EXHIBIT I TO SCHEDULE 13D
SECURITIES PURCHASE AGREEMENT dated as of October 29, 1999 (the
"Agreement") by and among (i) Greenwich Street Capital Partners II, L.P., a
Delaware limited partnership ("Greenwich II"), GSCP Offshore Fund, L.P., a
Cayman Islands limited partnership ("GSCP Offshore"), Greenwich Fund, L.P., a
Delaware limited partnership ("GF"), Greenwich Street Employees Fund, L.P., a
Delaware limited partnership ("GSEF"), and TRV Executive Fund, L.P., a Delaware
limited partnership ("TRV," together with Greenwich II, GSCP Offshore, GF and
GSEF, each a "Purchaser" and collectively, the "Purchasers"); and (ii) Walnut
Financial Services, Inc., a Utah corporation (the "Company").
W I T N E S S E T H:
Pursuant to the Amended and Restated Agreement and Plan of Merger dated as
of August 5, 1999 (the "Merger Agreement") among the Company, Tower Hill
Securities, Inc., a New York corporation ("Tower Hill"), and Tower Hill
Acquisition Corp., a New York corporation and wholly-owned subsidiary of the
Company ("Newco"), Newco shall be merged with and into Tower Hill (the
"Merger"). The Company will change its name to "THCG, Inc." at substantially the
same time as the Merger is effected.
Substantially simultaneously with the consummation of the Merger, but
subject to the effectiveness of the Merger, the Purchasers desire to acquire
from the Company, and the Company desires to issue and sell to the Purchasers,
for the consideration hereinafter provided, the Securities (as defined in
Section 1(a)).
Capitalized terms used in this Agreement without definition have the
meanings assigned to such terms in the Merger Agreement. For purposes hereof,
the term "Purchaser Documents" shall mean and include this Agreement and the
"Warrants," the "Registration Rights Agreement," the "Voting Agreement", the
"Tag-Along Agreement" and the "Escrow Agreement" (as such terms are hereinafter
defined), together with all amendments, modifications and supplements thereof.
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Purchasers and the Company hereby agree as follows:
1. Sale and Purchase of Securities; the Closing.
(a) Sale and Purchase of Securities. Subject to the terms and conditions of
this Agreement and on the basis of the representations, warranties, covenants
and agreements herein contained, and subject to the terms and conditions of the
Escrow Agreement, the Company shall sell, assign, convey and deliver to the
Purchasers, and the Purchasers shall purchase, acquire, accept from the Company
and pay for, in regard to each Purchaser, in the amounts and at the prices set
forth on Schedule A attached hereto, an aggregate of (i) 2,500,000 shares (the
"Shares") of the Company's common stock, $.01 par value per share (the "Common
Stock"); (ii) Warrants to purchase 1,000,000 shares of Common Stock at a per
share exercise price equal to the greater of (w) 1.5 multiplied by the initial
exercise price of options to purchase Common Stock that are granted to Company
Principals (as defined below in this Section 1(a)) substantially at the time of
the Merger (such options being herein referred to as the "Company Principals
21
Options"), or (x) $3.00, substantially in the form attached hereto as Exhibit
A-1 (the "Initial Warrants"); and (iii) Warrants to purchase 1,000,000 shares of
Common Stock at a per share exercise price equal to the greater of (y) 2.0
multiplied by the initial exercise price of the Company Principals Options, or
(z) $4.00, substantially in the form attached hereto as Exhibit A-2 (the
"Additional Warrants" and, together with the Initial Warrants, the "Warrants").
The Shares and the Warrants are collectively referred to herein as the
"Securities." For purposes of the Purchaser Documents, the term "Company
Principal(s)" shall mean any Person who: (i) is an executive officer, director
or Affiliate of the Company or any executive officer or director of any
Affiliate of the Company or any Related Person of any of the foregoing, or (ii)
prior to the Merger was a shareholder, executive officer, director or Affiliate
of Tower Hill or of any shareholder, executive officer or director of Tower Hill
or any Related Person of any of the foregoing (each of the foregoing persons
referred to in this clause (ii), a "THSI Principal").
(b) The Closing. Subject to the termination of this Agreement pursuant to
Section 7, and subject to the release of the "Escrow Documents" (as defined in
the Escrow Agreement) in accordance with the provisions of Section 4(a) of the
Escrow Agreement, the closing of the transactions contemplated hereby (the
"Closing") shall be deemed to have occurred substantially simultaneously with
the consummation of the Merger and provided that the conditions set forth in
Section 6 hereof have been satisfied. The date on which the Closing is deemed to
have occurred is hereinafter referred to as the "Closing Date."
2. Consideration; Delivery.
(a) Escrow Agreement. On the Closing Date, the parties hereto shall enter
into an Escrow Agreement substantially in the form of Exhibit B hereto (the
"Escrow Agreement") with the "Escrow Agent" described therein, and the execution
copies of the Purchaser Documents (other than this Agreement and the Escrow
Agreement) shall be deposited with the Escrow Agent in accordance with the terms
of the Escrow Agreement. The Purchaser Documents (other than this Agreement and
the Escrow Agreement) shall not be effective unless and until such copies are
released by the Escrow Agent in accordance with the provisions of Section 4(a)
of the Escrow Agreement.
(b) Consideration. The aggregate consideration for the Securities shall be
five million dollars ($5,000,000), payable in cash (the "Purchase Price"). On
the Closing Date, the Purchase Price shall be deposited with the Escrow Agent in
accordance with the terms of the Escrow Agreement and shall be released by the
Escrow Agent only in accordance with the terms of the Escrow Agreement.
(c) Delivery of Securities. On the Closing Date, the Company shall deliver
to the Escrow Agent duly executed certificates and instruments dated as of the
Closing Date registered in the names of the Purchasers representing the
Securities purchased by the Purchasers in conformity the applicable Purchaser
Documents, such certificates and instruments to be held by the Escrow Agent in
accordance with the terms of the Escrow Agreement and shall be released by the
Escrow Agent only in accordance with the terms of the Escrow Agreement.
(d) Registration Rights Agreement; Voting Agreement and Tag-Along
Agreement. On the Closing Date, the parties hereto shall enter into a
Registration Rights Agreement substantially in the form of Exhibit C hereto (the
"Registration Rights Agreement"), the other parties to the Voting Agreement
substantially in the form of Exhibit D hereto (the
22
"Voting Agreement") and the Tag-Along Agreement substantially in the form of
Exhibit E hereto (the "Tag-Along Agreement") shall have entered into the Voting
Agreement and the Tag-Along Agreement, and counsel to the Company shall have
issued opinions substantially in the form of Exhibits F-1, F-2 and F-3 hereto
(the "Legal Opinions"). The Registration Rights Agreement, the Voting Agreement,
the Tag-Along Agreement and the Legal Opinions shall be delivered to the Escrow
Agent to be held by the Escrow Agent in accordance with the terms of the Escrow
Agreement, shall be dated as of the Closing Date and shall be released by the
Escrow Agent only in accordance with the terms of the Escrow Agreement. The
Registration Rights Agreement, the Voting Agreement, the Tag-Along Agreement and
the Legal Opinions shall not be effective unless and until such copies are
released by the Escrow Agent in accordance with the provisions of Section 4(a)
of the Escrow Agreement; but upon their release pursuant to Section 4(a) of the
Escrow Agreement, such Escrow Documents shall be effective from and after the
Closing Date.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) Organization and Good Standing. The Company has been duly organized and
is validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority to own,
lease and operate its properties, to carry on its business as it is now being
conducted and to issue the Securities. The Company has heretofore delivered to
Greenwich II (on behalf of all of the Purchasers) true and complete copies of
its certificate of incorporation and by-laws, together with all amendments,
modifications and supplements thereof. The Company is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failure to be so qualified or licensed and in good standing that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means
any change, event or effect (i) in, on or relating to the business of the
Company or a Purchaser, as applicable, that is, or is reasonably likely to be,
materially adverse to the business, properties, assets, liabilities, condition
(financial or otherwise) or results of operations of the Company or such
Purchaser, as applicable, taken as a whole, other than any change or effect
arising out of general economic conditions in the United States or (ii) that may
prevent or materially delay the performance of the Purchaser Documents by the
Company or such Purchaser, as applicable, or the consummation by the Company or
such Purchaser, as applicable, of the transactions contemplated by the Purchaser
Documents (including without limitation, the BDC Withdrawal (as defined in the
Merger Agreement)).
(b) Authorization of Agreement. The Company has all necessary corporate
power and authority to execute and deliver the Purchaser Documents, to issue the
Securities and to consummate the other transactions contemplated by the
Purchaser Documents and to perform its obligations under the Purchaser
Documents. The execution and delivery by the Company of the Purchaser Documents
and the consummation by the Company of the transactions contemplated thereby
have been duly authorized and approved by the board of directors of the Company,
and assuming approval by the shareholders of the Company pursuant to the
Company's Articles of Incorporation and Bylaws and the Business Corporations Act
of the State of Utah, no other corporate proceedings on the part of the Company
are, or will be, necessary to authorize the Purchaser Documents or to consummate
the transactions contemplated thereby.
23
Each of the Purchaser Documents has been, or will be at the Closing, assuming
the due authorization, execution and delivery by the Purchasers of the Purchaser
Documents, duly and validly executed and delivered by the Company and
constitutes, or will constitute at the Closing, a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally.
(c) No Conflicts; Consents of Third Parties.
(i) No filing, registration or submission with or notice to, and no permit,
authorization, consent or approval of or with (collectively, "Filings and
Approvals"), any Governmental Entity is, or will be, necessary for the execution
and delivery by the Company of the Purchaser Documents, the issuance of the
Securities or the consummation by the Company of the transactions contemplated
thereby, except: (A) Filings and Approvals with the SEC and the National
Association of Securities Dealers (the "NASD"); (B) Filings and Approvals that,
if not made or obtained, could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; and (C) Filings and Approvals
which have been made or obtained and which are unconditional and in full force
and effect.
(ii) No consent or approval of any third party is, or will be, necessary
for the execution and delivery by the Company of the Purchaser Documents, the
issuance of the Securities or the consummation by the Company of the other
transactions contemplated thereby, except consents or approvals of the SEC and
the NASD (including without limitation the making of an additional listing
application with Nasdaq with respect to the issuance of the Shares), and except
such consents and approvals which have been obtained and which are unconditional
and in full force and effect.
(iii) Neither the execution, delivery and performance by the Company of the
Purchaser Documents, the issuance of the Securities nor the consummation by the
Company of the other transactions contemplated by the Purchaser Documents, will
(x) conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of the Company, (y) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company is a party or by which its
properties or assets are bound, or (z) assuming that all Filings and Approvals
have been made or obtained, violate any Law or any Governmental Order applicable
to the Company or its properties or assets, except in the case of clauses (y) or
(z) for violations, breaches or defaults which could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
(d) Capitalization.
(i) The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock and 1,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"). All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
non-assessable and free of preemptive rights. Except as contemplated by any of
the Purchaser Documents (other than the Escrow Agreement)
24
and except as set forth on Schedule 3(d)(i) to this Agreement, there are not any
outstanding (and immediately following the consummation of the Merger and the
Related Transactions and the issuance of all shares, securities and instruments
pursuant to the Merger Agreement, the Related Agreements and this Agreement
there will not be any outstanding) contractual obligations of the Company to
repurchase, redeem or otherwise acquire, or providing preemptive or registration
rights with respect to, any shares of capital stock of the Company. There are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that will
be triggered by the issuance of the Securities.
(ii) The Securities have been duly authorized and will be issued, free and
clear of all liens, encumbrances and claims and rights of third parties
(excluding liens, encumbrances, claims and rights of third parties claiming by,
through or under any Purchaser), and are fully paid (subject to the release of
the Purchase Price therefor in accordance with the terms of Section 4(a) of the
Escrow Agreement) and non-assessable, and the issuance of such Securities is not
subject to any preemptive right of any Person. A sufficient number of shares of
Common Stock have been duly authorized and reserved for issuance upon exercise
of the Warrants, and upon issuance in accordance with the terms of the Warrants,
such shares of Common Stock will be duly authorized, validly issued, fully paid
and non-assessable and the issuance of such Common Stock is not and will not be
subject to any preemptive right of any Person. Schedule 3(d)(ii) hereto sets
forth all of the shares of capital stock, all warrants, options and rights to
acquire shares of the capital stock and all convertible securities of the
Company which will be outstanding immediately following the consummation of the
Merger and the Related Transactions and the issuance of all shares, securities
and instruments pursuant to the Merger Agreement, the Related Agreements and
this Agreement. The Shares issued to the Purchasers will represent 30% of the
Common Stock of the Company on a fully-diluted basis (assuming the exercise of
all warrants, options and rights to acquire shares of the capital stock and all
convertible securities) as of immediately following the consummation of the
Merger and the Related Transactions and the issuance of all shares, securities
and instruments pursuant to the Merger Agreement, the Related Agreements and
this Agreement. The shares of Common Stock that will be issued as a result of
the Merger will be, when issued in accordance with the terms of the Merger
Agreement, duly authorized, validly issued, fully paid and non-assessable and
free of preemptive rights. The Company has heretofore delivered to Greenwich II
(on behalf of the Purchasers) a copy of the Merger Agreement (together with all
amendments, modifications and supplements thereto).
(e) Litigation. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company
before any court or arbitrator or any Governmental Entity relating to the
transactions contemplated by the Purchaser Documents.
(f) Merger Agreement. The representations and warranties of the Company,
Tower Hill and Newco contained in the Merger Agreement were true and correct as
of the date of the Merger Agreement and the Purchasers shall be entitled to rely
upon such representations and warranties in connection with the Purchaser
Documents and the purchase of the Securities and the consummation of the other
transactions under the Purchaser Documents.
(g) Disclosure. The final Proxy Statement of the Company accompanying the
Notice of Special Meeting of Stockholders dated September 30, 1999 (the "Proxy
Statement") with respect to the Company and the transactions contemplated by the
Purchaser Documents
25
and the Proxy Statement, and the representations and warranties by the Company
contained in the Purchaser Documents and in any Schedule or certificate
furnished or to be furnished by the Company pursuant thereto, do not contain or
will not, as of the Closing Date, contain any untrue statement of a material
fact, and do not omit or will not, as of the Closing Date, omit to state any
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 3(g) or
elsewhere in this Agreement or in any Schedule or certificate furnished or to be
furnished as aforesaid pursuant hereto shall not be affected or deemed waived by
reason of the fact that the Purchasers or their representatives know or should
have known that any such representation or warranty is or might be inaccurate in
any respect.
(h) Merger and Related Transactions. The Merger and the other "Related
Transactions" (as described in the Proxy Statement), if consummated, will be
consummated in all material respects in accordance with the terms, and subject
to the conditions, set forth in the Merger Agreement as in effect on the date of
this Agreement and as described in the Proxy Statement and without any material
amendment or waiver thereof; subject to the escrow of the documents pertaining
to the Related Transactions and, in accordance with the terms of such escrow
arrangements, the Related Transactions will be effected and the documents
pertaining thereto will be released from escrow prior to, or at the same time
as, the release of the Escrow Documents in accordance with the terms of Section
4(a) of the Escrow Agreement.
