Exhibit 10.1(a)
PLAN AND AGREEMENT OF EXCHANGE
PLAN AND AGREEMENT OF EXCHANGE, dated June 29, 2001, by and
among THCG, INC., a Delaware corporation with offices at 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, XX 00000 ("THCG"), XXXXXX & CO. SECURITIES, INC., a New
Jersey corporation with offices at 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000 (the "Company"), and STAR CROSS, INC., a Delaware corporation with offices
at 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 (the "Sole Shareholder").
W I T N E S S E T H:
WHEREAS, the parties hereto propose to enter into this Exchange
Agreement to provide for the acquisition by THCG from the Sole Shareholder of
all of the outstanding shares of capital stock of the Company in exchange for
shares of common stock, $ .01 par value per share (the "Common Stock"), of THCG
(the "Exchange"); and
WHEREAS, THCG is authorized to issue (i) 100,000,000 shares of Common
Stock, of which an aggregate of 14,216,069 shares will be issued and outstanding
on the Closing Date (as hereinafter defined); and (ii) 10,000,000 shares of
Preferred Stock, par value $.001 per share, of which 5,000 have been designated
Series A Convertible Participating Preferred Stock ("Series A Preferred Stock"),
none of which will be issued and outstanding on the Closing Date; and
WHEREAS, the Company is authorized to issue 1,000 shares of common
stock, $.01 par value per share, of which an aggregate of 100 shares will be
issued and outstanding on the Closing Date and all of which are owned by the
Sole Shareholder; and
WHEREAS, the Sole Stockholder desires to acquire shares of Common Stock
of THCG (the "THCG Shares") in exchange for all of the issued and outstanding
shares of Company common stock (the "Company Shares") in a transaction that will
qualify as a "tax free reorganization" pursuant to the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1986; and
WHEREAS, the parties desire to set forth in this Exchange Agreement
certain representations, warranties, agreements and conditions with respect to
the Exchange;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. THE EXCHANGE. On the Closing Date and in accordance with the
provisions of this Exchange Agreement (a) the Sole Shareholder shall sell,
assign, transfer, convey and deliver to THCG good and marketable title to the
Company Shares free and clear of all liens, claims, pledges, restrictions,
obligations, security interests and encumbrances of any kind, nature and
description, save only those relating to the transfer of such shares under
federal and state securities laws, and (b) THCG shall issue to the Sole
Shareholder the THCG Shares, free and clear of all liens, claims, pledges,
restrictions, obligations, security interests and encumbrances of any kind,
nature and description, save only those relating to the transfer of such shares
under federal and state securities laws, all in accordance with the terms and
conditions of this Exchange Agreement.
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2. TERMS OF THE EXCHANGE.
(a) Rate of Exchange. The Company Shares delivered by the Sole
Shareholder shall be exchanged for that number of shares of THCG Common Stock
equal to the number obtained by (i) first dividing (a) the sum of (t) the total
number of shares of THCG Common Stock outstanding at the close of business on
the day immediately prior to the Closing Date, and (y) the number of shares of
THCG Common Stock issuable upon the exercise of options and warrants outstanding
at the close of business on the day immediately prior to the Closing Date at an
exercise price of $1.00 or less per share (collectively, the "Outstanding THCG
Shares") by (b) thirty-two and 34/100 (32.34%) percent, then (ii) subtracting
from such quotient the number of Outstanding THCG Shares, and then (iii)
subtracting 1% of such number, which shall be paid as a finder's fee pursuant to
Section 10 hereof. An example of the calculation of shares is set forth on
Schedule 2(a), which example is for illustrative purposes only. For Purposes of
this paragraph, "Outstanding THCG Shares" shall mean shares physically issued or
obligated to be issued where issuance or physical delivery has not been
effected.
(b) Execution and Closing of the Exchange. This Exchange Agreement has
been executed on June 29, 2001 (the "Execution Date"). The closing (the
"Closing") of the Exchange shall take place on July 11, 2001. If all the
conditions of Closing are not met by July 11, 2001, the Closing will be extended
to the earliest possible date not later than August 31, 2001. If all of the
conditions of Closing have not been met by August 31, 2001, each of the parties
hereto may terminate this Agreement
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without penalty; provided that if one of the parties hereto is in compliance, it
may waive the closing conditions of the non-complying party in its discretion.
(c) Officers and Directors. At the Closing, the officers and directors
of THCG as set forth on Schedule 2(c) shall resign and the duly elected and
remaining directors of THCG shall cause the new officers and directors set forth
on Schedule 2(c) to be duly elected as officers and directors of THCG and
committees shall be reappointed or disbanded at the discretion of the Sole
Shareholder
(d) Further Assurances. From time to time from and after the Closing
Date, the parties shall execute and deliver, or cause to be executed and
delivered, any and all such further agreements, certificates and other
instruments, and shall take or cause to be taken any and all such further
action, as any of the parties may reasonably deem necessary or desirable in
order to carry out the intent and purposes of this Exchange Agreement.
(e) Restricted Securities. The THCG Shares to be issued in exchange for
the Company Shares shall be "restricted securities" as that term is defined
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), and may not be sold, transferred or assigned by the
holder thereof unless a registration statement has been filed with the
Securities and Exchange Commission and such registration statement has been
declared effective or unless there is a valid exemption from registration
available therefore.
3. Representations and Warranties of the Sole Shareholder. The Sole
Shareholder hereby represents, warrants and agrees with THCG as follows:
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(a) Corporate.
(1) The Company is a corporation duly organized, validly existing and
in good standing under and by virtue of the laws of the State of New Jersey.
Except as set forth on Schedule 3(a)(1), the Company is not qualified to do
business as a foreign corporation in any other jurisdiction and is not required
to be so qualified, whether by the ownership of assets, through the nature and
conduct of its business or otherwise except where the failure to so qualify
would not have a material adverse affect on the Company.
(2) The Company has the power to own its properties and to carry on its
business as and where such property is owned and such business is conducted and
to enter into and perform its obligations under this Exchange Agreement. Except
as set forth of Schedule 3(a)(2), or in carrying on its ordinary course of
business as a broker-dealer, the Company does not have any equity interest in
any other corporation, partnership, joint venture or association or control,
directly or indirectly, any other entity. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued, are fully paid and non-assessable, were not issued in violation of, or
subject to, any preemptive or similar rights and there are no outstanding
preemptive, conversion or other rights, warrants, options, agreements or
commitments of any kind obligating the Company or the Sole Shareholder,
contingently or otherwise, to issue or sell any shares of capital stock of the
Company or any securities convertible into or exercisable or exchangeable for
any such shares, or instruments convertible into or exercisable or exchangeable
for, or agreements or
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understandings with respect to the sale or issuance of, any shares of capital
stock or other equity interests in the Company.
(3) The Sole Shareholder is a corporation duly organized, validly
existing and in good standing under and by virtue of the laws of the State of
Delaware. The Sole Shareholder has the power to own its properties and to carry
on its business as and where such properties are owned and such business is
conducted and to enter into and perform its obligations under this Exchange
Agreement. The names of the shareholders of the Sole Shareholder and their
percentage ownership is set forth on Schedule 3(a)(3).
(4) The authorized capital stock of the Company consists solely of
1,000 shares of common stock, $.01 par value, of which 100 shares are issued and
outstanding on the date hereof and will be issued and outstanding on the Closing
Date. The Sole Shareholder owns all of the issued and outstanding capital stock
of the Company, free and clear of all encumbrances., All of the issued and
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and non-assessable. Except as set forth on Schedule
(3)(a)(4), there are no issued or outstanding shares of capital stock of the
Company. All of such Company Shares are owned free and clear of any charge,
encumbrance, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal or restriction
of any kind, including any restriction on use, voting, transfer, receipt of
income or exercise of any other attribute of ownership (collectively, "Liens").
(5) The execution, delivery and performance of this Exchange Agreement,
and the consummation of the transactions contemplated hereby, have been duly and
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validly authorized by all necessary corporate or other action on the part of the
Company and the Sole Shareholder, including their respective shareholders, if
necessary, and no other corporate or other proceedings on their part are
necessary to authorize this Exchange Agreement or the transactions contemplated
hereby (including the Exchange). This Exchange Agreement has been duly executed
by the Company and the Sole Shareholder and constitutes the legal, valid and
binding obligation of each of the Company and the Sole Shareholder, enforceable
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights and
remedies of creditors generally, and by general principles of equity.
(6) The Company and the Sole Shareholder have each delivered to THCG a
true, correct and complete copy of their certificate of incorporation, as
amended, and by-laws as in effect on the date hereof.
(7) The Company has no subsidiaries.
(8) Attached hereto as Schedule 3(a)(8) is a complete list of the duly
elected and serving officers and directors of each of the Company and the Sole
Shareholder, indicating the annual salaries of such officers
(b) Financials.
(1) The audited financial statements of the Company consisting of
balance sheets and profit and loss statements, cash flows and retained earnings
for the years ended September 30, 1998, September 30, 1999 and September 30,
2000 and the unaudited financial statements of the Company consisting of a
balance sheet, profit and loss statement, cash flows and retained earnings for
the eight months ended May
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31, 2001 (hereinafter collectively referred to as the "Financial Statements")
delivered to THCG have been prepared from the books and records of the Company
in accordance with generally accepted accounting principles consistently applied
("GAAP"), are complete and correct in all material respects and present fairly
in all material respects the financial position and results of operations of the
Company as of the end of and for the periods then ended.
