EX-2 EXECUTION VERSION MEMBERSHIP INTEREST PURCHASE AGREEMENT by and between ASSOCIATED BANK, N.A. and USI INSURANCE SERVICES LLC Dated the 4TH day of May, 2020. US 167664346 HB: 4845-7978-5147.2
EX-2 EXECUTION VERSION MEMBERSHIP INTEREST PURCHASE AGREEMENT by and between ASSOCIATED BANK, N.A. and USI INSURANCE SERVICES LLC Dated the 4TH day of May, 2020. US 167664346 HB: 4845-7978-5147.2
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by, or under common control with, such specified Person. “Ancillary Agreements” means the Transition Services Agreement, the Referral Agreement, the Assignment of Equity Interests, the New Real Estate Leases, and the Service Fee Agreements. “Xxxxxxxx Merger Agreement” means that certain Agreement and Plan of Merger dated May 1, 2018, by and among Associated Banc-Corp, the Company, The Xxxxxxxx Insurance Investment Agency and Xxxxx X. Xxxxx. “Antitrust Clearances” means the requisite clearances, approvals, or expirations of waiting periods, as applicable, under the Antitrust Laws of the U.S. related to the transactions contemplated by this Agreement. “Antitrust Laws” means any national, regional, domestic or foreign Law designed or intended to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade or the significant impediment of effective competition. “Applicable Employment Agreement” means that certain Employment Agreement identified as Item 3 in subsection (xii) of Schedule 3.13(a). “Assignment of Equity Interests” means the Assignment of Equity Interests executed by Seller in favor of Buyer, substantially in the form attached hereto as Exhibit 1.1(d). “Associated Benefit Plan” means each Employee Benefit Plan currently sponsored or maintained by Associated Banc-Corp. “Balance Sheet Date” means March 31, 2020. “Benefit Advisors Network” means Benefit Advisors Network, LLC, an Ohio limited liability company. “Business Day” means any day except Saturday, Sunday or any days on which banks in Milwaukee, Wisconsin or New York, New York are required by Law to close. “Buyer Fundamental Representations and Warranties” means those (and only those) representations and warranties expressly set forth in Section 5.2 (Authorization), Section 5.3(a) (Consents and Approvals; No Violations) and Section 5.9 (Certain Fees). “Cash” means, other than Trust Cash, all cash and cash equivalents (calculated in accordance with GAAP and measured in U.S. Dollars), as of the Valuation Time; provided, however that Cash shall (a) be increased by, to the extent not already included, (i) checks received but not cleared, wire transfers and drafts deposited or pending deposit for the account of the Company, in each case to the extent actually cleared, and (ii) deposits in money market accounts or other interest-bearing accounts, (b) be reduced by any issued but uncleared checks, wire transfers and drafts written or issued by the Company, and (c) exclude all credit card receivables and debit card receivables. “Charter Documents” means, (a) with respect to a limited liability company, the articles or certificate of organization or formation, and limited liability company agreement or operating agreement, as applicable, (b) with respect to a corporation, the certificate or articles of incorporation and bylaws, (c) with respect to a limited partnership, the certificate of limited partnership and the agreement of limited 2 US 167664346 HB: 4845-7978-5147.2
partnership and (d) with respect to any other entity, documentation of similar substance to any of the foregoing. “Client Accounts” shall mean all business accounts with clients of the Covered Business. “Code” means the U.S. Internal Revenue Code of 1986, as amended. “Combined Tax Return” means any Tax Return of any affiliated group within the meaning of Section 1504(a) of the Code or any other affiliated, combined, unitary or similar group defined under any state, local, or non-U.S. Law that includes Seller or any of its Affiliates that are not being transferred pursuant to this Agreement, on the one hand, and the Company, on the other hand. “Company Benefit Plan” means each Employee Benefit Plan sponsored or maintained by the Company that pertains to any current or former employee, director or independent contractor of the Company or with respect to which the Company may otherwise have any Liability. “Company Indebtedness” means the aggregate amount of Indebtedness of the Company as of immediately prior to Closing. “Company Intellectual Property” means, other than the Seller Marks, all Intellectual Property (i) owned or purported to be owned or controlled by the Company, or (ii) otherwise used or held for use by the Company and material to the Covered Business, including Company Registered Intellectual Property. “Company Registered Intellectual Property” means, except for any Seller Marks, all of the Registered Intellectual Property that is (i) owned or purported to be owned by the Company, or (ii) otherwise used or held for use by the Company and material to the Covered Business. “Company Transaction Expenses” means, without duplication, the sum of all unpaid (as of immediately prior to Closing) fees, costs and expenses that are incurred by the Company in connection with the transactions contemplated by this Agreement, including (a) all fees, costs and expenses of any brokers, investment bankers, financial advisors, consultants, accountants, attorneys or other professionals or advisors engaged by or paid by the Company in connection with the structuring, negotiation or consummation of the transactions contemplated by this Agreement, (b) all transaction-related bonuses, change-in-control payments, severance payments, termination payments, retention payments, or similar payments or benefits that become payable or due to any current or former director, employee, independent contractor or other service providers of the Company as a result of or in connection with the consummation of the transactions contemplated by this Agreement, excluding, in the case of this clause (b), the retention payments which are the subject of Section 6.10(d) and (c) the aggregate amount of the employer share of any payroll, social security, unemployment, excise or similar Taxes related to the items described in clause (b) above (excluding any Taxes relating to the retention payments which are the subject of Section 6.10(d)). “Confidential Information Memorandum” means the Confidential Information Memorandum prepared by Xxxxxxx Xxxxx and dated April 2020, regarding the Company and the Covered Business delivered to Buyer and its Affiliates or agents. “Confidentiality Agreement” means that certain Project Aspen – Confidentiality Agreement, dated April 2, 2020, by and between the Company (and/or its Affiliates) and Buyer. “Consultant” means any employee or other service provider of the Covered Business primarily engaged in the marketing of, or consulting with respect to, insurance and/or other products of the Covered 3 US 167664346 HB: 4845-7978-5147.2
Business, as identified on Schedule 3.18(a)(i) by the title “Consultant I,” “Consultant II” or “Consultant III.” “Contracts” means all agreements, contracts, leases, subleases, purchase orders, licenses, sublicenses, instruments and legally enforceable commitments, in each case whether written or oral. “Covered Taxes” means (a) all Taxes imposed on Seller with respect to any Taxable period; (b) all Pre-Closing Taxes; (c) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor thereof) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar state, local or non-U.S. Law; (d) all Taxes of any Person (other than the Company) imposed on the Company as a transferee or successor; by contract, agreement or arrangement; or otherwise; which Taxes are imposed on the Company as a result of an event, transaction or agreement occurring or entered into before the Closing (excluding any Taxes that are not for a Taxable period (or portion thereof) ending on or prior to the Closing Date and that arise pursuant to a standard commercial agreement entered into in the ordinary course of business and with respect to which Taxes is not a primary purpose); and (e) all Transfer Taxes for which Seller is responsible pursuant to Section 6.8(e). “Current Assets” means the current assets of the Company as of the Valuation Time, determined in accordance with the Accounting Principles and the methodology set forth on Exhibit 1.1(a)-A. “Current Liabilities” means the current liabilities of the Company as of the Valuation Time, determined in accordance with the Accounting Principles and the methodology set forth on Exhibit 1.1(a)- A. “Employee Benefit Plan” means, with respect to any Person, each plan that provides employee benefits, money, services, property or other benefits for the employees, former employees, directors, or independent contractors of such Person or the dependents of any of them, including (a) each profit sharing, 401(k), stock purchase, stock option, equity and equity-based compensation, deferred compensation, cash incentive compensation, severance pay, employment, excess or supplemental benefit, vacation, fringe benefit, change in control, retention or other compensatory plan, contract, scheme, program, commitment or arrangement of any kind, (b) each “welfare” plan (within the meaning of Section 3(1) of ERISA, determined without regard to whether such plan is subject to ERISA) and (c) each “pension” plan (within the meaning of Section 3(2) of ERISA, determined without regard to whether such plan is subject to ERISA). “Environmental Laws” means all Laws relating to pollution control, protection of the environment, including surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, or ambient air and Laws related to Hazardous Substances. “Environmental Permits” means all Licenses issued pursuant to Environmental Laws. “Equity Rights” means with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person’s capital stock or other equity interests (including partnership or membership interests in a partnership or limited liability company or any other interest or participation that confers on a Person the right to receive a share of the profits and losses, or distributions of assets, of the issuing Person, and options, warrants and other securities exercisable or convertible into capital stock or other equity interests of the issuing Person). “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. 4 US 167664346 HB: 4845-7978-5147.2
“Excess Cash” means the aggregate amount of Cash of the Company as of the Valuation Time. For the avoidance of doubt, Excess Cash shall never be less than zero. “Excluded Assets” means each of the assets listed on Schedule 1.1. “Final Adjusted Base Purchase Price” means an amount equal to (a) the Base Purchase Price, minus (b) any Specified Producer Base Purchase Price Adjustment required by Section 2.2(d), plus (c) any Specified Producer Base Purchase Price Adjustment Reversal Amount required by Section 2.6(e). “Financial Statements” means (a) the unaudited balance sheet of the Company as of December 31, 2019 and the unaudited statement of profit and loss for the Company for the year then ended, (b) the pro forma unaudited statement of profit and loss for the Covered Business for the year then ended, and (c) the pro forma unaudited balance sheet of the Covered Business as of March 31, 2020. “Fundamental Representations and Warranties” means the Seller Fundamental Representations and Warranties and the Buyer Fundamental Representations and Warranties. “GAAP” means generally accepted accounting principles in the U.S. applied on a consistent basis. “Governmental Entity” means any foreign, federal, state, provincial or local government, any political subdivision thereof or any court, administrative or regulatory agency, department, instrumentality, or other governmental authority, self-regulatory organization, quasi-governmental or arbitral authority or agency. “Hazardous Substance” means any waste, pollutant, contaminant, hazardous substance, toxic or corrosive substance, hazardous waste, special waste, industrial substance, by-product, process-intermediate product or waste, petroleum or petroleum-derived substance or waste, chemical liquids or solids, liquid or gaseous products, or any constituent of any such substance or waste, the use, handling or disposal of which by the Company is governed by or subject to applicable Law. “Historical Production Spreadsheets” means, collectively, those certain spreadsheets delivered by Seller identified on Exhibit 1.1(h), which spreadsheets provide certain historical production information for each employee or other service provider who is a Consultant II or Consultant III. “HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976. “Income Tax Return” means a Tax Return for Income Taxes. “Income Taxes” means any Tax based upon, measured by, or calculated with respect to (a) net income or profits or overall gross income or gross receipts or (b) multiple bases if one or more of the bases on which that Tax may be measured or calculated is described in clause (a) of this definition (including franchise Tax). “Indebtedness” means (a) all indebtedness or obligations for borrowed money or for the deferred purchase price or conditional sale of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit, bankers’ acceptances and similar transactions, in each case to the extent drawn upon or payable and not contingent, but excluding accounts payable incurred in the Ordinary Course and to the extent included in Closing Net Working Capital), (b) all obligations evidenced by notes, bonds, debentures or other similar instruments, (c) all obligations under interest rate swap Contracts, swap Contracts, foreign currency exchange Contracts or other hedging or similar Contracts (including any breakage or associated fees), (d) all obligations with respect to any earn-out, purchase price, post-closing adjustment or other similar contingent payments under any acquisition or similar agreements 5 US 167664346 HB: 4845-7978-5147.2
(excluding the earn-out and deferred purchase price payable pursuant to the Xxxxxxxx Merger Agreement), (e) lease obligations that are required to be accounted for as a finance or capital lease in accordance with GAAP, (f) all obligations of such Person to make or pay any dividend, distribution or equityholder bonus to any other Person, (g) all obligations in respect of sale-leaseback transactions, synthetic leases or similar items, (h) any post-employment or severance/termination pay obligations of the Company or the Covered Business incurred prior to the Closing, plus the employer share of any payroll, social security, unemployment, excise or similar Taxes related thereto, (i) the amount of any Loss Contingencies required to be accrued in accordance with FASB Accounting Standards Codification 450 (which shall, for the avoidance of doubt, include unpaid, incurred and estimated to be incurred attorneys’ fees), which amount shall be included as Indebtedness regardless of whether such accruals would be made under the Accounting Principles, (j) all obligations of the type referred to in (a) through (i), of any Person for which the Company is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, (k) all obligations of the type referred to in clauses (a) through (j), secured by any Lien on any property or asset of the Company, and (l) accrued but unpaid interest, prepayment and redemption premiums or penalties breakage costs, unpaid fees and expenses or similar charges associated with any of the foregoing obligations (other than Indebtedness described in clauses (e) ˗ (i)) or that would arise in connection with the discharge of any of the foregoing obligations (other than Indebtedness described in clauses (e) ˗ (i)) in connection with the transactions contemplated hereby as of immediately prior to Closing, regardless if any of such amounts are actually paid. “Insurance Policies” means policies and programs of or agreements for insurance and interests in insurance pools and programs (in each case including self-insurance and insurance from Affiliates). “Intellectual Property” means any or all of the following, and all rights, arising out of or associated therewith: (a) all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know-how, technology, technical data and customer lists and all documentation relating to any of the foregoing; (c) all works of authorship (whether copyrightable or not), all copyrights, copyright registrations and applications therefor and all other rights corresponding thereto, moral rights, database rights, and rights in confidential information; (d) all industrial designs and any registrations and applications therefor; and (e) all internet uniform resource locators, trade names, social media account identifiers, slogans, designs, and other Trademarks. “Knowledge” with respect to Seller, means all facts actually known by any of those individuals listed on Exhibit 1.1(b), and all such facts as any of those individuals would have become aware after conducting a reasonable inquiry. “Law” or “Laws” means any statutes, rules, codes, regulations or ordinances of, or issued by, Governmental Entities. “Leased Real Property” means the premises and the parcels of real property currently leased by the Company, together with all fixtures and improvements thereon. “Legal Dispute” means any Action between or among the Parties arising in connection with any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or any related document. “Liabilities” means all liabilities and obligations of every kind and nature, whether accrued, fixed or contingent, mature or inchoate, known or unknown, reflected on a balance sheet or otherwise, including, 6 US 167664346 HB: 4845-7978-5147.2
