SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
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by Rule 14a-6(e) (2))
Definitive Proxy Statement
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[_] Soliciting Material Pursuant (S)240.14a-12
INTERNATIONAL ASSETS HOLDING CORPORATION
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INTERNATIONAL ASSETS HOLDING CORPORATION
CENTER POINTE TWO
220 CENTRAL PARKWAY, SUITE 2060
ALTAMONTE SPRINGS, FLORIDA 32701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 24, 2003
----------------
TO THE STOCKHOLDERS OF
INTERNATIONAL ASSETS HOLDING CORPORATION
The annual meeting of the stockholders of International Assets Holding
Corporation, a Delaware corporation, will be held on Monday, February 24, 2003,
at 10:00 a.m. local time, at the Company's corporate offices, Center Pointe Two,
220 Central Parkway, Suite 2060, Altamonte Springs, Florida, 32701 for the
following purposes:
1. To elect a Board of six Directors to serve until the next annual meeting
and until their successors shall have been elected and qualified.
2. To approve the action of the Board of Directors in selecting KPMG LLP as
auditors to audit the financial statements of International Assets Holding
Company and subsidiaries for the period commencing October 1, 2002 and ending
September 30, 2003.
3. To consider and approve the specific term within Section 8 of the three
Share Subscription Agreements for Sean O'Connor, Scott Branch and John Radziwill
that permits the conversion of Series A Preferred stock to common stock. Upon
conversion of the Series A Preferred stock and issuance of common shares, the
three investors in total will own 48% of the assumed post conversion outstanding
shares of 4,563,075. The assumptions are that there will be no additional shares
issued, no stock options exercised, and that the number of preferred shares
converted into common is 2,187,500.
4. To approve and adopt the specific term within Section 8 of the three
Share Subscription Agreements to amend the Company's Certificate of
Incorporation to require at least a 75% vote of stockholders to remove or change
the Chairman of the Board.
5. To approve the proposed International Assets Holding Corporation 2003
Stock Option Plan.
6. The transaction of such other business as may properly be brought before
the meeting.
Stockholders of record at the close of business on December 26, 2002 will be
entitled to vote at the meeting. We hope that you will attend the meeting, but
if you cannot do so, please fill in and sign the enclosed proxy, and return it
in the accompanying envelope as promptly as possible. Any stockholder attending
the meeting can vote in person even though a proxy has already been returned.
By Order of the Board of Directors
DIEGO J. VEITIA
Chairman
P.S. In order to save your Company the additional expense of further
solicitation, please be kind enough to complete and return your proxy card
today.
Altamonte Springs, Florida
January 10, 2003
2
INTERNATIONAL ASSETS HOLDING CORPORATION
Center Pointe Two
220 Central Parkway
Suite 2060
Altamonte Springs, Florida 32701
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by or
on behalf of the Board of Directors of International Assets Holding Corporation
(the "Company?") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held in the Company's corporate offices at Center Pointe Two,
220 Central Parkway, Suite 2060, Altamonte Springs, Florida, on Monday, February
24, 2003 at 10:00 a.m. local time.
Proxy Solicitation
All proxies in the enclosed form which are properly executed and returned
to the Company will be voted as provided for therein at the Annual Meeting or at
any adjournments thereof. A stockholder executing and returning a proxy has the
power to revoke it at any time before it is exercised by giving written notice
of such revocation to the Secretary of the Company. Signing and mailing the
proxy will not affect your right to give a later proxy or to attend the Annual
Meeting and vote your shares in person.
The Board of Directors intends to bring before the Annual Meeting the
matters set forth in items 1, 2, 3, 4, and 5 in the foregoing notice. The
persons named in the enclosed proxy and acting thereunder will vote with respect
to items 1, 2, 3, 4, and 5 in accordance with the directions of the stockholder
as specified on the proxy card. If no choice is specified, the shares will be
voted IN FAVOR of the election of the six directors named under item 1; IN FAVOR
of ratification of KPMG LLP as auditors; IN FAVOR of the term in the Share
Subscription Agreements to permit conversion of the Series A Preferred shares
into common shares in Item 3; IN FAVOR of the proposed amendments to the
Company's Certificate of Incorporation to require a super majority vote from the
stockholders to remove the Chairman of the Board from office as described in
Item 4; and, IN FAVOR of the International Assets Holding Corporation 2003 Stock
Option Plan as described in Item 5. If any other matters are properly presented
to the meeting for action, it is intended that the persons named in the enclosed
Proxy and acting thereunder will vote in accordance with the views of management
thereon. This Proxy Statement and Form of Proxy are being first sent to
stockholders on or about January 10, 2003.
With respect to the election of Directors (Item 1), the six nominees
receiving the greatest number of votes will be elected. The affirmative vote of
a majority of the votes cast at the meeting is required for the ratification of
the selection of independent public accountants (Item 2). The affirmative vote
of a majority of the votes cast at the meeting is required for approval of the
conversion of shares of Series A Preferred into common shares (Item 3). The
affirmative vote of a majority of the outstanding shares as of the record date
is required for approval of the proposed amendment to the Company's Certificate
of Incorporation (Item 4). The affirmative vote of a majority of the votes cast
at the meeting is required for approval of the International Assets Holding
Corporation 2003 Stock Option Plan. (Item 5).
Abstentions and broker non-votes will be treated as shares present and
entitled to vote on the subject matter at the Annual Meeting. Thus, an
abstention or broker non-vote will not be counted for or against the proposals
in Items 1, 2, 3 and
5. An abstention or broker non-vote will have the effect of a vote against the
proposed amendments to the Company's Certificate of Incorporation in Item 4.
The Company will bear the entire cost of preparing, printing and mailing
this proxy statement, the proxies and any additional materials which may be
furnished to stockholders. Solicitation may be undertaken by mail, telephone,
telegraph and personal contact. The cost to solicit proxies will be borne by the
Company. The Annual Report of the Company for its fiscal year ending September
30, 2002 has been mailed to stockholders with this proxy statement.
Voting Securities and Principal Holders Thereof
Holders of common stock of the Company of record at the close of business
December 26, 2002, will be entitled to vote at the Annual Meeting or any
adjournment thereof. As of December 26, 2002, the Company had outstanding
2,375,575 shares of common stock. The stockholders are entitled to one vote per
share of common stock on all business to come before the meeting. The Company
knows of three entities which own, control, or share dispositive powers over
shares in excess of 5%. As of December 23, 2002, the Diego J. Veitia Family
Trust owns 22.65% of the outstanding common stock. Diego J. Veitia, as sole
beneficiary of the trust and through additional holdings, owns 28.42% of the
outstanding common stock. Stephen A. Saker owns 5.08% of the outstanding common
stock. As of December 23, 2002, the executive officers and directors of the
Company as a group beneficially own in the aggregate 31.0% of the outstanding
common stock of the Company.
ITEM 1 - ELECTION OF DIRECTORS
At the Annual Meeting six directors, constituting the entire Board of
Directors of the Company, are to be elected to hold office until the next annual
meeting or until their successors are elected and shall have qualified. Each
nominee has consented to serve if elected. Officers are elected annually by the
Board of Directors. The age, principal position of each nominee, and the year
they first became a director and officer of the Company are as follows:
First First
Became Became
Name Age ( ) and Position Director Officer
----- -------------------- -------- -------
Diego J. Veitia (59) Director and Executive Chairman of the 1987 1987
Board; Director and Chairman of the Board
of INTL Trading, Inc. ("INTL")
Sean M. O'Connor (40) Director and CEO of the Company; CEO
and President of INTL; Director and CEO of 2002 2002
OffshoreTrader.Com. ("OTCL")
Scott J. Branch (40) Director and President of the Company; 2002 2002
Director and President of OTCL and Director,
Chairman and President of International
Asset Management Corporation ("IAMC").
2
First First
Became Became
Name Age ( ) and Position Director Officer
---- -------------------- -------- -------
Edward R. Cofrancesco (40) Director, Executive Vice President and 2002 2002
COO of the Company; Director, COO and
Executive Vice President of INTL; and
Director of OTCL
Robert A. Miller, PhD (60) Director of the Company 1998 --
John Radziwill (55) Director of the Company 2002 --
Diego J. Veitia founded the Company in 1987 to serve as a holding company
for its subsidiaries. He has served as Chairman of the Board and director
since its inception He served as Chief Executive Officer of the Company
from its inception until December, 2002. He has also served as President of
the Company for the following periods: from 1987 until 1991, from November
1999 through August 2000 and again from September 2001 to December, 2002.
Mr. Veitia is also currently serving as Chairman of INTL. Until December,
2002, Mr. Veitia served as Chairman, Chief Executive Officer and President
of IAMC, INTL and OTCL. Mr. Veitia also serves as Chairman of Veitia and
Associates, Inc., an inactive registered investment advisor. During the
last five years, Mr. Veitia has served as director of America's All Seasons
Income Fund, Inc., an inactive management investment company until
December, 1998. Until November 1, 2001, Mr. Veitia served as Chairman of
the Board and President of International Assets Advisory Corp. ("IAAC") and
Global Assets Advisors, Inc.(GAA"). From November 1, 2001 until December
13, 2001, Mr. Veitia served as Chairman of the Board and President of
International Assets Advisory, LLC ("IAAL") and Global Assets Advisors, LLC
("GAAL").
Sean M. O'Connor joined the Company in October, 2002 as Chief Executive
Officer designate. In December, 2002 Mr. O'Connor was elected to the Board
of Directors to assume the position vacated by Stephen A. Saker and
currently serves as CEO. In November, 2002, Mr. O'Connor was also elected
as President of INTL. In December, 2002 Mr. O'Connor was elected to the
board of directors and as an officer of OTCL where he currently serves as
CEO. Prior to joining the Company and its subsidiaries, from 1994 until
2002 Mr. O'Connor was CEO and director of Standard New York Securities, a
division of Standard Bank. From 1999 until 2002 Mr. O'Connor served as
Executive Director on the Board of Standard Bank London, Ltd., a U. K.
registered bank and wholly owned subsidiary of the Standard Bank Group.
Scott J. Branch joined the Company in October, 2002 as President designate.
In December, 2002 Mr. Branch was elected to the Board of Directors to
assume the position vacated by Jerome F. Miceli and currently serves as
President. In December, 2002 Mr. Branch was also elected to the board of
directors and an officer of OTCL and IAMC. Prior to joining the Company and
its subsidiaries Mr. Branch was General Manager of Standard Bank London,
Ltd. From 1995 until 2002 Mr. Branch was affiliated with Standard Bank and
its subsidiaries and at various times was responsible for the Eastern
Mediterranean Region and the Forfaiting and Syndications Group. Mr. Branch
also served as a director of Standard Yatirim Menkul Kivmetler AS, a
Turkish broker/dealer and Standard Aval, a Czech finance company.
3
Edward R. Cofrancesco, Jr. was elected as a director of the Company in March,
2002 and elected Executive Vice President of the Company effective January 1,
2002. Mr. Cofrancesco served as Senior Vice President of Capital Markets for
International Assets Advisory Corporation, the Company's former subsidiary, from
December, 2000 until November, 2001 when he assumed the same position with INTL.
In January, 2002 Mr. Cofrancesco became Managing Director and Chief Operating
Officer of INTL. During the past five years Mr. Cofrancesco has also served as a
vice president of institutional sales for Lehman Brothers and as Vice President
and Manager of the international trading division of Raymond James.
Robert A. Miller, Ph.D. became a director of the Company in February, 1998. Dr.
Miller has served as President of Nazareth College in Rochester, New York since
1998. In November 2000 Dr. Miller became a director of Bergmann Associates, LLC,
a privately owned architectural and engineering firm with headquarters in
Rochester, N.Y. Dr. Miller previously served as the Academic Vice President of
Queens College in Charlotte, North Carolina from 1994 to 1998. Dr. Miller
previously served as a director of America's All Seasons Income Fund, Inc. until
December, 1998.
John Radziwill was elected as a director in December, 2002 to assume the
position vacated by Jeffrey Rush. Mr. Radziwill is currently a director of
Lionheart Group, Inc., USA Micro Cap Value Co Ltd, Goldcrown Group Limited (and
subsidiaries), New York Holdings Limited, Acquisitor Plc and Acquisitor Holdings
(Bermuda) Ltd. In the past five years he has also served on the boards of Air
Express International, Corp., Interequity Capital Corporation, GP and Radix
Organization Inc. Until 1997 he was a registered representative associated with
Cohmad Securities Corporation. Mr Radziwill is a member of the Bar of England
and Wales.
Director Remuneration
Members of the Board of Directors who are not officers or employees of the
Company were paid an annual fee of $12,000 for the fiscal year ended September
30, 2002. For fiscal year 2001 these directors were paid an annual fee of
$21,000 comprised of (i) $15,000 which was deposited in installments into a
Company brokerage account and paid to each director for the purchase of common
stock of the Company in the open market, and (ii) $6,000 payable in cash in
quarterly installments of $1,500 each. In addition to the 2001 annual fee,
outside directors also received $500 for each board meeting attended. The fee
portion for stock purchases for one director was redirected for cash payment for
the period June 2000 through June 2001. Such directors were also reimbursed for
expenses relating to their attendance at meetings during the fiscal year.
Director's fees for fiscal year 2003 will continue at $12,000 annually.
4
Meetings of the Board and Committees
There were three regularly scheduled meetings of the Board of Directors
during fiscal year 2002 and five extraordinary telephonic meetings. No incumbent
director attended fewer than 75% of the aggregate of (1) the total number of
meetings of the board of directors held during fiscal year 2002 and (2) the
total number of meetings held by all committees of the board on which he served
during fiscal year 2002. The Board has established Audit, Compensation and
Personnel/Nominating committees which are shown in the table below. The
Compensation and Personnel/Nominating Committees met twice during the fiscal
year. The Audit Committee, which is discussed in more detail later in this proxy
statement, also met twice during the fiscal year.
Committees for Fiscal Year 2002
Committee Chairman Members
--------- -------- -------
Audit Robert A. Miller Jerome F. Miceli
Jeffrey L. Rush
Compensation Jeffrey L. Rush Robert A. Miller
Jerome F. Miceli
Personnel/Nominating Robert A. Miller Jerome F. Miceli
Jeffrey L. Rush
Committees for Fiscal Year 2003
Committee Chairman Member
--------- -------- ------
Audit John Radziwill Robert A. Miller
Compensation Robert A. Miller John Radziwill
(These two members act as co-chairmen.)
Personnel/Nominating Robert A. Miller John Radziwill
The three Share Subscription Agreements, attached as Exhibits I, III,
and V, required that Sean O'Connor, Scott Branch and John Radziwill be elected
as directors of the Board. The circumstances under which Stephen A. Saker,
Jerome F. Miceli, and Jeffrey L. Rush resigned as member of the board were
occasioned by this condition. Prior to their resignations the nominating
committee, of which all three resigning directors were members, nominated the
slate of six directors for election at the annual meeting of shareholders.
Included with the nominations was the recommendation from these members that the
shareholders elect the slate of nominees.
5
Other Executive Officers
First Became
Name Age ( ) and Position Officer
---- -------------------- -------
Jonathan C. Hinz (40) Chief Financial Officer 1995
and Treasurer
Jonathan C. Hinz joined the Company in October 1995 and currently serves as
Chief Financial Officer and Treasurer for the Company, INTL, IAMC and OTCL. Mr.
Hinz is a certified public accountant. Prior to November, 1999 Mr. Hinz served
as Controller for the Company.
ITEM 2 - TO CONSIDER AND APPROVE APPOINTMENT OF AUDITORS
The Audit Committees of the Board for fiscal year 2002 and as
comprised for fiscal year 2003 have selected KPMG LLP as independent public
accountants to audit the financial statements of the Company and certain of its
subsidiaries for the fiscal year 2003. The Board has endorsed this appointment
and it is being presented to the stockholders for approval.
KPMG LLP has audited the financial statements of the Company
since 1990. Services that have been provided by KPMG LLP include: (1) regular
audits of the Company's consolidated financial statements, assistance in SEC
filings, and consultation on accounting and financial reporting matters; (2)
audits of the financial statements of certain subsidiary companies to meet
regulatory requirements; and (3) timely quarterly reviews and income tax
preparation and consulting.
Representatives of KPMG LLP will be present at the Annual
Meeting, will have an opportunity to make statements if they desire, and will be
available to respond to appropriate questions.
If the stockholders do not approve the appointment of KPMG
LLP, the Audit Committee will select another firm of auditors for fiscal year
2003.
6
Audit Committee
The Audit Committee established by the Board of Directors
includes two members who are independent as defined in NASD Rule 4200. The Audit
Committee makes recommendations concerning the engagement of independent
auditors, reviews with the independent auditors the plans and results of the
audit engagement, approves professional services provided by the independent
auditors, reviews the independence of the independent auditors, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. As of September 30, 2002, the Company does not
have an internal audit function. The Board of Directors has adopted the Charter
of the Audit Committee which is attached as Exhibit 1 to this proxy statement.
The Audit Committee met two times in 2002. Robert A. Miller, Jerome F. Miceli
and Jeffrey L. Rush were members of the Audit Committee.
Audit Committee Report
The Audit Committee oversees the Company's financial reporting
process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process, including
the systems of internal controls. In fulfilling its oversight responsibilities,
the Committee reviewed the audited financial statements in the Annual Report
with management including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors,
who are responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principals generally accepted in the United
States of America, their judgments as to the quality, not just the
acceptability, of the Company's accounting principles and such other matters as
are required to be discussed with the Committee under generally accepted
auditing standards. The Committee has reviewed the written disclosures and the
letter from the independent auditors required by Independent Standards Board
Standard No.1. In addition, the Committee has discussed with the independent
auditors the auditors' independence from management and the Company including
the matters in the written disclosures required by the Independence Standards
Board and considered the compatibility of non-audit services with the auditors'
independence.
The Audit Committee discussed with the Company's independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The Committee held two meetings during fiscal year 2002.
In reliance on the reviews and discussions referred to above,
the Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-KSB for the year ended September 30, 2002 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended, subject
to shareholder approval, the selection of the Company's independent auditors.
MEMBERS OF THE AUDIT COMMITTEE
7
Audit Fees, All Other Fees And Auditor Independence
For the year ended September 30, 2002 the Company paid its
independent auditors, KPMG LLP, approximately $48,850 for audit services and
($41,050*This number is expected to be adjusted) for other non-audit services.
These non-audit services consisted primarily of corporate tax fees, review of
corporate accounting matters, tax consultancy related to the sale of the
Company's retail broker-dealer subsidiary, tax consultancy regarding the
transaction relating to the three Share Subscription Agreements and due
diligence. The Audit Committee has concluded that the providing of these
non-audit services did not adversely impact the independence of KPMG LLP.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE APPOINTMENT OF KPMG LLP
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
ITEM 3 - TO CONSIDER AND APPROVE THE PROPOSAL IN SECTION 8 IN THE THREE SHARE
SUBSCRIPTION AGREEMENTS FOR SEAN O'CONNOR, SCOTT BRANCH AND JOHN RADZIWILL THAT
PROVIDES FOR THE CONVERSION OF SERIES A PREFERRED SHARES INTO SHARES OF COMMON
STOCK
On October 22, 2002 the Board of Directors of the Company approved the
three Share Subscription Agreements (the "Agreements") between the Company and
each of Sean O'Connor, Scott Branch, and John Radziwill (the "three Investors")
whereby the Company agreed to sell Series A Preferred stock to Messers O'Connor,
Branch and Radziwill for aggregate consideration to the Company of $3.7 million.
Copies of the Agreements are attached as Exhibits I, III and V, respectively. On
December 6, 2002 an amendment to each of the Agreements was further approved by
the respective parties.
The Agreements provide for the purchase of Series A Preferred shares at
a price of $1.70 per share. The Series A Preferred shares are non-voting and
non-convertible. Within the Agreements is a provision in Section 8 which
requires the Company to seek the approval of stockholders to allow conversion of
the Series A Preferred shares into common shares.
Under Rule 4350(i)(1)(B) and 4350(i)(1)(D) of The Nasdaq Stock Market
Inc.'s Marketplace Rules, an issuer whose securities are listed on The Nasdaq
Stock Market (Nasdaq) must seek shareholder approval:
. when the issuance or potential issuance will result in a change of
control of the issuer (the "Change of Control Rule"); or
. in connection with a transaction other than a public offering
involving:
(a) the sale, issuance or potential issuance by the issuer of common
stock at a price less than the greater of book or market value
which, together with sales by officers, directors or substantial
shareholders of the issuer, equals 20% or more of the common
stock or 20% or more of the voting power outstanding before the
issuance; or
(b) the sale, issuance or potential issuance by the issuer of common
stock equal to 20% or more of the common stock (or of the voting
power) outstanding before
8
the issuance for less than the greater of book or market value
of the stock (the "20% Rule").
The approval of Item No. 3, and the subsequent automatic conversion of
the Preferred shares into common shares of the Company' will cause the issuance
of greater than 20% of the Company's common stock. The approval sought under
this Item No. 3 will be effective to satisfy Nasdaq's required shareholder
approval rules. A failure to obtain shareholder approval under such
circumstances would violate Nasdaq's corporate governance rules, if the Company
converted the Preferred shares to common shares without shareholder approval.
Such a violation of Nasdaq rules might, in turn, result in the delisting of the
Company's common stock from Nasdaq.
If conversion of the Preferred shares is approved by the Company's
stockholders at the Annual meeting, the Series A Preferred Shares will
automatically be converted into common shares. Following the conversion, the
Three Investors - Sean O'Connor, Scott Branch and John Radziwill will own or
control, either directly or through related entities, as a group, approximately
48% of the post conversion outstanding shares of common stock. The initial share
purchase agreements were subsequently amended to permit the Three Investors to
assign all or a portion of their shares to trusts or other entities affiliated
with them for tax or other purposes. The initial individual ownership interests
for the three Investors or their controlled entities will be 19.3% for Mr.
O'Connor, 16.1% by Mr. Branch, and 12.5% by Mr. Radziwill. Due to the non-voting
status of the Series A Preferred, none of the three Investors will have the
ability to vote for the approval of this provision, unless they acquire the
Company's common shares in the open market before the Record Date, in which
event they would be entitled to vote those common shares.
As described in Section 9 (a) of the Share Subscription Agreements,
should the shareholders of the Company not approve the conversion of the
Preferred shares to common shares at the Annual meeting, the Investors at their
option have the right to redeem the preferred shares at the original cost of
$1.70 per share beginning 15 days after the Annual meeting and extending to a
date that is six months after closing (June 6, 2003). The investors redemption
rights are applicable to each investor, and they need not act as a group with
respect to their rights. The Company also has the right to repurchase the shares
at its option at a cost of $1.70 per share beginning 15 days after the Annual
meeting and extending to a date that is six months after closing (June 6, 2003).
In the event that any or all of the Investors exercises his redemption
rights, or the Company exercises its repurchase right, the Company will be
forced to utilize cash up to the full $3.7 million which was previously invested
by the investors. Further, in the event Mr. Radziwill exercises his redemption
right, or if the Company exercises it's repurchase right as to Mr. Radziwill's
shares, the Company is obligated to pay John Radziwill a fee of 6% per annum of
the amount paid by Mr. Radziwill for his 569,853 shares of Series A Preferred
shares ($968,750), for the period of time from closing which was December 6,
2002, until the date of exercise. This 6% fee provision does not apply to either
Mr. O'Connor or Mr. Branch.
Considerations Regarding Approval of this Item
In addition to the redemption of the purchase price which totaled
approximately $3.7 million there are other potential adverse effects should this
provision not be approved.
Potential to Cause a Drop in the Price of the Company's Common Stock.
9
At the time of the public announcement of this transaction the Company's common
stock had been trading at approximately $.60 per share. The price has risen
following the announcements concerning this transaction and the price of the
Company's common stock is now approximately $2.00 per share. A reversal of this
transaction would likely cause the price of the stock to drop.
Significant Dilutive Effects
The Agreements provide that upon approval by the shareholders of the
conversion of the Series A Preferred stock, the Company will issue shares of
common stock, representing approximately 48% of the outstanding shares of common
stock after giving effect to such issuances. This does not include any shares
purchased in the open market by any of the Three Investors personally, or shares
purchased in the open market by affiliates of the Three Investors. The issuance
of shares of common stock to the Three Investors upon conversion will
substantially dilute the ownership interests and voting rights of existing
shareholders.
Diminished Ability to Carry Out the Company's Expansion Plans.
The Company through its subsidiary INTL Trading, Inc. has received
approval from the NASD to open a branch office in New York City, and employ
additional associated persons to carry out its expansion plans for an
international fixed income trading business and enhance its existing equity
trading and market making business. The Company has recently signed a lease for
office space in New York City, and plans to be operational in that office by
mid- January 2003. . However, if the shareholders do not approve the conversion
of the Series A Preferred shares, and any or all of the Three Investors seek
redemption of their shares, the Company may have diminished ability to follow
through on it's expansion plans.
Controlling Interest in the Company.
Should the provision be approved and the common shares issued, the
Investors will control a significant percentage, approximately 48%, of the
outstanding shares. If each Investor casts his vote in agreement with the other
two they will possess the ability to impact and control shareholder approval or
opposition to matters placed before shareholders for a vote. Should Mr. Veitia,
who would continue to own approximately 15.2% Of the post conversion outstanding
shares, vote in agreement with the Investors, a majority of the vote on any
issue would be certain.
No Dissenters' Rights
Under Delaware law, shareholders are not entitled to dissenters' rights
of appraisal with respect to this proposal.
Vote Required
Under the Nasdaq Rules, the minimum vote which will constitute
shareholder approval of Proposal No. 1 for purposes of the Change of Control
Rule and 20% Rule is a majority of the total votes present in person or
represented by proxy at the special meeting, upon the establishment of a quorum.
The Company's executive officers and members of the Board of Directors have
indicated their non-binding intention to vote shares of common stock for which
they have voting power FOR the proposal
10
Recommendation Of The Board of Directors
The Board of Directors comprised of the six directors elected at the
2002 Annual Meeting has considered this transaction and unanimously approved it
upon the belief that it is in the best interests of the shareholders. After the
resignation of three members of the Board and their replacements by Messers
O'Connor, Brand and Radziwill, the new board (with the Three Investors
abstaining because they are "interested" in this regard), again recommended
approval of Item No. 3 by the stockholders.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE TO APPROVE THE CONVERSION OF THE
SERIES A PREFERRED SHARES INTO COMMON SHARES.
ITEM 4. TO CONSIDER, APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION TO REQUIRE AT LEAST A 75% VOTE OF THE STOCKHOLDERS TO REMOVE OR
CHANGE THE CHAIRMAN OF THE BOARD.
The Share Subscription Agreements contain a provision in Section 8 to
require the Company to seek shareholder approval to amend the Company's
Certificate of Incorporation to require at least a 75% vote of the stockholders
to remove or change the Chairman of the Board. The current Chairman of the Board
of the Company is Diego J. Veitia, who has served as Chairman since the
Company's formation in 1987.
The Share Subscription Agreements provide for changes to the
requirements for removal or change to the Chairman of the Board in both the
Bylaws and Certificate of Incorporation of the Company. Pursuant to the
requirements of Section 6 of the Share Subscription Agreements, the Board of
Directors of the Company approved an amendment to the Bylaws of the Company on
October 16, 2002 whereby the vote of the greater of at least (A) five directors
or (B) seventy-five percent (75%) of the directors is required to remove or
change the Chairman of the Board. Prior to this amendment, the Bylaws required
only the affirmative vote of a majority of the directors to remove or change the
Chairman.
The amendment is offered with the intent to require a supermajority
vote of the outstanding shares, in addition to a supermajority of the directors,
to remove or change the Chairman of the Board. The Board of Directors believes
it is desirable that Mr. Veitia's experience and expertise, together with his
unique knowledge of the history of the Company, remain available to the Company
and its stockholders. If the proposed amendment is adopted by the stockholders,
a supermajority vote of both the directors and the stockholders will be required
to remove or change the Chairman.
Proposed Amendment to Certificate of Incorporation
If the amendment is approved, a new Article 12 will be added to the
Company's Certificate of Incorporation to read in its entirety as follows:
11
12. A vote of no less than seventy-five percent of the outstanding
shares shall be required to remove or change the Chairman of the Board of the
Corporation.
Certain Effects of Proposed Amendment
At the present time, the Company is not aware of any pending or
threatened efforts by any party to change the Chairman of the Company, and the
amendment is not being proposed in response to any such efforts. However, the
requirement for a supermajority vote of the outstanding shares to remove or
change the Chairman of the Board would impede the Board of Directors in any
future attempt to make such a change.
Approval of the amendment may adversely impact stockholders who desire
a change in management and/or the Chairman of the Board of Directors or to
participate in a change in control of the Company by requiring a vote of
seventy-five percent (75%) of the outstanding shares before the Chairman may be
removed or changed. While it may be deemed to negatively effect any future
effort to change or remove the Chairman, the proposed amendment is not prompted
by any specific effort or threat perceived by the Company's Board of Directors.
As described in Section 9 (a) of the Share Subscription Agreements,
should the shareholders of the Company not approve this amendment at the annual
meeting, the Investors, at their option, have the right to redeem the preferred
shares at the original cost of $1.70 per share beginning 15 days after the
meeting and extending to a date that is six months after closing (June 6, 2003).
The Company also has the right to repurchase the shares at its option at a cost
of $1.70 per share beginning 15 days after the meeting and extending to a date
that is six months after closing (June 6, 2003).
In the event any of the Investors exercises his redemption right or the
Company exercises its repurchase right pursuant to the failure of the
stockholders to approve the amendment to the Certificate of Incorporation to
require a seventy-five (75%) vote of the outstanding shares to remove or change
the Chairman of the Board, the Subscription Agreement between the Company and
John Radziwill provides that Company will pay Mr. Radziwill a fee equal to 6%
per annum of his purchase price for the period of time from closing which was
December 6, 2002, until the date of exercise. This provision does not extend to
either Mr. O'Connor or Mr. Branch.
Effective Date of Proposed Amendment
The proposed amendment to the Certificate of Incorporation of the
Company, if adopted by the required vote of the stockholders, will become
effective on the date on which the Articles of Amendment to the Company's
Certificate of Incorporation are filed with the Secretary of State of the State
of Delaware.
Vote Required and Board Recommendation
The affirmative vote of holders of a majority of the outstanding shares
of common stock entitled to vote at the Annual Meeting is required to approve
the proposed amendment. If the amendment is not approved by the stockholders,
the Company's Certificate of Incorporation, which currently has no specific
requirements for the removal or change of the Chairman of the Board will
continue in effect.
12
Although the three investors party to the Share Subscription Agreements
cannot vote at the Annual Meeting, they have expressed their support of this
Amendment and join the Board of Directors in its recommendation for approval.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO THE
INTERNATIONAL ASSETS HOLDING CORPORATION CERTIFICATE OF INCORPORATION TO REQUIRE
AT LEAST A 75% VOTE OF THE STOCKHOLDERS TO REMOVE OR CHANGE THE CHAIRMAN OF THE
BOARD.
ITEM 5 - TO CONSIDER, APPROVE AND ADOPT THE INTERNATIONAL ASSETS HOLDING
CORPORATION 2003 STOCK OPTION PLAN
General
The Share Subscription Agreements also contain a provision in Section 8
to require the Company to adopt a new stock option plan and submit such plan to
the Company's stockholders for approval and adoption. The Company's existing
stock option plan terminates on January 13, 2003 and in order to fulfill the
terms of the Share Subscription Agreements and its employment contracts with
Sean O'Connor and Scott Branch, which are included as Exhibits VIII and IX to
this Proxy Statement, the Company is required to adopt a new plan and submit it
to the stockholders for approval. The new plan which is to be known as The
International Assets Holding Corporation 2003 Stock Option Plan, and which is
attached to this Proxy Statement as Exhibit X, ("The Plan") was adopted by the
Board by unanimous consent on December 19, 2002.
As described in Section 9 (a) of the Share Subscription Agreements,
should the shareholders of the Company not approve this Plan at the annual
meeting, the Investors at their option have the right to redeem the preferred
shares at the original cost of $1.70 per share beginning 15 days after the
meeting and extending to a date that is six months after closing (June 6, 2003).
The Company has the right to repurchase the shares at its option at a cost of
$1.70 per share beginning 15 days after the meeting and extending to a date that
is six months after closing (June 6, 2003).
In the event either the Investor exercises his redemption right or the
Company exercises its repurchase right, the Company will pay John Radziwill a
fee of 6% per annum of his purchase price for the period of time from closing
which was December 6, 2002, until the date of exercise. This provision does not
extend to either Mr. O'Connor or Mr. Branch.
Plan Description
The following summary describes briefly the principal features of the
Plan. This summary does not purport to be complete and is subject to and
qualified in its entirety by the provisions of the Plan.
Purpose
The purpose of the Plan is to advance the growth and development of the
Company by affording an opportunity to executives, consultants and key employees
of the Company as well as directors of the Company and its affiliates to
purchase shares of the Company's
13
common stock and to provide incentives for them to put forth maximum efforts for
the success of the Company's business.
Eligibility
The Plan provides that award may be granted to directors, consultants,
officers and executive, managerial and other key employees of the Corporation or
any parent or subsidiary of the Corporation. Non-employee directors or
consultants of the Corporation are eligible to receive award only of
Nonqualified Options (as defined below). Approximately 15 employees of the
Corporation and its subsidiaries are eligible to participate in the Plan.
