EXHIBIT 10.1
AMENDED AND RESTATED DEBT CONVERSION AGREEMENT
THIS AMENDED AND RESTATED DEBT CONVERSION AGREEMENT ("AGREEMENT"),
dated as November 12, 2004, among Ladenburg Xxxxxxxx Financial Services Inc., a
Florida corporation (the "Company"), New Valley Corporation, a Delaware
corporation ("New Valley"), and Frost-Nevada Investments Trust ("Frost-Nevada"
and together with New Valley, the "Holders").
WHEREAS, on May 7, 2001, the Company issued Senior Convertible
Promissory Notes due December 31, 2005, as amended from time to time, to the
Holders in an aggregate principal amount of $18,010,000 (the "Notes");
WHEREAS, the Holders have previously agreed to forbear the interest
payments due on the Notes until January 15, 2005;
WHEREAS, as a result of the Notes and the Company's other outstanding
indebtedness, the Company is highly leveraged and continues to have a negative
net worth;
WHEREAS, the foregoing has continued to negatively impact the Company's
operations, including its ability to attract and retain brokers;
WHEREAS, the Company has requested that the Holders convert their Notes
into common stock, par value $.0001 per share ("Common Stock"), of the Company
as set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties hereinafter set forth, the parties
hereto hereby agree as follows:
1. DEBT CONVERSION.
(a) Each of New Valley and Frost-Nevada hereby severally
agrees, subject to the conditions set forth herein, to convert the principal and
accrued interest on its Notes into shares of the Company's Common Stock
("Conversion Shares") at a conversion price of $0.50 and $0.40 per share,
respectively ("Debt Conversion"), subject to appropriate adjustment for
reclassifications, stock splits, stock dividends, spin-offs or distributions,
share combinations or other similar changes affecting the Common Stock as a
whole. The Company and the Holders further agree to apply receipt of the
Conversion Shares first to the principal portion of the Notes and then to the
accrued interest. The Company and the Holders shall treat the Debt Conversion as
a tax-free reorganization pursuant to Internal Revenue Code Section
368(a)(1)(E).
(b) In connection with the Debt Conversion, the Company has
proposed to undertake a private placement financing ("Financing") of up to
$20,000,000 of its shares ("Placement Shares") of Common Stock at $0.45 per
share. Each of New Valley and Frost-Nevada hereby agrees that, if investors
other than New Valley and Frost-Nevada do not subscribe for all of the Placement
Shares offered in the Financing by the day immediately following the Shareholder
Meeting (defined below) or such earlier date as agreed to by the Company and the
Holders (the "Commitment Date"), it will subscribe for an amount of Placement
Shares equal to $5,000,000 less fifty percent of the amount by which the
aggregate purchase price of Placement Shares subscribed for by other investors
exceeds $10,000,000 (the "Purchase Commitment"). The Purchase Commitment shall
be made by each of New Valley and Frost-Nevada in equal proportions between the
parties on terms no less favorable than those offered to other investors in the
Financing. The Company hereby covenants and agrees to use its commercially
reasonable efforts to have investors other than the Holders subscribe for all of
the Placement Shares prior to the Commitment Date. Solely for purposes of
clarification, if other investors in the Financing commit to purchase an
aggregate of $11,000,000 of Placement Shares, New Valley and Frost-Nevada shall
each commit to purchase $4,500,000 of Placement Shares. Alternatively, if other
investors in the Financing commit to purchase an aggregate of only $9,000,000 of
Placement Shares, New Valley and Frost-Nevada shall each commit to purchase
$5,000,000 of Placement Shares. New Valley and Frost-Nevada shall fulfill their
Purchase Commitment by executing and delivering to the Company a properly
completed subscription agreement or other similar document, reasonably
acceptable to them and used by the Company in connection with the Financing, on
the Commitment Date. Payment for all Placement Shares subscribed for in the
Financing shall occur at the Closing (defined below). Payment for the Placement
Shares to be purchased by New Valley and Frost-Nevada pursuant to the Purchase
Commitment shall be made by either certified check, wire transfer of immediately
available funds and/or by delivery of their outstanding $500,000 principal
amount promissory note, dated as of September 17, 2004, plus accrued interest
thereon, their outstanding $1,250,000 principal amount promissory note, dated as
of November 1, 2004, plus accrued interest thereon, as well as the principal and
any accrued interest evidenced by additional promissory notes that the Company
may issue in the future convertible by their terms into the Financing
(collectively, the "Purchase Notes"), at the Holder's option.