(2) Except as set forth in Schedule 3(b)(2) or in the Company's May 31,
2001 financial statements which have been delivered to THCG, since September 30,
2000, the business of the Company has been carried on in the ordinary course in
substantially the same manner as prior to that date, and there has not been:
(i) any Material Adverse Change. "Material Adverse Change" shall
mean any material adverse effect on, or change in, the condition (financial or
otherwise), business, results of operations, assets, liabilities, or prospects
or any event, condition or state of facts which with the passage of time would
be reasonably likely to have such a material adverse effect; any damage,
destruction or loss, whether covered by insurance or not, which has materially
and adversely affected the business, assets or operations of the Company;
(ii) any declaration, setting aside or payment of any dividend, or
any distribution with respect to the capital stock of the Company or any direct
or indirect redemption, purchase or other acquisition by the Company of any such
stock;
(iii) any increase in the compensation payable or to become payable
by the Company to directors, officers, employees or agents, other than as set
forth on Schedule 3(b)(2)(iii) or as mandated by law with respect to minimum
wages, or
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any payment of any bonus or any pension or benefit plan, payment or arrangement
made to, for or with any director, officer, employee or agent;
(iv) any other event or condition of any character, not in the
ordinary course of business, that has had or is reasonably likely to have a
Material Adverse Change on the Company;
(v) any incurrence of indebtedness for borrowed money by the
Company or the imposition of any Lien on any material assets or properties of
the Company;
(vi) any sale of other disposition of any material properties or
assets by the Company; or
(vii) any entry into or termination by the Company of any material
agreement, license or other obligation binding on the Company, other than in the
ordinary course of business, consistent with past practice, none of which will
have a Material Adverse Change on the Company.
(c) Undisclosed Liabilities.
(1) Except as set forth on Schedule 3(c)(1), the Company has no
liabilities or obligations, either accrued, absolute, contingent or otherwise,
except:
(i) to the extent reflected or reserved against in the Financial
Statements and not heretofore paid or discharged; and
(ii) those incurred in the normal and ordinary course of business
since September 30, 2000, all of which have been consistent with past practices
and none of which (x) arises out of, relates to, is in the nature of, or was
caused by any
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breach of contract, breach of warranty, tort, infringement or violation of law,
or (y) individually or in the aggregate will have a Material Adverse Change on
the Company.
(2) Except as set forth on Schedule 3(c)(2) or in the Company's May 31,
2001 financial statements, the Company is not aware of any reasonable basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, demand or claim against the Company or any liability of any nature in
any material amount arising out of or relating to facts occurring prior to the
Closing not fully set forth in the financial statements previously delivered,
except for liabilities incurred in the ordinary course of business since May 31,
2001 disclosed in the May 31, 2001 financial statements which individually or
collectively will not have a Material Adverse Change on the Company.
(d) Tax Returns.
(1) The Company has filed on a timely basis (including any extensions)
with the appropriate Governmental Bodies in the applicable jurisdictions either
each Tax Return that it is due to file or a valid request for extension with
respect to that Tax Return. All Tax Returns filed by the Company are accurate
and complete in all material respects. The Company has paid fully on a timely
basis all Taxes due except those Taxes that it is contesting in good faith by
appropriate proceedings or as to which the Company has set aside adequate
reserves determined in accordance with GAAP and stated in its Financial
Statements.
(2) Except as stated in Schedule 3(d) there are no material claims or
assessments pending against the Company for any alleged deficiency in any Tax,
there are no pending or to the Company's knowledge threatened audits or
investigations for
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or relating to any liability in respect of any Tax, and the Company has not been
notified in writing of any proposed Tax claims or assessments against it. The
financial consequences to the Company, as applicable, arising from any items
listed on Schedule 3(d) will be as stated in Schedule 3(d). There are no Liens
for material amounts of Taxes on the properties or assets of the Company except
for statutory Liens for current Taxes not yet due and payable. The Company has
not been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of its Taxes or Taxes for which it may be liable. The
Company has no liability for the Taxes of any other Person. The Company has not,
with regard to any assets or property held, acquired, or to be acquired by it,
filed a consent to the application of Section 341(f) of the Code, or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a "subsection (f)
asset" (as that term is defined in Section 341(f)(4) of the Code) owned by it.
All Persons who are treated as independent contractors by the Company are
properly classified as such by it.
(3) The Company is not a party to any agreement, arrangement or
contract providing for the allocation, indemnification or sharing of Taxes. The
Company is not a party to any agreement, contract or arrangement that could
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(4) The Company is not, or has been for the five-year period preceding
the Closing, a U.S. real property holding corporation as defined in Section
897(c)(2) of the Code.
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(5) As used in this Section 3 (d) and elsewhere in this agreement, the
following terms shall have the meanings given below:
(i) "Governmental Body" means any (1) nation, state, county, city,
town, village, district, or other jurisdiction of any nature, (2) federal,
state, local, municipal, foreign, or other government, (3) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal,
including an arbitral tribunal), (4) multi-national organization or body, or (5)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
(ii) "Person" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
Governmental Body or other entity.
(iii) "Taxes" means all taxes, duties, assessments or governmental
charges, including income, gross receipts, windfall profits, value added,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties, imposed by any Governmental Body having the power to tax.
(iv) "Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body
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in connection with the determination, assessment, collection, or payment of any
Tax or in connection with the administration, implementation, or enforcement of
or compliance with any law relating to any Tax.
(e) Title to Property.
(1) The Company does not lease any real or personal property as
lessee, except as set forth in Schedule 3(e)(1). Each of these leases (the
"Company Leases") is in good standing, valid, binding and in full force and
effect and has not been modified. The Company is not in default in any material
respect under any of the Company Leases and has not received any notice of its
default under any of the Company Leases, and the Company has not given any
notice of any, and, to the best of the Company's knowledge there is no default
in any material respect by any other party under any of the Company Leases, nor
has any event occurred which, with notice or the passage of time, or both, would
constitute a default in any material respect by any other party under any of the
Company Leases. Except as set forth on Schedule 3(e)(1), the Company's rights in
the property covered under the Company Leases (including any improvements and
appurtenances thereto) are paramount to the rights of any other person or entity
other than the lessors under the Company Leases. No consent or approval of any
third party is required with respect to any Company Lease in order to avoid a
default thereunder by reason of the transactions contemplated by this Exchange
Agreement, except as set forth on Schedule 3(e)(1). The Company has received no
notices other than periodic rent, common area maintenance and other operating
expense bills from the lessor under each Company Lease, other than as described
in Schedule 3(e)(1).
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(2) The Company has valid, good and marketable title to, or a valid
and enforceable leasehold, license or other interest in, all real and personal
property it owns or uses in the conduct of its business, free and clear of any
and all material Liens.
(3) All real property in which the Company has a leasehold
interest, and all material tangible personal property owned, leased or loaned by
the Company (collectively, the "Company Properties"), is in good operating
condition and repair and in all material respects conforms to all applicable
laws, including building and zoning laws, statutes, ordinances or regulations,
and no notice of any violation of such matters relating to the business,
property or assets of the Company has been received by the Company. Except as
set forth on Schedule 3(e)(3), none of the real property leased by the Company
is in need of maintenance or repairs except for reasonable wear and tear and
ordinary routine maintenance and repairs that are not material in nature or
cost.
(4) The Company does not own any real property.
(f) Material Contracts and Commitments. Except in the ordinary course
of carrying on its business as a broker-dealer or as set forth on the attached
Schedule 3(f):
(1) The Company has no written or oral contracts, guarantees or
commitments involving the payment or receipt of consideration in excess of
$20,000, is not a party to any contract, agreement or other binding obligation
involving the payment or receipt of consideration in excess of $20,000 or (a)
relating to any labor union; (b) for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment materially in excess of
normal operating requirements; (c) for the employment of any officer, individual
employee or other person on a full-time basis or with any Person on a consulting
basis; (d) that is an indenture relating to the borrowing
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of money or to the placing of a Lien on any asset of the Company; (e) that is or
represents indebtedness of a guaranty of any obligation for borrowed money; (f)
under which the Company is lessee of or holds or operates any property, real or
personal, owned by any other Person; (g) under which the Company is lessor of or
permits any Person to hold or operate any property, real or personal, owned or
controlled by the Company; (h) for capital expenditures in excess of $20,000;
(i) under which the Company is obligated to pay any broker's fees, finder's fees
or any such similar fees, to any Person; (j) relating to the holding, sale or
other transfer, voting or registration under the securities laws of any country
of any securities of the Company; (k) which prohibits the Company from engaging
in any line of business or in any location or from hiring any person; or (l)
which is otherwise material to the business of the Company (collectively, the
"Material Contracts"). The Company has delivered to THCG a true, correct and
complete copy of each of the Material Contracts, a list of which is set forth on
Schedule 3(f). All of the Material Contracts are in full force and effect and
constitute the valid and binding obligations of the Company and, to the
knowledge of the Company, the other parties thereto, enforceable in accordance
with their respective terms.
(2) The Company is not in default under any contract, whether
express or implied, between the customers or clients of the Company and the
Company and the Company has not received written notice in respect of such
contract that the services to be provided by the Company under the contract fail
to comply with the contract, that any material contract has been terminated or
that a customer or client intends to terminate any contract or materially reduce
purchases of the Company's services.
