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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission File Number 0-25056
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MAXCOR FINANCIAL GROUP INC.
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(Exact name of registrant as specified in its charter)
Delaware 59-3262958
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Two World Trade Center, 84th Floor, New York, NY 10048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 748-7000
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Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of class)
Preferred Stock Purchase Rights
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X -
The aggregate market value of the Common Stock held by non-affiliates
of the registrant (assuming directors, executive officers and 5% stockholders
are affiliates), based on the Nasdaq National Market closing sales price of
$1.375 on March 29, 1999, was approximately $7,783,992.
As of March 29, 1999, 11,323,782 shares of Common Stock were
outstanding.
Documents Incorporated by Reference: Those portions of registrant's
Proxy Statement for Annual Meeting of Stockholders (which registrant intends to
file pursuant to Regulation 14A on or before April 30, 1999) that contain
information required to be included in Part III of this Form 10-K are
incorporated by reference into Part III hereof as provided therein.
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MAXCOR FINANCIAL GROUP INC.
INDEX
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Page
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PART I
Item 1. Business....................................................... 3
Item 2. Properties..................................................... 17
Item 3. Legal Proceedings.............................................. 17
Item 4. Submission of Matters to a Vote of Security-Holders............ 17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 18
Item 6. Selected Financial Data....................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 31
Item 8. Financial Statements and Supplementary Data................... 33
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 33
PART III
Item 10. Directors and Executive Officers of the Registrant............ 34
Item 11. Executive Compensation........................................ 34
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 34
Item 13. Certain Relationships and Related Transactions................ 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 34
Signatures.............................................................. 36
Consolidated Financial Statements and Notes............................. F-1
Index to Consolidated Financial Statements.............................. F-2
Exhibit Index........................................................... X-1
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PART I
ITEM 1. BUSINESS
History
Maxcor Financial Group Inc. (the "Company" or "Maxcor") was
incorporated in August 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 (the "IPO"), pursuant to
which it issued 3,583,333 units, each comprised of one share of common stock,
$.001 par value ("Common Stock"), and two redeemable common stock purchase
warrants ("Series A Warrants"), 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"), since 1986 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 (the "Merger") with and into EBIC
on August 16, 1996, with EBIC thereby becoming a wholly-owned subsidiary of the
Company. In the Merger, former holders of EBIC common stock received
consideration consisting, in the aggregate, of approximately $22 million in
cash, 4,505,666 shares of Common Stock and 7,566,625 Series B redeemable common
stock purchase warrants ("Series B Warrants" and, together with the Series A
Warrants, the "Warrants") of the Company (economically identical in their terms
to the Series A Warrants).
The Merger was accounted for as a recapitalization of EBIC, with the
issuance of shares by EBIC for the net assets of Maxcor. Accordingly, financial
and other information of the Company presented herein for dates and periods
prior to the Merger, unless otherwise indicated, represent financial and other
information of EBIC (and its subsidiaries and affiliates) for such dates and
periods.
In November 1997, the Company consummated an exchange offer, on the
basis of 0.1667 of a share of Common Stock for each Warrant (the "Exchange
Offer"), pursuant to which it issued an aggregate of 2,380,975 shares of Common
Stock in exchange for 14,283,296 (or approximately 95.1%) of the
then-outstanding Warrants. As a result of the Exchange Offer, the Warrants were
delisted from trading on the Nasdaq National Market and deregistered under the
Securities Exchange Act of 1934, as amended.
In October 1998, the Company issued 2,000 shares of a newly created
Series B Cumulative Redeemable Preferred Stock ("Preferred Stock") to its 15%
equity affiliate, Yagi Euro Corporation ("Yagi Euro"), for an aggregate purchase
price of $2 million. The Preferred Stock pays a quarterly cumulative dividend,
in arrears, at an annual rate of 2%, and is subject
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to optional redemption by the Company at any time, and to mandatory redemption
on the tenth anniversary of its issue. The Preferred Stock does not have
conversion rights or, unless there is a payment default, voting rights.
At December 31, 1998, the Company had outstanding 11,323,782 shares of
Common Stock, 734,980 Warrants and 2,000 shares of Preferred Stock.
On March 24, 1999, the Company executed an agreement with the Welsh,
Carson, Anderson & Stowe venture capital group for the repurchase, for an
aggregate price of approximately $5.23 million, of all 2,986,346 shares of
Common Stock held by Welsh Carson's investment partnerships. Closing of the
repurchase is contingent upon the Company obtaining financing for the
transaction, which the Company currently is seeking to do, prior to the end of
May 1999. The shares to be repurchased represent approximately 26.4% of the
shares of Common Stock outstanding at December 31, 1998. If consummated (and
assuming no other changes in capitalization in the interim), the shares of
Common Stock outstanding would be reduced to 8,337,436.
The Common Stock is traded on the Nasdaq National Market under the
symbol "MAXF".
Overview
The Company is a financial services holding company. Through the Euro
Brokers division of its Maxcor Financial Inc. subsidiary, a U.S. registered
broker-dealer, and other EBIC subsidiaries and affiliates, the Company conducts
its principal business as a leading domestic and international inter-dealer
brokerage firm, specializing in (i) emerging market debt and related products,
(ii) cash deposits and other money market instruments, (iii) interest rate and
currency derivatives, (iv) natural gas, electricity, weather and other
energy-related products, (v) repurchase agreements and (vi) municipal
securities, convertible and high yield bonds and other fixed income securities.
The Company has more recently intensified its efforts to diversify its
businesses and sources of income through certain specialty subsidiaries. The
Company's Maxcor Financial Asset Management Inc. subsidiary, a registered
investment adviser, is engaged in securities lending through its Euro Brokers
Securities Lending division, as well as other asset management activities. The
Company's Maxcor Financial Services Inc. subsidiary is developing both a debt
advisory business and a specialty finance business. The Company's Maxcor
Information Inc. subsidiary is charged with exploiting the data and other
information generated by the Company's inter-dealer brokerage businesses. In
addition, the broker-dealer subsidiary, Maxcor Financial Inc., is developing
certain investment banking businesses.
The Company has approximately 625 employees worldwide and conducts its
businesses through principal offices in New York, Stamford, London, Geneva,
Tokyo,
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Toronto and Mexico City and by means of correspondent relationships with other
brokers throughout the world. The Geneva office was launched in July 1998.
Except as described below, the Company operates in each of these seven financial
centers through wholly-owned subsidiaries. In London, the Company, as of January
1, 1999, formed a 50/50 equity joint venture with the European broker, Finacor,
to combine their respective London-based capital market operations, as well as
Finacor's Paris-based capital markets operations. The Company's other London
operations, primarily comprised of securities businesses, remain wholly owned.
In Tokyo, the Company has a 50% interest with Yagi Euro in a partnership (the
"Tokyo Partnership") conducting yen derivative businesses, as well as its 15%
minority interest in Yagi Euro itself.
In its inter-dealer brokerage businesses, the Company functions
primarily as an intermediary, matching up the trading needs of its institutional
client base, which is primarily comprised of well-capitalized banks, investment
banks and other financial institutions, securities dealers and other
broker-dealers and large corporations. The Company assists its clients 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 clients with
historical data and real-time pricing information in the Company's various
products. Clients use the Company's services for several reasons. First, a
client can benefit from the broader access and liquidity provided by the
Company's worldwide broker and telecommunications network, which communicates
with and services most of the largest banks and securities firms. The result is
typically better pricing and faster execution than the client could achieve
acting unilaterally. Second, the Company provides clients with anonymity,
thereby enhancing their flexibility and ability to act without signaling their
intentions to the marketplace. Third, because of its network, the Company can
provide high-quality pricing and market information, as well as sophisticated
analytics and trading and arbitrage opportunities.
The Company's inter-dealer brokerage transactions are principally of
two types, (i) "name give-up" transactions, whereby the Company acts only as an
introducing 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 clients' 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 an introducing broker who
brings the two counterparties together, and not as a counterparty itself.
Consummation of the transaction may then remain subject to the actual
counterparties who have been matched by the Company accepting the credit of each
other. 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 acting as the counterparty for
each in matching, reciprocal back-to-back trades. This type of transaction is
then settled through one
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of various clearing institutions with which the Company has contractual
arrangements, and who will have previously reviewed and approved the credit of
the participating counterparties.
Products
The Company's inter-dealer brokerage businesses generally fall into
the brokerage of three broad groups of products: (i) money market products, (ii)
derivative products and (iii) securities products.
Money Market Products
In general, money market products take the form of cash 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
products primarily include offshore deposits (i.e., deposits placed outside the
country of denomination), onshore deposits (i.e., deposits placed within the
country of denomination), certificates of deposit, banker's acceptances and
short-term commercial paper. U.S. dollars continue to be the most actively
traded offshore currency deposit (traditionally known as the "Eurodollar").
Other actively traded offshore currency deposits are denominated in Japanese
yen, U.K. sterling, Swiss francs, Canadian dollars and, beginning in January
1999, the new euro. Examples of onshore deposits include term and overnight U.S.
Federal Funds and Canadian Interbank deposits. The Company brokers money market
products predominantly to multinational banks.
The January 1, 1999 adoption by eleven European countries of the euro
as their common currency has caused international money market traders to alter
their nomenclature regarding offshore deposits. These deposits were formerly
known as "Eurocurrency" deposits, and terms like "Euro sterling" and "Euro yen"
were commonplace. Such terms are now fading from usage in order to avoid
confusion with euro-based foreign exchange transactions.
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 instruments 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, and forward rate agreements, in each case conducted in a multitude of
different currencies and localized primarily by office. The Company also brokers
cross-currency swaps and a broad variety of 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
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exchanged, and market risk for the parties is limited to differences in the
interest payments. The usual format for swaps involves the exchange of fixed
rate payments based on the term of the swap for floating rate payments based on
a shorter-term rate.
Interest rate options, which include "cap," "floor" and "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 future 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.
In cross-currency swaps, interest rate flows denominated in different
currencies are exchanged, based on predetermined notional amounts, in order to
convert exposure in one currency to another.
Energy-related derivatives brokered by the Company primarily consist
of options and physical contracts based on natural gas, electricity, emission
allowances and coal, and generally are transactions in which payments based on
fixed and floating commodities indices are exchanged. The Company also brokers
weather-related derivatives, which may be based, among other measures, upon the
average temperature or rainfall of a given city during a stated period of time.
The Company brokers most of its derivative products predominantly to
multinational banks and investment banks. Energy-related derivative products,
however, are often traded by utilities and large energy marketing and trading
companies.
Securities Products
Products brokered by the Company in this category primarily consist of
a variety of debt obligations issued by governments, banks and corporations. The
Company brokers transactions in emerging market debt, municipal securities, U.S.
Treasury zero coupon bonds, U.S. domestic convertible bonds, floating rate
notes, high yield bonds and other corporate securities. This category also
includes repurchase agreements.
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Emerging market debt, including Brady bonds, global bonds, Eurobonds,
local issues and loans, as well as options and repurchase agreements on the
foregoing, continues to constitute the largest 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 provides
pricing and other data through proprietary, computerized screen systems located
directly in clients' offices. In most emerging markets transactions, Euro
Brokers acts as matched riskless principal and settles trades through a clearing
firm.
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. As is the case with emerging markets,
the Company disseminates repurchase agreement market information via its
proprietary, computerized screens. Most of the repurchase agreements that the
Company executes for dealers are cleared through the Government Securities
Clearing Corporation, in which Maxcor Financial Inc. is a member, although some
transactions are brokered on a name give-up basis.
The Company generally brokers municipal securities on a matched
riskless principal basis, but also uses a small allocation of the firm's capital
to support limited inventory positions. High yield bonds are generally brokered
on a matched riskless principal basis. U.S. convertible bonds are generally
brokered on a name give-up basis.
The Company brokers securities products predominantly to banks,
investment banks and other financial institutions.
Communications Network and Information and Related Systems
The Company has a global communications network through which it
conducts its inter-dealer brokerage businesses 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 strives to
keep its communication, technology and information systems as current as
possible.
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To ensure rapid and timely access to the most current market bids and
offers, the majority of the Company's clients are connected to the Company via
dedicated point to point telephone and data lines around the world. For products
that are screen-brokered, such as emerging market debt, repurchase agreements,
options on emerging market debt, banker's acceptances and commercial paper, the
Company maintains an extensive private network to connect the Company's offices
and the specific clients who trade in these products. In this way, all such
clients have the simultaneous ability to view and act upon market bids and
offers. The Company has also developed and deployed an Internet real-time
distribution capability for its emerging markets screen information, which has
allowed access to clients in more remote or unproven brokerage locations without
incurring the infrastructure costs associated with expanding its private
network.
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 businesses depend heavily on the use of advanced
telephone equipment, computer systems and pricing software. Direct line voice
communication, real-time computerized screen systems and rapid 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 continually needs
to expend significant resources on the maintenance, expansion and enhancement of
its communication and information system networks. After payroll, such costs
have historically represented the Company's second largest item of expenditure.
In 1998, in connection with its emerging market debt business, the
Company implemented an electronic blotter system as part of an upgraded front
and middle-office trade processing system. The new system effectively replaced
paper blotters and certain existing software, and has introduced a number of
efficiencies, including the ability to handle significantly increased trading
volumes, identify unbalanced trade conditions as they occur, impose tighter
security and provide clients with more certain and rapid check-outs of their
transactions.
The Company continues to explore whether more of its inter-dealer
brokerage businesses, such as energy derivatives, should become screen-based and
whether interactive trading systems can be developed and deployed successfully
in its businesses. An effort by the Company in 1997 to deploy an interactive
trading system in the Canadian repurchase market did not succeed in garnering
sufficient acceptance or market share to justify its continuance. However, the
Company continued work in 1998 on the development of an interactive customer
interface for its screen systems, and currently intends to beta test a version
with a few selected institutional clients in mid-1999.
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Other Businesses
Through the Euro Brokers Securities Lending division of its registered
investment adviser, Maxcor Financial Asset Management Inc., the Company conducts
a securities lending business. In securities lending, the Company arranges for
the lending of securities held in its clients' portfolios to securities dealers
and other market participants who need them to manage their own positions. In
exchange for such loaned securities, which are primarily U.S. government and
agency securities and U.S. corporate bonds (but also non-dollar government
securities and corporate bonds), the Company receives either (i) cash
collateral, which it then reinvests to earn a spread over the rebate rate it is
required to pay in connection with the underlying loan, or (ii) non-cash
collateral plus fee income from the borrower. In December 1998, Maxcor Financial
Asset Management entered into an agreement with SunGard/DML Inc., a subsidiary
of SunGard Data Systems Inc., to establish a master securities lending program
to offer its securities lending services to existing and prospective clients of
SunGard and its affiliates, as well as to use SunGard's software and data
interface products to automate certain of such services. In 1998, Maxcor
Financial Asset Management separately also provided advisory services, as a
qualified professional asset manager, to an unaffiliated investment partnership.
Although not yet producing material levels of revenue, the Company's
Maxcor Financial Services Inc. subsidiary is developing both a debt advisory
business and a golf course financing business. The debt advisory business, in
collaboration with Andrew Kalotay Associates, Inc., seeks to provide
corporations and other domestic bond issuers with independent, analytics-based
advice on managing their debt, including innovative refinancing strategies. The
golf course financing business, to be launched in April 1999, seeks to originate
golf course financing or refinancing loans and to sell the same, either as whole
loans or through securitization packages.
Similarly, the Company's broker-dealer subsidiary, Maxcor Financial
Inc., in addition to its well-established inter-dealer brokerage businesses, has
been seeking to create an investment banking business, with a focus on financial
advisory engagements and private placements.
In 1998, the Company's information and data subsidiary, Maxcor
Information Inc., established a subscription-based web page (www.maxEMG.com) for
the sale of both basic and premium information services sourced from the Euro
Brokers emerging market debt inter-dealer brokerage business. More recently, in
March 1999, Maxcor Information Inc. executed a three-year, non-exclusive
agreement with Telerate, Inc. for the sale to Telerate subscribers of an
indicative feed based on such emerging market debt information, as well as an
array of optional "add-on" services.
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Personnel
As of February 28, 1999, the Company employed 475 brokers, plus an
additional administrative staff, including officers and senior managers, of 146
persons, for a total employee headcount of 621. Of the brokers, 256 were located
in the U.S. and 149 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.
Segment and Geographic Data
Note 21 to the Consolidated Financial Statements contains summary
financial information, for each year of the three-year period ended December 31,
1998, with respect to each of the Company's reportable operating segments, which
are based upon the countries in which they operate.
Competition
The inter-dealer brokerage industry is highly competitive, with the
success of a company within the industry dependent on a variety of key factors.
These factors include:
o the experience of and extent of client networks developed by the
firm and its personnel;
o the range of products and value-added services offered;
o commission rates;
o the quality, speed and reliability of service;
o proficiency in and ability to implement current technology;
o salaries and other cost structures; and
o capital resources and perceived creditworthiness.
While there are not many large international inter-dealer brokers and
entry into the industry is costly, the Company encounters intense competition in
all aspects of its businesses from several companies which are divisions of much
larger financial services conglomerates and which have significantly greater
resources than the Company. Moreover, all brokerage firms are subject to the
pressures of offering their services at a lower price. The recent pace of
consolidation in the banking and financial services community continues to
reduce the number of clients in the marketplace and, accordingly, has further
increased the competition among inter-dealer brokers and the downward pressure
on already low commission rates. The use of volume discounting has also become
more widespread in recent years. As a result, increases in market volumes do not
necessarily result in proportionate increases in brokerage commissions and
revenues.
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As global communication advances and new technologies are developed,
the inter-dealer brokerage industry is also becoming more susceptible to the
possibility of losing clients to electronic trading systems that provide fully
automated trade matching. In practice, these systems so far have proved most
viable in markets involving very standardized products, such as spot foreign
exchange and U.S. equities. The Company believes that more complex financial
vehicles, in particular derivatives, are less amenable to fully electronic
matching. However, the number and penetration of such automated trading
platforms is increasing. For example, Bloomberg, primarily known as a data and
analytical service provider, has increasingly used its network of terminals to
facilitate on-line screen-based trading between authorized parties. The further
development and successful deployment of such systems in advance of, or more
successfully than, the Company's efforts to do so could ultimately have material
adverse effects on the Company's businesses.
The Company is inherently reliant on relationships with clients that
develop over time, and certain of the Company's brokers have established
long-term associations with clients. The Company's success depends to a
significant extent on these relationships and on the performance and experience
of a number of key management and brokerage personnel. The loss of one or more
of these key employees, who are often the target of aggressive recruitment
efforts by competitors within the industry, could have a material adverse effect
on the Company. Moreover, the highly competitive hiring environment by itself
creates upward pressures on broker compensation that can reduce profit margins.
While the Company has entered into employment agreements with, granted stock
options to, and implemented deferred compensation arrangements for, many of its
key employees, there can be no assurance that such employment agreements or
stock-based or deferred compensation will be effective in retaining such
persons' services or that other key personnel will remain with the Company
indefinitely. Nor can there be any guarantee that the Company will be able to
attract and retain qualified, experienced individuals, whether to replace
current personnel or as a result of expansion, because competition in the
brokerage industry for such individuals is intense.
The Company also faces intense competition from other inter-dealer
brokers to achieve revenues from, and the widest dissemination and acceptance
of, the data generated and collected from its brokerage businesses. In March
1999, the Company concluded its first such third-party information sale,
executing a three-year, non-exclusive agreement with Telerate, Inc. to provide
emerging markets bond pricing and other data to Telerate subscribers.
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 clients participating in those markets.
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Maxcor Financial Inc. ("MFI"), a wholly owned subsidiary of the
Company formerly known as Euro Brokers Maxcor Inc., is registered as a
broker-dealer with the Securities and Exchange Commission ("SEC"), all
applicable states, and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). Broker-dealers are subject to regulations that cover all
aspects of the securities business, including initial licensing requirements,
sales and trading practices, safekeeping of clients' funds and securities,
capital structure, record-keeping and the conduct of directors, officers and
employees. The SEC, other governmental regulatory authorities, including state
securities commissions and self-regulatory organizations, such as NASD
Regulation, Inc. ("NASDR") in the case of MFI, have broad oversight powers,
including the ability to institute administrative proceedings that can result in
censure, fine, the issuance of cease-and-desist orders, the suspension or
expulsion of a broker-dealer, its officers or employees or other similar
consequences.
MFI is also registered with the Commodity Futures Trading Commission
as a futures commission merchant and is a member of the National Futures
Association. As such, MFI's business activities in the futures and
options-on-futures markets are subject to regulation by these bodies.
MFI is also a member of the Government Securities Clearing Corporation
("GSCC") for the purpose of clearing certain U.S. Treasury repurchase agreements
and other U.S. Treasury securities. Such membership requires MFI to maintain
minimum net capital of $10,000,000, including a minimum deposit with GSCC of
$5,000,000.
Maxcor Financial Asset Management Inc. ("MFAM"), a subsidiary of the
Company, is an SEC registered investment adviser, pursuant to its securities
lending activities. As a result, MFAM's investment advisory business is subject
to various federal and state laws and regulations that generally grant
supervisory agencies and bodies broad administrative powers, including the power
to limit or restrict MFAM from carrying on its investment advisory business in
the event that it fails to comply with such laws and regulations and/or to
impose other censures and fines.
The Company's businesses are also subject to extensive regulation by
various non-U.S. governments and regulatory bodies, including: (i) in the United
Kingdom, the Bank of England and the Securities and Futures Authority, which are
being consolidated within a single regulatory body known as the Financial
Services Authority, and the Director General of Fair Trading; (ii) in Canada,
the Ontario Securities Commission; (iii) in Japan, the Bank of Japan and the
Japanese Ministry of Finance, and (iv) in Mexico, the Banking and Securities
National Commission. The compliance requirements of these different overseer
bodies may include, but are not limited to, net capital or stockholders' equity
requirements.
Additional legislation and regulations, changes in rules promulgated
by the SEC or other U.S. federal and state governmental regulatory authorities,
self-regulatory organizations or clearing organizations, as well as non-U.S.
governments or governmental regulatory
13
<PAGE>
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.
Recently, with effect in April 1999, the SEC has adopted final rules
regarding the regulation of alternative trading systems ("Regulation ATS"). In
Regulation ATS, the SEC adopts a new definition of "exchange" and espouses the
view that most inter-dealer brokers, regardless of their level of automation,
are exchanges. The SEC then exempts inter-dealer brokers and others from such
definition (and its attendant regulatory implications) if, instead, they
register as broker-dealers and comply with Regulation ATS. Regulation ATS
imposes significant reporting and recordkeeping requirements on so-called
"alternative trading systems" and phases in certain substantive requirements,
primarily depending upon the scope of coverage and market share of the
alternative trading system. Such requirements may include maintaining
transparency of certain pricing information, providing fair and equal access to
the system, and taking necessary steps to ensure the capacity, integrity and
security of the system.
Cautionary Statements
As provided under the Private Securities Reform Act of 1995, the
Company desires to caution investors that the following factors, among others
(including the factors discussed above under the "Competition" and "Regulation"
headings, and the factors discussed below under Item 7A, "Quantitative and
Qualitative Disclosures about Market Risk"), could affect the Company's results
of operations and cause such results to differ materially from those anticipated
in forward-looking statements made in this report and elsewhere by or on behalf
of the Company.
Economic and Market Conditions
The Company's brokerage businesses and their profitability are
affected by many factors, including the volatility of securities markets, the
volume, size and timing of securities transactions, the level and volatility of
interest rates, legislation affecting the business and financial communities and
the economy in general. Low trading volume may reduce revenues, which would
generally negatively impact profitability because a portion of the Company's
costs is fixed.
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
14
<PAGE>
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 or other errors can arise whereby
transactions are completed with only one counterparty ("out trades"), thereby
creating a potential liability for such subsidiaries. If the out trade is
promptly discovered, thereby allowing prompt disposition of the unmatched
position, the risk to the subsidiary is usually limited. If discovery is
delayed, the risk is heightened by the increased possibility of intervening
market movements prior to such disposition. Although out trades usually become
known at the time of or later on the day of the trade, on occasion they are not
discovered until later in the settlement process. When out trades occur and are
discovered, the Company's policy is to have the unmatched position disposed of
promptly. Out trades generally increase with increases in the volatility of the
market and, depending on their number and amount, have the potential to have a
material adverse effect on the financial condition or results of operations of
the Company.
Systems and Technology
In addition to the Company's continuing need to expend significant
resources on the maintenance, expansion and enhancement of its communication
network, information systems and other technology, it also faces the risk that
the systems it currently has or in the future implements, or the software
underlying such systems, will fail in some fashion or be inadequate to the task.
During the Asian and Latin American debt crisis that occurred in late October
1997, the Company's trade processing system for emerging market debt was unable
to handle smoothly the extraordinary spike in trading volume that occurred for a
sustained five-day trading period. As a result, the Company experienced
significant delays and backlogs in the processing and settlement of such trades
and a higher than usual incidence of disputed trades, all of which negatively
impacted 1997 fourth quarter earnings. Although the Company believes that the
electronic blotter and upgraded trade processing system that it implemented in
1998 will mitigate against any such recurrence, there can be no assurance that
there will not be other, unanticipated system or technology failures that could
negatively impact the Company's operations or business. In addition, although
the Company currently anticipates that the "Year 2000" issue will not materially
disrupt its operations as the result of any failure by the Company's systems to
be Year 2000 compliant (see Item 7 below), the possibility remains that the
compliance status of its clients or clearing firms, or currently unforeseen
compliance issues faced by the Company, could have such a negative impact.
Clearing Arrangements
Daiwa Securities America Inc. ("Daiwa") and the Pershing division of
Donaldson, Lufkin & Jenrette Securities Corporation ("Pershing") act as the
primary clearing agents, on a fully-disclosed basis, for MFI. Under the terms of
these agreements, Daiwa clears as principal
15
<PAGE>
a significant portion of MFI's transactions in emerging market debt and Pershing
clears as principal many of MFI's municipal securities and other domestic
fixed-income securities transactions. Among other services, both firms prepare
and mail confirmations and monthly statements to clients. The Daiwa agreement is
terminable by either party upon 30 days' prior notice and the Pershing agreement
is terminable by either party upon 90 days' prior notice. Daiwa, which also
clears emerging market debt transactions for nearly all of the firm's
competitors, has recently informed the Company and such firms that it does not
intend to continue in the clearing business past mid-1999. The Company currently
believes that it will be able to establish in timely fashion a new clearing
arrangement with another clearing correspondent on terms acceptable to MFI.
However, there can be no assurance that it will be able to do so, and a failure
in this regard is likely to have a material adverse effect on the Company's
results of operations and financial condition. The 1998 commencement of
operations of the Emerging Markets Clearing Corporation (an industry-owned
matching system for certain emerging market debt) may provide an alternative to
third-party clearing firms, although it has not yet garnered widespread industry
acceptance.
Litigation and Arbitration
Many aspects of the Company's businesses 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 financial
condition or results of operations.
Lack of Diversification
From a revenue perspective, the Company's inter-dealer brokerage
businesses account for substantially all of Maxcor's consolidated revenues.
Accordingly, the prospects for the Company's performance and the market prices
for the Common Stock are currently highly dependent upon the performance of the
inter-dealer brokerage businesses. Although the Company is continuously seeking
to strengthen and improve the inter-dealer brokerage businesses, it is also
constantly exploring various options for diversifying the Company's businesses
and sources of revenue and for strengthening its capital base. 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 or results of operations.
16
<PAGE>
ITEM 2. PROPERTIES
The Company has principal offices in each of the following locations:
New York, New York; London, England; Tokyo, Japan; Toronto, Canada; Stamford,
Connecticut (beginning in April 1998); Geneva, Switzerland (beginning in July
1998) and Mexico City, Mexico. 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). In September
1998, the Company subleased approximately one-third of its London premises to a
co-tenant in the building, for a term expiring at the end of 2002.
The Company believes that its facilities are suitable and adequate for
its present and anticipated purposes. See Note 14 to the Consolidated Financial
Statements for further information regarding future minimum rental commitments
under the Company's existing leases.
ITEM 3. LEGAL PROCEEDINGS
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 any currently known
matters will not have a material adverse impact on the Company's consolidated
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of its fiscal year ended December 31, 1998.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock currently trades on the Nasdaq National
Market tier of The Nasdaq Stock Market under the symbol "MAXF".
The following table sets forth the range of high and low sales prices
for the Common Stock, as reported by The Nasdaq Stock Market, for the Company's
last two fiscal years.
Common Stock: High Low
---- ---
Year Ended December 31, 1998
----------------------------
First Quarter.................................. $ 3.125 $1.625
Second Quarter................................. 3.125 1.00
Third Quarter.................................. 2.50 0.938
Fourth Quarter................................. 1.875 0.688
Year Ended December 31, 1997
----------------------------
First Quarter.................................. $ 4.50 $2.875
Second Quarter................................. 3.375 2.375
Third Quarter.................................. 4.25 2.813
Fourth Quarter................................. 4.563 1.688
As of March 29, 1999 there were 72 holders of record of the Common
Stock. The Company is aware that certain holders of record hold a substantial
number of shares of Common Stock as nominees for a significant number of
beneficial owners. Based on a broker-dealer inquiry made by the Company's
transfer agent in June 1998, the Company believes there are approximately 750
beneficial owners of the Common Stock.
The Company has never declared any cash dividends on the Common Stock.
It is the present intention of the Company's Board of Directors to retain all
earnings, if any, for use in the Company's business operations and, accordingly,
the Company does not anticipate declaring any cash dividends on the Common Stock
in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," each included elsewhere in this report. Statement of Operations
data presented below includes reclassifications of certain revenue and expense
items which are not directly associated with operations. Such
18
<PAGE>
reclassifications include interest income, interest expenses, foreign exchange
effects and other non-operating items.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Statement of Operations
Revenue:
Commission income $ 149,293,022 $ 163,467,438 $ 178,109,899 $ 171,576,327 $ 144,586,661
Other income 1,071,983 932,454 590,959 518,052 207,522
------------ ------------- ------------- ------------- -------------
150,365,005 164,399,892 178,700,858 172,094,379 144,794,183
------------ ------------- ------------- ------------- -------------
Operating costs:
Payroll and related
costs 100,527,090 107,375,812 116,296,606 110,915,257 96,207,365
Communication costs 14,726,069 16,010,272 18,288,441 17,187,573 15,633,010
Travel and entertainment 9,098,311 10,386,202 11,355,183 10,224,384 10,493,903
Occupancy costs 6,065,132 6,053,469 6,539,150 5,854,525 5,640,070
Depreciation and
amortization 5,004,626 5,318,983 4,734,101 4,568,164 4,248,181
Clearing fees 4,588,170 6,165,264 4,411,515 3,777,710 3,647,556
General and
administrative 5,757,524 7,667,597 7,495,441 7,550,059 6,817,988
- - ------------ ------------- ------------- ------------- -------------
145,766,922 158,977,599 169,120,437 160,077,672 142,688,073
------------ ------------- ------------- ------------- -------------
Operating profit 4,598,083 5,422,293 9,580,421 12,016,707 2,106,110
------------ ------------- ------------- ------------- -------------
Other non-operating
(expenses) income:
Interest expense ( 1,079,147) ( 840,584) ( 693,132) ( 775,077) ( 1,635,547)
Other non-operating
expenses ( 1,141,356) ( 632,247) ( 295,344) ( 520,607)
Other non-operating
income 450,000 490,000
Interest income 1,737,403 1,718,099 1,801,442 1,462,744 1,090,789
Foreign exchange (loss)
gain ( 184,518) 137,449 ( 8,229) 214,295 ( 17,139)
------------ ------------- ------------- ------------ ------------
( 667,618) 1,464,964 467,834 606,618 ( 592,504)
------------ ------------- ------------- ------------ -------------
Income before provision for
income taxes and 3,930,465 6,887,257 10,048,255 12,623,325 1,513,606
minority interest
Provision for income taxes 3,950,645 5,757,897 6,650,606 7,393,196 3,333,989
------------ ------------- ------------- ------------ -------------
(Loss) income before ( 20,180) 1,129,360 3,397,649 5,230,129 ( 1,820,383)
minority interest
Minority interest ( 1,254,970) ( 1,398,352) 307,311 ( 1,767,854) ( 250,480)
------------ ------------- ------------- ------------- -------------
Net (loss) income ($ 1,275,150) ($ 268,992) $ 3,704,960 $ 3,462,275 ($ 2,070,863)
============= ============= ============== ============ ==============
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $ 75,269,665 $ 86,531,513 $ 97,172,715 $ 82,078,742 $ 71,914,532
Obligations under capitalized
leases 751,747 974,186 1,428,764 2,284,806 2,804,836
Notes payable 3,824,842 6,261,839 7,379,762 7,880,032 9,830,284
Total liabilities 43,476,151 54,928,268 64,721,841 50,185,747 43,360,381
Minority interest 501,731 492,154
Redeemable preferred stock 2,000,000
Stockholders' equity 29,793,514 31,603,245 32,450,874 31,391,264 28,061,997
Per Share Information (a)
Net (loss) income ($ 0.11) ($ 0.03) $ 0.41 $ 0.39
Book Value $ 2.63 $ 2.79 $ 3.63 $ 3.51
Weighted average common shares 11,327,741 9,243,201 8,949,656 8,949,656
outstanding
</TABLE>
(a) The Merger acquisition of EBIC by Maxcor in August 1996 has been accounted
for as a recapitalization of EBIC. Per share information has been presented as
if all shares issued in the Merger 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 12 to the Consolidated Financial Statements.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's revenues currently are derived primarily from
commissions related to its inter-dealer brokerage businesses. Generally, the
Company receives a commission from both counterparties in a trade, although in
trades of certain products only one party pays a commission. The dollar amount
of the average transaction generating a commission varies significantly by the
type of product and the duration of the transaction. Similarly, the applicable
commission will vary according to product and may also reflect discounts for
high transaction volumes or other customer rebates.
Other sources of revenues include interest income, derived primarily
from deposits with clearing organizations and interest associated with municipal
securities positions, gains and losses on securities transactions (currently
primarily in connection with the Company's municipal securities business),
earnings from the Company's equity affiliate, Yagi Euro, and foreign exchange
gains and losses.
The largest single component of the Company's expenses is compensation
paid to its brokers. Attracting and retaining qualified brokerage personnel with
strong customer relationships is a prerequisite in the Company's business and in
the brokerage business in general. Brokers are generally compensated by a
combination of fixed salary and incentive payments based on commissions
generated by them or on the net profitability of their respective products. For
this purpose, revenue and direct expenses are regularly tracked by desk (which
may involve one or more products) and often by broker, at each location. Direct
client contact, including entertainment, is also an integral part of the
Company's marketing program and represents another significant component of its
expenses.
The costs of maintaining sophisticated trading room environments and a
worldwide data and communications network comprise another significant portion
of the Company's expenses. The Company's ability to compete effectively is
significantly dependent on its ability to maintain a high level of client
service through its proprietary software, computerized screen displays and
digital networks. It is this infrastructure and technological commitment that
enables the Company to support its existing client base and product lines, as
well as provide a platform for offering brokerage or other services in
additional or newly developing financial instruments. Product expansion, when
undertaken, also generally leads to an increase in the number of brokerage
personnel since the markets usually require brokers to specialize in a single
product or group of related products, rather than to function as market
generalists.
Reference is made to Item 6 above, "Selected Financial Data," for a
summary table comparison of changes in the major categories of revenues and
expenses over the Company's five most recent fiscal years.
20
<PAGE>
Year Ended December 31, 1998
The year ended December 31, 1998 proved to be a year of transition for
the Company and one that management believes will set the stage for a return to
profitability. Although results from operations for the year, after netting out
the effects of certain one-time charges, were essentially flat, the Company
believes it made good progress in positioning itself for 1999 by focusing on
improving its core business units in its three main business centers: New York,
London and Tokyo.
In both New York and London, the Company made headway in improving its
cash deposits and derivatives businesses, seeing both increased market activity
and increased market share. At the same time, the Company rode out continued
market uncertainty and lower levels of trading activity - associated with the
Russian and Latin America debt crises - in its emerging markets debt business.
To fortify its market share in emerging markets, the Company in the first half
of 1998 made a substantial investment in an entirely new and upgraded
operational infrastructure for the unit. The Company developed and implemented a
completely new middle office system that, together with a new electronic blotter
system, made a highly-manual process more automated and secure, while also
significantly increasing system capacity. Management believes that the net
result is to position the Company favorably to take advantage of increased
market activity in the emerging markets sector when and as it returns.
In London, the 1998 fiscal year culminated with the Company's
agreement to combine, through a 50/50 equity joint venture, its London-based
capital markets businesses with those in both London and Paris of the European
brokerage house, Finacor, Ltd. Effective as of the first business day of 1999,
the Company contributed its London-based interest rate options, U.S. dollar
deposit and euro, sterling and yen interest rate swaps units to the joint
venture, and Finacor contributed its Scandinavian interest rate swaps unit in
London and its euro interest rate swaps units in London and Paris.
The 1998 fourth quarter in London otherwise saw reduced market
activity as the market place appeared to focus its attention on the forthcoming
launch of the euro. Management believes the joint venture with Finacor, however,
has added critical mass and balance to its London operations and positioned the
firm to take fuller advantage of the euro's introduction. In addition, the
establishment through the joint venture of a physical presence in Paris, France,
together with the Company's opening of a Geneva, Switzerland office in July
1998, has given the Company a wider European presence and appeal, with the
potential for an expanded client base. In conjunction with a fourth quarter
sublease of approximately one-third of the Company's downtown London premises,
the joint venture has also provided the opportunity to seize upon material cost
rationalizations. Early 1999 first quarter indications suggest that the
Company's goals with the joint venture are being accomplished, and that the
London operations are being placed on a profitable footing.
21
<PAGE>
The Company's energy derivatives business, based in its Stamford,
Connecticut offices, was adversely affected in the second half of 1998 by market
turmoil experienced by some of its customers in June that caused dislocation in
the electricity markets and resulted in diminished trading volumes throughout
the market place. The Company's other energy businesses, however, involving the
brokering of natural gas, emission, allowances, coal and weather-related
derivatives, performed well.
In Tokyo, the Company's interest rate derivatives joint venture with
Yagi Euro continued to perform well in 1998, increasing revenues slightly over
1997. For 1999, the Company is looking to build upon this strength and maintain
the joint venture's strong market position in the face of increasingly strong
local competitive pressures.
In 1998, the Company's performance included certain after-tax,
non-recurring charges aggregating approximately $1.2 million. These expenses
primarily related to costs associated with the opening of the Company's Geneva
office and the consummation of the Company's joint venture in London, and to
losses required to be recognized on a current basis for certain foreign currency
forward contracts purchased by the Company to hedge exchange rate risks
associated with anticipated future foreign income streams.
The Company continues to look at electronic execution and matching
systems. Although the Company believes that many of the products it brokers,
such as derivatives, are not well suited to these systems because of their
complex and unique nature, there are other products that would benefit from
these systems. From a client perspective, the Company believes that receptivity
to technological innovation will come about only if the system enhances market
liquidity and provides better service. Accordingly, in 1998 the Company worked
on developing an interactive customer interface for its screen systems and
currently intends to beta test a version in mid-1999 with a few selected
institutional clients. Any fuller deployment is likely to await the outcome of
such tests and an assessment as to whether the necessary customer support for
this or other forms of interactive systems exists.
The Company has always recognized that it possesses valuable wholesale
market information generated by its brokerage operations, but has not always
been successful in exploiting this data to its commercial advantage. In 1998,
through its Maxcor Information Inc. subsidiary, the Company established a
subscription-based Internet web page (www.maxEMG.com) for the sale of both basic
and premium information services sourced from its emerging market debt business.
More recently, in March 1999, Maxcor Information Inc. executed a three-year,
non-exclusive agreement with Telerate, Inc. for the sale to Telerate subscribers
of an indicative feed based on such emerging market debt information. While the
Company's Internet information services remain in their marketing infancy,
management believes that such services, together with license agreements with
established third-party information vendors such as Telerate, will become an
increasingly important source of revenues.
22
<PAGE>
Management continued in 1998 to seek opportunities for diversifying
the Company's businesses and revenue streams. The Company's asset management
subsidiary, Maxcor Financial Asset Management, signed a five-year agreement with
SunGard/DML Inc. to establish a master securities lending program, using Euro
Brokers' securities lending services and SunGard's software products, to be
marketed to existing and prospective customers of SunGard and its affiliates.
The Company anticipates that this agreement with SunGard will add to the assets
the Company presently manages.
Separately, the Company's Maxcor Financial Services subsidiary is
developing both a debt advisory business and a golf course financing business.
The debt advisory business, in collaboration with Andrew Kalotay Associates,
Inc., seeks to provide corporations and other domestic bond issuers with
independent, analytics-based advice on managing their debt, including innovative
refinancing strategies. The golf course financing business, to be launched in
April 1999, will seek to originate golf course financing or refinancing loans
and to sell the same, either as whole loans or through securitization packages.
Although management believes these ventures represent important diversifications
of the Company's businesses, it is too soon to tell whether they will be
profitable or contribute materially to revenues in 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Commission income for 1998 decreased $14,174,416 to $149,293,022,
compared to $163,467,438 for 1997. The net decrease primarily resulted from the
combination of reduced brokerage in London and Toronto, primarily resulting from
several departmental closures during 1997, aggregating approximately $10.6
million, and reduced brokerage in New York, reflecting reduced market volumes in
emerging market debt products and electricity energy derivatives, of
approximately $5.5 million. These decreases were partially offset by increased
brokerage in Tokyo and Mexico City, notwithstanding the strong dollar, and
brokerage generated by the Company's new office in Geneva, which commenced
operations in July 1998.
Interest income for 1998 increased $19,304 to $1,737,403, compared to
$1,718,099 for 1997. This increase was primarily the result of the net effects
of an increase of approximately $167,000 associated with municipal securities
positions and a decrease of approximately $148,000 related to reduced cash and
deposit balances and a lower interest rate environment.
Other income for 1998 decreased $182,438 to $887,465, compared to
$1,069,903 for 1997. The difference was primarily due to the combination of
recording a foreign exchange loss of approximately $185,000 in 1998, as compared
with a gain of approximately $137,000 in 1997, accounting for a change of
approximately $322,000, and a decrease in income from affiliated companies of
approximately $111,000, offset by an increase in trading gains on municipal
securities transactions of approximately $264,000. The loss from foreign
exchange reflects, in part, the application of current accounting rules which
require that hedges of
23
<PAGE>
anticipated future income streams be marked to market, as compared with being
deferred and matched to the related income stream.
Payroll and related costs for 1998 decreased $6,848,722 to
$100,527,090, compared to $107,375,812 for 1997. The net decrease was primarily
the result of reduced employment costs in London and Toronto, associated with
departmental closures during 1997 and salary reductions during 1998, aggregating
approximately $6.0 million, and reduced employment costs in New York, associated
with reduced commission income and salary reductions during 1998, of
approximately $2.4 million. These decreases were partially offset by increased
employment costs associated with the expansion of operations in Tokyo and Mexico
City and the commencement of operations in Geneva. As a percentage of commission
income, payroll and related costs were relatively constant at 67% for 1998, as
compared to 66% for 1997, reflective in part of management's continued efforts
to correlate employment costs more closely to revenues.
Communication costs for 1998 decreased $1,284,203 to $14,726,069,
compared to $16,010,272 for 1997, primarily due to departmental closures in
London and Toronto during 1997, partially offset by costs incurred by the new
Geneva office.
Travel and entertainment costs for 1998 decreased $1,287,891 to
$9,098,311, compared to $10,386,202 for 1997. As a percentage of commission
income, travel and entertainment costs decreased to 6.1% for 1998 as compared to
6.4% for 1997, reflective of management's increased efforts to monitor and
reduce these costs.
Occupancy costs represent expenses incurred in connection with various
operating leases for the Company's office premises and include base rent and
related escalations, maintenance, electricity and real estate taxes. In 1998,
these costs increased by $11,663 to $6,065,132 compared to $6,053,469 for 1997,
primarily resulting from escalations of rent associated with pre-existing office
locations and rent attributable to new office locations in the U.S. and Geneva,
offset in part by income approximating $240,000 derived from subletting a
portion of the Company's leased space in London since September 1998.
Depreciation and amortization expense consists principally of
depreciation of communication and computer equipment and leased automobiles and
amortization of leasehold improvements and intangible assets. In 1998,
depreciation and amortization decreased $314,357 to $5,004,626 compared to
$5,318,983 for 1997, primarily as a result of a reduction in capitalized leased
automobiles in the U.K.
Clearing fees are fees for transaction settlements and credit
enhancement, which generally are charged by the Company's clearing firms in
transactions where the Company acts as a riskless principal on a fully matched
basis. These expenses decreased $1,577,094 to $4,588,170 for 1998, compared to
$6,165,264 for 1997, due primarily to a decline in the number of cleared
transactions. Per transaction costs, however, increased in connection with
24
<PAGE>
the implementation of processing of certain transactions through the Emerging
Markets Clearing Corporation, a clearing corporation established by emerging
market trading participants for the purpose of clearing their transactions and
reducing settlement risk.
Interest expense for 1998 increased $238,563 to $1,079,147, compared
to $840,584 for 1997. This increase was primarily the result of an increase of
approximately $280,000 in connection with the financing of municipal securities
positions, offset in part by a decrease of approximately $45,000 associated with
capitalized lease obligations.
General, administrative and other expenses include such operating
expenses as corporate insurance, office supplies and expenses, legal fees, audit
and tax fees, consulting fees, food costs and dues to various industry
associations. In 1998 these expenses decreased by $318,717 to $6,898,880,
compared to $7,217,597 for 1997. The net decrease reflects the effects of a
variety of items. In 1998 the Company incurred professional fees of
approximately $669,000 in connection with the joint venture in London with
Finacor and the opening of its Geneva office. These costs were offset by
reductions in various other general and administrative expenses of approximately
$476,000 and the adjustment of several over accruals by approximately $462,000.
In 1997, the costs included the write-off of approximately $500,000 relating to
the termination of the Company's electronic trading system efforts in Toronto,
offset by the reversal of excess litigation reserves of approximately $450,000.
Provision for income taxes for 1998 decreased $1,807,252 to
$3,950,645, compared to $5,757,897 for 1997, primarily due to reduced levels of
pre-tax accounting income. The high effective tax rate reflects the heightened
effect of the non-deductibility of certain expenses, principally entertainment
expenses, on lower pre-tax accounting income.
Minority interest in consolidated subsidiaries for 1998 decreased by
$143,382 to ($1,254,970), compared to ($1,398,352) for 1997, reflecting lower
after-tax net income generated by such subsidiaries.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Commission income for 1997 decreased $14,642,461 to $163,467,438,
compared to $178,109,899 for 1996. The net decrease was primarily attributable
to the disposition of the Company's joint venture in Hong Kong as of January 1,
1997, which accounted for approximately $8.1 million of the decrease, and the
closure of several departments in London, primarily deposit-based businesses,
which accounted for an additional approximately $8.0 million. Offsetting this
decrease was a net increase attributable to increased revenues in emerging
market products, commodity derivatives and convertible bonds, offset by revenue
decreases in repurchase agreements and interest rate derivatives in New York and
London.
25
<PAGE>
Interest income for 1997 decreased $83,343 to $1,718,099, compared to
$1,801,442 for 1996, principally due to a decrease in average cash balances
throughout the year.
Other income for 1997 increased by $487,174 to $1,069,903, from
$582,729 in 1996. The increase was principally due to increased foreign exchange
gains of approximately $146,000 and increased trading gains on municipal
securities transactions of approximately $357,000.
Payroll and related costs for 1997 decreased $8,920,794 to
$107,375,812, compared to $116,296,606 for 1996. The decrease was primarily due
to the disposition of the Company's Hong Kong joint venture, accounting for
approximately $6.0 million, and the closure of certain departments in London as
noted above.
Communication costs for 1997 decreased $2,278,169 to $16,010,272,
compared to $18,288,441 for 1996. The decrease was primarily due to the
disposition of the Company's Hong Kong joint venture and the London departmental
closures.
Travel and entertainment costs for 1997 decreased $968,981 to
$10,386,202, as compared to $11,355,183 for 1996. Such costs represented
approximately 6.4% of commission income for 1997, as was the case for 1996. The
absolute decrease is principally due to the department closures in London and
the disposition of the Company's Hong Kong joint venture.
Occupancy costs decreased $485,681 to $6,053,469 for 1997, compared to
$6,539,150 for 1996. The net decrease is principally attributable to the
disposition of the Company's Hong Kong joint venture, which resulted in a
decrease of approximately $800,000, offset in part by rent and operating expense
escalations elsewhere.
In 1997, depreciation and amortization expense, increased $584,882 to
$5,318,983, compared to $4,734,101 for 1996, reflective of continued expansion
of the Company's proprietary screen system and other front office technology
expenditures, principally in emerging market debt related business. These
expenditures include the expansion of the Company's screen system into Mexico
and Russia and the design and initial implementation of the electronic blotter
system for use in the brokering of emerging market debt products.
Clearing fees increased $1,753,749 to $6,165,264 for 1997, compared to
$4,411,515 for 1996, due principally to the growth in the volume of transactions
in emerging market debt products and an increase in the per transaction cost
which was effective January 1997.
Interest expense increased $147,452 to $840,584 in 1997, compared to
$693,132 in 1996. The net increase is attributable to the effects of an increase
in interest expense associated with financing municipal securities positions,
reduced by a decrease in interest
26
<PAGE>
expense associated with a repayment of principal on the Company's indebtedness
incurred in connection with the acquisition of certain EBIC predecessor
companies.
