the registered holder to purchase one share
of FSAC Common Stock for $5.00. The exercise price and the number of shares
of FSAC Common Stock issuable upon exercise of each FSAC Warrant are subject
to adjustment in certain circumstances, including in the event of a stock
dividend or recapitalization of FSAC. However, FSAC Warrants are not subject
to adjustment for issuances of FSAC Common Stock at a price below their
exercise price. FSAC Warrants (excluding the Bridge Warrants) will become
exercisable upon the consummation of a Business Combination and will expire
on November 30, 2001, although FSAC has the right, in its sole discretion, to
extend the expiration date of FSAC Warrants. FSAC may call FSAC Warrants for
redemption, in whole but not in part, at a price of $.01 per warrant, at any
time they are exercisable, upon not less than 30 days' prior written notice
to the holders thereof, provided that the last sale price of FSAC Common
Stock has been at least $8.50 per share for the 20 consecutive trading days
ending on the third day prior to the day on which notice is given.
FSAC Warrants can be exercised upon surrender of FSAC Warrant certificates
on or prior to the expiration date at the offices of Continental, with the
exercise form on the reverse side of the certificate completed and executed
as indicated, accompanied by full payment of the exercise price (by certified
check payable to FSAC) for the number of FSAC Warrants being exercised. Prior
to the exercise of FSAC Warrants, the holders of FSAC Warrants do not have
the rights or privileges of holders of the underlying shares of FSAC Common
Stock. Pursuant to the Underwriting Agreement, FSAC has agreed not to issue
any additional options or other securities convertible into FSAC Common Stock
prior to consummation of a Business Combination.
No FSAC Warrants are exercisable unless at the time of exercise there is a
current prospectus covering the shares of FSAC Common Stock issuable upon
exercise of such FSAC Warrants under an effective registration statement
filed with the Commission and such shares have been qualified for sale or are
exempt from qualification under the securities laws of the state of residence
of the holder of such FSAC Warrants. Although FSAC is obligated to use its
best efforts to meet such requirements, there can be no assurance that FSAC
will be able to do so.
No fractional shares will be issued upon exercise of FSAC Warrants.
However, if a holder of FSAC Warrants exercises all FSAC Warrants then owned
of record by such holder, FSAC will pay to such holder, in lieu of any
fractional share which is otherwise issuable to such holder, an amount in
cash based on the market value of FSAC Common Stock on the last trading day
prior to the date of exercise.
Upon the exercise of FSAC Warrants (not including the Merger Warrants),
FSAC has agreed (subject to certain conditions) to pay to GKN a commission
equal to 5% of the exercise price for each FSAC Warrant exercised. However,
no compensation will be paid to GKN in connection with the exercise of FSAC
Warrants if the market price of the underlying shares of FSAC Common Stock is
equal to or less than the exercise price, FSAC Warrants are held in a
discretionary account, or FSAC Warrants are exercised in an unsolicited
transaction.
MERGER WARRANTS
The Merger Warrants will be denominated as "Series B Redeemable Common
Stock Purchase Warrants" of FSAC. The form of the Merger Warrant is attached
hereto as Annex II and will entitle the
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holder to receive the same securities for the same exercise price as are
receivable by the holders of FSAC Warrants issued in the IPO upon any
exercise of such FSAC Warrants after the Effective Time. The Merger Warrants
will also have the same redemption terms, adjustment provisions and
expiration date as such FSAC Warrants and will otherwise have substantially
the same terms and conditions as such FSAC Warrants. However, no commission
will be payable to GKN in connection with exercises of the Merger Warrants.
ADVISOR UNITS AND BRIDGE WARRANTS
In connection with the IPO, FSAC sold the Unit Purchase Options,
representing the right to purchase an aggregate 333,333 Advisor Units at
$9.90 per unit, to the underwriters of the IPO and certain designees thereof.
The Advisor Units are identical to the FSAC Units, except that FSAC Warrants
contained in the Advisor Units are exercisable at $6.25 per share and expire
on November 30, 1999. In addition, the holders of the Unit Purchase Options
are entitled to certain "piggy-back" and demand registration rights for
periods of seven and five years, respectively, from the date of the IPO
prospectus with respect to the Advisor Units and the other FSAC securities
directly and indirectly issuable upon exercise thereof. In connection with
the Merger, FSAC has entered into the Unit Purchase Option Agreement with the
holders of the Unit Purchase Options which provides for the exchange,
contingent upon and effective immediately following the Merger, of all Unit
Purchase Options for an aggregate of 225,000 newly issued shares of FSAC
Common Stock. See "THE MERGER --Certain Related Transactions -- Unit Purchase
Option Exchange."
In September 1994, FSAC consummated the Bridge Financing to pay certain
organizational expenses and certain costs of the IPO. In connection with the
Bridge Financing, FSAC issued 400,000 Bridge Warrants to thirteen investors
in the Bridge Financing. The Bridge Warrants are identical to the FSAC
Warrants issued in the IPO, except that the Bridge Warrants are not
redeemable by FSAC until 90 days after consummation of a Business
Combination. The holders of the Bridge Warrants have agreed not to transfer
them until after the consummation of a Business Combination and not to
exercise them until 90 days after such consummation. In addition, the holders
of the Bridge Warrants are entitled to certain "piggy-back" registration
rights for the Bridge Warrants and the FSAC Common Stock underlying the
Bridge Warrants. Pursuant to the terms of the Merger Agreement, the Exchange
Offer, if made, will extend to the Bridge Warrants. See "THE MERGER --
Certain Related Transactions -- Exchange Offer."
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the DGCL (the "Delaware anti-takeover law"), certain
"business combinations" between a Delaware corporation, whose stock generally
is publicly traded or held of record by more than 2,000 stockholders, and an
"interested stockholder" are prohibited for a three-year period following the
date that such stockholder became an interested stockholder, unless (i) the
corporation has elected in its certificate of incorporation or by-laws not to
be governed by the Delaware anti-takeover law (FSAC has not made such an
election), (ii) the business combination was approved by the board of
directors of the corporation before the other party to the business
combination became an interested stockholder, (iii) upon consummation of the
transaction that made it an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock
owned by directors who are also officers or held in employee stock plans in
which the employees do not have a right to determine confidentially whether
to tender or vote stock held by the plan), or (iv) the business combination
was approved by the board of directors of the corporation and ratified by
66 2/3% of the voting stock which the interested stockholder did not own. The
three-year prohibition does not apply to certain business combinations
proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation
and a person who had not been an interested stockholder during the previous
three years or who became an interested stockholder with the approval of a
majority of the corporations's directors. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested
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stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as a stockholder who becomes the beneficial
owner of 15% or more of a Delaware corporation's voting stock. Section 203
could have the effect of delaying, deferring or preventing a change in
control of FSAC.
COMPARISON OF STOCKHOLDER RIGHTS
If the Merger is consummated, holders of EBIC Common Stock (except for
holders of Dissenting Shares) will become holders of FSAC Common Stock and
Merger Warrants. The following is a summary of material differences between
the rights of holders of FSAC Common Stock and the rights of holders of EBIC
Common Stock. As each of FSAC and EBIC is organized under the laws of
Delaware, these differences arise principally from provisions of the
certificate of incorporation and by-laws of each of FSAC and EBIC.
The following summaries do not purport to be complete statements of the
rights of FSAC stockholders under FSAC's Certificate of Incorporation and
By-laws as compared with the rights of EBIC stockholders under EBIC's
Certificate of Incorporation and By-laws or a complete description of the
specific provisions referred to herein. The identification of specific
differences is not meant to indicate that other equal or more significant
differences do not exist. These summaries are qualified in their entirety by
reference to the DGCL and the governing corporate instruments of FSAC and
EBIC, to which stockholders are referred. The terms of FSAC's capital stock
are described in greater detail under "DESCRIPTION OF FSAC CAPITAL STOCK."
VOTING AND OTHER RIGHTS
Holders of FSAC Common Stock and EBIC Common Stock are each entitled to
one vote per share of stock. Under Delaware law, stockholders do not have
preemptive rights unless such rights are expressly granted by the certificate
of incorporation. Neither FSAC's Certificate of Incorporation nor EBIC's
Certificate of Incorporation provides for preemptive rights. FSAC's
Certificate of Incorporation currently provides for Redemption Rights with
respect to the FSAC Public Shares, but following the Merger this provision by
its own terms will no longer be applicable and, pursuant to the Charter
Amendments, will be deleted. See "THE MERGER AGREEMENT -- FSAC Special
Meeting Proposals -- The Charter Amendments -- Deletion of Certain
SPAC(Registered Trademark) -- Related Provisions."
CERTAIN BUSINESS COMBINATIONS
FSAC's Certificate of Incorporation currently requires approval of the
holders of a majority of the outstanding shares of FSAC Common Stock for the
consummation of a Business Combination, whether or not the transaction would
be of the type which normally would require such stockholder approval under
the DGCL. Following consummation of the Merger, however, this provision by
its own terms will no longer be applicable to any such transactions and,
pursuant to the Charter Amendments, will be deleted. See "THE MERGER
AGREEMENT -- FSAC Special Meeting Proposals -- The Charter Amendments --
Deletion of Certain SPAC(Registered Trademark) -- Related Provisions."
EBIC's Certificate of Incorporation and By-laws do not contain any
supermajority voting provisions or any other provisions relating to the
approval of business combinations and other transactions by holders of EBIC
Common Stock.
ELECTION OF DIRECTORS
Under the DGCL, the number of directors are fixed or determined in the
manner set forth in the by-laws, unless the corporation's certificate of
incorporation fixes the number of directors, in which case the number of
directors can only be changed by amending the certificate of incorporation.
The DGCL permits the certificate of incorporation or by-laws to divide the
directors into one, two or three classes with the term of office of one class
of directors to expire each year.
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FSAC's By-laws currently set the number of directors at one or more
members, with the exact number to be fixed by the FSAC Board. FSAC's
Certificate of Incorporation divides the Board of Directors into two classes.
Each director is elected to serve a two-year term, with the term of office of
one class of directors to expire each year. FSAC currently has six directors.
At the FSAC Special Meeting, stockholders will vote on a proposal to divide
the Board of Directors into three classes serving staggered terms. If the
Classified Board Amendment is approved at the FSAC Special Meeting, FSAC's
Certificate of Incorporation will set the number of directors at not less
than three nor more than twelve, the exact number to be fixed by the
affirmative vote of a majority of the entire Board, but initially to be set
at eight directors. Two directors will be elected for an initial term
expiring at the 1997 annual meeting, three directors will be elected for an
initial term expiring at the 1998 annual meeting and the remaining three
directors will be elected for an initial term expiring at the 1999 annual
meeting. Thereafter, each director will be elected to serve a three-year
term, with the term of office of one class of directors to expire each year.
See "THE MERGER AGREEMENT -- FSAC Special Meeting Proposals --Election of
Directors" and "THE MERGER AGREEMENT -- FSAC Special Meeting Proposals -- The
Charter Amendments -- The Classified Board Amendment."
EBIC's By-laws sets the number of directors at not less than one nor more
than four members with the exact number to be fixed by the Board of Directors
or the stockholders. EBIC currently has four directors. EBIC does not have a
classified Board of Directors.
REMOVAL OF DIRECTORS
Under the DGCL, holders of a majority of shares then entitled to vote at
an election of directors can remove a director, with or without cause, unless
the corporation has a classified board. If a corporation's board is
classified, stockholders may not remove a director without cause unless
expressly permitted to do so by the charter document. Following the Merger,
FSAC will have a classified board, but its Certificate of Incorporation will
not have any provision for removal of directors by stockholders without
cause.
EBIC's By-laws provide that any director can be removed at any time with
or without cause by the affirmative vote of the holders of at least
two-thirds of all the issued and outstanding stock entitled to vote for the
election of directors at any annual meeting or special meeting of the
stockholders called for that purpose.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Neither FSAC's nor EBIC's Certificate of Incorporation currently contain
any supermajority voting provisions for the amendment thereof. Under the
DGCL, unless otherwise specified in a corporation's certificate of
incorporation, all amendments to such certificate of incorporation must be
approved by the affirmative vote of holders of a majority of the shares of
capital stock entitled to vote thereon, unless a class vote is required under
the DGCL. As a result of the Supermajority Amendment, an 80% supermajority
vote of FSAC stockholders will be required to alter, amend or repeal Article
SIXTH of FSAC's Certificate of Incorporation (which includes the provisions
of the Classified Board Amendment, the Stockholder's Action Amendment, the
Special Meeting Amendment and the Supermajority Amendment). See "THE MERGER
AGREEMENT -- FSAC Special Meeting Proposals --The Charter Amendments --
Supermajority Amendment."
SPECIAL MEETINGS
Under the DGCL, special meetings of stockholders can be called by the
Board of Directors or those persons authorized by the corporation's
certificate of incorporation or by-laws. FSAC's By-laws currently provide
that special meetings of stockholders can be called by either the Chairman or
the President, and shall be called by the Chairman, President or Secretary at
the request in writing of a majority of the Board of Directors or of
stockholders owning a majority of the capital stock of FSAC issued and
outstanding and entitled to vote. As a result of the Special Meeting
Amendment, following the Merger a special meeting of FSAC stockholders will
be able to be called only by the Chairman of the Board, the President, or by
an affirmative vote of a majority of the members of the Board of Directors.
See "THE MERGER AGREEMENT -- FSAC Special Meeting Proposals -- The Charter
Amendments -- Special Meeting Amendment."
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EBIC's By-laws provide that special meetings of stockholders can be called
at any time by the Chairman of the Board or the President.
ACTION BY WRITTEN CONSENT
Section 228 of the DGCL states that, unless otherwise provided in the
certificate of incorporation, any action which may be taken at any annual or
special meeting of stockholders of a corporation may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
FSAC's By-laws currently provide that any action required to be taken at a
meeting of the stockholders can be taken without a meeting if a consent in
writing setting forth the action so taken is signed by the holders of
outstanding stock having not less than the minimum number of votes necessary
to authorize or take such action. As a result of the Stockholders' Action
Amendment, following the Merger stockholder action will not be able to be
taken by written consent. See "THE MERGER AGREEMENT -- FSAC Special Meeting
Proposals -- The Charter Amendments -- Stockholders' Action Amendment."
EBIC's Certificate of Incorporation and By-laws make no special provision
restricting action by written consent of stockholders in lieu of a meeting.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL permits a corporation to indemnify its directors and officers
against expenses, judgements, fines and amounts paid in settlement incurred
by them in connection with any pending, threatened or completed action or
proceeding other than an action by or in the right of the corporation (a
"derivative action"), and permits such indemnification against expenses
incurred in connection with any pending, threatened or completed derivative
action, if the director or officer has acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Further, the
DGCL provides that expenses incurred in defending any action or proceeding
may be paid by the corporation in advance of the final disposition upon
receipt of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined that the director or officer is not
entitled to be indemnified by the corporation.
Both the FSAC Certificate of Incorporation and the EBIC Certificate of
Incorporation provide that the respective corporations shall indemnify, to
the fullest extent permitted by the DGCL, all persons who may be indemnified
pursuant to the DGCL. Further, the FSAC Certificate of Incorporation provides
that expenses so incurred shall be advanced by FSAC upon receipt of such an
undertaking.
DIRECTOR LIABILITY
Under the DGCL, a corporation's certificate of incorporation may include a
provision which limits or eliminates the liability of directors to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided such liability does not arise from certain
proscribed conduct, including intentional misconduct and breach of the duty
of loyalty. Both the FSAC Certificate of Incorporation and the EBIC
Certificate of Incorporation limit the personal liability of directors to the
fullest extent permitted by Delaware law.
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BUSINESS OF FSAC
GENERAL
FSAC was organized on August 18, 1994 as a Specified Purpose Acquisition
Company(Registered Trademark), or SPAC(Registered Trademark), with the
objective of acquiring a Target Business in the financial services industry.
The financial services industry includes entities of various types which
provide a broad array of financial services to their customers, including
commercial banks, thrift institutions, investment banking and securities
brokerage firms, money management firms, insurance companies and businesses
which provide support services for financial institutions.
Since its inception, FSAC has not engaged in any substantive commercial
business and its sole activities have been to evaluate and select a suitable
Target Business and to structure, negotiate and consummate a Business
Combination with such Target Business. FSAC may ultimately acquire more than
one business; however, FSAC's initial Business Combination must be with a
Target Business whose fair market value is at least 80% of the net assets of
FSAC at the time of the Business Combination. See "-- Characteristics of a
Specified Purpose Acquisition Company(Registered Trademark) --Fair Market
Value of Target Business."
In August 1994, FSAC issued 833,333 Pre-IPO shares for an aggregate
purchase price of $25,000, or $.03 per share, to the Initial FSAC
Stockholders. In September 1994, FSAC raised $200,000 in the Bridge Financing
and issued 400,000 Bridge Warrants. In December 1994, pursuant to the IPO,
FSAC sold 3,333,333 FSAC Units (and an additional 250,000 FSAC Units as part
of the underwriters' over-allotment) at $6.00 per Unit, each Unit consisting
of one share of FSAC Common Stock and two FSAC Warrants. Each FSAC Warrant
issued in the IPO entitles the holder to purchase from FSAC, during the
period commencing upon consummation of a Business Combination until the close
of business on November 30, 2001, one share of FSAC Common Stock at $5.00 per
share, subject to adjustment in certain circumstances, including in the event
of a stock dividend or recapitalization of FSAC. FSAC may call FSAC Warrants
for redemption, upon thirty days' prior written notice to the holders
thereof, at a price of $.01 per FSAC Warrant, at any time after they become
exercisable, if the last sale price of FSAC Common Stock has been at least
$8.50 per share for the 20 consecutive trading days ending on the third day
prior to the date on which notice of redemption is given. The Bridge Warrants
are identical to such FSAC Warrants except that they are not redeemable by
FSAC until 90 days after consummation of a Business Combination. FSAC also
sold 333,333 Unit Purchase Options to the IPO underwriters and certain of
their designees. Each Unit Purchase Option entitles the holder thereof to
acquire one share of FSAC Common Stock and two FSAC Warrants (which are
identical to FSAC Warrants sold in the IPO except that the exercise price per
warrant is $6.25 and their expiration date is November 30, 1999), for an
exercise price of $9.90 per option. See "DESCRIPTION OF FSAC CAPITAL STOCK --
Advisor Units and Warrants." FSAC received net proceeds from the IPO of
approximately $19,150,000 after payment of offering expenses, a substantial
portion of which (approximately $17,415,000) was placed in the
interest-bearing Trust. See "-- Characteristics of a Specified Purpose
Acquisition Company(Registered Trademark) -- Offering Proceeds Held in
Trust." FSAC also used such proceeds to repay the Bridge Financing. The
remaining proceeds of the IPO have been and are being used by FSAC to pay for
costs incurred in connection with evaluating and negotiating prospective
acquisitions, including the proposed Merger, and for the general,
administrative and organizational expenses and taxes (on interest income) of
FSAC.
Since the IPO, management of FSAC has considered and evaluated numerous
potential Target Businesses. In May 1995, FSAC entered into a letter of
intent with one such business and proceeded with the negotiation of a stock
purchase agreement for the acquisition thereof. Ultimately, those
negotiations failed and were terminated in July 1995. After that time, FSAC
management continued its search process, focusing primarily on brokerage
businesses, resulting in the Merger Agreement and the proposed Merger. See
"THE MERGER -- Background of the Merger."
CHARACTERISTICS OF A SPECIFIED PURPOSE ACQUISITION COMPANY(REGISTERED
TRADEMARK)
A SPAC(Registered Trademark) is an entity incorporating the selected
investor safeguards set forth below. Immediately after the consummation of a
Business Combination, these provisions (other than as described under "Escrow
of Pre-IPO Shares") will no longer apply.
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Offering Proceeds Held in Trust
FSAC completed the IPO in December 1994 and received net proceeds of
approximately $19,150,000 after payment of offering expenses. A substantial
portion of such net proceeds ($17,415,000) was placed in the Trust. Amounts
in the Trust may not be released until the earlier of (i) FSAC's consummation
of a Business Combination or (ii) the liquidation of FSAC. The remaining net
proceeds of the IPO that were not placed in the Trust, and the interest
earned thereon, have been used by FSAC to identify, evaluate and select a
suitable Target Business, to structure, negotiate and consummate a Business
Combination, including the Merger, and for general, administrative and
organizational expenses, including taxes on interest income. As of March 31,
1996, there was approximately $18,719,000 (including accrued interest
thereon) in the Trust, and FSAC held approximately $1,046,000 in cash and
cash equivalents and short-term investments outside of the Trust. If the
Merger is consummated, it is anticipated that all or substantially all of the
IPO proceeds held in the Trust, together with interest earned thereon, will
be paid to holders of EBIC Common Stock (subject to certain escrow
arrangements) as the Aggregate Cash Consideration.
Fair Market Value of Target Business
FSAC may not acquire a Target Business unless the fair market value of
such business (as determined by the FSAC Board of Directors based upon
standards generally accepted by the financial community, such as earnings,
potential sales, cash flow and book value), is equal to at least 80% of the
net assets of FSAC at the time of such acquisition. If the Board of Directors
of FSAC determines that the financial statements of a proposed Target
Business do not clearly indicate that the Target Business has a sufficient
fair market value, FSAC has agreed to obtain an opinion from an unaffiliated,
independent investment banking firm (which is a member of the NASD) with
respect to the satisfaction of such criteria. In connection with the Merger
Agreement, the FSAC Board determined that the foregoing fair market value
criterion was satisfied, and accordingly did not seek or obtain such an
opinion. See "THE MERGER -- Reasons for the Merger; Recommendations of the
Board of Directors" and "-- Absence of Fairness Opinion."
Stockholder Approval of Business Combination
FSAC, after signing a definitive agreement for the acquisition of a Target
Business, but prior to the consummation of any Business Combination, is
required to submit such transaction to its stockholders for their approval,
even if such acquisition would not ordinarily require stockholder approval
under applicable state law. In the event that FSAC stockholders holding 20%
or more of the outstanding FSAC Public Shares, or 716,667 shares, vote such
shares against the Business Combination and properly exercise their
Redemption Rights with respect to such shares, FSAC, pursuant to its
Certificate of Incorporation, is not permitted to consummate such Business
Combination. FSAC may only consummate a Business Combination if less than 20%
of the outstanding FSAC Public Shares are voted against the Business
Combination (and have Redemption Rights properly demanded with respect to
them), and at least a majority in interest of the outstanding shares of FSAC
Common Stock vote in favor of the Business Combination.
With respect to approval and adoption of a Business Combination, the
Initial FSAC Stockholders have agreed to vote all of their Pre-IPO Shares
(constituting approximately 18.9% of the currently outstanding shares of FSAC
Common Stock) in accordance with the vote of the majority in interest of the
FSAC Public Shares. The Initial FSAC Stockholders also own an aggregate of
597,000 FSAC Public Shares (constituting approximately 13.5% of the currently
outstanding shares) that they may vote for or against a Business Combination,
as they desire, although they have indicated their current intention to vote
all such shares in favor of approval and adoption of the Merger Agreement.
Redemption Rights
Holders of FSAC Public Shares who vote against a Business Combination such
as the Merger have the right to demand the cash redemption of their shares if
such Business Combination is approved and
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consummated. However, if 20% or more of the FSAC Public Shares are voted
against the Business Combination (and have Redemption Rights duly demanded
with respect thereto), the Business Combination will not be consummated. See
"-- Characteristics of a Specified Purpose Acquisition Company(Registered
Trademark)" and "-- Liquidation if No Business Combination." The per share
Redemption Price will be equal to the amount in the Trust, inclusive of
interest, as of the FSAC Record Date (in the case of the Merger), divided by
the number of FSAC Public Shares. A stockholder who fails to comply with all
of the requirements with respect to the redemption of his or her shares,
including a timely written demand therefor and delivery of a certificate or
certificates representing such shares, under cover of a properly completed
and executed letter of transmittal, will forfeit his or her Redemption
Rights. See "THE MERGER -- FSAC Redemption Rights." There will be no
distribution from the Trust with respect to any of the FSAC Warrants. The
FSAC Initial Stockholders do not have any Redemption Rights with respect to
the Pre-IPO Shares. In connection with the Merger, it is estimated that the
Redemption Price will be approximately $5.30 per FSAC Public Share.
Escrow of Pre-IPO Shares
The 833,333 Pre-IPO Shares (constituting approximately 18.9% of the
currently outstanding shares of FSAC Common Stock) are held until December 7,
1997 in escrow with Continental, as escrow agent. During such escrow period,
the Initial FSAC Stockholders are not able to sell or otherwise transfer
their respective Pre-IPO Shares, except (i) in a transaction subsequent to
the consummation of a Business Combination which is offered to all FSAC
stockholders or (ii) to family members or pursuant to the laws of descent.
Accordingly, the Initial FSAC Stockholders cannot separately negotiate the
purchase of any portion of their Pre-IPO Shares as part of a Business
Combination.
Liquidation if No Business Combination
If FSAC does not consummate the Merger or another Business Combination by
December 7, 1996, FSAC is obligated to dissolve and distribute to holders of
FSAC Public Shares the amount in the Trust, including any interest earned
thereon, estimated to be $5.40 per share as of such date, plus any remaining
net assets of FSAC. Pursuant to the IPO Lock-up Agreements, the Initial FSAC
Stockholders have waived any right to participate in any such liquidating
distribution with respect to their Pre-IPO Shares.
SUBSIDIARIES
FSAC's sole subsidiary is Merger Sub. Merger Sub is a Delaware corporation
and a wholly owned subsidiary of FSAC organized on February 15, 1996 solely
for purposes of facilitating the Merger. Except in connection with its
organization, the Merger Agreement and the Merger, Merger Sub has not engaged
in any business or substantive activities since its incorporation.
COMPETITION
If the Merger is consummated, FSAC will become subject to competition from
competitors of EBIC. See "BUSINESS OF EBIC -- Competition."
MANAGEMENT AND EMPLOYEES
The executive officers of FSAC are Gilbert D. Scharf (Chairman of the
Board, Chief Executive Officer and President) and Michael J. Scharf (Vice
President, Secretary and Treasurer). Pursuant to the Merger Agreement,
immediately following the Effective Time, FSAC will take all action necessary
to cause Donald Marshall to be appointed Vice-Chairman of FSAC. FSAC has one
other employee. Since FSAC's inception, no executive officer has received any
cash compensation from FSAC for services rendered, although Gilbert Scharf
has entered into one of the Employment Agreements that will become effective
upon consummation of the Merger (see "THE MERGER AGREEMENT -- Interests of
Certain Persons in the Merger -- Employment Agreements"), and it is expected
that any other full-time executive officers will receive compensation, in
amounts not yet determined, subsequent to consummation of the Merger. Prior
to consummation of a Business Combination, none of FSAC's officers or
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directors has received or will receive any compensation other than a $5,000
per month administrative fee payable to Scharf Advisors, Inc., a corporation
wholly owned by Gilbert Scharf, and reimbursement for out-of-pocket expenses
incurred in connection with FSAC's business. There is no limit on the amount
of such out-of-pocket expenses and there has not been nor will there be any
review of the reasonableness of such expenses by anyone other than the FSAC
Board, which includes persons who have received, and may seek, reimbursement.
None of FSAC's officers or directors (who collectively constitute all of the
Initial FSAC Stockholders) or their respective affiliates will receive any
consulting or finder's fee or other compensation in connection with the
introduction of FSAC to, or the evaluation of, a Target Business or
consummation of a Business Combination. See "MANAGEMENT OF FSAC."
PROPERTIES
Scharf Advisors, Inc. has provided office space and certain office and
secretarial services to FSAC for which FSAC pays $5,000 per month. This
arrangement, by its terms, currently terminates upon consummation of a
Business Combination.
LEGAL PROCEEDINGS
There are no legal proceedings pending against FSAC.
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MANAGEMENT OF FSAC
At the Effective Time, as a result of the Classified Board Amendment,
FSAC's Board of Directors will be expanded to consist of eight members, who
will be elected at the FSAC Special Meeting. The nominees for director are:
Gilbert D. Scharf, Michael J. Scharf, Denis Martin, Larry S. Kopp, William B.
Wigton, Frederick B. Whittemore, Donald R.A. Marshall and James W. Stevens.
All such nominees, other than Messrs. Marshall, Stevens and Wigton, are
currently directors of FSAC. Messrs. Marshall and Stevens are designees of
EBIC. Mr. Wigton is replacing William D. Birch, a current director of FSAC,
who has tendered his resignation effective upon consummation of the Merger.
As a result of the Classified Board Amendment, FSAC's Board of Directors will
be divided into three classes, with directors elected at the FSAC Special
Meeting to be designated as Class I Directors, Class II Directors or Class
III Directors. Two Class I Directors will serve for an initial term of one
year until the annual meeting of stockholders in 1997 and until their
respective successors are elected and qualified; three Class II Directors
will serve for an initial term of two years until the annual meeting of
stockholders in 1998 and until their respective successors are elected and
qualified; and three Class III Directors will serve for an initial term of
three years until the annual meeting of stockholders in 1999 and until their
respective successors are elected and qualified. Starting with the 1997
annual meeting and continuing for each succeeding annual meeting, successors
to the class of directors whose term expires at that annual meeting will be
elected for a term of three years.
The nominees, their proposed classes, ages and the year in which each
first became a director are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
CLASS OF BECAME
NOMINEE DIRECTOR AGE DIRECTOR
- ------------------------ ----------- ----- ------------
<S> <C> <C> <C>
Gilbert D. Scharf ....... Class III 47 1994
Michael J. Scharf ....... Class III 53 1994
Larry S. Kopp ........... Class III 53 1994
Donald R.A. Marshall ... Class II 51 N/A
Denis Martin ............ Class II 46 1994
William B. Wigton ....... Class II 49 N/A
James W. Stevens ........ Class I 59 N/A
Frederick B. Whittemore Class I 64 1994
</TABLE>
GILBERT D. SCHARF has been Chairman of the Board, President and Chief
Executive Officer of FSAC since its inception. Since April 1993, Mr. Scharf
has been Vice President, Secretary, Treasurer and a director of International
Metals Acquisition Corporation, a holding company with operating subsidiaries
in the business of manufacturing cold drawn steel bars ("IMAC"). Since 1989,
Mr. Scharf has been a private investor and Chairman of Scharf Advisors, Inc.
("Scharf Advisors"), a financial advisory firm. From 1985 to January 1989,
Mr. Scharf was a Managing Director of Lazard Brothers & Co. Ltd. in London,
where he was responsible for establishing and managing capital market
activities. From 1983 to 1985, Mr. Scharf was the General Partner of Mendez,
Scharf & Co., a private investment partnership. Prior thereto, Mr. Scharf was
a Managing Director at Morgan Stanley & Co. ("Morgan Stanley") from 1978 to
1983, where he managed all corporate and international bond trading and new
issue commitments and the money market department, and was co-chairman of the
risk management committee. Upon consummation of the Merger, Mr. Scharf will
also become Vice-Chairman of EBIC. Mr. Scharf earned a B.A. degree from Duke
University.
MICHAEL J. SCHARF has been Vice President, Secretary, Treasurer and a
director of FSAC since its inception. Since April 1994, Mr. Scharf has been
Chairman of the Board, President and Chief Executive Officer of IMAC. From
August 1989 to April 1994, he was a private investor. From October 1983 to
August 1989, Mr. Scharf was the Chairman and Chief Executive Officer of
Edgcomb Steel of New England, Inc. and its successor corporation, Edgcomb
Corporation, which was, from 1984 to 1989, one of the largest independent
metals service center and distribution companies in the United States.
Edgcomb Corporation was sold in 1989 to a company controlled by The
Blackstone Group. Mr. Scharf received an A.B. degree from Princeton
University and an M.B.A. from Harvard Business School.
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DENIS MARTIN has been a director of FSAC since its inception. Since July
1993, Mr. Martin has been a private investor. From January 1992 to July 1993,
Mr. Martin served as risk investment manager at Cragnotti & Partners Capital
Investment. From January 1990 to December 1991, Mr. Martin headed the
Investment Group at BNP Securities and, from 1985 to December 1989, he was a
partner in the Lazard Brothers Capital Group, where he was responsible for
risk management. From 1980 to 1985, Mr. Martin was a Eurobond market-maker at
Morgan Stanley and prior thereto, he was in the actuarial and investment
departments at Legal and General Assurance, a major U.K. insurance company.
Mr. Martin earned a B.S. degree from the University of Leicester, England.
LARRY S. KOPP has been a director of FSAC since its inception. Since
November 1992, Mr. Kopp has been Managing Director of Frank Russell and
Company, a pension consulting firm which currently has $600 billion under
advisement and $22 billion in investment funds. From 1978 to November 1992,
Mr. Kopp held several senior management positions in strategic growth areas
of Citicorp, including General Manager of its bank card business and Chairman
of Citicorp Insurance Services. From 1974 to 1978, Mr. Kopp was involved in
venture capital transactions and was an advisor at E.M. Warburg Pincus and
Company, where he served as a consultant to corporations regarding strategic
planning, turnarounds, financial restructuring and sales of assets. Mr. Kopp
earned B.A. and M.B.A. degrees from Stanford University.
FREDERICK B. WHITTEMORE has been a director of FSAC since its inception.
Mr. Whittemore currently serves as a member of the Boards of Directors of
Partner Re Services Ltd., Southern Pacific Petroleum, Integon Insurance and
Chesapeake Energy Corporation. Since 1989, Mr. Whittemore has been an
Advisory Director at Morgan Stanley and he is Chairman of several of Morgan
Stanley's mutual funds. Mr. Whittemore started at Morgan Stanley in 1958; he
was a Partner from 1967 to 1970 and a Managing Director from 1970 until 1988.
He was a senior banker in Corporate Finance, Mergers and Acquisitions and
Capital Markets, and Syndicate Manager responsible for organizing and pricing
all public offerings. Mr. Whittemore has also been a member of the Council of
Foreign Relations since 1983 and was Chairman of the Board, Amos Tuck School
of Business Administration at Dartmouth College from 1988 to June 1992. From
1977 to 1984, Mr. Whittemore was a Governor of the American Stock Exchange
("AMEX") and from 1982 to 1984 he was Vice Chairman of AMEX. Mr. Whittemore
earned an A.B. degree from Dartmouth College and an M.B.A. from the Amos Tuck
School of Business Administration.
WILLIAM B. WIGTON was a founding member and has been a managing partner of
Merrion Group, L.P., a broker-dealer, since its inception in 1989. He is also
a managing director of and investor in Merrion Investors, L.P., a private
investment fund, and in 1996 was appointed a director of Munn, Bernhard &
Associates, a registered investment advisor. From 1981 to 1989, Mr. Wigton
was employed by Lazard Freres & Co. and was a general partner from 1987 to
1989, with responsibility for corporate bond sales. From 1979 to 1981, Mr.
Wigton was a senior vice president at Dillon, Read & Co. Inc. ("Dillon
Read"). Prior thereto, he was associated with Morgan Stanley (1975 to 1979)
and Morgan Guaranty Trust Company (1970 to 1975). Mr. Wigton received his
B.A. from Lynchburg College.
DONALD R.A. MARSHALL was a director of the predecessor business to EBIC
and has been a director of EBIC since its inception. He has been President
and Chief Executive Officer and the director of EBIC's various domestic and
international subsidiaries and affiliates since 1986. Prior to joining EBIC,
Mr. Marshall was a money market specialist with Nesbitt Thompson and Co.
Ltd., a Canadian investment firm. Upon consummation of the Merger, Mr.
Marshall will become Vice-Chairman of FSAC. Mr. Marshall, who currently
serves as a member of the Boards of Directors of Trilon International
Securities Ltd. and Century IBC Management Inc., received his B.A. degree
from Trinity College, University of Toronto and his M.B.A. from Stanford
University.
JAMES W. STEVENS held various senior positions at The Prudential Insurance
Company of America ("Prudential") from October 1987 through December 1994 .
Mr. Stevens retired from Prudential in January 1995. As an Executive Vice
President, from October 1987 to December 1994, his responsibilities included
serving on the Operating Council since 1993 and serving as Chairman and Chief
Executive Officer of the Prudential Asset Management Group with
responsibility for global institutional money management since 1993. From
April 1985 to October 1987, he was a Managing Director of Dillon Read
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in its investment banking and private investment origination group. From 1974
to 1985, Mr. Stevens held several senior positions at Citicorp, including
Chairman of Citicorp Venture Capital Ltd. and Group Executive of the Capital
Markets Group, responsible for the Western Hemisphere merchant banking and
Investment Management activities of Citicorp. Mr. Stevens currently serves on
the board of directors of the following companies: Biogen, Inc., Markem
Corporation, MSO America, Polyfibron Technologies, Inc., and Prudential
Equity Investors. Mr. Stevens received his B.A. degree from Williams College
and his M.B.A. from New York University.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires FSAC's directors, executive
officers and persons who own greater than 10% of a registered class of FSAC's
equity securities ("10% Stockholders") to file with the Commission initial
reports of ownership and reports of changes in ownership of FSAC Common Stock
and other equity securities of FSAC and to furnish FSAC with copies of all
such forms. Based solely on its review of the copies of such forms furnished
to it, FSAC believes that during the fiscal year ended December 31, 1995 each
of its officers, directors and 10% Stockholders complied with the Section
16(a) reporting requirements.
EXECUTIVE COMPENSATION
Upon consummation of the Merger, it is expected that directors of FSAC who
are not full-time employees will be paid a retainer fee. The amount of such
fees have not yet been determined.
No executive officer of FSAC has received any cash compensation from FSAC
since its inception for services rendered, but it is anticipated that in
addition to the Employment Agreements (see "THE MERGER -- Interests of
Certain Persons in the Merger -- Employment Agreements"), full-time executive
officers will receive compensation, in amounts yet to be determined,
subsequent to consummation of the Merger. Except as described below with
respect to Scharf Advisors, prior to the consummation of a Business
Combination, none of FSAC's officers, directors or stockholders will receive
any compensation other than reimbursement for any out-of-pocket expenses
incurred in connection with activities on behalf of FSAC. There is no limit
on the amount of such out-of-pocket expenses and there will be no review of
the reasonableness of such expenses by anyone other than the FSAC Board of
Directors, which includes persons who may seek reimbursement. Under no
circumstances can the amount of such reimbursable expenses, together with all
of FSAC's other expenses related to the investigation and selection of a
Target Business and the negotiation of an agreement to acquire a Target
Business, be in excess of the amount of the net proceeds of the IPO not held
in the Trust, unless FSAC consummates a Business Combination, in which event
the proceeds of the Trust may be used to make such reimbursement and pay such
expenses.
CERTAIN OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1994, FSAC issued an aggregate 833,333 Pre-IPO Shares for an
aggregate purchase price of $25,000, or $.03 per share, to the Initial FSAC
Stockholders.
In September 1994, FSAC consummated the Bridge Financing. The thirteen
investors in the Bridge Financing loaned an aggregate of $200,000 to FSAC and
were issued promissory notes in that amount, bearing interest at the rate of
10% per annum and payable at the consummation of the IPO, and 400,000 Bridge
Warrants. None of the investors in the Bridge Financing were affiliated with
FSAC or the Initial FSAC Stockholders. Three of the investors are minority
stockholders (each owning less than 2%) of GKN Holdings Corp., the sole
stockholder of GKN. The Bridge Warrants are identical to the FSAC Warrants
issued in the IPO except that they are not redeemable by FSAC until 90 days
after the consummation of a Business Combination. The holders of the Bridge
Warrants have agreed not to transfer them until after the consummation of a
Business Combination and not to exercise them until 90 days after such
consummation. FSAC registered the Bridge Warrants and the underlying shares
of FSAC Common Stock pursuant to the registration statement FSAC filed in
connection with the IPO and granted the investors certain "piggy-back"
registration rights for the Bridge Warrants and such underlying shares. The
Exchange Offer, if made, would extend to the Bridge Warrants.
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In connection with the IPO, Scharf Advisors agreed that, until the
acquisition of the Target Business, it will make available to FSAC its office
space, as well as certain office and secretarial services as may be required
by FSAC from time to time. FSAC has agreed to pay Scharf Advisors $5,000 per
month for such services. In addition, Scharf Advisors receives reimbursement
for any out-of-pocket expenses incurred in connection with activities on
behalf of FSAC. Gilbert Scharf is the sole officer, director and stockholder
of Scharf Advisors. Management of FSAC believes that the arrangement with
Scharf Advisors is on terms at least as favorable as would be available from
an unaffiliated third party.
Gilbert D. Scharf and Michael J. Scharf are brothers. There are no other
family relationships among FSAC's directors, executive officers or persons
nominated or chosen by FSAC to become a director or executive officer.
BUSINESS OF EBIC
OVERVIEW
EBIC, through its subsidiaries and affiliates, is a wholesale broker of
money market instruments, derivative products, and selected fixed income
securities. It conducts its business through offices in major financial
centers, including New York, London, Toronto, Tokyo and Hong Kong, and by
means of correspondent relationships with other brokers throughout the world.