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(3) The Company has not given any revocable or irrevocable power of
attorney to any person, firm or corporation for any purpose whatsoever.
(4) The Company is not restricted by agreement from carrying on its
business in any state.
(5) No director, officer or stockholder of the Company, or member
of the family of any such person, or any corporation, partnership, trust or
other entity in which any such person, or any member of the family of any such
person, has a material interest or in which any such person is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a competitor, customer, supplier or other entity, which,
during the past 12 months, has been a party to any transaction with the Company,
including any contract, agreement or other arrangement providing for the
employment of (exclusive of the Company's officers), furnishing of services by,
rental of real or personal property from, or otherwise requiring payments by or
to any such person or entity.
(6) The Company is not in default, nor is there any reasonable
basis known to the Company for any claim of default, under any contracts or
commitments made or obligations owed by it, which default has had or is
reasonably likely to have a Material Adverse Change on the Company. The Company
has no present expectation or intention of not fully performing all its
obligations under any lease, contract or other agreement to which it is a party,
or by which it may be bound, and the Company has no knowledge of any breach or
anticipated breach in any material respect by the other party to any lease,
contract or commitment to which the Company is a party or by which it may be
bound. No consent or approval of any third party is required with respect to
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any such lease, contract or commitment in order to avoid a default thereunder by
reason of the transactions contemplated by this Exchange Agreement. The Company
is in full compliance with all of the terms and provisions of its Charter and
By-Laws, as amended.
(7) To the best of the Sole Shareholder's knowledge, all accounts
receivable of the Company as at May 31, 2001 and that have arisen since then
arose in the ordinary course of business, are current and collectible in the
ordinary course of business consistent with past practices of the Company,
without resort to litigation, except to the extent reserved against in the
Financial Statements. None of the account debtors with respect to such
receivables has any defense, counterclaim or offset with respect thereto.
(g) Employee Relations.
(1) Annexed hereto as Schedule 3(g)(1) is a true and complete
payroll roster of all employees of the Company as of May 31, 2001 showing the
current annual rate of pay for each such person entitled to receive compensation
from the Company, and the gross payments made to each such person for the year
ended September 30, 2000. No increases in such salaries, other than as set forth
on Schedule 3(b)(2)(iv), have been given since May 31, 2001.
(2) (i) The Company is not a party to any collective bargaining
agreement covering or relating to any of its employees. The Company is not
required to recognize and has not received a demand for recognition by any
collective bargaining representative;
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(ii) The Company is not a party to any contract with any of its
employees, agents, consultants, officers, salesmen, sales representatives,
distributors or dealers that is not cancelable by the Company without penalty or
premium on not more than thirty days' notice except as set forth in Schedule
3(g)(2)(ii);
(iii) The Company is not a party to any employment agreement or
consulting agreement, except as set forth in Schedule 3(g)(2)(iii); and
(iv) The Company has not promulgated any policy or entered into
any agreements relating to the payment of severance pay to employees whose
employment is terminated or suspended, voluntarily or otherwise, except as set
forth in Schedule 3(g)(2)(iv).
(3) Except as set forth in the schedules attached hereto, the
Company (i) has complied in all material respects with all applicable laws,
rules or regulations relating to employment, including those relating to wages,
hours, collective bargaining and the withholding and payment of taxes and
contributions, and (ii) has complied in all material respects with the National
Labor Relations Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, the Occupational Safety and Health Act,
Executive Order 11246, the regulations under such acts and all other Federal and
state laws relating to the employment of labor, including any provisions thereof
relating to discrimination or harassment. The Company has, and will have at the
Closing Date, withheld all amounts required by law or agreement to be withheld
from the wages or salaries of its employees and there are no arrearages of
wages, payments under any pension or insurance plan or any other benefit, or any
tax or penalty for failure to comply with the foregoing owed by all of them with
respect to
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employees which are not either accrued or adequately reserved for in the
Financial Statements or set forth on Schedule 3(g)(3). There are no material
controversies pending or, to the Company's knowledge, threatened, between the
Company and (A) any of its employees, or (B) any labor unions or other
collective bargaining agents representing or purporting to represent its
employees.
(4) The Company has not promulgated adopted or otherwise put into
effect any bonus, profit-sharing, retirement, stock purchase, deferred
compensation, medical, hospitalization, life insurance or other similar plan
providing benefits for its employees and the Company has not announced the
prospective promulgation thereof except as set forth in Schedule 3(g)(4). There
is no unfunded past service credit liability or any other liability with respect
to any such plans other than as set forth on Schedule 3(g)(4). No reportable
event as defined in Title IV of the Employee Retirement Income Security Act of
1974, as amended by the Multi Employer Pension Plan Amendments Act of 1980
("ERISA"), has occurred with respect to any such plan subject to the minimum
funding requirement of Section 412 of the Internal Revenue Code of 1986, as
amended. The Company is in compliance in all material respects with all
applicable provisions of ERISA.
(h) No Breach of Statute or Contract. Neither the execution and
delivery of this Exchange Agreement, compliance with the terms and provisions of
this Exchange Agreement on the part of the Company or the Sole Shareholder, nor
the consummation of the transactions contemplated hereby, including the
Exchange, will (1) violate in any material respect any statute, law, rule,
regulation, order, license or permit of any Governmental Body, (2) result in the
default or violation by the Company or the Sole
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Shareholder of any judgment, order, writ or decree of any court or
administrative agency, (3) with or without the giving of notice or the passage
of time, or both, breach, conflict with or result in a violation of or default
under any of the terms, conditions or provisions of any material agreement or
instrument to which the Company or the Sole Shareholder is a party, or by which
either of them or their respective properties or assets is or may be bound, or
require any notice thereunder, (4) violate any provision of the Company's
Certificate of Incorporation or By-Laws, (5) result in the creation or
imposition of any material Lien, of any nature whatsoever upon any of the
material properties or assets of the Company, or (6) give to others any claim,
interest or right, including a right of termination, modification, acceleration
or cancellation in, or with respect to, any material agreement or instrument.
The conduct of business by the Company does not violate in any material respect
any statute, law, rule, regulation or order applicable to such business. The
Company has complied in all material respects with all laws, statutes, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, and the Company has all necessary permits,
licenses and other authorizations required to conduct its business in all
material respects as conducted and as proposed to be conducted. There is no
existing law, statute, rule, regulation or order, and the Company is not aware
of any proposed law, statute, rule, regulation or order, whether Federal or
state, which would prohibit or materially restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting or proposes to conduct business.
-20-
(i) No Litigation. Except as set forth in Schedule 3(i), there is no
suit, action or legal, administrative, arbitration or other proceeding or
governmental investigation pending or to the best of the Sole Shareholder's
knowledge threatened against the Company or the Sole Shareholder. The Company
and Sole Shareholder have not received any written opinion or memorandum or
written legal advice from legal counsel to the effect that either of them are
exposed, from a legal standpoint, to any liability or disadvantage which may
result in a Material Adverse Change on the Company. Neither the Sole Shareholder
nor the Company is in default with respect to any order, writ, injunction or
decree known to or served upon the Company of any Governmental Body. There is no
action or suit by the Company or Sole Shareholder pending or threatened against
others. Neither the Company nor the Sole Shareholder has any knowledge of any
unasserted claim, the assertion of which is likely and that, if asserted, will
be for legal or equitable relief that, if granted, would have a Material Adverse
Change on the Company or the Sole Shareholder. No injunction, stay or
restraining order is in effect against the Company or the Sole Shareholder
prohibiting the consummation of any of the transactions contemplated by this
Exchange Agreement.
(j) Insurance. The Company holds policies in the amounts and for the
coverage set forth on Schedule 3(j), all of which policies are in full force and
effect. Such coverage is consistent with the Company's past business practices
and is customary for businesses similar to the Company. Except as disclosed on
the Schedule 3(j) hereto, the Company has received no written notice of any
claims pending against the Company under any insurance policies currently in
effect and covering the property, business or employees of the Company, and all
premiums with respect to the policies
-21-
maintained by the Company currently due and payable have been paid by the
Company. The Company has not been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it will be unable to
renew its existing insurance coverage upon terms at least as favorable as those
presently in effect, other than possible increases in premiums that do not
result from any act or omission of the Company.
(k) Books and Records. All constituent documents, business licenses,
minute books, stock certificate books, stock transfer ledgers and other records
of the Company have been maintained in accordance with reasonable business
practices and applicable legal requirements. The Company has made available to
THCG true, correct and complete copies of all such records and all such records
are complete and correct in all material respects and contain all material
matters required to be reflected therein.
(l) Disclosure. Neither this Exchange Agreement, any Schedule hereto
nor any certificate to be delivered by or on behalf of the Company or the Sole
Shareholder in connection with the Closing of the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading. There is no fact which materially adversely affects
the condition (financial or otherwise), business, results of operations, assets,
liabilities, operations or prospects of the Company, taken as a whole, which has
not been set forth in this Exchange Agreement or in the Schedules attached
hereto.
-22-
(m) Options, Warrants and Stock Rights. All options, warrants and
stock rights held by the Company, except on behalf of clients in the course of
its business as a broker-dealer or in the course of trading publicly listed
options for Company's own account , are set forth on Schedule 3(m).