General, administrative and other expenses decreased $910,090 to
$7,217,597 in 1997, compared to $8,127,687 in 1996, principally due to the
reversal of excess litigation reserves in the U.K. of approximately $450,000 and
the absence in 1997 of one-time expenses incurred in 1996 of $427,000 relating
to the disposition of the Hong Kong joint venture and the establishment of
reserves for the Australian joint venture and of $635,000 relating to
non-recurring legal fees. These decreases were offset in part by the write-off
of approximately $500,000 relating to an interactive electronic execution system
in Toronto and an aggregate increase of approximately $102,000 in various
miscellaneous expenses.
Provision for income taxes decreased $892,709 to $5,757,897 for 1997,
compared to $6,650,606 for 1996, primarily due to reduced levels of pre-tax
accounting income. The significant increase in the effective tax rate for 1997
as compared to 1996 reflects the heightened effect of the non-deductibility of
certain expenses, principally entertainment expenses, on lower pre-tax
accounting income.
Minority interest in income of consolidated subsidiaries of $1,398,352
for 1997 represents the net income allocable to the Company's non-controlling
shareholder in the Tokyo Partnership. Minority interest in the loss of
consolidated subsidiaries of $307,311 for 1996 relates primarily to the
non-controlling shareholder's share of earnings of the Tokyo Partnership, offset
by losses incurred by the Hong Kong and Australia operations, which have been
closed.
Liquidity and Capital Resources
Operating Activities
A substantial portion of the Company's assets, similar to other
brokerage firms, is liquid, consisting of cash, cash equivalents and assets
readily convertible into cash, such as receivable from broker-dealers and
customers, and securities owned.
Securities owned principally reflect municipal security positions
taken in connection with the Company's brokerage of municipal securities
business. Positions are generally held for short periods of time and for the
purpose of facilitating anticipated customer needs and are currently financed by
margin borrowings from a broker-dealer that clears these transactions on the
Company's behalf on a fully-disclosed basis ("Clearing Broker"). Prior to July
1998, these positions were generally financed on a settlement-date basis by
fully collateralized short-term bank loans. At year-end 1998, as reflected on
the Consolidated Statements of Financial Condition, the Company had net assets
relating to securities transactions of approximately $3.8 million, reflecting
securities owned of approximately $11.6 million, financed by a payable to the
Clearing Broker of approximately $7.8 million.
27
<PAGE>
MFI is a member of GSCC for the purpose of clearing U.S. Treasury
repurchase agreements. Pursuant to such membership, MFI is required to maintain
excess regulatory net capital of $10,000,000, and a pledge of $5,000,000 in U.S.
Treasury securities, which has been reflected as deposits with clearing
organizations on the Consolidated Statements of Financial Condition.
Net cash provided by operations for 1998 was approximately $1.1
million. This increase in cash is the combined result of a net loss of
approximately $1.3 million adjusted to reflect approximately $7.0 million of
non-cash expenses, principally for depreciation and amortization and deferred
income taxes, and the net negative effects of other working capital items,
principally reduced payable balances.
Net cash provided by operations for 1997 was approximately $4.2
million. This increase in cash is the combined result of a net loss of
approximately $269,000 adjusted to reflect approximately $5.6 million of
non-cash expenses, principally for depreciation and amortization, and the net
negative effects of other working capital items.
Net cash used in operations for 1996 was approximately $1.1 million.
This use of cash is the result of net income of approximately $3.7 million
adjusted to reflect approximately $4.7 of non-cash expenses, principally for
depreciation and amortization. These positive cash effects were offset by
decreases in cash attributable to increased deposits with clearing organizations
of $5.1 million (in connection with the Company's GSCC membership described
above) and an increase in net assets associated with securities transactions of
approximately $4.5 million.
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
interest of customers. The compliance requirements of these different regulatory
bodies may include, but are not limited to, net capital or stockholders' equity
requirements. The Company has historically met regulatory net capital and
stockholders' equity requirements and believes it will be able to continue to do
so in the future.
Investing Activities
Investing activities for 1998, 1997 and 1996 reflect net cash used of
approximately $3.6 million, $2.5 million and $3.8 million, respectively,
primarily for purchases of fixed assets. These purchases are reflective of the
Company's continuing commitment, as well as its competitive need, to upgrade
communication and information system technology.
28
<PAGE>
Financing Activities
Notes payable at December 31, 1998 of approximately $3.8 million
reflects the remaining installments of principal due on November 30, 1999 on
notes issued by the Company in connection with the acquisition of EBIC's
predecessor business in December 1986, which aggregate $2.1 million, and
approximately $1.7 million which relates to a secured financing obtained by the
Company in December 1997 in the form of a fixed rate note payable to GE Capital
Corporation. The principal and interest payments of these notes are expected to
be paid in timely fashion from the Company's resources.
Net cash used in financing activities for 1998 was approximately
$780,000 primarily reflective of the net effects of the repayment of notes
payable of approximately $2.5 million, the repayment of obligations under
capitalized leases of approximately $231,000 and the issuance of Preferred Stock
to Yagi Euro for $2.0 million.
Net cash used in financing activities for 1997 was approximately $2.0
million and is reflective of a net repayment of notes payable of approximately
$1.1 million, repayment of obligations under capitalized leases of approximately
$398,000, acquisition costs for treasury stock of approximately $209,000 and
expenses relating to the issuance of common stock pursuant to the Exchange Offer
of approximately $344,000.
Net cash used in financing activities for 1996 was approximately $4.3
million and is reflective of a net effect of approximately $2.2 million of net
cash used in connection with the deemed recapitalization of EBIC pursuant to the
Merger (as reflected in the Consolidated Statements of Cash Flows), net
repayment of notes payable of approximately $1.0 million and obligations under
capitalized leases of approximately $1.0 million.
Effects of Inflation
Because the Company's assets are to a large extent liquid in nature,
they are not significantly affected by inflation. However, increases in certain
Company expenses due to inflation, such as employee compensation, travel and
entertainment and occupancy and communication costs may not be readily
recoverable in the price of its services, particularly for operations domiciled
outside the United States where there are increased inflationary pressures. In
addition, to the extent inflation increases or decreases volatility in the
securities markets, the Company's brokerage business is likely to be affected by
corresponding increases or decreases in brokerage transaction volumes.
Year 2000 Compliance
The Company is well underway with the process of modifying and
upgrading its computer software applications and systems to incorporate the
"Year 2000" dating changes necessary to permit correct recording of, and
calculations involving, calendar dates for
29
<PAGE>
January 1, 2000 and later. The Company believes that it will be able to achieve
substantial or complete internal compliance by the end of June 1999, and does
not currently anticipate any material disruption to its operations as the result
of any failure by the Company to be in compliance.
In addition, the Company has already made significant efforts to
survey and test the Year 2000 compliance status and efforts of the key vendors,
suppliers and other third parties with whom it conducts business, and to obtain
appropriate Year 2000 compliance assurances from such parties. These efforts are
ongoing and are expected to continue throughout 1999. To date, preliminary or
verbal responses from, web page postings of, and/or testing by the Company with,
such third parties suggest that all or nearly all of the key third parties will
be timely Year 2000 compliant. However, the Company has not yet received many of
the confirmatory written representations it has sought from, or been able to
schedule or complete testing with many of, such third parties. The Company
intends to continue to seek the necessary written assurances from such third
parties, as well as the necessary opportunities to test the compliance status of
their relevant systems.
In 1998, the Company spent approximately $200,000 on Year 2000
compliance efforts, and has budgeted an additional $300,000 for 1999. These
amounts reflect that the Company, independent of Year 2000 considerations,
invests regularly in updating its technology, so that significant hardware and
software expenditures solely for Year 2000 purposes have proven less necessary.
These amounts also reflect that the Company, to date, has been able to conduct
most of its Year 2000 compliance efforts using internal information technology
personnel, except for certain attestation procedures recently conducted by
outside auditors at the mandate of new SEC rules applicable to all
broker-dealers. Going forward, the Company continues to expect not to have to
rely heavily on outside consultants in connection with its Year 2000 compliance
efforts.
The Company believes that it has already addressed many of the Year
2000 issues facing its business and is well positioned to address the remaining
ones. As a result, the Company has not yet developed a formal contingency plan,
although one is in the process of being prepared and, in connection therewith,
the Company has started identifying possible alternative vendors and suppliers,
should the need for them arise. Notwithstanding the Company's current comfort
level with the status and results of its Year 2000 compliance efforts, the
Company cautions that unforeseen circumstances may exist or arise and that it
cannot predict with certainty: (i) the ultimate outcome or success of its Year
2000 compliance efforts, (ii) the final costs required to address all of its
Year 2000-related related issues (including whether the above budgets for 1998
and 1999 will prove to be adequate), (iii) whether all necessary third party
systems will be timely Year 2000 compliant (or, if not, whether adequate
alternatives can be found) or (iv) if the Company's and/or third party
compliance efforts ultimately prove inadequate in any fashion, whether such
deficiencies would have a material adverse effect on the Company's business,
financial condition or results of operations.
30
<PAGE>
Forward Looking Statements
Certain statements contained in this Item 7 and elsewhere in this
report, as well as other oral and written statements made by the Company to the
public, contain and incorporate by reference forward-looking statements within
the meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform act of 1995. The forward-looking statements are based on management's
current knowledge, expectations or beliefs and are subject to a number of
factors and uncertainties (such as market conditions, the Company's
relationships with its employees, counterparties and clearing firms, the actions
of the Company's competitors, the success of the Year 2000 compliance efforts by
the Company and its key vendors and suppliers, and government regulatory
changes) that could cause actual results to differ materially from those
described in the forward-looking statements. Investors are cautioned that such
forward-looking statements involve risk and uncertainty, including, but not
limited to, the factors outlined under the "Competition," "Regulation" and
"Cautionary Statements" captions of Item 1 of this report and under the
"Quantitative and Qualitative Disclosures about Market Risk" caption of Item 7A
of this report. Reference is made to such sections for a fuller description of
these and additional uncertainties. The forward-looking statements made herein
are only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management of the Company is actively involved in the evaluation of
risks associated with certain financial instruments and will from time to time
reduce other risks inherent in its businesses through the use of financial
instruments.
The Company reduces market risk related to its municipal securities
positions by limiting both the size of its overall positions and the number of
days positions are held. In addition, the Company from time to time sells
interest rate sensitive financial futures contracts as a means of managing
market risk on its municipal securities positions. Management closely monitors
the Company's municipal securities positions on a daily basis through its review
of daily activity and position reports prepared by operations staff. These
reports detail all executed transactions, the resulting trading gains and sales
commissions and the closing positions with independently verified market prices.
At December 31, 1998, the Company held municipal securities positions with an
aggregate market value of approximately $11.6 million.
In the process of executing brokerage transactions, the Company
sometimes experiences "out trades" or other errors in which the Company may have
liability for the resulting unmatched position. Out trades generally increase
with increases in the volatility of
31
<PAGE>
the market. If an out trade is promptly discovered, thereby allowing prompt
disposition of the unmatched position, the risk to the Company is usually
limited. If discovery (or disposition) is delayed, the risk is heightened by the
increased possibility of intervening market movements prior to such disposition.
The Company believes that its new electronic blotter system, because of its
ability to identify unbalanced trade conditions as they occur, serves to help
limit the market risk exposure when out trades or other errors occur. To limit
its exposure further in such situations, the Company's policy is to dispose of
any resulting unmatched positions promptly after their discovery.
The Company has various foreign exchange rate exposures, including
commission income earned in a currency other than the functional currency and
foreign income streams which are eventually distributed. Management's strategies
to reduce these risks include the use of foreign currency forward contracts.
Gains and losses on these contracts are included in current operations even
though the offsetting gains and losses on the hedged exposures are not
recognized until realized.
The Company's notes payable and Preferred Stock have interest and
dividend rates that are fixed. Although the Company has theoretical interest
rate exposure with these instruments should market interest rates decline or
rise, management's judgment is that the aggregate future required payments under
these instruments are satisfactory as a business matter, and do not require
application of hedging strategies.
The table below provides information about the Company's financial
instruments used for other than trading purposes that are sensitive to either
changes in interest rates or changes in foreign exchange rates. For notes
payable and Preferred Stock the table presents principal and redemption cash
flows with expected maturity dates. For foreign currency forward contracts, the
table presents notional amounts with expected maturity dates.
32
<PAGE>
<TABLE>
<CAPTION>
After Fair
1999 2000 2001 2002 2003 Total Value
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate
Sensitivity:
7.71% Acquisition
Notes (imputed
Interest rate) $2,088,335 $2,088,335 $2,088,335
7.9% Equipment
Note 436,636 $472,501 $511,312 $316,057 1,736,506
2% Redeemable
Preferred Stock $2,000,000 2,000,000 2,000,000
Exchange Rate
Sensitivity:
Foreign Currency
Forward Contracts:
Sell Japanese yen/
Buy U.S. dollars 1,735,000 1,735,000 ( 355,956)
Sell U.S. dollars/
Buy British pounds
sterling 3,000,000 3,000,000 113,970
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item 8 is included as a separate section of this
Form 10-K. See Item 14 and the F-pages that follow.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
This Item 9 is not applicable to the Company.
33
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated herein by
reference to the Company's definitive proxy statement for the Company's 1999
Annual Meeting of Stockholders (the "Proxy Statement"). The Company intends to
file the Proxy Statement with the SEC on or prior to April 30, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to the Proxy Statement, except that such incorporation by reference
shall not be deemed to specifically incorporate by reference the information
referred to in Item 402(a)(9) of Regulation S-K. The Company intends to file the
Proxy Statement with the SEC on or prior to April 30, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to the Proxy Statement. The Company intends to file the Proxy
Statement with the SEC on or prior to April 30, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by
reference to the Proxy Statement. The Company intends to file the Proxy
Statement with the SEC on or prior to April 30, 1999.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
Listed on page F-2 of the Consolidated Financial Statements
included in this Form 10-K.
34
<PAGE>
(a) (2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial
Statements.
(a) (3) Exhibits
Listed in the Exhibit Index appearing at page X-1 of this Form
10-K.
(b) Reports on Form 8-K
During the fourth quarter of its fiscal year ended December 31,
1998, the Company filed one Current Report on Form 8-K, dated
December 22, 1998. The Form 8-K reported (i) the execution of an
agreement with SunGard/DML Inc., a subsidiary of SunGard Data
Systems, Inc., to establish a master securities lending program
using Euro Brokers' securities lending services and SunGard's
software products, and (ii) the execution of definitive
documentation with certain London and Paris-based subsidiaries
of the European brokerage house, Finacor, for the purpose of
combining Finacor's London and Paris-based capital markets
brokerage operations with the London-based capital markets
brokerage operations of Euro Brokers.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MAXCOR FINANCIAL GROUP INC.
By: /s/ Gilbert D. Scharf
------------------------------------
Gilbert D. Scharf,
Chairman of the Board, President and
Chief Executive Officer
Dated: March 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Gilbert D. Scharf Chairman of the Board, President March 30, 1999
- - ---------------------------- and Chief Executive Officer
Gilbert D. Scharf
/s/ Keith E. Reihl Chief Financial and Principal March 30, 1999
- - ---------------------------- Accunting Officer, Treasurer
Keith E. Reihl and Director
/s/ Larry S. Kopp Director March 30, 1999
- - -----------------------------
Larry S. Kopp
/s/ Michael J. Scharf Director March 30, 1999
- - -----------------------------
Michael J. Scharf
/s/ James W. Stevens Director March 30, 1999
- - -----------------------------
James W. Stevens
/s/ Frederick B. Whitemore Director March 30, 1999
- - -----------------------------
Frederick B. Whitemore
/s/ William B. Wigton Director March 30, 1999
- - -----------------------------
William B. Wigton
</TABLE>
36
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
DECEMBER 31, 1998, 1997 AND 1996
--------------------------------
F-1
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
DECEMBER 31, 1998, 1997 AND 1996
--------------------------------
Contents Page
- - ------------------------------------------------------------------------------
Report of Independent Accountants F-3
Consolidated Financial Statements:
Consolidated Statements of Financial Condition F-4
Consolidated Statements of Operations F-6
Consolidated Statements of Changes in Stockholders' Equity F-7
Consolidated Statements of Cash Flows F-9
Notes to the Consolidated Financial Statements F-11
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
and Stockholders of
Maxcor Financial Group Inc.
In our opinion, the accompanying consolidated statements of financial condition
and the related consolidated statements of operations, changes in stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of Maxcor Financial Group Inc. and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 24, 1999
F-3
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
December 31, December 31,
1998 1997
------------ ------------
ASSETS
- - ------
Cash and cash equivalents $ 15,150,296 $ 18,041,631
Deposits with clearing organizations 7,121,033 9,048,922
Receivable from broker-dealers and customers 16,557,824 20,366,191
Securities owned 11,578,515 10,497,465
Prepaid expenses and other assets 7,301,359 7,972,400
Income taxes receivable 967,263
Deferred tax asset 2,442,981 4,931,637
Equity in affiliated companies 2,935,100 2,606,987
Furniture, equipment and leasehold improvements 10,018,602 11,459,523
Intangible assets 1,196,692 1,606,757
------------ ------------
Total assets $ 75,269,665 $ 86,531,513
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Continued)
December 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
- - ------------------------------------ ------------ ------------
Liabilities:
Short-term bank loans $ $ 6,225,928
Payable to broker-dealer 7,845,490 449,458
Securities sold, not yet purchased 780,849
Accounts payable and accrued liabilities 15,478,695 18,490,511
Accrued compensation payable 14,704,076 18,202,561
Income taxes payable 375,665 2,886,269
Deferred taxes payable 495,636 656,667
Obligations under capitalized leases 751,747 974,186
Notes payable 3,824,842 6,261,839
------------ ------------
43,476,151 54,928,268
------------ ------------
Commitments and contingencies (Notes 14 and 15)
Redeemable preferred stock:
Series B, 2% cumulative, stated value $1,000,
2,000 shares issued at December 31, 1998 2,000,000
Stockholders' equity:
Preferred stock, $.001 par value, 1,000,000
shares authorized; 2,000 shares of Series B
issued at December 31, 1998, reported
above
Common stock, $.001 par value, 30,000,000
shares authorized; 11,392,269 shares issued
at December 31, 1998 and 1997 11,392 11,392
Additional paid-in capital 33,187,415 33,187,415
Treasury stock at cost; 68,487 and 61,638
shares of common stock held at
December 31, 1998 and
December 31, 1997, respectively (227,932) (209,451)
Accumulated deficit (5,100,223) (3,815,073)
Accumulated other comprehensive income:
Foreign translation adjustments 1,922,862 2,428,962
-------------- ------------
Total stockholders' equity 29,793,514 31,603,245
-------------- ------------
Total liabilities and stockholders' equity $ 75,269,665 $ 86,531,513
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenue:
Commission income $ 149,293,022 $ 163,467,438 $ 178,109,899
Interest income 1,737,403 1,718,099 1,801,442
Other income 887,465 1,069,903 582,729
------------- ------------- -------------
151,917,890 166,255,440 180,494,070
------------- ------------- -------------
Costs and expenses:
Payroll and related costs 100,527,090 107,375,812 116,296,606
Communication costs 14,726,069 16,010,272 18,288,441
Travel and entertainment 9,098,311 10,386,202 11,355,183
Occupancy costs 6,065,132 6,053,469 6,539,150
Depreciation and amortization 5,004,626 5,318,983 4,734,101
Clearing fees 4,588,170 6,165,264 4,411,515
Interest expense 1,079,147 840,584 693,132
General, administrative and other
expenses 6,898,880 7,217,597 8,127,687
------------- ------------- -------------
147,987,425 159,368,183 170,445,815
------------- ------------- -------------
Income before provision for income taxes and
minority interest 3,930,465 6,887,257 10,048,255
Provision for income taxes 3,950,645 5,757,897 6,650,606
------------- ------------- -------------
(Loss) income before minority interest (20,180) 1,129,360 3,397,649
Minority interest in (income) loss
of consolidated subsidiaries (1,254,970) (1,398,352) 307,311
------------- ------------- -------------
Net (loss) income ($ 1,275,150) ($ 268,992) $ 3,704,960
============= ============= =============
Weighted average common shares
outstanding 11,327,741 9,243,201 8,949,656
Basic and diluted (loss) earnings per
share ($ .11) ($ .03) $ .41
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
Comprehen- Additional Notes
sive Common Paid-in Treasury Accumulated Receivable from
Income Stock Capital Stock Deficit Stockholders
------ ----- ------- ----- ------- ------------
<S> <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)
Retirement of treasury stock (2,587) (10,174,520) 10,177,107
Comprehensive income
Net income for the year ended
December 31, 1996 $3,704,960 3,704,960
Other comprehensive
Income
Foreign translation
adjustment (net of
income tax expense
of $272,000) (411,685)
----------
Comprehensive income $3,293,275
==========
Recapitalization in connection
with the Merger:
Retirement of EBIC stock (1,671) 1,671
Issuance of shares to
EBIC shareholders 8,950 18,234,300
Cash Consideration paid
to EBIC shareholders (21,955,012)
Repayment of
stockholder notes 2,243,709
EBIC expenses incurred
in connection with
Merger (765,612)
------- ------------ ------------- ------------- ------------
Balance at
December 31, 1996 8,950 33,533,867 (3,546,081)
Issuance of shares in
Exchange Offer 2,381 (2,381)
Comprehensive income
Net loss for the year
ended December 31,
1997 ($ 268,992) (268,992)
Other comprehensive
income
Foreign translation
adjustment (net of income
tax expense of $111,000) (25,176)
----------
Comprehensive income ($ 294,168)
==========
Issuance of shares to
EBIC shareholders 61 (61)
Acquisition of treasury stock (209,451)
Expenses incurred in
connection with
Exchange Offer (344,010)
----------- ------- ------------ ------------- ------------- ------------
Balance at
December 31, 1997 11,392 33,187,415 (209,451) (3,815,073)
<CAPTION>
Accumulated
Other
Comprehensive
Income Total
------ -----
<S> <C> <C>
Balance at
December 31, 1995 $ 2,865,823 $ 31,391,264
Retirement of treasury stock
Comprehensive income
Net income for the year ended
December 31, 1996 3,704,960
Other comprehensive
Income
Foreign translation
adjustment (net of
income tax expense
of $272,000) (411,685) (411,685)
Comprehensive income
Recapitalization in connection
with the Merger:
Retirement of EBIC stock
Issuance of shares to
EBIC shareholders 18,243,250
Cash Consideration paid
to EBIC shareholders (21,955,012)
Repayment of
stockholder notes 2,243,709
EBIC expenses incurred
in connection with
Merger (765,612)
------------- -------------
Balance at
December 31, 1996 2,454,138 32,450,874
Issuance of shares in
Exchange Offer
Comprehensive income
Net loss for the year
ended December 31,
1997 (268,992)
Other comprehensive
income
Foreign translation
adjustment (net of income
tax expense of $111,000) (25,176) (25,176)
Comprehensive income
Issuance of shares to
EBIC shareholders (209,451)
Acquisition of treasury stock
Expenses incurred in
connection with
Exchange Offer (344,010)
------------- -------------
Balance at
December 31, 1997 2,428,962 31,603,245
F-7
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
----------------------------------------------------
(Continued)
-----------
</TABLE>
<TABLE>
<CAPTION>
Comprehen- Additional Notes
sive Common Paid-in Treasury Accumulated Receivable from
Income Stock Capital Stock Deficit Stockholders
------ ----- ------- ----- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 $11,392 $33,187,415 ($209,451) ($3,815,073)
Comprehensive income
Net loss for the year
ended December 31,
1998 ($1,275,150) (1,275,150)
Other comprehensive
income
Foreign translation
adjustment (net of
income tax benefit of
$163,348) (506,100)
----------
Comprehensive income ($1,781,250)
==========
Acquisition of treasury stock (18,481)
Preferred stock dividends (10,000)
---------- ------ ---------- -------- ---------- -------------
Balance at
December 31, 1998 $11,392 $33,187,415 ($227,932) ($5,100,223) $
======= =========== ========= =========== =============
<CAPTION>
Accumulated
Other
Comprehensive
Income Total
------ -----
<S> <C> <C>
Balance at
December 31, 1997 $2,428,962 $31,603,245
Comprehensive income
Net loss for the year
ended December 31,
1998 (1,275,150)
Other comprehensive
income
Foreign translation
adjustment (net of
income tax benefit of
$163,348) (506,100) (506,100)
Comprehensive income
Acquisition of treasury stock (18,481)
Preferred stock dividends (10,000)
---------- -----------
Balance at
December 31, 1998 $1,922,862 $29,793,514
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
MAXCOR FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income ($1,275,150) ($ 268,992) $ 3,704,960
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,004,626 5,318,983 4,734,101
Provision for doubtful accounts 53,777 96,203 (45,361)
Net loss (gain) on disposal of fixed assets 31,423 (36,257) (72,241)
Gain on sale of exchange memberships (8,000)
Undistributed earnings of unconsolidated subsidiaries (329,082) (646,233) (636,148)
Minority interest in consolidated subsidiaries (501,731)
Imputed interest expense 57,556 83,959 106,287
Amortization of deferred expenses 1,457 1,457 1,457
Deferred income taxes 1,957,221 222,733 (1,055,635)
Change in assets and liabilities:
Decrease (increase) in deposits with clearing
organizations 1,931,334 (1,872,061) (5,092,794)
Decrease (increase) in receivable from broker-dealers
and customers 3,268,139 8,932,584 (9,005,403)
Increase in securities owned (1,081,050) (1,746,189) (8,751,276)
Decrease in prepaid expenses and other assets 1,147,041 364,383 1,184,235
Increase in income taxes receivable (967,263)
(Decrease) increase in short-term bank loans (6,225,928) (3,463,055) 9,688,983
Increase (decrease) in payable to broker-dealer 7,414,513 (1,256,792) 1,825,650
(Decrease) increase in securities sold, not yet
purchased (780,849) (943,682) 1,724,531
(Decrease) increase in accounts payable and accrued
liabilities (2,489,237) 1,329,824 410,548
(Decrease) increase in accrued compensation payable (4,129,233) (4,436,546) 6,231,912
(Decrease) increase in income taxes payable (2,456,795) 2,480,599 (5,555,680)
----------- ----------- -----------
Net cash provided by (used in) operating activities 1,132,500 4,152,918 (1,103,605)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (4,073,603) (3,502,633) (4,889,861)
Proceeds from the sale of fixed assets 406,950 488,517 932,098
Investment in equity affiliates 36,771 58,520 113,070
Net sale of exchange memberships 148,000
Proceeds from the sale of subsidiary 322,622
----------- ----------- -----------
Net cash used in investing activities (3,629,882) (2,484,974) (3,844,693)
----------- ----------- -----------
</TABLE>
F-9
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Continued)
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Repayment of notes payable (2,520,331) (3,203,573) (1,027,396)
Issuance of note payable 2,140,000
Issuance of redeemable preferred stock 2,000,000
Redeemable preferred stock dividends (10,000)
Repayment of obligations under capitalized leases (231,137) (397,717) (1,001,529)
Expenses incurred in connection with
Exchange Offer (344,010)
Acquisition of treasury stock (18,481) (209,451)
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)
Repayments of notes receivable from stockholders 2,243,709
------------ ------------ ------------
Net cash used in financing activities (779,949) (2,014,751) (4,262,590)
------------ ------------ ------------
Effect of exchange rate changes on cash 385,996 156,512 429,464
------------ ------------ ------------
Net decrease in cash and cash equivalents (2,891,335) (190,295) (8,781,424)
Cash and cash equivalents at beginning of year 18,041,631 18,231,926 27,013,350
------------ ------------ ------------
Cash and cash equivalents at end of year $ 15,150,296 $ 18,041,631 $ 18,231,926
============ ============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 1,032,853 $ 768,270 $ 616,750
Income taxes paid 2,773,146 2,124,722 12,070,364
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
MAXCOR FINANCIAL GROUP INC.
---------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 1998, 1997 AND 1996
--------------------------------
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
- - ------------------------------------------------
Maxcor Financial Group Inc. ("MFGI") was incorporated in Delaware on August 18,
1994 with the objective of acquiring or merging with an operating business in
the financial services industry. On August 16, 1996 MFGI acquired Euro Brokers
Investment Corporation ("EBIC"), a privately held international and domestic
inter-dealer broker, in a merger transaction (the "Merger").
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, Geneva, Toronto and Mexico City, and
correspondent relationships with other brokers throughout the world. EBIC and
its subsidiaries and affiliates currently comprise substantially all of MFGI'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 MFGI. The historical assets and
liabilities of MFGI and EBIC have been combined and reflected in the
consolidated statements of financial condition at their respective book values.
The consolidated results of operations and financial position 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. The number of shares outstanding and related earnings per
share information for periods prior to the Merger have been presented as if all
shares issued in the Merger had been issued as of the first date of such period
and all such shares were outstanding for the merged and recapitalized entity
since that date.
The consolidated financial statements include the accounts of MFGI and its
majority-owned subsidiaries and other entities over which it exercises control
(collectively, the "Company"). 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 consolidated statements of operations. Certain
reclassifications have been made to the 1997 and 1996 balances to conform with
the current year presentation.
For the year ended December 31, 1996, the number of shares outstanding
(8,949,656) reflects a restatement of the number of shares reported outstanding
(9,011,295) in the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996. The restatement
reflects the actual number of shares issued in the Merger, as opposed to the
anticipated number.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
- - -----------------------------------------
Revenue recognition:
- - --------------------
Commission income and related expenses are recognized on a trade date basis.
F-11
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
- - -----------------------------------------------------
Securities transactions:
- - ------------------------
Securities transactions are recorded on a trade date basis.
Securities owned and securities sold, not yet purchased are carried at market
value, with unrealized gains and losses reflected in operations.
Cash and cash equivalents:
- - --------------------------
The Company considers all short-term investments with an initial maturity of
three months or less to be cash equivalents.
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 lesser of the terms of the related leases or the estimated
useful lives of the improvements.
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 $7,986,598 and $7,576,599 at December 31, 1998 and 1997,
respectively.
The Company has a policy of reviewing the carrying value of intangible assets to
consider whether events or changes in circumstances have occurred - such as the
loss of significant customers, a significant change in the revenues received
from customers or a significant change in the nature of the brokerage business
which would indicate that the carrying amount of such assets may not be
recoverable, in which case the Company would evaluate the estimated future cash
flows expected to result from the asset. 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, and the effect of exchange rate changes on
intercompany transactions of a long-term investment nature, are reflected as
foreign translation adjustments in the accumulated other comprehensive income
section of 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 operations.
F-12
<PAGE>
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
- - -----------------------------------------------------
Fair value of financial instruments:
- - ------------------------------------
The financial instruments of the Company are reported in the consolidated
statements of financial condition at market values or at carrying amounts that
management estimates approximate fair values, as such financial instruments are
short-term in nature or bear interest at rates approximating current market
rates.
Income taxes:
- - -------------
Income taxes are accounted for using the asset and liability method. Deferred
taxes are recognized for the tax consequences of temporary timing differences
between the recognition of tax effects for financial statement purposes and
income tax reporting purposes, and are calculated by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
A valuation allowance is recorded to reduce a deferred tax asset to only that
portion that is judged more likely than not to be realized.
Use of estimates:
- - -----------------
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Earnings per share:
- - -------------------
In computing basic and diluted earnings per share ("EPS") for the year ended
December 31, 1998, the Company increased its net loss attributable to common
shareholders (the numerator) by preferred stock dividends declared of $10,000.
For the years ended December 31, 1997 and 1996 no such adjustment was made as
there were no preferred shares outstanding. Options and warrants to purchase
common stock were not added to the weighted-average number of common shares
outstanding (the denominator) for the computation of diluted EPS since they were
antidilutive during the reporting periods.
Accounting developments:
- - ------------------------
On June 15, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). SFAS 133 requires that all derivative instruments, including
certain derivatives embedded in other contracts, be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are to be
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. Management is currently assessing
the effect SFAS 133 will have on the Company's consolidated results of
operations and financial position.
F-13
<PAGE>
NOTE 3 - DEPOSITS WITH CLEARING ORGANIZATIONS:
- - ----------------------------------------------
Deposits with clearing organizations at December 31, 1998 and 1997 are comprised
of the following:
December 31, 1998 December 31, 1997
----------------- -----------------
Cash $ 402,452 $ 766,734
U.S. Treasury obligations 6,718,581 8,282,188
----------- -----------
$ 7,121,033 $ 9,048,922
=========== ===========
Pursuant to its membership in Government Securities Clearing Corporation
("GSCC"), Maxcor Financial Inc. ("MFI"), a U.S. broker-dealer subsidiary, is
required to maintain a minimum deposit of $5,000,000. The balance of the
deposits is required pursuant to MFI's clearing firm relationships.
NOTE 4 - RECEIVABLE FROM AND PAYABLE TO BROKER-DEALERS AND CUSTOMERS:
- - ---------------------------------------------------------------------
At December 31, 1998 and 1997, receivable from and payable to broker-dealers and
customers consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------- --------------------------
Receivable Payable Receivable Payable
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Commissions receivable $15,453,109 $ $16,177,429 $
Receivable from clearing firm 1,104,715 3,239,381
Securities failed-to-
deliver/receive 458,281 449,458
Unsettled transactions 491,100
Payable to clearing firm 7,845,490
----------- ----------- ----------- ----------
$16,557,824 $ 7,845,490 $20,366,191 $ 449,458
=========== =========== =========== ==========
</TABLE>
The Company clears its matched riskless principal brokerage transactions and its
municipal securities trading transactions through other broker-dealers on a
fully-disclosed basis pursuant to clearing agreements (the "Agreements"). The
receivable from clearing firm at December 31, 1998 and 1997 primarily represents
commissions due from a broker-dealer on matched riskless principal brokerage
transactions, net of transaction fees, while the payable to clearing firm at
December 31, 1998 represents the net amount owed to a broker-dealer for
financing the Company's municipal securities positions. At December 31, 1997
these positions were financed on a settlement date basis by fully collateralized
short-term bank loans. The Agreements provide the clearing firms with a lien on
the Company's property held by them to secure the Company's liabilities and
obligations under the Agreements. Commissions receivable represent amounts
billed on the Company's name give-up brokerage transactions, net of allowances
for doubtful accounts of approximately $533,000 and $554,000 at December 31,
1998 and 1997 respectively.
NOTE 5 - SECURITIES OWNED AND SECURITIES SOLD, NOT YET PURCHASED:
- - -----------------------------------------------------------------
Securities owned at December 31, 1998 and 1997 primarily reflect municipal
securities positions taken in connection with the Company's municipal securities
business. Securities sold, not yet purchased at December 31, 1997 primarily
consist of foreign equity securities.
Trading gains on municipal securities of approximately $954,249, $690,505 and
$333,000 for the years ended December 31, 1998, 1997 and 1996 respectively, have
been included in other income in the consolidated statements of operations.
F-14
<PAGE>
NOTE 6 - 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, the Company has a partnership arrangement with Yagi Euro to broker
certain derivative products in Tokyo ("Tokyo Partnership"). 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 at December 31, 1998 and 1997 are
as follows:
1998 1997
------------- --------------
Yagi Euro $ 2,935,100 $ 2,488,957
Other 118,030
------------- --------------
$ 2,935,100 $ 2,606,987
============= ==============
Summarized financial information for Yagi Euro at and for the years ended
December 31, 1998 and 1997 is as follows:
1998 1997
--------------- --------------
Total assets $ 29,034,031 $ 20,162,750
Total liabilities 9,466,697 3,569,702
Revenues 4,719,847 7,770,628
Net income 625,980 1,430,121
NOTE 7 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
- - ---------------------------------------------------------
Furniture, equipment and leasehold improvements at December 31, 1998 and 1997
are summarized below:
December 31, December 31,
1998 1997
----------- -------------
Furniture and telephone equipment $ 13,785,296 $ 13,509,465
Leasehold improvements 7,690,009 6,813,323
Computer and related equipment 13,683,614 12,197,628
Automobiles 1,025,295 1,311,298
----------- -------------
36,184,214 33,831,714
Less - Accumulated depreciation
and amortization 26,165,612 22,372,191
------------ -------------
$ 10,018,602 $ 11,459,523
============ =============
F-15
<PAGE>
NOTE 8 - 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, 1998:
For the Year Ending December 31,
1999 $ 402,759
2000 257,785
2001 211,303
-----------
Total net minimum lease payments 871,847
Less: amount representing interest 120,100
-----------
Present value of net minimum lease
payments $ 751,747
===========
The gross amounts of assets under capitalized leases are approximately
$1,215,000 and $1,489,000 at December 31, 1998 and 1997, respectively. Such
amounts are principally automobiles and are included in furniture, equipment and
leasehold improvements in the consolidated statements of financial condition.
The charges to income resulting from the amortization of assets recorded under
capitalized leases were approximately $221,000, $297,000 and $520,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
NOTE 9 - NOTES PAYABLE:
- - -----------------------
Notes payable at December 31, 1998 and 1997 represent the remaining installments
due on notes issued in December 1986 in connection with the acquisition of the
predecessor businesses of EBIC ("Acquisition Notes") and on a note issued in
December 1997 secured by certain equipment ("Equipment Note").
The balance due on the Acquisition Notes at December 31, 1998 and 1997 was
$2,088,335 and $4,121,839, respectively. The Acquisition Notes bear interest at
a stated rate of 6-1/8% per annum and have been payable in equal annual
installments of approximately $2,100,000 each November 30 from 1995 through
1999. The Acquisition 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 Acquisition Notes are subordinated to the claims of financial
institutions to a maximum aggregate amount of $10,000,000. Approximately 56% of
the balance of the Acquisition Notes was denominated in British pounds sterling
at each of December 31, 1998 and 1997.
The balance due on the Equipment Note at December 31, 1998 and 1997 was
$1,736,506 and $2,140,000, respectively. The Equipment Note bears interest at a
rate of 7.9% per annum and is payable in monthly installments of $46,545 through
December 2001 and $27,482 thereafter through December 2002. The Equipment Note
is secured by all equipment owned by Euro Brokers Inc., a U.S. subsidiary.
F-16
<PAGE>
NOTE 9 - NOTES PAYABLE (Continued):
- - -----------------------------------
The changes in notes payable for the years ended December 31, 1998 and 1997 are
as follows:
1998 1997
----------- -----------
Balance at beginning of year $ 6,261,839 $ 7,379,762
Issuance of note payable 2,140,000
Repayment of principal (2,520,331) (2,102,500)
Exchange rate difference 25,778 (138,309)
Imputed interest 57,556 83,959
Repayment of note to Martin Brokers
(Hong Kong) Limited (1,101,073)
----------- -----------
Balance at end of year $ 3,824,842 $ 6,261,839
=========== ===========
NOTE 10 - EMPLOYEE BENEFIT PLAN:
- - --------------------------------
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
$366,000, $361,000 and $308,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
F-17
<PAGE>
NOTE 11 - INCOME TAXES:
- - -----------------------
Income (loss) before provision for income tax and minority interest was taxed
under the following jurisdictions:
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
----------- ----------- -----------
Domestic $ 606,080 $ 625,936 $11,570,041
Foreign 3,324,385 6,261,321 (1,521,786)
----------- ----------- -----------
Total $ 3,930,465 $ 6,887,257 $10,048,255
=========== =========== ===========
The components of the provision for income taxes are as follows:
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
----------- ----------- -----------
Current
Federal ($ 387,836) $ 1,623,627 $ 3,965,812
State and local 61,619 (672,374) 1,968,578
Foreign 2,060,265 4,614,209 2,488,923
----------- ----------- -----------
Total 1,734,048 5,565,462 8,423,313
----------- ----------- -----------
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
----------- ----------- -----------
Deferred
Federal (136,824) (114,331) (506,338)
State and local 142,413 31,265 (390,189)
Foreign 2,211,008 275,501 (876,180)
----------- ----------- -----------
2,216,597 192,435 (1,772,707)
----------- ----------- -----------
Total $ 3,950,645 $ 5,757,897 $ 6,650,606
=========== =========== ===========
F-18
<PAGE>
NOTE 11 - INCOME TAXES (Continued):
- - -----------------------------------
Deferred tax assets (liabilities) are comprised of the following:
December 31, December 31,
1998 1997
----------- -----------
Assets
Bad debt reserve $ 212,346 $ 190,800
Occupancy reserves 467,668 486,626
Deferred compensation 349,444 2,936,216
Miscellaneous reserves 614,707 623,129
Depreciation and amortization
1,092,876 694,866
State and local net
operating losses 501,262
Foreign tax credits 2,870,792 2,926,135
Deferred tax asset valuation
allowance (3,666,114) (2,926,135)
----------- -----------
Gross deferred tax assets,
after valuation
allowance $ 2,442,981 $ 4,931,637
=========== ===========
Liabilities
Unrealized foreign
exchange gain $ ($ 304,365)
Other (495,636) (352,302)
----------- -----------
Gross deferred tax
liabilities ($ 495,636) ($ 656,667)
=========== ===========
The valuation allowance for deferred tax assets has been established for foreign
tax credit carryforwards, state and local net operating losses ("NOLs") and
assets arising from various timing differences, due to the uncertainty regarding
their realizability. Foreign tax credit carryforwards of $1,990,000 and $936,135
expire in the years ended December 31, 2000 and 2002, respectively. NOLs
approximating $876,000 and $1,810,600 expire in the years ended 2012 and 2013,
respectively.
F-19
<PAGE>
NOTE 11 - INCOME TAXES (Continued):
- - -----------------------------------
The provision for income taxes differs from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to pretax
income from continuing operations as a result of the following differences:
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
----------- ----------- -----------
Tax at U.S. statutory rate $ 1,337,491 $ 2,341,667 $ 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 1,084,309 1,835,074 528,447
Nondeductible meals and
entertainment 1,429,700 1,792,990 1,903,558
State and local taxes, net 204,032 (423,060) 1,025,952
Other (104,887) 211,226 (324,240)
----------- ----------- -----------
$ 3,950,645 $ 5,757,897 $ 6,650,606
=========== =========== ===========
NOTE 12 - STOCKHOLDERS' EQUITY:
- - -------------------------------
Preferred stock:
- - ----------------
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.
On October 1, 1998 the Company issued 2,000 shares of a newly created Series B
Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") to Yagi Euro
at a purchase price of $1,000 per share ("Stated Value"). Cumulative dividends
at the annual rate of 2% of the Stated Value are payable quarterly in arrears.
The Company may, at any time, redeem the Series B Preferred Stock, in whole or
in part, at its option, at a per share price equal to the Stated Value together
with accrued and unpaid dividends thereon ("Liquidation Preference"). In
addition, the Series B Preferred Stock is subject to mandatory redemption at the
Liquidation Preference on October 1, 2008 or within 60 days of the disposition
of the Company's investment in Yagi Euro. The Series B Preferred Stock does not
have any conversion rights. The Series B Preferred Stock also is non-voting
unless the Company has not paid dividends in full for the two immediately
preceding quarters or has failed to meet any mandatory redemption obligation, in
which case the holders of the Series B Preferred Stock would be entitled to
appoint one additional director to the Company's Board of Directors.
F-20
<PAGE>
NOTE 12 - STOCKHOLDERS' EQUITY (Continued):
- - -------------------------------------------
Common stock and warrants:
- - --------------------------
Pursuant to the Merger in 1996, a newly-formed wholly-owned subsidiary of the
Company merged with and into EBIC, with EBIC thereby becoming a wholly-owned
subsidiary of the Company. As a result of the Merger, former holders of EBIC
common stock received consideration consisting, in the aggregate, of
approximately $22 million in cash, 4,505,666 shares of common stock and
7,566,625 Series B redeemable common stock purchase warrants ("Series B
Warrants"). The Series B Warrants are economically identical in their terms to
the 7,566,625 warrants issued in connection with the Company's 1994 initial
public offering ("IPO Warrants"). Both series of warrants entitle the holder to
purchase from the Company one share of common stock at an exercise price of
$5.00 per share, 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. The Company also acquired, in connection with the Merger,
in exchange for 225,000 shares of common stock, all of the unit purchase options
that had been issued in the initial public offering (representing the right, in
the aggregate, to acquire 333,333 units) and redeemed, for cash, 136,000 shares
of common stock for which certain merger-related conversion rights had been
exercised.
On November 17, 1997, the Company consummated an exchange offer, on the basis of
0.1667 of a share of common stock for each warrant, pursuant to which it issued
an aggregate of 2,380,975 shares of common stock in exchange for 14,283,296, or
approximately 95.1%, of the then outstanding warrants (6,880,718 of the IPO
Warrants and 7,402,578 of the Series B Warrants).
In May 1997, the Company acquired treasury stock consisting of 61,638 shares of
common stock and 115,015 Series B Warrants. During the fourth quarter of 1997,
the 115,015 Series B Warrants were canceled and returned to authorized but
unissued status. In August 1998, the Company acquired an additional 6,849 shares
of common stock resulting in a total of 68,487 common shares held in treasury as
of December 31, 1998.
Accordingly, at December 31, 1998 and 1997 the Company had outstanding
11,323,782 and 11,330,631 shares of common stock, respectively. At December
31,1998 and 1997, the Company also had outstanding 685,948 IPO Warrants and
49,032 Series B Warrants.
At December 31, 1998 and 1997, the Company had 734,980 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 13).
F-21
<PAGE>
NOTE 13 - STOCK OPTION PLAN:
- - ----------------------------
The Company's 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 of a share of common stock on the date
of grant. Employee options granted to date generally are ISOs and vest and
become exercisable in equal installments on each anniversary of the date of the
grant for periods of four or five years. Non-employee director options granted
to date are non-qualified stock options and vest in equal 50% installments on
the dates that are 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).
A summary of the Company's stock option activity follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
----------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,245,000 5.07 1,260,000 5.07
Granted 485,000 2.00 45,000 4.90 1,260,000 5.07
Canceled (80,000) 5.00 (60,000) 4.90
--------- ---- --------- ---- --------- ----
Outstanding
at end of year 1,650,000 2.00 1,245,000 5.07 1,260,000 5.07
========== ==== ========= ==== ========= ====
Exercisable
at end of year 521,000 2.00 292,000 5.08
========== ==== ========= ====
Weighted average
fair value of options
granted during
the year 1.30 1.20 1.93
========== ==== ====
</TABLE>
On August 6, 1998 the exercise price of all outstanding stock options
(1,165,000) was reset to $2.00 per share, which exceeded the market value of the
Company's common stock on August 6, 1998. As a result of this repricing and the
fact that substantially all stock options subsequently granted during 1998 were
at an exercise price of $2.00 per share, at December 31, 1998, outstanding stock
options had a weighted average exercise price of approximately $2.00 per share.
As allowed by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), the Company has elected to continue
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), in accounting for the Plan. Accordingly, the
Company has not recognized any compensation cost associated with the Plan, since
the market prices of the underlying stock were not greater than the exercise
prices on the grant dates. As required by SFAS 123, however, the Company has
disclosed below its approximate pro forma net (loss) income and (loss) earnings
per share if compensation costs under the Plan had been recognized using the
fair value method of SFAS 123. Because stock options under the Plan have
characteristics
F-22
<PAGE>
NOTE 13 - STOCK OPTION PLAN (Continued):
- - ----------------------------------------
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 for 1998, 1997 and 1996 with the
following weighted average assumptions: expected volatility of 66%, 35% and 30%,
respectively; risk free interest rate of 5.44%, 6.16% and 6.56 %, respectively;
and an expected option life of five years.
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C> <C>
Net (loss) income As reported ($1,275,150) ($ 268,992) $ 3,704,960
Pro forma ($1,862,690) ($ 745,211) $ 3,527,612
(Loss) earnings per share As reported ($ .11) ($ .03) $ .41
Pro forma ($ .16) ($ .08) $ .39
</TABLE>
NOTE 14 - 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. The Company is currently subleasing portions of certain
leased premises.
Future minimum rental commitments for operating leases, net of sublease income,
approximate the following:
Minimum Minimum
Rental Sublease
Year Payments Income Net
----------- ----------- -----------
1999 $ 8,871,975 $ 902,004 $ 7,969,971
2000 6,060,662 40,020 6,020,642
2001 5,102,840 5,102,840
2002 4,812,084 4,812,084
2003 2,708,190 2,708,190
Thereafter 4,671,664 4,671,664
----------- ----------- -----------
$32,227,415 $ 942,024 $31,285,391
=========== =========== ===========
NOTE 15 - CONTINGENCIES:
- - ------------------------
The Company is subject to various legal proceedings, arbitrations and claims
that arise in the ordinary course of its 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 any currently known matters will not have a material adverse
impact on the Company's consolidated financial condition or results of
operations.
F-23
<PAGE>
NOTE 16 -COUNTERPARTY RISK:
- - ---------------------------
In the normal course of business, certain securities transactions brokered by
the Company are introduced to and settled by the Company's clearing firms. In
the event of non-performance by a counterparty to such transactions, the Company
may be responsible to meet obligations incurred by such non-performance. The
Company and its clearing firms have a policy of reviewing, on an ongoing basis,
the credit standing of the Company's customers, which are primarily major
financial institutions.
