GBI CAPITAL MANAGEMENT CORP.
SECOND SUPPLEMENT
TO
PROXY STATEMENT DATED MARCH 28, 2001
This second supplement to our proxy statement, dated March 28, 2001, is
being sent to notify you that the date of our annual meeting of shareholders has
been adjourned until May 7, 2001. Additionally, this supplement provides you
with revised information with respect to the consideration we will be paying for
the outstanding common stock of Ladenburg, Thalmann & Co. as set forth under
Proposal 1 of our proxy statement. This supplement also provides you with
certain other information, including information relating to Proposal 2 of our
proxy statement.
This supplement and the attached appendices should be read together
with the general discussion of the stock purchase agreement and the Stock
Purchase Transactions as described under Proposal 1, and the general discussion
of the election of our directors as described under Proposal 2, each as are
more fully set forth in the proxy statement and the related appendices. The full
discussions of Proposal 1 and Proposal 2 in the proxy statement, when taken
together with revised information contained in this supplement, should be
considered as fully integrated proposals.
Revised information with respect to Proposal 1
Change in net worth adjustment. As described in our proxy statement
under Proposal 1, we have entered into a stock purchase agreement, dated as of
February 8, 2001, with New Valley Corporation, Ladenburg, Thalmann Group Inc.,
Berliner Effektengesellschaft AG and Ladenburg, Thalmann & Co. Inc., under which
we are to acquire the outstanding common stock of Ladenburg, Thalmann & Co. As
consideration for Ladenburg, Thalmann & Co.'s stock, the stock purchase
agreement provided for us to issue to New Valley and Berliner:
o 18,181,818 shares of our common stock;
o $10,000,000 aggregate principal amount of our senior
convertible notes; and
o $10,000,000 in cash, which we intended to fund from the
proceeds of a loan to us by Frost- Nevada, Limited Partnership
according to a loan agreement, dated as of February 8, 2001,
among our company and Frost-Nevada.
The stock purchase agreement also provided for an adjustment, in certain
situations, of the purchase price to be paid by us for the common stock of
Ladenburg, Thalmann & Co. based on the net worth of Ladenburg, Thalmann & Co. on
the Closing Date.
As a result of the Stock Purchase Transactions, New Valley, Berliner
and Frost-Nevada would have beneficially owned approximately 53.9%, 11.6% and
14.9%, respectively, of our common stock on and after the Closing Date, assuming
conversion by the parties of the full amount of the notes to be issued to each
party and including shares of our common stock that were previously owned by
Frost-Nevada.
On April 25, 2001, we entered into amendments to the stock purchase
agreement and loan agreement. The amendment to the stock purchase agreement,
among other things, replaces the existing purchase price adjustment clause.
Under the new adjustment provision, the number of shares of common stock we will
be required to issue to New Valley and Berliner will be adjusted ("Stock
Adjustment") based on the respective changes in the total stockholder equities
of Ladenburg, Thalmann & Co. and our company through the end of the calendar
month immediately preceding the month in which the Closing Date occurs.
The amendment to the stock purchase agreement also provides for the
conversion price of the notes that will be issued to New Valley and Berliner to
be adjusted in the same manner as the adjustment in the number of shares.
However, the conversion price of the notes to be issued to New Valley and
Berliner will not be decreased below a price that would result in a total number
of additional shares of our common stock being issuable upon conversion of the
notes, when added to the additional shares of our common stock being issued to
New Valley and Berliner as a result of the Stock Adjustment, exceeding 80% of
the sum (such sum being referred to as the "Total Additional Shares") of:
o the total number of additional shares to be issued and to be
issuable to New Valley and Berliner as provided for in the new
adjustment provision contained in the amendment to the stock
purchase agreement; and
o the number of additional shares of our common stock issuable
to Frost-Nevada as a result of the amendment to the loan
agreement described below.
The amendment to the loan agreement provides for an adjustment in the
conversion price of the note that will be issued to Frost-Nevada similar to the
adjustment provided for in the amendment to the stock purchase agreement.
However, the amendment provides that if the conversion price, after adjustment
as set forth in the amendment, would not yield a number of shares of our common
stock equal to at least the sum of 5,000,000 shares of our common stock and 20%
of the Total Additional Shares, the conversion price will be further adjusted
so that Frost-Nevada, upon conversion of its note, will receive the sum of
5,000,000 shares of our common stock and 20% of the Total Additional Shares.
Under the new adjustment provisions, based on what we anticipate the
respective stockholder equities of our company and Ladenburg, Thalmann & Co. to
be on April 30, 2001, we will be required to issue approximately:
o 2,595,747 additional shares of our common stock to New Valley
and 644,886 additional shares of our common stock to Berliner;
o 491,016 additional shares of our common stock upon conversion
of the notes to be issued to New Valley and 121,988 additional
shares of our common stock upon conversion of the notes to be
issued to Berliner, each at a conversion price of $2.2426
reduced from the original conversion price of $2.60; and
o 963,409 additional shares of our common stock upon conversion
of the note to be issued to Frost-Nevada, at a conversion
price of $1.6769 reduced from the original conversion price of
$2.00.
Accordingly, based on these estimates, New Valley, Berliner and Frost-Nevada
will beneficially own approximately 56.3%, 12.5% and 15.6%, respectively, of our
common stock on and after the Closing Date. Therefore, as a result of the
issuance of the additional 4,817,046 shares, the total increase in these three
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parties' beneficial ownership of our common stock will increase by approximately
4.0%. You should understand, however, that our estimates are not the actual
figures that will be used and we may be required to issue a greater or lesser
number of shares of common stock than we currently anticipate.
Change in closing conditions. The amendment to the stock purchase
agreement also removes the condition that the American Stock Exchange approve
the Stock Purchase Transactions. Although we believe that we will obtain
approval by the Exchange, we cannot assure you that we will be able to do so by
the Closing Date. If we are unable to obtain the Exchange's approval by the
Closing Date, our stock will be listed on the OTC Bulletin Board.
Additionally, the amendment provides that we will reimburse New Valley
and Berliner for all of their out-of-pocket expenses incurred by them in
connection with the Stock Purchase Transactions through the Closing Date. New
Valley and Berliner currently estimate that they will incur combined expenses
totaling approximately $400,000 through the Closing Date.
The amendments to the stock purchase agreement and the loan agreement
and the amended form of notes to be issued to New Valley, Berliner and
Frost-Nevada are attached to this supplement as Appendices A through D. You are
urged to read these appendices carefully.
Updated fairness opinion. As requested by our board of directors, Roth
Capital Partners, LLC, our financial advisors, provided us with a new opinion
stating that the consideration to be paid by us in exchange for Ladenburg,
Thalmann & Co.'s stock, as contemplated by the amended stock purchase agreement,
is fair to our shareholders from a financial point of view. The full text of
Roth Capital Partners' opinion, dated April 24, 2001, is attached to this
supplement as Appendix E.
Changes relating to our management after the Closing Date. In
connection with the amendments, David Thalheim, our administrator, will resign
from his position with us effective as of the Closing Date. The resignation
agreement provides, among other things, that we will pay Mr. Thalheim $1,000 per
month for two years from the Closing Date and will continue to maintain life,
disability, medical and dental insurance plans on his behalf. Additionally, we
will grant Mr. Thalheim a ten-year option to purchase 100,000 shares of our
common stock on the Closing Date at the same price as the options to be granted
to Mr. Victor Rivas on the Closing Date.
By this supplement, we are requesting that you approve the Stock
Purchase Transactions, as amended, all as are more fully set forth in the
amendments to the stock purchase agreement and loan agreement and the amended
forms of notes. Several of our officers, directors and key employees entered
into a proxy and voting agreement in which these individuals agreed to vote all
of our common stock owned by them (a total of 12,426,939 shares, representing
approximately 66% of our outstanding common stock) in favor of approving the
Stock Purchase Transactions and, accordingly, will vote in favor of the Stock
Purchase Transactions, as amended. Therefore, the Stock Purchase Transactions,
as amended, will be approved regardless of how our other shareholders vote on
this issue.
There is no need to discard the proxy cards you previously received
with our proxy statement dated March 28, 2001. A vote "FOR" approval of the
Stock Purchase Transactions will be deemed a vote "FOR" approval of the Stock
Purchase Transaction, as amended by the amendments to the stock purchase
agreement and loan agreement and the amended form of notes.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE STOCK PURCHASE
TRANSACTIONS, AS AMENDED, AND BELIEVES THAT THEY ARE FAIR TO, AND IN THE BEST
INTERESTS OF, OUR SHAREHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS APPROVE THE STOCK PURCHASE TRANSACTIONS, AS AMENDED.
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Revised information with respect to Proposal 2
As described in our proxy statement in Proposal 2 under the section
entitled "Compensation Arrangements for Directors," currently, our directors
receive no cash compensation for serving as directors, although they are
reimbursed for their costs incurred in attending meetings of the board of
directors or of the committees on which they serve. Our policy, however, has
been to grant our outside directors ten-year options under our 1999 Performance
Equity Plan to purchase 20,000 shares of our common stock at fair market value
on the date of grant. Accordingly, on the Closing Date, we will grant each new
outside director a ten-year option under the 1999 Performance Equity Plan to
purchase 20,000 shares of our common stock at fair market value. The options
will become fully exercisable on the first anniversary of the Closing Date.
Additionally, New Valley has advised us that, upon becomming members
of our board of directors, its designees to our board intend to propose a
resolution for adoption that would call for us to pay outside directors
following the Closing Date an annual fee of $12,000, payable in quarterly
installments.
Changing your vote if you have already returned your proxy card
If you have already returned your proxy card and wish to revoke your
proxy as a result of the information contained in this supplement, you may do so
at any time before it is exercised by:
o delivering written notification of your revocation to our
secretary;
o voting in person at the meeting; or
o delivering another proxy bearing a later date.
Please note that your attendance at the meeting will not alone serve to
revoke your proxy.
