EXHIBIT 2.1
EXECUTION VERSION
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STOCK PURCHASE AGREEMENT
BY AND AMONG
SAI HOLDINGS, INC.,
COMPUTER CLEARING SERVICES, INC.
AND
THE SELLING STOCKHOLDERS DEFINED HEREIN
DATED AS OF MAY 12, 2005
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XXXXXX, XXXXX & XXXXXXX LLP
NEW YORK, NEW YORK
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS............................................................................ 1
Section 1.01. Certain Defined Terms.................................................... 1
Section 1.02. Other Defined Terms...................................................... 7
Section 1.03. Construction............................................................. 8
ARTICLE II PURCHASE OF SHARES..................................................................... 8
Section 2.01. Purchase and Sale of the Shares.......................................... 8
ARTICLE III CONSIDERATION.......................................................................... 9
Section 3.01. Purchase Price........................................................... 9
Section 3.02. Allocation of Purchase Price............................................. 9
Section 3.03. Closing.................................................................. 9
Section 3.04. Closing Deliveries by the Selling Stockholders........................... 9
Section 3.05. Closing Deliveries by Buyer.............................................. 9
Section 3.06. Purchase Price Adjustment................................................ 10
Section 3.07. Right of Offset.......................................................... 11
Section 3.08. Accounts Receivable...................................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE SELLING STOCKHOLDERS AND THE COMPANY..... 12
Section 4.01. Company Organization..................................................... 12
Section 4.02. Selling Stockholder Organization......................................... 12
Section 4.03. Authority................................................................ 13
Section 4.04. No Conflicts............................................................. 13
Section 4.05. No Subsidiaries.......................................................... 13
Section 4.06. Capitalization; Title to the Shares...................................... 13
Section 4.07. Financial Statements..................................................... 14
Section 4.08. No Undisclosed Liabilities............................................... 14
Section 4.09. Receivables.............................................................. 14
Section 4.10. Absence of Material Adverse Change; Conduct of Business.................. 15
Section 4.11. Permits; Compliance...................................................... 15
Section 4.12. Taxes.................................................................... 15
Section 4.13. Absence of Litigation.................................................... 18
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Section 4.14. Investment Securities................................................... 18
Section 4.15. Derivative Instruments.................................................. 18
Section 4.16. Customer Agreements and Related Documentation........................... 18
Section 4.17. Disclosure of All Matters Relating To Regulatory Approval of the
Change-of-Control and Licensing....................................... 18
Section 4.18. Tangible Property....................................................... 18
Section 4.19. Material Contracts...................................................... 18
Section 4.20. Employee Benefit Plans.................................................. 19
Section 4.21. Intellectual Property................................................... 20
Section 4.22. Environmental Matters................................................... 21
Section 4.23. Broker-Dealer........................................................... 22
Section 4.24. Insurance............................................................... 25
Section 4.25. Bank Accounts........................................................... 26
Section 4.26. No Improper Payments.................................................... 26
Section 4.27. Brokers................................................................. 26
Section 4.28. Customers............................................................... 26
Section 4.29. Computer Systems........................................................ 26
Section 4.30. Affiliate Transactions.................................................. 26
Section 4.31. No Guaranties........................................................... 27
Section 4.32. Real Property........................................................... 27
Section 4.33. Sufficiency of Assets................................................... 27
Section 4.34. Disclosure.............................................................. 28
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BUYER................................... 28
Section 5.01. Organization of Buyer................................................... 28
Section 5.02. Authority............................................................... 28
Section 5.03. No Conflicts............................................................ 28
Section 5.04. Securities Act.......................................................... 29
Section 5.05. Brokers................................................................. 29
Section 5.06. Absence of Litigation................................................... 29
Section 5.07. Financial Statements.................................................... 29
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ARTICLE VI COVENANTS AND OTHER AGREEMENTS OF THE PARTIES....................................... 29
Section 6.01. Conduct of Business..................................................... 29
Section 6.02. Access to Information................................................... 31
Section 6.03. Confidentiality......................................................... 31
Section 6.04. Maintenance of Records.................................................. 32
Section 6.05. No Negotiation.......................................................... 32
Section 6.06. Commercially Reasonable Efforts; Obtaining Consents; Further Action..... 32
Section 6.07. Notifications........................................................... 33
Section 6.08. Public Announcements; Customer Communications........................... 33
Section 6.09. Conduct of Selling Stockholders......................................... 34
Section 6.10. Certain Employee Matters................................................ 34
Section 6.11. Non-Competition......................................................... 35
Section 6.12. Non-Solicitation; Non-Disparagement..................................... 36
Section 6.13. Dissolution of Subsdiaries.............................................. 37
Section 6.14. Boston Lease............................................................ 37
Section 6.15. Further Assurances...................................................... 37
ARTICLE VII CONDITIONS.......................................................................... 37
Section 7.01. Conditions Precedent to Closing Obligation of Buyer..................... 37
Section 7.02. Conditions Precedent to Closing Obligation of the Selling
Stockholders........................................................ 41
ARTICLE VIII TERMINATION; EFFECT OF TERMINATION.................................................. 41
Section 8.01. Termination............................................................. 41
Section 8.02. Effect of Termination................................................... 42
ARTICLE IX TAX MATTERS......................................................................... 42
Section 9.01. Tax Indemnification..................................................... 42
Section 9.02. Allocation of Certain Taxes............................................. 43
Section 9.03. Transfer Tax and Other Closing Expenses................................. 43
Section 9.04. Contests................................................................ 44
Section 9.05. Tax Returns............................................................. 44
Section 9.06. Cooperation............................................................. 45
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Section 9.07. Survival................................................................ 45
Section 9.08. Characterization as Purchase Price Adjustment........................... 46
Section 9.09. Absence of Withholding Tax Liability.................................... 46
Section 9.10. Termination of Tax Sharing Agreements................................... 46
Section 9.11. Conflict................................................................ 46
ARTICLE X INDEMNIFICATION................................................................... 46
Section 10.01. Survival of Representations and Warranties.............................. 46
Section 10.02. Indemnification by the Selling Stockholders............................. 47
Section 10.03. Indemnification by Buyer................................................ 48
Section 10.04. Limitations on Indemnification.......................................... 48
Section 10.05. Claims.................................................................. 49
Section 10.06. Notice of Third Party Claims; Assumption of Defense..................... 49
Section 10.07. Settlement.............................................................. 50
Section 10.08. Failure of Indemnifying Person to Act................................... 51
Section 10.09. Exclusive Remedy........................................................ 51
ARTICLE XI CONTINGENT PAYMENT................................................................ 51
Section 11.01. Contingent Payment...................................................... 51
Section 11.02. Disputes................................................................ 54
Section 11.03. Buyer Discretion........................................................ 54
ARTICLE XII MISCELLANEOUS.................................................................... 55
Section 12.01. Headings................................................................ 55
Section 12.02. Notices................................................................. 55
Section 12.03. Assignment.............................................................. 56
Section 12.04. Governing Law; Jurisdiction; Waiver of Jury Trial....................... 56
Section 12.05. Severability............................................................ 57
Section 12.06. Entire Agreement; Amendment; No Waiver.................................. 57
Section 12.07. Expenses................................................................ 57
Section 12.08. Obligations Joint and Several........................................... 57
Section 12.09. Schedules and Exhibits.................................................. 57
Section 12.10. No Third Party Beneficiaries............................................ 57
Section 12.11. Counterparts............................................................ 58
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Section 12.12. Stockholders' Representative............................................ 58
Annex A Shares and Percentage Ownership
Annex B Key Employees
Exhibit A Form of Key Employment Agreement
Schedule 1.01-1 Book Value Calculation Methodology
Schedule 1.01-2 Excluded Receivables
Schedule 1.01-3 Initial Balance Sheet
Schedule 4.02 Jurisdictions of Selling Shareholders
Schedule 4.04 Conflicts
Schedule 4.05 Subsidiaries
Schedule 4.08 Undisclosed Liabilities
Schedule 4.10 Material Adverse Change
Schedule 4.11 Permits; Compliance
Schedule 4.12 Taxes
Schedule 4.12(d) Tax Jurisdictions
Schedule 4.12(e) Tax Returns
Schedule 4.12(i) Tax Sharing Agreement
Schedule 4.12(j) NOLs
Schedule 4.13 Litigation
Schedule 4.15 Derivative Instruments
Schedule 4.17 Regulatory Matters
Schedule 4.19 Material Contracts; Defaults
Schedule 4.20(a) Benefit Plans
Schedule 4.20(g) ERISA
Schedule 4.20(f) Acceleration of Benefit Plans
Schedule 4.21(a) Intellectual Property
Schedule 4.21(b) Domain Names
Schedule 4.23(a) Broker-Dealer
Schedule 4.23(b) Registrations
Schedule 4.23(d) Regulatory Agreements
Schedule 4.24 Insurance
Schedule 4.25 Bank Accounts
Schedule 4.29 Computer Systems
Schedule 4.30(a) Affiliate Transactions
Schedule 4.30(b) Arm's-Length Transactions
Schedule 4.30(c) Settlements
Schedule 4.31 Guaranties
Schedule 4.32 Real Property
Schedule 5.03 Conflicts
Schedule 6.010 Conduct of Business
Schedule 6.10(a) Business Employees
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Schedule 6.11 Permitted Activities
Schedule 11.01(f)-1 Qualifying Customers
Schedule 11.01(f)-2 Prospective Qualifying Customers
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of May 12, 2005 by and
among SAI HOLDINGS, INC., a Texas corporation ("Buyer"), COMPUTER CLEARING
SERVICES, INC., a Delaware corporation (the "Company"), and the Selling
Stockholders.
RECITALS
WHEREAS, each Selling Stockholder and Epoch is the record and beneficial
owner of that number of shares of common stock, no par value per share, of the
Company ("Company Common Stock") as is set forth opposite the name of such
Selling Stockholder or Epoch, as the case may be, on Annex A, which such shares,
taken together with the shares of Company Common Stock held by the other Selling
Stockholders and Epoch, represent one hundred percent (100%) of the issued and
outstanding shares of Company Common Stock (collectively, the "Shares").
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Selling Stockholders desire to sell to Buyer and Buyer desires to
purchase from the Selling Stockholders, all of the Shares.
WHEREAS, prior to the consummation of the Closing hereunder, the Selling
Stockholders shall cause the Company to convey all rights and Liabilities
associated with the Excluded Litigations to the Selling Stockholders.
WHEREAS, subsequent to the purchase of the Shares hereunder, Buyer and/or
one or more of its Affiliates currently intends, but is in no way obligated or
required to, to effect a merger or other similar transaction involving all or a
material portion of the Company's or its Affiliates' stock or assets pursuant to
which the Company's independent operations and/or existence shall cease (any
such transaction, the "Post-Closing Transaction").
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, except as
expressly provided herein or as the context otherwise requires:
"Acument" means Acument Holding, Inc., a California corporation.
"Affiliate" means, with respect to any Person, (i) a Person that controls,
is controlled by, or is under common control with such Person (it being
understood that a Person shall be deemed to "control" another Person, for
purposes of this definition, if such Person directly or indirectly has the power
to direct or cause the direction of the management and policies of such other
Person, whether through holding beneficial ownership interests in such other
Person, by Contract
or otherwise and (ii) in addition, if such Person is a natural person, any
spouse or lineal descendant of such Person.
"Agreement" means this Stock Purchase Agreement, including all recitals,
Annexes, Exhibits and Schedules relating hereto.
"Ancillary Agreements" means the Key Employment Agreements.
"Book Value" means the book value of the Company calculated based on the
Initial Balance Sheet and in accordance with the methodology for such
calculation set forth on Schedule 1.01-1.
"Books and Records" means all books of account and other financial
records, files, documents, instruments, books and records relating principally
to the Company, including the books and records required under Rules 17a-3 and
17a-4 of the Exchange Act and other applicable Law.
"Business Day" means any day which is not a Saturday, a Sunday or any
other day on which banks in the State of New York are authorized or required by
law to close.
"Buyer Indemnified Parties" means (i) Buyer and each of its Affiliates,
and their respective officers, directors, employees, agents and representatives
and (ii) if (and only if) the Closing occurs, the Company.
"Buyer Material Adverse Effect" means an effect that is materially adverse
on the ability of Buyer to perform its obligations under or consummate the
transactions contemplated by this Agreement.
"Closing Date Payment" means the Book Value of the Company plus One
Million Dollars ($1,000,000).
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"COI Amendment" means the amendment to the Certificate of Incorporation of
the Company establishing the authorized capital stock of the Company at Six
Million (6,000,000) shares of Common Stock.
"Company Intellectual Property Rights" shall mean all Intellectual
Property Rights owned or held by the Company.
"Competitive Business" means the business of being a clearing or executing
broker in the United States of America.
"Confidentiality Agreement" means that certain Non-Disclosure Agreement
between Xxxxxx Worldwide, Inc. and the Company.
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"Contract" means any agreement, lease, sublease, occupancy agreement,
license, evidence of indebtedness, mortgage, indenture, instrument, security
agreement, security interest, guaranty, deed of trust or other contract
obligation or commitment (whether written or oral).
"Debt" means obligations in respect of (i) borrowed money, (ii)
capitalized lease obligations, (iii) obligations under interest rate agreements
and currency agreements, (iv) guaranties of any obligation of any third Person,
(v) letters of credit and (vi) indemnities or performance bonds.
"Effective Time" means 11:59 p.m. (eastern standard time) on the Closing
Date, or such other time as the parties hereto may agree to in writing.
"Epoch" means Epoch Investments, L.P., a Colorado limited partnership
(f/k/a Empyrean Investments, L.P.), which as of the date hereof is the holder of
Nine Hundred Twenty Eight Thousand Eight Hundred Eighty (928,800) shares of
Company Common Stock.
"Exchange Act" means the United States Securities and Exchange Act of
1934, as amended.
"Excluded Litigation" means the Litigation designated as "Excluded
Litigation" on Schedule 4.13.
"Excluded Receivables" means those receivables of the Company set forth on
Schedule 1.01-2.
"Final Closing Date Payment" means the calculation of the Closing Date
Payment based on the Revised Balance Sheet as such calculation is reflected on
the Revised Balance Sheet and, pursuant to Section 3.06(c), the Final Balance
Sheet.
"GAAP" shall mean United States generally accepted accounting principles,
as in effect from time to time and applied consistently throughout the
applicable periods.
"Glendale Securities" means Glendale Securities, Inc., a California
corporation.
"Indemnified Person" means the Person or Persons entitled to
indemnification under Article X.
"Indemnifying Person" means the Person or Persons obligated to provide
indemnification under Article X.
"Initial Balance Sheet" means the balance sheet of the Company, as of
either the date thirty (30) calendar days prior to the Closing Date or the last
day of the most recent calendar month ending prior to the Closing Date,
whichever is earlier, attached hereto as Schedule 1.01-3.
"IRS" means the United States Internal Revenue Service.
"Intellectual Property Rights" means all proprietary and other rights,
including rights granted under license, in and to the following: (i) trademarks,
service marks, trademark
3
registrations, service xxxx registrations, trade names, trade dress, corporate
names, logos and other designations of origin, applications to register any of
the foregoing and the goodwill associated therewith; (ii) copyrights,
copyrightable works, copyright registrations and applications for registration
of copyrights; (iii) Domain Names; (iv) patents, design patents and utility
patents, all applications for grant of any such patents pending as of the date
hereof or as of the Closing Date, all improvements to the inventions disclosed
in each patent, registration or application and all reissues, divisions,
continuations, continuations-in-part, reexaminations and extensions thereof; (v)
Software; (vi) technical documentation, confidential information, trade secrets,
designs, inventions, technology, processes, formulae, know-how, operating
manuals and guides, financial, marketing and business data, plans, new product
development, technical and marketing surveys, material specifications, product
specifications, invention records, research records, labor routings, inspection
processes, equipment lists, engineering reports and drawings, architectural or
engineering plans, marketing and licensing records, sales literature, customer
and supplier lists, trade lists, sales forces and distributor networks lists,
advertising and promotional materials, service and parts records, warranty
records, maintenance records and similar records; (vii) all rights and incidents
of interest in and to all non-competition or confidentiality agreements; (viii)
copies and tangible embodiments of all of the foregoing, as well as related
documentation in whatever form or medium; and (ix) all rights to xxx or recover
and retain damages and costs and attorney's fees for present and past
infringement of any of the foregoing.
"Joinder Agreement" means a written agreement, in form and substance
satisfactory to Buyer, pursuant to which Epoch shall become a party to this
Agreement as a Selling Stockholder hereunder for all purposes hereof, and which
shall include the assumption by Epoch of each and every duty and obligation of a
Selling Stockholder hereunder.
"Key Employees" means the individuals listed on Annex A, as such list may
be amended in Buyer's sole discretion from time to time up until the date which
is five (5) Business Days prior to the Closing Date.
"Key Employment Agreements" means those certain employment agreements
between the Company and each of the Key Employees entered into on or prior to
the Closing Date, substantially in the form attached hereto as Exhibit B.
"Knowledge" means (i) with regard to a natural person, the actual
knowledge of such individual as to a particular fact or matter and such
knowledge of such fact or matter as a prudent individual could be expected to
discover or otherwise become aware of in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact or matter and
(ii) with regard to any other Person, the knowledge of each individual who is
serving as a director, officer, employee, partner, executor or trustee of such
Person (or in any similar capacity) as determined in accordance with the
preceding clause (i). Notwithstanding anything to the contrary in the foregoing
definition, it is agreed that the term Knowledge when applied to Financial
Technology Partners L.L.C. and Xxxxxxx Xxxxxxx shall mean the actual knowledge
of such Person without implying any duty of investigation.
"Law" means any statute, law, constitutional provision, code, regulation,
ordinance, rule, ruling, judgment, decision, order, writ, injunction, decree,
permit, concession, grant, franchise, license, agreement, directive, binding
guideline or policy or rule of common law, requirement of,
4
or other governmental restriction of or determination by any Governmental Entity
or any interpretation of any of the foregoing by any Governmental Entity.
"Liabilities" means all Debt, and other liabilities of a Person of any
kind, character or description, whether absolute or contingent, known or
unknown, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, vested or unvested,
executory, determined, determinable or otherwise, and whether or not the same is
required to be accrued on the financial statements of such Person.
"Lien" means any encumbrance, mortgage, lien, claim, pledge, right of
first refusal, charge or other security interest or similar limitation.
"Litigation" means any actions, suits, arbitrations, proceedings,
hearings, investigations or complaints of any kind of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.
"Loss" or "Losses" means any and all losses, Liabilities, costs, claims,
damages, penalties, interest and expenses (including reasonable attorneys' fees
and expenses and reasonable costs of investigation and litigation but excluding
lost profits and consequential damages). In the event any of the foregoing are
indemnifiable hereunder, the terms "Loss" and "Losses" shall include any and all
reasonable attorneys' fees and expenses and reasonable costs of investigation
and litigation incurred by the Indemnified Person in enforcing such indemnity.
"Material Adverse Effect" means a material adverse effect on the financial
condition, business, prospects, assets, liabilities, or results of operations of
the Company or Buyer, as the case may be, individually or in the aggregate, but
shall not include any effect arising out of or resulting from (a) a change in
general economic or financial conditions and (b) a change affecting the
securities markets or the brokerage industries in the United States generally;
provided that such change does not have a disproportional effect on the Company.
"NASD" shall mean the NASD (f/k/a the National Association of Securities
Dealers, Inc.).
"Permitted Liens" means (a) Liens for Taxes not yet due and payable, (b)
mechanics', materialman's, carriers', workers', repairers', landlords' and
similar Liens arising or incurred in the ordinary course of business, (c)
zoning, entitlement, building and other land use regulations that are not
violated by current occupancy or use and (d) customary covenants, conditions,
restrictions, easements and similar restrictions of record affecting title that
do not impair current occupancy or use.
"Xxxxxx" means Xxxxxx Worldwide, Inc., a Delaware corporation.
"Person" means an individual, corporation, partnership, trust, limited
liability company, a branch of any legal entity, unincorporated organization,
joint stock company, joint venture, association, other entity or Governmental
Entity.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing
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Date, then the portion of the taxable period that begins on the day following
the Closing Date shall constitute a Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof that is
not a Post-Closing Period.
"Proportionate Percentage" means, at any given time and with regard to
each Selling Stockholder, the result, expressed as a percentage, obtained by
dividing (x) the total number of shares of Company Common Stock sold (or, prior
to the Closing, to be sold) to Buyer by such Selling Stockholder pursuant to
this Agreement by (y) the total number of shares of Company Common Stock, in the
aggregate, sold (or, prior to the Closing, to be sold) to Buyer by all Selling
Stockholders pursuant to this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Selling Stockholders" means each of Acument, Xxxxxx X. Angle, Xxxxxxx X.
Xxxxxx, Financial Technology Partners L.L.C., Xxxxxxx Xxxxxxx, Xxxxxxx X.
