Exhibit 10.1
Execution Copy
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as
of
July 9, 2008, by and between FIRST ALLIED SECURITIES, INC., a New
York
corporation, or one of its affiliates (the "Buyer"), FIRST MONTAUK
SECURITIES
CORP. a New York corporation (the "Seller") and FIRST MONTAUK
FINANCIAL CORP. a
New Jersey corporation (the "Parent").
RECITALS
A. Buyer desires to acquire from Seller, and Seller desires to
transfer
to Buyer, certain assets of the Seller, including (i) the right to
service
certain of Seller's customer accounts, and (ii) Seller's rights in,
under and to
Seller's agreements with its independent contractor registered
representatives,
all on the terms and subject to the conditions set forth in this
Agreement.
B. The purchase described herein may be conducted by Buyer or one
of
its Affiliates (as defined below).
C. The parties hereto desire to confirm their agreement and
understanding with respect to the transactions contemplated
hereby.
AGREEMENT
In consideration of the mutual agreements, representations,
warranties
and covenants set forth below, Buyer and Seller agree as
follows:
ARTICLE I
DEFINITIONS
1.1
Definitions. As used
in this Agreement, the following terms shall have
the following meanings:
(a) "Accounts" means all of Seller's customer accounts of the
Accepted Seller
Representatives.
(b) "Account Agreements" mean all of the contracts between the
Seller and each
of the account holders
setting forth the terms and conditions relating to the
Accounts.
(c) "Affiliate" means with respect to any Person, a Person directly
or
indirectly controlling
or controlled by or under common control with such
Person.
(d) "Closing" means the consummation of the transactions
contemplated hereby.
(e) "Closing Date" means the date of the Closing.
(f) "Governmental Authorizations" means the permits,
authorizations, consents or
approvals of any
Governmental Entity which are a condition to the lawful
consummation of the
transactions contemplated hereby, including, but not
limited to those
required under, (A) the Securities Exchange Act of 1934, as
amended, and the rules
and regulations promulgated thereunder (the "Exchange
Act"), (B) state
securities or "blue sky" laws, and (C) the Financial Industry
Regulatory Authority,
Inc. ("FINRA").
(g) "Governmental Entity" means any court, or any federal, state,
municipal or
other governmental
authority, department, commission, board, agency or other
instrumentality
(domestic or foreign), including regulated and self-regulated
entities existing
under the authority of any federal, state, municipal or
other government,
including without limitation, state securities regulatory
bodies, securities
exchanges, the U.S. Securities and Exchange Commission
("SEC"), FINRA, the
New York Stock Exchange, Inc. ("NYSE"), the NASDAQ Stock
Market, Inc.
("NASDAQ") and the Municipal Securities Rulemaking Board.
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(h) "Independent Contractor Representative Agreement" means (A) the
Independent
Contractor Affiliate
Agreements executed between the Seller and the owner or
manager of an
individual office of Seller setting forth the terms and
conditions under which
the owner or manager operates as an independent office
of the Seller; and (B)
the FMSC Registered Representative Agreements executed
by the Seller and an
individual Seller Representative setting forth the terms
and conditions under
which a Seller Representative operates as an independent
contractor registered
representative with the Seller. The forms of these
agreements have been
provided to Buyer.
(i) "Knowledge" means with respect to any party, the actual
knowledge of any
executive officer,
director, general partner or managing member of such party
or any executive
officer, director, general partner or managing member of an
affiliate of such
party, and such knowledge as any of them would reasonably be
expected to have after
reasonable inquiry.
(j) "Lien" means any mortgage, pledge, lien, security interest,
option,
covenant, condition,
restriction, encumbrance, charge or other third-party
claim of any kind.
(k) "Loss" means any claim, loss, obligation, liability, settlement
payment,
award, judgment, fine,
penalty, damage, deficiency, diminution of value,
royalty, interest and
penalties, cost or expense, including reasonable
attorneys' fees and
reasonable expenses of investigation and defense, or other
charge.
(l) "Material Adverse Effect" with respect to a Person means any
event, change
or effect that is
materially adverse to the condition (financial or
otherwise),
properties, assets, liabilities, business, operations, or
results
of operations, of such
Person.
(m) "Person" means an individual, corporation, partnership,
association, trust,
government or
political subdivision or agent or instrumentality thereof, or
other entity or
organization.
(n) "Production" means the aggregate commission and fee income for
the trailing
twelve month period
ended on the month end immediately prior to the date of
execution of this
Agreement which was generated by the Closing Date
Representatives and
credited to the Closing Date Representatives for the
purpose of computing
their commission payout as reflected on the books and
records of Seller,
including, without limitation, 12b-1 fees and any other
fees which Seller
includes in its calculation of payout, provided such amount
does not have a 100%
payout.