The date of this supplement is April 26, 2001
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Appendix A
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 dated April 25, 2001 ("Amendment No. 1") to STOCK
PURCHASE AGREEMENT dated February 8, 2001, among GBI CAPITAL MANAGEMENT CORP.,
NEW VALLEY CORPORATION, LADENBURG, THALMANN GROUP INC., BERLINER
EFFEKTENGESELLSCHAFT AG and LADENBURG, THALMANN & CO., INC. ("Stock Purchase
Agreement").
WHEREAS, the Parties have entered into the Stock Purchase Agreement and
desire to amend it in certain respects as set forth herein (capitalized terms
used herein that are defined in the Stock Purchase Agreement shall have the same
meanings herein as in the Stock Purchase Agreement);
IT IS AGREED:
1. Section 2.4 of the Stock Purchase Agreement is hereby amended in its
entirety to read as follows:
2.4 Net Worth Adjustment.
(a) As used in this Section 2.4:
(i) "Purchase Price Adjustment Percentage" means the amount
(expressed as a decimal) obtained by dividing the Net Closing Book Differential
by $21,263,080.
(ii) "Net Closing Book Differential" means the amount
obtained by subtracting the Ladenburg Book Differential from the GBI Book
Differential.
(iii) "GBI Book Differential" means the amount obtained by
subtracting the Adjusted Total Stockholders' Equity of the Purchaser on the last
day of the calendar month immediately preceding the month in which the Closing
occurs from $21,263,080.
(iv) "Ladenburg Book Differential" means the amount
obtained by subtracting the Total Ownership Equity of Ladenburg on the last day
of the calendar month immediately preceding the month in which the Closing
occurs from $29,642,000.
(v) "Adjusted Total Stockholders' Equity" means the amount
obtained by taking the sum of (1) the stockholders' equity of the Purchaser as
of the last day of the calendar month immediately preceding the month in which
the Closing occurs, based in part on the Total Ownership Equity of the
Purchaser's subsidiary, GBI Capital Partners Inc. ("GBICP"), and (2) all
out-of-pocket expenses incurred through such date by the Purchaser in connection
with the Stock Purchase Agreement and the related transactions to the extent
such expenses reduce the Purchaser's stockholders' equity.
(vi) "Total Ownership Equity" means the amount referred to
as "total ownership equity" in the Focus Reports referred to in subparagraph (b)
below.
(b) Promptly after the Closing, upon filing of Focus Reports
by Ladenburg and GBICP for the calendar month immediately preceding the month in
which the Closing occurs, the individuals then serving as the chief financial
officers of Ladenburg and Purchaser shall cooperate with each other to calculate
the Purchase Price Adjustment Percentage. The Focus Reports for Ladenburg and
GBICP shall be prepared, and the stockholders' equity of the Purchaser shall be
determined, in accordance with GAAP, applied consistently as in the Financial
Statements and the Purchaser Financial Statements. Upon completion of the
calculation of the Purchase Price Adjustment Percentage, the number of shares to
be issued to the Sellers and the conversion price of the Notes to be issued to
the Sellers shall be adjusted (the "Issuance Adjustment") as follows:
(i) The number of shares of Purchaser Common Stock to be
issued to the Sellers shall be increased from 18,181,818 to the Total New Shares
and the Purchaser shall issue to the Sellers certificates representing the Total
New Shares less 18,181,818. "Total New Shares" shall mean the quotient
obtained by taking (x) a numerator of 25,000,000 over (y) a denominator of (1)
1.375 less (2) the product of 1.375 and the Purchase Price Adjustment
Percentage. Notwithstanding the foregoing, if the issuance to LTGI of any
additional shares of Purchaser Common Stock pursuant to this Amendment No. 1
shall, when taken together with all other shares of Purchaser Common Stock
issued to LTGI as part of the Purchase Price, require compliance with the
notification provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Purchaser shall issue to LTGI only that
number of shares of Purchaser Common Stock as shall not require such compliance
and the Purchaser shall not be obligated to issue any further additional shares
of Purchaser Common Stock to LTGI until such compliance has been effected.
(ii) The Notes to be issued to the Sellers shall be
amended, a copy of which is annexed hereto as Exhibit A, such that the
conversion price shall be decreased by the amount obtained by taking the product
of $2.60 and the Purchase Price Adjustment Percentage. Notwithstanding the
foregoing, the conversion price of the Notes may not be decreased below a price
that would result in the total number of additional shares of Purchaser Common
Stock being issuable upon conversion of the Notes as a result of such
adjustment, when added to the additional number of shares of Purchaser Common
Stock being issued to the Sellers under subsection (i) above, exceeding 80% of
the sum of (x) the number of additional shares to be issued and issuable to the
Sellers under this Section 2.4(b) and (y) the number of additional shares of
Purchaser Common Stock issuable to Frost-Nevada, Limited Partnership ("Frost")
as a result of the Conversion Price Adjustment (as such term is defined in the
Loan Agreement, dated as of February 8, 2001, as amended on the date hereof,
between the Purchaser and Frost).
(c) Upon completion of calculating the Purchase Price
Adjustment Percentage and the Issuance Adjustment, such calculations shall be
submitted to the Enforcement Committee, New Valley and Berliner and shall be
deemed conclusively accepted unless written objection thereto is given by any
Party to the other Parties within 30 days after submission.
(d) If, within the 30-day period specified in Section 2.4(c),
an objection is made, the Purchaser's Accountants and the Sellers' Accountants
shall jointly review the determination of the Purchase Price Adjustment
Percentage and the Issuance Adjustment (the "Initial Determination") and attempt
to reach a mutually satisfactory determination of the Purchase Price Adjustment
Percentage and the Issuance Adjustment. If the Purchaser's Accountants and the
Sellers' Accountants are unable to reach such a mutually satisfactory
determination within 30 days after the Initial Determination has been submitted
to them for their joint review, they shall promptly submit the Initial
Determination to a firm of independent accountants jointly selected by them. The
independent third firm shall submit its determination of the Purchase Price
Adjustment Percentage and the Issuance Adjustment to New Valley, Berliner and
the Enforcement Committee within 30 days of its receipt of the Initial
Determination, and the determination of the Purchase Price Adjustment Percentage
and the Issuance Adjustment by such third firm shall be final and conclusive
upon the Parties. The Purchaser shall pay the fees and expenses of the
Purchaser's Accountants and New Valley and Berliner shall pay the fees and
expenses of the Sellers' Accountants. The fees and expenses of any independent
third firm shall be paid 50% by the Purchaser and 50% by New Valley and
Berliner.
(e) The Purchaser shall issue all shares of Purchaser Common
Stock under this Section 2.4 in the proportion of 80.1% to LTGI and 19.9% to
Berliner. Any additional shares of Purchaser Common Stock to be issued to the
Sellers shall constitute consideration to the Sellers for the LTI Stock
additional to the Purchase Price.
2. Promptly after the Closing, the Purchaser shall reimburse the
Sellers for all of their out-of-pocket expenses incurred through the date of the
Closing in connection with the Stock Purchase Agreement and the related
transactions.
3. Section 6.1(a) of the Stock Purchase Agreement and Schedules 3.3,
3.12 and 4.5 thereto are hereby amended to delete all references thereto to the
receipt of approval or consent of AMEX and NYSE and no Party's obligations to
consummate the transactions contemplated by the Stock Purchase Agreement shall
be subject to the receipt of such approval or consent.
4. Sections 6.2(e), 6.3(b) and 6.3(d) of the Stock Purchase Agreement
are hereby deleted in their entirety.
5. Schedules 2.8(a) and 2.8(b) are hereby replaced by the attached
Schedules 2.8(a)(i) and 2.8(b)(i) to reflect the directors and officers of the
Purchaser and of GBICP effective as of the Closing Date.
6. Section 3.9(e) of the Stock Purchase Agreement is hereby amended to
change the reference therein from "90 days" to "180 days."
7. The Purchaser represents and warrants to the Selling Parties as
follows:
7.1 Authority and Corporate Action. Other than the Stockholder
Approval, the Purchaser has all necessary corporate power and authority to enter
into this Amendment No. 1 and such other instruments to be executed and
delivered by the Purchaser in connection with the transactions contemplated by
this Amendment No. 1 ("Additional Purchaser Transaction Documents") and to
consummate the transactions contemplated thereby. Other than the Stockholder
Approval, all corporate action necessary to be taken by the Purchaser to
authorize the execution, delivery and performance of the Additional Purchaser
Transaction Documents has been, duly and validly taken. Each Additional
Purchaser Transaction Document constitutes, or will constitute upon execution
and delivery thereof, the valid, binding and enforceable obligation of the
Purchaser, enforceable in accordance with its terms, except (i) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws of general
application now or hereafter in effect affecting the rights and remedies of
creditors and by general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity) and (ii) as enforceability of any
indemnification provision may be limited by federal and state securities laws
and public policy.
7.2 Capitalization. Any additional shares of Purchaser Common
Stock to be issued pursuant to the revised Section 2.4 set forth above will be,
upon issuance in accordance with the terms of this Amendment No. 1, duly
authorized, validly issued, fully paid and nonassessable.
7.3 Opinion of Financial Advisor. The Purchaser has received a
new opinion of Roth Capital Partners, LLC, dated April 24, 2001, to the effect
that the consideration to be paid by the Purchaser for the Ladenburg Stock, as
set forth in the Stock Purchase Agreement as amended hereby, is fair from a
financial point of view to the Purchaser, and a true and complete copy of such
opinion has been delivered to the New Valley Parties and Berliner prior to the
execution of this Amendment No. 1.
