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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
MAXCOR FINANCIAL GROUP INC.
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(Name of Issuer)
MAXCOR FINANCIAL GROUP INC.
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(Name of Person(s) Filing Statement)
(1) Redeemable Common Stock Purchase Warrants
(2) Series B Redeemable Common Stock Purchase Warrants
- --------------------------------------------------------------------------------
(Title of Class of Securities)
(1) 57772G 118
(2) 57772G 126
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(CUSIP Number of Class of Securities)
Roger E. Schwed, Esq.,
General Counsel
Maxcor Financial Group Inc.
Two World Trade Center, 84th Floor
New York, New York 10048
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
October 16, 1997
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(Date Tender Offer First Published, Sent or Given to Security Holders)
Calculation of Filing Fee
$9,621,148.22 $1,924.23
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Transaction Valuation* Amount of Filing Fee*
- --------------------------------------------------------------------------------
* The transaction valuation and filing fee were calculated pursuant to
Rule 0-11(b) based on the market value of the Warrants, as determined
by the average high and low sale prices reported on the Nasdaq National
Market on October 14, 1997.
|X| Check box if any part of the fee is offset as provided by Rule 0-11(a)
(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: $26,264.37 Filing Party: Maxcor Financial Group Inc.
(formerly known as Financial
Acquisition Services Corporation)
Form or Dates Filed:
Registration No.: (1) Form S-1 (Reg. No. 33-85346) (1) October 19, 1994
(2) Form S-4 (Reg. No. 333-06753) (2) June 25, 1996
(3) Form S-4 (Reg. No. 333-34485, see Footnote (5)) (3) August 27, 1997
</TABLE>
<PAGE>
Item 1. SECURITY AND ISSUER.
(a) The name of the issuer and the address of its principal executive
office is:
Maxcor Financial Group Inc.
Two World Trade Center
84th Floor
New York, NY 10048
(b) The securities being sought are (i) all of the Redeemable Common
Stock Purchase Warrants ("Series A Warrants") and (ii) all of the Series B
Redeemable Common Stock Purchase Warrants ("Series B Warrants" and together with
the Series A Warrants, the "Warrants") of Maxcor Financial Group Inc. (the
"Company"). As of October 14, 1997, there were outstanding 7,566,666 Series A
Warrants and 7,451,610 Series B Warrants (which are economically identical in
their terms to the Series A Warrants). Each Warrant currently entitles the
holder thereof to purchase one share of the common stock, par value $.001 per
share ("Common Stock"), of the Company for $5.00, subject to adjustment in
certain circumstances. The Warrants expire on November 30, 2001. The Warrants
are subject to redemption by the Company under certain circumstances.
The Company is offering, upon the terms and subject to the
conditions set forth in its prospectus, dated October 16, 1997 (as it may be
amended from time to time, the "Prospectus"), and the related Letter of
Transmittal, respectively attached hereto as Exhibits 9(a)(i) and 9(a)(ii), to
exchange (the "Exchange Offer") 0.1667 of a share of Common Stock for each and
every of its outstanding Warrants. Accordingly, the Company will issue one whole
share of Common Stock in exchange for every six Warrants (either Series A
Warrants, Series B Warrants or both) tendered and accepted by the Company for
exchange pursuant to the Exchange Offer. No fractional shares of Common Stock
will be issued as a result of the Exchange Offer. Holders of Warrants who tender
a number of Warrants not evenly divisible by six and who would otherwise
therefore be entitled to a fractional share of Common Stock will receive cash in
lieu of such fractional amount. Under the Company's Stockholder Rights Plan, one
Right to purchase one one-hundredth of a share of the Company's Series A Junior
Participating Preferred Stock will be issued with and solely represented by each
share of Common Stock that is issued to a Warrant holder in exchange for his or
her Warrants.
All directors and executive officers of the Company and all
stockholders beneficially owning 5% or more of the outstanding Common Stock have
indicated to the Company their current intention to tender in the Exchange Offer
all of the Warrants owned by them. Such persons and entities in the aggregate
own 7,299,850 (or approximately 49%) of the outstanding Warrants. In addition,
certain of the same directors, executive officers and 5% stockholders,
beneficially owning in the aggregate 7,197,345 (or approximately 48%) of the
outstanding Warrants, are in any event obligated, pursuant to a Security
Transfer Agreement entered into with the Company in March 1996, to tender for
exchange (and not withdraw) in the Exchange Offer (in the event it is
consummated prior to November 30, 1997) their Warrants in numbers at least
proportionate to the aggregate tenders of Warrants by all other holders in the
Exchange Offer.
The information contained in the Prospectus under the captions
"THE EXCHANGE OFFER -- Terms of the Exchange Offer" and "BACKGROUND OF THE
EXCHANGE OFFER -- Interests of Certain Persons in the Exchange Offer and --
Security Transfer Agreement" is incorporated herein by reference.
2
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(c) The Common Stock, Series A Warrants and Series B Warrants are
currently trading on the Nasdaq National Market under the symbols MAXF, MAXFW
and MAXFZ, respectively. The information contained in the Prospectus under the
caption "PRICE RANGE OF THE COMPANY'S SECURITIES" is incorporated herein by
reference.
(d) Not applicable.
Item 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The consideration being offered by the Company to holders of
Warrants in exchange for the Warrants consists solely of shares of Common Stock.
Assuming consummation of and 100% participation in the Exchange Offer, the
Company would issue 2,503,046 shares of Common Stock and all of the outstanding
Warrants would be extinguished. The information contained in the Prospectus
under the captions "BACKGROUND OF THE EXCHANGE OFFER -- Purpose of the Exchange
Offer" and "THE EXCHANGE OFFER -- Payment of Solicitation Fees and -- Payment of
Expenses" is incorporated herein by reference.
(b) Not applicable.
Item 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE.
The purpose of the Exchange Offer is to retire all or substantially all
of the Warrants through the issuance of Common Stock in order to simplify the
Company's capital structure, reduce the potential future dilutive impact on the
Company's earnings per share that could be caused by the Warrants and eliminate
any overhang on the Common Stock price from the existence of the Warrants. If
the Exchange Offer is consummated, the Company intends to retire on the books of
the Company all Warrants accepted for exchange in the Exchange Offer.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
3
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(h) If the Exchange Offer is consummated, the Company intends to delist
the Warrants from trading on the Nasdaq National Market.
(i) If the Exchange Offer is consummated, the Company intends to
deregister the Warrants pursuant to the Securities Exchange Act of 1934, as
amended ("Exchange Act").
(j) Not applicable.
Item 4. INTEREST IN SECURITIES OF THE ISSUER.
Based upon the Company's records and upon information provided
to the Company by its directors and executive officers, no such transactions
have been effected during the past 40 business days.
Item 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO THE ISSUER'S SECURITIES.
The information contained in the Prospectus under the captions
"BACKGROUND OF THE EXCHANGE OFFER -- Security Transfer Agreement," "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" and "PRINCIPAL STOCKHOLDERS" is
incorporated herein by reference.
Item 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information contained in the Prospectus under the caption
"THE EXCHANGE OFFER -- Payment of Solicitation Fees and -- Payment of Expenses,"
is incorporated herein by reference.
Item 7. FINANCIAL INFORMATION.
(a) (1) The Company's audited consolidated financial statements as of
December 31, 1995 and December 31, 1996 and for each of three years in the
period ended December 31, 1996, including the Notes thereto (the "Audited
Financial Statements") are included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 (the "Form 10-K"). The Audited Financial
Statements on pages F-4 through F-23 of the Form 10-K are attached hereto as
Exhibit 9 (g)(i), and are incorporated herein by reference. Reference is also
made to the information contained in the Prospectus under the caption "SELECTED
CONSOLIDATED FINANCIAL INFORMATION."
(2) The unaudited balance sheets and comparative year-to-date
income statements and statements of cash flows and related earnings per share
amounts, including the Notes thereto (the "Unaudited Financial Statements") are
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (the "Form 10-Q"). The Unaudited Financial Statements on pages 4
through 12 of the Form 10-Q are attached hereto as Exhibit 9 (g)(ii), and
incorporated herein by reference. Reference is also made to the information
contained in the Prospectus under the caption "SELECTED CONSOLIDATED FINANCIAL
INFORMATION."
4
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(3) Not applicable.
(4) The information contained in the Prospectus under the
caption "CERTAIN PRO FORMA EFFECTS OF THE EXCHANGE OFFER" is incorporated herein
by reference.
(b) The information contained in the Prospectus under the captions
"CERTAIN PRO FORMA EFFECTS OF THE EXCHANGE OFFER" and "BACKGROUND OF THE MERGER
- -- Purpose of the Exchange Offer" is incorporated herein by reference.
Item 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) There are no applicable regulatory requirements which must be
complied with or approvals which must be obtained in connection with the
Exchange Offer except for (i) individual state "blue sky" securities law
requirements for the Exchange Offer that may be applicable and (ii) the federal
securities laws relating to issuer exchange offers.
(c) Not applicable.
(d) Not applicable.
(e) Each of the Prospectus and the related Letter of Transmittal should
be read in its entirety and is incorporated herein by reference in its entirety.
Item 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) (i) Prospectus dated October 16, 1997.
(ii) Form of Letter of Transmittal to be used by tendering
Warrant holders.
(iii) Form of Letter to Brokers, Dealers and Other Nominees from
the Registrant.
(iv) Form of Letter to Clients from Brokers, Dealers and Other
Nominees.
(v) Form of Letter to Warrant holders from the Registrant.
(vi) Form of Notice of Guaranteed Delivery.
(vii) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 and Certificate of Foreign
Status on Form W-8.
(viii) Text of Press Release dated October 16, 1997.
(b) Not applicable.
5
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(c) Security Transfer Agreement dated as of March 8, 1996.
(d) Not applicable.
(e) Prospectus dated October 16, 1997. Filed as
Exhibit 9 (a) (i) hereto.
(f) Not applicable.
(g) (i) Audited Financial Statements from pages F-4 through F-23
of the Form 10-K.
(ii) Unaudited Financial Statements from pages 4 through 12 of
the Form 10-Q.
(h) Consent of Price Waterhouse LLP.
6
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SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
MAXCOR FINANCIAL GROUP INC.
By: /s/ Gilbert D. Scharf
--------------------------------
Chairman of the Board, Chief
Executive Officer and President
Date: October 16, 1997
7
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EXHIBIT INDEX
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<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
9 (a)(i) Prospectus dated October 16, 1997.
9 (a)(ii) Form of Letter of Transmittal to be used by tendering Warrants holders.
9 (a)(iii) Form of Letter to Brokers, Dealers and Other Nominees from the Registrant.
9 (a)(iv) Form of Letter to Clients from Brokers, Dealers and Other Nominees.
9 (a)(v) Form of Letter to Warrant holders from the Registrant.
9 (a)(vi) Form of Notice of Guaranteed Delivery.
9 (a)(vii) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 and Certificate of Foreign Status on Form W-8.
9 (a)(viii) Text of Press Release dated October 16, 1997.
9 (c) Security Transfer Agreement dated as of March 8, 1996.
9 (g)(i) Audited Financial Statements from pages F-4 through F-23 of the Form 10-K.
9 (g)(ii) Unaudited Financial Statements from pages 4 through 12 of the Form 10-Q.
9 (h) Consent of Price Waterhouse LLP.
</TABLE>
8
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Maxcor Financial Group Inc.
Offer to Exchange 0.1667 of a Share of Common Stock
for Each and Every Outstanding
Redeemable Common Stock Purchase Warrant
and
Series B Redeemable Common Stock Purchase Warrant
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON NOVEMBER
13, 1997, UNLESS EXTENDED. THE EXCHANGE OFFER IS CONDITIONED UPON AT LEAST 95%
OF THE AGGREGATE OUTSTANDING WARRANTS BEING VALIDLY TENDERED AND NOT WITHDRAWN
AND CERTAIN OTHER CONDITIONS. WARRANTS TENDERED FOR EXCHANGE MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE AND, UNLESS PREVIOUSLY ACCEPTED FOR
EXCHANGE, AT ANY TIME AFTER 12:00 MIDNIGHT, NEW YORK CITY TIME ON DECEMBER 12,
1997.
- --------------------------------------------------------------------------------
Maxcor Financial Group Inc. (the "Company") hereby offers upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (as either may be amended from time to time, the "Exchange
Offer"), to exchange 0.1667 of a share (the "Exchange Ratio") of its common
stock, par value $.001 per share ("Common Stock"), for each and every of its
outstanding Redeemable Common Stock Purchase Warrants ("Series A Warrants") and
Series B Redeemable Common Stock Purchase Warrants ("Series B Warrants" and
together with the Series A Warrants, the "Warrants"). Accordingly, the Company
will issue one whole share of Common Stock in exchange for every six Warrants
(either Series A Warrants, Series B Warrants or both) tendered and accepted by
the Company for exchange pursuant to the Exchange Offer. No fractional shares of
Common Stock will be issued as a result of the Exchange Offer. Holders of
Warrants who tender a number of Warrants not evenly divisible by six and who
would otherwise therefore be entitled to a fractional share of Common Stock will
receive cash in lieu of such fractional amount. See "The Exchange Offer." Under
the Company's Stockholder Rights Plan, one Right to purchase one one-hundredth
of a share of the Company's Series A Junior Participating Preferred Stock will
be issued with and solely represented by each share of Common Stock that is
issued to a Warrant holder in exchange for his or her Warrants. See "Description
of Capital Stock - Series A Junior Participating Preferred Stock."
Neither the Company nor its Board of Directors is making any recommendation
to holders of the Warrants as to whether or not to tender their Warrants in the
Exchange Offer. However, all directors and executive officers of the Company and
all stockholders beneficially owning 5% or more of the outstanding Common Stock
have indicated to the Company their current intention to tender in the Exchange
Offer all of the Warrants owned by them. See "Background of the Exchange Offer."
Such persons and entities in the aggregate own 7,299,850 (or approximately 49%)
of the outstanding Warrants. See "Principal Stockholders." In addition, certain
of the same directors, executive officers and 5% stockholders, beneficially
owning in the aggregate 7,197,345 (or approximately 48%) of the outstanding
Warrants, are in any event obligated, pursuant to a Security Transfer Agreement
entered into with the Company in March 1996, to tender for exchange (and not
withdraw) in the Exchange Offer (if consummated on or before November 30, 1997)
their Warrants in numbers at least proportionate to the aggregate tenders of
Warrants by all other holders in the Exchange Offer. See "Background of the
Exchange Offer - Security Transfer Agreement."
The Common Stock, Series A Warrants and Series B Warrants are currently
trading on the Nasdaq National Market under the symbols MAXF, MAXFW and MAXFZ,
respectively. The closing sales prices of the Common Stock, Series A Warrants
and Series B Warrants as reported on the Nasdaq National Market on August 20,
1997, the last full trading day prior to the Company's initial announcement of
the Exchange Ratio and other terms of the Exchange Offer, was $3.25, $.344, and
$.25, respectively. The closing sales prices of the Common Stock, Series A
Warrants and Series B Warrants reported on the Nasdaq National Market on October
14, 1997, the last full trading day for which information was available prior to
the printing of this Prospectus, were $4.25, $.625, and $.688, respectively.
Notwithstanding any other provision of the Exchange Offer, the Company
reserves the right to terminate or not proceed with the Exchange Offer, or to
extend or otherwise amend the Exchange Offer, if, among other things, there is
not validly tendered prior to the Expiration Date (as hereinafter defined) and
not withdrawn a minimum of 95% of the aggregate outstanding Warrants (the
"Minimum Condition"). The Exchange Offer is also conditioned upon certain other
customary conditions. Any or all of the conditions of the Exchange Offer, if not
satisfied in the Company's reasonable discretion, may be waived by the Company
in whole or in part at any time prior to the Expiration Date, subject to
applicable law. See "The Exchange Offer - Conditions of the Exchange Offer."
In evaluating the Exchange Offer, Warrant Holders are strongly urged to
read and consider carefully the factors described under "Risk Factors" on pages
9 through 12 below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 16, 1997
<PAGE>
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED HEREIN, IN CONNECTION WITH THE
SOLICITATION AND THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF THE SALE OF,
OR AN OFFER TO SELL, OR A SOLICITATION OF THE PURCHASE OF, OR AN OFFER TO
PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH SOLICITATION OR
OFFERING MAY NOT LAWFULLY BE MADE.
IN CONNECTION WITH THIS OFFERING, CERTAIN BROKER-DEALERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK AND WARRANTS OF THE
COMPANY ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "THE EXCHANGE
OFFER -- PAYMENT OF SOLICITATION FEES."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-4 ("Registration Statement")
under the Securities Act of 1933, as amended ("Securities Act"), with respect to
all of the Common Stock that may be issued in the Exchange Offer. For the
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments, schedules and exhibits
thereto and any financial statements, notes and schedules filed as a part
thereof. The Company has also filed with the Commission a Schedule 13E-4
("Schedule 13E-4") pursuant to the Securities Exchange Act of 1934, as amended
("Exchange Act"), in connection with the Exchange Offer. In accordance with the
rules and regulations of the Commission, this Prospectus does not contain all of
the information set forth in the Registration Statement and the Schedule 13E-4.
Each statement made in this Prospectus concerning a document filed as an exhibit
to the Registration Statement or the Schedule 13E-4 is qualified in its entirety
by reference to such exhibit for a complete statement of its provisions. For
further information pertaining to the Company and the Common Stock offered in
the Exchange Offer, reference is made to the Registration Statement and the
Schedule 13E-4. The Registration Statement and the Schedule 13E-4 may be
inspected and copied at the public reference facilities maintained by the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 ("Washington Office"), or at its regional
offices at Citicorp Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 ("Chicago Office"), and at Seven World Trade Center, 13th Floor,
New York, New York 10048 ("New York Office"). Any interested party may obtain
copies of all or any portion of the Registration Statement at prescribed rates
from the Public Reference Section of the Commission at its Washington Office.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copied (at prescribed rates) at the
Commission's Washington Office, Chicago Office and New York Office. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. The Web site can be reached at
http://www.sec.gov. In addition, reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of the Nasdaq
National Market, 1745 K Street, N.W., Washington, D. C. 20006.
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the Company
are incorporated in this Prospectus by reference and made a part hereof:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1996.
(2) The Company's Current Reports on Form 8-K dated June 18, 1997 and
August 28, 1997, filed pursuant to Section 13 of the Exchange Act.
(3) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997.
(4) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997.
Each document or report filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the termination of the offering of the Common Stock pursuant to the
Exchange Offer shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the date of filing of such
document. Any statement contained herein, or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.
The Company's Annual Report on Form 10-K for the year ended December 31,
1996 and its Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1997 accompany delivery of this Prospectus.
This Prospectus incorporates certain other documents by reference which are
not present herein or delivered herewith. Copies of any such documents filed by
the Company, including exhibits to such documents, are available to any
registered holder or beneficial owner of the Warrants upon written or oral
request and without charge from the Company. Telephone requests may be directed
to the Company's General Counsel at (212) 748-7000. In order to ensure timely
delivery of the documents, any such request should be made by November 3, 1997.
3
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including notes thereto,
appearing or incorporated by reference elsewhere in this Prospectus. Each holder
of Warrants contemplating the Exchange Offer is urged to read this Prospectus in
its entirety.
The Company
The Company, through its subsidiaries and affiliates, is a leading domestic
and international inter-dealer brokerage firm, specializing in emerging market
debt, money market instruments, derivatives, natural gas and electricity,
repurchase agreements and other fixed income securities. The Company conducts
its business through principal offices in New York, London, Tokyo, Toronto,
Sydney and Mexico City and by means of correspondent relationships with other
brokers throughout the world.
The Company functions primarily as an intermediary, matching up the trading
needs of its customers, who are primarily well-capitalized banks, investment
banks and broker-dealers. The Company assists its customers in executing trades
by identifying counterparties with reciprocal interests. The Company provides
its services through an international network of brokers who service direct
phone lines to most of the Company's clients and through proprietary screen
systems and other delivery systems that provide customers with historical data
and real-time pricing information in the Company's various products.
The Company was incorporated under the laws of the State of Delaware in
August 1994 under the name Financial Services Acquisition Corporation. In
December 1994, the Company consummated an initial public offering ("IPO") and
raised net proceeds of approximately $20 million. In August 1996, a newly
formed, wholly-owned subsidiary of the Company merged (the "Merger") with and
into Euro Brokers Investment Corporation ("EBIC"), thereby acquiring its
inter-dealer brokerage business. In June 1997, the Company changed its name to
Maxcor Financial Group Inc. See "History of the Company." The Company's
principal executive office and mailing address is Two World Trade Center, 84th
Floor, New York, New York 10048 and the telephone number is (212) 748-7000.
The Exchange Offer
The Offer............................. Subject to the terms and conditions of
the Exchange Offer, the Company is
offering to exchange 0.1667 of a share
of its Common Stock for each and every
of its outstanding Warrants.
Accordingly, the Company will issue one
whole share of its Common Stock for
every six Warrants (either Series A
Warrants, Series B Warrants or both)
tendered and accepted by the Company for
exchange pursuant to the Exchange Offer.
No fractional shares of Common Stock
will be issued. Holders of Warrants who
would otherwise be entitled to a
fractional share of Common Stock will
receive cash in lieu of such fractional
amounts. Under the Company's Stockholder
Rights Plan, one right (a "Right") to
purchase one one- hundredth of a share
of the Company's Series A Junior
Participating Preferred Stock will be
issued with and solely represented by
each share of Common Stock that is
issued to a Warrant holder in exchange
for his or her Warrants. See "The
Exchange Offer" and "Description of
Capital Stock - Series A Junior
Participating Preferred Stock."
Expiration Date....................... 12:00 Midnight, New York City time, on
November 13, 1997, unless extended. See
"The Exchange Offer - Expiration Date;
Extensions; Termination; Amendments."
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The Warrants.......................... At October 14, 1997, there were
outstanding 7,566,666 Series A Warrants
(issued in connection with the IPO) and
7,451,610 Series B Warrants (issued in
connection with the Merger and
economically identical in their terms to
the Series A Warrants). Each Warrant
currently entitles the holder thereof to
purchase one share of Common Stock for
$5.00, subject to adjustment in certain
events. Provided that a current
prospectus with respect to the Common
Stock is in effect, the Warrants may be
exercised at any time until November 30,
2001. The Warrants are subject to
redemption by the Company under certain
circumstances. See "Description of
Capital Stock-- Warrants."
Purpose of Exchange Offer............ To retire all or substantially all of
the Warrants through the issuance of
Common Stock in order to simplify the
Company's capital structure, reduce the
potential future dilutive impact on the
Company's earnings per share that could
be caused by the Warrants and eliminate
any overhang on the Common Stock price
from the existence of the Warrants.
No Company or Board
Recommendation..................... Neither the Company nor its Board of
Directors is making any recommendation
to holders of the Warrants as to whether
or not to tender their Warrants in the
Exchange Offer. However, all directors
and named executive officers of the
Company and all stockholders
beneficially owning 5% or more of the
outstanding Common Stock have indicated
to the Company their current intention
to tender in the Exchange Offer all of
the Warrants owned by them. See
"Background of the Exchange Offer." Such
persons and entities in the aggregate
own 7,299,850 (or approximately 49%) of
the outstanding Warrants. See "Principal
Stockholders."
Security Transfer Agreement.......... Pursuant to a Security Transfer
Agreement entered into with the Company
at the time of the Merger, certain
directors, executive officers and 5%
stockholders of the Company beneficially
owning in the aggregate 7,197,345 (or
approximately 48%) of the outstanding
Warrants, are obligated to tender for
exchange (and not withdraw) in the
Exchange Offer (if consummated on or
before November 30, 1997) Warrants owned
by them in numbers at least
proportionate to the aggregate tenders
of Warrants by all other holders in the
Exchange Offer. See "Background of the
Exchange Offer - Security Transfer
Agreement."
Conditions of the Exchange
Offer............................ The Exchange Offer is subject to the
Minimum Condition that at least 95% (or
14,267,362) of the aggregate 15,018,276
outstanding Warrants are validly
tendered and not withdrawn prior to the
Expiration Date and to certain other
customary conditions, any or all of
which, if not satisfied in the Company's
reasonable discretion, may be waived by
the Company, in whole or in part at any
time prior to the Expiration Date,
subject to applicable law. See "The
Exchange Offer - Conditions of the
Exchange Offer."
Effects of the Exchange Offer
on the Company.................... In the absence of the Exchange Offer, an
additional 15,018,276 shares of Common
Stock would be issued if all of the
currently outstanding Warrants were
exercised, and the Company would receive
the proceeds
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5
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of such exercises. Assuming consummation
of and 100% participation in the
Exchange Offer, an additional 2,503,046
shares of Common Stock would be issued
and all of the outstanding Warrants
would be extinguished without the making
to the Company of any exercise payments.
The Exchange Offer will have no effect
on the Company's total stockholders'
equity (other than transaction costs).
The Exchange Offer will initially have a
dilutive effect on the Company's
earnings per share of Common Stock and
on other per share measurements such as
per share book value or per share voting
power because there will be more shares
of Common Stock outstanding. See
"Background of The Exchange Offer,"
"Selected Consolidated Financial
Information" and "Certain Pro Forma
Effects of the Exchange Offer."
Effects of the Exchange Offer
on Exchanging Holders
of Warrants....................... Holders of Warrants who exchange their
Warrants pursuant to the Exchange Offer
will: (i) receive whole shares of Common
Stock for their Warrants in accordance
with the Exchange Ratio, without the
requirement of making any exercise
payment, (ii) receive a cash payment,
without interest, for any fractional
interest in a share of Common Stock that
they would otherwise be entitled to
pursuant to the Exchange Ratio, (iii) be
able to vote such Common Stock on all
matters that may come before the holders
of the Common Stock, (iv) be able to
receive dividends on such Common Stock,
if any, when declared and paid by the
Company and (v) participate as a holder
of such Common Stock in proceeds from
liquidation of the Company after
creditors and preferred security
holders, if any, are paid. Exchanging
Warrant holders, however, will lose the
right to purchase, at any time until
November 30, 2001, a share of Common
Stock for $5.00, for each Warrant held,
and may be subject to certain tax
consequences as a result of the Exchange
Offer. See "Background of the Exchange
Offer" and "Certain United States
Federal Income Tax Considerations."
Effects of the Exchange Offer
on Non-Exchanging Holders
of Warrants...................... Holders of Warrants who do not
participate in the Exchange Offer will
retain the right to purchase, at any
time until November 30, 2001, a share of
Common Stock for $5.00 for each Warrant
held, subject to the Company's right to
redeem the Warrants under certain
circumstances. See "Description of
Capital Stock - Warrants." If the
Exchange Offer is consummated, the
Company intends to delist the Warrants
from trading on the Nasdaq National
Market and to deregister the Warrants
pursuant to the Exchange Act. In such
event, the trading market for, and the
liquidity of an investment in, the
Warrants remaining outstanding would be
significantly reduced. Warrant holders
do not have any appraisal or dissenters'
rights under the General Corporation Law
of the State of Delaware. See "The
Exchange Offer - Terms of the Exchange
Offer."
Procedures for
Tendering Warrants................ Each holder of Warrants who wishes to
tender such Warrants must, in order to
tender such Warrants validly, deliver or
cause to be delivered to the Exchange
Agent at the address set forth herein
the following documents prior to 12:00
Midnight, New York City time, on the
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6
<PAGE>
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Expiration Date, a properly completed
Letter of Transmittal, executed by the
registered holder of such Warrants, or
an Agent's Message (as defined below)
made in connection with a book-entry
delivery of such Warrants, and any other
documents required by the Letter of
Transmittal. In addition, prior to such
time either (i) the certificates for
such Warrants must be delivered to the
Exchange Agent or (ii) such Warrants
must be tendered pursuant to the
procedures for book-entry transfer set
forth under "the Exchange
Offer--Procedure for Tendering" and a
confirmation of receipt of such Warrants
received by the Exchange Agent.
Alternatively, if Warrant certificates
are not immediately available or time
does not otherwise permit compliance
with the foregoing procedures, a holder
of Warrants may tender his or her
Warrants by complying with the
guaranteed delivery procedures set forth
under "The Exchange Offer--Guaranteed
Delivery Procedure," which, among other
things, requires the delivery to the
Exchange Agent prior to 12:00 Midnight,
New York City time, on the Expiration
Date of a properly completed and duly
executed Notice of Guaranteed Delivery
or an Agent's Message with respect to
guaranteed delivery. Any holder of
Warrants whose Warrants are registered
in the names of brokers, dealers,
commercial banks, trust companies or
nominees are urged to contact such
registered holders promptly if such
holder wishes to accept the Exchange
Offer. Warrants should not be sent to
the Company.
Withdrawal of Tenders................ Tenders of Warrants may be withdrawn at
any time prior to 12:00 Midnight, New
York City time, on the Expiration Date
or, unless previously accepted for
exchange, after 12:00 Midnight, New York
City time, on December 12, 1997. See
"The Exchange Offer - Withdrawal
Rights."
Acceptance of Warrants and
Delivery of Common Stock......... Subject to the terms and conditions of
the Exchange Offer, the Company will
accept, by giving oral or written notice
to the Exchange Agent promptly after the
Expiration Date, all Warrants properly
tendered and not withdrawn prior to
12:00 Midnight, New York City time, on
the Expiration Date. The Company will
deliver shares of Common Stock pursuant
to the Exchange Offer (and any cash
payment in lieu of fractional interests)
promptly following any such acceptance.
See "The Exchange Offer - Acceptance of
Warrants for Exchange; Delivery of
Common Stock."
Certain Federal Income Tax
Considerations.................... Holders of Warrants are urged to consult
their own tax advisors as to the
specific tax consequences to them of the
Exchange Offer. In general, however, the
Company believes that the exchange of
Common Stock for Warrants will likely be
treated as a taxable transaction for
Federal income tax purposes. See
"Certain United States Federal Income
Tax Considerations."
Payment of Solicitation
Fees.............................. The Company will pay a solicitation fee
of $.05 per Warrant to Soliciting
Dealers (as hereinafter defined) for any
Warrants tendered and accepted for
exchange and exchanged pursuant to the
Exchange Offer; provided that (i) the
Letter of Transmittal for such tender
designates the Soliciting Dealer as
having solicited and obtained the tender
of the Warrants covered thereby and (ii)
no solicitation fee shall be payable
with respect to Warrants beneficially
owned (x) by any of the directors,
executive officers or 5% stockholders
who have indicated to the Company their
current intent to tender their Warrants,
(y) by any employee of the
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7
<PAGE>
- --------------------------------------------------------------------------------
Company or its affiliates or (z) by the
Soliciting Dealer. If tendered Warrants
are being delivered by book-entry
transfer or pursuant to the guaranteed
delivery procedure, the Soliciting
Dealer must also return a Notice of
Solicited Tenders to the Exchange Agent
within five business days after the
Expiration Date to receive a
solicitation fee. See "The Exchange
Offer - Payment of Solicitation Fees."
Exchange Agent....................... Continental Stock Transfer & Trust
Company, 2 Broadway, New York, New York
10004, Tel: (212) 509-4000, ext. 535.
Information Agent.................... D.F. King & Co., Inc., 77 Water Street,
New York, New York 10005, Tel: (800)
207-3158.
Risk Factors
Holders of Warrants should carefully evaluate certain risk factors in
considering whether or not to participate in the Exchange Offer. These risk
factors include, but are not limited to, a decrease in the liquidity of an
investment in any Warrants remaining outstanding after the Exchange Offer; the
potential varying relationship of the Exchange Ratio to trading prices for the
Common Stock and the Warrants; forbearance by exchanging Warrant holders of
potential future gains relating to certain future increases in the price of the
Common Stock underlying such Warrants; possible volatility of the Common Stock
trading price; certain potential tax consequences to tendering Warrant holders;
the concentration of voting control in officers, directors and certain
stockholders of the Company; certain aspects of the operations of a financial
services company (including with respect to unsettled trades); and the high
degree of government regulation and competition in the financial brokerage
industry. See "Risk Factors," at pages 9 through 12 below.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
THAT WARRANT HOLDERS TENDER OR REFRAIN FROM TENDERING THEIR WARRANTS, AND NO ONE
HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION ON BEHALF OF THE COMPANY.
THE DECISION TO TENDER IS A MATTER FOR EACH WARRANT HOLDER TO DETERMINE AFTER
CONSULTATION WITH HIS OR HER ADVISORS, INCLUDING TAX COUNSEL, ON THE BASIS OF
HIS OR HER OWN FINANCIAL POSITION AND REQUIREMENTS. SEE "THE EXCHANGE OFFER -
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS."
THE DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO SUCH DATE.