but not limited to, those arising under any Law or any judgment of any court of any kind or any award of any arbitrator of any kind, and those arising under any Contract, commitment or undertaking. “Licenses” means all licenses, permits, certificates, exemptions, variances, and approvals issued by any Governmental Entity. “Liens” means mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances. “Loss Contingencies” means any loss contingencies as defined by FASB Accounting Standards Codification 450, which shall include (a) any Action against the Company not listed on Schedule 3.11 or circumstances that could give rise to an Action, and (b) any asserted claims of errors or omissions or other professional liability claims. “Losses” means any claims, Liabilities, damages, losses, costs, expenses, penalties, fines and judgments (at equity or at law, including statutory and common) and damages whenever arising or incurred (including reasonable attorneys’ fees and expenses, but not including any such fees or expenses in connection with investigating or pursuing any claim hereunder), but excluding punitive or exemplary damages except to the extent actually required to be paid in relation to a Third Party Claim. Losses shall be reduced to the extent of any insurance proceeds and other recoveries actually received by a Party with respect to such Losses. “LPL Networking Contract” means the Financial Institution Services Agreement, between Seller and LPL Financial LLC, dated July 1, 2013, as modified by that certain Addendum to Financial Institution Services Agreement, dated March 31, 2018. “Material Adverse Effect” means any event, change, circumstance or effect that has occurred that (i) has had, or would reasonably be expected to have, individually or in the aggregate with any other event, change, circumstance or effect, a material adverse effect upon the Company or the Covered Business, in each case, taken as a whole or (ii) would prevent, materially impair or delay Seller’s ability to perform or comply with its obligations under this Agreement or to consummate any of the transactions contemplated by this Agreement, other than events, changes, circumstances or effects resulting from or relating to (a) general economic or market conditions affecting the industry or markets in which the Company operates, (b) the announcement of the transactions contemplated by this Agreement, (c) (i) the execution of or the taking of any action expressly required by this Agreement or the taking of any action requested in writing by Buyer or (ii) the consummation of the transactions contemplated by this Agreement, (d) any change or proposed change in GAAP or other accounting requirements or principles or the interpretation thereof or any change or proposed change in applicable Laws or the interpretation thereof, (e) any national or international political conditions, including the engagement by any jurisdiction in which the Company operates in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence or escalation of any military or terrorist attack, (f) pandemics, epidemics, or outbreaks (including, without limitation, the COVID-19 pandemic and any Orders enacted in connection therewith or in response thereto, any actions required to be taken pursuant to such Orders, any conditions arising as a result thereof and any other actions taken by the Company in response to the COVID-19 pandemic that are of a nature and scale consistent with the types of actions taken by similarly situated businesses in response to the COVID-19 pandemic), (g) earthquakes, hurricanes, tornadoes or other natural disasters, (h) general financial, banking, securities or capital market conditions, including interest rates or market prices, or changes therein, or (i) any failure by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement (it being understood that any underlying facts giving rise or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining 7 US 167664346 HB: 4845-7978-5147.2
whether there has been a Material Adverse Effect), unless in the case of each of clauses (a) and (d)-(h) such changes have had or would reasonably be expected to have a disproportionate impact upon the Company or the Covered Business, in each case, taken as a whole, relative to other participants in the industries in which the Covered Business conducts business. “Net Working Capital” means Current Assets minus Current Liabilities, determined as of the Valuation Time in accordance with the Accounting Principles and the methodology set forth on Exhibit 1.1(a)-A. “Net Working Capital Adjustment” means the amount by which Net Working Capital is less than the Net Working Capital Target. The Net Working Capital Adjustment may only be a positive number. “Net Working Capital Target” means $0.00. “New Real Estate Leases” means each of the following: (a) a lease in the form attached as Exhibit 1.1(f)-A between Seller, as landlord, the Company, as tenant, and Buyer, as guarantor, pertaining to the Kimberly, WI location and (b) a lease in the form attached as Exhibit 1.1(f)-B between Seller, as landlord, the Company, as tenant, and Buyer, as guarantor, pertaining to the Minnetonka, MN location. “NLRB” means the U.S. National Labor Relations Board. “Order” means any award, order, judgment, writ, injunction, ruling or decree entered, issued, made or rendered by any Governmental Entity of competent jurisdiction. “Ordinary Course” means the ordinary course of business of the Covered Business consistent with past practice. “Permitted Liens” means (a) Liens imposed by Law for Taxes not yet due and payable or for Taxes that are being properly contested in good faith and for which appropriate reserves have been established and accrued in the financial statements of the Covered Business in accordance with GAAP, (b) statutory Liens of landlords under the Real Property Leases, (c) Liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen and other like Liens imposed by Law or Contract incurred in the Ordinary Course that are not overdue or that are overdue and are being properly contested and for which appropriate reserves have been established in the financial statements of the Covered Business in accordance with GAAP, (d) easements, zoning restrictions, rights-of-way, Licenses, covenants, conditions, minor defects, encroachments or irregularities in title and similar encumbrances on or affecting any real property that do not secure any monetary obligations and do not materially interfere with the ordinary conduct of the Covered Business at any real property subject to such Liens, (e) (i) any interest or title of a lessor or sublessor, or lessee or sublessee under any lease, (ii) restriction or encumbrance that the interest or title of such lessor or sublessor, or lessee or sublessee may be subject to or (iii) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (ii), (f) Liens on goods held by suppliers arising in the Ordinary Course for sums not yet delinquent or being properly contested in good faith and for which appropriate reserves have been established in the financial statements of the Covered Business in accordance with GAAP and as long as such Lien remains unperfected, (g) with respect to any real property in which the Company, the Seller or one of their respective Affiliates owns a leasehold estate, any defect or encumbrance caused by or arising out of the failure to record the lease or a memorandum thereof in the applicable real property records in the jurisdiction where such real property is located and (h) the effect of any moratorium, eminent domain or condemnation proceedings; provided, that notwithstanding the foregoing, the term “Permitted Liens” will not include any Lien securing indebtedness for money borrowed by the Company. 8 US 167664346 HB: 4845-7978-5147.2
“Person” means any individual, partnership, joint venture, corporation, trust, limited liability company, unincorporated organization or other entity or any Governmental Entity. “Personal Information” means any data or information that (a) identifies, relates to, describes, is reasonably capable of directly or indirectly being associated with a particular individual or household or (b) which is otherwise defined as “personally identifiable information,” “personal information,” “personal data” or other similar term (as applicable), within the meaning of any applicable Laws. “Pre-Closing Taxes” means all Taxes imposed on or with respect to the Company (or any predecessor thereof) for any Taxable period that ends on or prior to the Closing Date and, for any Straddle Period, the portion of such Straddle Period through the end of the Closing Date (determined in accordance with Section 6.8(c)). For purposes of this definition, any penalties or additions to Tax accruing after the Closing Date with respect to Pre-Closing Taxes shall be deemed to be attributable to a Taxable period (or portion thereof) ending on or prior to the Closing Date. “Privacy Obligations” means, collectively, all: (a) applicable Laws, (b) the Company’s rules, policies, procedures and terms of use (including all applicable privacy policies), and (c) contractual requirements or obligations binding on the Company, as each may be amended from time to time, that in each case pertains to privacy or restrictions or obligations related to the collection or other processing of Personal Information. “Referral Agreement” means that certain Referral Agreement executed by Buyer and Seller (or its Affiliates), substantially in the form attached hereto as Exhibit 1.1(e). “Registered Intellectual Property” means all (a) patents and patent applications (including provisional applications), (b) registered Trademarks and any applications related to Trademarks, (c) registered copyrights and applications for copyright registration, (d) domain names registered with any domain name registrar, and (e) other Intellectual Property that is the subject of any registration or application therefor with any Governmental Entity. “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, dumping or disposing into the environment. “Retirement Plan Consulting Business” has the meaning ascribed to such term in the recitals hereto, and includes the books and records of such business (including the required records of such business under applicable Law). “Retirement Plan Consulting Business Spreadsheet” means that certain spreadsheet delivered by Seller to Buyer on May 3, 2020 (with receipt acknowledged in writing on the date hereof by an authorized representative of Buyer) and labeled as the “Retirement Plan Consulting Business Spreadsheet Dated March 31, 2020”, which spreadsheet identifies each of the Client Accounts of the Retirement Plan Consulting Business as of the date thereof. “Sales Consultant Incentive Plan” means the incentive compensation arrangements between Seller and/or the Company and the Consultants. “Schedules” means the schedules to this Agreement. “Seller Fundamental Representations and Warranties” means those (and only those) representations and warranties expressly set forth in Section 3.1(a) (Organization), Section 3.2 (Capitalization), Section 3.3 (Subsidiaries and Other Equity Rights), Section 3.4(a) (Consents and Approvals; No Violations), 9 US 167664346 HB: 4845-7978-5147.2
Section 3.14 (Taxes), Section 3.19 (Certain Fees), Section 3.26 (Certain Regulatory Matters), Section 4.1 (Authorization), Section 4.2 (Equity Interests Ownership), Section 4.3(a) (Consents and Approvals) and Section 4.4 (Certain Fees). “Seller Marks” means the marks attached hereto as Exhibit 1.1(a)-B. “SERP” means that certain Associated Supplemental Executive Retirement Plan for Xxxxxx Xxxxx, effective April 1, 2003. “Service Fee Agreements” means each of the following: (a) a service fee agreement in the form attached as Exhibit 1.1(g)-A between Seller’s parent and the Company pertaining to property and casualty related products or services and the agreement of Seller’s parent to continue to use the Company as its insurance broker of record for a specified period of time after the Closing and (b) a service fee agreement in the form attached as Exhibit 1.1(g)-B between Seller’s parent and the Company pertaining to employee benefits related products or services and the agreement of Seller’s parent to continue to use the Company as its insurance broker of record for a specified period of time after the Closing. “Solvent” when used with respect to any Person or group of Persons on a combined basis, means that, as of any date of determination, (a) the amount of the “fair saleable value” of the assets of such Person (or group of Persons on a combined basis), determined on a going-concern basis, will, as of such date, exceed (i) the value of all “liabilities of such Person, including contingent and other liabilities,” as of such date, as such quoted terms are generally determined in accordance with applicable Laws governing determinations of the insolvency of debtors, and (ii) the amount that will be required to pay the probable liabilities of such Person (or group of Persons on a combined basis) on its existing debts (including contingent liabilities) as such debts become absolute and matured, (b) such Person (or group of Persons on a combined basis) will not have, as of such date, an unreasonably small amount of capital for the operation of the businesses in which it is engaged and (c) such Person (or group of Persons on a combined basis) will be able to pay their respective debts in the ordinary course of business as they become due. “Subsidiary” or “Subsidiaries” means any and all corporations, partnerships, limited liability companies, joint ventures and other entities, whether incorporated or incorporated, of which at least a majority of the securities, or other interests having by their terms voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization, is directly or indirectly, owned by any Person or by any one or more of such Person’s subsidiaries. “Tax Return” means any original or amended report, return, declaration, claim for refund or information return or statement required to be supplied to a Governmental Entity in connection with Taxes, including any schedule or attachment thereto. “Taxes” (and with a correlative meaning, “Taxable”) means (a) all federal, state, local or non-U.S. taxes, charges, duties, fees, levies or other assessments, including income, gross receipts, License, payroll, employment, excise, stamp, occupation, premium, windfall profits, environmental, customs duties, escheat, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, imposed by any Governmental Entity, and (b) any interest, penalty or addition in respect of any item described in clause (a), in each case, whether disputed or not. “Trademarks” means all registered trademarks and service marks, logos, internet domain names, trade names, corporate names and doing business designations and all registrations and applications for registration of the foregoing, common law trademarks and service marks and trade dress. 10 US 167664346 HB: 4845-7978-5147.2