8. The New Valley Companies, on the one hand, and Berliner, on the
other hand, severally and not jointly represent and warrant to the Purchaser as
follows:
8.1 Authority and Corporate Action. Such Selling Party has all
necessary corporate power and authority to enter into this Amendment No. 1 and
the other instruments and agreements to be executed and delivered by such
Selling Party in connection with the transactions contemplated by this Amendment
No. 1 (collectively, the "Additional Seller Transaction Documents") and to
consummate the transactions contemplated thereby. All corporate action necessary
to be taken by such Selling Party to authorize the execution, delivery and
performance of the Additional Seller Transaction Documents has or will at
Closing have been duly and validly taken. Each of the Additional Seller
Transaction Documents to which it is a party constitutes, or upon the execution
and delivery by such Selling Party will constitute, the valid, binding and
enforceable obligation of such Selling Party, enforceable in accordance with its
terms, except (i) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws of
general application now or hereafter in effect affecting the rights and remedies
of creditors and by general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and (ii) as
enforceability of any indemnification provision may be limited by federal and
state securities laws and public policy.
9. Covenants.
9.1 Proxy Statement.
9.1.1 The Purchaser will prepare and file with the
Commission as soon as reasonably practicable after the date of execution of this
Amendment No. 1 a supplement ("Supplement") to the Purchaser's proxy statement,
dated March 28, 2001, under the 1934 Act with respect to the matters addressed
herein. The Purchaser shall give New Valley and Berliner and their counsel the
opportunity to review the Supplement prior to filing it with, or sending it to,
the Commission. The Purchaser will use its best efforts, after consultation with
the other Parties, to cause the Supplement to be mailed to the holders of
Purchaser Common Stock entitled to vote at the Purchaser Stockholder Meeting at
the earliest practicable time.
9.1.2 The Purchaser, acting through its Board of Directors,
shall include in the Supplement the recommendation of its Board of Directors
that the stockholders of the Purchaser vote in favor of the matters presented in
the Supplement for approval by vote of the stockholders and shall otherwise use
its reasonable best efforts to obtain the Stockholder Approval.
9.2 Stockholder Meeting. The Purchaser shall cause the
Purchaser Stockholder Meeting to be duly called and held as soon as reasonably
practicable after the date of execution of this Amendment No. 1 for the purposes
of voting on the items previously called for under the Stock Purchase Agreement
as well as the issuance of any additional shares of Purchaser Common Stock to be
issued pursuant to the revised Section 2.4 set forth above in this Amendment No.
1.
9.3 Additional Agreements. Concurrently with the execution of
this Amendment No. 1, the Purchaser, GBICP and David Thalheim are executing and
delivering an Amendment No. 2 to the Employment Agreement between GBICP and
David Thalheim, providing for the resignation of Mr. Thalheim's from GBICP
effective at the Closing.
10. Miscellaneous.
10.1 Press Release; Public Announcements; Filings. Promptly after
execution of this Amendment No. 1, the Parties shall issue a press release in
the form of Exhibit A annexed hereto (the "Amending Release"). The Purchaser and
New Valley shall also each file with the Commission a Report on Form 8-K/A with
respect to the transactions contemplated hereby (the "8-K/As" and together with
the Amending Release, the "Agreed Additional Disclosure"). Each 8-K/A shall be
provided by its preparer to the other Party prior to filing and the other Party
shall be given a reasonable opportunity to comment thereon. The Parties shall
not make any other public announcements in respect of this Amendment No. 1 or
the transactions contemplated herein inconsistent with the Agreed Additional
Disclosure without prior consultation and approval as to the form and content
thereof except to the extent required by law. Notwithstanding the foregoing, a
Party may make any disclosure which its counsel advises is required by
applicable law or regulation, in which case the other Party shall be given such
reasonable advance notice as is practicable in the circumstances and the Parties
shall use their best efforts to cause a mutually agreeable release or
announcement to be issued. The Parties may also make appropriate disclosure of
the transactions contemplated by this Amendment No. 1 to their officers,
directors and Representatives.
10.2 Headings. The headings contained in this Amendment No. 1 are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Amendment No. 1.
10.3 Severability, Etc. As amended hereby, the Stock Purchase
Agreement shall continue in full force and effect. All references in the Stock
Purchase Agreement to the term "Agreement" shall hereafter mean the Stock
Purchase Agreement as amended hereby. If any term or other provision of this
Amendment No. 1 is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Amendment
No. 1 shall nevertheless remain in full force and effect so long as the economic
or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any Party.
10.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York without giving
effect to principles of conflicts of law.
10.5 Counterparts. This Amendment No. 1 may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument. Delivery of an executed
counterpart of a signature page of this Amendment No. 1 by telecopier shall be
effective as delivery of a manually executed counterpart of this Amendment No.
1.
IN WITNESS WHEREOF, the Parties have caused this Amendment No. 1 to the
Stock Purchase Agreement to be executed as of the date first written above.
GBI CAPITAL MANAGEMENT CORP.
/s/ Richard J. Rosenstock
By: _________________________________
Name: Richard J. Rosenstock
Title: President
NEW VALLEY CORPORATION
/s/ Richard J. Lampen
By: _________________________________
Name: Richard J. Lampen
Title: Executive Vice President
BERLINER EFFEKTENGESELLSCHAFT AG
/s/ Holger Timm
By: _________________________________
Name: Holger Timm
Title: CEO
LADENBURG, THALMANN GROUP INC.
/s/ Victor M. Rivas
By: _________________________________
Name: Victor M. Rivas
Title:
LADENBURG, THALMANN & CO. INC.
/s/ Victor M. Rivas
By: _________________________________
Name: Victor M. Rivas
Title: Chairman & CEO
Appendix B
SENIOR CONVERTIBLE PROMISSORY NOTE
$10,000,000.00 [Aggregate to Sellers] __________, 2001
FOR VALUE RECEIVED, GBI CAPITAL MANAGEMENT CORP., a Florida
corporation ("Maker"), having an address at 1055 Stewart Avenue, Bethpage, New
York 11714, hereby promises to pay to _____________________________, a
______________ corporation, its successors and/or permitted assigns (any of
which is hereinafter referred to as "Holder"), at
_______________________________________, in lawful money of the United States,
the sum of ______________ Dollars and No Cents ($_________.00) on December 31,
2005. Interest on the unpaid principal amount of this Note shall be paid at the
rate of seven and one half percent (7-1/2%) per annum on each March 31, June 30,
September 30 and December 31, commencing June 30, 2001 or the lesser of fifteen
percent(15%) per annum or the maximum interest rate permitted by applicable law
following an Event of Default. At the Holder's request payments shall be made by
wire transfer to an account designated by the Holder. If a payment date is not a
business day, payment may be made on the next business day and interest shall
accrue for the intervening period. This Note may not be prepaid.
The Holder may, with or without notice to the Maker or any guarantor or
other party liable herefor, extend or renew this Note, or extend the time for
making payment of any amount provided for herein, or accept any amount in
advance, all without affecting the liability of the Maker or any other party or
guarantor liable herefor.
This Note is issued pursuant to the terms of that certain Stock
Purchase Agreement ("Stock Purchase Agreement") dated February 8, 2001 between
the Maker, New Valley Corporation, Ladenburg, Thalmann Group Inc., Ladenburg,
Thalmann & Co. Inc. and Berliner Effektengesellschaft AG. and the Holder and the
Maker are entitled to the benefits provided for therein. Terms used but not
defined herein shall have their respective meanings assigned in the Stock
Purchase Agreement. This Note is entitled to the benefits of the security for
the payment hereof provided pursuant to that certain Pledge and Security
Agreement dated February 8, 2001 between the Maker, the Secured Parties named
therein and U.S. Bank Trust National Association, as Collateral Agent ("Pledge
Agreement").
1. Conversion of Note
The principal of and accrued interest on this Note shall be
convertible, in whole or in part, at any time, at the election of the Holder,
into that number of fully paid and non-assessable shares of the Maker's common
stock, par value $0.0001 per share ("Common Stock"), determined by dividing the
amount of principal and interest to be so converted by the "Conversion Price"
(as hereinafter defined) in effect at the time notice of conversion is given to
the Maker as set forth below. As used herein, "Conversion Price" means,
initially, $2.60. Promptly following the Closing of the Stock Purchase
Agreement, the Conversion Price shall be decreased by the amount obtained
by taking the product of $2.60 and the Purchase Price Adjustment Percentage (as
such term is defined in the Stock Purchase Agreement, as amended).
Notwithstanding the foregoing, the Conversion Price of this Note may not be
decreased below a price that would result in the total number of additional
shares of Common Stock being issuable upon conversion of this Note as a result
of such adjustment, when added to the additional number of shares of Common
Stock being issued to the Sellers under Section 2.4(b)(i) of the Stock Purchase
Agreement, exceeding 80% of the sum of (x) the number of additional shares to be
issued and issuable to the Sellers under Section 2.4(b) of the Stock Purchase
Agreement and (y) the number of additional shares of Common Stock issuable to
Frost as a result of the Conversion Price Adjustment (as such term is defined in
the Loan Agreement, dated as of February 8, 2001, as amended, between the Maker
and Frost).
If, at any time after the date hereof, there occurs, with
respect to the Common Stock, a reclassification, stock split, stock dividend,
spin-off or distribution, share combination or other similar change affecting
the Common Stock as a whole and all holders thereof or if the Maker shall
consolidate with, or merge with or into, any other entity, sell or transfer all
or substantially all its assets or engage in any reorganization,
reclassification or recapitalization which is effected in such a manner that the
holders of Common Stock are entitled to receive stock, securities, cash or other
assets with respect to or in exchange for Common Stock (each, an "Adjustment
Event"), the Conversion Price and the kind and amount of stock, securities, cash
or other assets issuable upon conversion of this Note in effect at the time of
the record date for such dividend or distribution or of the effective date of
such share combination, split, consolidation, merger, sale, transfer,
reorganization, reclassification or recapitalization shall be appropriately
adjusted so that the conversion of the Note after such time shall entitle the
Holder to receive the aggregate number of shares of Common Stock or securities,
cash and other assets which, if this Note hade been converted immediately prior
to such time, the Holder would have owned upon such conversion and been entitled
to receive by virtue of such Adjustment Event, provided that if the kind or
amount of securities, cash and other property is not the same for each share of
Common Stock held immediately prior to such reclassification, change,
consolidation, merger, sale, transfer, or conveyance, any Holder who fails to
exercise any right of election shall receive per share the kind and amount of
securities, cash or other property received per share by a plurality of such
shares.