(o) "Seller Representatives" means registered representatives who
are licensed
with Seller on the
date hereof, as listed on Schedule 1.1(o) to this
Agreement, and any
registered representatives who become licensed with Seller
after the date
hereof.
(p) "Taxes" means all taxes, however denominated, including any
interest,
penalties or other
additions to tax that may become payable in respect
thereof, (i) imposed
by any federal, territorial, state, local or foreign
government or any
agency or political subdivision of any such government, for
which Buyer could
become liable as transferee, or servicer of, or in
connection with, the
Accounts or which could become a charge against or lien
on any of the
Accounts, which taxes shall include, without limiting the
generality of the
foregoing, all sales and use taxes, ad valorem taxes, excise
taxes, business
license taxes, occupation taxes, real and personal property
taxes, stamp taxes,
environmental taxes, real property gains taxes, transfer
taxes, income taxes,
payroll and employee withholding taxes, unemployment
insurance
contributions, social security taxes, and other governmental
charges, and other
obligations of the same or of a similar nature to any of
the foregoing, which
are required to be paid, withheld or collected, or (ii)
any liability for
amounts referred to in (i) as a result of any obligations to
indemnify another
person.
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(q) "Transfer" means the transfer by Seller to Buyer of (i)
Seller's right to
service the Accepted
Accounts, and (ii) Seller's rights in, to and under the
Closing Date
Representative Agreements.
ARTICLE II
TRANSFER AND PURCHASE
2.1 Transfer of Purchased Assets. Subject to the terms and
conditions of this
Agreement, on the Closing Date, Seller shall sell, transfer,
assign, convey and
deliver to Buyer, and Buyer shall purchase from Seller, free and
clear of all
Liens, all right, title and interest of Seller in, to and under the
following
assets, as the same shall exist on the Closing Date (herein
collectively called
the "Purchased Assets"):
(a) All of Seller's right, title and interest in and to service the
Accepted
Accounts under the
corresponding Account Agreements (the "Accepted Account
Agreements").
"Accepted Accounts" shall mean all Accounts, which are not as
of
the Closing Date
accompanied by customer complaints, litigation, regulatory
inquiry, unsecured
deficits or partially unsecured deficits or being serviced
by the Penson
Financial Services, Inc. All Accounts that are not Accepted
Accounts are referred
to herein as "Rejected Accounts" and the Account
Agreements related
thereto are referred to as the "Rejected Account
Agreements". Buyer
shall be responsible for the costs associated with the
transfer of the
Accepted Accounts from Seller to Buyer.
(b) All of Seller's right, title, and interest in and to all of the
Independent
Contractor
Representative Agreements between the Seller and the Closing
Date
Representatives (the
"Closing Date Representative Agreements"), whether or not
involved in the
servicing of the Accepted Accounts, including all
registrations,
licenses, permits, and applications therefor. "Closing Date
Representative" shall
mean (i) any Accepted Seller Representative who becomes
licensed with (or
otherwise becomes engaged by) the Buyer upon the Closing and
has not voluntarily
resigned or terminated their relationship with Buyer prior
to the Second Payment
Date (as defined below) and (ii) any Seller
Representative who
becomes licensed and affiliated with Buyer or any affiliate
of Buyer after the
date hereof and prior to the Closing Date and has not been
terminated for cause
or voluntarily resigned or terminated his or her
relationship with
Buyer prior to the Second Payment Date; provided, that Buyer
did not take or fail
to take any action (including reducing his or her
commission payout
rate) which directly caused or resulted in the resignation
of such Closing Date
Representative or the termination of the Closing Date
Representative's
relationship with Buyer. "Accepted Seller Representatives"
shall mean all Seller
Representatives who are not as of the Closing Date
rejected by Buyer. All
Seller Representatives who are not Accepted Seller
Representatives are
referred to herein as "Rejected Seller Representatives"
and the Independent
Contractor Representative Agreements related thereto are
referred to as the
"Rejected Advisor Agreements." Within thirty (30) days of
the date of this
Agreement, Buyer and Seller shall prepare and attach as
Schedule 2.1(b) a
preliminary list of Accepted Seller Representatives, which
list shall show amount
of Production for each Accepted Seller Representative.
However, Buyer shall
have up until the actual Closing to reject any Seller
Representative. Buyer
shall be responsible for the costs associated with the
transfer of the
licenses of the Closing Date Representatives from Seller to
Buyer.