Stock Subject to the Plan
The total number of shares of stock which may be issued by the
Corporation to all optionees under the Plan is 750,000 shares upon shareholder
approval of the Plan. If and to the extent an option granted under the Plan
expires or terminates for any reason whatsoever, in whole or in part, the shares
(or remaining shares) of stock subject to that particular option shall again be
available for grant under the Plan.
Administration
The Plan is to be administered by the Board of Directors of the
Corporation (the "Board"); provided, however, that the Board may from time to
time appoint a Compensation Committee consisting of not less than two directors
and delegate to such Committee full power and authority to take any action
required or permitted to be taken by the Board under the Plan. The Board may
issue incentive stock options ("Incentive Options") within the meaning as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or options that do not qualify as Incentive Options ("Nonqualified
Options"). In addition, the Board shall have the discretion to determine the
employees, directors and consultants to whom options are to be granted and the
number of shares subject to the options.
General Conditions
The Plan sets forth certain general conditions relating to the options
that may be granted thereunder: (a) the maximum term of any Incentive Option
shall be 10 years; (b) an option shall be exercisable only as long as optionee
is in "continuous employment" with the Corporation as such term is defined in
the Plan or is continually on the Board of Directors of the Corporation, or any
parent subsidiary or successor thereof except as expressly permitted by the
Plan; and (c) an option granted under the Plan shall not be assignable or
transferable other than by will or the laws of descent and distribution.
Stock Options
The option price of stock options granted under the Plan shall not be
less than 100% of the fair market value of the stock on the date the option is
granted. The option price of stock options granted under the Plan to any
individual who possesses more than 10% of the combined voting power of all
classes of common stock of the Corporation shall not be less than 110% of the
fair market value of the stock on the date the option is granted.
Options shall become exercisable as provided by the Board in the Option
Agreement. An option shall terminate upon the occurrence of the following
conditions: (a) the expiration of one year after termination of employment by
death or disability; (b) immediately upon
14
termination for cause; (c) the expiration of 90 days after termination of
employment for a reason other than death, disability or cause; or (d) the
expiration of 90 days after the removal or resignation of the optionee from the
Board.
The Plan contains certain additional conditions applicable to options
designated as Incentive Options. Incentive Options may be granted only to
employees. No employee may be granted Incentive Options exercisable for the
first time in any calendar year in which Incentive Options have an aggregate
fair market value of stock (determined for each Incentive Option at its date of
grant) in excess of $100,000. An Incentive Option granted to an employee who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the corporation shall have a per-share exercise price of not
less than 110% of the fair market value of the stock on the date the option is
granted.
Payment of the exercise price may be made in cash, by certified bank
check, in shares of the Corporation's common stock or any combination of the
foregoing. At the discretion of the Board, the Corporation may also accept a
promissory note, secured or unsecured, in the amount of the option price.
Plan Termination and Amendment
Under its terms, the Plan will terminate ten years following approval
by the stockholders. Furthermore, the Plan may be amended or terminated at any
time by the Board. Any termination shall not affect any award then outstanding.
Amendments to the Plan may be made without shareholder approval, except as such
shareholder approval may be required by law or the rules of a national
securities exchange, or if the amendment would increase the number of shares
that may be issued under the Plan, or modify the requirements as to eligibility
for participation in the Plan.
Federal Tax Treatment of Options
If an option is granted to an employee in accordance with the terms of
the Plan, no income will be recognized by such employee at the time the option
is granted.
Generally, on exercise of a Nonqualified Option, the amount by which
the fair market value of the shares of the stock on the date of exercise exceeds
the purchase price of such shares will be taxable to the optionee as ordinary
income, and will be deductible for tax purposes by the Corporation in the year
in which the optionee recognizes the ordinary income. The disposition of shares
acquired upon exercise of a Nonqualified Option under the Plan will ordinarily
result in long-term or short-term capital gain or loss (depending on the
applicable holding period) in an amount equal to the difference between the
amount realized on such disposition and the sum of the purchase price and the
amount of ordinary income recognized in connection with the exercise of the
Nonqualified Option.
Section 16(b) of the Exchange Act generally subjects executive
officers, directors and 10% shareholders of the Corporation to potential
liability if they both buy and sell shares of the Corporation's stock within a
six-month period. In the case of employees who are subject to these rules,
generally, unless the employee elects otherwise, the relevant date for measuring
the amount of ordinary income to be recognized upon the exercise of a
Nonqualified Option will be the later of (i) the date the six-month period
following the date of grant lapses and (ii) the date of exercise of the
Nonqualified Option.
15
Generally, upon exercise of an Incentive Option, an employee will not
recognize any income and the Corporation will not be entitled to a deduction for
tax purposes. However, the difference between the purchase price and the fair
market value of the shares of stock received on the date of exercise will be
treated as a positive adjustment in determining alternative minimum taxable
income, which may subject the employee to the alternative minimum tax. The
disposition of shares acquired upon exercise of an Incentive Option under the
Plan will ordinarily result in long-term or short-term capital gain or loss
(depending on the applicable holding period). Generally, however, if the
employee disposes of shares of stock acquired upon exercise of an Incentive
Option within two years after the date of grant or within one year after the
date of exercise (a "disqualifying disposition"), the employee will recognize
ordinary income, and the Corporation will be entitled to a deduction for tax
purposes, in the amount of the excess of the fair market value of the shares on
the date of exercise over the purchase price (or, in certain circumstances, the
gain on sale, if less). Any excess of the amount realized by the holder on the
disqualifying disposition over the fair market value of the shares on the date
of exercise of the Incentive Option will ordinarily constitute capital gain. In
the case of an employee subject to the Section 16(b) restrictions discussed
above, the relevant date in measuring the employee's ordinary income and the
Corporation's tax deduction in connection with any such disqualifying
disposition will normally be the later of (i) the date the six-month period
after the date of grant lapses or (ii) the date of exercise of the Incentive
Option.
If an option is exercised through the use of stock previously owned by the
employee, such exercise generally will not be considered a taxable disposition
of the previously owned shares and, thus, no gain or loss will be recognized
with respect to such shares upon such exercise. However, if the previously owned
shares were acquired through the exercise of an Incentive Option or other
tax-qualified stock option and the holding period requirement for those shares
was not satisfied at the time they were used to exercise an Incentive Option,
such use would constitute a disqualifying disposition of such previously owned
shares resulting in the recognition of ordinary income (but, under proposed
Treasury Regulations, not any additional capital gain) in the amount described
above. If any otherwise qualifying Incentive Option becomes first exercisable in
any one year for shares having a value in excess of $100,000 (grant date value),
the portion of the option in respect of such excess shares will be treated as a
Nonqualified Option.
The chart below shows those officers of the Company who are known to be
employees and/or directors who will receive a grant of options upon approval of
the new option plan.
New Plan Benefits
The International Assets Holding Corporation 2003 Stock Option Plan
------------------------------------- ----------------------------------- -----------------------------------
Name and Position Dollar Value$ Number of Units
------------------------------------- ----------------------------------- -----------------------------------
Sean O'Connor, CEO 331,250 (1) 132,500
------------------------------------- ----------------------------------- -----------------------------------
Scott Branch, President 331,250 (1) 132,500
------------------------------------- ----------------------------------- -----------------------------------
Edward Cofrancesco, COO Undeterminable(2) 90,000
------------------------------------- ----------------------------------- -----------------------------------
(1) The strike price of the options for Mr. O'Connor and Mr. Branch are
specified within the Employment Agreements as $2.50.
(2) The options are due to Mr. Cofrancesco under the terms of his current
employment contract. As no exercise price is specified within the contract, the
exercise price will be determined upon date of grant and the value is,
therefore, undeterminable at this time.
16
Vote Required and Board Recommendation
The affirmative vote of holders of a majority of the shares of common stock
entitled to vote at the Annual Meeting is required to approve the proposed
amendment.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF
THE INTERNATIONAL ASSETS HOLDING CORPORATION 2003 STOCK OPTION PLAN
ITEM 6. ANY OTHER BUSINESS
The Board of Directors does not know of any other business which will be
presented for consideration at the Annual Meeting. If any other business does
properly come before the Annual Meeting or any adjournment thereof, the proxy
holders will vote in regard thereto according to the discretion of management
insofar as such proxies are not limited to the contrary.
17
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table is a three-year summary of the compensation awarded
or paid to, earned by, the Company's Chief Executive Officer and its most highly
compensated executive officers whose total cash compensation exceeded $100,000
during the Company's last completed fiscal year.
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
---------------------------- ----------------------------------
Other- Rest- Secur
Name Annual ricted ities All other
and Compen- Stock Underlying LTIP Compensa-
Principal Salary Bonus sation Award(s) Options/ Payouts tion
Position Year $ $ $ $ SARs (#)(1) $ $
-------- ---- --------- -------- -------- -------- ------------ ------- ---------
Diego J. Veitia, 2002 $ 115,985 $ 35,000 $15,841 $ - 25,000 $ - $ -
Director, Chairman 2001 $ 148,349 $ - $19,845 $ - 25,000 $ - $ -
of the Board and 2000 $ 147,092 $201,690 $ - $ - - $ - $16,188
Chief Executive
Officer (2) (3) (4)
Edward R. 2002 $ 150,000 $ 55,000 $ - $ - 20,000 $ - $14,235
Cofrancesco 2001 $ 115,962 $110,000 $ - $ - 20,000 $ - $19,719
Director, Executive
Vice President and Chief
Operating Officer (5) (6)
Jonathan C. Hinz, 2002 $ 97,136 $ 30,000 $ - $ - 20,000 $ - $ -
Chief Financial 2001 $ 88,544 $ 18,000 $ - $ - 20,000 $ - $ -
Officer and 2000 $ 87,658 $ 20,000 $ - $ - 7,200 $ - $ -
Treasurer
--------------------------------------------------------------------------------------------------------------------
(1) Option shares presented for year 2000 have been restated for the 10% stock
dividend declared by the Corporation on February 25, 2000 for shareholders of
record as of March 10, 2000.
(2) Mr. Veitia received $15,841, or approximately 10.5% of 2002 total salary and
bonus in other annual compensation consisting of $9,845 paid for tax preparation
fees, $3,567 related to auto lease reimbursement and $2,429 related to
memberships. Mr. Veitia received $19,845, or approximately 13% of 2001 total
salary and bonus in other annual compensation consisting of $9,095 paid for tax
preparation fees and $10,750 related to auto lease reimbursement.
(3) All other compensation for Mr. Veitia for year 2000 is comprised of Company
contributions to the Company's 401(k) Profit Sharing Plan (formerly known as the
Employee Stock Ownership Plan), Retirement Savings Plan, automobile related
benefits paid directly by the Company and payments for personal income tax
preparation fees.
(4) Salary for 2002 does not include a $33,502 voluntary 25% salary waiver
related to the months of October 2001 through August 2002. Salary for 2001 does
not include a $3,156 voluntary 25% salary waiver related to the month of
September 2001.
18
(5) Mr. Cofrancesco joined the Company on December 22, 2000. Salary stated above
for 2001 includes base salary earned during the portion of the fiscal year from
December 22, 2000 through September 2001.
(6) All other compensation for Mr. Cofrancesco for year 2002 and 2001 is
comprised of payments and reimbursements related to relocation and an automobile
allowance.
Stock Options and Stock Appreciation Rights (SAR)
The International Assets Holding Corporation Stock Option Plan (the
"Existing Plan") was adopted by the Board of Directors of the Corporation in
January, 1993 and approved by the stockholders in November, 1993. On February
15, 1996 the shareholders approved an amendment to the Existing Plan to increase
the number of shares available for issuance under the Existing Plan from 250,000
to 500,000 shares effective December 28, 1995. On February 16, 1999 the
shareholders approved an amendment to the Existing Plan to increase the number
of shares available for issuance under the Existing Plan from 500,000 to 700,000
shares.
In accordance with the terms of the Company's stock option Existing Plan
the Company's Board of Directors has authorized a 10% share and price adjustment
for outstanding stock options issued prior to March 5, 1999. This adjustment is
related to the Company's 10% stock dividend declared on February 12, 1999 and
paid on March 26, 1999. Previously issued option shares have been
proportionately increased by 10% and the corresponding option exercise price per
share has also been reduced by 10%. In conjunction with the stock dividend for
record date March 5, 1999 the total options authorized under this Existing Plan
were proportionally increased from 700,000 options to 770,000 options as a
result of this stock dividend.
In addition, the Company's Board of Directors has authorized a 9% share and
price adjustment for outstanding stock options issued prior to March 10, 2000.
This adjustment is related to the Company's 10% stock dividend declared on
February 25, 2000 and paid on March 24, 2000. Previously issued option shares
have been proportionately increased by 9% and the corresponding option exercise
price per share has also been reduced by 9%. In conjunction with the stock
dividend for record date March 10, 2000 the total options authorized under this
Existing Plan were proportionally increased from 770,000 options to 839,300
options as a result of this stock dividend. On February 15, 2001 the
shareholders approved an amendment to the Existing Plan to increase the number
of shares available for issuance under the Existing Plan from 839,300 to
1,339,300 shares
The Existing Plan permits the granting of awards to employees of the
Company and its subsidiaries in the form of stock options of the Company's
common stock. Stock options granted under the Existing Plan may be "incentive
stock options" meeting the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or non-qualified options which do not
meet the requirements of Section 422.
The Existing Plan is administered by the Board of Directors or a committee
thereof. The Existing Plan gives broad powers to the Board of Directors to
administer and interpret the Existing Plan, including the authority to select
the individuals to be granted options and rights and to prescribe the particular
form and conditions of each option or right granted. All options are granted at
an exercise price equal to the fair market value or 110 percent of the fair
market value of the Company's common stock on the date of the grant. Awards may
be granted pursuant to the Existing Plan through January, 2003. The Existing
Plan may be terminated earlier by the Board of Directors at its sole discretion.
19
No Stock Appreciation Rights (SAR) have been granted by the Company.
Option/SAR Grants in Last Fiscal Year
The following table reports total options granted to named executive officers
during the 2002 fiscal year. Individual grants are as follows.
Number of
Securities % of Total
Underlying Options/SAR's Exercise
Options/SAR's Granted to or Base
Granted Employees in Price Expiration
ExecutiveOfficer (#/Shares) Fiscal Year ($/Share) Date
---------------- ---------- ----------- --------- ----
Diego J. Veitia (1) 25,000 19.08% 0.99 10/05/11
Edward R. Cofrancesco (2) 20,000 15.27% 0.60 12/22/11
Jonathan C. Hinz (1) 20,000 15.27% 0.90 10/05/11
--------------------------------------------------------------------------------
(1) Option granted on 10/5/2001 and exercisable at 33.3% after year one, 33.3%
after year two and 33.4% after year three.
(2) Option granted on 12/22/2001 and exercisable at 33.3% after year one,
33.3% after year two and 33.4% after year three.
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth for each of the Named Executive Officers
certain information concerning options exercised during the fiscal year ended
September 30, 2002 and the number of shares subject to both exercisable and
unexercisable stock options as of that date. The table also shows values for
"in-the-money" options. These values represent the positive spread between the
respective exercise prices of outstanding options and the fair market value of
the Company's common stock as of September 30, 2002.
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options /SARs at In-the-Money Options/SARs
On Value September 30, 2002 At September 30, 2002
Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Executive Officer (#) ($)(1) (#) (2) ($)(3)
----------------- -------- -------- ------------------------- -------------------------
Diego J. Veitia - $ - 118,633 / 41,675 $ - / $ -
Edward R. Cofrancesco - $ - 6,660 / 33,340 $ - / $200
Jonathan C. Hinz - $ - 10,957 / 43,437 $ - / $ -
--------------------------------------------------------------------------------
(1) Based on the fair market value of the Company's common stock on the exercise
date (the closing price) minus the exercise price and multiplied by the number
of shares acquired.
20
--------------------------------------------------------------------------------
(2) Includes both "in-the-money" and "out-of-the-money" options. "In the-money"
options are options with exercise prices below the market price of the Company's
common stock on September 30, 2002.
(3) Based on the closing price of the Company's common stock on September 30,
2002 ($0.61) minus the exercise price.
Long-Term Incentive Plans-Awards in Last Fiscal Year
None.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company had entered into an employment agreement with Diego J. Veitia,
its then chief executive officer, that would have expired March 24, 2003. As
described below, the arrangement has been modified effective September 1, 2002.
Under the terms of the original agreement, the officer would have received
specified annual compensation, a bonus, a monthly automobile allowance and
reimbursement for personal income tax preparation fees. The bonus was to be
calculated by applying the consolidated return-on-equity percentage for that
year to the consolidated pre-tax earnings adjusted before the deduction for
officer bonus expense and as adjusted for certain financial transactions. The
executive bonus percentage is subject to a minimum of 5% and a maximum of 15% of
adjusted consolidated pre-tax earning of the Company. The Company may award
additional bonuses to the executive from time to time as determined by the Board
of Directors. In the event of termination of the agreements by the Company other
than for cause, as defined, or if the executive resigns as a result of a breach
by the Company, the agreement provides for payments to such individual in an
amount equal to 100% of his total compensation for 24 months following the date
of termination.
The Board of Directors of the Company has modified the compensation payable
directly to Mr. Veitia under the employment agreement and has modified the
services to be provided under that agreement. The Company also agreed to enter
into a consulting agreement with Veitia and Associates ("V&A") for the
additional services required from the Executive Chairman (formerly chief
executive officer until October 22, 2002). V&A is a company solely owned by
Diego J. Veitia, the Executive Chairman of the Company. The agreement has an
original term from September 1, 2002 through September 30, 2003. Under the terms
of the agreements, the Executive Chairman will receive specified comprehensive
annual compensation, certain general employee benefits (such as medical
insurance), a monthly automobile allowance, three monthly club memberships and
reimbursement for personal income tax preparation fees. V&A will assume certain
other business expenses incurred by the executive that previously had been
reimbursed by the Company. The Company may award bonuses to the executive from
time to time as determined by the Board of Directors. In the event of
termination of the agreements by the Company other than for cause, as defined,
or if the executive resigns as a result of a breach by the Company, the
agreement provides for payments to such individual in an amount equal to 100% of
his total compensation for 24 months following the date of termination.
The Company also entered into an employment agreement with Edward R.
Cofrancesco, its chief operating officer which expires on December 31, 2002.
Under the
21
terms of the agreement, the officer will receive specified annual compensation,
a bonus and a monthly automobile allowance. The bonus is determined by the Board
of Directors. In the event of termination of the agreements by the Company other
than for cause, as defined, or if the executive resigns as a result of a breach
by the Company, the agreement provides for payments to such individual in an
amount equal to 100% of his total compensation for the remaining term of the
agreement or 6 months if longer, following the date of termination.
On October 22, 2002, the existing employment agreements for the
Company's Executive Chairman and Chief Operating Officer, and the consulting
agreement with V&A which was originally effective September 1, 2002, were each
modified and extended for a three-year term commencing on October 22, 2002. The
extension of the term of the agreements and provisions to limit the arbitrary
removal of the Executive Chairman are intended to provide a continuity of
executive direction for the Company after shareholders approve the matters being
presented at the next meeting of the shareholders. In the event of termination
of the compensation or consulting agreements by the Company other than for
cause, as defined, or if the executive resigns as a result of a breach by the
Company, the agreement provides for payment to such individual and to V&A in an
amount equal to 100% of the total compensation payable under the agreements for
the remaining term of the agreements or 6 months if longer, following the date
of termination.
Also, On October 22, 2002 the Company executed three year employment
agreements with both Sean O' Connor, as Chief Executive Officer and Scott Branch
as President. In the event of termination of the employment agreements by the
Company other than for cause, as defined, or if the executive resigns as a
result of a breach by the Company, each agreement provides for payment to such
individual an amount equal to 100% of the total compensation payable under the
agreement for the remaining term of the agreement or 6 months if longer,
following the date of termination.
As of September 30, 2002 the Company had 162,500 options granted for
common stock subject to terms where the options become immediately fully vested
and non-forfeitable if a change in control in the Company occurs. In addition,
on December 6, 2002 the Board of Directors of the Company granted an additional
305,000 options subject to these same provisions.
Employee Investment/Retirement Plans
Effective May 1, 1999, the Company implemented a defined contribution
401(k) Profit Sharing Plan (401(k) Plan). The 401(k) Plan amended and restated
the Company's employee stock ownership plan (ESOP), which was effective December
30, 1992. This plan retained the 401(k) profit sharing features of the December
30, 1992 plan, and effective May 1, 1999, deleted the employee stock ownership
plan provisions. Those participants who had account balances in the ESOP portion
of the plan, as of May 1, 1999 retained certain ESOP rights, such as the right
to receive distributions in the form of employer common stock. Also, the Company
implemented a defined contribution Retirement Savings Plan (RSP) effective
January 1, 1995.
On November 1, 2001, International Assets Advisory Corp. (a former 100% owned
subsidiary) terminated the International Assets Advisory Corporation 401K Profit
Sharing Plan (401K) and the International Assets Advisory Corporation Retirement
Savings Plan (RSP). All participants under the 401K and RSP vested 100% in their
respective account balances and the employer sponsor and its related employees
made no further contributions to the plans. Also, on November 1, 2001,
International Assets Holding Corporation became the
22
primary sponsoring employer of both plans. The plans became known as the
International Assets Holding Corporation 401K Profit Sharing Plan and the
International Assets Holding Corporation Retirement Savings Plan. International
Assets Holding Corporation will effectuate the necessary actions to terminate
the plans.
The Company did not make any contributions to either the 401K and RSP benefit
plans for the years ended September 30, 2002 and 2001. During the years ended
September 30, 2002 and 2001, no common shares of the Company were purchased from
terminated 401(K) or RSP plan participants.
As of September 30, 2002 and 2001, 146,982 and 158,928 common shares of the
Company were allocated to the 401(K) plan participants, respectively. As of
September 30, 2002 and 2001, 58,005 and 69,694 common shares of the Company were
allocated to RSP participants, respectively.
The Company has received written notification from the IRS dated Sep 17, 2002,
which acknowledges that the termination of the two plans does not adversely
affect the plans qualification for Federal tax purposes. The Company has begun
the liquidation and distribution process for both plans. This distribution
process is expected to be completed by December 31, 2002.
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of the Company's Common Stock and Series A Preferred Stock as of
December 23, 2002, by (i) each person known by the Company to own more than 5%
of the Common Stock, (ii) each director of the Company, (iii) each of the most
highly compensated executive officers whose total cash compensation exceeded
$100,000 during the Company's last completed fiscal year and (iv) all executive
officers and directors of the Company as a group. All shares are directly owned
by the individual unless otherwise indicated.
Title of Name and Address of Number of Percent of
Class Beneficial Owner Shares(1)(2) Class
----- ---------------- ------------ -----
Common The Diego J. Veitia Family Trust (3) 538,006 22.65%
Common Stephen A. Saker (3) (4) 140,948 5.08%
Common Diego J. Veitia (3)(5)(6)(7) 711,323 28.42%
Common Robert A. Miller (3)(8) 43,845 1.83%
Common Edward R. Cofrancesco (3)(9) 19,980 0.83%
Common Jonathan C. Hinz (3)(10) 21,516 0.90%
Common All directors and executive officers 796,664 31.00%
as a group (11) (Four persons)
Preferred Sean M. O'Connor (3) (12) 882,353 40.34%
Preferred Scott J. Branch (3) (13) 735,294 33.61%
Preferred John Radziwill (3) (14) 569,853 26.05%
(1) Except as otherwise stated, all stockholders have sole voting and investment
power with respect to the shares of Common Stock set forth opposite their
respective names.
(2) Includes common shares that can be acquired within 60 days from the date
hereof upon the exercise of warrants or options or conversion of convertible
securities. Shares subject to issuance upon the exercise of options or warrants
or other rights to acquire shares are deemed outstanding for purposes of
computing the percentage owned by each person but are not deemed to be
outstanding for the purpose of computing the outstanding percentage of any other
persons.
(3) 220 Central Parkway, Suite 2060, Altamonte Springs, Florida 32701.
(4) Includes 56,074 shares subject to five exercisable options from the Company.
(5)Includes 538,006 shares held by The Diego J. Veitia Family Trust (the
"Trust"). Mr. Veitia is Chairman of the Board of the Company and the settlor,
sole trustee and
24
primary beneficiary of the Trust and, as such, may be deemed the beneficial
owner of the shares held by the Trust under rules and regulations promulgated by
the SEC.
(6) Includes 126,958 shares subject to four exercisable options from the
Company.
(7) Does not include 58,025 shares held by The Diego J. Veitia Foundation.
(8) Includes 26,677 shares subject to four exercisable options from the Company.
(9) Includes 19,980 shares subject to two exercisable options from the Company.
(10) Includes 20,506 shares subject to five exercisable options from the
Company.
(11) Includes 194,121 shares subject to fifteen exercisable options in the favor
of Messrs. D. Veitia, Miller, Cofrancesco and Hinz from the Company.
(12) Includes 750,000 Series A Preferred shares owned by The St. James Trust.
Mr. O'Connor is an investment advisor and one of the beneficiaries of The St.
James Trust.
(13) Includes 367,647 Series A Preferred shares owned by Mr. Branch's spouse.
(14) Includes 569,853 Series A Preferred shares owned by Goldcrown Asset
Management Limited. Mr. Radziwill owns approximately 24% of Goldcrown Asset
Management Limited.
Compliance with Section 16(a) of the Exchange Act
Pursuant to Section 16(a) of the Exchange Act and the rules issued
thereunder, the Company's executive officers, directors and owners of in excess
of 10% of the issued and outstanding common stock are required to file with the
SEC reports of ownership and changes in ownership of the common stock of the
Company. Copies of such reports are required to be furnished to the Company.
Based solely on the review of such reports, the Company is aware of five
directors and two executive officer that had late filings under Section 16(a)
during fiscal year 2002.
Jerome F. Miceli, a director of the Company, did not report in a timely manner
under Section 16(a) a stock option awarded on October 5, 2001 for 15,000 shares
of common stock, with a strike price of $0.90 per share. Mr. Miceli subsequently
reported this transaction on a Form 5 filed on January 9, 2002. Diego J. Veitia,
a director of the Company, did not report in a timely manner under Section 16(a)
a stock option awarded on October 5, 2001 for 25,000 shares of common stock,
with a strike price of $0.99 per share. Mr. Veitia subsequently reported this
transactions on a Form 5 filed on August 28, 2002. Steven A. Saker, a former
director of the Company, did not report in a timely manner under Section 16(a) a
stock option awarded on October 5, 2001 for 20,000 shares of common stock, with
a strike price of $0.90 per share. Mr. Saker subsequently reported this
transaction on a Form 5 filed on August 28, 2002. Jeffrey Rush, a former
director of the Company, did not report in a timely manner under Section 16(a) a
stock option awarded on October 5, 2001 for 15,000 shares of common stock, with
a strike price of $0.90 per share. Mr. Rush subsequently reported this
transaction on a Form 5 filed on December 17, 2002. Robert A. Miller, a director
of the Company, did not report in a timely manner under Section 16(a) a stock
option awarded on October 5, 2001 for 15,000 shares of common stock, with a
strike price of $0.90 per share. Mr. Miller subsequently reported this
transaction on a Form 5 filed on December 17, 2002. Jonathan C. Hinz, an
executive officer of the Company, did not report in a timely manner under
Section 16(a) a stock option awarded on October 5, 2001 for 20,000 shares of
common stock, with a strike price of $0.90 per share. Mr. Hinz subsequently
reported this transaction on a Form 5 filed on August 28, 2002. Tresa N.
Veitia-Williamson, a former executive officer of the Company, did not report in
a timely manner under Section 16(a) a stock option awarded on
25
January 3, 2002, 2001 for 9,000 shares of common stock, with a strike price of
$0.65 per share. Ms. Veitia-Williamson subsequently reported this transaction on
a Form 5 filed on August 28, 2002.
The Company believes that during fiscal year 2002, all other executive officers
and directors complied with the Section 16(a) requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 5, 2001, the Company purchased, by issuance of 57,625 common shares
of the Company, a $150,000 promissory note, due by the then President of the
Company to his former employer. The promissory note included $13,657 of accrued
interest at 5.75% per annum. On July 11, 2001 the Company executed an
unconditional and irrevocable agreement to forgive the $150,000 promissory note
held by the Company with accrued interest, due from the former President of the
Company, with forgiveness effective June 11, 2002. The forgiveness of the note
was reflected as compensation and benefits expense in the third quarter of
fiscal 2001.
On January 4, 2000 the Company, after approval by the Board of Directors,
made a loan to the CEO of the Company including the execution and receipt of a
$250,000 promissory note due January 3, 2001. The Board of Directors of the
Company granted an extension of the due date of the promissory note to December
31, 2001. At the Board of Directors meeting held on February 15, 2002 the CEO
requested an extension to repay the balance by mid calendar year 2002, which
request was consented to by the Board of Directors. The promissory note includes
interest of 6 percent per annum. On August 7, 2002 the CEO repaid the entire
loan balance including the then principal and accrued interest balance of
$42,724.
On August 28, 2000 the Company made a loan to a Vice President of the
Company including the execution and receipt of a $66,000 promissory note due
August 27, 2001. The Board of Directors of the Company granted an extension of
the due date of the promissory note to August 31, 2002. The promissory note
includes interest of 6.27 percent per annum. On August 30, 2001 the Vice
President made a $47,000 loan payment to the Company. As of September 30, 2002
the remaining principal balance of the promissory note including accrued
interest is $21,468. The Vice President has notified the Company that he intends
to make payments of approximately $900 per month from October 1, 2002 through
March 31, 2003. In addition, the Vice President intends to make a balloon
payment on March 31, 2003 for the then remaining loan balance.
The Company has engaged, on a task-by-task basis, a creative design firm
that is partially owned by a spouse of an officer of the Company. The Company
incurred promotional expense related to this creative design firm totaling
approximately $0 and $34,023 during the years ended September 30, 2002 and 2001,
respectively.
On February 1, 2002 the Company executed a six-month contract for investor
relations services from an outside firm that is owned and managed by a cousin of
the Chairman of the Company. The contract was for $5,000 per month plus
reimbursement for reasonable expenses related to the performance of the service
contract. This services contract ceased on July 31, 2002 after the six-month
term expired.
On August 9, 2002, the Board of Directors of the Company agreed to execute
a list broker agreement between Veitia & Associates (V&A) and the Company
regarding the management and leasing of the Company's list rental access, for
the period October 1, 2002 to December 13, 2004. V&A will pay the Company 10% of
any proceeds generated from this
26
agreement. V&A is a company solely owned and controlled by the Chairman of the
Company.
Also on August 9, 2002, the Board of Directors of the Company decided to
cease the Company's ongoing efforts for the creation of a Company proprietary
hedge fund. The original cost of the legal work expended in pursuit to develop a
hedge fund for the Company, up to August 9, 2002, was approximately $15,000. The
Board of Directors has agreed to allow V&A access to a copy of the hedge fund
legal work generated up to August 9, 2002. V&A has indicated the intent to
develop a hedge fund. In addition, the Board of Directors agreed that certain
services, such as accounting support and operational support, be provided to the
V&A hedge fund under a soft dollar arrangement in exchange for certain security
order flow from V&A and/or its hedge fund. The Board of Directors gave its
assent to this arrangement subject to resolving the details and subject also to
the provision that the arrangement not affect in any adverse way the operations
of the Company.
The Company has paid to V&A, a travel lodging per diem for reimbursement to
the Chairman for corporate related travel to New York City. The Chairman
personally maintains a part-time residence in New York City. This per diem
offsets the Company cost that would have been incurred for hotel expense. The
total cost paid to V&A was $4,000 and $5,000 for the years ended September 30,
2002 and 2001, respectively.
In November 2002 the Company made a $20,000 contribution to The Diego J.
Veitia Foundation. This foundation is a not-for-profit foundation established by
Mr. Veitia, Executive Chairman for the sole purpose of making charitable
contributions, mostly in the form of education scholarships.
The Company believes that all prior transactions between the Company and
its officers, directors or other affiliates of the Company were on terms no less
favorable than could have been obtained from unaffiliated third parties on an
arm's-length basis. However, as the requisite conditions of competitive,
free-market dealings may not exist, the foregoing transactions cannot be
presumed to have been carried out on an arm's-length basis, nor upon terms no
less favorable than had unaffiliated parties been involved.
27
EXHIBIT I
SHARE SUBSCRIPTION AGREEMENT
THIS SHARE SUBSCRIPTION AGREEMENT ("Agreement") is made and entered into as of
the 22 day of October, 2002 (the "Effective Date"), by and between INTERNATIONAL
ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and SEAN M.
O'CONNOR (the "Investor").
R E C I T A L S
A. The Company, directly or through its subsidiaries, operates a financial
services company, including a market making and proprietary trading brokerage
firm specializing in global securities.
B. The Company is a publicly held entity, having previously offered shares of
the Company's common stock pursuant to a registration statement, and continues
to file reports as to the Company's business.
C. The Board of Directors of the Company (the "Board") considers it essential to
the best interests of the Company that (i) additional common equity and (ii)
preferred equity will be sold to the Investor subject to the terms of this
Agreement.
