Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of July 3, 2008 (the
"Agreement"), by and between SmartPros Ltd., a Delaware corporation, having its
principal place of business at 00 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000
("SmartPros") and Xxxxxxxx Xxxxxxxx, an individual, residing at 00 Xxxxxxxxx
Xxxxxx, Xxxx 00X, Xxx Xxxx, Xxx Xxxxxx 00000 ("Xxxxxxxx").
W I T N E S S E T H:
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WHEREAS, Xxxxxxxx owns one hundred (100) shares of the common stock
(the "Stock") of Xxxxxxxx Associates, P.A., a New Jersey professional
corporation (the "Company"), which Stock represents all of the issued and
outstanding shares of the capital stock of the Company; and
WHEREAS, SmartPros wishes to acquire the Stock; and
WHEREAS, Xxxxxxxx wishes to sell the Stock to SmartPros.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
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ACQUISITION OF STOCK
1.01 CONVEYANCE OF INTERESTS. On the terms and subject to the
conditions set forth herein, at the Closing (as defined below), Xxxxxxxx will
sell, assign and transfer the Stock to SmartPros free and clear of all liens and
encumbrances of any kind or nature whatsoever, and SmartPros will acquire the
Stock.
1.02 TRANSFER OF INTERESTS. At the Closing, Xxxxxxxx will deliver to
SmartPros one or more certificates evidencing the Stock accompanied by stock
powers executed in blank with respect to such Stock.
1.03 DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the respective meaning assigned to such terms in EXHIBIT A
hereto.
ARTICLE II
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CONSIDERATION; CLOSING
2.01 CONSIDERATION. The "Consideration" to be paid by SmartPros to
Xxxxxxxx for the Stock shall consist of (a) the "Fixed Price" (as defined
below), plus or minus (b) the "Variable Price" (as defined below), which Fixed
Price and Variable Price shall, respectively, be paid in the manner set forth
herein.
2.02 FIXED PRICE. The "Fixed Price" shall be equal to $3,500,000 and
shall be paid in cash at Closing as follows: (a) $3,150,000 shall be paid to
Xxxxxxxx in immediately available funds by wire transfer to the account
designated by Xxxxxxxx and (b) $350,000 shall be paid to American Stock Transfer
& Trust Company, LLC ("Escrow Agent") in immediately available funds by wire
transfer to the account designated by the Escrow Agent, to be held in escrow,
invested and distributed in accordance with the provisions of an escrow
agreement in the form of EXHIBIT B hereto (the "Escrow Agreement").
Notwithstanding anything contained to the contrary in the Escrow Agreement,
Xxxxxxxx shall pay the administration and maintenance fee of $3,500 to the
Escrow Agent and SmartPros and Xxxxxxxx shall each pay 50% of all other fees,
expenses and reimbursements due to the Escrow Agent under the Escrow Agreement.
2.03 VARIABLE PRICE.
(a) The "Variable Price" shall be an amount equal to the
Effective Time Net Assets (as defined below) and shall be determined and paid in
accordance with the provisions of this Section 2.03. The parties hereby agree
that in accordance with attached Schedule 2.03(a), the Effective Time Net Assets
are estimated to be $869,566 (the "Estimated ETNA"), which
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amount shall be paid to Xxxxxxxx at Closing in immediately available funds by
wire transfer to the account designated by Xxxxxxxx.
(b) Within ninety (90) days following the Closing Date,
Xxxxxxxx will deliver to SmartPros a statement (the "Net Assets Statement")
setting forth in reasonable detail the Net Assets (as defined below) of the
Company as of the Effective Time (the "Effective Time Net Assets").
(c) Within thirty (30) days after receipt of the Net Assets
Statement, SmartPros shall inform Xxxxxxxx whether it has any objections to the
Net Assets Statement. Unless SmartPros delivers to Xxxxxxxx within such
thirty-day period a notice specifying in reasonable detail any objections to the
Net Assets Statement, the Net Assets Statement shall be conclusive and binding
on the parties hereto.
(d) If SmartPros delivers to Xxxxxxxx a notice setting forth
any such exceptions within such thirty-day period, SmartPros and Xxxxxxxx shall
promptly endeavor to resolve the matters set forth in such notice and if
SmartPros and Xxxxxxxx fail to reach an agreement with respect to such matters
on or before the fifteenth day after receipt by Xxxxxxxx of such notice, then,
as to any matters in dispute, an independent public accounting firm jointly
selected by the parties shall promptly make a determination of such matters as
to which disagreement remains, which determination shall be conclusive and
binding on the parties hereto. The fees of the public accounting firm shall be
paid 50% by SmartPros and 50% by Xxxxxxxx.
(e) If the Effective Time Net Assets as finally determined is
more than the Estimated ETNA (the "Excess NA"), SmartPros will pay to Xxxxxxxx,
by wire transfer of immediately available funds, an amount equal to the Excess
NA. If the Effective Time Net Assets as finally determined is less than the
Estimated ETNA (the "Negative NA"), Xxxxxxxx will pay to
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SmartPros, by wire transfer of immediately available funds, an amount equal to
the Negative NA. Any such payment will be made within ten (10) days after such
final determination.
(f) "Net Assets" shall mean, as to the Company: (a) the sum of
all cash, prepaid expenses, accounts receivable, work in process (consisting of
unbilled amounts for services performed as of the Effective Time), security
deposits and any other current assets; minus (b) all funded indebtedness,
accounts payable, deferred revenue, the Vacation Accrual, (including payroll
expense and payroll taxes), accrued expenses and all other current liabilities,
all as determined in accordance with GAAP on a basis consistent with that used
in preparing Schedule 2.03(a), except that Tax Liabilities or Tax overpayments
shall not be taken into account (it being understood that Tax Liabilities or Tax
overpayments shall be taken into account under and shall be governed exclusively
by Section 6.02). For the avoidance of doubt, it is acknowledged and understood
that Net Assets shall be determined solely for the Company as a separate entity,
without regard to any consolidation which might otherwise be required under GAAP
for 130 Monmouth, E.E. Equity and Xxxxxxxx & Company, L.L.C.
2.04 ADDITIONAL ADJUSTMENT TO CONSIDERATION. (a) After the Closing, the
public accounting firm for SmartPros, Xxxxx Xxxxxxxxxx Xxxxxxxx LLP ("HRR"),
will, at the sole cost and expense of SmartPros, audit the financial statements
of the Company at December 31, 2007 and for the one year period then ended (the
"2007 Audit Report"). If the Company's 2007 Adjusted Net Income (as defined
below) is less than $1,449,580 (the "Target Amount"), then the Consideration
shall be reduced by (i) the amount by which the 2007 Adjusted Net Income is less
than the Target Amount, times (ii) three (the "Reduction Amount"). Xxxxxxxx
shall pay the Reduction Amount to SmartPros, by wire transfer of immediately
available funds, within 10 (ten) days after such determination becomes final as
provided below. The Company's 2007 Adjusted
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Net Income shall be an amount equal to (i) the Company's income or loss before
income taxes, determined on an accrual basis in accordance with GAAP, for the
year ended December 31, 2007, (ii) increased by the amount of compensation paid
to Xxxxxxxx, Xxxxxxx Xxxxxxxx ("WL") and Xxxxxxxx & Company, L.L.C. in 2007,
including, but not limited to, all amounts paid as salary, bonuses, honoraria,
consulting fees, professional fees and royalty payments (which are not required
to be made after the Effective Time), as well as any amounts contributed to any
retirement and/or profit sharing plans on behalf of and for the benefit of
Xxxxxxxx and/or WL, and (iii) disregarding any item of income or loss
attributable to EE Equity. For the avoidance of doubt, it is acknowledged and
understood that the Company's 2007 Adjusted Net Income shall be determined
solely for the Company as a separate entity, without regard to any consolidation
which might otherwise be required under GAAP for 130 Monmouth, E.E. Equity or
Xxxxxxxx & Company, L.L.C.
(b) Within ten (10) days of the completion of its calculation
of the 2007 Adjusted Net Income, SmartPros, shall deliver a schedule to Xxxxxxxx
setting forth in reasonable detail the calculation of the Company's 2007
Adjusted Net Income. In the event the Company's 2007 Adjusted Net Income is
purported to be less than the Target Amount, then within fifteen (15) days after
receipt of such Schedule, Xxxxxxxx shall inform SmartPros whether she has any
objections to the adjustments made to the Company's 2007 net income as set forth
in the 2007 Audit Report. Unless Xxxxxxxx delivers to SmartPros within such
fifteen-day period written notice specifying her objections in reasonable
detail, SmartPros' calculation of the Company' 2007 Adjusted Net Income shall be
deemed final and shall be conclusive and binding on the parties hereto.
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(c) If Xxxxxxxx delivers to SmartPros written notice setting
forth her objections to its calculation of the Company's 2007 Adjusted Net
Income within such fifteen-day period, SmartPros and Xxxxxxxx shall promptly
endeavor to resolve the matters set forth in such notice. If SmartPros and
Xxxxxxxx fail to reach an agreement with respect to such matters on or before
the fifteenth day after receipt by SmartPros of such notice, then, as to any
matters still in dispute, an independent public accounting firm jointly selected
by the SmartPros and Xxxxxxxx shall promptly make a determination of such
matters as to which disagreement remains, which determination shall be
conclusive and binding on the parties hereto; PROVIDED, HOWEVER, such
independent public accounting firm shall have no authority over the
determination of the Company's 2007 net income as set forth in the 2007 Audit
Report. The fees of the public accounting firm shall be paid 50% by SmartPros
and 50% by Xxxxxxxx.
