As filed with the Securities and Exchange Commission on December 5, 2001
Registration No. 333-71526
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT No. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LADENBURG THALMANN FINANCIAL SERVICES INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida 65-0701248
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
590 Madison Avenue, 34th Floor
New York, NY 10022
(212) 409-2000
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(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
-----------------------
Victor M. Rivas, President and Chief Executive Officer
Ladenburg Thalmann Financial Services Inc.
590 Madison Avenue, 34th Floor
New York, NY 10022
(212) 409-2000
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(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
David Alan Miller, Esq.
Graubard Miller
600 Third Avenue
New York, New York 10016
(212) 818-8800
(212) 818-8881 - Facsimile
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. |X|
-----------------------
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
-----------------------
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
-----------------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
-----------------------
The information in this prospectus is not complete and may be changed.
None of the selling shareholders may sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
Preliminary Prospectus
Subject to Completion, December 5, 2001
LADENBURG THALMANN FINANCIAL SERVICES INC.
47,028,073 shares of common stock
This prospectus relates to up to 47,028,073 shares of common stock of
Ladenburg Thalmann Financial Services Inc. that may be offered for resale for
the account of the selling shareholders set forth in this prospectus under the
heading "Selling Shareholders" beginning on page 14. The selling shareholders
may sell these shares in a variety of transactions as described under the
heading "Plan of Distribution" beginning on page 18.
Our common stock is traded on the American Stock Exchange under the
symbol "LTS." On December 3, 2001 the last reported sale price of our common
stock was $1.25.
We will not receive any proceeds from the sale of the shares. Although
we will not receive any proceeds from the issuance of our common stock upon
conversion of the senior convertible promissory notes held by some of the
selling shareholders, we will immediately retire, without the payment of
additional consideration, the debt attributable to the notes converted. We will
receive the amounts paid by some of the selling shareholders upon exercise of
their warrants and options to acquire a total of 1,500,000 of the above
47,028,073 shares being registered under this prospectus. If those warrants and
options are exercised in full, we will receive $4,509,375.00.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 6 for a discussion of information that should be
considered in connection with an investment in our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December __, 2001
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. The selling
shareholders are offering to sell, and seeking offers to buy, shares of common
stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our common stock.
Table of Contents
Page
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PROSPECTUS SUMMARY.........................................................3
RISK FACTORS...............................................................6
WARNING REGARDING OUR USE OF FORWARD-LOOKING STATEMENTS...................14
USE OF PROCEEDS...........................................................14
SELLING SHAREHOLDERS......................................................14
PLAN OF DISTRIBUTION......................................................18
LEGAL MATTERS.............................................................19
EXPERTS...................................................................19
WHERE YOU CAN FIND ADDITIONAL INFORMATION.................................20
---------------------------------------------
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PROSPECTUS SUMMARY
We are a holding company engaged in retail and institutional securities
brokerage, investment banking and research services through our two operating
subsidiaries, Ladenburg Thalmann & Co. Inc. and Ladenburg Capital Management
Inc. (f/k/a GBI Capital Partners Inc.).
Ladenburg Thalmann & Co.
Ladenburg Thalmann & Co. is a full service broker-dealer that has been
a member of the New York Stock Exchange since 1879. It provides its services
principally for middle market and emerging growth companies and high net worth
individuals through a coordinated effort among corporate finance, research,
capital markets, investment management, brokerage and trading professionals.
Ladenburg Thalmann & Co. is subject to regulation by, among others, the SEC, the
New York Stock Exchange, the National Association of Securities Dealers and the
Securities Investor Protection Corporation. Ladenburg Thalmann & Co. currently
has approximately 250 registered representatives and 100 other full time
employees.
Ladenburg Thalmann & Co.'s investment banking area maintains
relationships with businesses and provides them with research, advisory and
investor relations support. Services include merger and acquisition consulting,
management of and participation in underwriting of equity and debt financing,
private debt and equity financing, and rendering appraisals, financial
evaluations and fairness opinions. Ladenburg Thalmann & Co.'s listed securities,
fixed income and over-the-counter trading areas trade a variety of financial
instruments. Its client services and institutional sales departments serve
approximately 35,000 accounts worldwide and its asset management area provides
investment management and financial planning services to numerous individuals
and institutions.
Ladenburg Capital Management
Ladenburg Capital Management is a registered broker-dealer and a member
firm of the National Association of Securities Dealers, Inc. and the Securities
Investor Protection Corporation. It currently has approximately 350 registered
representatives and 300 other full time employees maintaining approximately
64,000 retail and institutional accounts.
Ladenburg Capital Management's business activities consist primarily of
retail sales and trading of exchange listed and over-the-counter equity
securities, options and mutual funds, as well as investment banking and research
services. In November 1999, it expanded its operations to include money
management services by establishing a private investment fund, Ladenburg Focus
Fund, L.P. (f/k/a GBI 1500 Focus Fund, L.P.), which invests its capital in
publicly traded equity securities. It has also instituted wholesale trading
operations in its Ft. Lauderdale, Florida office.
Stock purchase agreement and related transactions
On May 7, 2001, we consummated a stock purchase agreement, as amended,
with New Valley Corporation, New Valley Capital Corporation (f/k/a Ladenburg
Thalmann Group Inc.), Berliner Effektengesellschaft AG and Ladenburg Thalmann &
Co. Inc. On the same date, New Valley and Frost-Nevada, Limited Partnership
consummated several individual stock purchase agreements with five of our
present and former directors, officers and key employees. As a result of the
stock purchase agreements and the various related transactions, New Valley
acquired beneficial ownership of approximately 57.6% of our common stock and
Ladenburg Thalmann & Co. became our wholly owned subsidiary.
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As a condition to consummating the stock purchase agreement with New
Valley, New Valley Capital Corporation, Berliner and Ladenburg Thalmann & Co.,
we held an annual meeting of our shareholders on May 7, 2001. At the annual
meeting, our shareholders voted, among other things, to:
o approve the stock purchase agreement and the related
transactions;
o approve a change in our name from "GBI Capital Management
Corp." to "Ladenburg Thalmann Financial Services Inc."; and
o elect Richard Rosenstock, Vincent Mangone, Mark Zeitchick,
Howard M. Lorber, Victor M. Rivas, Bennett S. LeBow, Phillip
Frost, Henry C. Beinstein and Robert J. Eide to our board of
directors.
In addition to changing our name, we also changed our American Stock Exchange
symbol to "LTS."
In connection with the stock purchase agreements and the related
transactions, we entered into an investor rights agreement, dated as of February
8, 2001, as amended, with New Valley, New Valley Capital Corporation, Berliner,
Frost-Nevada and certain of our shareholders. As required under the agreement,
we are registering a number of shares of our common stock for resale by various
parties. Accordingly, this prospectus registers for resale the following:
o 23,218,599 shares of common stock that we issued to New Valley
and Berliner, as provided by the stock purchase agreement with
New Valley, New Valley Capital Corporation, Berliner and
Ladenburg Thalmann & Co.;
o 4,799,271 shares of common stock that we may issue on
conversion of the senior convertible promissory notes that we
issued to New Valley and Berliner, as provided by the stock
purchase agreement with New Valley, New Valley Capital
Corporation, Berliner and Ladenburg Thalmann & Co.;
o 6,497,475 shares of common stock that we may issue on
conversion of the senior convertible promissory note that we
issued to Frost-Nevada, who provided us with the funds we used
to pay the cash portion of the purchase price for the common
stock of Ladenburg Thalmann & Co.;
o 3,945,060 shares of common stock that were purchased by New
Valley from Joseph Berland, our former chairman and chief
executive officer, as provided by a separate stock purchase
agreement;
o 550,000 shares of common stock that were purchased by
Frost-Nevada from several of our present and former directors,
officers and key employees, as provided by individual stock
purchase agreements;
o 6,517,668 shares of common stock that are held by several of
our present and former directors, officers and key employees;
o 1,300,000 shares of common stock that we may issue on exercise
of options held by several of our officers and directors; and
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o 200,000 shares of common stock that we may issue on exercise
of warrants that we issued to New Valley and Frost-Nevada in
connection with a loan that each party made to us in August
2001.