In addition to its wholly owned subsidiaries in New York, London and Canada,
EBIC has a 51% interest in Yagi Euro (Hong Kong) Limited, a 50% interest in
the Tokyo Partnership and a 15% minority interest in Yagi Euro, its partner
in the Tokyo Partnership. EBIC's customers are primarily well capitalized
banks, investment banks and broker dealers. EBIC functions primarily as an
intermediary, matching the needs of financial institutions. EBIC'S
transactions are principally of two types, (i) transactions whereby EBIC acts
only as a matching broker and (ii) transactions whereby EBIC acts as a
matched riskless principal. In transactions involving cash deposits,
derivative products and repurchase agreements, the trades are executed on a
name give-up basis and settled directly between the counterparties with EBIC
acting solely as an agent. In these transactions EBIC is never a
counterparty. In the second type of transaction, primarily securities
transactions, EBIC acts as a matched riskless principal connecting buyers and
sellers at exact prices. EBIC does not earn a "spread" on any such
transaction; rather earnings are received through commissions. These
transactions are settled through clearing institutions within a few days of
the transaction date. Except for short-term positions in connection with its
municipal brokerage described below, EBIC does not, as a matter of practice,
take positions for its own account. At March 31, 1996 EBIC employed
approximately 783 personnel worldwide.
EBIC assists its customers in executing trades by identifying
counterparties with reciprocal interests. Securities traders and market
makers use these "match maker" services for several reasons. First, a
customer can benefit from using the larger sales force of a brokerage firm.
This is increasingly important as securities firms and banks have scaled down
their own sales operations in order to reduce overhead. Second, customers can
function anonymously until the point of a trade execution, thereby achieving
increased flexibility without signaling their intentions to the marketplace.
Third, a broker can provide market information, trading possibilities and
arbitrage opportunities. EBIC provides these services by means of a worldwide
telecommunications network, with direct lines to most of its approximately
2,000 institutional clients.
PRODUCTS
EBIC introduces customers, negotiates and executes transactions on their
behalf and receives a per transaction commission, which is either billed at
month end, or is retained in the process of clearing. EBIC's business falls
into the brokerage of three broad groups of products: (i) cash products, (ii)
derivative products and (iii) securities products and repurchase agreements.
Cash Products
In general, cash products take the form of deposits placed by one
financial institution with another, at an agreed-upon rate of interest, for a
fixed period of time. The most traditional product in this category
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is the Eurodollar deposit. Eurodollars are U.S. dollar deposits placed with
financial institutions domiciled outside the United States, including the
branches of U.S. banks. Eurodollar deposits are brokered throughout EBIC's
entire network. Additionally, each EBIC office brokers domestic deposits
applicable to its local country, such as domestic Sterling. EBIC also brokers
other Eurocurrencies, such as Euro Swiss Francs, Euro Deutchemarks and Euro
Yen. EBIC brokers cash products predominantly to multinational banks.
Derivative Products
A derivative products transaction is an agreement entered into by two
parties, in which each commits to a series of payments based upon the price
performance of an underlying financial instrument or commodity for a specific
period of time. This category includes a broad range of sophisticated
financing techniques employed by multinational banks, financial institutions,
securities dealers and corporations. Some of the types of derivatives most
frequently brokered by EBIC are interest rate swaps, forward rate agreements,
commodity swaps and asset conversion swaps.
In an interest rate swap, two parties agree to exchange interest rate
payment obligations on a notional principal amount over the term of the swap.
No principal is exchanged, and market risk is limited to differences in the
interest payments. Swaps enable institutions that may not be able to obtain
low cost fixed rate funding, but who can borrow lower cost floating rate
funds, to swap those floating rate obligations for fixed rate obligations and
obtain a fixed rate cost of funds that they could not otherwise access.
Additional swap instruments for which EBIC provides brokering services
include asset conversion swaps in which fixed rate and floating rate debt
instruments are swapped; and commodity swaps (including options and physical
contracts based on oil, natural gas and electricity) in which payments based
on fixed and floating commodities indices are exchanged.
Forward rate agreements ("FRAs") are over-the-counter, off-balance sheet
instruments similar to interest rate futures, designed to give the
counterparties protection against a shift in interest rates for time
deposits. The buyer, or borrower, of an FRA agrees to pay the seller, or
lender, at some specified future settlement date, an amount of interest based
on a notional principal at a fixed rate for a specified period of time. The
seller agrees to pay the buyer, on the same future settlement date, an amount
of interest based on the same amount of notional principal and the same
period of time but based on the then prevailing market rate for the time
period. No actual principal is exchanged. On the settlement date, the buyer
and the seller calculate the present value of the net interest owed, and one
party pays the other accordingly.
EBIC also brokers trades in cross currency swaps and various options. In
both the U.K. and Tokyo, a large portion of EBIC's derivative products
business is non-dollar denominated. EBIC brokers derivative products
predominantly to multinational banks and investment banks.
Securities Products and Repurchase Agreements
Products brokered by EBIC in this category include debt obligations issued
by governments, banks and corporations. EBIC brokers transactions in banker's
acceptances, certificates of deposit, commercial paper, floating rate notes,
federal agency securities, municipal securities, Brady bonds, Euro bonds, and
zero coupon bonds. EBIC also arranges investment agreements between municipal
bond issuers and financial providers.
Repurchase agreements ("repos") are contractual obligations entered into
by two counterparties, first to sell securities and then to repurchase those
same securities (or the reverse in the case of a buyer), at an agreed upon
future date and price. EBIC acts as an intermediary for the U.S. Primary
Government Dealer community (approximately 37 banks and dealers licensed to
participate in auctions of U.S. Treasury securities), as well as for a number
of U.S. regional banks, in the negotiation and execution of U.S. Treasury
repos. EBIC disseminates repo market information via proprietary,
computerized screens located in customers' offices. EBIC also provides a repo
service that is "voice brokered" directly to
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regional banks, which allows EBIC broad penetration of the market. Repos on
Canadian government securities are brokered from EBIC's Toronto office to the
Canadian dealer community in a similar fashion.
Using the same proprietary screen systems, Emerging Market debt, including
Brady bonds, local sovereign issues, Euro bonds and options on Brady bonds,
are brokered by specialized teams located in New York and London. Their
market coverage includes North and South America and Europe.
In June 1996, EBIC began brokering municipal securities, generally acting
as a matched riskless principal. Unlike in its other businesses, EBIC's
brokers of municipal securities are permitted to take limited positions in
municipal securities for short periods of time (generally less than 5 days)
to facilitate anticipated customer needs. EBIC's policy with respect to such
trading and positions requires management to monitor such positions on a
daily basis to assure compliance with established limits. In addition, any
such positions are marked to market on a daily basis using independently
obtained market prices.
EBIC brokers securities products and repurchase agreements predominantly
to banks, investment banks and other financial institutions.
COMMUNICATIONS NETWORK AND INFORMATION SYSTEMS
EBIC has a global communications network through which it conducts its
business and sophisticated computerized information systems over which it
receives instantaneous market information. Its teams of computer and
communications specialists provide technological support to the network. EBIC
is continually upgrading its technological facilities in order to access and
collate market information and redistribute it instantaneously throughout its
network. Through the continued development and use of proprietary software,
computerized screen displays, digital networks and interactive capabilities,
EBIC keeps its communication technology and information systems as current as
possible.
Due to the need for instantaneous communication, the majority of EBIC's
customers are connected to EBIC via direct point to point telephone lines
around the world. EBIC's sophisticated host computer system with digital
facilities is used to connect via one network EBIC offices and specific
customers who trade in certain products, including Emerging Markets debt,
repurchase agreements, bond options, bankers acceptances and certificates of
deposit. In this way, all parties have access simultaneously to market bids
and offers.
Most of the markets in which EBIC operates are highly efficient, offering
participants immediate access and enormous liquidity. Some markets are
subject to a high degree of volatility. Even the slightest variation in price
can make the difference between missing and executing a transaction.
Consequently, EBIC's business depends heavily on the use of advanced
telephone equipment, computer systems and pricing software. Direct line voice
communication, live computerized screen systems and instantaneous access to
financial information and trade execution for its clients are all imperative
for EBIC's continued success. For this reason, EBIC intends to continue to
expand and enhance its communication and information system networks.
PERSONNEL
As of March 31, 1996, EBIC employed approximately 783 full time staff,
including directors and senior managers. A summary of these employees by
geographic location is included below:
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------
BROKERS ADMINISTRATION TOTAL
--------- -------------- -------
<S> <C> <C> <C>
New York .... 246 71 317
London ...... 253 67 320
Canada ...... 21 5 26
Tokyo ....... 41 -- 41
Hong Kong .. 59 20 79
--------- -------------- -------
620 163 783
========= ============== =======
</TABLE>
95
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In common with all companies operating within the industry, EBIC's
business is heavily dependent on relationships that exist between brokers and
their clients. EBIC emphasizes building, nurturing and preserving those
relationships. Many brokers have performance related compensation packages.
Staff compensation constitutes the largest component of EBIC's expenses.
Significant amounts are also spent in connection with the continual marketing
of products and resources through direct personal contact and entertainment.
These expenses are an important and integral part of EBIC's marketing policy
and are encouraged in a controlled manner by EBIC's senior management.
REGULATION
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. As a registered broker-dealer,
Euro Brokers Maxcor Inc., a wholly owned subsidiary of EBIC, is regulated by
the Commission, the NASD, the Commodity Futures Trading Commission, the
National Futures Association and the New York Cotton Exchange, as well as by
various state authorities. As a registered investment advisor, Euro Brokers
Inc., is subject to regulations issued pursuant to the Investment Advisors
Act of 1940. Certain non-U.S. subsidiaries are subject to regulation in the
jurisdictions in which they conduct their businesses.
EBIC's principal non-U.S. regulated subsidiaries are Euro Brokers
International Ltd. and EBFSL, which are subject to regulation in the United
Kingdom by the Bank of England and the SFA, respectively. Recently, the SFA
has issued new rules with respect to the Investment Services Directive and
the Capital Adequacy Directive of the EC, in particular regarding
consolidated supervision rules which impose various capital thresholds on
investment, holding and service companies depending on, among other things,
the activities of such company. The SFA has conditionally confirmed the
categorization of EBFSL as a Category D firm and, as such, EBFSL satisfies
the capital adequacy requirements and is not subject to the consolidated
supervision rules of the SFA. Should EBFSL decide in the future to change or
expand the nature of its business, it may be required to comply with the
consolidated supervision requirements, which requirements the London group,
including EBFSL, may not satisfy with its current capitalization. The SFA had
also raised a concern regarding the technical solvency of EBHL, which concern
has been resolved principally by restructuring the capital of EBHL.
Euro Brokers Canada Ltd. is regulated by the Ontario Securities
Commission. Yagi Euro (Hong Kong) Limited is regulated by the Foreign
Exchange and Deposit Brokers Association. EBIC also holds a 15% equity
interest in Yagi Euro, which is subject to regulation in Japan by the
Ministry of Finance.
COMPETITION
EBIC faces intense competition in all aspects of its cash, money market,
derivatives, securities and repurchase agreements business. Constant
competition comes from other money and securities brokers, from information
providers through their use of sophisticated communication networks and
systems, from electronic execution systems such as those implemented by
Reuters and EBS (a company owned by a consortium of commercial banks), and
from certain of EBIC's own customers, themselves seeking to expand and/or
diversify their own businesses. To remain competitive, EBIC must be able to
respond to customer needs by anticipating changes in the marketplace and by
making constant improvements in the services it provides. It must continue to
invest in the expansion and increased functionality of its proprietary screen
system, and the use of specialized data and communication facilities. It must
maintain sufficient capital to sustain its creditworthiness in transactions
in order to facilitate trades where it acts either on a name give-up basis or
as riskless principal. Perhaps most importantly, EBIC must retain its ability
to recruit, incentivize and retain key personnel.
FACILITIES
EBIC's principal executive offices are located in approximately 48,800
square feet of space in New York City leased by EBIC pursuant to various
lease agreements that expire no earlier than September 2004. EBIC and its
subsidiaries also lease approximately 35,800 square feet of space in London
pursuant to a lease that expires in 2018 and includes an option to terminate
in 2003, at EBIC's discretion. In addition, EBIC and its subsidiaries lease
space in Toronto, Canada and Hong Kong. EBIC believes that its current
facilities are adequate for its existing needs.
96
<PAGE>
LEGAL PROCEEDINGS
In common with other money brokers, a subsidiary of EBIC has, in the past,
received commissions on a number of interest rate swap transactions which
were booked on behalf of banks and local authorities in the United Kingdom.
Following the ruling by the House of Lords that the nature of these contracts
was "ultra vires," or beyond the scope of the power of the local authorities,
some claims in a material amount have been received for the return of certain
of this brokerage. In addition, EBIC has been named as a defendant in other
civil actions that seek significant damages; management believes these suits
lack merit and intends to vigorously contest them.
The future outcome of these matters cannot be predicted with certainty
and, accordingly, it is possible that the ultimate disposition of the above
noted matters could be material to the results of operations in any given
period. Based upon discussions with legal counsel, however, it is the opinion
of management that the ultimate disposition of the above matters will not
have a material adverse effect on the consolidated financial condition of
EBIC, its results of operations or liquidity.
PROPOSED JOINT VENTURE
EBIC and Global Financial Information Corporation ("GFIC") have recently
executed a letter of intent providing for the establishment of a joint
venture (the "Venture") for the purpose of designing, developing,
implementing and distributing information and data generated or otherwise
collected by EBIC and its subsidiaries in certain Emerging Market debt
products, including Brady bonds. In general, EBIC would supply certain
information and data on a nonexclusive basis, except for competing uses, and
GFIC would supply electronic distribution capacity, as well as certain global
financial market information at no cost to the Venture. In addition, EBIC
would acquire an option to purchase up to one million shares of common stock
of GFIC at a price of $6.50 per share (the most recent issue price for such
shares at the time the letter of intent was signed). The option would be
exercisable for a period of five years, but only to the extent that the
aggregate exercise price did not exceed the share of Venture profits
allocated to EBIC during that period. GFIC is an affiliate of EBIC by reason
of the fact that a majority of GFIC voting stock is held by WCAS and other
partnerships affiliated with WCAS.
97
<PAGE>
MANAGEMENT OF EBIC
Upon completion of the Merger, the officers of EBIC immediately prior to
the Effective Time will continue to be the officers of the Surviving
Corporation and, pursuant to the Merger Agreement, immediately following the
Effective Time, FSAC and EBIC will take all action necessary to cause Gilbert
Scharf to be appointed as Vice-Chairman of EBIC.
The Surviving Corporation will initially have a Board of Directors
consisting of the EBIC Board of Directors and, pursuant to the Merger
Agreement, immediately following the Effective Time, FSAC and EBIC will take
all action necessary to cause Gilbert Scharf and Michael Scharf to be
appointed to the Board of Directors of EBIC. It is contemplated that Messrs.
Welsh and Anderson will resign immediately following the Merger and be
replaced on the EBIC Board by Messrs. Stevens and Bergstein.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by or paid to the
Chief Executive Officer and each of the four other most highly compensated
executive officers of EBIC (collectively, the "EBIC Named Executive
Officers") for the fiscal year ended December 31, 1995. EBIC does not have
any stock option or other long-term compensation plans.
<TABLE>
<CAPTION>
ALL OTHER
NAME AND POSITION SALARY(1) BONUS COMPENSATION(2)
- -------------------------- ---------- ---------- ---------------
<S> <C> <C> <C>
Donald R. A. Marshall(3) . $451,000 $100,000 $12,359
President and Chief
Executive Officer
Keith E. Reihl ............ 271,000 90,000 4,812
Senior Vice President,
Treasurer
Alistair Johnstone ........ 316,000 0 6,819
Executive Vice President
Brian Clark ............... 271,000 0 5,952
Executive Vice President,
Secretary
Walter Dulski ............. 271,000 0 2,065
Senior Vice President
</TABLE>
- ------------
(1) Includes, for each EBIC Named Executive Officer, a $1,000 contribution
by EBIC to its 401(k) Plan.
(2) Amounts, for each EBIC Named Executive Officer, are comprised of (i) an
annual premium of $785 paid by EBIC on travel accident insurance
policies providing coverage of $2.5 million for Mr. Marshall and $1
million for each other EBIC Named Executive Officer and (ii) annual
premiums paid by EBIC on long-term disability policies providing the
following coverage in the event of disability: monthly payments for
life to Mr. Marshall of $12,000 and to each of Messrs. Reihl, Johnstone
and Clark of $6,000; monthly payments for two years to Mr. Dulski of
$3,000.
(3) EBIC has agreed, in the event of Mr. Marshall's death, to purchase his
shares of EBIC Common Stock for an amount equal to the greater of (i)
50% of the proceeds payable to EBIC under a key person life insurance
policy maintained by EBIC on Mr. Marshall and (ii) the fair market
value of the shares. Amounts disclosed in the table do not reflect this
agreement.
98
<PAGE>
Employment Agreements
In connection with the Merger, as of March 8, 1996, EBIC entered into
employment agreements with Donald R.A. Marshall and Keith E. Reihl (the "EBIC
Employment Agreements"). Although the EBIC Employment Agreements have been
executed, they are contingent upon, and do not become effective until
consummation of the Merger. Mr. Marshall's employment agreement provides that
he will be Chairman of the EBIC Board of Directors, President and Chief
Executive Officer of EBIC and Vice Chairman of the FSAC Board of Directors,
with an annual base salary of $450,000, as from time to time increased by the
EBIC Board of Directors, with bonuses to be determined by the EBIC Board of
Directors, but only if the book value per share of FSAC Common Stock
increases during the applicable period. Pursuant to Mr. Reihl's employment
agreement he will be Chief Financial Officer of EBIC and a member of the EBIC
Board of Directors with an annual base salary of $300,000, as from time to
time increased by the EBIC Board of Directors with bonuses to be determined
by the EBIC Board of Directors, but only if the book value per share of FSAC
Common Stock increases during the applicable period. The term of the EBIC
Employment Agreements is three years, beginning on the date of the Effective
Time, with annual, automatic one-year extensions beginning on the second
anniversary of such date unless either party gives notice of nonrenewal at
least 90 days prior to such anniversary.
Pursuant to the EBIC Employment Agreements, both Mr. Marshall and Mr.
Reihl are prohibited from disclosing confidential information at any time
during and after termination of employment and are subject to noncompetition
covenants under specified conditions and for specified periods. See "THE
MERGER -- Interests of Certain Persons in the Merger -- Employment
Agreements."
99
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF EBIC AND FSAC
The following table sets forth certain information with respect to the
beneficial ownership of EBIC Common Stock as of May 31, 1996 by (i) each
person known to EBIC to be the beneficial owner of more than 5% of the
outstanding shares of EBIC Common Stock, (ii) each of EBIC's directors, (iii)
each EBIC Named Executive Officer and (iv) all directors and executive
officers of EBIC as a group.
BENEFICIAL OWNERSHIP OF SHARES OF EBIC COMMON STOCK
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME SHARES OWNED(5)
- --------------------------------------------- ----------- --------------
<S> <C> <C>
Welsh, Carson, Anderson & Stowe VI, L.P. (1) 907,602 54.31
Donald R. A. Marshall (2) .................... 197,823 11.8
Alistair H. Johnstone (2) .................... 119,870 7.2
Brian G. Clark (2) ........................... 70,320 4.2
Walter E. Dulski (2) ......................... 53,977 3.2
Keith E. Reihl (2) ........................... 50,362 3.0
Bruce K. Anderson (3)(4) ..................... 874,038 52.3
Patrick J. Welsh (3)(4) ...................... 874,038 52.3
All directors and executive officers
as a group (7 persons) (4) .................. 1,366,390 81.8
</TABLE>
- ------------
(1) The stockholder's address is One World Financial Center, Suite 3601,
New York, New York 10281 and the amount shown includes 56,718 shares of
EBIC Common Stock held by affiliates. See "BUSINESS OF EBIC -- Proposed
Joint Venture."
(2) The stockholder's address is c/o EBIC, Two World Trade Center, Suite
8400, New York, New York 10048.
(3) The stockholder's address is c/o WCAS, One World Financial Center,
Suite 3601, New York, New York 10281.
(4) The amount shown includes an aggregate 865,446 shares of EBIC Common
Stock owned by WCAS and WCAS Info. Messrs. Anderson and Welsh are
general partners of the sole general partners of each of these entities
but disclaim beneficial ownership of these shares.
(5) On a pro forma basis, assuming that no FSAC Warrants are exercised
immediately after the Effective Time, it is anticipated that the
percentage beneficial ownership in FSAC immediately after the Effective
Time of the specified persons will be approximately 50% of the
percentages specified.
100
<PAGE>
Set forth below is certain information concerning beneficial ownership of
FSAC Common Stock, as of May 31, 1996 (without giving effect to the
transactions contemplated by the Merger), by (i) each director and director
nominee of FSAC, (ii) each executive officer of FSAC, (iii) all executive
officers and directors of FSAC as a group and (iv) persons known to FSAC to
be the beneficial owners of 5% or more of the outstanding shares of FSAC
Common Stock.
BENEFICIAL OWNERSHIP OF SHARES OF FSAC COMMON STOCK
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME SHARES(1) OWNED(1)(2)
- ---------------------------------------------- ----------------- --------------------
<S> <C> <C>
Gilbert D. Scharf (3)(4) ...................... 831,666 18.8
Michael J. Scharf (3)(4) ...................... 386,667 8.8
Woodland Partners and affiliated entities (5) 355,000 8.0
Denis Martin (3)(4)(6) ........................ 45,000 1.0
Larry S. Kopp (3)(4) .......................... 33,000 *
William D. Birch (3)(4) ....................... 109,000 2.5
Frederick B. Whittemore (3)(4) ................ 25,000
All executive officers and directors
as a group (6 persons) ....................... 1,430,333 32.4
</TABLE>
- ------------
* Less than 1%
(1) Excludes shares of FSAC Common Stock issuable upon exercise of FSAC
Warrants. Gilbert Scharf beneficially owns 716,666 FSAC Warrants,
Michael Scharf beneficially owns 333,334 FSAC Warrants, Mr. Birch
beneficially owns 268,000 FSAC Warrants, Mr. Whittemore beneficially
owns 50,000 FSAC Warrants, Mr. Martin beneficially owns 10,000 FSAC
Warrants (jointly with his wife) and Mr. Kopp beneficially owns 21,000
FSAC Warrants.
(2) On a pro forma basis, assuming that (i) the Exchange Ratios are not
adjusted (see "THE MERGER AGREEMENT -- Adjustment of Exchange Ratios
and Cash Consideration") and (ii) no FSAC Warrants are exercised
immediately after the Effective Time, it is anticipated that the
percentage beneficial ownership of the specified persons will be
reduced by approximately 50% immediately after the Effective Time.
(3) The stockholder's address is c/o Financial Services Acquisition
Corporation, 667 Madison Avenue, New York, New York 10021.
(4) The aggregate 833,333 Pre-IPO Shares were placed in escrow with
Continental Stock Transfer & Trust Company, as escrow agent, for a
period ending on November 30, 1997. During such escrow period, such
persons are not able to sell or otherwise transfer the Pre-IPO Shares.
However, persons retain voting rights with respect to the Pre-IPO
Shares. Gilbert Scharf beneficially owns 498,333 Pre-IPO Shares,
Michael Scharf beneficially owns 220,000 Pre-IPO Shares, Mr. Martin
beneficially owns 40,000 Pre-IPO Shares and each of Messrs. Birch,
Whittemore and Kopp beneficially owns 25,000 Pre-IPO Shares.
(5) Based on information set forth in a Schedule 13D filed with the
Commission on December 12, 1994, Woodland Partners, a limited
partnership organized under the laws of the State of New York, is a
general partnership of which the general partners are Barry Rubenstein
and Marilyn Rubenstein. The general partners individually, as well as
The Marilyn and Barry Rubenstein Family Foundation, Woodland Venture
Fund, Seneca Ventures and Woodland Services Corp., entities with which
they are affiliated, may be deemed the beneficial owners of the shares
indicated. The address of Woodland Partners, as well as such other
beneficial owners, is 39 Woodland Road, Roslyn, New York 11576.
(6) Includes 5,000 shares of FSAC Common Stock beneficially owned jointly
with Mr. Martin's wife.
101
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the FSAC Common
Stock and Merger Warrants being offered hereby will be passed upon for FSAC
and Merger Sub by Skadden, Arps, Slate, Meagher & Flom, special counsel to
FSAC. Attorneys at Skadden, Arps, Slate, Meagher & Flom own in the aggregate
5,000 FSAC Units.
EXPERTS
The consolidated financial statements of EBIC and its subsidiaries as of
December 31, 1995 and 1994 and for each of the three years in the period
ended December 31, 1995 included in this Proxy Statement/Prospectus have been
so included in reliance upon the report of Price Waterhouse LLP, independent
accountants, appearing elsewhere herein, given on the authority of said firm
as experts in accounting and auditing.
The financial statements of FSAC included herein have been audited by BDO
Seidman, LLP, independent, certified public accountants, to the extent and
for the periods set forth in their report appearing elsewhere herein, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
STOCKHOLDER PROPOSALS
Assuming the Merger is consummated, any stockholder of what will then be
named Financial Services Corporation ("FSC") who wishes to submit a proposal
for presentation to the 1997 Annual Meeting of Stockholders must submit the
proposal to Financial Services Corporation, 667 Madison Avenue, New York, New
York, Attn: Secretary, no later than January 1, 1997, for inclusion, if
appropriate, in FSC's proxy statement and form of proxy relating to the 1997
Annual Meeting. FSC reserves the right to exclude any proposal which does not
meet all requirements for inclusion established by the Commission and in
effect at that time.
102
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL SERVICES ACQUISITION CORPORATION
<TABLE>
<CAPTION>
<S> <C>
PERIODS ENDED DECEMBER 31, 1994 AND 1995 (AUDITED)
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
Report of BDO Seidman, LLP, Independent Certified Public Accountants ................... 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 (Deficit) Accumulated During
the Development Stage ................................................................. F-5
Statements of Cash Flows ............................................................... F-6
Notes to Financial Statements .......................................................... F-7
EURO BROKERS INVESTMENT CORPORATION
AT DECEMBER 31, 1994 AND 1995 AND FOR THE YEARS ENDED
DECEMBER 31, 1993, 1994 AND 1995 (AUDITED)
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 (UNAUDITED)
Report of Price Waterhouse LLP, Independent Accountants ................................ F-11
Consolidated Statement of Financial Condition .......................................... F-12
Consolidated Statement of Operations ................................................... F-13
Consolidated Statement of Changes in Stockholders' Equity .............................. F-14
Consolidated Statement of Cash Flows ................................................... F-15
Notes to Consolidated Financial Statements ............................................. F-16
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Financial Services Acquisition Corporation
New York, New York
We have audited the accompanying balance sheets of Financial Services
Acquisition Corporation (a corporation in the development stage) as of
December 31, 1994 and 1995, and the related statements of operations, common
stock, common stock subject to possible conversion, preferred stock,
additional paid-in capital and retained earnings (deficit) accumulated during
the development stage, and cash flows for the period from August 18, 1994
(inception) to December 31, 1994 and the year ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 2, the Company's Certificate of Incorporation
provides for mandatory liquidation of the Company, without stockholder
approval, in the event that the Company does not consummate a business
combination within 24 months from the consummation of its Public Offering of
common stock (see Note 3). This 24-month period ends during December 1996.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Financial Services
Acquisition Corporation as of December 31, 1994 and 1995 and the results of
its operations and its cash flows for the period from August 18, 1994
(inception) to December 31, 1994 and the year ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
/s/ BDO SEIDMAN, LLP
- ------------------------------
New York, New York
March 8, 1996
F-2
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, DECEMBER 31, 1996
1994 1995 (UNAUDITED)
-------------- -------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents .............................. $ 1,783,022 $ 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) ..................... 17,475,598 18,489,353 18,718,730
Deferred acquisition costs (Note 8) .................... -- 60,000 622,500
Prepaid expenses ....................................... -- 5,000 --
Organization costs, less amortization of $845, $13,937
and $17,210 ........................................... 64,618 51,526 48,253
-------------- -------------- -------------
$19,323,238 $19,881,750 $20,435,972
============== ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and taxes ............................. $ 135,116 $ 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) ................... 3,493,372 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 3,700
Additional paid-in capital ............................. 15,710,140 15,710,140 15,710,140
Retained earnings (deficit) accumulated during the
development stage ..................................... (19,090) 176,392 250,760
-------------- -------------- -------------
$19,323,238 $19,881,750 $20,435,972
============== ============== =============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM THREE THREE PERIOD FROM
AUGUST 18, 1994 MONTHS MONTHS AUGUST 18, 1994
(INCEPTION) TO YEAR ENDED ENDED MARCH ENDED MARCH (INCEPTION) TO
DECEMBER 31, DECEMBER 31, 31, 1995 31, 1996 MARCH 31, 1996
1994 1995 (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
INCOME:
Interest ........................ $ 67,014 $1,102,027 $ 275,666 $ 244,118 $1,413,159
--------------- -------------- ----------- ----------- ---------------
EXPENSES:
General and administrative ..... 20,845 158,986 48,324 40,375 220,206
Acquisition costs (Note 7) ..... -- 239,817 -- -- 239,817
Occupancy (Note 4) .............. 5,000 60,000 15,000 15,000 80,000
Amortization of financing costs,
debt discount and organization
costs .......................... 40,345 13,092 3,273 3,273 56,710
State franchise taxes ........... 3,964 13,000 4,550 3,250 20,214
Interest (Note 3) ............... 3,836 -- -- -- 3,836
--------------- -------------- ----------- ----------- ---------------
Total expenses ................. 73,990 484,895 71,147 61,898 620,783
--------------- -------------- ----------- ----------- ---------------
Net income (loss) before taxes
on income ..................... (6,976) 617,132 204,519 182,220 792,376
Taxes on income (current) ........ -- 177,000 86,000 62,000 239,000
Taxes on income (deferred) ...... -- 42,000 -- -- 42,000
--------------- -------------- ----------- ----------- ---------------
Net income (loss) ................ $ (6,976) $ 398,132 $ 118,519 $ 120,220 $ 511,376
=============== ============== =========== =========== ===============
Net income per share ............. $ (.00) $ .09 $ .03 $ .03
=============== ============== =========== ===========
Weighted average common shares
outstanding ..................... 1,446,296 4,416,666 4,416,666 4,416,666
=============== ============== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
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 (DEFICIT)
ACCUMULATED DURING THE DEVELOPMENT STAGE
PERIOD FROM AUGUST 18, 1994 (INCEPTION) TO MARCH 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK SUBJECT
COMMON STOCK TO POSSIBLE CONVERSION PREFERRED STOCK
--------------------- ------------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- -------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 18, 1994 ...... -- $ -- -- $ -- -- $ --
Original issuance of common
stock ......................... 833,333 833 -- -- -- --
Issuance of warrants to
purchase common stock ......... -- -- -- -- -- --
Sale of 3,583,333 units, net of
underwriting discounts and
offering expenses ............. 2,866,667 2,867 716,666 3,481,258 -- --
Net loss for the period ........ -- -- -- -- -- --
Accretion to conversion value
of common stock ............... -- -- -- 12,114 -- --
----------- -------- ----------- ------------- ----------- --------
BALANCE, DECEMBER 31, 1994 .... 3,700,000 $3,700 716,666 $3,493,372 -- $ --
Net income for the year ........ -- -- -- -- -- --
Accretion to conversion value
of common stock ............... -- -- -- 202,650 -- --
----------- -------- ----------- ------------- ----------- --------
BALANCE, DECEMBER 31, 1995 .... 3,700,000 $3,700 716,666 $3,696,022 -- $ --
Net Income for the quarter
(unaudited) ................... -- -- -- -- -- --
Accretion to conversion value
of common stock (unaudited) . -- -- -- 45,852 -- --
----------- -------- ----------- ------------ ----------- --------
BALANCE MARCH 31, 1996
(UNAUDITED) ................... 3,700,000 $3,700 716,666 $3,741,874 -- $ --
=========== ======== =========== ============ =========== ========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RETAINED
EARNINGS
(DEFICIT)
ACCUMULATED
ADDITIONAL DURING THE
PAID-IN DEVELOPMENT
CAPITAL STAGE
-------- -----------
<S> <C> <C>
BALANCE, AUGUST 18, 1994 ...... $ -- $
Original issuance of common
stock ......................... 24,167 --
Issuance of warrants to
purchase common stock ......... 20,000 --
Sale of 3,583,333 units, net of
underwriting discounts and
offering expenses ............. 15,665,973 --
Net loss for the period ........ -- (6,976)
Accretion to conversion value
of common stock ............... -- (12,114)
----------- ----------
BALANCE, DECEMBER 31, 1994 .... $15,710,140 $ (19,090)
Net income for the year ........ -- 398,132
Accretion to conversion value
of common stock ............... -- (202,650)
----------- ----------
BALANCE, DECEMBER 31, 1995 .... $15,710,140 $ 176,392
Net Income for the quarter
(unaudited) ................... -- 120,220
Accretion to conversion value
of common stock (unaudited) .. -- (45,852)
------------ ----------
BALANCE MARCH 31, 1996
(UNAUDITED) ................... $15,710,140 $ 250,760
============ ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM THREE MONTHS THREE MONTHS AUGUST 18, 1994
AUGUST 18, 1994 YEAR ENDED ENDED MARCH ENDED MARCH (INCEPTION) TO
(INCEPTION) TO DECEMBER 31, 31, 1995 31, 1996 MARCH 31, 1996
DECEMBER 31, 1994 1995 (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ......................... $ (6,976) $ 398,132 $ 118,519 $ 120,220 $ 511,376
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Deferred income taxes ................... -- 42,000 42,000
Amortization of financing costs, debt
discount and organization costs ....... 40,345 13,092 3,273 3,273 56,710
Interest on U.S. Government securities
in Trust Fund .......................... (60,600) (1,013,755) (247,291) (229,377) (1,303,732)
Interest on short-term investment ...... -- (16,222) -- (12,395) (28,617)
(Increase) decrease in prepaid expenses -- (5,000) (27,932) 5,000 --
Increase (decrease) in accrued expenses
and taxes .............................. 135,116 118,380 (39,660) 434,002 687,498
----------------- -------------- -------------- -------------- ---------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ................... 107,885 (463,373) (193,091) 320,723 (34,765)
----------------- -------------- -------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
U.S. Government security deposited in
Trust Fund--December 1994 ................ (17,414,998) -- -- -- (17,414,998)
Cumulative maturities of U.S. Government
securities deposited in Trust Fund ...... -- 72,044,713 -- 18,616,000 90,660,713
Cumulative acquisitions of U.S. Government
securities reinvested in Trust Fund ..... -- (72,044,713) -- (18,616,000) (90,660,713)
Cumulative maturities of short-term
investments .............................. -- 1,120,000 1,120,000
Cumulative acquisitions of short-term
investments .............................. -- (1,099,992) -- (999,485) (2,099,477)
Deferred acquisition costs ................ (60,000) -- (562,500) (622,500)
----------------- -------------- -------------- -------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES ... (17,414,998) (1,159,992) -- (441,985) (19,016,972)
----------------- -------------- -------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and issuance
of warrants .............................. 200,000 -- -- -- 200,000
Proceeds from public offering of
3,583,333 units, net of underwriting
discounts and offering expenses .......... 19,150,098 -- -- -- 19,150,098
Repayment of notes payable ................ (200,000) -- -- -- (200,000)
Proceeds from sale of 833,333 shares of
common stock to founding stockholders ... 25,000 -- -- -- 25,000
Deferred financing costs .................. (19,500) -- -- -- (19,500)
Organization costs ........................ (65,463) -- -- -- (65,463)
----------------- -------------- -------------- -------------- ---------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES ............................. 19,090,135 -- -- -- 19,090,135
----------------- -------------- -------------- -------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................... 1,783,022 (1,623,365) (193,091) (121,262) 38,395
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD .................................... -- 1,783,022 1,783,022 159,657 --
----------------- -------------- -------------- -------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD .. $ 1,783,022 $ 159,657 $ 1,589,931 $ 38,395 $ 38,395
================= ============== ============== ============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for:
Interest ................................. $ 3,836 $ -- $ -- $ -- $ 3,836
Income taxes ............................. -- -- -- 179,680 179,680
================= ============== ============== ============== ===============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
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 ACCOUNTING POLICIES
Income Taxes
Financial Services Acquisition Corporation (the "Company") follows
Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes". SFAS No. 109 is an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns ("temporary
differences"). Temporary differences resulted from the Company using the cash
basis for income tax purposes.
Organization Costs
Organization costs are being 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 instruments 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 December 31, 1995
represents a U.S. Treasury bill purchased on November 16, 1995 which matured
on February 15, 1996. The cost of the security was $18,364,716. 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 December 31, 1995 represents a U.S. Treasury
bill purchased on September 22, 1995 at a cost of $1,099,992 which matured on
January 25, 1996. The short-term investment at March 31, 1996 represents a
U.S Treasury bill purchased on January 26, 1996 at a cost of $999,485 which
matures on April 25, 1996.
Investments
The Company follows Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
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
F-7
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited.)
1. SUMMARY OF ACCOUNTING POLICIES (Continued)
and retained earnings (deficit) accumulated during the development stage and
cash flows for the three months ended March 31, 1995 and 1996 are unaudited.
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 conformity with generally
accepted accounting principles requires management to make assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. ORGANIZATION AND BUSINESS OPERATIONS
The Company was incorporated in Delaware on August 18, 1994 with the
objective of acquiring or merging with an operating business in the financial
services industry. The Company's founding stockholders (the "Initial
Stockholders") purchased 833,333 of its common shares, $.001 par value (the
"Pre-IPO Shares"), for $25,000 in August 1994.
The registration statement for the Company's initial 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 industry ("Business Combination"). There is no assurance
that the Company will be able to successfully 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 investments to U.S. Government securities
with maturities of 180 days or less. The remaining proceeds will be used to
pay for business, legal and accounting due diligence on prospective
acquisitions, 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 Combination all of the Initial
Stockholders, consisting of all of the current officers and directors of the
Company, have agreed that all Pre-IPO Shares owned by them will be voted with
the majority 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
Combination 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 stockholders entitled to vote on the
Business Combination divided by the number of Public Shares. The Company 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
F-8
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited.)
2. ORGANIZATION AND BUSINESS OPERATIONS (Continued)
to them exercised. Accordingly, 19.99% of the aggregate number of Public
Shares may be converted to cash in the event of a Business Combination.
Holders of 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 provides 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 attributed 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 consummation of a
Business Combination and ending November 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 Combination.
In connection with the Offering, the Company also sold 333,333 Unit
Purchase Options (the "IPO Options") 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 provided by an affiliate of
certain stockholders of the Company. Such affiliate has agreed that,
commencing on the effective date of the Offering through the consummation of
a Business Combination, 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 Directors.
F-9
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited.)
6. COMMON STOCK
At each of December 31, 1995 and 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 COSTS
On May 16, 1995, the Company executed a letter of 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 ACQUISITION
On March 8, 1996, the Company entered into an agreement to acquire Euro
Brokers Investment Corporation ("Euro Brokers"), a privately held
international 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, subject to
certain adjustments, 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 (approximately 7,566,666 warrants), and (iii)
$9.57 in cash (which, if the transaction had been consummated as of March 31,
1996, would have been adjusted to approximately $11.37 per share, aggregating
to approximately $19 million). Completion of this transaction is subject to
certain conditions, including stockholders approvals and receipt of certain
regulatory approvals. Costs relating to this proposed acquisition, primarily
professional fees, aggregated $622,500 at March 31, 1996, and have been
deferred.
