AGREEMENT AND PLAN OF MERGER Dated as of November 7, 2007 among NATIONAL HOLDINGS CORPORATION, VFIN ACQUISITION CORPORATION and VFINANCE, INC.
AGREEMENT
AND PLAN OF MERGER
Dated
as of November 7, 2007
among
NATIONAL
HOLDINGS CORPORATION,
VFIN
ACQUISITION CORPORATION
and
VFINANCE,
INC.
Table
of Contents
|
Page
|
|
|
1
|
|
|
Section
1.1 Certain Definitions.
|
1
|
|
ARTICLE
2 THE MERGER
|
8
|
|
Section
2.1 The Merger
|
8
|
|
Section
2.2 Conversion of Shares and Merger Consideration.
|
9
|
|
Section
2.3 Surrender and Payment.
|
9
|
|
Section
2.4 Stock Options, Restricted Stock and Warrants.
|
11
|
|
Section
2.5 Adjustments
|
12
|
|
Section
2.6 Fractional Shares.
|
12
|
|
Section
2.7 Withholding Rights .
|
12
|
|
Section
2.8 Lost Certificates.
|
13
|
|
Section
2.9 Shares Held by Company Affiliates.
|
13
|
|
Section
2.10 Appraisal Rights
|
13
|
|
ARTICLE
3 THE SURVIVING CORPORATION
|
14
|
|
Section
3.1 Certificate of Incorporation of the Surviving
Corporation.
|
14
|
|
Section
3.2 Bylaws of the Surviving Corporation
|
14
|
|
Section
3.3 Directors and Officers of the Surviving Corporation
|
14
|
|
ARTICLE
4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
14
|
|
Section
4.1 Organization and Qualification.
|
14
|
|
Section
4.2 Capitalization.
|
14
|
|
Section
4.3 Authority.
|
15
|
|
Section
4.4 Governmental Authorization.
|
16
|
|
Section
4.5 Non-Contravention
|
16
|
|
Section
4.6 Board Recommendation; State Takeover Statutes
|
17
|
|
Section
4.7 Subsidiaries
|
17
|
|
Section
4.8 SEC and FINRA Filings.
|
17
|
|
Section
4.9 Disclosure Documents
|
18
|
|
Section
4.10 Absence of Certain Changes
|
19
|
|
Section
4.11 No Undisclosed Material Liabilities
|
19
|
|
Section
4.12 Litigation
|
20
|
|
Section
4.13 Taxes.
|
20
|
|
Section
4.14 Employees and Employee Benefit Plans.
|
22
|
|
Section
4.15 Compliance with Law.
|
23
|
|
Section
4.16 Contracts
|
24
|
|
Section
4.17 Finders’ or Advisors’ Fees
|
24
|
|
Section
4.18 Environmental Matters
|
24
|
|
Section
4.19 Labor Matters
|
25
|
|
Section
4.20 Property
|
26
|
|
Section
4.21 Proprietary Rights
|
26
|
|
Section
4.22 Insurance
|
27
|
|
Section
4.23 Opinion of Financial Advisor
|
27
|
|
Section
4.24 Takeover Laws
|
27
|
|
Section
4.25 Transactions with Affiliates
|
27
|
i
|
Section
4.26 Full Disclosure.
|
27
|
|
ARTICLE
5 REPRESENTATIONS AND WARRANTIES OF PARENT
|
28
|
|
Section
5.1 Organization and Qualification.
|
28
|
|
Section
5.2 Capitalization.
|
28
|
|
Section
5.3 Authority.
|
29
|
|
Section
5.4 Governmental Authorization
|
29
|
|
Section
5.5 Non-Contravention
|
29
|
|
Section
5.6 Board Recommendation
|
30
|
|
Section
5.7 Subsidiaries
|
30
|
|
Section
5.8 SEC and FINRA Filings
|
31
|
|
Section
5.9 Disclosure Documents.
|
31
|
|
Section
5.10 Absence of Certain Changes
|
31
|
|
Section
5.11 No Undisclosed Material Liabilities
|
32
|
|
Section
5.12 Litigation
|
32
|
|
Section
5.13 Taxes.
|
33
|
|
Section
5.14 Employees and Employee Benefit Plans.
|
34
|
|
Section
5.15 Compliance with Law
|
35
|
|
Section
5.16 Contracts.
|
36
|
|
Section
5.17 Finders’ or Advisors’ Fees.
|
36
|
|
Section
5.18 Environmental Matters
|
36
|
|
Section
5.19 Labor Matters.
|
37
|
|
Section
5.20 Property
|
38
|
|
Section
5.21 Proprietary Rights
|
38
|
|
Section
5.22 Insurance
|
39
|
|
Section
5.23 Opinion of Financial Advisor
|
39
|
|
Section
5.24 Takeover Statutes
|
39
|
|
Section
5.25 Transactions with Affiliates
|
39
|
|
Section
5.26 Full Disclosure
|
39
|
|
ARTICLE
6 COVENANTS RELATING TO CONDUCT OF BUSINESS
|
39
|
|
Section
6.1 Conduct of Business
|
39
|
|
Section
6.2 Governmental Filings
|
43
|
|
Section
6.3 Other Company Acquisition Proposals.
|
43
|
|
Section
6.4 Other Parent Acquisition Proposals.
|
46
|
|
Section
6.5 Consents of Parent’s and the Company’s Accountants
|
48
|
|
Section
6.6 Notification of Certain Matters.
|
49
|
|
Section
6.7 SEC Filings.
|
49
|
|
Section
6.8 Clearing Arrangements.
|
50
|
|
ARTICLE
7 ADDITIONAL COVENANTS OF PARENT AND THE COMPANY
|
50
|
|
Section
7.1 Preparation of Proxy Statement; Stockholders Meetings.
|
50
|
|
Section
7.2 Parent Board Of Directors.
|
52
|
|
Section
7.3 Access to Information; Confidentiality Agreement.
|
52
|
|
Section
7.4 Reasonable Commercial Efforts.
|
53
|
|
Section
7.5 Public Announcements
|
55
|
|
Section
7.6 Notification of Certain Matters
|
55
|
|
Section
7.7 Expenses
|
55
|
|
Section
7.8 Affiliates.
|
55
|
ii
|
Section
7.9 Intentionally Deleted
|
55
|
|
Section
7.10 Indemnification.
|
56
|
|
Section
7.11 Form S-8
|
57
|
|
ARTICLE
8 CONDITIONS TO THE MERGER
|
57
|
|
Section
8.1 Conditions to the Obligations of Each Party
|
57
|
|
Section
8.2 Conditions to the Obligations of Parent and Merger
Sub.:
|
58
|
|
Section
8.3 Conditions to the Obligations of the Company
|
59
|
|
ARTICLE
9 TERMINATION
|
59
|
|
Section
9.1 Termination
|
59
|
|
Section
9.2 Termination by Parent
|
60
|
|
Section
9.3 Termination by the Company
|
61
|
|
Section
9.4 Procedure for Termination
|
61
|
|
Section
9.5 Effect of Termination
|
61
|
|
ARTICLE
10 MISCELLANEOUS
|
62
|
|
Section
10.1 Notices.
|
62
|
|
Section
10.2 Non-Survival of Representations and Warranties
|
63
|
|
Section
10.3 Amendments; No Waivers.
|
63
|
|
Section
10.4 Successors and Assigns
|
63
|
|
Section
10.5 Governing Law
|
63
|
|
Section
10.6 Jurisdiction and Venue
|
63
|
|
Section
10.7 Waiver of Jury Trial.
|
64
|
|
Section
10.8 Counterparts; Effectiveness
|
64
|
|
Section
10.9 Entire Agreement
|
64
|
|
64
|
|
|
Section
10.11 Severability
|
64
|
EXHIBITS:
Exhibit
A
- Form of Xxxxxxxxxx Employment Agreement
Exhibit
B
- Form of Xxxxxxx Employment Agreement
Exhibit
C
- Form of Xxxxx Employment Agreement
Exhibit
D
- Form of Xxxxxxxxxx Option Agreement
Exhibit
E
- Form of Xxxxxxx Option Agreement
Exhibit
F
- Xxxxxxx Voting Agreement
Exhibit
G
- Form of Director Voting Agreement
Exhibit
H
- Form of Xxxxxxx Employment Termination Agreement
iii
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER, dated as of November 7, 2007 (the “Agreement”), by
and among vFinance, Inc., a Delaware corporation (the “Company”), National
Holdings Corporation, a Delaware corporation (“Parent”), and vFin Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
(“Merger Sub”).
WITNESSETH:
WHEREAS,
the respective Boards of Directors of Parent, Merger Sub and the Company have
approved this Agreement, and deem it advisable and in the best interests of
each
corporation and its respective stockholders to consummate the merger of Merger
Sub with and into the Company upon the terms and subject to the conditions
of
this Agreement in accordance with the General Corporation Law of the State
of
Delaware (the “DGCL”) and the Board of Directors of the Company, upon
unanimous recommendation of the Special Committee,
has
recommended that this Agreement be adopted by the Company’s stockholders; and
WHEREAS,
pursuant to the Merger, among other things, and subject to the terms and
conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company shall be converted into the right to receive shares
of voting common stock of Parent and all outstanding options and warrants to
purchase shares of common stock of the Company which are not exercised prior
to
the Merger shall be assumed by Parent; and
WHEREAS,
as a condition and inducement of Parent’s willingness to enter into this
Agreement, Xxxxxxx shall enter into the Voting Agreement referenced in Section
8.1 hereof (the “Voting Agreement”); and
WHEREAS,
for federal income tax purposes, the Merger is intended to qualify as a tax-free
reorganization within the meaning of section 368(a) of the Internal Revenue
Code
of 1986, as amended (the “Code”) and be accounted for as a purchase transaction;
and,
WHEREAS,
each of the parties hereto desires to make certain representations, warranties,
covenants and agreements in connection with the transactions contemplated
hereby:
NOW,
THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
ARTICLE
1
CERTAIN
DEFINITIONS
Section
1.1 Certain
Definitions.
The
following terms are used in this Agreement with the meanings set forth
below:
“Acceptable
Confidentiality Agreement” means a confidentiality and standstill agreement that
contains provisions that are no less favorable to the Company than those
contained in the Confidentiality Agreement and that shall not contain any
exclusivity provision in favor of the counterparty thereto or any provision
having the effect of prohibiting the Company from satisfying its obligations
under this Agreement.
“Agreeing
Party” has the meaning assigned in Section 6.1.
“Agreement”
has the meaning assigned in the Preamble.
“Approvals”
has the meaning assigned in Section 8.1(c).
“Business
Day” means any day on which the principal offices of the SEC in Washington, D.C.
are open to accept filings or, in the case of determining a date when any
payment is due, any day on which banks are not required or authorized to close
in New York City.
“Certificates”
has the meaning assigned in Section 2.3(a).
“Change
in the Company Recommendation” has the meaning assigned in Section 7.1(b).
“Clearing
Arrangements Approvals” has the meaning assigned in Section 6.8.
“Closing”
has the meaning assigned in Section 2.1(d).
“Closing
Date” has the meaning assigned in Section 2.1(d).
“COBRA”
has the meaning assigned in Section 4.14(f).
“Code”
has the meaning assigned in the Preamble.
“Company”
has the meaning assigned in the Preamble.
“Company
Acquisition Proposal” shall have the meaning assigned in Section
6.3.
“Company
Affiliate” shall have the meaning assigned in Section 7.8.
“Company
Agreements” has the meaning assigned in Section 4.5.
“Company
Balance Sheet” means the consolidated balance sheet of the Company as of
December 31, 2006.
“Company
Balance Sheet Date” means December 31, 2006.
“Company
Broker Dealers” has the meaning assigned in Section 5.8.
“Company
Common Stock” has the meaning assigned in Section 4.2.
“Company
Disclosure Schedule” has the meaning assigned in the introductory clause to
Article 4.
“Company
Employment Agreements” has the meaning assigned in Section 4.14.
“Company
Expenses” has the meaning assigned in Section 9.5.
2
“Company
Fairness Opinion” has the meaning assigned in Section 4.23.
“Company
Financial Statements” shall mean the audited consolidated financial statements
and unaudited consolidated interim financial statements of the
Company.
“Company
Intellectual Property” has the meaning assigned in Section 4.21.
“Company
Licenses” has the meaning assigned in Section 4.21.
“Company
Permits” has the meaning assigned in Section 4.15.
“Company
Preferred Stock” has the meaning assigned in Section 4.2.
“Company
Recommendation” has the meaning assigned in Section 7.1(b).
“Company
Record Date” shall mean the date of record set by the Board of Directors of the
Company for the determination of whether a holder of Company Common Stock is
entitled to vote at the Company Stockholders Meeting.
“Company
Returns” has the meaning assigned in Section 4.13(b).
“Company
SEC Documents” has the meaning assigned in Section 4.8.
“Company
Securities” has the meaning assigned in Section 4.2.
“Company
Share” has the meaning assigned in Section 2.2(a)(ii).
“Company
Stock Options” has the meaning assigned in Section 2.4(a).
“Company
Stock Plans” has the meaning assigned in Section 2.4(a).
“Company
Stockholder Approval” has the meaning assigned in Section 4.3.
“Company
Stockholders Meeting” has the meaning assigned in Section 4.3.
“Company
Trade Secrets” has the meaning assigned in Section 4.21.
“Company
Triggering Event” has the meaning assigned in Section 9.2.
“Company
Warrants” has the meaning assigned in Section 4.2.
“Costs”
has the meaning assigned in Section 7.10(a).
“DGCL”
has the meaning assigned in Section 2.1(a).
“Effective
Time” has the meaning assigned in Section 2.1(b).
“Employee
Plans” has the meaning assigned in Section 4.14(b).
“End
Date” has the meaning assigned in Section 9.1(b).
3
“Environment”
means air, surface water, ground water, stream and river sediments, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish, biota or other natural resources.
“Environmental
Clean-up Site” means any location which is listed or proposed for listing on the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System, or on any similar state list of sites relating
to investigation or cleanup, or which is the subject of any pending or
threatened action, suit, proceeding, or investigation, formal or informal,
related to or arising from any location at which there has been a Release or
threatened or suspected Release of a Hazardous Material.
“Environmental
Law” means any Law relating to Hazardous Materials or to the Environment,
including the Comprehensive, Environmental Response Compensation and Liability
Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid
Waste
Disposal Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the
California Safe Drinking Water and Toxic Enforcement Act.
“Environmental
Liabilities” means any claims, judgments, damages (including punitive damages),
losses, penalties, fines, liabilities, Encumbrances, violations, costs, and
expenses (including attorneys’ and consultants’ fees) that (a) are incurred
as a result of (i) the existence or alleged existence of Hazardous
Substances in, on, under, at or emanating from any Property, (ii) the
off-site transportation, treatment, storage or disposal of Hazardous Substances,
or (iii) the violation of or non-compliance with or alleged violation of or
non-compliance with any Environmental Law, or (b) arise under the
Environmental Laws.
“Environmental
Permit” means any permit, license, approval, consent or authorization required
under or in connection with any Environmental Law and includes any and all
orders, consent orders or binding agreements issued by or entered into with
a
Governmental Authority or Regulatory Authority.
“ERISA”
has the meaning assigned in Section 4.14(b).
“Exchange
Act” has the meaning assigned in Section 4.4.
“Exchange
Agent” has the meaning assigned in Section 2.3(a).
“Exchange
Ratio” has the meaning assigned in Section 2.2(a)(iii).
“FINRA”
means The Financial Industry Regulatory Authority.
“Form
S-4” has the meaning assigned in Section 4.9(a).
“GAAP”
shall mean generally accepted accounting principles.
“Xxxxxxxxxx”
has the meaning assigned in Section 8.1(e).
“Governmental
and SRO Authorizations” has
the
meaning assigned in Section 4.15(b).
4
“Governmental
Authority” means any United States federal, state, provincial, supranational,
county or local or any foreign government, governmental, regulatory or
administrative authority, agency, self-regulatory body, instrumentality or
commission, and any court, tribunal, or judicial or arbitral body (including
private bodies) and any political or other subdivision, department or branch
of
any of the foregoing.
“Hazardous
Material” means (a) any chemical, material, substance or waste including,
containing or constituting petroleum or petroleum products, solvents (including
chlorinated solvents), nuclear or radioactive materials, asbestos in any form
that is or could become friable, radon, lead-based paint, urea formaldehyde
foam
insulation or polychlorinated biphenyls, or (b) any chemicals, materials,
substances or wastes which are now defined as or included in the definition
of
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely
hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic
pollutants” or words of similar import under any Environmental Law.
“Indemnified
Parties” has the meaning assigned in Section 7.10(a).
“IRS”
means the Internal Revenue Service.
“Knowledge”
with respect to the “Knowledge” of a party means that such party will be deemed
to have “Knowledge” of a particular fact or matter if any individual who is
serving as a director or officer of such party or any of its Subsidiaries,
has
actual knowledge of such fact or matter, after reasonable inquiry.
“Laws”
means any foreign, federal, state or local statute, law (including common law),
rule, ordinance, code or regulation, any order, and any regulation, rule,
interpretation, guidance, directive, policy statement or opinion of any
Governmental Authority.
“Lien”
has the meaning assigned in Section 4.5.
“Material
Adverse Effect” means any change, violation, inaccuracy, circumstance or effect
that is materially adverse to the business, properties, assets (including
intangible assets), liabilities, capitalization, results of operations or
financial condition of either party and its Subsidiaries, taken as a whole,
as
the case may be; provided, however, that any direct adverse effect that results
solely from the public announcement of the transactions contemplated by this
Agreement shall not be taken into account in determining whether there has
been
a Material Adverse Effect.
“Merger”
has the meaning assigned in Section 2.1(a).
“Merger
Consideration” has the meaning assigned in Section 2.2(b).
“Merger
Sub” has the meaning assigned in the Preamble.
“Nonplan
Stock Options” has the meaning assigned in Section 2.4.
“Ordinary
course of business” means the ordinary course of business of the Company and the
Subsidiaries consistent with past practice.
5
“OTC
BB”
means the OTC Bulletin Board.
“Parent”
has the meaning assigned in the Preamble.
“Parent
Acquisition Proposal” has the meaning assigned in Section 6.4.
“Parent
Agreements” has the meaning assigned in Section 5.5.
“Parent
Balance Sheet” means the consolidated balance sheet of the Parent as of
September 30, 2006.
“Parent
Balance Sheet Date” means September 30, 2006.
“Parent
Common Stock” means the Common Stock of Parent.
“Parent
Disclosure Schedule” has the meaning assigned in the introductory clause to
Article 5.
“Parent
Employment Agreements” has the meaning assigned in Section 5.14(a).
“Parent
Expenses” has the meaning assigned in Section 9.5.
“Parent
Fairness Opinion” has the meaning assigned in Section 5.23.
“Parent
Financial Statements” shall mean the audited consolidated financial statements
and unaudited consolidated interim financial statements of the
Parent.
“Parent
Intellectual Property” has the meaning assigned in Section 5.21.
“Parent
Licenses” has the meaning assigned in Section 5.21.
“Parent
Permits” has the meaning assigned in Section 5.15.
“Parent
Preferred Stock” has the meaning assigned in Section 5.2.
“Parent
Returns” has the meaning assigned in Section 5.13(a).
“Parent
Securities” shall have the meaning assigned in Section 5.2.
“Parent
SEC Documents” has the meaning assigned in Section 5.8.
“Parent
Series A Preferred” has
the
meaning assigned in Section 5.2.
“Parent
Series B Preferred” has
the
meaning assigned in Section 5.2.
“Parent
Trade Secrets” has the meaning assigned in Section 5.21.
“Parent
Triggering Event” has the meaning assigned in Section 9.3.
“Person”
means an individual, a corporation, a limited liability company, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality thereof,
or
any other “person” as defined in Section 13(d)(3) of the Exchange Act.
6
“Proxy
Statement/Prospectus” has the meaning assigned in Section 4.9(a).
“Qualifying
Amendment” means an amendment or supplement to the Proxy Statement/Prospectus or
Form S-4 (including by incorporation by reference) to the extent it contains
(a)
a Change in the Company Recommendation, (b) a statement of the reasons of the
Board of Directors of the Company for making such a Change in the Company
Recommendation and (c) additional information reasonably related to the
foregoing.
“Regulatory
Law” means, all statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines and other Laws promulgated or enacted by any Governmental
Authority that are designed or intended to prohibit, restrict or regulate (a)
mergers, acquisitions or other business combinations, (b) foreign investment,
or
(c) actions having the purpose or effect of monopolization or restraint of
trade
or lessening of competition.
“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of a Hazardous Material
into
the Environment.
“Required
Approvals” has the meaning assigned in Section 7.4.
“Required
Company Stockholder Vote” has the meaning assigned in Section
4.9(c).
“Restricted
Stock Purchase Agreement” means a Restricted Stock Purchase Agreement in the
form utilized under one of the Company Stock Plans pursuant to which the Company
has sold Company restricted stock or issued Company stock purchase rights or
as
may otherwise have been entered into by the Company prior to the date of this
Agreement.
“SEC”
has
the meaning assigned in Section 4.8.
“Securities
Act” has the meaning assigned in Section 4.4.
“Site”
means any of the real properties currently owned, leased, occupied, used or
operated by the Company, including all soil, subsoil, surface waters and
groundwater.
“Xxxxxxx”
has the meaning assigned in Section 8.1(e).
“Special
Committee” means the Special Committee of the Company’s Board of Directors,
comprised of Xxxxxxx Xxxxxx and Xxxxx Xxxxxx.
“Subsidiary”
when used with respect to any Person means any other Person, whether
incorporated or unincorporated, of which (a) more than fifty percent (50%)
of
the securities or other ownership interests or (b) securities or other interests
having by their terms ordinary voting power to elect more than fifty percent
(50%) of the board of directors or others performing similar functions with
respect to such corporation or other organization, is directly owned or
controlled by such Person or by any one or more of its Subsidiaries.
7
“Superior
Proposal” has the meaning assigned in Section 6.3.
“Surviving
Corporation” has the meaning assigned in Section 2.1(a).
“Tail
Coverage” has the meaning assigned in Section 7.10(b).
“Takeover
Laws” means (a) any “moratorium,” “control share acquisition,” “fair price,”
“supermajority,” “affiliate transactions” or “business combination statute or
regulation” or other similar state antitakeover Laws and (b) Section 203 of the
DGCL.
“Tax”
has
the meaning assigned in Section 4.13(a).
“Taxing
Authority” has the meaning assigned in Section 4.13(a).
“Third
Party Expenses” means all legal, accounting and financial advisory fees and
expenses of third parties, whether payable in cash or securities, incurred
by a
party to this Agreement in connection with the negotiation and effectuation
of
all terms and conditions of this Agreement and the transactions contemplated
hereby.
“2006
10-K” has the meaning assigned in Section 4.7.
ARTICLE
2
THE
MERGER
Section
2.1 The
Merger.
(a) In
accordance with the provisions of this Agreement and the General Corporation
Law
of the State of Delaware (the “DGCL”), at the Effective Time, Merger Sub shall
be merged with and into the Company (the “Merger”), whereupon the separate
existence of Merger Sub shall cease and the Company shall be the surviving
corporation (hereinafter sometimes called the “Surviving Corporation”) in the
Merger and a wholly owned subsidiary of Parent.
(b) As
soon
as practicable after satisfaction or, to the extent permitted hereunder, waiver
of all conditions to the Merger, the Company and Merger Sub shall file a
certificate of merger with the Secretary of State of Delaware and make all
other
filings or recordings required by DGCL in connection with the Merger. The Merger
shall become effective at such time as the certificate of merger is duly filed
with the Secretary of State of the State of Delaware or at such later time
as is
specified in the certificate of merger (the “Effective Time”).
(c) From
and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, property and powers and be subject to all of the
restrictions, disabilities, debts, obligations and duties of the Company and
Merger Sub, all as provided under the DGCL.
(d) Unless
this Agreement is earlier terminated pursuant to Article 9, the closing of
the
Merger (the “Closing”) shall take place at the offices of Xxxxxxx Xxxxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as soon as practicable, but in any
event within three (3) Business Days after the day on which the last to be
fulfilled or waived of the conditions set forth in Article 8 (other than those
conditions that by their nature are to be fulfilled at the Closing, but subject
to the fulfillment or waiver of such conditions) shall be fulfilled or waived
in
accordance with this Agreement or at such other time, place and date as is
mutually agreed to in writing by the parties hereto. The date of the Closing
is
referred to in this Agreement as the “Closing Date.”
8
Section
2.2 Conversion
of Shares and Merger Consideration.
(a) As
of the
Effective Time, by virtue of the Merger and without any action on the part
of
Merger Sub, the Company or the holders of any of the following
securities:
(i) Each
share of common stock of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully
paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation with the same rights, powers and privileges as the shares
so converted, and such shares shall constitute the only outstanding shares
of
capital stock of the Surviving Corporation. From and after the Effective Time,
all certificates representing the common stock of Merger Sub shall be deemed
for
all purposes to represent the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with this Section
2.2(a)(i).
(ii) Each
share of Company Common Stock (a “Company Share”) held by the Company as
treasury stock or owned by any subsidiary of the Company, shall be cancelled,
and no payment shall be made with respect thereto.
(iii) Each
Company Share issued and outstanding immediately prior to the Effective Time
(and except as otherwise provided in Section 2.2(a)(ii)), by virtue of the
Merger will be converted into the right to receive 0.14 (the “Exchange Ratio”)
shares of Parent common stock (the “Parent Common Stock”), plus any cash in lieu
of fractional shares of Parent Common Stock as provided in Section 2.6
hereof.
(b) The
Parent Common Stock to be received as consideration pursuant to the Merger
by
each holder of Company Shares (together with cash in lieu of fractional shares
of Parent Common Stock as provided in Section 2.6 hereof) is referred to herein
as the “Merger Consideration.”
(c) From
and
after the Effective Time, all Company Shares converted in accordance with
Section 2.2(a)(iii) shall no longer be outstanding and shall automatically
be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Company Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any dividends
payable pursuant to Section 2.3(e). From and after the Effective Time, the
stock
transfer books of the Company shall be closed as to holders of Company Common
Stock immediately prior to the Effective Time and no transfer of Company Common
Stock by any such holder shall thereafter be made or recognized.
Section
2.3 Surrender
and Payment.
(a) Prior
to
the Effective Time, Parent shall appoint a bank or trust company as agent
(the
“Exchange Agent”) for the purpose of exchanging certificates representing
Company Shares (the “Certificates”) for the Merger Consideration. Parent will
make available to the Exchange Agent, as needed, the Merger Consideration to
be
delivered in respect of the Company Shares. Promptly after the Effective Time,
Parent will send, or will cause the Exchange Agent to send, to each holder
of
record at the Effective Time of Company Shares the following documents: (i)
a
letter of transmittal for use in such exchange (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the surrender of the Certificate in exchange for payment
with respect thereto.
9
(a) Each
holder of Company Shares that have been converted into a right to receive the
Merger Consideration, upon surrender to the Exchange Agent of a Certificate,
together with a properly completed letter of transmittal, will be entitled
to
receive the Merger Consideration payable in respect of the Company Shares
represented by such Certificate. Until so surrendered, each such Certificate
shall, after the Effective Time, represent for all purposes only the right
to
receive such Merger Consideration. In
the
event that a holder has lost or misplaced a Certificate, an affidavit of loss
thereof (together with an appropriate indemnity and/or bond if the Parent so
requires by notice in writing to the holder of such Certificate) satisfactory
in
form and substance to the Parent's transfer agent and the Exchange Agent shall
accompany such letter of transmittal in lieu of the applicable Certificate.
In
the event of transfer of ownership of Company Shares which is not registered
in
the transfer records of the Company, payment of the applicable Merger
Consideration may be made to a transferee if the Certificate representing
Company Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. No interest shall accrue or
be
paid to any beneficial owner of Company Shares or any holder of any Certificate
with respect to the Merger Consideration payable upon the surrender of any
Certificate. If there are any certificates or scrip or Company Shares
representing fractional shares of Company Shares, the holder of any such
fractional share interest shall be entitled to receive his or her pro rata
share
of the Merger Consideration as corresponds to his or her fractional share
interest.
(b) If
any
portion of the Merger Consideration is to be registered in the name of a Person
other than the Person in whose name the applicable surrendered Certificate
is
registered, it shall be a condition to such registration that the Certificate
so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such registration shall pay to the
Exchange Agent any transfer or other taxes required as a result of such
registration in the name of a Person other than the registered holder of such
Certificate or establish to the satisfaction of the Exchange Agent that such
tax
has been paid or is not payable.
(c) After
the
Effective Time, there shall be no further registration of transfers of Company
Shares. If, after the Effective Time, Certificates are presented to the Exchange
Agent, the Surviving Corporation or the Parent, they shall be canceled and
exchanged for the Merger Consideration provided for, and in accordance with
the
procedures set forth, in this Article 2.
(d) Any
portion of the Merger Consideration made available to the Exchange Agent
pursuant to Section 2.3(a) that remains unclaimed by the holders of Company
Shares one (1) year after the Effective Time shall be returned to Parent, upon
demand, and any such holder who has not exchanged such holder’s Company Shares
for the Merger Consideration in accordance with this Section 2.3 prior to that
time shall thereafter look only to Parent for delivery of the Merger
Consideration in respect of such holder’s Company Shares. Notwithstanding the
foregoing, Parent, the Exchange Agent and the Surviving Corporation shall not
be
liable to any holder of Company Shares for any Merger Consideration delivered
to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
10
(e) No
dividends or other distributions with respect to Parent Common Stock issued
in
the Merger shall be paid to the holder of any unsurrendered Certificates until
such Certificates are surrendered as provided in this Section 2.3. Subject
to
the effect of applicable laws, following such surrender, there shall be paid,
without interest, to the record holder of the Parent Common Stock issued in
exchange therefor (i) at the time of such surrender, all dividends and other
distributions payable in respect of such Parent Common Stock with a record
date
after the Effective Time and a payment date on or prior to the date of such
surrender and not previously paid and (ii) at the appropriate payment date,
the
dividends or other distributions payable with respect to such Parent Common
Stock with a record date after the Effective Time but with a payment date
subsequent to such surrender. For purposes of dividends or other distributions
in respect of Parent Common Stock, all Parent Common Stock to be issued pursuant
to the Merger shall be entitled to dividends pursuant to the immediately
preceding sentence as if issued and outstanding as of the Effective Time.
Section
2.4 Stock
Options, Restricted Stock and Warrants.
(a) At
the
Effective Time, each outstanding option to purchase Company Shares that is
either: (a) granted under the Company’s plans identified in Section 2.4 of the
Company Disclosure Schedule (as defined in the introductory clause to Article
4
below) as being the only compensation or benefit plans or agreements pursuant
to
which Company Shares may be issued (collectively, the “Company Stock Plans”), or
(b) granted outside of the Company Stock Plans and identified in Section 2.4
of
the Disclosure Schedule (the “Nonplan Stock Options”), whether vested or not
vested (collectively, the “Company Stock Options”), shall be deemed assumed by
Parent and shall thereafter be deemed to constitute an option to acquire, on
the
same terms and conditions (including any provisions for acceleration) as were
applicable under such Company Stock Option prior to the Effective Time (in
accordance with the past practice of the Company with respect to interpretation
and application of such terms and conditions), the number (rounded to the
nearest whole number) of shares of Parent Common Stock determined by multiplying
(x) the number of Company Shares subject to such Company Stock Option
immediately prior to the Effective Time by (y) the Exchange Ratio, at a price
per share of Parent Common Stock (rounded up to the nearest whole cent) equal
to
(a) the exercise price per Company Share otherwise purchasable pursuant to
such
Company Stock Option divided by (b) the Exchange Ratio. The parties intend
that
the conversion of the Company Stock Options hereunder will meet the requirements
of section 424(a) of the Code in the case of incentive stock options and this
Section 2.4(a) shall be interpreted or modified consistent with such intention.
Except
for the approval of the holders of certain options (which will be obtained
prior
to the Effective Time),
the
terms of the Company Stock Plans permit the assumption of options to purchase
Company Common Stock as provided in this Section 2.4(a), without the consent
or
approval of the holders of such options. Except
as
set forth in Section 2.4 of the Company Disclosure Schedule, the Merger will
not
terminate or accelerate any Company Stock Option or any right of exercise,
vesting or repurchase relating thereto with respect to Parent Common Stock
acquired upon exercise of such assumed Company Stock Option. Holders of Company
Stock Options will not be entitled to acquire Company Shares after the Merger.
In addition, prior to the Effective Time, the Company will make any amendments
to the terms of such stock option or compensation plans or arrangements that
are
necessary to give effect to the transactions contemplated by this Section 2.4.
11
(b) Parent
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Parent Common Stock for delivery pursuant to the terms
set
forth in this Section 2.4.
(c) Each
Company Warrant that remains outstanding following the Effective Time shall
continue to have, and be subject to, the same terms and conditions set forth
in
the documents governing such Company Warrant immediately prior to the Effective
Time, except that (i) such Company Warrant will be exercisable for that number
of whole shares of Parent Common Stock as is equal to the product of the number
of Company Shares that were purchasable under the Company Warrant immediately
prior to the Effective Time, multiplied by the Exchange Ratio, rounded down
to
the nearest whole number of shares of Parent Common Stock and (ii) the per
share
exercise price for Parent Common Stock issuable upon exercise of such Company
Warrant will be equal to the quotient obtained by dividing the aggregate
exercise price of such Company Warrant immediately prior to the Effective Time
by the number of shares of Parent Common Stock for which such Company Warrant
shall be exercisable as determined in accordance with the preceding clause
(i),
rounded to the nearest whole cent.
Section
2.5 Adjustments.
If at
any time during the period between the date of this Agreement and the Effective
Time, any change in the outstanding shares of capital stock of Parent or the
Company (other than as contemplated in Section 4.2 or permitted under this
Agreement) shall occur, including, without limitation, by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the Merger Consideration shall be appropriately adjusted
to
provide as nearly as practicable the effects contemplated by this Agreement
prior to such reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares or any stock dividend or similar
event.
Section
2.6 Fractional
Shares.
(a) No
fractional shares of Parent Common Stock shall be issued in the Merger, but
in
lieu thereof each holder of Company Shares otherwise entitled to a fractional
share of Parent Common Stock will be entitled to receive, from the Exchange
Agent in accordance with the provisions of this Section 2.6, a cash payment
in
lieu of such fractional shares of Parent Common Stock in an amount equal to
the
product obtained by multiplying: (i) the fractional share of Parent Common
Stock
to which such holder otherwise would be entitled to by (ii) the last sale price
on the OTC BB of a share of Parent Common Stock on the five trading days
immediately preceding the Closing Date.
(b) As
soon
as practicable after the determination of the amount of cash, if any, to be
paid
to holders of Company Shares in lieu of any fractional shares of Parent Common
Stock, the Exchange Agent shall make available such amounts to such holders
of
Company Shares without interest.
Section
2.7 Withholding
Rights.
Each of
the Surviving Corporation and Parent shall be entitled to deduct and withhold
from the consideration otherwise payable to any Person pursuant to this Article
2 such amounts as it is required to deduct and withhold with respect to the
making of such payment under any provision of federal, state, local or foreign
Tax Law. To the extent that amounts are so withheld by the Surviving Corporation
or Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Company
Shares in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
12
Section
2.8 Lost
Certificates.
If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Exchange Agent, the posting by
such
Person of a bond, in such reasonable amount as Parent or the Exchange Agent
may
direct, as indemnity against any claim that may be made against it, the
Surviving Corporation or the Exchange Agent with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to be paid in respect of the Company Shares
represented by such Certificate as contemplated by this Article 2.
Section
2.9 Shares
Held by Company Affiliates.
Anything to the contrary herein notwithstanding, no shares of Parent Common
Stock (or certificates therefor) shall be issued in exchange
for any Certificate to any Person who may be an “affiliate” of the Company
(identified pursuant to Section 7.8) until such Person shall have delivered
to
Parent a duly executed letter as contemplated in Section 7.8. Such Person shall
be subject to the restrictions described in such letter, and such shares (or
certificates therefor) shall bear a legend describing such
restrictions.
Section
2.10 Appraisal
Rights.
Notwithstanding
any provision of this Agreement to the contrary and to the extent available
under the DGCL, Company Shares that
are
outstanding immediately prior to the Effective Time and that have neither voted
in favor of the Merger nor consented thereto in writing and who have demanded
properly in writing
appraisal for such Company Shares (the “Dissenting Shares”) pursuant to, and who
complies in all respects with, the provisions of Section 262 of the DGCL
(“Section 262”) shall not be converted into, or represent the right to receive,
the Merger Consideration. Any such stockholder shall instead be entitled to
receive payment of the fair value of such stockholder’s Dissenting Shares in
accordance with the provisions of Section 262; provided, that, all Dissenting
Shares held by any stockholder who shall have failed to perfect or who otherwise
shall have withdrawn or lost such stockholder’s rights to appraisal of such
Company Shares under Section 262 shall thereupon be deemed to have been
converted into, and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration, without any interest thereon,
upon surrender in the manner provided in Section 2.3 of the Certificate or
Certificates that formerly evidenced such Company Shares. The Company shall
give
Parent prompt notice of any demands received by the Company for appraisal of
Company Shares, and Parent shall have the right to participate in and direct
all
negotiations and proceedings with respect to such demands. The Company shall
not
settle, make any payments with respect to, or offer to settle, any claim with
respect to Dissenting Shares without the prior written consent of
Parent.
13
ARTICLE
3
THE
SURVIVING CORPORATION
Section
3.1 Certificate
of Incorporation of the Surviving Corporation.
The
certificate of incorporation of Company in effect at the Effective Time shall
be
the certificate of incorporation of the Surviving Corporation until amended
in
accordance with applicable law, except
that the name of the Surviving Corporation shall be changed to the current
name
of the Company.
Section
3.2 Bylaws
of the Surviving Corporation.
The
bylaws of Company in
effect
at the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
Section
3.3 Directors
and Officers of the Surviving Corporation.
From
and after the Effective Time, until successors are duly elected or appointed
and
qualified in accordance with applicable law, (a) the directors of Merger Sub
at
the Effective Time shall be the directors of the Surviving Corporation and
(b)
the officers of Merger Sub at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
specifically disclosed in the Company Disclosure Schedule delivered by the
Company to Parent immediately prior to the execution of this Agreement (the
“Company Disclosure Schedule”), the Company represents and warrants to Parent
and Merger Sub as follows:
Section
4.1 Organization
and Qualification.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
(b) The
Company is qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which the nature
of its business requires such qualification, which states or jurisdictions
are
listed on Section 4.1(b) of the Company Disclosure Schedule, except where the
failure to be so qualified or in good standing, taken together with all other
such failures, would not have a Material Adverse Effect on the Company.
(c) The
Company has heretofore furnished or made available to Parent a complete and
correct copy of the charter documents (including the articles or certificate
of
incorporation and bylaws, if any), as most recently amended to date of the
Company and each of its Subsidiaries. Each such charter document is in full
force and effect. Neither the Company nor any of its Subsidiaries is in
violation or any of the provisions of its respective charter
documents.
Section
4.2 Capitalization.
The
authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, $0.01 par value per share (the “Company Common Stock”)
and 100,000 shares of Preferred Stock, $0.01 par value per share (the “Company
Preferred Stock”). As of November 7, 2007, (a) 54,829,876 shares of Company
Common Stock were issued and outstanding, (b) no shares of Company Preferred
Stock were issued and outstanding, (c) no shares of Company Common Stock were
reserved for issuance pursuant to the Company Stock Plans, of which stock
options to purchase an aggregate of no shares
of
Company Common Stock were outstanding, and 18,395,002 shares of Company Common
Stock were reserved for issuance pursuant to Nonplan Stock Options (of which,
as
of the date of this Agreement, no shares have been issued), (d) 4,559,728 shares
of Company Common Stock were reserved for issuance upon exercise of warrants
(“Company Warrants”), and (e) no Company Shares were held in the Treasury of the
Company or any of its Subsidiaries. All
the
outstanding shares of the Company’s Common Stock are, and all Company Shares
that may be issued pursuant to the exercise of outstanding Company Stock Options
and the Company Warrants
will be, when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Except as disclosed in this
Section 4.2 or in Section 4.2 of the Company Disclosure Schedule, there are
outstanding (x) no shares of capital stock or other voting securities of the
Company, (y) no securities of the Company convertible into or exchangeable
for
shares of capital stock or voting securities of the Company, and (z) no options,
warrants or other rights to acquire from the Company, and no preemptive or
similar rights, subscription or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of the Company, obligating the Company to issue, transfer or
sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company or obligating
the Company to grant, extend or enter into any such option, warrant,
subscription or other right, convertible security, agreement, arrangement or
commitment (the items in clauses (x), (y) and (z) being referred to collectively
as the “Company Securities”). There are no outstanding stock appreciation
rights, performance units, phantom stock, profit participation or similar rights
with respect to the Company and Company Securities, any Subsidiary or any of
their respective securities (collectively, “Company Rights”) or obligation of
the Company or any Subsidiary to issue or sell any such Company Right. There
are
no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. There
are
not as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings
to
which the Company or any of its
Subsidiaries is a party or by which it is bound relating to the voting of any
shares of the capital stock of the Company or any agreements, arrangements,
or
other understandings to which the Company or any of its Subsidiaries is a party
or by which it is bound that will limit in any way the solicitation of proxies
by or on behalf of the Company from, or the casting of votes by, the
stockholders of the Company with respect to the Merger.
14
Section
4.3 Authority.
The
Company has full corporate power and authority to execute and deliver this
Agreement and, subject to the receipt of the Company Stockholder Approval,
to
perform its obligations hereunder and consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by
Company’s Board of Directors. The Board of Directors of the Company,
upon the unanimous recommendation of the Special Committee, has directed that
this Agreement be submitted to the Company’s stockholders for approval at a
meeting of the Company’s stockholders for the purpose of approving the Merger
and this Agreement (the “Company Stockholders Meeting”), and, except for the
approval of this Agreement and the Merger by the affirmative vote of holders
of
a majority of the outstanding shares of the Company Common Stock (the “Company
Stockholder Approval”) no other corporate proceedings are necessary to authorize
this Agreement or the consummation of the transactions contemplated hereby.
This
Agreement has been duly and validly executed and delivered by the Company and
(assuming due authorization, execution and delivery by Parent and Merger Sub)
it
constitutes a legal, valid and binding agreement of the Company, enforceable
against it in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
15
Section
4.4 Governmental
Authorization.
The
execution, delivery and performance by the Company of this Agreement and the
consummation of the Merger by the Company require with respect to the Company
or
any of its Subsidiaries no consent of, or filing with, any Governmental
Authority other than (a) the filing of a certificate of merger in accordance
with DGCL, (b) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the “Exchange Act”), (c) compliance with
any applicable requirements of the Securities Act of 1933, as amended (the
“Securities Act”) and state securities laws, and (d) other actions or filings
which if not taken or made would not, individually or in the aggregate, have
a
Material Adverse Effect on the Company.
Section
4.5 Non-Contravention.
Except
as disclosed in Section 4.5 of the Company Disclosure Schedule, the execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby do not and will not
(a)
assuming compliance with the matters referred to in Section 4.3, contravene
or
conflict with the certificate of incorporation or bylaws of the Company or
any
Subsidiary, (b) assuming compliance with the matters referred to in Section
4.4,
contravene or conflict with or constitute a violation of any provision of any
Law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or any of its Subsidiaries, (c) constitute a default
under or give rise to a right of termination, cancellation or acceleration
of
any right or obligation of the Company or any of its Subsidiaries or to a loss
of any benefit to which the Company or any of its Subsidiaries is entitled
under
any provision
of any agreement, contract or other instrument binding upon the Company or
any
of its Subsidiaries (the “Company Agreements") or any license, franchise, lease,
permit or other similar
authorization held by the Company or any of its Subsidiaries, or (d) result
in
the creation or imposition of any Lien on any asset of the Company or any of
its
Subsidiaries, except, with respect to subsections (b) and (c) of this Section
4.5, for any such default, termination cancellation or acceleration or other
occurrences that would not individually, or in the aggregate, have
a
Material
Adverse Effect on the Company. For purposes of this Agreement, “Lien” means any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in
respect of such asset other than any such mortgage, lien, pledge, charge,
security interest or encumbrance (i) for Taxes (as defined in Section 4.13)
not
yet due or being contested in good faith (and for which adequate accruals or
reserves have been established on the Company Balance Sheet (as such term is
defined in Section 4.9), as the case may be); (ii) which is a carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like lien
arising in the ordinary course of business; (iii) statutory or common law liens
to secure obligations to landlords, lessors or renters under leases or rental
agreements confined to the premises rented or (iv) deposits or pledges made
in
connection with, or to secure payment of, workers’
compensation, unemployment insurance, or other social security programs mandated
under laws applicable to the Company. Except as disclosed in Section 4.5 of
the
Company Disclosure Schedule, neither the Company nor any Subsidiary of the
Company is a party to any agreement that expressly limits the ability of the
Company or any Subsidiary of the Company, or would limit Parent or any
Subsidiary of Parent after the Effective Time, to compete in or conduct any
line
of business or compete with any Person or in any geographic area or during
any
period of time.
All
material Company Agreements
are
filed as exhibits to the Company SEC Documents.