4. Further Representations and Warranties of the Sole Shareholder. The
Sole Shareholder hereby further represents and warrants to THCG that:
(a) Investment Intent. (1) The shares of THCG Shares being acquired by
it are "restricted securities" as defined under the Securities Act and that it
is acquiring the THCG Shares for its own account, for investment purposes only,
and not with a view towards distribution or resale thereof, except in accordance
with all applicable state and federal securities laws, and hereby agrees to the
placing on all THCG stock certificates issued it and representing the THCG
Shares of a legend reflecting the restrictive nature of the shares.
(2) The Sole Shareholder has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the THCG Shares and the issuance of the THCG Shares to
the Sole Shareholder is otherwise exempt from registration under Section 4(2) of
the Securities Act.(3)
(3) The executive officers of the Sole Shareholder have read
this Exchange Agreement and all other documents provided by THCG in connection
herewith, including the THCG SEC Reports (as defined herein), and fully
understand the terms under which the THCG Shares are being issued to it pursuant
hereto. THCG has made available to the executive officers of the Sole
Shareholder the opportunity to
-23-
ask questions of and receive answers from THCG concerning THCG and the terms and
conditions under which THCG Shares will be issued to it and to obtain any
additional information which THCG possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of information
furnished in connection with this Exchange Agreement or in response to any
request for information. The Sole Shareholder is satisfied with such answers and
information. Nothing contained in this provision shall limit the right of Sole
Shareholder to rely upon the representations and warranties contained herein.
(4) The Sole Shareholder understands that the THCG Shares have
not been registered under the Securities Act. The Sole Shareholder is fully
aware of the restrictions on sale, transferability and assignment of the THCG
Shares as set forth on the certificates representing the THCG Shares referred to
below, and that it must bear the economic risk of it's investment for an
indefinite period of time. The Sole Shareholder has no need for any liquidity in
its investment for an indefinite period of time, and is able to bear the
economic risk of losing its entire investment. Upon the Closing Date, the Sole
Shareholder shall cause THCG to make all required securities filings in
connection with the offer and sale of the THCG Shares.
(5) The Sole Shareholder agrees that, so long as required by
law, certificates evidencing the THCG Shares and any securities issued in
exchange for or in respect thereof shall bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE
-24-
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS."
(b) Restrictive Documents. The Sole Shareholder is not subject
to, or a party to, any charter, bylaw, mortgage, lien, lease, agreement,
contract, instrument, law, rule, regulation, order, judgment, or decree, or any
other restriction of any kind or character which materially and adversely
affects the business or financial condition of the Company, or which would
prevent (i) the consummation of the transactions contemplated by this Exchange
Agreement; (ii) compliance by any of them with the terms, conditions, and
provisions hereof; or (iii) the continued operation of the businesses of the
Company after the Closing Date on substantially the same basis as theretofore
operated. The performance of the obligations of the Sole Shareholder under this
Exchange Agreement do not on the date hereof, and will not hereafter, violate
any of the terms or provisions of any such leases, instruments, agreements, or
other documents binding upon the Sole Shareholder.
(c) Regulatory Approvals. The Company will use its best-efforts to
obtain all required regulatory approval of the transactions contemplated hereby,
including, but not limited to, the approval of the NASD and if required the SEC
by July 11, 2001.
5. Representations and Warranties of THCG. THCG represents and
warrants to the Company and the Sole Shareholder as follows:
(a) Corporate--THCG.
(1) THCG is in good standing under and by virtue of the laws of
Delaware. THCG is qualified to do business as a foreign corporation or entity in
such states or jurisdictions in which the ownership of their assets or the
nature and conduct
-25-
of their business requires such qualification, except where the failure to be so
qualified would not result in a Material Adverse Change on THCG.
(2) THCG has the power to own its respective properties and to
carry on their respective businesses as and where such are now conducted. THCG
does not have any equity interest in any corporation, partnership, joint venture
or association or control, directly or indirectly, of any other entity except as
set forth on Schedule 5(a)(2).
(3) The authorized capital stock of THCG consists of 100,000,000
shares of common stock, par value $.01 per share, of which 12,966,069 shares are
outstanding immediately prior to the date hereof and 10,000,000 shares of
Preferred Stock, par value $.001 per share, of which 5,000 have been designated
Series A Preferred Stock, none of which shall be issued and outstanding as of
the Closing Date. In addition, there are outstanding warrants and options, as
set in Schedule 5(a)(3). All of the issued and outstanding shares of THCG Common
Stock and Series A Preferred Stock are duly authorized, validly issued, fully
paid and non-assessable. There are no preemptive rights on the part of any
holder of any class of securities of THCG and no options, warrants, conversion
or other rights, agreements, or commitments of any kind obligating THCG,
contingently or otherwise, to issue, sell or register any shares of its capital
stock of any class or any securities convertible into or exchangeable for any
such shares and no authorization therefore has been given, except as set forth
on Schedule 5(a)(3).
(4) This Exchange Agreement has been duly executed and delivered by
THCG and constitutes the legal, valid and binding obligation of THCG,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy,
-26-
insolvency, reorganization, moratorium or similar laws affecting the rights and
remedies of creditors generally, and by general principles of equity. The
execution, delivery and performance of this Exchange Agreement, and the
consummation by THCG of the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action on the part of THCG, and no
other corporate proceedings on its part are necessary to authorize this Exchange
Agreement.
(b) Financial.
(1) The audited consolidated balance sheet of THCG as of
December 31, 2000, the related audited statements of earnings and cash flows for
the twelve months ended December 31, 2000, and the unaudited consolidated
balance sheet of THCG as of March 31, 2001 and the related unaudited statements
of earnings and cash flows for the three months ended March 31, 2001 included in
THCG's reports filed with the Securities and Exchange Commission (all
hereinafter collectively referred to as the "THCG Financial Statements") and
previously delivered to the Company, present fairly the financial condition of
THCG as of such dates, and the results of its operations for the periods then
ended, in conformity with GAAP and SEC accounting principles except as disclosed
in such financial statements, and except that the financial statements as of
March 31, 2001 and for the three months then ended do not contain footnotes in
accordance with GAAP and are subject to year end adjustment. Attached hereto as
Schedule 5(b)(1) is a proforma balance sheet (subject to adjustment through the
Closing Date) prepared by THCG which sets forth pre spin-off THCG, the
Liquidating Trust and post-spin off THCG.
-27-
(2) Except as disclosed in its Annual Report on Form 10-K for the year
ended December 31, 2000 (the "Form 10-K"), in its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001 (the "Form 10-Q") or in a Schedule hereto
since January 1, 2001 the business of THCG has been carried on in the ordinary
course in substantially the same manner as prior to that date and there has not
been:
(i) any Material Adverse Change in the financial condition or
in the operations or the business of THCG from that shown on the THCG Financial
Statements as of and for the year ended December 31, 2000, or any event which
has occurred that may result in such a Material Adverse Change other than a
change resulting from general economic conditions or changes in the financial
markets generally;
(ii) any damages, destruction or loss, whether covered by
insurance or not, which have a Material Adverse Change on the business, property
or assets of THCG;
(iii) any declaration, setting aside or payment of any
dividend, or any distribution with respect to the capital stock of THCG, other
than the provisions made with Castle Creek to convert Series A Preferred Stock
to Common Stock and the authorization and declaration of the distribution to
THCG, LLC of certain assets and liabilities as set forth on Schedule 5(p) and
the transfer of the ownership of THCG, LLC to a liquidating trust for the
benefit of THCG's stockholders (the "Liquidating Trust") to be effective prior
to the Closing of this Exchange Agreement:
-28-
(iv) any increase in the compensation payable or to become
payable by THCG to directors, officers or employees other than as set forth on
Schedule 5(b)(2)(iv); or
(v) any other event or condition of any character, not in the
ordinary course of business, that has a Material Adverse Change on the results
of operations or business or financial condition of THCG.
(c) Undisclosed Liabilities. Except as set forth in Schedule 5(c),
THCG has no liabilities or obligations, either accrued, absolute, contingent or
otherwise, of a type required to be set forth on a balance sheet or reserved
against in accordance with GAAP, except:
(1) to the extent reflected or reserved against in the THCG
Financial Statements, and not heretofore paid or discharged; and
(2) those incurred in or as a result of the normal and ordinary
course of business, all of which have been consistent with past practices and
none of which (x) arises out of, relates to, is in the nature of, or was caused
by any breach of contract, breach of warranty, tort, infringement or violation
of law or (y) individually or in the aggregate is material to the business,
properties, financial condition or results of operations of THCG.
(d) Tax Returns.
(1) THCG has filed on a timely basis (including any extensions)
with the appropriate Governmental Bodies in the applicable jurisdictions either
each Tax Return that they are due to file or a valid request for extension with
respect to that Tax Return. All Tax Returns filed by THCG are accurate and
complete in all material
-29-
respects. THCG has paid fully on a timely basis all Taxes due except those Taxes
that they are contesting in good faith by appropriate proceedings or as to which
THCG has set aside adequate reserves determined in accordance with GAAP and
stated in the Financial Statements.