2.05 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Morse, Zelnick, Rose & Lander LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 at 9:00 A.M. on July 3, 2008, or at such
other place, later date or time as shall be mutually agreed upon by the parties
(such date or such other agreed upon time and later date is called the "Closing
Date"). Regardless of when the Closing Date occurs, the Closing shall for all
purposes of this Agreement be deemed to become effective as of the Effective
Time, such that all adjustments to the Consideration contemplated by Section
2.03 based on the Estimated XXXX and the Net Assets Statement shall be made as
of the Effective Time, and not as of the Closing Date, and all operations of the
Company for the period from and after the Effective Time until the Closing
occurs shall be for the account and benefit, and at the expense, of SmartPros
and not Xxxxxxxx. Consistent with the foregoing, as between SmartPros and
Xxxxxxxx, all cash receipts collected by the Company after the Effective Time
but prior to Closing and all revenues earned
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by the Company for services rendered after the Effective Time but prior to the
Closing Date shall be for the account of SmartPros, and all accounts payable and
other operating expenses incurred in respect of the period from the Effective
Time though the Closing Date (including Taxes on income earned after the
Effective Time) shall be the responsibility of SmartPros.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF XXXXXXXX
Xxxxxxxx hereby represents and warrants to and agrees with SmartPros,
as follows:
3.01 OWNERSHIP. As of the date hereof, Xxxxxxxx is the record and
beneficial owner of the Stock. The Stock represents 100% of the issued and
outstanding shares of the capital stock of the Company.
3.02 NO LIENS. The Company Stock is owned by Xxxxxxxx free and clear of
all liens, charges, encumbrances and restrictions (except for the action
required by Section 6.09 hereof) of any kind and nature whatsoever and none of
the Company Stock is subject to any agreement whatsoever with respect to the
voting, sale or pledge thereof or any like matter, nor has any proxy been
granted to any Person with respect to the Company Stock.
3.03 AUTHORIZATION OF AGREEMENT. This Agreement has been duly and
validly executed and delivered by or on behalf of Xxxxxxxx and constitutes a
valid obligation of Xxxxxxxx, enforceable in accordance with its terms, except
to the extent that such enforceability may be limited by applicable insolvency,
bankruptcy, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general equity principles. No consent,
authorization or approval of, exemption by, or (except as contemplated by
Section 6.09) filing with any Governmental Entity is required to be obtained or
made by Xxxxxxxx in connection with the exe-
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cution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.04 NO CONFLICT. The performance of this Agreement by Xxxxxxxx and the
consummation of the transactions contemplated hereby will not result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, (a) any material contract or other agreement or instrument to which
Xxxxxxxx is a party, (b) the Certificate of Incorporation or Bylaws of the
Company, or (c) assuming the timely and proper filing of the certificates
refered to in Section 6.09, any law, order, rule, regulation, writ, injunction
or decree applicable to Xxxxxxxx.
3.05 INTERESTS IN PROPERTY OR ACTIVITIES OF THE COMPANY. Except as set
forth on Schedule 3.05, Xxxxxxxx does not have any (direct or indirect) interest
(a) in any property, real or personal, tangible or intangible used in the
business of the Company, or (b) in any Person which conducts business with the
Company.
3.06 TAX MATTERS. Xxxxxxxx is not a "foreign person" within the meaning
of Section 1445 of the Code or the U.S. Treasury regulations promulgated
thereunder.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
OF XXXXXXXX WITH RESPECT TO THE COMPANY
Xxxxxxxx hereby represents and warrants to and agrees with SmartPros
that:
4.01 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has full power and authority to conduct its business as
it is now conducted and to own or lease and operate the assets and properties
now owned or leased and operated by the Company, and is duly qualified to do
business and is in good standing in each jurisdiction in which the na-
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ture of its business or the character of its properties requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the Company or its operations.
4.02 CAPITALIZATION OF THE COMPANY; OPTIONS, ETC. The Company does not
have outstanding: (a) any options, warrants or other rights to purchase, acquire
or convert into, any equity interest in the Company; or (b) any other agreement
or right (preemptive, contractual or otherwise) to issue or sell any such equity
interests.
4.03 SUBSIDIARIES. Except as set forth on Schedule 4.03, the Company
does not own any equity interest, directly or indirectly, in any corporation,
company, partnership, trust, joint venture or other entity.
4.04 AUTHORIZATIONS AND CONSENTS. No consent, authorization or approval
of, exemption by, or (except for the filing of Stub Period Tax Returns as
contemplated by Section 6.02 and the filing of the certificates contemplated by
Section 6.09) filing with any Governmental Entity is required to be obtained or
made by the Company in connection with the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
4.05 ORGANIZATIONAL DOCUMENTS. Schedule 4.05 contains a true and
correct copy of the Certificate of Incorporation and the By-laws of the Company,
each as in effect on the date hereof.
4.06 ACCOUNTS RECEIVABLE. (a) All accounts receivable and work in
process to be included in the Effective Time Net Assets (the "Included
Receivables") arose and/or will arise from bona fide transactions in the
ordinary course of business. All trade accounts receivable are by their terms
generally due within thirty (30) days after being invoiced by the Company. All
Included Receivables are expected to be collected in full within one hundred
eighty (180) days after Closing. SmartPros shall use reasonable efforts to
effect the collection of the Included Re-
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ceivables, including regular periodic billing and follow-up collection by
SmartPros' collection staff consistent with SmartPros' customary practices.
Reasonable collection efforts shall not include referral to a collection agency
or institution of legal proceedings. Where the Company shall have an account
receivable outstanding from a client both with respect to services rendered
prior to the Effective Time and with respect to services rendered after the
Effective Time, any collections received from such client after the Effective
Time shall be applied as designated by such client in the payment or in any
memorandum or other writing accompanying the payment, and in the absence of such
designation to the oldest then outstanding account receivable from such client.
SmartPros shall provide Xxxxxxxx, not less frequently than monthly, with updated
collection reports in respect of the Included Receivables, so that Xxxxxxxx may
monitor collections and, in her reasonable discretion, initiate follow-up
contacts and otherwise participate in collection efforts with respect to clients
who have past due outstanding balances.
(b) If the amount of Included Receivables determined for
purposes of the adjustment required by Section 2.03(e) (the "Final Receivables
Balance") exceeds the actual amount collected by SmartPros or the Company with
respect to the Included Receivables within one hundred eighty (180) days after
the Closing Date (such excess referred to as the "Uncollected Receivables"),
Xxxxxxxx shall pay to SmartPros, by wire transfer of immediately available
funds, an amount equal to the Uncollected Receivables. If the actual amount
collected by SmartPros or the Company with respect to the Included Receivables
within one hundred eighty (180) days after the Closing Date exceeds the Final
Receivables Balance (such excess referred to as the "Excess Collections"),
SmartPros shall pay to Xxxxxxxx, by wire transfer of immediately available
funds, an amount equal to the Excess Collections. Any amount payable under this
Section 4.06(b) will
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be paid within ten (10) days after such determination. Excess Collections shall
not include interest, penalties or any late charges applied to the Included
Receivables after July 1, 2008.
(c) In the event that SmartPros or the Company shall receive
additional collections with respect to Included Receivables after the payment of
Uncollected Receivables or Excess Collections in accordance with Section
4.06(b), SmartPros shall pay such additional collections to Xxxxxxxx, by wire
transfer of immediately available funds, within fifteen (15) days after such
amounts are collected. At Xxxxxxxx'x request made at any time on or after
February 1, 2010, SmartPros shall assign to Xxxxxxxx, for no additional
consideration, any remaining outstanding uncollected Included Receivables,
together with all relevant documents reasonably necessary for effecting
collection.
4.07 COMPLIANCE WITH LAW. The operation by the Company of its business
and the use and occupancy of its assets and properties is in compliance in all
material respects with, and not in violation in any material respect of,
applicable Laws to which the Company or its assets are subject. The Company has
obtained and adhered in all material respects to the requirements of any
government Permits necessary to the operation of its business, a list of all of
such Permits being set forth on Schedule 4.07.
4.08 ABSENCE OF CERTAIN EVENTS. (a) Except as set forth on Schedule
4.08(a), since December 31, 2007, the Company has not:
(i) incurred any Liabilities, other than Liabilities incurred
in the ordinary course of business consistent with past practice;
(ii) sold, assigned or transferred any of its assets or
properties except in the ordinary course of business consistent with
past practice;
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(iii) created, incurred, assumed or guaranteed any
indebtedness for money borrowed (other than in the ordinary course of
business consistent with past practice), or mortgaged, pledged or
subjected to any lien, pledge, mortgage, security interest, conditional
sales contract or other encumbrance any of its assets or properties;
(iv) amended or terminated any material contract, commitment
or agreement to which it is a party or by which it is bound, or
canceled, modified or waived any material debts or claims held by it,
in each case other than in the ordinary course of business consistent
with past practice, or waived any rights of substantial value, whether
or not in the ordinary course of business; or
(v) entered into any material transaction or operated other
than in the ordinary course of business consistent with past practice,
(b) Except as set forth on Schedule 4.08(b), since June 30, 2008, the
Company has not made any payments, including salary, bonus, honoraria,
royalties, repayment of loans or distributions, to, on behalf of or for the
benefit of, Xxxxxxxx, XX and Xxxxxxxx & Company L.L.C. or their respective
affiliates, except for payment of any liability included in the determination of
the Effective Time Net Assets.
4.09 TAXES AND TAX RETURNS.
(a) The Company has: (i) timely filed all Tax Returns required to
be filed by it through the Closing Date with the appropriate Governmental
Entities in all jurisdictions in which such Tax Returns are required to be filed
(giving effect to all extensions), and such Tax Returns were true and complete;
(ii) timely paid or caused to be paid all Taxes required to be paid through the
date hereof and as of the Closing Date (whether or not shown due on any Tax
Return); and (iii) except as set forth on Schedule 4.09(a), not requested or
caused to be filed or
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caused to be requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
(b) Except as otherwise set forth on Schedule 4.09(b), since
January 1, 2000, the Company has not been notified that either the IRS or any
other Governmental Entity has raised any issues in connection with any Tax
Return of the Company or relating to Taxes. There are no pending Tax audits and
no currently outstanding requests, agreements or waivers to extend the statutes
of limitations with respect to the Company.
(c) The Company has complied in all material respects with all
applicable Laws relating to the collection, withholding and payment of Taxes
(such as required to have been withheld and paid in connection with amounts paid
or owing to any employee).