D. The Investor is an "accredited investor" as such term is defined in Appendix
1, and is capable of evaluating the merits and risks of an investment in the
Company.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Investor agree as follows:
1. Recitals. All of the above recitals are true and correct.
2. Term. This Agreement shall commence on the Effective Date and shall
terminate at 12:01 a.m. EST on the date that is the later of five (5) business
days from the date of receipt by the Company of (i) the audited consolidated
financial statements for the fiscal year ended September 30, 2002; or (ii)
written confirmation from NASDAQ with respect to the transactions evidenced by
this Agreement, but in no event later than December 15, 2002 (the "Termination
Date") unless the Closing, as hereafter defined, has occurred before the
Termination Date. This Agreement may be extended by the mutual written agreement
of the Company and the Investor prior to the Termination Date.
3. Purchase of Securities.
(a) Subject to the terms and conditions of this Agreement, the Company
offers to the Investor and the Investor hereby subscribes to purchase (i)
182,061 shares of common stock, $.01 par value per share of the Company (such
shares of common stock are referred to herein as the "Common Securities"), and
(ii) 700,292 shares of preferred stock, $.01 par value per share of the Company
(such shares of preferred stock are
referred to herein as the "Preferred Securities") (the Common Securities and the
Preferred Securities are collectively referred to as the "Securities"), each at
a fixed price per share equal to $1.70 (the "Per Share Purchase Price"). The
aggregate purchase price for the purchased Securities shall be equal to the
product of the Per Share Purchase Price and the aggregate number of Common
Securities and Preferred Securities purchased by the Investor (the "Aggregate
Purchase Price").
(b) The Preferred Securities will have the preferences, privileges,
restrictions and rights specified in Exhibit "A" to this Agreement. The Board
will promptly approve the terms of the Preferred Securities by adopting an
amendment to the Company's Certificate of Incorporation in the form of Exhibit
"A".
4. Earnest Money. The Investor will pay the Company a deposit in the amount of
$80,000 within three (3) days of the execution of this Agreement (the
"Deposit"). At the Closing, the Company will apply the Deposit to the Aggregate
Purchase Price as provided in Section 5. If the Agreement is terminated before
the Closing, as hereafter defined, pursuant to Subsection 7(a)(i), (ii) or (iii)
or Section 10 hereof, the Company will return the Deposit to the Investor. If
the Agreement is terminated before the Closing pursuant to Subsection 7(a)(iv)
hereof or if the Investor is unable to make full payment to the Company for the
purchased shares at Closing, the Investor will forfeit the Deposit.
5. Closing and Payment. The closing of the acquisition provided for in Section
3 of this Agreement (the "Closing") shall occur on a mutually agreeable date
prior to the Termination Date at the offices of Holland & Knight LLP in Orlando,
Florida or at such other time and place as the parties may agree. At the
Closing: (i) the Investor will pay the Aggregate Purchase Price less the Deposit
by either endorsing a certified or cashier's check made payable to the Company
or wiring immediately available funds to the Company's bank account (which
account number has been previously provided to the Investor), and (ii) the
Company will reimburse the Investor, together with the other Approved Investors,
up to the aggregate sum of $20,000 for amounts paid by the Approved Investors to
any intermediaries or brokers and for the legal and out-of-pocket expenses
incurred by the Approved Investors, provided that the Approved Investors shall
not be entitled to such reimbursement if the Closing does not occur for any
reason.
6. Conditions Precedent.
(a) The respective obligations of the Company and the Investor to effect the
Closing are subject to the satisfaction or waiver by the Company and the
Investor, prior to the Closing of each of the following conditions:
(i) There being no provision of applicable Law or any Court Order that
prohibits or otherwise makes illegal the consummation of the Closing.
(ii) All regulatory approvals required to consummate the transaction
contemplated hereby (other than the shareholder approval required for the
2
conversion of Preferred Securities) shall have been obtained and shall
remain in full force and effect.
(iii) No investigation, action, suit or proceeding by a Governmental
Authority shall be pending on the date of Closing, which challenges, or
might reasonably be expected to result in a challenge to this Agreement, or
which might reasonably be expected to give rise to a claim for damages in a
material amount as a result of the consummation of the transaction
contemplated by this Agreement.
(iv) The Company shall have consummated simultaneously with the Closing,
the transactions contemplated by Share Subscription Agreements of even date
herewith entered into by and between the Company and each of Scott J.
Branch and John Radziwill, or any assignee of each which has been approved
in writing by the Company (such persons, together with the Investor, the
"Approved Investors").
(v) The Company shall have received the written confirmation from NASDAQ
that the transactions evidenced by this Agreement do not require prior
stockholder approval.
(b) The obligation of the Investor to effect the Closing is subject to the
satisfaction or waiver by the Investor of the following additional conditions:
(i) The Company shall have performed in all material respects
all of its material obligations under this Agreement required to be performed by
it at or before the Closing.
(ii) Any representation or warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of the
Closing, as if made at and as of such time.
(iii) The Company and the Investor shall have entered into an
Employment Agreement in the form attached hereto as Exhibit "B" (the "Employment
Agreement").
(iv) The Company and the Investor shall have entered into a
Registration Rights Agreement in the form attached hereto as Exhibit "C" (the
"Registration Rights Agreement").
(v) The Board shall have duly adopted resolutions: (1)
approving the terms of (i) this Agreement, (ii) the terms of the Preferred
Securities, (iii) the Employment Agreement, and (iv) the Registration Rights
Agreement; (2) authorizing an employee share incentive program to allow for
options to be issued as provided in the Employment Agreement (the "Option Plan")
to be proposed to the stockholders of the Company for approval at the next
convened annual general meeting of stockholders currently scheduled to occur on
or before February 14, 2003 (the "Annual Meeting"); and (3)
3
approving an amendment to (i) the bylaws of the Company to require a
supermajority vote of the greater of (A) at least five directors or (B) at least
seventy-five percent (75%) of the directors to remove or change the Chairman of
the Board, and (ii) the Certificate of Incorporation of the Company to also
require a vote of at least seventy-five percent (75%) of the shares of common
stock to remove or change the Chairman of the Board to be proposed to the
stockholders of the Company at the Annual Meeting. Copies of these Board
resolutions certified by the Secretary of the Company shall be made available to
the Investor no later than 14 business days after execution of this Agreement.
(vi) The Company will have received a release from UBS Warburg
waiving any claim to compensation arising from this Agreement or the share
purchase evidenced hereby.
(vii) The Company will have secured letters of resignation from
all current directors not shown on Appendix 2 and shall appoint all new
directors shown on Appendix 2 effective as of the Closing.
(viii) The Company shall have entered into Employment
Agreements with Diego Veitia, Edward Cofrancesco, Charles Lyons, Brian Garrow,
Will Dennis, Jr., Doug Ross, Chris Myers and Michael Flannigan. Neither Diego
Veitia nor Edward Cofrancesco shall have terminated their Employment Agreement
with the Company.
(c) The Obligation of the Company to effect the Closing is subject to
satisfaction or waiver by the Company of the following conditions:
(i) The Investor shall have performed in all material
respects all of its material obligations under this Agreement required to be
performed by it at or before the Closing.
(ii) Any representation or warranties of the Investor
contained in this Agreement shall be true and correct in all material respects
as of the Closing, as if made at and as of such time.
7. Termination.
(a) This Agreement may be terminated at any time before the Closing:
(i) by the mutual agreement of the Investor and the
Company;
(ii) By either the Company or the Investor, if the
Closing has not occurred by December 15, 2002, provided that the right to
terminate this Agreement under this clause will not be available to any party
whose failure to fulfill any of its obligations under this Agreement resulted in
the failure to consummate the Closing by such date;
(iii) By the Investor, if there has been a material
breach of any representation, warranty or covenant in this Agreement by the
Company; or
4
(iv) By the Company, if there has been a material breach of any
representation, warranty or covenant in this Agreement by the Investor.
(b) The party terminating this Agreement pursuant to this Section will
give written notice of termination to the other party.
8. Stockholder Approval. At the Annual Meeting, the Company shall seek the
approval of the stockholders of the Company: (i) to allow conversion of the
Preferred Securities to Common Securities; (ii) to adopt the Option Plan; (iii)
to elect the persons listed on Appendix 2 to the Board; and (iv) to amend the
Certificate of Incorporation of the Company to require a seventy-five percent
(75%) vote of the stockholders to remove or change the Chairman of the Board.
Upon the approval of the stockholders at the Annual Meeting, the Preferred
Securities will automatically be converted into the Common Securities pursuant
to the conversion provisions included in Exhibit "A" hereto (the "Conversion").
9. Redemption and Repurchase Rights.
(a) In the event the stockholders do not approve the resolutions permitting
conversion of the Preferred Securities into common stock and the amendment to
the Company's Certificate of Incorporation to require a seventy-five percent
(75%) vote of the stockholders to remove or change the Chairman of the Board at
the Annual Meeting: (i) the Investor will, at a redemption price equal to the
Aggregate Purchase Price, have the option to cause the Company to repurchase the
Common Securities and the Preferred Securities for a period beginning fifteen
(15) days after the Annual Meeting and extending to the date that is six months
from the Closing (the "Redemption Right"), and (ii) the Company will have the
right to repurchase the Common Securities and the Preferred Securities from the
Investor for a period beginning fifteen (15) days after the Annual Meeting and
extending to the date that is six months from the Closing at a price equal to
the Aggregate Purchase Price (the "Repurchase Right").
(b) In the event that prior to the Conversion: (i) the Investor's
employment is terminated by the Company (other than for Cause, as such term is
defined in the Employment Agreement); or (ii) the Investor is removed as a
director of the Company; or (iii) Sean O'Connor's employment is terminated by
the Company (other than for Cause, as defined in the Employment Agreement of
even date herewith between the Company and Sean O'Connor); or (iv) either Sean
O'Connor or the nominee of John Radziwill is removed from the Board, then the
Company, at the Investor's option, shall repurchase the Common Securities and
the Preferred Securities from the Investor at a price equal to the Aggregate
Purchase Price within fifteen (15) days of such termination of employment or
removal of director. In the event that prior to the Conversion, the Investor's
employment is terminated by the Company for Cause, as such term is defined in
the Employment Agreement, the Company shall have the option to repurchase the
Common Securities and the Preferred Securities from the Investor at a price
equal to the Aggregate Purchase Price within fifteen (15) days of such
termination of employment.
5
(c) In the event the Annual Meeting is not held on or before March 15,
2003, the Investor will, at a redemption price equal to the Aggregate Purchase
Price, have the option to cause the Company to repurchase the Common Securities
and the Preferred Securities from the Investor at a price equal to the Aggregate
Purchase Price on or before March 30, 2003.
10. Adjusted Stockholders Equity Per Share. Notwithstanding anything to the
contrary in this Agreement, either party shall have the option to terminate this
Agreement prior to Closing in the event that stockholders' equity per share as
determined and adjusted pursuant to this Section (the "Adjusted Stockholders
Equity Per Share") is greater than $1.75 or less than $1.45. Stockholder equity
per share shall be determined as of September 30, 2002 by the independent public
accountants then regularly servicing the Company, in accordance with generally
accepted accounting principles consistently applied, based on the audited
consolidated financial statements of the Company, which determination shall be
binding on the parties hereto. Subject to compliance with auditor independence
and corporate governance considerations as effective or proposed by the SEC or
NASDAQ, the Investor shall have the right to consult with the independent public
accountants determining the Stockholder equity per share prior to such
determination and to approve any new accounting firm if the Company's accounting
firm as of the date of this Agreement resigns or is otherwise replaced.
Stockholders equity per share as so determined by the Company's accounting firm
shall then be adjusted as follows to determine the Adjusted Stockholders Equity
Per Share:
a. Stockholders equity per share shall include the value of the
Company's technology assets (which shall be deemed to be $300,000 in
aggregate at September 30, 2002) and the Company's deferred tax assets
(which shall be deemed to be $540,766 at September 30, 2002),
irrespective of the auditor's treatment thereof;
b. All costs related to the transaction contemplated by this Agreement
shall not be expensed but rather shall be debited directly against the
capital investment made by the Approved Investors. Such expenses shall
include legal and tax advisory fees, amounts paid to any
intermediaries or brokers and the legal and out of pocket expenses
incurred by the Investor (in aggregate with all other Approved
Investors, not to exceed $20,000). The aggregate of all such expenses
for entire aggregate investment by the Approved Investors is not to
exceed $200,000. Any excess beyond $200,000 to be deducted against
stockholder's equity per share; and
c. The resulting Stockholders equity per share shall then be reduced
by 7.5%.
11. Representations by the Investor. In connection with the purchase of
the Securities, the Investor acknowledges, warrants and represents to the
Company as follows:
a. The Investor is acquiring the Securities for investment for his own
account and without the intention of participating, directly or indirectly,
in a distribution of the Securities, and not with a view to resale or any
distribution of the Securities, or any portion thereof.
b. The Investor has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as it
has considered appropriate to assist in evaluating the merits and risks of
this investment. The Investor has had access to and an opportunity to
question the officers of the Company, or persons acting on their behalf,
with respect to material information about the Company and, in connection
with the evaluation of this investment, has, to the best of his knowledge,
received all information and data with respect to the Company that the
Investor has requested. The Investor has carefully reviewed all of the
Company's filings with the Securities and Exchange Commission. The Investor
is acquiring the Securities based solely upon its independent examination
and judgment as to the prospects of the Company.
c. The Securities were not offered to the Investor by means of publicly
disseminated advertisements or sales literature.
d. The Investor is acquiring the Securities without being furnished any
offering materials or prospectus.
e. The Investor acknowledges that an investment in the Securities is
speculative and involves a high degree of risk, including a risk of loss of
the entire investment in the Company, and the Investor may have to continue
to bear the economic risk of the investment in the Securities for an
indefinite period. The Investor acknowledges that the Securities are being
sold to the Investor without registration under any state or federal law
requiring the registration of securities for sale, and accordingly will
constitute "restricted securities" as defined in Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act"). The transferability of
the Securities is therefor restricted by applicable United States Federal
and state securities laws.
f. The Investor acknowledges that each certificate representing Securities
shall be subject to a legend substantially in the following form:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended or any state securities laws and neither
the securities nor any interest therein may be offered, sold, transferred,
pledged, or otherwise disposed of except pursuant to an effective
registration statement under such act or such laws or an exemption from
registration under such act and such laws which, in the opinion of counsel
for the holder, which counsel and opinion are reasonably satisfactory to
counsel for this entity, is available."
12. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investor except as set forth on a Schedule of Exceptions
(the
7
"Schedule of Exceptions") furnished to the Investor and its counsel, and
attached as Exhibit D hereto, specifically identifying the relevant section
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
a. Corporate Existence. The Company and each of its subsidiaries are
entities duly formed under the laws of their respective places of
formation, are each in good standing and have a legal existence, with full
power and authority to own, operate or lease their respective properties
and conduct their respective businesses in the manner and in the places
where such properties are owned or leased or such businesses are conducted.
b. Authorization of Transaction. Subject to the receipt of necessary third
party approvals or confirmations listed on Appendix 3 hereto (the "Required
Approvals"), the Company has the full power and authority to execute,
deliver and perform this Agreement and the other agreements to be executed
and delivered pursuant to this Agreement (the "Ancillary Agreements"); to
perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby. All necessary action,
corporate or otherwise, will have been taken by the Company prior to the
Closing to authorize the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements and the transactions
contemplated hereby and thereby. Each of this Agreement and the Ancillary
Agreements has been, or will be at the Closing, duly executed and delivered
by the Company, and each of this Agreement and the Ancillary Agreements is,
or upon the Closing will be, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms
except (a) as limited by applicable bankruptcy, insolvency or other laws of
general application affecting enforcement of creditors' rights; and (b)
general principles of equity that restrict the availability of equitable
remedies.
c. Capitalization. As of the date of this Agreement, the authorized capital
stock of the Company consists of 8,000,000 shares of common stock, par
value $.01 per share of which 2,375,575 shares are validly issued and
outstanding, fully paid and nonassessable on the date hereof, and 5,000,000
shares of preferred stock, par value $.01 per share, none of which are
issued or outstanding. In addition, on the date hereof, 527,224 shares of
common stock are subject to issuance pursuant to presently existing options
and warrants. There are no other outstanding options, warrants, rights,
convertible securities or exchange offers providing for the issuance of
common stock or any other capital stock of the Company.
d. Securities Duly Issued. Upon the issuance of the Securities at the
Closing, the Securities will be duly and validly issued, fully paid and
nonassessable, and will not be subject to any restrictions on transfer
other than those arising under applicable federal and state securities
laws.
e. Present Compliance with Obligations and Laws. Neither the Company nor
any of its subsidiaries are: (i) in violation of their respective
Organizational Documents; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the
8
giving of notice) affords to any person the right to accelerate any
indebtedness or terminate any right; (iii) in default of or in breach of
(with or without the passage of time or the giving of notice) any other
contract to which it is a party or by which it or its assets are bound; or
(iv) in violation of any Court Order or Governmental Authorization that is
held by the Company or its subsidiaries or is applicable to any of the
Company or its subsidiaries or their respective businesses or assets.
Except as set forth on Section 12(e) of the Schedule of Exceptions, the
Company and its subsidiaries have conducted and are now conducting their
businesses and the ownership and operation of their assets in compliance
with all applicable Laws, except where the failure to be in such compliance
would not have a Material Adverse Effect.
f. No Conflict of Transaction With Obligations and Laws. Except as set
forth on Schedule 12(f) of the Schedule of Exceptions, neither the
execution, delivery and performance of this Agreement or any Ancillary
Agreement, nor the performance of the transactions contemplated hereby or
thereby, will: (a) conflict with or constitute a breach or violation of any
provision of the Organizational Documents of the Company or any of its
subsidiaries; (b) require any Governmental Authorization, (c) require any
consent of any parties to loans, contracts, leases, licenses and other
agreements to which the Company is a party; (d) constitute (with or without
the passage of time or the giving of notice) a breach of, or default under,
any debt instrument to which the Company or any of its subsidiaries is a
party, or give any person the right to accelerate any indebtedness or
terminate, modify or cancel any right; (e) constitute (with or without the
passage of time or giving of notice) a default under or breach of any other
agreement, instrument or obligation to which the Company or any of its
subsidiaries is a party or by which it or its assets are bound; (f) result
in the creation of any encumbrance upon any capital stock or any of the
assets of the Company or its subsidiaries; (g) conflict with or result in a
violation of any Court Order or Law, or give to any other person, the right
to exercise any remedy or obtain any relief under any Court Order or Law,
to which the Company or any of its subsidiaries is subject or by which the
properties or assets of the Company or any of its subsidiaries are bound,
or (h) result in a violation of any of the terms or requirements of, or
give any Governmental Authority the right to revoke, suspend or otherwise
modify, any Government Authorization.
g. SEC Reports. The financial statements of the Company and the related
notes contained in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2001 and its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 present fairly the financial position of the
Company as of the dates indicated therein and the results of its operations
and cash flows for the periods therein specified. Such financial statements
(including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified and are true, correct and complete
in all respects.
9
h. Contracts and Commitments. Set forth on Section 12(h) of the Schedule of
Exceptions is a list of all (i) contracts, mortgages, indentures,
agreements, instruments and transactions to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
are bound which involve obligations of, or payments to, such company in
excess of $100,000 in the aggregate; (ii) agreements between the Company or
any of its subsidiaries and the Investor; (iii) agreements between the
Company or any of its subsidiaries and any officer, director, consultant,
stockholder, employee, affiliate or predecessor company; and (iv)
contracts, agreements, arrangements or understandings which are material to
the business of the Company or any of its subsidiaries (collectively
referred to as the "Material Contracts"). Copies of all Material Contracts
listed in Section 12(h) of the Schedule of Exceptions have previously been
made available to the Investor. All of the Material Contracts are valid,
binding and in full force and effect in all material respects, subject to
the effect of applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement
of the creditors' rights and rules or laws concerning equitable remedies.
Neither the Company nor any of its subsidiaries are in material default
under any such contract. Except as set forth in Section 12(h) of the
Schedule of Exceptions, with respect to each Material Contract, (a) the
Company or its subsidiaries, as the case may be, has performed in all
material respects all obligations required to be performed to date under
such Material Contract; (b) to the best knowledge of the Company, no party
to such Material Contract is in default, breach or arrears under the terms
of such Material Contract; and (c) to the best knowledge of the Company, no
condition exists or event has occurred that, with the giving of notice or
lapse of time or both, would constitute a material default under such
Material Contract.
i. Litigation. Except as set forth in Section 12(i) of the Schedule of
Exceptions, there is no action, suit, claim, proceeding, investigation or
arbitration proceeding pending (or to the best knowledge of the Company,
threatened in writing) against or otherwise involving the Company or any of
its subsidiaries and there are no outstanding Court Orders to which the
Company or any of its subsidiaries is a party or by which any of their
respective assets are bound.
j. ERISA and Employee Benefits. Except as set forth on Section 12(j) of the
Schedule of Exceptions, neither the Company nor any of its subsidiaries has
contributed to or participated in any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974 ("ERISA"), other than
medical benefit plans listed in Section 12(j) of the Schedule of Exceptions
with respect to which the Company or its subsidiary, as the case may be,
has made all required contributions. The Company and its subsidiary are in
compliance with all laws and regulations applicable to such plans under
ERISA, the violation of which, singly or in the aggregate, could have a
Material Adverse Effect.
k. Government Authorizations. The Company and each of its subsidiaries
holds all Government Authorizations which are required to own their
respective
10
properties and assets and to permit the Company and its subsidiaries to
conduct their respective businesses as presently conducted, except where
the failure to hold such Governmental Authorization would not have a
Material Adverse Effect. Set forth in Section 12(k) of the Schedule of
Exceptions is a listing of all such Government Authorizations held by the
Company and its subsidiaries. No consent, approval or authorization of (or
designation, declaration of filing with) any Governmental Authority by the
Company or any of its subsidiaries is required in connection with the valid
execution and delivery of this Agreement, the Ancillary Agreements, or the
offer or sale of the Common Securities or the Preferred Securities, or the
consummation of any other transaction contemplated hereby or under the
Ancillary Agreements, except for Required Approvals shown on Appendix 3.
l. Related-Party Transactions. To the knowledge of the Company, except as
disclosed in SEC Filings made by the Company or listed on Section 12(1) of
the Schedule to Exceptions, no employee, officer, director or stockholder
of the Company or any of its subsidiaries or member of his or her immediate
family is directly or indirectly interested in any material contract with
the Company or any of its subsidiaries.
13. Affirmative Covenants of the Company. The Company hereby covenants with the
Investor that between the date of this Agreement and the Closing, except as the
Investor shall otherwise consent, the Company will do the following:
a. Conduct its business only in the ordinary course of business consistent
with past practice and refrain from changing or introducing any method of
management or operations except in the ordinary course of business and
consistent with prior practices;
b. Refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except those that are
usual and normal in the ordinary course of business;
c. Maintain its equipment and other assets in good working condition and
repair according to the standards that it maintained to the date of this
Agreement, subject only to ordinary wear and tear;
d. Refrain from making any change or incurring any obligation to make a
change in its Organizational Documents or its authorized or issued capital
stock;
e. Refrain from declaring, setting aside or paying any dividend or making
any other distribution in respect of capital stock, or making any direct or
indirect redemption, purchase or other acquisition of its capital stock;
11
f. Refrain from merging, consolidating or reorganizing with, or acquiring,
any entity;
g. Use its best efforts to keep intact its business organization, to keep
available its present officers, agents and employees and to preserve the
goodwill of all suppliers, customers and others having business relations
with it;
h. Maintain true, correct and complete books of accounts and records
relating to its business;
i. Comply in all respects with all Laws applicable to the conduct of its
business or its properties or assets;
j. Promptly upon its knowledge thereof, advise the Investor in writing of
the termination or resignation of any key employee and the circumstances
therefore;
k. Pay all taxes, assessments, governmental charges or levies imposed upon
it or its income, profits or assets, or otherwise required to be paid by
it, nor fail to pay when due any liability or charge that if, unpaid, might
become an Encumbrance upon any such Company's assets; and
l. Promptly upon its knowledge thereof, advise the Investor in writing of
(i) any event, condition or circumstance occurring from the date hereof
until the Closing that would constitute a violation or breach of any
representation, warranty, covenant, agreement or provision contained in
this Agreement (provided, however, that such disclosure shall not be deemed
to cure any violation or breach of any such representation, warranty,
covenant, agreement or provision), or (ii) any event, occurrence,
transaction or other item that would have been or required to have been
disclosed on any Schedule, delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof, and use its commercially
reasonable efforts to prevent or promptly remedy the same.
m. The Company will not, directly or indirectly, through any officer,
director, affiliate, agent or otherwise, solicit, initiate or encourage
submission of any proposal or offer from any person or entity relating to
the acquisition or merger of the Company or any of its securities or assets
or participate in any discussions or negotiations regarding, furnish to any
other person any information with respect to, or otherwise cooperate in any
way with, or assist or participate in, or facilitate or encourage any
effort or attempt by any other person or entity to do or seek, any of the
foregoing.
14. Consummation of Agreement. The Company and the Investor shall each use their
best efforts to perform and fulfill all conditions and obligations on their
respective parts to be performed and fulfilled under this Agreement, to the end
that the transaction contemplated by this Agreement shall be fully carried out.
To this end, each of the Company and the Investor will use best efforts to
obtain all Required Approvals.
12
15. Survival of Representations and Warranties. All of the representations and
warranties of the Company and the Investor contained in Sections 12 and 11,
respectively, of this Agreement shall survive from the date of this Agreement
until the Conversion.
16. Restrictions on Sale. In consideration of the acceptance of this
subscription, the Investor agrees that the Securities will not be offered for
sale, sold or transferred by the Investor other than pursuant to (i) an
effective registration under the Securities Act, an exemption available under
the Securities Act or a transaction that is otherwise in compliance with the
Securities Act; and (ii) an effective registration under the securities law of
any state or other jurisdiction applicable to the transaction, an exemption
available under such laws, or a transaction that is otherwise in compliance with
such laws.
17. No Review. The Investor understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
18. Confidentiality. The Investor agrees not to disclose or use any information
provided to the Investor by the Company or any of its agents in connection with
the offering of the Securities, except for the purpose of evaluating an
investment in the Securities.
19. Indemnification.
a. Indemnification by Investor. The Investor agrees to indemnify and hold
harmless the Company and its officers, directors, partners, employees,
agents, and affiliates against any and all loss, liability, claim, damage,
and expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty or breach or failure by
the Investor to comply with any covenant or agreement made by the Investor
herein or in any other document furnished by the Investor to the Company to
the Investor in connection with this transaction.
b. Indemnification by Company. The Company agrees to indemnify and hold
harmless the Investor against any and all loss, liability, claim, damage,
and expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty or breach or failure by
the Company to comply with any covenant or agreement made by the Company
herein or in any other document furnished by the Company to the Investor in
connection with this transaction.
13
20. Definitions. In addition to the terms defined throughout this Agreement,
the following terms shall have the indicated respective meanings:
"Court Order" shall mean a court order, judgment, administrative or
judicial order, writ, decree, stipulation, arbitration award or injunction.
"Encumbrance" shall mean any lien, option (including right of first refusal
or first offer), encumbrance, charge, restriction, mortgage, pledge, security
interest, title exception, restriction, claim or charge of any kind or
character.
"Force Majeure" shall mean failure of any party to perform its obligations
under this Agreement due to fire, flood, strikes or other industrial
disturbances, accidents, war, acts of terrorism, riot, insurrection or other
causes beyond the reasonable control of the such party.
"Governmental Authority" shall mean any governmental body, whether
national, state, regional, local, or any subdivision or agency of any of the
foregoing.
"Governmental Authorization" shall mean any license, permit, order,
franchise agreement, concession, grant, authorization, consent or approval from
a Governmental Authority.
"Law" shall include any statute, law, ordinance, rule or regulation of a
Governmental Authority.
"Material Adverse Effect" shall mean an event which causes a material
adverse change in the condition, financial or otherwise, business operations,
properties, assets or liabilities of the Company except any material adverse
change resulting from a Force Majeure.
"NASDAQ" shall mean The Nasdaq Stock Market.
"Organizational Documents" shall mean the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of Delaware on the
date of this Agreement, as the same may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933.
21. Publicity and Disclosures. Except as may be otherwise required for
compliance with applicable stock exchange rules or securities laws, neither the
Investor nor the Company shall issue nor approve any news release or other
public announcement concerning this Agreement (or any schedules or exhibits
hereto) prior to the Closing without the prior written approval of the other.
22. Irrevocability; Binding Effect. The Investor hereby acknowledges and agrees
that the subscription hereunder is irrevocable by the Investor, that, except as
required by law,
14
the Investor is not entitled to cancel, terminate, or revoke this Agreement or
any agreements of the Investor hereunder, and that this Agreement and such other
agreements shall survive the death or disability of the Investor and shall be
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives, and permitted assigns. If the
Investor is more than one person, the obligations of the Investor hereunder
shall be joint and several and the agreements, representations, warranties, and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his heirs, executors, administrators, successors,
legal representatives, and permitted assigns.
23. Modification. Neither this Agreement nor any provisions hereof shall be
waived, modified, discharged, or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge, or
termination is sought.
24. Notices. Any notice or other communication required or permitted to be
given hereunder shall by in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to the Company, at the address set on the signature page
hereof, or (b) if to the Investor, at the address set forth on the signature
page hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 25). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
25. Assignability. This Agreement and the rights and obligations hereunder are
not transferable or assignable by any party without the prior written consent of
the other party.
26. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida as applied to residents of that
state executing contracts wholly to be performed in that state.
27. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively binding arbitration in Orlando,
Florida in accordance with the rules of American Arbitration Association then in
effect.
28. NOTICE TO FLORIDA RESIDENTS. PURSUANT TO SECTION 517.061(11)(A)(5) OF THE
FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, A FLORIDA SUBSCRIBER HAS A RIGHT
TO RESCIND THE SUBSCRIPTION BY GIVING NOTICE OF SUCH RESCISSION BY TELEPHONE,
TELEGRAPH OR LETTER, WITHIN THREE DAYS AFTER THE CONSIDERATION HEREUNDER IS
FIRST TENDERED TO THE COMPANY. IF THE NOTICE IS TENDERED ORALLY, A WRITTEN
CONFIRMATION THAT IT HAS BEEN RECEIVED SHOULD BE REQUESTED. IT IS PRUDENT TO
SEND NOTICE OF RESCISSION BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO INSURE
THAT IT WAS RECEIVED. IF NOTICE IS NOT
15
RECEIVED BY SUCH TIME, THE FOREGOING RIGHT OF RESCISSION SHALL BE NULL AND VOID.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their authorized official, this Agreement, effective as of the date
first above written.
INTERNATIONAL ASSETS HOLDING
CORPORATION
By: /s/ Diego J. Veitia
-------------------------------------
Printed Name: Diego J Veitia
-------------------------------------
Title: Chairman of the Board
-------------------------------------
Address:___________________________________________
___________________________________________________
INVESTOR:
/s/ SEAN M. O'CONNOR
---------------------------------------------------
SEAN M. O'CONNOR
Address:___________________________________________
___________________________________________________
16
APPENDIX 1 - ACCREDITED INVESTOR
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 (the "Act") includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed
for the specific purpose of acquiring the Securities, (iii) whose purchase is
directed by a person who, either alone or with his/her purchaser representative,
has such knowledge and experience in financial and business matters that he/she
is capable of evaluating the merits and risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
(5) Any entity in which all of the equity owners are "accredited
investors".
Individuals
(6) Individuals with income from all sources for each of the last two full
calendar years whose reasonably expected income for this calendar year exceeds
either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to your
adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(7) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(8) Directors, executive officers or general partners of the Issuer.
APPENDIX 2 - DIRECTORS SLATE
Diego Veitia Scott Branch
Edward Cofrancesco Sean O'Connor
Dr. Robert A. Miller [nominee of John Radziwill]
APPENDIX 3 - THIRD PARTY APPROVALS
Written confirmation from NASDAQ.
EXHIBIT "A"
TERMS OF PREFERRED STOCK
EXHIBIT A
INTERNATIONAL ASSETS HOLDING CORPORATION
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
The undersigned, Diego J. Veitia, certifies that he is the Chairman of
the Board of INTERNATIONAL ASSETS HOLDING CORPORATION, a corporation organized
and existing under the laws of the State of Delaware (the "Company"), and hereby
further certifies as follows:
A. Under the Certificate of Incorporation of the Company, the Company
is authorized to issue 5,000,000 shares, of preferred stock, par value $.01
per share (the "Preferred Stock").
B. Pursuant to the provisions of the Certificate of Incorporation of the
Company, the Board of Directors has adopted the following resolution
creating a series of Preferred Stock designated as "Series A Preferred
Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation in accordance with the provisions of the
Certificate of Incorporation, a series of preferred stock, par value
$.01 per share, of the corporation be and hereby are created, and that
the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications, limitations
and restrictions thereof are as follows:
1. DIVIDEND RIGHTS.
(a) Participating Dividends. Holders of Series A Preferred shall
be entitled to receive, when and as declared by the Board of Directors, any
dividends payable to the holders of the Common Stock on the basis that the
Series A Preferred have been converted into Common Stock as of the record date
of such dividend pursuant to the provisions of Section 4.
