AGREEMENT
AGREEMENT made this 8th day of August, 2002 (hereafter referred to as the
"Agreement") by and between Xxxxxx + Xxxxxx, Inc., a Delaware Corporation, with
a principal place of business at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxx
00000, together with its subsidiaries (hereinafter referred to as "GTAX"),
Xxxxxx Xxxxxxxxx, with a residence address of 00 Xxxx Xxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxxx 00000, Xxxxx Xxxxxx, with a residence address of 000 Xxx Xxx Xxxx,
Xxxxxxxxx, Xxxxxxxxxxx 00000, and Xxxxxxx X. Xxxx, with a residence address of 0
Xxxxxx Xxxxx, Xxxxxxxxxxxx, Xxx Xxxx 00000.
Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxx
1. An entity formed and controlled by Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxx (the
"Xxxxxxxxx Group") shall have the option, exercisable within 30 days from
the date of this Agreement, to purchase GTAX's White Plains office and such
of the other GTAX offices listed in Appendix I hereto, by giving notice to
such effect to GTAX and Xxxxxxx Xxxx; provided, however, that (i) the
Xxxxxxxxx Group has received the consent to its purchase of each selected
office by the office manager of such office, and (ii) the revenues
attributable to the selected offices during the year ended June 30, 2002
shall not exceed, in the aggregate, $25 million (as set forth in such
Appendix I). Messrs. Xxxxxxxxx and Xxxxxx agree not to, directly or
indirectly, solicit any GTAX offices not listed in such Appendix I. GTAX
and the Board agree not to offer any special compensation or inducements to
any registered representative in any office listed in Appendix I during the
option period.
2. The purchase price for the offices purchased by the Xxxxxxxxx Group shall
be the aggregate of, for each such office which had a positive EBITDA for
the year ended June 30, 2002 (as set forth in such Appendix I), 30% of the
revenues attributable to such office during the year ended June 30, 2002
and, for each such office which did not have a positive EBITDA for the year
ended June 30, 2002, 25% of the revenues attributable to such office during
the year ended June 30, 2002.
Page 1 of 6
3. The purchase price for the offices purchased by the Xxxxxxxxx Group shall
be payable to GTAX as follows:
(i) The lesser of 50% of such purchase price or $3,750,000, at the closing
in cash. However, the payment of the portion of such purchase price
payable at the closing in cash can be deferred for up to 90 days from
the closing to the extent (but only to the extent) the Xxxxxxxxx Group
is entitled to receive from Royal Alliance Associates proceeds from
the financing under the Xxxxxxxxx Group's agreement with Royal
Alliance Associates; provided, however, that to secure the obligation
of the Xxxxxxxxx Group under this paragraph, the right of the
Xxxxxxxxx Group to receive such proceeds shall be assigned to GTAX.
(ii) The Xxxxxxxxx Group shall assume the subordinated debt, including
accrued interest, of GTAX listed in Appendix II hereto and in
consideration of such assumption, shall be given a credit with respect
to the purchase price of $2 million.
(iii) The balance of the purchase price shall be paid in three annual
installments commencing one year from the closing date in equal
installments of of 33 1/3% of such balance with interest at the prime
rate of interest, which balance can be prepaid at any time, without
penalty.
4. GTAX agrees that of the cash received at the closing, the lesser of $1
million or 40% of such cash will be paid to First Union. GTAX agrees, in
connection with such payment, to use commercially reasonable efforts to have
First Union remove Xxxxxx Xxxxxxxxx from his personal guarantee. The balance of
the purchase price referred to in 3 (iii), when received by GTAX, will be paid
to First Union to retire its debt and then to Travelers to retire its debt. Any
remaining balance shall be retained by GTAX for general corporate purposes.
5. With respect to each office purchased by the Xxxxxxxxx Group, GTAX shall
assign to the Xxxxxxxxx Group all assets that the Company has the right to sell,
transfer or assign, including, but not limited to, the office lease and all
equipment in the office and use commercially reasonable efforts to cause any
registered representatives at such office to remain at such office, and the
Xxxxxxxxx Group shall assume such lease, any leases or unpaid purchase price of
said equipment and a pro rata portion of the WASCO blanket lease and all
obligations with respect to the employment of such registered representatives.
All master software licenses (such as Great Plains, Taxwise and Quick Books)
shall remain the property of GTAX.
6. The Xxxxxxxxx Group shall cause either the new company or each registered
representative in each office purchased by the Xxxxxxxxx Group to indemnify GTAX
for negligent or wrongful acts during their tenure with GTAX to the extent not
covered by GTAX's E&O insurance. The Xxxxxxxxx Group agrees to purchase tail
insurance to cover such liabilities.
Page 2 of 6
7. The effective date of the closing will be September 1, 2002, although the
actual closing shall be as soon as shall be practicable on or after September 1,
2002, and closing adjustments will be made to accomplish the economic effect of
a September 1, 2002 closing (including with respect to any business of a
registered representative in offices purchased by the Xxxxxxxxx Group who has
not transferred to Royal Alliance on or prior to September 1, 2002).
8. GTAX agrees to pay all registered representatives in offices purchased by
the Xxxxxxxxx Group who have been transferred to Royal Alliance on or prior to
September 1, 2002 their trailing commissions during the year ending August 31,
2003.
9. Should the Xxxxxxxxx Group not purchase any GTAX offices, (i) Xxxxxx
Xxxxxxxxx shall be entitled to one year of severance pay at the annual rate of
$350,000 and (ii) Xxxxx Xxxxxx shall be entitled to one year of severance pay at
the annual rate of $200,000.