(d) Except as set forth on Schedule 4.09(d), no claim has ever
been made by any Governmental Entity in a jurisdiction in which the Company does
not file Tax Returns that the Company is or may be subject to taxation by that
jurisdiction.
(e) Except for accounts receivable and work in process, the
Company is not required to include in income during a taxable period that ends
after the Effective Time any income that economically accrued prior to the
Effective Time by reason of the installment method of accounting, open
transaction reporting, the completed contract method of accounting or otherwise.
(f) Schedule 4.09(f) lists all the jurisdictions in which the
Company currently files Tax Returns or pay Taxes.
(g) There are no liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of any Company.
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(h) The Company has not made any payments, and is not obligated to
make any payments in connection with the transactions contemplated by this
Agreement, that would be excess parachute payments within the meaning of Section
280G of the Code (or any similar provision of state, local or foreign Tax Law).
(i) The Company has not entered into, or otherwise participated
(directly or indirectly) in any "listed transaction" within the meaning of
Treasury Regulations Section 1.6011-4(b)(2) or any other "reportable
transaction" within the meaning of Treasury Regulations Section 1.6011-4(b).
4.10 PATENTS, TRADEMARKS, COPYRIGHTS, ETC. The Company owns or validly
licenses all Intellectual Property Rights utilized in and necessary to the
conduct of its business as currently being conducted (the "Company Rights").
Schedule 4.10(a) contains a complete and correct list of all Company Rights
(except for paid-up licensed copies of standard, non-customized office software
such as word processing, contact management, database management, presentation,
and internal bookkeeping programs) including, where applicable, the registered
and beneficial owner and the expiration date thereof. Except as specifically set
forth as Schedule 4.10(b), the Company is not required to pay any royalties,
fees or other charges in connection with its use of any Company Rights. To
Xxxxxxxx'x knowledge, the conduct of the business of the Company as currently
conducted does not infringe upon the valid Intellectual Property Rights of
others in any way.
4.11 LEGAL PROCEEDINGS, ETC. There are no claims, actions, suits,
proceedings, arbitrations or investigations, either administrative or judicial,
pending or, to Xxxxxxxx'x knowledge, threatened by or against the Company, or
affecting its business or any of its assets or properties,
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or specifically relating to the transactions contemplated by this Agreement, at
law or in equity or otherwise, before or by any Governmental Entity.
4.12 REAL PROPERTY LEASES. The Company does not own any real property.
Schedule 4.12 sets forth all real property leases under which the Company is a
lessee. All such leases are valid and binding, and are in full force and effect;
there are no existing material defaults by the Company thereunder; and to
Xxxxxxxx'x knowledge no event has occurred which (whether with or without
notice, lapse of time, or both) would constitute a material default thereunder
by the Company.
4.13 CONTRACTS AND COMMITMENTS. Except as listed on Schedule 4.13, the
Company is not a party to any:
(a) Contract or Contracts for the borrowing of money or for a
guarantee, pledge or undertaking of the indebtedness of any other person;
(b) Contract limiting or restraining in any respect the Company or
Xxxxxxxx from engaging or competing in any lines of business or with any person;
(c) employment or consulting Contract;
(d) Contract to perform services by the Company involving receipt
by the Company of an amount in the aggregate in excess of $25,000 (it being
understood, however, that final pricing for individual program and seminar
Contracts depends on the actual number of attendees who sign up for and attend
the applicable program or seminar, which will not be confirmed until after the
program or seminar has occurred);
(e) Lease relating to personal property involving annual payments
by or to the Company in excess of $10,000;
(f) Contract with any labor union; or
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(g) any other Contract material to the operation of the business
of the Company or entered into otherwise than in the ordinary course of
business.
With respect to each of the Contracts listed on any Schedule to
this Agreement, including, but not limited to, the leases set forth on Schedule
4.12, to Xxxxxxxx'x knowledge: (i) such Contract is valid and enforceable in
accordance with its terms, except (A) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally, (B)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (C) insofar as indemnification
and contribution provisions may be limited by applicable law or public policy
relating thereto; and (ii) the Company is in compliance with the provisions
thereof in all material respects. The transactions contemplated by this
Agreement, will not (i) result in the automatic termination of any Contract
listed on any Schedule to this Agreement, (ii) result in the automatic amendment
of any of the terms of any such Contract or (iii) give rise to a right in any
party to unilaterally amend the terms of, or terminate, any such Contract. True
and correct copies of the Contracts set forth on Schedule 4.13 have been
provided to SmartPros.
4.14 EMPLOYEE BENEFITS.
(a) Schedule 4.14(a) contains a true, correct and complete list of
Employee Benefit Plans (collectively, the "Employee Plans") with respect to
which the Company is obligated to contribute or has or has had any actual or
potential Liability at any time during the six-year period ending on the Closing
Date. Any Employee Plan which is intended to meet the qualification requirements
of Section 401(a) of the Code is noted on Schedule 4.14(a).
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(b) With respect to each Employee Plan:
(i) (A) all required, declared or discretionary (in accordance
with historical practices) payments, premiums, contributions, reimbursements or
accruals for all periods ending prior to, or as of, the date hereof have been
properly paid and (B) the Company has not made and does not intend to make any
contribution for 2008 to the Xxxxxxxx Associates, P.A. Profit Sharing Plan (the
"Plan"), which contribution would in any event be wholly at the Company's
discretion;
(ii) there is no unfunded actual or unfunded potential
Liability relating to such Employee Plan as of the Closing Date;
(iii) no Proceedings (other than routine claims for benefits)
are pending or threatened against or relating to any Employee Plan or any
fiduciary thereof, and to Xxxxxxxx'x knowledge there is no basis for any such
Proceeding against any Employee Plan;
(iv) except as may be required under Laws of general
application, no Employee Plan obligates any Company to provide any employee or
former employee, or their spouses, family members or beneficiaries, any
post-employment or post-retirement health or life insurance, accident or other
"welfare-type" benefits;
(v) the Company has never maintained or been obligated to
contribute to a "multiemployer plan" (as defined in Section 3(37) of ERISA), a
"multiple employer plan" (as defined in Section 413 of the Code) or a "defined
benefit pension plan" (as defined in Section 3(35) of ERISA);
(vi) each Employee Plan has been established and operated for
the exclusive benefit of the participants and beneficiaries of such Employee
Plan; and
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(vii) the Company has not made or agreed to make, and is not
required to make (in order to bring any Employee Plan into compliance with
ERISA, the Code or any applicable Law), any changes in benefits that would
materially increase the costs of maintaining any Employee Plan.
(c) With respect to each Employee Plan:
(i) such Employee Plan has in all material respects been
established, maintained, operated and administered in accordance with its terms
and in compliance with ERISA, the Code and other applicable Laws (including with
respect to reporting and disclosure);
(ii) neither the Company nor, to Xxxxxxxx'x knowledge, any
other "disqualified person" or "party in interest" (as such terms are defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect
to such Employee Plan, has breached their fiduciary duties under ERISA or
engaged in a prohibited transaction that could subject any of the foregoing
Persons to any material Tax or penalty imposed under Section 4975 of the Code or
Section 502(i), (j) or (1) of ERISA;
(iii) any Employee Plan that is intended to be "qualified",
within the meaning of Section 401(a) of the Code, meets, to Xxxxxxxx'x
knowledge, all requirements for qualification under Section 401(a) of the Code
and the regulations thereunder. With respect to each such qualified Employee
Plan, the IRS has issued either (i) a favorable determination or (ii) a
favorable opinion letter if such Employee Plan is a prototype plan; and, to the
knowledge of Xxxxxxxx, no matter exists which would adversely affect the
qualified status of such Employee Plan and any related trust;
(iv) each Employee Plan that is subject to the requirements of
the Consolidated Omnibus Budget Reconciliation of 1985 ("COBRA") and the Health
Insurance Port-
-18-
ability and Accountability Act of 1996, as amended, and any rules or regulations
promulgated thereunder ("HIPAA") has been maintained in compliance with COBRA
and HIPAA, including all notice requirements, in all material respects, and no
Tax payable on account of Section 4980B or any other section of the Code has
been or is expected to be incurred;
(v) each Employee Plan that is intended to meet the
requirements of Section 125 of the Code meets such requirements and each program
of benefits for which employee contributions are provided pursuant to elections
made under such Employee Plan meets the requirements of the Code applicable
thereto;
(vi) to Xxxxxxxx'x knowledge, there has not been any act or
omission by any Company that has given rise to or could give rise to any fines,
penalties or related charges under ERISA or the Code for which the Company could
be liable;
(vii) the Company has the right under the terms of each
applicable Employee Plan and under applicable Law to amend, revise, merge or
terminate such plan (or participation in such plan by the Company) or transfer
the assets of such plan to another arrangement, plan or fund at any time
exclusively by action of the Company, and no additional contributions would be
required to properly effect such termination;
(viii) the execution, delivery and performance of, and
consummation of the transactions contemplated by, this Agreement will not (1)
entitle any current or former employee, director, officer, consultant,
independent contractors, contingent worker or leased employee (or any of their
dependents, spouses or beneficiaries) of the Company to severance pay,
unemployment compensation or any other payment, or (2) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
individual, except that the termination
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of the Plan as contemplated by Section 6.07(f) will cause any existing unvested
account balances of plan participants to fully vest; and
(ix) the Company does not have any duty or obligation to
indemnify or hold another Person harmless for any liability attributable to any
acts or omissions by such Person with respect to any Employee Plan.
4.15 EMPLOYEES. Set forth on Schedule 4.15 is a complete and accurate
list of the names, social security numbers, dates of hire, annual wages or
hourly wage rates (including 2008 raises), as the case may be, and job
descriptions of all present employees of the Company who are in active
employment (whether full-time or part-time) on the date hereof. An employee
shall be considered "in active employment" if he or she performs services or is
on vacation or authorized leave on the date hereof.