NOTE 17 - DERIVATIVE FINANCIAL INSTRUMENTS USED FOR TRADING PURPOSES:
- - ---------------------------------------------------------------------
The Company, from time to time, sells financial futures contracts as a means of
managing market risk on municipal securities positions held. Financial futures
contracts are exchange traded contractual commitments to either receive
(purchase) or deliver (sell) a standard amount of a financial instrument at a
specified future date and price. Maintaining a financial futures contract
requires the Company to deposit margin with its clearing broker as security for
its obligations. Financial futures contracts provide for daily cash settlements
with gains or losses based upon fluctuations in market value included in trading
gains on municipal securities transactions (see Note 5). Open equity in
financial futures contracts is recorded as receivable from and payable to
broker-dealers and customers as applicable. At December 31, 1998 and 1997, the
Company had no financial futures contracts outstanding.
NOTE 18 - DERIVATIVE FINANCIAL INSTRUMENTS USED FOR PURPOSES OTHER THAN TRADING:
- - --------------------------------------------------------------------------------
The Company utilizes foreign currency forward contracts to reduce its exposures
to exchange rate risks associated with anticipated commissions on transactions
denominated in a currency other than the functional currency and anticipated
dividends from the Tokyo Partnership. Pursuant to these foreign currency forward
contracts, the Company receives or pays the difference between the contracted
forward exchange rate (for the purchase or sale of one currency for another) and
the prevailing exchange rate at settlement date. The fair value of foreign
currency forward contracts is included on the consolidated statements of
financial condition as prepaid expenses and other assets or as accounts payable
and accrued liabilities, as applicable. Gains and losses as a result of changes
in the fair value of foreign currency forward contracts have been included in
current operations as other income, even though the offsetting gains and losses
on the hedged exposures are not included in operations until realized.
The amount of the Company's foreign currency forward contracts at December 31,
1998 is detailed below. There were no such contracts outstanding at December 31,
1997.
Sell Japanese yen/buy U.S. dollars $ 1,735,000
Sell U.S. dollars/buy British pounds sterling 3,000,000
F-24
<PAGE>
NOTE 19 - NET CAPITAL REQUIREMENTS:
- - -----------------------------------
MFI is subject to the Securities and Exchange Commission's Uniform Net Capital
Rule (rule 15c3-1), which requires the maintenance of minimum regulatory net
capital. MFI has elected to use the alternative method, as permitted by the
rule, which requires that MFI maintain minimum regulatory net capital, as
defined, equal to the greater of $250,000 or 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, 1998, MFI's regulatory net capital was $13,434,671 and exceeded the
minimum requirement of $250,000 by $13,184,671. MFI's membership in GSCC
requires it to maintain minimum excess regulatory net capital of $10,000,000. In
addition, a number of other subsidiaries operating in various countries are
subject to capital rules and regulations issued by the designated regulatory
authorities to which they are subject.
NOTE 20 - INCREASED TRADING VOLUME:
- - -----------------------------------
During the four trading-day period of October 23, 1997 through October 28, 1997,
the Company experienced up to an approximately five-fold increase in the typical
daily trading volume of the emerging market debt securities it brokers, together
with unprecedented price volatility in such securities. As a result, the Company
and its clearing firms experienced significant delays and backlogs in the
processing and settlement of such trades and a higher than usual incidence of
disputed trades. Although the temporary increase in volume generated additional
commission income, the delays, backlogs and disputes resulted in additional
costs for the Company, aggregating to approximately $6,000,000, principally
consisting of payments related to settlement of disputes, interest claims by
customers and financing charges from clearing firms. Such payments have been
reflected as a reduction of commission income in the consolidated statement of
operations for the year ended December 31, 1997.
NOTE 21 - SEGMENT REPORTING:
- - ----------------------------
In accordance with Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information", ("SFAS
131"), the Company is reporting certain information relating to its operating
segments. The Company has defined its operating segments based upon geographic
location. Although all segments are engaged in the inter-dealer brokerage
business, they are managed seperately to reflect their unique market, employment
and regulatory environments. The reportable segments, as defined by SFAS 131,
consist of the United States, United Kingdom, Japan, and Canada. United States
amounts are principally derived from the Company's New York office, but include
the results of operations of all its U.S. based operations. Tokyo amounts
include the consolidated results of operations of the Tokyo Partnership. Other
geographic segments which do not meet SFAS 131 materiality thresholds for
reportable segments have been included in "All Other".
F-25
<PAGE>
NOTE 21 - SEGMENT REPORTING(Continued):
- - ---------------------------------------
The accounting policies of the segments are the same as those described in Note
2.
<TABLE>
<CAPTION>
United United All
States Kingdom Japan Canada Other Total
------ ------- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
1998
Commission
income $ 78,832,769 $ 42,354,005 $ 23,172,310 $ 1,280,407 $ 3,653,531 $ 149,293,022
Interest income 1,875,942 541,652 337,004 5,714 2,888 2,763,200
Interest expense 1,295,220 789,970 19,754 2,104,944
Depreciation and
amortization 2,869,495 1,877,927 68,766 188,438 5,004,626
Provision for
income taxes 243,326 45,567 3,510,831 (1,143) 152,064 3,950,645
Income from
unconsolidated
affiliates 117,734 117,734
Net (loss) income (506,068) (2,375,260) 1,920,758 (459,440) 144,860 (1,275,150)
Assets 76,188,122 21,984,556 7,548,750 564,829 3,189,456 109,475,713
Capital
expenditures 2,405,177 1,282,038 46,144 340,244 4,073,603
Investment in
unconsolidated
affiliates 2,935,100 2,935,100
1997
Commission
income $ 84,313,196 $ 51,478,803 $ 22,865,358 $ 2,800,872 $ 2,009,209 $ 163,467,438
Interest income 2,000,642 485,142 101,470 12,456 3,187 2,602,897
Interest expense 808,833 911,896 4,653 1,725,382
Depreciation and
amortization 2,671,647 2,198,062 326,448 122,826 5,318,983
Provision for
income taxes 703,814 573,899 4,396,558 83,626 5,757,897
Income from
unconsolidated
affiliates 228,450 228,450
Net income (loss) 260,663 (1,010,821) 1,763,005 (1,413,804) 131,965 (268,992)
Assets 82,574,464 24,528,695 10,084,590 1,352,458 3,096,351 121,636,558
Capital
expenditures 1,996,364 799,469 319,824 386,976 3,502,633
Investment in
unconsolidated
affiliates 2,606,987 2,606,987
</TABLE>
F-26
<PAGE>
NOTE 21 - SEGMENT REPORTING (Continued):
- - ----------------------------------------
<TABLE>
<CAPTION>
United United All
States Kingdom Japan Canada Other Total
------ ------- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
1996
Commission
income $82,155,803 $64,399,407 $20,071,821 $ 3,375,172 $ 8,107,696 $ 178,109,899
Interest income 8,087,185 729,557 120,278 23,749 5,650 8,966,419
Interest expense 753,631 6,518,215 48,263 7,320,109
Depreciation and
amortization 2,040,900 2,430,600 233,021 29,580 4,734,101
Provision for
income taxes 5,740,378 (908,339) 1,818,567 6,650,606
Income from
unconsolidated
affiliates 257,759 257,759
Net income (loss) 6,103,914 (3,169,080) 1,918,935 (443,025) (705,784) 3,704,960
Assets 81,510,663 29,756,090 7,648,621 1,927,895 2,944,074 123,787,343
Capital
expenditures 2,248,634 1,461,372 444,051 735,804 4,889,861
Investment in
unconsolidated
affiliates 2,756,741 2,756,741
</TABLE>
Included below are reconciliations of reportable segment items to the Company's
consolidated totals as reported in the consolidated financial statements.
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Interest income:
Total for reportable segments $ 2,760,312 $ 2,599,710 $ 8,960,769
Other interest income 2,888 3,187 5,650
Elimination of intersegment
interest income (1,025,797) (884,798) (7,164,977)
------------- ------------- -------------
Consolidated total $ 1,737,403 $ 1,718,099 $ 1,801,442
============= ============= =============
Interest expense:
Total for reportable segments $ 2,104,944 $ 1,725,382 $ 7,320,109
Elimination of intersegment interest
expense (1,025,797) (884,798) (6,626,977)
------------- ------------- -------------
Consolidated total $ 1,079,147 $ 840,584 $ 693,132
============= ============= =============
Assets:
Total for reportable segments $ 106,286,257 $ 118,540,207 $ 120,843,269
Other assets 3,189,456 3,096,351 2,944,074
Elimination of intersegment
receivables (17,842,245) (20,779,815) (15,395,151)
Elimination of investments in
other segments (16,363,803) (14,325,230) (11,219,477)
------------- ------------- -------------
Consolidated total $ 75,269,665 $ 86,531,513 $ 97,172,715
============= ============= =============
F-27
<PAGE>
NOTE 22 - SUBSEQUENT EVENT:
- - ---------------------------
On January 1, 1999 Euro Brokers International Limited ("EBIL"), a U.K.
subsidiary, changed its name to Euro Brokers Finacor Limited ("EBFL").
Simultaneously therewith, EBFL completed a Sale and Purchase Agreement with
Monecor (London) Limited ("Monecor"), issuing 50% of its share capital to
Monecor in exchange for the shares of Monecor's subsidiary, Finacor Limited, and
the assets and undertaking of its Finacor Peter branch in Paris. EBFL will
combine the existing interest-rate options, U.S. dollar deposit and the euro,
British pound sterling and Japanese yen swaps operations of EBIL with the Euro
and Scandinavian swaps businesses of Finacor Limited and the Euro swaps business
of Finacor Peter. The equity and results of operations for EBFL will be
consolidated in the Company's financial statements with Monecor's interest
presented as minority interest.
F-28
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
2.1 Agreement and Plan of Merger, dated as of March 8,
1996, as amended, by and among the Registrant, EBIC
Acquisition Corp. and Euro Brokers Investment
Corporation ("EBIC"), without exhibits and schedules
(incorporated herein by reference to Exhibit 2.1 of
the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996 (the "Form
10-Q"))
2.2 Registration Rights Agreement, dated as of August 16,
1996, by and among the Registrant and the persons
listed in Annexes I, II and III thereto (incorporated
by reference to Exhibit 2.5 of the Registrant's
Current Report on Form 8-K, dated August 16, 1996)
2.3 Securities Purchase Agreement, dated as of March 24,
1999, by and among the Registrant, Welsh, Carson,
Anderson & Stowe VI, L.P. ("WCAS VI") and WCAS
Information Partners, L.P. ("WCAS Info")*
2.4 Escrow Agreement, dated as of March 24, 1999, by and
among the Registrant, WCAS VI, WCAS Info and
Continental Stock Transfer & Trust Company*
2.5 Sale and Purchase Agreement, dated 21 December 1998,
by and among Euro Brokers International Limited, Euro
Brokers Holdings Limited, Monecor (London) Limited and
Finacor Peter, without schedules*
3.1 Amended and Restated Certificate of Incorporation of
the Registrant (incorporated herein by reference to
Exhibit 3 of the Registrant's Registration Statement
on Form 8-A, dated October 28, 1996)
3.2 Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K, dated
June 18, 1997)
3.3 Certificate of Designation, Powers, Preferences and
Rights of Series B Cumulative Redeemable Preferred
Stock of the Registrant (incorporated herein by
reference to Exhibit 3.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1998)
3.4 Amended and Restated Bylaws of the Registrant
(incorporated herein by reference to Exhibit 3.2 of
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 ("1996 Form
10-K"))
4.1 Form of Common Stock Certificate (incorporated herein
by reference to Exhibit 4.1 of Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 (No.
33-85346), dated November 23, 1994 ("Amendment No.
1"))
X-1
<PAGE>
4.2 Form of Redeemable Common Stock Purchase Warrant
(incorporated herein by reference to Exhibit 4.2 of
Amendment No. 1)
4.3 Warrant Agreement, dated as of November 30, 1994, by
and between the Registrant and Continental Stock
Transfer & Trust Company (incorporated herein by
reference to Exhibit 4.4 of Amendment No.1)
4.4 Form of Series B Redeemable Common Stock Purchase
Warrant (incorporated herein by reference to Exhibit
4.5 of the Registrant's Registration Statement on Form
S-4 (No. 333-06753) dated June 25, 1996) (the "Form
S-4"))
4.5 Warrant Agreement, dated as of June 5, 1996, by and
between the Registrant and Continental Stock Transfer
& Trust Company (incorporated herein by reference to
Exhibit 4.3 of the Form S-4)
4.6 Rights Agreement, dated as of December 6, 1996,
between the Registrant and Continental Stock Transfer
& Trust Company, as rights agent (incorporated herein
by reference to Exhibit 1 to the Registrant's
Registration Statement on Form 8-A, dated December 6,
1996)
4.7 Agreement to furnish Debt Instruments*
10.1 Agreement of Lease, dated September 10, 1992, by and
between Euro Brokers Inc. and The Port Authority of
New York and New Jersey (the "NY Lease") (incorporated
herein by reference to Exhibit 10.1 of the 1996 Form
10-K)
10.2 Supplement No. 1 to the NY Lease, dated March 21, 1993
(incorporated herein by reference to Exhibit 10.2 of
the 1996 Form 10-K)
10.3 Supplement No. 2 to the NY Lease, dated July 1, 1994
(incorporated herein by reference to Exhibit 10.3 of
the 1996 Form 10-K)
10.4 Underlease of Premises, dated 28 May 1993, between
Chestermount Properties Limited and Euro Brokers
Holdings Limited (the "London Underlease")
(incorporated herein by reference to Exhibit 10.4 of
the 1996 Form 10-K)
10.5 Supplemental Deed to the London Underlease, dated 28
May 1993*
10.6+ The Registrant's 1996 Stock Option Plan, as amended
and restated (incorporated herein by reference to
Exhibit 10.7 of the 1996 Form 10-K)
X-2
<PAGE>
10.7+ Amended and Restated Employment Agreement, dated as of
August 14, 1998, by and between the Registrant and
Gilbert Scharf*
10.8+ Employment Agreement, dated as of August 14, 1998, by
and between the Registrant and Keith Reihl*
10.9+ Amended and Restated Employment Agreement, dated as of
August 14, 1998, by and between the Registrant and
Roger Schwed*
10.10+ Employment Agreement, dated 1 September 1998, by and
between Euro Brokers International Limited and Robin
Adrian Clark*
10.11+ Employment Agreement, dated as of August 14, 1998, by
and between Euro Brokers Investment Corporation and
Walter E. Dulski*
10.12+ Agreement, dated as of November 19, 1996, by and among
the Registrant, EBIC and Donald R.A. Marshall
(incorporated herein by reference to Exhibit 10.13 of
the 1996 Form 10-K)
10.13 Agreement for Securities Clearance Services, dated
March 13, 1998, by and between Daiwa Securities
America Inc. and Maxcor Financial Inc. (incorporated
herein by reference to Exhibit 10.1 of the Registrants
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998) (1)
21 Subsidiaries of the Registrant*
27 Financial Data Schedule (filed in electronic form
only)
- - ----------
* Filed herewith
+ Connotes a management contract or compensatory plan or arrangement in which
a director or executive officer of the Registrant participates.
(1) Portions of this exhibit have been redacted and confidential treatment
granted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934,
as amended.
X-3
</TABLE>
<PAGE>
Exhibit 2.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of March 24, 1999 (this
"Agreement"), between Maxcor Financial Group Inc., a Delaware corporation (the
"Company"), and Welsh, Carson, Anderson & Stowe VI, L.P., a Delaware limited
partnership ("WCAS VI"), and WCAS Information Partners, L.P., a Delaware limited
partnership ("WCAS Info" and, together with WCAS VI, the "Sellers").
WHEREAS, WCAS VI is the owner of 2,936,098 shares of the
Common Stock, par value $.001 per share ("Common Stock"), of the Company;
WHEREAS, WCAS Info is the owner of 50,248 shares of the Common
Stock;
WHEREAS, the Sellers have indicated their desire to sell the
aggregate 2,986,346 shares of Common Stock (the "Shares") that they own;
WHEREAS the Company has indicated its desire to purchase all
of the Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES; PURCHASE PRICE; CLOSING
SECTION 1.01. Purchase and Sale of the Shares. Upon the terms
and subject to the conditions set forth herein, at the Closing (as defined) the
Sellers agree to sell to the Company (the "Sale"), and the Company agrees to
purchase from the Sellers, the Shares, free and clear of all liens, security
interests, pledges, voting agreements, claims, options and encumbrances of every
kind, character and description whatsoever ("Liens"). The aggregate
consideration for the purchase of the Shares shall consist of (i) $4,226,105.50
in cash (the "Cash Consideration"), (ii) two six-month, 7% promissory notes of
the Company, one payable to WCAS VI and the other to WCAS Info, in the
respective forms attached hereto as Annex I and aggregating to $500,000 (the "7%
Notes"), and (iii) two twelve-month, 10% promissory notes of the Company in the
respective forms attached hereto as Annex II and aggregating to $500,000 (the
"10% Notes" and, together with the 7% Notes, the "Notes"), and shall be paid as
provided in Section 1.03 hereof.
SECTION 1.02 Escrow Arrangements. As security for repayment of
the Notes, the parties agree that 1,142,858 of the Shares (the "Escrowed
Shares") are to be deposited in escrow with Continental Stock Transfer & Trust
Company, as escrow agent ("Escrow Agent"), together with stock transfer powers
duly endorsed by the Company in blank with respect to the Escrowed Shares, with
the Escrowed Shares in whole or in part,
<PAGE>
and the related stock powers, to be released to the Company or the Sellers as
follows, and otherwise in accordance with the terms of the Escrow Agreement, of
even date (the "Escrow Agreement"), among the Company, the Sellers and the
Escrow Agent: (i) upon repayment in full of the 7% Notes, one-half of the
Escrowed Shares and the related stock power will be released by the Escrow Agent
to the Company; (ii) upon repayment in full of the 10% Notes, the other one-half
of the Escrowed Shares and the related stock power will be released by the
Escrow Agent to the Company; and (iii) upon any Event of Default (as defined in
the Notes), all of the then-remaining Escrowed Shares and related stock power or
powers will be released by the Escrow Agent to the Sellers.
SECTION 1.03. Closing. The closing (the "Closing") of the
purchase and sale of the Shares hereunder shall take place at the offices of the
Company, 2 World Trade Center, 84th Floor, New York, New York 10048 (i) at 10:00
a.m., local time, on May 7, 1999, or as soon thereafter as practicable after
each of the conditions set forth in Article 5 of this Agreement shall have been
fulfilled or waived in accordance herewith, or (ii) at such other date, time or
place as the Company and the Sellers may agree (the time and date of the Closing
being hereinafter called the "Closing Date"). At the Closing:
(a) The Company shall cause a wire transfer or transfers of
immediately available funds in the amounts specified under the heading "Payable
at Closing" opposite each Seller's name in Annex III (and aggregating
$4,226,105.50) to be made to such account or accounts as the Sellers shall
specify prior to the Closing Date;
(b) The Company shall deliver to the Sellers the Notes;
(c) The Sellers shall deliver to the Company certificates
representing the Shares, duly endorsed by the Sellers (with medallion guarantee)
for transfer to the Company or accompanied by stock powers duly endorsed by the
Sellers (with medallion guarantee) to the Company;
(d) The Company shall deliver the certificates representing
the Shares to Continental Stock Transfer & Trust Company, as transfer agent for
the Common Stock (the "Transfer Agent"), and cause the Transfer Agent (i) to
deliver to the Escrow Agent two certificates, each registered in the name of the
Company and representing one-half of the Escrowed Shares (the "Certificates")
and (ii) to deliver to the Company a certificate registered in the name of the
Company representing the balance of the Shares;
(e) The Company shall deliver to the Escrow Agent two stock
powers, each endorsed in blank by the Company and relating to one of the
Certificates (the "Stock Powers");
(f) The Sellers shall execute and deliver to the Company the
Amendment, in the form attached hereto as Annex IV (the "Amendment"), to the
Registration Rights Agreement, dated as of August 16, 1996, by and among the
Sellers, the Company and certain others.
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<PAGE>
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SELLERS
Each of the Sellers represents and warrants to, and agrees
with, the Company as follows:
SECTION 2.01. Authorization of Agreements, Etc. (a) The Seller
has full legal capacity and power to execute and deliver this Agreement, the
Escrow Agreement and the Amendment and to perform its obligations hereunder and
thereunder.
(b) The execution and delivery by the Seller of this
Agreement, the Escrow Agreement and the Amendment and the performance of its
obligations hereunder and thereunder will not violate any provision of law, any
order of any court or other agency of government, any judgment, award or decree
or any provision of any indenture, agreement or other instrument to which the
Seller is a party, or by which the Seller or any of the Shares is bound or
affected, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or other
instrument.
(c) The Seller acknowledges receipt of (i) the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997 Form
10-K"), (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 (the "3rd Quarter Form 10-Q"), (iii) the Company's draft
press releases relating to (x) the Company's results of operations for the year
ended December 31, 1998, (y) the Company's information data sale to Telerate,
Inc. and (z) the Sale (collectively, the "Releases"), (iv) the disclosure
letter, dated March 24, 1999, from the General Counsel of the Company to the
Seller (the "Disclosure Letter") and (v) all other information concerning the
Shares and the Company that the Seller has requested from the Company. The
Seller has made its own analysis of, and fully understands, the economic value
of the Shares that are hereby being sold by it to the Company. The Seller
acknowledges that the purpose of the Disclosure Letter is to provide the Seller
with certain material non-public information in the possession of the Company
prior to the execution of this Agreement, but recognizes that much of the
information contained therein is forward-looking, based on estimates and
assumptions of the Company's management, and that actual results may differ
materially from those anticipated therein.
(d) The Seller acknowledges and agrees that, as a result of
its receipt of the Disclosure Letter, it is in the possession of material,
non-public information about the Company (the "Information"), represents that it
has not since such receipt, and agrees that it will not after the execution
hereof, either (i) disclose any of the Information to any other party or (ii)
enter into any transaction with respect to any securities of the Company,
including any sale or purchase of any shares of Common Stock, except for the
Sale contemplated by this Agreement, unless and until the earlier of (x) a prior
written confirmation from the Company's General Counsel that the Information has
either been
3
<PAGE>
publicly disclosed or is no longer material (whether by virtue of being stale,
no longer accurate or otherwise) or (y) the public release of the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1999. The Seller
agrees to indemnify and hold harmless the Company from and against any and all
costs, expenses and other liabilities (including reasonable attorney's fees)
arising out of any breach by the Seller of its representations and agreements
contained in this subparagraph (d).
(e) The Seller acknowledges that there may be additional
material information concerning the Company, not contained in the Disclosure
Letter or the 1997 Form 10-K, the 3rd Quarter Form 10-Q or the Releases, in the
possession of the Company or arising after the date hereof, that the Company has
no obligation to make further disclosures to the Seller with respect to new
information, or changes in previously disclosed information, arising after the
date hereof, and that the Seller nonetheless desires to proceed with the
execution of this Agreement and consummation of the Sale. Accordingly, to the
fullest extent permissible under applicable law, the Seller (on behalf of
itself, its partners, its successors and assigns and any person or entity
claiming by or through it) hereby releases the Company from, and agrees not to
directly or indirectly initiate, support or otherwise encourage, any claim, suit
or action relating to or arising out of any failure by or on behalf of the
Company to supply or disclose any such additional or new information or any such
changes in previously disclosed information.
SECTION 2.02. Validity. Each of this Agreement, the Escrow
Agreement and the Amendment has been duly authorized, executed and delivered by
the Seller and constitutes a legal, valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms.
SECTION 2.03. Title to Shares. The Seller is the lawful holder
of record and beneficial owner of the Shares specified under the heading "Number
of Shares" opposite the Seller's name in Annex III, and has good and valid title
thereto, free and clear of any and all Liens. The Seller has not heretofore
assigned, transferred or otherwise disposed of, or encumbered or otherwise
subjected to a Lien, in any case whether by operation of law or otherwise, any
of the rights represented by the Shares. Upon consummation of the Sale
contemplated hereby, the Company will obtain good and valid title to the Shares,
free and clear of any and all Liens (other than the Lien of the Escrow Agreement
with respect to the Escrowed Shares).
SECTION 2.04. Brokers and Finders. The Seller has not employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement so as to give rise to any such liability on the part of the
Company.
SECTION 2.05. No Other Representations. Except as expressly
set forth in this Article 2, the Seller makes no representations or warranties
whatsoever, express or implied, to the Company. The Seller acknowledges that,
except for the representations and warranties of the Company set forth in
Article 3 below, the Seller has not relied upon any
4
<PAGE>
representations or warranties or other statements by or on behalf of the Company
in deciding to execute this Agreement and consummate the Sale.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Sellers as
follows:
SECTION 3.01. Authorization of Agreements, Etc. (a) The
Company has full legal power and capacity to execute and deliver this Agreement,
the Escrow Agreement and the Notes and to perform its obligations hereunder and
thereunder.
(b) The execution and delivery by the Company of this
Agreement, the Escrow Agreement and the Notes and the performance of its
obligations hereunder and thereunder will not violate any provision of law, any
order of any court or other agency of government, any judgment, award or decree
or any provision of any indenture, agreement or other instrument to which the
Company is a party, or by which the Company is bound or affected, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument.
SECTION 3.02. Validity. Each of this Agreement, the Escrow
Agreement and the Notes has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.03. Brokers and Finders. The Company has not
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement so as to give rise to any such liability on the part of the
Sellers.
SECTION 3.04 Letter of Intent. The Company's subsidiary, Euro
Brokers Inc. ("Euro Brokers"), has received and executed the letter of intent of
General Electric Capital Corporation, dated as of March 11, 1999 (the "Letter"),
a true and accurate copy of which has been provided to the Sellers.
SECTION 3.05. No Other Representations. Except as expressly
set forth in this Article 3, the Company makes no representations or warranties
whatsoever, express or implied, to Sellers. The Company acknowledges that,
except for the representations and warranties of the Sellers set forth in
Article 2 above, the Company has not relied upon any representations or
warranties or other statements by or on behalf of the Sellers in deciding to
execute this Agreement and consummate the Sale.
5
<PAGE>
ARTICLE 4
PRE-CLOSING COVENANTS
SECTION 4.01. Continued Effectiveness of Representations and
Warranties. The Sellers shall cause the representations and warranties contained
in Section 2.03 hereof, and shall use their commercially reasonable efforts to
cause the rest of the representations and warranties contained in Article 2
hereof, to continue to be true and correct on and as of the Closing Date as if
made on the Closing Date. The Company shall use its commercially reasonable
efforts to cause the representations and warranties contained in Article 3
hereof to continue to be true and correct on and as of the Closing Date as if
made on the Closing Date.
SECTION 4.02. Financing Pursuant to the Letter. The Company
shall use its commercially reasonable efforts to satisfy or cause to be
satisfied all conditions precedent to be satisfied by it or Euro Brokers to the
obtaining by Euro Brokers of financing pursuant to the Letter (and any related
documentation) in a cash amount sufficient to pay (and that is permitted to be
used to pay) the Cash Consideration (the "Financing"). Upon obtaining of the
Financing by Euro Brokers, the Company shall cause Euro Brokers to dividend,
loan or otherwise make available to the Company the Financing.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.01. Condition With Respect to Both Parties. The
obligations of both parties to consummate the Closing are subject to the
condition that there shall not have been issued or be in effect (i) any
judgment, decree or order issued by any federal, state, local or foreign court
of competent jurisdiction or (ii) any statute, rule or regulation enacted or
promulgated by any federal, state, local or foreign legislative, administrative
or regulatory body of competent jurisdiction that, in either of cases (i) or
(ii), prohibits the consummation of the transactions contemplated hereby or
makes such consummation illegal.
SECTION 5.02. Conditions With Respect to the Sellers. The
obligation of the Sellers to consummate the Closing shall be subject to the
satisfaction of each of the following conditions (unless any such condition is
expressly waived in writing by the Sellers) at the Closing:
(a) The representations and warranties of the Company herein
shall have been true and correct in all material respects as of the date hereof
and shall be true and correct in all material respects as of the Closing Date as
if made on and as of such date;
(b) The Company shall have performed in all material respects
all of its covenants and obligations under this Agreement to be performed at or
prior to the Closing; and
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<PAGE>
(c) The Sellers shall have received at the time of the Closing
certificates from the Company reasonably satisfactory in form to the Sellers
certifying to the satisfaction of each of the conditions set forth in the
preceding subparagraphs (a) and (b) of this Section 5.02.
(d) Each of the Notes shall have been duly and validly
executed by the Company and delivered to the Sellers.
SECTION 5.03. Conditions With Respect to the Company. The
obligation of the Company to consummate the Closing shall be subject to the
satisfaction of each of the following conditions (unless any such condition is
expressly waived in writing by the Company) at the Closing:
(a) The representations and warranties of the Sellers herein
shall have been true and correct in all material respects as of the date hereof
and shall be true and correct in all material respects as of the Closing Date as
if made on and as of such date;
(b) The Sellers shall have performed in all material respects
all of their respective covenants and obligations under this Agreement to be
performed at or prior to the Closing;
(c) The Company shall have received at the time of the Closing
certificates from the Sellers reasonably satisfactory in form to the Company
certifying to the satisfaction of each of the conditions set forth in the
preceding subparagraphs (a) and (b) of this Section 5.03;
(d) The Amendment shall have been duly and validly executed by
each of the Sellers and delivered to the Company; and
(e) The Company shall have received the Financing.
ARTICLE 6
TERMINATION
SECTION 6.01. Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(a) By mutual written consent of the Company and the Sellers;
or
7
<PAGE>
(b) By either the Company or the Sellers if the Closing has
not occurred by May 31, 1999 (other than as a result of a breach of
this Agreement by the party seeking termination); or
(c) By either party hereto if the other party shall have
breached in any material respect any representation, warranty, covenant
or obligation contained in this Agreement and such breach shall not
have been either (i) cured by the party in breach within ten (10) days
of written notice thereof given by the party not in breach or (ii)
waived by the party not in breach.
SECTION 6.02. Effect of Termination. If this Agreement is
terminated in accordance with Section 6.01 hereof, this Agreement shall become
void and of no further force and effect, and there shall be no liability on the
part of either the Company or the Sellers except for liability arising from a
willful material breach of this Agreement.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Expenses, Etc. All costs and expenses, including
fees and disbursements of counsel, incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the closing of the
transactions contemplated hereby, shall be paid by the party incurring such
expenses.
SECTION 7.02. Survival of Representations and Warranties. All
representations and warranties made by any party hereto in this Agreement or
pursuant hereto shall survive the execution of this Agreement and the
consummation of the Sale.
SECTION 7.03. Execution in Counterparts. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 7.04. Notices. All notices which are required or may
be given pursuant to the terms of this Agreement shall be in writing and shall
be sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
8
<PAGE>
if to the Company, to:
Maxcor Financial Group Inc.
2 World Trade Center, 84th Floor
New York, New York 10048
Attention: General Counsel
Facsimile: (212) 748-7979
if to the Sellers to them at:
c/o Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022
Attention: Patrick Welsh
Facsimile: (212) 893-9575
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: William J. Hewitt, Esq.
Facsimile: (212) 841-5725
or such other address or addresses as the Sellers, on the one hand, or the
Company, on the other hand, shall have designated by notice in writing to the
other.
SECTION 7.05. Amendments, Supplements, Waivers Etc. At any
time this Agreement may be amended or supplemented, or a breach or term or
condition hereof waived, by a writing make specific reference to this Agreement
and signed by the Sellers, on the one hand, and the Company, on the other hand,
in the case of an amendment or supplement, or by the party sought to be charged
with the waiver, in the case of a waiver. No such waiver shall be deemed to
constitute the waiver of any other breach of the same or of any other term or
condition of this Agreement.
SECTION 7.06. Equitable Relief. Each party acknowledges that,
in the event of any breach of this Agreement by a party, the other party would
be irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that such other party, in addition to any
other remedy to which it may be entitled, shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
compel specific performance of this Agreement.
SECTION 7.07. Joint Drafting. The parties have jointly drafted
this Agreement, and this Agreement shall not be interpreted against or in favor
of any of the parties on the basis that any of the parties participated in the
drafting of this Agreement.
9
<PAGE>
SECTION 7.08. Entire Agreement. This Agreement (together with
the Annexes and the Disclosure Letter) constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof.
SECTION 7.09. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, exclusive
of the conflicts of laws provisions thereof.
SECTION 7.10. Binding Effect; Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the day and year first above written.
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
By WCAS VI Partners, L.P., General Partner
By: /s/ WCAS VI Partners, L.P.
-------------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners, L.P., General Partner
By: /s/ WCAS INFO Partners, L.P.
-------------------------------------
General Partner
MAXCOR FINANCIAL GROUP INC.
By: /s/ Gilbert D. Scharf
-------------------------------------
President
11
<PAGE>
Annex I (WCAS VI Note)
-------
SECURED PROMISSORY NOTE
New York, New York $491,587.05
______ __, 1999 ===========
FOR VALUE RECEIVED, Maxcor Financial Group Inc., a Delaware corporation
("Maker"), hereby promises to pay to the order of Welsh, Carson, Anderson &
Stowe VI, L.P., a Delaware limited partnership ("Holder"), at the principal
office of Holder in New York City or at such other place as shall be designated
by Holder from time to time, the principal sum of Four Hundred, Ninety-One
Thousand, Five Hundred Eighty-Seven and Five One-Hundredths United States
Dollars (U.S. $491,587.05), in lawful money of the United States of America, on
______ __, 1999 [specify date six months later] (the "Maturity Date"), and to
pay interest from the date hereof on the unpaid principal amount of this Secured
Promissory Note (this "Note") as set forth below.
Commencing on and including the date hereof, and continuing until the
Maturity Date or such earlier or later day as this Note shall be paid in full,
interest shall accrue during each calendar month on the unpaid principal amount
of this Note at the rate of seven percent (7%) per annum (computed on the basis
of a 365 day year and actual days elapsed). Accrued interest shall be payable on
the Maturity Date or at the time of any earlier prepayment of this Note (with
respect to the principal amount prepaid). Notwithstanding the foregoing, if the
principal amount of this Note or any portion thereof is not paid when due,
interest shall thereafter accrue on such unpaid principal amount at the rate of
eight percent (8%) per annum.
Maker may prepay this Note in whole or in part from time to time
without premium or penalty. Notwithstanding anything in this Note to the
contrary, upon the occurrence of an Event of Default (as defined) or a Change in
Control (as defined), Holder may declare all principal, accrued interest and all
other amounts due hereunder to be, and the same shall thereupon be, immediately
due and payable.
Maker hereby waives, to the fullest extent permitted by applicable law,
diligence, demand, presentment for payment, and notice of dishonor of any kind
in collection or in bringing suit for collection of any amount of principal of
this Note which is due and payable.
This Note, together with a companion 7% secured promissory note held by
Holder's affiliate (collectively, the "Notes"), are secured by an aggregate of
571,429 shares of the Common Stock, par value $.001 per share, of Maker (the
"Security"), which Security has been deposited in escrow pursuant to, and is to
be held and released in accordance with, the terms of the Securities Purchase
Agreement and related Escrow Agreement, each dated as of the date hereof, to
which Maker and Holder are parties.
An "Event of Default" shall mean: (i) any default by Maker in the
payment of any principal of or interest on either of the Notes when due and
payable and such failure shall
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 2
continue unremedied for a period of five (5) days after written notice thereof
by Holder to Maker; or (ii) Maker, or either of its Euro Brokers Inc. or Maxcor
Financial Inc. subsidiaries, (a) is dissolved, (b) fails, is unable or admits in
writing its inability to pay its debts generally as they become due, (c)
commences a voluntary case in bankruptcy or any other action or proceeding for
any other relief under any law affecting creditors' rights that is similar to a
bankruptcy law or (d) consents by answer or otherwise to the commencement
against it of an involuntary case in bankruptcy or any other such action or
proceeding; or (iii) a court of competent jurisdiction enters an order for
relief or a decree in an involuntary case in bankruptcy or any other such action
or proceeding, in respect of Maker or either such subsidiary, if such order or
decree is not dismissed or stayed on or before the thirtieth day after the entry
thereof or if any such dismissal or stay ceases to be in effect.
A "Change in Control" shall mean (i) any person or entity (other than
Maker's current Chief Executive Officer, or a group including him) is or becomes
the beneficial owner, directly or indirectly, of securities of Maker
representing 50% or more of the combined voting power of Maker's then
outstanding securities; or (ii) there is consummated a merger, consolidation or
other business combination (collectively, "Combination") of Maker or a direct or
indirect subsidiary thereof with any other person or entity, other than a
Combination which would result in the voting securities of Maker outstanding
immediately prior to such Combination continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), at least 50% of the combined voting
power of the securities of Maker or such surviving entity or any parent thereof
outstanding immediately after such Combination; or (iii) there is consummated an
agreement for the sale or disposition by Maker of all or substantially all of
Maker's assets.
This Note may not be changed except by a writing signed by each of
Holder and Maker.
No delay on the part of Holder in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Holder
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.
This Note may not be transferred, assigned or pledged by either Maker
or Holder without the other's prior written consent.
In the event of an Event of Default, Maker agrees to pay all reasonable
costs and expenses of Holder incurred in connection with this Note and efforts
to collect amounts due hereunder, including any such costs and expenses
associated with collecting and disposing of the Security. In the event Holder
closes upon the Security, Holder agrees to dispose of the Security in a
commercially reasonable fashion, and that any proceeds of such disposition will
be applied to offset Maker's remaining payment obligations under the Notes.
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 3
All notices and other communications under this Note shall be in
writing and shall become effective when delivered by hand or received by
overnight courier, telecopier or first class mail, addressed as follows: (i) if
to Holder, at Maxcor Financial Group Inc., 2 World Trade Center, 84th Floor, New
York, New York 10048, Attention: General Counsel; and (ii) if to Maker, at
Welsh, Carson, Anderson & Stowe, 320 Park Avenue, Suite 2500, New York, New York
10022, Attention: Pat Welsh.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, irrespective of the place(s) of business or
domicile of Maker or of Holder and irrespective of where suit may be brought to
enforce this Note.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and place first
above written.
MAXCOR FINANCIAL GROUP INC.
By:
-------------------------------------
Keith E. Reihl
Chief Financial Officer
<PAGE>
Annex I (WCAS Info Note)
-------
SECURED PROMISSORY NOTE
New York, New York $8,412.95
______ __, 1999 =========
FOR VALUE RECEIVED, Maxcor Financial Group Inc., a Delaware corporation
("Maker"), hereby promises to pay to the order of WCAS Information Partners,
L.P., a Delaware limited partnership ("Holder"), at the principal office of
Holder in New York City or at such other place as shall be designated by Holder
from time to time, the principal sum of Eight Thousand, Four Hundred Twelve and
Ninety-Five One-Hundredths United States Dollars (U.S. $8,412.95), in lawful
money of the United States of America, on ______ __, 1999 [specify date six
months later] (the "Maturity Date"), and to pay interest from the date hereof on
the unpaid principal amount of this Secured Promissory Note (this "Note") as set
forth below.
Commencing on and including the date hereof, and continuing until the
Maturity Date or such earlier or later day as this Note shall be paid in full,
interest shall accrue during each calendar month on the unpaid principal amount
of this Note at the rate of seven percent (7%) per annum (computed on the basis
of a 365 day year and actual days elapsed). Accrued interest shall be payable on
the Maturity Date or at the time of any earlier prepayment of this Note (with
respect to the principal amount prepaid). Notwithstanding the foregoing, if the
principal amount of this Note or any portion thereof is not paid when due,
interest shall thereafter accrue on such unpaid principal amount at the rate of
eight percent (8%) per annum.
Maker may prepay this Note in whole or in part from time to time
without premium or penalty. Notwithstanding anything in this Note to the
contrary, upon the occurrence of an Event of Default (as defined) or a Change in
Control (as defined), Holder may declare all principal, accrued interest and all
other amounts due hereunder to be, and the same shall thereupon be, immediately
due and payable.
Maker hereby waives, to the fullest extent permitted by applicable law,
diligence, demand, presentment for payment, and notice of dishonor of any kind
in collection or in bringing suit for collection of any amount of principal of
this Note which is due and payable.
This Note, together with a companion 7% secured promissory note held by
Holder's affiliate (collectively, the "Notes"), are secured by an aggregate of
571,429 shares of the Common Stock, par value $.001 per share, of Maker (the
"Security"), which Security has been deposited in escrow pursuant to, and is to
be held and released in accordance with, the terms of the Securities Purchase
Agreement and related Escrow Agreement, each dated as of the date hereof, to
which Maker and Holder are parties.
An "Event of Default" shall mean: (i) any default by Maker in the
payment of any principal of or interest on either of the Notes when due and
payable and such failure shall continue unremedied for a period of five (5) days
after written notice thereof by Holder to
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 2
Maker; or (ii) Maker, or either of its Euro Brokers Inc. or Maxcor Financial
Inc. subsidiaries, (a) is dissolved, (b) fails, is unable or admits in writing
its inability to pay its debts generally as they become due, (c) commences a
voluntary case in bankruptcy or any other action or proceeding for any other
relief under any law affecting creditors' rights that is similar to a bankruptcy
law or (d) consents by answer or otherwise to the commencement against it of an
involuntary case in bankruptcy or any other such action or proceeding; or (iii)
a court of competent jurisdiction enters an order for relief or a decree in an
involuntary case in bankruptcy or any other such action or proceeding, in
respect of Maker or either such subsidiary, if such order or decree is not
dismissed or stayed on or before the thirtieth day after the entry thereof or if
any such dismissal or stay ceases to be in effect.
A "Change in Control" shall mean (i) any person or entity (other than
Maker's current Chief Executive Officer, or a group including him) is or becomes
the beneficial owner, directly or indirectly, of securities of Maker
representing 50% or more of the combined voting power of Maker's then
outstanding securities; or (ii) there is consummated a merger, consolidation or
other business combination (collectively, "Combination") of Maker or a direct or
indirect subsidiary thereof with any other person or entity, other than a
Combination which would result in the voting securities of Maker outstanding
immediately prior to such Combination continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), at least 50% of the combined voting
power of the securities of Maker or such surviving entity or any parent thereof
outstanding immediately after such Combination; or (iii) there is consummated an
agreement for the sale or disposition by Maker of all or substantially all of
Maker's assets.
This Note may not be changed except by a writing signed by each of
Holder and Maker.
No delay on the part of Holder in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Holder
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.
This Note may not be transferred, assigned or pledged by either Maker
or Holder without the other's prior written consent.
In the event of an Event of Default, Maker agrees to pay all reasonable
costs and expenses of Holder incurred in connection with this Note and efforts
to collect amounts due hereunder, including any such costs and expenses
associated with collecting and disposing of the Security. In the event Holder
closes upon the Security, Holder agrees to dispose of the Security in a
commercially reasonable fashion, and that any proceeds of such disposition will
be applied to offset Maker's remaining payment obligations under the Notes.
All notices and other communications under this Note shall be in
writing and shall become effective when delivered by hand or received by
overnight courier, telecopier or first
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 3
class mail, addressed as follows: (i) if to Holder, at Maxcor Financial Group
Inc., 2 World Trade Center, 84th Floor, New York, New York 10048, Attention:
General Counsel; and (ii) if to Maker, at Welsh, Carson, Anderson & Stowe, 320
Park Avenue, Suite 2500, New York, New York 10022, Attention: Pat Welsh.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, irrespective of the place(s) of business or
domicile of Maker or of Holder and irrespective of where suit may be brought to
enforce this Note.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and place first
above written.
MAXCOR FINANCIAL GROUP INC.
By:
-------------------------------
Keith E. Reihl
Chief Financial Officer
<PAGE>
Annex II (WCAS VI Note)
--------
SECURED PROMISSORY NOTE
New York, New York $491,587.05
______ __, 1999 ===========
FOR VALUE RECEIVED, Maxcor Financial Group Inc., a Delaware corporation
("Maker"), hereby promises to pay to the order of Welsh, Carson, Anderson &
Stowe VI, L.P., a Delaware limited partnership ("Holder"), at the principal
office of Holder in New York City or at such other place as shall be designated
by Holder from time to time, the principal sum of Four Hundred, Ninety-One
Thousand, Five Hundred Eighty-Seven and Five One-Hundredths United States
Dollars (U.S. $491,587.05), in lawful money of the United States of America, on
______ __, 1999 [specify date twelve months later] (the "Maturity Date"), and to
pay interest from the date hereof on the unpaid principal amount of this Secured
Promissory Note (this "Note") as set forth below.
Commencing on and including the date hereof, and continuing until the
Maturity Date or such earlier or later day as this Note shall be paid in full,
interest shall accrue during each calendar month on the unpaid principal amount
of this Note at the rate of ten percent (10%) per annum (computed on the basis
of a 365 day year and actual days elapsed). Accrued interest shall be payable on
the Maturity Date or at the time of any earlier prepayment of this Note (with
respect to the principal amount prepaid). Notwithstanding the foregoing, if the
principal amount of this Note or any portion thereof is not paid when due,
interest shall thereafter accrue on such unpaid principal amount at the rate of
eleven percent (11%) per annum.
Maker may prepay this Note in whole or in part from time to time
without premium or penalty. Notwithstanding anything in this Note to the
contrary, upon the occurrence of an Event of Default (as defined) or a Change in
Control (as defined), Holder may declare all principal, accrued interest and all
other amounts due hereunder to be, and the same shall thereupon be, immediately
due and payable.
Maker hereby waives, to the fullest extent permitted by applicable law,
diligence, demand, presentment for payment, and notice of dishonor of any kind
in collection or in bringing suit for collection of any amount of principal of
this Note which is due and payable.
This Note, together with a companion 10% secured promissory note held
by Holder's affiliate (collectively, the "Notes"), are secured by an aggregate
of 571,429 shares of the Common Stock, par value $.001 per share, of Maker (the
"Security"), which Security has been deposited in escrow pursuant to, and is to
be held and released in accordance with, the terms of the Securities Purchase
Agreement and related Escrow Agreement, each dated as of the date hereof, to
which Maker and Holder are parties.
An "Event of Default" shall mean: (i) any default by Maker in the
payment of any principal of or interest on either of the Notes, or on either of
the companion 7% secured
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 2
promissory notes respectively held by Holder and Holder's affiliate, when due
and payable and such failure shall continue unremedied for a period of five (5)
days after written notice thereof by Holder to Maker; or (ii) Maker, or either
of its Euro Brokers Inc. or Maxcor Financial Inc. subsidiaries, (a) is
dissolved, (b) fails, is unable or admits in writing its inability to pay its
debts generally as they become due, (c) commences a voluntary case in bankruptcy
or any other action or proceeding for any other relief under any law affecting
creditors' rights that is similar to a bankruptcy law or (d) consents by answer
or otherwise to the commencement against it of an involuntary case in bankruptcy
or any other such action or proceeding; or (iii) a court of competent
jurisdiction enters an order for relief or a decree in an involuntary case in
bankruptcy or any other such action or proceeding, in respect of Maker or either
such subsidiary, if such order or decree is not dismissed or stayed on or before
the thirtieth day after the entry thereof or if any such dismissal or stay
ceases to be in effect.
A "Change in Control" shall mean (i) any person or entity (other than
Maker's current Chief Executive Officer, or a group including him) is or becomes
the beneficial owner, directly or indirectly, of securities of Maker
representing 50% or more of the combined voting power of Maker's then
outstanding securities; or (ii) there is consummated a merger, consolidation or
other business combination (collectively, "Combination") of Maker or a direct or
indirect subsidiary thereof with any other person or entity, other than a
Combination which would result in the voting securities of Maker outstanding
immediately prior to such Combination continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), at least 50% of the combined voting
power of the securities of Maker or such surviving entity or any parent thereof
outstanding immediately after such Combination; or (iii) there is consummated an
agreement for the sale or disposition by Maker of all or substantially all of
Maker's assets.
This Note may not be changed except by a writing signed by each of
Holder and Maker.
No delay on the part of Holder in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Holder
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.
This Note may not be transferred, assigned or pledged by either Maker
or Holder without the other's prior written consent.
In the event of an Event of Default, Maker agrees to pay all reasonable
costs and expenses of Holder incurred in connection with this Note and efforts
to collect amounts due hereunder, including any such costs and expenses
associated with collecting and disposing of the Security. In the event Holder
closes upon the Security, Holder agrees to dispose of the Security in a
commercially reasonable fashion, and that any proceeds of such disposition will
be applied to offset Maker's remaining payment obligations under the Notes.
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 3
All notices and other communications under this Note shall be in
writing and shall become effective when delivered by hand or received by
overnight courier, telecopier or first class mail, addressed as follows: (i) if
to Holder, at Maxcor Financial Group Inc., 2 World Trade Center, 84th Floor, New
York, New York 10048, Attention: General Counsel; and (ii) if to Maker, at
Welsh, Carson, Anderson & Stowe, 320 Park Avenue, Suite 2500, New York, New York
10022, Attention: Pat Welsh.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, irrespective of the place(s) of business or
domicile of Maker or of Holder and irrespective of where suit may be brought to
enforce this Note.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and place first
above written.
MAXCOR FINANCIAL GROUP INC.
By:
------------------------------
Keith E. Reihl
Chief Financial Officer
<PAGE>
Annex II (WCAS Info Note)
--------
SECURED PROMISSORY NOTE
New York, New York $8,412.95
______ __, 1999 =========
FOR VALUE RECEIVED, Maxcor Financial Group Inc., a Delaware corporation
("Maker"), hereby promises to pay to the order of WCAS Information Partners,
L.P., a Delaware limited partnership ("Holder"), at the principal office of
Holder in New York City or at such other place as shall be designated by Holder
from time to time, the principal sum of Eight Thousand, Four Hundred Twelve and
Ninety-Five One-Hundredths United States Dollars (U.S. $8,412.95), in lawful
money of the United States of America, on ______ __, 1999 [specify date twelve
months later] (the "Maturity Date"), and to pay interest from the date hereof on
the unpaid principal amount of this Secured Promissory Note (this "Note") as set
forth below.