(c) All mailing lists, customer lists, subscriber lists, e-mail
addresses
relating to the
Accepted Accounts and the Closing Date Representatives;
(d) All commission and related receivables of Seller relating to
any Closing
Date Representative
where the Closing Date Representative has not been paid
his or her related
commission;
(e) All books and records ledgers, files, documents,
correspondence, lists,
reports, all
agreements between Seller and any Person relating to the
Accepted
Accounts and the
Closing Date Representatives, the Closing Date Representative
Agreements, and other
electronic or printed materials relating solely to the
Purchased Assets
(including all data and other information stored on discs,
tapes or other media)
of Seller (the "Transferred Records"); and
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(f) All loans (but excluding "forgivable loans") as of the Closing
Date from
Seller to the Closing
Date Representatives. Within thirty (30) days of the
date of this
Agreement, Buyer and Seller shall attach as Schedule 2.1(f) a
preliminary list of
such loans, which shall be updated as of the Closing Date.
2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1,
the
Purchased Assets shall not include the following (herein referred
to as the
"Excluded Assets"):
(a) All cash (including any cash held at any clearing firm), bank
deposits, cash
equivalents and
securities of Seller;
(b) All commission and related receivables of Seller relating to
Rejected Seller
Representatives and
any Closing Date Representative where such Closing Date
Representative has
been paid his or her related commission;
(c) All corporate minute books and stock transfer books and the
corporate seal
of Seller;
(d) All contracts of Seller other than the Purchased Contracts;
(e) All of Seller's employee benefit agreements, plans or similar
arrangements
maintained by
Seller;
(f) The trade mark, trade name or right to use the trade mark or
trade name
"Montauk Financial
Group", and all registered trademarks listed on Schedule
2.2(f);
(g) All licenses and registrations of Seller issued by the SEC,
FINRA and other
Governmental Entities;
and
(h) All other assets of Seller that are not "Purchased Assets" as
provided in
Section 2.1.
2.3 Purchased Contracts. On the Closing Date, Buyer shall deliver
to Seller an
assumption agreement, in the form attached hereto as Exhibit A (the
"Assumption
Agreement") pursuant to which Buyer shall assume and agree to
perform only the
obligations under the Accepted Account Agreements and the Closing
Date
Representative Agreements, (collectively, the "Purchased
Contracts") due to be
performed after the Closing Date, and Buyer shall not be obligated
to perform,
satisfy, pay or otherwise discharge any liabilities or obligations
under the
Purchased Contracts (A) to the extent such liabilities and
obligations, but for
a breach or default by Seller, would have been paid, performed or
otherwise
discharged on or prior to the Closing Date or (B) to the extent
such liabilities
and obligations arise out of any such breach or default.
2.4 Excluded Liabilities. Buyer shall not assume and shall not be
liable for,
and Seller and its Affiliates and their respective direct or
indirect
subsidiaries shall retain and remain solely liable for and
obligated to
discharge, all of their debts, contracts, agreements, commitments,
obligations
and other liabilities of any nature whatsoever, whether known or
unknown,
accrued or not accrued, fixed or contingent, not expressly assumed
by Buyer
pursuant to the Assumption Agreement (all such liabilities and
obligations not
being assumed being herein called the "Excluded Liabilities"),
including without
limitation, the following:
(a) Any liability for breaches of any and every applicable contract
or any other
instrument, or
purchase order or any liability for payments or amounts due
under any contract,
agreement, lease, license, commitment or any other
instrument, contract,
document or purchase order;
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(b) Any liability or obligation for Taxes attributable for any
period, or
attributable to or
imposed upon the Accounts for any period (or portion
thereof) through the
Closing, including, without limitation, any Taxes
attributable to or
arising from the transactions contemplated by this
Agreement;
(c) Any liability or obligation for or in respect of any loan,
other
indebtedness for money
borrowed, or account payable including any such
liabilities owed to
Affiliates of Seller;
(d) Any liability or obligation arising as a result of any legal or
equitable
action or judicial or
administrative proceeding initiated at any time, to the
extent relating to any
action or omission by or on behalf of Seller or any and
all of its Affiliates
and their respective direct or indirect subsidiaries,
including, without
limitation, any liability for violations of federal or
state securities or
other laws; provided that with respect to any Closing Date
Representatives, or
Accepted Account Agreement, Seller shall only have
responsibility for any
liability or obligation arising from or relating to any
actions or failure to
act on or prior to the Closing Date;
(e) Any liability or obligations relating to a Rejected Account or
Rejected
Seller Representative
Agreement;
(f) Any liability or obligation arising out of any "employee
benefit plan," as
such term is defined
by the Employee Retirement Income Security Act of 1974
("ERISA") or other
employee benefit plans;
(g) Any liability or obligation for making payments of any kind
(including as a
result of the Transfer
or as a result of the termination of employment of
employees, or other
claims arising out of the terms and conditions of
employment, or for
vacation or severance pay or otherwise) to employees of
Seller, its Affiliates
and their respective direct and indirect subsidiaries,
or in respect of
payroll taxes for employees of Seller, its Affiliates and
their respective
direct and indirect subsidiaries;
(h) Any liability or obligation for making payments of any kind
with respect to
the Accounts, whether
to customers or other third parties, where such
liability or
obligation was incurred or arose prior to the Closing Date;
(i) Any liabilities or obligations in respect of any Excluded
Assets; and
(j) Any liability or obligation of Seller incurred in connection
with the making
or performance of this
Agreement and the transactions contemplated hereby
including, but not
limited to, any liability or obligation related to the
failure to secure any
necessary Governmental Authorizations.