Xxxxxxxxx, Xxxxxx Xxxxxxxxxxx, Xxxxxxx X. "Xxxx" Xxxxx, Xxxxxxx Anas, Xxxxx X.
Xxxxxxx and, upon (and only upon) execution of the Joinder Agreement, Epoch.
"Software" means all computer software, including source code, object
code, operating systems and specifications, algorithms, data, databases and all
related documentation.
"SRO" means any domestic or foreign securities broker-dealer
self-regulatory organization.
"Stockholder Indemnified Parties" means the Selling Stockholders and each
of their Affiliates, and their respective officers, directors, employees, agents
and representatives; provided that in no event shall the Company be deemed to be
a Stockholder Indemnified Party.
"Subsidiary" means, with respect to any Person, any other Person (i) of
which such Person (either alone or through or together with one or more of such
first Person's other Subsidiaries) owns or has rights to acquire, directly or
indirectly, more than fifty percent (50%) of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such other Person or (ii) any
other Person over which such Person directly or indirectly has the power to
direct or cause the direction of the management and policies of such other
Person, whether through holding beneficial ownership interests in such other
Person, by Contract or otherwise.
"Tax" or "Taxes" means all federal, state, local, or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental, profits, windfall
profits, transaction, license, lease, service, service use, occupation,
severance, energy, unemployment, social security, worker's compensation,
capital, premium, or other taxes, assessments, customs, duties, fees, levies, or
other governmental
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charges of any nature whatever, whether disputed or not, together with any
interest, penalties, additions to tax, or additional amounts with respect
thereto.
"Tax Return" means a report, return or other information (including any
amendments) required to be supplied to a Taxing Authority with respect to Taxes,
including, where permitted or required, combined, consolidated, unitary or
similar returns for any group of entities that includes the Company.
"Taxing Authority" means any governmental agency, board, bureau, body,
department, or authority of any United States federal, state, or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
Section 1.02. Other Defined Terms. The following terms have the meanings
given thereto in the Sections set forth below:
Term Section
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1940 Act 4.23(d)
Accounting Firm 3.06(c)
Additional Contingent Payment 11.01(g)
Audited Financial Statements 4.07(a)
Bankruptcy Authorities 7.01(k)(i)
Benefit Plans 4.20(a)
Boston Lease 6.14
Business Employees 4.20(d)
Buyer Preamble
Closing 3.03
Closing Date 3.03
Company Preamble
Company Common Stock Recitals
Company Permits 4.11
Company Plans 4.20(a)
Company Policies and Procedures 4.23(e)
Competitive Activities 6.11(a)
Contest 9.04
Contingent Payment 11.01(f)
Designated Purpose 12.12
Dispute Notice 11.02(a).
Domain Names 4.21(b)
Earnout Year 11.01(f)
ERISA 4.20(a)
Final Balance Sheet 3.06(c)
Final Statement 11.02(a)
Financial Statements 4.07(a)
Governmental Entity 4.04
Investment Advisers Act 4.23(f)
IPO 11.01(f)
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Leased Real Property 4.32
Material Contract 4.19
Notice of Disagreement 3.06(b)
Xxxxxx Stock 11.01(f)
Xxxxxx Stock Cap 11.01(c)
Xxxxxx Valuation 11.01(f)
Plans 4.23(i)
Post-Closing Transaction Recitals
Preliminary Statement 11.02(a)
Proportionate Percentage 4.06
Purchase Price 3.01
Qualifying Customers 11.01(f)
Qualifying Revenue 11.01(f)
Real Property Lease 4.32
Receivables Settlement Date 3.08
Receivables Reserve 3.08
Regulatory Agreement 4.23(d)
Relevant Group 4.12(a)
Revised Balance Sheet 3.06(a)
Seller Plan 4.20(a)
Shares Recitals
SRO 4.23(a)
Stockholders' Representative 12.12(a)
Tax Indemnitee 9.01(a)
Unaudited Financial Statements 4.07(a)
Uncollected Receivables 3.08
Section 1.03. Construction. Unless otherwise expressly provided herein or
unless the context of this Agreement clearly requires otherwise, (a) words using
the singular or plural number also include the plural or singular number,
respectively, (b) the use of any gender herein shall be deemed to include the
other genders, (c) references herein to "Preamble," "Recitals," "Schedules,"
"Articles," "Sections," "subsections" and other subdivisions without reference
to a document are to the Preamble or specified Recitals, Schedules, Articles,
Sections, subsections and other subdivisions of this Agreement, (d) a reference
to a subsection without further reference to a Section is a reference to such
subsection as contained in the same Section in which the reference appears, and
this rule shall also apply to other subdivisions within a Section or subsection,
(d) the words "herein," "hereof," "hereunder," "hereby" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision, and (e) the words "include," "includes" and "including" are deemed to
be followed by the phrase "without limitation". All accounting terms used and
not expressly defined herein shall have the meanings given to them under GAAP.
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ARTICLE II
PURCHASE OF SHARES
Section 2.01. Purchase and Sale of the Shares. At the Closing, on and
subject to the terms and conditions set forth in this Agreement, the Selling
Stockholders shall sell, assign, transfer, convey and deliver to Buyer, and
Buyer shall purchase from the Selling Stockholders, all of the Shares, free and
clear of all Liens.
ARTICLE III
CONSIDERATION
Section 3.01. Purchase Price. As consideration for the Shares, Buyer shall
deliver to the Selling Stockholders (i) on the Closing Date, the Closing Date
Payment and (ii) to the extent payable after the Closing Date, the contingent
consideration to be paid pursuant to Article XI at such times as are set forth
thereunder for any such payments (collectively, the "Purchase Price"). All
payments of every kind to be made to all of the Selling Stockholders hereunder
shall be made to each Selling Stockholder pro rata in accordance with such
Selling Stockholder's percentage ownership of the Shares, as set forth opposite
the name of such Selling Stockholder on Annex A.
Section 3.02. Allocation of Purchase Price. The Purchase Price, as
adjusted pursuant to Section 3.06(d), shall be allocated one hundred percent
(100%) to the Shares for purposes of Section 1060 of the Code and for all other
Tax purposes. Buyer and the Selling Stockholders agree to be bound by such
determination and allocation and to complete and attach IRS Form 8594 to the
respective U.S. Tax Returns accordingly and to file all other Tax Returns
accordingly and not to take any position inconsistent therewith. In the event of
any adjustment to the Purchase Price pursuant to Article IX, X or XI that
results in an increase in the consideration received by the Selling
Stockholders, the allocation provided for herein shall be appropriately
adjusted.
Section 3.03. Closing. The closing of the purchase and sale of the Shares
(the "Closing") will take place at the offices of Xxxxxx, Xxxxx & Bockius LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as Buyer and
the Stockholders' Representative mutually agree, at 10:00 a.m. local time no
later than the third (3rd) Business Day following the satisfaction or waiver of
all conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective parties will take at the Closing itself) or such other date as the
parties may mutually determine (the date on which the Closing takes place, the
"Closing Date").
Section 3.04. Closing Deliveries by the Selling Stockholders. At the
Closing, the Selling Stockholders shall deliver or cause to be delivered to
Buyer:
(a) stock certificates evidencing the Shares duly endorsed in blank
or accompanied by stock powers and transfer forms duly executed in blank;
(b) a receipt for the payment of the Closing Date Payment; and
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(c) the certificates and other documents required to be delivered
pursuant to Section 7.01.
Section 3.05. Closing Deliveries by Buyer. At the Closing, Buyer shall
deliver to the Selling Stockholders:
(a) the Closing Date Payment by wire transfer of immediately
available funds to the bank accounts specified by the Stockholders'
Representative in a written notice at least five (5) Business Days prior to
Closing; and
(b) the certificates and other documents required to be delivered
pursuant to Section 7.02.
Section 3.06. Purchase Price Adjustment.
(a) Revised Balance Sheet. Within one hundred twenty (120) Business
Days after the Closing Date, Buyer shall deliver to the Stockholders'
Representative a balance sheet (including the related notes and schedules
thereto) of the Company as of the Effective Time, together with a calculation of
the Final Closing Date Payment, including in detail the amounts underlying the
calculation (the "Revised Balance Sheet"). The Revised Balance Sheet shall be
prepared in accordance with the Initial Balance Sheet using the same principles
as were used in preparing the Initial Balance Sheet and making the initial
calculation of the Closing Date Payment based thereon.
(b) Notice of Disagreement. The Stockholders' Representative shall
jointly notify Buyer in writing (such notice, a "Notice of Disagreement") within
ten (10) Business Days after receiving the Revised Balance Sheet if the
Stockholders' Representative disagrees with Buyer's calculation of the Revised
Balance Sheet, which Notice of Disagreement shall set forth in reasonable detail
the basis for such dispute, the U.S. Dollar amounts involved and the
Stockholders' Representative's own good faith estimate of the Revised Balance
Sheet. Any item not specifically disputed by the Stockholders' Representative
shall be deemed accepted by all of the Selling Stockholders and shall become
part of the Final Balance Sheet. If the Stockholders' Representative does not
deliver a Notice of Disagreement to Buyer within such ten (10) Business Day
period, then the Revised Balance Sheet shall be deemed to have been accepted by
all of the Selling Stockholders, shall become final and binding upon the parties
and shall be the Final Balance Sheet.
(c) Dispute Resolution. During the ten (10) Business Day period
immediately following the delivery of a Notice of Disagreement, the
Stockholders' Representative and Buyer shall seek in good faith to resolve any
differences that they may have with respect to any matter specified in the
Notice of Disagreement. If at the end of such ten (10) Business Day period the
Stockholders' Representative and Buyer have been unable to agree upon a Final
Balance Sheet, then the Stockholders' Representative and Buyer shall (within
five (5) Business Days after the end of such ten (10) Business Day period)
submit to the Accounting Firm for review and resolution any and all matters that
remain in dispute with respect to the Notice of Disagreement. Buyer and the
Stockholders' Representative shall cause BDO Xxxxxxx, LLP (the "Accounting
Firm") to use commercially reasonable efforts to make a final determination
(which
10
determination shall be binding on the parties hereto) of the Revised Balance
Sheet within fifteen (15) Business Days from such submission, and such final
determination shall be the Final Balance Sheet. The cost of the Accounting
Firm's review and determination shall be split between and paid by Buyer, on the
one hand, and the Selling Stockholders, on the other hand, on a proportionate
basis, based upon the relative amount by which the determination of the Revised
Pro Forma Balance Sheet of each of them differed from that determined by the
Accounting Firm. During the fifteen (15) Business Day review by the Accounting
Firm, Buyer and the Selling Stockholders shall each make available to the
Accounting Firm such individuals and such information, Books and Records as may
be reasonably required by the Accounting Firm to make its final determination.
The Revised Balance Sheet as accepted by the Selling Stockholders without Notice
of Disagreement, or as adjusted pursuant to agreement between Buyer and the
Stockholders' Representative, or as adjusted pursuant to Accounting Firm's
determination, shall be final and binding on the parties (the "Final Balance
Sheet").
(d) Adjustment. (i) If the Final Closing Date Payment set forth in
the Final Balance Sheet is higher than the Closing Date Payment, then Buyer
shall pay to the Selling Stockholders an amount equal to such excess, in cash in
immediately available funds, within five (5) Business Days after the Final
Balance Sheet becomes final and binding on the parties hereto as provided in the
previous paragraph. If the Final Closing Date Payment set forth in the Final
Balance Sheet is less than the Closing Date Payment, then the Selling
Stockholders shall be obligated jointly and severally to pay, and shall pay, to
Buyer an amount equal to such shortfall, in cash in immediately available funds,
within five (5) Business Days after the Final Balance Sheet becomes final and
binding on the parties hereto as provided in the previous paragraph. If Final
Closing Date Payment set forth in the Final Balance Sheet is equal to the
Closing Date Payment, then neither Buyer nor the Selling Stockholders shall owe
any amount to the other party pursuant to this Section 3.06(d).
(e) Accounting Books, Records, Policies and Procedures. Buyer agrees
that following the Closing through the date on which payment, if any, is made by
either party pursuant to this Section 3.06 or if the Final Balance Sheet
indicates that no such payment is required, then through the date on which such
Final Balance Sheet becomes final and binding on the parties hereto, Buyer will
not take any actions with respect to any accounting books, records, policies or
procedures on which the Initial Balance Sheet was based or the Final Balance
Sheet is to be based that would make it impossible or impracticable to calculate
the Final Balance Sheet in the manner and utilizing the methods required hereby
and that the Stockholders' Representative shall have such access to the
Company's Books and Records as may be reasonably necessary in connection with
its review of the Revised Balance Sheet or conduct of the dispute resolution
process set forth in this Article III.
Section 3.07. Right of Offset. The Selling Stockholders hereby expressly
acknowledge and agree that Buyer shall have the right, at its election and
without notice of any kind to any Person, to fully and completely offset against
any or all Contingent Payments payable or becoming payable, by Buyer pursuant to
Article XI (i) any and all amounts owed to any Buyer Indemnified Party pursuant
to Article X (or any portion thereof), (ii) any and all amounts owed to Buyer
pursuant to Section 3.06 and (ii) any and all amounts otherwise owed by the
Selling Stockholders to Buyer pursuant to this Agreement or any other Ancillary
Document (or any portion thereof). Any such offset shall be made (i) first,
against the Contingent Payment due to
11
each applicable Selling Stockholder in accordance with such Selling
Stockholder's Proportionate Percentage and (ii) second, in the event of joint
and several obligations of the Selling Stockholders for which an offset in
accordance with the foregoing clause (i) is inadequate, against the aggregate
amount of all Contingent Payments due, or becoming due, to all Selling
Stockholders.
Section 3.08. Accounts Receivable. Buyer shall use commercially reasonable
efforts to collect any accounts receivable set forth, and labeled as such, on
the Initial Balance Sheet; provided, however, that Buyer shall not be required
to institute suit or otherwise resort to any legal proceedings in connection
with such efforts. On the first Business Day following the date that is one
hundred eighty (180) days following the Closing Date (the "Receivables
Settlement Date"), Buyer shall provide the Stockholders' Representative with a
list of each such account receivable and the related amount that remains
uncollected as of the Settlement Date ("Uncollected Receivables"). If the
aggregate Uncollected Receivables exceeds the reserve shown in the Initial
Balance Sheet with respect to accounts receivables, as such reserve may be
finally adjusted on the Final Balance Sheet (the "Receivables Reserve"), within
five (5) Business Days following the Settlement Date, the Selling Stockholders
shall purchase from Buyer all Uncollected Receivables for a purchase price equal
to the amount of such excess, such purchase price to be paid by each Selling
Stockholder in an aggregate amount equal to such Selling Stockholder's
Proportionate Percentage of such purchase price in the following manner: first,
by offsetting such amount against the Contingent Payments, if any, due to such
Selling Stockholder at the end of the first Earnout Year and second, in the
event such Contingent Payments are inadequate to satisfy the offset of such
amount for any reason, by payment at such time in cash by such Selling
Stockholder equal to the amount of such shortfall. If the Receivables Reserve
exceeds the aggregate Uncollected Receivables, within five (5) Business Days
following the Settlement Date Buyer shall pay to the Selling Stockholders (as
directed by the Stockholders' Representative) the amount of such excess.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING
THE SELLING STOCKHOLDERS AND THE COMPANY
Each of the Company and each Selling Stockholder hereby represents and
warrants to Buyer, as of the date hereof and as of the Closing Date, as follows:
Section 4.01. Company Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to carry on its business as now being conducted. The Company is duly
qualified or licensed to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified or so licensed would not reasonably be expected to result in a
Material Adverse Effect. True, correct and complete copies of the certificate of
incorporation and by-laws of the Company, as most recently amended, have been
made available to Buyer.
12
Section 4.02. Selling Stockholder Organization. Schedule 4.02 contains a
complete and accurate list of the jurisdiction of incorporation or formation of
each Selling Stockholder that is not a natural person and Epoch and any other
jurisdictions in which such Selling Stockholder or Epoch is qualified to do
business as a foreign corporation or limited partnership as a result of the
activities of the Company. Each such Selling Stockholder and Epoch is a
corporation or limited partnership, as the case may be, duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
respective organization and each such Selling Stockholder has all requisite
corporate or limited partnership, as the case may be, power and authority to
carry on its business, to own and use the properties and assets that it purports
to own or use and to perform all its obligations under this Agreement.
Section 4.03. Authority. Each of the Company and each Selling Stockholder
has all requisite standing, power and authority (individual, corporate or
otherwise) to execute, deliver and perform its respective obligations under this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements
have been duly executed and delivered by the Company and each Selling
Stockholder, as appropriate, and constitute valid and binding obligations of
thereof, enforceable against the Company and such Selling Stockholder in
accordance with their respective terms.
Section 4.04. No Conflicts. Except as set forth on Schedule 4.04, none of
the execution, delivery and performance of this Agreement or the Ancillary
Agreements by the Company or the Selling Stockholders, as applicable, or the
consummation by the Company or the Selling Stockholders, as applicable, of the
transactions contemplated hereby and thereby, including the Post-Closing
Transaction does or will (a) conflict with or violate any organizational
document of the Company or any Selling Stockholder, (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any
foreign, federal, state or local government or subdivision thereof, or
governmental, judicial, legislative, executive, administrative or regulatory
authority, agency, commission, tribunal or body, SRO, clearing organization or
non-governmental regulating body (each, a "Governmental Entity") to the extent
that the rules, regulations or orders of such body are binding upon any Selling
Stockholder or the Company or otherwise have the effect of law, (c) require any
consent, waiver or approval or, with or without the giving of notice or lapse of
time or both, result in a default or breach by any Selling Stockholder or the
Company (or give rise to any right of termination, cancellation, modification or
acceleration) under any of the terms, conditions or provisions of any Contract
to which any Selling Stockholder or the Company is a party or by which any
Selling Stockholder or the Company or any of the assets of any Selling
Stockholder or the Company may be bound or is a third party beneficiary of, (d)
result in the creation or imposition of any Lien on any asset of the Company or
(e) conflict with or violate any Law applicable to any Selling Stockholder or
the Company or by which any of the assets of any Selling Stockholder or the
Company are bound.
Section 4.05. No Subsidiaries. Except as set forth on Schedule 4.05, the
Company does not have and never has had any Subsidiaries and does not own,
directly or indirectly, any debt, shares or other equity interest or securities
in any corporation, partnership, joint venture or other Person, and has no
agreement or commitment to purchase any such interest.
Section 4.06. Capitalization; Title to the Shares. As of the date hereof,
the authorized capital stock of the Company consists of Five Million (5,000,000)
shares of Company Common
13
Stock and, upon the filing and effectiveness of the COI Amendment with the
Secretary of State of the State of Delaware, the authorized capital stock of the
Company shall consist of Six Million (6,000,000) shares of Company Common Stock.
Five Million Seven Hundred Twenty Eight Thousand One Hundred Seventy Six
(5,728,176) such shares are issued and outstanding and are owned legally,
beneficially and of record by the Selling Stockholders and Epoch in the amounts
and percentages set forth on Annex A and, as of the Closing Date, such shares
shall constitute the Shares. Except for the Shares, there are no shares of
capital stock or other equity securities of the Company issued, reserved for
issuance or outstanding. All of the Shares have been duly authorized and validly
issued and are fully paid and nonassessable. There is no security, option,
warrant, right, call, subscription agreement, commitment or understanding of any
nature whatsoever to which any Selling Stockholder or the Company is a party
that, directly or indirectly, (a) calls for the issuance, sale, pledge or other
disposition of any Company Common Stock or any securities convertible into, or
other rights to acquire, any Company Common Stock or any other equity security
of, or interest in, the Company, (b) obligates any Selling Stockholder or the
Company to grant, offer or enter into any of the foregoing or (c) relates to the
voting or control of such Company Common Stock, equity securities or interests,
or other rights. Each Selling Stockholder has good and marketable title to the
Shares held thereby, free and clear of any Liens.
Section 4.07. Financial Statements. (a) The Selling Stockholders have
delivered to Buyer copies of each of (i) the audited balance sheets of the
Company (including all related notes and schedules thereto) at December 31, 2004
and the audited statements of income, stockholder's equity and cash flows of the
Company (including any related notes and schedules thereto) for the fiscal years
ended December 31, 2004 (collectively, the "Audited Financial Statements"), (ii)
the unaudited balance sheets (including all related notes and schedules thereto)
and the unaudited statements of income, stockholder's equity and cash flows
(including any related notes and schedules thereto) of the Company for each
calendar quarter during the calendar year 2005 (collectively, the "Unaudited
Financial Statements", and together with the Audited Financial Statements, the
"Financial Statements") and (iii) the Initial Balance Sheet.
(b) The Financial Statements and the Initial Balance Sheet have been
prepared in accordance with GAAP (except as may be set forth in the notes
thereto), and fairly present in all material respects the financial position of
the Company as of the dates indicated and the results of operations and cash
flows of the Company for the periods indicated. The Financial Statements were
prepared in accordance with the Books and Records of the Company.
(c) The Books and Records of the Company: (i) reflect all items of
the Company's income and expense and all the Company's assets and liabilities
required to be reflected therein in accordance with GAAP, (ii) are in all
material respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies and (iii) have been maintained in
accordance with good business and accounting practices.
(d) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
14
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Section 4.08. No Undisclosed Liabilities. Except as set forth on Schedule
4.08, there are no Liabilities of the Company other than Liabilities (i)
expressly reflected or reserved against on the Financial Statements or (ii)
incurred in the ordinary course of business, consistent with the past practice
of the Company since the respective dates thereof.
Section 4.09. Receivables. All trade accounts, notes receivable and other
receivables of the Company that are either reflected in the Books and Records of
the Company represent valid obligations arising from sales actually made in the
ordinary course of business, and, to the Company's or any Selling Stockholder's
Knowledge, are collectible net of any reserve shown on the Initial Balance
Sheet.
Section 4.10. Absence of Material Adverse Change; Conduct of Business.
Except as set forth on Schedule 4.10, since December 31, 2004, the Company has
conducted its business only in the ordinary course consistent with past practice
and there has been (a) no change or event that, individually or together with
other changes or events, (i) has had or could reasonably be expected to have a
Material Adverse Effect on the Company, (ii) prevent or materially delay the
Closing or (iii) make any of the representations and warranties of the Selling
Stockholders or the Company false or inaccurate as of the Closing Date, (b) no
declaration, setting aside or payment of any dividend or other distribution with
respect to, or any direct or indirect redemption or acquisition of, any of the
capital stock or any convertible security of the Company, (c) no waiver of any
material right of the Company or cancellation of any material Debt or claim held
by the Company, (d) no entering into, adoption or amendment of any material
agreement with any employee or consultant of the Company or any employee benefit
plan or arrangement and no material increase in the compensation paid or payable
to any officer, director, employee or agent of the Company, (e) no material
loss, destruction or damage to any property of the Company, whether or not
insured, (f) no material labor dispute involving the Company and no material
change in the personnel of the Company or the terms and conditions of their
employment, (g) no acquisition or disposition, assignment, license, mortgage,
pledge of, or otherwise subject to a Lien, any material assets (or any Contract
or arrangement therefor) of the Company, including, any of the Company
Intellectual Property Rights, except in the ordinary course of business, (h) no
change in accounting methods or practices of the Company, (i) no loss, or any
development that is expected to result in a loss, of any significant supplier,
customer, distributor or account of the Company (other than the completion in
the ordinary course of business of specific projects for customers), (j) no
amendment or termination of any Material Contract or other material agreement to
which the Company is a party or by which the Company or any of its Subsidiaries
is bound or any of the Company's organizational documents, (k) no incurrence,
assumption, guarantee or prepayment of any indebtedness for borrowed money or
amendment of the terms relating to any such indebtedness, or the issuance or
sale of any debt securities by the Company and (l) no agreement or commitment
(contingent or otherwise) to do any of the foregoing.
Section 4.11. Permits; Compliance. The Company is in possession of all
material franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents,
15
certificates, approvals and orders of any Governmental Entity legally necessary
for it to carry on its business and operations as they are now being conducted
(the "Company Permits"), and no suspension or cancellation of any Company Permit
is pending or, to the Knowledge of any of the Selling Stockholders or the
Company, threatened. Except as set forth on Schedule 4.11, the Company is not in
conflict with, or in default or violation of, nor, with the giving of notice or
lapse of time or both, would be in conflict with, or in default or violation of,
(a) any Law applicable thereto or by which any property or asset thereof is
bound or (b) any of the Company Permits.
Section 4.12. Taxes. Except as set forth on Schedule 4.12,
(a) All Tax Returns required to have been filed on or before the
Closing Date by or with respect to the Company or any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member
(a "Relevant Group") with any Taxing Authority have been duly and timely filed
(with due regard to extensions) in accordance with all applicable laws, and each
such Tax Return correctly and completely reflects the income, franchise or other
Tax liability and all other information required to be reported thereon. All
Taxes owed by the Company or any member of a Relevant Group, whether or not
shown on any Tax Return, have been paid.
(b) The provisions for Taxes due by the Company (as opposed to any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) in the Financial Statements were, as of the closing date of
the applicable Financial Statement, sufficient for all unpaid Taxes, being
current Taxes not yet due and payable, of the Company. As of the Closing Date,
such provisions, as adjusted for the passage of time through the Closing Date,
will be sufficient for the then-unpaid Taxes, being current Taxes not yet due
and payable, of the Company.
(c) All Tax Returns filed with respect to taxable years of the
Company through the taxable year ended June 30, 2001, have been examined and
closed or are Tax Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired. The Company is not a party or subject to any agreement extending
the time within which to file any Tax Return due on or before the Closing Date
that has not been filed. No waiver or extension of any statute of limitations is
in effect with respect to any Tax Return or the payment of Taxes nor has any
extension of time with respect to the payment of any Tax assessment or
deficiency been requested or granted (other than with respect to limitation
periods that have since expired). No power of attorney has been executed or
filed with respect to the Company, with any Taxing Authority. The Company is not
subject to any written ruling or agreement with any Taxing Authority regarding
Taxes.
(d) Schedule 4.12(d) contains a list of states, territories and
jurisdictions (foreign or domestic) to which any Tax is properly payable by the
Company. No claim has ever been made by any Taxing Authority in a jurisdiction
in which the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(e) No Taxing Authority is threatening to assess any additional
Taxes against or in respect of the Company for any past period. No dispute,
claim, audit, action, suit,
16
proceeding or investigation concerning any Tax liability of the Company is now
pending or threatened. No issues have been raised with any Selling Stockholder
or the Company in any examination by any Taxing Authority which reasonably could
be expected to result in a proposed deficiency with respect to the Company for
any Post-Closing Period. Schedule 4.12(e) attached hereto lists all federal,
state, local and foreign income Tax Returns filed by or with respect to the
Company for all taxable periods ended on or after December 31, 2001, indicates
those Tax Returns, if any, that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Company has delivered to
Buyer complete and correct copies of all federal, state, local and foreign
income Tax Returns filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, the Company since December 31,
2001.
(f) There are no Liens on any of the assets of Company that arose in
connection with any failure (or alleged failure) to pay any Tax, other than
liens for Taxes not yet due and payable.
(g) The Company has withheld and paid all Taxes required to have
been withheld and paid and has complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
former employee, creditor, independent contractor, stockholder, customer,
supplier or other third party.
(h) The Company is not a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as
in effect prior to the Tax Reform Act of 1986, or to any "long-term contract"
within the meaning of Section 460 of the Code. None of the assets or properties
of the Company constitutes tax-exempt use property under Section 168 of the
Code. The Company is not a party to any joint venture, partnership or other
arrangement that is treated as a partnership for federal income tax purposes.
Neither any Selling Stockholder nor Epoch is a "foreign person" as used in
Section 1445 of the Code, and Buyer is not required to withhold tax on the
acquisition of the Shares by reason of Section 1445 of the Code. The Company has
not made, is not obligated to make and is not a party to any agreement that
under any circumstances could require it to make any payments that are not
deductible under Sections 162(m) or 280G of the Code or that would result in an
excise tax to the recipient of such payment under Section 4999 of the Code. The
Company has not participated in an international boycott as defined in Code
Section 999. The Company is not required to make any adjustment under Code
Section 481(a) by reason of a change in accounting method or otherwise. The
Company has not been the "distributing corporation" (within the meaning of
Section 355(c)(2) of the Code) with respect to a transaction described in
Section 355 of the Code. Neither the Company nor any Relevant Group has
participated in a reportable transaction, as such term is defined by Untied
States Treasury Regulation Section 1.6011-4(b).
(i) The Company is not a party to any Tax allocation or sharing
agreement, other than the agreement described on Schedule 4.12(i), which shall
be terminated and of no further effect from and after the Closing Date. The
Company (i) has not been a member of an affiliated group, as defined in Section
1504(a) of the Code and (ii) has no liability for the Taxes of any Person other
than the Company under (A) Treas. Reg. Section 1.1502-6 (or any similar
17
provision of state, local, or foreign law), (B) as a transferee or successor,
(C) by Contract or (D) otherwise.
(j) The Company was included as a member of a Relevant Group of
which Acument was the parent, for federal income tax purposes, from October 1,
1999, through and including June 30, 2003. The Company had net operating loss
carryforwards as of the date that it was no longer a member of such Relevant
Group, for United States federal income tax purposes, of at least Fourteen
Million Dollars ($14,000,000), and the Tax Returns of the Company and such
Relevant Group shall be filed in a manner that reflects such net operating loss
carryforwards. The estimated amount, for federal and applicable state and local
Tax purposes, of the Company's net operating loss and net capital loss
carryforwards, and the Company's unused investment or other credits, unused
foreign tax credits, and excess charitable contributions, are as set forth in
Schedule 4.12(j). Except as set forth in Schedule 4.12(j), the Company has no
net operating losses or other tax attributes presently subject to limitation
under Sections 279, 382, 383 or 384 of the Code or any similar provisions of
state or local tax law.
Section 4.13. Absence of Litigation. Except as disclosed on Schedule 4.13,
none of any Selling Stockholder (with respect to the Company), the Company nor
any of their respective officers, directors or employees in their respective
capacities as such (a) is subject to any outstanding injunctions, judgments,
orders or decrees of any Governmental Entity or (b) is a party to or, to the
Knowledge of any Selling Stockholder or the Company, threatened to be made a
party to, or the subject of, any Litigation.
Section 4.14. Investment Securities. The Company has good and marketable
title to all securities held by it (except securities sold under repurchase
agreements or held in any fiduciary or agency capacity), free and clear of any
Liens (other than Permitted Liens), except to the extent such securities are
pledged in the ordinary course of business consistent with prudent business
practices to secure obligations of the Company. Such securities are valued on
the books of the Company in accordance with GAAP. From December 31, 2004 to the
date hereof, the Company has not incurred any material and unusual or
extraordinary losses (other than trading losses in the ordinary course of
business) in its investment portfolio.
Section 4.15. Derivative Instruments. Except as set forth on Schedule
4.15, the Company is not a party to or a beneficiary of any swaps, caps, floors,
futures, forward contracts, option agreements or any other derivative financial
instruments, contracts or arrangements, whether entered into for the account of
the Company, any customer or otherwise.
Section 4.16. Customer Agreements and Related Documentation. The Company
has in its possession, and has delivered true, complete and correct copies to
Buyer of, the valid, binding and enforceable documentation necessary to maintain
each customer's account and to perform brokerage and related services for its
customers, in a manner consistent with its activities on behalf of such
customers. Each transaction effected by the Company in an account on behalf of a
customer has been duly authorized and was performed in accordance with the terms
of the customer agreement or other documentation and applicable federal and
state securities and commodities Laws.
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Section 4.17. Disclosure of All Matters Relating To Regulatory Approval of
the Change-of-Control and Licensing. Except as disclosed on Schedule 4.17, none
of the Company or any Selling Stockholder is aware of any facts or circumstances
that would (a) cause any Governmental Entity to not approve the transfer of
ownership of the Company from the Selling Stockholders to Buyer or (b) cause any
Governmental Entity to revoke or restrict the Company's license or licenses to
operate as a broker-dealer after the change in ownership of the Company.
Section 4.18. Tangible Property. The Company has good title to, or a valid
lease, license or right to use, the tangible properties and assets used by it in
the conduct of its business. Such tangible properties and assets owned by the
Company are held free and clear of any Liens other than Permitted Liens.
Section 4.19. Material Contracts. Set forth on Schedule 4.19 is a complete
list of all Contracts to which the Company is a party or by which the Company or
any of its assets is bound which (i) involves aggregate payments of more than
Fifty Thousand Dollars ($50,000) over any twelve (12) month period, (ii) is with
any of the Company's officers, directors, employees or consultants performing
professional services related to the core business of the Company, (iii) is or
could reasonably be expected to be material to the Company, (iv) is a
confidentiality or standstill agreement, other than agreements entered into in
the ordinary course of business containing confidentiality or standstill
provisions, which agreements do not otherwise fall within clause (iii) above,
(v) is a clearing or services agreement or (vi) is a non-competition,
non-solicitation and agreements with similar restrictions (each such agreement
in clauses (i) through (vi) above, a "Material Contract"). Each Material
Contract is valid, in full force and effect and enforceable in accordance with
its terms. Except as set forth on Schedule 4.19, (x) the Company has not
received any written notice of any default under any Material Contract and (y)
no event has occurred or circumstance exists (with or without notice or lapse of
time or both) may contravene, conflict with or result in a violation or breach
of, or give any Person other than the Company the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, any Material Contract.
Section 4.20. Employee Benefit Plans.
(a) Schedule 4.20(a) lists (i) each "employee benefit plan" (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not subject thereto) contributed to,
maintained or sponsored by any Selling Stockholder, the Company or any of their
respective Affiliates, or with respect to which, the Company has any material
Liability or potential Liability and (ii) each other retirement, savings,
deferred compensation, severance, stock, performance, bonus, incentive,
employment, vacation or other compensation or employee benefit plan, policy, or
agreement of any kind, contributed to, maintained or sponsored by any Selling
Stockholder, the Company or any of their respective Affiliates, or with respect
to which any of them is a party or with respect to which the Company has any
Liability or potential Liability (collectively, the "Benefit Plans"). Schedule
4.20(a) also specifies which Benefit Plans are sponsored or maintained solely by
the Company solely for the benefit of Business Employees (the "Company Plans").
Each Benefit Plan that is not a Company Plan is hereinafter referred to as a
"Seller Plan", including any Benefit Plan that is sponsored or maintained by any
Selling Stockholder or any of its Affiliates,
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other than the Company, or with respect to which any Selling Stockholder or any
of its Affiliates, other than the Company, is a party.
(b) With respect to each Benefit Plan, the Selling Stockholders and
the Company have made available to Buyer a true and correct copy of (i) the most
recent annual report (e.g., Form 5500), (ii) such Benefit Plan, (iii) each trust
agreement relating to each Benefit Plan, (iv) any written summaries of such
Benefit Plan, (v) the most recent actuarial report or valuation, if any,
relating to a Benefit Plan and (vi) the most recent determination letter, if
any, issued by the IRS with respect to any Benefit Plan intended to be qualified
under Section 401(a) of the Code.
(c) No event has occurred and, to the Knowledge of any Selling
Stockholder or the Company, there exists no condition or set of circumstances in
connection with which Buyer or the Company could be subject to any actual or
contingent Liability under the terms of any Benefit Plans, ERISA, the Code or
any other applicable Law.
(d) None of the Company, any Selling Stockholder, or any of their
Affiliates is a party to any collective bargaining or other labor union Contract
applicable to the Business Employees, and no collective bargaining agreement is
being negotiated with respect to any employee (whether active or on leave of
absence) of the Company (the "Business Employees"). As of the date hereof, there
is no labor dispute, strike or work stoppage against the Company, any Selling
Stockholder or any of their Affiliates pending or, threatened in writing which
may interfere with the respective business activities of the Company. As of the
date hereof, to the Knowledge of the Selling Stockholders and the Company, none
of the Company, any Selling Stockholder or any of their respective Affiliates,
or any of their respective representatives or employees has committed any unfair
labor practices or violated any Law relating to the employment of labor,
including any provisions thereof relating to wages, hours collective bargaining,
the payment of payroll taxes, equal employment opportunity, employment
discrimination and employee safety, in connection with the operation of the
business of the Company, and there is no charge or complaint against the
Company, any Selling Stockholder or any of their respective Affiliates relating
thereto pending, or to the Knowledge of the Selling Stockholders or the Company,
threatened.
(e) Each Benefit Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has received a favorable determination
letter from the IRS and, to the Knowledge of any Selling Stockholder or the
Company, no circumstance exists that is reasonably likely to result in the
revocation or denial of any such favorable determination letter.
(f) Except as disclosed on Schedule 4.20(f), no compensation or
benefit under any Benefit Plan will become established, payable, increased or
accelerated by reason of this Agreement or consummation of the transactions
contemplated hereby, including the Post-Closing Transaction, either alone or in
conjunction with another event (e.g., termination of employment).
(g) Except as set forth on Schedule 4.20(g), no Company Plan (i) is
subject to ERISA, (ii) is in the nature of a defined benefit pension plan or
(iii) provides health or welfare benefits beyond an employee's termination of
employment, except as required by Law. Each
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Company Plan has been maintained and operated in material compliance with its
terms and with all applicable Laws.
Section 4.21. Intellectual Property. (a) Schedule 4.21(a) sets forth a
complete and correct list of all registered Company Intellectual Property
Rights. Except as set forth on Schedule 4.21(a):
(i) With respect to each of the Company Intellectual Property
Rights, the Company either (A) is the sole and exclusive owner of such Company
Intellectual Property Right free and clear of any royalty or other payment
obligation or Lien or (B) has sufficient rights to use such Company Intellectual
Property Right in the conduct of the business of the Company as such business is
currently conducted, under a valid and enforceable license agreement. There are
no restrictions on the direct or indirect transfer of any Company Intellectual
Property Rights. The Company Intellectual Property Rights represent all of the
Intellectual Property Rights utilized by the Company in the conduct of its
business or necessary therefor.
(ii) (A) The Company Intellectual Property Rights are valid
and enforceable, (B) the Company Intellectual Property Rights and the products
and services of the Company do not infringe or misappropriate the Intellectual
Property Rights of any Person and no litigation or claim that the Company
Intellectual Property infringes or misappropriates the Intellectual Property
Rights of any other person currently exists, is pending or has been threatened
and (C) all material maintenance taxes, annuities and renewal and maintenance
fees have been paid with respect to the Company Intellectual Property Rights,
and all other necessary actions to maintain the validity and effectiveness of
the Company Intellectual Property Rights have been taken through the date
hereof.
(iii) The Company has taken reasonable steps to protect the
Company Intellectual Property Rights and, where applicable, to preserve the
confidentiality of the Company Intellectual Property Rights.
(iv) The Company has not received any written notice or claim
that any of the Company Intellectual Property Rights have expired or are not
valid or enforceable.
(v) The Company has not given any written notice of
infringement to any third Person with respect to any of the Company Intellectual
Property Rights, nor does any Selling Stockholder or the Company have any
Knowledge of the infringement by any third Person of any of the Company
Intellectual Property Rights.
(vi) To the extent customary and appropriate, certificates of
registration and renewal, letters patent and copyright registration certificates
and all other instruments evidencing ownership of the Company Intellectual
Property Rights owned by the Company are, or as of the Closing will be, in the
possession or control of the Company.
(b) Schedule 4.21(b) sets forth a list of all Internet domain names
used by the Company in its business (collectively, the "Domain Names"). The
Company owns, and after the Closing Date the Company will own, a current
registration of each Domain Name and the right to continue to conduct the
Company's business as currently conducted under the Domain Names.
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Section 4.22. Environmental Matters. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably result
in the imposition of, any Liability on the Company arising under common law or
under any local, state or federal environmental statute, regulation or
ordinance, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, which are pending or, to the Knowledge of any
Selling Stockholder or the Company, threatened against the Company. There is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that could reasonably result in the imposition on the Company of
any such Liability.
Section 4.23. Broker-Dealer. (a) The Company is, and at all times since
its inception has been, duly and validly registered as a broker-dealer with the
SEC and is a duly qualified member of the NASD and each other SRO of which it is
required to be a member. Schedule 4.23(a) sets forth a complete list of each
jurisdiction in which the Company is duly qualified or registered as a
broker-dealer. Except as set forth on Schedule 4.23(a), the Company is not, and
at no time since its inception has it been, required to obtain any registration
as a broker-dealer, an investment adviser, a commodity trading advisor, a
commodity pool operator, a futures commission merchant, an insurance agent, a
sales person or in any similar capacity with the SEC, the NASD, the Commodity
Futures Trading Commission, state or Governmental Entity that has not been
properly and timely obtained.
(b) The Company has not exceeded in any material respect the
business activities enumerated in any membership agreements or other limitations
imposed in connection with its registrations, forms (including Form BDs) and
reports filed with the NASD or any Governmental Entity. Except as set forth on
Schedule 4.23(b), the Company has filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 2000 with any
Governmental Entity, and all other reports and statements required to be filed
by it have been filed including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, any state or
any Governmental Entity and the Company has paid all fees and assessments due
and payable in connection therewith. The information contained in such
registrations, forms and reports was true and complete in all material respects
as of the date of the filing thereof. Each such registration is in full force
and effect on the date hereof. Except for normal examinations conducted by a SRO
in the regular course of the business of the Company, no SRO has initiated any
proceeding or investigation into the business or operations of the Company or
any of its employees, agents, brokers or representatives. There is no unresolved
violation, criticism, or exception by any SRO with respect to any report or
statement relating to any examination of the Company.
(c) To the Knowledge of the Selling Stockholders and the Company,
each of the Company's employees that is required to be registered or licensed as
a registered principal, registered representative or a salesperson with the SEC,
the securities commission of any state or foreign jurisdiction or any SRO is
duly registered or licensed to act in their respective capacities, and all such
registrations and licenses are in full force and effect. All federal, state and
foreign registration requirements have been complied with in all respects and
such registrations as
22
currently filed, and all periodic reports required to be filed with respect
thereto, are accurate and complete in all respects.
(d) Except as set forth on Schedule 4.23(d), neither the Company nor
any of its Affiliates is subject to any cease-and-desist or other order or
enforcement action issued by, or a party to any written agreement, consent
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by, or
has been ordered to pay any civil penalty by, or is a recipient of any
supervisory letter from, or has adopted a board resolution at the request or
suggestion of, any regulatory authority or other Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its ability to pay dividends, its credit or risk management
policies, its management or its business (each, a "Regulatory Agreement"), nor
has the Company or any of its Affiliates been advised in writing or otherwise by
any regulatory authority or Governmental Entity that it is considering issuing
or requesting any such Regulatory Agreement nor is there any pending or, to the
Knowledge of the Selling Stockholders or the Company, threatened regulatory
investigation. Neither the Company nor any of its affiliated persons, as defined
in Section 2(a)(3) of the Investment Company Act of 1940, as amended (the "1940
Act"), has been convicted within the past ten (10) years of any felony or
misdemeanor described in Section 9(a)(1) of the 1940 Act, or is, by reason of
any misconduct, permanently or temporarily enjoined from acting in the
capacities, or engaging in the activities, described in Section 9(a)(2) of the
1940 Act.
(e) The Company (i) has implemented policies and procedures that are
reasonably designed to comply with the applicable federal and state securities
and commodities laws, rules and regulations including those relating to
anti-money laundering, advertising, licensing, sales practices, market conduct,
maintenance of net capital, supervision, books and records, risk assessment and
continuing education and the rules of any SRO having jurisdiction (collectively,
the "Company Policies and Procedures") and (ii) none of any Selling Stockholder
or the Company has any Knowledge of any noncompliance with the Company Policies
and Procedures.
(f) The Company is not required to be registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act"), and the transaction contemplated by this Agreement will not
require the Company, its Affiliates or customers to obtain the consent of any
person under Section 205 of the Investment Advisers Act.
(g) None of the activities of the Company requires it to be
registered as an exchange or transfer agent, a clearing agency, an alternative
trading system, a government securities dealer, a commodity trading advisor or
commodity pool operator.
(h) To the Knowledge of any Selling Stockholder or the Company, in
each case based on information available thereto, no employee of the Company is
or has been (as applicable):
(i) subject to a statutory disqualification specified in
Section 3(a)(39) of the Exchange Act, Sections 203(e) or (f) of the Investment
Advisers Act, or any substantially equivalent foreign (A) expulsion or
suspension from membership, (B) bar or suspension from
23
association, (C) denial of trading privileges, (D) order denying, suspending, or
revoking registration or barring or suspending association or (E) finding with
respect to causing any such effective foreign suspension, expulsion or order;
(ii) convicted of any foreign offense, enjoined from any
foreign act, conduct or practice, or found to have committed any foreign act
substantially equivalent to any of those listed in Sections 15(b)(4)(B), (C),
(D) or (E) of the Exchange Act; and
(iii) found to have made or caused to be made any false
foreign statement or omission substantially equivalent to any of those listed in
Section 3(a)(39)(E) of the Exchange Act.
(i) The Selling Stockholders and the Company have made available to
Buyer true, correct and complete copies of the governing plan documents and
related agreements, forms and contracts for each retirement plan, arrangement
and account, including individual retirement accounts under Section 408 or
408(A) of the Code, education savings accounts under Section 530 of the Code,
simplified employee pension plans under Section 408(k) of the Code, savings
incentive match plans for employees under Section 408(p) of the Code, plans
intended to be qualified under Section 401(a) of the Code, custodial accounts
under Section 403(b) of the Code, with respect to which the Company acts as a
custodian, trustee and/or prototype sponsor, and the governing plan documents
and related agreements, forms and contracts for each retirement plan,
arrangement and account for which the Company provides services (each a "Plan"
or collectively, the "Plans") and other related agreements or materials provided
to or made available to customers. Neither the Selling Stockholders, the Company
or any Affiliate thereof has any liability with respect to any transaction
involving a Plan in violation of Section 406 of ERISA or any "prohibited
transaction" as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) of the Code or
on which an excise tax could be payable under Section 4975 of the Code or a
civil penalty under Section 502(i) of ERISA.
(j) The Company serves as custodian, trustee and/or prototype
sponsor for plans intended to be qualified under Section 401(a) of the Code,
custodial accounts under Section 403(b) of the Code and individual retirement
accounts under Section 408 and 408(A) of the Code, including traditional,
SIMPLE, SEP and Xxxx individual retirement accounts, as well as education
savings accounts under Section 530 of the Code. On the Closing Date, the Company
shall be either a "bank" (as defined in Section 408(n) of the Code) or a person
authorized by the IRS to act as a custodian of such accounts pursuant to
Treasury Regulation Section 1.408-2(e) and that such entity or person is so
qualified to serve as a custodian of such accounts and has provided Buyer with
the true, correct and complete copies of such entity's non-bank trustee
application, IRS approval letter and any related notices thereto filed with the
IRS.
(k) The Company does not serve or has ever served during the past
seven (7) years as a custodian, trustee and/or prototype sponsor or issuer for
any retirement plan, arrangement or account other than those referenced in
paragraph (j) above, including individual retirement annuities under Section
408(b) of the Code, or plans intended to meet the requirements of Section 457 of
the Code. Notwithstanding anything to the contrary herein, none of the Company
nor any ERISA Affiliate of the Company serves or has served during the past
24
seven years as trustee of any Plan that is a retirement plan intended to be
qualified under Section 401(a) of the Code.
(l) The Company does not permit or has permitted during the past
seven (7) years individuals to maintain margin accounts for the purpose of
trading securities in connection with any Plans for which it serves as custodian
or trustee.
(m) The Company does not provide or has provided during the past
seven (7) years recordkeeping services to any employee pension benefit plan as
defined under Section 3(2) of ERISA, including any profit sharing, 401(k) or
money purchase pension plan, or any cash balance or defined benefit pension
plan.
(n) The Company does not provide or has provided during the past
seven (7) years services, including any design, management or administrative
services, to any qualified defined contribution plans that are either a stock
bonus plan, or a combination stock bonus and money purchase plan that invest
primarily in employer securities, including any employee stock ownership plan
under Section 409 of the Code, or any employee stock purchase plan under Section
423 of the Code.
(o) The Company does not provide or has provided during the past
seven (7) years services, including any design, management or administrative
services, to any qualified tuition program under Section 529 of the Code.
(p) The Company does not provide or has provided during the past
seven (7) years services, including any design, management or administrative
services, to any employee welfare benefit plan as defined under Section 3(1) of
ERISA, or any Xxxxxx medical savings account under Section 220 of the Code,
health savings account under Section 223 of the Code, health reimbursement
arrangement, flexible spending account, or cafeteria plan under Section 125 of
the Code.
(q) The form of the Plans and the conduct of the Selling
Stockholders and the Company with respect to the Plans has been and are in
compliance with applicable Law, including ERISA and the Code, and the Company
has not incurred and is not reasonably expected to incur any liability under
either ERISA or the Code relating to the Plans.
(r) All governmental reports required by the Company for acts
completed prior to the Closing Date with respect to the Plans, other than
reports with respect to distributions and contributions in 2004 reportable on
IRS Forms 1099-R and 5498 made from or to the Plans prior to the Closing Date,
have been timely filed.
(s) To the extent applicable, the Company has obtained a favorable
opinion letter from the IRS on changes to the Code and Treasury regulations,
including those made by the Economic Growth and Tax Relief Reconciliation Act of
2001 (or filed by applicable deadlines imposed by the IRS and are awaiting
receipt of such opinion letter) and all prior legislation with respect to each
Plan for which the Company serves as a prototype sponsor. No event has occurred
that would be reasonably likely to negatively impact reliance on such opinion
letter.
25
(t) The Company has not received notice of or been advised of any
investigations by any Governmental Authority with respect to any Plan and there
are no other claims, suits or proceedings pending or, to the Knowledge of the
Selling Stockholders or the Company, threatened against the Company with respect
to any Plan.
Section 4.24. Insurance. Schedule 4.24 is a complete list as of the date
hereof of all fidelity bonds and policies of fire, directors and officers,
general liability, property and other forms of liability insurance and/or
fidelity bonds owned, held by or applicable to the Company, its assets or
business. All such policies are in full force and effect, all premiums with
respect to such policies covering all periods up to and including the Closing
Date have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Schedule 4.24 includes an accurate
list as of the date hereof of all claims involving a potential loss in excess of
Fifty Thousand Dollars ($50,000) that have been made by the Company since
December 31, 2004 under the policies listed on Schedule 4.24 applicable to the
Company or any of its assets or properties. Such claim information includes the
following information with respect to each accident, loss or other event: (i)
the identity of the claimant and (ii) the date of the occurrence.
Section 4.25. Bank Accounts. Schedule 4.25 is a complete list of the names
and locations of each bank or other financial institution at which the Company,
and Selling Stockholder or any Affiliate thereof on behalf of the Company has an
account or safe deposit box, together with the applicable account or box number.
Section 4.26. No Improper Payments. To the Knowledge of any Selling
Stockholder or the Company, neither the Company nor any Person acting on its
behalf has made, paid or received any bribes, kickbacks or other similar
payments to or from any Person. Except for those that comply with applicable
laws, rules and regulations, no contributions have been made by the Company,
directly or indirectly, to a domestic or foreign political party or candidate.
Section 4.27. Brokers. None of any Selling Stockholder, the Company or any
of their respective Affiliates has employed any financial advisor or finder or
incurred any liability for any financial advisory or finders' fees in connection
with this Agreement or the transactions contemplated by this Agreement.
Section 4.28. Customers. (a) The Selling Stockholders have provided to
certain representatives of Buyer a list of the Qualifying Customers. None of any
Selling Stockholder or the Company has received any notice or has, to the
Knowledge of any Selling Stockholder or the Company, any reason to believe that
any Qualifying Customer has ceased, or will cease, to use the products or
services of the Company, or has substantially reduced the use of such products
or services at any time other than as a result of general market conditions.
(b) The Company's customer lists and related data have not been
integrated into any database of any Selling Stockholder or any Affiliate (other
than the Company), and no Selling Stockholder or any of its Affiliates (other
than the Company) has solicited any customers to become brokerage customers of
such Selling Stockholder or any of its Affiliates (other than the Company) using
the Company's customer lists or related data.
26
Section 4.29. Computer Systems. The computer hardware and Software and
related materials used by the Company are in satisfactory operating condition
for use in the conduct of the Company's business as such business is currently
conducted. Except as set forth in Schedule 4.29, the use of such computer
hardware and Software and related materials by the Company has not resulted in
the termination of any Material Contract or any material reduction in the
services provided to any of them, warranties available to any of them, or rights
of any of them under any Material Contract.
Section 4.30. Affiliate Transactions. (a) Except for the contracts
specifically disclosed as affiliate transactions in Schedule 4.19 or as
disclosed in Schedule 4.30(a), during the two (2) years prior to the date of
this Agreement, (i) there have been no intercompany Liabilities between the
Company, on the one hand, and any Selling Stockholder, Epoch or any of their
respective Affiliates, officers or directors, on the other, (ii) neither any
such Selling Stockholder nor any such Affiliate, officer, director has provided
or caused to be provided any assets, services or facilities to the Company and
(iii) the Company has not provided or caused to be provided any assets, services
or facilities to such Selling Stockholder or any such officer, director or
Affiliate.
(b) Except for the contracts specifically disclosed as affiliate
transactions in Schedule 4.19 or as disclosed in Schedule 4.30(b), each of the
Liabilities and transactions listed in Schedule 4.30(a) was incurred or engaged
in, as the case may be, on an arm's-length basis.
(c) Except as disclosed on Schedule 4.30(c) or provided herein,
since December 31, 2004, there have been no settlements of intercompany
Liabilities or allocations of any intercompany expenses between the Company, on
the one hand, and any Selling Stockholder, Epoch, any of the Company's other
Affiliates or any of their respective officers or directors, on the other.
Schedule 4.30(c) sets forth all amounts paid or accrued by the Company to any
Selling Stockholder, Epoch or to any of the Company's officers, directors or
other Affiliates for the twelve (12) month period ended on December 31, 2004 and
for the period commencing on January 1, 2005 through the date of the most recent
Unaudited Financial Statements.
Section 4.31. No Guaranties. Except as disclosed in Schedule 4.31, none of
the obligations or Liabilities of the Company is guaranteed by or subject to any
letter of credit, surety bond or other similar contingent obligations of any
other Person, nor has the Company guaranteed or become subject to a similar
contingent obligation in respect of the obligations or Liabilities of any other
Person.
Section 4.32. Real Property. The Company does not own any real property or
interest therein. Schedule 4.32 contains a true, correct and complete list of
(i) all real property leased by the Company (the "Leased Real Property") and
(ii) each real property lease with respect to each such parcel of Leased Real
Property (each, a "Real Property Lease"). Except as set forth on Schedule 4.32,
(x) each Real Property Lease is in full force and effect and constitutes a valid
and binding obligation of the Company and (y) no event or condition which, with
or without the giving of notice or the lapse of time or both, would constitute a
material default or termination
27
event or uncured material default by the Company under any Real Property Lease
exists or has occurred and no event or condition attributable any other Person
which, with or without the giving of notice or the lapse of time or both, would
constitute a material default or termination event or uncured material default
under any Real Property Lease exists or has occurred. Except as set forth on
Schedule 4.32, the leasehold interest of the Company in each Real Property Lease
is held free and clear of all Liens. The Selling Stockholders and the Company
have delivered to the Purchaser true, correct and complete copies of all Real
Property Leases. The Leased Real Property constitutes all real property used or
occupied by the Company in connection with the conduct of its business.
Section 4.33. Sufficiency of Assets. The assets (including equipment and
Company Intellectual Property Rights) of the Company (i) constitute all of the
assets, tangible and intangible, of any nature whatsoever, which are used to
operate and conduct the business of the Company in the manner presently operated
by the Company, (ii) correspond to the Financial Statements and (iii) are the
only assets required for such operation and conduct.
Section 4.34. Disclosure. No representation or warranty or other statement
made by any Selling Stockholder in this Agreement, the Ancillary Agreements or
otherwise in connection with the transactions contemplated hereby contains any
untrue statement or omits to state a material fact necessary to make any of
them, in light of the circumstances in which it was made, not misleading. No
Selling Stockholders knows of any fact that has specific application to the
Company (other than general economic or industry conditions) and that may
materially adversely affect the assets, business, prospects, financial condition
or results of operations of the Company that has not been set forth in this
Agreement, the Ancillary Agreements or the Schedules attached hereto and
thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
Buyer represents and warrants to each Selling Stockholder, as of the date
hereof and as of the Closing Date, as follows:
Section 5.01. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to carry on its business as now being conducted. Buyer is duly
qualified or licensed to do business in each jurisdiction in the United States
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so qualified or so licensed would not reasonably be
expected to have a Buyer Material Adverse Effect.
Section 5.02. Authority. Buyer has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements to which it is party and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements
have been duly executed and delivered by Buyer and constitute valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms.
Section 5.03. No Conflicts. Except as disclosed on Schedule 5.03, none of
the execution, delivery and performance of this Agreement or the Ancillary
Agreements by Buyer or
28
the consummation by Buyer of the transactions contemplated hereby and thereby
does or will (a) conflict with or violate any organizational document of Buyer,
(b) require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, to the extent that the rules,
regulations or orders of such body are binding upon Buyer or otherwise have the
effect of law, (c) require any consent, waiver or approval or, with or without
the giving of notice or lapse of time or both, result in a default or breach (or
give rise to any right of termination, cancellation, modification or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement, Contract, indenture or other instrument or obligation to
which Buyer or any of its Subsidiaries is a party or by which Buyer or any of
its Subsidiaries or any of the assets of Buyer or any of its Subsidiaries may be
bound, except for such consents, approvals and authorizations that have been
obtained or (d) conflict with or violate any Law applicable to Buyer or any of
its Subsidiaries or by which any of the assets of Buyer or any of its
Subsidiaries are bound.
Section 5.04. Securities Act. Buyer understands and acknowledges that the
Shares have not been registered under the Securities Act and will be subject to
certain restrictions and limitations as a result thereof. The Shares purchased
by Buyer pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof, and Buyer shall not offer to
sell or otherwise dispose of the Shares so acquired by it in violation of any of
the registration requirements of the Securities Act. Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
Section 5.05. Brokers. Neither Buyer nor any of its Affiliates has
employed any financial advisor or finder or incurred any liability for any
financial advisory or finders' fees in connection with this Agreement or the
transactions contemplated by this Agreement.
Section 5.06. Absence of Litigation. Buyer is not (a) subject to any
outstanding injunctions, judgments, orders or decrees of any Governmental Entity
or (b) a party to or, to the Knowledge of Buyer, threatened to be made a party
to, or the subject of, any Litigation; in each case other than as would not
reasonably be expected to result in a Buyer Material Adverse Effect.
Section 5.07. Financial Statements. Prior to the date hereof, Buyer has
delivered to representatives of the Selling Stockholders true and accurate
copies of the audited, consolidated balance sheet of Xxxxxx Worldwide, Inc. at
December 31, 2004 and the audited, consolidated statements of income,
stockholders equity and cash flows of Xxxxxx Worldwide, Inc. for the fiscal
years ended December 2004.
ARTICLE VI
COVENANTS AND OTHER AGREEMENTS OF THE PARTIES
Section 6.01. Conduct of Business. Except as specifically set forth on
Schedule 6.01, until the Closing, the Company shall conduct, and the Selling
Stockholders shall cause the business of the Company to be conducted, in the
ordinary course, consistent with prior practice, and, in any event, without the
prior written consent of Buyer the Company shall not, and the
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Selling Stockholders shall not, in connection with the conduct of the business
of the Company, and shall not permit the Company to:
(a) amend the Company's certificate of incorporation, by-laws or
other comparable organizational documents;
(b) declare or pay any dividend or make any other distribution to
its stockholders whether or not upon or in respect of any shares of the
Company's capital stock;
(c) redeem or otherwise acquire any shares of the Company's capital
stock or issue any capital stock of the Company or any option, warrant or right
relating thereto or any securities convertible into or exchangeable for any
shares of capital stock of the Company;
(d) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, limited liability company, partnership, joint venture,
association or Person or other business organization or division thereof;
(e) commence an action or proceeding against a customer of the
Company;
(f) acquire or lease any assets material to the Company or its
business or acquire or lease any real property;
(g) sell, lease, license, mortgage or otherwise subject to any Lien
(other than Permitted Liens) or dispose of any of its properties or assets that
are material to the Company or its business;
(h) incur or assume any Debt, other than in the ordinary course and
consistent with past practice;
(i) enter into any Contract which would be a Material Contract, or
modify, amend or terminate any Material Contract or waive, release, cancel or
assign any material rights or claims thereunder, including the waiver, release,
cancellation or assignment of any material Debt owing to the Company or the
prepayment of any principal or interest on any Debt;
(j) make any change to its accounting systems, methods, policies,
principles or practices, except as may be required by GAAP, or make any Tax
election, settle or compromise or change any Tax method, except as required by
Tax law;
(k) except as required by the terms and provisions of written
contracts between the Company, on the one hand, and a Business Employee, on the
other hand, as in existence on the date of this Agreement and listed in the
Schedules or to comply with any applicable Law, (i) adopt or amend any Benefit
Plan or (ii) materially increase in any manner the aggregate compensation or
benefits (including commissions) of any officer, director, Business Employee or
independent contractor of the Company other than, in the case of clause (ii),
increases in compensation granted to Business Employees who are not officers or
directors of the Company in the ordinary course of business consistent with past
practice;
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(l) terminate any Business Employee;
(m) engage in any transactions with any of its Affiliates or any
Affiliates of any Selling Stockholder other than on an arm's-length basis;
(n) fail to comply with the minimum net capital requirements as set
forth in Rule 15c3-l promulgated under the Exchange Act;
(o) demolish or materially alter any of its property (owned or
leased);
(p) take any action which has, or could reasonably be expected to
have, the effect of preventing or materially delaying the Closing or making any
of the representations and warranties of any of the Selling Stockholders or the
Company false or inaccurate as of the Closing Date;
(q) otherwise take any action resulting, or could reasonably be
expected to result in , the occurrence of any of the events set forth in clauses
(a) through (l) of Section 4.10; or
(r) authorize, or commit or agree to take, any of the foregoing
actions.
Section 6.02. Access to Information. Subject to any applicable legal
restrictions, each Selling Stockholder and the Company shall, and shall cause
its Affiliates to, upon reasonable notice during normal business hours during
the period prior to the Closing, afford to Buyer and its accountants, counsel
and other representatives reasonable access to all of the personnel, properties,
Contracts, Books and Records (including Tax Returns and work papers, whether
prepared by employees, consultants or independent auditors) of the Company,
shall furnish promptly to Buyer any information concerning the Company as Buyer
may reasonably request and shall assist Buyer in communicating with Persons
having business relationships, agreements and arrangements with the Company
regarding the transactions contemplated by this Agreement, including the
auditors, consultants and other financial and legal advisors of the Company and
the Selling Stockholder; provided that such access does not disrupt the normal
operations of the Company or result in the likely coordination of pricing or
other competitively-sensitive activities.
Section 6.03. Confidentiality. (a) Buyer acknowledges that the information
being provided to it in connection with this Agreement and the consummation of
the transactions contemplated hereby is subject to the Confidentiality
Agreement, the terms of which are incorporated herein by reference. Effective
upon, and only upon, the Closing, the obligations of Buyer and Xxxxxx under
Confidentiality Agreement with respect to information relating solely to the
Company shall terminate; provided that Buyer acknowledges that any and all other
information provided to it by the Selling Stockholders or their representatives
concerning the Selling Stockholders shall remain subject to the terms and
conditions of the Confidentiality Agreement after the date of the Closing and
therefore, in furtherance of the foregoing, (i) each of Buyer and each Selling
Stockholder agrees to join, and hereby joins, as a party to the Confidentiality
Agreement as if Buyer or such Selling Stockholder, as the case may be, was an
original party thereto and as a result thereof each of Buyer and such Selling
Stockholder hereby
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agrees to be subject to and bound by all of the terms and conditions thereof and
(ii) the terms of the Confidentiality Agreement shall be modified accordingly
hereby, mutatis mutandis.
(b) Each Selling Stockholder acknowledges that prior to the Closing
Date, such Selling Stockholder has had, and will continue to have, access to
confidential information of the Company which is not generally known to the
public. Each Selling Stockholder agrees that following the Closing it shall not,
and shall cause its Affiliates to not, without the prior express written
permission of Buyer, disclose to any other Person or use in any way any
confidential or proprietary information of the Company which such Selling
Stockholder or its Affiliates may have obtained at any time, whether prior to
the Closing Date or otherwise.
Section 6.04. Maintenance of Records. Except as otherwise provided in
Section 9.06, from and after the Closing, Buyer agrees (a) to hold all of the
Books and Records of the Company existing on the Closing Date and not to destroy
or dispose of any thereof as required by Section 17(a) of the Exchange Act and
Rules 17a-3 and 17a-4 promulgated thereunder, and thereafter, if it desires to
destroy or dispose of such Books and Records, to offer first in writing at least
sixty (60) days prior to such destruction or disposition to surrender them to
the Stockholders' Representative and (b) to afford the Stockholders'
Representative, their accountants and legal counsel, during normal business
hours, upon reasonable request, at any time, full access to such Books and
Records and to the employees of the Company to the extent that such access may
be reasonably necessary for any legitimate purpose related to the Company at no
cost to the Stockholders' Representative (other than for reasonable
out-of-pocket expenses of the Company).
Section 6.05. No Negotiation. Until such time as this Agreement shall be
terminated pursuant to Section 8.01, none of any Selling Stockholder or the
Company shall directly or indirectly solicit, initiate, encourage or consider
any inquiries or proposals from, discuss or negotiate with, provide any
nonpublic information to or consider the merits of any inquiries or proposals
from any Person (other than Buyer) relating to any sale of equity securities or
assets of the Company, any business combination transaction involving the
Company or the merger or consolidation of the Company.
Section 6.06. Commercially Reasonable Efforts; Obtaining Consents; Further
Action. (a) Each of the parties hereto agrees to use its commercially reasonable
efforts to take, and to cause its officers, employees, representatives, advisors
and agents to take, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including the
Post-Closing Transaction, and to cooperate with each other in connection with
the foregoing, including using commercially reasonable efforts (i) to obtain
promptly all necessary waivers, consents and approvals from other parties to
material agreements, leases and other Contracts or agreements, (ii) to make
promptly all filings and obtain promptly all necessary consents, approvals and
authorizations as are required to be obtained under any Law, (iii) to defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) to cause to be lifted
or rescinded any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
by this Agreement and (v) to cause and facilitate the prompt satisfaction of all
conditions in Article VII. The Selling Stockholders and Buyer, respectively,
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each agree to make, or to cause to be made, any filing or notification required
by any applicable Law, in each case, with respect to the transactions
contemplated by this Agreement (x) with respect to the NASD and any securities
exchange of which the Company is a member, within fifteen (15) Business Days
after the date of this Agreement and (y) with respect to all others required
under any Law, as soon as practicable after the date of this Agreement and to
supply promptly any additional information and documentary material that may be
requested pursuant to applicable Law.
(b) The parties shall keep each other apprised of the status of
matters relating to the completion of the transactions contemplated hereby and
work cooperatively in connection with obtaining the requisite approvals,
consents or orders of each applicable Governmental Entity, including:
(i) cooperating with each other in connection with required
filings;
(ii) furnishing to the other party all information within its
possession that is required for any application or other filing to be made by
the other party in connection with the transactions contemplated by this
Agreement;
(iii) promptly notifying each other of any communications from
or with any Governmental Entity with respect to the transactions contemplated by
this Agreement;
(iv) not agreeing to participate in any meeting or discussion
with any Governmental Entity in connection with proceedings relating to the
transactions contemplated by this Agreement unless it consults with the other
party in advance, and, to the extent permitted by such Governmental Entity,
gives the other party the opportunity to attend and participate thereat; and
(v) consulting and cooperating with one another in connection
with all analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings before any Governmental Entity relating to the
transactions contemplated by this Agreement.
(c) If any party or any Affiliate thereof receives a request for
additional information or documentary material from any Governmental Entity with
respect to this Agreement or the transactions contemplated by this Agreement,
then such party, in good faith, as soon as practicable and after consultation
with the other party, shall make an appropriate response to such request.
(d) At any time and from time to time, each party to this Agreement
agrees, subject to the terms and conditions of this Agreement, to take such
actions and to execute and deliver such documents as may be necessary to
effectuate the purposes of this Agreement at the earliest practicable time.
Section 6.07. Notifications. Until the Closing, each party shall promptly
notify the other parties in writing of (a) any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event of which it is aware
that will or is reasonably likely to result in any
33
of the conditions set forth in Article VII becoming incapable of being satisfied
or (b) a breach of a representation or warranty.
Section 6.08. Public Announcements; Customer Communications. (a) Except as
may otherwise be required by applicable Law, prior to the Closing, Buyer and the
Stockholders' Representative will consult with each other in advance of Buyer or
any Selling Stockholder issuing, or permitting any agent or Affiliate to issue,
any press releases or otherwise making, or permitting any agent or Affiliate to
make, any public statements with respect to this Agreement or the transactions
contemplated hereby.
(b) Immediately after the date of this Agreement, the Stockholders'
Representative and Buyer shall jointly prepare, and the Stockholders'
Representative shall deliver, or cause the Company to deliver, to each customer
of the Company, a communication regarding the acquisition of the Company by
Buyer in accordance with the terms of this Agreement and the consequences of
such transaction to such customer. The Company and the Selling Stockholders
shall, and the Selling Stockholders shall cause the Company to, assist Buyer, as
and when Buyer may reasonably request, in Buyer's initial contact with each such
customer. Except as may otherwise be required by applicable Law, prior to the
Closing, the Selling Stockholders and the Company shall not, and shall not
permit any agent or Affiliate to, send any other communication to any customer
of the Company regarding this Agreement or the transactions contemplated hereby
without the prior written consent of Buyer.
Section 6.09. Conduct of Selling Stockholders. No Selling Stockholder
shall (i) except as expressly contemplated hereby, sell, lease, mortgage or
otherwise subject to any Lien or enter into any transaction of any kind or
character with respect to, the Shares held by such Selling Stockholder or (ii)
take any action which has, or could reasonably be expected to have, the effect
of preventing or materially delaying the Closing or making any of the
representations and warranties of any of the Selling Stockholders or the Company
false or inaccurate as of the Closing Date.
Section 6.10. Certain Employee Matters.
(a) Continuation of Employment. Set forth on Schedule 6.10(a) is a
list showing the names of all Business Employees and their respective positions
and salary levels. The Selling Stockholders and the Company shall provide
updates to the list prior to the Closing to reflect new hires and terminations
and to reflect any agreed-upon additions or deletions thereto (and the term
Business Employee shall reflect all such updates that occur prior to the
Closing). Buyer shall continue the employ of each Business Employee whose
employer, immediately prior to the Closing, is the Company, conditional upon
completion of background checks and security clearance that are reasonably
satisfactory to Buyer and execution of Buyer's standard employee agreement, or
if applicable, a Key Employment Agreement. For at least a period of one year
from the Closing Date, each Business Employee employed by Buyer or any of its
Affiliates shall be allowed to participate in those benefit plans that Buyer or
its Affiliates may offer to similarly situated employees from time to time. Any
Business Employee who is determined by Buyer prior to the Closing to have failed
such background check and security clearance shall not be offered employment or
continued employment, and the Selling Stockholders and the Company will cause
the employment of any such Business Employee by the Company to be terminated
34
prior to the Closing Date without Liability to the Company. Promptly after the
date hereof, the Selling Stockholders and the Company shall provide, and the
Selling Stockholders shall cause the Company or its Affiliates to provide,
reasonable access to the Business Employees and shall assist Buyer in enabling
it to obtain employment applications from each such Business Employee prior to
Closing and, to the extent permitted by applicable Law, such information
regarding such employees as is contained in personnel records.
(b) Seller Plans. Neither Buyer nor any of its Affiliates shall
adopt, become a sponsoring employer of, or have any obligations under or with
respect to any compensation or benefit plan, policy, arrangement or agreement
(including any Seller Plans or workers compensation programs) other than the
Company Plans, and the Selling Stockholders shall be solely responsible for any
and all Liabilities which have arisen or may arise in connection with any such
compensation or benefit plan, policy, arrangement or agreement (other than the
Company Plans), including Liabilities arising from income or excise Tax
assessments, participant benefit claims, fiduciary conduct, or under Title IV of
ERISA.
(c) No Employee Rights; Termination/Modification of Plans. Nothing
in this Section 6.10, express or implied (including anything contained in the
Section 6.10(a), which shall be subject in all respects to this Section
6.10(c)), shall confer upon any Business Employee, or legal representative or
beneficiary thereof, any rights or remedies, including any right to employment,
or continued employment for any specified period, or compensation or benefits of
any nature or kind whatsoever under or by reason of this Agreement. Nothing in
this Section 6.10, express or implied (including anything contained in the
Section 6.10(a), which shall be subject in all respects to this Section
6.10(c)), shall be construed to prevent Buyer or any of its Affiliates from
terminating the employment of any Business Employee or modifying to any extent
or in any respect the terms and conditions of such employment (including any
benefit plan that Buyer or any of its Affiliates may establish or maintain).
Section 6.11. Non-Competition. (a) Except as specifically set forth to the
contrary on Schedule 6.11, for a period of five (5) years from the Closing Date,
each Selling Stockholder shall not, and shall cause each of its Affiliates not
to, directly or indirectly, engage in activities or businesses which engage in
any of (i) the Competitive Business, (ii) soliciting any former or present
customer or prospective customer of the Company to purchase any such services
referred to in clause (i) offered by the Company from anyone other than the
Company or (iii) assisting any Person in any way to do, or attempt to do,
anything prohibited by clauses (i) or (ii) above (the activities referred to in
the foregoing clauses (i), (ii) and (iii) being called "Competitive
Activities").
(b) Notwithstanding anything to the contrary contained in this
Section 6.11, the foregoing covenant shall not be breached as a result of only
the ownership or other right to acquire by any Selling Stockholder or its
Affiliates (for their own account) of not more than an aggregate of five percent
(5%) of any class of stock of a Person engaged, directly or indirectly, in
Competitive Activities.
(c) The parties hereto recognize that the Laws and public policies
of the various States of the United States of America may differ as to the
validity and enforceability of covenants similar to those set forth in this
Section 6.11. It is the intention of the parties that the
35
provisions of this Section 6.11 be enforced to the fullest extent permissible
under the Laws and policies of each jurisdiction in which enforcement may be
sought, and that the unenforceability (or the modification to conform to such
Laws or policies) of any provisions of this Section 6.11 shall not render
unenforceable or impair the remainder of the provisions of this Section 6.11.
Accordingly, if at the time of enforcement of any provision of this Section
6.11, a court of competent jurisdiction holds that the restrictions stated
herein are unreasonable under circumstances then existing, the parties hereto
agree that the maximum period, scope or geographic area reasonable under such
circumstances will be substituted for the stated period, scope or geographical
area and that such court shall be allowed to revise the restrictions contained
herein to cover the maximum period, scope and geographical area permitted by
Law.
(d) Each Selling Stockholder expressly acknowledges that the
restrictive covenants set forth in this Section 6.11, including the geographic
scope and duration of such covenants, are necessary in order to protect and
maintain the proprietary interests and other legitimate business interests of
Buyer, the Company and their Affiliates, and that any violation thereof would
result in irreparable injury to Buyer, the Company and their Affiliates that
would not be readily ascertainable or compensable in terms of money, and
therefore Buyer, the Company and their Affiliates shall be entitled to obtain
from any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief as well as damages, which rights shall be cumulative and in
addition to any other rights or remedies to which it may be entitled. Each
Selling Stockholder further agrees that if it is determined that it has
willfully breached the terms of this Section 6.11, Buyer, the Company and their
Affiliates shall be entitled to recover from such Selling Stockholder all costs
and reasonable attorneys' fees incurred as a result of its attempts to redress
such breach or to enforce its rights and protect its legitimate interests.
Section 6.12. Non-Solicitation; Non-Disparagement. (a) For a period of
five (5) years following the Closing Date, no Selling Stockholder or any
Affiliate thereof will, directly or indirectly, (i) solicit for employment (or
any similar arrangement) any employee of the Company or any Business Employee,
(ii) persuade, induce or attempt to persuade or induce any employee of the
Company or any Business Employee to leave his, her or its employment or to
refrain from providing services to the Company or its Affiliates, (iii) solicit
or induce, or in any manner attempt to solicit or induce, or cause or authorize
any other Person to solicit or induce any Person to cease doing business with
the Company or its Affiliates or (iv) disparage the Company or its Affiliates to
any employee of the Company, its Affiliates or any customer or client or
prospective customer or client of the Company or its Affiliates, or encourage
any customer or client or prospective customer or client not to continue to
retain the services of the Company or any of its Affiliates.
(b) Notwithstanding anything to the contrary contained in this
Section 6.12, the foregoing covenant shall not be breached by (i) any Selling
Stockholder or its Affiliates engaging in general employment solicitation (by
use of advertising) so long as such solicitation does not target the employees
of the Company or any Business Employee or (ii) any Selling Stockholder or its
Affiliates engaging in any of the conduct specified in Section 6.12(a) with
respect to any employee of the Company or Business Employee who has been
terminated by Buyer or the Company.
36
(c) The parties hereto recognize that the Laws and public policies
of the various States of the United States of America may differ as to the
validity and enforceability of covenants similar to those set forth in this
Section 6.12. It is the intention of the parties that the provisions of this
Section 6.12 be enforced to the fullest extent permissible under the Laws and
policies of each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such Laws or policies) of
any provisions of this Section 6.12 shall not render unenforceable or impair the
remainder of the provisions of this Section 6.12. Accordingly, if at the time of
enforcement of any provision of this Section 6.12, a court of competent
jurisdiction holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographic area reasonable under such circumstances will be substituted
for the stated period, scope or geographical area and that such court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and geographical area permitted by Law.
(d) Each Selling Stockholder expressly acknowledges that the
restrictive covenants set forth in this Section 6.12, including the geographic
scope and duration of such covenants, are necessary in order to protect and
maintain the proprietary interests and other legitimate business interests of
Buyer, the Company and their Affiliates, and that any violation thereof would
result in irreparable injury to Buyer, the Company and their Affiliates that
would not be readily ascertainable or compensable in terms of money, and
therefore Buyer, the Company and their Affiliates shall be entitled to obtain
from any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief as well as damages, which rights shall be cumulative and in
addition to any other rights or remedies to which it may be entitled. Each
Selling Stockholder further agrees that if it is determined that it has
willfully breached the terms of this Section 6.12, Buyer, the Company and their
Affiliates shall be entitled to recover from such Selling Stockholder all costs
and reasonable attorneys' fees incurred as a result of its attempts to redress
such breach or to enforce its rights and protect its legitimate interests.
Section 6.13. Dissolution of Subsdiaries. Prior to the Closing Date, the
Company shall have, at its sole cost and expense, taken all actions and
executed, delivered and filed all documents or instruments necessary in order to
cause the dissolution or disposition of each Subsidiary of the Company, and
shall deliver to Buyer documents, including all documents issued by each
applicable state office, evidencing the effectiveness of each such dissolution
or disposition.
Section 6.14. Boston Lease. The Selling Stockholders shall, at their sole
cost and expense, (i) use their commercially reasonable efforts to transfer,
convey and assign, and to cause the Company to transfer, convey and assign to a
third party on or prior to the Closing Date, without further Liability of any
kind to the Company or its Affiliates, all rights and obligations of the Company
under the Boston Community Property Lease, dated as of September 2004 (the
"Boston Lease"), between Xxxxxxx Xxx, Trustee and the Company and (ii) if
necessary or desirable, continue to use their commercially reasonable efforts
after the Closing Date to fully and completely effect such transfer, conveyance
and assignment as promptly as practicable and fully cooperate with Xxxxxx, the
Company and their Afilliates after the Closing Date in all matters with respect
thereto.
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Section 6.15. Further Assurances. At any time or from time to time after
the Closing, the Selling Stockholders shall execute and deliver to Buyer such
other documents and instruments, provide such materials and information and take
such other actions as Buyer may reasonably request to fulfill the Selling
Stockholders' obligations under this Agreement and consummate the transactions
contemplated hereby, including the Post-Closing Transaction.
ARTICLE VII
CONDITIONS
Section 7.01. Conditions Precedent to Closing Obligation of Buyer. The
obligation of Buyer to consummate the transactions contemplated by this
Agreement at the Closing is subject to the satisfaction at or prior to the
Closing of each of the following conditions (unless satisfaction of any such
condition is expressly waived by Buyer in a writing delivered by Buyer to the
Stockholders' Representative):
(a) (i) Each of the representations and warranties of the Selling
Stockholders and the Company contained in this Agreement shall be true and
correct in all material respects as of the Closing (without giving effect to any
exception for "Material Adverse Effect" or other qualifier using the term
"material" or any variation thereof) with the same force and effect as if made
as of the Closing (other than such representations and warranties as are made as
of another date, which shall be true and correct as of such date), (ii) the
covenants and agreements contained in this Agreement to be performed or complied
with by the Company, the Selling Stockholders or any of their Affiliates on or
before the Closing shall have been performed or complied with in all material
respects and (iii) Buyer shall have received a certificate of the Selling
Stockholders as to the matters set forth in clauses (i) and (ii) above;
(b) no action or proceeding by any Governmental Entity shall have
been instituted or threatened which enjoins or prohibits, or would be reasonably
expected to enjoin or prohibit, any provision of this Agreement or the
consummation of the transactions contemplated hereby, including the Post-Closing
Transaction, and no action or proceeding by any other Person shall have been
instituted that has resulted in any order or injunction that prohibits or
enjoins any provision of this Agreement or the transactions contemplated hereby,
including the Post-Closing Transaction;
(c) no Law shall be in effect that prohibits or declares illegal the
transactions contemplated by this Agreement;
(d) all material consents, waivers, approvals, authorizations,
exemptions, registrations, licenses, declarations or filings from or with a
Governmental Entity (including the NASD), the receipt or making of which is
required for the consummation of the transactions contemplated by this
Agreement, and each of the consents listed on Schedule 4.04 shall have been
obtained or made, and all waiting periods specified under applicable Law and all
extensions thereof, the passing of which is necessary for such consummation,
shall have passed;
38
(e) each Key Employee set forth on Annex B shall have executed and
delivered to Buyer his or her Key Employment Agreement and such Key Employment
Agreement shall be in full force and effect;
(f) there shall not have occurred a Material Adverse Effect;
(g) Buyer shall have received the resignations, effective as of the
Closing, of all the directors the Company and such officers of the Company as
shall have been designated in writing prior to the Closing by Buyer to the
Company;
(h) the Selling Stockholders shall have duly executed and delivered
to Buyer each of the Ancillary Agreements to which any of them is a party;
(i) Buyer shall have received the certificate described in Section
9.09 of this Agreement;
(j) each Person who is an employee of both Glendale Securities or
any of its Affiliates and the Company or any of its Affiliates, shall resign
from his or her position with Glendale Securities or its Affiliates, and shall
owe no further employment-related duties to any such Person as of the Closing
Date. It is agreed that the foregoing restriction shall not prevent any such
Person from owning a passive equity interest in Glendale Securities or any of
its Affiliates;
(k) Buyer shall be satisfied, in its sole discretion,
(i) with the form and substance of any transaction involving
the Company, any other Selling Stockholder and Epoch (and/or any Affiliate
thereof) in respect of Epoch's equity position in the Company or with the form
and substance of any transaction involving the Company, Epoch, the United States
Bankruptcy Court for the Southern District of New York, before which Epoch's
bankruptcy case (No. 04 B 12078) is pending, the bankruptcy trustee appointed in
connection therewith, the creditor's committee representing the creditors of
Epoch (such court, trustee and committee, collectively, the "Bankruptcy
Authorities") and/or any other Person in respect of Epoch's equity position in
the Company, as the case may be;
(ii) that as of the Closing Epoch and its Affiliates or
successors shall either (x) no longer retain any equity or other material
interest with respect to the Company or (y) have reached a satisfactory
agreement with the Bankruptcy Authorities that Epoch's entire equity and other
material interests with respect to the Company shall be disposed of for
aggregate consideration consisting solely of cash;
(iii) with the results of Buyer's ongoing diligence
investigation with respect to those shares owned by Epoch or its Affiliates or
successors, including with respect to any matters involving the Bankruptcy
Authorities;
(iv) that on the Closing Date, the shares of Company Common
Stock to be purchased by Buyer pursuant to this Agreement shall constitute one
hundred percent (100%) of the issued and outstanding shares of Company Common
Stock; and
39
(v) that it has received such sufficient documentary evidence
of any or all of the foregoing as it may request;
(l) there shall not have been made or threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or other voting, equity or ownership interest in, the Company or (ii) is
entitled to all or any portion of the Purchase Price payable for the Shares;
(m) the conveyance of the Excluded Litigations shall have been
effected in form and substance reasonably satisfactory to the Buyer;
(n) Buyer shall be satisfied, in its sole discretion, with the
results of its diligence investigation in connection with the pending
investigations by the SEC and the NASD of the Company's activities, and with any
other similar or related investigation with regard to the Company or its
Affiliates by any Governmental Entity;
(o) Buyer shall have received documents issued by each applicable
state office evidencing the dissolution of each Subsidiary of the Company
pursuant to Section 6.13;
(p) Buyer shall have received documentary evidence reasonably
satisfactory to it that the Consulting Agreement, dated as of March 27, 2003,
between the Company and Acument has been terminated without any Liability to the
Company, and that the Company has no further obligations thereunder;
(q) Buyer shall have received documentary evidence reasonably
satisfactory to it that the Consulting Agreement, dated as of March 27, 2003,
between the Company and Epoch has been terminated without any Liability to the
Company, and that the Company has no further obligations thereunder;
(r) Buyer shall have received documentary evidence reasonably
satisfactory to it that each Consulting Agreement between the Company and
Xxxxxxxxx Equity Consultants, LLC or any Affiliate thereof has either been
terminated without any Liability to the Company, and that the Company has no
further obligations thereunder, or been modified in a manner satisfactory to
Buyer in its sole discretion;
(s) Buyer shall have received documentary evidence reasonably
satisfactory to it that the Company and Acument have filed all previously
unfiled Tax Returns with respect to the 2004 tax year;
(t) Buyer shall have received documentary evidence reasonably
satisfactory to it that Xxxxxxx X. Xxxxxx has resigned from his position as a
member of the board of directors of each Person requested by Buyer, and shall
owe no further duties as a member of the board of directors to any such Person
as of the Closing Date;
(u) Buyer shall have received documentary evidence reasonably
satisfactory to it that all active customer accounts of the Company that not
previously verified by the McDonalds verification service have been so verified;
40
(v) Each oral employment arrangement of the Company shall have been
reduced to, and replaced by, a writing in form and substance satisfactory to
Buyer, and Buyer shall have, in each case, received a fully executed copy
thereof;
(w) Buyer shall have received documentary evidence reasonably
satisfactory to it that the COI Amendment has been filed with the Secretary of
State of the State of Delaware, has become fully effective, and that as a result
thereof or in connection therewith, (i) the certificate of incorporation and any
and all other relevant organizational or corporate documents have been amended
to establish the authorized capital stock of the Company at Six Million
(6,000,000) shares of Common Stock, (ii) the Shares shall all be duly
authorized, validly issued, fully paid and nonassessable and (iii) that there
shall be no Liability of Buyer as a result of the foregoing;
(x) Buyer shall have received the Joinder Agreement, executed by
each party thereto other than Buyer;
(y) Each of Schedule 1.01-3: Initial Balance Sheet and Schedule
4.12(e): Tax Returns shall have been attached hereto in form and substance
satisfactory to Buyer;
(z) Buyer shall have received documentary evidence reasonably
satisfactory to it that solely those Excluded Receivables that remain
uncollected as of the Closing Date have been conveyed to the Stockholders'
Representative, such evidence to include an itemized list setting forth the
specific Excluded Receivables so conveyed and the specific Excluded Receivables
that have been collected as of Closing Date;
(aa) Buyer shall have received all documents, instruments and other
items to be delivered pursuant to Section 3.04; and
(bb) all other documents or certificates that Buyer may reasonably
request.
Section 7.02. Conditions Precedent to Closing Obligation of the Selling
Stockholders. The obligation of the Selling Stockholders to consummate the
transactions contemplated by this Agreement at the Closing is subject to the
satisfaction at or prior to the Closing of each of the following conditions
(unless satisfaction of any such condition is expressly waived by the
Stockholders' Representative in a writing delivered by the Stockholders'
Representative to Buyer):
(a) (i) Each of the representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material respects
as of the Closing (without giving effect to any exception for "Material Adverse
Effect" or other qualifier using the term "material" or any variation thereof)
with the same force and effect as if made as of the Closing (other than such
representations and warranties as are made as of another date, which shall be
true and correct as of such date), (ii) the covenants and agreements contained
in this Agreement to be performed or complied with by Buyer on or before the
Closing shall have been performed or complied with in all material respects and
(iii) the Selling Stockholders shall have received a certificate from Buyer as
to the matters set forth in clauses (i) and (ii) above;
41
(b) no action or proceeding by any Governmental Entity shall have
been instituted or threatened which enjoins or prohibits, or would be reasonably
expected to enjoin or prohibit, any provision of this Agreement or the
consummation of the transactions contemplated hereby, and no action or
proceeding by any other Person shall have been instituted that has resulted in
any order or injunction that prohibits or enjoins any provision of this
Agreement or the transactions contemplated hereby;
(c) no Law shall be in effect that prohibits or declares illegal the
transactions contemplated by this Agreement;
(d) all material consents, waivers, approvals, authorizations,
exemptions, registrations, licenses, declarations or filings from or with a
Governmental Entity (including the NASD), the receipt or making of which is
required for the consummation of the transactions contemplated by this Agreement
and all waiting periods specified under applicable Law and all extensions
thereof, the passing of which is necessary for such consummation, shall have
passed;
(e) Buyer and each of its Affiliates, as applicable, shall have duly
executed and delivered to the Selling Stockholders each of the Ancillary
Agreements to which any of them is a party; and
(f) the Selling Stockholders shall have received all documents,
instruments and other items to be delivered pursuant to Section 3.05.
ARTICLE VIII
TERMINATION; EFFECT OF TERMINATION
Section 8.01. Termination. This Agreement may be terminated before the
Closing:
(a) by mutual written consent of the Stockholders' Representative
and Buyer;
(b) by either the Stockholders' Representative or Buyer by written
notice of termination, if the Closing has not occurred by the close of business
on December 31, 2005; provided, however, that the right to terminate this
Agreement under this Section 8.01(b) shall not be available to a party whose
failure to fulfill any of its obligations contained in this Agreement has been
the cause of, or resulted in, the failure of the Closing to have occurred on or
prior to such date; or
(c) by Buyer or the Stockholders' Representative, if any condition
set forth in Section 7.01 or 7.02, as the case may be, to such party's Closing
obligations shall become incapable of being satisfied by the date set forth in
Section 8.01(b) and is not waived; provided that the right to terminate this
Agreement pursuant to this Section 8.01(c) shall not be available to any party
that has not used the efforts required by this Agreement to cause such condition
to be satisfied.
Section 8.02. Effect of Termination. If this Agreement is terminated in
accordance with Section 8.01, then this Agreement shall become null and void and
of no further force or effect except for this Section 8.02, Section 6.03,
Articles IX, X and XII and all applicable definitions
42
set forth in Article I which shall survive such termination. In addition, the
Confidentiality Agreement and all claims arising thereunder shall survive any
termination of this Agreement. Nothing in this Section 8.02 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or to impair the right of any party to compel
specific performance by any other party of its obligations under this Agreement.
ARTICLE IX
TAX MATTERS
Section 9.01. Tax Indemnification. (a) Regardless of any disclosure of any
kind made on or prior to the date hereof, in the future or contained in this
Agreement, any Ancillary Agreement or any Schedule or Exhibit hereto or thereto,
the Selling Stockholders shall, jointly and severally, indemnify and hold Buyer
and the Company (each, a "Tax Indemnitee") harmless from and against:
(i) any Tax imposed upon or relating to (A) the Selling
Stockholders, Epoch or any Affiliate thereof for any period and (B) any party
other than the Selling Stockholders, Epoch, Buyer or their respective Affiliates
for a Pre-Closing Period, including, in each case, any such Tax for which the
Company may be liable, (W) under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), (X) as a transferee
or successor by operation of law, (Y) by Contract or (Z) otherwise;
(ii) any Tax imposed upon or relating to the Company for any
Pre-Closing Period (excluding any Tax reflected in the calculation of Book
Value);
(iii) any Tax arising directly or indirectly from a breach of
a representation or warranty set out in Section 4.12;
(iv) any incremental Liability for Tax in a Post-Closing
Period arising from an action taken by the Selling Stockholders, Epoch or an
Affiliate thereof with respect to a Tax Return for a Pre-Closing Period;
(v) any Liabilities, costs, expenses (including reasonable
expenses of investigation and attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax, including those incurred in the
good faith contest of the imposition, assessment or assertion of any Tax; and
(vi) any Liability as transferee; and
(vii) any Liability in any way related to, or arising out of
or in connection with, the Company's 1099-S filings for the years 2000 and 2001.
(b) Except as otherwise provided in Section 9.04, payment in full of
any amount due from the Selling Stockholders under this Section 9.01 shall be a
joint and several obligation of the Selling Stockholders and shall made by the
Selling Stockholders to Buyer in
43
immediately available funds at least five (5) Business Days before the date
payment of the Taxes to which such payment relates is due.
Section 9.02. Allocation of Certain Taxes.
(a) In the case of Taxes arising in a taxable period of the Company
that includes but does not end on the Closing Date, except as provided in
Section 9.02(b), the allocation of such Taxes between the Pre-Closing Period and
the Post-Closing Period shall be made on the basis of an interim closing of the
books as of the end of the Closing Date. For purposes of this Agreement, any Tax
resulting from the departure of the Company from any Relevant Group (resulting
from the triggering into income of deferred intercompany transactions or excess
loss accounts or otherwise) is attributable to the Pre-Closing Period.
(b) In the case of (i) franchise Taxes based on capitalization, debt
or shares of stock authorized, issued or outstanding, (ii) ad valorem Taxes and
(iii) any Tax other than Taxes based on or related to income, in each case
attributable to any taxable period that includes but does not end on the Closing
Date, the portion of such Taxes attributable to the Pre-Closing Period shall be
the amount of such Taxes for the entire taxable period, multiplied by a fraction
the numerator of which is the number of days in such taxable period ending on
and including the Closing Date and the denominator of which is the entire number
of days in such taxable period; provided, however, that if any property, asset
or other right of the Company is sold or otherwise transferred prior to the
Closing Date, then ad valorem Taxes pertaining to such property, asset or other
right shall be attributed entirely to the Pre-Closing Period.
(c) Buyer shall indemnify and hold each Selling Stockholder harmless
from and against any Tax imposed upon or relating to the Company for any
Post-Closing Period, except as provided in Section 9.01(a)(iv).
Section 9.03. Transfer Tax and Other Closing Expenses. The Selling
Stockholders shall be obligated, jointly and severally to pay, and shall pay
directly, or reimburse Buyer promptly upon demand and delivery of proof of
payment for, all excise, sales, transfer, documentary, filing, recordation and
other similar taxes, levies, fees and charges, if any (including all real estate
transfer taxes and conveyance and recording fees, if any), that may be imposed
upon, or payable or collectible or incurred in connection with, this Agreement
and the transactions contemplated hereby. All other expenses of Closing will be
paid by the party incurring such expense.
Section 9.04. Contests. If any claim for Tax is asserted in a Contest
against any Tax Indemnitee that would result in the indemnification of any such
Tax Indemnitee by the Selling Stockholders pursuant to this Article IX, then the
following provisions of this Section 9.04 will apply to the handling of such
claim. For purposes of this Agreement, "Contest" means any audit, court
proceeding or other dispute with respect to any Tax matter that affects the
Company. Each party shall, at no cost to any other party, cooperate with the
other parties hereto and the other parties' representatives in a prompt and
timely manner in connection with any Contest. Such cooperation shall include,
but not be limited to, making available to the other party, during normal
business hours, all books, records, returns, documents, files, other information
(including working papers and schedules), officers or employees (without
substantial interruption of
44
employment) or other relevant information necessary or useful in connection with
any Contest requiring any such books, records and files. The Stockholders'
Representative shall, at their election, have the right to represent the
interests of the Company in any Contest relating to a Tax matter for which the
Selling Stockholders may be required to make a payment pursuant to Section
9.01(a), to employ counsel of the Stockholders' Representative' choice at the
expense of the Stockholders' Representative and to control the conduct of such
Contest, including settlement or other disposition thereof; provided that any
settlement that would be adverse to Buyer or the Company shall require Buyer's
prior written consent. Buyer may, at its election, attend and participate in any
defense, prosecution, settlement or compromise of any Contest relating to a Tax
matter and shall bear its own expenses and costs with respect thereto.
Section 9.05. Tax Returns. (a) The Selling Stockholders shall include the
income of the Company for all periods through the Closing Date (including any
deferred amounts triggered into income under Section 1.1502-13 of the Treasury
regulations and any excess loss account taken into income under Section
1.1502-19 of the Treasury regulations) on the consolidated federal income Tax
Returns of the applicable Relevant Group. The Selling Stockholders shall pay any
federal income Taxes attributable to such income. The Company will furnish Tax
information to the Selling Stockholders for inclusion in the consolidated
federal income Tax Return of the applicable Relevant Group for the period that
includes the Closing Date in accordance with past custom and practice of the
Company. The Selling Stockholders will allow Buyer an opportunity to review and
comment upon such Tax Returns (including any amended Tax Returns) to the extent
that they relate to the Company. The principles of this Section 9.05(a) shall
apply to any state or local income Tax for which the Company files a combined,
consolidated, unitary or similar Tax Return with any Affiliate of the Selling
Stockholders.
(b) The Selling Stockholders shall file or cause to be filed all
separate Tax Returns of the Company for all taxable periods that end on or
before the Closing Date. The Selling Stockholders shall pay or cause to be paid
all Tax liabilities shown by such Tax Returns to be due.
(c) Buyer shall be responsible for the preparation and timely filing
of all Tax Returns of the Company for all taxable periods that end after the
Closing Date.
(d) With respect to a Tax Return of the Company for any taxable
period that begins on or before the Closing Date and ends after the Closing
Date, at least twenty (20) days prior to the due date (giving effect to any
extension thereof) of such Tax Return, Buyer shall cause to be presented to the
Selling Stockholders for the Selling Stockholders' approval (such approval not
to be unreasonably withheld) a copy of such Tax Return accompanied by an
allocation of the Taxes shown to be due thereon between the portion of such
period up to and including the Closing Date and the portion of such period
beginning after the Closing Date. Not later than ten (10) days before the due
date (giving effect to any extension thereof) of such Tax Return, the Selling
Stockholders shall pay to the Company the portion of the Taxes so allocated to
the portion of such period up to and including the Closing Date.
Section 9.06. Cooperation.
45
(a) Each party hereto shall, and shall cause its Affiliates to,
provide to each of the other parties hereto such cooperation and information as
any of them reasonably may request in filing any Tax Return, amended Tax Return
or claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include (i) the retention of all returns,
schedules and work papers, material records or other documents relating to any
tax matters of the Company for the first taxable period after the Closing Date,
and all prior taxable periods until the later of (A) the expiration of the
applicable statute of limitations or (B) six (6) years after the due date
without extension for such returns, including copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and relevant
work papers, relevant documents relating to rulings or other determinations by
Taxing Authorities and relevant records concerning the ownership and Tax basis
of property, which any such party may possess and (ii) (upon the other party's
request) the provision of such returns, schedules, work papers, records or other
documents. The Selling Stockholders and their Affiliates each agree (A) to abide
by all record retention agreements entered into with any Taxing Authority and
(B) to give Buyer reasonable written notice prior to transferring, destroying or
discarding any such books and records, and if Buyer so requests to allow Buyer
to take possession of such books and records. Each party shall make its
employees reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(b) The Selling Stockholders agree, upon request, to use its best
efforts to obtain any certificate or other document from any governmental
authority or customer or of the Company as may be necessary to mitigate, reduce
or eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby and by this Agreement).
Section 9.07. Survival. All obligations under this Article IX shall
survive the Closing hereunder and continue until sixty (60) days following the
expiration of the applicable statute of limitations on assessment of the
relevant Tax, including extensions.
Section 9.08. Characterization as Purchase Price Adjustment. All amounts
paid pursuant to this Article IX and Article X by one party to another party
shall be treated by such parties as an adjustment of the Purchase Price.
Section 9.09. Absence of Withholding Tax Liability. On or before the
Closing Date, the Selling Stockholders shall deliver to Buyer a certificate
complying with the Code and Treasury regulations, in form and substance
satisfactory to Buyer, certifying that the transactions contemplated hereby are
exempt from withholding under Section 1445 of the Code.
Section 9.10. Termination of Tax Sharing Agreements. Any and all Tax
allocation or sharing agreements or other agreements or arrangements binding the
Company shall be terminated with respect to the Company as of the day before the
Closing Date and, from and after the Closing Date, the Company shall not be
obligated to make any payment to the Selling Stockholders, any Affiliate of the
Selling Stockholders, or any Taxing Authority or other person pursuant to any
such agreement or arrangement for any past or future period.
46
Section 9.11. Conflict. In the event of a conflict between the provisions
of this Article IX and any other provision of this Agreement, the provisions of
this Article IX shall control.
ARTICLE X
INDEMNIFICATION
Section 10.01. Survival of Representations and Warranties. The
representations, warranties, covenants and agreements set forth in or made
pursuant to this Agreement and the Ancillary Agreements or in any certificate
delivered pursuant hereto shall survive as follows:
(i) indefinitely with respect to the representations and
warranties contained in Sections 4.01, 4.02, 4.06, 5.01 and 5.02 and the
covenants contained in Sections 6.03 and 6.08;
(ii) until sixty (60) days following the expiration of all
applicable statutes of limitation (including all periods of tolling or other
extension, whether automatic or permissive) with respect to matters covered by
Sections 4.12 and 4.20 and Article IX;
(iii) until the thirty (30) month anniversary of the Closing
Date in the case of all other representations and warranties and any covenant or
agreement contained in this Agreement to be performed in whole or in part on or
prior to the Closing Date; or
(iv) with respect to each other covenant or agreement
contained in this Agreement, indefinitely.
Notwithstanding the foregoing, (x) any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clause (ii) or
(iii) above will continue to survive if a claim notice shall have been timely
given on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved and (y) immediately
upon the occurrence of the Closing, the Company shall have no Liabilities to any
Selling Stockholder relating to, or arising out of or in connection with, any
representation or warranty relating to the Company and contained herein, in the
Ancillary Agreements or in any certificate delivered pursuant hereto, and in
furtherance of the foregoing, upon the occurrence of the Closing each Selling
Stockholder hereby fully and finally releases the Company from any claim of any
kind or nature for, and waives any and all rights of every kind or character
with respect to, indemnification or contribution by the Company with respect to
such representations and warranties.
Section 10.02. Indemnification by the Selling Stockholders. Regardless of
any disclosure of any kind made on or prior to the date hereof, in the future or
contained in this Agreement, any Ancillary Agreement or any Schedule or Exhibit
hereto or thereto, but subject to the provisions of Section 10.04, the Selling
Stockholders agree to indemnify, jointly and severally, each of the Buyer
Indemnified Parties against, and agrees to hold each of them harmless from any
and all Losses incurred or suffered by them relating to or arising out of or in
connection with any of the following:
47
(a) any breach of or any inaccuracy in any representation or
warranty of the Selling Stockholders or the Company contained in Article IV
(other than Section 4.12) made as of the date hereof and as though restated on
and as of the Closing Date, as may be qualified by the Schedules thereto;
(b) any breach of or failure by the Selling Stockholders, Epoch or,
prior to the Closing Date, the Company to perform any agreement, covenant or
obligation of the Selling Stockholders or the Company contained in this
Agreement (other than Article IX) or any document delivered by the Selling
Stockholders or Epoch to Buyer at the Closing;
(c) the conduct and operation of the business of the Company, on or
prior to the Closing Date, including any litigation, action, proceeding,
arbitration or regulatory investigation arising out of or relating to or in
connection with events occurring on or prior to the Closing Date, regardless of
when such claim is asserted;
(d) any Liability in any way related to, or arising out of or in
connection with, any and all pending or threatened Litigation to which the
Company is a party or with which it has been threatened, including the Excluded
Litigation and all other such matters set forth (or which should have been set
forth) on Schedule 4.13;
(e) any Liability in any way related to, or arising out of or in
connection with, any Subsidiary of the Company and/or the dissolution thereof;
(f) any Liability in any way related to, or arising out of or in
connection with, any transaction involving the Company, any other Selling
Stockholder and Epoch in respect of Epoch's equity position in, or other
involvement with, the Company;
(g) any Liability in any way related to, or arising out of or in
connection with, the employment by Glendale Securities or its Affiliates of any
Person employed by the Company or any of its Affiliates and/or the resignation
or termination of such employment by Glendale Securities or any of its
Affiliates;
(h) any Liability in any way related to, or arising out of or in
connection with the Boston Lease; and
(i) any Liability in any way related to, or arising out of or in
connection with any Litigation, pending or threatened and whenever arising,
relating to the Company's business relationship with Savvis Communications
Corporation, including any Contract therewith or the termination thereof, prior
to the Closing Date.
Section 10.03. Indemnification by Buyer. Subject to the provisions of
Sections 10.01 and 10.04, Buyer agrees to indemnify each Stockholder Indemnified
Party against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection with
any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Buyer contained in Article V made as of the date hereof or as
though restated on and as of the Closing Date; or
48
(b) any breach of or failure by Buyer to perform any agreement,
covenant or obligation of Buyer contained in this Agreement or in any document
delivered by Buyer to the Selling Stockholders at the Closing.
(c) Buyer's conduct and operation of the business of the Company
after the Closing Date.
Section 10.04. Limitations on Indemnification.
(a) General. The amount of any Losses incurred or suffered by any
Indemnified Person shall be calculated after giving effect to (i) any insurance
proceeds received by the Indemnified Person or any of its Affiliates with
respect to such Losses and (ii) any recoveries obtained by the Indemnified
Person or any of its Affiliates from any third Persons with respect to such
Losses; provided that the obligation of any Indemnifying Person to make any
payment to an Indemnified Person shall not be stayed or delayed pending any
determination as to whether an insurance carrier will make any payment with
respect to all or part of any Losses or whether the Indemnified Person or any of
its Affiliates will recover from any third Person with respect to all or part of
any Losses. If any such proceeds or recoveries are received by an Indemnified
Person or any of its Affiliates with respect to any Losses after an Indemnifying
Person has made a payment to the Indemnified Person with respect thereto, the
Indemnified Person or such Affiliate shall pay to the Indemnifying Person the
amount of such proceeds or recoveries (up to the amount of the Indemnifying
Person's payment).
(b) Limitation on Buyer's Right of Indemnification.
(i) No amounts of indemnity shall be payable by any Selling
Stockholder as a result of any claims under Section 10.02(a) or (c):
(x) unless and until the Buyer Indemnitees have
suffered, incurred, sustained or become subject to Losses in excess
of Fifty Thousand Dollars ($50,000) in the aggregate, in which case
the Buyer Indemnitees shall be entitled to seek indemnity for all
Losses from the first dollar forward; and
(y) with regard to each Selling Stockholder, in excess
of the aggregate portion of the Purchase Price paid to such Selling
Stockholder;
provided, that, (1) the foregoing clause (x) shall not apply to (A) any claims
based upon breaches of representation or warranty contained in Section 4.01,
4.02, 4.03, 4.05, 4.06, 4.14, 4.20, 4.22, 4.23, 4.30 or 4.34 (as Section 4.34
relates to such sections) or (B) to any claims based upon fraud or willful
misconduct and (2) the foregoing clause (y) shall not apply to (A) any claims
based upon breaches of representation or warranty contained in Section 4,02,
4.03, 4.05, 4.06, 4.30 or 4.34 (as Section 4.34 relates to such Sections) or (B)
to any claims based upon fraud or willful misconduct.
(ii) The indemnification obligations of each Selling
Stockholder under the Agreement, other than Acument shall not extend to any
breach of or inaccuracy in any representation or warranty, or any breach,
nonfulfillment in the performances of any covenant or agreement, on the part of
any other Selling Stockholder not caused in whole or in part by such
49
Selling Stockholder or Epoch and shall be satisfied solely by recourse to such
Selling Stockholder's Proportionate Percentage of the Purchase Price; provided,
that, the foregoing limitations shall not (x) apply in the event that any
Selling Stockholder had Knowledge of any such breach or inaccuracy on the part
of any other Selling Stockholder or Epoch on or prior to the Closing Date or (y)
to any claims based upon fraud or willful misconduct. For the avoidance of
doubt, it is hereby agreed that Acument shall jointly and severally be liable
for any and all claims made by any Buyer Indemnitee hereunder without
application of any limitation set forth in this Section 10.04(b)(ii).
Section 10.05. Claims. As soon as is reasonably practicable after becoming
aware of a claim for indemnification under this Agreement not involving a claim,
or the commencement of any suit, action or proceeding, of the type described in
Section 10.06, the Indemnified Person shall promptly give notice to the
Indemnifying Person of such claim and the amount (to the extent then
determinable) that, subject to Section 10.04, the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person; provided that the
failure of the Indemnified Person to give notice shall not relieve the
Indemnifying Person of its obligations under this Article X except to the extent
(if any) that the Indemnifying Person shall have been prejudiced in any material
respect thereby.
Section 10.06. Notice of Third Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person of the assertion of any claim, or the commencement of
any suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided that the failure of
the Indemnified Person to give notice shall not relieve the Indemnifying Person
of its obligations under this Article X except to the extent (if any) that the
Indemnifying Person shall have been prejudiced in any material respect thereby.
The Indemnifying Person may, at its own expense, (a) participate in the defense
of any such claim, suit, action or proceeding and (b) upon notice to the
Indemnified Person and the Indemnifying Person's delivering to the Indemnified
Person a written agreement that the Indemnified Person is entitled to
indemnification pursuant to Section 10.02 or 10.03 for all Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Person shall be
liable, subject to Section 10.04, for the entire amount of any Loss, at any time
during the course of any such claim, suit, action or proceeding, assume control
of the defense thereof; provided that (i) the Indemnifying Person's counsel is
reasonably satisfactory to the Indemnified Person and (ii) the Indemnifying
Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the Indemnifying Person shall pay
the reasonable fees and disbursements of such separate counsel. Whether or not
the Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
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Section 10.07. Settlement. (a) Any settlement or compromise made or caused
to be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any claim, suit, action or proceeding of the kind referred to in Section
10.06 shall also be binding upon the Indemnifying Person or the Indemnified
Person, as the case may be, in the same manner as if a final judgment or decree
had been entered by a court of competent jurisdiction in the amount of such
settlement or compromise. If the defense of such claim, suit, action or
proceeding is not assumed by the Indemnifying Person, the Indemnifying Person
will not be subject to any liability for any settlement or compromise made
without its consent, but such consent may not be unreasonably withheld; provided
that it shall not be unreasonable for an Indemnifying Person to withhold its
consent to any settlement or compromise involving the imposition of equitable
remedies or involving the imposition of any material obligations on the
Indemnifying Person other than monetary obligations for which the Indemnified
Person will be indemnified hereunder. If the Indemnifying Person assumes the
defense of such claim, suit, action or proceeding, the Indemnifying Person shall
have the right to enter into a settlement or compromise of such claim, suit,
action or proceeding without the consent of the Indemnified Person; provided
that the Indemnifying Person shall be required to obtain such consent if the
settlement or compromise involves the imposition of equitable remedies or
involves the imposition of any material obligations (monetary or otherwise) on
the Indemnified Person other than monetary obligations for which the Indemnified
Person will be indemnified hereunder; provided, however, if such consent is not
obtained, such settlement or compromise shall be null and void on the
Indemnified Party.
(b) The Indemnified Person shall give the Indemnifying Person at
least twenty (20) Business Days' notice of any proposed settlement or compromise
of any claim, suit, action or proceeding it is defending, during which time the
Indemnifying Person may reject such proposed settlement or compromise; provided
that from and after such rejection, the Indemnifying Person shall be obligated
to assume the defense of and full and complete liability and responsibility for
such claim, suit, action or proceeding. Any and all Losses suffered by the
Indemnified Person in connection with such claim, suit, action or proceeding for
which the Indemnified Person is not otherwise entitled to indemnification under
this Agreement shall be paid by the Indemnifying Person to the extent they
exceed the unindemnified Losses that would have been suffered by the Indemnified
Person under the proposed settlement that was so rejected.
Section 10.08. Failure of Indemnifying Person to Act. In the event that
the Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
Section 10.09. Exclusive Remedy. After the Closing, and other than with
respect to claims based upon breaches of Section 6.11 or Section 6.12, the
remedies available pursuant to the provisions of this Article X and Article IX
shall be the sole and exclusive remedy for monetary damages for any breach of
representations, warranties, covenants or agreements herein, provided, however,
the foregoing shall not limit the right to seek recovery for fraud or willful
misconduct or to seek specific performance, injunctive relief or other available
equitable remedies.
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ARTICLE XI
CONTINGENT PAYMENT
Section 11.01. Contingent Payment.
(a) In addition to the Closing Date Payment, Buyer, as part of the
Purchase Price, agrees to pay to the Selling Stockholders the Contingent Payment
with respect to the Qualifying Revenue actually received during each of the four
(4) Earnout Years following the Closing Date, unless extended for a longer
period pursuant to the terms of Section 11.01(g) below. The Contingent Payment
shall be payable quarterly in arrears during each Earnout Year.
(b) Each Selling Stockholder's Contingent Payment shall consist of
cash equal to fifty percent (50%) of such Selling Stockholder's Proportionate
Percentage of such Contingent Payment and such number of shares of Xxxxxx Stock
as is equal to fifty percent (50%) of such Selling Stockholder's Proportionate
Percentage of such Contingent Payment (as calculated in accordance with the
Xxxxxx Valuation).
(c) Anything herein to the contrary notwithstanding (including
anything contained in the foregoing paragraph (b)), under no circumstances (i)
shall the aggregate amount of all Xxxxxx Stock issued as Contingent Payments
hereunder exceed two and one half percent (2.5%) of the number of shares of
common stock of Xxxxxx issued and outstanding on the Closing Date (the "Xxxxxx
Stock Cap"), and upon reaching the Xxxxxx Stock Cap any and all Contingent
Payments made thereafter shall be made one hundred percent (100%) in cash or
(ii) shall Epoch or any Affiliate, partner, officer, employee or agent thereof,
or other Person affiliated therewith, receive any Contingent Payment or other
amount of any kind payable hereunder, directly or indirectly, consisting of
Xxxxxx Stock, but shall instead receive any Contingent Payments or other such
payments to which it may be entitled hereunder one hundred percent (100%) in
cash.
(d) Anything herein to the contrary notwithstanding (including
anything contained in the foregoing paragraph (b)), the issuance of Xxxxxx Stock
to any Selling Stockholder hereunder is expressly conditional upon such Selling
Stockholder (i) certifying as to his, her or its status as an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act and/or to such other matters as may be requested or
required by Buyer or Xxxxxx pursuant to the Securities Act, other applicable Law
or Xxxxxx or Buyer practice or policy and (ii) executing and delivering Xxxxxx'x
then-standard Stockholders Agreement, the current forms of which have been
previously provided to the Selling Stockholders, and such other agreements or
instruments as may be required by Buyer, Xxxxxx or Xxxxxx'x underwriters from
stockholders of Xxxxxx (including lock-up agreements). In the event that any
Selling Stockholder is unwilling or unable to comply with the provisions of this
paragraph, all Contingent Payments to which such Selling Stockholder may be
entitled hereunder shall be made one hundred percent (100%) in cash.
(e) Anything herein to the contrary notwithstanding (including
anything contained in the foregoing paragraph (b)), no shares of Xxxxxx Stock
shall be actually issued pursuant to this Section 11.01 unless and until Xxxxxx
has completed an IPO. In the event that
52
Xxxxxx does not complete an IPO on or before June 30, 2006, Xxxxxx shall issue
on or promptly after such date all accrued but unissued shares of Xxxxxx Stock
required to be issued hereunder at a valuation per share as of the Closing Date
determined by BDO Xxxxxxx, LLP or such other qualified firm as may be agreed
upon by Buyer and the Stockholders' Representative.
(f) For purposes of this Agreement:
"Contingent Payment" shall mean aggregate value (whether in cash or
in Xxxxxx Stock, as the case may be) equal to the following percentages
with respect to the Qualifying Revenues received during the applicable
period: (i) Earnout Year 1 equals twenty-five percent (25%); (ii) Earnout
Year 2 equals thirty percent (30%); (iii) Earnout Year 3 equals
twenty-five percent (25%) and (iv) Earnout Year 4 equals twenty percent
(20%).
"Earnout Year" shall mean a twelve (12) calendar month period the
first day of which shall be the calendar day of the Closing Date.
"IPO" shall mean an underwritten initial public offering of equity
securities of Xxxxxx pursuant to an effective registration statement under
the Securities Act.
"Xxxxxx Stock" shall mean the Common Stock, par value $.01per share,
of Xxxxxx.
"Xxxxxx Valuation" shall mean the lowest valuation per share
contained within the valuation range established by Xxxxxx and its
underwriters for Xxxxxx Stock with respect to an IPO (as adjusted from
time to time to reflect any stock dividend, stock split, reclassification
or other similar capitalization change of Xxxxxx).
"Qualifying Customer" shall mean those introducing broker customers
of the Company listed on Schedule 11.01(f)-1. Such term may also include:
(i) those introducing broker customer prospects listed on
Schedule 11.01(f)-2; provided that any such prospect becomes a Qualifying
Customer either (x) prior to the Closing Date, with the procuring cause of
such Qualifying Customer being a Business Employee or (y) within one (1)
year after the Closing Date, with the procuring cause of such Qualifying
Customer being Xxxxxx X. Angle; or
(ii) certain Persons who become introducing broker customers
of the Company, Buyer or any of Buyer's Affiliates after the Closing Date
as a result of marketing efforts, coordinated in advance with Buyer and
Xxxxxx, that were made by Xxxxxx X. Angle and that were the procuring
cause of any such customer during the period following the Closing Date.
In the event that any such Person becomes a Qualifying Customer pursuant
to the terms of the foregoing clauses (i) or (ii), Qualifying Revenue from
such additional Qualifying Customer will be calculated during each of the
four (4) Earnout Years following the date on which any such Person becomes
a Qualifying Customer with the Contingent Payment in respect of such
Qualifying Revenue from such additional Qualifying Customer being
53
twenty-five percent (25%) in each such Earnout Year. All payments in
respect of any such future Qualifying Customer shall be made one hundred
percent (100%) in cash.
"Qualifying Revenue" shall mean solely those gross revenues
generated by the Company, Buyer or any of Buyer's affiliates, as the case
may be, in respect of the Qualifying Customers during each applicable
period. For the avoidance of doubt, it is agreed that no revenues
associated with any Excluded Litigation shall constitute Qualifying
Revenue. For avoidance of doubt, the calculation of Qualifying Revenue
shall be performed consistently throughout all applicable Earnout Years in
accordance with GAAP as applied in the preparation of the Audited
Financial Statements.
(g) Notwithstanding anything to the contrary in this Article XI, if
the Qualifying Revenue received during any individual Earnout Year exceeds
Thirteen Million Five Hundred Thousand Dollars ($13,500,000) there shall be an
additional payment (the "Additional Contingent Payment") equal to ten percent
(10%) of any such excess during any such period. All Additional Contingent
Payments will be made solely in cash. It is hereby agreed that at the election
of the Selling Stockholders' Representative, twenty-five percent (25%) of any
Additional Contingent Payment shall not be considered part of the Purchase Price
or allocated or distributed to the Selling Stockholders, but shall instead be
set aside for payment to certain Selling Stockholders and certain non-Selling
Stockholder employees of the Company as determined in good faith by the Selling
Stockholders' Representative. In such event the Company shall deduct all
applicable withholding and other resulting Tax payments from any such payments.
Section 11.02 shall apply to Additional Contingent Payments, if any, mutatis
mutandis.
(h) Anything herein to the contrary notwithstanding, each of Buyer
and/or Xxxxxx or the applicable Affiliate thereof shall determine in its sole
and absolute discretion whether to accept or reject any introducing broker
customer, whether introduced or procured by Xxxxxx X. Angle or a Business
Employee in accordance with the terms and provisions hereof or otherwise, and
whether prior to or after the Closing Date.
Section 11.02. Disputes. (a) Upon the making of each Contingent Payment
or, if the Contingent Payment is zero, on the date the Contingent Payment would
have been made had it not been zero, Buyer shall deliver to the Stockholders'
Representative a statement of the Qualifying Revenue for the applicable period
(the "Preliminary Statement"). Buyer shall grant the Stockholders'
Representative and its agents access to the Books and Records supporting the
Preliminary Statement as necessary for the Stockholders' Representative review
thereof. The Preliminary Statement as delivered to the Stockholders'
Representative shall be final and binding on the parties for purposes of
determining the Contingent Payment in accordance herewith unless, within ninety
(90) days after delivery thereof to the Stockholders' Representative, the
Stockholders' Representative shall deliver to Buyer a joint written notice
specifying the items on the Preliminary Statement which the Stockholders'
Representative disagrees with and the reasons therefor (the "Dispute Notice").
Thereafter, Buyer and the Stockholders' Representative shall promptly negotiate
in good faith with respect to the subject of the Dispute Notice, and if they are
unable to reach an agreement within ten (10) Business Days after receipt by
Buyer of the Dispute Notice, the dispute shall be settled by submitting the
dispute to arbitration. Thereafter, within five (5) Business Days, such
arbitration shall be initiated by the parties, by
54
submitting the matter to the Accounting Firm to act as arbitrator. The
arbitrator's decision shall be final and binding on the parties. The arbitrator
shall be directed to issue its decision in writing within fifteen (15) Business
Days of submission of the dispute to arbitration. The arbitration fees and
expenses of the arbitrator shall be borne by Buyer, on one hand, and the
Stockholders' Representative, on the other hand, in inverse proportion as they
may prevail on matters resolved by the arbitrator, which proportionate
allocation shall also be determined by the arbitrator at the time the
determination of the arbitration is rendered on the merits of the maters
submitted. The Preliminary Statement as accepted by the Stockholders'
Representative without submission of a Dispute Notice, or as adjusted pursuant
to agreement between Buyer and the Stockholders' Representative, or as adjusted
pursuant to the arbitration decision, in any case pursuant to this paragraph,
shall be final and binding on the parties (the "Final Statement").
(b) The Contingent Payment shall be calculated based on the Final
Statement. If the Contingent Payment based on the Final Statement is greater
than the Contingent Payment paid by Buyer to the Selling Stockholders pursuant
to Section 11.01, then Buyer shall pay the Selling Stockholders the difference
in immediately available funds within five (5) Business Days of such final
determination. If the Contingent Payment based on the Final Statement is less
than the Contingent Payment paid by the Buyer to the Selling Stockholders
pursuant to Section 11.01 of the Agreement, then the Selling Stockholders shall
pay Buyer the difference in cash in immediately available funds within five (5)
Business Days of such final determination.
Section 11.03. Buyer Discretion. Notwithstanding any other provision of
this Agreement, including Section 11.01(g), Buyer retains the right, in its sole
discretion, to refuse to enter into any agreement, understanding or arrangement
that might or would lead to Qualifying Revenue if it determines in its good
faith business judgment that it is not in Buyer's interest to do so, and in any
event to determine the terms of any such understanding or arrangement in its
sole discretion.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Headings. The section headings herein are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof. References to
Sections, unless otherwise indicated, are references to Sections of this
Agreement.
Section 12.02. Notices. All notices to be given pursuant to this Agreement
to any party must be in writing and will be deemed to have been validly given if
delivered personally, sent by confirmed facsimile transmission or sent by
overnight courier (providing proof of delivery), to such party at its address
given below. Notices shall be deemed given (i) if delivered personally or by
overnight courier, upon delivery or (ii) if sent by facsimile transmission, upon
confirmation of transmission thereof.
The address of each party for the purposes of this Agreement is as
follows:
55
If to the Stockholders' Representative, to the Stockholders'
Representative at the address provided for notices thereby on
the signature pages hereto
with a copy to:
Keesal, Young & Xxxxx
000 Xxxxxxxxx
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to any Selling Stockholder, to such Selling Stockholder at
the address provided for notices thereby on the signature
pages hereto
with a copy to:
Keesal, Young & Xxxxx
000 Xxxxxxxxx
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to Buyer or Xxxxxx, to it at:
Xxxxxx Worldwide, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000 and (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: R. Xxxx Xxxxxx, Esq.