Commencing on and including the date hereof, and continuing until the
Maturity Date or such earlier or later day as this Note shall be paid in full,
interest shall accrue during each calendar month on the unpaid principal amount
of this Note at the rate of ten percent (10%) per annum (computed on the basis
of a 365 day year and actual days elapsed). Accrued interest shall be payable on
the Maturity Date or at the time of any earlier prepayment of this Note (with
respect to the principal amount prepaid). Notwithstanding the foregoing, if the
principal amount of this Note or any portion thereof is not paid when due,
interest shall thereafter accrue on such unpaid principal amount at the rate of
eleven percent (11%) per annum.
Maker may prepay this Note in whole or in part from time to time
without premium or penalty. Notwithstanding anything in this Note to the
contrary, upon the occurrence of an Event of Default (as defined) or a Change in
Control (as defined), Holder may declare all principal, accrued interest and all
other amounts due hereunder to be, and the same shall thereupon be, immediately
due and payable.
Maker hereby waives, to the fullest extent permitted by applicable law,
diligence, demand, presentment for payment, and notice of dishonor of any kind
in collection or in bringing suit for collection of any amount of principal of
this Note which is due and payable.
This Note, together with a companion 10% secured promissory note held
by Holder's affiliate (collectively, the "Notes"), are secured by an aggregate
of 571,429 shares of the Common Stock, par value $.001 per share, of Maker (the
"Security"), which Security has been deposited in escrow pursuant to, and is to
be held and released in accordance with, the terms of the Securities Purchase
Agreement and related Escrow Agreement, each dated as of the date hereof, to
which Maker and Holder are parties.
An "Event of Default" shall mean: (i) any default by Maker in the
payment of any principal of or interest on either of the Notes, or on either of
the companion 7% secured promissory notes respectively held by Holder and
Holder's affiliate, when due and payable and
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 2
such failure shall continue unremedied for a period of five (5) days after
written notice thereof by Holder to Maker; or (ii) Maker, or either of its Euro
Brokers Inc. or Maxcor Financial Inc. subsidiaries, (a) is dissolved, (b) fails,
is unable or admits in writing its inability to pay its debts generally as they
become due, (c) commences a voluntary case in bankruptcy or any other action or
proceeding for any other relief under any law affecting creditors' rights that
is similar to a bankruptcy law or (d) consents by answer or otherwise to the
commencement against it of an involuntary case in bankruptcy or any other such
action or proceeding; or (iii) a court of competent jurisdiction enters an order
for relief or a decree in an involuntary case in bankruptcy or any other such
action or proceeding, in respect of Maker or either such subsidiary, if such
order or decree is not dismissed or stayed on or before the thirtieth day after
the entry thereof or if any such dismissal or stay ceases to be in effect.
A "Change in Control" shall mean (i) any person or entity (other than
Maker's current Chief Executive Officer, or a group including him) is or becomes
the beneficial owner, directly or indirectly, of securities of Maker
representing 50% or more of the combined voting power of Maker's then
outstanding securities; or (ii) there is consummated a merger, consolidation or
other business combination (collectively, "Combination") of Maker or a direct or
indirect subsidiary thereof with any other person or entity, other than a
Combination which would result in the voting securities of Maker outstanding
immediately prior to such Combination continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), at least 50% of the combined voting
power of the securities of Maker or such surviving entity or any parent thereof
outstanding immediately after such Combination; or (iii) there is consummated an
agreement for the sale or disposition by Maker of all or substantially all of
Maker's assets.
This Note may not be changed except by a writing signed by each of
Holder and Maker.
No delay on the part of Holder in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Holder
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.
This Note may not be transferred, assigned or pledged by either Maker
or Holder without the other's prior written consent.
In the event of an Event of Default, Maker agrees to pay all reasonable
costs and expenses of Holder incurred in connection with this Note and efforts
to collect amounts due hereunder, including any such costs and expenses
associated with collecting and disposing of the Security. In the event Holder
closes upon the Security, Holder agrees to dispose of the Security in a
commercially reasonable fashion, and that any proceeds of such disposition will
be applied to offset Maker's remaining payment obligations under the Notes.
<PAGE>
Secured Promissory Note of
Maxcor Financial Group, Inc.,
Made as of __________ __, 1999
Page 3
All notices and other communications under this Note shall be in
writing and shall become effective when delivered by hand or received by
overnight courier, telecopier or first class mail, addressed as follows: (i) if
to Holder, at Maxcor Financial Group Inc., 2 World Trade Center, 84th Floor, New
York, New York 10048, Attention: General Counsel; and (ii) if to Maker, at
Welsh, Carson, Anderson & Stowe, 320 Park Avenue, Suite 2500, New York, New York
10022, Attention: Pat Welsh.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, irrespective of the place(s) of business or
domicile of Maker or of Holder and irrespective of where suit may be brought to
enforce this Note.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and place first
above written.
MAXCOR FINANCIAL GROUP INC.
By:
--------------------------------
Keith E. Reihl
Chief Financial Officer
<PAGE>
Annex III
Seller Number of Shares Payable at Closing
- - ------ ---------------- ------------------
Welsh, Carson, Anderson & Stowe VI, L.P. 2,936,098 $4,154,997.41
WCAS Information Partners, L.P. 50,248 $ 71,108.09
<PAGE>
Annex IV
Form of Amendment to Registration Rights Agreement
AMENDMENT ("Amendment"), dated as of _______ ___, 1999, by and among
Maxcor Financial Group Inc., a Delaware corporation (formerly known as Financial
Services Acquisition Corporation) (the "Company"), 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, together with
WCAS VI, the "WCAS Entities") and the individuals listed on Annex I hereto and
signatory hereto (the "Individuals"), to that certain Registration Rights
Agreement, dated as of August 16, 1996 (the "Agreement"), by and among, the
Company, the WCAS Entities, the Individuals and certain others.
WHEREAS, concurrent with the execution and delivery of this Amendment,
the Company is purchasing from the WCAS Entities (the "Purchase") all of the
shares of the Common Stock, par value $.001 per share ("Common Stock"), of the
Company owned by the WCAS Entities;
WHEREAS, the Agreement, by its terms, permits amendments and waivers to
the Agreement if executed by each of (i) the Company, (ii) Management
Stockholders then holding, in the aggregate, a majority of the Registrable Stock
then held by all Management Stockholders as a whole and (iii) Investor
Stockholders then holding, in the aggregate, a majority of the Registrable Stock
then held by all Investor Stockholders as a whole:
WHEREAS, each of the Individuals are Management Stockholders who, in
the aggregate, hold a majority of the Registrable Stock currently held by all
Management Stockholders as a whole;
WHEREAS, each of the WCAS Entities are Investor Stockholders who, in
the aggregate, hold a majority of the Registrable Stock currently held by all
Investor Stockholders as a whole;
WHEREAS, this Amendment is being entered into in connection with and as
a condition to the Company consummating the Purchase;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties signatory hereto agree as follows:
1. Terms used herein without separate definition shall have the meaning
assigned to them in the Agreement.
<PAGE>
2. The Agreement is hereby terminated, effective as of the date of this
Amendment, with all registration rights granted thereunder being
extinguished as a result of such termination.
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the parties hereto as of the day and year first above written.
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
By WCAS VI Partners, L.P., General Partner
By:
---------------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners, L.P., General Partner
By:
---------------------------------------
General Partner
MAXCOR FINANCIAL GROUP INC.
By:
---------------------------------------
Gilbert Scharf, President
Gilbert Scharf
-------------------------------------------
Michael Scharf
-------------------------------------------
Frederick B. Whittemore
-------------------------------------------
Larry S. Kopp
-------------------------------------------
Keith E. Reihl
-------------------------------------------
Walter E. Dulski
-------------------------------------------
Brian G. Clark
-------------------------------------------
2
<PAGE>
Exhibit 2.4
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of March 24, 1999 (this
"Agreement"), between Maxcor Financial Group Inc., a Delaware corporation (the
"Company"), 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, together with WCAS VI, the "Sellers"), and
Continental Stock Transfer & Trust Company, a New York corporation, as escrow
agent (the "Escrow Agent").
WHEREAS, the Company and the Sellers, concurrently with the
execution and delivery of this Agreement, are entering into a Securities
Purchase Agreement, dated as of March 24, 1999 (the "Purchase Agreement"),
providing for, among other things, the sale (the "Sale") to the Company of an
aggregate of 2,986,346 shares (the "Shares") of the Common Stock, par value
$.001 per share, of the Company owned by the Sellers;
WHEREAS, the consideration for the Sale consists of (i)
$4,226,105.50 in cash, (ii) two six-month, 7% secured promissory notes of the
Company, one payable to WCAS VI and the other to WCAS Info, in the respective
forms attached as Annex I to the Purchase Agreement and aggregating to $500,000
(the "7% Notes"), and (iii) two twelve-month, 10% secured promissory notes of
the Company in the respective forms attached as Annex II to the Purchase
Agreement and aggregating to $500,000 (the "10% Notes" and, together with the 7%
Notes, the "Notes");
WHEREAS, Section 1.03 of the Purchase Agreement provides that
at the Closing, as security for repayment of the Notes, 1,142,858 of the Shares
(the "Escrowed Shares") are to be deposited in escrow with the Escrow Agent,
together with stock transfer powers duly endorsed by the Company in blank with
respect to the Escrowed Shares (the "Stock Powers"), with the Escrowed Shares in
whole or in part, and the related Stock Powers, to be held and released by the
Escrow Agent in accordance with the terms of this Escrow Agreement and the
Purchase Agreement; and
WHEREAS, capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the
respective agreements hereinafter set forth, the parties hereto hereby agree as
follows:
ARTICLE I
DELIVERY OF ESCROWED SHARES AND STOCK POWERS
Section 1.1. At the Closing, (i) the Sellers shall deliver to
the Company, and the Company shall then forward to Continental Stock Transfer &
Trust Company, as transfer agent (the "Transfer Agent"), certificates
representing the Shares, duly endorsed by the
<PAGE>
Sellers (with medallion guarantee) for transfer to the Company or accompanied by
stock powers duly endorsed by the Sellers (with medallion guarantee) to the
Company, (ii) the Company will cause the Transfer Agent, upon receipt of the
foregoing instruments, to prepare and deliver (x) to the Escrow Agent two
certificates, each registered in the name of the Company and representing
one-half of the Escrowed Shares (respectively "Certificate 1" and "Certificate
2" and collectively, the "Certificates"), and (y) to the Company, one
certificate, registered in the name of the Company, representing all of the
Shares other than the Escrowed Shares, (iii) the Company shall execute and
deliver to the Escrow Agent Stock Powers with respect to each of Certificate 1
and Certificate 2 and (iv) the Escrow Agent will execute a receipt,
substantially in the form attached hereto as Exhibit A, acknowledging receipt of
the Certificates and the Stock Powers (the "Escrowed Instruments"). From and
after its receipt thereof, the Escrow Agent will accept and hold the Escrowed
Instruments on deposit with it from time to time in accordance with the terms of
this Agreement. During the period in which the Escrowed Shares are so held by
the Escrow Agent, the parties will continue to treat them as treasury stock of
the Company.
ARTICLE II
RELEASE OF
ESCROWED INSTRUMENTS
Section 2.1. Promptly upon repayment of the 7% Notes in full,
the Sellers shall jointly advise the Escrow Agent of such repayment and instruct
the Escrow Agent to release to the Company Certificate 1 and the related Stock
Power, and the Escrow Agent shall promptly release Certificate 1 and the related
Stock Power to the Company.
Section 2.2. Promptly upon repayment of the 10% Notes in full,
the Sellers shall jointly advise the Escrow Agent of such repayment and instruct
the Escrow Agent to release to the Company Certificate 2 and the related Stock
Power, and the Escrow Agent shall promptly release Certificate 2 and the related
Stock Power to the Company.
Section 2.3. If the Sellers believe an Event of Default (as
defined in the Notes) has occurred, the Sellers may deliver to the Escrow Agent
an instruction (the "Instruction") instructing the release of the Certificates
and the related Stock Powers to the Sellers. The Instruction shall (i) describe
in reasonable detail the Event of Default and (ii) certify that the Company has
been delivered a copy of the Instruction. Upon its receipt, the Escrow Agent
shall also promptly forward a copy of the Instruction to the Company. The
Instruction shall automatically become effective five (5) business days after
its delivery to the Escrow Agent, unless prior to such time it is objected to by
the Company as set forth below.
Section 2.4. Unless each of the Escrow Agent and the Sellers
receives a written notice of objection (an "Objection") to the Instruction from
the Company within five (5) business days after the date of the Escrow Agent's
forwarding to the Company of the Instruction, the Company shall be deemed to
have consented to the release of the Escrow
2
<PAGE>
Instruments, and the Instruction shall automatically become effective without
further action. Any Objection delivered by the Company shall state the reasons
for the Objection with reasonable specificity and also certify that such
Objection has been delivered to each of the Sellers. Upon its receipt, the
Escrow Agent shall also promptly forward a copy of such Objection to the
Sellers.
Section 2.5. In the event that the Company delivers to the
Escrow Agent and the Sellers an Objection to the Instruction within the time
frame specified in Section 2.4, the Escrow Agent shall not release any of the
Certificates or Stock Powers to the Sellers unless and until the Escrow Agent
receives (i) a certified copy of an award in arbitration from the Arbitrator (as
defined below) specifying the Certificates and Stock Powers, if any, so to be
released or (ii) a subsequent joint instruction from the Company and the Sellers
instructing the release of the Certificates. Promptly upon receipt of such a
certified copy of an award (or a subsequent joint instruction), the Escrow Agent
shall release the Certificates and Stock Powers Stock in accordance with such
award (or instruction), and such release shall be deemed to satisfy and resolve
both the Instruction and the Objection.
Section 2.6. Notwithstanding anything to the contrary
contained in this Agreement, the Escrow Agent shall release to the Company (i)
Certificate 1 and the related Stock power upon the date which shall be 32 weeks
after the Closing and (ii) Certificate 2 and the related Stock Power upon the
date which shall be 58 weeks after the Closing, unless prior to the applicable
date the Sellers have jointly delivered an Instruction to the Escrow Agent
pursuant to Section 2.3 above and the Company's and the Sellers' respective
entitlements to the Escrowed Shares have not been finally determined and
satisfied in accordance with the terms of this Agreement, in which case, the
Certificates and the Stock Powers shall not be released until final
determination and satisfaction of such pending Instruction.
Section 2.7. Notwithstanding anything to the contrary
contained in this Agreement, the Escrow Agent shall release the Escrow
Instruments, or any portion thereof, in accordance with any instrument in
writing expressly referring to this Agreement and signed by the Company and both
of the Sellers.
ARTICLE III
ARBITRATION
Section 3.1 The Company shall be entitled to dispute an
Instruction, provided that the Company raises such dispute in an Objection
delivered to the Escrow Agent within the time frame specified in Section 2.4.
The Company also shall be entitled to dispute the failure of the Sellers to
provide an instruction under Section 2.1 or 2.2, as applicable, upon repayment
of the Notes.
Section 3.2 If, within five (5) business days after delivery
of an Objection, the Company and the Sellers have been unable to reach agreement
with respect to the dispute, the dispute shall, at the instance of either the
Company or the Sellers, be referred to
3
<PAGE>
a partner knowledgeable about the financial services industry at such
nationally-recognized accounting firm as the parties may agree and which is not
affiliated and does not have a conflict with any of the parties (the
"Arbitrator").
Section 3.3. The Arbitrator shall be charged with making a
determination, in accordance with the Purchase Agreement and this Agreement, of
the parties' respective entitlements to the Escrowed Shares. The party making
the submission shall request the Arbitrator to render a decision within 30 days.
Any such determination of the Arbitrator shall be final and binding upon the
parties and shall not, in the absence of manifest error, be subject to judicial
review.
Section 3.4. The fees and expenses of the Arbitrator shall be
paid by the party seeking the arbitration, unless the Arbitrator determines that
such party substantially prevailed in the arbitration.
Section 3.5. The parties agree that any dispute arising as to
the release of the Escrow Instruments shall be resolved solely and exclusively
pursuant to the procedures set forth or contemplated in this Article III.
ARTICLE IV
RIGHTS OF AGENT
Section 4.1. The Escrow Agent shall have no duties or
responsibilities except those expressly set forth herein.
Section 4.2. No person, firm or corporation will be recognized
by the Escrow Agent as a successor or assignee of the Company or the Sellers
until there shall be presented to the Escrow Agent evidence satisfactory to it
of such succession or assignment.
Section 4.3. The Escrow Agent may rely upon any instrument in
writing believed in good faith by it to be genuine and sufficient and properly
presented and shall not be liable or responsible for any action taken or omitted
in accordance with the provisions thereof.
Section 4.4. The Escrow Agent shall not be liable or
responsible for any act it may do or omit to do except for its gross negligence,
bad faith or willful misconduct. The Escrow Agent may consult with counsel and
shall be fully protected with respect to any action taken or omitted by it in
good faith on written advice of counsel.
Section 4.5. The Company shall (i) reimburse the Escrow Agent
for all reasonable expenses incurred by the Escrow Agent in connection with its
duties hereunder and (ii) indemnify and hold harmless the Escrow Agent against
any and all losses, claims, liabilities, costs, payments and expenses, including
reasonable legal fees for counsel who may be selected by the Escrow Agent, which
may be imposed upon or incurred by the
4
<PAGE>
Escrow Agent hereunder, except as a result of the negligence, bad faith or
willful misconduct of the Escrow Agent. The compensation of the Escrow Agent
shall be One Hundred Dollars for each month from and after the Closing that this
Agreement is in effect.
Section 4.6. Each party shall from time to time deliver to the
Escrow Agent certificates as to the identity of the persons authorized to give
instructions, certificates and notices hereunder and otherwise to act on behalf
of such party, which certificates shall contain specimens of such persons'
signatures.
ARTICLE V
MISCELLANEOUS
Section 5.1. The Company and the Sellers shall attempt in good
faith to resolve any disputes arising hereunder promptly.
Section 5.2. This Agreement shall terminate after all Escrow
Instruments have been released in accordance with the terms hereof.
Section 5.3. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 5.4. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
(a) if to the Company, to:
Maxcor Financial Group Inc.
2 World Trade Center, 84th Floor
New York, New York 10048
Attention: General Counsel
Facsimile: (212) 748-7979
(b) if to the Sellers to them at:
c/o Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022
Attention: Patrick Welsh
Facsimile: (212) 893-9575
5
<PAGE>
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: William J. Hewitt, Esq.
Facsimile: (212) 841-5725
(c) if to the Escrow Agent, to:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attention: Compliance Department
Facsimile: (212) 509-5150
or such other address or addresses as the Sellers, the Company or the Escrow
Agent, as the case may be, shall have designated by notice in writing to the
other parties with respect to itself. A copy of any notice, request, demand,
certificate or other communication given hereunder by any party shall be
delivered to each other party to this Agreement as well as to the addressee at
the same time as it is given to the addressee.
Section 5.5. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, executors,
personal representatives, successors and assigns, provided that any assignment
of this Agreement or the rights hereunder by any party hereto without the
written consent of the other parties shall be void. Nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies under or by reason of this Agreement.
Section 5.7. Subject to the arbitration provisions hereof,
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York.
Section 5.8. No consent or waiver, expressed or implied, by
any party to or of any breach or default by any other in the performance by the
other of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such party
of the same or any obligations of the party. Except as otherwise expressly
provided herein, failure on the part of any party to complain of any act or
failure to act of the other party or to declare the other party in default,
irrespective of how long such failure continues, shall not constitute a waiver
by that party of its rights under this Agreement or otherwise.
6
<PAGE>
Section 5.9. No modification, waiver or discharge of this
Agreement shall bind any party unless it is in writing, specifically refers to
this Agreement and is signed by or on behalf of such party by a duly authorized
officer thereof
Section 5.10. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provisions hereof shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstances, is invalid or unenforceable, (i) a suitable and
equitable provision shall be substituted there-for in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 5.11. In the event of any conflict between the terms
of this Agreement and the Purchase Agreement, the terms of the Purchase
Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their authorized representatives, all as of the
date first above written.
MAXCOR FINANCIAL GROUP INC.
By: /s/ Gilbert Scharf
----------------------------------------------------
Gilbert Scharf
Chairman, President and Chief Executive Officer
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
By WCAS VI Partners, L.P., General Partner
By: /s/ WCAS VI Partners, L.P.
------------------------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners, L.P., General Partner
By: /s/ WCAS INFO Partners, L.P.
------------------------------------------------
General Partner
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: /s/ William F. Seegraber
------------------------------------------------
William F. Seegraber, Vice President
7
<PAGE>
Exhibit A
---------
Form of Receipt
---------------
[Date]
Maxcor Financial Group Inc.
2 World Trade Center, 84th Floor
New York, New York 10048
Attention: Roger E. Schwed
Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022
Attention: Patrick Welsh
Dear Sirs:
This letter will acknowledge the receipt today by Continental
Stock Transfer & Trust Company, as escrow agent under, and to hold in accordance
with, that certain Escrow Agreement, dated as of March 24, 1999, to which you
are parties, of the following instruments:
(i) Common Stock Certificate No. ___ of Maxcor Financial Group
Inc., representing 571,429 shares of Common Stock;
(ii) Common Stock Certificate No. ___ of Maxcor Financial
Group Inc., representing 571,429 shares of Common Stock; and
(iii) Two Stock Powers (one with respect to each of the
foregoing Certificates) endorsed in blank by Maxcor Financial Group Inc.
Very truly yours,
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By:
------------------------------------------
William F. Seegraber, Vice President
<PAGE>
Exhibit 2.5
DATED 21st DECEMBER 1998
(1) MONECOR (LONDON) LIMITED
(2) FINACOR PETER
(3) EURO BROKERS INTERNATIONAL LIMITED
(4) EURO BROKERS HOLDINGS LIMITED
-----------------------------------------
SALE AND PURCHASE AGREEMENT
-----------------------------------------
Baker & McKenzie
100 New Bridge Street
London EC4V 6JA
Telephone: (0171) 919 1000
Fax: (0171) 919 1999
Ref: HLS/JSHY
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Clauses Pages
- - ------- -----
<S> <C> <C>
1. Definitions and Interpretation....................................................................2
2. Sale of Finacor Shares, Business and Branch Assets...............................................11
3. Consideration....................................................................................12
4. Exchange.........................................................................................13
5. Conditions Precedent to Share Completion.........................................................14
6. Pre-Share Completion Obligations.................................................................16
7. Share Completion.................................................................................17
8. Asset Conditions.................................................................................20
9. Pre Completion Obligations in relation to the Branch Assets......................................22
10. Asset Completion.................................................................................23
11. Profits and Apportionments of the Business.......................................................25
12. Responsibility for Liabilities of the Business...................................................26
13. Employees of Business............................................................................27
14. Share Warranties.................................................................................28
15. Asset Warranties.................................................................................31
16. Euro Brokers' Warranties.........................................................................33
17. Net Asset Valuation for the Monecor Contribution.................................................36
18. Net Asset Valuation for EB Holdings' Contribution................................................38
19. Adjustment of Monecor's Contribution.............................................................40
20. Adjustment of EB Holdings' Contribution..........................................................40
21. Monecor Covenant in Respect of Tax...............................................................40
22. EB Holdings' Covenant in Respect of Tax..........................................................46
23. Restriction on Announcements.....................................................................52
24. Costs............................................................................................53
25. General..........................................................................................53
26. Notices..........................................................................................55
27. Governing Law and Submission to Jurisdiction.....................................................56
</TABLE>
SCHEDULE 1
PART A
Details of Finacor
PART B
Details of EBIL
SCHEDULE 2
Share Warranties
SCHEDULE 3
Euro Brokers' Warranties
SCHEDULE 4
Asset Warranties
SCHEDULE 5
Excluded Branch Assets
SCHEDULE 6
Transferring Employees
SCHEDULE 7
Intangible Assets
<PAGE>
DATE: 21st December 1998
PARTIES:
(1) MONECOR (LONDON) LIMITED a company incorporated in England with
registered number 851820 whose registered office is at 4th Floor,
Golding's House, Hays Galleria, London SE1 2HB ("Monecor").
(2) FINACOR PETER a company incorporated in France whose registered office
is at 52 Avenue des Champs Elysees, 75008 Paris, France ("Finacor
Peter").
(3) EURO BROKERS INTERNATIONAL LIMITED a company incorporated in England
with registered number 2226337 whose registered office is at 133
Houndsditch, London EC3A 7AJ ("EBIL").
(4) EURO BROKERS HOLDINGS LIMITED a company incorporated in England with
registered number 2087852 whose registered office is at 133
Houndsditch, London EC3A 7AJ ("EB Holdings").
RECITALS:
(A) EB Holdings and Monecor intend to enter into a joint venture
arrangement in respect of their respective capital market currency and
interest rate swaps businesses.
(B) EBIL, a subsidiary of EB Holdings, is intended to be used as the joint
venture vehicle and the existing assets and liabilities of EBIL are
deemed to constitute, for the purposes of the joint venture, EB
Holdings' capital contribution of 50% of the issued share capital of
EBIL. In this respect, EBIL has agreed to give to Monecor certain
warranties and undertakings relating to EBIL as more particularly set
out in this Agreement.
(B) Monecor will subscribe for new shares in EBIL representing 50% of the
issued share capital and will, in consideration for the allotment of
such issued share capital,
1
<PAGE>
contribute the shares of Finacor Limited and the assets and undertaking
of its branch in Paris and give EBIL certain warranties and
undertakings relating thereto.
TERMS AGREED:
1. Definitions and Interpretation
------------------------------
1.1 In this Agreement where the context so admits the following words and
expressions shall have the following meanings:
"1997 Accounting Date" 31 December 1997;
"1998 Accounting Date" 31 December 1998;
"Affiliate" in relation to any party, any
subsidiary undertaking or parent
undertaking of that party and any
other subsidiary undertaking of that
parent undertaking;
"Asset Completion Accounts" shall have the meaning ascribed to it
in Clause 10.1.1.3
"Asset Completion Date" the last Business Day of the month
during which satisfaction or waiver
of all of the Asset Conditions occurs
(or such later date as the parties
may agree) but in no event any later
than 30 June 1999;
"Asset Completion" completion of the sale and purchase
of the Business and the Completion
Branch Assets as specified in clause
10;
"Asset Conditions" the conditions specified in clause 8;
"Asset Disclosure Letter" the letter of today's date from
Monecor to EBIL in the approved
terms;
2
<PAGE>
"Asset Warranties" the representations, warranties and
undertakings in respect of the
Business and Branch Assets contained
or referred to in clause 15 and
Schedule 4;
"Branch Assets" the Customer Balances, Debts and
contracts of employment relating to
the Transferring Employees but not
the Excluded Assets;
"Branch Licence Agreements" the agreements relating to
(respectively) (i) the authorisation
for EBIL to register operations at
the Branch Property, (the "EBIL
Domiciliation Agreement"), and (ii)
the sharing of rent, rental expenses
and the maintenance costs of premises
at the Branch Property (the "EBIL
Repartition Agreement"), each to be
entered into by Finacor Gestion et
Participations and EBIL at the Share
Completion in the approved terms;
"Branch Property" the premises used by the Business and
located at 52/60 Avenue des Champs
Elysees, Paris, France;
"Branch Service Agreements" the agreements relating to: (i) the
use of common services at the Branch
Property (the "EBIL Common Services
Agreement") and (ii) the agreement
relating to the provision of
equipment and materials at the Branch
Property (the "EBIL Equipment and
Materials Agreement"), each to be
entered into by Finacor Gestation et
Participations and EBIL at the Share
Completion in the approved terms;
"Business" the Euro-Fra/swap section, including
the interest rate options desk,
operated by Finacor Peter at the date
hereof at the Branch Property, as
such Business is carried on as at 31
December 1998;
3
<PAGE>
"Business Day" a day (other than a Saturday or a
Sunday) on which banks in London are
open for business
"Cash Contribution" the additional payment which Monecor
may be required to make in accordance
with clause 19;
"Companies Acts" the Companies Act 1985 and the
Companies Act 1989 and the former
Companies Acts within the meaning of
Section 735(1)(c) of the Companies
Act 1985;
"Completion Branch Assets" means the: (i) such of the Branch
Assets as remain in existence at the
Asset Completion Date, (ii) all
proceeds or other assets attributable
to, or derived from, the Branch
Assets, and (iii) all other book
debts, notes receivable and other
rights to payment by Customers, in
each of the three foregoing cases
arising from the carrying on of the
Business as from the 1998 Accounting
Date.
"Confidential Information" know-how, trade secrets and other
information of a confidential or
proprietary nature;
"Consideration" the total consideration for the
Finacor Shares, Business and Branch
Assets and any Cash Contribution
referred to in clause 3 and being the
allotment of the EBIL Shares to
Monecor;
"Customer Balances" all book debts, notes receivable and
other rights to payment by customers
arising from the operation of the
Business prior to the 1998 Accounting
Date;
"Debts" all amounts owing by way of employee
loans from the Transferring Employees
as at the 1998 Accounting Date;
"EBIL Accounts" the audited financial statements of
EBIL for the accounting reference
period which ended on the 1997
Accounting Date (comprising a balance
sheet, profit and
4
<PAGE>
loss account, cash flow statement,
notes and directors' and auditors'
report);
"EBIL Completion Accounts" shall have the meaning ascribed to it
in clause 18;
"EBIL Licence Agreement" the agreement relating to the licence
to occupy the EBIL Property to be
entered into by EBIL and EB Holdings
in the approved terms;
"EBIL Ordinary Shares" 1,000 "B" ordinary shares of 1.00
Pound each in the capital of EBIL;
"EBIL Property" the premises occupied by EBIL and
located at 133 Houndsditch, London
EC3A 7AJ;
"EBIL Services Agreement" the agreement relating to the
provision of services to EBIL to be
entered into by Euro Brokers Services
Limited and EBIL in the approved
terms;
"EBIL Preference Shares" 1,399,000 "B" non-redeemable
Preference Shares of 1.00 Pound each
in the capital of EBIL;
"EBIL Shares" the EBIL Ordinary Shares and the EBIL
Preference Shares;
"Euro Brokers' Auditors" PricewaterhouseCoopers of Southwark
Towers, 32 London Bridge Street,
London SE1 9SY;
"Euro Brokers' Disclosure Letter" the letter of today's date from EB
Holdings to Monecor in the approved
terms;
"Euro Brokers' Group" the group of companies comprising EB
Holdings and its subsidiaries and
subsidiary undertakings but excluding
EBIL. The expression "member of Euro
Brokers's Group" shall be construed
accordingly;
"Euro Brokers Financial Services the agreement relating to the
provision of services to Euro Brokers
Financial Services Limited to be
entered into by
5
<PAGE>
Agreement" EBIL and Euro Brokers Financial
Services Limited at Share Completion
in the approved terms;
"Euro Brokers' Solicitors" Allen & Overy of One New Change,
London EC4M 9QQ;
"Euro Brokers' Warranties" the representations, warranties and
undertakings contained or referred to
in clause 16 and Schedule 3;
"Excluded Branch Assets" those assets used in or relating to
the Business which are excluded from
the sale and purchase and which are
identified in Schedule 5;
"Finacor" Finacor Limited, details of which are
set out in Schedule 1;
"Finacor Accounts" the audited financial statements of
Finacor for the accounting reference
period which ended on the 1997
Accounting Date (comprising a balance
sheet, profit and loss account, cash
flow statement, notes and directors'
and auditors' report);
"Finacor Auditors" Deloitte & Touche of Stonecutter
Court, 1 Stonecutter Street, London
EC4A 4TR;
"Finacor Completion Accounts" shall have the meaning ascribed to it
in clause 17;
"Finacor France" Finacor, a company incorporated in
France whose registered office is at
52 Avenue des Champs Elysees, 75008
Paris, France;
"Finacor Share Disclosure Letter" the letter of today's date from
Monecor to EBIL in the approved
terms;
"Finacor Shares" the 5,150,000 ordinary shares of
10.00 French Francs each in the share
capital of the Finacor;
"Finacor Peter Service Agreement" the service agreement to be entered
into by Finacor Peter
6
<PAGE>
and EBIL at Share Completion in the
approved terms;
"FSA" Financial Services Authority;
"Hive-up Agreement" the agreement relating to the
transfer of Finacor's assets and
undertaking to EBIL, in the approved
terms;
"Intellectual Property" includes Confidential Information,
patents, registered designs,
copyrights, rights in databases,
trade marks, business names,
registrations of and applications to
register any of the aforesaid items,
rights in the nature of any of the
aforesaid items in any country,
rights in the nature of unfair
competition rights and rights to sue
for passing off;
"Material Adverse Effect" when used in connection with any body
corporate, any change, effect, event,
occurrence or state of facts that is,
or would reasonably be expected to
be, materially adverse to the
business, financial condition or
results of operations of such body
corporate excluding for these
purposes changes, effects or events
caused by the general economic or
relevant industry conditions;
"Maxcor" Maxcor Financial Group Inc, a company
incorporated under the laws of the
State of Delaware, USA whose
principal office is at Two World
Trade Center, New York, NY 10048,
USA;
"Monecor Group" the group of companies comprising
Monecor and its subsidiaries and
subsidiary undertakings but excluding
Finacor. The expression "member of
Monecor's Group" shall be construed
accordingly;
"Monecor Service Agreement" the agreement relating to the
provision of services by Monecor to
EBIL to be entered into by EBIL and
Monecor at Share Completion in the
approved terms;
7
<PAGE>
"Monecor's Solicitors" Baker & McKenzie of 100 New Bridge
Street, London EC4V 6JA;
"Notes" (i) the Convertible Note in the
principal amount of 3,567,250 Pounds
dated 1 December 1986 between (1)
Euro Brokers Holdings, Inc., (2) Euro
Brokers Limited, and (3) MAG
Investments Limited; and (ii)
Convertible Note in the principal
amount of US$4,649,000 dated 1
December 1986 between (1) Euro
Brokers Holdings, Inc., (2) First
Euro Brokers, Inc., (3) Euro Brokers
(USA), Inc., and (4) EBH Holdings,
Inc.;
"parent undertaking" the meaning given to that term in
section 258 Companies Act 1985;
"Repayment Option Letter" the letter from Maxcor to Finacor
France and Monecor relating to the
right of Finacor France or Monecor to
repay or prepay the Notes, in the
approved terms;
"SFA" Securities and Futures Authority;
"Share Completion Date" 31 December 1998 or the first
Business Day after satisfaction or
waiver of the Share Conditions
whichever is the later;
"Share Completion" Completion of the sale and purchase
of the Finacor Shares and issue of
the EBIL Shares as specified in
clause 7;
"Share Conditions" the conditions specified in clause 5;
"Share Warranties" the representations,
warranties and undertakings relating
to the Finacor Shares contained or
referred to in clause 14 and Schedule
2.
"Shareholders' Agreement" the agreement governing the
relationship of Monecor and
8
<PAGE>
EB Holdings as shareholders in EBIL
in the approved terms;
"subsidiary undertaking" the meaning given to that term in
section 258 Companies Act 1985;
"Surrender Covenant" shall have the meaning ascribed to it
in clause 10.1.1.2
"Tax" all forms of taxation, withholdings,
duties, imposts, levies, social
security contributions and rates
imposed by any local, municipal,
governmental, state, federal, or
other body in the United Kingdom or
elsewhere and any interest, penalty,
surcharge or fine in connection
therewith;
"Taxes Act" the Income and Corporation Taxes Act
1988;
"TCGA" the Taxation of Chargeable Gains Act
1992;
"Traite d'Apport d'Actifs" the certified valuation of the net
tangible assets of the Business for
the accounting reference period which
ended on the 1998 Accounting Date;
"Transfer Regulations" the Transfer of Undertakings
(Protection of Employment)
Regulations 1981, as amended and/or
the equivalent legislation in France
which implements the EC Acquired
Rights Directive, whichever is
applicable;
"Transferring Employees" those employees of the Business whose
employment is intended to be
transferred to EBIL at Asset
Completion, a list of whom appears in
Schedule 6;
"TVA" tax sur la valeur ajoutee;
"VAT" value added tax;
"VATA" the Value Added Tax Act 1994.
9
<PAGE>
1.2 Save where the context otherwise requires words and phrases the
definitions of which are contained or referred to in Part XXVI of
the Companies Act 1985 shall be construed as having the meaning
thereby attributed to them.
1.3 Any references, express or implied, to statutes or statutory
provisions shall be construed as references to those statutes or
provisions as respectively amended or re-enacted or as their
application is modified from time to time by other provisions
(whether before or after the date hereof) and shall include any
statutes or provisions of which they are re-enactments (whether with
or without modification) and any orders, regulations, instruments or
other subordinate legislation under the relevant statute or
statutory provision. References to sections of consolidating
legislation shall wherever necessary or appropriate in the context
be construed as including references to the sections of the previous
legislation from which the consolidating legislation has been
prepared.
1.4 References in this Agreement to clauses and schedules are to clauses
in and schedules to this Agreement (unless the context otherwise
requires). The recitals and schedules to this Agreement shall be
deemed to form part of this Agreement.
1.5 Headings are inserted for convenience only and shall not affect the
construction of this Agreement.
1.6 Where any of the parties are referred to, their respective
successors and assigns (where the same are permitted under this
Agreement) shall be deemed to be included.
1.7 References to "persons" shall include bodies corporate,
unincorporated associations and partnerships (whether or not having
separate legal personality).
1.8 References to writing shall include any methods of reproducing words
in a legible and non-transitory form.
1.9 The masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa.
10
<PAGE>
1.10 All warranties, representations, indemnities, covenants, agreements
and obligations given or entered into by more than one person are
given or entered into jointly and severally.
1.11 A document expressed to be "in the approved terms" means a document
the terms of which have been approved by or on behalf of the parties
to this Agreement and a copy of which has been signed for the
purposes of identification by or on behalf of those parties.
1.12 Where in accordance with clauses 17.7, 19.1 and 19.2 of this
Agreement, any amounts are required to be converted from French
francs to Pounds sterling or vice versa or where Monecor wishes to
pay the Cash Contribution or any other payments pursuant to this
Agreement, in French Francs, the closing mid-point spot rate of
exchange shall be that prevailing as at close of business on 31
December 1998 as quoted in the Financial Times.
1.13 Where any Share Warranty or Asset Warranty is given qualified by the
statement "so far as Monecor is aware" (or a similar expression),
there shall be deemed to be included in such statement a further
statement that all reasonable enquiries have been made by Monecor of
its directors and management and, in the case of any Share Warranty,
the directors and management of Finacor, and, in the case of any
Asset Warranty, the directors and management of Finacor Peter.
1.14 Where any Euro Brokers' Waranty is given qualified by the statement
"so far as EB Holdings is aware" (or a similar expression), there
shall be deemed to be included in such statement a further statement
that all reasonable enquiries have been made by EB Holdings of its
directors and management and those of EBIL.
2. Sale of Finacor Shares, Business and Branch Assets
--------------------------------------------------
2.1 Subject to the terms and conditions of this Agreement, Monecor shall
sell and EBIL shall purchase:
11
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2.1.1 the Finacor Shares, free from all liens, charges, equities,
encumbrances and other rights exercisable by third parties and
together with all rights now or hereafter attaching to them; and
2.1.2 the Business as a going concern and all of the Branch Assets.
2.2 Monecor covenants with EBIL that it has the right to sell and
transfer the full legal and beneficial interest in the Finacor
Shares and that, immediately prior to Asset Completion, it will have
the right to sell and transfer the full legal and beneficial
interest in the Completion Branch Assets pursuant to clause 10.
2.3 Nothing in this Agreement shall operate to transfer from Monecor or
Finacor Peter any of the Excluded Branch Assets, nor to impose any
obligation or liability on EBIL in respect of any assets or
liabilities of Monecor or Finacor Peter except as specifically
provided in this Agreement.
3. Consideration
-------------
3.1 The total consideration payable for the Finacor Shares, the Business
and the Branch Assets and any Cash Contribution shall be the
allotment by EBIL of the EBIL Shares to Monecor at Share Completion,
to rank, with respect to each class of such EBIL Shares, pari passu
in all respects (other than as set out in clause 12 of the
Shareholders' Agreement) with the existing ordinary shares and
preference shares of EBIL respectively and to be credited as
follows:
3.1.1 1,334,506 of the EBIL Preference Shares and 954 of the EBIL
Ordinary Shares in respect of the Finacor Shares - credited as
fully paid; and
3.1.2 64,494 of the EBIL Preference Shares and 46 of the EBIL Ordinary
Shares in respect of the Business and Branch Assets - credited
as nil paid (but subject always to clause 10.3).
12
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3.2 EBIL hereby waives and agrees to procure the waiver of any
restrictions on the allotment of the EBIL Shares (including
pre-emption rights) which may exist under the articles of
association of EBIL or otherwise.
3.3 The consideration is inclusive of any amount of VAT or TVA. payable
thereon.
4. Exchange
--------
Upon the signing of this Agreement;
4.1 Monecor shall deliver to EBIL:
4.1.1 the Finacor Share Disclosure Letter, signed by Monecor and the
Asset Disclosure Letter, signed by Monecor and Finacor Peter;
4.1.2 a certified copy of a resolution of the board of Monecor
approving the conditional sale of the Finacor Shares, the
Business and the Branch Assets on the terms of this Agreement
and authorising any two of its directors to execute this
Agreement as a deed for and on behalf of Monecor; and
4.1.3 a certified copy of a resolution of the board of Finacor Peter
approving the sale of the Business and the Branch Assets to
Monecor, the entry into this Agreement by Finacor Peter and
authorising any director to execute this Agreement as a deed for
and on behalf of Finacor Peter.
4.2 EBIL shall deliver to Monecor:
4.2.1 the Euro Brokers' Disclosure Letter duly signed by EB Holdings;
4.2.2 a certified copy of the resolution of the board of EBIL
approving the conditional purchase of the Finacor Shares, the
Business and the Branch Assets on the terms of this Agreement
and authorising any two of its directors to execute this
Agreement as a deed for and on behalf of EBIL;
13
<PAGE>
4.2.3 a certified copy of the resolution of the board of EB Holdings
approving the terms of this Agreement;
5. Conditions Precedent to Share Completion
----------------------------------------
5.1 Share Completion is conditional upon:
5.1.1 the Share Warranties and the Asset Warranties being true and
accurate in all material respects both when made and at and as
of the Share Completion Date, as if made at and as of such time
subject only to matters fairly disclosed in the Finacor Share
Disclosure Letter and the Asset Disclosure Letter respectively),
except where the failure of the Share Warranties to be so true
and accurate does not have and is not likely to have,
individually or in the aggregate, a Material Adverse Effect on
Finacor or where the failure of the Asset Warranties to be so
true and accurate does not have and is not likely to have,
individually or in the aggregate, a Material Adverse Effect on
the Business;
5.1.2 the Euro Brokers' Warranties being true and accurate in all
material respects both when made and at and as of the Share
Completion Date, as if made at and as of such time subject only
to matters fairly disclosed in the Euro Brokers' Disclosure
Letter), except where the failure of the Euro Brokers'
Warranties to be so true and accurate does not have, and is not
likely to have, individually or in the aggregate, a Material
Adverse Effect on EBIL;
5.1.3 Monecor having complied fully with the obligations specified in
clause 6.1 and otherwise having performed in all material
respects all of the covenants and agreements required to be
performed by it under this Agreement;
5.1.4 EBIL having complied fully with the obligations specified in
clause 6.2 and otherwise having performed in all material
respects all of the covenants and agreements required to be
performed by it under this Agreement;
14
<PAGE>
5.1.5 The SFA having approved and not withdrawn its approval to the
change of control of EBIL and of Finacor and the proposed change
in directors of EBIL as contemplated by this Agreement;
5.1.6 The FSA having approved and not withdrawn its approval to the
change of control of EBIL and of Finacor and the proposed change
in directors of EBIL as contemplated by this Agreement;
5.1.7 Each of the FSA and SFA having approved and not withdrawn their
approval to the transactions contemplated in this Agreement with
respect to the transfer of the Finacor Shares and the issue of
the EBIL Shares and neither of the FSA or SFA having any
objections thereto.
5.1.8 EB Holdings having obtained the consent of British Land to EB
Holdings ceasing to beneficially own at least 75% of the issued
share capital of EBIL as required pursuant to clause 5.2 of a
Supplemental Deed dated 28 May 1993, a copy of which is attached
to the Euro Brokers' Disclosure Letter.
5.2 Monecor shall use all reasonable endeavours to ensure that the
conditions set out at clauses 5.1.1, 5.1.3, 5.1.5, 5.1.6 and 5.1.7
are satisfied as soon as practicable in the period from the date
hereof until Share Completion.
5.3 Each of EB Holdings and EBIL shall use all reasonable endeavours to
ensure that the conditions set out at clause 5.1.2, 5.1.4, 5.1.5,
5.1.6, 5.1.7 and 5.1.8 are satisfied as soon as practicable in the
period from the date hereof until Share Completion.
5.4 In the event that any of the conditions set out at clause 5.1.1,
5.1.3, 5.1.5, 5.1.6 or 5.1.7 shall not have been fulfilled (or
waived by EB Holdings) prior to 28 February 1999, then EB Holdings
and EBIL shall not be bound to proceed to Share Completion and this
Agreement shall cease to be of any effect except clauses 23, 24, 26
and 27 which shall remain in force and save in respect of any claims
arising out of any antecedent breach of this Agreement.
15
<PAGE>
5.5 In the event that any of the conditions set out at clause 5.1.2,
5.1.4, 5.1.5, 5.1.6, 5.1.7 or 5.1.8 shall not have been fulfilled
(or waived by Monecor) prior to 28 February 1999, then Monecor shall
not be bound to proceed to Share Completion and this Agreement shall
cease to be of any effect except clauses 23, 24, 26 and 27 which
shall remain in force and save in respect of any claims arising out
of any antecedent breach of this Agreement.
6. Pre-Share Completion Obligations
--------------------------------
6.1 Between the date hereof and the Share Completion Date, Monecor shall
carry on the business of Finacor in the usual and ordinary course
consistent with prior practice, including using all reasonable
endeavours to preserve its assets, customer and supplier relations,
employee relations, business and organisation.
6.2 Between the date hereof and the Share Completion Date, EBIL shall
and EB Holdings shall procure that EBIL shall carry on the business
of EBIL in the usual and ordinary course consistent with prior
practice, including using all reasonable endeavours to preserve its
assets, customer and supplier relations, employee relations,
business and organisation.
6.3 Each of EB Holdings and Monecor hereby undertakes that it will not
prior to the Share Completion Date, save as required by law, divulge
any Confidential Information relating to Finacor and EBIL
respectively, obtained by it in connection with or pursuant to this
Agreement, to any person other than the officers, employees or
professional advisers of it and its Affiliates.
6.4 Each of EB Holdings and Monecor hereby undertakes with respect to
each of EBIL and Finacor respectively to procure that as at the 1998
Accounting Date, EBIL or Finacor, as the case may be, shall:
(i) show in its respective cash balances a minimum amount of
1,000,000 Pounds net of accrued staff bonuses (including
any Tax payable thereon) relating to the financial year
ended on the 1998 Accounting Date; and
16
<PAGE>
(ii) have collected or otherwise discharged all aged debtors of
180 days or more.
7. Share Completion
----------------
7.1 Subject to the provisions of clause 5, the transfer of the Finacor
Shares shall take place on the Share Completion Date at the offices
of Euro Brokers' Solicitors, when all (but not some only) of the
events described in this clause shall occur.
7.2 On the Share Completion Date, Monecor shall:
7.2.1 deliver to EBIL:
7.2.1.1 duly executed transfers of all of the Finacor Shares in
favour of EBIL together with the relative share
certificates;
7.2.1.2 such waivers or consents as EBIL may require to enable EBIL
to be registered as the holder of the Finacor Shares;
7.2.1.3 a counterpart of the Shareholders' Agreement duly executed
by Monecor and Finacor France;
7.2.1.4 all the statutory and other books (duly written up to date)
of Finacor and its certificate of incorporation, common seal
(if any) and any other papers and documents of Finacor in
its possession;
7.2.1.5 letters of resignation in the approved terms from Marc
Craquelin, Stephen Bush, Raoul Saada and Michael Lehneis as
directors and Peter Lacey as the secretary of Finacor, such
resignations to take effect from close of the meeting of the
Board referred to in clause 7.2.2;
7.2.1.6 a counterpart of the Monecor Services Agreement duly
executed by Monecor.
17
<PAGE>
7.2.1.7 a counterpart of each of the: (i) Branch Service Agreements,
and Branch Licence Agreements, duly executed by Finacor
Gestion et Participations; and (ii) the Finacor Peter
Service Agreement;
7.2.1.8 a counterpart of the Repayment Option Agreement, duly
executed by Monecor;
7.2.2 cause the directors of Finacor to hold a meeting of the Board of
Finacor at which the directors shall pass resolutions in the
approved terms (inter alia) providing for the following to have
immediate effect as and from Share Completion:-
7.2.2.1 the approval of the registration of EBIL as a member of
Finacor subject only to the production of duly stamped and
completed transfers in respect of the Finacor Shares;
7.2.2.2 the appointment of such persons as EBIL may nominate as
directors and secretary of Finacor;
7.2.2.3 the revocation of all authorities to the bankers of Finacor
relating to bank accounts and to give authority to such
persons as Monecor and EB Holdings may nominate to operate
the same; and
7.2.2.4 the change of the registered office address of Finacor to
that of EBIL;
7.2.3 cause the directors of Finacor to convene a meeting of the
shareholders of Finacor which approves a special resolution to
change the name of Finacor to Eurocor UK Limited.