For a more detailed discussion of what we are registering by this prospectus,
see the section entitled "Selling Shareholders" beginning on page 14.
Corporate History
We were incorporated under the laws of the State of Florida on February
5, 1996. Ladenburg Thalmann & Co. was incorporated under the laws of the State
of Delaware on December 3, 1971. Ladenburg Capital Management was incorporated
under the laws of the State of New York in September 1983. Ladenburg Capital
Management became our wholly owned subsidiary on August 24, 1999 pursuant to a
merger with FHGB Acquisition Corporation, another one of our wholly owned
subsidiaries, with Ladenburg Capital Management surviving the merger. In October
2001, we transferred all of the capital stock of Ladenburg Capital Management to
Ladenburg Thalmann & Co., thereby making Ladenburg Capital Management a wholly
owned subsidiary of Ladenburg Thalmann & Co. and an indirect subsidiary of ours.
Our principal executive offices, as well as those of Ladenburg Thalmann & Co.,
are located at 590 Madison Avenue, New York, New York 10022 and both of our
telephone numbers are (212) 409-2000. Ladenburg Capital Management's principal
executive offices are located at 1055 Stewart Avenue, Bethpage, New York 11714
and its telephone number is (516) 470-1000.
5
RISK FACTORS
You should carefully consider the risks described below before you
decide to invest in our company. The risks described below are not the only ones
facing us. Additional risks not presently known to us or that we currently
believe are immaterial may also impair our business operations. Our business,
financial condition or results of operation could be materially adversely
affected by any of these risks. The trading price of our common stock could
decline because of any one of these risks, and you may lose all or part of your
investment.
We are subject to various risks associated with the securities industry.
As securities broker-dealers, Ladenburg Thalmann & Co. and Ladenburg
Capital Management are subject to uncertainties that are common in the
securities industry. These uncertainties include:
o the volatility of domestic and international financial, bond
and stock markets, as demonstrated by recent disruptions in
the financial markets;
o extensive governmental regulation;
o litigation;
o intense competition;
o substantial fluctuations in the volume and price level of
securities; and
o dependence on the solvency of various third parties.
As a result, revenues and earnings may vary significantly from quarter to
quarter and from year to year. In periods of low volume, profitability is
impaired because certain expenses remain relatively fixed. Ladenburg Thalmann &
Co. and Ladenburg Capital Management are much smaller and have much less capital
than many competitors in the securities industry. In the event of a market
downturn, our business could be adversely affected in many ways, including those
described below. Our revenues are likely to decline in such circumstances and,
if we are unable to reduce expenses at the same pace, our profit margins would
erode.
Our business could be adversely affected by a breakdown in the financial
markets.
As a securities broker-dealer, our business is materially affected by
conditions in the financial markets and economic conditions generally, both in
the United States and elsewhere around the world. Many factors or events could
lead to a breakdown in the financial markets including war, terrorism, natural
catastrophes and other types of disasters. These types of events could cause
people to begin to lose confidence in the financial markets and their ability to
function effectively. If the financial markets are unable to effectively prepare
for these types of events and ease public concern over their ability to
function, our revenues are likely to decline and our operations will be
adversely affected.
A single shareholder controls a majority of our shares of common stock and can
significantly influence our corporate actions.
New Valley Corporation beneficially owns approximately 57.6% of our
common stock. This amount may be increased as a result of adjustments that we
may be required to make pursuant to the stock purchase agreement with New
Valley, New Valley Capital Corporation, Berliner and Ladenburg Thalmann & Co.
Accordingly, New Valley has the unilateral ability to approve most, if not all,
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of our corporate actions, including the election of directors and the
appointment of officers. Additionally, New Valley's ownership of our common
stock makes it impossible for a third party to acquire control of us without the
consent of New Valley and, therefore, may discourage third parties from seeking
to acquire us. A third party would have to negotiate any possible transactions
with New Valley, and the interests of New Valley may be different from the
interests of our other shareholders. This may depress the price of our common
stock.
New Valley has indicated to our management that it intends to
distribute the shares it holds to its stockholders as a dividend on December 20,
2001. As a result, New Valley's stockholders will directly own the shares of our
common stock currently held by New Valley. New Valley, however, will continue to
be a debt and warrant holder of ours (beneficially owning 8.6% of our common
stock) and no change in our board of directors will take place as a result of
the distribution. Accordingly, we do not anticipate a change in our current
business strategies and goals to occur in the near future as a result of the
distribution of our shares to New Valley's stockholders. However, we cannot
assure you that such a change will not occur at a later time. If we are forced
to change our strategies and goals, our business may be materially and adversely
affected.
We have incurred, and may in the future incur, significant losses from trading
and investment activities due to market fluctuations and volatility.
We generally maintain trading and investment positions in the equity
markets. To the extent that we own assets, i.e., have long positions, in those
markets, a downturn in those markets could result in losses from a decline in
the value of those long positions. Conversely, to the extent that we have sold
assets that we do not own, i.e., have short positions, in any of those markets,
an upturn in those markets could expose us to potentially unlimited losses as we
attempt to cover our short positions by acquiring assets in a rising market.
We may from time to time have a trading strategy consisting of holding
a long position in one asset and a short position in another from which we
expect to earn revenues based on changes in the relative value of the two
assets. If, however, the relative value of the two assets changes in a direction
or manner that we did not anticipate or against which we are not hedged, we
might realize a loss in those paired positions. In addition, we maintain trading
positions that can be adversely affected by the level of volatility in the
financial markets, i.e., the degree to which trading prices fluctuate over a
particular period, in a particular market, regardless of market levels.
Our revenues may decline in adverse market or economic conditions.
Unfavorable financial or economic conditions may reduce the number and
size of the transactions in which we provide underwriting services, merger and
acquisition consulting and other services. Our investment banking revenues, in
the form of financial advisory and underwriting fees, are directly related to
the number and size of the transactions in which we participate and would
therefore be adversely affected by a sustained market downturn. Additionally, a
downturn in market conditions could lead to a decline in the volume of
transactions that we execute for our customers and, therefore, to a decline in
the revenues we receive from commissions and spreads.
Our risk management policies and procedures may leave us exposed to unidentified
risks or an unanticipated level of risk.
The policies and procedures we employ to identify, monitor and manage
risks may not be fully effective. Some methods of risk management are based on
the use of observed historical market behavior. As a result, these methods may
not predict future risk exposures, which could be significantly greater than the
historical measures indicate. Other risk management methods depend on evaluation
of information regarding markets, clients or other matters that are publicly
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available or otherwise accessible by us. This information may not be accurate,
complete, up-to-date or properly evaluated. Management of operational, legal and
regulatory risk requires, among other things, policies and procedures to
properly record and verify a large number of transactions and events. We cannot
assure you that our policies and procedures will effectively and accurately
record and verify this information.