16
Section
4.6 Board
Recommendation; State Takeover Statutes.
The
board of directors of the Company has (a) approved and adopted this Agreement,
(b) determined that this Agreement and the transaction contemplated by this
Agreement are advisable, fair to and in the best interests of the Company and
the stockholders of the Company, (c) resolved to recommend adoption of this
Agreement to the stockholders of the Company, and (d) resolved that the Company
take all action necessary to make inapplicable any restrictions on the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated by this Agreement that may result from the
provisions of all applicable state Takeover Laws including, but not limited,
to
Section 203 of the DGCL.
Section
4.7 Subsidiaries.
Each of
the Company’s Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has
all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. Each of the
Subsidiaries is duly qualified as a foreign corporation to do business, and
is
in good standing, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, which states or jurisdictions are listed on Section 4.7 of the
Company Disclosure Schedule, except where the failure to be so qualified or
in
good standing would not have a Material Adverse Effect on the Company. Exhibit
21 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2006 (the “2006 10-K”), as filed with the SEC, lists the only
Subsidiaries of the Company at December 31, 2006, and all Subsidiaries of the
Company thereafter formed or acquired are listed in Section 4.7 of the Company
Disclosure Schedule. All of the outstanding shares of capital stock of the
Subsidiaries of the Company are validly issued, fully paid and nonassessable
and
are owned by the Company free and clear of all liens, claims, charges or
encumbrances, and there are no irrevocable proxies with respect to such
shares. Except as set forth in Section 4.7 of the Company Disclosure Schedule
and except for the capital stock of its Subsidiaries, the Company does not
own,
directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, limited liability company or other entity which
is
material to the business of the Company and its Subsidiaries, taken as a whole.
There are no restrictions on the Company to vote the stock of any of its
Subsidiaries.
Section
4.8 SEC
and FINRA Filings.
(a) The
Company has filed with the Securities and Exchange Commission (“SEC”) true and
complete copies of, all forms, reports, schedules and other documents required
to be filed by it under the Exchange Act or the Securities Act since January
1,
2004 (as such documents have been amended since the time of their filing,
collectively, the “Company SEC Documents”). Except as set forth in Section 4.8
of the Company Disclosure Schedule, as of their respective dates or, if amended,
as of the date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial statements or schedules included therein
(a)
did not contain any untrue statement of a material fact or omit to state a
material 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 and (b)
complied as to form in all material respects with the applicable requirements
of
the Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Except as set forth in Section
4.8
of the Company Disclosure Schedule, none of the Company’s Subsidiaries is
required to file any forms, reports or other documents with the SEC. The
Company’s wholly-owned broker dealer subsidiaries vFinance
Investments, Inc. and EquityStation, Inc. (collectively, “Company Broker
Dealers”) have
each
filed with FINRA true and complete copies of all forms, reports and other
documents required to be filed by it, except where the failure to make such
filings would not have a Material Adverse Effect on the Company.
17
(b) The
Company is in compliance in all material respects with all of the provisions
of
the Xxxxxxxx-Xxxxx Act and the rules and regulations promulgated thereunder
that
are applicable to it.
(c) The
Company has designed and maintains disclosure controls and procedures to ensure
that material information relating to the Company and its Subsidiaries is made
known to the Chief Executive Officer and the Chief Financial Officer of the
Company by others within those entities. To the extent applicable, the Company
has disclosed, based on its most recent evaluation prior to the date of this
Agreement, to the Company’s auditors and the audit committee of the Board
(i) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting that are reasonably
likely to adversely affect in any material respect the Company’s ability to
record, process, summarize and report financial information and (ii) any
fraud or allegation of fraud, whether or not material, that involves management
or other employees who have a significant role in the Company’s internal
controls over financial reporting.
Section
4.9 Disclosure
Documents.
(a) The
proxy
statement of the Company relating to the required meeting of stockholders of
the
Company contemplated by Section 7.1(a) and the prospectus of Parent relating
to
the shares of Parent Common Stock to be issued in connection with the Merger
(the “Proxy Statement/Prospectus”) to be filed with the SEC in connection with
the Merger and the registration statement on Form S-4 of Parent (the “Form S-4”)
to be filed under the Securities Act relating to the issuance of Parent Common
Stock in the Merger, and any amendments or supplements thereto, will, when
filed, comply as to form in all material respects with the requirements of
the
Exchange Act and the Securities Act.
(b) Neither
the Proxy Statement/Prospectus to be filed with the SEC, nor any amendment
or
supplement thereto, will, at the date the Proxy Statement/Prospectus or any
such
amendment or supplement is first mailed to stockholders of Company or at the
time such stockholders vote on the adoption and approval of this Agreement
and
the transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Neither the Form S-4 nor any amendment or supplement
thereto will at the time it becomes effective under the Securities Act or at
the
Effective Time contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
18
(c) The
affirmative vote of the holders of a majority of the shares of Company Common
Stock outstanding on the Company Record Date (the “Required Company Stockholder
Vote”) is the only vote of the holders of any class or series of the Company’s
capital stock necessary to adopt this Agreement and to consummate the
transactions contemplated hereby.
(d) No
representation or warranty is made by the Company in this Section 4.9 with
respect to statements made or incorporated by reference therein based on
information supplied by Parent for inclusion or incorporation by reference
in
the Proxy Statement/Prospectus or the Form S-4.
Section
4.10 Absence
of Certain Changes.
Except
as set forth in Section 4.10 of the Company Disclosure Schedule, and except
as
expressly permitted by this Agreement, since December 31, 2006 (the “Company
Balance Sheet Date”), the Company and each Subsidiary has conducted its
respective business in the ordinary course consistent with past practice and,
without limiting the generality of the foregoing:
(a) There
has
been no event, occurrence or development of a state of circumstances or facts
that, individually or in the aggregate, has had or would be reasonably likely
to
have a Material Adverse Effect on the Company and its Subsidiaries, taken as
a
whole;
(b) There
has
not been any amendment or change in the Certificate of Incorporation or Bylaws
of the Company or any of its Subsidiaries;
(c) The
Company has not nor has any Subsidiary incurred additional debt for borrowed
money in excess of $75,000 for any single occurrence or $100,000 in aggregate,
or incurred any obligation or liability except in the ordinary course of
business consistent with past practice;
(d) The
Company has not nor has any Subsidiary declared or made any dividend, payment
or
other distribution on or with respect to any share of capital stock, other
than,
in the case of any Subsidiary, to the Company;
(e) Neither
the Company nor its Subsidiaries has made any change in accounting principles
or
methods, except in so far as may be required under GAAP; or
(f) The
Company has not nor has any Subsidiary entered into any material transaction
or
contract, or made any commitment to do the same, except in the ordinary course
of business consistent with past practice. Except as set forth in Section
4.10(f) of the Company Disclosure Schedule, no Company Agreement has been
modified or amended, nor has the Company or any of its Subsidiaries waived
any
material rights under any such Company Agreement.
Section
4.11 No
Undisclosed Material Liabilities.
There
are no material liabilities of the Company or any Subsidiary of the Company
of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
(a) liabilities
incurred in the ordinary course of business and consistent with past
practice;
19
(b) liabilities
disclosed in the Company SEC Documents filed prior to the date hereof or set
forth in Section 4.11 of the Company Disclosure Schedule; or
(c) liabilities
under this Agreement.
Section
4.12 Litigation.
Except
as disclosed in the Company’s SEC Documents or set forth in Section 4.12 of the
Company Disclosure Schedule, there is no claim, dispute, action, proceeding,
notice, order, suit, appeal or investigation, at law or in equity, pending
or to
the Company’s Knowledge, threatened, against the Company or any Subsidiary of
the Company, or to the Company’s Knowledge, any of their respective directors,
officers, employees or agents, or involving any of their respective assets
or
properties before any court, agency, authority, arbitration panel or other
tribunal which, if determined adversely, would have a Material Adverse Effect
on
the Company. Except as disclosed in the Company’s SEC Documents,
neither the
Company nor any Subsidiary is subject to any order, writ, injunction or decree
of any court, agency, authority, arbitration panel or other tribunal, nor is
the
Company or any Subsidiary in default with respect to any notice, order, writ,
injunction or decree which would have a Material Adverse Effect on the
Company.
Section
4.13 Taxes.
(a) For
purposes of this Agreement, the following terms have the following meanings:
“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means any and all
taxes, including without limitation (i) any income, profits, alternative or
add-on minimum tax, gross receipts, sales, use, value-added, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, net worth, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Authority
responsible for the imposition of any such tax (domestic or foreign) (a “Taxing
Authority”), (ii) any liability for the payment of any amounts of the type
described in clause (i) above as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period or as the result
of being a transferee or successor thereof, and (iii) any liability for the
payment of any amounts of the type described in clause (i) or (ii) above as
a
result of any express or implied obligation to indemnify any other Person.
(b) Except
as
set forth in Section 4.13(b) of the Company Disclosure Schedule, all Tax
returns, statements, reports and forms (including estimated Tax returns and
reports and information returns and reports) required to be filed with any
Taxing Authority with respect to any Taxable period ending on or before the
Effective Time, by or on behalf of the Company or any Subsidiary (collectively,
the “Company Returns”), have been or will be filed when due (including any
extensions of such due date), and all amounts shown to be due thereon on or
before the Effective Time have been or will be paid on or before such date,
other than such Taxes which are adequately reserved for in accordance with
GAAP.
The Company Financial Statements fully accrue all actual and contingent
liability for Taxes with respect to all periods through the dates thereof in
accordance with GAAP. The Company Financial Statements (i) fully accrue
consistent with past practices and in accordance with GAAP all actual and
contingent liabilities for Taxes with respect to all periods through the date
of
the Company Financial Statements and (ii) properly accrue consistent with past
practices and in accordance with GAAP all liabilities for Taxes payable after
the Company Balance Sheet Date with respect to all transactions and events
occurring on or prior to such date. All information set forth in the notes
to
the Company Financial Statements relating to Tax matters is accurate in all
material respects.
20
(c) No
Tax
liability has been incurred since the date of the Company Financial Statements
other than in the ordinary course of business and adequate provision has been
made for all Taxes since that date in accordance with GAAP on at least a
quarterly or, with respect to employment taxes, monthly basis. The Company
and
each Subsidiary have withheld and paid to the applicable financial institution
or Taxing Authority all amounts of Taxes required to be withheld in all material
respects. No Company Returns filed with respect to federal income tax returns
for Taxable periods of the Company in the case of the United States, have been
examined by the Internal Revenue Service. The Company has not nor has any
Subsidiary been granted any extension or waiver of the limitation period
applicable to any Company Return.
(d) There
is
no claim, audit, action, suit, proceeding or, investigation now pending or,
to
the Company’s Knowledge, threatened against or with respect to the Company or
any Subsidiary in respect of any Tax or assessment. There are no liabilities
for
Taxes with respect to any notice of deficiency or similar document of any Tax
Authority received by the Company or any Subsidiary which have not been
satisfied in full (including liabilities for interest, additions to tax and
penalties thereon and related expenses). There are no liens for Taxes upon
the
assets of the Company or any Subsidiary except liens for current Taxes not
yet
delinquent. Except as may be required as a result of the Merger, the Company
has
not nor has any Subsidiary been nor will it be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant
to
section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Effective Time.
(e) Except
as
set forth in Section 4.13(e) of the Company Disclosure Schedule, there is no
contract, agreement, plan or arrangement, including without limitation the
provisions of this Agreement, covering any employee or independent contractor
or
former employee or independent contractor of the Company or any Subsidiary
that,
individually or collectively, could, as a result of the transactions
contemplated hereby, give rise to the payment of any amount that would not
be
deductible pursuant to section 280G or section 162 (m) of the Code. Other than
pursuant to this Agreement, the Company is not nor is any Subsidiary a party
to
or bound by (nor will they prior to the Effective Time become a party to or
bound by) any tax indemnity, tax sharing or tax allocation agreement (whether
written, unwritten or arising under operation of federal law as a result of
being a member of a group filing consolidated tax returns, under operation
of
certain state laws as a result of being a member of a unitary group, or under
comparable laws of other states or foreign jurisdictions) which includes a
party
other than the Company or any Subsidiary. The Company has not nor has any
Subsidiary participated in (and prior to the Effective Time the Company will
not
nor will any Subsidiary participate in) an international boycott within the
meaning of section 999 of the Code. The Company has disclosed on its federal
income tax returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of section
6661 of the Code. The Company has previously provided or made available to
Parent complete and accurate copies of all the Company Returns and, as
reasonably requested by Parent, prior to or following the date hereof, presently
existing information statements, reports, work papers, Tax opinions and
memoranda and other Tax data and documents for the taxable periods ended
December 31, 2000 through December 31, 2004.
21
Section
4.14 Employees
and Employee Benefit Plans.
(a) Except
as
set forth at Section 4.14(a) of the Company Disclosure Schedule, neither the
Company nor any Subsidiary has entered into any employment contract or
arrangement with any director, officer, employee or any other consultant or
Person (i) which is not terminable by it at will without liability, except
as
the right of the Company or such Subsidiary to terminate its employees at will
may be limited by applicable federal, state or foreign law, or (ii) under which
the Company or any Subsidiary could have any material liability (collectively,
the “Company Employment Agreements”).
(b) Except
as
set forth in Section 4.14(b) of the Company Disclosure Schedule, neither the
Company nor any Subsidiary maintains any deferred compensation, pension, health,
profit sharing, bonus, stock purchase, stock option, fringe benefit,
hospitalization, insurance, severance, change in control, retention,
supplemental unemployment benefits, vacation benefits, disability benefits,
or
any other employee benefit plan (as defined in the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) covering any of its current or former
officers, directors, employees or consultants (“Employee Plans”).
(c) The
Company has made available to Parent true, complete and correct copies of (i)
each Company Employment Agreement, (ii) each Employee Plan (or, in the case
of
any unwritten Employee Plans, descriptions thereof), (iii) the most recent
annual report on Form 5500 filed with the IRS with respect to each Employee
Plan
(if any such report was required), (iv) the most recent summary plan description
for each Employee Plan for which such summary plan description is required,
(v)
each trust agreement and group annuity contract relating to any Employee Plan,
(vi) each determination letter and any outstanding request for a determination
letter, and (vii) all correspondence with the IRS or the United States
Department of Labor relating to any outstanding controversy or audit.
(d) Each
Employee Plan has been maintained, funded, operated and administered in
compliance in all material respects with all applicable laws and regulations,
including but not limited to, ERISA, the Code, and the Health Insurance
Portability and Accountability Act of 1996. Each Employee Plan that is intended
to be qualified under section 401(a) of the Code and each trust forming a part
thereof that is intended to be exempt from taxation under section 501(a) of
the
Code has received a favorable determination letter from the IRS as to its
qualification and tax-exempt status (or,
where there is no determination letter but the Employee Plan is based upon
a
master and prototype or volume submitter form, the sponsor of such form has
received a current advisory opinion as to the form upon which the Company is
entitled to rely under applicable IRS procedures), and
nothing has occurred, whether by any action or any failure to act, since the
date of such determination letter that could adversely affect the qualification
of such Employee Plan or the tax-exempt status of such related trust. No event
has occurred and, to the Knowledge of the Company, there currently exists no
condition or set of circumstances in connection with which the Company could
reasonably be expected to be subject to any liability under the terms of any
Employee Plans (other than for benefits payable in the normal course of the
operations of the Employee Plans), ERISA, the Code or any other applicable
law,
including any liability under Title IV of ERISA. Each Employee Plan can be
amended or terminated in accordance with its terms and any applicable law
without any material liability to the Company or any of its Subsidiaries
(excluding administrative expenses). No Employee Plan is a “multiemployer plan”
as defined in section 3(37) of the ERISA and 414(f) of the Code, or a “multiple
employer plan” as described in section 4063(a) of ERISA and 413 of the Code, and
none of the Company, any of its Subsidiaries or any ERISA Affiliate has ever
contributed or had an obligation to contribute to any multiemployer plan or
any
plan subject to Title IV of ERISA. For purposes of this Section 4.14, an “ERISA
Affiliate” is any organization that is a member of the controlled group of
organizations of the Company and its Subsidiaries (within the meaning of
sections 414(b), (c), (m) or (o) of the Code).
22
(e) Except
as
set forth in Section 4.14(e) of the Company Disclosure Schedule, no current
or
former director, officer or other employee of, or consultant to, the Company
or
any of its Subsidiaries will become entitled to any retirement, severance or
similar benefit or enhanced or accelerated benefit (including any acceleration
of vesting or lapse of repurchase rights or obligations with respect to any
employee stock option or other benefit under any stock option plan or
compensation plan or arrangement of the Company) as a result of the transactions
contemplated hereby.
(f) Except
as
set forth in Section 4.14(f) of the Company Disclosure Schedule, no Employee
Plan provides post-retirement health and medical, life or other insurance
benefits for retired employees of the Company or any of its Subsidiaries (other
than benefit coverage mandated by applicable statute, including benefits
provided pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985,
as codified in Code section 4980B and ERISA sections 601 et seq., as amended
from time to time (“COBRA”)).
(g) Except
as
required by applicable law, there has been no amendment to, written
interpretation or announcement (whether or not written) by the Company or any
of
its affiliates relating to, or change in employee participation or coverage
under, any Employee Plan that would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the twelve (12) months ended on the Company Balance Sheet
Date.
Section
4.15 Compliance
with Law.
(a) To
the
Company’s Knowledge, all licenses, franchises, permits, clearances, consents,
certificates and other evidences of authority of the Company and its
Subsidiaries which are necessary to the conduct of the Company’s and its
Subsidiaries’ respective businesses (“Company Permits”) are in full force and
effect and the Company is not nor is any Subsidiary in violation of any Company
Permit in any respect, except for such exceptions or violations that,
individually or in the aggregate, would not have, or be reasonably likely to
have, a Material Adverse Effect. To the Company’s Knowledge and except for
exceptions which would not have a Material Adverse Effect, the businesses of
the
Company and its Subsidiaries have been conducted in accordance with all
applicable laws, regulations, orders and other requirements of Governmental
Authorities.
Except
as set forth in Section 4.15(a) of the Company Disclosure Schedule,
no
investigation or review by any Governmental Authority or Regulatory Authority
is
pending or, to the Knowledge of the Company, threatened against the Company
or
its Subsidiaries, nor has any Governmental Authority or Regulatory Authority
indicated an intention to conduct the same, other than, in each such case,
those
the outcome of which could not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on the Company.
23
(b) The
Company and Company Broker Dealers possess
and are in substantial compliance with all SEC, FINRA and applicable state
governmental authorizations (collectively, “Governmental and SRO
Authorizations”) that are required to conduct the broker-dealer business of the
Company Broker Dealers including, without limitation, all authorizations and
licenses issued to any principal, officer or employee of the Company or Company
Broker Dealers used in connection with the conduct or operations the business
of
Company Broker Dealers, except where the failure to obtain or comply with such
Governmental and SRO Authorization would not have a Material Adverse Effect
on
the Company. Each of such Governmental and SRO Authorizations is listed on
Section 4.15(b) of the Company Disclosure Schedule. Each of such Governmental
and SRO Authorizations is valid and in full force and effect and neither Company
Broker Dealers nor any of their employees received in writing, at any time
since
January 1, 2004, other than as set forth on the Company’s Form BD, any notice or
other communication from any Governmental Authority or Regulatory Authority
regarding (i) any actual or alleged violation of or failure to comply with
any
material term or requirement of any Governmental and SRO Authorization, or
(ii)
any actual or proposed revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental and SRO Authorization,
except as may be required to consummate the transaction contemplated hereby.
(c) Company
Broker Dealers are,
and at
all times since January 1, 2002 have been, in compliance with SEC Rule 15c-3(1)
and Rule 15c-3(3) and in substantial compliance with the other provisions of
Rule 15c-3.
Section
4.16 Contracts.
Each
Company Agreement is legally valid and binding and in full force and effect,
except where the failure to be legally valid and binding and in full force
and
effect would not have a Material Adverse Effect, and neither the Company nor
any
Subsidiary has breached, is in default under or has received written notice
of
any breach of or default or has waived any material rights under any Company
Agreement, except those defaults and/or waivers that would not be reasonably
expected to have a Material Adverse Effect.
To the
Company’s Knowledge, no other party to any of the Company Agreements has
breached or is in default of any of its obligations thereunder.
Section
4.17 Finders’
or Advisors’ Fees.
There
is no investment banker, broker, finder or other intermediary who has been
retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section
4.18 Environmental
Matters.
Except
as disclosed in the Company SEC Documents or as set forth in Section 4.18 of
the
Company Disclosure Schedule:
(a) The
Company possesses any and all Environmental Permits necessary to or required
for
the operation of its business as currently conducted, except where the failure
to possess such Environmental Permits would not cause a Material Adverse Effect.
The Company will obtain, prior to the Closing, any Environmental Permits that
must be obtained as of or immediately after the Closing in order for the
Surviving Corporation and/or the Company to conduct the business of the Company
as it was conducted prior to the Closing.
24
(b) The
Company is in compliance in all material respects with (i) all terms, conditions
and provisions of its Environmental Permits; and (ii) all Environmental Laws.
(c) The
Company has not received any notice of alleged, actual or potential
responsibility for, or any inquiry regarding, (i) any release or threatened
or
suspected release of any Hazardous Material, or (ii) any violation of
Environmental Law, and there is no outstanding civil, criminal or administrative
investigation, action, suit hearing or proceeding pending or threatened against
the Company pursuant to any Environmental Law.
(d) The
Company does not have any Environmental Liabilities or other obligation or
liability with respect to any Hazardous Material, including any Release or
threatened or suspected Release of any Hazardous Material or any violation
of
Environmental Law, and there have been no events, facts or circumstances which
could form the basis of any such obligation or liability.
(e) No
Releases of Hazardous Material(s) have occurred at, from, in, to, on, or under
any Site and no Hazardous Material is present in, on, about or migrating to
or
from any Site.
(f) The
Company has not transported or arranged for the treatment, storage, handling,
disposal or transportation of any Hazardous Material at, from or to any site
or
other location.
(g) No
Site
is a current or proposed Environmental Clean-up Site.
(h) There
are
no Liens under or pursuant to any Environmental Law on any Site.
(i) There
is
no (i) underground storage tank, active or abandoned, (ii) polychlorinated
biphenyl containing equipment, (iii) asbestos-containing material, (iv) radon,
(v) lead-based paint or (vi) urea formaldehyde at any Site. Any underground
storage tank meets all current applicable upgrade requirements.
(j) There
have been no Environmental investigations, studies, audits, tests, reviews
or
other analyses conducted which are in the Company’s possession with respect to
any Site which have not been delivered to Parent prior to execution of this
Agreement.
(k) The
Company has provided all notifications and warnings, made all reports, and
kept
and maintained all records required pursuant to Environmental Laws except
where the failure to do so would not be reasonably expected to have a Material
Adverse Effect.
Section
4.19 Labor
Matters.
There
are no labor disputes or union organization activities pending or, to the
Company’s Knowledge, threatened between the Company or a Subsidiary and any of
its employees.
None of the employees of the Company or any of its Subsidiaries belongs to
any
union or collective bargaining unit. The Company and its Subsidiaries have
complied in all material respects with all applicable state and federal equal
employment opportunity and other laws and regulations related to employment
or
working conditions, including all civil rights and anti-discrimination laws,
rules and regulations. The Company is not nor is any of its Subsidiaries the
subject of any material proceeding asserting that the Company or any of its
Subsidiaries has committed an unfair labor practice or is seeking to compel
it
to bargain with any labor union or labor organization nor is there pending
or,
to the Knowledge of the Company, threatened, any labor strike, dispute, walkout,
work stoppage, slowdown or lockout involving the Company or any of its
Subsidiaries.
No
officer or key employee or group of employees of the Company has expressed
any
intention of terminating his or her employment in any capacity and the Company
and its Subsidiaries have no present intention to terminate the employment
of
any officer or key employee.
25
Section
4.20 Property.
The
Company and its Subsidiaries, as the case may be, have sufficient title or
leaseholds to real property to conduct their respective businesses as currently
conducted and as contemplated to be conducted after the Effective Time, with
only such exceptions as individually or in the aggregate would not have a
Material Adverse Effect on the Company and the Subsidiaries taken as a
whole.
Section
4.20 of the Company Disclosure Schedule lists all owned or leased real estate
used in the business of the Company and its Subsidiaries. The Company has
previously provided to Parent copies of all real property leases to which the
Company or any of its Subsidiaries is a party (the “Company Leases”). All
Company leases are in full force and effect and there has been no event of
default or action or circumstances that, with notice or the lapse of time or
both, would constitute an event of default by the Company or any Subsidiary
under any of the Company Leases.
Section
4.21 Proprietary
Rights.
Section
4.21 of the Company Disclosure Schedule sets forth a list of all registered
and
material unregistered Company Intellectual Property (as defined below) owned
by
the Company and used in the conduct of its business and all agreements granting
any right to use or practice any right relating to the Company Intellectual
Property (as defined below) currently used in the conduct of the Company’s or
any Subsidiary’s business (the “Company Licenses”). Except as set
forth
in Section 4.21 of the Company Disclosure Schedule, (i) the Company or its
Subsidiaries is the sole owner of all of its rights under the Company Licenses
free and clear of any liens, claims, encumbrances or interests; (ii) the Company
or its Subsidiaries is the sole owner
of,
or has a valid right to use pursuant to a Company License, all patents and
patent applications; registered and unregistered trademarks, service marks,
trade names, trade dress, logos, company names and other source or business
identifiers, including all goodwill associated therewith; the names, likenesses
and other attributes of individuals; registered and unregistered copyrights,
computer programs and databases; trade secrets, proprietary technology,
know-how, industrial designs and other confidential information (“Company Trade
Secrets”); any pending applications for any of the foregoing (collectively, the
“Company Intellectual Property”) currently used in the conduct of the Company’s
business, free and clear of any liens, claims, encumbrances or interests, (iii)
to the Company’s Knowledge the present or past operations of the Company or the
Subsidiaries does not infringe upon, violate, interfere or conflict with the
rights of others with respect to any Company Intellectual Property and no claim
is pending or, to the Company’s Knowledge, threatened, to this effect; (iv) to
the Company’s Knowledge, none of the Company Intellectual Property is invalid or
unenforceable, or has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Company Intellectual Property and no claim is
pending or, to the Company’s Knowledge, threatened, to this effect; (v) no
Company License provision or any other contract, agreement or understanding
with
any party exists which would prevent the continued use by the Company or the
Subsidiaries (as currently used by the Company or its Subsidiaries) of any
Company Intellectual Property following the consummation of the transactions
contemplated hereby; (vi) to the Company’s Knowledge, no person is infringing
upon or otherwise violating any Company Intellectual Property or Company
License; (vii) there are no claims pending or, to the Company’s Knowledge,
threatened in connection with
any
Company License; and (viii) to the Company’s Knowledge, no Company Trade Secret
has been disclosed by the Company or its Subsidiaries to any third party except
subject to an appropriate confidentiality agreement or as required by a
Governmental Authority.
No
consent of any third party is required under any Company License as a result
of
the Company entering into this Agreement or consummating the Merger or other
transactions contemplated by this Agreement.
26
Section
4.22 Insurance.
The
Company has provided Parent with copies of all insurance policies to which
the
Company or a Subsidiary is a party or is a beneficiary or named insured. All
of
the insurable properties of the Company and its Subsidiaries are insured
pursuant to insurance policies as is customary as to the risks insured, amounts
of coverage and other material terms in the industry in which the Company and
its Subsidiaries are engaged and all such insurance policies are in full force
and effect. Neither the Company nor any Subsidiary is in breach or default
(including any such breach or default with respect to the payment of premiums
or
the giving of notice), and no event has occurred that, with notice or the lapse
of time, would constitute such a breach or default, or permit termination or
modification, under any such insurance policy. To the Company’s Knowledge, no
insurer on any such policy has been declared insolvent or placed in
receivership, conservatorship or liquidation. There have been no claims in
excess of $50,000 asserted under any of the insurance policies of the Company
or
its Subsidiaries in respect of all general liability, professional liability,
errors and omissions, property liability and worker’s compensation and medical
claims since the Company’s Balance Sheet Date.
Section
4.23 Opinion
of Financial Advisor.
The
Company has received the opinion of Value Research Corporation to the effect
that, as of the date of such opinion, the Merger Consideration is fair from
a
financial point of view to the holders of Company Shares, and, as of the date
hereof, such opinion has not been withdrawn (such opinion, the “Company Fairness
Opinion”).
Section
4.24 Takeover
Laws.
The
Board of Directors of the Company has taken the necessary action to make
inapplicable any
applicable Takeover Laws or similar statute or regulation to this Agreement
and
the transactions contemplated hereby.
Section
4.25 Transactions
with Affiliates.
Except
as set forth in the Company SEC Documents or as set forth in Section 4.25 of
the
Company Disclosure Schedules, since the date of the Company’s last proxy
statement filed with the SEC, no event has occurred that would be required
to be
reported by the Company, pursuant to Item 404 of Regulation S-K promulgated
by
the SEC.
Section
4.26 Full
Disclosure.
No
statement contained in any representation or warranty contained herein or any
statement contained in any certificate or schedule furnished or to be furnished
by the Company or by any of its Subsidiaries to Parent or Merger Sub in, or
pursuant to the provisions of, this Agreement contains or shall contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in the light of the circumstances under which it was made,
in
order to make the statements herein or therein not misleading.
27
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except
as
specifically disclosed in the Parent Disclosure Schedule delivered by the Parent
to Company immediately prior to the execution of this Agreement (the “Parent
Disclosure Schedule”), the Parent represents and warrants to the Company as
follows:
Section
5.1 Organization
and Qualification.
(a) Each
of
Parent and Merger Sub is a corporation duly organized, validly existing and
in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has all requisite corporate power and authority to own, lease and operate
its respective properties and to carry on its business as now being conducted.
(b) Each
of
Parent and Merger Sub is qualified to do business as a foreign corporation
and
is in good standing under the laws of each state or other jurisdiction in which
the nature of its business requires such qualification, except where the failure
to be so qualified or in good standing, taken together with all other such
failures, would not have a Material Adverse Effect on Parent.
(c) Since
the
date of its incorporation, Merger Sub has not engaged in any activities other
than in connection with or as contemplated by this Agreement. Parent has made
available to the Company true and complete copies of Parent and Merger Sub’s
certificates of incorporation and bylaws, as amended to the date hereof. All
of
the issued and outstanding capital stock of Merger Sub is owned by Parent.
Section
5.2 Capitalization.
The
authorized capital stock of the Parent consists of 30,000,000
shares of Common Stock, $0.02 par value per share (the “Parent Common Stock”)
and 200,000 shares Preferred Stock, par value $.001 per share (50,000 of which
have been designated Series A Preferred Stock, and 20,000 shares of which have
been designated Series B Preferred Stock (the “Parent Preferred Stock”). As of
November 7, 2007, (a) 8,602,628 shares of Parent Common Stock were issued and
outstanding, (b) 37,550 shares of Series A, which are convertible into an
aggregate 3,004,000 shares of Parent Common Stock, and no shares of Series
B
Parent Preferred Stock were issued and outstanding, (c) 2,387,000 shares of
Parent Common Stock were reserved for issuance pursuant to the Parent Stock
Plans, of which stock options to purchase an aggregate of 2,007,000 shares
of
Parent Common Stock were outstanding, and 50,000 shares of Parent Common Stock
were reserved for issuance pursuant to restricted stock grants (of which, as
of
the date of this Agreement, no shares have been issued), (d) 750,000 shares
of
Parent Common Stock were reserved for issuance upon exercise of warrants
(“Parent Warrants”), and (e) no Parent Shares were held in the Treasury of the
Parent or any of its Subsidiaries. All
the
outstanding shares of the Parent’s capital stock are duly authorized, validly
issued, fully paid and non-assessable. Except as set forth in this Section
5.2,
as disclosed in Section 5.2 of the Parent Disclosure Schedule or in the Parent
SEC Documents, there are outstanding (x) no shares of capital stock or other
voting securities of the Parent, (y) no securities of the Parent convertible
into or exchangeable for shares of capital stock or voting securities of the
Parent, and (z) no preemptive or similar rights, subscription or other rights,
convertible securities, or agreements relating to the capital stock of the
Parent, obligating the Parent to issue, transfer or sell, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Parent or obligating the Parent to grant,
extend or enter into any such option, warrant, subscription or other right,
convertible security, agreement, arrangement or commitment (the items in clauses
(x), (y) and (z) being referred to collectively as the “Parent Securities”).
There are no outstanding obligations of the Parent or any of its Subsidiaries
to
repurchase, redeem or otherwise acquire any Parent Securities. There are not
as
of the date hereof and there will not be at the Effective Time any stockholder
agreements, voting trusts or other agreements or understandings to which the
Parent or any of its Subsidiaries is a party or by which it is bound relating
to
the voting of any shares of the capital stock of the Parent.
28
Section
5.3 Authority.
Each of
Parent and Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, the performance of each of Parent
and Merger Sub of its obligations thereunder, and
the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the respective Boards of Directors of Parent and
Merger Sub. Parent, as the sole stockholder of Merger Sub, has approved this
Agreement and the transactions contemplated hereby. No other corporate
proceedings are necessary to authorize this Agreement or the consummation of
the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and (assuming due authorization,
execution and delivery by the Company), it constitutes a legal, valid and
binding agreement of Parent and Merger Sub, enforceable against each in
accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. The shares of Parent Common Stock to be
issued by Parent pursuant to the Merger: (i) have been duly authorized, and,
when issued in accordance with the terms of the Merger and this Agreement (or
the applicable option agreements), will be validly issued, fully paid and
nonassessable and will not be subject to preemptive rights, (ii) will, when
issued in accordance with the terms of the Merger and this Agreement
(or the applicable option agreements), be registered under the Securities Act,
and registered or exempt from registration under applicable United States “Blue
Sky” laws, (iii) will, when issued in accordance with the terms of the Merger
and this Agreement,
be
quoted on the OTC BB and (iv) will be issued free and clear of any
Liens.
Section
5.4 Governmental
Authorization.
The
execution, delivery and performance by Parent and Merger Sub of this Agreement
and the consummation of the Merger by Parent and Merger Sub require with respect
to the Parent or any of its Subsidiaries, no consent of, or filing with, any
Governmental Authority or Regulatory Authority other than (a) the filing of
a
certificate of merger in accordance with DGCL, (b) compliance with any
applicable requirements of the Exchange Act, (c) compliance with any applicable
requirements of the Securities Act and state securities laws, and
(d)
other actions or filings which if not taken or made would not, individually
or
in the aggregate, have a Material Adverse Effect.
Section
5.5 Non-Contravention.
The
execution, delivery and performance by Parent and Merger Sub of this Agreement
and the consummation by Parent and Merger Sub of the transactions contemplated
hereby do not and will not (a) assuming compliance with the matters referred
to
in Section 5.3, contravene or conflict with the certificate of incorporation
or
bylaws of Parent or Merger Sub, (b) assuming compliance with the matters
referred to in Section 5.4, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Parent or any of its Subsidiaries,
(c)
constitute a default under or give rise to a right of termination, cancellation
or acceleration of any right or obligation of Parent or any of its Subsidiaries
or to a loss of any benefit
to which Parent or any of its Subsidiaries is entitled under any provision
of
any agreement, contract or other instrument binding upon Parent or any of its
Subsidiaries (the “Parent Agreements”) or any license, franchise, permit or
other similar authorization held by Parent or any of its Subsidiaries, or (d)
result in the creation or imposition of any Lien on any asset of Parent or
any
of its Subsidiaries, except for such contraventions, conflicts or violations
referred to in clause (b) or defaults, rights of termination, cancellation
or
acceleration, or losses or Liens referred to in clause (c) or (d) which would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
Except as disclosed in Section 5.5 of the Parent Disclosure Schedule, neither
Parent nor any Subsidiary of Parent is a party to any agreement that expressly
limits the ability of Parent or any Subsidiary of Parent to compete in or
conduct any line of business of the Company, or compete with any Person or
in
any geographic area or during any period of time in connection therewith, except
to the extent that any such limitation, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect on Parent after
the
Effective Time.
29
Section
5.6 Board
Recommendation.
The
board of directors of the Parent has (a) approved and adopted this Agreement,
(b) determined that this Agreement and the transactions contemplated by this
Agreement are advisable, fair to and in the best interests of the Parent, and
(c) approved and adopted the Merger, the Merger Agreement and the issuance
of
shares of Parent Common Stock in connection with the Merger.
Section
5.7 Subsidiaries.
Each of
the Parent’s Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted. Each
of the Parent’s Subsidiaries is duly qualified as a foreign corporation to do
business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary, which states or
jurisdictions are listed on Section 5.7 of the Parent Disclosure Schedule,
except where the failure to be so qualified or in good standing would not have
a
Material Adverse Effect on the Parent. Exhibit 21 to the Parent’s Annual Report
on Form 10-K for the fiscal year ended September 30, 2006, as filed with the
SEC, lists the only Subsidiaries of the Parent at September 30, 2006, and all
Subsidiaries of the Parent thereafter formed or acquired are listed in Section
5.7 of the Parent Disclosure Schedule. All of the outstanding shares of capital
stock of the Subsidiaries of the Parent are validly issued, fully paid and
nonassessable and are owned by the Parent free and clear of all liens, claims,
charges or encumbrances, and there are no irrevocable proxies with respect
to
such shares. Except as set forth in Section 5.7 of the Parent Disclosure
Schedule and except for the capital stock of its Subsidiaries, the Parent does
not own, directly or indirectly, any capital stock or other ownership interest
in any corporation, partnership, joint venture, limited liability company or
other entity which is material to the business of the Parent and its
Subsidiaries, taken as a whole. There are no restrictions on the Parent to
vote
the stock of any of its Subsidiaries.
30
Section
5.8 SEC
and FINRA Filings.
The
Parent has filed with the SEC true and complete copies of, all forms, reports,
schedules and other documents required to be filed by it under the Exchange
Act
or the Securities Act since January 1, 2004 (as such documents have been amended
since the time of their filing, collectively, the “Parent SEC Documents”). As of
their respective dates or, if amended, as of the date of the last such
amendment, the Parent SEC Documents,
including, without limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material fact or omit
to
state a material 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 and (b) complied as to form in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as
the
case may be, and the applicable rules and regulations of the SEC thereunder.
None of the Parent’s Subsidiaries is required to file any forms, reports or
other documents with the SEC.
The
Parent’s wholly owned subsidiary National Securities Corporation (“National
Securities”) has filed with FINRA true and complete copies of all forms, reports
and other documents required to be filed by it, except where the failure to
make
such filings would not have a Material Adverse Effect on the
Company.
Section
5.9 Disclosure
Documents.
(a) The
Proxy
Statement/Prospectus to be filed with the SEC in connection with the Merger
and
the Form S-4 to be filed under the Securities Act relating to the issuance
of
Parent Common Stock in the Merger, and any amendments or supplements thereto,
will, when filed, subject to the last sentence of Section 5.9(b), comply as
to
form in all material respects with the requirements of the Exchange Act and
the
Securities Act.
(b) Neither
the Proxy Statement/Prospectus to be filed with the SEC, nor any amendment
or
supplement thereto, will, at the date the Proxy Statement/Prospectus or any
such
amendment or supplement is first mailed to stockholders of the Company or at
the
time the Company’s stockholders vote on the adoption and approval of this
Agreement and the transactions contemplated hereby, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make
the statements therein, in the light of the circumstances under which they
were
made, not misleading. Neither the Form S-4 nor any amendment or supplement
thereto will at the time it becomes effective under the Securities Act or at
the
Effective Time contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) No
representation or warranty is made by Parent in this Section 5.9 with respect
to
statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference in the
Proxy
Statement/Prospectus or the Form S-4.
Section
5.10 Absence
of Certain Changes.
Except
as set forth in Section 5.10 of the Parent Disclosure Schedule, and except
as
expressly permitted by this Agreement, since September 30, 2006 (the “Parent
Balance Sheet Date”), Parent and each Subsidiary has conducted its respective
business in the ordinary course consistent with past practice and, without
limiting the generality of the foregoing:
(a) There
has
been no event, occurrence or development of a state of circumstances or facts
that, individually or in the aggregate, has had or would be reasonably likely
to
have a Material Adverse Effect on Parent and its Subsidiaries, taken as a whole;
31
(b) There
has
not been any amendment or change in Parent’s Certificate of Incorporation or
Bylaws;
(c) Parent
has not nor has any Subsidiary incurred additional debt for borrowed money
in
excess of $75,000 for any single occurrence or $100,000 in aggregate, or
incurred any obligation or liability except in the ordinary course of business
consistent with past practice;
(d) Parent
has not nor has any Subsidiary declared or made any dividend, payment or other
distribution on or with respect to any share of capital stock, other than,
in
the case of any Subsidiary, to Parent;
(e) Neither
the Parent nor its Subsidiaries has made any change in accounting principles
or
methods, except in so far as may be required under GAAP; and
(f) Neither
the Parent nor any Subsidiary has entered into any material transaction or
contract, or made any commitment to do the same, except in the ordinary course
of business consistent with past practice.
Section
5.11 No
Undisclosed Material Liabilities.
There
are no material liabilities of the Parent or any Subsidiary of the Parent of
any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, other than:
(a) liabilities
incurred in the ordinary course of business and consistent with past practice;
(b) liabilities
disclosed in the Parent SEC Documents filed prior to the date hereof; and
(c) liabilities
under this Agreement.
Section
5.12 Litigation.
Except
as disclosed in the Parent SEC Documents or set forth in Section 5.12 of the
Parent Disclosure Schedule, there is no claim, dispute, action, proceeding,
notice, order, suit, appeal or investigation, at law or in equity, pending
or,
to the Parent’s Knowledge, threatened, against the Parent or any Subsidiary, or
to the Parent’s Knowledge, any of their respective directors, officers,
employees or agents, or involving any of their respective assets or properties
before any court, agency, authority, arbitration panel or other tribunal which,
if determined adversely, would have a Material Adverse Effect on Parent. Except
as disclosed in the Company’s SEC Documents, the Parent is not nor is any
Subsidiary subject to any order, writ, injunction or decree of any court,
agency, authority, arbitration panel or other tribunal, nor is Parent or any
Subsidiary in default with respect to any notice, order, writ, injunction or
decree which would have a Material Adverse Effect on Parent.
32
Section
5.13 Taxes.
(a) All
Tax
returns, statements, reports and forms (including estimated Tax returns and
reports and information returns and reports) required to be filed with any
Taxing Authority with respect to any Taxable period ending on or before the
Effective Time, by or on behalf of Parent or any Subsidiary (collectively,
the
“Parent Returns”), have been or will be filed when due (including any extensions
of such due date), and all amounts shown to be due thereon on or before the
Effective Time have been or will be paid on or before such date, other than
such
Taxes which are adequately reserved for in accordance with GAAP. The Parent
Financial Statements fully accrue all actual and contingent liability for Taxes
with respect to all periods through the dates thereof in accordance with GAAP.
The Parent Financial Statements (i) fully accrue consistent with past practices
and in accordance with GAAP all actual and contingent liabilities for Taxes
with
respect to all periods through the date of the Parent Financial Statements
and
(ii) properly accrue consistent with past practices and in accordance with
GAAP
all liabilities for Taxes payable after the Parent Balance Sheet Date with
respect to all transactions and events occurring on or prior to such date.
All
information set forth in the notes to the Parent Financial Statements relating
to Tax matters is accurate in all material respects.
(b) No
Tax
liability has been incurred since the date of the Parent Financial Statements
other than in the ordinary course of business and adequate provision has been
made for all Taxes since that date in accordance with GAAP on at least a
quarterly or, with respect to employment taxes, monthly basis. The Parent and
each Subsidiary have, in all material respects, withheld and paid to the
applicable financial institution or Taxing Authority all amounts of Taxes
required to be withheld. No Parent Returns filed with respect to federal income
tax returns for Taxable years of the Parent in the case of the United States,
have been examined by the Internal Revenue Service. The Parent has not nor
has
any Subsidiary been granted any extension or waiver of the limitation period
applicable to any Parent Return.
(c) There
is
no claim, audit, action, suit, proceeding or, investigation now pending or,
to
Parent’s Knowledge, threatened against or with respect to Parent or any
Subsidiary in respect of any Tax or assessment. There are no liabilities for
Taxes with respect to any notice of deficiency or similar document of any Tax
Authority received by the Parent or any Subsidiary which have not been satisfied
in full (including liabilities for interest, additions to tax and penalties
thereon and related expenses). There are no liens for Taxes upon the assets
of
the Parent or any Subsidiary except liens for current Taxes not yet delinquent.
Except as may be required as a result of the Merger, the Parent has not nor
has
any Subsidiary been nor will it be required to include any adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as
a
result of transactions, events or accounting methods employed prior to the
Effective Time.
