Document:

Stock Option Agreement - Michael Philipps

 

Exhibit 10.1

LADENBURG THALMANN FINANCIAL SERVICES INC.

590 Madison Avenue,
34th
Floor

New York, NY 10022

As of March 25, 2005

Mr. Michael Philipps

12 Windmill Lane

Scarsdale, New York 10583

Dear Mr. Philipps:

     We are pleased to inform you that Ladenburg Thalmann Financial Services Inc. (the “Company”)
has granted you a nonqualified option (the “Option”) to purchase 1,500,000 shares of the Company’s
common stock, par value $.0001 per share (the “Common Stock”), at a purchase price of $0.64 per
share (any of the underlying shares of Common Stock to be issued upon exercise of the Option are
referred to hereinafter as the “Shares”). Capitalized forms used and not otherwise defined herein
shall have the meanings ascribed to them in the employment agreement of even date herewith between
you and the Company (“Employment Agreement”).

     1. Subject to the terms hereof, the Option may be exercised on or prior to March 25, 2015
(after which date the Option will, to the extent not previously exercised, expire). The Option
shall vest and become exercisable as to (i) 250,000 on and after each of March 25, 2006, 2007, 2008
and 2009; (ii) an additional 125,000 of the shares on and after March 25, 2008; and (iii) an
additional 375,000 shares on and after March 25, 2009; provided, in each case, you are then
employed by the Company and/or one of its present or future subsidiaries or affiliates (for
purposes of this Agreement, any other entity controlling, controlled by, or under common control
with, the Company); and provided, further, that the Shares referred to in (ii) and (iii) above
shall vest on such dates only if all the shares of Common Stock underlying your Stock Purchase
Obligation have been purchased.

     2. The Option, from and after the date it vests and becomes exercisable pursuant to Section 1
hereof, may be exercised in whole or in part by delivering to the Company a written notice of
exercise in the form attached hereto as Exhibit A (or such other form approved by the Company),
specifying the number of the Shares to be purchased and the purchase price therefor, together with
payment of the purchase price of the Shares to be purchased. The purchase price is to be paid in
cash or by delivering shares of Common Stock already owned by you for at least six months (“Mature
Shares”) and having a “Fair Market Value” on the date of exercise equal to the purchase price of
the Option being exercised, or a combination of such shares and cash. “Fair Market Value,” unless
otherwise required by any applicable provision of the Internal Revenue

 

 

Mr. Michael Philipps

As of March 25, 2005

Page 2

Code of 1986, as amended from time to time, and any successor thereto and the regulations
promulgated thereunder, means, as of any given date: (i) if the Common Stock is listed on a
national securities exchange or quoted on the Nasdaq National Market or Nasdaq Small Cap Market,
the last sale price of the Common Stock in the principal trading market for the Common Stock on the
last trading day preceding the date of grant of an award hereunder, as reported by the exchange or
Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national securities
exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the
over-the-counter market, the closing bid price for the Common Stock on the last trading day
preceding the date of grant of an award hereunder for which such quotations are reported by the OTC
Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such
quotations; and (iii) if the Fair Market Value of the Common Stock cannot be determined pursuant to
clause (i) or (ii) above, such price as the Compensation Committee of the Company shall determine,
in good faith.

     In addition, payment of the purchase price of the Shares to be purchased may also be made by
delivering a properly executed notice to the Company, together with a copy of the irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds
necessary to pay the purchase price, and, if required, the amount of any federal, state or local
withholding taxes.

     No Shares shall be issued until full payment therefor has been made. You shall have all of
the rights of a stockholder of the Company holding the Common Stock that is subject to the Option
(including, if applicable, the right to vote the Shares and the right to receive dividends
thereon), when you have given written notice of exercise, have paid in full for such Shares and, if
requested, have given the certificate described in Section 8 hereof.