Promptly after an Adjustment Event, the Maker shall mail to
the Holder a notice of the adjustment together with a certificate from the
Maker's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it.
If (i) the Maker takes any action that would cause an
Adjustment Event, (ii) there is a liquidation or dissolution of the Maker or
(iii) the Maker declares a cash dividend, the Maker shall mail to the Holder a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution, the Maker
shall mail the notice at least 15 days before such date.
If, during any period of twenty (20) consecutive trading days,
the closing sale price of the Common Stock is at least $8.00 per share (as
adjusted for all Adjustment Events occurring after the date of this Note), the
principal of and all accrued interest on this Note shall be automatically
2
converted, without further action on the part of the Holder, into shares of
Common Stock at the Conversion Price in effect on the last Trading Day of such
period.
In connection with any conversion of this Note, the Holder
shall surrender this Note and deliver it, together with written instructions to
convert in the form attached hereto, to the Maker at its principal executive
office. The date of such delivery shall be deemed the date of conversion. The
Maker shall, as soon as practicable, issue and deliver to a location in the
United States designated by the Holder certificates representing the securities
(or other assets) to which the Holder is entitled as a result of such conversion
together with a note for the unconverted balance.
The Maker shall not be required to issue fractions of shares
of Common Stock upon conversion and in lieu thereof any fractional share shall
be rounded up or down to the nearest whole share. The Maker shall reserve and
shall at all times have reserved out of its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the conversion of the
unpaid principal amount and accrued interest as provided for herein. The Maker
shall list such shares on any national securities exchange on which the Common
Stock is then listed. If the Holder converts this Note, the Maker shall pay any
documentary, stamp or similar issue or transfer tax due on such conversion
except that the Holder shall pay any such tax due because the shares are issued
in a name other than the Holder's.
The certificates representing shares of Common Stock issued
upon conversion of this Note shall bear a legend to the effect that such shares
are not registered under the 1933 Act and may not be sold, assigned or otherwise
transferred or hypothecated except in accordance with the registration
provisions of the 1933 Act or an exemption therefrom and in accordance with the
provisions of that certain Investor Rights Agreement dated as of February 8,
2001 among New Valley Corporation, Ladenburg, Thalmann Group Inc., Berliner
Effektengesellschaft AG, the Maker, Frost-Nevada, Limited Partnership and the
Principals party thereto ("Investor Rights Agreement"). This legend shall be
removed on receipt of an opinion of counsel reasonably satisfactory to the Maker
that such legend is no longer required.
2. Change of Control
(i) Promptly after the occurrence of a Change of Control (as
hereinafter defined) (the date of such occurrence being the "Change of
Control Date"), the Maker shall commence (or cause to be commenced) an
offer to purchase all outstanding Notes pursuant to the terms described
in paragraph (iii) of this "Change of Control" section (the "Change of
Control Offer") at a purchase price equal to the unpaid principal
amount of this Note and accrued interest thereon (the "Change of
Control Amount") on the Change of Control Payment Date (as hereinafter
defined), and shall purchase (or cause the purchase of) any Notes
tendered in the Change of Control Offer pursuant to the terms hereof.
As used in this Note, the term "Notes" means all Convertible Promissory
Notes of the Maker of like tenor to this Note (except as to principal
amount, interest rate and Conversion Price). The Change of Control
Amount shall be payable in cash.
(ii) Within 10 days following a Change in Control Date, the
Maker shall send, by first-class mail, postage prepaid, a notice to the
Holder. Such notice shall contain all instructions and materials
necessary to enable the Holder to tender this Note pursuant to the
3
Change of Control Offer and shall state:
(a) that a Change of Control has occurred, that a
Change of Control Offer is being made pursuant to this "Change
of Control" section and that all Notes validly tendered and
not withdrawn will be accepted for payment;
(b) the Change of Control Amount and the purchase
date (which must be no earlier than 10 days nor later than 20
days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(c) that any Notes not tendered will continue to
accrue interest;
(d) that, unless the Maker defaults in making payment
therefor, any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(e) that holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to
surrender such Notes, properly endorsed for transfer, together
with such other customary documents as the Maker may
reasonably request to the Maker at the address specified in
the notice prior to the close of business on the business day
prior to the Change of Control Payment Date;
(f) that holders of Notes will be entitled to
withdraw their election if the Maker receives, not later than
two business days prior to the Change of Control Payment Date,
a telegram, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Notes the
holder delivered for purchase and a statement that such holder
is withdrawing its election to have such Notes purchased;
(g) that holders who tender only a portion of their
Notes will, upon purchase of the Notes tendered, be issued a
Note representing the Notes not purchased; and
(h) the circumstances and relevant facts regarding
such Change of Control (including information with respect to
pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control).
(iii) The Maker will comply with any tender offer rules under
the Exchange Act which then may be applicable in connection with any
offer made by the Maker to repurchase the Notes as a result of a Change
of Control. If the provisions of any securities laws or regulations
conflict with provisions of this Note, in reliance on an opinion of
counsel, the Maker may comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligation
under this Note by virtue thereof.
4
(iv) On the Change of Control Payment Date, the Maker shall
(A) accept for payment the Notes validly tendered pursuant to the
Change of Control Offer, (B) pay to the holders of Notes so accepted
the Change of Control Amount therefor in cash as provided above and (C)
cancel each surrendered Note. Unless the Maker defaults in the payment
for the Notes tendered pursuant to the Change of Control Offer,
interest will cease to accrue with respect to the Notes tendered and
all rights of holders of such tendered Notes will terminate, except for
the right to receive payment therefor on the Change of Control Payment
Date.
(v) To accept the Change of Control Offer, the holder of a
Note shall deliver, prior to the close of business on the business day
prior to the Change of Control Payment Date, written notice to the
Maker (or an agent designated by the Maker for such purpose) of such
holder's acceptance, together with the Notes with respect to which the
Change of Control Offer is being accepted, duly endorsed for transfer.
(vi) For the avoidance of doubt, nothing in this "Change of
Control" section shall restrict the right of the holders of Notes, in
connection with a Change of Control, to convert and to receive the kind
and amount of consideration payable to holders of Common Stock in
respect of the Common Stock into which the Notes may be converted.
(vii) As used in this "Change of Control" section,
"Change of Control" means: (a) the sale, lease, transfer,
conveyance, merger, consolidation or other disposition (other
than a merger or consolidation that does not result in any
change in the Maker's stock and in which a majority of the
successor's voting securities is held by holders of the
Maker's Common Stock immediately before such transaction ), in
one or a series of related transactions, of all or
substantially all the assets of the Maker and its
subsidiaries, taken as a whole, to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act), (b) the
consummation of any transaction (including any merger or
consolidation) the result of which is that any "person" (as
defined above), other than the Principals party to the
Investor Rights Agreement, New Valley Corporation, Ladenburg,
Thalmann Group Inc., Berliner Effektengesellschaft AG and Dr.
Phillip Frost, individually or collectively, becomes the
beneficial owner (as determined in accordance with Rules 13d-3
and 13d-5 under the Exchange Act, except that a person will be
deemed to have beneficial ownership of all Voting Securities
(as hereinafter defined) that such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more
than 50% of the Voting Securities of the Maker, or (c) the
first day on which a majority of the members of the Board of
Directors of the Maker are not Continuing Directors;
"Continuing Directors" means individuals who constituted the
Board of Directors of the Maker on the date hereof (the
"Incumbent Directors"); provided that any individual becoming
a director after the date hereof shall be considered to be an
Incumbent Director if such individual's election, appointment
or nomination was recommended or approved by at least
5
two-thirds of the other Incumbent Directors continuing in
office following such election, appointment or nomination
present, in person or by telephone, at any meeting of the
Board of Directors of the Maker, after the giving of a
sufficient notice to each Incumbent Director so as to provide
a reasonable opportunity for such Incumbent Directors to be
present at such meeting; and
"Voting Securities" means securities of the Maker ordinarily
having the power to vote for the election of directors of the
Maker.
