AGREEMENT AND PLAN OF MERGER
DATED: May 14, 1998
by and among
EASTBROKERS INTERNATIONAL, INC.
EAST MERGER CORPORATION
CHERRY CREEK INVESTMENTS, LTD.
and
COHIG & ASSOCIATES, INC.
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER, is being entered into this 14th day of
May 1998, by and among Eastbrokers International, Inc., a Delaware corporation
("Eastbrokers"), East Merger Corporation, a Delaware corporation ("East"), and a
wholly-owned subsidiary of Eastbrokers, Cohig & Associates, Inc., a Colorado
corporation ("Cohig"), and Cherry Creek Investments, Ltd., the owner of all of
the issued and outstanding shares of capital stock of Cohig ("CCI").
R E C I T A L S:
1. Cohig is a registered broker-dealer engaged in the business of
investment banking, corporate finance and retail distribution of securities (the
"Business").
2. Eastbrokers desires to acquire from CCI and CCI desires to exchange all
of the issued and outstanding shares of capital stock of Cohig for shares of
Eastbrokers common stock, par value $.05 per share (the "Eastbrokers Common
Stock") upon the terms and subject to the conditions set forth herein.
3. The Board of Directors of each of Eastbrokers, East, Cohig and CCI have
determined that it is in the best interests of their respective companies and
their respective stockholders to consummate the business combination transaction
provided for herein, in which East will, subject to the terms and conditions set
forth herein, merge (the "Merger") with and into Cohig, so that Cohig is the
surviving corporation in the Merger.
4. This Agreement contemplates that CCI, as the holder of all of the
issued and outstanding shares of capital stock of Cohig, will receive
Eastbrokers Common Stock in exchange for its capital stock of Cohig.
5. It is intended that the Merger qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
6. It is contemplated by the parties hereto that subsequent to the date
hereof, subject to the terms hereof, CCI in connection with its dissolution,
will distribute to its stockholders certain rights to the Eastbrokers Common
Stock.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. In addition to the terms defined elsewhere
herein, the following terms have the meaning specified or referred to in this
SECTION 1.1 and shall be equally applicable to both the singular and plural
forms. Any agreement referred to below shall mean such agreement as amended,
supplemented and modified from time to time to the extent permitted by the
applicable provisions thereof and by this Agreement.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorney's fees and expenses.
"Affiliate" means with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Agreement" means this Agreement, including any exhibits, schedules and
attachments hereto.
"Approval" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement, declaration or other communication required to
be filed with or delivered to, any Governmental Authority or any other person.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended, and the rules and
regulations promulgated thereunder.
"Closing Date" shall mean the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Cohig Common Stock" means the common stock, no par value of Cohig.
"Contract" means any contract, agreement, commitment, undertaking,
arrangement or purchase order (whether oral or written).
"Encumbrance" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title, retention agreement, defect
in title, covenant or other restriction of any kind, including, any restriction
on use, voting transfer or other attributes of ownership.
"Environmental Law" means any environmental or health and/or
safety-related law, regulation, rule, ordinance, order, decree or judgment at
the Federal, state, or local level, whether
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existing as of the date hereof, previously enforced, or subsequently enacted,
including but not limited to: (i) CERCLA; (ii) RCRA; (iii) Federal Water
Pollution Control Act, as amended by the Clean Water Act, as amended, 33 U.S.C.
ss. 1251 et seq.; (iv) Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
as amended; (v) Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. ss. 11001 et seq., as amended; (vi) Clean Air Act, 42 U.S.C. ss. 7401 et
seq., as amended; (vii) Rivers and Harbors Act, 33 U.S.C. ss. 401 et seq., as
amended; (viii) OSHA; (ix) Safe Drinking Water Act, 42 U.S.C. ss. 300(f) et
seq., as amended, and (x) any other federal, state or local law, regulation,
rule, ordinance, order, decree or judgment currently or hereafter in existence
which governs:
a. the existence, cleanup and/or remediation of toxic or
Hazardous Substances;
b. the release or threatened release, emission, discharge or
presence of Hazardous Substances into or in the environment;
c. the control of Hazardous Substances; or
d. the use, generation, transport, treatment, handling,
management, storage, disposal, removal or recovery of Hazardous Substances.
"Escrow Agreement" means the escrow agreement in substantially the form
attached hereto as Exhibit A to be dated the date hereof among Eastbrokers, CCI
and an escrow agent acceptable to each of Eastbrokers and CCI.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Authority" means any foreign, federal or national, state or
provincial, municipal or local or other governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, political subdivision, court, tribunal, official
arbitrator or arbitral board.
"Hazardous Substances" means any substance, chemical or waste that is
listed, or contains material amounts of one or more components that are defined,
designated, classified, considered or listed, as hazardous, toxic, radioactive,
or dangerous under any applicable state or federal law; as well as any asbestos
or asbestos-containing material, petroleum, petroleum product or by-product,
crude oil or any fraction thereof, natural gas, natural gas liquids, liquified
natural gas, synthetic gas usable as fuel, or polychlorinated biphenyl's
("PCBs").
"Indebtedness" means all obligations for borrowed money and accounts
payable, however evidenced, including but not limited to principal and interest.
"Intellectual Property Rights" means all (i) patents, patent applications,
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos and corporate names and registrations and applications for
registration thereof together with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and
3
applications for registration thereof, (v) computer software, data bases and
documentation thereof, (vi) trade secrets, (vii) other intellectual property
rights and (viii) copies and tangible embodiments thereof (in whatever form or
medium).
"Laws" means all foreign, federal, state and local laws, statutes,
ordinances and all rules, regulations, requirements (that have the force of law
or regulation), and administrative codes of any Governmental Authority or
Regulatory Agency.
"Lawsuits" means the matters pending under the caption Euro American
Ins. Co. Ltd., et al v. National Family Care Life Insurance Company, Case No.
95-11063(J) in the 000xx Xxxxxxxx Xxxxxxxx, Xxxxxx Xxxxxx, Xxxxx and National
Family Care Life Insurance Co. x. Xxxxx Company, Inc., Bear Xxxxxxx
Securities Corp., and Xxxx Xxxxx, NASD Case No. 96-02673.
"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), results of operations, prospects, assets, liabilities
or business of a Person.
"Merger Consideration" means the Merger Shares and such amount of cash as
is necessary to pay for any fractional Merger Shares otherwise issuable in
connection with the Merger.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the NASD's Automated Quotations System.
"Orders" means any consent or other type of decree, injunction,
stipulation, decision, determination, judgment, order, ruling, arbitration or
other award, assessment or writ of any Government Authority or Regulatory
Agency.
"OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C.
ss. 651 et seq., as amended, and the rules and regulations promulgated
thereunder.
"Permits" means permits, certificates, Orders, licenses, approvals,
tariffs, registrations and other authorizations.
"Permitted Encumbrances" means (a) liens for taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and (c)
other like liens arising in the ordinary course of business for sums not yet due
and payable; provided, however, that "Permitted Encumbrances" shall not include
(i) liens of the types referred to in clauses (a), (b) or (c) above which exceed
$25,000 individually or $50,000 in the aggregate or (ii) liens or imperfections
which materially detract from the value of or materially impair the existing use
of the property affected by such lien or imperfection.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Authority or Regulatory Agency.
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"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., as amended, and the rules and regulations promulgated
thereunder.
"Regulatory Agency" means any self-regulatory organization, agency or
instrumentality.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
INDEX OF TERMS DEFINED IN OTHER SECTIONS
Business Recitals
CCI First Paragraph
Closing 10.1
Cohig First Paragraph
Cohig Certificates 2.5
Commission 3.26
Confidential Information 7.4
Delivering Party 7.4
Eastbrokers First Paragraph
Eastbrokers Certificate 2.6
East First Paragraph
Effective Time 2.2
Effective Date 2.2
Exchange Agent 2.4
Financial Statements 3.6
GCL 2.1
Indemnified Liabilities 13.2
Indemnitee 13.4
Indemnitor 13.4
Interim Financial Statements 3.6
Limited Representations and Warranties 13.1
Merger Recitals
Merger Shares 2.5
Most Recent Fiscal Month End 3.6
Most Recent Fiscal Year End 3.6
NASDR 14.9
Non-consenting Party 7.5
Notice of Claim 13.4
Option Plan 11.2
Owned Real Property 3.10
Pension Plan 3.18(c)
Plan(s) 3.18
Receiving Party 7.4
SIPC 3.28
Surviving Corporation 2.1
Tax Return 3.15(h)
Taxes 3.15(h)
5
Transmittal Letter 2.6
Unlimited Representations and Warranties 13.1
Welfare Benefit Plan 3.18(i)
SECTION 1.2. KNOWLEDGE. The phrase "to the best knowledge of Cohig" as
used herein refers to the actual personal knowledge, after reasonable inquiry,
of any of the directors or officers of Cohig or CCI.
ARTICLE II
THE MERGER
SECTION 2.1. MERGER. Upon and subject to the terms and conditions set
forth in this Agreement and in accordance with the Delaware General Corporation
Law, as amended (the "GCL"), and the Colorado Business Corporation Act, at the
effective time, East shall be merged with and into Cohig. Following the Merger,
Cohig shall continue to exist as the surviving corporation (sometimes referred
to as the "Surviving Corporation") under the laws of the State of Colorado, and
the separate corporate existence of East shall cease.
SECTION 2.2. FILING AND EFFECTIVE TIME. The Merger shall become effective
as set forth in the Certificate of Merger, which shall be filed with the
Secretary of State of the State of Delaware, and the Articles of Merger, which
shall be filed with the Secretary of State of the State of Colorado, on the date
hereof. The Merger shall become effective as the time (the "Effective Time," and
the date thereof hereinafter referred to as the "Effective Date") as set forth
in the Certificate of Merger and the Articles of Merger.
SECTION 2.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Sections 259 and 261 of the GCL and Section 0-000-000 of the Colorado
Business Corporation Act. In addition, without limiting the foregoing:
(a) The articles of incorporation of the Surviving Corporation shall
be the articles of incorporation of Cohig until amended or changed in
accordance with applicable law;
(b) The by-laws of the Surviving Corporation shall be the by-laws of
Cohig as amended and restated until amended or changed in accordance with
applicable law; and
(c) The directors of the Surviving Corporation shall be Messrs.
Xxxxxx X. Xxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxx Xxxx XxXxxx,
Xxxxxx X. Xxxxxxxxxx and Xxxxxxx Xxxxxxxxxx. Except for Messrs.
Xxxxxx, Kuijer and Xxxxxx, the directors of Cohig immediately prior to
the Effective Time shall not become directors of the Surviving
Corporation.
SECTION 2.4 ACTIONS AT THE CLOSING. On the date hereof, East shall deliver
the Merger Consideration to such bank or trust company as may be designated by
Eastbrokers and approved
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by CCI (such approval not to be unreasonably withheld or delayed) to act as the
exchange agent (the "Exchange Agent") in accordance with Section 2.6.
SECTION 2.5 CONVERSION OF SECURITIES. (a) At and as of the Effective Time,
each issued and outstanding share of Cohig Common Stock, by virtue of the Merger
and without any further action on the part of CCI, shall be converted into
3.5569 shares of Eastbrokers Common Stock. The shares of Eastbrokers Common
Stock into which the issued and outstanding capital stock of Cohig will be
converted pursuant to this Section 2.5 are referred to as the "Merger Shares."
(b) Each share of Cohig's capital stock held in Cohig's treasury
immediately prior to the Effective Time shall, by virtue of the Merger and
without any further action, be canceled and retired without payment of any
consideration therefor.
(c) Each share of common stock, $.01 par value per share, of East issued
and outstanding immediately prior to the Effective Time shall be converted into
and thereafter evidence one share of common stock, $.01 par value per share, of
the Surviving Corporation.
(d) CCI, as the holder of record of all of the issued and outstanding
shares of capital stock of Cohig, at the Effective Time, shall be entitled to
receive, subject to the terms and conditions set forth herein, the Merger Shares
upon tender of the stock certificates (the "Cohig Certificates") representing
the shares of Cohig Common Stock issued and outstanding immediately prior to the
Effective Time as set forth in Section 2.6 below.