     3. In the event that your employment is terminated by reason of your death or Disability, all
unvested Options that would have vested had you remained employed for the remainder of the then
current year (April 1 to March 31) of your Employment Period shall immediately vest (provided,
however, that if your employment is terminated in the first year of the Employment Period by death
or Disability, then all unvested Options that would have vested in both the first and second years
of your Employment Period shall immediately vest) and the portion of the Option which has vested
shall remain exercisable and effective for a period of one year following termination of
employment, but not beyond the term. In the event your employment is terminated for any reason
other than death or Disability, the Option shall thereupon terminate; provided, however, that if
your employment is terminated by the Company without Cause or by Employee for Good Reason, then the
portion of the Option which has vested by the date of termination of employment shall remain
exercisable and effective for a period of three months following termination of employment, but not
beyond the term. In the event of your death or Disability, the Option may be exercised by your
personal representative or representatives, or by the person or persons to whom your rights under
the Option shall pass by will or by the applicable laws of descent and distribution.

 

 

Mr. Michael Philipps

As of March 25, 2005

Page 3

     4. The Option is not transferable except by will or the applicable laws of descent and
distribution. Notwithstanding the foregoing, with the approval of the Compensation Committee, you
may transfer the Option (i) (A) by gift, for no consideration, or (B) pursuant to a domestic
relations order, in either case, to or for the benefit of your “Immediate Family” (as defined
below), or (ii) to an entity in which you and/or members of your Immediate Family own more than
fifty percent of the voting interest, in exchange for an interest in that entity, provided that
such transfer is being made for estate, tax and/or personal planning purposes and will not have
adverse tax consequences to the Company and subject to such limits as the Compensation Committee
may establish and the execution of such documents as the Compensation Committee may require. In
such event, the transferee shall remain subject to all the terms and conditions applicable to the
Option prior to such transfer. The term “Immediate Family” shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing your household (other than a tenant or
employee), a trust in which these persons have more than fifty percent beneficial interest, and a
foundation in which these persons (or you) control the management of the assets.

     5. In the event of any change in the shares of Common Stock of the Company as a whole
occurring as the result of a stock split, reverse stock split, stock dividend payable on shares of
Common Stock, combination or exchange of shares, or other extraordinary or unusual event occurring
after the date hereof, the Board of Directors of the Company (the “Board”) shall make appropriate
adjustments in the terms of the Option to preserve the economic interest of the grant. Any such
adjustments will be made by the Board, whose determination will be final, binding and conclusive.

     6. The grant of the Option does not confer on you any right to continue in the employ of the
Company or any of its subsidiaries or affiliates or interfere in any way with the right of the
Company or its subsidiaries or affiliates to terminate the term of your employment.

     7. The Company shall require as a condition to the exercise of any portion of the Option that
you pay to the Company, or make other arrangements regarding the payment of, any federal state or
local taxes required by law to be withheld as a result of such exercise. If the Board consents,
you may pay such taxes using Mature Shares, valued at Fair Market Value.

     8. Unless at the time of the exercise of any portion of the Option a registration statement
under the Securities Act of 1933, as amended (the “Act”), is in effect as to the Shares, the Shares
shall be acquired for investment and not for sale or distribution, and if the Company so requests,
upon any exercise of the Option, in whole or in part, you agree to execute and deliver to the
Company a reasonable certificate to such effect.

     9. You agree to abide by all of the Company’s policies in effect at the time you acquire any
Shares and thereafter, including the Company’s Insider Trading Policy, with respect to the
ownership and trading of the Company’s securities.

 

 

Mr. Michael Philipps

As of March 25, 2005

Page 4

     10. The Company represents and warrants to you as follows: (i) this Agreement and the grant of
the Option hereunder have been authorized by all necessary corporate action by the Company and this
letter is a valid and binding Agreement of the Company enforceable against the Company in
accordance with its terms; (ii) the Company will obtain, at its expense, any regulatory approvals
necessary or advisable in connection with the grant of the Option or the issuance of the Shares;
and (iii) the Company currently has reserved and available, and will continue to have reserved and
available during the term of the Option, sufficient authorized and issued shares of its Common
Stock for issuance upon exercise of the Option.