3. Events of Default
Upon the occurrence of any of the following events (herein
called "Events of Default"):
(i) The Maker shall fail to make any payment of principal on
this Note on the date specified herein for such payment;
(ii) The Maker shall fail to make any payment of interest on
this Note or any other payment due under this Note or the Pledge
Agreement within ten (10) days after it is due;
(iii) (a) The Maker or Ladenburg shall commence, or consent to
the entry of an order for relief in, any proceeding or other action
relating to it in bankruptcy or seek reorganization, arrangement,
readjustment of its debts, receivership, dissolution, liquidation,
winding-up, composition or any other relief under any bankruptcy law,
or under any other insolvency, reorganization, liquidation,
dissolution, arrangement, composition, readjustment of debt or any
other similar act or law, of any jurisdiction, domestic or foreign, now
or hereafter existing; or (b) the Maker or Ladenburg shall admit the
material allegations of any petition or pleading in connection with any
such proceeding; or (c) the Maker or Ladenburg shall apply for, or
consent or acquiesce to, the appointment of a receiver, conservator,
trustee or similar officer for it or for all or a substantial part of
its property; or (d) the Maker or Ladenburg shall make a general
assignment for the benefit of creditors; or (e) the Maker or Ladenburg
shall become unable, admit in writing its inability or fail generally
to pay its debts as they become due;
(iv) (a) The commencement of any proceedings or the taking of
any other action against the Maker or Ladenburg in bankruptcy or
seeking reorganization, arrangement, readjustment of its debts,
liquidation, dissolution, arrangement, composition, or any other relief
under any bankruptcy law or any other similar act or law of any
jurisdiction, domestic or foreign, now or hereafter existing and the
continuance of any of such events for sixty (60) days undismissed,
unbonded or undischarged; or (b) the appointment of a receiver,
conservator, trustee or similar officer for the Maker or Ladenburg for
any of its property and the continuance of any of such events for sixty
(60) days undismissed, unbonded or undischarged; or (c) the issuance of
6
a warrant of attachment, execution or similar process against any of
the property of the Maker or Ladenburg and the continuance of such
event for sixty (60) days undismissed, unbonded and undischarged;
(v) The Maker or Ladenburg shall default with respect to any
indebtedness of $250,000 or more for borrowed money if either (a) such
default is a payment default or the effect of such default is to
accelerate the maturity of such indebtedness (in each instance giving
effect to any applicable grace periods) or (b) the holder of such
indebtedness declares the Maker or Ladenburg to be in default (giving
effect to any applicable grace periods);
(vi) The failure by the Maker to observe any of the covenants
contained in this Note (other than the covenants to pay principal and
interest and the covenants in Sections 2 or 5) or in the Pledge
Agreement (other than Section 4.14) which failure is not cured within
30 days after notice thereof is given to the Maker by any of the
Secured Parties thereunder (or, if such failure is not capable of being
cured within such 30-day period, the failure of the Maker to continue
to proceed in a diligent matter to effect such cure);
(vii) The failure by the Maker to observe any of the covenants
contained in Sections 2 or 5 of this Note or in Section 4.14 of the
Pledge Agreement or the lien of Pledge Agreement will at any time not
constitute a first perfected lien on the collateral intended to be
covered thereby; or
(viii) Any judgment or judgments against the Maker or
Ladenburg or any attachment, levy or execution against any of its
properties for any amount in excess of $250,000 in the aggregate shall
remain unpaid, or shall not be released, discharged, dismissed, stayed
or fully bonded for a period of sixty (60) days or more after its
entry, issue or levy, as the case may be;
then, and in any such event, the Holder, at its option and with written notice
to the Maker, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived. The Events of Default listed herein are solely for the purpose
of protecting the interests of the Holder of this Note. If the Note is not paid
in full upon acceleration, as required above, interest shall accrue on the
outstanding principal of and interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
fifteen percent (15%) per annum or the maximum interest rate permitted by
applicable law.
Upon the occurrence a default under this Note (whether or not
it has become an Event of Default), the Maker agrees to pay the costs, expenses,
attorneys' and other fees paid or incurred by the Holder, or adjudged by a
court, including: (i) costs of suit and such amount as the court adjudges for
the fees of an attorney in an action to enforce this Note in whole or in part;
and (ii) reasonable costs of collection, costs and expenses of, and attorneys'
fees incurred or paid towards, the collection, enforcement, or sale of this Note
in whole or in part, or of any security for it.
7
4. Payment of Claims
Pursuant to Section 7.6 of the Stock Purchase Agreement, the
Maker may offset against amounts due under this Note any amounts owed by the
Holder to the Maker except that, prior to December 31, 2005, the Maker shall not
offset against amounts due under this Note any Claims against the Holder prior
to settlement or the entry of a final judgment and the expiration of all
applicable appeal periods and the failure of the Holder to pay such Claim within
ten (10) Business Days after such settlement or expiration. If any payment of
the indemnity obligations of the Holder pursuant to Section 8.1 of the Stock
Purchase Agreement is required to be made, the Holder may satisfy such payment
by delivery to the Maker of Notes acquired by it pursuant to the Stock Purchase
Agreement in a principal amount, together with accrued interest, equal to the
amount of the Claims for which payment is required in which case the Maker will
issue a new Note to the Holder for the remainder.
5. Consolidation and Mergers.
The Maker shall not consolidate or merge into, or transfer or
lease all or substantially all of its assets to, any person unless (1) the
person is a corporation; (2) the person assumes in a writing reasonably
acceptable to the Holder all the obligations of the Maker under this Note; and
(3) immediately after the transaction no Event of Default exists. The surviving,
transferee or lessee corporation shall be the successor Maker, but the
predecessor Maker in the case of a transfer or lease shall not be released from
the obligation to pay the principal of and interest of this Note.
6. Additional Provisions
The Maker and each other party liable herefor, whether
principal, endorser, guarantor or otherwise, jointly and severally hereby (i)
waive presentment, demand, protest, notice of dishonor and/or protest, notice of
non-payment and all other notices or demands in connection with the delivery,
acceptance, performance, default, enforcement or guaranty of this Note, and (ii)
waive recourse to suretyship defenses generally, including extensions of time,
releases of security and other indulgences which may be granted from time to
time by the Holder to the Maker or any party liable herefor.
Nothing contained in this Note or in any other agreement
between the Maker and the Holder shall require the Maker to pay, or the Holder
to accept, interest in an amount which would subject the Holder to any penalty
or forfeiture under applicable law. In no event shall the total of all charges
payable hereunder, whether of interest or of such other charges which may or
might be characterized as interest, exceed the maximum rate permitted to be
charged under applicable law. Should the Holder receive any payment which is or
would be in excess of that permitted to be charged under such applicable law,
such payment shall have been and shall be deemed to have been made in error and
shall automatically be applied to reduce the principal balance outstanding on
this Note.
The Holder shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights and/or remedies hereunder,
and no waiver whatsoever shall be valid unless in writing, signed by the Holder,
8
and then only to the extent therein set forth. The making of any demands or the
giving of any notices by the Holder or a waiver by the Holder of any right
and/or remedy hereunder on any one occasion shall not be construed as a bar to
or waiver of any right and/or remedy which the Holder would otherwise have on
any future occasion. All rights and remedies of the Holder shall be cumulative
and may be exercised singly or concurrently.
The terms and provisions hereof shall survive the payment,
cancellation or surrender of this Note. Any instrument taken by the Holder in
payment of, or for application against, any obligation of the Maker or any other
party liable herefor shall not operate as a discharge of such obligation until
the instrument is finally paid, notwithstanding the fact that a bank may be the
maker, drawer or acceptor of such instrument.
This Note may be assigned by the Holder only as permitted by
the provisions of the Investor Rights Agreement. In the event of a permitted
assignment of less than the entire unpaid principal amount of this Note, at the
request of the Holder the Maker shall issue new Notes to the transferee and the
Holder in the amounts assigned and not assigned, respectively. If this Note is
lost, destroyed or wrongfully taken, the Maker shall issue a replacement Note.
The Maker may require a reasonable indemnity bond.
The authority to assert, and to determine to defend against,
claims with respect to this Note on behalf of the Maker shall be vested solely
in the Enforcement Committee established under the Stock Purchase Agreement.
This Note may not be amended and no rights of the Maker hereunder may be waived
except with the consent of the Enforcement Committee.
This Note shall be governed by, and construed in accordance
with, the law of the State of New York without giving effect to principles of
conflicts of law. The provisions of Section 10.2 (Notices) and 10.12 of the
Stock Purchase Agreement (Consent to Jurisdiction and Service of Process) shall
apply to this Note as if fully set forth herein. THE MAKER HEREBY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
THIS NOTE OR ANY TRANSACTION RELATING THERETO.
GBI CAPITAL MANAGEMENT CORP.
By:
------------------------------
Richard Rosenstock, President
9
Appendix C
AMENDMENT NO. 1 TO LOAN AGREEMENT
AMENDMENT NO. 1 dated as of April 25, 2001 to Loan Agreement, dated as
of February 8, 2001, between GBI CAPITAL MANAGEMENT CORP. and FROST-NEVADA,
LIMITED PARTNERSHIP ("Loan Agreement").
WHEREAS, the Borrower had entered into a Stock Purchase Agreement
("Stock Purchase Agreement"), dated February 8, 2001, among the Borrower, New
Valley Corporation ("New Valley"), Ladenburg, Thalmann Group Inc. ("LTGI"),
Berliner Effektengesellschaft AG ("Berliner") and Ladenburg, Thalmann & Co. Inc.
("Ladenburg"); and
WHEREAS, the Borrower and Lender had entered into the Loan Agreement,
dated as of February 8, 2001, pursuant to which the Lender was to provide
certain funds to the Borrower to be used in the Stock Purchase Agreement by the
Borrower; and
WHEREAS, the Borrower has entered into an amendment to the Stock
Purchase Agreement, dated as of the date hereof, among the Borrower, New Valley,
LTGI, Berliner and Ladenburg; and
WHEREAS, the Borrower and Lender desire to similarly amend the Loan
Agreement in certain respects as set forth herein (capitalized terms used herein
that are defined in the Loan Agreement or Lender Note shall have the same
meanings herein as in the Loan Agreement and Lender Note);
IT IS AGREED:
1. Section 1.1 of the Loan Agreement is hereby amended in its entirety
to read as follows:
"1.1 Commitment and Loan. (a) Subject to the terms and conditions of
this Agreement, at the request of Borrower, Lender agrees to lend to Borrower
the aggregate sum of Ten Million Dollars ($10,000,000) (the "Commitment").
Lender shall advance the funds due under the Commitment to Borrower (the "Loan")
concurrently with, and subject to, the closing ("Closing") of the transactions
contemplated by that certain Stock Purchase Agreement dated February 8, 2001, as
amended, among Borrower, New Valley Corporation, Ladenburg, Thalmann Group Inc.
("LTGI"), Ladenburg, Thalmann & Co. Inc. ("Ladenburg") and Berliner (the "Stock
Purchase Agreement")."
2. The first paragraph of Section 1 of the Lender Note is hereby
amended in its entirety to read as follows:
"1. Conversion of Note
The principal of and accrued interest on this Note shall be
convertible, in whole or in part, at any time, at the election of the Holder,
into that number of fully paid and non-assessable shares of the Maker's common
stock, par value $0.0001 per share ("Common Stock"), determined by dividing the
amount of principal and interest to be so converted by the "Conversion Price"
(as hereinafter defined) in effect at the time notice of conversion is given to
the Maker as set forth below. As used herein, "Conversion Price" means,
initially, $2.00. Promptly following the Closing of the Stock Purchase
Agreement, the Conversion Price shall be decreased ("Conversion Price
Adjustment") by the amount obtained by taking the product of $2.00 and the
Purchase Price Adjustment Percentage (as such term is defined in the Stock
Purchase Agreement, as amended). Notwithstanding the foregoing, if the
Conversion Price, after adjustment as set forth in the previous sentence, would
not yield a number of shares of Common Stock equal to at least the sum of (x)
5,000,000 shares of Common Stock and (y) 20% of the sum of (i) the additional
shares issuable to Lender as a result of the Conversion Price Adjustment and
(ii) all other shares of Common Stock to be issued and issuable to LTGI and
Berliner pursuant to Section 2.4 of the Stock Purchase Agreement, the Conversion
Price will be further adjusted such that Lender, upon conversion of this Note,
will receive such sum of 5,000,000 shares of Common Stock and 20% of the total
number of additional shares issuable as a result of the Conversion Price
Adjustment and Section 2.4 of the Stock Purchase Agreement.