F-10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors
and Stockholders of
Euro Brokers Investment Corporation
In our opinion, the accompanying consolidated statement of financial
condition and the related consolidated statements of operations, changes in
stockholders' equity and cash flows present fairly, in all material respects,
the financial position of Euro Brokers Investment Corporation and its
subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
/s/ PRICE WATERHOUSE LLP
- -------------------------------------
New York, New York
February 26, 1996,
except as to Note 2
which is as of March 8, 1996
F-11
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, 1996
DECEMBER 31, DECEMBER 31, ------------------------------
1994 1995 ACTUAL PRO FORMA (NOTE 2)
--------- -------- -------- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ......... $ 21,355,273 $ 27,013,350 $22,805,511 $22,805,511
Restricted cash (Note 15) ......... 1,799,175 1,785,490 1,755,475 1,755,475
Commissions receivable ............ 16,851,230 18,502,261 21,687,505 21,687,505
Equity in affiliated companies ... 2,543,149 2,951,864 2,815,865 2,815,865
Receivable from clearing firm .... 2,444,484 3,668,952 3,976,787 3,976,787
Securities owned .................. 967,500
Prepaid expenses and other assets 6,542,004 6,804,925 7,241,065 7,241,065
Exchange memberships .............. 101,000 140,000 140,000 140,000
Deferred taxes .................... 1,081,275 5,520,348 4,748,281 4,748,281
Furniture, equipment and leasehold
improvements ..................... 15,392,656 13,264,743 12,819,192 12,819,192
Intangible assets ................. 2,836,786 2,426,809 2,324,308 2,324,308
-------------- -------------- ------------- ----------------
Total assets ................... $ 71,914,532 $ 82,078,742 $80,313,989 $80,313,989
============== ============== ============= ================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accounts payable and accrued
liabilities .................... $ 16,169,212 $ 15,835,131 $14,668,515 $14,668,515
Accrued compensation payable ... 10,446,615 15,998,721 12,971,036 12,971,036
Accrued interest payable ........ 177,609 166,789 288,363 288,363
Income taxes payable ............ 1,873,276 7,328,244 6,633,746 6,633,746
Obligations under capitalized
leases ......................... 2,804,836 2,284,806 2,298,188 2,298,188
Securities sold, not yet
purchased ...................... 1,280,000
Deferred taxes payable .......... 778,549 692,024 591,526 591,526
Notes payable ................... 9,830,284 7,880,032 7,834,318 7,834,318
Return of capital payable ...... 16,758,134
-------------- -------------- ------------- ----------------
43,360,381 50,185,747 45,285,692 62,043,826
-------------- -------------- ------------- ----------------
Minority interest ................. 492,154 501,731 395,397 395,397
-------------- -------------- ------------- ----------------
Commitments and contingencies
(Notes 15 and 16)
Stockholders' equity:
Common Stock; Class A $.01 par
value:
2,000,000 shares authorized,
none issued and outstanding;
Class B $.001 par value:
2,000,000 authorized,
1,671,290 issued and
outstanding at December 31,
1994 and 1995 and March 31,
1996 .......................... 4,258 4,258 1,671 1,671
Additional paid-in capital ...... 48,200,186 48,193,040 38,018,520 19,018,520
Treasury stock, at cost, 217,450
shares of Class A and 412,610
shares of Class B at December
31, 1994 and 1995; none at
March 31, 1996 .................. (10,177,107) (10,177,107)
Accumulated deficit .............. (10,713,316) (7,251,041) (3,797,866) (3,797,866)
Notes receivable from
stockholders .................... (2,283,886) (2,243,709) (2,241,866) --
Foreign translation adjustment .. 3,031,862 2,865,823 2,652,441 2,652,441
-------------- -------------- ------------- ----------------
Total stockholders' equity .... 28,061,997 31,391,264 34,632,900 17,874,766
-------------- -------------- ------------- ----------------
Total liabilities and
stockholders' equity .......... $ 71,914,532 $ 82,078,742 $80,313,989 $80,313,989
============== ============== ============= ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED
--------------------------------------------- -----------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1993 1994 1995 1995 1996
-------------- -------------- ------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Commission income ............ $135,577,625 $144,586,661 $171,576,327 $43,659,170 $48,339,964
Interest income .............. 1,203,082 1,090,789 1,462,744 310,956 418,772
Other income ................. 2,274,759 697,522 732,347 150,430 74,725
-------------- -------------- -------------- ------------- -------------
139,055,466 146,374,972 173,771,418 44,120,556 48,833,461
-------------- -------------- -------------- ------------- -------------
Costs and expenses:
Payroll and related costs ... 86,763,854 96,207,365 110,915,257 28,569,041 28,353,853
Communication costs .......... 12,987,800 15,633,010 17,187,573 4,683,240 3,948,713
Travel and entertainment .... 8,681,483 10,493,903 10,224,384 2,540,839 2,609,881
Depreciation and amortization 4,192,404 4,248,181 4,568,164 1,157,164 1,171,970
Clearing fees ................ 863,445 3,647,556 3,777,710 1,285,906 1,191,695
General and administrative
expenses .................... 9,235,053 7,355,734 7,845,403 2,098,590 2,004,770
Interest expense ............. 2,702,759 1,635,547 775,077 205,342 148,058
Occupancy costs .............. 4,452,232 5,640,070 5,854,525 1,520,584 1,500,966
Write-off of goodwill ........ 12,643,948
-------------- -------------- -------------- ------------- -------------
142,522,978 144,861,366 161,148,093 42,060,706 40,929,906
-------------- -------------- -------------- ------------- -------------
Income (loss) before provision
for income taxes and minority
interest ..................... (3,467,512) 1,513,606 12,623,325 2,059,850 7,903,555
Provision for income taxes ... 4,858,901 3,333,989 7,393,196 1,625,860 4,099,528
-------------- -------------- -------------- ------------- -------------
Income (loss) before minority
interest ..................... (8,326,413) (1,820,383) 5,230,129 433,990 3,804,027
Minority interest ............. (442,673) (250,480) (1,767,854) (531,299) (350,852)
-------------- -------------- -------------- ------------- -------------
Net income (loss) ............. ($ 8,769,086) ($ 2,070,863) $ 3,462,275 ($ 97,309) $ 3,453,175
============== ============== ============== ============= =============
Historical per share data
(without giving effect to any
Merger-related transactions):
Earnings (loss) per share ... ($ 8.03) ($ 1.51) $ 2.07 ($ .06) $ 2.07
Weighted average common shares
outstanding .................. 1,091,896 1,375,513 1,671,290 1,671,290 1,671,290
Pro forma earnings per share
(Note 2) ..................... $.40 $.40
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN TREASURY
STOCK CAPITAL STOCK
--------- -------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1992 . $ 3,348 $ 18,442,515 ($ 3,623,839)
Net loss ......................
Repayment of stockholder notes
Foreign translation adjustment
--------- -------------- --------------
Balance at December 31, 1993 . 3,348 18,442,515 (3,623,839)
Retirement of warrants ........ 5,141,145
Net loss ......................
Acquisition of treasury stock (6,553,268)
Issuance of common stock,
net of expenses .............. 910 24,616,526
Repayment of stockholder notes
Foreign translation adjustment
--------- -------------- --------------
Balance at December 31, 1994 . 4,258 48,200,186 (10,177,107)
Net income ....................
Expenses relating to
acquisition of common stock . (7,146)
Repayment of stockholder notes
Foreign translation adjustment
--------- -------------- --------------
Balance at December 31, 1995 . 4,258 48,193,040 (10,177,107)
Net income (unaudited) ........
Repayment of stockholders
notes (unaudited) ............
Foreign translation adjustment
(unaudited) ..................
Retirement of treasury stock
(unaudited) .................. (2,587) (10,174,520) 10,177,107
--------- -------------- --------------
Balance at March 31, 1996
(unaudited) .................. $ 1.671 $ 38,018,520
========= ============== ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RETAINED NOTES
EARNINGS/ RECEIVABLE FOREIGN
(ACCUMULATED FROM TRANSLATION
DEFICIT) WARRANTS STOCKHOLDERS ADJUSTMENT TOTAL
-------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 . $ 126,633 $ 5,141,145 ($ 3,989,714) $2,289,344 $18,389,432
Net loss ...................... (8,769,086) (8,769,086)
Repayment of stockholder notes 269,363 269,363
Foreign translation adjustment 497,958 497,958
-------------- ------------- -------------- ------------- -------------
Balance at December 31, 1993 . (8,642,453) 5,141,145 (3,720,351) 2,787,302 10,387,667
Retirement of warrants ........ (5,141,145)
Net loss ...................... (2,070,863) (2,070,863)
Acquisition of treasury stock (6,553,268)
Issuance of common stock,
net of expenses .............. 24,617,436
Repayment of stockholder notes 1,436,465 1,436,465
Foreign translation adjustment 244,560 244,560
-------------- ------------- -------------- ------------- -------------
Balance at December 31, 1994 . (10,713,316) (2,283,886) 3,031,862 28,061,997
Net income .................... 3,462,275 3,462,275
Expenses relating to
acquisition of common stock . (7,146)
Repayment of stockholder notes 40,177 40,177
Foreign translation adjustment (166,039) (166,039)
-------------- ------------- -------------- ------------- -------------
Balance at December 31, 1995 . (7,251,041) (2,243,709) 2,865,823 31,391,264
Net income (unaudited) ........ 3,453,175 3,453,175
Repayment of stockholders
notes (unaudited) ............ 1,843 1,843
Foreign translation adjustment
(unaudited) .................. (213,382) (213,382)
Retirement of treasury stock
(unaudited) ..................
-------------- ------------- -------------- ------------- -------------
Balance at March 31, 1996
(unaudited) .................. ($ 3,797,866) ($ 2,241,866) $2,652,441 $34,632,900
============== ============= ============== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED
------------------------------------------- ----------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1993 1994 1995 1995 1996
-------------- -------------- ------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................. ($ 8,769,086) ($ 2,070,863) $ 3,462,275 ($ 7,309) $ 3,453,175
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization ...................... 4,192,404 4,248,181 4,568,164 1,157,164 1,171,970
Provision for doubtful accounts .................... 87,492 (196,300) (48,956) 3,857 18,689
Gain on sale of exchange memberships ............... (490,000) (14,000)
Gain on sale of subsidiary ......................... (1,487,918)
Write off of goodwill .............................. 12,643,948
Unrealized foreign exchange loss ................... 166,940
Undistributed earnings of affiliates ............... (281,645) (137,775) (537,571) (1,096,181) (1,064,957)
Gain on sale of short-term investments ............. (3,890)
Minority interest .................................. 94,012 (55,416) 9,249 34,594 (106,275)
Imputed interest expense ........................... 110,529 120,806 129,358 32,565 26,266
Amortization of deferred expenses .................. 19,963 12,031 5,269 2,270 364
Deferred income taxes .............................. (227,514) 1,971,504 (4,522,662) (70,235) 677,806
Change in assets and liabilities:
Increase in restricted cash ........................ (1,701,425)
(Increase) decrease in commissions receivable ..... (567,689) 1,894,546 (1,654,378) (2,367,566) 3,328,499)
Increase in receivable from clearing firm ......... (1,203,810) (1,155,733) (1,024,931) (1,255,849) (308,674)
Decrease (increase) in securities .................. (967,500) 967,500 598,750
Increase in receivable from affiliates ............. (811,890)
Decrease (increase) in insurance claim receivable . (2,330,000)
(Increase) decrease in prepaid expenses and other
assets ............................................. (1,680,342) (2,398,411) (478,684) 122,686 551,217
Increase (decrease) in accounts payable and
accrued liabilities ............................... 5,607,377 1,473,250 (239,114) 959,983 (1,023,147)
Increase (decrease) in accrued compensation
payable ........................................... 10,236,008 (7,887,478) 5,552,106 (2,593,129) (2,934,126)
Decrease in accrued interest payable ............... (488,142) (300,161) (4,289) 162,835 121,791
(Decrease) increase in securities owned, not yet
purchased ......................................... 1,280,000 (1,280,000) (805,625)
Increase (decrease) in income taxes payable ....... (214,910) (1,345,847) 5,494,722 1,105,731 (559,366)
-------------- -------------- -------------- ------------- -------------
Net cash provided by (used in) operating activities 13,390,412 (1,208,344) 10,384,058 (4,105,459) (3,303,766)
-------------- -------------- -------------- ------------- -------------
Cash flows from investing activities:
Purchase of fixed assets ........................... (10,226,268) (4,340,179) (2,059,449) (390,198) (758,850)
Proceeds from sale of subsidiary in excess of
carrying value of investment ...................... 1,503,024
Net sale (purchase) of short-term investments ..... (139,979) 2,957,056
Investment in equity affiliates .................... 36,885 (93,745) 40,319 64,869
Minority interest in consolidated subsidiary ...... (733,285)
Purchase of exchange memberships ................... (101,000) (75,000)
Proceeds from sale of exchange memberships ........ 1,762,000 50,000
-------------- -------------- -------------- ------------- -------------
Net cash (used in) provided by investing activities (9,596,508) 314,762 (2,178,194) (349,879) (693,981)
-------------- -------------- -------------- ------------- -------------
Cash flows from financing activities:
Repayment of note payable .......................... (2,037,502)
Repayment of subordinated note payable ............. (1,459,536) (17,660,000)
Issuance of common stock, net of expenses ......... 1,617,436 (7,146) (7,146)
Issuance of secured demand note .................... 23,000,000
Decrease in obligations under capitalized leases .. (374,125) (119,010) (507,946) (214,185) 51,666
Acquisition of treasury stock ...................... (5,221,260)
Repayments of notes receivable from stockholders .. 269,363 105,676 40,177 1,150 1,843
-------------- -------------- -------------- ------------- -------------
Net cash (used in) provided by financing activities (1,564,298) 1,722,842 (2,512,417) (220,181) 53,509
-------------- -------------- -------------- ------------- -------------
Effect of exchange rate changes on cash ............. 234,779 233,079 (35,370) 209,394 (263,601)
-------------- -------------- -------------- ------------- -------------
Net increase in cash and cash equivalents .......... 2,464,385 1,062,339 5,658,077 (4,466,125) (4,207,839)
Cash and cash equivalents at beginning of year ..... 17,828,549 20,292,934 21,355,273 21,355,273 27,013,350
-------------- -------------- -------------- ------------- -------------
Cash and cash equivalents at end of year ............ $ 20,292,934 $ 21,355,273 $27,013,350 $16,889,148 $22,805,511
============== ============== ============== ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid ....................................... $ 2,771,710 $ 1,736,028 $ 650,007 -- --
Income taxes paid ................................... 4,230,493 2,828,794 881,875 $ 46,397 $ 3,306,459
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Reduction of notes receivable from stockholders in
connection with acquisition of treasury stock ..... $ 1,330,789
Conversion of secured demand note to equity ........ 23,000,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 1 -- ORGANIZATION AND OPERATIONS:
Euro Brokers Investment Corporation ("the Company"), incorporated in
December 1986, is the parent company to Euro Brokers Holdings, Inc. ("EBHI").
EBHI was incorporated in October 1986 for the purpose of acquiring certain
businesses from various subsidiaries of MAI plc, a public company in the
United Kingdom.
The Company, through its affiliates, conducts the business of a broker of
money market instruments, securities and capital market products in New York,
London, Tokyo, Toronto and Hong Kong.
NOTE 2 -- PROPOSED MERGER TRANSACTION:
On March 8, 1996, the Company entered into an Agreement and Plan of Merger
with Financial Services Acquisition Corporation ("FSAC") and EBIC Acquisition
Corp. ("Merger Sub"), a wholly owned subsidiary of FSAC, providing for, among
other things, the merger of Merger Sub with and into the Company, with the
Company surviving the merger as a wholly owned subsidiary of FSAC. At the
effective time of the merger, each outstanding share of Class B Common Stock
of the Company will be converted into the right to receive, subject to
certain adjustments and escrow arrangements, consideration comprising
approximately (i) 2.64 newly issued shares of FSAC's common stock, (ii) 4.53
newly issued redeemable common stock purchase warrants of FSAC, and (iii)
$9.57 in cash.
The consideration will be adjusted as necessary to provide that, upon
consummation of the merger, the current stockholders of the Company will own,
in the aggregate, a number of shares of FSAC common stock equal to the number
of shares of FSAC common stock outstanding immediately prior to the merger,
and (ii) a number of warrants equal to the number of warrants outstanding
immediately prior to the merger. The cash portion of the consideration will
also be adjusted prior to the merger to reflect the differences between the
respective pre-merger net worths of FSAC and the Company, subject to certain
adjustments, with the intention generally of equalizing the respective
pre-merger contributions of FSAC stockholders and Company stockholders to the
post-merger consolidation net worth FSAC.
The completion of this transaction is subject to certain conditions
including, among other things, the approval of the merger by the stockholders
of the Company and FSAC and receipt of certain regulatory approvals. There
can be no assurance that the proposed transaction will be consummated.
The accompanying unaudited pro forma balance sheet as of March 31, 1996
has been prepared to reflect as a liability and a reduction of stockholders'
equity in an amount equal to $16,758,134, representing $19,000,000 of cash to
be paid to the Company's shareholders as a return of capital upon
consummation of the merger (including adjustments to the cash consideration
based on changes in net worth through March 31, 1996), less cash to be
received upon the repayment of $2,241,866 of notes receivable from
stockholders as required concurrent with the merger. Such pro forma balance
sheet does not give effect to the adjustments, such as the merger of FSAC
assets and liabilities into the Company and the recapitalization, that will
occur upon completion of the transaction.
The merger will result, subject to certain escrow arrangements, in the
Company's current stockholders having a 50% ownership of the merged entity.
For accounting and financial purposes, the merger will be treated as an
issuance of shares by the Company for the net assets of FSAC, consisting
primarily of cash. The surviving corporation will reflect in its consolidated
financial statements the assets and liabilities of both companies at their
book values, and the historical earnings of the Company will be presented as
the historical earnings of the merged entity.
Pro forma earnings per share have been computed using weighted average common
shares outstanding of 8,588,880. Such pro forma shares outstanding have been
computed as the sum of (i) 4,641,666, which treats the 1,671,290 currently
outstanding shares of the Company as if they had been recapitalized into
4,641,666 shares (reflecting the merger stock exchange ratio of approximately
2.78, which assumes no exercise of redemption rights by FSAC stockholders and
the issuance of 225,000 additional shares of FSAC common stock under a unit
purchase option agreement), and (ii) 3,947,214, which represents the number of
new shares that would have to be issued at a pro forma "IPO" price of $4.25 per
share to pay the pro forma return of capital liability of $16,758,134 as of
March 31, 1996 that is presented on the pro forma consolidated statement of
financial condition. The pro forma "IPO" price is based on the ratio of the net
assets of FSAC of $19,706,474 as of March 31, 1996 to the 4,641,666 new shares
that would be issued (assuming the same stock exchange ratio) if the merger were
to be consummated on that date.
F-16
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES:
Basis of presentation:
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries and other entities over which it
exercises control. All significant intercompany balances and transactions
have been eliminated. Investments in unconsolidated affiliates where the
Company exercises significant influence over operating and financial policies
have been accounted for using the equity method. Earnings from investments
accounted for under the equity method have been reflected as other income in
the statement of operations.
Revenue recognition:
Commission income is recognized on a trade date basis.
Securities transactions:
Securities transactions, executed as riskless principal, are recorded on a
trade date basis. From time to time, the Company may be obliged to fulfill an
obligation by entering into one side of a trade which consequently results in
the Company recording securities positions. It is the Company's policy not to
carry such positions for any significant length of time. Any such security
positions are carried at market value. Substantially all of the securities
transactions are cleared on a fully disclosed basis and, as such, the
accounts are carried on the books of the Company's clearing firm.
Furniture, equipment and leasehold improvements:
Depreciation of furniture and equipment is computed on a straight line
basis using estimated useful lives of 3 to 5 years. Leasehold improvements
are amortized over the terms of the related leases or estimated useful lives
of the improvements, whichever period is shorter.
Exchange memberships:
The Company carries its exchange memberships at cost. At December 31, 1994
and 1995 and at March 31, 1996, the market value of these memberships
approximated cost.
During 1994, the Company sold its exchange memberships which it held at
December 31, 1993 realizing a gain of $490,000. During 1994, the Company also
purchased exchange memberships for an aggregate cost of $101,000.
During 1995, the Company sold two of its exchange memberships for $50,000,
realizing a gain of $14,000, and purchased an exchange membership at a cost
of $75,000.
Intangible assets:
Intangible assets principally include the values assigned to customer
lists and are being amortized on a straight line basis over their estimated
useful lives, which approximate 15 years. Accumulated amortization of
intangible assets aggregated $6,346,588, $6,756,592 and $6,839,093 at
December 31, 1994, December 31, 1995 and March 31, 1996, respectively.
The Company has a policy of reviewing the carrying value of intangible
assets to consider whether events or changes in circumstances have occurred
- --such as the loss of significant customers, a significant change in the
revenues received from customers or a significant change in the nature of the
brokerage business -- which would indicate that the carrying amount of such
assets may not be recoverable, in which case the Company would evaluate the
estimated future cash flows expected to result from the asset.
F-17
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996
and 1995 is unaudited)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Should the expected future cash flows be less than the carrying amount of the
asset, an impairment loss would be recognized to the extent that the carrying
value exceeds the fair value of the asset. There have been no impairment
losses with respect to intangible assets.
Goodwill:
The excess purchase price over net assets of businesses acquired was
originally recorded as goodwill and was being amortized as a straight line
basis over twenty years.
In recognition of certain business conditions and events, in 1993 the
Company reviewed the recorded value of goodwill based on an evaluation of the
net present value of future cash flows from certain of the Company's foreign
subsidiaries and affiliates. As a result of this reevaluation, it was
determined that there had been an other than temporary impairment in the
value of goodwill and, accordingly, amounts aggregating $10,839,790 which
were previously attributable to goodwill associated with the acquisition of
foreign subsidiaries and amounts aggregating $1,804,158 which were previously
attributable to goodwill associated with the Company's investment in an
affiliated company (see Note 6) were written off as of December 31, 1993.
Foreign currency translation:
Assets and liabilities denominated in foreign currencies are translated to
U.S. dollars using exchange rates at the end of the year; revenues and
expenses are translated at average rates for the year.
Gains and losses on foreign currency translation of the financial
statements of operations whose functional currency is other than the U.S.
dollar, together with related hedges and tax effects, are reflected in the
foreign translation adjustment account in stockholders' equity. Foreign
currency exchange gains and losses from transactions and balances denominated
in a currency other than the related operating subsidiary's functional
currency are recorded in income.
Fair value of financial instruments:
The Company's securities owned and securities sold, not yet purchased are
carried at market value. Additionally, off-balance sheet financial
instruments, as described in Note 15, are valued at market with unrealized
gains and losses recorded in the financial statements.
Management estimates that the aggregate net fair value of other financial
instruments recognized on the statement of financial condition (including
cash equivalents, commissions and other receivables, and notes payable)
approximates their carrying value, as such financial instruments are
short-term in nature, bear interest at current market rates, or, in the case
of notes payable, bear interest at rates which management believes are
comparable to current rates which could be obtained in similar financing.
Income taxes:
The Company files a consolidated federal income tax return which includes
U.S. subsidiaries in which the Company's ownership percentage is 80% or
greater. The Company and such U.S. subsidiaries also file separate and/or
combined income tax returns in various state and local tax jurisdictions.
The Company and its subsidiaries account for certain income and expense
items in a period different from that reported for tax purposes. The tax
effects of transactions are generally recognized in the financial statements
in the same period as the related items of income and expense, regardless of
when they are recognized for tax purposes.
F-18
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996
and 1995 is unaudited)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES: (Continued)
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption
of SFAS 109 had no material impact on the financial statements of the
Company.
Historical Earnings per share:
The computation of earnings (loss) per share in each year is based on the
weighted average number of Common Shares then outstanding. When dilutive,
warrants are included as share equivalents.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Unaudited information:
All unaudited information for the interim periods presented, in the
opinion of management, includes all adjustments, consisting only of normal
recurring accruals, necessary for fair presentation.
NOTE 4 -- CASH AND CASH EQUIVALENTS:
For the purpose of the statement of cash flows, the Company considers all
short-term investments with an initial maturity of three months or less to be
cash equivalents. Such investments are generally overnight Euro dollar
deposits.
NOTE 5 -- COMMISSIONS RECEIVABLE:
Commissions receivable are reflected in the statement of financial
condition net of allowance for doubtful accounts of $520,600, $471,100 and
$487,800 at December 31, 1994 and 1995 and March 31, 1996, respectively.
NOTE 6 -- RELATED PARTY TRANSACTIONS:
The Company incurred interest expense which was in respect of debt payable
to its majority shareholders aggregating $1,848,700 and $789,200, for the
years ended December 31, 1993 and 1994, respectively. As described in Note
10, all such debt was repaid during 1994.
Prepaid expenses and other assets include loans to employees aggregating
$1,732,300 and $2,317,500 at December 31, 1994 and 1995, respectively. Such
loans generally bear interest at the prime rate and are short term in nature.
NOTE 7 -- EQUITY IN AFFILIATED COMPANIES:
The Company's equity in affiliated companies principally consists of a 15%
equity interest in Yagi Euro Corporation ("Yagi Euro"), which operates the
business of a broker of money market and foreign exchange and derivative
products in Tokyo and is 85% owned by Yagi Tanshi Company, Limited.
In addition, in 1994 the Company entered into a partnership arrangement
with Yagi Euro to broker certain derivative products in Tokyo. The results of
such business are consolidated in the Company's financial statements and Yagi
Euro's approximately 50% interest in the related profit or loss is presented
as minority interest.
F-19
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 7 -- EQUITY IN AFFILIATED COMPANIES: (Continued)
During 1995, the Company purchased a 33% interest in Pacific Brokers
International, LLC, a broker of off-balance sheet products in the Far East.
The Company's investments in equity affiliates are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
-------------- -------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Yagi Euro .......................... $2,543,149 $2,794,211 $2,659,968
Pacific Brokers International, LLC 157,653 155,897
-------------- -------------- ------------
$2,543,149 $2,951,864 $2,815,865
============== ============== ============
</TABLE>
Summarized financial information for Yagi Euro is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
-------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Total assets ...... $ 20,237,126 $21,740,692 $24,597,832
Total liabilities 3,391,834 3,266,547 6,864,714
Revenues .......... 18,946,665 14,310,972 2,747,688
Net income ........ 925,844 2,735,871 190,596
</TABLE>
NOTE 8 -- ACQUISITION AND SALE OF SUBSIDIARY:
In 1992, the Company acquired a 51% interest in Liberty Euro Brokers
("LEB"), a newly formed broker of certain non-dollar denominated government
securities which conducts business in the United Kingdom.
Effective as of August 12, 1993, the Company sold its interest in LEB for
approximately $2,258,000, which resulted in a gain of approximately
$1,488,000 recorded in other income.
NOTE 9 -- FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995 MARCH 31, 1996
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and telephone equipment ................ $ 11,672,050 $ 11,512,903 $ 11,543,713
Leasehold improvements ........................... 6,373,214 6,329,807 6,275,149
Computer and related equipment ................... 6,460,324 7,265,569 7,691,968
Automobiles ...................................... 3,846,861 3,113,004 3,020,687
-------------- -------------- --------------
28,352,449 28,221,283 28,531,517
Less -- Accumulated depreciation and amortization (12,959,793) (14,956,540) (15,712,325)
-------------- -------------- --------------
$ 15,392,656 $ 13,264,743 $ 12,819,192
============== ============== ==============
</TABLE>
F-20
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 10 -- OBLIGATIONS UNDER CAPITALIZED LEASES:
The Company has purchased automobiles and telecommunications equipment
under capitalized leases. The lease terms generally do not exceed three
years. The following is a schedule of future minimum lease payments under
capitalized leases together with the present value of the net minimum lease
payments as of December 31, 1995:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
<S> <C>
1996 ..................................... $1,304,805
1997 ..................................... 744,317
1998 ..................................... 566,233
------------
Total net minimum lease payments ........... 2,615,355
Less: amount representing interest ........ 330,549
------------
Present value of net minimum lease payments $2,284,806
============
</TABLE>
The gross amount of assets under capitalized leases are $2,804,800 and
$2,284,800 at December 31, 1994 and 1995, respectively. Such amounts are
principally automobiles and are included in furniture, equipment and
leasehold improvements on the statement of financial condition.
The charges to income resulting from the amortization of assets recorded
under capitalized leases were approximately $625,500, $681,200 and $644,700
for the years ended December 31, 1993, 1994 and 1995, respectively, and
$167,900 and $132,900 for the three months ended March 31, 1995 and 1996,
respectively.
NOTE 11 -- NOTES PAYABLE:
Notes payable at December 31, 1994 and 1995 represent convertible purchase
price notes which were issued in December 1986 in connection with the
acquisition of the predecessor businesses and bear interest at a stated rate
of 6 1/8% per annum. The conversion feature expired on November 30, 1993.
The notes are due in equal annual installments each November 30 from 1995
through 1999. The notes have been adjusted for financial reporting purposes
to reflect imputed interest at fair market rates at the time of issuance
which vary from 6.125% to 7.71%. The notes are subordinated to the claims of
financial institutions to a maximum aggregate amount of $10,000,000.
Approximately 54% and 55% of the reported balance for the purchase price
notes was denominated in British pounds sterling at December 31, 1995 and
December 31, 1994, respectively.
On December 16, 1986, the Company executed a subordinated promissory note
in the amount of $13,000,000 payable to Annetinvest B.V., an affiliate of
Eurobrokers International Inc. ("EII"), a shareholder of the Company at that
time. The note was due on December 16, 1996 bearing interest at a fixed rate
of 9.25% per annum plus additional interest based on the profitability of the
Company up to a maximum of 4.5% per annum of the principal balance
outstanding. In November 1988, the Company executed a second subordinated
promissory note in the amount of $4,660,000, also payable to Annetinvest
B.V., which was due on January 31, 1999 bearing interest at a variable rate
of prime plus 1%.
F-21
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 11 -- NOTES PAYABLE: (Continued)
In February 1994, the Company entered into a secured demand note payable
aggregating $23,000,000, which was scheduled to mature on December 31, 1995.
The note had a stated interest rate of 10% during 1994 and 12% during 1995.
The Company pledged certain assets and stock of certain subsidiaries as
collateral for the loan. The proceeds of the loan were used to repay the
Company's subordinated notes payable of $17,660,000, and to repurchase all of
the Class A common stock and warrants outstanding at December 31, 1993 as
described in Note 13. In May, 1994, the $23,000,000 note was repaid in
connection with a stock purchase transaction as described in Note 13.
The change in notes payable is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE
------------------------------ MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at beginning of year ............ $ 27,080,598 $ 9,830,284 $7,880,032
Repayment of subordinated note .......... (17,660,000)
Repayment of principal .................. (2,037,502)
Secured demand note issued .............. 23,000,000
Secured demand note converted to equity (23,000,000)
Exchange rate difference ................ 288,880 (42,107) (71,980)
Imputed interest ........................ 120,806 129,357 26,266
-------------- -------------- ---------------
Balance at end of year .................. $ 9,830,284 $ 7,880,032 $7,834,318
============== ============== ===============
</TABLE>
NOTE 12 -- EMPLOYEE BENEFIT PLANS:
The Company maintains a 401(k) defined contribution plan for the Company's
U.S. operations covering substantially all salaried employees. The Company's
contributions to the 401(k) plan are based upon a percentage of employee
contributions. Total 401(k) plan expense approximated $161,000, $216,000 and
$222,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
NOTE 13 -- INCOME TAXES:
Income (loss) from continuing operations before provision for income tax
and minority interest was taxed under the following jurisdictions:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- ------------------- -----------------
<S> <C> <C> <C>
Domestic .. $ 225,567 $ 3,089,709 $ 2,645,217
Foreign .... (3,693,077) (1,576,103) 9,978,108
----------------- ------------------- -----------------
Total ...... ($ 3,467,512) $ 1,513,606 $12,623,325
================= =================== =================
</TABLE>
F-22
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 13 -- INCOME TAXES: (Continued)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- ------------------- -----------------
<S> <C> <C> <C>
Current
Federal ......... $ 385,879 $1,103,197 $ 2,745,733
State and local 701,500 706,747 931,547
Foreign ......... 3,778,047 (76,684) 8,510,075
----------------- ------------------- -----------------
4,865,426 1,733,260 12,187,355
----------------- ------------------- -----------------
Deferred
Federal ......... (99,515) 504,938 (1,946,254)
State and local (191,063) 411,633 (164,502)
Foreign ......... 284,053 684,158 (2,683,403)
----------------- ------------------- -----------------
(6,525) 1,600,729 (4,794,159)
----------------- ------------------- -----------------
Total ............ $4,858,901 $3,333,989 $ 7,393,196
================= =================== =================
</TABLE>
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Assets
Bad debt reserve ........................... $ 138,000 $ 161,000
Amortization of leasehold improvements .... 172,361 221,354
Rent reserve ............................... 214,774 211,830
Deferred compensation ...................... 251,850 4,415,679
Miscellaneous reserves ..................... 304,290 510,485
Foreign tax credits ........................ 2,675,017
Deferred tax asset valuation allowance .... (2,675,017)
----------------- -----------------
Gross deferred tax assets, after valuation
allowance ................................ $1,081,275 $ 5,520,348
================= =================
Liabilities
Depreciation ............................... (612,924) (447,092)
Unrealized foreign exchange (gain) loss ... (165,625) (244,932)
----------------- -----------------
Gross deferred tax liabilities ............ ($ 778,549) ($ 692,024)
================= =================
</TABLE>
The valuation allowance for deferred tax assets for the year ended
December 31, 1995 was established for foreign tax credit carryforward
benefits generated during 1995, due to the uncertainty regarding their
realizability. The foreign tax credit carryforward will expire in the year
ended December 31, 2000.
Not reflected above are the tax effects of foreign currency translation
adjustments related to the hedging of foreign net investments. These tax
effects are recorded directly in stockholders' equity. Such amounts recorded
in stockholders' equity are a tax benefit (expense) of $221,000, ($370,000),
and $20,600 in the years ended December 31, 1993, 1994 and 1995,
respectively.
F-23
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 13 -- INCOME TAXES: (Continued)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Tax at U.S. statutory rate ...................... ($1,178,954) $ 514,626 $4,291,930
Increase (decrease) in tax resulting from:
Higher effective rates on earnings of foreign
operations and tax benefit of foreign losses
not recognized ................................. 1,351,406 1,283,444 1,847,061
Nondeductible meals and entertainment ........... 398,923 869,536 868,507
Write-off of goodwill ........................... 4,089,856
State and local taxes, net ...................... 369,617 738,131 506,259
Other ........................................... (171,947) (71,748) (120,561)
-------------- -------------- --------------
$4,858,901 $3,333,989 $7,393,196
============== ============== ==============
</TABLE>
NOTE 14 -- STOCKHOLDERS' EQUITY:
Common stock:
There are 2,000,000 shares of Class B ($.001 par value) common stock of
the Company authorized, of which 1,671,290 shares were issued and outstanding
at December 31, 1994 and 1995, and at March 31, 1996.
In May 1994, the holder of the $23,000,000 secured demand note (see Note
10), Welsh, Carson, Anderson & Stowe VI ("WCAS VI"), executed a stock
purchase agreement pursuant to which WCAS VI acquired 910,150 shares of Class
B common stock, representing a majority equity interest. The total
consideration paid was $25,000,000, which was comprised of the delivery of
the $23,000,000 secured demand note, and $2,000,000 in cash.
The minority interest of Class B common stock, not held by WCAS VI is held
by management and employees. Pursuant to a stock purchase agreement, the
Company has the option to repurchase its shares of Class B common stock from
minority shareholders if the owner of such shares is no longer employed by
the Company or its subsidiaries. The repurchase price depends upon a number
of factors, including the employee's length of service and the fair market
value of such stock as determined by the Board of Directors.
The Company held 412,610 shares of Class B common stock in its treasury at
December 31, 1994 and 1995.
At December 31, 1994 and 1995, and March 31, 1996 there were 2,000,000
shares of Class A ($.01 par value) common stock of the Company authorized;
there were no shares outstanding and 217,450 held in treasury. During 1994,
the Company repurchased all of its Class A common stock in connection with
the stock purchase agreement referred to above.
At March 31, 1996, the Company retired the Class A and Class B common
stock which was held in its treasury.
F-24
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 14 -- STOCKHOLDERS' EQUITY: (Continued)
Warrants:
At December 31, 1993, the Company had outstanding 977,143 warrants which
entitled the holder to purchase, at any time through March 31, 1994, one
share of Class A common stock per warrant. 622,450 warrants were exercisable
at $20.885 per share and 354,693 were exercisable at $13.14 per share. All of
the warrants were held by EII and were exercisable in whole and not in part.
The warrants were retired by the Company in February 1994, pursuant to the
secured demand note transaction described in Note 11.
Notes receivable from stockholders:
Notes receivable from stockholders of $2,243,709 and $2,283,886 at
December 31, 1995 and 1994, respectively, and $2,241,866 at March 31, 1996
represent amounts due to the Company for the purchase of common stock of the
Company by certain of its employees. The notes have all matured and are
currently payable on demand. The notes bear interest at rates ranging from 5%
to 5.6% per annum, and are collateralized by the stock purchased therewith.
The notes have been reflected as a decrease to stockholders' equity.
NOTE 15 -- COMMITMENTS:
The Company is obligated under certain non-cancelable leases for office
space and telecommunication services.
The Company has executed various operating leases in respect of premises,
which contain escalation clauses for base rent, maintenance, electricity and
real estate tax increases.
At December 31, 1995, the Company had the following commitments under
long-term non- cancelable operating leases:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
<S> <C>
1996 .......................... $ 8,941,275
1997 .......................... 4,468,010
1998 .......................... 3,818,402
1999 .......................... 3,699,943
2000 and thereafter ........... 18,362,690
------------
Total minimum lease payments ... $39,290,320
============
</TABLE>
The Company has pledged pounds sterling1,150,000 in cash with a bank in
respect of a guarantee of its London premises lease. This amount has been
reflected as restricted cash on the statement of financial condition.
At December 31, 1994, the Company had forward contracts of approximately
$1,000,000 outstanding to buy foreign currency at various rates and dates
extending through September 16, 1996.
At December 31, 1995, the Company has forward contracts outstanding to buy
Sterling for $935,000 and sell 180,000,000 yen at various rates and dates
extending through September 30, 1996. Unrealized gains and losses have been
recognized in the statement of operations.
F-25
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 -- (Continued)
(Information as of and for the three-month periods ended March 31, 1996 and
1995 is unaudited)
NOTE 16 -- CONTINGENCIES:
In common with other money brokers, a subsidiary of the Company has, in
the past, received commissions on a number of interest rate swap transactions
which were booked on behalf of banks and local authorities in the United
Kingdom. Following the ruling by the House of Lords that the nature of these
contracts was "ultra vires," or beyond the scope of power of the local
authorities, some claims in a material amount have been received for the
return of certain of this brokerage.
The Company has been named as a defendant in other civil actions that seek
significant damages. Management believes the suits lack merit and intends to
vigorously contest the suits.
Management believes it has adequately accrued for the reasonably estimated
costs associated with resolving these matters. The future outcome of these
matters cannot be predicted with certainty and, accordingly, it is possible
that the ultimate disposition of the above noted matters could be material to
the results of operations in any given period. However, based upon
discussions with legal counsel, it is the opinion of management that the
ultimate disposition of the above noted matters will not have a material
adverse effect on the consolidated financial condition of the Company, its
results of operations or liquidity.
NOTE 17 -- CONCENTRATION OF CREDIT RISK:
The Company has a policy of reviewing, on an ongoing basis, the credit
standing of its customers, which are primarily financial institutions, as
well as the credit worthiness of the clearing firm used by the Company.
Financial instruments subject to credit risk are primarily commissions
receivable, which are unsecured and short-term in nature. Receivable from
clearing firm represents a concentration of credit risk, and is related to
securities transactions cleared primarily through one correspondent broker.
NOTE 18 -- GEOGRAPHIC DATA:
Financial information by geographic location is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations of
EBIC.