8
<PAGE>
RISK FACTORS
Holders of Warrants who participate in the Exchange Offer and receive
Common Stock in exchange for their Warrants will thereby be changing the nature
of their interest in the Company. The following risk factors, as well as the
information set forth elsewhere or incorporated by reference in this Prospectus,
should be considered carefully by all holders of Warrants in evaluating whether
or not to participate in the Exchange Offer. In addition, this Prospectus
contains certain forward looking statements that involve certain risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in these forward looking statements. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" below, as well as those discussed or incorporated by
reference elsewhere in this Prospectus.
Decrease in Liquidity of Remaining Warrants. Each Warrant currently represents
the right, until the Warrants expire on November 30, 2001 or are earlier
redeemed, to purchase a share of Common Stock for $5.00. If the Exchange Offer
is consummated, the Company intends to delist the Warrants from trading on the
Nasdaq National Market and to deregister the Warrants pursuant to the Exchange
Act. In such event, the trading market for, and liquidity of an investment in,
any Warrants remaining outstanding would be significantly reduced. Any such
reduction in liquidity could have the effect of depressing the market value of
any remaining outstanding Warrants. See "Background of the Exchange Offer" and
"Price Range of the Company's Securities."
Varying Relationship of Exchange Ratio to Trading Prices for the Common Stock
and Warrants. As of August 20, 1997, the last full trading day prior to the
Company's initial announcement of the Exchange Ratio and other terms regarding
the Exchange Offer, the closing sale prices of the Common Stock, Series A
Warrants and Series B Warrants as reported on the Nasdaq National Market were
$3.25, $.344 and $.25, respectively. For the 30 trading day period ending August
18, 1997, the average closing sale prices of the Common Stock, Series A Warrants
and Series B Warrants were $3.33, $.43 and $.36, respectively. For the 60 day
trading period ending August 18, 1997, the average closing sale prices of the
Common Stock, Series A Warrants and Series B Warrant were $3.36, $.50 and $.43,
respectively. The Exchange Ratio of 0.1667 of a share of Common Stock for each
Warrant represents a premium to the exchange ratio implied by the relationship
of the trading price of the Common Stock to the average trading prices of the
Series A Warrants and Series B Warrants for each of these dates and periods.
However, the market prices of the Common Stock, Series A Warrants and Series B
Warrants are subject to fluctuations, and the Company believes are likely to be
affected, among other factors, by the announcement and consummation of the
Exchange Offer itself. Accordingly, on any subsequent date, including the date
on which the Exchange Offer actually is consummated, the Exchange Ratio of
0.1667 of a share of Common Stock for each Warrant may not result in the same
premium to market value for Warrant holders, and may even result in no premium
or a negative premium to such market value. As of October 14, 1997, the last
full trading day for which information was available prior to the printing of
this Prospectus, the closing sale prices of the Common Stock, Series A Warrants
and Series B Warrants as reported on the Nasdaq National Market were $4.25,
$.625, and $.688, respectively. See "Price Range of the Company's Securities."
Forbearance of Potential Future Profit. In the case of any particular Warrant
holder, if the per share market price of the Common Stock in the future (but
prior to November 30, 2001) were to exceed the sum of the price such holder paid
for a Warrant plus $5.00, this excess would represent potential profits
recognizable by the Warrant holder for such Warrant. A Warrant holder who
exchanges his or her Warrants in the Exchange Offer will be forbearing the
potential future profit described above. In exchange, he or she will be
obtaining the opportunity to profit in any post-Exchange Offer appreciation of
the Common Stock (whether or not the price is above $5.00), but on a
less-leveraged basis because he or she will be receiving in the Exchange Offer
for such Warrants a number of whole shares of Common Stock (due to the payment
of cash in lieu of fractional interests in a share of Common Stock) that is
one-sixth (rounded down) of the number of Warrants that he or she tendered.
Possible Volatility of Common Stock Trading Price. There are numerous factors
that the Company believes could affect the trading prices for its Common Stock
(and any remaining Warrants) in the future. If the Exchange Offer is
consummated, the Company believes that the issuance of a significant number of
shares of Common Stock in exchange for the tendered Warrants will cause an
initial dilution in per share earnings and other per share measurements that may
have a negative effect on the trading price for the Common Stock and any
remaining outstanding Warrants. This effect, if it occurs, may be offset in part
or in total by the elimination or reduction (depending on the extent to which
the Warrants are exchanged) of the future potential dilutive impact on per share
earnings that could be caused by exercise of the Warrants and by market
perceptions of benefits from the elimination or reduction of a Warrant overhang
on the Common Stock price and from a simplified capital structure for the
Company.
9
<PAGE>
In addition, following the Exchange Offer, the Company will not need to reserve
as many shares (if any) of Common Stock for possible future exercises of the
Warrants. Accordingly, the number of authorized, but unissued and unreserved,
shares of Common Stock available for other issuances would increase. Subject to
the rules of the National Association of Securities Dealers, Inc. ("NASD"), the
Board of Directors is empowered, without stockholder approval, to issue any or
all of such authorized (but unissued and unreserved) shares of Common Stock, and
any such additional issuances (depending on the consideration, if any, received)
may dilute the interests of Common Stock holders and affect the market price of
the Common Stock (and any remaining outstanding Warrants). Other potential
issuances of securities (e.g., options under the Company's stock option plan or
shares of the Company's preferred stock) may have similar effects. Also,
potential sales of substantial blocks of the Company's securities by the holders
thereof could have a negative impact on the market price of the Common Stock
(and any remaining outstanding Warrants). See "Background of the Exchange
Offer."
Operational and other business and general economic factors also could cause the
market price for the Common Stock (and any remaining outstanding Warrants) to
fluctuate significantly. The Company believes these factors include, but are not
limited to, factors such as variations in the profitability and success of the
Company, as reflected in its announcement of quarterly and year-end financial
results, competitive developments in the inter-dealer brokerage industry,
changes in U.S. or foreign governmental regulations or capital requirements,
national and international economic and political conditions and broad trends in
business and finance.
Tax Consequences to Exchanging Warrant Holders. Although not free from doubt,
the Company believes that for Federal income tax purposes the Exchange Offer
will be treated as a taxable transaction to persons tendering their Warrants in
the Exchange Offer. For a discussion of certain general tax consequences to
exchanging Warrant holders, see "Certain United States Federal Income Tax
Considerations." The Exchange Offer will not affect the Federal income tax
treatment of holders who do not participate in the Exchange Offer.
Potential Redemption of Warrants. Any Warrants not exchanged in the Exchange
Offer may be redeemed by the Company, at a price of $.01 per Warrant, subject to
not less than 30 days' prior written notice to holders thereof, provided that
the last sale price of the 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 the Warrants could force the
holders thereof to exercise the Warrants and pay the exercise price at a time
when it may be disadvantageous for them to do so, to sell the Warrants at the
then-current market price when they might otherwise wish to hold the Warrants,
or to accept the $.01 per Warrant redemption price. See "Description of Capital
Stock - Warrants."
Concentration of Voting Control. Welsh, Carson, Anderson & Stowe, VI, L.P., a
Delaware limited partnership ("WCAS"), and WCAS Information Partners, L.P., also
a Delaware limited partnership ("WCAS Information"), own of record an aggregate
of 2,333,174 shares of Common Stock, constituting approximately 26% of the
8,949,656 shares of Common Stock currently outstanding. Current directors and
named executive officers of the Company, together with two other more than 5%
beneficial owners of the Common Stock (who are both officers of subsidiaries of
the Company), own of record an aggregate of 2,671,478 shares of Common Stock,
constituting approximately 30% of the shares of Common Stock currently
outstanding. In addition, WCAS and WCAS Information own of record an aggregate
of 3,918,254 Warrants, with the current directors, named executive officers and
other 5% stockholders of the Company also owning of record an aggregate of
3,381,596 Warrants. Assuming such persons and entities tender all of their
Warrants in the Exchange Offer, WCAS and WCAS Information will, based on the
Exchange Ratio, receive an additional 653,042 shares of Common Stock in the
aggregate and the directors, executive officers and other 5% stockholders of the
Company will, based on the Exchange Ratio, receive an additional 563,599 shares
of Common Stock in the aggregate. Accordingly, following the Exchange Offer,
WCAS and WCAS Information would own of record an aggregate of 2,986,216 shares
of Common Stock (constituting approximately 26% of the outstanding shares of
Common Stock, assuming a 100% tender rate for all other holders of Warrants),
and the directors and executive officers and other 5% stockholders of the
Company would own of record an aggregate of 1,896,241 shares of Common Stock
(constituting approximately 28% of the outstanding shares of Common Stock,
assuming a 100% tender rate for all other holders of Warrants and, collectively
with WCAS and WCAS Information, 54% of the outstanding Common Stock). Such
concentration of control in a single major stockholder and in directors, named
executive officers and other 5% stockholders of the Company may have an adverse
effect on the market prices for the Company's securities and could delay or
prevent a change in control of the Company. In addition, such persons, acting
together, have the ability to exercise significant influence over all matters
requiring stockholder approval. See "Management of the Company" and "Principal
Stockholders."
Authorization and Discretionary Issuance of Preferred Stock; Series A Junior
Participating Preferred Stock. The Company's Certificate of Incorporation
authorizes the issuance of "blank check" preferred stock with such designations,
10
<PAGE>
rights and preferences as may be determined from time to time by the Board of
Directors. Subject to the rules of the NASD, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of the Common Stock (or any
remaining outstanding Warrants). The preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company, which could have the effect of discouraging
bids for the Company and, thereby, preventing stockholders from receiving the
maximum value for their shares. In addition, in December 1996, the Company
adopted a Stockholder Rights Plan (the "Rights Plan"), and in connection
therewith authorized the creation of a Series A Junior Participating Preferred
Stock (the "Junior Preferred Stock"). The Rights Plan, and the issuance
thereunder of any Rights to purchase Junior Preferred Stock, also could be
utilized as a method of discouraging, delaying or preventing a change in control
of the Company. See "Description of Capital Stock - Preferred Stock."
Certain Shares Eligible for Future Sale. In connection with the Merger, the
Company entered into a Registration Rights Agreement with WCAS, WCAS Information
and certain related investors, certain initial stockholders of the Company who
acquired shares prior to the IPO (five of whom, Messrs. G. Scharf, M. Scharf,
Whittemore, Kopp and Martin, are current directors of the Company) and certain
members of senior management of EBIC (one of whom, Mr. Reihl, is a current
director of the Company) (collectively, the "Registration Rights Agreement
Signatories"). In the aggregate, the Registration Rights Agreement Signatories
are believed currently to own of record an aggregate of 5,211,360 shares of
Common Stock, constituting approximately 58% of the 8,949,656 shares of Common
Stock currently outstanding. In addition, Registration Rights Agreement
Signatories are believed currently to own of record an aggregate of 7,748,729
Warrants. Assuming such persons and entities tender all of their Warrants into
the Exchange Offer, Registration Rights Agreement Signatories will, based on the
Exchange Ratio and assuming 100% participation by all other holders, own of
record an aggregate of 6,502,815 (or approximately 57%) of the outstanding
shares of Common Stock following the Exchange Offer. The Registration Rights
Agreement covers all existing shares of Common Stock held by such persons and
entities and, following the Exchange Offer, will also cover all additional
shares of Common Stock received in exchange for Warrants tendered by such
persons and entities and, subject to certain limitations, provides for two
demand registration rights (the first of which may only be initiated by the WCAS
entities or their permitted transferees) and certain "piggyback" registration
rights. See "Certain Relationships and Related Transactions." Sales of
substantial numbers of shares of Common Stock, under the Registration Rights
Agreement or otherwise, could materially adversely affect the market prices for
the Common Stock (and any remaining outstanding Warrants).
Liability for Unsettled Trades. The Company through its subsidiaries functions
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 the credit, the transaction is completed directly
by both counterparties. Other transactions are completed with the subsidiary
acting as a matched riskless principal in which the respective parties to the
transaction know the subsidiary as the 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 such
subsidiaries operate, miscommunications can arise whereby transactions are
completed with only one counterparty ("out trades"), thereby creating a
potential liability for such subsidiaries. These occurrences usually become
known to the subsidiary 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. In general, the
Company's subsidiaries do not experience a high incidence of out trades, but in
those situations in which they occur, the subsidiary typically disposes of the
unmatched position within a short time frame. While out trades have not had a
significant adverse effect on the Company 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 or
results of operations of the Company at that time.
Government Regulation. The Company 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 participating in those markets. Euro
Brokers Maxcor Inc. ("EBMI"), a wholly-owned subsidiary of the Company, is
registered as a broker-dealer with the Commission and applicable states and is a
member of the NASD. Maxcor Financial Asset Management Inc., also a wholly-owned
subsidiary of the Company, is an investment advisor, registered with the
Commission pursuant to the securities lending activities of its Euro Brokers
Securities Lending division. Other subsidiaries of the Company conducting
business outside of the United States are also subject to extensive regulation
by various non-U.S. governmental and regulatory bodies, including the Bank of
England, the Securities and Futures Authority and the Director General of Fair
Trading in the United Kingdom, the Ontario Securities Commission, the Bank
11
<PAGE>
of Japan, the Japanese Ministry of Finance and the Australian Securities
Commission. Additional legislation and regulations, changes in the rules
promulgated by the Commission, other U.S. federal and state governmental
regulatory authorities, self-regulatory agencies or clearing organizations, as
well as non-U.S. governmental or regulatory agencies, or changes in the
interpretation or enforcement of laws and rules, may directly affect the manner
of operation and profitability of the Company. In addition, any expansion of the
Company's activities into new areas may subject the Company to additional
regulatory requirements that could similarly affect such operation and
profitability.
Competition. The financial brokerage industry is highly competitive and the
Company encounters competition from several companies with significantly greater
resources than the Company and access to wider pools of potential clients.
Moreover, all brokerage firms are subject to the pressures of offering their
services at a lower price, with the use of volume discounting having become more
widespread in recent years. In addition, the development of new technologies may
expose the Company and the rest of the inter-dealer brokerage industry to the
possibility of losing clients to companies and products that facilitate fully
automated dealing, without intermediaries. The Company is also inherently
reliant on relationships with clients that develop over time and on the
performance and experience of a number of key management and brokerage and other
sales personnel, many of whom are often the target of aggressive recruitment
efforts by competitors within the industry.
Clearing Arrangements. Morgan Stanley & Co. Incorporated ("Morgan Stanley") and
Daiwa Securities America Inc. ("Daiwa") act as the primary clearing agents, on a
fully-disclosed basis, for EBMI. Under the terms of these agreements, Morgan
Stanley and Daiwa clear as principals a significant portion of EBMI's
transactions in emerging market debt and other securities and, among other
services, prepare and mail confirmations and monthly statements to customers.
Although the Daiwa/EBMI relationship has been ongoing for approximately three
years, the agreement is terminable by either party upon 30 days' prior notice.
The Morgan Stanley clearing relationship is new and only commenced in September
1997, but is terminable by either party upon 120 days' prior notice. In the
event of a termination of either or both agreements, EBMI believes that a new
clearing arrangement could be established in a timely fashion with another
clearing correspondent on terms acceptable to EBMI. It remains possible,
however, that the disruption from such a change, or the terms of any such new
arrangement, could have a material adverse effect on the Company's results of
operations or financial condition.
Litigation and Arbitration. Many aspects of the Company's business involve
varying risks of liability. In recent years, there has been an increasing
incidence of litigation and arbitration involving participants in the
inter-dealer brokerage industry, including employee claims alleging
discrimination or defamation in connection with terminations and competitor
claims alleging theft of trade secrets, unfair competition or tortious
interference in connection with new employee or new desk hires. A settlement or
judgment related to these or similar types of claims or activities could have a
material adverse effect on the Company's results of operations or financial
condition.
European Market Unification. The "European Monetary Union" is scheduled to
commence on January 1, 1999 when the European Currency Unit will be replaced by
the "Euro" at the conversion rate of 1:1, and those national currencies which
are to participate in the European Monetary Union will ultimately cease to exist
as separate currencies by virtue of being replaced by the Euro. The introduction
of a single currency for the European Community ("EC") could eliminate the
European cross-currency market and have an adverse impact on the Company'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 the Company.
Lack of Diversification. EBIC and its subsidiaries and affiliates currently
comprise substantially all of the Company's business and assets. As a result,
the Company's performance and the market prices for the Company's securities are
highly dependent upon the performance of its inter-dealer brokerage business.
Although the Company is continuously seeking to strengthen and improve its
inter-dealer brokerage business, it is also currently exploring various options
for diversifying its businesses and sources of income. These possibilities
include the development of further asset management businesses, the development
of an investment banking business, the sale and other exploitation of data
generated and collected in the course of its business and/or acquisitions or
other business combinations to enhance or complement its business. There can be
no assurances, however, that the Company will be successful in achieving these
goals or others related to diversification or, if achieved, whether they will
positively affect the Company's financial condition and results of operations.
Dividends Unlikely. The Company has not paid any dividends on the Common Stock
to date. It is the present intention of the Board of Directors to retain all
earnings, if any, for use in the Company's business operations and accordingly,
the Company does not anticipate paying any dividends on the Common Stock in the
foreseeable future.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION (1)
(In thousands of dollars, except per share data)
The following selected consolidated financial data as of and for each of
the years in the five-year period ended December 31, 1996 are derived from the
Company's consolidated financial statements, which statements have been audited
by Price Waterhouse LLP, independent accountants.
The selected consolidated balance sheet data at June 30, 1997 and the
selected statement of operations data for the six-month periods ended June 30,
1997 and 1996 have been derived from unaudited consolidated financial statements
of the Company which, in the opinion of the Company's management, include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
statement of the results of unaudited periods. The results for the six-month
period ended June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997.
The selected consolidated financial data set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," each included in the documents incorporated herein by
reference. See "Incorporation of Certain Documents by Reference." Statement of
Operations data presented below includes 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>
Year Ended December 31, Six Months Ended June 30,
----------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Commission income $ 113,932 $ 135,578 $ 144,587 $ 171,576 $ 178,110 $ 90,081 $ 86,117
Other income 424 723 207 518 591 119 514
--------- --------- --------- --------- --------- -------- --------
114,356 136,301 144,794 172,094 178,701 90,200 86,631
--------- --------- --------- --------- --------- -------- --------
Operating Costs:
Payroll and related costs 71,105 86,764 96,207 110,915 115,537 54,366 54,146
Communication costs 12,413 12,988 15,633 17,188 18,288 8,384 8,486
Travel and entertainment 7,672 8,682 10,494 10,224 11,355 5,370 5,387
Depreciation and amortization 3,857 4,192 4,248 4,568 4,734 2,318 2,657
Occupancy costs 2,868 4,452 5,640 5,855 6,539 3,033 3,102
Clearing fees -- 864 3,648 3,778 4,412 2,116 3,257
General, administrative and other 5,312 7,148 6,818 7,550 8,255 4,065 3,689
Write-off of goodwill 12,644
--------- --------- --------- --------- --------- -------- --------
103,227 137,734 142,688 160,078 169,120 79,652 80,724
--------- --------- --------- --------- --------- -------- --------
Operating profit (loss) 11,129 (1,433) 2,106 12,016 9,581 10,548 5,907
--------- --------- --------- --------- --------- -------- --------
Other non-operating income (expenses):
Interest expense (3,265) (2,703) (1,636) (775) (693) (300) (447)
Other non-operating expenses (632) (2,086) (521) (295) (632) -- --
Other non-operating income -- 1,488 490 -- -- -- --
Interest income 1,450 1,203 1,091 1,463 1,801 841 823
Foreign exchange gain (loss) (1,581) 64 (17) 214 (8) 46 (85)
--------- --------- --------- --------- --------- -------- --------
(4,028) (2,034) (593) 607 468 587 291
--------- --------- --------- --------- --------- -------- --------
Income (loss) before provision for
income taxes and minority interest 7,101 (3,467) 1,513 12,623 10,049 11,135 6,198
Provision for income taxes 6,037 4,859 3,334 7,393 6,651 6,087 4,434
--------- --------- --------- --------- --------- -------- --------
Income (loss) before minority
interest 1,064 (8,326) (1,821) 5,230 3,398 5,048 1,764
Minority interest 371 (443) (250) (1,768) 307 (447) (623)
--------- --------- --------- --------- --------- -------- --------
Net income (loss) $ 1,435 ($ 8,769) ($ 2,071) $ 3,462 $ 3,705 $ 4,601 $ 1,141
========= ========= ========= ========= ========= ======== ========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
December 31, June 30,
------------------------------------------------------------ --------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $72,164 $76,632 $71,915 $82,079 $ 97,173 $ 94,521
Obligations under capitalized leases 3,210 2,767 2,805 2,285 1,429 1,176
Notes payable 28,236 27,081 9,830 7,880 7,380 6,224
Total liabilities 52,453 65,696 43,361 50,186 64,881 61,176
Minority interest 1,322 548 492 502 (159) (272)
Stockholders' equity 18,389 10,388 28,062 31,391 32,451 33,617
</TABLE>
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------------------------ --------------------------
1995 1996 1996 1997
------------- ------------- ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C>
Per Share Information(2)
Net income $ 0.39 $ 0.41 $ 0.51 $ 0.13
Book value $ 3.51 $ 3.63 $ 3.99 $ 3.76
Common shares outstanding 8,949,656 8,949,656 8,949,656 8,949,656
</TABLE>
- -------------------------
(1) The Merger acquisition of EBIC by the Company on August 16, 1996 has been
accounted for as a recapitalization of EBIC, with the issuance of shares by
EBIC for the net assets of the Company. The consolidated results of
operation and financial position of the Company for periods and dates prior
to the Merger are the consolidated historical results of operations and
financial position of EBIC for such periods and dates.
(2) The number of shares of Common Stock outstanding and related earnings and
book value per share information, as presented in the Company's audited
consolidated financial statements as of and for the years ended December
31, 1995 and December 31, 1996 included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 ("Consolidated Financial
Statements"), were presented on a pro forma basis, as if all shares
anticipated to be issued in Merger (9,011,295) had been issued as of
January 1, 1995 and all such shares were outstanding for the merged and
recapitalized entity since that date. See Notes 1 and 13 of the Notes to
the Consolidated Financial Statements. This number of shares outstanding
has been restated to reflect actual shares issued and outstanding at
December 31, 1996 of 8,949,656, which is also the number of actual shares
issued and outstanding at June 30, 1997. The restatement of number of
shares outstanding had no effect on the related earnings and book value per
share information after rounding. Accordingly, shares outstanding and
related earnings and book value per share information for the years ended
December 31, 1995 and December 31, 1996 and the six months ended June 30,
1996 have been presented as if all shares outstanding at December 31, 1996
had been issued as of January 1, 1995 and all such shares were outstanding
for the merged and recapitalized entity since that date.
14
<PAGE>
CERTAIN PRO FORMA EFFECTS OF THE EXCHANGE OFFER
The following table presents (i) the Company's historical earnings per
share of Common Stock for the year ended December 31, 1996 and the six months
ended June 30, 1997, (ii) the historical book value per share of Common Stock as
of December 31, 1996 and June 30, 1997, and (iii) the pro forma effect thereon
of the issuance of shares of Common Stock pursuant to the Exchange Offer
assuming 100% of the outstanding Warrants are exchanged. All per share
information has been calculated on the basis of 8,949,656 shares of Common Stock
outstanding at each of December 31, 1996 and June 30, 1997, and during the
periods then ended.
<TABLE>
<CAPTION>
Earnings per Share
------------------
Year Ended Six Months Ended
December 31, June 30,
1996 1997
------ -----
<S> <C> <C>
Historical...................................................................... $0.41 $0.13
Pro Forma....................................................................... $0.32 $0.10
</TABLE>
Book Value per Share
--------------------
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------ -----
<S> <C> <C>
Historical...................................................................... $3.63 $3.76
Pro Forma....................................................................... $2.83 $2.94
</TABLE>
15
<PAGE>
PRICE RANGE OF THE COMPANY'S SECURITIES
Since November 12, 1996, the Common Stock, Series A Warrants and Series B
Warrants have been traded on the Nasdaq National Market tier of The Nasdaq Stock
Market, first under the respective symbols FSAT, FSATW and FSATZ, and, following
the change in the Company's name on June 18, 1997, under the respective symbols
MAXF, MAXFW and MAXFZ. Prior to November 12, 1996, the Common Stock and Series A
Warrants were quoted on the OTC Bulletin Board, an NASD sponsored and operated
inter-dealer automated quotation system for equity securities not listed on The
Nasdaq Stock Market. Such over-the-counter market quotations reflect
inter-dealer prices, without retail markups, markdowns or commissions, and may
not necessarily represent actual transactions.
The following table sets forth (i) the range of high and low sales prices
for the Common Stock and Warrants, as reported by The Nasdaq Stock Market, for
the period beginning on November 12, 1996 when the Common Stock and Warrants
began trading on the Nasdaq National Market and (ii) for all other periods, the
range of high and low closing bid prices for the Common Stock and the Series A
Warrants on the OTC Bulletin Board, as reported by the NASD.
<TABLE>
<CAPTION>
Common Stock Warrants
------------------ -------------------------------------------
Series A Series B
------------------ -----------------
High Low High Low High Low
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
First Quarter $4.375 $4.250 $1.250 $0.625 $ $
Second Quarter 4.563 4.250 1.000 0.625
Third Quarter 4.625 4.250 1.000 0.688
Fourth Quarter 4.625 4.375 1.313 0.500
Year Ended December 31, 1996
First Quarter 4.875 4.625 1.313 0.500
Second Quarter 5.063 4.875 1.313 0.688
Third Quarter 5.375 4.813 1.313 0.688
Fourth Quarter (through November 11) 5.250 3.500 1.125 0.375
Fourth Quarter (from November 12) 4.000 2.625 1.000 0.406 0.969 0.188
Year Ended December 31, 1997
First Quarter 4.500 2.875 0.875 0.313 0.984 0.313
Second Quarter 3.375 2.375 0.813 0.250 0.813 0.313
Third Quarter 4.250 2.813 0.719 0.250 0.625 0.250
Fourth Quarter (through October 14, 1997) 4.563 3.438 0.844 0.500 0.813 0.500
</TABLE>
As of October 14, 1997, there were 56, 23 and 35 holders of record of the
Common Stock, Series A Warrants and Series B Warrants, respectively. The Company
is aware that certain holders of record hold a substantial number of shares of
Common Stock, Series A Warrants and/or Series B Warrants as nominees for a
significant number of beneficial owners.
The closing sales prices of the Common Stock, Series A Warrants and Series
B Warrants, respectively, reported on the Nasdaq National Market on October 14,
1997, the last full trading day for which information was available prior to the
printing of this Prospectus, were $4.25, $.625 and $.688, respectively.
The closing sales prices of the Common Stock, Series A Warrants and Series
B Warrants, respectively, reported on the Nasdaq National Market on August 20,
1997, the last full trading day prior to the Company's initial announcement of
the Exchange Ratio and other terms regarding the Exchange Offer, were $3.25,
$.344 and $.25, respectively.
Although the Series A Warrants and the Series B Warrants are economically
identical in their terms, the Company notes that, historically, liquidity (as
measured by average daily trading volume) in the Series B Warrants has been
significantly less than liquidity in the Series A Warrants. The Company believes
that this difference reflects the fact that the Series B Warrants were issued in
connection with the Merger to former holders of EBIC common stock
16
<PAGE>
most of whom, after the Merger, were subject to restrictions in their subsequent
transfers of such Series B Warrants either because they were signatories to the
Security Transfer Agreement (which prohibited most such transfers prior to
November 30, 1996), otherwise were affiliates of EBIC and/or the Company (and,
accordingly, could sell only pursuant to a registration statement under the
Securities Act or an applicable exemption from registration thereunder, such as
Rule 144), and/or were directors or employees of the Company (and, accordingly,
subject to the Company's insider trading policies, generally limiting
transactions in the Company's securities by such persons to 30-day window
periods following the release of the Company's quarterly and year-end results).
The Company has not paid any dividends on the Common Stock to date. It is
the present intention of the Board of Directors to retain all earnings, if any,
for use in the Company's business operations and accordingly, the Company does
not anticipate paying any dividends on the Common Stock in the foreseeable
future.
HISTORY OF THE COMPANY
The Company was incorporated in Delaware in August 1994, under the name
Financial Services Acquisition Corporation, with the objective of acquiring or
merging with an operating business in the financial services industry. To this
end, the Company consummated an initial public offering in December 1994 and
raised net proceeds of approximately $20 million.
On March 8, 1996, the Company entered into a merger agreement ("Merger
Agreement") to acquire EBIC, a privately-held domestic and international
inter-dealer broker for a broad range of financial instruments. Pursuant to the
Merger Agreement, a newly-formed, wholly-owned subsidiary of the Company merged
with and into EBIC (the "Merger") on August 16, 1996, with EBIC thereby becoming
a wholly-owned subsidiary of the Company. EBIC, together with its subsidiaries
and affiliates, currently comprise substantially all of the Company's business
and assets.
Pursuant to the Merger, each outstanding share of EBIC common stock was
converted into the right to receive, after giving effect to certain adjustments
and subject to certain escrow arrangements, approximately, (i) 2.70 shares of
the Common Stock (approximately 4,505,666 shares in the aggregate), (ii) 4.53 of
the Series B Warrants (approximately 7,566,666 Warrants in the aggregate) and
(iii) $13.14 in cash (approximately $22 million in the aggregate). The intent
and general effect of the stock and warrant components of the Merger
consideration were to provide former stockholders of EBIC with an aggregate 50%
post-Merger equity interest in the Company; consistent with this objective, the
cash component of the Merger consideration was intended generally to equalize
the respective contributions of the Company's stockholders and EBIC stockholders
to the post-Merger consolidated net worth of the Company by paying to the former
stockholders of EBIC an aggregate amount equal to the pre-Merger difference
between the Company's and EBIC's respective net worth (each as calculated in
accordance with the Merger Agreement).
In June 1997, in connection with its Annual Meeting of Stockholders, the
Company changed its name to Maxcor Financial Group Inc.
17
<PAGE>
BACKGROUND OF THE EXCHANGE OFFER
General
At the time of entering into the Merger Agreement, the Company disclosed
its intention to make (and the Merger Agreement specifically provides for the
contemplated making of) the Exchange Offer to acquire all of the outstanding
Warrants, as soon as reasonably practicable following consummation of the
Merger, on the basis of one share of Common Stock for a number of Warrants to be
determined.
Security Transfer Agreement
In connection with the Merger Agreement, the Company also entered into a
Security Transfer Agreement, dated as of March 8, 1996 (the "Security Transfer
Agreement"), with: (i) Gilbert D. Scharf, Chairman of the Board, President and
Chief Executive Officer of the Company and Michael J. Scharf, a Director and
also then Vice President, Secretary and Treasurer of the Company; (ii) WCAS and
WCAS Information, collectively, prior to the Merger, the holders of
approximately 52% of EBIC's outstanding Common Stock; and (iii) five members of
EBIC management consisting of Donald R.A. Marshall, Keith E. Reihl, Brian G.
Clark, Walter E. Dulski and Alistair H. Johnstone (collectively "EBIC
Management"). Among other things, the Security Transfer Agreement obligates such
persons (the "Agreement Signatories") to tender for exchange (and not withdraw)
in the Exchange Offer, if consummated on or prior to November 30, 1997, their
Warrants in numbers at least proportionate to the aggregate tenders of Warrants
made by all other holders in the Exchange Offer. At September 30, 1997, the
Agreement Signatories owned an aggregate of 7,197,345 Warrants, constituting
approximately 48% of all outstanding Warrants. Notwithstanding the foregoing,
each of the Agreement Signatories has indicated to the Company his or its
current intention to tender all of his or its Warrants in connection with the
Exchange Offer.
Purpose of the Exchange Offer
The Exchange Offer is intended to retire all or substantially all of the
Warrants through the issuance of Common Stock in order to simplify the Company's
capital structure, reduce the potential future dilutive impact on the Company's
earnings per share that could be caused by the Warrants and eliminate any
overhang on the Common Stock price from the existence of the Warrants.
Accordingly, the Company has established the Minimum Condition so that if there
is not validly tendered prior to the Expiration Date (and not withdrawn) a
minimum of 95% of the aggregate outstanding Warrants, the Company reserves the
right not to proceed with the Exchange Offer. See "The Exchange Offer -
Conditions of the Exchange Offer."
In the absence of the Exchange Offer, 15,018,276 shares of Common Stock
would be issued in exchange for the Warrants if all of the currently outstanding
Warrants were exercised, resulting in an aggregate of 23,967,932 shares of
Common Stock outstanding, and the Company would receive the proceeds of such
exercises. Assuming consummation of and 100% participation in the Exchange
Offer, 2,503,046 shares of Common Stock would be issued, resulting in an
aggregate of 11,452,702 shares of Common Stock outstanding, and all of the
Warrants would be extinguished. The Exchange Offer will have no effect on the
Company's total stockholders' equity (other than transaction costs). The
Exchange Offer will initially have a dilutive effect on the Company's earnings
per share of Common Stock and on other per share measurements such as per share
book value or per share voting power because there will be more shares of Common
Stock outstanding. See "Selected Consolidated Financial Data" and "Certain Pro
Forma Effects of the Exchange Offer."