(2) Except as stated in Schedule 5(d), there are no material claims
or assessments pending against THCG for any alleged deficiency in any Tax, there
are no pending or to THCG's knowledge threatened audits or investigations for or
relating to any liability in respect of any Tax, and THCG has not been notified
in writing of any proposed Tax claims or assessments against it. The financial
consequences to THCG, arising from any items listed on Schedule 5(d) will be as
stated in Schedule 5(d). There are no Liens for material amounts of Taxes on the
properties or assets of THCG except for statutory Liens for current Taxes not
yet due and payable. THCG has not given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of its Taxes
or Taxes for which it may be liable. THCG has no liability for the Taxes of any
other Person. THCG has not, with regard to any assets or property held,
acquired, or to be acquired by it, filed a consent to the application of Section
341(f) of the Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "subsection (f) asset" (as that term is defined in Section
341(f)(4) of the Code) owned by it. All Persons who are treated as independent
contractors by THCG are properly classified as such by it.
(3) THCG is not a party to any agreement, arrangement or contract
providing for the allocation, indemnification or sharing of Taxes. THCG is not a
party to
-30-
any agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(4) THCG has not been for the five-year period preceding the
Closing, a U.S. real property holding corporation as defined in Section
897(c)(2) of the Code.
(e) Title to Property.
(1) THCG owns all right, title and interest in and to all of THCG's
material properties and assets used by THCG, free and clear of all material
Liens of any nature whatsoever, except as set forth in the THCG Financial
Statements or in Schedule 5(e)(1) most of which will be contributed to THCG, LLC
and transferred to the Liquidating Trust.
(2) THCG does not lease any real or personal property as lessee,
except as set forth in Schedule 5(e)(2) attached hereto. Each of these leases
(the "THCG's Leases") is valid, binding and in full force and effect and has not
been modified. THCG is not in default under any of THCG's Leases and has not
received any notice of its default under any of THCG's Leases and THCG has not
given any notice of any, and, to THCG's knowledge, there is no, default by any
other party under any of THCG's Leases, nor has any event occurred which, with
notice or the passage of time, or both, would constitute a default by any other
party under any of THCG's Leases. Except as set forth on Schedule 5(e)(2),
THCG's rights in the property covered under THCG's Leases (including any
improvements and appurtenances thereto) are paramount to the rights of any other
person or entity other than the landlords under THCG's Leases. No consent or
approval of any third party is required with respect to
-31-
such THCG Leases in order to avoid a default thereunder by reason of the
transactions contemplated by this Exchange Agreement, except as set forth on
Schedule 5(e)(2). THCG has received no notices other than periodic rent, common
area maintenance and other operating expense bills from the landlord under each
lease.
(f) Contracts and Commitments. All material contracts of THCG in
effect as of the date hereof are listed on Schedule 5(f) or in other Schedules
of this Exchange Agreement. Except as set forth in THCG's SEC Reports (as
defined herein) or set forth on Schedule 5(f)(1):
(1) THCG is not restricted by agreement from carrying on its
business anywhere in the jurisdictions in which it operates;
(2) Except as disclosed in THCG's SEC Reports no director, officer,
employee or stockholder of THCG and/or its subsidiaries, or member of the family
of any such person, or any corporation, partnership, trust or other entity in
which any such person, or any member of the family of any such person, has a
substantial interest or in which any such person is an officer, director,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof, is a competitor, customer, supplier or other entity, which, during the
past 12 months, has been a party to any transaction with THCG or its
subsidiaries, including any contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such person or firm;
(3) Except as set forth in Schedule 5(f)(1), THCG is not in default
under any contracts or commitments made or obligations owed by it which default
is reasonably likely to have a Material Adverse Change on THCG. THCG is in full
-32-
compliance with all of the terms and provisions of its Certificate of
Incorporation and By-Laws, as amended, other than the holding of an annual
meeting of its stockholders. No consent or approval of any third party is
required with respect to any material contract or agreement to which THCG is a
party in order to avoid a default thereunder by reason of the transactions
contemplated by this Exchange Agreement.
(g) Employee Relations.
(1) (i) THCG is not a party to any collective bargaining agreement
covering or relating to any of its employees. THCG is not required to recognize
and has not received a demand for recognition by any collective bargaining
representative.
(ii) THCG is not a party to any employment agreement or
consulting agreement providing for compensation in excess of $100,000 per annum,
except as set forth in the Form 10-K; and
(iii) THCG has not promulgated any policy or entered into any
agreements relating to the payment of severance pay to employees whose
employment is terminated or suspended, voluntarily or otherwise, except as
described on Schedule 5(g)(1)(iii).
(2) Except as set forth in THCG's SEC Reports or in schedules
attached hereto, (i) THCG has complied in all material respects with all
applicable laws, rules or regulations relating to employment, including those
relating to wages, hours, collective bargaining and the withholding and payment
of taxes and contributions, and (ii) THCG has complied in all material respects
with the National Labor Relations Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Civil Rights Act of 1991, the Occupational Safety
and Health Act, Executive Order 11246, the regulations
-33-
under such acts and all other Federal and state laws relating to the employment
of labor, including any provisions thereof relating to discrimination or
harassment. THCG has, and will have at the Closing Date, withheld all amounts
required by law or agreement to be withheld from the wages or salaries of its
employees and there are no arrearages of wages, payments under any pension or
insurance plan or any other benefit, or any tax or penalty for failure to comply
with the foregoing owed with respect to employees which are not either accrued
or adequately reserved for in THCG's Financial Statements or in its books and
records with respect to periods after March 31, 2001. There are no material
controversies pending or threatened between THCG and any of its employees or any
labor unions or other collective bargaining agents representing or purporting to
represent its employees.
(3) THCG has not adopted any employee benefit plans,
profit-sharing, retirement, stock purchase, deferred compensation medical,
hospitalization, life insurance or other similar plan providing benefits for its
employees and THCG has not announced the prospective promulgation thereof except
as set forth in the Form 10-K or in Schedule 5(g)(3). There is no unfunded past
service credit liability or any other liability with respect to any such plans
other than as set forth on Schedule 5(g)(3). No reportable event as defined in
Title IV of ERISA has occurred with respect to any such plan subject to the
minimum funding requirement of Section 412 of the Internal Revenue Code of 1986,
as amended.
(4) THCG is administering health insurance pursuant to COBRA for
those former employees as set forth on Schedule 5(g)(4).
-34-
(h) No Breach of Statute or Contract. Except as would not result in a
Material Adverse Change on THCG and its subsidiaries taken as a whole, neither
the execution and delivery of this Exchange Agreement, nor compliance with the
terms and provisions of this Exchange Agreement on the part of THCG, will (1)
violate in any material respect any statute, license or regulation of any
Governmental Body to which THCG is subject, (2) result in the default or
violation by THCG of any judgment, order, writ, or decree, of any court or
administrative agency to which THCG is subject, (3) breach, conflict with, or
result in a violation of or default under in any material respect of any of the
terms, conditions or provisions of any material agreement or instrument to which
THCG is a party, or by which it is bound, or require any notice thereunder, (4)
violate any provision of THCG's Certificate of Incorporation or By-Laws, (5)
result in the creation or imposition of any material Lien of any nature
whatsoever upon any material properties or assets of THCG or its subsidiaries,
or (6) give to others any claim, interest or rights, including rights of
termination, modification, acceleration or cancellation in, or with respect to,
any material agreement or instrument.
The conduct of THCG's business does not violate in any material
respect any law or regulation applicable to such business. THCG has complied in
all material respects with all laws, rules, regulations and orders applicable to
its business, operations, properties, assets, products and services, and THCG
has all necessary material permits, licenses and other authorizations required
to conduct its business as conducted and as proposed to be conducted. There is
no existing law, rule, regulation or order, whether Federal or state, which
would prohibit or materially restrict THCG
-35-
from, or otherwise materially adversely affect THCG in, conducting its business
in any jurisdiction in which it is now conducting business.
(i) No Litigation. Except as set forth in THCG's Financial Statements,
in THCG's SEC Reports or in Schedule 5(i), there is no suit, action or legal,
administrative, arbitration or other proceeding or governmental investigation,
or any change in the zoning or building ordinances affecting the real property
or leasehold interests of THCG or any of its subsidiaries, pending or to THCG's
knowledge threatened against THCG or any of its subsidiaries. THCG is not in
default with respect to any order, writ, injunction or decree known to or served
upon THCG or its subsidiaries of any court or of any Federal, state, municipal
or other Governmental Body. Except as set forth in THCG's SEC Reports or
Schedule 5(i), there is no action or suit by THCG or its subsidiaries pending or
threatened against others. No injunction, stay or restraining order is in effect
against THCG prohibiting the consummation of the transactions contemplated by
this Agreement.
(j) Patents and Trademarks. THCG does not possess any patents, patent
applications, inventions, trade names, trademarks or copyrights, except as
listed in Schedule 5(j).
(k) Trademark Indemnification. THCG has not given any indemnification
for patent, trademark or copyright infringement as to any equipment, materials
or supplies manufactured, produced, used or sold by it or with respect to
services rendered by it.
(l) Insurance. THCG holds policies in the amounts and for the coverage
set forth on Schedule 5(l), all of which policies are in full force and effect,
and which coverage is consistent with THCG's past business practices and is
customary for
-36-
businesses similar to THCG. Except as disclosed on the Schedule 5(l) hereto,
THCG has received no written notice of any claims pending against THCG under any
insurance policies currently in effect and covering the property, business or
employees of THCG, and all premiums with respect to the policies maintained by
THCG due and payable through the date hereof have been paid by THCG. THCG has
not been refused any insurance coverage sought or applied for, and THCG has no
reason to believe that it will be unable to renew its existing insurance
coverage upon terms at least as favorable as those presently in effect, other
than possible increases in premiums that do not result from any act or omission
of THCG.