     11. Promptly following the date hereof, the Company shall use its best efforts to file and
keep in effect a Registration Statement on Form S-8 or other applicable form to register under the
Act the resale of the Shares issuable to you upon exercise of the Option.

     12. This Agreement contains all the understandings between the Company and you pertaining to
the matters referred to herein, and supercedes all undertakings and agreements, whether oral or in
writing, previously entered into by the Company and you with respect hereto. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to in writing signed
by you and a duly authorized officer of the Company. No waiver by the Company or you of any breach
by the other party hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same
time, any prior time or any subsequent time. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the
application of such provision to such person or circumstances other than those to which it is so
determined to be invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted by law. This
Agreement will be governed by and construed in accordance with the laws of the State of New York,
without regard to its conflicts of laws principles. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

 

Mr. Michael Philipps

As of March 25, 2005

Page 5

     Would you kindly evidence your acceptance of the Option and your agreement to comply with the
provisions hereof by executing this Agreement in the space provided below.

	 	 	 	 	 
	 	Very truly yours,

LADENBURG THALMANN FINANCIAL SERVICES INC.

 	 
	 	By:  	/s/ Salvatore Giardina
 	 
	 	 	Salvatore Giardina 	 
	 	 	Vice President and Chief Financial Officer 	 
	 

AGREED TO AND ACCEPTED:

/s/ Michael Philipps

MICHAEL PHILIPPS

 

 

EXHIBIT A

Ladenburg Thalmann Financial Services Inc.

590 Madison Avenue, 34th Floor

New York, NY 10022

Gentlemen:

     Notice is hereby given of my election to purchase _________shares of Common Stock, $.0001 par
value (the “Shares”), of Ladenburg Thalmann Financial Services Inc., at a price of $______per
Share, pursuant to the provisions of the stock option granted to me as of March 25, 2005. Enclosed
in payment for the Shares is:

		
	           o 	my check in the amount of $_________________.

		
	           o 	______________ Shares having a total value of $______________, such value
being based on the closing price(s) of the Shares on the date hereof.

     The following information is supplied for use in issuing and registering the Shares purchased
hereby:

	 	 	 
	Number of Certificates
and Denominations

	 	

	 
	 	 
	Name

	 	

	 
	 	 
	Address

	 	

	

	 	 

	

	 	 

	 
	 	 
	Social Security No.

	 	

Dated:

Very truly yours,

Michael PhilippsSubscription Agreement - Michael Philipps

 

Exhibit 10.2

SUBSCRIPTION AGREEMENT AND INVESTOR INFORMATION STATEMENT

     Ladenburg Thalmann Financial Services Inc. (the “Company”) and Michael Philipps (the
“Investor”) hereby agree as follows:

     1. Subscription for Securities. Investor hereby subscribes for and agrees to purchase
1,000,000 shares of Common Stock (“Share(s)”) at $0.45 per share upon the terms and conditions
described in this Agreement.

     2. Investor Deliveries. On the Closing Date (as hereafter defined), the Investor
shall wire to the Company the sum of $450,000, representing full payment for the Shares.
Certificates representing the Shares will be delivered to the Investor as soon thereafter as
practicable. “Closing Date” shall mean the date mutually agreed to by the Company and Investor,
but no later than April 1, 2005.

     3. Investor Representations and Warranties. Investor acknowledges, represents and
warrants to the Company as follows:

          (a) Information about the Company. Investor has read the Company’s recent filings
under the Securities Exchange Act of 1934 (“Exchange Act”). Investor has been given access to full
and complete information regarding the Company and has utilized such access to his satisfaction for
the purpose of verifying the information included in those filings. Investor has either met with
or been given reasonable opportunity to meet with officers of the Company for the purpose of asking
reasonable questions of such officers concerning the terms and conditions of the offering of the
Shares and the business and operations of the Company and all such questions have been answered to
Investor’s full satisfaction. Investor has been given an opportunity to obtain any additional
relevant information to the extent reasonably available to the Company. Investor has received all
information and materials regarding the Company that he has reasonably requested.

          (b) Speculative Investment. Investor is aware that the Shares are a speculative
investment that involve a high degree of risk including, but not limited to, the risk of losses
from operations of the Company and the total loss of his investment. Investor acknowledges and is
aware that there is no assurance as to the future performance of the Company. Investor has such
knowledge and experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Shares and has obtained, in his judgment, sufficient
information from the Company to evaluate the merits and risks of an investment in the Company.
Investor has not utilized any person as his purchaser representative (as defined in Regulation D)
in connection with evaluating such merits and risks and has relied solely upon his own
investigation in making a decision to invest in the Company. Investor believes that the investment
in the Shares is suitable for him based upon his investment objectives and financial needs, and
Investor has adequate means for providing for his current financial needs and contingencies and has
no need for liquidity with respect to his investment in the Company.

          (c) Restrictions on Transfer. Investor understands that (i) the Shares have not been
registered under the Securities Act of 1933 (“Securities Act”) or the securities laws of certain
states in reliance on specific exemptions from registration, (ii) no securities administrator of
any state or the federal government has recommended or endorsed this offering of Shares or made any
finding or determination relating to the fairness of an investment in the Company, and (iii) the
Company is relying on his representations and agreements for the purpose of determining whether
this transaction meets the requirements of the exemptions afforded by the Securities Act and
certain state securities laws. Investor understands and agrees that the Shares cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently registered under the
Securities Act and under applicable securities laws of certain states, or an exemption from such
registration is

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available. Investor acknowledges that, notwithstanding the Company’s commitment described
below in Section 4, there can be no assurance that the Company will be able to keep the
Registration Statement (defined below) effective until he sells the Shares registered thereon.

          (d) No Market for Shares. Investor is purchasing the Shares for his own account for
investment and not with a view to, or for sale in connection with, any subsequent distribution of
the Shares, nor with any present intention of selling or otherwise disposing of all or any part of
the Shares. Investor understands that, although there is a public market for the Shares, there is
no assurance that such market will continue.

     4. Registration Rights.

          (a)     (i) The Company shall include the Shares (“Registrable Securities”) on the registration
statement it files with the SEC covering the resale of the shares recently purchased by Mr. Mark
Klein (“Registration Statement”).

               (ii) In connection the foregoing, the Company will, as expeditiously as possible, use its best
efforts to: (A) furnish to Investor copies of reasonably complete drafts of all such documents
proposed to be filed (including exhibits), and the Investor shall have the opportunity to object to
any information pertaining solely to him that is contained therein and the Company will make the
corrections reasonably requested by the Investor with respect to such information prior to filing
any such Registration Statement or amendment; (B) prepare and file with the SEC such amendments and
supplements to such Registration Statement and any prospectus used in connection therewith as may
be necessary to maintain the effectiveness of such Registration Statement and to comply with the
provisions of the Securities Act with respect to the disposition of all Registrable Securities
covered by such Registration Statement; (C) promptly notify Investor: (1) when such Registration
Statement or any prospectus used in connection therewith, or any amendment or supplement thereto,
has been filed and, with respect to such Registration Statement or any post-effective amendment
thereto, when the same has become effective; (2) of any written comments from the SEC with respect
to the Registration Statement and of any written request by the SEC for amendments or supplements
to such Registration Statement or prospectus; and (3) of the notification to the Company by the SEC
of its initiation of any proceeding with respect to the Registration Statement or of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration Statement; (D)
furnish Investor such number of copies of the prospectus contained in such Registration Statement
(including each preliminary prospectus and any summary prospectus) and any other prospectus filed
under Rule 424 promulgated under the Securities Act relating to the Registrable Securities, and
such other documents as Investor may reasonably request to facilitate the disposition of his
Registrable Securities; (E) notify Investor at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event as a result of
which any prospectus included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of Investor promptly prepare and furnish Investor a
reasonable number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (F) make available for inspection by the Investor
and any attorney, accountant or other agent retained by the Investor (collectively, the
“Inspectors”), all financial and other records, pertinent corporate documents and properties of the
Company as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such Registration Statement, and
permit the Inspectors to participate in the preparation of such Registration Statement and any
prospectus contained therein and any amendment or supplement thereto.