2.5 Purchase
Price.
(a) The
aggregate purchase price for the Purchased Assets (the
"Purchase
Price") shall be an amount equal to thirty percent (30%) of the
Production, subject to adjustment as provided in Section 6.5(b).
The
amount of Production shown for the Accepted Seller Representatives
on
Schedule 2.1(b) is referred to herein as the "Estimated
Production
Amount." Within thirty (30) days after the Closing Date, Seller
and
Buyer shall adjust the Estimated Production Amount to account for
any
Accepted Seller Representatives who do not become Closing Date
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Representatives, and shall adjust the amount further on the
Second
Payment Date to account for the Accepted Seller Representatives
who
became licensed or otherwise engaged with the Buyer on the Closing
Date
but subsequently were terminated for cause or voluntarily resigned
or
terminated his or her relationship with Buyer prior to the
Second
Payment Date; provided, that Buyer did not take or fail to take
any
action (including reducing his or her commission payout rate)
which
directly caused or resulted in the resignation of such Closing
Date
Representative or the termination of the Closing Date
Representative's
relationship with Buyer.
(b) The
Purchase Price shall be payable by Buyer to Seller (or its
designee), as follows:
(1) Within two
(2) business days after the execution of this Agreement, the
Buyer shall pay to Seller, by wire transfer of immediate funds to
an
account designated by Seller, a deposit of Two Hundred Fifty
Thousand
Dollars ($250,000) (the "Prepayment Amount"), which shall be
applied
toward the Purchase Price on the Closing Date. Seller shall refund
to
Buyer the Prepayment Amount if this Agreement is terminated for
any
reason other than due to Buyer's breach of this Agreement.
(2) On the
Closing Date, Buyer shall deliver to Parent, for which Seller
shall accept as partial payment of the Purchase Price payment,
an
amount equal to the outstanding balance, including principal
and
accrued interest through the Closing Date, due under that
certain
Secured Convertible Promissory Note, dated December 7, 2007 made
by
Parent in favor of Buyer's Affiliate, AEFC FMFK Investment Corp.
(the
"Convertible Note") by cancelling and delivering the Convertible
Note
marked "cancelled" to Seller and Parent.
(3) On the
thirtieth (30th) day following the Closing Date, an amount
equal
to the lesser of Two Million Dollars ($2,000,000) or the balance of
the
Purchase Price, by wire transfer of immediately available funds to
an
account designated by Seller; and
(4) The
balance of the Purchase Price, if any, by wire transfer of
immediately available funds to an account designated by Seller, on
the
90th day after the Closing Date but in no event earlier than
January
15, 2009 (the "Second Payment Date").
(c)
Notwithstanding the foregoing, if (i) any Seller Representative
becomes
licensed and affiliated with Buyer or any affiliate of Buyer after
the
date hereof, and (ii) the Closing does not occur and such
Seller
Representative does not return to the Seller within thirty (30)
days of
the date of the termination of this Agreement, then Buyer shall pay
to
Seller an amount equal to 30% of the Production attributable to
each
such Seller Representative as reflected on Schedule 2.1(b) as
follows:
(1) Such
amount shall be first credited toward reducing the principal
amount of the Convertible Note and any interest thereon due and
payable
to Buyer by Parent; and
(2) If the
Convertible
Note is paid in full,
then such excess
amount
shall be paid in cash by Buyer to Parent within five (5) business days
of the termination of this Agreement.