(m) Loans and Advances. Except as set forth in THCG's SEC Reports or
THCG's Financial Statements or on Schedule 5(m), there are no outstanding loans
or advances to any Person and THCG is not obligated to make any such loans or
advances, except, in each case, for advances to employees of THCG in respect of
reimbursable business expenses anticipated to be incurred by them in connection
with their performance of services for THCG.
(n) Disclosure. No representation or warranty by THCG in this Exchange
Agreement, in any Schedule or in any certificate to be furnished by or on behalf
of THCG and/or its subsidiaries at the Closing pursuant to this Exchange
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
(o) SEC Reports. THCG has heretofore delivered to the Company complete
and correct copies of its most recent Form 10-K and the Form 10-Q as filed with
the
-37-
Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act (the
Form 10k and Form 10-Q are sometimes referred to herein as "THCG's SEC
Reports"). As of the dates thereof, neither the SEC Reports, nor any other
reports filed with the SEC since August 1999, did 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 were made, not misleading.
(p) Spin-Off of Assets. Prior to the Closing Date, THCG intends to
spin-off certain of its assets and liabilities as set forth on Schedule 5(p) to
THCG LLC which in turn will be transferred to a Liquidating Trust (as defined
herein) prior to the Closing Date(the "Spin-Off"). The Spin-Off shall comply in
all material respects with all applicable laws, rules and regulations.
(q) Bank Accounts. Set forth in Schedule 5(q) are the names and
addresses of all banks and brokerage accounts in which THCG has accounts and the
names of persons authorized to sign checks, drafts or other instruments drawn
thereon.
(r) Books and Records. All constituent documents, business licenses,
minute books, stock certificate books, stock transfer ledgers and other records
of THCG have been maintained in accordance with reasonable business practices
and applicable legal requirements. THCG has made available to the Sole
Shareholder true, correct and complete copies of all such records and all such
records are complete and correct in all material respects and contain all
material matters required to be reflected therein.
(s) Absence of Certain Business Practices. None of THCG or any of its
subsidiaries or any of their respective directors, officers, agents or
employees, or to the
-38-
best knowledge of THCG, any other Person associated with or acting for or on
behalf of any of them, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback or other payment to any
person, private or public, regardless of form, whether in money, property, or
services, that violates any law, statute, rule, ordinance, regulation or
agreement by which THCG or any subsidiary is bound (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of THCG or any subsidiary or any affiliate
of THCG or any subsidiary, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of THCG or any subsidiary.
6. Conduct of the Business of the Company and THCG Pending the Closing
Date. From and after the Execution Date and until the Closing Date, the Company
and THCG agree that:
(a) Full Access. The Sole Shareholder and THCG and their respective
authorized representatives shall have full access, during normal business hours,
to all properties, books, records, contracts, documents, personnel and
accountants of the other, and each shall furnish or cause to be furnished to the
other and its authorized representatives all information with respect to their
affairs and business as the other party may reasonably request. Each of the Sole
Shareholder, the Company and THCG agrees to and shall cause their respective
authorized representatives to treat and hold as confidential all proprietary
business information and any other confidential information they receive with
respect to the other's business. In the event this Exchange Agreement is
terminated for any reason, THCG and the Company shall each
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promptly return to the other all materials relating to the such party which have
been delivered by or on behalf of the other to them pursuant to this Exchange
Agreement.
(b) Carry On In Regular Course. Each of THCG and the Company shall
carry on its business diligently and substantially in the same manner as
heretofore and shall not make or institute any unusual or novel methods of
trade, purchase, sale, lease, management, accounting or operation.
(c) Contracts and Commitments. Neither THCG nor the Company shall
enter into any contract or commitment or engage in any transaction not in the
usual and ordinary course of its business and consistent with past practices
without the prior written consent of the other party except for those matters
set forth on Schedule 6(c).
(d) Indebtedness. Other than the Castle Creek note of $1,500,000 which
will be assumed by the Liquidating Trust, neither THCG nor the Company will
create any indebtedness, other than that incurred in the usual and ordinary
course of business that will not result in a Material Adverse Change as to such
party, or that incurred pursuant to existing contracts disclosed in the
Schedules attached hereto or that incurred pursuant to commitments permitted
hereby, except as set forth on Schedule 6(d).
(e) Investments. None of the Sole Shareholder, THCG or the Company
will make any investment, loan, advance or contribution to any other person,
corporation, limited liability company, partnership, joint venture or
association; provided, however, that the parties may (i) invest in United States
government obligations, certificates of deposit and commercial paper rated a-1
by Standard & Poor's Corporation or P-1 by Moody's; and (ii) the Company may
continue, in the ordinary course of business, its broker-dealer business without
regard to this provision.
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(f) Dividends and Distributions. Other than the distribution of
certain assets and liabilities of THCG to a liquidating trust as set forth on
Schedule 5(p) (the "Liquidating Trust") and the exchange of Castle Creek's
Series A Preferred Stock and Warrants for common stock, a promissory note, cash
and amended warrants, neither THCG nor the Company will declare or pay any
dividend or make any distribution with respect to its capital stock, or directly
or indirectly redeem, purchase or otherwise acquire any of its capital stock or
issue or in any way dispose of any shares of its capital stock or any rights
therein or thereto.
(g) Amendment of Charter. Neither THCG nor the Company will amend its
Certificate of Incorporation or By-Laws or make any change in the authorized or
unissued capital stock or its officers or directors without the prior written
consent of the other party.
(h) Insurance. All property, real and personal, owned, leased or
licensed by THCG and the Company will be insured to the same extent as such
properties were insured immediately prior to the date of this Exchange Agreement
by reputable insurance companies against all insurable risks normally insured
against by companies conducting a business the same as, or similar to, the
business conducted by THCG and the Company, and all property shall be used,
operated and maintained in a normal businesslike manner.
(i) Preservation of Organization and Employees. Each of THCG and the
Company will use their best efforts (without making any commitments on behalf of
the other) to preserve its business organization intact, to keep available its
key officers and employees, and to preserve the present relationships of THCG
and the Company with
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customers and suppliers and others having business relations with it. Except in
the case of THCG to the extent of request by the Sole Shareholder, neither THCG
nor the Company will change its present relationships with its employees.
(j) No Default. Neither THCG nor the Company shall do any act or omit
to do any act, or permit any act or omission to act, which will cause a breach
of any contract, lease, commitment or obligation by it.
(k) Compliance with Laws. Each of THCG and the Company will duly
comply with all laws applicable to the conduct of its business as may be
required to affect the Exchange and for the valid and effective transfer of the
THCG Shares and Company Shares as contemplated by this Exchange Agreement.
(l) Regulatory Approvals. The Company will use its best-efforts to
obtain all required regulatory approval of the transactions contemplated hereby,
including, but not limited to, the approval of the NASD and the SEC, if required
by July 11, 2001.
7. Conditions Precedent to THCG's Obligations. Each and every
obligation of THCG to be performed on the Closing Date or, to the extent
expressly provided in this Exchange Agreement, to be performed thereafter, as
the case may be, shall be subject to the satisfaction prior thereto of the
following conditions:
(a) Representations and Warranties True at the Execution Date and the
Closing Date. The representations and warranties made by the Sole Shareholder or
the Company in this Exchange Agreement or in any Schedule hereto or given on its
behalf hereunder shall have been true, complete and correct when made and shall
be repeated again at and as of the Closing Date and shall then be true, correct
and
-42-
complete in all material respects (without reference to any qualifications
therein as to materiality).
(b) Compliance with Exchange Agreement. The Company shall have
performed and complied in all material respects with all of its obligations
under this Exchange Agreement which are to be performed or complied with by it
prior to or on the Closing Date.
(c) Representation Certificate and Secretarial and Incumbency
Certificates. THCG shall have received (in substantially the form as attached
hereto) (i) a representation certificate of the Company and the Sole Shareholder
and (ii) Secretarial and Incumbency Certificates signed by the duly elected
officers of each of the Company and the Sole Shareholder, together with copies
of such companies Certificates of Incorporation and Bylaws, as amended to date,
and UCC tax, lien and judgment searches as of the most recent date available.
(d) Opinion of Counsel for the Sole Shareholder. THCG shall have
received a written opinion of counsel for the Sole Shareholder dated as of the
Closing Date, addressed to THCG satisfactory in form and substance to THCG and
the liquidating trust that: (1) the Company is a corporation duly organized,
validly existing and in good standing under and by virtue of the laws of its
state of incorporation; (2) the Company has no subsidiaries and the Company is
entitled to own or lease its property; (3) counsel has no knowledge of any
pending litigation to which the Company or Sole Shareholder is a party or any
threatened litigation against the Company other than has been disclosed in
Schedules to the Exchange Agreement; (4) to such counsel's knowledge, except as
disclosed on Schedule 3(f) the Company is not in default of any
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of the agreements disclosed on Schedule 3(f); (5) all of the shares of the
Company's Common Stock are duly authorized, validly issued, fully paid and
non-assessable and owned of record and beneficially by the Sole Shareholder; (6)
counsel has no knowledge of any restrictions on the transferability of the
Company's Common Stock, except for such restrictions as may be imposed by
federal or state securities laws; (7) none of the transactions contemplated by
this Exchange Agreement will violate or constitute a material default or ground
for revocation or acceleration under any provisions of any lease, contract,
agreement, indenture, license or any instrument to which the Company is bound
and which is disclosed in a Schedule to this Exchange Agreement or will violate
any of the above which is or purports to be binding upon the Company or its
assets; and (8) this Exchange Agreement has been duly authorized, executed by
the Sole Shareholder and the Company and is a valid and binding obligation of
the Sole Shareholder and the Company enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights and remedies of
creditors generally, and by general principles of equity.