2. VOTING RIGHTS.
(a) No General Rights. Except as otherwise
provided herein or as required by law, the Series A Preferred shall not be
entitled to any voting rights.
(b) Separate Vote of Series A Preferred. For so
long as any share of Series A Preferred remain outstanding, in addition to any
other vote or consent required herein or by law, the vote or written consent of
the holders of more than fifty percent (50%) of the then outstanding Series A
Preferred shall be necessary for effecting or validating the following actions:
(i) Any amendment, alteration, waiver or
repeal of any provision of the Certificate of Incorporation or the Bylaws of the
Company (including any filing of a Certificate of Designation); or
(ii) Any increase or decrease (other than
by redemption or conversion) in the authorized number of shares of Series A
Preferred; or
(iii) Any issuance of any stock or any
other securities convertible into equity securities of the Company, other than
the issuance of common stock, par value $.01 per share (the "Common Stock"),
upon the conversion of the Series A Preferred or the issuance of Common Stock
upon the conversion of any convertible security outstanding as of October __,
2002; or
(iv) Any redemption or repurchase of
shares of any stock or other equity security of the Company; or
(v) Any agreement by the Company or its
stockholders regarding an Asset Transfer or Acquisition (each as defined in
Section 3(c)); or
(vi) Any action that results in the
payment or declaration of a dividend on any shares of Common Stock or Preferred
Stock.
3. LIQUIDATION RIGHTS.
(a) Liquidation Preference. Upon any
liquidation, dissolution, or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment shall be made to the holders of
any other class of stock (a "Junior Stock"), the holders of Series A Preferred
shall be entitled to be paid out of the assets of the Company an amount per
share of Series A Preferred equal to the price paid for each share of Series A
Preferred (the "Original Issue Price") (as adjusted for any stock dividends,
combinations, splits, recapitalization and the like with respect to such shares)
for each share of Series A Preferred held by them (the "Liquidation
Preference").
(b) Deemed Liquidations. The following events
shall be considered a liquidation under this Section 3:
2
(i) Any consolidation or merger of the
Company with or into any other corporation or other entity or person, or any
other corporate reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization, own less than
50% of the Company's voting power immediately after such consolidation, merger
or reorganization, or any transaction or series of related transactions to which
the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred (an "Acquisition"); or
(ii) A sale, lease or other disposition of
all or substantially all of the assets of the Company (an "Asset Transfer"); or
(c) Pro Rata Distribution. If, upon any
liquidation, distribution, or winding up, the assets of the Company shall be
insufficient to make payment in full to all holders of Series A Preferred of the
Liquidation Preference set forth in Section 3(a), then such assets shall be
distributed among the holders of Series A Preferred at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
4. CONVERSION.
The Series A Preferred shall be converted into shares of Common Stock
on the following terms:
(a) Automatic Conversion. Subject to and in
compliance with the provisions of this Section 4, upon the approval by the
shareholders of the Company of the conversion provided for in this Section 4,
the shares of Series A Preferred will be automatically converted into fully-paid
and nonassessable shares of Common Stock. The number of shares of Common Stock
to which a holder of Series A Preferred shall be entitled upon conversion shall
be the product obtained by multiplying the "Series A Preferred Conversion Rate"
then in effect (determined as provided in Section 4(b)) by the number of shares
of Series A Preferred being converted.
(b) Series A Preferred Conversion Rate. The
conversion rate in effect at any time for conversion of the Series A Preferred
(the "Series A Preferred Conversion Rate") shall be the quotient obtained by
dividing the Liquidation Preference of the Series A Preferred by the "Series A
Preferred Conversion Price," calculated as provided in Section 4(c).
(c) Series A Preferred Conversion Price. The
conversion price for the Series A Preferred (the "Series A Preferred Conversion
Price") shall initially be the Original Issue Price of the Series A Preferred.
Such initial Series A Preferred Conversion Price shall be adjusted from time to
time in accordance with this Section 4. All references to the Series A Preferred
Conversion Price herein shall mean the Series A Preferred Conversion Price as so
adjusted.
(d) Mechanics of Conversion. Upon the conversion
of the Series A Preferred pursuant to this Section 4, the holder of the Series A
Preferred shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the
3
Company or any transfer agent for the Series A Preferred. Thereupon, the Company
shall promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled. Such conversion shall be deemed to have been made at the close of
business on the date on which the Series A Preferred are converted pursuant to
Section 4(a), and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock as of the close of business on such date.
(e) Adjustment for Stock Splits and
Combinations. If the Company shall at any time or from time to time after the
date that the first share of Series A Preferred is issued (the "Original Issue
Date") effect a subdivision of the outstanding Common Stock without a
corresponding subdivision of the Preferred Stock, the Series A Preferred
Conversion Price in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Company shall at any time or from
time to time after the Original Issue Date combine the outstanding shares of
Common Stock into a smaller number of shares without a corresponding combination
of the Preferred Stock, the Series A Preferred Conversion Price in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and
Distributions. If the Company at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Series A
Preferred Conversion Price that is then in effect shall be decreased as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Series A Preferred
Conversion Price then in effect by a fraction (i) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(ii) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series A
Preferred Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series A Preferred Conversion
Price shall be adjusted pursuant to this Section 4(f) to reflect the actual
payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange
and Substitution. If at any time or from time to time after the Original Issue
Date, the Common Stock issuable upon the conversion of the Series A Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section 3(b) or a subdivision or
combination of shares or stock dividend or
4
a reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 4), in any such event each holder of Series A Preferred shall
have the right thereafter to convert such stock into the kind and amount of
stock and other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series A Preferred could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or
Sales of Assets. If at any time or from time to time after the Original Issue
Date, there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(b) or a recapitalization,
subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 4), as a part of such capital
reorganization, provision shall be made so that the holders of the Series A
Preferred shall thereafter be entitled to receive upon conversion of the Series
A Preferred the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series A
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
(i) Notices of Record Date. Upon (i) any taking
by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
3(b)) or other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(b)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series A Preferred at least twenty (20) days prior to the record
date specified therein a notice specifying (A) the date on which any such record
is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
(j) Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of Series A Preferred. All shares
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of Series A
5
Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Company shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by the Common Stock's fair market value (as determined
by the Board of Directors) on the date of conversion.
(k) Reservation of Stock Issuable Upon Conversion.
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred, such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series
A Preferred. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose.
(l) Payment of Taxes. The Company will pay all
taxes (other than taxes based upon income) and other governmental charges
that may be imposed with respect to the issue or delivery of shares of
Common Stock upon conversion of shares of Series A Preferred, excluding any
tax or other charge imposed in connection with any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that in
which the shares of Series A Preferred so converted were registered.
(m) No Dilution or Impairment. Without the consent
of the holders of then outstanding Series A Preferred as required under
Section 2(b), the Company shall not amend its Amended and Restated
Certificate of Incorporation or participate in any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities
or take any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred against dilution or other impairment.
5. NO REISSUANCE OF SERIES A PREFERRED.
No share or shares of Series A Preferred acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued.
C. This Certificate of Designation has been duly adopted in accordance with the
provisions of Sections 151 of the General Corporation Law of the State of
Delaware by the Board of Directors of the Company.
6
IN WITNESS WHEREOF, International Assets Holding Corporation has caused
this Certificate of Designation be signed by its Chairman of the Board, on this
22 day of October, 2002.
INTERNATIONAL ASSETS HOLDING CORPORATION
By: /s/ Diego J. Veitia,
-------------------------
Diego J. Veitia,
---------------
Chairman of the Board
7
EXHIBIT II
FIRST AMENDMENT TO
SHARE SUBSCRIPTION AGREEMENT
THIS FIRST AMENDMENT TO SHARE SUBSCRIPTION AGREEMENT ("Amendment") is made and
entered into as of the 6th day of December, 2002, by and between INTERNATIONAL
ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and SEAN M.
O'CONNOR (the "Investor").
R E C I T A L S
A. The Company and the Investor entered into a Share Subscription Agreement (the
"Agreement") dated as of October 22, 2002 whereby the Investor subscribed to
purchase 182,061 shares of common stock and 700,292 shares of preferred stock of
the Company.
B. The parties wish to amend the Agreement to provide that the Investor shall
purchase an additional 182,061 shares of preferred stock of the Company (the
"Additional Preferred Shares") in lieu of the like number of shares of common
stock referenced in the Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Investor agree as follows:
1. Recitals; Definitions. All of the above recitals are true and correct. Any
terms used but not defined in this Amendment shall have the definitions assigned
such terms in the Agreement.
2. Amendment to Agreement. Subject to the terms and conditions of the
Agreement, as hereby amended, the Company offers to the Investor and the
Investor hereby subscribes to purchase 882,353 shares of preferred stock, $.01
par value of the Company, each at a fixed price of $1.70 per share in lieu of
the purchase of 700,292 shares of preferred stock and 182,061 shares of common
stock referenced in Section 3 of the Agreement. Any and all references to the
"Common Securities" in the Agreement shall be deemed to refer to the Additional
Preferred Shares, and all references to "Securities" in the Agreement shall be
deemed to refer to the Preferred Securities and Additional Preferred Securities.
Each of the Preferred Securities and the Additional Preferred Shares shall be
subject to the provisions applicable to the Preferred Securities and to the
Securities in the Agreement including, without limitation, the Redemption Right
and Repurchase Right set forth in Section 9 of the Agreement and the provisions
regarding convertibility.
3. Ratification - No Other Amendment. The Company and the Investor hereby
restate, ratify and confirm as accurate all representations and warranties set
forth in the Agreement. Except as modified or amended herein, no other term,
covenant or condition of the Agreement shall be considered modified or amended.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their authorized official, this Amendment, effective as of the date
first above written.
INTERNATIONAL ASSETS HOLDING
CORPORATION
By: /s/ Diego J. Veitia
-------------------
Printed Name: Diego J. Veitia
---------------
Title: Chairman
--------
INVESTOR:
/s/ Sean M. O'Connor
--------------------
SEAN M. O'CONNOR
2
EXHIBIT III
SHARE SUBSCRIPTION AGREEMENT
THIS SHARE SUBSCRIPTION AGREEMENT ("Agreement") is made and entered into as of
the 22 day of October, 2002 (the "Effective Date"), by and between INTERNATIONAL
ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and SCOTT J.
BRANCH (the "Investor").
R E C I T A L S
A. The Company, directly or through its subsidiaries, operates a financial
services company, including a market making and proprietary trading brokerage
firm specializing in global securities.
B. The Company is a publicly held entity, having previously offered shares of
the Company's common stock pursuant to a registration statement, and continues
to file reports as to the Company's business.
C. The Board of Directors of the Company (the "Board") considers it essential to
the best interests of the Company that (i) additional common equity and (ii)
preferred equity will be sold to the Investor subject to the terms of this
Agreement.
D. The Investor is an "accredited investor" as such term is defined in
Appendix 1, and is capable of evaluating the merits and risks of an investment
in the Company.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Investor agree as follows:
1. Recitals. All of the above recitals are true and correct.
2. Term. This Agreement shall commence on the Effective Date and shall
terminate at 12:01 a.m. EST on the date that is the later of five (5) business
days from the date of receipt by the Company of (i) the audited consolidated
financial statements for the fiscal year ended September 30, 2002; or (ii)
written confirmation from NASDAQ with respect to the transactions evidenced by
this Agreement, but in no event later than December 15, 2002 (the "Termination
Date") unless the Closing, as hereafter defined, has occurred before the
Termination Date. This Agreement may be extended by the mutual written agreement
of the Company and the Investor prior to the Termination Date.
3. Purchase of Securities.
(a) Subject to the terms and conditions of this Agreement, the Company
offers to the Investor and the Investor hereby subscribes to purchase (i)
151,717 shares of common stock, $.01 par value per share of the Company (such
shares of common stock are referred to herein as the "Common Securities"), and
(ii) 583,577 shares of preferred stock, $.01 par value per share of the Company
(such shares of preferred stock are referred to herein as the "Preferred
Securities") (the Common Securities and the Preferred Securities are
collectively referred to as the "Securities"), each at a fixed price per share
equal to $1.70 (the "Per Share Purchase Price"). The aggregate purchase price
for the purchased Securities shall be equal to the product of the Per Share
Purchase Price and the aggregate number of Common Securities and Preferred
Securities purchased by the Investor (the "Aggregate Purchase Price").
(b) The Preferred Securities will have the preferences, privileges,
restrictions and rights specified in Exhibit "A" to this Agreement. The Board
will promptly approve the terms of the Preferred Securities by adopting an
amendment to the Company's Certificate of Incorporation in the form of Exhibit
"A".
4. Earnest Money. The Investor will pay the Company a deposit in the amount of
$80,000 within three (3) days of the execution of this Agreement (the
"Deposit"). At the Closing, the Company will apply the Deposit to the Aggregate
Purchase Price as provided in Section 5. If the Agreement is terminated before
the Closing, as hereafter defined, pursuant to Subsection 7(a)(i), (ii) or (iii)
or Section 10 hereof, the Company will return the Deposit to the Investor. If
the Agreement is terminated before the Closing pursuant to Subsection 7(a)(iv)
hereof or if the Investor is unable to make full payment to the Company for the
purchased shares at Closing, the Investor will forfeit the Deposit.
5. Closing and Payment. The closing of the acquisition provided for in Section
3 of this Agreement (the "Closing") shall occur on a mutually agreeable date
prior to the Termination Date at the offices of Holland & Knight LLP in Orlando,
Florida or at such other time and place as the parties may agree. At the
Closing: (i) the Investor will pay the Aggregate Purchase Price less the Deposit
by either endorsing a certified or cashier's check made payable to the Company
or wiring immediately available funds to the Company's bank account (which
account number has been previously provided to the Investor), and (ii) the
Company will reimburse the Investor, together with the other Approved Investors,
up to the aggregate sum of $20,000 for amounts paid by the Approved Investors to
any intermediaries or brokers and for the legal and out-of-pocket expenses
incurred by the Approved Investors, provided that the Approved Investors shall
not be entitled to such reimbursement if the Closing does not occur for any
reason.
6. Conditions Precedent.
(a) The respective obligations of the Company and the Investor to effect the
Closing are subject to the satisfaction or waiver by the Company and the
Investor, prior to the Closing of each of the following conditions:
(i) There being no provision of applicable Law or any Court Order that
prohibits or otherwise makes illegal the consummation of the Closing.
(ii) All regulatory approvals required to consummate the transaction
contemplated hereby (other than the shareholder approval required for the
conversion of Preferred Securities) shall have been obtained and shall
remain in full force and effect.
(iii) No investigation, action, suit or proceeding by a Governmental
Authority shall be pending on the date of Closing, which challenges, or
might reasonably be
2
expected to result in a challenge to this Agreement, or which might
reasonably be expected to give rise to a claim for damages in a material
amount as a result of the consummation of the transaction contemplated by
this Agreement.
(iv) The Company shall have consummated simultaneously with the Closing,
the transactions contemplated by Share Subscription Agreements of even date
herewith entered into by and between the Company and each of Sean M.
O'Connor and John Radziwill, or any assignee of each which has been
approved in writing by the Company (such persons, together with the
Investor, the "Approved Investors").
(v) The Company shall have received the written confirmation from NASDAQ
that the transactions evidenced by this Agreement do not require prior
stockholder approval.
(b) The obligation of the Investor to effect the Closing is subject to the
satisfaction or waiver by the Investor of the following additional conditions:
(i) The Company shall have performed in all material respects
all of its material obligations under this Agreement required to be performed by
it at or before the Closing.
(ii) Any representation or warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of the
Closing, as if made at and as of such time.
(iii) The Company and the Investor shall have entered into an
Employment Agreement in the form attached hereto as Exhibit "B" (the "Employment
Agreement").
(iv) The Company and the Investor shall have entered into a
Registration Rights Agreement in the form attached hereto as Exhibit "C" (the
"Registration Rights Agreement").
(v) The Board shall have duly adopted resolutions: (1)
approving the terms of (i) this Agreement, (ii) the terms of the Preferred
Securities, (iii) the Employment Agreement, and (iv) the Registration Rights
Agreement; (2) authorizing an employee share incentive program to allow for
options to be issued as provided in the Employment Agreement (the "Option Plan")
to be proposed to the stockholders of the Company for approval at the next
convened annual general meeting of stockholders currently scheduled to occur on
or before February 14, 2003 (the "Annual Meeting"); and (3) approving an
amendment to (i) the bylaws of the Company to require a supermajority vote of
the greater of (A) at least five directors or (B) at least seventy-five percent
(75%) of the directors to remove or change the Chairman of the Board, and (ii)
the Certificate of Incorporation of the Company to also require a vote of at
least seventy-five percent (75%) of the shares of common stock to remove or
change the Chairman of the Board to be proposed to the stockholders of the
Company at the Annual Meeting. Copies of these
3
Board resolutions certified by the Secretary of the Company shall be made
available to the Investor no later than 14 business days after execution of this
Agreement.
(vi) The Company will have received a release from UBS Warburg
waiving any claim to compensation arising from this Agreement or the share
purchase evidenced hereby.
(vii) The Company will have secured letters of resignation from all
current directors not shown on Appendix 2 and shall appoint all new directors
shown on Appendix 2 effective as of the Closing.
(viii) The Company shall have entered into Employment Agreements with
Diego Veitia, Edward Cofrancesco, Charles Lyons, Brian Garrow, Will Dennis, Jr.,
Doug Ross, Chris Myers and Michael Flannigan. Neither Diego Veitia nor Edward
Cofrancesco shall have terminated their Employment Agreement with the Company.
(c) The Obligation of the Company to effect the Closing is subject to
satisfaction or waiver by the Company of the following conditions:
(i) The Investor shall have performed in all material respects all
of its material obligations under this Agreement required to be performed by it
at or before the Closing.
(ii) Any representation or warranties of the Investor contained in
this Agreement shall be true and correct in all material respects as of the
Closing, as if made at and as of such time.
7. Termination.
(a) This Agreement may be terminated at any time before the Closing:
(i) by the mutual agreement of the Investor and the Company;
(ii) By either the Company or the Investor, if the Closing has not
occurred by December 15, 2002, provided that the right to terminate this
Agreement under this clause will not be available to any party whose failure to
fulfill any of its obligations under this Agreement resulted in the failure to
consummate the Closing by such date;
(iii) By the Investor, if there has been a material breach of any
representation, warranty or covenant in this Agreement by the Company; or
(iv) By the Company, if there has been a material breach of any
representation, warranty or covenant in this Agreement by the Investor.
(b) The party terminating this Agreement pursuant to this Section will
give written notice of termination to the other party.
4
8. Stockholder Approval. At the Annual Meeting, the Company shall seek the
approval of the stockholders of the Company: (i) to allow conversion of the
Preferred Securities to Common Securities; (ii) to adopt the Option Plan; (iii)
to elect the persons listed on Appendix 2 to the Board; and (iv) to amend the
Certificate of Incorporation of the Company to require a seventy-five percent
(75%) vote of the stockholders to remove or change the Chairman of the Board.
Upon the approval of the stockholders at the Annual Meeting, the Preferred
Securities will automatically be converted into the Common Securities pursuant
to the conversion provisions included in Exhibit "A" hereto (the "Conversion").
9. Redemption and Repurchase Rights.
(a) In the event the stockholders do not approve the resolutions permitting
conversion of the Preferred Securities into common stock and the amendment to
the Company's Certificate of Incorporation to require a seventy-five percent
(75%) vote of the stockholders to remove or change the Chairman of the Board at
the Annual Meeting: (i) the Investor will, at a redemption price equal to the
Aggregate Purchase Price, have the option to cause the Company to repurchase the
Common Securities and the Preferred Securities for a period beginning fifteen
(15) days after the Annual Meeting and extending to the date that is six months
from the Closing (the "Redemption Right"), and (ii) the Company will have the
right to repurchase the Common Securities and the Preferred Securities from the
Investor for a period beginning fifteen (15) days after the Annual Meeting and
extending to the date that is six months from the Closing at a price equal to
the Aggregate Purchase Price (the "Repurchase Right").
(b) In the event that prior to the Conversion: (i) the Investor's
employment is terminated by the Company (other than for Cause, as such term is
defined in the Employment Agreement); or (ii) the Investor is removed as a
director of the Company; or (iii) Sean O'Connor's employment is terminated by
the Company (other than for Cause, as defined in the Employment Agreement of
even date herewith between the Company and Sean O'Connor); or (iv) either Sean
O'Connor or the nominee of John Radziwill is removed from the Board, then the
Company, at the Investor's option, shall repurchase the Common Securities and
the Preferred Securities from the Investor at a price equal to the Aggregate
Purchase Price within fifteen (15) days of such termination of employment or
removal of director. In the event that prior to the Conversion, the Investor's
employment is terminated by the Company for Cause, as such term is defined in
the Employment Agreement, the Company shall have the option to repurchase the
Common Securities and the Preferred Securities from the Investor at a price
equal to the Aggregate Purchase Price within fifteen (15) days of such
termination of employment.
(c) In the event the Annual Meeting is not held on or before March 15,
2003, the Investor will, at a redemption price equal to the Aggregate Purchase
Price, have the option to cause the Company to repurchase the Common Securities
and the Preferred Securities from the Investor at a price equal to the Aggregate
Purchase Price on or before March 30, 2003.
10. Adjusted Stockholders Equity Per Share. Notwithstanding anything to the
contrary in this Agreement, either party shall have the option to terminate this
Agreement
5
prior to Closing in the event that stockholders' equity per share as determined
and adjusted pursuant to this Section (the "Adjusted Stockholders Equity Per
Share") is greater than $1.75 or less than $1.45. Stockholder equity per share
shall be determined as of September 30, 2002 by the independent public
accountants then regularly servicing the Company, in accordance with generally
accepted accounting principles consistently applied, based on the audited
consolidated financial statements of the Company, which determination shall be
binding on the parties hereto. Subject to compliance with auditor independence
and corporate governance considerations as effective or proposed by the SEC or
NASDAQ, the Investor shall have the right to consult with the independent public
accountants determining the Stockholder equity per share prior to such
determination and to approve any new accounting firm if the Company's accounting
firm as of the date of this Agreement resigns or is otherwise replaced.
Stockholders equity per share as so determined by the Company's accounting firm
shall then be adjusted as follows to determine the Adjusted Stockholders Equity
Per Share:
a. Stockholders equity per share shall include the value of the
Company's technology assets (which shall be deemed to be $300,000 in
aggregate at September 30, 2002) and the Company's deferred tax assets
(which shall be deemed to be $540,766 at September 30, 2002),
irrespective of the auditor's treatment thereof;
b. All costs related to the transaction contemplated by this Agreement
shall not be expensed but rather shall be debited directly against the
capital investment made by the Approved Investors. Such expenses shall
include legal and tax advisory fees, amounts paid to any
intermediaries or brokers and the legal and out of pocket expenses
incurred by the Investor (in aggregate with all other Approved
Investors, not to exceed $20,000). The aggregate of all such expenses
for entire aggregate investment by the Approved Investors is not to
exceed $200,000. Any excess beyond $200,000 to be deducted against
stockholder's equity per share; and
c. The resulting Stockholders equity per share shall then be reduced
by 7.5%.
11. Representations by the Investor. In connection with the purchase of
the Securities, the Investor acknowledges, warrants and represents to the
Company as follows:
a. The Investor is acquiring the Securities for investment for his own
account and without the intention of participating, directly or
indirectly, in a distribution of the Securities, and not with a view
to resale or any distribution of the Securities, or any portion
thereof.
b. The Investor has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as
it has considered appropriate to assist in evaluating the merits and
risks of this investment. The Investor has had access to and an
opportunity to question the officers of the Company, or persons acting
on their behalf, with respect to material information about the
Company and, in connection with the evaluation of this investment,
has,
6
to the best of his knowledge, received all information and data with
respect to the Company that the Investor has requested. The Investor has
carefully reviewed all of the Company's filings with the Securities and
Exchange Commission. The Investor is acquiring the Securities based solely
upon its independent examination and judgment as to the prospects of the
Company.
c. The Securities were not offered to the Investor by means of publicly
disseminated advertisements or sales literature.
d. The Investor is acquiring the Securities without being furnished any
offering materials or prospectus.
e. The Investor acknowledges that an investment in the Securities is
speculative and involves a high degree of risk, including a risk of loss of
the entire investment in the Company, and the Investor may have to continue
to bear the economic risk of the investment in the Securities for an
indefinite period. The Investor acknowledges that the Securities are being
sold to the Investor without registration under any state or federal law
requiring the registration of securities for sale, and accordingly will
constitute "restricted securities" as defined in Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act"). The transferability of
the Securities is therefor restricted by applicable United States Federal
and state securities laws.
f. The Investor acknowledges that each certificate representing Securities
shall be subject to a legend substantially in the following form:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended or any state securities laws and neither
the securities nor any interest therein may be offered, sold, transferred,
pledged, or otherwise disposed of except pursuant to an effective
registration statement under such act or such laws or an exemption from
registration under such act and such laws which, in the opinion of counsel
for the holder, which counsel and opinion are reasonably satisfactory to
counsel for this entity, is available."
12. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investor except as set forth on a Schedule of Exceptions
(the "Schedule of Exceptions") furnished to the Investor and its counsel, and
attached as Exhibit D hereto, specifically identifying the relevant section
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
a. Corporate Existence. The Company and each of its subsidiaries are
entities duly formed under the laws of their respective places of
formation, are each in good standing and have a legal existence, with full
power and authority to own, operate or lease their respective properties
and conduct their respective businesses in the manner and in the places
where such properties are owned or leased or such businesses are conducted.
b. Authorization of Transaction. Subject to the receipt of necessary third
party approvals or confirmations listed on Appendix 3 hereto (the "Required
Approvals"), the Company has the full power and authority to execute,
deliver
7
and perform this Agreement and the other agreements to be executed and
delivered pursuant to this Agreement (the "Ancillary Agreements"); to
perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby. All necessary action,
corporate or otherwise, will have been taken by the Company prior to the
Closing to authorize the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements and the transactions
contemplated hereby and thereby. Each of this Agreement and the Ancillary
Agreements has been, or will be at the Closing, duly executed and delivered
by the Company, and each of this Agreement and the Ancillary Agreements is,
or upon the Closing will be, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms
except (a) as limited by applicable bankruptcy, insolvency or other laws of
general application affecting enforcement of creditors' rights; and (b)
general principles of equity that restrict the availability of equitable
remedies.
c. Capitalization. As of the date of this Agreement, the authorized capital
stock of the Company consists of 8,000,000 shares of common stock, par
value $.01 per share of which 2,375,575 shares are validly issued and
outstanding, fully paid and nonassessable on the date hereof, and 5,000,000
shares of preferred stock, par value $.01 per share, none of which are
issued or outstanding. In addition, on the date hereof, 527,224 shares of
common stock are subject to issuance pursuant to presently existing options
and warrants. There are no other outstanding options, warrants, rights,
convertible securities or exchange offers providing for the issuance of
common stock or any other capital stock of the Company.
d. Securities Duly Issued. Upon the issuance of the Securities at the
Closing, the Securities will be duly and validly issued, fully paid and
nonassessable, and will not be subject to any restrictions on transfer
other than those arising under applicable federal and state securities
laws.
e. Present Compliance with Obligations and Laws. Neither the Company nor
any of its subsidiaries are: (i) in violation of their respective
Organizational Documents; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the giving of notice) affords to any person
the right to accelerate any indebtedness or terminate any right; (iii) in
default of or in breach of (with or without the passage of time or the
giving of notice) any other contract to which it is a party or by which it
or its assets are bound; or (iv) in violation of any Court Order or
Governmental Authorization that is held by the Company or its subsidiaries
or is applicable to any of the Company or its subsidiaries or their
respective businesses or assets. Except as set forth on Section 12(e) of
the Schedule of Exceptions, the Company and its subsidiaries have conducted
and are now conducting their businesses and the ownership and operation of
their assets in compliance with all applicable Laws, except where the
failure to be in such compliance would not have a Material Adverse Effect.
f. No Conflict of Transaction With Obligations and Laws. Except as set
forth on Schedule 12(f) of the Schedule of Exceptions, neither the
execution, delivery and
8
performance of this Agreement or any Ancillary Agreement, nor the
performance of the transactions contemplated hereby or thereby, will: (a)
conflict with or constitute a breach or violation of any provision of the
Organizational Documents of the Company or any of its subsidiaries; (b)
require any Governmental Authorization, (c) require any consent of any
parties to loans, contracts, leases, licenses and other agreements to which
the Company is a party; (d) constitute (with or without the passage of time
or the giving of notice) a breach of, or default under, any debt instrument
to which the Company or any of its subsidiaries is a party, or give any
person the right to accelerate any indebtedness or terminate, modify or
cancel any right; (e) constitute (with or without the passage of time or
giving of notice) a default under or breach of any other agreement,
instrument or obligation to which the Company or any of its subsidiaries is
a party or by which it or its assets are bound; (f) result in the creation
of any encumbrance upon any capital stock or any of the assets of the
Company or its subsidiaries; (g) conflict with or result in a violation of
any Court Order or Law, or give to any other person, the right to exercise
any remedy or obtain any relief under any Court Order or Law, to which the
Company or any of its subsidiaries is subject or by which the properties or
assets of the Company or any of its subsidiaries are bound, or (h) result
in a violation of any of the terms or requirements of, or give any
Governmental Authority the right to revoke, suspend or otherwise modify,
any Government Authorization.
g. SEC Reports. The financial statements of the Company and the related
notes contained in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2001 and its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 present fairly the financial position of the
Company as of the dates indicated therein and the results of its operations
and cash flows for the periods therein specified. Such financial statements
(including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified and are true, correct and complete
in all respects.
h. Contracts and Commitments. Set forth on Section 12(h) of the Schedule of
Exceptions is a list of all (i) contracts, mortgages, indentures,
agreements, instruments and transactions to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
are bound which involve obligations of, or payments to, such company in
excess of $100,000 in the aggregate; (ii) agreements between the Company or
any of its subsidiaries and the Investor; (iii) agreements between the
Company or any of its subsidiaries and any officer, director, consultant,
stockholder, employee, affiliate or predecessor company; and (iv)
contracts, agreements, arrangements or understandings which are material to
the business of the Company or any of its subsidiaries (collectively
referred to as the "Material Contracts"). Copies of all Material Contracts
listed in Section 12(h) of the Schedule of Exceptions have previously been
made available to the Investor. All of the Material Contracts are valid,
binding and in full force and effect in all material respects, subject to
the effect of applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement
of the creditors' rights and rules or laws
9
concerning equitable remedies. Neither the Company nor any of its
subsidiaries are in material default under any such contract. Except as set
forth in Section 12(h) of the Schedule of Exceptions, with respect to each
Material Contract, (a) the Company or its subsidiaries, as the case may be,
has performed in all material respects all obligations required to be
performed to date under such Material Contract; (b) to the best knowledge
of the Company, no party to such Material Contract is in default, breach or
arrears under the terms of such Material Contract; and (c) to the best
knowledge of the Company, no condition exists or event has occurred that,
with the giving of notice or lapse of time or both, would constitute a
material default under such Material Contract.
i. Litigation. Except as set forth in Section 12(i) of the Schedule of
Exceptions, there is no action, suit, claim, proceeding, investigation or
arbitration proceeding pending (or to the best knowledge of the Company,
threatened in writing) against or otherwise involving the Company or any of
its subsidiaries and there are no outstanding Court Orders to which the
Company or any of its subsidiaries is a party or by which any of their
respective assets are bound.
j. ERISA and Employee Benefits. Except as set forth on Section 12(j) of the
Schedule of Exceptions, neither the Company nor any of its subsidiaries has
contributed to or participated in any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974 ("ERISA"), other than
medical benefit plans listed in Section 12(j) of the Schedule of Exceptions
with respect to which the Company or its subsidiary, as the case may be,
has made all required contributions. The Company and its subsidiary are in
compliance with all laws and regulations applicable to such plans under
ERISA, the violation of which, singly or in the aggregate, could have a
Material Adverse Effect.
k. Government Authorizations. The Company and each of its subsidiaries
holds all Government Authorizations which are required to own their
respective properties and assets and to permit the Company and its
subsidiaries to conduct their respective businesses as presently conducted,
except where the failure to hold such Governmental Authorization would not
have a Material Adverse Effect. Set forth in Section 12(k) of the Schedule
of Exceptions is a listing of all such Government Authorizations held by
the Company and its subsidiaries. No consent, approval or authorization of
(or designation, declaration of filing with) any Governmental Authority by
the Company or any of its subsidiaries is required in connection with the
valid execution and delivery of this Agreement, the Ancillary Agreements,
or the offer or sale of the Common Securities or the Preferred Securities,
or the consummation of any other transaction contemplated hereby or under
the Ancillary Agreements, except for Required Approvals shown on Appendix
3.
l. Related-Party Transactions. To the knowledge of the Company, except as
disclosed in SEC Filings made by the Company or listed on Section 12(1) of
the Schedule to Exceptions, no employee, officer, director or stockholder
of the Company or any of its subsidiaries or member of his or her immediate
family is
10
directly or indirectly interested in any material contract with the Company
or any of its subsidiaries.