If, at any time after the date hereof, there occurs, with respect
to the Common Stock, a reclassification, stock split, stock dividend, spin-off
or distribution, share combination or other similar change affecting the Common
Stock as a whole and all holders thereof or if the Maker shall consolidate with,
or merge with or into, any other entity, sell or transfer all or substantially
all its assets or engage in any reorganization, reclassification or
recapitalization which is effected in such a manner that the holders of Common
Stock are entitled to receive stock, securities, cash or other assets with
respect to or in exchange for Common Stock (each, an "Adjustment Event"), the
Conversion Price and the kind and amount of stock, securities, cash or other
assets issuable upon conversion of this Note in effect at the time of the record
date for such dividend or distribution or of the effective date of such share
combination, split, consolidation, merger, sale, transfer, reorganization,
reclassification or recapitalization shall be appropriately adjusted so that the
conversion of the Note after such time shall entitle the Holder to receive the
aggregate number of shares of Common Stock or securities, cash and other assets
which, if this Note had been converted immediately prior to such time, the
Holder would have owned upon such conversion and been entitled to receive by
virtue of such Adjustment Event, provided that if the kind or amount of
securities, cash and other property is not the same for each share of Common
Stock held immediately prior to such reclassification, change, consolidation,
merger, sale, transfer, or conveyance, any Holder who fails to exercise any
right of election shall receive per share the kind and amount of securities,
cash or other property received per share by a plurality of such shares."
3. As amended hereby, the Loan Agreement shall continue in full force
and effect. All references to the "Agreement" shall hereafter mean as amended
hereby. This Amendment No. 1 and the rights and obligations of the parties
hereunder shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York. BORROWER, IN ANY LITIGATION IN WHICH
LENDER SHALL BE AN ADVERSE PARTY, WAIVES TRIAL BY JURY, WAIVES THE RIGHT TO
CLAIM THAT A FORUM SPECIFIED HEREIN IS AN INCONVENIENT FORUM AND WAIVES THE
RIGHT TO INTERPOSE ANY SETOFF, DEDUCTION OR COUNTERCLAIM OF ANY NATURE OR
DESCRIPTION AND CONSENTS TO THE JURISDICTION OF THE COURTS (CITY, STATE AND
FEDERAL) LOCATED IN THE CITY, COUNTY AND STATE OF NEW YORK AND TO SERVICE OF
PROCESS BY REGISTERED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH ABOVE
OR SUCH OTHER ADDRESS AS BORROWER SHALL NOTIFY LENDER IN WRITING IS TO BE USED
FOR SUCH PURPOSE. If any of the provisions of this Amendment No. 1 shall be or
become illegal or unenforceable under any law, the other provisions shall remain
in full force and effect.
4. This Amendment No. 1 may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto were upon the same instrument. Delivery of an executed counterpart of a
signature page of this Amendment No. 1 by telecopier shall be effective as
delivery of a manually executed counterpart of this Amendment No. 1.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as
of the date first above written.
GBI CAPITAL MANAGEMENT CORP.
By: /s/ Richard Rosenstock
---------------------------------------------
Name: Richard Rosenstock
Title: President
Telecopier No.: 516-470-1050
FROST-NEVADA, LIMITED PARTNERSHIP
By: Frost-Nevada Corporation, General Partner
By: /s/ David Moskowitz
---------------------------------------------
Name: David Moskowitz
Title: President
Telecopier No.: 775-827-2185
Appendix D
SENIOR CONVERTIBLE PROMISSORY NOTE
$10,000,000.00 __________, 2001
FOR VALUE RECEIVED, GBI CAPITAL MANAGEMENT CORP., a Florida
corporation ("Maker"), having an address at 1055 Stewart Avenue, Bethpage, New
York 11714, hereby promises to pay to Frost-Nevada, Limited Partnership, a
Nevada limited partnership, its successors and/or permitted assigns (any of
which is hereinafter referred to as "Holder"), at 3500 Lakeside Court, Suite
200, Reno, Nevada 89509, in lawful money of the United States, the sum of Ten
Million Dollars and No Cents ($10,000,000.00) on December 31, 2005. Interest on
the unpaid principal amount of this Note shall be paid at the rate of eight and
one-half percent (8-1/2%) per annum on each March 31, June 30, September 30 and
December 31, commencing June 30, 2001 or the lesser of fifteen percent (15%) per
annum or the maximum interest rate permitted by applicable law following an
Event of Default. At the Holder's request payments shall be made by wire
transfer to an account designated by the Holder. If a payment date is not a
business day, payment may be made on the next business day and interest shall
accrue for the intervening period. This Note may not be prepaid.
The Holder may, with or without notice to the Maker or any guarantor or
other party liable herefor, extend or renew this Note, or extend the time for
making payment of any amount provided for herein, or accept any amount in
advance, all without affecting the liability of the Maker or any other party or
guarantor liable herefor.
This Note is issued pursuant to the terms of that certain Loan
Agreement ("Loan Agreement") dated as of February 8, 2001 between the Maker and
Frost-Nevada, Limited Partnership and the Maker and the Holder are entitled to
the benefits provided for therein. Terms used but not defined herein shall have
their respective meanings assigned in the Loan Agreement. This Note is entitled
to the benefits of the security for the payment hereof provided pursuant to that
certain Pledge and Security Agreement dated February 8, 2001 between the Maker,
the Secured Parties party thereto and US Bank Trust National Association, as
Collateral Agent ("Pledge Agreement").
1. Conversion of Note
The principal of and accrued interest on this Note shall be
convertible, in whole or in part, at any time, at the election of the Holder,
into that number of fully paid and non-assessable shares of the Maker's common
stock, par value $0.0001 per share ("Common Stock"), determined by dividing the
amount of principal and interest to be so converted by the "Conversion Price"
(as hereinafter defined) in effect at the time notice of conversion is given to
the Maker as set forth below. As used herein, "Conversion Price" means,
initially, $2.00. Promptly following the Closing of the Stock Purchase
Agreement, the Conversion Price shall be decreased ("Conversion Price
Adjustment") by the amount obtained by taking the product of $2.00 and the
Purchase Price Adjustment Percentage (as such term is defined in the Stock
Purchase Agreement, as amended). Notwithstanding the foregoing, if the
Conversion Price, after adjustment as set forth in the previous sentence, would
not yield a number of shares of Common Stock equal to at least the sum of (x)
5,000,000 shares of Common Stock and (y) 20% of the sum of (i) the additional
shares issuable to Lender as a result of the Conversion Price Adjustment and
(ii) all other shares of Common Stock to be issued and issuable to LTGI and
Berliner pursuant to Section 2.4 of the Stock Purchase Agreement, the Conversion
Price will be further adjusted such that Lender, upon conversion of this Note,
will receive such sum of 5,000,000 shares of Common Stock and 20% of the total
number of additional shares issuable as a result of the Conversion Price
Adjustment and Section 2.4 of the Stock Purchase Agreement.
If, at any time after the date hereof, there occurs, with
respect to the Common Stock, a reclassification, stock split, stock dividend,
spin-off or distribution, share combination or other similar change affecting
the Common Stock as a whole and all holders thereof or if the Maker shall
consolidate with, or merge with or into, any other entity, sell or transfer all
or substantially all its assets or engage in any reorganization,
reclassification or recapitalization which is effected in such a manner that the
holders of Common Stock are entitled to receive stock, securities, cash or other
assets with respect to or in exchange for Common Stock (each, an "Adjustment
Event"), the Conversion Price and the kind and amount of stock, securities, cash
or other assets issuable upon conversion of this Note in effect at the time of
the record date for such dividend or distribution or of the effective date of
such share combination, split, consolidation, merger, sale, transfer,
reorganization, reclassification or recapitalization shall be appropriately
adjusted so that the conversion of the Note after such time shall entitle the
Holder to receive the aggregate number of shares of Common Stock or securities,
cash and other assets which, if this Note hade been converted immediately prior
to such time, the Holder would have owned upon such conversion and been entitled
to receive by virtue of such Adjustment Event, provided that if the kind or
amount of securities, cash and other property is not the same for each share of
Common Stock held immediately prior to such reclassification, change,
consolidation, merger, sale, transfer, or conveyance, any Holder who fails to
exercise any right of election shall receive per share the kind and amount of
securities, cash or other property received per share by a plurality of such
shares.
Promptly after an Adjustment Event, the Maker shall mail to
the Holder a notice of the adjustment together with a certificate from the
Maker's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it.
If (i) the Maker takes any action that would cause an
Adjustment Event, (ii) there is a liquidation or dissolution of the Maker or
(iii) the Maker declares a cash dividend, the Maker shall mail to the Holder a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution, the Maker
shall mail the notice at least 15 days before such date.
2
If, during any period of twenty (20) consecutive trading days,
the closing sale price of the Common Stock is at least $8.00 per share (as
adjusted for all Adjustment Events occurring after the date of this Note), the
principal of and all accrued interest on this Note shall be
automatically converted, without further action on the part of the Holder, into
shares of Common Stock at the Conversion Price in effect on the last trading day
of such period.