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2.6 Performance Bonus Pro-ration. Within three (3) days prior to
the Closing
Date, the Buyer and Seller shall meet and mutually determine the
amount of
potential performance based compensation each Accepted Seller
Representative has
the right to be paid after the Closing Date under the Closing
Date
Representative Agreements, if any, assuming such person achieves
such
performance target after the Closing Date. The aggregate amount of
such
performance bonuses actually earned by Closing Date Representatives
and paid by
Buyer after the Closing Date is referred to herein as the
"Performance Based
Compensation Amount." The Seller shall reimburse to Buyer an amount
equal to the
Performance Based Compensation Amount multiplied by a fraction
where (i) the
numerator is the number of days in the performance period that
occurred on or
prior to the Closing Date and (ii) the denominator is the total
number of days
in the performance period. The Buyer shall have the right to reduce
the payment
due on the Second Payment Date for any amount owed but not
reimbursed by Seller
under this Section 2.6.
2.7 No Successor. Seller acknowledges and represents that (i) Buyer
is not
assuming any leases, commitments, obligations, or liabilities of
any nature of
Seller other than the Purchased Contracts, (ii) Buyer will not
employ any
employees of Seller (except as expressly provided herein), nor have
any
corporate management, officers or directors or shareholders in
common with
Seller, (iii) Seller is not receiving any equity in the Buyer nor
any rights of
ownership or rights to participate in the profits of the Buyer, and
(iv) nothing
contained herein or occurring as a result of the transactions
contemplated
hereby shall deem Buyer a successor in interest to Seller.
ARTICLE III
CLOSING
3.1 Closing. Subject to the terms and conditions of this Agreement,
the Closing
shall take place on such date, as soon as practicable after all
conditions
precedent in Articles VII and VIII have been satisfied or waived,
as the parties
may agree, at such place as shall be agreed upon by Buyer and
Seller.
3.2 Buyer Closing Deliveries. Subject to fulfillment or waiver of
the conditions
set forth in Article 7, at Closing, Buyer shall deliver to Seller
all the
following:
(a) The Convertible Note, together with a certificate showing the
aggregate
amount due there
under;
(b) A certificate of good standing for Buyer issued as of a recent
date by the
Secretary of State of
the State of placeStateDelaware;
(c) A certificate of the Secretary of Buyer, dated as of the
Closing Date, in
form and substance
reasonably satisfactory to Seller, as to (i) the Articles
of Incorporation of
Buyer; (ii) the by-laws of Buyer; (iii) the resolutions of
the Board of Directors
of Buyer authorizing the execution and performance of
this Agreement and the
contemplated transactions; and (iv) incumbency and
signatures of the
officers of Buyer executing this Agreement and any ancillary
agreements;
(d) The Assumption Agreement duly executed by Buyer; and
(e) The certificate contemplated by Section 8.1, duly executed by
an executive
officer of Buyer.
3.3 Seller's
Deliveries Upon Closing
(a) A certificate of good standing of Seller issued as of a recent
date by the
Secretary of State of
the State of placeStateNew York;
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(b) A certificate of the Secretary of Seller, dated as of the
Closing Date, in
form and substance
reasonably satisfactory to Buyer, as to: (i) the Articles
of Incorporation of
Seller; (ii) the By-laws of Seller; (iii) the resolutions
of the Board of
Directors of Seller and its shareholder authorizing the
execution and
performance of this Agreement and the contemplated
transactions;
and (iv) incumbency
and signatures of the officers of Seller executing this
Agreement and any
ancillary agreements;
(c) A certificate of good standing of Parent issued as of a recent
date by the
Secretary of State of
the State of placeStateNew Jersey;
(d) A certificate of the Secretary of Parent, dated as of the
Closing Date, in
form and substance
reasonably satisfactory to Buyer, as to: (i) the Articles
of Incorporation of
Parent, (ii) the By-laws of Parent; (iii) the resolutions
of the Board of
Directors of Parent and its shareholders authorizing the
execution and
performance of this Agreement and the contemplated
transactions;
and (iv) incumbency
and signatures of the officers of Parent executing this
Agreement and any
ancillary agreements;
(e) An Instrument of Assignment, in the form attached hereto as
Exhibit B, duly
executed by
Seller;
(f) The Governmental Authorizations and Required Consents (as
defined in Section
4.6 hereof);
(g) The certificate contemplated by Section 7.1(c), duly executed
by the
authorized officer of
Seller;
(h) Buyer shall have received a legal opinion from Becker &
Poliakoff, LLP
("Becker Poliakoff"),
legal counsel to Seller, dated the Closing Date, in a
form satisfactory to
Buyer and its legal counsel; and
(i) Such other bills of sale, assignments and other instruments of
transfer or
conveyance as Buyer
may reasonably request or as may be otherwise necessary to
evidence and effect
the sale, assignment, transfer, conveyance and delivery of
the Purchased Assets
to Buyer.
In addition to the above deliveries, Seller shall take all
steps and actions as Buyer may reasonably request or as may
otherwise be
necessary to put Buyer in actual possession or control of the
Purchased Assets
or to effect the Transfer.