Interests of Certain Persons in the Exchange Offer
In determining to approve and proceed with the Exchange Offer, the Board of
Directors took into account, and holders of Warrants contemplating participating
in the Exchange Offer should be aware of, the fact that (i) each member of the
Board owns shares of Common Stock (and/or shares of Common Stock issuable upon
exercise of options of the Company), and (ii) each member of the Board, other
than Messrs. James Stevens and William Wigton, owns Warrants. For historical and
pro forma Common Stock and Warrant holdings of such persons, see "Principal
Stockholders." In addition, the Merger Agreement required the agreement to the
Exchange Ratio of WCAS, although WCAS waived, prior to the determination of the
Exchange Ratio, any right to approve the Exchange Ratio.
In assessing the holdings of Board members of the Company's securities, the
Board believed that any potential conflicts of interest arising therefrom were
minimized due to the fact that Messrs. Gilbert Scharf, Michael Scharf and
18
<PAGE>
Keith Reihl (who collectively hold 1,278,010 Warrants, or approximately 94% of
all Warrants held by all of the Directors of the Company) are all Agreement
Signatories and thereby obligated pursuant to the Security Transfer Agreement to
tender in the Exchange Offer (if consummated on or before November 30, 1997) at
least such portion of the Warrants held by them as is proportionate to the
percentage of Warrants tendered by all other holders of Warrants in the Exchange
Offer, thereby generally aligning their interests with those of such other
Warrant holders. In addition, the Board believed that the interests of such
persons (as well as of the three Directors of the Company, Messrs. Whittemore,
Kopp and Martin, who hold Warrants but are not Agreement Signatories) were
ultimately also aligned with the interests of the holders of Common Stock by
virtue of the fact that each of them holds shares of Common Stock that
proportionately represent an equal or larger percentage of all outstanding
shares of Common Stock than the percentage that their respective holdings of
Warrants represent of all outstanding Warrants. See "Principal Stockholders."
Accordingly, to the extent that such persons voluntarily tender a portion of
their Warrants that may turn out to be greater than the percentage of Warrants
tendered by all other holders of Warrants, the Board believed that any potential
conflicts of interest presented by the participation of such persons in the
determination of the Exchange Ratio and the decision to approve and proceed with
the Exchange Offer would be minimized by the disproportionate dilutive effects
on the Common Stock holdings of such persons and entities if the Exchange Ratio
were to provide an unwarranted premium to Warrant holders. The Board also took
into account that Messrs. Stevens and Wigton, who own shares of Common Stock but
no Warrants, and thereby could be considered as having interests generally
aligned with those of other holders of Common Stock, participated in the Board's
determination of the Exchange Ratio and the decision to approve and proceed with
the Exchange Offer, which was unanimous. The Board also was aware that, at the
Exchange Ratio, each Director was willing to state his current intention to
tender all of his Warrants in the Exchange Offer.
Effects of Exchange Offer on Tendering Warrant Holders
Holders of Warrants who exchange their Warrants pursuant to the Exchange
Offer will: (i) without the requirement of making any cash exercise payment,
receive whole shares of Common Stock for their Warrants, in accordance with the
Exchange Ratio; (ii) receive a cash payment, without interest, for any
fractional interest in a share of Common Stock that they would otherwise be
entitled to pursuant to the Exchange Ratio; (iii) be able to vote such Common
Stock on all matters that may come before the holders of the Common Stock; (iv)
be able to receive dividends on such Common Stock, if any, when declared and
paid by the Company; and (v) participate as a holder of such Common Stock in
proceeds from liquidation of the Company after creditors and preferred security
holders, if any, are paid. Exchanging Warrant holders, however, will lose the
right to purchase, at any time until November 30, 2001, a share of Common Stock
for $5.00, for each Warrant held, and may be subject to certain tax consequences
as a result of the Exchange Offer. See "Certain United States Federal Income Tax
Considerations."
If the Exchange Offer is consummated, the Company believes that the
issuance of a significant number of shares of Common Stock in exchange for the
tendered Warrants will cause an initial dilution in per share earnings and other
per share measurements that may have a negative effect on the trading price for
the Common Stock and any remaining outstanding Warrants. This effect, if it
occurs, may be offset in part or in total by the elimination or reduction
(depending on the extent to which the Warrants are exchanged) of the future
potential dilutive impact on per share earnings that could be caused by exercise
of the Warrants and by market perceptions of benefits from the elimination or
reduction of a Warrant overhang on the Common Stock price and from a simplified
capital structure for the Company. See "Risk Factors - Possible Volatility of
Common Stock Trading Price."
Effects of Exchange Offer on Non-Tendering Warrant Holders
Holders of Warrants who do not participate in the Exchange Offer will
retain the right to purchase, at any time until November 30, 2001, a share of
Common Stock for $5.00 for each Warrant held, subject to the Company's right to
redeem the Warrants under certain circumstances. See "Description of Capital
Stock -- Warrants." If the Exchange Offer is consummated, the Company intends to
delist the Warrants from trading on the Nasdaq National Market and to deregister
the Warrants pursuant to the Exchange Act. In such event, the trading market
for, and the liquidity of an investment in, the Warrants remaining outstanding
would be significantly reduced, and the trading prices for the Warrants could be
negatively affected. See "Price Range of the Company's Securities."
19
<PAGE>
THE EXCHANGE OFFER
Terms of the Exchange Offer
The Company hereby offers, upon the terms and subject to the conditions of
the Exchange Offer (as set forth in this Prospectus and in the accompanying
Letter of Transmittal, as either may be amended from time to time), to exchange
0.1667 of a share (the Exchange Ratio) of Common Stock for each and every
outstanding Warrant. Accordingly, the Company will issue one whole share of
Common Stock in exchange for every six Warrants (either Series A Warrants,
Series B Warrants or both) tendered and accepted by the Company for exchange
pursuant to the Exchange Offer. No fractional shares of Common Stock will be
issued as a result of the Exchange Offer. Holders of Warrants who tender a
number of Warrants not evenly divisible by six and who would otherwise therefore
be entitled to a fractional share of Common Stock will receive cash in lieu of
such fractional amount. See "Fractional Shares" below. One Right to purchase one
one-hundredth of a share of Junior Preferred Stock will be issued with and
solely represented by each share of Common Stock that is issued to a Warrant
holder in the Exchange Offer. See "Description of Capital Stock - Series A
Junior Participating Preferred Stock."
The Exchange Offer is subject to the Minimum Condition that at least 95%
(or 14,267,362) of the aggregate 15,018,276 Warrants outstanding are validly
tendered and not withdrawn prior to the Expiration Date and to certain other
customary conditions, any or all of which, if not satisfied in the Company's
reasonable discretion, may be waived by the Company in whole or part at any time
prior to the Expiration Date, subject to applicable law. Accordingly, the
Company reserves the right, notwithstanding any other provision of the Exchange
Offer, to terminate or not proceed with the Exchange Offer, or to extend or
otherwise amend the Exchange Offer, if the Minimum Condition or any of the other
conditions of the Exchange Offer is not satisfied prior to the Expiration Date.
See "Conditions of the Exchange Offer."
As of October 14, 1997, 15,018,276 Warrants were outstanding. Of such
amount, 7,566,666 are Series A Warrants, which were issued in connection with
the IPO. The remaining 7,451,610 are Series B Warrants, which were issued in
connection with the Company's August 1996 Merger acquisition of EBIC. As of
October 14, 1997, there were 23 registered holders of the Series A Warrants and
35 registered holders of the Series B Warrants. This Prospectus and the Letter
of Transmittal are being sent to all persons and entities that, as of October
15, 1997, were registered holders of the outstanding Warrants. Although there is
no fixed record date for determining registered holders of Warrants entitled to
participate in the Exchange Offer, only a holder of Warrants who is the
registered holder thereof (or such person's legal representative or
attorney-in-fact) at the time of their tender in the Exchange Offer or who is a
person holding sale and transfer documents with respect to such Warrants from
the registered holder thereof at the time of such tender (which documents are
satisfactory to the Company and its transfer agent), may participate in the
Exchange Offer.
Warrant holders do not have appraisal or dissenters' rights under the
General Corporation Law of the State of Delaware in connection with the Exchange
Offer.
Although the Company has no current plan or intention to do so, it reserves
the right in its sole discretion to purchase or make offers for any Warrants
that remain outstanding subsequent to the Expiration Date, subject to the
requirements of Rule 13e-4(f)(6) of the Exchange Act. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
Tendering holders of Warrants will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Warrants pursuant to
the Exchange Offer. If, however, shares of Common Stock issued pursuant to the
Exchange Offer or substitute certificates evidencing Warrants not exchanged are
to be delivered to, or are to be issued in the name of, any person other than
the registered Warrant holder, or if tendered Warrants are recorded in the name
of any person other than the person signing the Letter of Transmittal, then the
amount of any transfer taxes (whether imposed on the registered Warrant holder
or any other person) will be payable by the tendering Warrant holder. See
"Payment of Expenses" below.
Expiration Date; Extension; Termination; Amendments
The Exchange Offer will expire at 12:00 Midnight, New York City time, on
November 13, 1997 (the "Expiration Date"), subject to extension by the Company
by notice given to Continental Stock Transfer & Trust Company (the "Exchange
Agent") and Warrant holders as herein provided. The Company reserves the right
to so extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the time and date on which
20
<PAGE>
the Exchange Offer as so extended shall expire. The Company will notify the
Exchange Agent of any extension by oral or written notice, and will make a
public announcement thereof by press release, in each case prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
The Company reserves the right (i) to delay accepting any Warrants for
exchange or to extend or terminate the Exchange Offer and not accept for
exchange any Warrants if any of the events set forth below under the caption
"Conditions of the Exchange Offer" shall have occurred and shall not have been
waived by the Company prior to the Expiration Date, by giving oral or written
notice of such delay or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner, including altering the Exchange Ratio
or otherwise changing the consideration offered in exchange for the Warrants in
the Exchange Offer (provided that any such changed consideration must be paid
with regard to all Warrants accepted in the Exchange Offer). Any such delay in
acceptance for exchange, extension or amendment will be followed as promptly as
practicable by public announcement thereof. If the Exchange Offer is amended in
a manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment in a manner reasonably calculated to
inform the holders of Warrants of such amendment and the Company, depending upon
the significance of the amendment and the manner of disclosure to the holders of
the Warrants, will extend if necessary the Exchange Offer for a period of time
in accordance with Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the
Exchange Act. These rules have been interpreted by the Commission as requiring
that the minimum period during which the Exchange Offer must remain open
following an announcement of a material change in the terms of the Exchange
Offer or information concerning the Exchange Offer (other than a change in
price, a change in the amount of securities sought, or a change in certain fees)
will depend on the facts and circumstances, including the relative materiality
of such change or information. If the material change in the Exchange Offer
relates to a change in the Exchange Ratio, the Minimum Condition or the
solicitation fee to be paid to Soliciting Dealers in connection with the
Exchange Offer, Rule 13e-4(f)(1) requires the Exchange Offer to remain open for
a period of not less than ten business days following the announcement of any
such change if the Exchange Offer would otherwise expire within such ten
business-day period. For purposes of the Exchange Offer, "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 a.m. through 12:00 midnight, New York City time. The
rights reserved by the Company in this paragraph are in addition to the
Company's rights set forth below under the caption "Conditions of the Exchange
Offer."
Procedure for Tendering
The acceptance of the Exchange Offer by holders of Warrants pursuant to the
procedure set forth below will constitute an agreement between such holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
To be tendered validly, a properly completed Letter of Transmittal (or
facsimile thereof), executed by the registered holder of the Warrants, or an
Agent's Message (as defined below) made in connection with a book-entry delivery
of the Warrants, and any other documents required by the Letter of Transmittal,
must be received by the Exchange Agent at the address set forth below prior to
12:00 Midnight, New York City time, on the Expiration Date. In addition, prior
to such time either (i) the certificates for such Warrants must be delivered to
the Exchange Agent or (ii) such Warrants must be tendered pursuant to the
procedure for book-entry tender set forth below and a confirmation of receipt of
such Warrants received by the Exchange Agent. Alternatively, if time does not
permit a holder of Warrants to provide the Exchange Agent with a Letter of
Transmittal or other required documents prior to 12:00 Midnight, New York City
time, on the Expiration Date, or if certificate(s) representing such holder's
Warrants are not available for delivery, prior to such time, to the Exchange
Agent, or the procedures for book-entry transfer cannot be completed on a timely
basis, a Warrant holder desiring to tender his or her Warrants must comply with
the guaranteed delivery procedure set forth below. See "Guaranteed Delivery
Procedure."
The Exchange Agent will establish an account with respect to the Warrants
for purposes of the Exchange Offer at The Depository Trust Company ("DTC")
within two days after the commencement date of the Exchange Offer. Any Eligible
Institution (as defined below) that is a participant in the DTC system may make
book-entry delivery of the Warrants by causing DTC to transfer such Warrants
into the Exchange Agent's account at DTC in accordance with DTC's book-entry
transfer procedure for such transfer. However, although delivery of the Warrants
may be effected through a timely confirmation of a book-entry transfer of such
Warrants into the Exchange Agent's account at DTC (a "Book-Entry Confirmation"),
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message, and any
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at its address set forth on the back cover page of this
Prospectus
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on or prior to the Expiration Date, or the guaranteed delivery procedure set
forth below must be complied with. LETTERS OF TRANSMITTAL AND WARRANTS SHOULD
NOT BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Warrants tendered pursuant thereto
are tendered (i) by a registered holder of Warrants who has not completed either
the box entitled "Special Delivery Instructions" or the box entitled "Special
Exchange Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a financial institution (a
commercial bank, savings and loan association, credit union or brokerage house)
that is a participant in the Securities Transfer Association Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (collectively "Eligible Institution").
THE METHOD OF DELIVERY OF WARRANTS AND OTHER DOCUMENTS TO THE EXCHANGE
AGENT IS AT THE ELECTION AND RISK OF THE HOLDER, BUT IF SUCH DELIVERY IS BY
MAIL, IT IS SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE.
If the Letter of Transmittal is signed by a person other than a registered
holder of any certificates representing Warrants listed thereon, such Warrants
must be endorsed or accompanied by appropriate stock powers or other instruments
of transfer satisfactory to the Company and its transfer agent, in each case
signed exactly as the name or names of the registered holder or holders appear
on such Warrants.
If the Letter of Transmittal or the Notice of Guaranteed Delivery or any
certificates representing Warrants or any stock powers or other transfer
instruments are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be so submitted.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that DTC has received an express acknowledgment from the participant in DTC
tendering the Warrants that are the subject of such Book-Entry Confirmation,
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal, and that the Company may enforce such agreement against
such participant. In the case of an Agent's Message relating to guaranteed
delivery, the term means a message transmitted by DTC and received by the
Exchange Agent which states that DTC has received an express acknowledgment from
the participant in DTC tendering Warrants that such participant has received and
agrees to be bound by the Notice of Guaranteed Delivery with respect to such
Warrants and that the Company may enforce such agreement against such
participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Warrants will be resolved by the
Company, whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which would, in the opinion of counsel for the Company, be
unlawful or violate the regulations of any national securities exchange or the
NASD. The Company also reserves the right to waive any irregularities of tender
as to particular Warrants. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding. Unless waived, any irregularities in
connection with tenders must be cured prior to the Expiration Date. None of the
Company, the Exchange Agent, the Information Agent or any other person shall be
under any duty to give notification of any defects or irregularities in such
tenders or incur any liability for failure to give such notification. Tenders of
Warrants will not be deemed to have been made until such irregularities have
been cured or waived. Any Warrants received by the Exchange Agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
Any beneficial owner whose Warrants are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
Warrants in the Exchange Offer should contact such registered Warrant holder
promptly and instruct such registered Warrant holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to tender directly,
such beneficial owner must, prior to completing and executing the Letter of
Transmittal and tendering Warrants, make appropriate arrangements to register
ownership of the Warrants in such
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beneficial owner's name. Beneficial owners should be aware that the transfer of
registered ownership may take considerable time.
Guaranteed Delivery Procedure
If a holder of Warrants desires to tender his or her Warrants and
certificate(s) representing such Warrants are not immediately available, or time
will not permit such holder's certificate(s) or any other required documents to
reach the Exchange Agent before 12:00 Midnight, New York City time, on the
Expiration Date, or to complete, prior to such time, the procedures for
book-entry transfer, a tender may nonetheless be effected if:
(a) The tender is made by or through an Eligible Institution;
(b) Prior to 12:00 Midnight, New York City time, on the Expiration Date,
the Exchange Agent receives from such Eligible Institution a properly completed
and duly executed (with required signature guarantees) Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery), or an Agent's
Message with respect to guaranteed delivery; and
(c) The certificate(s) for all tendered Warrants (or a confirmation of a
book-entry transfer of such Warrants into the Exchange Agent's account at DTC as
described above), as well as a properly completed and duly executed Letter of
Transmittal, with any required signature guarantees, or an Agent's Message made
in connection with a book-entry delivery of such Warrants, and all other
documents required by the Letter of Transmittal, are received by the Exchange
Agent within three business days after the Expiration Date.
Conditions of the Exchange Offer
In addition, and notwithstanding any other provision of the Exchange Offer,
the Company will not be required to accept for exchange, or issue Common Stock
in exchange for, any Warrants tendered and may terminate, extend or otherwise
amend the Exchange Offer as provided herein, if, at any time on or after the
date of this Prospectus and before the Expiration Date, any of the following
conditions is determined by the Company in its reasonable discretion to exist:
(a) the Minimum Condition has not been satisfied, so that there has not
been validly tendered prior to the Expiration Date a minimum of 14,267,362
Warrants (representing 95% of the aggregate outstanding Warrants) which have not
been withdrawn; or
(b) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or regulatory authority which challenges the
making of the Exchange Offer or which might materially impair the ability of the
Company to proceed with or consummate the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Company; or
(c) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which might materially impair the ability of the Company to
proceed with or consummate the Exchange Offer or have a material adverse effect
on the contemplated benefits of the Exchange Offer to the Company; or
(d) there shall have occurred (i) any general suspension of, shortening of
hours for, or limitation on prices for, trading in securities on the Nasdaq
National Market (whether or not mandatory), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks by Federal or state
authorities in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
crisis directly or indirectly involving the United States, (iv) any limitation
(whether or not mandatory) by any governmental authority on, or other event
having a reasonable likelihood of affecting, the extension of credit by banks or
other lending institutions in the United States, or (v) in the case of any of
the foregoing existing at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof; or
(e) any tender or exchange offer with respect to some or all of the Common
Stock or the Warrants (other than the Exchange Offer), or a merger, acquisition
or other business combination proposal for the Company, shall have been
proposed, announced or made by any person or entity.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions, or if not satisfied in the Company's reasonable discretion
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may be waived by the Company in whole or in part at any time prior to the
Expiration Date, subject to applicable law. Accordingly, if any of the foregoing
conditions shall have occurred prior to the Expiration Date, the Company may (i)
terminate the Exchange Offer and return tendered Warrants to the holders who
tendered them, (ii) extend the Exchange Offer and retain all tendered Warrants,
subject to Rule 13e-4(f)(2) of the Exchange Act (withdrawal rights), until the
expiration of the extended Exchange Offer or (iii) amend the Exchange Offer in
any respect, including by waiving such unsatisfied condition and accepting all
validly tendered Warrants that have not been withdrawn. If the Company
materially changes the terms of the Exchange Offer or information concerning the
Exchange Offer or if it waives a material condition of the Exchange Offer, the
Company will extend the Exchange Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act. If the Company
alters the Exchange Ratio, waives or amends the Minimum Condition or the
Soliciting Dealer fees related to the Exchange Offer, the Company will extend
the Exchange Offer if necessary, to remain open for a minimum of ten business
days from the date that the Company first gives notice, by public announcement
or otherwise, of such waiver or amendment, if the Exchange Offer would otherwise
expire within such ten business-day period.
Acceptance of Warrants for Exchange; Delivery of Common Stock
Upon the satisfaction or waiver of all of the conditions of the Exchange
Offer, the Company will accept promptly after the Expiration Date all Warrants
properly tendered and not withdrawn prior to 12:00 Midnight, New York City time,
on the Expiration Date. The Company will deliver or cause the Exchange Agent to
deliver shares of Common Stock issued pursuant to the Exchange Offer (and any
cash payment in lieu of fractional interests) promptly following any such
acceptance.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered and not withdrawn Warrants when, as and if the Company
has given oral or written notice thereof to the Exchange Agent. The Exchange
Agent will act as agent for the tendering holders of Warrants for the purposes
of receiving the Common Stock pursuant to the Exchange Offer (and any cash
payment in lieu of fractional interests) from the Company. Under no
circumstances will interest be paid by the Company by reason of any delay in
delivering such Common Stock (or cash payment).
If any tendered Warrants are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Warrants will be returned,
without expense, to the tendering holder thereof (or, in the case of Warrants
tendered by book-entry transfer within DTC, credited to an account maintained
within DTC by the Exchange Agent pursuant to the Exchange Offer) as promptly as
practicable after the expiration or termination of the Exchange Offer.
Withdrawal Rights
Any holder of Warrants who has tendered Warrants may withdraw the tender
thereof, in whole or in part, at any time prior to 12:00 Midnight, New York City
time, on the Expiration Date or, unless such tender has been previously accepted
for exchange, at any time after 12:00 Midnight, New York City time, on December
13, 1997, by delivery of a written notice of withdrawal to the Exchange Agent.
To be effective, a written notice of withdrawal (sent by hand, telegraph or
facsimile transmission) must (i) be timely received by the Exchange Agent at the
address set forth herein, (ii) specify the name of the person having tendered
the Warrants to be withdrawn, (iii) indicate the certificate number or numbers
of the Warrants to which the withdrawal relates, (iv) specify the number of
Warrants so withdrawn and (v) be (x) signed by the holder in the same manner as
the original signature on the Letter of Transmittal (including a guarantee of
signature, if required) or (y) accompanied by evidence satisfactory to the
Company that the holder withdrawing such tender has succeeded to registered
ownership of such Warrants. Withdrawals of tenders of Warrants may not be
rescinded, and any Warrants withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that withdrawn
Warrants may be retendered by again following one of the tender procedures
described herein at any time prior to 12:00 Midnight, New York City time, on the
Expiration Date.
All questions as to the validity (including time of receipt) of notices of
withdrawal will be determined by the Company, whose determination will be final
and binding. None of the Company, the Exchange Agent, the Information Agent or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
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Fractional Shares
No fractional shares of Common Stock will be issued as a result of the
Exchange Offer. All fractional interests in a share of Common Stock that a
holder of Warrants participating in the Exchange Offer otherwise would be
entitled to receive as a result of the Exchange Offer will be aggregated and, if
after such aggregation a fractional interest in a share of Common Stock would
result, such tendering holder will be entitled to receive, in lieu thereof, an
amount in cash determined by multiplying (i) the fractional interest in the
share of Common Stock to which such holder would otherwise be entitled and (ii)
the average of the closing sales prices for shares of Common Stock, as reported
by the Nasdaq Stock Market, for each of the five trading days (whether or not
sales have occurred on such days) immediately preceding the Expiration Date.
Under no circumstances will a fractional interest in a share of Common Stock
entitle the owner thereof to vote or to any rights of a security holder.
As soon as practicable after the determination of the amount of cash, if
any, to be paid to a tendering holder of Warrants with respect to any fractional
share interest, and promptly after the acceptance of Warrants for exchange, the
Exchange Agent shall distribute in cash the amount payable to such holder. Under
no circumstances will interest be paid by the Company by reason of any delay in
making such cash payment.
Transferability of Shares of Common Stock Received Upon Exchange
The issuance of shares of Common Stock upon exchange of the Warrants
pursuant to the Exchange Offer are being registered under the Securities Act
pursuant to a Registration Statement of which this Prospectus forms a part. As
registered, the shares of Common Stock issued upon exchange of the Warrants will
be freely tradeable under federal law, without compliance with prospectus
delivery requirements; provided that the person receiving the shares of Common
Stock issued upon exchange of the Warrants is not an affiliate of the Company.
If the recipient of the shares of Common Stock is an affiliate of the Company,
the shares of Common Stock may only be sold pursuant to an effective
registration statement under the Securities Act with respect to such shares of
Common Stock or an exemption from registration thereunder.
Accounting for the Exchange Offer
The Exchange Offer will be accounted for as a purchase of the Warrants into
treasury followed by a cancellation of the Warrants. As a result, there will be
no impact on total stockholders' equity other than the associated costs of the
Exchange Offer, which will result in a decrease of additional paid-in capital.
See "Payment of Expenses."
Exchange Agent
Continental Stock Transfer & Trust Company, the Transfer and Warrant Agent
for the Company, has been appointed as Exchange Agent for the Exchange Offer.
All correspondence in connection with tendering and withdrawal procedures
relating to the Exchange Offer and the Letter of Transmittal should be addressed
to the Exchange Agent, as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Reorganization Department
Facsimile: (212) 509-5150
Telephone: (212) 509-4000, ext. 535
Information Agent
D.F. King & Co., Inc. has been appointed as Information Agent for the
Exchange Offer. All inquiries concerning the Exchange Offer and/or requests for
additional copies of this Prospectus or the Letter of Transmittal should be
directed to the Information Agent, as follows:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Telephone: (800) 207-3158
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Payment of Solicitation Fees
The Company will pay to Soliciting Dealers (as hereinafter defined) a
solicitation fee related to their solicitation efforts of $.05 per Warrant for
any Warrants tendered and accepted for exchange and exchanged pursuant to the
Exchange Offer; provided that no solicitation fee shall be payable with respect
to Warrants beneficially owned (i) by any of the directors, executive officers
or 5% stockholders who have indicated to the Company their current intent to
tender their Warrants, (ii) by any employee of the Company or its affiliates or
(iii) by the Soliciting Dealer (collectively, "Fee Ineligible Warrants"). The
term "Soliciting Dealer" shall mean (x) any broker or dealer in securities that
is a member of any national securities exchange or of the NASD, (y) any foreign
broker or dealer not eligible for membership in the NASD which agrees to conform
to the NASD's Rules of Fair Practice in soliciting tenders outside the United
States to the same extent as though it were an NASD member or (z) any bank or
trust company.
No such solicitation fee shall be payable to a Soliciting Dealer with
respect to the tender of Warrants by a holder unless the Letter of Transmittal
accompanying such tender designates such Soliciting Dealer as having solicited
and obtained the tender of the Warrants covered thereby. No such fee shall be
payable to a Soliciting Dealer with respect to the tender of Warrants by the
holder of record, for the benefit of the beneficial owner, unless the beneficial
owner has designated such Soliciting Dealer. If tendered Warrants are being
delivered by book-entry transfer or pursuant to the guaranteed delivery
procedure, the Soliciting Dealer must return a Notice of Solicited Tenders to
the Exchange Agent within five business days after the Expiration Date to
receive a solicitation fee. All questions as to the validity, form or
eligibility (including time of receipt) of Notices of Solicited Tenders will be
determined by the Company, whose determination will be final and binding. None
of the Company, the Exchange Agent, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities in
any Notice of Solicited Tenders or incur any liability for failure to give any
such notification. The Company reserves the absolute right not to pay any
solicitation fees that would, in the opinion of counsel for the Company, be
unlawful or violate the regulations of any national securities exchange or the
NASD. No broker, dealer, bank, trust company or fiduciary shall be deemed to be
the agent of the Company, the Exchange Agent or the Information Agent for
purposes of the Exchange Offer.
In general, the rules of the Commission prohibit any broker-dealer that is
participating in the distribution of securities for or on behalf of the Company
from making a market in the Common Stock or Warrants during a "restricted
period" commencing up to five days prior to the date that this Prospectus is
distributed to Warrant holders and extending until completion of the Exchange
Offer. The Commission has, however, adopted exceptions to these rules that
permit market making under certain conditions. These rules permit such
broker-dealers to continue to make a market subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not connected
with the Exchange Offer and that its net purchases on any one trading day not
exceed prescribed limits. Pursuant to these exemptions, certain broker-dealers
receiving solicitation fees and/or their respective affiliates may engage in
passive market making in the Common Stock or Warrants during the restricted
period.
Payment of Expenses
Other than solicitation fees to be paid to the Soliciting Dealers, the
Company will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. The Company, however, will pay the Exchange
Agent and the Information Agent reasonable and customary fees for their services
in connection with the Exchange Offer and will reimburse them for their
reasonable out-of-pocket expenses in connection therewith. The Company will also
pay broker, dealers and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of the Warrants, and
in handling or forwarding tenders for their customers.
The cash expenses incurred or to be incurred by the Company in connection
with the Exchange Offer, other than solicitation fees payable to the Soliciting
Dealers, are estimated in the aggregate to be approximately $150,000 and include
estimated fees and expenses of the Exchange Agent and Information Agent,
estimated accounting, banking and legal fees and estimated printing and
miscellaneous expenses. Based on an estimate of the number of Fee Ineligible
Warrants, the Company anticipates that the aggregate solicitation fees payable
to Soliciting Dealers will not exceed $350,000.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Warrants to it or its order pursuant to the Exchange Offer. If, however,
shares of Common Stock issued pursuant to the Exchange Offer or substitute
certificates evidencing Warrants not exchanged are to be delivered to, or are to
be registered or issued in the name of,
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any person other than the registered holder of the Warrants tendered, or if
tendered certificates representing Warrants are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the transfer and sale of Warrants to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Use of Proceeds
The Company will not receive any cash proceeds from the issuance of the
Common Stock offered hereby.
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BUSINESS OF THE COMPANY
The following description of the business of the Company is qualified by
and should be read in conjunction with Part I of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, incorporated herein by reference
and accompanying delivery of this Prospectus.
Overview
The Company, through its subsidiaries and affiliates, is a leading domestic
and international inter-dealer brokerage firm, specializing in emerging market
debt, money market instruments, derivatives, natural gas and electricity,
repurchase agreements and other fixed income securities. The Company conducts
its business through principal offices in New York, London, Tokyo, Toronto,
Sydney and Mexico City and by means of correspondent relationships with other
brokers throughout the world. The Company operates in each of these six
financial centers (other than Tokyo and Sydney) through wholly-owned
subsidiaries. In Tokyo, the Company has a 50% interest in a partnership (the
"Tokyo Partnership") with Yagi Euro and a 15% minority interest in Yagi Euro
itself. In Sydney, the Company has a controlling interest in a joint venture
with management and a financial partner.
The Company functions primarily as an intermediary, matching up the trading
needs of its customers, who are primarily well-capitalized banks, investment
banks and broker-dealers. The Company assists its customers in executing trades
by identifying counterparties with reciprocal interests. The Company provides
its services through an international network of brokers who service direct
phone lines to most of the Company's clients and through proprietary screen
systems and other delivery systems that provide customers with historical data
and real-time pricing information in the Company's various products.
The Company believes that customers use its services for several reasons.
First, the Company believes that a customer can benefit from the Company's
worldwide broker and telecommunications network, which communicates with and
services most of the largest banks and securities firms. Second, the Company
provides customers with anonymity, which can enhance the customers' flexibility
and ability to act without signaling their intentions to the marketplace. Third,
because of its network, the Company believes it can provide high-quality pricing
and market information, as well as sophisticated analytics and trading and
arbitrage opportunities.
The Company's transactions are principally of two types, (i) transactions
whereby the Company acts only as a matching broker and (ii) transactions whereby
the Company acts as a matched riskless principal. Primarily in transactions
involving money market instruments, derivative products and certain repurchase
agreements, the trades are arranged while preserving the customers' anonymity,
but executed at the last instant on a name give-up basis and settled directly
between the counterparties. In these transactions the Company acts solely as the
matching broker and is never a counterparty. In the second type of transaction,
primarily securities transactions, the Company acts as a matched riskless
principal, connecting the buyer and seller for the transaction on a fully
anonymous basis by having the Company act as the counterparty for each. This
type of transaction is then promptly settled through one of various clearing
institutions with which the Company has contractual arrangements. Except for
limited positions in connection with its municipal securities business
(discussed below), the Company does not in this or other types of trades it
currently brokers seek to take positions for its own account.
Products
The Company's business generally falls into the brokerage of three broad
groups of products: (i) money market instruments, (ii) derivative products and
(iii) securities products.
Money Market Instruments
In general, money market instruments take the form of deposits or other
negotiable instruments placed by one financial institution with another, at an
agreed-upon rate of interest, for a fixed period of time. Money market
instruments primarily include Eurodollar deposits, term and overnight Federal
Fund deposits, Eurocurrency deposits, certificates of deposit, banker's
acceptances and short term commercial paper. The most traditional product in
this category is the Eurodollar deposit, which are U.S. dollar deposits placed
with financial institutions domiciled outside the United States (including
branches of U.S. banks). Eurocurrency deposits are non-dollar deposits placed
outside the country of denomination, such as Euro Swiss Franks, Euro Deutsche
marks and Euro Yen. The Company brokers money market instruments predominantly
to multinational banks.