4.16 INSURANCE. Schedule 4.16 contains a true and complete list of all
policies of liability, theft, fidelity, business interruption, life, fire,
errors and omissions, workers compensation, health and other material forms of
insurance held by the Company (specifying the insurer, amount of coverage, type
of insurance, policy number, scope (including an indication of whether the
coverage was on claims made, occurrence or some other basis (and if on a claims
made basis, a description of any retroactive premium adjustments), and any
material pending claims thereunder.
4.17 CERTAIN PAYMENTS. Except as set forth on Schedule 4.17, none of
the Company, Xxxxxxxx or, to Xxxxxxxx'x knowledge, any other officer, director,
manager, or any employee, agent or other Person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift,
contribution, bribe, rebate, payoff, influence payment, kickback or similar
benefit, to any customer, supplier, employee or agent of a customer or supplier,
or official or
-20-
employee of any Governmental Entity or other Person who was, is, or may be in a
position to help or hinder the business or the Company (or assist in connection
with any actual or proposed transaction) that (a) could subject any Company to
any damage or penalty in any Proceeding, (b) if not given in the past, would
have resulted in a loss of business to the Company, or (c) if not continued in
the future, could reasonably be expected to result in a loss of business to the
Company. There is not now, and there has never been, any employment by the
Company of, or beneficial ownership in any Company by, any official of any
Governmental Entity in any jurisdiction in which the Company has conducted or
proposes to conduct business.
4.18 PRACTICE OF ACCOUNTING. The Company is registered as a public
accounting firm with the state boards of accountancy in New Jersey, New York and
Pennsylvania. The Company has never engaged in audit, tax or attest services and
has never issued a report (including any compilation, review or audit report) on
the financial statements of any Person nor has it ever prepared a tax return for
any Person.
4.19 FINDER. There is no firm, corporation, agency or other person or
entity that is entitled to a finder's fee or any type of brokerage commission in
relation to or in connection with the transactions contemplated by this
Agreement as a result of any agreement or understanding with the Company or any
of its directors, officers or employees or their respective affiliates.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF SMARTPROS
SmartPros hereby represents and warrants to Xxxxxxxx as follows:
5.01 ORGANIZATION AND GOOD STANDING. SmartPros is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to conduct its business as is
now being conducted and to own or lease and
-21-
operate the assets and properties owned or leased and operated by it and is duly
qualified to do business and is in good standing in the State of New York.
5.02 AUTHORITY AND COMPLIANCE. SmartPros has full corporate power and
authority to execute and deliver this Agreement and the related transaction
documents referenced in this Agreement. The consummation and performance by
SmartPros of the transactions contemplated by this Agreement have been duly and
validly authorized by all necessary corporate and other proceedings. This
Agreement has been duly and validly executed and delivered on behalf of
SmartPros and constitutes a valid obligation of SmartPros, enforceable in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable insolvency, bankruptcy, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by general equity
principles. No consent, authorization or approval of, exemption by, or filing
with, any Governmental Entity, lender or other Person is required to be obtained
or made by SmartPros in connection with the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
5.03 FINDER. There is no firm, corporation, agency or other person or
entity that is entitled to a finder's fee or any type of brokerage commission in
relation to or in connection with the transactions contemplated by this
Agreement as a result of any agreement or understanding with SmartPros or any of
its directors, officers or employees or their respective affiliates.
5.04 FUNDING. SmartPros has available all necessary funds to pay in
full the Consideration due and payable at Closing, and the consummation of the
transactions contemplated by this Agreement is not contingent or dependent on
SmartPros' obtaining financing or funding, or a commitment for financing or
funding, from any third party. SmartPros is solvent and able to pay its debts
and perform its obligations as and when they become due, and the consummation of
the
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transactions contemplated by this Agreement will not render SmartPros insolvent
or unable to pay its debts or perform its obligations as and when due.
5.05 INVESTMENT. SmartPros is acquiring the Stock for its own account
for investment purposes only and not with a view to, or for sale in connection
with, any distribution within the meaning of the Securities Act of 1933, as
amended, and the accompanying rules and regulations. SmartPros understands that
the Stock has not been registered and may be subject to restrictions against
further resale or transfer in the absence of registration or an available
exemption from registration.
ARTICLE VI
----------
COVENANTS
6.01 CONDUCT OF BUSINESS UNTIL CLOSING DATE. Xxxxxxxx hereby covenants
and agrees with SmartPros that from and after the Effective Time until the
Closing Date, she will cause or has caused the Company to:
(a) operate its business only in the usual, regular and ordinary
manner and, to the extent consistent with such operation, to (i) preserve its
present business organization intact, (ii) use its reasonable efforts to keep
available the services of its present officers and significant employees, and
(iii) use its reasonable efforts to preserve the present business relationships
with customers, suppliers, and others having business dealings with them;
PROVIDED, HOWEVER, no payments of any kind (whether for compensation, loans
payable, distributions or otherwise) shall be made, for the benefit of or on
behalf of Xxxxxxxx, XX or Xxxxxxxx & Company, L.L.C. or any of their affiliates
other than any payment of any liability included in the determination of the
Effective Time Net Assets;
-23-
(b) maintain for the Company the ownership of and/or the right to
use the Company Rights and maintain in full force and effect insurance with
responsible companies comparable in amount, scope and coverage to that in effect
on the date of this Agreement;
(c) maintain its books, records and accounts in the usual, regular
and ordinary manner on a basis consistent with prior periods;
(d) duly comply in all material respects with all laws known to be
applicable to the Company and material to the conduct of its business; and
(e) perform all of its material obligations without default unless
being contested in good faith.
6.02 TAX RETURNS.
(a) FILING OF CERTAIN TAX RETURNS AFTER CLOSING DATE.
(i) Xxxxxxxx shall prepare, or cause to be prepared, a draft
of each Tax Return required to be filed by or with respect to the Company after
the Closing Date for Tax Periods ending on or before the Closing Date, including
any Stub Period ("Pre-Closing Returns"). For the avoidance of doubt, it is
acknowledged and understood that the Pre-Closing Returns to be prepared by
Xxxxxxxx after the Closing Date shall include, without limitation, Forms 1120
for (A) the full 12-month taxable year ending December 31, 2007 and (B) a Stub
Period ending on the Closing Date. Xxxxxxxx'x draft of any Pre-Closing Return
shall be submitted by her to SmartPros (together with copies of all schedules,
statements, work papers and supporting documentation) at least thirty (30) days
prior to the due date for the filing of the Pre-Closing Return. At the
reasonable request of Xxxxxxxx for any extension for the filing of a Pre-Closing
Return, SmartPros shall not unreasonably withhold consent or refuse to file for
the extension. Xxxxxxxx shall have the final and exclusive authority to
determine all reporting positions on Pre-Closing Returns,
-24-
PROVIDED THAT (x) SmartPros shall have a reasonable opportunity to review and
comment on Pre-Closing Returns, and (ii) Xxxxxxxx'x determinations shall be made
in good faith and in accordance with Section 6.02(a)(v). The final version of
each Pre-Closing Return shall be executed by an appropriate officer of the
Company at the direction of SmartPros and filed by the Company with the
applicable Taxing Authority. The Company shall remit (or cause to be remitted)
any Taxes payable by the Company in respect of each Pre-Closing Return, directly
to the applicable Governmental Entity, subject to adjustment in accordance with
Section 6.02(a)(iv) (to reflect the agreed-upon sharing of Tax liability for
such Pre-Closing Return between Xxxxxxxx and SmartPros).
(ii) SmartPros shall file or cause to be filed when due all
Tax Returns that are required to be filed by or with respect to the Company for
Tax Periods ending after the Closing Date, including all Tax Returns for any
Straddle Period.
(iii) Any Tax Return required to be filed by SmartPros
relating to any Straddle Period ("Straddle Return") shall be submitted (together
with copies of all schedules, statements, workpapers and supporting
documentation) to Xxxxxxxx at least thirty (30) days prior to the due date for
the filing of such Straddle Return. Xxxxxxxx shall have a reasonable opportunity
to review and comment upon each Straddle Return prior to its filing. SmartPros
shall have the final and exclusive authority to determine all reporting
positions on Straddle Returns, PROVIDED THAT such determinations shall be made
in good faith and in accordance with Section 6.02(a)(v). SmartPros shall cause
the completed Straddle Returns to be executed and filed with the appropriate
Governmental Entities. The Company shall remit (or cause to be remitted) any
Taxes payable by the Company in respect of each Straddle Return, directly to the
applicable Tax-
-25-
ing Authority, subject to adjustment in accordance with Section 6.02(a)(iv) (to
reflect the agreed-upon sharing of Tax Liability for such Straddle Return
between Xxxxxxxx and SmartPros).
(iv) At least five (5) business days prior to the filing of a
Pre-Closing Return or Straddle Return, an amount equal to the (A) the Tax
Liability, if any, which is attributable to the period ending at or before the
Effective Time (the "Pre-Effective Time Period"), determined in accordance with
Section 6.02(b), shall be payable by Xxxxxxxx to SmartPros, and (B) the Tax
overpayment, if any, which is attributable to the Pre-Effective Time Period,
determined in accordance with Section 6.02(b), shall be payable by SmartPros to
Xxxxxxxx. If Xxxxxxxx and SmartPros are unable to agree on the amount payable
under this Section 6.02(a)(iv) within (10) business days after they have started
good faith discussions, any unresolved dispute shall be promptly submitted to
and determined by an independent accounting firm jointly selected by SmartPros
and Xxxxxxxx, with such determination being final and binding. The fees of such
independent accounting firm shall be allocated 50% to Xxxxxxxx and 50% to
SmartPros.
(v) Any Pre-Closing Return or Straddle Return shall be
prepared in a manner consistent with past Tax accounting practices used with
respect to the Tax Return in question to the extent supported by applicable Law
and without a change of any election or accounting method.