13. Affirmative Covenants of the Company. The Company hereby covenants with the
Investor that between the date of this Agreement and the Closing, except as the
Investor shall otherwise consent, the Company will do the following:
a. Conduct its business only in the ordinary course of business consistent
with past practice and refrain from changing or introducing any method of
management or operations except in the ordinary course of business and
consistent with prior practices;
b. Refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except those that are
usual and normal in the ordinary course of business;
c. Maintain its equipment and other assets in good working condition and
repair according to the standards that it maintained to the date of this
Agreement, subject only to ordinary wear and tear;
d. Refrain from making any change or incurring any obligation to make a
change in its Organizational Documents or its authorized or issued capital
stock;
e. Refrain from declaring, setting aside or paying any dividend or making
any other distribution in respect of capital stock, or making any direct or
indirect redemption, purchase or other acquisition of its capital stock;
f. Refrain from merging, consolidating or reorganizing with, or acquiring,
any entity;
g. Use its best efforts to keep intact its business organization, to keep
available its present officers, agents and employees and to preserve the
goodwill of all suppliers, customers and others having business relations
with it;
h. Maintain true, correct and complete books of accounts and records
relating to its business;
i. Comply in all respects with all Laws applicable to the conduct of its
business or its properties or assets;
j. Promptly upon its knowledge thereof, advise the Investor in writing of
the termination or resignation of any key employee and the circumstances
therefore;
k. Pay all taxes, assessments, governmental charges or levies imposed upon
it or its income, profits or assets, or otherwise required to be paid by
it, nor fail to pay when due any liability or charge that if, unpaid, might
become an Encumbrance upon any such Company's assets; and
11
l. Promptly upon its knowledge thereof, advise the Investor in writing of
(i) any event, condition or circumstance occurring from the date hereof
until the Closing that would constitute a violation or breach of any
representation, warranty, covenant, agreement or provision contained in
this Agreement (provided, however, that such disclosure shall not be deemed
to cure any violation or breach of any such representation, warranty,
covenant, agreement or provision), or (ii) any event, occurrence,
transaction or other item that would have been or required to have been
disclosed on any Schedule, delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof, and use its commercially
reasonable efforts to prevent or promptly remedy the same.
m. The Company will not, directly or indirectly, through any officer,
director, affiliate, agent or otherwise, solicit, initiate or encourage
submission of any proposal or offer from any person or entity relating to
the acquisition or merger of the Company or any of its securities or assets
or participate in any discussions or negotiations regarding, furnish to any
other person any information with respect to, or otherwise cooperate in any
way with, or assist or participate in, or facilitate or encourage any
effort or attempt by any other person or entity to do or seek, any of the
foregoing.
14. Consummation of Agreement. The Company and the Investor shall each use their
best efforts to perform and fulfill all conditions and obligations on their
respective parts to be performed and fulfilled under this Agreement, to the end
that the transaction contemplated by this Agreement shall be fully carried out.
To this end, each of the Company and the Investor will use best efforts to
obtain all Required Approvals.
15. Survival of Representations and Warranties. All of the representations and
warranties of the Company and the Investor contained in Sections 12 and 11,
respectively, of this Agreement shall survive from the date of this Agreement
until the Conversion.
16. Restrictions on Sale. In consideration of the acceptance of this
subscription, the Investor agrees that the Securities will not be offered for
sale, sold or transferred by the Investor other than pursuant to (i) an
effective registration under the Securities Act, an exemption available under
the Securities Act or a transaction that is otherwise in compliance with the
Securities Act; and (ii) an effective registration under the securities law of
any state or other jurisdiction applicable to the transaction, an exemption
available under such laws, or a transaction that is otherwise in compliance with
such laws.
17. No Review. The Investor understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
18. Confidentiality. The Investor agrees not to disclose or use any information
provided to the Investor by the Company or any of its agents in connection with
the offering of the Securities, except for the purpose of evaluating an
investment in the Securities.
12
19. Indemnification.
a. Indemnification by Investor. The Investor agrees to indemnify and hold
harmless the Company and its officers, directors, partners, employees,
agents, and affiliates against any and all loss, liability, claim, damage,
and expense whatsoever (including, but not limited to, any and all
expenses reasonably incurred in investigating, preparing, or defending
against any litigation commenced or threatened or any claim whatsoever)
arising out of or based upon any false representation or warranty or
breach or failure by the Investor to comply with any covenant or agreement
made by the Investor herein or in any other document furnished by the
Investor to the Company to the Investor in connection with this
transaction.
b. Indemnification by Company. The Company agrees to indemnify and hold
harmless the Investor against any and all loss, liability, claim, damage,
and expense whatsoever (including, but not limited to, any and all
expenses reasonably incurred in investigating, preparing, or defending
against any litigation commenced or threatened or any claim whatsoever)
arising out of or based upon any false representation or warranty or
breach or failure by the Company to comply with any covenant or agreement
made by the Company herein or in any other document furnished by the
Company to the Investor in connection with this transaction.
20. Definitions. In addition to the terms defined throughout this Agreement,
the following terms shall have the indicated respective meanings:
"Court Order" shall mean a court order, judgment, administrative or
judicial order, writ, decree, stipulation, arbitration award or injunction.
"Encumbrance" shall mean any lien, option (including right of first
refusal or first offer), encumbrance, charge, restriction, mortgage, pledge,
security interest, title exception, restriction, claim or charge of any kind or
character.
"Force Majeure" shall mean failure of any party to perform its obligations
under this Agreement due to fire, flood, strikes or other industrial
disturbances, accidents, war, acts of terrorism, riot, insurrection or other
causes beyond the reasonable control of the such party.
"Governmental Authority" shall mean any governmental body, whether
national, state, regional, local, or any subdivision or agency of any of the
foregoing.
"Governmental Authorization" shall mean any license, permit, order,
franchise agreement, concession, grant, authorization, consent or approval from
a Governmental Authority.
"Law" shall include any statute, law, ordinance, rule or regulation of a
Governmental Authority.
13
"Material Adverse Effect" shall mean an event which causes a material
adverse change in the condition, financial or otherwise, business operations,
properties, assets or liabilities of the Company except any material adverse
change resulting from a Force Majeure.
"NASDAQ" shall mean The Nasdaq Stock Market.
"Organizational Documents" shall mean the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of Delaware on the
date of this Agreement, as the same may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933.
21. Publicity and Disclosures. Except as may be otherwise required for
compliance with applicable stock exchange rules or securities laws, neither the
Investor nor the Company shall issue nor approve any news release or other
public announcement concerning this Agreement (or any schedules or exhibits
hereto) prior to the Closing without the prior written approval of the other.
22. Irrevocability; Binding Effect. The Investor hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the Investor, that,
except as required by law, the Investor is not entitled to cancel, terminate, or
revoke this Agreement or any agreements of the Investor hereunder, and that this
Agreement and such other agreements shall survive the death or disability of the
Investor and shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives, and
permitted assigns. If the Investor is more than one person, the obligations of
the Investor hereunder shall be joint and several and the agreements,
representations, warranties, and acknowledgments herein contained shall be
deemed to be made by and be binding upon each such person and his heirs,
executors, administrators, successors, legal representatives, and permitted
assigns.
23. Modification. Neither this Agreement nor any provisions hereof shall be
waived, modified, discharged, or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge, or
termination is sought.
24. Notices. Any notice or other communication required or permitted to be
given hereunder shall by in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to the Company, at the address set on the signature page
hereof, or (b) if to the Investor, at the address set forth on the signature
page hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 25). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
14
25. Assignability. This Agreement and the rights and obligations hereunder are
not transferable or assignable by any party without the prior written consent of
the other party.
26. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida as applied to residents of that
state executing contracts wholly to be performed in that state.
27. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by binding arbitration in
Orlando, Florida in accordance with the rules of American Arbitration
Association then in effect.
28. NOTICE TO FLORIDA RESIDENTS. PURSUANT TO SECTION 517.061(11)(A)(5) OF THE
FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, A FLORIDA SUBSCRIBER HAS A RIGHT
TO RESCIND THE SUBSCRIPTION BY GIVING NOTICE OF SUCH RESCISSION BY TELEPHONE,
TELEGRAPH OR LETTER, WITHIN THREE DAYS AFTER THE CONSIDERATION HEREUNDER IS
FIRST TENDERED TO THE COMPANY. IF THE NOTICE IS TENDERED ORALLY, A WRITTEN
CONFIRMATION THAT IT HAS BEEN RECEIVED SHOULD BE REQUESTED. IT IS PRUDENT TO
SEND NOTICE OF RESCISSION BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO INSURE
THAT IT WAS RECEIVED. IF NOTICE IS NOT RECEIVED BY SUCH TIME, THE FOREGOING
RIGHT OF RESCISSION SHALL BE NULL AND VOID.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their authorized official, this Agreement, effective as of the date
first above written.
INTERNATIONAL ASSETS HOLDING
CORPORATION
By: /S/ Diego J. Veitia
-------------------------------------
Printed Name: Diego J. Veitia
---------------------------
Title: Chairman of the Board
----------------------------------
Address:
-----------------------------------------
INVESTOR:
/s/ Scott J. Branch
-----------------------------------------
SCOTT J. BRANCH
15
APPENDIX 1 - ACCREDITED INVESTOR
An "Accredited Investor" within the meaning of Regulation D under the Securities
Act of 1933 (the "Act") includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under section 301(c)
or (d) of the Small Business Investment Act of 1958; an employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as defined in
section 3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors.
(2) A private business development company as defined in Section 202(a)
(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not
formed for the specific purpose of acquiring the Securities, (iii) whose
purchase is directed by a person who, either alone or with his/her purchaser
representative, has such knowledge and experience in financial and business
matters that he/she is capable of evaluating the merits and risks of the
proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has total
assets in excess of $5,000,000.
(5) Any entity in which all of the equity owners are "accredited
investors".
Individuals
(6) Individuals with income from all sources for each of the last two
full calendar years whose reasonably expected income for this calendar year
exceeds either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding to
your adjusted gross income as calculated for Federal income tax purposes any
deduction for long term capital gains, any deduction for depletion allowance,
any exclusion for tax exempt interest and any losses of a partnership allocated
to you as a partner.
(7) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(9) Directors, executive officers or general partners of the Issuer.
APPENDIX 2 - DIRECTORS SLATE
Diego Veitia Scott Branch
Edward Cofrancesco Sean O'Connor
Dr. Robert A. Miller [nominee of John Radziwill]
APPENDIX 3 - THIRD PARTY APPROVALS
Written confirmation from NASDAQ.
EXHIBIT "A"
TERMS OF PREFERRED STOCK
EXHIBIT A
INTERNATIONAL ASSETS HOLDING CORPORATION
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
The undersigned, Diego J. Veitia, certifies that he is the
Chairman of the Board of INTERNATIONAL ASSETS HOLDING CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
(the "Company"), and hereby further certifies as follows:
C. Under the Certificate of Incorporation of the Company, the
Company is authorized to issue 5,000,000 shares, of preferred stock,
par value $.01 per share (the "Preferred Stock").
D. Pursuant to the provisions of the Certificate of
Incorporation of the Company, the Board of Directors has adopted the
following resolution creating a series of Preferred Stock designated
as "Series A Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of the corporation in accordance with the provisions
of the Certificate of Incorporation, a series of preferred stock,
par value $.01 per share, of the corporation be and hereby are
created, and that the designation and number of shares thereof
and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such
series and the qualifications, limitations and restrictions
thereof are as follows:
1. DIVIDEND RIGHTS.
(a) Participating Dividends. Holders of Series A Preferred
shall be entitled to receive, when and as declared by the Board of
Directors, any dividends payable to the holders of the Common Stock on the
basis that the Series A Preferred have been converted into Common Stock as
of the record date of such dividend pursuant to the provisions of Section
4.
2. VOTING RIGHTS.
(a) No General Rights. Except as otherwise provided herein
or as required by law, the Series A Preferred shall not be entitled to any
voting rights.
(b) Separate Vote of Series A Preferred. For so long as any
share of Series A Preferred remain outstanding, in addition to any other
vote or consent required herein or by law, the vote or written consent of
the holders of more than fifty percent (50%) of the then outstanding Series
A Preferred shall be necessary for effecting or validating the following
actions:
(i) Any amendment, alteration, waiver or repeal of
any provision of the Certificate of Incorporation or the Bylaws of the
Company (including any filing of a Certificate of Designation); or
(ii) Any increase or decrease (other than by
redemption or conversion) in the authorized number of shares of Series A
Preferred; or
(iii) Any issuance of any stock or any other
securities convertible into equity securities of the Company, other than
the issuance of common stock, par value $.01 per share (the "Common
Stock"), upon the conversion of the Series A Preferred or the issuance of
Common Stock upon the conversion of any convertible security outstanding as
of October __, 2002; or
(iv) Any redemption or repurchase of shares of any
stock or other equity security of the Company; or
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section
3(c)); or
(vi) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock.
3. LIQUIDATION RIGHTS.
(a) Liquidation Preference. Upon any liquidation,
dissolution, or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment shall be made to the
holders of any other class of stock (a "Junior Stock"), the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Company an amount per share of Series A Preferred equal to the price paid
for each share of Series A Preferred (the "Original Issue Price") (as
adjusted for any stock dividends, combinations, splits, recapitalization
and the like with respect to such shares) for each share of Series A
Preferred held by them (the "Liquidation Preference").
(b) Deemed Liquidations. The following events shall be
considered a liquidation under this Section 3:
(i) Any consolidation or merger of the Company with
or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization, own less
than 50% of the Company's voting power immediately after such
consolidation, merger or reorganization, or any transaction
2
or series of related transactions to which the Company is a party in which
in excess of fifty percent (50%) of the Company's voting power is
transferred (an "Acquisition"); or
(ii) A sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer"); or
(c) Pro Rata Distribution. If, upon any liquidation,
distribution, or winding up, the assets of the Company shall be
insufficient to make payment in full to all holders of Series A Preferred
of the Liquidation Preference set forth in Section 3(a), then such assets
shall be distributed among the holders of Series A Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
4. CONVERSION.
The Series A Preferred shall be converted into shares of Common Stock
on the following terms:
(a) Automatic Conversion. Subject to and in compliance with
the provisions of this Section 4, upon the approval by the shareholders of
the Company of the conversion provided for in this Section 4, the shares of
Series A Preferred will be automatically converted into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock
to which a holder of Series A Preferred shall be entitled upon conversion
shall be the product obtained by multiplying the "Series A Preferred
Conversion Rate" then in effect (determined as provided in Section 4(b)) by
the number of shares of Series A Preferred being converted.
(b) Series A Preferred Conversion Rate. The conversion rate
in effect at any time for conversion of the Series A Preferred (the "Series
A Preferred Conversion Rate") shall be the quotient obtained by dividing
the Liquidation Preference of the Series A Preferred by the "Series A
Preferred Conversion Price," calculated as provided in Section 4(c).
(c) Series A Preferred Conversion Price. The conversion
price for the Series A Preferred (the "Series A Preferred Conversion
Price") shall initially be the Original Issue Price of the Series A
Preferred. Such initial Series A Preferred Conversion Price shall be
adjusted from time to time in accordance with this Section 4. All
references to the Series A Preferred Conversion Price herein shall mean the
Series A Preferred Conversion Price as so adjusted.
(d) Mechanics of Conversion. Upon the conversion of the
Series A Preferred pursuant to this Section 4, the holder of the Series A
Preferred shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series
A Preferred. Thereupon, the Company shall promptly issue and deliver at
such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled. Such conversion
shall be deemed to have been made at the close of business on the date on
which the Series A Preferred are converted pursuant to Section 4(a), and
the person entitled to
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receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common
Stock as of the close of business on such date.
(e) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the date that the
first share of Series A Preferred is issued (the "Original Issue Date")
effect a subdivision of the outstanding Common Stock without a
corresponding subdivision of the Preferred Stock, the Series A Preferred
Conversion Price in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Company shall at any time or
from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a smaller number of shares without a
corresponding combination of the Preferred Stock, the Series A Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) Adjustment for Common Stock Dividends and
Distributions. If the Company at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, in each such
event the Series A Preferred Conversion Price that is then in effect shall
be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by
multiplying the Series A Preferred Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance
or the close of business on such record date, and (ii) the denominator of
which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on
such record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series A
Preferred Conversion Price shall be recomputed accordingly as of the close
of business on such record date and thereafter the Series A Preferred
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect
the actual payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Original Issue
Date, the Common Stock issuable upon the conversion of the Series A
Preferred is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than an Acquisition or Asset Transfer as defined in
Section 3(b) or a subdivision or combination of shares or stock dividend or
a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4), in any such event each holder of Series A
Preferred shall have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series A
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Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the Original Issue Date,
there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(b) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 4), as a part
of such capital reorganization, provision shall be made so that the holders
of the Series A Preferred shall thereafter be entitled to receive upon
conversion of the Series A Preferred the number of shares of stock or other
securities or property of the Company to which a holder of the number of
shares of Common Stock deliverable upon conversion would have been entitled
on such capital reorganization, subject to adjustment in respect of such
stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this
Section 4 with respect to the rights of the holders of Series A Preferred
after the capital reorganization to the end that the provisions of this
Section 4 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the
Series A Preferred) shall be applicable after that event and be as nearly
equivalent as practicable.
(i) Notices of Record Date. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in
Section 3(b)) or other capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company,
any merger or consolidation of the Company with or into any other
corporation, or any Asset Transfer (as defined in Section 3(b)), or any
voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to each holder of Series A Preferred at
least twenty (20) days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend
or distribution, (B) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(j) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of any fractional share, the
Company shall, in lieu of issuing any fractional share, pay cash equal to
the
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product of such fraction multiplied by the Common Stock's fair market value
(as determined by the Board of Directors) on the date of conversion.
(k) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, such number of its
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series A Preferred. If at
any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares
of the Series A Preferred, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(l) Payment of Taxes. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series A Preferred, excluding any tax or other
charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the
shares of Series A Preferred so converted were registered.
(m) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series A Preferred as required under Section
2(b), the Company shall not amend its Amended and Restated Certificate of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate
in order to protect the conversion rights of the holders of the Series A
Preferred against dilution or other impairment.
5. NO REISSUANCE OF SERIES A PREFERRED.
No share or shares of Series A Preferred acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued.
C. This Certificate of Designation has been duly adopted in accordance with
the provisions of Sections 151 of the General Corporation Law of the State
of Delaware by the Board of Directors of the Company.
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IN WITNESS WHEREOF, International Assets Holding Corporation has
caused this Certificate of Designation be signed by its Chairman of the
Board, on this 22 day of October, 2002.
INTERNATIONAL ASSETS HOLDING CORPORATION
By: /s/ Diego J. Veitia,
------------------------
Diego J. Veitia,
---------------
Chairman of the Board
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EXHIBIT IV
FIRST AMENDMENT TO
SHARE SUBSCRIPTION AGREEMENT
THIS FIRST AMENDMENT TO SHARE SUBSCRIPTION AGREEMENT ("Amendment") is made and
entered into as of the 6th day of December, 2002, by and between INTERNATIONAL
ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and SCOTT J.
BRANCH (the "Investor").
R E C I T A L S
A. The Company and the Investor entered into a Share Subscription Agreement (the
"Agreement") dated as of October 22, 2002 whereby the Investor subscribed to
purchase 151,717 shares of common stock and 583,577 shares of preferred stock of
the Company.
B. The parties wish to amend the Agreement to provide that the Investor shall
purchase an additional 151,717 shares of preferred stock of the Company (the
"Additional Preferred Shares") in lieu of the like number of shares of common
stock referenced in the Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Investor agree as follows:
1. Recitals; Definitions. All of the above recitals are true and correct. Any
terms used but not defined in this Amendment shall have the definitions assigned
such terms in the Agreement.
2. Amendment to Agreement. Subject to the terms and conditions of the
Agreement, as hereby amended, the Company offers to the Investor and the
Investor hereby subscribes to purchase 735,294 shares of preferred stock, $.01
par value of the Company, each at a fixed price of $1.70 per share in lieu of
the purchase of 583,577 shares of preferred stock and 151,717 shares of common
stock referenced in Section 3 of the Agreement. Any and all references to the
"Common Securities" in the Agreement shall be deemed to refer to the Additional
Preferred Shares, and all references to "Securities" in the Agreement shall be
deemed to refer to the Preferred Securities and Additional Preferred Securities.
Each of the Preferred Securities and the Additional Preferred Shares shall be
subject to the provisions applicable to the Preferred Securities and to the
Securities in the Agreement including, without limitation, the Redemption Right
and Repurchase Right set forth in Section 9 of the Agreement and the provisions
regarding convertibility.
3. Ratification - No Other Amendment. The Company and the Investor hereby
restate, ratify and confirm as accurate all representations and warranties set
forth in the Agreement. Except as modified or amended herein, no other term,
covenant or condition of the Agreement shall be considered modified or amended.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their authorized official, this Amendment, effective as of the date
first above written.
INTERNATIONAL ASSETS HOLDING
CORPORATION
By: /s/ Diego J. Veitia
Printed Name: Diego J. Veitia
Title: Chairman
INVESTOR:
/s/ Scott J. Branch
-------------------
SCOTT J. BRANCH
Address: ___________________________
____________________________________
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EXHIBIT V
SHARE SUBSCRIPTION AGREEMENT
THIS SHARE SUBSCRIPTION AGREEMENT ("Agreement") is made and entered into as of
the 22 day of October, 2002 (the "Effective Date"), by and between INTERNATIONAL
ASSETS HOLDING CORPORATION, a Delaware corporation (the "Company"), and JOHN
RADZIWILL (the "Investor").
R E C I T A L S
A. The Company, directly or through its subsidiaries, operates a financial
services company, including a market making and proprietary trading brokerage
firm specializing in global securities.
B. The Company is a publicly held entity, having previously offered shares of
the Company's common stock pursuant to a registration statement, and continues
to file reports as to the Company's business.
C. The Board of Directors of the Company (the "Board") considers it essential to
the best interests of the Company that (i) additional common equity and (ii)
preferred equity will be sold to the Investor subject to the terms of this
Agreement.
D. The Investor is an "accredited investor" as such term is defined in Appendix
1, and is capable of evaluating the merits and risks of an investment in the
Company.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Investor agree as follows:
1. Recitals. All of the above recitals are true and correct.
2. Term. This Agreement shall commence on the Effective Date and shall
terminate at 12:01 a.m. EST on the date that is the later of five (5) business
days from the date of receipt by the Company of (i) the audited consolidated
financial statements for the fiscal year ended September 30, 2002; or (ii)
written confirmation from NASDAQ with respect to the transactions evidenced by
this Agreement, but in no event later than December 15, 2002 (the "Termination
Date") unless the Closing, as hereafter defined, has occurred before the
Termination Date. This Agreement may be extended by the mutual written agreement
of the Company and the Investor prior to the Termination Date.
3. Purchase of Securities.
(a) Subject to the terms and conditions of this Agreement, the Company
offers to the Investor and the Investor hereby subscribes to purchase (i)
117,581 shares of common stock, $.01 par value per share of the Company (such
shares of common stock are referred to herein as the "Common Securities"), and
(ii) 452,272 shares of preferred stock, $.01 par value per share of the Company
(such shares of preferred stock are referred to herein as the "Preferred
Securities") (the Common Securities and the Preferred Securities are
collectively referred to as the "Securities"), each at a fixed price per share
equal to $1.70 (the "Per Share Purchase Price"). The aggregate purchase price
for the purchased Securities shall be equal to the product of the Per Share
Purchase Price and the
aggregate number of Common Securities and Preferred Securities purchased by the
Investor (the "Aggregate Purchase Price").
(b) The Preferred Securities will have the preferences, privileges,
restrictions and rights specified in Exhibit "A" to this Agreement. The Board
will promptly approve the terms of the Preferred Securities by adopting an
amendment to the Company's Certificate of Incorporation in the form of Exhibit
"A".
4. Earnest Money. The Investor will pay the Company a deposit in the amount of
$80,000 within three (3) days of the execution of this Agreement (the
"Deposit"). At the Closing, the Company will apply the Deposit to the Aggregate
Purchase Price as provided in Section 5. If the Agreement is terminated before
the Closing, as hereafter defined, pursuant to Subsection 7(a)(i), (ii) or (iii)
or Section 10 hereof, the Company will return the Deposit to the Investor. If
the Agreement is terminated before the Closing pursuant to Subsection 7(a)(iv)
hereof or if the Investor is unable to make full payment to the Company for the
purchased shares at Closing, the Investor will forfeit the Deposit.
5. Closing and Payment. The closing of the acquisition provided for in Section
3 of this Agreement (the "Closing") shall occur on a mutually agreeable date
prior to the Termination Date at the offices of Holland & Knight LLP in Orlando,
Florida or at such other time and place as the parties may agree. At the
Closing: (i) the Investor will pay the Aggregate Purchase Price less the Deposit
by either endorsing a certified or cashier's check made payable to the Company
or wiring immediately available funds to the Company's bank account (which
account number has been previously provided to the Investor), and (ii) the
Company will reimburse the Investor, together with the other Approved Investors,
up to the aggregate sum of $20,000 for amounts paid by the Approved Investors to
any intermediaries or brokers and for the legal and out-of-pocket expenses
incurred by the Approved Investors, provided that the Approved Investors shall
not be entitled to such reimbursement if the Closing does not occur for any
reason.
6. Conditions Precedent.
(a) The respective obligations of the Company and the Investor to effect the
Closing are subject to the satisfaction or waiver by the Company and the
Investor, prior to the Closing of each of the following conditions:
(i) There being no provision of applicable Law or any Court Order that
prohibits or otherwise makes illegal the consummation of the Closing.
(ii) All regulatory approvals required to consummate the transaction
contemplated hereby (other than the shareholder approval required for the
conversion of Preferred Securities) shall have been obtained and shall
remain in full force and effect.
(iii) No investigation, action, suit or proceeding by a Governmental
Authority shall be pending on the date of Closing, which challenges, or
might reasonably be expected to result in a challenge to this Agreement, or
which might reasonably be expected to give rise to a claim for damages in a
material amount as a result of the consummation of the transaction
contemplated by this Agreement.
2
(iv) The Company shall have consummated simultaneously with the
Closing, the transactions contemplated by Share Subscription Agreements
of even date herewith entered into by and between the Company and each
of Scott J. Branch and Sean M. O'Connor, or any assignee of each which
has been approved in writing by the Company (such persons, together
with the Investor, the "Approved Investors").
(v) The Company shall have received the written confirmation from
NASDAQ that the transactions evidenced by this Agreement do not require
prior stockholder approval.
(b) The obligation of the Investor to effect the Closing is subject to the
satisfaction or waiver by the Investor of the following additional conditions:
(i) The Company shall have performed in all material
respects all of its material obligations under this Agreement required to be
performed by it at or before the Closing.
(ii) Any representation or warranties of the Company
contained in this Agreement shall be true and correct in all material respects
as of the Closing, as if made at and as of such time.
(iii) The Company and the Investor shall have entered into an
Employment Agreement in the form attached hereto as Exhibit "B" (the "Employment
Agreement").
(iv) The Company and the Investor shall have entered into a
Registration Rights Agreement in the form attached hereto as Exhibit "C" (the
"Registration Rights Agreement").
(v) The Board shall have duly adopted resolutions: (1)
approving the terms of (i) this Agreement, (ii) the terms of the Preferred
Securities, (iii) the Employment Agreement, and (iv) the Registration Rights
Agreement; (2) authorizing an employee share incentive program to allow for
options to be issued as provided in the Employment Agreement (the "Option Plan")
to be proposed to the stockholders of the Company for approval at the next
convened annual general meeting of stockholders currently scheduled to occur on
or before February 14, 2003 (the "Annual Meeting"); and (3) approving an
amendment to (i) the bylaws of the Company to require a supermajority vote of
the greater of (A) at least five directors or (B) at least seventy-five percent
(75%) of the directors to remove or change the Chairman of the Board, and (ii)
the Certificate of Incorporation of the Company to also require a vote of at
least seventy-five percent (75%) of the shares of common stock to remove or
change the Chairman of the Board to be proposed to the stockholders of the
Company at the Annual Meeting. Copies of these Board resolutions certified by
the Secretary of the Company shall be made available to the Investor no later
than 14 business days after execution of this Agreement.
(vi) The Company will have received a release from UBS
Warburg waiving any claim to compensation arising from this Agreement or the
share purchase evidenced hereby.
3
(vii) The Company will have secured letters of resignation
from all current directors not shown on Appendix 2 and shall appoint all new
directors shown on Appendix 2 effective as of the Closing.
(viii) The Company shall have entered into Employment
Agreements with Diego Veitia, Edward Cofrancesco, Charles Lyons, Brian Garrow,
Will Dennis, Jr., Doug Ross, Chris Myers and Michael Flannigan. Neither Diego
Veitia nor Edward Cofrancesco shall have terminated their Employment Agreement
with the Company.
(c) The Obligation of the Company to effect the Closing is subject to
satisfaction or waiver by the Company of the following conditions:
(i) The Investor shall have performed in all material
respects all of its material obligations under this Agreement required to be
performed by it at or before the Closing.
(ii) Any representation or warranties of the Investor
contained in this Agreement shall be true and correct in all material respects
as of the Closing, as if made at and as of such time.
7. Termination.
(a) This Agreement may be terminated at any time before the Closing:
(i) by the mutual agreement of the Investor and the Company;
(ii) By either the Company or the Investor, if the Closing
has not occurred by December 15, 2002, provided that the right to terminate this
Agreement under this clause will not be available to any party whose failure to
fulfill any of its obligations under this Agreement resulted in the failure to
consummate the Closing by such date;
(iii) By the Investor, if there has been a material breach of
any representation, warranty or covenant in this Agreement by the Company; or
(iv) By the Company, if there has been a material breach of
any representation, warranty or covenant in this Agreement by the Investor.
(b) The party terminating this Agreement pursuant to this Section will
give written notice of termination to the other party.
8. Stockholder Approval. At the Annual Meeting, the Company shall seek the
approval of the stockholders of the Company: (i) to allow conversion of the
Preferred Securities to Common Securities; (ii) to adopt the Option Plan; (iii)
to elect the persons listed on Appendix 2 to the Board; and (iv) to amend the
Certificate of Incorporation of the Company to require a seventy-five percent
(75%) vote of the stockholders to remove or change the Chairman of the Board.
Upon the approval of the stockholders at the Annual Meeting, the Preferred
Securities will automatically be converted into the Common Securities pursuant
to the conversion provisions included in Exhibit "A" hereto (the "Conversion").
4
9. Redemption and Repurchase Rights.
(a) In the event the stockholders do not approve the resolutions
permitting conversion of the Preferred Securities into common stock and the
amendment to the Company's Certificate of Incorporation to require a
seventy-five percent (75%) vote of the stockholders to remove or change the
Chairman of the Board at the Annual Meeting: (i) the Investor will, at a
redemption price equal to the Aggregate Purchase Price, have the option to cause
the Company to repurchase the Common Securities and the Preferred Securities for
a period beginning fifteen (15) days after the Annual Meeting and extending to
the date that is six months from the Closing (the "Redemption Right"), and (ii)
the Company will have the right to repurchase the Common Securities and the
Preferred Securities from the Investor for a period beginning fifteen (15) days
after the Annual Meeting and extending to the date that is six months from the
Closing at a price equal to the Aggregate Purchase Price (the "Repurchase
Right").
(b) In the event that prior to the Conversion: (i) the Investor is
removed as a director of the Company; or (ii) Scott Branch's employment is
terminated by the Company (other than for Cause, as such term is defined in the
Employment Agreement of even date herewith between the Company and Scott
Branch); or (iii) Sean O'Connor's employment is terminated by the Company (other
than for Cause, as defined in the Employment Agreement of even date herewith
between the Company and Sean O'Connor); or (iv) either Sean O'Connor or Scott
Branch is removed from the Board, then the Company, at the Investor's option,
shall repurchase the Common Securities and the Preferred Securities from the
Investor at a price equal to the Aggregate Purchase Price within fifteen (15)
days of such termination of employment or removal of director.
(c) In the event the Annual Meeting is not held on or before March 15,
2003, the Investor will, at a redemption price equal to the Aggregate Purchase
Price, have the option to cause the Company to repurchase the Common Securities
and the Preferred Securities from the Investor at a price equal to the Aggregate
Purchase Price on or before March 30, 2003.
(d) In the event either the Investor or the Company exercise their
Redemption Right or Repurchase Right, as the case may be, pursuant to this
Section 9, the Company shall pay Investor a fee equal to six percent (6%) per
annum of the Aggregate Purchase Price for the period of time from the Closing
until the date of exercise of the Redemption Right or Repurchase Right.
10. Adjusted Stockholders Equity Per Share. Notwithstanding anything to the
contrary in this Agreement, either party shall have the option to terminate this
Agreement prior to Closing in the event that stockholders' equity per share as
determined and adjusted pursuant to this Section (the "Adjusted Stockholders
Equity Per Share") is greater than $1.75 or less than $1.45. Stockholder equity
per share shall be determined as of September 30, 2002 by the independent public
accountants then regularly servicing the Company, in accordance with generally
accepted accounting principles consistently applied, based on the audited
consolidated financial statements of the Company, which determination shall be
binding on the parties hereto. Subject to compliance with auditor independence
and corporate governance considerations as effective or proposed by the SEC or
NASDAQ, the Investor shall have the right to consult with the independent public
accountants determining the Stockholder equity per share prior to such
5
determination and to approve any new accounting firm if the Company's accounting
firm as of the date of this Agreement resigns or is otherwise replaced.