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Derivative Products
A derivative products transaction generally 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 specified
period of time. This category includes a broad range of sophisticated financial
techniques employed by multinational banks, financial institutions, securities
dealers and corporations. Some of the types of derivatives most frequently
brokered by the Company are interest rate swaps, interest rate options, forward
rate agreements and energy-related derivatives.
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. Interest rate
options, which may also be structured as "cap," "floor" or "swaption"
transactions, are transactions in which one party grants the other the right
(but not the obligation) to receive a payment equal to the amount by which an
interest rate either exceeds (for call options) or is less than (for put
options) a specified strike rate.
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 a 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.
Energy-related derivatives, including options and physical contracts based
on natural gas, electricity and emissions, generally are transactions in which
payments based on fixed and floating commodities indices are exchanged.
The Company also brokers trades in cross currency swaps, in which interest
rate flows denominated in different currencies are exchanged, based on
predetermined notional amounts, in order to convert exposure in one currency to
another. In both the United Kingdom and Tokyo, a large portion of the Company's
derivative products business is non-dollar denominated. The Company brokers
derivative products predominantly to multinational banks and investment banks.
Securities Products
Products brokered by the Company in this category include debt obligations
issued by governments, banks and corporations. The Company brokers transactions
in municipal securities, emerging market debt, U.S. Treasury zero coupon bonds,
U.S. domestic convertible bonds, U.S. Treasury options and other corporate
securities. This category also includes repurchase agreements.
Emerging market debt, including Brady bonds, local sovereign issues and
Eurobonds, as well as options and repurchase agreements on the foregoing, in
1996 constituted the fastest growing area within the securities products
category, and is brokered by specialized teams located in New York, London and
Mexico City and through a joint venture in Buenos Aires. The market coverage of
the teams from these locations is worldwide. The Company's brokerage of emerging
market debt utilizes direct communication phone lines and proprietary,
computerized screen systems located directly in customers' offices.
Repurchase agreements 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. The Company acts as an intermediary primarily for the U.S. Primary
Government Dealer community (banks and dealers licensed to participate in
auctions of U.S. Treasury securities), as well as for a number of U.S. regional
banks and dealers, in the negotiation and execution of U.S. Treasury and
mortgaged-backed repurchase agreements. The Company also disseminates repurchase
agreement market information via its proprietary, computerized screens.
29
<PAGE>
In June 1996, the Company began brokering municipal securities, generally
acting as a matched riskless principal, but also taking limited proprietary
positions. In October 1996, the Company also established a U.S. convertible bond
desk, generally brokering such instruments on a name give-up basis.
The Company also conducts a securities lending business, primarily in U.S.
government and agency securities and U.S. corporate bonds, but also in
non-dollar government securities and corporate bonds, in which it arranges for
the lending of such securities from institutional investor portfolios, in
exchange for cash or other collateral, to securities dealers and other market
participants who need them to manage their positions. The Company also engages
in certain structured finance activities, primarily involving the arranging of
investment agreements between municipal bond issuers and financial investment
agreement providers.
The Company brokers securities products predominantly to banks, investment
banks and other financial institutions.
Communications Network and Information Systems
The Company has a global communications network through which it conducts
its business and a sophisticated computerized information system over which it
receives and transmits current market information. Its teams of computer and
communications specialists provide technological support to the network. The
Company is continually upgrading its technological facilities in order to access
and collate market information and redistribute it virtually instantaneously
throughout its network. Through the continued development and use of proprietary
software, computerized screen displays, digital networks and interactive
capabilities, the Company keeps its communication, technology and information
systems as current as possible.
Due to the need for instantaneous communications, the majority of the
Company's customers are connected to the Company via direct point to point
telephone and data lines around the world. The Company's intranet, with its
sophisticated host computer system and digital facilities, is used to connect
via one network the Company's offices and specific customers who trade in
certain products, including emerging market debt, repurchase agreements,
options, bankers acceptances and certificates of deposit. In this way, all
parties have simultaneous access to market bids and offers.
Most of the markets in which the Company 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 or executing a transaction.
Consequently, the Company's business depends heavily on the use of advanced
telephone equipment, computer systems and pricing software. Direct line voice
communication, real-time computerized screen systems and instantaneous trade
execution for its clients are all imperative for the Company's continued success
in the inter-dealer brokerage business. For this reason, the Company intends to
continue to expand and enhance its communication and information system
networks.
Personnel
As of July 31, 1997, the Company employed 533 brokers, plus an additional
administrative staff, including officers and senior managers, of 165 persons,
for a total employee headcount of 698. Of the brokers, 282 were located in the
U.S. and 175 were located in Europe, with the balance distributed among the
Company's other office locations. None of the Company's employees are covered by
a collective bargaining agreement. The Company considers its relations with
employees to be good and regards compensation and employee benefits to be
competitive with those offered by other inter-dealer brokerage firms.
Properties
The Company has principal offices in each of the following locations: New
York, New York; London, England; Tokyo, Japan; Toronto, Canada; Greenwich,
Connecticut (in the process of moving to Stamford, Connecticut); Mexico City,
Mexico; and Sydney, Australia. The Company leases all of its office space and
has material lease obligations with respect to its New York and London premises.
The Company occupies an aggregate of approximately 49,000 square feet of space
in 2 World Trade Center in downtown New York under leases expiring on various
dates from 2004 through 2007 (with a lease break provision in 2002). The Company
occupies approximately 36,000 square feet of space in downtown London under a
lease expiring in 2018 (with a lease break provision in 2003).
30
<PAGE>
MANAGEMENT OF THE COMPANY
Executive Officers and Directors
Set forth below are the names, ages and positions of the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
Class of
Name Age Director Position
- ---- --- -------- --------
<S> <C> <C> <C>
Gilbert D. Scharf 49 III Chairman of the Board, Chief Executive Officer
and President
Michael J. Scharf 54 III Director
Larry S. Kopp 55 III Director
James W. Stevens 61 I Director
Frederick B. Whittemore 66 I Director
Denis Martin 47 II Director
William B. Wigton 50 II Director
Keith E. Reihl 45 II Director, Chief Financial Officer and Treasurer
(and Chief Operating Officer of EBIC)
Roger E. Schwed 39 -- Vice President, General Counsel and Secretary
Walter E. Dulski 56 -- Executive Vice President of EBI
Michael C. Morrison 39 -- Chief Operating Officer of EBIC's London
Operations
</TABLE>
The Board of Directors of the Company is divided into three classes, each
of which generally serves for a term of three years, with only one class of
directors being elected in each year. In each case, each director holds office
until the next annual meeting of stockholders at which his class of directors is
to be elected, or until his successor is duly qualified and appointed. The term
of the Class I Directors will expire at the Company's annual meeting of
stockholders in 2000; the term of the Class II Directors will expire at the
annual meeting of stockholders in 1998; and the term of the Class III Directors
will expire at the annual meeting of stockholders in 1999.
Certain Biographical and Other Information Regarding the Company's Officers and
Directors
Gilbert D. Scharf, 49, has been Chairman of the Board, President and Chief
Executive Officer of the Company since its inception in 1994. Since April 1993,
Mr. Scharf has been Vice President, Secretary, Treasurer and a director of
Niagara Corporation, a holding Company with operating subsidiaries in the
business of manufacturing cold drawn steel bars ("Niagara"). Since 1989, Mr.
Scharf has been a private investor and Chairman of Scharf Advisors, Inc.
("Scharf Advisors"). 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
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 Company's acquisition
of EBIC, Mr. Scharf became the Vice-Chairman of EBIC and is currently the
Chairman, President and Chief Executive Officer of EBIC, as well as of a number
of its subsidiaries. Mr. Scharf earned a B.A. degree from Duke University. He is
the Chairman of the Board's Executive Committee.
Michael J. Scharf, 54, has been a director of the Company since its
inception in 1994 and, until August 1997, was also Vice President, Secretary and
Treasurer of the Company. Since April 1993, Mr. Scharf has been the Chairman of
the Board, President and Chief Executive Officer of Niagara. 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. He is a member of the Board's Executive Committee.
Larry S. Kopp, 55, has been a director of the Company since its inception
in 1994. Since November 1992, Mr. Kopp has been Managing Director of Frank
Russell and Company, a pension consulting firm which currently has
31
<PAGE>
$700 billion under advisement and $60 billion in investment funds through the
Company's global investment and administrative relationships. 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. He is Chairman
of the Board's Compensation Committee.
James W. Stevens, 61, has been a director of the Company since its August
1996 acquisition of EBIC when he became the designee to the Board of Directors,
pursuant to the Merger Agreement, of EBIC and its largest shareholder WCAS, and
has since been re-elected by the Company's stockholders at their Annual Meeting
in June 1997. Mr. Stevens has 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 of Prudential, 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 & Co. Inc. ("Dillon Read") 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 boards of directors of the following
companies: Biogen, Inc., Markem Corporation, Polyfibron Technologies, Inc., Pen-
Tab Industries, Inc. and Walsh International, Inc. Mr. Stevens received his B.A.
degree from Williams College and his M.B.A. from New York University. He is
Chairman of the Board's Audit Committee.
Frederick B. Whittemore, 66, has been a director of the Company since its
inception in 1994. 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. He is a member of the Board's Audit Committee.
Denis Martin, 47, has been a director of the Company since its inception in
1994. Since April 1997, Mr. Martin has been a management consultant for Dynanet
Ltd., a real estate management company based in the Isle of Man. Since June
1997, Mr. Martin has also been employed as a Managing Director of Euro Brokers
Inc. ("EBI"). Mr. Martin has also been a private investor since July 1993. 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 Markets 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.
William B. Wigton, 50, has been a director of the Company since its August
1996 acquisition of EBIC in connection with the Merger. Mr. 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 from
1996 to 1997 served as a director of Munn, Bernhard & Associates, a registered
investment advisor. From 1981 to 1989, Mr. Wigton was employed at 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. 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. degree from Lynchburg College. He is a member of the Board's Compensation
Committee.
32
<PAGE>
Keith E. Reihl, 45, has been a director of the Company since April 1997,
when he was appointed to the Board of Directors to fill the vacancy created by
the resignation in November 1996 of Donald Marshall, the former Chief Executive
Officer of EBIC, and, since August 1997, Chief Financial Officer and Treasurer
of the Company. Mr. Reihl also is the Chief Operating Officer and Treasurer of
EBIC and a number of its subsidiaries, as well as a member of a number of such
companies' respective boards of directors. Prior to being appointed Chief
Operating Officer in November 1996, Mr. Reihl had served since 1983 as the Chief
Financial Officer of EBIC and a number of its subsidiaries. Prior to that time,
Mr. Reihl was employed for nine years by Price Waterhouse LLP, serving lastly as
Senior Manager. Mr. Reihl is a Certified Public Accountant and received his BA.
degree in Accounting from Elizabethtown College in 1974.
Roger E. Schwed, 39, has been Vice President and General Counsel of the
Company since October 1996 and, in August 1997, also became Secretary of the
Company (having previously been Assistant Secretary). Mr. Schwed is also
Executive Vice President, General Counsel and Secretary of EBIC and Executive
Vice President and Secretary of a number of EBIC's subsidiaries. Prior to
joining the Company, from March 1995 to September 1996, Mr. Schwed was Counsel
at the law firm Skadden, Arps, Slate, Meagher & Flom LLP in New York, and, from
October 1987 to February 1995, an associate at the law firm Cleary, Gottlieb,
Steen & Hamilton. Mr. Schwed received an A.B. degree from Princeton University
in 1979 and a J.D. degree from Columbia University School of Law in 1986.
Walter E. Dulski, 56, became an Executive Vice President of EBIC and a
number of its subsidiaries in 1997. Prior thereto, Mr. Dulski had been a Senior
Vice President of EBIC and such subsidiaries since 1979. Mr. Dulski is also a
director of EBI and a number of other EBIC subsidiaries. Mr. Dulski was a member
of the American Stock Exchange from 1977 to 1984. Mr. Dulski received his B.S.
degree in Economics from Villanova University in 1963.
Michael C. Morrison, 39, has been the Chief Operating Officer of the
Company's EBIC London operations since November 1996. Mr. Morrison also is, and
has been since 1987, the Chief Financial Officer and Secretary of such
operations and a member of the boards of directors of the companies comprising
such operations. Prior to that time, Mr. Morrison was employed for five years
with Price Waterhouse in London, serving lastly as Audit Manager. Mr. Morrison
is a Chartered Accountant and graduated Ardingly College in 1976, receiving his
Diploma in Accountancy from City of London Polytechnic in 1977.
Committees and Compensation of the Board of Directors
The Board of Directors has standing Executive, Audit and Compensation
Committees. The Executive Committee is currently comprised of Messrs. Gilbert
Scharf (Chairman) and Michael Scharf, and is authorized to exercise all powers
and authority of the Board of Directors, except those reserved to the Board by
law, Board resolution or the Company's Restated Certificate of Incorporation or
By-laws.
The Audit Committee is comprised of Messrs. Stevens (Chairman) and
Whittemore and recommends to the Board of Directors the accounting firm to be
appointed as independent accountants for the Company; reviews with the Company's
management and independent accountants the Company's quarterly and annual
operating results; and reviews with the Company's independent accountants the
scope and results of their audit and the adequacy of the Company's internal
accounting procedures and systems.
The Compensation Committee is comprised of Messrs. Kopp (Chairman) and
Wigton and determines the cash and non-cash compensation payable to executive
officers of the Company. The Compensation Committee also administers the
Company's 1996 Stock Option Plan ("Option Plan"). Each of Messrs. Kopp and
Wigton is an independent outside director and a "disinterested person" within
the meaning of Rule 16b-3 under the Exchange Act. There are no "interlocks," as
defined by the Commission, with respect to any director who serves, or for any
part of 1996 has served, as a member of the Compensation Committee.
The members of the Board of Directors are compensated in a manner and at a
rate determined from time to time by the full Board. In August 1996, each
non-employee member of the Board of Directors (then consisting of Messrs.
Stevens, Whittemore, Martin, Kopp and Wigton) received as compensation a
one-time grant of options under the Option Plan to acquire 10,000 shares of
Common Stock, exercisable at $5.00 per share, and vesting in equal 50%
increments on the dates respectively six months and twelve months after the date
of grant. Non-employee directors are also compensated annually in arrears (on or
before the time of the Company's annual meeting) at the rate of $500 for each
Board or Committee meeting attended, plus reimbursement of reasonable expenses
to attend.
33
<PAGE>
Executive Compensation
The following table summarizes compensation paid by the Company and its
subsidiaries, during each of the last three fiscal years, to its Chief Executive
Officer, its four remaining most highly compensated executive officers as of
December 31, 1996, and Donald Marshall, the former Chief Executive Officer of
EBIC who resigned in November 1996 (collectively, the "Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Name and Securities Underlying All Other
Principal Position Year Salary Bonus Options (# of shares) Compensation(1)
- ------------------ ---- ------ ----- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Gilbert D. Scharf, 1996 $168,750 $ -- 250,000 $ --
Chairman of the 1995 -- -- -- --
Board, President 1994 -- -- -- (3)
and Chief Executive
Officer (2)
Keith E. Reihl, 1996 281,250 50,000 100,000 6,419
Chief Financial Officer 1995 270,000 90,000 -- 6,293
and Treasurer 1994 293,750 -- -- 6,302
Walter E. Dulski, 1996 270,000 75,000 30,000 3,673
Executive Vice President 1995 270,000 -- -- 3,673
of EBI 1994 293,750 -- -- 3,805
Roger E. Schwed, 1996 62,500 25,000 50,000 1,780
Vice President, General -- -- -- -- --
Counsel and Secretary(4) -- -- -- -- --
Michael C. Morrison, 1996 157,300 133,705 50,000 382
Chief Operating Officer 1995 158,140 95,951 -- 432
of EBIC's London 1994 140,947 104,704 -- 424
Operations (5)
Donald R.A. Marshall, 1996 450,000 50,000 150,000 14,883
Former Chief Executive 1995 450,000 100,000 -- 14,607
Officer of EBIC (6) 1994 446,833 -- -- 14,673
</TABLE>
(1) Amounts, for each of Messrs. Reihl, Dulski and Marshall, are comprised of
(i) annual premiums ranging from $612 to $1,861 paid by EBI on travel
accident insurance policies providing coverage of $2.5 million for Mr.
Marshall and $1 million for each of Messrs. Reihl and Dulski and (ii)
annual premiums ranging from $1,281 to $11,574 paid by EBI on long-term
disability policies currently providing for, in the event of disability,
monthly payments for life to Mr. Marshall of $13,500 and to Mr. Reihl of
$6,900 and monthly payments for two years to Mr. Dulski of $3,000. Amounts
also include (x) for such persons and Mr. Schwed, $1,000 contributions
annually to the EBI 401(k) Savings Plan and (y) for all Named Executive
Officers, other than Mr. Morrison, annual premiums of $780 paid by EBI on
life insurance policies providing coverage for such officers of two times
the prior year's reported Form W-2 earnings (or base salary and guaranteed
bonus, if higher), up to a maximum coverage of $500,000. Amounts for Mr.
Morrison are comprised of pro rated annual premiums paid by EBIC's London
operations on a group life insurance policy providing coverage for Mr.
Morrison of four times his base salary. Certain perquisites and other
personal benefits that aggregate in each case to less than 10% of the Named
Executive Officer's annual salary and bonus have been omitted pursuant to
item 402(b)(1)(iii)(C)(1) of Regulation S-K.
(2) Mr. Scharf did not draw a salary from the Company prior to the date of the
Merger (August 16, 1996). His compensation disclosed for 1996 relates only
to the partial year following the Merger (reflecting an annual base salary
of $450,000).
34
<PAGE>
(3) In August 1994, Mr. Scharf was issued 498,333 shares of Common Stock at
$.03 per share that were placed in escrow for a period that will end
November 30, 1997 ("Pre-IPO Shares") and were subject to certain
restrictions, including having no value if the Company were forced to
liquidate by its inability to consummate an initial business combination
within two years of its December 1994 IPO. In the IPO, each unit offered
for sale to the public (consisting of one share of Common Stock and two
Warrants) was priced at $6.00. As a result of the Merger, the
characteristics described above with respect to the Pre-IPO Shares, other
than the escrow requirement, no longer apply.
(4) Mr. Schwed did not join the Company until October 1, 1996. His compensation
disclosed for 1996 relates only to a partial year (reflecting an annual
base salary, inclusive of guaranteed bonus, of $250,000). Mr. Schwed's
option grants include 25,000 options granted in February 1997, but relating
to fiscal year 1996.
(5) All amounts for Mr. Morrison reflect the U.S. Dollar equivalent of amounts
actually paid in Pounds Sterling, using average U.S. Dollar/Pounds Sterling
exchange rates of 1.5730, 1.5814 and 1.5376 for 1996, 1995 and 1994,
respectively.
(6) Mr. Marshall resigned as a director of the Company, and as Chief Executive
Officer of Euro Brokers and a number of its subsidiaries, in November 1996.
He will continue to be paid by the Company in his remaining capacity as a
consultant, at an annual compensation rate of $450,000, through November
22, 1999.
Stock Option Grant Table
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1996 to each of the
Named Executive Officers.
<TABLE>
<CAPTION>
Stock Option Grants in Last Fiscal Year
---------------------------------------
Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total Options Option of Stock Price
Underlying Granted to Exercise Term Appreciation for
Options Employees in Price Per Expiration Option Term (2)(3)
Name Granted(1) Fiscal Year Share Date 5% 10%
- ---- ---------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Gilbert Scharf(4) 150,000 11.7% $ 5.00 8/26/06 $ 471,671 $1,195,307
100,000 7.8 5.50 8/26/01 88,141 255,255
Keith Reihl 100,000 7.8 5.00 8/26/06 314,447 796,871
Walter Dulski 30,000 2.3 5.00 8/26/06 94,334 239,061
Roger Schwed(5) 25,000 1.9 5.1875 9/30/06 81,560 206,688
25,000 1.9 4.8125 2/03/07 42,577 139,062
Michael Morrison 50,000 3.9 5.00 8/26/06 157,224 398,436
Donald Marshall(6) 90,000 7.0 5.00 2/22/00 77,443 163,924
60,000 4.7 5.50 2/22/00 21,629 79,283
</TABLE>
(1) All options are grants under the Option Plan which was implemented in
August 1996. All options permit the holder to acquire shares of Common
Stock and, except as noted below, are incentive stock options ("ISOs")
granted on August 27, 1996 at an exercise price of $5.00, which was the
fair market value of the Common Stock on the date of grant (as determined
under the Option Plan), and vest in equal 20% increments on each of the
first through fifth anniversaries of the date of grant. Upon the occurrence
of a "Change in Control" (as defined in the Option Plan), all outstanding
options that are not then exercisable will become immediately exercisable.
(2) These amounts reflect the difference obtained by subtracting (i) the
product of the option's exercise price per share of Common Stock and the
total number of shares of Common Stock underlying the option from (ii) the
stated rate of interest (5% or 10%) applied, on a compounded basis over the
term of the option, to the product
35
<PAGE>
of the fair market value of a share of Common Stock on the option grant
date and the total number of shares of Common Stock underlying the option.
(3) These amounts represent certain assumed rates of appreciation only, in
accordance with Commission rules. Actual gains, if any, on stock option
exercises are dependent upon the future market performance of the Common
Stock and the date(s) on which the options are exercised, and may be
significantly greater or less than the amounts reflected in the table.
(4) Mr. Scharf's options consist of 100,000 ISOs and 150,000 non-qualified
stock options. Mr. Scharf's ISOs were granted at an exercise price of
$5.50, or 110% of fair market value of the Common Stock on the date of
grant, and vest in equal 20% increments on each of the first through fourth
anniversaries of the date of grant and on January 1, 2001.
(5) Mr. Schwed's options consist of 25,000 that were granted on October 1,
1996, at an exercise price $5.1875, which was the then-prevailing fair
market value of the Common Stock, and 25,000 that were granted on February
4, 1997 (relating to fiscal year 1996), at an exercise price of $4.8125,
which was above the then-prevailing $4.00 fair market value of the Common
Stock.
(6) Mr. Marshall's options consist of 60,000 ISOs and 90,000 non-qualified
stock options. Mr. Marshall's ISOs were granted at an exercise price of
$5.50, or 110% of the fair market value of the Common Stock on the date of
grant. All of Mr. Marshall's options vest in equal one-third increments on
November 22 of each of 1997, 1998 and 1999.
Option Exercises and Fiscal Year End Values
The Company's Option Plan was implemented in August 1996 and, accordingly,
at the Company's December 31, 1996 fiscal-year end, the number of options held
by each Named Executive Officer was the same as the total number granted to him
in fiscal year 1996 (as set forth in the table above). At December 31, 1996,
none of the options granted in 1996 to any of the Named Executive Officers was
exercisable (and, accordingly, none had been exercised). In addition, based on
the December 31, 1996 closing sale price for the Common Stock of $3-1/16 per
share, none of such options were "in-the-money" (i.e., none had an exercise
price below such closing sale price).
Employment Agreements
Each of the Named Executive Officers has an employment agreement with the
Company or one of its subsidiaries, except for Mr. Marshall, who has a
consulting agreement. Each of Mr. Scharf's and Mr. Reihl's agreements
(respectively with the Company and EBIC) became effective August 16, 1996, for
initial three-year terms, with annual, automatic one-year extensions beginning
on the second anniversary of the effective date unless either party gives notice
of non-renewal on or prior to such anniversary. These agreements provide Mr.
Scharf and Mr. Reihl with minimum annual base salaries of $450,000 and $300,000,
respectively, as from time-to-time reviewed and increased by the employer's
board of directors. Each agreement provides for annual bonuses that will be
determined by the board, but only if the book value per share of Common Stock
increases during the applicable period or in accordance with any annual
incentive plan adopted by the employer, 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 such agreements) or by the
executive other than for "Good Reason" (as defined in such agreements), he will
be entitled to no further payments under his agreement. If the executive's
employment is terminated for "Disability" (as defined in such agreements), he
will be entitled to an additional six months of base salary, followed by such
benefits as are provided under any 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 (a
"Salary Continuation Period"), 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
re-employed and is entitled to similar benefits from his new employer. Under the
agreements, the executive is subject to certain confidentiality obligations and,
during any Salary Continuation Period or, if the executive's employment is
terminated by the employer for "Cause" or by the executive other than for "Good
Reason," during the one-year period following any such termination (the
"Non-Compete Period"), is obliged not to engage in certain competitive
businesses (in consideration of the employer continuing to pay the executive at
a rate equal
36
<PAGE>
to one-half of his base salary), not to solicit employees of the employer (or
its subsidiaries) to work in such competitive businesses and not to solicit
customers of the employer (or its subsidiaries) for such competitive businesses.
Mr. Schwed's employment agreement is with the Company and is similar to the
ones described above, except that (i) it has a two-year initial term from an
effective date of October 1, 1996 (with annual, automatic one-year extensions
beginning on the first anniversary of the effective date unless either party
gives notice of non-renewal on or prior to such anniversary), (ii) it provides
for a minimum annual base salary (inclusive of minimum annual bonus) of
$250,000, (iii) it does not require an increase in the Company's per share book
value for the payment of discretionary bonuses, (iv) it permits unilateral
termination by the executive upon 60 days prior written notice, (v) the
continuation of base salary after a termination by the employer without "Cause"
or by the executive for "Good Reason" will terminate to the extent the executive
is re-employed and is entitled to similar base salary from his new employer and
(vi) the Non-Compete Period is six months, with the employer having the choice
to enforce executive's covenant not to engage in certain competitive businesses
during such time by continuing to pay the executive at a rate equal to his base
salary and minimum bonus.
Mr Dulski's employment agreement is with EBI and has a term that began on
September 1, 1996 and ends on June 30, 1999, subject to automatically continuing
past such termination date unless and until either party gives the other not
less than six months prior written notice of termination expiring on or after
such termination date. Under the agreement, Mr. Dulksi's base salary is
$270,000, and he is entitled to be considered for discretionary semi-annual
bonuses. Upon the executive's death or termination of the executive's employment
unilaterally by the executive or by the employer for "Cause" (as defined in the
agreement), he is entitled to no further payments under the agreement. The
agreement provides for certain confidentiality obligations, a six-month
post-termination non-competition period with respect to not engaging in certain
competitive businesses or soliciting clients of the employer (in consideration
of the continuance of the executive's base salary during such period), and a
one-year post-termination period with respect to non-solicitation of employees.
Mr. Morrison's employment agreement is with Euro Brokers International
Limited and had a fixed term that began on June 1, 1994 and ended on May 31,
1996, and an automatic rolling term that continues past such termination date
unless and until either party gives the other not less than six months prior
written notice of termination. Under the agreement, Mr. Morrison's base salary
is (pound)100,000, and he is entitled to be considered for discretionary
semi-annual bonuses. The agreement provides for certain confidentiality
obligations, a six-month non-competition period (running from the earlier of the
date a termination notice is given and the date the executive's employment is
terminated) with respect to not engaging in certain competitive businesses or
soliciting clients of the employer, and a one-year period (running from the same
date) with respect to non-solicitation of employees.
Mr. Marshall's consulting agreement is with EBIC and has a fixed term that
began on November 23, 1996 and ends on November 22, 1999. During the term of the
agreement, Mr. Marshall receives annual compensation of $450,000, reimbursement
of certain expenses and continued coverage under certain life, medical, accident
and disability insurance plans. Following the term, the agreement provides for
the continuance for certain defined periods of certain of the expense
reimbursement provisions and, subject to certain availability and cost limits,
Mr. Marshall's medical insurance coverage. During the first year of the term,
the Company is obligated to use its reasonable best efforts to arrange for the
private sale or sales, at mutually agreed prices, of up to 50% of the shares of
Common Stock owned by Mr. Marshall. During the first two years of the term, Mr.
Marshall is obligated not to engage in certain competitive businesses. During
all three years of the term, Mr. Marshall is also obligated not to solicit any
clients of EBIC (or its subsidiaries) for such competitive businesses and not to
solicit any employees of EBIC (or its subsidiaries) or assist any such
competitive businesses to hire such employees. Certain provisions in the
agreement relating to the right of EBIC to purchase shares of Common Stock held
by Mr. Marshall using the proceeds of a key man life insurance policy with
respect to Mr. Marshall are, with the lapsing of such policy in March 1997, no
longer of any effect.
37
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1994, the Company issued an aggregate of 833,333 shares of Common
Stock to its six initial stockholders, consisting of Messrs. G. Scharf, M.
Scharf, Kopp, Whittemore, Martin and William D. Birch (a former director of the
Company who resigned, effective as of the Merger, and was replaced by Mr.
Wigton), for an aggregate price of $25,000, or $.03 per share. Pursuant to
agreements entered into at the time between the holders of all such shares (the
"Pre-IPO Shares") and the Company, the Pre-IPO Shares were subject to certain
obligations and restrictions (which are no longer applicable) and were placed in
escrow for a period that will end on November 30, 1997. Until such time, the
beneficial owners of the Pre-IPO Shares are not able to sell or otherwise
transfer such shares (with certain limited exceptions), but retain full and
unrestricted voting rights.
Through August 1996, the Company paid $5,000 per month to Scharf Advisors
for office space and certain office and secretarial services. In addition,
Scharf Advisors received reimbursement for certain out-of-pocket expenses
incurred in connection with activities on behalf of the Company. Scharf Advisors
is wholly-owned by Gilbert Scharf, the Chairman, President and Chief Executive
Officer of the Company. Management of the Company believes that the arrangement
with Scharf Advisors was on terms at least as favorable as would have been
available from an unaffiliated third party.
The Merger was consummated on August 16, 1996, with EBIC becoming a
wholly-owned subsidiary of the Company. In the Merger, former shareholders of
EBIC (some of whom, WCAS and Messrs. Donald R.A. Marshall, Alistair H. Johnstone
and Brian G. Clark, as a result became beneficial owners of more than 5% of the
Common Stock, and some of whom, Messrs. Keith E. Reihl, Walter E. Dulski and
Michael C. Morrison, are currently deemed executive officers of the Company)
received, in exchange for each share of EBIC common stock they held at the time
of the Merger, consideration consisting of, after giving effect to certain
adjustments and subject to certain escrow arrangements, approximately (i) 2.70
shares of Common Stock, (ii) 4.53 Series B Warrants and (iii) $13.14 in cash.
In connection with the Merger, the Company entered into the Registration
Rights Agreement with WCAS and WCAS Information and certain related investors,
certain members of EBI management (including Messrs. Marshall, Reihl, Dulski,
Johnstone and Clark) and the Company's initial stockholders (Messrs. G. Scharf,
M. Scharf, Martin, Kopp, Whittemore and Birch) providing for two demand
registration rights, and certain "piggy-back" registration rights, with respect
to their shares of Common Stock. The first demand may only be initiated by
holders of at least a majority of the total shares of Common Stock issued in the
Merger to WCAS and certain related investors, 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 shares of Common Stock held by all
stockholders who are parties to the agreement.
In connection with the Merger, the Company also entered into the Security
Transfer Agreement with certain of its security holders, including WCAS, WCAS
Information and Messrs. G. Scharf, M. Scharf, Marshall, Reihl, Dulski, Johnstone
and Clark, obligating such holders, if the Company consummates a Common Stock
for Warrants exchange offer prior to November 30, 1997, to tender into such
exchange offer at least such portion of the Warrants then held by such holder as
is proportionate to the percentage of Warrants tendered by all other Warrant
holders.
Also in connection with the Merger, the Company entered into an escrow
agreement pursuant to which, among other things, 10% of the shares of Common
Stock issued in the Merger to former EBIC stockholders (including WCAS and
Messrs. Marshall, Reihl, Dulski, Morrison, Johnstone and Clark) were placed in
escrow to pay, among other things, indemnities, if any, that become owed to the
Company under the Merger agreement. The escrow period has expired without any
claim being made for the escrow shares and, accordingly, such shares are in the
process of being released, without adjustment.
Gilbert D. Scharf and Michael J. Scharf are brothers. There are no other
family relationships among the Company's directors, executive officers or
persons nominated or chosen by the Company to become a director or executive
officer.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information and certain pro forma
information after giving effect to the Exchange Offer (assuming the tender of
all Warrants) regarding the beneficial ownership of shares of Common Stock and
Warrants as of September 30, 1997, by (i) those persons or groups who
beneficially own more than 5% of the outstanding Common Stock, (ii) each
director of the Company, (iii) each Named Executive Officer of the Company and
(iv) all directors and executive officers of the Company as a group (based upon
public filings and information furnished by such persons).