(c) The Company shall cause a meeting of its shareholders
("Shareholder Meeting") to be duly called and held as soon as reasonably
practicable after the date of execution of this Agreement for the purposes of
voting on the Debt Conversion, the Financing, the Purchase Commitment and such
other customary matters as may be determined by the Company. In connection with
such Shareholder Meeting, the Company will prepare and mail to its shareholders
as promptly as practicable a proxy statement and all other proxy materials (the
"Proxy Statement") for such meeting. The Company and the Holders severally shall
cooperate with each other in all reasonable respects with the preparation of the
Proxy Statement and any amendment or supplement thereto. The Company shall
notify the Holders of the receipt of any comments of the Securities and Exchange
Commission ("Commission") with respect to the Proxy Statement and any requests
by the Commission for any amendment or supplement thereto or for additional
information, and shall provide to them promptly copies of any correspondence
between the Company or its counsel and the Commission with respect to the Proxy
2
Statement. The Company shall give the Holders and their counsel the opportunity
to review the Proxy Statement and all responses to requests for additional
information by and replies to comments of the Commission before their being
filed with, or sent to, the Commission. The Company will use its commercially
reasonable efforts, after consultation with the Holders, to respond promptly to
all such comments of and requests by the Commission and to cause the Proxy
Statement to be mailed to the Company's shareholders entitled to vote at the
Shareholder Meeting at the earliest practicable time.
(d) The Company will use its commercially reasonable efforts
to obtain the necessary approvals by its shareholders for the Debt Conversion,
Financing, Purchase Commitment and any related matters ("Shareholder Approval")
at the Shareholder Meeting and shall cause its Board of Directors to include in
the Proxy Statement its recommendation that the Company's shareholders vote in
favor of the matters presented in the Proxy Statement. In the event that the
Shareholder Approval is not obtained on the date on which the Shareholder
Meeting is initially convened, the Board of Directors of the Company shall
adjourn the meeting from time to time as necessary for the purpose of obtaining
the Shareholder Approval and shall use its commercially reasonable efforts
during any such adjournments to obtain the Shareholder Approval.
(e) By executing this Agreement, each of the Holders and
Xxxxxxx X. XxXxx, Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxxxx and
Xxxxxx X. Xxxx ("Proxy Parties") hereby severally appoint Xxxxxxx X. Xxxxxxxxxx,
Xxxx Xxxxxxxxx or Xxxxxxx X. Xxxxxxx, or any of them, with full power of
substitution, as their agent, attorney and proxy, representing an irrevocable
proxy pursuant to Section 607.0722 of the Florida Business Corporation Act,
coupled with an interest, so as to vote all the shares of Common Stock held by
the Proxy Parties in accordance with the vote of a majority of votes cast at the
Shareholder Meeting excluding the shares held by such Proxy Parties.
(f) The Company shall comply with all legal requirements
applicable to the Shareholder Meeting and take such other actions as may be
necessary to effectuate the Debt Conversion, Financing and Purchase Commitment,
including, but not limited to, providing notices to, and responding to queries
from, all applicable regulatory authorities and stock exchanges and obtaining
all necessary third party consents.