F-26
<PAGE>
ANNEX I
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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
ARTICLE I
THE MERGER ................................................... 1-2
Section 1.1 The Merger ................................................... 1-2
Section 1.2 Effective Time of the Merger ................................. 1-2
Section 1.3 Closing ...................................................... 1-2
ARTICLE II
THE SURVIVING CORPORATION .................................... 1-2
Section 2.1 Certificate of Incorporation ................................. 1-2
Section 2.2 By-Laws ...................................................... 1-2
Section 2.3 Directors and Officers of Surviving Corporation .............. 1-2
ARTICLE III
CONVERSION OF SHARES AND OTHER MATTERS ....................... 1-2
Section 3.1 Intended Effects of Merger ................................... 1-2
Section 3.2 Conversion of Shares ......................................... 1-3
Section 3.3 Escrowed Merger Consideration ................................ 1-4
Section 3.4 Dissenting Shares; Certain Releases from Escrow .............. 1-4
Section 3.5 No Fractional Securities ..................................... 1-5
Section 3.6 Adjustment of Exchange Ratios and Cash Consideration ........ 1-6
Section 3.7 Closing True-Up Procedures ................................... 1-6
Section 3.8 Exchange of Company Stock; Other Procedures .................. 1-9
Section 3.9 Dividends; Escheat ........................................... 1-10
Section 3.10 Closing of Company Transfer Books ............................ 1-10
Section 3.11 Further Assurances ........................................... 1-10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................ 1-11
Section 4.1 Organization ................................................. 1-11
Section 4.2 Capitalization ............................................... 1-11
Section 4.3 Company Subsidiaries ......................................... 1-11
Section 4.4 Authority Relative to this Agreement ......................... 1-12
Section 4.5 Consents; No Violations ...................................... 1-12
Section 4.6 Reports and Financial Statements; Undisclosed Liabilities ... 1-12
Section 4.7 Absence of Certain Changes ................................... 1-13
Section 4.8 Approvals .................................................... 1-13
Section 4.9 Litigation ................................................... 1-13
Section 4.10 No Default ................................................... 1-13
Section 4.11 Taxes ........................................................ 1-14
Section 4.12 Title to Properties; Encumbrances ............................ 1-16
Section 4.13 List of Properties, Contracts and Other Data ................. 1-16
Section 4.14 Intellectual Property; Trade Secrets ......................... 1-17
Section 4.15 Compliance with Applicable Law ............................... 1-18
Section 4.16 Information in Disclosure Documents and Registration
Statement .................................................... 1-20
Section 4.17 Employee Benefit Plans; ERISA ................................ 1-21
Section 4.18 Environmental Laws and Regulations ........................... 1-22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Section 4.19 Condition of Assets .......................................... 1-22
Section 4.20 Insurance .................................................... 1-22
Section 4.21 Absence of Certain Business Practices ........................ 1-23
Section 4.22 Vote Required ................................................ 1-23
Section 4.23 DGCL Section 203 ............................................. 1-23
Section 4.24 Affiliate Transactions ....................................... 1-23
Section 4.25 Brokers ...................................................... 1-23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FSAC ....................... 1-24
Section 5.1 Organization ................................................. 1-24
Section 5.2 Capitalization ............................................... 1-24
Section 5.3 Authority Relative to this Agreement ......................... 1-24
Section 5.4 Consents; No Violations ...................................... 1-25
Section 5.5 Reports and Financial Statements; Undisclosed Liabilities ... 1-25
Section 5.6 Absence of Certain Changes; Business of FSAC ................. 1-26
Section 5.7 Approvals .................................................... 1-26
Section 5.8 Litigation ................................................... 1-26
Section 5.9 No Default ................................................... 1-26
Section 5.10 Taxes ........................................................ 1-26
Section 5.11 Compliance with Applicable Law ............................... 1-27
Section 5.12 Information in Disclosure Documents and Registration
Statement .................................................... 1-27
Section 5.13 Vote Required ................................................ 1-27
Section 5.14 List of Contracts ............................................ 1-27
Section 5.15 Funds ........................................................ 1-28
Section 5.16 Brokers ...................................................... 1-28
Section 5.17 Affiliate Transactions ....................................... 1-28
Section 5.18 No Properties, Encumbrances, Leasehold Interests or Insurance 1-28
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER ....................... 1-28
Section 6.1 Conduct of Business by the Company Pending the Merger ....... 1-28
Section 6.2 Conduct of Business by FSAC Pending the Merger ............... 1-29
Section 6.3 Conduct of Business of Sub ................................... 1-30
ARTICLE VII
ADDITIONAL AGREEMENTS ........................................ 1-30
Section 7.1 Access and Information ....................................... 1-30
Section 7.2 No Solicitation. ............................................. 1-30
Section 7.3 Registration Statement ....................................... 1-31
Section 7.4 Proxy Statements; Stockholder Approvals ...................... 1-31
Section 7.5 Compliance with the Securities Act ........................... 1-32
Section 7.6 Reasonable Best Efforts ...................................... 1-32
Section 7.7 Related Agreements ........................................... 1-33
Section 7.8 FSAC Option Plan ............................................. 1-33
Section 7.9 Unit Purchase Option Exchange ................................ 1-33
Section 7.10 Charter Amendments ........................................... 1-33
Section 7.11 NASDAQ National Market ....................................... 1-33
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Section 7.12 Exchange Offer ............................................... 1-34
Section 7.13 Stockholder Loans ............................................ 1-34
Section 7.14 Directors and Officers ....................................... 1-34
Section 7.15 Public Announcements ......................................... 1-34
Section 7.16 Directors' and Officers' Indemnification ..................... 1-34
Section 7.17 Expenses ..................................................... 1-35
Section 7.18 Supplemental Disclosure ...................................... 1-35
Section 7.19 Letters of Accountants ....................................... 1-35
Section 7.20 Conversion Share Excess ...................................... 1-35
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER ..................... 1-36
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger .. 1-36
Section 8.2 Conditions to Obligations of FSAC and Sub to Effect the
Merger ....................................................... 1-36
Section 8.3 Conditions to Obligation of the Company to Effect the Merger 1-37
ARTICLE IX
TERMINATION .................................................. 1-38
Section 9.1 Termination .................................................. 1-38
Section 9.2 Effect of Termination ........................................ 1-39
ARTICLE X
INDEMNIFICATION .............................................. 1-40
Section 10.1 Survival of Representations and Warranties ................... 1-40
Section 10.2 Indemnification of FSAC81 .................................... 1-40
Section 10.3 Escrow Deposit; Recourse Against Escrow Securities .......... 1-40
Section 10.4 Representatives .............................................. 1-40
Section 10.5 Certain Limitations on Liability ............................. 1-41
Section 10.6 Exclusive Remedy ............................................. 1-41
ARTICLE XI
GENERAL PROVISIONS ........................................... 1-41
Section 11.1 Amendment and Modification ................................... 1-41
Section 11.2 Waiver ....................................................... 1-41
Section 11.3 Investigations ............................................... 1-42
Section 11.4 Notices ...................................................... 1-42
Section 11.5 Descriptive Headings; Interpretation ......................... 1-42
Section 11.6 Entire Agreement; Assignment ................................. 1-43
Section 11.7 Governing Law ................................................ 1-43
Section 11.8 Severability ................................................. 1-43
Section 11.9 Consolidating Supervisor ..................................... 1-43
Section 11.10 Counterparts ................................................. 1-43
</TABLE>
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
iii
<PAGE>
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)
iv
<PAGE>
TERM SECTION
- ---- -------
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)
v
<PAGE>
TERM SECTION
- ---- -------
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
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 8, 1996 (this
"Agreement"), 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 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
stockholders that FSAC acquire the Company pursuant to the terms and
conditions of this Agreement, and, in furtherance 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 inducement to FSAC and Sub's willingness to enter into
this Agreement, the Company is entering into an escrow agreement 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 Agreement")
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 inducement 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 restrictions 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 inducement to FSAC and Sub's willingness to enter into
this Agreement, FSAC, Sub and WCAS are entering into a Majority Stockholders'
Agreement, in the form attached hereto as Exhibit C (the "Majority
Stockholders' Agreement") with respect to, among other things, the making of
certain representations and certain agreements by WCAS in connection with the
Merger and the transactions contemplated thereby;
WHEREAS, in connection with the transactions contemplated by this
Agreement, certain key officers of the Company and FSAC have entered into
employment agreements with the Company and FSAC respectively (the "Employment
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 Incorporation that, subject to adoption thereof by the
stockholders 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").
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NOW, THEREFORE, in consideration of the foregoing 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
"Surviving Corporation") and shall continue its corporate existence 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 executed 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 "Closing") 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 Surviving Corporation shall be
"Euro Brokers Investment Corporation."
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 Surviving 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
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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 disregarding any payments of cash in lieu of
fractional interests, 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 Warrants, 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 agreement (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 Warrants outstanding, respectively, immediately prior to the
Effective Time ((x) reduced by the number of any Conversion 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 defined) and (y) after
giving effect, if it occurs, to the Unit Purchase Option Exchange (as defined
in and contemplated 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 (subject 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 Company issued and outstanding
immediately prior to the Effective 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 pursuant to Section 3.6, the "Stock Exchange Ratio"), (ii)
4.5274405 Merger Warrants (as adjusted pursuant to Section 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 determined 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 Aggregate
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 Effective 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
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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 controlled by such party and/or one or more of its
Subsidiaries.
(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 nonassessable
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 distributable 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 Consideration 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 Releases 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 thereupon 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 "Actual 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 provisions 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.
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(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 aggregate 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 Securities as
follows: (i) first, to pay the Merger Consideration (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 Holder"), as
additional consideration in connection with the Merger, such Participating
Holder's Proportionate Interest (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 release the remaining Cash Escrow Amount, if any, as follows: (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 understood 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 interests 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 multiplying (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 immediately
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 payment, 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.
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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 Prospectus,
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 certifications shall be treated as
additional representations and warranties made under this Agreement.
(b) In accordance with such certifications: (i) the Stock Exchange Ratio
shall be adjusted to equal the quotient obtained by dividing (x) the
difference 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 quotient 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 estimate 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 estimates of both
FSAC Closing Cash Equivalents and the Company's Closing Defined Net Worth,
and the aggregate 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 termination 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 hereinafter defined) required to be calculated pursuant to Section
3.7(e) below would be in excess of the Estimated Aggregate Cash
Consideration, the Estimated 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 finally agreed or
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determined), the Amount as so calculated would be less than the Estimated
Aggregate Cash Consideration, the Estimated Aggregate Cash Consideration
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
accountants) relating to the other's estimates to be delivered pursuant to
Section 3.7(a)(i), the other's Final Statement 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 Disagreement 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 Arbitrator 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 Arbitrator 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
difference obtained (the "Amount") by subtracting (i) the amount of the FSAC
Closing Cash Equivalents as so determined 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.
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(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 Adjustment"), 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 Equivalents" shall mean the sum of the
following balance sheet line items of FSAC, as reflected on a consolidated
balance 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 Stockholders 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. Government and government agency securities deposited in the
Trust Fund (as defined in the 1994 Prospectus) and accrued interest thereon,
plus (iii) prepaid expenses, minus (iv) accounts payable and other
liabilities (including 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
liabilities 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
contemplated 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 otherwise 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 contemplated by this Section 3.7.
Notwithstanding the foregoing, the parties agree and acknowledge that the
adjustments 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 reflective 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 contemplated 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
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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
outcome, 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
unutilized 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
determination 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 released 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 adjustments 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 adjusted
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 Warrants shall be deemed to have been issued at the Effective
Time, (iii) the Estimated Aggregate Cash Consideration (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 Certificate 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 cancelled. 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
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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 surrenders 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 distributions 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 Exchange 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 foregoing, 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 cancelled 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 Corporation 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, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this
Agreement.
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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 conducted. The Company 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 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
condition, results of operations, business, assets, liabilities, 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 transactions
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 capital 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 Subsidiaries, (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 understanding 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 arrangement between the Company or any of its
Subsidiaries and any other person (including any current officer or employee)
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 incorporation, 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 incorporation. Each Subsidiary of the Company that is a
partnership 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 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 Company Material Adverse Effect. All of the outstanding shares of
capital stock of the
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Subsidiaries of the Company 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 Agreement. 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 execution 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 agreement to be executed by the Company pursuant
to this Agreement or for the Company to consummate the transactions
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 accordance 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 agreement 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 provisions 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
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 the Company or any of its Subsidiaries pursuant to,
any of the terms, conditions or provisions 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,
conditions 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
commission or other governmental or other regulatory authority or
administrative agency or commission or of any self-regulatory organization
(collectively, a "Governmental Entity") applicable to the Company, any of its
Subsidiaries 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 consolidated
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
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practices 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 procedures of
the Company or any of its consolidated Subsidiaries.
(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
Subsidiaries had any obligations or liabilities, absolute, accrued or
contingent ("Liabilities"), as of the respective 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
Liabilities as of the date thereof. Since December 31, 1995, none of the
Company or its Subsidiaries has incurred 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 collectible 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, authorization, notification, consent or approval of, any
Governmental 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 Subsidiaries 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, arbitration, 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, proceeding, 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 provision of (i) its charter,
by-laws or comparable organizational 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
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Purchase Agreement): (i) the termination of the Stockholders Agreement, the
Pledge Agreement, the Escrow Agreement (without having effected the
Recapitalization 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 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 the Company 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 4.11 Taxes.
(a) The Company has heretofore delivered or will make available to FSAC
true, correct and complete 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 Subsidiaries 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 descriptions of all such unwritten
agreement or arrangements 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 federal, 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 "Service").
Except as set forth in Schedule 4.11, (i) neither 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 Company 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 applicable 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
Subsidiaries"):
(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.
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(ii) The UK Subsidiaries have no outstanding 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 registration is
subject to any conditions. The UK Subsidiaries are not part of a group for
the purpose of United Kingdom value added tax. The UK Subsidiaries have
materially complied with all statutory provisions, 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 transaction. No election has been made
either under Section 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 falls to be treated as a distribution under
section 209 of the Income & Corporation Taxes Act 1988 (meaning of
"distribution").
(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.
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(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, withholding, 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; Encumbrances; 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, contingent 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 agreement, in
each case without any material default of the Company or its Subsidiaries, as
the case may be, thereunder 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 agreements, employment and consulting
agreements, executive 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 specifically 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 Subsidiary 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;
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(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, qualifications, permits, franchises
and other authorizations 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
Subsidiaries, 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 registration of trademarks, service marks and copyrights,
technology and know-how, rights in Computer Software (as hereinafter defined)
and other proprietary rights and information and all technical and user
manuals and documentation 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 complete 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-proprietary Computer Software
included in the Intellectual Property. The Intellectual Property set forth in
Schedule 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
registration 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 therefor is the subject of any legal or governmental proceeding
before any registration authority in any jurisdiction.
(c) The Company and each of its Subsidiaries owns or has the right to use
all of the Intellectual Property used by it or held for use by it in
connection 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 conduct 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 infringement with any third
party's proprietary rights or (ii) challenging the ownership, use, validity
or enforceability 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,
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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 abandoned 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 computer software or
firmware, (ii) databases and compilations, including without limitation any
and all data and collections 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 foregoing.
(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 Subsidiaries has employed any trade
secrets or any information 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, regulations,
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 Subsidiaries 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 Permits 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 proceeding 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 impairment of any
material Company Permits.
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(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 material 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 contain an untrue statement of material fact or
omit to state a material fact necessary to make the statements 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 regulatory
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 whole sale
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
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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
circumstances 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 maintained 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 existence 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 inter-dealer bond broker under the
by-laws and regulations 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 Exchange Act, nor is it required to comply with
Section 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, ordinances, 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 Documents and Registration
Statement. None of the information to be supplied by the Company or any of
its Subsidiaries 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 Warrants (the "Warrant
Shares")(the "Registration Statement") 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 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 mailing of the
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Proxy Statements 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 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 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 understandings 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 deficiency 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 terminate 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 condition 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
Company. 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 deductible 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 contemplated 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 Sections 3(1) and 3(2) of ERISA) in
addition to, or in lieu of, those payments or benefits set forth under any
Company 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,
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salary continuation, termination, disability, death, retirement, health or
medical benefit to any person (including without 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 collective
bargaining unit or engaging in any other organizational 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, ordinances, decrees, orders or other binding legal requirements 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 ("Environmental 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
Subsidiaries to operate their businesses as currently conducted.
(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 Environmental Response, Compensation, and Liability Act of
1980, as amended) with respect to any actual or alleged environmental
contamination or (y) any request for information under any Environmental Law
from any Governmental Entity with respect to any actual or alleged material
environmental 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 Environmental Law.
Section 4.19 Condition of Assets. All material 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 respect to any such Insurance Policy. All such Insurance
Policies are in full force and effect and provide insurance, including
without limitation liability insurance, in such amounts and against such
risks as is customary for companies engaged in similar businesses to the
Company and its Subsidiaries to protect the employees, properties, assets,
businesses and operations of
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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, governmental 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 Company or any of its
Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (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 Agreement 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 contemplated 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 Subscription and Pledge Agreements entered into in
connection 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 Agreements, 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 advances, loans and payments between the Company and its
Subsidiaries 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 Subsidiaries, 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
brokerage, finder's or other fees or commissions payable in connection with
the Merger or the transactions contemplated by this Agreement based upon any
arrangements made by or on behalf of the Company.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FSAC
FSAC represents and warrants to the Company as follows:
Section 5.1 Organization. FSAC 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
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 Preferred 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 Amendments, all of the
shares of FSAC Common Stock, all of the Merger Warrants issuable in exchange
for shares of Company 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
outstanding. All of such outstanding shares are owned by FSAC, and are
validly issued, fully paid and nonassessable.
(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
authorized 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 understanding 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 Agreement. 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 consummate 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 consummation by each of FSAC and Sub of
the transactions contemplated on its part hereby and thereby,
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have been duly authorized (i) in the case of FSAC, by FSAC's Board of
Directors and, except for the approvals of FSAC's stockholders to be sought
at the stockholders' meeting contemplated 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 Conversion 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 executed by
Sub pursuant to this Agreement or for Sub to consummate 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 delivered by FSAC and
constitutes a valid and binding agreement of FSAC, enforceable against FSAC
in accordance with its terms. Each of this Agreement and all Related
Agreements 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 executed 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 Contract 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, constitute 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, injunction, decree, statute,
rule or regulation of any Governmental 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 "Securities Act") since
January 1, 1995 (collectively, the "FSAC SEC Reports"). Such FSAC SEC
Reports, as of their respective 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 included in the FSAC SEC Reports, including, without
limitation, the FSAC Balance Sheet and the unaudited balance sheet of FSAC as
of September 30, 1995 (the "FSAC Financial Statements"), have been prepared
in accordance with GAAP consistently applied throughout the periods indicated
(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 unaudited statements, to normal, recurring year-end adjustments and
any other adjustments described therein) the financial 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 procedures 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 Financial
Statements. Since September 30, 1995, neither FSAC nor Sub has incurred any
material
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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) amortization of organization costs and (vi)
federal, state and local income taxes payable on FSAC's cash interest income.
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
conducted 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
operating business in the financial services industry (including 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, authorization, notification, consent or approval of, any
Governmental 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 Effect. Nor, to the knowledge of FSAC, does there exist any basis for
any such action, suit, arbitration, investigation, 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, except, in the case
of clause (ii), for defaults or violations 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 Returns 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 accrued
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 foreign 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 examined, could reasonably be expected to result in a
proposed 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
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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 (including, 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 authorities 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 regulations 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 Documents and Registration
Statement. None of the information 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 mailing
of the Proxy Statements and any amendments or supplements thereto, and at the
time of the meeting of stockholders 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 respects 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 concerning the Company or any of its
Subsidiaries, WCAS incorporated 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 contemplated 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 contemplated 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
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Contracts which either exceed $50,000 per annum in amount or are otherwise
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
brokerage, finder's or other fees or commissions payable in connection with
the Merger or the transactions contemplated 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, associate 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 Company 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 practices 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 dividend 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 Subsidiary 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 Subsidiaries;
(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
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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 corporation, 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, commitment 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 practices; (v) incur, assume, discharge
or prepay any material Lien, any material indebtedness or any other
material Liabilities other than in the ordinary course of business and
consistent with past practices; (vi) assume, guarantee, 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 aggregate; (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
compensation; 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
employment 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 payment 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 Contracts, other than in each case in
connection with cash investments, Trust Fund management, general office
administration, preparation for and consummation of the transactions
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;
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(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 Certificate 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 distribution payable in
cash, stock or property;
(d) FSAC shall not authorize for issuance, 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 (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for (i) the
issuance of shares of FSAC Common Stock upon the exercise or exchange of
FSAC Warrants 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 Subsidiaries and its and their respective officers,
directors, employees, auditors and agents to) afford to the other and to the
other's officers, employees, financial advisors, 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, facilities 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-regulatory organization, provided
that no investigation pursuant to this Section 7.1 shall affect any
representations or warranties made herein or the conditions to the
obligations 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 Agreement")).
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
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Acquisition Transaction or enter into any agreement, arrangement or
understanding with respect to any such Acquisition Transaction or which would
require 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 contemplated 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 Registration
Statement declared effective. FSAC shall also use its reasonable best efforts
to take any action required 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 information concerning the Company and the holders of its capital 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 circumstance 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, promptly 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 meeting of the holders of Company Stock for the purpose
of voting to approve and adopt this Agreement and the transactions
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 special 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
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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 following, 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 transactions
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 certificate 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 Effective 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
registration 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 advisable 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 generality
of the foregoing, as promptly as practicable, the Company, FSAC and Sub (in
conjunction with WCAS as provided 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 reasonably required in connection
with this Agreement, the Related Agreements and the transactions contemplated
hereby and thereby by 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). 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 approvals
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
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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
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
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 necessary action.
Section 7.7 Related Agreements. As an essential 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 applicable 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 Amendment 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 Warrants 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
condition to the occurrence of the Closing.
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Section 7.12 Exchange Offer. It is contemplated 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 theretofore 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 agreements
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 Exchange Offer, certain stockholders of FSAC and the Company 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 distributable to such stockholder as evidenced by an
assignment and consent agreement (in a form reasonably acceptable 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 interest) the balance of such Stockholder Loan to
members of the Management and/or one or more designees of the foregoing
(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 recommendation in the Proxy Statement relating to its meeting of
stockholders and otherwise to use its best efforts to effect their election.
Immediately following the Closing, FSAC will also use its best efforts to
take all actions necessary to cause Donald Marshall to be appointed
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 reasonable best efforts to consult with the other parties
about the form and substance of such disclosure.
Section 7.16 Directors' and Officers' Indemnification. 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
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Incorporation or By-Laws shall, with respect to any matter existing or
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement), survive the Effective 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 expenses, 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 complied
with or satisfied by such party hereunder; provided, 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 reasonably 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 contingent 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
aggregate purchase price equal to the Excess Conversion Amount (as
hereinafter defined).
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation 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 permissible 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 seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) Stockholder Approval and FSAC Conversion 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 described 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 Registration 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 jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which materially restricts, prevents or
prohibits consummation 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 authorizations, 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 obtained, 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 requisite 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 representations 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 Company 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 material respects, in each case as of the date hereof, and,
except to the extent such representations and warranties speak as of an
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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 performed in all material respects all obligations
required to be performed by it under this Agreement or the Majority
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
financial 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 Defined 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 Affiliates 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
restricting 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 representations and warranties of FSAC set forth in
this Agreement 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 materiality 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
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and warranties 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 respects 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, respectively, 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
stockholders 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 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.
(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
Agreement);
(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 Company 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 agreements 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,
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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 contemplated 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 Warrant 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 Conversion 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 remained
unsatisfied in accordance with the proviso to said Section 8.3(d) for a
period of 10 days after the certification 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 Sections 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
exceeded 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
termination 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 Termination 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 termination or breach (if there is a
termination) of any representation, warranty or covenant under the
Majority Stockholders' Agreement or the Security Transfer Agreement;
provided, however, that FSAC shall be entitled to reimbursement of its
reasonable costs and expenses (including 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.
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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 collectively 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, judgments, 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 Agreement; or
(ii) any breach of any covenant or agreement of the Company or WCAS
contained in this Agreement or any Related Agreement.
For purposes of determining whether FSAC, as an Indemnified Party, shall have
had any Damages asserted against, resulting to, imposed upon or incurred by
it in connection with any of the matters described in the immediately
preceding clauses (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 Indemnified 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 ultimately have the effect of reducing the Merger Consideration
payable to each Holder, WCAS shall act as the Representative on behalf of
itself and all of the other Holders who are WCAS affiliates and Donald
R.A. Marshall shall act as the
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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 nature. 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 Representative shall not be liable to
any of the Holders or any other party for any error of judgment, act done
or omitted 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 reasonably
believed by it to be genuine, or upon any evidence reasonably deemed by it
to be sufficient. Each Representative 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 indemnification 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
indemnification 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
Article 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
stockholders of FSAC or the Company, no such amendment, modification or
supplementation shall be made which under Applicable 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 representations and warranties of
the other contained herein or in any documents delivered pursuant hereto and
(iii) waive compliance by
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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
documents 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 effective 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; Interpretation. 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. References 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 requires. The term "person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a Governmental Entity or an unincorporated
organization. References herein to "the knowledge of the
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<PAGE>
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, Michael 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 acknowledged 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 assignment
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 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 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 provision 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 pursuant 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 inaccuracy 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.
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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
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<PAGE>
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 expressly 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 provisions 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
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<PAGE>
ANNEX II
WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
VOID AFTER 5:00 PM NEW YORK CITY TIME -- ON NOVEMBER 30, 2001
---------------------
Number of Warrants
FINANCIAL SERVICES ACQUISITION CORPORATION
CUSIP
THIS CERTIFIES THAT, for value received
, or registered assigns
("Registered Holder") is the owner of the number of Series B Redeemable
Common Stock Purchase Warrants ("Warrants") of Financial Services Acquisition
Corporation, a Delaware corporation ("Company"), specified above. Each
Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and in the Warrant
Agreement (as hereinafter defined), one fully paid and nonassessable share
(subject to adjustment as hereinafter provided) of the Common Stock, par
value $.001 per share ("Common Stock"), of the Company at any time after the
issuance hereof and before the Expiration Date (as hereinafter defined) upon
the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the office of
Continental Stock Transfer & Trust Company, as warrant agent, or its
successor ("Warrant Agent") accompanied by payment of the $5.00 ("Purchase
Price") per Warrant, subject to adjustment as hereinafter provided, in lawful
money of the United States in cash, or by good certified or official bank
check payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms set forth in the
Warrant Agreement ("Warrant Agreement") dated as of , 1996 by and
between the Company and the Warrant Agent, to all the terms and provisions of
which the Registered Holder, by acceptance of this Warrant Certificate,
hereby assents. In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price and the number of shares of Common
Stock subject to purchase upon the exercise of each Warrant represented
hereby are subject to modification or adjustment. Reference is made to the
Warrant Agreement for a more complete statement of the rights and limitations
of the Registered Holder hereof, the rights and duties of the Warrant Agent
and the rights and obligations of the Company thereunder. Copies of the
Warrant Agreement are on file at the corporate trust office of the Warrant
Agent.
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
November 30, 2001, or such earlier date as the Warrant shall be redeemed. If
such date shall be in the City of New York a holiday or a day on which the
banks are authorized to close, "Expiration Date" shall mean 5:00 p.m. (New
York City time) the next following day which in the City of New York is not a
holiday or a day on which banks are authorized to close.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder. The Company shall not be required upon the exercise of the
Warrants represented hereby to issue any fractions of shares, but shall make
an adjustment therefor in cash on the basis of the market value of such
fractional interest (computed as provided in the Warrant Agreement). In case
this Warrant is exercised with respect to less than all of such Warrants, a
new Warrant Certificate or Certificates will be issued on such surrender for
the number of Warrants represented hereby which were not so exercised. Prior
to the exercise of any Warrant represented hereby the Registered Holder shall
not be entitled with respect to the shares of Common Stock to which this
Warrant Certificate relates to any rights of a stockholder of the Company
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceeding of the Company except as provided in said Warrant Agreement. Prior
to the due presentment for registration of transfer of this Warrant
Certificate,
2-1
<PAGE>
the Company and the Warrant Agent may deem and treat the Registered Holder as
the absolute holder hereof and each Warrant represented hereby
(notwithstanding any notation of ownership or other writing hereon by anyone
other than a duly authorized officer of the Company or the Warrant Agent),
for all purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
This Warrant Certificate is exchangeable upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender.
Upon due presentment together with any tax or any governmental charge
imposed in connection therewith, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants, will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of any Warrant unless a registration statement under the
Securities Act of 1933 with respect to such securities is effective. The
Company has covenanted and agreed that it will file a registration statement
or a post-effective amendment to its existing registration statement and will
use its best efforts to cause the same to become effective and to keep it
current while any of the Warrants are outstanding and exercisable. The
Warrants represented hereby shall not be exercisable by a Registered Holder
in any state where such exercise would be unlawful.
The Warrants may be redeemed at the option of the Company, in whole but
not in part, by paying in cash or certified or bank check
therefor $.01 per Warrant, upon at least thirty days written notice mailed to
the Registered Holders at any time, if the last sales price of the Common
Stock was at least $8.50 per share subject to adjustment as provided in the
Warrant Agreement, on each of the twenty consecutive trading days during a
period ending on the third day prior to the date on which the notice of
redemption is given. Each Warrant that is the subject of such redemption and
that has not been exercised on or before the date called for in such notice
shall become void, and all rights thereunder shall terminate.
If this Warrant shall be surrendered for exercise within any period during
which the transfer books for Common Stock or other securities purchasable
upon the exercise of this Warrant are closed for any purpose, the Company
shall not be required to make delivery of certificates for the securities
purchasable upon such exercise until the date of re-opening of said transfer
books.
This Warrant Certificate and each Warrant represented hereby shall be
construed in accordance with and governed by the laws of the State of New
York.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ------------------------ FINANCIAL SERVICES ACQUISITION
CORPORATION
COUNTERSIGNED: ATTEST:
By:
----------------------------------------
By: CONTINENTAL STOCK TRANSFER Vice President, Secretary and Treasurer
AND TRUST COMPANY By:
AUTHORIZED OFFICER ----------------------------------------
Chairman of the Board and Chief
Executive Officer
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<PAGE>
PURCHASE FORM
TO BE EXECUTED
UPON EXERCISE OF WARRANT CERTIFICATE
TO:
The undersigned hereby exercises, according to the terms and conditions
thereof, the right to purchase shares of Common Stock, evidenced by the
within Warrant Certificate, and herewith makes payment of the Purchase Price
in full.
NAME:
------------------------------
--------------------------------------
ADDRESS: PAYMENT ENCLOSED
---------------------------
--------------------------------------
- ----------------------------------- Social Security No. of Warrant Holder
- ----------------------------------- SIGNATURE:
----------------------------
DATED:
-----------------------------
TRANSFER FORM
For value received hereby sells, assigns and transfers unto
Warrants to purchase
shares of Common Stock represented by the within Warrant Certificate and does
hereby irrevocably constitute and appoint
Attorney to transfer such warrants on the books of the within
named Company with full power of substitution in the premises.
DATED:
-----------------------------
Notice:
----------------------------
The Signature to this assignment
- ----------------------------------- must correspond with the name as
Social Security Number of Assignee written upon the face of this
or other identifying number Warrant Certificate in every
particular.
[Note: The Warrant Agent shall be entitled to demand signatures which are
Medallion guaranteed by an Eligible Institution.]
2-4
<PAGE>
ANNEX III
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto
in writing pursuant to Section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest
in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at
the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by
more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to
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<PAGE>
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby
to demand the appraisal of his shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsection (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger of consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger of consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall
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<PAGE>
be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of
the stockholder entitled to an appraisal. Any stockholder whose name appears
on the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate fully
in all proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such items as the Court deems just.
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<PAGE>
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation. (Last amended
by Ch. 79, L. '95, eff. 7-1-95.)
3-4
<PAGE>
ANNEX IV
CERTIFICATE OF MERGER
OF
EBIC ACQUISITION CORP.
INTO
EURO BROKERS INVESTMENT CORPORATION
------------------------------------------------------------
PURSUANT TO SECTION 251(C) OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------------------------------------
Euro Brokers Investment Corporation, a Delaware corporation, does hereby
certify to the following facts relating to the merger of EBIC Acquisition
Corp. into Euro Brokers Investment Corporation (the "Merger"):
FIRST: The names and states of incorporation of the constituent
corporations to the Merger are as follows:
NAME STATE
---- -----
Euro Brokers Investment Corporation Delaware
EBIC Acquisition Corp. Delaware
SECOND: The Agreement and Plan of Merger, dated March 8, 1996 (the "Merger
Agreement"), by and among Financial Services Acquisition Corporation, EBIC
Acquisition Corp. and Euro Brokers Investment Corporation, has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with Section 251 of the General Corporation Law of
the State of Delaware.
THIRD: The name of the corporation surviving the Merger is Euro Brokers
Investment Corporation, a Delaware corporation (the "Surviving Corporation").
FOURTH: The Restated Certificate of Incorporation of Euro Brokers
Investment Corporation shall be amended pursuant to the Merger to read in its
entirety as set forth in Exhibit A attached hereto and, as amended, shall be
the Restated Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
FIFTH: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation, the address of
which is Two World Trade Center, Suite 8400, New York, NY 10048.
SIXTH: A copy of the Merger Agreement will be furnished by the Surviving
Corporation on request and without cost to any stockholder of either of the
constituent corporations.
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<PAGE>
IN WITNESS WHEREOF, Euro Brokers Investment Corporation has caused its
corporate seal to be affixed hereto and this Certificate of Merger to be
executed in its corporate name and attested to by its officers thereunto duly
authorized this day of , 1996.
EURO BROKERS INVESTMENT CORPORATION
By:
----------------------------------
Name:
Title:
ATTEST:
By:
------------------------------
Name:
Title:
(CORPORATE SEAL)
4-2
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
EURO BROKERS INVESTMENT CORPORATION
FIRST: The name of the Corporation is Euro Brokers Investment Corporation
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is One Thousand (1,000) shares of Common Stock, each
having a par value of One Cent ($.01).
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article FIFTH by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification with respect to acts or omissions occurring prior
to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE>
ANNEX V
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
FINANCIAL SERVICES CORPORATION
Financial Services Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the name of the Corporation is Financial Services Corporation,
and that the Corporation was originally incorporated under the name Financial
Services Acquisition Corporation.
SECOND: That at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Corporation, declaring said amendment to
be advisable and directing that said amendment be submitted to the
stockholders of the Corporation for consideration thereof at a Special
Meeting of Stockholders.
THIRD: That the proposed amendment to the Corporation's Certificate of
Incorporation is as follows:
1. Article SIXTH of the Corporation's Certificate of Incorporation is
hereby amended to read in its entirety as follows:
"SIXTH: A. The business of the Corporation shall be managed by or under
the direction of its Board of Directors, which shall consist of not less than
three nor more than twelve directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall be divided
into three classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the total number
of directors constituting the entire Board of Directors. Initially, the
number of directors shall be eight, with two Class I directors elected for a
one-year term, three Class II directors elected for a two-year term, and
three Class III directors elected for a three-year term. At each succeeding
annual meeting of stockholders beginning in 1997, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number
of directors in each class as nearly equal as possible, and any additional
director of any class elected to fill a vacancy resulting from an increase in
such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting of the stockholders for the year in which his
or her term expires and until his or her successor shall be elected and
qualified, subject, however, to prior death, resignation, retirement or
removal from office for cause. Except as the GCL may otherwise require, any
vacancy on the Board of Directors that results from an increase in the
authorized number of directors or any other vacancy occurring in the Board of
Directors (including any unfilled vacancy resulting from the removal of any
director for cause) may be filled by a majority of the remaining directors
then in office, although less than a quorum, or by a sole remaining director.
Any director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of his
predecessor or, if such director has no predecessor, as that of the class of
directors to which such director has been elected. Notwithstanding the
foregoing, whenever the holders of any one or more series of Preferred Stock
issued by the Corporation shall have the right, voting separately by series,
to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation or any Preferred Stock Designation pursuant to Article FOURTH
or as may be permitted by the GCL, and such directors so elected shall not be
divided into classes pursuant to this Article SIXTH unless expressly provided
by such terms.
B. Subject to the rights of the holders of shares of any series of
Preferred Stock to elect additional directors under specified circumstances
or to consent to actions taken by the Corporation which
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<PAGE>
specifically require the approval of such holders, any action required or
permitted to be taken by the stockholders of the Corporation must be effected
at an annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing in lieu of a meeting of such
stockholders.
C. Subject to the rights of the holders of any class or series of
Preferred Stock, and notwithstanding anything to the contrary in the By-Laws
of the Corporation, special meetings of the Corporation may be called only by
the Chairman of the Board, the President of the Corporation or by the
affirmative vote of a majority of the members of the Board of Directors.
D. Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation, the affirmative vote of the
holders of record of shares of Voting Stock representing at least eighty
percent (80%) of the votes entitled to be cast by holders of all the then
outstanding shares of Voting Stock, voting together as a single class,
without a separate vote of the holders of the Preferred Stock, or any series
thereof, unless a vote of any such holders is required pursuant to any
Preferred Stock Designation, shall be required to alter, amend or repeal this
Article SIXTH or to adopt any provision inconsistent herewith."
FOURTH: That thereafter, pursuant to resolutions of its Board of
Directors, a Special Meeting of the Stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
FIFTH: That said amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm, under penalties of perjury, that this Certificate is the act and deed
of the Corporation and the facts stated herein are true.
Date:
--------------------------------
Gilbert Scharf,
Chairman of the Board,
Chief Executive Officer
and President
Attest:
- -----------------------------------
Michael Scharf,
Secretary
5-2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
FINANCIAL SERVICES ACQUISITION CORPORATION
Financial Services Acquisition Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Corporation, declaring said amendment to
be advisable and directing that said amendment be submitted to the
stockholders of the Corporation for consideration thereof at a Special
Meeting of Stockholders.
SECOND: That the proposed amendment to the Corporation's Certificate of
Incorporation is as follows:
1. Article FIRST of the Corporation's Certificate of Incorporation is
hereby amended to read in its entirety as follows:
"FIRST: The name of the Corporation is Financial Services Corporation."
2. The first sentence of Article FOURTH of the Corporation's Certificate
of Incorporation is hereby amended to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 31,000,000, of which
30,000,000 shares shall be Common Stock of the par value of $0.001 per share
and 1,000,000 shares shall be Preferred Stock of the par value of $0.001 per
share."
THIRD: That thereafter, pursuant to resolutions of its Board of Directors,
a Special Meeting of the Stockholders of Financial Services Acquisition
Corporation was duly called and held, upon notice in accordance with Section
222 of the General Corporation Law of the State of Delaware, at which meeting
the necessary number of shares as required by statute were voted in favor of
the amendment.
FOURTH: That said amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm, under penalties of perjury, that this Certificate is the act and deed
of the Corporation and the facts stated herein are true.
Date:
----------------------------------
Gilbert Scharf,
Chairman of the Board,
Chief Executive Officer
and President
Attest:
- ---------------------------
Michael Scharf,
Secretary
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ANNEX VI
FINANCIAL SERVICES ACQUISITION CORPORATION
1996 STOCK OPTION PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the Financial Services Acquisition Corporation 1996 Stock
Option Plan (the "Plan") is to align the interests of executive officers and
other key employees of Financial Services Acquisition Corporation and its
subsidiaries with those of the stockholders of Financial Services Acquisition
Corporation, to afford an incentive to such officers and employees to
continue as employees, to increase their efforts on behalf of the Company and
to promote the success of the Company's business. To further such purposes,
the Committee may grant options to purchase shares of the Company's common
stock. The provisions of the Plan are intended to satisfy the requirements of
Section 16(b) of the Securities Exchange Act of 1934 and of Section 162(m) of
the Internal Revenue Code of 1986, and shall be interpreted in a manner
consistent with the requirements thereof, as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated below:
(a) "Agreement" shall mean a written agreement entered into between
the Company and an Optionee in connection with an award under the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause," when used in connection with the termination of an
Optionee's employment by the Company, shall mean (i) the conviction of the
Optionee for the commission of a felony, (ii) the willful and continued
failure by the Optionee substantially to perform his duties and
obligations to the Company or a Subsidiary (other than any such failure
resulting from his incapacity due to physical or mental illness), or (iii)
the willful engaging by the Optionee in misconduct that is materially
injurious to the Company or a Subsidiary. For purposes of this Section
2(c), no act, or failure to act, on an Optionee's part shall be considered
"willful" unless done, or omitted to be done, by the Optionee in bad faith
and without reasonable belief that his action or omission was in the best
interest of the Company. The Committee shall determine whether a
termination of employment is for Cause for purposes of the Plan.
(d) "Change in Control" shall mean the occurrence of the event set
forth in any of the following paragraphs:
(i) any Person (as defined below) is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
subsidiaries) representing 50% or more of the combined voting power of
the Company's then outstanding securities; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on
the date hereof, constitute the Board and any new director (other than
a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by
a vote of at least two-thirds ( 2/3 ) of the directors then still in
office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so
approved or recommended; or
(iii) there is consummated a merger or consolidation of the Company
or a direct or indirect subsidiary thereof with any other corporation,
other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to such
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merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, at least 50% of the combined
voting power of the securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no
Person is or becomes the beneficial owner, directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its subsidiaries) representing 50% or more of the
combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by Persons in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.
For purposes of this Section 2(d), "Person" shall have the meaning given
in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean a committee established by the Board to
administer the Plan.
(g) "Common Stock" shall mean shares of common stock, par value $.001
per share, of the Company.
(h) "Company" shall mean Financial Services Acquisition Corporation, a
corporation organized under the laws of the State of Delaware, or any
successor corporation.
(i) "Disability" shall mean an Optionee's inability to perform his
duties with the Company by reason of any medically determinable physical
or mental impairment, as determined by a physician selected by the
Optionee and acceptable to the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted
and applied by regulations, rulings and cases.
(k) "Fair Market Value" per share as of a particular date shall mean
(i) if the shares of Common Stock are then listed on a national securities
exchange, the closing sales price per share of Common Stock on the
national securities exchange on which the Common Stock is principally
traded for the last preceding date on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock are
then traded in an over-the-counter market, the average of the closing bid
and asked prices for the shares of Common Stock in such over-the-counter
market for the last preceding date on which there was a sale of such
Common Stock in such market, or (iii) if the shares of Common Stock are
not then listed on a national securities exchange or traded in an
over-the- counter market, such value as the Committee, in its sole
discretion, shall determine.
(l) "Incentive Stock Option" shall mean any option intended to be and
designated as an incentive stock option within the meaning of Section 422
of the Code.
(m) "Nonqualified Option" shall mean an Option that is not an
Incentive Stock Option.
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(n) "Option" shall mean the right, granted hereunder, to purchase
shares of Common Stock. Options granted by the Committee pursuant to the
Plan may constitute either Incentive Stock Options or Nonqualified Stock
Options.