We seek to monitor and control our risk exposure through a variety of
separate but complementary financial, credit, operational and legal reporting
systems. We believe that we effectively evaluate and manage the market, credit
and other risks to which we are exposed. Nonetheless, the effectiveness of our
ability to manage risk exposure can never be completely or accurately predicted
or fully assured. For example, unexpectedly large or rapid movements or
disruptions in one or more markets or other unforeseen developments can have a
material adverse effect on our results of operations and financial condition.
The consequences of these developments can include losses due to adverse changes
in inventory values, decreases in the liquidity of trading positions, higher
volatility in earnings, increases in our credit risk to customers as well as to
third parties and increases in general systemic risk.
Credit risk exposes us to losses caused by financial or other problems
experienced by third parties.
We are exposed to the risk that third parties that owe us money,
securities or other assets will not perform their obligations. These parties
include:
o trading counterparties;
o customers;
o clearing agents;
o exchanges;
o clearing houses; and
o other financial intermediaries as well as issuers whose
securities we hold.
These parties may default on their obligations owed to us due to bankruptcy,
lack of liquidity, operational failure or other reasons. This risk may arise,
for example, from:
o holding securities of third parties;
o executing securities trades that fail to settle at the
required time due to non-delivery by the counterparty or
systems failure by clearing agents, exchanges, clearing houses
or other financial intermediaries; and
o extending credit to clients through bridge or margin loans or
other arrangements.
Significant failures by third parties to perform their obligations owed to us
could adversely affect our revenues and perhaps our ability to borrow in the
credit markets.
We may have difficulty effectively managing our growth.
Over the past several years, we have experienced significant growth in
our business activities and the number of our employees through a variety of
transactions. For instance, in May 2001, we acquired Ladenburg Thalmann & Co.
and significantly increased the number of registered representatives under our
control. We expect our business to continue to grow. Growth of this nature
involves numerous risks such as:
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o difficulties and expenses incurred in connection with the
subsequent assimilation of the operations and services or
products of the acquired company;
o the potential loss of key employees of the acquired company;
and
o the diversion of management's attention from other business
concerns.
If we are unable to effectively address these risks, we may be required to
restructure the acquired business or write off the value of some or all of the
assets of the acquired business. Further, this type of growth requires increased
investments in management personnel, financial and management systems and
controls, and facilities. We cannot assure you that we will experience parallel
growth in these areas. If these areas do not grow at the same time, our
operating margins may decline from current levels.
Additionally, as is common in the securities industry, we will continue
to be highly dependent on the effective and reliable operation of our
communications and information systems. We believe that our current and
anticipated future growth will require implementation of new and enhanced
communications and information systems and training of our personnel to operate
such systems. Any difficulty or significant delay in the implementation or
operation of existing or new systems or the training of personnel could
adversely affect our ability to manage our growth.
We depend on several key employees and the loss of any of their services could
harm our business.
Our success is dependent in large part upon the services of several key
employees. We have entered into an employment agreement with Victor Rivas and
amended employment agreements with Richard Rosenstock, Mark Zeitchick and
Vincent Mangone which provide for these individuals to be employed by us through
August 2004. Each of these individuals, however, may terminate their agreement
upon 30 days' notice. Although the employment agreements contain various
incentives designed to retain the services of these individuals, including stock
options and other incentive based awards as well as non-solicitation provisions
in our favor, these provisions may be insufficient to keep these individuals
from leaving us for a more lucrative opportunity. This is especially true in
light of the increasing competition for experienced professionals in the
securities industry. We do not maintain and do not intend to obtain key man
insurance on the lives of any of these individuals. In the event that any of
these individuals terminate their agreements or otherwise leave our company, our
operations may be materially and adversely affected.
We face significant competition for professional employees.
From time to time, individuals we employ may choose to leave our
company to pursue other opportunities. We have experienced losses of research,
investment banking and sales and trading professionals in the past and the level
of competition for key personnel remains intense. We cannot assure you that the
loss of key personnel will not occur again in the future. The loss of an
investment banking, research, or sales and trading professional, particularly a
senior professional with a broad range of contacts in an industry, could
materially and adversely affect our operating results.
Intense competition from existing and new entities may adversely affect our
revenues and profitability.
The securities industry is rapidly evolving, intensely competitive and
has few barriers to entry. We expect competition to continue and intensify in
the future. Many of our competitors have significantly greater financial,
technical, marketing and other resources than we do. Some of our competitors
also offer a wider range of services and financial products than we do and have
greater name recognition and a larger client base. These competitors may be able
to respond more quickly to new or changing opportunities, technologies and
client requirements. They may also be able to undertake more extensive
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promotional activities, offer more attractive terms to clients, and adopt more
aggressive pricing policies. We may not be able to compete effectively with
current or future competitors and competitive pressures faced by us may harm our
business.
We currently do not have internet brokerage service capability.
Recently, a growing number of brokerage firms have begun offering
internet brokerage services to their customers in response to increased customer
demand for these services. While we intend to offer internet brokerage services
in the future, we may not be able to offer services that will appeal to our
current or prospective customers and these services may not be profitable. Our
failure to commence internet brokerage services in the near future could have a
material adverse effect on our business. Additionally, if we commence internet
brokerage services but are unable to attract customers for our services, our
revenues will decline.
We rely on clearing brokers and termination of the agreements with these
clearing brokers could disrupt our business.
Ladenburg Thalmann & Co. and Ladenburg Capital Management use clearing
brokers to process their securities transactions and maintain customer accounts
on a fee basis for their accounts and for the accounts of our clients. The
clearing brokers also provide billing services, extend credit and provide for
control and receipt, custody and delivery of securities. Our broker-dealers
depend on the operational capacity and ability of the clearing brokers for the
orderly processing of transactions. In addition, by engaging the processing
services of a clearing firm, Ladenburg Thalmann & Co. and Ladenburg Capital
Management are exempt from some capital reserve requirements and other
regulatory requirements imposed by federal and state securities laws. If the
clearing agreements are terminated for any reason, we would be forced to find
alternative clearing firms. We cannot assure you that we would be able to find
an alternative clearing firm on acceptable terms to them or at all.
Clearing brokers extend credit to our clients and we are liable if the clients
do not pay.
Ladenburg Thalmann & Co. and Ladenburg Capital Management permit their
clients to purchase securities on a margin basis or sell securities short, which
means that the clearing firm extends credit to the client secured by cash and
securities in the clients' account. During periods of volatile markets, the
value of the collateral held by the clearing brokers could fall below the amount
borrowed by the client. If margin requirements are not sufficient to cover
losses, the clearing brokers sell or buy securities at prevailing market prices,
and may incur losses to satisfy client obligations. Ladenburg Thalmann & Co. and
Ladenburg Capital Management have agreed to indemnify the clearing brokers for
losses they incur while extending credit to their clients.
The precautions we take to prevent and detect employee misconduct may not be
effective and we could be exposed to unknown and unmanaged risks or losses.
We run the risk that employee misconduct could occur. Misconduct by
employees could include:
o employees binding us to transactions that exceed authorized
limits or present unacceptable risks to us;
o employees hiding unauthorized or unsuccessful activities from
us; or
o the improper use of confidential information.
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These types of misconduct could result in unknown and unmanaged risks or losses
to us including regulatory sanctions and serious harm to our reputation. The
precautions we take to prevent and detect these activities may not be effective.
If employee misconduct does occur, our business operations could be materially
adversely affected.
We are currently subject to extensive securities regulation and the failure to
comply with these regulations could subject us to penalties or sanctions.
The securities industry and our business is subject to extensive
regulation by the SEC, state securities regulators and other governmental
regulatory authorities. We are also regulated by industry self-regulatory
organizations, including the New York Stock Exchange, the National Association
of Securities Dealers, Inc. and the Municipal Securities Rulemaking Board.
Ladenburg Thalmann & Co. and Ladenburg Capital Management are
registered broker-dealers with SEC and member firms of the NASD. Ladenburg
Thalmann & Co. is also a member firm of the New York Stock Exchange.
Broker-dealers are subject to regulations which cover all aspects of the
securities business, including:
o sales methods and supervision;
o trading practices among broker-dealers;
o use and safekeeping of customers' funds and securities;
o capital structure of securities firms;
o record keeping; and
o the conduct of directors, officers and employees.
Much of the regulation of broker-dealers has been delegated to self-regulatory
organizations, principally the NASD Regulation, Inc., the regulatory arm of the
NASD, and the New York Stock Exchange, which are our primary regulatory
agencies. NASD Regulation and the NYSE adopt rules, subject to approval by the
SEC, that govern its members and conducts periodic examinations of member firms'
operations.
Compliance with many of the regulations applicable to us involves a
number of risks, particularly in areas where applicable regulations may be
subject to varying interpretation. The requirements imposed by these regulators
are designed to ensure the integrity of the financial markets and to protect
customers and other third parties who deal with us. Consequently, these
regulations often serve to limit our activities, including through net capital,
customer protection and market conduct requirements. If we are found to have
violated an applicable regulation, administrative or judicial proceedings may be
initiated against us that may result in:
o censure;
o fine;
o civil penalties, including treble damages in the case of
insider trading violations;
o the issuance of cease-and-desist orders;
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o the deregistration or suspension of our broker-dealer
activities;
o the suspension or disqualification of our officers or
employees; or
o other adverse consequences.
The imposition of any of these or other penalties could have a material adverse
effect on our operating results and financial condition.
The regulatory environment is also subject to change. We may be
adversely affected as a result of new or revised legislation or regulations
imposed by the SEC, other federal or state governmental regulatory authorities,
or self-regulatory organizations. We also may be adversely affected by changes
in the interpretation or enforcement of existing laws and rules by these
governmental authorities and self-regulatory organizations.
Failure to comply with net capital requirements could subject us to suspension
or revocation by the SEC or suspension or expulsion by the NASD and the NYSE.
Each of our subsidiaries are subject to the SEC's net capital rule
which requires the maintenance of minimum net capital. We compute net capital
under the aggregate indebtedness method permitted by the net capital rule. Under
this method, our subsidiaries are required to maintain net capital equal to:
o the greater of 6-2/3% of aggregate indebtedness, as defined in
the net capital rule, or $100,000; or
o a determinable amount based on the market price and number of
securities in which our subsidiaries are a market-maker, not
to exceed $1,000,000.
The net capital rule is designed to measure the general financial integrity and
liquidity of a broker-dealer. In computing net capital, various adjustments are
made to net worth which exclude assets not readily convertible into cash.
Additionally, the regulations require that certain assets, such as a
broker-dealer's position in securities, be valued in a conservative manner so as
to avoid over-inflation of the broker-dealer's net capital. The net capital rule
requires that a broker-dealer maintain a certain minimum level of net capital
and a certain ratio of net capital to aggregate indebtedness. The particular
levels vary in application depending upon the nature of the activity undertaken
by a firm. Compliance with the net capital rule limits those operations of
broker-dealers which require the intensive use of their capital, such as
underwriting commitments and principal trading activities. The rule also limits
the ability of securities firms to pay dividends or make payments on certain
indebtedness such as subordinated debt as it matures. A significant operating
loss or any charge against net capital could adversely affect the ability of a
broker-dealer to expand or, depending on the magnitude of the loss or charge,
maintain its then present level of business. The NASD and the NYSE may enter the
offices of a broker-dealer at any time, without notice, and calculate the firm's
net capital. If the calculation reveals a deficiency in net capital, the NASD
may immediately restrict or suspend certain or all of the activities of a
broker-dealer, including its ability to make markets. Our subsidiaries may not
be able to maintain adequate net capital, or their net capital may fall below
requirements established by the SEC, and subject us to disciplinary action in
the form of fines, censure, suspension, expulsion or the termination of business
altogether.
Risk of losses associated with securities laws violations and litigation.
Many aspects of our business involve substantial risks of liability. An
underwriter is exposed to substantial liability under federal and state
securities laws, other federal and state laws, and court decisions,
12
including decisions with respect to underwriters' liability and limitations on
indemnification of underwriters by issuers. For example, a firm that acts as an
underwriter may be held liable for material misstatements or omissions of fact
in a prospectus used in connection with the securities being offered or for
statements made by its securities analysts or other personnel. In recent years,
there has been an increasing incidence of litigation involving the securities
industry, including class actions that seek substantial damages. Our
underwriting activities will usually involve offerings of the securities of
smaller companies, which often involve a higher degree of risk and are more
volatile than the securities of more established companies. In comparison with
more established companies, smaller companies are also more likely to be the
subject of securities class actions, to carry directors and officers liability
insurance policies with lower limits or not at all, and to become insolvent.
Each of these factors increases the likelihood that an underwriter of a smaller
companies' securities will be required to contribute to an adverse judgment or
settlement of a securities lawsuit.
In the normal course of business, our operating subsidiaries have been
and continue to be the subject of numerous civil actions and arbitrations
arising out of customer complaints relating to our activities as a
broker-dealer, as an employer and as a result of other business activities. In
general, the cases involve various allegations that our employees had mishandled
customer accounts. We believe that, based on our historical experience and the
reserves established by us, the resolution of the claims presently pending will
not have a material adverse effect on our financial condition. However, although
we typically reserve an amount we believe will be sufficient to cover any
damages assessed against us, we have in the past been assessed damages that
exceeded our reserves. If we misjudged the amount of damages that may be
assessed against us from pending or threatened claims, or if we are unable to
adequately estimate the amount of damages that will be assessed against us from
claims that arise in the future and reserve accordingly, our financial condition
may be materially adversely affected.
Possible additional issuances will cause dilution.
While we currently have outstanding 42,025,211 shares of common stock,
options to purchase a total of 2,997,354 shares of common stock, warrants to
purchase a total of 200,000 shares of common stock and senior convertible
promissory notes initially convertible into 11,296,746 shares of common stock,
we are authorized to issue up to 100,000,000 shares of common stock and are
therefore able to issue additional shares without being required to obtain
shareholder approval. If we issue additional shares, or if our existing
shareholders exercise or convert their outstanding options or notes, our other
shareholders may find their holdings drastically diluted, which if it occurs,
means that they will own a smaller percentage of our company.
The registration of the shares of common stock covered by this prospectus may
affect the market price and liquidity of our common stock.
This prospectus registers for resale for the account of the selling
shareholders a total of 47,028,073 shares of common stock. Once registered, the
selling shareholders will be able to sell these shares in the public market. The
ability on the part of these selling shareholders to make these sales may have
an adverse impact on our ability to raise capital in the public market and may
affect the price and liquidity of our common stock in the public market.
The American Stock Exchange may delist our common stock from quotation on its
exchange.
Our common stock is currently quoted on the American Stock Exchange. In
order to continue quotation of our common stock, we must maintain certain
financial, distribution and stock price levels. If we are unable to maintain
these levels, the American Stock Exchange may delist our common stock from
trading on its exchange. If this occurs, we could face significant material
adverse consequences including:
13
o a limited availability of market quotations for our common
stock;
o a limited amount of news and analyst coverage for our company;
and
o a decreased ability to issue additional securities or obtain
additional financing in the future.
We may issue preferred stock with preferential rights that may adversely affect
your rights.
The rights of our shareholders will be subject to and may be adversely
affected by the rights of holders of any preferred stock that we may issue in
the future. Our articles of incorporation authorize our board of directors to
issue up to 2,000,000 shares of "blank check" preferred stock and to fix the
rights, preferences, privilege and restrictions, including voting rights, of
these shares without further shareholder approval.
WARNING REGARDING OUR USE OF FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus are forward-looking
that relate to possible future events, our future performance and our future
operations. In some cases, you can identify these forward-looking statements by
the use of words such as "may," "will," "should," "anticipates," "believes,"
"expects," "plans," "future," "intends," "could," "estimate," "predict,"
"potential," "continue," or the negative of these terms or other similar
expressions. These statements are only our predictions. Our actual results could
and likely will differ materially from these forward-looking statements for many
reasons, including the risks described above and appearing elsewhere in this
prospectus. We cannot guarantee future results, levels of activities,
performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform them to
actual results or to changes in our expectations.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling shareholders.
We will not receive any proceeds from the issuance of our common stock
upon conversion of the senior convertible promissory notes held by some of the
selling shareholders, but will immediately retire, without the payment of
additional consideration, the debt attributable to the notes converted.
Some of the shares that will be sold by the selling shareholders are
subject to outstanding warrants and options. When the warrants and options are
exercised for cash, we will receive the exercise price. If the warrants and
options to purchase a total of 1,500,000 shares are fully exercised for cash, we
will receive $4,509,375. We are unable to estimate at this time the actual
number of warrants and options that may be exercised for cash and the amount of
proceeds we will receive from their exercise. We intend to use any proceeds from
the exercise of any warrants and options by the selling shareholders for working
capital and general corporate purposes.
SELLING SHAREHOLDERS
The following table provides certain information with respect to the
selling shareholders' beneficial ownership of our common stock as of December 4,
2001 and as adjusted to give effect to the sale of all of the shares offered by
this prospectus. Except as otherwise indicated, the number of shares reflected
14
in the table has been determined in accordance with Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended. Under this rule, each selling
shareholder is deemed to beneficially own the number of shares issuable upon
exercise or conversion of warrants, options or other convertible securities it
holds that are exercisable or convertible within 60 days from the date of this
prospectus. For purposes of presentation, it is assumed that the selling
shareholders will exercise or convert all of their derivative securities and
then resell all of the shares received as a consequence of their exercise or
conversion. Additionally, for purposes of presentation, we have included the
full amount of the options being registered by this prospectus in the number of
shares beneficially owned by the individuals holding the options. Unless
otherwise indicated, each of the selling shareholders possesses sole voting and
investment power with respect to the securities shown.
Shares Beneficially Shares Beneficially
Owned Owned
Before Offering After Offering
-------------------- ----------------------
Number of Number
Number of Shares of
Name Shares Percentage Offered Shares Percentage
---- -------- ---------- --------- ------- ----------
New Valley Corporation(1) 26,487,374(2) 57.6% 26,487,374(2) -0- -0-
Berliner Effektengesellschaft AG 5,575,556(3) 13.0% 5,575,556(3) -0- -0-
Frost-Nevada, Limited 7,901,241(5) 16.3% 7,247,475(5) 653,766(6) 1.6%
Partnership(4)
Victor M. Rivas(7) 1,000,000(8) 2.3% 1,000,000 -0- -0-
Richard J. Rosenstock(9) 3,789,246(10) 9.0% 3,789,246 -0- -0-
Mark Zeitchick(11) 1,514,211(12) 3.6% 1,514,211 -0- -0-
Vincent A. Mangone(13) 1,514,211(14) 3.6% 1,414,211 -0- -0-
-----------
(1) Bennett S. LeBow, chairman of the board and chief executive officer of
New Valley, and Howard M. Lorber, president and chief operating officer
of New Valley, have been members of our board of directors, with Mr.
Lorber acting as our chairman, since May 2001.
(2) Represents (i) 18,598,098 shares of common stock and 3,844,216 shares
issuable upon conversion of senior convertible promissory notes that
were acquired by New Valley under the stock purchase agreement between
our company, New Valley, New Valley Capital Corporation, Berliner and
Ladenburg Thalmann & Co., (ii) 3,945,060 shares of common stock that
were acquired by New Valley under a separate stock purchase agreement
with Joseph Berland, our former chairman and chief executive officer
and (iii) 100,000 shares of common stock issuable upon exercise of
warrants that were acquired by New Valley in connection with New Valley
loaning us $1,000,000 in August 2001.
(3) Represents 4,620,501 shares of common stock and 955,055 shares of
common stock issuable upon conversion of senior convertible promissory
notes that were acquired by Berliner under the stock purchase agreement
between our company, New Valley, New Valley Capital Corporation,
Berliner and Ladenburg Thalmann & Co.
(4) Phillip Frost, M.D., a director of ours since May 2001, is the sole
limited partner of Frost-Nevada. Dr. Frost is also the sole shareholder
of Frost-Nevada Corporation, the general partner of Frost-Nevada. The
securities reflected as being held by Frost-Nevada, Limited Partnership
are held of record by either Frost-Nevada, Dr. Frost or Frost-Nevada
Corporation. Record ownership of the shares may be transferred from
time to time among any or all of these three parties. Accordingly,
solely for purposes of reporting beneficial ownership of these shares
pursuant to Section 13(d) of the Exchange Act, each of these parties
will be deemed to be the beneficial owner of the shares held by any
other of the parties.
(5) Includes (i) 6,497,475 shares of common stock issuable upon conversion
of senior convertible promissory notes acquired by Frost-Nevada under a
loan agreement described below, (ii) 550,000 shares of common stock
that were acquired by Frost-Nevada under four separate stock purchase
15
agreements between Frost-Nevada and each of Richard Rosenstock, Mark
Zeitchick, Vincent Mangone and David Thalheim and (iii) 100,000 shares
of common stock that are issuable upon exercise of warrants acquired by
Frost-Nevada in connection with Frost-Nevada loaning us $1,000,000 in
August 2001.
(6) Represents shares previously owned or subsequently purchased on the
open market in private transactions by Frost-Nevada, Frost-Nevada
Corporation or Dr. Frost and has been co-chairman of Ladenburg Capital
Mangement since November 2001.
(7) Victor M. Rivas has been our president and chief executive officer and
a director since May 2001. Mr. Rivas has also been affiliated with
Ladenburg Thalmann & Co. since September 1997 and has been its chairman
and chief executive officer since July 1999. He has also been
co-chairman of Ladenburg Capital Management since November 2001.
(8) Represents 1,000,000 shares of common stock issuable upon exercise of
options that were issued to Mr. Rivas in connection with his becoming
our president and chief executive officer.
(9) Richard J. Rosenstock has been our vice chairman since May 2001 and our
chief operating officer since August 1999. Mr. Rosenstock was our
president from August 1999 until May 2001. Mr. Rosenstock has also been
affiliated with Ladenburg Capital Management since 1986. Mr. Rosenstock
has been Ladenburg Capital Management's chief executive officer since
May 2001. From January 1994 until May 1998, Mr. Rosenstock was an
executive vice president of Ladenburg Capital Management and was its
president from May 1998 until November 2001.
(10) Represents 3,689,246 shares of common stock held of record by The
Richard J. Rosenstock Living Trust Dated 3/5/96 of which Mr. Rosenstock
is sole trustee and beneficiary, and 100,000 shares of common stock
issuable upon exercise of options held by Mr. Rosenstock that were
issued to him in connection with his becoming our president and chief
operating officer in August 1999.
(11) Mark Zeitchick has been an executive vice president and member of our
board of directors since August 1999. Mr. Zeitchick has also been
affiliated with Ladenburg Capital Management since October 1993. Mr.
Zeitchick has been Ladenburg Capital Management's co-chairman since
November 2001. From September 1995 until November 2001, Mr. Zeitchick
was an executive vice president of Ladenburg Capital Management. From
May 2001 until November 2001, he served as chairman at which time he
became co-chairman with Mr. Rivas.
(12) Includes 100,000 shares of common stock issuable upon exercise of
options held by Mr. Zeitchick that were issued to him in connection
with his becoming our executive vice president in August 1999.
(13) Vincent A. Mangone has been an executive vice president and member of
our board of directors since August 1999. Mr. Mangone has also been
affiliated with Ladenburg Capital Management since October 1993 and has
been an executive vice president since September 1995.
(14) Represents 1,414,211 shares of common stock held of record by The
Vincent A. Mangone Revocable Living Trust Dated 11/5/96 of which Mr.
Mangone is the sole trustee and beneficiary, and 100,000 shares of
common stock issuable upon exercise of options held by Mr. Mangone that
were issued to him in connection with his becoming our executive vice
president in August 1999.
On May 7, 2001, we consummated the stock purchase agreement, as
amended, with New Valley, New Valley Capital Corporation, Berliner and Ladenburg
Thalmann & Co. in which we acquired all of the outstanding common stock of
Ladenburg Thalmann & Co. As partial consideration for the common stock of
Ladenburg Thalmann & Co., we issued:
o 18,598,098 shares of common stock and $8.01 million aggregate
principal amount of our senior convertible promissory notes,
currently convertible into 3,844,216 shares of common stock,
to New Valley; and
o 4,620,501 shares of common stock and $1.99 million aggregate
principal amount of our senior convertible promissory notes,
currently convertible into 955,055 shares of common stock, to
Berliner.
16
The stock purchase agreement provides that we may be required to issue an
additional number of shares of common stock to New Valley and Berliner on or
about May 7, 2003 pending a final resolution of all pre-closing litigation
adjustments. We also paid New Valley and Berliner $8.01 million and $1.99
million in cash, respectively. The cash portion of the consideration paid to New
Valley and Berliner was obtained pursuant to a loan agreement with Frost-Nevada,
Limited Partnership under which Frost-Nevada provided us with $10 million in
cash in exchange for $10 million aggregate principal amount of our senior
convertible promissory notes, currently convertible into 6,497,475 shares of
common stock.
The notes issued to New Valley and Berliner bear interest at a rate of
7-1/2% per year, payable quarterly, and are secured by a pledge of the shares of
common stock of Ladenburg Thalmann & Co. The notes are convertible, in whole or
in part, at any time, into that number of shares of common stock determined by
dividing the principal and interest to be converted by the "conversion price."
The "conversion price" is $2.0836498 and is subject to anti-dilution adjustment
for stock splits, dividends and other similar events. The conversion price is
also subject to adjustment on or about May 7, 2003 in the same manner as the
number of shares we issued to New Valley and Berliner described above.
Additionally, if, during any period of 20 consecutive trading days, the closing
sale price of our common stock is at least $8.00, the principal and all accrued
interest on the notes will be automatically converted into shares of common
stock at the conversion price then in effect. The notes also provide that if a
change of control occurs, as defined in the notes, we must offer to purchase all
of the outstanding notes at a purchase price equal to the unpaid principal
amount of the notes and the accrued interest.
The note issued to Frost-Nevada has the same terms as the notes issued
to New Valley and Berliner, except that the conversion price of the note is
$1.5390594 and pays interest at a rate of 8-1/2% per year. The note issued to
Frost-Nevada is also secured by a pledge of the shares of common stock of
Ladenburg Thalmann & Co.
According to the stock purchase agreement, until November 7, 2003, New
Valley agreed that it and its subsidiaries will not, within the United States,
directly or indirectly:
o engage in the broker-dealer business in any capacity other
than as an owner of less than 5% of the shares of any publicly
traded company;
o hire or solicit for employment, other than general public
solicitations not directed at any specific person or group,
any employee of our company or any of our subsidiaries, or any
person who was an employee of our company or any of our
subsidiaries within six months of the hiring or solicitation;
or
o interfere with, disrupt or attempt to disrupt the relationship
between Ladenburg Thalmann & Co., our company or our
subsidiaries and any of their lessors or customers.
However, New Valley and its affiliates are still able to make investments for
their own account and to own our common stock.
Concurrently with the closing of the stock purchase agreement, New
Valley purchased 3,945,060 of our common stock at $1.00 per share from Joseph
Berland, our former chairman and chief executive officer. Additionally, on the
same date, Frost-Nevada purchased a total of 550,000 shares of our common stock
at $1.00 per share from Richard Rosenstock, our vice chairman and chief
operating officer, Mark Zeitchick and Vincent Mangone, our executive vice
presidents, and David Thalheim, our former administrator. In connection with
these sales, our board waived lock-up agreements between us and the individuals
in which the individuals had agreed that they would not, without our board's
prior written consent, sell, transfer or otherwise dispose of any of their
shares of our common stock until August 2001.
17
Prior to the consummation of these transactions, New Valley maintained
office space at Ladenburg Thalmann & Co.'s principal offices. In connection with
the consummation, New Valley entered into a license agreement with Ladenburg
Thalmann & Co. in which New Valley will continue to occupy this space at no cost
to New Valley. The license agreement is for one year and is automatically
renewed for successive one year periods unless terminated by New Valley.
In connection with these transactions, Howard M. Lorber, president and
chief operating officer of New Valley, became our chairman and Victor M. Rivas,
chairman and chief executive officer of Ladenburg Thalmann & Co., became our
president and chief executive officer. Upon Mr. Rivas becoming our president and
chief executive officer, we granted Mr. Rivas an option to purchase 1,000,000
shares of common stock under our 1999 Performance Equity Plan. The option vests
in three equal annual installments commencing on May 7, 2002. The option also
provides that if a change of control occurs, the portion of the option not yet
vested will vest and become immediately exercisable.
On August 31, 2001, New Valley and Frost-Nevada each loaned us
$1,000,000. The loans are evidenced by promissory notes that mature on the
earlier of February 28, 2002 and the next business day after we receive our
federal income tax refund for the fiscal year ending September 30, 2001. The
promissory notes bear interest at the Prime Rate as published in the Wall Street
Journal plus 1%. The promissory notes state that we will not, so long as any
amount under the notes remains outstanding and unpaid, incur or assume any
indebtedness that is not subordinated in all respects to the notes without the
prior written consent of the holder. As consideration for the loans, we issued
to each of New Valley and Frost-Nevada a five-year, immediately exercisable
warrant to purchase 100,000 shares of our common stock at an exercise price of
$1.00 per share.
As a result of the foregoing transactions, New Valley, Berliner and
Frost-Nevada beneficially own approximately 57.6%, 13.0% and 16.3% of our common
stock, respectively.
In connection with these transactions, we entered into an investor
rights agreement, as amended, with some of the selling shareholders in which we
agreed to file this registration statement. The investor rights agreement also
provides that if either Berliner or Frost-Nevada propose to sell, transfer or
otherwise dispose of any of their notes or shares of common stock underlying
their notes, the party must give New Valley at least one business day's prior
written notice of the proposed sale or transfer. New Valley will then have the
right to purchase any or all of the shares proposed to be sold or transferred on
the same terms.
PLAN OF DISTRIBUTION
The sale or distribution of the common stock may be effected directly
to purchasers by the selling shareholders, or by any donee, pledgee or
transferee of the selling shareholders as principals, or through one or more
underwriters, brokers, dealers or agents from time to time in one or more public
or private transactions, including:
o block trades;
o on the American Stock Exchange or in the over-the-counter
market;
o otherwise than on the American Stock Exchange or in the
over-the-counter market;
o through the writing of put or call options relating to the
common stock;
18
o the short sales of the common stock;
o through the distribution of the common stock by any selling
shareholder to its partners, members or shareholders; or
o through a combination of these methods of sale.
Any of these transactions may be effected:
o at market prices prevailing at the time of sale;
o at prices related to the prevailing market prices;
o at varying prices determined at the time of sale; or
o at negotiated or fixed prices.
In addition, New Valley has informed our management that it intends to
distribute its shares registered under this prospectus to its stockholders as a
dividend.
If the selling shareholders effect transactions to or through
underwriters, brokers, dealers or agents, these underwriters, brokers, dealers
or agents may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders or purchasers. These discounts,
concessions or commissions may be in excess of those customary for the types of
transactions involved. However, none of the selling shareholders who are NASD
members will receive a commission or discount in excess of eight percent.
The selling shareholders and any broker, dealer or agent that assists
in the sale of the common stock may be deemed to be underwriters within the
meaning of Section 2(a)(11) of the Securities Act. Accordingly, any profit on
the sale of common stock by them and any discounts, concessions or commissions
received by any of the underwriters, brokers, dealers or agents may be deemed to
be underwriting discounts and commissions under the Securities Act.
Selling shareholders may also resell all or a portion of the common
stock in open market transactions in reliance upon Rule 144 under the Securities
Act. In these cases, they must meet the criteria and conform to the requirements
of that rule.
We will pay all of the costs, expenses and fees incident to the
registration of the shares offered under this prospectus. The selling
shareholders are responsible for any costs, expenses and fees related to the
offer and sale of the common stock to the public, including brokerage
commissions, fees and discounts of underwriters, brokers, dealers and agents. We
have agreed to indemnify the selling shareholders against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the common stock offered by this prospectus has been
passed upon by Graubard Miller, New York, New York.
EXPERTS
Our financial statements as of December 31, 2000 and 1999 and for each
of the three years in the period ended December 31, 2000, have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their report dated February 27, 2001. The consolidated financial statements of
our predecessor, GBI Capital Management Corp., including Ladenburg Capital
Management (f/k/a GBI Capital Partners Inc.), as of September 30, 2000 and
19
August 24, 1999 and for the periods from August 25, 1999 to September 30, 2000,
September 1, 1998 to August 24, 1999 and for the year ended August 31, 1998,
have been audited by Goldstein Golub Kessler LLP, independent certified public
accountants, to the extent indicated in their report. Our financial statements
and those of our subsidiaries, including Ladenburg Capital Management, are
incorporated by reference in this prospectus in reliance upon the respective
reports of PricewaterhouseCoopers LLP and Goldstein Golub Kessler LLP given upon
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room.
The SEC allows us to incorporate by reference the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. This
prospectus incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until all of the securities are sold:
o annual report on Form 10-K for the fiscal year ended September
30, 2000, as amended by Form 10-K/A;
o quarterly reports on Form 10-Q for the quarters ended December
31, 2000, March 31, 2001, June 30, 2001 and September 30,
2001;
o current report on Form 8-K dated February 8, 2001 and filed
with the SEC on February 21, 2001, as amended by Form 8-K/A
filed with the SEC on May 1, 2001, Form 8-K/A filed with the
SEC on May 14, 2001 and Form 8-K/A filed with the SEC on
September 10, 2001;
o definitive proxy statement for our annual meeting of
shareholders held on May 7, 2001, filed with the SEC on March
28, 2001, as supplemented on April 2, 2001 and April 26, 2001;
and
o the description of our common stock contained in our
registration statement on Form 8-A (No. 1-15799) filed with
the SEC pursuant to Section 12(b) of the Exchange Act.
Potential investors may obtain a copy of any of our SEC filings without
charge by written or oral request directed to Ladenburg Thalmann Financial
Services Inc., Attention: Investor Relations, 590 Madison Avenue, 34th Floor,
New York, New York 10022, (212) 409-2000.
20
PART TWO
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by us in connection with the
distribution of the securities being registered are as follows:
SEC Registration and Filing Fee................................$ 9,288.00
Legal Fees and Expenses........................................ 50,000.00
Accounting Fees and Expenses................................... 5,000.00
Printing....................................................... 5,000.00
Miscellaneous.................................................. 5,000.00
__________
TOTAL................................................$74,288.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the 1989 Business Corporation Act of the State of
Florida empowers a Florida corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal (other than an
action by, or in the right of, the corporation) by reason of the fact that he or
she is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against liability, judgments, settlements, penalties, fines
(including excise taxes assessed with respect to any employee benefit plan), and
expenses (including counsel's fees) actually and reasonably incurred in
connection with the proceeding and any subsequent appeals, if he or she acted in
good faith and in a manner that he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe that his or
her conduct was unlawful. The termination of any proceeding by judgment, order,
settlement, or conviction, or upon plea of nolo contendere or its equivalent,
does not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, or, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
In the case of an action by or in the right of the corporation, Section
607.0850 empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal, in any of the
capacities set forth above against expenses (including counsel's fees) and
amounts paid in settlement not exceeding, in the judgment of the board of
directors, the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
the proceeding or any subsequent appeals, if the person acted in good faith and
in a manner that he or she reasonably believed to be in or not opposed to the
best interests of the corporation. With respect to any claim, issue, or matter
as to which the person is adjudged to be liable to the corporation,
indemnification is not permitted unless, and only to the extent that, the court
in which the proceeding was brought determines upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for expenses that the
court deems proper.
II-1
Section 607.0850 further provides:
o that a Florida corporation is required to indemnify a
director, officer, employee, or agent against expenses
(including counsel's fees) actually and reasonably incurred by
the person in connection with any proceeding or in defending
any claim, issue, or matter involved in the proceeding as to
which the person has been successful on the merits or
otherwise;
o that indemnification provided for by Section 607.0850 shall
not be deemed exclusive of any other rights to which the
indemnified party may be entitled;
o that indemnification provided for by Section 607.0850 shall,
unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of
the person's heirs, executors, and administrators; and
o that a Florida corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer,
employee or agent of the corporation or who is or was serving
at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against any liability
asserted against the person and incurred by him or her in any
such capacity or arising out of his or her status as such,
whether or not the corporation would have the power to
indemnify the person against liability under Section 607.0850.
A Florida corporation may provide indemnification only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct. The determination is to be made:
o by the board of directors upon majority vote of a quorum
consisting of directors who were not party to the proceeding;
o if a quorum is not obtainable, or, even if obtainable, by
majority vote of a committee consisting solely of two or more
directors who are not parties to the proceeding at the time,
duly designated by the board of directors (in which interested
directors may participate);
o by independent legal counsel selected by majority vote of the
board of directors who were not party to the proceeding or a
committee so designated by the board of directors; or
o by shareholders upon majority vote of a quorum consisting of
shareholders who were not parties to the proceeding or, if a
quorum is not obtainable, by a majority vote of shareholders
who were not parties to the proceeding.
Article XI of our articles of incorporation, as amended, and Article
VII of our bylaws provide for indemnification of our directors and officers to
the fullest extent permitted by law, as now in effect or later amended. Article
VII of our bylaws provides that expenses incurred by a director or officer in
defending a civil or criminal action, suit, or proceeding may be paid by us in
advance of a final disposition upon receipt of an undertaking by or on behalf of
the director or officer to repay the advanced amount if he or she is ultimately
found not to be entitled to indemnification.
We may provide liability insurance for each of our directors and
officers for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers. We currently maintain
this type of liability insurance.
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Additionally, we have entered into indemnification agreements with all
of our directors and officers whereby we have agreed to indemnify, and advance
expenses to, each indemnitee to the fullest extent permitted by applicable law.
The indemnification agreements will continue until and terminate upon the later
of (i) ten years after the date that the indemnitee has ceased to serve as a
director or officer for us or (ii) the final termination of all pending
proceedings in respect of which the indemnitee is granted rights of
indemnification or advancement of expenses or any proceeding commenced by the
indemnitee.
Item 16. EXHIBITS
Incorporated
Exhibit By Reference No. in
Number Description from Document Document Page
------ ----------- ------------- -------- ----
4.1 Stock Purchase Agreement, dated February A Appendix -
8, 2001, by and among the Company, New A
Valley Corporation, New Valley Capital
Corporation, Berliner Effektengesellschaft
AG and Ladenburg Thalmann & Co. Inc.
4.2 Amendment No. 1 to Stock Purchase B Appendix -
Agreement, dated February 8, 2001, by and A
among the Company, New Valley
Corporation, New Valley Capital
Corporation, Berliner Effektengesellschaft
AG and Ladenburg Thalmann & Co. Inc.
4.3 Amendment No. 2 to Stock Purchase C 4.1 -
Agreement, dated February 8, 2001, by and
among the Company, New Valley
Corporation, New Valley Capital
Corporation, Berliner Effektengesellschaft
AG and Ladenburg Thalmann & Co. Inc.
4.4 Form of Senior Convertible Promissory C 4.2 -
Note, as amended, issued to New Valley
Capital Corporation and Berliner
Effektengesellschaft AG
4.5 Senior Convertible Promissory Note, as C 4.3 -
amended, issued to Frost-Nevada, Limited
Partnership
4.6 Form of Promissory Note issued to New C 4.4 -
Valley Corporation and Frost-Nevada,
Limited Partnership
5.1 Opinion of Graubard Miller - - Previously
Filed
10.1 Loan Agreement, dated as of February 8, A Appendix -
2001, between the Company and Frost- C
Nevada, Limited Partnership
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Incorporated
Exhibit By Reference No. in
Number Description from Document Document Page
------ ----------- ------------- -------- ----
10.2 Amendment No. 1 to Loan Agreement, B Appendix -
dated as of February 8, 2001, between the C
Company and Frost-Nevada, Limited
Partnership
10.3 Amendment No. 2 to Loan Agreement, C 10.1 -
dated as of February 8, 2001, between the
Company and Frost-Nevada, Limited
Partnership
10.4 Form of Stock Option Agreement, dated D 10.8 -
August 24, 1999, between the Company and
each of Richard J. Rosenstock, Mark
Zeitchick and Vincent Mangone
10.4.1 Schedule of Stock Option Agreements in D 10.8.1 -
the form of Exhibit 10.4, including material
detail in which such documents differ from
Exhibit 10.4
10.5 Stock Option Agreement, dated May 7, E 10.1 -
2001, between the Company and Victor M.
Rivas
10.6 Investor Rights Agreement, dated as of A Appendix -
February 8, 2001, among the Company, G
New Valley Corporation, New Valley
Capital Corporation, Berliner
Effektengesellschaft AG, Frost-Nevada,
Limited Partnership and the Principals
10.7 Letter Amendment to Investor Rights C 10.7 -
Agreement, dated as of February 8, 2001,
among the Company, New Valley
Corporation, New Valley Capital
Corporation, Berliner Effektengesellschaft
AG, Frost-Nevada, Limited Partnership
and the Principals
10.8 Form of Warrant issued to New Valley C 10.6 -
Corporation and Frost-Nevada, Limited
Partnership
23.1 Consent of Goldstein Golub Kessler LLP - - Filed
Herewith
23.2 Consent of PricewaterhouseCoopers LLP - - Filed
Herewith
23.3 Consent of Graubard Miller (included in - - -
Exhibit 5.1)
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Incorporated
Exhibit By Reference No. in
Number Description from Document Document Page
------ ----------- ------------- -------- ----
24.1 Power of Attorney (included on signature - - -
page of this Registration Statement)
A. Definitive proxy statement for our annual meeting of shareholders held
on May 7, 2001, filed March 28, 2001, as supplemented on April 2, 2001
and April 26, 2001.
B. Second supplement to our definitive proxy statement dated April 26,
2001.
C. Current report on Form 8-K/A, dated February 8, 2001, and filed with
the SEC on September 10, 2001.
D. Annual report on Form 10-K for the fiscal year ended September 30,
2000.
E. Quarterly report on Form 10-Q for the quarter ended June 30, 2001.
Item 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
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controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in New York, New York on December 4, 2001.
LADENBURG THALMANN FINANCIAL SERVICES INC.
(Registrant)
By: /s/ Victor M. Rivas
------------------------------------------
Name: Victor M. Rivas
Title: President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard M. Lorber, Richard J. Rosenstock,
Victor M. Rivas and J. Bryant Kirkland III, and each of them, with full power to
act without the other, such person's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign this Registration
Statement, any and all amendments thereto (including post-effective
amendments), any subsequent Registration Statements filed by the Company
pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and any
amendments thereto and to file the same, with exhibits and schedules thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
*
_____________________________ Chairman of the Board December 4, 2001
Howard M. Lorber
/s/ Victor M. Rivas
_____________________________ President and Chief December 4, 2001
Victor M. Rivas Executive Officer
/s/ Richard J. Rosenstock
_____________________________ Vice Chairman and Chief December 4, 2001
Richard J. Rosenstock Operating Officer
*
_____________________________ Chief Financial Officer December 4, 2001
J. Bryant Kirkland III (and Principal Accounting
Officer)
*
_____________________________ Executive Vice President December 4, 2001
Vincent A. Mangone and Director
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Signature Title Date
--------- ----- ----
*
_____________________________ Executive Vice President December 4, 2001
Mark Zeitchick and Director
*
_____________________________ Director December 4, 2001
Bennett S. LeBow
*
_____________________________ Director December 4, 2001
Phillip Frost
* Director December 4, 2001
_____________________________
Henry C. Beinstein
*
_____________________________ Director December 4, 2001
Robert J. Eide
* By Power of Attorney
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