7.3 On the Share Completion Date, EBIL shall:
7.3.1 deliver to Monecor:
18
<PAGE>
7.3.1.1 a counterpart of the Shareholders' Agreement and certified
copy of the EBIL Licence Agreement each duly executed by
each of EBIL and EB Holdings and in the case of the
Shareholders' Agreement, duly executed by Maxcor;
7.3.1.2 a certified copy of each of the: (i) the EBIL Services
Agreement duly executed by EBIL and Euro Brokers Services
Limited and (ii) the Euro Brokers Financial Services
Agreement, duly executed by Euro Brokers Financial Services
Limited and EBIL;
7.3.1.3 a counterpart of Monecor Services Agreement duly executed by
EBIL;
7.3.1.4 a counterpart of each of the Branch Service Agreements and
Branch Licence Agreements duly executed by EBIL;
7.3.1.5 the Repayment Option Letter, duly executed by Maxcor;
7.3.2 procure the delivery to Monecor of letters of resignation as
directors of EBIL signed by Ian McKay, Paul Dunkley, Nicholas
Chadd and Walter Kaczor;
7.3.3 cause the Board of EBIL to convene a meeting of the shareholders
of EBIL which approves the following resolutions:
(a) to change the name of EBIL to Euro Brokers Finacor
Limited;
(b) to convert the existing authorised share capital of EBIL
to 1,000 Ordinary Shares of 1.00 Pound each, 1,000 B
Ordinary Shares of 1.00 Pound each, 2,499,000 A
non-redeemable preference shares of 1.00 Pound each and
2,499,000 B non-redeemable preference shares of 1.00
Pound each (having the respective rights set out in the
articles of association of EBIL to be adopted pursuant to
this clause 7.3.3);
19
<PAGE>
(c) to adopt the new memorandum and articles of association of
EBIL in the approved terms; and
(d) to grant to the Board authority, pursuant to section 80 of
Companies Act 1985, to allot the EBIL Shares.
7.3.4 hold a meeting of the Board of EBIL to approve:
(i) the allotment of the EBIL Shares to Monecor credited in
accordance with clause 3 and subject to the Articles of
Association of EBIL;
(ii) the appointment of Olivier Stephanopoli and Alain Giraud
as directors of EBIL;
(iii) the resignation of the directors listed in clause 7.3.2.
7.4 Immediately after the Share Completion, EBIL and Finacor will
execute and complete the Hive-up Agreement.
7.5 As soon as practicable after the Share Completion, EB Holdings shall
use best endeavours to obtain the consent of British Land to the
sharing of the EBIL Property with EBIL as required pursuant to an
Underlease dated 28 May 1993, a copy of which is attached to the
Euro Brokers' Disclosure Letter.
8. Asset Conditions
----------------
8.1 The sale and purchase of the Business and the Branch Assets is
conditional upon:
8.1.1 the sale of the Business as a going concern and Completion
Branch Assets by Finacor Peter to Monecor having taken place
prior to Asset Completion;
20
<PAGE>
8.1.2 Share Completion having taken place or taking place concurrent
with Asset Completion;
8.1.3 the Asset Warranties set out in Part II of Schedule 4, being
true and accurate in all material respects at the Asset
Completion Date and there being no unremedied material breach of
the Asset Warranties given as at the Share Completion Date;
8.1.4 The Trade Register Department in France having approved and not
withdrawn its approval to the registration of its branch office
in Paris by Monecor.
8.1.5 The SFA having approved and not withdrawn its approval to the
acquisition of a branch office in Paris by Monecor from Finacor
Peter and the immediate disposal thereof by Monecor to EBIL.
8.1.6 The Trade Register Department in France having approved and not
withdrawn its approval to the registration of its branch office
in Paris by EBIL.
8.1.7 The FSA having approved and not withdrawn its approval to the
acquisition of a branch office in Paris to carry on investment
business in France by EBIL.
8.1.8 Each of the FSA, SFA and French regulatory authorities having
approved and not withdrawn their approval to the transactions
contemplated in this Agreement with respect to the transfer of
the Branch Assets initially to Monecor and subsequently to EBIL
and neither of the FSA, SFA or French regulatory having any
objections thereto.
8.2 Each of Finacor Peter and Monecor shall use all reasonable
endeavours to ensure that the conditions set out at clauses 8.1.1,
8.1.3 to 8.1.5 and 8.1.8 are satisfied as soon as practicable in the
period from the date hereof until Asset Completion.
21
<PAGE>
8.3 Each of EB Holdings and EBIL shall use all reasonable endeavours to
ensure that the conditions set out at clauses 8.1.6 and 8.1.7 are
satisfied as soon as practicable in the period from the date hereof
until Asset Completion.
8.4 Subject to satisfaction of the Asset Conditions, on the first to
occur of the following events:
8.4.1 receipt by Finacor Peter of the ruling from the relevant French
tax authority approving the transfer of the Business by Finacor
Peter to Monecor and then by Monecor to EBIL (the "Tax Ruling");
8.4.2 receipt by Finacor Peter of notice that the Tax Ruling will not
be given; or
8.4.3 30 June 1999;
Monecor shall proceed to Asset Completion in accordance with clause
10.
9. Pre Completion Obligations in relation to the Branch Assets
-----------------------------------------------------------
9.1 Between the date hereof and the Asset Completion Date, Finacor Peter
shall (i) carry on the Business in the usual and ordinary course
consistent with prior practice so as to maintain the same as a going
concern, including using all reasonable endeavours to preserve its
assets, customer and supplier relations, employee relations,
business and organisation; and (ii) transfer the Business as a going
concern and the Completion Branch Assets to Monecor immediately
prior to Asset Completion and in any event prior to 30 June 1999.
9.2 As from 1 January 1999, Finacor Peter and Monecor will ensure that
EBIL and any person authorised by it shall be given such access to
the Branch Property and to all the books, title deeds, records and
accounts of the Business as EBIL may reasonably request and be
permitted to take copies of any such books, deeds, records and
accounts. Finacor Peter and Monecor will procure that their
respective directors and employees provide EBIL promptly during this
period all such information and
22
<PAGE>
explanations requested by EBIL, and any person authorised by it, in
relation to the Business or the Branch Assets (including without
limitation) the draft Traite d'Apport d'Actif as submitted to the
French Mercantile Court and the final form thereof.
9.3 EBIL hereby undertakes that it will not prior to Asset Completion,
save as required by law, divulge any confidential information
relating to the Business obtained by it pursuant to this Agreement
to any person other than the officers, employees or professional
advisers of it or its Affiliates.
10. Asset Completion
----------------
10.1 Subject to the provisions of clause 8, the transfer of legal title
to the Business as a going concern and to the Completion Branch
Assets shall take place on the Asset Completion Date at the offices
of Monecor's Solicitors (or such other place agreed by the parties)
when all (but not some only) of the following events shall occur:-
10.1.1 Monecor shall:
10.1.1.1 make available to EBIL all the books of account, ledgers,
payroll records, stock and asset records, information
relating to customers and other books and documents which
relate to the Business (other than minute books relating
to directors' and shareholders' meetings and statutory
books) in whatever form and upon whatever media they may
be recorded Provided that Finacor Peter shall be entitled
to retain all TVA records or other books and records which
do not relate exclusively to the Business and Finacor
Peter and/or Monecor shall provide EBIL with full access
to all such records, including the right to take and hold
copies thereof.
10.1.1.2 deliver to EBIL the surrender covenant in the approved
terms ("Surrender Covenant") retrospective to 1 January
1999 in respect of the profits of the Business; and
23
<PAGE>
10.1.1.3 deliver to EBIL and EB Holdings a profit and loss account
of the Business for the period from 1 January 1999 to the
Asset Completion Date together with a balance sheet of the
Business as at the Asset Completion Date (the "Asset
Completion Accounts").
10.1.1.4 deliver to EBIL such deeds, documents and assignments as
EBIL may reasonably require in order to secure legal and
beneficial title to the Business and Completion Branch
Assets referred to above.
10.2 Upon receipt by EBIL and EB Holdings of the Asset Completion
Accounts, EB Holdings shall, with 15 days thereafter notify Monecor
as to whether it agrees or disagrees with the statement of profits
set out therein that are to be surrendered to EBIL pursuant to the
Surrender Covenant. If it disagrees, the parties shall seek to
negotiate in good faith agreement in respect of such profits,
failing which, the matter may be referred by either EB Holdings or
Monecor to an independent firm of French chartered accountants
selected by agreement between EB Holdings and Monecor (and failing
agreement, by the President of the French Companies Court, on the
application of either party) who shall act as experts and whose
decision shall be final and binding and whose costs shall be borne
equally by EB Holdings and Monecor.
10.3 The contribution of the Business and Branch Assets to EBIL by
Monecor at Asset Completion in accordance with the terms of this
Agreement together with any cash contribution made pursuant to
clause 19, shall be in full and final satisfaction of all monies
owed by Monecor to EBIL in respect of Monecor's subscription of the
Relevant EBIL Shares (as defined in clause 10.4) and subject to such
contributions having taken place or Monecor having transferred to
EBIL the cash sum referred to in clause 10.4 in accordance with that
clause, EBIL shall from the Asset Completion Date record the
Relevant EBIL Shares in its books credited as fully paid. For the
avoidance of doubt only, nothing in this clause 10.3 is intended to
prevent EBIL bringing any claim under the Asset Warranties.
10.4 If Monecor fails to transfer the Business and Branch Assets to EBIL
in accordance with this clause 10 on the Asset Completion Date then,
without prejudice to all of
24
<PAGE>
EBIL's rights and remedies in respect of such failure, EBIL should
be entitled to require Monecor forthwith to transfer to EBIL a cash
sum being the difference between the amount of net tangible assets
of Finacor as shown in the Finacor Completion Accounts and
3,250,000 Pounds (together with an amount equal to the profits
earned by the Business since the 1998 Accounting Date) in respect of
the consideration due for the EBIL shares allotted pursuant to
clause 3.1.2 (the "Relevant EBIL Shares"). Such amount shall be in
full and final settlement of all monies due to EBIL from Monecor in
respect of Monecor's subscription of the Relevant EBIL Shares as set
out in the Board Minutes of EBIL referred to in clause 4.2.2,
whereupon the Relevant EBIL Shares shall be recorded in the books of
EBIL as fully paid. Thereafter Finacor Peter and Monecor shall cease
to have any further liability under clauses 8, 9 and 10 (excluding
this clause 10.4) (without prejudice to any accrued liability under
such clauses) and clauses 11, 12, 13, 15, 17.7 and Schedule 4 shall
cease to be of any effect. Notwithstanding such cash payment, EBIL
shall be entitled to pursue any remedies it may have at law in
respect of Monecor's failure to transfer the Business and Completion
Branch Assets in accordance with clause 10.
11. Profits and Apportionments of the Business
------------------------------------------
11.1 Pursuant to the Surrender Covenant, all the profits or losses of the
Business attributable to the period from and including 1 January
1999 to the Asset Completion Date (both dates inclusive) as shown by
the Asset Completion Accounts shall be for the account of EBIL.
11.2 Without prejudice to the generality of clause 12, the following
items of expenditure relating to the Business shall be apportioned
such that the cost of items of expenditure accrued, or referable to
periods, prior to 1 January 1999 shall be borne by Finacor Peter and
on or after 1 January 1999 by EBIL:
11.2.1 all salaries, wages, accrued holiday pay entitlement, bonuses
and other emoluments relating to the employment of the
Transferring Employees in the Business;
25
<PAGE>
11.2.2 all social security payments and related tax charges relating to
the employment of the Transferring Employees in the Business;
11.2.3 all travel, entertainment, subsistence and other expenses
incurred by the Transferring Employees in connection with the
Business.
11.3 EBIL and Finacor Peter shall use all reasonable endeavours to draw
up and agree a statement of the apportionments referred to in this
clause 11, and the balance owing by one party to the other, as soon
as practicable after the Asset Completion Date. Payment of the
balance agreed to be due shall be made within 14 days after
agreement or determination.
11.4 In the event of any disagreement between EBIL and Finacor Peter in
relation to the statement referred to in clause 11.3, the matter may
be referred for determination by either EB Holdings or Finacor Peter
to an independent firm of chartered accountants selected by
agreement between EB Holdings and Finacor Peter or, failing
agreement, nominated by the President for the time being of the
Institute of Chartered Accountants in England and Wales upon the
request of either EB Holdings or Finacor Peter. Such independent
firm of chartered accountants shall act as experts and not as
arbitrators and their decision shall be final and binding and the
costs of such firm shall be borne equally by EB Holdings and Finacor
Peter.
12. Responsibility for Liabilities of the Business
----------------------------------------------
12.1 Without prejudice to the Asset Warranties, Monecor shall be
responsible for and shall keep EBIL fully and effectively
indemnified against:
12.1.1 all debts, obligations and liabilities whatsoever attributable
to the Branch Assets or arising from the carrying on of the
Business prior to 1 January 1999;
12.1.2 all liabilities or obligations in relation to the Excluded
Assets;
26
<PAGE>
12.1.3 all liabilities or obligations of Monecor other than those
transferred to EBIL pursuant to this Agreement.
12.2 Subject to the Asset Warranties and to Finacor having complied with
its obligations under clause 9.1 and 9.2 and the Surrender Covenant,
EBIL shall keep Monecor fully and effectively indemnified against
all debts, obligations and liabilities attributable to the Branch
Assets or arising from the carrying on of the Business on or after
the Asset Completion Date.
13. Employees of Business
---------------------
13.1 Other than by agreement with EBIL, the employment of any of the
Transferring Employees who are employed in the Business immediately
prior to the Asset Completion Date shall not be terminated for a
reason arising from or connected in any way with this Agreement. By
virtue of the Transfer Regulations all Monecor's rights, duties,
powers, liabilities and obligations in respect of any contract of
employment with the Transferring Employees still in force
immediately before the Asset Completion Date shall be transferred to
EBIL.
13.2 Monecor shall be responsible for and hereby undertakes to indemnify
and keep indemnified and fully reimburse EBIL at all times from and
against all claims, proceedings, actions, losses, demands,
liabilities, costs and expenses ("Losses") which EBIL may suffer,
sustain, incur or pay, in any way connected with or arising from:
13.2.1 the employment or termination of employment by Finacor of any
person who is not a Transferring Employee at any time; and
13.2.2 the employment or termination of employment by Monecor or
Finacor Peter of any of the Transferring Employees at any time
prior to the Asset Completion Date.
13.3 If any contract of employment with any person who is not a
Transferring Employee shall have effect at any time after the Asset
Completion Date as if originally made
27
<PAGE>
between EBIL and such person as a result of the operation of the
Transfer Regulations then (without prejudice to any other rights or
remedies which may be available to EBIL):
13.3.1 EBIL may, upon becoming aware of such operation of the Transfer
Regulations in relation to such contract, terminate such
contract forthwith; and
13.3.2 Monecor hereby agrees with EBIL to indemnify EBIL against all
Losses arising out of such termination and against any sums
payable to or on behalf of any such person or any benefits which
EBIL is required to provide to such person after the Asset
Completion Date but prior to the said termination.
14. Share Warranties
----------------
14.1 In consideration of the allotment of the EBIL Shares and any cash
contribution made by EBIL pursuant to clause 20, Monecor represents,
warrants and undertakes to and with EBIL that each of the statements
set out in Schedule 2 is now and will at and as of Share Completion
be true and accurate.
14.2 The Share Warranties are given subject to matters fairly disclosed
in the Finacor Share Disclosure Letter.
14.3 Monecor acknowledges that EBIL has agreed to purchase the Finacor
Shares and allot the EBIL Shares in reliance upon the Share
Warranties and has been induced by them to enter into this
Agreement.
14.4 Each of the Share Warranties shall be separate and independent and,
save as expressly provided to the contrary, shall not be limited by
reference to or inference from any other Share Warranty or any other
term of this Agreement.
14.5 Monecor hereby agrees with EBIL to waive any rights which it may
have in respect of any misrepresentation or inaccuracy in, or
omission from, any information or advice supplied or given by
Finacor or its officers, employees or advisers in connection with
28
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the giving of the Share Warranties and the preparation of the
Finacor Share Disclosure Letter.
14.6 The liability of Monecor under the Share Warranties:-
14.6.1 shall save in relation to paragraph 2 of Schedule 2 (the
"Finacor Tax Warranties") cease after the third anniversary of
the date hereof except in respect of matters which have been the
subject of a bona fide written claim made before such date by
EBIL to Monecor;
14.6.2 shall in relation to the Finacor Tax Warranties cease after 31
December 2005 except in respect of matters which have been the
subject of a bona fide written claim made before such date by
EBIL to Monecor.
14.7 The maximum aggregate liability of Monecor pursuant to this clause
14 in respect of all claims in respect of the Share Warranties and
clause 21 shall not exceed 5,000,000 Pounds.
14.8 No liability shall attach to Monecor pursuant to this clause 14 or
to clause 21 unless the aggregate amount of all claims under the
Share Warranties, the Asset Warranties and clause 21 for which it
would, in the absence of this provision, be liable shall exceed
50,000 Pounds and in such event Monecor shall be liable for the
whole of such amount and not merely the excess.
14.9 Monecor hereby undertakes to indemnify EBIL at all times from and
against all and any losses, damages and interest whatsoever and all
reasonable costs and expenses suffered or incurred by EBIL
(including without limitation professional fees) as a result of any
breach of the Share Warranties.
14.10 If any sum payable by Monecor to EBIL under this clause 14 shall be
subject to Tax (whether by way of deduction or withholding or by way
of direct assessment of EBIL) such payment shall be increased by
such an amount as shall ensure that after
29
<PAGE>
deduction, withholding or payment of such Tax, EBIL shall have
received a net amount equal to the payment otherwise required hereby
to be made.
14.11 In the event that a claim against Finacor arises as a result of or
in connection with a liability to or a dispute with any third
party, no such liability or dispute shall be admitted, settled
or discharged without the written consent of Monecor (such consent
not to be unreasonably withheld or delayed) and each of EB Holdings
and EBIL shall (provided that it is indemnified to its reasonable
satisfaction by Monecor against any costs, expenses, liabilities,
penalties, and fines which may be incurred by EB Holdings and/or
EBIL and Finacor in taking such action) take and shall procure that
Finacor shall take such action to avoid, dispute, resist, appeal,
compromise or contest such liability or dispute as may be reasonably
requested by Monecor;
14.12 Any claim made by EB Holdings for breach of Share Warranty shall be
reduced by (i) the amount of any payment made by Monecor in respect
of the same facts or circumstances pursuant to the provisions of
clause 21 of this Agreement or otherwise under this clause and (ii)
to the extent that there has been an adjustment to the Monecor
Contribution (as hereinafter defined) pursuant to clause 19 in
respect of the same facts or circumstances.
14.13 Where Monecor is liable to pay an amount to EBIL under this clause
14.1 in respect of a liability and EBIL obtains a deduction,
allowance, loss or other relief (a "Benefit") in respect of Tax
which would not have arisen but for the facts, events or
circumstances giving rise to the Tax liability then the amount which
Monecor is liable to pay to EBIL shall be reduced by the amount by
which EBIL's liability to pay Tax is or is reasonably expected to be
reduced in respect of the accounting period of EBIL in which the
claim for breach of the relevant Share Warranty is made (or a prior
period beginning after 31 December 1998) as a result of the
utilisation or set off of such Benefit. If it subsequently
transpires that EBIL is liable to pay Tax which was assumed to be
saved as a result of the use of a Benefit then, on the date on which
and to the extent that EBIL is required to pay such Tax to a
Taxation authority, Monecor shall pay to EBIL an amount equal to
such Tax together with an amount equal to
30
<PAGE>
interest on such sum at the rate of 1% above the base rate of
Barclays Bank plc from time to time from the due date to the date of
payment.
15. Asset Warranties
----------------
15.1 Monecor warrants and undertakes to and with EBIL that each of the
statements set out in Schedule 4 is true and accurate as at the date
hereof.
15.2 Monecor warrants and undertakes to and with EBIL that each of the
statements set out in Part II of Schedule 4 will be true and
accurate at and as of Asset Completion.
15.3 The Asset Warranties are given subject to matters fairly disclosed
in the Asset Disclosure Letter.
15.4 Monecor hereby undertakes to indemnify EBIL at all times from and
against all and any losses, damages and interest whatsoever and all
reasonable costs and expenses suffered or incurred by EBIL
(including without limitation professional fees) as a result of any
breach of the Asset Warranties.
15.5 Each of the Asset Warranties shall be separate and independent and,
save as expressly provided to the contrary, shall not be limited by
reference to or inference from any other Asset Warranty or any other
term of this Agreement.
15.6 Each of Finacor Peter and Monecor hereby agrees with EBIL to waive
any rights which it may have in respect of any misrepresentation or
inaccuracy in, or omission from, any information or advice supplied
or given by any of the Transferring Employees in connection with the
giving of the Asset Warranties and the preparation of the Asset
Disclosure Letter.
15.7 The liability of Monecor under the Asset Warranties shall cease
after the second anniversary of Asset Completion except in respect
of matters which have been the subject of a bona fide written claim
made before such date by EBIL to Monecor.
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<PAGE>
15.8 The maximum aggregate liability of Monecor pursuant to this clause
15 in respect of all claims shall not exceed 150,000 Pounds.
15.9 Clause 14.8 shall also apply to limit Monecor's liability in respect
of claims by EBIL under the Asset Warranties, save in the case of
where there are claims made only under the Asset Warranties, in
which case, no liability shall attach to Monecor unless the
aggregate amount of all such claims for which Monecor would, in the
absence of this provision, be liable, shall exceed 2,000 Pounds and
in such event Monecor shall be liable for the whole of such amount
and not merely the excess.
15.10 If any sum payable by Monecor to EBIL under this clause 15 shall be
subject to Tax (whether by way of deduction or withholding or by way
of direct assessment of EBIL) such payment shall be increased by
such an amount as shall ensure that after deduction, withholding or
payment of such Tax, EBIL shall have received a net amount equal to
the payment otherwise required hereby to be made.
15.11 Where Monecor is liable to pay an amount to EBIL under this clause
15 in respect of a Tax liability and EBIL obtains a deduction,
allowance, loss or other relief (a "Benefit") in respect of Tax for
EBIL which would not have arisen but for the facts, events or
circumstances giving rise to the Tax liability then the amount which
Monecor is liable to pay to EBIL shall be reduced by the amount by
which EBIL's liability to pay Tax is or is reasonably expected to be
reduced in respect of the accounting period of EBIL in which the
claim for breach of the relevant Asset Warranty is made (or a prior
period beginning after 31 December 1998) as a result of the
utilisation or set off of such Benefit. If it subsequently
transpires that EBIL is liable to pay Tax which was assumed to be
saved as a result of the use of a Benefit then, on the date on which
and to the extent that EBIL is required to pay such Tax to a
Taxation authority, Monecor shall pay to EBIL an amount equal to
such Tax together with an amount equal to interest on such sum at
the rate of 1% above the base rate of Barclays Bank plc from time to
time from the due date to the date of payment.
32
<PAGE>
16. Euro Brokers' Warranties
------------------------
16.1 In consideration of the transfer of the Finacor Shares, the transfer
of the Business and Branch Assets and the Cash Contribution (if
any), EB Holdings represents, warrants and undertakes to and with
Monecor for the benefit of EBIL that each of the statements set out
in Schedule 3 is now and will at and as of Share Completion be true
and accurate.
16.2 Although the Euro Brokers' Warranties are being given by EB Holdings
to Monecor, it is recognised and agreed by the parties that any
payment made by EB Holdings for breach of the Euro Brokers'
Warranties will be made directly to EBIL, save for payments made
pursuant to clause 16.10.2..
16.3 The Euro Brokers' Warranties are given subject to matters fairly
disclosed in the Euro Brokers' Disclosure Letter.
16.4 EB Holdings acknowledges that Monecor has agreed to sell the Finacor
Shares and the Business and Branch Assets to EBIL in reliance upon
the Euro Brokers' Warranties and has been induced by them to enter
into this Agreement.
16.5 Each of the Euro Brokers' Warranties shall be separate and
independent and, save as expressly provided to the contrary, shall
not be limited by reference to or inference from any other Euro
Brokers' Warranty or any other term of this Agreement.
16.6 EB Holdings and EBIL each hereby agree with Monecor to waive any
rights which either may have in respect of any misrepresentation or
inaccuracy in, or omission from, any information or advice supplied
or given by its officers, employees or advisers in connection with
the giving of the Euro Brokers' Warranties and the preparation of
the Euro Brokers' Disclosure Letter.
16.7 The liability of EB Holdings under the Euro Brokers' Warranties:-
33
<PAGE>
16.7.1 shall save in relation to paragraphs 2 of Schedule 3 (the "EBIL
Tax Warranties") cease after the third anniversary of the date
hereof except in respect of matters which have been the subject
of a bona fide written claim made before such date by Monecor to
EB Holdings;
16.7.2 shall in relation to the EBIL Tax Warranties cease after 31
December 2005 except in respect of matters which have been the
subject of a bona fide written claim made before such date by
Monecor to EB Holdings.
16.8 The maximum aggregate liability of EB Holdings pursuant to this
clause 16 in respect of all claims in respect of the Euro Brokers'
Warranties and clause 22 shall not exceed 5,000,000 Pounds.
16.9 No liability shall attach to EB Holdings pursuant to this clause 16
or to clause 22 unless the aggregate amount of all claims in respect
of Euro Brokers' Warranties and clause 22 for which it would, in the
absence of this provision, be liable shall exceed 50,000 Pounds and
in such event EB Holdings shall be liable for the whole of such
amount and not merely the excess.
16.10 EB Holdings hereby undertakes to Monecor to indemnify:
16.10.1 EBIL at all times from and against all and any losses, damages,
interest, costs or expenses whatsoever suffered or incurred by
EBIL as a result of any breach of the Euro Brokers' Warranties;
and
16.10.2 Monecor at all times from and against any reasonable costs and
expenses whatsoever (including professional fees) suffered or
incurred by it in bringing a claim against EB Holdings for
breach of the Euro Brokers' Warranties.
16.11 If any sum payable by EB Holdings to EBIL under this clause 16 shall
be subject to Tax (whether by way of deduction or withholding or by
way of direct assessment of EBIL) such payment shall be increased by
such an amount as shall ensure that after
34
<PAGE>
deduction, withholding or payment of such Tax, EBIL shall have
received a net amount equal to the payment otherwise required hereby
to be made.
16.12 In the event that a claim against EBIL arises as a result of or in
connection with a liability to or a dispute with any third party, no
such liability or dispute shall be admitted, settled or discharged
without the written consent of EB Holdings (such consent not to be
unreasonably withheld or delayed) and Monecor shall (provided that
it is indemnified to its reasonable satisfaction by EB Holdings
against any costs, expenses, liabilities, penalties, and fines which
may be incurred by Monecor and/or EBIL in taking such action) take
such action to avoid, dispute, resist, appeal, compromise or contest
such liability or dispute as may be reasonably requested by EB
Holdings.
16.13 Any claim made by Monecor for breach of any of the Euro Brokers'
Warranties shall be reduced by (i) the amount of any payment made by
EB Holdings in respect of the same facts or circumstances pursuant
to the provision of clause 22 of this Agreement and (ii) to the
extent that there has been an adjustment to the EB Holdings'
Contribution (as hereinafter defined) pursuant to clause 20 in
respect of the same facts or circumstances.
16.14 Where EB Holdings is liable to pay an amount to EBIL under this
clause 16 in respect of a liability and EBIL obtains a deduction,
allowance, loss or other relief (a "Benefit") in respect of Tax
which would not have arisen but for the facts, events or
circumstances giving rise to the Tax liability then the amount which
EB Holdings is liable to pay to EBIL shall be reduced by the amount
by which EBIL's liability to pay Tax is or is reasonably expected to
be reduced in respect of the accounting period of EBIL in which the
claim for breach of the relevant Euro Brokers' Warranty is made (or
a prior period beginning after 31 December 1998) as a result of the
utilisation or set off of such Benefit. If it subsequently
transpires that EBIL is liable to pay Tax which was assumed to be
saved as a result of the use of a Benefit then, on the date on which
and to the extent that EBIL is required to pay such Tax to a
Taxation authority, EB Holdings shall pay to EBIL an amount equal to
such Tax together with an amount
35
<PAGE>
equal to interest on such sum at the rate of 1% above the base rate
of Barclays Bank plc from time to time from the due date to the date
of payment.
17. Net Asset Valuation for the Monecor Contribution
------------------------------------------------
17.1 As soon as reasonably practicable after Share Completion, but in any
event no later than 14 February 1999, Monecor shall prepare draft
accounts for Finacor in respect of the accounting reference period
ending on 31 December 1998 (draft "Finacor Completion Accounts") and
submit such accounts to Finacor's Auditors in accordance with clause
17.2, such draft accounts to be prepared (i) on the same accounting
basis and in accordance with the same accounting and valuation
principles and practices as the Finacor Accounts and (ii) so that
the assets listed in Schedule 7 are ignored for the purposes of
calculating the net tangible assets in these accounts.
17.2 Following the submission of such draft accounts to Finacor's
Auditors, Finacor's Auditors shall conduct an audit applying the
same basis and principles referred to in clause 17.1 and produce a
draft of the Finacor Completion Accounts and a statement as to the
amount of the net tangible assets of Finacor derived from such
accounts.
17.3 Finacor's Auditors shall, as soon as reasonably practicable but no
later than 30 days after submission to them, submit the draft
Finacor Completion Accounts and draft statement as to the amount of
the Finacor net tangible assets to Euro Brokers' Auditors for their
review. Monecor shall procure that Finacor's Auditors' working
papers are made available to Euro Brokers' Auditors, if required by
them in carrying out their review.
17.4 If Finacor's Auditors and Euro Brokers' Auditors are able to agree
the form and content of the Finacor Completion Accounts and the
statement as to the amount of the Finacor net tangible assets as
shown in or derived from such Finacor Completion Accounts within 30
days of the date on which the drafts were submitted to Euro Brokers'
Auditors (or within such other period as Monecor and EB Holdings may
agree), the accounts if so agreed shall be the final Finacor
Completion Accounts and the two firms of auditors shall promptly
issue a joint statement as to the amount of the
36
<PAGE>
Finacor net tangible assets which shall be final and binding on the
parties to this Agreement. In carrying out their functions under
this Agreement, Finacor's Auditors and Euro Brokers' Auditors shall
be deemed to be acting as experts and not as arbitrators.
17.5 If Finacor's Auditors and Euro Brokers' Auditors shall not be able
to agree the draft Finacor Completion Accounts and a joint statement
as to the amount of the Finacor net tangible assets within 30 days
of the date on which the draft accounts were first submitted to Euro
Brokers' Auditors (or within such other period as Monecor and EB
Holdings may agree) the matter may be referred by either EB Holdings
or Monecor to an independent firm of chartered accountants selected
by agreement between EB Holdings and Monecor or, failing agreement,
nominated by the President for the time being of the Institute of
Chartered Accountants in England and Wales on the application either
of Monecor or EB Holdings and:
(i) such independent firm of chartered accountants shall be
requested to settle any matter in dispute, applying the same
basis and principles as are referred to in clause 17.1 and
determine the form and content of the Finacor Completion
Accounts and the statement as to the amount of the Finacor net
tangible assets; and
(ii) the decision of such firm of chartered accountants as to the
matter in dispute and the determination (if any) as to the
form and content of the Finacor Completion Accounts and the
statement as to the amount of the Finacor net tangible assets
shall be final and binding on the parties hereto and such
chartered accountants shall be deemed to act as experts and
not as arbitrators.
17.6 The costs of Finacor's Auditors in respect of the preparation and
the determination of the Finacor Completion Accounts shall be borne
by Monecor and the cost of Euro Brokers' Auditors shall be borne by
EB Holdings. The cost of the independent chartered accountant, if
any, shall be borne by Monecor and EB Holdings equally.
37
<PAGE>
17.7 The Monecor contribution for the purposes of Clause 19 shall be the
aggregate of the amount of the Finacor net tangible assets as so
agreed or determined and the net assets of the Business as shown by
the Traite d'Apport d'Actifs (the "Monecor Contribution").
18. Net Asset Valuation for EB Holdings' Contribution
-------------------------------------------------
18.1 As soon as reasonably practicable after Share Completion, but in any
event no later than 14 February 1999, EB Holdings shall prepare
draft accounts for EBIL in respect of the accounting reference
period ending on 31 December 1998 (draft "EBIL Completion Accounts")
and submit such accounts to Euro Broker's Auditors in accordance
with clause 18.2, such draft accounts to be prepared (i) on the same
accounting basis and in accordance with the same accounting and
valuation principles and practices as the EBIL Accounts and (ii) so
that the assets listed in Schedule 7 are ignored for the purposes of
calculating the net tangible assets in those accounts.
18.2 Following the submission of such draft accounts to Euro Broker's
Auditors, EB Holdings shall submit them to Euro Broker's Auditors
who shall conduct an audit applying the same basis and principles
referred to in clause 18.1 and produce a draft of the EBIL
Completion Accounts and a statement as to the amount of the net
tangible assets of EBIL derived from such accounts.
18.3 Euro Broker's Auditors shall, as soon as reasonably practicable,
submit the draft EBIL Completion Accounts and draft statement as to
the amount of the Finacor net tangible assets to Finacor's Auditors
for their review. EB Holdings shall procure that Euro Broker's
Auditors' working papers are made available to Finacor's Auditors,
if required by them in carrying out their review.
18.4 If Finacor's Auditors and Euro Brokers' Auditors are able to agree
the form and content of the EBIL Completion Accounts and the
statement as to the amount of the EBIL net tangible assets as
appearing in or derived from such accounts within 30 days of the
date on which the drafts were submitted to Finacor's Auditors (or
within such other period as Monecor and EB Holdings may agree), the
accounts if so agreed shall
38
<PAGE>
be the final EBIL Completion Accounts and the two firms of auditors
shall promptly issue a joint statement as to the amount of the EBIL
net tangible assets which shall be final and binding on the parties
to this Agreement. In carrying out their functions under this
Agreement, Finacor's Auditors and Euro Brokers' Auditors shall be
deemed to be acting as experts and not as arbitrators.
18.5 If Finacor's Auditors and Euro Brokers' Auditors shall not be able
to agree the draft EBIL Completion Accounts and a joint statement as
to the amount of the EBIL net tangible assets within 30 days of the
date on which the draft accounts were first submitted to Finacor's
Auditors (or within such other period as Monecor and EB Holdings may
agree) the matter may be referred by either EB Holdings or Monecor
to an independent firm of chartered accountants selected by
agreement between EB Holdings and Monecor or, failing agreement,
nominated by the President for the time being of the Institute of
Chartered Accountants in England and Wales on the application either
of Monecor or EB Holdings and:
(i) such independent firm of chartered accountants shall be
requested to settle any matter in dispute, applying the same
basis and principles as are referred to in clause 18.1 and
determine the form and content of the EBIL Completion Accounts
and the statement as to the amount of the EBIL net tangible
assets; and
(ii) the decision of such firm of chartered accountants as to the
matter in dispute and the determination (if any) as to the
form and content of the EBIL Completion Accounts and the
statement as to the amount of the EBIL net tangible assets
shall be final and binding on the parties hereto and such
chartered accountants shall be deemed to act as experts and
not as arbitrators.
18.6 The costs of Euro Broker's Auditors in respect of the preparation
and the determination of the EBIL Completion Accounts shall be borne
by EB Holding and the cost of Finacor' Auditors shall be borne by
Monecor. The cost of the independent chartered accountant, if any,
shall be borne by Monecor and EB Holdings equally.
39
<PAGE>
18.7 The Euro Broker's contribution for the purposes of clause 20, shall
be the amount of the EBIL net tangible assets as so agreed or
determined (the "Euro Brokers' Contribution").
19. Adjustment of Monecor's Contribution
------------------------------------
19.1 If the Monecor Contribution as agreed or determined in accordance
with clause 17 is less than 3,250,000 Pounds, Monecor shall
forthwith pay to EBIL an amount equal to such shortfall by way of an
additional cash contribution for the EBIL Shares (the "Cash
Contribution");
19.2 If the Monecor Contribution as agreed or determined in accordance
with clause 17 is more than 3,250,000 Pounds, EBIL shall forthwith
reimburse to Monecor with an amount equal to such excess.
20. Adjustment of EB Holdings' Contribution
20.1 If the EB Holdings' Contribution as agreed or determined in
accordance with clause 18 is less than 3,250,000 Pounds, EB Holdings
shall forthwith pay to EBIL an amount equal to such shortfall by way
of an additional cash contribution for the shares in EBIL held by
it;
20.2 If the EB Holdings' Contribution as agreed or determined in
accordance with clause 18 is more than 3,250,000 Pounds, EBIL shall
forthwith reimburse to EB Holdings an amount equal to such excess.
21. Monecor Covenant in Respect of Tax
----------------------------------
21.1 In this clause unless the context otherwise requires:
21.1.1 "event" includes (without limitation) any omission, event,
action or transaction whether or not Finacor is a party thereto,
the death of any person, a change in
40
<PAGE>
the residence of any person for any Tax purpose and the entering
into and completion of this Agreement;
21.1.2 "relief" includes (without limitation) any relief, allowance,
credit, set off, deduction or exemption for any Tax purpose;
21.1.3 reference to income or profits or gains earned, accrued or
received shall include income or profits or gains deemed to have
been or treated as or regarded as earned, accrued or received
for the purposes of any Tax legislation;
21.1.4 reference to any Tax liability shall mean any liability to make
actual payments of or in respect of Tax and shall also include:
21.1.4.1 the loss or reduction in the amount of, or the setting off
against income, profits or gains, or against any Tax
liability for which no provision has been made in preparing
the Finacor Completion Accounts, of any relief which would
(were it not for the said loss, reduction or setting off)
have been available to Finacor and which has been taken into
account in computing (and so eliminating or reducing) any
provision for deferred Tax which appears (or which but for
such relief would have appeared) in the Finacor Completion
Accounts;
21.1.4.2 the loss or reduction in the amount of, or the setting off
against any Tax liability for which no provision has been
made in preparing the Finacor Completion Accounts, of a
right to repayment of Tax which has been treated as an asset
of Finacor in preparing the Finacor Completion Accounts; and
21.1.4.3 the loss or reduction in the amount of, or the setting off
against income, profits or gains earned, accrued or received
on or before Share Completion, or against any Tax liability
of any relief which is not available on or before 31
December 1998 but which arises in respect of
41
<PAGE>
an event occurring after 31 December 1998 in circumstances
where, but for such loss, reduction or setting off, Finacor
would have had a Tax liability in respect of which EB
Holdings would have been able to make a claim under this
clause 21;
and in such a case the amount of Tax which could otherwise be
saved or relieved, by the relief so lost, reduced or set off or
the amount of repayment which would otherwise have been obtained
shall be treated as the amount of a Tax liability which has
arisen;
21.1.5 reference to a payment in respect of Tax includes (without
limitation) a payment for the surrender of losses or other
amounts by way of group relief (within the meaning of Section
402 of the Taxes Act) or for the surrender of advance
corporation tax or for the transfer of any other relief, a
repayment of any such payment and a payment to any person who
was a member of the same group of companies as Finacor at any
time before Share Completion by way of reimbursement or recharge
in respect of Tax.
21.2 Subject as hereinafter provided, Monecor hereby covenants with and
undertakes to EBIL to pay to EBIL, a sum equal to the amount of:
21.2.1 any Tax liability of Finacor resulting from or by reference to
any income, profits or gains earned accrued or received on or
before Share Completion or any event on or before Share
Completion whether or not such Tax is chargeable against or
attributable to any other person; and
21.2.2 any Tax liability of Finacor that arises after Share Completion
as a result of an act, omission or transaction by a person other
than Finacor and which liability to Tax falls upon Finacor as a
result of its having been in the same group for Tax purposes as
that person at any time before Share Completion; and
21.2.3 all reasonable costs and expenses which are incurred by Finacor
or EBIL in relation to demands, actions, proceedings and claims
in respect of Tax
42
<PAGE>
liabilities falling within clause 21.2.1 and 21.2.2 to the
extent they are not covered by the indemnity within clause 21.4.
21.3 The covenants contained in clause 21.2 do not apply to any
liability:
21.3.1 to the extent that provision or reserve in respect thereof has
been made in the Finacor Completion Accounts or to the extent
that payment or discharge of such liability has been taken into
account therein;
21.3.2 to the extent that it arises as a result of a transaction or
other matter in the ordinary course of business of Finacor after
31 December 1998;
21.3.3 in respect of which provision or reserve has been made in the
Finacor Completion Accounts which is insufficient only by reason
of any increase in rates of Tax made after the Share Completion
Date with retrospective effect.
21.3.4 to the extent that it arises directly or indirectly as a result
of any voluntary act, transaction or omission of EB Holdings
after Share Completion;
21.3.5 to the extent that it would not have arisen but for a change in
legislation made after 31 December 1998 (whether relating to
Tax, rates of Tax or otherwise) or any amendment to or the
withdrawal after 31 December 1998 of any practice published by
the Inland Revenue or other Taxation authority whether or not
the change, amendment or withdrawal purports to be effective
retrospectively in whole or in part;
21.3.6 to the extent that there are available to Finacor any reliefs or
rights to repayment of Tax to set against or otherwise mitigate
the liability which are reliefs or rights to repayment of Tax
which arose on or before 31 December 1998 and have not been
taken into account in the Finacor Completion Accounts.
43
<PAGE>
21.4 Where Monecor is liable to pay an amount to EBIL under this clause
21.2.1 in respect of a Tax liability and EBIL obtains a deduction,
allowance, loss or other relief (a "Benefit") in respect of Tax
which would not have arisen but for the facts, events or
circumstances giving rise to the Tax liability then the amount which
Monecor is liable to pay to EBIL on the due date shall be reduced by
the amount by which EBIL's liability to pay Tax is or is reasonably
expected to be reduced in respect of the accounting period of EBIL
in which the due date falls as a result of the utilisation or set
off of such Benefit. If it subsequently transpires that EBIL is
liable to pay Tax which was assumed to be saved as a result of the
use of a Benefit then, on the date on which and to the extent that
EBIL is required to pay such Tax to a Taxation authority, Monecor
shall pay to EBIL an amount equal to such Tax together with an
amount equal to interest on such sum at the rate of 1% above the
base rate of Barclays Bank plc from time to time from the due date
to the date of payment.
21.5 In the event that Finacor has or may have a liability in respect of
which a claim could be made under this clause, each of EB Holdings
or EBIL shall (if Monecor shall indemnify EB Holdings and Finacor to
EB Holdings' reasonable satisfaction against any liabilities, costs
or expenses which may be incurred thereby) take such action and
procure that Finacor shall take such action as Monecor may
reasonably request in writing to dispute, resist, appeal or
compromise the liability and EB Holdings shall co-operate with
Monecor to procure that Finacor shall make available to Monecor such
persons as Monecor may reasonably require and all such information
as may be available to it or them for avoiding, disputing,
resisting, appealing, compromising or contesting any such liability.
The action which Monecor may request be taken under this clause 21.5
shall include the delegation to Monecor of the conduct of any
correspondence or negotiations with any Tax authority or of any
proceedings on behalf of Finacor in relation to the relevant Tax
liability, provided that such request is reasonable and all other
provisions of this clause 21.5 are complied with. Neither Finacor
nor EB Holdings shall be required to take any such action unless
Monecor shall have received advice from an independent tax advisor
acceptable to EB Holdings in its reasonable discretion, after
disclosure of all relevant information and documents that it is
reasonable to take any such action. Neither Finacor nor EB Holdings
shall in any event be required to take any steps which are likely to
increase the future liability
44
<PAGE>
to Tax of EBIL or EB Holdings or which would require any admission
of guilt or liability relating to matters connected with the claim
in question or which would affect the future conduct of the business
of any member of the Euro Brokers Group or EBIL, or Finacor, or
affect the rights or reputations of any of them without the prior
written consent of EB Holdings, such consent not to be unreasonably
withheld or delayed. EBIL shall not settle or otherwise compromise
any claim for Tax without the prior written consent of Monecor which
shall not be unreasonably withheld or delayed.
21.6 The due date for the making of payments under this clause 21 shall
be:
21.6.1 where the payment relates to a liability of Finacor to make an
actual payment of or in respect of Tax, the date which is seven
days before the date on which such actual payment is due to be
made to the relevant authority;
21.6.2 where the payment relates to a matter falling within clause
21.1.4.1 or 21.1.4.3, the date falling seven days before Tax
becomes due to be paid by Finacor to a Tax authority which would
not have become due if the relevant relief had not been lost,
reduced or set off as therein mentioned;
21.6.3 where the payment relates to a matter falling within clause
21.1.4.2 the date on which the repayment of Tax would otherwise
have been due to be made; and
21.6.4 in the case of costs and expenses within clause 21.2.3 the date
on which such costs and expenses are incurred.
21.7 If any payment due to be made by Monecor under this clause is not
made on the due date for payment thereof the same shall carry
interest from such due date of payment until actual payment at the
rate of 1 per cent above the base rate from time to time of Barclays
Bank plc, compounded on the last days of March, June, September and
December in each year.
21.8 If any sum payable by Monecor to EBIL under this clause 21 (other
than interest under clause 21.7) shall be subject to Tax (whether by
way of deduction or
45
<PAGE>
withholding or by way of direct assessment of EBIL entitled thereto)
such payment shall be increased by such an amount as shall ensure
that after deduction, withholding or payment of such Tax EBIL shall
have received a net amount equal to the payment otherwise required
hereby to be made.
21.9 The liability of Monecor to make any payment under clause 21.2 shall
cease after 31 December 2005 except in respect of matters which have
been the subject of a bona fide written claim made on or before such
date by EB Holdings such claim specifying (in reasonable detail) the
nature of the claim and the estimated amount of the relevant Tax
liability.
21.10 Monecor shall give all such assistance and provide such information
as EB Holdings or EBIL shall reasonably request in writing from time
to time for the purpose of enabling EBIL or Finacor to make returns
and provide information as required to any Tax authority and to
negotiate any liability to Tax.
22. EB Holdings' Covenant in Respect of Tax
---------------------------------------
22.1 In this clause unless the context otherwise requires:
22.1.1 "event" includes (without limitation) any omission, event,
action or transaction whether or not EBIL is a party thereto,
the death of any person, a change in the residence of any person
for any Tax purpose and the entering into and completion of this
Agreement;
22.1.2 "relief" includes (without limitation) any relief, allowance,
credit, set off, deduction or exemption for any Tax purpose;
22.1.3 reference to income or profits or gains earned, accrued or
received shall include income or profits or gains deemed to have
been or treated as or regarded as earned, accrued or received
for the purposes of any Tax legislation;
46
<PAGE>
22.1.4 reference to any Tax liability shall mean any liability to make
actual payments of or in respect of Tax and shall also include:
22.1.4.1 the loss or reduction in the amount of, or the setting off
against income, profits or gains, or against any Tax
liability for which no provision has been made in preparing
the EBIL Completion Accounts, of any relief which would
(were it not for the said loss, reduction or setting off)
have been available to EBIL and which has been taken into
account in computing (and so eliminating or reducing) any
provision for deferred Tax which appears (or which but for
such relief would have appeared) in the EBIL Completion
Accounts;
22.1.4.2 the loss or reduction in the amount of, or the setting off
against any Tax liability for which no provision has been
made in preparing the EBIL Completion Accounts, of a right
to repayment of Tax which has been treated as an asset of
EBIL in preparing the EBIL Completion Accounts; and
22.1.4.3 the loss or reduction in the amount of, or the setting off
against income, profits or gains earned, accrued or received
on or before Share Completion, or against any Tax liability
of any relief which is not available on or before 31
December 1998 but which arises in respect of an event
occurring after 31 December 1998 in circumstances where, but
for such loss, reduction or setting off, EBIL would have had
a Tax liability in respect of which the Purchaser would have
been able to make a claim under this clause 22;
and in such a case the amount of Tax which could otherwise be
saved or relieved, by the relief so lost, reduced or set off or
the amount of repayment which would otherwise have been obtained
shall be treated as the amount of a Tax liability which has
arisen;
47
<PAGE>
22.1.5 reference to a payment in respect of Tax includes (without
limitation) a payment for the surrender of losses or other
amounts by way of group relief (within the meaning of Section
402 of the Taxes Act) or for the surrender of advance
corporation tax or for the transfer of any other relief, a
repayment of any such payment and a payment to any person who
was a member of the same group for Tax purposes as EBIL at any
time before Share Completion by way of reimbursement or recharge
in respect of Tax.
22.2 Subject as hereinafter provided, EB Holdings hereby covenants with
and undertakes to EBIL to pay to EBIL, a sum equal to the amount of:
22.2.1 any Tax liability of EBIL resulting from or by reference to any
income, profits or gains earned accrued or received on or before
Share Completion or any event on or before Share Completion
whether or not such Tax is chargeable against or attributable to
any other person; and
22.2.2 any Tax liability of EBIL that arises after Share Completion as
a result of an act, omission or transaction by a person other
than EBIL and which liability to Tax falls upon EBIL as a result
of its having been in the same group for Tax purposes as that
person at any time before Share Completion; and
22.2.3 all reasonable costs and expenses which are incurred by EBIL or
Monecor in relation to demands, actions, proceedings and claims
in respect of Tax liabilities falling within clause 22.2.1 and
22.2.2 to the extent they are not covered by the indemnity
within clause 22.4.