SECTION 2.6. EXCHANGE OF CERTIFICATES; ESCROW OF THE MERGER SHARES. At the
Effective Time, CCI shall deliver a transmittal letter in form reasonably
acceptable to Eastbrokers (the "Transmittal Letter") and surrender to the
Exchange Agent, the Cohig Certificates. Upon surrender to the Exchange Agent of
the Cohig Certificates, together with a duly executed Transmittal Letter, the
Exchange Agent, on behalf of the Surviving Corporation, shall cancel the Cohig
Certificates and shall deliver, in accordance with the directions set forth in
the Transmittal Letter, the Merger Shares into which the shares of Cohig Common
Stock previously represented by the surrendered Cohig Certificates shall have
been converted at the Effective Time. Until so surrendered, the Cohig
Certificates shall, at and after the Effective Time, be deemed for all purposes
to represent and evidence only the right to receive that number of Merger Shares
determined in accordance with SECTION 2.5 for each share of Cohig Common Stock
represented by such Cohig Certificates. The Transmittal Letter shall instruct
the Exchange Agent to deliver an Eastbrokers Certificate representing the
aggregate Merger Shares to an escrow account established pursuant to the Escrow
Agreement. The Merger Shares shall be held by the escrow agent in a separate
account, governed by the terms of the Escrow Agreement and shall be released
only pursuant to the terms of such agreement.
SECTION 2.7. NO FRACTIONAL SHARES. No fractional Merger Shares shall be
issued. In lieu of any fractional Merger Shares to which CCI otherwise would be
entitled pursuant to SECTION 2.5(A) hereof, CCI shall be entitled to receive
cash payable by check in lieu of any such fractional Merger Share computed on
the basis of the fair market value of Eastbrokers Common Stock on the date
hereof.
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SECTION 2.8. EARN-OUT ADJUSTMENT TO MERGER SHARES
(a) Of the aggregate Merger Shares, 210,000 shares are hereby designated
as the Maximum Earn-out Shares.
(b) As soon as practicable, but no later than 30 days after the completion
of the Eastbrokers' independent auditors audit for the year ended March 31,
2000, Eastbrokers will instruct the Escrow Agent to deliver to CCI the Maximum
Earn-out Shares if the Surviving Corporation's aggregate Pre-Tax Income for the
period commencing on April 1, 1998 and ending on March 31, 2000 (the "Earn-out
Period") equals or exceeds $600,000. If the Surviving Corporation's aggregate
Pre-Tax Income for the Earn-out Period is less than $600,000, the number of
Merger Shares which Eastbrokers will instruct the Escrow Agent to deliver to CCI
(the "Actual Earn-out Shares") will be as set forth below:
PRE-TAX INCOME ACTUAL EARN-OUT SHARES
Between $550,000 and $599,999 205,000
Between $500,000 and $549,999 200,000
Between $450,000 and $499,999 195,000
Between $406,000 and $449,999 196,000
Between $356,000 and $399,999 185,000
Between $300,000 and $349,999 186,000
Between $250,000 and $299,999 175,000
Between $200,000 and $249,999 170,000
Between $150,000 and $199,999 165,000
Between $100,000 and $149,999 160,000
Between $50,000 and $99,999 155,000
Between -0- and $49,999 156,000
If the Surviving Corporation incurs an aggregate Pre-Tax Loss during the
Earn-out Period, Eastbrokers will instruct the Escrow Agent to deliver to CCI
such number of Actual Earn-out Shares as is set forth below:
PRE-TAX LOSS ACTUAL EARN-OUT SHARES
Between $1 and $50,000 150,000
Between $50,001 and $100,000 140,000
Between $100,001 and $150,000 130,000
Between $150,001 and $200,000 120,000
Between $200,001 and $250,000 110,000
Between $250,001 and $300,000 100,000
Between $300,001 and $350,000 90,000
Between $350,001 and $400,000 80,000
Between $400,001 and $450,000 70,000
Between $450,001 and $500,000 60,000
Between $500,001 and $550,000 50,000
Between $550,001 and $600,000 40,000
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Between $600,001 and $650,000 30,000
Between $650,001 and $700,000 20,000
Between $700,001 and $750,000 10,000
Equal to or greater than $750,000 -0-
(c) For purposes of this Agreement, Pre-Tax Income of the Surviving
Corporation shall mean the Surviving Corporation's income (loss) after
depreciation, amortization, interest and extraordinary expenses and before
federal and state income taxes. Such amount shall be calculated in a manner
substantially similar to the historical manner pursuant to which Cohig has
computed Pre-Tax Income (Loss) prior to the Merger, PROVIDED, THAT such manner
is in accordance with generally accepted accounting principles.
SECTION 2.9. ADDITIONAL CONSIDERATION. If the Surviving Corporation's
aggregate Pre-Tax Income for the Earn-out Period is equal to or greater than
$1,200,000, Eastbrokers shall pay to CCI additional consideration (the
"Additional Consideration") in the form of 21,000 shares of Eastbrokers Common
Stock. If the Surviving Corporation's aggregate Pre-Tax Income for the Earn-Out
Period equals or exceeds $2,400,000, the Additional Consideration payable to
CCI, by Eastbrokers shall be 42,000 shares of Eastbrokers Common Stock.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CCI AND COHIG
As an inducement to Eastbrokers and East to enter into this
Agreement and to consummate the transactions contemplated hereby, each of CCI
and Cohig, jointly and severally represents and warrants to each of Eastbrokers
and East that on the date hereof that the matters set forth below are true and
correct except as set forth in the disclosure schedules attached hereto. Nothing
in any of the schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the schedule identifies
the exception with particularity and describes the relevant facts in detail.
SECTION 3.1. ORGANIZATION, QUALIFICATION AND AUTHORITY OF COHIG. (a) Cohig
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado. Cohig has full corporate power and authority and
all material licenses, permits and authorizations necessary to own and operate
its properties, to carry on the Business as presently conducted and presently
proposed to be conducted. Cohig has been duly qualified as a foreign corporation
for the transaction of business in, and is in good standing under the laws of,
each jurisdiction in which it owns, leases or uses property or conducts any
business so as to require such qualification, except where the failure to so
qualify would not have a Material Adverse Effect on Cohig. Cohig does not have
any subsidiaries, and, except as shown on SCHEDULE 3.1, Cohig does not have any
direct or indirect ownership or hold any rights to acquire any capital stock or
equity or debt securities of any corporation or any other direct or indirect
equity ownership interest or Indebtedness interest in any other Person.
9
(b) Cohig has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by Cohig and the performance of the transactions herein
contemplated have been duly authorized by the Board of Directors of Cohig and
submitted and recommended to CCI for its approval and, subject to the approval
of CCI, no further corporate action on the part of Cohig is necessary to
authorize this Agreement and the performance of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Cohig and
constitutes the legal, valid and binding obligation of Cohig enforceable against
it in accordance with its terms.
SECTION 3.2. CAPITALIZATION. (a) The authorized capital stock of Cohig
consists of (i) 200,000 shares of preferred stock, par value $1.00 per share, of
which no shares of preferred stock are issued and outstanding and (ii) 800,000
shares of common stock, no par value, of which 125,108 shares are issued and
outstanding. All of the issued and outstanding shares of Cohig capital stock
were duly authorized and validly issued, are fully paid and non-assessable and
are owned beneficially and of record by CCI, free and clear of any Encumbrances,
options, contracts, preemptive rights, rights of conversion or exchange, or
equities except for such Encumbrances as may be created by this Agreement. To
the best knowledge of Cohig, there are no voting trusts, proxies or other
agreements or understandings relating to the voting of the issued and
outstanding shares of Cohig capital stock. Cohig has not violated any applicable
federal or state securities laws in connection with the issuance of any of its
capital stock.
(b) Except as set forth on SCHEDULE 3.2(B), Cohig has no outstanding
(i) subscriptions, options, puts, calls, warrants, agreements or other rights
(including, without limitation, preemptive rights or rights of first refusal) or
commitments to issue, nor any obligation or commitment to redeem or purchase,
any of its authorized capital stock, or (ii) any securities convertible into or
exchangeable for any of its authorized capital stock. There are ___ shares of
capital stock held in the treasury of Cohig and no shares of capital stock of
Cohig have been issued in violation of, or are subject to, any preemptive
rights, puts, demands, subscription agreements or commitments of any character.
Cohig is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its issued and outstanding capital
stock.
SECTION 3.3. CORPORATE ORGANIZATIONAL DOCUMENTS. Copies of (i) the charter
of Cohig, certified by the Secretary of the State of Colorado, and (ii) the
by-laws of Cohig, certified by the secretary of Cohig, each of which have been
made available to counsel for Eastbrokers, are true and complete copies of such
documents, as amended to date, and are in full force and effect on the date
hereof.
SECTION 3.4. NO CONFLICT. Except as set forth on SCHEDULE 3.4, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated herein, will (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) violate or constitute a default,
an event of default (or an event which, with notice or lapse of time or both,
would constitute a default or an event of default) or an event creating rights
of modification, acceleration, termination, cancellation or other additional
rights, or loss of rights under, (iii) result in the creation of any Encumbrance
upon any of the capital stock, assets or property of Cohig pursuant to, or (iv)
require any authorization, consent, approval, exemption of other action by
notice or declaration to, or filing with any Governmental Authority or
Regulatory Agency pursuant to the charter or by-laws of Cohig, any note, bond,
mortgage, indenture, deed of trust,
10
lease, Contract, Permit, agreement, or other instrument or any Order of any
Governmental Authority or Regulatory Agency to which Cohig is a party or
subject, or by which any of its capital stock, assets or property is bound or
(v) contravene any applicable provision of any Laws.
SECTION 3.5. CONSENTS. Except for: (i) filings of applications and notices
with the NASD; (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and the filing of the Articles of Merger with
the Secretary of State of the State of Colorado; and (iii) consents and
approvals set forth on SCHEDULE 3.13; and except as otherwise set forth on
SCHEDULE 3.5, no consent, approval or authorization of, or declaration, filing
or registration with, any Person is required to be obtained, made or given by
Cohig in connection with the execution, delivery and performance of this
Agreement or the consummation by Cohig of the transactions contemplated by this
Agreement.
SECTION 3.6. FINANCIAL STATEMENTS. Cohig has heretofore delivered to
Eastbrokers correct and complete copies of the audited financial statements of
Cohig for the years ended September 26, 1997 (the "Most Recent Fiscal Year
End"), September 27, 1996 and September 30, 1995 (the "Financial Statements")
and the unaudited financial statements (the "Interim Financial Statements") of
Cohig for the six month period ended March 31, 1998 (the "Most Recent Fiscal
Month End"). Except as set forth on SCHEDULE 3.6, the Financial Statements and
the Interim Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. The Financial
Statements and the Interim Financial Statements are based on the books and
records of Cohig at the time of their preparation, and, fairly present the
financial condition of Cohig as of the dates they were prepared and the results
of the operations of Cohig for the periods indicated, subject, in the case of
the Interim Financial Statements, to normal recurring year-end adjustments
which, except as set forth on SCHEDULE 3.6, will not individually or in the
aggregate be material.
SECTION 3.7. NO UNDISCLOSED LIABILITIES. Cohig does not have any
liabilities or obligations (absolute, accrued, contingent or otherwise) which
individually, or in the aggregate, would have a Material Adverse Effect on
Cohig, except for (a) liabilities and obligations reflected in either the
Financial Statements or Interim Financial Statements, and (b) liabilities and
obligations disclosed on SCHEDULE 3.7.
SECTION 3.8. ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
3.8, since the date of the Interim Financial Statements, Cohig has operated the
Business only in the ordinary course and there has not been:
(a) any change in the Business or in the financial condition or in
the operations of Cohig (including, without limitation, a loss of traders) which
could reasonably be expected to have a Material Adverse Effect on Cohig;
(b) any damage, destruction or loss, not covered by insurance,
with respect to any material asset of Cohig;
(c) except in the ordinary course of business, any sale, assignment,
disposition, transfer, lease, mortgage, pledge or Encumbrance of any assets of
Cohig;
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(d) any loss of any customer which has had or could reasonably
be expected to have a Material Adverse Effect on Cohig;
(e) any increase by Cohig in the wages, salaries, compensation,
pension or other benefits payable to any employee of Cohig except as consistent
with past practices and PROVIDED, that such increase does not exceed $5,000;
(f) any increase, cancellation, release or waiver of any
Indebtedness, except for compromise of trade debt in the ordinary course of
business;
(g) any declaration or payment of any dividend or distribution to
CCI or redemption, purchase or other acquisition of any Cohig capital stock from
CCI;
(h) any material labor trouble, problem or grievance adversely
affecting Cohig;
(i) notice from any client of Cohig that it will or may cease
doing business with Cohig as a result of the transactions contemplated by this
Agreement;
(j) any change in any method of accounting or working practice;
or
(k) any agreement, whether or not in writing, to do any of the
foregoing.