(e) Certificates of Good Standing. The Sole Shareholder shall have
delivered to THCG a certificate issued by appropriate governmental authorities
evidencing the good standing of the Sole Shareholder and the Company as of a
date not more than ten (10) days prior to the Execution Date as a corporation of
the state of its incorporation and in each state where they are organized or
qualified to do business.
(f) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Exchange
-44-
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to THCG, and the Sole Shareholder shall have made
available to THCG for examination the originals or true and correct copies of
all records and documents relating to the business and affairs of the Sole
Shareholder and the Company, which THCG may reasonably request in connection
with said transaction. The Sole Shareholder and the Company shall have complied
in all material respects with all statutory requirements for the valid
consummation by the Sole Shareholder and the Company of the transactions
contemplated by this Exchange Agreement.
(g) No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency which in
the opinion of THCG's counsel is reasonably likely to result in the restraint,
prohibition or the obtaining of damages or other relief in connection with this
Exchange Agreement or the consummation of the transactions contemplated hereby.
(h) Regulatory Approvals. The Company shall have obtained all
necessary approvals or consents from the National Association of Securities
Dealers, Inc. in order to effect the transactions contemplated hereby.
(i) Castle Creek Restructuring. THCG shall have completed the
restructuring of the Castle Creek Series A Preferred Stock substantially as set
forth in the documents attached hereto as Schedule 8(k).
(j) Establishment of Liquidating Trust. The Liquidating Trust shall
have been established.
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8. Conditions Precedent to the Sole Stockholder's or the Company's
Obligations. Each and every obligationof the Sole Stockholder or the Company to
be performed on the Closing Date shall be subject to the satisfaction by THCG
prior thereto of the following conditions:
(a) Representations and Warranties True at the Closing Date. THCG's
representations and warranties contained in this Exchange Agreement shall have
been true in all material respects when made and shall be repeated again at and
as of the closing and shall then be true, correct and complete in all material
respects (without reference to any qualifications therein as to materiality).
(b) Compliance with Exchange Agreement. THCG shall have performed and
complied in all material respects with its obligations under this Exchange
Agreement which are to be performed or complied with prior to or on the Closing
Date.
(c) Balance Sheet. After giving effect to the spin-off of certain
assets and liabilities prior to the Closing Date pursuant to a Liquidating Trust
and as described in more detail herein, immediately prior to the Closing Date
THCG shall have a minimum net worth of $2,100,000, including a minimum of
$2,100,000 of cash on hand (including a security deposit in the form of a pledge
certificate of deposit for a letter of credit in favor of THCG's landlord in the
amount of approximately $1,053,000 and any loan made to the Sole Shareholder or
the Company prior to the Closing Date reduced by any expenses paid on behalf of
Sole Shareholder for expenses (as described herein) incurred from July 1, 2001
as set forth in Section 11 of this Exchange Agreement).
(d) Representation Certificate and Secretarial and Incumbency
Certificates. The Sole Shareholder shall have received (in substantially the
form as
-46-
attached hereto) (i) a representation certificate of THCG and (ii) a
Secretarial and Incumbency Certificate signed by the duly elected officers of
THCG, together with copies of its Certificate of Incorporation and Bylaws, as
amended to date, and UCC tax, lien and judgment searches as of the most recent
date available.
(e) Opinion of Counsel for THCG. The Sole Shareholder shall have
received a written opinion of counsel for THCG, Xxxxxxx & Xxxxxxxxxx, LLP and
for items (7) and (8) set forth below Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx, LLP for
the Liquidating Trust dated as of the Closing Date, addressed to the Sole
Shareholder satisfactory in form and substance to the Sole Shareholder and to
the effect that: (1) THCG is a corporation duly organized, validly existing and
in good standing under and by virtue of the laws of the State of Delaware; (2)
on the Closing Date all of the THCG Shares to be issued in the Exchange will be
duly authorized, validly issued, fully paid and non-assessable; (3) this
Exchange Agreement and the other agreements delivered by THCG at Execution or
Closing are valid and binding obligations of THCG enforceable against THCG in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights and
remedies of creditors generally, and by general principles of equity; (4) this
Exchange Agreement and the other agreements delivered by THCG at Execution or
Closing have been duly executed and delivered by THCG, and the execution,
delivery and performance of this Exchange Agreement and the other agreements
delivered by THCG at Execution or Closing have been duly authorized by all
requisite corporate action on the part of THCG; (5) THCG has all necessary
corporate power and authority to enter into this Exchange Agreement and the
other agreements to be delivered by
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THCG at Execution or Closing; (6) the execution, delivery and performance by
THCG of this Exchange Agreement and the other agreements to be delivered by THCG
at Execution or Closing do not require on the part of THCG any consent,
approval, authorization or other order of, action by, filing with or
notification to any governmental authority, other than the Securities and
Exchange Commission and analogous state authorities; (7) that the Spin-Off has
been effected in compliance with applicable law in all material respects; and
(8) the obligations and liabilities of the Trust with respect to its obligations
to THCG as set forth herein or in the Liquidating Trust Agreement are
enforceable in accordance with their terms.
(f) All Documents. All documents required by this Exchange Agreement
shall have been delivered or made available to the Sole Shareholder.
(g)Certificates of Good Standing. THCG shall have delivered to the
Sole Shareholder a certificate issued by appropriate governmental authorities
evidencing the good standing of THCG as of a date not more than ten (10) days
prior to the Execution Date and in each jurisdiction where they are organized or
qualified to do business.
(h) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Exchange Agreement, and all documents incident thereto and delivered on
the Execution Date and Closing Date, shall be reasonably satisfactory in form
and substance to Sole Shareholder and its counsel, and THCG shall have made
available to the representatives of the Sole Shareholder for examination the
originals or true and correct copies of all records and documents relating to
the business and affairs of THCG, which the Company may reasonably request in
connection with said transactions. THCG shall
-48-
have complied in all material respects with all statutory requirements for the
valid consummation by THCG of the transactions contemplated by this Exchange
Agreement.
(i) Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency which in
the opinion of the Sole Shareholder's counsel is reasonably likely to result in
the restraint, prohibition or the obtaining of damages or other relief in
connection with this Exchange Agreement or the consummation of the transactions
contemplated hereby
(j) Indemnification for Certain Matters. Prior to the Closing Date,
THCG shall have caused the Liquidating Trust to indemnify THCG against (i)
liabilities that result from any action, suit or proceeding that (x) commenced
against the THCG and was pending on the record date of the dividend to the
Liquidating Trust, including actions, suits and proceedings involving THCG's
former factoring businesses or arising out of or relating to THCG's guarantee of
the payment of notes of Pacific Financial Services Corp., one of THCG's
subsidiaries that was engaged in the factoring business, or (y) arises out of or
relates to the distribution of the Liquidating Trust units to the Stockholders;
and (ii) any material liability of THCG that is not disclosed in the Company's
financial statements, in any report filed by the Company with the SEC pursuant
to the Securities Exchange Act of 1934, as amended, or in any exhibit or
schedule to the Exchange Agreement which liability the executive officers of the
Company have actual knowledge as of the record date of the dividend to the
Liquidating Trust. The Liquidating Trust agrees to assume and control the
defense of any such
-49-
action, suit or proceeding as described above in Section 8(i) or on Schedule
5(i) and to pay the fees and expenses relating thereto.
(k) Castle Creek Restructuring. The Castle Creek Restructuring is
complete and the Restructuring Agreement is entered into by and between THCG and
Castle Creek in substantially the form as delivered to the Sole Shareholder and
attached hereto as Schedule 8(k) and the Trust assumes the obligations to pay
the consideration that Castle Creek is to receive, other than obligations
relating to the common stock and warrant rights and the Company shall have no
liability therefore.
(l) Liquidating Trust. The Liquidating Trust shall have been
established and the assets as set forth in Schedule 5(p) assigned and the
liabilities assumed as set forth in Section 2.4 of the Liquidating Trust
Agreement which shall be entered into in substantially the same form as is
attached hereto as Schedule 8(l) and the Spin Off shall have occurred.
(m) No Subsidiaries. On the Closing Date THCG shall have no
subsidiaries or other interest in any entity.
(n) No Liabilities Other Than as Set Forth in Schedules. On the
Closing Date THCG shall have no material obligations or material claims against
it or be party to any agreement except as (1) set forth in Schedule 5(d),
Schedule 5(e)(2), Schedule 5(f), Schedule 5(g)(1)(iii), Schedule 5(g)(3),
Schedule 5(g)(4), Schedule 5(i), Schedule 5(j); or (2) as assumed by the
Liquidating Trust.