(o) "Optionee" shall mean a person who receives a grant of an Option.
(p) "Option Price" shall mean the exercise price of the shares of
Common Stock covered by an Option.
(q) "Parent" shall mean any company (other than the Company) in an
unbroken chain of companies ending with the Company if, at the time of
granting an Option, each of the companies other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other companies in such chain.
(r) "Plan" shall mean this Financial Services Acquisition Corporation
1996 Stock Option Plan.
(s) "Retirement" shall mean an Optionee's retirement in accordance
with the terms of any tax-qualified retirement plan maintained by the
Company or a Subsidiary in which the Optionee participates.
(t) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in
effect, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, including any successor to such Rule.
(u) "Subsidiary" shall mean any company (other than the Company) in an
unbroken chain of companies beginning with the Company if, at the time of
granting an Option, each of the companies other than the last company in
the unbroken chain owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the
other companies in such chain.
(v) "Ten Percent Stockholder" shall mean an Optionee who, at the time
an Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock
of the Company or any Parent or Subsidiary.
3. Administration.
The Plan shall be administered by the Committee, the members of which
shall, except as may otherwise be determined by the Board, be "disinterested
directors" under Rule 16b-3 and "outside directors" under Section 162(m) of
the Code.
The Committee shall have the authority in its discretion, subject to and
not inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically
granted to it under the Plan or necessary or advisable in the administration
of the Plan, including, without limitation, the authority to grant Options;
to determine which Options shall constitute Incentive Stock Options and which
Options shall constitute Nonqualified Stock Options; to determine the
purchase price of the shares of Common Stock covered by each Option; to
determine the persons to whom, and the time or times at which awards shall be
granted; to determine the number of shares to be covered by each award; to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Agreements
(which need not be identical) and to cancel or suspend awards, as necessary;
and to make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All decisions,
determination and interpretations of the Committee shall be final and binding
on all Optionees of any awards under this Plan.
The Board shall have the authority to fill all vacancies, however caused,
in the Committee. The Board may from time to time appoint additional members
to the Committee, and may at any time remove one
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<PAGE>
or more Committee members. One member of the Committee shall be selected by
the Board as chairman. The Committee shall hold its meetings at such times
and places as it shall deem advisable. All determinations of the Committee
shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may appoint a secretary and make such rules and regulations for the
conduct of its business as it shall deem advisable, and shall keep minutes of
its meetings.
No member of the Board or Committee shall be liable for any action taken
or determination made in good faith with respect to the Plan or any award
granted hereunder.
4. Eligibility.
Awards may be granted to executive officers and other key employees of the
Company, EBIC and their Subsidiaries, including officers and directors who
are employees. In determining the persons to whom awards shall be granted and
the number of shares to be covered by each award, the Committee shall take
into account the duties of the respective persons, their present and
potential contributions to the success of the Company and such other factors
as the Committee shall deem relevant in connection with accomplishing the
purpose of the Plan.
5. Stock.
The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan shall be 1,800,000, subject to adjustment as provided
in Section 9 hereof. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company.
If any outstanding award under the Plan should for any reason expire, be
cancelled or be forfeited without having been exercised in full, the shares
of Common Stock allocable to the unexercised, cancelled or terminated portion
of such award shall (unless the Plan shall have been terminated) become
available for subsequent grants of awards under the Plan.
In no event may an Optionee be granted during any calendar year an Option
to acquire more than 500,000 shares of Common Stock.
6. Terms and Conditions of Options.
Each Option granted pursuant to the Plan shall be evidenced by an
Agreement, in such form and containing such terms and conditions as the
Committee shall from time to time approve, which Agreement shall comply with
and be subject to the following terms and conditions, unless otherwise
specifically provided in such Option Agreement:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically state
that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option.
(c) Option Price. Each Option Agreement shall state the Option Price,
which shall not be less than one hundred percent (100%) of the Fair Market
Value of the shares of Common Stock covered by the Option on the date of
grant unless, with respect to Nonqualified Stock Options, otherwise
determined by the Committee. The Option Price shall be subject to
adjustment as provided in Section 9 hereof. The date as of which the
Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted, unless such resolution
specifies a different date.
(d) Medium and Time of Payment. The Option Price shall be paid in
full, at the time of exercise, in cash or in shares of Common Stock then
owned by the Optionee having a Fair Market Value equal to such Option
Price or in a combination of cash and Common Stock or, unless the
Committee shall determine otherwise, by a cashless exercise procedure
through a broker-dealer.
(e) Term and Exercisability of Options. Each Option Agreement shall
provide the exercise schedule for the Option as determined by the
Committee; provided, however, that, the Committee
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shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its
sole discretion, deems appropriate. The exercise period will be ten (10)
years from the date of the grant of the Option unless otherwise determined
by the Committee; provided, however, that, in the case of an Incentive
Stock Option, such exercise period shall not exceed ten (10) years from
the date of grant of such Option. The exercise period shall be subject to
earlier termination as provided in Sections 6(f) and 6(g) hereof. An
Option may be exercised, as to any or all full shares of Common Stock as
to which the Option has become exercisable, by written notice delivered in
person or by mail to the Secretary of the Company, specifying the number
of shares of Common Stock with respect to which the Option is being
exercised.
(f) Termination. Except as provided in this Section 6(f) and in
Section 6(g) hereof, an Option may not be exercised unless the Optionee is
then in the employ of the Company or a Subsidiary (or a company or a
Parent or Subsidiary company of such company issuing or assuming the
Option in a transaction to which Section 424(a) of the Code applies), and
unless the Optionee has remained continuously so employed since the date
of grant of the Option. In the event that the employment of an Optionee
shall terminate (other than by reason of death, Disability, Retirement or
Cause), all Options of such Optionee that are exercisable at the time of
such termination may, unless earlier terminated in accordance with their
terms, be exercised within thirty (30) days after the date of such
termination (or such different period as the Committee shall prescribe).
(g) Death, Disability or Retirement of Optionee. If an Optionee shall
die while employed by the Company or a Subsidiary, or within thirty (30)
days after the date of termination of such Optionee's employment (or
within such different period as the Committee may have provided pursuant
to Section 6(f) hereof), or if the Optionee's employment shall terminate
by reason of Disability or Retirement, all Options theretofore granted to
such Optionee (to the extent otherwise exercisable) may, unless earlier
terminated in accordance with their terms, be exercised by the Optionee or
by the Optionee's estate or by a person who acquired the right to exercise
such Options by bequest or inheritance or otherwise by reason of death or
Disability of the Optionee, at any time within one year after the death,
Disability or Retirement of the Optionee (or such different period as the
Committee shall prescribe). In the event that an Option granted hereunder
shall be exercised by the legal representatives of a deceased or former
Optionee, written notice of such exercise shall be accompanied by a
certified copy of letters testamentary or equivalent proof of the right of
such legal representative to exercise such Option. Unless otherwise
determined by the Committee, Options not otherwise exercisable on the date
of termination of employment shall be forfeited as of such date.
(h) Other Provisions. The Option Agreements evidencing awards under
the Plan shall contain such other terms and conditions not inconsistent
with the Plan as the Committee may determine.
7. Nonqualified Stock Options.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 6 hereof.
8. Incentive Stock Options.
Options granted pursuant to this Section 8 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms
and conditions, in addition to the general terms and conditions specified in
Section 6 hereof.
(a) Value of Shares. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of Common Stock
with respect to which Incentive Stock Options granted under this Plan and all
other option plans of any subsidiary become exercisable for the first time by
each Optionee during any calendar year shall not exceed $100,000.
(b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one hundred ten percent (110%) of the Fair Market Value of the shares of
Common Stock on the date of grant of such Incentive Stock Option, and (ii)
the exercise period shall not exceed five (5) years from the date of grant of
such Incentive Stock Option.
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9. Effect of Certain Changes.
(a) In the event of any extraordinary dividend, stock dividend,
recapitalization, merger, consolidation, stock split, warrant or rights
issuance, or combination or exchange of such shares, or other similar
transactions, each of the number of shares of Common Stock available for
awards, the number of such shares covered by outstanding awards, and the
price per share of Options, as appropriate, shall be equitably adjusted by
the Committee to reflect such event and preserve the value of such awards;
provided, however, that any fractional shares resulting from such adjustment
shall be eliminated.
(b) Upon the occurrence of a Change in Control, each Option granted under
the Plan and then outstanding but not yet exercisable shall thereupon become
fully exercisable.
10. Surrender and Exchange of Awards.
The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any option granted under any other plan,
program or arrangement of the Company or any Subsidiary ("Surrendered
Option"), to be conditioned upon the granting to the Optionee of a new Option
for the same number of shares of Common Stock as the Surrendered Option, or
may require such voluntary surrender as a condition precedent to a grant of a
new Option to such Optionee. Subject to the provisions of the Plan, such new
Option may be an Incentive Stock Option or a Nonqualified Stock Option, and
shall be exercisable at the price, during such period and on such other terms
and conditions as are specified by the Committee at the time the new Option
is granted.
11. Period During Which Awards May Be Granted.
Awards may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board, or
the date the Plan is approved by the shareholders of the Company, whichever
is earlier, unless the Board shall terminate the Plan at an earlier date.
12. Nontransferability of Awards.
Awards granted under the Plan shall not be transferable otherwise than by
will or by the laws of descent and distribution, and awards may be exercised
or otherwise realized, during the lifetime of the Optionee, only by the
Optionee or by his guardian or legal representative.
13. Approval of Shareholders.
The Plan shall take effect upon its adoption by the Board and shall
terminate on the tenth anniversary of such date, but the Plan (and any grants
of awards made prior to the shareholder approval mentioned herein) shall be
subject to the approval of Company's shareholders, which approval must occur
within twelve months of the date the Plan is adopted by the Board.
14. Agreement by Optionee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of exercise of an Option
(a "Tax Event"), each Optionee shall agree that no later than the date of the
Tax Event, the Optionee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state or
local taxes of any kind required by law to be withheld upon the Tax Event.
Alternatively, the Committee may provide that an Optionee may elect, to the
extent permitted or required by law, to have the Company deduct federal,
state and local taxes of any kind required by law to be withheld upon the Tax
Event from any payment of any kind due to the Optionee. The withholding
obligation may be satisfied by the withholding or delivery of Common Stock.
15. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that, unless otherwise determined by
the Board, an amendment that requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any
other law, regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. Except as provided in
Section 9(a) hereof, no suspension, termination, modification or amendment of
the Plan may adversely affect any award previously granted, unless the
written consent of the Optionee is obtained.
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16. Rights as a Shareholder.
An Optionee or a transferee of an award shall have no rights as a
shareholder with respect to any shares covered by the award until the date of
the issuance of a stock certificate to him for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distribution of other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Section 9(a) hereof.
17. No Rights to Employment.
Nothing in the Plan or in any award granted or Agreement entered into
pursuant hereto shall confer upon any Optionee the right to continue in the
employ of the Company or any Subsidiary or to be entitled to any remuneration
or benefits not set forth in the Plan or such Agreement or to interfere with
or limit in any way the right of the Company or any such Subsidiary to
terminate such Optionee's employment. Awards granted under the Plan shall not
be affected by any change in duties or position of an Optionee as long as
such Optionee continues to be employed by the Company or any Subsidiary.
18. Beneficiary.
An Optionee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Optionee, the executor or administrator of the Optionee's estate
shall be deemed to be the Optionee's beneficiary.
19. Governing Law.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
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ANNEX VII
ESCROW AGREEMENT
ESCROW 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"), Euro Brokers Investment Corporation, a Delaware
corporation (the "Company"), Donald R.A. Marshall, President of the Company,
Welsh, Carson, Anderson & Stowe VI, L.P., a Delaware limited partnership
("WCAS VI" and, together with Mr. Marshall, sometimes hereinafter referred to
each as a "Representative" 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 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 the Company, as
a result of which the outstanding 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 Warrants"), 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 adjustments 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 adjustments 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
acknowledges 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.
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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
Representatives may from time to time jointly instruct the Escrow Agent in
writing. In the absence of such instructions (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 subject 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
Representatives shall jointly instruct the Escrow Agent to release the
Section 262 Securities in accordance with the provisions 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 Sections 3.7(f)(i) and (ii) of the Merger Agreement is
applicable, 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 provisions 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
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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 calculation 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 Representative.
Section 4.2. Unless each of the Escrow Agent, FSAC (if not the Payee) and
the Payee receives 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 forwarding to such Representative of the
Certificate, the Representatives 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 Certificate 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 receipt,
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 identity 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
satisfaction of any Cleared Damages with respect to such Certificate, 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 hereinafter 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) specifying 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. Promptly upon receipt of such a certified copy of an award (or a
subsequent joint
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instruction), the Escrow Agent shall release the portion of the Escrow Stock
as specified therein, 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
Certificate. 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 release, to FSAC, in satisfaction of the unobjected-to
portion 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
Certificates.
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 specified in
Section 4.2. Any Objection delivered by a Representative 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 business 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 Representatives
object, to a partner knowledgeable about the financial services industry at
such other nationally-recognized 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 decision within 60 days. Any such determination of
the Arbitrator 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.
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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 procedures 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) reimburse 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 following 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
instructions, 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
aggregation, 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.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. FSAC, each Representative 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
interpretation of this Agreement.
Section 8.4. All notices, requests, 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
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(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 arbitration 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 obligations 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 corporation) 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 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
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
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.
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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
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ANNEX VIII
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 execution 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 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 Redeemable Common Stock Purchase Warrants ("FSAC
Warrants") of FSAC (including 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
willingness 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 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.
SECURITY TRANSFER RESTRICTIONS
AND EXCHANGE OFFER OBLIGATION
SECTION 1.1 Restriction. Each Stockholder covenants and agrees with each
other Stockholder and FSAC not to, for the period commencing on the Effective
Time (as defined in the Merger Agreement) and ending on November 30, 1996,
sell, pledge, encumber, dispose, grant a security interest
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in or otherwise dispose of or transfer (collectively, "Sell", the doing
thereof being a "Sale") any Shares or Warrants owned or acquired,
beneficially 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 beneficiary 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 Transferee 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 Warrants), 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 immediately 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 CERTIFICATE IS
RESTRICTED UNDER AND SUBJECT TO THE TERMS OF AN AGREEMENT TO WHICH THE
COMPANY IS A PARTY, AS SUCH AGREEMENT 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 represents and warrants to each other Stockholder
and FSAC as follows:
SECTION 3.1 Authority Relative to this Agreement. Such Stockholder (if it
is a corporation, 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
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necessary to authorize this Agreement or to consummate such transactions.
This Agreement 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 Stockholder 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
cancellation of, or result in the creation of a lien or encumbrance of any
kind on any of such Owned Shares or Shares or Warrants 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
Stockholder 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 Securities 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 governmental 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 arrangement 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 Effective 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 administrators 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
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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 consummation of the
Exchange Offer and (y) November 30, 1997.
SECTION 5.2 Specific Performance. The parties hereto agree that if any of
the provisions 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 performance 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 respect 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 Agreement, 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 invalidity or unenforceability affect the validity or
enforceability 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 conflicts 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.
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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
--------------------------------
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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
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<PAGE>
ANNEX IX
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"), 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 (x) Common
Stock, par value $.001 per share, of FSAC, (y) Series B Redeemable Common
Stock Purchase 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 transactions 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 partnership 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 Agreement (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 consummation 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
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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 execution, 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, cancellation 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 Contract 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, conditions 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, authorization, 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
Statement, 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
Statement or any amendments thereof or supplements thereto, at the time of
the mailing of the Proxy Statement 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 heretofore occurred or will occur prior to the
Closing of the Merger (defined 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
having incurred any liability to EBIC, its debt or equity holders, or any of
its Subsidiaries), 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 Agreement 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.
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<PAGE>
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 Subsidiaries
(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 Acquisition Transaction or
enter into any agreement, arrangement or understanding with respect to (or
consummate) any such Acquisition Transaction 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 continued 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 reasonable 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 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; 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
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<PAGE>
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 automatically 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 representations 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 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 effective 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
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<PAGE>
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 indirect 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 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 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 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.
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<PAGE>
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/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:
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<PAGE>
ANNEX X
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of , 1996, by
and among Financial Services Acquisition Corporation, a Delaware corporation
(the "Company"), and the stockholders listed on Annexes I, II and III hereto
and signatory hereto (the "Stockholders").
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of March 8, 1996 (the "Merger Agreement"), with EBIC Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of the Company
("Sub"), and Euro Brokers Investment Corporation, a Delaware corporation
("Euro Brokers"), providing for, among other things, the merger (the
"Merger") of Sub with and into Euro Brokers; and
WHEREAS, this Agreement is being entered into in connection with and as a
condition to the parties thereto closing the Merger and the other
transactions contemplated under the Merger Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties signatory hereto agree as follows:
1. CERTAIN DEFINITIONS.
As used herein, the following terms shall have the following respective
meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Company as constituted as of the date of this Agreement, subject to
adjustment pursuant to the provisions of Section 7 hereof.
"EBIC Management Shares" shall mean (i) all shares of Common Stock
(including without limitation the Merger Escrow Shares and any shares of
Common Stock issued in respect of New Options (as defined in the Merger
Agreement)) issued to the EBIC Management Stockholders in connection with
the Merger and (ii) any additional shares of Common Stock issued in
respect of the Merger Warrants held by the EBIC Management Stockholders
(including any Warrants issued as part of the New Options), whether upon
exercise thereof pursuant to their terms, upon the exchange thereof
pursuant to the Exchange Offer (as defined in the Merger Agreement) or
otherwise.
"EBIC Management Stockholders" shall mean those persons listed on
Annex II hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Existing Registration Obligations" shall mean (i) the registration
obligations of the Company under that certain Warrant Agreement, dated
November 30, 1994, between the Company and Continental Stock Transfer
Trust Company, and (ii) the registration obligations of the Company under
that certain Unit Purchase Option, dated November 30, 1994 and granted by
the Company to certain persons and entities.
"FSAC Management Escrow Shares" shall mean all 833,333 FSAC Management
Shares that have been deposited in escrow pursuant to the terms of that
certain Stock Escrow Agreement, dated November 30, 1994, between the
Company, Continental Stock Transfer & Trust Company and the FSAC
Management Stockholders.
"FSAC Management Shares" shall mean (i) the aggregate 1,430,333 shares
of Common Stock currently held by the Management Stockholders (including
the FSAC Management Escrow Shares) and (ii) any additional shares of
Common Stock issued in respect of the conversion, pursuant to their terms,
or the exchange, pursuant to the Exchange Offer (as defined in the Merger
Agreement) or otherwise, of the FSAC Management Warrants.
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"FSAC Management Stockholders" shall mean those persons listed on
Annex III hereto.
"FSAC Management Warrants" shall mean (i) the aggregate 1,399,000
Warrants currently held by the FSAC Management Stockholders and (ii) any
securities (other than Common Stock) issued upon exchange, adjustment or
transfer of any such Warrants.
"Investor Shares" shall mean (i) all shares of Common Stock (including
without limitation the Merger Escrow Shares and any shares of Common Stock
issued in respect of New Options) issued to the Investor Stockholders in
connection with the Merger and (ii) any additional shares of Common Stock
issued in respect of the Merger Warrants held by the Investor Stockholders
(including any Warrants issued as part of the New Options), whether upon
the exercise thereof pursuant to their terms, upon the exchange thereof
pursuant to the Exchange Offer (as defined in the Merger Agreement) or
otherwise.
"Investor Stockholders" shall mean those persons listed on Annex I
hereto.
"Management Shares" shall mean, collectively, the EBIC Management
Shares and the FSAC Management Shares.
"Management Stockholders" shall mean, collectively, the EBIC
Management Stockholders and the FSAC Management Stockholders.
"Merger Escrow Shares" shall mean all Investor Shares and EBIC
Management Shares that, pursuant to the terms of the Merger Agreement and
that certain Escrow Agreement, dated as of March 8, 1996, among the
Company, Sub, Euro Brokers, United States Trust Company of New York, as
escrow agent, and certain others, have been deposited into escrow to pay,
if applicable, certain indemnification and other obligations arising under
the Merger Agreement.
"Merger Warrants" shall mean (i) all Warrants issued to the Investor
Stockholders and the EBIC Management Stockholders in connection with the
Merger and (ii) any securities (other than Common Stock) issued upon
exchange, adjustment or transfer of any such Warrants.
"Public Sale" shall mean any sale or other disposition of Common Stock
to the public pursuant to an offering registered under the Securities Act
or pursuant to the provisions of Rule 144 (or any successor or similar
rule) adopted under the Securities Act.
"Registrable Stock" shall mean the Investor Shares, the Management
Shares and any securities issued upon exchange, adjustment or transfer of
any of such shares, subject to adjustment pursuant to the provisions of
Section 7 hereof, provided, however, that neither the Merger Escrow Shares
nor the FSAC Management Escrow Shares shall be deemed to constitute shares
of Registrable Stock for purposes of the registration rights granted
pursuant to Sections 2 or 3 below until such time as such shares shall
have been released from escrow. As to any particular Registrable Stock,
such securities shall cease to be Registrable Stock when they have been
sold or otherwise disposed of pursuant to a Public Sale.
"Registration Expenses" shall mean the expenses so described in
Section 5 hereof.
"Securities Act" shall mean the Securities Act of 1933 or any similar
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 5
hereof.
"Warrants" shall mean the Redeemable Common Stock Purchase Warrants of
the Company.
2. REQUIRED REGISTRATION.
(a) At any time after October 1, 1996, (i) in the case of the first such
request, the holders of Investor Shares representing at least a majority of
the total outstanding Investor Shares constituting Registrable Stock at such
time, and (ii) in the case of the second such request, the holders of at
least a majority of the total outstanding Registrable Stock at such time, may
request the Company to register under the Securities Act all or any portion
of the Registrable Stock held by such requesting holder or holders for
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sale in the manner specified in such notice, provided, however, that (x) the
only securities which the Company shall be required to register pursuant
hereto shall be shares of Common Stock and (y) the Company shall take all
necessary steps to ensure that the first registration of Registrable Stock
pursuant to a request made under this Section 2 is not declared or deemed
effective by the Commission prior to November 30, 1996.
(b) Promptly following receipt of any notice under paragraph (a) above,
the Company shall notify each holder of Management Shares and any other
holders of Registrable Stock of whom the Company is aware from whom notice
has not been received and shall, subject to the proviso to said paragraph
(a), use its best efforts to register under the Securities Act, for Public
Sale in accordance with the method of disposition specified in such notice
from requesting holders, the number of shares of Registrable Stock specified
in such notice (and in any notices received from other holders pursuant to
this paragraph (b) within 20 days after their receipt of such notice from the
Company). If the holders of a majority of the Registrable Stock requesting
registration specify an underwritten public offering, the Company shall
designate the managing underwriter of such offering, subject to the approval
of the holders of a majority of the Registrable Stock covered by the
offering, which approval shall not be unreasonably withheld. The Company
shall be obligated to register Registrable Stock pursuant to this Section 2
on two occasions only. Notwithstanding anything to the contrary contained
herein, the obligation of the Company under this Section 2 shall be deemed
satisfied only when a registration statement covering all shares of
Registrable Stock specified in notices received as aforesaid, for sale in
accordance with the method of disposition (subject to clauses (i) and (ii) of
paragraph (d) below) specified by the requesting holders, shall have become
effective and, if such method of disposition is a firm commitment
underwritten public offering, all such shares shall have been sold pursuant
thereto.
(c) The Company shall be entitled to include in any registration statement
referred to in this Section 2, for sale in accordance with the method of
disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall
be an underwritten public offering), such inclusion would adversely affect
the marketing of the Registrable Stock to be sold. Except as provided in this
paragraph (c), the Company will not effect any registration of its Common
Stock to be sold for cash for its own account from the date of receipt of a
notice from requesting holders pursuant to this Section 2 until the
completion of the period of distribution of the registration contemplated
thereby or withdrawal of the registration.
(d) Notwithstanding anything to the contrary contained in this Section 2:
(i) The number of Management Shares included in the Registrable Stock
to be included in any registration statement referred to in this Section 2
for which the requested method of disposition is an underwritten public
offering may be reduced (pro rata among the requesting holders of
Management Shares based upon the number of Management Shares so requested
to be registered) if and to the extent that in the opinion of the managing
underwriter, such inclusion would adversely affect the marketing of the
Registrable Stock to be sold, provided, however, that if the Company has
determined to include in such registration statement shares of Common
Stock to be sold for its own account, as contemplated by Section 2(c)
above, any reduction shall first be made, if and to the extent necessary,
from such shares (including a reduction to zero) before any reduction is
made from the shares requested to be registered by the requesting holders
of Management Shares.
(ii) The number of shares of Registrable Stock to be included in any
registration statement referred to in this Section 2 for which the method
of disposition is other than an underwritten public offering shall not,
prior to June 30, 1997, exceed a number equal to 50% of the number of
shares of Registrable Stock then outstanding, provided, however, that such
limitation shall not apply if, at any time prior to the request for such
registration, the product obtained by multiplying (x) the number of
outstanding shares of Common Stock by (y) the closing price of a share of
Common Stock in the principal securities market in which the Common Stock
shall be traded shall have exceeded $100 million for 20 consecutive
trading days.
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(iii) The Company shall not be required to file a registration
statement pursuant to this Section 2, (x) during any period of time when
(A) the Company is contemplating an underwritten public offering of its
equity securities and, in the judgment of the managing underwriter
thereof, such filing would adversely affect the contemplated offering, (B)
the Company is in possession of material nonpublic information the
disclosure of which in such registration statement it reasonably believes
would be detrimental to the Company at such time or (C) the Company is
required under the Securities Act to include audited financial statements
for any period in such registration statement and such financial
statements are not yet available for inclusion therein or (y) during the
pendency of the Exchange Offer or within 60 days after the consummation or
termination thereof. The aggregate delays or postponements by the Company
of the filing of a registration statement pursuant to clause (x) of this
Section 2(d)(iii) shall not exceed 60 days.
3. INCIDENTAL REGISTRATION.
If the Company at any time after November 30, 1996 (other than pursuant to
Section 2 hereof or in connection with the Exchange Offer or pursuant to its
Existing Registration Obligations) proposes to register any of its Common
Stock under the Securities Act for sale to the public, whether for its own
account or for the account of other securityholders or both (except with
respect to registration statements on Forms S-4 or S-8 (or any successor
forms), a registration pursuant to an employee benefit plan or a registration
of securities on a form which does not permit the inclusion of securities
sold in a secondary offering), it will give written notice at such time to
all holders of whom it is aware of outstanding Registrable Stock of its
intention to do so. Upon the written request of any such holder, given within
30 days after receipt of any such notice by the Company, to register any of
its Registrable Stock (in accordance, subject to the following sentence, with
the method of disposition being used by the Company as specified in the
Company's notice), the Company will use its best efforts to cause the
Registrable Stock as to which registration shall have been so requested, to
be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit
the sale or other disposition by the holder of such Registrable Stock so
requested to be registered. In the event that any registration pursuant to
this Section 3 shall be, in whole or in part, an underwritten public offering
of Common Stock, any request by a holder pursuant to this Section 3 to
register Registrable Stock shall specify that either (i) such Registrable
Stock is to be included in the underwriting on the same terms and conditions
as the shares of Common Stock otherwise being sold through underwriters under
such registration or (ii) such Registrable Stock is to be sold in the open
market without any underwriting, on terms and conditions comparable to those
normally applicable to offerings of common stock in reasonably similar
circumstances. The number of shares of Registrable Stock to be included in
such an underwriting may be reduced (pro rata among the requesting holders
based upon the number of shares so requested to be registered) if and to the
extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold
by the Company therein, provided, however, that no reduction of the number of
shares of Registrable Stock so to be included in such registration shall be
made if any shares are to be included therein for the account of any person
other than the Company or another holder pursuant to a demand registration
right existing at the date of this Agreement or permitted hereby.
Notwithstanding the foregoing, the Company may at any time in its
discretion withdraw, without the consent of any requesting holders, a
registration statement that the Company had filed or proposed to file
pursuant to this Section 3 and abandon the proposed offering in which any
requesting holder or holders had requested to participate.
4. REGISTRATION PROCEDURES.
(a) If and whenever the Company is required by the provisions of Section 2
or 3 hereof to use its best efforts to effect the registration of any of the
Registrable Stock under the Securities Act, the Company will:
(i) prepare (and afford a single counsel for the selling holders of
Registrable Stock reasonable opportunity to review and comment thereon)
and file with the Commission as soon as practicable
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(but in a any event within 60 days of receipt of a request from requesting
holders pursuant to Section 2 hereof) a registration statement on any form
for which the Company then qualifies or which counsel for the Company
shall deem appropriate and which form shall be available for the
underwritten sale of the Registrable Stock (which, in the case of an
underwritten public offering pursuant to Section 2 hereof, shall be Form
S-1, S-3 or another form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement
to become effective and to remain effective until, in the case of a firm
commitment underwritten public offering, until each underwriter has
completed the distribution of all securities purchased by it, and, in the
case of any other registration, until the earlier of (x) the sale of all
Registrable Stock covered thereby and (y) 120 days after the effective
date thereof.
(ii) prepare (and afford a single counsel for the selling holders of
Registrable Stock reasonable opportunity to review and comment thereon)
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for the
period specified in paragraph (i) above and as comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Stock covered by such registration statement in accordance with the
method(s) of disposition set forth in such registration statement for such
period;
(iii) furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons may reasonably
request in order to facilitate the Public Sale of the Registrable Stock
covered by such registration statement;
(iv) use its best efforts to register or qualify the Registrable Stock
covered by such registration statement under the securities or blue sky
laws of such jurisdictions as a majority in interest of the sellers of
Registrable Stock or, in the case of an underwritten public offering, the
managing underwriter, shall reasonably request (provided that the Company
will not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this paragraph (iv) or (y) take any action that would subject it to
taxation in any such jurisdiction or to general service of process in any
jurisdiction);
(v) immediately notify each seller under such registration statement
and each underwriter, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing;
(vi) use its reasonable best efforts (if the offering is underwritten)
to furnish, at the request of holders of a majority in interest of the
Registrable Stock being sold, on the date that Registrable Stock is
delivered to the underwriters for sale pursuant to such registration: (x)
an opinion, dated such date, of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective
under the Securities Act and that (A) to the knowledge of such counsel, no
stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement thereof, comply as to
form in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements contained therein) and (C) to such other effects as are
customarily covered in such opinions given in connection with such
registrations and are reasonably requested by counsel for the underwriters
or by such sellers or their counsel, and (y) a letter dated such date from
the independent public accountants retained by the Company, addressed to
the underwriters and to such sellers, stating that they are independent
public accountants within the meaning of the Securities Act and that, in
the opinion of such accountants, the financial statements of the Company
included in the registration
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<PAGE>
statement or the prospectus, or any amendment or supplement thereof,
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act, and such letter shall additionally
cover such other financial matters with respect to the registration in
respect of which such letter is being given as are customarily covered in
such letters given in connection with such registrations and are
reasonably requested by such underwriters or sellers;
(vii) make available for inspection by each seller, any underwriter
participating in any distribution pursuant to such registration statement,
and any attorney, accountant or other agent retained by such seller or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement, in each case, subject to the Company's
prior receipt from such persons of appropriate agreements to maintain the
confidentiality of any such records, documents and information; and
(viii) if such registration covers a firm commitment underwritten
public offering, enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and
containing such provisions as are customary in the securities business for
such an arrangement between major underwriters and companies of the
Company's size and investment stature, provided that such agreement shall
not contain any such provision applicable to the Company which is
inconsistent with the provisions hereof and provided, further, that the
time and place of the closing under said agreement shall be as mutually
agreed upon between the Company and such managing underwriter.
(b) In connection with each registration hereunder, the selling holders of
Registrable Stock will:
(i) furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws or as shall reasonably be requested by the Company or its
counsel; and
(ii) not effect any public sale or distribution of the issue being
registered or any equity security of the Company, or any securities
convertible into or exchangeable or exercisable for such equity
securities, including a sale pursuant to Rule 144 under the Securities
Act, during the 14 days prior to, and during the 90-day period beginning
on, the effective date of such registration statement (except as part of
such registration), if and to the extent requested by the Company or the
managing underwriter.
(c) Each seller of Registrable Stock agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described
in Section 4(a)(v) that requires the preparation of a supplement or amendment
to such prospectus, such seller will forthwith discontinue disposition of
Registrable Stock pursuant to the registration statement covering such
Registrable Stock until such seller's receipt of the copies of the
supplemented or amended prospectus, and, if so directed by the Company, such
seller will deliver to the Company all copies, other than permanent file
copies, then in such seller's possession, of the most recent prospectus
covering such Registrable Stock at the time of receipt of such notice. In the
event the Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective by the
number of days during the period from and including the date of the giving of
notice hereof to the date when the Company shall make available to the
sellers of Registrable Stock a supplemented or amended prospectus.
(d) In connection with each registration pursuant to Sections 2 and 3
hereof covering an underwritten public offering, no holder of Registrable
Stock may participate in any registration hereunder unless such holder (i)
agrees to sell its Registrable Stock on the basis provided in the
underwriting arrangements applicable to such registration (appropriately
modified if such sales are not covered by such underwriting) and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents as are required to be executed
under the terms of such underwriting arrangements, subject, however, to the
provisions of Section 6 hereof.
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5. EXPENSES.
All expenses incurred by the Company in complying with Sections 2 and 3
hereof, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs
of insurance and reasonable fees and expenses of a single counsel for the
sellers of Registrable Stock, but excluding any Selling Expenses, are herein
called "Registration Expenses." All underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Stock
and any out-of-pocket expenses (other than the single counsel described
above) of the sellers (or agents who manage their accounts) are herein called
"Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 2 or 3 hereof. All Selling
Expenses in connection with any registration statement filed pursuant to
Section 2 or 3 hereof shall be borne by the participating sellers in
proportion to the number of shares sold by each, or by such persons other
than the Company (except to the extent the Company shall be a seller) as they
may agree.
6. INDEMNIFICATION.
In the event of a registration of any of the Registrable Stock under the
Securities Act pursuant to Section 2 or 3 hereof, the Company will indemnify
and hold harmless each seller of such Registrable Stock thereunder and each
underwriter of Registrable Stock thereunder and each officer, director and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller or underwriter or
controlling person becomes subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Stock was registered under the Securities Act
pursuant to Section 2 or 3, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any reasonable legal or
other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action, provided,
however, that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of such seller, such underwriter or such controlling person in writing
specifically for use in such registration statement or prospectus or any
amendment or supplement thereof.
In the event of a registration of any of the Registrable Stock under the
Securities Act pursuant to Section 2 or 3 hereof, each seller of such
Registrable Stock thereunder, severally and not jointly, will indemnify and
hold harmless the Company and each officer, director and each other person,
if any, who controls the Company within the meaning of the Securities Act,
each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or
such officer or director or underwriter or controlling person becomes subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Registrable
Stock was registered under the Securities Act pursuant to Section 2 or 3, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter
and controlling person for any reasonable legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or
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action, provided, however, that such seller will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in conformity with
information pertaining to such seller, as such, furnished in writing to the
Company by such seller specifically for use in such registration statement or
prospectus or any amendment or supplement thereof, provided, further,
however, that the liability of each seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of shares sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not to exceed the proceeds
received by such seller from the sale of Registrable Stock covered by such
registration statement.
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party other than under this Section 8. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish,
to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 6 for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and, in
the opinion of counsel reasonably satisfactory to the indemnifying party a
material conflict of interest exists between the indemnifying party and the
indemnified party in connection with such action, the indemnified party shall
have the right to select a separate counsel (reasonably acceptable to the
Company) and to assume such legal defenses and otherwise to participate in
the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the right
to retain its own counsel in any such action, but the fees and disbursements
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such
counsel. It is understood that the indemnifying party shall not, in
connection with any action or related actions in the same jurisdiction, be
liable for the fees and disbursements of more than one separate firm
qualified in such jurisdiction to act as counsel for all indemnified parties.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability (to the extent stated above) by reason of such settlement or
judgment.
If the indemnification provided for in the first two paragraphs of this
Section 6 is unavailable or insufficient to hold harmless an indemnified
party under such paragraphs in respect of any losses, claims, damages or
liabilities or actions in respect thereof referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or actions in such
proportion as appropriate to reflect the relative fault of the Company, on
the one hand, and the sellers of such Registrable Stock, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or actions as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact relates to information supplied by the Company, on the one
hand, or the sellers of such Registrable Stock, on the other, and to the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the sellers of
Registrable Stock agree that it would not be just and equitable if
contributions pursuant to this
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paragraph were determined by pro rata allocation (even if all of the sellers
of such Registrable Stock were treated as one entity for such purpose) or by
any other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or action in respect thereof, referred to above in this
paragraph, shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
paragraph, the sellers of such Registrable Stock shall not be required to
contribute any amount in excess of the amount, if any, by which the total
price at which the Common Stock sold by each of them was offered to the
public exceeds the amount of any damages which they would have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act), shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
7. CHANGES IN COMMON STOCK.
If, and as often as, there are any changes in the Common Stock by way of
stock split, stock dividend, combination or reclassification, or through
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof, as may
be required, so that the rights and privileges granted hereby shall continue
with respect to the Common Stock as so changed and shall apply to any
securities received in any such transaction.
8. RULE 144 REPORTING.
The Company covenants that it will file any reports required to be filed
by it under the Securities Act and the Exchange Act and that it will take
such further action as any holder of Registrable Stock may reasonably
request, all to the extent required from time to time to enable such holder
to sell Registrable Stock without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time. Upon the
request of such holder, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
9. OTHER REGISTRATION RIGHTS AGREEMENTS.
(a) All rights heretofore granted by the Company or Euro Brokers (i) to
the FSAC Management Stockholders relating to the registration of the FSAC
Management Shares or (ii) to the Investor Stockholders or the EBIC Management
Stockholders pursuant to the Registration Rights Agreement dated as of May
19, 1994 (the "Original Registration Rights Agreement") among Euro Brokers,
the Investor Stockholders and the EBIC Management Stockholders, are hereby
terminated and superseded by the rights granted by the Company as provided in
this Agreement, and the Original Registration Rights Agreement and any and
all previously existing registration rights granted to the Management
Stockholders or the Investor Stockholders are hereby canceled, waived and
shall have no further force or effect. Notwithstanding the foregoing, nothing
in this Agreement shall cancel, waive or otherwise affect any of the Existing
Registration Obligations (or constitute a cancellation or waiver of any
rights of any person or entity under any of the Existing Registration
Obligations).
(b) Nothing herein shall prohibit or limit the Company from entering into
an agreement providing holders of securities which may hereafter be issued by
the Company with such registration rights exercisable at such time or times
and in such manner as the Board of Directors shall deem in the best interests
of the Company so long as the performance by the Company of its obligations
under such other agreement will not cause the Company to breach its
obligations to the holders of Registrable Stock hereunder.
10. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto, including, without limitation, the
rights to indemnification under Section 6 hereof, shall bind and
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inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. Without limiting the generality of the
foregoing, the registration rights conferred herein on the holders of
Registrable Stock shall inure to the benefit of any and all subsequent
holders from time to time of the Registrable Stock (but only so long as such
Registrable Stock remains Registrable Stock).
(b) So long as Registrable Stock remains subject to this agreement, the
Company will not enter into any merger, consolidation, sale of substantially
all of its assets or other transaction in which it is not the surviving
entity unless the acquiror shall expressly assume by a supplemental
agreement, executed and delivered to the remaining holders of Registrable
Stock, in form satisfactory to holders of a majority of the Registrable Stock
then remaining, the due and punctual performance of every covenant of this
Agreement on the part of the Company to be performed and observed with
respect to the Registrable Stock after such transaction.
(c) All notices, requests, consents and other communications hereunder
shall be in writing and shall be mailed by first class registered mail,
postage prepaid, addressed as follows:
if to the Company, to it at 667 Madison Avenue, 11th Floor, New York,
New York 10021, Attention: Gilbert Scharf;
if to any holder of Registrable Stock, to it at its address as set
forth in Annex I, Annex II or Annex III hereto;
if to any subsequent holder of Registrable Stock, to it at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Registrable
Stock), or to the holders of Registrable Stock (in the case of the Company).
(D) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
(e) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof, and supersedes all other prior
agreements and understandings, whether oral or written, relating to the
subject matter hereof. This Agreement may not be modified or amended, and the
provisions hereof may not be waived, except in writing signed by each of (i)
the Company, (ii) Management Stockholders then holding, in the aggregate, a
majority of the Registrable Stock then held by all Management Stockholders as
a whole and (iii) Investor stockholders then holding, in the aggregate, a
majority of the Registrable Stock then held by all Investor Stockholders as a
whole.
(f) 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, and shall become effective as to each holder of
Registrable Stock upon such holder's execution of a counterpart after
execution of a counterpart by the Company.