4. Representations and Warranties of the Purchaser. The Purchasers, jointly
and severally, hereby represent and warrant to the Company that:
(a) Organization and Good Standing. Each Purchaser has been duly organized
and is validly existing and in good standing under the laws of the jurisdiction
of its organization and has the requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted.
(b) Authorization of Agreement. Each Purchaser has all necessary power and
authority to execute and deliver the Purchaser Documents, to consummate the
transactions contemplated by the Purchaser Documents, and to perform its
obligations under the Purchaser Documents. The execution and delivery by each
Purchaser of the Purchaser Documents and the consummation by each Purchaser of
the transactions contemplated thereby have been duly authorized and approved by
the general partner of each Purchaser, and no other proceedings on the part of
any Purchaser are, or will be, necessary to authorize the Purchaser Documents or
to consummate the transactions contemplated thereby. The Purchaser Documents
have been, or will be at the Closing, assuming the due authorization, execution
and delivery by the Company, duly and validly executed and delivered by each
Purchaser and constitutes, or will constitute at the Closing, a valid, legal and
binding agreement of each Purchaser, enforceable against each Purchaser in
accordance with its terms, subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally, and (ii) general principles of equity (regardless of whether
considered in a proceeding at law or in equity).
(c) No Conflicts; Consents of Third Parties.
(i) No Filing and Approval of or with any Governmental Entity is, or will
be, necessary for the execution and delivery by any Purchaser of the Purchaser
Documents or the
26
consummation by any Purchaser of the transactions contemplated thereby, except
Filings and Approvals that, if not made or obtained, could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(ii) No consent or approval of any third party is, or will be, necessary
for the execution and delivery by any Purchaser of the Purchaser Documents or
the consummation by any Purchaser of the transactions contemplated by the
Purchaser Documents.
(iii) Neither the execution, delivery and performance by any Purchaser of
the Purchaser Documents, nor the consummation by any Purchaser of the
transactions contemplated by the Purchaser Documents, will (x) conflict with or
result in any breach of any provision of the applicable organizational documents
of any Purchaser, (y) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which any Purchaser is a party or by which its properties or assets are
bound, or (z) assuming that all Filings and Approvals have been made or
obtained, violate any Law or any Governmental Order applicable to any Purchaser
or its properties or assets, except in the case of clauses (y) or (z) for
violations, breaches or defaults which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(d) Litigation. There is no action, suit, investigation or proceeding
pending or, to the knowledge of any Purchaser, threatened against any Purchaser
before any court or arbitrator or any Governmental Entity relating to the
transactions contemplated by this Agreement.
(e) Investment Representations. Each Purchaser understands that the
Securities (including the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares")) have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any state securities law.
Each Purchaser also understands that the Securities and the Warrant Shares are
being offered and sold pursuant to one or more exemptions from such registration
based in part upon each Purchaser's representations contained in this Agreement.
(i) Purchaser Bears Economic Risk. Each Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company and is capable of evaluating the
merits and risks of its investment in the Company. Each Purchaser understands
that it must bear the economic risk of this investment indefinitely unless the
Securities and the Warrant Shares are registered under the Securities Act, or an
exemption from registration is available. Each Purchaser also understands that
there is no assurance that any exemption from registration will be available and
that, even if available, such exemption may not allow such Purchaser to transfer
all or any portion of the Securities (or the Warrant Shares) under the
circumstances, in the amounts or at the times such Purchaser might propose.
(ii) Acquisition for Own Account. Each Purchaser is acquiring the
Securities, and will acquire the Warrant Shares, for its own account for
investment only, and will not sell, transfer or otherwise dispose of the
Securities or the Warrant Shares, or any portion thereof or
27
interest therein, in violation of the registration requirements of applicable
federal and state securities laws.
(iii) Accredited Investor. Each Purchaser is an accredited investor within
the meaning of Regulation D under the Securities Act.
(iv) Company Information. Each Purchaser has had an opportunity to discuss
the Company's business, management and financial affairs with directors,
officers and other management of the Company. Each Purchaser has also had the
opportunity to ask questions of, and receive answers from, the Company and its
management regarding the terms and conditions of this investment.
(v) Rule 144. Each Purchaser acknowledges and agrees that the Securities
(including the Warrant Shares) must be held indefinitely unless they are
subsequently registered under the Securities Act and any applicable state
securities law or an exemption from such registration is available. Each
Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act ("Rule 144"), which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company, the resale occurring not less than one
year after a Person has purchased and paid for the security to be sold, the sale
being through an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the number of shares being sold during any three-month
period not exceeding specified limitations.
(vi) Financing. Each Purchaser has, and on the Closing Date will have,
sufficient funds available to pay for the Securities to be purchased by it
pursuant to Section 1.
5. Covenants. The parties, as applicable, hereby covenant and agree as
follows:
(a) Access to Information; Confidentiality. Upon reasonable notice, the
Company shall afford to the executive officers, accountants, counsel and other
representatives of Greenwich II (on behalf of the Purchasers) reasonable access,
during the period prior to the Closing Date, to all its facilities, properties,
assets, books, contracts and records and, during such period, the Company shall
furnish promptly to Greenwich II (on behalf of the Purchasers) all information
concerning its business, facilities, properties, assets and personnel as
Greenwich II may reasonably request, and shall make promptly available to
Greenwich II (on behalf of the Purchasers) the appropriate individuals
(including officers, employees, accountants, counsel and other professionals)
for discussion of the Company's business, facilities, properties, assets and
personnel as Greenwich II may reasonably request. The Purchasers shall keep such
information confidential in accordance with the terms of the Confidentiality
Agreement dated September 2, 1999 between THCG, Inc. and Greenwich II. By their
execution of this Agreement, the Company agrees to be bound by the terms of the
foregoing Confidentiality Agreement to the same extent as THCG, Inc. was bound,
and the Purchasers agree to be bound by the terms of the foregoing
Confidentiality Agreement to the same extent as Greenwich II is bound.
(b) Reasonable Best Efforts; Further Action. Upon the terms and subject to
the conditions set forth in the Purchaser Documents, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done,
28
and to assist and cooperate with the other party in doing, or causing to be
done, all things necessary, proper or advisable to fulfill all conditions
applicable to such party pursuant to the Purchaser Documents, and to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by the Purchaser Documents, including (i) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
and the taking of all reasonable steps as may be necessary to make or obtain a
Filing and Approval to, of or with, or to avoid an action or Proceeding by, any
Governmental Entity; (ii) the obtaining of all necessary consents, approvals,
waivers or exemptions from non-governmental third parties; and (iii) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes and intent of,
the Purchaser Documents.
(c) Board Representation. As long as the Purchasers, in the aggregate, are
the beneficial owners of 5.0% or more of the issued and outstanding shares of
Common Stock on a fully-diluted basis (assuming for such purpose the exercise or
conversion of all outstanding options, warrants and other convertible
securities, including the Securities), Greenwich II shall be entitled to
nominate one person (the "Purchaser Appointee") for election to the Board of
Directors of the Company, provided, however, that such person is reasonably
acceptable to the Company, and the Company shall use its best efforts to cause
the Purchaser Appointee to be elected to the Board of Directors of the Company
and to be appointed to the Compensation Committee (including any stock option or
similar committee) of the Board of Directors of the Company.
(d) Restrictions on the Conduct of Business.
(i) As long as the Purchasers, in the aggregate, are the beneficial owners
of 5.0% or more of the issued and outstanding shares of Common Stock on a
fully-diluted basis (assuming for such purpose the exercise or conversion of all
outstanding options, warrants and other convertible securities, including the
Securities), the Company shall not, without the prior written consent of
Greenwich II, effect any merger, consolidation, recapitalization, redemption or
repurchase, extraordinary dividend or distribution or any similar transaction or
other extraordinary transaction affecting the Company or any of its Subsidiaries
or any shares of capital stock of the Company or any of its Subsidiaries;
provided, however, that the consent of Greenwich II shall not be required in
connection with:
(1) any of the transactions described in the preceding paragraph as long as
(A) all shares of the Common Stock owned by the Purchasers (including the
Warrant Shares) are treated as favorably as all other then outstanding shares of
the Common Stock are treated, and (B) without the prior written consent of
Greenwich II, no holder of Common Stock (or any Affiliate or Related Person of
such holder) receives in connection with the transaction any additional value or
consideration (excluding any compensation payable in the ordinary course of
business to employees of the Company or the successor entity in any such
transaction, if applicable, related solely to the performance of their duties as
employees);
(2) any repurchase of Common Stock upon the termination of employment of
any employee of the Company who is not or has not been a THSI Principal or who
is not or has not been a director of the Company; provided, however, that such
repurchase
29
must be approved by the Independent Directors (as defined in Section 5(d)(iii))
and must be pursuant to the terms of a Plan (as defined in Section 5(d)(ii));
(3) any redemption of shares of redeemable preferred stock or other
securities having redemption provisions issued after the consummation of the
Merger with the approval of the Independent Directors to a Person who is not at
the time of issuance a Company Principal;
(4) open market purchases of shares of Common Stock approved by the
Independent Directors; or
(5) any repurchase or redemption (other than as otherwise permitted by the
foregoing clauses (1) through (4) of this Section 5(d)(i)), approved by the
Independent Directors, of shares of the Common Stock held by any stockholder as
long as the aggregate of such repurchases or redemptions (together with all
prior repurchases or redemptions) from such stockholder and all Affiliates and
Related Persons of such stockholder (taken together) does not exceed an amount
equal to 5.0% or more of the number of shares of Common Stock on a fully-diluted
basis (assuming for such purpose the exercise or conversion of all outstanding
options, warrants and other convertible securities) outstanding immediately
after the consummation of the Merger (including the Securities), as
appropriately adjusted for stock splits and dividends, reverse stock splits and
combinations after the consummation of the Merger.
(ii) Except as set forth on Schedule 5(d)(ii), neither the Company nor any
of its Subsidiaries shall issue or grant any registration rights with respect to
any capital stock, or securities convertible into or exercisable for capital
stock, of the Company or any Subsidiary without the prior written consent of
Greenwich II; provided, however, that the foregoing restriction shall not
prohibit (x) the grant of registration rights covering shares issued in an
acquisition of, or a merger with, another Person, or in a private placement by
the Company or any Subsidiary of shares of its capital stock or other
securities, where such acquisition, merger or private placement does not
involve, and the recipients of such capital stock or other securities (and such
registration rights) are not Company Principals or (y) the registration on SEC
Form S-8 of Common Stock issued pursuant to the Company's Employee Stock
Incentive Plan established at the time of the Closing or any supplemental stock
incentive plan approved by the Independent Directors (each, a "Plan"). Any
registration rights granted pursuant to clause (x) of this Section 5(d)(ii)
shall not be on terms more favorable than the terms of the registration rights
granted to the Purchasers pursuant to the Registration Rights Agreement and any
right to "piggyback" on any registration effected pursuant to the Purchasers'
registration rights shall be subordinate to the Purchasers' demand registration
rights in the event of any cut-back or hold-back of shares. The Purchasers shall
have piggyback rights with respect to the exercise of any registration right
granted pursuant to clause (x) of this Section 5(d)(ii); and the Purchasers
shall have pro rata sale rights with the persons who have exercised the
registration rights, but priority sale rights over any other person whose shares
are proposed to be included in the registration, in the event of any required
cut-back or hold-back of shares to be sold pursuant to the registration right
exercised.
(iii) All compensation of, and other transactions with, any Company
Principals shall be subject to the approval of the Independent Directors. For
all purposes of the Purchaser Documents, the term "Independent Directors" shall
mean members of the Board of Directors of the Company other than the Company
Principals whose compensation is being considered and
30
who are not involved in and have no economic or other interest in the
transaction being considered and any Affiliates or Related Persons of such
Company Principals. For all purposes of the Purchaser Documents, the term
"Related Person" shall mean and include any relative of the Person to which such
Related Person refers (including any spouse, parent or grandparent, sibling,
child or grandchild, step-child or step-grandchild or adopted child or adopted
grandchild of such Person) and any trust or similar entity which exists for the
benefit of such Person or any other "Related Person" of such Person in which the
Person or any "Related Person" of such Person has any economic or other
interest.
(e) Tag-Along Rights.
(i) Subject to Section 5(e)(vii), if, at any time after the Closing, any of
the THSI Principals or any of their Transferees in an Exempt Transfer (as
defined in Section 5(e)(viii)) (each, a "Section 5 Transferor") or any group of
Section 5 Transferors proposes to Transfer any of such Person's Common Stock to
a Person or Persons, except pursuant to an Exempt Transfer or a Charitable
Transfer (as defined in Section 5(e)(viii)), prior to any such Transfer, such
Section 5 Transferor shall promptly (and in any event at least 20 business days
prior to the proposed closing date thereof) provide the Purchasers with written
notice of the proposed Transfer (the "Transfer Notice") containing the
following:
(1) the name and address of the proposed Transferee;
(2) the number of shares of Common Stock proposed to be Transferred by such
Section 5 Transferor; and
(3) the purchase price and other material terms and conditions of payment
and the closing date for the proposed Transfer (including, if available, a copy
of any purchase agreement related thereto).
(ii) If any Purchaser wishes to participate in such Transfer, such
Purchaser (or Greenwich II on behalf of such Purchaser) shall notify such
Section 5 Transferor by written notice (the "Tag-Along Notice") on or before the
expiration of 10 business days following receipt of the Transfer Notice that
such Purchaser desires to Transfer to the proposed Transferee a part of its
shares of Common Stock (as determined pursuant to the following sentence) on the
same terms and conditions set forth in the Transfer Notice. The Tag-Along Notice
shall specify the number of shares of Common Stock such Purchaser desires to
Transfer (the "Tag-Along Amount"). The maximum number of shares of Common Stock
that such Purchaser shall be entitled to Transfer pursuant to the Tag-Along
Notice shall be determined by multiplying the number of shares of Common Stock
held by such Purchaser at the time of the Transfer Notice by a fraction, the
numerator of which is the number of shares of Common Stock proposed to be
Transferred to the Transferee by such Section 5 Transferor and the denominator
of which is the aggregate number of shares of Common Stock then owned by all
Section 5 Transferors. If no Purchaser provides the Section 5 Transferor with a
Tag-Along Notice within the period above-specified, the Section 5 Transferor
shall be free to sell all or a portion of his Common Stock to the Transferee in
the amount and on the same terms and conditions set forth in the Transfer
Notice. If any Purchaser provides the Section 5 Transferor(s) with a Tag-Along
Notice, the Section 5 Transferor may not effect such Transfer unless the
Transferee shall have purchased the Tag-Along Amount or the Reduced Tag-Along
Amount (as defined in Section 5(e)(iv)) from such Purchaser on the same terms
and conditions set forth in the Transfer Notice.
(iii) The Tag-Along Notice given by such Purchaser shall constitute the
Purchaser's irrevocable and binding agreement to Transfer to the Transferee the
Tag-Along Amount or the Reduced Tag-Along Amount on the terms and conditions
specified in the Transfer Notice.