Stockholders equity per share as so determined by the Company's accounting firm
shall then be adjusted as follows to determine the Adjusted Stockholders Equity
Per Share:
a. Stockholders equity per share shall include the value of the
Company's technology assets (which shall be deemed to be $300,000 in
aggregate at September 30, 2002) and the Company's deferred tax assets
(which shall be deemed to be $540,766 at September 30, 2002),
irrespective of the auditor's treatment thereof;
b. All costs related to the transaction contemplated by this Agreement
shall not be expensed but rather shall be debited directly against the
capital investment made by the Approved Investors. Such expenses shall
include legal and tax advisory fees, amounts paid to any
intermediaries or brokers and the legal and out of pocket expenses
incurred by the Investor (in aggregate with all other Approved
Investors, not to exceed $20,000). The aggregate of all such expenses
for entire aggregate investment by the Approved Investors is not to
exceed $200,000. Any excess beyond $200,000 to be deducted against
stockholder's equity per share; and
c. The resulting Stockholders equity per share shall then be reduced
by 7.5%.
11. Representations by the Investor. In connection with the purchase of
the Securities, the Investor acknowledges, warrants and represents to the
Company as follows:
a. The Investor is acquiring the Securities for investment for his own
account and without the intention of participating, directly or
indirectly, in a distribution of the Securities, and not with a view
to resale or any distribution of the Securities, or any portion
thereof.
b. The Investor has knowledge and experience in financial and business
matters and has consulted with its own professional representatives as
it has considered appropriate to assist in evaluating the merits and
risks of this investment. The Investor has had access to and an
opportunity to question the officers of the Company, or persons acting
on their behalf, with respect to material information about the
Company and, in connection with the evaluation of this investment,
has, to the best of his knowledge, received all information and data
with respect to the Company that the Investor has requested. The
Investor has carefully reviewed all of the Company's filings with the
Securities and Exchange Commission. The Investor is acquiring the
Securities based solely upon its independent examination and judgment
as to the prospects of the Company.
c. The Securities were not offered to the Investor by means of
publicly disseminated advertisements or sales literature.
d. The Investor is acquiring the Securities without being furnished
any offering materials or prospectus.
6
e. The Investor acknowledges that an investment in the Securities is
speculative and involves a high degree of risk, including a risk of loss of
the entire investment in the Company, and the Investor may have to continue
to bear the economic risk of the investment in the Securities for an
indefinite period. The Investor acknowledges that the Securities are being
sold to the Investor without registration under any state or federal law
requiring the registration of securities for sale, and accordingly will
constitute "restricted securities" as defined in Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act"). The transferability of
the Securities is therefor restricted by applicable United States Federal
and state securities laws.
f. The Investor acknowledges that each certificate representing Securities
shall be subject to a legend substantially in the following form:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended or any state securities laws and neither
the securities nor any interest therein may be offered, sold, transferred,
pledged, or otherwise disposed of except pursuant to an effective
registration statement under such act or such laws or an exemption from
registration under such act and such laws which, in the opinion of counsel
for the holder, which counsel and opinion are reasonably satisfactory to
counsel for this entity, is available."
12. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investor except as set forth on a Schedule of Exceptions
(the "Schedule of Exceptions") furnished to the Investor and its counsel, and
attached as Exhibit D hereto, specifically identifying the relevant section
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
a. Corporate Existence. The Company and each of its subsidiaries are
entities duly formed under the laws of their respective places of
formation, are each in good standing and have a legal existence, with full
power and authority to own, operate or lease their respective properties
and conduct their respective businesses in the manner and in the places
where such properties are owned or leased or such businesses are conducted.
b. Authorization of Transaction. Subject to the receipt of necessary third
party approvals or confirmations listed on Appendix 3 hereto (the "Required
Approvals"), the Company has the full power and authority to execute,
deliver and perform this Agreement and the other agreements to be executed
and delivered pursuant to this Agreement (the "Ancillary Agreements"); to
perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby. All necessary action,
corporate or otherwise, will have been taken by the Company prior to the
Closing to authorize the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements and the transactions
contemplated hereby and thereby. Each of this Agreement and the Ancillary
Agreements has been, or will be at the Closing, duly executed and delivered
by the Company, and each of this Agreement and the Ancillary Agreements is,
or upon the Closing will be, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms
except (a) as limited by applicable bankruptcy, insolvency or other laws
7
of general application affecting enforcement of creditors' rights; and (b)
general principles of equity that restrict the availability of equitable
remedies.
c. Capitalization. As of the date of this Agreement, the authorized capital
stock of the Company consists of 8,000,000 shares of common stock, par
value $.01 per share of which 2,375,575 shares are validly issued and
outstanding, fully paid and nonassessable on the date hereof, and 5,000,000
shares of preferred stock, par value $.01 per share, none of which are
issued or outstanding. In addition, on the date hereof, 527,224 shares of
common stock are subject to issuance pursuant to presently existing options
and warrants. There are no other outstanding options, warrants, rights,
convertible securities or exchange offers providing for the issuance of
common stock or any other capital stock of the Company.
d. Securities Duly Issued. Upon the issuance of the Securities at the
Closing, the Securities will be duly and validly issued, fully paid and
nonassessable, and will not be subject to any restrictions on transfer
other than those arising under applicable federal and state securities
laws.
e. Present Compliance with Obligations and Laws. Neither the Company nor
any of its subsidiaries are: (i) in violation of their respective
Organizational Documents; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or
without the passage of time or the giving of notice) affords to any person
the right to accelerate any indebtedness or terminate any right; (iii) in
default of or in breach of (with or without the passage of time or the
giving of notice) any other contract to which it is a party or by which it
or its assets are bound; or (iv) in violation of any Court Order or
Governmental Authorization that is held by the Company or its subsidiaries
or is applicable to any of the Company or its subsidiaries or their
respective businesses or assets. Except as set forth on Section 12(e) of
the Schedule of Exceptions, the Company and its subsidiaries have conducted
and are now conducting their businesses and the ownership and operation of
their assets in compliance with all applicable Laws, except where the
failure to be in such compliance would not have a Material Adverse Effect.
f. No Conflict of Transaction With Obligations and Laws. Except as set
forth on Schedule 12(f) of the Schedule of Exceptions, neither the
execution, delivery and performance of this Agreement or any Ancillary
Agreement, nor the performance of the transactions contemplated hereby or
thereby, will: (a) conflict with or constitute a breach or violation of any
provision of the Organizational Documents of the Company or any of its
subsidiaries; (b) require any Governmental Authorization, (c) require any
consent of any parties to loans, contracts, leases, licenses and other
agreements to which the Company is a party; (d) constitute (with or without
the passage of time or the giving of notice) a breach of, or default under,
any debt instrument to which the Company or any of its subsidiaries is a
party, or give any person the right to accelerate any indebtedness or
terminate, modify or cancel any right; (e) constitute (with or without the
passage of time or giving of notice) a default under or breach of any other
agreement, instrument or obligation to which the Company or any of its
subsidiaries is a party or by which it or its assets are bound; (f) result
in the creation of any encumbrance upon any capital stock or any of the
assets of the Company or its subsidiaries; (g) conflict
8
with or result in a violation of any Court Order or Law, or give to any
other person, the right to exercise any remedy or obtain any relief under
any Court Order or Law, to which the Company or any of its subsidiaries is
subject or by which the properties or assets of the Company or any of its
subsidiaries are bound, or (h) result in a violation of any of the terms or
requirements of, or give any Governmental Authority the right to revoke,
suspend or otherwise modify, any Government Authorization.
g. SEC Reports. The financial statements of the Company and the related
notes contained in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2001 and its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 present fairly the financial position of the
Company as of the dates indicated therein and the results of its operations
and cash flows for the periods therein specified. Such financial statements
(including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified and are true, correct and complete
in all respects.
h. Contracts and Commitments. Set forth on Section 12(h) of the Schedule of
Exceptions is a list of all (i) contracts, mortgages, indentures,
agreements, instruments and transactions to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
are bound which involve obligations of, or payments to, such company in
excess of $100,000 in the aggregate; (ii) agreements between the Company or
any of its subsidiaries and the Investor; (iii) agreements between the
Company or any of its subsidiaries and any officer, director, consultant,
stockholder, employee, affiliate or predecessor company; and (iv)
contracts, agreements, arrangements or understandings which are material to
the business of the Company or any of its subsidiaries (collectively
referred to as the "Material Contracts"). Copies of all Material Contracts
listed in Section 12(h) of the Schedule of Exceptions have previously been
made available to the Investor. All of the Material Contracts are valid,
binding and in full force and effect in all material respects, subject to
the effect of applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement
of the creditors' rights and rules or laws concerning equitable remedies.
Neither the Company nor any of its subsidiaries are in material default
under any such contract. Except as set forth in Section 12(h) of the
Schedule of Exceptions, with respect to each Material Contract, (a) the
Company or its subsidiaries, as the case may be, has performed in all
material respects all obligations required to be performed to date under
such Material Contract; (b) to the best knowledge of the Company, no party
to such Material Contract is in default, breach or arrears under the terms
of such Material Contract; and (c) to the best knowledge of the Company, no
condition exists or event has occurred that, with the giving of notice or
lapse of time or both, would constitute a material default under such
Material Contract.
i. Litigation. Except as set forth in Section 12(i) of the Schedule of
Exceptions, there is no action, suit, claim, proceeding, investigation or
arbitration proceeding pending (or to the best knowledge of the Company,
threatened in writing) against or otherwise involving the Company or any of
its subsidiaries and there are no
9
outstanding Court Orders to which the Company or any of its subsidiaries is
a party or by which any of their respective assets are bound.
j. ERISA and Employee Benefits. Except as set forth on Section 12(j) of the
Schedule of Exceptions, neither the Company nor any of its subsidiaries has
contributed to or participated in any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974 ("ERISA"), other than
medical benefit plans listed in Section 12(j) of the Schedule of Exceptions
with respect to which the Company or its subsidiary, as the case may be,
has made all required contributions. The Company and its subsidiary are in
compliance with all laws and regulations applicable to such plans under
ERISA, the violation of which, singly or in the aggregate, could have a
Material Adverse Effect.
k. Government Authorizations. The Company and each of its subsidiaries
holds all Government Authorizations which are required to own their
respective properties and assets and to permit the Company and its
subsidiaries to conduct their respective businesses as presently conducted,
except where the failure to hold such Governmental Authorization would not
have a Material Adverse Effect. Set forth in Section 12(k) of the Schedule
of Exceptions is a listing of all such Government Authorizations held by
the Company and its subsidiaries. No consent, approval or authorization of
(or designation, declaration of filing with) any Governmental Authority by
the Company or any of its subsidiaries is required in connection with the
valid execution and delivery of this Agreement, the Ancillary Agreements,
or the offer or sale of the Common Securities or the Preferred Securities,
or the consummation of any other transaction contemplated hereby or under
the Ancillary Agreements, except for Required Approvals shown on Appendix
3.
l. Related-Party Transactions. To the knowledge of the Company, except as
disclosed in SEC Filings made by the Company or listed on Section 12(1) of
the Schedule to Exceptions, no employee, officer, director or stockholder
of the Company or any of its subsidiaries or member of his or her immediate
family is directly or indirectly interested in any material contract with
the Company or any of its subsidiaries.
13. Affirmative Covenants of the Company. The Company hereby covenants with the
Investor that between the date of this Agreement and the Closing, except as the
Investor shall otherwise consent, the Company will do the following:
a. Conduct its business only in the ordinary course of business consistent
with past practice and refrain from changing or introducing any method of
management or operations except in the ordinary course of business and
consistent with prior practices;
b. Refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except those that are
usual and normal in the ordinary course of business;
10
c. Maintain its equipment and other assets in good working condition and repair
according to the standards that it maintained to the date of this Agreement,
subject only to ordinary wear and tear;
d. Refrain from making any change or incurring any obligation to make a change
in its Organizational Documents or its authorized or issued capital stock;
e. Refrain from declaring, setting aside or paying any dividend or making any
other distribution in respect of capital stock, or making any direct or indirect
redemption, purchase or other acquisition of its capital stock;
f. Refrain from merging, consolidating or reorganizing with, or acquiring, any
entity;
g. Use its best efforts to keep intact its business organization, to keep
available its present officers, agents and employees and to preserve the
goodwill of all suppliers, customers and others having business relations with
it;
h. Maintain true, correct and complete books of accounts and records relating
to its business;
i. Comply in all respects with all Laws applicable to the conduct of its
business or its properties or assets;
j. Promptly upon its knowledge thereof, advise the Investor in writing of the
termination or resignation of any key employee and the circumstances therefore;
k. Pay all taxes, assessments, governmental charges or levies imposed upon it
or its income, profits or assets, or otherwise required to be paid by it, nor
fail to pay when due any liability or charge that if, unpaid, might become an
Encumbrance upon any such Company's assets; and
l. Promptly upon its knowledge thereof, advise the Investor in writing of (i)
any event, condition or circumstance occurring from the date hereof until the
Closing that would constitute a violation or breach of any representation,
warranty, covenant, agreement or provision contained in this Agreement
(provided, however, that such disclosure shall not be deemed to cure any
violation or breach of any such representation, warranty, covenant, agreement or
provision), or (ii) any event, occurrence, transaction or other item that would
have been or required to have been disclosed on any Schedule, delivered
hereunder, had such event, occurrence, transaction or item existed on the date
hereof, and use its commercially reasonable efforts to prevent or promptly
remedy the same.
m. The Company will not, directly or indirectly, through any officer, director,
affiliate, agent or otherwise, solicit, initiate or encourage submission of any
proposal or offer from any person or entity relating to the acquisition or
merger of the Company or any of its securities or assets or participate in any
discussions or negotiations regarding, furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, or
11
facilitate or encourage any effort or attempt by any other person or
entity to do or seek, any of the foregoing.
14. Consummation of Agreement. The Company and the Investor shall each use their
best efforts to perform and fulfill all conditions and obligations on their
respective parts to be performed and fulfilled under this Agreement, to the end
that the transaction contemplated by this Agreement shall be fully carried out.
To this end, each of the Company and the Investor will use best efforts to
obtain all Required Approvals.
15. Survival of Representations and Warranties. All of the representations and
warranties of the Company and the Investor contained in Sections 12 and 11,
respectively, of this Agreement shall survive from the date of this Agreement
until the Conversion.
16. Restrictions on Sale. In consideration of the acceptance of this
subscription, the Investor agrees that the Securities will not be offered for
sale, sold or transferred by the Investor other than pursuant to (i) an
effective registration under the Securities Act, an exemption available under
the Securities Act or a transaction that is otherwise in compliance with the
Securities Act; and (ii) an effective registration under the securities law of
any state or other jurisdiction applicable to the transaction, an exemption
available under such laws, or a transaction that is otherwise in compliance with
such laws.
17. No Review. The Investor understands that no U.S. federal or state agency has
passed upon the offering of the Securities or has made any finding or
determination as to the fairness of any investment in the Securities.
18. Confidentiality. The Investor agrees not to disclose or use any information
provided to the Investor by the Company or any of its agents in connection with
the offering of the Securities, except for the purpose of evaluating an
investment in the Securities.
19. Indemnification.
a. Indemnification by Investor. The Investor agrees to indemnify and hold
harmless the Company and its officers, directors, partners, employees,
agents, and affiliates against any and all loss, liability, claim, damage,
and expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty or breach or failure by
the Investor to comply with any covenant or agreement made by the Investor
herein or in any other document furnished by the Investor to the Company to
the Investor in connection with this transaction.
b. Indemnification by Company. The Company agrees to indemnify and hold
harmless the Investor against any and all loss, liability, claim, damage,
and expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty or breach or failure by
the
12
Company to comply with any covenant or agreement made by the Company
herein or in any other document furnished by the Company to the
Investor in connection with this transaction.
20. Definitions. In addition to the terms defined throughout this
Agreement, the following terms shall have the indicated respective
meanings:
"Court Order" shall mean a court order, judgment, administrative or
judicial order, writ, decree, stipulation, arbitration award or injunction.
"Encumbrance" shall mean any lien, option (including right of first
refusal or first offer), encumbrance, charge, restriction, mortgage,
pledge, security interest, title exception, restriction, claim or charge of
any kind or character.
"Force Majeure" shall mean failure of any party to perform its
obligations under this Agreement due to fire, flood, strikes or other
industrial disturbances, accidents, war, acts of terrorism, riot,
insurrection or other causes beyond the reasonable control of the such
party.
"Governmental Authority" shall mean any governmental body, whether
national, state, regional, local, or any subdivision or agency of any of
the foregoing.
"Governmental Authorization" shall mean any license, permit, order,
franchise agreement, concession, grant, authorization, consent or approval
from a Governmental Authority.
"Law" shall include any statute, law, ordinance, rule or regulation of
a Governmental Authority.
"Material Adverse Effect" shall mean an event which causes a material
adverse change in the condition, financial or otherwise, business
operations, properties, assets or liabilities of the Company except any
material adverse change resulting from a Force Majeure.
"NASDAQ" shall mean The Nasdaq Stock Market.
"Organizational Documents" shall mean the Certificate of Incorporation
of the Company as filed with the Secretary of State of the State of
Delaware on the date of this Agreement, as the same may be amended from
time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933.
21. Publicity and Disclosures. Except as may be otherwise required for
compliance with applicable stock exchange rules or securities laws, neither
the Investor nor the Company shall issue nor approve any news release or
other public announcement concerning this Agreement (or any schedules or
exhibits hereto) prior to the Closing without the prior written approval of
the other.
13
22. Irrevocability; Binding Effect. The Investor hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the Investor,
that, except as required by law, the Investor is not entitled to cancel,
terminate, or revoke this Agreement or any agreements of the Investor
hereunder, and that this Agreement and such other agreements shall survive
the death or disability of the Investor and shall be binding upon and inure
to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the Investor
is more than one person, the obligations of the Investor hereunder shall be
joint and several and the agreements, representations, warranties, and
acknowledgments herein contained shall be deemed to be made by and be
binding upon each such person and his heirs, executors, administrators,
successors, legal representatives, and permitted assigns.
23. Modification. Neither this Agreement nor any provisions hereof shall
be waived, modified, discharged, or terminated except by an instrument in
writing signed by the party against whom any such waiver, modification,
discharge, or termination is sought.
24. Notices. Any notice or other communication required or permitted to be
given hereunder shall by in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom
it is to be given (a) if to the Company, at the address set on the
signature page hereof, or (b) if to the Investor, at the address set forth
on the signature page hereof (or, in either case, to such other address as
the party shall have furnished in writing in accordance with the provisions
of this Section 25). Any notice or other communication given by certified
mail shall be deemed given at the time of certification thereof, except for
a notice changing a party's address which shall be deemed given at the time
of receipt thereof.
25. Assignability. This Agreement and the rights and obligations hereunder
are not transferable or assignable by any party without the prior written
consent of the other party.
26. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida as applied to residents of
that state executing contracts wholly to be performed in that state.
27. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by binding arbitration in
Orlando, Florida in accordance with the rules of American Arbitration
Association then in effect.
28. NOTICE TO FLORIDA RESIDENTS. PURSUANT TO SECTION 517.061(11)(A)(5) OF
THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, A FLORIDA SUBSCRIBER
HAS A RIGHT TO RESCIND THE SUBSCRIPTION BY GIVING NOTICE OF SUCH RESCISSION
BY TELEPHONE, TELEGRAPH OR LETTER, WITHIN THREE DAYS AFTER THE
CONSIDERATION HEREUNDER IS FIRST TENDERED TO THE COMPANY. IF THE NOTICE IS
TENDERED ORALLY, A WRITTEN CONFIRMATION THAT IT HAS BEEN RECEIVED SHOULD BE
REQUESTED. IT IS PRUDENT TO SEND NOTICE OF RESCISSION BY CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO INSURE THAT IT WAS RECEIVED. IF NOTICE IS NOT
RECEIVED BY SUCH TIME, THE FOREGOING RIGHT OF RESCISSION SHALL BE NULL AND
VOID.
14
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their authorized official, this Agreement, effective as of the
date first above written.
INTERNATIONAL ASSETS HOLDING CORPORATION
By: /s/ Diego J. Veitia
---------------------------------------
Printed Name: Diego J. Veitia
---------------------------------
Title: Chairman of the Board
----------------------------------------
Address:_______________________________________
_______________________________________________
INVESTOR:
/s/ John Radziwill
-----------------------------------------------
John Radziwill
Address:_____________________________
_____________________________________
15
APPENDIX 1 - ACCREDITED INVESTOR
An "Accredited Investor" within the meaning of Regulation D under the
Securities Act of 1933 (the "Act") includes the following:
Organizations
(1) A bank as defined in section 3(a)(2) of the Act, or any savings
and loan association or other institution as defined in section 3(a)(5)(A)
of the Act, whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to section 15 of the Securities
Exchange Act of 1934; insurance company as defined in section 2(13) of the
Act; an investment company registered under the Investment Company Act of
1940 or a business development company as defined in section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958; an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in section
3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are accredited investors.
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
(3) A trust (i) with total assets in excess of $5,000,000, (ii) not
formed for the specific purpose of acquiring the Securities, (iii) whose
purchase is directed by a person who, either alone or with his/her
purchaser representative, has such knowledge and experience in financial
and business matters that he/she is capable of evaluating the merits and
risks of the proposed investment.
(4) A corporation, business trust, partnership, or an organization
described in section 501(c)(3) of the Internal Revenue Code, which was not
formed for the specific purpose of acquiring the Securities, and which has
total assets in excess of $5,000,000.
(5) Any entity in which all of the equity owners are "accredited
investors".
Individuals
(6) Individuals with income from all sources for each of the last two
full calendar years whose reasonably expected income for this calendar year
exceeds either of:
(i) $200,000 individual income; or
(ii) $300,000 joint income with spouse.
NOTE: Your "income" for a particular year may be calculated by adding
to your adjusted gross income as calculated for Federal income tax purposes
any deduction for long term capital gains, any deduction for depletion
allowance, any exclusion for tax exempt interest and any losses of a
partnership allocated to you as a partner.
(7) Individuals with net worth as of the date hereof (individually or
jointly with your spouse), including the value of home, furnishings, and
automobiles, in excess of $1,000,000.
(8) Directors, executive officers or general partners of the Issuer.
APPENDIX 2 - DIRECTORS SLATE
Diego Veitia Scott Branch
Edward Cofrancesco Sean O'Connor
Dr. Robert A. Miller [nominee of John Radziwill]
APPENDIX 3 - THIRD PARTY APPROVALS
Written confirmation from NASDAQ.
EXHIBIT "A"
TERMS OF PREFERRED STOCK
EXHIBIT A
INTERNATIONAL ASSETS HOLDING CORPORATION
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
The undersigned, Diego J. Veitia, certifies that he is the
Chairman of the Board of INTERNATIONAL ASSETS HOLDING CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
(the "Company"), and hereby further certifies as follows:
A. Under the Certificate of Incorporation of the Company, the
Company is authorized to issue 5,000,000 shares, of preferred stock,
par value $.01 per share (the "Preferred Stock").
B. Pursuant to the provisions of the Certificate of
Incorporation of the Company, the Board of Directors has adopted the
following resolution creating a series of Preferred Stock designated
as "Series A Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of the corporation in accordance with the provisions
of the Certificate of Incorporation, a series of preferred stock,
par value $.01 per share, of the corporation be and hereby are
created, and that the designation and number of shares thereof
and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such
series and the qualifications, limitations and restrictions
thereof are as follows:
1. DIVIDEND RIGHTS.
(a) Participating Dividends. Holders of Series A Preferred
shall be entitled to receive, when and as declared by the Board of
Directors, any dividends payable to the holders of the Common Stock on the
basis that the Series A Preferred have been converted into Common Stock as
of the record date of such dividend pursuant to the provisions of Section
4.
2. VOTING RIGHTS.
(a) No General Rights. Except as otherwise provided herein
or as required by law, the Series A Preferred shall not be entitled to any
voting rights.
(b) Separate Vote of Series A Preferred. For so long as any
share of Series A Preferred remain outstanding, in addition to any other
vote or consent required herein or by law, the vote or written consent of
the holders of more than fifty percent (50%) of the then outstanding Series
A Preferred shall be necessary for effecting or validating the following
actions:
(i) Any amendment, alteration, waiver or repeal of
any provision of the Certificate of Incorporation or the Bylaws of the
Company (including any filing of a Certificate of Designation); or
(ii) Any increase or decrease (other than by
redemption or conversion) in the authorized number of shares of Series A
Preferred; or
(iii) Any issuance of any stock or any other
securities convertible into equity securities of the Company, other than
the issuance of common stock, par value $.01 per share (the "Common
Stock"), upon the conversion of the Series A Preferred or the issuance of
Common Stock upon the conversion of any convertible security outstanding as
of October __, 2002; or
(iv) Any redemption or repurchase of shares of any
stock or other equity security of the Company; or
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section
3(c)); or
(vi) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock.
3. LIQUIDATION RIGHTS.
(a) Liquidation Preference. Upon any liquidation,
dissolution, or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment shall be made to the
holders of any other class of stock (a "Junior Stock"), the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Company an amount per share of Series A Preferred equal to the price paid
for each share of Series A Preferred (the "Original Issue Price") (as
adjusted for any stock dividends, combinations, splits, recapitalization
and the like with respect to such shares) for each share of Series A
Preferred held by them (the "Liquidation Preference").
(b) Deemed Liquidations. The following events shall be
considered a liquidation under this Section 3:
(i) Any consolidation or merger of the Company with
or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization, own less
than 50% of the Company's voting power immediately after such
consolidation, merger or reorganization, or any transaction
2
or series of related transactions to which the Company is a party in which
in excess of fifty percent (50%) of the Company's voting power is
transferred (an "Acquisition"); or
(ii) A sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer"); or
(c) Pro Rata Distribution. If, upon any liquidation,
distribution, or winding up, the assets of the Company shall be
insufficient to make payment in full to all holders of Series A Preferred
of the Liquidation Preference set forth in Section 3(a), then such assets
shall be distributed among the holders of Series A Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
4. CONVERSION.
The Series A Preferred shall be converted into shares of Common Stock
on the following terms:
(a) Automatic Conversion. Subject to and in compliance with
the provisions of this Section 4, upon the approval by the shareholders of
the Company of the conversion provided for in this Section 4, the shares of
Series A Preferred will be automatically converted into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock
to which a holder of Series A Preferred shall be entitled upon conversion
shall be the product obtained by multiplying the "Series A Preferred
Conversion Rate" then in effect (determined as provided in Section 4(b)) by
the number of shares of Series A Preferred being converted.
(b) Series A Preferred Conversion Rate. The conversion rate
in effect at any time for conversion of the Series A Preferred (the "Series
A Preferred Conversion Rate") shall be the quotient obtained by dividing
the Liquidation Preference of the Series A Preferred by the "Series A
Preferred Conversion Price," calculated as provided in Section 4(c).
(c) Series A Preferred Conversion Price. The conversion
price for the Series A Preferred (the "Series A Preferred Conversion
Price") shall initially be the Original Issue Price of the Series A
Preferred. Such initial Series A Preferred Conversion Price shall be
adjusted from time to time in accordance with this Section 4. All
references to the Series A Preferred Conversion Price herein shall mean the
Series A Preferred Conversion Price as so adjusted.
(d) Mechanics of Conversion. Upon the conversion of the
Series A Preferred pursuant to this Section 4, the holder of the Series A
Preferred shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series
A Preferred. Thereupon, the Company shall promptly issue and deliver at
such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled. Such conversion
shall be deemed to have been made at the close of business on the date on
which the Series A Preferred are converted pursuant to Section 4(a), and
the person entitled to
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receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common
Stock as of the close of business on such date.
(e) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the date that the
first share of Series A Preferred is issued (the "Original Issue Date")
effect a subdivision of the outstanding Common Stock without a
corresponding subdivision of the Preferred Stock, the Series A Preferred
Conversion Price in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Company shall at any time or
from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a smaller number of shares without a
corresponding combination of the Preferred Stock, the Series A Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) Adjustment for Common Stock Dividends and
Distributions. If the Company at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, in each such
event the Series A Preferred Conversion Price that is then in effect shall
be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by
multiplying the Series A Preferred Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance
or the close of business on such record date, and (ii) the denominator of
which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on
such record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series A
Preferred Conversion Price shall be recomputed accordingly as of the close
of business on such record date and thereafter the Series A Preferred
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect
the actual payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Original Issue
Date, the Common Stock issuable upon the conversion of the Series A
Preferred is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than an Acquisition or Asset Transfer as defined in
Section 3(b) or a subdivision or combination of shares or stock dividend or
a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4), in any such event each holder of Series A
Preferred shall have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series A
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Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
(h) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the Original Issue Date,
there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(b) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 4), as a part
of such capital reorganization, provision shall be made so that the holders
of the Series A Preferred shall thereafter be entitled to receive upon
conversion of the Series A Preferred the number of shares of stock or other
securities or property of the Company to which a holder of the number of
shares of Common Stock deliverable upon conversion would have been entitled
on such capital reorganization, subject to adjustment in respect of such
stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this
Section 4 with respect to the rights of the holders of Series A Preferred
after the capital reorganization to the end that the provisions of this
Section 4 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the
Series A Preferred) shall be applicable after that event and be as nearly
equivalent as practicable.
(i) Notices of Record Date. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in
Section 3(b)) or other capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company,
any merger or consolidation of the Company with or into any other
corporation, or any Asset Transfer (as defined in Section 3(b)), or any
voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to each holder of Series A Preferred at
least twenty (20) days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend
or distribution, (B) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(j) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of any fractional share, the
Company shall, in lieu of issuing any fractional share, pay cash equal to
the
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product of such fraction multiplied by the Common Stock's fair market value
(as determined by the Board of Directors) on the date of conversion.
(k) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting
the conversion of the shares of the Series A Preferred, such number of its
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series A Preferred. If at
any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares
of the Series A Preferred, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(l) Payment of Taxes. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock
upon conversion of shares of Series A Preferred, excluding any tax or other
charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the
shares of Series A Preferred so converted were registered.
(m) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series A Preferred as required under Section
2(b), the Company shall not amend its Amended and Restated Certificate of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate
in order to protect the conversion rights of the holders of the Series A
Preferred against dilution or other impairment.
5. NO REISSUANCE OF SERIES A PREFERRED.
No share or shares of Series A Preferred acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued.
C. This Certificate of Designation has been duly adopted in accordance with
the provisions of Sections 151 of the General Corporation Law of the State
of Delaware by the Board of Directors of the Company.
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IN WITNESS WHEREOF, International Assets Holding Corporation has
caused this Certificate of Designation be signed by its Chairman of the
Board, on this 22 day of October, 2002.
INTERNATIONAL ASSETS HOLDING CORPORATION
By: /s/ Diego J. Veitia,
------------------------
Diego J. Veitia,
---------------
Chairman of the Board
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EXHIBIT VI
FIRST AMENDMENT TO
SHARE SUBSCRIPTION AGREEMENT
THIS FIRST AMENDMENT TO SHARE SUBSCRIPTION AGREEMENT ("Amendment") is made
and entered into as of the 6th day of December, 2002, by and between
INTERNATIONAL ASSETS HOLDING CORPORATION, a Delaware corporation (the
"Company"), and JOHN RADZIWILL (the "Investor").
R E C I T A L S
A. The Company and the Investor entered into a Share Subscription Agreement
(the "Agreement") dated as of October 22, 2002 whereby the Investor
subscribed to purchase 117,581 shares of common stock and 452,272 shares of
preferred stock of the Company.
B. The parties wish to amend the Agreement to provide that the Investor
shall purchase an additional 117,581 shares of preferred stock of the
Company (the "Additional Preferred Shares") in lieu of the like number of
shares of common stock referenced in the Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth hereinafter, the Company and the Investor agree as follows:
1. Recitals; Definitions. All of the above recitals are true and correct.
Any terms used but not defined in this Amendment shall have the definitions
assigned such terms in the Agreement.
2. Amendment to Agreement. Subject to the terms and conditions of the
Agreement, as hereby amended, the Company offers to the Investor and the
Investor hereby subscribes to purchase 569,853 shares of preferred stock,
$.01 par value of the Company, each at a fixed price of $1.70 per share in
lieu of the purchase of 452,272 shares of preferred stock and 117,581
shares of common stock referenced in Section 3 of the Agreement. Any and
all references to the "Common Securities" in the Agreement shall be deemed
to refer to the Additional Preferred Shares, and all references to
"Securities" in the Agreement shall be deemed to refer to the Preferred
Securities and Additional Preferred Securities. Each of the Preferred
Securities and the Additional Preferred Shares shall be subject to the
provisions applicable to the Preferred Securities and to the Securities in
the Agreement including, without limitation, the Redemption Right and
Repurchase Right set forth in Section 9 of the Agreement and the provisions
regarding convertibility.