Fax: (000) 000-0000
Any party may by notice to the others change its address for notice
and will so change its address for notice whenever its existing address for
notice ceases to be adequate for delivery both by hand or overnight courier and
by facsimile.
Section 12.03. Assignment. The rights and obligations under this Agreement
may be transferred only with the written consent of the other parties hereto.
Any transfer in violation of this Section 12.03 shall be null and void;
provided, however, that Buyer may assign any of its rights and obligations
hereunder to any of its Affiliates, it being understood that Buyer shall
56
remain liable for the performance of any such obligations. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.
Section 12.04. Governing Law; Jurisdiction; Waiver of Jury Trial. (a) This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
(b) To the fullest extent permitted by applicable law, each party
hereto (i) agrees that any claim, action or proceeding by such party seeking any
relief whatsoever arising out of, or in connection with, this Agreement or the
transactions contemplated hereby (except with respect to the matters governed by
Section 11.02 and Section 3.06(d), which shall be resolved in accordance with
the provisions thereof) shall be brought in any state or federal court of
competent jurisdiction sitting in New York County in the State of New York and
not in any other state or federal court in the United States of America or any
court in any other country, (ii) agrees to submit to the exclusive jurisdiction
of such courts described in clause (i) for purposes of all legal proceedings
arising out of, or in connection with, this Agreement or the transactions
contemplated hereby, (iii) waives and agrees not to assert any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court or any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum and (iv) agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by applicable Law.
(c) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS AND FOR ANY COUNTERCLAIM RELATING THERETO.
Section 12.05. Severability. In the event that any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby as long as the remaining provisions do not fundamentally alter
the relations among the parties.
Section 12.06. Entire Agreement; Amendment; No Waiver. (a) This Agreement,
together with the Ancillary Agreements and the Confidentiality Agreement, sets
forth the entire understanding and agreement between the parties with respect to
the subject matter hereof and thereof and supersede and replace any prior
understanding, agreement or statement of intent, in each case written or oral,
of any kind and every nature with respect hereto. Any provision of this
Agreement, the Ancillary Agreements or the Confidentiality Agreement may be
amended, modified or waived in whole or in part at any time by an agreement in
writing among the parties thereto.
(b) The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. Except
as otherwise expressly provided herein, no failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder, or
otherwise available in respect hereof at law or in equity, shall operate as a
57
waiver thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
Section 12.07. Expenses. Except as otherwise expressly set forth in this
Agreement, Buyer, on the one hand, and the Selling Stockholders, on the other
hand, shall each pay their respective expenses (including legal, investment
banking, finder's, broker's and accounting fees) incurred in connection with the
origination, negotiation and execution of, and the closing of the transactions
contemplated by, this Agreement and the Ancillary Agreements.
Section 12.08. Obligations Joint and Several. Each Selling Stockholder
hereby acknowledges and agrees that all obligations of every kind and character
of the Selling Stockholders to make payment of any amount hereunder or in any
Ancillary Agreement shall be a joint and several obligation of the Selling
Stockholders.
Section 12.09. Schedules and Exhibits. All Annexes, Exhibits and Schedules
to this Agreement are hereby incorporated by reference and made a part of this
Agreement. Any fact or item which is disclosed on any Schedule that is referred
to in a representation or warranty in this Agreement shall not be deemed to be
an exception to any other representation or warranty in this Agreement, or to be
disclosed on any other Schedule, unless specified on such other Schedule by a
cross-reference or otherwise. Any fact or item disclosed on any Annex, Schedule
or Exhibit to this Agreement shall not by reason only of such inclusion be
deemed to be material and shall not be employed as a point of reference in
determining any standard of materiality under this Agreement.
Section 12.10. No Third Party Beneficiaries. Except as expressly provided
herein, nothing herein shall create or establish any third-party beneficiary
hereto nor confer upon any Person not a party to this Agreement any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
Section 12.11. Counterparts. This Agreement may be executed by facsimile
and in any number of counterparts, each of which when so executed shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
Section 12.12. Stockholders' Representative.
(a) Each Selling Stockholder and the Company hereby irrevocably
designates and appoints Xxxxxx X. Angle as the Stockholders' Representative (the
"Stockholders' Representative") to represent and act for him, her or it for all
purposes in his, her or its capacity as a Selling Stockholder or the Company
under this Agreement and any Ancillary Agreement, but only for the specific
purposes specified in this Agreement and any Ancillary Agreement, subject only
to the terms and conditions hereof and thereof (each such purpose, a "Designated
Purpose"). The Stockholders' Representative hereby accepts such designation and
appointment and agrees to represent and act for the Selling Stockholders and the
Company under this Agreement, and any Ancillary Agreement, with respect to each
Designated Purpose in accordance with the terms and conditions set forth herein
and therein.
58
(b) In discharging its duties and responsibilities with respect to
each Designated Purpose hereunder and under any Ancillary Agreement, the
Stockholders' Representative shall have all rights and powers necessary and
incident to the proper discharge thereof, and any decision or act of the
Stockholders' Representative with respect to each Designated Purpose shall be
conclusive and absolutely binding upon each and all of the Stockholders and the
Company.
(c) The Stockholders and the Company hereby authorize the
Stockholders' Representative, at its sole discretion, to employ attorneys,
accountants and others to assist it in the performance of its duties and
responsibilities with respect to each Designated Purpose under this Agreement
and the Ancillary Agreements.
(d) The Stockholders and the Company hereby authorize the
Stockholders' Representative with respect to each Designated Purpose to (i)
interpret and construe the provisions of this Agreement and the Ancillary
Agreements and (ii) determine, resolve, settle or contest any action, suit,
proceeding or arbitration that may arise under this Agreement and any Ancillary
Agreement with respect to any Designated Purpose in any manner the Stockholders'
Representative deems appropriate under the circumstances. Any settlement by the
Stockholders' Representative of an action, suit, proceeding or arbitration with
respect to any Designated Purpose or any final order or judgment or award of a
court or tribunal of competent jurisdiction resulting from an action, suit,
proceeding or arbitration by Buyer or any other Buyer Indemnified Party against
the Stockholders' Representative with respect to any Designated Purpose shall be
binding upon and enforceable against each of the Selling Stockholders and the
Company.
(e) Upon the death, disability or resignation of the Stockholders'
Representative, a successor Stockholders' Representative shall be appointed by
the Selling Stockholders. A successor Stockholders' Representative shall become
such upon notice of appointment delivered to Buyer.
(f) Notwithstanding any provision of this Section 12.12 which
defines or limits the authority of the Stockholders' Representative, the
decisions, acts and instructions of the Stockholders' Representative or the
contesting of any actions shall be final, binding and conclusive upon each of
the Selling Stockholders and the Company; and the Buyer and any other Buyer
Indemnified Party may rely upon any such decision, act or instruction of the
Stockholders' Representative as being the decision, act or instruction of each
and all of the Selling Stockholders and the Company without the necessity of
investigating or determining whether or not such Stockholders' Representative
has acted within the scope of the powers given to it under this Agreement.
Notices or communications to or from the Stockholders' Representative shall
constitute notice to or from each and all of the Selling Stockholders and the
Company. The Buyer and any other Buyer Indemnified Party are hereby released and
discharged from any Liability to any Selling Stockholder or the Company for any
acts done by the Buyer and any other Buyer Indemnified Party in accordance with
such decision, act or instruction of the Stockholders' Representative.
Signature Page Follows
59
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
BUYER:
SAI HOLDINGS, INC.
By: ________________________________________
Name:
Title:
THE COMPANY:
COMPUTER CLEARING SERVICES, INC.
By: ________________________________________
Name:
Title:
THE SELLING STOCKHOLDERS:
____________________________________________
Xxxxxx X. Angle,
individually and as Stockholders' Representative
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
Signature Page to Stock Purchase Agreement
ACUMENT HOLDING, INC.
By: ________________________________________
Name:
Title:
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Xxxxxxx X. Xxxxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Xxxxxxx Xxxxxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Xxxxxxx Xxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
Signature Page to Stock Purchase Agreement
____________________________________________
Xxxxxx X. Xxxxxxxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Xxxxxx Xxxxxxxxxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Xxxxxxx X. Xxxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Xxxxx X. Xxxxxxx
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
Signature Page to Stock Purchase Agreement
FINANCIAL TECHNOLOGY PARTNERS L.L.C.
By: ________________________________________
Name:
Title:
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
Signature Page to Stock Purchase Agreement
ANNEX A
Shares and Percentage Ownership
NAME NUMBER OF SHARES OWNED PERCENTAGE
------------------------------------ ---------------------- ----------
Acument Holding, Inc. 3,612,820 63.70%
Epoch Investments, L.P.(1) 928,800 16.21%
Xxxxxx X. Angle 572,872 10.0%
Xxxxxxx X. Xxxxxx 228,970 4.0%
Financial Technology Partners L.L.C. 102,000 1.78%
Xxxxxxx Xxxxxxx 100,000 1.75%
Xxxxxx X. Xxxxxxxxx 85,975 1.5%
Xxxxxx Xxxxxxxxxxx 42,995 0.75%
Xxxxxxx X. "Cass" Xxxxx 32,246 0.56%
Xxxxxxx Xxxx 12,893 0.23%
Xxxxx X. Xxxxxxx 8,605 0.15%
Totals: 5,728,176 100%
------------------
(1) Pursuant to Section 7.01(k) of the Agreement, unless waived by Buyer in its
sole discretion, at the time of the Closing, Epoch Investments, L.P., or the
Bankruptcy Trustee appointed with respect thereto, will not own any equity
securities of the Company or, in the alternative, will only be entitled to
cash consideration in respect thereof.
ANNEX B
Key Employees
1. Xxxxxxx X. Xxxxxx
2. Xxxxxx X Xxxxxxxxx
3. Xxxxxxx Xxxx
4. Xxxxxx Xxxxxxxxxxx
5. Xxxxxx X. Angle
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 dated as of July 8, 2005 (this "Agreement") to the Stock
Purchase Agreement, dated as of May 12, 2005 (the "Stock Purchase Agreement"),
by and among Computer Clearing Services, Inc., a Delaware corporation, SAI
Holdings, Inc., a Texas corporation, and the Selling Stockholders identified on
the signature pages thereto
WHEREAS, the parties desire to amend the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties hereby agree as follows:
ARTICLE I
AMENDMENT TO STOCK PURCHASE AGREEMENT
1.1 All capitalized terms used herein but not otherwise defined shall have
the meanings given to them in the Stock Purchase Agreement.
1.2 Section 1.01 is hereby amended as follows:
The phrase "and the Loan Documents" is added to the end of the
definition of Ancillary Agreements.
The defined term ""Loan Documents" means (i) the Demand Promissory
Note, the Security Agreement and the Guaranty, each dated as of July
8, 2005 and each delivered by all of the Selling Stockholders to the
Buyer and/or its Affiliates, as well as any other agreements or
documents delivered in connection therewith and (ii) the Side Letter
dated July 8, 2005 and delivered to the Buyer and/or its Affiliates
by Acument." is hereby added to Section 1.01.
1.3 Section 3.01 of the Stock Purchase Agreement is hereby amended to read
in its entirety as follows:
"Section 3.01. Purchase Price. As consideration for the
Shares, Buyer hereby agrees to deliver to the Selling Stockholders
to the extent payable on or after the Closing Date, as applicable
pursuant to the terms of this Section 3.01, (i) the Closing Date
Payment and (ii) the contingent consideration to be paid pursuant to
Article XI at such times and subject to such conditions as set forth
herein (collectively, the "Purchase Price").
(a) The Closing Date Payment shall be payable as follows:
(i) Each of the Selling Stockholders other than Acument
and Xxxxxx X. Angle shall receive cash on the Closing Date.
Each such payment shall be made pro rata in accordance with
each such Selling Stockholder's percentage ownership of shares
as set forth opposite the name of each such Selling
Stockholder on Annex A.
(ii) Neither Acument nor Xxxxxx X. Angle (collectively,
the "Deferred Consideration Shareholders") shall receive
delivery of any payment on the Closing Date, but instead shall
only receive delivery of payment in respect of their Shares
upon Buyer's (or its Affiliates') receipt of repayment of
principal and interest and any other amount payable pursuant
to the Loan Documents (collectively, the "Loan Amount") as
follows:
(A) On each of the 30, 60, and 90 day anniversary
of the Closing Date the Buyer and the Stockholders'
Representative shall in good faith determine the amounts
received by Buyer or its Affiliates in respect of the
Loan Documents with respect to the period applicable to
each such date (the "Repaid Loan Amount"). Upon such
determination, the Buyer shall promptly deliver to each
of the Deferred Consideration Shareholders an amount in
cash, or other consideration with respect to Acument as
more fully detailed in the Acument Side Letter, equal to
the applicable Repaid Loan Amount divided by the Loan
Amount multiplied by the aggregate Closing Date Payment
and further multiplied by each such Deferred
Consideration Shareholder's percentage ownership of
shares as set forth opposite the name of such Selling
Stockholder on Annex A.
(B) For the avoidance of doubt, it is hereby
agreed that no payment made pursuant to subparagraph (A)
above shall be made in duplication of any other payment
made to any Selling Stockholder hereunder or under any
Ancillary Agreement.
(b) The parties hereby agree that notwithstanding anything to
the contrary herein, Buyer shall have no obligation in respect of
any portion of the Purchase Price that would otherwise be owed to
any Selling Stockholder, other than as specifically set forth in
Section 3.01(a)(i) above, to the extent that any Loan Amount remains
outstanding."
1.4 Section 3.06(a) of the Stock Purchase Agreement is hereby amended by
deleting the word "Within" and adding the phrase "No later than the date that is
the later of (i) the date the Loan Amount is repaid in full or (ii) any date
within" to the beginning of the first sentence of such Section.
1.5 Section 10.09 of the Stock Purchase Agreement is hereby amended by
adding the phrase "; provided, further, however, that the foregoing shall in no
way apply to the parties' rights and obligations in respect of the Loan
Documents." at the end of such Section.
1.6 Section 11.01(b) of the Stock Purchase Agreement is hereby amended to
read in its entirety as follows:
"(b) Each Selling Stockholder's Contingent Payment shall consist of
cash equal to forty percent (40%) of such Selling Stockholder's
Proportionate Percentage of such Contingent Payment and such number
of shares of Xxxxxx Stock as is equal to sixty percent (60%) of such
Selling Stockholder's Proportionate Percentage of such Contingent
Payment (as calculated in accordance with the Xxxxxx Valuation or
the valuation of a share of Xxxxxx Stock as determined pursuant to
Section 11.01(e), as applicable). No fractional shares of Xxxxxx
Stock shall be issued. Each Selling Stockholder shall be entitled to
receive in lieu of any fractional shares of Xxxxxx Stock to which
such Selling Stockholder otherwise would have been entitled to
pursuant to this Section 11.01(b) a cash payment in an amount equal
to the product of (a) the fractional interest of a share of Xxxxxx
Stock to which such Selling Stockholder would otherwise have been
entitled and (b) either the Xxxxxx Valuation or the valuation of a
share of Xxxxxx Stock as determined pursuant to Section 11.01(e), as
applicable."
1.7 Section 11.01(f) of the Stock Purchase Agreement is hereby amended by
adding the following defined terms:
""Bonus Account" shall mean an account designated in writing by the
Stockholders' Representative.
"Bonus Committee" shall mean Xxxxxxx Xxxxxx, Tan Anas and Xxxxx
Xxxxxxxxx.
"Management Group" shall mean Xxxxxxx Xxxxxx, Tan Anas, Xxxxx
Xxxxxxxxx, Xxxx Xxxxx and Xx Xxxxxxxxxxx."
1.8 Section 11.01(g) of the Stock Purchase Agreement is hereby amended to
read in its entirety as follows:
"(g) Notwithstanding anything to the contrary in this Article XI, if
the Qualifying Revenue received during any individual Earnout Year
exceeds Thirteen Million Five Hundred Thousand Dollars ($13,500,000)
there shall be an additional payment (the "Additional Contingent
Payment") equal to ten percent (10%) of any such excess during any
such period. All Additional
Contingent Payments will be made solely in cash. Section 11.02 shall
apply to Additional Contingent Payments, if any, mutatis mutandis."
1.9 Section 11.01 of the Stock Purchase Agreement is hereby amended by
adding the following paragraph as subsection (i) thereof:
"(i) Notwithstanding anything to the contrary set forth in Section
11.01(b) or Section 11.01(g), the Selling Stockholders hereby agree
as follows:
A. CREATION AND FUNDING OF MANAGEMENT GROUP BONUS ACCOUNT.
1. From Contingent Payment. An amount equal to two and one-half
percent (2.5%) of any Contingent Payment otherwise payable to each
Selling Stockholder shall not be considered part of the Purchase
Price but shall instead be paid to the Bonus Account. No fractional
shares of Xxxxxx Stock shall be paid to the Bonus Account and the
Stockholders' Representative shall direct Buyer to deposit, in lieu
thereof, an amount equal to the product of (a) the fractional
interest of a share of Xxxxxx Stock which would otherwise be
allocated to the Bonus Account and (b) either the Xxxxxx Valuation
or the valuation of a share of Xxxxxx Stock as determined pursuant
to Section 11.01(e), as applicable. Such amount shall be taken from
the cash portion of any Additional Contingent Payment otherwise
payable to the Selling Stockholders.
2. From Additional Contingent Payment. An amount equal to twenty
(20%) of any Additional Contingent Payment otherwise payable to each
Selling Stockholder shall not be considered part of the Purchase
Price but shall instead be paid to the Bonus Account.
B. DETERMINATION, MANNER AND METHOD OF ANY DISTRIBUTION FROM THE
BONUS POOL
1. Determination. The balance of the Bonus Account may be
distributed to the members of the Management Group as, if and to the
extent determined in the sole and absolute discretion of the Bonus
Committee. Nothing in this Agreement grants, is intended to grant,
or shall be construed to grant any member of the Management Group
any right to be awarded any amounts from the Bonus Account other
than in the sole and absolute discretion of the Bonus Committee.
2. Distributions. Any distributions from the Bonus Account to the
Management Group shall be made within 90 days of the date of any
deposit to the Bonus Account.
3. Withholding; Other Deductions. The Company shall deduct all
applicable withholding and other resulting Tax payments from any
bonuses paid to the Management Group.
4. No Standing. No member of the Management Group shall have any
standing under this Agreement to challenge any distributions from
the Bonus Account that may be authorized by the Bonus Committee or
the calculation of any deposit thereto.
5. No Alienation. No member of the Management Committee shall have
any right to pledge, hypothecate, anticipate or in any way create a
lien upon the Bonus Account or any amounts that the Bonus Committee
may determine are payable from the Bonus Account, and no amounts
that may be payable from the Bonus Account shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or
by operation of law."
1.10 Section 12.12 of the Stock Purchase Agreement is hereby amended by
adding the following paragraph as subsection (g) thereof:
"(g) The Stockholders hereby authorize the Stockholders'
Representative, at its sole discretion, to approve changes,
modifications and amendments to this Agreement, the Disclosure
Schedules and the Ancillary Agreements and to execute and deliver
any and all instruments and documents in connection therewith on
behalf of such Stockholders."
ARTICLE II
MISCELLANEOUS
2.1 Miscellaneous. Except as expressly modified by this Agreement, the
Stock Purchase Agreement as attached hereto as Exhibit A and the Disclosure
Schedules as attached hereto as Exhibit B (including all exhibits thereto) shall
remain in full force and effect in all respects in accordance with its terms.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. A counterpart may be
delivered by facsimile transmission, which transmission shall be deemed delivery
of an originally executed document.
* * * *
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BUYER:
SAI HOLDINGS, INC.
By: ________________________________________
Name:
Title:
THE COMPANY:
COMPUTER CLEARING SERVICES, INC.
By: ________________________________________
Name:
Title:
THE SELLING STOCKHOLDERS:
_____________________________________________
Xxxxxx X. Angle,
individually and as Stockholders' Representative
Signature Page to Amendment No. 1 to Stock Purchase Agreement
ACUMENT HOLDING, INC.
By: ________________________________________
Name:
Title:
____________________________________________
Xxxxxxx X. Xxxxxx
____________________________________________
Xxxxxxx Xxxxxxx
____________________________________________
Xxxxxxx Xxxx
____________________________________________
Xxxxxx X. Xxxxxxxxx
____________________________________________
Xxxxxx Xxxxxxxxxxx
____________________________________________
Xxxxxxx X. Xxxxx
____________________________________________
Xxxxx X. Xxxxxxx
FINANCIAL TECHNOLOGY PARTNERS L.L.C.
By: ________________________________________
Name:
Title:
Signature Page to Amendment No. 1 to Stock Purchase Agreement
EXHIBIT A
EXHIBIT B