(iv) If the sum (the "Aggregate Shares Offered") of (w) the aggregate number of
shares of Common Stock proposed to be Transferred to the Transferee by the
Section 5 Transferor and (x) the total of the Tag-Along Amounts for each
Purchaser exceeds the maximum number of shares of Common Stock that such
Transferee is willing to purchase (the "Maximum Number"), then (y) the maximum
number of shares of Common Stock that such Section 5 Transferor shall be
entitled to Transfer to the Transferee shall be reduced to the number (rounded
down to the nearest whole share) obtained by multiplying the number of shares of
Common Stock that such Section 5 Transferor proposed to Transfer to the
Transferee by a fraction, the numerator of which is the Maximum Number and the
denominator of which is the Aggregate Shares Offered, and (z) the maximum number
of shares of Common Stock that any Purchaser which has delivered a Tag-Along
Notice pursuant to Section 5(e)(ii) (the "Participating Purchasers") shall be
entitled to Transfer to the Transferee pursuant to such Tag-Along Notice shall
be reduced to the number (rounded up to the nearest whole share; the "Reduced
Tag-Along Amount") obtained by multiplying the Tag-Along Amount of such
Purchaser by the fraction described in clause (y) of this Section 5(e)(iv).
(v) The Participating Purchasers agree to execute and deliver purchase
agreements upon the same terms and subject to the same conditions as the Section
5 Transferor and shall take such action as the Transferee of such shares may
reasonably request (including the delivery of certificates or other documents)
to facilitate the consummation of the Transfer of such shares. Any indemnity
provided by a Participating Purchaser to the Transferee in such purchase
agreement will only relate to the shares of Common Stock Transferred by it. Any
indemnity provided to the Transferee by the Section 5 Transferor will only
relate to the shares of Common Stock Transferred by the Section 5 Transferor.
(vi) The Section 5 Transferor(s) and the Participating Purchasers shall be
required to bear their pro rata share, based on the number of shares of Common
Stock included in such Transfer, of the expenses of the transaction including,
without limitation, legal, accounting and investment banking fees, commissions
and expenses.
(vii) Notwithstanding any other provision of this Section 5(e), if, at any
time, any Section 5 Transferor or group of Section 5 Transferors proposes to
sell shares of Common Stock beneficially owned by him or them in a public
offering which, together with all prior Transfers, other than Exempt Transfers
and Charitable Transfers, by all THSI Principals, exceed 25% of the aggregate of
the shares of Common Stock (the "Original Shares") acquired by the THSI
Principals (A) pursuant to the Merger and (B) upon exercise of options granted
to the THSI Principals pursuant to the Merger Agreement and the Related
Agreements (including without limitation under the Plan), then the Purchasers
will have the right to sell in such public offering a number of shares of Common
Stock equal to four times the number of shares of Common Stock proposed to be
sold by the THSI Principals in excess of such 25% of their Original Shares and
such THSI Principals shall cut-back the number of shares of Common Stock
proposed to be sold by them in such public offering so as to accommodate the
Transfer by the Purchasers of their shares of Common Stock pursuant to this
Section 5(d)(vii); provided, however, that the foregoing shall not be applicable
to any sale by the Section 5 Transferors of
32
shares of Common Stock pursuant to Rule 144 if, at the time of such proposed
sale pursuant to Rule 144, any Purchaser is then permitted (subject to the
volume limitations of Rule 144) also to effect sales under Rule 144. Any
allocation among the Purchasers of shares to be transferred pursuant to this
Section 5(e)(vii) shall be determined by Greenwich II.
(viii) For purposes of the Purchaser Documents, the term "Transfer" shall
mean any sale, assignment, disposition, mortgage, pledge or similar lien or
encumbrance or other transfer or grant or any right to effect any of the
foregoing; unless in the case of the grant of any mortgage, pledge or similar
lien or encumbrance the mortgagee, the pledgee or holder of the lien or
encumbrance agrees in writing with the Purchasers that any further sale,
assignment, disposition or transfer or grant of any such right shall be subject
to the provisions of this Section 5 and to be deemed a "Section 5 Transferor"
for all purposes of this Agreement. For purposes of the Purchaser Documents, the
term "Exempt Transfer" shall mean a direct or indirect Transfer of capital stock
of the Company to a Person's Related Person provided that such capital stock
shall continue to be subject to the provisions of this Section 5 in connection
with any further Transfers. For purposes of the Purchaser Documents, the term
"Charitable Transfer" shall mean a Transfer of capital stock of the Company to
an organization exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, provided that the Person does not retain any
economic or other interest in the shares.
(ix) In the event of any merger, consolidation, recapitalization,
reclassification, stock split or combination, distribution of property (other
than cash) or securities, obligations or instruments, or any other transaction
affecting the Common Stock, the provisions of this Section 5 shall apply to any
stock, security, obligations, instruments or property which have been issued in
connection therewith to any Section 5 Transferor.
(f) Nasdaq Listing Application. The Company shall file an Application for
Listing of Additional Shares with the NASD with respect to the Shares and the
Warrant Shares. Such Application for Listing of Additional Shares shall be with
respect to designation as a National Market System security by The Nasdaq Stock
Market; however, the Company may delay the filing of such Application for
Listing of Additional Shares until it is determined by the NASD whether the
current designation of the Common Stock of the Company as a National Market
System security shall continue. In the event that the NASD shall determine that
the designation of the Common Stock as a National Market System security shall
not continue, or otherwise if requested by Greenwich II, the Company shall file
promptly an Application for Listing of Additional Shares with respect to
designation as a Smallcap security by The Nasdaq Stock Market and with respect
to the Shares and the Warrant Shares.
(g) Public Announcements. No party will issue or cause the publication of
any press release or other public announcement with respect to the Purchaser
Documents or the transactions contemplated by the Purchaser Documents without
the prior written consent of the other party hereto; provided, however, that
nothing herein will prohibit any party from issuing or causing publication of
any such press release or public announcement to the extent that such party
determines such action to be required by Law, in which case the party making
such determination will allow the other party reasonable time to comment on such
release or announcement in advance of its issuance.
(h) Investment Opportunities. Company agrees that it will use its
reasonable efforts to offer Greenwich II, or affiliates of Greenwich II as
designated by Greenwich II, the
33
opportunity to invest in private placements in which the Company acts as the
placement agent, financial advisor or principal investor.
(i) No Regulatory Filings. The Company and its Subsidiaries shall not
effect or engage in any transaction, investment or business which might impose
upon any Purchaser (or any of its Affiliates, partners, directors, officers or
employees) any obligation under any Law to file any reports, or to furnish any
information to any governmental authority (other than reports or information
required to be made or furnished under the Exchange Act and the rules and
regulations promulgated thereunder). In the event any Law, rule or governmental
regulation shall be enacted or adopted subsequent to the Company or its
Subsidiaries effecting or making any transaction or investment, or subsequent to
the commencement of any business, the Company shall use commercially reasonable
efforts to restructure such transaction, investment or business so as to avoid
any such reporting or information obligation imposed on any Purchaser (or any of
its Affiliates, partners, directors, officers or employees).
(j) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for the purposes described in the Proxy Statement and for general
corporate purposes.
(k) Name Change. The Company shall, prior to the release of the Escrow
Documents pursuant to Section 4(a) of the Escrow Agreement, change the name of
the Company to "THCG, Inc."
6. Conditions to Closing.
(a) Conditions Precedent to Each Party's Obligations.
The respective obligations of each party hereunder are subject to the
fulfillment or satisfaction on or before the Closing of each of the following
conditions (any one or more of which may be waived in writing by the Company or
Greenwich II (on behalf of all the Purchasers), as the case may be):
(i) All consents and approvals of the Boards of Directors and shareholders
of the Company and the other parties to the Merger Agreement and the Related
Transactions required for the consummation of the Merger, the change of the name
of the Company to "THCG, Inc.", the Related Transactions and the transactions
under the Purchaser Documents shall have been obtained. All of the other
conditions to the obligations of the parties to consummate the Merger, the
Related Transactions and the transactions under the Purchaser Documents, and to
effect the name change, shall have been satisfied subject only to: (A) the
filing of articles of merger with the Secretary of State of the New York to
effect the Merger; and (B) the filing of the BDC Withdrawal; and (C) the escrow
of the documents pertaining to the Related Transactions and, in accordance with
the terms of such escrow arrangements, such documents pertaining thereto being
released from escrow prior to, or at the same time as, the release of the
"Escrow Documents" (as defined in the Escrow Agreement") in accordance with the
terms of Section 4(a) of the Escrow Agreement.
(ii) No Law or Governmental Order shall have been enacted, entered,
promulgated or enforced which prohibits, restrains, enjoins or restricts the
consummation of the transactions contemplated by the Purchaser Documents, or
which subjects any party to substantial damages as a result of the consummation
of the transactions contemplated by the Purchaser Documents.
34
(iii) All required consents, approvals, waivers and authorizations of any
Governmental Entity or Regulatory Agency which are necessary to effect the
transactions contemplated by the Purchaser Documents at the Closing shall have
been obtained.
(iv) The Escrow Agreement shall have been executed and delivered by the
parties hereto and the Escrow Agent; and the Escrow Documents, the Shares and
the Warrants and the Purchase Price shall have been deposited with the Escrow
Agent in accordance with this Agreement and the Escrow Agreement.
(b) Conditions Precedent to Obligations of the Company.
The obligations of the Company hereunder are subject to the fulfillment or
satisfaction on or before the Closing Date of each of the following conditions
(any one or more of which may be waived in writing by the Company):
(i) Accuracy of Representations and Warranties. The representations and
warranties of each Purchaser set forth in Section 4 hereof shall be true and
accurate in all material respects (other than those qualified by materiality or
Material Adverse Effect which shall be true and accurate) on and as of the
Closing Date with the same force and effect as if they had been made at the
Closing, and each Purchaser shall execute and deliver a certificate to such
effect by an officer of such Purchaser.
(ii) Covenants. Each Purchaser shall have performed and complied in all
material respects with all of its covenants required to be performed by it under
the Purchaser Documents on or before the Closing Date, and each Purchaser shall
execute and deliver a certificate to such effect by an officer of such
Purchaser.
(iii) Delivery of Certificates. At the Closing, each Purchaser shall
deliver the certificates required by Sections 6(b)(i) and (ii) hereof to the
Escrow Agent for deposit into escrow pursuant to the terms and conditions of the
Escrow Agreement.
(c) Conditions Precedent to Obligations of the Purchasers.
The obligations of the Purchasers hereunder are subject to the fulfillment
or satisfaction on or before the Closing Date of each of the following
conditions (any one or more of which may be waived in writing by Greenwich II,
on behalf of the Purchasers):
(i) Accuracy of Representations and Warranties. The representations and
warranties of the Company set forth in Section 3 hereof and the representations
and warranties of the Company, Newco and Tower Hill set forth in the Merger
Agreement shall be true and accurate in all material respects (other than those
qualified by materiality or Material Adverse Effect which shall be true and
accurate) on and as of the Closing Date with the same force and effect as if
they had been made at the Closing, and the Company shall execute and deliver a
certificate to such effect by an officer of the Company.
(ii) Covenants. The Company shall have performed and complied in all
material respects with all of the covenants required to be performed by the
Company under the Purchaser Documents on or before the Closing Date, and the
Company shall execute and deliver a certificate to such effect by an officer of
the Company.
35
(iii) Delivery of Certificates. At the Closing, the Company shall deliver
the certificates issued pursuant to Sections 6(c)(i) and (ii) to the Escrow
Agent for deposit into escrow pursuant to the terms and conditions of the Escrow
Agreement.
(iv) Board Nominee. The Board of Directors of the Company shall have
elected Xxxxx Xxxxx to the Board of Directors of the Company as the Purchaser
Nominee effective upon the satisfaction of the terms of Section 4(a) of the
Escrow Agreement; and the THSI Principals shall have executed and delivered to
the Escrow Agent, for deposit into escrow pursuant to the terms and conditions
of the Escrow Agreement, an agreement substantially in the form attached hereto
as Exhibit D hereto wherein the THSI Principals agree to vote their shares for
the election of the Purchaser Appointee as a director of the Company (the
"Voting Agreement").
(v) Issuance of the Securities. The Securities shall have been duly
authorized and validly issued pursuant to Section 2(c) hereof (against the
payment of the purchase price therefor pursuant to Section 2(b) hereof), free
and clear of all liens, encumbrances and claims and rights of third parties
(including without limitation preemptive rights, but excluding liens,
encumbrances, claims and rights of third parties claiming by, through or under
any Purchaser); and the Purchasers shall have received the Legal Opinions.
7. Termination of Agreement.
(a) Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(i) by mutual written consent duly executed by the Company and Greenwich II
(on behalf of the Purchasers);
(ii) by either Greenwich II (on behalf of the Purchasers) or the Company,
if the Merger Agreement is terminated in accordance with its terms; or
(iii) by Greenwich II (on behalf of the Purchasers) or the Company at any
time after December 31, 1999 if the Closing shall not have occurred on or before
that date.
(b) Notice of Termination. Any termination of this Agreement under Section
7(a) hereof will be effective by the delivery of written notice (in accordance
with the provisions of Section 10(b)) of the terminating party to the other
parties hereto.
(c) Effect of Termination. In the case of any termination of this Agreement
as provided in this Section 7, this Agreement shall be of no further force and
effect; provided, however, that a termination of this Agreement shall not
relieve any party from liability for any breach of this Agreement or defeat or
impair the right of any party to pursue such relief as may otherwise be
available to it as a result of any breach of this Agreement or any of the
representations, warranties, covenants or agreements contained herein.
8. Legend on Certificates. Each stock certificate or warrant certificate
issued to represent the Securities and the Warrant Shares shall bear the
following (or a substantially equivalent) conspicuous legend on the face or
reverse side thereof:
36
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED
UNDER APPLICABLE STATE SECURITIES LAWS. NEITHER THESE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN
EFFECT WITH RESPECT THERETO UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL TO
THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such legend, unless in the
opinion of counsel for the Company, the Securities or the Warrant Shares
represented thereby need no longer be subject to the restrictions contained in
this Agreement. The Company shall not transfer on its books any certificate for
the Securities or the Warrant Shares in violation of the provisions of the
Purchaser Documents. The Company shall give appropriate stop transfer
instructions to its stock transfer agent with respect to the Securities and the
Warrant Shares.
9. Indemnification.
(a) The Company agrees to indemnify, defend and hold harmless the
Purchasers (and each officer, director, partner and Affiliate of the Purchasers)
from and against any and all losses, liabilities, damages, deficiencies, costs
or expenses (including reasonable attorneys' fees and disbursements)
(collectively, "Losses") based upon or arising out of or in connection with any
inaccuracy in or breach of any representation, warranty, covenant or agreement
of the Company contained in the Purchaser Documents.
(b) The Purchasers agree, jointly and severally, to indemnify, defend and
hold harmless the Company (and each officer, director, stockholder and Affiliate
of the Company) from and against any and all Losses based upon or arising out of
or connection with any inaccuracy in or breach of any representation, warranty,
covenant or agreement of any Purchaser contained in the Purchaser Documents.
10. Miscellaneous.
(a) Entire Agreement; Assignment. The Purchaser Documents (a) constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (b) shall not be assigned by operation of law or otherwise.
(b) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in Person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
37
if to Purchaser: Greenwich Street Capital Partners II, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx and Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to: Dechert Price & Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company: Walnut Financial Services, Inc. (or THCG, Inc.)
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address, facsimile number or Person's attention as the Person
to whom notice is given may have previously furnished to the other in writing in
the manner set forth above.
(c) Parties in Interest. The Purchaser Documents shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except for those parties indemnified pursuant to Section
9 or pursuant to the provisions of Section 8 of the Registration Rights
Agreement, nothing in the Purchaser Documents, express or implied, is intended
to or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of the Purchaser Documents.