(vi) Any amended Tax Return or claim for Tax refund ("Amended
Return") for any Pre-Closing Period shall be filed, or caused to be filed,
solely by Xxxxxxxx, and any Amended Return for a Straddle Period shall be filed,
or caused to be filed, solely by SmartPros; PROVIDED, HOWEVER, that any such
Amended Return shall be subject to all of the provisions set forth in this
Section 6.02(a) applicable to the Tax Return being amended (as if such Amended
Return constituted the filing of an original Tax Return); PROVIDED FURTHER,
HOWEVER, that no such
-26-
Amended Return shall be filed by Xxxxxxxx or SmartPros without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
None of SmartPros or any affiliate of SmartPros shall file or shall cause or
permit the Company to file any Amended Return for any Pre-Closing Period without
the prior written consent of Xxxxxxxx, which consent may be withheld in her sole
discretion.
(b) APPORTIONMENT OF TAX LIABILITIES BETWEEN XXXXXXXX AND
SMARTPROS.
(i) To the extent permitted or required by law or
administrative practice, the Tax Period of the Company which includes the
Closing Date shall be treated as closing as of 11:59 p.m. on the Closing Date;
provided, however, that all transactions not in the ordinary course of business
actually occurring after the Closing shall be reported on SmartPros'
consolidated federal income Tax Return to the extent permitted by
ss.1.1502-76(b)(1)(ii)(B) of the Treasury Regulations and shall be similarly
reported on other Tax Returns of SmartPros or its affiliates to the extent
permitted by Law.
(ii) For purposes of computing the amount payable referred to
in Section 6.02(a)(iv), the Tax Liability or Tax overpayment allocable to the
Pre-Effective Time Period shall be determined by using an "interim
closing-of-the-books" method AS IF the Company's Tax Period had ended at the
Effective Time (using the cash method of accounting for all income and franchise
tax purposes), even though applicable Laws or administrative practice require
such Company's Tax Period to close as of some other date, and by assuming that
any estimated Tax payments or overpayments applied from previous Tax Periods are
allocated entirely to the Pre-Effective Time Period; PROVIDED, HOWEVER, that AD
VALOREM or other taxes not based on income or receipts, such as personal
property Taxes or "minimum" state or local franchise or income Taxes,
-27-
shall be apportioned on a daily basis. SmartPros shall not make a "ratable
allocation" election under ss.1.1502-76(b)(2)(ii) of the Treasury Regulations.
(iii) Notwithstanding the provisions of Section 9.01 (relating
to indemnification by Xxxxxxxx), Xxxxxxxx shall not be liable to any Indemnified
Party for (x) any Taxes or related Losses attributable to a breach of SmartPros'
covenants in Section 6.02(e), or (y) any Taxes or related Losses attributable to
the period (if any) between the Effective Time and the Closing Date (determined
in accordance with the principles of Section 6.02(b)(i) and (ii)), PROVIDED THAT
such Taxes or related Losses do not result from a breach of any of the
representations, warranties, covenants or agreements made by Xxxxxxxx in this
Agreement, or (z) any Taxes incurred as a result of SmartPros' or its
affiliates' failure to cause the Company to timely file or have filed on its
behalf any Tax Return which SmartPros is required to cause the Company to file
pursuant to the terms of this Agreement, PROVIDED THAT Xxxxxxxx has complied in
all material respects with any covenants relating to the preparation of such Tax
Returns set forth in this Section 6.02.
(c) CERTAIN TAX REFUNDS.
(i) Any Tax refund (including any interest in respect of the
refund) received by or on behalf of the Company with respect to a Pre-Effective
Time Period, and any amounts credited against Tax of the Company with respect to
a Pre-Effective Time Period to which SmartPros or the Company becomes entitled
(including by way of any Amended Returns), shall be for the account of Xxxxxxxx,
except to the extent that such refund or credit was included in the
finally-determined Effective Time Net Assets Statement, in which case such
refund or credit shall be for the account of SmartPros.
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(ii) Any Tax refund (including any interest in respect of the
refund) received by Xxxxxxxx or the Company with respect to a period ending
after the Effective Time, and any amounts credited against Tax with respect to
such period to which Xxxxxxxx or the Company becomes entitled (including by way
of any Amended Return), shall be for the account of SmartPros.
(iii) For purposes of this Section 6.02(c), whenever a refund
or credit must be apportioned between Xxxxxxxx and SmartPros, such refund or
credit shall be apportioned in accordance with the principles of Section
6.02(b).
(d) ASSISTANCE AND COOPERATION ON TAX MATTERS. After the Closing,
Xxxxxxxx and SmartPros shall cooperate fully, as and to the extent reasonably
requested by any other party, in connection with the filing of Tax Returns
pursuant to this Section 6.02 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided under this Agreement.
(e) NO SECTION 338 ELECTION. SmartPros shall not make any election
under Section 338 of the Code or any similar provision of state or local Law.
6.03 EMPLOYMENT AGREEMENTS. At the Closing, (a) Xxxxxxxx shall enter
into an employment agreement with SmartPros in substantially the form annexed
hereto as Exhibit D-1 (the "Xxxxxxxx Employment Agreement") and (b) WL shall
enter into an employment agreement with SmartPros in substantially the form
annexed hereto as Exhibit D-2 (the "Xxxxxxx Employment Agreement") (collectively
the "Employment Agreements").
-29-
6.04 COVENANT NOT TO COMPETE. Xxxxxxxx and WL each acknowledge that, as
of the date hereof: (a) the Company is engaged in the business of developing and
providing educational programs for the accounting, engineering, legal and other
professions, various market segments, such as financial services, insurance and
pharmaceuticals, and compliance and ethics programs for the general corporate
market (the "Competitive Business"); (b) the Competitive Business is currently
conducted, or proposed to be conducted, throughout the United States (the
"Restricted Area"); and (c) the agreements and covenants contained in this
Section 6.04 are essential to protect the business and goodwill of the Company
which business and goodwill are being acquired by SmartPros hereunder in
exchange for the Consideration. Accordingly, each of Xxxxxxxx and WL agrees that
for a period of ten (10) years from and after the Closing Date (the "Restricted
Period"), she or he will not, directly or indirectly, in the Restricted Area,
otherwise than as an employee of or consultant to the Company: (x) engage or
participate in the Competitive Business; (y) enter the employ of, or render any
services (whether or not for a fee or other compensation) to, any person or
entity engaged in the Competitive Business; or (z) acquire an equity interest in
any person engaged in the Competitive Business; provided that Xxxxxxxx and WL
may each own, directly or indirectly, solely as a passive investment, not more
than five (5%) percent of the outstanding securities of any company traded on
any national securities exchange or on the National Association of Securities
Dealers Automated Quotation System. Notwithstanding the foregoing, neither
Xxxxxxxx nor WL shall be deemed to be engaging in a Competitive Business during
the Restricted Period by (i) teaching accounting or accounting-related subject
matter or performing accounting-related research or writing at a college,
university or other secondary level educational institution, (ii) writing
occasional articles on the topic of accounting or related subject matter for
dissemination in journals, magazines and other media intended for general
circulation or
-30-
circulation within the accounting profession generally, or (iii) practicing
traditional accounting, including the rendering of audit and attest services,
tax and forensic accounting, and related consulting services; PROVIDED, HOWEVER,
being employed or retained by an academic institution or other employer that has
a division or branch that engages in a Competitive Business shall not alone be
deemed a violation of this Section 6.04, so long as the Executive does not
personally participate or otherwise engage in the Competitive Business or work
in or assist the division or branch that engages in the Competitive Business.
Xxxxxxxx and WL each acknowledge that a violation of any of the
covenants contained in this Section 6.04 may cause irreparable injury to
SmartPros and that money damages would not provide an adequate remedy to
SmartPros, and therefore, SmartPros shall, in addition to, and not in lieu of,
any other rights and remedies available to any of them under law or in equity,
have the right and remedy to have the covenant set forth in this Section 6.04
specifically enforced by any court of competent jurisdiction.
In the event the covenants contained in this Section 6.04 should be
held by any court or other duly constituted judicial authority to be void or
otherwise unenforceable in any particular jurisdiction or with respect to any
particular activity or with respect to the period of restraint, then such
covenants so affected shall be deemed to have been amended and modified so as to
eliminate therefrom the particular jurisdiction or activity as to which such
covenants are so held to be void or otherwise unenforceable or to reduce the
period of restraint, and, as so modified and as to all other jurisdictions and
activities covered hereby, the terms and provisions hereof shall remain in full
force and effect.
6.05 LEASE OF PREMISES. At Closing, Xxxxxxxx shall cause 130 Monmouth
to enter into a lease with the Company for the premises at 000 Xxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxxxx (the
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"Premises") in the form of Exhibit C hereto (the "Lease"). The Company's payment
and performance under the Lease shall be guaranteed by SmartPros.
6.06 REPAYMENT OF MORTGAGE. Xxxxxxxx shall, prior to the Effective
Time, cause 130 Associates to repay to the Company the entire principal amount
and accrued interest of the mortgage on the Premises held by the Company.
6.07 EMPLOYEE MATTERS. (a) With respect to each employee of the
Company, SmartPros shall take into account the period of continuous employment
with the Company solely (i) for the purpose of applying the waiting period
requirements (or any similar provisions) under any group health, accident or
life insurance plan maintained or sponsored by or contributed to by SmartPros
under which coverage of all employees of the Company will be provided as of the
Closing Date, (ii) for purposes of applying the participation and vesting
requirements (but not for purposes of determining the extent of benefit accrual)
under SmartPros' pension, 401(k) savings, health and welfare, disability
benefit, executive compensation, incentive and bonus plans, programs or
arrangements and (iii) for purposes of determining vacation entitlement in
accordance with the express terms of SmartPros' vacation policies as may exist
for time to time. SmartPros shall not recognize the period of employment of any
employee of the Company under any other plan or arrangement maintained by
SmartPros or for any purposes other than as described above.
(b) Notwithstanding anything to the contrary contained herein,
SmartPros may (i) unilaterally change the salary (either by increase or
decrease) and/or the title and duties of any employee of the Company at any time
after the Closing Date and (ii) at SmartPros' sole discretion, change or
eliminate any of the plans, policies or arrangements of SmartPros applicable to
the employees of the Company, including, without limitation, the plans, policies
and arrangements of SmartPros referred to in this Section 6.07.