(g) The Company shall not hereafter enter into any agreement with respect
to its securities that grants any person or entity any registration rights
with respect to the Company's securities that take precedence over the rights
granted to the Stockholders hereunder, provided, however that the Company
shall have the right to grant registration rights on a basis substantially
identical to those provided in this Agreement with respect to additional
shares of Common Stock (or securities convertible into or exercisable for
shares of Common Stock) issued to any stockholder.
10-10
<PAGE>
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this Agreement, whereupon this Agreement shall
become binding upon the Company and you.
Very truly yours,
FINANCIAL SERVICES ACQUISITION
CORPORATION
By
-----------------------------------
Title:
AGREED TO AND ACCEPTED
as of the date first
above written.
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
By WCAS VI Partners, L.P., General Partner
By
------------------------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners, General Partner
By
-------------------------------------------------
General Partner
- --------------------------------------------------
Patrick J. Welsh
- --------------------------------------------------
Russell L. Carson
- --------------------------------------------------
Bruce K. Anderson
- --------------------------------------------------
Richard H. Stowe
DE CHARTER TRUST CO., as Trustee FBO the
IRA/Rollover of Richard H. Stowe
By
------------------------------------------------
- --------------------------------------------------
Thomas E. McInerney
- --------------------------------------------------
Andrew M. Paul
- --------------------------------------------------
James B. Hoover
10-11
<PAGE>
DE CHARTER TRUST CO., as Trustee FBO the
IRA/Rollover of James B. Hoover
By
------------------------------------------------
- --------------------------------------------------
Robert A. Minicucci
- --------------------------------------------------
Anthony J. DeNicola
- --------------------------------------------------
Laura Van Buren
David F. Bellet, Trustee, Profit Sharing Plan
DCJSC -- Custodian FBO David F. Bellet
- --------------------------------------------------
David F. Bellet
- --------------------------------------------------
Donald R.A. Marshall
- --------------------------------------------------
Alistair H. Johnstone
- --------------------------------------------------
Keith E. Reihl
- --------------------------------------------------
Brian G. Clark
- --------------------------------------------------
Walter E. Dulski
- --------------------------------------------------
Gilbert Scharf
- --------------------------------------------------
Michael J. Scharf
- --------------------------------------------------
Denis Martin
- --------------------------------------------------
Larry S. Kopp
- --------------------------------------------------
William D. Birch
- --------------------------------------------------
Frederick B. Whittemore
10-12
<PAGE>
ANNEX I
INVESTOR STOCKHOLDERS
Welsh, Carson, Anderson & Stowe VI, L.P.
WCAS Information Partners, L.P.
Patrick J. Welsh
Russell L. Carson
Bruce K. Anderson
Richard H. Stowe
DE Charter Trust Co., as Trustee
FBO the IRA/Rollover of
Richard H. Stowe
Thomas E. McInerney
Andrew M. Paul
James B. Hoover
DE Charter Trust Co., as Trustee
FBO the IRA/Rollover of
James B. Hoover
Robert A. Minicucci
Anthony J. deNicola
Laura Van Buren
David F. Bellet, Trustee, Profit
Sharing Plan DLJSC -- Custodian
FBO David F. Bellet
c/o Welsh, Carson, Anderson & Stowe
One World Financial Center
New York, New York 10281
10-13
<PAGE>
ANNEX II
EBIC MANAGEMENT STOCKHOLDERS
Donald R.A. Marshall
[Address]
Alistair H. Johnstone
[Address]
Keith E. Reihl
[Address]
Brian G. Clark
[Address]
Walter E. Dulski
[Address]
10-14
<PAGE>
ANNEX III
FSAC MANAGEMENT STOCKHOLDERS
Gilbert Scharf [Address]
Michael J. Scharf
[Address]
Denis Martin
[Address]
Larry S. Kopp
[Address]
William D. Birch
[Address]
Frederick B. Whittemore
[Address]
10-15
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporate Law (the "DGCL") provides
that a corporation may indemnify directors, officers, employees or agents
against liabilities they may incur in such capacities provided certain
standards are met, including good faith and the reasonable belief that the
particular action was in, or not opposed to, the best interests of the
corporation.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation), by reason of the fact that he
is or was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe that his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, by reason of the
fact that such person acted in any of the capacities set forth above, against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted under standards similar to those set forth above, except that no
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the Delaware Court of Chancery or the
court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that, among other things, to the
extent that a director or officer of a corporation has been successful in the
defense of any action, suit or proceeding referred to in Subsections (a) and
(b) of Section 145, or in the defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; and that a corporation is
empowered to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify against such
liability under Section 145.
Indemnification as described above shall be granted in a specific case
only upon a determination that indemnification is proper under the
circumstances using the applicable standard of conduct which is made by (a) a
majority of directors who were not parties to such proceeding, (b)
independent legal counsel in a written opinion if there are no such
disinterested directors or if such disinterested directors so direct, or (c)
the shareholders.
Article VII of the By-laws of FSAC provides that FSAC shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was a director, officer, employee or agent of FSAC
against expenses (including attorneys' fees), judgments, fines and settlement
payments actually and reasonably incurred by him or her if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of FSAC (except that in the case of an action
by or in the right of FSAC, no indemnification shall be made with respect to
any claim for which such person is judged liable to FSAC, unless the court
deems indemnification to be proper) and with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. Article
II-1
<PAGE>
EIGHTH of the FSAC Certificate of Incorporation and Article VII of the FSAC
By-laws provide that FSAC shall pay in advance of the final disposition of
such action, suit or proceeding the expenses incurred by a director or
officer in defending any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he or she is not entitled to be
indemnified by FSAC as authorized by the By-laws of FSAC.
Section 102(b)(7) of the DGCL permits the certificate of incorporation of
a corporation to provide that a director shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of his or
her fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL
(dealing with unlawful dividends or unlawful stock purchases or redemptions),
or (iv) for any transaction from which the director derived an improper
personal benefit.
Article EIGHTH of the FSAC Certificate of Incorporation eliminates
personal liability of directors to FSAC and its stockholders for monetary
damages for breach of fiduciary duty as directors to the extent permitted by
Section 102(b)(7) of the DGCL and by Delaware law in general if amended to
further expand director protection.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT, SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
<S> <C>
2.1 Agreement and Plan of Merger, dated as of March 8, 1996, by and among Financial
Services Acquisition Corporation, EBIC Acquisition Corp. and Euro Brokers Investment
Corporation ("EBIC") (incorporated herein by reference to Exhibit 2.1 of the
Registrant's Quarterly Report on Form 10-Q (No. 0-25056) dated May 15, 1996 (the
"Form 10-Q").
2.2 Security Transfer Agreement, dated as of March 8, 1996, among the Registrant,
Gilbert Scharf, Michael Scharf, Welsh, Carson, Anderson & Stowe VI, L.P. ("WCAS")
and certain individuals (incorporated herein by reference to Exhibit 2.2 of the Form
10-Q).
2.3 Majority Stockholders Agreement, dated as of March 8, 1996, among the Registrant,
EBIC Acquisition Corp. and WCAS (incorporated herein by reference to Exhibit 2.3 of
the Form 10-Q).
2.4 Escrow Agreement, dated as of March 8, 1996, among the Registrant, EBIC Acquisition
Corp., EBIC, Donald R.A. Marshall, WCAS and United States Trust Company of New York,
as escrow agent (incorporated herein by reference to Exhibit 2.4 of the Form 10-Q).
3.1 Certificate of Incorporation of the Registrant, as amended (incorporated herein by
reference to Exhibit 3.1 of the Registrant's Registration Statement on Form S-1 (No.
33-85346) dated October 19, 1994 (the "Form S-1")).
3.2 By-laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the
Form S-1).
4.1 Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 of
Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (No.
33-85346) dated November 23, 1994 ("Amendment No. 1")).
4.2 Form of Merger Warrants.
4.3 Warrant Agreement, dated as of June 5, 1996, by and between Continental Stock
Transfer & Trust Company and the Registrant.
4.4 Form of Unit Purchase Options granted to Underwriters and designees (incorporated
herein by reference to Exhibit 4.3 of Amendment No. 1).
II-2
<PAGE>
4.5 UPO Exchange and Custodial Agreement, dated as of June 24, 1996, by and among GKN
Securities Corp., Barington Capital Group, L.P., the Registrant and Graubard Mollen
& Miller, as custodian.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom.
8.1 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol, regarding tax matters.
10.1 Letter Agreements among certain stockholders of the Registrant, GKN Securities Corp.
and Barington Capital Group, L.P. (incorporated herein by reference to Exhibit 10.2
of Amendment No. 1).
10.2 Form of Investment Manager Trust Agreement between United States Trust Company of
New York and the Registrant (incorporated herein by reference to Exhibit 10.5 of
Amendment No. 1).
10.3 Form of Share Escrow Agreement between the Registrant and Continental Stock Transfer
& Trust Company of New York (incorporated herein by reference to Exhibit 10.6 of
Amendment No. 1).
10.4 Letter Agreement between Scharf Advisors, Inc. and the Registrant regarding
administrative support (incorporated herein by reference to Exhibit 10.7 of
Amendment No. 1).
10.5 Employment Agreement, dated March 8, 1996, by and between Gilbert Scharf and the
Registrant (incorporated herein by reference to Exhibit 10.8 of the Form 10-Q).
10.6 Employment Agreement, dated March 8, 1996, by and between Donald R.A. Marshall and
EBIC.
10.7 Employment Agreement, dated March 8, 1996, by and between Keith Reihl and EBIC.
10.11 Form of FSAC 1996 Stock Option Plan.
10.12 Form of Affiliate Letter.
21.1 Subsidiaries.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (included in its opinion filed as
Exhibit 5.1 hereto).
23.2 Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in its opinion
filed as Exhibit 8.1 hereto).
23.3 Consent of BDO Seidman, LLP.
23.4 Consent of Price Waterhouse LLP.
24.1 Powers of Attorney.
99.1 Consents of Director nominees.
99.2 Form of FSAC Proxy.
99.3 Form of EBIC Proxy.
</TABLE>
(b) Financial Statement Schedules.
None.
(c) Item 4(b) Information.
None.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder, through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of rule 145(c) of
the Securities Act of 1933, the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(b) The undersigned registrant hereby undertakes that every prospectus (i)
that is filed pursuant to the paragraph immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act
of 1933 and is used in connection with an offering of securities subject to
Rule 415 of the Securities Act of 1933, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on June 24, 1996.
FINANCIAL SERVICES ACQUISITION CORPORATION
By: /s/ Gilbert D. Scharf
------------------------------------------
Gilbert D. Scharf
Chairman of the Board,
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------- ------------------------------- --------
<S> <C> <C>
/s/ Gilbert D. Scharf Chairman of the Board, June 24, 1996
------------------------------- Chief Executive Officer and
Gilbert D. Scharf President
Chief Financial Officer and June 24, 1996
/s/ Michael J. Scharf Principal Accounting Officer,
------------------------------- Treasurer
Michael J. Scharf Secretary and Director
/s/ Denis Martin June 24, 1996
-------------------------------
Denis Martin Director
/s/ Larry S. Kopp June 24, 1996
-------------------------------
Larry S. Kopp Director
/s/ William D. Birch June 24, 1996
-------------------------------
William D. Birch Director
/s/ Frederick B. Whittemore June 24, 1996
-------------------------------
Frederick B. Whittemore Director
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
SEQUENTIAL PAGE
NUMBER NUMBER
- -------------- ----------------------------------------------------------------------- --------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of March 8, 1996, by and among
Financial Services Acquisition Corporation, EBIC Acquisition Corp. and
Euro Brokers Investment Corporation ("EBIC") (incorporated herein by
reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form
10-Q (No. 0-25056) dated May 15, 1996 (the "Form 10-Q").
2.2 Security Transfer Agreement, dated as of March 8, 1996, among the
Registrant, Gilbert Scharf, Michael Scharf, Welsh, Carson, Anderson &
Stowe VI, L.P. ("WCAS") and certain individuals (incorporated herein by
reference to Exhibit 2.2 of the Form 10-Q).
2.3 Majority Stockholders Agreement, dated as of March 8, 1996, among the
Registrant, EBIC Acquisition Corp. and WCAS (incorporated herein by
reference to Exhibit 2.3 of the Form 10-Q).
2.4 Escrow Agreement, dated as of March 8, 1996, among the Registrant, EBIC
Acquisition Corp., EBIC, Donald R.A. Marshall, WCAS and United States
Trust Company of New York, as escrow agent (incorporated herein by
reference to Exhibit 2.4 of the Form 10-Q).
3.1 Certificate of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibit 3.1 of the Registrant's
Registration Statement on Form S-1 (No. 33-85346) dated October 19,
1994 (the "Form S-1")).
3.2 By-laws of the Registrant (incorporated herein by reference to Exhibit
3.2 to the Form S-1).
4.1 Form of Common Stock Certificate (incorporated herein by reference to
Exhibit 4.1 of Amendment No. 1 to the Registrant's Registration
Statement on Form S-1 (No. 33-85346) dated November 23, 1994
("Amendment No. 1")).
4.2 Form of Merger Warrants.
4.3 Warrant Agreement, dated as of June 5, 1996, by and between Continental
Stock Transfer & Trust Company and the Registrant.
4.4 Form of Unit Purchase Options granted to Underwriters and designees
(incorporated herein by reference to Exhibit 4.3 of Amendment No. 1).
4.5 UPO Exchange and Custodial Agreement, dated as of June 24, 1996, by and
among GKN Securities Corp., Barington Capital Group, L.P., the
Registrant and Graubard, Mollen & Miller, as custodian.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom.
8.1 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol, regarding tax
matters.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
SEQUENTIAL PAGE
NUMBER NUMBER
- -------------- ---------------------------------------------------------------------- --------------
<S> <C> <C>
10.1 Letter Agreements among certain stockholders of the Registrant, GKN
Securities Corp. and Barington Capital Group, L.P. (incorporated
herein by reference to Exhibit 10.2 of Amendment No. 1).
10.2 Form of Investment Manager Trust Agreement between United States Trust
Company of New York and the Registrant (incorporated herein by
reference to Exhibit 10.5 of Amendment No. 1).
10.3 Form of Share Escrow Agreement between the Registrant and Continental
Stock Transfer & Trust Company of New York (incorporated herein by
reference to Exhibit 10.6 of Amendment No. 1).
10.4 Letter Agreement between Scharf Advisors, Inc. and the Registrant
regarding administrative support (incorporated herein by reference to
Exhibit 10.7 of Amendment No. 1.)
10.5 Employment Agreement, dated March 8, 1996, by and between Gilbert
Scharf and the Registrant (incorporated herein by reference to Exhibit
10.8 of the Form 10-Q).
10.6 Employment Agreement, dated March 8, 1996, by and between Donald R.A.
Marshall and EBIC.
10.7 Employment Agreement, dated March 8, 1996, by and between Keith Reihl
and EBIC.
10.11 Form of FSAC 1996 Stock Option Plan.
10.12 Form of Affiliate Letter.
21.1 Subsidiaries.
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom (included in its
opinion filed as Exhibit 5.1 hereto).
23.2 Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in its
opinion filed as Exhibit 8.1 hereto).
23.3 Consent of BDO Seidman, LLP.
23.4 Consent of Price Waterhouse LLP.
24.1 Powers of Attorney.
99.1 Consents of director nominees.
99.2 Form of FSAC Proxy.
99.3 Form of EBIC Proxy.
</TABLE>
WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
VOID AFTER 5:00 PM NEW YORK CITY TIME-ON NOVEMBER 30, 2001
Number of Warrants
FINANCIAL SERVICES ACQUISITION CORPORATION
CUSIP
THIS CERTIFIES THAT, for value received
, or registered assigns ("Registered Holder") is the owner of the number of
Series B Redeemable Common Stock Purchase Warrants ("Warrants") of Financial
Services Acquisition Corporation, a Delaware corporation ("Company"),
specified above. Each Warrant initially entitles the Registered Holder to
purchase, subject to the terms and conditions set forth in this Warrant
Certificate and in the Warrant Agreement (as hereinafter defined), one fully
paid and nonassessable share (subject to adjustment as hereinafter provided)
of the Common Stock, par value $.001 per share ("Common Stock"), of the
Company at any time after the issuance hereof and before the Expiration Date
(as hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the office of Continental Stock Transfer & Trust Company, as warrant agent, or
its successor ("Warrant Agent") accompanied by payment of the $5.00 ("Purchase
Price") per Warrant, subject to adjustment as hereinafter provided, in lawful
money of the United States in cash, or by good certified or official bank
check payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms set forth in
the Warrant Agreement ("Warrant Agreement") dated as of , 1996 by and
between the Company and the Warrant Agent, to all the terms and provisions
of which the Registered Holder, by acceptance of this Warrant Certificate,
hereby assents. In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price and the number of shares of Common
Stock subject to purchase upon the exercise of each Warrant represented
hereby are subject to modification or adjustment. Reference is made to
the Warrant Agreement for a more complete statement of the rights and
limitations of the Registered Holder hereof, the rights and duties of
the Warrant Agent and the rights and obligations of the Company thereunder.
Copies of the Warrant Agreement are on file at the corporate trust office
of the Warrant Agent.
The term "Expiration Date" shall mean 5:00 p.m. New York City time,
on November 30, 2001, or such earlier date as the Warrant shall be redeemed.
If such date shall be in the City of New York a holiday or a day on which the
banks are authorized to close, "Expiration Date" shall mean 5:00 p.m. (New
York City time) the next following day which in the City of New York is not a
holiday or a day on which banks are authorized to close.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder. The Company shall not be required upon the exercise of the
Warrants represented hereby to issue any fractions of shares, but shall make
an adjustment therefor in cash on the basis of the market value of such
fractional interest (computed as provided in the Warrant Agreement). In case
this Warrant is exercised with respect to less than all of such Warrants, a
new Warrant Certificate or Certificates will be issued on such surrender for
the number of Warrants represented hereby
<PAGE>
which were not so exercised. Prior to the exercise of any Warrant represented
hereby the Registered Holder shall not be entitled with respect to the shares
of Common Stock to which this Warrant Certificate relates to any rights of a
stockholder of the Company including, without limitation, the right to vote or
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceeding of the Company except as provided in said
Warrant Agreement. Prior to the due presentment for registration of transfer
of this Warrant Certificate, the Company and the Warrant Agent may deem and
treat the Registered Holder as the absolute holder hereof and each Warrant
represented hereby (notwithstanding any notation of ownership or other writing
hereon by anyone other than a duly authorized officer of the Company or the
Warrant Agent), for all purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary.
This Warrant Certificate is exchangeable upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender.
Upon due presentment together with any tax or any governmental charge
imposed in connection therewith, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants, will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of any Warrant unless a registration statement under the
Securities Act of 1933 with respect to such securities is effective. The
Company has covenanted and agreed that it will file a registration statement
or a post-effective amendment to its existing registration statement and will
use its best efforts to cause the same to become effective and to keep it
current while any of the Warrants are outstanding and exercisable. The
Warrants represented hereby shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
The Warrants may be redeemed at the option of the Company, in whole
but not in part, by paying in cash or certified or bank check therefor $.01
per Warrant, upon at least thirty days written notice mailed to the Registered
Holders at any time, if the last sales price of the Common Stock was at least
$8.50 per share subject to adjustment as provided in the Warrant Agreement, on
each of the twenty consecutive trading days during a period ending on the
third day prior to the date on which the notice of redemption is given. Each
Warrant that is the subject of such redemption and that has not been exercised
on or before the date called for in such notice shall become void, and all
rights thereunder shall terminate.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for Common Stock or other securities
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for the
securities purchasable upon such exercise until the date of re-opening of said
transfer books.
This Warrant Certificate and each Warrant represented hereby shall be
construed in accordance with and governed by the laws of the State of New
York.
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This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: FINANCIAL SERVICES ACQUISITION CORPORATION
COUNTERSIGNED: ATTEST:
By: CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
By:
Vice President, Secretary and Treasurer
AUTHORIZED OFFICER
By:
Chairman of the Board and Chief Executive
Officer
<PAGE>
PURCHASE FORM
TO BE EXECUTED
UPON EXERCISE OF WARRANT CERTIFICATE
TO:
The undersigned hereby exercises, according to the terms and
conditions thereof, the right to purchase shares of Common Stock, evidenced
by the within Warrant Certificate, and herewith makes payment of the Purchase
Price in full.
NAME:
PAYMENT ENCLOSED
ADDRESS:
Social Security No. of Warrant Holder
DATED: SIGNATURE:
TRANSFER FORM
For value received hereby sells,
assigns and transfers unto
Warrants to purchase shares of
Common Stock represented by the within Warrant Certificate and does hereby
irrevocably constitute and appoint
Attorney to transfer such
warrants on the books of the within named Company with full power of
substitution in the premises.
DATED:
Notice:
The Signature to this assignment must
correspond with the name as written
upon the face of this Warrant Certificate
in every particular.
Social Security Number of Assignee
or other identifying number
[Note: The Warrant Agent shall be entitled to demand signatures which are
Medallion guaranteed by an Eligible Institution.]
WARRANT AGREEMENT
Agreement made as of June 5, 1996, between FINANCIAL SERVICES ACQUISITION
CORPORATION, a Delaware corporation, with offices at 667 Madison Avenue, New
York, New York 10021 (the "Company"), and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, a New York corporation, with offices at 2 Broadway, New York, New
York 10004 (herein called the "Warrant Agent").
WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated as of March 8, 1996 (the "Merger Agreement"), by and among the Company,
EBIC Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of the Company ("Sub"), and Euro Brokers Investment Corporation, a Delaware
corporation ("EBIC"), pursuant to which, among other things, Sub will be
merged with and into EBIC (the "Merger"); and
WHEREAS, upon consummation of the Merger, the Company will issue and
deliver an aggregate 7,566,666 Series B Redeemable Common Stock Purchase
Warrants of the Company (the "Merger Warrants") to holders of EBIC common
stock, each of such Merger Warrants evidencing the right of the registered
holder thereof to purchase one share of common stock, $.001 par value per
share, of the Company (the "Common Stock") for $5.00 (subject to adjustment);
and
<PAGE>
WHEREAS, the Company will file with the Securities and Exchange
Commission, in connection with the Merger, a Registration Statement on
Form S-4 (the "Registration Statement") for the registration, under the
Securities Act of 1933, as amended (the "Securities Act"), of, among other
securities, the Merger Warrants and the Common Stock issuable upon exercise
of the Merger Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Merger Warrants; and
WHEREAS, the Company desires to provide for the provisions of the Merger
Warrants, the terms upon which they shall be issued and exercised, the form of
Merger Warrant certificate and the respective rights, limitation of rights and
immunities of the Company, the Warrant Agent and the holders of the Merger
Warrants; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Merger Warrants, when certificates representing the same
have been executed on behalf of the Company and countersigned by or on behalf
of the Warrant Agent, as provided herein, the valid, binding and legal
obligations of the Company, and to authorize the execution and delivery of
this Agreement.
2
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company for the Merger Warrants, and the Warrant
Agent hereby accepts such appointment and agrees to perform the same in
accordance with the terms and conditions set forth in this Agreement.
2. Warrant Certificates.
2.1 Form of Warrant Certificate. Each certificate representing one or
more Merger Warrants (each a "Warrant Certificate") shall be issued in
registered form only, shall be in substantially the form of Exhibit A hereto,
shall be signed by, or bear the facsimile signature of, the President and
Treasurer or Assistant Treasurer of the Company and shall bear a facsimile of
the Company's seal. In the event the person whose facsimile signature has been
placed upon any Warrant Certificate shall have ceased to serve in the capacity
in which such person signed the Warrant Certificate before such Warrant
Certificate is issued, it may be issued with the same effect as if such person
had not ceased to be such at the date of issuance. No Warrant Certificate may
be presented for exercise until it has been countersigned by the Warrant Agent
as provided in Section 2.3 hereof.
3
<PAGE>
2.2 Effect of Countersignature. Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant Certificate and the Merger
Warrants represented thereby shall be invalid and of no effect.
2.3 Events of Countersignature. The Warrant Agent shall countersign a
Warrant Certificate only upon the occurrence of either of the following
events:
(i) if the Warrant Certificate is to be issued in exchange or
substitution for one or more previously countersigned Warrant Certificates, as
hereinafter provided, including upon partial exercise of the Merger Warrants
represented by such Warrant Certificate(s), or
(ii) if the Company instructs the Warrant Agent to do so.
2.4 Registration.
2.4.1 Warrant Certificate Register. The Warrant Agent shall maintain
books (the "Warrant Register") for the registration of original issuance and
the registration of transfer of the Warrant Certificates. Upon the initial
issuance of a Warrant Certificate, the Warrant Agent shall issue and register
the Warrant Certificate in the names of the respective holders thereof in such
denominations and otherwise in accordance with instructions delivered to the
Warrant Agent by the Company.
2.4.2 Registered Holder. Prior to due presentment for registration of
transfer of any Warrant Certificate, the Company and the Warrant Agent
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<PAGE>
may deem and treat the person in whose name such Warrant Certificate shall be
registered upon the Warrant Register (the "registered holder") as the absolute
owner of such Warrant Certificate and of each Merger Warrant represented
thereby (notwithstanding any notation of ownership or other writing on the
Warrant Certificate made by anyone other than the Company or the Warrant
Agent) for the purpose of any exercise thereof, and for all other purposes,
and neither the Company nor the Warrant Agent shall be affected by any notice
to the contrary.
3. Terms and Exercise of Merger Warrants.
3.1 Warrant Price. Each Warrant Certificate shall, when countersigned by
the Warrant Agent, entitle the registered holder thereof, subject to the
provisions of such Warrant Certificate and of this Agreement, to purchase from
the Company a number of shares of Common Stock equal to the product of (i) one
share of Common Stock and (ii) the number of Merger Warrants represented by
such Warrant Certificate, at the price of $5.00 per whole share of Common
Stock, subject to the adjustments provided in Section 4 hereof.
Notwithstanding the foregoing, if, as of immediately following the Merger, the
exercise terms of the Redeemable Common Stock Purchase Warrants of the Company
issued in the Company's December 1994 initial public offering (the "Existing
Warrants") have theretofore been adjusted or at such time are required to be
adjusted pursuant to
5
<PAGE>
the terms of the Warrant Agreement, dated as of November 30, 1994, pursuant to
which they were issued, then each Merger Warrant automatically shall be
adjusted at such time so as to entitle the registered holder thereof to
purchase the same number of securities, at the same purchase price, as are
purchasable at such time (giving effect to any adjustments then required to be
made) with respect to each Existing Warrant, but thereafter shall be adjusted
only as and when provided in Section 4 hereof. The term "Warrant Price" as
used in this Agreement refers to the price per share at which Common Stock may
be purchased at the time a Merger Warrant is exercised.
3.2 Duration of Merger Warrants. A Merger Warrant may be exercised only
during the period (the "Exercise Period") commencing upon issuance of the
Merger Warrants and terminating (the "Expiration Date") on the earlier to
occur of: (i) November 30, 2001 and (ii) the date fixed for redemption of the
Merger Warrants as provided in Section 6 of this Agreement. Each Merger
Warrant not exercised on or before the Expiration Date shall become void, and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease at the close of business on the Expiration Date. The Company in
its sole discretion may extend the duration of the Merger Warrants by delaying
the Expiration Date.
3.3 Exercise of Merger Warrants.
6
<PAGE>
3.3.1 Payment. Merger Warrants represented by a Warrant Certificate that
has been countersigned by the Warrant Agent may be exercised by the registered
holder thereof by surrendering such Warrant Certificate, at the office of the
Warrant Agent, or at the office of its successor as Warrant Agent, in the
Borough of Manhattan, City and State of New York, with the subscription form,
as set forth in the Warrant Certificate, duly executed, and by paying in full,
in lawful money of the United States, in cash, good certified check or good
bank draft payable to the order of the Company, the Warrant Price for each
full share of Common Stock as to which the Merger Warrants are being exercised
and any and all applicable taxes due in connection with the exercise of such
Merger Warrants, the exchange of such Merger Warrants for Common Stock and/or
the issuance of Common Stock.
3.3.2 Issuance of Certificates. As soon as practicable after the exercise
of any Merger Warrant, the Company shall issue to the registered holder of the
underlying Warrant Certificate a certificate or certificates for the number of
full shares of Common Stock to which such holder is entitled, registered in
such name or names as may be directed by such holder, and if the Merger
Warrants represented by the Warrant Certificate presented for exercise shall
not have been exercised in full, a new countersigned Warrant Certificate for
the number of Merger Warrants as to which such Warrant Certificate shall not
have been exer-
7
<PAGE>
cised. Notwithstanding the foregoing, the Company shall not be obligated to
deliver any securities pursuant to the exercise of a Merger Warrant unless a
registration statement under the Securities Act with respect to the Common
Stock issuable upon such exercise is effective. Merger Warrants may not be
exercised by, or securities issued to, any registered holder in any state in
which such exercise would be unlawful.
3.3.3 Valid Issuance. All shares of Common Stock issued upon the proper
exercise of a Merger Warrant in conformity with this Agreement shall be
validly issued.
3.3.4 Date of Issuance. Each person in whose name any such certificate
for shares of Common Stock is issued shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the Warrant
Certificate representing the Merger Warrants exchanged therefor was
surrendered and payment of the Warrant Price was made, irrespective of the
date of delivery of such certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company
are closed, such person shall be deemed to have become the holder of such
shares at the close of business on the next succeeding date on which the stock
transfer books are open.
4. Adjustments.
8
<PAGE>
4.1 Stock Dividends - Split-Ups. If after the date hereof, and subject to
the provisions of Section 4.5 below, the number of outstanding shares of
Common Stock is increased by a stock dividend payable in shares of Common
Stock, or by a split-up of shares of Common Stock, or other similar event,
then, on the effective date of such stock dividend, split-up or similar event,
the number of shares issuable on exercise of each Merger Warrant shall be
increased in proportion to such increase in outstanding shares and the then
applicable Warrant Price shall be correspondingly decreased.
4.2 Aggregation of Shares. If after the date hereof, and subject to the
provisions of Section 4.5, the number of outstanding shares of Common Stock is
decreased by a consolidation, combination or reclassification of shares of
Common Stock or other similar event, then, on the effective date of such
consolidation, combination, reclassification or similar event, the number of
shares issuable on exercise of each Merger Warrant shall be decreased in
proportion to such decrease in outstanding shares and the then applicable
Warrant Price shall be correspondingly increased.
4.3 Reorganizations, etc. If after the date hereof any capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the sale
of all or substantially all of its assets to another corporation or other
similar event shall be effected
9
<PAGE>
(other than a reorganization, reclassification, consolidation, merger or sale
that does not result in the conversion, exchange or cancellation of all Common
Stock), then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and fair provision shall be made whereby
the Merger Warrant holders shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in the
Merger Warrants and in lieu of the shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented thereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by the Merger Warrants, had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in such
event appropriate provision shall be made with respect to the rights and
interests of the Merger Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant
Price and of the number of shares purchasable upon the exercise of the Merger
Warrants) shall thereafter be applicable, as nearly as may be, to any share of
stock, securities or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation, merger or sale unless,
prior to the consummation
10
<PAGE>
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or merger, or the corporation purchasing such assets, shall
assume, by written instrument executed and delivered to the Warrant Agent, the
obligation to deliver to the Merger Warrant holders such shares of stock,
securities or assets which, in accordance with the foregoing provisions, such
holders may be entitled to purchase.
4.4 Notices of Changes in Merger Warrant. Upon every adjustment of the
Warrant Price or the number of shares issuable upon exercise of a Merger
Warrant, the Company shall give written notice thereof to the Warrant Agent,
which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of a Merger Warrant, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based. Upon the occurrence of any event specified in Sections 4.1, 4.2 or 4.3,
or the circumstances described in the second sentence of Section 3.1, then, in
any such event, the Company shall give written notice in the manner set forth
above of the record date for such dividend, distribution or subscription
rights, or the effective date of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding up or issuance.
Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend,
11
<PAGE>
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for stock, securities or other assets deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such event.
4.5 No Fractional Shares. Notwithstanding any provision contained in this
Agreement to the contrary, the Company shall not issue fractional shares of
Common Stock upon exercise of any Merger Warrants. If, by reason of any
adjustment made pursuant to this Section 4 or otherwise, the holder of any
Merger Warrants would be entitled, upon the exercise of such Merger Warrants,
to receive a fractional interest in a share of Common Stock (it being
understood that all fractional interests resulting from all exercises of
Merger Warrants at such time by such holder shall be aggregated for these
purposes), the Company shall, upon such exercise, purchase such fractional
interest for an amount equal to the product of such fractional interest and
the "current value" of a share of Common Stock, determined as follows:
(i) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or included on the
Nasdaq National Market or Nasdaq SmallCap Market or the OTC Bulletin Board,
the current value shall be the last reported sale price of the Common
12
<PAGE>
Stock on the last business day prior to the date of exercise of the Merger
Warrants, or if no such sale is made on such day, the average of the closing
bid and asked prices for such day; or
(ii) If the Common Stock is not so listed, admitted to unlisted
trading privileges or included, the current value shall be the mean of the
last reported bid and asked prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of the Merger
Warrants; or
(iii) If the Common Stock is not so listed, admitted to unlisted
trading privileges or included and bid and asked prices are not so reported,
the current value shall be an amount determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
4.6 Form of Warrant Certificate. The form of Warrant Certificate need not
be changed because of any adjustment pursuant to this Section 4, and Warrant
Certificates issued after such adjustment may state the same Warrant Price and
the same number of shares as is stated in the Warrant Certificates initially
issued pursuant to this Agreement. However, the Company may at any time in its
sole discretion make any change in the form of Warrant Certificate that the
Company may deem appropriate and that does not affect the substance thereof,
and any Warrant Certificate thereafter issued or countersigned, whether in
exchange or
13
<PAGE>
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
5. Transfer and Exchange of Warrants Certificates.
5.1 Registration of Transfer. The Warrant Agent shall register the
transfer, from time to time, of any outstanding Warrant Certificate upon the
Warrant Register, upon surrender of such Warrant Certificate to the Warrant
Agent for transfer, properly endorsed with signatures properly guaranteed and
accompanied by a written request and appropriate instructions for transfer.
Upon any such transfer, a new Warrant Certificate of like tenor representing
an equal aggregate number of Merger Warrants shall be issued and the old
Warrant Certificate shall be cancelled by the Warrant Agent.
5.2 Procedure for Surrender of Warrant Certificates. Warrant Certificates
may be surrendered to the Warrant Agent, together with a written request for
exchange, and thereupon the Warrant Agent shall issue in exchange therefor one
or more new Warrant Certificates of like tenor representing an equal aggregate
number of Merger Warrants, as requested by the registered holder of the
Warrant Certificates so surrendered, and the old Warrant Certificates shall be
cancelled by the Warrant Agent.
5.3 Restrictive Legends. Notwithstanding anything to the contrary in this
Section 5, if a Warrant Certificate surrendered for registration of transfer
or
14
<PAGE>
exchange bears a restrictive legend, the Warrant Agent shall not cancel such
Warrant Certificate and issue new Warrant Certificates for transfer or in
exchange therefor until the Warrant Agent has received an opinion of counsel
reasonably acceptable in form and substance to the Company stating that such
transfer may be made without registration under the Securities Act, including
indicating whether the new Warrant Certificates must also bear a restrictive
legend. All Warrant Certificates cancelled by the Warrant Agent in connection
with a transfer or exchange shall be delivered by the Warrant Agent to the
Company from time to time upon request.
5.4 Fractional Warrants. The Warrant Agent shall not be required to
effect any registration of transfer or exchange which will result in the
issuance of a Warrant Certificate for a fraction of a Merger Warrant.
5.5 Service Charges. No service charge shall be made for any registra-
tion of transfer or exchange of Warrant Certificates.
5.6 Warrant Certificate Execution and Countersignature. The Warrant Agent
is hereby authorized to countersign and to deliver, in accordance with the
terms of this Agreement, the Warrant Certificates required to be issued
pursuant to the provisions of this Section 5, and the Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such purpose.
15
<PAGE>
6. Redemption.
6.1 Redemption. The Merger Warrants may be redeemed, at the option of the
Company, as a whole and not in part, at any time after they become exercisable
and prior to their expiration, at the office of the Warrant Agent, upon the
notice referred to in Section 6.2, at the price of $.01 per Merger Warrant
(the "Redemption Price"), provided that the last sales price of the Common
Stock has been at least $8.50, subject to adjustment in accordance with
Section 4 hereof, on each of the twenty (20) consecutive trading days ending
on the third business day prior to the date on which notice of redemption is
given.
6.2 Date Fixed for, and Notice of Redemption. In the event the Company
shall elect to redeem the Merger Warrants, the Company shall fix a date for
the redemption. Notice of redemption shall be mailed by first class mail,
postage prepaid, by the Company not less than 30 days from the date fixed for
redemption to the registered holders of the Merger Warrants to be redeemed at
their last addresses as they shall appear on the registration books. Any
notice mailed in the manner herein provided shall be conclusively presumed to
have been duly given whether or not the registered holder received such
notice.
6.3 Exercise After Notice of Redemption. The Merger Warrants may be
exercised in accordance with Section 3 of this Agreement at any time after
notice of redemption shall have been given by the Company pursuant to Section
6.2
16
<PAGE>
hereof and prior to the time and date fixed for redemption. On and after the
redemption date, record holders of Merger Warrants shall have no further
rights except to receive, upon surrender of the Warrant Certificates
representing such Merger Warrants, the per warrant Redemption Price.
7. Other Provisions Relating to Rights of Holders of Warrant Certificates.
7.1 No Rights as Stockholder. A Warrant Certificate does not entitle the
registered holder thereof to any of the rights of a stockholder of the
Company, including, without limitation, the right to receive dividends, or
other distributions, exercise any preemptive rights, to vote or to consent or
to receive notice as stockholders in respect of the meetings of stockholders
or the election of directors of the Company or any other matter.
7.2 Lost, Stolen, Mutilated, or Destroyed Warrant Certificates. If any
Warrant Certificate is lost, stolen, mutilated, or destroyed, the Company and
the Warrant Agent may on such terms as to indemnity or otherwise as they may
in their discretion impose (which shall, in the case of a mutilated Warrant
Certificate, include the surrender thereof), issue a new Warrant Certificate
of like denomination, tenor and date as the Warrant Certificate so lost,
stolen, mutilated or destroyed. Any such new Warrant Certificate shall
constitute a substitute contractual obligation of the Company, whether or not
the allegedly lost, stolen,
17
<PAGE>
mutilated or destroyed Warrant Certificate shall be at any time enforceable by
anyone.
7.3 Reservation of Common Stock. The Company shall at all times
reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Merger Warrants issued pursuant to this Agreement.
7.4 Registration of Common Stock. The Company will use its best
efforts (i) to cause the Registration Statement to become effective and (ii) to
maintain the effectiveness of the Registration Statement (or such other
registration statement covering the shares of Common Stock issuable upon
exercise of the Merger Warrants) until the expiration of the Merger Warrants
in accordance with the provisions of this Agreement.
8. Concerning the Warrant Agent and Other Matters.
8.1 Payment of Taxes. The Company will from time to time promptly pay
all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon
the exercise of Merger Warrants, but the Company shall not be obligated to pay
any transfer taxes in respect of the Merger Warrants or such shares.
Notwithstanding anything in this Agreement to the contrary, the Warrant Agent
shall not make any registration of transfer of a Warrant Certificate (or
issuance of shares upon
18
<PAGE>
exercise thereof to a person or persons other than the registered holder)
unless and until the person requesting such transfer (or issuance) has paid to
the Company the amount of any tax due and owing as a result of such transfer
(or issuance) or has established, to the satisfaction of the Company, that
such tax has been paid.
8.2 Resignation, Consolidation or Merger of Warrant Agent.
8.2.1 Appointment of Successor Warrant Agent. The Warrant Agent, or
any successor to it hereafter appointed, may resign its duties and be
discharged from all further duties and liabilities hereunder after giving
sixty (60) days' notice in writing to the Company. If the office of the
Warrant Agent becomes vacant by resignation or incapacity to act or otherwise,
the Company shall appoint in writing a successor Warrant Agent in place of the
Warrant Agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such resignation or
incapacity by the Warrant Agent or by any holder of a Merger Warrant, then the
holder of any Merger Warrant may apply to the Supreme Court of the State of
New York for the County of New York for the appointment of a successor Warrant
Agent. Any successor Warrant Agent, whether appointed by the Company or by
such court, shall be a corporation organized and existing under the laws of
the State of New York, in good standing and having its principal office in the
Borough of Manhat-
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tan, City and State of New York, and authorized under such laws to exercise
corporate trust powers and subject to supervision or examination by federal or
state authority. After appointment, any successor Warrant Agent shall be
vested with all the authority, powers, rights, immunities, duties, and
obligations of its predecessor Warrant Agent with like effect as if originally
named as Warrant Agent hereunder, without any further act or deed; but if for
any reason it becomes necessary or appropriate, the predecessor Warrant Agent
shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers, and
rights of such predecessor Warrant Agent hereunder, and upon request of any
successor Warrant Agent the Company shall make, execute, acknowledge and
deliver any and all instruments in writing for more fully and effectually
vesting in and confirming to such successor Warrant Agent all such authority,
power, rights, immunities, duties and obligations.