(d) Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
(f) Interpretation. The headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Article, Schedule or Exhibit, such reference
shall be to a Section or Article of or Schedule or Exhibit to this Agreement
unless otherwise indicated. Where the reference "hereby" or "herein" appears in
this Agreement, such reference shall be deemed to be a reference to this
Agreement as a whole. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall
38
be deemed to be followed by the words "without limitation." Words denoting the
singular include the plural, and vice versa, and references to it or its or
words denoting any gender shall include all genders.
(g) Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF.
(h) Waiver of Jury Trial. THE PURCHASERS AND THE COMPANY IRREVOCABLY WAIVE,
TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THE PURCHASER DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
(i) Expenses. Each party shall bear its own expenses in connection with the
negotiation and execution of this Agreement and the transactions contemplated
hereby, except that at the Closing the Company shall reimburse Greenwich II, on
behalf of the Purchasers, for their reasonable out-of-pocket expenses in
connection with the foregoing, up to an aggregate amount of $50,000.
* * *
39
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
Greenwich Street Capital Partners II, L.P.
GSCP Offshore Fund, L.P.
Greenwich Fund, L.P.
Greenwich Street Employees Fund, L.P.
TRV Executive Fund, L.P.
By: Greenwich Street Investments II,
L.L.C., their
Walnut Financial Services, Inc. general partner
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxx Xxxxx
---------------------------- -------------------------------
Xxxx X. Xxxxxx Xxxxx Xxxxx
President Managing Member
40
Schedule 3(d)(i) to Securities Purchase Agreement
Contractual obligations of the Company to
repurchase, redeem or otherwise acquire, or
providing preemptive or registration rights with
respect to, any
shares of capital stock of the Company
1. Settlement Agreement dated August 4, 1999, among Walnut Financial
Services, Inc. ("Walnut Financial"), Pacific Financial Services, Inc. and
Xxxxxxx Xxxxx, pursuant to which, among other things, Xx. Xxxxx agreed (a) to
return to Walnut Financial 20,000 shares of Walnut Financial common stock and
(b) to sell to any designee or designees of Walnut Financial, on Walnut
Financial's demand, at any time prior to or on February 28, 2000, 19,023 shares
of Walnut Financial Common Stock at $2.50 per share, and Walnut Financial agreed
that it shall be obligated to purchase such stock for such price within that
time period.
2. Agreement dated September 22, 1999, among Walnut Financial, Inland
Financial Corporation, Xxxxx Xxxxx and Xxxxxxxx Xxxxx, pursuant to which Xx.
Xxxxx and Xx. Xxxxx agreed, among other things, to return to Walnut Financial
20,000 shares of Walnut Financial common stock as partial consideration for the
forgiveness by Inland Financial Corporation of a debt owed to Inland Financial
Corporation by Xx. Xxxxx.
3. See Schedule 5(d)(ii) to this Agreement.
4. Contractual obligations of the Company to repurchase, redeem or
otherwise acquire shares of the capital stock of the Company as described in the
Merger Agreement and the Disclosure Schedules thereto.
Schedule 3(d)(ii) to Securities Purchase Agreement
Shares of capital stock, warrants, options and rights to acquire shares of the
capital stock and all convertible securities of the Company which will be
outstanding immediately following the consummation of the Merger and the Related
Transactions and the issuance of all shares, securities and instruments pursuant
to the Merger Agreement, the Related Agreements and the Securities Purchase
Agreement
Purchase
or
Security or Exercise Number of Shares
Security Holders Instrument Price
----------------------------------------------------------------------- --------------------- ----------- -------------------
THSI Principals (including Affiliates and Related Persons):
Xxx Xxxxx Common Stock (a) 1,396,056
Options (c) (d) 450,000
Xxxxxx Xxxx Xxxxxx Stock (a) 1,302,986
Options (c) (d) 450,000
Xxxx Xxxxx Common Stock (l) 372,281 (b)
Raviv GRAT (trust) Common Stock (a) 465,352
Xxxxxx X. Xxxx 1999 Trust, Xxxxx Xxxxxxxx Xxxx as trustee Common Stock (a) 186,141
Xxxxxx X. Xxxx 1999 Trust, Xxxxx Xxxxxxxx Xxxx as trustee Common Stock (a) 186,141
Xxxxxx X. Xxxx 1999 Trust, Xxxxx Xxxxxxxx Xxxx as trustee Common Stock (a) 186,141
Other Company Principals (including Affiliates and Related Persons)
Options (c) (d) 350,000
Greenwich Street Capital Partners and other Purchasers Common Stock $2.00 per 2,500,000
share
Warrants (e) 1,000,000
Warrants (f) 1,000,000
Investor Group Common Stock $2.00 per 932,500 (g)
share
Xxxx Xxxxx Common Stock (h) 100,000
Xxxxx Xxxxxx and Xxxxxxx Xxxxxx Common Stock (h) 100,000
Options of Walnut Employees under Existing Stock Option Plan Options (i) 37,684
Holders of Existing Class A Warrants Warrants (j) 633,334
All Other Shareholders Common Stock n/a 3,350,533 (k)
----------------------------------------------------------------------- --------------------- ----------- -------------------
42
Notes:
-----
(a) To be acquired pursuant to the Merger upon conversion of existing
shares of the Common Stock of Tower Hill.
(b) Does not include additional shares of Common Stock (not to exceed
200,000 shares in the aggregate as to all directors and officers) that might be
purchased by such person as part of the Investor Group at a price per share no
less than the price per share being paid by the Purchasers.
(c) To be granted under the new Walnut Stock Incentive Plan.
(d) The exercise price shall be the average of the high and low price of
the Common Stock on the Closing Date.
(e) The exercise price shall be the greater of: 150% of the initial
exercise price under the options granted to the Company Principals; or $3.00 per
share of Common Stock.
(f) The exercise price shall be the greater of: 200% of the initial
exercise price under the options granted to the Company Principals; or $4.00 per
share of Common Stock.
(g) Includes up to the 200,000 shares that might be issued to directors and
officers to which reference is made in note (b) above. Assumes that all 932,500
shares will be issued.
(h) Issued as a finders fee.
(i) The exercise prices per share of the Common Stock of such options are:
(x) $10.86 with respect to options to purchase 13,334 shares of the Common
Stock; (y) $13.50 with respect to options to purchase 1,000 shares of the Common
Stock; and (z) $10.80 with respect to the balance of such options.
(j) The Class A Warrants have a current exercise price of $9.00 per share
of Common Stock.
(k) Does not include 1,000,000 of Common Stock that are issuable under
options that may be granted under the new Walnut Stock Incentive Plan, in
addition to the options to which reference is made in note (c) above.
(l) To be issued pursuant to Section 2.1(c) of the Merger Agreement.
43
Schedule 5(d)(ii) to Securities Purchase Agreement
Registration Rights
1. Registration Rights will be granted to the Investor Group to which
reference is made on Schedule 3(d)(ii) to this Agreement with respect to 932,500
shares of the Common Stock to be acquired by the Investor Group. However, such
registration rights shall be subject to the provisions of Section 5(d)(ii) of
this Agreement and shall not include "demand" registration rights.
2. Certain security holders have been granted registration rights pursuant
to the following agreements, and the Company represents and warrants to the
Purchasers that true and complete copies of such agreements as amended and in
effect on the date hereof have been delivered to the Purchasers:
(a) Registration Rights Agreement dated October 19, 1998, among Walnut
Financial Services, Inc., Xxxxx Xxxxx, Xxxxxxxx Xxxxx and Xxxxx Xxxxxxx
(b) Registration Rights Agreement dated December 18, 1997, between Walnut
Financial Services, Inc. and Class A warrant holders
(c) Registration Rights Agreement dated January 30, 1998, between Walnut
Financial Services, Inc. and Xxxxxxx Xxxxx
44
Exhibit A-[1][2] to Securities Purchase Agreement
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
THCG, Inc.
Warrant for the Purchase of Shares of Common Stock
$.01 par value per share
THIS WARRANT EXPIRES ON ___________2002(1)
__________ Shares
THIS CERTIFIES that, for value received, , with an address at
_________________________________, _______________________, (the "Holder"), is
entitled to subscribe for and purchase from THCG, Inc., a Utah corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time before 5:00 P.M. on ___________, 2002(2) New York time, subject to
Section 1(b) hereof (the "Exercise Period"), 1,000,000 shares of the Company's
Common Stock, $.01 par value per share (the "Common Stock"), at a price equal to
$_____ per share, subject to adjustment as provided herein (the "Exercise
Price").
As used herein the term "this Warrant" shall mean and include this Warrant
and any Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part.
This Warrant has been issued pursuant to the Securities Purchase Agreement
dated as of October 29, 1999 (the "Securities Purchase Agreement") by and among
the Company and Greenwich Street Capital Partners II, L.P., GSCP Offshore Fund,
L.P., Greenwich Fund, L.P., Greenwich Street Employees Fund, L.P. and TRV
Executive Fund, L.P.
The number of shares of Common Stock issuable upon exercise of this Warrant
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. (a) Subject to Section 1(b) hereof, this Warrant may be exercised during
the Exercise Period, as to the whole or any lesser number of whole Warrant
Shares, by the surrender of this Warrant (with the election at the end hereof
duly executed) to the Company, or its duly authorized agent. Such executed
election must be accompanied by payment in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares for which this Warrant is being
exercised. Such payment may be made by certified or bank cashier's check payable
to the order of the Company.
(b) Subject to the last sentence of this Section 1(b), if at any time after
[six months from the date of issuance], 2000, the Market Price (as defined in
Section 1(b) hereof) of one share of Common Stock exceeds 150% of the Exercise
Price for a period of 60 consecutive trading days, the Company may, as part of a
capital raising transaction, or a series of capital raising transactions, other
than non-equity lending transactions with commercial banks or
-----------------------
(1) Three years from date of issuance.
45
insurance companies, in which the Company raises net proceeds of at least
$5,000,000 (exclusive of the capital raised upon the exercise of this Warrant as
provided in this Section 1(b) and upon the exercise of other similar Warrants
issued contemporaneously with this Warrant), give a notice to the Holder that it
has 30 days to exercise this Warrant as to one-half of the number of shares of
Common Stock that may then be purchased upon exercise hereof. Upon the giving of
such notice, this Warrant, and the Exercise Period, shall terminate and expire
with respect to such shares of Common Stock and the Holder shall have no right
after the expiration of such 30-day period to exercise this Warrant as to
one-half of the number of shares of Common Stock that may then be purchased upon
exercise of this Warrant. Any partial termination of this Warrant as aforesaid
shall not affect this Warrant with respect to the remaining shares of Common
Stock purchasable under this Warrant. The provisions of this Section 1(b) shall
be applicable only if, and so long as, (i) the Common Stock is listed or
admitted for trading on a national securities exchange or designated as a
National Market System security by The Nasdaq Stock Market, and (ii) no
proceedings or actions are pending or threatened for the de-listing, or the
suspension or termination of trading, of the Common Stock on the principal
national securities exchange for the Common Stock, or for the removal of the
designation of the Common Stock as a National Market System security.
(c) As used herein, the term "Market Price" shall mean, on any date
specified herein, the amount per share of Common Stock, equal to either (i) the
last reported sale price per share of such Common Stock, regular way, on such
date or, in case no such sale takes place on such date, the average of the
closing bid and asked prices thereof, regular way, on such date, in either case
as officially reported on the principal national securities exchange on which
the Common Stock is then listed or admitted for trading, (ii) if such Common
Stock are not then listed or admitted for trading on any national securities
exchange but are designated as a National Market System security by The Nasdaq
Stock Market, the last reported trading price per share of Common Stock, regular
way, on such date, or (iii) if there shall have been no trading on such date or
if the Common Stock is not designated as a National Market System security by
The Nasdaq Stock Market but have been designated as a Smallcap security by The
Nasdaq Stock Market or are quoted on The Nasdaq Stock Market's (or any successor
market's) over-the-counter market or on its electronic bulletin board, the
average of the closing bid and asked prices per share of the Common Stock on
such date as shown by The Nasdaq Stock Market's (or any successor market's)
automated quotation system, over-the-counter market or electronic bulletin
board, as the case may be.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise as of the close of business on the date of such
exercise, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. As soon as practicable after each such
exercise of this Warrant, and in any event within fifteen (15) days thereafter,
the Company shall issue and deliver to the Holder a certificate or certificates
for the Warrant Shares issuable upon such exercise, registered in the name of
the Holder or its designee. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder which
new Warrant shall in all other respects be identical to this Warrant.
46
3. (a) Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations promulgated thereunder.
(b) The Holder acknowledges that it has been advised by the Company that
neither this Warrant nor the Warrant Shares have been registered under the Act,
that this Warrant is being or has been issued and the Warrant Shares may be
issued on the basis of the statutory exemption provided by Section 4(2) of the
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering. The Holder acknowledges that it has
been informed by the Company of, or is otherwise familiar with, the nature of
the limitations imposed by the Act and the rules and regulations thereunder on
the transfer of securities. In particular, the Holder agrees that no sale,
assignment or transfer of this Warrant or the Warrant Shares issuable upon
exercise hereof shall be valid or effective, and the Company shall not be
required to give any effect to any such sale, assignment or transfer, unless (i)
the sale, assignment or transfer of this Warrant or such Warrant Shares is
registered under the Act, it being understood that neither this Warrant nor such
Warrant Shares are currently registered for sale and that the Company has no
obligation or intention to so register this Warrant or such Warrant Shares
except as specifically provided in that certain registration rights agreement of
even date herewith between the Company and the Holder (the "Registration Rights
Agreement"), or (ii) such sale, assignment or transfer is exempt from
registration under the Act.
(c) Following any assignment or other transfer resulting in the issuance of
Warrants to purchase Warrant Shares to more than one person or entity, all
elections that may be made by the Holders under such Warrants shall be made by
written notice of Holders representing rights to purchase a majority of the
Warrant Shares for which such Warrants are then exercisable.
4. (a) The Company shall at all times reserve and keep available out of its
authorized and unissued Securities, solely for the purpose of providing for the
exercise of the rights to purchase all Warrant Shares granted pursuant to this
Warrant, such number of shares of
47
Common Stock as shall, from time to time, be sufficient therefor. The Company
covenants that, if and when this Warrant is exercised in whole or in part, the
shares of Common Stock issued upon such exercise, upon receipt by the Company of
the full Exercise Price therefor, shall be validly issued, fully paid and
nonassessable and will not be issued in violation of any preemptive rights of
stockholders.
(b) If and so long as the Common Stock is listed on any securities exchange
(as defined in the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), or quoted on Nasdaq, the Company will, at its expense, obtain and
maintain the approval for listing or quotation on Nasdaq upon official notice of
issuance of all shares of Common Stock issuable upon the exercise of the
Warrants at the time outstanding and maintain the listing or quotation on Nasdaq
of such shares after their issuance; and the Company will so list on such
securities exchange or obtain such quotation on Nasdaq and will register under
the Exchange Act (or any similar statue then in effect), and will maintain such
listing or quotation of, any other securities that at any time are issuable upon
exercise of this Warrant if, and at the time that, any securities of the same
class shall be listed on such securities exchange or quotation on Nasdaq by the
Company.