3. Ratification - No Other Amendment. The Company and the Investor hereby
restate, ratify and confirm as accurate all representations and warranties
set forth in the Agreement. Except as modified or amended herein, no other
term, covenant or condition of the Agreement shall be considered modified
or amended.
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their authorized official, this Amendment, effective as of the
date first above written.
INTERNATIONAL ASSETS HOLDING
CORPORATION
By: /s/ Diego J. Veitia
--------------------
Printed Name: Diego J. Veitia
---------------
Title: Chairman
--------
INVESTOR:
/s/ John Radziwill
------------------
JOHN RADZIWILL
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EXHIBIT VII
International Assets Holding Corporation
Audit Committee Charter
The Audit Committee ("the Committee"), of the Board of Directors ("the
Board") of International Assets Holding Corporation ("the Company"), will
have the oversight responsibility, authority and specific duties as
described below.
COMPOSITION
The Committee will be comprised of two or more directors as determined by
the Board. The majority of the members of the Committee will meet the
independence requirements of the NASDAQ stock market. Independent directors
will be free of any relationship that would interfere with the exercise of
his or her independent judgment. The members of the Committee will be
elected annually at the first organizational meeting of the Board held after
the annual shareholders meeting. One of the members of the Committee will be
elected Committee Chair by the Board.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the
Securities and Exchange Commission (SEC); (ii) the system of internal
controls that management has established; and (iii) the internal and
external audit process. In addition, the Committee provides an avenue for
communication between internal audit, the independent accountants, financial
management and the Board. The Committee should have a clear understanding
with the independent accountants that they must maintain an open and
transparent relationship with the Committee, and that the ultimate
accountability of the independent accountants is to the Board and the
Committee. The Committee will maintain minutes and make regular reports to
the Board concerning its activities.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct
investigations, or to assure compliance with laws and regulations and the
Company's business conduct guidelines.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter or activity involving financial
accounting and financial reporting, as well as the internal controls of the
Company. In that regard, the Committee will have the authority to approve
the retention of external professionals, at Company expense, to render
advice and counsel in such matters. All employees
will be directed to cooperate with respect thereto as requested by members
of the Committee.
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MEETINGS
The Committee is to meet at least two times annually and as many additional
times as the Committee deems necessary. Content of the agenda for each
meeting should be cleared by the Committee Chair. The Committee is to meet
in separate executive sessions with the chief financial officer, independent
accountants and internal audit at least once each year and at other times
when considered appropriate.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chair may request that members of management and
representatives of the independent accountants and internal audit be present
at Committee meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
Review and reassess the adequacy of this charter annually and recommend any
proposed changes to the Board for approval. This should be done in
compliance with applicable NASDAQ Audit Committee Requirements.
Discuss with the Company's management, internal audit and independent
accountants the Company's accounting and financial reporting controls.
Obtain annually in writing from the independent accountants their letter as
to the adequacy of such controls.
Discuss with the Company's management, internal audit and independent
accountants significant accounting and reporting principles, practices and
procedures applied by the Company in preparing its financial statements.
Discuss with the independent accountants their judgments about the quality,
not just the acceptability, of the Company's accounting principles used in
financial reporting.
Review the scope of internal audit's work plan for the year and receive a
summary report of major findings by internal auditors and how management is
addressing the conditions reported.
Review the scope and general extent of the independent accountants' annual
audit. The Committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The
independent accountants should confirm to the Committee that no limitations
have been placed on the scope or nature of their audit procedures. The
Committee will review annually with management the fee arrangement with the
independent accountants.
Inquire as to the independence of the independent accountants and obtain
from the independent accountants, at least annually, a formal written
statement delineating all relationships between the independent accountants
and the Company as
2
contemplated by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees.
Have a predetermined arrangement with the independent accountants that they
will advise the Committee through its Chair of any matters identified during
their review of the Company's interim quarterly financial statements, and
that such notification as required under standards for communication with
Audit Committees is to be made prior to the related press release or, if not
practicable, prior to filing Forms 10-QSB.
At the completion of the annual audit, review with management, internal
audit and the independent accountants the following:
-- The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to shareholders
and on Form 10-KSB.
-- Results of the audit of the financial statements and the related report
thereon.
-- Any changes, or changes in the application of significant accounting
principals used by the Company in preparing the financial statements.
-- Significant changes to the annual external audit plan, if any, and any
serious disputes or difficulties with management encountered during the
audit. Inquire about the cooperation received by the independent accountants
during their audit, including access to all requested records, data and
information. Inquire of the independent accountants whether there have been
any disagreements with management which, if not satisfactorily resolved,
would have caused them to issue a nonstandard report on the Company's
financial statements.
-- Other communications required to be communicated by the independent
accountants by Statement of Auditing Standards (SAS) 61 as amended by SAS 90
relating to the conduct of the audit. Further, receive a written
communication from the independent accountants concerning their judgment
about the quality of the Company's accounting principles, as outlined in SAS
61 as amended by SAS 90, and that they concur with management's
representation concerning audit adjustments.
If deemed appropriate after such review and discussion, recommend to the
Board that the financial statements be included in the Company's annual
report on Form 10-KSB.
After preparation by management and review by internal audit and independent
accountants, approve the report required under SEC rules to be included in
the Company's annual proxy statement. The charter is to be published as an
appendix to the proxy statement every three years.
Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of management
regarding the responsiveness of the independent accountants to the Company's
needs.
3
Meet with management, internal audit and the independent accountants to
discuss any relevant significant recommendations that the independent
accountants may have, particularly those characterized as `material' or
`serious'. Typically, such recommendations will be presented by the
independent accountants in the form of a Letter of Comments and
Recommendations to the Committee. The Committee should review responses of
management to the Letter of Comments and Recommendations from the
independent accountants and receive follow-up reports on action taken
concerning the aforementioned recommendations.
Recommend to the Board the selection, retention or termination of the
Company's independent accountants.
Review the appointment and replacement of the senior internal audit
executive.
Review with management, internal audit and the independent accountants the
methods used to establish and monitor the Company's policies with respect to
unethical or illegal activities by Company employees that may have a
material impact on the financial statements.
Generally as part of the review of the annual financial statements, receive
an oral report(s), at least annually, from the Company's general counsel
concerning legal and regulatory matters that may have a material impact on
the financial statements.
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EXHIBIT VIII
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 22
day of October, 2002 (the "Effective Date"), by and between INTERNATIONAL ASSETS
HOLDING CORPORATION, a Delaware corporation (the "Company"), and SEAN M.
O'CONNOR (the "Executive").
R E C I T A L S
A. The Company, directly or through its subsidiaries, operates a financial
services company, including a market making and proprietary trading firm
specializing in global securities.
B. The Executive shall be, pursuant to the terms of this Agreement, the
Chief Executive Officer of the Company, and may hold such offices in its
subsidiaries as may be appropriate for the conduct of its business.
C. The Company is a publicly held entity, having previously offered shares
of the Company's common stock pursuant to a registration statement, and
continues to file reports as to the Company's business.
D. The Board of Directors of the Company (the "Board") considers it
essential to the best interests of the Company that the Executive commence
employment with the Company.
E. In order to induce the Executive to accept employment with the Company,
the Company desires to enter into this Agreement with the Executive, and to
be bound by it.
F. The Executive, desiring to accept employment by the Company, agrees to be
bound by the covenants herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Executive agree as follows:
1. Recitals. All of the above recitals are true and correct.
2. Term. The term of this Agreement shall be for a period of three years
commencing on the Effective Date, subject, however, to prior termination as
herein provided. Thereafter, this Agreement shall automatically renew for one
additional year unless either party shall have given written notice to the other
of its intent not to renew the Agreement no less than 90 days prior to the end
of the initial three year term of this Agreement and may be further extended by
the mutual written agreement of the Company and the Executive on a yearly basis.
3. Duties. During the period of employment (except as otherwise agreed by
the Executive), the Executive will be employed as the Chief Executive Officer of
the Company and shall have powers and duties as may from time to time be
delegated to the Executive by the Chief Executive
1
Officer or the Board. The Executive shall report to the Board. The Executive
shall devote substantially all of the Executive's business time to the affairs
of the Company.
4. Indemnification. The Company agrees to defend, indemnify and hold harmless
the Executive for acts in his capacity as Executive to the fullest extent
permitted by Delaware corporate law at the present time (or as such right of
indemnity may be increased in the future). The Company agrees to reimburse the
Executive on a monthly basis for any cost of defending any action or
investigation (including reasonable attorneys' fees and expenses) subject to an
undertaking from the Executive to repay the Company if the Executive is
determined not to be entitled to such indemnity by a Court of competent
jurisdiction.
5. Compensation and Related Matters.
(a) Basic Salary. As a compensation for the duties to be performed by the
Executive hereunder, the Company will pay the Executive a base salary at an
annual rate of $175,000 per year through the first anniversary of the Effective
Date, and such annual salary shall thereafter during the three year term hereof
increase effective as of the first day of each succeeding 12-month period by the
greater of (i) the change in the consumer price index during the preceding
12-month period, or (ii) such other amount as the Board in its discretion
determines to be appropriate. The Executive's base salary shall be payable in
accordance with the customary payroll practices of the company as in effect from
time to time during the period of employment.
(b) Bonus Plan.
(i) In addition to the base salary, the Executive shall be entitled
to additional compensation in an amount determined by the Board taking into
account the consolidated pre-tax earnings of the Company (including its
subsidiaries) for each fiscal year that ends during the initial three year
term hereof.
(ii) For purposes of this Section 5(b), the "consolidated pre-tax
earnings of the Company" shall be determined by the independent public
accountants then regularly servicing the Company, in accordance with
generally accepted accounting principles, consistently applied, based on the
audited consolidated financial statements of the Company for such fiscal
year, which determination shall be binding on the parties hereto.
(iii) Additional compensation authorized by the Board shall be paid
within sixty days after the later of: (A) the date on which the Company's
independent accountants delivers its final report on the audited
consolidated financial statements of the Company for the relevant fiscal
year, or (B) the next December 31 following the end of such fiscal year.
2
(c) Stock Options.
(i) The Executive shall be eligible to participate in a new
Stock Option Plan (the "Plan") to be established by the Company subject to
stockholder approval at the next convened annual general meeting of the
Company's stockholders. In the event the Plan is approved by the stockholders,
the Executive shall receive grants of options thereunder as provided in
subsection 5(c)(ii) hereof and at such other times as consideration shall be
given by the Board or such committee to the grants of stock options generally to
senior executive officers of the Company. If the Plan shall not be approved by
the stockholders or if the Plan is approved by the stockholders but shall
subsequently be terminated or if no options remain available for grant
thereunder, the Executive shall be entitled to participate in such other
incentive program as the Company may substitute for the Plan for its senior
executive officers.
(ii) Subject to approval of the Plan by the stockholders and
in connection with the employment of the Executive by the Company, the Company
will issue to the Executive 275,000 stock options at an exercise price of $2.50
per share, pursuant to the terms and conditions of the Plan and a Stock Option
Agreement to be executed between the Company and the Executive following
approval of the Plan (the "Stock Option Agreement"). The stock options will have
a term of 10 years. The stock options will have a three year vesting schedule
with one-third of such options becoming exercisable at the end each of the
first, second and third years of the Stock Option Agreement and will become
fully vested and non-forfeitable in the event of a change of control of the
Company. In the event of any termination of Executive's employment with the
Company pursuant to this Agreement: (i) any non-vested options shall be
cancelled and shall be of no further force or affect; and (ii) any vested
options shall be cancelled and shall be of no further force or affect if not
exercised by Executive within ninety (90) days of any termination of Executive's
employment with the Company.
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(d) Additional Compensation. The Company may award additional bonuses
to the Executive from time to time in amounts as determined by the Board or a
committee of the Board, and such compensation shall be payable in the manner and
at the time or times directed by the Board or its committee.
(e) Reimbursement of Expenses. During the term of this Agreement, the
Company shall promptly pay or reimburse the Executive for all reasonable
business expenses actually incurred or paid by the Executive in the performance
of his services hereunder, all in accordance with the policies and procedures of
the Company for the reimbursement of business expenses of its senior executive
officers, provided that the Executive properly accounts therefor in accordance
with Company policy.
(f) Benefits. The Company shall, at its sole cost, and expense, provide
life insurance, medical insurance, disability insurance, retirement and other
benefits comparable to those provided by comparable companies to their senior
executive officers.
6. Vacation, Days Off. The Executive may take a maximum of 4 weeks
vacation per year, at times to be determined in the manner most convenient for
the business of the Company. In addition, the Executive may take time off at
such times as may be determined by the Board to attend such meetings and
postgraduate courses as may comply with regulatory and licensing requirements of
the businesses conducted by the Company, or which otherwise directly advance the
interests of the Company. The Company may, in its discretion, reimburse the
Executive for some or all of the expenses incurred to register for or attend
such training courses.
7. Termination Provisions
(a) Termination
(i) The Executive's employment hereunder shall automatically
terminate (A) upon and by the failure of Executive to purchase Securities
pursuant to the terms and conditions of the Share Subscription Agreement
between the Company and Executive of even date herewith (the "Subscription
Agreement"); (B) upon any termination of the Subscription Agreement (C) upon
the Executive's death or Disability (as hereinafter defined); (D) upon
written notice by the Company for "Cause" (as hereinafter defined); or (E)
upon 30 days written notice by either party.
(ii) For purposes of this Agreement, "Disability" shall have
the same meaning as that term has under a disability policy maintained for
the Executive by the Company. If no such policy exists, or if payment of
benefits under the policy is not conditioned on meeting such a definition,
then "Disability" shall mean that the Executive is unable to perform his
duties hereunder on a full-time basis for three consecutive months after
reasonable accommodation by the Company.
(iii) For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon (A) the
willful failure by the Executive to substantially perform the Executive's
duties (other than any such failure resulting by the Executive's Disability)
and continuance of such failure for more than 30 days after the Company
notifies the Executive in writing of the Executive's failure to perform; (B)
the engaging by the Executive in willful misconduct which is injurious to
the Company; (C) the conviction of the Executive in a court of proper
jurisdiction of a crime which constitutes a felony in respect of
4
the conduct of the business of the Company; or (D) a finding by the National
Association of Securities Dealers, Inc. (the "NASD"), another
self-regulatory body of competent jurisdiction (the "SRO"), or U.S.
Securities and Exchange Commission (the "SEC') that the Executive personally
violated its rules or regulations, and such finding or penalty therefor
restricts the Executive's ability to perform his obligations under this
Agreement. Notwithstanding the foregoing, the Executive shall not be deemed
to have personally violated roles or regulations of the NASD, an SRO, or the
SEC, if a finding or penalty imposed is based upon a finding that the
Executive did not adequately supervise such employee, but was not otherwise
a party to the acts constituting the misconduct by such other person.
Further, the Executive shall not be deemed to have been terminated for Cause
unless and until there has been delivered to the Executive notice that a
resolution has been duly adopted by the Board which finds that the Company
has "Cause" to terminate the Executive as contemplated in this Section 7(a),
provided, that the Executive is terminated for Cause upon conviction of a
felony as identified in clause (C) above, and upon the revocation of any
license required under applicable law for the conduct of the business of the
Company by the Executive.
(b) Compensation Upon Termination. In the event the Executive's
employment hereunder terminates pursuant to Section 7(a)(i)(A) or 7(a)(i)(B)
hereof, no additional compensation shall be payable to the Executive following
the date of termination of employment. If either (i) the Company shall terminate
the employment of the Executive for Cause pursuant to the provisions of Section
7(a)(i)(C) hereof, or (ii) the Executive shall resign (other than as a result of
the violation of this Agreement by the Company), then the Company shall pay the
Executive 100% of the compensation set forth in Section 5 hereof for 30 days
following the date of the termination of employment. If the Company shall
terminate the employment of the Executive without Cause or the Executive resigns
as a result of a breach by the Company of its obligations to the Executive,
whether set forth herein or otherwise, then the Company shall pay the Executive
100% of the compensation set forth in Section 5 hereof for the remaining term of
this Agreement, or six full months, whichever period shall be greater.
8. Nondisclosure and Noncompetition.
During the period of employment hereunder and for a period of one year after
termination of this Agreement (for whatever reason), the Executive shall not,
without the written consent of the Board or a person authorized thereby,
disclose to any person or appropriate for his own use, information, knowledge or
data which is not theretofore publicly known and in the public domain that is
obtained by the Executive while in the employ of the Company (which for purposes
of this Section 8 shall include the Company or any of its subsidiaries),
respecting information about the Company, or of any products, systems, programs,
procedures, manuals, guides, confidential reports and communications,
improvements, designs or styles, customers, methods of distribution, sales,
prices, profits, costs, contracts, suppliers, business prospects, business
methods, techniques, research, trade secrets, or know-how of the Company, except
as the Executive may, in good faith, reasonably believe to be for the Company's
benefit. The Executive acknowledges that all information about the Company's
trading department customers, clients, prospects and pricing models constitutes
trade secrets under Section 688.002(4) of the Florida Statutes. Notwithstanding
the foregoing, following the termination of employment hereunder, the Executive
may disclose any information, knowledge or data of the type described to the
extent required by law in connection with any judicial or administrative
proceeding or inquiry.
5
In addition to the foregoing and in the interest of protecting the Company's
trade secrets, during the term of this Agreement and for a period of one year
after termination of this Agreement for any reason, the Executive shall not,
without the written consent of the Board or a person authorized thereby,
directly or indirectly, do any business with respect to, or solicit any business
similar to the business of the Company from, any of the Company's customers,
clients, or accounts without the consent of the Company; provided, that this
prohibition shall not limit the authority of the Executive (or the Executive's
new employer) to solicit business from any client or customer of the Company
that is already a customer or client of that new employer thirty days prior to
the last day the Executive is employed by the Company. In addition, Executive
shall not directly, or through any company of which Executive is an officer,
employee, or more than 5% owner, hire any employee of the Company, or attempt to
solicit any employee of, or independent contractor used by, the Company to leave
the service of the Company.
Executive agrees that the restrictions of this Section 8 are reasonable as to
time, area, subject matter and otherwise due to the confidential nature of the
information and trade secrets of the Company, and the unique role and
substantial compensation of the Executive. The covenants contained in this
Section 8 shall survive the termination of the Executive's employment pursuant
to this Agreement provided, however, that in the event this Agreement terminates
prior to the Conversion, as such term is defined in the Share Purchase Agreement
of even date herewith between the Executive and the Company, the noncompetition
provisions in this Section 8 shall not extend to the fixed income business
engaged in by the Executive prior to the date of this Agreement. The foregoing
provisions of this Section 8 shall be binding upon the Executive's heirs,
successors and legal representative. The Executive acknowledges and confirms
that the Company shall be entitled to specific performance or injunctive relief
without proof of monetary damages and without further proof of irreparable
injury in an action instituted in any court of competent jurisdiction, or a
proceeding before the NASD.
9. Other Directorships. The Company acknowledges and understands that the
Executive may be offered the opportunity to sit on the board of directors of
other public and private companies. The Executive agrees that he will not serve
on the board of directors of any company in competition with the Company and its
affiliates, and the Executive agrees that he will not accept any appointment to
another Board without the prior written consent of the Company, which consent
shall not be unreasonably withheld. The Company may determine that the Executive
shall not serve as a director, officer, or in any other position with an entity
that does not maintain liability insurance in an amount deemed to be adequate by
the Company. The Company agrees that the Executive shall be entitled to any fees
or salary received for his participation on the Boards of Directors of such
companies.
10. Attorneys' Fees. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations or any party
to this Agreement, the prevailing party shall be entitled to recover as an
element of such party's costs of suit, through all appeals, and not as damages,
reasonable attorneys' fees and paralegal's fees to be fixed by the arbitrator(s)
or court. The prevailing party shall be the party who is entitled to recover his
costs of suit or proceeding whether or not the action proceeds to final
judgment. A party not entitled to recover his costs shall not recover attorneys'
fees.
11. Successors and Assigns. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable by the Executive
without the written consent of the Company. The services to be performed by the
Executive hereunder may not be assigned by the Company, without the written
consent of the Executive, to any person, firm, corporation or other
6
entity, with the exception of a parent or subsidiary of the Company. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the Company and the Executive and the Executive's heirs and legal
representatives, and the Company's successors and permitted assigns.
12. Governing Law. This Agreement shall be construed in accordance with and
governed by the law of the State of Florida, without regard to the application
of principles of conflict of laws.
13. Notices. All notices and other communications required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have been
given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement shall specify by
notice to the other:
If to the Company: International Assets Holding Corporation
220 East Central Parkway
Altamonte Springs, Florida 32701
With a copy to: Louis T. M. Conti, Esq.
Holland & Knight LLP
200 S. Orange Avenue, Suite 2600
Orlando, Florida 32801
Mr. Sean M. O'Connor
____________________________________
____________________________________
With a copy to: Alfred George Smith II, Esq.
Shutts & Bowen
201 S. Biscayne Blvd., Suite 1500
Miami, Florida 33131-4328
All notices and communications shall be deemed to have been received on the date
of delivery or on the third business day after the mailing thereof.
14. Modification; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by the Board or a person authorized thereby, and is agreed to in a writing
signed by the Executive and such officer as may be specifically designated by
the Board. No waiver by either party hereto at the time of any breach by the
other party hereto of any condition or provision of this Agreement, or
compliance therewith, by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time, or at any prior or
subsequent time.
15. Complete Understanding. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. This Agreement
supercedes all prior agreements and understandings between the Company and the
Executive concerning his employment by the Company as well as his compensation,
including stock options, in connection therewith, except that the Executive
acknowledges that certain confidentiality provisions contained have been
subsumed and incorporated herein, and shall be deemed to continue from the
inception of his employment by the Company.
7
16. Headings. The headings in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of this
Agreement.
17. Severability. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and if any
one or more of the words, phrases, sentences, clauses or sections contained in
this Agreement shall be declared invalid, this Agreement shall be construed as
if such invalid word or words, phrase or phrases, sentence or sentences, clause
or clauses, or section or sections had not been inserted.
18. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
19. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding arbitration in Orlando,
Florida, in accordance with the rules of the American Arbitration Association
then in effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
COMPANY:
INTERNATIONAL ASSETS HOLDING CORPORATION,
a Delaware corporation
By: /s/ Diego J. Veitia
-------------------
Name: Diego J. Veitia
Title: Chairman of the Board
EXECUTIVE:
/s/ Sean M. O'Connor
--------------------
Sean M. O'Connor
8
EXHIBIT IX
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 22
day of October, 2002 (the "Effective Date"), by and between INTERNATIONAL ASSETS
HOLDING CORPORATION, a Delaware corporation (the "Company"), and SCOTT J. BRANCH
(the "Executive").
R E C I T A L S
A. The Company, directly or through its subsidiaries, operates a financial
services company, including a market making and proprietary trading firm
specializing in global securities.
B. The Executive shall be, pursuant to the terms of this Agreement, the
President of the Company, and may hold such offices in its subsidiaries as
may be appropriate for the conduct of its business.
C. The Company is a publicly held entity, having previously offered shares
of the Company's common stock pursuant to a registration statement, and
continues to file reports as to the Company's business.
D. The Board of Directors of the Company (the "Board") considers it
essential to the best interests of the Company that the Executive commence
employment with the Company.
E. In order to induce the Executive to accept employment with the Company,
the Company desires to enter into this Agreement with the Executive, and to
be bound by it.
F. The Executive, desiring to accept employment by the Company, agrees to be
bound by the covenants herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, the Company and the Executive agree as follows:
1. Recitals. All of the above recitals are true and correct.
2. Term. The term of this Agreement shall be for a period of three years
commencing on the Effective Date, subject, however, to prior termination as
herein provided. Thereafter, this Agreement shall automatically renew for one
additional year unless either party shall have given written notice to the other
of its intent not to renew the Agreement no less than 90 days prior to the end
of the initial three year term of this Agreement and may be further extended by
the mutual written agreement of the Company and the Executive on a yearly basis.
3. Duties. During the period of employment (except as otherwise agreed by
the Executive), the Executive will be employed as the President of the Company
and shall have powers and duties as may from time to time be delegated to the
Executive by the Chief Executive Officer or the
1
Board. The Executive shall report to Chief Executive Officer of the Company. The
Executive shall devote substantially all of the Executive's business time to the
affairs of the Company.
4. Indemnification. The Company agrees to defend, indemnify and hold harmless
the Executive for acts in his capacity as Executive to the fullest extent
permitted by Delaware corporate law at the present time (or as such right of
indemnity may be increased in the future). The Company agrees to reimburse the
Executive on a monthly basis for any cost of defending any action or
investigation (including reasonable attorneys' fees and expenses) subject to an
undertaking from the Executive to repay the Company if the Executive is
determined not to be entitled to such indemnity by a Court of competent
jurisdiction.
5. Compensation and Related Matters.
(a) Basic Salary. As a compensation for the duties to be performed by
the Executive hereunder, the Company will pay the Executive a base salary at an
annual rate of $175,000 per year through the first anniversary of the Effective
Date, and such annual salary shall thereafter during the three year term hereof
increase effective as of the first day of each succeeding 12-month period by the
greater of (i) the change in the consumer price index during the preceding
12-month period, or (ii) such other amount as the Board in its discretion
determines to be appropriate. The Executive's base salary shall be payable in
accordance with the customary payroll practices of the company as in effect from
time to time during the period of employment.
(b) Bonus Plan.
(i) In addition to the base salary, the Executive shall be entitled to
additional compensation in an amount determined by the Board taking into
account the consolidated pre-tax earnings of the Company (including its
subsidiaries) for each fiscal year that ends during the initial three year
term hereof.
(ii) For purposes of this Section 5(b), the "consolidated pre-tax earnings
of the Company" shall be determined by the independent public accountants then
regularly servicing the Company, in accordance with generally accepted
accounting principles, consistently applied, based on the audited consolidated
financial statements of the Company for such fiscal year, which determination
shall be binding on the parties hereto.
(iii) Additional compensation authorized by the Board shall be paid within
sixty days after the later of: (A) the date on which the Company's independent
accountants delivers its final report on the audited consolidated financial
statements of the Company for the relevant fiscal year, or (B) the next December
31 following the end of such fiscal year.
2
(c) Stock Options.
(i) The Executive shall be eligible to participate in a new
Stock Option Plan (the "Plan") to be established by the Company subject to
stockholder approval at the next convened annual general meeting of the
Company's stockholders. In the event the Plan is approved by the stockholders,
the Executive shall receive grants of options thereunder as provided in
subsection 5(c)(ii) hereof and at such other times as consideration shall be
given by the Board or such committee to the grants of stock options generally to
senior executive officers of the Company. If the Plan shall not be approved by
the stockholders or if the Plan is approved by the stockholders but shall
subsequently be terminated or if no options remain available for grant
thereunder, the Executive shall be entitled to participate in such other
incentive program as the Company may substitute for the Plan for its senior
executive officers.
(ii) Subject to approval of the Plan by the stockholders and
in connection with the employment of the Executive by the Company, the Company
will issue to the Executive 275,000 stock options at an exercise price of $2.50
per share, pursuant to the terms and conditions of the Plan and a Stock Option
Agreement to be executed between the Company and the Executive following
approval of the Plan (the "Stock Option Agreement"). The stock options will have
a term of 10 years. The stock options will have a three year vesting schedule
with one-third of such options becoming exercisable at the end each of the
first, second and third years of the Stock Option Agreement and will become
fully vested and non-forfeitable in the event of a change of control of the
Company. In the event of any termination of Executive's employment with the
Company pursuant to this Agreement: (i) any non-vested options shall be
cancelled and shall be of no further force or affect; and (ii) any vested
options shall be cancelled and shall be of no further force or affect if not
exercised by Executive within ninety (90) days of any termination of Executive's
employment with the Company.
(d) Additional Compensation. The Company may award additional
bonuses to the Executive from time to time in amounts as determined by the Board
or a committee of the Board, and such compensation shall be payable in the
manner and at the time or times directed by the Board or its committee.
(e) Reimbursement of Expenses. During the term of this Agreement,
the Company shall promptly pay or reimburse the Executive for all reasonable
business expenses actually incurred or paid by the Executive in the performance
of his services hereunder, all in accordance with the policies and procedures of
the Company for the reimbursement of business expenses of its senior executive
officers, provided that the Executive properly accounts therefor in accordance
with Company policy.
(f) Benefits. The Company shall, at its sole cost, and expense,
provide life insurance, medical insurance, disability insurance, retirement and
other benefits comparable to those provided by comparable companies to their
senior executive officers.
6. Vacation, Days Off. The Executive may take a maximum of 4 weeks
vacation per year, at times to be determined in the manner most convenient for
the business of the Company. In addition, the Executive may take time off at
such times as may be determined by the Board to attend such meetings and
postgraduate courses as may comply with regulatory and licensing requirements of
the businesses conducted by the Company, or which otherwise directly advance the
3
interests of the Company. The Company may, in its discretion, reimburse the
Executive for some or all of the expenses incurred to register for or attend
such training courses.
7. Termination Provisions
(a) Termination
(i) The Executive's employment hereunder shall automatically
terminate (A) upon and by the failure of Executive to purchase Securities
pursuant to the terms and conditions of the Share Subscription Agreement
between the Company and Executive of even date herewith (the "Subscription
Agreement"); (B) upon any termination of the Subscription Agreement (C) upon
the Executive's death or Disability (as hereinafter defined); (D) upon
written notice by the Company for "Cause" (as hereinafter defined); or (E)
upon 30 days written notice by either party.
(ii) For purposes of this Agreement, "Disability" shall have
the same meaning as that term has under a disability policy maintained for
the Executive by the Company. If no such policy exists, or if payment of
benefits under the policy is not conditioned on meeting such a definition,
then "Disability" shall mean that the Executive is unable to perform his
duties hereunder on a full-time basis for three consecutive months after
reasonable accommodation by the Company.
(iii) For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon (A) the
willful failure by the Executive to substantially perform the Executive's
duties (other than any such failure resulting by the Executive's Disability)
and continuance of such failure for more than 30 days after the Company
notifies the Executive in writing of the Executive's failure to perform; (B)
the engaging by the Executive in willful misconduct which is injurious to
the Company; (C) the conviction of the Executive in a court of proper
jurisdiction of a crime which constitutes a felony in respect of the conduct
of the business of the Company; or (D) a finding by the National Association
of Securities Dealers, Inc. (the "NASD"), another self-regulatory body of
competent jurisdiction (the "SRO"), or U.S. Securities and Exchange
Commission (the "SEC') that the Executive personally violated its rules or
regulations, and such finding or penalty therefor restricts the Executive's
ability to perform his obligations under this Agreement. Notwithstanding the
foregoing, the Executive shall not be deemed to have personally violated
roles or regulations of the NASD, an SRO, or the SEC, if a finding or
penalty imposed is based upon a finding that the Executive did not
adequately supervise such employee, but was not otherwise a party to the
acts constituting the misconduct by such other person. Further, the
Executive shall not be deemed to have been terminated for Cause unless and
until there has been delivered to the Executive notice that a resolution has
been duly adopted by the Board which finds that the Company has "Cause" to
terminate the Executive as contemplated in this Section 7(a), provided, that
the Executive is terminated for Cause upon conviction of a felony as
identified in clause (C) above, and upon the revocation of any license
required under applicable law for the conduct of the business of the Company
by the Executive.
(b) Compensation Upon Termination. In the event the Executive's
employment hereunder terminates pursuant to Section 7(a)(i)(A) or 7(a)(i)(B)
hereof, no additional compensation shall be payable to the Executive following
the date of termination of employment. If either (i) the Company shall terminate
the employment of the Executive for Cause pursuant to the provisions of Section
7(a)(i)(C) hereof, or (ii) the Executive shall resign (other than as a result of
the violation of this Agreement by the Company), then the Company shall pay the
Executive
4
100% of the compensation set forth in Section 5 hereof for 30 days following the
date of the termination of employment. If the Company shall terminate the
employment of the Executive without Cause or the Executive resigns as a result
of a breach by the Company of its obligations to the Executive, whether set
forth herein or otherwise, then the Company shall pay the Executive 100% of the
compensation set forth in Section 5 hereof for the remaining term of this
Agreement, or six full months, whichever period shall be greater.
8. Nondisclosure and Noncompetition.
During the period of employment hereunder and for a period of one year after
termination of this Agreement (for whatever reason), the Executive shall not,
without the written consent of the Board or a person authorized thereby,
disclose to any person or appropriate for his own use, information, knowledge or
data which is not theretofore publicly known and in the public domain that is
obtained by the Executive while in the employ of the Company (which for purposes
of this Section 8 shall include the Company or any of its subsidiaries),
respecting information about the Company, or of any products, systems, programs,
procedures, manuals, guides, confidential reports and communications,
improvements, designs or styles, customers, methods of distribution, sales,
prices, profits, costs, contracts, suppliers, business prospects, business
methods, techniques, research, trade secrets, or know-how of the Company, except
as the Executive may, in good faith, reasonably believe to be for the Company's
benefit. The Executive acknowledges that all information about the Company's
trading department customers, clients, prospects and pricing models constitutes
trade secrets under Section 688.002(4) of the Florida Statutes. Notwithstanding
the foregoing, following the termination of employment hereunder, the Executive
may disclose any information, knowledge or data of the type described to the
extent required by law in connection with any judicial or administrative
proceeding or inquiry.