SECTION 3.9. REPORTS. Cohig has timely filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since January 1, 1990 with
(i) any Governmental Authority, (ii) the NASD, and (iii) any other Regulatory
Agencies, and has paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Governmental Authority
or Regulatory Agency in the regular course of the business of Cohig, no
Governmental Authority or Regulatory Agency has initiated any proceeding or, to
the best knowledge of Cohig, investigation into the business or operations of
Cohig since January 1, 1990. There are no material unresolved violations,
criticisms, or exceptions by any Governmental Authority or Regulatory Agency
with respect to any report or statement relating to any examinations of Cohig.
SECTION 3.10. TITLE TO REAL PROPERTY. SCHEDULE 3.10 contains a complete
and accurate list of all real properties owned by Cohig (the "Owned Real
Property"). Cohig has good and marketable indefeasible fee simple title (both
legal and equitable) to the Owned Real Property, free and clear of any
Encumbrances, except Permitted Encumbrances and Encumbrances set forth on
SCHEDULE 3.10.
SECTION 3.11. REAL PROPERTY LEASES. SCHEDULE 3.11 contains a complete and
accurate list of each lease or similar agreement under which (i) Cohig is lessee
of, or holds or uses, any real property owned by any Person or (ii) Cohig is
lessor of any of the Owned Real Property. Except as set forth in SCHEDULE 3.11,
Cohig has the right to quiet enjoyment of all the leased real property for the
full term of each such lease or similar agreement relating thereto, and the
leasehold or other interest of Cohig is not subject or subordinate to any
Encumbrance except for Permitted Encumbrances. All leases and similar agreements
referred to in SCHEDULE 3.11
12
are legally binding and in full force and effect, and there exists no material
default or event of default (or an event which, with notice or lapse of time or
both, would constitute a default or event of default) thereunder on the part of
Cohig, or, to the best knowledge of Cohig, the other party thereto.
SECTION 3.12. TITLE AND CONDITION OF CERTAIN PERSONAL PROPERTY. (a) True
and correct copies of a fixed asset detail listing of Cohig have been previously
made available to Eastbrokers, which listing reflects all material personal
tangible assets of Cohig. Set forth in SCHEDULE 3.12 is a list of all equipment
and fixtures subject to any lease or rental agreement to which Cohig is a party
and which requires annual payments in excess of $5,000 per year. Except for
those Encumbrances set forth on SCHEDULE 3.12, there are no Encumbrances, except
Permitted Encumbrances, on any personal property owned by Cohig.
(b) Except as otherwise stated on SCHEDULE 3.12, the machinery,
equipment and other personal property used in the Business (i) is in good
operating condition, usable in the ordinary course of business, (ii) is in a
state of normal maintenance and repair, (iii) is sufficient and adequate to
carry on the Business as now conducted and (iv) complies in all material
respects with all applicable Laws.
SECTION 3.13. CONTRACTS. (a) SCHEDULE 3.13 contains a complete and
correct list of all Contracts of the following types to which Cohig is a
party, or by which Cohig is bound:
(i) any Contract relating to the future purchase of
services, products, materials or supplies which (A) has a remaining
obligation in excess of $5,000 or (B) otherwise materially affects
the Business;
(ii) any Contract relating to any obligation for
borrowed money or any guarantee or indemnification of an obligation
for borrowed money or any other obligation or liability;
(iii) any Contract that limits the right of Cohig to
compete in any line of business or to compete with any other Person;
(iv) any Contract (a) relating to any outstanding
commitment for capital expenditures in excess of $5,000 for any
single project (so long as all such contracts not disclosed do not
exceed $10,000 in the aggregate for all projects) or (b) that
otherwise materially affects the Business;
(v) any Contract relating to the employment of any
Person;
(vi) any Contract relating to management services,
consulting or any other similar type contract;
(vii) any Contract relating to Permits to or from
Cohig; or
(viii) excluding Contracts covered in subsections (i)
through (vii) above, any Contract which (a) involves the annual
payment or annual receipt by Cohig of more than $5,000 or (b)
otherwise materially affects the Business.
13
(b) Except as set forth on SCHEDULE 3.13, all the Contracts referred
to in SCHEDULE 3.13 are legally binding and in full force and effect, and there
exists no material default thereunder on the part of Cohig or, to the best
knowledge of Cohig, the other party thereof.
(c) True and complete copies of all documents listed on SCHEDULE
3.13 have been made available to Eastbrokers.
SECTION 3.14. LITIGATION. Except as otherwise set forth on SCHEDULE 3.14,
there is no claim, suit, action, arbitration, or other legal, administrative or
governmental investigation or proceeding pending or, to the best knowledge of
Cohig, threatened against Cohig which is reasonably likely to have, if adversely
determined, individually or in the aggregate, a Material Adverse Effect on
Cohig, nor is there any Order of any Governmental Authority to which the
Business or the assets or capital stock of Cohig is subject, or which insofar as
can be foreseen, in the future may have, any such effect on the Business or the
assets or capital stock of Cohig.
SECTION 3.15. TAX MATTERS.
(a) Cohig has filed all Tax Returns (as defined in SECTION 3.15(H))
that it was required to file. All such Tax Returns were correct and complete in
all respects, and all Taxes (as defined in SECTION 3.15(H)) owed by Cohig
(whether or not shown on any Tax Return) have been paid. Cohig is not the
beneficiary of any extension of time within which to file any Tax Return, and no
claim has ever been made by an authority in a jurisdiction where Cohig does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no liens, Encumbrances, charges or other security interests on any of
the assets of Cohig that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Cohig has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) Except as set forth in SCHEDULE 3.15(C), there is no dispute or
claim concerning any Tax liability of Cohig either (i) claimed or raised by any
authority in writing or (ii) as to which CCI or the directors or officers (or
employees responsible for Tax matters) of Cohig has knowledge based upon
personal contact with any agent of such authority. SCHEDULE 3.15(C), lists each
federal, state, local and foreign income Tax Return filed by or on behalf of
Cohig which has been audited or which is the subject of a current audit. Prior
to the execution of this Agreement, CCI shall have delivered to Eastbrokers
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by Cohig
for Taxable periods closing on or after September 30, 1994.
(d) Cohig has not (i) applied for a Tax ruling that has continuing
effect (or been affected by a Tax ruling directed to a member of an Affiliated
Group of which Cohig is a member which has continuing effect), (ii) entered into
or been affected by a closing agreement with any Tax authority that has
continuing effect, (iii) filed an election under Section 338(g) or Section
338(h)(10) of the Code or caused or been the subject of a deemed election under
Section 338(e) of the Code, (iv) made an election, or been required to treat any
asset of Cohig as owned by another Person pursuant to the provisions of Section
168(f) of the Code or as tax-exempt bond
14
financed property or tax-exempt use property within the meaning of Section 168
of the Code, (v) agreed to make, or been required to make, an adjustment under
Section 481(a) of the Code, (vi) participated in an international boycott under
Section 999 of the Code, or (vii) waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Cohig has not filed a consent under Section 341(f) of the Code,
concerning collapsible corporations. Cohig has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. Cohig has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A) of the Code.
Cohig has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Section 6662 of the Code. Cohig is not a party to any
Tax allocation or sharing agreement. Cohig has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return other than a
group the common parent of which is CCI.
(g) The unpaid Taxes of Cohig (i) did not, as of the Most Recent
Fiscal Month End, exceed the reserve for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of Cohig's balance sheet for the Most Recent
Fiscal Month End (rather than in any notes thereto) and (ii) do not exceed that
reserve as adjusted for the passage of time through the date hereof in
accordance with the past custom and practice of Cohig in filing its Tax Returns.
(h) For purposes of this Agreement, (i) the term "Tax" shall mean
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), custom duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not, and (ii) the term "Tax Return" shall mean any
return, declaration, report, claim for refund or other information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereto.
(i) Each Affiliated Group has filed all Tax Returns that it was
required to file for each taxable period during which Cohig was a member of the
group, and Taxes owed by the group (whether or not shown on any Tax Return) have
been paid.
(j) Cohig does not have any liability for the Taxes of any Person
other than Cohig under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of state, local or foreign law).
SECTION 3.16. COMPLIANCE WITH LAW; PERMITS. (a) Except as otherwise set
forth on SCHEDULE 3.16, the Business has been conducted in compliance with all
Laws and Orders and does not violate, and Cohig is not in conflict with, or in
default or violation of, any Laws and
15
Orders and Cohig has not received any notice from any Governmental Authority or
Regulatory Agency alleging any such lack of compliance, violation, conflict or
default.
(b) (i) Cohig has made and/or possesses all Permits necessary or
desirable for it to own and use its assets and properties and to conduct the
Business, (ii) Cohig is in compliance with the terms of, and has not violated,
such Permits, and (iii) no proceedings are pending or, to the best knowledge of
Cohig, threatened to revoke or limit any such Permit.
SECTION 3.17. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.17 contains a complete
and accurate list of all (i) patented or registered Intellectual Property Rights
owned or used by Cohig, (ii) pending patent applications and applications for
registrations of other Intellectual Property Rights filed by Cohig, (iii)
material unregistered trade names and corporate names owned or used by Cohig and
(iv) material unregistered trademarks, service marks, copyrights, mask works and
computer software owned or used by Cohig. SCHEDULE 3.17 also contains a complete
and accurate list of all licenses and other rights granted by Cohig to any third
party with respect to any material Intellectual Property Rights and all licenses
and other rights granted by any third party to Cohig with respect to any
material Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. Except as set forth on SCHEDULE 3.17, Cohig owns
all right, title and interest to, or has the right to use pursuant to a valid
license, all Intellectual Property Rights necessary for the operation of the
Business as presently conducted, free and clear of all Encumbrances (except for
any such license.) Except as set forth on SCHEDULE 3.17, the loss or expiration
of any Intellectual Property Right or related group of Intellectual Property
Rights owned or used by Cohig has not had and would not reasonably be expected
to have a Material Adverse Effect on Cohig, and no such loss or expiration is,
to the best knowledge of Cohig, threatened or pending. Cohig has taken all
necessary actions to maintain and protect the material Intellectual Property
Rights which it owns.
(b) Except as set forth on SCHEDULE 3.17, (i) Cohig owns all right, title
and interest in and to all of the Intellectual Property Rights listed on such
schedule, free and clear of all Encumbrances, (ii) there have been no claims
made against Cohig asserting the invalidity, misuse or unenforceability of any
of such Intellectual Property Rights, (iii) has not received any notices of any
infringement or misappropriation by, or conflict with, any third party with
respect to such Intellectual Property Rights (including, without limitation, any
demand or request that Cohig license any rights from a third party), (iv) to the
best knowledge of Cohig, the conduct of the Business has not infringed,
misappropriated or conflicted with and does not infringe, misappropriate or
conflict with any Intellectual Property Rights of other Persons, and (v) to the
best of knowledge of Cohig, the Intellectual Property Rights owned by or
licensed to Cohig have not been infringed, misappropriated or conflicted by
other Persons. Except as set forth in SCHEDULE 3.17, the consummation of the
transactions contemplated by this Agreement shall have no Material Adverse
Effect on the Company's right, title and interest in and to the Intellectual
Property Rights listed on SCHEDULE 3.17.
SECTION 3.18. BENEFIT PLANS OF COHIG. (a) Except as set forth in SCHEDULE
3.18, Cohig is not, and has never been, a party to (i) any "employee benefit
plan" within the meaning of Section 3(3) of ERISA, (ii) any profit sharing,
pension, defined compensation, bonus, stock option, stock purchase, disability,
severance, health, welfare or incentive plan or agreement, or (iii) any written
or unwritten plan or policy providing for "fringe benefits" to its employees,
16
including but not limited to vacation, paid holidays, personal leave, employee
discount, educational benefit or similar programs (individually a "Plan", and
collectively the "Plans").
(b) Each Plan is, and has at all times been, operated in all aspects
in substantial compliance with its governing documents, ERISA, the Code, all
regulations, rulings and announcements promulgated or issued under ERISA and the
Code, and all other applicable law, including without limitation, all reporting,
disclosure and other requirements of ERISA applicable to each such Plan.