(g) Subject to the terms and conditions of this Agreement, the
consummation of the Financing and the Debt Conversion contemplated by this
Agreement shall take place at a closing ("Closing") to be held at 10:00 a.m.,
local time, on the fourth business day after the date on which the last of the
conditions set forth in Section 4(c) below is fulfilled, at the offices of
Xxxxxxxx Xxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
time, date or place as the parties may agree upon in writing. The Company shall
send to each Holder at least two business days prior to the Closing a notice
indicating the amount of interest accrued on the Notes and Purchase Notes, if
any, through the date of the Closing and the number of shares of Common Stock
each Holder will be issued upon the Debt Conversion and obligated to purchase
3
pursuant to the Purchase Commitment. At the Closing, each Holder shall deliver
its Notes for cancellation and payment for any Placement Shares it purchases (as
described above in Section 1(b)) and the Company shall deliver to each Holder
certificates representing the Conversion Shares and Placement Shares to which
such Holder is entitled as a result of such Debt Conversion and Purchase
Commitment. From and after the Closing, the Notes shall represent solely the
right to receive Conversion Shares. If a Holder has lost its Note or Purchase
Notes and is unable to deliver such notes at the Closing, it shall submit an
affidavit of loss and indemnity agreement so that such notes may be replaced and
deemed cancelled in accordance with the terms hereof. In the event that as a
result of the Debt Conversion, fractions of shares would be required to be
issued, such fractional shares shall be rounded up or down to the nearest whole
share. The Company shall pay any documentary, stamp or similar issue or transfer
tax due on such Debt Conversion, except that the Holder shall pay any such tax
due because the Conversion Shares are issued in a name other than the Holder's.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. The
Company hereby represents and warrants to the Holders as follows:
(a) As of the date hereof, the Company has 200,000,000 shares
of Common Stock authorized, of which 46,540,573 shares of Common Stock are
issued and outstanding, and 2,000,000 shares of preferred stock authorized, of
which no shares are issued and outstanding. As of the date hereof, the Company
has reserved for issuance 11,142,656 shares of Common Stock upon exercise of all
outstanding options and warrants. All of the issued and outstanding shares of
the Company's Common Stock are, and all shares reserved for issuance will be,
upon issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly issued,
fully paid and nonassessable. The Placement Shares that may be issued and
delivered to the Holders as a result of the Purchase Commitment, and the
Conversion Shares to be issued and delivered to the Holders upon conversion of
the Notes, have been duly authorized and when issued upon payment of the
purchase price or conversion of the Notes, as the case may be, will be validly
issued, fully-paid and non-assessable. The issuance of the Conversion Shares
will be exempt from registration pursuant to Section 3(a)(9) promulgated under
the Securities Act of 1933, as amended ("Securities Act") and such Conversion
Shares will not be "restricted securities" as defined under Rule 144 promulgated
under the Securities Act. The issuance of the Placement Shares will be exempt
from registration pursuant to Section 4(2) promulgated under the Securities Act.
(b) The Company has full legal power to execute and deliver
this Agreement and to perform its obligations hereunder. All acts required to be
taken by the Company to enter into this Agreement and to carry out the
transactions contemplated hereby have been properly taken, and this Agreement
constitutes a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms and does not conflict with, result in a breach or
violation of or constitute (or with notice of lapse of time or both constitute)
a default under any instrument, contract or other agreement to which the Company
or its subsidiaries is a party.
4
(c) The affirmative vote of the holders of record of at least
a majority of the shares of the Company's Common Stock cast at the Shareholder
Meeting with respect to the matters referred to in Section 1 hereof is the only
vote of the holders of any class or series of the capital stock of the Company
required to approve the transactions contemplated hereby.
(d) None of the Company's Articles of Incorporation, as
amended, or Bylaws, or the laws of Florida, California or New York, contains any
applicable anti-takeover provision or statute which would restrict the Company's
ability to enter into this Agreement or consummate the transactions contemplated
by this Agreement or which would limit any of the Holders' rights following
consummation of the transactions contemplated by this Agreement.
(e) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company other than the fees of the investment banking firm that
has been engaged by the Company to render the Fairness Opinion (defined below),
the fees of which will be paid by the Company.
(f) The Company has delivered or made available to the Holders
prior to the execution of this Agreement true and complete copies of all
periodic reports, registration statements and proxy statements filed by it with
the Commission since January 1, 2002. Each of such filings with the Commission
(collectively, the "SEC Filings"), as of its filing date, complied in all
material respects with the requirements of the rules and regulations promulgated
by the Commission with respect thereto and did not contain any untrue statement
of a material fact or omit a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which such statements were made.