(d) There
is
no contract, agreement, plan or arrangement, including without limitation the
provisions of this Agreement, covering any employee or independent contractor
or
former employee or independent contractor of the Parent or any Subsidiary that,
individually or collectively, could, as a result of the transactions
contemplated hereby, give rise to the payment of any amount that would not
be
deductible pursuant to section 280G or section 162 (m) of the Code. Other than
pursuant to this Agreement, the Parent is not nor is any Subsidiary a party
to
or bound by (nor will they prior to the Effective Time become a party to or
bound by) any tax indemnity, tax sharing or tax allocation agreement (whether
written, unwritten or arising under operation of federal law as a result of
being a member of a group filing consolidated tax returns, under operation
of
certain state laws as a result of being a member of a unitary group, or under
comparable laws of other states or foreign jurisdictions) which includes a
party
other than the Parent or any Subsidiary. The Parent has not nor has any
Subsidiary participated in (and prior to the Effective Time the Parent will
not
nor will any Subsidiary participate in) an international boycott within the
meaning of section 999 of the Code. The Parent has disclosed on its federal
income tax returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of section
6661 of the Code. The Parent has previously provided or made available to the
Company complete and accurate copies of all the Parent Returns and, as
reasonably requested by the Company, prior to or following the date hereof,
presently existing information statements, reports, work papers, Tax opinions
and memoranda and other Tax data and documents for the taxable periods ended
September 30, 2005 though September 30, 2006.
33
Section
5.14 Employees
and Employee Benefit Plans.
(a) Except
as
set forth at Section 5.14(a) of the Parent Disclosure Schedule, neither the
Parent nor any Subsidiary has entered into any employment contract or
arrangement with any director, officer, employee or any other consultant or
Person (i) which is not terminable by it at will without liability, except
as
the right of the Parent or such Subsidiary to terminate its employees at will
may be limited by applicable federal, state or foreign law, or (ii) under which
the Parent or any Subsidiary could have any material liability (collectively,
the “Parent Employment Agreements”).
(b) Except
as
set forth in Section 5.14(b) of the Parent Disclosure Schedule, neither the
Parent nor any Subsidiary maintains any Employee Plans.
(c) The
Parent has made available to the Company true, complete and correct copies
of
(i) each Parent Employment Agreement, (ii) each Employee Plan (or, in the case
of any unwritten Employee Plans, descriptions thereof), (iii) the most recent
annual report on Form 5500 filed with the IRS with respect to each Employee
Plan
(if any such report was required), (iv) the most recent summary plan description
for each Employee Plan for which such summary plan description is required,
(v)
each trust agreement and group annuity contract relating to any Employee Plan,
(vi) each determination letter and any outstanding request for a determination
letter, and (vii) all correspondence with the IRS or the United States
Department of Labor relating to any outstanding controversy or audit. Each
Employee Plan complies in all material respects with applicable laws, including,
without limitation, ERISA and the Code.
(d) Each
Employee Plan has been maintained, funded, operated and administered in
compliance in all material respects with all applicable laws and regulations,
including but not limited to, ERISA, the Code, and the Health Insurance
Portability and Accountability Act of 1996. Each Employee Plan that is intended
to be qualified under section 401(a) of the Code and each trust forming a part
thereof that is intended to be exempt from taxation under section 501(a) of
the
Code has received a favorable determination letter from the IRS as to its
qualification and tax-exempt status (or,
where there is no determination letter but the Employee Plan is based upon
a
master and prototype or volume submitter form, the sponsor of such form has
received a current advisory opinion as to the form upon which the Company is
entitled to rely under applicable IRS procedures), and
nothing has occurred, whether by any action or any failure to act, since the
date of such determination letter that could adversely affect the qualification
of such Employee Plan or the tax-exempt status of such related trust. No event
has occurred and, to the Knowledge of the Parent, there currently exists no
condition or set of circumstances in connection with which the Parent that
could
reasonably be expected to be subject to any liability under the terms of any
Employee Plans (other than for benefits payable in the normal course of the
operations of the Employee Plans), ERISA, the Code or any other applicable
law,
including any liability under Title IV of ERISA. Each Employee Plan can be
amended or terminated in accordance with its terms and any applicable law
without any material liability to the Parent or any of its Subsidiaries
(excluding administrative expenses). No Employee Plan is a “multiemployer plan”
as defined in section 3(37) of the ERISA and 414(f) of the Code, or a “multiple
employer plan” as described in section 4063(a) of ERISA and 413 of the Code, and
none of the Parent, any of its Subsidiaries or any ERISA Affiliate has ever
contributed or had an obligation to contribute to any multiemployer plan or
any
plan subject to Title IV of ERISA. For purposes of this Section 5.14(d), an
“ERISA Affiliate” is any organization that is a member of the controlled group
of organizations of the Company and its Subsidiaries (within the meaning of
sections 414(b), (c), (m) or (o) of the Code).
34
(e) Except
as
set forth in Section 5.14(e) of the Parent Disclosure Schedule, no current
or
former director, officer or other employee of, or consultant to, the Parent
or
any of its Subsidiaries will become entitled to any retirement, severance or
similar benefit or enhanced or accelerated benefit (including any acceleration
of vesting or lapse of repurchase rights or obligations with respect to any
employee stock option or other benefit under any stock option plan or
compensation plan or arrangement of the Parent) as a result of the transactions
contemplated hereby.
(f) Except
as
set forth in Section 5.14(f) of the Parent Disclosure Schedule, no Employee
Plan
provides post-retirement health and medical, life or other insurance benefits
for retired employees of the Parent or any of its Subsidiaries (other than
benefit coverage mandated by applicable statute, including benefits provided
pursuant to COBRA).
(g) There
has
been no amendment to, written interpretation or announcement (whether or not
written) by the Parent or any of its affiliates relating to, or change in
employee participation or coverage under, any Employee Plan that would increase
materially the expense of maintaining such Employee Plan above the level of
the
expense incurred in respect thereof for the twelve (12) months ended on the
Parent Balance Sheet Date.
Section
5.15 Compliance
with Law.
(a) To
the
Parent’s Knowledge, all licenses, franchises, permits, clearances, consents,
certificates and other evidences of authority of Parent and its Subsidiaries
which are necessary to the conduct of Parent’s and its Subsidiaries’ respective
businesses (“Parent Permits”) are in full force and effect and neither Parent
nor any Subsidiary is in violation of any Parent Permit in any respect, except
for such exceptions or violations that, individually or in the aggregate, would
not have, or be reasonably likely to have, a Material Adverse Effect. To the
Parent’s Knowledge and except for exceptions which would not have a Material
Adverse Effect, the businesses of the Parent and its Subsidiaries have been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of Governmental Authorities. Except as set forth in Section 5.15(a)
of the Parent Disclosure Schedule, no
investigation or review by any Governmental Authority or Regulatory Authority
is
pending or, to the Knowledge of the Parent, threatened against the Parent or
its
Subsidiaries, nor has any Governmental Authority or Regulatory Authority
indicated an intention to conduct the same, other than, in each such case,
those
the outcome of which could not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on the Parent.
35
(b) National
Securities possesses and is in substantial compliance with all Governmental
and
SRO Authorizations that are required to conduct the broker-dealer business
of
National Securities including, without limitation, all authorizations and
licenses issued to any principal, officer or employee of National Securities
used in connection with the conduct or operations of the business of National
Securities, except where the failure to obtain or comply with such Governmental
and SRO Authorization would not have a Material Adverse Effect on the Parent.
Each of such Governmental and SRO Authorizations is listed on Section 5.15
to
the Parent Disclosure Schedule. Each of such Governmental and SRO Authorizations
is valid and in full force and effect and neither National Securities nor any
of
its employees received in writing, at any time since January 1, 2004, other
than
as set forth on National Securities’ Form BD, any notice or other communication
from any Governmental Authority or Regulatory Authority regarding (i) any actual
or alleged violation of or failure to comply with any material term or
requirement of any Governmental and SRO Authorization, or (ii) any actual or
proposed revocation, withdrawal, suspension, cancellation, termination of,
or
modification to any Governmental and SRO Authorization, except as may be
required to consummate the transaction contemplated hereby.
(c) National
Securities is, and at all times since January 1, 2004 has been in compliance
with SEC Rule 15c-3(1) and Rule 15c-3(3) and in substantial compliance with
the
other provisions of Rule 15c-3.
Section
5.16 Contracts.
Each
Parent Agreement is legally valid and binding and in full force and effect,
except where the failure to be legally valid and binding and in full force
and
effect would not have a Material Adverse Effect, and there are no defaults
thereunder nor has Parent or any of its Subsidiaries waived any material rights
thereunder, except those defaults and/or waivers that would not have a Material
Adverse Effect.
To the
Parent’s Knowledge, no other party to any of the Parent Agreements has breached
or is in default of any of its obligations thereunder.
Section
5.17 Finders’
or Advisors’ Fees.
Other
than the fee due Eureka Capital Markets, LLC in connection with their rendering
of a fairness opinion with respect to the Merger, there are no investment
brokers, finders or other intermediaries which have been retained by or are
authorized to act on behalf of Parent or any of its Subsidiaries who might
be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
Section
5.18 Environmental
Matters.
Except
as disclosed in the Parent SEC Documents or as set forth in Section 5.18 of
the
Parent Disclosure Schedule:
(a) The
Parent possesses any and all Environmental Permits necessary to or required
for
the operation of its business as currently conducted, except where the failure
to possess such Environmental Permits would not cause a Material Adverse Effect.
The Parent will obtain, prior to the Closing, any Environmental Permits that
must be obtained as of or immediately after the Closing in order for the
Surviving Corporation and/or the Parent to conduct the business of the Parent
as
it was conducted prior to the Closing.
36
(b) The
Parent is in compliance in all material respects with (i) all terms, conditions
and provisions of its Environmental Permits; and (ii) all Environmental Laws.
(c) The
Parent has not received any notice of alleged, actual or potential
responsibility for, or any inquiry regarding, (i) any release or threatened
or
suspected release of any Hazardous Material, or (ii) any violation of
Environmental Law, and there is no outstanding civil, criminal or administrative
investigation, action, suit hearing or proceeding pending or threatened against
the Parent pursuant to any Environmental Law.
(d) The
Parent does not have any obligation or liability with respect to any Hazardous
Material, including any Release or threatened or suspected Release of any
Hazardous Material and any violation of Environmental Law, and there have been
no events, facts or circumstances which could form the basis of any such
obligation or liability.
(e) No
Releases of Hazardous Material(s) have occurred at, from, in, to, on, or under
any Site and no Hazardous Material is present in, on, about or migrating to
or
from any Site.
(f) Neither
the Parent, nor any predecessor of the Parent, nor any entity previously owned
by the Parent, has transported or arranged for the treatment, storage, handling,
disposal or transportation of any Hazardous Material at, from or to any site
or
other location.
(g) No
Site
is a current or proposed Environmental Clean-up Site.
(h) There
are
no Liens under or pursuant to any Environmental Law on any Site.
(i) There
is
no (i) underground storage tank, active or abandoned, (ii) polychlorinated
biphenyl containing equipment, (iii) asbestos-containing material, (iv) radon,
(v) lead-based paint or (vi) urea formaldehyde at any Site. Any underground
storage tank meets all current applicable upgrade requirements.
(j) There
have been no Environmental investigations, studies, audits, tests, reviews
or
other analyses conducted which are in the Parent’s possession with respect to
any Site which have not been delivered to Parent prior to execution of this
Agreement.
(k) The
Parent has provided all notifications and warnings, made all reports, and kept
and maintained all records required pursuant to Environmental Laws, except
where
the failure to do so would not be reasonably expected to have a Material Adverse
Effect.
Section
5.19 Labor
Matters.
There
are no labor disputes or union organization activities pending or to Parent’s
Knowledge, threatened between Parent or a Subsidiary and any of its employees.
None of the employees of Parent or any of its Subsidiaries belongs to any union
or collective
bargaining unit. Parent and its Subsidiaries have complied in all material
respects with all applicable state and federal equal employment opportunity
and
other laws and regulations related to employment or working conditions,
including all civil rights and anti-discrimination laws,
rules and regulations. Parent is not nor is any of its Subsidiaries the subject
of any material proceeding asserting that Parent or any of its Subsidiaries
has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor is there pending or, to the Knowledge
of Parent, threatened, any labor strike, dispute, walkout, work stoppage,
slowdown or lockout involving Parent or any of its Subsidiaries.
No
officer or key employee or group of employees of the Company has expressed
any
intention of terminating his or her employment in any capacity and the Company
and its Subsidiaries have no present intention to terminate the employment
of
any officer or key employee.
37
Section
5.20 Property.
The
Parent and its Subsidiaries, as the case may be, have sufficient title or
leaseholds to real property to conduct their respective businesses as currently
conducted with only such exceptions as individually or in the aggregate would
not have a Material Adverse Effect on the Parent and the Subsidiaries taken
as a
whole.
All
leases for real property to which the Parent or any of its Subsidiaries is
a
party (the “Parent Leases”) are in full force and effect and there has been no
event of default or action or circumstances that, with notice or the lapse
of
time or both, would constitute an event of default by the Parent or any of
its
Subsidiaries under any of the Parent Leases.
Section
5.21 Proprietary
Rights.
Section
5.21 of the Parent’s Disclosure Schedule sets forth a list of all registered and
material unregistered Parent Intellectual Property (as defined below) owned
by
the Parent and used in the conduct of its business and all agreements granting
any right to use or practice any right relating to the Parent Intellectual
Property (as defined below) currently used in the conduct of the Parent’s or any
Subsidiary’s business (the “Parent Licenses”). Except as set forth in Section
5.21 of the Parent Disclosure Schedule, (i) the Parent or its Subsidiaries
is
the sole owner of all of its rights under the Parent Licenses free and clear
of
any liens, claims, encumbrances or interests; (ii) the Parent or its
Subsidiaries is the sole owner of, or has a valid right to use pursuant to
a
Parent License, all patents and patent applications; registered and unregistered
trademarks, service marks, trade names, trade dress, logos, company names and
other source or business identifiers, including all goodwill associated
therewith; the names, likenesses and other attributes of individuals; registered
and unregistered copyrights, computer programs and databases; trade secrets,
proprietary technology, know-how, industrial designs and other confidential
information (“Parent Trade Secrets”); any pending applications for any of the
foregoing (collectively, the “Parent Intellectual Property”) currently used in
the conduct of the Parent’s business, free and clear of any liens, claims,
encumbrances or interests, (iii) to the Parent’s Knowledge the present or past
operations of the Parent or the Subsidiaries does not infringe upon, violate,
interfere or conflict with the rights of others with respect to any Parent
Intellectual Property and no claim is pending or, to the Parent’s Knowledge,
threatened, to this effect; (iv) to the Parent’s Knowledge, none of the Parent
Intellectual Property is invalid or unenforceable, or has not been used or
enforced or has failed to be used or enforced in a manner that would result
in
the abandonment, cancellation or unenforceability of any of the Parent
Intellectual Property and no claim is pending or, to the Parent’s Knowledge,
threatened, to this effect; (v) no Parent License provision or any other
contract, agreement or understanding with any party exists which would prevent
the continued use by the Parent or the Subsidiaries (as currently used by the
Parent or its Subsidiaries) of any Parent Intellectual Property following the
consummation of the transactions contemplated hereby; (vi) to the Parent’s
Knowledge, no person is infringing upon or otherwise violating any Parent
Intellectual Property or Parent License; (vii) there are no claims pending
or,
to the Parent’s Knowledge, threatened in connection with any Parent License; and
(viii) to the Parent’s Knowledge, no Parent Trade Secret has been disclosed by
the Parent or its Subsidiaries to any third party except subject to an
appropriate confidentiality agreement or as required by a Governmental
Authority.
38
Section
5.22 Insurance.
The
Parent has provided the Company with copies of all insurance policies to which
the Parent or a Subsidiary is a party or is a beneficiary or named insured.
All
of the insurable properties of the Parent and its Subsidiaries are insured
pursuant to insurance
policies insurance policies as is customary as to the risks insured, amounts
of
coverage and other material terms and all such insurance policies are in full
force and effect in the industry in which the Company and its Subsidiaries
are
engaged. There have been no claims in excess of $50,000 asserted under any
of
the insurance policies of the Parent or its Subsidiaries in respect of all
general liability, professional liability, errors and omissions, property
liability and worker’s compensation and medical claims since the Parent’s
Balance Sheet Date.
Neither
the Parent nor any of its Subsidiaries is in breach or default (including any
such breach or default with respect to the payment of premiums or the giving
of
notice), and no event has occurred that, with notice or the lapse of time,
would
constitute such a breach or default, or permit termination or modification,
under any such insurance policy. To Parent’s Knowledge, no insurer on any such
policy has been declared insolvent or placed in receivership, conservatorship
or
liquidation.
Section
5.23 Opinion
of Financial Advisor.
The
Parent has been advised by its financial advisor, Eureka Capital Markets, LLC,
that in its opinion, as of the date of this Agreement, the Exchange Ratio and
the payment of the Merger Consideration is fair from a financial point of view
to the Parent and,
as
of the date hereof, such opinion has not been withdrawn (such opinion, the
“Parent Fairness Opinion”).
Section
5.24 Takeover
Statutes.
The
Board of Directors of Parent has taken the necessary action to make inapplicable
any applicable Takeover Laws or similar statute or regulation to this Agreement
and the transactions contemplated hereby.
Section
5.25 Transactions
with Affiliates.
Except
as set forth in the Parent SEC Documents, since the date of the Company’s last
proxy statement filed with the SEC, no event has occurred that would be required
to be reported by the Parent, pursuant to Item 404 of Regulation S-K promulgated
by the SEC.
Section
5.26 Full
Disclosure.
No
statement contained in any representation or warranty contained herein or any
statement contained in any certificate or schedule furnished or to be furnished
by the Parent or the Merger Sub to the Company in, or pursuant to the provisions
of, this Agreement contains or shall contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in the light
of
the circumstances under which it was made, in order to make the statements
herein or therein not misleading.
ARTICLE
6
COVENANTS
RELATING TO CONDUCT OF BUSINESS
Section
6.1 Conduct
of Business.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of the Agreement or the Effective Time, the Company, on the
one
hand, and the Parent, on the other hand, each agrees as to itself and its
Subsidiaries (in each such case, the “Agreeing Party”) that (except as expressly
contemplated or permitted by this Agreement or Section 6.1 of the Company
Disclosure Schedule or the Parent Disclosure Schedule, as the case may
be):
(a) Ordinary
Course.
39
(i) the
Agreeing Party and its Subsidiaries shall carry on their respective businesses
in the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use their
reasonable commercial efforts to keep available the services of their respective
present officers and key employees, preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with customers, suppliers and others having business dealings with them to
the
end that their ongoing businesses shall not be impaired in any material respect
at the Effective Time.
(ii) The
Agreeing Party shall not, and shall not permit any of its Subsidiaries to,
(A)
enter into any new material line of business or (B) incur or commit to any
capital expenditures or any obligations or liabilities in connection therewith
other than capital expenditures and obligations or liabilities in connection
therewith which do not exceed $50,000 in the aggregate.
(b) Dividends;
Changes in Share Capital.
The
Agreeing Party shall not, and shall not permit any of its Subsidiaries to,
and
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except the declaration
and
payment of regular dividends from a Subsidiary of the Agreeing Party to the
Agreeing Party or to another Subsidiary of the Agreeing Party in accordance
with
past dividend practice, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities
in
respect of, in lieu of or in substitution for, shares of its capital stock,
except for any such transaction by a wholly owned Subsidiary of the Agreeing
Party which remains a wholly owned Subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire any shares of
its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
(c) Issuance
of Securities.
The
Agreeing Party shall not, and shall not permit any of its Subsidiaries to,
issue, deliver, sell, pledge or dispose of, or authorize or propose the
issuance, delivery, sale, pledge or disposition of, any shares of its capital
stock of any class, or any securities convertible into or exercisable for,
or
any rights, warrants, calls or options to acquire, any such shares, or enter
into any commitment, arrangement, undertaking or agreement with respect to
any
of the foregoing, other than or in connection with (i) the issuance of the
Company Common Stock upon the exercise in accordance with their present terms
of
the Company Warrants and the Company Stock Options outstanding as of the date
of
this Agreement, (ii) the issuance of the Parent Common Stock upon the exercise
in accordance with their present terms of the Parent stock options and Parent
warrants outstanding as of the date of this Agreement, (iii) the issuance of
stock options to newly-hired employees in the ordinary course of business
consistent with past practice; (iv) issuances, sales or deliveries by a wholly
owned Subsidiary of the Agreeing Party of capital stock to such Subsidiary’s
parent or another wholly owned Subsidiary of the Agreeing Party or (v) the
issuance of a stock grant bonus to Xxxxxxxxxx on terms to be mutually agreed
to
by the Agreeing Parties.
40
(d) Governing
Documents.
Except
to the extent required to comply with its obligations hereunder or with
applicable law, the Agreeing Party shall not, and shall not permit its
Subsidiaries to, amend or propose to so amend its Certificate of Incorporation
or its By Laws or other governing documents.
(e) No
Mergers or Acquisitions.
Neither
Agreeing Party shall, nor shall it permit any of its Subsidiaries to, acquire
or
agree to acquire by merger or consolidation, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets (excluding the acquisition of assets used in the operations
of the business of the Agreeing Party and its Subsidiaries in the ordinary
course, which assets do not constitute a business unit, division or all or
substantially all of the assets of the transferor). Neither Agreeing Party
shall, nor shall it permit its Subsidiaries to, enter into any material joint
venture, partnership or other similar arrangement.
(f) No
Dispositions.
Neither
Agreeing Party shall, nor shall it permit any of its Subsidiaries to, sell,
lease or otherwise dispose of, or agree to sell, lease or otherwise dispose
of,
any substantial part of its assets (including capital stock of Subsidiaries
of
the Agreeing Party) other than in the ordinary course of business consistent
with past practice.
(g) Insurance.
Neither
Agreeing Party shall, nor shall it permit any of its Subsidiaries to, fail
to
renew any insurance policy naming it as a beneficiary or a loss payee, or take
any steps or fail to take any steps that would permit any insurance policy
naming it as a beneficiary or a loss payee to be canceled, terminated or
materially altered, except in the ordinary course of business and consistent
with past practice or in connection with the transactions contemplated
hereby.
(h) Investments;
Indebtedness.
Neither
Agreeing Party shall, nor shall it permit any of its Subsidiaries to (i) make
any loans, advances or capital contributions to, or investments in, any other
Person, other than (A) loans or investments by the Agreeing Party or a
Subsidiary of the Agreeing Party to or in the Agreeing Party or any Subsidiary
of the Agreeing Party, (B) in the ordinary course of business consistent with
past practice which are not, individually or in the aggregate, material to
the
Agreeing Party and its Subsidiaries taken together as a whole (provided that
none of such transactions referred to in this clause (B) presents a material
risk of making it more difficult to obtain any approval or authorization
required in connection with the Merger under Regulatory Law) or (ii) except
in
the ordinary course consistent with past practice, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another Person, issue
or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Agreeing Party or any of its Subsidiaries, guarantee any
debt
securities of another Person, enter into any “keep well” or other agreement to
maintain any financial statement condition of another Person (other than any
wholly owned Subsidiary), cancel or forebear or defer any material indebtedness
owed to the Agreeing Party or any Subsidiary thererof, or enter into any
arrangement having the economic effect of any of the foregoing.
(i) Compensation.
(i) Neither
Agreeing Party shall increase the amount of compensation of, or pay any
severance to any director, officer or employee (other than in the ordinary
course of business consistent with past practice) of the Agreeing Party or
any
Subsidiary of the Agreeing Party, or make any increase in, or commitment to
increase, or accelerate the payment of any employee benefits, grant any
additional stock options (except as permitted by Section 6.1(c)), adopt or
amend
or make any commitment to adopt or amend any Employee Plan (except as otherwise
expressly provided by this Agreement) or fund or make any contribution to any
Employee Plan or any related trust or other funding vehicles, other than
regularly scheduled contributions to trusts funding qualified plans.
41
(ii) Neither
Agreeing Party shall accelerate the vesting of, or the lapsing of restrictions
with respect to, any Company Stock Option or Parent Stock Option, as the case
may be, and any option granted or committed to be granted after the date of
this
Agreement shall not accelerate as a result of the approval or consummation
of
any transaction contemplated by this Agreement. Each Agreeing Party shall,
prior
to the Effective Date, eliminate by modifying the affected agreement any
provision providing for such acceleration of vesting or the lapsing of
restrictions with respect to any Company Stock Option or Parent Stock Option,
as
the case may be.
(j) Tax
Free Qualification.
The
Company and Parent shall use their best efforts not to, and shall use their
best
efforts not to permit any of their Subsidiaries to, take any action (including
any action otherwise permitted by this Section 6.1) that would prevent or impede
the Merger from qualifying as a “reorganization” within the meaning of Section
368(a) of the Code. Parent (i) has no plan or intention to reacquire any of
its
stock issued in the Merger, or to liquidate Company, merge Company with or
into
another corporation (other than the Merger Sub), sell or otherwise dispose
of
the stock of Company (except for transfers to corporations controlled by
Parent), or to cause Company to sell or otherwise dispose of any of its assets
(other than transfers to corporations controlled by Company) except for
dispositions made in the ordinary course of business, and (ii) will cause the
Company to continue its historic business or use a significant portion of its
historic business assets in a business.
(k) Accounting
Methods; Tax Matters.
Except
as disclosed in the Company SEC Documents and the Parent SEC Documents, as
the
case may be, filed prior to the date of this Agreement, or as required by a
Governmental Authority, neither Agreeing Party shall change in any material
respect its methods of accounting in effect at September 30, 2006 in the case
of
the Parent and December 31, 2006 in the case of the Company, except as required
by changes in GAAP as concurred in by the Agreeing Party’s independent public
accountants. Neither Agreeing Party shall (i) change its fiscal year; (ii)
make
any Tax election that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; (iii) settle any material Tax claim
or assessment or (iv) surrender any right to claim a material Tax refund or
to
any extension or waiver of the limitations period applicable to any material
Tax
claim or assessment.
(l) Litigation.
Neither
Agreeing Party shall, nor shall it permit any of its subsidiaries to, settle
or
compromise any material suit, action, proceeding or regulatory investigation
pending for an amount in excess of $50,000 or enter into any consent decree,
injunction or similar restraint or form of equitable relief in settlement of
any
suit, action, proceeding or regulatory investigation pending, except for such
consent decrees, injunctions or restraints which would not individually or
in
the aggregate have a Material Adverse Effect.
42
(m) Intellectual
Property.
Neither
Agreeing Party shall sell, transfer or license to any Person or otherwise
extend, amend or modify any rights to any Intellectual Property owned by either
Agreeing Party, other than in the ordinary course of business or pursuant to
any
contracts, agreements, arrangements or understandings currently in place.
(n) Certain
Actions.
Other
than as expressly permitted by Sections 9.1, 9.2 or 9.3, hereof, neither
Agreeing Party shall take any action or omit to take any action for the purpose
of preventing, delaying or impeding the consummation of the Merger or the other
transactions contemplated by this Agreement.
(o) Affiliate
Agreements.
Enter
into any contract (i) with an Affiliate, (ii) other than in the
ordinary course of business, (iii) that would have been set forth on
Section 4.5 of the Company Disclosure Schedule or Section 5.5 of the Parent
Disclosure Schedule if in effect on the date of this Agreement or (iv) that
amends, extends or terminates any of the contracts set forth on Section 4.5
of
the Company Disclosure Letter or Section 5.5 of the Parent Disclosure
Letter.
(p) Takeover
Laws.
Take
any action to subject the Merger or any party to this Agreement to, or to render
inapplicable any exemption from, any Takeover Law or state Law that purports
to
limit or restrict business combinations or the ability to acquire or vote
shares.
(q) No
Related Actions.
Neither
Agreeing Party shall, nor shall it permit any of its Subsidiaries to, agree
or
commit to do any of the foregoing.
Section
6.2 Governmental
Filings.
The
Company and Parent shall (a) confer on a reasonable basis with each other and
(b) report to each other (to the extent permitted by applicable law or
regulation or any applicable confidentiality agreement) on operational matters.
The Company and Parent shall file all reports and correspondence required to
be
filed by each of them with the SEC (and all other Governmental Authorities)
and
the FINRA between the date of this Agreement and the Effective Time and shall,
if requested by the other party and (to the extent permitted by applicable
law
or regulation or any applicable confidentiality agreement) deliver to the other
party copies of all such reports, correspondence, announcements and publications
promptly upon request.
Section
6.3 Other
Company Acquisition Proposals.
(a) Except
as
otherwise provided in this Section 6.3, the Company shall not, and shall not
permit or authorize the Company’s Subsidiaries, its and their officers,
directors, employees, affiliates, agents or other representatives (including
without limitation any investment banker, financial advisor, attorney or
accountant retained by it or any of its Subsidiaries), directly or indirectly,
to (i) initiate, solicit or knowingly encourage (including by way of furnishing
information) any inquiries or the making of any proposal relating to, any
Company Acquisition Proposals (as defined below), or enter into discussions
(except as to the existence of these provisions) or negotiate with any person
or
entity in furtherance of such inquiries or to obtain an Company Acquisition
Proposal, or agree to, approve, recommend, approve or endorse, any Company
Acquisition Proposal or (ii) enter into any merger agreement, letter of intent,
agreement in principle, share purchase agreement, share exchange agreement,
asset purchase agreement, option agreement or similar agreement providing for
or
relating to a Company Acquisition Proposal or enter into any agreement or
agreement in principal requiring the Company to abandon, terminate or fail
to
consummate the transactions contemplated hereby or breach its obligations
hereunder or propose or agree to do any of the foregoing. The
Company shall within twenty-four (24) hours notify Parent of all relevant terms
of any such inquiries or proposals received by the Company or by any subsidiary
or by any such officer, director, employee, agent, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters and if such inquiry or proposal is in writing, the Company shall within
twenty-four (24) hours deliver or cause to be delivered to Parent a copy of
such
inquiry or proposal and within twenty-four (24) hours update Parent as to any
material changes (and provide Parent with copies of same if in writing) with
respect to such inquiry or proposal. Nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (a) making any disclosure
to
its stockholders if, in the good faith judgment of its Board of Directors,
failure so to disclose would be inconsistent with its obligations under
applicable law; (b) negotiating with or furnishing information to any Person
who
has made an unsolicited bona fide written Company Acquisition Proposal; or
(c)
recommending such Company Acquisition Proposal to its stockholders, if and
only
to the extent that, in the case of actions referred to in clause (b) or clause
(c), such Company Acquisition Proposal is a Superior Proposal (as defined below)
and Parent is given at least two (2) Business Days’ written notice of the
identity of the third party and all material terms and conditions of the
Superior Proposal to respond to such Superior Proposal. Nothing contained in
this Agreement shall prevent the Board of Directors of the Company from
complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
with
regard to a Company Acquisition Proposal; provided that the Board of Directors
of the Company shall not recommend that the stockholders of the Company tender
their shares in connection with a tender offer except to the extent the Board
of
Directors of the Company determines in its good faith judgment that such a
recommendation is required to comply with the fiduciary duties of the Board
of
Directors of the Company to stockholders under applicable law, after receiving
the advice of its outside financial and legal advisors.
Neither
the Company nor any of its Subsidiaries shall provide any material non-public
information to any third party in connection with a Company Acquisition Proposal
unless such third party has entered into a confidentiality agreement
containing
terms the Company determines to be substantially the same as the
Confidentiality Agreement
(but
permitting the disclosures to Parent and its Affiliates described in this
Section 6.3 to be made to the Parent and its Affiliates).
43
(b) For
purposes of this Agreement, a “Company Acquisition Proposal” means, in respect
of the Company, an unsolicited bona fide proposal for or in respect of (i)
a
merger, consolidation, business combination, recapitalization, or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction would hold less than fifty
percent (50%) of the aggregate equity interests in the surviving or resulting
entity of such transaction, (ii) a sale or other disposition by the Company
of
assets representing in excess of fifty percent (50%) of the aggregate fair
market value of the Company’s business immediately prior to such sale, or (iii)
the acquisition by any person or group (including by way of a tender offer
or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of fifty percent (50%) of the voting power of the then
outstanding shares of capital stock of the Company, from a Person that in the
reasonable judgment of Company’s Board of Directors (based on advice from a
recognized investment bank, it being recognized for the purposes of this Section
6.3 that Value Research Corporation is a recognized investment bank) is
financially capable of consummating such proposal.
44
(c) For
purposes of this Agreement, a “Superior Proposal” means, an unsolicited, bona
fide written Company Acquisition Proposal (in respect of the Company) or Parent
Acquisition Proposal (in respect of the Parent) for or in respect of at least
a
majority of the outstanding Company Shares or Shares of the Parent on terms
that
the Board of Directors of the relevant entity determines, in its good faith
judgment (after consultation with its financial advisors and legal counsel)
to
be more favorable to the relevant entity’s stockholders than the terms of the
Merger; is from a Person that in the reasonable judgment of the relevant
entity’s Board of Directors (after consultation with a recognized investment
bank, it being recognized that for the purposes of this Agreement either Value
Research Corporation or Eureka Capital Markets, LLC is a recognized investment
bank) is financially capable of consummating such proposal, and that in the
reasonable judgment of the relevant entity’s Board of Directors (after
consultation with a recognized investment bank), if accepted, is reasonably
likely to be consummated taking into account all legal, financial and regulatory
aspects of the offer and the Person making the offer.
(d) Neither
the board of directors of the Company nor any committee thereof shall directly
or indirectly (i) withdraw or modify in a manner adverse to Parent or
Merger Sub, or publicly propose to withdraw or modify in a manner adverse to
Parent or Merger Sub, its recommendation in favor of the Merger or
(ii) take any other action or make any other public statement in connection
with the Company Stockholder Meeting inconsistent with such recommendation;
provided,
that at
any time prior to obtaining the Requisite Stockholder Vote, if the Company
receives an Acquisition Proposal which the board of directors of the Company
concludes in good faith constitutes a Superior Proposal, the board of directors
of the Company may (i) cause the Company to terminate this Agreement
pursuant to Section
9.1
and to
concurrently enter into a definitive agreement with respect to such Superior
Proposal or (ii) withdraw or modify its approval of this Agreement or its
recommendation that the Company’s stockholders adopt this Agreement and approve
the Transactions if, in each case, the Board determines in good faith, after
consultation with its outside financial and legal advisors, that failure to
take
such action would violate its fiduciary duties under applicable Law;
provided,
however,
that
the Company shall not terminate this Agreement pursuant to the foregoing clause
(i) and any purported termination pursuant to the foregoing clause
(i) shall be void and of no force and effect, unless prior to such
termination the Company pays the amounts payable pursuant to Section
9.5,
the
Company has complied with this Section
6.3
and such
Acquisition Proposal continues to constitute a Superior Proposal; and
provided,
further,
that
the Company may not terminate this Agreement pursuant to the foregoing clause
(i) and the Board may not effect a withdrawal or modification of its
approval of this Agreement pursuant to the foregoing clause (ii) unless the
Company shall have provided prior written notice to Parent, at least four
Business Days in advance (the “Notice
Period”),
of
its intention to withdraw or modify its approval of this Agreement or terminate
this Agreement to enter into a definitive agreement with respect to such
Superior Proposal, which notice shall include a written summary of the material
terms and conditions of such Superior Proposal (including the identity of the
party making such Superior Proposal), and shall have contemporaneously provided
a copy of the relevant proposed transaction agreements with the party making
such Superior Proposal and any other material documents relating thereto. During
the Notice Period, the Company shall, and shall cause its Representatives to,
negotiate with Parent and Merger Sub in good faith (to the extent Parent and
Merger Sub desire to negotiate) to make such adjustments in the terms and
conditions of this Agreement, and the Board shall take into account any changes
to the financial and other terms of this Agreement proposed by Parent in
response to any such written notice by the Company or otherwise, so that the
Acquisition Proposal ceases to constitute a Superior Proposal (it being
understood and agreed that any amendment to the financial terms or other term
of
such Superior Proposal shall require a new written notice by the Company and
a
new four-Business Day period).
45
(e) Nothing
contained in this Section
6.3
or
elsewhere in this Agreement shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act; provided,
that
any such disclosure (other than a “stop, look and listen” letter or similar
communication of the type contemplated by Rule 14d-9(f) under the Exchange
Act)
shall be deemed to be a withdrawal of the Board’s recommendation in favor of
this Agreement pursuant to Section
6.3(d)
unless
the Board expressly publicly reaffirms in such disclosure its recommendation
in
favor of the adoption of this Agreement.
(f) The
Company acknowledges and agrees that any violations of the restrictions set
forth in this Section
6.3
by any
Representative of the Company or any of its Subsidiaries, shall be deemed to
be
a breach of this Section
6.3
by the
Company.
(g) The
Company shall not, directly or indirectly, pay, reimburse or otherwise assume
liability for, or agree or commit to pay, reimburse or otherwise assume
liability for, any fees or expenses of any person with whom the Company holds
discussions or to whom the Company provides information pursuant to this
Section
6.3
in
excess of $100,000 in the aggregate.
Section
6.4 Other
Parent Acquisition Proposals.
(a) Except
as
otherwise provided in this Section 6.4, Parent shall not, and shall not permit
or authorize the Parent’s Subsidiaries, its and their officers, directors,
employees, affiliates, agents or other representatives (including without
limitation any investment banker, financial advisor, attorney or accountant
retained by it or any of its Subsidiaries), directly or indirectly, to (i)
initiate, solicit or knowingly encourage (including by way of furnishing
information) any inquiries or the making of any proposal relating to, any Parent
Acquisition Proposals (as defined below), or enter into discussions (except
as
to the existence of these provisions) or negotiate with any person or entity
in
furtherance of such inquiries or to obtain an Parent Acquisition Proposal,
or
agree to, approve, recommend, approve or endorse, any Parent Acquisition
Proposal or (ii) enter into any merger agreement, letter of intent, agreement
in
principle, share purchase agreement, share exchange agreement, asset purchase
agreement, option agreement or similar agreement providing for or relating
to a
Parent Acquisition Proposal or enter into any agreement or agreement in
principal requiring the Company to abandon, terminate or fail to consummate
the
transactions contemplated hereby or breach its obligations hereunder or propose
or agree to do any of the foregoing. Parent shall within twenty-four (24) hours
notify the Company of all relevant terms of any such inquiries or proposals
received by Parent or by any Subsidiary or by any such officer, director,
employee, agent, investment banker, financial advisor, attorney, accountant
or
other representative relating to any of such matters and if such inquiry or
proposal is in writing, Parent shall within twenty-four (24) hours deliver
or
cause to be delivered to the Company a copy of such inquiry or proposal and
within twenty-four (24) hours update the Company as to any material changes
(and
provide the Company with copies of same if in writing) with respect to such
inquiry or proposal. Nothing contained in this Agreement shall prevent Parent
or
its board of directors from (a) making any disclosure to its stockholders if,
in
the good faith judgment of its board of directors, failure so to disclose would
be inconsistent with its obligations under applicable law; (b) negotiating
with
or furnishing information to any Person who has made an unsolicited bona fide
written Parent Acquisition Proposal; or (c) recommending such Parent Acquisition
Proposal to its stockholders, if and only to the extent that, in the case of
actions referred to in clause (b) or clause (c), such Parent Acquisition
Proposal is a Superior Proposal (as defined below) and the Company is given
at
least two (2) Business Days’ written notice of the identity of the third party
and all material terms and conditions of the Superior Proposal to respond to
such Superior Proposal. Nothing contained in this Agreement shall prevent the
board of directors of Parent from complying with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act with regard to a Parent Acquisition Proposal;
provided that the board of directors of Parent shall not recommend that the
stockholders of Parent tender their shares in connection with a tender offer
except to the extent the board of directors of Parent determines in its good
faith judgment that such a recommendation is required to comply with the
fiduciary duties of the board of directors of Parent to stockholders under
applicable law, after receiving the advice of outside legal counsel. Neither
Parent nor any of its Subsidiaries shall provide any material non-public
information to any third party in connection with a Parent Acquisition Proposal
unless such third party has entered into an Acceptable Confidentiality Agreement
with Parent and a copy of such Acceptable Confidentiality Agreement has been
provided to the Company.
46
(b)
For
purposes of this Agreement, a “Parent Acquisition Proposal” means, in respect of
the Company, an unsolicited bona fide proposal for or in respect of (i) a
merger, consolidation, business combination, recapitalization, or similar
transaction involving the Parent pursuant to which the stockholders of Parent
immediately preceding such transaction would hold less than fifty percent (50%)
of the aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by Parent of assets representing
in excess of fifty percent (50%) of the aggregate fair market value of the
Parent’s business immediately prior to such sale, or (iii) the acquisition by
any person or group (including by way of a tender offer or an exchange offer
or
issuance by Parent), directly or indirectly, of beneficial ownership or a right
to acquire beneficial ownership of shares representing in excess of fifty
percent (50%) of the voting power of the then outstanding shares of capital
stock of Parent, from a Person that in the reasonable judgment of Parent’s Board
of Directors (based on advice from a recognized investment bank, it being
recognized for the purposes of this Section 6.4 that Eureka Capital Markets,
LLC
is a recognized investment bank) is financially capable of consummating such
proposal.
(c) Neither
the board of directors of Parent nor any committee thereof shall directly or
indirectly (i) withdraw or modify in a manner adverse to the Company, or
publicly propose to withdraw or modify in a manner adverse to the Company,
its
approval of the Merge; provided,
that at
any time prior to the Closing Date, if Parent receives an Acquisition Proposal
which the board of directors of Parent concludes in good faith constitutes
a
Superior Proposal, the board of directors of Parent may (i) cause Parent to
terminate this Agreement pursuant to Section
9.2
to
concurrently enter into a definitive agreement with respect to such Superior
Proposal or (ii) withdraw or modify its approval of this Agreement if, the
Board determines in good faith, after consultation with outside counsel, that
failure to take such action would violate its fiduciary duties under applicable
Law; provided,
however,
that
Parent shall not terminate this Agreement pursuant to the foregoing clause
(i) and any purported termination pursuant to the foregoing clause
(i) shall be void and of no force and effect, unless prior to such
termination Parent pays the amounts payable pursuant to Section
9.5,
Parent
has complied with this Section
6.4
and such
Acquisition Proposal continues to constitute a Superior Proposal; and
provided,
further,
that
Parent may not terminate this Agreement pursuant to the foregoing clause
(i) and the board of directors of Parent may not effect a withdrawal or
modification of its approval of this Agreement pursuant to the foregoing clause
(ii) unless Parent shall have provided prior written notice to the Company,
at least four Business Days in advance (the “Notice
Period”),
of
its intention to withdraw or modify its approval of this Agreement or terminate
this Agreement to enter into a definitive agreement with respect to such
Superior Proposal, which notice shall include a written summary of the material
terms and conditions of such Superior Proposal (including the identity of the
party making such Superior Proposal), and shall have contemporaneously provided
a copy of the relevant proposed transaction agreements with the party making
such Superior Proposal and any other material documents relating thereto. During
the Notice Period, Parent shall, and shall cause its Representatives to,
negotiate with the Company in good faith (to the extent the Company desires
to
negotiate) to make such adjustments in the terms and conditions of this
Agreement, and the board of directors of Parent shall take into account any
changes to the financial and other terms of this Agreement proposed by the
Company in response to any such written notice by Parent or otherwise, so that
the Acquisition Proposal ceases to constitute a Superior Proposal (it being
understood and agreed that any amendment to the financial terms or other term
of
such Superior Proposal shall require a new written notice by Parent and a new
four-Business Day period).
47
(d) Nothing
contained in this Section
6.4
or
elsewhere in this Agreement shall prohibit Parent from taking and disclosing
to
its stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a)
promulgated under the Exchange Act; provided,
that
any such disclosure (other than a “stop, look and listen” letter or similar
communication of the type contemplated by Rule 14d-9(f) under the Exchange
Act)
shall be deemed to be a withdrawal of the recommendation of the board of
directors of Parent in favor of this Agreement pursuant to Section
6.4(c)
unless
the board of directors of Parent expressly publicly reaffirms in such disclosure
its recommendation in favor of the adoption of this Agreement.
(e) Parent
acknowledges and agrees that any violations of the restrictions set forth in
this Section
6.4
by any
Representative of Parent or any of its Subsidiaries, shall be deemed to be
a
breach of this Section
6.3
by
Parent.
(f) Parent
shall not, directly or indirectly, pay, reimburse or otherwise assume liability
for, or agree or commit to pay, reimburse or otherwise assume liability for,
any
fees or expenses of any person with whom Parent holds discussions or to whom
Parent provides information pursuant to this Section
6.4.
Section
6.5 Consents
of Parent’s and the Company’s Accountants.
Each of
Parent and the Company shall use commercially reasonable efforts to cause its
independent accountants to deliver
to Parent a consent, dated the date on which the Form S-4 shall become
effective, in form reasonably satisfactory to Parent and customary in scope
and
substance for consents
delivered by independent public accountants in connection with registration
statements on Form S-4 under the Securities Act.
48
Section
6.6 Notification
of Certain Matters.
(a) Each
Agreeing Party shall give prompt notice to the other party of any representation
or warranty made by it contained in this Agreement becoming untrue or
inaccurate, or any failure of an Agreeing Party to comply with or satisfy in
any
respect any covenant, condition or agreement to be complied with or satisfied
by
it under this Agreement, in each case, such that any of the conditions set
forth
in Sections 8.1, 8.2 or 8.3 could reasonably be expected to not be satisfied;
provided, however, that no such notification shall
affect the representations, warranties, covenants, remedies or agreements of
the
parties or the conditions to the obligations of the parties under this
Agreement.