(c) Each Plan which is an employee pension benefit plan (a "Pension
Plan"), as defined in Section 3(2) of ERISA and which is intended to be
qualified under Section 401(a) of the Code, is so qualified, and any trust
through which any such Plan is or has been funded is exempt from federal income
tax under Section 501(a) of the Code, and no fact or circumstance exists which
would adversely affect the qualified status of any Plan or trust.
(d) Neither any Plan, nor Cohig, nor any "party in interest" (as
defined in Section 3(14) of ERISA) or "disqualified person" (as defined in
Section 4975 of the Code) with respect to any Plan, nor any other party, has
ever been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject Cohig to the tax or penalty imposed by Section
4975 of the Code or to any liability under Section 502 of ERISA.
(e) There is no event or condition existing which could be deemed a
"reportable event" (within the meaning of Section 4043 of ERISA) with respect to
which the third-day notice requirement has not been waived; no condition exists
which could subject the Cohig to a penalty under Section 4071 of ERISA.
(f) Cohig is not, and has never been, a party to any "multi-employer
plan", as that term is defined in Section 3(37) of ERISA.
(g) Eastbrokers has been provided with a true and correct copy of:
(i) all plan documents relating to each Plan; (ii) all material contracts
relating to each Plan, including without limitation insurance contracts,
investment management contracts and record keeping arrangements; (iii) Forms
5500 and any attached schedules with respect to the last three plan years for
each Plan; (iv) the most recent summary plan description of each Plan; (v) the
most recent determination letter issued by the Internal Revenue Service for each
Pension Plan; and (vi) with respect to each Pension Plan that is intended to
qualify under the Code, true and complete employee census information that will
enable counsel for Eastbrokers to determine whether each such Pension Plan
satisfies Section 410(b) of the Code and which identifies by name each employee
of Cohig who is a highly compensated employee (as defined in Section 414(q) of
the Code) for the most recent year; and (vii) in the case of a Pension Plan
which is a defined benefit plan, the three most recent actuarial reports
relating to the Plan.
(h) With respect to each Plan, there are no actions, suits or claims
(other than routine claims for benefits in the ordinary course) pending or
threatened against Cohig, and there are no Orders of any Governmental Authority
or Regulatory Agency outstanding against any Plan or any fiduciary thereof.
17
(i) With respect to each welfare benefit plan (as defined in Section
(3)(1) of ERISA) ("Welfare Benefit Plan") to which Cohig is, or has ever been, a
party which constitutes a group health plan subject to Section 4980B of the
Code, each such Welfare Benefit Plan complies, and in each case has materially
complied, with all applicable requirements of Section 4980B of the Code.
(j) No Plan that is a Welfare Benefit Plan provides or at any time
provided for non-terminable or non-alterable medical, life or other benefits
described in Section (3)(1) of ERISA, for employees or retirees, and no Welfare
Benefit Plan irrevocably or unalterably commits or at any time committed Cohig
to provide such benefits or any other benefits for any party upon or following
retirement or other termination of employment.
(k) No Pension Plan has suffered an "accumulated funding deficiency"
(as defined in Section 302(a)(2) of ERISA or Section 412(a) of the Code) and if
any Pension Plan is subject to Title IV of ERISA, the present value of all
accrued benefits under the Pension Plan does not exceed the current value of the
assets of the Pension Plan allocable to such accrued benefits, based on
reasonable actuarial assumptions utilized for the Pension Plan in its most
recent actuarial valuations.
(l) All material contributions, premiums or claim payments required
to be made to or on behalf of each Plan by law, contract or the terms of the
Plan have been made.
(m) No termination or partial termination of a Plan within the
meaning of Section 4042 of ERISA or Section 411(d)(3) of the Code has occurred,
and no condition exists that would constitute grounds for termination or partial
termination of any Plan.
(n) Cohig does not directly or indirectly maintain, or is a party to
or contributes to, or has maintained, or was a party to, or contributed to any
welfare plan that is separately funded or is intended, through any funding
method, trust or arrangement, to be part of a "voluntary employees beneficiary
association" (as defined in Section 509(c)(9) of the Code) or part of any other
funding method, trust or arrangement described in Section 501(c) of the Code
which is intended to be exempt from taxation under Section 501(a) of the Code.
(o) There is no "disqualified benefit" (as defined in Section
4976(b) of the Code) which would subject Eastbrokers, East or Cohig to tax under
Section 4980 of the Code.
(p) Cohig does not have any "leased employees" (as defined in
Section 414(n) of the Code) who must be taken into account for purposes of
Section 414(n)(3) of the Code.
SECTION 3.19. ENVIRONMENTAL AND HEALTH/SAFETY MATTERS. Except as set
forth on SCHEDULE 3.19:
(a) The operation of the Business is and has at all times been in
compliance with all applicable Environmental Laws.
(b) Cohig has obtained, maintained and complied with all Permits
required under Environmental Laws for the operation of the Business and such
Permits will continue to remain in effect without any change to their respective
terms and conditions after the Effective
18
Time and, to the extent required under any applicable Environmental Law, will be
transferred, re-obtained or otherwise modified by Cohig in such manner as to
allow the uninterrupted operation of the Business;
(c) SCHEDULE 3.19 hereto sets forth a complete and correct list of
all Permits referenced in subparagraph (b) above, copies of which have been
delivered to counsel for Eastbrokers;
(d) No Hazardous Substances have been generated, transported,
stored, treated, recycled, disposed of or otherwise handled in any way in the
operation of the Business;
(e) There are no locations now owned or operated by Cohig where
Hazardous Substances have been generated, transported, stored, treated,
recycled, disposed of or otherwise handled;
(f) There is no past or ongoing release or threat of release of
Hazardous Substances from any of the properties currently owned or operated by
Cohig or any of its Affiliates or, to the best of knowledge of Cohig, from any
properties formerly owned or operated by Cohig or any of its Affiliates;
(g) Cohig has not treated, stored for more than ninety (90) days, or
disposed of any hazardous waste, as such term is used within the meaning of RCRA
or similar applicable state or municipal Law;
(h) Cohig has not received any notice from any Governmental
Authority, Regulatory Agency or other Person advising that Cohig is potentially
responsible for costs associated with any release or threatened release of
Hazardous Substances or potentially liable for any violation of any
Environmental Law;
(i) No underground storage tanks are or, to the best knowledge of
Cohig, ever were located on any properties currently or previously owned or
leased by Cohig;
(j) No pending or threatened Order, litigation, settlement or
citation with respect to Hazardous Substances exists, and there is no pending or
contingent liability for Hazardous Substances, with respect to or in connection
with the operation of the Business;
(k) There has been no environmental investigation conducted by
any Governmental Authority or Regulatory Agency with respect to the operation
of the Business;
(l) No PCBs or asbestos-containing materials are located on,
contained in or otherwise form a part of any of the assets or properties of
Cohig; and
(m) Cohig has delivered to counsel for Eastbrokers all environmental
audits, reports and assessments concerning the assets or properties of Cohig
which Cohig possesses or reasonably could have obtained.
SECTION 3.20. CORPORATE RECORDS. All stock certificate books, stock
certificates, transfer ledgers and minute books of Cohig have been made
available to Eastbrokers and are true
19
and complete and constitute all of the stock books, stock certificates, transfer
ledgers and minute books thereof. The minute books of Cohig reflect all material
action taken and authorizations given by the Board of Directors of Cohig or any
committee thereof and all material action taken and authorizations given by the
current and any former holder of Cohig capital stock.
SECTION 3.21. DEPOSITORIES. SCHEDULE 3.21 contains a complete list of the
names, location and account numbers of each bank, trust company, securities
broker or other financial institution in which Cohig has an account, deposits or
other assets on hand and the names of all authorized persons with respect
thereto.
SECTION 3.22. INSURANCE. The assets and properties of Cohig and the
conduct of the Business are insured by insurers of recognized responsibility in
such amounts and against such risks and losses as are adequate therefor in
accordance with past practices and with customary industry practices. All
material insurance policies or binders insuring the property, assets or business
liabilities of Cohig are listed on SCHEDULE 3.22 and are in full force effect
and will be in full force and effect, or substantially comparable replacement
policies will be in full force and effect, on the date hereof. SCHEDULE 3.22
identifies those pending or threatened claims listed therein as to which the
insurance carrier has denied coverage or has advised Cohig that it is defending
such claim under reservation of right.
SECTION 3.23. TRUE AND COMPLETE COPIES. All copies of agreements, written
contracts and documents delivered and to be delivered hereunder by Cohig are and
will be true and complete copies of such agreements, contracts and documents as
of the respective date on which such agreements, contracts and documents were
delivered.
SECTION 3.24. BROKERAGE. Except as set forth on SCHEDULE 3.24, neither
Cohig nor any of its officers or directors has retained, employed or incurred
any obligation to any investment banker, broker or finder in connection with the
transactions contemplated by this Agreement.
SECTION 3.25. TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3.25, no officer, director or employee of Cohig or, to the knowledge of
Cohig, any Person in which any officer, director or employee of Cohig owns any
beneficial interest (other than a publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the counter market and
less than one percent of the stock of which is beneficially owned by all of such
Persons), has any material agreement, arrangement or understanding with Cohig or
any interest in any assets or property of Cohig.
SECTION 3.26. SECURITIES AND EXCHANGE COMMISSION BROKER-DEALER
REGISTRATION. Cohig is duly registered as a broker-dealer with the Securities
and Exchange Commission (the "Commission") pursuant to Section 15 of the
Exchange Act. Cohig has previously delivered to Eastbrokers a complete and
correct copy of Cohig's current Form BD.
SECTION 3.27. NASD MATTERS. Cohig is a member in good standing of the
NASD. Except as set forth on SCHEDULE 3.27, there are no special restrictions or
limitations imposed by the NASD on the conduct by Cohig of the Business, E.G., a
"restriction letter."
SECTION 3.28. SIPC/CRD REGISTRATION. Cohig is duly registered with
the Security Investors Protection Corporation (the "SIPC"). Cohig has paid
all SIPC fees due to date. Cohig
20
is registered with the Central Registration Depository of the National
Association of Securities Dealers, Inc. under CRD Number 16184.
SECTION 3.29. STATE BROKER-DEALER REGISTRATIONS. Cohig is registered as a
broker-dealer in each State within the United States. All of such registrations
are current and Cohig is in good standing as a registered broker-dealer in each
such state or jurisdiction. As of the date hereof, no renewal or registration
fee is due or owing to any state. All of Cohig's state broker-dealer
registrations are in good standing.
SECTION 3.30. EMPLOYEES. SCHEDULE 3.30 sets forth the name, job
description and compensation of each employee of Cohig whose earnings during
Cohig's most recent fiscal year was $20,000 or more (including bonuses and other
incentive compensation), and all employees who are expected to receive at least
$20,000 (including bonuses and other incentive compensation) in earnings in
respect of the present fiscal year. To the best knowledge of Cohig, there are no
pending or threatened disputes between Cohig and any of its employees.
SECTION 3.31. REGISTERED PRINCIPALS AND REPRESENTATIVES. Set forth on
SCHEDULE 3.31 is a list of each Person registered as a registered principal or a
registered representative with Cohig, and each state or jurisdiction in which
such individual is registered.
SECTION 3.32. BROKERS' BOND. Cohig currently has in effect a blanket
broker-dealer fidelity bond, a copy of which has previously been delivered to
Eastbrokers.
SECTION 3.33. INTERCOMPANY LIABILITIES. Except as reflected in the
Financial Statements or Interim Financial Statements or except as disclosed on
SCHEDULE 3.33 or SCHEDULE 3.25 attached hereto, there are no liabilities,
contracts or commitments between Cohig, on the one hand, and CCI or any
Affiliate of CCI, on the other. Except as disclosed on SCHEDULE 3.33 or SCHEDULE
3.25 attached hereto, during the period from the date of the Interim Financial
Statements to the date hereof, no such liabilities, contracts or commitments
have been paid and no settlements thereof have been made except those paid or
settled on a basis consistent with the past practices of Cohig.
SECTION 3.34. FULL DISCLOSURE. No statement by Cohig contained in this
Article III, the Schedules hereto or in any written certificate or document
furnished to Eastbrokers, East, or any of their respective representatives or
agents, as of the respective date thereof, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statement contained herein or therein not materially and adversely misleading;
PROVIDED, HOWEVER, that Cohig makes no representation or warranty as to the
general business and economic condition of the industry in which the Business is
conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CCI
As a further inducement to Eastbrokers and East to enter into this
Agreement and to consummate the transactions contemplated hereby, CCI represents
and warrants to each of
21
Eastbrokers and East that on the date hereof the matters set forth below are
true and correct except as set forth in the disclosure schedules attached
hereto.