(c) All determinations by the Board of Directors of the Company under the
provisions of this Warrant shall be made in good faith, and all valuations made
by the Board of Directors of the Company under the terms of this Warrant must be
made with due regard to any market quotations of securities involved in, or
related to, the subject of such valuation.
(d) If the issuance of any shares of the Common Stock or other securities
of the Company are required to be registered with or approved by any
governmental authority under any federal law (other than the Act) or under any
state law before such shares or other securities may be issued, and if such
registration or approval requirements are then applicable to the issuance of
shares of the Common Stock or other securities upon exercise of this Warrant
(other than as may be required by the governmental agencies or authorities of
any foreign jurisdiction and other than as may be required by a law applicable
to a Holder by reason of its own activities or business), the Company will at
its expense, as expeditiously as possible, take reasonable steps to cause such
shares or other securities to be duly registered or approved, as the case may
be, in connection with the issuance thereof.
5. (a) In case the Company shall at any time after the date this Warrant is
first issued (i) declare a dividend on the outstanding Common Stock of the
Company payable in shares of its Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then, in each case, the number of Warrant Shares issuable upon
exercise of this Warrant, in effect at the time of the record date for such
dividend or of the effective date of such subdivision or combination, shall be
proportionately adjusted so that the Holder after such time shall be entitled to
purchase the aggregate number of shares of Common Stock which, if this Warrant
had been exercised immediately prior to such time at the then-current exercise
price, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision or combination. Upon any
adjustment of the number of Warrant Shares pursuant to this Section 5(a), the
exercise price in effect prior to such adjustment shall be adjusted to the price
obtained by multiplying such exercise price by a fraction, the numerator of
which is the number of Warrant Shares issuable upon exercise of this Warrant
immediately prior to such adjustment and the denominator of which is the number
of Warrant Shares issuable upon exercise of this
48
Warrant immediately after such adjustment. Such adjustments shall be made
successively whenever any event listed above shall occur.
(b) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by certified
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
(c) The Company shall not be required to issue fractions of shares of
Common Stock of the Company upon the exercise of this Warrant. If any fraction
of a share would be issuable on the exercise of this Warrant (or specified
portions thereof), the Company shall purchase such fraction for an amount in
cash equal to the same fraction of the Market Price of such share of Common
Stock on the date of exercise of this Warrant or, if the Market Price of a share
of the Common Stock is not determinable for any reason, the Holder shall be
permitted to round up and purchase an additional whole share of the Common Stock
for the same price per share as other shares are purchased upon exercise of this
Warrant.
6. (a) In case of any consolidation with or merger of the Company with or
into another entity (other than a merger or consolidation in which the Company
is the surviving or continuing corporation), or in case of any sale, lease or
conveyance to another entity of the property and assets of any nature of the
Company as an entirety or substantially as an entirety, the Holder shall have,
and such successor, leasing or purchasing entity, as the case may be, shall
execute an agreement providing that the Holder shall have, the right thereafter
to receive upon exercise of this Warrant the kind and amount of shares of stock
and other securities or property, including cash, or any combination thereof,
receivable upon such consolidation, merger, sale, lease or conveyance by a
Holder of the number of shares of Common Stock for which this Warrant might have
been exercised immediately prior to such consolidation, merger, sale, lease or
conveyance. Such agreement shall contain appropriate provision for further
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5 hereof.
(b) In case of any reclassification or change of the shares of Common Stock
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another entity
with or into the Company in which the Company is the continuing corporation and
in which there is a reclassification or change (including a change to the right
to receive shares of stock or other securities or property, including cash) of
the shares of Common Stock (other than a change in par value, or from no par
value to a specified par value, or as a result of a subdivision or combination,
but including any change in the shares into two or more classes or series of
shares), the Holder shall have the right thereafter to receive upon exercise of
this Warrant the kind and amount of shares of stock and other securities or
property, including cash, or any combination thereof, receivable upon such
reclassification, change, consolidation or merger by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation or merger. In
case of any such capital reorganization or reclassification, appropriate
provision shall be made
49
with respect to the rights and interests thereafter of the Holder, to the end
that all the provisions of this Warrant (including without limitation the
adjustments in Section 5 hereof) shall thereafter be applicable, as nearly as
practicable, to such stock or other securities thereafter deliverable upon
exercise of this Warrant.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases and conveyances.
(d) The Company shall not take any action, directly or indirectly, to avoid
or seek to avoid the observance or performance of any of the terms of this
Section 6, but shall at all times in good faith assist in carrying out all of
such terms.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in
shares of Common Stock or make any other distribution (other than regularly
scheduled cash dividends) to all holders of Common Stock; or
(b) issue any rights, warrants or other securities to all holders of Common
Stock entitling them to purchase any additional shares of Common Stock or any
other rights, warrants or other securities; or
(c) effect any reclassification or change of outstanding shares of Common
Stock, or any consolidation, merger, sale, lease, or conveyance of property,
described in Section 6 hereof; or
(d) effect any liquidation, dissolution or winding-up of the Company
(whether voluntary or involuntary);
then, and in any one or more of such cases, the Company shall give written
notice thereof, by certified mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
twenty (20) days prior to (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined, (ii)
the date on which any such reclassification, change of outstanding shares of
Common Stock, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange their shares for shares of stock or other
securities or property, including cash, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution or winding-up, or (iii)
the date of such other action which would require an adjustment to the Exercise
Price.
8. The issuance of any shares or other securities upon the exercise of this
Warrant (including the issuance of new Warrants as set forth in Section 2
hereof), and the delivery of certificates or other instruments representing such
shares or other securities, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the
50
Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
9. The Warrant Shares issued upon exercise of this Warrant (unless at the
time of exercise such Warrant Shares are registered under the Securities Act)
shall be subject to a stop transfer order and the certificate or certificates
evidencing such Warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS
AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH
RESPECT THERETO UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL TO THE HOLDER OF SUCH
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED."
10. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant (and upon surrender of any
Warrant if mutilated), including an affidavit of the Holder that this Warrant
has been lost, stolen, destroyed or mutilated, together with an indemnity
against any claim that may be made against the Company on account of such lost,
stolen, destroyed or mutilated Warrant, and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder a new Warrant of like date, tenor and denomination.
11. The Holder of this Warrant shall not have solely on account of such
status any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
12. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles governing conflict of laws.
13. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, (i) if to the Holder, c/o Greenwich Street Capital Partners II,
L.P., 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Attention:
Xxxxx Xxxxx and Xxxxxxx X. Xxxxxxx), facsimile (000) 000-0000, with copy to:
Dechert Price & Xxxxxx, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
(Attention: Xxxxxx X. Xxxxxx, Esq.), facsimile (000) 000-0000; (ii) if to the
Company, at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
51
(Attention: President), facsimile (000) 000-0000, with copy to Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Attention:
Xxxxx X. Xxxxxxxx, Esq.), facsimile (000) 000-0000, or (iii) in either case, to
such other address, facsimile number or person's attention as the party shall
have furnished in writing in accordance with the provisions of this Section 13.
Notice to the estate of any party shall be sufficient if addressed to the party
as provided in this Section 13. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 13 shall be deemed given at the time of receipt thereof.
14. This Warrant may be amended only by a written instrument executed by
the Company and the Holder. Any amendment shall be endorsed upon this Warrant,
and all future Holders shall be bound thereby.
Dated: [Closing Date] THCG, Inc.
By:
---------------------------------
[Name]
President
[Seal]
-------------------------------
Secretary
52
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock, $.01 par value per share, of THCG, Inc. (the "Company"), together
with all right, title, and interest therein, and does hereby irrevocably
constitute and appoint ___________________ attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:
------------------------------- ----------------------------------
(Signature)
-------------------------------------
(Signature Guaranteed)
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
To: THCG, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Attn: President
53
FORM OF ELECTION TO EXERCISE The undersigned hereby exercises his or its
rights to purchase _______ Warrant Shares covered by the within Warrant, and
tenders payment herewith in the aggregate amount of $________, by certified or
bank cashier's check, and requests that certificates for such securities be
issued in the name of, and delivered to:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print Name, Address and Social Security or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print Name, Address and Social Security or Tax Identification Number)
Dated: Name:
------------------------------- ---------------------------------
(Print)
Address:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(Signature)
-------------------------------------
(Signature Guaranteed)
54
Exhibit B to Securities Purchase Agreement
ESCROW AGREEMENT dated as of [Closing Date] (this "Escrow Agreement") by and
among:
(i) Dechert Price & Xxxxxx (as "Escrow Agent");
(ii) Walnut Financial Services, Inc." (which will change its name to "THCG,
Inc.") ("Seller"); and
(iii)Greenwich Street Capital Partners II, L.P. ("Greenwich II"), GSCP Offshore
Fund, L.P. ("GSCP Offshore"), Greenwich Fund, L.P. ("GF"), Greenwich Street
Employees Fund, L.P. ("GSEF") and TRV Executive Fund, L.P. ("TRV") (each of
Greenwich II, GSCP Offshore, GF, GSEF and TRV, a "Purchaser" and
collectively, the "Purchasers").
Witnesseth:
WHEREAS, reference is made to the Securities Purchase Agreement dated as of
October 29, 1999 by and among Seller and the Purchasers (the "Securities
Purchase Agreement"), pursuant to which Purchasers are purchasing from Seller
(i) 2,500,000 shares (the "Shares") of Seller's common stock, $.01 par value per
share (the "Common Stock"), and (ii) warrants (the "Warrants") to purchase
2,000,000 shares of Common Stock; capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the Securities
Purchase Agreement;
WHEREAS, the "Merger" and the "Related Transactions" have not yet been
effected in accordance (and as defined in) with the Amended and Restated
Agreement and Plan of Merger, dated as of August 5, 1999, by and among Seller,
Tower Hill Acquisition Corp. and Tower Hill Securities, Inc. (the "Merger
Agreement"), and the "BDC Withdrawal" (as defined in the Merger Agreement) is
not yet effective; and
WHEREAS, the Seller and the Purchasers desire to effect the "Closing" under
the Securities Purchase Agreement pending and contingent upon the consummation
of the Merger and the Related Transactions and the effectiveness of the BDC
Withdrawal.
Now, therefore, the parties hereto agree as follows:
1. Establishment of Escrow. Seller and Purchasers hereby appoint Dechert
Price & Xxxxxx as the "Escrow Agent" to hold in escrow: (i) the Registration
Rights Agreement, the Voting Agreement, the Tag-Along Agreement, the Legal
Opinions and those certificates and agreements (the "Closing Certificates")
delivered by each Purchaser and the Seller pursuant to the terms of Sections
6(b)(iii) and 6(c)(iii), respectively, of the Securities Purchase Agreement,
each in separate counterparts executed by Seller, each Purchaser and the other
parties thereto, as the case may be (the foregoing, the "Escrow Documents");
(ii) certificates representing the Shares and Warrants; and (iii) the aggregate
consideration for the Shares and Warrants in an amount equal to five million
dollars ($5,000,000) (the "Purchase Price"). The Escrow Agent hereby accepts its
appointment and designation as escrow agent pursuant to the terms and conditions
of this Escrow Agreement and acknowledges receipt: (x) from Seller, Purchasers
and the other parties to the Escrow Documents, as the case may be, of the Escrow
Documents; (y)
55
from Seller, of certificates representing the Shares and Warrants; and (z) from
Purchasers, of cash in the amount of the Purchase Price pursuant to the terms of
the Securities Purchase Agreement. Subject to Section 4 below, the Escrow
Documents, the certificates representing the Shares and the Warrants and the
Escrow Account (collectively, the "Escrow Fund") shall be held in escrow
hereunder until 10:00 A.M. (New York City time) on ___________ [the third
business day following the Closing Date], 1999 (the "Expiration Time").
2. Terms of Escrow Account. The Escrow Agent agrees to deposit the Purchase
Price in the account identified on Schedule A to this Escrow Agreement (the
"Escrow Account"). The Escrow Agent shall have control over the Escrow Account,
and no disbursements shall be made from the Escrow Account without the prior
written consent of the Escrow Agent. The Escrow Agent shall only disburse or
release funds from the Escrow Account in accordance with the provisions of this
Escrow Agreement.
3. Terms of Escrow of Shares and Warrants.
(a) Unless and until the Shares and Warrants are delivered to Purchasers
pursuant to the terms of this Escrow Agreement, no Purchaser shall be entitled
to vote, sell, pledge, convey or otherwise transfer the Shares and Warrants,
receive dividends or other distributions thereon or otherwise exercise any
rights as a stockholder of the Seller. However, Seller and the Purchasers shall
comply in all other respects with provisions of the Purchaser Documents as if
the Shares and Warrants were delivered to the Purchasers on the Closing Date and
as if the Purchaser Documents were effective from and after the Closing Date.
(b) Upon the issuance, payment or distribution of any stock or cash
dividend on or with respect to the Shares, or of any securities, cash or other
property with respect to the Shares upon the recapitalization, conversion,
exchange, reclassification, split or combination of (or similar corporate event
relating to) the Shares or the Warrants, Purchaser and Seller hereby agree that
Seller shall deliver or cause to be delivered such securities, cash or other
property (in the case of securities, delivered in the name of the Purchaser) to
the Escrow Agent and said securities, cash or other property shall thereafter be
deemed to be part of the "Escrow Fund". However, upon delivery of the Warrants
to Purchasers, the Warrants shall be deemed to have been outstanding from and
after the date hereof for purposes of determining whether the holders of the
Warrants are entitled to any adjustments based on the occurrence of any of the
foregoing.
4. Release of Escrow. (a) The Escrow Agent shall deliver the following
promptly upon, or as soon as reasonably practicable following, the receipt by
the Escrow Agent of the "Release Documents" as defined in Section 4(c) hereof:
(i) to Seller and Purchasers, as the case may be, fully executed originals
of the Escrow Documents;
(ii) to Seller, an amount representing the Purchase Price;
(iii) to Purchasers, the certificates representing the Shares and the
Warrants pursuant to the terms of the Agreement; and
(iv) to the Purchasers, all interest or other income earned on the Purchase
Price under the Escrow Account.
56
(b) In the event that Seller fails to deliver the Release Documents before
the Expiration Time, Purchasers and Seller hereby agree that the Escrow
Documents and the obligations of the parties to the Securities Purchase
Agreement to effect the sale and purchase of the Securities shall be terminated
(without the necessity of any further action on the part of any of the parties
to the Escrow Documents), and shall be of no further force or effect (subject to
the proviso contained in Section 7 (c) of the Securities Purchase Agreement). In
such case the Escrow Agent shall deliver:
(i) to Seller, the counterparts of the Escrow Documents signed by Seller;
(ii) to each Purchaser, the counterparts of the Escrow Documents signed by
such Purchaser;
(iii) to Purchasers, the Purchase Price together with all the interest and
other income earned on the Purchase Price under the Escrow Account; and
(iv) to Seller, for cancellation, the certificates representing the Shares
and the Warrants.
(c) For purposes of this Escrow Agreement, "Release Documents" shall mean
and include the following:
(i) a copy of the Articles of Merger in the form attached as Exhibit A
hereto certified by the Company as having been filed with the Secretary of State
of New York and as being effective; and
(ii) a copy of the BDC Withdrawal together with evidence of its having been
filed with the United States Securities and Exchange Commission.