(b) The
Company shall give prompt notice to Parent, and Parent shall give prompt notice
to the Company, of (i) any material failure of the Company or Parent, as the
case may be, to comply with or satisfy any covenant, condition or agreement
to
be complied with or satisfied by it set forth in Article 8 hereof or the failure
of which would result in either Material Adverse Effect, as the case may be,
or
(ii) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transaction contemplated by this Agreement.
Section
6.7 SEC
Filings.
(a) The
Company will deliver promptly to Parent true and complete copies of each report,
registration statement or statement mailed by it to its security holders
generally or filed by it with the SEC, in each case subsequent to the date
of
this Agreement and prior to the Effective Time. As of their respective dates,
such reports, including the consolidated financial statements included therein,
and statements (excluding any information therein provided by Parent or Merger
Sub, as to which the Company makes no representation) will not contain any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements therein, in light of
the
circumstances under which they are made, not misleading and will comply in
all
material respects with all applicable requirements of law. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in such reports, (i) shall comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (ii) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) shall fairly present the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows
for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were
not,
or are not expected to be, material in amount.
(b) Parent
will deliver promptly to the Company true and complete copies of each report,
registration statement or statement mailed by it to its security holders
generally or filed by it with the SEC, in each case subsequent to the date
of
this Agreement and prior to the Effective Time. As of their respective dates,
such reports, including the consolidated financial statements included therein,
and statements (excluding any information therein provided by the Company,
as to
which Parent makes no representation) will not contain any untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading and will comply in all material respects
with all applicable requirements of law. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in
such reports (i) shall comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (ii) shall be prepared in accordance with
GAAP
applied on a consistent basis throughout the periods involved (except as may
be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange
Act)
and (iii) shall fairly present the consolidated financial position of Parent
and
its Subsidiaries as at the respective dates thereof and the consolidated results
of its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount.
49
Section
6.8 Clearing
Arrangements.
Each of
the Agreeing Parties shall use commercially reasonable efforts to obtain prior
to the Closing the approval of their respective clearing firms so that the
transactions contemplated by this Agreement do not trigger acceleration of
indebtedness thereunder or shall otherwise seek to modify their existing
clearing arrangements to consolidate same or such other arrangements reasonably
acceptable to Parent and the Company (collectively “Clearing Arrangements
Approvals”).
ARTICLE
7
ADDITIONAL
COVENANTS OF PARENT AND THE COMPANY
Section
7.1 Preparation
of Proxy Statement; Stockholders Meetings.
(a) As
promptly as reasonably practicable following the date hereof, Parent and the
Company shall cooperate in preparing and each shall cause to be filed with
the
SEC mutually acceptable proxy materials that shall constitute the Proxy
Statement/Prospectus and Parent shall prepare and file with the SEC the Form
S-4. The Proxy Statement/Prospectus will be included as a prospectus in and
will
constitute a part of the Form S-4 as Parent’s prospectus. Each of Parent and the
Company shall use reasonable commercial efforts to have the Proxy
Statement/Prospectus cleared by the SEC and the Form S-4 declared effective
by
the SEC and to keep the Form S-4 effective as long as is necessary to consummate
the Merger and the transactions contemplated hereby. Each of Parent and the
Company shall, as promptly as practicable after receipt thereof, provide the
other party with copies of any written comments and advise each other of any
oral comments with respect to the Proxy Statement/Prospectus or Form S-4
received from the SEC. The parties shall cooperate and provide the other party
with a reasonable opportunity to review and comment on any amendment or
supplement to the Proxy Statement/Prospectus and the Form S-4 prior to filing
such with the SEC and will provide each other with a copy of all such filings
made with the SEC. Notwithstanding any other provision herein to the contrary,
no amendment or supplement (including by incorporation by reference) to the
Proxy Statement/Prospectus or the Form S-4 shall be made without the approval
of
both Parent and the Company, which approval shall not be unreasonably withheld
or delayed; provided that, with respect to documents filed by a party hereto
that are incorporated by reference in the Form S-4 or Proxy
Statement/Prospectus, this right of approval shall apply only with respect
to
information relating to the other party or its business, financial condition
or
results of operations; and provided, further, that Parent, in connection with
a
Change in the Parent Recommendation, and the Company, in connection with a
Change in the Company Recommendation, may amend or supplement the Proxy
Statement/Prospectus or Form S-4 (including by incorporation by reference)
pursuant to a Qualifying Amendment to effect such a Change, and in such event,
this right of approval shall apply only with respect to information relating
to
the other party or its business, financial condition or results of operations,
and shall be subject to the right of each party to have its board of directors’
deliberations and conclusions to be accurately described. The Company will
use
reasonable commercial efforts to cause the Proxy Statement/Prospectus to be
mailed to the Company stockholders as promptly as practicable after the Form
S-4
is declared effective under the Securities Act. Each party hereto will advise
the other party, promptly after it receives notice thereof, of the time when
the
Form S-4 has become effective, the issuance of any stop order, the suspension
of
the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC
for
amendment of the Proxy Statement/ Prospectus or the Form S-4. If, at any time
prior to the Effective Time, any information relating to Parent or the Company,
or any of their respective affiliates, officers or directors, is discovered
by
Parent or the Company and such information should be set forth in an amendment
or supplement to any of the Form S-4 or the Proxy Statement/Prospectus so that
any of such documents would not include any misstatement of a material fact
or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the
party
hereto discovering such information shall promptly notify the other parties
hereto and, to the extent required by law, rules or regulations, an appropriate
amendment or supplement describing such information shall be promptly filed
with
the SEC and disseminated to the stockholders of the Company.
50
(b) The
Company shall duly take all lawful action to call, give notice of, convene
and
hold the Company Stockholders Meeting as soon as practicable on a date
determined in accordance with the mutual agreement of Parent and the Company
for
the purpose of obtaining the Company Stockholder Approval and, subject to
Section 6.3, shall take all lawful action to solicit the Company Stockholder
Approval. Notwithstanding anything to the contrary contained in this Agreement,
the Company may adjourn or postpone the Company Stockholders Meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Proxy Statement/Prospectus is provided to the Company Stockholders in advance
of
a vote on the Merger and this Agreement or, if as of the time for which the
Company Stockholders Meeting is originally scheduled (as set forth in the Proxy
Statement/Prospectus) there are insufficient shares of the Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary
to
conduct the business of the Company Stockholders Meeting. The board of directors
of the Company shall recommend the approval of the plan of merger contained
in
this Agreement by the Company Stockholders to the effect as set forth in Section
4.3 (the “Company Recommendation”), and shall not (i) withdraw, modify or
qualify (or propose to withdraw, modify or qualify) in any manner adverse to
Parent or Merger Sub such recommendation or (ii) take any action or make any
statement in connection with the Company Stockholders Meeting inconsistent
with
such recommendation (collectively, a “Change in the Company Recommendation”);
provided, however, that the Board of Directors of the Company may make a Change
in the Company Recommendation pursuant to Section 6.3 hereof. Notwithstanding
any Change in the Company Recommendation, this Agreement shall be submitted
to
the Company Stockholders at the Company Stockholders Meeting for the purpose
of
approving and adopting this Agreement and the Merger and nothing contained
herein shall be deemed to relieve the Company of such obligation unless this
Agreement shall have first been terminated as set forth in Section 9.2 or
Section 9.3.
51
Section
7.2 Parent
Board Of Directors.
(a) At
the
Effective Time, the Parent Board of Directors shall consist of between seven
and
nine members and shall consist of Xxxx Xxxxxxxxxx (Chairman of the Board),
Xxxxxxx Xxxxxxx (Vice Chairman of the Board), Xxxxxxxxxxx Xxxxx (Vice Chairman
of the Board), Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, up to three other designees of
the
Parent and up to one additional designee of the Company. Messrs. Xxxxxx and
Xxxxxx and the other designees of the Parent and the Company shall be
independent directors. Such Company Designees shall be qualified under current
law and reasonably acceptable to the board of directors of Parent. Parent’s
additional independent directors will be reasonably acceptable to the Company
and shall be identified by Parent as soon as practicable and no later than
two
(2) Business Days prior to the date that the Company mails the Proxy
Statement/Prospectus to the Company Stockholders. Such independent directors
must be reasonably acceptable to the board of directors of the Company. Messrs.
Xxxxxxxxxx, Xxxxxxx and Xxxxx will agree to enter into a voting agreement among
such parties to vote in favor of such nominees and each other.
(b) [Intentionally
Deleted.]
(c) On
or
prior to the Closing Date, to be effective at the Effective Time, Parent shall
take all requisite action to establish an executive committee of its Board
of
Directors consisting of Xxxxxxxxxx, Xxxxx and Xxxxxxx, which subject to
applicable law will be responsible for reviewing and approving proposals
considered material to the Parent, prior to their review and resolution of
the
entire board of directors.
Section
7.3 Access
to Information; Confidentiality Agreement.
(a) Upon
reasonable notice, each of Parent and the Company shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives (“Representatives”) of the other
party reasonable access
during normal business hours, during the period prior to the Effective Time,
to
all its properties, books, contracts, commitments, records, officers and
employees and, during such period, each of Parent and the Company shall (and
shall cause its Subsidiaries to) furnish promptly to the other party (a) a
copy
of each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of U.S. federal or state securities laws or any other Regulatory
Law, as applicable (other than documents that such party is not permitted to
disclose under applicable law), and (b) all other information concerning it
and
its business, finances, properties and personnel as such other party may
reasonably request; provided, however, that either Parent or the Company may
restrict the foregoing access to the extent that (i) any law, treaty, rule
or
regulation of any Governmental Authority applicable to it or any contract
requires it or its Subsidiaries to restrict or prohibit access to any such
properties or information or (ii) the information is subject to confidentiality
obligations to a third party. Each of Parent and the Company will hold any
information obtained pursuant to this Section 7.3 in confidence in accordance
with the Confidentiality and Exclusivity Agreement dated September 5, 2007
between the Company and Parent. Any investigation by either Parent or the
Company shall not affect the representations and warranties of the
other.
52
(b) The
Company hereby waives the provisions of the Confidentiality Agreement as and
to
the extent necessary to permit the consummation of the Merger and the
transactions contemplated by this Agreement. At the Effective Time, the
Confidentiality Agreement shall be deemed to have terminated without further
action by the parties thereto. If this Agreement is terminated, each party
shall
return to the other party or destroy any documents furnished by the other party
and all copies thereof any of them may have made and will hold in confidence
any
information obtained from the other party except to the extent (a) such party
is
required to retain or disclose such information by applicable Law or such
retention or disclosure is necessary in connection with the pursuit or defense
of a claim, (b) such information was known by such party prior to such
disclosure or was thereafter developed or obtained by such party independent
of
such disclosure or (c) such information becomes generally available to the
public other than by breach of this Section 7.3(b). Prior to any disclosure
of
information pursuant to the exception in clause (a) of the preceding sentence,
the party intending to disclose such information shall so notify the party
that
provided such information in order that such party may seek a protective order
or other appropriate remedy should it choose to do so.
Section
7.4 Reasonable
Commercial Efforts.
(a) Subject
to the terms and conditions of this Agreement, each party hereto will use its
reasonable commercial efforts to take, or cause to be taken, all actions, and
to
do, or cause to be done, all things necessary, proper or advisable under this
Agreement and applicable laws and regulations to consummate the Merger and
the
other transactions contemplated by this Agreement as soon as practicable after
the date hereof, including (i) preparing and filing as promptly as practicable
all documentation to effect all necessary applications, notices, petitions,
filings, and other documents and to obtain as promptly as practicable all
necessary consents and all other consents, waivers, licenses, orders,
registrations, approvals, permits, rulings, authorizations and clearances
necessary or advisable to be obtained from any third party and/or any
Governmental Authority in order to consummate the Merger or any of the other
transactions contemplated by this Agreement (collectively, the “Required
Approvals”) and (ii) taking all reasonable steps as may be necessary to obtain
all such Required Approvals. In furtherance and not in limitation of the
foregoing, each of Parent and the Company agrees, to the extent not already
accomplished (i) to make, as promptly as practicable, all necessary filings
with
Governmental Authorities relating to the Merger and the other transactions
contemplated by this Agreement, and, to supply as promptly as practicable any
additional information or documentation that may be requested pursuant to such
laws or by such governmental entities or any other applicable regulatory law
and
the receipt of Required Approvals under such other laws or from such
Governmental Authorities as soon as practicable and (ii) not to extend any
waiting period under any applicable regulatory law, except with the prior
written consent of the other parties hereto (which consent shall not be
unreasonably withheld or delayed). Notwithstanding anything to the contrary
in
this Agreement, neither Parent nor the Company nor any of their respective
Subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest or agree to divest any of their respective businesses
or
assets, or to take or agree to take any action or agree to any limitation that
could reasonably be expected to have a Material Adverse Effect on Parent
(assuming the Merger has been consummated) or to substantially impair the
benefits to Parent and the Company expected, as of the date hereof, to be
realized from consummation of the Merger, and neither Parent or the Company
shall be required to agree to or effect any divestiture, hold separate any
business or take any other action that is not conditional on the consummation
of
the Merger.
53
(b) Each
of
the Company and Parent shall, in connection with the efforts referenced in
Section 7.4(a) to obtain all Required Approvals, use its reasonable commercial
efforts to (i) cooperate in all respects with each other in connection with
any
filing or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, (ii) subject to
applicable law, permit the other party to review in advance any proposed written
communication between it and any Governmental Authority, (iii) promptly inform
each other of (and, at the other party’s reasonable request, supply to such
other party) any communication (or other correspondence or memoranda) received
by such party from, or given by such party to any Governmental Authority and
of
any material communication received or given in connection with any proceeding
by a private party, in each case regarding any of the transactions contemplated
hereby, and (iv) consult with each other in advance to the extent practicable
of
any meeting or conference with any Governmental Authority or, in connection
with
any proceeding by a private party, with any other Person, and to the extent
permitted by such applicable Governmental Authority or other Person, give the
other party the opportunity to attend and participate in such meetings and
conferences.
(c) In
furtherance and not in limitation of the covenants of the parties hereto
contained in Section 7.4(a) and 7.4(b), if any administrative or judicial action
or proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any applicable Regulatory Law of the United States,
or
if any Law is enacted, entered, promulgated or enforced by a Governmental
Authority that would make the Merger or the other transactions contemplated
hereby illegal or would otherwise prohibit or materially impair or delay the
consummation of the Merger or the other transactions contemplated hereby, each
of the Company and Parent shall cooperate in all respects with each other and
use its respective reasonable commercial efforts, including, subject to Section
7.4(a), selling, holding separate or otherwise disposing of or conducting their
business in a specified manner, or agreeing to sell, hold separate or otherwise
dispose of or conduct their business in a specified manner or permitting the
sale, holding separate or other disposition of, any assets of Parent, the
Company or their respective Subsidiaries or the conducting of their business
in
a specified manner, to contest and resist any such action or proceeding and
to
have vacated, lifted, reversed or overturned any decree, judgment, injunction
or
other order, whether temporary, preliminary or permanent, that is in effect
and
that prohibits, prevents or restricts consummation of the Merger or the other
transactions contemplated by this Agreement and to have such statute, rule,
regulation, executive order, decree, injunction or administrative order
repealed, rescinded or made inapplicable so as to permit consummation of the
transactions contemplated by this Agreement. Notwithstanding the foregoing
or
any other provision of this Agreement, nothing in this Section 7.4 shall limit
a
party’s right to terminate this Agreement pursuant to Section 9.1(b) or Section
9.1(c) so long as such party hereto has up to then complied with its obligations
under this Section 7.4.
(d) Each
of
Parent and the Company and their respective Boards of Directors shall, if any
Takeover Law or similar Law becomes applicable to this Agreement, the Merger
or
any other transactions contemplated hereby, take all action reasonably necessary
to ensure that the Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise to minimize the effect of such Law on this
Agreement, the Merger and the other transactions contemplated hereby.
54
Section
7.5 Public
Announcements.
Parent
and the Company agree that no public release or announcement concerning the
Transactions or the Merger shall be issued by either party without the prior
consent of the other party (which consent shall not be unreasonably withheld),
except as such release or announcement may be required by Law or the rules
or
regulations of any securities exchange or stock quotation service, in which
case
the party required to make the release or announcement shall use its best
efforts to allow the other party reasonable time to comment on such release
or
announcement in advance of such issuance; provided, however, that each of Parent
and the Company may make any public statement in response to specific questions
by the press, analysts, investors or those attending industry conferences or
financial analyst conference calls, so long as any such statements are not
inconsistent with previous public releases or announcements made by Parent
or
the Company in compliance with this Section 7.5 and do not reveal non-public
information regarding the other party.
Section
7.6 Notification
of Certain Matters.
Each of
the Company and Parent shall give prompt notice to the other party of (a) any
notice of, or other communication relating to, a breach of this Agreement or
event which, with notice or lapse of time or both, would become a breach,
received by it or any of its Subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any contract to which it or
any
of its Subsidiaries is a party or it, any of its Subsidiaries or any of its
or
their respective properties is subject, which breach would be reasonably likely
to have a Material Adverse Effect on it, or (b) any notice or other
communication from any third party alleging that the consent of such third
party
is or may be required in connection with the transactions contemplated by this
Agreement.
Section
7.7 Expenses.
Except
as set forth in Section 9.5, Parent and the Company shall bear their respective
expenses incurred in connection with the Merger, including, without limitation,
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, and all Third Party Expenses, except that
expenses incurred in printing, mailing and filing (including without limitation,
SEC filing fees and stock exchange or stock quotation service listing
application
fees) the Form S-4 and the Proxy Statement/Prospectus shall be shared equally
by
the Company and the Parent.
Section
7.8 Affiliates.
Section
7.8 of the Disclosure Schedule contains a complete and accurate list of those
persons who may be deemed to be, in the Company’s reasonable judgment,
“affiliates” of the Company within the meaning of Rule 145 promulgated under the
Securities Act (each, a “Company Affiliate” and collectively, the “Company
Affiliates”). The Company shall provide Parent with such information and
documents as Parent reasonably requests for purposes of reviewing such
list. The
Company shall use commercially reasonable efforts to cause each person who
is
identified as an “affiliate” in the Disclosure Schedule to deliver to Parent,
prior to the Effective Time, a written agreement in a form mutually agreeable
to
the Company and Parent.
Section
7.9 [Intentionally
Deleted.]
55
Section
7.10 Indemnification.
(a) From
and
after the Effective Time, Parent will cause the Surviving
Corporation to, and,
should the Surviving Corporation fail or be unable to do so, Parent
shall,
indemnify, defend and hold harmless each present and former director and officer
of the Company (when acting in such capacity) determined as of the Effective
Time (the “Indemnified Parties”), against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, losses, claims, damages or
liabilities (collectively, “Costs”) incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at
or prior to the Effective Time,
including,
but not limited to, actions or omissions relating to any of the transactions
contemplated by this Agreement, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted under the DGCL and its
certificate of incorporation, bylaws and other agreements in effect on the
date
hereof to indemnify such Person. Parent
will cause the Surviving Corporation to pay expenses in advance of final
adjudication of any such claim, action, suit, proceeding or investigation to
each of the Indemnified Parties to the fullest extent permitted under the DGCL
and the Surviving Corporation's certificate of incorporation and bylaws upon
receipt of any undertaking to repay such advances if it is ultimately determined
that such Person is not entitled to indemnification or as otherwise required
by
the DGCL and the Surviving Corporation's certificate of incorporation and
bylaws. Without limiting the foregoing, in any case in which approval of or
a
determination by the Surviving Corporation is required to effectuate any
indemnification, (i) each of the Indemnified Parties will conclusively be deemed
to have met the applicable standards for indemnification with respect to any
actions or omissions of the Indemnified Parties as an officer or director of
the
Company on or prior to the Effective Time relating to any of the transactions
contemplated by this Agreement and (ii) the Parent will cause the Surviving
Corporation to direct, at the election of any Indemnified Party, that the
determination of any such approval shall be made by independent counsel selected
by the Indemnified Parties and reasonably acceptable to the Surviving
Corporation. If any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising before or after the
Effective Time), (i) each Indemnified Party may retain counsel satisfactory
to
him or her that is reasonably acceptable to the Surviving Corporation, and
(ii)
the Parent shall cause the Surviving Corporation to pay all reasonable fees
and
expenses of such counsel for each Indemnified Party, as such fees and expenses
are incurred, upon receipt of a written undertaking by the Indemnified Party
that the Indemnified Party will repay the amount so paid if it ultimately is
determined that he or she is not entitled to be indemnified by the Surviving
Corporation as authorized by the DGCL. Neither the Parent nor the Surviving
Corporation shall have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine, after
exhaustion of all avenues of appeal, that such Indemnified Party is not entitled
to indemnification hereunder.
(b) The
Parent shall procure, fund and maintain continuing directors and officers
liability insurance coverage for a period not to exceed six years after the
Effective Time (the “Tail Coverage”) in an amount and upon terms substantially
equivalent, but not superior, to such insurance of the Company in effect as
of
the date hereof, provided, in no event shall the Parent be required to pay
aggregate premiums for insurance under this section in excess of 125% of the
aggregate premiums paid by the Company in the nine-month period ended September
30, 2006.
56
(c) The
provisions of this Section 7.10 are intended to be for the benefit of, and
shall
be enforceable by, each Indemnified Party, his or her heirs and his or her
representatives.
(d) If
the
Parent or the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and will not be the continuing
or surviving Person of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person, then in each
such
case, proper provisions will be made so that the successors and assigns of
the
Parent or the Surviving Corporation assume the obligations set forth in this
Section 7.10.
Section
7.11 Form
S-8.
Parent
shall file with the SEC, no later than fifteen (15) days after the Effective
Time, any amendments that may be necessary or advisable to Parent’s registration
statement on Form S-8 (or any successor form) relating to Parent Common Stock
issuable pursuant to assumed awards under the Company Stock Plans.
ARTICLE
8
CONDITIONS
TO THE MERGER
Section
8.1 Conditions
to the Obligations of Each Party.
The
obligations of the Company, Parent and Merger Sub to consummate the Merger
are
subject to the satisfaction (or, to the extent legally permissible, waiver)
at
or prior to the Closing of the following conditions:
(a) The
Company shall have obtained Company Stockholder Approval in accordance with
the
DGCL and the governing documents of the Company;
(b) no
provision of any applicable Law shall prohibit or enjoin the consummation of
the
Merger;
(c) all
required approvals, applications or notices with Governmental Authorities shall
have been obtained, including, without limitation, FINRA (the “Approvals”),
except those Approvals the failure of which to obtain would not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
Parent or the Company;
(d) the
Form
S-4 shall have been declared effective under the Securities Act and no stop
order suspending the effectiveness of the Form S-4 shall be in effect and no
proceedings for such purpose shall be pending before or threatened by the
SEC;
(e) Parent
shall have entered into written employment agreements with Xxxx Xxxxxxxxxx
“(Xxxxxxxxxx”), Xxxxxxx Xxxxxxx (“Xxxxxxx”) and Xxxx Xxxxx (“Xxxxx”),
substantially in the forms attached as Exhibits
A,
B
and
C,
respectively, annexed hereto;
(f) Parent
shall have entered into a written voting agreement with Xxxxxxx, substantially
in form attached as Exhibit
F
annexed
hereto (the “Voting Agreement”);
(g) as
of the
Closing Date, to be effective as of the Effective Time, the Board of Directors
of Parent shall consist of those persons as provided for in Section 7.2
hereto;
57
(h) the
Clearing Arrangements Approvals shall have been obtained to the mutual
reasonable satisfaction of Parent and the Company;
(i) there
shall be in full force and effect a voting agreement among Xxxxxxxxxx, Xxxxxxx
and Xxxxx, substantially in the form attached as Exhibit
G,
to vote
in favor of the nominees set forth in Section 7.2 hereof and each other for
the
position of director of the Parent;
(j) the
Company shall have entered into a written employment termination agreement
with
Xxxxxxx, substantially in form attached as Exhibit
H
annexed
hereto; and
(k) Parent
shall have completed a private placement of equity and/or equity-related
securities of Parent resulting in gross proceeds (prior to commissions, if
any,
fees and expenses) of at least $3 million.
Section
8.2 Conditions
to the Obligations of Parent and Merger Sub.
The
obligations of Parent and Merger Sub to consummate the Merger are subject to
the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:
(a) the
Company shall have performed in all material respects all of its obligations
and
covenants hereunder required to be performed by it at or prior to the Effective
Time, (ii) the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of the date
of
this Agreement and the Closing Date with the same force and effect as if made
on
the Closing Date except (y) those representations and warranties that address
matters only as of a particular date shall remain true and correct as of such
date and (z) (other than those in Section 4.2 of this Agreement) to the extent
that failure of the representations and warranties to be so true and correct
could not reasonably be expected, individually or in the aggregate, to have
a
Material Adverse Effect and (iii) Parent shall have received a certificate
signed by the chief executive officer of the Company to the foregoing
effect;
(b) the
Company shall have received all consents, waivers and approvals required in
connection with the consummation of the transactions contemplated hereby in
connection with the agreements, contracts, licenses or leases set forth in
Section 4.5 of the Company Disclosure Schedule, except those consents, waivers
or approvals the failure to obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company;
(c) there
shall not be pending any suit, proceeding or investigation: (i) challenging
or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement; (ii) relating to the Merger
and seeking to obtain from Parent, the Company or any of their respective
Subsidiaries any damages that may be material to Parent or the Company, as
applicable; (iii) seeking to prohibit or limit in any material respect Parent’s
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or
(iv)
which, if adversely determined could have a Material Adverse Effect on the
Company or Parent;
(d) there
shall have not occurred any event or change since the date of the Agreement
that
has had or could reasonably be expected to have a Material Adverse Effect on
the
Company and its Subsidiaries, taken as a whole; and
58
(e) Dissenting
Shares shall comprise no more than fifteen percent (15%) of the issued and
outstanding Company Shares.
Section
8.3 Conditions
to the Obligations of the Company.
The
obligation of the Company to consummate the Merger is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:
(a) Parent
shall have performed in all material respects all of its obligations hereunder
required to be performed by it at or prior to the Effective Time, (ii) the
representations and warranties of Parent contained in this Agreement shall
be
true and correct in all material respects as of the date of this Agreement
and
the Closing Date with the same force and effect as if made on the Closing Date
except (y) those representations and warranties that address matters only as
of
a particular date shall remain true and correct as of such date and (z) (except
for those in Section 5.2) to the extent that failure of the representations
and
warranties to be so true and correct could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and (iii)
the Company shall have received a certificate signed by the chief executive
officer of Parent to the foregoing effect;
(b) the
Parent shall have received all consents, waivers and approvals required in
connection with the consummation of the transactions contemplated hereby in
connection with the agreements, contracts, licenses or leases set forth in
Section 5.5 of the Parent Disclosure Schedule, except those consents, waivers
or
approvals the failure to obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Parent;
(c) there
shall not be pending any suit, proceeding or investigation: (i) challenging
or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement; (ii) seeking to prohibit
or
limit in any material respect ability of the Company Stockholders to vote,
receive dividends with respect to or otherwise exercise ownership rights with
respect to the stock of Parent; or (iii) which, if adversely determined could
have a Material Adverse Effect on the Company or Parent;
(d) the
Company shall have received an opinion from Xxxxxxx Xxxxxx Xxxxxx & Dodge
LLP, dated as of the Closing, in form and substance reasonably satisfactory
to
the Company, substantially to the effect that the Merger will constitute a
reorganization for U.S. federal income tax purposes within the meaning of
Section 368(a) of the Code; and
(e) there
shall have not occurred any event or change since the date of the Agreement
that
has had or could reasonably be expected to have a Material Adverse Effect on
Parent and its Subsidiaries, taken as a whole.
ARTICLE
9
TERMINATION
Section
9.1 Termination.
This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after approval by the stockholders of the Company:
(a) by
mutual
written consent of Parent and the Company;
59
(b) by
either
Parent or the Company if the Merger shall not have been consummated on or before
June 30, 2008 (the “End Date”), which date may be extended by mutual written
consent of the parties hereto; provided, however, that the right to terminate
this Agreement under this Section 9.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in
the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a material breach of this Agreement.
(c) by
either
Parent or the Company, if any Governmental Authority shall have issued an order
(other than a temporary restraining order), decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become final and nonappealable;
provided that the party seeking to terminate this Agreement shall have used
commercially reasonable efforts to avoid, remove or lift such order, decree
or
ruling; or
(d) by
Parent, if the Company Stockholder Approval has not been obtained by reason
of
the failure to obtain the required vote at the Company Stockholder
Meeting.
Section
9.2 Termination
by Parent.
This
Agreement may be terminated by action of the Board of Directors of Parent,
at
any time prior to the Effective Time, before or after Company Stockholder
Approval, if (a) the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in Article 2, Article 6 and
Article 7 of this Agreement to be complied with or performed by the Company
at
or prior to such date of termination; provided, however, that if such failure
to
comply is capable of being cured prior to the End Date, such failure shall
not
have been cured within thirty (30) days of delivery to the Company of written
notice of such failure, (b) there exists a breach or breaches of any
representation or warranty of the Company contained in this Agreement such
that
the closing condition set forth in Section 8.2(a) would not be satisfied;
provided, however, that if such breach or breaches are capable of being cured
prior to the End Date, such breaches shall not have been cured within thirty
(30) days of delivery to the Company of written notice of such breach or
breaches, (c) (i) the Board of Directors of the Parent authorizes the Parent,
subject to complying with the terms of this Agreement, to enter into a binding
written agreement concerning a transaction that constitutes a Superior Proposal
with respect to the Parent and the Parent notifies Company in writing in
accordance with Section 6.4 that it intends to enter into such an agreement,
attaching the most current version of such agreement (or a description of all
material terms and conditions thereof) to such notice and (ii) the Parent upon
such termination pursuant to this clause (c) pays to Company in immediately
available funds the fees required to be paid pursuant to Section 9.5 or (d)
a
Company Triggering Event (as defined below) shall have occurred.
For
the
purposes of this Agreement, a “Company Triggering Event” shall be deemed to have
occurred if: (a) there shall have occurred a Change in Company Recommendation;
(b) the Company shall have failed to include in the Proxy Statement/Prospectus
the recommendation of the Board of Directors of the Company in favor of the
adoption and approval of the Agreement and the approval of the Merger; (c)
the
Board of Directors of the Company or any committee thereof shall have approved
or recommended any Superior Proposal with respect to the Company; or (d) a
tender or exchange offer relating to more than 5% of the issued and outstanding
securities of the Company shall have been commenced by a Person unaffiliated
with Parent and the Company shall not have sent to its security holders pursuant
to Rule 14e-2 promulgated under the Exchange Act, within ten (10) Business
Days
after such tender or exchange offer is first published, sent or given, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer.
60
Section
9.3 Termination
by the Company.
This
Agreement may be terminated at any time prior to the Effective Time, before
or
after the Company Stockholder Approval, by action of the Board of Directors
of
the Company, if (a) Parent shall have failed to comply in any material respect
with any of the covenants or agreements contained in Article 2, Article 6 and
Article 7 of this Agreement to be complied with or performed by Parent at or
prior to such date of termination; provided, however, that if such failure
to
comply is capable of being cured
prior to the End Date, such failure shall not have been cured within thirty
(30)
days of delivery to Parent of written notice of such failure, (b) there exists
a
breach or breaches of any representation or warranty of Parent contained in
this
Agreement such that the closing condition set forth in Section 8.3(a) would
not
be satisfied; provided, however, that if such breach or breaches are capable
of
being cured prior to the End Date, such breaches shall not have been cured
within thirty (30) days of delivery to Parent of written notice of such breach
or breaches, (c)
(i)
the Board of Directors of the Company authorizes the Company, subject to
complying with
the
terms of this Agreement, to enter into a binding written agreement concerning
a
transaction that constitutes a Superior Proposal with respect to the Company
and
the Company notifies Parent in writing in accordance with Section 6.3 that
it
intends to enter into such an agreement, attaching the most current version
of
such agreement (or a description of all material terms and conditions thereof)
to such notice and (ii) the Company upon such termination pursuant
to this clause (c) pays to Parent in immediately available funds the fees
required to be paid pursuant to Section 9.5, or (d) a Parent Triggering Event
shall have occurred.
For
the
purposes of this Agreement, a “Parent Triggering Event” shall be deemed to have
occurred if: (a) the Board of Directors of Parent shall have withdrawn its
approval of this Agreement and the Merger; (b) the Board of Directors of the
Parent or any committee thereof shall have caused Parent to enter into, or
recommended that Parent stockholders approve and adopt, any Parent Acquisition
Proposal; or (c) a tender or exchange offer relating to more than 5% of the
issued and outstanding securities of the Parent shall have been commenced by
a
Person unaffiliated with the Parent and Parent shall not have sent to its
security holders pursuant to Rule 14e-2 promulgated under the Exchange Act,
within ten (10) Business Days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Parent recommends
rejection of such tender or exchange offer.
Section
9.4 Procedure
for Termination.
In the
event of termination by Parent or the Company pursuant to this Article 9,
written notice thereof shall forthwith be given to the other.
Section
9.5 Effect
of Termination.
In the
event of termination of this Agreement pursuant to this Article 9, this
Agreement shall forthwith become null and void, no party hereto (or any of
its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except as provided in this Section 9.5, Sections
7.3, 7.5 and 7.7 and Article 10 hereof, and except to the extent that such
termination results from willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in Agreement
in
which case such party shall be liable for all resulting liabilities or
damages.
In the
event of a termination by Parent under Section 9.2(d) hereof or a termination
by
the Company pursuant to Section 9.3(c) hereof, the Company shall pay to Parent
an amount equal to One Million Five Hundred Thousand Dollars ($1,500,000),
plus
the actual out of pocket expenses that Parent has incurred and is expected
to
incur after such termination in connection with the transactions contemplated
by
this Agreement (“Parent Expenses”) and
which
amount shall represent the entire amount that Parent is entitled to receive
with
respect to such expenses, including, but not limited to, fees and expenses
of
Parent’s counsel, accountants and financial advisors. In
the
event of a termination by the Company under Section 9.3(d) hereof or
a
termination by the Parent pursuant to Section 9.2(c)
hereof, the Parent shall pay to the Company an amount equal to One Million
Five
Hundred Thousand Dollars ($1,500,000), plus the actual out of pocket expenses
that the Company has incurred and is expected to incur after such termination
in
connection with the transactions contemplated by this Agreement (“Company
Expenses”) and which amount shall represent the entire amount that the Company
is entitled to receive with respect to such expenses, including, but not limited
to, fees and expenses of Company’s counsel, accountants and financial advisors.
In addition, prior
to
October 31, 2008, neither the Parent nor the Company will, without written
permission from the other, either for itself or for any other person or entity,
directly or indirectly, solicit, induce or attempt to induce any officer,
employee or independent contractor of the other, with whom such party has had
contact as part of its evaluation of the transactions contemplated by this
Agreement, or any client or customer of the other (other than client and
customers who as of the date hereof may have established brokerage accounts
or
are otherwise doing business with both parties) to terminate his or her
employment or business relationship with the other party; provided
that
nothing contained in this paragraph shall restrict any general advertisement
or
solicitation by any party hereto which is not directed at any particular officer
or employee; and provided further, that the foregoing restrictions shall not
apply in the event that either Parent or the Company, as the case may be, is
no
longer actively engaged in the broker-dealer business.
61
ARTICLE
10
MISCELLANEOUS
Section
10.1 Notices.
Any
notice, request, instruction or other document to be given hereunder by any
party to the other shall be in writing and delivered personally or sent by
certified mail, postage prepaid, by facsimile (with receipt confirmed and
promptly confirmed by personal delivery, U.S. first class mail, or courier),
or
by courier service, as follows:
If
to
Parent or Merger Sub to:
National
Holdings Corporation
000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxx Xxxxxxxxxx
with
a
copy to: Xxxxxxx
Krooks LLP
000
Xxxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxxx X. Xxxxxxx
62
If to the Company to: vFinance, Inc.
0000
Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx
Xxxxx, XX 00000
Facsimile:
(000)
000-0000
Attention:
Xxxxxxx X. Xxxxxxx
with
a
copy to: Xxxxxxx
Xxxxxx Xxxxxx & Dodge LLP
000
Xxxx
Xxx Xxxx Xxxx.
Xxxxx
0000
Xx.
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention:
Xxxxxx
X.
Xxxxxxx
Section
10.2 Non-Survival
of Representations and Warranties.
The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
Section
10.3 Amendments;
No Waivers.
(a) Any
provision of this Agreement (including the Exhibits and Schedules hereto) may
be
amended or waived prior to the Effective Time if, and only if, such amendment
or
waiver is in writing and signed, in the case of an amendment, by the Company,
Parent and Merger Sub, or in the case of a waiver, by the party against whom
the
waiver is to be effective; provided that after the Company Stockholder Approval,
no such amendment or waiver shall, without the further approval of such Company
Stockholders, alter or change (i) the amount or kind of Merger Consideration
or
(ii) any of the terms or conditions of this Agreement if such alteration or
change would adversely affect the holders of any shares of capital stock of
the
Company.
(b) No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
Section
10.4 Successors
and Assigns.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the parties hereto and their respective successors and assigns; provided that
no
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties hereto
except that Merger Sub may transfer
or assign, in whole or from time to time in part, to one or more of its
affiliates, its rights under this Agreement, but any such transfer or assignment
will not relieve Merger Sub of its obligations hereunder.
Section
10.5 Governing
Law.
This
Agreement shall be construed in accordance with and governed by the laws of
the
State of Delaware, without regard to principles of conflicts of
law.
Section
10.6 Jurisdiction
and Venue.
Any
suit, action or proceeding seeking to enforce any provision of, or based on
any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought exclusively in the state or federal court
of the State of New York located in the City of New York, and each of the
parties hereby consents to the jurisdiction of such court (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably
waives, to the fullest extent permitted by law, any objection which it may
now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum. Process
in any such suit, action or proceeding may be served on any party anywhere
in
the world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in this Section 10.6 shall be deemed effective service of process
on
such party.
63
Section
10.7 Waiver
of Jury Trial.
EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH
OF
THE PARTIES HERETO (I) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY
ACTION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND
THE TRANSACTIONS CONTEMPLATED HEREBY, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.7.
Section
10.8 Counterparts;
Effectiveness.
This
Agreement may be signed in any number of counterparts and by facsimile, each
of
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts hereof signed
by all of the other parties hereto.
Section
10.9 Entire
Agreement.
This
Agreement (including the Exhibits and Schedules hereto) constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral
and
written, between the parties with respect to the subject matter hereof and
thereof. Except as expressly provided in Section 7.10(d), no provision of this
Agreement or any other agreement contemplated hereby is intended to confer
on
any Person other than the parties hereto any rights or remedies.
Section
10.10 Captions.
The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof.
Section
10.11 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated so long as the economic or legal substance of the
transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
64
[Remainder
of page intentionally left blank]
65
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed, all
as
of the date first above written.
| VFINANCE, INC. | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxxx | |
|
Xxxxxxx Xxxxxxx |
||
| Chairman and CEO | ||
| NATIONAL HOLDINGS CORPORATION | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxxxxx | |
|
Xxxx Xxxxxxxxxx |
||
| Chairman and CEO | ||
| VFIN ACQUISITION CORPORATION | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxxxxx | |
|
Xxxx Xxxxxxxxxx |
||
| President | ||
66
Exhibit
A
EMPLOYMENT
AGREEMENT
This
Employment Agreement (“Agreement”)
is
made and entered into as of ___, 2008, by and between National Holdings
Corporation, a Delaware corporation (the “Company”)
and
Xxxx Xxxxxxxxxx (the “Executive”).
Recitals
WHEREAS,
the
Company wishes to employ the Executive, and Executive wishes to be so employed
by the Company, on the terms and conditions hereinafter set forth.
NOW,
THEREFORE,
in
consideration of the premises and mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are
mutually acknowledged, the Company and the Executive hereby agree as
follows:
Agreement
1. Definitions.
When
used in this Agreement, the following terms shall have the following
meanings:
(a) “Accrued
Obligations”
shall
mean:
(i) any
accrued but unpaid salary through the Termination Date;
(ii) any
unpaid or unreimbursed expenses incurred in accordance with Company policy,
including amounts due under Section 5(a) hereof, to the extent incurred during
the Term of Employment;
(iii) any
benefits provided under the Company’s Executive benefit plans upon a termination
of employment, in accordance with the terms therein, including rights to equity
in the Company pursuant to any plan or grant, and settlement of any Equity
Awards in accordance with the terms of such Equity Awards;
(iv) any
unpaid Bonus in respect to any completed fiscal year that has ended on or prior
to the end of the Term of Employment; and
(v) rights
to
indemnification by virtue of the Executive’s position as an officer or director
of the Company or its subsidiaries and the benefits under any directors’ and
officers’ liability insurance policy maintained by the Company, in accordance
with its terms thereof.
(b) “Board”
shall
mean the Board of Directors of the Company.
(c) “Bonus”
shall
mean any bonus payable to the Executive pursuant to Section 4(b)
hereof.
(d) “Bonus
Period”
shall
mean each period for which a Bonus is payable. Unless otherwise specified by
the
Board, the Bonus Period shall be the Company’s fiscal year.
(e) “Cause”
shall
mean, with respect to the Executive, the following:
(i) the
commission of a felony or other crime involving moral turpitude, or the
commission of any other act or omission involving dishonesty or fraud with
respect to the Company or any Related Entity or any of its or their respective
customers or suppliers; or
(ii) breach
of
fiduciary duty, willful misconduct or gross negligence with respect to the
Company or any Related Entity; or
(iii) substantial
and repeated failure to perform duties as reasonably directed by the
Board;
provided,
however,
that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to
the
Board’s reasonable satisfaction within
30
calendar days of notice of such breach;
or
(iv) material
breach of this Agreement;
provided,
however,
that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to
the
Board’s reasonable satisfaction within
30
calendar days of notice of such breach;
or
(v) any
action taken against Executive by a regulatory body or self-regulatory
organization that materially impairs the Executive from performing his duty
for
a period of more than 180 days; or
(vi) alcoholism
or drug addition which materially impairs the Executive’s ability to perform his
duties.
An
act or
failure to act shall not be “willful” if (A) done by the Executive in good faith
and (B) the Executive reasonably believed that such action or inaction was
in
the best interests of the Company and the Related Entities.
(f) “Change
in Control of the Company”
shall
mean:
(i) consummation
of a reorganization, merger or consolidation, sale, disposition of all or
substantially all of the assets or stock of the Company or any other similar
corporate event (a “Business Combination”), in each case, unless, following such
Business Combination, all or substantially all of the individuals or entities
who were the beneficial owners, respectively, of the voting securities of the
Company entitled to vote generally in the election of directors immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries); or (ii) approval by the Board of Directors of the
Company of a complete dissolution or liquidation of the Company; or (iii) any
“person” (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), is or becomes, after the Commencement Date, a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors of the Company.
-2-
(g) “CEO”
shall
mean the Chief Executive Officer of the Company.
(h) “COBRA”
shall
mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
from
time to time.
(i) “Code”
shall
mean the Internal Revenue Code of 1986, as amended.
(j) “Commencement
Date”
shall
mean ______ ___, 2008.
(k) “Confidential
Information”
shall
mean all trade secrets and information disclosed to the Executive or known
by
the Executive as a consequence of or through the unique position of his
employment with the Company or any Related Entity (including information
conceived, originated, discovered or developed by the Executive and information
acquired by the Company or any Related Entity from others) prior to or after
the
date hereof, and not generally or publicly known (other than as a result of
unauthorized disclosure by the Executive), about the Company or any Related
Entity or its business.
(l) “Disability”
shall
have the meaning set forth in a policy or policies of long-term disability
insurance, if any, the Company obtains for the benefit of itself and/or its
employees. If there is no definition of “disability” applicable under any such
policy or policies, if any, then the Executive shall be considered disabled
due
to mental or physical impairment or disability, despite reasonable
accommodations by the Company and any Related Entity, to perform his customary
or other comparable duties with the Company and any Related Entity immediately
prior to such disability for a period of at least 120 consecutive days or for
at
least 180 non-consecutive days in any 12-month period.
(m) “Draw”
shall
mean a loan or advance versus a Base Salary or other forms of compensation
provided for in Section 4(a) hereof.
(n) “Equity
Awards”
shall
mean any stock options, restricted stock, restricted stock units, stock
appreciation rights, phantom stock or other equity based awards granted by
the
Company to the Executive.
(o) “Excise
Tax”
shall
mean any excise tax imposed by Section 4999 of the Code, together with any
interest and penalties imposed with respect thereto, or any interest or
penalties incurred by the Executive with respect to any such excise tax.
(p) “Expiration
Date”
shall
mean the date on which the Term of Employment, including any renewals thereof
under Section 3(b) hereof, shall expire.
(q) “Good
Reason”
shall
mean:
(i) the
assignment to the Executive of any duties inconsistent in any material respect
with the Executive’s position (including status, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
2(b) hereof, or any other action by the Company that results in a material
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of written
notice thereof given by the Executive; or
-3-
(ii) any
material failure by the Company to comply with any of the provisions of Section
4 hereof, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and that is remedied by the Company promptly after
receipt of written notice thereof given by the Executive; or
(iii) the
Company’s requiring the Executive to be based at any office or location located
more than fifty (50) miles outside of New York, New York, except for travel
reasonably required in the performance of the Executive’s responsibilities;
or
(iv) any
decrease in salary or bonuses payable pursuant to the terms of this Agreement
without the Executive’s written consent.