8.2.2 Notice of Successor Warrant Agent. In the event a successor
Warrant Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the transfer agent for the Common Stock not
later than the effective date of any such appointment.
8.2.3 Merger or Consolidation of Warrant Agent. Any corporation
into which the Warrant Agent may be merged or with which it may be
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consolidated or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party shall be the successor Warrant Agent
under this Agreement without any further act.
8.3 Fees and Expenses of Warrant Agent.
8.3.1 Remuneration. The Company agrees to pay the Warrant Agent
reasonable remuneration for its services as such Warrant Agent hereunder and
will reimburse the Warrant Agent upon demand for all expenditures that the
Warrant Agent may reasonably incur in the execution of its duties hereunder.
8.3.2 Further Assurances. The Company agrees to perform, execute,
acknowledge and deliver, or cause to be performed, executed, acknowledged and
delivered, all such further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
of the provisions of this Agreement.
8.4 Liability of Warrant Agent.
8.4.1 Reliance on Company Statement. Whenever in the performance of
its duties under this Agreement, the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a statement signed by the
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President of the Company and delivered to the Warrant Agent. The Warrant Agent
may rely upon such statement for any action taken or suffered in good faith by
it pursuant to the provisions of this Agreement.
8.4.2 Indemnity. The Warrant Agent shall be liable hereunder only
for its own negligence, willful misconduct or bad faith. The Company agrees to
indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted by the Warrant Agent in the execution of this
Agreement except as a result of the Warrant Agent's negligence, willful
misconduct, or bad faith.
8.4.3 Exclusions. The Warrant Agent shall have no responsibility
with respect to the validity of this Agreement or with respect to the validity
or execution of any Warrant Certificate (except its countersignature thereof);
nor shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant Certificate; nor shall
it be responsible to make any adjustments required under the provisions of
Section 4 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require
any such adjustment; nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
shares of Common Stock to be issued pursuant to this Agreement or any Warrant
Certificate or as to whether
22
<PAGE>
any shares of Common Stock will when issued be valid and fully paid and
nonassessable.
8.5 Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms
and conditions herein set forth and among other things, shall account promptly
to the Company with respect to Merger Warrants exercised and concur- rently
account for, and pay to the Company, all money received by the Warrant Agent
for the purchase of shares of Common Stock through the exercise of Merger
Warrants.
9. Miscellaneous Provisions.
9.1 Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns.
9.2 Notices. Any notice, statement or demand authorized by this Agreement
to be given or made by the Warrant Agent or by the holder of any Merger
Warrant to or on the Company shall be sufficiently given or made if sent by
certified mail, or private courier service, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
23
<PAGE>
Financial Services Acquisition Corporation
667 Madison Avenue
New York, New York 10021
Attn: Gilbert Scharf, President
Any notice, statement or demand authorized by this Agreement to be given or
made by the holder of any Merger Warrant or by the Company to or on the
Warrant Agent shall be sufficiently given or made if sent by certified mail or
private courier service, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company), as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attn: Compliance Department
9.3 Applicable law. The validity, interpretation and performance of this
Agreement and of the Merger Warrants shall be governed in all respects by the
laws of the State of New York, without giving effect to conflict of law
principles.
9.4 Persons Having Rights under this Agreement. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the parties hereto and the registered holders of the
Merger Warrants any right, remedy or claim under or by reason of this
Agreement or of any covenant, condition, stipulation, promise or agreement
hereof. All covenants, conditions, stipulations, promises and agreements
contained in this Agreement shall
24
<PAGE>
be for the sole and exclusive benefit of the parties hereto and their
successors and assigns and of the registered holders of the Merger Warrants.
9.5 Examination of the Agreement. A copy of this Agreement shall be
available at all reasonable times at the office of the Warrant Agent in the
Borough of Manhattan, City and State of New York, for inspection by the
registered holder of any Merger Warrant. The Warrant Agent may require any
such holder to submit his or her Warrant Certificate for inspection by it.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one
and the same instrument.
9.7 Effect of Headings. The Section headings herein are for convenience
only and are not part of this Agreement and shall not affect the
interpretation thereof.
25
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
Attest: FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Gilbert Scharf
- --------------------------- ----------------------------
Gilbert Scharf, President
Attest: CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
/s/ Thomas Jennings By: /s/ William F. Seegraber
- --------------------------- -----------------------------
Thomas Jennings Name: William F. Seebraber
Assistant Secretary Title: Vice President
26
<PAGE>
WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
VOID AFTER 5:00 PM NEW YORK CITY TIME-ON NOVEMBER 30, 2001
-------------------
Number of Warrants
FINANCIAL SERVICES ACQUISITION CORPORATION
CUSIP
THIS CERTIFIES THAT, for value received
, or registered assigns ("Registered Holder") is the owner of the number
of Series B Redeemable Common Stock Purchase Warrants ("Warrants") of
Financial Services Acquisition Corporation, a Delaware corporation
("Company"), specified above. Each Warrant initially entitles the Registered
Holder to purchase, subject to the terms and conditions set forth in this
Warrant Certificate and in the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share (subject to adjustment as hereinafter
provided) of the Common Stock, par value $.001 per share ("Common Stock"), of
the Company at any time after the issuance hereof and before the Expiration
Date (as hereinafter defined) upon the presentation and surrender of this
Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the office of Continental Stock Transfer & Trust Company, as
warrant agent, or its successor ("Warrant Agent") accompanied by payment of
the $5.00 ("Purchase Price") per Warrant, subject to adjustment as hereinafter
provided, in lawful money of the United States in cash, or by good certified
or official bank check payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms set forth in the
Warrant Agreement ("Warrant Agreement") dated as of , 1996 by and between
the Company and the Warrant Agent, to all the terms and provisions of which
the Registered Holder, by acceptance of this Warrant Certificate, hereby
assents. In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject
to modification or adjustment. Reference is made to the Warrant Agreement for
a more complete statement of the rights and limitations of the Registered
Holder hereof, the rights and duties of the Warrant Agent and the rights and
obligations of the Company thereunder. Copies of the Warrant Agreement are on
file at the corporate trust office of the Warrant Agent.
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
November 30, 2001, or such earlier date as the Warrant shall be redeemed. If
such date shall be in the City of New York a holiday or a day on which the
banks are authorized to close, "Expiration Date" shall mean 5:00 p.m. (New
York City time) the next following day which in the City of New York is not a
holiday or a day on which banks are authorized to close.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder. The Company shall not be required upon the exercise of the
Warrants represented hereby to issue any fractions of shares, but shall make
an adjustment therefor in cash on the basis of the market value of such
fractional interest (computed as provided in the Warrant Agreement). In case
this Warrant is exercised with respect to less than all of such Warrants, a
new Warrant Certificate or Certificates will be issued on such surrender for
the number of Warrants represented hereby
<PAGE>
which were not so exercised. Prior to the exercise of any Warrant represented
hereby the Registered Holder shall not be entitled with respect to the shares
of Common Stock to which this Warrant Certificate relates to any rights of a
stockholder of the Company including, without limitation, the right to vote or
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceeding of the Company except as provided in said
Warrant Agreement. Prior to the due presentment for registration of transfer
of this Warrant Certificate, the Company and the Warrant Agent may deem and
treat the Registered Holder as the absolute holder hereof and each Warrant
represented hereby (notwithstanding any notation of ownership or other writing
hereon by anyone other than a duly authorized officer of the Company or the
Warrant Agent), for all purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary.
This Warrant Certificate is exchangeable upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender.
Upon due presentment together with any tax or any governmental charge
imposed in connection therewith, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants, will be issued to the
transferee in exchange therefor, subject to the limitations provided in the
Warrant Agreement.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of any Warrant unless a registration statement under the
Securities Act of 1933 with respect to such securities is effective. The
Company has covenanted and agreed that it will file a registration statement
or a post-effective amendment to its existing registration statement and will
use its best efforts to cause the same to become effective and to keep it
current while any of the Warrants are outstanding and exercisable. The
Warrants represented hereby shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
The Warrants may be redeemed at the option of the Company, in whole
but not in part by paying in cash or certified or bank check therefor $.01 per
Warrant, upon at least thirty days written notice mailed to the Registered
Holders at any time, if the last sales price of the Common Stock was at least
$8.50 per share subject to adjustment as provided in the Warrant Agreement, on
each of the twenty consecutive trading days during a period ending on the third
day prior to the date on which the notice of redemption is given. Each Warrant
that is the subject of such redemption and that has not been exercised on or
before the date called for in such notice shall become void, and all rights
thereunder shall terminate.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for Common Stock or other securities
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for the
securities purchasable upon such exercise until the date of re-opening of said
transfer books.
This Warrant Certificate and each Warrant represented hereby shall be
construed in accordance with and governed by the laws of the State of New
York.
2
<PAGE>
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated:____________________________ FINANCIAL SERVICES ACQUISITION CORPORATION
COUNTERSIGNED: ATTEST:
By: CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
By:_________________________________________________
Vice President, Secretary and Treasurer
AUTHORIZED OFFICER
By:_________________________________________________
Chairman of the Board and Chief Executive Officer
<PAGE>
PURCHASE FORM
TO BE EXECUTED
UPON EXERCISE OF WARRANT CERTIFICATE
TO:
The undersigned hereby exercises, according to the terms and conditions
thereof, the right to purchase shares of Common Stock, evidenced by the within
Warrant Certificate, and herewith makes payment of the Purchase Price in full.
NAME:_________________________________ _________________________
PAYMENT ENCLOSED
ADDRESS:______________________________
______________________________________
______________________________________ _____________________________________
Social Security No. of Warrant Holder
DATED:_______________________________ SIGNATURE:___________________________
TRANSFER FORM
For value received hereby sells,
assigns and transfers unto
Warrants to purchase shares of
Common Stock represented by the within Warrant Certificate and does hereby
irrevocably constitute and appoint
Attorney to transfer such
warrants on the books of the within named Company with full power of
substitution in the premises.
DATED:__________________________________
Notice:__________________________________
The Signature to this assignment
must correspond with the name as
written upon the face of this
Warrant Certificate in every
particular.
____________________________________________
Social Security Number of Assignee
or other identifying number
[Note: The Warrant Agent shall be entitled to demand signatures which are
Medallion guaranteed by an Eligible Institution.]
UPO EXCHANGE AND CUSTODIAL AGREEMENT
THIS UPO EXCHANGE AND CUSTODIAL AGREEMENT (this "Agreement")
is entered into this 24th day of June, 1996, by and among GKN Securities Corp.
("GKN"), Barington Capital Group, L.P. ("Barington") and those persons
identified on Schedule I hereto (such persons, together with GKN and
Barington, collectively, the "Holders" and each, individually, a "Holder"),
Financial Services Acquisition Corporation, a Delaware corporation ("FSAC"),
and Graubard Mollen & Miller ("GM&M"), as custodian (the "Custodian").
WHEREAS, in connection with the December 1994 initial public
offering of FSAC, the Holders acquired an aggregate of 333,333 unit purchase
options of FSAC (collectively, the "UPOs" and each, individually, an "UPO");
WHEREAS, each UPO entitles the holder thereof to acquire, at
a $9.90 per UPO exercise price, one share of the Common Stock, par value $.001
per share ("FSAC Common Stock"), of FSAC and two Redeemable Common Stock
Purchase Warrants of FSAC ("FSAC Warrants"), with each FSAC Warrant, in turn,
exercisable for a share of FSAC Common Stock at $6.25 per share;
WHEREAS, to eliminate the "overhang" on the market for
FSAC's securities occasioned by the UPOs, FSAC has offered to exchange an
aggregate of 225,000 newly-issued shares of FSAC Common Stock for all 333,333
of the UPOs (the "Exchange"), and the Holders desire to accept such offer, in
each case in accordance with the terms set forth below;
WHEREAS, the Holders, prior to or simultaneously with the
execution and delivery of this Agreement, have tendered for deposit with the
Custodian all 333,333 of the UPOs (the "Tendered UPOs"); and
WHEREAS this Agreement authorizes the Custodian, in
accordance with the terms of this Agreement, to exchange the Tendered UPOs in
the Exchange for shares of FSAC Common Stock (rounded to the nearest whole
number) at the rate of 1.48148 Tendered UPOs for each share of FSAC Common
Stock.
NOW THEREFORE, in consideration of the premises set forth
above and the mutual promises and agreements set forth herein, the Holders,
FSAC, and the Custodian agree as follows:
<PAGE>
1. The deposit of the Tendered UPOs with the Custodian shall
be irrevocable. The Tendered UPOs shall remain on deposit with the Custodian
until released or returned in accordance with this Agreement. The Tendered
UPOs are to be held by the Custodian as custodian for the accounts of the
undersigned and are to be administered by the Custodian in accordance with the
terms of this Agreement, and the Custodian is hereby authorized and directed
to hold the Tendered UPOs, subject to the terms of this Agreement.
2. Immediately following the consummation of the merger
contemplated by that certain Agreement and Plan of Merger, dated as of March
8, 1996, by and among FSAC, EBIC Acquisition Corp. and Euro Brokers Investment
Corporation (the "Merger Agreement"), (i) FSAC shall deliver to the Custodian
certificates registered in the names of those persons identified on Schedule I
evidencing the number of whole shares of FSAC Common Stock set forth opposite
the name of each such person (the "Certificates") and (ii) the Custodian shall
deliver to FSAC for cancellation all of the Tendered UPOs and transfer forms,
endorsed in blank or in favor of FSAC, duly executed by each Holder with
signatures guaranteed. The Custodian shall promptly thereafter deliver to the
respective Holders the Certificates registered in their names as they may be
entitled to under this paragraph 2. Each Holder acknowledges and agrees that
upon consummation of the Exchange, it shall have no further rights under any
of its UPOs or its Unit Purchase Option, dated November 30, 1994, which shall
automatically be cancelled and of no further force or effect.
3. Each Holder acknowledges and agrees that it may not make
any sale, transfer or other disposition (a "Sale") of the shares of FSAC
Common Stock issued to it in the Exchange unless (i) such Sale has been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), (ii) such Sale is made in conformity with the volume and other
limitations of Rule 144 promulgated by the Securities and Exchange Commission
(the "SEC") under the Securities Act or (iii) FSAC shall have received an
opinion of counsel, which opinion and counsel shall be reasonably acceptable
to FSAC, to the effect that such Sale is otherwise exempt from registration
under the Securities Act.
4. Each Holder acknowledges and agrees that
the Certificate(s) issued to it in the Exchange (and any
replacements or substitutions therefor) shall bear the
2
<PAGE>
following legend, and that FSAC may notify its transfer agent to cause stop
transfer orders to be placed with respect to all Certificates that bear such
legend:
THE SHARES OF COMMON STOCK OF FINANCIAL SERVICES CORPORATION
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS THEY ARE AT THE TIME REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SALE OR TRANSFER THEREOF
IS NOT REQUIRED TO BE SO REGISTERED OR IS MADE PURSUANT TO AN
APPLICABLE EXEMPTION FROM REGISTRATION PROVIDED BY SAID ACT OR THE
GENERAL RULES AND REGULATIONS THEREUNDER.
5. It is understood and agreed that the legend set forth
above in paragraph 4 shall be removed by delivery of substitute certificates
without such legend (and that any stop transfer orders given shall be
rescinded) if a Holder has delivered to FSAC an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to FSAC, or a letter from
the staff of the SEC, to the effect that such legend is not required for
purposes of the Securities Act or the Rules and Regulations of the SEC
promulgated thereunder.
6. FSAC agrees, for purposes of the opinions of counsel
referred to above in paragraphs 3 and 5, that (i) the firm of Graubard Mollen
& Miller ("GM&M") is acceptable to FSAC and (ii) absent a change in the
relevant law as it exists on the date hereof, a conclusion in any such opinion
to the effect that, for purposes of Regulation 144(d) of the General Rules and
Regulations under the Securities Act, the shares of FSAC Common Stock issued
to a Holder in the Exchange in respect of such Holder's UPOs are deemed to
have been acquired by such Holder on the date such Holder acquired the UPOs so
exchanged, is acceptable to FSAC.
7. The shares of FSAC Common Stock issued to the Holders in
the Exchange shall be fully paid and non-assessable, and shall be free from
taxes, liens, and other charges with respect to their issuance.
8. FSAC agrees to include the 225,000 shares of FSAC Common
Stock to be issued in the Exchange in the Form S-4 Registration Statement (the
"Registration Statement") to be filed by it in connection with the
transactions contemplated by the Merger Agreement if such shares may be
included in such Form S-4 Registration Statement under SEC policy. The Holders
hereby acknowledge having
3
<PAGE>
seen and reviewed a draft, submitted to the SEC on June 5, 1996, of the
Registration Statement.
9. FSAC agrees, with respect to any materials that it plans
to file with the SEC that refer to the Exchange or this Agreement, to provide
to GM&M, as counsel for the Holders, at least 24 hours prior to such filing
(unless provision 24 hours in advance is impracticable, in which event, as
much in advance as is practicable), copies of such materials for review and to
give reasonable consideration to the comments of GM&M, if any, with respect
thereto. GM&M hereby agrees to maintain the confidentiality of any such
materials that are so provided until such time, if any, as they are filed with
the SEC and publicly available, except that GM&M may share and review any such
materials with GKN and such other of the Holders who acknowledge such
confidentiality obligation.
10. In consideration of the premises set forth above and the
undertakings of FSAC pursuant to this Agreement, the authority hereby
conferred by the Holders is hereby agreed to be irrevocable and coupled with
an interest, and this Agreement shall not be terminable by any act or deed of
the respective Holders or by any other person, firm or corporation, or by the
death or incapacity of such Holders, or by operation of law; or if this
instrument is executed on behalf of a trust or other fiduciary estate, it
shall not be terminated by any act or event requiring a distribution of the
assets of such estate to any person, or by the occurrence of any other event
or events; or if this instrument is executed on behalf of a corporation or
partnership, it shall not be terminated by dissolution, winding up, or other
event affecting the legal life of such entity. If any such event shall occur
prior to the completion of the transactions contemplated hereby, the Custodian
is, nevertheless, authorized and directed to administer the Tendered UPOs in
accordance with the terms and conditions hereof as if such event had not
occurred.
11. The Custodian shall be entitled to act and rely upon,
and shall incur no liability for or in respect of any action taken, suffered
or omitted by it in reliance on, any statement, request, notice or
instructions respecting this Agreement given to it by the parties hereto or
any of them or their respective substitutes.
12. The Custodian shall have no responsibility
or liability hereunder to any person other than to admin-
4
<PAGE>
ister the Tendered UPOs in accordance with the provisions hereof, and the
other parties hereto jointly and severally agree to indemnify and defend the
Custodian from, and hold it harmless against, any loss, liability, claim,
damage, cost, or expense (including, but not limited to, reasonable attorney's
fees) incurred in connection with or arising out of: (i) any of its acts or
omissions undertaken in accordance with the terms of this Agreement other than
any act or omission constituting gross negligence or willful misconduct by it,
(ii) any breach by the Holders or FSAC of any of their duties or obligations
under this Agreement, and (iii) any violation of applicable law by the Holders
or FSAC or any of their respective directors, officers, employees, or agents.
If there is a dispute between the Holders and FSAC regarding the disposition
of the Tendered UPOs, the Custodian shall be entitled to deposit same into a
court of appropriate jurisdiction.
13. Each of the Holders hereby severally represents and
warrants to FSAC, and agrees for the benefit of FSAC, that: (i) it has full
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, (ii) it has duly executed and
delivered this Agreement, (iii) all authorizations and consents, if any,
necessary for the execution and delivery of this Agreement by it, or the
consummation of the transactions contemplated hereby by it, have been obtained
or given, (iv) it currently has, and at the effective time of the merger
contemplated by the Merger Agreement it will continue to have, valid and
marketable title to the Tendered UPOs to be exchanged by it pursuant to this
Agreement, free and clear of all liens, encumbrances, equities and claims
whatsoever, and (v) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any of the terms, provisions or conditions of any
agreement or instrument to which it is a party or by which it or the Tendered
UPOs may be bound or affected.
14. FSAC hereby represents and warrants to the Holders that:
(i) it has full right, power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, (ii) it has
duly executed and delivered this Agreement, (iii) all authorizations and
consents, if any, necessary for the execution and delivery of this Agreement
by it, or the consummation of the transactions contemplated hereby by it, have
been obtained or given and (iv) the execution and delivery of
5
<PAGE>
this Agreement and the consummation of the transactions contemplated hereby
will not conflict with or result in a breach of any of the terms, provisions
or conditions of any agreement or instrument to which it is a party or by
which it may be bound or affected.
15. The Custodian hereby is authorized to rely conclusively
and shall be protected in acting upon any order, notice, demand, certificates,
opinion of counsel, other advice of counsel, statement, instrument, report, or
other document (as to its due execution, delivery, validity, and as to the
truth and acceptability of any information therein contained) that it
reasonably believes to be genuine.
16. This Agreement shall forthwith terminate and have no
further force and effect (except for the provisions of paragraphs 11, 12 and
15 hereof, which shall survive) if (i) the Merger Agreement is terminated (in
which event, FSAC shall promptly notify the Custodian of such termination),
(ii) the Merger has not been consummated on before August 31, 1996, or (iii)
prior to the occurrence of the Exchange, any state agency of competent
jurisdiction charged with the enforcement of state securities laws imposes
transfer restrictions or escrow requirements upon any of the shares of FSAC
Common Stock to be received by a Holder in the Exchange, which restrictions or
requirements are to remain in effect for a period longer than two years from
the date such Holder first acquired its UPOs. In the event of any such
termination, the Custodian shall be authorized to return and shall return the
Tendered UPOs forthwith to the Holders.
17. References in this Agreement to "it" and
"its" with respect to Holders shall be deemed to include,
as appropriate, "he" and "she" and "his" and "her."
18. This Agreement is made under, and shall be
governed pursuant to, the laws of the State of New York,
except for its law of conflicts.
19. This Agreement may be executed in counterparts, each of
which shall be a valid and binding obligation of the parties thereto, but all
of which shall constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
/s/ David M. Nussbaum
---------------------------------
David M. Nussbaum
/s/ Roger Gladstone
---------------------------------
Roger Gladstone
/s/ Robert Gladstone
---------------------------------
Robert Gladstone
/s/ Richard Buonocore
---------------------------------
Richard Buonocore
/s/ Deborah Schondorf
---------------------------------
Deborah Schondorf
/s/ Andrew Lazarus
---------------------------------
Andrew Lazarus
/s/ Brian K. Coventry
---------------------------------
Brian K. Coventry
/s/ Andrea B. Goldman
---------------------------------
Andrea B. Goldman
GKN SECURITIES CORP.
By: /s/ David M. Nussbaum
__________________________
Name: David M. Nussbaum
Title:
7
<PAGE>
BARINGTON CAPITAL GROUP, L.P.
By LNA Capital Corp., General
Partner
By: /s/ Marc S. Cooper
__________________________
Name: Marc S. Cooper
Title: Executive Vice-
President
FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Gilbert Scharf
_____________________________
Name: Gilbert Scharf
Title: Chief Executive Officer
and President
ACCEPTANCE BY CUSTODIAN
Graubard Mollen & Miller, named as Custodian in this
Agreement, hereby acknowledges receipt of the 333,333 Tendered UPOs described
in this Agreement, and agrees to act in accordance with this Agreement.
GRAUBARD MOLLEN & MILLER
By: /s/ David Miller
___________________________
Partner
AGREEMENT BY GRAUBARD MOLLEN & MILLER
Graubard Mollen & Miller hereby agrees to the provisions of
the last sentence of paragraph 9 of this Agreement.
GRAUBARD MOLLEN & MILLER
By: /s/ David Miller
_____________________
Partner
8
<PAGE>
SCHEDULE I
NAME NUMBER OF UPOS NUMBER OF SHARES
David M. Nussbaum 30,000 20,250
Roger Gladstone 30,000 20,250
Robert Gladstone 30,000 20,250
Richard Buonocore 3,333 2,250
Deborah Schondorf 4,333 2,925
Andrew Lazarus 2,500 1,687
Brian K. Coventry 1,000 675
Andrea B. Goldman 500 337
Barington Capital
Group, L.P. 166,666 112,500
GKN Securities Corp. 65,001 43,876
Total: 333,333 Units 225,000 Shares
9
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM]
June 25, 1996
Financial Services Acquisition Corporation
667 Madison Avenue
11th Floor
New York, NY 10021
Re: Registration Statement on Form S-4
of Financial Services Acquisition
Corporation
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Financial Services Acquisition
Corporation, a Delaware corporation ("FSAC"), in connection with the proposed
transactions described in the prospectus/proxy statement (the "Prospectus")
forming a part of FSAC's Registration Statement on Form S-4 (the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission") on June 25, 1996, including (i) the proposed merger (the
"Merger") of EBIC Acquisition Corp., a newly-formed, wholly-owned subsidiary
of FSAC ("Merger Sub"), with and into Euro Brokers Investment Corporation, a
Delaware corporation ("EBIC"), with EBIC as the surviving corporation and
becoming a wholly-owned subsidiary of FSAC, and (ii) concurrent with and in
connection with the Merger, the proposed exchange (the "UPO Exchange") of
shares of Common Stock, par value $.001 per share ("FSAC Common Stock"), of
FSAC for all outstanding unit purchase options of FSAC (the "UPOs"). Upon
consummation of the Merger, up to 4,641,666 shares of FSAC Common Stock (the
"Merger Shares") and up to 7,566,666 Series B Redeemable Common Stock Purchase
Warrants of FSAC (the "Merger Warrants") will be issued to holders of the
Class B Common Stock, par value $.001 per share ("EBIC Common
<PAGE>
Financial Services Acquisition Corporation
June 25, 1996
Page 2
Stock"), of EBIC, and upon consummation of the UPO Exchange, up to 225,000
shares of FSAC Common Stock (the "Exchange Shares") will be issued to holders
of the UPOs. In addition to the Merger Shares, the Merger Warrants and the
Exchange Shares, the Prospectus and the Registration Statement also relate to
the up to 7,566,666 shares of FSAC Common Stock (the "Warrant Shares" and,
together with the Merger Shares, the Merger Warrants and the Exchange Shares,
the "FSAC Securities") underlying and initially issuable (without regard to
any subsequent application of the antidilution provision of the Merger
Warrants) upon exercise of the Merger Warrants.
In acting as special counsel for FSAC and in connection with the opinions
expressed below, we have examined (i) the Prospectus and the Annexes thereto,
including (w) the Agreement and Plan of Merger, dated as of March 8, 1996 (as
amended, the "Merger Agreement"), by and among FSAC, Merger Sub and EBIC, (x)
the Escrow Agreement, dated as of March 8, 1996 (the "Escrow Agreement"), by
and among FSAC, Merger Sub, EBIC and certain others, (y) the Security Transfer
Agreement, dated as of March 8, 1996 (the "Security Agreement"), by and among
FSAC and certain FSAC and EBIC stockholders, and (z) the forms of certificates
of amendment to FSAC's Certificate of Incorporation (the "Charter Amendments")
to be adopted in connection with the Merger, (ii) the Registration Statement
and the Exhibits thereto, including (x) the Warrant Agreement, dated as of
June 5, 1996, by and between FSAC and Continental Stock Transfer & Trust
Company (the "Warrant Agreement"), relating to the Merger Warrants and (y) the
UPO Exchange and Custodial Agreement, dated as of June 24, 1996 (the "UPO
Exchange Agreement"), providing for the UPO Exchange, (iii) the Certificate of
Incorporation and the By-laws of FSAC, in each case as amended to the date
hereof; (iv) certain resolutions of the Board of Directors of FSAC relating to
the Merger and the issuance of the FSAC Securities; and (v) such other
documents as we have deemed necessary or appropriate as a basis for the
opinion set forth below.
<PAGE>
Financial Services Acquisition Corporation
June 25, 1996
Page 3
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. As to any facts material to the
opinion expressed herein which were not independently established or verified,
we have relied upon the facts as stated in the Prospectus or upon oral or
written statements and representations of officers and other representatives
of FSAC and others.
Members of our firm are admitted to the Bar in the States of New York and
Delaware and we do not express any opinion as to the laws of any other
jurisdiction other than the federal laws of the United States of America to
the extent specifically referred to herein.
Based upon the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that (i)
the Merger Shares issuable to holders of EBIC Common Stock in the Merger have
been duly authorized by all necessary corporate action of FSAC and, when
issued and delivered in accordance with the Merger Agreement and the Escrow
Agreement and the Security Agreement, will be validly issued by FSAC and,
subject to the terms of the Escrow Agreement, will be fully paid and
nonassessable; (ii) the Merger Warrants issuable to holders of EBIC Common
Stock in the Merger have been duly authorized by all necessary corporate
action of FSAC and, when issued and delivered in accordance with the Merger
Agreement, the Warrant Agreement, the Escrow Agreement and the Security
Agreement, will be validly issued by FSAC and, subject to the terms of the
Warrant Agreement and the Escrow Agreement, will be fully paid and
nonassessable; (iii) the Warrant Shares underlying the Merger Warrants
initially issuable to holders of EBIC Common Stock in the Merger have been
duly authorized by all necessary corporate action of FSAC
<PAGE>
Financial Services Acquisition Corporation
June 25, 1996
Page 4
and, when issued and delivered in accordance with the Merger Agreement and the
Warrant Agreement, including the payment of the full cash exercise price
therefor, will be validly issued by FSAC and, subject to the terms of the
Security Agreement, will be fully paid and nonassessable; and (iv) the
Exchange Shares issuable to holders of the UPOs have been duly authorized by
all necessary corporate action of FSAC and, when issued and delivered in
accordance with the Merger Agreement and the UPO Exchange Agreement, will be
validly issued by FSAC and will be fully paid and nonassessable.
In rendering the foregoing opinions, we have assumed that (i) the Merger
and the other transactions contemplated in the Merger Agreement will be
consummated in accordance with the terms of the Merger Agreement (and the
exhibits thereto), including being approved and adopted by the requisite votes
of FSAC stockholders and EBIC stockholders (and holders of 20% or more of the
FSAC Public Shares (as defined in the Prospectus) not exercising their
redemption rights under FSAC's Certificate of Incorporation), (ii) the Charter
Amendments will be approved by the requisite vote of FSAC stockholders, (iii)
the FSAC Securities will conform in all material respects to the descriptions
thereof set forth in the Prospectus and (iv) the certificates representing the
FSAC Securities will be duly executed and delivered.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"LEGAL MATTERS" in the Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Commission thereunder.
<PAGE>
Financial Services Acquisition Corporation
June 25, 1996
Page 5
This opinion is furnished to FSAC solely for its benefit in connection
with the Registration Statement as described above. It is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM
------------------------------------
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
[LETTERHEAD OF REBOUL, MACMURRAY, HEWITT, MAYNARD & KRISTOL]
June 25, 1996
Euro Brokers Investment Corporation
Two World Trade Center, Suite 8400
New York, New York 10048
Re: Federal Income Tax Consequences of the Merger
of EBIC Acquisition Corp. into Euro Brokers
Investment Corporation
Dear Sirs:
We have acted as counsel to Euro Brokers Investment Corporation, a
Delaware corporation ("EBIC"), in connection with the proposed merger (the
"Merger"), pursuant to which EBIC Acquisition Corp., a Delaware corporation
("Acquisition") which is a wholly-owned subsidiary of Financial Services
Acquisition Corporation, itself a Delaware corporation ("FSAC"), will be
merged with and into EBIC.
Upon consummation of the Merger, each issued and outstanding share of
Class B Common Stock of EBIC ("EBIC Common Stock") (other than shares held in
the treasury of EBIC, shares owned by any subsidiary of EBIC and shares owned
by FSAC, all of which will be cancelled, and other than shares as to which
appraisal rights shall have been duly demanded) will be converted into the
right to receive, subject to certain adjustments and escrow arrangements,
approximately (i) 2.64 newly-issued shares of FSAC common stock ("FSAC Common
Stock"), (ii) 4.53 newly-issued Series B Redeemable Common Stock Purchase
Warrants of FSAC (the "Merger Warrants") and (iii) cash. Cash will be paid in
lieu of fractional shares of FSAC Common Stock and fractional Merger Warrants.
<PAGE>
Euro Brokers Investment Corporation
June 25, 1996
Page 2
Based upon the foregoing, we are of the opinion that:
1. The Merger will be treated as a taxable transaction for federal
income tax purposes.
2. Each holder of shares of EBIC Common Stock should recognize capital
gain or loss equal to the difference between the amount realized by
such stockholder and such stockholder's aggregate tax basis in the
shares of EBIC Common Stock surrendered.
3. Such amount realized will equal the sum of the amount of cash plus
the fair market value of the shares of FSAC Common Stock and the fair
market value of the Merger Warrants received by such stockholder.
4. Such stockholder's gain or loss will be long-term capital gain or
loss if, as of the Effective Time, such stockholder held the
surrendered shares of EBIC Common Stock for more than one year.
5. Such stockholder's initial tax basis in the shares of FSAC Common
Stock and the Merger Warrants received will equal the fair market
value of such shares or warrants, respectively, as of the Effective
Time.
6. Such stockholder's holding period for the shares of FSAC Common Stock
and the Merger Warrants received will commence as of the day
following the date on which the Effective Time occurs.
In providing these opinions, we have relied on the description of the
transactions as set forth in the Agreement and Plan of Merger, dated as of March
8, 1996, as amended, the Form S-4 Registration Statement, filed by FSAC with the
Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and the accompanying exhibits to each of those
documents. Further, our opinions are based upon the Internal Revenue Code of
1986, as amended (the "Code"), the legislative history with respect thereto,
rules and regulations promulgated thereunder, published rulings of the Internal
Revenue Service and court decisions, all as in effect and existing on the date
hereof, and all of which are subject to change at any time, possibly on a
retroactive basis. There is no assurance that our conclusions will not be
rendered invalid as a result of subsequent changes in the law, including changes
to the Code, the regulations thereunder, and the interpretation thereof by the
courts and the Internal Revenue Service.
The opinions rendered herein are solely for your use in connection with
the Merger and the preparation of the Registration Statement in connection
therewith and may not be relied upon for any other purpose without our prior
written consent. We consent to the inclusion of this opinion as Exhibit 8.1 to
the Registration Statement, and to the reference to us therein under the heading
"Certain Federal Income Tax Consequences."
Very truly yours,
Reboul, MacMurray, Hewitt, Maynard & Kristol
EMPLOYMENT AGREEMENT
by and between
EURO BROKERS INVESTMENT CORPORATION
and
Donald R. A. Marshall
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Employment....................................................... 1
2. Term............................................................. 1
3. Position and Duties.............................................. 2
4. Place of Performance............................................. 2
5. 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
6. Offices.......................................................... 3
7. Termination...................................................... 4
(a) Death........................................... 4
(b) Disability...................................... 4
(c) Cause........................................... 4
8. Termination Procedure............................................ 5
(a) Notice of Termination........................... 5
(b) Date of Termination............................. 6
9. Compensation upon Termination or During
Disability....................................................... 6
(a) Disability; Death............................... 6
(b) By Company without Cause........................ 7
(c) By Company for Cause or by the Executive........ 7
(d) Compensation Plans.............................. 7
10. Mitigation....................................................... 8
11. Confidential Information; Noncompetition
Requirement...................................................... 8
(a) Confidential Information........................ 8
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(b) Noncompetition Requirement..................... 8
(c) Salary Continuation............................ 9
(d) Injunctive Relief.............................. 9
12. Indemnification; Legal Fees..................................... 10
13. Successors; Binding Agreement................................... 10
(a) Company's Successors........................... 10
(b) Executive's Successors......................... 11
14. Notice.......................................................... 11
15. Miscellaneous................................................... 12
16. Validity........................................................ 12
17. Counterparts.................................................... 12
18. Entire Agreement................................................ 13
ii
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 8, 1996, by and between Donald R.A.
Marshall (the "Executive"), and Euro Brokers Investment 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 conditions 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 Financial Services Acquisition
Corporation, a Delaware corporation ("FSAC"), EBIC Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of FSAC, and the Company,
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 7. On the second anniversary of the Closing Date and on
each successive anniversary thereafter, the term of the Executive's employment
shall be automatically 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.
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<PAGE>
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 FSAC.
The Executive shall have the full responsibilities and authority attendant to
such position and shall report directly to the Board. 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 consistent with the
Executive's position with the Company. The Executive agrees to devote
substantially all of his working time and efforts to the performance of his
duties for the Company.
4. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the principal
executive offices of the Company in New York, New York, except for reasonably
required travel on the Company's business.
5. 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 decreased.
(b) Bonuses. During the Employment Period, the Executive
shall be eligible to receive 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, in accordance with the terms of such
plan.
(c) Expenses. The Company shall promptly reimburse the
Executive for all reasonable business ex-
2
<PAGE>
penses 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 accounted 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, 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
in the future to its executives and key management employees (including
without limitation 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 available in the future shall be deemed to be in lieu of the salary
payable to the Executive pursuant to subsection (a) of this Section 5.
(e) Vacation. The Executive 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.
6. Offices. Subject to Sections 3 and 4 hereof, the Executive
agrees to serve without additional
3
<PAGE>
compensation, if elected or appointed thereto, as a director of the Company,
FSAC 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 currently provided to any other director of the Company or
any of its subsidiaries, or any such executive position, as the case may be.
7. 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 8 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 hereunder 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 hereunder 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 continuing failure by the
Executive to substantially perform his duties hereunder (other than
such failure resulting from the Executive's incapacity 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
4
<PAGE>
the manner in which the Company believes the Executive has not
substantially performed his duties; or
(iii) the willful misconduct by the Executive
(including, but not limited to, breach by the Executive of the provisions
of Section 11 hereof) that is demonstrably and materially 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 7(c) and specifying the particulars thereof
in detail. For purposes of this Section 7(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 affected by his
incapacity due to physical or mental illness.
8. 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 7(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with
5
<PAGE>
Section 14. 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 7(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 7(c), the
date specified in the Notice of Termination, 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.
9. Compensation upon Termination 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 5(d) until
his employment is terminated pursuant to Section 7(b) and shall continue to
receive such Base Salary for a period of six months thereafter. Subsequent to
the six-month period following the termination of the Executive's employment
pursuant to Section 7(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 Executive 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.
6
<PAGE>
(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 5(a) or 5(b) hereof, the Company shall continue to
pay to the Executive (or his legal representatives 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 shall maintain in full force and
effect, for the continued 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 programs in which
the Executive was entitled to participate immediately prior to the Date
of Termination, provided that the Executive's continued participation is
possible under the general terms and provisions of such plans and
programs. In the event that the Executive's participation in any such
plan or program is barred, the Company shall arrange to provide the
Executive and his dependents 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 9.
(d) Compensation Plans. Following any termination of the
Executive's employment, the Company shall pay the Executive all unpaid
amounts, if any, to
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<PAGE>
which the Executive is entitled as of the Date of Termination under any
compensation plan or program of the Company, at the time such payments are
due.
10. 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 employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
the Company or otherwise except as is hereinafter specifically provided in
this Section 10. To the extent that the Executive, during the relevant period
described in Section 9(b)(ii) hereof, shall receive from a subsequent employer
benefits similar to those to be provided under Section 9(b)(ii), the benefits
to be provided under the provisions of said Section shall be correspondingly
reduced.
11. Confidential Information; Noncompetition Requirement.
(a) Confidential Information. 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 required 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 11(a).
(b) Noncompetition Requirement. 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
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<PAGE>
and (3) with respect to clauses (i) and (ii) of this Section 11(b), any period
that the Executive is entitled to payment pursuant to Section 9(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, principal, partner, stockholder, corporate
officer, director, manager, investor, lender, advisor, owner, associate or in
any other individual or representative capacity, (i) solicit, entice,
encourage or otherwise attempt to procure or service by telephone or otherwise
accounts from any customers (determined as of the Date of Termination) of the
Company or a subsidiary thereof for a business that is competitive 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.
(c) Salary Continuation. As additional consideration for
the Executive's performance of the covenant provided in subsection (b) (iii)
of this Section 11 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 covenants, 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 11, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or
9
<PAGE>
threatened breach, the Executive acknowledging that damages would be
inadequate and insufficient.
12. 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 hereunder. 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 evidence of his having prevailed (as
described in the preceding sentence) and such evidence of the fees and
expenses incurred, as the Company may reasonably require. Any termination of
the Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 12.
13. 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 succession 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 13 or which otherwise be-
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comes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Successors. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
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.
14. Notice. For the purposes of this Agreement, notices,
demands and all other communications 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 certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Donald R.A. Marshall
927 Mohawk Road
Franklin Lakes, New Jersey 07417
If to the Company:
Euro Brokers Investment Corporation
Two World Trade Center
Suite 8400
New York, New York 10048
With copies to:
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.