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          (b) The Company shall bear all fees and expenses attendant to registering the Registrable
Securities, but the Investor shall pay any and all sales commissions and the expenses of any legal
counsel selected by them to represent them in connection with the sale of the Registrable
Securities. The Company shall use its best efforts to cause any registration statement filed
pursuant to this section to remain effective until all the Registrable Securities registered
thereunder are sold or until the delivery to the Investor of an opinion of counsel to the Company
to the effect set forth in Section 4(h).

          (c)     (i) The Company will indemnify the Investor and each underwriter, if any, and each person
who controls any of them within the meaning of the Securities Act or the Exchange Act against all
claims, losses, damages and liabilities (or actions or proceedings, commenced or threatened, in
respect thereof), joint or several, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification or the like) incident to any
registration, qualification or compliance pursuant to this Section 4 or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of the Securities Act
or any rule or regulation thereunder applicable to the Company in connection with any such
registration, qualification or compliance, and will reimburse the Investor, each such underwriter
and each person who controls any such underwriter within the meaning of the Securities Act or the
Exchange Act for any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action or proceeding;
provided that the Company will not be liable to Investor in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by or on behalf of the Investor
specifically stating that it is intended for inclusion in any Registration Statement under which
Registrable Securities are registered. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Investor or any underwriter or controlling
person, and shall survive the transfer of such securities by Investor.

               (ii) Investor shall indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company’s securities covered by such registration statement, each
person who controls the Company or such underwriter within the meaning of the Securities Act and
the Exchange Act and the rules and regulations thereunder, each other securityholder participating
in such distribution and each of their officers and directors and each person controlling such
other securityholder, against all claims, losses, damages and liabilities (or actions or
proceedings, commenced or threatened, in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such other security holders, directors,
officers, persons, underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss, damage, liability or
action or proceeding, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is made in such document
in reliance upon and in conformity with written information furnished to the Company by or on
behalf of Investor specifically stating that it is intended for inclusion in such document;
provided, however, that the obligations of Investor hereunder shall be limited to an amount equal
to the proceeds received by Investor of securities sold as contemplated herein. Such indemnity
shall remain in full force and effect regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person, and shall survive the transfer of such
securities by Investor.

               (iii) Each party desiring indemnification or contribution under this Section 4(c) hereof (the
“Securities Indemnified Party”) shall give notice to the party required to provide indemnification
or contribution (the “Securities Indemnifying Party”) promptly after such Securities Indemnified
Party has actual knowledge of any claim as to which indemnity or contribution may be sought, and
shall permit the Securities Indemnifying Party to assume, at its sole cost and expense, the defense
of any such claim or any litigation

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resulting therefrom, provided that counsel for the Securities Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the
Securities Indemnified Party (whose approval shall not be unreasonably withheld). The Securities
Indemnified Party may participate in such defense at the Securities Indemnified Party’s expense
unless (A) the employment of counsel by the Securities Indemnified Party has been authorized in
writing by the Securities Indemnifying Party, (B) the Securities Indemnified Party has been
advised by such counsel employed by it that there are legal defenses available to it involving
potential conflict with those of the Securities Indemnifying Party (in which case the Securities
Indemnifying Party will not have the right to direct the defense of such action on behalf of the
Securities Indemnified Party), or (C) the Securities Indemnifying Party has not in fact employed
counsel to assume the defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees and expenses of counsel for
the Securities Indemnified Party shall be at the expense of the Securities Indemnifying Party. The
failure of any Securities Indemnified Party to give notice as provided herein shall not relieve the
Securities Indemnifying Party of its obligations under this Section 4. No Securities
Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent
of each Securities Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the claimant or plaintiff to
such Securities Indemnified Party of a release from all liability in respect to such claim or
litigation. No Securities Indemnified Party shall settle any claim or demand without the prior
written consent of the Securities Indemnifying Party (which consent will not be unreasonably
withheld). Each Securities Indemnified Party shall furnish such information regarding itself or
the claim in question as the Securities Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and litigation resulting
therefrom.

               (iv) The provisions of this Section 4(c) shall be in addition to any other rights to
indemnification or contribution which an Indemnified Party may have pursuant to law, equity,
contract or otherwise.

          (d) In order to provide for just and equitable contribution under the Securities Act in any
case in which (A) any person entitled to indemnification under Section (c) makes a claim for
indemnification pursuant hereto but such indemnification is not enforced in such case
notwithstanding the fact that this section provides for indemnification in such case, or (B)
contribution under the Securities Act, the Exchange Act or otherwise is required on the part of any
such person in circumstances for which indemnification is provided under this section, then, and in
each such case, the Company and the Investor shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity agreement (including
legal and other expenses reasonably incurred in connection with investigation or defense) incurred
by the Company and the Investor, as incurred, in proportion to their relative fault and the
relative knowledge and access to information of the Securities Indemnifying Party, on the one hand,
and the Securities Indemnified Party, on the other hand, concerning the matters resulting in such
losses, liabilities, claims, damages and expenses, the opportunity to correct and prevent any
untrue statement or omission, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact relates to information supplied by the
Securities Indemnifying Party, on the one hand, or the Securities Indemnified Party, on the other
hand, and any other equitable considerations appropriate under the circumstances; provided that no
person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this section, each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same rights to contribution
as the Company.

          (e) The Investor shall furnish to the Company such information regarding himself and the
distribution proposed by him as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or compliance referred to in
this Section 4.

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          (f) The Company shall comply with all of the reporting requirements of the Exchange Act and
with all other public information reporting requirements of the Commission, which are conditions to
the availability of Rule 144 for the sale of the Shares. The Company shall cooperate with the
Investor in supplying such information as may be necessary for such investor to complete and file
any information reporting forms presently or hereafter required by the Commission as a condition to
the availability of Rule 144.

          (g) The Company represents and warrants to the Investor that the granting of the registration
rights to the Investor hereby does not and will not violate any agreement between the Company and
any other security holders with respect to registration rights granted by the Company.

          (h) The rights granted under this Section 4 shall terminate upon delivery to the Investor of
an opinion of counsel to the Company reasonably satisfactory to the Investor to the effect that
such rights are no longer necessary for the public sale of the Registrable Securities without
restriction as to the number of securities that may be sold at any one time or the manner of sale.

          (i) The rights granted under this Section 4 shall not be transferable; provided, however, that
if Investor transfers any of the Shares to members of his immediate family or trusts and limited
partnerships established for their benefit (collectively, “Immediate Family Members”) for estate
planning purposes, such transferees shall be entitled to the benefit of this Section as fully as if
they were the Investor.

     5. Lock-up and Insider Trading Policy. The Investor agrees that he will not sell,
assign or transfer any of the Shares until November 15, 2005, except to an Immediate Family Member
who shall agree to continue to be bound by this restriction. Investor understands that he will be
required to abide by all of the Company’s policies in effect, including the Company’s Insider
Trading Policy, with respect to the ownership and trading of the Company’s securities.

     6. Indemnification. Investor hereby agrees to indemnify and hold harmless the
Company, its respective officers, directors, stockholders, employees, agents and attorneys against
any and all losses, claims, demands, liabilities, and expenses (including reasonable legal or other
expenses incurred by each such person in connection with defending or investigating any such claims
or liabilities, whether or not resulting in any liability to such person or whether incurred by the
indemnified party in any action or proceeding between the indemnitor and indemnified party or
between the indemnified party and any third party) to which any such indemnified party may become
subject, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact made by Investor and
contained herein or (b) arise out of or are based upon any breach by Investor of any
representation, warranty or agreement made by him contained herein.