(r) “Related
Entity”
shall
mean the Company and any direct or indirect subsidiary of the Company or the
subsidiary, and any business, corporation, partnership, limited liability
company or other entity designated by the Board, in which the Company or a
subsidiary holds a substantial ownership interest, directly or
indirectly.
(s) “Restricted
Period”
shall be
the Term of Employment and the twelve (12) month period immediately following
termination of the Term of Employment; provided, however, that if the Company
terminates the Executive’s employment for Cause, or Executive terminates his
employment without Good Reason, the twelve (12) month period shall be extended
to eighteen (18) months.
(t) “Severance
Amount”
shall
mean (i) one hundred fifty percent (150%) of the Executive’s annual Base Salary
in the event of termination of employment without Cause or with Good Reason
and
(ii) one hundred (100%) percent of the Executive’s annual Base Salary for any
other termination of employment.
(u) “Severance
Term”
shall
mean the eighteen (18) month period following the Termination Date.
(v) “Term
of Employment”
shall
mean the period during which the Executive shall be employed by the Company
pursuant to the terms of this Agreement.
(w) “Termination
Date”
shall
mean the date on which the Term of Employment ends.
(x) “Termination
Year Bonus”
shall
mean the Bonus payable under Section 4(b) hereof for the Bonus Period in which
the Executive’s employment with the Company terminates for any reason.
-4-
2. Employment.
(a) Employment
and Term.
The
Company hereby agrees to employ the Executive, and the Executive hereby agrees
to serve the Company, during the Term of Employment on the terms and conditions
set forth herein.
(b) Duties
of Executive.
During
the Term of Employment, the Executive shall be employed and serve as the
Chairman and CEO, and shall have such duties typically associated with such
title and shall exercise such power and authority as may from time to time
be
delegated to him by the Board. The Executive shall devote his full business
time, attention and efforts to the performance of his duties under this
Agreement, render such services to the best of his ability, and use his
reasonable best efforts to promote the interests of the Company. The Executive
shall not engage in any other business or occupation during the Term of
Employment, including, without limitation, any activity that (i) conflicts
with
the interests of the Company or its Related Entities, (ii) interferes with
the
proper and efficient performance of his duties for the Company, or (iii)
interferes with the exercise of his judgment in the Company’s best interests.
Notwithstanding the foregoing or any other provision of this Agreement, it
shall
not be a breach or violation of this Agreement for the Executive to (x) serve
on
corporate (subject to prior approval of the Board), civic or charitable boards
or committees, (y) deliver lectures, fulfill speaking engagements or teach
at
educational institutions, or (z) manage personal investments, so long as such
activities do not significantly interfere with or significantly detract from
the
performance of the Executive’s responsibilities to the Company in accordance
with this Agreement. The Executive represents he holds all licenses and
regulatory approvals necessary to perform these responsibilities, including
holding a Series 7 and a Series 24. As of the date hereof, the Executive is
approved to be a member of the boards listed on Exhibit
A
attached
hereto.
(c) Management
Committee.
At all
times during the Term of Employment, the Executive shall serve as a member
of
the Executive Committee of the Company, and the Board shall take all necessary
and appropriate actions to appoint and retain the Executive on such
committee.
3. Term.
(a) Initial
Term.
The
initial Term of Employment under this Agreement, and the employment of the
Executive hereunder, shall commence on the Commencement Date and shall expire
on
the fifth anniversary of such Commencement Date, unless sooner terminated in
accordance with Section 6 hereof.
(b) Renewal
Terms.
At the
end of the Initial Term, the Term of Employment automatically shall renew for
successive one (1) year terms (subject to earlier termination as provided in
Section 6 hereof), unless the Company or the Executive delivers written notice
to the other at least ninety (90) days prior to the Expiration Date of its
or
his election not to renew the Term of Employment.
(c) Release.
Upon
termination of this Agreement in accordance with the terms contained herein,
as
a condition to receiving any payments or benefits to which he is entitled under
the terms of this Agreement, the Executive shall execute and deliver to the
Company a release in the form attached hereto as Exhibit
B
within
thirty (30) days following his termination of employment. Such release shall
remain in full force and effect so long as the Company is in compliance with
its
obligations to pay severance and provide the other post-termination benefits
hereunder, subject to the Executive continuing to abide by the post-termination
obligations and covenants contained herein.
-5-
4. Compensation.
(a) Base
Salary.
The
Executive shall receive an initial base salary of $450,000 per annum which
shall
increase five percent (5%) per annum beginning on the first anniversary of
the
Commencement Date and each anniversary date thereafter (the "Base Salary").
Such
Base Salary shall be payable in installments consistent with the Company’s
normal payroll schedule, subject to applicable withholding and other taxes.
The
Base Salary and Executive’s other forms of compensation shall be reviewed, at
least annually, and may, by action and in the discretion of the Board, be
increased (but may not be decreased) at any time or from time to time. In no
event shall the Base Salary be deemed a Draw.
(b) Bonuses.
During
the Term of Employment, the Executive shall be entitled to receive on a fiscal
year basis a cash bonus from the Company determined in the discretion by the
Compensation Committee; provided,
however,
that
such Bonus on a fiscal year basis shall not be less than:
(i) Two
Hundred Twenty Five Thousand ($225,000) Dollars, paid in quarterly installments
as follows: with respect to the first three quarters of the Company’s fiscal
year, the cash bonus shall be paid by the Company to the Executive within forty
five (45) days after the end of the Company’s fiscal quarter and with respect to
the last fiscal quarter, ninety (90) days after the end of the Company’s fiscal
year (the “Guaranteed Bonus”); and
(ii) An
amount
equal to five percent (5%) of the Company’s fiscal year’s consolidated Net
Income in excess of $4.5 million, but in no event to exceed an amount equal
to
the difference between (i) 100% of the then current Base Salary for such fiscal
year and (ii) the Guaranteed Bonus, payable within ninety (90) days after the
end of the Company’s fiscal year. Notwithstanding anything to the contrary in
this sub-section (b)(ii), in the event that the Company’s Net Income is a
negative number for any fiscal year, then the Bonus payment paid to the
Executive
for such
fiscal year under this sub-section (ii) shall be $0 and the Executive
shall
not be required to reimburse the Company for any Bonus previously paid by the
Company; and
(iii) Such
additional Bonuses, if any, as the Board may in its sole and absolute discretion
determine based upon its assessment of the performance of the CEO in the
following areas: (A) revenue growth of the Company, (B) new business
development, (C) investor relations, (D) communication with the Board of
Directors, (E) communication and collaboration with the other members of the
Executive Committee of the Board of Directors, and (F) special projects as
assigned by the Board of Directors.
(iv) With
respect to the first fiscal year in which the Commencement Date falls, the
Bonus
described in (i) and (ii) above shall be prorated accordingly with respect
to
such applicable Bonus Period.
-6-
5. Expense
Reimbursement and Other Benefits.
(a) Reimbursement
of Expenses.
Upon the
submission of proper substantiation by the Executive, and subject to such rules
and guidelines as the Company may from time to time adopt with respect to the
reimbursement of expenses of executive personnel, the Company shall reimburse
the Executive for all reasonable expenses actually paid or incurred by the
Executive during the Term of Employment in the course of and pursuant to the
business of the Company, including, without limitation, expenses relating to
his
cell phone and his Blackberry or other similar devices. The Executive shall
account to the Company in writing for all expenses for which reimbursement
is
sought and shall supply to the Company copies of all relevant invoices, receipts
or other evidence reasonably requested by the Company.
(b) Compensation/Benefit
Programs.
During
the Term of Employment, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and dismemberment,
disability, travel and life insurance plans, and any and all other plans as
are
presently and hereinafter offered by the Company to its executive personnel,
including savings, pension, profit-sharing and deferred compensation plans,
subject to the general eligibility and participation provisions set forth in
such plans. The benefits currently provided by the Company to its Executives
are
as stated in the Company’s Executive handbook, which is subject to change. In
addition, during the Term of Employment, the Company shall pay (at the “Buy-Up
Premium” level) all health insurance premiums required to be made on behalf of
the Executive and his dependents with respect to their participation in such
health plans. Should Executive not want to participate in the Company's health
plan, the Company will reimburse Executive for the expense incurred in
participating in another plan in an amount not to exceed the cost of
participation of Executive and his dependents in the Company’s health plan.
Additionally, Executive shall be added as an insured to any director and officer
and errors and omissions insurance policy that the Company or any of the
Company’s subsidiaries or affiliates hereafter procures.
(c) Working
Facilities.
During
the Term of Employment, the Company shall furnish the Executive with an office,
a personal assistant, other secretarial help and such other facilities and
services suitable to his position and adequate for the performance of his duties
hereunder. The Company and the Executive acknowledge and agree that the personal
assistant or other secretarial help assigned to the Executive shall also be
responsible for handling certain personal matters that may be assigned to them
from time to time by the Executive.
(d) Automobile.
During
the Term of Employment, the Company shall provide the Executive with a
non-accountable automobile allowance (inclusive of parking) of $1,000 per month.
(e) Equity
Awards.
The
Company and Executive shall enter into the Stock Option Agreement attached
hereto as Exhibit
C
pursuant
to which the Company shall grant to Executive certain options (“Options”) to
purchase common stock of the Company upon such terms and conditions set forth
therein. To the extent that any stock options granted hereunder are not made
pursuant to the Company’s 2006 Stock Option Plan or other plan covered by a
registration statement declared effective by the Securities and Exchange
Commission (the “SEC”), the Company agrees to file with the SEC, within a
reasonable period following the grant of such options, a Form S-8 registration
statement covering the shares of common stock issuable upon exercise of the
stock options. In addition, the Executive shall be eligible to be granted Equity
Awards under (and therefore subject to all terms and conditions of) the
Company’s 2006 Stock Option Plan or such other plans or programs as the Company
may from time to time adopt, and subject to all rules of regulation of the
Securities and Exchange Commission applicable thereto. The number and type
of
Equity Awards, and the terms and conditions thereof, shall be determined by
the
Compensation Committee of the Board of the Company, in its discretion and
pursuant to the plan or arrangement pursuant to which they are granted.
Notwithstanding any other provision in this Agreement, in the event of a Change
in Control during the Term of Employment, all Options granted to Executive
as
described in Exhibit
C
hereto
shall immediately vest and be exercisable.
-7-
(f) Other
Benefits.
The
Executive shall be entitled to five (5) weeks of paid vacation each calendar
year during the Term of Employment, to be taken at such times as the Executive
and the Company shall mutually determine and provided that no vacation time
shall significantly interfere with the duties required to be rendered by the
Executive hereunder. Any vacation time not taken by Executive during any
calendar year may be carried forward into any succeeding calendar year. The
Executive shall receive such additional benefits, if any, as the Board shall
from time to time determine.
(g) Minimum
Compensation.
In
no
event will the Executive’s total compensation be less than the total
compensation (including without limitation, Base Salaries, Bonuses, other
incentive compensation, options or other securities, or benefits) paid to the
CEO.
(h) Gym
or Club Membership Fees. During
the Term, the Company agrees to pay up to $150 per month for Executive to belong
to a health club of his choosing.
6. Termination.
(a) General.
The Term
of Employment shall terminate upon the earliest to occur of (i) the Executive’s
death, (ii) a termination by the Company by reason of the Executive’s
Disability, (iii) a termination by the Company with or without Cause or (iv)
a
termination by Executive with or without Good Reason. Upon any termination
of
Executive’s employment for any reason, except as may otherwise be requested by
the Company in writing and agreed upon in writing by Executive, the Executive
shall resign from any and all directorships, committee memberships or any other
positions the Executive holds with the Company or any of its Related Entities.
Upon termination of Executive’s employment with the Company pursuant to this
Section, all compensation and benefits shall cease to accrue upon discharge
of
Executive and the Company shall have no further obligations to the Executive
or
his heirs, administrators, or executors with respect to compensation and
benefits thereafter, except to pay the Executive or his heirs, administrators
or
executors as set forth in this Section.
(b) Termination
by Company for Cause.
The
Company shall at all times have the right, upon written notice to the Executive,
to terminate the Term of Employment for Cause. For purposes of this Section
6(b), any good faith determination by the Board of Cause shall be binding and
conclusive on all interested parties. In the event that the Term of Employment
is terminated by the Company for Cause, the Executive shall be entitled only
to
the Accrued Obligations, payable within a reasonable period following the
Termination Date.
(c) Disability.
The
Company shall have the option to terminate the Term of Employment upon written
notice to the Executive, at any time during which the Executive is suffering
from a Disability. In the event that the Term of Employment is terminated due
to
the Executive’s Disability, the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;
-8-
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month
in
which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date
of
such termination with the Company paying all premiums relating thereto until
the
earlier of: (A) eighteen (18) months following the Termination Date, or (B)
the
date the Executive commences employment with any person or entity and, thus,
is
eligible for health insurance benefits; provided, however, that as a condition
of continuation of such benefits, the Company may require the Executive to
elect
to continue his health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit C hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(d) Death.
In the
event that the Term of Employment is terminated due to the Executive’s death,
the estate of the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month
in
which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to the Executive’s covered dependents under the
Company health plans as in effect from time to time after the Executive’s death
with the Company paying all premiums relating thereto until eighteen (18) months
following the Termination Date; provided, however, that as a condition of
continuation of such benefits, the Company may require the covered dependents
to
elect to continue such health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit C hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
-9-
(e) Termination
Without Cause.
The
Company may terminate the Term of Employment at any time without Cause, by
written notice to the Executive. In the event that the Term of Employment is
terminated by the Company without Cause (other than due to the Executive’s death
or Disability), the Executive shall be entitled to:
(i) Accrued
Obligations, payable as soon as reasonably practicable following the Termination
Date;
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal installments during the Severance Period
commencing with the first business day in the first calendar month immediately
following the month in which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date
of
such termination with the Company paying all premiums until the earlier of:
(A)
eighteen (18) months following the Termination Date, or (B) the date the
Executive commences employment with any person or entity and, thus, is eligible
for health insurance benefits; provided, however, that as a condition of
continuation of such benefits, the Company may require the Executive to elect
to
continue his health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit C hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for a
period of nine (9) months from
the
date of the termination; provided, however, such period of nine (9) months
shall
not exceed the earlier of the latest date upon which such options could have
expired by their original terms under any circumstances or the tenth anniversary
of the original date of grant of such options.
(f) Termination
by Executive for Good Reason.
The
Executive may terminate the Term of Employment for Good Reason by providing
the
Company thirty (30) days’ written notice setting forth in reasonable specificity
the event that constitutes Good Reason, which written notice, to be effective,
must be provided to the Company within thirty (30) days of the occurrence of
such event. During such thirty (30) day notice period, the Company shall have
a
cure right (if curable), and if not cured within such period, the Executive’s
termination shall be effective upon the date immediately following the
expiration of the thirty (30) day notice period, and the Executive shall be
entitled to the same payments and benefits as provided in Section 6(e) above
for
a termination without Cause.
(g) Termination
by Executive Without Good Reason.
The
Executive may terminate his employment without Good Reason by providing the
Company thirty (30) days’ written notice of such termination. In the event of a
termination of employment by the Executive under this Section 6(g), the
Executive shall be entitled only to the Accrued Obligations. In the event of
termination of the Executive’s employment under this Section 6(g), the Company
may, in its sole and absolute discretion, by written notice, accelerate such
date of termination and still have it treated as a termination without Good
Reason.
-10-
(h) Termination
Upon Expiration Date.
In the
event that Executive’s employment with the Company terminates upon the
expiration of the Term of Employment, the Executive shall be entitled to only
the Accrued Obligations, payable within a reasonable period following the
Termination Date. In addition, if the Term of Employment terminates either
because the Company refused to extend the Term of Employment without Cause
(and
other than by reason of the Executive’s Disability), or the Executive refused to
extend the Term for Good Reason, the Company shall pay the
Executive:
(i) the
Accrued Obligations, payable as soon as practicable following the Termination
Date;
(ii) the
Termination Year Bonus, payable within 2 1/2 months after the last day of the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Term;
(iv) continuation
of the health benefits provided to the Executive and his covered dependants
under the Company health plans as in effect from time to time after the date
of
such termination until the earlier of: (A) eighteen (18) months following the
Termination Date, or (B) the date the Executive commences employment with any
person or entity and, thus, is eligible for health insurance benefits; provided,
however, that as a condition of continuation of such benefits, the Company
may
require the Executive to elect to continue his health insurance pursuant to
COBRA; and
(v) all
Options granted to Executive as described in Exhibit B hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(i) Change
in Control of the Company.
If the
Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason during the six (6) month period immediately following
the Change in Control of the Company, then in lieu of any amounts otherwise
payable under Sections 6(e) or 6(f) hereof, the Executive shall be entitled
to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
-11-
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Period commencing with the first calendar month immediately following the month
in which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to Executive and his covered dependants under
the Company health plans as in effect from time to time after the date of such
termination with the Company paying all premiums until the earlier of: (A)
eighteen (18) months following the Termination Date, or (B) the date the
Executive commences employment with any person or entity and, thus, is eligible
for health insurance benefits; provided, however, that as a condition of
continuation of such benefits, the Company may require the Executive to elect
to
continue his health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit B hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(j) Section
280G Additional Payments by the Company.
(i) Anything
in this Agreement to the contrary notwithstanding, in the event that
the
Executive shall become entitled to payments and/or benefits provided by this
Agreement or any other amounts in the “nature of compensation” (whether pursuant
to the terms of any plan, arrangement or agreement with the Company, any person
whose actions result in a change of ownership or effective control covered
by
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
“Code”)
or any
person affiliated with the Company or such person) as a result of such change
in
ownership or effective control (collectively, the “Company
Payments”),
and
such Company Payments will be subject to the tax (the “Excise
Tax”)
imposed by Section 4999 of the Code (and any similar tax that may hereafter
be
imposed by any taxing authority), the Company shall pay to the Executive at
the
time specified in clause (iv) hereof an additional amount (the “Gross-Up
Payment”)
such
that the net amount retained by the Executive, after deduction of any Excise
Tax
on the Company Payments and any U.S. federal, state, and local income or payroll
tax upon the Gross-Up Payment provided for by this clause (i), but before
deduction for any U.S. federal, state, and local income or payroll tax on the
Company Payments, shall be equal to the Company Payment.
(ii) For
purposes of determining whether any of the Company Payments and Gross-Up Payment
(collectively, the “Total
Payments”)
will
be subject to the Excise Tax and the amount of such Excise Tax, (A) the Total
Payments shall be treated as “parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “parachute payments” in excess of the “base
amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company’s independent certified public accountants appointed prior to any
change in ownership (as defined under Section 280G(b)(2) of the Code) or tax
counsel selected by such accountants or the Company (the “Accountants”)
such
Total Payments (in whole or in part): (1) do not constitute “parachute
payments,” (2) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the “base
amount” or (3) are otherwise not subject to the Excise Tax, and (B) the value of
any non-cash benefits or any deferred payment or benefit shall be determined
by
the Accountants in accordance with the principles of Section 280G of the Code.
In the event that the Accountants are serving as accountants or auditors for
the
individual, entity or group effecting the change in control (within the meaning
of Section 280G of the Code), the Executive may appoint another nationally
recognized accounting firm to make the determinations hereunder (which
accounting firm shall then be referred to as the “Accountants” hereunder). All
determinations hereunder shall be made by the Accountants which shall provide
detailed supporting calculations both to the Company and the Executive at such
time as it is requested by the Company or the Executive. The determination
of
the Accountants shall be final and binding upon the Company and the
Executive.
-12-
(iii) For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay U.S. federal income taxes at the highest marginal rate of
U.S.
federal income taxation in the calendar year in which the Gross-Up Payment
is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive’s residence for the calendar
year in which the Company Payments are to be made, net of the maximum reduction
in U.S. federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year. In the event that the Excise Tax
is
subsequently determined by the Accountants to be less than the amount taken
into
account hereunder at the time the Gross-Up Payment is made, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the prior Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and U.S. federal, state and local income tax
imposed on the portion of the Gross-Up Payment being repaid by the Executive
if
such repayment results in a reduction in Excise Tax or a U.S. federal, state
and
local income tax deduction), plus interest on the amount of such repayment
at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event that any portion of the Gross-Up Payment to be refunded
to the Company has been paid to any U.S. federal, state and local tax authority,
repayment thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive, and interest
payable to the Company shall not exceed the interest received or credited to
the
Executive by such tax authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the course of action to
be
pursued (and the method of allocating the expense thereof) if the Executive’s
claim for refund or credit is denied. In the event that the Excise Tax is later
determined by the Accountants or the Internal Revenue Service (or other taxing
authority) to exceed the amount taken into account hereunder at the time the
Gross-Up Payment is made (including by reason of any payment the existence
or
amount of which cannot be determined at the time of the Gross-Up Payment),
the
Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) promptly
after the amount of such excess is finally determined.
(iv) The
Gross-Up Payment or portion thereof provided for in clause (iii) shall be paid
not later than the thirtieth (30th) day following an event occurring which
subjects the Executive to the Excise Tax; provided,
however,
that if
the amount of such Gross-Up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such
day an estimate, as determined in good faith by the Accountants, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to clause (iii), as soon as the amount
thereof can reasonably be determined, but in no event later than the ninetieth
(90th) day after the occurrence of the event subjecting the Executive to the
Excise Tax. Subject to clauses (iii) and (viii) hereof, in the event that the
amount of the estimated payments exceeds the amount subsequently determined
to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
-13-
(v) In
the
event of any controversy with the Internal Revenue Service (or other taxing
authority) with regard to the Excise Tax, the Executive shall permit the Company
to control issues related to the Excise Tax (at the Company’s expense), provided
that such issues do not potentially materially adversely affect the Executive,
but the Executive shall control any other issues. In the event that the issues
are interrelated, the Executive and the Company shall in good faith cooperate
so
as not to jeopardize resolution of either issue, but if the parties cannot
agree, the Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority as to the
Excise Tax or associated income taxes, the Executive shall permit the
representative of the Company to accompany the Executive, and the Executive
and
the Executive’s representative shall cooperate with the Company and its
Representatives.
(vi) The
Company shall be responsible for all charges of the Accountants.
(vii) The
Company and the Executive shall promptly deliver to each other copies of any
written communications, and summaries of any verbal communications, with any
taxing authority regarding the Excise Tax covered by this Section
6(i).
(viii) Nothing
in this Section 6(i) is intended to violate the Xxxxxxxx-Xxxxx Act of 2002
and
to the extent that any advance or repayment obligation hereunder would do so,
such obligation shall be modified so as to make the advance a nonrefundable
payment to the Executive and the repayment obligation null and void. The
provisions of this Section 6(i) shall survive the termination of the Executive’s
employment with the Company for any reason.
(k) Cooperation.
Following the Term of Employment, the Executive shall give his assistance and
cooperation willingly, upon reasonable advance notice with due consideration
for
his other business or personal commitments, in any matter relating to his
position with the Company, or his expertise or experience as the Company or
any
Related Entity may reasonably request, including his attendance and truthful
testimony where deemed appropriate by the Company or any Related Entity, with
respect to any investigation or the Company’s or any Related Entity’s defense or
prosecution of any existing or future claims or litigations or other proceedings
relating to matters in which he was involved or potentially had knowledge by
virtue of his employment with the Company. In no event shall his cooperation
materially interfere with his services for a subsequent employer or other
similar service recipient. To the extent permitted by law, the Company agrees
that (i) it shall promptly reimburse the Executive for his reasonable and
documented expenses in connection with his rendering assistance and/or
cooperation under this Section 6(k) upon his presentation of documentation
for
such expenses and (ii) the Executive shall be reasonably compensated for any
continued material services as required under this Section 6(k).
-14-
(l) Section
409A.
(i) The
intent of the parties is that payments and benefits under this Agreement comply
with Internal Revenue Code Section 409A and the regulations and guidance
promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to
the maximum extent permitted, this Agreement shall be interpreted to be in
compliance therewith. If the Executive notifies the Company (with specificity
as
to the reason therefore) that the Executive believes that any provision of
this
Agreement (or of any award of compensation, including equity compensation or
benefits) would cause the Executive to incur any additional tax or interest
under Code Section 409A, the Company shall, after consulting with the Executive,
reform such provision to try to comply with Code Section 409A through good
faith
modifications to the minimum extent reasonably appropriate to conform with
Code
Section 409A. To the extent that any provision hereof is modified in order
to
comply with Code Section 409A, such modification shall be made in good faith
and
shall, to the maximum extent reasonably possible, maintain the original intent
and economic benefit to the Executive and the Company of the applicable
provision without violating the provisions of Code Section 409A.
(ii) Notwithstanding
any provision to the contrary in this Agreement, if the Executive is deemed
on
the date of termination to be a “specified employee” within the meaning of that
term under Code Section 409A(a)(2)(B), then with regard to any payment or the
provision of any benefit that constitutes an item of deferred compensation
under
Section 409A and becomes payable by reason of the Executive’s separation from
service, such payment or benefit shall not be made or provided (subject to
the
last sentence of this Section 6(k)(ii)) prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of the Executive’s
“separation from service” (as such term is defined under Code Section 409A), and
(ii) the date of Executive’s death (the “Delay Period”). Upon the expiration of
the Delay Period, all payments and benefits delayed pursuant to this Section
6(k)(ii) (whether they would have otherwise been payable in a single sum or
in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under
this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein.
(m) Contact
Management Database Rights.
The
Company and the Executive each acknowledge and agree that the Executive has
developed and currently maintains a contact management database (the
“Database”), and the Company acknowledges and agrees that the Executive shall
have non-exclusive access to such Database at all times during the Term of
Employment and after the Termination Date of this Agreement for any reason
not
in violation of Section 12 hereof.
7. Intentionally
Deleted.
8. Taxes.
Anything in this Agreement to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or his estate
or
beneficiaries shall be subject to the withholding of such amounts relating
to
taxes as the Company may reasonably determine it should withhold pursuant to
any
applicable law or regulation. In lieu of withholding such amounts, in whole
or
in part, the Company may, in its sole discretion, accept other provisions for
payment of taxes and withholding as required by law, provided it is satisfied
that all requirements of law affecting its responsibilities to withhold have
been satisfied.
-15-
9. Assignment.
The
Company shall have the right to assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any corporation or other
entity with or into which the Company may hereafter merge or consolidate or
to
which the Company may transfer all or substantially all of its assets, if in
any
such case said corporation or other entity shall by operation of law or
expressly in writing assume all obligations of the Company hereunder as fully
as
if it had been originally made a party hereto, but may not otherwise assign
this
Agreement or its rights and obligations hereunder. The Executive may not assign
or transfer this Agreement or any rights or obligations hereunder.
10. Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
internal laws of the State of New York, without regard to principles of conflict
of laws.
11. Arbitration.
(a) Exclusive
Remedy.
The
parties recognize that litigation in federal or state courts or before federal
or state administrative agencies of disputes arising out of the Executive’s
employment with the Company or out of this Agreement, or the Executive’s
termination of employment or termination of this Agreement, may not be in the
best interests of either the Executive or the Company, and may result in
unnecessary costs, delays, complexities, and uncertainty. Except as otherwise
provided in Section 12 hereof, the parties agree that any dispute between the
parties arising out of or relating to the Executive’s employment, or to the
negotiation, execution, performance or termination of this Agreement or the
Executive’s employment, including, but not limited to, any claim arising out of
this Agreement, claims under Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act
of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil
Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive
Retirement Income Security Act, and any similar federal, state or local law,
statute, regulation, or any common law doctrine, whether that dispute arises
during or after employment shall be resolved by arbitration in the New York,
New
York area, in accordance with the National Employment Arbitration Rules of
the
American Arbitration Association, as modified by the provisions of this Section
11. The parties each further agree that the arbitration provisions of this
Agreement shall provide each party with its exclusive remedy, and each party
expressly waives any right it might have to seek redress in any other forum,
except as otherwise expressly provided in this Agreement. The parties
acknowledge and agree that their obligations under this arbitration agreement
survive the expiration or termination of this Agreement and continue after
the
termination of the employment relationship between the Executive and the
Company. Except
as otherwise provided in Section 12 hereof, by election of arbitration as the
means for final settlement of all claims, the parties hereby waive their
respective rights to, and agree not to, xxx each other in any action in a
federal, state or local court with respect to such claims, but may seek to
enforce in court an arbitration award rendered pursuant to this Agreement.
The
parties specifically agree to waive their respective rights to a trial by jury,
and further agree that no demand, request or motion will be made for trial
by
jury.
(b) Arbitration
Procedure and Arbitrator’s Authority.
In the
arbitration proceeding, each party shall be entitled to engage in any type
of
discovery permitted by the Federal Rules of Civil Procedure, to retain its
own
counsel, to present evidence and cross-examine witnesses, to purchase a
stenographic record of the proceedings, and to submit post-hearing briefs.
In
reaching his/her decision, the arbitrator shall have no authority to add to,
detract from, or otherwise modify any provision of this Agreement. The
arbitrator shall submit with the award a written opinion which shall include
findings of fact and conclusions of law. Judgment upon the award rendered by
the
arbitrator may be entered in any court having competent
jurisdiction.
-16-
(c) Effect
of Arbitrator’s Decision; Arbitrator’s Fees.
The
decision of the arbitrator shall be final and binding between the parties as
to
all claims which were or could have been raised in connection with the dispute,
to the full extent permitted by law. In all cases in which applicable federal
law precludes a waiver of judicial remedies, the parties agree that the decision
of the arbitrator shall be a condition precedent to the institution or
maintenance of any legal, equitable, administrative, or other formal proceeding
by the Executive in connection with the dispute, and that the decision and
opinion of the arbitrator may be presented in any other forum on the merits
of
the dispute. If the arbitrator finds that the Executive was terminated in
violation of law or this Agreement, the parties agree that the arbitrator acting
hereunder shall be empowered to provide the Executive with any remedy available
should the matter have been tried in a court, including equitable and/or legal
remedies, compensatory damages and back pay. The arbitrator’s fees and expenses
and all administrative fees and expenses associated with the filing of the
arbitration shall be borne by the non-prevailing party.
12. Restrictive
Covenants.
(a) Executive
recognizes and acknowledges that the Company, Related Entities and their
subsidiaries, through the expenditure of considerable time and money, have
developed and will continue to develop in the Confidential Information. In
consideration of his continued employment by the Company hereunder, Executive
agrees that he will not, during the Restricted Period, directly or indirectly,
make any disclosure of Confidential Information now or hereafter possessed
by
the Company, Related Entities, and/or any of their current or future, direct
or
indirect subsidiaries (collectively, the "Group"), to any person, partnership,
corporation or entity either during or after the term hereunder, except to
employees of the Group and to others within or without the Group, as Executive
may deem necessary in order to conduct the Group's business and except as may
be
required pursuant to any court order, judgment or decision from any court of
competent jurisdiction. The foregoing shall not apply to information which
is in
the public domain on the date hereof; which, after it is disclosed to Executive
by the Group, is published or becomes part of the public domain through no
fault
of Executive; which is known to Executive prior to disclosure thereof to him
by
the Group as evidenced by his written records; or, after Executive is no longer
employed by the Group, which is thereafter disclosed to Executive in good faith
by a third party which is not under any obligation of confidence or secrecy
to
the Group with respect to such information at the time of disclosure to him.
The
provisions of this Section 6 shall continue in full force and effect
notwithstanding termination of Executive's employment under this Agreement
or
otherwise.
(b) Executive
agrees that if the Company has made and is continuing to make all required
payments to him upon and after termination of his employment, then during the
Restricted Period, Executive shall neither directly and/or indirectly (a)
solicit, hire and/or contact any prior (within twelve (12) months) or then
current employee of the Company and/or Related Entities nor any of their
respective direct and/or indirect subsidiaries (collectively, the "Applicable
Entities"), nor (b) solicit any business with any prior (within twelve (12)
months of termination) or then current customer and/or client of the Applicable
Entities. In addition, Executive shall not attempt (directly and/or indirectly)
to do anything either by himself or through others that he is prohibited from
doing pursuant to this Section 12. Given that this Agreement is providing
significant benefits to Executive, Executive hereby agrees that during the
Restricted Period, without the prior written consent of the Board, he will
not,
directly or indirectly, either as principal, manager, agent, consultant,
officer, director, stockholder, partner, investor, lender or employee or in
any
other capacity, carry on, be engaged in or have any financial interest in,
any
business which is in competition with any business of the Applicable Entities.
For purposes of this section, a business shall be deemed to be in competition
with any business of the Applicable Entities if it is materially involved in
the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by any member of the Applicable Entities
within the same geographic area in which such member of the Applicable Entities
effects such purchases, sales or dealings or renders such services; provided,
however,
that for
the period commencing with the termination of Executive's employment, a business
shall be deemed to be in competition with any business of the Applicable
Entities only if it is materially involved in the retail brokerage business.
Notwithstanding the foregoing, Executive shall be allowed to make passive
investments in publicly held competitive businesses as long as his ownership
is
less than 5% of such business.
-17-
(c) Executive
acknowledges that the restrictive covenants (the "Restrictive Covenants")
contained in this Section 12 are a condition of his continued employment and
are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or
any
part of any of the Restrictive Covenants, is invalid or unenforceable, the
remainder of the Restrictive Covenants and parts thereof shall not thereby
be
affected and shall be given full effect, without regard to the invalid portion.
If any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable because of the geographic or temporal
scope
of such provision, such court shall have the power to reduce the geographic
or
temporal scope of such provision, as the case may be, and, in its reduced form,
such provision shall then be enforceable. If Executive breaches, or threatens
to
breach, any of the Restrictive Covenants, the Company, in addition to and not
in
lieu of any other rights and remedies it may have at law or in equity, shall
have the right to injunctive relief; it being acknowledged and agreed to by
Executive that any such breach or threatened breach would cause irreparable
and
continuing injury to the Company and that money damages would not provide an
adequate remedy to the Company.
13. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and, upon its effectiveness, shall
supersede all prior agreements, understandings and arrangements, both oral
and
written, between the Executive and the Company (or any of its affiliates) with
respect to such subject matter. This Agreement may not be modified in any way
unless by a written instrument signed by both the Company and the
Executive.
14. Survival.
The
respective rights and obligations of the parties hereunder shall survive any
termination of the Executive’s employment hereunder, including without
limitation, the Company’s obligations under Section 6, and the expiration of the
Term of Employment, to the extent necessary to the intended preservation of
such
rights and obligations.
15. Notices.
All
notices required or permitted to be given hereunder shall be in writing and
shall be personally delivered by courier or sent by registered or certified
mail, return receipt requested addressed as set forth herein. Notices personally
delivered or sent by overnight courier shall be deemed given on the date of
delivery and notices mailed in accordance with the foregoing shall be deemed
given upon the earlier of receipt by the addressee, as evidenced by the return
receipt thereof, or three (3) days after deposit in the U.S. mail. Notice shall
be sent (i) if to the Company, addressed to National Holdings Corporation,
000
Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000, Attention: Chairman of the Compensation Committee, and
(ii)
if to the Executive, to his address as reflected on the payroll records of
the
Company, or to such other address as either party shall request by notice to
the
other in accordance with this provision.
-18-
16. Benefits;
Binding Effect.
This
Agreement shall be for the benefit of and binding upon the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and, where permitted and applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation,
sale
of stock, sale of assets or otherwise.
17. Right
to Consult with Counsel; No Drafting Party.
The
Executive acknowledges having read and considered all of the provisions of
this
Agreement carefully, and having had the opportunity to consult with counsel
of
his own choosing, and, given this, the Executive agrees that the obligations
created hereby are not unreasonable. The Executive acknowledges that he has
had
an opportunity to negotiate any and all of these provisions and no rule of
construction shall be used that would interpret any provision in favor of or
against a party on the basis of who drafted the Agreement.
18. Severability.
The
invalidity of any one or more of the words, phrases, sentences, clauses,
provisions, sections or articles contained in this Agreement shall not affect
the enforceability of the remaining portions of this Agreement or any part
thereof, all of which are inserted conditionally on their being valid in law,
and, in the event that any one or more of the words, phrases, sentences,
clauses, provisions, sections or articles contained in this Agreement shall
be
declared invalid, this Agreement shall be construed as if such invalid word
or
words, phrase or phrases, sentence or sentences, clause or clauses, provisions
or provisions, section or sections or article or articles had not been inserted.
If such invalidity is caused by length of time or size of area, or both, the
otherwise invalid provision will be considered to be reduced to a period or
area
which would cure such invalidity.
19. Waivers.
The
waiver by either party hereto of a breach or violation of any term or provision
of this Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation.
20. No
Mitigation.
In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement.
21. Section
Headings.
The
article, section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
22. No
Third Party Beneficiary.
Nothing
expressed or implied in this Agreement is intended, or shall be construed,
to
confer upon or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason
of
this Agreement.
-19-
23. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument and agreement.
24. Indemnification.
(a) Subject
to limitations imposed by law, the Company shall indemnify and hold harmless
the
Executive to the fullest extent permitted by law from and against any and all
claims, damages, expenses (including reasonable attorneys’ fees), judgments,
penalties, fines, settlements, and all other liabilities incurred or paid by
him
in connection with the investigation, defense, prosecution, settlement or appeal
of any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative and to which the Executive
was
or is a party or is threatened to be made a party by reason of the fact that
the
Executive is or was an officer, Executive or agent of the Company, or by reason
of anything done or not done by the Executive in any such capacity or
capacities, provided that the Executive acted in good faith, in a manner that
was not grossly negligent or constituted willful misconduct and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company also shall
pay
any and all expenses (including reasonable attorney’s fees) incurred by the
Executive as a result of the Executive being called as a witness in connection
with any matter involving the Company and/or any of its officers or
directors.
(b) The
Company shall pay any expenses (including reasonable attorneys’ fees),
judgments, penalties, fines, settlements, and other liabilities incurred by
the
Executive in investigating, defending, settling or appealing any action, suit
or
proceeding described in this Section 24 in advance of the final disposition
of
such action, suit or proceeding. The Company shall promptly pay the amount
of
such expenses to the Executive, but in no event later than 10 days following
the
Executive’s delivery to the Company of a written request for an advance pursuant
to this Section 24, together with a reasonable accounting of such
expenses.
(c) The
Executive hereby undertakes and agrees to repay to the Company any advances
made
pursuant to this Section 24 if and to the extent that it shall ultimately be
found that the Executive is not entitled to be indemnified by the Company for
such amounts.
(d) The
Company shall make the advances contemplated by this Section 24 regardless
of
the Executive’s financial ability to make repayment, and regardless whether
indemnification of the Indemnitee by the Company will ultimately be required.
Any advances and undertakings to repay pursuant to this Section 24 shall be
unsecured and interest-free.
(e) The
provisions of this Section 24 shall survive the termination of the Term of
Employment or expiration of the term of this Agreement.
-20-
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
|
COMPANY:
NATIONAL HOLDINGS CORPORATION
|
||
| |
|
By:
Name:
Title:
|
|
EXECUTIVE:
XXXX
XXXXXXXXXX
|
||
-21-
EXHIBIT
A
CURRENT
BOARDS
-22-
EXHIBIT
B
FORM
OF RELEASE
I,
XXXX
XXXXXXXXXX, on behalf of myself and my heirs, successors and assigns, in
consideration of the performance by National Holdings Corporation., a Delaware
corporation (together with its Subsidiaries, the “Company”),
of
its material obligations under the Employment Agreement, dated as of ________
2008 (the “Agreement”),
do
hereby release and forever discharge as of the date hereof the Company, its
Affiliates, each such Person’s respective successors and assigns and each of the
foregoing Persons’ respective present and former directors, officers, partners,
stockholders, members, managers, agents, representatives, employees (and each
such Person’s respective successors and assigns) (collectively, the
“Released
Parties”)
to the
extent provided below.
1. I
understand that any payments or benefits paid or granted to me under
Section
6
of the
Agreement represent, in part, consideration for signing this General Release
and
are not salary, wages or benefits to which I was already entitled. I understand
and agree that I will not receive the payments and benefits specified in
Section
6
of the
Agreement unless I execute this General Release and do not revoke this General
Release within the time period permitted hereafter or breach this General
Release.
2. I
knowingly and voluntarily release and forever discharge the Company and the
other Released Parties from any and all claims, controversies, actions, causes
of action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims for
costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in
equity, both past and present (through the date of this General Release),
whether under the laws of the United States or another jurisdiction and whether
known or unknown, suspected or claimed against the Company or any of the
Released Parties which I, my spouse, or any of my heirs, executors,
administrators or assigns, have or may have, which arise out of or are connected
with my employment with, or my separation from, the Company (including, but
not
limited to, any allegation, claim or violation, arising under: Title VII of
the
Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age
Discrimination in Employment Act of 1967, as amended (including the Older
Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the
Americans with Disabilities Act of 1990; the Family and Medical Leave Act of
1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining
and Notification Act; the Employee Retirement Income Security Act of 1974;
any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; or under any other federal, state or local civil
or
human rights law, or under any other local, state, or federal law, regulation
or
ordinance; or under any public policy, contract or tort, or under common law;
or
arising under any policies, practices or procedures of the Company; or any
claim
for wrongful discharge, breach of contract, infliction of emotional distress,
or
defamation; or any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters) (all of the foregoing collectively
referred to herein as the “Claims”);
provided,
however, that nothing contained in this General Release shall apply to, or
release the Company from, (i) any obligation of the Company contained in the
Agreement to be performed after the date hereof or (ii) any vested or accrued
benefits pursuant to any employee benefit plan, program or policy of the
Company.
-23-
3. I
represent that I have made no assignment or transfer of any right, claim,
demand, cause of action, or other matter covered by paragraph 2
above.
4. I
agree
that this General Release does not waive or release any rights or claims that
I
may have under the Age Discrimination in Employment Act of 1967 which arise
after the date I execute this General Release. I acknowledge and agree that
my
separation from employment with the Company in compliance with the terms of
the
Agreement shall not serve as the basis for any claim or action (including,
without limitation, any claim under the Age Discrimination in Employment Act
of
1967).
5. In
signing this General Release, I acknowledge and intend that it shall be
effective as a bar to each and every one of the Claims hereinabove mentioned
or
implied. I expressly consent that this General Release shall be given full
force
and effect according to each and all of its express terms and provisions,
including those relating to unknown and unsuspected Claims (notwithstanding
any
state statute that expressly limits the effectiveness of a general release
of
unknown, unsuspected and unanticipated Claims), if any, as well as those
relating to any other Claims hereinabove mentioned or implied. I acknowledge
and
agree that this waiver is an essential and material term of this General Release
and that without such waiver the Company would not have agreed to the terms
of
the Agreement. I covenant that I shall not directly or indirectly, commence,
maintain or prosecute or xxx any of the Released Persons either affirmatively
or
by way of cross-complaint, indemnity claim, defense or counterclaim or in any
other manner or at all on any Claim covered by this General Release. I further
agree that in the event I should bring a Claim seeking damages against the
Company, or in the event I should seek to recover against the Company in any
Claim brought by a governmental agency on my behalf, this General Release shall
serve as a complete defense to such Claims. I further agree that I am not aware
of any pending charge or complaint of the type described in paragraph 2 as
of
the execution of this General Release.
6. I
agree
that neither this General Release, nor the furnishing of the consideration
for
this General Release, shall be deemed or construed at any time to be an
admission by the Company, any Released Party or myself of any improper or
unlawful conduct.
7. I
agree
that this General Release is confidential and agree not to disclose any
information regarding the terms of this General Release, except to my immediate
family and any tax, legal or other counsel I have consulted regarding the
meaning or effect hereof or as required by law, and I will instruct each of
the
foregoing not to disclose the same to anyone.
8. Any
non-disclosure provision in this General Release does not prohibit or restrict
me (or my attorney) from responding to any inquiry about this General Release
or
its underlying facts and circumstances by the Securities and Exchange
Commission, FINRA or any other self-regulatory organization or governmental
entity.
9. Without
limitation of any provision of the Agreement, I hereby expressly re-affirm
my
obligations under Section
12
under
the Agreement.
10. Whenever
possible, each provision of this General Release shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this General Release is held to be invalid, illegal or unenforceable in
any
respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or any
other
jurisdiction, but this General Release shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had
never been contained herein.
-24-
“Affiliate”
means,
with respect to any Person, any Person that controls, is controlled by or is
under common control with such Person or an Affiliate of such
Person.
“Person”
means
an individual, a partnership, a limited liability company, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, investment fund, any other business entity and a governmental
entity or any department, agency or political subdivision thereof.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or business entity of which (i) if a corporation,
a
majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled, directly
or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or
more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a
Person or Persons shall be deemed to have a majority ownership interest in
a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director
or
general partner of such limited liability company, partnership, association,
or
other business entity.
BY
SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:
(a) I
HAVE
READ IT CAREFULLY;
(b) I
UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,
INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED;
THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND
THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;
(c) I
VOLUNTARILY CONSENT TO EVERYTHING IN IT;
(d) I
HAVE
BEEN ADVISED TO CONSULT WITH AN ATTORNEY (VIA THE AGREEMENT AND THIS RELEASE)
BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND
CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;
(e) I
HAVE
HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY
IN ITS FINAL FORM ON _______________ __, _____ TO CONSIDER IT AND THE CHANGES
MADE SINCE THE _______________ __, _____ VERSION OF THIS RELEASE ARE NOT
MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;
(f) THE
CHANGES TO THE AGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT
MATERIAL OR WERE MADE AT MY REQUEST.