In connection with any conversion of this Note, the Holder
shall surrender this Note and deliver it, together with written instructions to
convert in the form attached hereto, to the Maker at its principal executive
office. The date of such delivery shall be deemed the date of conversion. The
Maker shall, as soon as practicable, issue and deliver to a location in the
United States designated by the Holder certificates representing the securities
(or other assets) to which the Holder is entitled as a result of such conversion
together with a note representing the unconverted balance.
The Maker shall not be required to issue fractions of shares
of Common Stock upon conversion and in lieu thereof any fractional share shall
be rounded up or down to the nearest whole share. The Maker shall reserve and
shall at all times have reserved out of its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the conversion of the
unpaid principal amount and accrued interest as provided for herein. The Maker
shall list such shares on any national securities exchange on which the Common
Stock is then listed. If the Holder converts this Note, the Maker shall pay any
documentary, stamp or similar issue or transfer tax due on such conversion,
except that the Holder shall pay any such tax due because the shares are issued
in a name other than the Holder's.
The certificates representing shares of Common Stock issued
upon conversion of this Note shall bear a legend to the effect that such shares
are not registered under the 1933 Act and may not be sold, assigned or otherwise
transferred or hypothecated except in accordance with the registration
provisions of the 1933 Act or an exemption therefrom and in accordance with the
provisions of that certain Investor Rights Agreement dated as of February 8,
2001 among New Valley Corporation, Ladenburg, Thalmann Group Inc., Berliner
Effektengesellschaft AG, the Maker and the Principals party thereto and
Frost-Nevada, Limited Partnership ("Investor Rights Agreement"). This legend
shall be removed on receipt of an opinion of counsel reasonably satisfactory to
the Maker that such legend is no longer required.
2. Change of Control
(i) Promptly after the occurrence of a Change of Control (as
hereinafter defined) (the date of such occurrence being the "Change of
Control Date"), the Maker shall commence (or cause to be commenced) an
offer to purchase all outstanding Notes pursuant to the terms described
in paragraph (iii) of this "Change of Control" section (the "Change of
Control Offer") at a purchase price equal to the unpaid principal
amount of this Note and accrued interest thereon (the "Change of
Control Amount") on the Change of Control Payment Date (as hereinafter
defined), and shall purchase (or cause the purchase of) any Notes
tendered in the Change of Control Offer pursuant to the terms hereof.
As used in this Note, the term "Notes" means all Convertible Promissory
Notes of the Maker of like tenor to this Note (except as to principal
amount, interest rate and Conversion Price). The Change of Control
Amount shall be payable in cash.
3
(ii) Within 10 days following a Change in Control Date, the
Maker shall send, by first-class mail, postage prepaid, a notice to the
Holder. Such notice shall contain all instructions and materials
necessary to enable the Holder to tender this Note pursuant to the
Change of Control Offer and shall state:
(a) that a Change of Control has occurred, that a
Change of Control Offer is being made pursuant to this "Change
of Control" section and that all Notes validly tendered and
not withdrawn will be accepted for payment;
(b) the Change of Control Amount and the purchase
date (which must be no earlier than 10 days nor later than 20
days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(c) that any Notes not tendered will continue to
accrue interest;
(d) that, unless the Maker defaults in making payment
therefor, any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(e) that holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to
surrender such Notes, properly endorsed for transfer, together
with such other customary documents as the Maker may
reasonably request to the Maker at the address specified in
the notice prior to the close of business on the business day
prior to the Change of Control Payment Date;
(f) that holders of Notes will be entitled to
withdraw their election if the Maker receives, not later than
two business days prior to the Change of Control Payment Date,
a telegram, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Notes the
holder delivered for purchase and a statement that such holder
is withdrawing its election to have such Notes purchased;
(g) that holders who tender only a portion of their
Notes will, upon purchase of the Notes tendered, be issued a
Note representing the Notes not purchased; and
(h) the circumstances and relevant facts regarding
such Change of Control (including information with respect to
pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control).
(iii) The Maker will comply with any tender offer rules under
the Exchange Act which then may be applicable in connection with any
offer made by the Maker to repurchase the Notes as a result of a Change
4
of Control. If the provisions of any securities laws or regulations
conflict with provisions of this Note, in reliance on an opinion of
counsel, the Maker may comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligation
under this Note by virtue thereof.
(iv) On the Change of Control Payment Date, the Maker shall
(A) accept for payment the Notes validly tendered pursuant to the
Change of Control Offer, (B) pay to the holders of Notes so accepted
the Change of Control Amount therefor in cash as provided above and (C)
cancel each surrendered Note. Unless the Maker defaults in the payment
for the Notes tendered pursuant to the Change of Control Offer,
interest will cease to accrue with respect to the Notes tendered and
all rights of holders of such tendered Notes will terminate, except for
the right to receive payment therefor on the Change of Control Payment
Date.
(v) To accept the Change of Control Offer, the holder of a
Note shall deliver, prior to the close of business on the business day
prior to the Change of Control Payment Date, written notice to the
Maker (or an agent designated by the Maker for such purpose) of such
holder's acceptance, together with the Notes with respect to which the
Change of Control Offer is being accepted, duly endorsed for transfer.
(vi) For the avoidance of doubt, nothing in this "Change of
Control" section shall restrict the right of the holders of Notes, in
connection with a Change of Control, to convert and to receive the kind
and amount of consideration payable to holders of Common Stock in
respect of the Common Stock into which the Notes may be converted.
(vii) As used in this "Change of Control" section,
"Change of Control" means: (a) the sale, lease, transfer,
conveyance, merger, consolidation or other disposition (other
than a merger or consolidation that does not result in any
change in the Maker's stock and in which a majority of the
successor's voting securities is held by holders of the
Maker's Common Stock immediately before such transaction ), in
one or a series of related transactions, of all or
substantially all the assets of the Maker and its
subsidiaries, taken as a whole, to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act), (b) the
consummation of any transaction (including any merger or
consolidation) the result of which is that any "person" (as
defined above), other than the Principals party to the
Investor Rights Agreement, New Valley Corporation, Ladenburg,
Thalmann Group Inc., Berliner Effektengesellschaft AG and Dr.
Phillip Frost, individually or collectively, becomes the
beneficial owner (as determined in accordance with Rules 13d-3
and 13d-5 under the Exchange Act, except that a person will be
deemed to have beneficial ownership of all Voting Securities
(as hereinafter defined) that such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more
than 50% of the Voting Securities of the Maker, or (c) the
first day on which a majority of the members of the Board of
Directors of the Maker are not Continuing Directors;
5
"Continuing Directors" means individuals who constituted the
Board of Directors of the Maker on the date hereof (the
"Incumbent Directors"); provided that any individual becoming
a director after the date hereof shall be considered to be an
Incumbent Director if such individual's election, appointment
or nomination was recommended or approved by at least
two-thirds of the other Incumbent Directors continuing in
office following such election, appointment or nomination
present, in person or by telephone, at any meeting of the
Board of Directors of the Maker, after the giving of a
sufficient notice to each Incumbent Director so as to provide
a reasonable opportunity for such Incumbent Directors to be
present at such meeting; and
"Voting Securities" means securities of the Maker ordinarily
having the power to vote for the election of directors of the
Maker.
3. Events of Default
Upon the occurrence of any of the following events (herein
called "Events of Default"):
(i) The Maker shall fail to make any payment of principal on
this Note on the date specified herein for such payment;
(ii) The Maker shall fail to make any payment of interest on
this Note or any other payment due under this Note or the Pledge
Agreement within ten (10) days after it is due;
(iii) (a) The Maker or Ladenburg shall commence, or consent to
the entry of an order for relief in, any proceeding or other action
relating to it in bankruptcy or seek reorganization, arrangement,
readjustment of its debts, receivership, dissolution, liquidation,
winding-up, composition or any other relief under any bankruptcy law,
or under any other insolvency, reorganization, liquidation,
dissolution, arrangement, composition, readjustment of debt or any
other similar act or law, of any jurisdiction, domestic or foreign, now
or hereafter existing; or (b) the Maker or Ladenburg shall admit the
material allegations of any petition or pleading in connection with any
such proceeding; or (c) the Maker or Ladenburg shall apply for, or
consent or acquiesce to, the appointment of a receiver, conservator,
trustee or similar officer for it or for all or a substantial part of
its property; or (d) the Maker or Ladenburg shall make a general
assignment for the benefit of creditors; or (e) the Maker or Ladenburg
shall become unable, admit in writing its inability or fail generally
to pay its debts as they become due;
(iv) (a) The commencement of any proceedings or the taking of
any other action against the Maker or Ladenburg in bankruptcy or
seeking reorganization, arrangement, readjustment of its debts,
liquidation, dissolution, arrangement, composition, or any other relief
under any bankruptcy law or any other similar act or law of any
jurisdiction, domestic or foreign, now or hereafter existing and the
continuance of any of such events for sixty (60) days undismissed,
unbonded or undischarged; or (b) the appointment of a receiver,
conservator, trustee or similar officer for the Maker or Ladenburg for
any of its property and the continuance of any of such events for sixty
6
(60) days undismissed, unbonded or undischarged; or (c) the issuance of
a warrant of attachment, execution or similar process against any of
the property of the Maker or Ladenburg and the continuance of such
event for sixty (60) days undismissed, unbonded and undischarged;
(v) The Maker or Ladenburg shall default with respect to any
indebtedness of $250,000 or more for borrowed money if either (a) such
default is a payment default or the effect of such default is to
accelerate the maturity of such indebtedness (in each instance giving
effect to any applicable grace periods) or (b) the holder of such
indebtedness declares the Maker or Ladenburg to be in default (giving
effect to any applicable grace periods);
(vi) The failure by the Maker to observe any of the covenants
contained in this Note (other than the covenants to pay principal and
interest and the covenants in Sections 2 or 5) or in the Pledge
Agreement (other than Section 4.14) which failure is not cured within
30 days after notice thereof is given to the Maker by any of the
Secured Parties thereunder (or, if such failure is not capable of being
cured within such 30-day period, the failure of the Maker to continue
to proceed in a diligent matter to effect such cure);
(vii) The failure by the Maker to observe any of the covenants
contained in Sections 2 or 5 of this Note or in Section 4.14 of the
Pledge Agreement or the lien of Pledge Agreement will at any time not
constitute a first perfected lien on the collateral intended to be
covered thereby; or
(viii) Any judgment or judgments against the Maker or
Ladenburg or any attachment, levy or execution against any of its
properties for any amount in excess of $250,000 in the aggregate shall
remain unpaid, or shall not be released, discharged, dismissed, stayed
or fully bonded for a period of sixty (60) days or more after its
entry, issue or levy, as the case may be;
then, and in any such event, the Holder, at its option and with written notice
to the Maker, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived. The Events of Default listed herein are solely for the purpose
of protecting the interests of the Holder of this Note. If the Note is not paid
in full upon acceleration, as required above, interest shall accrue on the
outstanding principal of and interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
fifteen percent (15%) per annum or the maximum interest rate permitted by
applicable law.