(including the calculations included therein) delivered by Buyer, which shall be final, binding and conclusive for all purposes hereunder. In the event there is a dispute, Buyer and Seller will attempt in good faith to reconcile their differences, and any written resolution by them as to any disputed amounts will be final, binding and conclusive on the Parties. Any items agreed to by Seller and Buyer in writing, together with any items not disputed or objected to by Seller in a dispute notice, are collectively referred to herein as the “Resolved Matters”. If Seller and Buyer are unable to reach a resolution with such effect within 30 days after the receipt by Buyer of Seller’s written notice of dispute, Seller and Buyer will submit the items remaining in dispute (the “Unresolved Matters”) for resolution to the Chicago, Illinois office of PricewaterhouseCoopers or, if the Chicago, Illinois office of PricewaterhouseCoopers is unwilling or unable to serve, to a nationally recognized accounting firm mutually agreed upon by Seller and Buyer (which shall not be the primary auditor of either Buyer or Seller) (such identified or selected firm, the “Independent Accountant”). The Independent Accountant will act as an expert, and not an arbitrator, and will use commercially reasonable efforts to issue its report as to all Unresolved Matters (and only such matters) and the determination of the Adjustment Amounts within 30 days after such dispute is referred to the Independent Accountant. The Independent Accountant will not have the power to modify or amend any term or provision of this Agreement. All communications between a party and the Independent Accountant shall be in writing and shall be transmitted to the other party at the same time they are transmitted to the Independent Accountant and neither Buyer nor Seller shall have ex parte communications with the Independent Accountant. The Independent Accountant’s determination shall be based solely on the written submissions of the parties and not an independent investigation. With respect to each Unresolved Matter, the Independent Accountant’s determination, if not in accordance with the position of either Seller or Buyer, will not be in excess of the higher, nor less than the lower, of the amounts advocated by Seller or Buyer with respect thereto. The Independent Accountant’s final written determination will be conclusive and binding upon the Parties. Buyer on the one hand, and Seller on the other hand, will bear all costs and expenses incurred by them in connection with such arbitration, except that the fees and expenses of the Independent Accountant hereunder will be borne by Buyer, on the one hand, and Seller, on the other hand, in the same proportion that the aggregate amount of Unresolved Matters submitted to the Independent Accountant that is unsuccessfully disputed by each such Party (as finally determined by the Independent Accountant) bears to the total amount of such disputed items submitted. This provision will be specifically enforceable by the Parties, and the decision of the Independent Accountant in accordance with the provisions hereof will be final and binding with respect to the matters so arbitrated and there will be no right of appeal therefrom. (c) The “Final Closing Statement” will be (i) in the event that no dispute notice is delivered by Seller to Buyer, or Seller notifies Buyer that it has no such disputes or objections to the Buyer Closing Statement, in each case prior to the expiration of the Review Period, the Buyer Closing Statement delivered by Buyer to Seller pursuant to Section 2.6(a); (ii) in the event that a dispute notice is delivered by Seller to Buyer prior to the expiration of the Review Period, the Buyer Closing Statement delivered by Buyer to Seller pursuant to Section 2.6(a), as adjusted pursuant to the agreement of Seller and Buyer in writing; or (iii) in the event that a dispute notice is delivered by Seller to Buyer prior to the expiration of the Review Period and Seller and Buyer are unable to agree on all matters set forth in such dispute notice, the Buyer Closing Statement delivered by Buyer to Seller pursuant to Section 2.6(a), as adjusted by the Independent Accountant to be consistent with the Resolved Matters and the final determination of the Independent Accountant of the Unresolved Matters in accordance with Section 2.6(b). In the event the Final Closing Statement is determined (x) pursuant to clauses (i) or (ii) of the immediately preceding sentence, Buyer will prepare the Final Closing Statement and calculate the Adjustment Amounts, if any, in each case in accordance with the terms of this Agreement, and deliver such items to Seller within three (3) Business Days following the determination thereof or (y) pursuant to clause (iii) of the immediately preceding sentence, Buyer 17 US 167664346 HB: 4845-7978-5147.2
and Seller shall cause the Independent Accountant to prepare the Final Closing Statement and calculate the Adjustment Amounts, if any, based on the Final Closing Statement, in accordance with the terms of this Agreement, and deliver such items to Seller and Buyer within three (3) Business Days following the delivery of the final written determination of the Independent Accountant to Seller and Buyer. (d) The parties agree to make the following payments (each, an “Adjustment Amount”) based upon the respective amounts set forth in the Final Closing Statement: (i) if the Company Indebtedness is greater than the Estimated Company Indebtedness, Seller will pay to Buyer the difference between the Company Indebtedness and the Estimated Company Indebtedness; (ii) if the Company Indebtedness is less than the Estimated Company Indebtedness, Buyer will pay to Seller the difference between the Estimated Company Indebtedness and the Company Indebtedness; (iii) if the Net Working Capital Adjustment is less than the Estimated Net Working Capital Adjustment, Seller will pay to Buyer the difference between the Estimated Net Working Capital Adjustment and the Net Working Capital Adjustment; (iv) if the Net Working Capital Adjustment is greater than the Estimated Net Working Capital Adjustment, Buyer will pay to Seller the difference between the Net Working Capital Adjustment and the Estimated Net Working Capital Adjustment; (v) if the Company Transaction Expenses are greater than the Estimated Company Transaction Expenses, Seller will pay to Buyer the difference between the Company Transaction Expenses and the Estimated Company Transaction Expenses; (vi) if the Company Transaction Expenses are less than the Estimated Company Transaction Expenses, Buyer will pay to Seller the difference between the Estimated Company Transaction Expenses and the Company Transaction Expenses; (vii) if the Excess Cash is greater than the Estimated Excess Cash, Buyer will pay to Seller the difference between the Excess Cash and the Estimated Excess Cash; and (viii) if the Excess Cash is less than the Estimated Excess Cash, Seller will pay to Buyer the difference between the Excess Cash and the Estimated Excess Cash. (e) If a Specified Producer Base Purchase Price Adjustment was made to the Purchase Price at Closing pursuant to Section 2.2(b)(ii) with respect to any Specified Producer, and such Specified Producer executes and delivers to Buyer the Buyer New Hire Documents within the thirty (30) day period after the Closing Date and does not repudiate or disavow such Buyer New Hire Documents within such thirty (30) day period, then the Specified Producer Base Purchase Price Adjustment attributable to such Specified Producer, as set forth on Exhibit 2.2(d), shall be paid within five (5) Business Days following the determination and delivery of the Final Closing Statement (such amount, if any, the “Specified Producer Base Purchase Price Adjustment Reversal Amount”). (f) The Adjustment Amount to be paid pursuant to Section 2.6(d)(i)-(viii) and Section 2.6(e) will be netted so that only Seller, on the one hand, or Buyer, on the other hand, is required to make a payment hereunder. Any payment required pursuant to Section 2.6(d) or Section 2.6(e) will 18 US 167664346 HB: 4845-7978-5147.2
in a default (with or without due notice or lapse of time or both) under, or give rise to any right of modification, consent, approval, termination, cancellation or acceleration under, or a loss of any benefits by the Company under, any of the terms, conditions or provisions of any Business Contract, Insurance Contract or License; (d) violate any Law or Order applicable to the Company, by which or to which any portion of the Company’s properties or assets is bound, or to the Covered Business and (e) result in the creation or imposition of any Lien on any asset of the Company, (or the Covered Business) except for any Permitted Liens; excluding from the foregoing clauses (b) – (e), such requirements, violations, conflicts, defaults or rights which would not be material to the Company or the Covered Business, taken as a whole, and would not materially and adversely affect the ability of Seller to consummate the transactions contemplated by this Agreement. Section 3.5 Financial Statements (a) The Financial Statements are attached as Schedule 3.5(a)(i). Except as set forth on Schedule 3.5(a)(ii), the Financial Statements have been prepared in all material respects in accordance with GAAP from the books and records of the Company consistently applied throughout the periods indicated. Except as set forth on Schedule 3.5(a)(iii), each balance sheet included in such Financial Statements (including any related notes and schedules) fairly presents in all material respects the financial position of the Company or the Covered Business (as applicable) as of the date of such balance sheet, and each statement of income included in the Financial Statements (including any related notes and schedules) fairly presents in all material respects the results of operations, as the case may be, of the Company or the Covered Business (as applicable) for the periods set forth therein, in each case in accordance with GAAP consistently applied during the periods involved, except as otherwise noted therein and subject to normal and recurring year-end adjustments (none of which are material) and the absence of notes. (b) The Trust Cash as of the Balance Sheet Date (including reasonable detail regarding the significant components thereof) is as set forth on Schedule 3.5(b). All Trust Cash is held in accounts owned by the Company. (c) The information contained in each Historical Production Spreadsheet is true and correct in all material respects as of March 31, 2020, subject to de minimis deviations for each individual Consultant covered thereby (which deviations are not material in the aggregate, in any event). (d) Schedule 3.5(d) sets forth the aggregate revenue assigned to the “house accounts” (i.e. the Client Accounts not assigned to any Consultant) as of March 31, 2020, which aggregate amount was $21,811,451 (the “Total House Account Amount”). Of the Total House Account Amount, $7,841,638 has been, or after the date hereof may be, coded or assigned to a Consultant. The remaining amount of the Total House Account Amount (equal to $13,969,814) has not been coded or assigned to a Consultant as of the date hereof (the “Non-Assignable House Account Amount”). (e) The information contained in the Retirement Plan Consulting Business Spreadsheet is true and correct in all material respects as of the date thereof, subject to de minimis deviations (which deviations are not material in the aggregate, in any event). (f) The Company and Seller maintain, and have each at all times since June 30, 2018, maintained, a system of internal accounting controls sufficient for a business such as the Covered Business, including to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations and (ii) transactions are recorded as necessary 21 US 167664346 HB: 4845-7978-5147.2
threatened against any of the Owned Real Property or Leased Real Property or the improvements thereon, which, if occurring, pertain to the Leased Real Property or would have a Material Adverse Effect. The use and operation of the Owned Real Property and Leased Real Property in the conduct of the Covered Business do not violate in any material respect any Law, covenant, condition, restriction, easement, license, permit or agreement. Section 3.10 Intellectual Property; Privacy and Data Security. (a) Schedule 3.10(a) sets forth a list of all Company Registered Intellectual Property, the owner of such item, and the jurisdictions where each is registered (if any). To the Knowledge of Seller, all Company Registered Intellectual Property and Seller Marks are valid, subsisting, and enforceable, except as would not reasonably be expected to be material to the Company or the Covered Business. (b) Except set forth on Schedule 3.10(b), the Company is the exclusive owner of the material Company Intellectual Property, free and clear of all Liens other than Permitted Liens, or possesses adequate and valid rights to use the Company Intellectual Property and Seller Marks in the Covered Business. The Company has paid all maintenance fees, renewal fees or annuity expenses due for payment prior to the Closing Date for maintenance of the Company Registered Intellectual Property. (c) The Company has not granted any licenses or other agreements granting any rights with respect to any Company Intellectual Property to any Affiliate or third party, except in the Ordinary Course. (d) To the Knowledge of Seller, neither the use of Company Intellectual Property or Seller Marks by the Company nor the conduct of the Covered Business during the three (3) year period prior to the Closing Date has misappropriated, infringed upon or conflicted with any Intellectual Property rights of any third party in any material respect. No Person has asserted a written claim (or, to the Knowledge of Seller, otherwise threatened a claim) during the three (3) year period prior to the Closing Date against the Company alleging that it has violated, infringed on or otherwise improperly used the Intellectual Property rights of such party. (e) To the Knowledge of Seller, no infringement, misappropriation, or other violation of any material Company Intellectual Property by any third party is occurring. To the Knowledge of Seller, each Person who contributed to or was involved in the creation or development of any material Company Intellectual Property has signed a valid and binding agreement sufficient to transfer to the Company ownership of all right, title and interest of such Persons in such Intellectual Property. (f) Since June 30, 2018, except as would not be material to the Company or the Covered Business, taken as a whole, the Company and Seller (with respect to the Covered Business) have (i) implemented, enforced, and maintained appropriate safeguards, policies and procedures related to the privacy and security of Personal Information under applicable Laws, (ii) to Seller’s Knowledge, complied with all Privacy Obligations in all material respects, (iii) not received any notice or been subject to any action or complaints from any Person, including a Governmental Entity, asserting that the Company or the Covered Business is not in compliance with applicable Privacy Obligations, and (iv) not experienced any material loss, damage, or unauthorized access, modification, disclosure, use or breach of security of any database containing Personal Information that is or previously has been possessed or otherwise controlled by or on behalf of the Company or the Covered Business, and (v) not received any notices, inquiries, or complaints from any Person regarding any of the foregoing. 23 US 167664346 HB: 4845-7978-5147.2
any business activity in any geographic area or soliciting, accepting or hiring clients, employees, vendors or suppliers or other business relationships, (B) requiring the Company to deal exclusively with any Person with respect to any matter or that provide “most favored nation” pricing or terms to the other party to such Contract or any third party or (C) containing a right of first refusal or right of first offer, right of first negotiation or similar right in favor of a third party or otherwise; (vii) all Contracts relating to the acquisition or disposition of any Person or business pursuant to which the Company has ongoing economic obligations (including with respect to any continuing contingent earn-out or acquisition consideration to any seller(s) of businesses acquired by the Company prior to the date hereof) or any other material ongoing obligations; (viii) all Contracts by which the Company licenses Intellectual Property from or to any Person that individually involve contractually obligated payments to or from the Company in excess of $500,000 on an annual basis or which are otherwise material to the Company or the Covered Business, taken as a whole, excluding any Contracts licensing generally available mass market software under a click-wrap or shrink-wrap license or subscription service; (ix) all Contracts that provide for the assumption of any Tax, environmental or other Liability of any Person; (x) all Contracts with any Governmental Entity other than client Contracts entered into in the Ordinary Course; (xi) all Contracts that provide for any joint venture, partnership or similar arrangement; (xii) all Contracts that provide for the sharing of commissions, or require the Company, or Seller or any Affiliate of Seller as part of the Covered Business, to guarantee any amount or make any minimum payment; (xiii) all Contracts containing guarantees of performance at pre-defined service levels by the Company or the Covered Business; (xiv) all Contracts required to be listed in Schedule 3.23; (xv) all Contracts relating to the settlement, release, compromise or waiver of any material rights or Liabilities; and (xvi) all performance bonds, letters of credit or surety agreements and Contracts relating to any swap, forward, futures, warrant, option or other derivative transactions. (b) Seller has made available to Buyer true and correct copies of the Business Contracts, or in the case of oral Business Contracts, a summary of the material terms thereof. All Business Contracts and Material Insurance Contracts are in full force and effect and to the Knowledge of Seller, assuming the due authorization, execution and delivery by any other party thereto, are currently enforceable against the Company, Seller or Affiliate of the Seller, as applicable, party thereto (the “Seller Counterparty”) and, to the Knowledge of Seller, the other party thereto and, as of the Closing will be, if not previously terminated or expired, enforceable against the other party thereto in 25 US 167664346 HB: 4845-7978-5147.2
receive and maintain certificates, forms, and other documents for exemption from withholding and remitting Taxes or collecting and remitting Taxes, as applicable. (c) There are no Liens for Taxes against any asset of the Company (other than for Taxes not yet due and payable). (d) The Company has been a disregarded entity for U.S. federal income tax purposes for its entire existence. Neither the Seller, the Company, nor any other Person has made an election under Law to have the Company treated as a corporation for federal, state or local income tax purposes. (e) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency which remains open. (f) The Company is not currently the subject of an audit, investigation, action, inquiry or other proceeding regarding any Tax or Tax Return by any Governmental Entity. The Company has not received any written notice from any Governmental Entity of an assessment or of an intent to open an audit or other review, and, to the Knowledge of the Seller, no such assessments, audits, or reviews have been proposed or threatened. (g) The Company is not a party to, or bound by, any Tax allocation, indemnity or sharing agreement that will have any effect after the Closing, other than, in each case, standard commercial agreements with third parties that are entered into in the ordinary course of business and are not primarily about Taxes. (h) The Company (i) has not been a member or a part of an affiliated group filing a consolidated U.S. federal income Tax Return (other than being included in a group the common parent of which is Associated Banc-Corp; and (ii) has no liability for the Tax of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. Law), as a transferee or successor, by contract (other than (a) any contract that will be terminated prior to, and have no effect after, Closing, and (b) standard commercial contracts with third parties that are entered into in the ordinary course of business and are not primarily about Taxes); or otherwise. (i) The Company will not be required to include any item of income or gain in, or be required to exclude any item of deduction or loss from, Taxable income for any Taxable period ending after the Closing Date as a result of any: (i) change in accounting method for a Taxable period (or portion thereof) ending on or prior to the Closing Date; (ii) use of an improper method of accounting for a Taxable period (or portion thereof) ending on or prior to the Closing Date; (iii) closing or similar agreement described in Section 7121 of the Code (or similar provision of state, local or non-U.S. Tax Law) executed on or prior to the Closing Date; or (iv) installment sale or open transaction made on or prior to the Closing Date; (v) prepaid amount on or prior to the Closing Date. The Company does not currently use the cash method of accounting for Tax purposes. (j) The Company has not engaged in a “reportable transaction” as defined in Treasury Regulations Section 1.6011-4(b) or any comparable provision of state, local or non-U.S. Law. (k) The Company does not own an interest in any (i) controlled foreign corporation, (ii) deferred foreign income corporation or (iii) passive foreign investment company, in each case, as defined under the Code. The Company does not own an interest in any entity other than Benefit Advisors Network. The Company does not have a permanent establishment (within the meaning of 27 US 167664346 HB: 4845-7978-5147.2
Plan and each material Associated Benefit Plan, Seller has made available to Buyer (i) the current plan document and any amendments thereto, (ii) the most recent determination, opinion or advisory letter from the U.S. Internal Revenue Service (the “IRS”), (iii) the current summary plan description and any summary of material modifications and (iv) the most recently filed annual report. (b) Except as set forth on Schedule 3.17(b): (i) No Company Benefit Plan or Associated Benefit Plan is a “multiple employer plan” described in Section 413(c) of the Code, and the Company has not, within the last five years, contributed to, been required to contribute to, or otherwise had any Liability in connection with any “multiemployer pension plan” (as defined in Sections 3(37) or 4001(a)(3) of ERISA) or “multiple employer plan”; (ii) No Company Benefit Plan or Associated Benefit Plan is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA or Section 412 of the Code, and neither the Company nor Seller has incurred any Liability under Title IV of ERISA that has not been paid in full; (iii) Each Company Benefit Plan and material Associated Benefit Plan has been established and administered in all material respects in accordance with its terms and in compliance with applicable Laws, including ERISA and the Code; (iv) Each Company Benefit Plan and Associated Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code that is intended to be exempt from taxation under Section 501(a) of the Code has received a favorable determination letter from the IRS or other letter indicating that it is so qualified, or is in the process of obtaining such a letter. Nothing has occurred since the issuance of the IRS determination letters referred to in this Section 3.17(b)(iv) that would result in the revocation of any such IRS determination letters; (v) There is no pending or, to the Knowledge of Seller, threatened, Action (other than a routine claim for benefits) with respect to any Company Benefit Plan or Associated Benefit Plan that would result in any Liability to the Company; (vi) Payment as of the Closing Date has been fully made or adequately provided for on the books and consolidated financial statements of the Company or Seller, as applicable, with respect to: (i) all amounts and premiums which the Company or Seller is required, under the terms of all Associated Benefit Plans and Company Benefit Plans that pertain to the service providers of the Covered Business to have paid as contributions to such Associated Benefit Plans and Company Benefit Plans as of the last day of the most recent fiscal year prior to the Closing Date and (ii) all pro rata amounts which the Company or Seller is required to pay as contributions to each such Associated Benefit Plan or Company Benefit Plan for the fiscal year that includes the Closing Date; (vii) Neither the Company nor Seller provides, nor have they at any time provided, coverage under any welfare plan (including, but not limited to, life insurance, disability, medical, dental, prescription drugs, or accidental death or dismemberment) to any of the Company’s retirees, other than any continuation or conversion coverage which any such Company retiree may have purchased at his or her own expense; 29 US 167664346 HB: 4845-7978-5147.2
(viii) There have been no statements, either written or oral, or communications made or materials provided to any employee or former employee of the Covered Business by any Person that provide for or could be construed as a contract or promise (i) by the Company or Seller to provide for any pension, welfare, or other insurance-type benefits to any such employee or former employee of the Covered Business, whether before or after retirement, other than benefits under the Company Benefit Plans or Associated Benefit Plans or (ii) regarding continued employment or terms and conditions of employment with Buyer or the Company following the Closing; (ix) Each Company Benefit Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code and any award thereunder, in each case that is subject to Section 409A of the Code, (i) has at all times been operated in compliance in all material respects with Section 409A of the Code and all applicable IRS guidance promulgated thereunder and (ii) either (A) has at all times been in a form which complies with the requirements of Section 409A of the Code or (B) has been timely amended under guidance issued pursuant to Section 409A of the Code so that its terms and provisions comply with the requirements of Section 409A of the Code; and (x) Neither the execution and performance of this Agreement nor the consummation of the transactions contemplated hereby could (either alone or in conjunction with any other event) (i) constitute a stated triggering event under any Company Benefit Plan or Associated Benefit Plan that will result in any payment (whether of severance pay or otherwise) becoming due to any employee of the Covered Business, (ii) accelerate the time of payment or vesting or increase the amount of compensation due to any employee of the Covered Business under any Company Benefit Plan or Associated Benefit Plan, (iii) cause any employee of the Covered Business to accrue or receive additional benefits, service or accelerated rights to payment of benefits under any Company Benefit Plan or Associated Benefit Plan, (iv) directly or indirectly cause the Company or Seller to transfer or set aside any assets to fund or otherwise provide for benefits for any employee of the Covered Business or (v) subject any Person to Liability for Tax under Section 4999 of the Code or cause the loss of a deduction to Seller or the Company under Section 280G of the Code. Section 3.18 Labor Relationships. (a) (i) Schedule 3.18(a)(i) sets forth the following: a true, complete and accurate list, as of the date hereof and updated from time to time through the Closing, of each employee, independent contractor and director of the Covered Business, his or her date(s) of hire, position and title (and with respect to each Consultant I, Consultant II, and Consultant III, grouping such levels together (i.e., all Consultant I’s grouped together, all Consultant II’s grouped together, and all Consultant III’s grouped together)), current rate of compensation (including base salary, variable incentive compensation, annual discretionary bonuses and Sales Consultant Incentive Plan commissions, if any, and excluding any Seller Bonus Arrangements, which need not be set forth on Schedule 3.18(a)(i)), and payment received for the calendar year prior to the calendar year in which the Closing Date occurs under (A) any variable incentive compensation in the form of a formulaic incentive with the Covered Business (other than under a Sales Consultant Incentive Plan), (B) annual discretionary bonus arrangement of the Covered Business or (C) the Sales Consultant Incentive Plan. In the case of an employee, Schedule 3.18(a)(i) shall also list whether such employee is hourly or salaried, whether such employee is exempt or non-exempt, the number of such employee’s accrued sick days and vacation days, whether such employee is absent from active employment and, if so, the date such employee became inactive, the reason for inactive status and, if applicable, the anticipated date of return to 30 US 167664346 HB: 4845-7978-5147.2
active employment. (ii) Schedule 3.18(a)(ii) includes a list of employees of the Covered Business whose employment has been involuntarily terminated within the ninety (90) day period preceding the date hereof and includes such employees’ positions and titles and the then-current rate of compensation as of his or her termination date. (iii) Except as disclosed on Schedule 3.18(a)(iii), neither the Company nor Seller has any unsatisfied Liability to any such previously terminated employee or independent contractor of the Covered Business. Seller has made available to Buyer all written employee handbooks, policies, programs and arrangements applicable to employees of the Covered Business. No Consultant is entitled to receive commissions (excluding any equity based compensation) in respect of renewal business at a rate that exceeds 30%. (b) None of the employees of the Covered Business are represented by a labor organization or group that was either voluntarily recognized or certified by any labor relations board (including the NLRB). (c) None of the employees of the Covered Business is a signatory to a collective bargaining Contract with any trade union, works council, labor organization or group. (d) No labor dispute, walk out, strike, hand billing, picketing or work stoppage involving the employees of the Covered Business has occurred, is in progress or, to the Knowledge of Seller, has been threatened in the last two years. (e) No Consultant, Account Executive, member of the Specialized Resources group, executive officer of the Company and/or the Covered Business has informed the Company or Seller, either orally or in writing, of any plans to terminate his, her or their employment with the Covered Business generally or as a result of the transaction contemplated hereby. (f) The Company has complied in all material respects with all applicable Laws, rules and regulations relating to labor, labor relations or employment, including, without limitation, any provisions thereof relating to equal employment opportunity, wages, hours, overtime regulation, employee safety and health, immigration control, drug testing, termination pay, paid sick leave, vacation pay, fringe benefits, collective bargaining and the payment and/or accrual of the same and all Taxes, insurance and all other costs and expenses applicable thereto, and the Company is not liable for any arrearage, or any Taxes, costs or penalties for failure to comply with any of the foregoing. Without limiting the generality of the foregoing, the Company has not incurred a violation of Part 6 of Subtitle B of Title I of ERISA or other applicable state insurance continuation Law, nor will any such violation occur as a result of the transactions contemplated hereby. As of the Closing Date, the Company will not incur, nor will it ever have incurred, Liabilities, penalties or other charges under the Worker Adjustment and Retraining Notification Act (“WARN”) or any similar state, local or foreign Law, and neither Seller nor the Company reasonably expects to conduct a layoff of any employees of the Covered Business as of or following the Closing Date (other than individual terminations for just cause), regardless of whether such layoff shall be deemed to effectuate or cause to be effectuated a “plant closing” or “mass layoff” (each as defined under WARN) or to trigger any statutory notice requirements under similar state Law. (g) Except as set forth on Schedule 3.18(g), Since June 30, 2018, there have not been any allegations, charges or complaints concerning employment discrimination, wage payment, overtime obligations or other issues pertaining to unlawful employment practices pending against the Covered Business or, to the Knowledge of Seller, threatened, nor to the Knowledge of Seller, is there any basis for any such allegation, charge or complaint. 31 US 167664346 HB: 4845-7978-5147.2
(b) EXCEPT AS EXPRESSLY COVERED BY A REPRESENTATION AND WARRANTY CONTAINED IN THIS ARTICLE III OR ARTICLE IV, ANY OTHER INFORMATION OR DOCUMENTS (FINANCIAL OR OTHERWISE) MADE AVAILABLE TO BUYER OR ITS COUNSEL, ACCOUNTANTS OR ADVISERS WITH RESPECT TO THE COMPANY OR THE COVERED BUSINESS, INCLUDING THE CONFIDENTIAL INFORMATION MEMORANDUM. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows: Section 4.1 Authorization. The Seller is duly organized, validly existing and in good standing under the laws of the United States. Seller has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party by Seller and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required action on the part of Seller. This Agreement and the Ancillary Agreements to which it is a party have been duly executed and delivered by Seller, and do, when duly executed by all other parties thereto and delivered by Seller, constitute the valid and binding agreements of Seller enforceable against Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Section 4.2 Equity Interests Ownership. Seller is the record and beneficial owner of all the Equity Interests. The Seller has, and at the Closing will have, good title to the Equity Interests free and clear of any Lien other than restrictions on transfer arising under state or federal securities laws. The Equity Interests will be transferred to Buyer at the Closing free and clear of any Liens, other than restrictions on transfer arising under state or federal securities laws. Section 4.3 Consents and Approvals. Except as set forth on Schedule 4.3 and for the Antitrust Clearances, the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party, the consummation of the transactions contemplated hereby and thereby and the fulfillment of and compliance with the terms and conditions hereof and thereof do not and will not (a) violate or conflict with any provision of the Charter Documents of Seller, or with any resolution or authorization adopted by the governing body or equity holders of Seller, (b) violate or conflict with any Order applicable to Seller or by which Seller or any of its properties or assets is bound, (c) violate or conflict with any Law or arbitration award applicable to Seller, (d) require any filing with, or the obtaining of any permit, authorization, consent, waiver or approval of, any Governmental Entity, excluding from the foregoing clauses (b)-(d) such requirements, violations, conflicts, defaults or rights which would not materially adversely affect the ability of Seller to consummate the transactions contemplated by this Agreement or any Ancillary Agreement to which it is a party. Section 4.4 Certain Fees. The Company will not be responsible for any broker, finder or investment banker fee or commission or other similar fees in connection with this Agreement or the transactions contemplated hereby based on any commitments made by or on behalf of Seller. Section 4.5 Litigation. There is no Action pending or, to the Knowledge of Seller, threatened against or by or affecting Seller or any Affiliate of Seller by or before any Governmental Entity or by any 36 US 167664346 HB: 4845-7978-5147.2
payment obligations required to be paid or satisfied by Buyer in connection with the transactions contemplated by this Agreement. Section 5.6 Solvency. Buyer is not entering into the transactions contemplated by this Agreement with the actual intent to hinder, delay or defraud either present or future creditors of the Company. Buyer is Solvent as of the date of this Agreement and, assuming (a) the satisfaction of the conditions to Seller’s obligation to consummate the transactions contemplated by this Agreement, (b) that the representations and warranties set forth in Articles III and IV are true and correct, and (c) that any estimates, projections or forecasts made available by Seller and/or the Company with respect to the Covered Business have been prepared in good faith based upon assumptions that were and continue to be reasonable, and after giving effect to the consummation of the transactions contemplated hereby, at the Closing, Buyer and the Company (on both a stand-alone and on a combined basis) will, after giving effect to all of the transactions contemplated by this Agreement, including the payment of the Purchase Price, be Solvent as of immediately after the Closing Date. Section 5.7 Independent Review. Buyer has conducted its own independent review and analysis of the Company and the Covered Business and its condition, cash flow and prospects, and acknowledges that Buyer has been provided access to the properties, premises and records of the Company and the Covered Business as Buyer has deemed necessary for this purpose, including to certain projections, including projected statements of operating revenues and income from operations of the Company and the Covered Business and certain business plan information. Buyer acknowledges that there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that Buyer is familiar with such uncertainties and that Buyer is taking full responsibility for its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it, including the reasonableness of the assumptions underlying such estimates, projections and forecasts. Buyer is knowledgeable about the industries and sectors in which the Company and the Covered Business operates and is capable of evaluating the merits and risks of the transactions contemplated by this Agreement and is able to bear the substantial economic risk of such investment for an indefinite period of time. In entering into this Agreement, Buyer has relied exclusively upon its own investigation and analysis and the representations and warranties contained herein, and Buyer: (a) acknowledges that: (i) it has had the opportunity to visit with the Company and meet with its officers and other representatives to discuss the Covered Business and its condition, cash flow and prospects and (ii) materials and information requested by Buyer have been provided to Buyer to Buyer’s reasonable satisfaction; (b) acknowledges that it has undertaken such due diligence (including a review of the assets and liabilities of the Company) as Buyer deems adequate; (c) acknowledges that, except as set forth in Article III and Article IV, none of Seller, the Company, nor any of their respective partners, officers, employees, Affiliates, agents or representatives makes, and that Buyer has not relied on, any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Buyer or its agents or representatives prior to the execution of this Agreement; (d) agrees, to the fullest extent permitted by Law, that none of Seller, the Company, nor any of their respective partners, directors, officers, employees, Affiliates, agents or representatives will have any Liability or responsibility whatsoever to Buyer on any basis (including in contract or tort, under federal or state securities Laws or otherwise) based upon any information provided or made available, or statements made, to Buyer prior to the execution of this Agreement; and 38 US 167664346 HB: 4845-7978-5147.2
operations and good will related to the Covered Business, including not terminating the services of the key officers and key employees of the Covered Business and preserving its relationships with, and the good will of, vendors, carriers, clients and other Persons with whom it has a material business relationship relate to the Covered Business in a manner consistent with past practice; (e) not mortgage, pledge or subject to any Lien or security interest (other than Permitted Liens) any material asset of the Company or the Covered Business, or in the case of the Company, incur any Indebtedness; (f) not cancel or terminate, or modify or amend any existing Real Property Lease enter into any new leases or subleases of real property or acquire an ownership interest in any real property; (g) in the case of the Company, other than with respect to any Combined Tax Return, not (i) make, amend or revoke any material Tax election; (ii) adopt, amend or revoke any Tax accounting method, (iii) file any amended Tax Return, (iv) enter into any “closing agreement” regarding Taxes with any Governmental Entity, (v) settle any Tax claim or assessment, or (vi) surrender any right to claim a refund of Taxes; (h) not enter into any Contracts or arrangement (i) restricting the Company from, and/or imposing any limitations or penalties on the Company with respect to, engaging in or competing with any business activity in any geographic area or soliciting, accepting or hiring clients, employees, vendors or suppliers or other business relationships, (ii) requiring the Company to deal exclusively with any Person with respect to any matter or that provide “most favored nation” pricing or terms to the other party to such Contract or any third party or (iii) containing a right of first refusal or right of first offer, right of first negotiation, most favored nation or similar right in favor of a third party or otherwise; (i) not enter into guarantee, lease, indemnity, surety bond, letter of credit or letter of comfort or any other obligation that would become an Indemnified Guarantee; (j) not make any change to its methods of accounting policies or practices, except as required by changes in GAAP or other applicable Law; (k) not (i) amend in a manner adverse to the Covered Business or terminate (prior to its expiration) any Business Contract or Material Insurance Contract, (ii) waive, release or assign any material rights or claims under any Business Contract or Material Insurance Contract or (iii) other than in the Ordinary Course, enter into any Contract that would have been a Business Contract had it been entered into prior to the date of this Agreement; (l) not enter into any Contract, arrangement or transaction constituting a Related Person Transaction; (m) in the case of the Company, not make capital expenditures in excess of $200,000 in the aggregate; (n) not acquire or dispose of (whether by merger, consolidation, acquisition of Equity Rights or assets or otherwise), directly or indirectly, any business, line of business or material assets, or dispose of any assets other than the disposition of obsolete equipment in the Ordinary Course; (o) not adopt a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation or recapitalization of the Company; 40 US 167664346 HB: 4845-7978-5147.2
(p) in the case of the Company, not make any material loans, advances or capital contribution to, or investments in, any other Person or acquire Equity Rights of any other Person; (q) other than as required by the terms of any Company Benefit Plan or Associated Benefit Plan or applicable Law or with respect to base salary increases in connection with promotions in the Ordinary Course, not (i) grant or increase any severance or termination entitlement to any employee of the Covered Business (or amend any such existing severance or termination pay arrangement), (ii) enter into any employment, deferred compensation or other similar agreement with any employee of the Covered Business (or amend any such existing agreement), (iii) increase compensation, bonus or other benefits payable to any employee of the Covered Business or (iv) adopt, amend or terminate any Company Benefit Plan or Associated Benefit Plan unless such adoption, amendment or termination is equally applicable to the employees of Seller and its Affiliates and Company Employees alike; (r) terminate the employment of any Consultant, Account Executive, Specialized Resource or other employees of the Covered Business with significant client-facing activities, except in circumstances that require immediate termination for cause consistent with Seller’s personnel policies and customary practice; provided, that Seller shall provide reasonable notice to Buyer of the termination of any such employee of the Covered Business or, to the extent such disclosure is not prohibited by applicable Law in reasonable opinion of Seller’s counsel, and, for the avoidance of doubt, reasonable notice may be given by Seller promptly after the termination has occurred depending on the circumstances; (s) in the case of the Company, not enter into, amend or terminate any collective bargaining agreement; (t) (i) not initiate or commence any material claim or Action or (ii) settle any material claim or Action except for monetary settlements paid before the Valuation Time which do not impose any continuing obligations on the Company after the Closing other than confidentiality obligations or other obligations that (A) are not reasonably expected to have any effect on the Company’s ability or right to solicit, acquire, retain or service clients or prospective clients and (B) will not have an effect on the ongoing operations of the Covered Business; (u) not cancel, modify, terminate or transfer, or agree to the cancellation, modification, termination or transfer of, any Company Insurance Policy that is held by Company as of the date hereof, or any other Company Insurance Policy or other liability insurance policy covering the Company or the Covered Business that is owned, maintained or controlled by an entity other than the Seller or any Affiliate, without obtaining comparable substitute insurance coverage, and with respect to each such Company Insurance Policy that is a “claims made” policy, securing the extension of the reporting terms for each such Company Insurance Policy to a date at least three years subsequent to the Closing Date or taking whatever steps the Buyer may reasonably request in connection with the purchase of a “tail” policy providing for continued coverage of the Company and the Covered Business for a period extending at least three years following the Closing Date, covering all liabilities accruing with respect to the Company and the Covered Business prior to the Closing Date; (v) except for those Actions set forth as Items 3 and 5 on Schedule 3.22(g) (to the extent the facts and circumstances underlying such Actions have not changed materially), fail to provide notice under any Company Insurance Policy of any Action or other matter that is Known by Seller prior to Closing and for which insurance coverage may be available under any Company Insurance Policy (other than any Company Insurance Policy held by LPL and made available to the Covered 41 US 167664346 HB: 4845-7978-5147.2
information it receives from any Governmental Entity in connection therewith and will promptly (i) reasonably cooperate with each other in connection with any filing or submission and in connection with any investigation or any inquiry; (ii) provide the other with a description of the information provided to any Governmental Entity with respect to any such oral or written communication, inquiry or request; (iii) permit the other Party to review and consider in good faith the other Party’s reasonable comments in any communication given by it to any Governmental Entity; and (iv) to the extent practicable and permitted by such applicable Governmental Entity, give the other Party or its counsel the opportunity to attend and participate in all meetings, substantive telephone calls or conferences with any Governmental Entity. Notwithstanding anything to the contrary in this Agreement (including this Section 6.3), nothing contained herein shall require any party to disclose to the other party (A) documents filed pursuant to Item 4(c) and 4(d) of the Notification and Report Form under the HSR Act or communications regarding the same documents, (B) information submitted in response to any request for additional information or documents which reveal such party’s negotiating objectives or strategies regarding the transactions contemplated hereby, (C) information relating to business and investments of Buyer’s Affiliates other than USI Advantage Corp. and its Subsidiaries, (D) any information for which disclosure is prohibited by any Governmental Entity or (E) any information for which disclosure would waive applicable legal privilege. (c) Neither Buyer nor Seller will, and each will cause its respective Affiliates not to, take any action that could reasonably be expected to adversely affect the approval of any Governmental Entity of any of the aforementioned filings. (d) Notwithstanding any provision of this Agreement to the contrary, Buyer will use its reasonable best efforts to obtain all necessary consents, approvals, Orders or waivers of Governmental Entities, and to avoid or eliminate each and every impediment under any Antitrust Laws that may be asserted by any Governmental Entity so as to enable the Parties to close the transactions contemplated by this Agreement, including (i) supplying promptly any additional information and documentary material that may be requested by a Governmental Entity pursuant to the HSR Act or any other Antitrust Laws and (ii) agreeing to any restrictions or limitations on any businesses, operations, assets or contractual freedoms of any such businesses or operations (provided, that any such commitment or transaction involving the Company (or any of its assets or business) may be subject to the occurrence of the Closing). For the avoidance of doubt, Buyer will take any and all actions necessary in order to remedy or otherwise address the concerns (whether or not formally expressed) of any Governmental Entity under the HSR Act or any other Antitrust Laws, including divesting, disposing of, restricting, or holding separate all or a material portion of the businesses or assets of Buyer or any of its Affiliates or the Covered Business (each of the actions described in this Section 6.3(d), an “Antitrust Concession”); provided, however, that notwithstanding anything to the contrary in this Agreement (including Section 6.3(c) and Section 6.3(d)), nothing contained in this Agreement shall be construed to require Buyer to cause any Person to take any action other than USI Advantage Corp. and its controlled Affiliates. (e) In connection with this Section 6.3, if any Action is instituted (or threatened to be instituted) challenging the transactions contemplated by this Agreement as violative of any Antitrust Laws, the Parties will jointly (to the extent practicable) use their respective reasonable best efforts to (i) oppose or defend against such Action and (ii) take such action as necessary to have vacated, lifted, reversed or overturned any Order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement, including by appeal if necessary of any Order that makes illegal or prohibits the consummation of the transactions contemplated by this Agreement; provided, that any commitment 44 US 167664346 HB: 4845-7978-5147.2
the Closing Date no later than three days prior to the date such Tax Returns are filed, except to the extent such Taxes were reflected as a Liability in the Final Closing Statement. For purposes of this Section 6.8(c), in the case of any Taxes that are imposed on a periodic basis and are payable for a Taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the portion of such Tax that relates to the portion of such Taxable period ending on the Closing Date will (i) in the case of any Taxes other than Taxes based upon or related to income, receipts or transactions, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period and (ii) in the case of any Tax based upon or related to income, receipts or transactions (including income Taxes, withholding Taxes and sales and use Taxes), be deemed equal to the amount which would be payable if the relevant Taxable period ended on the Closing Date; provided, that, exemptions, allowances or deductions that are calculated on an annual basis (including, but not limited to, depreciation and amortization deductions) will be allocated between the period ending on the Closing Date and the period beginning after the Closing Date in proportion to the number of days in each period to the extent permitted by applicable Law. Any credits or estimated Tax payments relating to a Straddle Period will be taken into account as though the relevant Taxable period ended on the Closing Date. (d) Finalization of Other Returns. With respect to any Tax Return required to be filed after the Closing Date by Seller pursuant to Section 6.8(b)(i) or by Buyer pursuant to Section 6.8(c), in each case, for any Taxable period (or portion thereof) ending on or prior to the Closing Date, the preparing party will prepare the Tax Return in a manner consistent with past practice, unless otherwise required by applicable Law. The preparing Party will provide the other Party with copies of any such Income Tax Return and other material Tax Return, along with all material schedules, statements, workpapers and supporting documentation (the “Supporting Documentation”) promptly after the preparing Party has prepared such Tax Return and Supporting Documentation. The non- preparing Party will have the right to review any such Income Tax Return, other material Tax Return and Supporting Documentation; provided, that the preparing Party will not be required to request an extension of time for the filing of such Tax Return and the preparing Party will have the right to file such Tax Return even if the non-preparing Party has not completed its review of such Tax Return and Supporting Documentation or objects to any such Tax Return. If the non-preparing Party disputes any items shown on any such Income Tax Return or other material Tax Return, the non-preparing Party will notify the preparing Party within 20 Business Days after receiving such Tax Return and the Supporting Documentation. Buyer and Seller will negotiate in good faith and use commercially reasonable efforts to resolve any disputed items. If Buyer and Seller are unable to resolve any disputed items within 30 days after the receipt by the non-preparing Party of the Tax Return filed or proposed to be filed, such dispute will be resolved by the Independent Accountant, which will resolve any issue in dispute as promptly as practicable. Upon resolution of any dispute by Buyer and Seller or by the Independent Accountant’s delivery of its determination to Buyer and Seller, appropriate amendments will be made to the Tax Return and appropriate adjustments will be made to the Tax amount previously paid by Seller to Buyer in order to reflect the resolution by Buyer and Seller or the Independent Accountant’s determination, as the case may be. If such determination reflects an overpayment by Seller, Buyer will promptly pay, or will cause the Company to promptly pay to Seller an amount equal to such overpayment amount. The determination by the Independent Accountant will be final, conclusive and binding on the Parties. The fees and expenses of the Independent Accountant will be shared equally by Buyer and Seller. (e) Certain Taxes. All Transfer Taxes incurred in connection with the transactions contemplated by this Agreement will be borne 50% by Buyer and 50% by Seller, except for Transfer Taxes incurred in connection with the transactions contemplated by Section 6.18, which will be borne solely by Seller. Seller will prepare and timely file all Transfer Tax Returns and promptly provide a 47 US 167664346 HB: 4845-7978-5147.2
copy of such Tax Return to Buyer. Buyer and Seller will, and will cause their respective Affiliates to, reasonably cooperate to timely prepare and file any Tax Returns or other filings relating to such Transfer Taxes, including any claim for exemption or exclusion from the application or imposition of any Transfer Taxes. (f) Refunds. Any Tax refunds that are received by Buyer or the Company, and any amounts credited against Taxes to which Buyer or the Company becomes entitled (including any interest paid or credited with respect thereto), that relate to Tax periods or portions thereof ending on or before the Closing Date will be for the account of Seller except to the extent such refund was (i) included as a Current Asset in the calculation of Net Working Capital, or (ii) attributable to any carryback of a loss or credit generated in a Taxable period (or portion thereof) beginning after the Closing Date. Buyer will pay over to Seller an amount equal to such refund or amount of any such credit, net of any reasonable out-of-pocket costs (including Taxes) incurred in connection with the receipt thereof, within 15 days after receipt of such refund or claiming of such credit. Any such refunds or credits relating to any Straddle Period will be equitably apportioned between Buyer and Seller in accordance with Section 6.8(c). (g) Amendments to Returns. Following the Closing, Buyer will not (i) file any amended Tax Return for the Company for a Tax period (or portion thereof) ending on or before the Closing Date, or (ii) make, change or revoke any Tax election or change any accounting period or method of the Company with retroactive effect to any Tax period (or portion thereof) ending on or before the Closing Date, in each case, except (a) with the Seller’s consent (not to be unreasonably withheld, conditioned or delayed), or if such action could not result in a Tax liability to Seller or form the basis for an indemnity claim against the Seller hereunder. (h) Tax Cooperation. Buyer and Seller will cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of Tax Returns relating to the operations of the Company and any Action with respect to Taxes. Cooperation includes (i) the retention and (on the other Party’s request and at such Party’s expense) the provision of records and information that are reasonably relevant to the filing of any Tax Returns and any Action and (ii) making employees available on a mutually convenient basis to provide additional information and explanation of any material provided under this Agreement. Each of Seller and Buyer agree (A) to retain all books and records of the Company with respect to Tax matters pertinent to the Company relating to any Taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer, any extensions thereof) of the respective Taxable periods, and (B) to abide by all record retention agreements entered into with any Governmental Entity. Notwithstanding anything to the contrary in this Agreement, Seller shall not be required to provide Buyer any Combined Tax Returns or any Tax Returns or related work papers of Seller or any of its Affiliates that are not being transferred pursuant to this Agreement. (i) Tax Treatment. Buyer and Seller agree that the purchase and sale of the Equity Interests shall, for U.S. federal, state and local income tax purposes be treated as a purchase and sale of the assets of the Company, unless otherwise required by applicable Law. Buyer and Seller will (and will cause their respective Affiliates to) report the U.S. federal, state, and local income and other Tax consequences of the transactions contemplated by this Agreement in a manner consistent therewith. (j) Benefit Advisors Network. (i) To the extent permissible under applicable Law (including Section 706 of the Code) and the applicable governing documents of Benefits Advisors Network, the 48 US 167664346 HB: 4845-7978-5147.2
the terms of this Agreement and advance written consent by Buyer, supplement or amend Schedule 6.10(a). (b) Commencing on the Closing Date, Buyer will, or will cause the Company to continue to, employ each employee of the Company who is not otherwise identified as a Consultant on Schedule 3.18(a)(i) (the “Continuing Employees”) (including each such employee who is absent due to vacation, holiday, illness or leave of absence). Notwithstanding the above, Seller shall provide Buyer a correct and complete list on the Closing Date of any employee described in this subsection who is absent on the Closing Date due to coverage under a short-term disability arrangement of the Seller or an Affiliate, and each such employee shall become a “Continuing Employee” on the date such employee is both (i) no longer covered under such short-term disability arrangement, and (ii) willing and able to return to active employment status with Buyer; provided, however, Buyer shall have no obligation to hire any such employee who has transitioned to a long-term disability arrangement of the Seller or an Affiliate as of or following the Closing Date. Buyer agrees that each Continuing Employee will, for a period of one year following the Closing Date, be provided with (i) target total cash compensation opportunities (inclusive of base salary or wages and cash bonus opportunities, as applicable) substantially equal to those to which such Continuing Employees were entitled immediately prior to the Closing Date and (ii) other benefits that are of substantially similar benefit levels in the aggregate to the benefits provided by Buyer to its employees generally (excluding the Continuing Employees) who are similarly situated to such Continuing Employees (with the comparison of benefits under this clause (ii) determined with reference to benefits other than annual bonuses, deferred compensation arrangements and incentive and equity-based compensation plans). (c) Buyer agrees to provide Consultants for one year following the Closing Date with other benefits that are of substantially similar benefit levels in the aggregate to the benefits provided by Buyer to its employees generally who are similarly situated to such Consultants (with the comparison of benefits determined with reference to benefits other than annual bonus, deferred compensation arrangements and incentive and equity-based compensation plans). (d) In connection with the employee communications and other actions contemplated by Section 6.10(l), Buyer shall offer and communicate the retention payments consistent with the parameters described on Exhibit 6.10(d) to such Consultants, Transferred Employees and Continuing Employees as are identified therein, which shall include each of the Specified Producers. Without limiting the foregoing, Buyer shall make the offers described in the preceding sentence to each of the Specified Producers within ten (10) calendar days after the date hereof. (e) On the Closing Date, Seller or the Company, as applicable, shall pay out to each Consultant an amount in cash equal to all paid time off entitlements earned by such Consultant prior to the Closing Date. (f) Immediately prior to the Closing Date, the Company shall transfer all assets and Liabilities associated with the SERP to Seller, if any, such that, as of and following the Closing Date, neither Buyer nor any its Affiliates shall assume or be responsible for any obligations or Liabilities under or with respect to the SERP. (g) To the extent permissible under the terms of the applicable Buyer Benefit Plans (as hereinafter defined) and in accordance with applicable Law, Buyer agrees to use commercially reasonable efforts to: (i) provide continuation coverage pursuant to Section 4980B of the Code and Section 601 of ERISA to Persons whose “qualifying event” occurs following the Closing Date with respect to any Consultant, Transferred Employee or Continuing Employee who primarily performed services for the Company following the Closing Date and his or her “qualified beneficiaries,” with 50 US 167664346 HB: 4845-7978-5147.2