9. Execution and Closing Date. The Execution Date of this Exchange
Agreement is June 29, 2001. On the Execution Date:
(a) The Sole Shareholder shall deliver to THCG the following:
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(1) Certificates of good standing, referred to in subsection(e) of
Section 7 hereof;
(2) the Secretarial and Incumbency Certificates of the Sole
Shareholder referred to in subsection (c) of Section 7 hereof;
(3) certificates representing all of the Company Stock as set forth
in Section 2(a) hereof (which shall be held in escrow by counsel pending the
Closing) or in the event THCG lends funds to the Company and a pledge of stock
is received as part of that transaction, the right to receive certificates when
they are released from the Pledge;
(4) consents of any party whose consent is required by reason of
the transactions contemplated by this Exchange Agreement; and
(5) such other and further documents, instruments and certificates
not inconsistent with the provisions of this Exchange Agreement, executed by the
Company, and the Sole Shareholder as THCG shall reasonably require to carry out
and effectuate or evidence the purposes and terms of this Exchange Agreement.
(b) THCG shall deliver to the Sole Shareholder the following:
(1) Certificates of good standing, referred to in subsection (g) of
Section 8 hereof; and
(2) the Secretarial and Incumbency Certificates of THCG referred to
in subsection (d) of Section 8 hereof.
The Closing of the Exchange Agreement shall take place at the offices of THCG,
000 Xxxxxxx Xxxxxx, 00xx xxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. on July 11,
2001 (or such other date not later than August 31, 2001), as extended by either
of the parties in
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the event not all conditions of this Exchange Agreement are satisfied by July
11, 2001. At the Closing the following documents shall be delivered:
(c) by the Company and the Sole Shareholder:
(1) Opinion of counsel for the Company, described in subsection (d)
of Section 7 hereof;
(2) Representation Certificate; (3) Evidence of NASD approval. (d)
by THCG: (1) Stock certificates (the "THCG Stock Certificates") representing the
number of shares of THCG's Common Stock provided for in Section 2(a); (2)
Representation Certificate;
(3) Opinion of counsel for THCG, described in subsection(e) of
Section 8 hereof;
(4) Any additional shares as may be required pursuant to the
formula set forth in Section 2(a) hereof;
(5) Evidence that the Spin-off has taken place; and
(6) Evidence that Castle Creek has been restructured in accordance
with the documents set forth as Schedule 8(k).
10. Brokerage. The Company represents and warrants that it has engaged
the services of G-V Capital and agrees to indemnify and hold THCG harmless
against any claim for brokers' or finders' fees or compensation in connection
with the transactions herein provided for by any other person, firm or
corporation claiming a right to the same because engaged by the Company. THCG
represents and warrants to the
-52-
Company that it has also engaged the services of G-V Capital in connection with
the transactions herein provided for and agrees to indemnify and hold harmless
the Company against any claims for brokers' or finders' fees or compensation in
connection with the transactions herein provided for by any other person, firm
or corporation claiming a right to the same because engaged by THCG or its
Subsidiaries. A finder's agreement has been executed by G-V Capital, THCG, the
Company and the Sole Shareholder and is attached hereto as Schedule 10, and each
party hereto represents and warrants to the other that such finders agreement is
a valid, binding and enforceable agreement in accordance with its terms.
11. Adjustments. On the Execution Date, THCG and the Sole Shareholder
shall make provision for certain items that require adjustment and which can be
identified on such date. These adjustments will be set forth in a letter
agreement which will be binding upon the parties as if set forth in its entirety
herein. It is further agreed by THCG and the Sole Shareholder that expenses paid
by THCG during the period between the Execution Date and the Closing Date
relating to the operations of THCG subsequent to June 30, 2001, including the
lease of real property for 000 Xxxxxxx Xxxxxx, the lease of office equipment,
telecommunications and internet services, cleaning services and any other costs
of the facilities and the liability for directors and officers insurance will
reduce the amount of cash to be maintained on the balance sheet as set forth in
Section 8(c). Payments for expenses incurred prior to July 1, 2001 and any
expenses paid or incurred relating to the assets being transferred which are set
forth in Schedule 5(p) through the date of Closing and any costs of this
transaction incurred by THCG prior to the Closing Date will not reduce the
balance sheet amount
-53-
set forth in Section 8(c). Further it is agreed that the calculation of the
exact number of shares to be issued by THCG on the Execution Date may not be
able to be finally determined and will be adjusted if necessary to reflect the
number of THCG shares outstanding immediately prior to the Closing Date Date.
12. Miscellaneous.
(a) Entire Agreement. This Exchange Agreement, together with the
Schedules and Exhibits delivered pursuant to this Exchange Agreement, sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof, and merges and supersedes all prior discussions, agreements and
understandings of every and any nature between them, and no party shall be bound
by any condition, definition, covenant, agreement, warranty or representation,
other than as expressly set forth or provided for in this Exchange Agreement, or
as may be, on or subsequent to the date hereof, set forth in writing and signed
by the party to be bound thereby. This Exchange Agreement may not be changed or
modified, except by agreement in writing signed by all of the parties hereto.
(b) Parties in Interest. All the terms and provisions of this Exchange
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors in interest of the respective parties hereto.
(c) Laws Governing. This Exchange Agreement shall be construed and
interpreted according to the law of the State of New York as applied to
contracts executed and performed in the State of New York, without regard to
principles of conflicts of law.
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(d) Assignment. This Exchange Agreement shall not be assigned by the
Sole Shareholder, the Company or THCG except by operation of law;
(e) Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or overnight courier, if telecopied or if mailed, certified or
registered mail, with first-class postage paid, in each case addressed as
follows: (a) if to the Company or the Shareholder to Xxxxxx Xxxx, 00 Xxxx 00xx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Telecopy No.: (000) 000-0000, or to such
other person and place as the Company shall furnish to THCG in writing, with
copies to Xx Xxxxx, Esq., 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000,
Telecopy No.: (000) 000-0000, and Xxxxxxx XxXxxxxxxx, Esq., Xxxxxx Xxxxxx, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; and (b) if to THCG, to Mr. Xxxxxx Xxxx,
000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX, Telecopy No.: (000) 000-0000, or
to such other person and place as THCG shall furnish to the Company in writing,
with a copy to Xxxxxxx & Xxxxxxxxxx, LLP, 0000 Xxxxxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, XX 00000; Attn: H. Xxxxx Xxxxxxx, Xx., Telecopy No.: (000) 000-0000
and a copy to Xxxxx Xxxxxxxx, Esq., Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx, LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000. All notices shall be deemed given
upon receipt.
(f) Further Instruments. Each of the parties hereto will, on and after
the Closing Date, execute and deliver or cause to be executed and delivered such
other documents as the other parties hereto may reasonably request to more
effectively consummate the transactions contemplated by this Exchange Agreement.
-55-
(g) Counterparts. This Exchange Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(h) Headings; Construction. The headings in the sections of this
Exchange Agreement are inserted for convenience only, shall not constitute a
part hereof, and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Exchange Agreement is made to a
Section, Schedule or Exhibit, such reference shall be to a Section of or
Schedule or Exhibit to this Exchange Agreement unless otherwise indicated. Where
the reference "hereof," "hereby" or "herein" appears in this Exchange Agreement,
such reference shall be deemed to be a reference to this Exchange Agreement as a
whole. Whenever the words "include," "includes" or "including" are used in this
Exchange Agreement, they shall be deemed to be followed by the words "without
limitation." Words denoting the singular include the plural, and vice versa, and
references to it or its or words denoting any gender shall include all genders.
(i) Expenses. Except as otherwise provided in this Exchange Agreement,
THCG, on the one hand, and the Company and the Sole Shareholder, on the other
hand, shall bear their own respective expenses, including professional fees,
incurred in connection with this Exchange Agreement and the Exchange.
(j) Confidentiality. Each party shall maintain the existence of this
Exchange Agreement and the terms and conditions described herein ("Confidential
Information") strictly confidential. No party may disclose any Confidential
Information to any third party (other than to its legal, accounting or financial
advisors) without the prior consent
-56-
of the other party. Any press release will be subject to the prior consent of
the parties. However, the parties acknowledge that THCG shall have the right to
make any press release or other disclosure required to be made by THCG, in its
discretion, in order for it to comply with any federal or state securities laws
and that the contents of such disclosure shall be at THCG's discretion;
provided, however, that THCG shall deliver a copy thereof to the Company and the
Sole Shareholder prior to its release or disclosure, and shall consult with the
Company and the Sole Shareholder concerning the contents thereof.
(k) Severability. If any provision of this Exchange Agreement is held
by any court of competent jurisdiction to be illegal, invalid or unenforceable,
such provision shall be of no force and effect, but the illegality, invalidity
or unenforceability shall have no effect upon and shall not impair the
enforceability of any other provision of this Exchange Agreement; provided that
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party.
(l) Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements of the parties hereto
shall survive for a period of two years.
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IN WITNESS WHEREOF, the parties hereto have caused this
Exchange Agreement to be duly executed as of the day and year first above
written.
THCG, INC.
By: /s/ Xxxxxx Xxxx
----------------------------------------
Name: Xxxxxx Xxxx
Title:
XXXXXX & CO. SECURITIES, INC.
By: /s/ Xxxxxxx Xxxx
----------------------------------------
Name: Xxxxxxx Xxxx
Title:
STAR CROSS, INC.
By: /s/ Xxxxxxx Xxxx
----------------------------------------
Name: Xxxxxxx Xxxx
Title:
