þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Florida | 65-0701248 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification Number) | |
4400 Biscayne Boulevard, 12 th Floor | ||
Miami, Florida | 33137 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer o | Accelerated filer þ |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
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29
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share and per share amounts)
September 30,
December 31,
2009
2008
(Unaudited)
$
5,624
$
6,621
2,281
4,828
12,609
14,558
151
5,418
3,960
267
318
3,375
3,714
375
701
29,266
31,625
29,739
29,739
1,950
2,400
4,341
3,204
$
95,396
$
101,668
$
38
$
91
5,696
3,661
5,769
5,005
5,741
5,851
3,529
3,863
1,326
780
207
193
34,035
30,934
$
56,341
$
50,378
17
17
169,064
166,172
(130,026
)
(114,899
)
39,055
51,290
$
95,396
$
101,668
Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
Three months ended
Nine months ended
September 30,
September 30,
2009
2008
2009
2008
$
32,788
$
25,130
$
88,400
$
64,617
3,077
4,178
8,750
13,385
502
666
1,408
2,150
709
(609
)
882
(452
)
487
982
2,344
3,003
(111
)
(111
)
1,683
1,036
5,077
2,704
$
39,246
$
31,272
$
106,861
$
85,296
$
23,099
$
15,126
$
62,439
$
39,237
10,843
11,198
29,743
31,685
1,686
1,538
5,273
4,605
1,663
1,638
5,110
3,877
480
917
2,589
1,967
1,033
1,563
4,370
4,071
1,014
1,118
3,186
3,474
940
898
2,810
2,241
2,308
2,277
6,001
5,344
$
43,066
$
36,273
$
121,521
$
96,501
(3,820
)
(5,001
)
(14,660
)
(11,205
)
(92
)
690
467
752
$
(3,728
)
$
(5,691
)
$
(15,127
)
$
(11,957
)
$
(0.02
)
$
(0.03
)
$
(0.09
)
$
(0.07
)
167,624,573
167,303,935
168,875,151
163,850,741
167,624,573
167,303,935
168,875,151
163,850,741
Table of Contents
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
(in thousands, except share amounts)
(Unaudited)
Additional
Common Stock
Paid-In
Accumulated
Shares
Amount
Capital
Deficit
Total
171,715,514
$
17
$
166,172
$
(114,899
)
$
51,290
181,785
101
101
502,875
235
235
380
380
4,893
4,893
(4,531,400
)
(2,717
)
(2,717
)
(15,127
)
(15,127
)
167,868,774
$
17
$
169,064
$
(130,026
)
$
39,055
Table of Contents
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine months ended September 30,
2009
2008
$
(15,127
)
$
(11,957
)
400
357
(27
)
(69
)
578
603
2,359
1,833
450
509
51
51
546
633
14
219
5,273
4,605
2,547
(2,033
)
1,949
18,698
(151
)
12,444
(1,458
)
1,757
(1,137
)
1,367
(53
)
(577
)
2,035
(1,487
)
764
(931
)
(110
)
(1,283
)
(1,097
)
24,739
(2,433
)
(6,478
)
(148
)
(368
)
(385
)
326
323
(42
)
(9,121
)
336
736
(2,717
)
(1,012
)
10,000
(2,500
)
(12,000
)
(4,977
)
(3,603
)
142
(15,879
)
(997
)
(261
)
6,621
8,595
$
5,624
$
8,334
Table of Contents
STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
(Unaudited)
Nine months ended September 30,
2009
2008
$
2,109
$
2,786
35
57
2,016
571
$
4,433
(1,326
)
3,107
(435
)
(239
)
$
2,433
$
24,574
(2,172
)
22,402
(4,384
)
(10,427
)
7,591
(1,113
)
$
6,478
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
1.
Description of Business and Basis of Presentation
Description of Business
The unaudited condensed consolidated financial statements include the accounts of Ladenburg
Thalmann
Financial Services Inc. (LTS or the Company), a holding company, and its subsidiaries.
The principal operating subsidiaries of LTS are Ladenburg Thalmann & Co. Inc. (Ladenburg),
Investacorp, Inc. (collectively with related companies, Investacorp) and Triad Advisors, Inc.
(Triad).
Ladenburg is a full service broker-dealer that has been a member of the New York Stock Exchange
(NYSE) since 1879. Broker-dealer activities include principal and agency trading, investment
banking and asset management. Ladenburg provides its services principally for middle market and
emerging growth companies and high net worth individuals through a coordinated effort among
corporate finance, capital markets, asset management, brokerage and trading professionals.
Investacorp and Triad, which were acquired on October 19, 2007 and August 13, 2008,
respectively, are registered broker-dealers and investment advisors that have been serving the
independent registered representative and investor advisor communities since 1978 and 1998,
respectively. Investacorps and Triads independent registered representatives primarily serve
retail clients. They derive revenue from commissions and advisory fees, primarily from the sale
of mutual funds, variable annuity products and other financial products and advisory services.
Ladenburg, Investacorp and Triad customer transactions are cleared through clearing brokers on a
fully-disclosed basis. Each of Ladenburg, Investacorp and Triad is subject to regulation by,
among others, the Securities and Exchange Commission (SEC), the Financial Industry Regulatory
Authority (FINRA) and the Municipal Securities Rulemaking Board. Ladenburg is also subject to
regulation by the Commodities Futures Trading Commission (CFTC) and the National Futures
Association (NFA). (See Note 6.)
Basis of Presentation
The condensed consolidated financial statements are unaudited and have been prepared in
accordance with accounting principles generally accepted in the United States of America
(GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. In the opinion of management, the interim data includes all adjustments,
consisting of normal recurring adjustments, necessary for a fair statement of the results for
the periods presented. Because of the nature of the Companys business, interim period results
may not be indicative of full year or future results.
The unaudited condensed consolidated financial statements do not include all information and
notes required in annual financial statements in conformity with GAAP. The statement of
financial condition at December 31, 2008 has been derived from the audited financial statements
at that date, but does not include all of the information and notes required by GAAP for
complete financial statement presentation. Please refer to the notes to the consolidated
financial statements included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2008, as amended (Form 10-K), filed with the SEC, for additional disclosures and
a description of the Companys accounting policies.
Certain prior year items have been reclassified to conform to the current periods presentation.
All intercompany balances and transactions have been eliminated.
2.
Summary of Significant Accounting Policies
Revenue Recognition
Besides the accounting policies disclosed in the Form 10-K, the Company has the following
significant accounting policy related to revenue from Specified Purpose Acquisition Companies
(SPAC).
Investment banking revenues include revenues earned from SPAC transactions. The Company
receives a significant portion (up to approximately 50%) of its revenue upon the completion of a
SPACs initial public offering and receives the remaining portion of the revenue (deferred fees) only if the SPAC completes a business
combination transaction. The Company records the portion of the revenue payable upon completion
of the initial public offering at the time the
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
offering is completed. The Company earns and recognizes the deferred fees, only if and when the
SPAC completes a business combination. Generally, these deferred fees may be received within 24
months from the date of the offering, or not received at all if no business combination
transaction is completed during such time period. If deferred fees are recognized upon a SPACs
successful completion of a business combination, the Company recognizes related compensation
expense and finders fees, which are earned only if deferred revenue is earned. For the third
quarters of 2009 and 2008, Ladenburg received deferred fees from SPACs that completed business
combination transactions of $550 and $2,878, respectively (included in investment banking
revenues), and incurred commissions and related expenses of $216 and $1,295, respectively
(included in compensation and benefits). For the nine months ended September 30, 2009 and 2008,
Ladenburg received deferred fees of $3,575 and $5,289, respectively (included in investment
banking revenues), and incurred commissions and related expenses of $1,472 and $2,145,
respectively (included in compensation and benefits).
3.
Recently Issued Accounting Principles
During the third quarter of 2009, the Financial Accounting Standards Boards (FASB) Accounting
Standards Codification became the single source of authoritative U.S. GAAP. The Codification
does not create any new GAAP standards, but incorporates existing accounting and reporting
standards into a new topical structure. Beginning with this quarterly report, LTS used a new
referencing system to identify authoritative accounting standards, replacing the existing
references to SFAS, EITF, FSP, etc. Existing standards will be designated by their Accounting
Standards Codification (ASC) topical reference and new
standards will be designated as Accounting Standards Updates
(ASU)
with a year and assigned sequence number. The adoption of the Codification did not have any
impact on the Companys financial statements.
On April 9, 2009, the FASB issued ASC No. 825-10 Financial Instruments (ASC 825-10). ASC
825-10 amends disclosure standards to require disclosures about fair value of financial
instruments in interim and annual financial statements. ASC 825-10 is effective for interim
periods ending after June 15, 2009 and the Company adopted the provisions of ASC 825-10 in the
second quarter of 2009. (See Note 8)
In May 2009, the FASB issued ASC No. 855-10, Subsequent Events (ASC 855-10). ASC 855-10
establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date, but before financial statements are issued or are available to be issued.
ASC 855-10 requires the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that date. The Company adopted the provisions of ASC 855-10 for the
quarter ended June 30, 2009 and has evaluated subsequent events through the date the financial
statements were issued on November 6, 2009.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS
167), which changes how a company determines when an entity that is insufficiently capitalized
or is not controlled through voting should be consolidated. The determination of whether a
company is required to consolidate an entity is based on, among other things, an entitys
purpose and design and a companys ability to direct the activities of the entity that most
significantly impact the entitys economic performance. SFAS 167 requires an ongoing
reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS
167 also requires additional disclosure about a companys involvement in variable interest
entities and any significant changes in risk exposure due to that involvement. SFAS 167 is
effective for the Company beginning on January 1, 2010. The Company is presently
evaluating the effect, if any, that the adoption of SFAS 167 will have on its financial
statements. SFAS 167 has not yet been included in the Codification.
In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value (ASU
2009-05), codified primarily in ASC 820. ASU 2009-05 provides clarification and guidance
regarding how to value a liability when a quoted price in an active market is not available for
that liability. ASU 2009-05 is effective for the first reporting period (including interim
periods) beginning after issuance (October 1, 2009 for the
Company), and adoption is not expected to have a
significant impact on the Companys financial statements.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
4.
Acquisitions
Triad
On August 13, 2008, Triad became a wholly-owned
subsidiary of the Company. All outstanding shares of Triads common stock were converted into an aggregate of $6,826 in cash (net of a
post-closing adjustment of $674), 7,993,387 shares of the Companys common stock, subject to
certain transfer restrictions, valued at $10,427 and a $5,000 promissory note valued at $4,384.
The Companys common stock was valued at $1.60 per share based on the average closing market
price for a reasonable period before and after July 10, 2008, the date the acquisition was
announced, and discounted for the transfer restrictions. The note, which was valued based on an
imputed interest rate of 11%, is collateralized by a pledge of Triads stock held by the
Company. The Company incurred $130 of merger-related costs. In the event that Triad meets
certain cumulative profit targets during the three-year period following completion of the
merger, the Company also will pay to Triads former shareholders up to $7,500 in cash and issue
to such shareholders up to 4,134,511 shares of the Companys common stock. Any such payments
will be accounted for as additional purchase price and allocated to goodwill.
The total consideration paid by the Company in the merger, including related costs, was
allocated to the identifiable assets acquired and liabilities assumed based on their estimated
fair values with the amount exceeding the fair values being recorded as goodwill. The Company
obtained third party valuations in determining fair value for acquired intangible assets.
Punk Ziegel
On May 2, 2008, Punk, Ziegel & Company, L.P. (Punk Ziegel), a specialty investment bank
based in New York City, was merged into Ladenburg. The Company paid the sellers $2,770,
representing Punk Ziegels retained earnings plus paid-in-capital, plus 250,000 shares of the
Companys common stock valued at $475.
After giving effect to certain post-closing purchase price adjustments, the adjusted purchase
price was $2,700 in cash (including acquisition costs) and 250,000 shares of the Companys
common stock valued at $435.
Pro Forma Information
The Companys financial statements include the results of operations of Triad and Punk Ziegel
from their respective dates of acquisition. The following unaudited pro forma information
represents the Companys consolidated results of operations as if the acquisition of Triad had
occurred at the beginning of 2008. The Companys acquisition of Punk Ziegel did not constitute a
material business combination and the following pro forma data does not include Punk Ziegel. The
pro forma net loss reflects amortization of the amounts ascribed to intangibles acquired in the
acquisition and interest expense on debt used to finance the acquisition.
Three months ended
Nine months ended
September 30, 2008
September 30, 2008
$
41,976
$
126,644
$
(6,057
)
$
(11,680
)
$
(0.04
)
$
(0.07
)
171,177,792
170,552,471
The unaudited pro forma financial information contained in the table above is not
representative or indicative of the Companys consolidated results of operations that would have
been reported had the Triad acquisition been completed as of the beginning of the period
presented, nor should it be taken as indicative of the Companys future consolidated results of
operations.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
5.
Securities Owned and Securities Sold, But Not Yet Purchased
The components of marketable securities owned and securities sold, but not yet purchased, at
fair value at September 30, 2009 and December 31, 2008 were as follows:
Securities sold,
Securities
but not
owned
yet purchased
$
300
$
448
29
1,533
9
$
2,281
$
38
$
1,100
$
3,231
91
497
$
4,828
$
91
Securities owned, at fair value
Level 1
Level 2
Level 3
Total
$
$
300
$
$
300
448
1,533
1,981
$
448
$
1,833
$
$
2,281
Securities sold, but not yet purchased, at fair value
Level 1
Level 2
Level 3
Total
$
29
$
9
$
$
38
$
29
$
9
$
$
38
As of December 31, 2008:
Securities owned, at fair value
Level 1
Level 2
Level 3
Total
$
$
1,100
$
$
1,100
3,231
497
3,728
$
3,231
$
1,597
$
$
4,828
Securities sold, but not yet purchased, at fair value
Level 1
Level 2
Level 3
Total
$
91
$
$
$
91
$
91
$
$
$
91
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Warrants are carried at a discount to fair value as determined by using the Black-Scholes option
pricing model due to illiquidity. This model takes into account the underlying securities
current market value, the underlying securities market volatility, the term of the warrants,
exercise price, and risk free return rate. As of September 30, 2009, the fair value of the
warrants is $1,323 and is reported in the statement of financial condition under securities
owned at fair value.
6.
Net Capital Requirements
As a registered broker-dealer, Ladenburg is subject to the SECs Uniform Net Capital Rule 15c3-1
and the CFTCs Regulation 1.17, which require the maintenance of minimum net capital. Ladenburg
has elected to compute its net capital under the alternative method allowed by these rules. At
September 30, 2009, Ladenburg had net capital, as defined in the SECs Net Capital Rule, of
$2,397, which exceeded its minimum capital requirement of $500, by $1,897.
Investacorp and Triad are also subject to the SECs Net Capital Rule, which requires the
maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net
capital, both as defined in the SECs Net Capital Rule, not exceed 15 to 1. At September 30,
2009, Investacorp had net capital of $693, which was $341 in excess of its required net capital
of $352. Investacorps net capital ratio was 7.6 to 1. At September 30, 2009, Triad had net
capital of $792, which was $498 in excess of its required net capital of $294. Triads net
capital ratio was 5.6 to 1.
Ladenburg, Investacorp and Triad claim exemption from the provisions of the SECs Rule 15c3-3
pursuant to paragraph (k)(2)(ii) as their customer transactions are cleared through clearing
brokers on a fully-disclosed basis.
7.
Income Taxes
Income tax expense for the three months and nine months ended September 30, 2009 and the three
months and nine months ended September 30, 2008 primarily represents deferred income taxes
relating to amortization of goodwill for tax purposes.
8.
Notes Payable
Notes payable consisted of the following:
September 30,
December 31,
2009
2008
$
5,424
$
8,820
15,500
18,000
3,111
4,114
10,000
$
34,035
$
30,934
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
The Company estimates that the fair value of fixed interest notes payable to the former
principal shareholder of Investacorp, former Triad shareholders, clearing firm National
Financial Services LLC (NFS), a Fidelity Investments company and to an affiliate of LTS
principal shareholder approximated $29,151 at September 30, 2009 and $27,483 at December 31,
2008 based on anticipated current rates at which similar amounts of debt could then be borrowed.
The Company is currently in compliance with all debt covenants in its debt agreements.
Investacorp Note
On October 19, 2007, as part of the purchase price for Investacorp, the Company issued a
three-year, non-negotiable promissory note in the aggregate principal amount of $15,000 to
Investacorps then principal shareholder. The note bears interest at 4.11% per annum and is
payable in 36 equal monthly installments. The note was recorded at $13,550 based on an imputed
interest rate of 11%. The Company has pledged the stock of Investacorp as security for the
payment of the note. The note contains customary events of default, which, if uncured, entitle
the holder to accelerate the due date of the unpaid principal amount of, and all accrued and
unpaid interest on, the note.
Frost Gamma Credit Agreement
On October 19, 2007, in connection with the Investacorp acquisition, the Company entered into a
$30,000 revolving credit agreement with Frost Gamma Investment Trust (Frost Gamma), an
affiliate of LTS principal shareholder, and borrowed $30,000. Borrowings under the Frost Gamma
credit agreement bear interest at a rate of 11% per annum, payable quarterly. Frost Gamma
received a one-time funding fee of $150. On August 25, 2009, the Company and Frost Gamma entered into an amendment to the revolving
credit agreement to extend the maturity date to August 25, 2016.
The note issued under the
credit agreement contains customary events of default, which, if uncured, entitle the holder to
accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest
on, such note. Under the revolving credit agreement, Frost Gamma received a warrant to purchase
2,000,000 shares of LTS common stock. The warrant is exercisable at any time during its ten-year
term at an exercise price of $1.91 per share, the closing price of the Companys common stock on
the acquisition date. The warrant was valued at $3,200 based on the Black-Scholes option pricing
model, and effective January 1, 2008, the unamortized portion has been reclassified from debt
discount to debt issue cost, which is being amortized under the straight-line method over the
remaining term of the revolving credit agreement.
The average loan balance for the three and nine months ended September 30, 2009 was $20,300 and
$19,925, respectively.
Triad Note
On August 13, 2008, as part of the consideration paid for Triad, the Company issued a
three-year, non-negotiable promissory note in the aggregate principal amount of $5,000 to
Triads then shareholders. The note bears interest at 2.51% per annum and is payable in 12 equal
quarterly installments. The note was recorded at $4,384, based on an imputed interest rate of
11%. The Company has pledged the stock of Triad as security for the payment of the note. The
note contains customary events of default, which, if uncured, entitle the holder to accelerate
the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the
note.
NFS Forgivable Loan
On August 25, 2009, National Financial Services, LLC (NFS), Fidelity Investments Company,
provided the Company with a seven-year, $10,000 forgivable loan. NFS serves as the primary clearing
broker for the Companys three principal broker-dealer subsidiaries. During the third quarter
of 2009, the three firms amended their clearing agreements with NFS to, among other things,
extend the term for a seven-year period. During this time, NFS will become the exclusive
clearing broker for the three firms, with Investacorp completing the migration of all of its
clearing operations to NFS over the coming year. The Company expects to realize significant cost
savings as a result of these new clearing arrangements.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Interest on the loan agreement accrues at the prime rate plus 2%. If the Companys
broker-dealer subsidiaries meet certain annual clearing revenue targets set forth in the loan
agreement, the principal balance of the loan will be forgiven in seven equal yearly installments
of $1,429 commencing in August 2010 and continuing on an annual
basis through August 2016.
Interest payments due with respect to each such year will also be forgiven if the annual
clearing revenue targets are met. Any principal amounts not forgiven will be due in August
2016, and any interest payments not forgiven are due annually. If during the loan term any
principal amount is not forgiven, the Company may have such principal
forgiven in future years if its broker-dealer subsidiaries exceed subsequent annual clearing
revenue targets. The Company has expensed, and expects to continue to expense, interest under
the loan agreement until such time as such interest is forgiven.
The loan agreement contains other covenants including limitations on the incurrence of
additional indebtedness, maintaining minimum adjusted shareholders equity levels and a
prohibition on the termination of the Companys revolving credit agreement. Upon the occurrence
of an event of default, the outstanding principal and interest under the loan agreement may be
accelerated and become due and payable. If the clearing agreements are terminated prior to the
loan maturity date, all amounts then outstanding must be repaid on
demand. The loan agreement is secured by the Companys (but not
the Companys broker-dealer subsidiaries) deposits and
accounts held at NFS or its affiliates, which amounted to $558 at
September 30, 2009.
9.
Commitments and Contingencies
Operating Leases
In March 2009, Ladenburg relocated all employees in its Lexington Avenue retail brokerage office
in New York City to another location and during the quarter ended March 31, 2009, the Company
recorded a liability and a charge to operations of $562, which represented the fair value of the
remaining lease commitment of approximately $1,550, net of the estimated sublease rentals, which
were approximately $950. In September 2009, Ladenburg reopened the Lexington Avenue office, at
which time the remaining liability of $421 was eliminated and credited to operations.
Litigation and Regulatory Matters
In May 2003, a suit was filed in the U.S. District Court for the Southern District of New York
by Sedona Corporation against Ladenburg, former employees of Ladenburg, and a number of other
firms and individuals. The plaintiff alleged, among other things, that certain defendants (not
Ladenburg) purchased convertible securities from plaintiff and then allegedly manipulated the
market to obtain an increased number of shares from the conversion of those securities.
Ladenburg acted as placement agent and not as principal in those transactions. Plaintiff alleged
that Ladenburg and the other defendants violated federal securities laws and various state laws.
The plaintiff sought compensatory damages from the defendants of at least $660,000 and punitive
damages of $2,000,000. In August 2005, Ladenburgs motion to dismiss the First Amended Complaint
was granted in part and denied in part. On May 27, 2009, the Court granted in part and denied
in part motions to dismiss the Second Amended Complaint, and granted plaintiff leave to replead.
On July 9, 2009, plaintiff filed its Third Amended Complaint, which contains no claims under
the federal securities laws, leaving only common law claims; Ladenburgs motion to dismiss the
Third Amended Complaint is currently pending. The Company believes the plaintiffs claims are
without merit and intends to vigorously defend against them.
In July 2004, a suit was filed in the U.S. District Court for the Eastern District of Arkansas
by Pet Quarters, Inc. against Ladenburg, a former employee of Ladenburg, and a number of other
firms and individuals. The plaintiff alleged, among other things, that certain defendants (not
Ladenburg) purchased convertible securities from the plaintiff and then allegedly manipulated
the market to obtain an increased number of shares from the conversion of those securities.
Ladenburg acted as placement agent and not as principal in those transactions. Plaintiff alleged
that Ladenburg and the other defendants violated federal securities laws and various state laws.
The plaintiff seeks compensatory damages from the defendants of at least $400,000. In April
2006, Ladenburgs motion to dismiss was granted in part and denied in part. On April 9, 2007,
the Court issued an order staying the action pending the final outcome of an arbitration
involving parties other than Ladenburg. A motion by plaintiff to enforce a purported settlement
among the parties to that arbitration is pending in the court action. The Company believes that
the plaintiffs claims are without merit and intends to vigorously defend against them.
In December 2005, a suit was filed in New York State Supreme Court, New York County, by Digital
Broadcast Corp. against Ladenburg and a Ladenburg employee. The plaintiff alleged, among other
things, that in connection with
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
plaintiffs retention of Ladenburg to assist it in its efforts to obtain financing through a
private placement of its securities, Ladenburg committed fraud and breach of fiduciary duty and
breach of contract. The plaintiff seeks compensatory damages in excess of $100,000. In December
2008, the Court granted Ladenburgs motion for summary judgment and dismissed the complaint. On
June 30, 2009, the Appellate Division of the Supreme Court issued an order unanimously affirming
the dismissal. Plaintiff has indicated that it intends to seek leave to appeal to the New York
Court of Appeals. The Company believes that the plaintiffs claims are without merit and
intends to vigorously defend against them.
In July 2008, a suit was filed in the Circuit Court for the 17th Judicial Circuit, Broward
County, Florida, by BankAtlantic and BankAtlantic Bancorp, Inc. against Ladenburg and a former
Ladenburg research analyst. The plaintiffs alleged, among other things, that research reports
issued by defendants were false and defamatory, and that defendants are liable for defamation
per se and negligence; the amount of the alleged damages is unspecified. The defendants motion
to dismiss the case was denied in September 2008. The Company believes that the allegations are
without merit and intends to vigorously defend against them.
In the ordinary course of business, the Companys subsidiaries are defendants in litigation and
arbitration proceedings and may be subject to unasserted claims or arbitrations primarily in
connection with their activities as securities broker-dealers or as a result of services
provided in connection with securities offerings. Such litigation and claims may involve
substantial or indeterminate amounts and are in varying stages of legal proceedings. Where the
Company believes that it is probable that a liability has been incurred and the amount of loss
can be reasonably estimated, the Company has included an estimation of such amount in accounts
payable and accrued liabilities.
Upon final resolution, amounts payable by the Company may differ materially from amounts
reserved. The Company has accrued liabilities in the amount of approximately $103 at September
30, 2009 and $460 at December 31, 2008 in respect of these matters. With respect to other
pending matters, the Company is unable to estimate a range of possible loss; however, in the
opinion of management, after consultation with counsel, the ultimate resolution of these matters
should not have a material adverse effect on the Companys consolidated financial position,
results of operations or liquidity.
10.
Off-Balance-Sheet Risk and Concentration of Credit Risk
Ladenburg, Investacorp and Triad do not carry accounts for customers or perform custodial
functions related to customers securities. They introduce all of their customer transactions,
which are not reflected in these financial statements, to their clearing brokers, which maintain
the customers accounts and clear such transactions. Also, the clearing brokers provide the
clearing and depository operations for proprietary securities transactions. These activities may
expose the Company to off-balance-sheet risk in the event that customers do not fulfill their
obligations to the clearing brokers, as each of Ladenburg, Investacorp and Triad has agreed to
indemnify their respective clearing brokers for any resulting losses. Each of Ladenburg,
Investacorp and Triad continually assesses risk associated with each customer who is on margin
credit and records an estimated loss when management believes collection from the customer is
unlikely.
11.
Shareholders Equity
Repurchase Program
In March 2007, the Companys board of directors authorized the repurchase of up to 2,500,000
shares of the Companys common stock from time to time on the open market or in privately
negotiated transactions, depending on market conditions. The repurchase program is funded using
approximately 15% of the Companys EBITDA, as adjusted. During the nine months ended September
30, 2009, 31,400 shares were repurchased for $17. The Company may purchase up to an additional
1,552,176 shares of its common stock under this program.
In April 2009, the Company repurchased 4,500,000 shares of common stock at a price of $0.60 per
share (an aggregate of $2,700) in a privately-negotiated transaction. This purchase was not
made under the Companys share repurchase program, which remains in effect.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Stock Compensation Plans
LTS granted an option to purchase 1,000,000 shares of its common stock in February 2009. The
option grant has five tranches with various vesting dates and vesting conditions and with
exercise prices ranging from $0.80 to $1.50 per share. The Company has valued options to
purchase 325,000 shares, which have vested or will vest on the first anniversary of the grant
date, at $176 using the Black-Scholes option pricing model. In August 2009, the remaining
options to purchase 675,000 shares were forfeited.
LTS granted an option to purchase 500,000 shares of its common stock in April 2009. The option
grant has five tranches with various vesting dates and vesting conditions and with exercise
prices ranging from $0.90 to $1.50 per share. The Company has valued options to purchase
170,000 shares, which have vested or will vest on the first anniversary of the grant date, at
$116, using the Black-Scholes option pricing model. The remaining option tranches are
contingent upon satisfaction of performance criteria which have not yet been determined. Thus,
the Company will value the remaining options to purchase an aggregate of 330,000 shares at the
beginning of each applicable vesting period or the date that the applicable performance criteria
are determined and will recognize compensation expense at such times.
As of September 30, 2009, there was $8,444 of unrecognized compensation cost for stock-based
compensation, of which $252 related to the 2009 grants. This cost is expected to be recognized
over the vesting period of each option, which on a weighted-average basis is approximately 1.16
years for all grants and approximately 2.40 years for the 2009 grants.
A total of 248,000 and 503,000 options were exercised during the three and nine months ended
September 30, 2009, respectively. The intrinsic value of options exercised during the three and
nine month periods ended September 30, 2009 was $72 and $144, respectively.
12.
Per Share Data
Basic net loss per common share is computed using the weighted-average number of common shares
outstanding. The dilutive effect of common shares potentially issuable under outstanding
options and warrants is included in diluted earnings per share. The computations of basic and
diluted per share data were as follows:
Three months ended
Nine months ended
September 30,
September 30,
2009
2008
2009
2008
$
(3,728
)
$
(5,691
)
$
(15,127
)
$
(11,957
)
167,624,573
167,303,935
168,875,151
163,850,741
$
(0.02
)
$
(0.03
)
$
(0.09
)
$
(0.07
)
For the three and nine month periods ended September 30, 2009 and 2008, options and
warrants to purchase 28,298,540 and 26,596,065 common shares, respectively, were not included in
the computation of diluted loss per share as the effect would have been anti-dilutive.
13.
Segment Information
The Company has two operating segments. The Ladenburg segment includes the retail and
institutional securities brokerage, investment banking services, asset management services and
investment activities conducted by Ladenburg. The independent brokerage and advisory services
segment includes the broker-dealer and investment advisory services provided by Investacorp and,
since its acquisition on August 13, 2008, Triad through their independent registered
representatives.
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Segment information for the three and nine months ended September 30, 2009 and 2008 was as
follows:
Independent
Brokerage and
Ladenburg
Advisory Services (1)
Corporate
Total
$
10,076
$
29,138
$
32
$
39,246
(1,395
)
130
(2,555
)
(3,820
)
19,631
74,805
960
95,396
351
572
17
940
5
3
1,006
1,014
303
7
310
$
11,496
$
19,858
$
(82
)
$
31,272
(2,133
)
(159
)
(2,709
)
(5,001
)
32,358
73,172
6,753
112,283
375
506
17
898
6
9
1,103
1,118
55
37
92
$
26,358
$
80,399
$
104
$
106,861
(7,583
)
569
(7,646
)
(14,660
)
19,631
74,805
960
95,396
1,002
1,757
51
2,810
102
14
3,070
3,186
312
56
368
$
34,099
$
51,228
$
(31
)
$
85,296
(3,645
)
553
(8,113
)
(11,205
)
32,358
73,172
6,753
112,283
982
1,208
51
2,241
26
9
3,439
3,474
325
60
385
(1)
Includes Triad from its August 13, 2008 date of acquisition
Table of Contents
Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(in thousands, except share and per share data)
Table of Contents
Table of Contents
Three months ended September 30,
Nine months ended September 30,
2009
2008
2009
2008
$
39,246
$
31,272
$
106,861
$
85,296
43,066
36,273
121,521
96,501
(3,820
)
(5,001
)
(14,660
)
(11,205
)
(3,728
)
(5,691
)
(15,127
)
(11,957
)
(191
)
(1,802
)
(3,456
)
(1,384
)
11
45
65
189
92
310
310
(1,014
)
(1,118
)
(3,186
)
(3,474
)
(690
)
(467
)
(752
)
(940
)
(898
)
(2,810
)
(2,241
)
(1,686
)
(1,538
)
(5,273
)
(4,605
)
$
(3,728
)
$
(5,691
)
$
(15,127
)
$
(11,957
)
Table of Contents
Ladenburg includes the retail and institutional securities brokerage,
investment banking services, asset management services and investment activities
conducted by Ladenburg.
Independent brokerage and advisory services includes the broker-dealer and
investment advisory services provided by Investacorp and Triad through their independent
contractor registered representatives.
Three months
Nine months
ended September 30,
ended September 30,
2009
2008
2009
2008
$
10,076
$
11,496
$
26,358
$
34,099
29,138
19,858
80,399
51,228
32
(82
)
104
(31
)
$
39,246
$
31,272
$
106,861
$
85,296
$
(1,395
)
$
(2,133
)
$
(7,583
)
$
(3,645
)
130
(159
)
569
553
(2,555
)
(2,709
)
(7,646
)
(8,113
)
$
(3,820
)
$
(5,001
)
$
(14,660
)
$
(11,205
)
Table of Contents
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1.
Our shareholders elected each of the individuals nominated for election
for a one-year term and until their successors are elected and qualified as follows:
Table of Contents
Votes For
Authority Withheld
131,479,933
9,641,993
130,888,187
10,233,739
130,789,211
10,332,715
131,801,384
9,320,542
133,229,320
7,892,606
131,852,704
9,269,222
132,971,454
8,150,472
132,143,714
8,978,212
133,155,714
7,966,212
133,285,344
7,836,582
133,131,318
7,990,608
2.
Our shareholders approved our 2009 Incentive Compensation Plan that
authorizes for issuance 25,000,000 shares of our common stock in connection with
awards granted under the plan.
For
Against
Abstaining
Broker Non-Votes
90,720,587
5,393,794
9,452,639
35,554,906
Exhibit No.
Description
4.1
4.2
31.1
31.2
32.1
32.2
Table of Contents
LADENBURG THALMANN FINANCIAL
SERVICES INC.
(Registrant)
Date: November 6, 2009
By:
/s/ Brett H. Kaufman
Brett H. Kaufman
Vice President and Chief Financial Officer
(Principal Financial and Accounting
Officer)
(i) | Business Day shall mean any day other than a Saturday or Sunday on which banks are open for domestic and foreign exchange business in New York City |
-1-
and are not authorized or required to close for such business. | |||
(ii) | U.S. Prime Rate shall mean the U.S. prime rate as published by the Wall Street Journal for the date in question, or if such rate is not so published, the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks. | ||
(iii) | Average Annual U.S. Prime Rate shall mean, as of an applicable Annual Forgiveness Date, the average of the U.S. Prime Rate on the first Business Day of each of the twelve months preceding such Annual Forgiveness Date. | ||
(iv) | Loan Documents shall mean this Agreement, the Tranche A Note, the Tranche B Note, and any exhibit attached hereto. | ||
(v) | Material Adverse Effect shall mean, with respect to any event or occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding): (a) a material adverse effect on the business, properties, prospects, condition (financial or otherwise), assets, operations or income of the Organization, individually or the Organization and its subsidiaries, taken as a whole; (b) a material adverse effect on the ability of the Organization to perform any of its obligations under any of the Transaction Documents to which it is a party; or (c) any material impairment of the validity, binding effect or enforceability of any of the Transaction Documents or any impairment of the rights, remedies or benefits available to the Lender under any Transaction Document. In determining whether any individual event could reasonably be expected to result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events could reasonably be expected to result in a Material Adverse Effect. | ||
(vi) | Termination Material Event shall mean the Organization, any of the Organizations current or future broker-dealer subsidiaries (Affiliated B-Ds), or any officer, director or principal shareholder of either the Organization or any of its Affiliated B-Ds: (a) shall be indicted for a state or federal crime involving moral turpitude, or (b) any other civil or criminal proceeding or investigation by a governmental or regulatory authority shall have been brought or overtly threatened against the Organization, any of its Affiliated B-Ds, or any such officer, director or principal shareholder, in either case that the Lender reasonably determines could have a material adverse impact on the reputation of the Organization or any of its Affiliated B-Ds or that the Lenders association with the Organization, any of its Affiliated B-Ds, or such officer, director or principal shareholder is materially adverse to the Lenders interests. | ||
(vii) | Annual Forgiveness Dates shall mean the seven (7) consecutive anniversary dates following the Effective Date (each an Annual Forgiveness Date). | ||
(viii) | Final Payment Date shall mean the last Annual Forgiveness Date. |
-2-
(ix) | Transaction Documents shall mean the Loan Documents and the Clearing Agreements. |
(i) | The Lender agrees that, subject to the terms and conditions contained in this Agreement, and in reliance on the representations and warranties contained in Section 3, it shall make loans to the Organization on the Effective Date in the aggregate amount of $10,000,000 (the Aggregate Loan Amount), divided into two equal principal amounts (Tranche A Loan in the sum of $5,000,000 and Tranche B Loan in the sum of $5,000,000). | ||
(ii) | Tranche A Note: |
(a) | Subject to the terms and conditions hereinafter set forth, the Organization promises to pay to the Lender or its assigns on the Final Payment Date, to the extent not forgiven as hereinafter provided, all principal amounts owing in respect of the Tranche A Loan. On each Annual Forgiveness Date, to the extent not forgiven as hereinafter provided, interest shall be paid on all outstanding principal amounts of the Tranche A Loan for the period from the Effective Date, or the preceding Annual Forgiveness Date for which interest was paid with respect to such Tranche A Loan, as the case may be, at a rate equal to the Average Annual U.S. Prime Rate plus two percent (2%) per annum (with interest for any period that is less than twelve full months being computed on the actual number of days elapsed in a year of 360 days). Such payments of principal and interest shall be made by the Organization to the Lender no later than 5:00 p.m. (or other local time at the place of payment), Boston, Massachusetts time, on the applicable Annual Forgiveness Date, in arrears, by wire transfer of immediately available funds to the account of the Lender specified in Section 17 or to such other account as to which the Lender shall give notice to the Organization from time to time. Should any amount due hereunder become due on a day other than a Business Day, payment thereof shall be extended to the next succeeding Business Day and interest shall be payable thereon at a rate as stated above. Notwithstanding anything to the contrary contained herein, but subject to the last sentence of this Section 2(ii)(a) below, if the Organizations consolidated shareholders equity (excluding from the determination thereof any non-cash charges and non-cash interest expenses from and after January 1, 2009 relating to compensation expense, interest charges (including debt discount and issuance costs), depreciation and the write-off or amortization of goodwill or other intangible assets; as so determined, the Consolidated Adjusted Shareholders Equity) is less than $25,000,000 as of the date of any financial statements of the Organization delivered by the Organization pursuant to Section 4(iii) and is also less than $25,000,000 as of the date of the financial statements of the Organization next delivered by the Organization pursuant to Section 4(iii) |
-3-
(a Mandatory Prepayment Event) and the date such second financial statements are delivered by the Organization being the Mandatory Prepayment Date), the Organization shall make mandatory prepayments of the Tranche A Loan over the seven-month period immediately following the Mandatory Payment Date as follows: |
Payment | ||||
Period: | Payable on: | Amount: | ||
Month 1
|
immediately following the Mandatory Prepayment Date (or, if any such last day is not a Business Day, on the next succeeding Business Day) | 25% of the outstanding principal balances of Tranche A Loan plus all accrued and unpaid interest thereon | ||
|
||||
Months 2-7
|
on the last day of each thirty-day period for this 6-month period (or, if any such thirty-day period that does not end on a Business Day, on the next succeeding Business Day) | the remaining principal balance of the Tranche A Loan, plus all accrued interest thereon, in equal (as to principal) consecutive monthly installments, together with accrued interest owing through each payment date |
Notwithstanding the foregoing, in the event that the Organization evidences to the Lender within seven (7) months of a Mandatory Prepayment Event that the Organizations Consolidated Adjusted Shareholders Equity is in excess of $25,000,000, the Lender shall promptly return to the Organization any Tranche A Loan principal amounts delivered to the Lender as a result of the Mandatory Prepayment Event and such amounts returned shall be due and payable, and subject to forgiveness, in accordance with the terms of this Agreement as if the Mandatory Prepayment Event had not occurred. | |||
(b) | The obligation of the Organization to repay the Tranche A Loan shall be evidenced by a promissory note of the Organization in the form of Exhibit B-1 hereto (the Tranche A Note) dated as of the date hereof and completed with appropriate insertions. The outstanding principal amount of the Tranche A Note, as set forth on Schedule 1 hereto, shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on Schedule 1 , or failure to send Schedule 1 to Organization upon an entry made on Schedule 1 , shall not limit or otherwise affect the obligations of the Organization hereunder or under the Tranche A Note to make payments of principal or interest on such Note when due in accordance with the terms and conditions of this Agreement. Upon each |
-4-
entry being made upon Schedule 1 , the Lender shall send the Organization a copy of Schedule 1 as then in effect. |
(iii) | Tranche B Note: |
(a) | Subject to the terms and conditions hereinafter set forth, the Organization promises to pay to the Lender or its assigns on the Final Payment Date, to the extent not forgiven as hereinafter provided, all principal amounts owing in respect of the Tranche B Loan. On each Annual Forgiveness Date, to the extent not forgiven as hereinafter provided, interest shall be paid on all outstanding principal amounts of the Tranche B Loan for the period from the Effective Date, or the preceding Annual Forgiveness Date for which interest was paid with respect to such Tranche B Loan, as the case may be, at a rate equal to the Average Annual U.S. Prime Rate plus two percent (2%) per annum (with interest for any period that is less than twelve full months being computed on the actual number of days elapsed in a year of 360 days). Such payments of principal and interest shall be made by the Organization to the Lender no later than 5:00 p.m. (or other local time at the place of payment), Boston, Massachusetts time, on the applicable Annual Forgiveness Date, in arrears, by wire transfer of immediately available funds to the account of the Lender specified in Section 17 or to such other account as to which the Lender shall give notice to the Organization from time to time. Should any amount due hereunder become due on a day other than a Business Day, payment thereof shall be extended to the next succeeding Business Day and interest shall be payable thereon at a rate as stated above. Notwithstanding anything to the contrary contained herein, to the extent any Mandatory Payment Date occurs, but subject to the last sentence of this Section 2(iii)(a) below, the Organization shall make mandatory prepayments of the Tranche B Loan over the seven-month period immediately following the Mandatory Payment Date as follows: |
Payment | ||||
Period: | Payable on: | Amount: | ||
Month 1
|
immediately following the Mandatory Prepayment Date (or, if any such last day is not a Business Day, on the next succeeding Business Day) | 25% of the outstanding principal balances of Tranche B Loan plus all accrued and unpaid interest thereon | ||
|
||||
Months 2-7
|
on the last day of each thirty-day period for this 6-month period (or, if any such thirty-day period that does not end on a Business Day, on the next succeeding Business Day) | the remaining principal balance of the Tranche B Loan, plus all accrued interest thereon, in equal (as to principal) consecutive monthly installments, together with accrued interest owing through each payment date |
-5-
Notwithstanding the foregoing, in the event that the Organization evidences to the Lender within seven (7) months of a Mandatory Prepayment Event that the Organizations Consolidated Adjusted Shareholders Equity is in excess of $25,000,000, the Lender shall promptly return to the Organization any Tranche B Loan principal amounts delivered to the Lender as a result of the Mandatory Prepayment Event and such amounts returned shall be due and payable, and subject to forgiveness, in accordance with the terms of this Agreement as if the Mandatory Prepayment Event had not occurred. | |||
(b) | The obligation of the Organization to repay the Tranche B Loan shall be evidenced by a promissory note of the Organization in the form of Exhibit B-2 hereto (the Tranche B Note) (the Tranche A Note and Tranche B Note are collectively referred to herein as the Notes), dated as of the date hereof and completed with appropriate insertions. The outstanding principal amount of the Tranche B Note, as set forth on Schedule 2 hereto, shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on Schedule 2, or failure to send Schedule 2 to the Organization upon an entry being made on Schedule 2, shall not limit or otherwise affect the obligations of the Organization hereunder or under the Tranche B Note to make payments of principal or interest on such Note when due in accordance with the terms and conditions of this Agreement. Upon each entry being made upon Schedule 2 , the Lender shall send the Organization a copy of Schedule 2 as then in effect. |
(iv) | Prior to entering into this Agreement, the Organization shall provide Lender with: (a) a copy of a Corporate Resolution of the Organization, certified by the Organizations Secretary, authorizing it to enter into the Loan Documents; (b) recent evidence of corporate good standing of the Organization obtained from the Organizations state of organization; and (c) copies of the Clearing Agreements fully executed by LTC, TAI and Investacorp. | ||
(v) | Forgiveness of Notes : Notwithstanding the Organizations requirement to pay principal and interest as otherwise set forth in this Agreement, upon each Annual Forgiveness Date the Lender shall forgive the obligations of the Organization up to the amount of $714,285.71 of outstanding principal for each of the Tranche A Loan and the Tranche B Loan, or the remaining principal of each of the Tranche A Loan and the Tranche B Loan if less than |
-6-
that amount, plus accumulated interest otherwise owed to the Lender under the Tranche A Loan or Tranche B Loan, respectively, provided that each of the following conditions precedent is satisfied to the reasonable satisfaction of the Lender on such Annual Forgiveness Date: |
(a) | Each of the representations and warranties of the Organization contained in Section 3(i), (ii) and (iii) and shall be true as of the date as of which it was made and shall also be true at and as of the time any loan amounts under either the Tranche A Loan or the Tranche B Loan are forgiven, with the same effect as if made at and as of that time (except to the extent of changes resulting in transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date). | ||
(b) | No Default or Event of Default specified in any of paragraphs (a), (b), (c), (f), (g), (j) and (k) of Section 6(i) shall have occurred and be continuing on such date. | ||
(c) | The Consolidated Adjusted Shareholders Equity of the Organization as of the date of the financial statements most recently delivered by the Organization pursuant to Section 4(iii) shall be at least $25,000,000. | ||
(d) | The Revolving Line of Credit dated October 19, 2007 provided to the Organization by First Gamma Investments Trust in the amount of $30,000,000 (Frost Gamma Line of Credit) shall remain outstanding with a final term date not to precede the Final Payment Date and no material event of default to the lender thereunder shall have occurred and be continuing. | ||
(e) | Each of the Clearing Agreements is in full force and effect and no material defaults or other termination events have occurred and are continuing thereunder. | ||
(f) | The Organization has not discontinued or divested any of the following subsidiaries: LTS, TAI, or Investacorp. | ||
(g) | The Organization shall cause its subsidiary, Investacorp, to convert to the Lender, within twelve (12) months of the Effective Date, all or substantially all of the business currently cleared through J.P. Morgan, as well as Ridge Clearing and Outsourcing Solutions, Inc. | ||
(h) | This paragraph applies only with respect to the forgiveness of the Tranche A Loan on any Annual Forgiveness Date: the Core Fee |
-7-
Measure (as defined on Exhibit A attached hereto) of all the Subsidiary Broker-Dealers and the other subsidiaries of the Organization on the Lenders clearing platform is (i) equal to, or greater than, $[*] for the prior twelve (12) month period, or (ii) the average annual Core Fee Measure of these entities for the period commencing on the Effective Date and ending on such Annual Forgiveness Date is equal to, or greater than, $[*]. Notwithstanding the foregoing, if the Organization is not entitled to forgiveness with respect to a portion of the Tranche A Loan on an Annual Forgiveness Date pursuant to the preceding sentence (a Tranche A Unachieved Forgiveness) but as of a subsequent Annual Forgiveness Date the average annual Core Fee Measure of such entities for the period commencing on the Effective Date and ending on such subsequent Annual Forgiveness Date is equal to, or greater than, $[*], the principal amount of the Tranche A Unachieved Forgiveness for all previous years and the interest payable for the year ending on such subsequent Annual Forgiveness Date shall be forgiven as of such subsequent Annual Forgiveness Date. | |||
(i) | This paragraph applies only with respect to the forgiveness of the Tranche B Loan on any Annual Forgiveness Date: (i) for the prior twelve (12) month period ending on such Annual Forgiveness Date, the Core Fee Measure of all the Subsidiary Broker-Dealers and the other subsidiaries of the Organization on the Lenders clearing platform is equal to, or greater than, the Core Fee Measure Benchmark for such Annual Forgiveness Date as noted on the below schedule, or (ii) the average annual Core Fee Measure of such entities for the period commencing on the Effective Date and ending on such Annual Forgiveness Date is equal to, or greater than, the Average Annual Core Fee Measure Benchmark noted on the below schedule: |
Core Fee Measure | Average Annual Core Fee | |||||||
Annual Forgiveness Date | Benchmark | Measure Benchmark | ||||||
1
st
|
[*] | [*] | ||||||
2
nd
|
[*] | [*] | ||||||
3
rd
|
[*] | [*] | ||||||
4
th
|
[*] | [*] | ||||||
5
th
|
[*] | [*] | ||||||
6
th
|
[*] | [*] | ||||||
7
th
|
[*] | [*] |
Notwithstanding the foregoing, if the Organization is not entitled to forgiveness with respect to a portion of the Tranche B Loan on an Annual Forgiveness Date pursuant to the preceding sentence (a Tranche B Unachieved Forgiveness) but as of a subsequent Annual Forgiveness Date the average annual Core Fee Measure of such entities for the period commencing on the Effective Date and ending on such subsequent Annual |
-8-
Forgiveness Date is equal to, or greater than, the Average Annual Core Fee Measure Benchmark noted in the above schedule for such subsequent Annual Forgiveness Date, the amount of the Tranche B Unachieved Forgiveness for all previous years and the interest payable for the year ending on such subsequent Annual Forgiveness Date shall be forgiven as of such subsequent Annual Forgiveness Date. | |||
(j) | This paragraph applies only with respect to the forgiveness of the Tranche B Loan: With respect to any acquisition of a broker-dealer or of broker-dealer assets made by the Organization after the Effective Date, and until such time as the Organization has expended more than $[*] of cash as consideration in such acquisitions or acquisitions, the Organization has provided the Lender with evidence reasonably satisfactory to the Lender that the Organization is [*]. The Lender agrees to bear [*]. |
(vi) | All payments made by the Organization hereunder and under any of the other Loan Documents shall be made without recoupment, setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Organization is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Organization with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Organization shall pay to the Lender, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in United States Dollars as shall be necessary to enable the Lender to receive the same net amount which the Lender would have received on such due date had no such obligation been imposed upon the Organization. | ||
(vii) | The Organization may, at its option and without any penalty, make prepayment of all or any portion of the principal amount hereof to the Lender prior to the Final Payment Date (such payment being hereinafter referred to as the Prepayment) at any time subsequent to the Effective Date. Each Prepayment under this paragraph shall be accompanied by the payment of the interest accrued on the amount prepaid to the date of such Prepayment. Each partial Prepayment shall be in a principal amount of $250,000 or an integral multiple thereof. No amounts repaid may be reborrowed. |
3. | REPRESENTATIONS AND WARRANTIES |
(i) | It is a corporation duly organized, validly existing and in good standing under the laws of its state of organization, and has all requisite authority, whether arising |
-9-
under its Articles of Incorporation or by-laws or applicable federal or state laws, to enter into this Agreement and the other Loan Documents and to discharge the duties and obligations apportioned to it in accordance with the terms hereof, and that the person(s) executing this Agreement and the other Loan Documents on behalf of Organization is/are duly authorized to do so. | |||
(ii) | The execution and delivery of this Agreement and the other Loan Documents to which the Organization is or is to become a party will result in valid and legally binding obligations of the Organization enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors rights and except to the extent that availability of the remedies of specific performance and injunctive relief and other equitable remedies are subject to the discretion of the court before which any proceeding therefor may be brought. | ||
(iii) | The execution, delivery and performance by the Organization of this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained. | ||
(iv) | No material default or event of default exists under any of the Transaction Documents or any other agreement between the Lender and the Organization. | ||
(v) | The Consolidated Adjusted Shareholders Equity of the Organization as of the last day of the month immediately preceding the Effective Date is at least $20,000,000. | ||
(vi) | It wholly owns each of LTC, TAI and Investacorp. | ||
(vii) | Since March 31, 2009, no Material Adverse Effect has occurred and is continuing. | ||
(viii) | There are no actions, suits, proceedings or investigations of any kind pending or threatened against the Organization before any governmental authority (a) that, if adversely determined, is reasonably likely, either in any case or in the aggregate, to (i) have a Material Adverse Effect or (ii) materially impair the right of the Organization to carry on business substantially as now conducted by it, or result in any substantial liability not adequately covered by insurance, or (b) that question the validity of this Agreement or any of the other Transaction Documents, or any action taken or to be taken pursuant hereto or thereto. | ||