“qualifying event” and “qualified beneficiaries” defined under Section 4980B of the Code and Section 601 of ERISA; (ii) to the extent permitted by applicable Law, assume, honor and be solely responsible for paying, providing or satisfying when due all vacation, sick pay and other paid time off for the Transferred Employees and Continuing Employees accrued but unused as of the Closing Date, on the terms and conditions applicable thereto that are in effect immediately prior to the Closing Date; (iii) cause the benefit plans, programs, practices, policies or arrangements maintained by Buyer following the Closing Date and in which any of the Consultants, Transferred Employees and Continuing Employees participate (the “Buyer Benefit Plans”) to recognize all costs and expenses incurred by the Consultants, Transferred Employees and Continuing Employees (and their respective dependents and beneficiaries) up to (and including) the Closing Date, for purposes of satisfying applicable deductible, co-payment, coinsurance, maximum out-of-pocket provisions and like adjustments or limitations on coverage under any such Buyer Benefit Plan, and to waive any preexisting condition, evidence of insurability, good health or actively-at-work exclusions for the Consultants, Transferred Employees and Continuing Employees; (iv) continue to provide paid time off for the remainder of the calendar year in which the Closing occurs and for the succeeding year under the vacation and holiday plan offered to Transferred Employees and Continuing Employees as of immediately prior to the Closing Date, to the extent more favorable than the vacation and holiday benefits provided under the applicable Buyer Benefit Plan, in which any such employee may instead be entitled to participate following the Closing Date; and (v) offer severance to the Transferred Employees and Continuing Employees upon termination during the one-year period starting on the Closing Date equal to the greater of (A) the severance payments and benefits that would have been offered pursuant to arrangements applicable to the Transferred Employees and Continuing Employees that were in effect immediately before the Closing Date as set forth on Exhibit 6.10(g) or (B) the severance payments and benefits offered pursuant to the applicable Buyer Benefit Plan; provided that if any such Transferred Employee or Continuing Employee either (1) has entered into an individual employment agreement containing a contractual severance component with the Company or Seller, as applicable, prior to the date hereof and does not enter into the Buyer New Hire Documents (as hereinafter defined), or (2) enters into any Buyer New Hire Documents containing a contractual severance component containing greater severance payments and benefits than what would be provided under clause (A) and (B) above, such Transferred Employee or Continuing Employee shall instead be entitled to receive the contractual severance payments and benefits offered pursuant to the applicable Contract. (h) Effective after the Closing Date, Buyer or its Affiliates will use commercially reasonable efforts to recognize, for purposes of determining eligibility to participate and vesting and accrual purposes under the Buyer Benefit Plans, as permitted by the terms of each such Buyer Benefit Plan, for the benefit of the Consultants, Transferred Employees and the Continuing Employees, all previous service with Seller and its Affiliates, including the Company, prior to the Closing Date to the extent such service was recognized under the corresponding Company Benefit Plan or Associated Benefit Plan covering such Consultants, Transferred Employees or Continuing Employees, except where credit would result in duplication of benefits. (i) Following the Closing and pursuant to Section 401(a)(31)(D) of the Code, Buyer shall permit its or an Affiliate’s tax-qualified defined contribution plan to accept rollover contributions of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code) in cash in an amount equal to the total value of the account balances distributed to the Consultants, Transferred Employees and Continuing Employees from any Associated Benefit Plan that is a tax-qualified defined contribution plan (a “Seller 401(k) Plan”). For purposes of this Section 6.10(i), the term “eligible rollover distribution” shall include (i) the amount of any unpaid balance of loans made to a Consultant, Transferred Employee or Continuing Employee, as applicable, under a Seller 401(k) Plan and (ii) the promissory note evidencing such loans, but shall expressly exclude 51 US 167664346 HB: 4845-7978-5147.2
any portion of an account balance that is comprised of Equity Rights in Seller. Seller and its Affiliates shall take all actions necessary to ensure that any Seller 401(k) Plan allows the Consultants, Transferred Employees and Continuing Employees to rollover distributions of their respective account balances (in cash and in loan notes, if any, evidencing loans to such employees as of the date of distribution). (j) Buyer and Seller agree to utilize or cause their respective Affiliates to utilize, the standard procedure set forth in Revenue Procedure 2004-53, 2004-2 C.B. 320, with respect to wage reporting. (k) Except as otherwise specifically provided herein, neither Buyer nor any its Affiliates shall assume any obligations or Liabilities under or with respect to, or receive any right or interest in any trusts relating to, any assets of or any insurance, administration or other contracts pertaining to, any of the Associated Benefit Plans. Except as otherwise specifically provided herein, all Consultants, Transferred Employees and Continuing Employees will cease, effective as of the Closing Date, any participation in and any benefit accrual under each of the Associated Benefit Plans, except as required by applicable Law. The Consultants, Transferred Employees and Continuing Employees shall continue participation under the Associated Benefit Plans which provide health, disability, severance, life insurance or similar benefits with respect to claims incurred by such employees and their eligible spouses, dependents or qualified beneficiaries, as applicable, on or prior to the Closing Date. (l) Buyer shall from the date hereof to the Closing Date, upon reasonable advance notice to Seller, be allowed to meet with Consultants and any other employee of Seller or the Company who becomes a Transferred Employee or Continuing Employee, as applicable, for the purpose of coming to terms of continued employment. The Company shall permit Buyer reasonable access to such Consultants, Transferred Employees and Continuing Employees to enable Buyer to present and discuss terms of employment, including requesting that each employee sign Buyer’s new hire documents for similarly situated employees of Buyer and its Affiliates (the “Buyer New Hire Documents”). Buyer shall not distribute templates of any Buyer New Hire Documents to any Consultants, Transferred Employees and/or Continuing Employees without Seller’s prior consent (which consent shall not be unreasonably withheld, conditioned or delayed). Buyer shall provide reasonable advance notice to Seller of, and Seller shall have the right to attend, any in-person, on-site meeting, and any phone calls or online presentations, in each case between Buyer and any group of Consultants, Transferred Employees and/or Continuing Employees. Seller agrees, on behalf of itself and the Company, to facilitate any communications with any such employees as reasonably requested by Buyer, subject to Seller’s prior review, comment and consent (which consent shall not be unreasonably withheld, conditioned or delayed) with respect to any broad-based communications. (m) To the extent that any current or former Consultant or other employee of the Covered Business has agreed to be bound by any employment agreement, offer letter, confirmation letter, equity or equity-based award agreement, confidentiality agreement, or severance or separation agreement with Seller or any of its Affiliates (other than the Company), in each case with restrictive covenants binding upon such Consultant or employee, (i) Seller agrees, at Buyer’s request, to cause Seller and its Affiliates to assign the rights intended to be rights of the Company, including rights with respect to restrictive covenants, and the obligations intended to be obligations of the Company (for the avoidance of doubt, excluding obligations under any Associated Benefit Plan, such as equity or equity-based incentive plans), under the applicable documents to the Company within a reasonable time period following such request, and/or (ii) Seller agrees, at Buyer’s request and expense, to seek to enforce the terms of such restrictive covenants in an appropriate forum, whether through injunctive relief or other form of available remedy. 52 US 167664346 HB: 4845-7978-5147.2
As used herein, the term “Active Client” shall mean any customer or client of the Company or Seller who purchased any products or services from the Company or Seller pertaining to the Covered Business within the two (2) year period preceding the Closing Date. “Prospective Client” means any Person, or a group of Persons, (x) who or which had been identified with reasonable particularity by the Company or Seller (or any of their respective representatives) in the business records of the Company or Seller within the two (2) year period preceding the Closing Date, as a possible client or customer of the Covered Business, (y) to whom a representative of the Company or Seller (with respect to the Covered Business) had communicated within the two (2) year period preceding the Closing Date in writing (including by e-mail) with respect to the provision of any services of the Covered Business. (b) Subject to Section 6.12(c), Seller agrees that, for three (3) years after the Closing Date, Seller shall not, and shall cause its Affiliates not to, engage, directly or indirectly in, or own an interest in, or manage, operate or control any Person engaged in, any business that is similar to, within or competitive with, the Covered Business (a “Competing Business”), in each case in Illinois, Wisconsin or Minnesota. (c) Nothing contained in Section 6.12(b) shall be construed to prohibit Seller and its Affiliates from: (i) acquiring or holding all or any portion of the assets or equity interests of any Person engaged in a Competing Business; provided, that if the Competing Business accounts for more than 10% of the revenues of such assets or such Person (based on the latest relevant annual financial statements), Seller will, or, if applicable, will cause its Affiliates to (A) limit such Covered Business or (B) divest a portion of the assets that constitute such Competing Business, in each case, within 12 months after the consummation of the acquisition such that following such limitation or divestment, the applicable Competing Business accounts for less than 10% of the revenues of such assets or such Person (based on the latest relevant financial statements); provided that, following such acquisition, the acquired business engages in the Competing Business (1) only in compliance with Section 6.12(a) and (2) only under a name that is not confusingly similar to the name “Associated Benefits and Risk Consulting”; (ii) acquiring, holding of investments or owning, directly or indirectly, any voting stock, capital stock or other voting equity interest of any Person engaged in a Competing Business, so long as such ownership interest represents not more than (A) 3% of the aggregate voting power of such Person if such Person is listed on any national securities exchange or national quotation system or (B) 5% of any private equity fund or alternative investment vehicle in which Seller or its Affiliates is a passive investor; provided, however, that in the case of (A) or (B) Seller and its Affiliates do not directly or indirectly participate in any way in the operation or management of the Competing Business; or (iii) continuing to engage in any business other than the Covered Business. (d) Seller agrees that, for three (3) years after the Closing Date, Seller and Affiliates shall not solicit for employment or hire any current or former Consultant or any Transferred Employee or Continuing Employee; provided that this Section 6.12(d) shall not prohibit Seller or its Affiliates from (i) conducting a general solicitation or advertisement that is not specifically directed at any of such individuals or groups of individuals, (ii) soliciting for employment or hiring any Transferred Employees or Continuing Employees who have not been employed or engaged by the 54 US 167664346 HB: 4845-7978-5147.2