<TABLE>
<CAPTION>
Prior to Exchange Offer After Exchange Offer +
----------------------------------------------------------- ----------------------
% of % of Common
No. of Common % of Stock No. of
Common Stock No. of Warrants Beneficially Common %
Name (1) Shares(2) Owned(3) Warrants(4) Owned(5) Owned(6) Shares(7) Owned(8)
- -------- --------- -------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Gilbert D. Scharf (9)(10) 881,666 9.8 716,666 4.8 16.4 1,001,110 8.7
Michael J. Scharf (9)(10) 388,667 4.3 333,334 2.2 7.8 444,222 3.9
Donald R.A. Marshall (10) 583,315 6.5 895,631 6.0 14.9 732,586 6.4
Denis Martin (9)(11) 55,000 * 10,000 * * 56,666 *
James W. Stevens 20,000 * -- -- * 20,000 *
Frederick B. Whittemore (9) 35,000 * 50,000 * * 43,333 *
Larry S. Kopp (9) 43,000 * 21,000 * * 46,500 *
William B. Wigton 10,000 * -- -- * 10,000 *
Keith E. Reihl (10) 155,771 1.7 228,010 1.5 4.2 193,772 1.7
Walter E. Dulski (10) 151,517 1.7 244,377 1.6 4.3 192,246 1.7
Roger E. Schwed 5,000 * -- -- * 5,000 *
Michael C. Morrison 22,805 * 21,505 * * 26,389 *
Alistair H. Johnstone (10) 323,160 3.6 542,704 3.6 9.1 413,610 3.6
Brian G. Clark (10) 193,577 2.1 318,369 2.1 5.5 246,638 2.2
Welsh, Carson, Anderson
& Stowe VI, L.P.
("WCAS") (10)(12) 2,333,174 26.0 3,918,254 26.0 48.6 2,986,216 26.1
All executive officers and
directors as a group
(11 persons) 1,768,426 19.4 1,624,892 10.8 31.7 2,039,238 17.6
</TABLE>
+ Assumes that all outstanding Warrants are exchanged for shares of Common
Stock in the Exchange Offer at the Exchange Ratio.
* Indicates less than 1%.
(1) The address of each stockholder, other than WCAS, is c/o Maxcor Financial
Group Inc., Two World Trade Center, 84th Floor, New York, New York 10048.
The address of WCAS is 320 Park Avenue, Suite 2500, New York, New York
10022.
(2) Reflects shares of Common Stock held of record, plus shares of Common Stock
issuable upon exercise of stock options held by each stockholder that are
currently exercisable or exercisable within 60 days ("Exercisable
Options"), but does not include shares of Common Stock issuable upon
exercise of Warrants held by such stockholder (see footnote 4 below). The
exercise price for each Exercisable Option is $5.00 per share. Beneficial
ownership of Exercisable Options is as follows: Denis Martin - 10,000;
James W. Stevens - 10,000; Frederick B. Whittemore - 10,000; Larry S. Kopp
- 10,000; William B. Wigton - 10,000; Gilbert D. Scharf - 50,000; Michael
J. Scharf - 2,000; Donald R.A. Marshall - 50,000; Keith E. Reihl - 20,000;
Walter E. Dulski - 6,000; Roger E. Schwed - 5,000; Michael C. Morrison -
10,000; Brian G. Clark - 4,000; and all executive officers and directors as
a group - 143,000.
(3) Calculated as the number of shares of Common Stock held of record by the
stockholder, plus shares issuable upon exercise of Exercisable Options,
divided by the 8,949,656 shares of Common Stock outstanding as of
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<PAGE>
October 14, 1997, plus any shares issuable upon exercise of Exercisable
Options held by the stockholder (but not by any other stockholders).
(4) All of the outstanding Warrants are immediately exercisable. Accordingly,
shares of Common Stock underlying the Warrants are deemed under Commission
rules to be beneficially owned by the holder thereof. Accordingly, the
total beneficial ownership of shares of Common Stock prior to the Exchange
Offer by persons or groups identified in this table can be calculated as
the sum of the Warrants held (as identified in this column) and the number
of shares of Common Stock held of record (as identified in the first column
of this table).
(5) Based on an aggregate of 15,018,276 Warrants outstanding.
(6) Reflects (i) shares of Common Stock beneficially owned, including shares of
Common Stock issuable upon exercise of Exercisable Options and Warrants, by
such person or entity as a percentage of (ii) the outstanding Common Stock
as of October 14, 1997, plus any shares issuable upon exercise of the
Exercisable Options and Warrants held by such person or entity (but not any
other holder).
(7) Reflects (i) shares of Common Stock owned of record, (ii) shares of Common
Stock beneficially owned as a result of Exercisable Options and (iii) on a
pro forma basis, shares of Common Stock issuable upon exchange of Warrants
in the Exchange Offer.
(8) Calculated as (a) (i) the number of shares of Common Stock held of record
by the stockholder, plus (ii) shares of Common Stock beneficially owned by
such stockholder as a result of Exercisable Options, plus (iii) on a pro
forma basis, shares of Common Stock issuable to such stockholder upon
exchange of his or its Warrants in the Exchange Offer, divided by (b) the
8,949,656 shares of Common Stock outstanding as of October 14, 1997, plus
any shares issuable upon exercise of Exercisable Options held by the
stockholder (but not by any other stockholders).
(9) Certain of the shares of Common Stock indicated as owned by the stockholder
are Pre-IPO Shares, held in escrow with Continental Stock Transfer & Trust
Company, as escrow agent, for a period ending on November 30, 1997. During
the remaining balance of such escrow period, the beneficial owners of such
shares retain full and unrestricted voting rights but are not able to sell
or otherwise transfer them (with certain limited excep tions). Beneficial
ownership of Pre-IPO Shares is as follows: Gilbert D. Scharf - 498,333;
Michael J. Scharf - 220,000; Mr. Martin - 40,000; Mr. Whittemore - 25,000;
Mr. Kopp - 25,000; and all executive officers and directors as a group -
808,333.
(10) All Warrants held by the stockholder are subject to the terms of the
Security Transfer Agreement entered into in connection with the Merger that
obligates the holder thereof to tender into the Exchange Offer at least
such portion of the Warrants then held by such stockholder as is
proportionate to the percentage tendered by all other Warrant holders.
(11) Includes 5,000 shares of Common Stock beneficially owned jointly with Mr.
Martin's wife.
(12) Includes 39,258 shares of Common Stock and 65,928 Warrants owned by WCAS
Information. Information with respect to WCAS and WCAS Information and
their respective holdings are derived from their joint Schedule 13D with
respect to the Common Stock, dated August 16, 1996, and filed with the
Commission on August 23, 1996 ("WCAS 13D"). As set forth therein, WCAS and
WCAS Information filed a single joint Schedule 13D because they may be
deemed to constitute a "group" within the meaning of Section 13(d)(3) of
the Exchange Act. Individual general partners (including related trusts) of
the limited partnerships serving as general partners of WCAS and WCAS
Information, who in the aggregate directly own 113,644 shares of Common
Stock and 190,848 Warrants (based on the WCAS 13D and Form 3 and Form 4
filings by such persons), may be deemed to have beneficial ownership of the
shares of Common Stock and Warrants owned by WCAS and WCAS Information. As
set forth in the WCAS 13D, such persons disclaim any such beneficial
ownership other than for any shares of Common Stock or Warrants such
persons own by virtue of their indirect pro rata interest, as a partner of
the applicable general partner of WCAS or WCAS Information, in the shares
of Common Stock and Warrants owned by WCAS and WCAS Information. In
addition, as set forth in the WCAS 13D, WCAS and WCAS Information disclaim
any beneficial ownership of such persons' shares of Common Stock.
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company is authorized to issue 30,000,000 shares of Common Stock, par
value $.001 per share. At October 14 1997, the Company had outstanding 8,949,656
shares of Common Stock.
The holders of the Company's Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors then being elected. The Board of
Directors of the Company is divided into three classes, each of which generally
serves for a term of three years, with only one class of directors being elected
in each year. In each case, each director will hold office until the next annual
meeting of stockholders at which his class of directors is to be elected, or
until his successor is duly qualified and appointed. The holders of 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 liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all 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 Common Stock. Holders of
shares of Common Stock, as such, have no redemption, preemptive or other
subscription rights, and there are no conversion provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock to be issued in the Exchange Offer as set forth in this
Prospectus will be, fully paid and nonassessable. Under the Company's
Certificate of Incorporation (i) holders of Common Stock may not act by written
consent and (ii) the ability to call special meetings of stockholders is limited
to the Chairman or President of the Company or to an affirmative vote of a
majority of the Board of Directors.
Warrants
As of October 14 1997, the Company had outstanding 7,566,666 Series A
Warrants and 7,451,610 Series B Warrants. Each of the outstanding Warrants (both
series) currently entitles the holder thereof to purchase from the Company one
share of Common Stock at an exercise price of $5.00 per share subject to
adjustment in certain circumstances. The Warrants expire on November 30, 2001.
The Company may call the Warrants for redemption, in whole or in part, at a
price of $.01 per Warrant at any time upon not less than 30 days prior written
notice to the Warrant holders, if the last sale price of the Common Stock has
been at least $8.50 per share for at least 20 consecutive trading days ending on
the third day prior to the date on which the notice of redemption is given. The
Series A Warrants and the Series B Warrants were issued in registered form under
Warrant Agreements between the Company and Continental Stock Transfer & Trust
Company, as Warrant Agent, dated November 30, 1994 and June 5, 1996,
respectively.
The exercise price, number of shares of Common Stock issuable on exercise
of the Warrants and the redemption price of the Warrants are subject to
adjustment in certain circumstances, including a stock dividend,
recapitalization, reorganization, merger or consolidation of the Company.
However, the Warrants are not subject to adjustment for issuances of Common
Stock at a price below the exercise price of the Warrants.
The Company has the right, in its sole discretion, to decrease the exercise
price of the Warrants for a period of not less than 30 days on not less than 30
days prior written notice to the Warrant holders. In addition, the Company has
the right, in its sole discretion, to extend the expiration date of the Warrants
on five business days prior written notice to the Warrant holders.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check, payable to the Company) for the number of Warrants being
exercised. The Warrant holders do not have the rights or privileges of holders
of the Common Stock prior to the exercise of the Warrants.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such 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 Warrants.
41
<PAGE>
No fractional shares will be issued upon exercise of the Warrants. However,
if a Warrant holder exercises all Warrants then owned of record by him, the
Company will pay to such Warrant holder in lieu of the issuance of any
fractional share which is otherwise issuable to such Warrant holder, an amount
in cash, based on the market value of the Common Stock on the last trading day
prior to the date of exercise.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of preferred stock, par value $.001 per share ("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, subject to NASD rules, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
Common Stock. The Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. At October 14, 1997, no shares of Preferred Stock were
issued and outstanding.
Series A Junior Participating Preferred Stock
Pursuant to the Company's adoption of the Rights Plan in December 1996, the
Company authorized the creation of the Junior Preferred Stock, and reserved
shares thereof for issuance upon any exercise of the Rights granted under the
Rights Plan. In December 1996, pursuant to the Rights Plan, the Rights were
dividended among each holder of Common Stock, with such holders receiving one
Right, expiring December 6, 2006, for each share of Common Stock held of record.
Each Right entitles the holder to purchase from the Company, under certain
specified circumstances, one one-hundredth of a share of Junior Preferred Stock
for $22.50, subject to adjustment. Prior to the time that the Rights become
exercisable, the Rights trade with, and are represented solely by the
certificate for, the Common Stock. At the time the Rights become exercisable,
separate certificates will be distributed, and the Rights could begin to trade
separately from the Common Stock. Rights generally become exercisable ten days
after a person or group acquires 15% or more beneficial ownership, or a person
or group that beneficially owns 15% or more of the Common Stock acquires an
additional 5% or more beneficial ownership, of the outstanding Common Stock, or
a person or group commences a tender or exchange offer for 15% or more of the
Common Stock (or, if already a 15% or more holder, that would result in its
acquisition of an additional 5% beneficial ownership). Upon occurrence of such
event (other than pursuant to an offer for all outstanding shares of Common
Stock that the independent directors of the Company determine to be fair to and
otherwise in the best interests of the Company and its stockholders), and
subject to the Rights no longer being redeemable, each Right would entitle the
holder thereof (other than the person or group triggering such exercisability)
to buy (with certain limited exceptions) Common Stock (or, in certain
circumstances, a combination of Common Stock, other securities, cash or other
property) having a market value of twice the exercise price of each Right. If
the Company is involved in certain mergers or other business combinations, or
50% or more of the Company's assets, cash flow or earning power is sold or
transferred at any time after the Rights become exercisable, the Rights will be
modified so as to entitle the holder thereof (other than the person or group
triggering such exercisability) to buy a number of the acquiring company's
common shares having a market value of twice the exercise price of each Right.
Rights are redeemable by the Company at $.01 each at any time (with certain
limited exceptions) prior to the tenth day after a person or group acquires 15%
or more beneficial ownership, or a person or group that beneficially owns 15% or
more of the Common Stock acquires an additional 5% or more beneficial ownership,
of the outstanding Common Stock.
One Right will be issued with (and solely represented by) each share of
Common Stock issued to a Warrant holder in exchange for his or her Warrants
pursuant to the Exchange Offer. The foregoing description of the Rights and the
Rights Plan is qualified in its entirety by reference to the Rights Agreement,
dated as of December 6, 1996, between the Company and Continental Stock Transfer
& Trust Company, as Rights Agent, which is incorporated herein by reference.
Units
In its IPO, the Company's issuance of Common Stock and Series A Warrants
took the form of the issuance of Units, with each Unit consisting of one share
of Common Stock and two Series A Warrants. The securities constituting the Units
became separately transferable upon the closing of the IPO. The Units are
sporadically quoted on the OTC Bulletin Board under the symbol "MAXFU."
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<PAGE>
Delaware Anti-Takeover Law
Under Section 203 of the Delaware General Corporation Law ("Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock 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 bylaws not to be governed by the Delaware anti-takeover law
(the Company 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 corporation'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 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
a beneficial owner of 15% or more of a Delaware corporation's voting stock. The
Delaware anti-takeover law could have the effect of delaying, deferring or
preventing a change in control of the Company.
Limitation of Liability and Indemnification Matters
The Company's Restated Certificate of Incorporation provides that directors
of the Company shall not be personally liable to the Company or 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 Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a known violation of law, (iii) under Section 174 of
the Delaware General Corporation Law (the "DGCL"), relating to prohibited
dividends or distributions or the repurchase or redemption of stock, or (iv) for
any transaction from which the director derives an improper personal benefit. If
the DGCL is amended to authorize the further elimination or limitation of
directors' liability, then under the Company's Restated Certificate of
Incorporation the liability of directors of the Company shall automatically be
eliminated or limited to the fullest extent provided by law. The Company's
Restated Certificate of Incorporation and By-laws also contain provisions to
indemnify the directors, officers, employees and other agents of the Company to
the fullest extent permitted by the DGCL, as it may be amended from time to
time. Currently, Section 145 of the DGCL generally permits a corporation to
indemnify its directors, officers, employees and other agents against expenses,
judgments, fines and amounts paid in settlement incurred by them in connection
with any pending, threatened or completed action or proceeding if the director,
officer, employee or agent 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, except that in an action by or
in the right of the corporation (a "derivative action"), 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 there are certain
court determinations that, in view of all of the circumstances of the case,
indemnification (for such expenses that the court deems proper) is fair and
reasonable. The Company's Restated Certificate of Incorporation and By-laws also
provide that expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action for which such officer or director may be entitled to indemnification
shall be paid by the Company in advance of the final disposition of such action
upon receipt of certain undertakings by such officer or director.
43
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of the United States federal
income tax consequences to holders of Warrants tendering their Warrants pursuant
to the Exchange Offer. The Exchange Offer will not affect the United States
federal income tax treatment of holders who do not participate in the Exchange
Offer. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations, administrative pronouncements and
judicial decisions, all as in effect and existing on the date hereof and all of
which are subject to change, possibly with retroactive effect. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought by the
Company.
This summary applies only to those holders who have held Warrants and will
hold the Common Stock received in exchange therefor as capital assets pursuant
to Section 1221 of the Code, and does not address the Federal income tax
consequences to holders who are subject to special rules (such as insurance
companies, financial institutions, tax-exempt organizations and broker-dealers)
or special rules with respect to integrated transactions (such as certain
hedging transactions) or certain straddle transactions.
As used in the discussion which follows, the term "U.S. Holder" means a
beneficial owner of Warrants that, for United States federal income tax
purposes, is (i) a citizen or resident of the United States, (ii) a corporation,
or other entity taxable as a corporation, created or organized in or under the
laws of the United States or of any political subdivision thereof, or (iii)
otherwise subject to United States federal income taxation on a net income basis
with respect to worldwide income. The term "Non-U.S. Holder" means a holder of
Warrants that is, for United States federal income tax purposes, not a U.S.
Holder.
Tax Consequences to U.S. Holders
Although the matter is not entirely free from doubt, the Company believes
that the exchange of Warrants for shares of Common Stock pursuant to the
Exchange Offer will be treated as a taxable transaction and will result in the
following Federal income tax consequences to participating U.S. Holders of
Warrants:
1. A participating U.S. Holder of a Warrant will recognize gain or loss
equal to the excess of (i) the sum of the fair market value of the shares of
Common Stock received in the Exchange Offer and any cash received in lieu of a
fractional share of Common Stock over (ii) the participating U.S. Holder's tax
basis in the Warrants exchanged therefor;
2. Such gain or loss will be capital gain or loss if the Warrants were
capital assets in the hands of a participating U.S. Holder;
3. The tax basis of the shares of Common Stock received in the Exchange
Offer will be equal to the fair market value of such shares of Common Stock
received in the Exchange Offer; and
4. The holding period for the shares of Common Stock received in the
Exchange Offer will commence on the day following the consummation of the
Exchange Offer if the shares of Common Stock are capital assets in the hands of
a participating U.S. Holder.
Information Reporting and Backup Withholding
The "backup" withholding and information reporting requirements on the
gross value of the shares of Common Stock will apply to the receipt of the
Common Stock upon the exchange of the Warrants. The Company will be required to
withhold tax at a rate of 31% if the U.S. Holder, among other things, (i) fails
to furnish his or her social security number or other taxpayer identification
number ("TIN") to the Company, (ii) furnishes to the Company an incorrect TIN,
(iii) fails to provide the Company with a certified statement, signed under
penalties of perjury, that the TIN provided to the Company is correct and that
the U.S. Holder is not subject to backup withholding or (iv) fails to report
properly interest and dividends on his or her tax return. A U.S. Holder who does
not provide the Company with his or her correct TIN may be subject to penalties
under the Code. Certain U.S. Holders, including corporations, are not subject to
backup withholding if their exempt status is properly established.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be allowed as a credit against such holder's
United States Federal income tax liability and may entitle such holder to a
refund, provided the required information is furnished to the Service.
44
<PAGE>
Tax Consequences to Non-U.S. Holders
A Non-U.S. Holder generally will not be subject to United States federal
income tax on any gain realized in connection with the exchange of Warrants for
shares of Common Stock pursuant to the Exchange Offer, unless (i) (x) the gain
is effectively connected with a trade or business carried on by the Non-U.S.
Holder within the United States or (y) if a tax treaty applies, the gain is
attributable to the United States permanent establishment maintained by the
Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual,
such holder is present in the United States for 183 days or more in the taxable
year of exchange and certain other conditions are satisfied or (iii) the
Non-U.S. Holder is subject to tax pursuant to provisions of the Code applicable
to United States expatriates.
Information Reporting and Backup Withholding
Delivery to a Non-U.S. Holder of shares of Common Stock in exchange for
Warrants is subject to both backup withholding at the rate of 31% and
information reporting unless the beneficial owner provides the Company with a
completed IRS Form W-8 which certifies under penalties of perjury that such
owner is a Non-U.S. Holder who meets all the requirements for exemption from
United States federal income tax on any gain from the sale or exchange of the
Warrants.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be allowed as a credit against such non-U.S.
Holder's United States federal income tax liability and may entitle such holder
to a refund, provided the required information is furnished to the Service.
ALL HOLDERS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN THE
EXCHANGE OFFER.
LEGAL MATTERS
The validity of the Common Stock offered hereby is being passed upon
for the Company by Graubard Mollen & Miller, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996 that are incorporated by reference in this Prospectus, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
45
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information...................................................... 2
Incorporation of Certain Documents by
Reference............................................................. 3
Prospectus Summary......................................................... 4
Risk Factors............................................................... 9
Selected Consolidated Financial Information................................ 13
Certain Pro Forma Effects of the
Exchange Offer........................................................ 15
Price Range of the Company's Securities.....................................16
History of the Company......................................................17
Background of the Exchange Offer........................................... 18
The Exchange Offer..........................................................20
Business of the Company.....................................................28
Management of the Company...................................................31
Certain Relationships and Related
Transactions...........................................................38
Principal Stockholders......................................................39
Description of Capital Stock................................................41
Certain United States Federal
Income Tax Considerations...............................................44
Legal Matters...............................................................45
Experts.....................................................................45
EXCHANGE AGENT
Continental Stock Transfer
& Trust Company
2 Broadway
New York, New York 10004
Attention: Reorganization Department
Telephone: (212) 509-4000, ext. 535
Facsimile: (212) 509-5150
INFORMATION AGENT
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Telephone: (800) 207-3158
46
<PAGE>
EXHIBIT 9 (a)(ii)
10
<PAGE>
LETTER OF TRANSMITTAL
to Tender
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
and
SERIES B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
of
MAXCOR FINANCIAL GROUP INC.
Pursuant to the Prospectus, dated October 16, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON NOVEMBER
13, 1997, UNLESS EXTENDED. THE EXCHANGE OFFER IS CONDITIONED UPON AT LEAST 95%
OF THE AGGREGATE OUTSTANDING WARRANTS BEING VALIDLY TENDERED AND NOT WITHDRAWN
AND CERTAIN OTHER CONDITIONS. WARRANTS TENDERED FOR EXCHANGE MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE AND, UNLESS PREVIOUSLY ACCEPTED FOR
EXCHANGE, AT ANY TIME AFTER 12:00 MIDNIGHT NEW YORK CITY TIME ON DECEMBER 12,
1997.
EXCHANGE AGENT:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Continental Stock Transfer Continental Stock Transfer Continental Stock Transfer &
& Trust Company & Trust Company Trust Company
2 Broadway 2 Broadway 2 Broadway, 19th Floor
New York, NY 10004 New York, NY 10004 New York, NY 10004
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
(registered or certified mail
recommended)
</TABLE>
By Facsimile:
Continental Stock Transfer
& Trust Company
Attn: Reorganization Department
Fax No. (212) 509-5150
(For Eligible Institutions Only)
Confirm by telephone:
Telephone no. (212) 509-4000, ext. 535
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE
TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW
AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
The undersigned acknowledges receipt of the Prospectus, dated
October 16, 1997 ("Prospectus"), of Maxcor Financial Group Inc. ("Company")
which, together with this Letter of Transmittal ("Letter of Transmittal"), as
either may be amended from time to time, constitute the Company's offer
("Exchange Offer"), upon the terms and subject to the conditions set forth in
the Prospectus and this Letter of Transmittal, to exchange 0.1667 of a share of
its common stock, par value $.001 per share ("Common Stock"), for each and every
of its issued and outstanding Redeemable Common Stock Purchase Warrants ("Series
A Warrants") and Series B Redeemable Common Stock Purchase
11
<PAGE>
Warrants ("Series B Warrants" and, together with the Series A Warrants, the
"Warrants"). As described in more detail in the Prospectus, the Company will
issue one whole share of Common Stock in exchange for every six Warrants (either
Series A Warrants, Series B Warrants or both) tendered and accepted by the
Company for exchange pursuant to the Exchange Offer. No fractional shares of
Common Stock will be issued as a result of the Exchange Offer. Holders of
Warrants who tender a number of Warrants not evenly divisible by six and who
would otherwise therefore be entitled to a fractional share of Common Stock will
receive cash in lieu of such fractional amount. Additionally, under the
Company's Stockholder Rights Plan, one Right to purchase one one-hundredth of a
share of the Company's Series A Junior Participating Preferred Stock will be
issued with and solely represented by each share of Common Stock that is issued
to a Warrant holder in exchange for his or her Warrants.
The undersigned has checked the appropriate boxes below and
signed this Letter of Transmittal to indicate the action the undersigned desires
to take with respect to the Exchange Offer.
PLEASE READ THE INSTRUCTIONS INCLUDED IN THIS LETTER OF
TRANSMITTAL CAREFULLY BEFORE COMPLETING OR SIGNING THIS LETTER OF TRANSMITTAL OR
CHECKING ANY BOX BELOW.
List below the Warrants to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Warrant certificate
numbers, the number of Warrants represented thereby, the number of Warrants
being tendered and the Series of Warrant should be listed on a separate signed
schedule and affixed hereto.
DESCRIPTION OF WARRANTS TENDERED HEREWITH
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(If blank, please fill in exactly as name(s)
appears on Warrant certificate(s)) WARRANTS TENDERED
Indicate
Whether
Series A Total
Warrant Warrant or Total Number of
Certificate Series B Number of Warrants
Number(s)* Warrant Warrants* Tendered**
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total Warrants
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Warrant holders tendering Warrants by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Warrants
represented by the certificates bearing the serial numbers listed are being
tendered.
12
<PAGE>
This Letter of Transmittal is to be completed by holders of
Warrants pursuant to instructions set forth below and the procedures set forth
in the Prospectus under the caption "THE EXCHANGE OFFER -- Procedure for
Tendering."
Warrant holders whose Warrants are not immediately available
or who cannot deliver their Warrants or a confirmation (a "Book-Entry
Confirmation") of a book-entry tender of their Warrants into the Exchange
Agent's account at the Depositary Trust Company ("DTC") and all other documents
required hereby to the Exchange Agent on or prior to the Expiration Date must
tender their Warrants in accordance with the Notice of Guaranteed Delivery
enclosed herewith and the guaranteed delivery procedure set forth in the
Prospectus under the caption "THE EXCHANGE OFFER -- Guaranteed Delivery
Procedure." See Instruction 1 of this Letter of Transmittal. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent.
/ / CHECK HERE IF TENDERED WARRANTS ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s): _________________________________________
Name of Eligible Institution that Guaranteed Delivery: ________________
/ / CHECK HERE IF TENDERED WARRANTS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT THE
DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ________________________________________
Account Number: _______________________________________________________
Transaction Code Number: ______________________________________________
o CHECK HERE TO INDICATE WHETHER ANYONE SOLICITED THE TENDER OF
YOUR WARRANTS AND, IF SO, COMPLETE THE FOLLOWING (SEE INSTRUCTION 9)
Name of Soliciting Dealer: ____________________________________________
Name of Individual Broker: ____________________________________________
Telephone Number of Broker: ___________________________________________
Address: ______________________________________________________________
Number of Warrants Solicited: _________________________________________
13
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned hereby tenders to the Company the Warrants listed above.
Subject to, and effective upon, the acceptance for exchange of the Warrants
tendered herewith, the undersigned hereby sells, exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Warrants. No fractional shares of Common Stock will be issued as a
result of the Exchange Offer. Holders of Warrants who tender a number of
Warrants not evenly divisible by six and who would otherwise therefore be
entitled pursuant to the Exchange Offer to a fractional share of Common Stock
will receive cash in lieu of such fractional amount. Under the Company's
Stockholder Rights Plan, one Right to purchase one one-hundredth of a share of
the Company's Series A Junior Participating Preferred Stock will be issued with
and solely represented by each share of Common Stock that is issued to a Warrant
holder in exchange for his or her Warrants.
The undersigned represents and warrants that the undersigned
is the lawful owner of, and has full power and authority to tender, exchange,
assign and transfer, the Warrants described above and tendered hereby and that,
if and when the same are accepted for exchange, the Company will acquire good
and unencumbered title to the tendered Warrants, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
undersigned also warrants that the undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Warrants.
The Exchange Offer is subject to certain conditions as set
forth in the Prospectus under the caption "Exchange Offer--Conditions to the
Exchange Offer," including without limitation, a minimum condition that at least
95% of the outstanding Warrants be exchanged prior to the Expiration Date. The
undersigned recognizes that as a result of these conditions (which may be
waived, in whole or in part, by the Company) as more particularly set forth in
the Prospectus, the Company may not be required to complete the Exchange Offer
and/or exchange any of the Warrants tendered hereby and, in such event, the
Warrants not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned.
The undersigned hereby irrevocably appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned with respect
to the undersigned's Warrants tendered hereby, with full power of substitution
(such power-of-attorney being deemed to be an irrevocable power coupled with an
interest) to effect the exchange of such Warrants for the shares of Common Stock
(and cash payment in lieu of fractional interests, if any) being offered by the
Company in exchange therefor pursuant to and upon the terms of the Exchange
Offer, including to deliver such Warrants, together with all accompanying
evidences of transfer and authenticity, to the Company, the Exchange Agent or
the stock transfer agent of the Company for retirement or cancellation.
All authority herein conferred or agreed to be conferred shall
survive the death, bankruptcy or incapacity of the undersigned and every
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Tendered
Warrants may be withdrawn at any time prior to 12:00 Midnight, New York City
Time on November 13, 1997, unless extended ("Expiration Date") and, unless
previously accepted for exchange, at any time after 12:00 Midnight, New York
City time, on December 12, 1997.
14
<PAGE>
Unless otherwise indicated herein under "Special Exchange
Instructions," please issue the Common Stock and/or return any Warrants not
accepted for exchange in the name of the registered holder(s) appearing above
under "Description of Warrants Tendered Herewith." Similarly, unless otherwise
indicated under "Special Delivery Instructions" below, please mail the
certificates representing issued Common Stock (and any cash in lieu of
fractional interests) and/or return any Warrants not accepted for exchange (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) above appearing under "Description of Warrants Tendered Herewith." If
both the "Special Exchange Instructions" and the "Special Delivery Instructions"
are completed, please issue the Common Stock and/or return any Warrants not
accepted for exchange in the name of, and deliver the certificates(s) for such
Common Stock (and any cash in lieu of fractional interests) and/or return any
Warrants not accepted for exchange to, the person or persons so indicated.
Appropriate signature guarantees have been included with respect to Warrants for
which Special Exchange Instructions and/or Special Delivery Instructions have
been given. The undersigned recognizes that the Company has no obligation,
pursuant to the "Special Exchange Instructions," to transfer any Warrants from
the name of the registered holder thereof if the Company does not accept for
exchange any of the Warrants so tendered.
<TABLE>
<CAPTION>
SPECIAL EXCHANGE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See
Instructions 3, 4 and 5) (See Instructions 3, 4 and 5)
<S> <C>
To be completed ONLY if the shares of the To be completed ONLY if the shares of the issued
Common Stock are to be issued in the name of Common Stock are to be mailed to someone other
someone other than the undersigned. than the undersigned, or to the undersigned at an
address other than that shown above.
Issue and Mail Shares of the Common Stock to: Mail Shares of the Common Stock to:
Name: Name:
------------------------------------------------ ----------------------------------------------------
(Please Print) (Please Print)
Address: Address:
--------------------------------------------- -------------------------------------------------
- ------------------------------------------------------ ----------------------------------------------------------
(Include Zip Code) (Include Zip Code)
- ------------------------------------------------------ ----------------------------------------------------------
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
</TABLE>
The undersigned understands that tender of any of the Warrants
pursuant to any of the procedures described in the Prospectus under the caption
"THE EXCHANGE OFFER--Procedure for Tendering" and in the instructions hereto
will constitute a binding agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Exchange Offer set forth in the
Prospectus and this Letter of Transmittal. The undersigned further understands
that no interest will be paid with respect to the shares of Common Stock (and/or
any cash payment in lieu of fractional interests) to be issued and delivered to
the undersigned in exchange for the undersigned's Warrants tendered hereby by
reason of any delay in effecting such exchange or otherwise.
15
<PAGE>
TENDERING WARRANT HOLDER(S) SIGN HERE
(Also complete Substitute Form W-9 Below)
<TABLE>
<S> <C>
- ------------------------------------------------------ ----------------------------------------------------------
Signature of Holder Social Security Number or Taxpayer I.D. Number
- ------------------------------------------------------ ----------------------------------------------------------
Signature(s) of Holder(s) Social Security Number or Taxpayer I.D. Number
</TABLE>
Dated: , 1997
(Must be signed by the registered holder(s) exactly as the name(s) appear(s) on
the certificate(s) for the tendered Warrants or a security position listing or
by any person(s) authorized to become registered holder(s) by endorsements and
other documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, the capacity of the
person should be indicated. See Instruction 3.)
Name(s):
-----------------------------------------------------------------------
(Please Print)
Capacity (full title):
---------------------------------------------------------
Address:
-----------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
---------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(Only if Required -- See Instruction 3)
Authorized Signature:
----------------------------------------------------------
Name:
--------------------------------------------------------------------------
(Please Print)
Title:
-------------------------------------------------------------------------
Name of Eligible Institution:
--------------------------------------------------
Address:
-----------------------------------------------------------------------
Area Code and Telephone No.:
---------------------------------------------------
Dated: , 1997
------------------------------------
16
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
(i) Delivery of this Letter of Transmittal and Warrants;
Guaranteed Delivery Procedures. This Letter of Transmittal is to be used to
exchange Warrants for shares of Common Stock either if Warrants are to be
forwarded herewith or, unless an Agent's Message (as defined in the Prospectus)
is utilized, if tenders of Warrants are to be made pursuant to the procedures
for delivery by book-entry transfer set forth under "The Exchange
Offer--Procedure for Tendering" in the Prospectus. Accordingly, certificates for
all physically delivered Warrants or Book-Entry Confirmation of the tender of
such Warrants, as the case may be, as well as a properly completed and duly
executed copy of this Letter of Transmittal or a facsimile hereof, or an Agent's
Message in connection with a book-entry delivery, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein on or prior to the Expiration Date.
The method of delivery of this Letter of Transmittal, the
Warrants or Book-Entry Confirmation, as the case may be, and any other required
documents is at the election and risk of each holder of Warrants and, except as
otherwise provided below, the delivery will be deemed made only when actually
received by the Exchange Agent. Instead of delivery by mail, it is recommended
that Warrant holders use an overnight or hand delivery service providing for
receipted delivery.
Holders whose Warrants are not immediately available or who
cannot deliver their Warrants and all other required documents to the Exchange
Agent on or prior to the Expiration Date, or who cannot complete the procedure
for book-entry transfer on a timely basis, may tender their Warrants by
delivering the Notice of Guaranteed Delivery form enclosed herewith, properly
completed and duly executed by an Eligible Institution (as defined below--see
Instruction 3), or by delivering an Agent's Message with respect to guaranteed
delivery, in each case pursuant to the guaranteed delivery procedure set forth
in the Prospectus under "Exchange Offer--Guaranteed Delivery Procedure." To be
effective, such Notice of Guaranteed Delivery must be: (i) made by or through an
Eligible Institution, (ii) received by the Exchange Agent on or prior to the
Expiration Date, and (iii) followed, within three business days after delivery
of the Notice of Guaranteed Delivery, by the tendered Warrants, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed copy of this Letter of Transmittal (or a
facsimile hereof), or an Agent's Message in connection with a book-entry
delivery, and any other documents required by this Letter of Transmittal.
No alternative, conditional, irregular or contingent tenders
will be accepted. All tendering Warrant holders, by execution of this Letter of
Transmittal (or facsimile hereof), shall waive any right to receive notice of
the acceptance of their Warrants for exchange.
(ii) Withdrawals. Tenders of Warrants pursuant to the Exchange
Offer are irrevocable, except that Warrants tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to 12:00 Midnight, New York City time,
on the Expiration Date and, unless previously accepted for exchange, at any time
after 12:00 Midnight, New York City time, on December 12, 1997. To be effective,
a written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Exchange Agent at the address set forth herein.
Any such notice of withdrawal must (i) specify the person named in this Letter
of Transmittal as having tendered Warrants to be withdrawn, (ii) specify
certificate numbers and designation of the Warrants to be withdrawn, (iii)
specify the number of Warrants so being withdrawn, (iv) include a statement that
such Warrant holder is withdrawing its tender of such Warrants for exchange, (v)
include the name of the registered Warrant holder of such Warrants, and (vi) be
signed by the Warrant holder in the same manner as the original signature on
this Letter of Transmittal (including
17
<PAGE>
any required signature guarantees) or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Warrants being withdrawn. The Exchange Agent will
return the properly withdrawn Warrants promptly following receipt of notice of
withdrawal.
(iii) Guarantee of Signatures; Signature on this Letter of
Transmittal; Written Instruments and Endorsements. No signature guarantee on
this Letter of Transmittal is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Warrants being tendered herewith (the
term "registered holder" for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as the
owner of such Warrants) unless such holder(s) have completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Exchange
Instructions" on this Letter of Transmittal or (ii) such Warrants are tendered
for the account of a financial institution (a commercial bank, savings and loan
association, credit union, or brokerage house) that is a participant in the
Securities Transfer Association Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
("Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. If Warrants are
registered in the name of a person other than the signer of this Letter of
Transmittal, the tendered Warrants must be endorsed or accompanied by an
appropriate instrument of transfer, signed exactly as the name or names of the
registered owner or owners appear on the Warrants, with the signatures on the
Warrants or instrument of transfer guaranteed as aforesaid.
If this Letter of Transmittal is signed by the registered
holder(s) of the Warrants tendered hereby, the signature must correspond with
the name(s) as written on the face of certificates without alteration,
enlargement or any change whatsoever.
If any of the Warrants tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Warrants registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Warrants.
When this Letter of Transmittal is signed by the registered
holder or holders of Warrants listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than
the registered holder or holders of the Warrants listed, the tendered Warrants
must be endorsed or accompanied by separate written instrument of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
holder or holders, in either case signed exactly as the name or names of the
registered holder or holders appear(s) on the Warrants with the signatures on
the Warrants or instrument of transfer guaranteed as aforesaid.
If this Letter of Transmittal, any certificates or separate
written instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should indicate
such capacity when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
18
<PAGE>
(iv) Transfer Taxes. The Company shall pay all transfer taxes,
if any, applicable to the exchange of Warrants pursuant to the Exchange Offer.
If, however, certificates representing Common Stock issued pursuant to the
Exchange Offer or substitute certificates evidencing Warrants not exchanged are
to be delivered to, or are to be issued in the name of, any person other than
the registered holder of the Warrants tendered hereby, or if tendered Warrants
are recorded in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
transfer and sale of Warrants to the Company or its order pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Warrant holder or any other person) will be payable by the
tendering Warrant holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer taxes
will be billed directly to such tendering Warrant holder.
(v) Special Exchange and Delivery Instructions; Mutilated,
Lost, Stolen or Destroyed Warrants. If shares of the Common Stock are to be
issued in the name of a person other than the signer of this Letter of
Transmittal or if shares of the Common Stock are to be sent (or unexchanged
Warrants returned) to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed.
Any holder whose Warrants have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
(vi) Requests for Assistance or Additional Copies. All
questions relating to the Exchange Offer, as well as requests for additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Information Agent, as follows: D.F. King & Co., Inc., 77 Water Street, New York,
New York 10005, Tel: 1-800/207-3158. In addition, all questions relating to
procedures for tendering may be directed to the Exchange Agent, Continental
Stock Transfer & Trust Company, at 212/509-4000, extension 535, or by mail at 2
Broadway New York, New York 10004, Attention: Reorganization Department.
(vii) Irregularities. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Letters of
Transmittal or Warrants, and of notices of withdrawal of tendered Warrants, will
be resolved by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all Letters of Transmittal
or tenders of Warrants, or notices of withdrawal of tendered Warrants, that it
determines are not in proper form or the acceptance of which may, in the opinion
of the Company's counsel, be unlawful. The Company also reserves the right to
waive any irregularities or conditions of tender as to the particular Warrants
covered by any Letter of Transmittal or tendered pursuant to such Letter of
Transmittal or any particular Warrant holder. None of the Company, the
Information Agent, the Exchange Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or withdrawals
or incur any liability for failure to give any such notification. The Company's
interpretation of the terms and conditions of the Exchange Offer shall be final
and binding.
(viii) Taxpayer Information and Substitute W-9.
All Warrant holders
All Warrant holders must complete Part 1 of the "Substitute
Form W-9" set forth below by providing the Warrant holder's name, street
address, city, and either (i) state and zip code, or (ii) country of residence.
United States Warrant holders must also complete Part 2 of the "Substitute Form
W-9" and all foreign Warrant holders must also complete Part 3 of the
"Substitute Form W-9."
19
<PAGE>
United States Warrant holders
United States federal income tax law requires that a United
States holder who surrenders Warrants provide the Exchange Agent (as payor) with
his or her correct taxpayer identification number ("TIN"), which, if the
surrendering holder is an individual, is his or her social security number. If
the Exchange Agent is not provided with the correct TIN, the surrendering holder
may be subject to a penalty imposed by the Internal Revenue Service and payments
that are made by the Company to the tendering holder may be subject to a 31%
backup withholding. If withholding results in an overpayment of taxes, a refund
may be obtained. Exempt persons (including, among others, all corporations) are
not subject to these backup withholding and reporting requirements.
To prevent the 31% backup withholding tax, each surrendering
United States holder must provide his or her correct TIN by completing Part 2 of
the "Substitute Form W-9" set forth below, certifying that the TIN provided is
correct (or that the surrendering holder is awaiting a TIN) and that (a) the
surrendering holder has not been notified by the Internal Revenue Service that
he or she is subject to backup withholding as a result of failure to report all
interest or dividends, or (b) the Internal Revenue Service has notified the
surrendering holder that he or she is no longer subject to backup withholding or
certify in accordance with the enclosed Guidelines that such surrendering holder
is exempt from backup withholding. If shares of the Common Stock are to be
issued in more than one name or in a name other than that of the actual owner,
consult the enclosed Guidelines for information on which TIN to report.
Foreign Warrant holders
United States federal income tax law requires a foreign holder
who surrenders Warrants to provide the Exchange Agent (as payor) with a
certification of such holder's foreign status. If the Exchange Agent is not
provided with the certification of foreign status, payments that are made by the
Company to the surrendering holder (including but not limited to any future
dividends on the Common Stock) may be subject to the 31% backup withholding tax.
To prevent the 31% backup withholding tax, each surrendering
foreign holder must certify, by completing Part A of Part 3 of the "Substitute
Form W-9" set forth below, that such holder is not a United States citizen or
United States resident (or that such holder is a foreign corporation,
partnership, trust or estate). If shares of the Common Stock are to be issued in
the name of a securities clearing organization, a bank or other financial
institution, then an authorized representative of such institution must complete
Part B of Part 3 of the "Substitute Form W-9" set forth below.
If the shares of the Common Stock are to be owned jointly be
more than one foreign holder, each such joint owner must complete a separate
Part 3 of the "Substitute Form W-9."
20
<PAGE>
PAYOR'S NAME:
Continental Stock Transfer & Trust Company
(As Exchange Agent)
All Warrant holders must complete Part 1 and either Part 2 or
Part 3 (See Instruction 8).
<TABLE>
<S> <C>
SUBSTITUTE
Form W-9
-------------------------------------------------------------------
PART 1: TO BE COMPLETED BY ALL WARRANT HOLDERS
Name
Address
City, State, and ZIP code (or Country)
PART 2: TAXPAYER IDENTIFICATION NUMBER (TO BE COMPLETED BY ALL UNITED
STATES WARRANT HOLDERS.)
(CHECK IF AWAITING TIN |_|)
Enter your taxpayer Social security number
identification number ____-__-____
in the appropriate box:
Employer identification number
__________-_________
Certification. --Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
awaiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the IRS has notified me that I am no
longer subject to backup withholding.
Signature _____________________________________________ Date_____________________________
- ------------------------------------------------------------------------------------------------------------------------------------
PART 3: CERTIFICATE OF FOREIGN STATUS -- COMPLETE EITHER PART A OR PART B.
(TO BE COMPLETED BY ALL FOREIGN WARRANT HOLDERS.)
Part A: Certification of Under penalties of perjury, I certify that, to the best of my knowledge and belief, I am not a
Registered Holder United States citizen or resident (or I am a foreign corporation, partnership, trust or estate).
Signature ______________________________________________ Date ___________________________
Part B: Certification of Under penalties of perjury, I certify that I am an authorized representative of the financial
Financial institution named below and that we have received from the beneficial owner a Form W-8 or
Institution substitute form in accordance with the provisions of Treasury Regulations Section
1.6049-5(b)(2)(iv).
___________________________________________________________________________________________
Name of Financial Institution
Signature ______________________________________________ Date _____________________________
- ------------------------------- ---------------------------------------------------------------------------------------------------
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
</TABLE>
21
<PAGE>
(ix) Solicited Tenders. The Company will pay to Soliciting
Dealers (as hereinafter defined) a solicitation fee related to their
solicitation efforts of $.05 per Warrant for any Warrants tendered and accepted
for exchange and exchanged pursuant to the Exchange Offer; provided that no
solicitation fee shall be payable with respect to Warrants beneficially owned
(i) by any of the directors, executive officers or 5% stockholders of the
Company who have indicated to the Company their current intent to tender their
Warrants, (ii) by any employee of the Company or its affiliates or (iii) by the
Soliciting Dealer. The term "Soliciting Dealer" shall mean (x) any broker or
dealer in securities that is a member of any national securities exchange or of
the National Association of Securities Dealers, Inc. ("NASD"), (y) any foreign
broker or dealer not eligible for membership in the NASD which agrees to conform
to the NASD's Rules of Fair Practice in soliciting tenders outside the United
States to the same extent as though it were an NASD member or (z) any bank or
trust company.
No such solicitation fee shall be payable to a Soliciting
Dealer with respect to any tender of Warrants pursuant to this Letter of
Transmittal unless this Letter of Transmittal specifically designates where
indicated above such Soliciting Dealer as having solicited and obtained the
tender of the Warrants covered thereby. No such fee shall be payable to a
Soliciting Dealer with respect to the tender of Warrants by the holder of
record, for the benefit of the beneficial owner, unless the beneficial owner has
designated such Soliciting Dealer. If tendered Warrants are being delivered by
book-entry transfer or pursuant to the guaranteed delivery procedure, the
Soliciting Dealer must return a Notice of Solicited Tenders to the Exchange
Agent within five business days after the Expiration Date to receive a
solicitation fee. All questions as to the validity, form or eligibility
(including time of receipt) of Notice of Solicited Tenders will be determined by
the Company, whose determination will be final and binding. None of the Company,
the Exchange Agent, the Information Agent, or any other person will be under any
duty to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give any such
notification. The Company reserves the absolute right not to pay any
solicitation fees that would, in the opinion of counsel for the Company, be
unlawful or violate the regulations of any national securities exchange or the
NASD. No broker, dealer, bank, trust company or fiduciary shall be deemed to be
the agent of the Company, the Exchange Agent or the Information Agent for
purposes of the Exchange Offer.
(x) Inadequate space. If the space provided in this Letter of
Transmittal is inadequate, list and attach hereto on a separate schedule the
Warrant certificate numbers, the number of Warrants represented thereby, the
number of Warrants being tendered and the Series of Warrant.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES FOR WARRANTS AND ALL OTHER REQUIRED DOCUMENTS) OR
A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
22
<PAGE>
EXHIBIT 9 (a)(iii)
23
<PAGE>
MAXCOR FINANCIAL GROUP INC.
Offer to Exchange
0.1667 of a Share of Common Stock
of Maxcor Financial Group Inc.
for Each and Every of its Outstanding
Redeemable Common Stock Purchase Warrants
and
Series B Redeemable Common Stock Purchase Warrants
October 16, 1997
To Brokers, Dealers and Other Nominees:
Maxcor Financial Group Inc. ("Company") is enclosing herewith copies of
a Prospectus, dated October 16, 1997 ("Prospectus"), a related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Exchange Offer") and certain other materials listed below. These materials are
intended for you to distribute to your clients in connection with the Company's
offer to exchange 0.1667 of a share of its common stock, par value $.001 per
share ("Common Stock"), for each and every of its outstanding Redeemable Common
Stock Purchase Warrants ("Series A Warrants") and Series B Redeemable Common
Stock Purchase Warrants ("Series B Warrants" and together with the Series A
Warrants, the "Warrants"), upon the terms and subject to the conditions of the
Exchange Offer. As described in more detail in the Prospectus, the Company will
issue one share of Common Stock in exchange for every six Warrants (either
Series A Warrants, Series B Warrants or both) tendered and accepted by the
Company for exchange pursuant to the Exchange Offer. No fractional shares of
Common Stock will be issued as a result of the Exchange Offer. Holders of
Warrants who tender a number of Warrants not evenly divisible by six and who
would otherwise therefore be entitled to a fractional share of Common Stock will
receive cash in lieu of such fractional amount. Additionally, under the
Company's Stockholder Rights Plan, one Right to purchase one one-hundredth of a
share of the Company's Series A Junior Participating Preferred Stock will be
issued with and solely represented by each share of Common Stock that is issued
to a Warrant holder in exchange for his or her Warrants.
The Company will pay to Soliciting Dealers (as hereinafter defined) a
solicitation fee related to their solicitation efforts of $.05 per Warrant for
any Warrants that they solicit and that are tendered and accepted for exchange
and exchanged pursuant to the Exchange Offer; provided that no solicitation fee
shall be payable with respect to Warrants beneficially owned (i) by any of the
directors, executive officers or 5% stockholders of the Company who have
indicated to the Company (as described in the Prospectus) their current intent
to tender their Warrants, (ii) by any employee of the Company or its affiliates
or (iii) by the Soliciting Dealer. The term "Soliciting Dealer" shall mean (x)
any broker or dealer in securities that is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. ("NASD"),
(y) any foreign broker or dealer not eligible for membership in the NASD which
agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders
outside the United States to the same extent a though it were an NASD member or
(z) any bank or trust company.
No such solicitation fee shall be payable to a Soliciting Dealer with
respect to the tender of Warrants by a holder unless the Letter of Transmittal
accompanying such tender designates such Soliciting Dealer as having solicited
and obtained the tender of the Warrants covered thereby. No such fee shall be
payable to a Soliciting Dealer with respect to the tender of Warrants by the
holder of record, for the benefit of the beneficial owner, unless the beneficial
owner has designated such Soliciting Dealer. If tendered Warrants
24
<PAGE>
are being delivered by book-entry transfer or pursuant to the guaranteed
delivery procedure, the Soliciting Dealer must return a Notice of Solicited
Tenders to the Exchange Agent within five business days after the Expiration
Date to receive a solicitation fee. All questions as to the validity, form or
eligibility (including time of receipt) of Notices of Solicited Tenders will be
determined by the Company, whose determination will be final and binding. None
of the Company, the Exchange Agent, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities in
any Notices of Solicited Tenders or incur any liability for failure to give any
such notification. The Company reserves the absolute right not to pay any
solicitation fees that would, in the opinion of counsel for the Company, be
unlawful or violate the regulations of any national securities exchange or the
NASD. No broker, dealer, bank, trust company or fiduciary shall be deemed to be
the agent of the Company, the Exchange Agent or the Information Agent for
purposes of the Exchange Offer.
For your information and for forwarding to your clients for whom you
hold Warrants registered in your name or in the name of your nominee, or who
hold Warrants registered in their own names, we are enclosing the following
documents:
1. The Prospectus, dated October 16, 1997.
2. The Letter of Transmittal to be used by registered holders of
Warrants in accepting the Exchange Offer;
3. A form of letter which you may send, as a cover letter to
accompany the Prospectus and related materials, to your clients for whose
accounts you hold Warrants registered in your name or the name of your nominee,
with space provided for obtaining such clients' instructions with respect to the
Exchange Offer;
4. A Letter to Warrant holders from Gilbert D. Scharf, Chairman,
President and Chief Executive Officer of the Company;
5. The Annual Report on Form 10-K of the Company for the year
ended December 31, 1996;
6. The Quarterly Report on Form 10-Q of the Company for the three
months ended June 30, 1997;
7. A Form of Notice of Guaranteed Delivery (to be used to accept
the Exchange Offer if certificates evidencing the Warrants are not immediately
available or under certain other circumstances described in the Prospectus);
8. Guidelines of the Internal Revenue Service for Certification
of Taxpayer Identification Number on Substitute Form W-9;
9. Certificate of Foreign Status on Form W-8 (for non-United
States clients); and
10. A return envelope addressed to Continental Stock Transfer &
Trust Company, the Exchange Agent.
Your prompt action is requested. We urge you to contact your clients as
soon as possible. The Exchange Offer will expire at 12:00 Midnight, New York
City time, on November 13, 1997, unless extended ("Expiration Date"). Tendered
Warrants may be withdrawn at any time prior to the Expiration Date and unless
theretofore accepted for exchange by the Company, may also be withdrawn after
12:00 Midnight, New York City time, on December 12, 1997.
25
<PAGE>
The Exchange Offer is conditioned upon at least 95% of the aggregate
outstanding Warrants being validly tendered and not withdrawn prior to the
Expiration Date and certain other conditions. Any or all of the conditions, if
not satisfied in the Company's reasonable discretion, may be waived by the
Company, in whole or in part at any time prior to the Expiration Date, subject
to applicable law. See "THE EXCHANGE OFFER--Conditions of the Exchange Offer" in
the Prospectus.
Other than fees to be paid to any Soliciting Dealers, as described
above, the Company will not make any payments to brokers, dealers or others
soliciting tenders of Warrants pursuant to the Exchange Offer. The Company,
however, will pay to Continental Stock Transfer & Trust Company (the Exchange
Agent) and D.F. King & Co., Inc. (the Information Agent) reasonable and
customary fees for their services in connection with the Exchange Offer and will
reimburse them for their reasonable out-of-pocket expenses in connection
therewith. In addition, you will be reimbursed for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
your clients who are beneficial owners of the Warrants, and in handling or
forwarding any of their tenders of Warrants.
In general, the rules of the Securities and Exchange Commission
prohibit any broker-dealer that is participating in the distribution of
securities for or on behalf of the Company from making a market in the Common
Stock or Warrants during a "restricted period" commencing up to five days prior
to the date that this Prospectus is distributed to Warrant holders and extending
until completion of the Exchange Offer. The Commission has, however, adopted
exceptions to these rules that permit market making under certain conditions.
These rules permit such broker-dealers to continue to make a market subject to
the conditions, among others, that its bid not exceed the highest bid by a
market maker not connected with the Exchange Offer and that its net purchases on
any one trading day not exceed prescribed limits. Pursuant to these exemptions,
certain broker-dealers receiving solicitation fees and/or their respective
affiliates may engage in passive market making in the Common Stock or Warrants
during the restricted period.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Warrants to it or its order pursuant to the Exchange Offer. If,
however, shares of Common Stock issued pursuant to the Exchange Offer or
substitute certificates evidencing Warrants not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Warrants tendered, or if tendered certificates
representing Warrants are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the transfer and sale of Warrants to the Company or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
To participate in the Exchange Offer, certificates for Warrants, or a
timely confirmation of a book-entry transfer of such Warrants into the Exchange
Agent's account at the Depository Trust Company, in each case together with a
duly executed and properly completed Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message in connection with
a book-entry delivery of Warrants, and any other required documents, must be
received by the Exchange Agent by 12:00 Midnight, New York City time, on the
Expiration Date as indicated in the Letter of Transmittal and the Prospectus.
If holders of the Warrants wish to tender, but it is impracticable for
them to forward their Warrants prior to 12:00 Midnight, New York City time, on
the Expiration Date or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "THE EXCHANGE OFFER--Guaranteed
Delivery Procedure," which procedures include delivering a properly completed
and executed Notice of Guaranteed Delivery with required signature guarantees,
or an Agent's Message with respect to guaranteed delivery, prior to such time.
26
<PAGE>
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be addressed to
the Information Agent, D.F. King & Co., Inc. at (800) 207-3158.
Very truly yours,
MAXCOR FINANCIAL GROUP INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS AN AGENT OF THE COMPANY, THE INFORMATION AGENT OR THE EXCHANGE
AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER,
EXCEPT FOR THE DOCUMENTS ENCLOSED AND THE STATEMENTS EXPRESSLY MADE THEREIN.
27
<PAGE>
NOTICE OF SOLICITED TENDERS
The Company will pay to any Soliciting Dealer (as defined hereinafter)
a solicitation fee related to its solicitation efforts of $.05 per Warrant for
any Warrants that it solicits and that are tendered and accepted for exchange
and exchanged in connection with the Exchange Offer; provided, that no
solicitation fee shall be payable with respect to Warrants beneficially owned by
(i) any of the directors, executive officers or 5% stockholders who have
indicated to the Company their current intent to tender their Warrants, (ii) any
employee of the Company or its affiliates or (iii) the Soliciting Dealers. The
term "Soliciting Dealer" shall mean (x) any broker or dealer in securities that
is a member of any national securities exchange or of the National Association
of Securities Dealers, Inc. ("NASD"), (y) any foreign broker or dealer not
eligible for membership in the NASD which agrees to conform to the NASD's Rules
of Fair Practice in soliciting tenders outside the United States to the same
extent as though it were an NASD member or (z) any bank or trust company. If
tendered Warrants are being delivered by book-entry transfer or pursuant to the
guaranteed delivery procedure, the Soliciting Dealer must return this Notice of
Solicited Tenders to the Exchange Agent within five business days after the
Expiration Date in order to receive a solicitation fee.
No such solicitation fee shall be payable to a Soliciting Dealer with
respect to the tender of Warrants by a holder unless the Letter of Transmittal
accompanying such tender designates such Soliciting Dealer as having solicited
and obtained the tender of the Warrants covered thereby. No such fee shall be
payable to a Soliciting Dealer with respect to the tender of Warrants by the
holder of record, for the benefit of the beneficial owner, unless the beneficial
owner has designated such Soliciting Dealer.
List below the number of Warrants tendered by each beneficial owner
whose tender you have solicited. If the space below is inadequate, list the
Warrants on a separate signed schedule and affix the list to this Notice of
Solicited Tenders.
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(Please fill in) WARRANTS TENDERED
Indicate
Whether
Series A Total
Warrant Warrant or Total Number of
Certificate Series B Number of Warrants
Number(s) Warrant Warrants Tendered*
- --------------------------------------------------------------------------------
28
<PAGE>
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(Please fill in) WARRANTS TENDERED
- --------------------------------------------------------------------------------
Indicate
Whether
Series A Total
Warrant Warrant or Total Number of
Certificate Series B Number of Warrants
Number(s) Warrant Warrants Tendered*
- --------------------------------------------------------------------------------
Total Warrants
- -------------------------------------------------- ---------------- ----------
* Unless otherwise indicated, it will be assumed that the total number of
Warrants represented by the certificates bearing the serial numbers
listed are being tendered.
29
<PAGE>
All questions as to the validity, form or eligibility (including time
of receipt) of Notices of Solicited Tenders will be determined by the Company,
whose determination will be final and binding. None of the Company, the Exchange
Agent, the Information Agent or any other person will be under any duty to give
information of any defects or irregularities in any Notices of Solicited Tenders
or incur any liability or failure to give any such notification. The Company
reserves the absolute right not to pay any solicitation fees that would, in the
opinion of counsel for the Company, be unlawful or violate the regulations of
any national securities exchange or the NASD.
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
EXCHANGE AGENT AND MUST BE RECEIVED BY THE EXCHANGE AGENT WITHIN FIVE
BUSINESS DAYS AFTER THE EXPIRATION DATE.
The undersigned hereby confirms that: (i) it has complied with the
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations thereunder, in connection with such
solicitation; (ii) it is entitled to such compensation for such solicitation
under the terms and conditions of the Exchange Offer; (iii) in soliciting
tenders of Warrants, it has used no soliciting materials other than those
furnished by the Company; and (iv) if it is a foreign broker or dealer not
eligible for membership in the NASD, it has agreed to conform to the NASD's
Rules of Fair Practice in making solicitations.
- ------------------------------- -------------------------------------
Firm Name Address (including Zip Code)
- ------------------------------- -------------------------------------
By: Area Code and Telephone Number
Title:
DO NOT SEND WARRANTS WITH THIS FORM.
WARRANT CERTIFICATES MUST BE SENT WITH THE
LETTER OF TRANSMITTAL
SOLICITATION FEE PAYMENT INSTRUCTIONS
Issue check to:
Name____________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Taxpayer identification or Social Security No.)
30
<PAGE>
EXHIBIT 9 (a)(iv)
31
<PAGE>
Offer to Exchange
0.1667 of a Share of Common Stock of
MAXCOR FINANCIAL GROUP INC.
for Each and Every of its Outstanding
Redeemable Common Stock Purchase Warrants and
Series B Redeemable Common Stock Purchase Warrants
October 16, 1997
To Our Clients:
Enclosed for your consideration is a Prospectus, dated October 16, 1997
("Prospectus"), of Maxcor Financial Group Inc., a Delaware corporation
("Company"), and a related Letter of Transmittal (which, as amended from time to
time, together constitute the "Exchange Offer") relating to the Exchange Offer
by the Company to exchange 0.1667 of a share of its common stock, par value
$.001 per share ("Common Stock"), for each and every of its outstanding
Redeemable Common Stock Purchase Warrants ("Series A Warrants") and Series B
Redeemable Common Stock Purchase Warrants ("Series B Warrants" and, together
with the Series A Warrants, the "Warrants"), upon the terms and subject to the
conditions of the Exchange Offer. As described in more detail in the Prospectus,
the Company will issue one share of Common Stock in exchange for every six
Warrants (either Series A Warrants, Series B Warrants or both) tendered and
accepted by the Company for exchange pursuant to the Exchange Offer. No
fractional shares of Common Stock will be issued as a result of the Exchange
Offer. Holders of Warrants who tender a number of Warrants not evenly divisible
by six and who would otherwise therefore be entitled to a fractional share of
Common Stock will receive cash in lieu of such fractional amount. Additionally,
under the Company's Stockholder Rights Plan, one Right to purchase one
one-hundredth of a share of the Company's Series A Junior Participating
Preferred Stock will be issued with and solely represented by each share of
Common Stock that is issued to a Warrant holder in exchange for his or her
Warrants.
Also enclosed for your information are the Company's most recent
Quarterly Report on Form 10-Q (for the three months ended June 30, 1997) and
Annual Report on Form 10-K (for the year ended December 31, 1996).
Please note that the Exchange Offer will expire at 12:00 Midnight, New
York City time, on November 13, 1997, unless extended ("Expiration Date").
Tenders of Warrants may be withdrawn at any time prior to the Expiration Date
and unless theretofore accepted for exchange by the Company, may be withdrawn
after 12:00 Midnight, New York City time on December 12, 1997.
The Company reserves the right to terminate or not proceed with the
Exchange Offer, or to extend or otherwise amend the Exchange Offer, if, among
other things, there is not validly tendered prior to the Expiration Date and not
withdrawn a minimum of 95% of the aggregate outstanding Warrants. The Exchange
Offer is also conditioned upon certain other customary conditions. Any or all of
the conditions, if not satisfied in the Company's reasonable discretion, may be
waived by the Company, in whole or in part at any time prior to the Expiration
Date, subject to applicable law.
This material is being forwarded to you as the beneficial owner of
Warrants carried by us in your account but not registered in your name. A tender
of such Warrants may be made only by us as the holder of record and pursuant to
your instructions. The accompanying Letter of Transmittal is furnished to you
for your information only and may not be used by you to tender Warrants.
Accordingly, we request instructions as to whether you wish us to
tender any or all such Warrants held by us for your account, pursuant to the
terms and conditions of the Exchange Offer as described in the enclosed
Prospectus and Letter of Transmittal.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender your Warrants on your behalf in accordance with the
provisions of the Exchange Offer.
If you wish to have us tender any or all of your Warrants, please so
instruct us by completing, executing and returning to us the attached
instruction form.
32
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
OF MAXCOR FINANCIAL GROUP INC.
The undersigned acknowledge(s) receipt of your letter, the Prospectus
describing the Exchange Offer by the Company to acquire all of its outstanding
Warrants, the related Letter of Transmittal and the Company's most recent Form
10-Q and Form 10-K.
This will instruct you to tender the number of Warrants indicated below
(or, if no number is indicated below, all Warrants) held by you for the account
of the undersigned, pursuant to the terms and conditions of the Exchange Offer
as set forth in the Prospectus and the related Letter of Transmittal.
Number of Warrants to be Tendered:
______________ Series A Warrants and
______________ Series B Warrants.
Date: ________________________
----------------------------------
----------------------------------
Signature(s)
_________________________________________ __________________________________
Please type or print address(es) here
__________________________________
Please print name(s) here
_________________________________________
Area Code and Telephone Number
_________________________________________
Taxpayer Identification or Social Security Number(s)
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN IN THE SPACE PROVIDED,
YOUR SIGNATURE(S) HEREON SHALL CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL
YOUR WARRANTS PURSUANT TO THE TERMS AND CONDITIONS SET FORTH IN THE PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL.
33
<PAGE>
EXHIBIT 9 (a)(v)
34
<PAGE>
Maxcor Financial Group Inc.
October 16, 1997
To Our Warrant Holders:
The Company is proposing in the documents enclosed herewith to allow
holders of its Redeemable Common Stock Purchase Warrants (Nasdaq: MAXFW) and its
Series B Redeemable Common Stock Purchase Warrants (Nasdaq: MAXFZ) to exchange
such Warrants for shares of the Company's Common Stock (Nasdaq: MAXF) on the
basis of 0.1667 of a share of Common Stock for each and every outstanding
Warrant (the "Exchange Offer"). Accordingly, the Company will issue one whole
share of Common Stock in exchange for every six Warrants (of either or both
series) tendered and accepted by the Company for exchange pursuant to the
Exchange Offer. Cash will be paid in lieu of fractional shares being issued.