(ix) | The Organization is not subject to any governing document (including, without limitation, its Articles of Incorporation and by-laws or similar documents) or other legal restriction, or any judgment, decree, order, law, statute, rule or regulation that, since March 31, 2009, has had or is expected, in the judgment of the Organizations officers, to have a Material Adverse Effect. The Organization is |
-10-
not a party to any contract or agreement that, since March 31, 2009, has had or is expected, in the judgment of the Organizations officers, to have any Material Adverse Effect. | |||
(x) | The Organization is not in violation of any provision of its governing documents, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that is reasonably likely to result in the imposition of substantial penalties or have a Material Adverse Effect. | ||
(xi) | The Organization (a) has made or filed, or has received a currently valid extension to file, all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and none of the officers of the Organization know of any basis for any such claim. |
4. | AFFIRMATIVE COVENANTS |
(i) | The Organization shall duly and punctually pay or cause to be paid the principal and interest due on the Notes, as well as all fees and all other amounts provided for in this Agreement and the other Loan Documents, all in accordance with the terms of this Agreement and such other Loan Documents. | ||
(ii) | The Organization shall (a) keep, and cause each of its subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries shall be made in accordance with United States generally accepted accounting principles (GAAP), and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its subsidiaries, contingencies, and other reserves, and (c) at all times engage independent certified public accountants reasonably satisfactory to the Lender as the independent certified public accountants of the Organization and its subsidiaries and shall not permit more than thirty (30) days to elapse between the cessation of such firms (or any successor firms) engagement as the independent certified public accountants of the Organization and its subsidiaries and the appointment in such capacity of a successor firm as shall be reasonably satisfactory to the Lender. The Lender acknowledges that Eisner LLP is reasonably satisfactory to it. |
-11-
(iii) | The Organization shall deliver to the Lender financial statements of the Organization as follows: (a) for each of the first two months of a fiscal quarter year, on or before the forty-fifth calendar day following each calendar month during the term of this Agreement, monthly financial statements prepared by the Organization consisting of a balance sheet and a statement of operations; (b) for each of the first three fiscal quarters of a fiscal year, on or before the forty-fifth calendar day following the end of such fiscal quarter, the financial statements included in the Form 10-Q filed by the Organization with the SEC for such fiscal quarter; and (c) for each full fiscal year, on or before the ninetieth calendar day following the end of such fiscal year, the financial statements included in the Form 10-K filed by the Organization for such fiscal year. In each case, the Organization shall also deliver to the Lender a calculation setting forth the Organizations Consolidated Adjusted Shareholders Equity as of the date of the financial statements so delivered derived from the information contained in such financial statements. The financial statements to be delivered pursuant to the foregoing clauses (a) and (b) will not contain all notes and disclosures required by GAAP and will be subject to normal year-end and audit adjustments. | ||
(iv) | The Organization shall promptly notify the Lender in writing of the occurrence of any Default or Event of Default as well as any material default or material event of default under any Transaction Document or any other agreement evidencing any loan to the Organization or indebtedness of the Organization, together with a reasonably detailed description thereof, and the actions the Organization proposes to take with respect thereto. | ||
(v) | The Organization shall give written notice to the Lender within ten (10) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Organization or to which the Organization is or becomes a party involving an uninsured claim against the Organization that, if adversely determined, could reasonably be expected to have a Material Adverse Effect on the Organization and stating the nature and status of such litigation or proceedings. The Organization shall give written notice to the Lender, in form and detail satisfactory to the Lender, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Organization or any of its subsidiaries in an amount in excess of $1,000,000. | ||
(vi) | The Organization shall do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence, rights and franchises and shall not convert to a limited liability company or a limited liability partnership. It (a) shall cause all of its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (b) shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Organization may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (c) shall continue to engage primarily in the businesses now conducted by it and its |
-12-
subsidiaries and in related businesses; provided that nothing in this paragraph will prevent the Organization from discontinuing the operation and maintenance of any of its or its subsidiaries properties if such discontinuance is, in the judgment of the Organization, desirable in the conduct of its or their business and all such discontinuances do not in the aggregate have a Material Adverse Effect. | |||
(vii) | The Organization shall duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that (a) any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Organization shall have set aside on its books adequate reserves with respect thereto; (b) the Organization shall pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor or post a bond or other security to preclude foreclosure; and (c) a failure to comply with the provisions of this Section 4(vii) shall not constitute an Event of Default unless such failure has a Material Adverse Effect upon the Organization. | ||
(viii) | The Organization shall permit the Lender to visit and inspect any of the properties of the Organization, to examine the books of account of the Organization (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Organization with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Lender may reasonably request. | ||
(ix) | The Organization shall comply with (a) the applicable laws and regulations wherever its business is conducted, (b) the provisions of its governing documents, (c) all agreements and instruments by which it or any of its material properties may be bound and (d) all applicable decrees, orders, and judgments, the failure to comply with which would constitute a Material Adverse Effect. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Organization may fulfill any of its obligations hereunder or any of the other Transaction Documents, the Organization shall immediately take or cause to be taken all reasonable steps within the power of the Organization to obtain such authorization, consent, approval, permit or license and furnish the Lender with evidence thereof. | ||
(x) | The Organization shall not use the proceeds of Tranche A Loan or Tranche B Loan for any purpose that is in contravention of any state or federal laws or regulations. | ||
(xi) | The Organization shall cooperate with the Lender and execute such further |
-13-
instruments and documents as the Lender shall reasonably request to carry out to the Lenders reasonable satisfaction the transactions contemplated by this Agreement and the other Transaction Documents to which the Organization is a party. | |||
(xii) | The Organization shall cause its subsidiary, Investacorp, to convert to the Lender, within twelve (12) months of the Effective Date, all or substantially all of the business currently cleared through J.P. Morgan, as well as Ridge Clearing and Outsourcing Solutions, Inc. |
5. | NEGATIVE COVENANT |
(i) | Other than (a) indebtedness to finance customary operating expenses of the Organization that are incurred in the ordinary course of business consistent with past practices in an aggregate amount not to exceed $ 1 million outstanding at any time; (b) indebtedness of the Organization arising under the Frost Gamma Line of Credit which ranks as to payment rights pari passu with (but not senior to) the obligations of the Organization to the Lender under this Agreement; (c) purchase money indebtedness, indebtedness incurred by means of capitalized leases or other indebtedness of the Organization the proceeds of which are used to finance an acquisition of the assets or equity interests of another entity or of equipment or other property (Acquisition Debt) so long as such Acquisition Debt ranks as to payment rights either pari passu with or junior to (but not senior to) the obligations of the Organization to the Lender under this Agreement; and (d) any renewal, refinancing, replacement or substitution of any the foregoing, provided that any such renewal, refinancing, replacement or substitution does not result in a net increase in overall indebtedness to the Organization, the Organization shall not incur any indebtedness for borrowed money from any other lender, unless such indebtedness is subordinate to the Organizations obligations to Lender under this Agreement in a manner reasonably satisfactory to the Lender. | ||
(ii) | The Organizations Subsidiary Broker-Dealers shall not enter into clearing agreements with a party other than the Lender for services and products similar to those set forth in the Clearing Agreements without the prior written consent of Lender, which shall not unreasonably be withheld or delayed provided that the Subsidiary Broker-Dealers have first requested Lender to provide the services that the Subsidiary Broker-Dealers are seeking to obtain from such other party and upon such request, the Lender is either unwilling, or unable in a timely manner, to provide such products or services. |
(i) | If any of the following events (Events of Default or, if the giving of notice |
-14-
or the lapse of time or both is required, then, prior to such notice or lapse of time, Defaults) shall occur: |
(a) | The Organization shall fail to pay any principal on the Tranche A Loan or the Tranche B Loan when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment, and does not remedy such failure within ten (10) calendar days of its occurrence, unless otherwise forgiven by Lender as provided in this Agreement; | ||
(b) | The Organization shall fail to pay any interest on either the Tranche A Loan or the Tranche B Loan, any fees, or other sums due hereunder or under any of the other Loan Documents, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment, and does not remedy such failure within ten (10) calendar days of its occurrence, unless otherwise forgiven by Lender as provided in this Agreement; | ||