SECTION 4.1. RECORD AND BENEFICIAL OWNERSHIP OF COHIG COMMON STOCK. All of
the issued and outstanding shares of Cohig Common Stock are owned beneficially
and of record by CCI, free and clear of any Encumbrances, options, contracts,
preemptive rights, rights of conversion or exchange, or equities except for such
Encumbrances as may be created by this Agreement. There are no voting trusts,
proxies or other agreements or understandings relating to the voting of the
issued and outstanding shares of Cohig Common Stock.
SECTION 4.2. NO CONFLICT. Except as set forth on SCHEDULE 4.2, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated herein, will (i) conflict with or result in a breach
of the terms of, (ii) violate or constitute a default, an event of default (or
an event which, with notice or lapse of time or both, would constitute a default
or an event of default) or an event creating rights of modification,
acceleration, termination, cancellation or other additional rights, or loss of
rights under, (iii) result in the creation of any Encumbrance upon any assets or
property of CCI pursuant to, or (iv) require any authorization, consent,
approval, exemption of other action by notice or declaration to, or filing with
any Governmental Authority or Regulatory Agency pursuant to the charter and
by-laws of CCI, any note, bond, mortgage, indenture, deed of trust, lease,
Contract, Permit, agreement, or other instrument or any Order of any
Governmental Authority or Regulatory Agency to which CCI is a party or subject,
or by which the assets or property of CCI is bound or (v) contravene any
applicable provision of any Laws.
SECTION 4.3. CONSENTS. Except for: (i) filings of applications and notices
with the NASD; and (ii) the approval of this Agreement and the transactions
contemplated by this Agreement by the Board of Directors of CCI and the holders
of a majority of the issued and outstanding capital stock of CCI, and except as
otherwise set forth on SCHEDULE 4.3, no consent, approval or authorization of,
or declaration, filing or registration with, any Person is required to be
obtained, made or given by CCI in connection with the execution, delivery and
performance of this Agreement or the consummation by CCI of the transactions
contemplated by this Agreement.
SECTION 4.4. BROKERAGE. Except as set forth on SCHEDULE 4.4, CCI has not
retained, employed or incurred any obligation to any investment banker, broker
or finder in connection with the transactions contemplated by this Agreement.
SECTION 4.5. INVESTMENT REPRESENTATIONS. (a) The Merger Shares being
acquired by CCI pursuant hereto are for CCI's own account PROVIDED, HOWEVER,
that CCI may distribute the Merger Shares to its stockholders by way of dividend
or other pro-rata distribution. CCI has no intention of selling such securities
in a public distribution in violation of the federal securities laws or any
applicable state securities laws.
(b) CCI understands and acknowledges that (a) the Merger Shares will
be unregistered and may be required to be held indefinitely unless such shares
are subsequently registered under the Securities Act, or an exemption from such
registration is available; (b) Eastbrokers is under no obligation to file a
registration statement with the Commission with respect to the Merger Shares;
and (c) Rule 144 promulgated under the Securities Act, which
22
provides for certain limited sales of unregistered securities, will not be
immediately available with respect to the Merger Shares.
SECTION 4.6. TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
4.6, neither CCI, nor any officer, director or employee of CCI or, to the
knowledge of CCI, any Person in which any officer, director or employee of CCI
owns any beneficial interest (other than a publicly-held corporation whose stock
is traded on a national securities exchange or in the over-the counter market
and less than one percent of the stock of which is beneficially owned by all of
such Persons), has any material agreement, arrangement or understanding with
Cohig or any interest in any assets or property of Cohig.
SECTION 4.7. REPRESENTATION AND CONSULTATION. CCI has consulted with and
relied upon its own professional advisors with respect to the Tax, legal and
other effects of the transactions contemplated by this Agreement including,
without limitation, the federal, state and local Tax consequences to CCI and its
stockholders of a distribution by CCI to its stockholders of the Merger
Consideration.
SECTION 4.8 FULL DISCLOSURE. No statement by CCI contained in this Article
IV, the Schedules hereto or in any written certificate or document furnished by
CCI to Eastbrokers or East as of the respective date thereof, or to the best of
CCI's knowledge, no statement contained by Cohig in Article III or the schedules
hereto contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statement contained herein or
therein not materially and adversely misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF EASTBROKERS
As an inducement to each of Cohig and CCI to enter into this Agreement and
to consummate the transactions contemplated hereby, Eastbrokers hereby
represents and warrants to each of Cohig and CCI, as follows:
SECTION 5.1. ORGANIZATION, QUALIFICATION AND AUTHORITY OF Eastbrokers. (a)
Eastbrokers is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Eastbrokers has full corporate
power and authority and all material licenses, permits and authorizations
necessary to own and operate its properties, to carry on its business as
presently conducted and presently proposed to be conducted. Eastbrokers has been
duly qualified as a foreign corporation for the transaction of business in, and
is in good standing under the laws of, each jurisdiction in which it owns,
leases or uses property or conducts any business so as to require such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect on Eastbrokers. SCHEDULE 5.1 sets forth all the subsidiaries of
Eastbrokers and describes each direct or indirect ownership or other rights of
Eastbrokers to acquire any capital stock or equity or debt securities of any
corporation or any other direct or indirect equity ownership interest or
Indebtedness interest in any other Person which is owned or held by Eastbrokers.
23
(b) Eastbrokers has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by Eastbrokers and the performance of the
transactions herein contemplated have been duly authorized by the Board of
Directors of Eastbrokers, and no further corporate action on the part of
Eastbrokers is necessary to authorize this Agreement and its performance of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Eastbrokers and constitutes the legal, valid and binding obligation
of Eastbrokers enforceable against it in accordance with its terms.
SECTION 5.2. NO CONFLICT. Except as set forth on SCHEDULE 5.2, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated herein, will (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) violate or constitute a default,
an event of default (or an event which, with notice or lapse of time or both,
would constitute a default or an event of default) or an event creating rights
of modification, acceleration, termination, cancellation or other additional
rights, or loss of rights, under, (iii) result in the creation of any
Encumbrance upon any of the capital stock, assets or property of Eastbrokers
pursuant to, or (iv) require any authorization, consent, approval, exemption of
other action by notice or declaration to, or filing with any Governmental
Authority or Regulatory Agency pursuant to, the charter or bylaws of
Eastbrokers, any note, bond, mortgage, indenture, deed of trust, lease,
Contract, Permit, agreement, or other instrument or any Order of any
Governmental Authority or Regulatory Agency to which Eastbrokers is a party or
subject, or by which any of its capital stock, assets or property is bound or
(v) contravene any applicable provision of any Laws.
SECTION 5.3. CONSENTS. Except for filings of applications and notices with
the NASD and except as otherwise set forth on SCHEDULE 5.3, no consent, approval
or authorization of, or declaration, filing or registration with, any Person is
required to be obtained, made or given by Eastbrokers in connection with the
execution, delivery and performance of this Agreement or the consummation by
Eastbrokers of the transactions contemplated by this Agreement.
SECTION 5.4. BROKERAGE. Except as set forth on SCHEDULE 5.4, neither
Eastbrokers nor any of its officers or directors has retained, employed or
incurred any obligation to any investment banker, broker or finder in connection
with the transactions contemplated by this Agreement.
SECTION 5.5. EASTBROKERS COMMON STOCK. All of the Merger Shares on the
date of issuance or delivery thereof, shall (a) be duly authorized, validly
issued, fully paid and nonassessable, (b) subject as the case may be to the
Escrow Agreement, be free and clear of any Encumbrances and (c) bear the
following legend:
"The securities represented by this
certificate are not registered under the
Securities Act of 1933, as amended (the
"Securities Act") and cannot be
transferred or sold unless they are
subsequently registered under the
Securities Act or, in the opinion of
counsel for the issuer, an exemption
from such registration is available."
24
SECTION 5.6. FILINGS WITH THE COMMISSION. All documents filed by
Eastbrokers with the Commission pursuant to reporting obligations arising under
the Securities Exchange Act of 1934, as amended, were true and correct in all
material respects as of the date specified in such documents or if no date was
so specified as of the date such documents were filed. Except for consummation
of the transactions contemplated hereby, as of the date hereof, there has been
no event, development or change in the business of Eastbrokers which would give
rise to an obligation on behalf of Eastbrokers to amend, modify or supplement a
filing with the Commission previously made or to file additional reports,
schedules or documents with the Commission.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF EASTBROKERS AND EAST
As an inducement to Cohig and CCI to enter into this Agreement and to
consummate the transactions contemplated hereby, Eastbrokers and East, jointly
and severally, hereby represent and warrant to Cohig and CCI as follows:
SECTION 6.1. ORGANIZATION AND AUTHORITY. (a) East is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. East has full corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
engage in the Business. East has been duly qualified as a foreign corporation
for the transaction of business in, and is in good standing under the laws of,
each jurisdiction in which it owns, leases or uses property or conducts any
business so as to require such qualification, except where the failure to so
qualify would not have a Material Adverse Effect on East . East does not have
any subsidiaries, and, except as contemplated by this Agreement, East does not
have any direct or indirect ownership or hold any rights to acquire any capital
stock or equity or debt securities of any corporation or any other direct or
indirect equity ownership interest or Indebtedness interest in any other Person.
(b) East has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by East and the performance of the transactions herein
contemplated have been duly authorized by the Board of Directors of East and
Eastbrokers, as the holder of all of the issued and outstanding shares of common
stock of East, and no further corporate action on the part of East is necessary
to authorize this Agreement and its performance of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by East and
constitutes the legal, valid and binding obligation of East enforceable against
it in accordance with its terms.
SECTION 6.2. NO CONFLICT. Except as set forth on SCHEDULE 6.2, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated herein, will (i) conflict with or result in a breach
of the terms of, (ii) violate or constitute a default, an event of default (or
an event which, with notice or lapse of time or both, would constitute a default
or an event of default) or an event creating rights of modification,
acceleration, termination, cancellation or other additional rights, or loss of
rights, under, (iii) result in the creation of any Encumbrance upon any of the
capital stock, assets or property of East pursuant
25
to, or (iv) require any authorization, consent, approval, exemption of other
action by notice or declaration to, or filing with any Governmental Authority or
Regulatory Agency pursuant to the charter or bylaws of East , any note, bond,
mortgage, indenture, deed of trust, lease, Contract, Permit, agreement, or other
instrument or any Order of any Governmental Authority or Regulatory Agency to
which East is a party or subject, or by which any of its capital stock, assets
or property is bound or (v) contravene any applicable provision of any Laws.
SECTION 6.3. CONSENTS. Except for: (i) filings of applications and notices
with the NASD; (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and Articles of Merger with the Secretary of
State of the State of Colorado and except as set forth on SCHEDULE 6.3, no
consent, approval or authorization of, or declaration, filing or registration
with, any Person is required to be obtained, made or given by East in connection
with the execution, delivery and performance of this Agreement or the
consummation by East of the transactions contemplated by this Agreement.
SECTION 6.4. EAST CAPITALIZATION. East 's authorized capital stock
consists of one thousand (1,000) shares of common stock, par value $.01 per
share, of which one hundred (100) shares are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and non-assessable. There
are no options, warrants, preemptive rights, conversion privileges or other
contracts which give any Person or entity the right to acquire any capital stock
of East or any interest therein. Eastbrokers is the beneficial and record owner
of all of the outstanding shares of common stock of East, free and clear of all
Encumbrances.
SECTION 6.5. BUSINESS ACTIVITY; INDEBTEDNESS. East has not engaged in any
business activity of any nature prior to the date of this Agreement and as of
the date hereof, East is not indebted or liable to any Person for any obligation
except as expressly contemplated herein.
ARTICLE VII.