The Company is undertaking the Exchange Offer in order to simplify the
Company's capital structure, reduce the potential future dilutive impact on the
Company's earnings per share that could be caused by the Warrants and eliminate
any overhang on the Common Stock price from the existence of the Warrants. The
Company believes these purposes are best served only is all or substantially all
of the Warrants are retired and, accordingly, has established a minimum tender
condition of 95%, meaning that the Company reserves the right not to proceed
with the Exchange Offer if less than 95% of all outstanding Warrants are validly
tendered. If the Exchange Offer is consummated, the Company intends to delist
any remaining Warrants from trading on the Nasdaq National Market and to
deregister such Warrants under the Securities Exchange Act of 1934.
Neither the Company nor its Board of Directors is making any recommendation
to Warrant holders as to whether or not to tender their Warrants in the Exchange
Offer. However, you should be aware that all directors and executive officers of
the Company, and all stockholders beneficially owing 5% or more of the
outstanding Common Stock, have indicated to the Company their current intention
to tender in the Exchange Offer all of the Warrants owned by them. Such persons
and entities collectively own approximately 49% of all outstanding Warrants.
The Exchange Offer will expire at 12:00 Midnight, New York City time, on
November 13, 1997, unless extended. Accordingly, we urge you to read promptly
the enclosed Prospectus, which sets forth the full terms and conditions of the
Exchange Offer, as well as the enclosed Form 10-K and Form 10-Q, which set forth
financial and other information concerning the Company. The enclosed Letter of
Transmittal (as well as pages 20 to 27 of the Prospectus) contains detailed
instructions as to the steps needed to be taken by you in order to participate
in the Exchange Offer. In addition, if you have any questions about the Exchange
offer or need additional copies of the enclosed materials, you should feel free
to contact the Company's Information Agent, D.F. King & Co., Inc. at (800)
207-3158.
Very truly yours,
/s/ Gilbert D. Scharf
Gilbert D. Scharf
Chairman, President and
Chief Executive Officer
<PAGE>
EXHIBIT 9 (a)(vi)
35
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
AND
SERIES B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
OF
MAXCOR FINANCIAL GROUP INC.
This form or one substantially equivalent hereto, or an Agent's Message
with respect to guaranteed delivery, must be used to accept the Exchange Offer
of Maxcor Financial Group Inc. ("Company") made pursuant to the Prospectus dated
October 16, 1997 ("Prospectus") and the accompanying Letter of Transmittal, if
certificates for the Warrants are not immediately available or time will not
permit all required documents to reach the Exchange Agent prior to 12:00
Midnight, New York City time, on the Expiration Date of the Exchange Offer or if
the procedures for book-entry transfer cannot be completed on a timely basis.
This form may be delivered by hand or transmitted by facsimile transmission or
by mail to the Exchange Agent. See "THE EXCHANGE OFFER--Procedures for
Tendering" and "--Guaranteed Delivery Procedure" in the Prospectus. Defined
terms used in this Notice of Guaranteed Delivery without separate definition
shall have the meaning herein as is assigned to such terms in the Prospectus.
EXCHANGE AGENT:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Continental Stock Transfer Continental Stock Transfer Continental Stock Transfer &
& Trust Company & Trust Company Trust Company
2 Broadway 2 Broadway 2 Broadway, 19th Floor
New York, NY 10004 New York, NY 10004 New York, NY 10004
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
(registered or certified mail
recommended)
By Facsimile:
Continental Stock Transfer
& Trust Company
Attn: Reorganization Department
Fax No. (212) 509-5150
(For Eligible Institutions Only)
Confirm by telephone:
Telephone no. (212) 509-4000,
ext. 535
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on
a Letter of Transmittal is required to be guaranteed by an eligible institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal
itself.
36
<PAGE>
Ladies & Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, as each may be amended
from time to time, the Series and number of Warrants set forth below, pursuant
to the guaranteed delivery procedure set forth under the caption "THE EXCHANGE
OFFER--Guaranteed Delivery Procedure" in the Prospectus. By so tendering, the
undersigned hereby does make, at and as of the date hereof, the representations
and warranties of a tendering holder of Warrants as set forth in the Letter of
Transmittal.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Holder(s) or Name(s) of Registered Holder(s):
Authorized Signatory:
________________________________________ ____________________________________
________________________________________ ____________________________________
(Please Print)
Warrants Tendered Hereby:
Address:_________________________
Series A Warrants
Certificate Warrant Nos. (if available)______ __________________________________
_____________________________________________ Tel. No.(s)_______________________
Number of Warrants Tendered__________________ If Warrants will be delivered by
book-entry transfer through the
_____________________________________________ Depository Trust Company, check
the box below and provide account
number.
Series B Warrants
Certificate Warrant Nos. (if available)______ // The Depository Trust Company
Account Number:________________
_____________________________________________ __________________________________
Number of Warrants Tendered__________________
Dated:____________________________
_____________________________________________
37
<PAGE>
GUARANTEE
(Not to be used for signature guarantees)
The undersigned, a financial institution (a commercial bank, savings
and loan association, credit union or brokerage house) that is a participant in
the Securities Transfer Association Medallion Program, the New York Stock
Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion
Program, hereby (a) represents that each holder of Warrants on whose behalf this
tender is being made "own(s)" the Warrants covered hereby within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents
that the tender of Warrants effected hereby complies with such Rule 14e-4, and
(c) guarantees that, within three New York Stock Exchange trading days from the
date of this Notice of Guaranteed Delivery, (i) a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees, or an Agent's Message in the case of a book-entry delivery
of Warrants, together with (ii) either certificates representing the Warrants
tendered hereby in proper form for transfer or timely confirmation of the
book-entry transfer of such Warrants into the Exchange Agent's account at the
Depository Trust Company, and (iii) any other required documents, will be
deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Warrants tendered hereby to the Exchange Agent within the time
set forth above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm:_________________________ Authorized Signature:
Address:______________________________ ___________________________
_____________________________________ Print Name:________________
Area Code and Telephone No:____________ Title:_____________________
_____________________________________ Date:______________________
- --------------------------------------------------------------------------------
38
<PAGE>
EXHIBIT 9 (a)(vii)
39
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR.
- --Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payor.
- -------------------------------------------------------------
GIVE THE SOCIAL
FOR THIS TYPE OF ACCOUNT: SECURITY
NUMBER OF --
- -------------------------------------------------------------
1. An individual's ac- The individual
count
2. Two or more individ- The actual owner of the
uals (joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person(1)
4. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
5. Adult and minor The adult or, if the minor
(joint account) is the only contributor, the
minor(1)
6. Account in the name The ward, minor, or in-
of guardian or com- competent person(3)
mittee for a designat-
ed ward, minor, or
incompetent person
7. a. The usual The grantor-trustee(1)
revocable savings
trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is
not a legal or
valid trust under
State law
8. Sole proprietorship The owner(4)
account
- -------------------------------------------------------------
- -------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- -------------------------------------------------------------
9. A valid trust, estate, The Legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity itself
is not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational organi-
zation account
12. Partnership account The partnership
held in the name of
the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agri-
culture in the name of
a public entity (such
as a State or local
government, school
district or prison)
that receives agricul-
tural program pay-
ments
- --------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an
individual retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization or any agency, or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one non-resident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6019 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATON NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to a reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT
OR THE INTERNAL REVENUE SERVICE.
<PAGE>
Form W-8
(Rev. November 1992) Certificate of Foreign Status
Department of the Treasury
Internal Revenue Service
- --------------------------------------------------------------------------------
Name of owner (If joint account, also give joint owner's name.)
(See Specific Instructions.)
U.S. taxpayer identification no. (if any)
Please
Print -----------------------------------------------------------------
or
Type
Permanent address (See Specific Instructions.)
(Include apt. or suite no.)
-----------------------------------------------------------------
City, province or state, postal code, and country
-----------------------------------------------------------------
Current mailing address, if different from permanent address
(Include apt. or suite no., P.O. box if mail is not delivered to
street address.)
-----------------------------------------------------------------
City, town or post office, state, and ZIP code (If foreign
address, enter city, province or state, postal code, and
country.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
List account information here Account number Account type Account Number Account type
(Optional, see Specific
Instructions.)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notice of Change in Status.--To notify the payer, mortgage interest recipient,
broker, or barter exchange that you no longer qualify for exemption,
check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . / /
If you check this box, reporting will begin on the account(s) listed.
- --------------------------------------------------------------------------------
Certification.--(Check applicable box(es)). Under penalties of
perjury, I certify that:
/ / For INTEREST PAYMENTS, I am not a U.S. citizen or
Please resident (or I am filing for a foreign corporation,
Sign partnership, estate, or trust).
Here / / For DIVIDENDS, I am not a U.S. citizen or resident (or
I am filing for a foreign corporation, partnership,
estate, or trust).
/ / For BROKER TRANSACTIONS or BARTER EXCHANGES, I am an
exempt foreign person as defined in the instructions
below.
--------------------------------------- ----------------
Signature Date
- --------------------------------------------------------------------------------
General Instructions
(Section references are to the Internal Revenue Code unless otherwise noted.)
Purpose
Use Form W-8 or a substitute form containing a substantially similar statement
to tell the payer, mortgage interest recipient, middleman, broker, or barter
exchange that you are a nonresident alien individual, foreign entity, or exempt
foreign person not subject to certain U.S. information return reporting or
backup withholding rules. Caution: Form W-8 does not exempt the payee from the
30% (or lower treaty) nonresident withholding rates.
Nonresident Alien Individual
For income tax purposes, "nonresident alien individual" means an individual who
is neither a U.S. citizen nor resident. Generally, an alien is considered to be
a U.S. resident if:
o The individual was a lawful permanent resident of the United States at any
time during the calendar year, that is, the alien held an immigrant visa (a
"green card"), or
o The individual was physically present in the United States on:
(1) at least 31 days during the calendar year, and
(2) 183 days or more dung the current year and the 2 preceding calendar
years (counting all the days of physical presence in the current year, one-third
the number of days of presence in the first preceding year, and only one-sixth
of the number of days in the second preceding year).
See Pub. 519, U.S. Tax Guide for Aliens, for more information on
resident and nonresident alien status.
Note: If you are a nonresident alien individual married to a U.S. citizen or
resident and have made an election under section 6013(g) or (h), you are treated
as a U.S. resident and may not use Form W-8.
Exempt Foreign Person
For purposes of this form, you are an "exempt foreign person" for a calendar
year in which:
1. You are a nonresident alien individual or a foreign corporation,
partnership, estate, or trust,
2. You are an individual who has not been, and plans not to be, present
in the United States for a total of 183 days or more during the calendar year,
and
3. You are neither engaged, nor plan to be engaged during the year, in
a U.S. trade or business that has effectively connected gains from transactions
with a broker or barter exchange.
If you do not meet the requirements of 2 or 3 above, you may instead
certify on Form 1001, Ownership, Exemption, or Reduced Rate Certificate, that
your country has a tax treaty with the United States that exempts your
transactions from U.S. tax.
Filing Instructions
When To File.--File Form W-8 or substitute form before a payment is made.
Otherwise, the payer may have to withhold and send part of the payment to the
Internal Revenue Service (see Backup Withholding below). This certificate
generally remains in effect for three calendar years. However, the payer may
require you to file a new certificate each time a payment is made to you.
Where To File.--File this form with the payer of the qualifying income who is
the withholding agent (see Withholding Agent on page 2). Keep a copy for your
own records.
Backup Withholding
A U.S. taxpayer identification number or Form W-8 or substitute form must be
given to the payers of certain income. If a taxpayer identification number or
Form W-8 or substitute form is not provided or the wrong taxpayer identification
number is provided, these payers may have to withhold 20% of each payment or
transaction. This is called backup withholding. Note: On January 1, 1993, the
backup withholding rate increases from 20% to 31%.
(Continued on back).
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Reportable payments subject to backup withholding rules are:
o Interest payments under section 6049(a).
o Dividend payments under sections 6042(a) and 6044.
o Other payments (i.e., royalties and payments from brokers and barter
exchanges) under sections 6041, 6041A(a), 6045, 6050A, and 6050N.
If backup withholding occurs, an exempt foreign person who is a
nonresident alien individual may get a refund by filing Form 1040NR, U.S.
Nonresident Alien Income Tax Return, with the Internal Revenue Service Center,
Philadelphia, PA 19255, even if filing the return is not otherwise required.
U.S. Taxpayer Identification Number
The Internal Revenue law requires that certain income be reported to the
Internal Revenue Service using a U.S. taxpayer identification number ('TIN).
This number can be a social security number assigned to individuals by the
Social Security Administration or an employer identification number assigned to
businesses and other entities by the Internal Revenue Service.
Payments to account holders who are foreign persons (nonresident alien
individuals, foreign corporations, partnerships, estates, or trusts) generally
are not subject to U.S. reporting requirements. Also, foreign persons are not
generally required to have a TIN, nor are they subject to any backup withholding
because they do not furnish a TIN to a payer or broker.
However, foreign persons with income effectively connected with a trade
or business in the United States (income subject to regular (graduated) income
tax), must have a TIN. To apply for a TIN, use Form SS-4, Application for
Employer Identification Number, available from local Internal Revenue Service
offices, or Form SS-5, Application for a Social Security Card, available from
local Social Security Administration offices.
Special Rules
Mortgage Interest.-For purposes of the reporting rules, mortgage interest is
interest paid on a mortgage to a person engaged in a trade or business
originating mortgages in the course of that trade or business. A mortgage
interest recipient is one who receives interest on a mortgage that was acquired
in the course of a trade or business.
Mortgage interest is not subject to backup withholding rules, but is
subject to reporting requirements under section 6050H. Generally, however, the
reporting requirements do not apply if the payer of record is a nonresident
alien individual who pays interest on a mortgage not secured by real property in
the United States. Use Form W-8 or substitute form to notify the mortgage
interest recipient that the payer is a nonresident alien individual.
Portfolio Interest.-Generally, portfolio interest paid to a nonresident
alien individual or foreign partnership, estate, or trust is not subject to
backup withholding rules. However, if interest is paid on portfolio investments
to a beneficial owner that is neither a financial institution nor a member of a
clearing organization, Form W-8 or substitute form is required.
Registered obligations not targeted to foreign markets qualify as
portfolio interest not subject to 30% withholding, but require the filing of
Form W-8 or substitute form. See Instructions to Withholding Agents on this page
for reporting rules.
See Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign
Corporations, for registered obligations targeted to foreign markets and when
Form W-8 or substitute form is not required on these payments.
Bearer obligations.-The interest from bearer obligations targeted to
foreign markets is treated as portfolio interest and is not subject to 30%
withholding. Form W-8 or substitute form is not required.
Dividends.-Any distribution or payment of dividends by a U.S.
corporation sent to a foreign address is subject to the 30% (or lower treaty)
withholding rate, but is not subject to backup withholding. Also, there is no
backup withholding on dividend payments made to a foreign person by a foreign
corporation. However, the 30% withholding (or lower treaty) rate applies to
dividend payments made to a foreign person by a foreign corporation if:
o 25% or more of the foreign corporation's gross income for the three preceding
taxable years was effectively connected with a U.S. trade or business, and
o The corporation was not subject to the branch profits tax because of an income
tax treaty (see section 884(e)).
If a foreign corporation makes payments to another foreign corporation,
the recipient must be a qualified resident of its country of residence to
benefit from that country's tax treaty. Broker or Barter Exchanges.-Income from
transactions with a broker or barter exchanges is subject to reporting rules and
backup withholding unless Form W-8 or substitute form is filed to notify the
broker or barter exchange that you are an exempt foreign person as defined on
page 1.
Specific Instructions
Name of Owner.-If Form W-8 is being filed for portfolio interest, enter the name
of the beneficial owner.
U.S. Taxpayer Identification Number.-If you have a U.S. taxpayer identification
number, enter your number in this space (see the discussion earlier).
Permanent Address.-Enter your complete address in the country where you reside
permanently for income tax purposes.
If you are: Show the
Address of
An individual Your permanent
residence
A partnership Principal Office
or corporation
An estate or trust Permanent
residence or
principal office of
any fiduciary
Also show your current mailing address if it differs from your permanent
address. Account Information (optional).-If you have more than one account
(savings, certificate of deposit, pension, IRA, etc.) with the same payer, list
all account numbers and types on one Form W-8 or substitute form unless your
payer requires you to file a separate certificate for each account.
If you have more than one payer, file a separate Form W-8 with each payer.
Signature.-If only one foreign person owns the account(s) listed on this form,
that foreign person should sign the Form W-8.
If each owner of a joint account is a foreign person, each should sign a
separate Form W-8. Notice of Change in Status.-If you become a U.S. citizen or
resident after you have filed Form W-8 or substitute form, or you cease to be an
exempt foreign person, you must notify the payer in writing within 30 days of
your change in status.
To notify the payer, you may check the box in the space provided on this
form or use the method prescribed by the payer.
Reporting will then begin on the account(s) listed and backup withholding
may also begin unless you certify to the payer that:
(1) The U.S. taxpayer identification number
you have given is correct, and
(2) The Internal Revenue Service has not notified you that you are subject
to backup withholding because you failed to report certain income.
You may use Form W-9, Request for Taxpayer Identification Number and
Certification; to make these certifications.
If an account is no longer active, you do not have to notify a payer of your
change in status unless you also have another account with the same payer that
is still active. False Certificate.-If you file a false certificate when you are
not entitled to the exemption from withholding or reporting, you may be subject
to fines and/or imprisonment under U.S. perjury laws.
Instructions to Withholding
Agents
Withholding Agent.-Generally, the person responsible for payment of the items
discussed above to a nonresident alien individual or foreign entity is the
withholding agent (see Pub. 515). Retention of Statement.--Keep Form W-8 or
substitute form in your records for at least four
years following the end of the last calendar year during which the payment is
paid or collected. Portfolio Interest.-Although registered obligations not
targeted to foreign markets are not subject to 30% withholding, you must file
Form 1042S, Foreign Person's U.S. Source Income Subject to Withholding, to
report the interest payment. Both Form 1042S and a copy of Form W-8 or
substitute form must be attached to Form 1042, Annual Withholding Tax Return for
U.S. Source income of Foreign Persons.
*U.S. Government Printing Office: 1994-375-125
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 9 (a)(viii)
40
<PAGE>
DATE: October 16, 1997
CONTACT: Maxcor Financial Group Inc.
2 World Trade Center, 84th floor
New York, N.Y. 10048
Gilbert Scharf
(212) 748-7000
FOR IMMEDIATE RELEASE
- ---------------------
MAXCOR FINANCIAL GROUP INC.
ANNOUNCES COMMENCEMENT OF ITS
COMMON STOCK FOR WARRANT EXCHANGE OFFER
NEW YORK, Oct. 16 -- Maxcor Financial Group Inc. (NASDAQ: MAXF)
announced today the commencement of its exchange offer to acquire all of its
outstanding Redeemable Common Stock Purchase Warrants (NASDAQ: MAXFW) and Series
B Redeemable Common Stock Purchase Warrants (NASDAQ:MAXFZ). The exchange offer
is being made on the basis of 0.1667 of a share of the Company's Common Stock
for each and every outstanding Warrant. Accordingly, the Company will issue one
whole share of Common Stock in exchange for every six Warrants (of either or
both series) tendered and accepted in the exchange offer (with cash paid in lieu
of fractional shares of Common Stock).
The exchange offer will expire at 12 midnight (EST) on Thursday,
November 13, 1997, unless extended. The Company's obligation to consummate the
exchange offer is conditioned upon at least 95% of the aggregate outstanding
warrants being validly tendered and not withdrawn prior to the expiration date
(in addition to certain other customary conditions).
Neither the Company nor its Board of Directors is making any
recommendation to Warrant holders as to whether or not to tender their Warrants
in the exchange offer. However, all directors and executive officers of the
Company, and all stockholders beneficially owning more than 5% of the
outstanding Common Stock, have indicated to the Company their current intention
to tender in the exchange offer all of the Warrants owned by them. Such persons
and entities collectively own approximately 49% of all outstanding Warrants.
The Company will pay a solicitation fee of $.05 per Warrant to any
eligible broker, dealer, bank or trust company who solicits Warrants tendered
and accepted for exchange in the
<PAGE>
exchange offer (other than Warrants owned by directors, executive officers and
5% shareholders described above, by employees of the Company or by the
soliciting entity).
Details with respect to the exchange offer (including the circumstances
under which and to whom the above-described solicitation fees will be payable)
are set forth in the Company's Prospectus, dated October 16, 1997, and related
Letter of Transmittal and other exchange offer materials that are being sent to
all holders of record (as of October 15, 1997) of the Warrants. This news
release does not constitute an offer to purchase or sell any securities, and the
exchange offer is only being made pursuant to, and on the terms and conditions
set forth in, the Prospectus and related Letter of Transmittal.
The information agent for the exchange offer is D.F. King & Co., Inc.
Additional copies of the Prospectus and other exchange offer materials may be
obtained from the information agent by calling 1-800-207-3158.
Maxcor Financial Group Inc. is a financial services holding company.
Through its Euro Brokers subsidiaries, it is a leading domestic and
international inter-dealer brokerage firm specializing in emerging market
products, money market instruments, derivatives, natural gas and electricity,
repurchase agreements and fixed income securities. Operating from principal
offices in New York, London, Tokyo, Toronto, Sydney and Mexico City, the Company
employs approximately 700 professionals and services a wide range of
multinational banks, securities dealers and other financial institutions.
<PAGE>
EXHIBIT 9 (c)
41
<PAGE>
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:
42
<PAGE>
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 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.
43
<PAGE>
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 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,
44
<PAGE>
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 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, make a Sale, in violation of the terms hereof, that would 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 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
45
<PAGE>
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.
46
<PAGE>
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
----------------------------------------------
One World Financial Center WCAS INFORMATION PARTNERS, L.P.
Suite 3601
New York, New York 10281
By WCAS INFO Partners, General Partner
14,562 shares of EBIC Common Stock
By: /s/ Patrick J. Welsh
---------------------------------------------
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
---------------------------------------------
47
<PAGE>
Two World Financial Center BRIAN G. CLARK
Suite 8400
New York, New York 10281
70,320 shares of EBIC Common Stock
/s/ Brian G. Clark
---------------------------------------------
Two World Financial Center WALTER E. DULSKI
Suite 8400
New York, New York 10281
53,977 shares of EBIC Common Stock
/s/ Walter E. Dulski
---------------------------------------------
GILBERT SCHARF
333,333 shares of FSAC Common Stock
/s/ Gilbert Scharf
---------------------------------------------
MICHAEL SCHARF
166,667 shares of FSAC Common Stock
/s/ Michael Scharf
---------------------------------------------
FINANCIAL SERVICES
ACQUISITION CORPORATION
By: /s/ Gilbert Scharf
---------------------------------------------
Name: Gilbert Scharf
Title: Chairman, President and Chief
Executive Officer
48
<PAGE>
EXHIBIT 9 (g)(i)
49
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $27,013,350 $18,231,926
Restricted cash (Note 15) 1,785,490 1,968,851
Commissions receivable 18,502,261 18,558,643
Equity in affiliated companies 2,951,864 2,756,741
Receivable from clearing firm 1,592,650 2,200,062
Deposits with clearing organizations 2,076,302 7,181,992
Securities owned 8,751,276
Receivable from broker-dealers and
customers 9,042,613
Prepaid expenses and other assets 6,944,925 6,177,118
Deferred tax asset 5,520,348 6,662,193
Furniture, equipment and leasehold
improvements 13,264,743 13,624,500
Intangible assets 2,426,809 2,016,800
----------- -----------
Total assets $82,078,742 $97,172,715
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(CONTINUED)
<TABLE>
<CAPTION>
December 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1996
- ------------------------------------ ------------- ------------
<S> <C> <C>
Liabilities:
Short-term borrowings $ $ 9,688,983
Accounts payable and accrued liabilities 16,001,920 17,336,032
Accrued compensation payable 15,998,721 22,973,060
Income taxes payable 7,328,244 1,804,543
Obligations under capitalized leases 2,284,806 1,428,764
Securities sold, not yet purchased 1,724,531
Payable to broker-dealers and customers 1,826,250
Deferred taxes payable 692,024 719,324
Notes payable 7,880,032 7,379,762
------------- ------------
50,185,747 64,881,249
------------- ------------
Minority interest in consolidated subsidiaries 501,731 ( 159,408)
------------- ------------
Commitments and contingencies
(Notes 15 and 16)
Stockholders' equity (Note 13):
Preferred stock, at December 31, 1995, none
authorized, at December 31, 1996, $.001
par value, 1,000,000 shares authorized,
none outstanding
Common stock, at December 31, 1995, Class A
$.01 par value; 2,000,000 shares authorized,
none outstanding, Class B $.001 par value,
2,000,000 shares authorized, 1,671,290
outstanding; at December 31, 1996, $.001 par
value, 30,000,000 shares authorized,
9,011,295 outstanding 4,258 9,011
Additional paid-in capital 48,193,040 33,533,806
Treasury stock at cost ( 10,177,107)
Accumulated deficit ( 7,251,041) ( 3,546,081)
Notes receivable from stockholders ( 2,243,709)
Foreign translation adjustment 2,865,823 2,454,138
------------- -------------
Total stockholders' equity 31,391,264 32,450,874
------------- -------------
Total liabilities and stockholders' $ 82,078,742 $ 97,172,715
equity ============= =============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31, December 31,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenue:
Commission income $ 144,586,661 $ 171,576,327 $ 178,109,899
Interest income 1,090,789 1,462,744 1,801,442
Other income 697,522 732,347 582,729
------------- ------------- -------------
146,374,972 173,771,418 180,494,070
------------- ------------- -------------
Costs and expenses:
Payroll and related costs 96,207,365 110,915,257 115,536,731
Communication costs 15,633,010 17,187,573 18,288,441
Travel and entertainment 10,493,903 10,224,384 11,355,183
Occupancy costs 5,640,070 5,854,525 6,539,150
Depreciation and
amortization 4,248,181 4,568,164 4,734,101
Clearing fees 3,647,556 3,777,710 4,411,515
General, administrative
and other expenses 7,355,734 7,845,403 8,887,562
Interest expense 1,635,547 775,077 693,132
------------- ------------- -------------
144,861,366 161,148,093 170,445,815
------------- ------------- -------------
Income before provision for income
taxes and minority interest 1,513,606 12,623,325 10,048,255
Provision for income taxes 3,333,989 7,393,196 6,650,606
------------- ------------- -------------
Income (loss) before minority
interest ( 1,820,383) 5,230,129 3,397,649
Minority interest in consolidated
subsidiaries ( 250,480) ( 1,767,854) 307,311
------------- ------------- -------------
Net income (loss) ($ 2,070,863) $ 3,462,275 $ 3,704,960
============= ============= =============
Pro forma common shares outstanding
(Note 1) 9,011,295 9,011,295
Pro forma earnings per share (Note 1) $.38 $.41
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
Notes
Additional receivable Foreign
Common paid-in Treasury Accumulated EBIC from translation
stock capital stock deficit warrants stockholders adjustment Total
------ ----------- ----------- ----------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $3,348 $18,442,515 ($3,623,839) ($8,642,453) $5,141,145 ($3,720,351) $2,787,302 $10,387,667
Retirement of warrants 5,141,145 (5,141,145)
Net loss (2,070,863) (2,070,863)
Acquisition of treasury stock (6,553,268) (6,553,268)
Issuance of common stock, net of
expenses 910 24,616,526 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 4,258 48,200,186 (10,177,107) (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) (7,146)
Repayment of stockholder notes 40,177 40,177
Foreign translation adjustment (166,039) (166,039)
------ ----------- ----------- ----------- ---------- ----------- ---------- -----------
Balance at December 31, 1995 4,258 48,193,040 (10,177,107) (7,251,041) (2,243,709) 2,865,823 31,391,264
Retirement of treasury stock (2,587) (10,174,520) 10,177,107
Net income 3,704,960 3,704,960
Foreign translation adjustment (411,685) (411,685)
Recapitalization in connection
with the Merger (See Note 1)
Retirement of EBIC stock (1,671) 1,671
Issuance of shares to EBIC
shareholders (Note 13) 9,011 18,234,239 18,243,250
Cash consideration paid to
EBIC shareholders (21,955,012) (21,955,012)
Repayment of stockholder
notes 2,243,709 2,243,709
EBIC expenses incurred in
connection with Merger (765,612) (765,612)
------ ----------- ----------- ----------- ---------- ----------- ---------- -----------
Balance at December 31, 1996 $9,011 $33,533,806 $ ($3,546,081) $ $ $2,454,138 $32,450,874
====== =========== =========== =========== ========== =========== ========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
Year Ended
December 31, December 31, December 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 2,070,863) $ 3,462,275 $ 3,704,960
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 4,248,181 4,568,164 4,734,101
Provision for doubtful accounts ( 196,300) ( 48,956) ( 45,361)
Gain on sale of exchange memberships ( 490,000) ( 14,000)
Undistributed earnings of affiliates ( 137,775) ( 537,571) ( 636,148)
Minority interest in consolidated subsidiaries ( 55,416) 9,249 ( 635,630)
Imputed interest expense 120,806 129,358 106,287
Amortization of deferred expenses 12,031 5,269 1,457
Deferred income taxes 1,971,504 ( 4,522,662) ( 1,055,635)
Change in assets and liabilities:
Decrease (increase) in commissions receivable 1,894,546 ( 1,654,378) 644,622
(Decrease) increase in receivable from clearing firm ( 1,155,733) 852,110 ( 607,412)
Increase in deposits with clearing organizations ( 1,877,041) ( 5,092,794)
(Increase) decrease in securities owned ( 967,500) 967,500 ( 8,751,276)
Increase in receivable from broker-dealers and customers ( 9,042,613)
Decrease (increase) in prepaid expenses and other assets 2,398,411 ( 478,684) 1,184,235
Increase in short-term borrowings 9,688,983
Increase (decrease) in accounts payable and accrued
liabilities 1,173,089 ( 243,403) 569,448
(Decrease) increase in accrued compensation payable ( 7,887,478) 5,552,106 6,231,912
Increase (decrease) in securities owned, not yet purchased 1,280,000 ( 1,280,000) 1,724,531
Increase in payable to broker-dealers and customers 1,825,650
(Decrease) increase in income taxes payable ( 1,345,847) 5,494,722 ( 5,555,680)
----------- ----------- -----------
Net cash (used in) provided by operating activities ( 1,208,344) 10,384,058 ( 1,006,363)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets ( 4,340,179) ( 2,059,449) ( 4,030,004)
Net sale of short-term investments 2,957,056
Investment in equity affiliates 36,885 ( 93,745) 113,070
Net (purchase) sale of exchange memberships 1,661,000 ( 25,000)
----------- ----------- -----------
Net cash provided by (used in) investing activities 314,762 ( 2,178,194) ( 3,916,934)
----------- ----------- -----------
</TABLE>
F-8
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31, December31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Repayment of notes payable (2,037,502) (1,027,396)
Repayment of subordinated note payable (17,660,000)
Issuance of common stock, net of expenses 1,617,436 (7,146)
Issuance of secured demand note 23,000,000
Decrease in obligations under capitalized leases (119,010) (507,946) (1,001,529)
Acquisition of treasury stock (5,221,260)
Issuance of shares in connection with Merger 18,243,250
EBIC expenses incurred in connection with Merger (765,612)
Cash merger consideration paid to EBIC shareholders (21,955,012)
Increase in minority shareholders (25,001)
Repayments of notes receivable from stockholders 105,676 40,177 2,243,709
------------ ------------ ------------
Net cash provided by (used in) financing activities 1,722,842 (2,512,417) (4,287,591)
------------ ------------ ------------
Effect of exchange rate changes on cash 233,079 (35,370) 429,464
------------ ------------ ------------
Net increase (decrease)in cash and cash equivalents 1,062,339 5,658,077 (8,781,424)
Cash and cash equivalents at beginning of year 20,292,934 21,355,273 27,013,350
------------ ------------ ------------
Cash and cash equivalents at end of year $ 21,355,273 $ 27,013,350 $ 18,231,926
============ ============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 1,736,028 $ 650,007 $ 616,750
Income taxes paid 2,828,794 881,875 12,070,364
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-9
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
Financial Services Acquisition Corporation (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. To this end, the Company
consummated an initial public offering in December 1994 and raised net proceeds
of approximately $20 million.