5. The Escrow Agent. Acceptance by the Escrow Agent of its duties under
this Escrow Agreement is subject to the following terms and conditions, which
the parties to this Agreement hereby agree shall govern and control the rights,
duties and immunities of the Escrow Agent:
(a) The duties and obligations of the Escrow Agent shall be determined
solely by the express provisions of this Escrow Agreement and the Escrow Agent
shall not be bound by the provisions of any agreement between Seller and
Purchasers or any third party, except that the Escrow Agent is charged with
knowledge of the Escrow Documents;
(b) This Escrow Agreement sets forth the duties and obligations of the
Escrow Agent with respect to all matters pertinent thereto and such duties and
obligations will terminate as set forth herein;
(c) The Escrow Agent shall not be responsible for any failure or inability
of the Seller or the Purchasers or of anyone else, to deliver the Escrow Fund to
the Escrow Agent or otherwise to honor any of the provisions of this Escrow
Agreement or the provisions of any of the other Purchaser Documents;
(d) The out-of-pocket fees and expenses of the Escrow Agent in
administering this Escrow Agreement shall be borne by the Seller. Seller and
Purchasers, jointly and severally,
57
hereby agree to indemnify the Escrow Agent and each of its partners, employees
and agents (the "Indemnified Parties") for, and to hold each of the Indemnified
Parties harmless against, any loss, liability or expense, including but not
limited to reasonable attorneys' fees and expenses arising out of or in
connection with its acceptance of, or the performance of its duties and
obligations under this Escrow Agreement (including, but not limited to, any
action taken or omitted by the Escrow Agent in connection with this Escrow
Agreement or any action allegedly so taken or omitted) or by reason of, or as a
result of, the Escrow Agent's compliance with the joint instructions of Seller
and the Purchasers ; provided, however, that the Escrow Agent shall not be
entitled to indemnification with respect to any loss, liability or expense which
arises out of gross negligence or willful misconduct on the part of the Escrow
Agent.
(e) The Escrow Agent shall be fully protected in acting on and relying upon
any written notice, direction, request, waiver, consent, receipt or other paper
or document which the Escrow Agent in good faith believes to be genuine and to
have been signed or presented by the proper party or parties;
(f) The Escrow Agent shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it in good faith or for anything which
it may do or refrain from doing in connection herewith, except its own willful
misconduct or gross negligence; and
(g) The Escrow Agent may seek the advice of legal counsel (which may
include a partner of the Escrow Agent) in the event of any dispute or question
as to the construction of any of the provisions of this Escrow Agreement or its
duties hereunder, and it shall incur no liability and shall be fully protected
in respect of any action taken, omitted or suffered by it in good faith in
accordance with the written opinion of such counsel.
(h) The Escrow Agent is acting, and the parties hereto understand that the
Escrow Agent may continue to act, as counsel to the Purchasers in connection
with the Purchaser Documents (including this Agreement) and the transactions
contemplated thereunder or hereunder, whether or not the Escrow Fund is being
held by the Escrow Agent or has been delivered to an appropriate court in the
State of New York.
(i) The Escrow Agent does not have and will not have any interest in the
Escrow Fund but is serving only as escrow holder and has only possession
thereof.
6. Successor Agent. (a) The Escrow Agent may resign at any time by giving
thirty (30) days' written notice thereof to Seller and the Purchasers . Within
thirty (30) days after receiving such notice, the Seller and the Purchasers ,
shall in good faith agree upon and appoint a successor escrow agent (the
"Successor Escrow Agent") at which time the Escrow Agent shall deliver the
Escrow Fund to the Successor Escrow Agent. After appointment of the Successor
Escrow Agent and delivery of the foregoing by the Escrow Agent, the Escrow Agent
shall have no further duties or responsibilities in connection herewith.
(b) The Seller and the Purchasers may jointly remove the Escrow Agent upon
written notice to the Escrow Agent stating such removal and designating a
Successor Escrow Agent, and, upon delivery of the Escrow Fund to the Successor
Escrow Agent, the Escrow Agent shall thereupon be discharged from all
obligations under this Escrow Agreement and shall have no further duties or
responsibilities in connection herewith.
58
(c) If after thirty (30) days from the date of delivery of its written
notice of intent to resign, or of a notice of removal, pursuant to Section 6(b)
above, the Escrow Agent has not received a written designation of a Successor
Escrow Agent, the Escrow Agent's sole responsibility shall be in its sole
discretion either to retain custody of the Escrow Fund, or to apply to a court
of competent jurisdiction for appointment of a Successor Escrow Agent and after
such appointment to have no further duties or responsibilities in connection
herewith.
7. Miscellaneous. (a) This Escrow Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
applicable to contracts made and to be entirely performed therein. Each of the
parties hereto irrevocably submits to the jurisdiction of any New York State
court sitting in the County of New York and any Federal court sitting in the
Southern District of the State of New York in respect of any suit or proceeding
related to or arising out of this Escrow Agreement. Each party hereto also
hereby irrevocably waives any objection to the laying of the venue of any such
suit or proceeding in any such court and further waives any claim that any such
suit or proceedings brought in any such court has been brought in an
inconvenient forum. In addition to any form of service of process authorized by
law, service of process in any suit or proceeding hereunder shall be sufficient
if mailed to each party hereto at the address specified in Section 7(c) below,
and such service shall constitute "personal service" for purposes of such suit
or proceeding.
(b) This Escrow Agreement may not be assigned by any party hereto without
the written consent of the other parties. This Escrow Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective successors and permitted assigns. This Escrow Agreement shall
not confer any rights or remedies upon any person other than the parties hereto
and their respective heirs, personal representatives, legatees, successors and
permitted assigns.
(c) Any notice or consent hereunder shall be in writing and hand delivered
or sent by registered or certified mail, return receipt requested, or by Federal
Express or other similar courier service or by facsimile, as follows:
if to Seller:
THCG, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
if to any of the Purchasers:
Greenwich Street Capital Partners, II L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx and Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
59
if to the Escrow Agent:
Dechert Price & Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address or facsimile number (or to such other person's
attention) as shall be specified by like notice. Any notice which is hand
delivered in the manner provided herein shall be deemed to have been duly given
to the party to whom it is directed upon actual receipt by such party (or its
agent for notices hereunder). Any notice which is addressed and mailed in the
manner herein provided shall be conclusively presumed to have been duly given to
the party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail. Any
notice which is sent by Federal Express or other similar service shall be
conclusively presumed to have been received on the next business day. Any notice
which is sent by facsimile shall be conclusively presumed to have been received
upon dispatch; any such notice shall be confirmed by mail.
(d) For the convenience of the parties, any number of counterparts hereof
may be executed, each such executed counterpart shall be deemed an original and
all such counterparts together shall constitute one and the same instrument.
(e) This Escrow Agreement may be modified or amended only by an instrument
in writing, duly executed by Seller, each Purchaser and the Escrow Agent. No
such modification or amendment shall be binding on the Escrow Agent unless the
Escrow Agent consents thereto in writing.
(f) No waiver by any party of any term, provision, covenant, representation
or warranty contained in this Escrow Agreement (or any breach thereof) shall be
effective unless it is in writing executed by the party against which such
waiver is to be enforced; no waiver shall be deemed or construed as a further or
continuing waiver of any such term, provision, covenant, representation or
warranty (or breach) on any other occasion or as a waiver of any other term,
provision, covenant, representation or warranty (or of the breach of any other
provision) contained this Escrow Agreement on the same or any other occasion.
(g) In this Escrow Agreement (i) words denoting singular include the plural
and vice versa, (ii) "it" or "its" or words denoting any gender include all
genders, (iii) the word "including" shall mean "including without limitation,"
whether or not expressed, (iv) any reference herein to a Section refers to a
Section of this Escrow Agreement, unless otherwise stated, and (v) when
calculating the period of time within or following which any act is to be done
or steps taken, the date which is the reference day in calculating such period
shall be excluded and if the last day of such period is not a business day, then
the period shall end on the next day which is a business day.
(h) Any provision of this Escrow Agreement which may be determined by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
60
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. It is expressly understood, however, that the parties hereto
intend each and every provision of this Escrow Agreement to be valid and
enforceable and hereby knowingly waive all rights to object to any provision of
this Escrow Agreement.
* * *
61
In witness whereof, the undersigned have executed this Escrow Agreement as
of the date first above written.
Dechert Price & Xxxxxx, Walnut Financial Services, Inc.
as Escrow Agent
By: By:
--------------------- ---------------------------------
Xxxxxx X. Xxxxxx [Name]
A member of the firm President
Greenwich Street Capital Partners II, L.P.
GSCP Offshore Fund, L.P.
Greenwich Fund, L.P.
Greenwich Street Employees Fund, L.P.
TRV Executive Fund, L.P.
By: Greenwich Street Investments II,
L.L.C., their general partner
By:
---------------------------------
Xxxxx Xxxxx
Managing Member
62
Exhibit C to Securities Purchase Agreement
REGISTRATION RIGHTS AGREEMENT dated as of [Closing Date] (the "Agreement"),
by and among:
(i) THCG, Inc., a Utah corporation and formerly known as Walnut
Financial Services, Inc. (the "Company"); and
(ii) Greenwich Street Capital Partners II, L.P., a Delaware limited
partnership ("Greenwich II"), GSCP Offshore Fund, L.P., a Cayman Islands
limited partnership ("GSCP Offshore"), Greenwich Fund, L.P., a Delaware
limited partnership ("GF"), Greenwich Street Employees Fund, L.P., a
Delaware limited partnership ("GSEF"), and TRV Executive Fund, L.P., a
Delaware limited partnership ("TRV," and together with Greenwich II, GSCP
Offshore, GF and GSEF, each a "Purchaser" and collectively, "Greenwich" or
the "Purchasers").
W I T N E S S E T H:
The Company and Greenwich have entered into a Securities Purchase Agreement
dated as of October 29, 1999 (the "Purchase Agreement") pursuant to which
Greenwich is purchasing from the Company (i) 2,500,000 shares (the "Shares") of
the Company's Common Stock, $.01 par value per share (the "Common Stock"), (ii)
Warrants to purchase 1,000,000 shares of the Common Stock at a per share
exercise price of $_____ (the "Initial Warrants") and (iii) Warrants to purchase
1,000,000 shares of the Common Stock at a per share exercise price of $_____
(the "Additional Warrants" and, together with the Initial Warrants, the
"Warrants").
Capitalized terms used in this Agreement without definition have the
meanings assigned to such terms in the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Greenwich and the Company hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Business Day" shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in New York City are
authorized or required by law, regulation or executive order to close.
"Delay Notice" shall have the meaning set forth in Section 6(b) hereof.
"Demand Participation Notice" shall have the meaning set forth in Section
3(a) hereof.
"Demand Registration" shall have the meaning set forth in Section 3(a)
hereof.
"Demand Registration Notice" shall have the meaning set forth in Section
3(a) hereof.
63
"Holder" shall mean any Person that owns Registrable Securities. For
purposes of this Agreement, the Company may deem the registered holder of a
Registrable Security as the Holder thereof, regardless of any notice to the
Company.
"Material Development Condition" shall have the meaning set forth in
Section 6(b) hereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by a prospectus supplement with respect to
the terms of the offering of any portion of the Registrable Securities covered
by such Registration Statement and by all other amendments and supplements to
the prospectus, including post-effective amendments and all materials
incorporated by reference in such prospectus.
"Registrable Securities" shall mean (i) the Shares, (ii) the Warrant
Shares, and (iii) any other securities issued or issuable as a result of or in
connection with any stock dividend, stock split or reverse stock split,
combination, recapitalization, reclassification, merger or consolidation,
exchange or distribution in respect of such Common Stock.
"Registration Expenses" shall have the definition set forth in Section 7
hereof.
"Registration Period" shall have the definition set forth in Section 3(b)
hereof.
"Registration Statement" shall mean any registration statement which covers
any of the Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus included therein, all amendments and supplements to
such registration statement, including post-effective amendments, all exhibits
and all materials incorporated by reference in such registration statement.
"Requesting Securityholder" shall have the meaning set forth in Section 4
hereof.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, or any similar successor rule thereto that may be
promulgated by the SEC.
"Rule 415" shall mean Rule 415 promulgated under the Securities Act, as
amended from time to time, or any similar successor rule thereto that may be
promulgated by the SEC.
"Rule 903" shall mean Rule 903 promulgated under the Securities Act, as
amended from time to time, or any similar successor rule thereto that may be
promulgated by the SEC.
"Rule 904" shall mean Rule 904 promulgated under the Securities Act, as
amended from time to time, or any similar successor rule thereto that may be
promulgated by the SEC.
64
"SEC" shall mean the United States Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended (or any
similar successor federal statute), and the rules and regulations thereunder, as
the same are in effect from time to time.
"Underwritten Offering" shall mean a registered offering in which
securities of the Company are sold to an underwriter on a firm commitment basis
for reoffering to the public.
"Warrant Shares" shall mean the shares of Common Stock issuable upon
exercise of the Warrants.
2. Securities Subject to this Agreement. The securities entitled to the
benefits of this Agreement are the Registrable Securities but, with respect to
any particular Registrable Security, only so long as Greenwich or their
Affiliates or Related Persons continue to be the Holder of such Registerable
Security. A Registrable Security that has ceased to be a Registrable Security
cannot thereafter become a Registrable Security.
3. Demand Registration.
(a) Demand. At any time and from time to time during the term of this
Agreement, Greenwich II may demand, in writing (a "Demand Registration Notice"),
that the Company effect the registration of all or part of such Registrable
Securities held by one or more of the Holders (and in the amounts specified by
Greenwich II in the Demand Registration Notice) in the following manner: (i)
only one demand may be made with respect to the Shares, (ii) only one demand may
be made with respect to the Warrant Shares issuable upon exercise of the Initial
Warrants and (iii) only one demand may be made with respect to the Warrant
Shares issuable upon exercise of the Additional Warrants. In other words,
Holders shall have a total of three demands exercisable by Greenwich II which
shall be exercised as provided in the foregoing clauses (i)-(iii); however, any
demand made under clauses (ii) and (iii) may include any Registrable Securities
that might not have been covered by any previous "Demand Registration" (as
hereinafter defined). The Company shall have no obligation to effect any Demand
Registration unless the Demand Registration Notice covers Registrable Securities
having a "Market Price" (as defined in the Warrants) of at least $500,000 in the
aggregate. Greenwich II may, at any time up to five (5) Business Days before the
filing date of the applicable Registration Statement relating to the Demand
Registration, request that Registrable Securities of any Holder not be included
therein by providing a written notice to that effect to the Company, which
request shall be final and irrevocable. If Greenwich II shall give such notice
with respect to all of the Registrable Securities included in the Demand
Registration Notice, the Demand Registration Notice shall be deemed not to have
been made or count towards any demand rights hereunder provided that Greenwich
II (or Holders) shall reimburse the Company for its out-of-pocket costs and
expenses incurred in connection with the preparation and filing of the
Registration Statement and provided that Greenwich II has not exercised such
withdrawal right with respect to all Registrable Securities included in the
Demand Registration Notice with respect to any previously proposed Demand
Registration.