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(c) With respect to any employee of the Company on or prior to the
Closing Date, SmartPros and Xxxxxxxx hereby agree as follows:
(i) Any health, accident and other employee welfare benefit
claims of such employee and their eligible dependents to the extent such claims
are incurred on or before the Closing Date and are covered and not excludable
under the applicable employee plan of the Company, regardless of when any such
claim is submitted for payment, shall be treated as a Liability arising on or
before the Effective Time. For purposes of this Section 6.07(c), a health or
accident claim shall be deemed to have been incurred when the event or condition
that is the subject of the claim occurred and treatment is sought;
(ii) Any worker's compensation benefits, occupational disease
claims and employer liability claims (collectively "Comp Claims") shall be
treated as a Liability arising before the Effective Time if the event which
caused the injury or illness upon which the Comp Claim is based occurred prior
to the Closing Date;
(iii) Any other employment-related claim shall be treated as a
Liability arising before the Effective Time if the event upon which the claim is
based occurred prior to the Closing Date; and
(iv) Any obligation for vacation pay entitlements for periods
ending at the Effective Time shall be treated as a Liability arising before the
Effective Time. There shall be included as part of the Estimated ETNA and the
Net Assets Statement the Vacation Accrual. Promptly following the Closing,
SmartPros shall pay, or shall cause the Company to pay, to the Company's
employees all accrued and unused vacation time carried over from years prior to
2008, to the extent reflected in the Vacation Accrual less any required
withholding taxes, and SmartPros or the Company shall also pay or remit to the
applicable Governmental Entity any re-
-33-
lated payroll Taxes associated with such accrued vacation payments. SmartPros
and the Company shall recognize the entitlement of the employees to paid
vacation time, accrued and unused by them for calendar year 2008 through the
Effective Time, to the extent reflected in the Vacation Accrual, and shall
permit the employees to take such paid vacation time in 2008 after the Closing
in accordance with their already scheduled vacation plans, if applicable, and
otherwise as shall be scheduled with SmartPros' approval in accordance with
SmartPros' customary vacation policy. Any such accrued vacation time not taken
in 2008 shall be forfeited to the extent SmartPros' customary vacation policy so
provides, and SmartPros shall so advise the employees promptly following the
Closing. Any employee whose employment with SmartPros terminates on or before
December 31, 2008, whether with or without cause, shall be paid for any
remaining unused 2008 vacation time that accrued prior to the Effective Time and
was included within the Vacation Accrual. Vacation entitlements after the
Effective Time shall accrue in accordance with SmartPros' vacation policy and
shall be for SmartPros' account.
(d) Prior to the Closing Xxxxxxxx, in her capacity as president of
the Company and trustee of the Plan, shall cause the Company to adopt
appropriate resolutions to freeze and terminate the Plan in accordance with the
terms of the Plan and applicable Law. Within thirty (30) days of the Closing
Date Xxxxxxxx shall apply to the IRS for a determination letter in connection
with the Plan termination, and Xxxxxxxx shall be responsible for the costs of
the application and making any required Form 5500 filings pending receipt of the
IRS determination letter. The vested account balances of the participants shall
be distributed to them after the Closing in accordance with the terms of the
Plan and applicable Law upon receipt of the IRS determination letter, if
applicable, or at such other time as Xxxxxxxx shall determine, pending which
Xxxxxxxx shall remain as sole trustee of the Plan. SmartPros maintains a 401(k)
savings plan ("Buyer's
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Savings Plan"). SmartPros agrees that Buyer's Savings Plan will accept rollovers
(including direct rollovers pursuant to Section 401(a)(31) of the Code), from or
with respect to, any Company employee of any "eligible rollover distribution"
(within the meaning of Section 401(a)(31) of the Code) from the Company's Plan
at any time after the Closing Date, subject to the Company providing SmartPros
with satisfactory evidence that the distributing plan meets the requirements for
qualification under Section 401(a) of the Code in form and in operation and
distributions may properly be made from such Plan in accordance with applicable
law. Except as provided above, neither SmartPros nor the Buyer's Savings Plan
shall assume responsibility for accrued benefits or accounts under any qualified
employee plan maintained by the Company prior to the Closing Date.
(e) None of SmartPros, Xxxxxxxx or the Company intends this
Section 6.07 to create any rights or interest except as among them, and no
present or future employees of either party (or any dependents of such
employees) will be treated as third party beneficiaries in or under this
Agreement.
6.08 AUDIT PACKAGES. Within twenty (20) days after the Closing Date,
Xxxxxxxx shall provide SmartPros with such information, or shall use her
reasonable best efforts to obtain such information, if such information is not
in her or the Company's possession, as may be reasonably necessary or desirable
to enable SmartPros to prepare financial statements for the Company in
accordance with GAAP as at December 31, 2007 and June 30, 2008 and for the years
ended December 31, 2007 and 2006 and the six months ended June 30, 2008
(collectively, the "Financial Statements"). Xxxxxxxx and WL shall be actively
involved in preparing the Financial Statements and shall be afforded the
opportunity to meet with representatives of HRR, the firm who will be auditing
the Financial Statements. Upon completion of the audit to her satisfaction,
which shall
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be determined in good faith, Xxxxxxxx agrees to execute and deliver such
letters, documents and certificates, including management certifications and
"rep" letters, as HRR shall reasonably request in order that they may issue
their audit report. The audits shall be conducted at the sole cost and expense
of SmartPros and, except as set forth in Section 2.04 with respect to the 2007
Audit Report, the results of such audits shall be for SmartPros' purposes only
and shall have no effect on the Consideration.
6.09 CONVERSION OF P.A. Concurrently with the Closing, Xxxxxxxx shall
sign and cause to be filed with the New Jersey Department of Treasury,
Commercial Recording Division, on behalf of the Company a certificate of
amendment to the Company's certificate of incorporation, in the form of EXHIBIT
E, which shall change the Company's name to "Xxxxxxxx Associates Ltd." and
provide that effective immediately, the Company is converted from a professional
service corporation service to a business corporation operating under the New
Jersey Business Corporation Act, N.J.S.A. 14A:1-1 ET SEQ., exclusive of the
provisions of the P.A. Act. Promptly upon the Closing, Xxxxxxxx shall also sign
and file evidence of the name change with the corporate filing office of the
Commonwealth of Pennsylvania and shall at the same time notify the state boards
of accountancy in the States of New Jersey and New York and the Commonwealth of
Pennsylvania about the name change and the Company's conversion from a
professional service accounting firm to a regular business corporation. All
out-of-pocket costs and expenses of such filings and notifications, together
with any additional filings and notifications that may be required in the same
or any other jurisdictions in connection with the Company's name change and
conversion, shall be borne and paid by Xxxxxxxx and not by SmartPros.
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6.10 MISCELLANEOUS. (a) As soon as reasonably practicable, the Company
shall sell the Lexus ES300 that it owns and within ten (10) days of its receipt
of the proceeds from such sale, remit 50% of the net proceeds to Xxxxxxxx as
additional purchase price for the Stock.
(b) The Company shall obtain a "tail" for its professional
liability policy as in effect immediately prior to the Closing, covering
pre-Effective Time acts and omissions, for such period as Xxxxxxxx shall
specify. Xxxxxxxx shall reimburse the Company for the cost of such extension.
ARTICLE VII
-----------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SMARTPROS
The obligations of SmartPros pursuant to this Agreement are subject to
the satisfaction at the Closing of each of the following conditions; provided,
however, that SmartPros may, in its sole discretion, waive any of such
conditions in writing and proceed with the transactions contemplated hereby.
7.01 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Xxxxxxxx contained in this Agreement or any other document
delivered by the Xxxxxxxx to SmartPros at the Closing in connection with this
Agreement shall be true and correct in all material respects on and as of the
Closing Date.
7.02 PERFORMANCE OF AGREEMENTS. Xxxxxxxx shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by her on or before the Closing Date pursuant
to this Agreement.
7.03 LITIGATION, ETC.
(a) No claim, action, suit, proceeding, arbitration, or hearing or
notice of hearing shall be pending (and no action or investigation by any
governmental authority shall be
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threatened) which seeks to enjoin or prevent the consummation of the
transactions contemplated by this Agreement.
(b) No law, regulation or governmental decree shall have been
adopted or promulgated after the date hereof, the enforcement of which would
materially adversely affect the assets, properties, financial condition, results
of operations, properties, business or prospects of the Company, taken as a
whole; and no law, regulation or governmental decree shall have been adopted or
promulgated after the date hereof, the enforcement of which would materially
adversely affect the ability of SmartPros to consummate the transactions
contemplated by this Agreement.
7.04 EMPLOYMENT AGREEMENTS. Each of the Employment Agreements shall
have been executed and delivered by Xxxxxxxx and WL, respectively.
7.05 APPROVALS; CONSENTS. All material approvals, consents, waivers,
filings, registrations, permits, authorizations or other actions by or from
Governmental Entities which are required in connection with the consummation of
the transactions contemplated by this Agreement or on account of the change in
ownership of the Company, as and to the extent set forth on Schedule 7.05, shall
have been obtained or made.
7.06 GOOD STANDING CERTIFICATES. SmartPros shall have received
certificates of the Secretaries of State (or other applicable office) in the
jurisdiction in which the Company is organized and in those jurisdictions in
which the Company is qualified to do business, dated as of a date not more than
ten (10) days prior to the Closing Date, certifying as to the good standing of
the Company in each such jurisdiction.
7.07 PREMISES LEASE. The Lease shall have been executed and delivered
by 130 Associates and the Company.
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7.08 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
and delivered by Xxxxxxxx and the Escrow Agent.
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF XXXXXXXX
The obligations of Xxxxxxxx under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions; provided,
however, that Xxxxxxxx acting in her sole discretion may waive any of such
conditions in writing and proceed with the transactions contemplated hereby.
8.01 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of SmartPros contained in this Agreement or any other document
delivered by SmartPros to Xxxxxxxx at the Closing in connection with this
Agreement shall be true and correct in all material respects on and as of the
Closing Date.
8.02 PERFORMANCE OF AGREEMENTS. SmartPros shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by SmartPros on or before the Closing Date
pursuant to this Agreement.