(g) I
UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE
IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE
EIGHTH DAY FOLLOWING EXECUTION OF THE AGREEMENT;
-25-
(h) I
HAVE
SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF
ANY
COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
(i) I
AGREE
THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED
OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE COMPANY AND BY ME.
(j) THIS
RELEASE SHALL REMAIN IN FULL FORCE AND EFFECT SO LONG AS THE COMPANY IS IN
COMPLIANCE WITH ITS OBLIGATIONS TO PAY SEVERANCE AND PROVIDE THE OTHER
POST-TERMINATION BENEFITS UNDER THE AGREEMENT, SUBJECT TO THE EXECUTIVE
CONTINUING TO ABIDE BY THE POST-TERMINATION OBLIGATIONS AND COVENANTS CONTAINED
IN THE AGREEMENT.
| DATE: ___________ __, ______ |
|
-26-
EXHBIIT
C
OPTION
GRANT
-27-
Exhibit
B
EMPLOYMENT
AGREEMENT
This
Employment Agreement (“Agreement”)
is
made and entered into as of ___, 2008, by and between National Holdings
Corporation, a Delaware corporation (the “Company”)
and
Xxxxxxx X. Xxxxxxx (the “Executive”).
Recitals
WHEREAS,
the
Company wishes to employ the Executive, and Executive wishes to be so employed
by the Company, on the terms and conditions hereinafter set forth.
NOW,
THEREFORE,
in
consideration of the premises and mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are
mutually acknowledged, the Company and the Executive hereby agree as
follows:
Agreement
1. Definitions.
When
used in this Agreement, the following terms shall have the following
meanings:
(a) “Accrued
Obligations”
shall
mean:
(i) any
accrued but unpaid salary through the Termination Date;
(ii) any
unpaid or unreimbursed expenses incurred in accordance with Company policy,
including amounts due under Section 5(a) hereof, to the extent incurred during
the Term of Employment;
(iii) any
benefits provided under the Company’s Executive benefit plans upon a termination
of employment, in accordance with the terms therein, including rights to equity
in the Company pursuant to any plan or grant, and settlement of any Equity
Awards in accordance with the terms of such Equity Awards;
(iv) any
unpaid Bonus in respect to any completed fiscal year that has ended on or prior
to the end of the Term of Employment; and
(v) rights
to
indemnification by virtue of the Executive’s position as an officer or director
of the Company or its subsidiaries and the benefits under any directors’ and
officers’ liability insurance policy maintained by the Company, in accordance
with its terms thereof.
(b) “Board”
shall
mean the Board of Directors of the Company.
(c) “Bonus”
shall
mean any bonus payable to the Executive pursuant to Section 4(b)
hereof.
(d) “Bonus
Period”
shall
mean each period for which a Bonus is payable. Unless otherwise specified by
the
Board, the Bonus Period shall be the Company’s fiscal year.
(e) “Cause”
shall
mean, with respect to the Executive, the following:
(i) the
commission of a felony or other crime involving moral turpitude, or the
commission of any other act or omission involving dishonesty or fraud with
respect to the Company or any Related Entity or any of its or their respective
customers or suppliers; or
(ii) breach
of
fiduciary duty, willful misconduct or gross negligence with respect to the
Company or any Related Entity; or
(iii) substantial
and repeated failure to perform duties as reasonably directed by the
Board;
provided,
however,
that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to
the
Board’s reasonable satisfaction within
30
calendar days of notice of such breach;
or
(iv) material
breach of this Agreement;
provided,
however,
that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to
the
Board’s reasonable satisfaction within
30
calendar days of notice of such breach;
or
(v) any
action taken against Executive by a regulatory body or self-regulatory
organization that materially impairs the Executive from performing his duty
for
a period of more than 180 days; or
(vi) alcoholism
or drug addition which materially impairs the Executive’s ability to perform his
duties.
An
act or
failure to act shall not be “willful” if (A) done by the Executive in good faith
and (B) the Executive reasonably believed that such action or inaction was
in
the best interests of the Company and the Related Entities.
(f) “Change
in Control of the Company”
shall
mean:
(i) consummation
of a reorganization, merger or consolidation, sale, disposition of all or
substantially all of the assets or stock of the Company or any other similar
corporate event (a “Business Combination”), in each case, unless, following such
Business Combination, all or substantially all of the individuals or entities
who were the beneficial owners, respectively, of the voting securities of the
Company entitled to vote generally in the election of directors immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries); or (ii) approval by the Board of Directors of the
Company of a complete dissolution or liquidation of the Company; or (iii) any
“person” (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), is or becomes, after the Commencement Date, a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors of the Company.
-2-
(g) “COBRA”
shall
mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
from
time to time.
(h) “Code”
shall
mean the Internal Revenue Code of 1986, as amended.
(i) “Commencement
Date”
shall
mean ______ ___, 2008.
(j) “Confidential
Information”
shall
mean all trade secrets and information disclosed to the Executive or known
by
the Executive as a consequence of or through the unique position of his
employment with the Company or any Related Entity (including information
conceived, originated, discovered or developed by the Executive and information
acquired by the Company or any Related Entity from others) prior to or after
the
date hereof, and not generally or publicly known (other than as a result of
unauthorized disclosure by the Executive), about the Company or any Related
Entity or its business.
(k) “Disability”
shall
have the meaning set forth in a policy or policies of long-term disability
insurance, if any, the Company obtains for the benefit of itself and/or its
employees. If there is no definition of “disability” applicable under any such
policy or policies, if any, then the Executive shall be considered disabled
due
to mental or physical impairment or disability, despite reasonable
accommodations by the Company and any Related Entity, to perform his customary
or other comparable duties with the Company and any Related Entity immediately
prior to such disability for a period of at least 120 consecutive days or for
at
least 180 non-consecutive days in any 12-month period.
(l) “Draw”
shall
mean a loan or advance versus a Base Salary or other forms of compensation
provided for in Section 4(a) hereof.
(m) “Equity
Awards”
shall
mean any stock options, restricted stock, restricted stock units, stock
appreciation rights, phantom stock or other equity based awards granted by
the
Company to the Executive.
(n) “Excise
Tax”
shall
mean any excise tax imposed by Section 4999 of the Code, together with any
interest and penalties imposed with respect thereto, or any interest or
penalties incurred by the Executive with respect to any such excise tax.
(o) “Expiration
Date”
shall
mean the date on which the Term of Employment, including any renewals thereof
under Section 3(b) hereof, shall expire.
-3-
(p) “Good
Reason”
shall
mean:
(i) the
assignment to the Executive of any duties inconsistent in any material respect
with the Executive’s position (including status, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
2(b) hereof, or any other action by the Company that results in a material
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of written
notice thereof given by the Executive; or
(ii) any
material failure by the Company to comply with any of the provisions of Section
4 hereof, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and that is remedied by the Company promptly after
receipt of written notice thereof given by the Executive; or
(iii) the
Company’s requiring the Executive to be based at any office or location located
more than fifty (50) miles outside of Palm Beach County, Florida, except for
travel reasonably required in the performance of the Executive’s
responsibilities; or
(iv) any
decrease in salary or bonuses payable pursuant to the terms of this Agreement
without the Executive’s written consent.
(q) “President”
shall be
President of the Company.
(r) “Related
Entity”
shall
mean the Company and any direct or indirect subsidiary of the Company or the
subsidiary, and any business, corporation, partnership, limited liability
company or other entity designated by the Board, in which the Company or a
subsidiary holds a substantial ownership interest, directly or
indirectly.
(s) “Restricted
Period”
shall be
the Term of Employment and the twelve (12) month period immediately following
termination of the Term of Employment; provided, however, that if the Company
terminates the Executive’s employment for Cause, or Executive terminates his
employment without Good Reason, the twelve (12) month period shall be extended
to eighteen (18) months.
(t) “Severance
Amount”
shall
mean (i) one hundred fifty percent (150%) of the Executive’s annual Base Salary
in the event of termination of employment without Cause or with Good Reason
and
(ii) one hundred (100%) percent of the Executive’s annual Base Salary for any
other termination of employment.
(u) “Severance
Term”
shall
mean the eighteen (18) month period following the Termination Date.
(v) “Term
of Employment”
shall
mean the period during which the Executive shall be employed by the Company
pursuant to the terms of this Agreement.
(w) “Termination
Date”
shall
mean the date on which the Term of Employment ends.
-4-
(x) “Termination
Year Bonus”
shall
mean the Bonus payable under Section 4(b) hereof for the Bonus Period in which
the Executive’s employment with the Company terminates for any reason.
2. Employment.
(a) Employment
and Term.
The
Company hereby agrees to employ the Executive, and the Executive hereby agrees
to serve the Company, during the Term of Employment on the terms and conditions
set forth herein.
(b) Duties
of Executive.
During
the Term of Employment, the Executive shall be employed and serve as the Vice
Chairman and President, and shall have such duties typically associated with
such title and shall exercise such power and authority as may from time to
time
be delegated to him by the Board. The Executive shall devote his full business
time, attention and efforts to the performance of his duties under this
Agreement, render such services to the best of his ability, and use his
reasonable best efforts to promote the interests of the Company. The Executive
shall not engage in any other business or occupation during the Term of
Employment, including, without limitation, any activity that (i) conflicts
with
the interests of the Company or its Related Entities, (ii) interferes with
the
proper and efficient performance of his duties for the Company, or (iii)
interferes with the exercise of his judgment in the Company’s best interests.
Notwithstanding the foregoing or any other provision of this Agreement, it
shall
not be a breach or violation of this Agreement for the Executive to (x) serve
on
corporate (subject to prior approval of the Board), civic or charitable boards
or committees, (y) deliver lectures, fulfill speaking engagements or teach
at
educational institutions, or (z) manage personal investments, so long as such
activities do not significantly interfere with or significantly detract from
the
performance of the Executive’s responsibilities to the Company in accordance
with this Agreement. The Executive represents he holds all licenses and
regulatory approvals necessary to perform these responsibilities, including
holding a Series 7 and a Series 24. As of the date hereof, the Executive is
approved to be a member of the boards listed on Exhibit
A
attached
hereto.
(c) Management
Committee.
At all
times during the Term of Employment, the Executive shall serve as a member
of
the Executive Committee of the Company, and the Board shall take all necessary
and appropriate actions to appoint and retain the Executive on such
committee.
3. Term.
(a) Initial
Term.
The
initial Term of Employment under this Agreement, and the employment of the
Executive hereunder, shall commence on the Commencement Date and shall expire
on
the fifth anniversary of such Commencement Date, unless sooner terminated in
accordance with Section 6 hereof.
(b) Renewal
Terms.
At the
end of the Initial Term, the Term of Employment automatically shall renew for
successive one (1) year terms (subject to earlier termination as provided in
Section 6 hereof), unless the Company or the Executive delivers written notice
to the other at least ninety (90) days prior to the Expiration Date of its
or
his election not to renew the Term of Employment.
-5-
(c) Release.
Upon
termination of this Agreement in accordance with the terms contained herein,
as
a condition to receiving any payments or benefits to which he is entitled under
the terms of this Agreement, the Executive shall execute and deliver to the
Company a release in the form attached hereto as Exhibit
B
within
thirty (30) days following his termination of employment. Such release shall
remain in full force and effect so long as the Company is in compliance with
its
obligations to pay severance and provide the other post-termination benefits
hereunder, subject to the Executive continuing to abide by the post-termination
obligations and covenants contained herein.
4. Compensation.
(a) Base
Salary.
The
Executive shall receive an initial base salary of $450,000 per annum which
shall
increase five percent (5%) per annum beginning on the first anniversary of
the
Commencement Date and each anniversary date thereafter (the "Base Salary").
Such
Base Salary shall be payable in installments consistent with the Company’s
normal payroll schedule, subject to applicable withholding and other taxes.
The
Base Salary and Executive’s other forms of compensation shall be reviewed, at
least annually, and may, by action and in the discretion of the Board, be
increased (but may not be decreased) at any time or from time to time. In no
event shall the Base Salary be deemed a Draw.
(b) Bonuses.
During
the Term of Employment, the Executive shall be entitled to receive on a fiscal
year basis a cash bonus from the Company determined in the discretion by the
Compensation Committee; provided,
however,
that
such Bonus on a fiscal year basis shall not be less than:
(i) Two
Hundred Twenty Five Thousand ($225,000) Dollars, paid in quarterly installments
as follows: with respect to the first three quarters of the Company’s fiscal
year, the cash bonus shall be paid by the Company to the Executive within forty
five (45) days after the end of the Company’s fiscal quarter and with respect to
the last fiscal quarter, ninety (90) days after the end of the Company’s fiscal
year (the “Guaranteed Bonus”); and
(ii) An
amount
equal to five percent (5%) of the Company’s fiscal year’s consolidated Net
Income in excess of $4.5 million, but in no event to exceed an amount equal
to
the difference between (i) 100% of the then current Base Salary for such fiscal
year and (ii) the Guaranteed Bonus, payable within ninety (90) days after the
end of the Company’s fiscal year. Notwithstanding anything to the contrary in
this sub-section (b)(ii), in the event that the Company’s Net Income is a
negative number for any fiscal year, then the Bonus payment paid to the
Executive
for such
fiscal year under this sub-section (ii) shall be $0 and the Executive
shall
not be required to reimburse the Company for any Bonus previously paid by the
Company; and
(iii) Such
additional Bonuses, if any, as the Board may in its sole and absolute discretion
determine based upon its assessment of the performance of the President in
the
following areas: (A) revenue growth of the Company, (B) new business
development, (C) investor relations, (D) communication with the Board of
Directors, (E) communication and collaboration with the other members of the
Executive Committee of the Board of Directors, and (F) special projects as
assigned by the Board of Directors.
-6-
(iv) With
respect to the first fiscal year in which the Commencement Date falls, the
Bonus
described in (i) and (ii) above shall be prorated accordingly with respect
to
such applicable Bonus Period.
5. Expense
Reimbursement and Other Benefits.
(a) Reimbursement
of Expenses.
Upon the
submission of proper substantiation by the Executive, and subject to such rules
and guidelines as the Company may from time to time adopt with respect to the
reimbursement of expenses of executive personnel, the Company shall reimburse
the Executive for all reasonable expenses actually paid or incurred by the
Executive during the Term of Employment in the course of and pursuant to the
business of the Company, including, without limitation, expenses relating to
his
cell phone and his Blackberry or other similar devices. The Executive shall
account to the Company in writing for all expenses for which reimbursement
is
sought and shall supply to the Company copies of all relevant invoices, receipts
or other evidence reasonably requested by the Company.
(b) Compensation/Benefit
Programs.
During
the Term of Employment, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and dismemberment,
disability, travel and life insurance plans, and any and all other plans as
are
presently and hereinafter offered by the Company to its executive personnel,
including savings, pension, profit-sharing and deferred compensation plans,
subject to the general eligibility and participation provisions set forth in
such plans. The benefits currently provided by the Company to its Executives
are
as stated in the Company’s Executive handbook, which is subject to change. In
addition, during the Term of Employment, the Company shall pay (at the “Buy-Up
Premium” level) all health insurance premiums required to be made on behalf of
the Executive and his dependents with respect to their participation in such
health plans. Should Executive not want to participate in the Company's health
plan, the Company will reimburse Executive for the expense incurred in
participating in another plan in an amount not to exceed the cost of
participation of Executive and his dependents in the Company’s health plan.
Additionally, Executive shall be added as an insured to any director and officer
and errors and omissions insurance policy that the Company or any of the
Company’s subsidiaries or affiliates hereafter procures.
(c) Working
Facilities.
During
the Term of Employment, the Company shall furnish the Executive with an office,
a personal assistant, other secretarial help and such other facilities and
services suitable to his position and adequate for the performance of his duties
hereunder. The Company and the Executive acknowledge and agree that the personal
assistant or other secretarial help assigned to the Executive shall also be
responsible for handling certain personal matters that may be assigned to them
from time to time by the Executive.
(d) Automobile.
During
the Term of Employment, the Company shall provide the Executive with a
non-accountable automobile allowance (inclusive of parking) of $1,000 per month.
-7-
(e) Equity
Awards.
The
Company and Executive shall enter into the Stock Option Agreement attached
hereto as Exhibit
C
pursuant
to which the Company shall grant to Executive certain options (“Options”) to
purchase common stock of the Company upon such terms and conditions set forth
therein. To the extent that any stock options granted hereunder are not made
pursuant to the Company’s 2006 Stock Option Plan or other plan covered by a
registration statement declared effective by the Securities and Exchange
Commission (the “SEC”), the Company agrees to file with the SEC, within a
reasonable period following the grant of such options, a Form S-8 registration
statement covering the shares of common stock issuable upon exercise of the
stock options. In addition, the Executive shall be eligible to be granted Equity
Awards under (and therefore subject to all terms and conditions of) the
Company’s 2006 Stock Option Plan or such other plans or programs as the Company
may from time to time adopt, and subject to all rules of regulation of the
Securities and Exchange Commission applicable thereto. The number and type
of
Equity Awards, and the terms and conditions thereof, shall be determined by
the
Compensation Committee of the Board of the Company, in its discretion and
pursuant to the plan or arrangement pursuant to which they are granted.
Notwithstanding any other provision in this Agreement, in the event of a Change
in Control during the Term of Employment, all Options granted to Executive
as
described in Exhibit
C
hereto
shall immediately vest and be exercisable.
(f) Other
Benefits.
The
Executive shall be entitled to five (5) weeks of paid vacation each calendar
year during the Term of Employment, to be taken at such times as the Executive
and the Company shall mutually determine and provided that no vacation time
shall significantly interfere with the duties required to be rendered by the
Executive hereunder. Any vacation time not taken by Executive during any
calendar year may be carried forward into any succeeding calendar year. The
Executive shall receive such additional benefits, if any, as the Board shall
from time to time determine.
(g) Minimum
Compensation.
In
no
event will the Executive’s total compensation be less than the total
compensation (including without limitation, Base Salaries, Bonuses, other
incentive compensation, options or other securities, or benefits) paid to the
President.
(h) Gym
or Club Membership Fees. During
the Term, the Company agrees to pay up to $150 per month for Executive to belong
to a health club of his choosing.
6. Termination.
(a) General.
The Term
of Employment shall terminate upon the earliest to occur of (i) the Executive’s
death, (ii) a termination by the Company by reason of the Executive’s
Disability, (iii) a termination by the Company with or without Cause or (iv)
a
termination by Executive with or without Good Reason. Upon any termination
of
Executive’s employment for any reason, except as may otherwise be requested by
the Company in writing and agreed upon in writing by Executive, the Executive
shall resign from any and all directorships, committee memberships or any other
positions the Executive holds with the Company or any of its Related Entities.
Upon termination of Executive’s employment with the Company pursuant to this
Section, all compensation and benefits shall cease to accrue upon discharge
of
Executive and the Company shall have no further obligations to the Executive
or
his heirs, administrators, or executors with respect to compensation and
benefits thereafter, except to pay the Executive or his heirs, administrators
or
executors as set forth in this Section.
-8-
(b) Termination
by Company for Cause.
The
Company shall at all times have the right, upon written notice to the Executive,
to terminate the Term of Employment for Cause. For purposes of this Section
6(b), any good faith determination by the Board of Cause shall be binding and
conclusive on all interested parties. In the event that the Term of Employment
is terminated by the Company for Cause, the Executive shall be entitled only
to
the Accrued Obligations, payable within a reasonable period following the
Termination Date.
(c) Disability.
The
Company shall have the option to terminate the Term of Employment upon written
notice to the Executive, at any time during which the Executive is suffering
from a Disability. In the event that the Term of Employment is terminated due
to
the Executive’s Disability, the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month
in
which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date
of
such termination with the Company paying all premiums relating thereto until
the
earlier of: (A) eighteen (18) months following the Termination Date, or (B)
the
date the Executive commences employment with any person or entity and, thus,
is
eligible for health insurance benefits; provided, however, that as a condition
of continuation of such benefits, the Company may require the Executive to
elect
to continue his health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit C hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(d) Death.
In the
event that the Term of Employment is terminated due to the Executive’s death,
the estate of the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;
-9-
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month
in
which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to the Executive’s covered dependents under the
Company health plans as in effect from time to time after the Executive’s death
with the Company paying all premiums relating thereto until eighteen (18) months
following the Termination Date; provided, however, that as a condition of
continuation of such benefits, the Company may require the covered dependents
to
elect to continue such health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit C hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(e) Termination
Without Cause.
The
Company may terminate the Term of Employment at any time without Cause, by
written notice to the Executive. In the event that the Term of Employment is
terminated by the Company without Cause (other than due to the Executive’s death
or Disability), the Executive shall be entitled to:
(i) Accrued
Obligations, payable as soon as reasonably practicable following the Termination
Date;
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal installments during the Severance Period
commencing with the first business day in the first calendar month immediately
following the month in which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date
of
such termination with the Company paying all premiums until the earlier of:
(A)
eighteen (18) months following the Termination Date, or (B) the date the
Executive commences employment with any person or entity and, thus, is eligible
for health insurance benefits; provided, however, that as a condition of
continuation of such benefits, the Company may require the Executive to elect
to
continue his health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit C hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for a
period of nine (9) months from
the
date of the termination; provided, however, such period of nine (9) months
shall
not exceed the earlier of the latest date upon which such options could have
expired by their original terms under any circumstances or the tenth anniversary
of the original date of grant of such options.
-10-
(f) Termination
by Executive for Good Reason.
The
Executive may terminate the Term of Employment for Good Reason by providing
the
Company thirty (30) days’ written notice setting forth in reasonable specificity
the event that constitutes Good Reason, which written notice, to be effective,
must be provided to the Company within thirty (30) days of the occurrence of
such event. During such thirty (30) day notice period, the Company shall have
a
cure right (if curable), and if not cured within such period, the Executive’s
termination shall be effective upon the date immediately following the
expiration of the thirty (30) day notice period, and the Executive shall be
entitled to the same payments and benefits as provided in Section 6(e) above
for
a termination without Cause.
(g) Termination
by Executive Without Good Reason.
The
Executive may terminate his employment without Good Reason by providing the
Company thirty (30) days’ written notice of such termination. In the event of a
termination of employment by the Executive under this Section 6(g), the
Executive shall be entitled only to the Accrued Obligations. In the event of
termination of the Executive’s employment under this Section 6(g), the Company
may, in its sole and absolute discretion, by written notice, accelerate such
date of termination and still have it treated as a termination without Good
Reason.
(h) Termination
Upon Expiration Date.
In the
event that Executive’s employment with the Company terminates upon the
expiration of the Term of Employment, the Executive shall be entitled to only
the Accrued Obligations, payable within a reasonable period following the
Termination Date. In addition, if the Term of Employment terminates either
because the Company refused to extend the Term of Employment without Cause
(and
other than by reason of the Executive’s Disability), or the Executive refused to
extend the Term for Good Reason, the Company shall pay the
Executive:
(i) the
Accrued Obligations, payable as soon as practicable following the Termination
Date;
(ii) the
Termination Year Bonus, payable within 2 1/2 months after the last day of the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Term;
(iv) continuation
of the health benefits provided to the Executive and his covered dependants
under the Company health plans as in effect from time to time after the date
of
such termination until the earlier of: (A) eighteen (18) months following the
Termination Date, or (B) the date the Executive commences employment with any
person or entity and, thus, is eligible for health insurance benefits; provided,
however, that as a condition of continuation of such benefits, the Company
may
require the Executive to elect to continue his health insurance pursuant to
COBRA; and
-11-
(v) all
Options granted to Executive as described in Exhibit B hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(i) Change
in Control of the Company.
If the
Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason during the six (6) month period immediately following
the Change in Control of the Company, then in lieu of any amounts otherwise
payable under Sections 6(e) or 6(f) hereof, the Executive shall be entitled
to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;
(ii) the
Termination Year Bonus, payable within four (4) months after the last day of
the
Bonus Period in which the Termination Date occurs;
(iii) the
Severance Amount, payable in equal monthly installments during the Severance
Period commencing with the first calendar month immediately following the month
in which the employment of Executive has been terminated;
(iv) continuation
of the health benefits provided to Executive and his covered dependants under
the Company health plans as in effect from time to time after the date of such
termination with the Company paying all premiums until the earlier of: (A)
eighteen (18) months following the Termination Date, or (B) the date the
Executive commences employment with any person or entity and, thus, is eligible
for health insurance benefits; provided, however, that as a condition of
continuation of such benefits, the Company may require the Executive to elect
to
continue his health insurance pursuant to COBRA; and
(v) all
Options granted to Executive as described in Exhibit B hereto and any other
options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.
(j) Section
280G Additional Payments by the Company.
(i) Anything
in this Agreement to the contrary notwithstanding, in the event that
the
Executive shall become entitled to payments and/or benefits provided by this
Agreement or any other amounts in the “nature of compensation” (whether pursuant
to the terms of any plan, arrangement or agreement with the Company, any person
whose actions result in a change of ownership or effective control covered
by
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
“Code”)
or any
person affiliated with the Company or such person) as a result of such change
in
ownership or effective control (collectively, the “Company
Payments”),
and
such Company Payments will be subject to the tax (the “Excise
Tax”)
imposed by Section 4999 of the Code (and any similar tax that may hereafter
be
imposed by any taxing authority), the Company shall pay to the Executive at
the
time specified in clause (iv) hereof an additional amount (the “Gross-Up
Payment”)
such
that the net amount retained by the Executive, after deduction of any Excise
Tax
on the Company Payments and any U.S. federal, state, and local income or payroll
tax upon the Gross-Up Payment provided for by this clause (i), but before
deduction for any U.S. federal, state, and local income or payroll tax on the
Company Payments, shall be equal to the Company Payment.
-12-
(ii) For
purposes of determining whether any of the Company Payments and Gross-Up Payment
(collectively, the “Total
Payments”)
will
be subject to the Excise Tax and the amount of such Excise Tax, (A) the Total
Payments shall be treated as “parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “parachute payments” in excess of the “base
amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company’s independent certified public accountants appointed prior to any
change in ownership (as defined under Section 280G(b)(2) of the Code) or tax
counsel selected by such accountants or the Company (the “Accountants”)
such
Total Payments (in whole or in part): (1) do not constitute “parachute
payments,” (2) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the “base
amount” or (3) are otherwise not subject to the Excise Tax, and (B) the value of
any non-cash benefits or any deferred payment or benefit shall be determined
by
the Accountants in accordance with the principles of Section 280G of the Code.
In the event that the Accountants are serving as accountants or auditors for
the
individual, entity or group effecting the change in control (within the meaning
of Section 280G of the Code), the Executive may appoint another nationally
recognized accounting firm to make the determinations hereunder (which
accounting firm shall then be referred to as the “Accountants” hereunder). All
determinations hereunder shall be made by the Accountants which shall provide
detailed supporting calculations both to the Company and the Executive at such
time as it is requested by the Company or the Executive. The determination
of
the Accountants shall be final and binding upon the Company and the
Executive.
(iii) For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay U.S. federal income taxes at the highest marginal rate of
U.S.
federal income taxation in the calendar year in which the Gross-Up Payment
is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive’s residence for the calendar
year in which the Company Payments are to be made, net of the maximum reduction
in U.S. federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year. In the event that the Excise Tax
is
subsequently determined by the Accountants to be less than the amount taken
into
account hereunder at the time the Gross-Up Payment is made, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the prior Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and U.S. federal, state and local income tax
imposed on the portion of the Gross-Up Payment being repaid by the Executive
if
such repayment results in a reduction in Excise Tax or a U.S. federal, state
and
local income tax deduction), plus interest on the amount of such repayment
at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event that any portion of the Gross-Up Payment to be refunded
to the Company has been paid to any U.S. federal, state and local tax authority,
repayment thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive, and interest
payable to the Company shall not exceed the interest received or credited to
the
Executive by such tax authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the course of action to
be
pursued (and the method of allocating the expense thereof) if the Executive’s
claim for refund or credit is denied. In the event that the Excise Tax is later
determined by the Accountants or the Internal Revenue Service (or other taxing
authority) to exceed the amount taken into account hereunder at the time the
Gross-Up Payment is made (including by reason of any payment the existence
or
amount of which cannot be determined at the time of the Gross-Up Payment),
the
Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) promptly
after the amount of such excess is finally determined.
-13-
(iv) The
Gross-Up Payment or portion thereof provided for in clause (iii) shall be paid
not later than the thirtieth (30th) day following an event occurring which
subjects the Executive to the Excise Tax; provided,
however,
that if
the amount of such Gross-Up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such
day an estimate, as determined in good faith by the Accountants, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to clause (iii), as soon as the amount
thereof can reasonably be determined, but in no event later than the ninetieth
(90th) day after the occurrence of the event subjecting the Executive to the
Excise Tax. Subject to clauses (iii) and (viii) hereof, in the event that the
amount of the estimated payments exceeds the amount subsequently determined
to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(v) In
the
event of any controversy with the Internal Revenue Service (or other taxing
authority) with regard to the Excise Tax, the Executive shall permit the Company
to control issues related to the Excise Tax (at the Company’s expense), provided
that such issues do not potentially materially adversely affect the Executive,
but the Executive shall control any other issues. In the event that the issues
are interrelated, the Executive and the Company shall in good faith cooperate
so
as not to jeopardize resolution of either issue, but if the parties cannot
agree, the Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority as to the
Excise Tax or associated income taxes, the Executive shall permit the
representative of the Company to accompany the Executive, and the Executive
and
the Executive’s representative shall cooperate with the Company and its
Representatives.
(vi) The
Company shall be responsible for all charges of the Accountants.
-14-
(vii) The
Company and the Executive shall promptly deliver to each other copies of any
written communications, and summaries of any verbal communications, with any
taxing authority regarding the Excise Tax covered by this Section
6(i).
(viii) Nothing
in this Section 6(i) is intended to violate the Xxxxxxxx-Xxxxx Act of 2002
and
to the extent that any advance or repayment obligation hereunder would do so,
such obligation shall be modified so as to make the advance a nonrefundable
payment to the Executive and the repayment obligation null and void. The
provisions of this Section 6(i) shall survive the termination of the Executive’s
employment with the Company for any reason.
(k) Cooperation.
Following the Term of Employment, the Executive shall give his assistance and
cooperation willingly, upon reasonable advance notice with due consideration
for
his other business or personal commitments, in any matter relating to his
position with the Company, or his expertise or experience as the Company or
any
Related Entity may reasonably request, including his attendance and truthful
testimony where deemed appropriate by the Company or any Related Entity, with
respect to any investigation or the Company’s or any Related Entity’s defense or
prosecution of any existing or future claims or litigations or other proceedings
relating to matters in which he was involved or potentially had knowledge by
virtue of his employment with the Company. In no event shall his cooperation
materially interfere with his services for a subsequent employer or other
similar service recipient. To the extent permitted by law, the Company agrees
that (i) it shall promptly reimburse the Executive for his reasonable and
documented expenses in connection with his rendering assistance and/or
cooperation under this Section 6(k) upon his presentation of documentation
for
such expenses and (ii) the Executive shall be reasonably compensated for any
continued material services as required under this Section 6(k).
(l) Section
409A.
(i) The
intent of the parties is that payments and benefits under this Agreement comply
with Internal Revenue Code Section 409A and the regulations and guidance
promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to
the maximum extent permitted, this Agreement shall be interpreted to be in
compliance therewith. If the Executive notifies the Company (with specificity
as
to the reason therefore) that the Executive believes that any provision of
this
Agreement (or of any award of compensation, including equity compensation or
benefits) would cause the Executive to incur any additional tax or interest
under Code Section 409A, the Company shall, after consulting with the Executive,
reform such provision to try to comply with Code Section 409A through good
faith
modifications to the minimum extent reasonably appropriate to conform with
Code
Section 409A. To the extent that any provision hereof is modified in order
to
comply with Code Section 409A, such modification shall be made in good faith
and
shall, to the maximum extent reasonably possible, maintain the original intent
and economic benefit to the Executive and the Company of the applicable
provision without violating the provisions of Code Section 409A.
(ii) Notwithstanding
any provision to the contrary in this Agreement, if the Executive is deemed
on
the date of termination to be a “specified employee” within the meaning of that
term under Code Section 409A(a)(2)(B), then with regard to any payment or the
provision of any benefit that constitutes an item of deferred compensation
under
Section 409A and becomes payable by reason of the Executive’s separation from
service, such payment or benefit shall not be made or provided (subject to
the
last sentence of this Section 6(k)(ii)) prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of the Executive’s
“separation from service” (as such term is defined under Code Section 409A), and
(ii) the date of Executive’s death (the “Delay Period”). Upon the expiration of
the Delay Period, all payments and benefits delayed pursuant to this Section
6(k)(ii) (whether they would have otherwise been payable in a single sum or
in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under
this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein.
-15-
(m) Contact
Management Database Rights.
The
Company and the Executive each acknowledge and agree that the Executive has
developed and currently maintains a contact management database (the
“Database”), and the Company acknowledges and agrees that the Executive shall
have non-exclusive access to such Database at all times during the Term of
Employment and after the Termination Date of this Agreement for any reason
not
in violation of Section 12 hereof.
7. Intentionally
Deleted.
8. Taxes.
Anything in this Agreement to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or his estate
or
beneficiaries shall be subject to the withholding of such amounts relating
to
taxes as the Company may reasonably determine it should withhold pursuant to
any
applicable law or regulation. In lieu of withholding such amounts, in whole
or
in part, the Company may, in its sole discretion, accept other provisions for
payment of taxes and withholding as required by law, provided it is satisfied
that all requirements of law affecting its responsibilities to withhold have
been satisfied.
9. Assignment.
The
Company shall have the right to assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any corporation or other
entity with or into which the Company may hereafter merge or consolidate or
to
which the Company may transfer all or substantially all of its assets, if in
any
such case said corporation or other entity shall by operation of law or
expressly in writing assume all obligations of the Company hereunder as fully
as
if it had been originally made a party hereto, but may not otherwise assign
this
Agreement or its rights and obligations hereunder. The Executive may not assign
or transfer this Agreement or any rights or obligations hereunder.
10. Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
internal laws of the State of New York, without regard to principles of conflict
of laws.
11. Arbitration.
(a) Exclusive
Remedy.
The
parties recognize that litigation in federal or state courts or before federal
or state administrative agencies of disputes arising out of the Executive’s
employment with the Company or out of this Agreement, or the Executive’s
termination of employment or termination of this Agreement, may not be in the
best interests of either the Executive or the Company, and may result in
unnecessary costs, delays, complexities, and uncertainty. Except as otherwise
provided in Section 12 hereof, the parties agree that any dispute between the
parties arising out of or relating to the Executive’s employment, or to the
negotiation, execution, performance or termination of this Agreement or the
Executive’s employment, including, but not limited to, any claim arising out of
this Agreement, claims under Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act
of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil
Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive
Retirement Income Security Act, and any similar federal, state or local law,
statute, regulation, or any common law doctrine, whether that dispute arises
during or after employment shall be resolved by arbitration in the New York,
New
York area, in accordance with the National Employment Arbitration Rules of
the
American Arbitration Association, as modified by the provisions of this Section
11. The parties each further agree that the arbitration provisions of this
Agreement shall provide each party with its exclusive remedy, and each party
expressly waives any right it might have to seek redress in any other forum,
except as otherwise expressly provided in this Agreement. The parties
acknowledge and agree that their obligations under this arbitration agreement
survive the expiration or termination of this Agreement and continue after
the
termination of the employment relationship between the Executive and the
Company. Except
as otherwise provided in Section 12 hereof, by election of arbitration as the
means for final settlement of all claims, the parties hereby waive their
respective rights to, and agree not to, xxx each other in any action in a
federal, state or local court with respect to such claims, but may seek to
enforce in court an arbitration award rendered pursuant to this Agreement.
The
parties specifically agree to waive their respective rights to a trial by jury,
and further agree that no demand, request or motion will be made for trial
by
jury.
-16-
(b) Arbitration
Procedure and Arbitrator’s Authority.
In the
arbitration proceeding, each party shall be entitled to engage in any type
of
discovery permitted by the Federal Rules of Civil Procedure, to retain its
own
counsel, to present evidence and cross-examine witnesses, to purchase a
stenographic record of the proceedings, and to submit post-hearing briefs.
In
reaching his/her decision, the arbitrator shall have no authority to add to,
detract from, or otherwise modify any provision of this Agreement. The
arbitrator shall submit with the award a written opinion which shall include
findings of fact and conclusions of law. Judgment upon the award rendered by
the
arbitrator may be entered in any court having competent
jurisdiction.
(c) Effect
of Arbitrator’s Decision; Arbitrator’s Fees.
The
decision of the arbitrator shall be final and binding between the parties as
to
all claims which were or could have been raised in connection with the dispute,
to the full extent permitted by law. In all cases in which applicable federal
law precludes a waiver of judicial remedies, the parties agree that the decision
of the arbitrator shall be a condition precedent to the institution or
maintenance of any legal, equitable, administrative, or other formal proceeding
by the Executive in connection with the dispute, and that the decision and
opinion of the arbitrator may be presented in any other forum on the merits
of
the dispute. If the arbitrator finds that the Executive was terminated in
violation of law or this Agreement, the parties agree that the arbitrator acting
hereunder shall be empowered to provide the Executive with any remedy available
should the matter have been tried in a court, including equitable and/or legal
remedies, compensatory damages and back pay. The arbitrator’s fees and expenses
and all administrative fees and expenses associated with the filing of the
arbitration shall be borne by the non-prevailing party.
-17-
12. Restrictive
Covenants.
(a) Executive
recognizes and acknowledges that the Company, Related Entities and their
subsidiaries, through the expenditure of considerable time and money, have
developed and will continue to develop in the Confidential Information. In
consideration of his continued employment by the Company hereunder, Executive
agrees that he will not, during the Restricted Period, directly or indirectly,
make any disclosure of Confidential Information now or hereafter possessed
by
the Company, Related Entities, and/or any of their current or future, direct
or
indirect subsidiaries (collectively, the "Group"), to any person, partnership,
corporation or entity either during or after the term hereunder, except to
employees of the Group and to others within or without the Group, as Executive
may deem necessary in order to conduct the Group's business and except as may
be
required pursuant to any court order, judgment or decision from any court of
competent jurisdiction. The foregoing shall not apply to information which
is in
the public domain on the date hereof; which, after it is disclosed to Executive
by the Group, is published or becomes part of the public domain through no
fault
of Executive; which is known to Executive prior to disclosure thereof to him
by
the Group as evidenced by his written records; or, after Executive is no longer
employed by the Group, which is thereafter disclosed to Executive in good faith
by a third party which is not under any obligation of confidence or secrecy
to
the Group with respect to such information at the time of disclosure to him.
The
provisions of this Section 6 shall continue in full force and effect
notwithstanding termination of Executive's employment under this Agreement
or
otherwise.
(b) Executive
agrees that if the Company has made and is continuing to make all required
payments to him upon and after termination of his employment, then during the
Restricted Period, Executive shall neither directly and/or indirectly (a)
solicit, hire and/or contact any prior (within twelve (12) months) or then
current employee of the Company and/or Related Entities nor any of their
respective direct and/or indirect subsidiaries (collectively, the "Applicable
Entities"), nor (b) solicit any business with any prior (within twelve (12)
months of termination) or then current customer and/or client of the Applicable
Entities. In addition, Executive shall not attempt (directly and/or indirectly)
to do anything either by himself or through others that he is prohibited from
doing pursuant to this Section 12. Given that this Agreement is providing
significant benefits to Executive, Executive hereby agrees that during the
Restricted Period, without the prior written consent of the Board, he will
not,
directly or indirectly, either as principal, manager, agent, consultant,
officer, director, stockholder, partner, investor, lender or employee or in
any
other capacity, carry on, be engaged in or have any financial interest in,
any
business which is in competition with any business of the Applicable Entities.
For purposes of this section, a business shall be deemed to be in competition
with any business of the Applicable Entities if it is materially involved in
the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by any member of the Applicable Entities
within the same geographic area in which such member of the Applicable Entities
effects such purchases, sales or dealings or renders such services; provided,
however,
that for
the period commencing with the termination of Executive's employment, a business
shall be deemed to be in competition with any business of the Applicable
Entities only if it is materially involved in the retail brokerage business.
Notwithstanding the foregoing, Executive shall be allowed to make passive
investments in publicly held competitive businesses as long as his ownership
is
less than 5% of such business.
-18-
(c) Executive
acknowledges that the restrictive covenants (the "Restrictive Covenants")
contained in this Section 12 are a condition of his continued employment and
are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or
any
part of any of the Restrictive Covenants, is invalid or unenforceable, the
remainder of the Restrictive Covenants and parts thereof shall not thereby
be
affected and shall be given full effect, without regard to the invalid portion.
If any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable because of the geographic or temporal
scope
of such provision, such court shall have the power to reduce the geographic
or
temporal scope of such provision, as the case may be, and, in its reduced form,
such provision shall then be enforceable. If Executive breaches, or threatens
to
breach, any of the Restrictive Covenants, the Company, in addition to and not
in
lieu of any other rights and remedies it may have at law or in equity, shall
have the right to injunctive relief; it being acknowledged and agreed to by
Executive that any such breach or threatened breach would cause irreparable
and
continuing injury to the Company and that money damages would not provide an
adequate remedy to the Company.
13. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and, upon its effectiveness, shall
supersede all prior agreements, understandings and arrangements, both oral
and
written, between the Executive and the Company (or any of its affiliates) with
respect to such subject matter. This Agreement may not be modified in any way
unless by a written instrument signed by both the Company and the
Executive.
14. Survival.
The
respective rights and obligations of the parties hereunder shall survive any
termination of the Executive’s employment hereunder, including without
limitation, the Company’s obligations under Section 6, and the expiration of the
Term of Employment, to the extent necessary to the intended preservation of
such
rights and obligations.
15. Notices.
All
notices required or permitted to be given hereunder shall be in writing and
shall be personally delivered by courier or sent by registered or certified
mail, return receipt requested addressed as set forth herein. Notices personally
delivered or sent by overnight courier shall be deemed given on the date of
delivery and notices mailed in accordance with the foregoing shall be deemed
given upon the earlier of receipt by the addressee, as evidenced by the return
receipt thereof, or three (3) days after deposit in the U.S. mail. Notice shall
be sent (i) if to the Company, addressed to National Holdings Corporation,
000
Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000, Attention: Chairman, and (ii) if to the Executive, to his
address as reflected on the payroll records of the Company, or to such other
address as either party shall request by notice to the other in accordance
with
this provision.
16. Benefits;
Binding Effect.
This
Agreement shall be for the benefit of and binding upon the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and, where permitted and applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation,
sale
of stock, sale of assets or otherwise.
-19-
17. Right
to Consult with Counsel; No Drafting Party.
The
Executive acknowledges having read and considered all of the provisions of
this
Agreement carefully, and having had the opportunity to consult with counsel
of
his own choosing, and, given this, the Executive agrees that the obligations
created hereby are not unreasonable. The Executive acknowledges that he has
had
an opportunity to negotiate any and all of these provisions and no rule of
construction shall be used that would interpret any provision in favor of or
against a party on the basis of who drafted the Agreement.
18. Severability.
The
invalidity of any one or more of the words, phrases, sentences, clauses,
provisions, sections or articles contained in this Agreement shall not affect
the enforceability of the remaining portions of this Agreement or any part
thereof, all of which are inserted conditionally on their being valid in law,
and, in the event that any one or more of the words, phrases, sentences,
clauses, provisions, sections or articles contained in this Agreement shall
be
declared invalid, this Agreement shall be construed as if such invalid word
or
words, phrase or phrases, sentence or sentences, clause or clauses, provisions
or provisions, section or sections or article or articles had not been inserted.
If such invalidity is caused by length of time or size of area, or both, the
otherwise invalid provision will be considered to be reduced to a period or
area
which would cure such invalidity.
19. Waivers.
The
waiver by either party hereto of a breach or violation of any term or provision
of this Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation.
20. No
Mitigation.
In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement.
21. Section
Headings.
The
article, section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
22. No
Third Party Beneficiary.
Nothing
expressed or implied in this Agreement is intended, or shall be construed,
to
confer upon or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason
of
this Agreement.
23. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument and agreement.
24. Indemnification.
(a) Subject
to limitations imposed by law, the Company shall indemnify and hold harmless
the
Executive to the fullest extent permitted by law from and against any and all
claims, damages, expenses (including reasonable attorneys’ fees), judgments,
penalties, fines, settlements, and all other liabilities incurred or paid by
him
in connection with the investigation, defense, prosecution, settlement or appeal
of any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative and to which the Executive
was
or is a party or is threatened to be made a party by reason of the fact that
the
Executive is or was an officer, Executive or agent of the Company, or by reason
of anything done or not done by the Executive in any such capacity or
capacities, provided that the Executive acted in good faith, in a manner that
was not grossly negligent or constituted willful misconduct and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company also shall
pay
any and all expenses (including reasonable attorney’s fees) incurred by the
Executive as a result of the Executive being called as a witness in connection
with any matter involving the Company and/or any of its officers or
directors.