In addition to the foregoing and in the interest of protecting the Company's
trade secrets, during the term of this Agreement and for a period of one year
after termination of this Agreement for any reason, the Executive shall not,
without the written consent of the Board or a person authorized thereby,
directly or indirectly, do any business with respect to, or solicit any business
similar to the business of the Company from, any of the Company's customers,
clients, or accounts without the consent of the Company; provided, that this
prohibition shall not limit the authority of the Executive (or the Executive's
new employer) to solicit business from any client or customer of the Company
that is already a customer or client of that new employer thirty days prior to
the last day the Executive is employed by the Company. In addition, Executive
shall not directly, or through any company of which Executive is an officer,
employee, or more than 5% owner, hire any employee of the Company, or attempt to
solicit any employee of, or independent contractor used by, the Company to leave
the service of the Company.
Executive agrees that the restrictions of this Section 8 are reasonable as to
time, area, subject matter and otherwise due to the confidential nature of the
information and trade secrets of the Company, and the unique role and
substantial compensation of the Executive. The covenants contained in this
Section 8 shall survive the termination of the Executive's employment pursuant
to this Agreement provided, however, that in the event this Agreement terminates
prior to the Conversion, as such term is defined in the Share Purchase Agreement
of even date herewith between the Executive and the Company, the noncompetition
provisions in this Section 8 shall not extend to the fixed income business
engaged in by the Executive prior to the date of this Agreement. The foregoing
provisions of this Section 8 shall be binding upon the Executive's heirs,
successors and legal
5
representative. The Executive acknowledges and confirms that the Company shall
be entitled to specific performance or injunctive relief without proof of
monetary damages and without further proof of irreparable injury in an action
instituted in any court of competent jurisdiction, or a proceeding before the
NASD.
9. Other Directorships. The Company acknowledges and understands that the
Executive may be offered the opportunity to sit on the board of directors of
other public and private companies. The Executive agrees that he will not serve
on the board of directors of any company in competition with the Company and its
affiliates, and the Executive agrees that he will not accept any appointment to
another Board without the prior written consent of the Company, which consent
shall not be unreasonably withheld. The Company may determine that the Executive
shall not serve as a director, officer, or in any other position with an entity
that does not maintain liability insurance in an amount deemed to be adequate by
the Company. The Company agrees that the Executive shall be entitled to any fees
or salary received for his participation on the Boards of Directors of such
companies.
10. Attorneys' Fees. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations or any party
to this Agreement, the prevailing party shall be entitled to recover as an
element of such party's costs of suit, through all appeals, and not as damages,
reasonable attorneys' fees and paralegal's fees to be fixed by the arbitrator(s)
or court. The prevailing party shall be the party who is entitled to recover his
costs of suit or proceeding whether or not the action proceeds to final
judgment. A party not entitled to recover his costs shall not recover attorneys'
fees.
11. Successors and Assigns. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable by the Executive
without the written consent of the Company. The services to be performed by the
Executive hereunder may not be assigned by the Company, without the written
consent of the Executive, to any person, firm, corporation or other entity, with
the exception of a parent or subsidiary of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and the Executive and the Executive's heirs and legal representatives,
and the Company's successors and permitted assigns.
12. Governing Law. This Agreement shall be construed in accordance with and
governed by the law of the State of Florida, without regard to the application
of principles of conflict of laws.
6
13. Notices. All notices and other communications required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have been
given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement shall specify by
notice to the other:
If to the Company: International Assets Holding Corporation
220 East Central Parkway
Altamonte Springs, Florida 32701
With a copy to: Louis T. M. Conti, Esq.
Holland & Knight LLP
200 S. Orange Avenue, Suite 2600
Orlando, Florida 32801
Mr. Scott Branch
39 Meeker Avenue
Allendale, New Jersey 07401
With a copy to: Alfred George Smith II, Esq.
Shutts & Bowen
201 S. Biscayne Blvd., Suite 1500
Miami, Florida 33131-4328
All notices and communications shall be deemed to have been received on the date
of delivery or on the third business day after the mailing thereof.
14. Modification; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by the Board or a person authorized thereby, and is agreed to in a writing
signed by the Executive and such officer as may be specifically designated by
the Board. No waiver by either party hereto at the time of any breach by the
other party hereto of any condition or provision of this Agreement, or
compliance therewith, by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time, or at any prior or
subsequent time.
15. Complete Understanding. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. This Agreement
supercedes all prior agreements and understandings between the Company and the
Executive concerning his employment by the Company as well as his compensation,
including stock options, in connection therewith, except that the Executive
acknowledges that certain confidentiality provisions contained have been
subsumed and incorporated herein, and shall be deemed to continue from the
inception of his employment by the Company.
16. Headings. The headings in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of this
Agreement.
17. Severability. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and if any
one or more of the words, phrases, sentences, clauses or sections contained in
this
7
Agreement shall be declared invalid, this Agreement shall be construed as
if such invalid word or words, phrase or phrases, sentence or sentences, clause
or clauses, or section or sections had not been inserted.
18. Counterparts. This Agreement may be executed in one or more counterparts,
each of which
19. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding arbitration in Orlando,
Florida, in shall be deemed to be an original but all of which together will
constitute one and the same instrument.accordance with the rules of the American
Arbitration Association then in effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
COMPANY:
INTERNATIONAL ASSETS HOLDING
CORPORATION, a Delaware corporation
By: /s/ Diego J. Veitia
-------------------
Name: Diego J. Veitia
Title: Chairman of the Board
EXECUTIVE
/s/ Scott J. Branch
-------------------
Scott J. Branch
8
EXHIBIT X
INTERNATIONAL ASSETS HOLDING CORPORATION
2003 STOCK OPTION PLAN
International Assets Holding Corporation, a Delaware
corporation, hereby adopts a stock option plan for its key employees,
officers, directors and consultants, in accordance with the following terms
and conditions.
1. Purpose of the Plan. The purpose of the Plan is to advance
the growth and development of the Company by affording an opportunity to
executives, consultants and key employees of the Company as well as
directors of the Company and its affiliates to purchase shares of the
Company's common stock and to provide incentives for them to put forth
maximum efforts for the success of the Company's business. The Plan is
intended to permit certain designated stock options granted under the Plan
to qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended.
2. Definitions. For purposes of this Plan, the following
capitalized terms shall have the meanings set forth below:
(a) "Board of Directors" means the board of directors of
the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
currently in effect or as hereafter amended.
(c) "Company" means International Assets Holding
Corporation ,a Delaware corporation.
(d) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(e) "Eligible Employee" means all directors, consultants,
officers, and executive, managerial, and other key employees of the Company
or- any Parent or Subsidiary. In order to be eligible for an Incentive Stock
Option, a director or a consultant must also be a common law employee of the
Company as provided in Section 422 of the Code; however, in order to be
eligible for a Nonqualified Stock Option, a director or consultant need not
be a common law employee of the Company.
(f) "Fair Market Value" as of a particular date shall mean
the fair market value of the Common Stock. If the Common Stock is admitted
to trading on a national securities exchange, fair market value of the
Common Stock on any date shall be the closing price reported for the Common
Stock on the last day preceding such date on which a sale was reported. If
the Common Stock is admitted to quotation on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") System or other comparable
quotation system and has been designated as a National Market System ("NMS")
security, fair market value of the Common Stock on any date shall be the
closing sale price reported for the Common Stock on such system on the last
date preceding such date on which a sale was reported. If the Common Stock
is admitted to quotation on the
1
Nasdaq System but has not been designated as an NMS security, the fair
market value of the Common Stock on any date shall be the average of the
highest bid and lowest asked prices of such share on such system on the last
date preceding such date on which both bid and ask prices were reported. If
the Committee determines that the value of the Common Stock determined on
the basis of selling or bid and asked prices as provided above in this
Section 2(f) does not reflect the fair market value of the Common Stock
because no actual sale prices or bona fide bid and asked prices are
available for a date within a reasonable period before the valuation date,
then the fair market value of the Common Stock shall be determined by the
Board of Directors in its sole discretion and in good faith as required by
Section 422 of the Code.
(g) "Incentive Stock Option(s)" means a stock option
granted to an Eligible Employee to purchase Shares which is intended to
qualify as an "incentive stock option," as defined in Section 422 of the
Code.
(h) "Mature Shares" means Shares for which the holder
thereof has good title, free and clear of all liens and encumbrances, and
that such holder either (i) has held for at least six months or (ii) has
purchased on the open market.
(i) "Nonqualified Stock Option(s)" means a stock
option granted to an Eligible Employee to purchase Shares which is not
intended to qualify as an "incentive stock option" as defined in Section 422
of the Code.
(j) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(k) "Option" means any unexercised and unexpired
Incentive Stock Option or Nonqualified Stock Option issued under this Plan,
or any portion thereof remaining unexercised and unexpired.
(l) "Option Agreement" means a written agreement by
and between the Company and an Optionee setting forth the terms and
conditions of the Option granted by the Board of Directors to such Optionee.
(m) "Optionee" means any Eligible Employee who is
granted an Option as provided in the Plan.
(n) "Parent" means any present or future "parent
corporation" of the Company as such term is defined in Section 424(e) of the
Code and which the Board of Directors of the Company has elected to be
covered by the Plan.
(o) "Plan" means this International Assets Holding
Company 2003 Stock Option Plan, as amended from time to time.
(p) "Share" means a share of Stock.
(q) "Stock" means authorized and unissued shares of
the Company's Common Stock, $.01 par value per share, or treasury shares of
such class.
2
(r) "Subsidiary" means any present or future
"subsidiary corporation" of the Company, as such term is defined in Section
424(f) of the Code and which the Board of Directors has elected to be
covered by the Plan.
(s) Where applicable, the terms used in this Plan
have the same meaning as the terms used in the Code and the regulations and
rulings issued thereunder and pursuant thereto, with reference to Options.
(3) Stock Subject to Option.
(a) Available Shares. The total number of Shares
which may be issued by the Company to all Optionees under this Plan is
[__________] Shares. Except as otherwise provided in Section 3(b) of the
Plan, the total number of Shares which may be so issued may be increased
only by a resolution adopted by the Board of Directors and approved by the
shareholders of the Company.
(b) Expired Options and Delivered Shares. If any
Option granted under this Plan is terminated or expires for any reason
whatsoever, in whole or in part, the Shares (or remaining Shares) subject to
that particular Option shall again be available for grant under this Plan.
If any Shares (whether subject to or received pursuant to an Option granted
under the Plan, purchased on the open market, or otherwise obtained, and
including Shares that are deemed (by attestation or otherwise) to have been
delivered to the Company as payment for all or any portion of the exercise
price of an Option) are withheld or applied as payment by the Company in
connection with the exercise of an Option or the withholding of taxes
related thereto, such Shares, to the extent of any such withholding or
payment, shall again be available or shall increase the number of Shares
available, as applicable, for future Options under the Plan. The Board may
from time to time determine the appropriate methodology for calculating the
number of Shares issued pursuant to the Plan.
(4) Administration of the Plan.
(a) Board of Directors. This Plan shall be
administered by the Board of Directors who may, from time to time, issue
orders or adopt resolutions, not inconsistent with the provisions of the
Plan, to interpret the provisions and supervise the administration of the
Plan. All determinations shall be by the affirmative vote of a majority of
the members of the Board of Directors at a meeting, or reduced to writing
and signed by all of the members of the Board of Directors. Subject to the
Company's Bylaws, all decisions made by the Board of Directors in selecting
Optionees, establishing the number of shares and terms applicable to each
Option, and in construing the provisions of this Plan shall be final,
conclusive and binding on all persons, including the Company, shareholders,
Optionees, and purchasers of shares pursuant to this Plan. No member of the
Board of Directors shall be liable for any action or determination made in
good faith with respect to the Plan or an Option granted hereunder.
(b) Compensation Committee. The Board of Directors
may from time to time appoint a Compensation Committee, consisting of not
less than two (2) directors (the "Committee"). The Board of Directors may
delegate to such Committee full power and authority to take any action
required or permitted to be taken by the Board of Directors under this Plan,
subject to restrictions on affiliate participation under the Securities
Exchange Act of 1934, as amended, pertaining to,
3
among other things, Section 16(b). The Board of Directors may from time to
time, at its sole discretion, remove members from or add members to the
Committee. Vacancies may be filled by the Board of Directors only. Where the
context requires, the Board of Directors shall mean the Committee, if
appointed, for matters dealing with administration of the Plan.
(c) Authorization of Officers to Grant Options. In
accordance with applicable law, the Board of Directors may, by a resolution
adopted by the Board of Directors, authorize one or more Officers to
designate Eligible Employees (excluding the Officer so authorized) to be
Optionees of Options and determine the number of Options to be granted to
such Eligible Employees; provided, however, that the resolution adopted by
the Board of Directors so authorizing such Officer or Officers shall specify
the total number and the terms (including the exercise price, which may
include a formula by which such price may be determined) of Options such
Officer or Officers may so grant.
(d) Compliance with Internal Revenue Code. The Board
of Directors (or committee if appointed) shall at all times administer this
Plan and make interpretations hereunder in such a manner that Options
granted hereunder designated as Incentive Stock Options will meet the
requirements of Section 422 of the Code.
5. Selection of Optionees.
(a) Discretion of the Board of Directors. In
determining which Eligible Employees shall be offered Options, as well as
the terms thereof, the Board of Directors shall evaluate, among other
things, (i) the duties and responsibilities of Eligible Employees, (ii)
their past and prospective contributions to the success of the Company,
(iii) the extent to which they are performing and will continue to perform
outstanding services for the benefit of the Company, and (iv) such other
factors as the Board of Directors deems relevant.
(b) Limitation on Incentive Stock Options. The
aggregate Fair Market Value, determined on the date of grant, of Shares with
respect to which any Incentive Stock Options under the Plan and all other
plans of the Company become exercisable by any individual for the first time
in any calendar year shall not exceed $100,000. To the extent that any
Option exceeds this limit, it shall be deemed a Nonqualified Stock Option.
(c) Limitation on Annual Grants of Options. No
Eligible Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 300,000 Shares. The limitation described in
this Section 5(c) shall be adjusted proportionately in connection with any
change in the Company's capitalization as described in Section 12 of the
Plan. If an Option is canceled in the same fiscal year of the Company in
which it was granted (other than in connection with a transaction described
in Sections 12 or 13 of the Plan), the canceled Option will be counted
against the limitation described in this Section 5(c).
(6) Option Agreement. Subject to the provisions of this
Plan, each Option granted to an Optionee shall be set forth in an Option
Agreement upon such terms and conditions as the Board of Directors
determines, including a vesting schedule. Each such Option Agreement shall
incorporate the provisions of this Plan by reference. The date of the grant
of an Option is the date specified in the Option
4
Agreement. Any Option Agreement shall clearly identify the corresponding
Option as an Incentive Stock Option or Nonqualified Stock Option.
(7) Option Prices.
(a) Determination of Option Price. Except as
otherwise provided by this Section 7(a), the option price for Stock shall
not be less than one hundred percent (100%) of the fair market value of the
Stock on the date of the grant of such Option. The option price for Stock
granted to an Eligible Employee who possesses more than ten percent (10%) of
the total combined voting power of all classes of common stock of the
Company shall not be less than one hundred ten percent (110%) of the fair
market value of the Stock on the date of the grant of such Option. Any
Option that is (1) granted to an Eligible Employee in connection with the
acquisition ("Acquisition"), however effected, by the Company of another
corporation or entity ("Acquired Entity") or the assets thereof, (2)
associated with an option to purchase shares of stock or other equity
interest of the Acquired Entity or an affiliate thereof ("Acquired Entity
Option") held by such Eligible Employee immediately prior to such
Acquisition, and (3) intended to preserve for the Eligible Employee the
economic value of all or a portion of such Acquired Entity Option, may be
granted with such exercise price as the Board of Directors determines to be
necessary to achieve such preservation of economic value. Any Option that is
granted to an Eligible Employee not previously employed by the Company, or a
Parent or Subsidiary, as a material inducement to the Eligible Employee's
commencing employment with the Company may be granted with such exercise
price as the Board of Directors determines to be necessary to provide such
material inducement.
(b) Determination of Stock Ownership. For purposes of
paragraphs 7 and 8, an Optionee's common stock ownership shall be determined
by taking into account the rules of constructive ownership set forth in
Section 424(d) of the Code.
(8) Term of Option. The term of an Option may vary within
the sole discretion of the Board of Directors, provided, however., that the
term of an Incentive Stock Option granted to an Eligible Employee shall not
exceed ten (10) years from the date of grant of such Incentive Stock Option.
An Incentive Stock option may be cancelled only in connection with the
termination of employment or death of the Optionee (as more particularly
described in paragraph 9 hereof). A Nonqualified Stock Option may be
cancelled only in connection with the termination of employment (or
consulting contract) or death of an Optionee, or the removal or resignation
of an Optionee who is a director.
(9) Exercise of Option.
(a) Limitation on Exercise of Option. Except as
otherwise provided herein, the Board of Directors, in its sole discretion,
may limit an Option by restricting its exercise in whole or in part to
specified vesting periods or until specified conditions have occurred. The
vesting periods and any restrictions will be set forth in the Option
Agreement. The Board of Directors, in its sole discretion, may accelerate
the vesting of any Option at any time.
5
(b) Exercise Prior to Cancellation. An Option shall
be exercisable only during the term of the Option as long as the Optionee
isin "Continuous Employment" with the Company or is continually on the Board
of Directors of the Company or any Parent, Subsidiary, or any successor
thereof. Notwithstanding the preceding sentence, as lonas the Option's term
has not expired, and unless otherwise provided in the Option Agreement, an
Option which is otherwise exercisable in accordance with its provisions
shall be exercisable;
(i) for a period ending ninety (90) days
after the Optionee has terminated his Continuous Employment with the
Company, unless the Optionee was terminated for cause by the Company in
which case the Option terminates on notice of termination of employment; or
(ii) for a period ending ninety (90) days
after the removal or resignation of the Optionee from the Board of
Directors, which such Optionee has served; or
(iii) by the estate of the Optionee, within
one (1) year after the date of the Optionee's death, if the Optionee should
die while in the Continuous Employment of the Company or while serving on
the Board of Directors of the Company or any Parent, Subsidiary, or any
successor thereof; or
(iv) within one (1) year after the
Optionee's employment with the Company terminates, if the Optionee becomes
disabled during Continuous Employment with the Company and such disability
is the cause of termination.
For purposes of this Plan, the term "Continuous Employment"
shall mean the absence of any interruption or termination of employment (or
termination of a consulting contract) by the Company or any Parent or
Subsidiary which now exists or hereafter is organized or acquired by the
Company. Continuous Employment with the Company shall not be considered
interrupted in the case of sick leave, military leave, or any other leave of
absence approved by the Company or in the case of transfers between
locations of the Company or between any Parent or Subsidiary, or successor
thereof. The term "cause" as used in this subparagraph 9(b) shall mean: (i)
commission of a felony or a charge of theft, dishonesty, fraud or
embezzlement; (ii) failure to adhere to Company's reasonable directives and
policies, willful disobedience or insubordination; (iii) disclosing to a
competitor or other unauthorized person, proprietary information,
confidences or trade secrets of the Company or any Parent or Subsidiary;
(iv) recruitment of Company or any Parent or Subsidiary personnel on behalf
of a competitor or potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof; or (v) solicitation of business on
behalf of a competitor or potential competitor of the Company, any Parent or
Subsidiary, or any successor thereof.
(C) Method of Exercising an Option. Subject to
the provisions of any particular Option, including any provisions relating
to vesting of an Option, an Optionee may exercise an option, in whole or in
part, by written notice to the Company stating in such written notice the
number of Shares such Optionee elects to purchase under the Option, and the
time of the delivery thereof, which time shall be at least fifteen (15) days
after the giving of such notice, unless an earlier date shall have been
mutually agreed upon. Upon receipt of such written
6
notice, the Company shall provide the Optionee with that information
required by the applicable state and federal securities laws. If, after
receipt of such information, the Optionee desires to withdraw such notice of
exercise, the Optionee may withdraw such notice of exercise by notifying the
Company, in writing, prior to the time set forth for delivery of the Shares.
In no event may an Option be exercised after the expiration of its term. An
Optionee is under no obligation to exercise an Option or any part thereof.
(d) Payment for Option Stock. The exercise of
any option shall be contingent upon receipt by the Company of the acceptable
form of consideration equal to the full option price of the Shares being
purchased. The acceptable form of consideration may consist of any
combination of cash, certified bank check, wire transfer or, subject to the
approval of the Administrator:
(i) Mature Shares; or
(ii) pursuant to procedures approved by
the Board of Directors, (A) through the sale of the Shares acquired on
exercise of the Option through a broker-dealer to whom the Optionee has
submitted an irrevocable notice of exercise and irrevocable instructions to
deliver promptly to the Company the amount of sale or loan proceeds
sufficient to pay the exercise price, together with, if requested by the
Company, the amount of federal, state, local or foreign withholding taxes
payable by the Optionee by reason of such exercise, or (B) through
simultaneous sale through a broker of Shares acquired upon exercise. For
purposes of this paragraph 9, Mature Shares that are delivered in payment of
the option price shall be valued at their Fair Market Value. In the
alternative, the Board of Directors may, but is not required to, accept a
promissory note, secured or unsecured, in the amount of the option price
made by the Optionee on terms and conditions satisfactory to the Board of
Directors.
(e) Delivery of Stock to Optionee. Provided the
Optionee has delivered proper notice of exercise and full payment of the
option price, the Company shall undertake and follow all necessary
procedures to make prompt delivery of the number of Shares which the
Optionee elects to purchase at the time specified in such notice. Such
delivery, however, may be postponed at the sole discretion of the Company to
enable the Company to comply with any applicable procedures, regulations or
listing requirements of any governmental agency, stock exchange or
regulatory authority. As a condition to the issuance of Shares, the Company
may require such additional payments from the Optionee as may be required to
allow the Company to withhold any income taxes which the Company deems
necessary to insure the Company that it can comply with any federal or state
income tax withholding requirements.
10) Nontransferability of Options. Except as otherwise
provided in paragraph 9(b)(iii) and (iv) hereof, an Option granted to an
Optionee may be exercised only during such Optionee's lifetime by such
Optionee. An Option may not be sold, exchanged, assigned, pledged,
encumbered, hypothecated or otherwise transferred except by will or by the
laws of descent and distribution. No Option or any right thereunder shall be
subject to execution, attachment or similar process by any creditors of the
Optionee. Upon any attempted assignment, transfer, pledge, hypothecation or
other encumbrance of any Option contrary to the provisions hereof, such
option and all rights thereunder shall immediately terminate and shall be
null and void with respect to the transferee or assignee.
7
(11) Compliance with the Securities Laws.
(a) Optionee's Written Statement. The Board of
Directors may, in its sole discretion, require that at the time an Optionee
elects to exercise his Option, he shall furnish a written statement to the
Company that he is acquiring such Shares for investment purposes only and
that he has no present intention of reselling or otherwise disposing of such
Stock, along with a written acknowledgment that the Option and the Shares
pertaining to the Option are not registered under the Securities Act of
1933, as amended (the "Act"), the Florida securities laws, or any other
state securities laws. In the event that Shares subject to the Option are
registered with the Securities and Exchange Commission, an Optionee shall no
longer be required to comply with this subparagraph 11(a).
(b) Registration Requirements. If at any time
the Board of Directors determines, in its sole discretion, that the listing,
registration or qualification .of the Shares subject to the Option upon any
securities exchange or under any state or federal securities laws, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the issuance or purchase
of shares thereunder, then the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained (and the same shall have been free of
any conditions not acceptable to the Board of Directors).
(c) Restrictions on Transfer of Shares. The
Shares acquired by an Optionee pursuant to the exercise of an Option
hereunder shall be freely transferable; provided, however, that such Shares
may not be sold, transferred, pledged or hypothecated, unless (i) a
registration statement covering the securities is effective under the Act
and appropriate state securities laws, or (ii) an opinion of counsel,
satisfactory to the Company, that such sale, transfer, pledge or
hypothecation may legally be made without registration of such shares under
federal or state securities laws has been received by the Company.
(d) Restrictive Legend. In order to enforce the
restrictions imposed upon Shares under this Plan, the Company shall make
appropriate notation in its stock records or, if applicable, shall issue an
appropriate stock transfer instruction to the Company's stock transfer
agent. In addition, the Company may cause a legend or legends to be placed
on any certificates representing Shares issued pursuant to this Plan, which
legend or legends shall make appropriate reference to such restrictions in
substantially the following form:
"The shares of Common Stock evidenced by this
certificate have been issued under the International
Assets Holding Corporation Stock Option Plan (the
"Plan") and are subject to the terms and provisions
of such Plan.
These shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), the
Florida Securities and Investor Protection Act or any
other state securities laws, and, therefore, cannot
be sold unless they are subsequently
8
registered under the Act and any applicable state
securities laws or an exemption from registration is
available."
12. Changes in Capital Structure of Company. In the event of a
capital adjustment resulting from a stock dividend, stock split,
reclassification, recapitalization, or by reason of a merger, consolidation,
or other reorganization in which the Company is the surviving corporation,
the Board of Directors shall make such adjustment, if any, as it may deem
appropriate in the number and kind of shares authorized by this Plan, or in
the number, option price and kind of shares covered by the Options granted.
The Company shall give notice of any adjustment to each Optionee and such
adjustment shall be deemed conclusive. The foregoing adjustments and the
manner of application of the foregoing provisions shall be determined solely
by the Board of Directors, and any such adjustment may provide for the
elimination of fractional shares.
13. Reorganization Dissolution or Liquidation. In the event of
the dissolution or liquidation of the Company, or any merger or combination
in which the Company is involved, in which the Company is not a surviving
corporation, or a transfer by the Company of substantially all of its assets
or property to another corporation, or in the event any other corporation
acquires control of the Company in a reorganization within the meaning of
Section 368(a) of the Code, all outstanding Options shall thereupon
terminate, unless such Options are assumed or substitutes therefor are
issued (within the meaning of Section 425(a) of the Code) by the surviving
or acquiring corporation in any such merger, combination or other
reorganization. Notwithstanding the previous sentence, the Company shall
give at least fifteen (15) days written notice of such transaction to
holders of unexercised Options prior to the effective date of such merger,
combination, reorganization, dissolution or liquidation. The Board of
Directors, in its sole discretion, may elect to accelerate the vesting
schedules of all Options previously issued upon such notice, and the holders
thereof may exercise such options prior to such effective date,
notwithstanding any time limitation previously placed on the exercise of
such Options.
14. Notification of Disqualifying Disposition. If an Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an
Incentive Stock Option on or before the later of (i) two years after the
date of grant, or (ii) one year after the exercise date, the Optionee shall
immediately notify the Company in writing of such disposition.
15. Escrow. In order to enforce the restrictions imposed upon
shares under this Plan, the Board of Directors or Stock Option Plan
Committee may require any Optionee to enter into an Escrow Agreement
providing that the certificates representing shares issued pursuant to this
Plan shall remain in the physical custody of an escrow holder until any or
all of such restrictions have terminated.
16. Application of Funds. All proceeds received by the Company
from the exercise of Options shall be paid into its treasury and such
proceeds shall be used for general corporate purposes.
17. Optionee's Rights as a Holder of Shares.
9
(a) Prior to Exercise. No Optionee or his legal
representatives, legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any share of Stock subject to an Option
unless and until stock certificates of such Shares are issued to such person
or persons pursuant to the terms of this Plan. Except as otherwise provided
in paragraph 12 of this Plan, no adjustment shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
(b) Dividends. Purchasers of Stock pursuant to
this Plan will be entitled, after issuance of their stock certificates, to
any dividends that may be declared and paid on the Shares registered in
their names. A stock certificate representing dividends declared and paid in
Shares shall be issued and delivered to the purchaser after such shares have
been registered in the purchaser's name. Such stock certificate shall bear
the legends set forth above and shall be subject to the provisions of this
Plan, the Option Agreement and any escrow arrangement.
(c) Voting Rights. Purchasers of shares of the
Stock shall be entitled to receive all notices of meetings and exercise all
voting rights of a shareholder with respect to the Shares purchased.
18. Amendment and Termination of the Plan.
(a) Discretion of the Board of Directors. The
Board of Directors may amend or terminate this Plan at any time; provided,
however, that (i) any such amendment or termination shall not adversely
affect the rights of any Optionee, unless mutually agreed otherwise between
the Optionee and the Company, which agreement must be in writing and signed
by the Grantee and the Company; and (ii) the Company shall obtain
shareholder approval of any Plan amendment to the extent the Board
determines that such approval is necessary and desirable to comply with
Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any
exchange or quotation system on which the Common Stock is listed or quoted).
Such stockholder approval, if required, shall be obtained in such a manner
and to such a degree as is required by the applicable law, rule or
regulation.
(b) Automatic Termination. This Plan shall
terminate ten (10) years after its approval by the shareholders of the
Company or its adoption by the Board of Directors, whichever is earlier,
unless the Board of Directors shall, in its discretion, elect to terminate
this Plan at an earlier date. Options may be granted under this Plan at any
time and from time to time prior to termination of the Plan under this
subparagraph 18(b). Any Option outstanding at the time the Plan is
terminated under this subparagraph 18(b) shall remain in effect until the
Option is exercised or expires.
19. Miscellaneous.
(a) Notices. All notices and elections by an
Optionee shall be in writing and delivered in person or by mail to the
President or Treasurer of the Company at the principal office of the
Company.
(b) Effective Date of the Plan. The effective
date of this Plan shall be the earlier of the date on which the Board adopts
the Plan, or the date of its approval by the shareholders of the Company.
10
(c) Employment. Nothing in the Plan or in any
Option granted hereunder, or in any Stock Option Agreement relating thereto
shall confer upon any employee of the Company or any Subsidiary, or any
successor thereof, the right to continue in the employ of the Company or any
Subsidiary.
(d) Plan Binding. The Plan shall be binding upon
the successors and assigns of the Company.
(e) Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include
the feminine gender.
(f) Headings. Captioned headings of paragraphs
and subparagraphs hereof are inserted for convenience and reference, and
constitute no part of the Plan.
(g) Applicable Law. The validity, interpretation
and enforcement of this Plan are governed in all respects by the laws of the
State of Florida and the United States of America.
Adopted by the Board of Directors on December 19, 2002.
Adopted by the Shareholders on ____________________________________.
11
Proxy
International Assets Holding Corporation
CENTER POINTE TWO
220 E. CENTRAL PARKWAY
SUITE 2060
ALTAMONTE SPRINGS, FLORIDA 32701
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS DIEGO J. VEITIA AND SEAN M. O'CONNOR, AS
PROXIES, EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE; AND HEREBY AUTHORIZES
THEM, OR ANY OF THEM, TO REPRESENT AND VOTE ALL THE SHARES OF COMMON STOCK OF
INTERNATIONAL ASSETS HOLDING CORPORATION HELD OF RECORD BY THE UNDERSIGNED ON
DECEMBER 26 , 2002, AT THE ANNUAL MEETING OF STOCKHOLDERS ON FEBRUARY 24, 2003,
OR ANY ADJOURNMENT THEREOF:
1. On the ELECTION OF DIRECTORS __________FOR all nominees listed (except as
marked to the contrary below)
_________WITHHOLD AUTHORITY to vote for all nominees
listed below
Diego J. Veitia Sean M. O'Connor Scott J. Branch Edward R. Cofrancesco Robert
A. Miller John Radziwill
(Instruction to withhold authority to vote for any individual nominee: place a
line through the nominee's name.)
2. To approve the action of the Board of Directors in selecting KPMG LLP as
auditors to audit the financial statements of International Assets Holding
Company and subsidiaries for the period commencing October 1, 2002 and ending
September 30, 2003.
_____________FOR _____________AGAINST _____________ABSTAIN
3. To consider and approve the specific term within Section 8 of the three Share
Subscription Agreements for Sean O'Connor, Scott Branch and John Radziwill that
permits the conversion of Series A Preferred stock to common stock.
_____________FOR _____________AGAINST _____________ABSTAIN
4. To approve and adopt the specific term within Section 8 of the three Share
Subscription Agreements to amend the Company's Certificate of Incorporation
to require at least a 75% vote of stockholders to remove or change the
Chairman of the Board.
_____________FOR _____________AGAINST _____________ABSTAIN
5. To approve the proposed International Assets Holding Corporation 2003 Stock
Option Plan.
_____________FOR _____________AGAINST _____________ABSTAIN
6. In their discretion, upon the transaction of any other matters which may
properly come before the meeting or any adjournment thereof.
The shares represented by this proxy, when properly executed, will be voted as
specified in the foregoing items 1 , 2, 3, 4, and 5 by the undersigned
stockholder(s). If no direction is made, this proxy will be voted FOR the
election of the six nominees named in the proxy statement; FOR the approval of
KPMG LLP; FOR approval of the term which permits conversion of Series A
Preferred shares into common; FOR approval of the term which requires a 75% vote
of stockholders to remove or change the Chairman of the Board; FOR approval of
The International Assets Holding Corporation 2003 Stock Option Plan; and, in the
discretion of management as to any other matter which may come before the
meeting.
_________________________________________
_________________________________________
Signature(s) of Stockholder(s)
Dated _______________________, 2002
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign the corporate name by the President or other authorized officer. If a
partnership, please sign in the partnership name by an authorized person.