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15. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Executive and such officer 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 Agreement 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 9 and of the Executive under Section
11 shall survive 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.
16. 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.
17. Counterparts. This Agreement 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.
18. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in
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respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
EURO BROKERS INVESTMENT
CORPORATION
By:/s/ Keith E. Reihl
Name: Keith E. Reihl
Title: Senior Vice President
/s/ Donald R.A. Marshall
Donald R.A. Marshall
AGREED:
Financial Services Acquisition Corporation hereby agrees that the Executive
shall serve as its Vice Chairman during the Employment Period in accordance
with Section 3 hereof.
FINANCIAL SERVICES ACQUISITION
CORPORATION
By: /s/ Gilbert Scharf
Name: Gilbert Scharf
Title: Chairman, President & CEO
EMPLOYMENT AGREEMENT
by and between
EURO BROKERS INVESTMENT CORPORATION
and
Keith E. Reihl
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Employment.................................................. 1
2. Term........................................................ 1
3. Position and Duties......................................... 2
4. Place of Performance........................................ 2
5. Compensation and Related Matters............................ 2
(a) Base Salary................................ 2
(b) Bonuses.................................... 2
(c) Expenses................................... 3
(d) Other Benefits............................. 3
(e) Vacation................................... 3
(f) Services Furnished......................... 3
6. Offices..................................................... 4
7. Termination................................................. 4
(a) Death...................................... 4
(b) Disability................................. 4
(c) Cause...................................... 4
8. Termination Procedure....................................... 5
(a) Notice of Termination...................... 5
(b) Date of Termination........................ 6
9. Compensation upon Termination or During
Disability.................................................. 6
(a) Disability; Death.......................... 6
(b) By Company without Cause................... 7
(c) By Company for Cause or by the Executive... 7
(d) Compensation Plans......................... 8
10. Mitigation.................................................. 8
11. Confidential Information; Noncompetition
Requirement................................................. 8
(a) Confidential Information................... 8
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(b) Noncompetition Requirement................. 8
(c) Salary Continuation........................ 9
(d) Injunctive Relief.......................... 9
12. Indemnification; Legal Fees................................. 10
13. Successors; Binding Agreement............................... 10
(a) Company's Successors....................... 10
(b) Executive's Successors..................... 11
14. Notice...................................................... 11
15. Miscellaneous............................................... 12
16. Validity.................................................... 12
17. Counterparts................................................ 12
18. Entire Agreement............................................ 13
ii
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 8, 1996, by and between Keith
E. Reihl (the "Executive"), and Euro Brokers Investment 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 conditions 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 Financial Services Acquisition
Corporation, a Delaware corporation ("FSAC"), EBIC Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of FSAC, and the Company,
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 7. On the second anniversary of the Closing Date and on
each successive anniversary thereafter, the term of the Executive's employment
shall be automatically 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.
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3. Position and Duties. During the Employment Period, the
Executive shall serve as Chief Financial Officer of the Company and a member
of the Board. The Executive shall have the full responsibilities and authority
attendant to such position and shall report to the Chairman, President and
Chief Executive Officer of the Company. 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 Chairman, President and Chief
Executive Officer of the Company or the Chairman of FSAC, provided that such
responsibilities and authority are consistent with the Executive's position
with the Company. The Executive agrees to devote substantially all of his
working time and efforts to the performance of his duties for the Company.
4. Place of Performance. In connection with
the Executive's employment by the Company, the Executive shall be based at
the principal executive offices of the Company in New York, New York,
except for reasonably required travel on the Company's business.
5. 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 $300,000 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 decreased.
(b) Bonuses. During the Employment Period,
the Executive shall be eligible to receive 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, in accordance with the
terms of such plan.
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(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 accounted 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, 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 in the future to its executives and key management employees
(including without limitation 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 available in the future shall be deemed to be in
lieu of the salary payable to the Executive pursuant to subsection (a) of this
Section 5.
(e) Vacation. The Executive 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.
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<PAGE>
6. Offices. Subject to Sections 3 and 4 hereof, the
Executive agrees to serve without additional compensation, if elected or
appointed thereto, as a director of the Company, FSAC 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 currently
provided to any other director of the Company or any of its subsidiaries, or
any such executive position, as the case may be.
7. 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 8 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 hereunder 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
hereunder 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 continuing failure by the
Executive to substantially perform his duties hereunder (other than
such failure resulting from the Executive's incapacity due to
physical or mental illness or subsequent to the issuance of a Notice
of Termination by the Executive for Good Reason) after
4
<PAGE>
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 misconduct by the Executive
(including, but not limited to, breach by the Executive of the
provisions of Section 11 hereof) that is demonstrably and materially
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 7(c) and specifying the particulars thereof
in detail. For purposes of this Section 7(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
affected by his incapacity due to physical or mental illness.
8. Termination Procedure.
(a) Notice of Termination. Any termina-
tion of the Executive's employment by the Company or by the Executive (other
than termination pursuant to Section
5
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7(a) hereof) shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 14. 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 Termi-
nation" 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 7(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 7(c), the date specified in the Notice of Termination, 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.
9. Compensation upon Termination 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 5(d) until his employment is terminated
pursuant to Section 7(b) and shall continue to receive such Base Salary for a
period of six months thereafter. Subsequent to the six-month period following
the termination of the Executive's employment pursuant to Section 7(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 Executive under this
Agreement and the Executive's benefits shall be determined under the Company's
retirement, insurance and other
6
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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 5(a) or 5(b) hereof, the Company
shall continue to pay to the Executive (or his legal representatives
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 shall maintain in
full force and effect, for the continued 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 programs in which the Executive was entitled to participate
immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that
the Executive's participation in any such plan or program is barred,
the Company shall arrange to provide the Executive and his dependents
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 Execu-
tive 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 9.
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(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 Termination under any compensation plan or program of the Company, at the
time such payments are due.
10. 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 employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
the Company or otherwise except as is hereinafter specifically provided in
this Section 10. To the extent that the Executive, during the relevant period
described in Section 9(b)(ii) hereof, shall receive from a subsequent employer
benefits similar to those to be provided under Section 9(b)(ii), the benefits
to be provided under the provisions of said Section shall be correspondingly
reduced.
11. Confidential Information; Noncompetition
Requirement.
(a) Confidential Information. The Execu-
tive 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 required 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 11(a).
(b) Noncompetition Requirement. During
(1) any period that the Executive is performing services
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<PAGE>
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
11(b), any period that the Executive is entitled to payment pursuant to
Section 9(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, principal, partner,
stockholder, corporate officer, director, manager, investor, lender, advisor,
owner, associate or in any other individual or representative capacity, (i)
solicit, entice, encourage or otherwise attempt to procure or service by
telephone or otherwise accounts from any customers (determined as of the Date
of Termination) of the Company or a subsidiary thereof for a business that is
competitive 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.
(c) Salary Continuation. As additional
consideration for the Executive's performance of the covenant provided in
subsection (b) (iii) of this Section 11 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 covenants, 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 11, the Executive agrees that the
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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.
12. 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 hereunder. 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 evidence of his having prevailed (as
described in the preceding sentence) and such evidence of the fees and
expenses incurred, as the Company may reasonably require. Any termination of
the Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 12.
13. 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 succession 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
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as aforesaid which executes and delivers the agreement provided for in this
Section 13 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) Executive's Successors. This Agree-
ment and all rights of the Executive hereunder shall inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, 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.
14. Notice. For the purposes of this Agreement, notices,
demands and all other communications 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 certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Keith E. Reihl
534 Allen Avenue
Westfield, New Jersey 07090
If to the Company:
Euro Brokers Investment Corporation
Two World Trade Center
Suite 8400
New York, New York 10048
With copies to:
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
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that notices of change of address shall be effective only
upon receipt.
15. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Executive and such officer 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 Agreement 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 9 and of the Executive under Section
11 shall survive 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.
16. Validity. The invalidity or unenforce-
ability 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.
17. Counterparts. This Agreement 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.
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18. 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, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
EURO BROKERS INVESTMENT
CORPORATION
By:/s/ Donald R. A. Marshall
Name: Donald R. A. Marshall
Title: President
/s/ Keith E. Reihl
Keith E. Reihl
14
FINANCIAL SERVICES ACQUISITION CORPORATION
1996 STOCK OPTION PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the Financial Services Acquisition
Corporation 1996 Stock Option Plan (the "Plan") is to align the interests of
executive officers and other key employees of Financial Services Acquisition
Corporation and its subsidiaries with those of the stockholders of Financial
Services Acquisition Corporation, to afford an incentive to such officers and
employees to continue as employees, to increase their efforts on behalf of the
Company and to promote the success of the Company's business. To further such
purposes, the Committee may grant options to purchase shares of the Company's
common stock. The provisions of the Plan are intended to satisfy the
requirements of Section 16(b) of the Securities Exchange Act of 1934 and of
Section 162(m) of the Internal Revenue Code of 1986, and shall be interpreted
in a manner consistent with the requirements thereof, as now or hereafter
construed, interpreted and applied by regulations, rulings and cases.
2. Definitions.
As used in this Plan, the following words and phrases shall
have the meanings indicated below:
(a) "Agreement" shall mean a written
agreement entered into between the Company and an Optionee in connection
with an award under the Plan.
(b) "Board" shall mean the Board of
Directors of the Company.
(c) "Cause," when used in connection with
the termination of an Optionee's employment by the Company, shall mean (i) the
conviction of the Optionee for the commission of a felony, (ii) the willful
and continued failure by the Optionee substantially to perform his duties and
obligations to the Company or a Subsidiary (other than any such failure
resulting from his incapacity due to physical or mental illness), or (iii)
the willful engaging by the Optionee in misconduct that is materially
injurious to the Company or a Subsidiary. For purposes of this Section 2(c),
no act, or failure to act, on an Optionee's part shall be considered "willful"
<PAGE>
unless done, or omitted to be done, by the Optionee in bad faith and without
reasonable belief that his action or omission was in the best interest of the
Company. The Committee shall determine whether a termination of employment is
for Cause for purposes of the Plan.
(d) "Change in Control" shall mean the
occurrence of the event set forth in any of the following
paragraphs:
(i) any Person (as defined below) is
or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its subsidiaries) representing 50% or more of the
combined voting power of the Company's then outstanding securities;
or
(ii) the following individuals cease
for any reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute the
Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a vote
of at least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or
recommended; or
(iii) there is consummated a merger
or consolidation of the Company or a direct or indirect subsidiary
thereof with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into
2
<PAGE>
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of
the Company, at least 50% of the combined voting power of the
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation,
or (B) a merger or consolidation effected to implement a
recapitaliza- tion of the Company (or similar transaction) in which
no Person is or becomes the beneficial owner, directly or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its subsidiaries) representing 50% or more of the
combined voting power of the Company's then outstanding securities;
or
(iv) the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 50%
of the combined voting power of the voting securities of which are
owned by Persons in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
For purposes of this Section 2(d), "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
3
<PAGE>
(e) "Code" shall mean the Internal Reve-
nue Code of 1986, as amended from time to time.
(f) "Committee" shall mean a committee
established by the Board to administer the Plan.
(g) "Common Stock" shall mean shares of
common stock, par value $.001 per share, of the Company.
(h) "Company" shall mean Financial Ser-
vices Acquisition Corporation, a corporation organized under the laws of the
State of Delaware, or any successor corporation.
(i) "Disability" shall mean an Optionee's
inability to perform his duties with the Company by reason of any medically
determinable physical or mental impairment, as determined by a physician
selected by the Optionee and acceptable to the Company.
(j) "Exchange Act" shall mean the Securi-
ties Exchange Act of 1934, as amended from time to time, and as now or
hereafter construed, interpreted and applied by regulations, rulings and
cases.
(k) "Fair Market Value" per share as of a
particular date shall mean (i) if the shares of Common Stock are then listed
on a national securities exchange, the closing sales price per share of Common
Stock on the national securities exchange on which the Common Stock is
principally traded for the last preceding date on which there was a sale of
such Common Stock on such exchange, or (ii) if the shares of Common Stock are
then traded in an over-the-counter market, the average of the closing bid and
asked prices for the shares of Common Stock in such over-the-counter market
for the last preceding date on which there was a sale of such Common Stock in
such market, or (iii) if the shares of Common Stock are not then listed on a
national securities exchange or traded in an over-the-counter market, such
value as the Committee, in its sole discretion, shall determine.
(l) "Incentive Stock Option" shall mean
any option intended to be and designated as an incentive stock option within
the meaning of Section 422 of the Code.
4
<PAGE>
(m) "Nonqualified Option" shall mean an
Option that is not an Incentive Stock Option.
(n) "Option" shall mean the right, grant-
ed hereunder, to purchase shares of Common Stock. Op-
tions granted by the Committee pursuant to the Plan may
constitute either Incentive Stock Options or Nonqualified
Stock Options.
(o) "Optionee" shall mean a person who receives a
grant of an Option.
(p) "Option Price" shall mean the exercise price
of the shares of Common Stock covered by an Option.
(q) "Parent" shall mean any company
(other than the Company) in an unbroken chain of companies ending with the
Company if, at the time of granting an Option, each of the companies other
than the Company owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
companies in such chain.
(r) "Plan" shall mean this Financial Services
Acquisition Corporation 1996 Stock Option Plan.
(s) "Retirement" shall mean an Optionee's
retirement in accordance with the terms of any tax-qualified retirement plan
maintained by the Company or a Subsidiary in which the Optionee participates.
(t) "Rule 16b-3" shall mean Rule 16b-3,
as from time to time in effect, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, including any successor to
such Rule.
(u) "Subsidiary" shall mean any company
(other than the Company) in an unbroken chain of companies beginning with the
Company if, at the time of granting an Option, each of the companies other
than the last company in the unbroken chain owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other companies in such chain.
5
<PAGE>
(v) "Ten Percent Stockholder" shall mean
an Optionee who, at the time an Incentive Stock Option is
granted, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary.
3. Administration.
The Plan shall be administered by the Committee, the members
of which shall, except as may otherwise be determined by the Board, be
"disinterested directors" under Rule 16b-3 and "outside directors" under
Section 162(m) of the Code.
The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Options; to determine which Options shall constitute Incentive Stock
Options and which Options shall constitute Nonqualified Stock Options; to
determine the purchase price of the shares of Common Stock covered by each
Option; to determine the persons to whom, and the time or times at which
awards shall be granted; to determine the number of shares to be covered by
each award; to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
Agreements (which need not be identical) and to cancel or suspend awards, as
necessary; and to make all other determinations deemed necessary or advisable
for the administration of the Plan.
The Committee may delegate to one or more of its members or
to one or more agents such administrative duties as it may deem advisable, and
the Committee or any person to whom it has delegated duties as aforesaid may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. All decisions,
determination and interpretations of the Committee shall be final and binding
on all Optionees of any awards under this Plan.
The Board shall have the authority to fill all vacancies,
however caused, in the Committee. The Board
6
<PAGE>
may from time to time appoint additional members to the Committee, and may at
any time remove one or more Committee members. One member of the Committee shall
be selected by the Board as chairman. The Committee shall hold its meetings at
such times and places as it shall deem advisable. All determinations of the
Committee shall be made by a majority of its members either present in person
or participating by conference telephone at a meeting or by written consent.
The Committee may appoint a secretary and make such rules and regulations for
the conduct of its business as it shall deem advisable, and shall keep minutes
of its meetings.
No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or
any award granted hereunder.
4. Eligibility.
Awards may be granted to executive officers and other key
employees of the Company, EBIC and their Subsidiaries, including officers and
directors who are employees. In determining the persons to whom awards shall
be granted and the number of shares to be covered by each award, the Committee
shall take into account the duties of the respective persons, their present
and potential contributions to the success of the Company and such other
factors as the Committee shall deem relevant in connection with accomplishing
the purpose of the Plan.
5. Stock.
The maximum number of shares of Common Stock reserved for
the grant of awards under the Plan shall be 1,800,000, subject to adjustment
as provided in Section 9 hereof. Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or may be
reacquired by the Company.
If any outstanding award under the Plan should for any
reason expire, be cancelled or be forfeited without having been exercised in
full, the shares of Common Stock allocable to the unexercised, cancelled or
terminated portion of such award shall (unless the Plan shall have been
terminated) become available for subsequent grants of awards under the Plan.
7
<PAGE>
In no event may an Optionee be granted during any calendar
year an Option to acquire more than 500,000 shares of Common Stock.
6. Terms and Conditions of Options.
Each Option granted pursuant to the Plan shall be evidenced
by an Agreement, in such form and containing such terms and conditions as the
Committee shall from time to time approve, which Agreement shall comply with
and be subject to the following terms and conditions, unless otherwise
specifically provided in such Option Agreement:
(a) Number of Shares. Each Option Agree-
ment shall state the number of shares of Common Stock to which the Option
relates.
(b) Type of Option. Each Option Agree-
ment shall specifically state that the Option constitutes an Incentive Stock
Option or a Nonqualified Stock Option.
(c) Option Price. Each Option Agreement
shall state the Option Price, which shall not be less than one hundred percent
(100%) of the Fair Market Value of the shares of Common Stock covered by the
Option on the date of grant unless, with respect to Nonqualified Stock
Options, otherwise determined by the Committee. The Option Price shall be
subject to adjustment as provided in Section 9 hereof. The date as of which
the Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted, unless such resolution
specifies a different date.
(d) Medium and Time of Payment. The
Option Price shall be paid in full, at the time of exercise, in cash or in
shares of Common Stock then owned by the Optionee having a Fair Market Value
equal to such Option Price or in a combination of cash and Common Stock or,
unless the Committee shall determine otherwise, by a cashless exercise
procedure through a broker-dealer.
(e) Term and Exercisability of Options.
Each Option Agreement shall provide the exercise schedule for the Option as
determined by the Committee; provided, however, that, the Committee shall have
the authority to
8
<PAGE>
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period will be ten (10) years from the date of the grant of the
Option unless otherwise determined by the Committee; provided, however, that,
in the case of an Incentive Stock Option, such exercise period shall not
exceed ten (10) years from the date of grant of such Option. The exercise
period shall be subject to earlier termination as provided in Sections 6(f)
and 6(g) hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by written notice
delivered in person or by mail to the Secretary of the Company, specifying the
number of shares of Common Stock with respect to which the Option is being
exercised.
(f) Termination. Except as provided in
this Section 6(f) and in Section 6(g) hereof, an Option may not be exercised
unless the Optionee is then in the employ of the Company or a Subsidiary (or a
company or a Parent or Subsidiary company of such company issuing or assuming
the Option in a transaction to which Section 424(a) of the Code applies), and
unless the Optionee has remained continuously so employed since the date of
grant of the Option. In the event that the employment of an Optionee shall
terminate (other than by reason of death, Disability, Retirement or Cause),
all Options of such Optionee that are exercisable at the time of such
termination may, unless earlier terminated in accordance with their terms, be
exercised within thirty (30) days after the date of such termination (or such
different period as the Committee shall prescribe).
(g) Death, Disability or Retirement of
Optionee. If an Optionee shall die while employed by the Company or a
Subsidiary, or within thirty (30) days after the date of termination of such
Optionee's employment (or within such different period as the Committee may
have provided pursuant to Section 6(f) hereof), or if the Optionee's
employment shall terminate by reason of Disability or Retirement, all Options
theretofore granted to such Optionee (to the extent otherwise exercisable)
may, unless earlier terminated in accordance with their terms, be exercised by
the Optionee or by the Optionee's estate or by a person who acquired the right
to exercise such Options by bequest or inheritance or otherwise by reason
9
<PAGE>
of death or Disability of the Optionee, at any time within one year after the
death, Disability or Retirement of the Optionee (or such different period as
the Committee shall prescribe). In the event that an Option granted hereunder
shall be exercised by the legal representatives of a deceased or former
Optionee, written notice of such exercise shall be accompanied by a certified
copy of letters testamentary or equivalent proof of the right of such legal
representative to exercise such Option. Unless otherwise determined by the
Committee, Options not otherwise exercisable on the date of termination of
employment shall be forfeited as of such date.
(h) Other Provisions. The Option Agree-
ments evidencing awards under the Plan shall contain such other terms and
conditions not inconsistent with the Plan as the Committee may determine.
7. Nonqualified Stock Options.
Options granted pursuant to this Section 7 are intended to
constitute Nonqualified Stock Options and shall be subject only to the general
terms and conditions specified in Section 6 hereof.
8. Incentive Stock Options.
Options granted pursuant to this Section 8 are intended to
constitute Incentive Stock Options and shall be subject to the following
special terms and conditions, in addition to the general terms and conditions
specified in Section 6 hereof.
(a) Value of Shares. The aggregate Fair
Market Value (determined as of the date the Incentive Stock Option is granted)
of the shares of Common Stock with respect to which Incentive Stock Options
granted under this Plan and all other option plans of any subsidiary become
exercisable for the first time by each Optionee during any calendar year
shall not exceed $100,000.
(b) Ten Percent Stockholder. In the case
of an Incentive Stock Option granted to a Ten Percent Stockholder, (i) the
Option Price shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the shares of Common Stock on the date of grant of such
Incentive Stock Option, and (ii) the exercise period
10
<PAGE>
shall not exceed five (5) years from the date of grant of such Incentive Stock
Option.
9. Effect of Certain Changes.
(a) In the event of any extraordinary
dividend, stock dividend, recapitalization, merger, consolidation, stock
split, warrant or rights issuance, or combination or exchange of such shares,
or other similar transactions, each of the number of shares of Common Stock
available for awards, the number of such shares covered by outstanding awards,
and the price per share of Options, as appropriate, shall be equitably
adjusted by the Committee to reflect such event and preserve the value of such
awards; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.
(b) Upon the occurrence of a Change in
Control, each Option granted under the Plan and then outstanding but not yet
exercisable shall thereupon become fully exercisable.
10. Surrender and Exchange of Awards.
The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan or any option granted under any
other plan, program or arrangement of the Company or any Subsidiary
("Surrendered Option"), to be conditioned upon the granting to the Optionee of
a new Option for the same number of shares of Common Stock as the Surrendered
Option, or may require such voluntary surrender as a condition precedent to a
grant of a new Option to such Optionee. Subject to the provisions of the Plan,
such new Option may be an Incentive Stock Option or a Nonqualified Stock
Option, and shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Committee at the time the
new Option is granted.
11. Period During Which Awards May Be Granted.
Awards may be granted pursuant to the Plan from time to time
within a period of ten (10) years from the date the Plan is adopted by the
Board, or the date the Plan is approved by the shareholders of the Company,
11
<PAGE>
whichever is earlier, unless the Board shall terminate the Plan at an earlier
date.
12. Nontransferability of Awards.
Awards granted under the Plan shall not be transferable
otherwise than by will or by the laws of descent and distribution, and awards
may be exercised or otherwise realized, during the lifetime of the Optionee,
only by the Optionee or by his guardian or legal representative.
13. Approval of Shareholders.
The Plan shall take effect upon its adoption by the Board
and shall terminate on the tenth anniversary of such date, but the Plan (and
any grants of awards made prior to the shareholder approval mentioned herein)
shall be subject to the approval of Company's shareholders, which approval
must occur within twelve months of the date the Plan is adopted by the Board.
14. Agreement by Optionee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of
exercise of an Option (a "Tax Event"), each Optionee shall agree that no later
than the date of the Tax Event, the Optionee will pay to the Company or make
arrangements satisfactory to the Committee regarding payment of any federal,
state or local taxes of any kind required by law to be withheld upon the Tax
Event. Alternatively, the Committee may provide that an Optionee may elect, to
the extent permitted or required by law, to have the Company deduct federal,
state and local taxes of any kind required by law to be withheld upon the Tax
Event from any payment of any kind due to the Optionee. The withholding
obligation may be satisfied by the withholding or delivery of Common Stock.
15. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend,
terminate, modify or amend the Plan; provided, however, that, unless otherwise
determined by the Board, an amendment that requires stockholder approval in
order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of
the Code or any other law, regulation
12
<PAGE>
or stock exchange requirement shall not be effective unless approved by the
requisite vote of stockholders. Except as provided in Section 9(a) hereof, no
suspension, termination, modification or amendment of the Plan may adversely
affect any award previously granted, unless the written consent of the
Optionee is obtained.
16. Rights as a Shareholder.
An Optionee or a transferee of an award shall have no rights
as a shareholder with respect to any shares covered by the award until the
date of the issuance of a stock certificate to him for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of other rights for which
the record date is prior to the date such stock certificate is issued, except
as provided in Section 9(a) hereof.
17. No Rights to Employment.
Nothing in the Plan or in any award granted or Agreement
entered into pursuant hereto shall confer upon any Optionee the right to
continue in the employ of the Company or any Subsidiary or to be entitled to
any remuneration or benefits not set forth in the Plan or such Agreement or to
interfere with or limit in any way the right of the Company or any such
Subsidiary to terminate such Optionee's employment. Awards granted under the
Plan shall not be affected by any change in duties or position of an Optionee
as long as such Optionee continues to be employed by the Company or any
Subsidiary.
18. Beneficiary.
An Optionee may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Optionee, the executor or administrator of
the Optionee's estate shall be deemed to be the Optionee's beneficiary.
13
<PAGE>
19. Governing Law.
The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware.
14
FORM OF COMPANY AFFILIATE LETTER
_______ __, 1996
Financial Services Acquisition
Corporation
667 Madison Avenue
11th Floor
New York, NY 10021
Ladies and Gentlemen:
This letter agreement (this "Agreement") is being delivered
in accordance with Section 7.5(b) of the Agreement and Plan of Merger, dated
as of March 8, 1996 (the "Merger Agreement"), 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 Euro Brokers Investment Corporation, a Delaware corporation (the
"Company"), providing for, among other things, the merger (the "Merger") of
Sub with and into EBIC, as a result of which the outstanding shares of Class A
Common Stock, par value $.01 per share, and Class B Common Stock, par value
$.001 per share, of EBIC (collectively, "EBIC Common Stock"), will be
converted into the right to receive (i) Common Stock, par value $.001 per
share, of FSAC ("FSAC Common Stock"), (ii) Series B Redeemable Common Stock
Purchase Warrants of FSAC (the "FSAC Warrants" and, together with the FSAC
Common Stock (including FSAC Common Stock obtained upon conversion of the FSAC
Warrants), the "FSAC Securities") and (iii) cash, without interest.
The undersigned understands that as of the date of this
letter he, she or it may be deemed to be an "affiliate" of the Company as such
term is used in paragraphs (c) and (d) of Rule 145 of the General Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act").
<PAGE>
1. The undersigned hereby represents, warrants,
covenants and agrees as follows:
(a) The undersigned has full power to execute this Agreement
and to make the representations, warranties, covenants and agreements herein
and to perform the undersigned's obligations hereunder.
(b) The undersigned is the beneficial or record owner of all
the shares of EBIC Common Stock indicated immediately below the undersigned's
signature and address on the last page of this Agreement (all such shares,
including any hereafter acquired, the "Company Shares"). Except for the
Company Shares, the undersigned does not beneficially or of record own any
shares of EBIC Common Stock or any rights or other equity securities of the
Company.
(c) The undersigned will not sell, transfer or
otherwise dispose of or offer or agree to sell, transfer
or dispose of or in any other way reduce the undersigned's risk of ownership
or investment in (any of the foregoing, a "Disposition") any of the FSAC
Securities in violation of the Securities Act or the Rules and Regulations.
(d) The undersigned has carefully read this Agreement and
the Merger Agreement and discussed with the undersigned's counsel or counsel
for the Company the applicable limitations upon the undersigned's ability to
make any Disposition of the FSAC Securities.
(e) The undersigned understands that the issuance of FSAC
Securities pursuant to the Merger has been registered with the SEC under the
Securities Act on a Registration Statement on Form S-4 and that, because at
the time the Merger is submitted to a vote of the stockholders of the Company,
the undersigned may be deemed to be an Affiliate of the Company and the
distribution by the undersigned of any FSAC Securities has not been registered
under the Securities Act, the undersigned may not make any Disposition of the
FSAC Securities unless (i) such Disposition has been registered under the
Securities Act, (ii) such Disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the SEC under the Securities
Act, or (iii) FSAC has received an opinion of counsel, which opinion and
counsel shall be reasonably acceptable to FSAC, to the
<PAGE>
effect that such Disposition is otherwise exempt from registration under the
Securities Act.
(f) The undersigned understands that stop transfer
instructions will be given to all transfer agents for the FSAC Securities and
that there will placed on the certificates evidencing the FSAC Securities, or
any replacements or substitutions therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT DATED _________ ___, 1996
BETWEEN THE REGISTERED HOLDER HEREOF AND FINANCIAL SERVICES
ACQUISITION CORPORATION, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF FINANCIAL SERVICES
ACQUISITION CORPORATION."
(g) The undersigned also understands that unless a
Disposition of the FSAC Securities has been registered under the Securities
Act or is made in conformity with the provisions of Rule 145, FSAC reserves
the right to put the following legend on the certificates evidencing any of
the FSAC Securities issued to any transferee of the undersigned:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE
ACQUIRED FROM A PERSON WHO RECEIVED SUCH SECURITIES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SECURITIES MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
(h) It is understood and agreed that the legends set forth
in Sections 1(f) and 1(g) above shall be removed by delivery of substitute
certificates without such legend (and that any stop transfer instructions
given pursuant to Section 1(f) shall be rescinded) if the undersigned has
delivered to FSAC an opinion of counsel, which opinion and counsel shall be
reasonably satisfacto-
<PAGE>
ry to FSAC, or a letter from the staff of the SEC, to the effect that such
legend and instructions are not required for purposes of the Rules and
Regulations or the Securities Act.
2. The undersigned further understands and agrees that the
representations, warranties, covenants and agreements of the undersigned set
forth herein are for the benefit of FSAC and the surviving corporation in the
Merger and will be relied upon by such entities and their respective counsel.
3. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
the undersigned and any pledgees holding the Company Shares or the FSAC
Securities as collateral. If the Merger Agreement is terminated in accordance
with its terms prior to the Effective Time, this Agreement will thereupon
automatically terminate.
<PAGE>
Very truly yours,
_______________________________
Name:
Address: ______________________
_______________________________
_______________________________
Company Shares owned beneficially or of
record:
__________ shares of EBIC Common
Stock.
Agreed to and accepted:
FINANCIAL SERVICES ACQUISITION
CORPORATION
By:
Name:
Title:
SUBSIDIARIES
1. EBIC Acquisition Corp., a Delware Corportion.
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Financial Services Acquisition Corporation
New York, New York
We hereby consent to the inclusion in the Prospectus of Financial Services
Acquisition Corporation constituting part of the Registration Statement on Form
S-4 of our report dated March 8, 1996 relating to the financial statements of
Financial Services Acquisition Corporation for the periods ended December 31,
1995 and 1994.
We also consent to the reference to our firm under the caption "Experts" and
"Selected Financial Data" in such Prospectus and related Registration Statement.
/s/ BDO Seidman, LLP
-------------------------------
New York, New York
June 20, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Financial Services Acquisition
Corporation of our report dated February 26, 1996, except as to Note 2 which
is as of March 8, 1996, relating to the financial statements of Euro Brokers
Investment Corporation, which appears in such Prospectus. We also consent to
the references under the headings "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
/s/ PRICE WATERHOUSE LLP
- -------------------------------
NEW York, New York
June 19, 1996
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the
undersigned directors of Financial Services Acquisition Corporation, a
Delaware corporation (the "Corporation"), hereby severally constitutes and
appoints Gilbert D. Scharf and Michael J. Scharf, and each of them, as
attorneys-in-fact for the undersigned, in the capacities indicated below, with
full power of substitution, to sign any amendments to the registration
statement of the Corporation to which this Power of Attorney is filed as an
exhibit (including post-effective amendments and supplements thereto), and all
instruments or documents filed as a part thereof or in connection therewith,
and to file the same, with all exhibits thereto, and all other instruments or
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commission; and each of the undersigned hereby
ratifies and confirms all that said attorney-in-fact shall do or cause to be
done by virtue hereof.
Signature Title Date
/s/ Denis Martin
- -------------------------- Director April 9, 1996
Denis Martin
- -------------------------- Director
Larry S. Kopp
- -------------------------- Director
William D. Birch
- -------------------------- Director
Frederick B. Whittemore
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the
undersigned directors of Financial Services Acquisition Corporation, a
Delaware corporation (the "Corporation"), hereby severally constitutes and
appoints Gilbert D. Scharf and Michael J. Scharf, and each of them, as
attorneys-in-fact for the undersigned, in the capacities indicated below, with
full power of substitution, to sign any amendments to the registration
statement of the Corporation to which this Power of Attorney is filed as an
exhibit (including post-effective amendments and supplements thereto), and all
instruments or documents filed as a part thereof or in connection therewith,
and to file the same, with all exhibits thereto, and all other instruments or
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commission; and each of the undersigned hereby
ratifies and confirms all that said attorney-in-fact shall do or cause to be
done by virtue hereof.
Signature Title Date
- -------------------------- Director
Denis Martin
/s/ Larry S. Kopp
- -------------------------- Director
Larry S. Kopp
- -------------------------- Director
William D. Birch
- -------------------------- Director
Frederick B. Whittemore
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the
undersigned directors of Financial Services Acquisition Corporation, a
Delaware corporation (the "Corporation"), hereby severally constitutes and
appoints Gilbert D. Scharf and Michael J. Scharf, and each of them, as
attorneys-in-fact for the undersigned, in the capacities indicated below, with
full power of substitution, to sign any amendments to the registration
statement of the Corporation to which this Power of Attorney is filed as an
exhibit (including post-effective amendments and supplements thereto), and all
instruments or documents filed as a part thereof or in connection therewith,
and to file the same, with all exhibits thereto, and all other instruments or
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commission; and each of the undersigned hereby
ratifies and confirms all that said attorney-in-fact shall do or cause to be
done by virtue hereof.
Signature Title Date
- -------------------------- Director
Denis Martin
- -------------------------- Director
Larry S. Kopp
/s/ William D. Birch
- -------------------------- Director
William D. Birch
- -------------------------- Director
Frederick B. Whittemore
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the
undersigned directors of Financial Services Acquisition Corporation, a
Delaware corporation (the "Corporation"), hereby severally constitutes and
appoints Gilbert D. Scharf and Michael J. Scharf, and each of them, as
attorneys-in-fact for the undersigned, in the capacities indicated below, with
full power of substitution, to sign any amendments to the registration
statement of the Corporation to which this Power of Attorney is filed as an
exhibit (including post-effective amendments and supplements thereto), and all
instruments or documents filed as a part thereof or in connection therewith,
and to file the same, with all exhibits thereto, and all other instruments or
documents in connection therewith, with the Securities and Exchange Commission
and any state securities commission; and each of the undersigned hereby
ratifies and confirms all that said attorney-in-fact shall do or cause to be
done by virtue hereof.
Signature Title Date
- -------------------------- Director
Denis Martin
- -------------------------- Director
Larry S. Kopp
- -------------------------- Director
William D. Birch
/s/ Frederick B. Whittemore
- -------------------------- Director
Frederick B. Whittemore
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/Gilbert D. Scharf
Name: Gilbert D. Scharf
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/Michael J. Scharf
Name: Michael J. Scharf
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/Denis Martin
Name: Denis Martin
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/Larry S. Kopp
Name: Larry S. Kopp
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/Frederick B. Whittemore
Name:Frederick B. Whittemore
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/William B. Wigton
Name: William B. Wigton
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/Donald R.A. Marshall
Name: Donald R.A. Marshall
April 17, 1996
<PAGE>
CONSENT OF PERSON TO BE NAMED AND ACT AS A DIRECTOR
The undersigned hereby consents to being named in the
registration and proxy statements of Financial Services Acquisition
Corporation ("FSAC") as a person to become a director of FSAC (to be renamed
Financial Services Corporation) following its acquisition of Euro Brokers
Investment Corporation, and hereby agrees to act as a director of FSAC if so
elected.
/s/James W. Stevens
Name: James W. Stevens
April 17, 1996
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON , 1996
The undersigned hereby appoints Gilbert D. Scharf and Michael J. Scharf as
Proxies, each with the power to appoint such stockholder's substitute, and
hereby authorizes them, or either one of them, to represent and to vote, as
designated below, all of the shares of the Common Stock, par value $0.001 per
share ("FSAC Common Stock"), of Financial Services Acquisition Corporation
("FSAC") held of record by the undersigned on , 1996 at the Special
Meeting of Stockholders to be held on , 1996 at 10:00 a.m. local time
and any and all adjournments or postponements thereof. Any and all proxies
heretofore given are hereby revoked.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3, 4, 5
AND 6.
1. Proposal 1 -- Approval and adoption of the Agreement and Plan of Merger,
dated March 8, 1996, among FSAC, EBIC Acquisition Corp., a wholly owned
subsidiary of FSAC ("Merger Sub") and Euro Brokers Investment Corporation
("EBIC"), providing for the merger of Merger Sub with and into EBIC (the
"Merger"), with EBIC being the surviving corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal 2 -- Election of Directors (subject to satisfaction of all
conditions to consummation of the Merger, including Proposal 5 below) --
Nominees are (x) Class I Directors (initial one year term) -- William D.
Birch and James W. Stevens, (y) Class II Directors (initial two-year term) --
Frederick B. Whittemore, Donald R. A. Marshall and Denis Martin, and (z)
Class III Directors (initial three year term) -- Gilbert D. Scharf, Michael
J. Scharf and Larry S. Kopp.
[ ] FOR all Nominees, for their initial designated terms [ ] WITHHOLD
AUTHORITY to vote for all Nominees
3. Proposal 3 -- Name Change Amendment (subject to satisfaction of all other
conditions to consummation of the Merger) --approval of an amendment to
FSAC's Certificate of Incorporation to change the name of FSAC to "Financial
Services Corporation."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
<PAGE>
4. Proposal 4 -- Additional Company Stock Amendment (subject to satisfaction
of all other conditions to consummation of the Merger) -- approval of an
amendment to FSAC's Certificate of Incorporation to increase the number of
authorized shares of FSAC Common Stock to 30,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal 5 -- Amendment to Article Sixth (subject to satisfaction of all
other conditions to consummation of the Merger) -- approval of an amendment
to FSAC's Certificate of Incorporation to (x) divide the Board of Directors
into three classes serving staggered terms, (y) eliminate stockholder's
ability to act by written consent and (z) restrict the ability to call
special meetings of stockholders to the Chairman and the President of FSAC or
to an affirmative vote of a majority of the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Proposal 6 -- FSAC Option Plan (subject to satisfaction of all other
conditions to consummation of the Merger) --approval of the adoption of the
FSAC Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting and any and all
adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2, 3, 4, 5 AND 6.
Dated: , 1996
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Signature
-------------------------
Signature if held jointly
Please sign exactly as
your name appears herein.
If shares are held jointly
tenants, both must sign.
When signing as an attorney,
executor, administrator,
trustee, or guardian, give
your full title as such. If
shares are held by a
corporation, the corporation's
president or other authorized
officer must sign using the
corporation's full name. Of
shares are held by a
partnership, an authorized
person must sign using the
partnership's full name.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
EURO BROKERS INVESTMENT CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 5, 1996
The undersigned hereby appoints Donald R. A. Marshall and Keith E. Reihl
as Proxies, each with the power to appoint such stockholder's substitute, and
hereby authorizes them, or either one of them, to represent and to vote, as
designated below, all of the shares of the Class B Common Stock, par value
$.001 per share, of Euro Brokers Investment Corporation ("EBIC") held of
record by the undersigned on June 21, 1996 at the Special Meeting of
Stockholders to be held on July 15, 1996 at 10:00 a.m. local time and any and
all adjournments or postponements thereof. Any and all proxies heretofore given
are hereby revoked.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
1. Proposal--Approval and adoption of the Agreement and Plan of Merger,
dated as of March 8, 1996, as amended, among Financial Services
Acquisition Corporation ("FSAC"), EBIC Acquisition Corp., a wholly owned
subsidiary of FSAC ("Merger Sub") and EBIC, providing for the merger of
Merger Sub with and into EBIC, with EBIC being the surviving corporation
and becoming a wholly owned subsidiary of FSAC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the Special Meeting and any and
all adjournments or postponements thereof.
<PAGE>
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL.
Dated: , 1996
------------------------
Signature
------------------------
Signature if held
jointly
PLEASE SIGN EXACTLY AS
YOUR NAME APPEARS
HEREIN. IF SHARES ARE
HELD BY JOINT TENANTS,
BOTH MUST SIGN. WHEN
SIGNING AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN,
GIVE YOUR FULL TITLE AS
SUCH. IF SHARES ARE HELD
BY A CORPORATION, THE
CORPORATION'S PRESIDENT
OR OTHER AUTHORIZED
OFFICER MUST SIGN USING
THE CORPORATION'S FULL
NAME. IF SHARES ARE HELD
BY A PARTNERSHIP, AN
AUTHORIZED PERSON MUST
SIGN USING THE
PARTNERSHIP'S FULL NAME.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