Upon receipt of a Demand Registration Notice, the Company shall use its
reasonable best efforts to file a Registration Statement on Form S-1 or, if then
available to the
65
Company, Form S-2 or Form S-3 (or any successor forms), or any other available
form under the Securities Act, covering all Registrable Securities which the
Company has been so requested to register (the "Demand Registration"), as
expeditiously as possible, but in any event no later than: (i) sixty days in the
case of a Registration Statement on Form S-1 or a Registration Statement on Form
S-2 or S-3 which will be an Underwritten Offering, or (ii) forty-five (45) days
in the case of a Registration Statement on Form S-2 or S-3 which is not an
Underwritten Offering.
(b) Effectiveness of Registration Statement. Subject to the provisions of
Section 6(b) hereof, the Company agrees to use its best efforts to (i) cause the
Registration Statement(s) relating to the Demand Registration described in
Section 3(a) hereof to become effective as promptly as practicable, and (ii)
thereafter keep each such Registration Statement effective continuously for the
period (the "Registration Period") ending, subject to the second sentence of
Section 5(b) hereof and clauses (ii) and (iii) of the last sentence of Section
6(b) hereof, on the earlier of (i) 120 days after such Registration Statement is
declared effective by the SEC, and (ii) the date on which all Registrable
Securities covered by each such Registration Statement have been sold and the
distribution contemplated thereby has been completed.
(c) Inclusion of Other Securities. The Company and any other holder of the
Company's securities who has registration rights may include its securities in
the Demand Registration effected pursuant to this Section 3 subject to the
provisions of Section 5(d)(ii) of the Securities Purchase Agreement and;
provided, the Holders shall have priority sale rights over the Company and such
other holders with respect to all Registrable Securities requested by them to be
included in such Demand Registration.
(d) Underwriter. Upon the request of the Company or Greenwich II, and the
identification by the Company of a managing underwriter reasonably satisfactory
to the Holders who have submitted the Demand Registration Notice, the Demand
Registration Statement shall provide for an Underwritten Offering. The Company
and the Holders whose Registrable Securities are covered by the Demand
Registration Statement shall enter into customary purchase and underwriting
agreements with such underwriter in connection with any Underwritten Offering
and take all such other actions as such Holders of the Registrable Securities
shall reasonably request in order to facilitate or expedite the disposition of
the Registrable Securities, including without limitation the furnishing of
information regarding the Company and its subsidiaries and their businesses,
assets, liabilities, financial condition and results of operations and causing
the officers and employees of the Company and its subsidiaries to be available
to discuss and answer questions regarding such information.
4. Piggyback Registration. If, during the term of this Agreement, the
Company at any time proposes to file a registration statement with respect to
any class of equity securities, other than for the registration of securities
for sale on a continuous or delayed basis pursuant to Rule 415, whether (i) for
its own account (other than in connection with the Registration Statement
contemplated by Section 3 hereof or a registration statement on Form S-4 or S-8
(or any successor or substantially similar form), and other than in connection
with (x) an employee stock option, stock purchase or compensation plan or of
securities issued or issuable pursuant to any such plan or (y) a dividend
reinvestment plan), or (ii) for the account of a holder of securities of the
Company pursuant to demand registration rights granted by the Company in a
manner and on terms which satisfy the requirements of, and only to the extent
permitted by Section 5(d)(ii) of the Securities Purchase Agreement (a
"Requesting Securityholder"), then the Company shall in each case give written
notice of such proposed filing to all Holders of Registrable Securities at
66
least thirty (30) days before the anticipated filing date of any such
registration statement by the Company, and such notice shall offer to all
Holders the opportunity to have any or all of the Registrable Securities held by
such Holders included in such registration statement. Each Holder of Registrable
Securities desiring to have its Registrable Securities registered under this
Section 4 shall so advise the Company in writing within fifteen (15) days after
the date of receipt of such notice (which request shall set forth the amount of
Registrable Securities for which registration is requested), and the Company
shall use its best efforts to include in such registration statement all such
Registrable Securities so requested to be included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of any such proposed
public offering reasonably advises the Company that the total amount or kind of
securities which the Company, the Holders of Registrable Securities and any
other Persons or entities intended to be included in such proposed public
offering is sufficiently large to adversely affect the success of such proposed
public offering, then the amount or kind of securities to be offered for the
accounts of any person intended to be included in the proposed offering, other
than the Company, the Requesting Securityholders and the Holders of Registrable
Securities, shall be reduced (to zero if necessary) to the extent necessary to
reduce the total amount or kind of securities to be included in such proposed
public offering to the amount or kind recommended by such managing underwriter
or underwriters, and if such reduction is not sufficient, then the amount or
kind of securities to be offered for the accounts of the Requesting
Securityholders and the Holders of Registrable Securities shall be reduced pro
rata, based on the aggregate number of securities to be offered for the accounts
of all Requesting Securityholders and all Holders of Registrable Securities,
before any reduction in the number or kind of securities to be offered by the
Company. Anything to the contrary in this Agreement notwithstanding, the Company
may withdraw or postpone a registration statement referred to in this Section 4
at any time before it becomes effective or withdraw, postpone or terminate the
offering after it becomes effective without obligation to the Holder or Holders
of the Registrable Securities.
5. Registration Procedures.
(a) General. In connection with the Company's registration obligations
pursuant to Section 3 hereof and, to the extent applicable, Section 4 hereof,
the Company will:
(i) subject to the provisions of Section 6(b) hereof, prepare and file with
the SEC a new Registration Statement or such amendments and post-effective
amendments to an existing Registration Statement as may be necessary to keep
such Registration Statement effective for the time periods set forth in Section
3(b) hereof, provided that no Registration Statement shall be required to remain
in effect after all Registrable Securities covered by such Registration
Statement have been sold and distributed as contemplated by such Registration
Statement, and, provided, further, that as soon as practicable, but in no event
later than three (3) Business Days before filing such Registration Statement,
any related Prospectus or any amendment or supplement thereto, other than any
amendment or supplement made solely as a result of incorporation by reference of
documents filed with the SEC subsequent to the filing of such Registration
Statement, the Company shall furnish to the Holders of the Registrable
Securities covered by such Registration Statement and the managing underwriters,
if any, copies of all such documents proposed to be filed, which documents shall
be subject to the review of such Holders and underwriters;
(ii) notify the selling Holders of Registrable Securities and the managing
underwriters, if any, promptly (u) when a new Registration Statement, Prospectus
or any
67
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any new Registration Statement or post-effective amendment, when it
has become effective, (v) of any request by the SEC for amendments or
supplements to any Registration Statement or Prospectus or for additional
information, (w) of the issuance by the SEC of any comments with respect to any
filing, (x) of any stop order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that purpose, (y) of any
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (z) if there is a misstatement, untrue statement or omission of a
material fact in any Registration Statement, Prospectus or any document
incorporated therein by reference or if any event occurs which requires the
making of any changes in any Registration Statement, Prospectus or any document
incorporated therein by reference in order to make the statements therein (in
the case of any Prospectus, in the light of the circumstances under which they
were made) not misleading;
(iii) if reasonably requested by the managing underwriter or underwriters
or a Holder of Registrable Securities being sold in connection with an
Underwritten Offering, promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Holders of a majority of the Registrable Securities being sold in such
Underwritten Offering agree should be included therein relating to the sale of
the Registrable Securities, including information with respect to the aggregate
number of shares of Registrable Securities being sold to such underwriters, the
purchase price being paid therefor by such underwriters and with respect to any
other terms of the Underwritten Offering of the Registrable Securities to be
sold in such offering; and promptly make all required filings of such Prospectus
supplement or post-effective amendment;
(iv) furnish to each selling Holder of Registrable Securities and each
managing underwriter, if any, without charge, as many conformed copies as may
reasonably be requested of the then effective Registration Statement and any
post-effective amendments thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(v) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the then effective
Prospectus (including each prospectus subject to completion) and any amendments
or supplements thereto as such Persons may reasonably request;
(vi) use its reasonable best efforts to register or qualify or cooperate
with the selling Holders of Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or "blue sky" laws of such jurisdictions as any selling Holder of
Registrable Securities or underwriter reasonably requests in writing; provided,
however, that the Company will not be required to (1) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify, but for
this paragraph (vi), (2) subject itself to general taxation in any such
jurisdiction, or (3) file a general consent to service of process in any such
jurisdiction;
(vii) cooperate with the selling Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the
68
managing underwriters if any may request at least two (2) Business Days prior to
any sale of Registrable Securities to the underwriters;
(viii) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange (or quotation system operated
by a national securities association) on which identical securities issued by
the Company are then listed if requested by the Holders of a majority of the
Registrable Securities covered by such Registration Statement or the managing
underwriters, if any, and enter into customary agreements including, if
necessary, a listing application and indemnification agreement in customary
form, and provide a transfer agent for such Registrable Securities no later than
the effective date of such Registration Statement;
(ix) otherwise use its best efforts to comply in all material respects with
all applicable rules and regulations of the SEC relating to such registration
and the distribution of the securities being offered and make generally
available to its securities holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act;
(x) use its reasonable best efforts to list Registrable Securities on any
securities exchange (including without limitation Nasdaq) on which the Common
Stock is then listed for trading, and cooperate and assist in any filings
required to be made with the National Association of Securities Dealers, Inc.
(the "NASD");
(xi) subject to the proviso in Section 5(a)(vi) hereof, if the transfer or
sale of any shares of the Common Stock or other securities of the Company is
required to be registered with or approved by any governmental agencies or
authorities (other than the SEC or the NASD) to enable a transferor or seller
thereof to effect a transfer or sale, and if such registration or approval
requirements are then applicable to the transfer or sale of the Registrable
Securities, then the Company shall use its reasonable best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities (other than as may
be required by the governmental agencies or authorities of any foreign
jurisdiction and other than as may be required by a law applicable to a selling
Holder by reason of its own activities or business other than the sale of
Registrable Securities);
(xii) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(xiii) in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any related Prospectus or suspending the qualification of
any Common Stock included in such Registration Statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of each order;
(xiv) use its reasonable best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities, if
the disposition or transfer of any shares of the Common Stock or other
securities of the Company are required to be registered with or approved
69
by any governmental authority under any federal or state law before any
disposition or transfer of such shares may be effected and if such registration
or approval requirements are then applicable to the disposition of such
Registrable Securities (other than as may be required by the governmental
agencies or authorities of any foreign jurisdiction and other than as may be
required by a law applicable to a selling Holder by reason of its own activities
or business other than the sale of Registrable Securities); and
(xv) obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the holders of a majority of the
Registrable Securities covered by the Registration Statement reasonably request.
As a condition precedent to the participation in any registration
hereunder, the Company may require each seller of Registrable Securities as to
which any such registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request to comply with the applicable
provisions of the Securities Act.
(b) Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(a)(ii) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the then current Prospectus until (i) such Holder is advised in writing by
the Company that a new Registration Statement covering the offer of Registrable
Securities has become effective under the Securities Act or (ii) such Holder
receives copies of any required supplemented or amended Prospectus, or until
such Holder is advised in writing by the Company that the use of the Prospectus
may be resumed. If the Company shall have given any such notice during a period
when a Demand Registration is in effect, the Company shall extend the period
during which such Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during which any such disposition of
Registrable Securities is discontinued pursuant to this Section 5(b). If so
directed by the Company, on the happening of such event, the Holder will deliver
to the Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
6. Holdback Agreements.
(a) Hold-Back Election. In the case of the registration of any Underwritten
Offering initiated by the Company (other than any registration by the Company on
Form S-4 or Form S-8 (or any successor or substantially similar form), and other
than in connection with (i) an employee stock option, stock purchase or
compensation plan or of securities issued or issuable pursuant to any such plan,
or (ii) a dividend reinvestment plan) or any underwritten secondary offering
initiated at the request of a Requesting Securityholder, each Holder agrees that
if it is reasonably requested to do so by the managing underwriter or the
underwriters, then such Holder shall not effect any public sale or distribution
of securities of the Company, except as part of such underwritten registration,
during the period beginning twenty (20) days prior to the closing date of such
Underwritten Offering and ending ninety (90) days after such closing date (or
such longer period as may be reasonably requested by the managing underwriter or
underwriters).
70
The Company agrees not to effect any public sale or distribution of its
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock (but the mere issuance of shares of Common Stock upon any
conversion, exercise or exchange of outstanding options, warrants or other
convertible securities shall not itself be deemed to be a public sale or
distribution for purposes of this sentence), (i) during the 10 days prior to and
during the forty-five (45) day period following the effective date of any Demand
Registration or Piggyback Registration, or (ii) if an Underwritten Offering,
such longer period as any underwriter in the Underwritten Offering shall
require, or such shorter period as the underwriter in the Underwritten Offering
shall permit, but in no event longer than 90 days following the effective date
of any Demand Registration or Piggyback Registration.
(b) Material Development Condition. With respect to any Registration
Statement filed or to be filed pursuant to Section 3 hereof, if the Company
determines that, in its good faith judgment, (i) it would (because of the
existence of, or in reasonable anticipation of, any acquisition or corporate
reorganization or other transaction, financing activity, stock repurchase or
other development involving the Company or any subsidiary, or the unavailability
for reasons substantially beyond the Company's control of any required financial
statements, or any other event or condition of similar significance to the
Company or any subsidiary for purposes of disclosure to the stockholders or
potential investors of the Company) be materially disadvantageous (a "Material
Development Condition") to the Company or any subsidiary or its stockholders for
such a Material Development Condition to be publicly disclosed, and (ii) the
Company reasonably believes it would be required under the Securities Act to
disclose such Material Development Condition in such Registration Statement,
then the Company shall, notwithstanding any other provision of this Agreement,
be entitled, upon the giving of a written notice that a Material Development
Condition has occurred (a "Delay Notice") from an officer of the Company to any
Holder of Registrable Securities included or to be included in such Registration
Statement, (x) to cause sales of Registrable Securities by such Holder pursuant
to such Registration Statement to cease, (y) to cause such Registration
Statement to be withdrawn and the effectiveness of such Registration Statement
terminated, or (z) in the event no such Registration Statement has yet been
filed or declared effective, to delay filing or effectiveness of any such
Registration Statement until, in the good faith judgment of the Company, such
Material Development Condition may be disclosed or no longer exists (notice of
which the Company shall promptly deliver to any Holder of Registrable Securities
with respect to which any such Registration Statement has been filed).
Notwithstanding the foregoing provisions of this Section 6(b): (i) in no event
may such cessation or delay be, for each such Registration Statement, for a
period of more than ninety (90) consecutive days from the giving of its Delay
Notice to a Holder or Holders with respect to such Material Development
Condition, as above provided; (ii) in the event a Registration Statement is
filed and subsequently withdrawn by reason of any existing or anticipated
Material Development Condition, the Company shall cause a new Registration
Statement covering the Registrable Securities to be filed with the SEC as soon
as practicable after such Material Development Condition may be discharged or no
longer exists or, if sooner, as soon as practicable after the expiration of such
ninety (90) day period and the Registration Period for such new Registration
Statement shall be the greater of thirty (30) days or the number of days that
remained in such Registration Period with respect to the withdrawn Registration
Statement at the time it was withdrawn; and (iii) in the event the Company
elects not to withdraw or terminate the effectiveness of any such Registration
Statement but to cause a Holder or Holders to refrain from selling Registrable
Securities for any period during the Registration Period, the Registration
Period with respect to such Holders shall be extended by the number of
71
days during the Registration Period that such Holders are required to refrain
from selling Registrable Securities.
7. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including all registration and
filing fees, fees and expenses of compliance with securities or "blue sky" laws
(including reasonable fees and disbursements of counsel in connection with "blue
sky" qualifications or registrations (or the obtaining of exemptions therefrom)
of the Registrable Securities), printing expenses (including expenses of
printing Prospectuses), messenger and delivery expenses, fees and disbursements
of its counsel and its independent certified public accountants, securities acts
liability insurance (if the Company elects to obtain such insurance), fees and
expenses of any special experts retained by the Company in connection with any
registration hereunder, fees and expenses of other Persons retained by the
Company and fees and expenses in connection with any review of the underwriting
arrangements by the NASD (all such expenses being referred to as "Registration
Expenses"), shall be borne by the Company; provided, that Registration Expenses
shall not include any fees and expenses of counsel for the Holders,
out-of-pocket expenses incurred by the Holders and underwriting discounts,
commissions or fees attributable to the sale of the Registrable Securities.
8. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, but without duplication,
each Holder of Registrable Securities (and its Affiliates, partners,
shareholders, officers and directors), and each Person who controls such Holder
(within the meaning of the Securities Act), against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement or
alleged untrue statement of a material fact in, or any omission or alleged
omission of a material fact required to be stated in, any Registration Statement
or Prospectus or necessary to make the statements therein (in the case of a
Prospectus in light of the circumstances under which they were made) not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by any Holder or any
underwriters expressly for use therein. The Company will also indemnify
underwriters participating in the distribution, their officers, directors,
employees, partners and agents, and each Person who controls such underwriters
(within the meaning of the Securities Act), to the same extent as provided above
in this Section 8(a) with respect to the indemnification of the Holders of
Registrable Securities, if so requested.
(b) Indemnification by Holders of Registrable Securities. In connection
with any Registration Statement in which a Holder of Registrable Securities is
participating, each such Holder will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such Registration Statement or Prospectus and agrees to
indemnify and hold harmless, to the full extent permitted by law, but without
duplication, the Company, its Affiliates, officers, directors, stockholders,
employees, advisors and agents, and each Person who controls the Company (within
the meaning of the Securities Act), against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement or
alleged untrue statement of material fact in, or any omission or alleged
omission of a material fact required to be stated in, the Registration Statement
or Prospectus or necessary to make the statements therein (in the case of a
Prospectus in light of the circumstances under which they
72
were made) not misleading, to the extent, but only to the extent, that such
untrue statement or alleged untrue statement, or omission or alleged omission,
is contained in any information or affidavit so furnished in writing by such
Holder to the Company specifically for inclusion therein. The Company and the
other Persons described above in this Section 8(b) shall be entitled to receive
indemnities from underwriters participating in the distribution to the same
extent as provided above with respect to information furnished in writing by
such Persons specifically for inclusion in any Prospectus or Registration
Statement.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel of such
indemnifying party's choice; provided, however, that any Person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in (but not control) the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such indemnified Person
unless (A) the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to the indemnified party
in a timely manner or (B) in the reasonable judgment of any such Person, based
upon a written opinion of its counsel, a conflict of interest may exist between
such Person and the indemnifying party with respect to such claims (in which
case, if the Person notifies the indemnifying party in writing that such Person
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such Person). No indemnifying party will be subject to any
liability for any settlement made without its consent. No indemnified party will
be required to 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 indemnified party of a release from all liability
in respect of such claim or litigation. An indemnifying party who is not
entitled to, or elects not to, assume the defense of the claim will not be
obligated to pay the fees and expenses of more than one counsel (except one
local counsel if required in a specific instance) for all parties indemnified by
such indemnifying party with respect to such claim.
(d) Contribution. If for any reason the indemnification provided for in
Section 8(a) or Section 8(b) hereof is unavailable to an indemnified party or
insufficient to hold it harmless as contemplated by Section 8(a) and Section
8(b) hereof, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement or the omission or alleged omission relates
to information supplied by the indemnifying party or parties on the one hand, or
the indemnified party or parties on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentations. In no event shall any participating Holder be
required to contribute any amount in excess of the proceeds received by such
Holder from the Registrable Securities offered and sold by such Holder pursuant
to such Registration Statement.
73
9. Participation in Underwritten Registrations. No Person may participate
in any Underwritten Offering hereunder unless such Person (i) agrees to sell
such Person's Registrable Securities on the basis provided in any customary
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements. Nothing in this Section 9
shall be construed to create any additional rights regarding the registration of
Registrable Securities in any Person otherwise than as set forth herein.
10. Term of Agreement. This Agreement may be terminated at any time by a
written instrument signed by Holders of all of the Registrable Securities then
outstanding. Unless sooner terminated in accordance with the preceding sentence,
this Agreement shall terminate in its entirety on such date as Greenwich or
their Affiliates or Related Persons shall cease to be the Holders of all
Registrable Securities.
11. Entire Agreement; Assignment. This Agreement (a) constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise.
12. Amendment. The provisions of this Agreement, including the provisions
of this Section 12, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Holders of a majority of the
Registrable Securities then outstanding, and any such consent so obtained shall
be binding on all Holders of Registrable Securities.
13. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in Person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to the Purchasers: Greenwich Street Capital Partners II, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx and Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to: Dechert Price & Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company to: THCG, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
74
with a copy to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address, facsimile number or Person's attention as the Person
to whom notice is given may have previously furnished to the other in writing in
the manner set forth above.
14. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and its successors and permitted
assigns, and except in regard to the parties indemnified pursuant to Section 8
hereof, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other Person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement; however, any Affiliate or
Related Person of Greenwich which becomes a Holder of Registrable Securities
shall be entitled to the benefits of this Agreement.
15. Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
17. Interpretation. The headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Article, Schedule or Exhibit, such reference
shall be to a Section or Article of or Schedule or Exhibit to this Agreement
unless otherwise indicated. Where the reference "hereof," "hereby" or "herein"
appears in this Agreement, such reference shall be deemed to be a reference to
this Agreement as a whole. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Words denoting the singular include the plural,
and vice versa, and references to it or its or words denoting any gender shall
include all genders.
18. Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF.
19. Waiver of Jury Trial. THE PURCHASERS AND THE COMPANY IRREVOCABLY WAIVE,
TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
75
* * *
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
Greenwich Street Capital Partners
II, L.P.
GSCP Offshore Fund, L.P.
Greenwich Fund, L.P.
Greenwich Street Employees Fund, L.P.
TRV Executive Fund, L.P.
THCG, Inc. (formerly Walnut Financial) By: Greenwich Street Investments
Services, Inc. II, L.L.C., their general
partner
By: By:
------------------------------------ ----------------------------------
[Name] Xxxxx Xxxxx
President Managing Member
76
Exhibit D to Securities Purchase Agreement
Voting Agreement
Whereas, pursuant to Section 5(c) of the Securities Purchase Agreement
dated as of October 29, 1999 (the "Securities Purchase Agreement") by and among:
(i) Greenwich Street Capital Partners II, L.P. ("Greenwich II"), GSCP Offshore
Fund, L.P., Greenwich Fund, L.P., Greenwich Street Employees Fund, L.P. and TRV
Executive Fund, L.P., (the foregoing being herein together referred to as the
"Purchaser") and (ii) Walnut Financial Services, Inc. (which will change its
name to "THCG, Inc.") (the "Company"), the Purchaser is entitled to nominate one
person (the "Purchaser Appointee") for election to the Board of Directors of the
Company so long as the Purchaser is the beneficial owner of 5.0% or more of the
issued and outstanding shares of Common Stock on a fully-diluted basis (assuming
for such purpose the exercise or conversion of all outstanding options, warrants
and other convertible securities, including the "Securities" (as defined in the
Securities Purchase Agreement)); and
Whereas, the undersigned is a "THSI Principal" as defined in the Securities
Purchase Agreement.
Now therefore, as an inducement to the Purchaser to purchase the
"Securities" under, and as defined in, the Securities Purchase Agreement, the
undersigned does hereby agree as follows:
1. The undersigned shall vote all shares of the capital stock of the
Company owned from time to time by the undersigned in favor of the election of
the Purchaser Appointee as shall be designated from time to time by Greenwich II
pursuant to Section 5(c) of the Securities Purchase Agreement, all to the same
extent as if the undersigned were a party to Section 5(c) of the Securities
Purchase Agreement; and the undersigned shall not take any action (or fail to
take any action) which is inconsistent with, or in contravention of, the
provisions of Section 5(c) of the Securities Purchase Agreement.
2. The undersigned shall not effect any "Exempt Transfer" (as defined in
the Securities Purchase Agreement) unless the undersigned shall have caused the
transferee to execute and deliver to the Purchaser this Voting Agreement, thus
agreeing to: (i) vote all shares of the capital stock of the Company owned from
time to time by such transferee in favor of the election of the Purchaser
Appointee as shall be designated from time to time by Greenwich II pursuant to
Section 5(c) of the Securities Purchase Agreement, and (ii) be bound by the
terms of this Voting Agreement to the same extent as the undersigned.
3. The undersigned hereby grants to the President of the Company a proxy to
vote all shares of the capital stock of the Company owned of record or
beneficially by the undersigned in favor of the election of the Purchaser
Appointee; and such proxy shall be irrevocable and shall survive the death or
disability of the undersigned (if an individual) and any merger, consolidation,
liquidation, dissolution or similar transaction affecting the undersigned or the
shares of the capital stock of the Company owned of record by the undersigned
(if the undersigned be other than an individual) if the Person who becomes the
record or beneficial holder of the shares is otherwise a THSI Principal. In the
event that, for any reason, the foregoing proxy shall become unenforceable or
shall have expired, then the undersigned shall execute and grant a new proxy on
the same terms as provided herein. The proxy granted hereunder, and the
77
obligations of the undersigned under this Voting Agreement, shall be noted in
the voting records and registrar of the Company.
4. The undersigned acknowledges that the Purchaser is relying upon this
Voting Agreement in connection with the execution, delivery and performance by
the Purchaser of the Securities Purchase Agreement and the purchase by the
Purchaser of the Securities.
5. This Voting Agreement shall terminate upon any termination of the
obligations under the Securities Purchase Agreement of the Company to issue, and
the Purchaser to purchase, the Securities. Unless terminated as aforesaid, this
Voting Agreement shall be effective as of the "Effective Time" of the Merger (as
defined in the Merger Agreement) but subject to the release of this Voting
Agreement pursuant to Section 4(a) of the Escrow Agreement.
6. This Voting Agreement shall be governed by the laws of the State of New
York, except to the extent that the corporate laws of the State of Utah shall be
applicable in connection with the exercise of the proxy granted herein.
7. Capitalized terms used herein which are not expressly defined herein
shall have the meanings given such terms in the Securities Purchase Agreement.
* * *
79
In witness whereof, the undersigned have executed and delivered this Voting
Agreement as of the [Closing Date].
THSI Principal:
------------------------------------------
Print Name:
-------------------------------
Acknowledged and accepted:
Walnut Financial Services, Inc.
(or THCG, Inc.)
By:
--------------------------------
[Name]
President
Greenwich Street Capital Partners II, L.P.
GSCP Offshore Fund, L.P.
Greenwich Fund, L.P.
Greenwich Street Employees Fund, L.P.
TRV Executive Fund, L.P.
By: Greenwich Street Investments II, L.L.C.,
their general partner
By:
----------------------------------
Xxxxx Xxxxx
Managing Member
79
Exhibit E to Securities Purchase Agreement
Tag-Along Agreement
Whereas, pursuant to Section 5(e) of the Securities Purchase Agreement
dated as of October 29, 1999 (the "Securities Purchase Agreement") by and among:
(i) Greenwich Street Capital Partners II, L.P. ("Greenwich II"), GSCP Offshore
Fund, L.P., Greenwich Fund, L.P., Greenwich Street Employees Fund, L.P. and TRV
Executive Fund, L.P., (the foregoing being herein together referred to as the
"Purchaser") and (ii) Walnut Financial Services, Inc. (which will change its
name to "THCG, Inc.") (the "Company"), the Purchaser is entitled to participate
in any proposed "Transfer" by any "Section 5 Transferor" (as such terms are
defined in the Securities Purchase Agreement); and
Whereas, the undersigned would be a "Section 5 Transferor" as defined in
the Securities Purchase Agreement.
Now therefore, as an inducement to the Purchaser to purchase the
"Securities" under, and as defined in, the Securities Purchase Agreement, the
undersigned does hereby agree as follows:
1. The undersigned shall be bound by, and shall comply with, all of the
provisions of Section 5(e) of the Securities Purchase Agreement, and all other
provisions of the Securities Purchase Agreement related thereto, which would
impose obligations upon the undersigned, all to the same extent as if the
undersigned were a party to Section 5(e) of the Securities Purchase Agreement;
and the undersigned shall not take any action (or fail to take any action) which
is inconsistent with, or in contravention of, the provisions of Section 5(e) of
the Securities Purchase Agreement.
2. The undersigned shall not effect any "Exempt Transfer" (as defined in
the Securities Purchase Agreement) unless the undersigned shall have caused the
transferee to execute and deliver to the Purchaser this Tag-Along Agreement,
thus agreeing to be bound by the terms of this Tag-Along Agreement to the same
extent as the undersigned.
3. The restrictions imposed upon the undersigned, and with respect to any
proposed Transfer of shares of the capital stock of the Company which is subject
to the provisions of Section 5(e) of the Securities Purchase Agreement and this
Tag-Along Agreement, and the obligations of the undersigned under this Tag-Along
Agreement, shall be noted on the stock certificates of the undersigned and in
the stock transfer and voting records and registrar of the Company. No Transfer
of shares of the capital stock of the Company which is subject to the provisions
of Section 5(e) of the Securities Purchase Agreement and this Tag-Along
Agreement shall be effected by the Company unless there has been compliance with
provisions of Section 5(e) of the Securities Purchase Agreement and this
Tag-Along Agreement.
4. The undersigned acknowledges that the Purchaser is relying upon this
Tag-Along Agreement in connection with the execution, delivery and performance
by the Purchaser of the Securities Purchase Agreement and the purchase by the
Purchaser of the Securities.
5. This Tag-Along Agreement shall terminate upon any termination of the
obligations under the Securities Purchase Agreement of the Company to issue, and
the Purchaser to purchase, the Securities. Unless terminated as aforesaid, this
Tag-Along Agreement shall be
80
effective as of the "Effective Time" of the Merger (as defined in the Merger
Agreement) but subject to the release of this Tag-Along Agreement pursuant to
Section 4(a) of the "Escrow Agreement".
6. This Tag-Along Agreement shall be governed by the laws of the State of
New York.
7. Capitalized terms used herein which are not expressly defined herein
shall have the meanings given such terms in the Securities Purchase Agreement.
* * *
81
In witness whereof, the undersigned have executed and
delivered this Tag-Along Agreement as of the [Closing Date].
Section 5 Transferor:
------------------------------------------
Print Name:
-------------------------------
Acknowledged and accepted:
Walnut Financial Services, Inc.
(or THCG, Inc.)
By:
--------------------------------
[Name]
President
Greenwich Street Capital Partners II, L.P.
GSCP Offshore Fund, L.P.
Greenwich Fund, L.P.
Greenwich Street Employees Fund, L.P.
TRV Executive Fund, L.P.
By: Greenwich Street Investments II, L.L.C.,
their general partner
By:
----------------------------------
Xxxxx Xxxxx
Managing Member
82