3.4 Post
Closing Date Transactions.
(a) All income and expenses attributable to the servicing of the
Accepted
Accounts and the
activities of Closing Date Representatives accruing on or
after the Closing Date
shall accrue to the accounts of the Buyer.
(b) If payments are received by the Buyer that are attributable to
the servicing
of the Accepted
Accounts and/or the activities of Closing Date Representatives
occurring prior to the
Closing Date, and any Closing Date Representative has
been paid with respect
to such income, Buyer shall promptly forward such
amounts to Seller.
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(c) If payments are received by the Seller that are attributable to
the
servicing of the
Accepted Accounts and/or the activities of Closing Date
Representatives
occurring prior to the Closing Date, and any Closing Date
Representative has not
been paid with respect to such income, Seller shall
promptly forward such
amounts to Buyer, and Buyer shall be responsible for
making appropriate
payment to the Closing Date Representative.
(d) If payments are received by the Seller from any source related
to the
servicing of the
Accepted Accounts (such as insurance premiums, commissions,
12(b)-1 trailers and
the like) or the activities of Closing Date
Representatives for
transactions with a trade date on or after the Closing
Date (except with
respect to 12(b)-1 trail payments, for which the date of
payment shall apply,
rather than the trade), Seller shall promptly forward
such amounts to
Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Each representation and warranty set forth below is qualified by
any
exception or disclosures set forth in the Seller Disclosure
Schedule attached
hereto, which exceptions specifically reference the Section(s) to
be qualified.
In all other respects, each representation and warranty set out in
this Article
IV is not qualified in any way whatsoever, will not merge on
Closing or by
reason of the execution and delivery of any agreement, document or
instrument at
the Closing, will remain in force on and after the Closing Date for
such time as
the indemnity for the breach thereof shall survive as set forth in
Sections 9.1.
Seller and Parent represent and warrant to Buyer as follows:
4.1 Organization, Standing and Power. Seller is a corporation duly
organized,
validly existing and in good standing under the laws of
placeStateNew York.
Parent is a corporation duly organized, validly existing and in
good standing
under the laws of placeStateNew Jersey. Each of Parent and Seller
has the
requisite corporate power and authority and all necessary
permits,
authorizations, consents, and approvals of all Governmental
Entities to own,
lease and operate its properties and to carry on its business as
now being
conducted and as proposed to be conducted, except where the failure
to have such
power, authority and governmental approvals would not, individually
or in the
aggregate, have a Material Adverse Effect. Each of Parent and
Seller is duly
qualified or licensed as a foreign corporation to do business, and
is in good
standing, in each jurisdiction where the character of the
properties owned,
leased or operated by it or the nature of its business makes such
qualification
or licensing necessary, except for failures to be so qualified or
licensed and
in good standing that would not, individually or in the aggregate,
have a
Material Adverse Effect.
4.2 Authority. The execution and delivery of this Agreement (and
all other
agreements and instruments contemplated under this Agreement) by
each of Parent
and Seller, the performance by each of Parent and Seller of its
obligations
hereunder and thereunder, and the consummation by each of Parent
and Seller of
the transactions contemplated hereby and thereby have been duly
authorized by
all necessary action by the board of directors of each of Parent
and Seller, and
will, by the Closing Date, be approved by the stockholders of
Parent, and no
other act or proceeding on the part of or on behalf of Parent or
Seller or its
respective shareholders is necessary to approve the execution and
delivery of
this Agreement and such other agreements and instruments, the
performance by
each of Parent and Seller of its obligations hereunder and
thereunder and the
consummation of the transactions contemplated hereby and thereby.
The signatory
officers of each of Parent and Seller have the power and authority
to execute
and deliver this Agreement and all of the other agreements and
instruments to be
executed and delivered by Parent and/or Seller pursuant hereto, to
consummate
the transactions hereby and thereby contemplated and to take all
other actions
required to be taken by Parent or Seller pursuant to the provisions
hereof and
thereof.
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4.3 Execution and Binding Effect. This Agreement has been duly and
validly
executed and delivered by each of Parent and Seller and
constitutes, and the
other agreements and instruments to be executed and delivered by
Parent and/or
Seller pursuant hereto, upon their execution and delivery by Parent
and/or
Seller, will constitute (assuming, in each case, the due and
valid
authorization, execution and delivery thereof by Buyer) legal,
valid and binding
agreements of Seller, enforceable against Seller in accordance with
their
respective terms, except as enforceability may be limited by
bankruptcy,
insolvency, moratorium, or other laws affecting the enforcement of
creditors'
rights generally or provisions limiting competition, and by
equitable
principles.