(c) | The Organization shall fail to comply in any material respect with any of its covenants contained in Section 4(ii), Section 4(iii), Section 4(vi) or Section 4(vii) and such failure shall not be cured to the reasonable satisfaction of the Lender within ten (10) calendar days after receipt of notice from the Lender demanding such cure or the Organization shall fail to comply in any material respect with any of its covenants contained in Section 4(iv), Section 4(v), Section 4(viii), Section 4(ix), Section 4(x), Section 4(xii) or Section 5 hereof, or any of the covenants contained in any of the other Loan Documents; | ||
(d) | Any representation or warranty of the Organization contained in Section 3(i), (ii,) and (iii) is deemed to have been false in any material respect upon the date when made; | ||
(e) | The Organization shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any capitalized leases, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any capitalized leases for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; | ||
(f) | The Organization or any of its Subsidiary Broker-Dealers shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, |
-15-
liquidator or receiver of the Organization or any of its Subsidiary Broker-Dealers or of any substantial part of the assets of the Organization or any of its Subsidiary Broker-Dealers, or shall commence any case or other proceeding relating to the Organization or any of its Subsidiary Broker-Dealers under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Organization or any of its Subsidiary Broker-Dealers and the Organization or any of its Subsidiary Broker-Dealers shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within ninety (90) days following the filing thereof; | |||
(g) | A decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Organization or any of its subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Organization or any of its subsidiaries in an involuntary case under federal bankruptcy laws as now or hereafter constituted, provided, however, that in the event such order or decree is entered solely against a subsidiary of the Organization and such order or decree does not have a Material Adverse Effect on the Organization, then such an order or decree shall not be considered an Event of Default under this Section 6(i)(g); | ||
(h) | There shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against the Organization that, with other outstanding final judgments, undischarged, against the Organization exceeds in the aggregate $37,500,000; | ||
(i) | The Organization fails to maintain Consolidated Adjusted Shareholders Equity of at least $20,000,000, as determined as of the date of any of the financial statements delivered by the Organization pursuant to Section 4(iii), subject to any cure period contained herein this Agreement; | ||
(j) | The Frost Gamma Line of Credit is in default or is terminated; | ||
(k) | The SEC, The New York Stock Exchange, the Financial Industry Regulatory Authority or any other regulatory authority, including state securities administrators, to which any of the Subsidiary Broker- Dealers is subject suspends (and does not reinstate within ten (10) days), places material restrictions on (and such restrictions are not removed within fifteen (15) business days) and of the Subsidiary Broker-Dealers or revokes membership of any of the Subsidiary |
-16-
Broker-Dealers as a member organization of any such organization that is a self-regulatory organization and such action results in a Material Adverse Effect; | |||
(l) | Any of the Clearing Agreements, and, in addition, any of the future clearing agreements between NFS and any future Affiliated B-Ds, ceases to be in full force and effect or is otherwise terminated (other than termination by the Lender in circumstances not requiring a default by a Subsidiary Broker-Dealer party thereto) or if any of the other Transaction Documents shall be cancelled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lender, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Transaction Documents shall be commenced by or on behalf of the Organization or any of its equity holders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Transaction Documents is illegal, invalid or unenforceable in accordance with the terms thereof; or | ||
(m) | The Organization fails to remain the sole owner of any of the Subsidiary Broker-Dealers; |
then, and in any such event, so long as the same may be continuing, the Lender may by notice in writing to the Organization declare all amounts owing with respect to this Agreement and the Tranche A Note and the Tranche B Note to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Organization; provided that in the event of any Event of Default specified in Section 6(i)(f) or 6(i)(g), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Lender. | |||
(ii) | In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Lender shall have accelerated the maturity of the Tranche A Note or the Tranche B Note pursuant to this Section 6, the Lender may proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the obligations to the Lender are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Lender. No remedy herein conferred upon the Lender or the holder of the Tranche A Note or Tranche B Note is intended to be |
-17-
exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. |
Payment | ||||
Period: | Payable on: | Amount: | ||
Month 1
|
thirty (30) days following notice of the Termination Material Event (or, if any such last day is not a Business Day, on the next succeeding Business Day) | (i) 25% of the outstanding principal balances of Tranche A Loan plus all accrued and unpaid interest thereon; and (ii) 25% of the outstanding principal balances of Tranche B Loan plus all accrued and unpaid interest thereon | ||
|
||||
Months 2-7
|
on the last day of each thirty-day period for this 6-month period (or, if any such thirty-day period that does not end on a Business Day, on the next succeeding Business Day) | the remaining principal balance of the Tranche A and Tranche B Loans, plus all accrued interest thereon, in equal (as to principal) consecutive monthly installments, together with accrued interest owing through each payment date |
-18-
Payment | ||||
Period: | Payable on: | Amount: | ||
Month 1
|
thirty (30) days following notice of the Termination Material Event (or, if any such last day is not a Business Day, on the next succeeding Business Day) | (i) 25% of the outstanding principal balances of Tranche A Loan plus all accrued and unpaid interest thereon; and (ii) 25% of the outstanding principal balances of Tranche B Loan plus all accrued and unpaid interest thereon | ||
|
||||
Months 2-12
|
on the last day of each thirty-day period for this 11-month period (or, if any such thirty-day period that does not end on a Business Day, on the next succeeding Business Day) | the remaining principal balance of the Tranche A and Tranche B Loans, plus all accrued interest thereon, in equal (as to principal) consecutive monthly installments, together with accrued interest owing through each payment date |
-19-
-20-
-21-
(a) | If to the Organization, at 4400 Biscayne Blvd., 12 th Floor, Miami, FL 33137, Attention: Richard Lampen, President and Chief Executive Officer; and | ||
(b) | If to the Lender, at 200 Seaport Blvd., Boston, MA 02210, Attention: Chief Financial Officer. |
-22-
ORGANIZATION: LADENBURG THALMANN FINANCIAL SERVICES INC. | LENDER: NATIONAL FINANCIAL SERVICES LLC | |||||||||
|
||||||||||
By:
Name: |
/s/ Brett Kaufman
|
By:
Name: |
/s/ Mark C. Healy
|
|||||||
Title:
|
Chief Financial Officer | Title: | EVP, Client Mgt. |
-23-
1. | The Clearing and Execution Expense in the Commission Revenue summary section of the clearing statement multiplied by -1, plus | ||
2. | The Net Other Revenue related to the Volume Adjustment and Miscellaneous Fees line items in the Other Revenue Detail section of the clearing statement multiplied by -1, plus | ||
3. | The Net Expense in the Expense summary section of the clearing statement multiplied by -1, plus | ||
4. | The Net Inc/(Exp) related to the line items referenced in Table 1 below which are contained in the Expense Detail section of the clearing statement, plus | ||
5. | The average number of IRA accounts multiplied by [*], plus | ||
6. | The Units related to the Custody/Rcrdkpng Fee line item in the Expense Detail section of the clearing statement multiplied by [*], plus | ||
7. | Any and all expenses and fees paid by the Subsidiary Broker-Dealers and other subsidiaries of the Organization on the Lenders clearing platform to the Lender or its affiliates for technology products and/or consulting fees. |
Table 1 | ||
Transfer of Asset
|
||
Legals (Legal Transfers)
|
||
Transfer/Ship of Sec
|
||
Extensions
|
||
Mailgrams
|
||
Physical Reorganizat
|
||
Legal Returns
|
||
Bounced Checks
|
||
Stop Payment
|
||
Custody/Rcrdkpng Fee (Inactive Account Fee)
|
||
Br P ATM Fees Wvd NF (Brokerage Access w/out Debit Card)
|
||
Brkrg Access w/debit
|
||
Brkrg Port Gold
|
||
Brkrg Port Platinum
|
||
IRA Fee Full Subsidy
|
||
IRA Fee Part Subsidy
|
||
IRA Unpaid Maint Fee
|
||
IRA Termination Fee
|
||
Wire Fees
|
1 | NFS reserves the right to adjust the Core Fee Measure Calculation in the event that there is a change in the format of the clearing statement terms or its structure. | |
2 | Note: If at anytime [*]. |
-24-
By:
|
||||
|
|
|||
Name:
|
||||
|
|
|||
Title:
|
||||
|
|
-25-
By:
|
||||
|
|
|||
Name:
|
||||
|
|
|||
Title:
|
||||
|
|
-26-
Outstanding | ||||||||||||||||
Amount | Amount | Amount | ||||||||||||||
Annual | of | Principal | Principal | Amount of | Of | Amount | After Annual | |||||||||
Forgiveness | Principal | Amount | Amount | Interest | Interest | of Interest | Forgiveness | |||||||||
Date | Payment | Forgiven | Re-Paid | Payment | Forgiven | Paid | Date | Signature | ||||||||
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|
-27-
Outstanding | ||||||||||||||||
Amount | Amount | Amount | ||||||||||||||
Annual | of | Principal | Principal | Amount of | Of | Amount | After Annual | |||||||||
Forgiveness | Principal | Amount | Amount | Interest | Interest | of Interest | Forgiveness | |||||||||
Date | Payment | Forgiven | Re-Paid | Payment | Forgiven | Paid | Date | Signature | ||||||||
|
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1
Ladenburg Thalmann Financial Services Inc.
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By: | /s/ Richard J. Lampen | |||
Name: | Richard J. Lampen | |||
Title: | President and CEO | |||
Frost Nevada Investments Trust
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By: | /s/ Phillip Frost, M.D. | |||
Name: | Phillip Frost, M.D. | |||
Title: | Trustee | |||
2
/s/ Richard J. Lampen | ||||
Richard J. Lampen | ||||
President and Chief Executive Officer
(Principal Executive Officer) |
/s/ Brett H. Kaufman | ||||
Brett H. Kaufman | ||||
Vice President and Chief Financial Officer
(Principal Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Richard J. Lampen | ||||
Richard J. Lampen | ||||
President and Chief Executive Officer
(Principal Executive Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Brett H. Kaufman | ||||
Brett H. Kaufman | ||||
Vice President and Chief Financial Officer (Principal Financial Officer) | ||||