     7. Governing Law and Jurisdiction. This Subscription Agreement will be deemed to have
been made and delivered in New York City and will be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State of New York. Each
of the Company and the Investor hereby (i) agrees that any legal suit, action or proceeding arising
out of or relating to this Subscription Agreement will be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for the Southern District
of New York, (ii) waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum for such suit, action or proceeding,
(iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York in any such suit,
action or proceeding, (iv) agrees to accept and acknowledge service of any and all process that may
be served in any such suit, action or proceeding in New York State Supreme Court, County of New
York or in the United States District Court for the Southern District of New York and (v) agrees
that service of process upon it mailed by certified mail to its address set forth on my signature
page will be deemed in every respect effective service of process upon it in any suit, action or
proceeding.

5

 

     8. Counterparts. This Subscription Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together will constitute
one and the same instrument. The execution of this Subscription Agreement may be by actual or
facsimile signature.

     9. Benefit. Except as otherwise set forth herein, this Subscription Agreement is
binding upon and inures to the benefit of the parties hereto and their respective heirs, executors,
personal representatives, successors and assigns.

     10. Notices. All notices, offers, acceptance and any other acts under this
Subscription Agreement (except payment) must be in writing, and is sufficiently given if delivered
to the addressees in person, by overnight courier service, or, if mailed, postage prepaid, by
certified mail (return receipt requested), and will be effective three days after being placed in
the mail if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. All communications to me should be sent to
Investor’s residence address on the signature page hereto. All communications to the Company
should be sent to:

		
	                     	Ladenburg Thalmann Financial Services Inc.

590 Madison Avenue, 34th Floor

New York, New York 10022

Attn: Sal Giardina, Chief Financial Officer

     11. Entire Agreement. This Subscription Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior oral and
written agreements between the parties hereto with respect to the subject matter hereof. In the
event any parts of this Subscription Agreement are found to be void, the remaining provisions of
this Subscription Agreement are nevertheless binding with the same effect as though the void parts
were deleted. This Subscription Agreement may not be changed, waived, discharged, or terminated
orally, but rather, only by a statement in writing signed by the party or parties against which
enforcement or the change, waiver, discharge or termination is sought.

     12. Section Headings. Section headings herein have been inserted for reference only
and will not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in
whole or in part, any of the terms or provisions of this Subscription Agreement.

     13. Survival of Representations, Warranties and Agreements. The representations,
warranties and agreements contained herein will survive the delivery of, and the payment for, the
Shares.

6

 

SIGNATURE PAGE FOR INDIVIDUAL INVESTORS - COMPLETE ALL INFORMATION

Name: Michael Philipps

Residence Address: 12 Windmill Lane, Scarsdale, New York 10583

Telephone:            (H)                               (W)                               (Cell)

Social Securities Number:

Amount of Investment:

Number of Shares: 1,000,000

Corresponding dollar amount ($0.45 multiplied by number of Shares): $450,000

Accredited Investor Status For Individuals.

               (i) I am an accredited investor within the meaning of Section 2(15) of the Securities Act and
Rule 501 promulgated thereunder because (check any boxes that apply):

		
	           ý 	My individual annual income during each of the two most
recent years exceeded $200,000 and I expect my annual income
during the current year will exceed $200,000.

		
	            ̈ 	If I am married, my joint annual income with my spouse
during each of the two most recent years exceeded $300,000
and I expect my joint annual income with my spouse during the
current year will exceed $300,000.

		
	           ý 	My individual or joint (together with my spouse) net
worth (including my home, home furnishings and automobiles)
exceeds $1,000,000.

     I hereby confirm the information set forth above is true and correct in all respects as of the
date hereof and will be on the date of the purchase of Shares.

	 	 	 	 
	

	 	 	The foregoing subscription is accepted and the
Company hereby agrees to be bound by its terms.
	 
	 	 	 
	

	 	 	LADENBURG THALMANN FINANCIAL SERVICES INC.
	Signature: /s/ Michael Philipps

	 	 	By: /s/ Salvatore Giardina
	 
	 	 	 
	Print Name: Michael Philipps

	 	 	Name: Salvatore Giardina
	 
	 	 	 
	Date: As of March 25, 2005

	 	 	Title: Vice President and Chief Financial Officer
	 
	 	 	 
	

	 	 	Date: As of March 25, 2005

7

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