10. Should the revenues attributed to the offices purchased by the Xxxxxxxxx
Group be less than $5 million, Messrs. Xxxxxxxxx and Xxxxxx shall be entitled to
one-half of the foregoing severance pay. Should the revenues attributed to the
offices purchased by the Xxxxxxxxx Group be $5 million or more, neither Xx.
Xxxxxxxxx nor Xx. Xxxxxx shall be entitled to any severance pay.
11. For a period of two (2) years from the date of the closing, Xxxxxx
Xxxxxxxxx and Xxxxx Xxxxxx covenant and agree that neither of them will,
directly or indirectly, file, participate in, or otherwise support the filing of
any proxy statement, tender offer, or consent solicitation seeking to gain
control of or otherwise affect GTAX.
12. Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxx agree that they will not run for or
accept elections for a board seat if they are an owner, employee, officer or
director of a competing company.
13. Upon the execution of this Agreement, Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxx
shall execute their resignations, annexed to this Agreement as Appendix III, and
shall deliver such executed resignations to the Board of Directors.
Page 3 of 6
GTAX
1. Effective upon the execution and delivery of this Agreement, the Board of
Directors of GTAX shall take the following actions:
(i) Elect Xxx X. Xxxxxxxxxxx as Vice President effective December 1, 2001
and acknowledge and approve any actions as Vice President that he may
have taken since such date.
(ii) Approve this Agreement and authorize Xxx X. Xxxxxxxxxxx to execute it
on behalf of GTAX.
(iii) Recognizing the potential conflicts of all other members of the
Board, the Board irrevocably appoints Xxx Xxxxx to take all actions
necessary to execute an agreement to effectuate the closing of the
Xxxxxxxxx Group transaction, pursuant to the terms of such agreement,
all in accordance to the terms of this Agreement. To the extent that
he is entitled to be released, pursuant to paragraph 3 under "All
Parties", GTAX agrees to indemnify Xxx Xxxxx to the full extent of the
provisions of Delaware law.
(iv) Accept the resignation of Xxxxxx Xxxxxxxxx as Director and Chief
Executive Officer effective the earlier of 45 days from the date of
this Agreement or the closing of the Xxxxxxxxx Group transaction. The
Board agrees not to take any action concerning their employment,
pending the effective date of resignation, provided that he carries
out his duties in good faith.
(v) Accept the resignation of Xxxxx Xxxxxx as Chief Financial Officer
effective the earlier of 45 days from the date of this Agreement or
the closing of the Xxxxxxxxx Group transaction. The Board agrees not
to take any action concerning their employment, pending the effective
date of resignation, provided that he carries out his duties in good
faith.
(vi) Elect Xxxxxxx X. Xxxx as President, effective immediately.
(vii) Set the number of directors that constitute the Board of Directors at
nine (9).
(viii) Elect Xxxxxxx X. Xxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxx to fill the
vacancies on the Board.
(ix) Elect Xxxxxxx X. Xxxx as Chief Executive Officer effective the earlier
of 45 days from the date of this Agreement or the closing of the
Xxxxxxxxx Group transaction.
(x) Approve the Company's legal expenses accrued to date.
(xi) Agree to reimburse the Concerned Stockholders expenses in connection
with the Consent Solicitation in an amount not to exceed $250,000.
(xii) Withdraw the lawsuit filed against Xxxxxxx X. Xxxx.
(xiii) The payments in (xi) and all payments due Akabas & Xxxxx are
subordinated to the dictates of First Union and Travelers.
Page 4 of 6
2. Cause to be executed the resolution annexed as Appendix IV, rescinding the
resolution of the Board of Directors of Prime Financial Services, Inc. to
terminate the employment of Xxxxxxx X. Xxxx and Xxxxxx Xxxxxxx.
Xxxxxxx X. Xxxx
1. Agrees to cause the Solicitation of Consent Statement in opposition to the
Board of Directors and current management and all related actions to be
withdrawn and terminated.
2. Agrees to dismiss the arbitration claim filed regarding his termination.
All Parties
1. Agree to draft a mutually acceptable press release.
2. Work together to effect a smooth transition to new management and the
smooth transition of registered representatives in offices purchased by the
Xxxxxxxxx Group.
3. Execute general releases for all parties, for all board members, and for
relevant other employees. Said releases will exclude the activities of Xxx
Xxxxx concerning the Xxxxxxxxx Group transaction. However, the Xxx Xxxxx
will provide regular reports to the Board of their actions. Should the
Board not object to these actions within 30 days of receipt, Xxx Xxxxx
shall receive general releases for these actions, as well.
4. Enter into a mutually acceptable non-solicitation agreement. Should GTAX or
the Xxxxxxxxx Group directly or indirectly benefit from the separation of
service of a registered representative, tax or accounting professional
during the 24 months subsequent to the closing of the Xxxxxxxxx Group
transaction, GTAX and the Xxxxxxxxx Group respectively agree to pay to the
other 50% of the trailing 12 months gross dealer concession and tax and
accounting billing generated by said registered representative or employee.
Said payment to be in cash with half due within 30 days after the severance
of the individual's employment with the respective entity, and the balance
due within one year.
5. The parties agree to enter into a mutual non-disparagement agreement.
Page 5 of 6
Dated: August 8, 2002
Approved and Ratified:
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------
Xxxxxx Xxxxxxxxx
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx
By: /s/ Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
Xxxxxx + Ciocia, Inc.
By: /s/ Xxx X. Xxxxxxxxxxx
------------------------------
Xxx X. Xxxxxxxxxxx, G
General Counsel & Vice President
Page 6 of 6