CONDITIONS TO THE OBLIGATIONS OF EASTBROKERS AND EAST
The obligations of Eastbrokers and East to consummate, on the date hereof,
the transactions contemplated by this Agreement will be subject to the
satisfaction, on or before the date hereof of each of the following conditions,
unless waived in writing by Eastbrokers:
SECTION 7.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE. All
representations and warranties made by each of Cohig and CCI in this Agreement
shall be true and correct in all material respects on the date hereof. Each of
Cohig and CCI shall have performed and complied with all agreements, covenants
and conditions required to be performed and complied with by Cohig and CCI,
respectively, prior to the date hereof; Cohig and CCI each shall have certified
to the effect of this Section 8.1 in writing to Eastbrokers, in a form
reasonably satisfactory to Eastbrokers, as of the date hereof. Notwithstanding
anything to the contrary contained herein, the Closing of the transactions
contemplated hereby shall not be deemed to be a waiver by Eastbrokers or any
Indemnitee of any rights to indemnification under or pursuant to Article XIII of
this Agreement, irrespective of whether Eastbrokers or any other Person had
knowledge on or
26
before the date hereof of the breach by either Cohig or CCI of any
representation, warranty, agreement, covenant or condition contained in this
Agreement.
SECTION 7.2. APPROVALS. All Approvals required to be obtained by Cohig and
CCI to consummate the transactions contemplated by this Agreement shall have
been validly obtained and shall be in full force and effect and all statutory
waiting periods in respect thereof shall have expired or been terminated and
copies of all such Approvals shall have been delivered to Eastbrokers.
SECTION 7.3. NO PROCEEDING OR LITIGATION. No action, suit or proceeding
before any court, any other Governmental Authority or Regulatory Agency shall
have been commenced or threatened, and no investigation by any Governmental
Authority or Regulatory Agency shall have been threatened, against any of the
parties to this Agreement or any of the principals, officers, directors or
stockholders of any of them seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions or seeking damages in connection with any of such
transactions.
SECTION 7.4. ESCROW AGREEMENTS. Eastbrokers shall have received an
executed copy of the Escrow Agreement.
SECTION 7.5. EMPLOYMENT AGREEMENTS. East shall have received executed
copies of employment agreements from Xx. Xxxxxx X. Xxxxxx and from each of the
other employees of Cohig identified on Schedule 7.5 substantially in the form
attached as Exhibit B and Exhibit C, respectively.
SECTION 7.6. OTHER DOCUMENTS. Cohig and CCI shall have furnished or caused
to be furnished to Eastbrokers the documents set forth in Section 9.2 and such
other documents and certificates as may be reasonably requested by Eastbrokers.
SECTION 7.7. CORPORATE ACTION. Cohig and CCI each shall have taken all
corporate action necessary to approve the transactions contemplated by the
Agreement, and Cohig and CCI shall have furnished Eastbrokers with copies of
resolutions, adopted by the Board of Directors of each of Cohig and CCI and the
stockholders of CCI and certified by the secretary of each respective entity as
of the date hereof, in form and substance reasonably satisfactory to counsel for
Eastbrokers, in connection with such transactions.
SECTION 7.8. SECURITIES LAWS EXEMPTIONS. The transfer of the Merger Shares
shall not be subject to registration under the Securities Act of 1933, as
amended, or under any applicable state securities laws based on exemptions
available on terms and conditions reasonably acceptable to Eastbrokers.
27
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF COHIG
AND CCI
The obligations of Cohig and CCI to consummate, on the date hereof, the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the date hereof, of each of the following conditions,
unless waived in writing by each of Cohig and CCI:
SECTION 8.1. REPRESENTATIONS AND WARRANTIES; PERFORMANCE. All
representations and warranties made by each of Eastbrokers and East herein shall
be true and correct in all material respects on the date hereof. Each of
Eastbrokers and East shall have performed and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to be
performed and complied with by Eastbrokers and East, respectively, prior to the
date, and each of Eastbrokers and East shall have so certified to Cohig and CCI
on the date hereof. Notwithstanding anything to the contrary contained herein,
the Closing of the transactions contemplated hereby shall not be deemed a waiver
by CCI or any Indemnitee of any rights to indemnification pursuant to Article
XIII of this Agreement, irrespective of whether CCI or any other Person had
knowledge on or before the date hereof of the breach by either Eastbrokers or
East, of any representation, warranty, agreement, covenant or condition
contained in this Agreement.
SECTION 8.2. APPROVALS. All Approvals required to be obtained by each of
Eastbrokers and East to consummate the transactions contemplated by this
Agreement shall have been validly obtained and shall be in full force and effect
and all statutory waiting periods shall have expired or been terminated and
copies of such Approvals shall have been delivered to Cohig.
SECTION 8.3. NO PROCEEDING OR LITIGATION. No action, suit or proceeding
before any court or any other Governmental Authority or Regulatory Agency shall
have been commenced or threatened, and no investigation by any Governmental
Authority shall have been threatened, against any of the parties to this
Agreement or any of the principals, officers or directors of any of them seeking
to restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions or seeking
damages in connection with any of such transactions.
SECTION 8.4. CORPORATE ACTION. Each of Eastbrokers and East shall have
taken all corporate action necessary to approve the transactions contemplated by
the Agreement, and each of Eastbrokers and East shall have furnished Cohig with
copies of resolutions, adopted by the Board of Directors of Eastbrokers and
East, and certified by the secretary of each respective entity as of the date
hereof, in form and substance reasonably satisfactory to counsel for Cohig, in
connection with such transactions.
SECTION 8.5. ESCROW AGREEMENT. Cohig and CCI shall have received an
executed copy of the Escrow Agreement.
28
SECTION 8.6. OTHER DOCUMENTS. Each of Eastbrokers and East shall have
furnished Cohig and CCI with the documents set forth in SECTION 9.3 and such
other documents and certificates as may be reasonably requested by Cohig.
ARTICLE IX
CLOSING
SECTION 9.1. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur at the close of the NASDAQ SmallCap Market
trading day on May 14, 1998 or such later date as the parties hereto may
mutually agree at the offices of Xxxxxx Xxxx & Xxxxxx LLP, Two Stamford Plaza,
000 Xxxxxxx Xxxxxxxxx, Xxxxxxxx, XX 00000.
SECTION 9.2. DELIVERY OF DOCUMENTS BY COHIG. Cohig agrees to execute
and deliver, or cause to be executed and delivered, to Eastbrokers and East
at the Closing, the following:
(a) All of the instruments and documents required to be
delivered under ARTICLE VII.
(b) Written resignations of the directors of Cohig specified on
SCHEDULE 9.2(B) hereto, effective as of the date hereof.
(c) All minute books, stock certificate books and stock ledgers
of Cohig.
(d) A copy of the Articles of Incorporation of Cohig as in effect
immediately prior to the Effective Time certified as of a recent date by
the Secretary of the State of Colorado.
(e) Certificates, as of the most recent practicable dates as to the
corporate good standing of Cohig issued by the Secretaries of State of the
States of Colorado, Florida, Missouri, Utah and Oregon and any other state
in which Cohig is required to be qualified or licensed to transact
business, confirming such good standing on or immediately prior to the
date hereof.
(f) A copy of the By-laws of Cohig in effect on the date hereof,
certified by the Secretary or Assistant Secretary of Cohig as of the date
hereof.
(g) Resolutions of the Board of Directors of Cohig and CCI
authorizing and approving all matters in connection with this Agreement
and the transactions contemplated hereby, certified by the Secretary or
Assistant Secretary of Cohig as of the date hereof.
(h) A Certificate of the Secretary or Assistant Secretary of Cohig
dated the date hereof certifying (i) as to the matters in (f) and (g),
above, (ii) that the Articles of Incorporation of Cohig has not been
amended, and (iii) to the incumbency and specimen
29
signature of each officer of Cohig executing this Agreement and the
other agreements contemplated herein.
(i) Such other documents as Eastbrokers may reasonably request.
SECTION 9.3. DELIVERY OF DOCUMENTS BY EASTBROKERS AND EAST . Each of
Eastbrokers and East agrees to execute and deliver, or cause to be executed and
delivered, to Cohig and CCI, as the case may be, at the Closing, the following:
(a) All of the instruments and documents required to be
delivered under ARTICLE VIII.
(b) Such other documents as Cohig or CCI may reasonably request.
SECTION 9.4. FILING OF CERTIFICATE OF MERGER AND ARTICLES OF MERGER.
Concurrent with the exchange of documents referred to in this ARTICLE IX, and
subject to satisfaction of the conditions set forth herein, Eastbrokers, East,
CCI and Cohig hereby authorize the filing, on the date hereof, of the
Certificate of Merger in the office of the Secretary of State of the State of
Delaware and the Articles of Merger in the office of the Secretary of State of
the State of Colorado.
ARTICLE X
TAX MATTERS
SECTION 10.1. TAX SHARING AGREEMENT. Any tax sharing agreement between CCI
and Cohig is terminated as of the date hereof and will have no further effect
for any taxable year (whether the current year, a future year, or a past year).
SECTION 10.2. TAXES OF OTHER PERSONS. CCI agrees to indemnify Eastbrokers
and the Surviving Corporation from any Adverse Consequences Eastbrokers or the
Surviving Corporation may suffer resulting from, arising out of, relating to, in
the nature of, or caused by any liability of Cohig for taxes of any Person other
than Cohig under Section 1.1502-6 of the Treasury Regulations (or any similar
provision of state, local or foreign law).
SECTION 10.3. TAX RETURNS . CCI will include the income of Cohig
(including any deferred income triggered into income by Sections 1.1502-13 and
1.1502-14 of the Treasury Regulations and any excess loss accounts taken into
income under Section 1.1502-19 of the Treasury Regulations) on the CCI
consolidated federal income Tax Returns (and any similar state, local or foreign
Tax Returns) for all periods through the date hereof and pay any federal income
Taxes attributable to such income. The Surviving Corporation will furnish Tax
information to CCI for inclusion in CCI's federal consolidated income Tax Return
(and any similar state, local or foreign Tax Returns) for the period which
includes the date hereof in accordance with Cohig's past custom and practice.
CCI will allow Eastbrokers and the Surviving Corporation an opportunity to
review and comment upon such Tax Returns (including any amended returns) to the
extent that they relate to Cohig that would adversely affect the Surviving
Corporation after the date hereof. The income of Cohig will be apportioned to
the
30
period up to and including the date hereof and the period after the date hereof
by closing the books of Cohig as of the end of the date hereof.
SECTION 10.4. AUDITS. CCI will allow the Surviving Corporation and its
counsel to participate in any audits of CCI's consolidated federal income Tax
Returns (and any similar state, local or foreign Tax Returns) to the extent that
such returns relate to Cohig. CCI will not settle any such audit in a manner
which would adversely affect the Surviving Corporation after the date hereof
without the prior written consent of Eastbrokers or the Surviving Corporation,
which consent shall not unreasonably be withheld.
SECTION 10.5. CARRYBACKS. CCI will immediately pay to the Surviving
Corporation any Tax refund (or reduction in Tax liability) resulting from a
carryback of a postacquisition Tax attribute of Cohig into the CCI consolidated
Tax Return, when such refund or reduction is realized by CCI. CCI will cooperate
with the Surviving Corporation in obtaining such refunds (or reduction in Tax
liability), including through the filing of amended Tax Returns or refund
claims.
SECTION 10.6. RETENTION OF CARRYOVERS. CCI will not elect to retain any
net operating loss carryovers or capital loss carryovers of Cohig under Section
1.1502-20(g) of the Treasury Regulations.
SECTION 10.7. CERTAIN OTHER TAX MATTERS. The following provisions shall
govern the allocation of responsibility as between the Surviving Corporation and
CCI for certain tax matters following the Closing:
(a) TAX PERIODS ENDING ON OR BEFORE THE DATE HEREOF. The Surviving
Corporation shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns (except for the Tax Returns contemplated in SECTION 11.3 of this
Agreement) for Cohig for all periods ending on or prior to the date hereof which
are filed after the date hereof. The Surviving Corporation shall permit CCI to
review and comment on each such Tax Return described in the preceding sentence
prior to filing. CCI shall reimburse the Surviving Corporation for Taxes of
Cohig with respect to such periods within fifteen (15) days after payment by the
Surviving Corporation or Cohig of such Taxes to the extent such Taxes are not
reflected in the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect differences between book and Tax income) shown on
the face of Cohig's balance sheet for the Most Recent Fiscal Month End.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE DATE HEREOF.