4.4 Consents and Approvals of Governmental Entities. Other than the
Governmental
Authorizations as set forth in Schedule 4.4, there is no
requirement applicable
to the Seller or Parent to make any filing, declaration or
registration with, or
to obtain any permit, authorization, consent or approval of, any
Governmental
Entity as a condition to the lawful consummation by Seller or
Parent of the
transactions contemplated by this Agreement and the other
agreements and
instruments to be executed and delivered by Seller and/or Parent
pursuant hereto
or the consummation by Seller and Parent of the transactions
contemplated herein
or therein. Seller and Buyer acknowledge and agree that prior to
the Closing,
FINRA will be notified of the Transfer and as a condition precedent
to the
Closing, FINRA shall have approved the Transfer.
4.5 No Violation. Neither the execution, delivery and performance
of this
Agreement and all of the other agreements and instruments to be
executed and
delivered pursuant hereto, nor the consummation of the transactions
contemplated
hereby or thereby, will, with or without the passage of time or the
delivery of
notice or both, (a) conflict with, violate or result in any breach
of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws
of Parent or
Seller or their Affiliates, (b) conflict with or result in a
violation or breach
of, or constitute a default or require consent of any Person (or
give rise to
any right of termination, cancellation or acceleration) under, any
of the terms,
conditions or provisions of any contract, notice, bond, mortgage,
indenture,
license, franchise, permit, agreement, lease or other instrument or
obligation
to which Seller or Parent is a party or by which Seller or Parent
or any of the
Accounts may be bound, (c) violate any statute, ordinance or law or
any rule,
regulation, order, writ, injunction or decree of any Governmental
Entity or
Regulator applicable to Parent or Seller or by which any properties
or assets of
Seller or Parent may be bound, or (d) result in any cancellation
of, or
obligation to repay, any grant, loan or other financial assistance
received by
Seller or Parent from any Governmental Entity. No "bulk sales"
legislation
applies to the transactions contemplated by this Agreement.
4.6 Consents. Schedule 4.6 sets forth each agreement, contract or
other
instrument binding upon Seller or Parent requiring a consent as a
result of the
execution, delivery and performance of this Agreement and the
consummation of
the transactions contemplated hereby (including consents necessary
to transfer
the Accepted Accounts and the Closing Date Representative
Agreements to the
Buyer) (each a "Required Consent").
4.7 Filings; No Undisclosed Liabilities. Seller has filed all
forms, reports,
schedules, statements and other documents required to be filed by
it since
January 1, 2007 (as supplemented and amended) (collectively, the
"Seller's
Reports"), with each Governmental Entity, including without
limitation the SEC,
FINRA and the NYSE, each of which filings complied when filed in
all material
respects with applicable requirements. All of the information
contained in the
Seller's Reports was prepared from the books and records of the
Seller regularly
maintained by management. None of the Seller's Reports contained at
the time
filed any untrue statement of a material fact or omitted to state
any material
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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. There is no liability, indebtedness, obligation,
expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued,
absolute,
contingent, matured, unmatured or other, with respect to any of the
Accounts or
the Independent Contractor Representative Agreements.
4.8 Absence of Certain Changes. Seller has operated the Accounts in
the ordinary
course consistent with past practice and Seller has complied in all
material
respects with laws and regulations applicable to the Accounts, has
not commenced
a lawsuit or other proceeding related to or involving the Accounts,
and has not
assigned, sold or otherwise conveyed to any third party, any of the
Accounts
prior to the Closing Date.
4.9 Accounts
and Independent Contractor Registered Representative
Agreements Generally.
(a) Other than the Required Consents and the Governmental
Approvals, no licenses
or other consents
from, or payments to, any other Person are or will be
necessary for Buyer to
service the Accounts or the Independent Contractor
Representative
Agreements in the manner in which Seller has serviced the same.
(b) Seller has the complete and unrestricted power and the
unqualified right to
sell, assign and
deliver the right to service the Accounts and Seller's rights
under the Independent
Contractor Representative Agreements to Buyer. Upon
consummation of the
transactions contemplated by this Agreement, Buyer will
have acquired the
right to service the Accepted Accounts and Seller's rights
under the Closing Date
Representative Agreements free and clear of any Liens
and to Seller's
Knowledge, there will exist no restriction on the use or
transfer of the right
to service the Accepted Accounts and Seller's rights
under the Closing Date
Representative Agreements. No Person other than Seller
has any right or
interest in the right to service the Accounts and in Seller's
rights under the
Independent Contractor Representative Agreements, including
the right to grant
interests in the right to service the Accounts and the
Seller's rights under
the Independent Contractor Representative Agreements to
third parties.