22.3 The covenants contained in clause 22.2 do not apply to any
liability:
22.3.1 to the extent that provision or reserve in respect thereof has
been made in the EBIL Completion Accounts or to the extent that
payment or discharge of such liability has been taken into
account therein;
48
<PAGE>
22.3.2 to the extent that it arises as a result of a transaction or
other matter in the ordinary course of business of EBIL after 31
December 1998;
22.3.3 in respect of which provision or reserve has been made in the
EBIL Completion Accounts which is insufficient only by reason of
any increase in rates of Tax made after the Share Completion
Date with retrospective effect.
22.3.4 to the extent that it arises directly or indirectly as a result
of any voluntary act, transaction or omission of Monecor after
Share Completion;
22.3.5 to the extent that it would not have arisen but for a change in
legislation made after 31 December 1998 (whether relating to
Tax, rates of Tax or otherwise) or any amendment to or the
withdrawal after 31 December 1998 of any practice published by
the Inland Revenue or other Taxation authority whether or not
the change, amendment or withdrawal purports to be effective
retrospectively in whole or in part;
22.3.6 to the extent that there are available to EBIL any reliefs or
rights to repayment of Tax to set against or otherwise mitigate
the liability which are reliefs or rights to repayment of Tax
which arose on or before 31 December 1998 and have not been
taken into account in the EBIL Completion Accounts;
22.3.7 to the extent that EB Holdings is liable to make a payment to
EBIL in respect thereof under clause 22.4.
22.4.1 EB Holdings hereby covenants with and undertakes to EBIL to pay
to EBIL a sum equal to the amount of any liability of EBIL to
pay national insurance contributions (and any interest payable
in respect thereof) calculated by reference to earnings paid or
deemed to have been paid for national insurance contributions
purposes in respect of any period ending on or before 31
December 1998 to the extent that such liability has neither been
discharged on or before 31 December 1998 nor provided for in the
EBIL Completion Accounts.
49
<PAGE>
22.4.2 Any liability of EBIL Holdings under this clause 22.5 shall be
left out of account for the purposes of clauses 16.8 and 16.9
and any claim under this clause 22.4 shall not be subject to
the limitations in clauses 22.3 and 22.10.
22.5 Where EB Holdings is liable to pay an amount to EBIL under this
clause 22 in respect of a Tax liability and EBIL obtains a
deduction, allowance, loss or other relief (a "Benefit") in respect
of Tax which would not have arisen but for the facts, events or
circumstances giving rise to the Tax liability then the amount which
EB Holdings is liable to pay to EBIL on the due date shall be
reduced by the amount by which EBIL's liability to pay Tax is or is
reasonably expected to be reduced in respect of the accounting
period of EBIL in which the due date falls as a result of the
utilisation or set off of such Benefit. If it subsequently
transpires that EBIL is liable to pay Tax which was assumed to be
saved as a result of the use of a Benefit then, on the date on which
and to the extent that EBIL is required to pay such Tax to a
Taxation authority, EB Holdings shall pay to EBIL an amount equal to
such Tax together with an amount equal to interest on such sum at
the rate of 1% above the base rate of Barclays Bank plc from time to
time from the due date to the date of payment.
22.6 In the event that EBIL has or may have a liability in respect of
which a claim could be made under this clause, Monecor or EBIL (as
the case may be) shall give written notice thereof to EB Holdings
and shall (if EB Holdings shall indemnify Monecor and EBIL to
Monecor's reasonable satisfaction against any liabilities, costs or
expenses which may be incurred thereby) take such action and procure
that EBIL shall take such action as EB Holdings may reasonably
request in writing to dispute, resist, appeal or compromise the
liability and Monecor shall co-operate with EB Holdings to procure
that EBIL shall make available to EB Holdings such persons as EB
Holdings may reasonably require and all such information as may be
available to it or them for avoiding, disputing, resisting,
appealing, compromising or contesting any such liability. The action
which EB Holdings may request be taken under this clause 22.6 shall
include the delegation to EB Holdings of the conduct of any
correspondence or negotiations with any Tax authority or of any
proceedings on behalf of EBIL in relation to the relevant Tax
liability, provided that such request is reasonable and all other
provisions of this clause 22.6 are complied with. Neither EBIL nor
EB
50
<PAGE>
Holdings shall be required to take any such action unless EB
Holdings shall have received advice from an independent tax advisor
acceptable to Monecor in its reasonable discretion, after disclosure
of all relevant information and documents that it is reasonable to
take any such action. Neither EBIL nor Monecor shall in any event be
required to take any steps which are likely to increase the future
liability to Tax of EBIL or which would require any admission of
guilt or liability relating to matters connected with the claim in
question or which would affect the future conduct of the business of
any member of the Monecor Group, or EBIL or affect the rights or
reputations of any of them without the prior written consent of
Monecor such consent not to be unreasonably withheld or delayed.
EBIL shall not settle or otherwise compromise any claim for Tax
without the prior written consent of EB Holdings which shall not be
unreasonably withheld or delayed.
22.7 The due date for the making of payments under this clause 22 shall
be :-
22.7.1 where the payment relates to a liability of EBIL to make an
actual payment of or in respect of Tax, the date which is seven
days before the date on which such actual payment is due to be
made to the relevant authority;
22.7.2 where the payment relates to a matter falling within clause
22.1.4.1 or 22.1.4.3, the date falling seven days before Tax
becomes due to be paid by EBIL to a Tax authority which would
not have become due if the relevant relief had not been lost,
reduced or set off as therein mentioned; and
22.7.3 where the payment relates to a matter falling within clause
22.1.4.2 the date on which the repayment of Tax would otherwise
have been due to be made; and
22.7.4 in the case of costs and expenses within clause 22.2.3 the date
on which such costs and expenses are incurred.
22.8 If any payment due to be made by EB Holdings under this clause is
not made on the due date for payment thereof the same shall carry
interest from such due date of payment until actual payment at the
rate of 1 per cent above the base rate from time to
51
<PAGE>
time of Barclays Bank plc, compounded on the last days of March,
June, September and December in each year.
22.9 If any sum payable by EB Holdings to EBIL under this clause 22
(other than interest under clause 22.8) shall be subject to Tax
(whether by way of deduction or withholding or by way of direct
assessment of EBIL) such payment shall be increased by such an
amount as shall ensure that after deduction, withholding or payment
of such Tax EBIL shall have received a net amount equal to the
payment otherwise required hereby to be made.
22.10 The liability of EB Holdings to make any payment under clause 22.2
shall cease after 31 December 2005 except in respect of matters
which have been the subject of a bona fide written claim made on or
before such date by EB Holdings such claim specifying (in reasonable
detail) the nature of the claim and the estimated amount of the
relevant Tax liability.
22.11 EB Holdings shall give all such assistance and provide such
information as Monecor shall reasonably request in writing from time
to time for the purpose of enabling EBIL to make returns and provide
information as required to any Tax authority and to negotiate any
liability to Tax.
22.12 EBIL shall take such action as may reasonably be directed in writing
by Monecor from time to time to enforce EBIL's rights under this
clause 22 against EB Holdings
23. Restriction on Announcements
----------------------------
Each of the parties to this Agreement undertakes that it will not (save as
required by law or by any securities exchange or any supervisory or regulatory
body to whose rules any party to this Agreement is subject) make any
announcement in connection with this Agreement unless the other parties shall
have given their respective consents to such announcement (which consents may
not be unreasonably withheld or delayed and may be given either generally or in
a specific case or cases and may be subject to conditions).
52
<PAGE>
24. Costs
-----
Each party to this Agreement shall pay its own costs of and incidental to this
Agreement and the sale and purchase hereby agreed to be made, save that Monecor
shall be liable for all or any stamp duty payable on the transfer of the Finacor
Shares and the Branch Assets.
25. General
-------
25.1 This Agreement shall be binding upon and enure for the benefit of
the successors of the parties. No party shall be entitled to assign
the benefit of this Agreement in whole or in part.
25.2 This Agreement (together with any documents referred to herein or
executed contemporaneously by the parties in connection herewith)
constitutes the whole agreement between the parties hereto and
supersedes any previous agreements or arrangements between them
relating to the subject matter hereof; it is expressly declared that
no variations hereof shall be effective unless made in writing
signed by duly authorised representatives of the parties.
25.3 All of the provisions of this Agreement shall remain in full force
and effect notwithstanding Share Completion and Asset Completion
(except insofar as they set out obligations which have been fully
performed at Share Completion and Asset Completion, as the case may
be).
25.4 If any provision or part of a provision of this Agreement shall be,
or be found by any authority or court of competent jurisdiction to
be, invalid or unenforceable:
25.4.1 such invalidity or unenforceability shall not affect the other
provisions or parts of such provisions of this Agreement or the
enforceability thereof in other jurisdictions, all of which
shall remain in full force and effect; and
25.4.2 the parties hereto shall in good faith agree a substitute
provision or part of a provision which will be capable of having
a similar effect.
53
<PAGE>
25.5 No failure of any party to exercise, and no delay or forbearance in
exercising, any right or remedy in respect of any provision of this
Agreement shall operate as a waiver of such right or remedy.
25.6 Each party irrevocably and unconditionally waives any right it might
have to rescind this Agreement for breach of any warranty not
contained in this Agreement or for any misrepresentation not
contained in this Agreement unless such warranty or
misrepresentation was made fraudulently or dishonestly.
25.7 Upon and after Share Completion and Asset Completion (as the case
may be) Monecor shall do and execute or procure to be done and
executed all such further acts, deeds, documents and things as may
be necessary to give effect to the terms of this Agreement and to
transfer the Finacor Shares and the Business (as the case may be) to
EBIL and pending the doing of such acts, deeds, documents and things
Monecor shall as from the Share Completion Date and the Asset
Completion Date (as the case may be) hold the legal estate in the
Finacor Shares and the Branch Assets (as the case may be) in trust
for EBIL.
25.8 Upon and after Share Completion, EB Holdings shall do and execute or
procure to be done and executed all such further acts, deeds,
documents and things as may be necessary to give effect to the terms
of this Agreement.
25.9 The parties shall not give effect to or enforce any provision of
this Agreement or any other agreement forming part of the same
arrangement which is such as to render the agreement or arrangement
subject to registration in accordance with the Restrictive Trade
Practices Act 1976 until the day following that on which particulars
of the arrangement are duly furnished to the Director General of
Fair Trading in accordance with the provisions of the said Act.
25.10 This Agreement may be executed in one or more counterparts, and by
the parties on separate counterparts, but shall not be effective
until each party has executed at least one counterpart and each such
counterpart shall constitute an original of this
54
<PAGE>
Agreement but all the counterparts shall together constitute one and
the same instrument.
25.11 If any Overprovision (as defined in clause 12(7) of the Shareholders
Agreement) is determined by the auditors of EBIL pursuant to the
said clause 12(7), such Overprovision shall be treated as never
having been made in the EBIL Completion Accounts for the purposes of
clauses 16 and 22 of this Agreement. If any Overprovision (as
defined in clause 12(8) of the Shareholders Agreement) is determined
by the auditors of EBIL pursuant to the said clause 12(8), such
Overprovision shall be treated as never having been made in the
Finacor Completion Accounts for the purposes of clauses 14 and 21 of
this Agreement.
25.12 Notwithstanding any other provision of this Agreement and the
Shareholders Agreement, neither Monecor nor EB Holdings shall
benefit more than once in respect of the same Tax asset (whether
being a Tax asset of EBIL or Finacor) where such benefit may be
obtained pursuant to clauses 14.13, 15.11, 16.14, 21.4 or 22.5 or
clauses 12 or 21 of the Shareholders Agreement or otherwise.
26. Notices
-------
(1) Any notice or other document to be served under this agreement may
be delivered or sent by first class recorded delivery post or
facsimile process to the party to be served at its address appearing
in this agreement or at such other address as it may have notified
to the other parties in accordance with this clause.
(2) Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 am on the second Business Day after it was
put into the post; or
55
<PAGE>
(c) if sent by facsimile process, at the expiration of two hours
after the time of despatch, if despatched before 3.00 pm on
any Business Day, and in any other case at 10.00 am on the
Business Day following the date of despatch.
(3) In proving service of a notice or document it shall be sufficient to
prove that delivery was made or that the envelope containing the
notice or document was properly addressed and posted as a prepaid
first class letter or that the facsimile message was properly
addressed and despatched as the case may be.
27. Governing Law and Submission to Jurisdiction
--------------------------------------------
This Agreement shall be governed by and construed in accordance with English law
and the parties hereto submit to the exclusive jurisdiction of the English
courts for the purpose of enforcing any claim arising hereunder. Finacor Peter
hereby appoints Monecor as its agent for service of process under the Agreement.
56
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this document as a deed on
the date appearing at the head hereof.
EXECUTED as a DEED by )
MONECOR (LONDON) LIMITED ) /s/ MONECOR (LONDON) LIMITED
--------------------------------------
acting by ) Director
and )
) /s/ MONECOR (LONDON) LIMITED
--------------------------------------
Director / Secretary
EXECUTED as a DEED by )
FINACOR PETER ) /s/ FINACOR PETER
--------------------------------------
acting by ) Director
and )
) /s/ FINACOR PETER
--------------------------------------
Director / Secretary
EXECUTED as a DEED by )
EURO BROKERS )
INTERNATIONAL LIMITED ) /s/ EURO BROKERS INTERNATIONAL LIMITED
--------------------------------------
acting by ) Director
and )
) /s/ EURO BROKERS INTERNATIONAL LIMITED
--------------------------------------
Director / Secretary
57
<PAGE>
EXECUTED as a DEED by )
EURO BROKERS )
HOLDINGS LIMITED ) /s/ EURO BROKERS HOLDINGS LIMITED
--------------------------------------
acting by ) Director
and )
) /s/ EURO BROKERS HOLDINGS LIMITED
--------------------------------------
Director / Secretary
58
<PAGE>
Exhibit 4.7
Maxcor Financial Group Inc.
Roger E. Schwed March 31, 1999
Vice President and General Counsel
Direct Dial: (212) 748-8860
Direct Fax: (212) 748-7979
E-Mail: [email protected]
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, D.C. 20549
Dear Sirs or Madams:
This will confirm that Maxcor Financial Group Inc. (the "Company") will
furnish to the Securities and Exchange Commission upon request copies of the
following Notes:
(i) Convertible Note dated 1st December, 1988 issued by Euro Brokers
Holdings, Inc. and Euro Brokers Limited to MAG Investments
Limited;
(ii) Convertible Note dated December 1, 1986 issued by Euro Brokers
Holdings, Inc., First Euro Brokers, Inc., and Euro Brokers (USA)
Inc., to EBH Holding, Inc.; and
(iii) Secured Promissory Note, dated December 10, 1997 issued by Euro
Brokers Inc. to General Electric Capital Corporation.
The amount of each of the foregoing Notes does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
Very truly yours,
/s/ Roger E. Schwed
<PAGE>
Exhibit 10.5
DATED 28th May 1993
CHESTERMOUNT PROPERTIES LIMITED
-to-
EURO BROKER HOLDINGS LIMITED
-and-
EURO BROKERS INVESTMENT CORPORATION
-and-
EURO BROKERS LIMITED AND OTHERS
- - --------------------------------------------------------------------------------
SUPPLEMENTAL DEED
relating to Premises on the Second Floor of
5 Acre Square Houndsditch London EC3
- - --------------------------------------------------------------------------------
NABARRO NATHANSON
50 Stratton Street
London WIX 5FL
Telephone 071-493-9933
Telex: 08813-144 NABAROG
Fax: 071-629-7900
<PAGE>
THIS SUPPLEMENTAL DEED is made the 28th day of May 1993 BETWEEN:
(1) CHESTERMOUNT PROPERTIES LIMITED whose registered office is at 38 Curzon
Street London WI ("the Landlord" which expression shall include its
successors in title and assigns)
(2) EURO BROKERS HOLDINGS LIMITED whose registered office is at Adelaide
House London Bridge London EC4R 9EQ (hereinafter called "the Tenant")
(3) EURO BROKERS INVESTMENT CORPORATION of two World Trade Center Suite 8400
New York New York 10048 (hereinafter called "Euro")
(4) EURO BROKERS LIMITED EURO BROKERS STERLING LIMITED EURO BROKERS CAPITAL
MARKETS LIMITED EURO BROKERS FINANCIAL SERVICES LIMITED and EURO BROKERS
SERVICES LIMITED whose registered offices are at Adelaide House aforesaid
(hereinafter together called "the Existing Subsidiaries")
WHEREAS:
This Deed is supplemental to an Underlease of even date made between the
Landlord and the Tenant relating to the premises known as the second floor 5
Acre Square Houndsditch London EC3
NOW THIS DEED WITNESSETH as follows:
1.1 In this Deed the following expressions shall have the following
meanings respectively:
1.1.1 "Bank Guarantee"
----------------
means the guarantee provided by National Westminster Bank plc to
the Landlord on the date hereof in the form set out in Annexure
1 hereto
<PAGE>
1.1.2 "Works"
-------
means the following works to be carried out by the Tenant to the
Building namely the extension of the ceiling across the base of
the north east and north west atria in a similar specification
to the existing tartan grid suspended ceiling and incorporating
the necessary lighting sprinkler and air conditioning amendments
including the extension of the fresh air smoke vent ducts from
low level second floor to high second floor and such works as
necessary to provide new bases for the atria at high second
floor level and such works to comply with all relevant local
authority and statutory regulations and bye-laws and to be
carried out in accordance with all current British Standards and
codes of practice and such works to be more particularly defined
in plans and specifications to be produced by the Tenant as soon
as reasonably practicable after the date hereof for approval by
the Landlord (such approval not to be unreasonably withheld or
delayed)
1.1.3 "Building Contract"
-------------------
means the contract placed with the Tenant's Building Contractor
for the carrying out of the Works
1.1.4 "Deed of Covenant"
------------------
means the deed in the form contained in Annexure 2 hereto
1.1.5 "Group Company"
---------------
means any member of the same group (as defined by Section 42 of
the Landlord and Tenant Act 1954) of companies as the Tenant
<PAGE>
1.1.6 "Fitting Out Guide"
-------------------
means the document contained in Annexure 3 hereto
1.1.7 "Completion"
------------
means the date the Works have been substantially completed in
accordance with the terms of this Deed (save for any minor works
of an unfinished nature which would normally be the subject of a
building contractor's snagging list)
1.1.8 "Lease"
-------
means the underlease of the Premises of even date made between
the Landlord and the Tenant
1.1.9 "Managing Agents"
-----------------
means Messrs Richard Main & Co of 29 Gresham Street London EC2
1.1.10 "Landlord's Building Contractor"
--------------------------------
means the Landlord's main building contractor Balfour Beatty
Building Limited
1.1.11 "Premises"
----------
means the premises known as the second floor of 5 Acre Square
Houndsditch London EC3 as is more particularly described in the
Lease
1.1.12 "Professional Team"
-------------------
<PAGE>
means the persons or bodies details whereof are set out in the
Schedule hereto
1.1.13 "Tenant's Building Contractor"
------------------------------
means Stanhope Interior PLC of 15 Appold Street London EC2A 2AA
or such other building contractor who is first approved by the
Landlord (such approval not to be unreasonably withheld or
delayed)
1.2 The words and phrases contained in this Deed shall have the
meanings ascribed to them in the Lease
2. THE INITIAL WORKS
-----------------
2.1 The tenant HEREBY COVENANTS with the Landlord to:
2.1.1 forthwith after the date hereof and as expeditiously as possible
to carry out and complete the Works
2.1.2 to carry out the Works in a good and workmanlike manner with
good quality materials fit for the purposes for which they are
required and to the reasonable satisfaction of the Landlord and
to the satisfaction of the local and any other competent
authority
2.1.3 to provide to the Landlord when requested in writing by the
Landlord a copy of every consent necessary for the lawful
carrying out of the Works
2.1.4 to permit the Landlord at all reasonable times to inspect the
progress of the Works and the quality of the materials and
workmanship used therein
2.1.5 promptly to make good to the reasonable satisfaction of the
Landlord any injury or loss whether to the Building or to the
Plant or Conduits or to person or property or otherwise arising
directly or indirectly from the Works
2.1.6 to indemnify the Landlord against all actions claims costs
demands and proceedings for damage injury or loss whether to the
Building or to the Plant or
<PAGE>
Conduits or to person or property or otherwise arising directly
or indirectly from the Works or any special requirement relevant
to the Works
2.1.7 to give the Landlord notice in writing at least 14 days prior to
the anticipated date for Completion so as to enable the Landlord
and its agents to make an inspection
2.1.8 not to gain access in connection with the Works to the Premises
and any other area in the Building in which the Works are being
carried out save as specified in the Fitting Out Guide or along
such other routes as the Landlord or the Managing Agents may
from time to time direct
2.1.9 to comply with the requirements of the Fitting Out Guide where
those requirements are additional to the requirements of the
forgoing clauses save to the extent that those provisions are
inconsistent herewith
2.1.10 to indemnify the Landlord against all actions claims costs
demands and proceedings for damage injury or loss arising from
suspension or interference with the proper functioning of the
Plant and the Conduits or any part thereof as a result whether
direct or indirect of the Works
2.1.11 to comply with all regulations issued prior to the date hereof
(or such further reasonable regulations issued after the date
hereof (whether in addition to or substitution for the existing
regulations) provided such regulations do not materially
adversely interfere with the Tenants progress of the Works) by
the Landlord and/or the Managing Agents in relation to the
conduct of the Works
2.1.12 the obligation of the Landlord to provide the services pursuant
to Clause 5.4 of the Underlease shall be suspended to the extent
they cannot be supplied due to the Works and in any event the
Landlord shall be under no obligation to the Tenant to
recommence the supply of such suspended services until they have
been (where necessary) the subject of recommissioning by the
Tenant
2.2 Once the Landlord's Managing Agents are satisfied that the Works
have reached Completion the Landlord shall pay to the Tenant:
2.2.1 the sum of NINETY EIGHT THOUSAND FOUR HUNDRED AND FIFTY THREE
POUNDS AND SEVENTY NINE PENCE (98,453.79 Pounds) (inclusive of
<PAGE>
Value Added Tax) upon receipt by the Landlord of a valid Value
Added Tax invoice for such amount
2.2.2 upon receipt by the Landlord of a valid Value Added Tax invoice
for such amount a sum equal to the reasonable and proper costs
(including Value Added Tax to the extent it is not recoverable
by the Tenant) paid to the Tenant's Building Contractor in
respect of the Works PROVIDED THAT:
2.2.2.1 any management fee paid to the Tenant's Building Contractor
shall not be at a percentage higher than the equivalent fee paid
(or to be paid) by the Tenant to the Tenant's Building
Contractor in respect of its proposed fitting out works for the
Premises; and
2.2.2.2 the Landlord has the right to approve (such approval not to be
unreasonably withheld) any tenders submitted for the carrying
out of the Works and
2.2.2.3 the Tenant shall at the request of the Landlord provide such
information and assistance to the Landlord as the Landlord may
reasonably require in relation to the carrying out of the Works
2.3.1 the Tenant will during the last 28 days before the expiry of the
defects liability period under the Tenants Building Contract
arrange for the Works to be inspected (accompanied by the
Landlord and its Managing Agents ) to ascertain whether any
defects have arisen in respect of the Works
2.3.2 the Tenant shall forthwith after such inspection use its best
endeavours to procure that the Tenant's Building Contractor
forthwith remedies to the reasonable satisfaction of the
Landlord's Managing Agents any such defects without expense to
the Landlord
2.4 The Tenant recognises that the Landlord will be seeking capital
allowances under the Capital Allowances Act 1990 Section 154 in
respect of the payment for the Works contained in Clause 2.2.2
above and accordingly the Tenant:
<PAGE>
2.4.1 undertakes that it will not itself seek such capital allowances
on the cost of the Works
2.4.2 it will render to the Landlord without charge such itemised
invoices and receipts as the Landlord may reasonably require in
order to seek and secure such capital allowances
2.5 The Works shall form part of the Building or shall be deemed to
be Landlords fixtures and fittings (as the case may be) for the
purposes of the Lease
3. WARRANTIES
----------
As soon as reasonably practicable after the date hereof the
Landlord shall use all reasonable endeavours to procure that
there are delivered to the Tenant duly executed collateral
warranty deeds from the Landlord's Building Contractor and the
Professional Team in substantially the form of the draft copies
contained in Annexure 4 hereto PROVIDED THAT the Tenant shall
not unreasonably withheld consent in relation to any minor
amendment proposed by any party required to give a warranty
4. BANK GUARANTEE
--------------
4.1 The Tenant has on the date hereof procured the Bank Guarantee in
favour of the Landlord
4.2 At any time during the Term the Tenant shall be entitled to
procure a Deed of Covenant from a third party ("the Proposed
Guarantor") who shall have been first approved by the Landlord
in accordance with Clause 4.3 below
4.3 In the event that the Proposed Guarantor shall satisfy the
following criteria:
4.3.1 a company incorporated in a country which then has arrangements
for enforceability in that country of judgements obtained in
England and Wales
4.3.2 whose audited accounts for the immediately preceding three
financial years disclose for each of those financial years
either:
<PAGE>
4.3.2.1 pre-tax profits (on a group basis) of not less than three times
the rents firstly secondly and thirdly reserved by the Lease
then payable under the Lease or
4.3.2.2 net current assets on a group basis exceeding three times the
rent firstly secondly and thirdly reserved by the Lease
4.3.3 for the purpose of Clause 4.3.2 above the rent firstly reserved
shall exclude the initial rent free period and the rent shall be
assumed to have been payable from the date hereof
4.3.4 for which satisfactory references from a clearing bank an
accountant and the last landlord of the Proposed Guarantor and
such other persons as the Landlord reasonably requires have been
produced then the consent of the Landlord to the Proposed
Guarantor shall not be unreasonably withheld
4.4 In the event that the Landlord approves the Proposed Guarantor
engrossments of the Deed of Covenant shall be prepared by the
Landlord's solicitors and shall be executed by the Landlord and
the Proposed Guarantor
4.5 On completion of the Deed of Covenant the Bank Guarantee shall
immediately cease and determine but without prejudice to any
rights of the Landlord to receive any monies due prior to the
date of such determination
4.6 The costs of the Landlord incurred in considering any
application by the Tenant under Clause 4.2 above (whether or not
such application is approved) and in completing the Deed of
Covenant in accordance with Clause 4.4 above shall be paid by
the Tenant on demand
4.7.1 The Bank Guarantee shall terminate on receipt by the Landlord of
audited accounts for Euro Brokers Holdings Limited which
disclose for the immediate three preceding financial years
either:
4.7.1.1 pretax profits (on a group basis) of not less than three times
the rents firstly secondly and thirdly reserved by the Lease
then payable under the Lease or
4.7.1.2 net current assets (on a group basis) exceeding three times the
rent firstly secondly and thirdly reserved by the Lease
<PAGE>
4.7.2 For the purpose of Clause 4.7.1 above the rent firstly reserved
shall also have the meaning ascribed to it in clause 4.3.3 above
4.8 Subject to the Bank Guarantee not having been released in
accordance with the terms of the Bank Guarantee if following the
review of rent due under the Lease the rent firstly reserved is
increased than the Tenant shall forthwith thereafter procure
form a London Town Clearing Bank an additional guarantee equal
to the annual amount of such increase (and any VAT payable
thereon) such guarantee to be on the same terms and conditions
(other than the amount of the maximum liability) as the Bank
Guarantee
5. THE SUBSIDIARIES
----------------
The tenant HEREBY COVENANTS WITH THE Landlord that unless the
Landlord shall agree otherwise (such agreement not to be
unreasonably withheld or delayed):
5.1 Euro Brokers Limited Euro Brokers Sterling Limited and Euro
Brokers Capital Markets Limited (together "the Subsidiaries")
shall continue to be regulated by the Bank of England or the
appropriate regulatory authority (to the extent that is required
for the purposes of their respective businesses)
5.2 the Tenant will at all times beneficially own at least 75% of
the issued share capital of each of the Subsidiaries
5.3 the Tenant will not sell or permit or suffer the sale of any
business or businesses presently carried on by the Subsidiaries
6. SUBORDINATION OF DEBT
---------------------
6.1 For the purposes of the Clause 6 the following expressions shall
have the following meanings:
<PAGE>
6.1.1 "Inner Group"
-------------
means Euro Brokers Holdings Limited and any Subsidiary (but
excluding Liberty as hereinafter defined) from time to time of
that company and "Inner Group Company" shall be construed
accordingly
6.1.2 "Outer Group"
-------------
means Euro and any Subsidiary from time to time of that company
but excluding any company in the Inner Group and "Outer Group
Company" shall be construed accordingly
6.1.3 "Subsidiary"
------------
has the meaning ascribed to it in Section 736 of the Companies
Act 1985 (as amended by the Companies Act 1989)
6.1.4 "Regulatory Authority"
----------------------
means the Bank of England or the Securities and Futures
Authority
6.1.5 "Loan"
------
means any existing or future loan or facility
6.1.6 "Non Group Member"
------------------
means:
6.1.6.1 any individual; or
6.1.6.2 a company which is neither an Inner Group Company or an Outer
Group Company
6.1.7 "Liberty"
---------
means Liberty Euro Brokers Limited
6.2 the Existing Subsidiaries covenant with the Landlord that in
relation to any Loan by any one of the Existing Subsidiaries to
either an Outer Group company or a Non Group Member:
6.2.1 if the Loan shall be repayable on demand or
<PAGE>
6.2.2 if the Loan is regulated by a Regulatory Authority the Loan
shall be repayable at the earliest possible time permitted by
such Regulatory Authority; or
6.2.3 the Loan shall require the prior written approval of the
Landlord (such approval not to be unreasonably withheld) if the
Loan is regulated by any authority similar to the Regulatory
Authority; or
6.2.4 if the Loan is to an employee or ex employee of an Inner Group
Company it shall be for no more than 10,000 Pounds or if for
more than 10,000 Pounds it is made with the prior approval of
the Landlord (such approval not to be unreasonably withheld)
6.3 Euro and the Tenant covenant with the Landlord that:
6.3.1 the Existing Subsidiaries will comply with their obligations to
the Landlord contained in Clause 6.2
6.3.2 they will procure any company or companies from time to time
falling within the definition of Inner Group Company shall
comply with the same obligations as those contained in Clause
6.2 above
6.4.1 The Existing Subsidiaries covenant with the Landlord that in
relation to any Loan made to any one of the Existing
Subsidiaries by an Outer Group Company that they will not pay
any principal or interest on such Loan if there is any
outstanding rent or other sums due and immediately payable under
the Lease
6.4.2 Euro and the Tenant covenant with the Landlord that:
6.4.2.1 the Existing Subsidiaries will comply with their obligations
contained in Clause 6.4.1 above;
6.4.2.2 that they will procure that any company which from time to time
falls within the definition of Inner Group Company will comply
with the same obligations as those contained in clause 6.4.1
above;
6.4.2.3 that they will procure that any company from time to time
falling within the definition of Outer Group company will not
seek or accept payment of any principle or interest on any Loan
referred to Clause 6.4.1 above other than in accordance with
that Clause
6.4.3 Without prejudice to 6.4.2 above Euro will not accept payment of
any principal or interest and the Tenant shall not offer payment
of any principal or interest on the
<PAGE>
existing loan between those two companies if there is any
outstanding rent or sums due and immediately payable under the
Lease
6.5 If:
6.5.1 resolution is passed or order made for the winding up
liquidation dissolution administration or re-organisation of the
Tenant save for the purposes of reconstruction or amalgamation
while the Tenant is solvent under a scheme forthwith put into
effect
6.5.2 the Tenant becomes subject to any insolvency bankruptcy
re-organisation receivership liquidation dissolution or other
similar proceedings save for the purposes of reconstruction or
amalgamation while the Tenant is solvent under a scheme
forthwith put into effect
6.5.3 the Tenant assigns the whole or a substantial proportion of its
assets to the benefit of all or any of its creditors (other than
the Landlord) or enters into an arrangement with its creditors
generally
then the Existing Subsidiaries will (and Euro and the Tenant
will procure that any other companies in the Outer Group or the
Inner Group will also) direct the trustee in bankruptcy
liquidator administrator receiver assignee or other person
distributing the assets of the Tenant not to (save for any
trading indebtedness incurred by the Tenant with any Outer Group
Company or Inner Group Company which is incurred during the
normal course of business between such companies (the priority
for settlement of which will be governed by general law)) pay
any sums to any Inner Group company or Outer Group company until
all sums due to the Landlord under the Lease have been paid in
full
6.6 Euro will procure that any sums paid to an Outer Group Company
or an Inner Group company in breach of the terms of this Clause
shall as soon as Euro becomes aware of any such breach shall be
held by such company in a separate account on trust for the
Landlord
6.7.1 The Existing Subsidiaries covenant with the Landlord that in
relation to any Loan by any one of the Existing Subsidiaries to
Liberty such Loan shall only be made on the same conditions as
those set out in Clause 6.2 above
6.7.2 Euro and the Tenant covenant with the Landlord that:
<PAGE>
6.7.2.1 The Existing Subsidiaries will comply with their obligations to
the Landlord contained in Clause 6.7.1 above and
6.7.2.2 they will procure any company or companies from time to time
falling within the definition of the inner Group Company shall
comply with the same obligations as those contained in Clause
6.7.1 above
6.7.2.3 the Existing subsidiaries covenant with the Landlord that in
relation to any Loan made to any one of the Existing
Subsidiaries by Liberty that they will not pay any principal or
interest on such Loan if there is any outstanding rent or other
sums due and immediately payable under the Lease
6.7.2.4 Euro and the Tenant covenant with the Landlord that:
6.7.2.4.1 the Existing Subsidiaries will comply with the obligations
to the Landlord contained in Clause 6.7.2.3 above
6.7.2.4.2 that they will procure any company or companies from time to
time falling within the definition of the Inner Group
company shall comply with the same obligations as those
contained in Clause 6.7.2.3 above
6.7.2.5 Without prejudice to Clause 6.7.2.4.2 above the Tenant and Euro
covenant with the Landlord to procure that Liberty will not make
any Loan to the Tenant unless Liberty prior to the making of any
such Loan covenants by Deed with the Landlord that Liberty will
not seek payment (or accept payment) of any principal or
interest on any Loan if there is any outstanding rent or other
sums due and immediately payable under the Lease
6.8 Any covenants given by any one of the Existing Subsidiaries or
Liberty or any of them shall only remain in force for so long as
the relevant company continues to be a Subsidiary of the Tenant
6.9 all covenants contained in Clauses 4, 5 and 6 of the Deed or any
of them which are given by the Tenant or Euro or any of the
Existing Subsidiaries or Liberty or any of them shall only
remain in force for so long as the Lease remains vested in Euro
Brokers Holding Limited or another Group company of Euro
PROVIDED THAT this shall not affect any liability of any parties
to this Deed in respect of any antecedent breaches
7. "CONSENT TO ASSIGNMENT"
-----------------------
<PAGE>
7.1 Subject to the conditions contained in Clause 7.3 below the Landlord
consents to Euro Brokers Holding Limited assigning the whole of its
interest in the Lease to the Approved Assignee ("the Assignment")
7.2 For the purposes of Clause 7.1 above the "Approved Assignee" is a
company which is:
7.2.1 A limited company incorporated in England and Wales
7.2.2 At the time the Lease is assigned to it and throughout the
period the Lease remains vested in it:
7.2.2.1 has 75% of more of its issued share capital beneficially owned
by Euro Brokers Holdings Limited; and
7.2.2.2 whose principal assets (or equivalent assets) are no less than
and whose principal liabilities are not (except to the extent
that the assets have been increased) more than the principal
assets and principal liabilities (as appropriate) or Euro
Brokers Holdings Limited as at the date hereof but subject to
any subsequent variations to such assets and liabilities as the
Landlord may have then approved pursuant to Clause 5 of this
Deed
7.3 The conditions referred to in Clause 7.2 are that:-
7.3.1 the consent of the Superior Landlord is obtained prior to the
Assignment and the Tenant and the Approved Assignee comply with
any reasonable conditions imposed by the Superior Landlord
7.3.2 The Tenant pay the Landlord's and Superior Landlord's legal and
surveyors' fees incurred in connection with any application for
such consent whether or not such consent is granted
7.3.3 The Approved Assignee:-
7.3.3.1 covenants with the Landlord that from the date of the Assignment
and during the residue of the term granted by the Lease
including any statutory continuation of the Lease that it will
comply with the Tenant's obligations in the Lease whether
arising before or after the date of Assignment
7.3.3.2 If the Bank Guarantee has not at the date of the Assignment been
terminated in accordance with the terms of the Bank Guarantee,
on the Assignment it provides to the Landlord a bank guarantee
from a London Town Clearing Bank for an
<PAGE>
amount ("the Amount") equal to the rents firstly (not being less
than 895,550 Pounds) secondly and thirdly reserved by the Lease
at the date of the Assignment such guarantee to be on the same
terms and conditions (other than the amount of the maximum
liability which shall be for the Amount) as the Bank Guarantee
7.3.3.3 Covenants with the Landlord on the same terms (mutatis mutandis)
as Clauses 4 5 and 6 of this Deed provided that:-
7.3.3.3.1 references in Clauses 4.7.1 and 6.1.1 to "Euro Brokers Holdings
Limited" shall be deemed to be reference to the Approved
Assignee
7.3.3.3.2 immediately following the Assignment Euro Brokers Holdings
Limited shall for the purposes of Clause 6 be deemed to be
within the "Outer Group"
7.3.3.4.1. This sub-clause 7.3.3.4 shall only apply if Euro Brokers
Holdings Limited has at the date of the Assignment produced the
Landlord accounts for two or less accounting periods which
satisfy the tests contained in Clause 4.3 or Clause 4.7 (as
appropriate) of this Deed
7.3.3.4.2. In the event that the Approved Assignee provides to the Landlord
an audited certificate on a proforma basis for the Approved
Assignee which certifies that with the then existing assets and
liabilities of the Approved Assignee the Approved Assignee would
also have satisfied the tests contained in Clause 4.3 or Clause
4.7 (as appropriate) for the years for which the accounts of
Euro Brokers Holdings Limited had previously satisfied the tests
had the Approved Assignee been the tenant at such time then the
accounts previously produced by Euro Brokers Holdings Limited
shall for the purposes of those Clauses be deemed to have
produced by the Approved Assignee
7.3.3.5 If the Assignment has not been completed within five years from
the date hereof permission contained in this Clause 7 (but not
any other part of this Clause) will become void but without
liability on the Landlord or Superior Landlord to refund any
monies paid to the Landlord or Superior Landlord in connection
with any matters hereinbefore contained
8. RESTRICTION ON ASSIGNMENT
-------------------------
The Tenant shall not assign or dispose of the benefit of this
Deed or any part
<PAGE>
thereof other than to a party who simultaneously with such
assignment takes an assignment of the Lease in accordance with
the terms of the Lease
9. BREACHES
--------
Any breach of the terms of this Deed by the Tenant will give
rise to a right of re-entry under the terms of the Lease
10. JURISDICTION
------------
The parties hereby agree and declare that this Deed shall be
governed by and construed in all respects in accordance with
English Law and the Tenant Euro and the Existing Subsidiaries
hereby submit to the exclusive jurisdiction of the English
Courts in respect of all matters affecting this Deed and Euro's
address for service in England and Wales is the Premises
11. NOTICES
-------
Section 196 of the Law of Property Act 1925 shall apply to all
notices and certificates required or permitted to be served or
given under this Deed
IN WITNESS whereof the parties hereto have caused their respective Common Seals
to be affixed to this Deed the day and year first before written
<PAGE>
Exhibit 10.7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
by and between
MAXCOR FINANCIAL GROUP INC.
and
Gilbert Scharf
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
1. Employment....................................................1
2. Term..........................................................2
3. Position and Duties; Place of
Performance...................................................2
4. Compensation and Related Matters..............................2
(a) Base Salary..............................................2
(b) Bonuses..................................................3
(c) Expenses.................................................3
(d) Other Benefits...........................................3
(e) Vacation.................................................3
(f) Services Furnished.......................................4
5. Offices.......................................................4
6. Termination...................................................4
(a) Death....................................................4
(b) Disability...............................................4
(c) Cause....................................................4
(d) Good Reason..............................................5
(e) Change in Control........................................7
7. Termination Procedure.........................................9
(a) Notice of Termination....................................9
(b) Date of Termination.....................................10
(c) Compensation During Dispute.............................10
8. Compensation upon Termination or
During Disability............................................11
(a) Disability; Death.......................................11
(b) By Company without Cause or by
the Executive for Good Reason...........................11
(c) By Company for Cause or by the
Executive Other than for
Good Reason.............................................12
(d) Compensation Plans......................................13
(e) Gross-Up Payment........................................13
i
<PAGE>
9. Mitigation...................................................15
10. Confidential Information;
Noncompetition Requirement...................................15
(a) Confidential Information................................15
(b) Noncompetition Requirement..............................16
(c) Salary Continuation.....................................16
(d) Injunctive Relief.......................................17
11. Indemnification; Legal Fees..................................17
12. Successors; Binding Agreement................................17
(a) Company's Successors....................................17
(b) Executive's Successors..................................18
13. Notice.......................................................18
14. Miscellaneous................................................19
15. Validity.....................................................19
16. Counterparts.................................................20
17. Entire Agreement.............................................20
ii
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT, dated as of August 14, 1998,
by and between Gilbert Scharf (the "Executive"), and Maxcor Financial Group Inc.
(formerly Financial Services Acquisition Corporation), a Delaware corporation
(the "Company"), restating the employment agreement between the parties hereto,
dated as of March 8, 1996, as amended (the "1996 Agreement").
WHEREAS, the Board of Directors of the Company (the "Board")
currently employs the Executive and the Executive currently furnishes services
to the Company on the terms and conditions set forth in the 1996 Agreement; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties desire to amend and restate the 1996
Agreement in order to add certain Change in Control and other provisions;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to continue to employ
the Executive, and the Executive hereby accepts such continued employment, on
the terms and conditions hereinafter set forth.
<PAGE>
2. Term. The period of employment of the Executive by the
Company hereunder (the "Employment Period") shall commence on August 16, 1996
(the "Commencement Date"), and end on the fifth anniversary of the Commencement
Date, unless further extended as provided in this Section 2 or sooner terminated
as provided in Section 6. On the fourth anniversary of the Commencement Date and
on each successive anniversary thereafter, the contract term of the Executive's
employment shall be automatically extended for one (1) additional year unless,
on or prior to such anniversary, the Company shall have delivered to the
Executive or the Executive shall have delivered to the Company written notice
that the term of the Executive's employment hereunder will not be extended (the
initial five-year contract term, as it may be so extended, the "Contract Term");
provided, however, that, if a Change in Control shall have occurred during the
original or extended term of this Agreement, the Contract Term shall continue in
effect for at least twenty-four (24) months subsequent to the month in which
such Change in Control occurs.
3. Position and Duties; Place of Performance. During the
Employment Period, the Executive shall serve as Chairman of the Board and
President and Chief Executive Officer of the Company. The Executive shall report
directly to the Board. The Executive's responsibilities and authority shall
include such responsibilities and authority as may from time to time be assigned
to the Executive by the Board, provided that such responsibilities and authority
are consistent with the Executive's position with the Company. In connection
with the Executive's employment by the Company, the Executive shall be based in
Manhattan, New York, except for reasonably required travel on the Company's
business.
4. Compensation and Related Matters.
(a) Base Salary. As compensation for the performance by the
Executive of his obligations hereunder, during the Employment Period, the
Company shall pay the Executive a base salary at the rate of $450,000 per annum
("Base Salary"). Base Salary shall be paid in approximately equal installments
in accordance with the Company's customary payroll practices. Base Salary may be
increased from time to time in accordance with the normal business practices of
the Company and, if so
2
<PAGE>
increased, shall not thereafter during the Employment Period be decreased.
(b) Bonuses. During the Employment Period, the Executive
shall be eligible to receive such semi-annual bonuses (the "Bonus") as may be
awarded to him as the Board or the Compensation Committee of the Board shall
determine, or if an annual incentive plan is adopted by the Company or a
subsidiary thereof, in accordance with the terms of such plan.
(c) Expenses. The Company shall promptly reimburse the
Executive for all reasonable business expenses incurred during the Employment
Period by the Executive in performing services hereunder, including all expenses
of travel and living expenses while traveling on business or at the request of
and in the service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
(d) Other Benefits. The Executive shall be entitled to
participate in all of the employee benefit plans and arrangements currently
maintained by the Company or a subsidiary thereof, in accordance with the terms
of such plans and arrangements, and shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangement made available
by the Company or a subsidiary thereof in the future to its executives and key
management employees (including without limitation each incentive plan, pension
and retirement plan and arrangement, supplemental pension and retirement plan
and arrangement, stock option plan, life insurance and health-and-accident plan
and arrangement, medical insurance plan, disability plan, survivor income plan,
relocation plan and vacation plan), subject to and on a basis consistent with
the terms, conditions and overall administration of such plans and arrangements.
Nothing paid to the Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Executive pursuant to subsection (a) of this Section 4.
(e) Vacation. The Executive shall be entitled to the number
of vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Com-
3
<PAGE>
pany's vacation plan or policy as from time to time in effect. The Executive
shall also be entitled to all paid holidays given by the Company to its
executives.
(f) Services Furnished. During the Employment Period, the
Company shall furnish the Executive with office space, stenographic assistance
and such other facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties as set forth in Section
3 hereof.
5. Offices. Subject to Section 3 hereof, the Executive agrees
to serve without additional compensation, if elected or appointed thereto, as a
director of the Company or any subsidiaries of the Company and as a member of
any committees of the board of directors of any such corporations, and in one or
more executive positions of any of the Company's subsidiaries, provided that the
Executive is indemnified for serving in any and all such capacities on a basis
no less favorable than is currently provided to any other director of the
Company or any of its subsidiaries, or any such executive position, as the case
may be.
6. Termination. The Executive's employment hereunder (and the
Employment Period) may be terminated without any breach of this Agreement only
under the circumstances set forth in the following subsections (a), (b), (c) and
(d).
(a) Death. The Executive's employment hereunder (and the
Employment Period) shall terminate upon his death.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of his duties hereunder for the entire
period of six consecutive months, and within thirty (30) days after written
Notice of Termination (as defined in Section 7 hereof) is given shall not have
returned to the performance of his duties hereunder on a full-time basis, the
Company may terminate the Executive's employment hereunder (and the Employment
Period) for "Disability."
(c) Cause. The Company may terminate the Executive's
employment hereunder (and the Employment
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Period) for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following events:
(i) the conviction of the Executive for the
commission of a felony; or
(ii) the willful and continuing failure by the
Executive to substantially perform his duties hereunder (other than
such failure resulting from the Executive's incapacity due to physical
or mental illness or subsequent to the issuance of a Notice of
Termination by the Executive for Good Reason) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes the
Executive has not substantially performed his duties; or
(iii) the willful misconduct by the Executive
(including, but not limited to, breach by the Executive of the
provisions of Section 10 hereof) that is demonstrably and materially
injurious to the Company or its subsidiaries, whether monetarily or
otherwise.
Cause shall not exist unless and until the Company has delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than two-thirds (2/3) of the entire membership of the Board of Directors of
the Company at a meeting of such board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before such board), finding that in the
good faith opinion of such board, the Executive was guilty of the conduct set
forth in this Section 6(c) and specifying the particulars thereof in detail. For
purposes of this Section 6(c), no act or failure to act on the Executive's part
shall be considered "willful" unless done or failed to be done by the Executive
in bad faith and without reasonable belief that the Executive's action or
omission was in the best interest of the Company.
(d) Good Reason. The Executive may terminate his employment
hereunder (and the Employment
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Period) during the Contract Term hereunder for "Good Reason" after the
occurrence, without the written consent of the Executive, of an event
constituting a material breach of this Agreement by the Company that has not
been fully cured within ten (10) days after written notice thereof has been
given by the Executive to the Company, provided that, without limiting the
generality of the foregoing, on and after a Change in Control, any one of the
following events shall be deemed a material breach of this Agreement:
(i) the assignment to the Executive of any
duties inconsistent with the Executive's status as Chief Executive
Officer of the Company or a substantial adverse alteration in the
nature of the Executive's responsibilities from those in effect
immediately prior to the Change in Control, or being required to report
to anyone other than the Board;
(ii) a reduction by the Company in the
Executive's Base Salary as in effect immediately prior to the Change in
Control;
(iii) the relocation of the Executive's
principal place of employment to a location outside of Manhattan, New
York;
(iv) the failure by the Company to pay to
the Executive any portion of the Executive's current compensation or to
pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company
within fifteen (15) days of the date such compensation is due;
(v) the failure by the Company to provide
the Executive with compensation plans which, in the aggregate, provide
the Executive with substantially comparable compensation opportunities
to those compensation opportunities for which the Executive was
eligible immediately prior to the Change in Control;
(vi) the failure by the Company to continue
to provide the Executive with benefits substantially similar to those
enjoyed by the Exec-
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utive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any material
perquisite or other fringe benefit, or secretarial service and office
space at the level, enjoyed by the Executive at the time of the Change
in Control, or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled on
the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change in
Control;
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7(a) or that does
not comply with Section 6(c), if applicable (and for purposes of this
Agreement, no such purported termination shall be effective); or
(viii) the failure of a successor to the
Company to expressly assume and agree to perform this Agreement
pursuant to Section 12(a) hereof.
The Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(e) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (as defined hereinbelow)
becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (as defined hereinbelow) representing 25% or more of the
combined voting power of the Company's then outstanding securities,
excluding (x) any Person who
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becomes such a Beneficial Owner in connection with a transaction
described in clause (A) of paragraph (iii) below and (y) any Person who
currently is such a Beneficial Owner unless such Person becomes the
Beneficial Owner of additional securities of the Company representing
5% or more of the combined voting power of the Company's then
outstanding securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on the date of this amended and restated
Agreement, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or
recommended; or
(iii) there is consummated a merger or
consolidation of the Company or any direct or indirect subsidiary of
the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 60% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities, excluding any
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Person who currently is such a Beneficial Owner unless such Person
becomes the Beneficial Owner of additional securities of the Company
representing 5% or more of the combined voting power of the Company's
then outstanding securities; or
(iv) the stockholders of the Company approve
a plan of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets, other than a sale
or disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the combined voting
power of the voting securities of which are owned by stockholders of
the Company in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
For purposes of this Section 6(e) and Section 8(e) hereof,
"Person" shall have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
For purposes of this Section 6(e), "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
7 Termination Procedure.
(a) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to Section 6(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 13.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
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upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(b) Date of Termination. "Date of Termination" shall
mean (i) if the Executive's employment is terminated by his death, the date of
his death, (ii) if the Executive's employment is terminated for Disability
pursuant to Section 6(b), thirty (30) days after Notice of Termination (provided
that the Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), (iii) if the Executive's
employment is terminated for Cause pursuant to Section 6(c), the date specified
in the Notice of Termination, which shall not be earlier than the date of the
Notice of Termination and (iv) if the Executive's employment is terminated for
any other reason, the date on which a Notice of Termination is given or any
later date (within 30 days) set forth in such Notice of Termination; provided,
however, that if either party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected); provided further, however,
that the Date of Termination shall be extended by a notice of dispute given by
the Executive only if such notice is given in good faith and the Executive
pursues the resolution of such dispute with reasonable diligence.
(c) Compensation During Dispute. If a purported
termination occurs on or after a Change in Control and during the Contract Term,
and such termination is disputed in accordance with subsection (b) of this
Section 7, the Company shall continue to pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until the
Date of Termination, determined in accordance with subsection (b) of this
Section 7. Amounts paid under this
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Section 7(c) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
8 Compensation upon Termination or During Disability.
(a) Disability; Death. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness ("Disability Period"), the Executive shall continue
to receive his full Base Salary at the rate in effect at the beginning of such
period and continue as a participant in all compensation and employee benefit
plans in which the Executive was participating pursuant to Section 4(d) until
his employment is terminated pursuant to Section 6(b) and shall continue to
receive such Base Salary for a period of six months thereafter. Subsequent to
the six-month period following termination of the Executive's employment
pursuant to Section 6(b), or in the event the Executive's employment is
terminated by reason of his death, the Company shall have no further obligations
to the Executive under this Agreement and the Executive's benefits shall be
determined under the Company's retirement, insurance and other compensation
programs then in effect in accordance with the terms of such programs.
(b) By Company without Cause or by the Executive for
Good Reason. If during the Contract Term the Executive's employment is
terminated by the Company other than for Cause or Disability or by the Executive
for Good Reason, then --
(i) in addition to any amounts due the
Executive pursuant to Sections 4(a) or 4(b) hereof, the Company shall
continue to pay to the Executive (or his legal representatives or
estate) his Base Salary (at the rate in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of
Termination) for the remainder of the Contract Term or, if greater, for
one year; provided, however, that if such termination occurs on or
after a Change in Control, then the Company shall, within five (5) days
following the Date of Termination, pay to the Executive, in an
undiscounted cash lump sum, an amount equal to (i)
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three (3) times the sum of Base Salary (at the rate in effect
immediately prior to the occurrence of the circumstance giving rise to
the Notice of Termination) and the Bonus (annualized if paid for less
than a full year) awarded in respect of the last completed bonus period
prior to the fiscal year in which occurs the Change in Control or the
Date of Termination, whichever resulting Bonus is greater, provided
that, solely for purposes of this Section 8(b)(i), such annualized
Bonus shall not be less than $200,000; and
(ii) the Company or a subsidiary thereof
shall maintain in full force and effect, for the continued benefit of
the Executive and his dependents for the remainder of the Contract Term
or, if greater, for one year, all medical, dental and life insurance
benefit plans and programs in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that
the Executive's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive and his dependents with
benefits substantially similar to those which the Executive and his
dependents would otherwise have been entitled to receive under such
plans and programs from which their continued participation is barred;
and
(iii) the Executive shall be deemed to
continue as an employee of the Company during the remainder of the
Contract Term for purposes of the exercise and/or vesting of
outstanding stock and stock option awards and cash incentive awards.
(c) By Company for Cause or by the Executive Other
than for Good Reason. If the Executive's employment shall be terminated by the
Company for Cause or by the Executive other than for Good Reason, then the
Company shall pay the Executive his Base Salary (at the rate in effect at the
time Notice of Termination is given) through the Date of Termination, and the
Company shall have no additional obligations to the Executive under this
Agreement except as set forth in subsection (d) of this Section 8.
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(d) Compensation Plans. Following any termination of
the Executive's employment, the Company shall pay the Executive all unpaid
amounts, if any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company, at the time
such payments are due.
(e) Gross-Up Payment.
(i) Notwithstanding any other provi-sions of
this Agreement, in the event that any payment or benefit received or to
be received by the Executive in connection with a Change in Control or
the termination of the Executive's employment (whether pursuant to the
terms of this Agreement (the "Severance Payments") or any other plan,
arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company
or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") would be
subject (in whole or part) to the excise tax ("Excise Tax") imposed
under section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), then the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments
and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 8(e), shall be equal to the Total
Payments.
(ii) For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and the amount
of such Excise Tax, (A) all of the Total Payments shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the
Code, unless in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive ("Tax
Counsel"), such other payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (B) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code
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shall be treated as subject to the Excise Tax, unless in the opinion of
Tax Counsel such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, in excess of
the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (C) the value of any
noncash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which occurs the Date of Termination
(or such earlier date on which any payment or benefit becomes subject
to the Excise Tax) and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination (or such earlier date on which any
payment or benefit becomes subject to the Excise Tax), net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(iii) In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by
the Executive to the extent that such repayment results in a reduction
in the Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including by reason of any payment the existence or
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<PAGE>
amount of which cannot be determined at the time of the Gross-Up
Payment) the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that
the amount of such excess is finally determined.
9 Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for the Executive by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for the
Executive hereunder be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
otherwise except as is hereinafter specifically provided in this Section 9. To
the extent that the Executive, during the relevant period described in Section
8(b)(ii) hereof, shall receive from a subsequent employer benefits similar to
those to be provided under Section 8(b)(ii), the benefits to be provided under
the provisions of said Section shall be correspondingly reduced.
10 Confidential Information; Noncompetition Requirement.
(a) Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all trade secrets
and confidential information relating to the Company and its businesses, which
shall have been obtained by the Executive during the Executive's employment by
the Company and which shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). The Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such trade secrets or information to
anyone other than the Company and those designated by the Company. Any
termination of the Executive's employment or of this Agreement shall have no
effect on the continuing operation of this Section 10(a).
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(b) Noncompetition Requirement. During (1) any period
that the Executive is performing services hereunder, (2) a period of one (1)
year following a termination of the Executive's employment by the Company for
Cause or by the Executive other than for Good Reason (if the Company so
requests, notifies and pays the Executive as provided in paragraph (c) of this
Section 10), (3) on or after a Change in Control, a period of six (6) months
following a termination of the Executive's employment by the Executive for Good
Reason, and (4) with respect to clauses (i) and (ii) of this Section 10(b), any
period with respect to which the Executive is entitled to payment pursuant to
Section 8(b)(i) or, if shorter, a period of one year, the Executive agrees that,
without the prior written consent of the Company, he shall not, directly or
indirectly, with or without pay, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director, manager,
investor, lender, advisor, owner, associate or in any other individual or
representative capacity, (i) solicit, entice, encourage or otherwise attempt to
procure or service by telephone or otherwise accounts from any customers
(determined as of the Date of Termination) of the Company or a subsidiary
thereof for a business that is competitive in any manner whatsoever (a
"Competitive Business") with the interdealer brokerage business in which the
Company is then engaged (the "Business"), (ii) solicit, entice or encourage any
employee (determined as of the Date of Termination) of the Company or a
subsidiary thereof to terminate such employee's employment in order to work in a
Competitive Business, or (iii) upon the written request of the Company, engage
or participate in any Competitive Business unless such Competitive Business is
located more than seventy-five (75) miles from the site, as of the Date of
Termination, of the Company's executive offices in New York; provided, however,
that trading by the Executive for his own benefit or in proprietary accounts
shall not constitute a Competitive Business.
(c) Salary Continuation. As additional consideration
for the Executive's performance of the covenant provided in subsection (b) (iii)
of this Section 10 relating to the twelve-month period following a termination
of his employment by the Company for Cause or by the Executive other than for
Good Reason, but only for so long as the Executive shall continue to perform
such
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covenants, the Company shall pay the Executive for each month during such
twelve-month period an amount equal to one twelfth (1/12th) of the Executive's
Base Salary. It is agreed and understood that such payment constitutes full and
fair consideration to the Executive for observance of such covenants and his
possible abstinence from the Business for such period.
(d) Injunctive Relief. In the event of a breach or
threatened breach of subsections (a), (b) or (c) of this Section 10, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or threatened
breach, the Executive acknowledging that damages would be inadequate and
insufficient.
11 Indemnification; Legal Fees. The Company shall indemnify
the Executive to the full extent permitted by law and the by-laws of the Company
for all expenses, costs, liabilities and legal fees which the Executive may
incur in the discharge of his duties hereunder. The Company shall also reimburse
the Executive for any reasonable legal fees and expenses incurred by the
Executive in contesting or disputing any termination of the Executive's
employment hereunder or in seeking to obtain or enforce any right or benefit
provided by this Agreement, but only if the Executive shall substantially
prevail with respect to the preponderance of the matters at issue. Such payments
shall be made within five (5) days after the Executive's request for payment
accompanied with such evidence of his having prevailed (as described in the
preceding sentence) and such evidence of the fees and expenses incurred, as the
Company may reasonably require. Any termination of the Executive's employment or
of this Agreement shall have no effect on the continuing operation of this
Section 11.
12 Successors; Binding Agreement.
(a) Company's Successors. The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this
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Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as he would be entitled to hereunder if
the Company had terminated his employment other than for Cause, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 12 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(b) Executive's Successors. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts would still be payable to him hereunder
if he had continued to live, all such amounts unless otherwise provided herein
shall be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
13 Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Gilbert Scharf
120 East End Avenue, Apt 8-C
New York, New York 10028
With a copy to the offices of the Company
If to the Company:
Maxcor Financial Services Group
Two World Trade Center
84th Floor
New York, New York 10048
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Attn: Chairman
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
14 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by its Board of Directors or its compensation
committee. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. This Agreement shall
be binding on all successors to the Company. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company and the Executive
under this Section 14 and Sections 7, 8, 9, 10, 11 and 12 hereof shall survive
the expiration of the term of this Agreement. The compensation and benefits
payable to the Executive under this Agreement shall be in lieu of any other
severance benefits to which the Executive may otherwise be entitled upon his
termination of employment under any severance plan, program, policy or
arrangement of the Company.
15 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall
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be deemed to be an original but all of which together will constitute one and
the same instrument.
17 Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
MAXCOR FINANCIAL GROUP INC.
By: /s/ Keith E. Reihl
-------------------------------
Name: Keith E. Reihl
Title: Chief Financial Officer
/s/ Gilbert Scharf
-------------------------------
Gilbert Scharf
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
by and between
MAXCOR FINANCIAL GROUP INC.
and
Keith E. Reihl
<PAGE>
TABLE OF CONTENTS
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SECTION PAGE
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1. Employment.............................................................................2
2. Term...................................................................................2
3. Position and Duties....................................................................2
4. Place of Performance...................................................................2
5. Compensation and Related Matters.......................................................3
(a) Base Salary.......................................................................3
(b) Bonuses...........................................................................3
(c) Expenses..........................................................................3
(d) Other Benefits....................................................................3
(e) Vacation..........................................................................4
(f) Services Furnished................................................................4
6. Offices.................................................................................4
7. Termination............................................................................4
(a) Death.............................................................................5
(b) Disability........................................................................5
(c) Cause.............................................................................5
(d) Good Reason.......................................................................6
(e) Change in Control.................................................................8
8. Termination Procedure.................................................................10
(a) Notice of Termination............................................................10
(b) Date of Termination..............................................................10
(c) Compensation During Dispute......................................................11
9. Compensation upon Termination
or During Disability..................................................................11
(a) Disability; Death................................................................11
(b) By Company without Cause or
by the Executive for Good Reason.................................................11
(c) By Company for Cause or by the
Executive Other than for Good Reason.............................................13
(d) Compensation Plans...............................................................13
(e) Gross-Up Payment.................................................................13
10. Mitigation............................................................................15
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11. Confidential Information; Noncompetition
Requirement...........................................................................16
(a) Confidential Information.........................................................16
(b) Noncompetition Requirement.......................................................16
(c) Salary Continuation..............................................................17
(d) Injunctive Relief................................................................17
12. Indemnification; Legal Fees...........................................................17
13. Successors; Binding Agreement.........................................................18
(a) Company's Successors.............................................................18
(b) Executive's Successors...........................................................18
14. Notice................................................................................19
15. Miscellaneous.........................................................................19
16. Validity..............................................................................20
17. Counterparts..........................................................................20
18. Entire Agreement......................................................................20
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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 14, 1998, by and between Keith
E. Reihl (the "Executive"), and Maxcor Financial Group Inc., a Delaware
corporation (the "Company"), superseding and replacing the employment agreement
between the Executive and Euro Brokers Investment Corporation, a Delaware
corporation and a direct, wholly owned subsidiary of the Company ("EBIC"), dated
as of March 8, 1996, as amended (the "1996 Agreement").
WHEREAS, the Board of Directors of EBIC currently employs the
Executive and the Executive currently furnishes services to EBIC on the terms
and conditions set forth in the 1996 Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board")
desires to employ the Executive directly at the Company level and the Executive
desires to be so employed; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties desire to amend and restate the 1996
Agreement in order to add certain Change in Control and other provisions;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth below, the parties hereby agree as follows:
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1. Employment. The Company hereby agrees to continue to employ
the Executive, and the Executive hereby accepts such continued employment, on
the terms and conditions hereinafter set forth.
2. Term. The period of employment of the Executive by the
Company hereunder (the "Employment Period") shall commence on August 14, 1998
(the "Commencement Date"), and end on the third anniversary of the Commencement
Date, unless further extended as provided in this Section 2 or sooner terminated
as provided in Section 7. On the second anniversary of the Commencement Date and
on each successive anniversary thereafter, the contract term of the Executive's
employment shall be automatically extended for one (1) additional year unless,
on or prior to such anniversary, the Company shall have delivered to the
Executive or the Executive shall have delivered to the Company written notice
that the term of the Executive's employment hereunder will not be extended (the
initial three-year contract term, as it may be so extended, the "Contract
Term"); provided, however, that, if a Change in Control shall have occurred
during the original or extended term of this Agreement, the Contract Term shall
continue in effect for at least twenty-four (24) months subsequent to the month
in which such Change in Control occurs.
3. Position and Duties. During the Employment Period, the
Executive shall serve as Chief Financial Officer and Treasurer of the Company
and Chief Operating Officer of EBIC and its subsidiaries. The Executive shall
have the full responsibilities and authority attendant to such position and
shall report directly to the Chairman, President and Chief Executive Officer of
the Company. The Executive's responsibilities and authority shall include such
responsibilities and authority as may from time to time be assigned to the
Executive by the Chairman, President and Chief Executive Officer of the Company,
provided that such responsibilities and authority are consistent with the
Executive's position with the Company. During the Employment Period, the
Executive agrees to devote substantially all of his working time and efforts to
the performance of his duties for the Company.
4. Place of Performance. In connection with the Executive's
employment by the Company, the Executive
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shall be based at the principal executive offices of the Company in New York,
New York, except for reasonably required travel on the Company's business.
5. Compensation and Related Matters.
(a) Base Salary. As compensation for the performance by the
Executive of his obligations hereunder, during the Employment Period, the
Company shall pay the Executive a base salary at the rate of $300,000 per annum
("Base Salary"). Base Salary shall be paid in approximately equal installments
in accordance with the Company's customary payroll practices. Base Salary may be
increased from time to time in accordance with the normal business practices of
the Company and, if so increased, shall not thereafter during the Employment
Period be decreased.
(b) Bonuses.During the Employment Period, the Executive
shall be eligible to receive such semi-annual bonuses (the "Bonus") as may be
awarded to him as the Board or the Compensation Committee of the Board shall
determine, or if an annual incentive plan is adopted by the Company, in
accordance with the terms of such plan.
(c) Expenses. The Company shall promptly reimburse the
Executive for all reasonable business expenses incurred during the Employment
Period by the Executive in performing services hereunder, including all expenses
of travel and living expenses while traveling on business or at the request of
and in the service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
(d) Other Benefits. The Executive shall be entitled to
participate in all of the employee benefit plans and arrangements currently
maintained by the Company, in accordance with the terms of such plans and
arrangements, and shall be entitled to participate in or receive benefits under
any employee benefit plan or arrangement made available by the Company in the
future to its executives and key management employees (including without
limitation each incentive plan, pension and retirement plan and arrangement,
supplemental pension and retirement plan and arrangement, stock option plan,
life
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insurance and health-and-accident plan and arrangement, medical insurance
plan, disability plan, survivor income plan, relocation plan and vacation plan),
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to the Executive
pursuant to subsection (a) of this Section 5.
(e) Vacation. The Executive shall be entitled to the number
of vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Company's vacation
plan or policy as from time to time in effect. The Executive shall also be
entitled to all paid holidays given by the Company to its executives.
(f) Services Furnished. During the Employment Period, the
Company shall furnish the Executive with office space, stenographic assistance
and such other facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties as set forth in Section
3 hereof.
6. Offices. Subject to Sections 3 and 4 hereof, the Executive
agrees to serve without additional compensation, if elected or appointed
thereto, as a director of the Company, FSAC or any subsidiaries of the Company,
and as a member of any committees of the board of directors of any such
corporations, and in one or more executive positions of any of the Company's
subsidiaries, provided that the Executive is indemnified for serving in any and
all such capacities on a basis no less favorable than is currently provided to
any other director of the Company or any of its subsidiaries, or any such
executive position, as the case may be.
7 Termination. The Executive's employment hereunder (and the
Employment Period) may be terminated without breach of this Agreement only under
the circumstances set forth in the following subsections (a), (b), (c) and (d).
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(a) Death. The Executive's employment hereunder (and the
Employment Period) shall terminate upon his death.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of his duties hereunder for the entire
period of six consecutive months, and within thirty (30) days after written
Notice of Termination (as defined in Section 8 hereof) is given shall not have
returned to the performance of his duties hereunder on a full-time basis, the
Company may terminate the Executive's employment hereunder (and the Employment
Period) for "Disability."
(c) Cause. The Company may terminate the Executive's
employment hereunder (and the Employment Period) for Cause. For purposes of this
Agreement, the Company shall have "Cause" to terminate the Executive's
employment hereunder upon the occurrence of any of the following events:
(i) the conviction of the Executive for the commission of a
felony; or
(ii) the willful and continuing failure by the Executive to
substantially perform his duties hereunder (other than such failure
resulting from the Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
the Executive for Good Reason) after demand for substantial
performance is delivered by the Company in writing that specifically
identifies the manner in which the Company believes the Executive
has not substantially performed his duties; or
(iii) the willful misconduct by the Executive (including,
but not limited to, breach by the Executive of the provisions of
Section 11 hereof) that is demonstrably and materially injurious to
the Company or its subsidiaries, whether monetarily or otherwise.
Cause shall not exist unless and until the Company has delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than two-
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thirds (2/3) of the entire membership of the Board of Directors of
the Company at a meeting of such board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before such board), finding that in the
good faith opinion of such board, the Executive was guilty of the conduct set
forth in this Section 7(c) and specifying the particulars thereof in detail. For
purposes of this Section 7(c), no act or failure to act on the Executive's part
shall be considered "willful" unless done or failed to be done by the Executive
in bad faith and without reasonable belief that the Executive's action or
omission was in the best interest of the Company.
(d) Good Reason. The Executive may terminate his employment
hereunder (and the Employment Period) during the Contract Term for "Good Reason"
after the occurrence, without the written consent of the Executive, of an event
constituting a material breach of this Agreement by the Company that has not
been fully cured within ten (10) days after written notice thereof has been
given by the Executive to the Company, provided that, without limiting the
generality of the foregoing, on and after a Change in Control, any one of the
following events shall be deemed a material breach of this Agreement:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's status as senior executive officer
of the Company or a substantial adverse alteration in the nature of
Executive's responsibilities from those in effect immediately prior
to the Change in Control or being required to report to anyone other
than the Chairman;
(ii) a reduction by the Company in the Executive's Base
Salary as in effect immediately prior to the Change in Control;
(iii) the relocation of the Executive's principal place of
employment to a location outside of Manhattan, New York;
(iv) the failure by the Company to pay to the Executive any
portion of the Executive's
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current compensation or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company within fifteen (15) days of the date such
compensation is due;
(v) the failure by the Company to provide the Executive
with compensation plans which, in the aggregate, provide the
Executive with substantially comparable compensation opportunities
to those compensation opportunities for which the Executive was
eligible immediately prior to the Change in Control;
(vi) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control,
the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the
Executive of any material perquisite or other fringe benefit, or
secretarial service and office space at the level, enjoyed by the
Executive at the time of the Change in Control, or the failure by
the Company to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of
years of service with the Company in accordance with the Company's
normal vacation policy in effect at the time of the Change in
Control;
(vii) any purported termination of Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 8(a) or that does not comply with Section
7(c), if applicable (and for purposes of this Agreement, no such
purported termination shall be effective); or
(viii) the failure of a successor to the Company to
expressly assume and agree to perform this Agreement pursuant to
Section 13(a) hereof.
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The Executive's right to terminate his employment hereunder
for Good Reason shall not be affected by his incapacity due to
physical or mental illness. The Executive's continued employment
shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder.
(e) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person (as defined hereinbelow) becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company (as defined hereinbelow) representing 25% or more of the
combined voting power of the Company's then outstanding securities,
excluding (x) any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (A) of paragraph
(iii) below and (y) any Person who currently is such a Beneficial
Owner unless such Person becomes the Beneficial Owner of additional
securities of the Company representing 5% or more of the combined
voting power of the Company's then outstanding securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date of this amended and restated Agreement,
constitute the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination
for election by the Company's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was
previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of the
Company or any direct or
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indirect subsidiary of the Company with any other corporation, other
than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60% of the combined
voting power of the securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then
outstanding securities, excluding any Person who currently is such a
Beneficial Owner unless such Person becomes the Beneficial Owner of
additional securities of the Company representing 5% or more of the
combined voting power of the Company's then outstanding securities;
or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets, other than a
sale or disposition by the Company of all or substantially all of
the Company's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
For purposes of this Section 7(e) and Section 9(e) hereof,
"Person" shall have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a
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corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
For purposes of this Section 7(e), "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
8 Termination Procedure.
(a) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to Section 7(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(b) Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated for Disability pursuant
to Section 7(b), thirty (30) days after Notice of Termination (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), (iii) if the Executive's
employment is terminated for Cause pursuant to Section 7(c), the date specified
in the Notice of Termination, which shall not be earlier than the date of the
Notice of Termination and (iv) if the Executive's employment is terminated for
any other reason, the date on which a Notice of Termination is given or any
later date (within 30 days) set forth in such Notice of Termination; provided,
however, that if either party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected); provided further, however,
that the Date of
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Termination shall be extended by a notice of dispute given by
the Executive only if such notice is given in good faith and the Executive
pursues the resolution of such dispute with reasonable diligence.
(c) Compensation During Dispute. If a purported termination
occurs on or after a Change in Control and during the Contract Term, and such
termination is disputed in accordance with subsection (b) of this Section 8, the
Company shall continue to pay the Executive the full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the Date of Termination, determined
in accordance with subsection (b) of this Section 8. Amounts paid under this
Section 8(c) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
9 Compensation upon Termination or During Disability.
(a) Disability; Death. During any period that the Executive
fails to perform his duties hereunder as a result of incapacity due to physical
or mental illness ("Disability Period"), the Executive shall continue to receive
his full Base Salary at the rate in effect at the beginning of such period and
continue as a participant in all compensation and employee benefit plans in
which the Executive was participating pursuant to Section 5(d) until his
employment is terminated pursuant to Section 7(b) and shall continue to receive
such Base Salary for a period of six months thereafter. Subsequent to the
six-month period following the termination of the Executive's employment
pursuant to Section 7(b), or in the event the Executive's employment is
terminated by reason of his death, the Company shall have no further obligations
to the Executive under this Agreement and the Executive's benefits shall be
determined under the Company's retirement, insurance and other compensation
programs then in effect in accordance with the terms of such programs.
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(b) By Company without Cause or by the Executive for Good
Reason. If during the Contract Term the Executive's employment is terminated by
the Company other than for Cause or Disability or by the Executive for Good
Reason, then --
(i) in addition to any amounts due the Executive pursuant
to Sections 5(a) or 5(b) hereof, the Company shall continue to pay
to the Executive (or his legal representatives or estate) his Base
Salary (at the rate in effect immediately prior to the occurrence of
the circumstance giving rise to the Notice of Termination) for the
remainder of the Contract Term or, if greater, for one year;
provided, however, that if such termination occurs on or after a
Change in Control, then the Company shall, within five (5) days
following the Date of Termination, pay to the Executive, in an
undiscounted cash lump sum, an amount equal to (i) three (3) times
the sum of Base Salary (at the rate in effect immediately prior to
the occurrence of the circumstance giving rise to the Notice of
Termination) and the Bonus (annualized if paid for less than a full
year) awarded in respect of the last completed bonus period prior to
the fiscal year in which occurs the Change in Control or the Date of
Termination, whichever resulting Bonus is greater, provided that,
solely for purposes of this Section 8(b)(i), such annualized Bonus
shall not be less than $200,000; and
(ii) the Company shall maintain in full force and effect,
for the continued benefit of the Executive and his dependents for
the remainder of the Contract Term or, if greater, for one year, all
medical, dental and life insurance benefit plans and programs in
which the Executive was entitled to participate immediately prior to
the Date of Termination, provided that the Executive's continued
participation is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company
shall arrange to provide the Executive and his dependents with
benefits substantially similar to those which the Executive and his
dependents would otherwise have been entitled to receive under such
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plans and programs from which their continued participation is
barred; and
(iii) the Executive shall be deemed to continue as an
employee of the Company during the remainder of the Contract Term
for purposes of the exercise and/or vesting of outstanding stock and
stock option awards and cash incentive awards.
(c) By Company for Cause or by the Executive Other than for
Good Reason. If the Executive's employment shall be terminated by the Company
for Cause or by the Executive other than for Good Reason, then the Company shall
pay the Executive his Base Salary (at the rate in effect at the time Notice of
Termination is given) through the Date of Termination, and the Company shall
have no additional obligations to the Executive under this Agreement except as
set forth in subsection (d) of this Section 9.
(d) Compensation Plans. Following any termination of the
Executive's employment, the Company shall pay the Executive all unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination under
any compensation plan or program of the Company, at the time such payments are
due.
(e) Gross-Up Payment.
(i) Notwithstanding any other provisions of this Agreement,
in the event that any payment or benefit received or to be received
by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the
terms of this Agreement (the "Severance Payments") or any other
plan, arrangement or agreement with the Company, any Person whose
actions result in a Change in Control or any Person affiliated with
the Company or such Person) (all such payments and benefits,
including the Severance Payments, being hereinafter called "Total
Payments") would be subject (in whole or part) to the excise tax
("Excise Tax") imposed under section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), then the Company shall pay to
the Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by the
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Executive, after deduction of any Excise Tax on the Total Payments
and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 9(e), shall be equal to the
Total Payments.
(ii) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (A) all of the Total Payments shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the
Code, unless in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive
("Tax Counsel"), such other payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (B) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of
Tax Counsel such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, in excess
of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (C) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with
the principles of sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in
which occurs the Date of Termination (or such earlier date on which
any payment or benefits becomes subject to the Excise Tax) and state
and local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive's residence on the Date of
Termination (or such earlier date on which any payment or benefits
becomes subject to the Excise Tax), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes.
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(iii) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder
at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such repayment
results in a reduction in the Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination of the
Executive's employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment) the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) at
the time that the amount of such excess is finally determined.
10 Mitigation. The Executive shall not be required to
mitigate the amount of any payment provided for the Executive by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for the Executive hereunder be reduced by any compensation earned by the
Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
the Company or otherwise except as is hereinafter specifically provided in this
Section 10. To the extent that the Executive, during the relevant period
described in Section 9(b)(ii) hereof, shall receive from a subsequent employer
benefits similar to those to be provided under Section 9(b)(ii), the benefits to
be provided under the provisions of said Section shall be correspondingly
reduced.
11 Confidential Information; Noncompetition Requirement.
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(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information relating to the Company and its businesses, which shall
have been obtained by the Executive during the Executive's employment by the
Company and which shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). The Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such trade secrets or information to
anyone other than the Company and those designated by the Company. Any
termination of the Executive's employment or of this Agreement shall have no
effect on the continuing operation of this Section 11(a).
(b) Noncompetition Requirement. During (1) any period that
the Executive is performing services hereunder, (2) a period of one (1) year
following a termination of the Executive's employment by the Company for Cause
or by the Executive other than for Good Reason (if the Company so requests,
notifies and pays the Executive as provided in paragraph (c) of this Section
11), (3) on or after a Change in Control, a period of six (6) months following a
termination of the Executive's employment by the Executive for Good Reason, and
(4) with respect to clauses (i) and (ii) of this Section 11(b), any period with
respect to which the Executive is entitled to payment pursuant to Section
9(b)(i) or, if shorter, a period of one year, the Executive agrees that, without
the prior written consent of the Company, he shall not, directly or indirectly,
with or without pay, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, manager, investor,
lender, advisor, owner, associate or in any other individual or representative
capacity, (i) solicit, entice, encourage or otherwise attempt to procure or
service by telephone or otherwise accounts from any customers (determined as of
the Date of Termination) of the Company or a subsidiary thereof for a business
that is competitive in any manner whatsoever (a "Competitive Business") with the
interdealer brokerage business in which the Company is then engaged (the
"Business"), (ii) solicit, entice or encourage any employee (determined as
16
<PAGE>
of the Date of Termination) of the Company or a subsidiary thereof to terminate
such employee's employment in order to work in a Competitive Business, or (iii)
upon the written request of the Company, engage or participate in any
Competitive Business unless such Competitive Business is located more than
seventy-five (75) miles from the site, as of the Date of Termination, of the
Company's executive offices in New York; provided, however, that trading by the
Executive for his own benefit or in proprietary accounts shall not constitute a
Competitive Business.
(c) Salary Continuation. As additional consideration for
the Executive's performance of the covenant provided in subsection (b) (iii) of
this Section 11 relating to the twelve-month period following a termination of
his employment by the Company for Cause or by the Executive other than for Good
Reason, but only for so long as the Executive shall continue to perform such
covenants, the Company shall pay the Executive for each month during such
twelve-month period an amount equal to one twelfth (1/12th) of the Executive's
Base Salary. It is agreed and understood that such payment constitutes full and
fair consideration to the Executive for observance of such covenants and his
possible abstinence from the Business for such period.
(d) Injunctive Relief. In the event of a breach or
threatened breach of subsections (a), (b) or (c) of this Section 11, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or threatened
breach, the Executive acknowledging that damages would be inadequate and
insufficient.
12 Indemnification; Legal Fees. The Company shall indemnify
the Executive to the full extent permitted by law and the by-laws of the Company
for all expenses, costs, liabilities and legal fees which the Executive may
incur in the discharge of his duties hereunder. The Company shall also reimburse
the Executive for any reasonable legal fees and expenses incurred by the
Executive in contesting or disputing any termination of the Executive's
employment hereunder or in seeking to obtain or enforce any right or benefit
provided by this Agreement, but only if the Executive shall substantially
prevail with respect to the preponderance of the matters at
17
<PAGE>
issue. Such payments shall be made within five (5) days after the Executive's
request for payment accompanied with such evidence of his having prevailed (as
described in the preceding sentence) and such evidence of the fees and expenses
incurred, as the Company may reasonably require. Any termination of the
Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 12.
13 Successors; Binding Agreement.
(a) Company's Successors. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as he would be
entitled to hereunder if the Company had terminated his employment other than
for Cause, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
herein before defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
13 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) Executive's Successors. This Agreement and all rights
of the Executive hereunder shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
18
<PAGE>
14 Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Keith E. Reihl
534 Allen Avenue
Westfield, New Jersey 07090
If to the Company:
Maxcor Financial Group Inc.
Two World Trade Center
Suite 8400
New York, New York 10048
Attn: Chairman
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by its Board of Directors or its compensation
committee. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. This Agreement shall
be binding on all successors to the Company. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without
19
<PAGE>
regard to its conflicts of law principles. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company and the Executive under this Section 15 and
Sections 8, 9, 10, 11, 12 and 13 hereof shall survive the expiration of the term
of this Agreement. The compensation and benefits payable to the Executive under
this Agreement shall be in lieu of any other severance benefits to which the
Executive may otherwise be entitled upon his termination of employment under any
severance plan, program, policy or arrangement of the Company.
16 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
17 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18 Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
MAXCOR FINANCIAL GROUP INC.
By: /s/ Gilbert D. Scharf
--------------------------
Name: Gilbert D. Scharf
Title: President
EURO BROKERS INVESTMENT CORPORATION
By: /s/ Gilbert D. Scharf
---------------------------
Name: Gilbert D. Scharf
Title: President
/s/ Keith E. Reihl
-------------------------------
Keith E. Reihl
21
<PAGE>
Exhibit 10.9
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
by and between
MAXCOR FINANCIAL GROUP INC.
and
Roger E. Schwed
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- - ------ -----
<S> <C> <C>
1. Employment............................................................................1
2. Term..................................................................................1
3. Position and Duties...................................................................2
4. Place of Performance..................................................................2
5. Compensation and Related Matters......................................................2
(a) Base Salary.......................................................................2
(b) Guaranteed Bonus..................................................................3
(c) Other Bonuses.....................................................................3
(d) Proration.........................................................................3
(e) Expenses..........................................................................3
(f) Other Benefits....................................................................3
(g) Vacation..........................................................................4
(h) Services Furnished................................................................4
6. Offices...............................................................................4
7. Termination...........................................................................4
(a) Death.............................................................................5
(b) Disability........................................................................5
(c) Cause.............................................................................5
(d) Good Reason.......................................................................6
(e) Change in Control.................................................................8
(f) Unilateral.......................................................................10
8. Termination Procedure................................................................10
(a) Notice of Termination............................................................10
(b) Date of Termination..............................................................10
(c) Compensation During Dispute......................................................11
9. Compensation upon Termination
or During Disability.................................................................11
(a) Disability; Death................................................................11
(b) By Company without Cause or by the
Executive for Good Reason........................................................12
(c) By Company for Cause or by the Executive
Other than for Good Reason.......................................................13
(d) Compensation Plans...............................................................13
10. Mitigation...........................................................................13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
11. Confidential Information; Noncompetition.............................................14
(a) Confidential Information.........................................................14
(b) Noncompetition Requirement.......................................................14
(c) Salary and Bonus Continuation....................................................15
(d) Injunctive Relief................................................................15
12. Indemnification; Legal Fees..........................................................16
13. Successors; Binding Agreement........................................................16
(a) Company's Successors.............................................................16
(b) Executive's Successors...........................................................17
14. Notice...............................................................................17
15. Miscellaneous........................................................................17
16. Validity.............................................................................18
17. Counterparts.........................................................................18
18. Entire Agreement.....................................................................18
</TABLE>
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT, dated as of August 14, 1998,
by and between Roger E. Schwed (the "Executive"), and Maxcor Financial Group
Inc. (formerly Financial Services Acquisition Corporation), a Delaware
corporation (the "Company"), restating the employment agreement between the
parties hereto, dated as of September 11, 1996 (the "1996 Agreement").
WHEREAS, the Company currently employs the Executive and the
Executive currently furnishes services to the Company and its subsidiaries on
the terms and conditions set forth in the 1996 Agreement; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control; and
WHEREAS, the parties desire to amend and restate the 1996
Agreement in order to add certain Change in Control and other provisions;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth below, the parties hereby agree as follows:
11 Employment. The Company hereby agrees to continue to employ
the Executive, and the Executive hereby accepts such continued employment, on
the terms and conditions hereinafter set forth.
12 Term. The period of employment of the Executive by the
Company hereunder (the "Employment
<PAGE>
Period") shall commence (the "Commencement Date") on October 1, 1996, and end on
the fifth anniversary of the Commencement Date, unless further extended as
provided in this Section 2 or sooner terminated as provided in Section 7. On the
fourth anniversary of the Commencement Date and on each successive anniversary
thereafter, the contract term of the Executive's employment shall be
automatically extended for one (1) additional year unless, on or prior to such
anniversary, the Company shall have delivered to the Executive or the Executive
shall have delivered to the Company written notice that the term of the
Executive's employment hereunder will not be extended (the initial five-year
contract term, as it may be so extended, the "Contract Term"); provided,
however, that, if a Change in Control shall have occurred during the original or
extended term of this Agreement, the Contract Term shall continue in effect for
at least twenty-four (24) months subsequent to the month in which such Change in
Control occurs.
13 Position and Duties. During the Employment Period, the
Executive shall serve as Vice President, General Counsel, and Secretary of the
Company and Executive Vice President, General Counsel and Secretary of the
Company's subsidiary, Euro Brokers Investment Corporation ("EBIC"). The
Executive's responsibilities and authority shall include such responsibilities
and authority as may from time to time be assigned to the Executive by the
Chairman of the Company, provided that such responsibilities and authority are
consistent with the Executive's position with the Company and EBIC. The
Executive shall report directly to the Chairman. During the Employment Period,
the Executive agrees to devote substantially all of his working time and efforts
to the performance of his duties for the Company and EBIC.
14 Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the principal
executive offices of EBIC in New York, New York, except for reasonably required
travel on the Company's business.
15 Compensation and Related Matters.
(0) Base Salary. As compensation for the performance by the
Executive of his obligations hereunder, during the Employment Period, the
Company shall pay
2
<PAGE>
the Executive a base salary at the rate of $250,000 per annum ("Base Salary").
Base Salary shall be paid in approximately equal installments in accordance with
the Company's customary payroll practices. Base Salary may be increased from
time to time in accordance with the normal business practices of the Company
and, if so increased, shall not thereafter during the Employment Period be
decreased.
(1) Guaranteed Bonus. During the Employment Period, the
Company shall pay the Executive a guaranteed minimum bonus at the rate of
$50,000 per annum ("Minimum Bonus"). Minimum Bonus shall be paid in
approximately equal semi-annual installments. Minimum Bonus may be increased
from time to time in accordance with the normal business practices of the
Company.
(2) Other Bonuses. During the Employment Period, the
Executive shall be eligible to receive, in addition to the Minimum Bonus, such
semi-annual bonuses as may be awarded to him as the Chairman of the Company
shall determine, or if an annual incentive plan is adopted by the Company or a
subsidiary thereof, in accordance with the terms of such plan.
(3) Proration. The Executive shall be entitled to pro rata
payments under Section 5(b) above, and to be considered for pro rata payments
under Section 5(c) above, in each case to the extent that the period of his
service to the Company at the regular time for the determination for such
payments is less than the full period over which the determination of such
payments is normally measured.
(4) Expenses. The Company shall promptly reimburse the
Executive for all reasonable business expenses incurred during the Employment
Period by the Executive in performing services hereunder, including all expenses
of travel and living expenses while traveling on business or at the request of
and in the service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company.
(5) Other Benefits. The Executive shall be entitled to
participate in all of the employee benefit plans currently maintained by the
Company or a subsidiary thereof, in accordance with the terms of such plans, and
shall be entitled to participate in or receive benefits under any employee
benefit plan made available by the Company or a subsidiary
3
<PAGE>
thereof in the future to its executives and key management employees (including
without limitation each incentive plan, pension and retirement plan,
supplemental pension and retirement plan, stock option plan, life insurance and
health-and-accident plan, medical insurance plan, disability plan, survivor
income plan, relocation plan and vacation plan), subject to and on a basis
consistent with the terms, conditions and overall administration of such plans.
Nothing paid to the Executive under any plan currently in effect or made
available in the future shall be deemed to be in lieu of the salary or bonus
payable to the Executive pursuant to subsections (a) and (b) of this Section 5.
(6) Vaction. The Executive shall be entitled to 20 vacation
days in each calendar year(and a pro rata number of vacation days for any
initial portion of the Employment Period that is not a full calendar year). The
Executive shall also be entitled to all paid holidays given by the Company to
its executives.
(7) Services Furnished. During the Employment Period, the
Company shall furnish the Executive with office space, stenographic assistance
and such other facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties as set forth in Section
3 hereof.
16 Offices. Subject to Section 3 hereof, the Executive agrees
to serve without additional compensation, if elected or appointed thereto, as a
director of the Company or any subsidiaries of the Company and as a member of
any committees of the board of directors of any such corporations, and in one or
more executive positions of any of the Company's subsidiaries, provided that the
Executive is indemnified for serving in any and all such capacities on a basis
no less favorable than is currently provided to any other director of the
Company or any of its subsidiaries, or any such executive position, as the case
may be.
17 Termination. The Executive's employment hereunder (and the
Employment Period) may be terminated without any breach of this Agreement only
under the
4
<PAGE>
circumstances set forth in the following subsections (a), (b), (c),
(d) and (f).
(0) Death. The Executive's employment hereunder (and the
Employment Period) shall terminate upon his death.
(1) Disability. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from the
full-time performance of his duties hereunder for the entire period of six
consecutive months, and within thirty (30) days after written Notice of
Termination (as defined in Section 8 hereof) is given shall not have returned to
the performance of his duties hereunder on a full-time basis, the Company may
terminate the Executive's employment hereunder (and the Employment Period) for
"Disability."
(2) Cause. The Company may terminate the Executive's
employment hereunder (and the Employment Period) for Cause. For purposes of this
Agreement, the Company shall have "Cause" to terminate the Executive's
employment hereunder upon the occurrence of any of the following events:
(1) the conviction of the Executive for the commission of
a felony; or
(2) the willful and continuing failure by the Executive to
substantially perform his duties hereunder (other than such failure
resulting from the Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by the
Executive for Good Reason) after demand for substantial performance is
delivered by the Company in writing that specifically identifies the
manner in which the Company believes the Executive has not
substantially performed his duties; or
(3) the willful misconduct by the Executive (including,
but not limited to, breach by the Executive of the provisions of
Section 11 hereof) that is demonstrably and materially injurious to the
Company or its subsidiaries, whether monetarily or otherwise.
5
<PAGE>
For purposes of this Section 7(c), no act or failure to act on the Executive's
part shall be considered "willful" unless done or failed to be done by the
Executive in bad faith and without reasonable belief that the Executive's action
or omission was in the best interest of the Company.
(3) Good Reason. The Executive may terminate his employment
hereunder (and the Employment Period) during the Contract Term for "Good Reason"
after the occurrence, without the written consent of the Executive, of an event
constituting a material breach of this Agreement by the Company that has not
been fully cured within ten (10) days after written notice thereof has been
given by the Executive to the Company, provided that, without limiting the
generality of the foregoing, on and after a Change in Control, any one of the
following events shall be deemed a material breach of this Agreement:
(1) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive officer
of the Company or a substantial adverse alteration in the nature of the
Executive's responsibilities from those in effect immediately prior to
the Change in Control, or being required to report to anyone other than
the Chairman;
(2) a reduction by the Company in the Executive's Base
Salary as in effect immediately prior to the Change in Control;
(3) the relocation of the Executive's principal place of
employment to a location outside of Manhattan, New York;
(4) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation or to pay to the
Executive any portion of an installment of deferred compensation under
any deferred compensation program of the Company within fifteen (15)
days of the date such compensation is due;
6
<PAGE>
(5) the failure by the Company to provide the Executive
with compensation plans which, in the aggregate, provide the Executive
with substantially comparable compensation opportunities to those
compensation opportunities for which the Executive was eligible
immediately prior to the Change in Control;
(6) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any material
perquisite or other fringe benefit, or secretarial service and office
space at the level, enjoyed by the Executive at the time of the Change
in Control, or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled
under this Agreement;
(7) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 8(a) or that does not comply
with Section 7(c), if applicable (and for purposes of this Agreement,
no such purported termination shall be effective); or
(8) the failure of a successor to the Company to expressly
assume and agree to perform this Agreement pursuant to Section 13(a)
hereof.
The Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or
7
<PAGE>
a waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
(4) Change in Control. A "Change in Control" shall be deemed
to have occurred if the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person (as defined hereinbelow) becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
(as defined hereinbelow) representing 25% or more of the combined
voting power of the Company's then outstanding securities, excluding
(x) any Person who becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii) below and (y)
any Person who currently is such a Beneficial Owner unless such Person
becomes the Beneficial Owner of additional securities of the Company
representing 5% or more of the combined voting power of the Company's
then outstanding securities; or
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date of this amended and restated Agreement,
constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved or recommended;
or
(3) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company
8
<PAGE>
with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person becomes the Beneficial Owner, directly
or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding securities,
excluding any Person who currently is such a Beneficial Owner unless
such Person becomes the Beneficial Owner of additional securities of
the Company representing 5% or more of the combined voting power of the
Company's then outstanding securities; or
(4) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the Company's
assets to an entity, at least 60% of the combined voting power of the
voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.
For purposes of this Section 7(e), "Person" shall have the
meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its Affiliates, (iii) an underwriter temporarily
9
<PAGE>
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
For purposes of this Section 7(e), "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
(5) Unilateral. The Executive may unilaterally terminate his
employment hereunder (and the Employment Period) during the Contract Term other
than for Good Reason, and without the Company's consent, upon not less than 60
days' written notice to the Company.
18 Termination Procedure.
(0) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to Section 7(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(1) Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated for Disability pursuant
to Section 7(b), thirty (30) days after Notice of Termination (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), (iii) if the Executive's
employment is terminated for Cause pursuant to Section 7(c), the date specified
in the Notice of Termination, which shall not be earlier than the date of the
Notice of Termination and (iv) if the Executive's employment is terminated for
any other reason, the date on which a Notice of Termination is given or any
later date (within 60 days) set forth in such Notice of Termination;
10
<PAGE>
provided, however, that if either party notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected); provided further,
however, that the Date of Termination shall be extended by a notice of dispute
given by the Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable diligence.
(2) Compensation During Dispute. If a purported termination
occurs on or after a Change in Control and during the Contract Term, and such
termination is disputed in accordance with subsection (b) of this Section 8, the
Company shall continue to pay the Executive the full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the Date of Termination, determined
in accordance with subsection (b) of this Section 8. Amounts paid under this
Section 8(c) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
19 Compensation upon Termination or During Disability.
(0) Disability; Death. During any period that the Executive
fails to perform his duties hereunder as a result of incapacity due to physical
or mental illness ("Disability Period"), the Executive shall continue to receive
his full Base Salary and Minimum Bonus at the rate in effect at the beginning of
such period and continue as a participant in all compensation and employee
benefit plans in which the Executive was participating pursuant to Section 5(f)
until his employment is terminated pursuant to Section 7(b) and shall continue
to receive such Base Salary and Minimum Bonus for a period of six months
thereafter. Subsequent to the six-month period following termination of the
Executive's employ-
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ment pursuant to Section 7(b), or in the event the Executive's employment is
terminated by reason of his death, the Company shall have no further obligations
to the Executive under this Agreement and the Executive's benefits shall be
determined under the Company's retirement, insurance and other compensation
programs then in effect in accordance with the terms of such programs.
(1) By Company without Cause or by the Executive for Good
Reason. If during the Contract Term the Executive's employment is terminated by
the Company other than for Cause or Disability or by the Executive for Good
Reason, then --
(1) in addition to any amounts due the Executive
pursuant to Sections 5(a), 5(b) or 5(c) hereof, the Company shall
continue to pay to the Executive (or his legal representatives or
estate) his Base Salary and Minimum Bonus (at the rate in effect
immediately prior to the occurrence of the circumstance giving rise to
the Notice of Termination) for the remainder of the Contract Term or,
if greater, for one year (the "Severance Payments"); provided, however,
that if such termination of employment occurs following a Change in
Control, then the aggregate Severance Payments shall be made in an
undiscounted cash lump sum within five (5) days following the Date of
Termination; and
(2) the Company or a subsidiary thereof shall maintain
in full force and effect, for the continued benefit of the Executive
and his dependents for the remainder of the Contract Term or, if
greater, for one year, all medical, dental and life insurance benefit
plans and programs in which the Executive was entitled to participate
immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms
and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive and his dependents with
benefits substantially similar to those which
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the Executive and his dependents would otherwise have been entitled to
receive under such plans and programs from which their continued
participation is barred; and
(3) the Executive shall be deemed to continue as an
employee of the Company during the remainder of the Contract Term for
purposes of the exercise and/or vesting of outstanding stock and stock
option awards and cash incentive awards.