The Surviving Corporation shall prepare and cause to be prepared and file or
cause to be filed any Tax Returns of Cohig for Tax periods which begin before
the date hereof and end after the date hereof. CCI shall pay to the Surviving
Corporation within fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the date hereof to the
extent such Taxes are not reflected in the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect differences between
book and Tax income) shown on the face of Cohig's balance sheet for the Most
Recent Fiscal Month End. For purposes of this SECTION 11.7(B), in the case of
any Taxes that are imposed on a periodic basis and are payable for a Taxable
period that includes (but does not end on) the date hereof, the portion of such
Tax which relates to the
31
portion of such Taxable period ending on the date hereof shall (x) in the case
of any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire Taxable period multiplied by
a fraction the numerator of which is the number of days in the Taxable period
ending on the date hereof and the denominator of which is the number of days in
the entire Taxable period, and (y) in the case of any Tax based upon or related
to income or receipts, be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the date hereof. Any credits relating to a
Taxable period that begins before and ends after the date hereof shall be taken
into account as though the relevant Taxable period ended on the date hereof. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of Cohig.
(c) COOPERATION ON TAX MATTERS. (i) The Surviving Corporation and CCI
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Article XI
and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Surviving Corporation and CCI agree (A) to
retain all books and records with respect to Tax matters pertinent to Cohig
relating to any Taxable period beginning before the date hereof until the
expiration of the statute of limitations (and, to the extent notified by the
Surviving Corporation or CCI, any extensions thereof) of the respective Taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other party so requests, the Surviving Corporation or CCI, as the case
may be, shall allow the other party to take possession of such books and
records; (ii) the Surviving Corporation and CCI further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby); and (iii) the
Surviving Corporation and CCI further agree, upon request, to provide the other
party with all information that either party may be required to report pursuant
to Section 6043 of the Code and Treasury Regulations promulgated thereunder.
ARTICLE XI.
REMEDIES
Each party acknowledges that the unique nature of the transactions to be
consummated hereunder renders money damages an inadequate remedy for breach by
either party of its obligations hereunder, and the parties each agree that in
the event of such breach, the non-breaching party will, upon instituting proper
action, be entitled to a decree of specific performance.
32
ARTICLE XII.
COVENANTS OF THE PARTIES SUBSEQUENT TO THE CLOSING
SECTION 12.1. CONTRIBUTION OF NET CAPITAL. On the date that all waiting
periods and other conditions to the effectiveness of the Approvals have expired,
terminated or lapsed, Eastbrokers will contribute to the Surviving Corporation
equity capital in the amount of $500,000. Eastbrokers will contribute additional
equity capital in the amount of $1 million to the Surviving Corporation as soon
as practicable after delivery to Eastbrokers of evidence reasonably satisfactory
to Eastbrokers that the Lawsuits have been resolved at the sole discretion of
Eastbrokers in favor of Cohig.
SECTION 12.2. EQUITY INCENTIVE PLAN. Within thirty (30) days of the
Closing, Eastbrokers will grant, pursuant to the Eastbrokers International Inc.
1996 Stock Option Plan (the "Option Plan"), options to purchase shares of
Eastbrokers Common Stock to certain of the employees of Cohig. The options will
vest and become exercisable by the respective optionee only if performance and
other criteria set forth in the Option Plan and the respective option agreement
are satisfied.
SECTION 12.3. GOVERNMENTAL AND REGULATORY APPROVALS AND COMPLIANCE. As
promptly as practicable after the Closing, each of Eastbrokers and the Surviving
Corporation shall file or cause to be filed with the appropriate Governmental
Authority and Regulatory Agency any notifications, applications or other
documents required to be filed with respect to the transactions contemplated
hereby and in connection with the registration of the Surviving Corporation as a
registered broker-dealer in each State within the United States, a member in
good standing of the NASD and will promptly file an Uniform Application for
Broker-Dealer Registration on Form BD with the NASD. CCI agrees to make
available to each of Eastbrokers and the Surviving Corporation such information
as each of them may reasonably request to enable each of them to file the
required applications, notices and other requisite documents with such
Governmental Authorities and Regulatory Agencies and to provide any additional
information requested by such agencies.
SECTION 12.4. ASSIGNMENT BY CCI TO THE SURVIVING CORPORATION OF LEASES,
OTHER CONTRACTS, PROPERTY AND EQUIPMENT. Subsequent to the Closing, CCI shall
assign or transfer, at the sole discretion of Eastbrokers, to either the
Surviving Corporation or such other subsidiary of Eastbrokers which may be
hereafter established for such purpose, all real property and equipment leases,
such other contracts and contract rights and all other property and equipment of
CCI which immediately prior to the date hereof were used or useful to Cohig in
connection with its business activities. Additionally, for a period of not less
than 90 days after the Closing, or such longer period as may be required to
obtain necessary third party consents to such assignment or transfers, CCI
agrees not to take any action which would result in a termination or a material
modification of the terms of the leases, contracts or contract rights or would
otherwise impair the usefulness of any other property and equipment of CCI which
was immediately prior to the date hereof used by or useful to Cohig in
connection with its business activities.
SECTION 12.5. LIQUIDATION OF CCI. CCI agrees that, during the period in
which any Merger Shares are held in the escrow account, it will not file with
any Governmental Authority
33
any documents, instruments or agreements relating to the liquidation or
dissolution of CCI, without the prior consent of Eastbrokers, which consent will
not be unreasonably withheld. CCI further agrees that during the period in which
any Merger Shares are held in the escrow account, CCI will not take any action
with respect to its corporate organizational status or the dissolution of CCI,
which would impair the rights of either Eastbrokers or East to be indemnified by
CCI.
SECTION 12.6. UNWIND. If all Approvals necessary to permit the Surviving
Corporation to engage fully in the business activities conducted by Cohig
immediately prior to the Merger have not been obtained by August 14, 1998, at
the request of Eastbrokers, each of CCI and Cohig hereby agree to take all
actions which are necessary to unwind the Merger and to take all actions which
are necessary to return, to the extent possible, each of the parties hereto the
respective position and status such party held immediately prior to the date
hereof.
SECTION 12.7. CONDUCT OF BUSINESS. Subsequent to the date hereof, the
surviving Corporation, shall not, without the prior written consent of
Eastbrokers, take any action or engage in any transaction which could be
reasonably expected to create in an obligation for Eastbrokers to publicly
disclose such action or transaction. Each of Eastbrokers and East agree that it
will not take any arbitrary action which is intended to impair Cohig's ability
to achieve the performance criteria set forth in Sections 2.8 and 2.9 hereof.
SECTION 12.8. CONFIDENTIALITY. (a) All data, reports, records and other
written and oral information of any kind received by any party hereto or
Affiliates, stockholders, directors, partners, officers, employees, agents,
representatives, consultants or lenders of such party (such party being
hereinafter referred to as the "Receiving Party") from any other party hereto or
Affiliates, stockholders, partners, directors, officers, employees, agents,
representatives or consultants of such other party (such other party being
hereinafter referred to as the "Delivering Party") under this Agreement or in
connection with the transactions contemplated hereby shall be treated as
confidential (collectively, "Confidential Information"). Except as otherwise
provided herein, the Receiving Party shall not disclose or use (and shall not
permit its Affiliates, stockholders, directors, officers, partners, employees,
agents, representatives or consultants to use) Confidential Information for its
own (or their own) benefit and shall use commercially reasonable efforts (and
shall cause its Affiliates, stockholders, partners, directors, officers,
employees, agents, representatives or consultants to use commercially reasonable
efforts) to maintain the confidentiality of Confidential Information. If the
Receiving Party or any of its Affiliates, stockholders, directors, officers,
partners, employees, agents, representatives or consultants is required to
disclose Confidential Information by or to any court, arbitrator, Governmental
Authority or Regulatory Agency of competent jurisdiction, the Receiving Party
shall, prior to such disclosure, promptly notify the Delivering Party of such
requirement and all particulars related to such requirement. The Delivering
Party shall have the right, at its own cost and expense, to object to such
disclosure and to seek confidential treatment of any Confidential Information to
be so disclosed on such terms as it shall determine.
(b) The restrictions set forth in SECTION 12.8(A) hereof shall not
apply to the use or disclosure of Confidential Information to the extent, but
only to the extent, (i) permitted or required pursuant to any other agreement
between or among the parties hereto, (ii) necessary by a party hereto in
connection with exercising its or their rights or performing its or their duties
or obligations under this Agreement, or the other agreements described in clause
(i) of this sentence, (iii) contemplated by the last two sentences of SECTION
12.8(A) hereof or (iv) that the
34
Receiving Party can demonstrate such Confidential Information (A) is or became
generally available to the public through no fault or neglect of the Receiving
Party, (B) is received in good faith on a non-confidential basis from a third
party who discloses such Confidential Information without violating any
obligations of secrecy or confidentiality, or (C) was already in possession of
such information at the time of receipt as shown by prior dated written records.
(c) For the purposes of this SECTION 12.8, (i) information which is
specific shall not be deemed to be within an exception set forth in SECTION
12.8(B) hereof merely because it is embraced by general information which is
within such an exception and (ii) a combination of information shall not be
deemed to be within an exception set forth in SECTION 12.8(B) hereof merely
because individual aspects of such combination are within such an exception
unless the combination of information itself, its principle of operation and its
value or advantages are within such an exception.
SECTION 12.9. TAX BENEFITS. CCI, to the extent that it is unable to
utilize any tax attributes, net loss carryforwards or other similar items to
reduce or eliminate taxes currently owed or previously paid by CCI with respect
to the business activities of Cohig prior to the date hereof, will cooperate
with and take such actions as are reasonably requested by Eastbrokers and East
to enable Eastbrokers and East to utilize to the extent legally permissable such
tax attributes, net loss carryforwards or other similar items.
SECTION 12.10. FURTHER ASSURANCES. (a) Upon the terms and subject to the
conditions provided herein, each of Eastbrokers, the Surviving Corporation and
CCI shall use commercially reasonable efforts to take, cause to be taken, all
action or do, or cause to be done, all things or execute or cause to be executed
any documents necessary, proper or advisable under applicable Laws to consummate
and make effective the transactions contemplated by this Agreement, and the
other agreements contemplated hereby.
(b) On and after the date hereof, each of Eastbrokers, the Surviving
Corporation and CCI shall take all commercially reasonable appropriate action
and execute any additional documents, instruments or conveyances of any kind
(not containing additional representations and warranties) which may be
reasonably necessary to carry out any of the provisions of this Agreement.
ARTICLE XIII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS; INDEMNIFICATION
SECTION 13.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Except for the Unlimited Representations and Warranties (as hereinafter
defined), the representations, warranties and covenants (the "Limited
Representations and Warranties") of the parties contained in this Agreement
shall survive the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby until the fifth anniversary
of the date hereof. The representations, warranties and covenants of the parties
contained in Sections 3.1, 3.10, 3.12, 3.15, 3.17(a), 4.1, 5.1, 6.1, 12.8 and
Article 12 (the "Unlimited Representations and Warranties") shall survive
indefinitely other than as otherwise
35
set forth under applicable statutes of limitations. No suit, action or
proceeding may be commenced by a party with respect to any claim arising out of
or relating to the Limited Representations and Warranties, representations and
covenants after the fifth anniversary of the Closing. Notwithstanding the
foregoing, and subject to the other provisions of this ARTICLE XIII, the parties
shall have the right to commence a suit, action or proceeding after the fifth
anniversary of the date hereof with respect to claims arising out of or relating
to the Unlimited Representations and Warranties.
SECTION 13.2. INDEMNIFICATION BY EASTBROKERS. Subject to SECTIONS 13.1 AND
13.4. Eastbrokers shall indemnify Cohig and the Affiliates, directors and
officers of Cohig and CCI for, and shall hold each of them harmless from, any
and all damages, claims, complaints, suits, actions, causes of action,
proceedings, investigations, obligations, losses, liabilities, assessments,
penalties, judgments, deficiencies, expenses and disbursements (including,
without limitation, reasonable legal, accounting and other professional
expenses) ("Indemnified Liabilities") asserted against or incurred or sustained
by any of them relating to, associated with or arising out of any breach of the
warranties or representations of Eastbrokers and East set forth in ARTICLE V or
ARTICLE VI of this Agreement or the covenants of Eastbrokers and East set forth
in this Agreement.