(c) To Seller's Knowledge, no restrictions will exist on Buyer's
right to resell
the servicing of the
Accepted Accounts or the rights under the Closing Date
Representative
Agreements, nor will any such restrictions be imposed on Buyer
as a consequence of the
transactions contemplated by this Agreement or by any
agreement referenced
in this Agreement or otherwise.
(d) Except as occurs in the normal course of business (e.g. pending
ACATS), the
Seller has not
received a notice from any holder of an Account or Seller
Representative that
such customer or registered representative intends to
transfer the servicing
responsibility for his, her or its Account to an entity
other than Buyer.
4.10 Licenses and Permits. Seller holds all consents, approvals,
registrations,
certifications, authorizations, permits and licenses of, and has
made all
filings with, or notifications to, all Governmental Entities
pursuant to
applicable requirements of such Governmental Entities applicable to
the
servicing of the Accounts and/or any Independent Contractor
Representative
Agreement. There is no investigation or inquiry to which Seller is
a party or,
to Seller's knowledge, pending or threatened, relating to the
Accounts and/or
any Independent Contractor Representative Agreement.
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4.11 Taxes. All Taxes have been or will be paid or properly accrued
for by
Seller for all periods (or portions thereof) prior to and including
the Closing
Date. Seller and any other person required to file returns or
reports of Taxes
have duly and timely filed (or will file prior to the Closing Date)
all returns
and reports of Taxes required to be filed prior to such date, and
all such
returns and reports are true, correct, and complete. There are no
liens for
Taxes on any of the Accepted Accounts. There are no pending or
threatened
proceedings with respect to Taxes, and there are no outstanding
waivers or
extensions of statutes of limitations with respect to assessments
of Taxes.
4.12 Compliance with Law. The servicing of the Accounts by Seller
and the
exercise of Seller's rights under the Independent Contractor
Registered
Representative Agreements have been conducted in all material
respects in
accordance with all applicable laws, regulations and other
requirements of
Governmental Entities having jurisdiction over the same.
4.13
Litigation; Other Claims. Except as set forth in Schedule
4.13:
(a) There are no claims, actions, suits, inquiries, proceedings,
or
investigations against
Seller, or any of its officers, directors, shareholders
or registered
representatives seeking monetary or other damages, which are
currently pending or,
to Seller's Knowledge, threatened, at law or in equity
or before or by any
Governmental Entity, or which challenge or seek to
prevent, enjoin, alter
or materially delay any of the transactions
contemplated hereby,
nor is Seller aware of any basis for such claims,
actions, suits,
inquiries, proceedings, or investigations.
(b) There are no unresolved customer complaints or actions related
to any of the
Accounts, nor are
there any customer complaints or actions that are currently
pending or, to
Seller's Knowledge, threatened, and Seller is not aware of any
basis for such
complaints or actions other than those listed in Schedule 4.13.
Within thirty (30)
days of the date of this Agreement, Seller shall prepare
Schedule 4.13 which
shall include a list of customer complaints with respect
to Accepted Seller
Representatives within the twelve (12) months prior to the
Closing Date, along
with the details and a brief description thereof.
(c) No Governmental Entity has issued an order, decree or ruling or
taken any
other action
restraining, enjoining or otherwise prohibiting the
transactions
contemplated by this
Agreement.
4.14 Defaults. Seller is not in default under or with respect to
any judgment,
order, writ, injunction or decree of any court or any Governmental
Entity, which
could reasonably be expected to prevent or delay the Closing. There
does not
exist any default by Seller or, to Seller's Knowledge, by any other
Person, or
event that, with notice or lapse of time, or both, would constitute
a default
under any agreement entered into by Seller, and no notices of
breach thereof
have been received by Seller.
4.15 Schedules. All of the schedules attached hereto, including
those describing
the Accounts and the Independent Contractor Representative
Agreements are
complete and accurate.
4.16 Full Disclosure. Except as disclosed in this Agreement and
the
Schedules and Exhibits hereto, Parent and Seller are not aware of
any facts
pertaining to the Accounts or the Independent Contractor
Representative
Agreements which affect the Accounts or Independent Contractor
Representative
Agreements in an adverse manner or which will likely in the future
affect the
Accounts or Independent Contractor Representative Agreements in an
adverse
manner, including the existence of customer complaints,
arbitration, litigation
of any sort, margin calls, unsecured deficits and the like, or
regulatory
investigations or inquiries. Neither this Agreement nor any other
agreement,
exhibit, schedule or certificate being entered into or delivered
pursuant to
this Agreement contains any untrue statement of a material fact or
omits to
state any m