On March 8, 1996, the Company entered into a merger agreement to acquire Euro
Brokers Investment Corporation ("EBIC"), a privately-held international and
domestic inter-dealer broker for a broad range of financial instruments,
pursuant to which a newly-formed, wholly-owned subsidiary of the Company would
merge (the "Merger") with and into EBIC. The Merger was consummated on August
16, 1996. Pursuant thereto, each outstanding share of EBIC common stock was
converted into the right to receive, after giving effect to certain adjustments
and subject to certain escrow arrangements, approximately (i) 2.70 shares of the
common stock, $.001 par value ("Common Stock"), of the Company (approximately
4,505,666 shares in the aggregate), (ii) 4.53 of the Company's Series B
redeemable common stock purchase warrants (approximately 7,566,666 warrants in
the aggregate) and $13.14 in cash (approximately $22 million in the aggregate).
In connection with and immediately following the Merger, the Company also
consummated an exchange with the holders of its outstanding options, issued in
connection with the 1994 initial public offering, to acquire 333,333 units of
the Company (each unit consisting of one share of Common Stock and two
warrants). In the exchange, all such unit purchase options were acquired by the
Company for an aggregate consideration consisting of 225,000 newly issued shares
of Common Stock.
EBIC, incorporated in December 1986, through its subsidiaries and affiliates, is
primarily an inter-dealer broker of money market instruments, derivative
products and selected securities, with offices in major financial centers,
including New York, London and Tokyo, and correspondent relationships with other
brokers throughout the world. EBIC and its affiliates comprise substantially all
of the Company's business and assets.
The Merger has been accounted for as a recapitalization of EBIC, with the
issuance of shares by EBIC for the net assets of the Company. The historical
assets and liabilities of the Company and EBIC have been combined and reflected
in the statement of financial condition at their respective book values. The
consolidated results of operations and financial position of the Company for
periods and dates prior to the Merger are the consolidated historical results of
operations and financial position of EBIC and its subsidiaries and affiliates
for such periods and dates. Pro forma number of shares outstanding and related
pro forma earnings per share information have been presented as if all shares to
be issued in the Merger had been issued as of January 1, 1995 (See Note 13) and
all such shares were outstanding for the merged and recapitalized entity since
that date.
F-10
<PAGE>
NOTE 2 - 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 may
exercise 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 are recorded on a trade date basis.
Securities owned and securities sold but not yet purchased are carried at market
value with unrealized gains and losses reflected in income.
Gains on securities transactions of approximately $333,000 for the year ended
December 31, 1996 have been included in other income in the Consolidated
Statement of Operations.
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, 1995 and
1996, the market value of these memberships approximated cost.
At December 31, 1995 and 1996, the cost of such memberships aggregated $140,000
and has been included in prepaid expenses and other assets.
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 $6,756,592 and $7,166,596 at December 31, 1995 and 1996,
respectively.
F-11
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: Continued:
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. 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
assets. There have been no impairment losses with respect to intangible assets.
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
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 financings.
Income taxes:
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-12
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: Continued:
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.
NOTE 3- ACQUISITION AND SALE OF BUSINESS:
During 1996, the Company's 51% owned Hong Kong subsidiary, Yagi Euro (Hong Kong)
Limited ("YEHK") entered into a joint venture with Martin Brokers (Hong Kong)
Limited ("Martins") whereby YEHK contributed its business and substantially all
of its net assets to the joint venture in exchange for 57.5% of the common stock
of the joint venture and a note. Martins also contributed its business and net
assets in exchange for 42.5% of the common stock and notes. The Company's
financial statements include the accounts of the joint venture on a consolidated
basis and, at December 31, 1996, include notes payable aggregating approximately
$1,100,000 that were issued to minority shareholders in connection with the
transaction. As described in Note 19, YEHK sold its interest in the joint
venture to Martins in February 1997.
NOTE 4- CASH AND CASH EQUIVALENTS:
The Company considers all short-term investments with an initial maturity of
three months or less to be cash equivalents.
NOTE 5- COMMISSIONS RECEIVABLE:
Commissions receivable are reflected in the statement of financial condition net
of allowances for doubtful accounts of $471,100 and $434,400 at December 31,
1995, and 1996, respectively.
NOTE 6- RELATED PARTY TRANSACTIONS:
The Company incurred interest expense which was in respect of debt payable to
its then majority shareholder aggregating $789,200 for the year ended
December 31, 1994. All such debt was repaid during 1994.
Prepaid expenses and other assets include loans to employees aggregating
$2,317,500 and $1,526,000 at December 31, 1995 and 1996, respectively. Such
loans generally bear interest at the prime rate and are short term in nature.
F-13
<PAGE>
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, 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.
The Company's investments in equity affiliates are as follows:
December 31, December 31,
1995 1996
------------ ------------
Yagi Euro $ 2,794,211 $ 2,604,439
Other 157,653 152,302
------------ ------------
$ 2,951,864 $ 2,756,741
============ ============
Summarized financial information for Yagi Euro is as follows:
December 31, December 31,
1995 1996
------------ ------------
Total assets $ 21,740,692 $ 20,729,326
Total liabilities 3,266,547 3,366,396
Revenues 14,310,972 10,169,693
Net income 2,735,871 1,296,149
NOTE 8 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements are summarized below:
December 31, December 31,
1995 1996
------------ ------------
Furniture and telephone equipment $ 11,512,903 $ 13,579,847
Leasehold improvements 6,329,807 6,865,342
Computer and related equipment 7,265,569 10,193,793
Automobiles 3,113,004 2,156,887
------------ ------------
28,221,283 32,795,869
Less- Accumulated depreciation
and amortization ( 14,956,540) ( 19,171,369)
------------ ------------
$ 13,264,743 $ 13,624,500
============ ============
F-14
<PAGE>
NOTE 9 - 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, 1996:
For the Year Ending December 31,
1997 $ 829,638
1998 627,705
1999 162,745
----------
Total net minimum lease payments 1,620,088
Less: amount representing interest 191,324
----------
Present value of net minimum
lease payments $1,428,764
==========
The gross amount of assets under capitalized leases are $3,361,700 and
$2,435,700 at December 31, 1995 and 1996, 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 $681,200, $644,700 and $520,200 for the
years ended December 31, 1994, 1995 and 1996, respectively.
NOTE 10 - NOTES PAYABLE:
Notes payable at December 31, 1995 and 1996 primarily represent convertible
purchase price notes which were issued in December 1986 in connection with the
acquisition of the predecessor businesses of EBIC 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 of 7.71%.
The notes are subordinated to the claims of financial institutions to a maximum
aggregate amount of $10,000,000. Approximately 54% and 57% of the reported
balance of the purchase price notes was denominated in British pounds sterling
at December 31, 1995 and 1996, respectively.
Notes payable at December 31, 1996 also included notes issued by the Company's
Hong Kong joint venture to minority shareholders in connection with the
formation of the joint venture. In February 1997 the Company sold its interest
in the joint venture, (See Note 19) and, accordingly, the notes payable are no
longer a liability of the Company.
F-15
<PAGE>
NOTE 10 - NOTES PAYABLE: Continued:
The change in notes payable is as follows:
For the Year Ended
-------------------------------
December 31, December 31,
1995 1996
------------ ------------
Balance at beginning of year $ 9,830,284 $ 7,880,032
Repayment of principal (2,037,502) (2,128,469)
Exchange rate difference (42,108) 420,839
Imputed interest 129,358 106,287
Issuance of note to Martin Brokers
(Hong Kong) Limited 1,101,073
------------ ------------
Balance at end of year $ 7,880,032 $ 7,379,762
============ ============
NOTE 11- 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, subject to a maximum limit, based upon a
percentage of employee contributions. Total 401(k) plan expense approximated
$216,000 and $222,000 and $308,000 for the years ended December 31, 1994, 1995
and 1996, respectively.
NOTE 12 - INCOME TAXES:
Income (loss) from continuing operations before provision for income tax and
minority interest was taxed under the following jurisdictions:
For the Year Ended
--------------------------------------------------
December 31, December 31, December 31,
1994 1995 1996
------------ ------------ ------------
Domestic $ 3,089,709 $ 2,645,217 $ 11,570,041
Foreign (1,576,103) 9,978,108 (1,521,786)
------------ ------------ ------------
Total $ 1,513,606 $ 12,623,325 $ 10,048,255
============ ============ ============
F-16
<PAGE>
NOTE 12 - INCOME TAXES: Continued:
The components of the provision for income taxes are as follows:
For the Year Ended
--------------------------------------------------
December 31, December 31, December 31,
1994 1995 1996
------------ ------------ ------------
Current
Federal $ 1,103,197 $ 2,745,733 $ 3,965,812
State and local 706,747 931,547 1,968,578
Foreign (76,684) 8,510,075 2,488,923
------------ ------------ ------------
1,733,260 12,187,355 8,423,313
------------ ------------ ------------
Deferred
Federal 504,938 (1,946,254) (506,338)
State and local 411,633 (164,502) (390,189)
Foreign 684,158 (2,683,403) (876,180)
------------ ------------ ------------
1,600,729 (4,794,159) (1,772,707)
------------ ------------ ------------
Total $ 3,333,989 $ 7,393,196 $ 6,650,606
============ ============ ============
Deferred tax assets (liabilities) are comprised of the following:
December 31, December 31,
1995 1996
------------ ------------
Assets
Bad debt reserve $ 161,000 $ 149,500
Amortization of leasehold
improvements 221,354 294,161
Rent reserve 211,830 254,535
Deferred compensation 4,415,679 5,583,442
Miscellaneous reserve 510,485 380,555
Foreign tax credits 2,675,017 1,990,000
Deferred tax asset valuation
allowance (2,675,017) (1,990,000)
------------ ------------
Gross deferred tax asset, after
valuation allowance $ 5,520,348 $ 6,662,193
============ ============
Liabilities
Depreciation (447,092) (54,164)
Unrealized foreign exchange
(gain) loss (244,932) (665,160)
------------ ------------
Gross deferred tax liabilities $ (692,024) $ (719,324)
============ ============
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.
F-17
<PAGE>
NOTE 12 - INCOME TAXES: Continued:
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 tax benefit (expense) of ($370,000), $20,600 and
($272,000) in the years ended December 31, 1994, 1995 and 1996, respectively.
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:
For the Year Ended
--------------------------------------------------
December 31, December 31, December 31,
1994 1995 1996
------------ ------------ ------------
Tax at U.S. statutory rate $ 514,626 $ 4,291,930 $ 3,516,889
Increase (decrease) in tax
resulting from:
Higher effective rates on
earnings of foreign
operations and tax benefit
of foreign losses not
recognized 1,283,444 1,847,061 1,413,660
Nondeductible meals and
entertainment 869,536 868,507 1,018,345
State and local taxes, net 738,131 506,259 1,025,952
Other (71,748) (120,561) (324,240)
------------ ------------ ------------
$ 3,333,989 $ 7,393,196 $ 6,650,606
============ ============ ============
NOTE 13 - STOCKHOLDERS' EQUITY:
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 its Board of Directors. At December 31, 1996, no shares of
preferred stock were issued or outstanding.
Common stock and warrants:
The Company is authorized to issue 30,000,000 shares of Common Stock. At
December 31, 1996, the Company had outstanding 8,926,547 shares of Common Stock,
7,566,666 redeemable common stock purchase warrants (issued in connection with
the Company's 1994 initial public offering) and 7,408,487 Series B redeemable
common stock purchase warrants (issued in connection with the Merger and
economically identical to the public offering warrants). Once all certificates
formerly representing EBIC common stock (all of which were canceled in the
Merger) are exchanged, the Company expects it will have approximately 9,011,295
shares of Common Stock and an aggregate of approximately 15,133,332 warrants
outstanding. Each of the Company's
F-18
<PAGE>
NOTE 13 - STOCKHOLDERS' EQUITY: Continued:
outstanding warrants (both series) currently entitles the holder thereof to
purchase from the Company one share of Common Stock at an exercise price of
$5.00 per share. The warrants expire on November 20, 2001 and are redeemable at
a price of $.01 per warrant upon 30 day's notice at any time, but only if the
last sale price of the Common Stock has been 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.
At December 31, 1996, the Company had 15,133,332 shares of Common Stock reserved
for issuance upon exercise of all warrants and an additional 1,800,000 shares
reserved for issuance upon exercise of options that have been and may be granted
pursuant to the Company's 1996 Stock Option Plan (see Note 14).
Notes receivable from stockholders:
Notes receivable from stockholders of $2,243,709 at December 31, 1995, represent
amounts due to the Company for the purchase of common stock of EBIC by certain
of its employees. The notes all matured and were payable on demand. The notes
bore interest at 5% per annum, and were collateralized by the EBIC stock
purchased therewith. The notes have been reflected as a decrease to
stockholders' equity.
In connection with the Merger described in Note 1, such notes have been repaid
through the application of the cash Merger consideration otherwise payable to
such stockholders.
NOTE 14 - STOCK OPTION PLAN:
The FSAC 1996 Stock Option Plan, as amended (the "Plan"), provides for the
granting of stock options, in the form of incentive stock options ("ISOs") and
non-qualified stock options, to directors, executive officers and key employees
of the Company and its subsidiaries, as determined by the compensation committee
of the Company's Board of Directors. Options to purchase a maximum of 1,800,000
shares of Common Stock are available under the Plan. In the case of ISOs, the
duration of the option may not exceed ten years and the exercise price must be
at least equal to the fair market value on the date of grant of a share of
Common Stock. Employee options granted to date generally are ISOs and vest and
become exercisable in equal 20% installments on each of the first five
anniversaries of the date of the grant. Non-employee director options granted to
date are non-qualified stock options and vest in equal 50% installments on the
dates that are respectively six and twelve months following the date of grant.
Under the Plan, unless otherwise determined by the compensation committee,
options may only be exercised during the period of employment or service with
the Company or the 30-day period thereafter (or, in the case of death,
disability or retirement, the one-year period thereafter).
F-19
<PAGE>
NOTE 14 - STOCK OPTION PLAN: Continued:
A summary of the Company's stock option activity follows:
Weighted average
Shares exercise price
--------- ----------------
Outstanding at January 1, 1996 0
Granted 1,260,000 $ 5.07
---------
Outstanding at December 31, 1996 1,260,000
=========
Exercise prices for options outstanding at December 31, 1996 ranged from $5.00
to $5.50. The weighted average fair value of options granted during the year was
$1.93 per share based on the value of the Common Stock at the date of grant.
Because stock options under the Plan have characteristics significantly
different from those of traded options and because changes in subjective
assumptions can materially affect the fair value estimated, the Company used the
Black-Scholes pricing model with the following weighted average assumptions for
options granted during 1996: expected volatility of 30%; risk free interest rate
of 6.56% and an expected option life of five years.
The Company applies APB Opinion 25 in accounting for the Plan and, accordingly,
does not recognize any compensation cost associated with the Plan in the
consolidated financial statements. Had compensation costs for the Plan been
determined based on the fair value at the grant dates for the options under SFAS
No. 123, net income and earnings per share for the year ended December 31, 1996
would approximate the pro forma amounts indicated below:
Net income As reported $ 3,704,960
Pro forma 2,099,972
Earnings per share As reported $ .41
Pro forma .23
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.
F-20
<PAGE>
NOTE 15 - COMMITMENTS: Continued:
At December 31, 1996, the Company had the following commitments under long-term
non-cancelable operating leases:
For the Year Ending December 31, 1996 $ 9,445,795
1997 4,832,234
1998 4,047,982
1999 3,946,044
2000 and thereafter 18,032,138
------------
Total minimum lease payments $ 40,304,193
============
The Company has pledged (pound)1,150,500 in cash with a bank in respect of a
guarantee of its London premises lease. This amount has been reflected as
restricted cash in the statement of financial condition.
NOTE 16 - CONTINGENCIES:
The Company and/or its subsidiaries are subject to various legal proceedings,
arbitrations and claims that arise in the ordinary course of their businesses.
Although the results of legal proceedings and arbitrations cannot be predicted
with certainty, based on information currently available and established
reserves, management believes that resolving these matters will not have a
material adverse impact on the Company's consolidated financial condition or
results of operations.
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 - NET CAPITAL REQUIREMENTS:
The Company's U.S. broker dealer subsidiary Euro Brokers Maxcor Inc.("EBMI") is
subject to the Securities and Exchange Commission's Uniform Net Capital Rule
(rule 15c3-1) which requires the maintenance of minimum net capital. EBMI has
elected to use the alternative method, as permitted by the rule, which requires
that EBMI maintain minimum net capital, as defined, equal to the greater of
$250,000; 2% of aggregate debit items arising from customer transactions, as
defined; or 4% of the funds required to be segregated pursuant to the Commodity
Exchange Act and regulations thereunder. At December 31, 1996, EBMI's net
capital was $11,778,015 and exceeded the minimum requirement of $250,000 by
$11,528,015. In addition, a number of the Company's other subsidiaries
F-21
<PAGE>
NOTE 18 - NET CAPITAL REQUIREMENTS: Continued:
operating in various countries are subject to capital rules and regulations
issued by the designated regulatory authorities to which they are subject.
NOTE 19 - SUBSEQUENT EVENT:
On February 5, 1997 the Company's YEHK subsidiary completed the sale of its
57.5% interest in Euro Yagi Martin Limited, its joint venture in Hong Kong with
Martins. The business was sold to the minority shareholder for $323,000 at a
loss of $277,000, which was fully reserved at December 31, 1996.
Commission income, expenses and net loss before minority interest for Euro Yagi
Martin Limited which have been reflected in the consolidated statement of
operations for the year ended December 31, 1996 were $8,085,000, $9,885,000 and
$1,800,000, respectively.
NOTE 20- GEOGRAPHIC DATA:
The following tables set forth, for each year in the three-year period ended
December 31, 1996, summary financial information for each of the Company's
principal geographic locations. United States amounts principally derive from
the Company's New York office, but include the results of operations of all of
its U.S.-based operations. Tokyo amounts include the consolidation of the
results of operations of the Tokyo Partnership and Hong Kong amounts include the
consolidation of the results of operations of the Company's Hong Kong joint
venture (a 51% interest prior to June 1996 and a controlling, approximately 30%
beneficial interest, during the balance of 1996). The Company's stake in the
Hong Kong joint venture was subsequently sold in February 1997 as described in
Note 19. Results of operations from the Company's Australia joint venture are
consolidated into the results of operations for the United Kingdom.
F-22
<PAGE>
Year Ended December 31,
-------------------------------------------------
1994 1995 1996
-------------- -------------- --------------
Commission income:
United States $ 66,090,388 $ 69,081,547 $ 82,178,265
United Kingdom 61,226,002 65,715,235 64,399,407
Canada 3,091,433 3,452,205 3,375,172
Japan 6,965,106 24,601,532 20,071,821
Hong Kong 7,213,732 8,725,808 8,085,234
-------------- -------------- --------------
Total $ 144,586,661 $ 171,576,327 $ 178,109,899
============== ============== ==============
Income (loss) from operations:
United States $ 4,301,375 $ 3,021,226 $ 5,045,727
United Kingdom (2,960,188) 2,901,237 1,452,943
Canada (249,413) (874,440) (452,261)
Japan 1,140,723 6,985,361 4,919,490
Hong Kong (126,387) (16,677) (1,385,478)
-------------- -------------- --------------
Total $ 2,106,110 $ 12,016,707 $ 9,580,421
============== ============== ==============
F-23
<PAGE>
EXHIBIT 9 (g)(ii)
50
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 17,581,508 $ 18,231,926
Restricted cash 1,914,777 1,968,851
Commissions receivable 17,699,873 18,558,643
Equity in affiliated companies 2,776,987 2,756,741
Receivable from clearing firm 3,239,318 2,200,062
Deposits with clearing organizations
(Includes cash of $195,617 and U.S. Treasury
bills of $6,542,856 at June 30, 1997) 6,738,473 7,181,992
Securities owned 4,564,024 8,751,276
Receivable from broker-dealers and customers 15,034,653 9,042,613
Prepaid expenses and other assets 5,105,224 6,177,118
Deferred tax asset 5,718,852 6,662,193
Furniture, equipment and leasehold improvements 12,335,525 13,624,500
Intangible assets 1,811,793 2,016,800
------------- -------------
Total assets $ 94,521,007 $ 97,172,715
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4 of 23 Pages
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(continued)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- -----------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Short-term borrowings $ 14,429,743 $ 9,688,983
Accounts payable and accrued liabilities 18,142,187 17,336,032
Accrued compensation payable 18,879,462 22,973,060
Income taxes payable 1,605,809 1,804,543
Obligations under capitalized leases 1,175,614 1,428,764
Securities sold, not yet purchased 1,724,531
Payable to broker dealers and customers 1,826,250
Deferred taxes payable 719,324 719,324
Notes payable 6,223,909 7,379,762
------------- --------------
61,176,048 64,881,249
------------- --------------
Minority interest in consolidated subsidiaries (272,319) (159,408)
------------- --------------
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized, none issued and outstanding at June
30, 1997 and December 31, 1996
Common stock, $.001 par value; at December 31, 1996,
30,000,000 shares authorized, 8,949,656 shares issued
and outstanding; at June 30, 1997, 30,000,000 shares
authorized, 9,011,294 shares issued and 8,949,656
shares outstanding (Notes 1 and 2) 8,950 8,950
Additional paid-in capital 33,533,867 33,533,867
Treasury stock (211,599)
Accumulated deficit (2,405,078) (3,546,081)
Foreign translation adjustment 2,691,138 2,454,138
------------- --------------
Total stockholders' equity 33,617,278 32,450,874
------------- --------------
Total liabilities and stockholders' equity $ 94,521,007 $ 97,172,715
============= ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 5 of 23 Pages
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Commission income $ 42,704,169 $ 41,740,861 $ 86,116,521 $ 90,080,825
Interest income 395,117 422,059 823,788 840,831
Other income 252,225 89,792 428,806 164,517
------------ ------------ ------------- -------------
43,351,511 42,252,712 87,369,115 91,086,173
------------ ------------ ------------- -------------
Costs and expenses:
Payroll and related costs 27,603,129 26,012,610 54,146,346 54,366,463
Communication costs 4,133,683 4,435,222 8,485,917 8,383,935
Travel and entertainment 2,672,903 2,759,893 5,387,284 5,369,774
Occupancy costs 1,551,042 1,532,392 3,101,912 3,033,358
Depreciation and amortization 1,334,601 1,145,865 2,657,419 2,317,835
Clearing fees 1,407,018 924,671 3,256,561 2,116,366
General, administrative and
other expenses 2,115,056 2,059,012 3,688,556 4,063,782
Interest expense 231,757 151,464 447,263 299,522
------------ ------------ ------------- -------------
41,049,189 39,021,129 81,171,258 79,951,035
------------ ------------ ------------- -------------
Income before provision for
income taxes and minority
interest 2,302,322 3,231,583 6,197,857 11,135,138
Provision for income taxes 1,826,105 1,987,353 4,433,952 6,086,881
------------ ------------ ------------- -------------
Income before minority interest 476,217 1,244,230 1,763,905 5,048,257
Minority interest in consolidated
subsidiaries (369,161) (96,168) (622,902) (447,020)
------------ ------------ ------------- -------------
Net income $ 107,056 $ 1,148,062 $ 1,141,003 $ 4,601,237
============ ============ ============= =============
Average common shares outstanding
(Note 1) 8,949,656 8,949,656 8,949,656 8,949,656
Earnings per share (Note 1) $ .01 $ .13 $ .13 $ .51
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 6 of 23 Pages
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIODS ENDED DECEMBER 31, 1996 AND JUNE 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Notes
Additional receivable Foreign
Common paid-in Treasury Accumulated from translation
stock capital stock deficit stockholders adjustments Total
----- ------- ----- ------- ------------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 $ 4,258 $ 48,193,040 ($10,177,107) ($ 7,251,041) ($ 2,243,709) $ 2,865,823 $ 31,391,264
Retirement of (2,587) (10,174,520) 10,177,107
treasury stock
Net income for
the year ended
December 31, 1996 3,704,960 3,704,960
Foreign translation
adjustment (411,685) (411,685)
Recapitalization
in connection
with the Merger:
Retirement of
EBIC stock (1,671) 1,671
Issuance of
shares to
EBIC 8,950 18,234,300 18,243,250
shareholders
Cash
consideration
paid to EBIC (21,955,012) (21,955,012)
shareholders
Repayment of
stockholder notes 2,243,709 2,243,709
Expenses
incurred in
connection
with Merger (765,612) (765,612)
--------- ------------ ------------ ------------ ------------ ------------ -------------
Balance at
December 31, 1996 8,950 33,533,867 (3,546,081) 2,454,138 32,450,874
Net income for
the six months
ended June 30, 1997 1,141,003 1,141,003
Acquisition of
treasury stock (211,599) (211,599)
Foreign translation
adjustment 237,000 237,000
--------- ------------ ------------ ----------- ------------ ------------ ------------
Balance at June
30, 1997 $ 8,950 $ 33,533,867 ($ 211,599) ($ 2,405,078) $ $ 2,691,138 $ 33,617,278
========= ============ =========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 7 of 23 Pages
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1997 June 30, 1996
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,141,003 $ 4,601,237
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,657,419 2,317,835
Provision for doubtful accounts 24,328 (13,909)
Undistributed earnings of affiliates (652,932) (422,239)
Minority interest in consolidated subsidiaries (266,070) (216,211)
Imputed interest expense 42,658 52,940
Amortization of deferred expenses 729
Deferred income taxes 898,094 318,788
Change in assets and liabilities:
Increase in restricted cash (764)
Decrease (increase) in commissions receivable 642,906 (1,472,233)
Increase in receivable from clearing firm (1,039,256) (577,422)
Decrease (increase) in deposits with clearing organizations 437,820 (52,169)
Decrease in securities owned 4,187,252
Increase in receivable from broker dealers and customers (5,992,040) (1,100,497)
Decrease in prepaid expenses and other assets 1,717,836 288,605
Decrease in short-term borrowings 4,740,760
Increase in accounts payable and accrued liabilities 863,147 4,302,486
(Decrease) increase in accrued compensation payable (3,828,252) 2,651,067
Increase (decrease) in income taxes payable (117,887) (4,349,219)
Decrease in securities sold, not yet purchased (1,724,531)
Decrease (increase) in payable to broker dealers and customers (1,826,250) 1,273,046
----------- ------------
Net cash provided by operating activities 1,906,005 7,602,070
----------- ------------
Cash flows from investing activities:
Purchase of fixed assets (1,380,599) (1,369,440)
Proceeds from the sale of subsidiary 322,622
Investment in equity affiliates 51,368
Increase in minority interest in consolidated subsidiaries
(34,292)
----------- ------------
Net cash used in investing activities (1,040,901) (1,369,440)
----------- ------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 8 of 23 Pages
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) (continued)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Cash flows from financing activities:
Repayment of notes receivable from stockholder 196,124
Decrease in notes payable (1,099,311)
Decrease in obligations under capitalized leases (207,034) (282,962)
Acquisition of treasury stock (211,599)
Increase in minority shareholders 20,588
Issuance of common stock, net of expenses (236,406)
------------ ------------
Net cash used in financing activities 1,497,356 (323,244)
------------ ------------
Effect of exchange rate changes on cash (18,165) 16,624
------------ ------------
Net (decrease) increase in cash and cash equivalants (650,417) 5,926,010
Cash and cash equivalents at beginning of period 18,231,925 27,013,350
------------ ------------
Cash and cash equivalents at end of period $ 17,581,508 $ 32,939,360
============ ============
Supplemental disclosures of cash flow information
Interest paid $ 141,953
Income taxes paid 1,724,564 $ 5,848,411
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 9 of 23 Pages
<PAGE>
MAXCOR FINANCIAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
Maxcor Financial Group Inc. ("the Company") was incorporated in Delaware in
August 1994 under the name of Financial Services Acquisition Corporation, with
the objective of acquiring or merging with an operating business in the
financial services industry. On August 16, 1996, the Company acquired Euro
Brokers Investment Corporation ("EBIC"), a privately-held international and
domestic inter-dealer broker, in a merger transaction (the "Merger"). The
Company changed its name to Maxcor Financial Group Inc. in June 1997.
EBIC, incorporated in December 1986, through its subsidiaries and affiliates is
primarily an inter-dealer broker of money market instruments, derivative
products and selected securities, with offices in major financial centers,
including New York, London, Tokyo, Toronto and Sydney, and correspondent
relationships with other brokers throughout the world. EBIC and its affiliates
currently comprise substantially all of the Company's business and assets.
The Merger has been accounted for as a recapitalization of EBIC, with the
issuance of shares by EBIC for the net assets of the Company. The historical
assets of the Company and EBIC have been reflected in the statement of financial
condition at their respective book values. The consolidated results of
operations and financial position of the Company for periods and dates prior to
the Merger are the consolidated historical results of operations and financial
position of EBIC for such periods and dates.
The number of shares of the common stock, par value $.001 per share ("Common
Stock"), of the Company outstanding and related earnings per share information,
as presented in the Company's audited consolidated financial statements as of
and for the year ended December 31, 1996 included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K"), were
presented on a pro forma basis, as if all shares anticipated to be issued in the
Merger (9,011,295) had been issued and were outstanding for the merged and
recapitalized entity at December 31, 1996 and for the entire period. This number
of shares outstanding and related earnings per share information has now been
restated to reflect actual shares issued and outstanding at December 31, 1996 of
8,949,656, which is also the number of actual shares outstanding at June 30,
1997. Shares outstanding and related earnings per share information for the
three month and six month periods ended June 30, 1996 have been presented as if
all shares outstanding at June 30, 1997 had been issued and were outstanding for
such three month and six month periods ended June 30, 1996.
Page 10 of 23 Pages
<PAGE>
The accompanying unaudited consolidated condensed financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the interim periods
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. All significant intercompany
balances and transactions have been eliminated in consolidation. For further
information, refer to the audited consolidated financial statements of the
Company as of December 31, 1996 and for each of the years in the three year
period then ended and the footnotes thereto included in the 1996 Form 10-K.
NOTE 2 - STOCKHOLDERS' EQUITY:
Common stock and warrants:
The Company is authorized to issue 30,000,000 shares of Common Stock. At June
30, 1997, the Company had outstanding 8,949,656 shares of Common Stock,
7,566,666 redeemable common stock purchase warrants (issued in connection with
the Company's 1994 initial public offering) and 7,451,610 Series B redeemable
common stock purchase warrants (issued in connection with the Merger and
economically identical in their terms to the public offering warrants). Each of
the Company's outstanding warrants (both series) currently entitles the holder
thereof to purchase from the Company one share of Common Stock at an exercise
price of $5.00 per share. The warrants expire on November 30, 2001 and are
redeemable, at a price of $.01 per warrant, upon 30 days notice at any time, but
only if the last sale price of the Common Stock has been 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.
At June 30, 1997, the Company had 15,018,276 shares of Common Stock reserved for
issuance upon exercise of its warrants and an additional 1,800,000 shares
reserved for issuance upon exercise of options that may be granted pursuant to
the Company's 1996 Stock Option Plan.
The Company held 61,638 shares of Common Stock and 115,015 Series B warrants in
treasury at June 30, 1997.
Page 11 of 23 Pages
<PAGE>
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 its Board of Directors. At June 30, 1997, no shares of
preferred stock were issued or outstanding.
Pursuant to the Company's adoption of a shareholder rights plan (the "Plan") in
December 1996, the Company authorized the creation of Series A junior
participating preferred stock and reserved 300,000 shares thereof for issuance
upon exercise of the rights that, pursuant to the Plan, were at the time
dividended to holders of Common Stock.
NOTE 3 - NET CAPITAL REQUIREMENTS:
The Company's U.S. broker-dealer subsidiary, Euro Brokers Maxcor Inc. ("EBMI"),
is subject to the Securities and Exchange Commission's Uniform Net Capital Rule
(rule 15c3-1), which requires the maintenance of minimum net capital. EBMI has
elected to use the alternative method, as permitted by the rule, which requires
that EBMI maintain minimum net capital, as defined, equal to the greater of
$250,000; 2% of aggregate debit items arising from customer transactions, as
defined; or 4% of the funds required to be segregated pursuant to the Commodity
Exchange Act and regulations thereunder. At June 30, 1997, EBMI's net capital
was $13,597,751 and exceeded the minimum requirement of $250,000 by $13,347,751.
EBMI's memberships in certain clearing corporations and its agreements with
certain clearing organizations also require it to maintain certain minimum
levels of net capital. In addition, a number of the Company's other
subsidiaries operating in various countries are subject to capital rules and
regulations issued by the designated regulatory authorities to which they are
subject.
Page 12 of 23 Pages
<PAGE>
EXHIBIT 9 (h)
Consent of Independent Accountants
We hereby consent to the incorporation and reference in this Schedule 13E-4 of
our report dated March 6, 1997, appearing on page F-3 of Financial Services
Acquisition Corporation's Annual Report on Form 10-K for the year ended December
31, 1996, filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, and incorporated by reference in this Schedule
13E-4 and in Amendment No. 1 to Form S-4 of Maxcor Financial Group Inc.
(formerly Financial Services Acquisition Corporation) filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1993.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, NY
October 15, 1997
51