-20-
(b) The
Company shall pay any expenses (including reasonable attorneys’ fees),
judgments, penalties, fines, settlements, and other liabilities incurred by
the
Executive in investigating, defending, settling or appealing any action, suit
or
proceeding described in this Section 24 in advance of the final disposition
of
such action, suit or proceeding. The Company shall promptly pay the amount
of
such expenses to the Executive, but in no event later than 10 days following
the
Executive’s delivery to the Company of a written request for an advance pursuant
to this Section 24, together with a reasonable accounting of such
expenses.
(c) The
Executive hereby undertakes and agrees to repay to the Company any advances
made
pursuant to this Section 24 if and to the extent that it shall ultimately be
found that the Executive is not entitled to be indemnified by the Company for
such amounts.
(d) The
Company shall make the advances contemplated by this Section 24 regardless
of
the Executive’s financial ability to make repayment, and regardless whether
indemnification of the Indemnitee by the Company will ultimately be required.
Any advances and undertakings to repay pursuant to this Section 24 shall be
unsecured and interest-free.
(e) The
provisions of this Section 24 shall survive the termination of the Term of
Employment or expiration of the term of this Agreement.
25. Vesting
of Exchange Options.
The
Company hereby acknowledges and agrees to the terms of Section 3 of that certain
Employment Termination Agreement of even date hereof, by and between Executive
and vFinance, Inc., as it relates to the Exchange Options, as defined
therein.
-21-
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
| COMPANY: | |||
| NATIONAL HOLDINGS CORPORATION | |||
| By: | |||
|
|
|||
| Name: | |||
|
|
|||
| Title: | |||
|
|
|||
|
EXECUTIVE:
|
|||
|
XXXXXXX X. XXXXXXX |
|||
-22-
EXHIBIT
A
CURRENT
BOARDS
-23-
EXHIBIT
B
FORM
OF RELEASE
I,
XXXXXXX X. XXXXXXX, on behalf of myself and my heirs, successors and assigns,
in
consideration of the performance by National Holdings Corporation., a Delaware
corporation (together with its Subsidiaries, the “Company”),
of
its material obligations under the Employment Agreement, dated as of ________
2008 (the “Agreement”),
do
hereby release and forever discharge as of the date hereof the Company, its
Affiliates, each such Person’s respective successors and assigns and each of the
foregoing Persons’ respective present and former directors, officers, partners,
stockholders, members, managers, agents, representatives, employees (and each
such Person’s respective successors and assigns) (collectively, the
“Released
Parties”)
to the
extent provided below.
1. I
understand that any payments or benefits paid or granted to me under
Section
6
of the
Agreement represent, in part, consideration for signing this General Release
and
are not salary, wages or benefits to which I was already entitled. I understand
and agree that I will not receive the payments and benefits specified in
Section
6
of the
Agreement unless I execute this General Release and do not revoke this General
Release within the time period permitted hereafter or breach this General
Release.
2. I
knowingly and voluntarily release and forever discharge the Company and the
other Released Parties from any and all claims, controversies, actions, causes
of action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims for
costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in
equity, both past and present (through the date of this General Release),
whether under the laws of the United States or another jurisdiction and whether
known or unknown, suspected or claimed against the Company or any of the
Released Parties which I, my spouse, or any of my heirs, executors,
administrators or assigns, have or may have, which arise out of or are connected
with my employment with, or my separation from, the Company (including, but
not
limited to, any allegation, claim or violation, arising under: Title VII of
the
Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age
Discrimination in Employment Act of 1967, as amended (including the Older
Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the
Americans with Disabilities Act of 1990; the Family and Medical Leave Act of
1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining
and Notification Act; the Employee Retirement Income Security Act of 1974;
any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; or under any other federal, state or local civil
or
human rights law, or under any other local, state, or federal law, regulation
or
ordinance; or under any public policy, contract or tort, or under common law;
or
arising under any policies, practices or procedures of the Company; or any
claim
for wrongful discharge, breach of contract, infliction of emotional distress,
or
defamation; or any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters) (all of the foregoing collectively
referred to herein as the “Claims”);
provided,
however, that nothing contained in this General Release shall apply to, or
release the Company from, (i) any obligation of the Company contained in the
Agreement to be performed after the date hereof or (ii) any vested or accrued
benefits pursuant to any employee benefit plan, program or policy of the
Company.
-24-
3. I
represent that I have made no assignment or transfer of any right, claim,
demand, cause of action, or other matter covered by paragraph 2
above.
4. I
agree
that this General Release does not waive or release any rights or claims that
I
may have under the Age Discrimination in Employment Act of 1967 which arise
after the date I execute this General Release. I acknowledge and agree that
my
separation from employment with the Company in compliance with the terms of
the
Agreement shall not serve as the basis for any claim or action (including,
without limitation, any claim under the Age Discrimination in Employment Act
of
1967).
5. In
signing this General Release, I acknowledge and intend that it shall be
effective as a bar to each and every one of the Claims hereinabove mentioned
or
implied. I expressly consent that this General Release shall be given full
force
and effect according to each and all of its express terms and provisions,
including those relating to unknown and unsuspected Claims (notwithstanding
any
state statute that expressly limits the effectiveness of a general release
of
unknown, unsuspected and unanticipated Claims), if any, as well as those
relating to any other Claims hereinabove mentioned or implied. I acknowledge
and
agree that this waiver is an essential and material term of this General Release
and that without such waiver the Company would not have agreed to the terms
of
the Agreement. I covenant that I shall not directly or indirectly, commence,
maintain or prosecute or xxx any of the Released Persons either affirmatively
or
by way of cross-complaint, indemnity claim, defense or counterclaim or in any
other manner or at all on any Claim covered by this General Release. I further
agree that in the event I should bring a Claim seeking damages against the
Company, or in the event I should seek to recover against the Company in any
Claim brought by a governmental agency on my behalf, this General Release shall
serve as a complete defense to such Claims. I further agree that I am not aware
of any pending charge or complaint of the type described in paragraph 2 as
of
the execution of this General Release.
6. I
agree
that neither this General Release, nor the furnishing of the consideration
for
this General Release, shall be deemed or construed at any time to be an
admission by the Company, any Released Party or myself of any improper or
unlawful conduct.
7. I
agree
that this General Release is confidential and agree not to disclose any
information regarding the terms of this General Release, except to my immediate
family and any tax, legal or other counsel I have consulted regarding the
meaning or effect hereof or as required by law, and I will instruct each of
the
foregoing not to disclose the same to anyone.
8. Any
non-disclosure provision in this General Release does not prohibit or restrict
me (or my attorney) from responding to any inquiry about this General Release
or
its underlying facts and circumstances by the Securities and Exchange
Commission, FINRA or any other self-regulatory organization or governmental
entity.
9. Without
limitation of any provision of the Agreement, I hereby expressly re-affirm
my
obligations under Section
12
under
the Agreement.
10. Whenever
possible, each provision of this General Release shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this General Release is held to be invalid, illegal or unenforceable in
any
respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or any
other
jurisdiction, but this General Release shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had
never been contained herein.
-25-
“Affiliate”
means,
with respect to any Person, any Person that controls, is controlled by or is
under common control with such Person or an Affiliate of such
Person.
“Person”
means
an individual, a partnership, a limited liability company, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, investment fund, any other business entity and a governmental
entity or any department, agency or political subdivision thereof.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or business entity of which (i) if a corporation,
a
majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled, directly
or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or
more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a
Person or Persons shall be deemed to have a majority ownership interest in
a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director
or
general partner of such limited liability company, partnership, association,
or
other business entity.
BY
SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:
(a) I
HAVE
READ IT CAREFULLY;
(b) I
UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,
INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED;
THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND
THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;
(c) I
VOLUNTARILY CONSENT TO EVERYTHING IN IT;
(d) I
HAVE
BEEN ADVISED TO CONSULT WITH AN ATTORNEY (VIA THE AGREEMENT AND THIS RELEASE)
BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND
CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;
(e) I
HAVE
HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY
IN ITS FINAL FORM ON _______________ __, _____ TO CONSIDER IT AND THE CHANGES
MADE SINCE THE _______________ __, _____ VERSION OF THIS RELEASE ARE NOT
MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;
-26-
(f) THE
CHANGES TO THE AGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT
MATERIAL OR WERE MADE AT MY REQUEST.
(g) I
UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE
IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE
EIGHTH DAY FOLLOWING EXECUTION OF THE AGREEMENT;
(h) I
HAVE
SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF
ANY
COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
(i) I
AGREE
THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED
OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE COMPANY AND BY ME.
(j) THIS
RELEASE SHALL REMAIN IN FULL FORCE AND EFFECT SO LONG AS THE COMPANY IS IN
COMPLIANCE WITH ITS OBLIGATIONS TO PAY SEVERANCE AND PROVIDE THE OTHER
POST-TERMINATION BENEFITS UNDER THE AGREEMENT, SUBJECT TO THE EXECUTIVE
CONTINUING TO ABIDE BY THE POST-TERMINATION OBLIGATIONS AND COVENANTS CONTAINED
IN THE AGREEMENT.
| DATE: ___________ __, ______ | _________________________________________ | ||
-27-
EXHBIIT
C
OPTION
GRANT
-28-
Exhibit
C
EMPLOYMENT
AGREEMENT
This
Employment Agreement (“Agreement”)
is
made and entered into as of ___, 2008, by and between National Holdings
Corporation, a Delaware corporation (the “Company”)
and
Xxxx X. Xxxxx (the “Executive”).
Recitals
WHEREAS,
the
Company wishes to employ the Executive, and Executive wishes to be so employed
by the Company, on the terms and conditions hereinafter set forth.
NOW,
THEREFORE,
in
consideration of the premises and mutual covenants set forth herein, and
for
other good and valuable consideration, the receipt and sufficiency of which
are
mutually acknowledged, the Company and the Executive hereby agree as
follows:
Agreement
1. Definitions.
When
used in this Agreement, the following terms shall have the following
meanings:
(a) “Accrued
Obligations”
shall
mean:
(i) any
accrued but unpaid salary through the Termination Date;
(ii) any
unpaid or unreimbursed expenses incurred in accordance with Company policy,
including amounts due under Section 5(a) hereof, to the extent incurred during
the Term of Employment;
(iii) any
benefits provided under the Company’s Executive benefit plans upon a termination
of employment, in accordance with the terms therein, including rights to
equity
in the Company pursuant to any plan or grant, and settlement of any Equity
Awards in accordance with the terms of such Equity Awards;
(iv) any
unpaid Bonus in respect to any completed fiscal year that has ended on or
prior
to the end of the Term of Employment; and
(v) rights
to
indemnification by virtue of the Executive’s position as an officer or director
of the Company or its subsidiaries and the benefits under any directors’ and
officers’ liability insurance policy maintained by the Company, in accordance
with its terms thereof.
(b) “Board”
shall
mean the Board of Directors of the Company.
(c) “Bonus”
shall
mean any bonus payable to the Executive pursuant to Section 4(b)
hereof.
(d) “Bonus
Period”
shall
mean each period for which a Bonus is payable. Unless otherwise specified
by the
Board, the Bonus Period shall be the Company’s fiscal year.
(e) “Cause”
shall
mean, with respect to the Executive, the following:
(i) the
commission of a felony or other crime involving moral turpitude, or the
commission of any other act or omission involving dishonesty or fraud with
respect to the Company or any Related Entity or any of its or their respective
customers or suppliers; or
(ii) breach
of
fiduciary duty, willful misconduct or gross negligence with respect to the
Company or any Related Entity; or
(iii) substantial
and repeated failure to perform duties as reasonably directed in writing
by the
Chief Executive Officer;
provided,
however,
that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to
the
Board’s reasonable satisfaction within
30
calendar days of notice of such breach;
or
(iv) material
breach of this Agreement;
provided,
however,
that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to
the
Board’s reasonable satisfaction within
30
calendar days of notice of such breach;
or
(v) any
action taken against Executive by a regulatory body or self-regulatory
organization that materially impairs the Executive from performing his duty
for
a period of more than 180 days; or
(vi) alcoholism
or drug addition which materially impairs the Executive’s ability to perform his
duties.
An
act or
failure to act shall not be “willful” if (A) done by the Executive in good faith
and (B) the Executive reasonably believed that such action or inaction was
in
the best interests of the Company and the Related Entities.
(f) “Change
in Control of the Company”
shall
mean:
(i) consummation
of a reorganization, merger or consolidation, sale, disposition of all or
substantially all of the assets or stock of the Company or any other similar
corporate event (a “Business Combination”), in each case, unless, following such
Business Combination, all or substantially all of the individuals or entities
who were the beneficial owners, respectively, of the voting securities of
the
Company entitled to vote generally in the election of directors immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries); or (ii) approval by the Board of Directors of
the
Company of a complete dissolution or liquidation of the Company; or (iii)
any
“person” (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), is or becomes, after the Commencement Date, a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors of the Company.
-2-
(g) “CFO”
shall
mean the Chief Financial Officer of the Company.
(h) “COBRA”
shall
mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
from
time to time.
(i) “Code”
shall
mean the Internal Revenue Code of 1986, as amended.
(j) “Commencement
Date”
shall
mean ______ ___, 2008.
(k) “Confidential
Information”
shall
mean all trade secrets and information disclosed to the Executive or known
by
the Executive as a consequence of or through the unique position of his
employment with the Company or any Related Entity (including information
conceived, originated, discovered or developed by the Executive and information
acquired by the Company or any Related Entity from others) prior to or after
the
date hereof, and not generally or publicly known (other than as a result
of
unauthorized disclosure by the Executive), about the Company or any Related
Entity or its business.
(l) “Disability”
shall
have the meaning set forth in a policy or policies of long-term disability
insurance, if any, the Company obtains for the benefit of itself and/or its
employees. If there is no definition of “disability” applicable under any such
policy or policies, if any, then the Executive shall be considered disabled
due
to mental or physical impairment or disability, despite reasonable
accommodations by the Company and any Related Entity, to perform his customary
or other comparable duties with the Company and any Related Entity immediately
prior to such disability for a period of at least 120 consecutive days or
for at
least 180 non-consecutive days in any 12-month period.
(m) “Draw”
shall
mean a loan or advance versus a Base Salary or other forms of compensation
provided for in Section 4(a) hereof.
(n) “Equity
Awards”
shall
mean any stock options, restricted stock, restricted stock units, stock
appreciation rights, phantom stock or other equity based awards granted by
the
Company to the Executive.
(o) “Excise
Tax”
shall
mean any excise tax imposed by Section 4999 of the Code, together with any
interest and penalties imposed with respect thereto, or any interest or
penalties incurred by the Executive with respect to any such excise tax.
(p) “Expiration
Date”
shall
mean the date on which the Term of Employment, including any renewals thereof
under Section 3(b) hereof, shall expire.
(q) “Good
Reason”
shall
mean:
(i) the
assignment to the Executive of any duties inconsistent in any material respect
with the Executive’s position (including status, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
2(b) hereof, or any other action by the Company that results in a material
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken
in
bad faith and which is remedied by the Company promptly after receipt of
written
notice thereof given by the Executive; or
-3-
(ii) any
material failure by the Company to comply with any of the provisions of Section
4 hereof, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and that is remedied by the Company promptly after
receipt of written notice thereof given by the Executive; or
(iii) the
Company’s requiring the Executive to be based at any office or location outside
of Broward County or Southern Palm Beach County, Florida, except for travel
reasonably required in the performance of the Executive’s responsibilities;
or
(iv) the
cessation of the Executive’s position for any reason other than with the
Executive’s written consent; or
(v) any
decrease in salary or bonuses payable pursuant to the terms of this Agreement
without the Executive’s written consent.
(r) “Related
Entity”
shall
mean the Company and any direct or indirect subsidiary of the Company or
the
subsidiary, and any business, corporation, partnership, limited liability
company or other entity designated by the Board, in which the Company or
a
subsidiary holds a substantial ownership interest, directly or
indirectly.
(s) “Restricted
Period”
shall be
the Term of Employment and the twelve (12) month period immediately following
termination of the Term of Employment; provided, however, that if the Company
terminates the Executive’s employment for Cause, or Executive terminates his
employment without Good Reason, the twelve (12) month period shall be extended
to eighteen (18) months.
(t) “Severance
Amount”
shall
mean 50% of the Executive’s annual Base Salary.
(u) “Severance
Term”
shall
mean the six (6) month period following the Termination Date.
(v) “Term
of Employment”
shall
mean the period during which the Executive shall be employed by the Company
pursuant to the terms of this Agreement.
(w) “Termination
Date”
shall
mean the date on which the Term of Employment ends.
2. Employment.
(a) Employment
and Term.
The
Company hereby agrees to employ the Executive, and the Executive hereby agrees
to serve the Company, during the Term of Employment on the terms and conditions
set forth herein.
-4-
(b) Duties
of Executive.
During
the Term of Employment, the Executive shall be employed and serve as the
Chief
Financial Officer and Chief Accounting Officer, and shall have such duties
typically associated with such title and shall exercise such power and authority
as may from time to time be delegated to him by the Chief Executive Officer.
The
Executive shall devote his full business time, attention and efforts to the
performance of his duties under this Agreement, render such services to the
best
of his ability, and use his reasonable best efforts to promote the interests
of
the Company. The Executive shall not engage in any other business or occupation
during the Term of Employment, including, without limitation, any activity
that
(i) conflicts with the interests of the Company or its Related Entities,
(ii)
interferes with the proper and efficient performance of his duties for the
Company, or (iii) interferes with the exercise of his judgment in the Company’s
best interests. Notwithstanding the foregoing or any other provision of this
Agreement, it shall not be a breach or violation of this Agreement for the
Executive to (x) serve on civic or charitable boards or committees, (y) deliver
lectures, fulfill speaking engagements or teach at educational institutions,
or
(z) manage personal investments, so long as such activities do not significantly
interfere with or significantly detract from the performance of the Executive’s
responsibilities to the Company in accordance with this Agreement. The Executive
represents that he holds all licenses and regulatory approvals necessary
to
perform these responsibilities, including holding a Series 27 (“FINOP”) license
and if requested by the Chief Executive Officer, shall also serve as the
FINOP
of the one or more of the Company’s affiliated broker dealers.
3. Term.
(a) Initial
Term.
The
initial Term of Employment under this Agreement, and the employment of the
Executive hereunder, shall commence on the Commencement Date and shall expire
on
the first anniversary of such Commencement Date, unless sooner terminated
in
accordance with Section 6 hereof.
(b) Renewal
Terms.
At the
end of the Initial Term, the Term of Employment automatically shall renew
for
successive one (1) year terms (subject to earlier termination as provided
in
Section 6 hereof), unless the Company or the Executive delivers written notice
to the other at least three (3) months prior to the Expiration Date of its
or
his election not to renew the Term of Employment.
(c) Release.
Upon
termination of this Agreement in accordance with the terms contained herein,
as
a condition to receiving any payments or benefits to which he is entitled
under
the terms of this Agreement, the Executive shall execute and deliver to the
Company a release in the form attached hereto as Exhibit
A
within
thirty (30) days following his termination of employment. Such release shall
remain in full force and effect so long as the Company is in compliance with
its
obligations to pay severance and provide the other post-termination benefits
hereunder, subject to the Executive continuing to abide by the post-termination
obligations and covenants contained herein.
4. Compensation.
(a) Base
Salary.
The
Executive shall receive an initial base salary of $180,000 per annum (the
"Base
Salary"). Such Base Salary shall be payable in installments consistent with
the
Company’s normal payroll schedule, subject to applicable withholding and other
taxes. The Base Salary and Executive’s other forms of compensation shall be
reviewed, at least annually, and may, by action and in the discretion of
the
Board, be increased (but may not be decreased) at any time or from time to
time.
In no event shall the Base Salary be deemed a Draw.
-5-
(b) Bonuses.
During
the Term of Employment, the Executive shall be entitled to receive on a fiscal
year basis a cash bonus from the Company determined in the discretion by
the
Compensation Committee based upon its assessment of the performance of the
Executive in the following areas: (A) revenue, net income and revenue growth
of
the Company, (B) new business development, (C) investor relations, (D)
communication with the Board of Directors, (E) communication and collaboration
with the other members of the Executive Committee of the Board of Directors,
and
(F) and other factors including without limitation special projects as assigned
by the Chief Executive Officer, Executive Committee or Board of Directors.
5. Expense
Reimbursement and Other Benefits.
(a) Reimbursement
of Expenses.
Upon the
submission of proper substantiation by the Executive, and subject to such
rules
and guidelines as the Company may from time to time adopt with respect to
the
reimbursement of expenses of executive personnel, the Company shall reimburse
the Executive for all reasonable expenses actually paid or incurred by the
Executive during the Term of Employment in the course of and pursuant to
the
business of the Company, including, without limitation, expenses relating
to his
cell phone and his Blackberry or other similar devices. The Executive shall
account to the Company in writing for all expenses for which reimbursement
is
sought and shall supply to the Company copies of all relevant invoices, receipts
or other evidence reasonably requested by the Company.
(b) Compensation/Benefit
Programs.
During
the Term of Employment, the Executive shall be entitled to participate in
all
medical, dental, hospitalization, accidental death and dismemberment,
disability, travel and life insurance plans, and any and all other plans
as are
presently and hereinafter offered by the Company to its executive personnel,
including savings, pension, profit-sharing and deferred compensation plans,
subject to the general eligibility and participation provisions set forth
in
such plans. The benefits currently provided by the Company to its Executives
are
as stated in the Company’s Executive handbook, which is subject to change. In
addition, during the Term of Employment, the Company shall pay (at the “Buy-Up
Premium” level) all health insurance premiums required to be made on behalf of
the Executive and his dependents with respect to their participation in such
health plans. Should Executive not want to participate in the Company's health
plan, the Company will reimburse Executive for the expense incurred in
participating in another plan in an amount not to exceed the cost of
participation of Executive and his dependents in the Company’s health plan.
Additionally, Executive shall be added as an insured to any director and
officer
and errors and omissions insurance policy that the Company or any of the
Company’s subsidiaries or affiliates hereafter procures.
(c) Other
Benefits.
The
Executive shall be entitled to three (3) weeks of paid vacation each calendar
year during the Term of Employment, to be taken at such times as the Executive
and the Company shall mutually determine and provided that no vacation time
shall significantly interfere with the duties required to be rendered by
the
Executive hereunder. The Executive shall receive such additional benefits,
if
any, as the Board shall from time to time determine.
-6-
6. Termination.
(a) General.
The Term
of Employment shall terminate upon the earliest to occur of (i) the Executive’s
death, (ii) a termination by the Company by reason of the Executive’s
Disability, (iii) a termination by the Company with or without Cause, or
(iv) a
termination by Executive with or without Good Reason. Upon any termination
of
Executive’s employment for any reason, except as may otherwise be requested by
the Company in writing and agreed upon in writing by Executive, the Executive
shall resign from any and all positions the Executive holds with the Company
or
any of its Related Entities. Upon termination of Executive’s employment with the
Company pursuant to this Section, all compensation and benefits shall cease
to
accrue upon discharge of Executive and the Company shall have no further
obligations to the Executive or his heirs, administrators, or executors with
respect to compensation and benefits thereafter, except to pay the Executive
or
his heirs, administrators or executors as set forth in this
Section.
(b) Termination
by Company for Cause.
The
Company shall at all times have the right, upon written notice to the Executive,
to terminate the Term of Employment for Cause. For purposes of this Section
6(b), any good faith determination by the Board of Cause shall be binding
and
conclusive on all interested parties. In the event that the Term of Employment
is terminated by the Company for Cause, the Executive shall be entitled only
to
the Accrued Obligations, payable as soon as practicable following the
Termination Date.
(c) Disability.
The
Company shall have the option to terminate the Term of Employment upon written
notice to the Executive, at any time during which the Executive is suffering
from a Disability. In the event that the Term of Employment is terminated
due to
the Executive’s Disability, the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following
the
Termination Date;
(ii) the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month
in
which the employment of Executive has been terminated;
(iii) continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date
of
such termination with the Company paying all premiums relating thereto until
the
earlier of: (A) eighteen (18) months following the Termination Date, or (B)
the
date the Executive commences employment with any person or entity and, thus,
is
eligible for health insurance benefits; provided, however, that as a condition
of continuation of such benefits, the Company may require the Executive to
elect
to continue his health insurance pursuant to COBRA; and
(iv) all
Options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest
date
upon which such options could have expired by their original terms under
any
circumstances or the tenth anniversary of the original date of grant of such
options.
-7-
(d) Death.
In the
event that the Term of Employment is terminated due to the Executive’s death,
the estate of the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as reasonably practicable following
the
Termination Date;
(ii) the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month
in
which the employment of Executive has been terminated;
(iii) continuation
of the health benefits provided to the Executive’s covered dependents under the
Company health plans as in effect from time to time after the Executive’s death
with the Company paying all premiums relating thereto until eighteen (18)
months
following the Termination Date; provided, however, that as a condition of
continuation of such benefits, the Company may require the covered dependents
to
elect to continue such health insurance pursuant to COBRA; and
(iv) all
Options granted to Executive to purchase the Company’s common stock prior to
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest
date
upon which such options could have expired by their original terms under
any
circumstances or the tenth anniversary of the original date of grant of such
options.
(e) Termination
Without Cause.
The
Company may terminate the Term of Employment at any time without Cause, by
written notice to the Executive. In the event that the Term of Employment
is
terminated by the Company without Cause (other than due to the Executive’s death
or Disability), the Executive shall be entitled to:
(i) the
Accrued Obligations, payable as soon as practicable following the Termination
Date;
(ii) the
Severance Amount, payable in equal monthly installments during the Severance
Term;
(iii) continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date
of
such termination with the Company paying all premiums relating thereto until
the
earlier of: (A) twelve (12) months following the Termination Date, or (B)
the
date the Executive commences employment with any person or entity and, thus,
is
eligible for health insurance benefits; provided, however, that as a condition
of continuation of such benefits, the Company may require the Executive to
elect
to continue his health insurance pursuant to COBRA; and
(iv) any
options granted to Executive to purchase the Company’s common stock prior to or
after the date of this Agreement shall immediately vest and be exercisable
for
a
period of six (6) months from the date of the termination; provided, however,
such period of six (6) months shall not exceed the earlier of the latest
date
upon which such options could have expired by their original terms under
any
circumstances.
-8-
(f) Termination
by Executive for Good Reason.
The
Executive may terminate the Term of Employment for Good Reason by providing
the
Company thirty (30) days’ written notice setting forth in reasonable specificity
the event that constitutes Good Reason, which written notice, to be effective,
must be provided to the Company within thirty (30) days of the occurrence
of
such event. During such thirty (30) day notice period, the Company shall
have a
cure right (if curable), and if not cured within such period, the Executive’s
termination shall be effective upon the date immediately following the
expiration of the thirty (30) day notice period, and the Executive shall
be
entitled to the same payments and benefits as provided in Section 6(e) above
for
a termination due to the Executive’s Termination Without Cause.
(g) Termination
by Executive Without Good Reason.
The
Executive may terminate his employment without Good Reason by providing the
Company thirty (30) days’ written notice of such termination. In the event of a
termination of employment by the Executive under this Section 6(g), the
Executive shall be entitled only to the Accrued Obligations. In the event
of
termination of the Executive’s employment under this Section 6(g), the Company
may, in its sole and absolute discretion, by written notice, accelerate such
date of termination and still have it treated as a termination without Good
Reason.
(h) Termination
Upon Expiration Date.
In the
event that Executive’s employment with the Company terminates upon the
expiration of the Term of Employment, the Executive shall be entitled to
only
the Accrued Obligations.
(i) Change
in Control of the Company.
If the
Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason during the six (6) month period immediately following
the Change in Control of the Company, then the Executive shall be entitled
to
the same payments and benefits as provided in Section 6(e) above for a
termination due to the Executive’s Termination Without Cause.
(j) Cooperation.
Following the Term of Employment, the Executive shall give his assistance
and
cooperation willingly, upon reasonable advance notice with due consideration
for
his other business or personal commitments, in any matter relating to his
position with the Company, or his expertise or experience as the Company
or any
Related Entity may reasonably request, including his attendance and truthful
testimony where deemed appropriate by the Company or any Related Entity,
with
respect to any investigation or the Company’s or any Related Entity’s defense or
prosecution of any existing or future claims or litigations or other proceedings
relating to matters in which he was involved or potentially had knowledge
by
virtue of his employment with the Company. In no event shall his cooperation
materially interfere with his services for a subsequent employer or other
similar service recipient. To the extent permitted by law, the Company agrees
that (i) it shall promptly reimburse the Executive for his reasonable and
documented expenses in connection with his rendering assistance and/or
cooperation under this Section 6(j) upon his presentation of documentation
for
such expenses and (ii) the Executive shall be reasonably compensated for
any
continued material services as required under this Section 6(j).
7. Intentionally
Omitted.
8. Taxes.
Anything in this Agreement to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or his estate
or
beneficiaries shall be subject to the withholding of such amounts relating
to
taxes as the Company may reasonably determine it should withhold pursuant
to any
applicable law or regulation. In lieu of withholding such amounts, in whole
or
in part, the Company may, in its sole discretion, accept other provisions
for
payment of taxes and withholding as required by law, provided it is satisfied
that all requirements of law affecting its responsibilities to withhold have
been satisfied.
-9-
9. Assignment.
The
Company shall have the right to assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any corporation or other
entity with or into which the Company may hereafter merge or consolidate
or to
which the Company may transfer all or substantially all of its assets, if
in any
such case said corporation or other entity shall by operation of law or
expressly in writing assume all obligations of the Company hereunder as fully
as
if it had been originally made a party hereto, but may not otherwise assign
this
Agreement or its rights and obligations hereunder. The Executive may not
assign
or transfer this Agreement or any rights or obligations hereunder.
10. Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
internal laws of the State of New York, without regard to principles of conflict
of laws.
11. Arbitration.
(a) Exclusive
Remedy.
The
parties recognize that litigation in federal or state courts or before federal
or state administrative agencies of disputes arising out of the Executive’s
employment with the Company or out of this Agreement, or the Executive’s
termination of employment or termination of this Agreement, may not be in
the
best interests of either the Executive or the Company, and may result in
unnecessary costs, delays, complexities, and uncertainty. Except as otherwise
provided in Section 11 hereof, the parties agree that any dispute between
the
parties arising out of or relating to the Executive’s employment, or to the
negotiation, execution, performance or termination of this Agreement or the
Executive’s employment, including, but not limited to, any claim arising out of
this Agreement, claims under Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act
of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the
Civil
Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive
Retirement Income Security Act, and any similar federal, state or local law,
statute, regulation, or any common law doctrine, whether that dispute arises
during or after employment shall be resolved by arbitration in New York County,
New York area, in accordance with the National Employment Arbitration Rules
of
the American Arbitration Association, as modified by the provisions of this
Section 11. The parties each further agree that the arbitration provisions
of
this Agreement shall provide each party with its exclusive remedy, and each
party expressly waives any right it might have to seek redress in any other
forum, except as otherwise expressly provided in this Agreement. The parties
acknowledge and agree that their obligations under this arbitration agreement
survive the expiration or termination of this Agreement and continue after
the
termination of the employment relationship between the Executive and the
Company. Except
as otherwise provided in Section 11 hereof, by election of arbitration as
the
means for final settlement of all claims, the parties hereby waive their
respective rights to, and agree not to, xxx each other in any action in a
federal, state or local court with respect to such claims, but may seek to
enforce in court an arbitration award rendered pursuant to this Agreement.
The
parties specifically agree to waive their respective rights to a trial by
jury,
and further agree that no demand, request or motion will be made for trial
by
jury.
-10-
(b) Arbitration
Procedure and Arbitrator’s Authority.
In the
arbitration proceeding, each party shall be entitled to engage in any type
of
discovery permitted by the Federal Rules of Civil Procedure, to retain its
own
counsel, to present evidence and cross-examine witnesses, to purchase a
stenographic record of the proceedings, and to submit post-hearing briefs.
In
reaching his/her decision, the arbitrator shall have no authority to add
to,
detract from, or otherwise modify any provision of this Agreement. The
arbitrator shall submit with the award a written opinion which shall include
findings of fact and conclusions of law. Judgment upon the award rendered
by the
arbitrator may be entered in any court having competent
jurisdiction.
(c) Effect
of Arbitrator’s Decision; Arbitrator’s Fees.
The
decision of the arbitrator shall be final and binding between the parties
as to
all claims which were or could have been raised in connection with the dispute,
to the full extent permitted by law. In all cases in which applicable federal
law precludes a waiver of judicial remedies, the parties agree that the decision
of the arbitrator shall be a condition precedent to the institution or
maintenance of any legal, equitable, administrative, or other formal proceeding
by the Executive in connection with the dispute, and that the decision and
opinion of the arbitrator may be presented in any other forum on the merits
of
the dispute. If the arbitrator finds that the Executive was terminated in
violation of law or this Agreement, the parties agree that the arbitrator
acting
hereunder shall be empowered to provide the Executive with any remedy available
should the matter have been tried in a court, including equitable and/or
legal
remedies, compensatory damages and back pay. The arbitrator’s fees and expenses
and all administrative fees and expenses associated with the filing of the
arbitration shall be borne by the non-prevailing party.
12. Restrictive
Covenants.
(a) Executive
recognizes and acknowledges that the Company, Related Entities and their
subsidiaries, through the expenditure of considerable time and money, have
developed and will continue to develop in the Confidential Information. In
consideration of his continued employment by the Company hereunder, Executive
agrees that he will not, during the Restricted Period, directly or indirectly,
make any disclosure of Confidential Information now or hereafter possessed
by
the Company, Related Entities, and/or any of their current or future, direct
or
indirect subsidiaries (collectively, the "Group"), to any person, partnership,
corporation or entity either during or after the term hereunder, except to
employees of the Group and to others within or without the Group, as Executive
may deem necessary in order to conduct the Group's business and except as
may be
required pursuant to any court order, judgment or decision from any court
of
competent jurisdiction. The foregoing shall not apply to information which
is in
the public domain on the date hereof; which, after it is disclosed to Executive
by the Group, is published or becomes part of the public domain through no
fault
of Executive; which is known to Executive prior to disclosure thereof to
him by
the Group as evidenced by his written records; or, after Executive is no
longer
employed by the Group, which is thereafter disclosed to Executive in good
faith
by a third party which is not under any obligation of confidence or secrecy
to
the Group with respect to such information at the time of disclosure to him.
The
provisions of this Section 6 shall continue in full force and effect
notwithstanding termination of Executive's employment under this Agreement
or
otherwise.
(b) Executive
agrees that if the Company has made and is continuing to make all required
payments to him upon and after termination of his employment, then during
the
Restricted Period, Executive shall neither directly and/or indirectly (a)
solicit, hire and/or contact any prior (within twelve (12) months) or then
current employee of the Company and/or Related Entities nor any of their
respective direct and/or indirect subsidiaries (collectively, the "Applicable
Entities"), nor (b) solicit any business with any prior (within twelve (12)
months of termination) or then current customer and/or client of the Applicable
Entities. In addition, Executive shall not attempt (directly and/or indirectly)
to do anything either by himself or through others that he is prohibited
from
doing pursuant to this Section 12. Given that this Agreement is providing
significant benefits to Executive, Executive hereby agrees that during the
Restricted Period, without the prior written consent of the Board, he will
not,
directly or indirectly, either as principal, manager, agent, consultant,
officer, director, stockholder, partner, investor, lender or employee or
in any
other capacity, carry on, be engaged in or have any financial interest in,
any
business which is in competition with any business of the Applicable Entities.
For purposes of this section, a business shall be deemed to be in competition
with any business of the Applicable Entities if it is materially involved
in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by any member of the Applicable Entities
within the same geographic area in which such member of the Applicable Entities
effects such purchases, sales or dealings or renders such services; provided,
however,
that for
the period commencing with the termination of Executive's employment, a business
shall be deemed to be in competition with any business of the Applicable
Entities only if it is materially involved in the retail brokerage business.
Notwithstanding the foregoing, Executive shall be allowed to make passive
investments in publicly held competitive businesses as long as his ownership
is
less than 5% of such business.
-11-
(c) Executive
acknowledges that the restrictive covenants (the "Restrictive Covenants")
contained in this Section 12 are a condition of his continued employment
and are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants,
or any
part of any of the Restrictive Covenants, is invalid or unenforceable, the
remainder of the Restrictive Covenants and parts thereof shall not thereby
be
affected and shall be given full effect, without regard to the invalid portion.
If any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable because of the geographic or temporal
scope
of such provision, such court shall have the power to reduce the geographic
or
temporal scope of such provision, as the case may be, and, in its reduced
form,
such provision shall then be enforceable. If Executive breaches, or threatens
to
breach, any of the Restrictive Covenants, the Company, in addition to and
not in
lieu of any other rights and remedies it may have at law or in equity, shall
have the right to injunctive relief; it being acknowledged and agreed to
by
Executive that any such breach or threatened breach would cause irreparable
and
continuing injury to the Company and that money damages would not provide
an
adequate remedy to the Company.
13. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and, upon its effectiveness, shall
supersede all prior agreements, understandings and arrangements, both oral
and
written, between the Executive and the Company (or any of its affiliates)
with
respect to such subject matter. This Agreement may not be modified in any
way
unless by a written instrument signed by both the Company and the
Executive.
14. Survival.
The
respective rights and obligations of the parties hereunder shall survive
any
termination of the Executive’s employment hereunder, including without
limitation, the Company’s obligations under Section 6, and the expiration of the
Term of Employment, to the extent necessary to the intended preservation
of such
rights and obligations.
-12-
15. Notices.
All
notices required or permitted to be given hereunder shall be in writing and
shall be personally delivered by courier or sent by registered or certified
mail, return receipt requested addressed as set forth herein. Notices personally
delivered or sent by overnight courier shall be deemed given on the date
of
delivery and notices mailed in accordance with the foregoing shall be deemed
given upon the earlier of receipt by the addressee, as evidenced by the return
receipt thereof, or three (3) days after deposit in the U.S. mail. Notice
shall
be sent (i) if to the Company, addressed to National Holdings Corporation,
000
Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000, Attention: Chief Executive Officer, and (ii) if to the
Executive, to his address as reflected on the payroll records of the Company,
or
to such other address as either party shall request by notice to the other
in
accordance with this provision.
16. Benefits;
Binding Effect.
This
Agreement shall be for the benefit of and binding upon the parties hereto
and
their respective heirs, personal representatives, legal representatives,
successors and, where permitted and applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation,
sale
of stock, sale of assets or otherwise.
17. Right
to Consult with Counsel; No Drafting Party.
The
Executive acknowledges having read and considered all of the provisions of
this
Agreement carefully, and having had the opportunity to consult with counsel
of
his own choosing, and, given this, the Executive agrees that the obligations
created hereby are not unreasonable. The Executive acknowledges that he has
had
an opportunity to negotiate any and all of these provisions and no rule of
construction shall be used that would interpret any provision in favor of
or
against a party on the basis of who drafted the Agreement.
18. Severability.
The
invalidity of any one or more of the words, phrases, sentences, clauses,
provisions, sections or articles contained in this Agreement shall not affect
the enforceability of the remaining portions of this Agreement or any part
thereof, all of which are inserted conditionally on their being valid in
law,
and, in the event that any one or more of the words, phrases, sentences,
clauses, provisions, sections or articles contained in this Agreement shall
be
declared invalid, this Agreement shall be construed as if such invalid word
or
words, phrase or phrases, sentence or sentences, clause or clauses, provisions
or provisions, section or sections or article or articles had not been inserted.
If such invalidity is caused by length of time or size of area, or both,
the
otherwise invalid provision will be considered to be reduced to a period
or area
which would cure such invalidity.
19. Waivers.
The
waiver by either party hereto of a breach or violation of any term or provision
of this Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation.
20. No
Mitigation.
In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive
under
any of the provisions of this Agreement.
-13-
21. Section
Headings.
The
article, section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
22. No
Third Party Beneficiary.
Nothing
expressed or implied in this Agreement is intended, or shall be construed,
to
confer upon or give any person other than the Company, the parties hereto
and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason
of
this Agreement.
23. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument and agreement.
24. Indemnification.
(a) Subject
to limitations imposed by law, the Company shall indemnify and hold harmless
the
Executive to the fullest extent permitted by law from and against any and
all
claims, damages, expenses (including reasonable attorneys’ fees), judgments,
penalties, fines, settlements, and all other liabilities incurred or paid
by him
in connection with the investigation, defense, prosecution, settlement or
appeal
of any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative and to which the Executive
was
or is a party or is threatened to be made a party by reason of the fact that
the
Executive is or was an officer, Executive or agent of the Company, or by
reason
of anything done or not done by the Executive in any such capacity or
capacities, provided that the Executive acted in good faith, in a manner
that
was not grossly negligent or constituted willful misconduct and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company also shall
pay
any and all expenses (including reasonable attorney’s fees) incurred by the
Executive as a result of the Executive being called as a witness in connection
with any matter involving the Company and/or any of its officers or
directors.
(b) The
Company shall pay any expenses (including reasonable attorneys’ fees),
judgments, penalties, fines, settlements, and other liabilities incurred
by the
Executive in investigating, defending, settling or appealing any action,
suit or
proceeding described in this Section 24 in advance of the final disposition
of
such action, suit or proceeding. The Company shall promptly pay the amount
of
such expenses to the Executive, but in no event later than 10 days following
the
Executive’s delivery to the Company of a written request for an advance pursuant
to this Section 24, together with a reasonable accounting of such
expenses.
(c) The
Executive hereby undertakes and agrees to repay to the Company any advances
made
pursuant to this Section 24 if and to the extent that it shall ultimately
be
found that the Executive is not entitled to be indemnified by the Company
for
such amounts.
(d) The
Company shall make the advances contemplated by this Section 24 regardless
of
the Executive’s financial ability to make repayment, and regardless whether
indemnification of the Indemnitee by the Company will ultimately be required.
Any advances and undertakings to repay pursuant to this Section 24 shall
be
unsecured and interest-free.
-14-
(e) The
provisions of this Section 24 shall survive the termination of the Term of
Employment or expiration of the term of this Agreement.
-15-
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
COMPANY:
NATIONAL
HOLDINGS CORPORATION
By:
______________________________
Name:
____________________________
Title:
_____________________________
EXECUTIVE:
___________________________________
XXXX
X.
XXXXX
-16-
EXHIBIT
A
FORM
OF RELEASE
I,
XXXX
X. XXXXX, on behalf of myself and my heirs, successors and assigns, in
consideration of the performance by National Holdings Corporation., a Delaware
corporation (together with its Subsidiaries, the “Company”),
of
its material obligations under the Employment Agreement, dated as of ________
2008 (the “Agreement”),
do
hereby release and forever discharge as of the date hereof the Company, its
Affiliates, each such Person’s respective successors and assigns and each of the
foregoing Persons’ respective present and former directors, officers, partners,
stockholders, members, managers, agents, representatives, employees (and
each
such Person’s respective successors and assigns) (collectively, the
“Released
Parties”)
to the
extent provided below.
1. I
understand that any payments or benefits paid or granted to me under
Section
6
of the
Agreement represent, in part, consideration for signing this General Release
and
are not salary, wages or benefits to which I was already entitled. I understand
and agree that I will not receive the payments and benefits specified in
Section
6
of the
Agreement unless I execute this General Release and do not revoke this General
Release within the time period permitted hereafter or breach this General
Release.
2. I
knowingly and voluntarily release and forever discharge the Company and the
other Released Parties from any and all claims, controversies, actions, causes
of action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims
for
costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in
equity, both past and present (through the date of this General Release),
whether under the laws of the United States or another jurisdiction and whether
known or unknown, suspected or claimed against the Company or any of the
Released Parties which I, my spouse, or any of my heirs, executors,
administrators or assigns, have or may have, which arise out of or are connected
with my employment with, or my separation from, the Company (including, but
not
limited to, any allegation, claim or violation, arising under: Title VII
of the
Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age
Discrimination in Employment Act of 1967, as amended (including the Older
Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the
Americans with Disabilities Act of 1990; the Family and Medical Leave Act
of
1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining
and Notification Act; the Employee Retirement Income Security Act of 1974;
any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; or under any other federal, state or local civil
or
human rights law, or under any other local, state, or federal law, regulation
or
ordinance; or under any public policy, contract or tort, or under common
law; or
arising under any policies, practices or procedures of the Company; or any
claim
for wrongful discharge, breach of contract, infliction of emotional distress,
or
defamation; or any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters) (all of the foregoing collectively
referred to herein as the “Claims”);
provided,
however, that nothing contained in this General Release shall apply to, or
release the Company from, (i) any obligation of the Company contained in
the
Agreement to be performed after the date hereof or (ii) any vested or accrued
benefits pursuant to any employee benefit plan, program or policy of the
Company.
-17-
3. I
represent that I have made no assignment or transfer of any right, claim,
demand, cause of action, or other matter covered by paragraph 2
above.
4. I
agree
that this General Release does not waive or release any rights or claims
that I
may have under the Age Discrimination in Employment Act of 1967 which arise
after the date I execute this General Release. I acknowledge and agree that
my
separation from employment with the Company in compliance with the terms
of the
Agreement shall not serve as the basis for any claim or action (including,
without limitation, any claim under the Age Discrimination in Employment
Act of
1967).