Company or Seller for a period of six months prior to the date such individuals were first solicited for employment or (iii) soliciting for employment or hiring any Consultants, Transferred Employees or Continuing Employees whose employment or engagement with the Company is terminated by the Company. (e) Seller and its Affiliates shall treat and hold as confidential (i) any and all confidential or proprietary information, knowledge and data to the extent relating to the Company and/or the Covered Business and shall use commercially reasonable efforts to prevent the unauthorized use, dissemination or disclosure of such confidential or proprietary information, knowledge and data, and (ii) all confidential or proprietary information relating to the business of Buyer and its Affiliates that becomes known to Seller or its Affiliates in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, and not otherwise use such confidential or proprietary information (the confidential or proprietary information, knowledge and data set forth in clauses (i) and (ii), collectively, the “Buyer Confidential Information”), in each of clauses (i) and (ii), unless Buyer provides its prior written consent to such use or disclosure; provided, that Seller shall be permitted to disclose Buyer Confidential Information (A) to its respective representatives to whom such disclosure is necessary in the conduct of the business of Seller if such Persons are informed by Seller of the confidential nature of such Buyer Confidential Information and are directed by Seller to comply with the provisions of this Section 6.12(e) and (B) subject to the last sentence of this Section 6.12(e), as may be required by applicable Law. Seller shall be liable to Buyer for any breach by its Affiliates and representatives of this Section 6.12(e). The term “Buyer Confidential Information” shall not include any information that (1) at the time of disclosure is publicly available through no act or omission of Seller, (2) becomes available on a non-confidential basis from a third party source, so long as such source is not known by Seller to be bound by a confidentiality agreement with or other obligations of secrecy to Buyer, or (3) is developed independently by Seller without the use of Buyer Confidential Information, as evidenced by the internal records of Seller. Notwithstanding the foregoing, if Seller or its Affiliates or their respective representatives becomes legally compelled by Order or is required by the rules and regulations or any action of any applicable Governmental Entity or stock exchange to disclose any such Buyer Confidential Information, Seller shall, and shall direct its applicable Affiliates or representatives, (x) to the extent reasonably practicable and permitted by applicable Law, provide Buyer with reasonable prior written notice of such requirement so that Buyer may seek a protective order or other remedy (at Buyer’s expense), (y) if such protective order or other remedy is not obtained, furnish only that portion of such Buyer Confidential Information that is legally required to be provided and exercise its commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such Buyer Confidential Information, and (z) use commercially reasonable efforts to promptly furnish to Buyer a copy (in whatever form or medium) of such Buyer Confidential Information it intends to furnish or has furnished. (f) The undertakings in Section 6.12(a) through Section 6.12(e) are given to Buyer and to each of its Affiliates. Seller acknowledges that such undertakings are entirely independent restrictions and are no greater than is reasonably necessary to protect the interests of Buyer and its Affiliates. If the final judgment of a court of competent jurisdiction declares that any term or provision of Section 6.12(a), Section 6.12(b), Section 6.12(c), Section 6.12(d) or Section 6.12(e) is invalid or unenforceable, the Parties agree that such court making the determination of invalidity or unenforceability will have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement will be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 55 US 167664346 HB: 4845-7978-5147.2
Policies except with respect to any Company Insurance Policy held by the Company, and otherwise with the consent of Seller, which shall not be unreasonably withheld, conditioned or delayed. (d) Notwithstanding anything to the contrary contained in this Agreement, except with respect to any Company Insurance Policy held by the Company, or any Company self-insurance policy or program, nothing in this Agreement will limit, waive or abrogate in any manner any rights of Seller or its Affiliates to insurance coverage for the Seller or its Affiliates under any Company Insurance Policy for any matter, whether relating to the Company, the Covered Business or otherwise. (e) For the avoidance of doubt, and notwithstanding anything in the contrary contained in this Agreement, on and subsequent to the Closing Date, the Company shall have the exclusive right to control, cancel, modify, terminate, renew or extend any Company Insurance Policy held by the Company or any Company self-insurance policy or program. (f) To the extent that any claim is made against the Company or the Covered Business arising out of any act, omission, occurrence, fact or circumstance existing or occurring prior to the Closing Date and any Company Insurance Policy (for the avoidance of doubt, excluding (i) any Company Insurance Policy held by the Company or (ii) any self-insurance policy or program) by its terms covers such claim (any such claim, an “Insurance Claim”), upon the Company’s written request to Seller and at the sole cost and expense of the Company, Seller shall reasonably cooperate with the Company in making such Insurance Claim unless Seller reasonably believes that such Insurance Claim is frivolous and utterly devoid of merit. In the event that (i) Seller receives any proceeds of the coverage afforded by the Company Insurance Policy with respect to any Insurance Claim and (ii) the amount of such Insurance Claim has been paid by the Company, Seller shall promptly pay such proceeds (net of any actual out-of-pocket costs or expenses paid by Seller or any of its Affiliates in connection with such Insurance Claim) to the Company to the extent of the amount so paid by the Company. The Company hereby acknowledges and agrees that (A) any Insurance Claims shall be subject to (and recovery thereon shall be reduced by the amount of) any applicable deductibles, retentions or co-insurance provisions, (B) any out-of-pocket costs incurred to pursue Insurance Claims shall be borne solely by the Company, (C) the Insurance Claims shall be subject to exhaustion of existing sublimits and aggregate limits, (D) neither Seller nor any of its Affiliates shall have any obligation to pay any additional premiums or other amounts due to any insurer under any Company Insurance Policy in connection with any Insurance Claims and (E) neither Seller nor any of its Affiliates shall be liable or otherwise responsible for the failure of any insurer or other provider of insurance to pay any Insurance Claim for any reason, except that in the event of any such failure to pay an Insurance Claim, Seller and its Affiliates shall cooperate with any reasonable request by the Company for assistance in pursuing the payment of such Insurance Claim. (g) With respect to all open, closed, new and re-opened claims covered under Seller and its Affiliates’ workers’ compensation and employers’ liability Insurance Policies or comparable workers’ compensation self-insurance programs relating to employees of the Company or the Covered Business arising from occurrences prior to the Closing Date, Buyer will, or will cause the Company to, promptly reimburse Seller and its Affiliates for all claim payments, costs and expenses relating to such claims, as well as any catastrophic coverage charges, overhead, claim handling and administrative costs, Taxes, surcharges, state assessments and other related costs, in each case irrespective of whether such claims are made by the Company, Transferred Employees, Continuing Employees, or by third parties with respect to the conduct and operation of the Company or the Covered Business, and in each case limited to actual out-of-pocket costs or charges paid by Seller or any of its Affiliates. Any payments, costs and adjustments required to be made pursuant to this 59 US 167664346 HB: 4845-7978-5147.2
Party reasonably prompt written notice thereof, but in any event not later than 30 calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that such failure materially prejudices the defense of such Action. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of available material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party within 30 days after receiving notice of such Third Party Claim, at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, to assume the defense of any Third Party Claim for so long as the Indemnifying Party prosecutes and vigorously defends the Third Party Claim, and (i) such Third Party Claim is not a criminal Action made by or on behalf of any Governmental Entity and does not seek an injunction or other equitable relief, (ii) the Indemnifying Party shall have agreed in writing for the benefit of the Indemnified Party that the indemnification provisions of Section 9.2(a) or Section 9.2(b) (as applicable), cover such Third Party Claim, (iii) there are no actual or potential conflicts of interest between the Indemnified Party and Indemnifying Party such that representation by the same counsel or control by the Indemnifying Party would be inappropriate, (iv) if the Indemnifying Party is Seller, the Third Party Claim is not a claim adverse to any insurance company or carrier who has a material business relationship with Buyer or its Affiliates, and the Indemnified Party shall cooperate in good faith in such defense and (v) such claim does not involve the determination by the Company whether to exercise its rights under Section 7.4 of the Applicable Employment Agreement, which determination and right to exercise shall remain in the Company’s sole discretion; provided, however, that in the case of any Third-Party Claim relating to any Tax where the Seller is the Indemnifying Party, the Indemnifying Party shall only be entitled to assume the defense of such Third Party Claim if it relates solely to a Taxable period ending on or before the Closing Date. In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 9.3(c), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, or appeal any such Third Party Claim, and make defensive counterclaims that would negate the existence or magnitude of such Third Party Claim (and excluding, for the avoidance of doubt, any other counterclaims that might be available to the Indemnified Party, including those relating to the same facts and circumstances that do not negate the existence or magnitude of the Third Party Claim), in each case in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided that the Indemnifying Party shall be liable for the reasonable fees and expenses of the Indemnified Party’s counsel for any period during which the Indemnifying Party has not assumed such defense or after the Indemnifying Party fails to diligently defend such Third Party Claim. For the avoidance of doubt, unless and until the Indemnifying Party has validly elected to defend a Third Party Claim as provided in this Agreement, the Indemnified Party may, subject to Section 9.3(c) pay, compromise and defend such Third Party Claim. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out- of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim. (c) Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section 9.3(c). If the Indemnifying Party shall have validly assumed the defense of a Third Party Claim as provided in Section 9.3(b) and be diligently prosecuting such defense, and a firm offer is made to settle a Third 69 US 167664346 HB: 4845-7978-5147.2
(b) Notwithstanding anything to the contrary contained herein, Seller shall not have any liability for indemnification under Section 9.2(a)(i) (excluding Seller Fundamental Representation and Warranties) unless the aggregate of all Losses under such Section exceed One Half of One Percent (0.5%) of the Final Adjusted Base Purchase Price (the “Deductible”) and then only for Losses in excess of the Deductible up to a maximum indemnification obligation for such Losses equal to Seven and One Half Percent (7.5%) of the Final Adjusted Base Purchase Price (the “Cap”). For the avoidance of doubt, the limitations set forth in this Section 9.4(b) shall not apply to any indemnification obligations arising in connection with Seller Fundamental Representations and Warranties. (c) Notwithstanding anything to the contrary contained herein, Buyer shall not have any liability for indemnification under Section 9.2(b)(i) (excluding Buyer Fundamental Representation and Warranties) unless the aggregate of all Losses under such Section exceed the Deductible then only for Losses in excess of the Deductible up to a maximum indemnification obligation for such Losses equal to the Cap. For the avoidance of doubt, the limitations set forth in this Section 9.4(c) shall not apply to any indemnification obligations arising in connection with Buyer Fundamental Representations and Warranties. (d) The maximum liability of either Party for indemnification of Losses for breaches of such Party’s representations and warranties, including but not limited to breaches of such Party’s Fundamental Representations and Warranties, shall not exceed 50% of the Final Adjusted Base Purchase Price. For the avoidance of doubt, this Section 9.4(d) shall not be interpreted to increase the amount of the Cap for any Losses to which the Cap relates. (e) For purposes of determining whether there has been a breach of any representation or warranty and the amount of any Losses that are the subject matter of a claim for indemnification hereunder for breach of any representation or warranty, each representation and warranty shall be read without regard and without giving effect to any materiality or Material Adverse Effect standard or qualification contained in such representation or warranty (as if such standard or qualification were deleted from such representation and warranty); provided, that (i) any qualification relating to materiality or Material Adverse Effect to the extent it qualifies an affirmative requirement to list specified items on a section of the Schedule shall not be disregarded and (ii) the qualification relating to Material Adverse Effect in Section 3.7(b) (Absence of Certain Changes) shall not be disregarded. (f) In addition to the limitation set forth above, payments by an Indemnifying Party pursuant to this Article IX in respect of any Losses shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds actually received in respect of any such claim, net of any costs incurred in connection with obtaining such insurance proceeds (including any increased premiums resulting therefrom). In the event that the Indemnified Party maintains insurance that would cover any Loss for which it has sought indemnification under this Article IX, such Indemnified Party agrees to make a claim under the applicable insurance police(ies) in a timely manner to the extent reasonably possible under the circumstances, and to provide the applicable carrier with such additional information as it may request with respect to such claim. Nothing contained in this Article IX or otherwise shall require the Indemnified Party to assert or threaten to assert any Action against any insurance carrier in connection with seeking insurance recovery in respect of any Loss for which it has sought indemnification from the Indemnifying Party hereunder. (g) Each of the Parties acknowledges and agrees that the right to indemnification or any other remedy based on the representations, warranties, covenants and agreements contained in this Agreement will not be affected by any investigation conducted with respect to, or any knowledge 71 US 167664346 HB: 4845-7978-5147.2
employees, agents, representatives, successors and permitted assigns (the “Financing Related Parties”) in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including, but not limited to, any dispute arising out of or relating in any way to any Buyer Financing or the performance thereof or the financings contemplated thereby, in any forum other than the federal and New York State courts located in the Borough of Manhattan within the City of New York; (b) agrees that, except as specifically set forth in the definitive agreement for any Buyer Financing, all Actions (whether at law, in equity, in contract, in tort or otherwise) against any of the Financing Related Parties in any way relating to any Buyer Financing or the performance thereof or the financings contemplated thereby, shall be exclusively governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of laws of another jurisdiction; and (c) HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (WHETHER AT LAW OR IN EQUITY, IN CONTRACT, IN TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING IN ANY WAY TO ANY BUYER FINANCING. Notwithstanding anything to the contrary contained in this Agreement, the Financing Related Parties are intended third-party beneficiaries of, and shall be entitled to the protections of this provision and Section 10.3 to the same extent as if the Financing Related Parties were parties to this Agreement. Notwithstanding anything to the contrary in this Agreement, Section 10.16 and this Section 10.17 may not be amended, modified or supplemented, or any of its provisions waived in a manner that is adverse in any respect to any Financing Related Parties without the written consent of the Financing Related Parties, which consent may be granted or withheld in the sole discretion of the Financing Related Parties. [Signature pages follow.] 77 US 167664346 HB: 4845-7978-5147.2