(g) Since December 31, 2003, except as disclosed in the SEC
Filings filed by the Company with the Commission before the date of this
Agreement, the Company and its subsidiaries, taken as a whole, has not suffered
any material adverse change in its assets, liabilities, financial condition,
results of operations or business, except for those occurring as a result of
general economic or financial conditions affecting the United States as a whole
or the region in which the Company conducts its business or developments that
are not unique to the Company but also affect other entities engaged or
participating in the brokerage industry generally in a manner not materially
less severely. For purposes of this section, revenues and losses materially
consistent with the Company's revenues and losses for the quarter ended June 30,
2004, as reflected in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004, shall not be deemed a material adverse change.
(h) The Company has received the opinion ("Fairness Opinion")
of Capitalink, L.C. (a copy of which will be furnished to each Holder) to the
effect that (i) the average price at which the Notes will be converted and (ii)
5
the purchase price for the Placement Shares to be paid by the Holders pursuant
to the Purchase Commitment are fair from a financial point of view to the
unaffiliated shareholders of the Company.
(i) No information to be contained in the Proxy Statement to
be prepared pursuant to this Agreement and no representation or warranty by the
Company contained in this Agreement contains any untrue statement of a material
fact or omits a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which such statements were made.
(j) Since January 1, 2002 and except as disclosed in the SEC
Filings filed by the Company with the Commission before the date of this
Agreement, the Company has conducted its business in compliance in all material
respects with all applicable laws, rules, regulations, court or administrative
orders and processes and rules, directives and orders of regulatory and
self-regulatory agencies and bodies, except as would not reasonably be expected,
singly or in the aggregate, to be materially adverse to the business, assets or
financial condition of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS. New Valley and
Frost-Nevada severally and not jointly represent and warrant to the Company as
follows:
(a) Each Holder has full legal power to execute and deliver
this Agreement and to perform its obligations hereunder. All acts required to be
taken by such Holder to enter into this Agreement and to carry out the
transactions contemplated hereby have been properly taken; and this Agreement
constitutes a legal, valid and binding obligation of such Holder enforceable in
accordance with its terms.
(b) Each Holder has reviewed the filings of the Company
referred to in Section 2(f) above.
(c) Each Holder has been given an opportunity to ask questions
and receive answers from the officers and directors of the Company and to obtain
additional information from the Company.
(d) Each Holder has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Company's securities and has obtained, in its judgment,
sufficient information about the Company to evaluate the merits and risks of an
investment in the Company.
(e) Each Holder has sufficient cash resources on hand to
purchase the Placement Shares required by its Purchase Commitment on the terms
and conditions contained in this Agreement.
(f) Each Holder is relying solely on the representations and
warranties contained in Section 2 hereof and in certificates delivered hereunder
in making their decision to enter into this Agreement and consummate the
6
transactions contemplated hereby and no oral representations or warranties of
any kind have been made by the Company or its officers, directors, employees or
agents to such Holders.
4. CONDITIONS.
(a) The obligations of the Company to consummate the
transactions contemplated by this Agreement, including the Debt Conversion and
the Financing, shall be subject to the fulfillment of the following conditions:
(i) The representations and warranties of each of the
Holders set forth in Section 3 hereof shall be true and correct on and as of the
Closing date and a certificate certifying such shall be delivered.
(ii) All proceedings, corporate or otherwise, to be
taken by the Holders in connection with the consummation of the transactions
contemplated by this Agreement shall have been duly and validly taken and all
necessary consents, approvals or authorizations of any governmental or
regulatory authority or other third party required to be obtained by the Company
or the Holders shall have been obtained in form and substance reasonably
satisfactory to the Company.
(iii) The Shareholder Approval shall be obtained by
the necessary affirmative vote of the shareholders of the Company as described
above in Section 1.
(iv) Each of the Holders shall have delivered to the
Company for cancellation their Notes or an affidavit of loss and indemnity and
the purchase price for the Placement Shares to be purchased by the Holders
pursuant to the Purchase Commitment.
(b) The obligations of the Holders to subscribe for the
Placement Shares they will purchase pursuant to the Purchase Commitment shall be
subject to the fulfillment of the following conditions on or prior to the
Commitment Date:
(i) The representations and warranties of the Company
set forth in Section 2 hereof shall be true and correct on and as of such date
and a certificate certifying such shall be delivered.
(ii) All proceedings, corporate or otherwise,
required to be taken by the Company on or prior to such date in connection with
the consummation of the transactions contemplated by this Agreement shall have
been duly and validly taken and all necessary consents, approvals or
authorizations of any governmental or regulatory authority or other third party
required to be obtained by the Company or the Holders on or prior to such date
shall have been obtained in form and substance reasonably satisfactory to the
Holders.
7
(iii) The Shareholder Approval shall be obtained by
the necessary affirmative vote of the shareholders of the Company as described
above in Section 1.
(iv) The Company shall have caused the Conversion
Shares and Placement Shares to be approved for listing on the American Stock
Exchange or any national securities exchange on which the Common Stock is then
listed.
(v) The Holders shall have received a legal opinion
of Xxxxxxxx Xxxxxx, counsel to the Company, addressed to the Holders dated as of
such date covering such matters as is customary of transactions of this nature
and in form and substance reasonably satisfactory to the Holders.
(c) The obligations of the Holders to consummate the Debt
Conversion and the Purchase Commitment shall be subject to the fulfillment of
the following conditions on or prior to the Closing Date:
(i) All of the conditions of Section 4(b) shall have
been satisfied substituting all references to the Commitment Date in each such
condition with references to the Closing Date.
(ii) The Required Registration Statement (defined
below) shall have been declared effective by the Commission.
(d) In the event that either of the Holders (or its permitted
assigns) shall have failed to (i) deliver to the Company for cancellation such
party's Note or an affidavit of loss and indemnity or (ii) fulfill its Purchase
Commitment (in either case, a "Breaching Party"), the other Holder
("Non-breaching Party") shall have the right to terminate this Agreement without
any breach of this Agreement on such Non-breaching Party's part; provided,
however, that the Breaching Party shall remain liable to the Company for the
breach of its obligations hereunder.
5. REGISTRATION.
(a)(i) The Company shall file a registration statement (the
"Required Registration Statement") to register the Conversion Shares and
Placement Shares received by the Holders under this Agreement (collectively the
"Registrable Securities") for resale pursuant to the Securities Act no later
than ten business days after the Commitment Date. The Company shall use
commercially reasonable efforts to cause the Required Registration Statement to
be declared effective by the Commission as promptly as practicable. Frost-Nevada
hereby agrees that it will not sell, assign or transfer any of the Conversion
Shares or Placement Shares it receives under this Agreement for a period of one
year from the date hereof (except to an affiliated entity that shall agree to
continue to be bound by the foregoing restriction).
(ii) In connection the foregoing, the Company will, as
expeditiously as possible, use its best efforts to: (A) furnish to New Valley
and Frost-Nevada copies of reasonably complete drafts of all such documents
proposed to be filed (including exhibits), and each of New Valley and
8
Frost-Nevada shall have the opportunity to object to any information pertaining
solely to it that is contained therein and the Company will make the corrections
reasonably requested by either of them with respect to such information prior to
filing any such registration statement or amendment; (B) prepare and file with
the Commission such amendments and supplements to such registration statement
and any prospectus used in connection therewith as may be necessary to maintain
the effectiveness of such registration statement and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement; (C) promptly
notify New Valley and Frost-Nevada: (1) when such registration statement or any
prospectus used in connection therewith, or any amendment or supplement thereto,
has been filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become effective; (2) of any
written comments from the Commission with respect to any filing referred to in
clause (A) and of any written request by the Commission for amendments or
supplements to such registration statement or prospectus; and (3) of the
notification to the Company by the Commission of its initiation of any
proceeding with respect to the issuance by the Commission of, or of the issuance
by the Commission of, any stop order suspending the effectiveness of such
registration statement; (D) furnish New Valley and Frost-Nevada such number of
copies of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to the
Registrable Securities, and such other documents, as New Valley or Frost-Nevada
may reasonably request to facilitate the disposition of its Registrable
Securities; (E) notify New Valley and Frost-Nevada at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which any prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and at the request of New Valley or
Frost-Nevada promptly prepare and furnish New Valley and Frost-Nevada a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (F) make available
for inspection by New Valley and Frost-Nevada and any attorney, accountant or
other agent retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Inspector in connection with such registration statement, and permit the
inspectors to participate in the preparation of such registration statement and
any prospectus contained therein and any amendment or supplement thereto.
9
(b) The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, and shall bear all fees the Holders may
incur in connection with its review and due diligence of the Required
Registration Statement, but the Holders shall pay any and all sales commissions
and the expenses of any legal counsel selected by them to represent them in
connection with the sale of the Registrable Securities. The Company shall use
its best efforts to cause any registration statement filed pursuant to this
section to remain effective until all the Registrable Securities registered
thereunder are sold or until the delivery to the Holders of an opinion of
counsel to the Company to the effect set forth in Section 5(h).
(c)(i) The Company will indemnify the Holders, their directors
and officers and each underwriter, if any, and each person who controls any of
them within the meaning of the Securities Act or the Exchange Act against all
claims, losses, damages and liabilities (or actions or proceedings, commenced or
threatened, in respect thereof), joint or several, arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any registration,
qualification or compliance pursuant to this Section 5 or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company in connection with any such registration,
qualification or compliance, and will reimburse the Holders, their directors and
officers, each such underwriter and each person who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action or
proceeding; provided that the Company will not be liable to a Holder in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by or on behalf of such Holder specifically
stating that it is intended for inclusion in any registration statement under
which Registrable Securities are registered. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of a
Holder or any such director, officer or controlling person, and shall survive
the transfer of such securities by any Holder.
(ii) Each of the Holders, severally and not jointly, shall
indemnify the Company, each of its directors and officers and each underwriter,
if any, of the Company's securities covered by such registration statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act and the Exchange Act and the rules and regulations thereunder,
each other securityholder participating in such distribution and each of their
officers and directors and each person controlling such other securityholder,
against all claims, losses, damages and liabilities (or actions or proceedings,
commenced or threatened, in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such other security holders,
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
10
defending any such claim, loss, damage, liability or action or proceeding, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
document in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder specifically stating that it is
intended for inclusion in such document; provided, however, that the obligations
of each Holder hereunder shall be limited to an amount equal to the proceeds
received by such Holder of securities sold as contemplated herein. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person, and shall survive the transfer of such securities by any Holder.
(iii) Each party desiring indemnification or contribution
under this Section 5(c) hereof (the "Securities Indemnified Party") shall give
notice to the party required to provide indemnification or contribution (the
"Securities Indemnifying Party") promptly after such Securities Indemnified
Party has actual knowledge of any claim as to which indemnity or contribution
may be sought, and shall permit the Securities Indemnifying Party to assume, at
its sole cost and expense, the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Securities Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Securities Indemnified Party (whose approval
shall not be unreasonably withheld). The Securities Indemnified Party may
participate in such defense at the Securities Indemnified Party's expense unless
(A) the employment of counsel by the Securities Indemnified Party has been
authorized in writing by the Securities Indemnifying Party, (B) the Securities
Indemnified Party has been advised by such counsel employed by it that there are
legal defenses available to it involving potential conflict with those of the
Securities Indemnifying Party (in which case the Securities Indemnifying Party
will not have the right to direct the defense of such action on behalf of the
Securities Indemnified Party), or (C) the Securities Indemnifying Party has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees and expenses of counsel for the
Securities Indemnified Party shall be at the expense of the Securities
Indemnifying Party. The failure of any Securities Indemnified Party to give
notice as provided herein shall not relieve the Securities Indemnifying Party of
its obligations under this Section 5. No Securities Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Securities Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Securities Indemnified Party of a release from
all liability in respect to such claim or litigation. No Securities Indemnified
Party shall settle any claim or demand without the prior written consent of the
Securities Indemnifying Party (which consent will not be unreasonably withheld).
Each Securities Indemnified Party shall furnish such information regarding
itself or the claim in question as the Securities Indemnifying Party may
11
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(iv) The provisions of this Section 5(c) shall be in
addition to any other rights to indemnification or contribution which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
(d) In order to provide for just and equitable contribution
under the Securities Act in any case in which (A) any person entitled to
indemnification under Section (c) makes a claim for indemnification pursuant
hereto but such indemnification is not enforced in such case notwithstanding the
fact that this section provides for indemnification in such case, or (B)
contribution under the Securities Act, the Exchange Act or otherwise is required
on the part of any such person in circumstances for which indemnification is
provided under this section, then, and in each such case, the Company and each
of the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
(including legal and other expenses reasonably incurred in connection with
investigation or defense) incurred by the Company and the Holders, as incurred,
in proportion to their relative fault and the relative knowledge and access to
information of the Securities Indemnifying Party, on the one hand, and the
Securities Indemnified Party, on the other hand, concerning the matters
resulting in such losses, liabilities, claims, damages and expenses, the
opportunity to correct and prevent any untrue statement or omission, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission of a material fact relates to information supplied by the Securities
Indemnifying Party, on the one hand, or the Securities Indemnified Party, on the
other hand, and any other equitable considerations appropriate under the
circumstances; provided that no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this section, each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
(e) Each of the Holders shall furnish to the Company such
information regarding itself and the distribution proposed by it as the Company
may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Section 5.
(f) The Company shall comply with all of the reporting
requirements of the Exchange Act and with all other public information reporting
requirements of the Commission, which are conditions to the availability of Rule
144 for the sale of the Common Stock. The Company shall cooperate with each
Holder in supplying such information as may be necessary for such Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of Rule 144.
12
(g) The Company represents and warrants to the holders of
Registrable Securities that the granting of the registration rights to the
Holders hereby does not and will not violate any agreement between the Company
and any other security holders with respect to registration rights granted by
the Company.
(h) The rights granted under this Section 5 shall terminate
upon delivery to the Holders of an opinion of counsel to the Company reasonably
satisfactory to the Holders to the effect that such rights are no longer
necessary for the public sale of the Registrable Securities without restriction
as to the number of securities that may be sold at any one time or the manner of
sale.
(i) The rights granted under this Section 5 shall not be
transferable except to an affiliated entity of a Holder in the event that such
Holder assigns its obligation to fulfill its Purchase Commitment to an
affiliated entity pursuant to Section 8(e) below.
6. PRESS RELEASE; FILINGS. Promptly after execution of this
Agreement, the Company shall issue a press release announcing the Debt
Conversion, Financing and Purchase Commitment. The Company shall also file with
the Securities and Exchange Commission a Current Report on Form 8-K with respect
to the transactions contemplated hereby. The Company shall provide the Holders
with drafts of both the press release and Form 8-K and a reasonable opportunity
to comment thereon. No party hereto shall make any public announcements in
respect of this Agreement or the transactions contemplated herein inconsistent
with the press release and Form 8-K without the prior approval of the other
parties as to the form and content thereof, which approval will not be
unreasonably withheld. Notwithstanding the foregoing, any disclosure may be made
by a party which its counsel advises is required by applicable law or
regulation, in which case the other party shall be given such reasonable advance
notice as is practicable in the circumstances and the parties shall use their
best efforts to cause a mutually agreeable release or announcement to be issued.
The parties may also make appropriate disclosure of the transactions
contemplated by this Agreement to their officers, directors, agents and
employees.
7. TERMINATION. This Agreement may be terminated no later than
the Closing:
(a) At the option of any party in the event that the
transactions contemplated by this Agreement have not occurred by May 13, 2005
and such delay was not as a result of any breach of this Agreement by the
terminating party;
(b) By the Holders if the Company's Board of Directors failed
to recommend or withdrew or modified in a manner adverse to the Holders its
approval or recommendation of the Debt Conversion, Financing and Purchase
Commitment;
13
(c) At the option of any party in the event that Shareholder
Approval was not obtained at the Shareholder Meeting and any adjournment
thereof;
(d) At the option of any party if any other party has
materially breached a term of this Agreement and has not cured such breach
within 30 days; or
(e) At the option of any party if any competent regulatory
authority shall have issued an order making illegal or otherwise restricting,
preventing, prohibiting or refusing to approve the transactions contemplated
hereby, and such order shall have become final and non-appealable.
8. MISCELLANEOUS.
(a) Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(b) This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same agreement.
(c) This Agreement shall be a contract made under and governed
by the laws of the State of New York.
(d) All obligations of the Company and rights of the Holders
expressed herein shall be in addition to and not in limitation of those provided
by applicable law.
(e) The rights and obligations under this Agreement are not
assignable except that each of New Valley and Frost-Nevada may assign its
obligation to fulfill its Purchase Commitment to an affiliated entity; provided,
however, that each of New Valley and Frost-Nevada shall remain liable to fulfill
its Purchase Commitment if its respective assignee does not fulfill such
obligation. This Agreement shall be binding upon the Company, the Holders and
their respective successors and permitted assigns, and shall inure to the
benefit of the Company, the Holders and their respective successors and
permitted assigns.
(f) The terms and provisions of this Agreement are intended
solely for the benefit of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other person or entity.
(g) All amendments or modifications of this Agreement and all
consents, waivers and notices delivered hereunder or in connection herewith
shall be in writing.
14
(h) This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the parties with
respect thereto.
(i) Whether or not the Closing occurs, the Company shall pay
all costs and expenses, including reasonable attorneys' fees, incurred by it or
the Holders with respect to the negotiation, execution, delivery and performance
of this Agreement, including without limitation any expenses of enforcing this
provision and any expenses incurred in connection with any filings made by a
Holder with the Commission relating to this Agreement and any legal fees
incurred by a Holder in connection with its review of the Required Registration
Statement; provided, however, that in the event a Holder materially breaches its
obligations hereunder, the Company shall no longer be responsible to pay such
costs and expenses and any payments previously made by the Company to such
Holder shall be reimbursed by the Holder. This provision shall survive
termination of the Agreement. The Company further agrees that it shall reimburse
(or advance) to the Holders any costs and expenses incurred in connection with
the engagement by such Holders of a nationally recognized appraiser to perform
an appraisal of the value of each Holder's Conversion Shares or Placement Shares
upon the Closing for purposes of preparing each Holder's tax returns.
9. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDERS
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10. SPECIFIC PERFORMANCE. THE PARTIES HERETO ACKNOWLEDGE AND
AGREE THAT ANY REMEDY AT LAW FOR ANY BREACH OF THE PROVISIONS OF THIS AGREEMENT
WOULD BE INADEQUATE, AND EACH PARTY HERETO HEREBY CONSENTS TO THE GRANTING BY
ANY COURT OF AN INJUNCTION OR OTHER EQUITABLE RELIEF, WITHOUT THE NECESSITY OF
ACTUAL MONETARY LOSS BEING PROVED, IN ORDER THAT THE BREACH OR THREATENED BREACH
OF SUCH PROVISIONS MAY BE EFFECTIVELY RESTRAINED.
15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
first above written.
LADENBURG XXXXXXXX FINANCIAL
SERVICES INC.
By: /s/ XXXXXXX X. XXXXXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and CEO
NEW VALLEY CORPORATION
By: /s/ XXXXXXX X. XXXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President
FROST-NEVADA INVESTMENTS TRUST
By: /s/ XXXXXXX XXXXX
----------------------------------
Name: Xxxxxxx Xxxxx, M.D.
Title: Trustee
/s/ XXXXXXX X. XXXXX
----------------------------------
Xxxxxxx X. XxXxx
(solely with respect to Section 1(e) hereof)
/s/ XXXXXX X. XXXXXX
----------------------------------
Xxxxxx X. Xxxxxx
(solely with respect to Section 1(e) hereof)
/s/ XXXXXXX X. XXXXXX
----------------------------------
Xxxxxxx X. Xxxxxx
(solely with respect to Section 1(e) hereof)
16
/s/ XXXXX X. XXXXXXXXX
----------------------------------
Xxxxx X. Xxxxxxxxx
(solely with respect to Section 1(e) hereof)
/s/ XXXXXX X. XXXX
----------------------------------
Xxxxxx X. Xxxx
(solely with respect to Section 1(e) hereof)
17