Upon the occurrence of a default under this Note (whether or
not it has become an Event of Default), the Maker agrees to pay the costs,
expenses, attorneys' and other fees paid or incurred by the Holder, or adjudged
by a court, including: (i) costs of suit and such amount as the court adjudges
for the fees of an attorney in an action to enforce this Note in whole or in
part; and (ii) reasonable costs of collection, costs and expenses of, and
attorneys' fees incurred or paid towards, the collection, enforcement, or sale
of this Note in whole or in part, or of any security for it.
7
4. Consolidation and Mergers.
The Maker shall not consolidate or merge into, or transfer or
lease all or substantially all of its assets to, any person unless (1) the
person is a corporation; (2) the person assumes in a writing reasonably
acceptable to the Holder all the obligations of the Maker under this Note; and
(3) immediately after the transaction no Event of Default exists. The surviving,
transferee or lessee corporation shall be the successor Maker, but the
predecessor Maker in the case of a transfer or lease shall not be released from
the obligation to pay the principal of and interest of this Note.
5. Additional Provisions
The Maker and each other party liable herefor, whether
principal, endorser, guarantor or otherwise, jointly and severally hereby (i)
waive presentment, demand, protest, notice of dishonor and/or protest, notice of
non-payment and all other notices or demands in connection with the delivery,
acceptance, performance, default, enforcement or guaranty of this Note, and (ii)
waive recourse to suretyship defenses generally, including extensions of time,
releases of security and other indulgences which may be granted from time to
time by the Holder to the Maker or any party liable herefor.
Nothing contained in this Note or in any other agreement
between the Maker and the Holder shall require the Maker to pay, or the Holder
to accept, interest in an amount which would subject the Holder to any penalty
or forfeiture under applicable law. In no event shall the total of all charges
payable hereunder, whether of interest or of such other charges which may or
might be characterized as interest, exceed the maximum rate permitted to be
charged under applicable law. Should the Holder receive any payment which is or
would be in excess of that permitted to be charged under such applicable law,
such payment shall have been and shall be deemed to have been made in error and
shall automatically be applied to reduce the principal balance outstanding on
this Note.
The Holder shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights and/or remedies hereunder,
and no waiver whatsoever shall be valid unless in writing, signed by the Holder,
and then only to the extent therein set forth. The making of any demands or the
giving of any notices by the Holder or a waiver by the Holder of any right
and/or remedy hereunder on any one occasion shall not be construed as a bar to
or waiver of any right and/or remedy which the Holder would otherwise have on
any future occasion. All rights and remedies of the Holder shall be cumulative
and may be exercised singly or concurrently.
The terms and provisions hereof shall survive the payment,
cancellation or surrender of this Note. Any instrument taken by the Holder in
payment of, or for application against, any obligation of the Maker or any other
party liable herefor shall not operate as a discharge of such obligation until
the instrument is finally paid, notwithstanding the fact that a bank may be the
maker, drawer or acceptor of such instrument.
8
This Note may be assigned by the Holder only as permitted by
the provisions of the Investor Rights Agreement. In the event of a permitted
assignment of less than the entire unpaid principal amount of this Note, at the
request of the Holder the Maker shall issue new Notes to the transferee and the
Holder in the amounts assigned and not assigned, respectively. If this Note is
lost, destroyed or wrongfully taken, the Maker shall issue a replacement Note.
The Maker may require a reasonable indemnity bond.
This Note shall be governed by, and construed in accordance
with, the law of the State of New York without giving effect to principles of
conflicts of law. The Maker hereby irrevocably appoints the President of GBI
Capital Management Corp., at its offices at 1055 Stewart Avenue, Bethpage, New
York 11714, its lawful agent and attorney to accept and acknowledge service of
any and all process against it in any action, suit or proceeding arising out of
or relating to this Note and upon whom such process may be served, with the same
effect as if the Maker were a resident of the State of New York and had been
lawfully served with such process in such jurisdiction, and waives all claims of
error by reason of such service. The Maker will enter into such agreements with
such agents as may be necessary to constitute and continue the appointment of
such agents hereunder. In the event that such agent and attorney resigns or
otherwise becomes incapable of acting as such, the Maker will appoint a
successor agent and attorney in the City of New York, reasonably satisfactory to
the Holder, with like powers. The Maker hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the
Borough of Manhattan in the City of New York in any such action, suit or
proceeding arising out of or relating to this Note or any transaction relating
thereto, and agrees that any such action, suit or proceeding shall be brought
only in such court, provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph and shall not be deemed to
be a general submission to the jurisdiction of said courts or in the State of
New York other than for such purpose. The Maker hereby irrevocably waives, to
the fullest extent permitted by Law, any objection that it may now or hereafter
have to the laying of the venue of any such action, suit or proceeding brought
in such a court and any claim that any such action, suit or proceeding brought
in such a court has been brought in an inconvenient forum. THE MAKER HEREBY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF THIS NOTE OR ANY TRANSACTION RELATING THERETO.
GBI CAPITAL MANAGEMENT CORP.
By:
--------------------------------
Richard Rosenstock, President
9
Appendix E
April 25, 2001
Board of Directors
GBI Capital Management Corp.
1055 Stewart Avenue
Bethpage, NY 11714
Gentlemen:
On February 8, 2001, we rendered our opinion with respect to the fairness, from
a financial point of view, to the shareholders of GBI Capital Management Corp.
(the "Company") of the Total Consideration (as defined below) proposed to be
paid by the Company pursuant to the Stock Purchase Agreement, dated as of
February 8, 2001, (the "Agreement"), among the Company, Ladenburg, Thalmann &
Co. Inc. ("Ladenburg"), New Valley Corporation ("New Valley"), Ladenburg,
Thalmann Group Inc. ("Group") and Berliner Effektengesellschaft AG ("BEAG").
Pursuant to the Agreement, the Company will purchase from Group and BEAG all of
the outstanding stock of Ladenburg in consideration for 18,181,818 shares (the
"Stock Consideration") of the Company's Common Stock, par value $0.0001 per
share (the "Shares"), $10,000,000 Senior Convertible Promissory Notes (the
"Notes") and $10,000,000 cash (the "Cash" and, collectively with the Stock
Consideration and the Notes, the "Total Consideration"). That opinion is
incorporated by reference.
On April 25, 2001, the Company entered into an amendment to the Agreement
("Amendment No. 1" and together with the Agreement, the "Amended Agreement").
Pursuant to the Amendment No. 1, the existing purchase price adjustment clause
contained in the Agreement was replaced with a new provision whereby the Stock
Consideration would be increased based on the respective changes in the total
stockholder equities of the Company and Ladenburg through the end of the
calendar month immediately preceding the month in which the closing of the
Agreement occurs. Additionally, the Amendment No. 1 provides that the conversion
price of the Notes will be reduced based on a similar provision.
As a result of the Amended Agreement, the Total Consideration will be
approximately 21,422,451 Shares, $10,000,000 7.5% Senior Convertible
($2.24/share) Promissory Notes (the "Notes") and $10,000,000 cash (the "Cash"
and, collectively with the Stock Consideration and the Notes, the "Amended Total
Consideration") in consideration for all the outstanding stock of Ladenburg. The
Board of Directors has asked Roth Capital Partners, LLC ("RCP") to provide an
updated opinion in connection with the Amended Agreement.
We have considered the terms of the Amended Agreement and re-evaluated the
financial condition of both the Company and Ladenburg as represented in the
financial statements dated March 31, 2001 and the projected financial statements
for the period ending April 30, 2001, which is the basis of the Amended Total
Consideration. Based upon our analysis of the (a) current and projected
financial statements of the Company and Ladenburg, (b) the added dilution
resulting from the re-pricing of the Notes, (c) comparable public company
analysis to reflect stock prices of publicly traded companies as of April 20,
2001 and (d) comparable transaction analysis based upon updated information
provided to us by the Company and the Seller. Based upon our analyses we hereby
reaffirm our prior opinion dated February 8, 2001; provided there is no material
change in the projected financial statements relied upon in our analysis.
This opinion is directed to the Board of Directors of the Company in its
consideration of the Amended Agreement and is not a recommendation to any
stockholder as to how such stockholder should vote with respect to the Amended
Agreement. Further, this opinion addresses only the financial fairness of the
Amended Agreement and does not address the relative merits of the Amended
Agreement and any alternatives to the Amended Agreement, the Company's
underlying decision to proceed with or effect the Amended Agreement or any other
aspect of the Amended Agreement. This opinion may not be used or referred to by
the Company, or quoted or disclosed to any person in any manner, without our
prior written consent, which consent is hereby given to the inclusion of this
opinion in any solicitation/recommendation statement, proxy statement or
prospectus filed with the Securities and Exchange Commission in connection with
the Amended Agreement. In furnishing this opinion, we do not admit that we are
experts within the meaning of the term "experts" as used in the Securities Act
and the rules and regulations promulgated thereunder, nor do we admit that this
opinion constitutes a report or valuation within the meaning of Section 11 of
the Securities Act.
Very truly yours,
/s/ Roth Capital Partners, LLC