(2) By Company for Cause or by the Executive Other than for
Good Reason. If the Executive's employment shall be terminated by the Company
for Cause or by the Executive other than for Good Reason, then the Company shall
pay the Executive his Base Salary and Minimum Bonus (at the rate in effect at
the time Notice of Termination is given) through the Date of Termination, and
the Company shall have no additional obligations to the Executive under this
Agreement except as set forth in subsection (d) of this Section 9.
(3) Compensation Plans. Following any termination of the
Executive's employment, the Company shall pay the Executive all unpaid amounts,
if any, to which the Executive is entitled as of the Date of Termination under
any compensation plan or program of the Company, at the time such payments are
due.
110 Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for the Executive by seeking other employment
or otherwise, nor, except as is hereinafter specifically provided in this
Section 10, shall the amount of any payment or benefit provided for the
Executive hereunder be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
otherwise. If the Executive's employment is terminated prior to a Change in
Control, then to the extent that the Executive, during the relevant period
described in Section 9(b)(i) hereof, shall receive from a subsequent employer
base salary and/or any bonus similar to the Minimum Bonus, the payments to be
provided under the provisions of said Section shall be correspondingly reduced.
To the extent that the
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Executive, during the relevant period described in Section 9(b)(ii) hereof,
shall receive from a subsequent employer benefits similar to those to be
provided under Section 9(b)(ii), the benefits to be provided under the
provisions of said Section shall be correspondingly reduced.
111 Confidential Information; Noncompetition Requirement.
(0) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information relating to the Company and its businesses, which shall
have been obtained by the Executive during the Executive's employment by the
Company and which shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). The Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such trade secrets or information to
anyone other than the Company and those designated by the Company. Any
termination of the Executive's employment or of this Agreement shall have no
effect on the continuing operation of this Section 11(a).
(1) Noncompetition Requirement. During (1) any period that
the Executive is performing services hereunder, (2) a period of six (6) months
following a termination of the Executive's employment by the Company for Cause
or by the Executive other than for Good Reason (if the Company so requests,
notifies and pays the Executive as provided in Section 11(c) below), (3) on or
after a Change in Control, a period of six (6) months following a termination of
the Executive's employment by the Executive for Good Reason, and (4) with
respect to clauses (i) and (ii) of this Section 11(b), any period with respect
to which the Executive is entitled to payment pursuant to Section 9(b)(i) or, if
shorter, a period of one year, the Executive agrees that, without the prior
written consent of the Company, he shall not, directly or indirectly, with or
without pay, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, manager, investor, lender,
advisor, owner, associate or in any other individual or
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representative capacity, (i) solicit, entice, encourage or otherwise attempt to
procure or service by telephone or otherwise accounts from any customers
(determined as of the Date of Termination) of the Company or a subsidiary
thereof for a business that is directly competitive (a "Competitive Business")
with the business in which the Company is then engaged (the "Business"), (ii)
solicit, entice or encourage any employee (determined as of the Date of
Termination) of the Company or a subsidiary thereof to terminate such employee's
employment in order to work in a Competitive Business, or (iii) upon the written
request of the Company, directly engage or participate in any Competitive
Business unless such Competitive Business is located more than seventy-five (75)
miles from the site, as of the Date of Termination, of the Company's executive
offices in New York; provided, however, that (x) trading by the Executive for
his own benefit or in proprietary accounts shall not constitute a Competitive
Business and (y) the Executive may engage or participate in a business which has
a Competitive Business as a component or portion thereof if engaging or
participating in such Competitive Business does not constitute a substantial
part of the Executive's duties.
(2) Salary and Bonus Continuation. Following a termination
of the Executive's employment by the Company for Cause or by the Executive other
than for Good Reason, the Company may elect, by written notice given to the
Executive within 7 days of such notice of termination, to require the Executive
to perform the covenant provided in subsection (b)(iii) of this Section 11
during the six-month period following the effectiveness of such termination. As
additional consideration for the Executive's performance of such covenant during
such period, but only for so long as the Executive shall continue to perform
such covenant, the Company shall pay the Executive for each month during such
six-month period an amount equal to one-twelfth (1/12th) of the Executive's Base
Salary and Minimum Bonus. It is agreed and understood that such payment
constitutes full and fair consideration to the Executive for observance of such
covenant.
(3) Injunctive Relief. In the event of a breach or
threatened breach of subsections (a), (b) or (c) of this Section 11, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or
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threatened breach, the Executive acknowledging that damages would be inadequate
and insufficient.
112 Indemnification; Legal Fees. The Company shall indemnify
the Executive to the full extent permitted by law and the by-laws of the Company
for all expenses, costs, liabilities and legal fees which the Executive may
incur in the discharge of his duties hereunder. The Company shall also reimburse
the Executive for any reasonable legal fees and expenses incurred by the
Executive in contesting or disputing any termination of the Executive's
employment hereunder or in seeking to obtain or enforce any right or benefit
provided by this Agreement, but only if the Executive shall substantially
prevail with respect to the preponderance of the matters at issue. Such payments
shall be made within five (5) days after the Executive's request for payment
accompanied with such evidence of his having prevailed (as described in the
preceding sentence) and such evidence of the fees and expenses incurred, as the
Company may reasonably require. Any termination of the Executive's employment or
of this Agreement shall have no effect on the continuing operation of this
Section 12.
113 Successors; Binding Agreement.
(0) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as he would be entitled to hereunder if
the Company had terminated his employment other than for Cause, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 13 or which otherwise be-
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comes bound by all the terms and provisions of this Agreement by operation of
law.
(1) Executive's Successors. This Agreement and all rights
of the Executive hereunder shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
114 Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Roger E. Schwed
225 West 106th Street, Apt. 11A
New York, New York 10025
With a copy to the offices of the Company
If to the Company:
Maxcor Financial Group Inc.
Two World Trade Center
84th Floor
New York, New York 10048
Attn: Chairman
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
115 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and an authorized officer of the
Company (other than the Executive). No waiver by
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either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be binding on all successors
to the Company. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York without
regard to its conflicts of law principles. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state or
local law. The obligations of the Company and the Executive under this Section
15 and Sections 8, 9, 10, 11, 12 and 13 hereof shall survive the expiration of
the term of or the termination of this Agreement. The compensation and benefits
payable to the Executive under this Agreement shall be in lieu of any other
severance benefits to which the Executive may otherwise be entitled upon his
termination of employment under any severance plan, program, policy or
arrangement of the Company.
116 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
117 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
118 Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
MAXCOR FINANCIAL GROUP INC.
By: /s/ Gilbert D. Scharf
-------------------------------
Name: Gilbert D. Scharf
Title: President
/s/ Roger E. Schwed
-----------------------------------
Roger E. Schwed
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Exhibit 10.10
DATED 1 SEPTEMBER 1998
EURO BROKERS INTERNATIONAL LIMITED
- AND -
ROBIN ADRIAN CLARK
-----------------
AGREEMENT
-----------------
<PAGE>
AN AGREEMENT MADE ON 1 SEPTEMBER 1998
BETWEEN:
(1) EURO BROKERS INTERNATIONAL LIMITED of 133 Houndsditch, London EC3A 7AJ
("the Company"), and
(2) ROBIN ADRIAN CLARK of 45 Upper Park, Loughton, Essex, IG10 4EQ.
In accordance with the requirements of Section 1 of the Employment Rights Act
1996, this Agreement incorporates a statement of the main terms and conditions
binding upon you at the date hereof.
Any amendments or additions to this Contract (other than as to rates of pay)
will be issued as a supplement to individual employees and should be affixed to
this Agreement.
1. JOB TITLE
1.1 You are hereby initially appointed as Joint Managing Director of the
Company. Because of the changing nature of the business, the
obligations upon you will inevitably vary and develop. The Company
reserves the right at any time during your employment, upon reasonable
notice, to require you to undertake any duties which fall within your
capabilities for the Company or another Group Company.
1.2 Whilst in the Company's employment you may not have an interest or an
involvement in another business or other employment, including working
on your own account, without specific prior approval from the Company's
Board of Directors. On no account will an interest or an involvement in
another business or other employment which conflicts with the interests
of the Company or the Euro Brokers Group of Companies be permitted.
1.3 Whilst in the Company's employment, you must always use your best
endeavours to promote and protect the interests of the Company, and
must not do anything which is harmful or disloyal to those interests.
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2. COMMENCEMENT DATE AND DURATION
2.1 This Agreement shall be deemed to have commenced on 1 May 1998 ("the
Commencement Date") and shall continue for a minimum term of three
years and thereafter unless terminated by you or the Company giving six
months notice in writing to expire at any time on or after the expiry
of the minimum term.
2.2 Your period of continuous employment commenced on 1 August 1994.
Employment with any previous employer before this date does not count
as part of the continuous employment.
2.3 Your retiring age shall be 50 and unless otherwise agreed, this
Agreement or any agreement with the company shall automatically
determine when you reach that age.
3. REMUNERATION
3.1 Your remuneration is as follows: (i) for the first two years of your
employment a fixed salary of 200,000 Pounds per annum and (ii)
thereafter a fixed salary of 300,000 Pounds per annum for the duration
of this Agreement unless otherwise agreed, payable by twelve monthly
instalments by direct credit transfer to your bank account on the last
working day of every month. Any future changes will be notified to you
in writing.
3.2 You may in addition be entitled to receive a performance bonus
currently payable in February and August of each year but awarded at
the entire discretion of the Company. To be eligible for a
discretionary bonus you must be employed (and not under notice whether
given by you or the Company) on the date when the payment is made.
4. HOURS OF WORK AND EXPENSES
4.1 Your hours of work are market hours, Monday to Friday each week. You
may be required to vary your start and finishing times of work, or to
work reasonable additional hours in order to satisfactorily complete
your duties and satisfy the
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business interests of the Company and you will not be entitled to
receive any payments for work performed outside normal business hours.
4.2 You are entitled to be reimbursed for all reasonable out of pocket
expenses wholly and exclusively incurred by you on the Company's
business (including entertainment and travelling expenses) which should
be evidenced in the manner required and as approved by the Company.
4.3 In this position you must be willing to travel and work overseas,
staying away for periods of up to several weeks duration as required.
5. STATUTORY REQUIREMENTS AND CONFIDENTIALITY
5.1 You must adhere at all times to all statutory requirements and laws
relating to the business of the Company or any Group Company including
in particular those controlling dealing and broking operations,
together with any requirements laid down by the regulatory bodies which
from time to time regulate the conduct of the business of the Company
or any Group Company or associates. In this regard, you accept that you
have read and will adhere to the requirements of both the Grey Paper
and the Securities and Futures Authority, and you are required to sign
an S.F.A. undertaking acknowledging your full compliance with Part 5 of
The Criminal Justice Act 1993 (Appendix 1). The Company reserves the
right to require you to sign any other undertakings or acknowledgements
that it deems necessary in order to comply with all relevant laws,
statutes or regulations, or to promote the good conduct of the business
of the Company or any Group Company.
5.2(a) You shall not make use of or divulge to any person, and you shall use
your best endeavours to prevent the use, publication or disclosure of,
any information of a confidential or secret nature:
(i) concerning the business of the Company or any Group Company
and which comes to your knowledge during the course of or in
connection with your employment or your holding any office
within the Group from any source within the Company or any
Group Company; or
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(ii) concerning the business of any person having dealings with the
Company or any Group Company and which is obtained from any
person outside the Company or any Group Company who has
required the Company or any Group Company to keep any such
information confidential.
For the purposes of paragraph (i) above, information of a confidential or secret
nature includes but is not limited to rates of brokerage, levels of discount
provided to clients and levels of brokerage earned from clients. Additionally
rates of pay and bonuses paid are confidential (including those of yourself) and
must not be discussed with anyone except the Company's Board of Directors or as
required by law.
(b) This clause shall not apply to information which is:
(i) used or disclosed in the proper performance of your duties or
with the prior written consent of the Company; or
(ii) ordered to be disclosed by a Court or competent jurisdiction
or otherwise required to be disclosed by law.
(c) This clause shall continue to apply after the termination of your
employment (whether terminated lawfully or not) without limit in time.
(d) Each of the restrictions in each paragraph or subclause above shall be
enforceable independently of each of the others and its validity shall
not be affected if any of the others is invalid. If any of those
restrictions is void but would be valid if some part of the restriction
were deleted, the restriction in question shall apply with modification
as may be necessary to make it valid.
5.3 All documents provided to you and all documents, notes and memoranda
created by you in the course of your employment are and remain the
property of the Company. Documents for this purpose includes
information held on computer or in any other form. Any such documents
shall be given to the Company on request (together with any copies) and
in any event on termination of your employment.
5.4 It is strictly forbidden to offer to any third party or accept any
benefit whether financial or in kind from any other party (other than
your proper remuneration from
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the Company). It is strictly forbidden to accept gifts or hospitality
other than by way of a token nature from any person or business with
whom they are involved on Company business. You must always clear the
position with the Company's Board of Directors before accepting any
gift or hospitality whatever the nature.
6. COMPANY CAR
6.1 Entitlement to the use and continued use of a Company car is
discretionary and dependent upon the approval of the Board of Directors
of the Company. If you have or become entitled to the use of a Company
car, it will be provided to you subject to and upon the Terms and
Conditions of the rules issued by the Company. The Company reserves the
right to change the size or nature of the car being used by you or to
remove the entitlement at its discretion in the light of an assessment
of the current requirements of the job. You will be responsible for
ensuring that the vehicle is always maintained in a clean and road
worthy condition. In the event of your employment with the Company
terminating for any reason whatsoever, you may be required to reimburse
some monies to the Company if the car is not due for replacement for a
period of more than 6 months on the date on which your employment
terminates. You will find attached to this statement the rules and
regulations relating to the Company Car Scheme (Appendix 3). Please
also sign this document as it will constitute an integral part of your
Contract of Employment.
6.2 Entitlement to a company car will cease on either party giving notice
to terminate this contract under clause 2 or 14 or on the date your
employment terminates, whichever is the earlier date.
7. HOLIDAY ENTITLEMENT
7.1 The holiday year starts on 1 January. Entitlement in a full year is 30
working days, or pro rata for a part-year's service, plus 8 statutory
holidays each year.
7.2 The Company reserves the right to allocate up to 5 days holiday each
year for all employees.
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7.3 Any excess of days holiday actually taken over holiday entitlement at
the time of leaving service will be translated to an equivalent number
of days at basic rate and deducted from the final payment made to the
employee.
7.4 No payment for holiday entitlement will be made.
7.5 No carry-over of holiday entitlement will be permitted to the following
holiday year, unless exceptionally given in writing by the Company's
Board of Directors.
7.6 For full details of the Company's Holiday Arrangements see Appendix 4.
8. SICKNESS AND INJURY - GENERAL RULES (APPENDIX 5)
8.1 If you are absent from work as a result of sickness or injury, you must
notify the Company of the reason for your absence by 9.00 am on the
first day of absence.
8.2 Employees must self-certificate absences from work up to seven days
including weekends. Failure to complete a Self Certificate under these
circumstances, or the provision of false information will be
disciplinary offences.
8.3 If you are absent for a period of 8 days or more you must provide a
Doctor's certificate which should be sent to the Personnel Department
immediately and on return to work you must provide a medical
certificate which states you are fit to resume your duties unless the
previous certificate gives the date on which you may resume work.
8.4 Provided that you have complied with the sickness and injury procedure
as laid down by the company, employees with more than 6 months
continuous service may at the Company's discretion be entitled up to a
maximum of 26 weeks pay during any period of 12 months absence. Any
Company sickness absence payments will be at the basic rate less the
value of any state benefits or Statutory Sick Payments to which the
employee is entitled. Qualifying Days for Statutory Sick Pay purposes
are Monday to Friday each week.
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8.5 It is a condition of your employment that you will agree to have a
medical examination with a Company nominated Doctor if required by the
Company and agree that the results of such examination may, on request,
be disclosed to the Company.
9. PENSIONS AND MEDICAL CARE
9.1 Initially, you will be automatically entered into the State Pension
Scheme unless you are a member of an Approval Personal Pension Scheme.
9.2 The Company operates four insurance schemes for the benefit of
employees after they are appointed to the permanent staff:
(a) Salary Sacrifice Scheme to provide pensions and if required life
assurance benefits.
(b) Group Disability scheme to enable you to receive a permanent income in
case of illness or permanent disability.
(c) Medical Insurance to enable you and your family to receive private
medical treatment currently with PPP.
(d) Life Assurance cover of four times your annual salary as at 1 February
of each year, capped at a maximum figure as determined by the Inland
Revenue.
Scheme (a) requires that you authorise the Company to deduct your agreed
contribution at source.
Schemes (b), (c) and (d) will be paid for by the Company.
Benefits under the Schemes are provided subject to their rules or the terms of
any insurance policy under which they are provided, from time to time.
Full details of any of these schemes can be obtained from the Personnel
Department.
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10. GARDEN LEAVE
10.1 The Company may suspend any of your duties and powers (and may require
you not to attend at the Company's premises) during the whole or any
one or more parts of any period after notice of termination of your
employment has been given by the Company or you. In particular the
Company may exercise this right in circumstances where it is reasonable
for the Company to believe that you will or intend to be interested or
concerned in a business, company or firm carrying on, or about to
commence, a business which is, or is likely to be, competitive with any
part of the business of the Company or any Group Company with which you
were engaged or concerned in the 12 months before the suspension
started. In addition or alternatively, the Company may during the whole
or any one or more parts of such period require you to perform duties
(including any modified duties the Company may reasonably require you
to perform) at such locations as the Company may reasonably require
which shall include requiring you to carry out duties that do not
involve contact with the Group's clients. Throughout any such period of
suspension your salary and the other benefits to which you are entitled
under this Agreement shall continue to be paid or provided by the
Company.
10.2 If you hold any directorship or other office in a Group Company, at any
time during such period you shall, at the request of the Company,
immediately resign, without claim for compensation, from that office.
If you do not resign the Company is irrevocably authorised to appoint
some person in your name and on your behalf to do all such things and
execute all such documents as may be necessary for or incidental to
giving effect to your resignation.
11. PROTECTIVE COVENANTS
11.1 You covenant with the Company (for itself and as trustee for each Group
Company) that you will not:
(a) for a period of the shorter of the notice period you are required to
give to terminate your employment or 12 months from the Relevant Date
be concerned in any business which is competitive or likely to be
competitive with any business with which you were actively involved
during the course of your employment during the
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12 months ending on the Relevant Date and which is carried on by the
Company or another Group Company at the Relevant Date.
(b) for a period of the shorter of the notice period you are required to
give to terminate your employment or 12 months after the Relevant Date
be concerned in any business within a radius of 5 miles of the Bank of
England and which is competitive or likely to be competitive with any
business in which you were actively involved in the course of your
employment during the 12 months ending on the Relevant Date and which
is carried on by the Company or another Group Company at the Relevant
Date.
(c) for a period of the shorter of the notice period you are required to
give to terminate your employment or 12 months from the Relevant Date
(except as expressly authorised by the Company or a Group Company) deal
with (whether directly or indirectly) in relation to or in connection
with services similar to or competitive with those being provided by
the Company or any Group Company at the Relevant Date and with which
you were involved in the course of your employment during the twelve
months ending on the Relevant Date, any person who is at that date or
who has been at any time within the year ending on that date a client
of the Company or a Group Company with whom you or the Desk are, or
have been engaged or concerned or about whom you have been provided
information.
(d) for a period of the shorter of the notice period you are required to
give to terminate your employment or the 12 months from the Relevant
Date (except as expressly authorised by the Company or a Group Company)
canvass or solicit business, orders or custom (whether directly or
indirectly) for services similar to or competitive with those being
provided by the Company or any Group Company at the Relevant Date and
with which you were involved in the course of your employment during
the 12 months ending on the Relevant Date, from any person who is at
that date or who has been at any time within the year ending on that
date a client of the Company or a Group Company with whom you were
engaged or concerned or about whom you have been provided information,
(e) for a period of twelve months from the Relevant Date induce or attempt
to induce (whether directly or indirectly) any supplier of the Company
or a Group Company to cease to supply, or to restrict or vary the terms
of supply to, that company; or
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(f) for a period of 12 months from the Relevant Date induce or attempt to
induce or encourage (whether directly or indirectly) any senior
employee of the Company or a Group Company or any person who is
employed as a broker by the Company or a Group Company (and in either
case, insofar as this restriction applies following the termination of
your employment was employed at the date on which your employment
terminates), to leave the employment of that company.
11.2 For the purposes of sub-clause 11.1:
(a) "Relevant Date" means the earlier of the date on which your employment
with the Company terminates OR the date upon which notice of such
termination is given.
(b) You are concerned in a business if you carry it on as a principal or
agent or if:
(i) you are directly or indirectly a partner, director, employee, secondee,
consultant or agent in, of or to any person who carries on the
business; or
(ii) you have any direct or indirect financial interest (as shareholder or
otherwise) in any person who carries on the business; or
(iii) you are directly or indirectly a partner, director, employee, secondee,
consultant or agent in, of or to any person who has direct or indirect
financial interest (as a shareholder or otherwise) in any person who
carries on the business (disregarding any financial interest of a
person in securities which are listed or dealt in on any Recognised
Investment Exchange if that person, you and any person connected with
you (within the meaning of section 839 of the Income and Corporation
Taxed Act 1988) are interested in securities which amount to less than
one per cent of the issued securities of that class and which, in all
circumstances, carry less than one per cent of the voting rights (if
any) attaching to the issued securities of that class); and
(c) reference to a Group Company shall mean any parent, subsidiary or
affiliate of the Company and shall include its and their successors in
business.
10
<PAGE>
11.3 The restrictions in each paragraph or sub-clause above shall be
enforceable independently of each of the others and its validity shall
not be affected if any of the others is invalid; if any of those
restrictions is void but would be valid if some part of the
restrictions were deleted the restriction in question shall apply with
such modification as may be necessary to make it valid.
11.4 You acknowledge that the above provisions of this clause are no more
extensive than is reasonable to protect the Company and the Group.
12. DISCIPLINARY PROCEDURE
12.1 If you have a grievance relating to your employment or are dissatisfied
with any disciplinary decision, the issue should be raised initially
with the Company's Board of Directors to whom you may also apply to
inspect the Company's Disciplinary Rules and Procedures and Grievance
Procedure (Appendices 6 & 7) and any appeal from a disciplinary
decision should be to the Board of Directors of EBIC.
12.2 You hereby agree with the Company to exclude any claim which you may
have in respect of your rights to a redundancy payment or to
compensation for unfair dismissal under the Employment Rights Act 1996
(or any statutory modification or re-enactment thereof for the time
being in force) in the event of the expiry of the terms of this
agreement in accordance with the provisions of Clause 2.1 without its
being renewed.
13. TERMINATION OF APPOINTMENT
If:
13.1 you are unable properly to perform your duties by reason of ill-health,
accident or otherwise for a period or periods aggregating at least 60
days in any period of 12 consecutive months; or
13.2 fail to act in accordance with any lawful direction of the President,
Chief Executive Officer or Board of Directors of EBIC or the Company
(or any designee of the
11
<PAGE>
foregoing), or are guilty of any serious breach of your obligations
under this agreement (including any consent granted under it): or
13.3 you are guilty of serious misconduct or any other conduct which affects
or is likely to affect prejudicially the interests of the Company or
the Group or you are convicted of an arrestable offence (other than a
road traffic offence for which a non-custodial penalty is imposed); or
13.4 you become bankrupt or make any arrangement or composition with your
creditors; or
13.5 you are disqualified from being a director of any company by reason of
any order made by any competent court; or
13.6 you are guilty of any breach or non-observance of any code of conduct,
rule or regulation referred to in clause 5 or fail or cease to be
registered (where such registration is, in the opinion of the Board,
required for the performance of your duties) by any regulatory
authority in the United Kingdom or elsewhere;
the Company may (whether or not any notice of termination has been given under
clause 2 above) by written notice to you, terminate the Appointment with
immediate effect.
14. CONTINUING EFFECT OF AGREEMENT
A termination of this Agreement for any reason shall not operate to
affect those provisions in this Agreement which are intended to have
effect after termination. Without limiting the application of the
preceding sentence, such termination shall not release you from the
continuing observance and performance by you of your obligations
contained in Clauses 5.2 and 11.
15. REFERENCES
The Employee authorises the Company to provide a reference when
requested by a potential employer, a regulatory body or a provider of
credit facilities. The
12
<PAGE>
Employee agrees that any such reference, which is provided in good
faith, will not give rise to any liability of the Company to him.
16. RELEVANT LAW
This Agreement shall be governed and construed under English Law and
each of the parties here to submits to the jurisdiction of the English
Courts.
17. PREVIOUS CONTRACTS
17.1 Subject to clause 17.2 this Agreement is in substitution for and
supersedes all previous contracts of employment between the Company and
yourself which shall be deemed to have been terminated by mutual
consent as from the date on which this Agreement commences together
with all and any rights and obligations under such previous contracts
of employment which have been and shall be treated as replaced by the
terms and conditions of employment set out in this Agreement. This
Agreement constitutes the entire understanding between the parties as
to the arrangements contemplated herein.
17.2 For the avoidance of doubt the provisions contained in a letter dated
between you and Euro Brokers Holdings Inc. shall remain in full force
and effect.
The Terms and Conditions of your Employment are in accordance with, and subject
to the Company's Rules and Policy Documents as detailed in the Appendices 1 - 11
of this Contract and current Employment Legislation. The relevant Company
documents are available for your inspection upon request. This document
supersedes and replaces any earlier particulars of Terms of Employment and
letter of appointment issued to you.
13
<PAGE>
Any future changes to your Terms and Conditions of employment will be recorded
and notified to you in writing giving the appropriate period of notice.
SIGNED by Paul Dunkley }/s/ Paul Dunkley
for and on behalf of the }
Company in the presence }
of:- }
SIGNED by Robin Clark }/s/ Robin Clark
in the presence of:- }
APPENDICES 1 -11 TO BE ATTACHED
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 14th day of August, 1998, between EURO
BROKERS INVESTMENT CORPORATION, a Delaware corporation (the "Company"), or
affiliates as the Company may assign from time to time, with principal offices
at Two World Trade Center, 84th Floor, New York, New York 10048 and WALTER E.
DULSKI ("Dulski"), residing at 70 Dogwood Court, Stamford, Connecticut 06903.
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment, Acceptance and Term
Subject to the provisions hereof, the Company agrees to employ
Dulski, and Dulski agrees to serve the Company, as Executive Vice
President for a term commencing on the date hereof and ending on August
31, 2001, which date (the "Termination Date") shall also be the date
upon which this Agreement shall terminate (except for such provisions
hereof as shall expressly survive termination or expiration). This
Agreement and the term of employment of Dulski will automatically
continue unless terminated by the Company or Dulski on not less than
six months prior written notice expiring on or after the Termination
Date. The last date of the term of this Agreement pursuant to any such
automatic continuance is herein called the "Extended Termination Date."
2. Duties and Authority
2.1 During the term hereof, Dulski shall faithfully and
diligently devote Dulski's full time, best efforts, skills and energies
to the business of the Company and its subsidiary and affiliated
entities (collectively, the "Business"). Dulski shall not accept any
other employment or render advisory services during the initial or any
extended term of this Agreement, nor shall Dulski permit such personal
business interests as Dulski may have to interfere with the performance
of Dulski's duties hereunder. Dulski acknowledges that neither the
Company nor any of its affiliates for which Dulski may be working
hereunder or with respect to which Dulski may have access to
confidential information ("Affiliates") shall have any obligation to
elect Dulski a director or an officer, but Dulski agrees to serve as
such if so elected. Dulski agrees to faithfully and diligently perform,
to the best of Dulski's abilities, such duties as may from time to time
be assigned to Dulski by the Company's Board of Directors (or its
designee). Dulski will duly, punctually and faithfully perform and
observe all rules that the Company may from time to time establish
concerning the conduct of the Business. All such services shall be
rendered for and in consideration of the compensation payable to Dulski
under Section 3 hereof.
2.2 Dulski grants the Company the right to obtain insurance on
Dulski's life during the term hereof for the benefit of the Company in
such amount as the Company shall
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Employment Agreement: Walter E. Dulski
August 14, 1998
Page 2
deem appropriate and hereby agrees to execute all such documents and
perform all such acts as the Company shall deem necessary in connection
therewith.
3. Compensation
During the term hereof, the Company shall pay Dulski
compensation at the rate of $270,000 per annum, payable periodically in
accordance with the Company's then prevailing practices (the "Base
Salary"). In addition, Dulski may be paid a bonus, on a semi-annual
basis, at the sole discretion of the Board of Directors of the Company,
but the Company shall not be obligated to pay any such bonus. Any bonus
award, if paid, will be made after consideration of Company profits and
the satisfactory performance by Dulski of his obligations under this
Agreement.
4. Expenses
4.1 In addition to the compensation payable to Dulski pursuant
to Section 3 hereof, the Company shall pay or reimburse Dulski, upon
submission of proper vouchers in respect thereof, all reasonable and
necessary transportation, hotel, living and related expenses incurred
by Dulski on business trips and all other business and entertainment
expenses, provided that all such expenses shall have been incurred in
accordance with the Company's policies or approved in advance by the
President of the Company or his designee.
4.2 Dulski is aware that Dulski may incur business expenses
for which it will be impracticable to claim reimbursement hereunder and
acknowledges that the compensation hereunder has been fixed to enable
Dulski to bear such expenses out of such compensation.
5. Additional Benefits
Dulski shall be entitled to an annual vacation in accordance
with the Company's policies as established from time to time, and shall
be entitled to participate in all retirement, insurance,
hospitalization, disability and other plans which the Company may in
its sole discretion establish from time to time, provided that Dulski
is eligible by the terms thereof to participate therein.
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 3
6. Discharge for Cause
The Company may terminate Dulski's employment hereunder for
Cause. For purposes of this Agreement, the Company shall have "Cause"
to terminate Dulski's employment hereunder upon the occurrence of any
of the following events:
(a) the conviction of Dulski for the commission of a felony; or
(b) the willful and continuing failure by Dulski to
substantially perform his duties hereunder (other than such
failure resulting from Dulski's incapacity due to physical
or mental illness) after demand for substantial performance
is delivered by the Company in writing that specifically
identifies the manner in which the Company believes Dulski
has not substantially performed his duties; or
(c) the willful misconduct by Dulski (including, but not limited
to, breach by Dulski of the provisions of Sections 8 and 9
hereof) that is demonstrably and materially injurious to the
Company or its subsidiaries, whether monetarily or
otherwise.
For purposes of this Section 6, no act or failure to act on
Dulski's part shall be considered "willful" unless done or failed to be
done by Dulski in bad faith and without reasonable belief that his
action or omission was in the best interest of the Company.
7. Termination of Employment
7.1 Notwithstanding anything to the contrary herein, Dulski's
employment hereunder may only be terminated without breach of this
Agreement as follows: (i) upon Dulski's death; (ii) based on Dulski's
failure to perform the duties of the position for a period of 60
consecutive days, or 120 days in the aggregate during any twelve-month
period (except as may be prohibited by federal, state or local
disability laws); (iii) upon termination by mutual consent of the
parties; (iv) upon notice to Dulski of discharge for Cause. In any such
event, the Company shall have no obligations hereunder other than to
pay sums due to Dulski as of the date of such termination. In addition,
Dulski may terminate this Agreement as set forth in Section 7.5 below.
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 4
7.2 If Dulski's employment is terminated by the Company in
breach of the preceding Section 7.1, or if Dulski terminates his
employment for Good Reason (as defined below), then:
(a) in addition to any amounts due Dulski pursuant to Sections
3, 4 or 5 hereof, the Company shall continue to pay to
Dulski (or his legal representatives or estate) his Base
Salary as in effect on the date of termination of employment
("Date of Termination") during the remainder of the period
that would have ended on the Termination Date (or any
applicable Extended Termination Date), but for the
termination of Dulski's employment hereunder (the
"Continuation Period"); and
(b) the Company or a subsidiary thereof shall maintain in full
force and effect, for the continued benefit of Dulski and
his dependents for the Continuation Period, all medical,
dental and life insurance benefit plans and programs in
which Dulski was entitled to participate immediately prior
to the Date of Termination, provided that Dulski's continued
participation is possible under the general terms and
provisions of such plans and programs. In the event that
Dulski's participation in any such plan or program is
barred, the Company shall arrange to provide Dulski and his
dependents with benefits substantially similar to those
which Dulski and his dependents would otherwise have been
entitled to receive under such plans and programs from which
their continued participation is barred; and
(c) Dulski shall be deemed to continue as an employee of the
Company during the Continuation Period for purposes of the
exercise and/or vesting of outstanding stock and stock
option awards and cash incentive awards.
7.3 If following a Change in Control (as defined in the
amended and restated employment agreement by and between Maxcor
Financial Group Inc. and its Chief Executive Officer, dated as of
August 14, 1998, as the same may from time to time be amended), Dulski
notifies the Company that a dispute exists concerning whether his
employment was properly terminated for Cause, or the Company notifies
Dulski that a dispute exists concerning whether his employment was
properly terminated for Good Reason, the Company shall continue to pay
Dulski the full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, Base Salary)
(such amounts being in addition to all other amounts due under this
Agreement) and
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 5
continue Dulski as a participant in all compensation, benefit and
insurance plans in which Dulski was participating when the notice
giving rise to the dispute was given, until the dispute is finally
determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or
decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected), provided
that such notice is given in good faith and Dulski pursues the
resolution of such dispute with reasonable diligence.
7.4 If Dulski's employment is terminated prior to a Change in
Control, then to the extent that Dulski, during the Continuation
Period, shall receive salary payments from a subsequent employer, the
payments to be provided under the provisions of Section 7.2(a) shall be
correspondingly reduced. To the extent that Dulski, during the
Continuation Period (whether or not a Change in Control has occurred),
shall receive from a subsequent employer benefits similar to those to
be provided under Section 7.2(b), the benefits to be provided under the
provisions of said Section shall be correspondingly reduced.
7.5 Dulski may terminate his employment hereunder for "Good
Reason" within 90 days after the occurrence, without his written
consent, of an event following a Change in Control constituting a
material breach of this Agreement by the Company that has not been
fully cured within 10 days after written notice thereof has been given
by Dulski to the Company. Dulski's right to terminate his employment
hereunder for Good Reason shall not be affected by his incapacity due
to physical or mental illness.
8. Non-Competition; Customers; Other Employees
8.1 Both parties recognize that the services to be rendered by
Dulski under this Agreement, including Dulski's development over the
term of his employment at the Company's expense of trading and customer
relationships and knowledge of customer preferences, are special,
unique and of extraordinary character. Dulski acknowledges that the
Company has a vital interest in retaining its employees and in
preserving its trading and customer relationships and that the level of
Dulski's compensation as set forth in Section 3 includes specific
additional amounts that, together with the further payments
contemplated by Section 8.5, are sufficient to constitute fair and
adequate consideration for the obligations and commitments of Dulski
under this Section 8 and that the specific enforcement of the
provisions contained herein will not diminish Dulski's ability to earn
a livelihood or create or impose upon Dulski any undue hardship.
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 6
8.2 Both during the term of Dulski's employment hereunder and,
if the Company so requests in writing, during the period (the
"Non-Compete Period") commencing immediately following any termination
of such employment (the "Term End") and ending (subject to Section 8.5
below) on the later of the Termination Date (or, if then applicable,
the Extended Termination Date) and the date that is six months
following the Term End, Dulski agrees that Dulski shall not in any
manner, directly or indirectly, be or become interested in or be
associated, by employment or otherwise, including as an officer,
director, stockholder, partner, associate, employee, consultant, owner,
agent, coventurer or otherwise, with any other business, entity
(corporate, partnership or otherwise) or person that is (i) engaged in
any business competitive (a "Competitive Business") with any aspect of
the Business in which Dulski has had direct and substantive involvement
during any portion of the term of his employment hereunder (the
"Relevant Business"); and (ii) located anywhere in the tri-state area
of New York, Connecticut and New Jersey. Notwithstanding the foregoing,
it shall not be deemed a violation of the provisions of this Section
8.2 if (x) Dulski acquires or owns, directly or indirectly, not more
than three percent (3%) of the issued and outstanding voting stock of
any corporation the shares of which are regularly traded on a national
securities exchange or on the over-the-counter markets or (y) Dulski is
or becomes associated with a business or entity for which such
Competitive Business both constitutes less than 5% of its net worth and
contributes less than 5% of its total revenues and profits, provided
that Dulski is "chinese-walled" from, and does not directly or
indirectly communicate or work with, or in any other fashion assist or
perform services, duties or other functions for, such Competitive
Business.
8.3 Both during the term of his employment hereunder and any
Non-Compete Period, Dulski agrees that Dulski shall not in any manner,
directly or indirectly, whether for Dulski's own account or the account
of any other business, entity or person, interfere with, disrupt or
damage, or attempt to interfere with, disrupt or damage, the
relationship of the Company or any of its Affiliates with any business,
entity or person that is, or at any time within the six-month period
preceding the Term End was, a client or customer of the Relevant
Business, including by soliciting, encouraging, accepting or otherwise
attempting to procure or service by telephone or otherwise for or on
behalf of a Competitive Business (wherever located) accounts or
business of any such client or customer that was serviced by, or became
known to, Dulski during the term of his employment hereunder.
8.4 Both during the term of his employment hereunder and
during the twelve-month period immediately following the Term End,
Dulski agrees that Dulski shall not in any manner, directly or
indirectly, without the Company's prior written consent, enter into any
arrangement with or otherwise solicit, entice or encourage any person
who is, or within six months prior to the Term End was, an employee of
the Company or any of its Affiliates to terminate such employee's
employment with the Company or such Affiliate to apply for or
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 7
accept employment with any Competitive Business. Notwithstanding the
foregoing, the provisions of this Section 8.4 shall not apply to any
employees in any aspect of the Business in which the Company or such
Affiliate has ceased to conduct operations as of the Term End.
8.5 As additional consideration, during any Non-Compete Period
following the Term End, for Dulski's performance at the request of the
Company of the covenants contained in Sections 8.2 and 8.3 above, the
Company shall pay Dulski for each month during such Non-Compete Period
(the "Non-Compete Payments") an amount equal to one-twelfth (1/12th) of
Dulski's Base Salary hereunder. Notwithstanding the foregoing (or
anything to the contrary in Sections 8.2 and 8.3), the Company, by
written notice at any time to Dulski, may terminate the Non-Compete
Period early and, in connection therewith, stop any further Non-Compete
Payments. In addition, if the Company determines that Dulski has
breached any of Dulski's covenants contained in this Agreement,
including said Sections 8.2 or 8.3, the Company may suspend any further
Non-Compete Payments (or, if during the Term, any further payments
under Section 3 above), or offset from such payments the Company's
reasonable estimate of the damages it has suffered as the result of
such breach, in each case without prejudice to any of its rights or
remedies under this Agreement.
9. Confidential Information
Dulski acknowledges that due to Dulski's position and duties
with the Company, Dulski will have access to the trade secrets, client
lists, customer preferences, computer software programs, financial
models, technology practices and other proprietary and/or confidential
information (collectively, "Confidential Information") of or relating
to the Business and/or the Affiliates. Accordingly, Dulski agrees that
Dulski shall not at any time (whether during or after the term of his
employment hereunder) use outside the scope of Dulski's employment
hereunder or disclose to anyone any Confidential Information. At or
prior to the Term End, Dulski shall return to the Company all copies of
any written (or otherwise stored, including electronically)
Confidential Information (including any notes, extracts or other
documents reflecting such information) in Dulski's possession.
10. Certain Remedies
10.1 Dulski acknowledges that given Dulski's special skills
and unique responsibilities with the Company, Dulski's access to
Confidential Information and the opportunity afforded Dulski by
Dulski's position with the Company to develop unique trading and
customer relationships, and given the vital importance to the Company
of its human resources and of preserving trading and customer
relationships developed at its expense, that any breach or violation,
or threatened breach or violation, by Dulski of the provisions of the
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 8
preceding Sections 8 and/or 9 shall cause irreparable harm to the
Company, which harm cannot be fully redressed by the payment of damages
to the Company. Accordingly, Dulski agrees that the Company shall be
entitled, in addition to any other right and remedy it may have, at law
or in equity, to an injunction, without the posting of any bond or
other security, enjoining or restraining Dulski from any such breach or
violation or threatened breach or violation of said Sections 8 and/or
9, and Dulski hereby consents to the issuance of such injunction.
Dulski acknowledges and agrees that any violation of the restrictive
covenants and agreements contained in Sections 8 and/or 9 above shall
suspend the expiration of the time limits of each of those covenants
and agreements for so long as the violation continues.
10.2 Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under all
applicable laws. However, in the event that any such provision or
portion thereof shall be held by an arbitrator or court of competent
jurisdiction to be invalid, illegal or unenforceable by reason of its
duration, geographical scope, extent or otherwise (the "Invalid
Provision"), then it is the specific intent of the parties hereto that
(i) for purposes of the application of the Invalid Provision in such
instance, the Invalid Provision shall be deemed modified to the extent,
but only to the extent, of such invalidity, illegality or
unenforceability, (ii) the Invalid Provision be enforced in its
remaining form (e.g., with reduced duration, geographical scope,
extent, etc., as the case may be), (iii) a suitable and equitable
provision be substituted for the modified portion of the Invalid
Provision in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such modified portion, (iv) the
interpretation or application of the Invalid Provision in any other
instances, under any other laws or jurisdictions or to any other
circumstances shall not be affected thereby and (v) all other
provisions of this Agreement shall remain in full force and effect, and
not be affected by such invalidity, illegality or unenforceability of
the Invalid Provision or any modification thereof or substitution
therefor.
10.3 Should the Company or Dulski be required to engage legal
counsel and/or to institute any action, arbitration or proceeding
(including seeking an injunction) to enforce or prevent the breach or
threatened breach of any of the provisions of this Agreement and/or to
seek any other remedy at law or in equity, then the prevailing party in
such action, arbitration or proceeding (or, if there is no single
prevailing party, the party that prevails with respect to the
preponderance of the issues in dispute) shall be entitled to recover
from the other party all costs and expenses incurred thereby,
including, but not limited to, reasonable attorneys' fees, expenses and
all other costs.
10.4 This Section 10, Sections 7, 8 and 9 above and Sections
11, 12 and 17 below shall survive the Termination Date (or, if
applicable, the Extended Termination Date), the cessation of Dulski's
employment with the Company and any termination of this Agreement.
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 9
11. Representations and Warranties of Dulski
11.1 Dulski represents and warrants that Dulski is free to
enter into this Agreement and to perform the duties required hereunder,
and that there are no employment contracts, restrictive covenants or
other restrictions that would be breached by or prevent the performance
of Dulski's duties hereunder.
11.2 DULSKI REPRESENTS AND ACKNOWLEDGES THAT DULSKI HAS
CAREFULLY READ THIS AGREEMENT, INCLUDING SECTIONS 8, 9 AND 10 ABOVE,
THAT DULSKI HAS BEEN ADVISED BY THE COMPANY AND AFFORDED THE TIME TO
CONSULT WITH INDEPENDENT COUNSEL OF HIS CHOOSING AND THAT DULSKI
UNDERSTANDS AND IS FREELY AGREEING TO THE PROVISIONS CONTAINED HEREIN,
INCLUDING THE RESTRICTIONS ON POST-EMPLOYMENT COMPETITION AND
SOLICITATION, FOR WHICH DULSKI ACKNOWLEDGES RECEIPT OF ADDITIONAL AND
ADEQUATE CONSIDERATION. IN RECOGNITION OF THE FOREGOING, DULSKI
EXPRESSLY WAIVES AND AGREES TO BE ESTOPPED FROM RAISING ANY OBJECTIONS
TO THE ENFORCEMENT OF THE POST-EMPLOYMENT RESTRICTIONS OF THIS
AGREEMENT.
12. Inventions, Discoveries, Etc.
Dulski agrees promptly and fully to disclose to the Company,
and hereby assigns and transfers (and agrees to assign and transfer) to
the Company all of his right, title and interest in and to, any and all
developments, knowhow, discoveries, inventions, improvements, concepts,
ideas, writings, formulae, processes and methods (whether
copyrightable, patentable or otherwise) made, received, conceived,
acquired or written during working hours or otherwise by Dulski
(whether or not at the request or upon the suggestion of the Company)
during the period of Dulski's employment with the Company, solely or
jointly with others, in or relating to any activities of the Company or
any of the Affiliates or any of their respective customers known to him
as a consequence of Dulski's employment.
13. Notices
All notices hereunder shall be in writing and delivered by
hand or sent by registered mail or overnight courier, addressed to such
party at its address referred to above, or at such other address as
such party may from time to time designate by notice to the other
party. Any such notice shall be deemed to have been given on the date
delivered by hand, the business day after deposit with an overnight
courier, or on the fifth day following the mailing thereof.
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Employment Agreement: Walter E. Dulski
August 14, 1998
Page 10
14. Waivers
The failure of either party to insist in any one or more
instances upon strict performance of any of the terms or conditions of
this Agreement shall not be construed as a waiver of any right granted
hereunder or of the future performance of any such term or condition.
No waiver of any term or condition of, or consent, authorization or
notice under, this Agreement shall be made except by a written
instrument, specifically referring to this Agreement, executed by the
party (in the case of the Company, by either its Chief Executive
Officer or Chief Operating Officer) charged with the waiver or
providing the consent, authorization or notice. No waiver of any breach
of any provision of this Agreement shall be deemed to constitute a
waiver of any other breach of such provision or a waiver of any breach
of any other provision of this Agreement.
15. Agreement Complete; Amendments; Counterparts
This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supersedes and replaces
in its entirety the existing employment agreement, made as of September
1, 1996, between Dulski and Euro Brokers Inc., which is hereby
terminated. There are no oral agreements or understandings with respect
to or affecting this Agreement. Subject to the provisions of Section
10.2, this Agreement may not be amended, supplemented, canceled or
discharged except by a written instrument specifically referring to
this Agreement and executed by each of the parties hereto. This
Agreement may be executed in two or more counterparts, all of which,
taken together, shall constitute one and the same instrument.
16. Assignment
Dulski acknowledges that the services to be rendered by Dulski
are personal in nature and, accordingly, agrees not to assign any of
Dulski's rights or delegate any of Dulski's duties or obligations under
this Agreement (and any such assignment or delegation shall be null and
void). The rights and obligations of the Company under this Agreement
shall inure to the benefit of, may be assigned to and shall be binding
upon, any successor or assign of the Company.
17. Governing Law and Exclusive Jurisdiction
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
its principles of conflicts of law. With respect to any claims,
disputes or controversies arising from or relating to this Agreement,
including, but not limited to, the negotiation, interpretation,
performance, termination or breach hereof, the parties hereto hereby
submit to the exclusive jurisdiction of the courts of New York State in
and
<PAGE>
Employment Agreement: Walter E. Dulski
August 14, 1998
Page 11
for New York County and/or any Federal court held therein. Each party
hereby irrevocably consents to the exercise of personal jurisdiction
over such party by such courts, agrees that venue shall be proper in
such courts and irrevocably waives and releases any and all defenses in
such courts based on lack of personal jurisdiction, improper venue
and/or forum non conveniens.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
EURO BROKERS INVESTMENT CORPORATION
By: /s/ Keith E. Reihl
---------------------------------
Keith E. Reihl
Chief Operating Officer
Agreed and Accepted:
/s/ Walter Dulski
- - -----------------------
Walter E. Dulski
Solely for purposes of Section 15 hereof:
EURO BROKERS INC.
By: /s/ Keith E. Reihl
-------------------
Keith E. Reihl
Chief Operating Officer
<PAGE>
Exhibit 21
MAXCOR FINANCIAL GROUP INC.
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION
SUBSIDIARY OF INCORPORATION
- - --------------------------------------- ----------------
EURO BROKERS INVESTMENT CORPORATION DELAWARE
EURO BROKERS HOLDINGS INC. NEW YORK
EURO BROKERS INC. NEW YORK
MAXCOR FINANCIAL INC. NEW YORK
MAXCOR FINANCIAL ASSET MANAGEMENT INC. DELAWARE
MAXCOR FINANCIAL SERVICES INC. DELAWARE
MAXCOR INFORMATION INC. DELAWARE
E-B FUNDING CORPORATION DELAWARE
EURO BROKERS HOLDINGS LTD. ENGLAND
EURO BROKERS FINACOR LTD. ENGLAND
EURO BROKERS FINANCIAL SERVICES LTD. ENGLAND
EURO BROKERS SERVICES LTD. ENGLAND
EURO BROKERS TOKYO INC. DELAWARE
YAGI EURO CORPORATION JAPAN
EURO BROKERS CANADA, LTD. CANADA
EURO BROKERS MEXICO, S.A. de C.V. MEXICO
EURO BROKERS (SWITZERLAND) S.A. SWITZERLAND
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements of Maxcor Financial Group Inc. at and as of
September 30, 1998 and is qualified in its entirety by reference to such
Consoldated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 15,150,296
<RECEIVABLES> 16,557,824
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 11,578,515
<PP&E> 10,018,602
<TOTAL-ASSETS> 75,269,665
<SHORT-TERM> 0
<PAYABLES> 7,845,490
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 3,824,842
2,000,000
0
<COMMON> 11,392
<OTHER-SE> 29,782,122
<TOTAL-LIABILITY-AND-EQUITY> 75,269,655
<TRADING-REVENUE> 954,249
<INTEREST-DIVIDENDS> 1,737,403
<COMMISSIONS> 149,293,022
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 1,079,147
<COMPENSATION> 100,527,090
<INCOME-PRETAX> 3,930,465
<INCOME-PRE-EXTRAORDINARY> 3,930,465
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,275,150)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