SECTION 13.3. INDEMNIFICATION BY CCI. Subject to SECTIONS 13.1 AND 13.4,
CCI shall indemnify Eastbrokers and East and the Affiliates, directors and
officers of each of them for, and shall hold each of them harmless from, any and
all Indemnified Liabilities asserted against or incurred or sustained by any of
them relating to, associated with or arising out of (i) any breach of any of the
warranties or representations of Cohig and CCI set forth in Article III or
Article IV of this Agreement, (ii) any breach of any breach of any of the
covenants of Cohig or CCI set forth in this Agreement, or (iii) any Taxes of
Cohig with respect to any Tax year or portion thereof ending on or before the
date hereof (or for any Tax year beginning before and ending after the Closing
Date to the extent allocable (determined in a manner consistent with SECTION
10.7) to the portion of such period beginning before and ending on the Closing
Date), to the extent such Taxes are not reflected in the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of Cohig's
balance sheet for the Most Recent Fiscal Month End, and (y) unpaid Taxes of any
person (other than Cohig) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise. In addition, CCI shall indemnify the Surviving
Corporation for all Indemnified Liabilities asserted against, incurred or
sustained by the Surviving Corporation to the extent such Indemnified
Liabilities exceed $500,000 annually during each of the two years subsequent to
the date hereof relating to, associated with or arising out of, any and all
liabilities or obligations of Cohig other than: (i) obligations fully reserved
for on the balance sheet of Cohig included in the Interim Financial Statements;
(ii) liabilities set forth on the Schedules hereto except for liabilities
relating to or arising from the matters set forth on Schedule 3.15; and (iii)
liabilities incurred in connection with the operation of the Business after the
date hereof. Notwithstanding anything to the contrary, the maximum liability of
CCI arising pursuant to this Article XIII for Indemnified Liabilities shall not
exceed the fair market value of the Merger Shares or other assets substituted
therefor which are held in an escrow account pursuant to the terms of the Escrow
Agreement.
SECTION 13.4. INDEMNIFICATION PROCEDURE. (a) Within a reasonable time
after obtaining knowledge thereof, a Person who may be entitled to
indemnification hereunder (the
36
"Indemnitee") shall promptly give the Party who may be obligated to provide such
indemnification (the "Indemnitor") written notice of any Indemnified Liability
which the Indemnitee has determined has given or could give rise to a claim for
indemnification hereunder (a "Notice of Claim"); PROVIDED, HOWEVER, that no
failure or delay in giving any such Notice of Claim shall relieve the Indemnitor
of its obligations except, and only to the extent, that it is prejudiced
thereby. A Notice of Claim shall specify in reasonable detail the nature and all
known particulars related to an Indemnified Liability. The Indemnitor shall
perform its indemnification obligations in respect of an Indemnified Liability
described in a Notice of Claim under SECTIONS 13.2 or 13.3 hereof, as the case
may be, within 30 days after the Indemnitor shall have received such Notice of
Claim; provided, however, such obligation shall be suspended so long as the
Indemnitor is in good faith performing its obligations under SECTION 13.4(B)
hereof with respect to such Indemnified Liability.
(b) The Indemnitor shall (i) promptly inform the Indemnitee of all
material developments with respect to a matter which is the subject of a Notice
of Claim and (ii) inform the Indemnitee promptly after the Indemnitor has made a
good faith determination, based on the facts alleged in such Notice of Claim or
which have otherwise become known to the Indemnitor, either that the Indemnitor
acknowledges that it has an indemnification obligation hereunder in respect of
such Indemnified Liability or that the Indemnitor has made a good faith
determination that it has no indemnification obligation hereunder in respect of
such Indemnified Liability. Except as set forth in SECTION 13.4(C), the
Indemnitee shall have the right, but not the obligation, to participate, at its
own cost and expense, in the defense, contest or other opposition of any such
third party claim, demand, suit, action or proceeding through legal counsel
selected by it and shall have the right, but not the obligation, to assert any
and all cross-claims or counterclaims which it may have. So long as the
Indemnitor is in good faith performing its obligations under this SECTION
13.4(B), the Indemnitee shall (i) at Indemnitor's cost and expense, cooperate in
all reasonable ways with, make its relevant files and records available for
inspection and copying by, make its employees reasonably available to and
otherwise render reasonable assistance to the Indemnitor upon request and (ii)
not compromise or settle any such claim, demand, suit, action or proceeding
without the prior written consent of the Indemnitor. If the Indemnitor fails to
perform its obligations under this SECTION 13.4(B), or if the Indemnitor shall
have informed the Indemnitee in writing in accordance herewith that the
Indemnitor does not have an indemnification obligation hereunder in respect of
such Liability, then the Indemnitee shall have the right, but not the
obligation, to take the actions which the Indemnitor would have had the right to
take in connection with the performance of such obligations and, if the
Indemnitee is entitled to indemnification hereunder in respect of the event or
circumstance as to which the Indemnitee takes such actions, then the Indemnitor
shall, in addition to indemnifying Indemnitee for the Liability, indemnify the
Indemnitee for all of the legal, accounting and other costs, fees and expenses
reasonably and actually incurred in connection therewith. If the Indemnitor
proposes to settle or compromise any such third party action, demand, claim,
suit or proceeding, the Indemnitor shall give written notice to that effect
(together with a statement in reasonable detail of the terms and conditions of
such settlement or compromise) to the Indemnitee a reasonable time prior to
effecting such settlement or compromise. Notwithstanding anything contained
herein to the contrary, the Indemnitee shall have the right to object to the
settlement or compromise of any such third party action, demand, claim, suit or
proceeding whereupon (i) the Indemnitee will assume the defense, contest or
other opposition of any such third party action, demand, claim, suit or
proceeding for its own account and as if it were the Indemnitor and (ii) the
Indemnitor shall be released from any and all liability with respect to any such
third party action,
37
demand, claim, suit or proceeding to the extent that such liability exceeds the
liability which the Indemnitor would have had in respect of such a settlement or
compromise.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
SECTION 14.1. AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Board of Directors, at any time before or after approval of the
matters related to the transactions contemplated by this Agreement; PROVIDED,
however, that after any approval of the transactions contemplated by this
Agreement by CCI, there may not be, without further approval of CCI, any
amendment of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to CCI hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 14.2. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for their
performance of any of the obligations or other acts of the parties hereto, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by this Agreement by CCI, there may
not be, without further approval of CCI, any extension or waiver of this
Agreement or any portion thereof which reduces the amount or changes the form of
the consideration to be delivered to CCI hereunder other than as contemplated by
this Agreement. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
SECTION 14.3. EXPENSES. Except as otherwise provided in this Agreement,
CCI will pay the legal and other expenses incurred by or on behalf of itself and
Cohig and Eastbrokers will pay the legal and other expenses incurred by or on
behalf of itself and East in connection with the negotiation and preparation of
this Agreement and the transactions contemplated herein whether or not such
transactions are completed or this Agreement is terminated.
SECTION 14.4. INVESTIGATIONS. The respective representations and
warranties of the parties contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto.
SECTION 14.5. HEADINGS. The article and section headings contained in
this Agreement are for references purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
38
SECTION 14.6. NOTICES. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been given as follows: on the day established by the
sender as having been delivered personally or by telecopier (with confirmation);
on the day delivered by a private courier as established by the sender by
evidence obtained from the courier; or on the third (3rd) day after the date
mailed, by certified or registered mail, return receipt requested, postage
prepaid. Such communications, to be valid, must be addressed as follows:
(a) IF TO COHIG OR CCI:
Cherry Creek Investments, Ltd.
0000 X. Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
(b) IF TO EASTBROKERS OR EAST :
Eastbrokers International , Inc.
00000 Xxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxxxxx
Telecopy No.: ( 000 ) 000-0000
WITH A COPY TO:
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx X. XxXxxxx, Esq.
Telecopy No.: (000) 000-0000
or to such other address or to the attention of person or persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
SECTION 14.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties except that Eastbrokers may
freely assign this Agreement to any of its subsidiaries provided that such
subsidiary shall be and shall remain during such period as obligations of
Eastbrokers under this Agreement shall continue, a wholly-owned subsidiary of
Eastbrokers. Subject to the preceding sentence, this Agreement and all of the
provisions hereof
39
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns
SECTION 14.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK AS TO ALL MATTERS, INCLUDING, BUT NOT LIMITED TO,
MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
SECTION 14.9. FORUM. ANY DISPUTE ARISING HEREUNDER SHALL BE RESOLVED, AT
THE ELECTION OF THE AGGRIEVED PARTY, BY EITHER: (i) INITIATING A PROCEEDING IN A
STATE OF FEDERAL COURT IN THE STATE OF MARYLAND, IF THE AGGRIEVED PARTY IS
EASTBROKERS, East OR THE SURVIVING CORPORATION, AND IN A STATE OR FEDERAL COURT
IN THE STATE OF COLORADO, IF THE AGGRIEVED PARTY IS EITHER CHERRY CREEK OR COHIG
OR (ii) BY SUBMITTING A CLAIM TO NASD REGULATION, INC. ("NASDR") FOR RESOLUTION
OF THE DISPUTE AT A LOCATION SUGGESTED BY THE AGGRIEVED PARTY AND ACCEPTABLE TO
THE NASDR. THE PARTIES HERETO AGREE THAT THE LEGAL FEES AND EXPENSES OF A PARTY
WHICH SUCCEEDS IN PROSECUTING A CLAIM OR DEFENDING A CLAIM BROUGHT AGAINST IT
WILL BE BORNE BY THE OPPOSING PARTY. EACH PARTY CONSENTS TO SERVICE OF PROCESS
UPON IT WITH RESPECT TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT
REQUESTED, AND BY ANY OTHER MEANS PERMITTED BY APPLICABLE LAWS AND RULES. EACH
PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH PROCEEDING IN ANY SUCH COURT AND ANY CLAIM THAT IT MAY NOW OR
HEREAFTER HAVE THAT ANY SUCH PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN
ANY INCONVENIENT FORUM.
SECTION 14.10. COUNTERPARTS. 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 14.11. NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights on any Persons other than parties to this Agreement as
provided herein.
SECTION 14.12. SEVERABILITY. In the event that any particular provision or
provisions of this Agreement shall for any reason be determined to be
unenforceable, or in violation of any law, Order or regulation, such
unenforceability or violation shall not affect the remaining provisions of this
Agreement which shall continue in full force and effect and be binding upon the
parties.
SECTION 14.13. ENTIRE AGREEMENT. This Agreement (including the Schedules
attached hereto) and the agreements referred to herein contain the entire
agreement between the parties with respect to the transactions contemplated
hereby, and supersede all written or verbal negotiations, representations,
warranties, commitments, offers, bids, solicitations and other understandings
prior to the date hereof between Eastbrokers, East, Cohig and CCI. There are no
agreements, covenants, representations or warranties with respect to the
transactions
40
contemplated hereby other than those expressly set forth herein or in any
agreement or other instrument contemplated hereby.
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
EASTBROKERS INTERNATIONAL, INC.
BY: /s/ Xxxxxx X. Xxxxxxxxxx
Xxxxxx X. Xxxxxxxxxx
Vice Chairman
EAST MERGER CORPORATION
BY: /s/ Xxxxxx X. Xxxxxxxxxx
Xxxxxx X. Xxxxxxxxxx
President
CHERRY CREEK INVESTMENTS, LTD.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
COHIG & ASSOCIATES, INC.
BY: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
42
EXHIBITS
A. Escrow Agreement
B. Employment Agreement
C. Non-Competition Agreement
D. Opinion of KDW
SCHEDULES
3.1 Ownership of Other Securities or Indebtedness
3.2(b) Outstanding Rights for Cohig Capital Stock
3.4 Conflicts - Cohig
3.5 Cohig Consents
3.6 Financial Statements and Adjustments Thereto
3.7 Liabilities
3.8 Certain Changes
3.10 Owned Real Property and Encumbrances Thereon
3.11 Real Property Leases
3.12 Equipment and Fixtures and Encumbrances Thereon
3.13 Contracts
3.14 Litigation
3.15 Tax Matters
3.16 Compliance; Permits
3.17 Intellectual Property
3.18 Benefit Plans
3.19 Environmental and Health/Safety Matters
3.21 Depositories
3.22 Insurance Policies
3.24 Brokerage
3.25 Transactions with Affiliates of Cohig
3.27 NASD Matters
3.30 Cohig Employees
3.31 Registered Principals and Representative
3.33 Intercompany Liabilities
4.2 Conflicts - CCI
4.3 CCI Consents
4.4 Brokerage
4.6 Transaction with Affiliates of CCI
5.1 Subsidiaries of Eastbrokers; Ownership of Other Securities or
Indebtedness
5.2 Conflicts - Eastbrokers
5.3 Eastbroker Consents
5.4 Brokerage
6.2 Conflicts - East
6.3 East Consents
8.5 Cohig Employees Subject to Non-Competition Agreements
10.2 Resigning Directors of Cohig
43