8.03 LITIGATION, ETC.
(a) No claim, action, suit, proceeding, arbitration or hearing or
notice of hearing shall be pending (and no action or-investigation by any
governmental authority shall be threatened) which seeks to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
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(b) No law, regulation or governmental decree shall have been
adopted or promulgated after the date hereof, the enforcement of which would
materially adversely affect the ability of Xxxxxxxx to consummate the
transactions contemplated by this Agreement.
8.04 EMPLOYMENT AGREEMENTS. The Employment Agreements shall have been
executed and delivered by SmartPros.
8.05 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
and delivered by SmartPros and the Escrow Agent.
8.06 PREMISES LEASE. The Lease shall have been executed and delivered
by SmartPros as guarantor.
ARTICLE IX
----------
INDEMNIFICATION
9.01 INDEMNIFICATION BY XXXXXXXX. Xxxxxxxx hereby covenants and agrees
with SmartPros that Xxxxxxxx shall reimburse and indemnify SmartPros and its
respective successors and assigns (individually an "Indemnified Party") and hold
them harmless from, against and in respect of any and all Losses incurred by any
of them due to, arising out of, or in connection with, (i) a breach of any of
the representations, warranties, covenants or agreements made by Xxxxxxxx in
this Agreement, or (ii) any Pre-Closing Liability (as defined below) or (iii)
any Losses arising in connection with the Plan regardless of whether such Losses
arise prior or subsequent to the Effective Time or (iv) any amounts due and
payable by Xxxxxxxx to the Escrow Agent pursuant to Section 2.02 hereof. As used
in this Article IX, "Pre-Closing Liability" means any Liability of the Company
or Xxxxxxxx, fixed or contingent, known or unknown, arising before the Closing
that was not included in the determination of the Net Assets Statement, except
for (i) Liabilities, including Liabilities for Taxes, accrued expenses and trade
accounts payable, arising from or
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incurred in respect of the operations of the Company in the ordinary course of
business between the Effective Time and the Closing Date and which are intended
to be for the account and at the expense of SmartPros in accordance with Section
2.05; and (ii) Liabilities consisting of executory obligations for payment or
performance, including executory obligations under the Lease and other
Contracts, accruing in respect of or intended to be performed in any period
following the Effective Time.
9.02 INDEMNIFICATION BY SMARTPROS. SmartPros hereby covenants and
agrees with Xxxxxxxx that it shall reimburse and indemnify her and her
respective successors and assigns (also individually an "Indemnified Party") and
hold them harmless from, against and in respect of any and all Losses incurred
by any of them due to, arising out of, or in connection with, (i) a breach of
any of the representations, warranties, covenants or agreements made by
SmartPros in this Agreement, or (ii) the operation of the Company or the
business of the Company from and after the Closing Date or (iii) any amounts due
and payable by SmartPros to the Escrow Agent pursuant to Section 2.02 hereof.
9.03 INDEMNIFICATION PROCEDURES.
(a) A claim for indemnification for any matter not involving a
Third Party Claim (as defined below) may be asserted by written notice to the
party from whom indemnification is sought stating in reasonable detail the
nature of the claim and the amount claimed or demanded therewith within ten (10)
business days after first having actual knowledge of the matter; provided that
no failure to provide such written notice shall excuse the indemnifying party
from any of its obligations under this Article IX except to the extent that the
indemnifying party can demonstrate actual loss and prejudice as a result of such
failure. Any dispute with respect to such claim shall be resolved in accordance
with Section 10.10 below.
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(b) In the event that any proceedings shall be instituted or that
any claim or demand shall be asserted by any third party in respect of which
indemnification may be sought under this Article IX (regardless of the
limitations set forth herein) (each, a "Third Party Claim"), the Indemnified
Party shall promptly cause written notice of the assertion of any Third Party
Claim of which it has knowledge which is covered by such indemnity to be
forwarded to the indemnifying party. The failure of the Indemnified Party to
give reasonably prompt notice of any Third Party Claim shall not release, waive
or otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss and
prejudice as a result of such failure. The indemnifying party shall have the
right, at its sole expense and with counsel of its choice, to defend against,
negotiate, settle or otherwise deal with any Third Party Claim which relates to
any Losses indemnified against hereunder, including but not limited to asserting
claims and affirmative defenses and impleading or pursuing claims against other
Persons who may have been responsible for all or part of the Losses associated
with such Third Party Claim, provided that no settlement shall be effected by
the indemnifying party without the consent of the Indemnified Party unless it
solely involves the payment of money by the indemnifying party and contains a
complete release of the Indemnified Party with respect to such Third Party
Claim. If the indemnifying party makes any payment on any Third Party Claim, the
indemnifying party shall be subrogated, to the extent of such payment, to all
rights and remedies of the Indemnified Party to any insurance benefits or other
claims of the Indemnified Party with respect to such Third Party Claim.
9.04 OFFSET FOR THIRD-PARTY RECOVERIES. In determining an Indemnified
Party's Losses subject to indemnification under this Article IX, such Losses
shall be determined after subtracting any insurance proceeds or other recoveries
actually received from any third party
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by the Indemnified Party with respect to such Losses, less (in the case of
insurance proceeds) any applicable policy deductibles, and in each case less
reasonable out-of-pocket fees and expenses incurred by the Indemnified Party in
recovering such amounts.
9.05 LIMITATIONS. (a) Xxxxxxxx shall not be required to indemnify
SmartPros or any related Indemnified Party against Losses for any breaches of
representations or warranties made in Articles III and IV unless and until the
aggregate amount of all Losses from all breaches of representations and
warranties by Xxxxxxxx exceeds the sum of $20,000 in the aggregate; PROVIDED,
HOWEVER, in the event Losses exceed $20,000 Xxxxxxxx shall be responsible for
100% of the Losses.
(b) Xxxxxxxx shall not be required to indemnify SmartPros or any
related Indemnified Party to the extent Losses exceed $2.9 million in the
aggregate, except as provided in Section 9.05(c).
(c) Notwithstanding anything contained to the contrary in Section
9.05(a) or 9.05(b) above, Xxxxxxxx shall be required to indemnify SmartPros for
100% of the Losses incurred by SmartPros resulting from: (i) a breach of any
representation or warranty in Sections 3.01 (Ownership), 3.02 (No Liens), 4.06
(Accounts Receivable), 4.09 (Taxes and Tax Returns) or 4.19 (Finder); (ii) fraud
or willful malfeasance on the part of Xxxxxxxx; or (iii) a breach of any
covenant or agreement contained in Article VI.
(d) Any amount to which SmartPros is entitled under Section 9.01
shall first be made as a payment to SmartPros from the funds deposited with the
Escrow Agent in accordance with the terms of the Escrow Agreement until such
funds have been exhausted and then directly from Xxxxxxxx.
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9.06 EXCLUSIVE REMEDY. Following the Closing, and except in the case of
(i) demonstrated fraud or willful malfeasance, or (ii) breach of any of the
provisions of Article VI, indemnification as provided in this Article IX shall
be the sole and exclusive remedy of Xxxxxxxx and SmartPros and each of their
respective Indemnified Parties; PROVIDED, HOWEVER, that this exclusivity
provision shall not be deemed a waiver by any party of any right to specific
performance or injunctive relief. Any indemnification payments made pursuant to
this Article IX shall be treated for all Tax purposes as adjustments to the
Consideration.
ARTICLE X
---------
GENERAL PROVISIONS
10.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS. The representations and warranties contained in this Agreement shall
survive the closing of the transactions contemplated by this Agreement until
July 3, 2011; PROVIDED, HOWEVER, that the representations and warranties
relating to federal, state local and foreign Tax obligations of the Company
shall survive for the period of the applicable statute of limitations with
respect thereto. If any claim for indemnity has been timely made but has not
been resolved by the parties prior to the expiration of the applicable time
period of survival then, and in such event, such claim shall survive until
finally resolved, but otherwise no claim for indemnity shall be made or asserted
after the expiration of the applicable time period of survival.
10.02 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, and except as may be otherwise expressly provided
elsewhere in this Agreement, all costs and expenses incurred by SmartPros in
connection with this Agreement and the transactions contemplated hereby
(including all legal fees) shall be paid by SmartPros and all costs and
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expenses incurred by Xxxxxxxx in connection with this Agreement and the
transactions contemplated hereby (including all legal fees) shall be paid by
Xxxxxxxx.
10.03 NOTICES. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given (a) when delivered in
person, (b) one business day following dispatch by an overnight courier service
(such as Federal Express or UPS, etc.) for next business day delivery, or (c)
five (5) days after dispatch by certified or registered first class mail,
postage prepaid, return receipt requested, in each case addressed as follows to
the party to whom the same is so given or made:
If to SmartPros addressed to: 00 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
with a copy to: Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
If to Xxxxxxxx addressed to: 00 Xxxxxxxxx Xxxxxx
Xxxx 00X
Xxx Xxxx, Xxx Xxxxxx 00000
with a copy to: Orloff, Lowenbach, Xxxxxxxxx &
Xxxxxx, P.A.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
or to such other address as any of the parties shall hereafter notify to the
other parties in writing.
10.04 ASSIGNABILITY AND AMENDMENTS. This Agreement and the rights and
obligations created hereunder shall not be assignable by any of the parties.
This Agreement cannot be altered or otherwise amended except pursuant to an
instrument in writing signed by each of the parties.
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This Agreement shall be binding upon and inure to the benefit of the parties,
their successors, legal representatives and assigns.
10.05 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
which are a part hereof and the other writings and agreements specifically
identified herein, together with the Non-Disclosure Agreement dated April 9,
2008 between the Company and SmartPros, contain the entire agreement between the
parties with respect to the transactions contemplated herein and supersede all
previous written or oral negotiations, commitments and understandings.
10.06 WAIVERS, REMEDIES. Any condition to the performance of any party
hereto which legally may be waived on or prior to the Closing Date may be waived
by the party entitled to the benefit thereof. Any waiver must be in writing and
signed by the party to be bound thereby. A waiver of any of the terms or
9conditions of this Agreement shall not in any way affect, limit or waive a
party's rights under any other term or condition of this Agreement. Except where
otherwise expressly provided in this Agreement, all remedies under this
Agreement shall be cumulative and not alternative.