5. In
signing this General Release, I acknowledge and intend that it shall be
effective as a bar to each and every one of the Claims hereinabove mentioned
or
implied. I expressly consent that this General Release shall be given full
force
and effect according to each and all of its express terms and provisions,
including those relating to unknown and unsuspected Claims (notwithstanding
any
state statute that expressly limits the effectiveness of a general release
of
unknown, unsuspected and unanticipated Claims), if any, as well as those
relating to any other Claims hereinabove mentioned or implied. I acknowledge
and
agree that this waiver is an essential and material term of this General
Release
and that without such waiver the Company would not have agreed to the terms
of
the Agreement. I covenant that I shall not directly or indirectly, commence,
maintain or prosecute or xxx any of the Released Persons either affirmatively
or
by way of cross-complaint, indemnity claim, defense or counterclaim or in
any
other manner or at all on any Claim covered by this General Release. I further
agree that in the event I should bring a Claim seeking damages against the
Company, or in the event I should seek to recover against the Company in
any
Claim brought by a governmental agency on my behalf, this General Release
shall
serve as a complete defense to such Claims. I further agree that I am not
aware
of any pending charge or complaint of the type described in paragraph 2 as
of
the execution of this General Release.
6. I
agree
that neither this General Release, nor the furnishing of the consideration
for
this General Release, shall be deemed or construed at any time to be an
admission by the Company, any Released Party or myself of any improper or
unlawful conduct.
7. I
agree
that this General Release is confidential and agree not to disclose any
information regarding the terms of this General Release, except to my immediate
family and any tax, legal or other counsel I have consulted regarding the
meaning or effect hereof or as required by law, and I will instruct each
of the
foregoing not to disclose the same to anyone.
8. Any
non-disclosure provision in this General Release does not prohibit or restrict
me (or my attorney) from responding to any inquiry about this General Release
or
its underlying facts and circumstances by the Securities and Exchange
Commission, FINRA or any other self-regulatory organization or governmental
entity.
9. Without
limitation of any provision of the Agreement, I hereby expressly re-affirm
my
obligations under Section
12
under
the Agreement.
10. Whenever
possible, each provision of this General Release shall be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this General Release is held to be invalid, illegal or unenforceable in
any
respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or any
other
jurisdiction, but this General Release shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had
never been contained herein.
-18-
“Affiliate”
means,
with respect to any Person, any Person that controls, is controlled by or
is
under common control with such Person or an Affiliate of such
Person.
“Person”
means
an individual, a partnership, a limited liability company, a corporation,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, investment fund, any other business entity and a governmental
entity or any department, agency or political subdivision thereof.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or business entity of which (i) if a corporation,
a
majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled, directly
or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of partnership or other similar ownership interest thereof is at
the
time owned or controlled, directly or indirectly, by that Person or one or
more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a
Person or Persons shall be deemed to have a majority ownership interest in
a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director
or
general partner of such limited liability company, partnership, association,
or
other business entity.
BY
SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:
(a) I
HAVE
READ IT CAREFULLY;
(b) I
UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,
INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED;
THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND
THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;
(c) I
VOLUNTARILY CONSENT TO EVERYTHING IN IT;
(d) I
HAVE
BEEN ADVISED TO CONSULT WITH AN ATTORNEY (VIA THE AGREEMENT AND THIS RELEASE)
BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND
CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;
(e) I
HAVE
HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY
IN ITS FINAL FORM ON _______________ __, _____ TO CONSIDER IT AND THE CHANGES
MADE SINCE THE _______________ __, _____ VERSION OF THIS RELEASE ARE NOT
MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;
(f) THE
CHANGES TO THE AGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT
MATERIAL OR WERE MADE AT MY REQUEST.
(g) I
UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO
REVOKE
IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL
THE
EIGHTH DAY FOLLOWING EXECUTION OF THE AGREEMENT;
-19-
(h) I
HAVE
SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE
OF ANY
COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
(i) I
AGREE
THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED
OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE COMPANY AND BY ME.
(j) THIS
RELEASE SHALL REMAIN IN FULL FORCE AND EFFECT SO LONG AS THE COMPANY IS IN
COMPLIANCE WITH ITS OBLIGATIONS TO PAY SEVERANCE AND PROVIDE THE OTHER
POST-TERMINATION BENEFITS UNDER THE AGREEMENT, SUBJECT TO THE EXECUTIVE
CONTINUING TO ABIDE BY THE POST-TERMINATION OBLIGATIONS AND COVENANTS CONTAINED
IN THE AGREEMENT.
DATE:
___________ __, ______ ______________________________
Xxxx
X.
Xxxxx
-20-
Exhibit
D
NATIONAL
HOLDING CORPORATION
000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX
00000
_________________,
200_
Xxxx
Xxxxxxxxxx
000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Dear
Xxxx:
We
are
pleased to inform you that National Holdings Corporation (the “Company”), has
granted you a nonqualified option (the “Option”) to purchase the greater of (i)
1,000,000 shares of the Company’s common stock, par value $.02 per share (the
“Common Stock”) or (ii) 5% of all the Company’s actually issued and outstanding
shares of Common Stock immediately after consummation of the Merger, but giving
effect to the shares of Common Stock issuable upon conversion of the Company’s
existing shares of Series A Preferred Stock, at a purchase price of
$__________[to
be calculated on a 10-day trailing closing price of National’s stock prior to
Effective Date of Merger]
per
share (any of the underlying shares of Common Stock to be issued upon exercise
of the Option are referred to hereinafter as the “Shares”). Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to them
in the employment agreement of even date herewith between you and the Company
(“Employment Agreement”).
1. Subject
to the terms hereof, the Option may be exercised on or prior to ____________,
2015 (after which date the Option will, to the extent not previously exercised,
expire). The Option shall vest and become exercisable as to 25% of the Shares
on
and after each of ___________, 2008, 2009, 2010 and 2011, provided you are
then
still employed by of the Company.
2. The
Option, from and after the date it vests and becomes exercisable pursuant to
Section 1 hereof, may be exercised in whole or in part by delivering to the
Company a written notice of exercise in the form attached hereto as
Exhibit 1 (or such other form approved by the Company), specifying the
number of the Shares to be purchased and the purchase price therefor, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash or by delivering shares of Common Stock already
owned by you for at least six months and having a Fair Market Value on the
date
of exercise equal to the purchase price of the Option being exercised, or a
combination of such shares and cash. Fair Market Value, unless otherwise
required by any applicable provision of the Internal Revenue Code of 1986,
as
amended from time to time, and any successor thereto and the regulations
promulgated thereunder, means, as of any given date: (i) if the Common Stock
is
listed on a national securities exchange or quoted on the Nasdaq Global Select,
Global or Capital Markets (collectively, the “Nasdaq Markets”), the last sale
price of the Common Stock in the principal trading market for the Common Stock
on the last trading day on or before such date, as reported by the exchange
or
Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national
securities exchange or quoted on any of the Nasdaq Markets, but is traded in
the
over-the-counter market, the last sale price for the Common Stock on the last
trading day on or before such date for which such quotations are reported by
the
OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar
publisher of such quotations; and (iii) if the fair market value of the Common
Stock cannot be determined pursuant to clause (i) or (ii) above, such price
as
the Compensation Committee of the Company shall determine, in good
faith.
In
addition, payment of the purchase price of the Shares to be purchased may also
be made by delivering a properly executed notice to the Company, together with
a
copy of the irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds necessary to pay the purchase price,
and, if required, the amount of any federal, state or local withholding taxes.
No
Shares shall be issued until full payment therefor has been made. You shall
have
all of the rights of a shareholder of the Company holding the Common Stock
that
is subject to the Option (including, if applicable, the right to vote the Shares
and the right to receive dividends thereon), when you have given written notice
of exercise, have paid in full for such Shares and, if requested, have given
the
certificate described in Section 9 hereof.
3.
The
Option shall immediately vest and become exercisable as to all of the Shares
pursuant to the terms and conditions of the Employment Agreement.
4. In
the
event your employment with the Company is terminated, the Option shall forthwith
terminate, provided that you may exercise any then unexercised portion of the
Option then vested and exercisable pursuant to Section 1 hereof at any time
prior to the earlier of nine months after such date, or the expiration of the
Option.
5. The
Option is not transferable except (i) by will or the applicable laws of
descent and distribution or (ii) for transfers to your family members or
trusts or other entities whose beneficiaries are your family members, provided
that such transfer is being made for estate, tax and/or personal planning
purposes and will not have adverse tax consequences to the Company. In such
event, the transferee shall remain subject to all the terms and conditions
applicable to the Option prior to such transfer.
-2-
6. In
the event of your death or Disability, the Option may be exercised by your
personal representative or representatives, or by the person or persons to
whom
your rights under the Option shall pass by will or by the applicable laws of
descent and distribution, within the nine-month period following termination
due
to death or Disability.
7. In
the
event of any change in the shares of Common Stock of the Company as a whole
occurring as the result of a stock split, reverse stock split, stock dividend
payable on shares of Common Stock, combination or exchange of shares, or other
extraordinary or unusual event occurring after the date hereof, the Board of
Directors of the Company (“Board”), or a committee thereof shall make
appropriate adjustments in the terms of the Option to preserve the economic
interest of the grant. Any such adjustments will be made by the Board, or a
committee thereof, whose determination will be final, binding and conclusive.
8.
The
grant of the Option does not confer on you any right to continue in the employ
of the Company or any of its subsidiaries or affiliates or interfere in any
way
with the right of the Company or its subsidiaries or affiliates to terminate
the
term of your employment.
9.
The
Company shall require as a condition to the exercise of any portion of the
Option that you pay to the Company, or make other arrangements regarding the
payment of, any federal state or local taxes required by law to be withheld
as a
result of such exercise.
10. Unless
at
the time of the exercise of any portion of the Option a registration statement
under the Securities Act of 1933, as amended (the “Act”), is in effect as to the
Shares, the Shares shall be acquired for investment and not for sale or
distribution, and if the Company so requests, upon any exercise of the Option,
in whole or in part, you agree to execute and deliver to the Company a
reasonable certificate to such effect.
11.
You
understand and acknowledge that: (i) any Shares purchased by you upon
exercise of the Option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance
upon Rule 144 promulgated under the Act may be made only in accordance with
the terms and conditions of that Rule (which, under certain circumstances,
restrict the number of shares which may be sold and the manner in which shares
may be sold); (iii) certificates for Shares to be issued to you hereunder
shall bear a legend to the effect that the Shares have not been registered
under
the Act and that the Shares may not be sold, hypothecated or otherwise
transferred in the absence of an effective registration statement under the
Act
relating thereto or an opinion of counsel satisfactory to the Company that
such
registration is not required; (iv) the Company shall place an appropriate
“stop transfer” order with its transfer agent with respect to such Shares; and
(v) you shall abide by all of the Company’s policies in effect at the time
you acquire any Shares and thereafter, including the Company’s Xxxxxxx Xxxxxxx
Policy, with respect to the ownership and trading of the Company’s securities.
-3-
12. The
Company shall use commercially reasonable to file and keep in effect a
Registration Statement on Form S-8 registering under the Act the Shares issuable
to you upon exercise of the Option.
13. The
Company represents and warrants to you as follows: (i) this agreement and
the grant of the Option hereunder have been authorized by all necessary
corporate action by the Company and this agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with
its
terms; (ii) the grant of the Option to you on the terms set forth herein
will be exempt from the provisions of Section 16(b) of the Exchange Act pursuant
to Rule 16b-3(d) thereunder; (iii) the Company will obtain, at its
expense, any regulatory approvals necessary or advisable in connection with
the
grant of the Option or the issuance of the Shares; and (iv) the Company
currently has reserved and available, and will continue to have reserved and
available during the term of the Option, sufficient authorized and issued shares
of its Common Stock for issuance upon exercise of the Option.
14.
This
agreement and the Employment Agreement contain all the understandings between
the Company and you pertaining to the matters referred to herein, and supersedes
all undertakings and agreements, whether oral or in writing, previously entered
into by the Company and you with respect hereto. No provision of this agreement
may be amended or waived unless such amendment or waiver is agreed to in writing
signed by you and a duly authorized officer of the Company. No waiver by the
Company or you of any breach by the other party hereto of any condition or
provision of this agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same time,
any
prior time or any subsequent time. If any provision of this agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this agreement or the application
of such provision to such person or circumstances other than those to which
it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law. This agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws principles. This agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-4-
Would
you kindly evidence your acceptance of the Option and your agreement to comply
with the provisions hereof by executing this agreement in the space provided
below.
|
Very
truly yours,
NATIONAL
HOLDINGS CORPORATION
|
||
| |
|
|
| By: | ||
|
Authorized
Representative
|
||
|
|
|
|||
|
AGREED
TO AND ACCEPTED:
|
|
|||
|
|
|
|||
|
Xxxx
Xxxxxxxxxx
|
|
|||
-5-
EXHIBIT
1
NATIONAL
HOLDING CORPORATION
000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Gentlemen:
Notice
is hereby given of my election to purchase ____________ shares of Common Stock,
$.02 par value (the “Shares”), of National Holdings Corporation, at a price of
$_________ per Share, pursuant to the provisions of the stock option granted
to
me on ____________, 200_. Enclosed in payment for the Shares is:
o my
check in the amount of $______.
o ______
Shares having a total value of $________, such value being based on the Fair
Market Value of the Shares on the date of exercise.
The
following information is supplied for use in issuing and registering the Shares
purchased hereby:
|
Number
of Certificates
and
Denominations
|
|
_______________________________
|
|
|
||
|
Name
|
|
_______________________________
|
|
|
||
|
Address
|
|
_______________________________
|
|
|
||
|
|
|
_______________________________
|
|
|
||
|
|
|
_______________________________
|
|
|
||
|
Social
Security No.
|
|
_______________________________
|
Dated:
| |
Very
truly yours,
|
|
|
Xxxx
Xxxxxxxxxx
|
||
-6-
Exhibit
E
NATIONAL
HOLDING CORPORATION
000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX
00000
_________________,
200_
Xxxxxxx
X. Xxxxxxx
0000
Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx
Xxxxx, XX 00000
Dear
Lenny:
We
are
pleased to inform you that National Holdings Corporation (the “Company”), has
granted you a nonqualified option (the “Option”) to purchase the greater of (i)
1,000,000 shares of the Company’s common stock, par value $.02 per share (the
“Common Stock”) or (ii) 5% of all the Company’s actually issued and outstanding
shares of Common Stock immediately after consummation of the Merger, but giving
effect to the shares of Common Stock issuable upon conversion of the Company’s
existing shares of Series A Preferred Stock, at a purchase price of
$__________[to
be calculated on a 10-day trailing closing price of National’s stock prior to
Effective Date of Merger]
per
share (any of the underlying shares of Common Stock to be issued upon exercise
of the Option are referred to hereinafter as the “Shares”). Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to them
in the employment agreement of even date herewith between you and the Company
(“Employment Agreement”).
1. Subject
to the terms hereof, the Option may be exercised on or prior to ____________,
2015 (after which date the Option will, to the extent not previously exercised,
expire). The Option shall vest and become exercisable as to 25% of the Shares
on
and after each of ___________, 2008, 2009, 2010 and 2011, provided you are
then
still employed by of the Company.
2. The
Option, from and after the date it vests and becomes exercisable pursuant to
Section 1 hereof, may be exercised in whole or in part by delivering to the
Company a written notice of exercise in the form attached hereto as
Exhibit 1 (or such other form approved by the Company), specifying the
number of the Shares to be purchased and the purchase price therefor, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash or by delivering shares of Common Stock already
owned by you for at least six months and having a Fair Market Value on the
date
of exercise equal to the purchase price of the Option being exercised, or a
combination of such shares and cash. Fair Market Value, unless otherwise
required by any applicable provision of the Internal Revenue Code of 1986,
as
amended from time to time, and any successor thereto and the regulations
promulgated thereunder, means, as of any given date: (i) if the Common Stock
is
listed on a national securities exchange or quoted on the Nasdaq Global Select,
Global or Capital Markets (collectively, the “Nasdaq Markets”), the last sale
price of the Common Stock in the principal trading market for the Common Stock
on the last trading day on or before such date, as reported by the exchange
or
Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national
securities exchange or quoted on any of the Nasdaq Markets, but is traded in
the
over-the-counter market, the last sale price for the Common Stock on the last
trading day on or before such date for which such quotations are reported by
the
OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar
publisher of such quotations; and (iii) if the fair market value of the Common
Stock cannot be determined pursuant to clause (i) or (ii) above, such price
as
the Compensation Committee of the Company shall determine, in good
faith.
In
addition, payment of the purchase price of the Shares to be purchased may also
be made by delivering a properly executed notice to the Company, together with
a
copy of the irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds necessary to pay the purchase price,
and, if required, the amount of any federal, state or local withholding taxes.
No
Shares shall be issued until full payment therefor has been made. You shall
have
all of the rights of a shareholder of the Company holding the Common Stock
that
is subject to the Option (including, if applicable, the right to vote the Shares
and the right to receive dividends thereon), when you have given written notice
of exercise, have paid in full for such Shares and, if requested, have given
the
certificate described in Section 9 hereof.
3.
The
Option shall immediately vest and become exercisable as to all of the Shares
pursuant to the terms and conditions of the Employment Agreement.
4. In
the
event your employment with the Company is terminated, the Option shall forthwith
terminate, provided that you may exercise any then unexercised portion of the
Option then vested and exercisable pursuant to Section 1 hereof at any time
prior to the earlier of nine months after such date, or the expiration of the
Option.
5. The
Option is not transferable except (i) by will or the applicable laws of
descent and distribution or (ii) for transfers to your family members or
trusts or other entities whose beneficiaries are your family members, provided
that such transfer is being made for estate, tax and/or personal planning
purposes and will not have adverse tax consequences to the Company. In such
event, the transferee shall remain subject to all the terms and conditions
applicable to the Option prior to such transfer.
-2-
6. In
the event of your death or Disability, the Option may be exercised by your
personal representative or representatives, or by the person or persons to
whom
your rights under the Option shall pass by will or by the applicable laws of
descent and distribution, within the nine-month period following termination
due
to death or Disability.
7. In
the
event of any change in the shares of Common Stock of the Company as a whole
occurring as the result of a stock split, reverse stock split, stock dividend
payable on shares of Common Stock, combination or exchange of shares, or other
extraordinary or unusual event occurring after the date hereof, the Board of
Directors of the Company (“Board”), or a committee thereof shall make
appropriate adjustments in the terms of the Option to preserve the economic
interest of the grant. Any such adjustments will be made by the Board, or a
committee thereof, whose determination will be final, binding and conclusive.
8.
The
grant of the Option does not confer on you any right to continue in the employ
of the Company or any of its subsidiaries or affiliates or interfere in any
way
with the right of the Company or its subsidiaries or affiliates to terminate
the
term of your employment.
9.
The
Company shall require as a condition to the exercise of any portion of the
Option that you pay to the Company, or make other arrangements regarding the
payment of, any federal state or local taxes required by law to be withheld
as a
result of such exercise.
10. Unless
at
the time of the exercise of any portion of the Option a registration statement
under the Securities Act of 1933, as amended (the “Act”), is in effect as to the
Shares, the Shares shall be acquired for investment and not for sale or
distribution, and if the Company so requests, upon any exercise of the Option,
in whole or in part, you agree to execute and deliver to the Company a
reasonable certificate to such effect.
11.
You
understand and acknowledge that: (i) any Shares purchased by you upon
exercise of the Option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance
upon Rule 144 promulgated under the Act may be made only in accordance with
the terms and conditions of that Rule (which, under certain circumstances,
restrict the number of shares which may be sold and the manner in which shares
may be sold); (iii) certificates for Shares to be issued to you hereunder
shall bear a legend to the effect that the Shares have not been registered
under
the Act and that the Shares may not be sold, hypothecated or otherwise
transferred in the absence of an effective registration statement under the
Act
relating thereto or an opinion of counsel satisfactory to the Company that
such
registration is not required; (iv) the Company shall place an appropriate
“stop transfer” order with its transfer agent with respect to such Shares; and
(v) you shall abide by all of the Company’s policies in effect at the time
you acquire any Shares and thereafter, including the Company’s Xxxxxxx Xxxxxxx
Policy, with respect to the ownership and trading of the Company’s securities.
-3-
12. The
Company shall use commercially reasonable to file and keep in effect a
Registration Statement on Form S-8 registering under the Act the Shares issuable
to you upon exercise of the Option.
13. The
Company represents and warrants to you as follows: (i) this agreement and
the grant of the Option hereunder have been authorized by all necessary
corporate action by the Company and this agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with
its
terms; (ii) the grant of the Option to you on the terms set forth herein
will be exempt from the provisions of Section 16(b) of the Exchange Act pursuant
to Rule 16b-3(d) thereunder; (iii) the Company will obtain, at its
expense, any regulatory approvals necessary or advisable in connection with
the
grant of the Option or the issuance of the Shares; and (iv) the Company
currently has reserved and available, and will continue to have reserved and
available during the term of the Option, sufficient authorized and issued shares
of its Common Stock for issuance upon exercise of the Option.
14.
This
agreement and the Employment Agreement contain all the understandings between
the Company and you pertaining to the matters referred to herein, and supersedes
all undertakings and agreements, whether oral or in writing, previously entered
into by the Company and you with respect hereto. No provision of this agreement
may be amended or waived unless such amendment or waiver is agreed to in writing
signed by you and a duly authorized officer of the Company. No waiver by the
Company or you of any breach by the other party hereto of any condition or
provision of this agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same time,
any
prior time or any subsequent time. If any provision of this agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this agreement or the application
of such provision to such person or circumstances other than those to which
it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law. This agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws principles. This agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-4-
Would
you kindly evidence your acceptance of the Option and your agreement to comply
with the provisions hereof by executing this agreement in the space provided
below.
|
Very
truly yours,
|
||
|
NATIONAL
HOLDINGS CORPORATION
|
||
| |
|
|
| By: | ||
|
Authorized
Representative
|
||
|
AGREED
TO AND ACCEPTED:
|
|||
|
Xxxxxxx
X. Xxxxxxx
|
|||
-5-
EXHIBIT
1
NATIONAL
HOLDING CORPORATION
000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Gentlemen:
Notice
is hereby given of my election to purchase ____________ shares of Common Stock,
$.02 par value (the “Shares”), of National Holdings Corporation, at a price of
$_________ per Share, pursuant to the provisions of the stock option granted
to
me on ____________, 200_. Enclosed in payment for the Shares is:
| o |
my
check in the amount of $______.
|
| o |
______
Shares having a total value of $________, such value being based
on the
Fair Market Value of the Shares on the date of
exercise.
|
The
following information is supplied for use in issuing and registering the Shares
purchased hereby:
|
Number
of Certificates
and
Denominations
|
|
_______________________________
|
|
|
||
|
Name
|
|
_______________________________
|
|
|
||
|
Address
|
|
_______________________________
|
|
|
||
|
|
|
_______________________________
|
|
|
||
|
|
|
_______________________________
|
|
|
||
|
Social
Security No.
|
|
_______________________________
|
Dated:
| |
|
Very
truly yours,
|
|
Xxxxxxx
X. Xxxxxxx
|
||
-6-
Exhibit
G
NATIONAL
HOLDINGS CORPORAION
VOTING
AGREEMENT
THIS
VOTING AGREEMENT (the “Agreement”) is made and entered into as of this _____day
of ___________, 2008 by and among National Holdings Corporation, a Delaware
corporation (the "Company"), and the persons listed on Schedule I hereto
(individually, a "Director" and collectively the "Directors").
RECITALS:
A. The
Directors are the beneficial owners of an aggregate of [2,117,968]
shares
of the common stock of the Company, par value $.02 per share, including shares
underlying the Company’s Series A Preferred Stock (the "Common
Stock").
B. The
Company has entered into that certain Agreement and Plan of Merger dated as
of
November 7, 2007 (as the same may be amended, supplemented or otherwise modified
in accordance with its terms, the “Merger Agreement”) by and among the Company,
vFinance, Inc. (“vFinance”) and VFIN Acquisition Corporation, a wholly-owned
subsidiary of the Company (“Merger Sub”) whereby the Merger Sub shall merge with
and into vFinance (the "Merger").
C. Pursuant
to Section 8.1(i) of the Merger Agreement, it is a condition to the completion
of the Merger that the Directors enter into this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
|
1.
|
Voting.
|
1.1 Director
Shares.
Each of
the Directors agrees to hold all shares of Common Stock of the Company
registered in their respective names or beneficially owned by them as of the
date hereof and any and all other securities of the Company beneficially owned
by each of the Directors after the date hereof (hereinafter collectively
referred to as the "Director Shares") subject to, and to vote the Director
Shares in accordance with, the provisions of this Agreement.
1.2 Nomination
of Directors.
(a) Each
of
the Directors shall vote and shall take all other necessary or desirable actions
within his control, (including, without limitation, execution of written
consents or resolutions in lieu of meetings), from time to time and at all
times
in whatever manner shall be necessary, to ensure that each of the following
persons is nominated to serve as a director of the Company: Xxxx Xxxxxxxxxx
("Xxxxxxxxxx"), Xxxxxxx Xxxxxxx ("Xxxxxxx"), Xxxxxxxxxxx X. Xxxxx (“Xxxxx”),
Xxxxxxx Xxxxxx (“Xxxxxx”), Xxxxx Xxxxxx (“Xxxxxx”), and up to three directors
nominated by Xxxxxxxxxx, which shall be reasonably satisfactory to vFinance
(the
"Xxxxxxxxxx Nominated Director") and up to one additional director nominated
by
Xxxxxxx, which shall be reasonably satisfactory to the Company (together with
Xxxxxx and Xxxxxx, the “Xxxxxxx Nominated Directors”). In the event that: (i)
Xxxxxxxxxx beneficially owns less than 150,000 shares of the Common Stock,
then
the other Directors will not be obligated to nominate Xxxxxxxxxx to serve as
a
member of the Company's board of directors and the Xxxxxxxxxx Nominated
Directors to serve as members of the Company's board of directors, and, as
long
as Xxxxxxxxxx owns more than 150,000 shares
of
the Common Stock, Xxxxxxxxxx shall have the right to designate a person (the
"Replacement Director") to replace any Xxxxxxxxxx Nominated Director and,
assuming the Replacement Director is reasonably satisfactory to the other
Directors, all of the other Directors shall vote to nominate the Replacement
Director to the Company's board of directors; (ii) Xxxxx beneficially owns
less
than 150,000 shares of the Common Stock, then the other Directors will not
be
obligated to nominate such person; and (iii) Xxxxxxx beneficially owns less
than
150,000 shares of the Common Stock, then the other Directors will not be
obligated to nominate such person, or the Xxxxxxx Nominated Directors to serve
as members of the Company's board of directors, and, as long as Xxxxxxx owns
more than 150,000 shares
of
the Common Stock, Xxxxxxx shall have the right to designate a Replacement
Director to replace a Xxxxxxx Nominated Director and, assuming the Replacement
Director is reasonably satisfactory to the other Directors, all of the other
Directors shall vote to nominate the Replacement Director to the Company's
board
of directors.
(b) In
the
event of changes in all of the outstanding Common Stock by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations, or exchanges of shares or other similar transactions, the number
of shares set forth in Section 1.2(a) hereof, shall automatically be
proportionately adjusted.
1.3 Election
of Directors.
(a) Each
of
the Directors shall vote all of his Director Shares and take all other necessary
or desirable actions within his control (including, without limitation,
execution of written consents or resolutions in lieu of meetings), from time
to
time and at all times in whatever manner shall be necessary, to ensure that
all
of the persons nominated to be members of the Company's board of directors
pursuant to Section 1.2 hereof are elected as directors of the
Company.
(b) The
Directors will be present, in person or by proxy, at all meetings of the
stockholders of the Company at which directors are elected so that all Director
Shares may be counted for the purpose of determining the presence of a quorum
at
meetings and voted as required herein.
1.4 Legend.
(a) Concurrently
with the execution of this Agreement, there shall be imprinted or otherwise
placed, on certificates representing the Director Shares owned or hereinafter
acquired the following restrictive legend (the "Legend"):
“THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS
OF A VOTING AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE
SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES
SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF
SUCH
VOTING AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED TO THE
RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.”
-2-
(b) Except
as
provided in Section 1.4 (c) hereof, the Company agrees that, during the term
of
this Agreement, it will not remove, and will not permit to be removed (upon
registration of transfer, reissuance of otherwise), the Legend from any such
certificate and will place or cause to be placed the Legend on any new
certificate issued to represent Director Shares theretofore represented by
a
certificate carrying the Legend.
(c) The
Company shall instruct the transfer agent to remove the Legend in the case
of a
bona fide sale or transfer which does not represent a Negotiated Sale, as such
term is defined in Section 1.5 hereof.
1.5 Successors.
The
provisions of this Agreement shall be binding upon the successors in interest
to
any of the Director Shares in a private sale or transfer or in a privately
negotiated public block sale or transfer (collectively, a “Negotiated Sale”). In
the case of a Negotiated Sale, the Company shall not permit the transfer of
any
of the Director Shares on its books or issue a new certificate representing
any
of the Director Shares unless and until the person to whom such security is
to
be transferred shall have executed a written agreement, substantially in the
form of this Agreement, pursuant to which such person becomes a party to this
Agreement and agrees to be bound by all the provisions hereof as if such person
were a Director.
1.6 Other
Rights.
Except
as provided by this Agreement or any other agreement entered into in connection
with the Merger Agreement, each Director shall exercise the full rights of
a
holder of capital stock of the Company with respect to the Director Shares.
|
2.
|
Termination.
|
2.1 This
Agreement shall continue in full force and effect from the date hereof through
the earliest of the following dates, on which date it shall terminate in its
entirety:
(a) the
date
of the closing of the Company’s merger into or consolidation with any other
corporation or other entity, or any other corporate reorganization, in which
the
holders of the Company’s outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the corporation or other
entity surviving such transaction, provided that this Section 2.1(a) shall
not
apply to a merger effected exclusively for the purpose of changing the domicile
of the Company;
(b) the
date
as of which all the parties hereto terminate this Agreement by written
consent;
(c) the
date
that all of the Directors beneficially own less than one percent (1%) of the
Common Stock;
-3-
(d) upon
the
fifth anniversary of this Agreement; or
(e) upon
listing of the Company’s common stock on AMEX, the NASDAQ Capital Market or
NASDAQ Global Market.
2.2 In
the
event that (i) Xxxxxxxxxx shall cease to be employed with the Company, then
Xxxxxxx’x obligation to vote for Xxxxxxxxxx and the Xxxxxxxxxx Nominated
Director shall terminate but Xxxxxxxxxx’x obligation to vote for Xxxxxxx and the
Xxxxxxx Nominated Directors shall not be terminated and (ii) Xxxxxxx shall
cease
to be employed with the Company then Xxxxxxxxxx’x obligation to vote for Xxxxxxx
and the Xxxxxxx Nominated Directors shall terminate but Xxxxxxx’x obligation to
vote for Xxxxxxxxxx and the Xxxxxxxxxx Nominated Directors shall not be
terminated; provided
further however,
that
nothing contained in this Section 2.2 shall prohibit Xxxxxxxxxx or Xxxxxxx
from
voting for the other or their nominated directors regardless of the employment
status of Xxxxxxxxxx or Xxxxxxx, as the case may be.
|
3.
|
Miscellaneous.
|
3.1 Director
Ownership.
Each
Director represents and warrants to each other that (a) such Director now owns
the Director Shares set forth opposite his name on Schedule I, free and clear
of
liens or encumbrances, and has not, prior to or on the date of this Agreement,
executed or delivered any proxy or entered into any other voting agreement
or
similar arrangement other than one which has expired or terminated prior to
the
date hereof, and (b) such Director has full power and capacity to execute,
deliver and perform this Agreement, which has been duly executed and delivered
by, and evidences the valid and binding obligation of, such Director enforceable
in accordance with its terms.
3.2 Director
Further Action.
If and
whenever the Director Shares are sold, the Directors or the personal
representative of the Directors shall do all things and execute and deliver
all
documents and make all transfers, and cause any transferee of the Director
Shares to do all things and execute and deliver all documents, as may be
necessary to consummate such sale consistent with this Agreement.
3.3 Specific
Performance.
The
parties hereto hereby declare that it is impossible to measure in money the
damages which will accrue to a party hereto or to their heirs, personal
representatives, or assigns by reason of a failure to perform any of the
obligations under this Agreement and agree that the terms of this Agreement
shall be specifically enforceable. If any party hereto or his heirs, personal
representatives, or assigns institutes any action or proceeding to specifically
enforce the provisions hereof, any person against whom such action or proceeding
is brought hereby waives the claim or defense therein that such party or such
personal representative has an adequate remedy at law, and such person shall
not
offer in any such action or proceeding the claim or defense that such remedy
at
law exists.
3.4 Governing
Law.
This
Agreement, and the rights of the parties hereto, shall be governed by and
construed in accordance with the laws of the State of Delaware as such laws
apply to agreements to be performed entirely within the State of
Delaware.
3.5 Amendment
or Waiver.
This
Agreement may be amended (or provisions of this Agreement waived) only by an
instrument in writing signed by all of the parties hereto. Any amendment or
waiver so effected shall be binding upon the Company, each of the parties hereto
and any assignee of any such party.
-4-
3.6 Severability.
In the
event one or more of the provisions of this Agreement should, for any reason,
be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal
or
unenforceable provision had never been contained herein.
3.7 Successors.
This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, successors, assigns, administrators, executors
and
other legal representatives.
3.8 Additional
Shares.
In the
event that subsequent to the date of this Agreement any shares or other
securities are issued on, or in exchange for, any of the Director Shares by
reason of any stock dividend, stock split, combination of shares,
reclassification or the like, such shares or securities shall be deemed to
be
Director Shares for purposes of this Agreement.
3.9 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed an original but all of which together shall constitute one and the same
agreement.
3.10 Waiver.
No
waivers of any breach of this Agreement extended by any party hereto to any
other party shall be construed as a waiver of any rights or remedies of any
other party hereto or with respect to any subsequent breach.
3.11 Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified,
(ii)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient; if not, then on the next business day, (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the party to be
notified at the address as set forth on the signature page hereof or at such
other address as such party may designate by ten (10) days advance written
notice to the other parties hereto.
3.12 Entire
Agreement.
This
Agreement and the Schedule attached hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except
as
specifically set forth herein and therein.
3.13 Consent
To the Exclusive Jurisdiction Of the Courts Of New York; Waiver of Jury Trial;
Arbitration.
(a) SUBJECT
TO THE ARBITRATION PROVISONS OF SUBSECTION (e) BELOW, EACH OF THE PARTIES HERETO
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL, STATE AND LOCAL
COURTS LOCATED IN THE STATE OF NEW YORK, AS WELL AS TO THE JURISDICTION OF
ALL
COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF
ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY PROCEEDING RELATING TO ANCILLARY MEASURES IN AID OF ARBITRATION,
PROVISIONAL REMEDIES AND INTERIM RELIEF, OR ANY PROCEEDING TO ENFORCE ANY
ARBITRAL DECISION OR AWARD.
-5-
(b) EACH
PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING ANY SUIT, ACTION
OR
OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER THAN THE FEDERAL,
STATE AND LOCAL COURTS LOCATED IN THE STATE OF NEW YORK AND COVENANTS THAT
IT
SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS SET FORTH
IN
THIS ARTICLE XIV OR TO CHALLENGE OR SET ASIDE ANY DECISION, AWARD OR JUDGMENT
OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF.
(c) EACH
OF
THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE
TO
VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY
OF
SUCH COURTS. IN ADDITION, EACH OF THE PARTIES CONSENTS TO THE SERVICE OF PROCESS
BY PERSONAL SERVICE OR ANY MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER
IN
ACCORDANCE WITH SECTION 12(k).
(d) EACH
OF
THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY
IN
ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT, ANY
OF
THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
(e) Any
controversy, dispute or claim arising out of or in connection with or relating
to this Agreement, or the breach, termination or validity hereof or any
transaction contemplated hereby (any such controversy, dispute or claim being
referred to as a “Dispute”) shall be finally settled by arbitration conducted
expeditiously in accordance with the Commercial Arbitration Rules then in force
(the “AAA Rules”) of the American Arbitration Association (the “AAA”). There
shall be a panel of three arbitrators who shall be appointed pursuant to AAA
procedure, in each case, within fifteen (15) business days of receipt of the
demand for arbitration by the respondent(s) in any such proceeding. Each of
the
arbitrators shall be an attorney with no less than fifteen (15) years’
experience in the practice of business law (preferably with experience in the
acquisition and financing of businesses such as those engaged in by the Company
and the Subsidiaries at the time such dispute arises) who shall not have
performed any legal services for any of the parties or person controlled by
any
of the parties for a period of 5 years prior to the date the demand for
arbitration is received by the respondent(s). The situs for an arbitration
pursuant to this Section shall be New York, New York. A final award shall be
rendered as soon as reasonably possible and, in any event, within ninety (90)
days of the appointment of the panel of arbitrators; provided, however, that
if
the arbitrators determine by majority vote that fairness so requires, such
ninety (90) day period may be extended by no more than sixty (60) additional
days. The parties agree that the arbitrators shall have the right and power
to
shorten the length of any notice periods or other time periods provided in
the
AAA Rules and to implement Expedited Procedures under the AAA Rules in order
to
ensure that the arbitration process is completed within the time frames provided
herein. The arbitration decision or award shall be reasoned and in writing.
Judgment on the decision or award rendered by the arbitrators may be entered
and
specifically enforced in any court having jurisdiction thereof. Notwithstanding
the provisions of Section 12(d), any arbitration held pursuant to the provisions
of this Section shall be governed by the Federal Arbitration Act. All
arbitrations commenced pursuant to this Agreement while any other arbitration
hereunder shall be in progress shall be consolidated and heard by the initially
constituted panel of arbitrators.
-6-
3.14 Counterparts.
This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when two
or
more of the counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that each party need not sign the
same
counterpart.
3.15 Interpretation.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
-7-
IN
WITNESS WHEREOF, the parties hereto have executed this Voting Agreement as
of
the date first above written.
|
COMPANY:
|
||
|
National
Holdings Corporation
|
||
| |
|
|
| By: | ||
|
Xxxx
Xxxxxxxxxx, Chairman and CEO
|
||
|
DIRECTORS:
|
||
|
Xxxx
Xxxxxxxxxx
|
||
|
Xxxxxxx
Xxxxxxx
|
||
|
Xxxxxxxxxxx Xxxxx |
||
-8-
SCHEDULE
I
LIST
OF STOCKHOLDERS
|
Name
|
No.
of Shares
|
|||
|
1.
Xxxx Xxxxxxxxxx
|
[930,473
|
]
|
||
|
2.
Xxxxxxx Xxxxxxx
|
[823,621
|
]
|
||
|
3.
Xxxxxxxxxxx X. Xxxxx
|
[363,874
|
]
|
||
-9-
Exhibit
H
EMPLOYMENT
TERMINATION AGREEMENT
This
Employment Termination Agreement (the “Agreement”) dated as of [●],
2007
(the “Effective Date”) is entered into between vFinance, Inc. (the “Employer”)
and Xxxxxxx X. Xxxxxxx (the “Employee”) (collectively, the
“Parties”).
RECITALS:
A. The
Employee is employed as Chairman and Chief Executive Officer of Employer
pursuant to an Amended and Restated Employment Agreement dated November 16,
2004, as amended on May 12 and December 29, 2006 (the “Employment Agreement”);
B. Upon
the
merger with a wholly-owned subsidiary of National Holdings Corporation
(“National”), the principal office of the Employer will be relocated to New York
(the “Merger”);
C. Pursuant
to the terms of the Employment Agreement, as a result of the Merger of National
and the relocation of the principal office of the Employer, Employee would
be
entitled to a lump sum payment of One Million One Hundred and Fifty Thousand
($1,150,000) in cash as of the effective date (“Effective Date”) of such merger;
D. The
Parties have agreed that the Employment Agreement shall be terminated and
replaced with a new employment agreement with National of even date herewith
(the “New Employment Agreement”).
NOW,
THEREFORE, the Employer and Employee agree as follows:
1. Termination
of Employment.
The
Employee shall resign from his positions as Chairman and Chief Executive Officer
of the Employer and the Employment Agreement shall terminate as of the Effective
Date. From and after the Effective Date, neither party has or will have any
right, liability or obligation arising under the Employment
Agreement.
2. Payments.
(a) Salary
and Bonus.
On the
Effective Date, the Employer shall pay to the Employee all salary and all
accrued payments due and payable to the Employee on the Effective Date pursuant
to the terms of the Employment Agreement.
(b) Triggering
Event Payment.
The
Employer shall pay to the Employee the principal sum of $1,150,000 on the
Effective Date.
3. Waiver
of Acceleration of Derivative Securities.
Notwithstanding the fact that in accordance with the terms of the Employment
Agreement, as of the Effective Date, all Employer stock options held by Employee
would otherwise become immediately and fully vested, Employee hereby waives
such
acceleration of Employer stock options and acknowledges that in connection
with
the Merger such stock options shall be exchanged for stock options of National
at the applicable exchange ratio of the Merger (the “Exchanged Options”).
However, in the event Employee is terminated by National with cause or Employee
voluntarily resigns from National for any reason all, Exchanged Options shall
become 100% vested and shall remain exercisable by the Employee or his
beneficiaries for a period of nine (9) months from the date of such event;
provided, however, such period of nine (9) months shall not exceed the earlier
of the latest date upon which such options could have expired by their original
terms under any circumstances or the tenth anniversary of the original date
of
grant of such options. Notwithstanding anything contained in the New Employment
Agreement to the contrary, the terms of this Section 3 shall control with
respect to the acceleration of the vesting terms of the Exchanged Options in
the
event of Employee’s termination of employment from the National.
4. Taxes.
If any
of the payments under this Agreement or any other agreement, including the
acceleration of derivative securities pursuant to Section 3 of this Agreement
(the “Payments”),
will
be subject to the tax (the “Excise
Tax”)
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”)
on the
Employee, (or any similar tax that may hereafter be imposed) the Company shall
pay to the Employee an additional amount (the “Gross-Up
Payment”)
in a
manner consistent with Section 6(i) of the New Employment
Agreement.
5. Indemnification.
In
accordance with and subject to Employer’s corporate bylaws, Employer recognizes
its continuing duty to indemnify, defend and hold Employee harmless to the
fullest extent of Delaware law for any liabilities that may arise as a result
of
any acts taken by Employee (including, without limitation, the failure to take
action) in the course of performing his duties for Employer. In addition, in
accordance with Employer’s corporate bylaws, Employer shall pay any expenses
(including reasonable attorneys’ fees), judgments, penalties, fines,
settlements, and other liabilities incurred by Employee in investigating,
defending, settling or appealing any action, suit or proceeding in advance
of
the final disposition of such action, suit or proceeding. Employer shall
promptly pay the amount of such expenses to Employee, but in no event later
than
ten (10) days following Employee’s delivery to Employer of a written request for
an advance pursuant to this Section 5, together with a reasonable accounting
of
such expenses.
6. Release.
Simultaneous with the execution and delivery of this Agreement, the Employee
shall deliver a release in favor of the Company substantially in form and
substance identical to the release attached as Exhibit B to the New Employment
Agreement.
7. Severability;
Entire Agreement; Governing Law.
In the
event any provision hereof becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision. If any court refuses to enforce
any part of this Agreement as written, the court shall modify that part to
the
minimum extent necessary to make it enforceable under applicable law, and shall
enforce it as so modified. This Agreement represents the entire agreement and
understanding concerning Employee’s separation from Employer. This
Agreement supersedes and replaces any and all prior agreements, understandings,
discussions, negotiations, or proposals concerning Employee’s relationship with
Employer.
This
Agreement may only be amended in writing signed by the Employee and an executive
officer of the Employer. This Agreement shall be governed by the laws of the
State of Florida, without regard to its conflict of laws rules. Each Party
hereby irrevocably submits to the exclusive jurisdiction of any Federal or
state
court sitting in Palm Beach County, Florida for the adjudication of any dispute
arising out of or relating to the Agreement and the transactions contemplated
hereunder, and hereby irrevocably waives, and agrees not to assert in any
proceeding relating to this Agreement, any claim that he or it, as the case
may
be, is not personally subject to the jurisdiction of any such court, or that
any
such proceeding has been commenced in an improper or inconvenient forum.
-2-
8. Attorneys'
Fees.
In the
event any dispute or litigation arises hereunder between any of the parties
hereto, the prevailing party shall be entitled to all reasonable costs and
expenses incurred by it in connection therewith (including, without limitation,
all reasonable attorneys' fees and costs incurred before and at any trial or
other proceeding and at all tribunal levels), as well as all other relief
granted in any suit or other proceeding. As used herein, a party shall be deemed
"prevailing" when it recovers (i) as to a damages claim, an aggregate of more
than fifty percent (50%) of the damages which it seeks among its various
asserted claims exclusive of interest, attorney's fees, costs incurred and
exemplary damages and (ii) as to an equity claim, substantial injunctive or
other equitable relief upon its asserted claim. Either of the parties herein
shall be entitled to request the trier of fact in any dispute, litigation or
arbitration between them, to determine which of the parties is
"prevailing."
9. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original, but all of which together shall constitute one
instrument.
|
vFinance,
Inc.
|
||||
| By: | By: | |||
|
Xxxxxxx X. Xxxxxxx |
_____________, its _____________ |
|||
-3-