10.07 COUNTERPARTS AND HEADINGS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. All headings (including,
without limitation, Article headings and Section titles) are inserted for
convenience of reference only and shall not affect its meaning or
interpretation.
10.08 SEVERABILITY. If and to the extent that any court of competent
jurisdiction holds any provision (or any part thereof) of this Agreement to be
invalid or unenforceable, such holding shall in no way affect the validity of
the remainder of this Agreement.
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10.09 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to conflict
of law provisions.
10.10 DISPUTE RESOLUTION AND ARBITRATION.
(a) Each and every controversy or claim arising out of or relating
to this Agreement and/or any document executed or delivered in connection
herewith shall first be addressed through good faith discussions between the
parties to resolve such dispute.
(b) Except for those matters in dispute between the parties which
pursuant to the express provisions of this Agreement are to be submitted for
conclusive resolution by an independent public accounting firm jointly selected
by SmartPros and Xxxxxxxx, in the event that any controversy or claim arising
out of or relating to this Agreement and/or any document executed or delivered
in connection herewith cannot be resolved between the parties within thirty (30)
days of written notice thereof despite their good faith efforts pursuant to (a)
above, such controversy or claim shall be settled by arbitration in accordance
with the commercial rules of the American Arbitration Association, in New York,
New York and judgment upon the award rendered in such arbitration shall be final
and binding upon the parties and may be entered in any court having jurisdiction
thereof. Notice of the demand for arbitration shall be filed in writing with the
other party to this Agreement, which such demand shall set forth the claims to
be submitted to arbitration. Notwithstanding the foregoing, this agreement to
arbitrate shall not bar any party from seeking injunctive relief or other
temporary relief in any court of competent jurisdiction and such relief may be
sought prior to any good faith discussions between the parties to attempt to
resolve such dispute. This agreement to arbitrate may be specifically enforced
by a court of competent jurisdiction under the applicable law of the State of
New York pertaining to arbitrations. The rules of the American Arbitration
Association concerning commercial disputes
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shall be applicable to any such arbitration proceeding except as they may be
modified by the terms of this Agreement.
(c) The arbitrators shall have the authority and jurisdiction to
enter any preliminary award that would aid and assist the conduct of the
arbitration or preserve the parties' rights with respect to the arbitration as
the arbitrators shall deem appropriate in their discretion. The award of the
arbitrators shall be in writing and it shall specify in detail the issues
submitted to arbitration and the award of the arbitrators with respect to each
of the issues so submitted. The parties hereby agree that any such arbitration
award shall be final and binding on all parties hereto, and shall be enforceable
by any court of competent jurisdiction.
(d) Counsel to the parties in connection with the negotiation of
and consummation of the transactions under this Agreement shall be entitled to
represent their respective party in any and all Proceedings under this Section
or in any other Proceeding. The parties hereto waive the right and agree they
shall not seek to disqualify any such counsel in such Proceedings for any
reason, including but not limited to the fact that such counsel or any member
thereof may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose interests
are adverse to the party represented by such counsel in any such Proceedings.
10.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption of burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
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10.12 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be
deemed to confer rights on any Person or to indicate that this Agreement has
been entered into for the benefit of any Person other than the parties hereto.
10.13 FURTHER ASSURANCES. At any time after the Closing Date, each
party shall upon the reasonable request of the other party, execute, acknowledge
and deliver all such further and other assurances and documents, and will take
such action consistent with the terms of this Agreement, as may be reasonably
requested to carry out the transactions contemplated herein and to permit each
party to enjoy its rights and benefits hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
SMARTPROS LTD.
By:
-----------------------
Xxxxx X. Xxxxxx,
Chief Executive Officer
------------------------
Xxxxxxxx Xxxxxxxx
------------------------
Xxxxxxx Xxxxxxxx
(as to Sections 6.04 and 6.08 only)
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EXHIBIT A
---------
DEFINITIONS
The following terms used in this Agreement shall have the respective
meanings set forth below.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
"CONFIDENTIAL INFORMATION" means Intellectual Property Rights of the
Company and all information of a proprietary nature relating to the Company or
its business, excluding any information that (a) as of the date hereof, is in
the public domain; or (b) after the date hereof enters the public domain through
no wrongful action or inaction on the part of Xxxxxxxx.
"CONTRACT" means any written or oral contract, Permit, loan or credit
agreement, note, bond, mortgage, indenture, lease, sublease, purchase order or
other agreement, instrument, concession, franchise or license.
"EE EQUITY" means the Company's general partnership interest in the
real estate investment limited partnership known as "E.E. Equity Partnership,
Ltd.", which interest was transferred by the Company to WL as of June 30, 2008.
"EFFECTIVE TIME" means the effective time as of which the Closing shall
be deemed to have occurred in accordance with Section 2.05, which shall be
11:59:59 p.m., Monday, June 30, 2008.
"EMPLOYEE BENEFIT PLAN" means, with respect to any Person, (a) each
plan, fund, program, agreement, arrangement or scheme providing for employee
benefits or for the remuneration, direct or indirect, of the employees, former
employees, directors, managers, officers, of such Person or the dependents or
beneficiaries of any of them (whether written or oral), including each deferred
compensation, bonus, incentive compensation, pension, retirement, stock
purchase, stock option and other equity compensation plan, "welfare" plan
(within the meaning of Section 3(1) of ERISA), (b) each "pension" plan (within
the meaning of Section 3(2) of ERISA), (c) each severance plan or agreement,
health, vacation, summer hours, supplemental unemployment benefit,
hospitalization insurance, medical, dental, legal and (d) each other employee
benefit plan, fund, program, agreement, arrangement or scheme under which such
Person has any Liability, whether direct or indirect. Notwithstanding the
foregoing the payment of wages and payments made in connection with legally
required benefits such as social security, unemployment insurance, workers
compensation, etc. shall not be deemed to be an "Employee Benefit Plan"
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, or any successor federal Law, and the rules and regulations promulgated
thereunder, all as the same may from time to time be in effect.
"GAAP" means United States generally accepted accounting principles
employed in the United States.
"GOVERNMENTAL ENTITY" means any national, federal, state, county,
local, Canadian, or other foreign court, tribunal, arbitral body, arbitrator,
administrative agency or commission or other governmental or regulatory
authority or instrumentality.
"INTELLECTUAL PROPERTY" means all intangible and intellectual property
owned by the Company or licensed to the Company including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, fictitious business names (d/b/a's), service marks, service xxxx
applications, registered copyrights, copyright applications, URL's, domain
names, know-how, trade secrets, proprietary processes and formulae, Confidential
Information, franchises, licenses, customer lists, inventions, instructions,
marketing materials, trade dress, logos and designs and all documentation and
media constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
"INTELLECTUAL PROPERTY RIGHTS" means all rights in Intellectual
Property.
"IRS" means the Internal Revenue Service of the United States.
"LAW" means any law (both common and statutory law and civil and
criminal law), treaty, convention, rule, directive, legislation, ordinance,
regulatory code (including, without limitation, statutory instruments, guidance
notes, circulars, directives, decisions, rules and regulations) or similar
provision having the force of law or an order of any Governmental Entity or any
self regulatory organization.
"LIABILITY" means any actual or potential liability or obligation
(including as related to Taxes), whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated and whether due or to become due, regardless of when asserted.
"LOSSES" means any and all out-of-pocket losses, claims, shortages,
damages, Liabilities and expenses (including reasonable attorneys' and
accountants' and other professionals' fees and litigation expenses and the costs
of enforcement of any and all indemnification claims under ARTICLE IX), arising
from or in connection with any such matter that is the subject of
indemnification under ARTICLE IX, whether or not foreseeable; provided, however,
"Losses" shall not include any amount constituting consequential, exemplary or
punitive damages, except in the case of a breach of any of the provisions of
Article VI.
"130 MONMOUTH" means 000 Xxxxxxxx Xxxxxx, LLC.
"P.A. ACT": As defined in Section 3.04.
"PERMITS" means all permits, licenses, authorizations, filings or
registrations, franchises, approvals, certificates (including certificates of
need), exemptions, variances and similar rights obtained, or required to be
obtained, from Governmental Entities.
"PERSON" shall be construed as broadly as possible and shall include an
individual or natural person, a partnership (including a limited liability
partnership), a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a Governmental Entity.
-2-
"PROCEEDINGS" means actions, suits, claims, reviews, and investigations
and legal, administrative or arbitration proceedings.
"STRADDLE PERIOD" means, with respect to the Company, any Tax Period
that begins before and ends after the Closing Date.
"STUB PERIOD" means a Tax Period beginning before the Closing Date and
ending on the Closing Date.
"TAX" OR "TAXES" means, with respect to any entity, any Liability for
(a) all income taxes (including any tax on or based upon net income, gross
income, income as specially defined, earnings, profits or selected items of
income, earnings or profits) and all gross receipts, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax and other additional amounts imposed by any
Governmental Entity (domestic or foreign) on such entity (if any); and (b) any
obligation to indemnify or otherwise assume or succeed to the Tax Liability of
any other Person.
"TAX PERIOD" means, with respect to any Tax, the taxable year or other
period for which the Tax is reported in accordance with applicable Tax Laws.
"TAX RETURNS" means federal, state, local and foreign returns, reports,
statements, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, including any amendment
thereof.
"TREASURY REGULATIONS" means the final, temporary or proposed (as the
case may be) Treasury Regulations promulgated under the Code.
"VACATION ACCRUAL" means the amount to be reflected as an accrued
expense within the Estimated XXXX and the Net Assets Statement, representing
accrued and unused vacation entitlements of the Company's employees for the
period January 1, 2008 through the Effective Time, plus any accrued and unused
vacation entitlements carried over from prior calendar years, inclusive in each
case of the employer's share of FICA, FUTA and any other applicable payroll
Taxes on such amounts.
-3-
